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322 the exchange to par. And had they clone this at a sufficiently early period, it is all but certain the bank would not have lost more than two or three millions of bullion ; whereas, by their following a different line of conduct, and deferring the adoption of vigorous repressive measures till too late a period, it was drained of about seven millions of bullion, and its safety seriously compromised before it could stop the drain.

Legislation of 1826—Suppression of £1 Notes—Joint-Stock Banks of Issue authorized.

Notwithstanding the fact that nations are slow and reluctant learners, the events of 1825-20, taken in connec tion with those of the same sort that had previously occurred, produced a conviction of the necessity of doing something that should at least improve the system of country banking in England. But the measures adopted with this view were very far indeed from effectually securing their object. The law of 1708, limiting to six the number of partners in banking establishments issuing notes, was repealed; and it was enacted, that banks with any number of partners might be established for the issue of notes anywhere beyond sixty-five miles from London, and that banks not issuing notes might be established in London itself with any number of partners. The circulation of notes for less than five pounds in England and Wales was at the same time forbidden. It was intended to extend the same prohibition to Scotland and Ireland, but the opposition to the proposal excited in these countries was too strong to be overcome. Sir Walter Scott threw himself zealously into the controversy, and by his Letters of Malachi Makigrowther, helped to make the resistance effectual. The suppression of 1 notes was advantageous in shutting up one of the principal channels by which the inferior class of country bankers got their paper into circulation, to the frequent loss of the poorer classes ; but it is now generally admitted that the balance of argument is in favour of the issue of notes of this denomination by the Bank of England or some agency of the state, under conditions ensuring their convertibility. The second branch of the banking legislation of 1826 was for some time a comparative failure. Those who supposed that joint-stock banks would be immediately set on foot in all parts of England, were a good deal disap pointed with the slowness with which they spread for some years after the Act permitting their establishment was passed. The heavy losses occasioned by the downfall of most of the joint-stock projects set on foot in 1824 and 1825, made all projects of the same kind be looked upon for a considerable period with suspicion, and deterred most persons from embarking in them. But this caution gradu ally wore off ; and the increasing prosperity of the country, and the difficulty of vesting money so as to obtain from it reasonable return, generated anew a disposition to adven ture in hazardous projects. A mania for embarking in speculative schemes acquired considerable strength in 1834 ; and during 1835 and part of 1836, it raged with a violence but little inferior to that of 1825. It was at first princi pally directed to railroad projects ; but it soon began to embrace all sorts of schemes, and, among others, joint-stock banks, of which an unprecedented number were projected in 1835. The progress of the system was as follows:—

Banks. Iii 182(3 there were registered 6 In 1827 1 In 1828 5 In 1829 4 In 1830 3 In 1831 .. 8 Banks. In 1832 there were registered 10 In 1833 13 In 1834 8 In 1835 45 In 1836.... .. 11 Total. .114 In point of fact, however, the number of banks created in 1835 and 1836 was vastly greater than appears from this statement. It seems that, at an average, each of the 56 banks established in those years, like those previously established, had from four to five branches ; and as these branches transacted all sorts of banking business, and enjoyed the same credit as the parent establishment, from which they were frequently at a great distance, they were, to all intents and purposes, so many new banks ; so that, instead of 56, it may safely be affirmed that from about 220 to 280 new joint-stock banks were opened in England and Wales in 1835 and 1836, but mostly in the former year. In January, February, and March 1836, when the rage for establishing joint-stock banks was at its height, the exchange was either at par, or slightly in our favour, showing that the currency was already up to its level, and that if any considerable additions were made to it, the exchange would be depressed, and a drain for bullion be experienced. But these circumstances, if ever they occurred to the managers of the joint-stock banks, do not seem to have had, and could not in truth be expected to have, any ma terial influence over their proceedings. Their issues, which amounted on the 26th of December 1835 to 2,799,551, amounted on the 25th of June 1836 to 3,588,064, exclusive of the vast mass of additional bills, cheques, and other substitutes for money they had put into circula tion. The consequences were such as every man of sense might have foreseen. In April 1836 the exchange became unfavourable, and bullion began to be demanded from the Bank of England. The directors, that they might the better meet the drain, raised the rate of interest in June from 4 to 4 It may, perhaps, be supposed that the increased issue of the joint-stock banks would be balanced by a corresponding diminution of the issues of the private banks, and that on the whole the amount of their joint issues might not be increased. This, however, was not the case. Some private banks were abandoned in 1836, and others incorporated with joint-stock banks ; and it is further true, that those which went on managed their affairs with more discretion than their associated competitors. But, from the 26th of September 1835 to the 31st of December 1836, the issues of the private banks were diminished only 159,087, whilst those of the joint-stocks were increased during the same period 1.750,160, or more than ten times the falling off in the others. These statements show the inexpediency of leaving the issue of paper to the unregulated discretion of an indefinite number of competing -banks. Its issue ought in all cases to be governed by the state of the exchange, or rather, as already stated, by the influx and efflux of bullion. But previously to 1844, the provincial banks might go on over issuing for a lengthened period without being affected by a demand for bullion, or even for Bank of England paper.