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 HIS 
 
 BANK OF ENGLAND. 
 
 A Comprehensive Account of its Origin, Foundation, Rise, Progress, 
 Times and Traditions, Manner of Conducting Business, 
 its Officers and Offices, and a full History 
 of the Bank and its entire Work- 
 ing and Management. 
 
 B Y 
 
 JOSEPH HUME FRANCIS. 
 
 THE FIRST COMPLETE HISTORY OF THE WORLD'S GREATEST FINANCIAL 
 INSTITUTION EVER WRITTEN. 
 
 CHICAGO, ILLINOIS: 
 EUCLID PUBLISHING COMPANY. 
 
 f^^ 
 
 S. 1^. COZENS & CO., Publishers, 
 
 r / 831 Arch Street, PHILADELPHIA.
 
 delphia Daily Times and the Baltimore Telegram, speaking from their peni 
 acquaintance with the author of this book, highly commend his ability to wrA 
 and say that in point of detail of fa<5ls and incidents, and the fixing of da*-s, i/
 
 HIS 
 
 BANK OF ENGLAND, 
 
 A Comprehensive Account of its Origin, Foundation, Rise, Progress, 
 Times and Traditions, Manner of Conducting Business, 
 its Officers and Offices, and a full History 
 of the Bank and its entire Work- 
 ing and Management. 
 
 BY 
 
 JOSEPH HUME FRANCIS. 
 
 THE FIRST COMPLETE HISTORY OF THE WORLD'S GREATEST FINANCIAL 
 INSTITUTION EVER WRITTEN. 
 
 CHICAGO, ILLINOIS: 
 EUCLID PUBLISHING COMPANY. 
 
 1888. 
 
 y
 
 Entered according to Act of Congress, in the year 18S8, by the 
 
 Euclid Publishing Company, 
 
 In the office of the Librarian of Congress, at 
 
 Washington, D. C. 
 
 Pre«! of E. Rul)Ovits .'c Hro., Chicago.
 
 J 
 
 'J 
 
 
 /■/■^ 
 
 TO 
 
 HON. WM. N. TRENHOLM, 
 
 Comptroller of the Currency of the United States, 
 
 History of the Bank of England 
 
 IS, 
 
 H' 
 
 WITH HIS KIND PER^[ISSI0N, 
 
 MOST RESPECTFULLY DEDICATED 
 
 BY The Author. 
 
 388478
 
 P^epACe. 
 
 Custom, which is as arbitrary as fashion, renders it 
 necessary that this volume should be prefaced by the 
 author. 
 
 This history is presented with the hope that it may 
 impart useful knowledge regarding the life of the greatest 
 monetary establishment in the world — something mea- 
 gerly and imperfectly understood. 
 
 The chief merit claimed for this work is that of its 
 being an extensive collection of facts connected with the 
 history of the Bank of England, and of its foundation, 
 rise and working and general management. Other sub- 
 jects germane to banking and the Bank of England are 
 touched upon. Every known source of information has 
 been consulted, and in collecting and arranging the facts 
 for the first complete history of the Bank of England 
 only matters of interest and value have been treated, al- 
 though we have in hand and have had the benefit of 
 material extending over many centuries. 
 
 A rich store of knowledge may be obtained from 
 books, but there are two entirely opposite methods of 
 giving knowledge. The first is that which enters into 
 extensive detail, and repels and confuses the average 
 reader with scientific phraseology, meaningless tables and
 
 Vi HISTORY OF THE BANK OF ENGLAND. 
 
 figures, and verbose description. The second is that 
 which seeks, by simplicity and conciseness, to make 
 knowledge attractive, entertaining and instructive. The 
 latter is the method adopted in this volume. The aim has 
 been to explain and elucidate all matters of real interest 
 connected with the bank and its history. 
 
 We wish in this connection to thank several officials 
 and employees of the Bank of England for courtesies 
 extended, and also for placing at our disposal all informa- 
 tion desired. 
 
 The Author. 
 
 Chicago, 111., December 1, 1888.
 
 Conye^TS' 
 
 Chapter I. 
 
 Pages. 
 
 ORIGIN OF AND FIRST BANKERS IN THE WORLD.— Rank 
 First Mentioned in the Bible — Money Changers in the Jewish 
 Temple — Origin of the Word Bank — People who Invented Bank- 
 ing — First Bank in luirope — All the Early Banks in Europe — First 
 Bank in London — How Bills of Exchange Originated- — First 
 Funding System — First Permanent National Debt — Bankers of 
 Greece and Rome — High Rates of Interest — Origin of Modern 
 Banking — Goldsmiths as Bankers in London — English Country 
 Bankers — Primitive Financial Methods — Necessity for Money — 
 Fundamental Nature of Money — What Ancients Used for Money 
 — When Gold and Silver were First Coined-^Invention of Money 
 — Money Made of Iron, Wood, Shells, Salt, Brass and Tin Current 
 — Origin of Various Coins . 13-29 
 
 Chapter II. 
 
 DUTIES AND USES OF BANKS AND BANKERS.— What is a 
 Banker? — First Bank of Deposit — Interest from Borrowers — A 
 Bank in its Simplest Form — How Profits are Derived — How to 
 Pay Interest on Deposits — Security Against Fraud — Safest Way of 
 Loaning Deposits — Securities Prudent Bankers Avoid — The Power 
 of Credit — Keeping Deposits on Hand — The Many Uses of Banks 
 — William E. Gladstone on Credit — Banks of Issue and Banks of 
 Deposit — Advantages of Combining a System of Lending Money 
 with that of Receiving It — Origin of English Pounds, Shillings, 
 Pence, Guineas and Sovereigns — Thompson Hankey, an Ex-Gov- 
 ernor of the Bank of England, on Bankers — Banking Schemes andr' 
 Projects Prior to the Foundation of the Bank of England — The 
 Idea of Credit Banks , 30-48 
 
 Chapter III. 
 
 FOUNDATION AND EARLY HISTORY OF THE BANK OF 
 
 ENGLAND.~Why the Bank was Established— Origin of the 
 Bank — The Governor and Company of the Bank of England — 
 History of William Paterson, its Founder — He dies Unhonored and 
 Neglected — Prophets who Predicted Financial Ruin — "The Old 
 Lady of Threadneedle Street " — Paterson and his lU-Fated Darien 
 Scheme — Present Condition of the Bank — The Policy of the Bank 
 Assailed by the Public — How the Bank is Officered — The Bank 
 Charter — How it Reads — Restrictions, Impositions and De- 
 mands — Buying Property from and Lending Money to the Crown 
 — Suspending Payment of Notes — Assistance from the Govern- 
 ment Averts a Failure — Capital Increased — Confideuce Restored — 
 Length of Original Charter 49-63
 
 viii nisiOKY ok tiik 
 
 Packs. 
 
 Chapter IV. 
 
 HISTORY OF RENEWALS, DEBTS AND PANICS. —Advancing 
 Money to the Government— How the Hank Receives Pay from the 
 Government- Persecution— The " Uea.l Weight "—Table of Re- 
 newals of Charter, with Capital, Debt and Conditions of Renewals 
 —An Explanation by an Ex-Governor of the Bank— Amount of 
 Loans to the Government— Present Capital of the Bank of Eng- 
 land- -A Panic Quieted by a Novel Method— Merchants Come to 
 the Bank's Rescue— The Bank Attacked by Rioters- Solidity of 
 the Bank of England. 64-78 
 
 CHAPTER V. 
 
 PROGRESS OF BANKING.— The Desirability of a National Bank 
 — Success Brings Competition — The Scheme for a "National Land 
 Bank"— Country Banks Issue their Own Notes— War for Inde- 
 pendence in America— Great Industrial and Commercial Develop- 
 ment—Startling Increase in Banks— Unreliable Bankers, Worth- 
 less Paper, Unlimited Credit and Prodigal Bankers Precipitate a 
 Big Crxsh — Violent Revulsion in London — 300 out of 350 Banks 
 Compelled to Stop Payments — The Bank Assailed by Jealo'is 
 Competitors — Its Triumph — Given Exclusive Banking Privileges — 
 Banks Prohibited from Doing Business Within Sixty-five Miles of 
 London — Sir Henry Parnell on Banking , ... 79 87 
 
 CHAPTER VI. 
 
 SUSPENSION OF CASH PAYMENTS.— Important Epoch in the 
 History of English Banking— Passage of the Restriction Act — The 
 Government Advises with the Bank — Run on Country Banks — 
 Bank of England Again in Trouble — Suspension of Cash Payments 
 — Embarking on a New Course — The Bank Issues a Notice to the 
 Public — Increase in Country Banks in 1797 — Cause of Enormous 
 Failures — Extending- the Field for Circulation of Bank of England 
 Paper — History of Depreciation of Currency — Paper Raised to Par 
 by Accidental Circumstances 88-93 
 
 Chapter VII. 
 
 SPECULATIONS, SCHEMES, FAILURES AND LOSSES.— Bank 
 of England Resumes Cash Payments — Vicissitudes of Banking — 
 Speculative Rage — No Scheme Too Hazardous — Speculation of 
 Today not Without a Precedent — Worthless Paper Readily Nego- 
 tiated — Discounts Easily Olitained — Schemes of Country Bankers 
 — A Cyclone of Failures — Bank of England Makes a Serious Blun- 
 der — Distrust Fully Awake — A Tremendous Run — Cause of the 
 DifTiculties — An Instructive Table — Accumulation of Securities — 
 What the Directors Should Have Done to Avoid Disaster — Loss of 
 Three Millions of Bullion — The South Sea Bubble — A Delirium of 
 Speculation — List of the Bubble Companies in 1721 — Getting Rich 
 VVithout Trouble— Philanthropist Thomas Guy 99-110 
 
 Chapter VIII. 
 
 LOOSE banking METHODS PARALYZE BUSINESS.— Im- 
 proving Country Banking — Suppressing £1 Notes — Repealing
 
 BANK OF ENGLAND. IX 
 
 Pagbs. 
 Laws — Circulation of Notes for Less than ^5 Forbidden — Specu- 
 lative Schemes Again in Abundance — Rage for Establishing New 
 Banks — Voluminous Issue of Notes — Raising the Rate of Interest 
 —Shock to Industrial Undertakings— How the Bank of England 
 Escaped Failure — Natural Obstacle to Formation of New Banks — 
 The Railway Mania — Gigantic Frauds Perpetrated by Projectors of 
 Imaginary Railroads— The Country Wild with Speculation — The 
 Crash Wrecks Thousands — A Banker's Duty — The Penalty of 
 Neglect 111-124 
 
 Chapter IX. 
 
 BANK OF ENGLAND HANDLED BY PARLIAMENT.— The 
 
 Famous 1844 Bank Act — Sir Robert Peel Battling for Reform — 
 Providing a Remedy for Instability — Financial Writers Interested 
 — Peel's Speech on the Renewal of the Bank's Charter — Important 
 Provisions of the New Law — Price Paid for Exclusive Privilege of 
 Banking— Suspending the Bank Act in 1866 — Fundamental Prin- 
 ciple upon which English Currency Rests — The Law and the Bank 
 —The Bank's Control of Its Capital 125-135 
 
 Chapter X. 
 
 RADICAL CHANGES IN THE MANAGEMENT OF THE 
 BANK. — Privileges of Officers and Directors — Groundless Nature 
 of a Charge Often Made- Plausible Objections to New Laws — 
 Amount of Notes Issued — How to Determine an Excess of Cur- 
 rency — Notes in the Banking Department — Great Changes 
 Wrought in the Management of the Bank — Restricting Banks for 
 the Issuing of Notes — Convertibility of Bank of England Notes — 
 Variations in the Rate of Discount — Temporary Suspension of the 
 Act of 1844 to Avert a Panic — Effect of Modification of Usury 
 Laws — Particulars as to Number and Class of Depositors — Devel- 
 opment of the Methods of Economizing Money — Transitory 
 Credits — Discount Variations — Credit and Capitalists — No Change 
 Probable in the Methods of the Bank of England — Should Banks 
 be Prohibited from Issuing Notes — True Way to Remove Danger 
 — Modification of Banking Laws — Bank of England Notes Made 
 Legal Tender 136-154 
 
 Chapter XI. 
 
 FRAUDS, forgeries, THEFTS AND DEFALCATIONS.— The 
 First Forged Note on the Bank of England and Execution of the 
 Forger — How Discovered— Counterfeiting —Decision of the Lord 
 Chief Justice — Defeating Counterfeiters — Great Theft of the Head 
 Cashier of the Bank of England — A Loss of _2{^320,000 — Inventing 
 a Safety Paper — Men Executed by Scores for Counterfeiting — In- 
 genious Schemes for Swindling — Sir Robert Peel Victimized — 
 Another Thieving Official — Fauntleroy Secures ;/'360,000 by 
 Forgery — A Rascally Clerk Escapes to the United States and is 
 Apprehended — Losses by Forgery — A Chief Clerk Swindles the 
 Bank to the Amount of ;^800,000— His Novel Method that went 
 Undetected for Five Years — Bidwell's Million Pound Swindle. . .155-167
 
 X HISTORY OF THE 
 
 Chapter XII. 
 
 MANAC.r.MF.N'T OF THE NATIONAL DEBT.— M.inap:eitient of 
 all Other Stocks Held by the Hank— How the Work is lY-rformca 
 by the Hank of England— Stock Offices— Dividend Pay Olhce— 
 Cheque Office— Unclaimed Dividends— Stock Office Library— 
 Nunil)er of Books in Library— A Perfect System— 178,000 Distinct 
 Accounts- Register Office— Post Warmnt Office— Tlie Routine 
 Work iof Above Named Offices Descrdjcii — Names of the Gov- 
 ernors of the Bank of England from 1694 to 1888 168-178 
 
 Chapter XIII. 
 
 INFERNAL WORKINGS OF THE BANK OF ENGLAND.— Pri- 
 vate Drawing Office -Public Drawing Office -What is Considered 
 a Remunerative Balance —Working Accounts— Number of Bills 
 Issued Business in the Bill Office -Branch Banks, and How 
 Conducted — Drawing Accounts and Discount Accounts — Import- 
 ant Service Performed by Branch Banks Number and Location 
 — Rules and Regulations Under Which Accounts are Received in 
 the Bank of England— Denomination of Bank of England Notes . 179-189 
 
 Chapter XIV. 
 
 BUSINESS OF THE BANKING DEPARTMENT.— How it is Con- 
 ducted — .'Vmounts Cheques may be Drawn for— Opening an Ac- 
 count with the Bank — ^Business the IJank Transacts for Customers 
 — Bank Deposits — Profits of the Batik— How Derived — Expenses 
 of the Bank— Weekly Bank Statement Given and Analyzed — Pro- 
 portion of Assets to Liabilities 190-196 
 
 Chapter XV. 
 
 DISCOUNTS, DIVIDENDS, LOANS AND RULES.— Duties of 
 the Discount Office — Precaution Before Discounting — Powers of 
 the Directors — Who Are Allowed Discount Accounts — Checking a 
 Speculative Tendency — Inconsistency of Long Date Discounts — 
 Opinion of an English Writer — Real and Fictitious Transactions — 
 Rules to Observe — Who Controls the Rate of Discount? — False 
 Notions Regarding the Power of the Bank of England — Rate of 
 Discount from 1794 to Date— Dividends on Bank of England 
 Stock from 1694 to 1888-The Price of Bank Stock and How 
 Bought and Sold 197-206 
 
 CHAPTER XVI. 
 
 ENGLISH AND AMERICAN CLEARING HOUSES.— How they 
 Originated in London — Primitive Manner of Conducting Business 
 — 1 low Transacted Today and Amount of Business Annually Done 
 — A Clearing House for Country Bankers — American Clearing 
 Houses — Detailed Statement of the Routine Business in the New 
 Yoik Clearing House— Scene in the Clearing House During Busi- 
 ness Hours -Specimen Credit Ticket- How the Banks are Rep- 
 resented and Settlements are Made— The Settling Clerk and De- 
 livery Clerk -Duties of the Proof Clerk-- Specimen Sheet of 
 Clearing House Proof-Penalty for Making Errors — Specimen 
 Sheet of Settling Clerk's Statement 207 216
 
 BANK OF ENGLAND. XI 
 
 Chapter XVII. 
 
 BANK OF ENGLAND AND AMERICAN BANK NOTES.— Des- 
 cription of a Bank of England Note — How Made — Peculiarity of 
 Design — Nuniljcr of Notes Paid out Daily and Number Cancelled 
 — How Burned and Destroyed — The Accountant's Library — Why 
 Notes are Not Reissued — The Bank's Printing Office — Durability 
 of the Notes — Cutting Notes in Two Pieces Sent Through the 
 Mails — Curiosities in the Bank Album — Barlow's Remarks on liank 
 of England Notes — Antiquity of Bank Notes — United States Cur- 
 rency — How it is Printed, Worn Out and Destroyed — Workings of 
 the National Bank Redemption Agency 217-21 'J 
 
 Chapter XVIII. 
 
 ISSUE DEPARTMENT.— NO INTEREST ON DEPOSITS.— Pre- 
 paring Bank Notes for Use — How Notes Get into Circulation — 
 Exchanging Notes for Gold — Inland and Foreign Withdrawals — 
 The Bullion Office — Bank of England Purchasing Gold — Gold 
 Weighing Room — Mechanical Accuracy and Dispatch — No In- 
 terest Allowed on Deposits — An Ex-Governor Defends the Policy 
 of the Bank— A Tradition 230-237 
 
 Chapter XIX. 
 
 PRESENT MANAGEMENT AND DESCRIPTION OF THE 
 BANK OF ENGLAND.— How the Bank is Officered and Man- 
 aged — Qualification and Election of Officers — Salaries — Tenure of 
 Office — Court of Directors — Bank Committees — Explanation of 
 their Duties — Division of the Clerical Force — Working in Harmony 
 — The Secretary and his Duties — Total Number of Employees 
 in the Bank— The Enormous Salary List — Conveniences and Socie- 
 ties for Clerks — Library, Reading and Dining Room — Insurance 
 and Guarantee Society — -Medical Attendance— How Clerks are 
 Appointed — Names of the Various Departments — Description of 
 the Bank — Its Exterior and Interior — Number ()f Acres the Bank 
 Occupies — Statue in Bank, with Inscription Thereon — How the 
 Bank is Guarded — Officers who Reside in the Bank — Eminent 
 Services Rendered by the Bank 238-253 
 
 Chapter XX. 
 
 ENGLISH AND SCOTCH BANKS.— Scotch Banks Not Affected 
 by the Bank of England — First Scotch Bank — Its Founder — Cap- 
 ital and Distiibution of Shares — Origin of British Linen Bank — 
 Passing Through Commercial Crises — Minimum Deposit Received- 
 Allowing Interest on Deposits — Responsibility of Shareholders — 
 Superior Banking System — Taking Advantage of an Old Law — A 
 Scotch Cash Credit — General Solidity of Scotch Banks — Re- 
 sposibility of Bank Partners — Law on Attaching a Debtor's Prop- 
 erty— Scotch and Irish Banks in London 254-260 
 
 Chapter XXI. 
 
 A FINANCIAL pressure.— Definition of a Pressure — Dates of 
 Principal Pressures — Speculation the Main Cause — Gilbart on 
 Pressures — The Duties of a Banker — Pressure of 1847— Report of 
 the Lords' Committee — The Government Asks the Bank of Eng- 
 land for Assistance --Correspondence Between the Bank and the 
 Government . 2C1 -270
 
 xii HISTORY 01' THE BANK OF ENGLAND. 
 
 ClIAPTKR XXII. 
 V COPY OF THE CORRESPONDENCK Between the Chancellor 
 * of the Exchccmcr and the Bank of E,>gla-ul, Relative to the l^c^" 
 
 nevval of the Charter of 1844 "'^ -°' 
 
 Chapter XXIII. 
 
 AMERICAN AND ENGLISH BANKERS ASSOCIATIONS--Con- 
 stitution of the American Bankers Association— \Vho are Eligible 
 to .Memlxrrship -Its Objects- How Con.lncted-'l he English In- 
 stitute of Bankers- Its Consliiuiion- Facilities Affonlcd to Mem- 
 bers—Detailed Account of the Manner of Conducting Business. .^a»-dUl
 
 CHAPTER I. 
 
 ORIGIN OF AND FIRST BANKERS IN THE WORLD. 
 
 Bank First Mentioned in the Bible — Money Changers in the 
 JeivisJi Temple — Origin of the Word Bank — People 
 who Invented Banking— First Bank in Europe — A II 
 the Early Banks in Europe — First Bank in London — 
 How Bills of Exchange Originated — First Funding 
 System — First Permanent National Debt — Bankers 
 of Greece and Rome — High Rates of Interest — Origin 
 of Modern Banking — Goldsmiths as Bankers i)i Lon- 
 don — English Country Bankers — Primitive Financial 
 Methods — Necessity for Money — Fundamental Na- 
 ture of Money — What Ancients Used for Money — 
 When Gold and Silver ivas First Coined — Invention 
 of Money — Money Made of Iron, Wood, Shells, Salt, 
 Brass and Tin Current — Origin of Various Coins. 
 
 The denunciations in the Bible, in Exodus xxii, 25, 
 shows that banking institutions were of very ancient date. 
 The earliest modern bank was that of Venice in 1171, 
 which was finally closed by the conquest of the French
 
 1 1 
 
 HISTORY OK THE 
 
 in 1797. Several of the early banks began at the follow- 
 ing dates: 
 
 Venice 1 171 
 
 Geneva 1345 
 
 Barcelona.. . . 140 1 
 Genoa 1407 
 
 Am-^tcrdam. . 1607 
 Hamburg. . . . 1619 
 
 Rotterdam. . . 1635 
 Stockholm. . . 1C8S 
 Bank of Eng- 
 land 1694 
 
 Scotland 1695 
 
 Copenhagen . 1736 
 
 Berlin 1765 
 
 UnitedStates. 1780 
 StPctersburg 1780 
 
 Ireland 17S3 
 
 France 1800 
 
 The National Banking system of the United States 
 was established by Acts of Congress Feb. 25, 1863, and 
 June 3, 1864. 
 
 In times when nations were chiefly engaged in pas- 
 toral or agricultural pursuits, the trade of banking would 
 hardly suggest itself to anybody as a profitable calling; 
 and until, in the progress of a community toward civiliza- 
 tion, the e.xtent of its commercial dealings had become 
 very considerable, none would be led to give their atten- 
 tion to the occupation of facilitating the money operations 
 of the rest of the mercantile community. It is probable 
 that the necessity for some such arrangement would be 
 first experienced in consequence of the different weights 
 and degrees of fineness of the coined money and bullion 
 which would pass in the course of business between mer- 
 chants of different nations. The principal occupation of 
 the money-changers mentioned by St. Matthew, by whom 
 the sacredness of the Jewish Temple was invaded, was 
 doubtless that of purchasing the coins of one country, and 
 paying for them in those of their own or of any other 
 people, according to the wants and convenience of their
 
 BANK OF ENGLAND. 15 
 
 customers. It is likewise probable that they exercised 
 other functions proper to the character of bankers, by tak- 
 ing in and lending out money, for which they either 
 allowed or charged interest {MattJiciv xxv. 27). Little, 
 however, is known with certainty regarding the nature of 
 the money dealings of the ancient Jews. 
 
 In the time of Demosthenes, banking operations were 
 carried on to a great extent in Athens. They exchanged 
 foreign moneys, received deposits at interest, and gave 
 loans. The bankers were generally of low origin, such as 
 freedmen and aliens; but they frequently rose to great 
 wealth and eminence. 
 
 Gilbart in his "Treatise on Banking" says the term 
 bank is derived from banco, the Italian word for bench, as 
 the Lombard Jews in Italy kept benches in the market 
 place, where they exchanged money and bills. When 
 a banker failed, his bench was broken by the populace; 
 and from this circumstance sprang the term bankrupt. 
 
 In the year 1171 the City of Venice was at war with 
 both the eastern and western Empires. The finances were 
 in a state of great disorder, and the Great Council ordered 
 a forced loan of one per cent, from every citizen, upon 
 payment of interest at five per cent. Commissioners were 
 appointed to manage the payment of the interest to the 
 bond holders and the transfers of the stock. The citizens 
 received stock certificates in exchange for the sums they 
 paid, bearing interest, which they might sell or transfer to 
 any one else. The original loan was called the Monte 
 Vecchio; afterwards two other similar loans were contract- 
 ed which were called the Monte Nuovo and Monte Nuovis- 
 simo.
 
 IG HISTORY OF THE 
 
 At this period the Germans were masters of a great 
 part of Italy; and the German word Banck came to be 
 used as well as its Italian equivalent Monte, and was Ital- 
 ianized into Banco, and the loans on public debts were 
 called indifferently Monti or Banchi, and the word was 
 finally reduced to Banke; thus we find an English writer, 
 Benbrigge, in 1646, speaking of "The three Bankes of 
 Venice." 
 
 Galiani, an Italian historian, says: " Lombard Jews 
 invented the business of banking in Rome in the ninth 
 century, and were called Argentarii. They received the 
 money of their clients much after the manner of the banks 
 of the nineteenth century, who could give their creditors 
 cheques on their bankers, as is also the modern custom. 
 They also invented bills of exchange, and to send a draft 
 for money was called permutare. We find in the middle 
 ages an increase in the business of the Roman banks. As 
 commerce increased in the prosperity of the eleventh cen- 
 tury, they established correspondents in various parts of 
 Europe and drew bills upon them called Bills of Exchange." 
 
 The meaning of the word bank was the same in Eng- 
 lish when it was first introduced. The essential features 
 of all these early banks was that a number of persons 
 placed their money in them and received in exchange for 
 it, credit or a promise to pay, which credit they might 
 transfer to any one else. The Bank of England was form- 
 ed in a similar manner of a company of persons who 
 advanced a sum of money to the government and received 
 in exchange for it an annuity. This was the foundation 
 of the national debt of Great Britain, and to the present 
 day the funds are legally called "Bank Annuities."
 
 BANK OF ENGLAND. l7 
 
 During the Middle Ages, when commerce was but 
 little developed, there was little field for banking opera- 
 tions; but the business was first established in Europe by 
 the Lombard Jews in Italy, A. D. 808, of whom some set- 
 tled in Lombard Street, London, where many bankers still 
 have their places of business. It seems to have been 
 revived in Florence during the early part of the twelfth 
 century. From the success that attended the commercial 
 enterprises of the Florentines, that city became the centre 
 of the money transactions of every commercial country of 
 Europe, and her merchants and bankers accumulated great 
 wealth. At one time Florence is said to have had 80 
 bankers; and we find that between 1430 and 1433, 76 bank- 
 ers at Florence lent the state 4,865,000 gold florins. 
 
 As previously stated, the earliest public bank in 
 modern Europe was that of Venice, founded in ii/r. It 
 originated in the financial difficulties of the State, which, 
 in order to extricate itself, had recourse to a forced loan 
 from the citizens, promising them interest at the rate Of 
 five per cent. The stock was made transferable, and a 
 body of commissioners, called the Camera degli Imprestiti, 
 or Chamber of Loans, was appointed to manage the trans- 
 fer of stock and the payment of interest. This is believed 
 to be the earliest instance on record of the funding system, 
 and the first example in any country of a permanent 
 national debt. This Chamber of Loans, as originally insti- 
 tuted for the purpose of managing the public debt, could 
 scarcely be called a bank; and it does not appear to have 
 carried on anything like a banking business for several 
 centuries. Venice being the centre of an enormous com- 
 merce, foreign coins, usually in a very worn or clipped
 
 18 HISTORY OF THE 
 
 condition, were in circulation, to the great inconvenience 
 of merchants; and hence the State had recourse to the 
 expedient of authorizing theChamber of Loans to receive 
 coins of all sorts, and to pay for them in notes an amount 
 corresponding to the real amount of bullion deposited. 
 These notes promised to pay the bearer on demand a defi- 
 nite quantity of bulHon of the proper fineness. The bank, 
 however, does not seem to have discounted bills on its 
 own account. Its only advantage was to save the wear 
 and tear of the coinage, and to insure a uniform standard 
 jn mercantile transactions. Its notes always bore a prem- 
 ium as compared to the current money of the city; and it 
 continued to exist until the fall of the republic in 1797. 
 
 Banking appears to have reached a high state of de- 
 velopment among the ancients. The bankers of Greece 
 and Rome exercised nearly the same functions as those of 
 the present day, except that they do not appear to have 
 issued notes. They received money on deposit, to be re- 
 paid on demands made by cheques or orders, or at some 
 stipulated period, sometimes paying interest for it, and 
 sometimes not. Their profits arose from their lending the 
 balance at their disposal at higher rates of interest than 
 they allowed the depositors. They were also extensively 
 employed in valuing and exchanging foreign moneys for 
 those of Athens, Corinth, Rome, &c., and in negotiating 
 bills of exchange. In general they were highly esteemed 
 and great confidence was placed in their integrity. The 
 rate of interest charged by the bankers was sometimes very 
 high, but that was not a consequence, as has been alleged, 
 of their rapacity, but of the defective state of the law 
 which, as it gave every facility to debtors disposed to
 
 I;ANK of ENGLAND. 19 
 
 evade payment of their debts, obliged the bankers to 
 guarantee themselves by charging a proportionally high 
 rate of interest. 
 
 Banking reappeared in Italy upon the revival of civil- 
 ization. The bank of Venice is reputed the first in date in 
 the history of modern Europe; but it did not become a 
 bank, as we understand the term, till long after its founda- 
 tion. Historians inform us that the republic, being hard 
 pressed for money, was obliged, upon four different 
 occasions, in 1156, 1171, 1480, and 15 10, to levy forced con- 
 tributions upon the citizens, giving them in return perpetual 
 annuities at certain rates per cent. The annuities due 
 under the forced loan of 1156 were, however, finally ex- 
 tinguished in the i6th century; and the offices for the 
 payment of the annuities due under the other two loans 
 having been consolidated, eventually became the Bank of 
 Venice. This might be effected as follows: — The interest 
 on the loan to Government being paid punctually, every 
 claim registered in the books of the office would be con- 
 sidered as a productive capital; and these claims, or the 
 right of receiving the annuity accruing thereon, must soon 
 have been transferred, by demise or cession, from one per- 
 son to another. This practice would naturally suggest to 
 holders of stock the simple and easy method of discharg- 
 ing their mutual debts by transfers on the office books, 
 and as soon as they became sensible of the advantages to 
 be derived from this method of accounting, bank-money 
 was invented. It will, however, be seen that the estab- 
 lishment thus described was at first no more than the 
 transfer office of a National Debt, transfers of which were 
 accepted at par in discharge of private debts, and it is
 
 20 HISTORY OF THE 
 
 indeed said that the funded debt transferred sometimes 
 commanded a sHght premium above the current money 
 of the republic. This cstabHshmcnt was ruined, after 
 passing through many changes, by the invasion of the 
 French in 1797. Thus the origin of modern banking may 
 be authentically and directly traced to the money-dealers 
 of Florence, who were in high repute as receivers on de- 
 posit and lenders of money in the 14th century; and 
 banking was indeed practiced at Florence in the 13th if 
 not in the 12th century. Mr. Macleod writes {English 
 Banking, vol. i. 289) — 
 
 "The names of the Bardi, Acciajuoli, Peruzzi, Pitti, 
 and Medici were famous throughout Europe. In 1345 the 
 Bardi aud the Peruzzi, the two greatest mercantile houses 
 in Italy, failed. Edward III. owed the Bardi 900,000 gold 
 florins, which his war with France prevented him paying; 
 and the king of Sicily owed them 100,000 gold florins. The 
 deposits of citizens and strangers with the Bardi were 
 550,000 gold florins. The Peruzzi were owed 600,000 gold 
 florins by Edward III., and 100,000 by the king of Sicily, 
 and the deposits they owed their customers were 350,000 
 gold florins. The fall of these two great pillars of credit 
 involved that of multitudes of other smaller establishments; 
 the community of Florence had never been thrown into 
 such ruin and disorder before. And thereupon he breaks 
 out against the folly of his fellow-citizens, entrusting their 
 money to the care of others for the love of gain. The city, 
 however, recovered from this terrible disaster, and we find 
 that between 1430 and 1433 seventy-six bankers at Flor- 
 ence lent 4,865,000 gold florins. At one time Florence is 
 said to have had eighty bankers, but not any public bank."
 
 BANK OF ENGLAND. 21 
 
 The business of banking was not introduced into En- 
 gland till the 17th century, when it began to be undertaken 
 by goldsmiths in London, who appear to have borrowed it 
 from Holland. It was attacked as innovations commonly 
 are. From a pamphlet published in 1676, entitled TJie 
 Mystery of the Ncw-Fashioned Goldsmiths or Bankers 
 Discovered, a passage may be reproduced that will be found 
 interesting: — "Much about the same time — the time of the 
 civil commotion— the goldsmiths (or new-fashioned bank- 
 ers) began to receive the rents of gentlemen's estates 
 remitted to town, and to allow them, and others who put 
 cash into their hands, some interest for it if it remained 
 but a single month in their hands, or even a lesser time. 
 This was a great allurement for people to put money into 
 their hands, which would bear interest till the day they 
 wanted it; and they could also draw it out by one hund- 
 red pounds or fifty pounds, &c., at a time as they wanted 
 it, with infinitely less trouble than if they had lent it out 
 on either real or personal security. The consequence was 
 that it quickly brought a great quantity of cash into their 
 hands, so that the chief or greatest of them was now 
 enabled to supply Cromwell with money in advance, on 
 the revenues, as his occasion required, upon great advan- 
 tages to themselves." 
 
 Sir Josiah Child also attacked "that innovated prac- 
 tice of bankers in London" in his Neiu Discourse of Trade, 
 though he subsequently became himself a banker ; and 
 his house, Messrs Child & Co., of Temple Bar, and the 
 house of Messrs Hoare, in Fleet Street, still survive as the 
 only private banks now in existence in London which 
 were established previous to the Bank of England.
 
 22 HISTORY OF THE 
 
 Money matters in England were also for some time 
 regulated by the Royal Exchangers, but their calling fell 
 into disuse until revived by Charles I. in 1627. The royal 
 mint in the tovver of London was used as a bank of deposit 
 until Charles I., by a forced loan, in 1638, destroyed its 
 credit. The Goldsmiths' Company, of London, undertook 
 private banking in 1645, but on the closing of the Exche- 
 quer, in 1672, their transactions terminated. 
 
 It thus appears that in every country where money 
 was in use, there the trade of banking seemed to follow 
 as a natural consequence. According to the commonest 
 principles of the economy resulting from division of labor, 
 wherever money came into general use, there banking 
 became a common trade, in the same way as the trades of 
 butchers and bakers, all found equally useful in their re- 
 spective ways for the distribution of articles of consumption 
 in the most easy and in the most economical manner. 
 Banking was the channel into which money passed almost 
 as an article of commerce, — the mode by which the money, 
 not immediately required by one individual, found its way 
 to be used by another : the banker thus appearing to act, 
 and really acting, in the double capacity of borrower and 
 lender ; but in neither case was he a creator, but a mere 
 distributor of capital, any more than the butcher perform- 
 ed any other functions than that of distributing the articles 
 in which they respectively dealt, and thus contributing to 
 the general wealth of the community by the economy of 
 time and money effected by this general system. 
 
 Prior to the establishment of the bank of England, 
 banking in London was conducted first by the Jews, who 
 were succeeded by the Lombards, who were in turn sup-
 
 BANK OF ENGLAND. 23 
 
 planted by the goldsmiths. The latter lent money at 
 rates much below those charged by their predecessors, 
 and they issued promissory notes payable on demand, or 
 at a certain period after date. These bankers deposited 
 their funds at the royal mint in the tower of London. 
 This practice was discontinued when Charles I., being in 
 want of money, seized the amount thus deposited, 
 ;^200,000, by which means the bankers were utterly ruin- 
 ed. During the civil war the business of the goldsmiths 
 largely increased, and during the commonwealth, as well 
 as subsequently, various plans were devised by different 
 individuals for the establishment of public banks. No 
 action was, however, taken to mature and carry out these 
 plans until the establishment of the bank of England. 
 After the seizure of the funds by Charles I., it was the 
 practice of the goldsmiths to deposit their surplus means 
 in the Exchequer, which funds were drawn once a week, to 
 meet such demands as might be made upon their owners. 
 Charles II., in 1672, being in want of money, closed the 
 Exchequer, and seized the funds belonging to the gold- 
 smiths, amounting to ;^i,328,562, oa which there accrued 
 25 years' interest, making thereby a sum total of ;^3,32i,- 
 313. No consideration was given for any part of this large 
 sum, except ^£664,26^, for which government loan was 
 issued, forming the basis of the present national debt of 
 Great Britain. As may readily be imagined, the gold- 
 smiths were ruined irretrievably by this infamous pro- 
 ceeding. 
 
 The earliest country bank established in England, of 
 which there exists any record, was at Newcastle-on-Tyne, 
 in 1755. This was a bank of issue. From that period the
 
 24 HISTORY OF THE 
 
 number of these institutions increased. In 1694 the Bank 
 of England was established. 
 
 In the primitive ages of the world we have abundant 
 evidence that there was no such a thing as money. When 
 persons traded, they exchanged the products directly with 
 one another. Thus we have in Iliad, vii. 468: — 
 
 •'From Lemnos' Isle a numerous fleet had come 
 Freighted with wine. * * * * 
 » * * * All the other Greeks 
 Hastened to purchase some with brass, and some 
 With gleaming iron : some with hides, 
 Cattle, or slaves." 
 
 This exchange of products against products is termed 
 barter, and the inconveniences of this mode of trading were 
 palpable. What haggling and bargaining it would require 
 to determine how much leather should be given for how 
 mtich wine, how many oxen, or how many slaves.'' Some 
 ingenious person would then discover that it would great- 
 ly facilitate traffic, if the things to be exchanged were 
 referred to some common measure. But the state of barter 
 still continued, as it is quite common at the present day 
 when the precious metals are used as money, to exchange 
 goods according to their value in money. Such a state of 
 things in no way implied money, or currency, or circulat- 
 ing medium. 
 
 The necessity for money arises from a somewhat 
 different cause. So long as the things exchanged were 
 equal in value there would be no need for money. If it 
 happened that the exchanges of products or services among 
 persons were equal, there would be an end of the matter. 
 But it would often happen that when one person required 
 some product or service from his neighbor, that neighbor
 
 DANK OF ENGLAND. 
 
 would not require an equal amount of product or service 
 at the same time, or, perhaps, even none at all. If then a 
 transaction took place with such an tineqiial result, there 
 would remain a certain amount or difference of product 
 due from the one to the other, and this would constitute a 
 debt — that is to say, a right or property would be created 
 in the person of the creditor to demand this balance of 
 product at some future time, and at the same time a duty 
 is created in the person of the debtor to pay the product, 
 or perform the service, when required. 
 
 Now among all nations who exchange, this result 
 must happen : — Persons want something from others when 
 those other persons want nothing from them. And it is 
 easy to imagine the inconveniences which would arise if 
 persons never could get anything they wanted, unless the 
 persons who could supply these things wanted something 
 in return at the same time. In process of time all nations 
 hit upon this plan : — they fixed upon some material sub- 
 stance which they agreed to make always exchangeable 
 among themselves to represent the amount of debt. That 
 is, that if an unequal exchange took place among persons 
 with a balance due from one to the other, then an amount 
 of this universally exchangeable merchandise was given 
 to make up the balance, so that the person to whom the 
 balance was due might get an equivalent from some other 
 person. 
 
 Thus is seen the fundamental nature of money, as this 
 universally exchangeable merchandise is called ; its espe- 
 cial and particular purpose is to represent the debts 
 that arise from unequal exchanges among men, and 
 to enable persons to obtain the equivalent of the
 
 26 HISTORY OF THE 
 
 service they have done to one person from some one 
 
 else. 
 
 An old phamphleteer in 1710 writes: "Trade found 
 itself unsuffcrably straightened and perplexed for want of 
 a general specie of a complete intrinsic worth as a medium 
 to supply the defect of exchanging, and to make good the 
 balance, where a nation, or a market, or a merchant de- 
 mands of another a greater quantity of goods than either 
 the buyer had goods to answer, or the seller had occasion 
 to take back." 
 
 But when we consider the purposes for which money 
 is intended, it is easily seen that no substance possesses so 
 many advantages as metal. The use of money being to 
 preserve the record of services being due to the owner of 
 it for any future time, it is clear that it should not be lia- 
 ble to alter by time. A money of dried codfish would not 
 be likely to keep very long, nor would it be very easy 
 divisible. One of the first requisites of money is that it 
 should be divisible into very small fragments, so that its 
 owner should be able to get any amount of service at any 
 time he pleases. Taking these requisites into considera- 
 tion, it is manifest that there is no substance which com- 
 bines these qualifications so well as metal. It is uniform 
 in its texture, and it can be divided into any number of 
 fragments, each of which shall be equal in value to another 
 fragment of equal weight ; and if required, these frag- 
 ments can always be reunited, and form a whole again of 
 the aggregate value of all its parts. All civilized nations, 
 therefore, have agreed to adopt a metal as money, and 
 of metals, gold, silver and copper have been chiefly 
 used.
 
 SANK OF ENGLAND. 27 
 
 MONEY AND PRECIOUS METALS FIRST DISCOVERED AND 
 
 USED. 
 
 Salt is current in Abyssinia. 
 
 Codfish is current in Iceland. 
 
 Cakes of tea are used in India. 
 
 Shells are used in India and Africa. 
 
 Pieces of silk pass as money in China. 
 
 Bronze was coined in China 1120 B. C. 
 
 Silver coin was used in Britain 25 B. C. 
 
 Gold was first coined in Rome 207 B. C. 
 
 Silver was a metal known to the ancients. 
 
 Tin was coined by Dionysius I. of Syracuse. 
 
 Leaden coin is current in the Burman Empire. 
 
 Platinum was coined in Russia A. D. 182S — 1845. 
 
 Gold is a metal known from the remotest times. 
 
 Silver money was not used in Rome before 269 B. c. 
 
 Brass money is spoken of by Homer as existing 1184 
 B. c. 
 
 Brass was coined in Rome under Servius Tullius 573 
 B. c. 
 
 Paper money was in use in the 13th century at Milan, 
 Italy. 
 
 Cattle were used for money in ancient Greece and 
 Rome. 
 
 Nails of iron and copper were used in Greece as the 
 National coin. 
 
 Wampum was used by the American Indians as a pur- 
 chasing power. 
 
 Skins of wild animals were used by the ancient 
 Romans for currency.
 
 OK HISTORY or THE 
 
 According to Heroditus the Lydians were the first 
 to coin gold and silver. 
 
 Quantities of pasteboard were coined in Holland A. D. 
 1574, and passed current as money. 
 
 The largest collection of coins, 125,000 in number, is 
 in the cabinet of antiquities, Vienna. 
 
 Money was made of wood and leather by Numa Pom- 
 pilius, King of Rome, about 700 B. C. 
 
 Money was coined in the Temple of Juno Moncnta, 
 from whence the English word money was derived. 
 
 The inner bark of the mulberry tree was cut into 
 round pieces, stamped and used as money in China in 
 ancient days. 
 
 The Parian Chronicle ascribes the first coinage of 
 copper and silver money to Pheidon, King of Argos in 
 yEgina, 895 B. C. 
 
 The ancient English penny, penig. or pening, was the 
 first silver coin struck in England, and the only one cur- 
 rent among the early Saxons. 
 
 The coin known as the guinea took its denomination 
 because the gold whereof the first was struck was brought 
 from that part of Africa so called. 
 
 In Britain as late as the Norman conquest two kinds 
 of money was in use, living money consisting of slaves and 
 cattle, dead money consisting -of metal. 
 
 About A. D. 1635, among the Colonists of Massachu- 
 setts the prevailing currency was wampum, corn and 
 beans ; musket balls passed for a farthing apiece. 
 
 A mint was established at Camulodumum (Colches- 
 ter), England, by Cunobelin, one of the native kings, dur-
 
 BANK OF ENGLAND. 29 
 
 ing the reign of Augustus, where money was coined of 
 gold, silver and brass. 
 
 Coin {cuna pecunid) seems to come from the French 
 coigit, that is, angulus, " a corner ; " whence it has been 
 held that the most ancient sort of coin was square with 
 corners, and not round as it now is. 
 
