Viscount Palmerston to Queen Victoria.

CRISIS IN THE CITY

Downing Street, 12th November 1857.

Viscount Palmerston presents his humble duty to your Majesty, and begs to state that the condition of financial affairs became worse to-day than it was yesterday.[53] The Governor of the bank represented that almost all private firms have ceased to discount bills, and that the Reserve Fund of the Bank of England, out of which discounts are made and liabilities satisfied, had been reduced last night to £1,400,000, and that if that fund should become exhausted the bank would have to suspend its operations. Under these circumstances it appeared to Viscount Palmerston, and to the Chancellor of the Exchequer, that a case had arisen for doing the same thing which was done under somewhat similar circumstances in 1847—that is to say, that a letter should be written by the first Lord of the Treasury and the Chancellor of the Exchequer to the Governor of the Bank of England, saying that if under the pressure of the emergency the bank should deem it necessary to issue more notes than the amount to which they are at present confined by law, the Government would apply to Parliament to grant them an indemnity.

This Measure, in 1847, had the effect of stopping the then existing panic, and the necessity for making such an issue did not arise; on the present occasion this announcement will, no doubt, have a salutary effect in allaying the present panic, but as the bank had to discount to-day bills to the amount of £2,000,000, which they could not have done out of a fund of £1,400,000, unless deposits and payments in, to a considerable amount, had been made, the probability is that the issue thus authorised will actually be made. The Governor and Deputy-Governor of the bank represented that the communication, in order to be effectual and to save from ruin firms which were in imminent danger, ought to be made forthwith, so that they might be enabled to announce it on the Stock Exchange before the closing of business at four o'clock. Viscount Palmerston and Sir George Lewis therefore signed at once, and gave to the Governor of the bank the letter of which the accompanying paper is a copy, the pressure of the matter not allowing time to take your Majesty's pleasure beforehand.

SUSPENSION OF BANK CHARTER ACT

The state of things now is more urgent than that which existed in 1847, when the similar step was taken; at that time the Reserve Fund was about £1,900,000, last night it was only £1,400,000; at that time the bullion in the bank was above £8,000,000, it is now somewhat less than £8,000,000; at that time things were mending, they are now getting worse.

But however necessary this Measure has been considered, and however useful it may be expected to be, it inevitably entails one very inconvenient consequence. The Government have authorised the bank to break the law, and whether the law shall actually be broken or not, it would be highly unconstitutional for the Government not to take the earliest opportunity of submitting the matter to the knowledge of Parliament. This course was pursued in 1847. The letter from Lord John Russell and Sir Charles Wood to the Governor of the bank was dated on the 25th October, Parliament then stood prorogued in the usual way to the 11th November, but a council was held on the 31st October, at which your Majesty summoned Parliament to meet for the despatch of business on the 18th November; and on that day the session was opened in the usual way by a Speech from the Throne. It would be impossible under present circumstances to put off till the beginning of February a communication to Parliament of the step taken to-day.

Viscount Palmerston therefore would beg to submit for your Majesty's approval that a Council might be held at Windsor on Monday next, and that Parliament might then be summoned to meet in fourteen days. This would bring Parliament together in the first days of December, and after sitting ten days, or a fortnight, if necessary, it might be adjourned till the first week in February.54

Viscount Palmerston submits an explanatory Memorandum which he has just received for your Majesty's information from the Chancellor of the Exchequer....