During the month of September panic pervaded the monetary and commercial world. Failures in every branch of business in London and in the provinces were numerous and disastrous. The following were among the most extensive in London:—
Liabilities. Sanderson and Co...................... £1,725,900 J. and S. Woolley ..................... 90,500 Reid, Irving, and Co................... 1,500,000 Gower, Nephews........................ 450,000 Cockerell and Co...................... 600,000 Bensusan and Co...................... 60,000 Perkins, Schlusser, and Mullens...... 150,000 Luall, Brothers, and Co................ 400,000 Philips and Co......................... 150,000 Prime, Ward, and Co................... 100,000 Robinson and Co......................... 96,000 Castellain................................. 100,000 Giles and Co............................ 160,000
Some of these persons, and many others who incurred like misfortune, had been regarded as opulent merchants or bankers, and were men of position and influence. Mr. Robinson was, at the time of his failure, a governor of the Bank of England; Sir John Rae Reid had lately filled that office. Mr. Gomer and Mr. Settle were bank directors at the time of their stoppage.
The Bank of England not only raised its rate of interest to eight per cent., but contracted the time of accommodation to thirty days. The funds, always susceptible of the influence of an uneasy state of public affairs, and of violent changes in the money market, were at this juncture peculiarly so, falling as much as two per cent, in a single day. Consols were as low as eighty-four. Railway shares suffered more than any other kind of stock or scrip, becoming so depreciated in the market as to be unsaleable. A great outcry was raised against the monetary policy which had been initiated by Sir Robert Peel. “Peel’s bill” was the subject of unmeasured denunciation by all who were accustomed to obtain bank accommodation, but to whom that advantage was no longer open. Early in October a deputation from the city bankers waited upon the government for the purpose of inducing some relaxation upon the stringency of Sir Robert Peel’s bill. The deputation consisted of most influential men—such as Mr. Masterman, Mr. Abel Smith, Mr. Glynn, Mr. Bevan, Mr. Barnett. The chancellor of the exchequer addressed the deputation in terms which led them to expect that the object for which they were deputed would be accomplished. Their expectations were not disappointed, for the following letter was addressed to the governors of the Bank:—
“Her majesty’s government have seen with the deepest regret the pressure which has existed for some weeks upon the commercial interests of the country, and that this pressure has been aggravated by a want of that confidence which is necessary for carrying on the ordinary dealings of trade. They have been in hopes that the check given to transactions of a speculative character, the transfer of capital from other countries, the influx of bullion, and the feeling which a knowledge of these circumstances might have been expected to produce, would have removed the prevailing distrust. They were encouraged in this expectation by the speedy cessation of a similar state of feeling in the month of April last. These hopes, however, have been disappointed, and her majesty’s government have come to the conclusion that the time has arrived when they ought to attempt, by some extraordinary and temporary measure, to restore confidence to the mercantile and manufacturing community. For this purpose, they recommend to the directors of the Bank of England, in the present emergency, to enlarge the amount of their discounts and advances upon approved security; but that, in order to retain this operation within reasonable limits, a high rate of interest should be charged. In present circumstances they would suggest that the rate of interest should not be less than eight per cent. If this course should lead to any infringement of the existing law, her majesty’s government will be prepared to propose to parliament, on its meeting, a bill of indemnity. They will rely upon the discretion of the directors to reduce as soon as possible the amount of their notes, if any extraordinary issues should take place within the limits pi escribed by law. Her majesty’s government are of opinion that any extra profit derived from this measure should be carried to the account of the public, but the precise mode of doing so must be left to future arrangement. Her majesty’s government are not insensible to the evil of any departure from the law which has placed the currency of this country upon a sound basis; but they feel confident that, in the present circumstances, the measure which they have proposed may be safely adopted; and that, at the same time, the main provision of that law and the vital principle of preserving the convertibility of the bank-note may be firmly maintained.”
The Bank directors passed resolutions consequent upon this letter, which were of great importance to the trading community. These resolutions were conveyed to the government by a letter from the governor and deputy governor of the Bank:—
Bank Resolutions.
“Resolved,—That this Court do accede to the recommendation contained in the letter from the First Lord of the Treasury and the Chancellor of the Exchequer, dated this day, and addressed to the Governor and Deputy Governor of the Bank of England, which has been read;
“That the minimum rate of discount on bills not having more than 95 days to run be 8 per cent;
“That advances be made on Bills of Exchange, Stock, Exchequer Bills, and other approved securities, in sums of not less than £2000, and for periods to be fixed by the Governors, at the rate of 8 per cent, per annum.”