V 
 THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 3>32 
 B875 
 
 V- 32 
 
 fliOMSHJS
 
 LETTER 
 
 EDITOR of the TIMES, 
 
 QUESTION 
 
 BANK CHARTER, 
 
 SHEWING THE INCONSISTENCY OF SOME OF THE 
 
 ACCOUNTS LATELY FURNISHED BY THE 
 
 BANK TO THE COMMITTEE OF THE 
 
 HOUSE OF COMMONS. 
 
 A. VUGEL, PRINTER, 1, ST. GLORGE'S PLACE, CAMBERWELL. 
 1833.
 
 The following remarks have been thrown together with a view to 
 their insertion in the columns of the Times, but the length to 
 which they have extended, apart from any other consideration, 
 has induced the writer to think that they would not find a place 
 there; — still conceiving that they may serve to direct the public 
 attention to some points in the question of the Renewal of the 
 Bank Charter, which have not yet attracted it, — he deems no 
 further apology necessary for the present attempt to give them 
 circulation.
 
 THE BANK CHARTER. 
 
 (To the Editor of the Times.) 
 
 SIR, 
 
 As the time is approaching when the renewal 
 of the Bank Charter must be taken into consideration 
 by Parliament, and as many attempts have been made 
 by the friends of " things as they are," to mislead the 
 public mind,* and to mystify this subject in every 
 possible way, a short statement of the case, as between 
 the Public and the Bank, may not be unacceptable to 
 such of your readers as have not the leisure or inclina- 
 tion to investigate the question for themselves : a 
 question, by the bye, which, when divested of the 
 obscurities purposely thrown around it, is not so com- 
 plicated or intricate, as might at first sight appear. 
 
 The principal relation in which the Bank stands to 
 the Government, in virtue of which it is supposed to 
 hold its Charter, and from which it derives its greatest 
 source of profit, is in its character of issuer of the pa- 
 per money of the state, and the two points which it 
 chiefly concerns the public to determine, are, first, 
 whether there be, or be not, a very considerable gain 
 accruing from the supply of the paper circulation of the 
 country, and if there be, whether the nation, to whom 
 it naturally belongs,t should not enjoy this gain, ra- 
 
 * Particularly by an Article in the last Number of the Edin. Review. 
 
 •f " Paper Money may be considered as a seiguorage equal to its whole 
 exchangeable value, but seignorage in all Countries, belongs to the state." 
 Proposals for an economical and secure currency by D. Ricardo, Esq. ,1816
 
 ther than the Bank, which neither has nor pretends to 
 have any claim upon the country, for gratuitous ad- 
 vantage; and secondly, whether the Bank, as at present 
 constituted, is the fittest body to be entrusted with that 
 control over the monetary system of the country, 
 which the unrestricted power of issuing such circula- 
 tion must necessarily bestow upon it. 
 
 And first: the Bank has been for a number of 
 years in possession of all the advantages derivable 
 from its peculiar connection with the government, 
 and during all this period, it has anxiously concealed 
 from its proprietors, and consequently from the public, 
 no doubt for very sufficient reasons, all accounts of 
 the sources from whence its profits are derived, as well 
 as all general details of its proceedings. But when, 
 at length, the Committee appointed by the House of 
 Commons in May last, called for the production of 
 these accounts, the Bank Directors found themselves 
 in rather an awkward dilemma ; on the one hand it 
 behoved them to put forth such a statement as should 
 satisfy their proprietary and the public, of the pros- 
 perous state of their affairs and the largeness of their 
 rate of profit, and on the other hand and with a view 
 to the inducing, upon easy terms, a renewal of their 
 charter, it became necessary to shew that the least 
 possible part of this profit was derivable from the ad- 
 vantages afforded by the business of the state, lest from 
 the too apparent fruitfulness of these advantages, the 
 state might be tempted to resume them. To effect this 
 object, a little mystification was resorted to, and two 
 different accounts have been furnished,* by one of 
 which the whole net income or profits of the Bank, for 
 
 * See a copy of these accounts, at the end.
 
 the year ending February 1 $32, and composed of items 
 detailed in Appendix No. 15 of the report, is made to 
 amount to ,a£l, 189,627, and by the other, (Appendix 
 23,) the portion of this income derived from the circu- 
 lation of notes, the management of the debt, and every 
 thing, in short, which had reference to its connection 
 with the state, is reduced to the insignificant sum of 
 ,s£l78,875. If this were the true state of the case, it 
 might be unwise to take the management of our affairs 
 out of the hands of the Bank, for the sake of effecting 
 so paltry a saving, and it certainly would be very un- 
 reasonable to expect that establishment to pay, as a 
 tine for the renewal of its charter, any such sum as 
 ^200,000 or^300,000 per aim. for the privilege of 
 making only <a6 > 178,875. But in order to shew that 
 this account must be fallacious, if the other be true, 
 and vice versa, it will be only necessary to analyse 
 them. 
 
