The United States government were at this time reestablishing a metallic currency, and drawing large sums of bullion from this country in exchange for securities.

An Irish bank, the Agricultural and Commercial, failed in November, 1836, causing a run on the other banks, and necessitating a large importation of gold, Bank of England notes not being a legal tender in Ireland. Then the Northern and Central Bank, having a number of branches in the manufacturing districts, had to apply to the Bank for assistance, which was granted to a large amount; liberal accommodation also was afforded in other quarters and the crisis passed over.

The second drain of gold was owing to very different causes; following the plentiful harvests above mentioned came a succession of bad ones. To meet the deficiency a large importation of corn took place, which in due course, the balance of trade being against England, had to be provided for by an export of gold. This might not of itself have been so serious, but that simultaneously a continental demand for bullion set in, which reduced the gold in the Bank to such an extent that artificial means were resorted to in order to meet the difficulty.

An arrangement was made by which Messrs Baring & Co. drew on Paris bankers for about two millions sterling, the Bank of France engaging to pay the drafts should the acceptors not be in a position to meet them at maturity. The drain was thus stopped, but not before the bullion had on the 2nd September, 1839, fallen as low as £2,406,000.* The tide then turned and an accumulation of gold began which continued almost without interruption until the year 1844.

It now becomes necessary to consider the Acts of 1844-45, by which the bank note circulation of England, Scotland, and Ireland are now regulated. As before mentioned, at the renewal of the Charter in 1833, power was reserved by the ministry to cancel the exclusive privileges of the Bank (under certain conditions) at the end of ten years. In April, 1844, a correspondence was opened with the Bank by Mr. Goulburn, the Chancellor of the Exchequer, in an exhaustive letter, in which the propositions of the Government were given in detail. To these, after some vain attempts to obtain better terms as regards the sum to be paid in lieu of stamp duty, the consent of the court of Directors was given.

The main objects in view in the proposed changes were " to place the general circulation of the country on a sounder footing, and to prevent, as much as possible,, fluctuations in the currency, of the nature of those which have at different times occasioned hazard to the Bank and embarrassment to the country." + Sir Robert Peel also explained in Parliament that it was intended " to prevent the recurrence of those evils from which we suffered in 1825, 1836, and 1839. It is better to prevent the paroxysm than to excite it, and trust to desperate remedies for the means of recovery."

* Macleod, ' On Banking,' vol. ii, p. 120. + Mr. Goulburn's Letter, April 16th, 1844.

The supporters of Sir Robert Peel's measure claim it as a success on the ground that the convertibility of the note is secure, and doubtless it is so; but as to the fluctuations of the currency, and the prevention of panics, it is sufficient to remark that the former are as great as before the passing of the Act, and that the panics of 1847, 1857, and 1866 were, to say the least, quite equal in intensity to any that had happened before. The Act in operation did not prevent the panic, but when suspended a better feeling immediately arose on each occasion.

The clauses of the Act of 1844 (7 & 8 Vict., cap. 32) affecting the Bank of England are as follows :

1st. That on and after the 31st August, 1844, the issue of bank notes payable on demand by the Bank of England should be separated, and thenceforth kept wholly distinct from the general banking business, and should be carried on by a separate department, entitled "The Issue Department of the Bank of England."

2nd. That on the 31st August, 1844, there should be transferred to the Issue Department securities to the value of. £14,000,000 (of which the debt due by the public of £11,015,100 should be deemed a part), and also any gold and silver not required for banking purposes; and thereupon the Issue Department should deliver to the Banking Department such an amount of notes as should, added to those in the hands of the public, be exactly equal to the aggregate of securities, gold and silver transferred to the Issue Department. The Bank was forbidden to increase the securities in the Issue Department, but might decrease them at pleasure, and again increase them up to the limit. After the transfer the Issue Department was allowed only to issue notes, whether to the Banking Department or the public, in exchange for other notes, or for gold and silver coin or bullion.

3rd. That the proportion of silver bullion held by the Issue Department should not at any time exceed one fourth part of the gold coin or bullion.

4 th. That after the 31st August, 1844, all persons should be entitled to receive notes for standard gold, at the rate of £3 17s. 9d. per ounce, the assay to be conducted by persons approved of by the Bank, and the expense thereof to be borne by the seller.

5th. That if any banker who, on the 6th May, 1844, was issuing his own notes, should cease to do so, it should be lawful for the Privy Council, on the application of the Bank of England, to authorize the increase of the securities in the Issue Department beyond £14,000,000, by a sum not exceeding two thirds of the issue so discontinued, and thereupon to issue notes to that amount; the authority for so doing to be published in the next 'London Gazette,'

6th. That the accounts of the Bank in a prescribed form should be published weekly in the 'London Gazette.'

7th. That Bank of England notes should be issued free of stamp duty.

8th. That the sum paid by the Bank for its exclusive privileges should be raised from £120,000 to £180,000 per annum; the nett profits arising from increased issues (under the 5th clause) should also be paid to the public.