Thoughts on a New Bank of England.

Notwithstanding the errors of business and of political meddling with which the Bank Directors may be justly charged, it may be doubted whether the country would be benefited by any attempt to set up a rival establishment. A banking firm of undoubted stability is essential to the functions of government for the receipt and disbursement of the public revenue, and for the management of the national currency. But would it be possible to form an association, better adapted for these purposes than the Bank of England? In the first place with respect to the circulating medium. The Bank enjoying the exclusive privilege of issuing notes in the metropolis, it possesses a complete control over the circulation directly in London and indirectly in the provinces; and it can only arise from a mistaken cupidity or culpable remissness of duty in the Directors if the general circulation is either redundant or deficient—if it is not maintained precisely in that state which the wants of commerce and the course of the exchanges require. But such corrective power over the currency can only be advantageously exercised by a single association. Supposing two chartered bodies had concurrent authority in the issue of notes, they would either pursue their business in opposition or concert: if the former, then would there be a contest between them, which could get out the greatest amount of paper; if the latter, then the case would not be altered from what now exists—it would still be virtually one body, only acting under two denominations, the New Bank of England and the Old Bank of England.

Next as to experience in banking business. In this the Bank could not possibly be excelled by a new establishment. The Direction, it cannot be denied, consists of the élite of the commercial world; moreover they inherit, in virtue of their offices, all the wise saws, maxims, and precepts accumulated by their predecessors for the last hundred and forty years, and which, we presume, are carefully treasured up for reference in the Bank parlour, inscribed on tablets or other tangible record.

The last and most important consideration, with respect to any new association, which should undertake to be the national banker, would be the security it could afford. A sum of four or five millions, which is the average amount of the government balances, ought not to be entrusted to any mushroom establishment. On this head the Bank appears wholly unexceptionable. Just let us see by fair appraisement how much the “Old Lady” would yield, providing all her effects were brought under the hammer of alderman Farebrother. Lot the first, is that solid capital of £14,686,800, lent to Government at three per cent. and which at the present market price of £195 per hundred pound stock is worth exactly £29,619,260. The second lot is the surplus of profits, &c. after paying all outstanding demands; owing to the extreme reserve of the Old Girl the value of this assortment cannot be stated—common report says betwixt two and three millions: according to her Ladyship’s inventory in 1819 (No. II. at the end of this article,) she had a nice balance in her favour of £5,202,320. Supposing we take the Old Dame at her word—here are two articles alone worth £34,821,580. Besides which, is the immense pile in Threadneedle-street, consisting of innumerable vaults, rotunda, cashier, court, committee and tellers’ rooms, and a floor of apartments more spacious and intricate than the Cretan labyrinth, together with the site of eight acres, fittings up and Corinthian columns included—all which could not be appraised at a less sum than two millions, and with the preceding constitutes a substantial security to the amount of nearly thirty-seven millions, and must be amply sufficient to satisfy the most scrupulous tax-payer in the kingdom.

Though the Bank of England possesses the recommendations we have mentioned to the office of national banker, yet the Government is not dependent upon or at the mercy of the Corporation. When the charter has expired, the Bank proprietary become nothing more than a common partnership trading upon a joint-stock. Government, by granting a charter of incorporation to a new association, and transferring to it the exclusive privileges of issuing notes, of retaining the public balances, and of paying the public dividends, might, at one blow, destroy two-thirds at least of the business and revenue of the Threadneedle-street establishment. This we advert to lest it might be thought on the renewal of the Bank charter, the Directors had power to prescribe their own terms to Government: the power is all on the other side—in the hands of ministers, and if they do not exercise it for the public benefit, they will not have faithfully discharged their duty to the community. The relation in which the Bank stands to the public is nothing more than that of a number of private individuals entitled to no special favour; whatever privilege they enjoy, they ought to pay for; for whatever work they perform, they ought not to receive more than a reasonable compensation. Upon this principle let us inquire what ought to be the main conditions of the future contract between the Bank and Government.

First, the Bank ought to account to the public for the profits arising from the exclusive privilege of issuing notes, after deducting a reasonable sum for trouble and incidental expenses.

Secondly, the Bank ought to pay a per-centage for the average amount of public balances it holds and employs in banking.

Thirdly, if the composition paid by the Bank in lieu of stamp duties be inadequate, it ought to be augmented.

Fourthly, the Bank ought not to charge a greater sum per million for the payment of the dividends than is an equitable consideration for trouble and loss of time.

Fifthly, the Bank being invested with important public trusts, and having the control of the national currency, and as any error of judgment committed by the Directors, might be productive of disastrous consequences, it is highly expedient their affairs and proceedings should be at all times known, so as to be constantly open to public and parliamentary observance and discussion.

Sixthly, if the suggestion which has been made and appears judicious, be adopted, of making a Bank of England note a legal tender when offered by the country banks, the concession of so great and advantageous a privilege would justly claim a bonus from the Bank to the public; especially as it would tend to augment the circulation of their notes, and accelerate the spread and establishment of their branch institutions.

Lastly, the Bank charter ought only to be renewed for a short term of years. For this three reasons may be assigned. First, it would tend to keep the Bank dependent upon and under the control of the legislature. Secondly, the peculiar and changing state of the country at the present moment is a strong objection both against granting and accepting long leases by public bodies. Thirdly, there is no public reason for renewing the charter for a long term. In this respect the Bank and East India Company materially differ; the affairs of the former are all at home, and may be wound up any time in six months; the affairs of the latter extend to the other side of the globe, and require years.

Upon the conditions we have thus shortly sketched, the Bank charter might be renewed, with advantage to the Corporation, the Government, and the community.