The creation of the National Bank of Belgium was one of the consequences of the separation of Belgium from Holland in 1830, and of the unsatisfactory condition of banking which followed the separation. It was onlyafter experiments for twenty years with existing institutions, which did not operate satisfactorily as banks of ssue nor as agents of the treasury, that the National Bank was created in 1850. The charter adopted followed simple lines for keeping the Bank free from entanglements by restricting its field of operations to the discounting of commercial paper based upon actual transactions.'1

So directly and effectively was it aimed at these results that it became the model of at least two foreign countries in the reconstruction of their banking systems. When the Government of Holland remodeled
the charter of the Bank of the Netherlands in 1864, the new law was based upon that of Belgium. It was declared by M. Betz, the Netherlands Minister of Finance:b " If one wished to qualify definitely by a foreign name the system adopted by the Government, one would be near the truth in saying that while the French, Scotch, and American systems have been rejected, the Belgian system has been chosen."

In the reform of the currency system of Japan, also in 1882, Count Matsukata, the eminent Minister of Finance, set forth in his report on the subject: c " In point of the perfectness of organization and the well regulated condition of business management, the National Bank of Belgium stands highest. This fact is due doubtless to the lateness of its founding, which enabled it to

« It was declared in the report of M. Descamps to the Senate in 1900,
that while the Belgian system had nothing to fear but everything to gain
from an analysis of its principles, it was proper to recall "tha t it had not
been presented to the country as the work of a social reformer, as a system
formulated a priori under the Empire of preconceived economic doctrines,
'sprung full armed from the head of Jupiter,' but had been derived from the
simple lessons of experience."—Documents Parlementaires: 1900, p. 352
& Documents Officiels: 1872, p. 46.
c Report on the Adoption of the Gold Standard in Japan, p. 64.

consider fully the mistakes as well as the successes of older banks. Its regulations are for this reason more
perfect than those of any others, winning highest praises from the financiers of the world, and leading the Bank of Amsterdam, at the time of its organization, to closely follow its pattern. In the case of a Japanese central bank, therefore, no better pattern can be found than the National Bank of Belgium; and if the regulations thus copied are modified to suit our peculiar conditions and circumstances, I have little doubt that the system thus adopted will perfectly meet our present need, and tha t also in point of practical organization it will prove to be a success."

There were, at the time of the creation of the National Bank in 1850 four banking institutions in Belgium—the Societe Generate, the Bank of Belgium, the Bank of Flanders, and the Bank of Liege.a The Societe Generate with a capital of 50,000,000 florins (about $20,000,000), dated from early in the nineteenth century, and under the Dutch sovereignty performed most of the financial operations of the Government. The control of the institution was chiefly in the hands of the Dutch element, who felt little sympathy with the new political regime in Belgium. The newT Government was compelled, however, to employ the Bank in the same manner as its predecessor. The Societe Generate, feeling itself indispensable, refused to permit the supervision of the court of accounts over its management as treasurer for the State.
a This narrative of the beginnings of the National Bank is based mainly
on Banques d'Emission en Europe, Octave Noel,Paris, 1888, pp. 477-488.

The Belgian Government sought to remedy this condition of things by the creation of a rival institution. It
lent its favor to the organization of the Bank of Belgium, which was created in 1835. The Government plainly indicated its preference by taking away from the Societe Generate its functions as cashier of the treasury and transferring them to the Bank of Belgium. But the new institution fell upon troublous times. A crisis loomed on the horizon in 1837, which became acute in 1838, when trouble with Holland was threatened over the boundaries  of Limbourg and Luxembourg. The Societe Generate seized the occasion to cripple its younger rival by gathering up its notes and presenting them for redemption.

On December 4, 1838, the sum of 1,000,000 francs ($193,000) was thus presented. On December 10 another sum of 1,200,000 francs was presented, and on December 15 300,000 francs. The Bank of Belgium was forced to suspend and to seek the assistance of the Government.

y a law of January 1, 1839, a credit of 2,600,000 francs ($501,800) was granted to the Bank for the redemption of its notes and for other purposes, and 1,400,000 francs ($270,200) for the repayment of the savings deposits, which were under its charge.

