A list of the foreign loans contracted in England, with the amounts of the same, the names of the contractors, the years in which the contracts were made, and the prices at which they were issued.

1825. At the commencement of this year there was every appearance of general prosperity, but in December occurred "THE PANIC."

The course of exchange being unfavourable, had occasioned a demand for gold for exportation. The bank became under the necessity of restraining its issues.

The house of Sir Peter Pole and Co., who were agents to several country banks, stopped payment. This occasioned a general alarm, and the notes of private bankers became discredited throughout the country. As the bank had ceased to issue notes under 57., they were obliged to find gold to the country bankers to pay off their notes; but their gold failing, they reissued their 17. notes, some of which, happily, had not been destroyed. Notwithstanding the great liberality of the

bank, several London bankers, and a much greater number of country bankers, were obliged to suspend their payments. Most of the joint-stock companies, that had been formed in the season of speculation, fell to the ground."

*

The following is the opinion of J. H. Palmer, Esq., the governor of the bank, as to the causes of the wild spirit of speculation which had preceded the panic:

"Will you state to the committee what, in your opinion, was the nature and the march of the crisis in 1825?—I have always considered that the first step towards the excitement was the reduction of the interest upon the government securities; the first movement in that respect was, I think, upon 135,000,000l. of five per cents., which took place in 1823. In the subsequent year, 1824, followed the reduction of 80,000,000l. of four per cents. I have always considered that reduction of interests, one-fifth in one case, and one-eighth in the other, to have created the feverish feeling in the minds of the public at large, which prompted almost everybody to entertain any proposition for investment, however absurd, which was tendered. The excitement of that period was further promoted by the acknowledgment of the South American republics by this country, and the inducements held out for engaging in mining operations, and loans to those governments, in which all classes of the community in England seem to have partaken almost simultaneously. With those speculations arose general speculation in commercial produce, which had an effect of disturbing the relative values between this and other countries, and creating an unfavourable foreign exchange, which continued from October, 1824, to November, 1825, causing a very considerable export of bullion from the bank, about seven millions and a half. Commercial speculations had induced some bankers, one particularly, to invest money in securities not strictly convertible, to a larger extent than was prudent; they were also largely connected with country bankers. I allude to the house of Messrs. Pole and Co., a house originally possessed of very great property, in the persons of the partners, but which fell with the circumstances of the times. The failure of that banking-house was the first decisive check to commercial and banking credit, and brought at once a vast number of country bankers, which were in correspondence with it, into difficulties. That discredit was followed by a general discredit throughout London and the interior."

Some of the other witnesses considered the panic to have arisen from an over-issue of notes on the part of the Bank of England and the country bankers. But whatever may have

The crisis was at its height from Monday, the 12th, to Saturday, the 17th December. Up to the night of Wednesday the bank restricted its issues, to the ruin of houses of first-rate importance. Becoming sensible of its error, it discounted liberally the three last days of the week, issuing upwards of 5,000,0007, of notes; otherwise, the ruin would have been universal.

E

been the cause, the bank certainly acted with great liberality at the period of the alarm, even at the risk of its own stoppage of payment.

"Will you describe the manner in which the bank lent its assistance at that time?-We lent it by every possible means, and in modes that we never had adopted before. We took in stock as security, we purchased exchequer bills, we made advances on exchequer bills, we not only discounted outright, but we made advances on deposit of bills of exchange to an immense amount; in short, by every possible means consistent with the safety of the bank; and we were not, upon some occasions, over nice; seeing the dreadful state in which the public were, we rendered every assistance in our power.

"Did any communication take place between the bank and the government respecting an order in council to restrain payments in gold at that period?-Yes; it was suggested by the bank.

"What answer did his Majesty's government give to that?—They resisted it from first to last.

"The Bank of England issued one-pound notes at that period. Was that done to protect its remaining treasure?-Decidedly; and it worked wonders, and it was by great good luck that we had the means of doing it because one box containing a quantity of one-pound notes had been overlooked, and they were forthcoming at the lucky moment.

"Had there been no foresight in the preparation of these one-pound notes? None whatever, I solemnly declare.

