133. An event of such portentous magnitude as the suspension of cash payments by the Bank of England, could not fail to give rise to the most conflicting opinions as to the necessity of the measure, of the course of conduct of the directors which led to it, and as to the policy which ought to have been adopted under the drain which occurred in the last week of February, 1797. Many men of great eminence and ability changed their opinions in after times, when they came to look back upon the subsequent events. In examining this question, so as to form a just estimate of the conduct of the directors, we must remember that they were not masters of their own policy. They were distracted by two antagonistic claims, both of which they conceived it impossible to satisfy, at the same time, namely, that of the Chancellor of the Exchequer and the demands of commerce. They considered that if they advanced to the Government they must contract their issues to merchants, and, as the Minister was the more powerful and imperious party of the two, they were obliged to yield to his power

134. Several of the directors, being examined before the committees, unanimously attributed the necessity of stopping payment to the enormous amount of their advances to Government, and gave it as their decided opinion, that if the Government had repaid these advances, as they ought to have done, that this great catastrophe would have been avoided. We may take it, therefore, as admitted on all hands, that if they had been repaid by Government, they would have very greatly extended their advances to merchants. The real question then is, considering that they were under such advances to Government, would it have been prudent to have been more liberal in their accommodation to merchants?

135. Mr. Henry Thornton was very strongly of opinion that the excessive contraction of the Bank notes had produced the most injurious effects in shaking public credit of all descriptions. That the excessive reduction of notes had caused an unusually severe demand for guineas, that the great public distrust was directed against country bank notes, and that the Bank of

England ought to have extended their issues to supply the place of the country notes

136. Mr. Walter Boyd, an eminent merchant, was very clearly of opinion that the restriction upon the issue of notes by the Bank was the chief cause of the forced sale and depreciation of the public securities, and, if the Bank had only maintained its issues at the same height as they were in December, 1795, the drain of specie from the Bank, as well as the embarrassments in the mercantile world, would have been avoided, and a great portion of the fall which public securities had experienced, would have been prevented

137. Mr. George Ellison, who was secretary to an association of a great part of the country banks, considered that the quantity of coin in the country was greater than it was in 1793, though a very considerable part was hoarded away owing to the public alarms that were abroad. He attributed the great public distrust to the remembrance of the conduct of the Bank in 1793, when it suddenly contracted its discounts, just at the period when they were most wanted

138. The Committee of the Lords called the attention of the House very strongly to these opinions, but they did not venture themselves to pronounce an opinion on their justness. The Committee of the Commons went considerably nearer towards approving of them. In the year 1810, the Governor of the Bank being examined before the Bullion Committee, stated, that after the experience of their policy of restriction, many of the directors repented of the measure, and the Bullion Committee explicitly condemned the policy of the Bank both in 1793 and 1797

139. The Directors of the Bank, acting in the midst of such unprecedented circumstances, and so tremendous an emergency, are entitled to have their conduct examined with all forbearance. But, taking all these circumstances into consideration, we cannot fail to acquiesce in the opinion expressed by so many eminent

bankers and merchants at the time, by the subsequent avowal that experience had led many of the directors to repent of the policy they then pursued, and by the decided opinion of the Bullion Committee, that the policy pursued by the Bank in this momentous crisis was erroneous, and that the severe restrictions they attempted to place upon commerce, very greatly contributed to bring on the calamity by which they were subsequently overwhelmed. Nothing, in short, could be more unhappy than their regulations of the amount of their issues. When the exchanges were violently adverse, so that it was enormously profitable to export gold, they enlarged them to an extravagant extent, and when the exchanges were extremely favourable, so that gold was sure to flow in, they restricted them with merciless severity. The issues, which were £14,000,000, when the exchanges were against the country, were reduced to £8,640,250, when they had been for several months eminently favourable. It appears, from the entire evidence in the reports, that it was this excessive restriction of notes which drained their vaults during the autumn of 1796, and that if they had been more liberal in their issues, their vaults would have been much better replenished with cash

