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Bankers Deposits—Financial Panics—Resolution

Volume 229: debated on Tuesday 16 May 1876

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, in rising to call the attention of the House to certain existent causes and conditions which have in the past conduced to the occurrence of Financial Panics, and which tend to their recurrence; to suggest certain legislative remedies; and to move—

"That this House is of opinion that Her Majesty's Government should take into its early consideration whether it would not be for the advantage of the Country that a moderate and graduated stamp or composition Duty should be levied in respect to all interest-bearing deposits with bankers in the United Kingdom, and whether the scale and incidence of such Duty may not be so devised as to encourage the making of such deposits for fixed periods and renewable periods, as for instance from three months to three months, in preference to the system which has grown up and now prevails, whereby the greater number and amount of the interest-bearing deposits in the United Kingdom are held subject to recall at a few days' notice,"
said, he would not argue the proposition that if it be possible to prevent the occurrence, or diminish the frequency, or restrict the operation of financial panics, it was desirable to do so. He was content to allow that portion of the case which he was about to submit to rest as an assumption to be accepted or rejected according to the dictates of common sense; but he would undertake to show that there were causes and conditions conducive to the occurrence of panics which might be discovered on investigation, of which cognizance ought to be taken, because they could to a large extent be obviated, and satisfactorily dealt with by law, without inflicting the least injury on any class or interest in the Empire. That hon. Members might not mistake the scope or object of his Resolution, he would observe at starting that he was as much opposed as any hon. Member of that House to what might be termed meddling legislation and to measures which infringed upon or hampered freedom of contract. Having said that, however, he would remark that neither in this, nor in any other country with which he was acquainted, was the law of contract, or ought it to be, in all respects perfectly free. Our system, for instance, although one of the freest, had been frequently, and was at present, designed to encourage one species of contract by immunity from tax, or by a light scale of duties, whilst it discouraged or weighted others by heavier imposts. To obviate the dangers which now existed, and which he intended to point out, he would propose that Parliament should do no more than apply this principle of imposing a moderate but appreciable and carefully-graduated scale of duties, under circumstances which it was his duty to prove to the House were sufficiently important to excuse him for occupying its attention. A few more preliminary words might not be out of place. He would propose no remedy which could cost the State anything; on the contrary, the adoption of the measure which he would suggest would open to the State a new, and in the truest sense a most legitimate, source of revenue. His object, however, was quite apart from the consideration of raising revenue, and the measures he was about to suggest had been devised solely with a view to obviate existing conditions conducive to fitful fluctuations in the value of money, and frequently leading to panic. Few, even of those who were generally well informed and highly educated, understood the precise operation of a financial panic; and still fewer were capable of distinguishing—perhaps he should more correctly express it, tried to distinguish—how far the crisis which had occurred was due to the inexorable nature of things, or to what extent it might be a preventible epidemic. They were all, no doubt, familiar with the external symptoms. They first probably read in the newspapers of a considerable fall in the prices of commodities or stocks. When that happened contemporaneously with cheap money—that was to say, with money cheap on loans from day to day, on Government Stock, or on discount of short bills—it was a bad sign, for it indicated forced sales, and want of confidence somewhere. They next probably heard of the stoppage of large firms previ- ously reputed to be wealthy. Then of advancing rates of interest for money, and of the diminution of the reserves at the Bank of England; then, in quick succession, of factories working only half time—of other factories altogether ceasing to work—of ships laid up in dock, or sold at ruinous prices—of furnaces extinguished—of discount houses ruined—of bankruptcies, liquidations—and so forth; and thus they acquired a forcible but somewhat chaotic notion of the disaster which had befallen the community, but of actual diagnosis they had little or none. They no doubt heard what purported to explain how it had all come to pass. One man said—"It was brought about by the failure of two or three great commercial or financial firms, which all stopped payment about the same time; people got alarmed at the extent of the