of the Bank of England, previous to Mr Grenfell's investigations, seem needful for elucidating their scope and object. So long as the Bank continued responsible for its issues, by being liable to pay in specie, like any private bank, it seems to have been sufficiently careful and circumspect in its bargains with the public; and its advances to Government and to the merchants seem to have been influenced by each other. The discounts were subject then, as now, to great fluctuation. Mr Bosanquet stated to the Lords' Committee, that he had seen them decrease in amount from a whole to a third. So cautious were the directors in their transactions with Government, as, in 1783, to refuse making the usual advances on the loan.* In 1782, the highest amount of their notes in circulation was £9,100,000; in 1783, £7,300,000; and in the year following, £6,700,000. From 1787 to 1793, the amounts were eight, nine, ten, and eleven millions; in 1794, a little less than eleven millions; in 1795, £13,500,000; in 1796, a little more than eleven millions. From 1777 to 1794, the advances made by the Bank on land, malt, and other Government securities, had fluctuated from seven to eight and nine millions, never exceeding £9,900,000. In 1795, they stood at eleven millions. At the end of that year, it was understood that Mr Pitt contemplated a loan of £3,000,000 to the Emperor of Austria. At this momentous period, however, the country began to feel vitally the effects of its hitherto unparalleled exertions. Taxation had cut deeply into a national capital, which had not been reinforced by any temporary expedients, or excited by artificial stimuli. The pressure of commercial distress, which is always more or less attendant on a state of war, had then been considerable. Demands for accommodation at the Bank had been great. That corporation, trading on ascertained resources, had become impressed with the necessity of limiting its issues of notes, and of caution in giving discounts. The doubtful success of our continental alliances against France, and the spirit of change which seemed brooding over the mighty waters that

bounded the political horizon at home, had banished mercantile confidence. Hoards of gold were everywhere made by the timid and avaricious; and men's fears, operating on their interests, made those with small possessions desirous of withdrawing their floating paper securities for something more tangible, in the event of foreign invasion or domestic tumult. In this situation of things, so early as 3d December 1795, the Court of Directors thus expressed their opinion to Mr Pitt: "Should such a loan take place, they are but too well grounded in declaring (from the actual effects of the Emperor's last loan, and the continued drains of specie and bullion they still experience), that they have the most cogent reasons to apprehend very momentous and alarming consequences." This opinion was enforced and repeated in two deliberately formal opinions, delivered to the Chancellor of the Exchequer by the Court, on 14th January and 11th February 1796. Previous to these dates, the demand for gold from abroad was very great. The market price of that article was four guineas an ounce, while our coin cost only £3: 17: 101; the consequence of which was, that foreign shipmasters had orders to take back their returns in specie or bullion, and large quantities of English guineas were melted at Hamburgh and other ports abroad.* At the early part of that year, so large a loan as six millions for Germany, and eighteen for Britain, was expected, and threw the Bank Directors into the greatest consternation. They had frequent communications with Mr Pitt on such small advances as he could persuade them to give. At an interview, 23d October 1795, the Governor of the Bank told him, that another loan of magnitude "would go nigh to ruin the country!" But the most impressive remonstrance made to the Premier from the Directors, was one dated 28th July 1796, on which day a series of resolutions were passed in Court, on an advance of £800,000, of which this is the conclusion: They likewise consent to this measure, in a firm reli

66

*For the principles connected with these facts, as they bear on the question of the suspension of cash payments at the Bank, and its effects on currency and prices, see sect. 1. of Mr M'Culloch's Essay on the Reduction of the Interest of the National Debt.

ance that the repeated promises so frequently made to them, that the advances on the Treasury bills should be completely done away, may be actually fulfilled at the next meeting of Parliament, and the necessary arrangements taken to prevent the same from ever happening again; as they conceive it to be an unconstitutional mode of raising money, what they are not warranted by their charter to consent to, and an advance always extremely inconvenient to themselves." Towards the close of 1796, and the beginning of 1797, the fears of the Bank increased, and Mr Pitt's demands became more urgent. On 25th February, the banknotes in circulation were £8,640,250; and next day an order in council was issued, suspending payments in specie at the Bank, which was soon after followed by an act of the Legislature, "restraining the Bank of England from paying its obligations in cash." On 1st May 1797, the first issue of one and two pound notes was made; and at that date the amount of notes in circulation was £13,055,800-a sudden bound of four or five millions from that point which the Directors found safe while they were called on for specie. On 27th December 1796, Mr Pitt stated the probable expenditure of the ensuing year at £27,647,000, and the new taxes to defray the interest of a loan of £18,000,000, to make up that expenditure, at £2,132,000. In 1796, we find the highest price of bank stock to have been, on 23d January, 1774, and the lowest, on 24th November, 144. The highest amount of bank notes in circulation was £11,700,000. In January 1797, it was only £10,500,000; and Mr Grenfell states the value of the capital stock, " on an average of the whole year, only 125 per cent." The total of the funded debt, in 1796, was £327,071,371.