 Cash, in a commercial style signifying the ready 
 money which a banker, or merchant, or other person has 
 at his present disposal, and is so called from the French 
 term caisse, that is, " chest or coffer," for the keeping of 
 money. 
 
 The etymology of the word scylling would lead one 
 to suppose it to have been a certain quantity of uncoined 
 silver ; for whether it is derived from pcylan, " to divide ;" 
 or pecale, "a scale," the idea presented by either word is 
 the same ; that is, so much silver cut off, as in China, and 
 weighing so much. 
 
 Though a pound is one of the most common denomi- 
 nations for money, it never was a real coin, either in gold 
 or silver, in any age or country. Such large and ponderous 
 coins would have been in many respects inconvenient. 
 But for many ages, both in Great Britain and in other 
 countries, that number of small coins which was denomi- 
 nated a pound in computation, or a pound in sale, really 
 contained a pound of silver, and they might have been and 
 frequently were weighed, as well as numbered, to ascer- 
 tain their value. If the number of coins that were denomi- 
 nated a pound in sale, did not actually make a pound in 
 weight, an additional number of coins were thrown in to 
 make up the weight.
 
 CHAPTER II. 
 
 DUTIES AND USES OF BANKS AND BANKERS. 
 
 IV/iai is a Banker }— First Bank of Deposit— Interest 
 from Borrowers — A Bank in its Simplest Form — 
 How Profits are Derived — Hoiv to Pay Interest on 
 Deposits — Security Against Fraud — Safest Way of 
 Loaning Deposits - -Securities Pruden t Bankers A void 
 — The Power of Credit— Keeping Deposits on Hand — 
 The Many Uses of Banks — William E. Gladstone on 
 Credit — Banks of Issue and Banks of Deposit — Ad- 
 vantages of Combining a System of Lending Money 
 with that of Receiving It — Origin of English 
 Pounds, ShillingSy Pence, Guineas and Sovereigns — 
 Thompson Hankey, an Ex -Governor of the Bank of 
 England, on Bankers — Banking Schemes and Projects 
 Prior to the Foundation of the Bank of England — 
 The Idea of Credit Banks. 
 
 A BANKER is the custodian of the money of other per- 
 sons. Such is his business viewed in its simplest aspect. 
 A banker, if he hoarded the money deposited with him,
 
 BANK OF ENGLAND. 31 
 
 would be simply a cash keeper to the public ; his bank 
 would be literally a bank of deposit. Even were the bus- 
 iness of banks Hmited to the keeping of deposits, it would 
 be of no small advantage to society ; the depositors would 
 be retired from the care of their money and in many cases 
 from the trouble of handing it to those to whom they 
 required to make payment. If the person to whom the 
 depositor wishes to pay money intends also to deposit it, 
 a transfer in the books of the banker, from the one to the 
 other, made on the order or check of the depositor, would 
 effect the payment. The money itself would lie undis- 
 turbed. The Bank of Amsterdam, which was founded in 
 1607, was a bank of deposit simply. But the business of 
 receiving money has almost always been, and is now uni- 
 versally, in all portions of the civilized world, combined 
 with that of lending it out. A banker does not hoard all 
 the money deposited with him — he gives the greatest por- 
 tion out to loan. The lending of money is as much a part 
 of his business as the receiving of deposits. For the 
 money he lends he receives interest from the borrowers ; 
 and in this interest he is paid for his trouble in taking 
 charge of the deposits, and for his risk of bad debts. The 
 services that a banker performs as the cash-keeper of his 
 depositors are great. In the case of persons, not them- 
 selves in business, it is quite usual for a banker to make 
 all their money payments, beyond their small daily expen- 
 ditures, and to receive the money payable to them. 
 
 A bank, in its simplest form, is an institution where 
 money may be deposited for safe keeping ; but banks are 
 now established to lend as well as to receive money ; and 
 the profits of a banker are commonly derived from the
 
 33 HISTORY OF THF. 
 
 excess of the interest he receives from those indebted to 
 him over the interest he allows, so fiir as he allows any, 
 to those who have deposited money with him. 
 
 When money is received on deposit it is commonly 
 repayable to the depositor alone, to whom a deposit note 
 or receipt is given, but it may be also paid to any one 
 to whom the depositor gives an order on the bank. 
 
 If a banker undertakes to pay interest on deposits, the 
 rate generally varies according to the length of the notice 
 the depositor agrees to give before withdrawing the 
 money, the ability of the banker to deal with it being, of 
 course, dependent upon tlie time he may rely upon keep- 
 ing it. When money is received on a current or drawing 
 account the customer of the banker draws it out, as he 
 requires, by means of orders, to which the specific name 
 cheques is given. Partly for convenience and partly by 
 way of security against fraud, bankers are in the habit of 
 giving their customers books of forms of cheques consecu- 
 tively numbered. 
 
 In a primitive state of society, where the community 
 consumes immediately, or presently, all the produce of its 
 labor, there can be no such thing as capital. All the com- 
 munity may be in a happy and comfortable condition, but 
 so long as this state of things continues, it never can be 
 possessed of capital. When, however, the same commu- 
 nity, or any part of it, desires and finds it possible to lay 
 by a part of its produce, that is to consume less than it 
 produces, such surplus becomes capital. 
 
 A banker often makes advances upon the deposit of 
 government securities, railway debentures, bills of lading, 
 mortgages, municipal bonds, and such like ; but, except
 
 BANK OF ENGLAND. 33 
 
 the government securities, the others are generally looked 
 carefully into by prudent bankers. Loans are usually 
 divided into short loans and dead loans, \.\iQ. former having 
 a fixed time for their repayment, the latter no fixed time. 
 Loans of the latter class are generally avoided. Advances 
 upon deeds, except in agricultural districts, are always 
 objectionable. If depositors have the power of demand- 
 ing the amount of their deposits of any kind from the 
 banker, while he usually makes his advances for a fixed 
 or definite period, it is evident that he must always have 
 on hand, uninvested, a considerable sum to meet such 
 claims. The amount necessary for this purpose may gen- 
 erally be pretty nearly estimated. It depends upon a 
 number of circumstances ; as the state of the money mar- 
 ket, the amount and nature of the deposits, the average 
 amount of daily payments, and the like. If a banker is at 
 liberty to issue bank-notes to a certain amount, it is evi- 
 dent that the profit derived therefrom is equal to the inter- 
 est upon the difference between the average amount in 
 circulation and the amount of specie required to be kept 
 on hand to meet them, less the expense of their manufac- 
 ture. If, however, a banker were obliged to keep dead 
 stock or bullion equal to the amount of his notes in circu- 
 lation, he could make no profit. But for a banker in good 
 credit it is considered that a 4th or a 5th part of this sum 
 is usually sufficient. Besides serving as places for the 
 safe custody of money, and allowing interest on deposits, 
 banks are of great use in a safe and rapid transference of 
 money from one place to another. 
 
 Banking is trading in and with money — buying, sell- 
 ing, exchanging, receiving and paying money — not mon-
 
 j4 history or TMK 
 
 ey's worth, not goods, but money in some shape or form- 
 that medium which is used in all civilized societies for 
 denoting a certain exchangeable value, and thus rendering 
 as simple and as easy as possible the mutual exchange of 
 all the commodities required for the use of mankind. 
 
 In considering the advantage and economy derived 
 by society from a system of banking, it is of essen- 
 tial importance to bear in mind this very general 
 definition, because it is by no means unfrequently sup- 
 posed that bankers possess great powers of adding to the 
 existing wealth of the country by augmenting its capital 
 —powers which cannot properly be attributed to them. 
 
 William I^. Gladstone once said in a parliamentary 
 debate : — 
 
 "Though banks afford a valuable assistance in the 
 collection and distribution of capital, it must not be sup- 
 posed, as is often done, that they have any direct influence 
 over its formation. That is the joint effort of industry 
 and economy — the former in producing convenient and 
 desirable articles, and the latter in saving and preserving 
 them for future use. Credit is neither more nor less than 
 the transfer of money or other valuable produce from one 
 set of individuals called lenders, to another set called bor- 
 rowers — a transfer which is greatly facilitated by the 
 establishment of banks. And as there can be no reason- 
 able doubt that those who borrow have, in the majority 
 of instances, better means of employing capital with 
 advantage than those by whom it is lent, its transference 
 from the one to the other will, in so far as this presump- 
 tion is realized, be publicly advantageous. But this is the 
 entire extent of the beneficial influence of what is called
 
 
 HANK OF KNCLAND. 
 
 credit ; and when it happens, as is too often the 
 divert capital into the pockets of knaves and gamblers, it 
 is disadvantageous. No doubt we frequently hear of great 
 undertakings being carried on by means of credit; but 
 such statements are entirely false and misleading. They 
 will, indeed, be uniformly found, when analyzed, to mean 
 / only that the undertakings are carried on by means of 
 borrowed capital. Credit is impotent to produce anything 
 whatever. It is, in fact, a mere name for the trust reposed 
 by a lender in a borrower. To call it capital is as much 
 an abuse of language as it would be to call weight color, 
 or color weight. It may transfer money or produce from 
 A to B, or from C to D, but that is all that it either docs 
 or can do. When credit is said to be high, nothing is 
 really meant save that those who have money or capital 
 to lend have great confidence in the borrowers, and con- 
 versely when credit is said to be low." 
 
 Among the instruments of civilization which the 
 ingenuity and industry of man have given to his species, 
 not one has been so completely characterized by the 
 elements of potency of affect and universality of applica- 
 tion as money, says Lawson in his ancient History of 
 Banking. The love of gold has been associated in the 
 minds of unphilosophical moralists with an inordinate 
 appetite for wealth, oblivious of the truism that in the 
 absence of money, the comparative productions of nature, 
 and of the labors of man, might be appreciated, but could 
 not be harmoniously adjusted. In the days when gold 
 was not, swains might barter a sheep for a cow, and con- 
 sider it a good bargain, but when those days of simplicity 
 developed into days of wisdom, a more thorough apprecia-
 
 ^Q insToRV oi HIE 
 
 tion of things took place. A very small quantity of the 
 finest metals, such as gold and silver, being, by reason of 
 their scarcity, of greater value than other commodities, 
 because by common consent the means whereby all things 
 necessary for man might be obtained ; and in all ages they 
 have been distinguished as precious metals by all civilized 
 nations, and people have exerted their utmost industry 
 and ingenuity in procuring them. But as even gold and 
 silver were subject to be adulterated by the admixture of 
 baser metals, certain standards were agreed upon by which 
 to ascertain their purity; and their value was computed 
 by weight, the unit of quantity being some known natural 
 substance, the variations in which were supposed to lie 
 within very narrow limits. 
 
 To conform to this measurement the pennyweight 
 was devised. Henry the Third caused a grain of wheat 
 gathered from the middle of the ear to be the standard 
 weight ; and, thirty-two of these, well dried, were to 
 make one pennyweight ; twenty pennyweights one 
 ounce, and twelve ounces one pound Troy ; then it was 
 thought advisable to divide the pennyweight into twenty- 
 four equal parts, called grains. 
 
 Before, however, we proceed to develop the progress 
 of banking in England, a word will not be amiss on En- 
 glish money. Previous to the Norman Conquest, the 
 mode of reckoning by the Anglo-Saxons was by pounds or 
 pence. It is recorded that William the Conqueror intro- 
 duced into England the method of reckoning by pounds, 
 shillings, and pence, or by pounds, ounces and penny- 
 weights. The pound weight of silver was divided into 
 twelve shillings, composed of twenty pennies each— cor-
 
 BANK OF ENGLAND. 37 
 
 responding to pounds, ounces and pennyweights — or 
 twenty shillings, of twelve pennies each, but it was not 
 till some time afterwards that it obtained the denomina- 
 tion of the "pound sterling." 
 
 Antiquaries and critics are greatly divided in their 
 opinion as to the origin of the word sterling. One writer 
 attributes it to the Castle of Striveling, or Sterling, in 
 Scotland, where a small coin was anciently struck which 
 it is supposed gave the name to all the rest. 
 
 We must now explain how a certain weight of gold 
 bullion has come in modern times to be called a pound. 
 The original measure of value in England, France and 
 Scotland was the pound weight of silver bullion. No 
 coin, however, of this actual weight was ever struck. But 
 the pound weight of silver bullion was cut into 240 pieces 
 called pence. Twelve of these pence were called a shilling 
 or solidus; and therefore twenty shillings, or solidi, made 
 a pound. These 240 pence actually weighed a pound of 
 bullion. 
 
 Now let us denote the pound weight of metal in the 
 form of bullion by the symbol — ib., and the pound weight 
 of metal in the form of coin by the symbol — £. Then we 
 have — 
 
 240 pence =20 shillings= iiJ' = iftt. 
 
 It is perfectly clear that if the pound weight of bullion 
 were divided into a greater number of pieces than 240, 
 that greater number would still be equal to the pound 
 weight ; and if we denoted by the symbol £, 240 pieces or 
 pence, irrespective of their weight, we should have the iBb, 
 equal to £\ + the number of pieces above 240. 
 
 Now this is what has been done in the coinages of all 
 
 08S478
 
 38 HISTORY OF THE 
 
 the three countries before mentioned. The sovereigns of 
 these countries were frequently in want of money to 
 pursue their various extravagances, and as they could not 
 make more money they adopted the fraudulent and surrep- 
 titious plan of cutting the pound weight of bullion into a 
 greater number of pieces, but they still called them by the 
 same name. By this means they gained an illusory aug- 
 mentation of wealth. As they could not multiply the 
 quantity of the metal, they at various periods falsified the 
 certificate. While they still called them by the same 
 name, they diminished the quantity of bullion in them, 
 and so coined more than the original number of pence 
 out of a pound weight of bullion. 
 
 The consequence of this was very manifest, as 240 
 pence were still called a pound, or £, in money, whatever 
 their weight was, and as more than 240 pence were coined 
 out of a pound weight of bullion, the £, or pound of money 
 in coin, began to vary from the ft., or pound weight of 
 bullion. Edward I. began this evil practice in 1300, when 
 he coined 243 pence out of the pound Avcight of bullion. 
 Subsequent sovereigns followed the same evil example ; 
 and this falsification of the certificate increased till in the 
 time of Elizabeth no less than 744 pence, or 62 shillingsT" 
 were coined out of the pound weight of bullion. Then we 
 have manifestly— 
 
 744 pence=62 shillings=;{^3 2.y==ilb. 
 
 As there are twelve ounces in the pound weight of 
 bullion, it is seen that each ounce was coined into sixty- 
 two pence, and hence as the value of bullion is measured 
 by the ounce, the mint price of silver was said to be 55. 2d. 
 the ounce.
 
 BANK OF ENGLAND. 39 
 
 In the reign of Charles II., the African Company 
 brought home a large quantity of gold from the Guinea 
 coast. He had it coined into pieces called guineas, which 
 were intended to represent the £, or twenty shillings in 
 silver. In 1717 Sir Isaac Newton, then Master of the 
 Mint, reported to Parliament that the true value of the 
 guinea according to the relative market value of gold and 
 silver at that time was 20s. 8d. A royal proclamation, 
 however, was issued, declaring them to be current at 
 twenty-one shillings. 
 
 Gold and silver coin were then made unlimited legal 
 tender for debts of any amount. Gold gradually became 
 to be considered as the measure of value in England. 
 
 Forty pounds weight of standard gold bullion by the 
 regulations of the English mint are cut into 1,869 pounds. 
 
 The legal weight of a sovereign or pound is five dwts. 
 3^3 grains, containing 1 13623 grains of fine gold. Sovereigns 
 which fall below 5 dwts. 2f grains, and half-sovereigns of 
 less than 2 dwts. 13^ grains, cease to be legal tender. 
 
 It was adopted as a principle of law in 1816 that a 
 nation should adopt only one metal as the legal measure 
 of value, and make any other that may be used subsidiary 
 ^nd gold coin was declared the only legal tender to an 
 unlimited amount, and the silver and copper coins were 
 intended only as small change for the gold coin. 
 
 Banks are usually divided into three classes, as they 
 are merely for the custody or issue of money, or for both. 
 
 Banks of Deposit.— The first class, or the banks of 
 deposit, are, strictly speaking, those early banks which 
 received money or valuables for custodjf, and kept them 
 in their coffers till called for; but now the term is gener-
 
 40 
 
 HISTORY OF THE 
 
 ally applied to those establishments that receive money 
 from their customers, and lend it out to others at a higher 
 rate of interest. 
 
 Banks of Issue.— Banks of issue arc those that issue 
 their own notes for circulation ; but as they likewise 
 receive deposits, the term is generally applied to what 
 forms the third class of the division. Were the duties of 
 banks limited to the safe custody of money, they would 
 still be of immense advantage to the public. Every one 
 who has the care of large sums of money knows the anx- 
 iety that attends their custody, and the risks to which 
 they are subjected ; and hence the value of a place of 
 security in which to lodge them. This gave rise to the first 
 formation of public banks. But. were the money merely 
 to lie idly in the coffers of the bank, it is evident that the 
 depositor would not only not receive any interest upon it, 
 but would have to pay for the trouble and expense of 
 keeping it ; while the money thus kept was so much drawn 
 from the trading capital of the country. 
 
 The advantages of combining a system of lending 
 money with that of receiving it soon became apparent ; 
 and banks were established for the purpose of both receiv- 
 ing and lending money ; the interest received on the sums 
 being considered sufficient to cover all expense connected 
 with its management, or the risk of losing it. By this 
 means, numerous small sums of money, which would have 
 remained unproductive in the hands of individuals, are 
 collected into large sums in the hands of the bankers, who 
 employ it in granting facilities to trade and commerce, and 
 in this way increase the productive capital of the nation. 
 Thus a million of money, in place of lying useless in small 
 
 1
 
 BANK OF HNGLAND. 41 
 
 sums in the hands of the owners, or in one large sum in 
 the coffers of a bank, is lent out to increase the capital of 
 manufacturers and traders ; and thus the world is made 
 one million richer, or at least is saved from being one mil- 
 lion poorer. Besides the money which a banker receives in 
 deposits from his customers, he must be possessed of a 
 certain capital of his own, in order to carry on business ; 
 and to insure confidence in his stability ; for no one would / 
 lend money to a banker if he knew that he was possessed , 
 of no capital. The interest derived from this capital forms \ 
 part of the profits of the banker, but it is evident that the 
 profit in this case is not the same as that which he derives 
 from trading with the capital of others ; in other words, 
 that the interest is not greater than if he had lent out his 
 money in any other way equally safe, and involving the 
 same amount of trouble. The deposits over and above a 
 certain sum which he must have at hand to meet daily 
 claims, he advances in various ways as loans. The best 
 and safest mode of employing such funds is considered to 
 be in the discounting of good mercantile bills of exchange; 
 that is, bills representing bona fide transactions of trade 
 and commerce. 
 
 In the first place, banks are useful as places of secur^ 
 ity for the deposit of money. Banking increases the 
 productive capital of a country. Another advantage con- 
 ferred upon society by bankers is that they make advances 
 to persons who want to borrow money, when proper"' 
 security is presented. Persons engaged in trade and 
 commerce are thus enabled to augment their capitil, and 
 consequently their wealth. The increase of money in cir- 
 culation stimulates production. When bankers arc
 
 I • HISTORY OV THE 
 
 compelled to withhold their usual accommodation, both 
 the commercial and the agricultural interests are plunged 
 into extreme distress. Banking also exercises a powerful 
 influence upon the morals of society. It tends to produce 
 honesty and punctuality in pecuniary engagements. It is 
 thus that bankers perform the functions of public conser- 
 vators of the commercial virtues. From motives of private 
 interest they encourage the industrious, the prudent, the 
 punctual, and the honest, while they discountenance the 
 reckless and shiftless business man and speculator. They 
 hold out inducements to uprightness, which are not dis- 
 regarded by even the most abandoned. 
 
 Thompson Mankey, a Director, and formerly Governor 
 of the Bank of England, in his work on the "Principles of 
 lianking," says: — 
 
 "We are all destined in this world to earn our bread 
 by the sweat of our brow; and I know no trade or calling 
 in which high religious and moral qualities can be more 
 sensibly appreciated and brought to bear for practical 
 utility in our journey through life than in that of banking. 
 Let me find a man honestly striving to use his best talents 
 and energies in the endeavor to discharge his duties to 
 the best of his ability in that position of life in which it 
 has pleased God to place him — acting as if he were con- 
 vinced that he can only succeed by living a life based on 
 sound religious principles, which he will never violate for 
 any worldly objects that may appear to tempt him out of 
 his path of duty— and I would infinitely prefer to deal 
 with that man as a banker, or trust him as a correspon- 
 dent in business with the use of money, than a man of the 
 greatest wealth acquired by less honest means, and acting
 
 I5ANK OF F.NGLAND. 43 
 
 as if he thought lightly of honesty and integrity. Hon- 
 esty is a quality which many political economists have 
 thought deserving of at least an equal value as industry 
 and credit; and we who are connected with trade know 
 how immeasurably superior it ought to be esteemed above 
 every other qualification for a good man of business. The 
 old adage that ' honesty is the best policy,' should be 
 prominently placed up in the office of every banking 
 establishment, and should be engraved on the mind of 
 every one who wishes to obtain credit amongst capitalists." 
 We propose to describe, in a condensed form, some of 
 the most prominent and other banking projects which for 
 half a century occupied public attention, and made the 
 task of founding the liank of England conriparatively easy 
 to the projectors. Many "charity banks" and Lombards, or i 
 Lombard-houses, now commonly called pawn brokers, - 
 were projected. 
 
 "The making transferable all promissory notes be- 
 tween man and man," was recommended by William Potter 
 in his "Key of Wealth." 
 
 One Henry Robinson ardently advocated the creation 
 of a Land Bank in which all payments above twenty 
 pounds should be made in bank credit; and that beside 
 the principal bank in London, there should be one hun- 
 dred subordinate banks in different parts of England, all 
 centering in the said capital bank of London, wherein, for 
 the support of the credit thereof, a general mortgage of 
 lands was proposed, for which the mortgager should have 
 credit in bank to the value of his land. The condition of 
 such mortgage should be, either to pay so much money, 
 with interest at six per cent, within a year from the day
 
 44 HISTORY OF THE 
 
 that bank credit should any way fail to be current, or, in 
 default of such payment, the said mortgaged lands to be 
 forfeited without redemption and to be divided amongst 
 the proprietors of the credit in bank. Others proposed a 
 general register of houses and ships as well as of land; a 
 court of merchants for the summary recovery of all debts; 
 also some very ill-judged projects for uniting into corpora- 
 tions all merchants trading into any one country, for the 
 sake of what they call "uniformity of trade." 
 
 Samuel Lamb, one of the most eminent London mer- 
 chants at the time of Charles the l-'irst, warmly espoused 
 the subject of public banks, and during the common- 
 wealth presented an "humble address to his Highness the 
 Lord Trotector," wherein he described the great advan- 
 tages the Hollanders derived from banks, and the 
 disadvantages England labored under in their absence. 
 The following reasons, which were embodied in the 
 petition, appear to us to be so prophetic as to deserve to 
 be recorded: — 
 
 "The good that wc may do ourselves by banks, if 
 settled in England, are many; for no nation ever made 
 use of them but they flourished and thrived accordingly. 
 
 " Imprimis: they will, by well ordering them, bring 
 back the gold and silver which hath been drained out of 
 this land by the Hollanders' banks, and by other princes 
 raising the value thereof in their dominions. 
 
 "They will much increase the stock of this land, 
 which will wonderfully increase all manner of trade, and 
 will bring in that excellent transferring trade, and make 
 England the staple of all foreign commodities, as Holland 
 is at this time, and has been since they had the use of
 
 BANK OF ENGLAND. 4 5 
 
 banks, who have nothing considerable of their own growth 
 and manufactures, yet have the staple of all commerce, as 
 a rich treasure in money and jewels, all materials for ship- 
 ping, and even all manner of clothing, and the granary 
 and vincN'ard of Europe, with which commodities they 
 furnish most countries, and which England may also do. 
 
 "They will increase and much encourage the fishery 
 of this nation, and breed up in that emplojment many 
 thousands of seamen, which will find employment in the 
 East Indies' Streights, and other voyages into other parts 
 of the world. 
 
 "They will increase the warlike trading, shipping and 
 mariners of this nation, which will much strengthen us 
 against our enemies. 
 
 " They will also much increase the revenues and 
 customs of the land by increasing credit. 
 
 " They will wonderfully employ the poor of this land, 
 and increase the natural manufacture thereof, and make 
 us capable to buy or sell at home or abroad. 
 
 " They will make the English capable to engross 
 the commodity of any country, and withhold it from 
 another that may be at enmity with us to whom the said 
 commodity may be useful to our prejudice, and also make 
 our own price of it. 
 
 "They will increase trade in our plantations, and 
 cause ships to be built in New England as good or better 
 than any built in Holland. 
 
 " They will furnish factors in England with credit to 
 pay customs and charges of a great cargo of goods, which 
 may on a sudden be conveyed to them; for many times 
 such English factors may be of good estate and credit,
 
 40 HISTORY OF THE 
 
 yet have not always a great cash lying by them for such 
 uses, thouijh the Dutch are seldom without it; therefore 
 may oftentimes be forced to strain their credit to take up 
 money at interest, or sell all or part of such goods at 
 under-rate for want thereof, which may be a great 
 prejudice to themselves and loss to their principals, and 
 is believed causes many such great commissions to be 
 carried from the English and consigned to the Dutch 
 residing in England, to their great benefit and advantage, 
 and loss and prejudice to the English nation. 
 
 "They will increase trade in Ireland, which will peo- 
 ple that island, and increase the revenue thereof 
 
 " They will furnish many young men with stock that 
 have by their industry and well-spent time, and travels in 
 their apprenticeships, gained good experience in foreign 
 traffic. 
 
 " They will preserve many good men from failing and 
 losing their credit, and many others, which trial and 
 experience will daily discover; as quick and easie paying 
 bills of exchange, foreign or domestick, and all other pay- 
 ments; preventing fraudulent payments in counterfeit or 
 dipt coyn or mis-telling money; rectifying errors in 
 accounts which occasion law suits; preventing theft and 
 breaking open houses where money is suspected to be; 
 and robbing in the highways graziers, carriers, or others 
 that used to carry money from fairs and other places, 
 which may be returned by assignment in bank. Whereas 
 now the several hundreds in many places are forced to 
 guard such as carry money for fear of their being robbed, 
 and such hundreds paying them the money they lost, as 
 it hath often fallen out of late time.
 
 BANK OF KNGLAND. 47 
 
 "Lastly, a bank with a certain number of sufficient 
 men of estate and credit, joined together in a joynt stock, 
 being as it were the general cashkcepers or treasurers of 
 the place where they are settled, and divers others, tend- 
 ing much to the tranquility of your highness and the 
 welfare of the English nation, which, with your highncss's 
 favourable encouragement, I shall in all humility be ready 
 to make known to you, and remove any objections as can 
 be alledged in the premises, and propound a way how it 
 may be effected, and the evils remedied and prevented, 
 being unwilling to bury the talent in a napkin which it hath 
 pleased the Giver of all blessings in Hisgreat goodness and 
 mercie to bestow upon me, hoping that I shall not offend 
 by tendering this with my best services to your high- 
 ness." 
 
 It appears by the Rolls of Parliament, that, two years 
 after the presentation of the above address to Cromwell, 
 Samuel Lamb petitioned the House of Commons on the 
 subject of his proposal for a bank ; and that on Friday, the 
 4th of March, 1658, the petition was referred to a com- 
 mittee ; but it does not subsequently appear that any 
 report was made thereon, or any steps taken to forward 
 his views. 
 
 In the year 165 1, there appeared the following " Hum- 
 ble Proposal to the honorable Council of Trade, and all 
 Merchants and others who desire to improve their 
 Kstates," which, if enacted by Parliament, " would, as with 
 due submission is conceived, conduce to advance trade, 
 imploy the poor, diminish interest, improve publique rev- 
 enue, prevent the cruelty of creditors and the injustice of 
 debtors, tending likewise speedily to promote the enter-
 
 48 HISTORN OF THE 
 
 prise discovered in a late treatise, entitled ' The Key of 
 WValth"" 
 
 This proposal had reference to a bank of credit, in 
 which bills of exchange were to be the principal circulat- 
 ing medium. 
 
 Ill the year 16C5, a very elaborate account of the 
 *• Offjce of Credit " appeared. The author endeavors to 
 remove what he calls two vulgar errors, viz : "That credit 
 in bank is only current because men can have money 
 when they will;" and further "that without money no 
 trade can be managed." At the end of the work there is 
 a summary of the wliole ; the author's main object, as he 
 himself states, is satisfactorily to ansu er the objections, 
 "that men will have money and not credit." 
 
 Scheme followed scheme for the establishment of a 
 solid bank, but none met with royal favor and aid from 
 Parliament until William Paterson made public his plans 
 for the Bank of England, which is described at length in 
 the following chapter.
 
 CHAPTER III. 
 
 FOUNDATION AND EARLY HISTORY OF THE BANK OF ENGLAND. 
 
 Wkf the Bank zvas Established — Origin of the Bank — 
 The Governor and Company of the Batik of Etigland — 
 History of William Paterson, its Founder — He dies 
 Unhonored and Neglected — Prophets ivJio Predicted 
 Financial Ruin — " TJie Old Lady of Threadneedle 
 Streef^ — Paterson and his Ill-Fated Darien Scheme — 
 Present Condition of the Bank — TJie Policy of the Bank 
 Assailed by the Public — Hoiv the Bank is Officered — 
 The Batik Charter — Hoiv it Reads — Restrictions, 
 Impositions and Demands — Buying Property from 
 atid Lending Money to the Crown — Suspending Pay- 
 ment of Notes — Assistance from the Government 
 Averts a Failure — Capital Increased — Confidence 
 Restored — Length of Original Charter. 
 
 The important position assumed by England towards 
 the middle of the seventeenth century, rendered the 
 absence of a national bank somewhat surprising. The 
 nation was rapidly increasing in commercial and political
 
 50 HISTORY OF THE 
 
 greatness, and although several projects were issued for 
 banks, the necessity for their formation not being abso- 
 lutely felt the proposals were dismissed without much 
 attention. 
 
 There were many reasons for the establishment of a 
 national bank. It was necessary for the sake of a secure 
 paper currency. It was required for the support of the 
 national credit and reducing the rate of interest. In 1546, 
 the payment of interest had been rendered legal, and 
 fixed at ten per cent. In 1624 the rate was reduced to 
 eight per cent. The rate of interest, which was higher 
 in England than abroad, rendered trade comparatively 
 disadvantageous to England. 
 
 Sixteen years previous to the establishment of the 
 Bank of England, proposals and schemes for a national 
 bank were discussed, but none were considered practi- 
 cable, although one or two were tried. i 
 
 A very curious account of the origin of the Bank of 
 England is to be found in a pamphlet printed in 17 17, 
 called the " Conferences on the Public Debts, by the 
 Wednesday's Club in Friday Street." The discussions 
 among the members of this society excited considerable 
 public attention ; William Paterson, who was evolving a 
 scheme for a bank, belonged to this club, the members of 
 which presented a petition to King William, setting forth 
 among other things the great advantages of a public bank — 
 but at that time their proposal was received with suspicion. 
 
 Paterson anticipated that the government would 
 readily incorporate, with certain powers ^rid privileges, 
 such parties as would advance a considerable sum of 
 money by way of loan to meet the public exigencies. Yet,
 
 BANK OF ENGLAND. 51 
 
 as he himself relates in the account of his transactions in 
 relation to the Bank of England, printed in 1695, that he 
 found it much more difficult to get it consented to by the 
 Privy Council, in order to be brought into Parliament, than 
 he had at first apprehended. 
 
 The Bank of England, which has long been the prin- 
 cipal bank of deposit and circulation in Great Britain, and 
 indeed in Europe, was founded in 1694. The govern- 
 ment being at that time much distressed for money, 
 brought about in great measure froin the defects and 
 abuses in the system of taxation, and partly from the diffi- 
 culty of borrowing money on account of the supposed 
 instability of the government, the Bank of England actu- 
 ally grew out of a loan to the government of ;^i, 200,000 
 for the public service. The subscribers, besides receiving 
 eight per cent, on the sum advanced as interest, and 
 ;j^4,ooo a year as the expense of management, in all;{^ioo,- 
 000 a year, were incorporated into a society denominated 
 the "Governor and Company of the Bank of England." 
 Many consider that to the war with France, and the 
 extreme difficulty the government experienced in raising 
 funds for the conduct of the war, is the institution of this 
 giant monopoly due. The idea of the Bank of England 
 ' originated solely with William Paterson, a merchant of 
 London, a brainy Scotchman. Paterson readily saw that 
 the government, which had been paying interest at the 
 rate of from 20 to 40 per cent, per annum, would, without 
 much hesitation, grant exclusive and almost unlimited 
 privileges to such parties as would in turn furnish it with 
 a fixed and permanent loan, at a reasonable rate of inter- 
 est. The plan, being brought to the attention of the
 
 52 HISTORV OF THE 
 
 King, was submitted to the Privy Council, when the 
 details were completed, and it was laid before Parliament. 
 Here it met with the violent opposition of a formidable 
 party. Nevertheless, the bill was finally carried by the 
 government, and on April 25, 1694, became a law, from 
 which date the original charter was granted for eleven 
 years. 
 
 Of William Paterson, the author of the Bank of En- 
 gland, but little is known. It is perhaps unfortunate that 
 no biography of this remarkable man exists. As the pro- 
 jector of the Bank of England, he deserves notice. He 
 was born in Traillflat, Stotland, in 1658, and was educated 
 for the ministry. A speculative, as well as an adventur- 
 ous man, he was the soul of the ill-fated Darien expedi- 
 tion, and losing all returned to England to die neglected, 
 unhonored and ignored by his former business associates. 
 
 The name of the founder of the Bank of England was 
 not upon the list of directors only for the year of its estab- 
 lishment in 1694. The facts which led to his departure 
 from the honored part of director are difficult to learn ; 
 but it is not at all improbable that Paterson was too daring 
 and speculative for those with whom he was joined in com- 
 panionship. One writer says : "The friendless Scot was 
 tricked out of the post and the honors he had earned.'' 
 Sir John Dalrymple remarks : " The persons to whom 
 Paterson applied made use of his ideas, took the honor 
 and credit to themselves, and absolutely neglected him 
 afterwards." 
 
 Paterson found it more difficult to procure consent 
 than he anticipated, and all those who feared an invasion 
 of their interests were arrayed against it. The goldsmith
 
 BANK OF ENGLAND. 53 
 
 foresaw the destruction of his monopoly, and he opposed 
 it from self interest. The Tory foresaw an easier mode of 
 gaining money for the government he approved. The 
 usurer foresaw the destruction of his oppressive extortion, 
 and he resisted it with the vigor of his craft. The rich 
 man foresaw his profits diminished on government con- 
 tracts, and he vehemently and virtuously opposed it on 
 public principles. The outcries were hard and long, but 
 to no avail. Prophets are in their graves who predicted 
 the early downfall of the Bank of England. The sup- 
 porters claimed that the bank would rescue the nation 
 out of the hands of extortioners, lower interest, raise the 
 value of land, renew public credit, extend circulation, 
 improve commerce, and connect the people more closely 
 with the government. 
 
 As previously stated there were many reasons why a 
 national bank should be established. To relieve the 
 moneyless government was one of the objects of the 
 founder of the Bank of England, and though his motive 
 was not wholly unselfish nor unconditionally patriotic; 
 though he was bitterly opposed and relentlessly assailed 
 by usurers, shylocks and others who had profited by 
 extortionate discounts and the general helplessness of the 
 government, and by a large and demonstrative class who 
 declared that such a bank would at once become a danger- 
 ous monopoly, and engross the whole money of the 
 kingdom, and that it would be arbitrary in its powers; but 
 the indomitable William Paterson not only obtained a 
 charter, but was very soon justified in affirming that the 
 bank had spared the ministers their humiliating proces- 
 sions into London to secure loans at ten and twelve per
 
 54 HISTORY OF THE 
 
 cent, interest; given life and currency to double or treble 
 the value oi" its capital in other branches of public credit; 
 and it was patent to all that the bank was the principal 
 means of the success of the campaign in 1695, particularly 
 in reducing Namur, the first step towards the peace of 
 1697. 
 
 This man, William Paterson, who founded the Bank 
 of England, and also the Bank of Scotland, was a dreamer 
 of a lofty and generous nature and large ideas, which 
 sometimes carried him into the impracticable, though 
 usually there was a substratum of utility to what seemed 
 to be the least substantial of his schemes. It was Pater- 
 son who led the Daricn expedition, that wild attempt to 
 establish another East India Company and to found an 
 Arcadia on the American isthmus. On the 26th of July, 
 1698, four years after the establishment of the bank, 
 twelve hundred persons, many of whom were of high birth 
 and influence, embarked with Paterson from Lcith, and 
 in due time reached the site of their proposed colony. 
 Paterson had purchased the land from its Indian posses- 
 sors, and proclaimed as the two leading principles of his 
 commonwealth : freedom of faith and freedom of trade to 
 all sects and to all nations. His generosity was unbound- 
 ed, and when the colony seemed most likely to succeed, 
 he voluntarily surrendered the large share of the profits 
 which belonged to him. 
 
 The adventurers were first charmed with their new 
 home, but their subsequent fate was something deplorable. 
 They fell victims to famine, disease and the attacks of the 
 Spaniards. Utopia was once again laid waste, and of the 
 number which left Leith only thirty ever again set foot in
 
 BANK OF ENGLAND. 55 
 
 their native land. One of these was Paterson, of whom 
 a letter of the period said: "The colonists give him due 
 praise, for he hath been diligent and true to the end." 
 
 The chivalrous and high-minded man was followed 
 by misfortune. The persons to whom he applied made use 
 of his ideas; were civil to him for awhile and then abso- 
 lutely neglected him. Paterson was a man prolific of good 
 ideas but utterly unable to direct them for his own gain. 
 He always took scheming men into his confidence, which 
 of course ruined him. 
 
 The Act of Parliment by which the bank was estab- 
 lished, is entitled: "An Act for granting to their 
 Majesties, several duties upon tonnage of ships and vessels, 
 and upon beer, ale and other liquors, for securing certain 
 recompenses and advantages in the said Act mentioned, 
 to such persons as shall voluntarily advance the sum of 
 ^1,500,000 towards carrying on the war with France." 
 After a variety of enactments relative to " the duty upon 
 tonnage of ships and vessels, and upon beer, ale, and other 
 liquors," the Act authorizes the raising of ^1,200,000 by 
 voluntary subscription, the subscribers to be formed into 
 a corporation, and be styled: "The Governor and Com- 
 pany of the Bank of England." The sum of ,-^300,000 was 
 also to be raised by subscription, and the contributors, of 
 which there were but 1,300, to receive instead, annuities 
 for one, tv/o, or three lives. Towards the ;^ 1,200,000 no 
 one person was to subscribe more than ;^io,ooo before the 
 first day of July next ensuing, nor at any time more than 
 ;^20,ooo. The corporation were to lend their whole 
 capital to the Government, for which they were to receive 
 interest at the rate of 8 per cent, per annum, and ^4,000
 
 56 HISTORY OF THE 
 
 per annum for management; being ^100,000 per annum 
 in the wliolc. They were not allowed to borrow or owe 
 more than the amount of their capital ; and if they did so, 
 the individual members became liable to the creditors, in 
 proportion to the amount of their stock. They were not 
 to trade in any "goods, wares, or merchandise whatsoever;" 
 but they were allowed to deal in bills of exchange, gold or 
 silver bullion, and to sell any goods, wares, or merchan- 
 dise, upon which they had advanced money, and which 
 had not been redeemed within three months after the 
 time agreed upon. The whole subscription having been, 
 filled in ten days, a charter was issued on the 27th day of 
 July, 1694. The management of the corporation was 
 intrusted to a Governor, a Deputy Governor, and twenty- 
 four directors, all elected annually, and all subjects of 
 England, the Governor being required to have at least 
 ;^4,ooo of the capital stock of the bank in his own name, 
 the Deputy Governor at least ;!^3,ooo, and each Director 
 jQ2,ooo. When the subscription was complete the sum 
 was handed into the Exchequer, and the bank procured 
 from other quarters the funds which it required for the 
 transaction of its current business. 
 
 The current business at the foundation of the bank 
 was not large, and all of it was done in one medium sized 
 room. To-day it is the most extensive banking institu- 
 tion in the world. It employs over one thousand clerks, 
 and its buildiVigs cover over eight acres of ground. But 
 from its inception to the present day it has manifestly 
 held up its head through all vicissitudes, and has been 
 inseparably connected with the fortunes of the English 
 government. At times it has been a supplicant, then a
 
 BANK OF ENGLAND. 57 
 
 dictator, nurtured by Halifax, bullied by Walpole and 
 coaxed by Pitt. If it has not always been generous in 
 times of adversity, it has been prudent, and its influence 
 has been against chimeras and reckless speculation ; and 
 because it has not in all seasons of commercial distress 
 been willing to play the part of benefactor, it has been 
 assailed by scribblers and disappointed men to such an 
 extent that the titles of their choleric outbreaks cover 
 some thirty pages of the British Museum Catalogue. 
 
 "The Old Lady of Threadneedle Street," a cant name 
 for the Bank of England, which is situated in Thread- 
 needle street, is a synonym of strength and security 
 throughout the civilized world. Its notes are as good as 
 gold in any community, and a Bank of England note 
 stands at par in the wilds of Africa even as it does in the 
 City of London. This institution is regarded with pride, 
 ^not only by the English but by every man or woman who 
 speaks that language, and- is regarded with awe and rev- 
 erence by financiers and intelligent people in all parts of 
 the world. 
 
 The present capital and surplus of the Bank of England 
 is /^S6,yo4,ySi. The capital is ;!^I4, 5 53,000. p/^16,200,000 
 is now issued by he bank on securities. Debt of the 
 government to the bank is ,7^11,015,100; the bank also 
 holds government securities for ;^5, 184,900. Shares of 
 Bank of England are worth ^315. The dividends for the 
 year ending Oct. 5, 1888, were at the rate of ;!/79f percent. 
 
 On the first of January, 1695, the bank commenced 
 active operations, although open and preparing for work 
 since the preceding July. 
 
 On the 19th of January, same year, a petition from
 
 58 HISTORY or THE 
 
 several merchants and traders of the city of London, on 
 behalf of themselves and others, was presented to the 
 IIq'usc of Commons, setting forth:— "That by an Act made 
 the las't session of this Parliament, for granting to their 
 Majesties a duty upon the tonnage of ships, etc., and by 
 virtue of their Majesties' letters patent in pursuance of 
 the said Act, a corporation of the Governor and Company 
 of the Bank of England is established to receive and man- 
 age the sum of ;^ 1,200,000; which said bank, as the same 
 is and may be managed, is ruinous and destructive to 
 trade in general, injurious to his Majesty's revenues, pre- 
 judicial to the lands and manufactures of this nation, and 
 is only a private advantage to the said corporation." 
 
 This petition was taken into consideration on January 
 22, 1695, when the petitioners, together with the governor 
 and directors of the bank, attended the House of Commons, 
 and were informed that their petition could not be re- 
 ceived. This decision of the House of Commons was 
 considered conclusive as to the degree of protection which 
 the bank might calculate upon receiving from the govern- 
 ment ; but it had the effect of causing the publication of 
 sharp and bitter animadversions upon its management, 
 and of the retirement of several of the directors. 
 
 In granting the charter for the Bank of England, Par- 
 liament declared amongst other things, that the manage- 
 ment shall be " capable in law, to purchase, enjoy, and 
 retain to them and their successors, any moneys, lands, 
 rents, tenements, and possessions whatsoever ; and to 
 purchase and acquire all sorts of goods and chattels what- 
 soever, wherein they are not restrained by Act of Parlia- 
 ment ; and also to grant, demise, and dispose of the same.
 
 BANK OF ENGLAND. Fy^) 
 
 " That the management and government of the cor- 
 poration be committed to the governor and twenty-four 
 directors, who shall be elected between the 25th of March 
 and the 25th of April of each year, from among the mem- 
 bers of the company duly qualified. 
 
