Maberly Phillips.

A history of banks, bankers, & banking in Northumberland, Durham, and North Yorkshire, illustrating the commercial development of the north of England, from 1755 to 1894, with numerous portraits, facsimiles of notes, signatures, documents, &c online

. (page 49 of 57)
Online LibraryMaberly PhillipsA history of banks, bankers, & banking in Northumberland, Durham, and North Yorkshire, illustrating the commercial development of the north of England, from 1755 to 1894, with numerous portraits, facsimiles of notes, signatures, documents, &c → online text (page 49 of 57)
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with the amount of its engagements ? I may venture to say it would not ; and that a depreciation of
the currency would be the inevitable result. An opponent may reply, that our present system of
banking is liable to the same objections. I say no. I say that under the present system the demand
for gold must always be comparatively small. Suspicion may attach to a particular bank, or to the
banks in a particular district, but can never extend to country banks in general, while perfectly
unconnected, as they are, with each other. A large proportion of provincial notes must, therefore,
always remain in undisputed credit ; thus, not only checking and restraining the demand for gold,
but affording at the same time to the particular bankers run upon, a most convenient substitute for
gold. In fact, as experience has proved, the existing system contains within itself, in a great measure,
the means of its own support and renovation. Not so with the Bank of England, when it shall have
engrossed the whole circulation. A run upon its establishment at Newcastle could not be met with
the notes of one of its other establishments at Northallerton or York. Gold must be found to meet
the exigency — no substitute presents itself — and while discredit attaches to the paper of the bank in
one quarter, who can estimate the danger of its spreading and convulsing the empire ?

It is made matter of charge against the country bankers, that they are prone to foster a spirit of
over-trading. Nothing, however, can be more groundless than the accusation. Their interests are
directly opposed to every scheme of rash or improvident adventure ; and those who are best acquainted
with country bankers, will probably agree with me in opinion, that it may very safely be left to themselves
to judge of the prudence or imprudence of trusting other people with their money. The charge,
however, against them of encouraging a spirit of over-trading, comes with a peculiarly bad grace from
the Bank of England, when, in its own transactions, it is about to give an instance of over-trading
unexampled in the history of this or any other country.

For the rest, I shall only observe, that placing in the hands of any body of men identified with
government a power so immense as that attendant upon a monopoly or anything approaching to a
monopoly of the banking business of this country, is a measure fraught with alarm to the consti-
tutional rights and liberties of the people. Whether the government be whig or tory — liberal or
illiberal — it must possess, through the agency of the Bank of England and its various establishments,
an influence dangerous to the free exercise of opinion, and frustrative of every attempt having for
its object the detection of any public abuse.

I remain, &c.,
Newcastle, Dec. 1, 1827. ALFRED.



LETTER II.

You have informed us, and I dare say correctly, that the Directors of the Bank of England,
nothing moved by the representations of the Committee of country bankers assembled in London, are
at length making active preparations for the opening of a branch bank in Bailiff-gate, in this town.
On whose advice, in this instance, the Directors can have acted, it is difficult to conceive. The
bankers themselves cannot have urged the necessity of any such establishment ; nor is it to be



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supposed that any portion of the merchants, manufacturers, or tradesmen of the town, can have been
actuated by a wish of seeing introduced here a principle of banking calculated solely to check the free
circulation of money, and thus inevitably to injure all classes of the people. The measure would seem
to me to bear upon the face of it every appearance of a job undertaken for the advantage of a few
hungry and dependent friends of the Bank. But, with whatever view this establishment and others have
been projected, the public are bound to look upon them with the utmost jealousy. The clause in the bank
charter in virtue of which the right of establishing branch banks in any part of England is claimed,
was never until lately considered to admit of any such construction ; if it had been supposed to invest
the Directors with a power of unfair competition, as against the country bankers, we may easily
imagine that the charter would not from time to time have been renewed without the most pointed
and strenuous opposition. It is only, therefore, upon what, at best, had long been a dormant right,
that the present very questionable policy of the Bank is founded. I need not inform you, Mr. Editor,
or your readers, that the bank charter was originally granted in the reign of William and Mary, and
that it was not until a period long subsequent that country banking can be said to have at all existed.
Under such circumstances, therefore, that a clause should have crept into the charter incompatible
with the rights of private persons, and with the interests of the public, can excite no surprise. I say
incompatible with the rights of private persons, because in more respects than one, the Bank of
England has advantages which the covmtry bankers have not; and I say incompatible with the
interests of the public, because the interests of the public consist only with fair and equal competition.
The Bank, however, would seem to say with Shylock — " I stay here on my bond." " I crave the law 1 "

