The Great Panic

THE general election of 1847 did not materially alter the position of parties in the House of Commons.  The high prices of agricultural produce which then prevailed naturally rendered the agricultural interest apathetic, and although the rural constituencies, from a feeling of esteem, again returned those members who had been faithful to the protective principle, the farmers did not exert themselves to increase the number of their supporters.  The necessity of doing so was earnestly impressed upon them by Lord George Bentinck, who warned them then that the pinching hour was inevitable; but the caution was disregarded, and many of those individuals who are now the loudest in their imprecations on the memory of Sir Robert Peel, and who are the least content with the temperate course which is now recommended to them by those who have the extremely difficult office of upholding their interests in the House of Commons, entirely kept aloof, or would smile when they were asked for their support with sarcastic self-complacency, saying, ’Well, Sir, do you think after all that free trade has done us so much harm?’ Perhaps they think now, that if they had taken the advice of Lord George Bentinck and exerted themselves to return a majority to the House of Commons, it would have profited them more than useless exécrations and barren discontent.  But it is observable, that no individuals now grumble so much as the farmers who voted for free trader in 1847, unless indeed it be the shipowners, every one of whom for years, both in and out of Parliament, supported the repeal of the corn laws.

The Protectionists maintained their numbers, though they did not increase them, in the new Parliament.  Lord George Bentinck however gained an invaluable coadjutor by the re-appearance of Mr. Herries in public life, a gentleman whose official as well as parliamentary experience, fine judgment, and fertile resource, have been of inestimable service to the Protectionist party.  The political connection which gained most were the Whigs; they were much more numerous and compact, but it was in a great measure at the expense of the general liberal element, and partly at the cost of the following of Sir Robert Peel.  The triumphant Conservative majority of 1841 had disappeared; but the government, with all shades of supporters, had not an absolute majority.

Had the general election been postponed until the autumn, the results might have been very different.  That storm ­which had been long gathering in the commercial atmosphere ­then burst like a typhoon.  The annals of our trade afford no parallel for the widespread disaster and the terrible calamities.  In the month of September, fifteen of the most considerable houses in the city of London stopped payment for between five and six millions sterling.  The governor of the Bank of England was himself a partner in one of these firms; a gentleman who had lately filled that office, was another victim; two other Bank directors were included in the list.  The failures were not limited to the metropolis, but were accompanied by others of great extent in the provinces.  At Manchester, Liverpool, and Glasgow large firms were obliged to suspend payments.  This shock of credit arrested all the usual accommodation, and the pressure in the money-market, so terrible in the spring, was revived.  The excitement and the alarm in the city of London were so great that when the Chancellor of the Exchequer hurried up to town on the 1st of October, he found that the interest of money was at the rate of 60 per cent. per annum.  The Bank Charter produced the same injurious effect as it had done in April; it aggravated the evil by forcing men to hoard.  In vain the commercial world deplored the refusal of the government to comply with the suggestion made by Lord George Bentinck and Mr. Thomas Baring in the spring; in vain they entreated them at least now to adopt it, and to authorize the Bank of England to enlarge the amount of their discounts and advances on approved security, without reference to the stringent clause of the charter.  The government, acting, it is believed, with the encouragement and sanction of Sir Robert Peel, were obstinate, and three weeks then occurred during which the commercial credit of this country was threatened with total destruction.  Nine more considerable mercantile houses stopped payment in the metropolis, the disasters in the provinces were still more extensive.  The Royal Bank of Liverpool failed; among several principal establishments in that town, one alone stopped payment for upwards of a million sterling.  The havoc at Manchester was also great.  The Newcastle bank and the North and South Wales bank stopped.  Consols fell to 79 1/4, and exchequer bills were at last at 35 per cent, discount.  The ordinary rate of discount at the Bank of England was between 8 and 9 per cent., but out of doors accommodation was not to be obtained.  In such a state of affairs, the small houses of course gave way.  From their rising in the morning until their hour of retirement at night, the First Lord of the Treasury and the Chancellor of the Exchequer were employed in seeing persons of all descriptions, who entreated them to interfere and preserve the community from universal bankruptcy.  ’Perish the world, sooner than violate a principle,’ was the philosophical exclamation of her Majesty’s ministers, sustained by the sympathy and the sanction of Sir Robert Peel.  At last, the governor and the deputy-governor of the Bank of England waited on Downing Street, and said it could go on no more.  The Scotch banks had applied to them for assistance.  The whole demand for discount was thrown upon the Bank of England.  Two bill-brokers had stopped; two others were paralyzed.  The Bank of England could discount no longer.  Thanks to the Bank Charter, they were safe and their treasury full of bullion, but it appeared that everybody else must fall, for in four-and-twenty hours the machinery of credit would be entirely stopped.  The position was frightful, and the government gave way.  They did that on the 25th of October, after houses had fallen to the amount of fifteen millions sterling, which they had been counselled to do by Lord George Bentinck on the 25th of April.  It turned out exactly as Mr. Thomas Baring had foretold.  It was not want of capital or deficiency of circulation which had occasioned these awful consequences.  It was sheer panic, occasioned by an unwisely stringent law.  No sooner had the government freed the Bank of England from that stringency, than the panic ceased.  The very morning the letter of license from the government to the Bank of England appeared, thousands and tens of thousands of pounds sterling were taken from the hoards, some from boxes deposited with bankers, although the depositors would not leave the notes in their bankers’ hands.  Large parcels of notes were returned to the Bank of England cut into halves, as they had been sent down into the country, and so small was the real demand for an additional quantity of currency, that the whole amount taken from the Bank, when the unlimited power of issue was given, was under L400,000, and the Bank consequently never availed itself of the privilege which the government had accorded it.  The restoration of confidence produced an ample currency, and that confidence had solely been withdrawn from the apprehension of the stringent clauses of the Bank Charter Act of 1844.