This temporary relief did not remove the fundamental  causes of weakness. Both the Bank of Belgium and the Societe Generate had locked up considerable amounts of capital in industrial ventures from which it could not be readily converted into cash.

The crises which affected Belgium in 1837 and in 1838 were much more serious in their effects because the two banks had to meet at once  the demand for the redemption of their notes and the needs of the industrial enterprises which they were supporting. From these two sides—the demands of the public and of their industrial clients—the Bank of Belgium was exposed to the disappearance of its metallic reserve and the suspension of payments in specie.

Notwithstanding the aid of the Government in 1839, the same embarrassments recurred in 1842. The Bank of Belgium confessed its inability to fulfill its financial mission for the Government and resigned its functions
as cashier of the treasury. The Society Generale had encountered the same difficulties as the Bank of Belgium.

On its part also it had supported numerous industrial enterprises and had suffered severely in the financial crises through which the country had passed. It was even compelled in 1842 to suppress the branches which it maintained in the provinces, of which the larger number had shown bad results, and to continue only the branch at Antwerp. But the Societe Generale was more firmly established than its rival and was the only institution which was in position to resume the service of the treasury without danger to the public finances.

A new convention restored to the Societe Generale the functions of cashier of the State. The arrangement was, on the part of the Government, only a makeshift. The time had come when those responsible for the conduct of public affairs were considering seriously the creation of an institution which should be restricted in the scope of its operations to commercial banking and should not be exposed, like the existing institutions, to the results of unsound financiering. When, therefore, the SociŁtŁ Generate  in 1843 demanded the extension of its charter, which was asked by the shareholders for a period of twenty-five years, the Government declared tha t it would reserve to itself the right to indicate before the end of the year 1849 the conditions under which the Bank might continue to exist and the modifications which it would be required to
insert in its statutes.

The crisis of 1848 obliged both the Societe Generate and the Bank of Belgium again to suspend payments. This furnished the Government an opportune occasion for putting its plans in execution. The existing institutions were protected for the moment by making their notes legal tender, while restricting their issues; but the year 1849 had hardly begun before the president of the council of ministers, M. Frere-Orban, formulated a series of reforms which he submitted to the Societe Generate as the basis of the establishment of a national bank. The conditions were such as almost to compel a refusal. They constituted a demand upon an institution long in operation, generally prosperous and honorably known, and engaged from the beginning in affairs requiring time for their development, tha t it should suddenly restrict its operations at
an almost certain loss and with grave prejudice to its credit.

The Government anticipated the refusal of the Bank to adopt this policy, and was fully prepared in tha t case to propose the creation of a new institution based upon the principle of issuing notes only upon commercial paper. From these conditions sprang the National Bank, which was established by a law of May 5, 1850. The new institution  was given a duration of twenty-five years, which might be extended by law upon the demand of a majority of the shareholders. The capital was fixed at 25,000,000 francs ($4,825,000), divided into 25,000 shares of 1,000 francs each.

The significance of the difference between the character of the new institution as representative of the State and those which it superseded in this capacity is indicated by the provisions of the charter in regard to the forms of business in which it might engage. These privileges, as laid down by the law and by the statutes of the bank, were to discount or buy bills of exchange and other obligations relating to commercial operations; to buy Treasury bonds within the limits to be prescribed; to conduct the purchase and sale of gold and silver; to grant advances upon those metals; to assume the collection of paper which might be remitted to it by individuals or firms; to receive money on current account; and to receive on deposit securities, precious metals, and gold and silver money, and, finally, to make advances in current account or for short terms on deposits of national securities or other securities guaranteed by the State, within limits and conditions to be fixed periodically by the administration of the Bank with the approval of the Minister of Finance.

The beginnings of the Bank were not brilliant. Commercial transactions in Belgium were limited in scope
and were the subject of competition between the new bank, the SociŁte Generate, the Bank of Belgium, and several other institutions. To perform the service of the treasury compelled the new institution to establish offices in the chief places of the country and wherever the government considered it necessary.

 It was contended, moreover, by the authors of the law that the benefits which the Bank offered to commerce should be extended into all parts of the country, in order that no merchant or manufacturer should be excluded from its advantages. The Bank was prudently managed, however, and weathered the serious crises which shook Europe from 1855 to 1858 and from 1863 to 1866, without embarrassment to its credit.

