STATE OF THE BANKING SYSTEM, ETC.
At this time there was a general impression that there was something in the constitution of the joint-stock banks, that imperatively called for legislative interference. This, indeed, was one of the subjects immediately pressed upon the investigation of parliament, by the speech of the lords commissioners at the opening of the session. In the preceding session a select committee had been appointed to consider the state of the law in reference to this subject. This committee began its inquiries in the month of May, and continued them till the close of the session. In their report to the house, they stated that they saw so many difficulties in the way of immediate legislation, and so many objections to imperfect legislation, that they would content themselves with merely recommending that the committee should be revived in the following session. On the 6th of February the chancellor of the exchequer made a motion to that effect, on which occasion he observed that he did not mean in any way to anticipate the decision of the committee; but he should be greatly misconceived, if it were supposed that his motion was made in hostility to the general principle of joint-stock banks. It had been suggested, he said, that the range of inquiry should be extended; but he considered the subjects already before them were sufficiently complicated and difficult, without the committee embarrassing themselves with other and still more delicate matters of investigation. He should, however, propose the extension of the committee’s inquiries to Ireland; and with that view would move the addition to its number of four Irish members, two from each side of the house. Mr. Hume expressed himself satisfied that the source of the difficulty lay, not in the conduct of the joint-stock banks, but in that of the Bank of England; and he was therefore anxious that the inquiries of the committee should be extended to the proceedings of that establishment, and generally to the banking system of the country. The conduct of the Bank of England, he contended, should form a principal object of investigation; and he moved as an amendment, “that there be an inquiry into the state of banking, and the causes for the changes of the circulation since the year 1833.” Mr. Williams seconded the amendment, and urged that the Bank of England had displayed a more reckless disregard of the interests of the country than had ever been shown by any public body intrusted with the management of its financial resources. On the 28th of December, 1833, the issues of the Bank were £32,600,000, and their stock £10,000,000. On the 28th of March, 1835, a reduction appeared on those issues of no less than four millions and a half. Nine months afterwards of the same year, there appeared an increased issue of nearly nine millions, being more than one-fourth of their circulation. What was the consequence? Such an advance in prices, that in September last the cost of every article of import was raised from forty to one hundred per cent. This caused a falling off of trade. Then again in January last the circulation of the Bank of England was £31,000,000, and they had four millions to pay that amount, being little more than half-a-crown in the pound to meet their engagements. The directors professed to have discovered that the true principle for regulating their issues was to keep gold to the amount of one-third of those issues; in so doing they would be safe. But had they acted upon that principle? At that moment, instead of having one-third, they had only about one-seventh or one-eighth of their issues in gold. Mr. Gisborne took a similar view of the conduct of the Bank of England, and urged the necessity of an inquiry into it by the committee, if, at least, any inquiry into the banking system was at all necessary. For his own part he did not think it was; it would only lead to expectations which it would be impossible to satisfy. The debate was closed by the chancellor of the exchequer, who objected to an extended inquiry, and on a division, the original motion was carried by one hundred and twenty-one to forty-two.