Jackson had determined that the Charter of the National Bank of the United States, which expired in 1836, should not be renewed, and that the currency of that country should be placed on a sounder footing than it had hitherto been, by forming a sound metallic basis. Operations to effect this purpose soon commenced. Immense quantities of American securities of all sorts were imported into England, and negotiated for the purpose of remitting the specie to America. The improperly low rate of discount in this country, favoured by the inordinate multiplication of Banks, enabled a great quantity of these securities of various descriptions to be realised in England, and the cash was remitted to America.

66. The joint stock banks had been blowing the bubble of credit to the utmost tenuity, by re-discounting most of the bills which they discounted. This practice largely increases the proportion of paper currency compared to the metallic basis, and, of course, adds to any peril in times of discredit. The Bank of England, at length, but too tardily, as has almost invariably been the case, awoke to the impending danger, and determined to strike a blow at the distended state of credit. It not only raised the rate of discount to five per cent. in August, but absolutely refused to discount any bills indorsed by any joint stock bank of issue. This was a great blow at the great amount of American securities afloat in the country, as most of those bills had been purchased by the joint stock banks, and re-issued with their indorsement upon them.

67. In the autumn of 1836, the symptoms of the coming storm were very apparent, especially in Ireland. One very large joint stock bank, the Agricultural and Commercial, was known to be in difficulties early in the autumn, and it made several applications to the other joint stock banks in Ireland, and England, and Scotland, for assistance, which they all refused. It also made a call upon its shareholders, which was not responded to. The other Irish banks, foreseeing a stoppage of the Agricultural and Commercial, had been laying in a stock of gold, to meet the run which would necessarily follow the failure of a bank with so many ramifications. The sum in gold which the Irish banks laid in, to provide for the run, was estimated to be not less than

£2,000,000, all of which came from the Bank of England. Much of this was required on account of the extraordinary differences of opinion that were given by the most eminent Irish counsel, as to whether the Bank of England notes were legal tender in Ireland. Three very eminent lawyers held that they were legal tender, and three equally eminent held that they were not. The Bank of Ireland itself thought they were not, and was still less inclined to make the experiment when there was such a difference of opinion among the lawyers. The other banks followed the example of the Bank of Ireland, and provided gold.

68. The catastrophe that had been foreseen took place on the 14th of November, when the Agricultural and Commercial Bank stopped payment, which was immediately followed by a general run upon all the Banks in Ireland; but it was well met, from the care which had been previously taken to provide specie. So great was the state of discredit, that even Bank of England notes were at a heavy discount in Dublin. The Bank of Ireland would only take them in very small quantities from their customers, at a discount of 2s. 6d. each. During all this time, the diminution of bullion in the Bank of England was going on rapidly. At the beginning of October, it had £5,035,000 in bullion, to meet £29,869,000 of liabilities; at the end of November its liabilities were £30,941,000, and its bullion £3,640,000. During December its bullion slightly increased, and in January diminished again. In November, the Northern and Central Bank, with its head office in Manchester, and thirtynine branches in the manufacturing districts, became seriously embarrassed, and applied to the Bank of England for assistance, which the Bank at first refused; but, upon consulting the leading bankers in London, their opinion was that the stoppage of so extensive a concern in the manufacturing districts would very probably bring on a general panic. The Bank, therefore, determined to advance the sum of £500,000, to enable it to meet its engagements, which, upon subsequently discovering that these were much more extensive than had at first been represented, was further increased to the sum of £1,370,000. Early in January, a London banking house applied for assistance to the Bank, and, on the other London bankers giving their

guarantee to the Bank of England, it made advances sufficient to enable that house to meet its engagements. The difficulties attending the American houses, both in London and Liverpool, became now so pressing, that they also were obliged to apply to the Bank. Persons were appointed to look into their affairs, who represented that, if assistance were given them to meet their outstanding engagements, they would ultimately prove solvent. As an additional reason for granting this assistance, it was stated that if these American houses were permitted to stop payment, their concerns were so vast, and so extended throughout the north of England, that a general destruction of credit would

After full consideration, the Bank determined to attempt to carry these houses through their embarrassments, and for this purpose, it advanced the enormous sum of £6,000,000. This great operation was, however, successful, though the final liquidation of the account was retarded by the great prostration of American credit in 1839. The advances made to the banking interests in England were all repaid, principal and interest, with one very trifling exception. The Bank thus followed, for a second time, the principles laid down by the Bullion Report and there can be no doubt averted a calamity only second in magnitude to the catastrophe of 1825.