over-trading and rash speculation which were disclosed by accident and magnified by rumour; and great numbers who had never speculated themselves got frightened, not knowing where the evils might end, and some of them withdrew their money from the strongest and most solvent banks. Then these banks had to limit their most legitimate advances, and to call up others in order to pay, or be prepared to pay, their own way; and so solvent people who held value against every pound they owed were driven on the market to sell their stocks at the very worst season to force sales, and then, as a natural consequence of glutting the markets, there came a fall in prices all round, which, no doubt, first broke those who had overtraded most, but then beggared nearly every one who could not carry on his business without credit." He (Sir Joseph M'Kenna) admitted that that was some account of how a panic was brought about. Another would tell the same tale, only that he would attribute the immediate cause of the panic to the outbreak of war, or the rumour of war, which was sometimes, financially speaking, quite as bad news. In respect to such explanations, he would say that they were generally true enough, but they were insufficient. Over-trading and rash speculation, and wars and rumours of wars had undoubtedly a great deal to do with financial panics. They were the untoward and alarming incidents which, so to speak, acted as depressing nervous alteratives on the public mind; but unfortunately, they were incidents which legislation was for the most part powerless to prevent. His observations would scarcely apply to them, and he would try to explain why they should not. The match which lighted the fuse and exploded the mine was, no doubt, in one sense, the cause of the explosion; but one seldom cared to inquire whether the match were of sulphur or phosphorus. What one would desire to know in such a case was, he would say, nearly the same in terms as what they should inquire into now, if they wished to understand the nature of a financial panic. What were the ingredients of the mine, and how were such ingredients combined so as to render them liable to explosion by accident or design? He would try to answer these questions in respect to financial panics before he sat down; he would, however, refer very shortly, in the first instance, to the panics which had occurred from 1825 to 1866. Each panic for the last half century had a history of its own. The panic of 1825 was instigated by the collapse of the numerous South American mining schemes, by which (when the community was much less able to afford it than at present) several millions were lost. The uneasiness and distrust arising out of these unfortunate speculations gave rise to a general run on the banks of that period, and very many hundreds of them closed their doors, never to open them again. It was, no doubt, the collapse of the mining speculations which alarmed the public; but it was the over-issue of notes by those bankers, often wholly unconnected with the collapsed mining adventures, which obliged them to stop payment. There was no very serious panic in England between 1826 and 1847, although there did occur seasons of considerable pressure—notably 1836—and some local panics. The panic of 1847 was caused by the alarm growing out of the numerous failures of persons who had engaged in railway enterprizes and incurred obligations on shares altogether in excess of their financial resources, and by the failure of several mercantile houses, some of them in the corn trade. The amount of interest-bearing deposits in the London banks in 1847 was comparatively small, scarcely more than a tenth of the sum held in 1866. In no instance that he could remember was there a run on any London bank in 1847. One feature of that panic, was, however, worth bearing in mind, and it was the chief reason why he alluded to 1847. The late Mr. S. Gurney—and he was no mean authority—stated that at least from £4,000,000 to £5,000,000 in bank notes were, during that panic, locked up and inoperative, having been drawn out of the several banks by persons whom no rate of interest could tempt to employ the money, and who preferred to keep bank notes rather than lodge the money to their credit in any bank. The panic of 1847 was the first that occurred subsequently to the passing of the Bank Act of 1844. It was allayed by the Government of the day issuing an Order in Council to suspend the operation of the Bank Act, in order to enable the Bank of England to afford temporary assistance to other financial institutions. Within three weeks from the suspension of the Act confidence was restored, and within a month permission to over-issue was formally withdrawn. In 1857 there was again a panic, caused this time by large failures in America. There was again the same remedy—permission to the Bank of England to over-issue to the extent of £2,000,000. Now, he would ask the House to consider what he was about to tell them. Between 1847 and 1857 the deposits in the three principal joint stock banks in London had increased from £7,215,729 in 1847, to £35,501,241 in 1857. Now, inasmuch as there were several other banks established in London in the