NOTES AND MEMORANDA 393 Now that the severity of the Baring crisis has passed, there can be no impropriety in discussing the principle of the Bank's action, or in saying that nothing short of some threatened great national calamity wou. ld justify the Bank of England being placed in the position of having nearly one-half of its capital locked up in unsaleable foreign securities. To emphasize the importance of that position into which the Bank of England was brought through the decision to save the house of Ba. ring Brothers from failure to meet its engage- ?nents, we will imagnne the occurrence, even some time after the Baring difficulties were public property, of similar troubles overtaking another large house and an appeal being made to the Bank of England for help. The Bank would have been powerless in fact was powerless, as was proved. This fact alone demonstrates that nothing, as I have said, short of the imminence of some great national calamity could justify such a lock-up of the liquid funds of a great public bank, and I very much doubt if the directors, realizing as they do now what has been their responsibility, would ever place themselves in such a position again. That responsibility, it is tru.e, was in sense shared a . by the other banks and by some of the more ?mportant public financial institutions, but inasmuch as the reserve of the Bank of England was at the same time the collective reserves of the London banks, the sharing of the responsibility by the other London banks as regards any immediate pressure that might arise was more imaginary than real. If the Barings were to be helped at all, I think each bank acting as a guarantor should in turn have liquidated some portion of the firm's acce.pt?nces as if the bills had borne their own name. On that system provm?on must have been made in case of need by the sale to some foreign market, if necessary, of securities, the proceeds of which would have furnished any increase in the gold that might be required. Some people. may remark that that would have been a roundabout way of achmwng the same result; but I repeat that the great central bank, holding the ultimate reserve of the country for immediate pressing needs, ought under no conceivable circumstances to be locked up to the extent of nearly one-half its capital with unsaleable fo.re!gn securities, and I think time and reflection will show that that opinion is a sound one. To reply that there was no alternative is not true. I say advisedly that the Barings could have been prevented from stopping payment without the necessity of the Bank of England placing itself in the position it did. The liability assumed by the Bank of England could have been more spread out without any greater danger of loss to the community than has been incurred. There was the alternative of a limited liability co?npany, which was perfectly feasible if the right people had been called in in time. There is still another point with reference to the policy pursued by the Bank in that matter. If the point be conceded that the leading bank in the country was not justified in lettering itself as it did even under such very grave circumstances, it must be conceded also that, being in that dangerous position, not a moment was to be lost in getting out of it, for I take it that there can be no difference of opinion upon the point that, the moment the Bank was in possession of a fair bid for the residumn securities of the Baring estate, they were bound to take it. Offers were made to them even before the last of the acceptances had run off, but nothing was done; perhaps there are reasons why nothing in this direction could be done. If so, we should all like to know what they were. l?leanwhile affairs both political and