The suspension of cash payments we consider to have been at that period the most important event that had occurred, from the declaration of independence by the British American colonies, if we except the revolution in France itself. All parties are now agreed on the importance of this suspension, though two very distinct opinions have been maintained about its propriety. We humbly imagine, that it was fraught with political and moral consequences of the most serious im

port to this country, and, indirectly, to the civilized world. These, however, are yet only so far advanced in their progress; and it would ill become passing speculators like us to attempt to describe its future direction. The immediate fact with regard to the purpose intended by this measure is, that it was completely successful. Indeed, the untouched resources of this country were, from many causes, at that time in a state of unparalleled vigour. The more they were probed, it was found, to use an expression of Mr Burke's, that " we were full, even to plethory." Taxes to an amount hitherto unknown in the history of the world were collected with certainty, and with such ease, that their first pressure only was felt. All the powers of Europe who joined in the coalition against France were subsidized by us, some years nearly to the amount of their own revenues. The great majority of the landed proprietors, almost all the merchants and manufacturers, and certainly much of the rest of the population, fully concurred in these measures. If ever minister could say, that in all he proposed the nation went with him, that minister was Mr Pitt. His schemes of war and expedients of finance were received with a fervour of approbation which seemed to think no advance too great for the objects in view, and only to regret that means alone, however costly, could not accomplish them. All of our national spirit that was sentiment, or emotion, or propensity, tended to utter hatred of France, and cordial trust of the high-minded man who had gained the ascendant in our councils. It is with the consequences of these measures to the Bank of England that we have now to do; and they were as follow:

The Bank of England was, by public contract, the agent for managing our debt, and, by parliamentary appointment, the place of deposit for all balances of public money from departments of revenue or accountantship. In the first of these characters, its emoluments had increased with the increasing burdens of the country, until for that service alone nearly £300,000 per annum was received; and in the second, the Bank has now had, for eleven years, the custody of balances of money permanently, averaging, on the whole, £11,500,000. On this large sum the Government

received no interest. It attracted the attention of the committee on public expenditure in 1807. That committee, in its report, commented with equal good sense and ability on the advantages which the Bank must derive from such a large deposit of money.* The bank notes in circulation had then increased to £16,621,390; and the deposits, which in 1797 had been only £5,130,140 inclusive of private accounts, were, on the Government account alone, betwixt eleven and twelve millions. Bank stock, which had sold in 1800 from 156 to 172 per cent., then sold at 230strong circumstances," as the committee observes, "in confirmation of the large increase of profits." It appears, from the evidence of Mr Samuel Thornton before the committee, that in 1800, when he, as Governor, transacted with Mr Pitt a renewal of the Bank's charter for twenty-one years, it had not escaped his eagle eye, to urge, on the part of the public, a right to participate in the profits of the Bank, arising, among other things, from money lodged there to pay the growing dividends, and the quarterly issues for redemption of the national debt, which "Mr Pitt estimated, might, during the progress of the charter, accumulate to £4,000,000 a quarter."+ The final bargain made for the public was, for the renewal, and on account of the advantages from public money enjoyed by the Bank,- -a loan of three millions, without interest, for six years, " producing," as Mr Thornton says, a profit of £900,000; but, at the then price of annuities, it was worth only £750,000, reckoning £5 per cent. interest of money." The same gentleman states the average balance from money lodged for payment of growing dividends, as "two millions and an half," and "on the public accounts at that time, of trifling amount." Mr Grenfell, however, has found out, "from statements now made by the Bank," and avers it in his speech, that the money for growing dividends exceeded £3,600,000, and that the trifling deposits were £1,947,000. If Mr Pitt had possessed, in 1800, the knowledge which

66

دو

See Report, &c. ordered by the House of Commons to be printed, 10th August 1807, pp. 75, 76, 77, 78, and 79.

+ Vide Report, as above, p. 103.