meantime, whose operations he (Sir Joseph M'Kenna) had not taken into account, he was fully justified in taking the amount of interest-bearing deposits as having increased five-fold within the 10 years referred to. The figures he had quoted were for deposits, whether bearing interest or not; other data, however, which need not be referred to now, convinced him that the increase in the interest-bearing deposits had been continuously and relatively greater than the increase in balances which did not carry interest. In 1859 another cloud passed over the commercial horizon; it arose from the apprehension of a European war. The scare, however, passed away without producing actual panic. The year 1864 was very remarkable. From spring to autumn it boded very badly. People, however, since 1866 appeared to have forgotten the deep anxieties and vicissitudes of 1864; and yet it was the fact that never since the usury laws were repealed had so great a pressure or so high a rate of interest prevailed for a whole year as in 1864. The average rate of discount for that year, at the Bank of England, was 7½per cent. In the panic year of 1866 it averaged no more than 7. The panic of 1866 was sufficiently recent to be within the recollection of most of the Members of that House; he had, therefore, no intention of going through its details, but would quote the words of Mr. John P. Gassiot, one of the directors of the largest of the great London joint-stock banks, who thus summarized the condition to which the banking and financial community were reduced on the 11th May, 1866, before the issue of the Order in Council suspending the Bank Act. These were Mr. Gassiot's words—
"At any time after 12 o'clock on the 11th May, 1866, there was probably no price for which the Bank of England banks or bankers could have obtained Bank of England notes for any amount of Government Stock."
He (Sir Joseph M'Kenna) admitted that he might now be fairly expected to give his own view of those conditions of our financial and commercial system which, he maintained, conduced to the occurrence of financial panics, and to much of the disturbance which sometimes occurred without eventuating in positive panic; and this he would do as briefly as possible. They all knew that the trade of this country was now, and always had been, largely carried on with borrowed money. They did not, however, sufficiently take into consideration this other fact—that it was so carried on with money borrowed twice over. The last-mentioned circumstance was, however, the key to the problem which they had to solve. The banker was the first borrower. He (Sir Joseph M'Kenna) had already shown that between 1847 and 1857 the deposits in three London joint stock banks had increased from £7,000,000 to £35,000,000. Between 1857 and 1866 the deposits in these three banks had increased from £35,000,000 to £57,000,000. Now, they must reflect that what had taken place with these three banks was taking place in almost all the other joint-stock banks in the United Kingdom. These monies were—to the extent, probably, of three-fourths or seven-eighths of the whole—borrowed at varying rates of interest, and were made repayable by the banks in each case at call, or on a few days' notice. They had now to bear in mind that the banker, having himself to pay interest for the money, was obliged by the very nature of things to re-lend it, and at a higher rate, in order to reimburse himself. Now, what he did was this—take an individual case—he lent the money to some one who, in return for the money, gave him some other security which the banker deemed sufficient at the time. When that operation was carried out—that was to say, when the banker had re-lent the depositor's money—so far as the banker and depositor were concerned, the money qua money had ceased to exist. It might have gone to Dantzic or to Odessa to pay for a cargo of corn; or it might have gone to St. Petersburg or Vienna to pay for the stuff which the banker had agreed to take as security; or it might have gone into some other security, good or bad. The banker, however, must be presumed to know what he was about, and, as a general rule, he got good security, and with a sufficient margin to protect him from loss. Now, they might take this as certain, that owing to the influx of deposits the normal condition of a banker in this country was that of one seeking to employ money—to lend it on good security at a remunerative rate. He could not afford to have money to any considerable extent idle for which he had himself contracted to pay interest. At this stage they had also to bear in mind that there were not commercial bills in existence to absorb half the money—or anything like half the money—which the bankers had to lend. The banker was, therefore, as an exigency of his business, constrained to advance money largely on financial securities, Government Stock, if he could get it, and he seldom could, railway debentures, railway stocks, canal stocks, Russian, French, or other Government bonds, or suchlike. He believed, and he was generally right in believing, that he could make himself as safe with some of these financial securities as he could be by discounting ordinary