The foregoing took place on the evening of the 11th; and on the 17th the Chancellor was again interrogated as follows:-
Captain Gridley asked the Chancellor of the Exchequer : "Whether he was aware that the directors of the Bank of England had declined to make advances upon the lodgment of Government securities, on the ground that they ought to be realized; and whether he considered the directors had complied with the expressed understanding that they, on getting permission to increase the issue of bank notes, were to afford accommodation to bankers and merchants."
Mr. Wyld asked the Chancellor of the Exchequer :
"If it were true that the Bank of England had refused to make advances on consols, and had otherwise neglected to give to merchants, bankers, and others, the accommodation not only implied, but expressed, when they obtained power to increase their issue of notes."
The Chancellor of the Exchequer :
"It may be convenient that, in answering the questions of the hon. members, I should combine them together, as they are so nearly akin. In the first place, I may say that I have not received complaints from any persons who consider themselves aggrieved by the conduct of the Bank of England. At the same time, certain rumours have gone abroad, and it is in respect of those rumours, as embodied in the questions of the hon. members, that I give my reply. The two points principally raised are these. First, whether I am aware that the directors of the Bank of England have declined to make advances upon the lodgment of Government securities, on the ground that they ought to be realized; and, secondly, whether I am of opinion that the directors have complied with the express understanding that they, on getting permission to increase the issue of bank notes, were to afford accommodation to bankers and merchants. I think these questions have been very opportunely put, because they enable me to remove a mis apprehension that has got abroad, and which appears, from all that I can see, to have taken possession to a certain extent of the public mind. The misapprehension refers equally to the subject of advances upon bills and discounting of bills, and to advances upon Government securities. The best account that can be given of the operations of the Bank of England with regard to these two great branches of banking, is to state the figures relating to them, and I think it will be found on referring to them that the Bank of England has not refused to make advances on Government securities. These figures are as follows:-The advances made by the Bank of England on Government securities on Friday, the day of the panic, amounted to .£919,000, on Saturday to £747,000, and on three subsequent days various amounts, making up the total amount advanced on these securities, in five days, to £2,874,000. (Hear, hear.) Then with regard to the accommodation of commerce in general, the best measure that can be given of the manner in which the bank has exercised its functions is shown in this-that it has made advances upon bills and has discounted bills to the extent of £9,350,000, making a total of advances and discounts in five days of £12,225,000. (Hear, hear.) Looking at these figures, I do not think that a very strong prima facie case has been made out of the bank having declined to afford to commerce the accommodation it should have given, but it is only due to the bank that I should point out certain words in the letter of Government which were expressly intended to serve as a notice to the world that the Bank of England was not to be expected, in the then circumstances of difficulty, to depart from all rules of caution. The conditional promise made in the letter, signed by the First Minister and myself, was a promise to apply to Parliament for its sanction, in case it should happen that necessity should require the bank, for the purpose of making advances and discounting bills, to issue notes beyond the limit fixed by law, subject to the restriction that the bank was not to give to everybody everything that was asked, but that it should be governed by those prudent rules of caution by which it was generally guided. That was a very important limitation, and it reserved, I think, entirely, as it was meant to do, the discretion of the gentlemen of the Bank of
England, in whom we have every reason to place confidence. With regard to the Government securities and other points, the foundation upon which the rumours rest is of the slightest possible nature. I cannot find that there is any possible ground for supposing that any limit was placed by the bank on its advances on securities, either upon Friday, the day of the severest pressure, or upon Saturday, which was also a critical day; but on Monday, when the panic began to subside, and when Government securities were brought to the bank for advances, the bank directors suggested, in various instances, to the holders of those securities, that it would be better for them to try the open market and to realize for themselves. (Hear, hear.) In consequence of that view-in my opinion, not an unreasonable one on the part of the directors of the bank-certain sales of securities were effected. These sales, I believe, were effected by one, two, or three persons only; and whenever representations were made to the bank that sales could not be made-meaning, I presume thereby, without serious loss the bank met all the reasonable demands of the parties. With respect to other kinds of accommodation, commercial accommodation strictly so called, I have not been able to discover, nor are the authorities at the bank aware of any other ground for the rumours existing than the circumstance that applications did arise from one or two quarters, not for an amount of discount to a given limit, but for an unlimited amount of discount to be made use of in case necessity should arise. The directors of the Bank of England did not consider that their duty compelled them to accede to such demands, and, as far as I am able to judge, I think that, under the circumstances of the times, they acted wisely in giving no engagement to meet an unlimited amount of discount. That, I believe, to be the sole foundation for the rumours which are abroad. I think the explanation I have given is one which the House will be glad to receive, and I believe that the authentic figures which I have stated to the House will do more than any mere verbal statement to explain the liberal, yet judicious manner in which the operations of the Bank of England are conducted at critical periods. I hope the effect of such communications will be that all that hereafter transpires with respect to the state of the bank will tend not to disturb, but further to compose the public mind." (Cheers.)