It will be recollected that in 1857 the British Parliament was 
hastily called together in consequence of the suspension of the 
Bank Charter Act,’ which, by letter of Nov. 12, in the midst of the 
monetary panic, the Premier and the Chancellor of the Exche- 
quer* had assumed the responsibilitv of decreeing. The Indemnity 
bill once passed,” Parliament adjourned, leaving behind a select 
Committee appointed “to inquire into the operations of the Bank 
acts of 1844 and 1845, as well as into the causes of the recent 
commercial. distress.” The Committee had, in fact, sat since the 
beginning of 1857, and had already published two heavy volumes, 
one of evidence, the other appendix, both relating to the 
operations and effects of the Bank Acts of 1844-45.° its labors 
were almost forgotten when the occurrence of the commercial 
crisis recalled it to life, and afforded it an “additional element of 
inquiry.” In the two heavy volumes to which we have referred, 
trade, just two months before its tremendous collapse, was 
declared to be “sound” and “safe.” As to the working of Sir 
Robert Peel’s Bank Act, Lord Overstone expressed himself before 
the Committee, on July -14, 1857, in these rather dithyrambic 
strains: 

“By strict and prompt adherence,” he said, “to the principles of the act of 1844, 
everything has passed off with regularity and ease; the morietary system is safe and 
unshaken; the prosperity of the country is undisputed; the public confidence in the 

b On December 12, 1857.— Ed. 

wisdom of the act of 1844 is daily gaining strength; and if the Committee wish for 
further practical illustration of the soundness of the principle on which it rests, or 
of the beneficial results which it has insured, the true and sufficient answer to the 
Committee is, look around you; look at the present state of trade of the country; 
[...] look at the contentment of the people; look at the wealth and prosperity which 
every class of the country presents; and then, having done so, the Committee may 
be fairly called upon to decide whether they will interfere with the continuance of 
an act under which those results have been developed.” 4 

Six months later, the same Committee had to congratulate 
Government upon having suspended this very same act! 

The Committee numbered among its members not less than five 
Chancellors or ex-Chancellors of the Exchequer, viz.: Mr. Disraeli, 
Sir G. C. Lewis, Mr. Gladstone, Sir Charles Wood, and Sir Francis 
Baring, backed by Mr. Wilson and Mr. Cardwell, two men long 
accustomed to find brains for Ministers of Finance. Beside these, 
all the magnates of the English bureaucracy had been added to it. 
In fact, it mustered about two dozen strong, and was a remarkable 
conclave of financial and economical wisdom. The questions to be 
decided were, first, the principles of the bank act, of 1844; 
secondly, the influence on commercial crises of the issue of 
bank-notes, payable on demand; and, lastly, the general causes of 
the recent distress. We propose, succinctly, to review the answers 
given to these different questions. 

Sir Robert Peel, the Parliamentary godfather, and Lord Over- 
stone, the scientific father, of the act of 1844,” which prohibited 
the Bank of England from issuing notes beyond the amount of 
£14,500,000, save on the security of bullion, flattered themselves 
they had prevented such pressures and panics as had periodically 
occurred from 1815 to 1844. Twice in ten years their expectation 
has been baffled, despite the extraordinary and unexpected aid 
afforded to the working of the act by the great gold discoveries.’ 
In 1847 and 1857, as is shown by the evidence laid before the 
Committee, the panics were even of a more intense and 
destructive character than any ever witnessed before. Twice, in 
1847 and 1857, the Government had to infringe the bank act, in 
order to save the bank and the monetary world revolving around 
it. 

The Committee, it would appear, had to decide on a very simple 
alternative. Either the periodical violation of the law by the 
Government was right, and then the law must be wrong, or the 
law was right, and then the Government ought to be interdicted 

from arbitrarily tampering with it. But will it be believed that the 
Committee has contrived to simultaneously vindicate the perpetui- 
ty of the law and the periodical recurrence of its infraction? Laws 
have usually been designed to circumscribe the discretionary 
power of Government. Here, on the contrary, the law seems only 
continued in order to continue to the Executive the discretionary 
power of overruling it. The Government letter, authorizing the 
Bank of England to meet the demands for discount and advances 
upon approved securities beyond the limits of the circulation 
prescribed by the Act of 1844, was issued on Nov. 12; but up to 
the 30th the Bank had, on a daily average, to throw into 
circulation about half a million of notes beyond the legal margin. 
On Nov. 20, the illegal surplus circulation had risen to about a 
million. What other proof was wanted of the mischievous futility 
of Sir Robert Peel’s attempt at “regulating” the currency? The 
Committee are quite right in affirming “that no system of 
currency can secure a commercial country against the conse- 
quences of its own imprudence.”* But this sage remark is not to the 
point. The question was, rather, whether the monetary panic, 
which forms only one phase of the commercial crisis, may or may 
not be artificially aggravated by legislative enactments. 
In justification of the Bank Act, the Committee say: 

“The main object of the legislation in question was undoubtedly to secure the 
variation of the paper currency of the kingdom according to the same laws by 
which a metallic circulation would vary. No one contends that the object has not 
been attained.” 

