The sale of stock, too, by the Bank of England in the middle of a panic is impossible.  The bank at such a time is the only lender on stock, and it is only by loans from a bank that large purchases, at such a moment, can be made.  Unless the Bank of England lend, no stock will be bought.  There is not in the country any large sum of unused ready money ready to buy it.  The only unused sum is the reserve in the Banking Department of the Bank of England:  if, therefore, in a panic that Department itself attempt to sell stock, the failure would be ridiculous.  It would hardly be able to sell any at all.  Probably it would not sell fifty pounds’ worth.  The idea that the Bank can, during a panic, replenish its reserve in this or in any other manner when that reserve has once been allowed to become empty, or nearly empty, is too absurd to be steadily maintained, though I fear that it is not yet wholly abandoned.

The second and more reasonable conception of the independence of the Bank of England is, however, this:  It may be said, and it is said, that if the Bank of England stop at the beginning of a panic, if it refuse to advance a shilling more than usual, if it begin the battle with a good banking reserve, and do not diminish it by extra loans, the Bank of England is sure to be safe.  But this form of the opinion, though more reasonable and moderate, is not, therefore, more true.  The panic of 1866 is the best instance to test it.  As everyone knows, that panic began quite suddenly, on the fall of ‘Overends.’  Just before, the Bank had 5,812,000 L. in its reserve; in fact, it advanced 13,000,000 L. of new money in the next few days, and its reserve went down to nothing, and the Government had to help.  But if the Bank had not made these advances, could it have kept its reserve?

Certainly it could not.  It could not have retained its own deposits.  A large part of these are the deposits of bankers, and they would not consent to help the Bank of England in a policy of isolation.  They would not agree to suspend payments themselves, and permit the Bank of England to survive, and get all their business.  They would withdraw their deposits from the Bank; they would not assist it to stand erect amid their ruin.  But even if this were not so, even if the banks were willing to keep their deposits at the Bank while it was not lending, they would soon find that they could not do it.  They are only able to keep those deposits at the Bank by the aid of the Clearing-house system, and if a panic were to pass a certain height, that system, which rests on confidence, would be destroyed by terror.