BANK RESUMPTION AT THE NORTH PREVENTED BY THE PANIC IN ENGLAND - EFFECT OF BANK SUSPENSION
Private advices from New York and other Northern cities do no concur with the hopeful representation of the press respecting an actual relief of the money pressure, and the revival of business. The truth is, that though the worst has come, the worst has not passed. There are to be more failures, and further developments of the extent of the financial disasters that have occurred during the revulsion.
Further intelligence from England must be awaited before the effect which the pressure there will have upon our concern will be ascertained. It is hardly yet to be seen what will be the effect in England of the suspension of the act limiting the bank not issues. The measure was designed to relieve the mercantile pressure, and at the same time save the Bank from the menaced necessity of suspending specie payments. This measure was preceded by a most intense and general panic, and a general protraction of business, and rupture of credit and confidence. Relief was afforded, however, by the authority given by the Treasury to the Bank of England to increase its issue of bank notes, without regard to the specie reserve. The relief afforded by this measure is similar in kind to that afforded in this country by a suspension here. The issue of notes by the Bank has been limited to sixteen millions of pounds sterling on the faith of the Government, and beyond this sum no issue could be made, except upon a corresponding amount of specie on hand. The Bank now is authorized to overstep this point, and issue paper at will, upon good security.
The panic will be to some extent relieved by this paper issue, which will be good, because it is a legal tender.
The Bank might exercise this privilege in such a manner as greatly to inflate the currency, and render a suspension of their payments inevitable when these issues are thrown back upon them. Besides this, when Parliament meets, they will have to face the opposition of the bullionists.
The pressure in England has thrown the specie current against it, and it is likely to go out faster and in greater quantity than it came in. The proposition for resumption of specie payments by our banks in the Northern cities and States will be embarrassed by this means. Our banks most, therefore, outline a course of contraction to a very severe extent, especially if the State Legislatures shall refuse to legalize their suspension.
Will not many of the banks, if their suspension be tolerated, be tempted greatly to enlarge their circulation to such an extent that their paper will depreciate and a return to specie payments be indefinitely protracted or rendered impossible? In this case, such banks must ultimately be compelled to go into liquidation, under circumstances that will be exceedingly oppressive to their debtors. In fine, it is too early to congratulate the country upon any permanent restoration of confidence and activity. On the contrary, it becomes the duty of the State and Federal Governments to look into the cause of the calamity which has befallen the country, and protect against its recurrence, as far as possible, through a return to a sound currency