This article was much disliked by many of the Bank directors, and especially by some whose opinion is of great authority.  They thought that the ‘Economist’ drew ‘rash deductions’ from a speech which was in itself ’open to some objection’which was, like all such speeches, defective in theoretical precision, and which was at best only the expression of an opinion by the Governor of that day, which had not been authorised by the Court of Directors, which could not bind the Bank.  However the article had at least this use, that it brought out the facts.  All the directors would have felt a difficulty in commenting upon, or limiting, or in differing from, a speech of a Governor from the chair.  But there was no difficulty or delicacy in attacking the ‘Economist.’  Accordingly Mr. Hankey, one of the most experienced bank directors, not long after, took occasion to observe:  ’The “Economist” newspaper has put forth what in my opinion is the most mischievous doctrine ever broached in the monetary or banking world in this country; viz, that it is the proper function of the Bank of England to keep money available at all times to supply the demands of bankers who have rendered their own assets unavailable.  Until such a doctrine is repudiated by the banking interest, the difficulty of pursuing any sound principle of banking in London will be always very great.  But I do not believe that such a doctrine as that bankers are justified in relying on the Bank of England to assist them in time of need is generally held by the bankers in London.

’I consider it to be the undoubted duty of the Bank of England to hold its banking deposits (reserving generally about one-third in cash) in the most available securities; and in the event of a sudden pressure in the money market, by whatever circumstance it may be caused, to bear its full share of a drain on its resources.  I am ready to admit, however, that a general opinion has long prevailed that the Bank of England ought to be prepared to do much more than this, though I confess my surprise at finding an advocate for such an opinion in the “Economist.”  If it were practicable for the Bank to retain money unemployed to meet such an emergency, it would be a very unwise thing to do so.  But I contend that it is quite impracticable, and if it were possible, it would be most inexpedient; and I can only express my regret that the Bank, from a desire to do everything in its power to afford general assistance in times of banking or commercial distress, should ever have acted in a way to encourage such an opinion.  The more the conduct of the affairs of the Bank is made to assimilate to the conduct of every other well-managed bank in the United Kingdom, the better for the Bank, and the better for the community at large.’

I am scarcely a judge, but I do not think Mr. Hankey replies to the ‘Economist’ very conclusively.

First.  He should have observed that the question is not as to what ‘ought to be,’ but as to what is.  The ‘Economist’ did not say that the system of a single bank reserve was a good system, but that it was the system which existed, and which must be worked, as you could not change it.