 "That no dividend shall at any time be made by the 
 said governor and company, save only out of the interest, 
 profit, or produce arising by, or out of the said capital 
 stock, or fund, or by such dealing as is allowed by Act of 
 Parliament. 
 
 " The governor, deputy governor and directors must 
 be natural born subjects of England; or naturalized sub- 
 jects ; they shall have in their own name and for their 
 own use capital stock of the Bank of Enc^land to the follow- 
 ing amount : The governor, at least ^4,000, deputy gov- 
 ernor ^3,000, and director ^2,coo. 
 
 " That thirteen or more of the said governors and 
 directors (of which the governor or deputy governor 
 must be ahvays one), shall constitute a court of directors, 
 for the management of the affairs of the company, and for 
 the appointment of all agents and servants which may be 
 necessary, paying them such salaries as they may con- 
 sider reasonable. 
 
 " Every elector must have, in his own name and for 
 his own use, ;^50O or more capital stock, and can only give 
 one vote. He must, if required by any member present, 
 take the oath of stock, or the declaration of stock, in case 
 he may be one of the people called Quakers. 
 
 " Four general courts shall be held in every year, in 
 the month of September, December, April and July. A 
 general court may be summoned at any time, upon the
 
 (iU HISTORY OF THE 
 
 requisition of nine proprietors duly qualified as electors. 
 The majority of electors in general courts have the power 
 to make and constitute by-laws and ordinances for the 
 government of the corporation, provided that such by-laws 
 and ordinances be not repugnant to the laws of the King- 
 dom." 
 
 •Armed with this authority from the government, the 
 Bank of England commenced business on July 27, 1694. 
 The applications for stock in the new enterprise were 
 numerous, and the projectors were thereby enabled to 
 select first-class men for stockholders and officers. The 
 bank immediately issued notes, none of which v/crc, how- 
 ever, of a smaller denomination than i^20 sterling, and 
 commenced discounting bills of exchange at rates varying 
 from 3 to 6 per cent., distinction being made in favor of 
 persons who used the bank as a place of deposit. 
 
 The Bank of England had not issued any notes for 
 less than ;^20 previously to 1759, when it commenced the 
 issue of i^io notes ; but the country bankers put in circu- 
 lation notes for such small sums that Parliament enacted 
 in 1775, that none should be issued for less than £1. In 
 1777 this minimum limit was further raised to ^^, but in 
 spite of this restriction the number and the amount of the 
 issues of the country bankers soon became dangerously 
 multiplied. 
 
 The Bank of England is prohibited by law from 
 engaging in any sort of commercial undertaking, other 
 than dealing in bills of exchange, and gold and silver. It 
 is authorized to advance money upon the security of goods 
 or merchandise pledged to it, and to sell by public auction 
 such goods as are not redeemed within a specified time.
 
 • BANK OF ENGLAND. Gl 
 
 There was virtually no end of Parliamentary tinker- 
 ing with the new bank, and in the latter part of the year 
 the corporation was organized it was enacted by statute 
 that "the bank shall not deal in any goods, wares, or mer- 
 chandise (except bullion), or purchase any lands or reve- 
 nues belonging to the Crown, or advance, or lend to their 
 Majesties, their heirs or successors, any sum or sums of 
 money, by way of loan or anticipation on any part or 
 parts, branch or branches, fund or funds of the revenue, 
 now granted or belonging, or hereafter to be granted to 
 their Majesties, their heirs and successors, other than such 
 fund or funds, part or parts, branch or branches of the said 
 revenue only on which a credit of loan is, or shall be 
 granted by Parliament." The foregoing Parliamentary 
 injimction interfered with a profitable business the bank 
 had built up with certain titled dignitaries. 
 
 In 1697 the government caused to have enacted a bill 
 that was regarded with great favor by the bank. It was, 
 "that the common capital, or the principal stock of the 
 Bank of England, and also the real fund of the Governor 
 and Company, or any profit or produce to be made thereof, 
 or arising thereby, shall be exempted from any rates, 
 taxes, assessments, or impositions whatsoever during the 
 continuance of the bank ; that all the profit, benefit and 
 advantage from time to time arising out of the manage- 
 ment of the said corporation, shall be applied to the uses 
 of all the members of the said association of the Governor 
 and Company of the Bank of England, ratably and in pro- 
 portion to each members' part, share, and interest in the 
 common capital and principal stock of the said Governor 
 and Company hereby established."
 
 G2 HISTORY OF THE 
 
 In 1696, during the great rccoinage, the bank was 
 involvetl in numerous difficulties, and was even compelled 
 to suspend payment of its notes, which had fallen as. low 
 as 20 per cent, below par. Owing, however, to the judic- 
 ious conduct of the directors, and tlic prompt assistance 
 of the government, the bank got over the crisis. Had it not 
 been for the aid of the government the bank would have 
 succumbed to the strain and passed out of existence. It was 
 at this time judged expedient, in order to place it in a sit- 
 uation the better to withstand any adverse circumstances 
 that might afterwards occur, to immediately increase the 
 capital from ^1,200,000 to ^2,201,171. This increase in- 
 spired confidence with the public in the integrity, solvency 
 and judicious management of the bank, which evinced 
 itself in many ways. The increase in capital, among other 
 things, had the effect within a few months of causing the 
 stock not only to recover a discount of from 40 to 50 per 
 cent, but to sell at a premium of 12 percent. 
 
 The charter of the Bank of England enumerates at 
 some length the fundamental principles of the corpora- 
 tion, and displays in the manner in which it is drawn up, a 
 considerable extent of knowledge of commercial affairs. 
 Instead, however, of obtaining exclusive privileges of trad- 
 ing, which a century before would have been an object 
 of ambition with a society of merchants, the bank was 
 restricted to the dealing in bills of exchange and in gold 
 and silver. It was prohibited from taking part in any 
 mercantile concern ; but it was authorized to make ad- 
 vances on the security of merchandise lodged with it, or 
 pledged to it by written documents. The latter descrip- 
 tion of business, it was thought, would form the principal
 
 BANK OF ENGLAND. C3 
 
 source of profit. The wisdom of the founders of the bank 
 has long since been apparent, but William Paterson, who 
 was the originator and prime mover in its organiza- 
 tion, was brushed aside by unscrupulous associates and 
 dethroned of the honor really due him. The Bank of 
 England, however, stands to-day a monument to Patcr- 
 son's greatness.
 
 CHAPTER IV. 
 
 HISTORY OF RENEWALS, DEBTS, AND PANICS. 
 
 Advaucifig Money to the Government — Hozv the Bank 
 Receives Pay from the Government — Persecution — 
 The " Dead Weight " — Table of Renezvals of Charter, 
 with Capital, Debt and Conditions of Renewals — 
 An Explanation by an Ex-Governor of the Baiik 
 — Amount of Loans to the Government — Present 
 Capital of the Bank of England — A Panic Quieted 
 by a Novel Method — Merchants Come to the Bank's 
 Rescue — The Bank A t tacked by Rioters — Solidity of 
 the Bank of England. 
 
 The charter of the Bank of England, when first grant- 
 ed in 1694, was to continue for eleven years certain, or 
 till a year's notice after the first of August, 1705. 
 
 J
 
 BANK OF ENGLAND. 65 
 
 The charter was further prolonged in 1697. In 1708, 
 the bank having advanced ^400,000 for the public service, 
 without interest, the exclusive privileges of the corpora- 
 tion were prolonged till 1733. And in consequence of 
 various advances made at different times, the exclusive 
 privileges of the bank have been continued, with the 
 proviso that they might be cancelled on a year's notice. 
 
 In addition to the permanent debt of the government 
 to the bank, the latter contracted with the former on 
 March 20, 1823, to j)ay at stated intervals between 1823 
 and 1828 certain pensions and annuities arising out of the 
 then recent wars, amounting to ^13,089,419. This is 
 termed the "dead weight." In consideration of this the 
 bank was to receive from the government an annuity of 
 ;^585,740 for 44 years. 
 
 Although the necessities of the State contributed to 
 the establishment of the Bank of England, they were, at 
 intervals of every few years, compelled, after making a 
 feeble resistance, to purchase the continuance of the priv- 
 ileges on exceedingly onerous terms. The history of the 
 seven renewals of the charter between 1694 and 1800, and 
 of the accordance of permission to increase the capital of 
 the bank, is one continuous record of exactions. 
 
 The bank, as a condition of State patronage, v/as on 
 each successive occasion forced to increase its loans to 
 the Government at low rates of interest or without any 
 interest whatever, three millions sterling being lent for six 
 years without interest in 1800. Interest on previous loans 
 was reduced, exchequer bills were cancelled, and on one 
 occasion a free gift of ;^i 10,000 was made to the State. 
 As a consequence the Government debt to the bank
 
 fir, 
 
 HISTORY OF rilF. 
 
 increased at a rapid rate, till it amounted at last to 
 upwards of fourteen and a half millions sterling, or rather 
 more than the whole capital of the corporation. In 1833 
 the Government paid off one-fourth of this debt in reduced 
 annuities, and tiiereby reduced it to i^i 1,015,100, at which 
 amount it now stands. While Ministry after Ministry thus 
 accurately tested the pliability of the "Governor and Com- 
 j)ain'," and relentlessly preyed on their fears as to the 
 continuance of their monopoly, an intense feeling of loyal- 
 ty actuated the directors in all their dealings with the 
 State. When, after the Rebellion in 171 5, the Govern- 
 ment propo.sed to reduce the interest on the National 
 Debt irom six to five per cent., the bank testified to their 
 desire to assist the measure by at once agreeing to accept 
 the lower rate, and to provide money to pay off those 
 creditors who declined to submit to the reduction. Again, 
 when a further reduction in the interest on part of the 
 National Debt was proposed in 1750, the bank at once 
 assented, and arranged to find a sum of money to pay off 
 the dissentients. 
 
 The following table of renewals should be carefully 
 noted. It gives an account of the successive renewals of 
 the charter, of the conditions under which these renewals 
 were made, and of the variations in the amount and 
 interest of the permanent debt due by Government to the 
 bank, exclusive of the "dead weight:" —
 
 BANK OF ENGLAND. 
 
 67 
 
 Date of 
 Renewal. 
 
 Conditions under which Renewals were made 
 and Permanent Debt contracted. 
 
 Permanent Debt. 
 
 1694 
 
 1697 
 
 1708 
 
 Charter granted redeemable 
 upon the expiration of 12 
 months' notice after the first 
 of August, 1705, upon pay 
 ment by the public to the 
 bank of the demand therein 
 specified. 
 
 Under the Act the bank 
 advanced to the Govern- 
 ment ;^ 1, 200,000 in consid- 
 eration of their receiving an 
 annuity of ;^ 100,000 a year, 
 viz: 8 per cent, interest and 
 ^4,000 for management. . . 
 Charter continued by 8 and 9 
 Will. III. c. 20, till twelve 
 months' notice after ist ol 
 August, 1710, on payment, 
 &c. 
 
 Under this Act the bank 
 took up and added to their 
 stock ^1,001,171 Excheq- 
 uer bills and tallies. 
 
 Charter continued by 7 Anne, 
 c. 7, till twelve months' no- 
 tice after ist of August, 1732, 
 on payment &c. 
 
 Under this Act the bank 
 
 £. 
 
 s. 
 
 1,200,000 o o
 
 t5S 
 
 HISTORY OF THK 
 
 nale of 
 Renewal. 
 
 1713 
 
 Conditions iniUer which Renewals were made 
 and Permanent Debt contracted. 
 
 Permanent Debt. 
 
 advanced /;400.000 to Gov- 
 ernment without interest, 
 and delivered up to be can- 
 celled ^1-775.0^7. '7^- lod. 
 Exchequer bills, in consid- 
 eration of their receiving an 
 annuity of ;!^io6,50i, 13s., 
 being at the rate of 6 per 
 
 cent 
 
 Charter continued by 12 
 Anne, stat. i, c. 11, till 
 twelve months' notice after 
 the 1st of August, 1742, on 
 payment, &c. 
 
 In 1 7 1 6, by the 3 Geo. I. c.8 
 the bank advanced to Gov 
 ernment, at 5 per cent. . . . 
 
 And by the same Act the 
 interest on the Exchequer 
 bills cancelled in 1780 was 
 reduced from 6 to 5 per cent 
 
 In 1721, by 8 Geo. I.e. 21, 
 the South Sea Company was 
 authorized to sell ;!^20O,0O0 
 Government annuities, and 
 corporations purchasing the 
 same at 26 years' purchase 
 were authorized to add the 
 
 L 
 
 2,1 027 17 10 
 
 2,000,000 o o
 
 BANK OF ENGLAND. 
 
 69 
 
 Date of I Conditions under which Renewals were made 
 Renewal. and Permanent Debt contracted. 
 
 amount to their capital 
 stock. The bank purchased 
 the whole of these annuities 
 at twenty years, purchase . . 
 Five per cent, interest 
 was payable on this sum to 
 midsummer 1727, and there 
 after 4 per cent. 
 
 At different times be 
 tween 1727 and 1738, both 
 inclusive, the bank received 
 from the public, on account 
 of permanent debt, ;^3,275,- 
 027, 17s. lod., and advanced 
 to it, on account of ditto, 
 ;^3,ooo,ooo: Difference . . 
 Debt due by the public in 
 
 1738 
 
 1742 Charter continued by 15 Geo. 
 II. c' 13, till 12 months' 
 notice after the ist of Aug- 
 ust, 1764, on payment, &c. 
 
 Under this Act the bank 
 advanced ^1,600,000 with- 
 out interest, w*hich, being 
 added to the original ad- 
 vance of^i,20O,000, and the 
 ;,^400,ooo advanced in 17 10, 
 
 Permanent Debt. 
 
 £ s. d. 
 
 4,000,000 o o 
 
 9.375.027 17 10 
 
 275,027 17 10 
 
 9,100,000 o o
 
 HISIOKY OF IHE 
 
 Dale of 
 Renew;tl 
 
 1764 
 
 I78I 
 
 Conditions under which Renewals were made 
 and Permanent Debt contracted. 
 
 Permanent Debt. 
 
 bearing- interest at 6 per 
 cent., reduced the interest 
 on tlie whole to 3 per cent.. 
 In 1745, under authority 
 of 19 Geo. II. c. 6, the bank 
 delivered up to be cancelled 
 j(^g86,ooo of Exchequer 
 bills, in consideration of an 
 annuity of ^39,472, being 
 at the rate of 3 per cent.. 
 
 In 1749, the 23d Geo. II. 
 c. 6, reduced the interest on 
 the 4 per cent, annuities, 
 held by the bank, to 3J^ per 
 cent, for seven years from 
 the 25th of December, 1750, 
 and thereafter to 3 per cent. 
 
 Charter continued by 4 Geo. 
 III. c. 25, till twelve months' 
 notice after the ist of Aug- 
 ust 1786, on payment, &c. 
 
 Under this Act the bank 
 paid into the Exchequer 
 ;^i 10,000, free of all charge. 
 
 Charter continued by 21 Geo. 
 III. c. 60, till twelve months' 
 notice after the ist of Aug- 
 ust, 1812, on payment, &c. 
 
 yC s. d 
 
 1 ,600,000 o o 
 
 986,000 o o
 
 BANK OF F.XGLAND. 
 
 n 
 
 Date of 
 Renewal 
 
 Conditions under which Renewals were made 
 and Permanent Debt contracted. 
 
 Permanent Debt. 
 
 1800 
 
 1833 
 
 Under this Act the bank 
 advanced ^30,000,000 for 
 the public service for three 
 years, at 3 per cent. 
 Charter continued by 40 Geo. 
 Ill, c. 28, till twelve months' 
 notice after the ist of Aug- 
 ust, 1833, on payment, &c. 
 
 Under this Act the bank 
 advanced to Government 
 ^3,000,000 for six years 
 without interest; but in pur- 
 suance of the recommenda- 
 tion of the committee of 
 1807, the advance was con- 
 tinued, without interest, till 
 six months after the signa- 
 ture of a definitive treaty of 
 peace. 
 
 In 1 8 16, the bank, under 
 authority of the Act 56 Geo. 
 III. c. 96, advanced at 3 per 
 cent., to be repaid on or be- 
 fore the 1st of August, 1833. 
 Charter co<ntinued by 3 and 4 
 Will. IV. c. 98, till twelve 
 months' notice after the ist 
 of August, 1855, with a pro- 
 
 £ s. d. 
 
 3,000,000 o o 
 14,686,000 c o
 
 HISTORY OF THE 
 
 Date of Conditions under which Renewals were made 
 Renewal. I and Permanent Debt contracted. 
 
 Permanent Debt. 
 
 1844 
 
 vise that it may be dissolv- 
 ed on twelve months' notice 
 after the 1st of August, 1855, 
 on payment, S:c. 
 
 This Act directs that in 
 future the bank shall deduct 
 ;^ 1 20,000 a year from their 
 charge on account of the 
 management of the public 
 debt; and that a fourth part 
 of the debt due by the pub 
 lie to the bank, or ^3,671, 
 000, be paid off . . 
 
 Permanent advance by 
 the bank to the public, bear- 
 ing interest at 3 per cent., 
 independent of the advances 
 on account of dead weight, 
 or other public securities 
 
 held by it 
 
 Charter continued by 7 and 8 
 Vict. c. 32, till twelve mos. 
 after the ist of August,i855, 
 on payment, &c. 
 
 This act exempts the 
 notes of the bank from all 
 charge on account of stamp 
 duty, and directs that in 
 
 £. s. d. 
 
 % 
 
 3,671,000 o o 
 
 11,015,000 o o
 
 BANK OF ENGLAND. 
 
 73 
 
 Pate of 
 Renewal. 
 
 Conditions under which Rcnewah were made 
 and Permanent Deljt contracted. 
 
 future the bank shall deduct 
 a further sum of ;^ 180,000 a 
 year from the charge on ac 
 count of the management of 
 the public debt. It also al 
 lows notes of the value of 
 ;^ 14,000,000 to be issued on 
 securities, separates the 
 banking from the issuing 
 department of the estab- 
 •lishment, and effects other 
 important changes. 
 
 The amount now issued on securi 
 ties (October, 1888,) is ^16,200,000 
 Present debt of the Government to 
 the bank (1888) is ;^11, 015,100. 
 
 Permanent Debt. 
 
 £ 
 
 s. d. 
 
 In i86i, a fresh arrangement was made between the 
 government and the bank, to endure for twenty-five years, 
 and under this agreement the bank receives ^^300 per mil- 
 lion on ;{J"6oo,ooo,ooo, and ^150 per million on the amount 
 of debt above that sum ; but from these allowances are 
 deducted iJ"6o,ooo for exemption from stamp duties and 
 the whole allowance out of profit of issue, making together 
 nearly ;^200,ooo. Charter will continue until the bank 
 gives the government twelve months' notice and by the 
 payment of all public debts — but notice has not yet been 
 given, nor is it contemplated. 
 
 Many people imagine that the government and the 
 bank are so closely identified, one with the other, that it
 
 74 HISrORY OV THE 
 
 would be impossible to separate their interests ; but this 
 is a great mistake. The government, although debtors to 
 the bank»are in evcr>- other respect perfectly independent 
 of that corporation : and indeed, the debt is of such a 
 nature that it cannot be called in but on certain condi- 
 tions, a consideration having been given for the loan of 
 the money ; which consideration, as we have before 
 shown, consists in the privilege of being bankers to the 
 State, and tlie sole bank of issue under certain conditions 
 previously mentioned. 
 
 liy referring to the preceding table of renewals it 
 will be noted that the capital of the bank on which divi- 
 dends are paid have never exactly coincided with, though 
 it has seldom differed very materially from, the permanent 
 advance by the bank to the government. We have already 
 5ccn that it amounted, in 1708, to ^4,402,342. Between 
 that year and 1727, it had increased to near ;^9,ooo,ooo. 
 In 1746 it amounted to ^10,780,000. From this period 
 it underwent no change till 1782, when it was increased 8 
 per cent., amounting to ^11,642,400. It continued sta- 
 tionary at this sum down to 1816, when it was raised to 
 ^J4.553'000. by an addition of 25 per cent, from the 
 profits of the bank. In i833„the Act for the renewal of 
 the charter directed that the sum of ^3,67 1,700, being the 
 fourth part of the debt due by the government to the 
 bank, should be paid to the latter, giving the bank the 
 option of deducting it from its capital. But that has not 
 been done ; and after sundry changes, the capital of the 
 Bank of England amounts to-day as formerly, to ^14,553- 
 000, or seventy-three millions of dollars. The reserve is 
 i:3,4 14,660.
 
 i;.\\K OF KNGLANI). iO 
 
 In the year 1844 Parliament passed the Bank Charter 
 Act, which separated the issue from the banking depart- 
 ment, and placed the note issue upon its present basis. 
 The extensions of its corporate existence, noted at the 
 beginning of this chapter, were not always voluntarily 
 granted, but were the occasion of bitter controversy, and 
 were dearly paid for. Over and over the bank acconnno- 
 dated the government, and sometimes accommodations 
 were wrung from it as a condition of the continuance of 
 its existence. 
 
 Up to 1844 the Bank of England, and private banks 
 out of London wnth not more than six partners, could issue 
 any number of notes, the " promise to pay " on the face 
 of which \\as guaranteed only by the desire and ability of 
 the issuers to keep faith with the holders of them ; but by 
 the act of that year all banks established subsequently were 
 prohibited from issuing notes, and the issue of banks then 
 existing was limited. In the case of the Bank of En- 
 . gland the same Act, in separating the issue department 
 from the banking department, defined the limits within 
 which the issue of notes upon securities must be confined, 
 and provided that the bank should purchase any amount 
 of gold offered to it at a certain fixed rate, or, in other 
 words, receive in deposit any quantity at a certain rate in 
 exchange for notes. Since 1844 the governors and direc- 
 tors of the corporation have had practically no control 
 over the issue of notes, that is the Act providing that any 
 any excess of issue above ^14,000,000 (now, October, 1888, 
 ;^ 16,000,000) represented by securities shall have its 
 equivalent in bullion. 
 
 Some may wonder, perhaps, how it would be possible
 
 76 
 
 HISTORV OP' THE 
 
 to pay all notes in gold when ;^ 15,000,000 of them are not 
 represented by gold in possession of the bank, but by 
 securities. The method has been thus lucidly explained 
 by Thomson Hankey, Esq., an ex-govcrnor and one of 
 the directors of the bank. Supposing that all the notes 
 outstanding, except the ^15,000,000, were presented for 
 payment, there would be enough gold in the bank to meet 
 them at any hour of any day, and long before the funds 
 could be reduced to fifteen millions. 
 
 By any legal process the bank would begin to realize 
 on the ^15,000,000 of securities. Four millions of the 
 securities arc of a class salable at all times, and the 
 remaining jQi 1,000,000 are loaned to the government. If 
 there should be any need of that sum, the Chancellor of 
 the Exchequer would have no difficulty in turning the 
 government's debt to the bank into three-per-cent. stock, 
 which he would assign to the governor and company, and 
 they would sell the stock as required, receiving in pay- 
 ment their own notes, which would be immediately can- 
 celled. 
 
 The good luck that has always attended the bank has 
 become proverbial, and it has become customary to hear 
 people say, when desiring to convey an idea of solidity or 
 reliability : " As sound as the Bank of England." How- 
 ever, the bank has been frequently affected by panics 
 among the holders of her notes. In 1745 the alarm occa- 
 sioned by the advance of the Highlanders, under the Pre- 
 tender, as far as Derby, led to a run upon the bank. The 
 streets about the bank were thronged with -an angry and 
 excited crowd, the major portion of them beinig attracted 
 through curiosity, and as the throng augmented the noise
 
 BANK OF ENGLAND. 11 
 
 and confusion became greater, and rumors of failure were 
 sent flying to all parts of London. The managers were 
 equal to the occasion, and in order to gain time to effect 
 measures for allaying the unwarranted excitement and to 
 effect measures for averting the run, it was decided to 
 adopt the device of paying in shillings and sixpences ; 
 but they derived a more effectual relief from the retreat of 
 the Highlanders, and also from a resolution agreed to at a 
 meeting of the leading merchants and traders of London, 
 and very numerously signed, asserting their belief in the 
 solvency and future of the bank, and declaring their will- 
 ingness to receive the bills of the bank from any person 
 in payment of any sum that might be due to them, and 
 also pledging themselves to use their utmost endeavors to 
 make all their payments in the same medium. 
 
 In June, 1780, the bank was attacked by rioters, but 
 no damage was incurred. A considerable military force 
 guards the bank every night as a protection in any emer- 
 gency that may occur. 
 
 The Bank of England is known, and has long been 
 known, to possess the largest capital of any bank in the 
 world, it being at present, 1888, ;^i4,553,ooo, with a reserve 
 fund of ^3,414,660. The prestige it has always enjoyed 
 is very great. No government has ever questioned its 
 security for public deposits of all kinds. The stock has 
 become a favorite investment for public, private, and trust 
 funds ; and it is very questionable whether it would enjoy 
 the same reputation with a greatly diminished capital. 
 The shareholders do not complain, and there certainly 
 can be no reason why any one else should desire a change. 
 
 But it would be an error to conclude that the capital
 
 78 HISTORY OF THE 
 
 of the bank is not so invested as to be of use to the trad- 
 ing community. The amounts lent to corporations for 
 local improvements, to railways on their debentures, and 
 in various other ways, all tend to relieve the money mar- 
 ket from a certain number of applicants, and thus more 
 capital is left free for other commercial requirements. 
 
 The bank has always been in a position to meet all 
 the legitimate claims upon it from its own depositors, and 
 all these depositors could be paid off and the bank wound- 
 up and brought to a conclusion within a very few months, 
 without its being required to touch one farthing of the 
 capital, which would thus remain for division amongst its 
 proprietors.
 
 CHAPTER V. 
 
 PROGRESS OF BANKING. 
 
 TJie Desirability of a National Bank — Success Brings 
 Competition — TJie Scheme for a ^'National La?id 
 Bank!' — Cojintry Banks Issue their Own Notes — War 
 for Independence in America — Great Industrial and 
 Cojnmercial Development — Startling Increase in 
 Banks — Unreliable Bankers y Worthless Paper, Unlim- 
 ited Credit and Prodigal Bankers Precipitate a Big 
 Crash — Violent Revulsion in London — joo out of ;^§o 
 Banks Compelled to Stop Pay7npits — The Bank 
 Assailed by Jealous Competitors — Its TriiimpJi — 
 Given Exclusive Banking Privileges — Banks Prohib- 
 ited from Doing Business Within Sixty-five Miles of 
 London — Sir Henry Par^icll on Banking. 
 
 Pr?:vious to the establishment of the Bank of En- 
 gland much of the nation's spare money was deposited 
 with the goldsmiths, and the receipts they issued circu- 
 lated from hand to hand, and were negotiable much as
 
 80 HISTORY OF THE 
 
 bank-notes are now. But the first banker, pure and sim- 
 ple, was Francis Child, once the apprentice of a goldsmith, 
 who lived frugally and decently, and pointed his career 
 with a moral by marrying his master's richly endowed 
 daughter. 
 
 The desirability of a national bank became apparent 
 in many ways. It was necessary for the support of the 
 national credit, and for the security of a paper currency. 
 It promised to be a means of reducing the rate of interest 
 paid by the state, and of restoring the coinage, which had 
 become vitiated through fraud and wear, to a legitimate 
 standard. In 1673, sixteen years previous to the founda- 
 tion of the Bank of I'^ngland, proposals were made for a 
 model bank, and in 1683 a " national bank of credit " was 
 projected. Neither of these was exactly what was want- 
 ed, and neither was carried out. The scheme upon which 
 the Bank of England founded itself was a substantial 
 one. 
 
 The success of the Bank of England attracted the 
 attention of moneyed men and many were anxious to fol- 
 low in its footsteps. Active competition was promised. 
 A bank was proposed by Dr. Hugh i Chamberlain, to 
 advance money on the security of landed property. A 
 company was formed and this wonderful project seemed to 
 be on the eve of consummation. Unable to get money at 
 the appointed time the scheme fell through. Many other 
 schemes sprang up that promised to live, but faded away. 
 
 Dr. Chamberlain's scheme for a bank, as a competitor 
 of the Bank of England, proposed to lend money at a low 
 rate of interest on the «security of land. The following is 
 an extract from one of the -doctor's proposals: —
 
 BANK or ENGLAND. 81 
 
 "What we call commodities, is nothing but land 
 severed from the soil. Man deals in nothing but earth. 
 The merchants are the factors of the world, to exchange 
 one part of the earth's produce for another. The King is 
 fed by the labors of the ox; and the clothing of the army 
 and the victualling of the navy must all be paid for to the 
 owner of the soil, as the ultimate receiver. All things in 
 the world are originally the produce of the ground, and 
 thence must all things be raised." 
 
 The principal difference between this scheme of a 
 bank and that of the Bank of England, in opposition to 
 which corporation, then in its infancy and struggling with 
 difficulties, this project was started, was, that no money 
 was ever to be lent on personal security, but exclusively 
 on title deeds of unencumbered freehold land. The bank 
 was christened the "National Land Bank." Enough sub- 
 scriptions could not be obtained within the prescribed 
 time, consequently the scheme was a failure. 
 
 The business of banking had meanwhile been under- 
 taken in several of the country towns of England. They 
 met with varying success. Nearly all the banks issued 
 their own notes, payable to bearer as part of their busi- 
 ness; and they were not very scrupulous in regard to the 
 magnitude of the sums for which they were given. Many 
 of the country banks in England, still in existence, trace 
 back their history to the latter half of the last century. 
 
 The termination of the War for Independence in 
 America was followed in England by a great industrial 
 and commercial development. Agriculture, commerce, 
 and still more, manufactures, into which Watt and Ark- 
 wright's inventions had been introduced, immediately
 
 HISTOR^ OF THE 
 
 began to advance with a rapidity unknown at any former 
 period. In consequence, that confidence which had cither 
 been destroyed, or very much weakened by the disastrous 
 events of tlie war. was fully re-established. The extended 
 transactions of the rapidly developing country required 
 fresh facilities for carrying them on, and these were sup- 
 plied to the utmost profusion. The tiumber of banks in 
 Kngland, which in 1784 was certainly under 150, increased 
 so rapidly, that in 1792 they amounted to about 350. A 
 phenomenal increase for those days, A banking office 
 was opened in every market town and in most villages of 
 suitable size. Such being the case, it is needless, per- 
 haps, to add, that the prudence, capital, character and 
 connections of those who set up these establishments were 
 but little looked into or attended to. The great object of 
 a large class of traders was to obtain discounts; and the 
 bankers of an inferior description were equally anxious to 
 accommodate them. All sorts of papers were thus forced 
 into circulation and enjoyed nearly the same degree of 
 esteem. The bankers and those with whom they dealt 
 had the fullest confidence in each other. These bankers 
 generally lived in regal splendor, entertained handsomely 
 and gave outward evidence of untold wealth. No one 
 seemed to suspect that there was anything hollow or 
 unsound in the system. Credit of every kind was strained 
 to the utmost; and the available funds at the disposal of 
 the bankers were reduced far below the level which the 
 magnitude of their transactions required to render them 
 secure. Trouble was brewing unseen on every hand. 
 
 The catastrophe which followed was such as might 
 easily have been foreseen. The currency having become
 
 BANK OF ENGLAND. 83 
 
 redundant, the exchanges took an unfavorable turn in the 
 early part of 1792. A difficulty of obtaining financial 
 accommodation in London was not long after experien- 
 ced; and, notwithstanding the honest efforts of the Bank 
 of England to mitigate the pressure, a violent revulsion 
 took place in the latter part of 1792 and the beginning of 
 1793. The failure of one or two great houses excited a 
 panic which proved fatal to many more. Out of the 350 
 country banks in England and Wales, when this revul- 
 sion began, about 300 were compelled to stop payments, 
 and upwards of fifty were totally destroyed, producing by 
 their fall an extent of misery and bankruptcy till then 
 unknown in the country. 
 
 Attempts have at times been made to show that this 
 crisis was not occasioned by an excess of paper money 
 liaving been forced into circulation, but by the agitation 
 caused by the war then on the eve of breaking out. 
 Others contend that there does not seem to be any good 
 grounds for the opinion, and cite the symptoms of an over- 
 flow of paper — a fall of the exchange, and an efflux of the 
 exchange — which took place only in 1792, or about twelve 
 months before the breaking out of war. 
 
 The journals of the period show that the bank had no 
 pleasant path to pursue. The goldsmiths and private 
 money loaners were jealous of their great competitor. 
 Their business was diminished; their discounts were low- 
 ered; their transactions with the government had passed 
 to the Bank of England. For years, owing to foreign 
 funds and internal division, the directors experienced 
 great difficulties. Nothing but strong will, unconquerable 
 energy, and a healthy perseverance, bore them on to a
 
 H4 HISTORY OF THK 
 
 triumphant issue. Looking upon the Bank of England in 
 its present pre-eminent position, it is difficult to imagine 
 it borne down or disturbed by jealous rivalry; struggling 
 for a- precarious existence, and laboring with an unheard 
 of zeal to preserve itself. The bank easily triumphed over 
 all of its enemies. 
 
 In 1708 the directors undertook to pay off and cancel 
 one million and a half of the exchequer bills they iTad circu- 
 lating twd years before at 4^ per cent, with the interest 
 upon them, amounting in all to ^1,755,028. which 
 increased the permanent debt due by the public to the 
 bank, including ^^400,000 then advanced in consideration 
 of the renewal of the charter, to ^3,375.028, for which 
 the)* were allowed C per cent. 
 
 The year 17(8 is memorable in the history of the 
 IJank of England for the passage by Parliament of a law 
 w hich declared that during the continuance of the corpo- 
 ration of the liank of England, it should not be lawful for 
 any body politic, erected or to be erected, other than the 
 said governor and company of the Bank of England, or of 
 any other persons whatsoever, united or to be united in 
 covenants or partnership, exceeding the number of six 
 persons, in that part of Great Britain called England, to 
 borrow, owe, or take up any sum or sums of money on 
 their bills or notes payable on demand or in any less time 
 than six months from the borrowing thereof. This pro- 
 viso is said to have been elicited from the fact of a rival 
 company having commenced the banking business and 
 begun to issue notes. 
 
 It will be seen on examination of the above that the 
 proviso did not prohibit the formation of associations for
 
 BANK OF F.NGLAND. 85 
 
 general banking business ; it simply, but absolutely, for- 
 bade the issue of notes by associations of more than six 
 partners. The issuance of notes was regarded as so essen- 
 tial to the business of banking that it came to be believed 
 that joint-stock banking associations were absolutely pro- 
 hibited in England, and no such association was founded 
 until 1826, and then only after special legislation permit- 
 ting them. 
 
 As previously stated, the year [708 will be ever 
 memorable in the history of the Bank of England and of 
 England itself In this year the government was led into 
 making the Bank of England a gigantic financial monop- 
 oly, a move which wrought irretrievable ruin to many 
 banking houses. 
 
 In consequence of this law all the joint-stock banks 
 doing business were compelled to \\ind up their affairs. 
 
 The Act tacitly gave encouragement to small shop- 
 keepers and others, however limited their means, to estab- 
 lish banks and issue notes ; but to persons of capital, res- 
 pectability and credit, willing to associate in large bodies 
 and embark in a similar undertaking, it iu fact said, "your 
 company shall not consist of more than six partners," 
 thereby placing the banking system in a state of liberty 
 as to everything rotten and bad, and in a state of restric- 
 tion as to cver\'thing good and substantial. Even to this 
 day there is no part of English laws more complicated, or 
 less understood, than the laws relating to partnership ; 
 they seem to be founded upon no general principle, and 
 consequently arc contradictory and obscure. 
 
 This state of affairs was continued until 1825. when 
 an Act was passed allowing co-partnerships of more than
 
 Pg niSTOKV OK THE 
 
 six persons to carry on business in England as bankers, 
 sixty-five miles from London, with tlie provision, how- 
 ever, that such stockholders should be Jiable for the entire 
 debts of the bank. Notwithstanding the provisions of 
 this law, which would seem to prevent any joint-stock 
 bank being established within sixty-five miles of London, 
 in 1834 the London and Westminister bank was founded, 
 and has been in operation ever since, although not with- 
 out having innumerable troubles to encounter. Litiga- 
 tion Avith the Bank of England, caused by a too fierce 
 competition, and other difficulties, at first beset it, but 
 through all of these it has passed, and met with the high- 
 est success. The success of the bank encouraged others, 
 and in and about London are to be found plenty of them. 
 
 It must be borne in mind, however, that there are 
 to-day (1888) no English joint-stock banks of issue except 
 such as were formed prior to the passage of what is known 
 as the 1844 Bank Act, which prohibited joint-stock banks 
 from setting up within sixty-five miles of London. And 
 these were all situated beyond the sixty-five mile limit, 
 but as a matter of fact the privilege of issue is very little 
 regarded in England to-day. The issuing banks have a 
 right to issue ;^5, 5 12,000 — but they onl}- have in circula- 
 tion. October, 1888.^2,560,000. 
 
 The celebrated Act of 1844, which is described at 
 length further on, affected the Bank of England in many 
 ways. Up to this period the bank, as also private banks 
 with not more than six partners, and since the year 1826, 
 joint-stock banks beyond a radius of sixty-five miles from 
 London, could issue notes without restriction, with the 
 'promise to pay" expressed upon the notes was guaran-
 
 RANK OF ENGLAND. 8*7 
 
 teed only by the desire and ability of the issuers to keep 
 faith with the holders of them. The Act of 1844 prohib- 
 ited in future all issues by newly formed private or joint- 
 stock banks, and by those which had from any cause ceased 
 to issue prior to that date, or should do so subsequently ; 
 and restricted such issues as then existed within certain 
 fixed amounts. 
 
 " The trade of banking," says Sir Henry Parnell, " is 
 of such a nature, that it is scarcely possible for any but a 
 very numerous body of partners to furnish a capital suffic- 
 iently large for carrying it on advantageously to the pub- 
 lic. A single individual, or a few individuals, cannot be, 
 but very rarely, possessed of that amount of capital which 
 alone can render this trade a safe one ; for this reason, in 
 order to establish in a country a sound system of banking, 
 it is indespensibly necessary that care should be taken 
 not to impose any legislative restrictions in the way of 
 large bodies associating together toform joint-stock bank- 
 ing companies.
 
 CHAPTER VI. 
 
 SUSPENSION OF CASH PAYMENTS. 
 
 Important Epoch in tlic History of English Banking- 
 Passage of the Restriction Act — The Government 
 Advises ^vith the Bank- -Run on Country Batiks — 
 Bank of England Again in Trouble — Suspension of 
 Cash Payments ■ Embarking on a New Course — The 
 Bank Issues a Notice to the Public — Increase in Coun- 
 try Banks in lygj — Cause of Enormous Failures — 
 Extending the Field for Circulation of Bank of 
 England Paper — History of Depreciation of Currency 
 — Paper Raised to Par by Accidental Circumstances. 
 
 The year 1797 was a most important epoch in the 
 history of English banking. Owing partly to events con- 
 nected with the war then carried on, to loans to the 
 Emperor of Germany, to bills drawn on the treasury at 
 home by the British agents abroad, and partly, and chiefly, 
 perhaps, to the advances most unwillingly made by 
 the bank to the government, which prevented the direc- 
 tors from having a sufficient control over their issues, the
 
 BANK OF EN'GLAND. 89 
 
 exchanges became unfavorable in 1795, and in that and 
 the follovvin^^ year large sums of specie were drawn from 
 the bank. In the end of 1796 and beginning of 1797, con- 
 siderable apprehensions were entertained of invasions, and 
 rumors were propogated of descents having been actually 
 made on the coast. In consequence of the fears that were 
 thus excited, runs were made on the provincial banks in 
 different parts of the country; and some of them having 
 failed, the panic became general and extended itself to 
 London. Demands for cash poured in from all quarters 
 upon the bank, which, on Saturday, the 25th of February, 
 1797, had only ^{^ 1,272,000 of cash and bullion in its coffers 
 with every prospect of a violent run taking place on the 
 following Monday. In this emergency, an order in council 
 was issued on 5unda\', tlie 26th, prohibiting the directors 
 from paying their notes in cash until the sense of Parlia- 
 ment should be tal<cn on the subject. And after 
 Parliament met, and the measure had been much discussed, 
 it was agreed to continue the restriction till six months 
 after the signature of a definitive treaty of peace. 
 
 We have now come to a period in the history of 
 banking marked by one of the most extraordinary cir- 
 cumstances that ever happened in iMigland, namely, the 
 stoppage of the issue of specie in their customar\- ]"iay- 
 ments by the Bank of England. We arc now approaching 
 one of the most important and critical periods in the 
 history of the bank. We propose, therefore, to give 
 somewhat in detail a gradual development of its condition, 
 and the real causes which led to the final suspension of all 
 payments in cash, together Avith the consequences which 
 followed that suspension.
 
 90 
 
 HISTORY OF THE 
 
 On the 15th of January, 1795, the Court of Directors 
 of the Bank of England passed a resolution that the Chan- 
 cellor of the Exchequer be requested to make such 
 arrangements in his finances of the present year as not to 
 depend on any further assistance from them beyond what 
 had already been agreed on ; and on the i6th of April the 
 governor and deputy-governor were directed to wait upon 
 a representative of the government to express the uneasi- 
 ness they felt at being called upon to pay upwards of two 
 millions in treasury bills, and to request the government 
 to provide for their discharge. 
 
 On the Sth of October, 1795, the Court of Directors 
 sent a written paper to the Chancellor of the Exchequer, 
 purporting that the very large and continued drain of 
 bullion and specie which the bank had lately experienced, 
 arising from loans and other subsidies, together with the 
 prospect of the demand for gold not appearing soon to 
 cease, had excited such apprehension in the Court of 
 Directors that, on the most serious deliberation, they 
 deemed it right to communicate to the Chancellor of 
 the Exchequer the absolute necessity they conceived to 
 exist for diminishing the sum of their present advances to 
 the government, the last having been granted with great 
 reluctance on their part; and then only on his pressing 
 solicitations, and statement that serious embarrassments 
 would arise to the public service if the bank refused." 
 
 Xo reply was made to this application, or any steps 
 taken bj' the Chancellor of the Exchequer to relieve the 
 bank from the difficulties in which they found themselves; 
 but they were left to struggle through them as best they 
 might. The directors of the bank waited on the govern-
 
 BANK (»K ENGLAND. D 1 
 
 ment on the 25th of the same month, on the subject of a 
 contemplated loan to the Emperor of Austria, and were 
 informed that no such loan was contemplated. 
 
 Several commLuiications appear to have passed 
 between the bank and Ljovcrnmcnt from this time until the 
 20th of July, 1796, on which day the bank received a letter 
 from the government requiring several advances of monc\' 
 including the payment of the treasury bills; and, after a 
 debate on the subject of the letter, the court came to 
 several resolutions, which resulted in a compliance with 
 the government's request, with this significant addition, 
 that such compliance be accompanied with a MOST 
 SERIOUS ANT) SOLKMN Ri'.SOLUTTOX, which, for the justi- 
 fication of the court, they desire may be laid before his 
 Majesty's cabinet. Tiiis remonstrance concluded as fol- 
 lows:^ 
 
 "They (the Court of Directors) beg leave to declare 
 that nothing could induce them, under present circum- 
 stances, to comply with the demand made upon them, but 
 that the dread of their refusal might be {productive of a 
 greater evil ; and nothing but the extreme pressure and 
 exigency of the case can, in any shape, justify them for 
 acceding to this measure, and they apprehend in so doing 
 they render themselves totally incapable of granting any 
 further assistance to government during the remainder of 
 this year, and unable to make the usual advances on the 
 land and malt taxes for the ensuing year; should those 
 bills be passed before Christmas. The}' likewise consent 
 to this measure in a firm reliance that the repeated prom- 
 ises so frequently made to them, that the advances on the 
 treasury bills should be completely done away, may be
 
 92 HISTORY OF THE 
 
 actually fulfilled at the next meeting of Parliament, and 
 the necessary arrangements taken to prevent the same 
 from ever happening again, as they conceive it to be an 
 unconstitutional mode of raising money; what they are 
 not warranted by their charter to consent to; and an 
 advance always extremely inconvenient to themselves." 
 
