"Already in March, 1864," writes Mr. Macleod, " the number of new companies formed under the Limited Liability principle gave great uneasiness. Up to that time it appeared there were 263 companies formed, with a nominal capital of 78,135,000, out of which 27 were banks, and 15 discount companies. In August, 1864, the long-dated acceptances of the new financial companies began to press on the market, and lay the foundation of the crisis of 1866."

On the 20th of June, 1865, the rate of discount reached its minimum, 3 per cent. From the 3rd of August to the 28th of September, the minimum rate of discount was 4 per cent.; on the 28th of the same month it was raised to 4 1/2, on the 2nd of October to 5, on the 5th to 6, and on the 7th to 7 per cent.-a rise of 3 per cent in nine days. In November a drain set in of gold to Paris, and of silver to the East. The bank raised its rate in January, 1866, from 7 to 8. At the same time, the Bank of France raised its rate from 4 to 5 per cent.; and this simultaneous rise seems to have exercised a healthy influence upon jobbers and speculators. February, 1866, was a period of intense perturbation among the holders of miscellaneous securities. Some large firms engaged in railway contracts suspended payment. Investments became unmarketable which a few months before had been eagerly sought after, and the public scouted concerns which had "floated" readily during the Limited Liability mania. Suspicion everywhere prevailed, and all kinds of securities were thrown upon the market at once. And, finally, a large percentage of the companies formed under the Limited Liability Act of 1862 were daily wound up, to the serious hindrance of the ordinary business of the courts.

But it was the break-up of the Joint-Stock Discount Company, which first raised any acute alarm; then followed the stoppage in April of Barned's Bank, at Liverpool, with liabilities of three and a half millions. The fright culminated into universal panic. On the 3rd of May, the bank raised its discount from 6 per cent., the quotation for the previous month, to 7; on the 8th, to 8; on the 9th to 9. And on the 10th the most disastrous failure that ever filled the City with panic and dread, the stoppage of the great house of Overend, Gurney, and Co., for upwards of ten millions sterling, took place, and the bank raised their rate to 10 per cent. This momentous news was only known after banking hours; but when made public by the papers the next morning, that of Friday, the 11th, the scene of excitement which then took place is said to have thrown all previous wild terrors of the kind into the background; it was, said the Chancellor of the Exchequer, next evening in the House of Commons, declared by the oldest inhabitants of the City to have been without a parallel.

The following was the account given by the "Times," in its impression of May 12,1866, of this bewildering scene:

"The doors of the most respectable banking houses were besieged, more, perhaps, by a mob actuated by the strange sympathy which makes and keeps a mob together, than by creditors of the banks; and throngs, heaving and tumbling about Lombard Street, made that narrow thoroughfare impassable. The excitement on all sides was such as has not been witnessed since the great crisis of 1825, if indeed the memory of the few survivors who shared that panic can be trusted when they compare it with the madness of yesterday. Nothing had happened since the day before to justify such a fear as was everywhere shown. Rumour, however, like the false woman in the Laureate's legend, ' ran riot amongst the noblest names,' and left no reputation unassailed. Each man exaggerated the suspicions of his neighbour; and until a report, at that time unfounded, was circulated in the afternoon, that the Government had authorized the bank directors to issue notes to the extent of five millions beyond the limit imposed by the Bank Charter Act, it seemed as if the fears and distrust of the commercial world had become boundless."

A writer in the " Bankers' Magazine " says :-

"A greater crash has never taken place in any one week in any country in the world. Looking at the list of suspensions, it will be seen that their business ramifications are more than European. More or less they embrace all the four quarters of the world, and we have yet to feel the reaction from the effect which the news will produce as it extends from point to point."

The fever was at its height, the crisis had set in, and, for the third time, suspension of the Bank Charter Act wrought the cure. In reply to the questions certain to be asked in the House of Commons on emergencies of the kind, the Chancellor of the Exchequer said:-

"I stated in the commencement of the evening that representations had been made to me from quarters of the greatest influence and credit with respect to the extraordinary state of the market, and the distress prevailing in the city to-day. I stated that those representations had come to me from gentlemen representing in particular the private banks of London, and I expected that I should shortly have received similar representations from those connected with the joint-stock banks. Those representations I have received accordingly, and they were pressed even more earnestly and urgently than I anticipated. I stated also, at the time when I had the honour of addressing the House, that the effects of the day's proceedings through the Bank of England had not been fully given to us. Since then we have become acquainted with them, and we find that the bank, through a desire to extend relief, has raised its loans and discounts to-day to a sum of something more than .4,000,000. The effect of that large accommodation was to reduce the reserves of the bank to a sum not very far short of 3,000,000 of money. Under these circumstances, as far as the facts are known, and there being no reason to believe that any great change has occurred in the state of things, the estimate is sufficiently accurate for all practical purposes, we find the bank reserves reduced in a single day from a sum approaching 6,000,000 to a little exceeding" 3,000,000. The Government have felt that this is a state of things which, combined with the public feeling, calls for intervention on their part. We have taken the opportunity during the evening of considering the state of the facts, and the result has been that we have addressed a letter to the governor and deputy-governor of the bank, substantially the same as was addressed to those high officers in 1847 and 1857. That is to say, if the bank, proceeding upon its usual prudent rules of administration, shall find occasion to make such advances from the issue department as shall exceed the limits allowed by law, we recommend that they should not hesitate to make that issue, and we undertake to make immediate application to parliament for its sanction. (Cheers.) There are other points of detail, but that is the substance of the letter which shall be in the hands of the governor and deputy-governor of the bank to-morrow, and which I earnestly hope may have the effect of allaying the feeling of uneasiness which prevails in the country, especially as it does not arise from any general unsoundness in the condition of our commercial relations, but only from causes of a peculiar and specific character. In that respect we are able to draw a favourable distinction between the present crisis and others in former times; but there is also another distinction, and that is the extraordinary rapidity with which the crisis has come upon us, and which has prevented the adoption of measures which otherwise would have been taken for its relief. We have not, however, hesitated to act, to address ourselves to the subject with all the means in our power, and we trust that our proceedings will meet with the approbation of Parliament." (Cheers.)