Page:The Bank of England and the State, 1905.djvu/14
The Bank of England and the State.
is accessible to all who care to look for it. The main points I wish to place before you are the duties with regard to what is essentially the function of the State, viz. the maintenance of a sound and safe currency: but before entering on that part of the subject a brief historical review of the development of the Bank itself may not be without interest, for it will be shown that it is not as a private institution, but as a Government Bank, that it has been called into existence and grown step by step.
An interesting memorandum on the question of establishing a National or State Bank, dated, Treasury, 10th February, 1858, by Mr. G. Arbuthnot, is published as an appendix to the Report of the Select Committee on the Bank Act, 1858. "The Bank of England," says Mr. Arbuthnot, "owed its origin to the pecuniary wants of a Government whose credit was low on account of the unsettled politics of the day and the drain occasioned by a war, on the issue of which the independence of the country hung. In return for the advances made by the Corporation to the Government, it obtained its exclusive privileges. Each extension of these privileges in after times was the result of some pecuniary accommodation; and an institution so dependent on the Government of the day for the continuance of valuable rights was little able, as Mr. Ricardo observed, to withstand the cajolings of Ministers. The Bank attributed (whether correctly or not may admit of doubt) the necessity for the suspension of cash payments in 1797 to the frequent and urgent demands for an increase of advances on the part of the Government; and that body had frequently been induced to increase their advances on Exchequer Bills and Treasury Bills at the very moment when they were themselves declaring that it would be attended with the greatest risk to the stability of the establishment and to the public interest.
"All cause for such apprehensions had, in fact, been already removed by recent Acts of Parliament when these observations were written. The Act 59 George III, c. 76, precludes the Bank of England from making advances to the Government upon Exchequer Bills, Treasury Bills, or other Government