6, and then to 7. The Bank of France also raised its rate to 7, and spoke of issuing 50 franc notes; on the 2nd of December the Bank raised its rate to 7, and on the 3rd to 8. At the same time a great fall took place in the Russian Exchange, in consequence of certain Government measures not having succeeded. In consequence of these circumstances, the reserves of the Bank were considerably strengthened after a short time. But in January, 1864, a fresh export of specie began and continued with great severity till the middle or end of May, so that discount varied from 8 to 7, and 6, and again up to 9. In May the Bank again raised its rate twice in one week to 9. With a few fluctuations

this great pressure continued all through the summer. Having fallen to 6 per cent. in June, it gradually rose again to 9 in September. After that it gradually fell to 3 per cent. in June, 1865

53. Already in March, 1864, the numbers of new companies formed under the limited liability principle gave great uneasiness. Up to that time it appeared there were 263 companies formed with a nominal capital of £78,135,000, out of which 27 were banks, and 14 discount companies. In August, 1864, the longdated acceptances of the new financial companies began to press on the market, and lay the foundations of the crisis of 1866. In April the Bank of England joined the Clearing House, thereby still further economising the use of Bank notes

On the 8th of September the Bank raised its rate to 9 per cent., and this measure stopped the foreign drain, lowered the price of foreign commodities, and strengthened their reserves. The price of cotton was greatly lowered owing to the expected peace in America, and this rise in the rate of discount, striking on a falling market, produced an immense curtailment of business in all directions

The Great Crisis of May, 1866

54. On the 20th June, 1865, the rate of discount reached its minimum, 3 per cent. On the 5th August it was raised to 4, and then gradually and continuously, with very slight fluctuations, till it culminated in the crisis of May, 1866

In November a strong foreign drain began, the exchange fell

and, this growing stronger in January, 1866, the Bank raised its rate on the 6th to 8. This had some effect in arresting the drain, but it did not bring in fresh supplies from abroad. At this period the National Provincial Bank began to bank in London, and, in consequence, were obliged by law to give up their issues, which amounted to £442,371. Several other banks having ceased to issue, since the Bank of England had been last authorised to increase its issues, it was now permitted to increase its issues on securities to £15,000,000. The high rate of interest here cansed a good deal of foreign money to be invested in long-dated bills

Towards the end of January the difficulties began, which brought on the panic in May. In consequence of there having been no Parliamentary inquiry, as might have been expected, the circumstances of this panic have never been fully explained. But it may be stated generally that these Finance and Discount Companies had advanced enormous sums of money to promote great enterprises, such as railways, and other schemes, which could never repay their cost until completed, which might take years to do. The first company that went was the Joint Stock Discount Company in February. This spread a general feeling of alarm, as the doings of this Company were merely a type of a large amount of business which was known to have been engaged in by numerous other companies. In March Barned's Bank at Liverpool stopped payment, with liabilities of upwards of 31 millions. Several great railway contractors suspended, involving in discredit the companies with whom they were known to have "financed'

54. On the 3rd of May the Bank raised its discount to 7 per cent. Every one now felt that the long-dreaded crisis was at last come. The air was thick with rumours. Every one knew now that it was merely a question of weeks, perhaps of days, when the storm should burst. On the 8th of May the Bank raised its discount to 8 per cent. The advocates of the Bank Act, in their usual strain, proclaimed that on no account whatever must the Act be suspended. Such a thing was not to be thought of. Credit was then tottering and received a blow from the report of a speech of the Emperor Napoleon III., said to have been addressed by him to a meeting at Auxerre, in which he expressed

his detestation of the treaties of 1815. This, in the feverish political state of the Continent, was held to mean that he was determined on war