A more serious test of the prudence and resources of the Bank came with the war between France and Germany in 1870. Belgium was close to the route followed by the contending armies. For this reason her banks were the channel through which flowed much of the money for the expenses incurred in the maintenance of both the French and German troops. Many private financial transactions also were transferred, from motives of prudence as well as convenience, from Paris and Berlin to the National Bank at Brussels.

 As the result of the demand for discounts Belgian commercial paper in the Bank, which stood on July 10, 1870, at 177,500,000 francs, rose by July 20 to 203,923,100 francs; on July 31 to 223,231,744 francs; and maintained itself until August 20 in the neighborhood of 204,000,000 francs ($39,372,000).

While other financial institutions and merchants thus sought discounts from the Bank much larger in volume
than in normal times, the public was seized with panic and presented notes in large amounts for redemption. During  the entire year 1869, with an average circulation of 177,000,000 francs, the amount in notes presented for redemption had reached only 216,507,760 francs, or a daily average of about 600,000 francs ($115,000).

During the eighty-two days from July i to September 20, 1870, notes presented for redemption reached the sum of 85,022,000 francs, or over 1,000,000 francs ($193,000) per day. The pressure was felt most severely during the latter half of July, when the daily average attained about 2,094,000 francs ($404,142), and redemptions on the single day of July 20 were 6,286,000 francs, and on July 21 7,025,000 francs.

The intensity of the panic was much increased by the shortsighted measures taken by the government in casting distrust upon the soundness of the Bank, instead of giving it moral support. From the early days of July, the Royal Government, fearing that the declaration of war between France and Germany would lead to the violation of the neutrality of Belgium, warned the National Bank to take measures to transfer to Antwerp that portion of the metallic reserve representing the balance of the treasury.

On July 13, 1870, without further previous notice, the Bank was informed that this operation must be effected without delay. The Bank had declared that the operation could be accomplished within three hours,
and the sudden demand for its execution was a signal of alarm which did not fail to arouse great uneasiness.

 The order was revoked for the moment, only to be renewed on the 15th by an oral demand from a subordinate of the Ministry of Finance, with the condition that the transfer should be made under the superintendence of two agents of the department.

The transfer of the metallic reserve of the treasury outside of Brussels deprived the Bank of valuable resources at a moment when anxiety was spreading throughout the country. Inevitably, the effort to keep the measure secret was unsuccessful and provoked violent excitement, which led to many demands by the
public for the redemption of notes at the counters of the Bank.

The Ministry of Finance added to the difficulties of the situation by directing its agents in the provinces to keep very small reserves in cash and not to modify their character—that is, not to exchange coin for bank notes.

The Minister of War at the same time addressed to all the heads of army corps a circular warning them that he had taken measures in concert with the Minister of Finance that all agencies of the Bank, especially the most important, should be provided with gold, silver, and notes in sufficient quantities to provide for the exchange of bank notes which might be found in the military chests.

These measures threw such discredit upon the notes of the National Bank and so seriously impaired confidence in the circulation, at a moment when the difficulty of obtaining precious metals was becoming constantly greater on the foreign exchanges, that it soon became imperative to make a change of policy.

The Minister of War on July 31—five days after his first circular—addressed a new order to the heads of army corps, informing them that he had been requested by his associate in the finance department "to recommend particularly to governing boards and to other paymasters of the army to demand as little gold as possible of the agencies of the National Bank and to pay in bank notes everything susceptible of being thus paid, as well as to exchange notes of 500 francs and 1,000 francs which might be on hand for denominations of 20 and 50 francs in order to facilitate payments."

It was too late to counteract fully the effects of the earlier measures. The Bank was compelled to raise the
rate of discount and then to take restrictive measures by limiting the amount of paper accepted from the same indorser and maturing at the same date. Advantage had already been taken, from the date of the transfer of the treasury reserves to Antwerp, of the option given the Bank by the law to redeem its notes only at Brussels, except that it continued redemptions at Antwerp.

