Then with respect to miners and manufacturers, any system which would bring them into immediate contact with the operation of the bank for regulating the foreign exchanges, without that protection and defence from those convulsive changes which the local circulation afford, would be a system pregnant with indescribable hazard.
Such was the state of the currency question when the late Sir Robert Peel came into office in the year 1841. The charter of the Bank of England was subject to renewal in the year 1844, and in that year was passed an Act of Parliament "to regulate the issue of bank notes, and for giving to the governor and company of the Bank of England certain privileges for a limited period."
The Act of 1844.
The charges against the country circulation had been that it was unsafe, excessive, and ill-regulated. The Act of 1844 dealt chiefly with the second of these accusations.
According to the provisions of this Act no new bank of issue was permitted to be established in the United Kingdom, and the maximum amount of notes which each existing bank of issue might issue upon an average of four weeks, should, after the 10th October, 1844, be the average amount of the notes in circulation during the twelve weeks ending the 27th April, 1844; that returns should be made to Government of the average amount of notes in circulation during each week; and if, upon an average of four weeks, the amount in circulation exceeded the authorized amount, the bank should be subject to a penalty equal to the amount of that excess. That if any existing Lank, not having more than six partners, should increase the number of partners to more than six, it should lose the privilege of issue. That if any two banks should unite so as to increase their number beyond six, they should lose the right of issue. And if any banker should become bankrupt, or cease to carry on the business of a banker, or cease to issue notes, it should not be lawful for such banker at any time thereafter to issue any such notes.
The charge of being unsafe the Act did not meddle with,-except so far as limiting the issues of each bank, and prohibiting any new bank of issue, may be regarded as elements of safety. But the Act of 1844 left the country circulation still unregulated by the amount of gold in the Bank of England. In the month of October, 1844, when the Act came into operation, the amount of gold in the Bank of England was £12,149,367. On the 23rd October, 1847, the amount of gold was £6.745,354, but the law required no corresponding reduction in the amount of the country circulation. On the 10th July, 1852, the gold had advanced to £21.845,390, but the law permitted to the country circulation no corresponding expansion. It does not, therefore, appear to have been the object of the Act that the country bankers should regulate their issues by the amount of gold in the Bank of England.
The maximum was the average of the twelve weeks ending 27th April, 1844, but there seems to be no reason why this period should have been chosen. Sir Robert Peel originally proposed that the maximum should be the average of the previous two years. The private bankers asked for the average of the previous five years. The joint-stock banks asked for the maximum of the two years, contending that if an average were made a maximum, the circulation would be still further reduced. Sir Robert Peel ultimately determined on the average of the twelve weeks previous to the announcement of the measures to Parliament. The respective amounts are as follows :-
Average of the two years
Average of the five years
Maximum of the two years
Average of the twelve weeks as ultimately certified ....
The private banks were at that time 205, and the joint-stock banks 72.
The enactments of the Act of 1844 affecting the country bankers are contained in clauses 10 to 22 inclusive. These clauses respectively enact that there shall be no new bank of issue; that there shall be restrictions against issue of bank notes; that bankers ceasing to issue notes may not resume; that existing banks of issue may continue under certain limitations; a provision for united banks; that a duplicate of the certificate to be given by the commissioners of stamps and taxes to issuing bankers, certifying the limit to which they may issue, shall be published in the "Gazette," and that the "Gazette " shall be conclusive evidence of such limit; that in case banks become united, the commissioners shall certify the amount of bank notes which each bank was authorized to issue; a penalty on banks issuing in excess; that issuing banks shall render accounts; the mode of ascertaining the average amount of bank notes of each banker in circulation during the first four weeks after the 10th October, 1844; empowers commissioners of stamps and taxes to cause bankers' books, containing accounts of notes in circulation, to be inspected, and imposes penalty on bankers for refusing to allow such inspection; that all bankers shall return their names once a year to the Stamp Office; that all bankers liable shall take out a separate licence for every place at which they issue notes or bills, with a proviso in favour of bankers who had four such licences in force on the 6th of May, 1844.
The clauses, of which the foregoing are the headings, will be found in the Act of 1844, which may be obtained at any time from Messrs. Spottiswoode & Co., London, and from a careful perusal of them it will be seen that the provisions of the Act require-
1. That no new bank of issue shall be established in the United Kingdom.
2. That the maximum of each bank of issue in England shall be the average of the notes in circulation during the four weeks ending the 27th April, 1844.
3. That if any bank having not more than six partners should exceed that number, it would lose its issue. This tends to prevent private banks merging into joint-stock banks.
4. That no union can take place between a joint-stock bank and a private bank, or between two joint-stock banks of issue, without one of them at least losing it9 circulation.