The events of April, 1847, also lead us to remark that the London bankers never vary their rate of discount with a, view to regulate the foreign exchanges. If it behoves the banking department to do this, it has certainly to perform duties which are not considered to belong to " any other banking concern." Nor do the London bankers suddenly and abruptly stop discounting for those customers in whom they have confidence. The frequent occurrence of such suspension of loans and discounts as occurred in April, 1847, would form an insuperable barrier to the banking department ever acquiring that kind of business which is carried on by the London bankers. No merchant would like to depend on such a bank for the means of making his daily payments. We believe, however, that most mercantile firms that have a discount account with the Bank of England have another banking account elsewhere, and some have also accounts with the large bill-brokers.
The pressure that existed in April, 1847, has been attributed to the publication of the amount of the bank's reserve. It was said, and said truly, that the bank might very prudently reduce its reserve for a few days below the average amount, knowing that by bills falling due, or by other means, it would soon receive a sum that would replenish its coffers. But the public, seeing only the amount of the reserve, and knowing nothing of the sums about to be received, might become unnecessarily alarmed, and hence, a panic might ensue. Upon this ground, some parties questioned the policy of publishing the bank accounts in their present form. But the remedy for this is not to suppress the returns, but to circulate throughout the community such an amount of knowledge as shall enable them to judge accurately respecting banking affairs. Other parties, of a higher class than those we denominate the public, have fallen into erroneous opinions by a literal adhesion to these returns. Almost up to the time of the suspension of the Act of 1844, it was contended by some who "sit in high places" that there could be no pressure on the commercial classes, since there were then more notes in the hands of the public than in former seasons when no pressure existed. And before the Parliamentary Committees of 1847 it was stated by the governor and deputy-governor, that it could make no difference to the public whether the bank advanced three millions, or any other sum, to the Government on deficiency bills, or advanced the same sum in loans and discounts to the commercial classes, inasmuch as the returns would show that the amount of notes in circulation would be the same. The events that followed the suspension of the Act showed the fallacy of these opinions. It was shown that the amount of notes in the hands of the public is not of itself a certain criterion by which to judge of the amount of banking facilities enjoyed by the commercial classes.
1 Commons, No. 3001.
IV. The Administration of the Banking Department from September, 1847, to September, 1848.
During this period the minimum rate of interest was advanced from 5 1/2 to 6 per cent. on the 23rd of September; to 8 per cent., by authority of the Government letter, on the 25th of October. It was reduced to 7 per cent. on the 22nd of November; to 6 per cent. on the 2nd of December; to 5 per cent. on the 23rd of December; to 4 per cent. on the 27th of January, 1848; and to 3 1/2 per cent. on the ] 6th of June.
At the commencement of this period a great number of commercial houses failed, not only in London, but also in Liverpool and Glasgow, and other large places. The following is the account given by the Governor of the bank to the Committee of the House of Lords: -
"An unprecedented large importation of food, caused by a deficient harvest, required in payment the export of a large amount of bullion, to the extent of about £7,500,000, from the coffers of the bank, and probably not less than £1,500,000 from other sources - together £9,000,000. From this great reduction in the available capital of the country, in addition to the still larger amount invested in railway expenditure, acting suddenly upon a previous high state of credit and excessive speculation, arose the pressure in the money market. There was an abstraction of £7,500,000 from the bullion held by the bank, and consequently a diminution in the notes to that extent."1
"1. The Bank of England being applied to by a very large firm in London, who had at that time liabilities to the extent of several millions sterling, advanced £150,000 on the security of debentures to that amount of the Governor and Company of the Copper Miners in England, and thereby prevented them from stopping payment; it was distinctly understood that the operation was for that purpose. 2. The bank advanced £50,000 to a country banker on the security of real property. 3. On the urgent representations of several parties of the first importance in the city of London, the bank advanced £120,000 to the Governor and Company of the Copper Miners, on the guarantee of approved names, taking at the same time a mortgage on the Company's property for £270,000 to cover this sum, and the amount of £150,000 debentures before advanced upon; it was stated that the stoppage of this company would have thrown 10,000 people out of employment. 4. The bank advanced £300,000 to the Royal Bank of Liverpool, on the security of bills of exchange, over and above their usual discounts to this bank; this advance unfortunately proved inadequate, and the Royal Bank, having no more security to offer, stopped payment. 5. The bank assisted another joint-stock bank in the country with =£100,000, on the security of bills of exchange, over and above usual discounts. 6. The bank advanced .£130,000 on real property to a large mercantile house in London. 7. The bank advanced £50,000 to another mercantile house on the guarantee of approved names. 8. The bank advanced .£50,000 to a joint-stock issuing bank on bills of exchange, and agreed to open a discount account with the said bank, on condition that it should withdraw its issues, but the joint-stock bank stopped payment before the arrangement could be completed. 9. The bank advanced .£15,000 on real property to a large establishment in London. 10. The bank assisted, and prevented from failing, a large establishment in Liverpool, by forbearing to enforce payment of upwards of £100,000, of their acceptances, and engaging to give further aid if required. 11. The bank assisted a very large joint-stock bank in the country with advances on loans on bills of exchange to the extent of £800,000 over and above usual discounts. 12. The bank advanced £100,000 to a country banker on real property. 13. The bank advanced a joint-stock bank in the country £200,000 on the security of local bills, besides discounting £60,000 of London bills. 14. The bank assisted another joint-stock bank in the country with an advance of £100,000 on local and London bills. 15. The bank advanced £100,000 to a large mercantile house in London, on approved personal security. 16. The bank assisted a large house at Manchester to resume payment, by an advance of £40,000 on approved personal security. 17. The bank advanced £30,000 to a country bank on real property. 18. The bank assisted many other houses, both in town and country, by advances of smaller sums on securities not admitted by the bank under ordinary circumstances; nor did the bank, during the period in question, reject at their London establishment any one bill offered for discount, except on the ground of insufficient security."1