as

We must, however, distinguish between "the system established by the Act of Parliament, and the administration of the banking department in consequence of the establishment of that system. We have given in the preceding section our opinion of the system. But the Administration of the Banking Department of the Bank of England under the system has, in our sober judgment, been distinguished by a high degree of both wisdom and liberality.

The administration of the banking department since September, 1848, does not call for any particular remark. We had the usual indications of the first stage after a panic. The bullion in the issue department increased from 12,883,5057. to 14,330,8457.; the notes in reserve from 8,784,7957. to 9,553,4607. Money had been abundant, and the rate of interest low. On the 2nd of November, 1848, the bank reduced the minimum rate of discount to 3 per cent. This would probably have been done at an earlier period but for the political aspect of the Continent. The same reason possibly induced the directors to maintain the same interest to February, 1849, although this appears to be an abandonment of the principle adopted in the year 1844.

SECTION X.

THE PANICS OF 1857 AND OF 1866.

MR. GILBART's estimate, in the preceding section, of the effects of the Bank Charter Act of 1844, in producing that singularly similar sequence of variations in the rate of interest "to which we must always be liable as long as our currency is regulated by the Act," has been amply verified by subsequent experience. Nor are these fluctuations of rise and fall in the bank rate more marked in the regularity of their fitfulness, than is the recurrence of those far more momentous periodic changes in the money market which entail misery upon thousands of happy households, and even bring nations themselves to the verge of bankruptcy.

There is a general impression that panics recur at regular intervals of about ten years each; nor can this be wondered at, seeing that the years 1825, 1837, 1847, 1857, and 1866 have, from

various causes, been marked by the catastrophes so named. Judging by this recurrence of disasters at an apparently fixed period, it certainly seems as if there were a cycle, and this of but short duration, fated to bring in its train ruin to the monetary world and to millions outside of it. Going further back than the earliest years named above, we find no such fatal sequences; and when we take into consideration that, together with the immense development within the last few years of trade and commerce, there has grown up along with it not alone a wholesome feeling of caution, the fruit of bitter experience, but a fuller and wider knowledge as well of the invariable laws which prevail no less in the financial than in the physical world, one cannot but hope that the monetary whirlwinds called panics will eventually have their course defined as accurately, and the means of escape from their destructive force as distinctly known, as are those of the fiercest storm-winds. The dominant causes of the panics of the years specified, and their distinguishing characters, differ in some essential particulars. In one feature, indeed, they are all alike—the unreasoning fear which heralds, accompanies, follows, always accelerates, and sometimes produces these devastating tornadoes.

The presumed derivation of the word attests its significance. Causeless dread occasioned by the voices of mountain or of forest, which were ascribed to "the great god, Pan," became fossilized in the word " Panic;" or, according to another etymology, it originated in Pan, a general of Bacchus, putting to ignominious flight an army (which, outnumbering his own, was preparing to fall upon him in a rocky valley) by ordering his soldiers to awaken the surrounding echoes: their shouts reverberating on all sides, seemed to proceed from an innumerable host, and the. enemy fled in fear. A stampede of horses or of buffaloes in the prairies of America, the panic which will indifferently seize a disorderly mob or veteran troops, and a monetary crisis, are "of imagination all compact"-they paralyse the reason. They also mournfully resemble each other in another sad particular; the misery they bring upon thousands of innocent persons. In these two points a picture and description of one would serve for a counterpart of all.

Like the awful panic of 1825, that of 1857 came suddenly upon the public. A general delusion had prevailed in the former year, countenanced by the speeches from the throne

on the opening and on the prorogation of Parliament, as well as by the complacent remarks of members of both Houses, that the country was about to enjoy an era of unexampled prosperity. Peru and Mexico were to pour into her lap the fabled wealth of El Dorado, and the golden sands of Pactolus to be eclipsed by the treasures which every tide would bring up the Thames. By the end of the year those fairy visions had disappeared before stern realities. It was the same in 1857. Families that had been living in opulence, or revelling in fancied enjoyment of palaces like Aladdin's, were in a few brief agonising hours reduced to beggary and plunged in despair— their fortunes gone, their hopes dreams. Labour was driven, from its accustomed fields; commerce laid prostrate; credit all but extinct; energy paralysed; fear and distrust in the ascendant; and enterprise a departed spirit. The gloom was universal, for thousands in every rank of life were ruined.

In sober truth, the crisis of 1857 fell upon the commercial world like a thunderbolt. Notwithstanding the extra expenditure entailed by the Crimean war, peace was concluded before the national resources had been strained beyond the limit their strength could bear.

