FOOTNOTES:

[4] See Appendix.

[5] Market.

The cost was£12,748
Paid off since 1822 6,648
Balance due on Market6,100

CHAPTER VII

THE CRISIS

No trace was found of any reply or acknowledgment by the Privy Council. Presumably they were satisfied with the answer submitted by the States.

But not so the opponents.

In addition to the Old Bank already mentioned, another Bank, the Commercial Bank, had been started in 1830. Both of these appear to have issued notes at their own discretion. Consequently the Island seems to have been flooded with paper money, and an awkward situation had arisen. The Commercial Bank claimed an equal right with the Old Bank and even with the States to issue notes. The Finance Committee, it was stated, had refused to confer with the Commercial Bank. So long as the Banks had a right to issue notes they appear to have had it in their power to put pressure on the States. For they could thus put into circulation a currency beyond that required for the internal needs of the Island.

Daniel de Lisle Brock summoned the States to consider the matter, evidently with the intention of obtaining an injunction against the issue of notes by the Banks.

His message to the States Meeting, held 21st September, 1836, is very spirited and defends the rights of the States as against private individuals, as will be seen from the following lengthy quotation.

"If there is one incontestable principle it is that all matters relating to the current coin of any country have their source in the supreme prerogative, and that no one has the right to arrogate to himself the power of circulating a private coinage on which he imprints for his own profit an arbitrary value. If this is true for metal coins still more so is it for paper money which in itself has no value whatever.

"Has not experience shown us the danger of private paper money? Can we have forgotten the disastrous period when payment of one hundred thousand one-pound notes put into circulation by two banks enjoying good credit was suddenly stopped? Have we forgotten the ruin of some, the distress of others, the embarrassment of all? Have we not quite recently seen a bank established by people considered immensely rich, advancing large sums for distilleries, steam boats and other projects, and coming to an end in less than two years with a composition with its creditors who thought themselves lucky to get a few shillings in the pound?

"With these facts before our eyes we must realise the necessity of limiting the issue of paper money to the needs, the custom, and the benefit of the community in general. Permission cannot be granted to certain individuals to play with the wealth and prosperity of society, to take from it its hard cash and to give it in exchange rags of paper. What incentive can they offer to persuade the public to give up to them valuable bills for worthless ones, certainty for uncertainty? What advantage can they pretend will accrue to the public from the loss of its currency and the possible depreciation of their paper? These general reflections will find their application. Let no one exclaim against the possibility of the supposed danger. The wealth of the present stockholders of our banks is well known, their names suffice to inspire the greatest confidence; but apart from extraordinary events, the ordinary casualties of life may bring about in a short time the change of all these names, and there may remain in their place only men of straw.

"The States are met in order to take counsel together on measures for its defence. For an object so important they ought to count on the help of all friends of their country.

"Speaking of the present banks, and it is necessary to refer to them, no one desires more than I do to see them flourish, provided that it is not at the expense of the public interest. Several of the stockholders seem to rely for success on the issue of paper-money, as if this were the principal aim of the business of banking. This aim, on the contrary, is quite foreign to real bankers—one finds them in all the great towns of Europe enjoying colossal fortunes—they never dream of paper-money; their functions are confined to discounting bills, furnishing bills on all countries, taking money on deposit at low interest to lend it again at the legal rate on landed estates, or property of assured value, and to a number of other services required by commerce: each transaction yields a profit which should suffice. A bank of this kind was wanting in the Island. The first of the two existing ones was formed under the most favourable auspices, nothing could exceed its credit: although it issued paper money it did not seem inclined to push this circulation to the point of annoyance to the States. It even made common cause with them when it was a question of replacing the old coins with new, and contributed half the expense. If it had shown itself more obliging and ready at any time to supply bills for those who, money in hand, wanted them to meet engagements in London or Paris, it would have continued the only bank for all business. But as it would not put itself out in any way, the second bank was started by merchants in order to escape from the domination and caprice of the first.

