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SECOND REPORT,

&c. &c.

THE Committee of Secrecy appointed to consider of the State of the Bank of England, with reference to the Expediency of the Resumption of Cash Payments at the period fixed by law, and into such other matters as are connected therewith; and to report to the House such information relative thereto, as may be disclosed without injury to the Public interests, with their Observations thereupon;-have further considered the matters to them referred, and have agreed upon the following Report:

Your Committee will preface the observations they have to make upon the matters immediately referred to them by the House, by a brief recapitulation of the laws which imposed and have contiuned the Restriction upon Payments in Cash by the Bank of England.

It is not necessary to advert to the circumstances under which that Restriction was originally imposed by Order in Council in the year 1797, as they became the subject of Parliamentary inquiry previously to the passing of the Act, by which the Restriction was confirmed and continued. Its duration was limited by the first Act, which received the Royal Assent on the 3rd May 1797, to the 24th June following. From that period it was continued until one month after the commencement of the succeeding Session; and again, by the first Act of that Session, until one month after the conclusion of the War, by a definitive Treaty of Peace.

In 1802, the provisions of the Acts above referred to were

continued in operation until the 1st March of the following year they were further continued until six weeks after the commencement of the then next Session of Parliament, before which period war having again broken out, they were continued until six months after the ratification of a definitive Treaty of Peace.

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An Act which passed in the year 1814, continued the Restriction until the 25th March of the following year, when, by an Act which recited in the preamble," that it was highly desirable, that the Bank of England should, as soon as possible, return to the payment of its notes in cash," the further suspension of cash payments was directed until the 5th of July, 1816.

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In 1816 it was again continued till the 5th July 1818, the preamble of the Act reciting," that it is highly desirable that the Bank of England should, as soon as possible, return to the payment of its notes in cash, but it is expedient that the provisions of the Acts imposing the restriction shall be further continued, in order to afford time to the Directors of the Bank to make such preparations as to their discretion and experience may appear most expedient for enabling them to resume payments in cash without public inconvenience, and at the earliest period, and that a time should be fixed at which the said restriction shall cease.

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The Act which passed in the last session, after reciting that it is highly desirable that the Bank of England should as soon as possible return to the payment of its notes in cash, and that "unforeseen circumstances which have occurred since the passing of the last Act continuing the Restriction, have rendered it expedient that the Restriction should be further continued, and that another period should be fixed for the termination thereof, " directed that the Suspension should remain in force another year.

The Restriction therefore at present stands limited to the 5th July next; and, in fulfilment of the duty imposed upon them by the House, your Committee will proceed, in the first instance, to report the result of their inquiries into the State of the Bank of England, and their opinion with respect to the Expediency of the Resumption of Payments in Specie, at the period at which by law they are to be resumed.

I. Your Committee called for an account of the total amount of outstanding demands on the Bank of England, and of the Funds in the possession of the Bank for the discharge of those demands; and have ascertained, that the sum which the Bank were liable to be called on to pay in fulfilment of their engagements, amounted, on the 30th January last, to 33,894,5807., and that the Bank were then in possession of Government securities and other credits to the amount of 39,096,9007., leaving a surplus

in favor of the Bank of England of 5,202,3201.; exclusive of the permanent debt due from Government to the Bank of 14,686,800l., repayable on the expiration of the charter.

This document furnishes a clear and decisive proof of the florishing condition of the affairs of the Bank of England, and justifies that ample confidence which the Public have reposed in the stability of their resources.

The next point upon which the Committee required information, respects the amount of Cash and Bullion in the coffers of the Bank, at the present and at various other periods since the year 1797.

After several fluctuations in the Amount of their Treasure, which was very much reduced at the close of the war, there appears to have been a gradual increase from the month of July 1815, to the month of October in the year 1817. During the interval between July 1816 and July 1817, the market price of Gold did not exceed 3l. 19s. per oz. The Exchanges with the Continent, for a very considerable portion of that period, were in favor of this Country; and the Bank took advantage of those circumstances, and made a great addition to the amount of the precious metals in their possession. The purchases made by the Bank appear to have had no unfavorable effect on the price of Gold; and there is reason to believe, that it would have fallen to the mint price, had not the Bank fixed the rate, at which they were willing to purchase, at 37. 18s. 6d. per oz. Mr. Goldsmid informed the Committee, that " at that period there were no other buyers in the market, at the price which was given by the Bank; had there been, they would have been supplied on the same terms, if they had wanted Gold." Being asked, whether, if the Bank had not been purchasers at 37. 18s. 6d. he believes the price of Gold would have fallen to the mint price; he answers, "I think it might after some time; but that is matter of opinion only."

