The committee of 1832 led to a renewal of the Bank Charter for an additional term of ten years, and a re-enactment of the legal tender clause, a privilege ceded by Lord Althorpe with the view of aiding the Bank in keeping a constant supply of gold in the country adequate to the wants of the public. In this, as the result showed, there was nothing gained; so far, therefore, the inquiry of 1832 was as feeble in producing practical advantages as all preceding ones had been. Nevertheless some of the information drawn out upon the occasion was pertinent and unusually satisfactory. The Bank now stated definitively the rules and principles upon which its business was conducted; and those rules and principles were generally admitted to be sound, judicious, and consistent with experience and authority. It is one thing, however, to settle a set of principles, and another to act upon them. Those by which the Bank directors of 1832 professed themselves bound were well explained by Mr. Horsley Palmer then governor, and by Mr. Ward one of his colleagues, and may be reduced to the following:

1st, The Bank controls the currency of the country, and can contract or diminish it without the interference of the public.

2nd, The issues of the Bank should be regulated by the state of the foreign exchanges which govern the stock of bullion: when these are at par the currency is full. Strict attention is also required, to the circulation of the private and joint-stock Banks, as an undue extension of their paper leads to a demand for gold upon the Bank.

3rd, The securities of the Bank should always be kept fixed, and its amount of bullion should always be equal to one-third of the total liabilities it is under to pay on demand, which of course will include deposits as well as issues3.

Such were the cardinal points of action set forth in 1832 as those upon the application of which a sound system of currency was to be secured. The Bank then admitted that it had full power in its own hands for good or for evil; and the expectation upon the part of the public naturally was, that the maxims referred to, having been set up as the true ones, would be strictly observed, and a safe and steady currency thenceforward be maintained. By those means all would go well; and no more panics were to be brought about by improvident Bank management. This, I repeat, the public fully ex-pected, forgetting the ninth beatitude, in Dean Swift, "Blessed are they that expect nothing, for they shall not be disappointed!" The public expected, and the public was disappointed; in the three next years there were two panics, and during their prevalence the notable discovery was made, that the celebrated rule of 1832 was incorrect in prin-ciple, unsound, and cannot be always acted upon. In short, it is effective against a Bank of issue, but not effective against a Bank of deposit also.

3 The operation suggested for this purpose by Mr. Horsley Palmer, their governor, was to take a period of full currency, and consequently a par of exchange, and to invest and retain in securities two-thirds of the available funds of the Bank, and to hold the remaining third in bullion. Thenceforth, the Bank was to retain the aggregate amount of securities unaltered, and leave any demand arising on the part of the public in presenting notes, to fall exclusively upon the coin and bullion.

The first of these panics took place the same year; it was a political panic, and not chargeable against the Bank. It is, however, remarkable as an instance to show the danger of dogmatizing upon Banking, and the risk we shall always be exposed to if we rely with extreme confidence upon any set of maxims whatever. For of these, one and all, it may be said with great safety, that they depend entirely for success upon having a clear stage and no favour or prejudice. They have each essential conditions, which must not be varied or interfered with, or their virtues take wings and fly; hence their inherent insecurity if brought to bear upon a country exposed to political agitation. But though fear seized the people when Lord Grey's reform ministry was in jeopardy, and they ran so furiously for gold, taking three hundred thousand sovereigns in a day, as to drain the Bank of more than two millions in about a month, no such extraordinary cause started into operation to bring about the formidable panic of 1836; on the contrary, it is not difficult to show that the Bank produced it; produced it, moreover, by systematically violating the principles of sound action which, in 1832, it had set up as a standard, and professed to observe.

It is rather a curious fact, and one that shows but too plainly how little the Bank directors are to be relied upon for anything like a faithful adherence to their own rule of right, that some of the remote causes of the great panic of 1836 set in as early as 1832; and that while the committee of that year was sitting, those causes were detected and pointed out by one of their own body. Mr. Ward, in his evidence, June 21st, 1832, adverting to the derangement of the currency, spoke thus: - " There is now an in-flux of gold to the Bank greater than is required to meet the demands of the public; and I believe it will have a very pernicious effect. That influx has amounted already to two millions since March. Suppose the dividends come out on the 9th of July, and suppose those persons, that have already (during the ministerial interregnum) hoarded a million and a half or two millions of sovereigns, change their humour, and bring them back to the Bank; you will then have two millions of notes more in the market, and you will perhaps have six millions issued from the dividends, making eight millions. No man can deny that such an amount as eight millions of notes brought upon the public in addition to about sixteen that now exist, is a most inconvenient situation."

We thus perceive that Mr. Ward foresaw and forewarned the Bank of one of those awkward instances of prosperity which seldom present themselves without proving forerunners of a series of fluctuations, and are usually found to turn ere long into a panic, and end in a crash. The action of the Bank under such circumstances is therefore matter of some interest: was it consistent? was it prudent? was it successful? The published accounts show, that in December, 1833, its issues were 17,469,000l., and the bullion in store, 10,200,000l.; adding the deposits to the circulation, its total liabilities to pay on demand amounted to 32,629,000l. The due proportion of bullion in reserve, therefore, having been fixed at one-third of these liabilities, it follows that there ought to have been 10,876,000l. of gold in the Bank, whereas it had, as just stated, no more than 10,200,000l. The difference between the two sums last given is the measure of the departure from the rule of right.