before the 5th of February, 1826, might be issued, re-issued, and circulated, until the 5th April, 1829, and no longer

41. The opinions expressed in Parliament and the country were, of course, most conflicting, as to the causes of this great catastrophe, but the great preponderance of opinion was adverse to the small note issues. Mr. Baring, who defended the country bankers from the accusations levelled against them, said that their small notes were bad as a permanent system, and they ought to be called in. Even although they might sometimes be of almost indispensable use to the country, still, if the misery which had been caused by their use, among the poorer classes, was taken into consideration, it was a sufficient reason why the nuisance should be abated; and it was his opinion that the House had not got rid of this deluge of paper at the time when it had the power to do so, and that it had not resisted as it ought to have resisted, the importunity of the country bankers. That these small notes should be abolished as soon as practicable

42. Mr. Huskisson described the frightful nature of the panic during 48 hours (Monday and Tuesday, December 12 and 13), and said that it had been truly observed that the Bank, by its prompt and efficacious assistance, had put an end to the panic, and averted the ruin, which threatened all the banking establishments in London, and, through them, the banking establishments and monied men all over the country. The conduct of the Bank had been most praiseworthy, and had, in a great degree, saved the country from a general convulsion. The Bank, through its prompt, efficacious, and public-spirited conduct, had had the countenance, advice, and particular recommendation of the Premier and Chancellor of the Exchequer. He admitted that the commercial distress in Scotland was very great, but that did not prove that the system of Scotch banking did not afford greater securities than the English system, and that it was desirable to introduce it into this country. He then described the wild spirit of speculation which had seized the country, which produced a rise of prices so rapid as had never been equalled. He might mention, as an instance, the price of nutmegs, which rose in one month from 2s. 6d. to 12s. 6d. a lb., and speculation in other spices caused a corresponding rise in their prices. The mania extended equally to other articles of consumption; merchants, traders, shopkeepers, clerks, and apprentices partook equally of the frenzy of vying with each other in their endeavours to secure a monopoly of each article. And this state of things took its rise, not among the wild, insane, and bedlamite schemers, but among those who were considered the sober, steady merchants and traders of the metropolis. And all this took place at a time when money was rapidly leaving the country. Now, if, when it when it was leaving the country so rapidly, it was still hawked about at a greatly lowered rate of interest, that showed there must be something wrong in the currency. And to what would any sober man say such a state of things must come to at last? The Bank, at last, was obliged to provide for its own safety, by narrowing its issues, which checked the spirit of speculation, and as a necessary result, those country banks which had been most rash and immoderate in aiding these speculations by advances were ruined. The ruin of these bad and unstable banks had affected even the stability of the most solvent ones. A general panic ensued, and seven or eight hundred country banks had asked for assistance from the Bank of England. She had 700 or 800 drains for gold suddenly opened upon her. Was this a safe or proper condition to leave the country in? Certainly not. It was his opinion, an opinion not hastily formed, but the result of long and anxious observation, that a permanent state of cash payments, and a circulation of one and two-pound notes could not co-exist. If there were in any country a paper and a coin currency of the same denomination, the paper and the coin could not circulate together, the paper would drive out the coin. Let crown notes be made, and a crown piece would never be seen, make half-crown notes, and no half-crowns would remain in circulation. Allow one-pound notes to circulate, and we should never see a sovereign. One of the great evils they were called on to correct was the excessive issue of paper. This had been the cause of the greatest distress, it had caused the ruin of thousands of innocent persons. Nothing but disgrace and danger could attend the deviation from the true principles of currency, which Parliament had solemnly recognised. If they wished to prove the value of a steady unchangeable currency, they had it in the

1

example of France, which had twice been invaded by a foreign army, her capital had been taken, and she had been obliged to pay a large sum to foreign countries for corn, but she had a steady metallic currency, and, however much the great contractors might have suffered, the great body of the people had remained uninjured. This was due to the excellent footing upon which the currency of that country was established. If this measure was adopted, every country banker would be obliged to have as great a regard to the exchanges as the Bank of England, and be compelled to provide for his own safety, without leaning upon the Bank in times of danger. Now was the time to withdraw these small notes, when the bankers were smarting under the consequences of their over-issues. They had at present a large amount of gold and bank notes; if they allowed the favourable time to pass by, the small notes would soon be issued again. They had now got the gold in their coffers, and now was the time to provide that it should not be exported again. It would be advantageous to the public to have chartered joint stock banks, established under a proper system, with only a limited liability. This would, no doubt, induce many persons, of great fortune and credit, to take shares in them, but the Bank objected to the extension of limited liability, and had stipulated that the Banks of Scotland and Ireland should not have this privilege. Some thought that the currency should be even more purely metallic than was now proposed, and that notes of a higher denomination should be suppressed. For himself, he entirely differed from Mr. Ricardo, as to the true basis of the currency, and he believed that if Mr. Ricardo, ingenious as he was, had been sole Director of the Bank of England, it would before now have stopped payment. He thought Mr. Ricardo's view of the currency quite