 The assets of the Bank in February 1832, by a 
 rate of interest upon which it derives its profits, 
 are stated in Appendix 1 3 to consist of the following 
 items ; — 
 
 Bank Notes outstanding - - <s£ 18,05 1,7 10 
 
 Money of the state deposited - 3,198,730 
 
 Private deposits - - - 5,738,430 
 
 Capital lent to Government - 14,553,000 
 Balance of surplus, or savings 
 
 called "rest." - - - 2,637,760 
 
 -544,179,630 
 
 Now if upon the two first items, or even upon a 
 larger estimated amount, as per Appendix 23, before 
 referred to, the Bank only allows that it makes
 
 6 
 
 .^178,875, it must make the balance between this 
 sum and its whole profit of ^£1,189,627, or ^£1,010,752, 
 by a rate of interest upon the three last items, and as 
 against the first of these three, the Bank, according 
 to its practise, ought to keep one third of bullion, 
 upon which of course, it would make no interest, 
 the account of items remaining for profitable invest- 
 ment, would stand as follows ; — 
 Private deposits .€5,738,430 
 
 Deduct i for bullion 1,912,810 
 
 Remaining - - 3,825,620 
 Surplus, or " rest" 2,637,760 
 
 6463,380SS™i e a t? p b . e c e e rrf258^35 
 Cap 1 lent to Governm* 14,553,000 fixed at 3 p.ct. 446,502 
 Profit on Bullion, Commission, Rent, &c. - 71,859 
 Estimated net profit from circulation of Notes, 
 
 and Government business, as p. App. 23 178,875 
 
 955,771 
 Less balance of expenses, (after deducting 
 those charged on account of circulation 
 and Government business) - - , 109,549 
 
 846,222 
 Leaving a deficiency of 343,405 
 
 between that sum and the real statement of 
 
 profits, or - 1,189,627 
 
 So that this estimated account of profit from the cir- 
 culation of notes and government business, of ^178,875 
 must be wrong by nearly ^€300,000, and to shew in 
 
 * It will be seen, upon reference to the Accounts, that the interest gained 
 by the Bank, upon its various investments, does not average much more than 
 3'| per cent, and it is to be observed that even this is a high rate of interest 
 for the Bank to make on the private deposits, since if the market rate were 
 so high, the private depositors would know better what to do with their 
 Money, than to leave so large an Amount unemployed at the Batik.
 
 what the errors consist, it will be only necessary to re- 
 fer to the account itself, in which it will be seen, first, 
 that the Bank charges for s£8, 000,000 of bullion retained 
 against £24,000,000 of circulation and deposits, whereas 
 it actually retained, in the last year, an average of 
 £6,000,000 against its whole liabilities of .£28,00 ',000, 
 and should not consequently charge for more than 
 £5,000,000 against the £24,000,000 : secondly, that all 
 the lowest rated investments are credited to this ac- 
 count, and consequently that the average rate of interest 
 allowed, does not exceed 2^ per cent, and yet that this 
 same account is modestly charged 1 per cent, upon 
 the capital lent to government at 3 per cent., as if the 
 said loan were a loss of 1 per cent., instead of an 
 absolute gain of § : and further, that a charge is 
 made of £40,000 as the average of forgeries per 
 aim. for the last ten years, whereas, if we except 
 Fauntleroy's forgery, the like of which has not oc- 
 curred in the history of the Bank charter, nor will 
 probably occur again, the said average does not ex- 
 ceed £4000 per ami. Now if all these items be re- 
 stored to the account of profit made by Government 
 business, it will stand pretty nearly as under. 
 Profit allowed by the Bank - - £178,875 
 
 3$ per cent, average rate of interest upon 
 
 £3,000,000 bullion, wrongly charged 1 12,500 
 1 per cent, on capital lent to government, do. 147,000 
 < her-charge on account of forgeries - 30,000 
 