It can hardly, I think, be doubted, but in the course of the present session a question will be
brought before parliament, if not of the right, at least of the expediency of the Bank of England
establishing branch banks throughout the country, not with the wishes, but absolutely against the
wishes of the trading classes of the people, and without a single reason having been advanced in favour
of such an extension of the privileges of the Bank. Surely the enlightened mind of Mr. Huskisson
will perceive that where no want of banking accommodation is complained of — where the stability of
banking establishments is beyond any rational doubt — and where innovation may do harm, and cannot
possibly do good, it must be the height of absurdity to risk an experiment. Upon what ground,
practical or demonstrative, it can occur to any man to defend the policy of the Bank, I am unable to
conjecture. Lord Bacon tells us, " It is good not to try experiments in states, except the necessity be
urgent or the utility evident." Tried by this test, how stands the conduct of the Directors ? What
" urgent necessity " has there been for the establishment of Branches of the Bank of England at Leeds,
Liverpool, Manchester, Birmingham, and other places, to which the ramifications of the Bank have
already been extended ? In none of those places does it appear that the slightest difficulty had been
found in discounting approved bills. The branch banks profess to discount no other than good bills.
Where, then, was the necessity of any interference ? In fact the business done by the branch banks,
wherever they have yet been established, has been of the most trivial amount, and necessarily so from
the narrow and cautious principles on which the managers are bound to proceed. Such establishments,
therefore, neither having " necessity " nor " utility " to recommend them, ought never to have been
put forward as an experiment on the credit and commercial resources of the country.

We have latterly had before the public many of those schemes expressively called " bubbles ; "
but nothing has appeared to me so very strongly in point with the recent measures of the Bank, as the
famous " South Sea bubble." The Directors of the Bank — the greater part of them young and
inexperienced persons — seem to take it for granted that the issues of the Bank never can be carried to
any dangerous extent. Now, what is this but the principle of the Mississippi scheme ? " The idea,"
says Smith, " of the possibility of multiplying paper money to almost any extent, was the real
foundation of what is called the Mississippi scheme, the most extravagant project, hoth of banking and



UfSj

stock-jobbing, that perhaps, the world ever saw." And yet, after the lapse of more than a century — a
period in which the Bank of England, on one occasion, was reduced to the necessity of paying in
sixpences ; on another to the necessity of obtaining an act of parliament exempting them from the
payment of their notes in cash ; and on another, and that quite recently, driven to an extremity which
threatened a general convulsion of credit (the country being said to have been " within forty-eight
hours of barter ")— after thus witnessing that the Bank is any thing but invulnerable, that it bears
" no charmed life," but yields, as other banks must yield, to force of circumstances, we must needs be
doomed to a new experiment on the circulating medium of the country, founded on the not very
obvious principle, that the more extended are the issues of the Bank, the more capable will it be of
meeting its engagements ! Eeally, to any man of plain understanding, it must appear incredible that
the Directors of the Bank of England, who only two years ago were subjected to a run which drained
them of almost their last sovereign, should now be taking measures for more than ever increasing their
issues — measures which, at the same time, most judiciously multiply the points at which, in a moment
of panic, the Bank would be assailable for gold !

