Territorial Debt of India, Bank of England.

(Errors excepted.)

There is a class of politicians in this country with just one idea; and that idea is, there is nothing good in public economy unless it be conducive to the accumulation of capital. The distribution of wealth is a consideration of no importance; their only object being to heap it up in masses, no matter how disproportioned, provided the total amount is augmented. For this purpose, they have been always recommending the indefinite enlargement of farms, the substitution of machinery for manual labour, and the establishment of banks of credit and paper-money. That their principles are true in the abstract, and that the application of them, within certain limits and under certain circumstances, would be beneficial, we have little doubt; but their unqualified and precipitate adoption would, in our opinion, be productive of disastrous consequences. In every case, we believe, they tend to augment the aggregate wealth of the community, but not the aggregate amount of social happiness. National happiness, however, is more important than national wealth; and a system which would compromise the former for the attainment of the latter, sacrifices the end to the means. The direct tendency of the principles of the Economists is to destroy the intermediate links of society; or, more correctly, to consolidate them in one end of the chain;—to replace the feudal aristocracy, from which Europe has suffered so much, with a monied aristocracy more base in its origin, more revolting in its associations, and more inimical to general freedom and enjoyment.

The history of banking affords an apt illustration of the practical tendency of the unqualified dogmas of the Ricardo school. Banking has always been the favourite invention of these theorists, as tending most effectually to the extension of credit, the development of industry, and accumulation of capital. These are its natural results; but such advantages may be more than counterbalanced by an alloy of accompanying evils. In England, we consider the system of credit founded on bank paper to have been the chief auxiliary and main stay of the reckless and unprincipled government of the last forty years. It was this which enabled ministers to build up the baseless superstructure of the Funds, which must ultimately fall, not on its guilty authors, but on those who have unwarily confided in their delusive representations. It was this which enabled them to destroy the currency of 1797, to substitute, for 26 years, in place of the universal medium of exchange, a forced inconvertible representative, which raised prices to an unnatural height, altered the standard of value, by which all existing contracts and engagements were violated; and then, when the profligate errors so committed were to be repaired, the country was again dragged through a series of changes and calamities not less unjust and ruinous than those it had previously suffered. These are not the only evils of the banking system; it has demoralized the country and exercised a baneful influence on internal economy, by giving an undue ascendancy to particular branches of industry—the commercial and manufacturing, for instance; it has given an artificial impulse to population,—multiplying the number of the people beyond the means of permanent employment and subsistence; it has created a vast monied interest, whose sole element is war, gambling, and speculation; it has been a principal cause of over-trading, of mercantile revulsions and vicissitudes, and the endless source of frauds, litigation, arrests, insolvencies, and bankruptcies.

These evils, it will be alleged, are not inherent in banking, but have been the consequences of banking not being conducted on sound principles. What the sound principles of banking are the professors of the “science of exchanges” have not yet distinctly laid down. One of the sound principles of the Bullionists in 1810 was that bank paper should always be convertible into coin at the will of the holder. But experience proved that this was no effectual guarantee against over-issues. The paper of the Bank of England and of the provincial banks was so convertible in 1825; but it did not avert the commercial crisis which arose out of the redundant issue of their notes and bills of exchange. The fact is, the political economists are wise after the event, like many other people with much less pretensions to depth and comprehensiveness. While the banking system was in its full career of fallacious prosperity, they never forewarned the community of its disastrous consequences; they were as little gifted with foreknowledge as others, and, like others, only learnt from experience. Similar results have flowed from other branches of their science. They discovered that a saving might be effected by farming on a great scale, and by manufacturing on a great scale; but they could discern nothing further: they could not discern the political, the social, and moral calamities which would flow from the aggregation of great capitals in agricultural and manufacturing industry.

It is this want of foresight of practical evils which ought to make us cautious in adopting the maxims of the Economists. France has recently passed through the same ordeal as England. During the summer of 1830, she suffered from precisely the same causes as those which produced such wide-spread distress in this country in 1811, 1815, and 1825; and the sudden collapse of an extensive system of banking, credit, and mercantile paper, by occasioning great pecuniary embarrassments, threatened, at one period, to impede the full triumph of her glorious revolution.