The Bank was struggling bravely in the meantime to meet legitimate demands. The cash reserve stood on
July 15, soon after the trouble broke out, at 15,000,000 francs ($2,895,000), which was above 25 per cent of demand liabilities. The bank hastened to seek additional cash resources to the amount- of 25,000,000 francs in the markets of London, Amsterdam, Hamburg, and Paris. In spite of the enormous amounts of coin called for by the crisis, the metallic reserve of the Bank was not permitted to fall below the limits assigned to it by the management.

The discount rate was promptly advanced in order to check unnecessary demands for accommodation. The
rate remained from July 1 to July 15 at 2 % per cent for accepted bills and at 3 per cent for those which had not been accepted. These rates were promptly advanced on the 15th to 5 and $% per cent, where they remained until August 5, when they were again advanced to 6 and 6% per cent. A rate of 7 per cent was then charged for drafts drawn from abroad upon Belgium.

At the outbreak of the crisis the Bank possessed foreign paper to an amount of 64,144,561.25 francs ($12,370,000). Such prompt disposition was made of these securities to obtain coin that on July 31 the amount of such paper was reduced to 7,227,333.20 francs and on August 20 to 3,531,907.38 francs. The proceeds of this paper was employed in the purchase of gold and silver, principally silver bullion, which the mint converted into 5-franc pieces, with which the bank filled the void in its reserves caused by the redemption of notes.

Thanks to these energetic measures, which imposed a loss of 705,340.42 francs ($136,100), the Bank weathered the storm and was able by August 27, 1870, to reduce discount rates to 5 ^ per cent for accepted bills and 6 per cent for those not accepted, following this by reductions on September 20 to 4.% and 5 per cent, and on October 8 to 2>% and 4 per cent. Calm was reestablished by the middle of August and the Bank returned to normal conditions.

The special commission which had been appointed by the Government to study the best means of
allaying the disturbance found nothing to do, and the approach of the date of the expiration of the charter
gave emphasis to the success with which the management of the Bank had piloted it through the storm and through the difficulties invoked by ministerial blundering.

So successfully had the Bank met the stress of the war between France and Prussia that there was little
opposition to the renewal of the charter when the proposal was submitted in 1872.

There were indeed protests from one or two deputies against bringing in the project of renewal on February 27, 1872, nearly three years before the expiration of the old charter, and there was a proposal  to reserve to the chambers the right of revision at either of the two sessions prior to January i, 1883, which failed only by a vote of 38 in the affirmative to 53 in the negative, and 1 not voting.® The final vote in the chambers, however, taken on May 10, 1872, showed 87 votes in favor of the project of renewal, with only 6 in the
negative, and 3 not voting.

The debate in the Senate was short. The bill passed at the sitting of May 17 by the unanimous vote of the 37 members voting, with 1 abstaining because he was one of the censors of the Bank. The feeling indicated by the majority in the debates was in accord with a passage from the report made in the name of the central section of the Chamber of Deputies by M. Eudore Pirmez:6 " It might be asked if a profound examination of the principles on which the National Bank rests is still necessary. The discussion seems uncalled for. The National Bank is not attacked in any of its fundamental principles. Your sections, in devoting themselves to the examination of the subject, have brought none of these principles into question. They have limited themselves to considerations of detail. Beyond this, complete unanimity seems to reign. There is general accord with the position of the Government, that there can be no question of destroying in order to reconstruct, but only of preserving and improving.

 Parties, however lively their differences, have had the wisdom, to-day as in 1850, to silence their divisions in a matter which does not concern  them, and we shall see without doubt an institution, created upon the proposition of one of the chiefs of one
o Documents Officiels, 1872, p. 409.
b Documents Officiels, 1872, p. 20
of the great political schools, receive a new existence upon the proposal of one of the chiefs of the other—an agreement which honors equally him who had the initiative in the work and him who seeks only to render it better/'

The extension of the charter became law on May 20, 1872. The capital of the bank was increased from
25,000,000 francs to 50,000,000 francs. The provision was then first introduced that the circulation in excess of 275,000,000 francs should pay a tax of a quarter of 1 per cent semiannually, or at the rate of one-half of 1 per cent a yeds.