To the memorial presented to ministers by the committee of country bankers, I see that an
official answer has been returned. From that answer, it appears that, with respect to stamps,
ministers are willing to place the country bankers on a footing of equality with the Bank of England ;
but that they decline adopting the suggestion of the committee for putting down the branch banks.
Now supposing the country bankers, with respect to stamps, put upon a footing of equality with the
Bank of England, still they must be exposed to a most unfair competition, and a competition the idea
of which never could have occurred to them. Country bankers cannot combine, nor would it be for
the interest of the public that they should do so ; and yet, singly, as opposed to a chartered company,
backed by the government, they must labour under many disadvantages. They are not exempt from
liability either in person or property — have no deposits of the public money — and, be the exigency what
it will, they cannot have the benefit of a restriction act. These are important considerations, and
shew very clearly the injustice of subjecting the country bankers to a rivalship with such an institution
as the Bank of England.

It is said the Directors have relinquished the idea of establishing a branch at Hull, even after
having gone so far as to contract for premises in which to carry on the business. But why they should
forego a branch at Hull, and cling to a branch at Newcastle is not easy to discover. The Directors
must have been strangely misinformed, if they have been given to suppose that any change in the
system of banking is wanted here, " and least of all such change as they would bring us." There can
be but two grounds of complaint against bankers — either that they do not afford to the public the
accommodation they have a right to expect, or that the local currency, supplied by them, is not such
as to carry with it implicit confidence. Now I am sure, that in Newcastle no person can experience
the smallest difficulty in turning into money any amount of bills, at the ordinary dates, which are
esteemed to be good ; and as to the security of the currency, I think it may be very safely affirmed
that in no part of the kingdom is the stability of the paper in current circulation more amply
guaranteed. Can it then be pique or caprice, or ignorance on the part of the Directors, which induces
them to establish a branch in Newcastle in preference to Hull ? Perhaps the enlightened cambist,
who is to be entrusted in Newcastle with the exercise of the colossal powers of the Bank, may not
think it derogatory to his appointment to afford the public a solution of the riddle.

From the establishment of a branch bank in Newcastle, so far as the public are concerned, no
advantage, evident or remote, has ever been hinted at. In the absence, therefore, of avowed motives,
and in great darkness as to any imaginable cause, a writer, who undertakes the defence of our present
system of credit, is necessarily made to contend with arguments of a shadowy and fictitious nature. In
this, however, and in my former letter on the subject, I have not evaded, nor, I trust, left unrefuted.



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any argument which has occurred to me as being possible to be urged in favour of the establishment
here of a branch of the Bank of England. I consider such an institution as a violent experiment on
our circulation, demanded by no party, and holding forth no prospect whatever of good. " Let well
alone," is an old maxim, but one which, unfortunately, the Directors entirely put aside. In vain we
tell them, " We are well, our pulse and complexion prove it — let those who are sick take physic." "
yes," reply the Directors, "you may be very well ; but take our draughts, and we assure you you'll be
better." Now, this is a doctrine which goes much against the grain with us, and very naturally ; for
we have all heard (and we wish to profit from experience) of the epitaph on the poor Italian, who, not
content with the enjoyment of good health, would be better, took physic, and died ! If, however, the
Bank, reason cr none, will administer medicine to us, we may at least indulge the hope that their
practices cannot be of any long duration. The time for monopolies is past. Every man must now see,
that all exclusive privileges are for the emolument of a few, at the expense of the many. In a very
few years (if I mistake not, in 1833) the charter of the Bank of England will expire, and in the
meanwhile it is not to be expected that any minister will be found bold enough (or, which is often the
same thing, weak enough,) to propose a renewal of it, except with such alterations as will render it, if
not beneficial, yet at least harmless, to the community.

I remain, &c.,

1st March, 1828. ALFRED.



