14. It has now been clearly shewn that the Bank Act has completely failed both in Theory and Practice. It has been shewn that it is based on a Definition of the word "Currency" which any Mercantile Lawyer would at once pronounce to be erroneous - that it professes to adopt a Theory of Currency which it has entirely failed to enforce - that if the Directors choose they can mismanage the Bank quite as easily under the Act as before it, and that the pretended "mechanical" action of the Act wholly failed to prevent them from doing so - that the Act was expressly framed with the expectation that it would prevent commercial panics, and that it has wholly failed in doing so: and hitherto panics have recurred with the same regularity as before - and furthermore, although the Act is in no sense whatever the cause or original source of these crises, yet when they do occur, and they reach a certain degree of intensity, the operation of the Act, by visibly limiting the means of assistance, deepens a severe monetary pressure into a panic, which can only be allayed by its suspension, and a violation of its principles.

In every one of these respects the Bank Act has completely failed: and in regard to these things its credit and reputation is utterly dead and gone. It is therefore necessary to examine fairly the arguments alleged in its favour, and the reasons urged why it should still be maintained.

The supporters of the Act, allowing that it has failed in some respects, yet allege that the Directors having committed the same mischievous errors as they had done before it, it arrested their mismanagement much sooner than would otherwise have been the case: and that when the panic did occur, it was only through the Act that the Bank had six millions of gold to meet the crisis: and that by this means the convertibility of the Note was secured.

So far as regards the crisis of 1847, it must be admitted that there is much truth and force in this argument. The Directors at that date shewed that they had not yet acquired the true principles of Banking, and it must be conceded that it was entirely owing to the Act that they were checked in their mistaken policy while there was still six millions of gold in the Bank.

But the same ground of censure did not apply to the crisis of 1857. In the interval between 1847 and 1857, the Directors really grasped the true method of controlling the Paper Currency by means of the Rate of Discount. The truth of this principle was probably more quickly enforced on their attention by the limitation imposed by the Act than it would otherwise have been. It has never been alleged that the Commercial Crisis of 1857 was in any way due to the Act. But it is a matter of positive certainty that since that date the Bank has fully recognised and adopted the principle of governing the Paper Currency by means of the Rate of Discount. The same rule has been adopted by the Bank of France, and this is now the recognised principle by which every Bank is managed. Certainly since 1857 there has been nothing to blame in the general management of the Bank. Granting every merit that can fairly be due to the Act, that it has compelled the recognition and adoption of this principle some years earlier than it otherwise would have been, it may be said that the Act has now fulfilled its purpose. It has done all the good it can do. The Directors now perfectly understand, and have for the last 19 years conducted the Bank with the greatest success on sound principles. Having therefore accomplished this great purpose, the Act has done its work, and has ceased to be necessary: and its operation at other most important times being proved to be injurious by the most overwhelming evidence, it may now be safely and advantageously repealed - so far at least as regards the limitation of its power of issue. And the reason for the expediency of this change is this -

Under the present system of Commercial Credit, there must be some Source with the Power of issuing undoubted Credit to support solvent Commercial Houses in times of Monetary Panic.

It has been conclusively shewn in the preceding remarks, that it is entirely futile to expect that Commercial Crises can be prevented; and that they occur with precisely the same violence in places where there is a purely Metallic Currency as anywhere else. Hence the illusions in this respect, on which the Act was founded, are now completely vanished.

In all cases, houses which are clearly insolvent should not be supported: they ought to be compelled to stop without any hesitation. To support such houses is a fraud upon their creditors. But under our complicated system of commerce, the Credit of even the most solvent houses is so inter-twined and connected with others, that no one can tell how far any house, even of the highest name, is solvent. Consequently every one is affected by this universal discredit. Many houses which are really solvent, may have their assets locked up in some form which is not readily convertible. Under such circumstances it is absolutely indispensable, to prevent universal ruin, that there should be some source with the power of issuing undoubted Credit to houses which can prove their solvency. And there are but two sources from which such Credit can be issued, the Government and the Bank of England.

In 1793 the Bank resolutely refused to support Commercial Credit, and the Government was obliged to assist solvent houses with Exchequer bills, and this saved the commercial community from ruin. In 1797 the Bank also refused to support commerce, and the result was its own stoppage. After the stoppage, however, it largely extended its issues, and commerce was relieved.

In every commercial crisis since 1797, however sternly the Bank has adopted the Restrictive Theory at first, it has ultimately been driven to abandon it, and adopt the Expansive Theory. In 1825, while the Bank persisted in the Restrictive Theory, some eminent bankers stopped payment with assets worth 40s. in the pound. Two days afterwards the Bank changed its policy, and issued notes with the most profuse liberality, and the panic vanished. If the Bank had adopted this principle at first, and assisted those bankers who were really solvent, they would have been saved from stopping payment.