69. The assistance of the Bank was only intended to be of a temporary nature, to give time for the gradual withdrawal of the great mass of unsound paper from circulation. This having been effected to a large extent, the result followed which always has been the case, and always must be the case—a great influx of gold, to fill the vacuum caused by the great annihilation of this paper currency. During the whole of 1837 bullion rapidly flowed into the Bank; and in December it reached the sum of ten millions and a half. The position of the Bank on the 13th of March, 1838, was as follows

Liabilities.

£31,573,000 {

Securities......£21,046,000
Bullion.........£10,527,000

Thus, after a long period of nearly five years, the Bank was at length brought back again into what the directors had laid down for themselves as the normal position; and it enabled credit to

pass through a crisis which would have been tenfold more severe if it had not been met by that "judicious increase of accommodation" which the Bullion Report declared was the proper remedy for a temporary failure of credit.

70. From 1832 to 1837 there had been a series of seasons of remarkable abundance. For several years a series followed of extreme scarcity. The crop of 1838, was the worst that had been known since 1816; that of 1839 was scarcely, if at all, better. This great deficiency rendered it necessary to import foreign corn to the value of £10,000,000, a considerable portion of this required to be remitted in specie. But, just at this period, a number of other concurrent causes happened to create a great demand for gold for foreign countries. During the preceding years America, France, and Belgium, had carried the extension of paper credit to most extravagant lengths. In America, the fatal system of issuing Bank notes upon "property" and "securities" had been carried to a length almost worthy of Law. In France and Belgium joint stock banks had been extensively formed. This great extension of paper currency had the very same effect as the over issue of paper had in England; it drove bullion out of these countries, and was one of the causes which, together with the fortunate destruction of the extravagant paper credit in England in 1837, caused such an influx of gold in this country up to March, 1838. But in this latter year these bubbles burst. In the autumn of 1838 the Bank of Belgium failed, and a severe run upon the Banks at Paris took place. This revulsion of credit, and extinction of paper issues in those countries, caused a current of bullion to set in towards them which came from the Bank of England.

71. In the beginning of 1838, when the bullion in the Bank had been rapidly increasing for several months, the commercial world thought it was time for the Bank to make use of the treasure in its vaults. It accordingly reduced the rate of discount from 5 to 4 per cent., and was induced to send over one million of sovereigns to America, the exchanges being favourable to that country in consequence of the destruction of paper, to assist the American banks to resume payments in cash.

72. The bullion in the Bank kept a pretty even amount till December, 1838. On the 18th of that month the liabilities were £28,120,000, the securities £20,776,000, and the bullion £9,794,000. From this date a rapid and steady drain set, in, which continued with unabated severity till October, 1839. When the Bank lowered its rate of discount to 4 per cent. in February, 1838, the market rate had fallen still lower, and in summer was about 3 per cent. From that time forward it began to rise, and at the end of the autumn was level with the Bank. While everything was symptomatic of an impending drain of bullion, the Bank on the 29th of November, suddenly lowered its rate to 3 per cent. for advances upon bills of exchange, East India bonds, Exchequer bills, and other approved securities. The market rate of interest was now decidedly higher than that of the Bank, and the consequence was an immediate pressure for accommodation on the Bank. The securities which, in December, 1838, were £19,536,000, mounted up in January, 1839, to £27,594,000, and the bullion fell from £9,522,000 to £8,826,000. The following table will exhibit clearly the progressive diminution of bullion

73. Up to this time the Bank seemed to have been struck with actual paralysis. Notwithstanding the continuous rise in the market rate of interest, and the unmistakeable drain of bullion that had set in, they, on the 28th of February, issued a notice continuing the same rates on the same securities as in the previous November. And it was not until the 16th May that they suddenly raised it to 5 per cent. The above figures show how completely the directors had belied their own principles of keeping their bullion at one-third of the liabilities. The market rate had advanced considerably more rapidly, so that the Bank was