the crisis, during the crisis, and at the present time, will show how great was the convulsion and how striking have been the vicissitudes. On the 9th of May, the very day before the first calamity of the crisis, the position of the bank was as follows: Note circulation, £22,344,395; gold in both departments, £13,156,140; reserve, notes and coin, £5,811,745 ; loans and discounts, £20,844,217; bank rate, 8 per cent.; private deposits, £13,515,537. On the afternoon of the very day after these returns were drawn up the great firm of Overend, Gurney & Co. suddenly stopped payment, and on the 11th panic reigned supreme in the city. Mark the consequences in the next return of the Bank of England (May 16): Note circulation, £26,120,995; gold in both departments, £12,323,805; reserve, notes and coin, £1,202,840; loans and discounts, £30,943,259; bank rate, 10 per cent.; private deposits, £18,620,672. Finally, let us show the position in which the bank has been left after the crisis was over. The bank returns for the 28th of November were as follows: Note circulation, £22,486.750; gold in both departments, £18,175,570; reserve, notes and coin, £10,358,918; loans and discounts, £19,186,008; bank rate 4 per cent.; private deposits, £13,515,537. Thus the first effect of the crisis in May was to add 10 millions (50 per cent.) to the bank's loans and discounts, fully 5 millions to its private deposits, and nearly 4 millions to its note issues. Hence it appears that of the 10 millions of advances required from the bank, half of that amount was not withdrawn from the bank at all; it simply remained at the credit of those parties who had got the loans. Of the remaining five millions, £3,776,000 were taken from the bank in the form of notes, and £810,000 in coin. It is also to be noted (as shown by the return obtained by Ald. Salomons) that of the 32 million of notes thus withdrawn, the greater part were large notes-not meant for currency, but either for hoarding on the part of the public, or for the payment of deposits by the banks. These facts throw great light on the nature of the difficulty experienced by the bank in May. The demands upon it were of two kinds: (1) from merchants who, owing to the stoppage of Overend's and other establish. ments, and the general cessation of discounting by the London banks, could not get their usual accommodation from the old quarters, and had to take their securities to the bank to be converted into banking currency, or at least into banking credit. But (2) by far the larger part of the extra demand then made upon the Bank of England came, not from the public, but from the other banks. Many of these establishments had to withstand a "run" for deposits which they could only meet by suddenly converting their assets into currency to a much larger extent than usual. And this could only be done by taking these assets to the Bank of England, which is the only establishment which is permitted by law to increase its note-issues. The requirement of the banks was two-fold. In the first place, they had to meet payment of the checks drawn upon them and passed through the Clearing House; and, as the settlements in the Clearing House are made by drafts on the Bank of Engiand, the banks had to increase their deposits at the bank to meet the exceptional demand to which they might be exposed. No more currency was required for this, neither did it involve any withdrawal of capital from the bank. On the contrary, as we have seen, the only effect of this was to add fully 5 millions to the private deposits in the bank-which doubtless shifted about a good deal from one bank's account to another's, in consequence of the "clearing" operations, but the whole of which remained in the bank and strengthened its position greatly. But, secondly, while adding to their credit or deposits at the Bank of England, the London banks had also to meet the crisis by other means. While they had to provide for the extra run made upon them through the Clearing House by increasing their credit at the bank, they had at the same time to meet the run for deposits made upon them 66 over the counter" by laying in a much larger stock of currency than usual. Hence, beside adding largely to their deposits in the Bank of England, they had to withdraw from the bank some 3 millions of notes and £800,000 in coin. These operations, by which the banks supplied themselves with currency during the crisis, were not loans of capital; they were simply temporary exchanges of capital for currency. The banks took a portion of their negotiable assets (bills, &c.) to the bank, and obtained a supply of bankingcurrency in exchange, by which they might meet the unusual demand for cash payments made upon them by their depositors. Probably at least three-fourths of the increase in the Bank's loan and discount business in May came from the London banks; the remaining fourth from persons who could not get their bills discounted in the old quarters (owing to the bank suspensions and and general stoppage of discounts,) and who accordingly had to apply at the Bank of