We shall, however, leave these general topics to come to our more immediate object,—the origin and present state of the powerful corporation in Threadneedle-street—the great foster-parent of banking, credit, and paper-money in this country. In treating of the Bank of England, there appear to be three objects particularly deserving of attention. First, a brief outline of the history and connexion of the Bank with government. Secondly, the enormous profits it has derived, and the immense wealth it has accumulated from that connexion. Thirdly, its present state and influence. We shall treat on these subjects as briefly as possible, so as to put the reader in possession of the most important facts necessary to a knowledge of them.

The Bank had its origin in war and taxation; and was originally projected by one Paterson, a Scotch speculator, who was afterwards engaged in the disastrous project of colonization at Darien. William III. who introduced standing armies, the excise-laws, the funding system, and other calamities, wanted money to carry on a vigorous war against the French. An act passed, inviting people to make voluntary advances to the amount of £1,500,000; and, for securing the payment of the interest, taxes were laid upon beer, ale, and other liquors. Upon condition of £1,200,000 of this sum being advanced within a certain time, the subscribers were to be incorporated; and, this being done, the incorporation took place, and the subscribers were formed into a trading company, called, “The Governor and Company of the Bank of England.” The charter of corporation was executed July 27, 1694; and directs, among other things, that a governor or deputy-governor, and twenty-four directors, shall be chosen for conducting the establishment; that thirteen or more of them (the governor or deputy-governor being always one) shall constitute a court for the management of the affairs of the Company; that the qualification of the governor shall be at least £5000 stock; deputy-governor £3000; directors £2000 each; and every elector £500; that four general courts shall be held every year, when the majority of electors present may make bye-laws for the government of the corporation; and that “no dividend shall at any time be made by the said governor and Company save only out of the interest, profit, or produce arising by or out of the said capital, stock, or fund, or by such dealing as is allowed by the act of parliament.” For the £1,200,000 lent to government, they were to receive yearly £100,000; £96,000, the interest at eight per cent. and £4000 for the charges of management. Their loan to government might be redeemed on a year’s notice; and, in that case, the charter and company to expire.

Such is the origin and constitution of the Bank; on which, one or two remarks may be made. It is clear, from the act of incorporation, (the 5 & 6 William and Mary,) that nothing more than the establishment of a company of traders, or pawnbrokers, was intended; and that it never was surmised that they would ever form a part of, or have any dominant influence in, the government. The act specifies, very particularly, the sort of trade they were to carry on: they were not to trade in goods or merchandise, but to employ their capital in advancing money on goods and pledges, in discounting bills of exchange, and the buying and selling of gold and silver bullion; with a permission, however, to sell such goods as were mortgaged to them, and not redeemed within three months after the expiration of the time of redemption.

But, still further to confine these traders and pawnbrokers to their province, and prevent any further connexion with the executive, of which the parliament of that day appears to have been somewhat apprehensive, the same law of William and Mary imposes a penalty upon the Directors if they purchase, on account of the corporation, any crown lands, or if they advance to his Majesty any sum of money, by way of loan or anticipation of any branch of the public revenue, other than on such funds only on which a credit is or shall be granted by parliament. Contrary to this clause, and notwithstanding the penalty, the Directors continued to make advances from time to time, on treasury bills, to the year 1793. In that year, Mr. Bosanquet was governor; he had some doubt of the legality of these advances, and applied for a bill of indemnity: the Bank having then become an essential part of the government, this was easily obtained; and an act was passed to protect the governor and company from any penalties they had incurred, or might incur in future, on account of any advances to government.

There are few facts in the early history of the Bank meriting particular notice. During the great re-coinage of 1696, the company was involved in considerable difficulty, and was even compelled to suspend payment of its notes, which were at a heavy discount. Owing, however, to the skilful management of the directors and the assistance of government, the Bank got over this crisis. But it was at the same time judged expedient, in order to enable the copartners to withstand any subsequent pressure, to augment their capital to £2,201,171.

