1st. An unprecedented extension of our foreign trade.

2nd. An importation of gold and silver on a scale unknown in history since the period which immediately succeeded the first discovery of America.

3rd. A most remarkable development of the economy afforded by the practice of banking for the use and distribution of capital.

All these combined naturally caused a vast amount of speculation, but at the same time no particular uneasiness manifested itself in this country until the month of September, 1857, when news arrived from America of the great depreciation of railway securities, very largely held in England. This was rapidly followed by the intelligence of failures of banks in Philadelphia, Baltimore, and New York. In the last-named city 62 out of 63 banks stopped payment. These disasters were felt with terrible force in Liverpool, Glasgow, and London. On the 27th October the Liverpool Borough Bank closed its doors. On the 7th November, Dennistoun and Co. stopped payment, with liabilities of upwards of £2,000,000. On the 9th the Western Bank of Scotland stopped, and on the 11th the City of Glasgow Bank were added to the list.

Numberless other banks and commercial houses were brought down, despite the liberal assistance rendered by the Bank of England, and on what scale that help was given the following figures will show:

On the 12th the Government issued the letter which the ' City' had been expecting, practically authorising the suspension of the Bank Act, but the effect was not so instantaneous as in 1847. The demand for discounts and advances still continued. By the 21st this item had increased to £21,600,000, an amount exceeding the total of the public and private deposits, and more than double what had been advanced on the 27th October, when the first bank failure was announced.

In 1847 it was not found necessary to infringe the provisions of the Act of 1844, but on this occasion there was an excess of issue during eighteen days, the highest excess being £928,000, and the average £488,000.

The third, and at present the last occasion on which the Bank Act has been suspended was in 1866, a period of excitement and alarm still fresh in the minds of commercial men. It cannot be said that the disasters of that year were unexpected; on the contrary, the feeling had been for months previously that nothing short of a monetary convulsion could put an end to the eminently unsound state of things.

The banking and finance companies, of which so many had been started in the years 1863-5, seem to have generally gone on the principle that 'business' must be done and that profits must be shown, if only on paper. The quality of the 'business' was quite a secondary consideration. Such being the case, it is not to be wondered at that the numberless adventurers who are always on the look-out for opportunities were quite ready to oblige them. All sorts of companies were started, the capital of which was really provided by banks and finance institutions, bills being freely discounted which had nothing whatever to back them, and cost but the stamps to create. The credit thus obtained was supported by renewals, but such a system it was evident could endure but for a limited time.

One of the worst offenders in this way, the Joint Stock Discount Company, failed in February, followed in March by Barned's Banking Company at Liverpool. The feeling of distrust thus engendered was still further increased by the stoppage of several railway contractors, who were deeply implicated in the ' financing' system. On the 3rd May the Bank rate was raised to 7, on the 8th to 8 per cent., and on the following day the decision in certain actions against the Central Wales Railway Company on some dishonoured bills was given in the Court of Common Pleas in favour of the defendants, on the ground that a railway company had no authority to accept bills, thus at once rendering utterly worthless an untold amount of these securities then current.

This brought matters to a climax; Overend, Gurney and Co., who held a large quantity, applied to the Bank for assistance and being refused, immediately suspended. This was on the 10th. The next day, now known in the City as ' black Friday,' witnessed a panic compared with which all others sink into insignificance. The Bank of England made a further advance in the rate of discount to 9 per cent., in spite of which bills were discounted and loans granted to the extent of £4,000,000 during the day. Late in the evening the Chancellor of the Exchequer announced in the House of Commons the suspension of the Bank Act, coupled with the information that the directors had been recommended to charge a minimum rate of discount of not less than 10 per cent.

A notion of the pressure on the Bank for assistance may be gathered from the fact that in five days the loans granted amounted to £2,874,000, and the bills discounted to £9,350,000, making a total of £12,224,000. When the Government letter was issued the reserve was a little over £3,000,000, but with these enormous advances it was still further reduced, until the return of the 30th May showed only £860,000. No actual infringement of the Act took place, though it is no secret that this was the result of management, and was really more technical than real. By the 16th August, the reserve having increased to £4,600,000, the minimum was placed at 8 per cent. and was also reduced 1 per cent. in each of the two following weeks.

Now, the most casual glance at the accounts of the two departments of the Bank during each of these panics reveals the fact that, while on the one hand the issue had no strain upon it, that no one was more than usually anxious to exchange notes for gold, the banking department was in imminent danger, so much so that but for the issue of the Government letters payment must have been suspended in 1847, 1857, and perhaps also in 1866.