for home purposes, the Chancellor of the Exchequer be requested to make his financial arrangements for the year without aid from the Bank; and that they would make no advances upon Treasury bills, exceeding, at any one time, the sum of £500,000.

Although Mr. Pitt promised a ready compliance with the requests of the Directors, he acted only in reference to his own necessities; and notwithstanding their remonstrance, he wrung from the Bank, in August, 1795, the sum of £2,000,000. In the mean time, the Bank, in face of the loans it was called upon to make, as well as others that were proposed, and which it might have to aid in making, largely increased its issues of notes, although at the same time there was a constant and heavy outflow of specie. Its notes, which in August, 1794, stood at £10,000,000, reached £14,000,000 in February, 1795, the increase being made chiefly in payment of bills drawn upon the Treasury in behalf of foreign governments. The point was already reached at which it could consult its own safety only at the cost of declaring government bankrupt.

As the outflow of specie continued to increase in force, its Directors, in October, 1795, again made a formal representation to the government of their apprehensions growing out of the condition of affairs, and the absolute necessity of a reduction in the amount of their advances. They called its attention to the fact that the representations made at the commencement of the year as to the dangers likely to arise from foreign loans were being fully realized, and that numerous payments were yet to be provided for. They showed the market price of gold to have risen to a considerable premium; and, with the extraordinary call for it which had caused the rise, they declared they could make no further advances. The rumors that new loans were contemplated were at first denied by Mr. Pitt. At subsequent interviews, however, he stated to the Directors that a new loan of £2,000,000 to the Austrian government would be of great aid to the common cause of which he was the master-spirit, the object of which was to humble the power and ambition of France. He stated, at the same time, that if such a loan would hazard the welfare or stability of the Bank, all thought of it should be abandoned. As the Bank had in great measure exhausted its means by its loans to the government, which were, necessarily, very

largely drawn in coin, it had no other alternative than to reduce its accommodations to the public. Its Directors accord ingly announced, that such advances as they could make, day by day, should be divided proportionably among the applicants. This determination caused great alarm and distress in commercial circles. In spite, however, of all expedients, matters continued to go from bad to worse; the Bank, in the mean time, remonstrating in the strongest, and Mr. Pitt always replying in the most compliant terms. On the 14th of February, 1796, the Directors formally represented to Mr. Pitt, "That it is the opinion of this Court [of Directors,] founded on its experience of the effect of the late Imperial loan, that if any further loan or advance of money to the Emperor [of Germany], or other foreign state, should, in the present state of affairs, take place, it would in all probability prove fatal to the Bank of England. The Court of Directors, therefore, do most earnestly deprecate the adoption of any such measure; and they solemnly protest against any responsibility for the calamitous consequences that may follow therefrom." Mr. Pitt replied in his usual strain, that no further loan should be made without communicating with them; that he saw no reason for their apprehension; and that their representations must have been made in a moment of needless alarm.

As the stringent measures adopted by the Bank, for the purpose of contracting its issues, produced great distress among all classes, various propositions were made for relief; and among them, that a Committee of twenty-five members be appointed by Parliament, authorized to issue notes payable six months after date, bearing interest at the rate of 14 pence daily per £100, upon receiving their value in gold and silver, Bank of England notes, or bills of exchange having not more than three months to run. Such a suggestion was made, probably, in consequence of an issue of Exchequer bills for the purpose of arresting the commercial and financial panic of 1793. All such propositions, however, came to nothing. In the mean time, Mr. Pitt applied, in July, 1796, for a loan of £800,000 on Treasury bills (the Bank being already in advance on account of such bills to the amount of over £1,200,000); and for a similar sum in August. The Directors agreed to advance the first sum, but refused to advance the second. Mr. Pitt replied, that without the second the first would be of no use to him, and

they were driven most reluctantly to make both loans. They again addressed an earnest remonstrance to the government, and declared that they yielded to its demands only from fear of the consequences that would follow a refusal. "They consented," they said, "to this measure, in a firm reliance that the repeated promises, so frequently made to them, that the advances on the Treasury bills should be completely done away, may be actually fulfilled at the next meeting of Parliament, and the necessary arrangements taken to prevent the same from ever happening again; as they conceive it to be an unconstitutional mode of raising money, what they are not warranted by their charter to consent to, and an advance always extremely inconvenient to themselves." The immediate response to this remonstrance, so pertinent and reasonable, was a fresh demand upon the Bank for £2,750,000, on the security of the malt and land taxes; which was granted upon condition that the advances on the Treasury bills, then amounting to £1,513,345, were to be paid out of it. Mr. Pitt pocketed the new loan, without paying off any advances that had been made on the Treasury bills. The Directors again demanded payment; as the advances on such bills had increased to £1,554,635, and would, in a few days, be increased to £1,854,635. Mr. Pitt was full of excuses for non-payment, made abundant promises for the future; but hinted at the same time, that a large amount of bills, estimated at £700,000, had come in from San Domingo. He further hinted, at the same time, that he should presently want £200,000 for Ireland. All that the Directors could do was to repeat their remonstrances, and picture the ruin which now stared them in the face. Pitt, in fact, knew no law but that imposed upon him by the situation in which he was placed. With vast military operations, of which he was the centre, he would have been in the greatest straits for money with tenfold the advances that were made. It was a struggle which of the two mighty geniuses that were brought into collision should become master of the destinies of the world. In all this Pitt simply impersonated the spirit of the nation, then roused to a pitch of fervor and determination which perhaps occurs but once in a nation's history. It was a struggle for every thing the preservation of which gave value to life. It was a struggle which absorbed the will of the nation, and in which the Bank Directors, though

