22. The conduct of the Bank, in keeping down the rate of discount when a rapid drain was going on, and the foreign exchanges were unfavourable, was the exact counterpart of what it had done on so many previous occasions, and excited much comment and adverse criticism by the whole commercial community of London. The market rate rose decidedly above it, so that a rush for discounts was made to the Bank, which were no sooner granted than the gold was immediately drawn out.

23. On the 27th of May, the Chancellor of the Exchequer brought the subject of the monetary pressure before the House, and stated that he had numerous deputations to him respecting a suspension of the Act of 1844, which the Government were not prepared to adopt. However, he meant to assist the Bank so far as to dispense with the aid the Government usually had from the Bank at Quarter day. With this view, he intended to raise the interest on Exchequer bills, which were then at a greater depreciation than any other species of Government security, to 3d. per day. On the 10th he brought in a resolution, to allow all persons who had subscribed to the eight million Irish loan a discount of 5 per cent. on any instalment paid in before the 18th of June, and 4 per cent. if paid in before the 10th of September.

24. The enormously high price of grain, which had no parallel since 1812, had the natural effect of tempting a great number of houses to enter into speculations for the import of grain, far beyond their power to support. The enormous importations in May, June, and July, coupled with the very favourable appearance of the harvest, caused a heavy and continuous fall in the price of grain, and the reports of the potato crop being favourable, the price of wheat fell to 49s. 6d. in September. But the tremendous fall in the price of wheat had been attended with ruin to the houses which had speculated in it. Moreover, that hideous nuisance which always flourishes with noxious luxuriance in times of speculation-accommodation paper-was extensively prevalent. The failures in the corn trade began in August, which engendered a great discredit in that and other branches of commerce. On the 7th of August, the minimum rate of discount was raised to 5; but this only

referred to very short-dated paper, as the greater part of the paper discounted was charged at much higher rates, even up to 7 per cent., which were maintained up to the 9th October.

25. On the 9th August, the first of the frightful catalogue of failures began. Leslie, Alexander, and Co. stopped payment, with liabilities amounting to £500,000. On Wednesday, the 11th, Coventry and Sheppard stopped for £200,000, and King, Melville, and Co., also for £200,000, and several other minor firms made the total failures in the first week amount to £1,200,000. In the next week, Giles and Co. failed for £100,000, and the total in the second week was £300,000. In the following week, Robinson and Co. failed for £110,000, the senior partner of which firm was the Governor of the Bank of England. In three weeks, the failures were £3,027,000. Week after week followed, each one increasing in severity, until at last the total exceeded £15,000,000. In the middle of September Saunderson and Co., the eminent bill brokers, stopped payment, being much involved with the great houses in the corn trade. The exchanges, which had been brought to par in April by the monetary pressure in that month, were, in consequence of the increasing severity of the crisis, become decidedly favourable, and, on the 25th of September, bullion began to flow in. During the whole of September the commercial calamities were falling fast and thick.

26. Almost all the firms connected with the Mauritius, such as Reid, Irving, and Co., failed, principally from having their funds locked up in sugar plantations. This was accompanied by immense failures in the India trade; the credit commonly given in that trade being of unusual length, which affords dangerous facilities for stretching it to too great a length. The railway works which had been sanctioned in the session of 1845-6, were now in full operation, causing an immense demand for ready money. Almost every tradesman in the kingdom, from Land's End to John O'Groats, was deep in railway speculations. The extravagant delirium of prosperity in 1845-6, had caused great numbers of them, not only to live far beyond their means themselves, but to trust their customers beyond all the bounds of ordinary credit. We have heard it said, that in numberless

