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perior, taken as a whole, to our own. That it should not have sufficed to neutralize the evil influence of the unrestricted power to issue notes, is no proof that it is not good, with respect to its immediate and legitimate object; for, to no banks, I am satisfied, however constituted, can such power be safely entrusted.
SEPARATION OF THE FUNCTIONS OF THE BANK OF ENG
LAND NOT SUFFICIENT.--NO ADVANTAGE IN TAKING SECURITY FOR THE AMOUNT OF ISSUES FROM ISSUING BANKS.
It remains only that I should notice, which I shall find it necessary to do but very briefly, the two remaining points, to which I referred in the outset as having engaged public attention, viz. the separation of the functions of the Bank of England into those connected with banking, and those incident to the issuing of promissory notes, and the calling on all issuing bodies to give security for the amount of their issues.
With regard to the former,-if it be viewed as implying, after the separation, the suppression of issue by all other banks, and the substitution for their issues of the notes of the Bank of England, then it must be considered as identical in character with the plan of a state bank, and requiring no further nor separate consideration. In such case, however, it would, perhaps, be better that the name, as well as the functions, of a state authority should be assumed by the body entrusted by the Legislature with the power of issuing notes; and that it should not be called a bank, both because the assumption of some new and appropriate designation, such, for instance, as “ Commissioners for the Issue of State Notes," would at once in public apprehension define and limit the duties to be discharged, and because it might have some tendency to diminish the feelings of jealousy with which other issuing bodies might see their own circulation superseded by that of the Bank of England.
If the separation of the functions of the Bank of England be not intended to imply any interference with the issues of any other Banks (and in such sense perhaps the term is more commonly understood), then, although I should still consider it as a very important step in the path of monetary reform, I should most deeply regret our stopping short in our application of the only principle on which we can rely for security in the administration of a paper currency. We should still have, it must be recollected, one half, or nearly one half of our note issues subject to no control but that discretion on the part of the issuers, which all experience shews to be so fatally inadequate to the task. But we should do more than stop short in the application of a just principle — we should subject the operation of the principle itself to an unfair experiment. While one half of our paper currency was contracting agreeably to just and inflexible rules, the issuers of the other moiety would not only have it in their power to retain it at its full amount; but possibly under combinations of circumstances quite conceivable, to extend it in proportion to the diminution in the soundly administered half, thus prolonging the drain of specie, and creating on a scarcely diminished scale the very train of evils, the plan would have been adopted to prevent. Neither ought it to be forgotten that we should have lost the remedial and repressing powers, now exerted by the Bank in a forced action on the rate of interest and other similar expedients-expedients, from the use of which the issuing department would be precluded by the law under which it would be constituted, and from all responsibility of resorting to which the directors of the general body might, under the new arrangement, justly conceive themselves exonerated. And yet to such expedients, however empirical and worse than useless under a really sound system, it would be asserting too much to say that, in the case supposed, it might not be necessary to recur. : · With regard to the remaining point, the proposi. tion, viz. of requiring from all issuing banks security for the amount of their issues, it seems to me to be of little or no value-holding out scarcely one advantage to compensate for the grave objections to which it is liable. It would, in the first place, be unjust; it might well happen that a bank, insolvent as regarded its whole liabilities, would devote to the required security its only good assets, and on its stoppage all other creditors than the holders
of its notes might fail in recovering one sixpence in the pound on their debts-their property having been used to give to their unworthy debtors a false appearance of solidity. Nor is such preference to be justified by any especial commiseration to which the holders of notes, rather than depositors, or the other creditors of a bank, are entitled ;—since the extinction of notes under 51. the holders of notes in England cannot be among the most humble and helpless classes and with regard to the 1l, and 21. note circulation of Scotland and Ireland, the true remedy, as we have already seen, on this as well as other grounds, is suppression.
In a general or national point of view, the plan is worse than useless-not merely a remedy in the opposite direction of the evil against which we should seek to guard, but positively injurious. Inasmuch as it would give increased currency to the notes of all issuing bodies, by removing any doubt of their being ultimately paid,-it would facilitate and afford the temptation to excessive issuethe real danger to be apprehended with regard to a paper currency. The object to be aimed at with respect to such a currency, is, as we have seen, that it should not exceed in amount the metallic currency for which it is a substitute, but the amplest security for every note of which it may be composed, would not tend in the slightest de. gree to the attainment of that object. It will