"Do you think that issuing of the one-pound notes did avert a complete drain?-As far as my judgment goes, it saved the credit of the country."

Evidence of Jeremiah Harman, Esq. (p. 154.)

On the last day of December, 1825, the coin and bullion in the bank amounted to only 1,260,8907.

Dec. 13. The bank raised the rate of discount from four to five per cent. upon bills not having more than ninety-five days to run. This rate continued until July, 1827.

1826. Jan. 13. The government made a communication to the bank directors, stating their intention, in order to prevent a recurrence of panic, to propose to parliament the gradual abolition of country bank notes under 51.; and also proposing to the bank,

"First, That the Bank of England should establish branches of its own body in different parts of the country.

"Secondly, That the Bank of England should give up its exclusive privilege as to the number of partners engaged in banking, except within a certain distance from the metropolis."

The directors were at first unwilling to establish branches, but ultimately they acceded to both the above propositions.

The government also induced the bank to make advances upon the security of goods, and accordingly the bank established boards for this purpose at the following places, and advanced to the undermentioned amounts :-

To carry these measures into effect several Acts of Parliament were passed, viz:

"An Act to facilitate the advancing of money by the Governors and Company of the Bank of England, upon deposits and pledges" (7 Geo. IV. c. 7). It was enacted that persons in possession of bills of lading, warrants, &c., should be deemed owners of the goods therein mentioned, so far as to make valid any contracts for the advance of money thereupon by the Bank of England.

"An Act to limit, and after a certain period to prohibit, the issuing of promissory notes, under a limited sum, in England" (7 Geo. IV. c. 6). By this Act, no further notes under 51. were allowed to be stamped, and those already stamped could not be issued or reissued after the 5th of April, 1829, under a penalty of 207. The Bank of England were required to make monthly returns to the treasury, of the weekly amounts of their notes in circulation under 57., to be published in the Gazette, and laid before parliament. And after the 5th of April, 1829, all bankers' notes under 207. were to be made payable at the place of issue, though they might also be made payable at other places.

"An Act for the better regulating copartnerships of certain bankers in England," &c. (7 Geo. IV. c. 46.) According to this Act

1. Banks having more than six partners might carry on business in England at a greater distance than sixty-five miles from London, provided they have no establishment as bankers in London, and that all the partners are liable for the whole debts of the bank.

2. The banks shall not issue their notes at a place within

sixty-five miles from London, nor draw any bills on London for a less amount than 507.

3. The banks may sue, and be sued, in the name of their public officers; and when judgment is obtained against such public officers, execution may be issued against any member of the copartnership.

4. Previous to issuing notes, the bank shall deliver to the Stamp Office, schedules containing the name or title of the bank -the names and places of abode of all the partners—the names of the places where the banks are established-and the names and descriptions of the public officers in whose name the bank wishes to sue and be sued.

5. These banks are allowed to compound for the stamp duties on their notes, at the rate of seven shillings per annum for every 1007. in circulation.

This was

By the fifteenth clause of this Act, the Bank of England was expressly authorized to establish branches. enacted to "prevent any doubts that might arise" subject. The bank accordingly opened branches this year at Gloucester, Manchester, and Swansea.

upon the

1827. July 5. The bank reduced the rate of discount from five to four per cent.

The extension of the branches of the Bank of England this year occasioned great dissatisfaction among the country bankers. The establishment of rival banks in their own neighbourhood, was a circumstance that the country bankers could not view with indifference. They declared that the Bank of England, and not themselves, had been the cause of the previous spirit of speculation; that the Bank of England, by their advances to government and loans on mortgage, had made excessive issues, and that now to extend their influence, at the expense of the country bankers, was to reward the guilty and to punish the innocent. The country bankers had been accustomed to charge five per cent. on the bills they discounted, and at some places five or six shillings commission besides the discount, but the branches of the Bank of England charged only four per cent. without any commission. The country bankers were of course compelled to do business on the same terms, or to permit their customers to go to the branch. The chief advantage the country bankers possessed over the branch banks was, that they continued to allow interest on deposits, which the branch banks did