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THE RIGHT HONORABLE
LORD VISCOUNT GODERICH,
ON THE FITNESS OF THE SYSTEM OF THE BANK OF ENGLAND,OF THE COUNTRY BANKS, AND OF THE BRANCH BANKS OF ENGLAND, TO THE WANTS OF THE PEOPLE:
THE AMPLE MEANS OF PROTECTION, WHICH PRIVATE BANKERS AND THE PUBLIC HAVE, AGAINST THE MONOPOLY OF THE
BANK OF ENGLAND.
BY HENRY BURGESS.
To the Right Honorable Lord Viscount Goderich, First Lord Commissioner of His Majesty's Treasury.
The Memorial of HENRY BURGESS, of 81, Lombard Street,
THAT your memorialist, feeling the greatest anxiety that your Lordship, and His Majesty's present government, should adopt principles and recommend measures, in regard to the important subject of the currency, founded on a correct knowlege of the case; has determined, at the risk of being charged with presumption for so doing, forthwith to submit his reflections, on one part of this momentous subject, to your Lordship's consideration.
That your memorialist firmly believes, that ruin the most extensive, and misery the most aggravated, have been produced, solely because the government, the parliament, and public bodies, have all along proceeded to act on erroneous or defective information, in regard to the money and banking affairs of this country.
That your memorialist, by much intercourse with bankers, deems himself thoroughly acquainted with their habits and opinions; but he prays, in a more especial manner, for your Lordship's serious attention to his statement; because he has had very peculiar opportunities of observing the habits, and knowing the interests and opinions, of farmers, graziers, traders, and the secondary class of manufacturers: these, which in the aggregate form the great
central body of the industrious portion of the community; on whom mainly depend the wealth, prosperity, and power of the state; have never been properly, consulted, as to the manner and degree in which their condition will be affected by arbitrary changes in the money affairs of the country.
When viewed in relation to the public and private money engagements of the kingdom, the general question of the currency is involved in perplexity and difficulty: your memorialist will therefore not be guilty of the gross indiscretion of attempting to convey, by memorial, his reflections on any but that part of the subject which requires the immediate consideration and interposition of the government. He will, therefore, confine his observations to the Bank of England-to the private bank system, and to the effect on bankers in general, and on the community, of establishing Branch Banks and suppressing country banks.
When the remarkable effects of alarm, in the beginning of the year 1826, threatened to exterminate a great proportion of country bank-note circulation, your memorialist was one who hastily adopted the erroneous opinion, that it was the duty of the directors of the Bank of England to establish branches to meet the emergency. The extraordinary and unprecedented nature of that emergency, greatly extenuates any error of judgment. The directors of the Bank of England resolved to establish branches, to remedy distressing temporary and local inconveniences. Looking at the early professions of the Bank directors, as set forth in open court by the governor, to limit their operations to "places where the particular accommodation they had the power of furnishing was justly required;"at their recent measures and their avowed purposes, no man of sense will deny that the present objects of the directors are;-to prevent the circulation of all notes but those of the Bank of England, and to obtain all the most lucrative banking business of the country. The first they will speedily endeavor to accomplish by a new law; the second, they will attain by offering cheaper terms to the public, and sinking the capital stock of the proprietors in establishing connexions, till all wealthy bankers are driven from the field of competition, and they have an undisturbed monopoly.
The Bank of England was established, by royal charter, in the year 1696; and their Majesties confirmed the Governor and Company of the Bank of England "one body politic and corporate," with "perpetual succession;" describing their motive" to be a desire to promote the public good and benefit of our people, which in these presents is chiefly designed and intended."
See the Times newspaper, September 26th, 1826.
This company conducted their affairs, during 130 years, viz. from the year 1696 to the year 1826, wholly in Loudon; and they confined their operations almost exclusively to transactions with the government; and with the chartered banks of Scotland and Ireland; and to making loans to merchants by discounting bills. During that period they scarcely interfered in any manner with the general banking business of the country.
The Bank of England can receive but little of the surplus capital of the country, because it allows no interest for money deposited. The giving of interest would, on its fixed and unreversible principles, and under the management of almost any set of directors, soon cause ruin to the establishment; yet the great characteristic of the country banker is that of agent for the affluent, who employ him to invest their surplus capital judiciously amongst the industrious. The present constitution of society renders the borrowing of money from the rich, on interest, and lending it to the necessitous, so natural and urgent, that it was carried on for a long period in England, chiefly by scriveners; encumbered with all the expenses, delays, technicalities, and formalities of law. No effort of human wisdom could devise a scheme better adapted to its purpose, than that of establishing country banks, to take the spare money of the wealthy, on interest, and lend it to men of industry in the vicinity-securing, in a manner the most easy and efficacious, advantages in common to those who labor, and those who, by their savings, can rest from labor. A system which, by diffusing capital promptly and efficiently amongst the productive classes, has, with the moral qualities of the people, caused this country to rise in political importance above all other states.
