1 This whole subject was reported upon, with evidence, by a select committee, in Parliamentary Documents, 1837-58, vol. v, interrupted, if doubt on the part of buyers prevents sales, or embarrassment of lenders prevents or diminishes loans, the fears of debtors to whom the failure to make their payments punctually means bankruptcy and ruin, become at times ungovernable. No man is any longer sure of anything except his own indebtedness and its near maturity; there is a universal pressure to borrow, even beyond the real needs of the moment, lest borrowing should presently become impossible; and there is a universal tightening of the grasp on all ready means by such as are so fortunate as to have them. The sauve qui pent of merchants, who are desperate as to their means of payment, is as mutually destructive and as fatal to their hopes of escape, as is the crush of a panic-stricken audience, blocking the exit from a burning building. To a community thus dominated by universal terror, the Bank of England was able to say that its potential reserve was now so enlarged, as to fix no limit to its ability to extend its loans and meet all consequent liabilities. The effect of this assurance in allaying the panic was instantaneous. Men ceased to press for what might not be needed after all, and the other banks in the city, no longer dreading demands from their own depositors, resumed their operations. Confidence had indeed suffered too severe a shock to recover without that process of liquidation which is called a revulsion of business; but the liquidation, instead of being immediate, could now be gradual enough to enable debtors to collect and realize upon their resources with some deliberation.

It was not then so much the four millions which the Bank felt safe in adding to its securities in a week after the suspension of the act of 1844, as the moral relief given to the public, which constituted the real remedy by which the crisis was ended. As for the change in the amount of the note issues of the Bank, we may fairly deny that in itself it had any influence whatever, so trifling was its amount. The notes issued in excess of the statutory limit, and actually in the hands of the public, stood at their highest point on the 20th of November, when they amounted to £928,000, and by the end of the month the Issue Department had returned to its normal condition.1 Indeed the difference between the minimum and maximum of the outstanding notes for the month was only £1,300,000.

The conditions on which this singular abandonment of the terms of the Bank charter has been allowed are jealously guarded. The Bank has been required to pay over to the government all profits made by it from any increase of issues above the statutory limit,2 and both in 1857 and 1866 it

1 This opinion, that the relief given by the suspension of the limit fixed by the act is a moral relief and is not to be found in the actual issue of notes, is confirmed by the fact that neither in October, 1847, nor in May, 1866, was the issue of notes upon securities increased at all, - the mere announcement that such issue would be made, if needed for the reserve, being sufficient to quell the panic.

2 The profit on the increase of issues above the limit in 1857 was was required to maintain its rate of discount at ten per cent., so long as it should use the permission given to it. As this rate would drive away business from the Bank as soon as the rate in the general market should fall, this condition insures as speedy a return to the legal limit of the issue as is practicable.

Whatever the conditions, however, the repeated resort to this extra-legal measure is a remarkable departure from an elaborate scheme of legislation in favor of a crude expedient, and does not easily find its parallel, even in English administration. And the question has been raised, with good reason, as to the real value of a legal limit, which everybody believes will be set aside when it begins to press. No such mistakes of management could now occur as marked the whole course of the history of the Bank in the first half of the last century. The Bank was not quick to learn the real risks of its position and its responsibilities; but still it has learned them, and now guards its reserve with vigilance, by appropriate means, and with general success. It takes the alarm sooner than formerly, it sets its customary line of supposed safety higher, and thus, in the great crisis of 1873, it escaped the disaster which befell it in 1857 in a condition of affairs not more dangerous. Upon the outbreak of the European War in 1914 the act was again suspended by an Order-incalculated on £2,000,000, for 41 days at the rate of two per cent. Parliamentary Documents, 1857-58, xxxiii., 271, 275.

Council. On this occasion there was a small excess issue for a period of only five days, pending the preparation of currency notes issued by the government. Legal authority for the suspension of the restriction on note issue in future emergencies was granted by Parliament in August, 1914. But the perfection of the provisions of law, even after this change, is doubtful. An elastic provision like that contained in the German legislation would be easier in operation and equally effectual. Power, such as that possessed by the Bank of France, to issue notes unfettered by special restrictions would seem to be even more effective and at the same time entirely consistent with safety for a well managed central bank, like the Bank of England, strong in the confidence of the people.

From what has been said, it will be seen that the Bank of England, although a highly privileged establishment, is not a government institution. it has a partial monopoly of the right of issuing notes, which in theory is destined to become complete; it has the distinction of having its notes the only paper legal tender in the United Kingdom; it is the chief depository of a government which maintains no public treasury; it is charged with the duty of keeping the registry of the public debt, and of paying the interest thereon; still it is a private corporation of the familiar type, managed by its own officers, in whose selection the government has no share, and whose responsibility is to their own stockholders alone. The Bank has duties thrown upon it, partly by law and partly by force of circumstances, which make it a highly important member of the body politic, and yet it is in form a corporation intended to earn dividends for the owners of its stock. For many years after its foundation it was even forbidden by law to lend to the government, beyond a certain narrow limit, without the express sanction of Parliament,1 and although it has now for a long time been a trusted agent, and has at times compromised its own safety by its financial support of the Exchequer, it has never failed in its dealings with the authorities to assert its own essential independence.