commercial bills if they were forthcoming. As a general rule, he obtained good and sufficient security for the ultimate repayment of his advances in all ordinary times. The one consideration, however, which was, or which should, always be present to the banker's mind was this, that as he had himself undertaken to repay his depositors at call, or on a few days' notice, he must be ever vigilant lest anything should occur, or be likely to occur, which could render his securities unmarketable for even the shortest time. Now, let them suppose that at a time when trade was neither very prosperous nor the reverse, considerable activity in some few branches and depression in others, the banker reads some disquieting intelligence. A report, apparently well founded, reaches him as to some formidable foreign complications, or it might be as to some great impending bankruptcy. Some persons believe the news, and others disbelieve it; his own opinion is that, whether it be true or false, it could have very little ultimate effect on the value of the securities in his bank. But this is not a sufficient assurance for him, if he thinks the report might suffice to render the public sensitive, or to bring down market prices; so, without betraying, or admitting that he sees, the slightest symptom of alarm, he quietly calls up a number of his loans, and declines to renew others as they fall due—which comes to the same thing. But the banker whose action he had described acted on information open to all, and it was therefore highly probable that 50 other bankers all over the country—in town and country—acted similarly, without the least concert one with another. Now, the immediate and natural effect of that was, that the customers of the banks, whose loans were called up, put unusual quantities of their stocks or their produce simultaneously on the market, and then—even supposing the amount of purchases to continue the same as usual—a fall of price ensued which, if it continued long without reaction, tended to produce that sensitiveness in the public mind which the banker had himself anticipated, but had also contributed to provoke. He (Sir Joseph M'Kenna) could not blame the bankers at all in this matter. Each banker knew that all other bankers were likely, or liable, to be influenced as he was himself, and at such a time to adopt a stringent policy. Moreover, he knew from experience that if a real pressure, even one far short of a panic, were to come about, the customer who had been earliest forced on the market came off better than those who had been indulged until later on, when lower prices were sure to prevail. When falling prices continued to be telegraphed day after day to the country, many depositors not as yet in the least degree moved by panic, but looking out for good investments, yet hesitating to invest, gave notice to their banker to place the amount of their deposits on the proper day to their credit on current account. If these monies were shortly after chequed away, the banker congratulated himself, and had good reason for doing so, that he had made timely provision for the demand. Many such pressures as those he (Sir Joseph M'Kenna) had described, after a few days of nervousness, or a few weeks, perhaps, passed away; prices rallied; everyone became re-assured; and credit circulated once more through its usual channels. But, on the other hand, if anything to stimulate the excitement and distrust occurred, the pressure continued until at length the point was reached when sales on the market could no longer be made, even at the low figures which were set down as the market price. Prices, in fact, became nominal. At this point, panic amongst depositors might at any moment become intense. It usually began to operate in this fashion—People who were previously in the habit of lodging their daily receipts with their bankers ceased to do so, and whilst they had funds in the bank they paid off their ordinary engagements by drafts on their bankers. Other people drew out their deposits, equally without the appearance of any nervousness, but they thought it well to hold cash in their safes, in preference to having it at their credit in any bank. This latter was something like what Mr. Samuel Gurney stated as having occurred in 1847, when, to his knowledge, some £4,000,000 or £5,000,000 in bank notes were locked up in the safes of private persons. But there are also many who, under such circumstances, hold gold. Concurrently with this process, mercantile and financial failures are announced from day to day. The strongest bankers find themselves at last in this position—that if things continue to go from bad to worse, it is only a question of a very short time when the best must succumb. Therefore, they think something must be done at once to allay the nervousness which by this time has spread widely through depositors. Thereupon a deputation of bankers is organized, which waits on the right hon. Gentleman who happens to be Chancellor of the Exchequer for the time being, and Her Majesty's Government is besought to pass, and does pass, an Order in Council to enable the Bank of England to issue bank notes in excess of its ordinary statutable powers, that it may