In the year 1817 the Bank had a much larger amount of Cash and Bullion in their coffers, than they had been in possession of at any former period since their establishment. From the commencement of the year 1818 the stock has been progressively diminished. This diminution has taken place in consequence of engagements into which the Bank entered (in conformity with the power reserved to them by the original Restriction act) in the months of November 1816, and April and September of the following year, to pay in the first and second instance cash for allnotes issued prior to the 1st January 1812 and 1st January 1816; and in the latter, to pay cash for their notes of every denomination dated prior to the 1st January 1817.

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The total quantity of Gold coin issued from the Bank, in conse

quence of the engagements thus entered into, and the continuance of the fractional payments, under five pounds, appears by accounts before the House, to have amounted, between the 1st January 1817, and the 1st January 1819, to the sum of 1,596,256/. in guineas and half guineas, and in sovereigns and half sovereigns to 4,459,725l. Your Committee have ascertained, that subsequently to the 1st January there has been a further demand on the Bank for Gold to the extent of about 700,000l. The total sum, therefore, which has been issued by the Bank since the commencement of the year 1817, has been about 6,756,000/.: And no doubt can be entertamed that the Coin thus drawn from the Bank was demanded, not for the purposes of internal circulation, but in order to realise a profit either on its sale as Bullion in this Country, or on its exportation.

Your Committee are confirmed in this conclusion, by the documents before the House; from which it appears, that the sum issued from the 9th December 1816 (when the notes of the Bank became payable under the notice issued in the preceding month,) to July 1817, amounted only to 38,0201. 10s. though the Bank had become liable on the 2d of May of the latter year to pay cash for all their notes of 1. and 27. value, dated prior to the 1st of January 1816.

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In July 1817 the foreign exchanges became unfavorable, and have continued so since that period; a profit has been realised on the exportation of Gold coin, and the Bank has been subject to a constant demand for cash in payment of their notes.

The following extract from the evidence given by Mr. Alexander Baring shows the purposes to which a considerable portion of the Gold thus withdrawn from the coffers of the Bank has been applied :-" In France it appears, by the Report of the Minister of Finance, that there has been carried to the mint of France, in the sixteen months preceding the 31st December last, Gold to the amount of 125 millions of francs, (being equal to about 5 millions sterling;) and Silver to the amount of a little more than three millions of francs. Of that Gold, upwards of three-fourths was in Coin from this Country; and this operation has continued during the present year, though the amount of the importations of this year has not been reported."

Your Committee are satisfied that the Bank, in undertaking to pay their Notes in cash, under the circumstances above mentioned, acted from the best motives, and from a belief that the measure would tend to facilitate the complete resumption of payments in specie. Unfortunately it has had a contrary effect; the last of the three notices having been given at a period when the exchanges were unfavorable, when the price of Gold had risen from 31. 18s. 6d. to 41. per oz.; and at a time when the Bank had not

(according to the evidence given by Mr. Harman,) that control over their issues, which might have enabled them to counteract the effect of the unfavorable exchange, by a reduction of their paper

currency.

There was, in fact, in the half year between July and December 1817, a considerable increase in the amount of notes issued by the Bank. The average amount outstanding, in the four half years preceding, had not exceeded 26,771,9147. In this half year it was increased to 29,210,0357., having been in the previous half year 27,339,768/. It appears by the returns, that on the 5th July 1817, immediately preceding the payments of the dividends, the amount outstanding was 25,800,000l.; and on the 4th October, being a few days before the payment of the dividends of that quarter, the amount was, 28,900,000l.

The issue of Sovereigns between July and December 1817, amounted to 1,240,4227.; so that had the sovereigns remained in circulation, there would have been an increase to the circulating medium issued by the Bank of England in the course of that half year, compared with the average amount outstanding in the four half years preceding, to the extent of 3,678,5431.

Your Committee cannot avoid expressing an opinion, that whatever might be the policy, and however laudable the intentions of the Bank, in engaging to make partial issues of coin in payment of their notes, yet when the exchanges became unfavorable, and the price of gold rose above the mint price, the only mode by which they could have retained the coin in circulation would have been a contraction of their issues; and unless the Bank at that period possessed such a control over the amount of those issues, as would have enabled them to effect that object, your Committee must consider it to have been inexpedient, in the then state of the Exchanges, to undertake an extensive though partial issue of Coin, which subjected the Bank to considerable loss, and a great drain of Treasure.

Under these impressions, and from a firm conviction that the continued issue of Coin from the Bank, by diminishing the amount of their treasure, would have the effect of postponing the period at which the termination of the Restriction can take place, without producing on the other hand any advantage whatever to the Country, while the Exchanges and the price of Gold are in their present state, your Committee were induced to recommend to the House, in their First Report, the immediate enactment of a law to suspend all payments in Gold coin by the Bank, until your Committee might be enabled to present to the House their view of the whole subject which has been referred to their consideration. The next important point to which the Committee will call the

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