There is even a simpler case:  the banker who is uncertain of his credit, and wants to increase his cash, may have money on deposit at the bill brokers.  If he wants to replenish his reserve, he may ask for it, suppose, just when the alarm is beginning.  But if a great number of persons do this very suddenly, the bill brokers will not at once be able to pay without borrowing.  They have excellent bills in their case, but these will not be due for some days; and the demand from the more or less alarmed bankers is for payment at once and to-day.  Accordingly the bill broker takes refuge at the Bank of England the only place where at such a moment new money is to be had.

The case is just the same if the banker wants to sell Consols, or to call in money lent on Consols.  These he reckons as part of his reserve.  And in ordinary times nothing can be better.  According to the saying, you ‘can sell Consols on a Sunday.’  In a time of no alarm, or in any alarm affecting that particular banker only, he can rely on such reserve without misgiving.  But not so in a general panic.  Then, if he wants to sell 500,000 L. worth of Consols, he will not find 500,000 L. of fresh money ready to come into the market.  All ordinary bankers are wanting to sell, or thinking they may have to sell.  The only resource is the Bank of England.  In a great panic, Consols cannot be sold unless the Bank of England will advance to the buyer, and no buyer can obtain advances on Consols at such a time unless the Bank of England will lend to him.

The case is worse if the alarm is not confined to the great towns, but is diffused through the country.  As a rule, country bankers only keep so much barren cash as is necessary for their common business.  All the rest they leave at the bill brokers, or at the interest-giving banks, or invest in Consols and such securities.  But in a panic they come to London and want this money.  And it is only from the Bank of England that they can get it, for all the rest of London want their money for themselves.

If we remember that the liabilities of Lombard Street payable on demand are far larger than those of any like market, and that the liabilities of the country are greater still, we can conceive the magnitude of the pressure on the Bank of England when both Lombard Street and the country suddenly and at once come upon it for aid.  No other bank was ever exposed to a demand so formidable, for none ever before kept the banking reserve for such a nation as the English.  The mode in which the Bank of England meets this great responsibility is very curious.  It unquestionably does make enormous advances in every panic

In 1847 the loans on ‘private securities’ increased from 18,963,000 L to 20,409,000 L 1857 ditto ditto 20,404,000 L to 31,350,000 L 1866 ditto ditto 18,507,000 L to 33,447,000 L