In 1745 the alarm occasioned by the advance of the Highlanders under the Pretender, led to a run on the Bank; and, in order to gain time, the Directors resorted to the expedient of paying in shillings and sixpences! During Lord George Gordon’s riots in 1780, the Bank incurred considerable danger. Had the mob attacked the establishment at the commencement of the riots, before it was put into a state of defence, the consequences might have been fatal. Subsequently a military force has been nightly placed in the Bank as a protection in case of emergency.

The next circumstance deserving notice is the increase in the denomination of the notes issued by the Company. For above sixty years, no notes were issued for a less sum than twenty-pounds; and these were made payable to the bearer on demand; and for the amount of which notes, in the legal coin of the realm, the Company was liable to be sued and arrested. As the Bank enlarged its advances to government, it became necessary to lower the denomination of its notes. A different reason has been assigned; but this, no doubt, is the true one. It is clear, indeed, that the real capital of the Bank being a limited sum, it could only have money to lend to government by increasing its fictitious capital; in other words, by extending its issue of paper; which again could only be done by lowering the denomination of its notes. While £20 notes alone were issued, their circulation, from their amount, being limited to the commercial and trading classes, no great quantity of paper could possibly be emitted; but when notes of the value of 15, 10, 5, and 1 pound were issued, their circulation extending through all classes of the community, the issue of Bank paper would proportionately increase. Government, therefore, in order to obtain advances from the Bank, readily permitted the issuing of notes of smaller value. In the war of 1755, the Bank began to put out notes of the value of £15; and before the conclusion of that war, notes of the value of £10. At the commencement of the Anti-Jacobin war, in 1793, they were still further indulged, and allowed to issue £5 notes; and, lastly, in the year 1797, came the £1 and £2 notes. Rents, wages, salaries, taxes, and every thing else, could now be paid in Bank paper; and the Restriction-Act having protected the Bank from the necessity of taking up their own notes, they were issued in prodigious quantities; and in exactly the same proportion the Bank enlarged its advances to Government. The following statement, extracted from the report of the Committee of the House of Lords, in 1819, of the amount of Bank paper in circulation in different years; and of the amount of the sums advanced to government on exchequer-bills, and other government securities, will show the connexion which has subsisted between the issue of paper and advances to government:—

Having shown the causes which led to the issue of small notes, and the connexion betwixt the issue of Bank paper and advances to government, we shall now mention some other points connected with the history of this Company.

Without the assistance of the Bank the immense fabric of debt and taxation could not have been reared. Of this government appears to have been soon sensible, from the numerous laws enacted for its protection and encouragement. To prevent competition from the Mine Adventure Company, which had commenced banking, and began to issue notes, it was provided by the 6th of Anne that no other banking company of more than six persons, should issue notes payable in less than six months. Innumerable acts have passed, imposing the penalty of death for forging Bank notes; others, the punishment of transportation, on persons uttering, or having them in their possession. The English code has been made the bloodiest in the world, in order to uphold the Oligarchy and the paper system, and its laws more savage than those of Draco. But of these, and also the Restriction Act, we shall speak shortly; let us now only attend to those laws for upholding the credit of its paper.

After the Restriction-Act, the Bank ceased to be an independent company; it might be considered a government office, of which the governor and directors had the management; and which issued a forced government paper. Paper issued under such circumstances would necessarily depreciate; and this was an evil which it was of importance to government, as far as possible, to prevent. Having by force kept bank-notes in circulation, it seemed a slight extension of the same desperate principle to attempt also by force to maintain their credit. Various laws were passed for this purpose. After the Restriction-Act, a law passed to protect debtors from arrest, who tendered payment in notes, though they still continued liable to a common action for debt, to compel payment in guineas. This was the first attempt of the boroughmongers to render Bank-paper a legal tender, and equivalent to gold. In 1810, when paper had depreciated 30 per cent., and guineas sold for from 25s. to 28s. in bank-notes, a law passed to punish persons pursuing this traffic, and imposing penalties on those who sold them for their real value in paper. Tenants, who offered notes for rent, were protected from distress, though liable to a common action of debt or ejectment. At length, in 1811, Lord King having given notice to his tenants to pay their rents in guineas, the legal coin of the realm, an act passed to protect persons, tendering payment in notes, from all further proceedings. This was nearly the climax. Bank paper was now a legal tender to all intents and purposes; and by the fiat of the Oligarchy, old rags were metamorphosed into gold. Even this was not enough to satisfy the omnipotent parliament; they actually passed a resolution, declaring a one-pound bank-note and a shilling equal in value to a guinea, though the latter was openly selling for twenty-seven shillings!

