6. Sir Robert Peel then said that some contended-and he was not prepared to deny the proposition-that if we had a new state of society to deal with, the wisest plan would be to claim for the State the exclusive privilege of the issue of promissory notes, as we have claimed for it the exclusive privilege of coining. They considered that the State is entitled to the whole profits to be derived from that which is the representative of coin, and that if the State had the exclusive power of issuing paper, there would be established a controlling power which would ensure, as far as possible, an equilibrium in the currency. Is it necessary to point out the gross and ludicrous fallacy of Sir Robert Peel in this sentence? It is the height of incorrectness to say that the State has the exclusive power over the coinage, or at least, that she has reserved it to herself. Ever since the reign of Charles II., every private person has the right to have bullion coined at the Mint; formerly both gold and silver, to an unlimited extent. Since 1816 this privilege is confined to gold coin. At this moment all persons are entitled to have as much gold bullion as they please coined at the Mint; the only thing the State reserves to itself is the privilege of coining it so as to insure its being of a certain weight and fineness. But in what way is this analogous to the issue of promissory notes? The only duty of the State is to take measures that those who issue notes shall be in a condition to fulfil their promise of payment on demand. He then stated it was the intention of the Government to increase as much as possible the power of a single bank of issue, and that bank should be the Bank of England. The Bank was, therefore, to continue its privileges of issue, but it was to be divided into two departments, the one for the purpose of issuing notes, and the other for the ordinary business of banking. But the Bank was to be deprived, once for all, of the power of unlimited issues. These were to take place in future on two foundations only: 1st, a fixed amount of public securities; and 2ndly, bullion. The amount of issues upon public securities was permanently fixed at £14,000,000; every other note was to be issued in exchange for bullion only, so that the amount of the notes issued on bullion should be governed solely by the action of the public. Although Sir Robert Peel wished that there should only be a single bank of issue, yet existing interests were to be regarded; and those banks which were at that time

lawfully issuing their own notes might remain banks of issue; but their amount was to be strictly limited to a certain definite average. There were other details concerning joint stock banks which we shall reserve.

7. On the 20th of May, Sir Robert Peel introduced his further resolutions, and proposed that, in the event of any country banks of issue failing, or withdrawing their notes voluntarily from circulation, the Bank might, with the consent of the Crown, increase its issues to a definite proportion of the notes thus withdrawn. And further, that the Bank should be obliged to buy all gold bullion presented for purchase at £3 17s. 9d. per ounce (the Bank had been giving only £3 17s. 6d.), and a certain proportion was allowed to be on silver bullion, as the export of that was a proper remedy for the inconvenience of our standard differing from that of other nations. It was, therefore, of great importance to ensure such a stock of silver in this country, as might meet the wants of merchants, and prevent them having to send to the Continent for it. He proposed that the silver bullion upon which the Bank might issue notes should not exceed onefourth of the gold bullion.

8. It was impossible for Sir Robert Peel not to see the inconsistency of his measure of 1844, with his expressed sentiments in 1819 and 1833, that it was inexpedient to limit the issues of the Bank to any fixed amount, because there were times of commercial difficulty, when an increased issue of notes might be the proper remedy. There is no doctrine more strenuously insisted on by the Bullion Report, by the statesmen of 1819, as well as by the Government in 1833, and Sir Robert Peel himself, at both these periods, than that it was impossible to fetter the discretion of the Bank in its issues. Sir Robert Peel knew that he was now taking away this power from the Bank altogether, and, accordingly, he was obliged to meet this objection. He said

"It is said that the Bank of England will not have the means which it has heretofore had of supporting public credit, and of affording assistance to the mercantile world in times of commercial difficulty. Now, in the first place, the means of supporting credit are not means exclusively possessed by banks. All

who are possessed of unemployed capital, whether bankers or not, and who can gain an adequate return by the advance of capital, are enabled to afford, and do afford, that aid which it is supposed by some that banks alone are enabled to afford. In the second place, it may be a question, whether there be any permanent advantage in the maintenance of public or private credit, unless the means of maintaining it are derived from the bonâ fide advance of capital, and not from a temporary increase of promissory notes, issued for a special purpose. Some apprehend that the proposed restriction upon issue will diminish the power of the Bank to act with energy at the period of monetary crisis and commercial alarm and derangement. But the object of the measure IS TO PREVENT (So far as legislation can prevent) the recurrence of those evils from which we suffered in 1825, 1836, and 1839. IT IS BETTER TO PREVENT THE PAROXYSM than to excite it, and trust to desperate remedies for the means of recovery."