LETTER III.
" Once more unto the breach-



Public feeling being at length roused to a sense of the inconvenience and detriment which the
proposed establishment of a branch of the Bank of England in Newcastle must inevitably inflict on
the commerce and manufactures of this town and neighbourhood, I may venture, without being
thought tedious or intrusive, to offer to yourself and your readers, a few additional reasons why
it becomes us to oppose, by every means in our power, the threatened innovation of the Bank of
England on a system of monied operations which experience has proved to have been eminently
conducive to the advantages of this part of the country. Under the existing system of banking, we
have seen that the industry and enterprise of the people have received the most effectual support and
encouragement. Let any man but look to the important concerns in mining, in ship-building, and in
liaanufactures of various descriptions — let any man but look to the activity of commerce, of navigation,
and of the general business of retail, as carried on, or to be observed, within a circuit of 15 miles of
Newcastle, and the most complete proof must be afforded to him of the efficacy and advantage of our
present system of banking.— Yet under these circumstances, and merely to increase the power and
patronage of an over-grown establishment, we must be subjected to an experiment of banking which
may put to hazard the most important interests of the district. Well might the Chamber of
Commerce be unanimous in the adoption of a memorial to the Directors of the Bank of England,
setting forth the inexpediency of any interference on the part of the Bank, with a system of credit and
currency from which so many, and such important advantages have been derived. The memorial
might have gone further, and shewn the positive loss to which manufacturers and others, who have
large sums to pay for duties or excise, will unavoidably be exposed. If such payments are to be made
in gold, or Bank of England notes, to which, in effect, all such payments, through the establish-
ment of a branch of the Bank of England must be reduced, we cannot but expect that private bankers
will be obliged to charge a small commission on sums advanced for such purposes. How otherwise are
they to be compensated for large advances in gold or Bank of England notes — a description of



[43o]

currency which they can only procure from London, subject to both expense and risk? Let our
merchants and manufacturers who are in the habit of paying large sums to the public boards look to
this ; let them consider what even a very small commission on the amount of monies, advanced them for
such purposes, may in the course of a year amount to ; and then say whether the establishment of a
branch of the Bank of England in Newcastle, is likely to be attended with an augmentation of their
profits ?

Some friend of the branch bank may intimate, that gold or Bank of England notes will be
obtainable at the branch bank without any charge in the shape of commission. I admit the fact. But
what must be the securities on which the tied-up and timorous agents of the bank will consider
themselves justified in giving out gold or Bank of England notes? Bills which, however good they
may be, must be sent in by persons previously approved of by the Bank Directors, and which in no
case will be taken with less than two responsible names to them. Now I, who am a manufacturer and
subject to the excise — who have my customers in London or some other distant part of the kingdom,
and can only receive payment in bills which I must draw upon them — am reduced, as often as I have
money to pay the excise, to a strait of this kind, I must either beforehand send my bills for
acceptance, and thus subject myself both to expense and inconvenience, or I must submit to the
payment of that commission which the Newcastle bankers, in discounting for pa) ments to the excise,
find it necessary to impose. Whether, therefore, in future, I apply to a Newcastle banker or to the
branch bank for discounts to meet such part of my payments, it is quite clear that, from the conflicting
interests of the rival establishments, I must be a sufferer. Manufacturers, ye, who have large sums to
pay to the crown, look to yourselves !

The projected branch will not however be more injurious to a large class of our manufacturers,
than to the great body of the coal-owners ; and therefore I should say it equally behoves the coal-
owners to take into consideration the best means of averting a measure so generally obnoxious. Let
the Bank of England but once obtain a footing here, and the coal-owners need trouble themselves no
further about any regulation of their vends. Coals must be raised, or the concerns must be laid in.
There is no such thing as going " on tick " with the Bank of England ; and the resources of the
private bankers will be found to have their limits. My firm conviction is, that the establishment of a
branch of the Bank of England in Newcastle will be a death-blow to the coal trade of this district.
It requires no conjuror to point out " the why and wherefore." But I leave the coal-owners
themselves to follow out these hints. Apathy must be their ruin.