These extraordinary events had not occurred unnoticed by Lord George Bentinck.  The two subjects that mostly engaged his attention after the general election were the action of the Bank Charter and the state of our sugar colonies.  Perhaps it would be best to give some extracts from his correspondence at this period.  He was a good letter-writer, easy and clear.  His characteristic love of details also rendered this style of communication interesting.  It is not possible to give more than extracts, and it is necessary to omit all those circumstances which generally in letter-reading are most acceptable.  His comments on men and things were naturally free and full, and he always endeavoured, for the amusement of his correspondents, to communicate the social gossip of the hour.  But although all this must necessarily be omitted, his letters may afford some illustrations of his earnestness and energy, the constancy of his aim, and the untiring vigilance with which he pursued his object ­especially those which are addressed to gentlemen engaged in commercial pursuits who cooperated with him in his investigations.

TO A FRIEND.

Harcourt House, August 30, 1847.

An answer is come out to my address to my constituents at King’s Lynn, and to my speech in answer to Peel’s manifesto.  Pray read it.  At first I thought I could swear to its being , I now think I can swear to its being ; the servility to Peel, and the official red-tape style would equally do for either; but the no-popery page, I think, fixes it on .

I think it wretchedly weak, and have written some notes on the margin, showing up the principal points.  The nine months’ famine of 1846-47, as contrasted with Peel’s famine, shows a difference of between L6,000,000 and L7,000,000; that is to say, on the balance in the nine months 1845-46, Ireland exported about three millions’ worth of breadstuffs, and not a soul died of famine.  In the nine months 1846-47, she imported three millions’ sterling worth of bread-stuffs, which insufficed to prevent one million ­or say half a million ­of the people from dying of starvation.

At present I have seen no notice of the pamphlet in any of the newspapers:  if it is either ’s, or ’s, or ’s we shall see it reviewed in ‘Times,’ ‘Chronicle,’ and ‘Spectator.’

