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Relation oj the Bank to the State. 125

'ment. It is, however, most important that those who 'are responsible for the management of the affairs of 'a great country like this—seeing how easy it is, by 'unwise legislation, to create panic or introduce con'fusion into the monetary transactions of the country '—it is most important that they should deal con'siderately with private interests; first, because justice 'requires it; and secondly, because there is danger 'that the cause of progressive amendment will be in'jured if you cannot reconcile reform with a due regard 'to the happiness and welfare of individuals.'

It is not the purpose here to explain or criticise the provisions of this celebrated Act from a financial point of view. It is sufficient to notice that the effect of the Act was to render the Bank of England far more a department of the State than it had ever been before. The State, in fact, by this Act assumed the responsibility of securing the convertibility into coin of notes issued by the Bank, and the machinery introduced by the Act was a device, more or less wisely and aptly constructed, for the achievement of this end. Instead of being, as it had been hitherto, a mere private corporation, which in return for loans to the State, and for its services as agent in the management of the National Debt, had certain definite and peculiar privileges conceded to it, the Bank was transformed into a public institution, having supreme control over the issue of notes and the coining of money—the limits, the modes, and the occasions of such issue and coinage being strictly defined by Act of Parliament, and conceived in the interests, not of the shareholders of the Bank, but of the public at large, or rather of the State as an organised whole.

The privileges and responsibilities conferred by the Bank Charter Act on the Bank of England necessarily involved a reconsideration and readjustment of the rights and duties of all the other banks in the country; and the Bank Charter Act itself, and later Acts, contain numerous provisions for reconciling the vested interests of banks existing at the time of the passing of the Bank Charter Act with the new position of the Bank of England, for facilitating the multiplication of banks which should not interfere with the operations of the Bank of England, and for protecting the public against an unlimited diffusion of responsibility without sufficient guarantees, while on the other hand permitting an unlimited increase in the number of partners, under legally prescribed conditions of liability towards the customers of the bank. There is no doubt that much of this, legislation has proceeded in too hap-hazard a way, and has been much perplexed by the incongruous state of things already existing in 1844. The whole subject has been repeatedly brought before Select Committees of the House of Commons, and more systematic legislation than heretofore is likely to characterise the future. What is of chief importance to notice is, that from 1844 the public policy towards banking has been one of well-studied economic principle, and not of pedantic sciolism or of mere deference to existing interests or to the call of a transient emergency.

(2) The principles involved in the recent policy of Parliament in reference to Public Companies are not identical with those involved in the Bank legislation just referred to, though in some points they cover the same field. The older policy of the country in reference to trade associations of all sorts was that of jealousy Public Companies.

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and restriction. Beyond the cumbrous, technical, and confined mechanism of a legal partnership, and the alternative resource of incorporation at the arbitrary will of the Government, no opportunity was afforded for a combination of efforts among a variety of persons, though directed to ends however presumably beneficial. The Act of 1834,1 based upon the Act of 1825, for the first time introduced a more elastic machinery of association than any previously known, though the accordance of it in any given case depended on the will of the Crown. The Act of 1834 enabled the Crown to grant, by letters-patent, 'to any company or body of 'persons associated together for any trading, charitable, 'literary, or other purposes, and to the heirs, executors, 'administrators, and assigns of any such persons, 'although not incorporated by such letters-patent, any 'privilege or privileges which, according to the rules of 'the common law, or in pursuance of the said recited Act, '[that of 1825, enabling the Crown to grant charters of 'incorporation with individual liability] it would be com1 petent to His Majesty, his heirs and successors, to grant 'to any such company or body of persons in and by any 'charter of incorporation.' It was in 1844, when the insufficiencies of the Statute on the one hand, and of the administrative powers possessed by Courts of Law or of Equity on the other, for the purpose of facilitating co-operative trade and industry became apparent, that the Legislature first passed an Act for the registration, incorporation, and regulation of joint-stock Companies. The Joint Stock Companies Act of 1806 carried into effect the principle of limited liability, and not only facilitated the

1 4 and 5 Will. IV. cat). 94. 6 Geo. IV. cap. 91.

formation of corporate Companies by any seven or more persons with or without limited liability, but provided for the interests of the public, so far as notoriety was concerned, and for the interests of shareholders and of creditors. The general policy of Parliament is, however, most strongly marked by the Act of 1862.1 It is entitled * An Act for the Incorporation, Regulation, and 'Winding-up of Trading Companies and other Associa

• tions,' and is briefly cited as 'The Companies Act, '1862.' It repeals almost all the former Acts on the subject, and is a short code in itself. It affords the utmost facility for the constitution of joint-stock Companies, and, by help of the mere formalities of a 'Memorandum of Association' declaring the name, objects, capital, and subscribing members of the proposed Company,—and, in certain cases, of 'Articles of 'Association' in addition, prescribing regulations for the Company,—converts the Company into a corporation with far more adequate provisions for its judicial supervision and administration, as well as for its ' winding

• up,' than any other species of corporation had before possessed. The later Acts have in fact been no more than amendments and amplifications of this leading measure, or have applied it with some special provisions to Companies such as Gas and Public Lighting Companies, Eailway Companies, Submarine Telegraph Companies, and generally those in which the citizens of a town or the public generally have some exceptional concern. Thus the constitutional attitude indicated by this whole class of legislation is that of affording practically unlimited facilities for industrial and commercial com

25 and 26 Vict. cap. 89.

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binations, while interposing (though most inefficiently at present) the arm of the State to protect the general public against imposture, the shareholders against the consequences of involuntary ignorance, and creditors against the fraud or accidents from which their own vigilance can only imperfectly defend them.

(3) Closely akin to the principles of legislation recently assumed in the ca3e of public Companies, are those which have been progressively elaborated for the case of railway construction and management. Soon after the first infection of what is now historically known as the railway mania, and before many of the innumerable projects had actually been brought into working order, Sir Robert Peel's Government interposed, in 1844, and introduced the Railway Act of that year, upon which all the later Parliamentary policy in this respect has been founded. The part of the Act, indeed, which provided that if within a certain fixed time the profits of any railway were found permanently to exceed ten per cent., the Lords of the Treasury might, on guaranteeing for a time ten per cent, profit, reduce fares in the interest of the public, and which secured to Government the option of purchasing, under certain circumstances, and by an Act of Parliament to be obtained for the purpose, railways yet to be constructed, has been rendered abortive, partly through the sanguine expectations of that day not being fulfilled, - and partly through the policy of Government interference with locomotive enterprises being a matter of unsettled controversy. But the real importance of the Act of 1844 was that it expressed or inaugurated the constitutional position, that the poorest and most dependent citizen has a claim not only to have his vested rights of free

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