us much valuable caution, we cannot expect that the Act will enforce a degree of prudence on the Bank which it would not exercise otherwise, certainly not that the degree of extra prudence which we shall so obtain is worth the feverish apprehension which the knowledge of the restriction is sure to produce.

Some theorists have indeed said, that there should be a warning now and once for all explicitly given that the Act shall be broken no more. We have seldom any faith in legislative "compacts" and promises fettering the inevitable discretion of future administrators. But in reality we have now something like a compact that the Act will be evaded when future circumstances are similar to those we have just passed through. Chancellors of the Exchequer are cautious men; the desire of cautious men is to be safe; the way to be safe is to follow a precedent. The boldest man in England would shrink from not following a precedent, when the inevitable and instantaneous result would be the failure of the Bank of England, and the consequent and irretrievable ruin of the banking and moneydealing community. No one who duly considers how formal is the habit, how extreme the prudence, and how tenacious the love of precedent in English statesmen, will have any idea that any of them will ever be so wedded by an abstract, an abstruse, and, in our judgment, an erroneous principle, as, in a pressing crisis, to accept such a responsibility.

Some statesmen have fancied they can elude the difficulty by carrying further the essential principle of the Act of 1844, vesting the business of issue in a Government department altogether and geographically separate from the Bank of England. We do not, however, perceive how, if that course had been adopted previously to the present crisis, it would have at all lightened our difficulties. The issue department of the Bank would have been at Somerset House; but the banking department would have been just in the same state that it was. The demand on it would have been the same, and its funds precisely the same. The destruction of the credit currency, such as we have described it, would have been exactly as important; the need of a remedy as urgent; the kind of remedy identical; public opinion would have pressed the Government to authorise an extra issue, just as now: indeed the pressure in all real likelihood would have been greater, because the interposition of an independent body like the Bank shields the Government from impatient clamour, and mitigates the apprehension of a factious political opposition. At any rate, men of the world will commonly believe that, notwithstanding the change of form, the Government would have done exactly what they

have now done. You may make a rigid rule easily enough; but where will you find a rigid statesman to adhere to that rule?

The separation of the issue department from the Bank is supported, as he himself tells us, by Mr. Gladstone, because he believes that it is a confusion of the business of issue with that of banking, which leads to the notion that it is the business of the Bank to aid trade without limitation in crises of difficulty. We have seen, however, that this notion rather arises from the habit of the Bank (as explained by Mr. Norman) to make advances at all times, to unlimited amounts, on such securities as come within their peculiar rules, or only to check those advances by the greater rate of interest charged to the borrowers in times of scarcity. So long as the Bank has any such principle as this, no separation of the issue department from the banking department will weaken the pressure upon it. If the Bank of England were to define the limit of its advances to its regular customers, and not consider itself bound to make advances to any but its regular customers, no separation of the business of issue would be needful. We are not recommending this course, -for it is not in the parenthesis of an article that the fundamental maxims of the most important corporation of the country can be discussed,-we only say, if an alteration is needed, if it is undesirable that the Bank should be expected to advance without stint on occasions of scarcity,-this alteration of their banking practice will be absolutely necessary, and will be enough to effect that which is required. A change in the geographical position of the power of issue would have upon it no effect whatever.

The next suggestion which is made by those who wish to retain the essential peculiarity of the Act of 1844, and at the same time to prevent the necessity of extra-legal and recurring suspensions of it, is the "elastic clause." The details of this proposal have never been very well worked out, and probably differ much in the minds of different theorists. The essential principle of it, under all variations, however, is, that at a certain point in a commercial crisis, either the Bank Directors or the Government, or both together, should have the legal right to authorise an additional issue of notes upon securities. Some persons would restrict the power to occasions at which the bullion was below a certain point; others to times at which the rate of interest was as much as ten per cent or twelve per cent; and others again to times at which the exchanges were not unfavourable to the country: but these persons are all agreed that at some point or other in the crisis some such step should be taken, and some power of taking such a step without infringing the law should be provided. If the Act of 1844 is to

be retained, we can scarcely question that such a power should be given; and yet there are many and great difficulties in settling the way in which it should be conferred, and the persons to whom it should be intrusted. We may dispose,—at least so it seems to us,-almost at once of the suggestion for an exact pre-appointment of the occasions on which this exceptional discretion is to be. exercised. The circumstances of commercial crises differ so very much, that even for the few of which we know the details it would not be easy to fix a machinery which would be uniformly applicable; and it would be immeasurably more difficult to prescribe beforehand, and in an enactment, for all which the future may have in store for us. We may have a domestic panic when the bullion in the issue department is above any point which we can exactly specify,—when the rate of interest is eight per cent or ten per cent,-during a foreign drain of bullion, or after it. No practical statesman will, it is probable, frame an elaborate proposal of this kind; persons conversant with complicated affairs are habitually averse to minute predescription, and to any profession of foreseeing more than it is possible to foresee. The most plausible of these contrivances is that which would fix the minimum rate of interest to be charged during the time that the Bank may avail itself of such exceptional issues; but even this is liable to the two objections -that it may happen that the minimum is fixed too high; and that the necessity of changing it, in order to obtain the needful notes, may impose a needless burden on the public during a time of difficulty: and secondly, that it only in appearance limits the occasions on which the exceptional power may be exerted, since the fixing the rate of interest must necessarily be in the same hands as the exercise of that power, whether of the Chancellor of the Exchequer or of the Bank, or of both; and if those authorities at any time wish to avail themselves of the power, they can adjust the rate of interest accordingly. On the whole, therefore, if such a clause should be hereafter added to our legislation, it will probably be found necessary to leave the occasions on which it may be exercised, as well as the extent and manner of that exercise, to the unfettered discretion of some persons, and it will only be necessary to consider who those persons should be. At first sight, it seems absurd to place this expansive power in the sole discretion of the Bank directors. These are the persons, it should seem, whose discretion we cannot trust, and on whom we wish to impose a binding fetter; yet great difficulties arise when we attempt to vest any such power in any department of the executive government. As Mr. Gladstone has observed, nothing can be more foreign to our habits, and to the entire genius of our legislation and