Let us now revert to the capital part of Bank legislation—the Restriction-Act. By turning to the preceding page, and observing the amount of the Bank advances to government in the year 1796, and reflecting on the various laws enacted in favour of the Company, it will appear that an intimate connexion and mutual dependence had been created betwixt the Bank and Government, before the Restriction-Act, in 1797; that law, however, fairly incorporated the Bank with church and state. The causes which produced the stoppage were briefly these:—From the commencement of the year 1797, great apprehensions were entertained of a French invasion: the people were alarmed for the stability of the government: consequently for the stability of the Bank, which depended upon the government: a run upon the Bank ensued; the credit of the establishment was endangered; and suspicion, which Paine justly denominates credit asleep, was now awakened. The run on the Bank continued hourly to increase, till Saturday the 25th of February, 1797. This was the last day the Bank was compelled to pay their notes on demand, agreeably to the tenor of their notes, and the conditions on which they had been issued. The alarm not being likely to subside, and the run continuing to increase till the latest hour the Bank was open, on the next day, Sunday, an order was issued from the Privy Council, requiring the Bank to forbear issuing any more cash, till the sense of parliament could be taken on the subject. This order, as might be expected, was instantly obeyed, a few days more would have drawn out of the Bank coffers the last farthing of cash and bullion. The Company wished anxiously to conceal the amount of specie in their possession at the time of the stoppage: but, by an ingenious calculation of Mr. Allardyce, this point was subsequently ascertained almost to a certainty. It appears, that, on the 25th of February, the last day of payment, the notes in circulation amounted to £8,640,250, and the total amount of cash and bullion in the Bank, to only one million two hundred and seventy two thousand pounds.

The Bank, like true traders, has always manifested great anxiety about the credit of the house, and endeavoured to make it appear that the stoppage did not originate in the necessities of the Bank, but the necessities of the government. In the resolutions of a court of directors, on the 25th March, 1797, affixed to the second report of the Bank committee of 1819, it is said, “That the restriction on cash payments was altogether a measure of state necessity.” Whether it originated in the necessities of the Bank, or of the boroughmongers, or both—the latter appears most probable—it is not very material to inquire: but it appears that on the last day of payment the Bank had little more than a million of cash and bullion to pay more than eight millions of their notes; and how, under such circumstances, the Bank could have met their creditors, or what could have protected them from arrest for debt, but the interference of government, it is not easy to conceive.

But the fact is, the stoppage was concerted betwixt Mr. Pitt and the directors. Sometime before the order in council was issued, Mr. Bosanquet and other directors had had repeated interviews with that minister to consult how the run could be stayed, and the Company saved from impending bankruptcy. The last interview was on the 22d of February; the Directors were then in a terrible fright; they told the minister they were “alarmed for the safety of the house;” and asked him, when “he would think it necessary to interfere.” Pitt interfered on the following Sunday; a singular day for the consummation of this extraordinary transaction. Immediately after, the Bank had recourse to a great deal of dissimulation to disguise their insolvency from the public. On the 2d of March, six days after the stoppage, a court of proprietors was called. Mr. Bosanquet, who waited on the Minister to express his fears for the “safety of the house,” and to know when Government would interfere, was present. After expatiating on the then prosperous state of Bank affairs, this gentleman told the proprietors that he earnestly hoped they would soon be permitted to pay their notes, as usual, in cash. Thanks were then voted to the directors for complying with the order in council, which empowered them to violate their engagements to the public with impunity, and refuse payment for their notes. All this was excellent. Mr. Bosanquet “earnestly hoped” that they would be permitted to do that which he had earnestly petitioned Mr. Pitt they might be protected from doing; and the proprietors gravely thanked the directors for complying with their own earnest request!