instances, their bills for goods furnished in 1845 were unpaid in 1847. There can be no doubt whatever but that commercial credit of all sorts and descriptions, among all classes of traders, was in probably a more unhealthy state than it had ever been before, and that an unprecedentedly large portion of the community were entangled in obligations, of which there was no prospect of their ever working themselves free. Sharp and severe, therefore, as the remedy was, it unquestionably was the very best thing that could happen, that this unhealthy superstructure should be cleared away, and that commerce should be reconstructed upon an improved and renovated basis. The extreme pressure may be considered to have begun on the 23rd of September, when the Bank adopted more stringent measures for curtailing the demand upon its resources. Ever since the 26th of June, the diminution of bullion had been going on rapidly; on the 2nd of October it was reduced to £8,565,000, the notes in circulation being £18,712,000, and the reserve, £3,409,000. This rapid diminution of their resources shewed the directors that the time had come when they must think of their own safety; and on that day they gave notice that the minimum rate on all bills falling due before the 15th of October would be 5; and they refused altogether to make advances on stock or Exchequer bills. This last announcement created a great excitement on the Stock Exchange. The town and country bankers hastened to sell their public securities, to convert them into money. The difference between the price of consols for ready money, and for the account of the 14th of October, shewed a rate of interest equivalent to 50 per cent. per annum. Exchequer bills were sold at 35s. discount. Everything became worse and worse day by day. On the 16th of October, the Bank rates of discount varied from 5 to 9 per cent. At this time the bullion was £8,431,000; the notes in circulation, £19,359,000; and in reserve, £2,630,000. The following week, from Monday, the 18th, to Saturday, the 23rd, was the great crisis. On that Monday the Royal Bank of Liverpool, with a paid up capital of £800,000, stopped payment, which caused the funds to fall 2 per cent. This was followed by the stoppage of the North and South Wales Bank, also of Liverpool, the Liverpool Banking Company, the Union Bank of Newcastle, heavy runs on the other banks of the district, and

other bank failures at Manchester, and in the West of England. As the whole of the commercial world knew that the resources of the Banking department were being rapidly exhausted, a complete panic seized them. A complete cessation of private discounts followed. No one would part with the money or notes in his possession. The most exorbitant sums were offered to

and refused by merchants for their acceptances.

27. The continued and ever-increasing severity of the crisis caused deputation after deputation to be sent to the Government, to obtain a relaxation of the Act, and, on Saturday, the 23rd of October, the final determination of the Ministry to authorise the Bank to issue notes beyond the limits prescribed by the Act was taken, and communicated to the Bank, who immediately acted upon it, and discounted freely at 9 per cent. The letter itself was not actually sent till Monday, the 25th. It stated that the Government had expected that the pressure which had existed for some weeks would have passed away like the one in April, had done, by the operation of natural causes; that, being disappointed in this hope, they had come to the conclusion that the time had come when they ought to attempt, by some extraordinary and temporary measure, to restore confidence to the mercantile community. That, for this purpose, they recommended the directors of the Bank of England, in the emergency, to enlarge the amount of their discounts and advances upon approved security; but that, in order to restrain this operation within reasonable limits, a high rate of interest should be charged, which, under the circumstances, should not, they thought, be less than 8 per cent. That if such a course should lead to any infringement of the law, they would be prepared to propose to Parliament, on its meeting, a Bill of Indemnity. This letter was made public about 1 o'clock on Monday, the 25th, and no sooner was it done so than the panic vanished like a dream! Mr. Gurney stated that it produced its effect in ten minutes! No sooner was it known that notes might be had, than the want of them ceased! Not only did no infringement of the Act take place, but the whole issue of notes, in consequence of this letter, was only £400,000; so that, while at one moment the whole credit of Great Britain was in imminent danger of total destruction, within one hour it was saved by the issue of £400,000.

28. The extraordinary and disastrous state of public credit at this period may be judged of by the aid afforded by the Bank of England to different establishments, from the 15th of September to the 15th of November, as follows

1. It advanced £150,000 to a large firm in London, who were under liabilities to the extent of several millions, on the security of debentures of the Governor and Company of the Copper Miners of England, which prevented them stopping payment.

2. It advanced £50,000 to a country banker, on the security of real property.

3. It advanced £120,000 to the Governor and Company of the Copper Miners, which prevented them stopping payment.

4. It advanced £300,000 to the Royal Bank of Liverpool, on the security of bills of exchange, over and above their usual discounts; but this was inadequate, and the bank, having no further security to offer, stopped payment.

5. It advanced £100,000 to another joint stock bank in the country.

6. It advanced £130,000, on real property, to a large mercantile house in London.

7. It advanced £50,000 to another mercantile house, on the security of approved names.

8. It advanced £50,000, on bills of exchange, to a joint stock bank of issue, which soon after stopped payment.

9. It advanced £15,000, on real property, to another mercantile house in London.

10. It saved a large establishment in Liverpool from failing, by forbearing to enforce payment of £100,000 of their acceptances falling due.

11. It assisted another very large joint stock bank in the country, by an advance of £800,000 beyond its usual discount limit.

12. It advanced £100,000 to a country banker, on real security.

13. It advanced to a Scotch bank, £200,000, on the security of local bills, and £60,000 on London bills.

14. It assisted another Scotch bank, by discounting £100,000 of local and London bills.

15. It advanced £100,000 to a large mercantile house in London, on approved personal security.