SELECT STATUTES DOCUMENTS & REPORTS RELATING TO BRITISH BANKING, 1832-1928 THE BANK AND ROYAL EXCHANGE, CORNHILL, circa ,846 SELECT STATUTES , . DOCUMENTS & REPQRTS RELATING TO BRITISH BANKING, 1832-1928 SELECTED WITH AN INTRODUCTION By T. E. GREGORY SIR B. CASSEL PROFESSOR OF BANKING AND CURRENCY ·IN mIl UNIVERSITY OF LONDON OXFORD UNIVERSITY PRESS LONDON: HUMPHREY MILFORD 1929 OXFORD UNIVERSITY PRESS AllEN HOUSE, E.C. 4 LONDON EDINBURGH GLASGOW LBIPZIG HEW YORK TORORTO MBLBOURNB CAPETOWN BOil BAY CALCUTTA IlADRAS SHANGDAI HUliIPHREY MILFORD I'UBLISIIEa '10 'J'BB IDIlVERSlTY >< c; 2. · (z "3) ps. \ 77bO Printed in Great Britain CONTENTS OF VOL. I INTRODUCTION ix PART I. THE BANK OF ENGLAND BEFORE THE BANK ACT OF 1844 183a. THE BANK CHARTER INQUIRY RBcULATION OF THE NOTE ISSUES Evidence of John Horsley Palmer, 29th May 1832 3 .. .. George Warde Norman, 26th June 1832 6 GOVERNMENT OF THE BANK OF ENGLAND Evidence of John Horsley Palmer, 31st May and 5th June 1832 8 THE BANK CHARTER Acr, 1833 C3 & 4 Will. IV, c. 98) 19 1840-4. (I) THE BANKING AND CURRENCY CONTRO­ VERSY SI!LECT COMMITTEE ON BANKS OF IssUE Evidence of Samuel Jones Loyd (Lord Overstone), 17th July 1840 and subsequently 27 Evidence of Vincent Stuckey, 12th March 1841. and subse- quently. 62 Evidence of John William Gilbart, 19th March 1841 and sub- sequently . .' 70 1844. (2) THE" BANK CHARTER ACT Correspondence between the Government and the Bank of "England concerning the Renewal of the Bank Charter 117 THE BANK Acr, 1844 (7 & 8 Vict. c. 32) 129 CONTENTS OF VOL. II PART II. THE BANK OF ENGLAND AFTER THE BANK ACT OF 1844 1847-8. THE CRISIS OF 1847 The Petition of the Merchants, Bankers, and Traders of London against the Bank Charter Act 3 The Treasury Letter of 1847 relaxing the Bank Act and reply of the Bank 7 vi CONTENTS Evidence of the Governor and Deputy Governor of the Bank of England before the Secret Committee of the House of Lords on the CommerCial Distress, 7th February 1848 9 Evidence of the Governor and Deputy Governor of the Bank of England before the Secret Committee of the House of Commons on the CommerCial Distress, 7th March 1848. 13 Extracts from Report from the Secret Committee of the House of Lords on the Commercial Distress, 28th July 1848 36 1854. THE END OF THE USURY ACTS 17 & 18.Vict. c. 90 1857-8. THE BANK ACTS BEFORE PUBLIC OPINION; AND THE 1857 CRISIS Evidence of the former Governor and present Governor of the· Bank of England before the Select Committee on the Bank Acts, 19th May i8S7: The Bank Rate as a Means of Control 50 Market Rate and Bank Rate 56 Evidence of William Newrnarch, 5th June 1857: The Separation of Departments of the Bank of England 60 The Management of the Bank . 64 The Level of the Bank Rate 66 Correspondence between the Government and the Bank of England in the Crisis of 1857 72 Evidence of the Governor and Deputy Governor of the Bank of England before the Select Committee on the Bank Acts, 16th March 1858: The Bank of England and the Discount Market . 76 Evidence of David Salomons, 19th March 1858: Deposit Rates and the Safety of Joint Stock Banking 86 Evidence of George Holgate Foster, 13th April 1858: Deposit Rates of the London Joint Stock BaDks . 97 Evidence of Sampsol). Samuel Lloyd, 16th April 1858: The Bank of England ,/IIld the Provincial Banks of Issue 101 Report of the Select Committee on the Bank Acts, 1st July 1858 • 107 CONTENTS vii 1866. OVEREND, GURNEY, .AND CO. Correspondence between the Government and the Bank of England 124 The Times on the Crisis and its Lessons 127 The Economist and the Crisis 165 Report of the Provisional Liquidators 181 1890' THE BARING CRISIS Comments from The Times. 1 87 Comments from The Economist 195 1907. THE AMERICAN CRISIS OF 1907 Comments from The Economist . 202 PART III. JOINT STOCK BANKING 1836. JOINT STOCK BANKING Report of the Secret Committee of the House of Commons on Joint Stock Banks, 20th August 1836 219 18..,.--{ja. THE JOINT STOCK BANKING CODE 7 & 8 Vict. c. 113 (An Act to Regulate the Joint Stock Banks in England) (5th September 18..,.) 