 Hv this confession on the part of the bank, it appears 
 that the\- w ere in the habit of violating that clause in 
 their charter which prohibits their lending any money to 
 the King without the consent of Parliament. 
 
 On the 9th of h'ebruary, 1797, the Court of Directors 
 ordered the governor of the bank to notify the j^overn- 
 ment that, under the i)resent state of the bank's advances 
 to government, to agree to his request of making a further 
 advance of /j, 500,000 as a loan to Ireland, would threaten 
 ruin to the bank, and most probably bring the directors 
 under the necessity of shutting up their doors. 
 
 These several remonstrances to the p;overnment seem 
 to have had little or no effect; and the result anticipated, 
 viz.: a stoppage of the Bank of England, took place even 
 at an earlier period than the directors themselves calcu- 
 lated upon. 
 
 The run — to speak in commercial phraseology — com 
 menced upon some of the countr}' bankers ; and the great 
 demand for specie to supply them induced the directors 
 to lay the state of their affairs before the government. 
 
 His Majesty's Privy Council held a meeting and the 
 following resulted : 
 
 " Upon the representation of the Chancellor of the 
 Exchequer, stating, that from the result of the informa- 
 tion he has received, and of the inquiries which it has
 
 BANK OF r.N'GLANI). 
 
 98 
 
 been his duty to make respecting the effect of the unusual 
 demand for specie that has been made upon the metropo- 
 Hs, in consequence of ill-founded alarms in different parts 
 of the country ; it appears, that unless some measure is 
 immediately taken, there may be reason to apprehend a 
 want of a sufficient supply of cash to answer the exigencies 
 of the public service. It is the unanimous opinion of the 
 Board, that it is indispensably necessary for the public 
 service that the tlirectors of the Bank of England should 
 forbear issuing any cash in payment until the sense of Par- 
 liament can be taken on that subject, and the proper 
 measures adopted thereupon for maintaining the means 
 of circulation, and supporting the public and commercial 
 credit of the Kingdom at this important juncture. And it 
 ordered that a copy of this minute be transmitted to the 
 directors of the Bank of England at once. 
 
 On the next Monday morning the following was 
 issued by the bank: — 
 
 " In consequence of an order of his Majesty's Privy 
 Council, notified to the bank last night, the (jovernor, 
 Deputy Governor, and Directors of the Bank of England 
 think it is their duty to inform the proprietors of the bank 
 stock, as well as the public at large, that the general con- 
 cerns of the bank are in the most affluent and flourishing 
 condition, and such as to preclude every doubt as to the 
 security of its notes. The Directors mean to continue 
 their usual discounts, for the accommodation of the com- 
 mercial interests, paying the amount in bank notes; and 
 the dividend warrants will be paid in the same manner." 
 
 Great alarm was excited throughout London on the 
 appearance of the above notice.
 
 94 
 
 HISTORY OF THE 
 
 By the order of the Privy Council the Directors of the 
 Bank of England were restrained from doing what in fact 
 was physically impossible for them to do; and were in- 
 dulged with the liberty of exchanging one promise to pay 
 for another promise to pay, yet, notwithstanding this sus- 
 pension of cash payments, which forms a most memorable 
 era in the history of political economy, the credit of the 
 bank immediately revived, and their notes were circulated 
 more freely than ever, and retained the same degree of 
 credit as when, according to the tenor of their promises, 
 they were honored with an immediate payment. 
 
 The bank was determined to act up to the letter and 
 spirit of the order of the Privy Council ; for they even 
 refused to furnish the bankers of the metropolis with a suf- 
 ficient quantity of specie to pay the fractional part of the 
 checks drawn on them; and in reply to the application of 
 the Committee of Bankers, stated : — "They could not 
 spare the specie." 
 
 The moment the Bank of England on authority re- 
 fused to pay their notes, the legislature without doubt 
 became responsible for the validity of that currency which 
 they had hitherto only connived at. 
 
 As previously stated, as soon as the order in council 
 prohibiting payments in cash appeared, a meeting of the 
 principal bankers, merchants, traders, &c., of the metrop- 
 olis, was held, when a resolution was agreed to, and very 
 numerously signed, pledging those present to accept, and 
 to use every means in their power to make bank-notes be 
 accepted, as cash in all transactions. This resolution 
 tended to allay the apprehensions that the restriction had 
 excited.
 
 BANK OF r.NflLAND. 95 
 
 Parliament being in session at the time, a committee 
 was immediately appointed to examine into the affairs of 
 the bank ; and their report put to rest whatever doubts 
 might have been entertained with respect to the solvency 
 of the establishment, by showing, that at the moment 
 when the order in council appeared, the bank was possess- 
 ed of property to the amount of ;i^i 5,5 13,690, after all 
 claims upon it had been deducted. This suspension of 
 cash payments being naturally followed by a withdrawal 
 of gold from circulation, made it necessar)- to allow of the 
 issue of notes of a smaller denomination than ^5, and the 
 statute of 1777 was accordingly also suspended. 
 
 It had been generally supposed, previously to the 
 passing of the Restriction Act, that bank-notes would not 
 circulate unless they were immediately conxertible into 
 cash. But the event showed that this was not really the 
 case. Though the notes of the Bank of England were 
 not, at the passing of the Restriction Act, declared by law 
 to be legal tender, they were rendered such in practice, 
 by being received as cash in all payments on account of 
 government, and by the vast majority of individuals. For 
 the first three years of the restriction, their issues were so 
 moderate that they not only kept on a par with gold, but 
 actually bore a small premium. But in 1801, 1802, and 
 1803, they were so much increased that they fell to a dis- 
 count of from 8 to 10 per cent. In 1804 they again recov- 
 ered their value ; and from that year to 1808, both inclu- 
 sive, they were at a discount of 2^ per cent. In 1809 and 
 18 10, however, the directors appear to have embarked on 
 a new course, and to have entirely lost sight of the princi- 
 ples by which their issues had previously been governed ;
 
 90 HISTORY OF THE 
 
 for the average amount of bank-notes in circulation, which 
 had not exceeded 17^ millions, nor fallen short of 16^ mil- 
 lions, in any one year, from 1802 to 1808, both inclusive, 
 was in 1809 raised to ;£; 18,927,833, and iSioto ;{;22,54i,523. 
 The issues of country bank paper were increased in a still 
 greater proportion ; and, as there was no corresponding 
 increase of the business of the country, the discount on 
 bank-notes rose from 2k in 1808 to from 13 to 16 per 
 cent, in 1809 and 1810. 
 
 This depreciation in the value of bank paper being 
 accompanied by a corresponding fall in the exchange, 
 attracted the attention of the public and the legislature. 
 In consequence, the House of Commons appointed, in 
 1810, a committee to inquire into the subject ; and having 
 examined several witnesses, the committee in their report, 
 which was both an able and a celebrated paper, justly 
 ascribed the fall in the value of bank paper, as compared 
 with gold, to its over-issue ; and recommended, in the 
 view of correcting the existing evil and of preventing its 
 recurrence, that within two years the bank should be 
 obliged to resume specie payments. But this recommen- 
 dation not being adopted, the over-issue of paper went on 
 increasing. In 18 12 it was at an average discount, as 
 compared with bullion, of 20 per cent.; in 1813, of 23 per 
 cent.; and in 18 14, when the maximum of depreciation 
 was attained, it was at 25 per cent. 
 
 At the period when the restriction on cash payments 
 took place in 1797, it is supposed that there were about 
 280 country banks in existence ; but so rapidly were these 
 establishments multiplied, that they amounted to above 
 900 in 1813. The price of corn, influenced partly by the
 
 BANK OF ENGLAND. 97 
 
 depreciation of the currency and the facihty with which 
 discounts were obtained, but more by deficient harvests 
 and the unprecedented difficulties which the war threw in 
 the way of importation, rose to an extraordinary height 
 during the five years ending witli 1813. But the harvest 
 of that year being unusually productive, and the inter- 
 course with the Continent being then also renewed, prices, 
 influenced by both circumstances, sustained a very heavy 
 fall in the latter part of 18 13 and the beginning of 18 14. 
 And this fall having ruined a considerable number of far- 
 mers and produced a general want of confidence, such a 
 destruction of provincial paper took place as has rarely 
 been paralleled. In 18 14, 18 15, and 18 16, no fewer than 240 
 country banks stopped payment ; and cigJity-nine com- 
 missions of bankruptcy were issued against these estab- 
 lishments, being at the rate of one commission against 
 every ten and a Jialf oi X\\q. total number of banks existing 
 in 1813. 
 
 The great reduction that was thus suddenly and vio- 
 lently brought about in the quantity of country bank 
 paper, by extending the field for the circulation of Bank 
 of England paper, raised its value in 18 17 nearly to a par 
 with gold. The return to cash payments being thus facil- 
 itated, it was fixed, in 1819, that they should take place 
 in 1823. But to prevent any future over issue, and at the 
 same time to render the resumption as little burdensome 
 as possible, it was enacted that the banks should be 
 obliged, during the interval from the passing of the .Vet 
 till the return to specie payments, to pay its notes, if 
 required, in bars of standard bullion of not less than sixty- 
 ounces' weight. This plan was not, however, acted upon
 
 98 HISTORY OK THE IJANK OF ENGLAND. 
 
 during the period allowed by law ; for, a large amount of 
 gold having been accumulated at the bank, the directors 
 preferred recommencing specie payments on the ist of 
 May. 1821. 
 
 It is true, that after a currency has been for a consid- 
 erable period depreciated, as much injustice is done by 
 raising, as was previously done by depressing, its value. 
 But there is good reason to doubt whether the deprecia- 
 tion from 1809 to 18 1 5 (for the depreciation of 2^- per cent, 
 during the six preceding years is too inconsiderable to be 
 taken into account) extended over a sufficiently length- 
 ened period to warrant legislation looking for a departure 
 from the old standard. It is needless, however, to offer 
 any opinion on this rather difficult point, for we have seen 
 that the value of paper was raised in 18 16 and 18 17 almost 
 to par by accidental circumstances without any interfer- 
 ence on the part of the government or the bank. Sir 
 Robert Peel's Act, to which this raise has been ascribed, 
 not being passed till 18 19, could have nothing to do with 
 what occurred two or three years previously. Its object 
 was two-fold, to redeem the pledge given by Parliament 
 to restore the old standard on the return of peace, and to 
 shut the door against any further depreciation of paper.
 
 CHAPTER VII. 
 
 SPECULATIONS, SCHEMES, FAILURES AND LOSSES. 
 
 Batik of England Resumes Cash Payments — Vicissitudes 
 of Banking — Speculative Rage — No Scheme Too 
 Hazardous — Speculation of To- Day Not Without a 
 Precedent — Worthless Paper Readily Negotiated — 
 Discounts Easily Obtained — Schemes of Country 
 Bankers — A Cyclone of Faihires — Bank of England 
 Makes a Serious Blunder — Distrust Frilly Awake — 
 A Tremendous Ru7i — Cause of the Difficulties — An 
 Instructive Table — Accumulation of Securities — What 
 the Directors Should Have Done to Avoid Disaster 
 — Loss of Three Millions of Bullion — The South Sea 
 Bubble — A Delirium of Speculation — List of the 
 Bubble Companies of 1721 — Getting Rich Without 
 Trouble — Philanthropist Thomas Guy. 
 
 The resumption of cash payments did not, however, 
 put an end to the vicissitudes of banking. Notwithstand- 
 ing the ample experience that had been supplied by the
 
 fJO HISTORY OF THE 
 
 occurrences of 1792-3, and 1814-16, of the mischievious 
 consequences of the issue of paper by the country banks, 
 and of their want of solidity, nothing whatever was done 
 when provision was made for returning to specie payment 
 to restrain their issues, or to place them on a better foot- 
 ing. The consequences of such improvidence were not 
 long in manifesting themselves. The price of corn and 
 other agricultural products, which had been greatly de- 
 pressed in consequence of abundant harvests, in 1820, 1821, 
 and 1822, rallied in 1823, and the country bankers imme- 
 diately began to enlarge their issues. It is hardly 
 necessary to look into the circumstances which conspired, 
 along witli the rise of prices, to promote the extraordinary 
 rage for speculation exhibited in 1824 and 1825. It is 
 sufficient to observe, that in consequence of their opera- 
 tion, confidence was very soon carried to the greatest 
 height. It did not seem to be supposed that any scheme 
 could be hazardous, much less wild or extravagant. Wild 
 American speculation, occasionally seen, is tame com- 
 pared with the wild business ventures and speculations in 
 England in the years named above. So speculation, after 
 all, as seen to-day, is not without its precedent. 
 
 In those days the infatuation for speculation was 
 such, that even those regarded as the most conservative 
 and considerate did not scruple to embark in visionary 
 and the most utterly absurd projects; while the extreme 
 facility with which discounts were procured upon bills at 
 very long dates, afforded the means of carrying on every 
 sort of undertaking. The most worthless paper was read- 
 ily negotiated. Many of the country bankers seemed to 
 have no other object than to get themselves indebted to
 
 BANK OK ENGLAND. 101 
 
 the public. And such was the vigor and success of their 
 efforts to force their paper into circulation, that the 
 amount of it afloat in 1825 is estimated to have been 
 nearly 60 per cent, greater than in 1823. The conse- 
 quence of this unprincipled and extravagant conduct 
 speedily brought ruin to all engaged. 
 
 Now came a cyclone of failures, the direct outgrowth 
 of speculation, the like of which was never experienced 
 before, seventy banks going under in six weeks, the 
 majority, of course, being country banks. The currency 
 having become redundant, the exchange began to decline 
 in the summer of 1824. The directors of the Bank of 
 England having unwarily entered, in the early part of that 
 year, into an engagement with the government to pay off 
 such holders of 4 percent, stock as might dissent from its 
 conversion into a 3}^ per cent, stock, were obliged to 
 advance a considerable sum on this account after the de- 
 pression of the exchange. But despite this circumstance, 
 they might and ought to have taken measures, in the 
 latter part of 1824 and the earlier part of 1825, by lessen- 
 ing their issues to stop the efflux of bullion. But not 
 being sufficiently alive to the urgency of the crisis, the 
 London currency was not materially diminished till Sep- 
 tember, 1825. The recoil, which would have been less 
 severe had the efforts of the bank to prevent the exhaustion 
 of its coffers taken place at an earlier period, was most 
 appalling. 
 
 The country banks began to give way the moment 
 they experienced a considerably increased difficulty of 
 obtaining accommodation in London, and confidence and 
 credit were immediately at an end. Suspicion having
 
 102 HISTORV OF THE 
 
 awakened from her trance, distrust had no limits. All 
 classes of depositors made haste to draw out the money 
 they had entrusted to the care of the banks. There was 
 also a tremendous run upon them for payment of their 
 notes, not in the view of sending the gold as a mercantile 
 adventure to the Continent, but to escape the loss which 
 it became obvious the holders of country paper would have 
 to sustain. SiJir^'c qui pent was the universal cry; and 
 the destruction was so sudden and extensive, that in less 
 than six weeks more than seventy banking establishments 
 were swept out of existence, and a vacuum was created in 
 the currency which absorbed from eight to ten millions of 
 additional issues by the Bank of England at the same time 
 that myraids of those private bills that had previously 
 swelled the amount of currency, and added to the 
 machinery of speculation, were totally destroyed. 
 
 It may be worth while, perhaps, to observe that it has 
 been alleged, in opposition to what is now stated, that the 
 difficulties of the bank in 1825 were not caused by any 
 excess either of its issues as of those of the country banks, 
 but by the too great amount of capital, that is of coin and 
 bullion, it had lent; and in proof of this allegation, we are 
 referred to the increase of nearly eight millions in secur- 
 ities which the bank held in August, 1825, over their 
 amount in August, 1822, and to the simultaneous decrease 
 of nearly six and a half millions in the amount of bullion 
 in its coffers. The following statement is instructive: — 
 Securities of all sorts, 31st August, 1822,. . . . £1^ ,2^0,^10 
 
 31st August, 1825, 25,106,030 
 
 Excess of securities, 31st August, 1825, over 
 
 those held on 31st August, 1822, i;7,8i 5,520
 
 BANK OF ENGLAND. 103 
 
 Bullion in Bank, 31st August, 1822 ;Cio,097,96o 
 
 " 31st August, 1825 3,634,320 
 
 Diminution of bullion, ;(^6,463,640 
 
 On the 28th February, 1826, the bullion in the bank 
 amounted to only ^^"2,459,5 10. 
 
 A little consideration will suffice to show the futility 
 of this statement. No issue of notes can be said to be in 
 itself excessive. Whether it is or is not in excess depends 
 upon its relation to the amount of coin and bullion reserv- 
 ed by the issuing banks in its coffers. The Bank of Eng- 
 land enlarged its issues disproportionately and took no 
 steps, or none of sufficient energy, to reduce the amount 
 of notes in circulation till long after the exchange had 
 become unfavorable, and bullion was demanded of it for 
 exportation. 
 
 The accumulation of securities was the necessary 
 result of this radical error. The currency having become 
 redundant in 1824, the notes of the bank were returned 
 upon it for gold, so that its securities were augmented at 
 the same time that its means of dealing with the unfavor- 
 able exchange were impaired. It should be remembered, 
 that the efflux of bullion showed conclusively that, how- 
 ever issued, and whether greater or less than at former 
 periods, the paper afloat was in excess, and that its reduc- 
 tion had become indispensable. And such being the case, 
 it was the duty of the bank directors, as soon as they felt 
 the drain for gold setting steadily against them, to adopt 
 every means in their power, by raising the rate of interest, 
 selling securities, and otherwise, to reduce their issues and 
 restore the exchange to par. And had they done this at 
 a sufficiently early period, it is all but certain the bank
 
 104 HISTORY OF THE 
 
 would not have lost more than two or three millions of 
 bullion; whereas, by their following a different line of con- 
 duct, and deferring the adoption of vigorous repressive 
 measures till too late a period, it was drained of about 
 seven millions of bullion, and its safety seriously compro- 
 mised before it could stop the drain. 
 
 The speculative rage before mentioned was not with- 
 out precedent. The South Sea Company was the leader 
 of the maddest kind of schemes and speculations England, 
 or in fact any other country, ever saw. The memorable 
 project for the formation of the South Sea Company was 
 brought out in the year i/ii, and owed its origin to the 
 following circumstances : — 
 
 During the war with France, in the reign of King 
 William the Third, the payments to the sailors of the En- 
 glish navy being neglected, they received tickets instead 
 of money, and they were frequently obliged, by their ne- 
 cessities, to sell their tickets at forty, and sometimes fifty, 
 per cent, below the amount for which they received them. 
 By this and other means the debts of the nation unpro- 
 vided for by Parliament, amounted together to £9,4^1,- 
 325. Mr. Ilarley, at that time Chancellor of the Exche- 
 quer, proposed a scheme to allow the holders of these 
 tickets or debentures, and the other portion of the float- 
 ing debt, six per cent, per annum interest, and to incorpo- 
 rate them for the purpose of carrying on a trade to the 
 South Seas ; and they were accordingly incorporated 
 under the title of the Governor and Company of merchants 
 of Great Britain, trading to the South Seas and other parts 
 of America, and for encouraging the Fisheries. 
 
 The company soon abandoned all idea of mercantile
 
 BANK OF KNGLAND. 105 
 
 operations— if they ever seriously intended to undertake 
 
 *^i them — and confined themselves to money dealings with 
 
 W, the government, and increasing the value of their stock, 
 
 5 which at one time rose to the enormous amount of 1,000 
 
 per cent. 
 
 The apparent success of the South Sea Compan 
 scheme caused numerous romantic projects, proposals and 
 undertakings, both private and national, to be submitted 
 to the public, many of which were notoriously absurd. 
 Persons of rank of both sexes were deeply engaged in 
 these bubbles ; avarice prevailing at this time over all 
 consideration, cither of dignity or equity, the gentlemen 
 going to taverns and coffee-houses to meet their brokers, 
 and the ladies to their milliners' and haberdashers' shops 
 for the like purpose. 
 
 Any impudent imposter, while the speculative delir- 
 ium was at its height, needed only to hire a room at some 
 coffee-house, or other resort, near the exchange, for a few 
 hours, and open a subscription book for something rela- 
 tive to commerce, manufactures, plantations, or some 
 supposed invention, newly hatched out of his own brain. 
 These delusive projects, a list of some of the most ridicu- 
 lous of which will be found below, received their first check 
 from the power to which they owed their birth, viz.: the 
 South Sea Company, the directors of which, desirious to 
 monopolize all the money of the speculators to themselves, 
 obtained writs of scire facias against the conductors of 
 the bubbles. 
 
 A LIST OF THE BUBBLES, AS PUBLISHED IN THE YEAR I72I. 
 Hard Soap. 
 Potato Starch.
 
 106 HISTORY OF THE 
 
 Silver Extract. 
 
 Men's Breeches. 
 
 Fattening Hogs. 
 
 South Sea Hops. 
 
 Swords from Iron. 
 
 Bleaching of Hair. 
 
 Butter Manufactory. 
 
 Overall's Fire Office. 
 
 Employing the Poor. 
 
 Fishery for Gudgeons. 
 
 Suppression of Piracy. 
 
 Improvements of Hops. 
 
 Women's Silk Stockings. 
 
 Ladies' Hoop Petticoats. 
 
 Trade to the North Seas. 
 
 Grand American Fishery. 
 
 Grand Fishery for Smelts. 
 
 Improvements in Tobacco. 
 
 Exportation of Old Clothes. 
 
 Insurance Against Burglars. 
 
 Hurst's Importation of Hair. 
 
 Insuring Children's Fortunes. 
 
 Insurance Against Highwaymen. 
 
 A New Method for Cleaning Streets. 
 
 Serving London with Hay and Corn. 
 
 Curing of Broken Winded Horses and Mares. 
 
 Melting Sawdust and Shavings into Deal Boards of 
 any length and free from knots. 
 
 The bursting of these bubbles left traces of misery 
 and distress to an extent hitherto unknown in the mone- 
 tary world.
 
 BANK OF ENGLAND. 107 
 
 The credulity of the British public at this period was 
 only surpassed by the impudence of the inventor. Men, 
 without any capital but presumption, proposed and carried 
 out companies ; and when, by the aid of an important 
 name or two, obtained, perhaps, under fraudulent preten- 
 ces, and a prospectus full of specious phraseology and defi- 
 nite promises, they had arrived at a premium, the shares 
 were sold and the associations abandoned. 
 
 In a satirical novel of the day, a bubble company to 
 be called " The Gold, Wine and Olive Joint-Stock Com- 
 pany," is supposed to be projected. From the writer's 
 position, it is very probable that much of his presumed 
 fiction was facts. " All we have to do," says one of the 
 projectors, *' is to puff our shares up to a premium, hum- 
 bug the public into buying them, and then let the whole 
 concern go to ruin." There was also presented for public 
 favor the prospectus of a company to drain the Red Sea, 
 in search of the gold and jewels left by the Egyptians, in 
 their passage after the Israelites, Many similar jocculo- 
 sities were in circulation, some of which emanated from 
 the members of the Stock Exchange, always alive to a 
 sense of the ridiculous. But it is impossible, and the 
 experience of every speculative era has proved it, to open 
 the eyes of men who are making large profits. Every one 
 appeared to get rich without trouble. The price of all 
 articles increased in value. Ten-fold higher terms were 
 paid for land, with the view of building on it, than it was 
 worth, 
 
 " The wildness of speculation," says Knight's History 
 of London, "was not, however, confined to joint-stock 
 projects ; but at length reached to commercial produce
 
 lOS HISTORY OF THE 
 
 generally. Money was abundant, and circulated with 
 rapidity. Trices and profits rose higher and higher, and, 
 in short, 
 
 * .\H went merry as a marriage bell.' " 
 
 The newspapers and periodicals of the day could 
 scarcely contain the announcements which day after day 
 poured from the prolific pens of schemers. Shares were 
 issued at high premiums; loan after loan was taken at 
 high rates; but high as they were contracted, the extrav- 
 agant feeling of the period sent them all higher. The 
 shopkeeper ceased to toil, that he might become suddenly 
 rich. The merchant embarked his capital and his credit; 
 the clerk risked his reputation and his place, to obtain a 
 share of the broad golden stream, which waited to be 
 drunk. The broker could scarcely find time to execute 
 his commissions. There was one individual who looked 
 calmly on during the progress of these schemes and bub- 
 bles, and although not profiting at the expense of the 
 credulit}' of the people engaged in them, had reaped an 
 immense fortune by foreseeing at their commencement the 
 events that actually occurred. That individual was 
 Thomas Guy, the founder of Guy's Hospital. Mr. Guy 
 was a bookseller. 
 
 We have before stated that such was the poverty of 
 the Exchequer at the latter part of the reign of King 
 William the Third, money could not be obtained for pay- 
 ing the seamen's wages, and that they were accordingly 
 paid by tickets or debentures, which, from their necessi- 
 ties, they were compelled to part with considerably below 
 their nominal value. The purchasers of these tickets 
 were in turn obliged to sell them; and at one lime such
 
 BANK OF ENGLAND 109 
 
 was their depreciation that they fell to fifty per cent, dis- 
 count. 
 
 Mr. Guy, having been a thrifty, saving man, had 
 reaHzed what in tliosc days was considered a large sum of 
 money; and, having the utmost possible confidence in the 
 honor and integrity of the government, that the deben- 
 tures would one day^and that at no distant period — be 
 paid in full, was one of the first to set an example of in- 
 vesting his capital in government securities, by purchasing 
 a considerable quantity of this "floating debt," as it was 
 then called. The result was that out of his investments 
 he eventually realized several million pounds. 
 
 The cost of erecting Guy's Hospital was iT 18,793, and 
 of endowing it £2ig,4.gg, together ^^238,292, which munif- 
 icent gift, during his lifetime, was a much larger sum than 
 had ever before been dedicated by a single individual to 
 charitable purposes. It even rivalled the endowment of 
 Kings. Thomas Guy died December 27, 1724, in the 
 eightieth year of his age. Sixteen years before his death 
 he built and furnished the wards in St. Thomas's Hospital, 
 for the reception of sixty-four patients. He also left to 
 the managers of Christ's Hospital a perpetual annuity of 
 ;^400 a year for taking in four children annually. He 
 also left ;^i,ooo to be appropriated in relieving from prison 
 those prisoners whose debts did not exceed ^5 each, by 
 which bequest six hundred obtained their liberty. He 
 also provided liberally for his relatives. 
 
 Although the above account does not, strictly speak- 
 ing, fall within the range of subjects marked out for this 
 work, we could not refrain from referring to a character so 
 truly estimable and charitable as that of Thomas Guy,
 
 110 
 
 HISTORY OF THE BANK OF ENGLAND, 
 
 whose beneficence is still dispensed with the same gen- 
 erous sympathy for the afflicted as it was upwards of one 
 hundred and sixty years ago.
 
 CHAPTER VIII. 
 
 LOOSE BANKING METHODS PARALYZE BUSINESS. 
 
 Improving Country Banking — Suppressing £i Notes — 
 Repealing Laws — Circulation of Notes for Less thati 
 £^ Forbidden — Speculative Schemes Again in 
 Abundance — Rage for Establishing Nczv Banks — Vol- 
 uminous Issue of Notes — Raising the Rate of Interest 
 — Shock to Industrial Undertakings — How the Bank 
 of England Escaped Failure — Natural Obstacle to 
 Formation of New Banks — The Railway Mania — 
 Gigantic Frauds Perpetrated by Projectors of Imag- 
 inary Railroads — TJie Country Wild with Speculation 
 — The Crash Wrecks Thousands — A Ba?ikers Duty — 
 TJie Penalty of Neglect. 
 
 Notwithstanding the fact that nations are slow and 
 reluctant learners, the events of 1825-26, taken in connec- 
 tion with those of the same sort that had previously 
 occurred, produced a conviction of the necessity of doing 
 something that should at least improve the system of 
 country banking in England. But the measures adopted
 
 1 12 mSTOKV OF THE 
 
 with this view were very far indeed from effectually secur- 
 ing their object. The law of 1708, limiting to six the 
 number of partners in banking establishments issuing 
 notes, was repealed; and it was enacted, that banks with 
 any number of partners might be established for the issue 
 of notes anywhere beyond sixty-five miles from London, 
 and that banks not issuing notes might be established in 
 London itself with any number of partners. The circulation 
 of notes for less than five pounds in England and Wales 
 was at the same time forbidden. It was intended to 
 extend the same prohibition to Scotland and Ireland, but 
 the opposition to the proposal excited in these countries 
 was too strong to be overcome. Sir Walter Scott threw 
 himself zealously into the controversy, and by his Letters 
 of Malachi Malagrowther, helped to make the resistance 
 effectual. 
 
 The suppression of ^i notes was advantageous in 
 shutting up one of the principal channels by which the 
 inferior class of country bankers got their paper into cir- 
 culation, to the frequent loss of the poorer classes; but it 
 is now generally admitted that the balance of argument is 
 in favor of the issue of notes of this denomination by the 
 l^ank of England or some agency of the state, under con- 
 ditions ensuring their convertibility. 
 
 The second branch of the banking legislation of 1826 
 was for some time a comparative failure. Those who sup- 
 posed that joint-stock banks would be immediately set on 
 foot in all parts of England, were a good deal disappointed 
 with the slowness with which they spread for some years 
 after the Act permitting their establishment was passed. 
 Tlie heavy losses occasioned by the downfall of most of
 
 RANK OK EiVGLAND. 113 
 
 the joint stock projects set on foot in 1824 and 1825, made 
 all projects of the same kind be looked upon for a consid- 
 erable period with suspicion, and deterred most persons 
 from embarking^ in them. 15ut this caution gradually 
 wore off; and the increasing prosperity of the country, 
 and the difficulty of investing money so to obtain from it 
 reasonable return, generated anew a disposition to adven- 
 ture in hazardous j^rojects. A mania for embarking in 
 speculative schemes acquired considerable strength in 
 1834; and during 1835 and part of 1836, it raged with a 
 violence but little inferior to that of 1825, which is describ- 
 ed in a previous chapter. It was at first principally 
 directed to railroad projects; but it soon began to 
 embrace all sorts of schemes, and, among others, joint- 
 stock banks, of which an unprecedented number were pro- 
 jected in 1835. The progress of the system was as fol- 
 lows : — 
 
 Banks. 
 
 In 1826 there were registered 6 
 
 In 1827 I 
 
 In 1828 5 
 
 In 1829 4 
 
 In 1830 3 
 
 In 183 1 8 
 
 In 1832 10 
 
 In 1833 13 
 
 In 1834 8 
 
 In 1835 45 
 
 In 1836 II 
 
 Total 114
 
 1 14 HISTORY OF THE 
 
 In point of fact, however, the number of banks created 
 in 1S35 and 1836 was vastly greater than appears from 
 this statement. It seems that, at an average, each of the 
 56 banks estabUshed in those years, like those previously 
 established, had from four to five branches; and as these 
 branches transacted all sorts of banking business, and 
 enjoyed the same credit as the parent estabhshment, from 
 which they were frequently at a great distance, they were, 
 to all intents and purposes, so many new banks; so that, 
 instead of 56, it may safely be affirmed that from about 
 220 to 280 new joint-stock banks were opened in England 
 and Wales in 1835 and 1836, but mostly in the former 
 year. 
 
 In January, February, and March, 1836, when the rage 
 for establishing joint-stock banks Avas at its height, the 
 exchange was either at par, or nearly so, showing that the 
 currency was already up to its level, and that if any con- 
 siderable additions were made to it, the exchange would 
 be depressed, and a drain for bullion be experienced. But 
 these circumstances, if ever they occurred to the mana- 
 gers of the joint-stock banks, do not seem to have had, and 
 could not in truth be expected to have, any material in- 
 fluence over their proceedings. Their issues, Avhich 
 amounted on the 26th of December, 1835 to i^2, 799,551, 
 amounted an the 25th of June, 1836, to ^3,588,064, exclu- 
 sive of the vast mass of additional bills, checks, and other 
 substitutes for money they had put into circulation. The 
 consequences were such as every man of sense might have 
 foreseen. In April, 1836, the exchange became unfavor- 
 able, and bullion began to be demanded from the Bank of 
 England. The directors, that they might the better meet 
 
 I
 
 BANK OF ENGLAND. 115 
 
 the drain, raised the rate of interest in June from 4 to 4I 
 per cent., and this not being enough to sufficiently lessen 
 the pressure on the bank for discounts, they raised it in 
 August from 42 to 5 per cent. But during the whole of 
 this period the country banks went on increasing their 
 issues; and the issues of the joint-stock banks rose from 
 ^3,588,064 in June, to no less than ^4,258,197 on the 31st 
 of December, being an increase of nearly 20 per cent, after 
 the exchange was notoriously against the country; and 
 the most serious consequences were apprehended from 
 the continued drain for bullion. 
 
 It may, perhaps, be supposed that the increased issue 
 of the joint-stock banks would be balanced by a corres- 
 ponding diminution of the issue of the private banks, and 
 that on the whole the amount of their joint issues might 
 not be increased. This, however, was not the case. Some 
 private banks were abandoned in 1836, and others incor- 
 porated with joint-stock banks ; and it is further true, 
 that those which went on managed their affairs with more 
 discretion than their associated competitors. But, from 
 the 26th of September, 1835, to the 31st of December, 1836, 
 the issues of the private banks were diminished only 
 ;^i 59,087, whilst those of the joint-stocks were increased 
 during the same period ^^1,750,160, or more than ten times 
 the falling off in the others. 
 
 These statements show the inexpediency of leaving 
 the issue of paper to the unregulated discretion of an 
 indefinite number of competing banks. Its issue ought in 
 all cases to be governed by the state of the exchange, or 
 rather, as already stated, by the influx and efflux of bul- 
 lion. But previously to 1844, the provincial banks might
 
 116 HISTORY OF THE 
 
 go on over-issuing for a lengthened period without being 
 affected by a demand for bullion, or even for Bank of En- 
 gland paper. In the end, no doubt, an afflux of the former 
 was sure, by rendering money and all sorts of pecuniary ac- 
 commodation scarce in the metropolis, to affect the country 
 banks as well as the Bank of England; and then the injury to 
 industry, occasioned by the withdrawal of their accus- 
 tomed accommodations from a great number of individ- 
 uals, was severe in proportion to the too great liberality 
 with which they had previously been supplied. This was 
 especially the case in 1836, when the Bank of England, by 
 bolstering up neighboring banks averted a panic that would 
 have proved fatal to nearly every joint-stock and private 
 bank in England. 
 
 Still, the shock given to industrial undertakings, by 
 the revulsion in the latter part of the year, and in 1837, 
 although unaccompanied by any panic, was very severe 
 and wide-spread. All sorts of commercial speculations 
 were for a while completely paralyzed, and there were but 
 few districts in which the manufacturing establishments 
 were not closed, and thousands upon thousands thrown out 
 of employment. In Paisley, Birmingham, Manchester, 
 Leeds and Sheffield the distress occasioned was something 
 terribleand long continued. And owing to the Bank of En- 
 gland having delayed, in 1838 and the earlier part of 1839, 
 to take efficient measures for the reduction of its issues, 
 despite the unmistakable evidence of their being redund- 
 ant, the bullion in its coffers was reduced in September, 
 1839, to ;^2,4o6,ooo ; and, but for the efficient assistance 
 obtained from the Bank of France, its stoppage could 
 hardly have been averted.
 
 BANK OF ENGLAND. 11 "7 
 
 It might be added that with the exception of Lon- 
 don, and some of the larger provincial towns, there have 
 been very few banks established in England since 1836, 
 eight years before the important liank Charter Act of 
 1844, which we treat at length in the following pages, and 
 of the banks established in 1835 and 1836, very many were 
 formed by the conversion of pre-existing private banks 
 into joint-stock associations. The truth appears to be 
 that the natural obstacles to the establishment of a new 
 bank in a district already occupied by banks and bankers 
 are almost insuperable. A bank cannot be successful 
 unless it commands credit ; and those who want a place 
 of safe keeping for their money select establishments that 
 have been tried and tested through long years. Hence, it 
 happens that, though private banks of long standing con- 
 tinue in esteem, the attempts to set up new private banks 
 are most rare ; and, unless the wealth and prosperity of a 
 neighborhood have rapidly developed, so that capitalists 
 have risen to prominence in it who are not connected as 
 shareholders or directors with existing banks, it is not 
 easy to form joint stock associations of weight enough to 
 compete with the institutions in possession of the field. 
 
 The history of the railway mania in England in 1845 
 is not the least remarkable among those delusions which 
 from time to time arise to throw aside legitimate trade, 
 and paralyze national commerce. In 1842 discounts were 
 easy and money plentiful. The funds maintained a high 
 rate ; and low interest only could be obtained. In 1844 
 it was remarked that there had been a longer continuance 
 of a plentiful supply ot money than had occurred in the 
 memory of the oldest capitalist. A desire to speculate
 
 118 HISTORY OF THE 
 
 grew out of these circumstances. Unlike most periods, 
 when this desire has been spread over many objects, it 
 was concentrated on railways and railway schemes ; and 
 England was again seized with her ancient frenzy that 
 wrought so much havoc in 1825. For some time it was 
 legitimate, and confined within its proper boundary — but 
 the desire spread — the contagion passed to all, and from 
 the clerk to the capitalist the speculative fever reigned, 
 uncontrollable and uncontrolled. Some portion of the 
 press aided the mania. The subject was a capable one, 
 and leading articles trumpeted the growing greatness of 
 the train. 
 
 The directors of the railways were formed of all 
 classes, and of all conditions. Long lists of provisional 
 committeemen, with their residences and professions, were 
 paraded in the newspapers. The journals were in many 
 instances increased in size to contain the numerous adver- 
 tisements. Men who had mingled in the bubbles and 
 schemes of 1825 ; men who were known and recognized 
 as adventurous swindlers, but who had disappeared when 
 no money was to be obtained, reappeared to exercise their 
 customary vocation. Royalty partook of the excitement. 
 Grave and sober men dabbled in scrip. The literary man 
 and the artist risked their hard-earned money to procure 
 a share in the profits. The youth of the empire sought to 
 gratify expensive habits. The old man sought to indulge 
 his avarice. The clergyman traded in "undeniable secur- 
 ities." The physician murmured of the broad and narrow- 
 guase. The lawyer forsook his fee ; the lady jeopardized 
 her soft and gentle influence ; the matron forgot her chil- 
 dren, and the maiden her embroidery, in one universal
 
 KANK OF ENGLAND. 
 
 119 
 
 pursuit. The names of the clergy on the lists of directors 
 produced an opinion from the Bishop of Exeter, that for 
 a clergyman to speculate in railways came under the 
 denomination of " dealing for gain or profit," and this was 
 against the statute. "As the statute only mentions deal- 
 ing," remarked a journal of the time, "and railway specu- 
 lation involves shuffling, some of the reverend gentlemen 
 maintain that they do not violate the Act of Parliament." 
 
 The following from a periodical of the day, is undoubt- 
 edly a faithful picture of the way in which many railways 
 were established: — 
 
 " A young gentleman need only look to a half-crown 
 railway map, and search for a district tolerably clear of 
 the rail. Taking two of the towns that form that open 
 space, he draws a diagonal with his pencil, and thus 
 creates a direct line. He then writes down the name of 
 the company, his own name as * promoter,' either alone, or 
 with the names of as many friends as he can venture to 
 take that liberty with, or with any names, real or fictitious; 
 his own occupation, whether gentleman or esquire, engi- 
 neer, artist, merchant, lawyer, clerk or tailor ; his place of 
 business if he has one. In his walks about town he may 
 remodel his company, changing every name in it, whether 
 of place or person, including himself. Arriving at his 
 of^ce, he invests a few sovereigns, begged, borrowed, or 
 stolen, in fees, and enters his company. Advertisements 
 and letters of allotment do the rest. It may, for anything 
 the registrar knows or cares, be straight across a moun- 
 tain, a mile high, or straight across the arm of a sea, ten 
 miles broad. It would be his duty to register a tunnel 
 under the Atlantic ; and we are not quite sure that he
 
 120 HISTORY OV THE 
 
 would have the option of refusing a railroad to the moon, 
 with extension to the planets, and a short branch to the 
 sun." 
 
 The prospectus was sure to promise all the advan- 
 tages of all the world, perhaps to some small village which 
 had hitherto been unable to support a coach once a week. 
 The name of a local person of influence was obtained ; 
 a meeting was called at the village- inn ; speeches were 
 uttered, which discoursed most. eloquent music in the 
 cars of the villagers, for their property was to be 
 improved, and their importance doubled. Propositions 
 were unanimously carried with a wild huzza that a rail- 
 way was necessary; the speeches appeared in the local 
 journals with flaming head lines and were prominently 
 advertised in London newspapers; ten times the number 
 of shares were applied for which were issued; and when 
 they arrived at a premium, the promoters, secretaries, and 
 directors seized the golden opportunity, and as usual, the 
 dear public came off second best. The socializing influ- 
 ences of the railway were descanted upon. Directors 
 dreamed of premiums, patronage and pay. "Men who 
 were known to have been penniless," writes a keen 
 observer of that day, "suddenly kept their liveried servants 
 and broughams, valuable diamonds gleamed from their 
 fingers which had hitherto been guiltless of the bright 
 adornment. Railway papers and railway pantaloons, rail- 
 way ties and railway tricks, abounded. It was a railway 
 madness. London was to be tunnelled. The names of 
 men well known in London as swindlers whose notorious 
 character had banished them from the society of all good 
 men, suddenly reappeared on the lists of the proprietors
 
 BANK OF ENGLAND. - 121 
 
 and directors, their names graced by the cheap esquire, 
 and their residences given in some far distant country." 
 
 Everyone talked of making large fortunes, and very 
 few realized them. The same person was director of 
 thirty different railways, under various descriptions. The 
 crash finally came. Twelve "leading men" in the city 
 brought out a project for a railway. The deposit was 
 trifling, but their standing enabled them to demand 
 a heavy premium. They cleared by this ^^"25,000 each, 
 and shortly afterwards sent round a circular, stating that 
 unforeseen engineering difficulties rendered the abandon- 
 ment of the scheme necessary, and, with a trifling per 
 centage deducted for expenses, the deposits, not the 
 premiums, were returned. An endeavor at the time to 
 establish the truth of this produced the reply: "It is likely 
 to be true of so many that it will be useless t.o fix it upon 
 any particular company." The panic continued. The 
 reckless speculation produced its natural results. The 
 evil commenced to abate. The fluctuations in the peri- 
 odical returns of the Bank of England were eagerly 
 watched ; and each week the apparent impossibility of 
 paying up the deposits was confirmed. It was what has 
 been finely termed' "the rushing mania of a nation." 
 
 Of this prevailing madness, however, the evil effects 
 remained long after the hope had departed. Many men 
 of character, who had worked hard for the independence 
 they had gained, had consented in an evil hour to join the 
 committees of projected companies; in the height of their 
 delusion they talked of large profits, made extensive pur- 
 chases, and lived in a costly style; but they soon found 
 out that they were liable for their indi^vidual risk, and
 
 122 HISTORY OF THE 
 
 many were compelled to sell their property at a sacrifice 
 and fly to a foreign soil, from their relentless creditors. 
 In one instance, a person who had stepped out of his 
 legitimate path to speculate in these securities, was pay- 
 ing 200 per cent, in the stock Exchange at the very 
 time that his bills were being taken at 3>i$ per cent, in the 
 discount market. Railway shares and stocks suddenly 
 became worthless. The wild speculative excitement 
 ended. It was another proof of the fact that no warning 
 can save a people determined to grow suddenly rich. 
 The small trader who had neglected his calling was 
 ruined. The merchant who had embarked in the adven- 
 turous speculations found to his cost that the reckoning 
 was yet to come. The deposits were to be met, and 
 many possessed no money wherewith to pay them. 
 They had embarked in engagements which they could 
 not fulfill, and a fearful prospect awaited them. Every- 
 one who invested suffered ; a few audacious scoundrels 
 became wealthy ; and a period of depression followed 
 that has never been equaled. Through this memorable 
 crisis the Bank of England played an important though 
 successful part. 
 