Mr Grenfell now possesses, we should have had a bargain more advantageous to the public. The plain truth, with respect to what was really done, is, that the Bank lent, with an air of sacrifice and self-denial, as the equivalent in a bargain most advantageous to them, three millions of money to that public, of whose treasure they were then in permanent possession of sums amounting to more than six millions! In 1806 this loan became payable. The administration at that time did not find it convenient to make the payment, but succeeded in " prolonging the period of this loan for the then existing war," at 3 per cent. i.e. paying

66

£90,000 per annum for the use of it." "Why, sir," says Mr Grenfell, addressing the Speaker with most excusable animation," 66 at the very moment, in 1806, when the Bank required, and the public most improvidently agreed to pay, £90,000 for the use of three millions of money, the Bank held, and were in possession of, a treasure belonging to the public amounting to a sum little short of twelve millions, wholly unproductive to the public, but productive of advantage to the Bank." In the year 1814, it is most proper to add here, this loan was repaid, and the interest on it, amounting, for eight years and eight months, to £780,000!

As soon as the report of the committee on public expenditure made its appearance, Mr Perceval, who was by that time Chancellor of the Exchequer, came forward to claim for the public a participation in the profits derivable from the deposits, and a reduction in the charge for managing the national debt. The Bank agreed to give another loan of three millions without interest; to allow the withdrawing of half a million of the unclaimed dividends then lying in their hands; and

a reduction equal to about one fourth in the then existing charges for the management of the debt." The saving by this arrangement was £242,000 per annum. In 1814 this loan became due. The present Chancellor of the Exchequer prevailed easily on the Bank to allow the prolongation of it to 5th April in this year, on the ground that the public balances had remained "undiminished."

We may now venture to state the

* Mr Grenfell's Speech, p. 21.

present profits of the Bank, arising out of its contracts or transactions with the public.

Interest at 5 per cent. on £11,500,000 of public balances held by the Bank since 1806, £575,000. From which deduct for a loan of three millions to the public without interest, saving 5 per cent., which is £150,000; another of six millions, at 4 per cent. saving 1 per cent. £60,000; another of three millions, at 3 per cent. saving 2 per cent. £60,000; and half a million taken from the unclaimed dividends, saving 5 per cent. £25,000; in all £295,000; leaving to the Bank of England, merely for the safe custody of the public money, a clear profit of £280,000 a-year! The rest of their allowances stand thus: Commission for making transfers and paying dividends on the national debt, £275,000. Commission on loans and lotteries, £30,000 (both these stated as in 1815). Annual allowance, since the erection of the Bank, for house expenses, £4000. Annual allowance on four millions of the public debt bought by the Bank in 1722 from the South Sea Company, £1898. If to this we add, for sixteen millions of increase in the circulation of Bank of England paper, since 26th February 1797, an annual profit of 5 per cent. which is £800,000, the gross returns to our national Bank, from its transactions with the state, will be £1,390,898 yearly!*

The effects of this profitable arrangement, which has operated so visibly on that thriving establishment, will be seen to the full conviction of our readers, when we add a statement of the profits realized by Bank proprietors during the last twenty years, reckoning from 1797; from which period, by the increased amount in the public expenditure producing such deposits of money, and the increase of the national debt, and the increased issue of notes, unchecked, until within the last three years, by any motive of prudence, over and above the old ordinary dividend of 7 per cent., there has accrued to that description of persons-In bonuses, and increase of di

*It is only fair to state here a saving of £233,720 per annnm, from £11,686,000 advanced to the public from the Bank since 1746, at 3 per cent. interest, being the consideration paid on every renewal of their charter for their exclusive privileges.

vidends, 64 per cent. £7,451,136.* New bank stock, £2,910,600, divided amongst the proprietors in May 1816, worth 250 per cent. equivalent in money to £7,276,500. Increased value of the capital of £11,642,000, upon an average of 1797 only 125 per cent. but which is now taken at 250, being an increase in the market value of this property of 125 per cent. equivalent to £14,553,000. Thus the total profit, in addition to the annual dividends of 7 per cent. which had never been exceeded during the first hundred years of the Bank's existence, has been, in twenty years, on a capital of £11,642,400, the incredible sum of £29,280,636 !

