In the meantime, the subject of the proper regulation of the currency underwent a good deal of discussion, and in the year 1819 the Act known as "Peel's Bill" was passed. It provided that after 1821 the bank should be compelled to pay its notes in bullion at the rate of £3 17s. 10-1/2d. per ounce, and that after 1823 holders of notes might demand at the bank current coin of the realm in Exchange. The same Act abolished the legal tender of silver for any sum beyond forty shillings.
This made matters worse. Banks became more stringent. Prices of all commodities fell. Numbers of people were thrown out of work. Poor's rates increased in amount and frequency, and general discontent prevailed. Corn and agricultural produce no longer fetched war prices. Landlords insisted upon retaining war rents, which farmers were unable to pay. To meet this difficulty, Parliament passed the Corn Laws, hoping thereby to keep up prices. These new laws produced the contrary effect. Wheat fell from 12s. to 5s. the bushel. Rents could not be collected. Mortgages upon land could not be redeemed, and land became practically unsaleable.
Things at length attained such a condition, that Government became seriously alarmed, and brought into Parliament five distinct money bills in one night. These bills were hurried through both Houses as fast as the forms of Parliament would allow. All of them had for their object the relaxation of the stringency of the money laws; and one Act permitted the issue of one pound notes for ten years longer, i.e., to 1833.
Trade immediately revived. Labour became abundant, and everyone, high or low, in the country, felt immediate relief and benefit. Unfortunately, with the return to prosperity came the usual unwise rebound in public feeling. Everything became couleur de rose. The wildest joint stock enterprises were projected. Capital, obtained on easy terms of credit, was forced into every branch of commerce. Trade was pushed beyond legitimate requirements. Imports of cotton, wine, and silk increased so far beyond their usual amount, that the rates of exchange turned against this country. The Bank of England, in self-defence, "put on the screw." Money invested in distant countries, in speculative operations, was now badly wanted at home. Suspicion arose, and confidence was shaken. Merchants, in default of their usual help from bankers, suspended payment. Bankers themselves, having depended upon the return of their former advances, were in great peril. Alarm having become general, there was a simultaneous run for gold throughout the country, with the result that in a very short time seventy-nine banks stopped payment, of which no fewer than fifty-nine became bankrupt. The whole kingdom was in a frightful state of consternation. Failure followed failure in rapid succession. The whole circulation of the country was deranged, and at the beginning of December, 1825, the Bank of England stock of cash amounted only to a very few thousand pounds.
Ministers were called together in haste, and Cabinet Councils were daily held. It was decided to issue two millions sterling of Exchequer bills, upon which the bank was authorised to issue an equal amount of notes. The bank was also "recommended" to make advances of a further sum of three millions, upon the security of produce and general merchandise.
At this moment a fortunate discovery was made which did more to allay the excitement than the measures just mentioned. The bank had ceased to issue one pound notes six years before, and it was thought that they had all been destroyed. Accidentally, and most opportunely, when things were at the worst, one of the employés of the Bank, in searching a store-room, found a case of the £1 unissued notes, which had escaped observation at the time of the destruction. They were at once issued to the public, by whom they were hailed with delight, as the first "bit of blue" in the monetary sky. Under these re-assuring circumstances the panic soon subsided, but it left its blighting legacy of misery, ruin, diminished credit, and general embarrassment.
The banking laws were soon after altered. The Bank of England was induced to forego its exclusive monopoly of having more than six proprietors, and the formation of joint stock banks consequently became possible. A new era in banking commenced, which, modified from time to time, has existed down to the present time.
It will be seen that the close of the war, in 1814, was the commencement of the great and violent monetary changes I have attempted to describe. There were then six banks in Birmingham. Two of these are altogether extinct; the other four have merged into existing banks. For convenience sake, I will sketch the extinct banks first, and afterwards show the processes by which the others have been incorporated with existing institutions.
At the period mentioned, the firm of Smith, Gray, Cooper, and Co. had the largest banking business in the town. They carried on their operations in the premises in Union Street now occupied by the Corporation as offices for their gas department. This bank did a large business with merchants and wholesale traders, and it "was a very useful bank." After several changes, the firm became Gibbins, Smith, and Goode. In the great panic of 1825, one of their customers, a merchant named Wallace, failed, owing them £70,000. This, with other severe losses, brought them down. They failed for a very large amount. Such, however, had been their actual stability, that, after all their losses, and after payment of the costs of their bankruptcy, the creditors received a dividend of nineteen shillings and eightpence in the pound. Mr. Smith, of this firm, was a man of great shrewdness and probity, and was greatly esteemed by his friends. The late Mr. Thomas Upfill had, in his dining-room, an excellent life-size portrait of Mr. Smith, taken, probably, about the year 1820. This portrait is now in the possession of a lady at Harborne. The face is a shrewd and observant one, and it always struck me as having a remarkable likeness to the great James Watt, the engineer. Of Mr. Gibbins and Mr. Goode we shall hear more as we go on, but "Smith's Bank" became extinct.
The firm of Galton, Galton, and James had their offices in the tall building in Steelhouse Lane, opposite the Children's Hospital. They weathered the storm of 1825, but, some years later on, Mr. James accepted the post of manager of the Birmingham Banking Company, whereupon the remaining partners retired into private life, and the bank was closed.