We remark in the first place that the Committee decline to state 
their opinion as to the laws by which a metallic circulation would 
vary; because they were afraid “they would not be able to arrive at 
any conclusion without much difference of opinion.”‘ In the 
opinion of the bullionists, led by Sir Robert Peel, a merely metallic 
circulation would contract or expand in accordance with the state 
of the exchange—that is to say, gold would flow in with a favorable 
exchange, while it would leave the country with an unfavorable one. 
In the former case, general prices would rise; in the latter, they 
would fall. Now, supposing these violent fluctuations of prices to be 
inherent in a purely metallic circulation, Mr. J. S. Mill was certainly 
right in stating before the Committee ‘ that the condition to be aimed 

at by a paper currency was not to imitate but to correct and 
supersede such disastrous vicissitudes. 

But the premises the bullionists proceed from in their reason- 
ings have been proved to be imaginary. In countries where no 
credit operations exist, and consequently no paper circulation, as, 
comparatively speaking. was the case until recently in France, and 
is still the case on a much greater scale throughout Asia, private 
hoards of gold and silver are everywhere accumulated. When 
bullion is drained by an unfavorable exchange,these hoards open 
in consequence of a rise in the rate of interest. When the 
exchange turns, the hoards again absorb the surplus of the 
precious metals. In neither case, is a vacuum created in the 
currency, nor the opposite. The efflux and influx of bullion affect 
the state of the hoards, but not the state of the currency, and thus 
no action at all is exercised upon general prices. What, then, does 
the apology of the Committee amount to, that the Bank act of 
1844, in periods of pressure, tends to create sudden fluctuations 
of prices which it falsely supposes would occur on the foundation 
of a purely metallic currency? But say the Committee, the 
convertibility of the notes, which it is the first duty of the Bank to 
maintain, is at least guaranteed by Sir Robert Peel’s act. They add: 

“The supply necessarily maintained in the coffers of that establishment under 
the provisions of the act of 1844, is greater than that which was ever maintained 
under circumstances of pressure in former times. During the crisis of 1825, the 
bullion fell to £1,261,000; in 1837 to £3,831,000, and in that of 1839 to 
£2,406,000, while the lowest points to which it has fallen since 1844 have been, in 
1847 £8,313,000, and in 1857 £6,080,000.” 4 

In the first instance, the convertibility of the notes was upheld in 
all those panics, not because the Bank possessed bullion enough to 
realize its promises, but simply because it was not asked to pay 
them in gold. In 1825, for instance, the Bank withstood the run by 
issuing £1 notes. If the comparatively greater bullion reserves in 
1847 and 1857 are considered as simply the consequences of the 
act of 1844, then, on the same reasoning, to the same act must be 
attributed the fact that in 1857 the bullion reserve, despite 
California and Australia, had sunk by more than £2,000,000 below 
the level of 1847. But, although possessed of twice or thrice the 
amount of gold which it had owned in 1825 and 1836, the Bank 
of England, thanks to the provisions of Sir Robert Peel’s act, 
trembled in 1847 and 1857 on the verge of bankruptcy. According 

to the evidence of the Governor of the Bank,’ the entire reserve of 
the banking department on Nov. 12, 1857, the day of the issue of 
the Treasury Letter, was only £580,751, its deposits at the same 
time amounting to £22,500,000, of which near £6,500,000 
belonged to London Bankers. But for the appearance of the 
Treasury Letter, the shop must have been shut up. To raise or 
reduce the rate of interest—and the Bank confesses that it had no 
other means of acting upon the circulation —is an operation which 
was applied before the passing of the act of 1844, and which, of 
course, might still have been applied after its repeal. But, says the 
Bank, the Directors want their virtue to be fortified by the act, and 
it would not be expedient “to leave them to their own unresisted 
wisdom and firmness.” In ordinary times, when the act is 
notoriously a dead letter, they want to be fortified by the fiction of 
its legal operation, and in moments of pressure, the only moments 
in which it can operate at all, they want to get rid of it by a 
Government ukase.