society, than that ministers of the crown should have to decide which commercial house or firm is to stand and which to fail. Yet in actual practice the discretionary employment of such an expansive power as is proposed does of necessity involve their having to decide such points. The power is only to be exercised in times of extreme pressure or of panic. What is to be the test of the extremity of the pressure? The only test is the stoppage or critical position of great commercial houses. The panic apprehension which brings such eminent firms into a crisis of difficulty can only be tested by communication with such firms, and an examination of their difficulties. No more delicate or unpleasant power can be placed in the hands of any minister, especially of a minister under a parliamentary government, who may be politically and closely connected with some commercial city, and have to decide on the ruin or prosperity of his warmest and most important supporters. Vesting the expansive power in the Government has also some of the inconveniences, just now so familiar to us, of a double government. In 1847, the Bank directors maintained that the state of the Bank was a perfectly safe one, that they desired no help from the administration, and that the issue of Sir C. Wood's letter was only desirable-if desirable at all-for the general welfare of the commercial community. We do not know if there was any such "coquetting" on the late occasion; but in her Majesty's Speech, and in the debate, ministers appeared to take on themselves the full responsibility of the extra-legal act. In this there is certainly some anomaly. The Bank directors ought to regulate, and ought to be responsible for, all the acts of the Bank, whether legal or extra-legal-whether they were done in the common course of business, or under the authority of an "elastic clause." The legislative creation of such an expansive power, assumes that its existence is necessary and its employment at times desirable. The authorities of the Bank can hardly be permitted to abdicate all responsibility at these times-to manage in ordinary periods as they did in the year 1847, so as to aggravate the intensity of a great crisis; and then, in the moment of the most harassing difficulty, to devolve the entire care of the banking community upon the executive government. The warmest admirers of a duplicate administration will scarcely recommend that we should have one set of authorities to get us into trouble, and another set to get us out. We can hardly question, that if there is to be such an elastic element within the limits of the law, the Bank should have a share in the responsibility of withholding it or of setting it free. Possibly the best solution of these conflicting practical difficulties would be, to vest the responsible discretion of making or not making such exceptional issues in the Bank and the Govern

ment together. We would recommend that there should be a distinct application from the Bank to the financial executive for the permission to make such unusual issues, and an official reply from the Government authorising such issues to be made. We should then clearly know who was responsible for what has been done the Bank directors, having expressly asked for permission to overstep the ordinary limit, could not in any degree evade an important share in the responsibility so incurred; the Government, having acted at the request and under the counsel of the Bank directors, would be relieved from some part of the odium which attaches to the intervention of parliamentary statesmen amid the distressing personalities, and what must be to them the unaccustomed scene, of a commercial crisis. As we have formerly remarked, we believe that if such a discretion is to be given at all, it had better be an unrestricted discretion. Only a doctrinaire pedantry can, we think, presume to enumerate circumstances, or define the precise minute, at which it will be required.

The difficulty of framing such an "elastic clause" throws great doubt, in our judgment, on the advisability of framing it at all. This arbitrary limit, and authorised manner of overpassing it, have rather an appearance of artificiality and technical theory. All such schemes are likewise liable to the objection that the relief they provide us with, is, if the expression may be allowed, relief with a jerk. The panic is allowed to become imminent, and then is on a sudden calmed by an extraordinary and peculiar act. Under an unfettered system the relief might be given gradually, insensibly, and as a matter of

course.

We are aware of the great feeling which exists in England against vesting an unfettered power of issuing notes payable on demand in any body whatever. We believe that this feeling, in so far as it is a just one, is founded on historical circumstances, especially on the insolvency of the old race of country bankers in times when banks were not allowed to be composed of more than six partners, and on remarkable misuses of its metropolitan monopoly during the same period by the Bank of England. Much might be said as to these historical circumstances in mitigation of these apprehensive feelings; but it is simpler to observe that the whole subject is a choice of difficulties. It may be an evil to have discretion; but the events of the last few months prove-and all that we have written is but an attempt to explain-the evils of a rigid rule which admits of no discretion.

Much of the apprehension which prevails in England as to "baseless paper" might perhaps be calmed if we adopted the plan of requiring from all issuers of it a specific security.