 £468,375 
 
 which may be considered to be clearly established, to 
 be the least sum which the Bank makes by its connec - 
 tion with Government, according to its own published 
 accounts, independently of all other adventitious ;i<l-
 
 vantages.* It does not surely need to be argued that 
 this profit and these advantages are the property of the 
 public, and might, with every propriety, be saved to 
 the state. That this saving might be effected by the 
 establishment of a National Bank, was the proposition 
 of the late Mr. Ricardo; he, indeed, estimated the 
 saving at d£700,000t per annum, which would be 
 probably nearer the truth, as the expences might, no 
 doubt, be greatly reduced, and as a National Bank 
 would not require to keep so large a proportionate 
 stock of bullion. But if such a plan were deemed in- 
 expedient, and the Bank were to be considered in other 
 respects fit to be entrusted with the control of the 
 circulation of the country, still the mdirect advantages 
 which she derives from her connection with the state, 
 apart from the direct profit under consideration, ought 
 to enable her to relinquish such profit, or an equivalent 
 for it, to the nation; — for, that the Bank has enjoyed 
 immense advantages, will be manifest to all, by a 
 reference to the account published in Appendix No. 
 29, in which it will be seen that she has returned to 
 her proprietors, in bonuses and increased dividends, 
 no less than ^"17,318,070, a sum exceeding her sub- 
 scribed capital by nearly one third, and that she con- 
 tinues to this moment to pay a dividend equal to 10 
 per cent, upon the said capital ; the present dividend of 
 8 per cent, being upon a capital to which 25 per cent, 
 has been added, and which forms a part of the 
 .£17,000,000 above mentioned. 
 
 The second point for determination remains to be 
 
 * It is to be observed that in these accounts, no scrutiny is made into the 
 alleged expences of the Bank, which are conducted upon a most extrava- 
 gant scale. 
 
 f This estimate of profit is made by Mr. R. on the presumption that a Na- 
 tional Bank would be the sole issuer of paper currency for the whole country.
 
 considered, namely, whether the Bank, by its conduct 
 in the management of its affairs, has entitled itself to 
 the confidence of the nation, and shewn itself worthy of 
 the trust reposed in it, in submitting to its discretion 
 the unlimited power of issuing notes, or in other words, 
 of creating money, and in fact, controlling the whole 
 monetary system of the country. That such a power, 
 entrusted to a body of men, who are in their individual 
 capacities, merchants and traders, however respecta- 
 ble, but whose concerns are liable to be affected by the 
 measures pursued by the Bank, is likely to be used 
 indiscreetly, if not to be absolutely abused, is a pro- 
 position which would, I think, present itself to every 
 unprejudiced mind ; and that such power might be 
 more safely confided to Commissioners appointed by 
 Government, who would be free from these influences, 
 and who would be responsible to Parliament for their 
 conduct, it would not, perhaps, be very difficult to de- 
 monstrate. To say that such Commissioners would be 
 too much under the influence of Ministers, who might 
 desire to make an unworthy use of this power, is an 
 idle objection which might be refuted by the fact of their 
 responsibility, and by the obligation which they might 
 be placed under of constantly publishing their accounts. 
 On the other hand, that the Bank Directors, so far 
 from being above this influence, have been ever un- 
 ceasingly subjected to it, is abundantly proved by the 
 whole past history of their conduct. 
 
 The records of the Bank Report furnish sufficient 
 evidence of this, and a reference to them will shew, not 
 only how complete has been the subserviency of the 
 Bank to the views and schemes of the Ministers of the 
 day, but how totally ignorant it has proved itself to be 
 of the true principles of banking, and how signally
 
 10 
 
 unfit to preside over the commercial interests of a 
 great nation. It will be seen by looking at the evidence 
 of Mr. Wm. Ward, in the Bank report, page 143, that 
 previous to the year 1819, the Bank had not discovered 
 the necessity of having regard to the state of foreign 
 exchanges, in the regulation of its issues, — that, up 
 to the year 1827, a resolution existed upon the 
 minutes of the Bank court, to the effect that there 
 was no foundation for this rule ! and that it is only 
 since this time, that it has been ascertained that 
 this is the only safe rule upon which to proceed in 
 such regulation ! The same Gentleman shews how 
 constantly the Bank, either from ignorance, or sub- 
 servience to ministerial influence, or both, has been 
 in the habit of transgressing this rule ; and to in- 
 stance a memorable example, let us take a short 
 review of the conduct of the Bank from the time of 
 the resumption of cash payments in 1819, to that of 
 the panic in 1825, and we shall soon see that to all the 
 distress under which the commercial world then la- 
 boured, and from which it has, scarcely yet, recovered, 
 that same conduct was mainly conducive. 
 