It is possible that this excitement might have passed off, as the Bank had a fair reserve in the banking department, and abundance of bullion in the issue department. On the 9th of May the Bank raised the rate of discount to 9 per cent. On this day, however, occurred the event which it is probable produced the great panic. The Mid-Wales Railway Company had accepted bills of exchange to the amount of £60,000, which were held by three parties-Bateman; Overend, Gurney & Co.; and the National Discount Company. The Company had dishonoured the bills, and actions had been brought against them by the three parties above named. As ill fortune would have it, judgment in these actions was delivered on the 9th of May, in the very height of the excitement. The Court of Common Pleas held unanimously that the Railway Company had no authority whatever to accept such bills, and consequently that they were absolutely invalid, and so much waste paper. For some time back it was known that Overend, Gurney & Co. were very deep in with contractors and other parties; moreover they held forged bills to a large amount of another firm. Their shares had been pressed on the market, and were going down. This fall in their shares produced a steady withdrawal of their deposits. The judgment in the case of the Mid-Wales Railway converted this into a complete run; and, on the afternoon of Thursday, May 10th, the terrible news spread through London that the great establishment of Overend, Gurney & Co. had stopped payment, with liabilities exceeding £10,000,000-the most stupendous failure that had ever taken place in the City. This news only spread about after banking hours, but every one could foresee what the effects would be next morning. The Chancellor of the Exchequer said next evening in the House that the oldest inhabitants of the City declared that the excitement was without a parallel. Early in the evening he was questioned as to whether Government had authorised the Bank to issue notes in excess of the legal limit. The Chancellor replied that he had not yet done so, but that he had received a deputation from the private bankers, and was expecting one from the Joint Stock Banks, on the subject. Very

soon afterwards this came, and the Members of the Cabinet, having retired to a committee room and consulted, the Chancellor, later in the evening, announced, amidst the loudest cheers from all parts of the House, that the Government, following the precedents of 1847 and 1857, had informed the Bank that, if they thought proper to make advances beyond the limit, the Government would bring in a Bill of Indemnity. He also stated that the Bank had advanced £4,000,000 that day

55. The announcement of the suspension of the Bank Charter Act produced the best effects next morning. The Bank raised its rate to 10 per cent., and everything calmed down, and though subsequently to this some other stoppages took place, yet the knowledge that the Bank had power to make advances on good securities abated the panic. On the 18th of May the Chancellor of the Exchequer stated that the Bank had advanced £12,225,000 in five days. The sum that was paid away during the panic can probably never be known, but it was something perfectly fabulous. It has been said, though of course we know not on what authority, that one great bank alone paid away £2,000,000 in six hours. The establishments that stopped payment were as follows, with their liabilities, according to their last published balance-sheet, though, of course, these were greatly diminished during the panic

Besides these stoppages, several other banks connected with the East confessed to enormous losses. Thus, the Bank of Hindostan, China, and Japan stated its profits at £23,485, and

his detestation of the treaties of 1815. This, in the feverish political state of the Continent, was held to mean that he was determined on war

It is possible that this excitement might have passed off, as the Bank had a fair reserve in the banking department, and abundance of bullion in the issue department. On the 9th of May the Bank raised the rate of discount to 9 per cent. On this day, however, occurred the event which it is probable produced the great panic. The Mid-Wales Railway Company had accepted bills of exchange to the amount of £60,000, which were held by three parties-Bateman; Overend, Gurney & Co.; and the National Discount Company. The Company had dishonoured the bills, and actions had been brought against them by the three parties above named. As ill fortune would have it, judgment in these actions was delivered on the 9th of May, in the very height of the excitement. The Court of Common Pleas held unanimously that the Railway Company had no authority whatever to accept such bills, and consequently that they were absolutely invalid, and so much waste paper. For some time back it was known that Overend, Gurney & Co. were very deep in with contractors and other parties; moreover they held forged bills to a large amount of another firm. Their shares had been pressed on the market, and were going down. This fall in their shares produced a steady withdrawal of their deposits. The judgment in the case of the Mid-Wales Railway converted this into a complete run; and, on the afternoon of Thursday, May 10th, the terrible news spread through London that the great establishment of Overend, Gurney & Co. had stopped payment, with liabilities exceeding £10,000,000-the most stupendous failure that had ever taken place in the City. This news only spread about after banking hours, but every one could foresee what the effects would be next morning. The Chancellor of the Exchequer said next evening in the House that the oldest inhabitants of the City declared that the excitement was without a parallel. Early in the evening he was questioned as to whether Government had authorised the Bank to issue notes in excess of the legal limit. The Chancellor replied that he had not yet done so, but that he had received a deputation from the private bankers, and was expecting one from the Joint Stock Banks, on the subject. Very