Secondly.  Mr. Hankey should have shown ’some other store of unused cash’ except the reserve in the Banking Department of the Bank of England out of which advances in time of panic could be made.  These advances are necessary, and must be made by someone.  The ‘reserves’ of London bankers are not such store; they are used cash, not unused; they are part of the Bank deposits, and lent as such.

Thirdly.  Mr. Hankey should have observed that we know by the published figures that the joint stock banks of London do not keep one-third, or anything like one-third, of their liabilities in ‘cash’ even meaning by ‘cash’ a deposit at the Bank of England.  One-third of the deposits in joint stock banks, not to speak of the private banks, would be 30,000,000 L.; and the private deposits of the Bank of England are 18,000,000 L. According to his own statement, there is a conspicuous contrast.  The joint stock banks, and the private banks, no doubt, too, keep one sort of reserve, and the Bank of England a different kind of reserve altogether.  Mr. Hankey says that the two ought to be managed on the same principle; but if so, he should have said whether he would assimilate the practice of the Bank of England to that of the other banks, or that of the other banks to the practice of the Bank of England.

Fourthly.  Mr. Hankey should have observed that, as has been explained, in most panics, the principal use of a ‘banking reserve’ is not to advance to bankers; the largest amount is almost always advanced to the mercantile public and to bill-brokers.  But the point is, that by our system all extra pressure is thrown upon the Bank of England.  In the worst part of the crisis of 1866, 50,000 L. ’fresh money’ could not be borrowed, even on the best securityeven on Consols except at the Bank of England.  There was no other lender to new borrowers.

But my object now is not to revive a past controversy, but to show in what an unsatisfactory and uncertain condition that controversy has left a most important subject.  Mr. Hankey’s is the last explanation we have had of the policy of the Bank.  He is a very experienced and attentive director, and I think expresses, more or less, the opinions of other directors.  And what do we find?  Setting aside and saying nothing about the remarkable speech of the Governor in 1866, which at least (according to the interpretation of the ‘Economist’) was clear and excellent, Mr. Hankey leaves us in doubt altogether as to what will be the policy of the Bank of England in the next panic, and as to what amount of aid the public may then expect from it.  His words are too vague.  No one can tell what a ‘fair share’ means; still less can we tell what other people at some future time will say it means.  Theory suggests, and experience proves, that in a panic the holders of the ultimate Bank reserve (whether one bank or many) should lend to all that bring good securities quickly, freely, and readily.  By that policy they allay a panic; by every other policy they intensify it.  The public have a right to know whether the Bank of Englandthe holders of our ultimate bank reserveacknowledge this duty, and are ready to perform it.  But this is now very uncertain.