It is said that the accidental discovery of a number of £1 notes at the Bank ready for circulation, and the issue thereof with the consent of the Government, aided very materially in restoring confidence in the country districts.

The panic was, however, the death blow to small notes in England, as after February, 1826, no more stamps were issued for £1 or £2 notes, although those already issued were allowed to remain in circulation until April, 1829. It was intended also to abolish the Scotch and Irish £1 and £2 notes, but the opposition in Scotland, headed by Malachi Malagrowther (Sir Walter Scott) was too strong for ministers, and the small notes have ever since remained in full use to the great content of the sister countries.

In the early part of 1826 a correspondence took place between the Government, represented by the First Lord of the Treasury and the Chancellor of the Exchequer, and the Bank of England, in which two proposals were made by the former, both having the same object in view, the improvement of the country note circulation. These were-

1st. That the Bank should establish branches in country towns.

2nd. That the Bank should consent to the establishment of joint-stock banks of issue beyond sixty-five miles from London.

To the first, the Directors appear to have acceded without any difficulty, and in consequence the undermentioned branches have been opened at various dates:

* 'Committee on Bank Charter, 1832/ Answer 2217.

Branches have also been opened at Cardiff, Exeter, Gloucester, Leicester, Norwich, and Swansea, but for various reasons have been discontinued.

To the second proposal of the Government some opposition was offered, but finally a reluctant consent was given, and a bill was passed legalizing joint-stock banks of issue beyond a radius of sixty-five miles from London, the liability of the shareholders being unlimited.

It may be remarked that in the debates in Parliament relative to these changes the principle of limited liability, as applied to banking, was strongly advocated by Mr. Huskisson and the late Sir Robert Peel.

The important step of making Bank of England notes a legal tender was taken at the renewal of the charter in 1833, when it was enacted that the tender of such notes for any sum above £5 was legal anywhere in England and Wales. This measure was much debated, one of its strongest opponents being Sir Robert Peel; it was, however, carried on a division by 214 to 156.

Notes issued at any of the branches were made payable at the place of issue as well as in London, but on the other hand those issued in London were only payable there.

In the course of the negociations between the Government and the Bank relative to the renewal of the Charter, the attention of the law officers was called to an opinion, expressed so far back as 1822, that there was nothing in the existing law to prevent joint-stock banks being opened in London, or within sixty-five miles there of, provided that they did not issue notes. After due consideration this was officially declared to be the case, and it was determined to take immediate advantage of the discovery, and the following clause was inserted in the Act: " Be it therefore declared and enacted that any body politic or corporate, or society, or company, or partnership, although consisting of more than six persons, may carry on the trade or business of banking in London or within sixty-five miles thereof, provided that such body politic, or corporate, or society, or company, or partnership do not borrow, owe, or take up in England any sum or sums of money on their bills or notes payable on demand, or at any less time than six months from the borrowing thereof, during the continuance of the privileges granted by this Act to the said Governor and Company of the Bank of England.-"

The Bank protested most strongly against this clause, declaring that it was a violation of the understanding that their privileges were to be preserved intact. To this Lord Althorp retorted by saying that the bargain was that their privileges should not be diminished, to which he would strictly adhere, but that he could not propose to Parliament to improve their position. As the Directors did not feel strong enough to resist the Government, they did the best thing possible under the circumstances-submitted with a good grace.

The passing of this Act was quickly followed by the establishment of the London and Westminster, London Joint-Stock and Union Banks in rapid succession. As to the policy of the removal of the restriction, so far as the interests of the public are concerned, there can now be hardly two opinions, and it is probable that the damage to the Bank did not prove to be nearly so great as the fears of the Directors led them to expect.

A small concession was also granted to the country banks of issue, by allowing them to have an agent in London through whom their notes could be retired. The charter was renewed by this Act for twenty-one years from the 1st August, 1834, but power was reserved by the Government to cancel it after the expiration of ten years, upon giving twelve months' notice, and paying off the debt due to the Bank.

Within the next few years there were two serious disturbances in the money market, arising from very different causes; the first culminating in the latter end of the year 1836, the second in 1839. The harvests of 1832-3-4 were very abundant, and the price of corn in consequence fell extremely low, causing great agricultural distress, though for the same reason the manufacturing interests were exceedingly prosperous.

Railway schemes were starting, and speculation of all kinds was increasing. The new joint-stock banks were giving great facilities in the way of credit, by the means afforded them of re-discounting with the Bank, until a notice was issued that all bills bearing the indorsement of a joint-stock bank would be refused by the discount office, whatever other names they might bear. This measure was of course attributed to jealousy of the new banks, but in point of fact it appears to have been forced upon the Bank.