The Bank of England has raised the interest on ’s mortgage one-third per cent., making an additional annual charge of L1,500 a year to him.  I am very sorry for him, but I know nothing so likely to rouse the landed aristocracy from their apathy, and to weaken their idolatry of Peel so much as this warning note of the joint operation of his free trade and restrictive currency laws.

TO A FRIEND.

Harcourt House, September 2, 1847.

I think it is .  The trickster, I observe, has carefully reduced the pounds of cotton to cwts., in the hopes of concealing a great fraud to which he has condescended; taking, in the Whig year of 1841, the home consumption of cotton, whilst in Peel’s year he gives entire importation as the home consumption, representing both as home consumption.

In Peel’s year, 1846, officially we have only the gross importation; but in the Whig year, 1841, the entire importation and the home consumption are given separately:  the importation exceeding the home consumption by fifty million pounds.  Burn’s ‘Glance,’ however, gives the importation and home consumption for both years; unfortunately, however, not in lbs. or cwts., but in bags. ’s fraud, however, is not the less apparent.

He selects a Whig year when the home consumption was 220,-000 bags under the importation, and a year for Peel when the importation exceeded the home consumption by 280,000 bags, and claps down the figures as alike describing the home consumption.

None of the Peel papers have taken up the subject:  if they should, the ‘Morning Post’ will answer the pamphlet; but I should like to have mine back again, in order that I may furnish them with the notes.

was with me this morning, and called my attention to the circumstance that the author starts with ‘We,’ but drops into the singular number; fancies it is Peel himself, but the page on endowment fixes it on .

Lord L means, I presume, that Peel’s savage hatred is applied to the Protectionist portion of his old party, not of course to the janissaries and renegade portion.

The following letter was in reply to one of a friend who had sent him information, several days before they occurred, of the great failures that were about to happen in the city of London.  The list was unfortunately quite accurate, with the exception indeed of the particular house respecting which Lord George quotes the opinion of Baron Rothschild.

TO A FRIEND.

Welbeck, September 17, 1847.

A thousand thanks for your letter, the intelligence in which created a great sensation at Doncaster.

As yet none of the houses appear to have failed except S .  Baron Rothschild was at Doncaster.  I talked with him on the subject; he seemed not to doubt the probable failure of any of the houses you named, except .  He declared very emphatically ’that house was as sound as any house in London.’

Lord Fitzwilliam declares ’it is no free trade without free trade in money.’

Lord Clanricarde is here ­laughs at the idea of Parliament meeting in October; but talks much of the difficulties of Ireland ­says he does not see how the rates are to be paid.

Messrs. Drummond are calling in their mortgages.  I expect to hear that this practice will be general; money dear, corn cheap, incumbrances enhanced, and rents depressed.  What will become of the apathetic country gentlemen?  I judge from ’s language, that Lord John Russell will stand or fall by the Bank Charter Act-but that he feels very apprehensive of being unable to maintain it.

I agree with Bonham, in thinking that the Protectionist party is smashed for the present Parliament; but I must say I think Protectionist principles and policy are likely to come into repute again far sooner than was expected; and though Peel’s party be a compact body, and formidable in the House of Commons, I cannot think that there appears that in the working of his measures to make it likely that he should be soon again carried into power on the shoulders of the people.  I think his political reputation must ebb further before it can rise again, if it should ever rise again. thought him ’broken and in low spirits,’ when he met him at Longshaw; but Lord , who was there at the same time, came away more Peelite than ever, and told them at Bretby that Sir Robert said, ’That he was quite surprised at the number of letters he got every day from members returned to Parliament, saying they meant to vote with him.’

You may rely upon it the Peelites are very sanguine that they will be in power again almost directly.  We must keep them out.

TO MR. BURN, EDITOR OF THE ‘COMMERCIAL GLANCE.’