be able to make advances to banks which are in one sense perfectly solvent, and are yet admittedly under such pressure, or in immediate prospect of it, as would render them liable to stop payment. Now, it was their duty to obviate, if they could, such wide-spread evils as had invariably occurred before this last somewhat empirical expedient—the Order in Council—had become the only resource for the strongest and best managed banks. Why should remedial or preventive action only commence when so much mischief had been already done? He said it was a somewhat empirical expedient, and yet it sufficed, because the affection was mainly a nervous one. There was a general, vague apprehension that no one was likely to have money enough to pay his way, and therefore every creditor, or at any rate a vast number of creditors, said to their debtors—"Pay us off." And then the debtors, in this last resort, being great bankers and influential people, waited on the Chancellor of the Exchequer, and got the Order in Council issued; whereupon, all at once, as if by magic, or like a miracle following some sacramental act, confidence was restored, and those creditors who the day before were anxious about their money assumed all at once that everything was set right again, and credit was re-instated by the bare tender, or by a mere morsel of relief. The success which had invariably attended the mere issue of the Order in Council—its immediate sedative effect—showed sufficiently that the evil was mainly attributable to apprehension and distrust, and was not due to the existence of obligations attributable to overtrading and reckless speculation, save and except to this extent—which he freely admitted—that public instances of overtrading and unfortunate speculation originated too often the distrust, which then spreads far and wide. Parliament could do but little to check overtrading, or put an end to reckless speculation; but it could, nevertheless, do a great deal to curtail the area over which panic generated by such practices could propagate itself. Parliament could, by the discriminative application of a moderate system of stamp or composition duties, induce the depositing community—that was to say, all who received interest on their deposits—to adopt a routine for the making and calling up of deposits, which, without the slightest unfairness, would preclude the possibility of vast numbers of depositors simultaneously calling up their deposits under the influence of panic. Now, the process whereby that could be done was essentially simple. It was not merely inexpensive, but it might be made the source of very considerable revenue to the State. Save and except the imposition of a moderate and carefully-devised scale of stamp or composition duties—which ought never to be oppressive—he would leave the right of contract between the banker and his depositor precisely as it was at present. He did not propose to apply any rule to, or levy any duty whatever in respect to, deposits or balances in banks which did not bear interest to the depositor. As the banker received those monies without any obligation to pay interest for them, he was not compelled to make use of them by the nature of the transaction, and therefore he might be fairly looked to to have the full monies forthcoming at all times. In the case of interest-bearing deposits, the principle was quite different, and as the banker must be presumed to make use of them, he would propose that the House should so legislate as to lead the public to cultivate a system of business which would introduce more certainty into the dealings of depositors with their bankers. He proposed that all interest-bearing deposits should be made liable to a certain stamp or composition duty, like that now levied on bank notes and on bank bills in circulation. The composition duty now payable by bankers on their notes and bills in circulation was at the rate of 7s. per cent per annum. He did not propose to apply this precise rate in any case, and merely mentioned it because it was an impost of an analogous nature, if not quite similar to that which he was about to suggest. In the matter of impost he proposed that a very light scale indeed should apply to the classes of deposits which should be made least susceptible of being acted upon by nervous or panic-stricken persons. With this view he proposed that every interest-bearing deposit of money made with a banker in the United Kingdom should, if no stipulation to the contrary were made, stand as payable on the day three months following the day of lodgment, and not be of right payable on an earlier day; and, if not demanded on its first day of maturity, should stand as re-lodged for another three months, and so on from three months to three months. These he would call "common deposits." He would suggest their being made subject to a composition duty, payable by the banker, and not chargeable against his depositor, at the rate of 4s. per cent per annum. Nothing should prevent the banker, if he thought fit, on the request of his customer, from paying any such deposit at an earlier day than the next maturity; but they should not be at liberty to stipulate beforehand that he should do