"The second bank should have kept, and still ought to keep, to the legitimate business of banking transactions. It appeared to have for its principal object the issue of paper money; even on its origin it suggested that the States and the two banks should weekly make a mutual exchange of their respective notes, each party paying interest for the balance of notes remaining against it; in this way all the notes of the States would have found themselves in the coffers of the Banks and paying interest to them. Though this proposition was not accepted, the States were not the less troubled with requests for cash in payment of their notes, and these requests are daily—not only for the ordinary household needs, as might have been expected, but for sending abroad, for if there are drafts to be cashed by the bank for anyone who wishes for money to send to France or to Jersey, the drafts are paid in States Notes, in order that the money shall ultimately come from this last named source. The Bank makes no secret of its pretensions: there are, it says, three parties for issuing paper money; this issue cannot rise above £90,000 since the circulation in the country does not allow for more, the States ought to have only one-third of the issue, the two banks the two remaining thirds. This is a fine way of making the division, and very convenient certainly for the Commercial Bank. It would even have some show of justice if the parties had equal rights, and if the public had no interest in the matter; but the rights are not equal—the bank has none to put forward, that of the States is incontestable: they exercise it for the welfare and advantage of the whole Island which they represent. Consequently the public has the greatest interest in preserving for the States the power of issuing paper-money without interruption. Let the bank reply to the questions already put; let it say what inducement it can offer the public to drive out of circulation the States Notes, the profit on which benefits all, especially the productive classes, and substitute for it Bank notes, the profit on which benefits only individuals of the unproductive classes? Now is the time to ask the proprietors themselves and ascertain whether in starting a bank they ever had the intention of letting it work to the detriment of their country? The public Treasury is the heart of the State—did they ever wish, do they to-day wish to strike it with a dagger? I know that we live in a financial age, that it is reproached with indifference to every generous sentiment, and that the love of money and the lust for gain absorb all other passions. In spite of that I have not lost all confidence in the patriotism of the members of the bank, they have the greatest personal interest in supporting the States in their efforts for the improvement of their country, efforts which contribute so greatly to the prosperity of internal commerce, to the residence of inhabitants of means, and to the wealth of strangers. Finance is the pivot on which turns the administration of affairs. The least disturbance imposes on me the duty of sounding the alarm and summoning the States. What I have said will be sufficient, I hope, to persuade the bank to maintain a friendly course. The bank should feel that it is not enough to intend not to injure, but that it is necessary to abandon any step which, even without its wish, would be prejudicial to the interests of the country. It should recognise that, as regards the circulation of paper-money, the States have, for a long time and for the common good, been in possession of the ground which it seems to wish to invade, which, however, it cannot occupy without injustice.

"Every war, it is said, ends where it should have begun—in peace. I am firmly convinced of this truth; and experience has shown me that in civil life as in political, war might almost always be avoided to the great advantage of both parties, and that lawsuits, like wars, have for end rather the injury of the adverse party than good to oneself. The States are on the defensive, and such war is just and inevitable if any war is. It is, moreover, a war in which all the inhabitants who are the friends of their country will eagerly unite for the defence of the States in their just rights—thus united they will defend them with complete success. For this purpose the States will doubtless appoint a Committee with the fullest powers to propose, in case of need, measures which may ultimately become necessary.

"I do not forsee that the case will require it, and I should wish to avoid, as far as possible, any foreign intervention—but if the efforts of the States were not sufficient to defend their rights there would be no alternative, they would find themselves obliged to petition His Majesty in Council to consent to restrict the issue of one pound notes, and only to permit the putting into circulation of the number absolutely required by the States. Under the present circumstances this would be an indispensable measure, and it can scarcely be doubted that a humble request to this effect would be graciously received."

The debate, reported at length in the local papers, was a heated one. It first raged round the third proposition, which appealed in general terms to the islanders to rally round the States. The following is the proposition as translated by the Comet of 22nd September, 1836:—"That in execution of the numerous ameliorations that have taken place during the last 20 or 30 years, the States having put into circulation about 55,000 One Pound Notes, as a financial measure in favour of the public generally, if they are of opinion to defend the rights of the States against those who wish, for the advantage of a few individuals only, to hinder the circulation of the States Notes, for the purpose of substituting those of private individuals in lieu thereof; and whether it would not be proper to make an appeal to all the inhabitants, who are the friends of their country, to invite them to afford their assistance in supporting with all their might the notes belonging to the States."

This was carried by 18 votes to 11. The minority represented chiefly town rather than country parishes, the Jurats being equally divided, and included at least two persons closely connected with the Banks. The victory of States Notes seemed complete, and the fourth Proposition appointing a Committee to give effect to the decision was carried by a large majority. It is as follows:—

"If they are of opinion to name a Committee that shall be authorised in a special manner to defend the rights and interests of the States, and of the public:—to do their utmost by every conciliatory measure in their power, and above all, to agree to an arrangement that shall screen the States from all interruption in the circulation of their Notes, which have been issued for the benefit and advantage of the public, with the design of gradually diminishing the number annually. And in the event of such an arrangement not taking place, to adopt every measure, and make every necessary sacrifice for supporting the circulation of the States Notes. And finally, should the case require it, to propose to the States the adoption of those ulterior measures deemed requisite by the Committee, for the general interests of the island."