After the Bank of England had been established more than half a century, those causes began first to operate on an extended scale, and in a remarkable manner; which, by increasing the productions of the mines, by extending manufactures, by giving enterprise to commerce, by improvements in agriculture, have afforded results unexampled in the history of nations.
The principles of the Bank of England render it wholly unfitted to extend any effectual aid to those important causes, which in our day have produced such astonishing effects. But then, if ever, was
the time, when the directors should have resolved on establishing Branch Banks; when the extended mining and manufacturing operations of the country needed the aid of new capital, to insure a successful and triumphant issue. Not when connexions had been formed-interests grown up, and ample capital furnished, and judiciously appropriated by other banks. The necessity for such aid was obvious, and its urgency may be known, by the fact, that manufacturers, in some of the remote parts of Yorkshire and
Lancashire, were compelled to conduct all their banking transactions at Nottingham, 70 to 100 miles distant from their dwellings and factories; because there were no banks at Leeds or Sheffield, or any of the intermediate towns. These transactions were performed in the most cumbrous and expensive manner. When a Leeds merchant received a remittance of foreign bills of exchange, the only bank between his dwelling and London being situated at Nottingham; his habit was to mount his horse, carry his bills thither to be discounted, and bring home the solid metal in his saddle-bags.
The urgent and imperative wants of the people, made manifest by these circumstances, caused the great extension of the country bank system; and with it the general banking interest of London. Banks, by being the points where money is collected, and whence it is distributed to the public, bear the same relation to the money affairs of a country, as markets and roads do to the productions and commodities: they facilitate interchange, remove obstacles and delays in the transit; and, in this manner, they all tend to increase productions and to diminish their cost. If those important moral causes of the nation's wealth and prosperity, the skill, and industry, and genius of the people, could have derived no pecuniary succor but such as the Bank of England would afford, they might, in some of the most important departments of industry, have ceased to operate with the first efforts of the enterprising and laborious individuals; who, by perseverance, and the effectual aid which they derived from banks, succeeded in opening to the country vast sources of wealth and power.
The extraordinary consequences in all mining, manufacturing, and commercial operations, which have flowed from the application of capital, chiefly by the means of banks, are notorious, and may be estimated with tolerable accuracy by returns rendered by the customs, or excise, or stamp offices, or by some municipal or established authority; but no similar estimate can be made of the effect produced by the same cause on the cultivation of the land. Some criterion by which to judge of this may, however, be afforded by the fact, that a land-owner, now living, increased his rental during his own life, from one and the same estate, from two thousand pounds per annum to twenty thousand pounds per annum ; and the tenants were more prosperous, and richer, at the higher rentcharge than at the lower. The effect was not caused by the proximity of the estate to a manufacturing or greatly increasing population; but by improved husbandry, the introducing and maintaining of which depended on the country bank system.
In considering the wonderful effect produced by the stimulation which was given by the banking system of England to ingenuity and
labor, in all departments of industry, it is remarkable how little of this effect can be traced to the Bank of England, which, "in itself and by itself," gave little, if any, direct support to the expanding energies of the people, who were engaged in agriculture, mines, and manufactures. No farmer, desirous of augmenting the produce of his fields, could aid his operations in husbandry, or add a hoof to the flocks and the herds in his pastures, by borrowing money of the Bank of England. The workmen in the mines have not been paid in the money of that corporation; and in regard to manufacturers, though a few have obtained loans from the Bank of England, and used its notes in paying wages, the number is so small as to prove, by the exception, the utter insignificance of the aid which any operations in industry have received from that establishment.
Nothing has rendered this country more famous than the perfection of its means for interior communication; yet, what association for constructing bridges or canals, roads or railways, has been supported by loans from the Bank of England? It was not money from this bank which converted the pestilential and useless marshes into healthy and luxuriant meadows; or which caused the rich corn-fields to rise on the sterile wastes.
The country banking interest has grown up, principally, during the last seventy years, in aid of the energies of the country; an interest which has, for a long time, been like cause and effect, intimately connected with all the operations in industry, and is now inseparably blended with the means of national wealth. It may be said, generally speaking, that no farmer enters on a farm, without knowing previously whether, in case of a deficiency in his own means, the neighboring banker will, directly or indirectly, enable him to purchase stock; nor will be enter on extensive improvements, without knowing whether he will be supported by the same pecuniary aid, till the beneficial returns which must result from those improvements come to set him free. While the miner and the manufacturer resort to country bankers for the means of paying wages, as well as for assistance to keep their workmen employed and accumulate stock, during temporary but constantly recurring periods of slackened demand. It is impossible to estimate accurately the magnitude of this interest. No man acquainted with the subject will deny, that in the personal property of bankers amenable for their engagements; in the deposits committed to their charge; and in their paper circulation, an interest is combined of a magnitude six times the extent of that which is comprised in the paper circulation, the deposits, and the capital stock of the Bank of
1 See letter and communication from Lord Liverpool and Mr. Robinson, to the Governor and Deputy-governor of the Bank, January 13th, 1826.