so. In cases where what he called a "common deposit" would not suit the depositor, he might stipulate to lodge the money repayable at shorter intervals than three months, but in each such case, if the period fixed were not less than three weeks, he would subject the deposit to a composition duty at the rate of 1s. per cent for each such period; but in these cases the duty would not be borne by the banker, but would be deducted by him from the accrued interest, and so accounted for to the Commissioners of Stamps and Taxes. If the deposits were made repayable at periods less than three weeks, he would render them liable to a duty of 6d. per cent in respect to each such shorter period—to be charged, collected, and accounted for as in the previous case. If the deposit were made repayable after a certain number of months, weeks, or days' notice had expired, and not at a fixed time, the number of such months, weeks, or days would be treated as a period, and the deposit would be liable to a duty of 6d. or 1s. per cent—as the case might be—for each such period of months, weeks, or days as it remained with the banker—to be charged, collected, and accounted for—as in the two last-mentioned cases. There were some other details and some purely technical matters which would have to be considered; but he would not dwell upon them now. He estimated that more than two-thirds of the deposits in the banks of the United Kingdom would, from mere motives of economy, fall into the three-monthly routine of common deposits. He needed not to dilate on the advantages which would accrue. He had explained, as well as he could in brief terms, the nature of the present dangers and disadvantages, all of which would almost wholly disappear. The trading and financial communities had all felt the hardships and the grievances incidental to the present system; they would be among the first to realize and appreciate the advantage of the organization of credit which he proposed. He spoke from a very intimate acquaintance with the subject; he had not the slightest shadow of personal interest in the matter. Now, as for the depositors, the great majority of them would, he had no doubt, be pleased as well as benefited. They were, for the most part, men who had genuine confidence in their banker, but who were sometimes induced to join in a run after this fashion—A B feared what might be the effect if C D and E F, and all the rest of them, drew out their money before he did so himself. All those quiet people—and they were the great majority—would have the ineffable satisfaction of knowing that the bank in which their monies were lodged could not be imperilled by a simultaneous panic of its depositors. But those who would benefit most of all by the organization of credit were the honest and legitimate traders—whether their trade be manufacture, commerce, or finance—the classes from whom and from whose skill and industry the banker's profits and the depositor's interest were alike derived; for they would no longer be dealing with bankers who had only a fitful and wavering tenure of the funds they dispensed, but with men whose engagements were so marshalled and provided for as to render them reasonably masters of their own actions and policy. He had to thank the House for the patience with which it had listened to him, and to move the Resolution of which he had given Notice.

Motion made, and Question proposed,

"That this House is of opinion that Her Majesty's Government should take into its early consideration whether it would not be for the advantage of the Country that a moderate and graduated stamp or composition Duty should be levied in respect to all interest-bearing deposits with bankers in the United Kingdom, and whether the scale and incidence of such Duty may not be so devised as to encourage the making of such deposits for fixed periods and renewable periods, as for instance from three months to three months, in preference to the system which has grown up and now prevails, whereby the greater number and amount of the interest-bearing deposits in the United Kingdom are held subject to recall at a few days' notice."—(Sir Joseph M'Kenna.)

:said, that the recommendation made by the hon. Gentleman was one purely for the consideration of the Chancellor of the Exchequer. The hon. Member had proposed to tax all deposits left with the bankers; but he had not shown that people would continue to deposit as much with the bankers as they did at present. The public left money on deposit with the bankers for two reasons—either for safe custody, or because they got better interest than elsewhere. If, however, notwithstanding a tax on deposits, an equal amount were left with the bankers no one would be so glad as the Chancellor of the Exchequer. A very small tax on these very large deposits would give the Chancellor of the Exchequer more than he wanted, and would enable him to take a penny off the Income Tax. For himself, however, he could not understand how a tax on the profits of the bankers was not to affect the amount of the deposits left with them; and he trusted that some other hon. Gentleman would follow who would remove the doubts he felt as to the practicability of the proposal.