229 20 & 21 Vict. c. 49 (An Act to amend the Law relating to Banking Companies) (17th August 1857) 251 21 & 2Z Vict. c. 91 (An Act to enable Joint Stock Banking Com­ panies to be formeCl on the Principle of Limited Liability) (and August 1858) 257 as & a6 Viet. c. 89 (An Act for the Incorporation, Regulation, and Winding-up of 'l'rading Companies and other Associa- tions) (7th August 1862) 260 1875. THE LAST INQUIRY INTO PRIVATE NOTE ISSUES Evidence of William Hamilton Crake before the Select Committee of the House of Commons on Banks of Issue, 8th July 1875: Bank Acceptances • 263 Evidence of Walter Bagehot, 22nd July 1875: Single or Multiple Issues 266 1878. THE GLASGOW BANK SCANDAL The Economist and Limited Liability 288 Joint Stock Banking Liability: 42 & 43 Viet. c. 76 (An Act to amend the Law with respect to the Liability of Members of Banking and other Joint Stock Companies) (15th August 1879) • 300 viii CONTENTS PART IV. THE WAR AND POST-WAR PERIOD 1910. THE BANK OF ENGLAND ON THE EVE OF WAR Interview between the Governor and Directors of the Bank of England and the National Monetary Commission of the U.S.A. - 307 1914-18. THE CURRENCY AND BANK NOTES ACTS 4 & 5 Geo. V, c. 14 (An Act to authorise the issue of Currency Notes, and to make Provision with respect to the Note Issue of Banks) (6th August 1914) • 320 4 & 5 Geo. V, c. 72 (An Act to amend the Currency and Bank Notes Act, 1914) (28th August 1914) 3:n Report of the Treasury Committee on Bank Amalgamations, ut May 1918 323 1918-19. C THE CUNLIFFE LIMIT' First Interim Report of the Cunliffe Committee on Currency and Foreign Exchanges, 15th August 1918 334 Final Report of the Cunliffe Committee, 3rd December 1919 . 366 Circulation of Currency Notes: Treasury Minute of 15th Decem- ber 1919 371 1925-8. THE RETURN TO THE GOLD STANDARD Report of the Committee on the Currency and Bank of England Note Issues, 5th February 1925 372 The Gold Standard Act, 13th May 1925 (IS & 16 Geo. V, c. 29) 38j Currency and Bank Notes Act, 1928 (18 &; 19 Geo. 5. c. 13) • 385 LIST OF ILLUSTRATIONS VOLUME I The Bank arid Royal Exchange. Cornhill, circa 1846 Frontispiece The Bank looking towards the Mansion House, 1848 • • Facing 1I4 VOLUME II The Bank and Mansion Hohse. King William Street, 1850 Frontispiece Panic in Lombard Street • Faci"ll 124 INTRODUCTION §I HE student who turns from the literature of the Heroic Age T of British monetary controversy in order to attempt a study of the original sources relating to the antecedents of our modern banking situation will find himself confronted with a jungle of blue books and Parliamentary discussions, pamphlets and tracts and leading articles: a jungle at first sight so impenetrable that he may well despair. For it is characteristic of the period of middle-class ascendancy after 1832 that it produced much heat and little light; many massive volumes of evidence and statistics, but no classic reports; much legislation but, for a long time at least, no final solution of the various problems to be faced. These volumes are an attempt to bring together some of the material by which the growth of British banking policy and of British banking institutions, in the Victorian. era particularly, can be illustrated and illuminated. The original intention was to cover the period 1832-1925 in a singie volume, and to accompany it by a volume cQvering the rise of British banking and the vexed era of the- Restriction and the Resumption of Cash Payments. It very soon became apparent that, unless the book was to be nothing but a collection of mere snippets, restriction of scope and exten­ sion of IJpace were indispensable. Thus very little will be found in these pages of the detail of banking practice: the development of Colonial Banking and contemporaneous events in Scotland and Ireland have had to be excluded, and the development of the capital market neglected. These are defects of which the present writer is fully aware, and he can only plead that even within the field so restricted, the material from which he was forced to choose was so overwhelming that but a small fragment can be presented here. The value of original material lies only in part in the evideIwe it presents of the tendencies of thought or of the movements of events. A secondary but still not immaterial consideration is that it is only by the study of original materials that the tone of X INTRODUCTION economic life, the temper of an age, can be fully appreciated. Mere antiquarianism is a taste for which the present generation least of all has any profound respect; but still, the language in which economic concepts are clothed has varied more, perhaps, than the concepts themselves, and there is some instruction to be derived from studying the words in which the leaders of the banking world in successive generations have dressed their argu­ ments and convictions. Conflicts in the sphere of banking policy have revolved round a relatively restricted number of central ideas, but it is only by becoming familiar, through the study of documentary material, with the diversity of phrase that one comes to realize the real identity of content.