Sir Robert Peel, therefore, deliberately took away the power of the Bank to act on extreme occasions, under the impression that his Act would prevent these extreme occasions from arising. We shall see how his hope was fulfilled.

9. Sir Charles Wood followed Sir Robert Peel, travelling over the same ground, and giving the same caricatured description of American banking as he had done; moreover, he also was infected with what is known by the name of the " currency principle"

"It is not enough, then, to enact that the Bank notes shall be convertible. The paper circulation must not only be convertible, but must vary in amount from time to time as a metallic circulation would vary. A system, therefore, of paper circulation is required, which will attain this object, and insure a constant and steady regulation of the issues on this principle. This, and this alone, affords a permanent security for the practical convertibility of the notes at all times, and for the consequent maintenance of the standard."

10. The bill was read a second time, after a feeble opposition, by a majority of 185 to 30. It passed through the House of Lords with a very short debate, and no division. Lord Radnor

alone protested against it, and it received the Royal Assent on the 19th of July, 1844.

11. The chief provisions of this Act are as follows (Statute 1844, c. 32)—

1. That, after the 31st August, 1844, the issue of Bank notes by the Bank of England should be kept wholly distinct from the general banking business, and be conducted by such a committee of the directors as the Court might appoint, under the name of the "Issue Department of the Bank of England."

2. That, on the same day, the Governor and Company should transfer, appropriate, and set apart, to the issue department securities to the value of £14,000,000, of which the debt due by the public to the Bank was to be a part; and also so much of the gold coin and gold and silver bullion as should not be required for the banking department. The issue department was then to deliver over to the banking department an amount of notes exactly equal to the securities, coin, and bullion so deposited with them. The Bank was then forbidden to increase the amount of securities in the issue department; but it might diminish them as much as it pleased, and increase them again to the limit defined, but no further. The banking department was forbidden to issue notes to any person whatever, except in exchange for other notes, or such as they received from the issue department in terms of the Act.

3. The proportion of silver bullion, in the issue department, on which notes were to be issued, was not at any time to exceed one-fourth part of the gold coin and bullion held at the time by the issue department.

4. All persons whatever, from the 31st August, 1844, were to be entitled to demand Bank notes in exchange for standard gold bullion, at the rate of £3 17s. 9d. per ounce.

5. If any banker who, on the 6th May, 1844, was issuing his own notes, should cease to do so, it should be lawful for the Crown, in Council, to authorise the Bank to increase the amount of securities in the issue department to any amount not exceeding two-thirds of the amount of notes withdrawn from circulation.

6. Weekly accounts in a specified form were to be transmitted to Government, and published in the next London Gazette.

7.

From the same date the Bank was relieved from all stamp duty on their notes.

8. The annual sum payable by the Bank for their exclusive privileges should be increased from £120,000, as settled in 1833, to £180,000. And all profits derived by the Bank from the increase of their issues above the £14,000,000, as prescribed by the Act, shall go the public.

9.

After the passing of the Act, no person other than a banker who was lawfully issuing his own notes on the 6th May, 1844, should issue Bank notes in any part of the United Kingdom.

10. After the passing of the Act, it was forbidden to any banker to draw, accept, make, or issue, in England or Wales, any bill of exchange, or promissory note, or engagement for the payment of money payable to bearer on demand, or to borrow, owe, or take up in England or Wales, any sum or sums of money, on the bills or notes of such banker, payable to bearer on demand, except such bankers as were on the 6th May, 1844, issuing their own Bank notes, who were allowed to continne their issues in such manner, and to such extent, as afterwards provided. The rights of any existing firm were not to be affected by the withdrawal, change, or addition of any partner, provided the whole number did not exceed six persons.

11. Any banker who ceased to issue his own notes from any reason whatever, after the Act, was not to resume such issues.

12. All existing banks of issue were forthwith to certify to the commissioners of stamps and taxes, the place, and name, and firm, at and under which they issued notes during the twelve weeks next preceding the 27th April, 1844. The commissioners were then to ascertain the average amount of each bank's issues, and it should be lawful for such banker to continue his issues to that amount, provided that on an average of four weeks they were not to exceed the average so ascertained.

13. If any two or more banks of issue had become united during that twelve weeks, the united bank might issue notes to the aggregate amount of each separate bank.

14. The commissioners were to issue in the London Gazette a statement of the authorised issues of each bank.

15. If two or more banks afterwards become united, each of less than six partners, then the commissioners might authorise them to issue notes to the amount of their separate issues. But