The Order in Council, requiring the Bank to issue no more cash, was issued on the 26th of February. The Restriction-Act received the royal assent on the 3d of May, and was to continue in force till the 24th of June, that is, only for fifty-two days. On the 22d of June, two days before the expiration of the original act, it was renewed till one month after the next session of Parliament. This was the first renewal; the second renewal was in 1798, to continue till one month after the signing of a definitive treaty of peace. Peace came in 1801; but, before the expiration of the month, the third renewal was passed, to continue till the 1st of March, 1803; before that time, notwithstanding peace continued, a fourth renewal passed to continue till six weeks after the next session of Parliament. In the interim war broke out; the fifth renewal followed as a matter of course, and to continue till the singing of a definite treaty of peace. In 1814, plaguy peace came again to put these delusions to the test; but before the expiration of the six months, the sixth renewal passed, to continue only one year. In 1816, the country being at peace, every one expected the law would expire: when lo! it was renewed the seventh time, for two years! In 1818, it was again renewed, for the eighth time, for one year; and in 1819, it was renewed for the ninth time, and the Bank protected from payment of its notes in statutable coin for four years.

This was the last renewal, the Bank in 1823 resuming payments in specie, after a suspension of twenty-six years. It was thought by many, and confidently predicted by some, such an event could not possibly happen. These views were fallacious, originating in misconception; all that was requisite to enable the Bank to fulfil its engagements were a general peace, public confidence, and such a favourable state of the exchanges as would enable it to obtain a supply of the precious metals adequate to meet the probable demand for gold in lieu of paper. These circumstances concurring at the period fixed for the resumption of cash-payments, the Bank resumed its ancient course of business, and an event to which such undue importance had been previously attached, was actually consummated without exciting the least interest or attention.

One of the greatest calamities resulting from the suspension of cash-payments by the Bank, and consequent inundation of the country with small notes, was the vast increase in the number of prosecutions for forgery. It appears, from returns to parliament, that, in the interval from 1797 to 1818, the Bank instituted 998 prosecutions either for forging, uttering, or having forged notes in possession. The results of these prosecutions were a dreadful sacrifice of human life; and it has been calculated that four hundred victims were offered up in the space of twenty-one years to the Moloch of paper money. As a set off against this terrible calendar, it is proper to mention that there was an abatement in the number of Mint prosecutions.

Another evil may be justly charged to the vast amount of paper issued by the Bank of England; the great extent of their circulation gave them a complete control over the national currency, which enabled them, at their own arbitrary discretion, merely by contracting or enlarging their issues, to determine the prices of all articles of consumption and merchandize. Thus was a company of traders, without responsibility or peculiar fitness for so grave a function, and whose conduct experience proved not to be always influenced either by absolute wisdom or disinterestedness, empowered to entail on the body of the people a plenty or scarcity of the necessaries of life, and on the commercial public the most sudden and disastrous vicissitudes.

Our next object will be to give an account of the Bank profits, and the enormous wealth it has acquired since the suspension of cash-payments.

The profits of the Bank arise from various sources. First, from the interest of their notes in circulation, which, in some years, as in 1817, amounted to more than twenty-nine millions. Secondly, from balances of public money. These balances arise from the public dividends, payable by the Bank, but unclaimed, and from the produce of different taxes paid into the Bank, and which have not been drawn out for the service of government. On an average of ten years, from 1806 to 1816, the balances amounted to £11,000,000, on which the Bank gained an interest of five per cent. per annum. The amount of public balances has since fallen considerably; in 1825 they amounted at an average to £5,247,314; and in 1829 to £3,862,656.

The third source of profit is the interest on their capital and savings. The Bank’s permanent capital amounts to £14,686,800, lent to government at an interest of 3 per cent. The fourth source of profit is from the management of the public debt. From a late act for the management of the debt, the Bank is paid £340 per million per annum, when its amount shall be 400 millions, and not exceed 600 millions: and £300 per million on such part of the debt as exceeds 600 millons.

Besides these sources of profit, the Bank derives a profit from its trade in bullion, the destruction of its notes, and the private deposits of individuals. It also has a profit, at the rate of £805 : 15 : 10 per million, for receiving subscriptions on loans contracted for by government. All these form the gross profits of the Bank; from which, in order to form an estimate of their annual gain, it is only necessary to deduct the amount of their expenses, the stamp-duty on their notes, and the interest of their cash and bullion, which constitute their unproductive capital.