foreseeing certain ruin in their path, stood ready to sacrifice themselves upon what they believed to be the altar of their country's good. The attitude of England to the French republic was in every respect selfish and unjustifiable; but when the liberties of France were surrendered to a remorseless and unprincipled despot, the only course for England was to fight the battle to the bitter end. Her crowning triumph would have been wholly impossible but for the aid furnished by the Bank. By means of it, she availed herself of the whole financial power of the nation; and was enabled to carry on for twenty years a struggle in which, without the Bank, she must have been ignominiously driven from the field.

a

The action of the Bank in restricting its issues, to which it rigidly adhered in endeavoring to save itself from what appeared to be nothing less than certain destruction, precipitated the crisis which was impending, and which could not then probably have been avoided. In a period of eighteen months, it reduced its circulation from £14,017,510 to £8,640,250, reduction of nearly one-half. A wide-spread panic was the natural result of the unexampled distress which was caused, and by which all classes were alike affected, and greatly increased the run for coin. The Directors, now fully comprehending the situation, sent, on the 21st of February, 1797, a deputation to Mr. Pitt to ask him how much longer he thought the Bank should continue to pay specie, and when he should think it advisable for him to interfere. Mr. Pitt replied that, as a preliminary step, the affairs of the Bank should be examined by a secret committee; to which request the Directors promptly assented. The specie on hand on that day was reduced to £1,272,000. It was evident that it could go on no longer; and, on the 25th of February, a meeting of the Cabinet was held, and an "Order in Council" issued, directing the Bank to suspend all payments in specie until the sense of Parliament should be known. Accompanying this order was a statement of the Directors, that the affairs of the Bank were in a prosperous condition, and that it was possessed of ample means for the ultimate payment of all its liabilities. Its specie was reduced, on the day of the suspension, to £1,086,000. With the announcement of the suspension, the panic instantly subsided. The relief was immediate and complete. The merchants and bankers of London, immediately

upon the announcement, held a meeting, at which they resolved, "That, being highly sensible how necessary the preservation of public credit is at this time, we do most readily declare, that we will not refuse to receive bank-notes in payment of any sum of money to be paid us; and we will use our utmost endeavors to make all our payments in the same manner." This resolution was subsequently signed by nearly four thousand individuals and firms. The Bank immediately began to expand its issues; increasing them within one week by the sum of nearly £2,000,000. Confidence being fully restored, a return flow of specie into it immediately set in; for the run upon it, for some time previous to the suspension, was not caused by the foreign demand, but by hoarding in consequence of the distrust which had prevailed. The foreign exchanges had for some time previous to the suspension been in favor of the country, and continued in its favor for a considerable period thereafter. An Act of Parliament was speedily passed, "for continuing for a limited time the restriction contained in the Minute of Council for the 25th of February, 1797, on payment of cash by the Bank." By this Act the Bank Directors were indemnified for having complied with the Order in Council. They were forbidden to pay cash, except in sums under 208.; but, if any person lodged specie with them, he might be repaid in kind to the extent of three-fourths of the sum deposited, provided such sum were not less than £500. Payments, in the notes of the Bank were to be deemed as payments in specie, if accepted as such. The notes were also to be received in payment of taxes; and no debtor was to be held to special bail, unless the affidavit stated that payment in bank-notes had not been offered. The Act was continued in force till June 24th of the same year. The Bank was also at the same time authorized to issue notes under £5. Within six months after the suspension, it held £4,089,620 in specie and bullion against £1,086,000 held by it on the day of the suspension. On the 28th of February, 1798, one year after the suspension, the amount of specie held equalled £5,828,940. The amount of notes outstanding on the day of the suspension was £8,640,250. The amount on the 31st of August, 1797, was £11,114,130; on the 28th of February, 1798, £13,095,320; and on the 28th of February, 1799, two years after suspension, £12,959,800. These changes were a decisive proof of the healthy condition