It was at this time also that the requirement was first imposed that the profits arising from a discount rate above 5 per cent should go into the public treasury. The life of the Bank was extended until January 1, 1903, and it was not for more than a quarter of a century that the question of the relations of the Bank to the State and the public again came under general discussion.

So firmly was the credit of the Bank established after the trial of the war between France and Germany that
it was specially stipulated in the treaty of peace between the belligerent countries that among the forms of payment accepted by Germany from France should be notes of the National Bank of Belgium. The effect of this stipulation upon the operations of the Bank was thus set forth in the annual report for 1874:a " It has not been forgotten that the treaty of Frankfort, concluded between Germany and France, stipulated
for the admission of Belgian bills as one of the means of
a Quoted by Noel, I, p. 511.
liquidation of the war indemnity. This striking proof of the confidence inspired by our establishment abroad,
however honorable it may have been, was not without certain inconveniences for Belgium. It provoked naturally an unsought extension and considerable fluctuations in our credit circulation.

The redemption and reinstatement in our vaults of more than 115,000,000 francs of these bills, effected within a space of five months, will permit the appreciation of the importance of these movements. One of the oldest and most powerful financial institutions of Berlin (the Maritime Commerce Company) was charged by the German Treasury with the negotiation of our bills.

This institution made overtures to the National Bank with a view of effecting the exchange under the most advantageous conditions. We did not hesitate to extend a cooperation entirely disinterested, having no other concern than to guard the commerce and industry of the country from the inconvenience of sharp variations in the bank reserve, which would inevitably have produced considerable exportations of the precious metals.

 It was especially by means of the purchase of foreign paper, of which the influence can be found in the assets of the Bank, that the repayment of so  considerable a sum was effected, without shock and without prejudice to the country."

The increase in the discounts of the Bank during the two years 1872 and 1873 showed the influence of these operations.

Total discounts, which had been only 1,522,000,000 francs in 1871, advanced to 1,853,200,000 francs
in 1872, and to 2,019,300,000 francs ($389,000,000) in 1873. The increase was striking in the number of bills drawn upon Belgium, but was more notable in the proportion of foreign bills discounted, which increased in amount from 2,400,000 francs in 1871 to 125,800,000 francs in 1872, and 67,300,000 francs in 1873.

The amount of this foreign paper discounted fell off in 1874 to 38,000,000 francs, only to increase materially a few years later, when the policy of carrying foreign bills in the reserve was permanently adopted.

In anticipation of the expiration of the charter in 1903, a measure was prepared by M. P. de Smet de Naeyer, Minister of Finance, which was the basis of the law finally enacted; but a vigorous and prolonged opposition developed from the benches of the Socialist party, which was represented in the chambers by some of the most eminent and learned professors of political economy in Belgium.

The project of the Government, making moderate changes in the charter, was presented to the chambers on December 22, 1898. It will be seen in the sequel that while the government's project became law without modification and did not change the essential character of the Bank, yet the influence of the critical attitude assumed toward corporate property was shown in the government project itself in the heavy burdens imposed upon the Bank and the large share in its profits attributed to the State.

Upon several important questions a considerable vote was cast for the amendment of the government measure.  A proposal by M. Theodor, in the Chamber of Deputies, that the Government should have the right to terminate the charter on January 1, 1914, if a preliminary notice were given of two years, received 25 votes, with 73 votes in the negative.0

Upon two amendments, compelling
a Discussions Parlementaires, 1900 (sitting of January 31, 1900), p. 526,
the Bank to advance funds to the Government to promote small agricultural and urban credits, the vote was
much closer. The amendment of M. Theodor, setting aside 20,000,000 francs for such purposes, failed only by a vote of 39 against 47; while that of M. Delvaux, authorizing the Government to borrow for such purposes on  treasury bonds to an amount not exceeding 3,000,000 francs a year, failed by 38 votes against 43. aWhen the vote was taken on February 15, 1900, in the Chamber of Deputies, 66 members voted for the government project, 29 voting in the negative, and 7 abstaining from voting. In the upper chamber, as in
1872, the debate was much shorter and the supporters of the Government were relatively stronger.