England. The effects of this immense increase of business, contemporaneous with an exorbitant rate of interest, are visible in the large profits made by the Bank during the crisis. The undivided profits at the end of the last-half year (on Sept. 5) amounted to four millions (£3,987,417,) the highest point ever reached; and the net profit on the half-year was £975,655, the largest ever made by the bank. Moreover, if the weekly gains of the establishment be examined, it will be found that these were fully twice as great during the period of monetary distress as in the remainder of the half-year. During the fourteen weeks when the rate of discount was 10 per cent the bank's profits were £679,000, against only £300,000 in the other twelve weeks. The object of raising the bank-rate, we are told, is to check the withdrawal of gold, and at the same time to attract gold from other countries But the facts contradict this view of the matter very strongly. During the months of May, June, and July, specie accumulated steadily and enormously in the Bank of France, which charged only 3 and 4 per cent; while the Bank of England, which charged 10 per cent, found its stock of gold no greater on the 2d of August than it had been on the 3d of May : FE 14,170,000 10 per cent. 12,930,000 J 25,080,000 4 per cent. 23,270,000 34 per cent. The logic of these facts are unanswerable. Here are two great banks, within twelve hours' distance of one another-one of which holds 21 millions of specie and lends its currency to the public at 3 per cent., while the other has less than 13 millions of specie and charges 7 per cent. According to the theories which have so long been held sacred, such a condition of things ought to have been impossible. Only a few months before Baron Rothschild had declared to the French Government Inquiry that if the Bank of France were at any time to lend its currency at 2 to 3 per cent. below the banks of other countries, it would forthwith be drained of its last sovereign. In spite of this dogmatic theorising, at the beginning of May we beheld the Bank of France charging only half as much for its currency as the Bank of England, yet no drain at all set in from the former bank to the latter! Although within a few hours' distance, the specie remained unmoved at Paris, while on this side of the Channel the public was forced by the bank to pay 7 per cent. instead of the 3 in France. According to the so-called established theory, such a position of affairs was an impossibility-but here it was. Moreover, instead of disappearing, when the bank screw was still further put on, the difference between the two neighboring banks only grew greater and greater. While the Bank of England charged 10 per cent. for three months with no result of increasing its stock of gold, the specie in the Bank of France shot up from 21 to 284 millions sterling, while the charge for its currency was only from 3 to 4 per cent. In fact, as is well known, so totally inefficacious was the raising of the bank-rate, that specie actually flowed from England to France, although the rate was 300 per cent. higher in the former country than in the latter. As a set-off against the enormous gains made by the Bank of England during the crisis, there has recently been a very considerable reduction in its business below the ordinary amount. Its loans and discounts, which usually amount to 21 millions, are at present £19,636,741. The bank, in fact, is quite at a loss how to imploy the money. Owing to the increase in its stock of gold, the currency which it has the power to issue has increased, whilst the demand for it is much less than usual. In consequence of this, if the directors had followed their usual course, the bank rate would have been reduced still lower than it is: but, on the present occasion, instead of reducing the rate, the directors have invested 5 millions of their money in the purchase of Government securities-as shown by the rise in the amount of these securities in the Banking Department from £10,694,254 on the 3d of May to £13,011,222. The following have been the extraordinary changes in the bank rate since the beginning of May: While the bank rate was thus falling, the gold in the bank steadily increased. On the 2d August the gold in both departments was £13,516,140. It is now (Dec. 12) no less than £18,551,471-a higher point than has been witnessed since the similar period of collapse after the crisis of 1857. DAILY PRICES OF GOLD AT NEW YORK FOR FIVE YEARS. From January 1862. Day of month. January. 1. Holiday February. March ... ... 10. 8. ... S. ... .......... 9................. ........... S. April. May. 103%-103% 102 -102% .... ...... June. July. August. 0. -108% 102-104% 101-102% 101-102% 102-104 103-109% 108%%-120 112x-110 116-124 122 -133 129 -1334 128-134 March. 1334-131 10. 136%-138% 152%-153% 160 -163 11.. 12. 13.. 14. 15. 16 17. S. 145-145% 155%-157% 154-155 146%-147% 158-159 154%-155 18. 19. 20. 21. 23. December. November Month. 133 %-100% 152-172 139 -171% 145-157% 143-154% 140-148% 1234-145 122-129% 126%-143% 140%-156% 143 -154 148% 1.2% |