 Bankers possess, from their peculiar position, very 
 superior means of distinguishing the careful from the im- 
 provident trader ; indeed, it is considered as a regular 
 branch of their professional experience, that they should 
 appreciate the credit of the various traders within the 
 district which their business transactions are supposed to 
 cover. It is becoming now the practice of bankers to 
 communicate, confidentially, with each other, touching 
 the credit of individuals and firms within their bailiwicks.
 
 liAXK OF KNGLAND, 123 
 
 A banker, in his character as trustee for others, should 
 be at all times a man of decision, and have a general 
 knowledge of the respectability and responsibility of the 
 mercantile community, especially of his own neighborhood. 
 The science of banking is not intuitive; there is no golden 
 road to it. A man may be rich and powerful in his neigh- 
 borhood, and looked up to as a man of wealth; but, as the 
 taking care of his own estate is not banking, his character 
 as a banker only commences when he has to take care of, 
 and judiciously employ, the moneys of other people 
 entrusted to him. 
 
 It is by neglecting to watch narrowly the operations 
 of commercial men, that bankers are too often instru- 
 mental in causing, not only the failure of their customers, 
 but of themselves also. To avoid as much as possible 
 this state of things, a banker should, at the proper time, 
 be able to negative the applications made to him for 
 assistance, and on no account to allow feelings of personal 
 nature to get the better of his judgment. 
 
 Most bankers in the country carry on their business 
 of borrowing or receiving money at interest, as well as 
 lending upon securities, and they thereby form a connect- 
 ing link in the chain between the operative and 
 unoperative classes ; they become the debtors of the cap- 
 italists and the creditors of the producers or distributors 
 of revenue, and thus afford a ready medium of adjustment 
 between the interests of these two great divisions of 
 society. It is therefore the chief object of his study, and 
 his constant desire to search out and to make choice of 
 the most secure, as well as the most profitable em- 
 ployment of the capital which is thus placed under
 
 124 HI.STORV OK THE I'.ANK Ol' KNCLAND. 
 
 his charge, and for the safety of which he is held respon- 
 sible. 
 
 I
 
 CHAPTER IX. 
 
 BANK OF ENGLAND HANDLED BY PARLIAMENT. 
 
 The Famous 1S4.4 Bank Act — Sir Robert Peel Battling 
 for Reform- — Providing a Remedy /or Instability — 
 Financial Writers Interested — Peel's Speech on the 
 Renezval of the Bank's Charter — Important Provisions 
 of the New Law — Price Paid for Exclusive Privilege 
 of Banking — Suspending the Baiik Act in 1866 — 
 Fiindamoital Principle upon zvJiich English Ctirrency 
 Rests — TJie Lazv and the Bank — The Batik's Control 
 of Its Capital. 
 
 The position of the country in 1844 was indeed 
 critical. A feeling of discontent was prevalent among the 
 agrarian and manufacturing population. An empty treas- 
 ury, a failing revenue, and a dissatisfied people, were 
 sufficient to render the government of the nation a diffi- 
 cult task. The labors of the officers of the bank was 
 greatly increased by the deduction of the property tax 
 from more than half a million of dividends belonging to
 
 120 HISTORY OF THE 
 
 the public creditor, and the interests of the bank were yet 
 more deeply involved in this tax, as it opened the question 
 with regard to the justice of paying the charges upon 
 terminable annuities. In many instances these annuities 
 would expire in a very few years; and in the case of the 
 bank, which possessed the dead weight and other annui- 
 ties, entered into without any idea of such a tax, it 
 appeared to the proprietors a very objectionable impost. 
 It was argued by these gentlemen that it would not be 
 equitable to compel them to pay the income tax on annu- 
 ities, as it would be in reality paying on the capital. It 
 was resolved to memorialize the government on the 
 question, but the attempt was vain, and it was determined 
 that no difference should be made between the dividend 
 of the bond-holder and the payment of the annuitant. 
 
 The advent of Sir Robert Peel to power, in 1842, was 
 a circumstance of some importance to the Bank of England. 
 The powerful majority by which he was supported render- 
 ed it almost undoubted that he would maintain the 
 position in which he had been placed by the country, 
 when the expiration of the first ten years allowed by the 
 charter for the continuance of the privileges of the corpor- 
 ation should arrive. It was almost equally certain that 
 he would modify the principles on which it had hitherto 
 been founded, according to his own views of the necessi- 
 ties of the monetary world. The Bank Act of 1844; 
 marked an important era in the management and business 
 of the Bank of England. 
 
 On each renewal of the charter the management 
 sought to have incorporated in the laws for its govern- 
 ment more liberal provisions than were accorded to or
 
 BANK OF EXGI-AND. 127 
 
 asked by any other banking institution. In some instances 
 the bank was successful. Although a private enterprise, 
 the Bank of England is generally regarded as a literal cog 
 in the wheel of England's financial machinery. 
 
 Perhaps nowhere in the world does the history of 
 banking show greater instability than in England, where 
 during this century joint-stock banks have failed by the 
 scores. Their profits in many instances have been very 
 large, but their risks being correspondingly great, their 
 failures have been most disastrous. Greater freedom has 
 always existed in Scotch banking than in that of England, 
 and consequently there has been greater security— those 
 institutions, unlike the great monopoly, trading upon 
 their capital. 
 
 The fluctuating and vascillating course pursued by the 
 bank and its managers had attracted the attention of a 
 number of able financial writers, prominent of whom were 
 Lord Overstonc, Colonel Torrens, Mr. Norman, and 
 others. 
 
 They maintained and enunciated the following prin- 
 ciples: — 
 
 I.— That bank notes, i. e., the promise of bankers to 
 pay money on demand, alone are "currency,'' and that no 
 other forms of paper credit are currency. 
 
 2. — That if banks are permitted to issue notes they 
 ought to be only exactly in amount to what the specie 
 would have been if there were no notes. 
 
 3. — That any excess of notes above the specie th 
 displace is a depreciation of the currency. 
 
 The above named writers being men of great influence, 
 converted Sir Robert Peel to their views, and on the
 
 128 HISTORY OF THK 
 
 renewal of the charter of the bank in 1844, Sir Robert 
 Peel, then prime minister, having become satisfied of the 
 dangerous influence exerted in the bank's ever varying 
 and never stable system, first of expansion and then of 
 contraction, in its laws, thought to provide a remedy. 
 The principal feature of this measure was to limit the 
 circulation so that it would be regulated by the amount of 
 coin and bullion in the vaults of the institution. 
 
 Accordingly, he brought in a bill which became a law 
 on July 19, 1844, entitled "An act to regulate the issue of 
 bank notes, and for giving to the governor and company 
 of the Bank of England certain privileges for a limited 
 period." 
 
 In a speech in the House of Commons on May 6, 1844, 
 on the renewal of the bank charter, Sir Robert Peel 
 said: — 
 
 "With respect to the banking business of the bank, I 
 propose that it should be governed on precisely the same 
 principles as would regulate any other body dealing with 
 Bank of England notes. -^ -:r * * * 
 
 "It is said the Bank of England will not have the 
 means which it has heretofore had of supporting public 
 credit, and of affording assistance to the mercantile world 
 in times of commercial difficulty. Now, in the first place, 
 the means of supporting credit are not means exclusively 
 possessed by banks. All who are possessed of unemploy- 
 ed capital, whether bankers or not, and" who can gain an 
 adequate return by the advance of capital, are enabled to 
 afford, and do afford, that aid which it is supposed by 
 some that banks alone are enabled to afford. In the 
 second place, it may be a question whether there be any
 
 BANK OF EN'GI.AND. 129 
 
 permanent advantage in the maintenance of private or 
 public credit, unless the means of obtaining it are derived 
 from the bona fide advance of capital, and not from a tem- 
 porary increase of promissory notes issued for a special 
 purpose. Some apprehend that the proposed restrictions 
 upon issue will diminish the power of the bank to act with 
 energy at the period of monetary crisis and commercial 
 alarm and derangement; but the object of the measure is 
 to prevent (so far as legislation can prevent) the recur- 
 rence of those evils from which we suffered in 1825, 1836, 
 and 1839. It is better to prevent the paroxysm than to 
 excite it, and trust to desperate remedies for the means 
 of recovery." 
 
 The machinery adopted was as follows : The bank 
 was divided into two departments. The Issue Depart- 
 ment, and the Banking Department. 
 
 Following is the law as finally enacted for the guid- 
 ance of the Bank of England: 
 
 I.— Provides for " the issue department of the Bank 
 of England," which shall provide the notes payable on 
 demand, and shall, from August 31, 1844, be kept wholly 
 separate and distinct. 
 
 2. — That on August 31, 1844, the bank shall transfer 
 to the issue department securities to the value of fourteen 
 millions, the debt due by the public to be deemed part ; 
 that the banking department shall transfer to the issue 
 department all the gold coin and gold and silver 
 bullion not required ; that the issue department shall 
 deliver to the banking department such an amount of notes 
 as with those in circulation shall equal the securities, 
 coin, and bullion transferred to the issue department ;
 
 130 HISTORY OF THE 
 
 that the bank may not increase, but diminish the amount 
 and again increase it to any sum not exceeding fourteen 
 millions. 
 
 3. — That the bank shall not retain in its issue depart- 
 ment at one time silver to any amount greater than one- 
 fourth the gold held at the same time. 
 
 4. — That notes may be demanded for gold bullion at 
 the rate of ;^3 17 s. <^d. per oz. of standard gold. 
 
 5. — Provides for a weekly statement of the affairs of 
 the bank. 
 
 6. — That the bank shall be exempt from stamp duty 
 on its notes. 
 
 7. — That the bank allow ;^ 180,000 per annum out of 
 the amounts payable by government for the exclusive 
 privileges of banking. 
 
 8. — That the public shall receive such profits as may 
 be obtained by an increase of circulation, beyond the 
 amount provided in paragraph 2. 
 
 9. — That no other banks of issue be allowed, but such 
 as were in existence May 6, 1844. 
 
 10. — That no bank in England or Wales shall issue 
 any bill of exchange or promissory note payable on 
 demand, excepting such bankers as were in existence 
 May 6, 1844. That no company now consisting of six or 
 less than six partners shall, if they exceed that number, 
 be allowed to issue notes. 
 
 By an Act passed the same year, with reference to 
 joint-stock banks in England, so many restrictive clauses 
 were introduced as practically to prevent any new institu- 
 tions of the kind from being established. Since then 
 more liberal measures have been enacted recognizing lim-
 
 BANK OF ENGLAND. 131 
 
 ited liability, and under it many institutions are in suc- 
 cessful operation throughout the United Kingdom. 
 
 It is needless to recapitulate the various Acts of Par- 
 liament which affected the Bank of England during the 
 first one hundred and fifty years of its existence. Its 
 operations were yearly assuming greatly increased pro- 
 portions. The Act of 1844, which regulated the bank 
 note issues of the country, also prescribed the conditions 
 in accordance with which the bank is now conducted. 
 
 A minute and extended discussion of the provisions 
 of the Act would not be particularly interesting or instruc- 
 tive, but those parts which affect the constitution of the 
 bank are : — 
 
 1st. Those which created the " Issue Department," 
 by means of which the issue of notes is distinctly sepa- 
 rated from the Banking Department. 
 
 2d. Those limiting the issue of notes to such a sum 
 as the bank may hold in bullion (of which a fifth part may 
 be silver), in addition to a sum of ;^I4, 000,000, increased 
 since that date to iJ" 16, 200,000, issued on securities, where- 
 of the debt due by the public to the Bank formed part.* 
 And, 
 
 3rd. Those compelling the bank to purchase any 
 amount of gold offered to it at a certain fixed rate ; or, in 
 other words, to receive in deposit any quantity of gold at 
 a certain rate in exchange for bank notes. 
 
 The Act by this means secures, as far as possible, 
 
 that gold shall be the basis of the currency of the country, 
 
 * Tha Act of 1844, which limited the note issue of the then existing pri- 
 vate Banks, provided that when any Issuing Bank relinquished its right of 
 issue, the Bank of England might increase its issue on securities in a fixed 
 proportion to the amount thus withdrawn.
 
 132 HISTORY OF THE 
 
 the note circulation expanding or contracting as gold in 
 plentiful or scarce, or as if it consisted of gold only ; and 
 also acts as a guarantee to the general note-holder for the 
 convertibility of his note. This last is assured by the 
 special constitution of the Issue Department, where the 
 right is confirmed of demanding at any moment coin for 
 notes ; and, further, by the weekly publication of the 
 accounts of this department, which explain at a glance, 
 and in the simplest language, that the issue of the notes 
 is the same as the bullion of which the bank is possessed 
 in this department, plus the ;^ 16,200,000 issued on secur- 
 ities. 
 
 For the privileges in regard to the issuing of bank 
 notes, and for exemption from duty on them, the bank 
 now pays to Government a sum of ;i^2 13,895 per annum- 
 The bank, however, makes no additional profit on any 
 issue beyond ^^ 14,000,000. Although the amount on which 
 notes are issued on security has been raised to £16,200,- 
 000, the profit on the additional sum accrues under the 
 Act of 1844, to the public, and hence it is evident that the 
 cost of every note issued beyond the sum of ;{^ 16,200,000 
 is a direct charge on the bank for the benefit and conven- 
 ience of the public. 
 
 It was eventually demonstrated that Robert Peel 
 entirely misapprehended the causes at work in producing 
 the fluctuations complained of, and that he applied the 
 restrictions to that particular branch which varied but lit- 
 tle in a series of years. The real cause of the trouble was 
 to be found in the loans; which have been irregular in the 
 extreme and at times productive of great injury. This 
 injury has not alone been confined to Great Britain, but
 
 BANK OF ENGLAND. 133 
 
 has extended in a greater or less degree to every country 
 with which intimate business relations existed. That the 
 Peel Act had no effect in mitigating the evil, will be 
 clearly seen in the fact that these fluctuations have never 
 been more violent than since its passage. The British 
 public had long shown entire confidence in the circulating 
 medium, and no legislation to effect this object was neces- 
 sary. Since the passage of the law it has several times 
 been suspended, as no doubt it will be again whenever it is 
 rendered necessary to do so. One of the suspensions was 
 on May 1 1, 1866, on which day the bank raised the rate of 
 discount, to 10 per cent., it having been 6 per cent, nine 
 days before. It its efforts to save itself and comply with 
 the absurd provisions of the bank act, it spread ruin and 
 desolation around it, and years have been necessary to 
 enable the country to recover from the effects of the panic 
 thus created. While the notes of the bank are legal 
 tender elsewhere, they are not such in payments by the 
 bank itself. ' 
 
 The notes of the Bank of England in circulation for 
 some years previously to 1844 rarely amounted to twenty, 
 or sunk so low as sixteen millions. And such being the 
 case, Sir Robert Peel was said to be justified in assuming 
 that the circulation of the bank could not, in any ordinary 
 condition of society, or under any merely commercial 
 vicissitudes, be reduced below fourteen millions. The law 
 of 1844 allowed the bank to issue this amount upon secur- 
 ities, of which the /^i 1,015,100 lent by the bank to the 
 public was the most important item. Inasmuch, however, 
 as the issues of the provincial banks were at the same 
 time limited in their amount, and confined to certain ex-
 
 134 HISTORY OF THE 
 
 isting banks, it was further provided, in the event of any 
 of these banks ceasing to issue notes, that the Bank of 
 England might be empowered, by order in council, to 
 issue, upon securities, two-thirds, and no more, of the 
 notes which such banks had been authorized to issue. 
 Under this condition the total secured issue of the bank 
 was increased. But for every other note which the issue 
 department may at any time issue over and above the 
 maximum amount issued on securities, an equal amount 
 of coin or bullion must be paid into its coffers. 
 
 It will be seen that under this system the notes of the 
 Bank of England were rendered really and truly equiva- 
 lent to gold, while their immediate conversion into that 
 metal no longer depends, as it previously did, on the good 
 faith, the skill, or the prudence of the directors. These 
 important results have been attained without imposing 
 any burden of which anyone has any right to complain. 
 English currency rests on the fundamental principle that 
 all debts above forty shillings must be paid in gold. But 
 individuals and associations, including the banking or 
 commercial department of the bank, have the option, if 
 they prefer it, to exchange gold for bank-notes, and to 
 make use of the latter in their dealings with the public. 
 Hence, if A or B goes to the issuers of paper, and gets lOO 
 or 500 notes from them in exchange for an equivalent 
 amount of gold, it is his own convenience he has exclu- 
 sively in view. He was at full liberty to use gold, but he 
 preferred exchanging it for notes because he could employ 
 the latter more advantageously. This is the way in which 
 paper is issued under the act of 1844; and such being the 
 case it is contradictory to say that it is productive either
 
 IJANK OV ENGLAND. 135 
 
 of hardship or inconvenience. It certainly is a wise Act. 
 It is alleged that the new system is injurious by 
 shackling the bank in the use of its credit, and the answer 
 given is, that it does this in order to prevent the greater 
 injury of over-issues of paper. The law very properly 
 prevents the bank from issuing substitutes for money 
 which cocs not represent money. It docs not absorb or 
 lock up a single six[)cnce worth of capital, nor does it in- 
 terfere in any manner of way with its employment. The 
 gold in the issue department of the Bank of England was 
 not purchased by the bank and does not belong to it ! 
 The bank is its keeper, but not its owner. It belongs to 
 the public, or to the holders of bank notes, who deposited 
 it in the bank in exchange for notes, with and under the 
 express stipulation, that on paying the latter into the 
 bank they should receive back their gold. Any interfer- 
 ence with these deposits would be an interference with 
 property held in pledge for others, that is, it would be an 
 act precisely of the same kind with that which exposes 
 private bailees to penal servitude. 
 
 But though the bank directors may not lay violent 
 hands on the property of the public, the bank, it is 
 obvious, has at this moment the same absolute command 
 over its entire capital and credit, that it would have were 
 the Act of 1844 non-existent. 
 
 Beginning on page 271 will be found the full corres- 
 pondence between the Chancellor of the Exchequer and 
 the Bank of England relative to the renewal of the bank 
 charter in 1S44.
 
 CHAPTER X. 
 
 RADICAL CHANGES IN THE MANAGEMENT OF THE BANK. 
 
 Privileges of Officers and Directors — Groundless Nature 
 of a Charge Often Made — Plausible Objections to 
 New Laws — Amount of Notes Issued — Hoiv to Deter- 
 mine an Excess of Currency— Notes in the Banking 
 Department — Great Changes Wrought in the Man- 
 agement of the Bank —Restricting Banks for the Issu- 
 ing of Notes — Convertibility of Bank of England 
 Notes — Variations in the Rate of Discount — Tempor- 
 ary Suspension of the Act of 18^4. to Avert a Panic — 
 Effect of Modification of Usury Laws — Particulars as 
 to Number and Class of Depositors — Development of 
 the Methods of Economizing Money — Transitory Cred- 
 its — Discount Variations — Credit and Capitalists — 
 No Change Probable in the Methods of the Baiik oj 
 England — Should Banks be ProJiibited From Issu- 
 ing Notes — True Way to Remove Danger — Modifica- 
 tion of Banking Laws — Bank of England Notes Made 
 Legal Tender. 
 
 Apart from the practice of issuing transferable notes, 
 the Bank of England is free from all restraint, and is 
 in precisely the same situation as other banking or
 
 IJANK 01' ENGLAND. 
 
 137 
 
 mercantile establishments. Its directors may lend or not 
 lend as they please, and may lay down such conditions as 
 they please in regard to the interest and the terms of 
 loans and discounts. In short, they may do whatever they 
 like with their own ; but farther they are not permitted 
 to go. They may not substitute shadows for realities. 
 They cannot, whether to assist others, or to relieve them- 
 selves from embarrassment, issue a single note except upon 
 a deposit of bullion. But this rule does not operate on 
 the bank only. It applies to all individuals and associa- 
 tions. And to relax it in any degree would be — disguise 
 it as one may — to authorize an issue of fictitious or spur- 
 ious paper, and consequently to vitiate the currency and 
 to abuse credit in the way that is sure to be in the end 
 the most disastrous. 
 
 This statement shows the groundless nature of the 
 charge which is often made against the Act of 1844, 
 (which is given in preceding chapter) that under its 
 operation the bank runs the risk of being brought to a 
 stop, though it may have some five, six, or even eight 
 millions bullion in its coffers. For it is plain that two 
 things are confounded in this charge, which are quite dis- 
 tinct, and have no necessary connection with each other, 
 viz., the proceedings of the bank in the capacity of issuer 
 of notes, and its proceedings in the capacity of a banking 
 company. In the former capacity it is all but impossible 
 that it should be brought to a stop ; and if such a thing 
 should happen, there would not then be an ounce of bul- 
 lion in its coffers. It is not, however, impossible nor even 
 very improbable, that the bank should be brought, in its 
 mercantile capacity, into difficulties, while there may be
 
 138 IIISTORV OF THE 
 
 a large amount of bullion in the issue department. But, 
 though such should be the case, is that any reason why 
 the bank directors should be permitted to draw on funds 
 that do not belong to them, and over which they have no 
 control ? Supposing the bank was in difficulties, is it to 
 be allowed to right itself by setting aside the principle of 
 metiin and tniim, and seizing on what belongs to others ? 
 The directors would be the first to repudiate such a doc- 
 trine, which must be rejected by all men who have any 
 sense of honor or regard for character. 
 
 One of the most plausible objections to the Act of 
 1844 is that it "limits the currency;" that it makes no 
 provision for the increasing demands of the public ; and 
 confines matters in 1S88, when the exports are in the 
 hundreds of millions, to the same amount of money as in 
 1844, when the exports did not exceed 58^ millions. The 
 simple truth, however, is that the Act allows money to be 
 imported and exported, to be retained or sent elsewhere, 
 just as it is wanted, and what it does limit is the uncon- 
 trolled issue of paper representatives of money, which 
 experience proved were too often omitted without any 
 reference to the reserves of money kept to maintain the 
 convertibility of the paper issued. The ^^16,200,000 now 
 issued on securities is the only thing that is limited in the 
 Act ; everything else varies with the varying condition 
 and circumstances of the country, including the means by 
 which the use of money may be economized. 
 
 The present note issue of the Bank of England, Octo- 
 ber, 18SS, is ^^36,829,970 ; notes in circulation ^23,142,180; 
 estimated average circulation for 1888, ^24,381,000. And 
 if the country had really required a larger supply of
 
 BANK Of ENGLAND. 139 
 
 money, that is, if more coins, or paper equivalent to coins, 
 could have been absorbed into the circulation without ren- 
 dering the currency redundant, and depressing the 
 exchange, the additional quantity would have been forth- 
 with supplied. For, under such circumstances, merchants, 
 bankers, and money-dealers, would have realized a certain 
 and immediate profit by carrying bullion to the mint or 
 the bank, that they might obtain coins, or notes, or both, 
 with which to increase the currency. It is one of the 
 chief merits of the Act of 1844, that, under its agency, the 
 supply of money is not to any extent or in any degree 
 regulated or influenced by the proceedings of the bank or 
 the Government. They have nothing to do in the matter, 
 unless it be to coin the bullion which individuals or firms 
 carry to the mint for that purpose, and to exchange, when 
 called upon, notes for coins, and coins for notes. The 
 supply of money, like that of all non-monopolized articles, 
 is wholly dependent upon, and is determined by the free 
 action of the public. It would, indeed, be quite as true to 
 say, that the Act of 1844 limits the amount of corn, of 
 cloth, or of iron produced in the country, as that it limits 
 the amount of money. It maintains the value of the notes 
 issued by the bank on a level with the coins for which they 
 are substitutes ; but beyond that its effect is nil. It has 
 nothing whatever to do with the greater or less amount 
 of the coin and notes of trustworthy convertibility put into 
 circulation. That depends entirely on the estimate formed 
 by the public of its excess or deficiency, an estimate 
 which when wrong is sure to be corrected by the ex- 
 changes. 
 
 It may be added, that no inference can ever be safely
 
 140 HISTORY OV THE 
 
 drawn from the number of notes or coins, or both, afloat 
 in a country, as to whether its currency be, or be not, in 
 excess. That is to be learned by the state of the ex- 
 change, or by the influx and efflux of bullion. If the 
 imports of bullion exceed the exports, it shows that the 
 currency is in some degree deficient ; while, if the exports 
 exceed the imports, it shows that the currency is in 
 excess, and that no additions can be made to it without 
 farther depressing the exchange and increasing the drain 
 of bullion. When the imports and exports of bullion are 
 about equal, then of course the currency is at about its 
 proper level. These are the only criteria by which any- 
 thing can ever be correctly inferred in regard to the defi- 
 ciency or excess of currency. Its absolute amount affords 
 hardly even a basis for conjecture. When there is little 
 speculation or excitement, an issue of 25 or 27 millions 
 bank notes may be in excess ; while, at another time, and 
 with a different state of trade and speculation, an issue of 
 35 or 37 millions of notes may not be enough. Except in 
 periods of internal commotion, or when the country is dis- 
 turbed by alarms of invasion, the state of the exchange is 
 the only, as it is the infallible, test of the sufficiency and 
 insufficiency of the currency. We may further state, that 
 those who are in the habit of complaining of the limita- 
 tion of the currency by the Act of 1844, almost uniformly 
 underrate its amount. We have already seen that the notes 
 issued by the issue department of the bank in October, 
 18S8, amounted to ^36,829,970, and of these ;^ 13,687,795 
 were in the banking department of the bank, leaving a 
 balance of ^23,142,180 in the hands of the general public ; 
 and this latter sum is, wc are told, the real amount of the
 
 BANK OF EN'Ca.ANI). 141 
 
 issues. But tliis is falling into the rather serious blunderof 
 mistaking- a part for the whole. The notes in the banking 
 department of the bank make not only a part, but a most 
 important and active part, of the currency of the country. 
 They constitute the means, along with the bullion in the 
 same department, with which the bank carries on her 
 banking business, and are as evidently a portion of the 
 currency as the notes in the tills of private bankers and 
 the pockets of individuals. The notes in the banking 
 department of the bank must therefore never be omitted 
 in estimating the amount of notes in circulation. The 
 latter, and the notes out of the issue department, are 
 identical ; and, in a general point of view, it matters not a 
 straw whether they are in the hands of the banking 
 department of the bank or of individuals. 
 
 So far the legislation of 1S44 in its direct bearing on 
 the Bank of England has been specifically treated. It ^\■ill 
 be found the most interesting and instructive move in the 
 life of the world's greatest financial institution. Sir Rob- 
 ert Peel was unable to complete the full routine of his 
 policy, but his action wrought wonderful changes. 
 
 He held that experience had shown that the balance of 
 advantages lay on the side of suppression of all note issues 
 except that of the Bank of England, as reformed by him, 
 or of some similar supplementary establishments regulat- 
 ed in the same manner. But it was obviously impossible 
 to prohibit, without compensation, the future exercise by 
 country bankers of the rights they had legitimately ac- 
 quired; and as it was not easy to buy up the existing 
 privileges of the private and joint-stock banks, Sir Robert 
 Peel allowed them to remain under conditions prohibiting
 
 142 HISTORY OF THE 
 
 their extension, and he apparently hoped that country 
 issues would gradually disappear before the rivalry of 
 Bank of England notes. The Act of 1844, accordingly, 
 enacted that no new bank for the issue of notes should be 
 established in any part of the United Kingdom; and that 
 the maximum issue of notes by the existing country banks 
 of England should in future be limited to the average 
 amount which they had respectively in circulation during 
 the twelve weeks preceding the 27th of April, 1844. It 
 was also ordered that the names of the partners in joint- 
 stock and other banks should be periodically published. 
 A provision was also enacted under which an issuing bank 
 could resign its privilege by composition with the Bank of 
 England. The existing law was maintained preventing 
 the issue of any notes other than the Bank of England in 
 London, and the establishment, within sixty-five miles of 
 London, of any branch of an English joint-stock bank 
 having the privilege of issue. 
 
 The convertibility of the Bank of England notes has 
 been perfectly maintained since 1844; and the manage- 
 ment of English banks, whether private or joint-stock, 
 has been sound and judicious, the cases of failure among 
 them being few and contrasting strongly with the recur- 
 rent epidemics of insolvency of earlier experience. It 
 must, however, be admitted that the variations in the rate 
 of discount charged by the bank have been much more 
 numerous and violent since 1844 than they were before, 
 and on three occasions — in 1847, 1857, 1866 — it has been 
 judged necessary to authorize a suspension of the Act so 
 far as to allow the bank directors the power to strengthen 
 the banking department by recourse to the reserves of
 
 HANK OF ENGLAND. 143 
 
 the issue department. In each case the suspension of the 
 Act arrested and allayed the panic prevailing up to the 
 moment of suspension, and in 1866 it was not, in fact, 
 found necessary to exercise the power to borrow from the 
 issue department which had been conceded to the direc- 
 tors. 
 
 It is necessary to enquire whether the y\ct of 184-I. is 
 to be blamed for the increase in the number of clianges of 
 the rate of discount which has since been experienced,' 
 and whether this increase and the suspension of the Act 
 in time of trial constitute a reason for its abrogation or 
 for a modification of its provisions. In the first place, the 
 increased number of changes in the rate of discount is 
 more apparent than real. The management of the Bank 
 of England has become responsive to the movement in the 
 value of money in the open market in a degree unknown 
 before this generation. The rate of discount outside the 
 bank changed rapidly and often before 1844, but its fluc- 
 tuations were to a large extent prevented from affecting 
 the Bank of England. Previously to the modification of 
 the Usury Laws in 1839, the bank could not charge more 
 for loans than five per cent., and for some considerable 
 period after the restriction had been removed the direc- 
 tors, influenced, in part at least, by their accustomed 
 habit on several occasions, permitted the bank to be 
 involved in difficulties which might have been averted by 
 the sooner raising the rate of discount. 
 
 Strict limitation in the number and class of customers 
 with whom the bank would do business, and a refusal to 
 rediscount bills that had been already discounted by 
 money dealers, made it possible to keep the bank rate
 
 144 HISTORY OF THE 
 
 below the rates of the open market without exposing the 
 resources of the establishment to an exhausting demand. 
 Next, it is to be observed that the methods of econo- 
 mizing the use of money by the development of banking 
 have been extraordinarily multiplied during the past few 
 years. The Bank Act, as has been shown, in no way 
 operates to diminish the supply of money in the country; 
 on the contrary, it tends to increase it, since it forbids any 
 extension of the use of notes issued on credit as a substi- 
 tute for money. The effect of the Act has therefore been 
 to neutralize rather than to stimulate the process of 
 economy in the use of money to which we have called 
 attention. But the transactions of bankers — the issue of 
 checks, the negotiation of bills, etc., etc., have multiplied 
 out of all proportion to the stock of ready money* on which 
 they risk, and the mass of transitory credits being con- 
 stantly increasing while the reserves of cash suffer little 
 change, there naturally and necessarily follows an increas- 
 ed sensibility in the equilibrium of the money market, 
 with constant oscillations in the rate of interest. But 
 although the increase in the number of changes of discount 
 since 1 844 has not been as great as may at first seem appar- 
 ent, and so far as the increase has been real it must be 
 chiefly attributed to the growing disproportion between 
 the magnitude of transitory credits at any time existing 
 and the reserve of cash kept on hand, yet it may be freely 
 admitted that it is not impossible that changes have from 
 time to time happened that might not have occurred 
 supposing the separation of the banking and issue depart- 
 ments had not been established. It is evident that if the 
 cash in the two departments had been equally accessible
 
 ^ -r >, ^ 
 
 ■». ^^ 
 
 BANK OF ENGLAND. V, ^/'^ V 
 
 to the bank directors, a withdrawal of moncy\;n<di is now " '55?^ ^-^ 
 thrown upon one department would not have (>^!^1 so .' '/^ 
 great a change in the proportion between liabiHtic!5*>ijW/>q ^ ^ 
 reserve. 
 
 The oscillations experienced in the rate of discount 
 in the I'ank of England, oscillations which after all indi- 
 cate nothing more than the natural movement in the value 
 of a medium which is the first to be agitated by changes 
 in value of every other commodity, arc cheaply purchased 
 as the price of the permanent and perfect equality of the 
 bank note and the money it represents. The repeated 
 suspensions of the Act of 1841. in time of tr'iA do, pr///ia 
 facie, present a much stronger argument for the repeal of 
 the statute. Legislation which breaks down upon critical 
 occasions discredits the legislature that decreed it ; and 
 it is not to be denied that the mere suspension of the Act 
 has more than once ojjeratcd as a charm to allay feelings 
 of panic among bankers, money dealers, and merchants. 
 It must also be admitted that Sir Robert Peel, in common 
 with the earlier advocates of the policy of the Act, believ- 
 ed that it would prevent the recurrence of commercial 
 crises. It is strange that such an anticipation should have 
 been entertained. 
 
 Whoever will reflect on the nature of the organization 
 of credit in the commercial world, and on the timid and 
 self protecting instincts of men, especially of capitalists, 
 will be forced to confess that the recurrence of crises must 
 be accepted as inevitable. The more highly developed is 
 the economy of money the greater must be the sum which 
 banks and bankers are liable to be called upon to repay 
 on demand or at short notice in proportion to the reserves
 
 140 HISTORY or THE 
 
 of money kept in their coffers; and the greater also must 
 be the ahiount of bills falling due daily, and largely met 
 as they fall due by the proceeds of bills drawn daily and 
 discounted as drawn. The smoothness of action of the 
 commercial machine evidently depends upon the continu- 
 ance of that confidence which is ordinarily felt by the 
 creditor class in the solvency of debtors, and any access of 
 distrust may easily produce consequences culminating in a 
 crisis. Bankers who Are at once debtors and creditors are 
 necessarily constrained to protect themselves in such 
 periods of defective confidence by declining to meet the 
 applications for loans and discounts which are forced upon 
 them; and a sharp competition ensues for the possession 
 of the ready money that is available in the market. The 
 pressure is concentrated upon the Bank of England, and 
 the publicity of the condition of that institution, consequent 
 upon the weekly issue of its balance sheet, lets all men 
 know the rate of decline of its cash reserve. At such a 
 time an accident may cause the spirit of caution to pass 
 into apprehension and panic. The fear that the cash 
 balances of the banking department may be exhausted 
 incites bankers to hasten to anticipate one another in with- 
 drawing any reserve they may have kept at the bank, and 
 the rate of diminution of the cash of the department is 
 accelerated. It is obvious that the condition we have 
 described is in its origin independent of any particular 
 regulations adopted with respect to the note circulation of 
 a community; and it has, in fact, been experienced in 
 Great Britain under all varieties of laws, and in the United 
 States, in Northern and Southern Germany, and in the 
 British colonies under an equally wide dissimilarity of cur-
 
 BANK OF f.NGLAND. 147 
 
 rency-rcgulations. English history shows that such a 
 condition may be aggravated, if not precipitated, by an 
 antecedent issue of notes increasing the proportion 
 between the volume of transitory credits and the cash 
 available to meet instantaneous demands ; and as long 
 as the issue of notes was unrestricted, bankers could 
 never resist the temptation to make up, by an increase in 
 their issues, any diminution in their available cash, a cause 
 directly provocative of a further diminution by its effect on 
 adverse exchanges, and therefore producing a sharper 
 reaction when the necessity was at last recognized of re- 
 covering the balance between their cash in hand and their 
 liabilities. No legislation can prevent panic, but it pre- 
 vents bankers from resorting to causes which aggravate 
 panics, and it moreover supplies a means of allaying the 
 unreasoning terror in which panics culminate. Were it 
 not for the separation of the issue and banking depart- 
 ments we should be constrained to witness and tolerate 
 periodical suspension of cash payments, as this would be 
 the only means left of appeasing alarm ; and this desperate 
 expedient has been, in fact, employed over and over 
 again, under such circumstances, both in England and 
 elsewhere. 
 
 When the minds of creditors are unhinged, and all 
 are competing for money which is not in existence in 
 sufficient quantities to satisfy their demands, the announce- 
 ment that the Government has authorized the bank 
 directors to suspend the action of the Act and to fall back 
 on the resources of the issue department operates as a 
 charm. The mere announcement is often enough to put 
 an end to the panic preViously prevailing, the feverish fit
 
 14S HISTOKV OF THE 
 
 passes away, and the customary temper of confidence is 
 more or less slowly restored. 
 
 It is said that the existence of the Act of 1844 is 
 justified even when it is suspended, for it provides, in the 
 maintenance of the cash reserves of the issue department, 
 a stock of money, the unlocking of which furnishes the 
 means of arresting panic which would otherwise have to 
 be sought in a periodic suspension of cash payments. It 
 lias naturally been asked whether the law might not be 
 saved the apparent discredit involved in its being set aside 
 by an act of the Executive Government, acting on the 
 faith of a subsequent indemnity from Parliament, by the 
 embodiment in it of a power authorizing its suspension 
 under circumstances that provoke its suspension. 
 
 We have already said that Sir Robert Peel contem- 
 plated an ultimate extinction of all note issues save that 
 of the Bank of England ; and he probably expected that 
 the substitution of Bank of England notes for all others 
 would not be long delayed. The progress actually 
 acliicvcd towards this end has been very slow. It may 
 be added that the provisions of the Act of 1844, relied 
 upon Sir Robert Peel for bringing about by arrangement 
 a substitution of Bank of England notes for those of privil- 
 eged bankers, have been for many years entirely 
 neglected. With these facts before us it is not surprising 
 that, in 1866, Mr. Gladstone, as Chancellor of the Excheq- 
 uer under Lord Palmerston, should have submitted to the 
 House of Commons a bill dealing with the subject. By it, 
 it was proposed that private banks of issue in England 
 and Wales should be released from the existing restriction 
 that the numbers of partners must not exceed six, and
 
 BANK OF EXGLAND. 14'J 
 
 that joint-stock banks should be allowed to come within 
 the circle of sixty-five miles from London upon their 
 undertaking to pay annually to the Exchequer a duty at 
 the rate of one per cent., and on their average issues, and 
 that thereupon their privileges of issue should be assured 
 to them until 1890, at which time they should cease. The 
 bill was purely permissive ; but it was thought by its 
 author that a large proportion of the English banks of 
 issue would place themselves under its operation, and 
 further legislation would be practicable with respect to 
 the rest. The bill, however, was less and less approved as 
 it became better known, and it was ultimately withdrawn. 
 There is no probability of any legislation being 
 enacted, supposing legislation to be desirable, looking to 
 a radical change in the methods of the Bank of England 
 or the strong private and joint-stock banks of the King- 
 dom. The reasons for this are many, the chief, however, 
 being the fact that the bankers of the Kingdon are largely 
 represented on both sides of the House of Commons, and 
 they are on the whole quite well contented with the 
 present state of the law, while the great body of the public 
 are profoundly ignorant, and uninterested in it. In 
 America, banks are plenty and banking business so 
 general that nearly every intelligent citizen takes a direct 
 and positive interest in banks and banking, and as a 
 natural outcome of this public censorship beneficial and 
 equitable legislation is easily enacted \\lienever necessary. 
 In England, the inaction to overcome is so great, and 
 the force available is so limited, nothing will be done except 
 under the influence of a commercial crisis, when almost 
 anything can be done. The aim of economists and stater.-
 
 150 HISTOKV ()!• I HE 
 
 men should be to produce a body of authority that may 
 command respect even in the midst of universal agitation. 
 
 At the risk of stating something that may appear too 
 obviously true to require statement, we would submit that 
 the question, whether bankers should be permitted to 
 issue notes, must be determined upon a balance of oppos- 
 ing considerations of expediency. Many of the advocates 
 and supporters of Sir Robert Peel's legislation of 1S44, 
 have said, apparently with a conviction that they were 
 expressing an axiomatic truth, that the issue of notes was 
 no part of the business of a banker. The force of assertions 
 of this kind cannot be admitted by everybody. There is 
 certainly no law of nature limiting the action of a banker 
 within the bounds sought to be prescribed ; and if we 
 accept as the definition of a banker a person whose busi- 
 ness it is to borrow and lend money, we cannot but 
 recognize in the issue of transferable notes a most con- 
 venient process of carrying on this business. 
 
 A banker who issues notes borrows so much from the 
 persons from time to time holding them, and this money 
 he has lent to the customers indebted to him. The 
 reasons of convenience which justify a prohibition of the 
 liberty of issue are, 
 
 First. — That experience has shown that this process 
 of borrowing is too patent and too easily abused to the 
 precipitation and aggravation of commercial crises. 
 
 Second.— That the great and almost insuperable dif- 
 ficulty of refusing to receive notes which have obtained 
 general currency makes it most desirable that such notes 
 should possess some better guarantee than can be always 
 forthcoming of the solvency of private issuers.
 
 FiANK or KN'GLANI). 151 
 
 These are the rea'sons which prevail to uphold Sir 
 Robert Peel's legislation, and which impel one to consider 
 what means may be discovered of perfecting his policy by 
 the unification of issuers throughout the Kingdom. 
 
 The time when one note currency, and the accelera- 
 tion of the time when one currency only shall be in 
 circulation, would both be greatly facilitated by a mechan- 
 ical and local separation of the issue department from the 
 Bank of England. Much confusion of thought still pre- 
 vails by reason of the fact that the Bank of England is 
 used as the agent for managing what is now a state issue, 
 resting, so far as it is uncovered by specie, upon state 
 security. 
 
 If the business of issuing notes were removed bodily 
 from the Bank of England and located in a Government 
 office, and the name of the notes at the same time chang- 
 ed, it could not fail to be seen that the business left behind 
 in Threadnecdle street differed in no essential particular 
 from that of any other banker in Lombard street, and 
 much of the superstitious regard for the Bank of England, 
 and trust in its assistance in time of trouble, would be 
 rapidly destroyed. It would then be understood that the 
 cry for ministerial interference at the time of crises, and of 
 incipient crises, was nothing more than a claim for the 
 nation to cover with its credit those who had not been 
 prudent enough to maintain adequate reserves for their 
 own defence ; and, as this would be understood before- 
 hand, it would induce the consequence of greater 
 circumspection on the part of dealers in money and a less 
 temptation to rely on extraneous aid. The purely 
 mechanical act of removing the issue of notes from
 
 152 lUSlOKV UK iUL: 
 
 Thrcadnccdlc street would make the facts of the situation 
 plain, and woukl bring about an alteration of conduct 
 amonjj^ London bankers, so that it should conform to the 
 facts thus perceived. 
 
 The cash reserves kept by the London bankers arc 
 disproportionately small compared with the amount of 
 their instantaneous liabilities. Competition has, of course, 
 been a considerable element in causing this attenuation 
 of cash reserves. Each joint-stock bank has struggled 
 after that increase of credit which follows an increase of 
 dividends ; and the unproductive cash balances on hand 
 have been kept down to the lowest lim.it. They would, 
 however, never have been reduced to such narrow dimen- 
 sions but for the reliance placed on the assistance of the 
 Bank of England in the last extremity ; and if it were 
 made plain that the I^ank of England is itself nothing more 
 than a big joint-stock bank, this reliance would disappear. 
 Many schemes, equally ingenious and chimerical, have 
 been recently put forth for compelling bankers to keep 
 larger reserves of cash in proportion to their deposits. 
 The true way to remove the danger that is always threat- 
 ening, under the system that exists, is to produce a convic- 
 tion among bankers that they must not expect help else- 
 where if they become distressed through a default in their 
 own reserves of cash. 
 
 If the separation of the issue department from the 
 rest of the Bank of England was completed by its transfer 
 to a Government office under the management of state 
 agents, the unification of the issues of the Kingdom might 
 be accomplished by legislation akin to that adopted by the 
 United States in relation to the national banks. Each
 
 IJANK OF KNGLAXI). ]:>.', 
 
 bank of issue might be required to withdraw its own notes 
 and to receive and put out in exchange for them notes 
 emanatincf from the state estabhshment, but bearinj^ a 
 statement on their face of tlie banks through which they 
 were issued. Government securities should be deposited 
 by the issuing banks for the amounts thus put into circu- 
 lation, which must not exceed the amount of their exist- 
 ing authorized issues ; and the interest on these securities 
 would be paid to the banks, less a fixed charge to defray 
 the cost of preparing and issuing the notes delivered to 
 them. The notes thus issued would be payable at the 
 central state office, and would circulate throughout the 
 kingdom ; but as often as they were brought back to the 
 central office they would be cleared again by the several 
 issuing banks for reissue, unless the latter desired to be 
 retired from the arrangement, in which case the issuing 
 bank would redeem the notes it issued, which would be 
 cancelled, and the securities deposited, or a corresponding 
 part of them, would be handed back. It would not be 
 improper to force this plan on the acceptance of the priv- 
 ileged banks of issue, although it is believed it would be 
 freely accepted, inasmuch as their notes would at once 
 acquire currency throughout the kingdom without dis- 
 crimination of locaHty in exchange for the deposit of 
 security, and the gain they now realize from the issue of 
 notes would be left undiminished. 
 