First, as to the expenses of the Bank. The Committee of Public Expenditure stated, in their Report in 1807, “that the number of clerks employed in the Bank, exclusively or principally in the public business was,

The total expense for managing the public business, the salaries of the governor, directors, &c. as stated by the same report, are as follows:—

Owing to the increase of Debt and other causes, Mr. Ricardo supposed that the number of clerks employed in the public business had increased from four hundred and fifty to between five and six hundred. The expenses estimated by the committee, in 1807, at £119,500, he calculated to have increased, in 1816, to £150,000. He states, the total number of clerks employed by the Bank in the whole of their establishment, at one thousand. Half of this number is employed in the public business, and the other half in the private business of the Bank. The expenses of the Company may be supposed to bear some proportion to the whole number of clerks employed. And, according to this rule, Mr. Ricardo says that, “as £150,000 has been calculated to be the expense attending the employment of five hundred clerks in the public business, we may estimate a like expense to be incurred by the employment of the other five hundred, and therefore the whole expenses of the Bank, at the present time, about £300,000, including all charges whatsoever.”—Secure and Economical Currency, p. 71, 2.

This estimate includes every charge: the expense of managing the public business, the salaries of the governor, directors, and clerks: stationery, incidental expenses, additional buildings, and repairs; together with law-expenses, loss by frauds, forgeries, and every other expense incurred in conducting the business of the establishment.

The next subject forming a part of the outgoings of the Bank is the stamp-duty. The Bank, till lately, has always been particularly favoured in the composition which they paid for stamp-duties. In 1791 they paid a composition of £12,000 per annum, in lieu of all stamps either on bills or notes. In 1799, on an increase of the stamp-duty, this composition was advanced to £20,000, and an addition of £4000 for notes issued under £5, raised the whole to £24,000. In 1804, an addition of not less than 50 per cent. was made to the stamp-duty; but, although the Bank circulation of notes under £5 had increased from one and a half to four and a half millions, the whole composition was only raised from £24,000 to £32,000. In 1808, there was a further increase of 33 per cent. to the stamp-duty, at which time the composition was raised from £32,000 to £42,000. In both these instances the increase was not in proportion even to the increase of duty; and no allowance whatever was made for the increase in the amount of the Bank circulation.

It was not till the Session of 1815, on a further increase of the stamp-duty, that the new principle was established, and the Bank compelled to pay a composition in some proportion to the amount of its circulation. The composition is now fixed as follows:—Upon the average circulation of the preceding year, the Bank is to pay at the rate of £3,500 per million, on their aggregate circulation, without reference to the different classes and value of their notes. The establishment of this principle it is calculated caused a saving to the public, in the years 1815 and 1816, of £70,000. By the neglect of this principle, which ought to have been adopted in 1799, Mr. Ricardo estimated the public to have been losers, and the Bank consequently gainers, of no less a sum than half a million.

The last subject for which an allowance is to be deducted from the gross profits of the Bank, is for their unproductive capital, namely, their cash and bullion. At the stoppage in 1797, the Bank stated in their accounts, laid before parliament, that their cash and bullion, and their bills and notes discounted, together amounted to £4,196,080. They also gave a scale of discounts from 1782 to 1797, and a corresponding scale of the cash and bullion in the Bank for the same period. By comparing these numbers with each other, and some parts of the evidence, Mr. Allardyce discovered the whole secret the Bank wished to conceal—namely, the amount of cash and bullion in their coffers. According to this gentleman’s calculation, as before mentioned, the cash and bullion of the Bank, on the 26th February, 1797, was reduced as low as one million two hundred and seventy-two thousand pounds. Subsequently the Bank increased its stock of cash and bullion; and on the average of the eighteen years, from 1797 to 1815, Mr. Ricardo conjectured it amounted to about three millions.