erroneous

43. Sir John Newport, as a banker himself, considered the issue of small notes to be most injurious to all connected with them, as affording the most dangerous facilities for extravagant speculation. It had been said that a considerable part of the commerce of the country could not be carried on if these notes were abolished. He was quite willing to accept that alternative, and abandon a portion of our commerce, rather than continue them. He did not believe that such would be the case. Now was the best time to abolish this pernicious system, when so many of the country bankers had failed

44. Mr. Secretary Peel was convinced that the root of the evil lay in the monopoly of the Bank of England, and that if in the year 1793 a set of banks had existed in this country on the Scotch system it would have escaped the danger it was then involved in, as well as the calamity which had just occurred. In 1793 upwards of 100 banks had failed. In seven years, from 1810 to 1817, 157 commissions in bankruptcy were issued against country bankers; in the crisis which had just occurred 76 failures had taken place. But, from the different ways of making compositions, etc., the number of failures should probably be estimated at four times the number of the commissions of bankruptcy. What system could be worse, or more prejudicial to every interest in the country, than one which admitted of such an enormous amount of failures? Contrast what had been the case in Scotland, under a different system. Mr. Gilchrist, a manager of one of the Scotch banks, had been asked by the committee of 1819 how many failures there had been in Scotland within his recollection, and said there had only been one, that the creditors had been paid 14s. in the pound immediately, and finally the whole of their claims. These facts were a strong presumptive proof that the Scotch system, if not quite perfect, was at least far superior to the one existing in England. The present system of country banking was most prejudicial in every point of view. He then described the terrible misery caused by the failure of the country banks. He trusted that the institution of Joint Stock Banks would place the currency on a firmer footing. He most sincerely trusted that the great obstacle to the proposed institutions, the want of a charter, would be removed. He hoped the directors of the Bank of England would seriously consider what advantage they would derive from refusing charters to these banks. He himself could not imagine what benefit they would derive from it; they no doubt had the right to prevent such charters being granted, but he hoped they would refrain from exercising their right. He eulogised highly the conduct of the directors during the late crisis; he could not conceive it possible for any body of men to have acted better, or to have exercised more judgment, discretion and liberality than they had done-of which he hoped they would give a further instance by not opposing the grants of charters to the proposed new banks. He fully concurred with Mr. Huskisson, that it was impossible to maintain coin in circulation if paper of the same denomination were allowed to circulate along with it. Now was the most favourable opportunity of getting rid of the small notes. It would be impolitic and unsafe to wait the moment of returning prosperity, as the country bankers would be more reluctant to agree to it, and more able to oppose it. To stand gazing on the bank in idle expectation, now that the river was passable, would be an irreparable mistake. The ministerial propositions prevailed by a majority of 222 to 39, and a motion to continue the small notes of the Bank of England was rejected by 66 to 7

45. The chief provisions of the Act (Statute 1826, c. 6) fcr prohibiting small notes in England are as follows

1. The Act repealing the Act (Statute 1777, c. 30) which prohibited promissory notes and bills under 20s. was repealed, thereby reviving the former Act; but all notes of private bankers stamped before the 5th of February, 1826, or of the Bank of England stamped before the 10th of October, 1826, were exempted from its operation, and were permitted to be issued, re-issued and negociated until the 5th of April, 1829

2. Any person after that date making, issuing, signing or re-issuing any note or bill under £5, was subject to a penalty of £20

3. Any person who published, uttered or negociated any promissory or other notes, or any negociable or transferable bill, draft or undertaking in writing, for the payment of 20s., or above that sum and less than £5, or on which such sum should be unpaid, should forfeit the sum of £20

4. These penalties were not attached to any person drawing a cheque on his banker for his own use

5. All promissory notes under £20, made payable to bearer on demand, were to be made payable at the Bank, or place where they were issued; and as many more places as the issuer pleased