 Up to the year 1858, banking companies could not be 
 constituted with limited liability of partners except by 
 way of privilege under special Acts of Parliament ; and 
 althougli the Bank of England, and the three oldest estab- 
 lished banks in Scotland, were thus favored without any
 
 1.04 HISTORY OF THE I'.ANK OF ENGLAND. 
 
 consequent deterioration in the character of their manage- 
 ment, abundant arguments were adduced in depreciation 
 of a general law on the subject. In 1S58, however, an Act 
 was passed authorizing the formation and registration of 
 banking companies with limited liability, and also enabling 
 existing unlimited companies to register as associations 
 with a limited liability of partners, subject to a proviso 
 that if the bank was a bank of issue, the liability of its 
 partners should remain unlimited in respect of such issue. 
 Several banks have been established and registered under 
 this law, and no evil results have been observed to follow. 
 When the charter was renewed in 1833, the notes of 
 the Bank of England were made legal tender everywhere 
 in England, except at the bank. Of the wisdom of this 
 regulation no doubt can be entertained. Bank notes are 
 necessarily always equivalent to bullion ; and, by making 
 them substitutes for coin at country banks, the demand 
 for the latter during periods of alarm or runs is materially 
 diminished, and the stability of the banlc and of the pecu- 
 niary system of the country proportionately increased.
 
 CHAPTER XL 
 
 FRAUDS, FORGERIES, THEFTS AND DEFALCATIONS, 
 
 The First Forged Note on ihe Bank of England and Exe- 
 cution of ihe Forger — IIow Discovered — Counter/cit- 
 ing — Decision of the Lord Chief Justice — Defeating 
 Counterfeiters— Great Theft of the Head Cashier of 
 the Bank of England— A Loss of £j 20,000 — Invent- 
 ing a Safety Paper — Men Executed by Scores for 
 Counterfeiting — Ligenious Schemes for Swindling — 
 Sir Robert Peel Victimized — Another Thieving Offi- 
 cial — Fauntlcroy Secures £j6ofioo by Forgery — A 
 Rascally Clerk Escapes to the United States and is 
 Apprehended — Losses by Forgery — A Chief Clerk 
 Szvindlcs the Bank to the Amount of £Soo,ooo — His 
 Novel Method that went Undetected for Five Years — 
 BidwelTs Million Pound Szvindle. 
 
 Like all great monetary institutions, the Bank of Eng- 
 land has been the victim of innumerable forgeries, thefts 
 and defalcations by trusted servants and wily rogues. 
 
 The day on which a forged note was first presented 
 at the Bank of England forms a memorable era in its his- 
 tory. For sixty-four years the establishment had circu- 
 lated its paper with freedom ; and during this period no
 
 156 HISTORY OP THE 
 
 attempt had been made to imitate it. He who takes the 
 initiative in a new line of wrongdoing has more than the 
 simple act to answer for, and to Richard William 
 Vaughan, a linen draper, belongs the melancholy celebrity 
 of having led the van in this new phrase of crime, in the 
 year 1758. The records of his life do not show want, beg- 
 "•ar>', or starvation urging him to crime, but a foolish 
 desire to seem greater than he was. By one of the engrav- 
 ers employed, and there were several employed on dififer- 
 c-nt parts of the notes, the fraud was discovered. The ras- 
 cal had filled up to the number of twenty, and deposited 
 them in the hands of a young lady to whom he was 
 attached, as a proof of his wealth. There is no calculat- 
 ing how much longer Bank of England notes might have 
 been free from imitation, had this man not shown with 
 what ease they might be counterfeited. From this period 
 forged notes became common. The faculty of imitation 
 is so great, that when the expectation of profit is added, 
 there is little hope of restraining the destitute or a bad 
 man from a career which adds the charm of novelty to the 
 chance of gain. The publicity given to the fraud, the 
 notoriety of the proceedings, and the execution of the for- 
 mer, tended to excite that morbid sympathy which, up to 
 the present day, is evinced for any extraordinary criminal. 
 It is, therefore, possible that if Vaugha.n had not been 
 induced by circumstances to startle London with his novel 
 crime, the idea of forging bank notes might have been 
 long delayed, and that some of the strange facts to be 
 related would never have occurred. 
 
 The same }'ear (1758) was also memorable for a judg- 
 ment passed b} the Lord Chief Justice, in connection with
 
 BANK OF ENGLAND. 157 
 
 some notes which were stolen from the mails. The rob- 
 ber, after stopping the coach, and taking out all the 
 money contained in the letters, went boldly to a neigh- 
 boring post-office and had one of the notes exchanged. 
 The remainder of the stolen notes were passed on trades- 
 men. They were, however, stopped at the bank, and an 
 action was brought by the possessors to recover the 
 money. The question attracted widespread attention, 
 and it was decided by the law authorities: — "That any 
 person paying a valuable consideration for a bank note, 
 payable to bearer, in a fair course of business, has an 
 undoubted right to recover the money from the bank." 
 
 The notes of a banking establishment are always lia- 
 ble to imitation ; and as the paper of a national bank cir- 
 culates as freely as coin, it is not surprising that men of 
 desperate hopes have successfully attempcd to ain by 
 fraud that which they were denied by fortune. 
 
 John Mathison was a man of great mechanical capac- 
 ity, who, becoming acquainted with an engraver, unhap- 
 pily acquired that art which ultimately proved his ruin 
 and cost him his life. A yet more dangerous qualification 
 of his. was imitating signatures wath remarkable accuracy. 
 In London he forged a large number of Bank of England 
 notes, the paper, engraving, water-mark and general 
 appearance being superior almost to the genuine. Hav- 
 ing been in the habit of procuring notes from the bank, 
 that he might the more accurately copy them, he chanced 
 to be there when a customer paid in a number of guineas, 
 one of w^hich was scrupled. Mathison, from a distance, 
 said it was a good one. " Then," said the bank clerk, on 
 the trial, " I recollected him,"
 
 ]-)« HISTORY OF THE 
 
 The frequent visits of Mathison, who was very incau- 
 tious, together with other circumstances, created some 
 suspicion that he might be connected with these notes. On 
 another occasion, when Mathison was there, a forged note 
 of his own was presented, and the teller, half in jest and half 
 in earnest, charged Maxwell, the name by which Mathison 
 was known, with some knowledge of the forgeries. 
 I'urther suspicion was excited, and directions were given 
 to detain him at some future period. The day following 
 he was decoyed into the presence of the directors. To all 
 inquiries he replied that he declined to answer; that he 
 was a citizen of the world, and knew not how he had come 
 into it, or how he should go out of it. He watched his 
 chance, raised a window and dashed into the street. He 
 was recaptured. His actions condemned him. Further 
 questioning weakened him. He burst into tears, and yell- 
 ing "I am a dead man," said he would confess all. At his 
 trial he was found guilty on his own acknowledgement, 
 when he stated he could make a whole note in one day. 
 It was asserted at the time, that, had it not been for his 
 confession, he could not have been convicted. He offered 
 to explain the secret of his discovery of the water-mark, 
 provided the bank officials would intercede with the Gov- 
 ernment to spare his life. His proposal was rejected, and 
 he paid the penalty with his life. 
 
 Forgeries still continued. Considering the advances 
 made in the mechanical arts, they were rough and even 
 rude in their execution. Easily imitated, they were also 
 easily circulated. From 1797 the executions for forgery 
 of £1 notes augmented to an extent which bore no pro- 
 portion to any other class of crime. During the six years
 
 BANK Ol" ENGLAND. 159 
 
 prior to tlicir issue there was but one capital conviction ; 
 during the four following years eighty-five lives were 
 taken for counterfeiting. This enormous increase pro- 
 duced inquiry, which resulted in an Act "For the better 
 prevention of the forgery of the notes and bills of exchange 
 of persons carrying on the business of bankers." By this 
 some stringent penalties were denounced against offenders; 
 and a notice to the following effect was published in the 
 London papers in September, 1801 : — "All the one and two 
 pound notes issued by the Bank of England after this 
 date, will, to prevent forgeries, be printed on a peculiar 
 and purposely constructed paper." 
 
 This endeavor to repress crime fell sadly short of the 
 necessity, owing to the great truth that punishment is not 
 a sufficient preventative of crime ; but that to teach men 
 to be good is more effectual than to punish them for being 
 bad. So long as the law was left to take its course, and 
 no voice was heard save that of the victim, the justice 
 which hung a man for a one pound note was unquestioned. 
 Finally a change came. 
 
 The first instance of fraud in the present century was 
 the defalcation of no less a person than ]\Ir. Robert 
 Astlett, cashier of the Bank of England. In the year 1803, 
 Mr. Bish, a member of the stock exchange, was applied to 
 by Cashier Astlett to dispose of some exchange bills. 
 When they were delivered into Mr. Bish's hands he was 
 greatly astonished to find not only that these bills had 
 previously been in his possession, but that they had been 
 also delivered to the bank. Surprised at this, he imme- 
 diately opened a communication with the directors, which 
 led to the discovery of the fraud and the arrest of Astlett.
 
 IGO HISTORY OF TUF. 
 
 All the bank officials had the most implicit faith in Astlett's 
 honesty, and his theft produced tlic greatest constcrna- 
 ticMi imatjinablc. 
 
 At Astlett's trial it was shown that the prisoner had 
 been placed in sole charge of all exchequer bills brought 
 to the bank, and it was his duty to deliver them in person 
 to the directors, who counted them, and a receipt given to 
 the cashier. The prisoner, from his acquaintance with 
 business, had induced the directors to believe that he had 
 handed them bills to the amount of ;^700,000, when they 
 were only in possession of ;^500,ooo. So completely did 
 the cashier deceive the directors, that two of the body 
 vouched by their signatures for the delivery of the larger 
 amount. 
 
 The cashier was tried for the felonious embezzlement 
 of three bills of exchequer for ;{^ 1,000 each. By a technical 
 objection of his counsel the cashier was acquitted. He 
 was detained, however, until the directors could cause a 
 civil process to be issued against him. L>om this plan 
 they departed, and Astlett was again tried for the criminal 
 offence. The indictment this time charged him with the 
 felonious embezzlement of property and effects of the 
 Bank of luigland. He was found guilty this time and 
 sentenced to death. The sentence, however, was not 
 executed, and Astlett remained a prisoner in Newgate for 
 many years. The bank sustained a loss through Cashier 
 Astlett's thefts of ^^320,000. 
 
 Forgeries still continued, and executions occurred 
 weekly. Finally a committee was appointed to inquire 
 into and devise a method to prevent the forgery of bank 
 notes. In January, 18 19, the committee rendered its
 
 BANK OF ENGLAND. 161 
 
 report. They stated that the directors of the Bank of 
 England had furnished them with a detailed account of 
 one hundred and eight projects and specimens of the 
 originals for forger-proof notes, and of the imitation of the 
 above ordered by the directors. The committee had com- 
 munications from seventy outsiders who had ideas. They 
 also examined forged notes of various l:inds. They finally 
 concluded that the greatest degree of safety would be in 
 specially devised paper. The following is a description, 
 from a contemporary authority, of the improved note: — 
 
 "A number of squares will appear in chequer work 
 upon the note, filled with hair lines in elliptic curves of 
 various degrees of eccentricity, the squares to be alter- 
 nately of red and black lines ; the perfect mathematical 
 coincidence of the extremities of the lines of different 
 colors on the sides of the squares will be effected by the 
 arrangement of machinery of singular fidelity. But even 
 with the use of this machinery a person who has not the 
 key to the proper disposition would make millions of 
 experiments to no purpose. Other obstacles to imitation 
 will be also presented in the structure of the note ; but 
 this is the one principally relied upon. It is plain that 
 any failure in the imitation will be manifest to the obser- 
 vation of the most careless ; and the most skillful 
 merchants who have seen the operation declare that the 
 note cannot be imitated. The machine works with three 
 cylinders, and the impression is made by small convex 
 cylindrical plates." 
 
 In the ten first years of the present century, ^106,061 
 were refused payment on the plea of forgery. In 1797, the 
 entire cost for prosecuting forgeries was ^1,500, and in the
 
 \C,-2 HISTORY OF 'IIIE 
 
 last three months of 1818 it was nearly i;20,ooo. It was 
 clear that the severity of punishment had not prevented 
 the crime of forgery. The bank directors were blamed on 
 all sides for their presumed apathy. Every person who 
 had proposed a plan, and had it declined, joined the cry. 
 livery disappointed adventurer, who had asked for bank 
 capital to carry out his scheme, asserted that they had not 
 inquired into the particulars but dismissed an excellent 
 proposal without due consideration. It was eventually 
 found out that to prevent a crime was better than to pun- 
 ish it. Education, intelligence and a note almost impossi- 
 ble to imitate has rendered forged Bank of England notes 
 well nigh impossible. In April, 1820, forty men were held 
 in London for counterfeiting, and men were hung in 
 strings. From one or two manufactories issued most, if 
 not all, the forged notes which were in circulation ; and 
 the manufacturer of thousands remained unsettled while 
 the issuer of one was hung. They were sold to ignorant, 
 uneducated, and almost irresponsible men, for a few shil- 
 lings in the pound ; and there was always a sufficient 
 number urged by want, desire, or vice, to run the risk 
 which accompanied their circulation. When a poor man 
 was hung the public looked upon the act as a virtuous 
 atonement for an awful deed. But when a banker or gen- 
 tleman was found in danger of punishment, the morbid 
 sympathy of the people was excited. 
 
 In 1822, another servant was recreant to his trust. 
 William Turner, a clerk, was discovered to be the perpe- 
 trator of a very singular and intricate fraud. Records of 
 internal treachery have not been plenty in the Bank of 
 England. It was Turner's duty to place a certain amount
 
 BANK OF ENGLAND. 163 
 
 to the credit of Sir Robert Peel. Pie increased Peel's 
 credit to the extent of /; 10,000. Having secured the foun- 
 dation of the object which lie had in view, the next move- 
 ment was to dispose of the amount which he had thus 
 created by a single stroke of his pen. The second step 
 was effected with almost as much facility as the first, by 
 opening an account in the fictitious name of J. Rcnn, of 
 Ilighgate, whom he credited to the amount of ^10,000. 
 A purchaser was found, the stock appeared to the credit 
 of the seller, and the transfer was effected. 
 
 ^ The fraud was accidentally discovered. Great diffi- 
 culty in fastening the crime on Turner was occasioned 
 by the fact that he had covered up his tracks and destroyed 
 many evidences of his guilt. On the trial, as the only wit- 
 ness who was disposed to swear decidedly to the writing 
 of the prisoner was answering the questions put to him. 
 Turner whispered to his counsel, who immediately asked 
 the witness:—" Do you believe the New Testament to be 
 a revelation from God ? " The witness hesitated, and the 
 question was repeated. " Yes, I do," was the reply, 
 uttered in a faint tone. He was, however, again pressed, 
 and evidence being produced to prove that he had fre- 
 quently avowed his disbelief, the prisoner's fate was greatly 
 decided by the knowledge, and the jury returned a verdict 
 of" Not Guilty." 
 
 Turner retained the money. He even had the audac- 
 ity to visit the bank. With his ill-gotten money Turner 
 went to Italy, purchased a fine villa on the shores of Lake 
 Como. His stealing amounted to many thousands of 
 pounds, more than originally discovered. He soon dissi- 
 pated his property and returned to England. A retribu-
 
 1G4 HISTORY OF THF. 
 
 tlve justice overtook him, as it overtakes mostly all who 
 depart from the path of rectitude, and he died in an obscure 
 street in London, in a cheap lodging house, in the great- 
 est povert}-. 
 
 From 1815 to 1823, the Bank of England lost ^360,000 
 by what is known as the Fauntleroy forgeries. Henry 
 Fauntlcroy was a partner in a private banking house. He 
 was only twenty-five years of age. He was joint-trustee 
 in an account with some other gentlemen in the imperial 
 three-per-cents. He forged a power of attorney for the 
 sale of same. No doubt appears to have been excited at 
 the bank. It passed the ordeal of the bank examinations. 
 In the management of the trust some difficulties arose, 
 and the only plan w hich could save the executors was to 
 throw the property into chancery. Fauntleroy strenuously 
 objected. In the course of the dispute, one of the trustees 
 visited the bank and learned the fearful intelligence which 
 first led to the discovery of a series of gigantic forgeries, 
 so gigantic in their respect, and so unparalleled in their 
 nature, as to border on the regions of fiction. Fauntleroy 
 was arrested. Among his papers was found this unique 
 document: — 
 
 " In order to keep up the credit of our house, I have 
 forged powers of attorney, and have, thereupon, sold out 
 all these sums, without the knowledge of my partners. I 
 have given credit in the accounts for interest when it 
 became due. The Bank of England first began to refuse 
 our acceptances, and thereby destroyed the credit of our 
 house. The bank shall smart for it. 
 
 "Henry Fauntleroy."
 
 IIANK OF KNCLAND. 165 
 
 True to his word, the bank suffered to the extent of 
 £160,000. The crime excited the greatest interest. The 
 pubh'c press teemed with his doings. He had a book con- 
 taining a classified Hst of his forgeries. He was tried, 
 convicted, and expiated his crime at Newgate amidst 
 thousands of spectators. In 1832, capital punishment for 
 counterfeiting was repealed. 
 
 In the month of October, 1841, London was startled 
 \vi;h a rumor of a scries of forgeries. It was stated that a 
 large number of the exchequer bills then in the market 
 were forged. Edward Beaumont Smith, chief clerk in the 
 exchequer office for twenty-eight years, was arrested for 
 the forgery. Smith had taken genuine bills and forged 
 the proper signature. In every other respect they were 
 genuine. Smith had two confederates. For five years did 
 Smith carry on his forgeries without detection. Upwards 
 of ;^8oo,ooo were thus procured. As another proof that 
 money wrongfully gained is easily lost, they lost nearly all 
 upon the stock market. It was invariably stipulated that 
 the very bills which were pledged should be returned 
 when the money was repaid, or on other exchequer bills 
 being given. In this manner the rascals escaped detection 
 until boldness caused a suspicion which led to their appre- 
 hension. Smith and his accomplices were transported for 
 life. 
 
 In 1845, William Burgess, a clerk, forged a note for 
 ,{,"8,500, and fled to the United States. He was captured 
 in Boston and returned to England and punished. 
 
 The losses occurring to the Bank of England from 
 forged notes and other fraudulent documents have been 
 commensurate with the greatness of its transactions.
 
 16(5 HISTORY OF IHK 
 
 Still, constant vigilance is the price of security from losses 
 by designing and unscrupulous men. Forgeries and 
 defalcations of late years are not numerous and wrong- 
 doing of employees rare. The system of checks used in 
 all departments renders mistakes almost impossible, 
 and internal dishonesty so sure of instant detection that 
 crookedness is rarely ever attempted. 
 
 At an average of the ten }'ears ending with 1831, the 
 bank lost through forgeries, ^{^40,204 per year. Since then 
 modern appliances has reduced this to almost nothing. 
 
 In 1872, the Bank of England was defrauded of nearly 
 1,000,000 pounds sterling, through the rascality of four 
 American thieves, George and Austin Bidwell, George 
 McDonald and Edward Hills. These men discovered an 
 unguarded loop-hole in the banking department of the 
 bank and concocted a scheme to take advantage of this to 
 swindle them to the best of their ability. The bank was 
 in the habit of receiving bills of exchange in deposit on 
 account without verifying either the signatures or the 
 acceptances, and stowing them away until they became 
 due. 
 
 These men managed to secure the necessary intro- 
 duction, and opened an account with the bank under an 
 assumed name. They then had hundreds of bills of 
 exchange printed on counterfeit plates, and flooded the 
 Bank of England with these bills from all over the world, 
 profusely signed and accepted, and the bank unhesitat- 
 ingly cashed them and put the proceeds to the credit of 
 the rascals, which were drawn out in ostensible business 
 transactions in such a manner as not to excite the sus- 
 picion of the bank officials. On one occasion the rascals
 
 HANK 0|- KNCLANI). 1G7 
 
 neglected to date the acceptance of two of the fraudulent 
 bills. These were sent by the bank to the acceptors to 
 supply the omission and the fraud was at once discovered 
 and exposed. The four men were apprehended after an 
 exciting chase by detectives, and upon trial were all given 
 life sentences. George Bidwell was pardoned in 1888 and 
 returned to the United States. The other men are still in 
 prison although a determined effort is being made by their 
 friends to obtain their release.
 
 CHAPTER XII. 
 
 MANAGEMENT OF THE NATIONAL DEBT. 
 
 ManagcDii'iit of all Other Stocks Held by the Bank — Ilotv 
 the Work is Performed by the Bank of England — 
 Stock Offices — Dividend Pay Office — Cheque Office 
 — Unclaimed Dividcjids — Stock Office Library — Num- 
 ber of Books in Library — A Perfect System — iy8,ooo 
 Distinct Accounts — Register Office — Post Warrant 
 Office-- The Routine Work of Above Named Offices 
 Described — Names of the Governors of the Bank of 
 England from i6p^ to iS88. 
 
 Tin: management of the national debt, and of all the 
 other stocks which are inscribed at, and the interest on 
 which is payable by, the bank of England, is conducted in 
 the Department of the Chief Accountant, who is respon- 
 sible for the due performance of the various duties. The 
 work is divided into the following offices — viz.. Stock, 
 Transfer, Dividend, Post Warrant, Cheque, Register 
 Office, Unclaimed Dividend, and the Stock Office Library. 
 Each of these is under the superintendence of a Principal 
 and Deputy-Principal, and the whole of them are under 
 the control of one head, called the Controller of Stock 
 Offices, who again is under the Chief Accountant. A
 
 RANK OF F.NGI.ANn. 101) 
 
 brief description of the work of tlie various offices having 
 in charge the national debt and other pubUc stocks will 
 be found interesting. 
 
 Stock Office — The bank, in its capacity of man- 
 ager or account-keeper of the national debt, neither buys 
 nor sells, although as bankers, or in their corporate 
 capacity, they may buy or sell, as may any other stock- 
 holders, liuying and selling stock is carried on principally 
 through the intervention o( stock-brokers. A person 
 wishes to buy /^i,ooo of a particular stock, say X3 per 
 cent, consols ; he applies to In's stock-broker, who deals 
 with a person called a stock-jobber, and having agreed as 
 to the price, the broker sends to the bank a transfer 
 ticket or request to have a certain amount of stock trans- 
 ferred from the name A, a seller, to.l^, a buyer. 
 
 One of the clerics of the bank, who attends to the 
 stock transactions of all accounts beginning with letter A, 
 refers to the ledger to see that such an amount of stock is 
 on the account of A, and he then copies from the transfer 
 ticket left by the broker, into a book called the transfer 
 book, which consists of blank forms of transfer, printed 
 according to the regulation of the Acts of Parliament, the 
 name into which the stock of A is required to be placed. 
 In the meantime the broker has prepared a document 
 called the stock receipt, agreeing in the main particulars 
 with the entry made in the transfer book; and when A 
 comes to make the transfer (having previously been iden- 
 tified to the satisfaction of the bank), he signs the book, 
 which is a formal discharge to the bank for that amount 
 of stock, and the stock receipt, which is handed to 1), the 
 buyer, as an acknowledgement both for the monc}-
 
 170 HISTORY OF THE 
 
 received in purchase of the stoclc, and a memorandum that 
 the said amount of stock has been transferred to ]^. From 
 that moment A ceases to have any control over that par- 
 ticular amount of stock. It is at once entered in the name 
 of 15. and B stands in the place of A, and can, in like 
 manner, on being identified, deal with the stock by selling 
 to C. It matters not into how many accounts A may 
 wish to transfer his stock; for if, instead of selling the 
 whole amount to B, he sells one-half, or i^ioo, or sixpence, 
 the same operation goes on with respect to that particular 
 part, as if he were selling all the amount standing in his 
 name. Each transfer is a perfect deed of conveyance, and, 
 when completed, the transaction is entered in a journal, 
 from which it is then posted in the ledger. 
 
 The dividends on all British government stock, 
 except the i^2 15.?., and the £2 \os. per cent, annuities, 
 are paid half-yearly, either in January and July, or April 
 and October. 
 
 Dividend Office — Immediately previous to the first 
 day of payment, the dividend books and the warrants are 
 passed from the Transfer Offices into the Dividend Office. 
 The books being arranged on the counter in alphabetical 
 order, and the warrants deposited in drawers inside the 
 counters, both are presided over by a numerous staff of 
 clerks, whose duty it is to deliver the warrants to the 
 stockholders as they appear to receive their dividends. 
 The parties applying must name the amount of stock of 
 which they may be possessed. If right, the applicant is 
 required to sign the dividend book as an acknowledge- 
 ment that the dividend warrant has been received, and 
 the warrant for the amount is then handed to him.
 
 BANK OK ENGLAND. 171 
 
 In the Dividend Pay Office arc paid the dividends 
 on: — 
 
 1. liritish Government Funds (including Life Annui- 
 
 ties, the warrants for wliich are prepared and 
 issued by the National Debt Office, Old Jewry). 
 
 2. Indian Government Debt. 
 
 3. Indian Railways purchased by tiie Cjovernmcnt. 
 
 4. Metropolitan Board of Works and City of London 
 
 Debts. 
 
 5. Various Colonial and British Corporation Stocks. 
 
 6. Turkish Guaranteed Loan. 
 
 7. Bank Stock. 
 
 On some of these stocks the dividends are payable 
 only by warrant, on others on!}- b)' coupon. 
 
 The warrant answers the double purpose of being a 
 cheque payable on demand, as well as a receipt ; the 
 coupon is payable to bearer, but must be left for examina- 
 tion three clear days before being paid. Postal Warrants 
 are only paid through a banker, but warrants other than 
 these, and coupons, arc paid cither through a banker, or 
 over the counter, in notes or coin, as may be desired. 
 
 The work of this office has been largely augmented 
 of late years, owing partly to the great additions made in 
 colonial and corporation stocks, and the growing tendency 
 to pay dividends quarterly instead of half-yearly. At the 
 heaviest periods of the j-ear, when as many as 50 clerks 
 are employed, from io,oco to 12,000 separate dividend 
 warrants are paid in a single day, about 3,000 of these 
 being presented at the counter for payment in notes and 
 coin. Great care is required in the manipulation of both 
 warrants and coupons. After examination and pa\-ment.
 
 172 HISTORY OF THE 
 
 the warrants are cancelled by a small portion being 
 punched out, the form and position of the punch mark 
 denoting the date on which the warrants were paid. 
 
 Dividends are now paid on 75 stocks; the warrants 
 number" about 400,000, and the coupons 350,000, represent- 
 ing a value of about ;^38,ooo,ooo, and a capital stock of 
 about ^"900,000,000. 
 
 Cheque Office — The warrants paid in the Dividend 
 Office are handed over, day by day, to the Cheque Office. 
 The duty of this office is to make up the amount of all the 
 warrants passed to it, and see that they agree in the 
 arrrrregate with the amount paid upon them by the Divi- 
 dend Office. The warrants are from time to time sorted 
 into numerical order (which brings them into alphabeti- 
 cal order), and are then entered in journals marked with 
 letters corresponding to the stock ledgers. The total of 
 these journals should agree with the amount paid as rep- 
 resented in the cash books. 
 
 Unclaimed Dividends — It must be obvious that 
 from many causes amounts of stock, and the dividends 
 thereon, will from time to time remain unclaimed. Per- 
 sons die intestate, and the relatives are not aware, 
 perhaps, that they were possessed of stock. Others leave 
 the country, and, perhaps, never return. When such 
 amounts have remained unclaimed for ten years, they are 
 transferred to the account of the commissioners for the 
 reduction of the national debt, but the persons entitled to 
 same can make their claim good at any time and receive 
 their money. 
 
 Stock Office Library— The Stock Office Library 
 of the bank contains the old stock ledgers, transfer books,
 
 BANK OF KXGLAND. 173 
 
 dividend books, power of attorney cases, and numerous 
 other books and documents, from the cstabhshmcnt of the 
 bank in 1694, commencing with the original of bank stock 
 created at that early period, and embracing the various 
 government stocks^, and securities from the respective 
 dates of their creation down to the present time. There 
 are about 65,000 of these books and documents, which are 
 all placed under the immediate charge of a librarian, and 
 so systematically and conveniently arranged that reference 
 can readily be made to any of them. They are all in 
 good condition, and their due preservation is a matter of 
 considerable moment. It is not too much to assert that 
 the titles of all who have at any time been possessed of 
 government stock, can be proved by these means readily. 
 No reference, however, can be made but by those persons 
 connected with the business of the respective stock offices, 
 and all references are registered, being signed for by the 
 parties making them. The books in this library contain a 
 very interesting and valuable collection of autographs, 
 embracing among their number those of some of the most 
 remarkable persons of their day. The number of books 
 in the Stock Office Library in July, 18S8, was: ledgers 
 and alphabets, 4,200 ; transfer books, 27,675 ; dividend 
 books, 20,642; powers of attorney, 10,210; odd books, 
 4,280 — total, 67,007. 
 
 To carry out the management of the national debt 
 about 175 persons are employed, wuth an additional 
 staff of about 30, when dividends arc paid. Ten rooms 
 are entirely devoted to the purpose, and upwards of 1,700 
 books are in constant use. The remuneration made to the 
 bank for this service is regulated by an Act of 1861, and
 
 174 HISTORY OF THF. 
 
 amounts at the present time to something over i;2 10,000 
 per annum. Formerly, the compensation to the bank for 
 managing the national debt was at the rate of ;^45o per 
 million, but it is now only ^^300 per million. From the 
 elaborate character of the offices and arrangements, it will 
 be readily understood that the cost of this department is 
 very great, and it is thought the net profit is not more 
 than one-third of the amount received. 
 
 There is involved, in the course of each year, the pay- 
 ment, twice over, on 178,000 accounts, of the interest on 
 nearly ;^630,000,000 of money. In no other country of 
 the civilized world is there exhibited so bright an example 
 of national integrity on the one hand, and of simple, 
 unsuspecting confidence on the other, as is shown in this 
 vast monetary connection betwixt the government and 
 the people. 
 
 Register Office — Another office immediately con- 
 nected with the management of the national debt is the 
 Register Ofifice. In this office a registration is made of 
 all wills and administrations exhibited at the bank, for the 
 purpose of substantiating claims to the various amounts 
 of stock standing in the names of persons deceased. On 
 the following day they are delivered up to the parties de- 
 positing the same, or to their order ; and, in the mean- 
 time, the deceased person's account will have been " made 
 dead," as it is called, in the bank books, in the various 
 stock accounts in which his name may appear. In this 
 way, upwards of 5,000 wills and administrations are dealt 
 with annually. 
 
 Post Warrant Office— The work in this office 
 varies considerably, being especially heavy at the four
 
 BANK OF ENGLAND. 175 
 
 quarterly periods of the year, when the permanent staff 
 of the office requires to be largely supplemented by extra 
 hands to assist in making out the lists and post the war- 
 rants. In the year 1886-7, as many as 131,783 warrants 
 were thus sent. 
 
 It is not intended to give here a list of all the stocks 
 which are registered, and the interest on which is payable 
 at the Bank of England. The mode of dealing with all 
 stocks is, as near as circumstances will admit, similar to 
 that adopted in the case of the national debt. The facili- 
 ties given are equal to, if not in excess of, what could be 
 afforded by any other establishment, and the system is 
 such that every transaction can be referred to with the 
 least possible delay, 
 
 NAMES OF THE 
 
 Governors of the Bank of England 
 
 From its foundation in 1G94 to A. 1). 1888. 
 
 1G94-95-96. Sir John Houblon. 
 
 1697-1698. Sir William Scawen. 
 
 1699-1700. Nathaniel Tench. 
 
 1701-1702. John Ward. 
 
 1703-1704. Abraham Houblon. 
 
 1705-1706. Sir James Bateman. 
 
 1707-1708. Francis Evles. 
 
 1709-1710. Sir Gilbert Heathcote. 
 
 1711-1712. Nathaniel Gould. 
 
 1713-1714. John RuDGE.
 
 170 ' history of the 
 
 1715-1716. Sir Peter Delme. 
 
 1717-171S. Sir Gerard Conyers. 
 
 1719-1720. John- Hanger. 
 
 1721-1722. Sir Thomas Scawen. 
 
 1723-1724. Sir Gilbert Heathcote. 
 
 1725-1720. William Thompson. 
 
 1727-1728. Humphry Morice. 
 
 1729-1730. Samuel HoLDEN. 
 
 1731-1732. Sir Edward Bellamy. 
 
 1733-1734. The Hon. Horatio Townsend. 
 
 1735-1736. BuYAN Benson. 
 
 1737-38-39. Thomas Cooke, 
 
 1 740. Delillers Carbonnel. 
 
 1741-1742. Stamp Brooksbank. 
 
 1743-1744. William Fawkener. 
 
 1745-1740. Charles Savage. 
 
 1747-1748. Benjamin Longust. 
 
 1749-50-51. WiLLiAN Hunt. 
 
 1752-1753. Alexander Sheafe. 
 
 1754-1755. Charles Palmer. 
 
 1756-1757. Matthews Beachcroft. 
 
 1758-1759. Merrik Burrell. 
 
 1760-1761. Bartholomew Burton. 
 
 1762-1763. Robert Marsh. 
 
 1764-1705. John Weyland. 
 
 1760-07-08. Matthew Clarmont. 
 
 1709-1770. William Cooper. 
 
 1771-1772. Edward Payne. 
 
 1773-1774. James Sperling. 
 
 1775-1776. Samuel Beachcroft. 
 
 1777-1778. Peter Gaussen. 
 
 1779-1780. Daniel Booth.
 
 BANK OF ENGLAND. 177 
 
 1781-1782. William Ewer. 
 1783-1784. Richard Neave. 
 1785-1786. George Peters. 
 1787-1788. Edward Darell. 
 1789-1790. Mark Wevland. 
 1791-1792. Samuel Bosanquet. 
 1793-1794. Godkrey Thornton. 
 
 1795-1796. Daniel Giles. 
 
 1797-1798. Thomas Raikes. 
 
 1799-1800. Samupx Thornton. 
 
 1801-1802. Job Mathew. 
 
 1803. Joseph Nutt. 
 
 1804-1805. Benjamin Winthrop. 
 
 1806-1807. Beeston Long. 
 
 1808-1809. John Whitmore. 
 
 "1810-1811. John Pearse. 
 
 1812-1813. William Manning. 
 
 1814-1815. William Mellish. 
 
 1816-1817. Jeremiah Harman. 
 
 1818-1819. George Dorrien. 
 
 1820-1821. Charles Pole. 
 
 1822-1823. John Bowden. 
 
 1824-1825. Cornelius Buller. 
 
 1826-1827. John Baker Richards. 
 
 1828-1829: Samuel Drewe. 
 
 1830-31-32. John Horslev Palmer. 
 
 1833-1834. Richard Mee Raikes. 
 
 1835-1836. James Pattison. 
 
 1837-1838. Timothy Abraham Curtis. 
 
 1839-1840. Sir John Rae Reid, Bart. 
 
 1841. Sir John Henry Pelly, Bart. 
 
 1842-43-44. William Cotton.
 
 178 history of the bank of england. 
 
 1845-1846. John Benjamin Heath. 
 
 1847. William R. Rodinson. 
 
 1847-1848. Ja.mes Morris. 
 
 1849-1850. Henry James Prescott. 
 
 1851-1852. Thomson Hankf.y, Jr. 
 
 1 853-1 8.'.4. John Gellibrand Hibbard. 
 
 1855-1856. Thomas Matthias Weguelin. 
 
 1857-1858. Sheffield Neave. 
 
 1859-1860. bonamy dobree. 
 
 1861-1802. Alfred Latham. 
 
 1863-1864. KiRKMAN Daniel Hodgson. 
 
 1865-1866. Henry Lancelot Holland. 
 
 1867-1868. Thomas Newman Hunt. 
 
 1869-1870. Robert Wigram Crawford. 
 
 1871-1872. George Lyall. 
 
 1873-1874. Benjamin Buck Greene. 
 
 1875-1876. Henry Hucks Gibbs. 
 
 1877-1878. Edward Howley Palmer. 
 
 1879-1880. John William Birch. 
 
 1881-1882. Henry Riversdale Grenfell. 
 
 1883-1884. John Saunders Gilliat. 
 
 1885-1886. James Pattison Currie. 
 
 1887-1888. Mark Wilks Collet.
 
 CHAPTER XIII. 
 
 INTERNAL WORKINGS OF THE BANK OF ENGLAND. 
 
 Private Drawing Office — Public Drawing Office — What is 
 Considered a Remunerative Balance — Working Ac- 
 counts — Niimbcr of Bills Issued — Business in the 
 Bill Office — Branch Banks, and How Conducted — 
 Drawing Accounts and Discount Accounts — Impor- 
 tant Service Performed by Branch Banks — Number 
 and Location — Rules and Regulations Under Which 
 Accounts are Received in the Bank of England — De- 
 nomination of Bank of England Notes. 
 
 The Private Drawing Office is devoted entirely to 
 the management of private accounts. Any person desir- 
 ing to open a drawing account at the Bank of England, 
 must be respectably introduced to the chief cashier, the 
 sole condition being that the account shall be remunera- 
 tive to the bank. This condition will be fulfilled if the 
 ordinary balance on the account be sufficient to enable 
 the bank, by the use of such balance at the average rate 
 of interest for money, to realize a profit over and above 
 the expense of keeping the account. The amount of 
 balance required in order that an account may be consid- 
 ered remunerative, will, of course, depend upon the
 
 180 HISTORY OF THE 
 
 number of cheques paid, and tlie amount of work other- 
 wise required to be done. There is no stipulated sum 
 insisted upon as a cash balance; but the head of the office 
 will always explain to any person, on his opening an 
 account, what kind of balance would be deemed remunera- 
 tive. As a rough guess, it has been considered that 
 unless the bank can receive as interest, during the year, 
 6(L for every entry of a cheque paid, there would be no 
 adequate remuneration. 
 
 Suppose, for instance, that a customer keeps an 
 average balance of i^Soo, it would be necessary to keep 
 ;^ioo unemployed, and the remaining ;{;400, at 3 percent., 
 would yield an interest of ;^I2 a year. Now, if not more 
 than 480 cheques are drawn in the year, the balance would 
 be considered remunerative, 480 at 6d. being ^12. If, 
 however, such account were used at the rate of 1,000 
 cheques, or drafts for payment, in the course of the year, 
 the case would be different. A few accounts are allowed 
 to be kept without the necessity of a balance being 
 insisted upon ; but a charge, in proportion to the quantity 
 of work required to be done, is made annually — this plan 
 is, however, an exception to the general rule. 
 
 The bank affords every convenience to its customers, 
 and will buy, or sell, or take charge of securities, receive 
 their dividends of all kinds, and make payments at almost 
 any place ; and although accounts are not allowed to be 
 overdrawn, the bank is always ready to discount bills, if 
 considered good, for its customers, and to make advances 
 on such securities as it is in the habit of receiving ; but 
 these advantages are only afforded to those who keep 
 either their sole account at the bank, or what is considered
 
 BANK OF ENGLAND. 181 
 
 a remunerative balance. It is the duty of the head of the 
 office to see that all the accounts are fairly worked, and 
 that the bank is thus remunerated for the work done. If 
 an account is not considered to be fairly worked, the cus- 
 tomer is communicated with, and if the representations 
 made are not attended to, the account is ordered to be 
 closed. 
 
 The bank, through the Private Drawing Office, grants 
 bills due at seven days' or sixty days' date, the value be- 
 ing paid in cash when the bills are taken out, and the 
 bank becoming responsible for the payment of the bills at 
 maturity. These bills, which can be taken out for uneven 
 amounts, are a great convenience to persons having occa- 
 sion to remit money to various parts of England, or even 
 foreign countries, as they are readily taken all over the 
 world upon the credit of the Bank of England ; and the 
 person wishing to make a remittance knows that the only 
 expense is the loss of the interest on the money. There 
 is generally an outstanding balance of about i^i 70,000, 
 which the bank may make use of; the interest which can 
 be made, minus the expense of the office and printing the 
 bills, being to the profit of the bank. There are about 
 40,000 bills issued in the course of the year in London 
 and at the branches, representing an aggregate of about 
 ^5,000,000. All the money collected throughout the 
 country by the revenue officers for customs and excise 
 dues, taxes, etc., are paid into it, and all payments on ac- 
 count of the public service are made by orders made 
 on it. 
 
 The separation of the public from the private accounts 
 is merely made to insure, by the subdivision of labor.
 
 182 HISTORY OF THE 
 
 greater convenience, both to the pubhc generally and to 
 the clerks of the bank. There is no practical difference 
 whether money is paid or received on a government ac- 
 count, or on any other account which may be kept at this 
 separate department ; all receipts in the day go to the 
 credit of deposits, and all payments are charged to de- 
 posits, and the balance at the close of the day must agree 
 with the cash brought in to the cashiers as money not 
 used, after accounting for all payments and receipts made 
 during the day ; and the daily business of the bank is not 
 considered as concluded until the balance is found correct. 
 
 In the Bill Office all bills of exchange belonging to 
 customers, or bills which have been discounted and be- 
 long to the bank, are kept duly sorted and so arranged as 
 to be presented without fail at maturity. All cheques 
 paid into the Private and Public Drawing Offices, and 
 all cheques received from the country, are sent to this 
 office for collection, and the proceeds passed to the credit 
 of their respective owners. Cheques and bills on clear- 
 ing bankers are collected through the clearing house; 
 those on non-clearing bankers, merchants and others, 
 through the out-tellers' department. There is a collec- 
 tion for the latter class at eleven o'clock in the forenoon 
 for cheques, etc., paid to account in the Drawing Offices 
 the previous day, and another collection at one o'clock 
 for those paid in on the same day. Cheques and bills on 
 clearing bankers are sent to the clearing house, the last 
 charge being made up to 3.45 o'clock. All cheques paid 
 in up to that hour may be drawn against the same day. 
 
 Although this office adds nothing to the revenues of 
 the bank, it is most important in the economy of the
 
 BANK OF ENGLAND. • 183 
 
 general business, performing, as it does, the part of col- 
 lecting agent for the other departments, in presenting, 
 under a system which insures unerring precision and 
 great promptitude, all the cheques, etc., which they have 
 received, and all bills or interest notes which are payable 
 at a distant date. 
 
 If cheques requiring collection at a distance arc pai 
 in to the credit of an account, time must bt allowed for 
 the receipt of money before it can be drawn against; but 
 the endeavor of the ^ank of England is to afford every 
 facility consistent with security to enable its customers 
 to make use of every kind of order for payment, by turn- 
 ing it into cash as quickly as practicable. In the Private 
 Drawing Office there are about 1 12 clerks employed, and 
 nearly 200 books are in constant use. 
 
 The Public Drawing Office, as its name implies, is 
 devoted to the custody of the drawing accounts of the 
 government and various public companies and institutions, 
 although there is, of course, practically no difference 
 between the accounts of the government and those of the 
 private customers of the bank. 
 