“A period of nearly ten years,” says an able writer, " uneventful as far as commercial disaster is concerned, may be passed over in silence, except to remark that in 1852 consols attained their maximum price since 1737, namely, 101g. The beginning of the memorable year, 1857, seemed to promise a long period of commercial ease, but the outbreak of the mutiny in India, the consequent suspension of remittances from that quarter, and the inverse demand for specie, the demand for capital to supply materials of war to the Government and the East India Company-all those causes tended to depress the funds. In January they reached 943; in November, they fell to 87-lower than at any time since January, 1856, during the pressure of the Russian war.'

Even so late in the year as the month of August, the public were unapprehensive of the storm soon to ensue, and few or none foresaw the severity with which it would rage. During the inquiry which followed, the Governor of the Bank stated:

Things were at this time pretty stationary; the prospects of harvest were very good; there was no apprehension that commerce was otherwise than sound. There were certain more far-seeing persons who considered that the great stimulus given by the war expenditure, which had created a very large consumption of goods imported from the East and other * Commercial Panics, by Arthur Locker: Companion to the British Almanac, 1867.

places, must now occasion some collapse; and still more those who observed that the merchants, notwithstanding the enhanced prices of produce, were nevertheless importing as they had done successfully in the previous years. But the public generally viewed trade as sound, and were little aware that a crisis of any sort was impending, far less that it was so near at hand.”

The crisis of 1847 had been owing chiefly to excessive railway speculations at home; this of 1857 was mainly due to overtrading abroad.

About the middle of September, the mails brought disastrous news from the United States. American railway securities had fallen nearly 20 per cent. The railway accounts had long been "cooked," and the too well-known results of the process followed-sudden and enormous depreciations of railway stock, widely-spread distrust, a drain upon the American banks, and failures shaking commercial credit to its centre. The proximate cause of this terrible crisis in America was the stoppage of the Ohio Life and Trust Company; an establishment which made advances on financial securities, and which, at the time it stopped payment, held deposits to the amount of 1,200,000l. Hereupon, a deliberately planned system of “bearing" operations was put in movement, which was described in the Times City article of September 10, 1857, as follows:

"There is actually a powerful combination for the avowed purpose of bringing all the principal undertakings to ruin. A large body of active persons are known to be associated for the purpose: they influence the press to work out their views, and are alleged not merely to operate with a joint capital, but to hold regular meetings, and permanently retain legal advisers, whose chief vocation, it may be assumed, is to discover points that may enable the validity of each kind of security to be called in question, and thus to create universal distrust."

The downfall of the Ohio Land and Trust Company had been quickly followed by the failure of 150 banks in Pennsylvania, Maryland, Virginia, and Rhode Island; and since no less than eighty millions of American railway stock were computed to be held in England, a large demand for bullion on American account set in here. The run for deposits in specie on the New York banks brought about by the villainous "bearing" organisation noticed above, swelled distrust in America into a panic, which soon reacted on England. By the middle of October failures began to be numerous here. Liverpool and Glasgow, ever necessarily the most sensitive to fluctuations in the

American markets, exhibited unmistakable indications of the probable severity of the coming storm. Rumours spread affecting the Borough Bank of Liverpool* and the Western Bank of Scotland; and the alarm in London, where failures were following in quick succession, rose to its height when, on November 7th, the great firm of Dennistoun and Co., which had numerous agencies in America and Australia, stopped payment, with liabilities of about two millions; and when, on the morning of the 9th, news arrived of the failure of the Western Bank of Scotland for between six and seven millions. Together with. this intelligence came a call for gold from Scotland, a most unexpected, because unusual and exceptional circumstance, the predilection of the Scotch for their one-pound note currency, and the confidence justly reposed in their tried, tested, and proven system of banking, inclining the Scotch banks to forego keeping any large metallic reserves. Three hundred thousand sovereigns were despatched to meet this demand; and when, on the 11th of November, the city was excited by the suspension of Sanderson and Co., a great discount house, with liabilities to the amount of upwards of five millions, when further demands for gold came from Scotland, when large calls followed from Ireland as well, when tremendous failure succeeded tremendous failure, and the utter rottenness which had pervaded the commercial world became apparent, and general bankruptcy seemed imminent-recourse was had, for the second time, to the panacea-suspension of the Bank Act of 1844. Government authorized the Bank of England to exceed the prescribed limit of its issues by discounts and advances upon approved securities.

This authorization, which was given on the 12th, at once quieted the public mind; but there was this notable difference between the effects of the first suspension of the Act in 1817 and of the present, that whereas in that year the mere notice of suspension had operated as a charm, and notes to the amount only of 400,000l. were actually issued in excess of the statutory limit,-in 1857 the bank issued, from November 13th to the end of the month, no less than 6,776,000l. of notes beyond the limit (14,475,0007.) fixed by the Act. Nor did the reverses consequent upon fraudulent financial management and reckless overtrading end with the allaying of the general panic. Trade with America had acquired such development here and on the *Not long afterwards it stopped payment. † Now raised to 15,000,000l.