Welbeck, September 38, 1847.  To the many courtesies you have already bestowed upon me, I will sincerely thank you to add that of informing me what have been the estimated cotton crops in the United States in each of the last four years.  I would also thank you to inform me the comparative importation, home consumption, re-exportation, and stocks on hand of cotton of the first seven months of the current and three preceding years.

TO MR. BURN.

Welbeck, October 4, 1847.

Your statistics have reached me in the very nick of time, and are invaluable.  I care nothing about ‘outsides,’ it is ‘insides’ I look to; give me a good ‘heart,’ and I don’t care how rough the ‘bark’ is.

Anything so good I fear to spoil by suggesting the most trivial addition, else I should say it would be an interesting feature to classify the exports of cotton goods, etc., etc., under three heads: ­

1st.  To the British colonies and British possessions abroad.

2nd.  To the northern states of Europe, France, Spain, Germany, Italy, etc., etc., the United States of America, and other countries having high tariffs.

3rd.  To China, Turkey, Africa, and the Southern States of America, and countries with low tariffs.

I fear these failures of East and West India houses must entail great distress upon Manchester, and the manufacturing interests generally.  You have given an account of the bankruptcies in the cotton trade during a long series of years till last year inclusive; are you able to say how the first nine months of the current year stands in comparison with its predecessors?

I so highly prize your new work, that I must ask for a dozen copies to distribute among my friends.

P. S. I have already parted with the copy you sent me; may I, therefore, beg another without waiting for any other binding?

TO A FRIEND.

Welbeck, October 5, 1847.

I shall go up to town on Friday evening, in my way to Newmarket, and shall be at Harcourt House all Saturday and Sunday, and shall be delighted to see you, and have a thorough good talk with you.  Free trade seems working mischief faster than the most fearful of us predicted, and Manchester houses, as I am told, ‘failing in rows,’ ashamed to do penance in public, are secretly weeping in sackcloth and ashes, and heartily praying that Peel and Cobden had been hanged before they were allowed to ruin the country.

Money at Manchester is quoted one and a quarter per cent, for ten days:  L45 12d. per cent. per annum!

TO A FRIEND.

Harcourt House, October 22, 1847.  I have this moment got a note from Stuart, telling me that ’the Chancellor has this afternoon sent out his notice of the business to be taken in his own court during Michaelmas term, that is, from the 2nd of November till the 26th, and below it there is this notice ­except those days on which the Lord Chancellor may sit in the House of Lords!!!’

Surely this must portend a November session.

TO A FRIEND.

Harcourt House, October 23, 1847.  The fat banker’s gossip is all stuff.  Peel goes to Windsor today, I believe on an invitation of some standing. who had been dining at Palmerston’s last night, tells me that he does not think that ministers mean calling Parliament together, and is confident they mean to maintain the Bank Charter Act.  There have been some first-rate articles and letters in the ‘Morning Chronicle’ lately on this subject.

TO A FRIEND.

Harcourt House, November 6, 1847.

I will stay over Tuesday, that I may have the pleasure of a thorough talk with you.

I am told things are gradually getting better.  I expect, however, a fresh reverse about six weeks or two months hence, when the returned lists of the stoppages in the East and West Indies, consequent upon the late failures here, come home.  The Western Bank of Scotland is whispered about.  If that were to fail, it might bring the canny Scots to their senses; but they are a headstrong race.

A committee on commercial distress having been appointed, the principal reason for the summoning of the new Parliament in the autumn had been satisfied, and an adjournment until a month after Christmas was in prospect.  Before, however, this took place, a new and interesting question arose, which led to considerable discussion, and which ultimately influenced in no immaterial manner the parliamentary position of Lord George Bentinck.

The city of London at the general election had sent to the House of Commons, as a colleague of the first minister, a member who found a difficulty in taking one of the oaths appointed by the House to be sworn preliminarily to any member exercising his right of voting.  The difficulty arose from this member being not only of the Jewish race, but unfortunately believing only in the first part of the Jewish religion.