We have now mentioned all the circumstances necessary to form an estimate of the net profits of the Bank. We have mentioned all the sources whence the gross profits are derived, and also the different items of their disbursements. Proceeding on these principles, Mr. Ricardo calculated the clear gains of the Bank from the time of the suspension of cash payments, in 1797, to the year 1816. The results of his calculations were communicated to the Bank Committee of the House of Lords in 1819. We shall insert his statement, exhibiting at one view the amount of bonuses and increase of dividends to the proprietors, the new stock created, and the increased value of the original capital. It is Mr. Ricardo who is interrogated.

“Do you believe the following account to be an accurate account of the profits of the Bank since the Restriction, namely,

I have no reason to doubt it; I believe it is accurate as far as I recollect.”

This statement, we conceive, needs no explanation. In bonuses and an increase of dividends, the Bank gained £7,451,136. The new Bank-stock created, at £250 per cent. is worth £7,276,500. The original capital of £11,642,000, has increased in value £14,553,000. The total gain of the Bank on a capital of eleven millions, is more than twenty-nine millions. This is the Bank prize-money, the spoil of war, the clear gains from the loans, lotteries, and taxation of the “Pitt and Plunder system.” The brief history of the Bank, for nineteen years after the stoppage in 1797, is this: they have hanged and transported about eight hundred persons, and in addition to their old dividend have made a profit of near three hundred per cent!

Colquhoun had some reason when he said the Bank was the richest establishment in the world. We here see the amount of its vast profits during twenty years of blood, rapine, and injustice. The ability of the Bank to expend nearly a quarter of a million in hanging and transporting their fellow-creatures can no longer excite surprise. At the conclusion of the war in 1815, the Bank could have divided more than one hundred per cent. without encroaching on their permanent capital: in other words, they could have granted £100 to every holder of Bank-stock to the amount of £100, and yet not encroached on the original capital of the Company. If they made a division of one hundred per cent. bonus, they would still have had an unappropriated income of £542,000, which would have enabled them to increase their permanent dividend from ten to fourteen and a half per cent. If they had divided only a bonus of seventy-five per cent. they would retain a surplus capital exceeding that of 1797, and an unappropriated income of £673,000, which would enable them to raise their dividend from ten to fifteen and a half per cent. If the profits of the Bank had continued, and no addition been made to the present dividend of ten per cent. the accumulation of the surplus profit in forty years would have given to the Bank a disposable fund of more than one hundred and twenty millions.

According to the charter, all profits and advantages arising out of the management of the Bank ought to be divided, from time to time, among the proprietors, in proportion to each person’s share and interest in the stock of the Company. This law has never been observed by the Directors: the concern has been carried on, and no statement of its affairs, nor the surplus savings, has ever been submitted to the proprietors. Mr. Allardyce, in 1801, and subsequently Mr. Young and other proprietors, have attempted at different times to compel the Governor and Directors to make a declaration of the affairs of the Bank; but these gentlemen appear to have considered it more prudent policy to conceal, as far as possible, their gains from the public. The rotten-boroughs have not been more intimately identified with the past system of misgovernment than the Bank of England. It is to the war, commenced by the Oligarchy in 1793, the Bank is indebted for its enormous wealth and inordinate gains. It is to this war the Bank was indebted for the Restriction-Act, which enabled it to raise the circulation of its notes from 12 millions to 27 millions. It was the war which raised the unredeemed public debt from 220 to 850 millions; of this debt the Bank has had the management, and for which it has received from the public about £300,000 per annum, whereas the receipt on account of the debt in 1792 was only £99,800. It is to the war, too, the Bank was indebted for the increase in the amount of public deposits. In 1792 the deposits were probably less than four millions. In and since 1806, to the peace, they exceeded eleven millions. From this source alone, Mr. Ricardo calculated that, in the ten years from 1806 to 1816, the Bank gained £5,500,000. It is to the war the Bank has been indebted for an annual dividend and bonus on its capital to the amount of 10, 12, and in some years as high as 17 per cent. Lastly, the Bank is indebted to the war for clear savings, from the year 1797 to the year 1816, to the enormous amount of £29,280,636.

We are not greatly in favour of ex post facto laws, nor bills of pains and penalties, but should there ever be any thing like an equitable adjustment, a refunding or surrendering of surreptitious gains, the Bank will certainly have to yield up the most freely next to the Church and the Aristocracy.

