course proportionate to the increase of rate of interest.  We found that the Bank had the power to lend money on deposit of goods.  As our issue of Exchequer Bills would have been useless unless the Bank cashed them, as therefore the intervention of the Bank was in any event absolutely necessary, and as its intervention would be chiefly useful by the effect which it would have in increasing the circulating medium, we advised the Bank to take the whole affair into their own hands at once, to issue their notes on the security of goods, instead of issuing them on Exchequer Bills, such bills being themselves issued on that security.

’They reluctantly consented, and rescued us from a very embarrassing predicament.’

The success of the Bank of England on this occasion was owing to its complete adoption of right principles.  The Bank adopted these principles very late; but when it adopted them it adopted them completely.  According to the official statement which I quoted before, ‘we,’ that is, the Bank directors, ’lent money by every possible means, and in modes which we had never adopted before; we took in stock on security, we purchased Exchequer Bills, we made advances on Exchequer Bills, we not only discounted outright, but we made advances on deposits of bills of Exchange to an immense amountin short, by every possible means consistent with the safety of the Bank.’  And for the complete and courageous adoption of this policy at the last moment the directors of the Bank of England at that time deserve great praise, for the subject was then less understood even than it is now; but the directors of the Bank deserve also severe censure, for previously choosing a contrary policy; for being reluctant to adopt the new one; and for at last adopting it only at the request of, and upon a joint responsibility with, the Executive Government.

After 1825, there was not again a real panic in the money market till 1847.  Both of the crises of 1837 and 1839 were severe, but neither terminated in a panic:  both were arrested before the alarm reached its final intensity; in neither, therefore, could the policy of the Bank at the last stage of fear be tested.

In the three panics since 1844—­in 1847, 1857, and 1866—­the policy of the Bank has been more or less affected by the Act of 1844, and I cannot therefore discuss it fully within the limits which I have pre scribed for myself.  I can only state two things:  First, that the directors of the Bank above all things maintain, that they have not been in the earlier stage of pamc prevented by the Act of 1844 from making any advances which they would otherwise have then made.  Secondly, that in the last stage of panic, the Act of 1844 has been already suspended, rightly or wrongly, on these occasions; that no similar occasion has ever yet occurred in which it has not been suspended; and that, rightly or wrongly, the world confidently expects and relies that in all similar cases it will be suspended again.