 When branch banks of the Bank of li^ngland were first 
 broached they were not viewed with favor by country 
 bankers, who saw that their profits and influence would be 
 depreciated. Since 1826, the bank has established 
 branches in some of the great commercial towns. I'ollow- 
 ing will be found the mode of conduct of business, which 
 is about the same as the parent bank : — 
 
 For instance, the branch at Liverpool, and the same 
 is true of those established in other places, is to be a 
 secure place of deposit for persons having occasion to
 
 184 . HISTORY OF THE 
 
 make use of a bank for that purpose. Such persons arc 
 said to have drawing accounts. To facilitate to the mer- 
 cantile and trading classes the obtaining discounts of good 
 and unexceptionable bills, founded upon real transactions, 
 two approved names are required upon every bill or 
 note discounted. These are called discount accounts. 
 The applications of parties who desire to open discount 
 accounts at the branch are forwarded to the parent bank 
 in London for approval. When approved, good bills may 
 be discounted at branches without further reference to 
 London. Bills payable at London, or any place where a 
 branch is established, are discounted under this regula- 
 tion. The dividends on any of the public funds, which 
 are payable at the Bank of England, may be received at 
 any branch by persons who have opened drawing accounts, 
 after signing powers of attorney for that purpose, which 
 the branch will procure from London. No charge is made 
 in this case, except the expense of the power of attorney 
 and the postage incurred in transmitting it. Purchases 
 and sales of every description of government securities 
 are effected by the branch at a charge corresponding to 
 that made by the local bankers where the branch is sit- 
 uated. A commission, including brokerage in London, 
 and all expenses of postage, is charged on paying at the 
 Bank of England bills accepted by persons having draw- 
 ing accounts at branches. All branches grant bills on 
 London, payable at seven days' date, without acceptance, 
 for sums of ;^ 10 and upward. Persons having a drawing 
 account at a branch may order money to be paid at the 
 bank in London to their credit at the branch and vice 
 versa. Bank post bills, which are accepted and due, are
 
 BANK OF i:ngland. 185 
 
 received at the branch from parties having drawinjj 
 accounts. No interest is allowed on deposits. No 
 advance is made by a branch upon any description of 
 landed or other properly, nor is any account allowed to be 
 overdrawn. The notes are the same as those issued by 
 the parent establishment, except being dated at the 
 branch, and made payable there and in London. 
 
 There are two branches in London and nine in the 
 country. Those in London are the Western Branch and 
 the Law Courts Branch. They do not issue notes, but 
 carry on only just such banking business as is carried on 
 by other banks in the same districts. The countr\- 
 branches, naming them in order of their importance, are : 
 Liverpool, Manchester, Newcastle-on-Tyne, Leeds, Bir- 
 mingham, Hull, Bristol, Plymouth, Portsmouth. These all 
 carry on ordinary banking business, but do not compete 
 for it very keenly. Their business mainly lies in the issue 
 of notes, and in affording convenience for the collection 
 of the revenue, and for the disbursements of some of the 
 large government establishments. The notes issued by 
 each branch are payable in cash only at that branch, and 
 notes issued by the head office are, likewise, payable there 
 only. 
 
 The branches of the Bank of England, both in Lon- 
 don and in the country, each of which is under the charge 
 of an agent and sub-agent, are all perfectly subordinate to 
 the parent establishment. They carry on all the ordinary 
 business of local banking, such as receiving deposits pay- 
 able on demand, transmitting money, receiving money for 
 customers at all places, and taking charge of securities ; 
 in short, each branch carries on the same kind of business
 
 186 HISTORY OF THR 
 
 as is conducted in the drawing (or ordinar}- banking) 
 offices in London in addition to the issue of bank notes 
 (so far as the country branches are concerned), seven days' 
 bills, or bills at longer dates. The notes issued at a par- 
 ticular branch are payable in cash only at that branch, or 
 in London ; and it should be borne in mind that bank 
 notes issued by the head office are not payable in cash on 
 demand at any of the branches, whether in London or the 
 country. The accounts are balanced every night, exactly 
 as in London, and the balance sent up to London daily by 
 post, together with particulars of all the transactions of 
 each day. Any sum of money may be remitted from Lon- 
 don to any branch, or between the respective branches, 
 where also stockholders can now have their dividends 
 paid. There are nine of these country branches, and 
 about one hundred and fifty persons are employed at 
 them. One of the most important services performed 
 through the branch banks is the remittance of the rev- 
 enue, which is paid over by the collectors at the various 
 places of receipt to clerks attending from the branch 
 banks for the purpose. Credit is then immediately given 
 to the exchequer account in London, so that the revenue 
 is made available for the public service with the least 
 possible loss of time. 
 
 Following arc the rules and regulations for the 
 general conduct of the business of the Bank of England: — 
 
 1. All letters should be addressed to the chief 
 cashier. 
 
 2. It is desirable that drafts should be drawn upon 
 cheques furnished by the bank.
 
 DANK OK ENGLAND. 187 
 
 3. Cheques upon city bankers, eastward of King 
 street, Cheapsidc, — 
 
 Paid in by I2 o'clock may be drawn for after i. 
 Do. 2 o'clock " " after 3. 
 
 4. Cheques paid in after 2, and before 3 o'clock, and 
 cheques upon all other London bankers paid in before 12 
 o'clock, may be drawn for on the following morning. 
 
 5. Cheques paid in after 3 o'clock are sent out at 9 
 the following morning, and may be drawn for as soon as 
 received. 
 
 6. Dividend warrants are received at the drawing 
 office until 4 o'clock in the afternoon for all persons hav- 
 ing accounts at the bank. 
 
 7. It is requested that notice be given at the draw- 
 ing office of bills accepted payable at the bank, with the 
 date of their maturity. 
 
 8. Persons keeping a arawing account with the bank 
 (although not having a discount account) ma}' tender bills 
 for discount through the drawing office. Application for 
 discounts or for advances on stock, exchequer bills, &c., 
 must be made before 2 o'clock. 
 
 9. Bills of exchange and notes not paid when due 
 v/ill be noted. 
 
 10. The bank will make purchases or sales of British 
 or foreign securities upon an order in writing addressed to 
 the chief cashier ; and dividends on stock maybe received 
 under powers of attorney granted to the cashiers of the 
 bank. 
 
 11. Exchequer bills, bonds, railway debentures, or 
 any other securities may be deposited, and the interest, 
 when payable, will be received and placed to account.
 
 188 HISTORY or THE 
 
 12. Credits paid into account are received without 
 the bank-book, and are afterwards entered therein without 
 the party claiming them. 
 
 13. Notes of country bankers, payable in London, 
 are sent out the same day for payment if paid in before 
 3 o'clock. 
 
 14. The pass-books should be left at the drawing 
 office, at least once a month, to be written up. 
 
 15. Where post-bills are required, or a payment is to 
 be made to any office of the bank by cheque on the Bank 
 of England, the cheque must be presented at the office 
 upon which it is drawn, and exchanged for an order on 
 the post-bill office, or on the office at which the payment 
 is to be made. 
 
 16. Cash-boxes taken in, contents unknown, for such 
 parties as keep accounts at the bank. 
 
 17. A person having a drawing account may have a 
 discount account ; but no person can have the latter with- 
 out at the same time having the former. When a discount 
 account is opened, the signatures of the parties are 
 entered in a book kept for that purpose, and powers of 
 attorney are granted empowering the persons named in 
 them to act for their principals. Bills of exchange having 
 more than 95 days to run are not eligible for discount. 
 
 A^. />. — All changes in the residence of persons keep- 
 ing cash at the bank are requested to be made known at 
 the drawing office ; and it is particularly requested that 
 no gratuities be offered to the clerks of the banking 
 offices, such gratuities being strictly forbidden. 
 
 The denominations of Bank of England notes are £^, 
 £^0, ^20, £10, £so, £\oo, ;^200, i;300, ;^5oo, ;^ 1,000. No
 
 BANK OF ENGLAND. 1^9 
 
 notes are issued of less than £S. during the years from 
 1797 to i82i,the bank issued notes for £i and i:2, but 
 they ceased issuing them in the latter year, and paid 
 them off in 1822.
 
 CHAPTER XIV. 
 
 BUSINESS OF THE BANKING DEPARTMENT. 
 
 How it is Conducted — Anwiints Cheques may be Drawn 
 for — Opening an Account with the Bank — Business 
 the Bank Transacts for Customers — Bank Deposits — 
 Profits of the Bank — How Derived — Expenses of the 
 Bank — Weekly Bank Statement Given and A nalyzed — 
 Proportion of Assets to Liabilities. 
 
 The business of the Banking Department — which, 
 except as regards the magnitude of its transactions, and 
 the current accounts of other bankers and of the govern- 
 ment, differs but little from that of any other London or 
 American bank — is carried on chiefly in the Private Draw- 
 ing Office, the Public Drawing Office, the Discount Office 
 and the Bill and Post Bill Offices. Besides these offices, 
 there are the Dividend Pay Office, devoted to the cash 
 payment of dividends, and the chief cashier's office, where 
 advances on securities and the various public loans are in- 
 itiated, and to which is attached the private room of the 
 chief cashier, which, for the most part, corresponds with 
 the manager's room in any ordinary bank. 
 
 Formerly, the business transacted at the Bank of 
 ICngland was so much encumbered with forms and condi-
 
 BANK OF ENGr.AND. 191 
 
 tions, that the generality of merchants and ordinary peo- 
 ple rarely thought of employing it to keep their money or 
 make their payments. But in this respect an entire 
 change has been effected. Cheques, the minimum amount 
 of which was formerly i^io, may now be drawn for any 
 amount, great or small ; and all sorts of banking business 
 is conducted with facility and dispatch, and, it may be 
 added, with perfect security. 
 
 The bank opens banking accounts, or, as they are 
 called, " drawing accounts," for the safe custod}', and the 
 receipt and payment of cash, not only with merchants and 
 traders, but with all persons who choose to keep their 
 money at a banker's and draw cheques against it. The 
 bank also takes charge of its customer's bills of exchange, 
 the exchange of exchequer bills, the receipt of dividends, 
 etc., free of charge. Plate chests, and deed and security 
 boxes, may be deposited free of expense, by customers, 
 for safe custody. The bank looks to the average balance 
 of cash on each account to compensate for the trouble and 
 expense for keeping it, and in this respect the require- 
 ments of the bank are certainly not greater than those of 
 ordinary bankers. No particular sum is to be lodged on 
 opening an account, it is only necessary that the party 
 should be known as respectable, and in a condition to 
 require a banking account. But the bank receives and 
 holds sums of money for safe custody for parties who have 
 no current accounts. 
 
 The bank affords every convenience to its customers, 
 and buys or sells or takes care of securities, receives divi- 
 dends of all kinds, and makes payments anywhere re- 
 quired. Although the accounts are not allowed to be
 
 192 HISTORV OF THE 
 
 overdrawn, it is always ready to discount satisfactory bills 
 for its customers, and to make advances on a certain class 
 of securities. In brief, it is what all other banks are, and 
 this part of its business is conducted on substantially the 
 same basis as theirs, with perhaps a little more caution 
 and exclusiveness. 
 
 It is not necessary to enter at length on the subject 
 of the general management of the bank, as the principle 
 on which business is carried on does not differ from any 
 other well-conducted bank. The average amount of de- 
 posits being known, and due regard paid to the temporary 
 or permanent character of the same, the first duty of 
 every banker is to invest, in the best banking securities, 
 all above the amount to which such deposits are likely to 
 be reduced. 
 
 When it is considered that the total deposits in the 
 Bank of England vary from ;^30,ooo,ooo to ^40,000,000, it 
 can readily be imagined that the securities in which these 
 deposits are invested, and the amount kept daily in re- 
 serve, form a very important part of the duty devolving 
 on the directors, and especially on the governors, who 
 have all such accounts and charges under their direct 
 observation. 
 
 The principal item in the private deposits is the total 
 of the balances of the other London bankers. From 1845 
 to 1877, a return was made showing the amount of the 
 banker's balances, but since the latter date this informa- 
 tion has not been given. In 1845 and 1846, the totals of 
 these balances averaged respectively ;^i, 250,000 and 
 ;C 1,400,000, whilst in 1877 they averaged ;^9,500,ooo. It 
 is by means of this office that the London bankers make
 
 BANK OF ENGLAND. 193 
 
 all their settlements between one another. The non- 
 clearini^ bankers pay all charges presented by bankers by 
 means of drafts on a clearing banker or upon the Bank of 
 England. The clearing bankers settle their differences at 
 the clearing house by means of transfers from their own 
 accounts to that of the clearing house, or vice versa, the 
 clearing house having also an account at the bank, and, of 
 course, the transactions therein balance every day, with 
 the exception of the trifling difference running on for 
 errors in the settlement. 
 
 The total of deposits, both public and private, held 
 by the Bank of England at its head office and its branches, 
 on 15th of August, 1888, was ^ ^27,777, 836. This was some- 
 what below the usual figure. In the ten years, 1876- 1885, 
 the deposits averaged more than ^31,000,000. 
 
 As to the profits earned by the Bank of England, 
 there have on many occasions been reports made to par- 
 liament giving particulars of the principal sources of 
 profit, but some of these have been materially reduced 
 during recent years. In the first place, the charge for* 
 managing the National Debt is i^300 per million. The 
 management of the entire public debt of Great Britain is 
 placed in the hands of the Bank of England. Then again 
 the profits on the note issue is considerable. The bank 
 also has the profits to be derived from the use of its depos- 
 its. There is generally an average of about ^20,000,000 
 to be employed in various ways. There is also the profit 
 on the buying and selling of gold in the bullion depart- 
 ment, which is stated as bringing in from ^25,000 to i^45,- 
 000 per annum. There is also the interest receivable on 
 the investment of the large capital, ^14,553,000. Of this.
 
 194 HISTORY OF THE 
 
 ;{;i 1,015,100 is lent to the government, and bears, at pres- 
 ent, 3 per cent, interest. The remainder is invested in 
 miscellaneous British securities. There is also a profit 
 derived from the agencies. The estimated net profits of 
 the bank are about X" 1,450,000 per annum. 
 
 Although the profits are large, there are deductions 
 to be made. The bank has to pay to the government 
 i;6o,ooo per annum for the stamp duty on its notes, and a 
 fixed sum of i;i20,ooo out of the profits, besides the whole 
 profit on the ;{;2,200,ooo extra issue against securities. In 
 1886, the bank paid to the government under these three 
 heads £2iT„8gS, being more than ;{;20,ooo over the amount 
 received for the management of the national debt. No 
 account is ever rendered of the profits or expenses of the 
 bank for public perusal. 
 
 The " Banking Department" of the Bank of England 
 is the separation of the ordinary banking business from 
 the business of financial agency and issuing notes. 
 
 The Bank Act of 1844 does not touch the manage- 
 ment of the Banking Department in any way beyond 
 requiring that a weekly statement of its assets and liabil- 
 ities shall be published. A specimen statement is given 
 following this paragraph. This statement — which forms 
 part of the "Bank Return"— may be thus analyzed. On one 
 side are the liabilities, divided into the liability towards 
 the proprietors of the bank, as shown by the amounts of 
 "Proprietors' Capital" and "Rest" (which latter is practi- 
 cally an addition to the capital); the liability to the 
 government, as shown by the amount of " Public Deposits," 
 which are the balances of different government accounts; 
 tlic liability to the customers, as shown by the amount of
 
 BANK OF EN'Or^AND. 195 
 
 the "Other Deposits," which are the sum of the balances 
 of the current or "drawing" accounts and the liability to 
 the holders of the bank's acceptances, as shown by the 
 amount of "Seven-day and other Bills" in circulation. On 
 the other side of the statement are the assets by which 
 these liabilities are represented, divided into " Govern- 
 ment Securities," which show the amount of the banking 
 capital invested in government securities; the "Other 
 Securities," which show the amount of other investments 
 made by the bank; and, separately, the " notes" and "gold 
 and silver coin," which show the amount of cash in hand 
 for the current purposes of the Banking Department. 
 This sum of notes and gold and silver coin forms, so to 
 speak, the cash assets of the bank, and the proportion 
 which it bears to the current liabilities disclosed by the 
 public and other deposits and seven-day bills is called the 
 proportion of reserve to liabilities, and is always a matter 
 of great interest, and often of great anxiety, to London 
 on Thursdays, the day on which the "Bank Return" is 
 issued. 
 
 The question of the proportion which these cash 
 assets should bear to liabilities is one of extreme import- 
 ance to a prudent banker. It is generally considered that 
 it should be about one-third. The publication of the 
 weekly bank return is useful and important to commerce, 
 banking and finance. The Bank of England, through 
 its banking department, undertakes duties merely to- 
 wards its own customers and the government. Its 
 banking business is conducted for the most part (in theory, 
 at all events,) on the same lines as any other banking 
 institution.
 
 jijO HISTORY OF Tlir. BANK OF ENGLAND. 
 
 HANK OF ENGLAND STATEMENT. 
 Following is a specimen of the weekly bank state- 
 ment issued in conformity with the Act of Parliament of 
 1S44, viz. : — 
 
 .•\n account pursuant to the Act 7 and 8 Vict. cap. 3'2, for the week ending on 
 Wednesday, August 22, 1888. 
 
 Issue Department. 
 
 Notes Issued jC3o,lU,220 
 
 /:r^ 164,220 
 
 Dated the 21st day of August, 1888. 
 
 Government Debt ;^11, 015,100 
 
 Other Securities T), 184,900 
 
 Gold Coin and Bullion. 18,964,220 
 Silver Bullion 
 
 ;^35, 164,220 
 
 F. May, Chief Cashier. 
 
 Banking Department. 
 
 Proprietors' Capital. . . . ;^ 14, 5.53, 000 
 
 Rest 3,390,734 
 
 Public Deposits (includ | 
 
 ing Exchequer, Sav- I 
 
 ings Banks, Conimiss- [ 3,143,939 
 
 ioners of Nat'l. Debt, | 
 
 & Dividend Accounts) J 
 
 Other Deposits 24,118,044 
 
 7 Day and other Bills. . 172,358 
 
 ;^45,378,075 
 
 Dated the 21st day of August, 1888. 
 
 Government Securities. _;^15, 017,396 
 
 Other Securities 18,433,287 
 
 Notes 10,587,105 
 
 Gold aud Silver Coin... 1,340,287 
 
 ;^45,378,075 
 
 F. May, Chief Cashier. 
 
 The prominent feature in the re.turn is the separation 
 of the business of the bank into the two distinct depart- 
 ments, dealing respectively with Issue and Banking.
 
 CHAPTER XV. 
 
 DISCOUNTS, DIVIDENDS, LOANS AND RULES. 
 
 Duties of the Discount Office — Precaution Before Dis- 
 counting — Powers of the Directors — Who Are 
 Allowed Discount Accounts — Checking a Speculative 
 Tendency — Inconsistency of Long Date Discounts — 
 Opinion of an English Writer — Real and Fictitious 
 Transactions — Rules to Observe — Who Controls the 
 Rate of Discount? — False Notions Regarding the 
 Power of the Bank of England — Rate of Discount 
 from I7P4 to Date — Dividends on Bank of England 
 Stock from 16^4. to 1888 — The Price of Bank Stock 
 and How Boiizht and Sold. 
 
 The Discount Office is charged with the reception of 
 all bills offered for discount by parties who have opened 
 discount accounts with the bank. These bills are sub- 
 mitted to a committee of directors (sitting daily for the 
 purpose) who decide upon the amount of accommodation 
 to be granted and the rate of discount to be charged. 
 The net proceeds of the bills discounted are then passed 
 to the credit of the customer's account, while the bills 
 themselves are entrusted to the care of the Bill Office, 
 which occupies itself with the duty of sorting and arrang-
 
 198 IlISTORV OF THE 
 
 ing them so that they may be duly presented for payment 
 at maturity. 
 
 The bank employs a certain amount of its usual de- 
 posits in discounting, as it is considered one of the very 
 best modes in which money payable on demand can be 
 safely used. If the sum so employed were generally kept 
 up to about the same proportion of the deposits, say one- 
 third or one-half, the utmost limit of the date at which 
 bills become due, commonly called the cckcance, being 
 ninety days, and the average about sixty-eight days, the 
 amount returning to the bank for bills daily falling due 
 would be about the same ; and thus a very satisfactory 
 control over these resources of the bank would be main- 
 tained. But this state of* things, owing to the ordinary 
 habits of London, and the great dependence placed on the 
 Bank of England to supply additional funds at periods 
 when money or capital has become unduly engaged, it is 
 extremely difficult to maintain ; and, consequently, in the 
 management of this description of security the greatest 
 care is required. It has been held by some authorities 
 that the power of raising the rate of interest to an un- 
 limited extent is sufficient to protect the Bank of Eng- 
 land against an undue amount of pressure ;, but, prac- 
 tically, this has not been exercised with much severity. 
 It has very frequently occurred that, after a long succes- 
 sion of very low rates of interest, indicating a great 
 abundance of unemployed capital, an extent of business 
 has been undertaken far beyond what a judicious regard 
 to safety should have induced ; and if, when this state of 
 things is in existence, any sudden apprehension of an ap- 
 proaching scarcity of capital should occur, no rise in the
 
 BANK OF KNGLAND. 199 
 
 rate of discount at the bank will immediately check the 
 demand ; on the contrary, for a certain time the very op- 
 posite effect may be produced, and it is, therefore, very 
 necessary for the Bank of England to have other sources 
 on which it may depend for a supply of money on such 
 occasions. 
 
 But the prevalent desire to extend discount opera- 
 tions, especially by those banking establishments who 
 make their money principally by the difference between 
 the interest allowed on deposits, and that which they can 
 make by employment of the same, renders it quite im- 
 possible for the bank, however prudently its own business 
 may have been managed, to make others, with whose con- 
 duct it has nothing whatever to do, equally circumspect. 
 At particular periods, for many years past, it has invari- 
 ably been found that the Bank of England has been 
 looked to for an unusual supply of money, at the very 
 time when other banking establishments, and especially 
 the bill brokers of London, have had less available money 
 at their command than usual. 
 
 Any person who is carrying on a respectable business 
 in London can have a discount account at the Bank of 
 England, if introduced by any director to whom he may 
 be known, or by introduction to the governors with such 
 references as they maj/ think fit to require; and when 
 once introduced and a discount account opened, he may 
 send in bills daily for discount, the quality of the bills, and 
 the amount to be granted, being subject to the approval 
 of the directors in daily attendance. 
 
 The Bank of England rarely discounts bills that have 
 more than two, or at most three months to run. The dis-
 
 200 HISTORY OF THE 
 
 counting of bills at long dates is a powerful stimulus to 
 unsafe speculation. When individuals obtain loans which 
 they are not to be called upon to pay for six, twelve, or, 
 perhaps, eighteen months, they are tempted to adventure 
 in speculations which arc not expected to be wound up 
 till some proportionately distant period ; and as these not 
 unfrcquently fail, the consequence is that, when the bills 
 become due, there is commonly little or no provision 
 made for their payment. In such cases, the discounters, 
 to avert an imminent loss, sometimes consent to renew 
 the bills. But, while a proceeding of this sort is rarely 
 productive of ultimate advantage to either party, the fact 
 of its having taken place makes other adventurers reckon 
 that, in the event of their speculations proving to be less 
 successful than they anticipated, their bills will be treated 
 in the same manner, and thus aggravates and extends the 
 evil. 
 
 In other respects, too, the discounting of bills at long 
 dates, or their renewal, or the making of permanent loans, 
 is altogether inconsistent with sound banking principles, 
 for it prevents the bankers from having that command 
 over their resources which is advantageous at all times, 
 and indispensable in periods of difficulty or distress. 
 
 In the discounting of bills, a great deal of stress is 
 usually laid, or pretended to be laid, on the distinction 
 between those that arise out of real transactions and those 
 that are fictitious or that are intended for accommodation 
 purposes. The former are said to be legitimate, while the 
 latter arc stigmatized as illegitimate. Mr. Thornton, in 
 his work on the Paper-Credit of Great Britain, has shown 
 that the difference is neither so well marked nor so wide
 
 BANK OF ENGLAND. 201 
 
 as many suppose. A notion seems to be generally enter- 
 tained that all real bills are drawn against produce of one 
 sort or other, which (or its value) is supposed to form a 
 fund for their payment. Such, however, is not always, 
 nor even most commonly, the case. 
 
 A, for example, sells to B certain produce, for which 
 he draws a bill at sixty days' date. But prices are rising, 
 trade is brisk, or a spirit of speculation is afloat, and, in a 
 week or two (sometimes much less), B sells the produce 
 at an advance to C, who thereafter sells it to D, and so on. 
 Hence it may, and, in fact, frequently does happen, that 
 bills amounting to four, five, or even ten times the value of 
 a quantity of merchandise, have grown out of its success- 
 ive sales, before the first of the series has become due. 
 And not only this, but bills are themselves very frequently 
 rediscounted ; and in this case the credit of the last 
 indorser is generally the only thing looked to ; and there 
 is not, perhaps, one case in ten in which any inquiries are 
 made in regard to the origin and history of the bills, 
 though they are often of the most questionable descrip- 
 tion. 
 
 On the whole, therefore, it would seem that the real 
 or presumed solvency of the parties signing a bill, and 
 responsible for its payment, is the only safe criterion by 
 which to judge whether it should or should not be dis- 
 counted. But the fact of a merchant or other trader 
 offering accommodation bills for discount ought unques- 
 tionably to excite a suspicion that he is trading beyond 
 his capital. 
 
 A writer in an English magazine says: — 
 
 " Besides bills avowedly intended for accommodation
 
 202 HISTIIRY OF THE 
 
 purposes, another and a different variety of such bills is 
 drawn by parties at a distance from each other, often men 
 of straw, and made to appear as if they were bottomed on 
 real transactions. Bills of this sort are, it is greatly to be 
 regretted, always current, and often to a large extent. Of 
 course no person of respectability can be knowingly con- 
 nected with such bills, which are almost always put in 
 motion either to bolster up some bankrupt concern, or to 
 cheat and defraud the public. But despite the mischief of 
 which they are productive, it appears to be pretty gen- 
 erally supposed that the currency of these bills is an evil 
 which cannot be prevented. There can, however, be no 
 real doubt that it may, at all events, be very greatly 
 diminished ; and this desirable result would be effected 
 were it enacted that all bills shall henceforth bear upon 
 their face what they really are ; that those that are 
 intended for accommodation purposes shall have at their 
 head the words ''Accoinniodation bill;" and that those 
 only shall bear to be for " value received " that have grown 
 out of /^iv/rt^c/<? transfers of property. An enactment of 
 this sort could not be felt as a grievance by anyone unless 
 he had a fraudulent purpose in view. And were the 
 impressing of a false character on a bill made a criminal 
 offence, punishable by several years' imprisonment, there 
 is every probability that a formidable check would be 
 given to the issue of spurious bills, and to the manifold 
 abuses to which the practice gives rise." 
 
 Bill discounters, who have got fictitious paper on 
 their hands, and attempt to get rid of it by concealing its 
 character or representing it in a favorable light, make 
 themselves parties to the fraud. Such conduct is so very
 
 liANK OK KNGI.AN'I). 203 
 
 flagitious, that when it can be fairly brought home to the 
 parties, it should subject them to the severest penalties. 
 
 The Bank of England is so large a holder of money 
 that to some extent it controls the rate of discount ; the 
 discount it demands determines all other banks in fixing 
 their rate. Many persons believe, the late Walter Bage- 
 hot has written, that the Bank of England has some pe- 
 culiar power of fixing the value of money. 
 
 Mr. Bagehot further says : — " They see that the bank 
 varies its minimum rate of discount from time to time, 
 and that, more or less, all other banks follow its lead, and 
 charge as much as it charges, and they are puzzled why 
 this should be. The explanation is simple. The value 
 of money is settled by the law of supply and demand, as 
 that of all other commodities is. The Bank of England 
 used to be the predominant, and is still a most important, 
 dealer in money. It states the lowest price at which it 
 will dispose of its stock of money, and its quotation en- 
 ables other dealers to obtain that price, or something 
 near it. The reason is obvious. At all ordinary moments 
 there is not enough money in the market unless some is 
 taken from the Bank of England. As soon as the bank 
 rate of interest is fixed, a great many persons who have 
 bills to discount try to see how much cheaper than at that 
 rate they can get them done for. They seldom can get 
 them done for much less than the bank would charge, for if 
 they did every one would leave the bank, and the outer 
 market would have more bills than it could bear. Should 
 the bank see this beginning, it would lower its rate, so as 
 to secure a reasonable portion of the business to itself" 
 
 The notion that the Bank of Ensjland has absolute
 
 201 HISTORY OF THE 
 
 control over the money market, and can fix the rate of dis- 
 count as it likes, has survived, continues Mr. Bagehot, 
 from the days before 1844, when it could issue as many 
 notes as it liked, and even then the notion was a mistake. 
 
 In order to understand the action of the Bank of Eng- 
 land correctly, it must always be borne in mind that, since 
 the Act of 1844, the directors have had no control over 
 that part of the currency which consists of bank notes ; 
 that is, they have had nothing whatever to do with the 
 amount at any time in circulation in the country. The 
 only function of the bank in this respect is to give notes 
 for sovereigns, when the latter exceed five in number, or 
 for bar gold, and to give or return sovereigns for every 
 bank note presented for payment. 
 
 The rates of discount charged by the bank since its 
 establishment are as follows : 
 
 Per cent. 
 
 From Aug. 8, 1694, to Aug. 30, 1694, on foreign bills 6 
 
 Aug. 30, 1694, to Jan. 16, 1695, on foreign bills 4^ 
 
 Oct. 24, 1694, to Jan. 16, 1695, on inland bills 6 
 
 Jan. 16, 1695, to May 19, 1695, on foreign bills 6 
 Jan. 16, 1695, to May 19, 1695, to customers of 
 
 tlie bank 3 
 
 Jan. 16, 1695, to July 26, 1716, on inland bills. 4^ 
 
 May 19, 1695, to Feb. 28, 1704, on foreign bills 4 
 May 19, 1695, to Feb. 28, 1704, on foreign bills 
 
 not payable at the bank 5 
 
 I'eb. 28, 1704, to June 22, 17 10, on foreign bills 5 
 June 22, 1710, to July 26, 17 16, on foreign and 
 
 inland bills 4 
 
 July 26, 1716, to April 30, 1719, on bills and 
 
 notes 5
 
 BANK OF ENGLAND, 205 
 
 Oct. 27, 1720, to Aug. 23, 1722, on bills 4 
 
 Aug. 23, 1722, to Oct. 18. 1742, on inland bills 5 
 
 Aug. 23, 1722, to Oct. 18, 1742, on foreign bills 4 
 
 Oct. 18, 1742, to Dec. 12, 1744, on foreign bills 5 
 Dec. 12, 1744, to May i, 1746, on foreign bills 
 
 ( 1 5 days to run) 4 
 
 Dec. 12, 1744, to May i, 1746, on inland bills. . 5 
 May I, 1746, to June 20, 1822, on bills and 
 
 notes (95 days to run) 4 
 
 June 20, 1822, to Dec. 13, 1825, on bills and 
 
 notes (95 days to run) 5 
 
 Dec. 13, 1825, to July 5, 1827, on bills and 
 
 notes (95 days to run) 5 
 
 July 5, 1827, to July 21, 1836, on bills and 
 
 notes (95 days to run) 4 
 
 July 21, 1836, to Sept. I, 1836, on bills and 
 
 notes (95 days to run) 4^ 
 
 Feb. 13, 1838, to May 16, 1839, on bills and 
 
 notes (95 days to run) 4 
 
 May 16, 1839, to June 20, 1839, on bill and 
 
 notes (95 days to run) 5 
 
 Aug. I, 1839, to Jan. 23, 1840, on bills and 
 
 notes (95 days to run) 6 
 
 Jan. 23, 1840, to Oct. 15, 1840, on 65-day bills. 5 
 
 Oct. 15, 1840, to June 3, 1841, on 95-day bills. 5 
 
 June 3, 1841, to April 7, 1842, on 95-day bills. 5 
 
 April 7, 1842, to Sept. 5, 1844, on 95-day bills. 4 
 
 Sept. 5, 1844, to March 13, 1845, on bills 2^- 
 
 Sept. 5, 1844, to March 13, 1845, on notes 3 
 
 Since 1845, the changes have been more numerous. In 
 
 1847, there were 10 changes; in 1861, 13; 1864, 14;
 
 206 
 
 HISTORY OF THE T.AXK OF ENGLAND. 
 
 1873,14; 1879, 13; 1884,10; and so on, with hun- 
 dreds of fluctuations to date. We give above the rate for 
 many different years, which is enough to show the fre- 
 quency of changes and uncertainty in the rates of dis- 
 counts. 
 
 The dividends on bank stock of the Bank of England 
 from the estabhshment, in 1694, to the present time, 1888, 
 have been as follows: — 
 
 Years. 
 694. 
 697. 
 708. 
 729. 
 730. 
 
 731- 
 
 721. 
 728. 
 
 747- 
 753- 
 764. 
 
 767- 
 78.. 
 7S8. 
 807. 
 823. 
 
 839- 
 852. 
 
 853- 
 856. 
 
 859- . . ^ 
 
 863. 84 " 1888. c>\ " Est. 
 
 864. 
 
 The stock is bought and sold upon the market in the 
 same manner as other stocks are dealt in. For many 
 years past the dividend paid has averaged about 9 per 
 cent., and the price of the stock has generally been 
 quoted about 300. Of late it has participated in the gen- 
 eral rise in price of first-class securities, and is now 
 quoted at about 325. 
 
 Dividend. 
 
 8 per cent. 
 
 9 " 
 
 j Varied from 9 to 
 
 ( 5^ per cent. 
 
 6 
 
 5i 
 6 
 
 5i 
 
 5 
 
 4* 
 
 5 
 
 5i 
 
 6 
 
 7 
 
 10 
 
 8 
 
 7 
 
 7\ 
 
 8 
 
 9\ 
 8^ 
 8f 
 9f 
 
 Years. 
 
 
 Dividend. 
 
 1865. 
 
 nil 
 
 5er cent. 
 
 1866. 
 
 lOi 
 
 " 
 
 1867. 
 
 10 
 
 *' 
 
 IS68. 
 
 8 
 
 it 
 
 1869. 
 
 8f 
 
 t( 
 
 1872. 
 
 9^ 
 
 (t 
 
 1873- 
 
 10 
 
 (( 
 
 1874. 
 
 10 
 
 «( 
 
 1875- 
 
 9 
 
 u 
 
 1876. 
 
 9 
 
 it 
 
 1877. 
 
 9h 
 
 i< 
 
 1878. 
 
 9\ 
 
 i( 
 
 1879. 
 
 \oh 
 
 i( 
 
 1880. 
 
 9\ 
 
 It 
 
 I881. 
 
 9\ 
 
 (( 
 
 1882. 
 
 \6h 
 
 it 
 
 1883. 
 
 io\ 
 
 it 
 
 1884. 
 
 9f 
 
 tt 
 
 1885. 
 
 10 
 
 it 
 
 1886. 
 
 9\ 
 
 ti 
 
 1887. 
 
 ^ 
 
 ii 
 
 1888. 
 
 9h 
 
 "
 
 CHAPTER XVI. 
 
 ENGLISH AND AMERICAN CLEARING HOUSES. 
 
 Hoiv they Originated in Londo^u — Primitive Manner of 
 Conducting Business — How Transacted To-day and 
 Amount of Business Annually Done — A Clearing 
 House for Country Bankers — American Clearing 
 Houses — Detailed Statement of the Routine Business 
 in the New York Clearing House — Scene i>i the Clear- 
 ing Room During Business Hours — Specimen Credit 
 Ticket — Hozv the Banks are Represented and Settle- 
 ments A re Made — The Settling Clerk and the Deliv- 
 ery Clerk — Duties of the Proof Clerk — Specimen 
 Sheet of Clearing House Proof — Penalty for Making 
 Errors — Specimen Sheet of Settling Clerk's State- 
 ment. 
 
 Not many years after the London bankers had 
 ceased to issue notes, the inconvenience of making all 
 payments in Bank of England notes and gold had become 
 so great, that some change was indispensably necessary, 
 when the plan of adjusting each other's daily payments by 
 an interchange of liabilities was adopted, as the best mode 
 of economizing the use of money.
 
 203 HIsrORY OF THE 
 
 At first the system adopted was of the most primitive 
 kind, and certainly not the safest. The clerks of the vari- 
 ous banking houses used to perform the operation ol 
 exchanges at the corners of streets and on the top of a 
 post ; then they met by appointment at a public house ; 
 but, from the insecurity of these arrangements it was at 
 last thought best that the principal city bankers should 
 rent a house where all the banks should meet. This house 
 was named the clearing house. 
 
 The clearing house in London was established over a 
 century ago. It was first used as a place where the clerks 
 of the bankers in the city of London could assemble daily 
 to exchange with one another the cheques drawn upon 
 and bills payable at their respective houses. The clear- 
 ing house is an institution founded, not merely upon the 
 idea of saving time and trouble in the use of the precious 
 metals, but also of circulating notes. All the banks and 
 bankers associated as members of a clearing house are for 
 this purpose, as it were, but one individual. The clearing 
 house of London, the first of its kind in the history of 
 finance, originated among the bankers of that city, whose 
 transactions in the cheques, bills, and drafts drawn upon 
 each other became so large as to call for the daily and 
 even hourly use of vast sums in bank notes by all of them. 
 Appreciating how readily the debits and credits respect- 
 ively due or held by them might be set off, the one against 
 the other, they formed the clearing house, where up to 4 
 o'clock each day all drafts, bills, etc., drawn upon each 
 individual member were taken. The system of the Lon- 
 don clearing house has recently been much extended and 
 improved, and all balances are settled by cheques drawn
 
 BANK OF ENGLAND. 209 
 
 upon the Bank of England— no bank notes being required 
 at all. 
 
 Before the clearing house existed, each banker had to 
 send a clerk to the places of business of all the other 
 bankers in London to collect the sums payable to them in 
 respect of cheques and bills; and it is obvious that much 
 time was consumed by this process, which involved also 
 the use of an unnecessary quantity of money and corres- 
 ponding risks of safe carriage. In 1775, the common 
 centre of exchange was agreed upon. Its use was con- 
 fined to the bankers,— at that time and long afterwards 
 exclusively private bankers, — doing business within the 
 city, and the bankers in the west end of the metropolis 
 used some one or other of the city banks as their agent in 
 clearing, a practice which still continues. When the joint- 
 stock banks were first established, the jealousy of the 
 existing banks was powerful enough to exclude them 
 altogether from the use of the clearing house ; and some 
 years elapsed before this feeling was removed so as to 
 allow them to be admitted. 
 
 At first the clearing house was simply a place of 
 meeting, but it came to be perceived that the sorting and 
 distributing of cheques, bills, &c., could be more expediti- 
 ously conducted by the appointment of two or three 
 common clerks to whom each banker's clerk could give 
 all the instruments of exchange he wished to collect, and 
 from whom he could receive all those payable at his own 
 house. The payment of the balance settled the transac- 
 tion, and an analysis of the statistics of the clearinghouse, 
 as far back as 1856, shows that the amount of cash that 
 passed was often less than 4 per cent, of the total sums
 
 210 HISTORY OF THE 
 
 cleared. Latterly, however, the arrangements of the 
 clearing house have been further perfected, so that neither 
 notes nor coin arc now required. The clearing house, as 
 well as each banker using it, has an account at the Bank 
 of England ; and the balances due at the close of each 
 day's transactions are settled by transfers from one 
 account to another at the bank. 
 
 The use of the clearing house was still further 
 extended in 1858, so as to include the settlement of 
 exchanges between the country bankers of England. 
 Before that time each country banker receiving cheques 
 on other country bankers sent them to those other bank- 
 ers by post (supposing they were not carrying on business 
 in the same place), and requested that the amount should 
 be paid by the London agent of the banker on whom the 
 cheques were drawn to the London agent remitting them. 
 Cheques were thus collected by correspondence, and each 
 remittance involved a separate payment in London. In 
 1858, it was proposed to set up a country clearing house 
 in London ; but it was suggested by Sir John Lubbock 
 that the existing establishment could accompHsh what 
 was desired, and this was eventually done. A country 
 banker now sends cheques on other country banks to his 
 London correspondent, who exchanges them at the clear- 
 ing house with the correspondents of the bankers on 
 whom they are drawn. It will be easily understood that 
 an extraordinary economy in the use of coin has resulted 
 from these arrangements. Statistics have been given, 
 .showing that out of the sum of a million dollars paid into 
 a certain bank, only ^^4,500 was in bank-notes, and £6,210 
 of coin. In 1868, the weekly average clearance of the 
 London clearing house was about £6$, 197,0"/^.
 
 BANK OF ENGLAND. 211 
 
 In 1873, the average weekly clearance was £i 16,254,- 
 717. In 18S7, the average weekly clearance was £^7Sr 
 758,000. Total clearance of the London clearing house 
 for 1887 was i;6,o77,097,ooo. 
 
 The American clearing house is founded upon the 
 English system in general, although the detail work 
 is somewhat different. 
 
 The New York clearing house is a building, or 
 rather, nine series of connected rooms in a building, in 
 which each of a certain number of banks daily delivers to 
 every other bank, sustaining associated relations with it, 
 all the bills, drafts, and cheques drawn upon or payable 
 at that bank in the course of the preceding day. It also 
 receives from every other bank all the drafts and cheques 
 drawn upon it, together with all the bills payable by or at 
 it. Sometirnes the difference between the sums total is 
 in its favor, in which case it receives through its messen- 
 ger the balance due. At other times, the difference is 
 against it, and must be promptly liquidated by cash or its 
 authorized representatives. This entire process is desig- 
 nated by the expressive term clearing, because it clears 
 off all pecuniary obligations due from, and claims of, all 
 connected fiscal institutions upon each other. 
 
 We are indebted to '* The Office " for the following 
 description of the New York clearing house : The 
 scene in the clearing room during business hours is a busy 
 and pleasing one. The arrangement of the working room 
 consists in three rows of double desks, each desk num- 
 bered, and bearing on a silver plate in front the name of 
 the bank to whose use it is appropriated. Elegant, pol- 
 ished, furnished with seats, drawers, and other conveni-
 
 212 HISTORV OF THE 
 
 ences for the clerks, these desks arc separated from each 
 other by wire guards, and stretch from one end of the 
 room to the other. Two high wire railings, each with a 
 row of benches, and providing for transit by opening in 
 the middle, separate each line of desks from its neighbor. 
 The design of this arrangement is obvious enough, as 
 the clerks from member banks pour in. Young, middle- 
 aged, and old, sprightly and sedate, dudes and doctors, all 
 on serious thought intent. Their business demands alert- 
 ness, care, efficiency. Some are settling, others delivery 
 clerks. 
 
 Upon entering the room, every settling clerk lays 
 down upon the table a credit ticket, of which a sample is 
 given herewith : — 
 
 No. 27. NEW YORK CLEARING HOUSE, 
 
 November 1st, 1888. 
 
 Debit , National Bank, Amount received $957,853.13 
 
 Credit " brought $2,001,319.27 
 
 $ Debit balance due Clearing-house 
 
 Credit balance due National Bank, $1,043,466.14 
 
 Thomas Rogers, 
 
 Settling Clerk. 
 
 SPECIMEN CREDIT TICKET. 
 
 This credit ticket shows the amount of exchanges sent 
 by his employers. The settling clerk then seats himself at 
 the compartment bearing the number and name of his 
 bank, while the delivery clerk of the same bank assumes a 
 standing position opposite to him. 
 
 Precisely at lo A. M., two taps of a gong announce 
 everything ready for business. Another tap and the
 
 HANK OF ENGLAND. 213 
 
 financial procession begins its march. Delivery clerks, 
 exchanges arranged in box or on arm, each deposits a 
 brown manila envelope containing checks, drafts and 
 bills, and with ticket memorandum of amount attached, 
 on the counter of every debtor institution in consecutive 
 order, taking written acknowledgement of receipt on his 
 "Delivery Clerk's Statement," and thus securing vouchers 
 for the due distribution of his exchanges, until the round 
 is completed, and lie finds himself exhausted of packages 
 and standing at the point of departure. 
 
 In the brief space of ten minutes no less than 4,032 
 have been effected and receipts therefor given by the 
 settling clerks, who enter upon their settling sheets the 
 amount of exchanges brought by each associated bank 
 opposite its printed name. The Strasburg clock is not 
 more measured or precise in its movements, nor more 
 unfailing in its accuracy, than the living automaton, the 
 New York clearing house. In fifteen minutes all, or 
 nearly all, the delivery clerks have disappeared. 
 
 After the delivery clerk has returned to his bank, the 
 settling clerk remains to make proof. Adding up the 
 several items of receipt from the creditor banks, he in- 
 scribes the aggregate, with other particulars, upon a debit 
 ticket, which is collected by a junior clerk. 
 