The meeting ended with a fine fighting speech from the Bailiff. He reiterated the principle of the States being the sovereign power in issuing currency, claimed that the Cour Royale had the right of stopping the private issue of notes, and pointed to the example of England, where only £5 notes were permitted in the country, and these under a heavy tax, while only the Bank of England might issue notes in and around London. He showed that it was a choice between notes issued for the benefit of individuals and notes issued for the public good. He defended the improvements carried out by the States, and once again declared that they had been advantageous in giving employment to the poor, security to the rich and encouragement to commerce.

CHAPTER VIII

THE END

One can imagine the enthusiasm and the satisfaction with which the majority returned home. One anticipates a triumphant report in the Bailiff's best vein; and expects that the banks will in future have to confine themselves to the operations permitted to English banks, while the States restore equilibrium by causing the withdrawal of superfluous notes and confining future issues, once again entirely in their own hands, to quantities proportioned to the needs of the island.

With surprise, the subsequent proceedings are found to be on quite different lines. Truth is stranger than fiction. The prosaic facts are as follows:—

The Bailiff in presenting his Billet d'Etat to the States Meeting, 29th March, 1837, reported on the arrangement made by the Committee with the two Banks. He brought forward no proposition on the matter on which the States should deliberate. He simply states that:—

"After some preliminary conferences the Committee received the following letter:—

'To D. De Lisle Brock, Esq.,
Bailiff, etc., etc., etc.,
Guernsey, 8th Oct., 1836.
Sir,

To settle the differences now existing between the States and the Banks, and to promote an amicable adjustment between them, we propose:

That the States should withdraw immediately £15,000 of their Notes, nor have at any time more than £40,000 in circulation, give up all Banking transactions, and cease to collect the notes of the Banks.

In consideration thereof the Banks engage whenever they draw bills either on London or Paris, to take States' Notes for one half at least of their amount and to pass them to the public as their own.

The Banks further engage to supply the States annually with £10,000 in cash, each bank to provide for one half, by payments of £250 at a time, and this free of expence and in exchange for States' Notes.

The above agreement to remain in force until three months notice be given by either party to the others to annul the same.

We remain respectfully, Sir,
Signed for Priaulx, Le Marchant & Co.
Thomas D. Utermarck,
Abraham J. Le Mesurier.
For the Commercial Banking Co.,
H. D. G. Agnew}
T. De Putron } Managers.'

"And asked M. Le Bailiff to reply as follows:—

'Court House, Guernsey,
9 Oct., 1836.

Gentlemen,

The Committee named by the States on the 21st September for the purpose of conferring with the Banks which you represent, on the subject of the one pound notes current in this island, have taken into consideration the proposals which you have transmitted to them, under yesterday's date, 8th Oct.

The Committee adopt those proposals as the basis of the arrangement so desirable to be entered into, and from this day to be in force between the States and the Banks.—They do so, because the States may at any time, within 3 months, release themselves from the obligations which that arrangement imposes; and above all, because the sacrifice of pecuniary gain on the part of the States which it may deem to occasion, will be more than compensated by the harmony and good feeling which it will tend to promote among the inhabitants, and which constituting the chief happiness of a well regulated community, can hardly be too highly estimated.

With sentiments of a like friendly nature, sincerely entertained by the Committee towards yourselves, and the rest of their fellow citizens,

I have the honour to be, Gentlemen,

Your obedient humble servant
Daniel De Lisle Brock,
President of the States' Committee.'

"In consequence of this arrangement the Committee decided that £10,000 sterling of the total one pound notes in circulation on account of Fountain Street should be withdrawn as a Savings Bank loan at an interest of 3 per cent. per annum. Also that five thousand of those forming part of the old debt, called the Permanent Debt, should be withdrawn to be converted into obligations at 3 per cent. per annum."

In the discussion at the States Meeting on a proposition to authorise the payment of a sum spent on repairs to the coasts, there were references by three Members of the States to the fact that the expenditure of the States would be increased by having to pay interest on the 15,000 £1 notes withdrawn from circulation.

The same fact is alluded to in a few words by Daniel De Lisle Brock himself in his Billet d'Etat to the States, 20th September, 1838. Commenting on the Finance Committee's Report, he tabulates five items of annual loss, among which is found the terse remark, "The founding of the commercial banks causes an annual loss of £450."

Although the States thus agreed not to issue any more Notes, to complete the history it should be recorded that these £40,000—to be perfectly accurate the total amount in 1906 was £41,318—are still in circulation in the Island.