 It is well known that the Bank was averse to the 
 return to cash payments, and such of the Directors 
 as had seats in Parliament, strenuously opposed 
 this measure in their places. It was, however, 
 carried against them, and in 1819, and the follow- 
 ing years, the Bank either was, or fancied it was, 
 under the necessity of procuring a large supply of 
 gold, to meet the engagement thus forced upon it. 
 In effecting this operation, however, it shewed no 
 moderation, but obtained tffmuch greater quantity 
 of the precious metals than the case demanded. Indeed 
 by the following quotation from Mr. Ward's evi-
 
 II 
 
 dence, page 143, it would almost appear that temper 
 was evinced on this occasion, and that the interests of 
 the whole nation were subjected at this time to the 
 spleen of the Bank Directors. — Mr. Ward says, " The 
 " Bank had been accused of rapacity, and of not 
 " meeting the resumption of cash payments from 
 " grounds of cupidity, which certainly was not a ten- 
 " able accusation ; but being so challenged and so 
 " much being said upon the subject, I think their feel- 
 " ing was, that they would, at least, go far enough in 
 " providing abundance of gold, that they would rather 
 " procure too much than too little, so that they might 
 " be able, at least, to assert it was not from interested 
 " motives that we have not complied with what Par- 
 " liament requires ; then, till they had accomplished 
 " that object, they did not look so minutely at the 
 " principle as might have been advisable." * 
 
 Be this, however, as it may, the consequences were 
 disastrous to the country, for the preparation for this 
 unnecessary accumulation of treasure, occasioned such 
 a ruinous depression of prices, that by 1822, wheat had 
 fallen to 37s. per quarter. At this time, Ministers 
 were so pressed by the complaints of the agriculturists, 
 that they prevailed upon the Bank to undertake an 
 increased issue of paper, which in 1S25 amounted to 
 4,000,000. This increased issue had the effect of rais- 
 ing prices considerably, and a great degree of specu- 
 lation ensued. About this time, the Bank, still being 
 encumbered with a large amount of treasure, began to 
 lend money on mortgage, a species of investment at 
 variance with the sound principles of banking ; they, 
 
 * Mr. Ward here alludes to a violation of the principle of the currency 
 which the Bank then committed, and which he says, must always take place 
 when gold is unnaturally drawn to th? Bank for any particular purpose.
 
 12 
 
 then undertook to purchase an annuity of Government, 
 by which they finally locked up about *g 10,000,000 
 more of their capital, another investment not strictly 
 justifiable in their circumstances. Not content with 
 this, in the beginning of 1824, they engaged with Min- 
 isters to furnish an indefinite sum of money to pay off 
 the dissentients from a proposed reduction of the 4 per 
 cent, annuities to 3| per cents. Before, however, this 
 payment came into operation, the exchanges had taken 
 an unfavorable turn, and by November in this year, a 
 considerable drain of gold from the Bank had taken 
 place. It now became the duty of the Bank, according 
 to the principles which it has since discovered to be 
 true, and upon which, it even then professed to act, to 
 contract its issues ; had it done so, however, it would 
 soon have checked speculation,prices would have fallen, 
 the golden dreams of the Minister would have dis- 
 appeared, and the holders of 4 per cent, stock would 
 have spurned at the idea of any reduction of their in- 
 terest. The Bank, therefore, disregarded these warn- 
 ings, and instead of preparing for the storm, spread 
 its canvass to the breeze and sailed before the wind. 
 It increased its issues, — every thing wore a smiling 
 aspect, — the King, in his speech from the throne, in 
 February, 1825, spoke of the thriving condition of all 
 the great interests of the nation, and the Minister in 
 his place in Parliament, stept out of his way to vaunt 
 the prosperity of the country. Some few reflecting 
 minds saw through the flimsy veil, and foretold the im- 
 pending ruin, but the unthinking majority were de- 
 luded. The exchanges continued to fall, the demand 
 for gold went on, until in the autumn of this year the 
 Bank had been drained of nearly ten millions of specie ; 
 this was a state of things no longer to be trifled with, —
 
 IS 
 
 the Bank, at length took alarm, and suddenly began to 
 contract its issues ; — the scene changed as if by magic, 
 and the whole scheme of prosperity vanished in aninstant. 
 
