Rate of Interest.

In the practical operations of the Bank, do you think it undesirable to vary frequently the rate of interest?—I think the rate of interest should never go below a certain point, 4 per cent.

Effect of the Bank screw on Commerce.

Mr. Cayley. The capital we get back upon the rectification of the exchanges affords no compensation for the capital which the country loses during the operation?-None; you have the strongest instance of that in the months of April and October of last year; in the month of April, in consequence of the stringent measures of the Bank, a million and a half of bullion was forced into the country from credit or capital, within a month or six weeks; in October, from the violence of the contraction in November and December; and what is now evidenced in India is the effect of that discredit, and of capital being forced into the country; the East India Company are now bringing £1,000,000 of silver from India, which, I believe, is intimately connected with the depressed state of trade between India and England.

And the pressure produces forced sales?-It stops credit and the British merchant sells his goods for the purpose of carrying on his payment, and brings back his capital at an earlier period than it would come in the ordinary course of trade.

The Danger of the Bank in October.

Mr. Spooner.-Was any intimation given to the Bank on the part of bankers having deposits in their hands in the month of October, that if the pressure continued, those deposits would be required?-Not that I am aware of, but the balances would probably have been required to a certain extent.

At that time the reserve in the hands of the Bank was reduced to somewhere about £1,200,000?-Before the Government letter came down we had notes and coin together amounting to £2,000,000 in London and the country.

I think the private deposits of that time amounted to £5,000,000 or £6,000,000?-On the 23rd of October the private deposits were nine millions and a half.

At that time what was the reserve of notes and bullion in the hands of the Bank?-Two millions.

Can you state what was the amount of bankers' balances at that time? -One million six hundred thousand pounds.

In that state of the reserve and deposits, do you still hold the opinion that there was no danger of the deposits being so drawn out of the Bank as to absorb all the notes and all the bullion which they had in their hands?—The reserve in London would not exceed £1,000,000; there fore I conceive that it was quite practicable for the bankers alone to have drawn out that reserve.

Supposing notes came in to you for payment, after that you must have gone with those notes to the Bank of Issue?-We should have gone to the stock market and endeavored to have sold stock at all hazards.

Do you think that under those circumstances any parties would have been found to purchase the stock?-My own opinion is that we should never have succeeded in selling it; but I believe the Governor of the Bank is of a different opinion; he is of opinion that we might have effected a sale. The question has been put to me in another place, whether I thought it practicable that £2,000,000 could have been sold at that time, and to that question I gave an answer, that I thought it could not, but that is a matter of opinion.

If you had failed in your attempt to sell, what would have been the result? If we could have effected a sale at all, the effect would have been a fall of stock to 60 or 65.

But with regard to the other alternative, if you could not have effected a sale, what would have been the result?—The result would have been that we should have had no notes in the banking department.

Mr. Glyn.-Do not you think that, considering the relative position of the private banks of London and the Bank of England, the private banks had a right to expect that if the pressure from the country had continued, and they had been borne upon by their country connexions, the Bank of England would have been in a situation to have given them the accommodation of discounts which they received in 1825?— Certainly.

But the Bank was not in that situation in 1847?-It was not. Mr. Hume.-Was it the operation of the Act of 1844 which prevented the Bank being in that situation?-Certainly.

Rate of Interest.

Mr. Alderman Thompson.-Is not it an advantage to a banker to keep the rate of interest as high as he can ?-The prevalence of an exorbitant rate of interest is not for his ultimate advantage, because that which injures trade injures him eventually, though, of course, he keeps his charges for discount as high as the market will justify.

Privileges of the Bank of England should be maintained.

Mr. Hume.-What, in your opinion, would be the effect, if the privileges which the Bank of England now enjoy were removed, and other banking establishments were allowed to act in London as they do in Edinburg, without there being any peculiar privilege or monopoly whatever? I think it would be a very dangerous experiment.

Do you think it would be dangerous to abolish the privileges of the monopoly which the Bank of England enjoys with respect to circulation and other matters, by having their notes a legal tender, and having certain exclusive privileges within a circuit of so many miles?—I think it would be a great pity to introduce any parties upon the same footing as the Bank of England is; I think that it is best as it is, with respect to the Bank of England being our one great national bank.

The monopoly they have, you think, should continue?—Yes.

Although you admit that they have the power of raising or lowering the value of property as they may think proper to advertise their rate of discounts?—Yes.

Joshua Bates, Esq. Examined.

Chairman. You are a partner in the house of Barings?—I am. How long have you been in business in London ?—About thirty years. Will you have the goodness to tell the committee what you consider the state of trade was in 1846?-The state of trade generally was very prosperous; very active; everything was selling, and merchants were making good profits.

What do you consider to be the present state of things in the city?— Quite the reverse from what it was in 1846.

During your recollection of business, have you ever seen a time when trade has been in a worse condition than it has been during the present year?-Never; nor do I recollect that I ever saw a time when the prospects were so alarming as at present.

Do you remember any time in which the commercial interest has gone through more difficulties than it has done during the last year?— No; I do not recollect anything to be compared to it; I was here in 1825, but I was not sufficiently engaged in business to be able to judge.

Cause of the Crisis in April.

