have felt a difficulty in commenting upon, or limiting, or in differing from, a speech of a Governor from the chair. But there was no difficulty or delicacy in attacking the 'Economist.' Accordingly, Mr. Hankey, one of the most experienced bank directors, not long after, took occasion to observe :

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"The Economist' newspaper has put forth what, in my opinion, is the most mischievous doctrine ever broached in the monetary or banking world in this country; viz., that it is the proper function of the Bank of England to keep money available at all times to supply the demands of bankers who had rendered their own assets unavailable. Until such a doctrine is repudiated by the banking interest, the difficulty of pursuing any sound principle of banking in London will be always very great. But I do not believe that such a doctrine as that bankers are justified in relying on the Bank of England to assist them in time of need, is generally held by the bankers in London."

If Mr. Hankey's statement had been accepted there would have been an end of the controversy,

and after the next panic it could not be asked, as it was in the "Economist" of 22nd Sept., 1866: "Let us know precisely who is to keep the Bank reserve. If the Joint Stock Banks and the Private Banks and the Country Banks are to keep their share, let us determine on that; Mr. Gladstone appeared not long since to say in Parliament that it ought to be so. But at any-rate there should be no doubt whose duty it is." But Mr. Hankey's statement was not received as final, and Mr. Bagehot published "Lombard Street" to show why it was not.

As Mr. Bagehot's work is called "Lombard Street," I venture to call this book-in which it is asserted that he has not proved that it is the duty of the "Old Lady of Threadneedle Street" to save Lombard Street bankers the trouble and expense of keeping cash reserves—“Threadneedle Street"

THREADNEEDLE STREET.

CHAPTER I.

BANKING DEPARTMENT OF THE BANK OF ENGLAND.

THE proposition that it is the duty of the Bank of England to keep money available at all times to supply the demands of bankers who have rendered their own assets unavailable, when stated in this explicit manner, appears on the face of it so utterly unreasonable, that it suggests an enquiry into the circumstances which could have produced it. If anyone nowadays were to sit down and elaborate a plan on which banking should be conducted, it would not occur to him to establish in London only one bank, and confer upon it the privilege of exclusive banking. Such a proposal would be so entirely out of harmony with the notions of to-day that it is necessary to be reminded that the object of founding the Bank of England was to raise money for the use of the Government. The

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Act of Parliament by which the Bank was. established in 1694 is entitled "An Act for granting to their Majesties several duties upon tonnage of ships and vessels, and upon beer, ale, and other liquors, for securing certain recompenses and advantages in the said Act mentioned, to such persons as shall voluntarily advance the sum of fifteen hundred thousand pounds towards carrying on the war with France." From time to time the charter of the Bank of England was renewed, and with it the privilege of exclusive banking was granted. During the existence of this privilege no Banking Company of more than six persons was allowed to issue notes payable on demand within London or 65 miles thereof. The notes so issued were payable in cash on demand, until 1797, when the suspension of cash payments took place under an order in council, based upon a report from the Chancellor of the Exchequer that an unusual demand for specie had been made upon the Metropolis, in consequence of ill-founded or exaggerated alarms in different parts of the country; and it appeared that unless some measure was immediately taken there might have been reason to apprehend a want of a sufficient supply of cash

to answer the exigencies of the public service. This order in council was followed by the Bank Restriction Act (in the first instance passed for a period of 52 days, but which continued in force for 22 years), which provided that the Bank of England should not be sued for the payment of any of their notes for which they were willing to give other notes; and that no person could be held to special bail upon any process issuing out of any court, unless the affidavit made for the purpose stated, also, that the party had made no offer to pay in bank notes. The result was that bank notes were constantly at a discount, and the Bullion Committee in 1810 reported to the House of Commons "there is at present an excess in the paper circulation of this country which is to be ascribed to the want of a sufficient check and control in the issues of paper from the Bank of England, and originally to the suspension of cash payments which removed the natural and true control." However, the House rejected their report, and, in their collective wisdom, came to the conclusion that it was not the value of bank notes that was depreciated, but that the value of gold was advanced-in other words that the promise of a bank note to pay so many pounds on demand