The bill passed at the sitting of March 23, 1900, by a vote of 55 in the affirmative, 2 in the negative, and 5 abstaining from voting—4 upon the ground of participation in the ownership or management of the Bank and 1 upon the ground that the bill did not embody two provisions which he considered of vital importance.b
The new law, which was proclaimed by King Leopold on March 26, 1900, continued the life of the Bank until January 1, 1929, and made no change in the amount of the capital. The most important changes made were in granting a larger share in the profits of the Bank to the Government.

The limit of untaxed notes was left unchanged at 275,000,000 francs, in spite of the increase in the circulation, from about 200,000,000 francs in 1870 to 600,000,000 francs in 1900.
« Discussions Parlementaires, 1900, pp. 684-686.
& Ibid., pp. 896-897.
The National Bank of Belgium, as already set forth, is a joint-stock company, so far as concerns ownership, but is under the direct supervision of the State. It was declared by Article XXIV of the law of 1850, which is still in force:
"The Government has the right to control all operations. It shall have the power to prevent the execution
of any measure which shall be contrary to the law, to the statutes, or to the interests of the State."

The governor is appointed by the King for five years, and may be reappointed.

The six directors, who constitute with the governor the active administrative council, are chosen in general meeting of the shareholders, and serve for six years.

The Government exercises its supervision through a special commissioner, whose compensation is fixed by the Government by agreement with the Bank, but which is paid by the Bank.

There is also a council of censors, consisting of seven members, elected by the shareholders, and performing the functions of auditors and supervisors.

Thus, while a firm guiding hand is kept by the Government upon the National Bank, it is governed in its commercial operations by officers chosen from the business community and in accordance with the demands of commercial conditions.

The subject was discussed at considerable length in 1899 whether this form of organization, similar in general character to that of the Banks of France and Germany, should not be superseded by that
of a bank owned entirely by the State.

On the very day  following the presentation in the chambers of the government measure for the renewal of the charter, Prof. Hector Denis, one of the leading professors of political economy in Belgium and a pronounced advocate of state socialism, submitted a proposal that there should be a general inquiry into the operations of the Bank and other banking institutions in Belgium. He proposed that the inquiry should be made by the Superior Council of Industry and Commerce and should deal with the following subjects :

a "On the actual conditions and degree of development which has been attained in Belgium by credit, and especially commercial credit in all its forms.

"On the part in this which has been taken by the National Bank.

"On the independent institutions which are interested therein and their relations with the National Bank.

"On the reforms which experience and science will permit to be introduced into Belgium, in the interest of the general body of merchants and producers of the country and in the interest of the State, in the organization and development of credit and of circulation, and in the operations of a bank of issue.

"On the extension of perfected modes of collection, payment, transfer, and clearing, which will save or render unnecessary in the future the employment of metallic money.

" On the means of preventing or ameliorating monetary crises.
a Documents Parlementaires: 1900, pp. 97-98.
"On the maintenance of the privilege accorded to the National Bank or on the reforms which should, in the
interest of commerce, of the public, and of the State, be introduced into the legal constitution, the organization, the services, and the operation of said Bank and its branches, and its relations with other Belgian institutions, with the Government, or with foreign banks."

This inquiry was vigorously opposed by the representatives of the Government in the chamber as involving
unnecessary delay and as entirely uncalled for by conditions prevailing in Belgium.

The memorandum submitted by M. Denis quoted Professor Nasse, of the University of Bonn, as declaring that "for a long time the issue of bank notes was a private banking operation in the same manner as the creation of bills of exchange, and that it was only little by little that the bank note assumed the character of money which it now possessed.

At the present time, since the public character of the issue of bank notes is recognized, one is guilty of an
inconsistency in confiding this public service to a private corporation." After quoting these words, Professor Denis summed up his memorandum with this declaration:0 "And if he speaks truly, the nation which has succeeded in creating the Union of Credit and which has solved the problem of the savings bank more threatened, perhaps, in the past with abuses by the State than banking itself, is that nation powerless to realize scientifically, and to eliminate all abuses from it, the system of a state bank? Even if, while recognized as sound and attainable, it may not perhaps be the work of a single day, the
a Documents Parlementaires: 1900 p. 89
influence of an inquiry will yet inoculate the public mind with the necessity of preparing for it by a normal and
organic evolution and of giving it the imprint of our national genius."

