THE BANK OF ENGLAND AND THE ORGANISATION OF CREDIT IN ENGLAND. CHAPTER I. THE BANK CHARTER ACT. No public measure, of equal importance, has ever passed through so much good and evil report, with so little understanding of its true character, as the Bank Charter Act of 1844. This Act has been ever since the subject of vehement comment, for and against. Committees of both Houses of Parliament have sat in judgment upon it. Numerous witnesses have recorded their opinions of it, in answer to the volumes of questions submitted to them, and ponderous Blue Books have given these Questions and Answers to the world. But, to this day, B men of commercial experience and men of intellectual renown are not agreed as to the real effects of this famous Bank Charter Act of 1844. It is, however, a significant fact that, the great Capitalists are almost universally in favor of it, and that, almost everybody else,- - who knows anything about it,—is against it. This is significant of its actual operation and effects. It will be shown that, these effects are much more favorable to lenders than to borrowers, and that, as the borrowers are always the most numerous, the opponents of this measure very far outnumber its advocates. If this be no argument against the Act, yet, it is a strong ground for inquiry; and if it can be shown that this Act has worked injuriously to the trade and industry of the country, and that, it is founded on erroneous principles, the case for repeal is proved, notwithstanding that the Act may have worked to the profit of the Bank of England and to certain large capitalists. The present object is to prove this case. The main enactments of the existing Bank Charter Act are five. 1. It establishes two separate and distinct departments, the one for the issue of bank-notes, other for the ordinary banking business. It enacts that, the Bank of England shall transfer fourteen millions of Government Securities to the Issue Department, and shall receive from that department the same amount of banknotes; and enacts that, the Issue Department shall issue to the public bank-notes to the same amount for any quantity of gold bullion which may be brought into that department for the purchase of such notes, and shall repay sovereigns, on demand, for all notes of the Bank of England presented to the Issue Department by the public. 3. It limits the issue of notes by country banks, according to the average of their circulation up to a certain time. 4. It prohibits the establishment of country banks of issue. 5. It provides that, if any of the country banks should cease to issue notes, the Bank of England shall be authorised to issue notes, without any deposit of securities or bullion, to the extent of two-thirds of the lapsed issues of such country banks. From this it will be seen that, the Bank of England, so far as banking is concerned, is placed on the same footing as every other bank in the kingdom. It is only the largest bank amongst many others, with a special and very good customer, the Government. Mr. Samuel Jones Loyd, (now Lord Overstone) who is supposed to have been the principal framer of this Act, and who is avowedly its most strenuous supporter, imperatively declares that, the Issue Department is perfectly distinct from the Banking Department of the Bank of England, and has no more to do with it than any other bank. The fact that the bank-note still bears the name of the Bank of England, and is signed on behalf of that corporation, has perpetuated the illusion of the division of one and the same body into two subordinate departments, notwithstanding the disavowal of any such idea by the author of this curious contrivance. But that is only the illusion of the ignorant, and it is quite immaterial if, in the consideration of the whole question, the fact be borne in mind that, the Issue Department is quite separate and distinct from the Bank of England, and is wholly and entirely an office of the State for the manufacture of banknotes, as the Royal Mint is for the coinage of sovereigns. It is important that this should be borne in mind for a correct understanding of the present question, for it will be maintained that, the Government, and not the Bank of England, authorises the issue of the notes, and, therefore, that the Government, and not the Bank, is |