BANK. 



403 



ment of specie until the pleasure of parliament 

 should be made known. The parliament took the 

 subject into consideration the next day, February 

 27th, and approved of the order of the privy council. 

 The suspension of specie payment was originally in- 

 tended to be only a temporary measure, and the 

 strongest assurances were given to this effect on the 

 part of the bank and the government. It was, how- 

 ever, continued, from time to time, but always as a 

 temporary measure, until, in 1819, twenty-two years 

 after the suspension of payment, an act was intro- 

 duced by Mr Peel, for resuming specie payments, 

 which were, in fact, resumed, on the 1st of May, 

 1823. The bank thus presents the singular example 

 of a virtual insolvency for twenty-six years, and 

 eventual redemption of its paper and its credit ; and 

 this return to specie payments was not attended by 

 any sudden revulsion or commercial shock : prepa- 

 rations were made for it long beforehand. The 

 amount of the notes of the bank in circulation was 

 reduced from about 24,000,000 to about 18,000,000. 

 In the meantime, a new coinage of gold had been 

 issued, in 18211822, to the amount of 14,877,547, 

 which supplied the chasm made in the circulation of 

 the country by the reduction of the amount of bank 

 of England notes, and also went to replenish the 

 vaults of the bank, in preparation for the run that 

 might be made on the resumption of payment ; but 

 the danger was passed with the greatest facility. 

 The bank-notes liad depreciated, or, as the phrase 

 was at the time, the price of bullion had gradually 

 risen, so as to be, at one period, at the rate of 14 or 

 15 per cent. ; and, if the bank had then stopped 

 suddenly, and, if we may imagine it possible, had 

 redeemed the whole of its paper, 25,000,000 or 

 more, with specie, it would have been a gain to the 

 then holders of the notes, in the whole, or '3,500,000, 

 and a loss to the then debtors to the bank of the 

 same amount, assuming the depreciation to be 14 

 per cent. ; while the bank itself would have lost 

 only the amount of bad debts, which would have 

 been made by such a sudden and tremendous revul- 

 sion ; for, the moment of the bank's resuming to pay 

 specie itself, by this very operation, it reduced the 

 payments to the bank, by its debtors, to specie ; for 

 the bank had a right to demand payment of notes 

 and bills discounted in specie, or, what would have 

 been equivalent, its own notes. Such a measure 

 would evidently have shaken the kingdom to its 

 foundations, and probably have brought down its 

 commercial, financial, and economical systems in 

 ruins. Instead of such a catastrophe, either in dis- 

 continuing or renewing payments of specie, each of 

 which was equally difficult and hazardous, the transi- 

 tion in the depreciation of the paper was gradual, 

 and almost imperceptible, and, after the overthrow 

 of Napoleon, its rise in value was again, for the most 

 part, as gradual, until it arrived at a par with gold, 

 before the resumption of specie payments. In a 

 political, financial, and commercial view, this institu- 

 tion, from the suspension to the resumption of specie 

 payments, presents a stupendous phenomenon, un- 

 paralleled in history. The suspension of payment, 

 in 1797, was one of those bold measures, which are 

 justified only by extreme cases, and which, in such 

 cases, are, in fact, the only .prudent measures. The 

 whole system of financial administration, and all the 

 commercial combinations and connexions of the 

 kingdom, were involved in the aflairs of the institu- 

 tion at the time of its stopping, in 1797. The hold- 

 ers of the notes, and the depositors, were pressing 

 to the bank for specie, of which there remained in 

 the vaults only 1,272,000, while the notes and 

 claims outstanding, and which might be demanded, 

 were 8,640,250, and the demands were pouring in 



with a still increasing tide. It seemed probable that 

 the bank must stop payment after paying out this 

 specie ; the shock, whatever it might be, must be 

 encountered, and it was very justly supposed that it 

 would be, in a measure, broken, by anticipating the 

 necessity, and stopping with more than a million in 

 its vaults, instead of waiting until they should have 

 been emptied. The reasons given in parliament in 

 favour of this suspension of payment, and of its con- 

 tinuance from time to time were, 1. that the bank 

 could not continue its discounts, and its payments in 

 specie ; and, if its discounts were stopped, or greatly 

 reduced, the commerce of the country would be 

 destroyed : 2. that the credit of the government 

 would be lost if the bank should cease to make ad- 

 vances upon its taxes : 3. that specie payments were 

 of no benefit to England, as the specie, on being 

 drawn from the bank, went abroad : 4. tlmt it was 

 more important that the bank should exist, than that 

 it should meet its payments at the expense of Us 

 existence: 5. that the commercial arrangements, 

 combinations, and relations, existing in the kingdom, 

 would be broken up by the dissolution of this insti- 

 tution, and, being once broken up, could never be 

 renewed ; and, 6. that it was better to stop specie 

 payments while some specie and bullion could be 

 kept in the country by that means. Such were the 

 reasons given in favour of the measure, and though 

 it has been censured by some, who have pretended 

 to discover in it the cause of much financial and 

 commercial derangement, yet they do not show by 

 what other course Great Britain could have struggled 

 through the terrible conflicts of that period. 



Banks in Scotland. The act of 1708, which prevent- 

 ed more than six individuals from entering into a 

 partnership for carrying on the business of banking in 

 England, did not extend to Scotland. In consequence 

 of this exemption, several banking companies, with 

 numerous bodies of partners, have always existed in 

 that part of the empire. The bank of Scotland was 

 established by act of parliament in 1695. It enjoyed, 

 by the terms of its charter, for twenty-one years, the 

 exclusive privilege of issuing notes in Scotland. Its 

 original capital was only 100,000. It was increased 

 to 200,000 in 1744 ; and now amounts to 1,500,000. 

 The partners are liable only to the amount of the 

 shares they respectively hold. The royal bank of 

 Scotland was established in 1727. Its original 

 capital was 151,000. At present it amounts to 

 1,500,000. The British linen company was incor- 

 porated in 1746, for the purpose, as its name implies, 

 of undertaking the manufacture of linen. But the 

 views in which it originated were speedily abandoned ; 

 and it became a banking company only. Its capital 

 amounts to 500,000. None of the other banking 

 companies established in Scotland are chartered asso- 

 ciations ; and the partners are jointly and individually 

 liable, to the whole extent of their fortunes, for the 

 debts of the firms. Some of them, such as the na- 

 tional bank, the commercial banking company, the 

 Dundee commercial bank, the Perth oanking com- 

 pany, c., have very numerous bodies of partners. 

 Their a Hairs are uniformly conducted by a board of 

 directors, annually chosen by the shareholders. The 

 bank of Scotland began to issue one pound notes 

 so early as 1704 ; and their issue has since been con- 

 tinued without interruption. In Scotland, the issue 

 of promissory notes payable to the bearer on demand, 

 for a sum of not less than twenty shillings, has been 

 at all times permitted by law ; nor has any act been 

 passed, limiting the period for which such issue shall 

 continue legal in that country. In England, the issue 

 of promissory notes for a less sum than five pounds 

 was prohibited by law from the year 1777 to the 

 period of the bank restriction in 1797. It was per 