Against this demand for a state-owned bank, which was supported by arguments going to show the profits made by the National Bank, the central section of the Chamber of Deputies made a report through M. Delbeke on June 29, 1899, which took up most of these points. It opposed the inquiry demanded by M. Denis upon the ground tha t  no complaint had been made against the organization of the Bank or its operation, neither on the part of commerce, of industry, of finance, of borrowers, by organized
bodies, nor in the press. The National Bank, it was declared, is alone, perhaps, in presenting this phenomenon; in a country where everybody complains no one complains of it.

On the contrary, the Union of Credit and the popular banks have inscribed in their reports the expression of
their satisfaction and of their gratitude. a It was declared by M. Delbeke tha t the expression " a bank of state, " did not convey the idea of a clearly defined type. In certain respects the National Bank of Belgium
might be called a state bank, since the State named and removed its chief officers, controlled its management by a commissioner, and was required to approve the most important of its acts. The real question was reduced, therefore, to the abolition of the capital furnished by individuals. The majority of the section for which M. Delbeke was reporting declared themselves opponents of the theory
of complete state control, because they considered tha t the
a Documents Parlementaires: 1900, p. 103.
State, already a bad manufacturer and a bad merchant, would prove a still worse financier. It was not a question whether a state bank was possible, but whether its management would be better than one under private initiative, guided by self-interest and controlled by the public powers.
Upon this point M. Delbeke continued: a"The answer can not be doubtful when one considers the grave inconveniences in the management of general  credit which would be presented by the constant intrusion
of political considerations. The discounts, the credit to be granted to this or that person, to this or that class, the collateral to be waived or required for such a group of citizens, the advances in mass to be made to this or that element of the population—all these would become the clubs of election day.

 It would be discussed in the campaign and would form the object of pledges taken by candidates elected and even of imperative restrictions. Is it necessary to add that these questions would be determined
under the single impulse of appetite and in absolute contempt of economic laws and of the necessities of credit and of the circulation?

One would thus find created and steadily growing an electoral scourge till now unknown. " An example is furnished even this year in Germany by the debates on the renewal of the monopoly of the Bank of the Empire which gives visible form, even to the least clear-sighted, to this great danger.

The suppression of the private capital has been demanded there with ardor by the agrarians and not by the socialists, who, contrary to the policy of the socialists of Belgium, have energetically demanded its continuance.   The agrarians wish to render
a Documents Parlementaires: 1900, p. 121.
the State master of the Bank, because they are to-day masters of the State. If the State becomes master of the Bank of the Empire, the agrarians hope that nothing can  longer prevent them from compelling the State to employ the funds of the Bank in the execution of their programme.

It is important to place the central organism of credit aloof from such assaults, under which it would not fail to succumb, dragging down with it public prosperity. 1 'It is a common error to believe that the State alone
gives solidity to a bank of issue, that the credit of the State is the sole origin of the credit of the Bank and of its notes, and that, in consequence, it can not be dispensed with. History proves that governments have been saved by the credit of the chartered bank and that the credit circulation has remained intact, thanks to its private origin, in the midst of the crash of the credit of the State.

'The Bank of France saved us,' said M. Thiers, ' because it was not a bank of state/ During the war of 1870, says  a leading unsigned article in the ' Journal des Debats' of July 2, 1895, the securities of the State had fallen from 72 per cent to 50 per cent, while the note of the Bank of France, bearing the signature of a private establishment, had lost almost none of its value.

"Is it necessary to point out, among so many other dangers, the danger in the liberty given to governments to
draw upon the resources of the bank of issue—the irresistible temptation to inflate the credit circulation and to transform the bank note into paper money and ultimately into the assignat?  It is vain to pretend that this temptation is not irresistible.

 The facts show it to be such. In vain is it answered, that even private banks, like those of  Spain and Portugal, have not had the virtue to resist the solicitations of the treasury in extremity. The real point is whether the credit of these nations would not have fallen even lower with banks of state.

In vain is it said that private interest in its turn will drive the banks into complacency toward the State. In private banks of issue this private interest finds in itself an insurmountable limit to its complacencies."

