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every £100 of that stock is now saleable in the market at about 200 per cent.—upon the credit, of course, of the talent of the directors of the corporation, for outwitting and over-reaching the government in the treaty on foot for a new bargain.
The value of that speculation appears, therefore, to be estimated on the Stock Exchange at the difference between £122. 5s. 3d. and £200, or at about 78 per cent.
It remains to be seen, if the charter be renewed on the terms now proposed to the House of Commons, whether bank-stock will rise or fall. But whatever may be the future price of bank-stock in the market-it is evident, that the directors and partners in the bank speculate on obtaining an enormous profit and advantage beyond the £122 5s. 3d. per cent., (which is, upon their own showing, the utmost present intrinsic value of their stock), as the fruit of the measures for the renewal of their charter now under consideration of the House of Commons.
It will, therefore, be very becoming of the members of parliament, who are partners in the bankand who have, therefore, a direct interest in pounds, shillings and pence, in any proposed contract between the Government and the corporation-if they withdraw from the House upon any divisions which may take place upon questions touching such contract.
Among the securities held by the bank to meet the payment of its notes out payable to bearer in coin on demand, there is one of a very singular
kind, viz. an annuity of £585,740 (called the dead-weight annuity), for a term of years of which 23 were unexpired on the 5th April, 1844.
For that annuity for 44 years then unexpired, the bank in the year 1823 (pursuant to 4 George IV, cap. 22), when not possessed of any disposable capital beyond the Rest, then amounting to 3 millions (£3,067,020 in August 1823), agreed to advance 13 millions (£13,089,419) of its notes, payable to bearer in coin on demand. The bank, therefore, after it advanced those 13 millions of notes, payable to bearer in coin on demand, had not a shilling wherewith to pay the same, beyond the said sum of three millions—the Rest !!! and the half-yearly payments of the said annuity.
The bank, after having stopped payment for a quarter of century, resumed payment in the year 1822.-If any one had been asked, in the year 1823, to devise a mode or plan for insuring forthwith another stoppage of payment of the bank—no plan could well have been devised more likely to insure such a result-as the purchase by the bank of an annuity for 44 years, by the issue of 13 millions of promissory notes, payable to bearer in coin on demand, without a shilling to meet the payment of those 13 millions of such notes except the said sum of 3 millions of Rest and the halfyearly payments of the said annuity!!
In about three years, accordingly, after the resumption of its payments—in the year 1822, - viz., in the year 1825,--the bank proposed to
the Government that it should again stop payment.*
Such an annuity, which is very appropriately called a dead-weight annuity, must be an incubus on the “ Circulation department” of the bank, which it would seem politic to constrain the corporation by law to shake off ; but it is, nevertheless, manifestly contemplated by the Bill that the “ Banking department” of the bank shall retain that annuity—for in schedule A of the said Bill a form is prescribed of a weekly return to be made of the securities held by the “ Banking department” of the bank-in which form there is the following entry : “ Government securities (including the dead-weight annuity).”
The purchase of that annuity stood the bank, in February 1832, in the sum of 11 millions
* The following is extracted from the minutes of evidence annexed to the report of the committee of secrecy of the House of Commons on the Bank of England Charter, ordered to be printed 11th August 1832.—Evidence of Jeremiah Harman, a Director of the Bank.
Question 2214. Were the Bank placed in great danger in the month of December 1825, in consequence of a short supply of bullion ?
Answer. No question about it.
Q. 2224. Did any communication take place between the Bank and the Government respecting an order in council to restrain payment in gold at that period ?
A. Yes. It was suggested by the Bank,
Q. 2225. What answer did His Majesty's government give to that?
A. They resisted it from first to last.
(£10,897,880);* from which year, down to the present year (1844), the bank has received the annuity of £585,740, in reduction of the principal and interest of those 11 millions.
To what capital sum the sum of 11 millions in February 1832, is now in the year 1844 reduced, by the receipt of the annuity, depends upon the rate of interest cast by the bank on the 11 millions, credited with the annuity since 1832.
The unexpired term of the annuity is 23 years from 5th April 1844,—and the value in present money of an annuity of £585,740 for 23 years unexpired, calculating interest at three per cent., is more than 94 millions (£9,631,674).
Calculating interest at three per cent. (which is the rate paid to the bank on its deposited capital), on the 11 millions (£10,897,880) credited with the annuity since 1832,- the bank (94 millions being taken as the value of the annuity in present money), is now gainer of nearly two millions and a half by the speculation.
But as the rate of interest in the market is a continually fluctuating quantity, and in the event of war, would probably rise to five, or a higher rate per cent. instanter ; the purchase of such annuity (apart from any consideration of the risk of stopping payment in consequence), regarded merely as a speculative investment of funds of the bank,was most indiscreet on the part of the directors of
* Appendix No. 13, annexed to the report of the committee on the Bank of England Charter, ordered by the House of Commons to be printed 11th August 1832.
the corporation ; and it was worse than folly of the Government of the day to encourage such an investment of the paper-money of the bank, payable to bearer in coin on demand : the sanction of which by the government, implies, moreover, that the corporation of the bank, without one shilling of disposable capital, was, in the opinion of that government, better able to bear a dead weight of 13 millions than the nation itself !
Notwithstanding that a monopoly is by the Bill proposed to be sold and secured to the bank, more stringent than the corporation has ever heretofore possessed,—and notwithstanding that the provisions of the 3 & 4 William IV. cap. 98, (the Act of 1833 for the last renewal of the charter of the bank), whereby the notes of the bank (by being made lawful tender in payment of the public revenue of 52 millions per annum), are made a state paper-money to all intents and purposes, are, by the Bill, not proposed to be repealed,—the price to be paid by the bank for the purchase of such monopoly, and exclusive privileges, is not proposed to be raised from what the corporation now pays for its less stringent monopoly, &c.
The consideration which the 2,500 proprietors of the bank pay to the public for the purchase of its present monopoly, exclusive privileges, &c. is a loan of 11 millions (£11,015,100), guaranteed to be repaid by the public on the determination of the bargain, with interest at three per cent. per ann. until repaid—and a deduction of 120 thousand pounds per ann. from the sum agreed to be paid