said, he had hoped that the House might have been favoured with some discussion on the part of hon. Members who were practically acquainted with the system of banking in this metropolis, as he hardly felt able to deal adequately with the subject. Undoubtedly the evil at which the hon. Gentleman directed his Resolution was one of the greatest magnitude, and if the House saw its way to putting an end to the panics that occurred at intervals and caused so much injury it would be very desirable to take some action in the matter; and if, moreover, the remedy took the form of putting a considerable sum into the Exchequer, that would be an additional inducement to the Chancellor of the Exchequer to look favourably upon such a scheme. Undoubtedly, however, the suggestion of the hon. Member could not be adopted by the Government without considerable hesitation, and without fuller and more ample discussion than it was likely to receive on the present occasion. It had frequently happened, when pressure and alarm were felt in the Money Market, that the depositors in banks withdrew their funds. The bankers, in turn, finding a certain pressure upon them, and fearing that it might increase, began to realize their securities and call in their money from the Bank of England and other firms, so as to be in a position to meet the demands of those who had deposited money with them. The mischief, therefore, went on growing, and the apprehension of panic itself produced panic. It was most desirable to allay that apprehension; but he could not see that the remedy proposed by the hon. Member would have the effect he contemplated, or that if it succeeded to a slight extent it would counterbalance the inconvenience that would follow its adoption. The House must look at the root of the matter, which was that a large proportion of the business of the country was carried on upon credit. It must have a certain basis, and when credit was shaken, if the loan able capital available were too small, it caused a rush for that capital, and when it was found to be insufficient the panic went on spreading, and the fall of one house caused the fall of others. The real remedy was for those who were concerned with monetary affairs to be on their guard, to be wise in time, and to avoid putting too great a pressure upon the loan able capital when there was a danger of scarcity. It was, therefore, desirable that the public should be supplied with all the information possible as to the amount of capital obtainable, and hence the value of the publication of the Bank of England Returns, &c. The hon. Member proposed, however, that the State should step in and should endeavour to prevent these panics by discouraging the depositing of money with the bankers by means of placing a tax upon those deposits. But was that the way to increase the quantity of loanable capital? He could not see that the hon. Member had made out so clear a case as to justify the House in interfering with the natural operations of trade. The question would arise—"What is a Banker?" Another question would be as to the nature of the inspection of the bankers' accounts on the part of the Government, so that they might get the proper amount of tax in the way of stamp duty or otherwise. It would be necessary also to know what amount of interference with the business of the banker would be requisite. The real difficulty was the competition between the bankers for the unemployed capital of the country, and the question was whether that could be stopped by diminishing the profits of the bankers by the plan of giving the State a proportion of those profits. The hon. Gentleman must, he thought, be conscious of the difficulty and complicated character of a proposal involving so many considerations, and he must feel that it would be premature to ask the House to pronounce an opinion upon it at the present moment. He shrank very much from encouraging the hope that the action of the State was what was required to prevent these panics in the Money Market. He thought it was a dangerous thing for them to encourage the hope that they could put a stop to the mischief or prevent the recurrence of the panics by anything they could do on the part of the State. He did not say it was absolutely impossible that State interference might not be desirable and useful in such matters; but he did say that it would be mischievous to lead the Money Market and business people generally to believe that the Government had devised a penacea that would guard against these panics. The effect would be that the lessons of the past, which it might be hoped had taught a good deal of caution, would be in danger of being neutralized by the idea that some security had been provided, and people who were naturally anxious to make the most of their money would allow little restraint to be imposed by the fear of what might happen from any reckless proceedings. Indeed, they might be encouraged in reckless proceedings by thinking that Parliament had devised a plan that was to be a safeguard against them. Therefore, he was not at all prompt to welcome, or at all events accept proposals of this character. At the same time, it would not be courteous if, after so brief an examination of the subject, they endeavoured to pass any summary verdict against the proposal; and therefore he would suggest to the hon. Gentleman that it would be preferable, having brought his statement forward and drawn public attention to the subject in a way which would probably lead to discussion, to withdraw the Motion and not compel the House to come to a decision upon it.

said, he had great pleasure in falling in with the view of the Chancellor of the Exchequer. He committed the problem, with the solution he had suggested, to the consideration of the public. If it did not find favour with the bankers, it was not likely it would find much favour with himself; because he deferred very much to their judgment in a matter which affected their own interest and that of their customers and clients. He had, however, little doubt of the reception his proposal would meet when its nature became generally understood.

Motion, by leave, withdrawn.