Now too that we comprehend the inevitable vicissitudes of Lombard Street, we can also thoroughly comprehend the cardinal importance of always retaining a great banking reserve.  Whether the times of adversity are well met or ill met depends far more on this than on any other single circumstance.  If the reserve be large, its magnitude sustains credit; and if it be small, its diminution stimulates the gravest apprehensions.  And the better we comprehend the importance of the banking reserve, the higher we shall estimate the responsibility of those who keep it.

CHAPTER VII.

A More Exact Account of the Mode in Which the Bank of England Has Discharged Its Duty of Retaining a Good Bank Reserve, and of Administering It Effectually.

The preceding chapters have in some degree enabled us to appreciate the importance of the duties which the Bank of England is bound to discharge as to its banking reserve.

If we ask how the Bank of England has discharged this great responsibility, we shall be struck by three things:  first, as has been said before, the Bank has never by any corporate act or authorised utterance acknowledged the duty, and some of its directors deny it; second (what is even more remarkable), no resolution of Parliament, no report of any Committee of Parliament (as far as I know), no remembered speech of a responsible statesman, has assigned or enforced that duty on the Bank; third (what is more remarkable still), the distinct teaching of our highest authorities has often been that no public duty of any kind is imposed on the Banking Department of the Bank; that, for banking purposes, it is only a joint stock bank like any other bank; that its managers should look only to the interest of the proprietors and their dividend; that they are to manage as the London and Westminster Bank or the Union Bank manages.

At first, it seems exceedingly strange that so important a responsibility should be unimposed, unacknowledged, and denied; but the explanation is this.  We are living amid the vestiges of old controversies, and we speak their language, though we are dealing with different thoughts and different facts.  For more than fifty yearsfrom 1793 down to 1844, there was a keen controversy as to the public duties of the Bank.  It was said to be the ‘manager’ of the paper currency, and on that account many expected much good from it; others said it did great harm; others again that it could do neither good nor harm.  But for the whole period there was an incessant and fierce discussion.  That discussion was terminated by the Act of 1844.  By that Act the currency manages itself; the entire working is automatic.  The Bank of England plainly does not manage—­cannot even be said to manage—­the currency any more.  And naturally, but rashly, the only reason upon which a public responsibility used to be assigned to the Bank having now clearly come to an end, it was