At the end of this article are inserted several accounts laid before Parliament by the Bank in 1830, exhibiting their own statements of their past proceedings, the profits they have realized, and their existing transactions with the Government. Between the estimate of the Bank of the amount of their profits and the estimate of Mr. Ricardo, we do not find any material discrepancy. The Bank make their aggregate gains, exclusive of their ordinary dividend of 7 per cent. £16,619,526. If to this sum we add the difference between the value of their capital of £11,642,400 in 1797, and the value of their present capital of £14,553,000, we shall find that the prosperous career of the Bank has not been exaggerated.

The charter of the Bank, when first granted, was to continue for eleven years certain, or till a year’s notice after August 1st, 1705. The charter was further renewed in 1697. In 1708 the Bank having advanced £400,000 for the public service, without interest, the exclusive privileges of the Corporation were prolonged till 1733. After further renewals, in consequence of advances in 1800, the charter, having then twelve years to run, was prolonged till the expiration of twelve months’ notice to be given after August 1st, 1833, and till the payment by the government of the debt owing to the establishment. The last renewal is by 40 Geo. III. c. 29, and in consideration of an advance to the public of three millions for six years without interest.

It is reasonable to expect the Bank charter will not be again renewed without an entirely new arrangement far more favourable to the public interests than that now subsisting. The Bank annually receives about £257,000 for its trouble in paying the dividends. It holds balances of public money, free of interest, averaging three or four millions. These balances are employed in discounting bills at the rate of four per cent. yielding a revenue of £160,000, which, being added to the £257,000, makes an annual sum of £417,000 derived from its dealings with the Treasury. This has been always deemed a most extravagant remuneration, and has never been defended even in the House of Commons, except on the groundless plea, that it was binding on the public so long as the present charter had to run.

These do not constitute the whole of the advantages of this long favoured establishment: it enjoys various exclusive privileges in carrying on the trade of banking. By the act of Anne, before cited, no corporate body or partnership, consisting of more than six persons other than the Bank of England, is allowed to carry on the business of banking. After the panic of 1826, this privilege was so far relaxed as to allow the establishment of banking firms of more than six partners, at places exceeding the distance of sixty miles from London; provided such firms had no establishment as bankers in the metropolis.

Why should these restrictions be tolerated in favour of an overgrown corporation, which has already profited so much by its exclusive immunities? They form, moreover, the chief obstacle to the improvement of the system of banking in both the country and metropolis, by discouraging the establishment of joint-stock associations. Could banking firms be opened in the metropolis with an indefinite number of partners, on the plan of the Scotch banks, their credit would rest on such a sure and extended basis, that they might fairly compete with the establishment in Threadneedle-street for a share of the public business; Government would be relieved from its dependence on a single fraternity; and, in lieu of paying the Bank £257,000 per annum for the payment of the dividends, it is not improbable the whole sum might be saved, and the business transacted for the sake of the profit which might be realized from holding the balances of the public money and unclaimed lottery prizes and dividends.

The Bank has never conducted its affairs either on such liberal or enlightened principles as to become entitled to peculiar favour from the community. Notwithstanding the enormous profits of this great corporation, it has constantly manifested an eagerness for gain, and impatience for the profitable employment of its capital, which could hardly have been exceeded by a private establishment. In 1822, with a view of extending their discount, they lowered the rate of interest from five to four per cent., and extended the term of discount from sixty to ninety days. In 1823, they contracted for a portion of the dead-weight annuity, by imposing upon themselves the obligation of advancing an annual loan for several years; which engagement was clearly at variance with the legitimate principles of banking. At the close of the same year, they announced their intention to lend money on mortgage, which was a deviation from one of their oldest established rules. Lastly, in 1825, they came forward with a proposition to lend money on government securities, and upon their own stock.

By these expedients they were enabled greatly to extend the circulation of their notes; but their resources, contrary to all sound maxims, were tied up in inconvertible securities, so that they were less able to discharge their proper functions as bankers. What was worse, the greedy example was followed by the country bankers; and thus the race commenced between them, which could push out the most paper, till they brought upon the country the disastrous mercantile revulsion of 1825-6.