140. This disaster was the second notable penalty which the country paid within four years for the unjustifiable monopoly of the Bank. Never was there a more unfortunate example of monopolising selfishness; it would neither establish branches of its own in the country, nor would it permit any other private company, of power and solidity, to do so, whose credit might have interposed, and aided in sustaining its own. Moreover, when a failure of confidence was felt in the country notes, it refused to issue notes of its own to supply their place. The power of issuing what plays so important a part in commerce, was absolutely forbidden to wealthy companies, and left in unbounded freedom to private persons, many of whom had no capital or property to support their issues, and whose credit vanished like a puff of smoke, in any public danger. The Bank, consequently, was left to bear the whole brunt of the crisis, solitary and unsupported, and finally succumbed

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141. From the foregoing considerations, as well as the weight of authority on the subject, we can scarcely have any room to doubt that the suspension of cash payments was brought about at that particular time by the erroneous policy of the directors. We must, in candour, state that it appears open to much doubt whether any management, however skilful, could ultimately have saved them from such a disaster, during some period of the war. Several of those who concurred in the measure at the time, after their judgment had been corrected by experience, expressed their regret at having done so. Sir Robert Peel, in 1844, said it was a fatal" measure. Notwithstanding, however, the concurrence SO many weighty authorities and this is peculiarly a case where great authorities carry much weight-we cannot help thinking that it was fortunate that it occurred at this early period. The alarm and dangers which preceded its stoppage were comparatively slight compared with those which menaced the country after that event. The mutinies in the fleet, the rebellion in Ireland, the enormous accumulation of troops on the heights of Boulogne, flushed with victory, and led by a more fortunate, though probably not a greater soldier than Hoche, and burning with zeal for the invasion of England, were dangers of such portentous magnitude, as to render it to the last degree improbable that any paper currency, convertible into gold, could have survived them. That Montague was a greater and more successful financier than Pitt can, we think, scarcely be doubted, and the carrying through the re-coinage of the silver, in the midst of so much public distress, was a financial operation, of which the audacity, skill, and success must ever be regarded with admiration. But it must be remembered that the crisis in that reign lasted a much shorter time than the revolutionary war, and was never fraught with so much real danger to the independence of the country. At that period there was no paper credit, except the notes of the Bank of England, and William was at the head of a great European confederacy against one overgrown power, so that the circumstances of the two periods were in no way parallel, but rather, we may say, reversed. The confederacy against England at the latter period was far more menacing and formidable than the alliance against France. The

fortunes of the British Empire were apparently at their lowest ebb in 1798, and there seemed to be but one thing wanting to complete the destruction of the country-the loss of public credit. However great and invaluable are the blessings of a paper currency in time of peace, there does not appear to be any instance of its having successfully withstood the danger of an invasion by a foreign enemy. Even in Scotland, where it had been confessedly conducted upon a better system, and obtained the confidence of the country to a much greater degree, it could not have withstood the dread of invasion, if it had not been for the timely assistance of the Bank of England. And if it could not do so in that country, where the danger was remote, it is not probable that it could do so in England, where not only it was of much inferior stability, but was the very part of the empire aimed at, and first exposed to danger. The constant power of producing public embarrassment by demands for gold would have been a powerful weapon in the hands of the enemy, in which they would have found many to support them in this country from political sympathy. This measure, therefore, removed one perpetual source of terror and alarm from the Ministry. We shall show, in the next chapter, that the great depreciation of the currency which took place some years later was not by any means a necessary consequence from such a measure, but was produced by the infatuated perversity, both of the Government and of the Bank of England, who, with fatal obstinacy, persisted in a system combining almost every false principle that could be thought of. As the suspension, then, must, we think, have taken place sooner or later, it was probably advantageous for the country that it did occur so early in the struggle

142. The presumed scarcity of guineas, which led to the supposed necessity of issuing the order in Council, also rendered a more abundant supply of the circulating medium necessary, and an Act was immediately passed suspending, till the 1st May, the Act (Statute 1775, c. 51) restraining the negotiation of small promissory notes. In a few days the Bank caused to be prepared and issued £1 and £2 notes, and, to supply still further the demand for a small currency, they issued a notice that they had