We have now put our readers in possession of some striking facts in the history of this celebrated establishment, for almost all of which, at least for those which are most important, we are indebted to the unwearied research and perseverance of the author of the Speech before us. That speech, and the propositions to Parliament on which it is founded,† resolve themselves into three questions. Can the allowances made to the Bank be reduced in their amount, with justice to the Bank and safety to the public? Can the nation derive farther advantage from the large deposits of money lodged at the Bank? These objects once found practicable and expedient, What would be the most effectual and dignified course to be adopted for securing them?

On each of these we shall offer such obvious and simple hints as the stinted limits of our publication will admit. 1st, As to what farther deduction may be made on the allowance for managing the debt, we quote, with deference and satisfaction, from a letter addressed to the Treasury, 18th January 1786, by the commissioners for auditing public accounts. "We take the liberty to suggest (what is indeed very obvious), that the commencement of every undertaking is usually the most expensive; and consequently, when the Bank had once provided additional

* Bonuses distributed among the proprietors betwixt June 1799 and October 1806, 32 per cent. Permanent increase of dividend, at 3 per cent. per annum, commencing in April 1807, is to April 1817, 10 years' dividends, or 314 per cent. Together, 64 per cent.

+ See No 390, Parl. Pro. Sess. 1815.

must be of the highest value. It is to them so much added to their ordinary capital, without much of the risk or responsibility to which their floating obligations subject them. For every thousand of this money in their hands, they are enabled to discount so many more bills, or issue so many more notes. The public service ought instantly to be benefitted by them, if the usury laws are repealed, to an amount according to what may be the average rate of interest for money throughout the country. 3dly, Mr Grenfell recommends that Parliament should interfere to make a new arrangement for the public; assigning as a reason, that the influence which, though all powerful,irresistible in Downing Street, would be impotent and unavailing within the walls of the House." not," says he, with the same animation which we spoke of before,-" Is not your whole financial history, during the last twenty years, filled with proofs of this influence? It is then in this House, and through the medium of this House only, that the interests and rights of the public can be secured in all negotiations of this nature with the Bank; and I repeat it, if the House of Commons will interfere, my conviction is, that the Bank will not resist. If, however, I should be disappointed in this expectation, and if the Bank, unmindful of what it owes to the public,

clerks, and incurred such other new expenses as might be necessary, the same persons and accommodations (or nearly the same) would be sufficient to transact the payment of the dividends on several additional millions, without much increase of charges of management. We believe that most other contractors have found, that a moderate sum gained on a large quantity of any commodity generally produces a greater profit than a higher price on a less quantity: therefore, if £360 was a sufficient allowance when annuities on a capital of one million only were created, it should seem that the Bank could well undertake the like service at a much lower rate, not only when the public necessities have unfortunately increased the capital of the national debt to the enormous load of two hundred millions,* but also when the consolidation of a variety of annuities must have lessened both the trouble and expense attending the management thereof." The Bank has incurred, within the last twenty years, a very great expense for additional hands, and more accommodation to the public business; and no one can deny that it is executed unexceptionably well. But these views of the committee are still applicable as principles. The allowance of £4000 for house expenses was strongly adverted to for discontinuance, in the end of 1807, by Mr Perceval, in his correspondence with the Bank at that time. The same reasons exist now; and indeed, the authority of that very acute and able man is sufficient to those who know, that if his leisure from the multifarious calls of state had permitted him to turn a full attention to the affairs of the Bank, he would have insisted on a thorough sifting and revision of their bargains. The allow ance for the debt purchased of the South Sea Company, is one which ought to cease instantly, on the plain ground that all management on it has ceased since 1722. 2dly, the deposits of public money lying at the Bank are just so many millions of capital taken from the productive labour and productive capital of the country, where they might at least be useful, and lodged with a great corporation whose trade is money, and to whom they

That truly "enormous load" is now nearly 860 millions!

"Is

forgetting that it has duties to perform towards the public, as well as within the limited circle of its own proprietors,-I will go farther, and as a proprietor of bank stock myself, add, that if the Bank, taking a narrow, contracted, selfish, and therefore mistaken, view of its own real permanent interests, should resist regulations founded in fairness, equity, and justice,-in such a state of things, sir, I say it must be a consolation to us to know, and I assert it confidently, that we have a remedy within our own reach." p. 60. As to the profits accruing from the paper circulation of the Bank, of which we hope the country will continue to enjoy the advantages, under due modifications,* Mr Ricardo is of

*We hope to be able to announce very soon, from the pen of one of the ablest economists of our time, an Essay, shewing that a large coinage of gold would be an unproductive fixation of capital, and therefore hurtful to the state. For the happiest idea that ever was conceived, of a currency liable to