Turning to the point that all the profits now going to private owners could be converted into reductions of the
rate of discount to borrowers, so as to realize the optimistic dream of an interest rate of one-tenth of i per
cent, M. Delbeke inquired how it would be possible with such a rate to prevent the commercial paper of the world pouring into the Bank and exhausting its resources.

The  state bank, moreover, however ably managed, would not be able to act with the promptness of a private bank in great emergencies.

Referring to the suspension of a banking house at Brussels a few years before, it was recounted how several millions had been obtained within an hour from the National Bank. " If I had had to deal with a bank of state," said the narrator, " I would not have dared to make the application, because it would have involved sums belonging to the treasury.

Moreover, I would not have been able to do it without the intervention of the legislature; and before the chambers had acted the catastrophe would have taken place."

In view of these considerations and others which were  invoked, the central section declared that the system
already in operation afforded the advantages and assurances of private initiative at the same time as the guarantees of intervention and control by the State, and was thus in accord, not only with the suggestions of wise and practical policy, but with the latest conclusions of financial science.0 Their attitude was sustained in the Chamber of Deputies by a large majority. Professor Denis crystallized the movement for a state-owned bank by a proposed amendment to the government measure, which gave to the bank an independent legal personality, but proposed that the  capital should be provided by the State in the form of 3 per cent rentes, which should not bear interest while in possession of the bank.

The liabilities of the bank, in case of liquidation with impaired assets, were to be met by the State. The council of administration was to be named by the King, the college of censors by the chambers, half to be chosen from lists submitted by the Superior Council of Commerce and Industry. This proposal was
rejected, 23 to 72, with one member abstaining.6 In the Senate report also the project of a state-owned
bank was severely criticised. Among the reasons set forth for opposing such a new departure were these:0
" There is first, the confusion of public and private credit, to the great damage of each; for they ought to
remain distinct, for their respective good and for the mutual assistance which they are at times called upon to
lend to each other. Further, there is the acceptance by the State of a task—the task of discounting—which is not within its competence and of which, even with the best of will, it will acquit itself badly. It is neither wise
o Documents Parlementaires: 1900, pp. 121-126.
& Discussions Parlementaires: 1900, p. 464.
c Documents Parlementaires: 1900, pp. 341-344.
nor practicable to suppress the legitimate stimulus of private interest in such affairs as discount. It must not
be believed that in such a matter disinterestedness alone suffices or can afford a better guide than the foresight of those wiio run the risks and reap the benefits of such operations. * * * "The bank of state has been represented as a means of furnishing credit to a greater number of persons, as a means of popularizing credit (democratiser le credit).

It is possible to imagine a bank of Providence, distributing capital to every applicant without adequate guaranties;  but such an organism is the negation of the conditions upon which the problem of credit rests and ought to be solved. It would involve within a brief interval filling the assets with impaired securities, the ruin of the bank, and the demoralization of credit itself.

" Others see in a bank of state a means of procuring discount at the lowest possible price for all, at ' the price of return,' as has been said—indicating by that the cost of administration and a premium against risks.

 But this is a misunderstanding of the factors by which the market for money is governed, independent of the institution which grants discount, whether that be a bank of state or a private bank. The first is no more capable of reducing the rate of discount than the second. One does not find, indeed, that banks of state acquit themselves of this function better than others—witness the Imperial Bank of Russia, which in the month of December last recorded  a rate of 7 per cent—unless one wishes to fix rates artificially  low, surrendering the resources of the bank to the assaults of bad paper within and pillage from without!
But this again means ruin and demoralization by another

In the Senate the debate on the articles of the new law was brief and no amendment was offered to change the fundamental character of the Bank.

The fundamental principles upon which a bank of issue should be based, as set forth by M. Frere-Orban in proposing the charter of the National Bank in 1850, were as follows: ° "A bank ought to devote itself only to operations which are certain. It should be able always to meet its engagements. It should be in a degree infallible. Every enterprise or form of commerce of a nature to impair its credit ought to be carefully avoided. It ought not to lock up
its capital. It ought not to borrow, but should operate with its own resources. It should not carry on industry, but it ought to be impartial and to discount paper which embodies the required conditions. It ought to stand as intermediary between the capitalist and the producer, to
distribute capital with justice and liberality through all parts of the body corporate.'' ...