 The " Panic" ensued, and the Bank, with one mil- 
 lion of gold in its coffers, was driven to the desperate 
 expedient of issuing more notes, to save the sinking 
 credit of the state.* That this was finally accom- 
 plished, was more owing to the returning confidence 
 of the public, and to the good fortune of the Bank, 
 aided by the most strenuous exertions of both, than to 
 the previous prudence or good management of either. 
 
 Taking these statements, therefore, to be correct, 
 and a reference to the published evidence and tables 
 will show that they cannot be refuted, it will not be 
 difficult to ascribe to their true causes, the ruinous 
 fluctuations to which the credit and prosperity of the 
 commercial world has been, of late years, subjected. 
 
 If such then, have been the probable advantages 
 which the Bank has derived from its connection with 
 the state, and such the disastrous consequences which 
 have ensued to the public from the mismanagement of 
 its affairs, it is not surely too much to expect that the 
 Government shall hesitate to renew the charter of this 
 Company, or at least that it shall take care to secure 
 to the public, not only a proper indemnification for the 
 advantages it foregoes, but also a sufficient securityf 
 for the better administration of so important a concern 
 as the currency of the country. 
 
 I am, SIR, 
 Your obedient Servant, 
 
 W. R. 
 
 * Exchequer bills had fallen to 90s. discount in a few days. — Ward, p 141 . 
 f One of the greatest safeguards would be the publicity of the Accounts.
 
 14 
 
 [Copy from Bank Report.] 
 
 APPENDIX, No. 15. 
 
 An account of the prof ts of the Bank of England, for the year 
 ending 29th February, 1832, stating the description of the secu- 
 rities held by the Bank, and the sources from which the said prof ts 
 have accrued. 
 
 Interest on Commercial Bills - £130,695 
 
 Do. Exchequer Bills .... 204,109 
 
 Annuity for 45 years, (dead weight account) - 451,415 
 
 Interest on capital received from Government - 446,502 
 Allowance received for Management of the Public 
 
 Debt 251,896 
 
 Interest on Loans on Mortgages ... - 60,684 
 
 Do. Stock in the Public Funds - - - 15,075 
 
 Do. Private Loans ----- 56,941 
 
 Profit on Bullion, Commission, Rent, &c. &c. - 71,859 
 
 £1,689,176 
 
 Note. — From this Account are to be deducted the whole expenses, 
 £499,549; leaving £1,189,627, as the whole net profits.
 
 15 
 
 [Copy from Bank Report."} 
 
 APPENDIX, No. 23. 
 
 An estimated Account of Profit derived by the Bank, from 
 
 circulation of Promissory Notes, and from Government Business. 
 
 Circulation - - £20,000,000 
 Government deposits 4,000,000 
 
 £24,000,000 of which 2-3rds are estimated to be 
 invested in securities & l-3d in bullion. 
 Securities £16,000,000 ; viz*— 
 9,000,000 Exchequer Bills at 2j per cent. £202,500 
 800,000 Stock - - at 3 „ 24,000 
 
 1,000,000 Advances for circu- 
 lation on discount at 3 „ 30,000 
 500,000 Country discount at 3i „ 17,500 
 4,700,000 - - - at4i „ 193,875 
 
 16,000,000 
 
 -467,875 
 
 Deduct — ■ 
 
 Expense of circulation ... - 106,000 
 
 Expense of Government Deposits - - 10,000 
 
 Stamp Duty on circulation ... 70,000 
 
 1 p. ct. on capital (heldbygovernmentat3p.ct.) 147,000 
 
 333,000 
 
 134,875 
 
 THE PUBLIC DEBT. 
 
 Amount received from government for manage- 
 ment of the Public Debt for the year ending 
 5th April, 1832, including Life Annuities 251,000 
 
 Management of Life Annuities proposed to 
 
 be transferred 3,000 
 
 248,000 
 
 Deduct — 
 Expenses for management of the National Debt 1 64,000 
 Average of forgeries per ann. during the last 
 
 ten years 40,000 
 
 204,000 
 
 44,000 
 
 Estimated profit £178,875