Will you have the goodness to state what you consider to have been the immediate cause of the difficulties in April, 1847?—The panic of April, I conceive, was brought on by the Bank being called upon to advance heavily on deficiency bills; the Bank authorities could have done this without producing a panic, but for the necessity of publication, which would have shown the reserve of notes to be almost nothing; that is my view of it; I cannot say that I am correct; but it is believed that their loans would have come in, in the course of two or three days; and, after all, the advances to the government do not go out of the Bank, at least not immediately; all would have gone right but for the necessity of publication; the Bank was thus compelled to borrow on the Stock Exchange, and stop suddenly its advances on securities; this gave the first general intimation to the commercial community of the altered power of the Bank, and the panic ensued; it would have been entirely prevented, however, had the Chancellor of the Exchequer allowed the contractors of the loan the usual privilege of paying up under discount; this he emphatically refused, saying, "that he only wanted the loan as the instalments fell due."

How would that have obviated the difficulty ?-Of course, when persons take a loan, they prepare for it by selling stock; if they had been allowed to pay up on discount, they would only have had to deliver stock and to get the money; it would have gone directly into the treasury as fast as it could be turned over, and there would have been no want of funds on the part of the Chancellor of the Exchequer.

Causes of the Commercial Distress of 1847.

To what causes do you attribute the difficulties of the country in 1847?—I think it was a combination of causes; the alterations in the tariff, allowing the importation of so many articles free of duty, acted upon by an immense internal expenditure, stimulating importations, to which may be added the failure of the potato crop, in Ireland; these were all aggravated by the stringent clauses of the Bank charter.

Do you believe, then, that if there had been no failure of the potato crop in Ireland, still the year 1847 would have been a year of difficulty? -I do not think it would; if the corn law had been in force, I do not see how it could have occurred; because, however great the internal expenditure stimulating consumption, if it was in home grown corn the price would rise, and the country would receive all the advantage; but when it goes to foreigners, it entirely alters the case.

Do you consider that even if the harvest of 1846 had been a good harvest, yet if the commercial policy had been followed which has been followed, and the corn laws had been repealed, the country would have experienced difficulty?-1 think it would; I have no doubt of that; I always considered that the great alterations made in the tariff must lead to a commercial convulsion sooner or later; but it has been hastened certainly by the failure of the potato crop, and by the enormous internal expenditure.

Do you attribute much of the difficulties to the railway expenditure? -Undoubtedly, to the railway expenditure, acting upon the free importation of various articles.

How has that acted so as to produce any of the difficulties of 1847?— It has acted to augment the importations, and thus, by affecting the balance of trade, it has caused the exportation of gold, the contraction of the currency, and all the distress which has followed.

It has, in your opinion, aggravated the evil which would otherwise have arisen from the tariff being reduced?—It has accelerated it; it has produced that in 1847 which would have come gradually perhaps in

1849.

You have stated that you thought that the operation of the Act of 1844 has aggravated the difficulties; will you have the goodness to point out to the Committee in what way it has acted?-It has acted in this way; I think the commercial public were not aware, although perhaps they should have been, that the power of the Bank by this Act was very much reduced; and as I remarked in a previous answer, it was not till April, 1847, that there was what I should call public notice that the power of the Bank was limited; the public had never seen anything like the Bank going to borrow, and then every one said, "The Bank has no power," and began to examine more closely, and fright ensued; but it was very soon allayed then, because there was no real cause of panic at that time.

Do you believe that the pressure in April, 1847, would have arisen, supposing that the Act of 1844 had not been in operation?-It would not, in my opinion, have arisen but for the publication clause; the Bank would have given accommodation without any difficulty.

You are against the publication of the accounts of the Bank?—I think that in the present form it operates injuriously.

You think it is injurious to the general interests of trade?—I think that those out of doors draw improper inferences from it; that the publication might, for example, show a very small amount of notes in the reserve, while the directors of the Bank might be quite certain that there was enough.

Then would you have no publication of the accounts of the Bank?— I suppose now the public have become used to it; it is necessary to have some publication; but I think that once in three months is enough.

Causes of the Failures in the Corn Trade, &c.

A great number of mercantile houses failed, but solvent houses that continued their business experienced very great losses, did they not?— Undoubtedly, there have been very great losses to those who have not failed, but to many of those who have failed the losses were very great; I think you may classify the failures.

In what way?—I think there were some who ought to have failed, and some who were ruined by Act of Parliament, and some who failed by reason of the crisis.

Those who ought to have failed, had over-traded beyond their means? Yes, they had not sufficient means; and that will be the case always, to a certain extent, in every community.

What do you mean by failing by Act of Parliament ?—I refer to those who had sugar estates; they were ruined by the Sugar Bill.

You mean by the change of the law with regard to the introduction of sugar?—Yes; then the people engaged in the importation of corn were ruined by Government, I think; in the first place, in 1845, when there was a want of corn, it was ordered secretly to be bought; there was no delusion any where, and a small quantity sufficed; but in 1846, the Government, no doubt from the best motive, thought it was improper to interfere with commerce, and in order not to interfere with it, they ruined it; they bought here, which raised the prices very much; they bought secretly, I suppose; the corn-factors, taking this for a natural demand, sent orders in every direction, and when they got their corn over they found that they were selling in competition with the Government, and the very high prices were in part produced by the Government purchases. I examined several of the corn factors' estates, and they did not appear to me to have over-traded. I know two, more particularly, where there was a capital of £60,000, and it did not appear that they had bought more than £120,000 or £130,000 of corn; they were utterly ruined from the importation being so great; in consequence of the exaggerated notion of the want there was for corn here; and the raising of the prices by the Government purchasing at home, contributed very much to delude the corn-dealers; but I think, in general, with reference to the bankruptcies, it will be found on examination that the dividends are much greater than usual, and there are fewer instances of dishonorable conduct, and that most of the bankrupts have wound up their estates under inspection, which shows what