The Directors are above assigning any motive for the proposed establishment. We must suppose,
however, that their object is either profit to the Bank or accommodation to the public. If profit to the
Bank — I think it must be evident to all that the experiment will end in disappointment ; the expenses
of the establishment must eat up every shilling of profit. If public accommodation is the object —
then I say that the ear of the Directors has been grossly abused. They must have had impressed upon
their minds an idea that the established banks are insufficient for the support and extension of our
commerce ; an idea for which not the slightest foundation exists. Who the worthy parties are who
have had so much influence with the Bank we may by and by know ; but in the meanwhile no person
I think can doubt that the measure in question savours strongly of a job. Job, do I say ? Why, even
the fitting up of the bank premises must be a job, or why send workmen from London for the purpose ?
Have we not in Newcastle bricklayers, joiners, and other handicrafts, capable of converting a few rooms
and cellars of a house to the purposes of a bank? But the very pens and ink, I understand, will be sent
from London to swell the account of some favoured stationer in town. Whether the Bank, in its
wisdom, will " send coals to Newcastle," is not yet determined.

The folly of establishing a branch in Newcastle is only to be equalled by the mischief to which
it may give rise. " Discontent," it has been well observed, " is the child of distress, and distress is the



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daughter of ill-timed experiment." Take away from the Newcastle banks the power of occasionally
assisting manufacturers and others in their business, and the most frightful check may be given to the
labouring employment of the place. True, says a friend of the branch, if any friend here it has — but
why should the establishment of a branch lessen the power of the Newcastle banks to accommodate
trade ? I say for an obvious reason. The branch bank will be sure to get into circulation a certain
amount of its paper — thus displacing an equal amount of the notes of the other banks, and diminishing
to the same extent the power of the Newcastle banks to support the various undertakings of the
district. But this is not all ; for the branch bank not complying with the usual rule of exchanging notes
once a week with the other banks, and then paying or receiving any balance by bills at sight upon
London,* must impose upon the Newcastle banks the necessity of keeping by them, unemployed, a
much larger sum in gold or Bank of England notes than would otherwise be required ; and then again,
from the uncertainty of the channel through which notes may be brought into them for payment,
they must constantly have funds both lure and in London for the liquidation of their notes. Under
such circumstances, the available power of the Newcastle banks may be contracted in a degree much
exceeding the proportion of their paper thrown out of circulation ; and thus the injury which a branch
bank may do the business of the place is almost incalculable.

A friend of mine talking lately with a Bank Director, and telling him of the inconvenience which
people in business here apprehended might result from the institution of a branch bank, was very
gravely assured that " in Newcastle the trading part of the community could have nothing to fear
from the measure, for that happen what would, they would still have the Scotch banks to fly to for
assistance." A most comfortable assurance truly I But can any man, not a Bank Director, for a
moment suppose that if from the annoyances of the branch bank, our own bankers should be induced
to withdraw the whole of their notes from circulation, that almost a single note of any description
would afterwards circulate in the district ? And in this case should we not be forfeiting all the
advantages which are admitted to arise from the use of a paper currency ? On a principle, as between
borrower and lender, of mutual advantage, the notes of the Newcastle banks are continually being put
into circulation, and though every note issued by a banker is destined to return to him, and that often
very quickly, yet where, as in Newcastle, a perfect confidence exists that the notes of the various banks
may at any time be converted into gold or Bank of England paper, an amount of notes adequate to all
the purposes of trade we may easily suppose will steadily remain in circulation. But would it be
possible to substitute for such a currency, either the notes of the Scotch banks, or the notes of a branch
of the Bank of England ? Admitting the cautious Sandy would, upon our own terms, deal with us
southerans, (" ask where's the north ' — at York 'tis on the Tweed,") the circumstance of the Scotch
notes not being payable in Newcastle, would operate as an effectual check to their circulation ; and as
to the notes of the branch bank, seeing that the public can never have any interest in common with
that establishment, there would be wanting on the part of the public that great and constant impulse
to circulation, without which, every effort of a banker to keep in circulation any considerable amount

* While country bankers adhere to this rule, it appears to me that no danger is to be apprehended from what is



Online LibraryMaberly PhillipsA history of banks, bankers, & banking in Northumberland, Durham, and North Yorkshire, illustrating the commercial development of the north of England, from 1755 to 1894, with numerous portraits, facsimiles of notes, signatures, documents, &c → online text (page 49 of 57)