 A proof clerk revises everything. He occupies a 
 platform with the manager and the assistant manager. 
 While the proof clerk is revising the reports, the settling 
 clerk is busy on his own private sheet. Exchanges re- 
 ceived here have been sent to the bank, but the tickets 
 that accompanied them on presentation at the clearing 
 house have been retained at his desk. By means of these
 
 214 HISIDRV OF Till", 
 
 he corrects original entries, if so be that he has fallen 
 into error at the time of reception. In this way the proof 
 of certainty is made manifest. Absolute accuracy is 
 rarely achieved on the first trial. Life is too full of dis- 
 turbing influences to quietly leave every scrivener in full 
 control of his powers. Thought may dart off to one or 
 more of a hundred objects, instead of fixing itself exclu- 
 sively on the settling clerk's statement. Five errors are 
 made to-day. Sometimes the number rises to twenty-five. 
 Shortly after 10.30 the manager announces a collective 
 difference of $16,068.98. In three minutes more the re- 
 ceipt of correction tickets from fallible accountants re- 
 duces it to $70 ; in six minutes to $1.02, and in seven to 
 $1. The discovery of that insidious dollar now engages 
 the anxious energies of all the settling clerks and of the 
 manager and his staff. In such a hunt no occult gifts of 
 mind-reading are of any avail. The game eludes detec- 
 tion. " Exchange to the right for examination of foot- 
 ings !" is the next order, instantly followed by transfer of 
 each settling sheet to the dexter neighbor, who runs up 
 the arithmetical columns. But the cunning dollar is not 
 unearthed. "Bank of New York and Ninth National 
 lead off for examination. Both amounts with care !" is 
 the following command from the chief. Another orderly 
 evolution ensues, in which debits and credits are called 
 off, but without the desired result. Fresh tactics are 
 adopted, and the caller in turn plays the part of listener. 
 Still no discovery. At 11.05, "Change sheets to the 
 left 1" is the curt instruction, and sheets are changed to 
 the left. "Ah! there it is. An error in both columns." 
 The fugitive is captured, penned up in correction ticket,
 
 nANK OK F.NGLAND. 
 
 215 
 
 conveyed in triumph to the proof clerk, deposited in the 
 correction column, and proof is once more proclaimed. 
 
 No, 
 
 Due Clcari 
 House. 
 
 '*> Banks. 
 
 Rank of N. Y. Nat'l B'k'g Ass'n. $378,681.89 
 
 Maiiliattaii Company ' 
 
 Merchants' National I!ank . . , 
 Mechanics' National Bank. . 
 
 Union National Bank 
 
 Bank of America 
 
 Bhosnix National 
 
 Kational City Bank 
 
 Seaboard Bank 
 
 Sixth National Bank 
 
 Western National Bank 
 
 1 '20, 38 1.90 
 
 2'.'6.506.0(j 
 4L', 30 1.04 
 
 Numbers, names, and amount; 
 from 8 to 85 omitted. 
 
 S4,301,201.7'; 
 
 ,874.48 
 ,.330.05 
 ,144.40 
 40,5.14 
 057.77 
 414.C: 
 227 0(3 
 227. W) 
 922.90 
 321.40 
 
 Banks. Cr. 
 
 ?9, 
 
 ,857, 
 )35, 
 771, 
 102. 
 140, 
 31)2, 
 9:)4, 
 0-30, 
 599, 
 71, 
 
 ,192.59 
 548 10 
 099.57 
 470.73 
 549.71 
 131.81 
 594.. 57 
 741 83 
 021.80 
 731.43 
 
 $124,993,869.38 $184,993,869.38 
 
 Due Banks. No. 
 
 $41,218.11 
 
 47.. 555. 08 
 
 9, 055. .59 
 
 37,491.94 
 
 202,307.51 
 
 16,410.03 
 
 $4,301,201.77 
 
 SPECIMEN CLEARING HOUSE PROOF. 
 
 In an hour and a half — ordinarily in three-quarters of 
 an hour' — from the time of beginning-, unbroken silence 
 reigns in the deserted clearing room. What has been 
 faultily done therein is soon ascertained at the fiscal 
 institution, whose representative has subjected its treasury 
 to an exaction of six dollars by the commission of a double 
 error. Only forty-five minutes are allowed for effecting 
 proof. Errors undetected at 11.15 are mulcted by a double 
 fine, at 12 M. by one quadrupled. For all errors on the 
 credit side of the settling-clerk's statement, whether of 
 entry or footing, of the amounts brought, and for all dis- 
 crepancies between credit-entries, check-tickets, and 
 exchange-slips, a fine of $3 each is imposed ; for every 
 error in making entries of the amounts received, $2 ; for 
 errors in the tickets reported to the clearing house, and 
 causing differences between the balances and the aggre- 
 gate, $2 each ; errors in footing receipts, $1 (rarely 
 inflicted) ; disorderly conduct or non-compliance with
 
 216 
 
 HISTORY OF THE BANK OF ENGLAND. 
 
 managerial mandates, each offence, $2 ; failure to be punc- 
 tually on hand with statements and tickets complete, at 
 the morning exchanges, $2 ; neglect of debtor banks to 
 pay their balances before 1.30 P. M., $3 ; and for each mis- 
 take in the delivery or receipt of exchanges, $1. Part of 
 the painfully interesting correspondence of the member 
 banks is the manager's monthly report of its fines. 
 
 Park National Bank. 
 Settling Clerk's Statement. 
 
 Nov. 1, 1888. 
 
 No. 
 
 lUnks. 
 
 First Debit. 
 
 Additions. 
 
 Total Debit. 
 
 Banks Cr. 
 
 No. 
 
 1 
 
 2 
 
 Sixty-three 
 
 other bank 
 
 accounts 
 
 omitted. 
 
 Bank of New York 
 NatM. Banking Ass'n. 
 Manhattan Co 
 
 $1,220,58989 
 556,78100 
 
 $100,087 22 
 
 $1,320.87717 
 556,78100 
 
 $1,296,732 11 
 693,829 25 
 
 1 
 
 
 
 Footings 
 
 86,.3.37,229 10 
 Credit B 
 
 $125,33.3 25 
 alance 
 
 $6,462,562.35 
 
 221,152 00 
 
 $6,241,410 35 
 
 $6,241,410 35 
 
 
 SPECIMEN SETTLING CLERKS' STATEMENT.
 
 CHAPTER XVIL 
 
 BANK OF ENGLAND AND AMERICAN BANK NOTES. 
 
 Description of a Bank of England Note — Hozv Made — 
 Peculiarity of Design — Number of Notes Paid Out 
 Daily and Number Cancelled — Hoiv Burned and De- 
 stroyed — TJie Accountant'' s Library — Why Notes are 
 Not Reissued — The Bank's Printing Office — Durabil- 
 ity of the Notes — Cutting Notes in Two Pieces Sent 
 Through the LI ails — Curiosities in the Bank Album 
 — Barlozvs Remarks on Bank of England Notes — 
 Antiquity of Bank Notes — United States Currency 
 — How it is Printed, Worn Out and Destroyed — 
 Workings of the National Bank Redemption Agency. 
 
 Notwithstanding Bank of England notes are to be 
 found in all parts of the world, there are undoubtedly 
 many people who have never seen one, and following will 
 be found a brief description: — 
 
 They are unlike any other note in the world. In size 
 they are quite large, being about 8}^ inches in length by 
 53^ in width, and of a design plain and unpretending in 
 the highest degree. The ink used in printing is of an 
 intense black, upon paper of remarkable whiteness, which 
 is also extremely crisp and tough.
 
 218 HISTORY OF THE 
 
 The Bank of England note is printed on Irish Hnen 
 water-lined paper, plain white and with ragged edges. 
 The paper lacks the smooth, oily feeling of United States 
 currency, and the plainness of the lettering and the entire 
 absence of any coloring excepting black and white makes 
 the bill in appearance easy to counterfeit. 
 
 The chief object in the manufacture of bank notes is 
 to render forgery impossible, or at least easy of detection. 
 This is sought to be effected by peculiarity of paper, 
 design, and printing, or by a combination of these means. 
 The main reliance in the case of the notes of the Bank of 
 England has been on mechanical design ; the writing, the 
 emblems, and the ornaments being so combined as to 
 render forgery difficult. The ink, too, is peculiar, being 
 the blackest and the most indelible of inks. As a further 
 security against forgery, a self-registering machine is used. 
 Copperplate printing was the only printing in use for 
 bank notes till 1837, when a great improvement was 
 made. This was the production of designs by the mill 
 and die by mechanical pressure. The pattern is engraved 
 on a soft steel plate, which is then hardened, to transfer 
 the pattern by pressure to a soft steel roller, on which, of 
 course, the pattern is produced in relief; the roller or mill 
 is then hardened, to reproduce the pattern in the plate 
 from which the printing is to be done; and thus almost 
 any number of plates for all common purposes can easily 
 be produced. No Bank of England notes are issued 
 twice. This system of siderography continued in use for 
 bank note printing in the Bank of England till 1855, when 
 electrotype printing was introduced by Mr. Smee, with 
 the assistance of the mechanical officials ; and since that
 
 BANK OF ENGLAND. 219 
 
 time the notes of the Bank of England have been all pro- 
 duced by surface-printing by the electrotype. The whole 
 of the printing of the bank is executed within its walls. 
 The number of persons employed in the printing depart- 
 ment solely on the production of notes is about thirty. In 
 addition to these there are nine cashiers and sub-cashiers, 
 who are highly paid ofificers of the bank. 
 
 Of the paper required in the manufacture of bank 
 notes about 15,000 reams are usually supplied to the bank 
 yearly, each ream of 500 pieces of paper making 1,000 
 notes, the paper being generally kept for six months 
 before it is taken into use. The paper is made at a special 
 manufactory at a cost of about £1 a ream. The dies from 
 which the water-mark is made, as well as the plates used 
 in printing the notes, are all manufactured at the bank, 
 where also the notes are printed. The chief cashier regu- 
 lates the quantity of notes required to be printed, and 
 sends orders to the printing office for the number he 
 deems requisite. The notes, which were formerly printed 
 by the distinct process, are now completed by one opera- 
 tion. They are placed in the hands of the cashiers, who 
 count them over, and discharge the printer of all further 
 responsibility. 
 
 The Bank of England never re-issues its notes. As 
 they come in they are laid aside, and kept five years and 
 then burned. The whole number is not destroyed together, 
 but at different times, and as many are burnt as corres- 
 ponds with the new notes issued. Notes are issued to 
 anyone in exchange for gold or other notes. The notes 
 are generally issued to bankers in bundles containing five 
 hundred each. For every note issued an entry has pre-
 
 220 HISTORY OF THE 
 
 viously been made recording its number and the date of 
 issue. This entry is not closed until the note is returned 
 to the bank and cancelled. The note may be out for 
 years, or only for a few hours; in any case, the book in 
 which it has been entered is kept open to receive the 
 completion of its history. Ordinarily about 50,000 notes 
 are paid by the bank in a day, and about as many new 
 ones are issued. Those which have been in circulation 
 are at once cancelled, the corner bearing the signature of 
 the cashier being torn off, and the words indicating the 
 denomination punched out. The number of notes thus 
 cancelled daily varies from 30,000 to nearly 80,000, and 
 averages about 50,000. When they are thus cancelled, 
 and have been accounted for in the books, they are 
 arranged according to their numbers and date in parcels 
 of from 300 to 1,500, and are marked in such a way with 
 references to the balance sheets that a clerk can readily 
 ascertain by whom and when each was paid in. The par- 
 cels are then deposited in the accountant's library, and 
 preserved for five years, at the end of which they are 
 burned. The accountant's library usually contains nearly 
 one hundred millions of these cancelled notes stowed 
 away in about 13,500 boxes, any one of which can be 
 referred to in four or five minutes. 
 
 While this system is very expensive it is not deemed 
 extravagant, because of the great advantages it offers. 
 The most notable advantage is the cleanly condition of 
 the circulation; but of course there arc other advantages 
 of greater import. One is the facility with which the 
 payment of any note is traced, and also the saving of labor 
 in keeping account of the notes. In this all the London
 
 BANK OF ENGLAND. 221 
 
 bankers share, as none of them pay out any but new notes. 
 All notes received by them in the course of their business 
 are paid in to their accounts at the Bank of England, and 
 they draw new notes for their requ-irements. In paying 
 away large bundles of notes they are able to keep a 
 record of their distinctive numbers by entering only the 
 numbers of the first and last of the parcel. The plan of 
 re-issuing notes was tried by the bank in 1838, but so 
 much inconvenience was caused to the bankers and the 
 public that it was abandoned. It seems to be a very 
 wasteful proceeding that a quantity of newly manufactured 
 notes issued by the bank in the forenoon, and returned to 
 the bank in the afternoon, should not be re-issued, but 
 stored away and eventually consigned to the flames. 
 
 No notes of a higher denomination than ;!^iooo are 
 issued, and, as the bank's printing press is capable of pro- 
 ducing these at the rate of 3000 an hour, this part of its work 
 is soon accomplished. There are several other presses print- 
 ing five and ten pound notes, some completing with one, 
 and those of older date with two impressions. The number 
 and date of each note are printed at both ends of it, and 
 as the separate halves are thus easily identified, it is com- 
 mon in England to remit money by cutting a bank-note 
 in two equal pieces and transmitting each by different 
 mails or in separate envelopes. This is done as a guard 
 against theft and loss. A portion of the bill has no value. 
 Not the smallest scrap of paper is wasted, and if a note is 
 spoiled in the printing, it has to be accounted for no less 
 than the perfect ones. 
 
 While for beauty of design the notes of the Bank of 
 England are inferior to those of the United States, they
 
 222 HISTORY OF TliK 
 
 are securer and more durable. Brittle to the touch as the 
 paper seems, it is almost as strong as parchment, and 
 it is possible to hold a piece no larger than a note by the 
 edges and place a fifty-pound weight upon it without tear- 
 ing it. Its thinness and transparency prevent erasures 
 and other illegal alterations. 
 
 In an album kept at the bank the various counterfeits 
 discovered are preserved, and the best of these is one exe- 
 cuted by a Frenchman. It would take an extremely 
 experienced eye to detect any fault in the engraving, but 
 the spuriousness of the paper is visible at a glance. Most 
 of the imitations could not deceive a child, and the poor- 
 est one shown in the bank is a hundred pound note 
 which was sent to a charitable institution inclosed with a 
 benevolent letter. 
 
 The penalty for forgery is so heavy, and the detect- 
 ives of the Bank of England are so vigilant, that few 
 criminals have courage enough to exercise their ingenuity 
 in forging notes, and at the present time no forged notes 
 are known to be in circulation. In earlier times, when 
 the design of the notes was ruder, forgery could be at- 
 tempted with greater impunity, and the history of the 
 bank, like all old and large financial institutions, contains 
 many instances of daring and brilliant roguery. 
 
 The bank album, in which specimens of the various 
 counterfeits discovered are preserved, also contains some 
 interesting proofs of the extraordinary durability of the 
 notes. There are three notes for twenty-five pounds 
 which passed through the Chicago fire and were sent in 
 for redemption. Though they are burnt to a crisp black 
 ash, the paper is scarcely broken, and the engraving is as
 
 BANK OF ENGLAND. - 223 
 
 clear as in a new note. There are also five five-pound 
 notes which went to the bottom of the sea in the unfor- 
 tunate training ship, " Eurydice," and were recovered after 
 six months' immersion. They are not even frayed. The 
 paper is stained a light brown, and that is the only effect 
 their long exposure to salt water has had. In a small 
 case, covered with a magnifying glass, are a few charred 
 fragments of paper, for which the bank paid ;({^ 1,400. 
 They are the remains of several notes destroyed in a fire, 
 and were redeemed at their full value, the holders being 
 able to give their numbers and dates, and to satisfy the 
 bank that they had actually been destroyed. There is 
 another note in the album, which was in circulation 125 
 years before it was returned to the bank for payment. As 
 soon as a note is returned, even though it has been out 
 but a few hours, it is cancelled. Very often a note issued 
 in the morning is brought back to the bank in the after- 
 noon of the same day ; but on an average a five-pound 
 note is out about eighty days. One thing the notes will 
 not endure. They will hold together at the bottom of 
 the sea, and come out of a furnace intact, but they will 
 not outlast the scrubbing, the bleaching and the mangling 
 of the laundry, 
 
 A Bank of England note is the safest piece of paper 
 in the world, and, under any circumstances, the bank 
 could pay every one in circulation without touching a shil- 
 ling of its capital. The great object of the charter of 
 1844 was to secure at all times and under every possible 
 contingency the conversion of every bank note into gold 
 whenever presented for payment, and that object has 
 been completely attained. The effect has been to accu-
 
 224 HISTORY OF THE 
 
 mulate much more gold than would have been necessary- 
 had the interests of the shareholders alone been con- 
 sidered ; and while this stock of bullion, bearing no in- 
 terest, and held only for the integrity of the bank note, is 
 a drawback from one point of view, the enormous benefit 
 which the country derives from the absolute equality of 
 the note and the coin far outweighs any attendant dis- 
 advantage. 
 
 The following curious description of the paper used in 
 making bank notes is abridged from Barlow's lecture on 
 "A Bank of England Note." 
 
 " The color of the paper is peculiar, and cannot exactly 
 be imitated by a forger, except at great expense. The 
 combined thinness and strength of the paper is also 
 unique. The paper is made in pieces large enough for 
 two notes ; each note before it is sized weighs about 
 eighteen grains, and if then doubled it is strong enough 
 to suspend a weight of thirty-six pounds ; with the addi- 
 tion of about a grain of size it will suspend fifty-six pounds. 
 The texture of the paper is also peculiar; it has a crisp 
 feel, invariably the same, and such that bank clerks of 
 experience can readily detect forgeries by this test alone." 
 
 Those who suppose that bank notes are a modern 
 invention may be surprised to know that they were first 
 issued in China more than two thousand years before 
 Christ. They were engraved in blue ink on paper made 
 from the fibres of the mulberry tree, and had on them this 
 motto : " Produce all you can ; spend with economy." 
 Besides this were designs similar to those of modern notes, 
 such as the date of issue, number of note, signature of the 
 oflficial issuing it, and also a notice of the pains and penal-
 
 BANK OF ENGLAND. -i-i-i 
 
 ties of counterfeiting. One of these curiosities is pre- 
 served in the Asiatic Museum at St. Petersburg, and bears 
 the date equivalent to 1399 B. C. 
 
 United States paper currency is more artistic in ap- 
 pearance and convenient in size and form than Bank of 
 England notes. 
 
 The Bureau of Engraving and Printing, at Washing- 
 ton, D. C, where all United States currency is manufac- 
 tured, occupies a large brick building built expressly for 
 it, at a cost of some $300,000. It has three stories and a 
 high basement. Here 250 plate presses a/e worked by hand, 
 and over 500 men and women employed in the processes 
 of printing sheets of bank notes, bonds and internal rev- 
 enue stamps. Six hundred sheets per day are printed on 
 each press, and after each impression the delicate copper 
 and steel plate must be removed from the press, carefully 
 wiped dry, polished with whiting, inked and then returned 
 to its place for another impression. The fibre paper must 
 be handled expertly, and everything about the work done 
 with precision and care. All is perfect system and exact- 
 ness here. The greenbacks and other securities issued for 
 the government, from the time the paper is manufactured 
 until the finished note is issued, are subjected to a system 
 of registering and checking at every step, so minute and 
 precise that the chance of any error or dishonesty in the 
 handling of this most valuable product is reduced to a 
 minimum. 
 
 The sheets before being wet are delivered to the 
 plate printers, counted and charged to them, and again 
 counted in the presence of an assistant, who certifies to 
 the count. Attached to the machines by which the wet-
 
 226 HISTORY OF THE 
 
 ting is done are registers which automatically count the 
 sheets a third time as they pass through. Next comes 
 the examining division, where, after the fourth count, the 
 sheets are dried and counted for the fifth time. Experts 
 then examine the sheets, and those which are pronounced 
 perfect go into the hydraulic press, from which powerful 
 machine they emerge in a smooth state ready for print- 
 ing. 
 
 Any sheets spoiled in printing — too light or too dark, 
 or otherwise imperfect — are thrown out by the examiner, 
 but cannot be destroyed until after passing through a 
 regular prescribed course. The lettering and numbering 
 divisions, and the engraving division, are interesting also. 
 Visitors are permitted to inspect all the divisions of the 
 bureau, and a guide is provided to conduct all who apply 
 on a "tour" of the rooms. Of the 500 or 600 persons 
 employed, a large majority are ladies, and some of the 
 most difficult and responsible work is performed by lady 
 experts. The bureau turns out an average of $100,000 in 
 notes printed daily. The great chilled iron and steel 
 vaults of the treasury are objects of much interest, but 
 only certain ones can be entered by outsiders, and these 
 only on a permit from the treasurer. 
 
 When the national bank notes have tramped about 
 the country until they have become ragged and vagabond, 
 and have reached the lowest depths of degradation, they 
 are bundled up and sent to the Treasury Department for 
 redemption. Many millions of these vagrants are received 
 at the department each year. They have to pass in re- 
 view through the National Bank Redemption Agency, 
 where those that are utterly depraved and good for noth-
 
 BANK OF ENGLAND. 227 
 
 ing are sentenced to be chewed up, and those which have 
 got in through the force of association, but are still not so 
 far gone that some good may not be got out of them, are 
 sent back into the service. In the place of those that are 
 ' condemned nice, new notes, crisp and clean, are sent out. 
 The experience of these notes is varied, and in some cases 
 very novel and interesting, but their tale is told only by 
 their ragged and dirty appearance when they get back to 
 the department. The average length of time that a new 
 note can keep up a respectable appearance is about three 
 years. Some have been found at the end of twenty years 
 to be as crisp as on the day of their issue, but these are 
 exceptional cases, where they have fallen into the hands 
 of people who made pets of them, and carefully guarded 
 them from rough usage. The wandering note soon be- 
 comes a tramp. It rapidly goes to pieces if it starts out 
 for the west, stopping along at the crossroad inns, or if it 
 frequents drinking saloons and falls in with low company. 
 Bad habits tell on a bank note very quickly. It is in hard 
 luck when it falls in with a bloody-fingered butcher. Some 
 have been known to become good for nothing under such 
 circumstances in a few weeks. They are subject, too, to 
 all sorts of misfortune by fire and water. 
 
 Many thousand get burned up. Then their charred 
 and blackened remains are sent to the treasury for redemp- 
 tion. One lady in the comptroller's office in this case has 
 charge of them, and they are sent to her for identification 
 before they can be redeemed. She is said to be very ex- 
 pert, seldom failing to identify a note, giving its proper 
 name, date and classification, no matter how badly burned 
 it is. Sometimes packages of several hundred, done up to
 
 228 HISTORY OF THE 
 
 be expressed, are sent in all stuck together, and burned 
 clear through to a black crispy mass. She then separates 
 them one by one with a very thin bladed knife, and places 
 the charred remains of each one separately on a glass 
 slab and examines it very carefully with a magnifying 
 glass. She is familiar with all peculiarities of the issues of 
 the various banks, and the note must be reduced almost 
 to ashes to be beyond her recognition, though to an 
 experienced eye it might not be distinguished from a 
 piece of grocer's paper which had gone through the fire. 
 
 All these notes otherwise mutilated go directly to the 
 Redemption Agency. The degree of expert efficiency 
 displayed there is something remarkable. This branch of 
 the service was organized by General Spinner. Prior to 
 that there was no systematic redemption of the paper cur- 
 rency as it became too worn for circulation, and a good 
 many ragamuffin notes were wandering about the 
 country. 
 
 The counting-in and assorting of the notes requires 
 great care, and it is only after long experience that it can 
 be done rapidly. There is an average of about i5O,0(X),- 
 ooo notes per year handled, and they have to be counted 
 about five hundred times, if there is no hitch in the count, 
 and oftcner if any mistakes are made. 
 
 The force can handle just half a million notes each 
 day. This is very expert counting. The notes, when 
 they come to be judged, have first to be " counted-in." 
 This requires the "counters-in" to go over them twice, 
 and they must make no mistake and pass no counterfeit, 
 or the loss thus caused will be deducted from their 
 salaries. To do this requires constant attention and is a
 
 BANK OF ENGLAND. 229 
 
 great strain on the nerves, as each note has to be scruti- 
 nized very closely to see that it is not counterfeit, and the 
 "counter-in" must know the name of every bank that has 
 a counterfeit upon it, and have in his mind a full descrip- 
 tion of the false note, so as to be able to detect it at sight. 
 The superintendent says counterfeit notes are thrown out 
 by these experts without hesitation every time they come 
 to them. They have a line of notes passing before their 
 eyes at the time, and any flaw or defect they notice on 
 the instant. So familiar is everyone with the money of 
 the United States that an extended description would not 
 be particularly interesting or instructive.
 
 CHAPTER XVIII. 
 
 ISSUE DEPARTMENT-NO INTEREST ON DEPOSITS. 
 
 Preparing Bank Notes for Use— How Notes Get into Cir- 
 culation — Exchanging Notes for Gold — Inland and 
 Foreign Withdrawals — The Bullion Office — Bank of 
 England Purchasing Gold— Gold Weighing Room — 
 Mechanical Accuracy and Dispatch — No Interest 
 Allowed on Deposits — An Ex-Governor Defends the 
 Policy of the Bank — A Tradition. 
 
 As PREVIOUSLY stated, the paper upon which Bank 
 of England notes are printed is specially made for the 
 bank, and the greatest care is taken to produce a paper 
 that is difficult to counterfeit. As fast as the paper is 
 printed it is sent to the bank and placed under the care 
 of the chief cashier. The notes are then printed at the 
 bank and kept in the banking department until wanted in 
 the Issue Department. Each note bears the date of its 
 printing, together with a distinctive number. 
 
 One of the great divisions of the functions of the 
 Bank of England is the Issue Department. This opera- 
 tion is carried on under the immediate supervision of the 
 chief cashier, who is responsible that the conditions 
 imposed upon the bank by the Act of 1844 arc strictly
 
 BANK OF ENGLAND. 231 
 
 complied with. The first requisite of a practical nature 
 is the preparation of the notes themselves, which is fully 
 described in Chapter XVII. 
 
 When the chief cashier from time to time orders the 
 issue of fresh bank notes, he gives the chief accountant 
 notice thereof, specifying how many are to be prepared, 
 and the dates they will respectively bear. The account- 
 ant immediately opens a general credit for the amount of 
 the new creation of notes, and at the same time prepares 
 books in his own department, called ledgers, numbered 
 and dated to correspond with the notes in question, in 
 which a separate credit is opened for every individual 
 note made. 
 
 The notes being now ready for use are drawn from 
 the treasury, as occasion may require, by the chief cashier, 
 whether for London or branch bank issues, and passed 
 into the Issue Department, from which they are issued to 
 the public, to the bankers, to the banking offices of the 
 house, and to the respective branches, so that this depart- 
 ment is cognizant of, and virtually responsible for, the 
 issue of all the notes circulated by the Bank of England. 
 There are two principal ways in which notes get into cir- 
 culation. In the first place, notes are issued to anyone in 
 exchange for gold bullion; and, secondly, any person hav- 
 ing a drawing account at the bank has only to draw a 
 cheque, and on its presentation he will be paid the whole 
 or any part of the amount on his account in notes, or 
 notes and gold, as he may prefer. Every note issued is 
 entered by its number and date in the books of the Issue 
 Department, and these books being all duly balanced at 
 the close of each day, all the remaining notes (including
 
 232 HISTORY OF THE 
 
 those considered as broken cash, in the hands of the pay- 
 clerks, and deposited each night in the treasury) are re- 
 turned every evening to the cashier, whose account will 
 then show the number of notes issued in the course of the 
 day. Simultaneously with this process, another will have 
 been in operation through the day, and in the same de- 
 partment, viz., the exchange of notes for gold. The bank 
 note being a promise to pay the amount thereof in gold 
 on demand, anyone bringing notes to the bank is entitled 
 to make his demand, and during each day large amounts 
 of gold are given in exchange for notes. The cashier's 
 daily account, therefore, will show the number of notes 
 received back again by the bank in this way, as well as all 
 paid in to account by parties having drawing accounts at 
 the bank. A similar account in abstract of all notes ex- 
 changed for gold, or gold exchanged for notes, and of 
 notes paid or received in the banking offices, is kept by 
 the accountant of the bank, whose accounts must agree 
 daily with those of the cashier. 
 
 It is evident that the amount of bank notes issued 
 varies in exact proportion to the amount of gold in the 
 Issue Department, the issue against the government debt 
 and other securities being invariable. Roughly speaking, 
 the contraction or expansion of tlie circulation indicates 
 a corresponding curtailment or increase in commercial 
 facilities or requirements. Hence the Issue Department 
 return becomes an important guide to the operations of 
 bankers, brokers, and financial firms, by whom it is care- 
 fully \\atched, since the increase or diminution of the 
 stock of gold may be said respectively to be a signal of 
 safety or danger. The receipts or withdrawals of gold
 
 BANK OF r.N'GLAND. 233 
 
 in any large quantity by and from the bank arc of two 
 kinds, inland and foreign. The former for the most part 
 occurs at certain regular periods of the year, such as the 
 harvest season, Scotch "term-time," etc. They exercise 
 but a very modified and temporary influence on the money 
 market, for the laws by which they are governed are fairly 
 understood and recognized, and the amount of gold act- 
 ually in the kingdom remains unaltered. 
 
 It has already been mentioned that as the notes are 
 from time to time numbered and dated for issue, the 
 accountant is made acquainted therewith, and that he pre- 
 pares ledgers containing a separate credit for every note 
 issued. When the notes are returned again to the bank 
 for payment, these individual credits are cancelled by the 
 date of the return of each respective note being posted in 
 the ledger against the number corresponding with that 
 borne by the note itself. Thus it will be seen that the 
 amount of the credits closed, or, in other words, the num- 
 ber of notes paid in, being deducted from the circulation 
 account, Avill show at the close of each day the actual 
 number and amount of the notes remaining in circulation. 
 
 Another important part of the bank, directly con- 
 nected with the Issue Department, is the bullion office. 
 As the Bank of England is bound by law to buy any 
 amount of gold at the rate of ^"3 17s. gd. per ounce of 
 standard gold, or, in other words, to give its notes or 
 acknowledgement at that rate, it is necessary to have a 
 department where the bullion so acquired may be placed 
 in safe custody. The obligation on the bank to buy gold 
 or bullion at the above mentioned rate per ounce stand- 
 ard is a convenience to the public who require an ex-
 
 234 HISTORY OF THE 
 
 changeable commodity such as coin, instead of gold as 
 imported, in the shape of bullion— bullion meaning gold 
 or silver in any other shape or form than coin. If an im- 
 porter of gold wishes to sell, that is, to obtain gold coin 
 which he can pay away, he can take his bullion to the 
 mint, and for every ounce of gold of twenty-two carats 
 fine, or twenty-two parts out of twenty-four pure gold, he 
 will receive gold coin at the rate of £l lys. lo^d. per 
 ounce ; but to obtain this he must send the gold to the 
 mint, and wait some weeks for the coin. It is, therefore, 
 found more advantageous to the seller to take the gold to 
 the bank and receive \\d. less per ounce ; this operation 
 being effected without any loss to the bank, which sells 
 again the same bullion at the rate of ^3 ijs. io\d. per 
 ounce, or obtains sovereigns from the mint. The bank 
 only sends its bullion to the mint as it may be in want of 
 gold coin. Frequently it sells foreign gold coin at a small 
 profit, as it may be worth more to an exporter — for in- 
 stance, to Russia — to have Russian gold coin than either 
 bar gold or sovereigns ; but, in all cases, the general rule 
 of the bank is to buy foreign gold coin only at such a 
 price as will render it equivalent to gold bars — that is to 
 say, at a rate for which, without loss, it can always con- 
 vert such coin into bars at £t, \ys. ^d. per ounce stand- 
 ard, which again can be converted into British gold coin 
 at the mint. 
 
 The bullion office at the bank is also made use of as 
 a depot orwarenouse for gold or silver, or other such valu- 
 able commodities — diamonds or precious stones, for in- 
 stance ; and importers are allowed to deposit and retire 
 their goods free of charge, the bank being remunerated
 
 r.ANK OF EXGLAND. 235 
 
 by small payments for the use of the bank's scales and 
 packing bullion for export. 
 
 All gold paid into the bank is weighed in a room 
 called the " Gold Weighing Room." In this room there 
 are sixteen machines (the invention of Mr. Cotton, a 
 former governor of the bank) constantly at work. It is 
 merely necessary to keep them fed with sovereigns and 
 half-sovereigns, and the whole process of weighing and 
 dividing the light from the full-weight coins is performed 
 automatically by the machines, at the rate of about 2,000 
 an hour each, and with an accuracy and precision that 
 could not possibly be attained by manual labor. In this 
 manner, in the year 1885, ^^25,087, 250 worth of gold coin 
 was weighed and sorted, and the number of individual 
 pieces amounted to 27,272,760. As each gold coin paid 
 into the bank is very accurately weighed, to the daily av- 
 erage of about 89,125, and those found to be light are cut, 
 the current weight of the circulation is to a considerable 
 extent preserved. 
 
 The machines are kept in motion by an atmospheric 
 engine, connected with the steam engine, and the light 
 coins are immediately cut, to be remelted. 
 
 The Bank of England does not allow, either at the 
 head office in London, or at its branches, any interest on 
 deposits, and many plausible reasons have been advanced 
 in defence of this rule. Mr. Wegeulin, formerly governor 
 of the bank, gave the views of the managers of that insti- 
 tution on interest on deposits before a parliamentary com- 
 mittee in 1857. 
 
 He said the managers of the Bank of England have 
 always considered that the " proper functions of a banker
 
 23G HISTORY OF TITE 
 
 were to keep the spare cash of his customer, such 
 cash as his customer required for his daily expenditure, 
 for the sudden demands of his business, and any acci- 
 dental accumulation which might happen before the 
 customer had occasion to invest it. That is contrasted 
 with the system pursued by the joint-stock banks. The 
 joint-stock bank invites a large deposit by offering a 
 certain rate of interest for the deposit ; in point of 
 fact, the joint-stock bank becomes the investor of the 
 money instead of the customer. The customer of a joint- 
 stock bank docs not himself invest his own money, but he 
 employs the joint-stock bank to do it, taking the guaran- 
 tee of the joint-stock bank, and taking, possibly, a lower 
 rate of interest. Now, that system, if applied to the Bank 
 of England, would be very prejudicial to the public inter- 
 ests. It would, in the first place, force upon the Bank of 
 England to invest its reserves much more closely than it 
 does now\ If it had to pay interest upon its deposits, it 
 could only do so by investing them in some securities that 
 would pay a higher rate of interest than that which it 
 pays. Its deposits also are of that particular character 
 which would render it still more inexpedient that they 
 should be closely invested. They consist, in the first 
 place, of government deposits, which rise from a lov/ rate 
 at one period of a quarter up to five or six millions higher 
 at another period of a quarter, and again collapse to a very 
 low rate at another period. Again, the private deposits 
 consist, to a certain extent, of the deposits of the bankers 
 and the joint-stock banks of London. Those deposits are 
 the amounts which those bankers require to work their 
 own business. Consequently, they arc not deposits which 
 should be very closely invested by the Bank of England."
 
 P.ANK OF KNfll.AND. 2-U 
 
 A former officer of this bank says that, in times when 
 there is a great accumulation of deposits in the Bank of 
 England, it is because the public arc not able at those 
 times to find investments to their mind to employ those 
 deposits ; and consequently, it is not at all likely that the 
 Bank of England, if that is the case with the public gen- 
 erally, will be able to find investments which the public 
 themselves have not been able to do. All these reasons 
 combined would lead one to think, that to force a system 
 upon the Bank of England by which it should be obliged 
 to employ its deposits very closely — much more closely 
 than it does at present — would be not only prejudicial and 
 unsafe as regards the Bank of England, but would be pre- 
 judicial to the public interest. 
 
 It is, however, obvious that this reasoning is quite 
 inconlusive. The truth is, says another ex-governor, that 
 the non-allowance of interest is a tradition, of no authority 
 in itself, and operating injuriously in keeping up the delu- 
 sion that the banking department of the Bank of England 
 is an institution differing essentially in the character of its 
 business from other banks. 
 
 Equivalent of British 
 
 Money 
 
 IN 
 
 American 
 
 Money. 
 
 
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 Cents. 
 
 Mills. 
 
 to 
 
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 Mills. 
 
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 Dollars. 
 
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 Mills. 
 
 lA 
 
 C 
 
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 en 
 
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 1 
 
 24.2 
 
 7 
 
 1 69 4 
 
 13 
 
 3.14.6 
 
 1 
 
 4 84 
 
 15 
 
 72 60 
 
 2 
 
 48.4 
 
 8 
 
 1.93.6 
 
 14 
 
 3.38.8 
 
 2 
 
 9 68 
 
 20 
 
 96 80 
 
 3 
 
 72.6 
 
 9 
 
 2.17 8 
 
 15 
 
 3.63.0 
 
 3 
 
 14 52 
 
 25 
 
 121 00 
 
 4 
 
 96.8 
 
 10 
 
 2.42.0 
 
 16 
 
 3.87.2 
 
 4 
 
 19 36 
 
 30 
 
 145 20 
 
 5 
 
 1.21.0 
 
 11 
 
 2.66.2 
 
 18 
 
 4.35.6 
 
 5 
 
 24 20 
 
 35 
 
 169 40 
 
 6 
 
 1.45.2 
 
 12 
 
 2.90.4 
 
 20 
 
 4.84.0 
 
 10 
 
 48 40 
 
 50 
 
 242 00
 
 CHAPTER XIX. 
 
 PRESENT MANAGEMENT AND DESCRIPTION OF THE BANK OF ENGLAND. 
 
 How the Bank is Officered and Managed — Qualification 
 and Election of Officers — Salaries — Temire of Office 
 — Court of Directors — Bank Committees — Explana- 
 tion of their Duties — Division of the Clerical Force — 
 Working in Harmony — Tlie Secretary and his Duties 
 — Total Number of Employees in the Bajik — The Enor- 
 mous Salary List — Convenieiices and Societies for 
 Clerks — Library, Reading and Dining Room — Lnsur- 
 ance and Guarantee Society — Medical Attendance — 
 How Clerks are Appointed — Names of the Various 
 Departments — Description of the Bajik — Its Exterior 
 and Literior — Number of Acres the Bank Occupies — 
 Statue in Bank, with Inscription Thereon — How the 
 Bank is Guarded — Officers who Reside in the Bank — 
 Emitient Services Rendered by the Bank. 
 
 The management of the bank is entirely in the hands 
 of the proprietors of the bank stock, and absolutely 
 without any sort of interference or control on the 
 part of the government. The direction of its affairs is 
 committed to a committee composed of the governor, the 
 deputy governor, and twenty-four directors. Eight of
 
 BANK OF ENGLAND. 239 
 
 these directors retire annually, by rotation, and arc all in- 
 variably re-elected, unless they wish to retire. In that 
 case the court of directors submits to the proprietors the 
 name or names of any persons whom it may be thought 
 desirable to have upon the committee. The qualification 
 for a director is the holding of £2,000 stock, and as the 
 position is very much coveted, the names submitted are 
 usually members of the very first firms in London. The 
 governor and the deputy governor are also elected by the 
 proprietors, although they are first selected by the direct- 
 ors from among themselves, and their names submitted to 
 the general court at the annual meeting. The qualifica- 
 tion for the position of governor is the holding of ;!^4,ooo 
 stock, whilst the deputy governor must hold ;^3,ooo. The 
 qualification of a proprietor for voting is the holding of 
 ^500 of stock in his own right. The governor and the 
 deputy governor are elected for one year only, but as they 
 are invariably re-elected at the close of the first year, they 
 hold office for two years. At the expiration of that time, 
 the governor returns upon the board of directors, and the 
 deputy governor invariably succeeds and is elected gov- 
 ernor, and a new deputy is chosen. The governor and 
 deputy governor each receive ^1,000 per annum, and 
 every director receives iJ"500 per annum. From the caVe- 
 ful manner in which the directors are selected, it follows 
 that the management of the bank, which really involves 
 the most important interests of the whole commercial 
 community, is conducted by men who are in touch with 
 every movement of commerce and finance in the country, 
 and in every quarter of the world. 
 
 Matters of daily routine, such as questions relating
 
 240 HISTORY OF THE 
 
 to discipline, are generally referred, in the first instance, to 
 the deputy governor ; while all communications between 
 the government and the bank, and all matters affecting 
 the principle of management, are referred, usually, direct 
 to the governor, who is the final appeal in all cases requir- 
 ing decision, which the heads of departments may not 
 consider themselves justified in settling. 
 
 The directors are in like manner elected annually by 
 the proprietors ; but although the stockholders in this 
 way have the power of turning out any director — that is, 
 of not re-electing him — yet, on vacancies occurring, it has 
 been the invariable rule to leave the selection of new di- 
 rectors to the court of directors, which include all of the 
 directors of the bank, and the governor and deputy gov- 
 ernor, who are considered more competent to choose effi- 
 cient members for the board, and who, from their posi- 
 tion in business and general character, are best calculated 
 to promote the important interests and general welfare of 
 the Bank of England. 
 
 Beyond the status which their position gives them, 
 the governor and deputy governor derive no bene- 
 fit from their office, while they tax themselves most liber- 
 ally by their contributions towards the welfare of their 
 clerks. They remain in office for two years only, and this 
 short tenure of office is, with considerable reason, thought 
 to be detrimental to the efficient and consistent adminis- 
 tration of the functions of government. A governor, let 
 us say, is an enlightened financier ; for two years his 
 policy is paramount ; but his successor then comes, and, 
 perhaps, reverses everything, and the onus of the change, 
 so far as the bank customers are concerned, is left to be
 
 BANK OF ENGLAND. 241 
 
 borne by the permanent officers of the bank, who have, 
 perhaps, never been consulted in the matter, or whose 
 opinions, based on the experience of many years, may be 
 ruthlessly ignored. The two years' system undoubtedly 
 has its advantages in the constant introduction of new 
 blood ; it also strengthens the governors from above and 
 below the chair. The directors below the chair give the 
 governor a loyal and hearty support, because they feel 
 that one day their own turn may come, while those above 
 the chair, having passed through the ordeal, know the 
 value of their colleagues' support. 
 
 The governor and deputy governor are in daily at- 
 tendance at the bank ; and there is also a daily commit- 
 tee, consisting of three directors, who meet at half-past 
 eleven o'clock, to receive reports of all proceedings at the 
 branches, see that the whole of the securities of the pre- 
 vious day have been lodged with the proper officers, take 
 in or deliver gold or silver from the vaults, approve or re- 
 ject bills offered for discount, examine from time to time 
 securities deposited by customers, and attend generally to 
 any work required by the governors. 
 
 The twenty-four directors in addition to the two gov- 
 ernors, and these, collectively, constitute the court of di- 
 rectors. The court meets for regular business every 
 Thursday, when a statement is made, showing the exact 
 position of the bank accounts up to the preceding night, 
 and when every matter is brought before it requiring its 
 authority, such as the granting of discount accounts, the 
 ordering of payments for lost notes, the granting of pen- 
 sions, and all other matters which the governor has not 
 authority to carry out on his own responsibility, as well
 
 242 HISTORY OF THE 
 
 as those which the governor thinks of sufficient import- 
 ance to require communication to the directors. 
 
 The directors have full cognizance, either by direct 
 weekly communication or otherwise, of every transaction 
 carried on in the bank. The court of directors is divided 
 into certain committees, whose duty it is to attend to all 
 matters referred especially to their consideration, and who 
 are required to report their proceedings from time to time 
 to the court. 
 
 The regular committees are six in number: — 
 
 The committee of treasury. 
 
 The committee of daily waiting. 
 
 The committee for law suits and the management 
 of the branch banks. 
 
 The committee for the house and servants and the 
 examination of clerks. 
 
 The committee of inspection for the cashier's office. 
 
 The committee of inspection for the accountant's 
 office. 
 
 In addition to which, special committees are from 
 time to time appointed, as occasion may require. 
 
 The treasury committee consists of the two gov- 
 ernors for the time being, the directors who have already 
 filled those positions, and those who, without having 
 served as governor, have been specially elected by the 
 court to this committee. 
 
 The committee of daily waiting consists of three 
 directors in rotation from the whole body. Their attend- 
 ance is at half-past eleven o'clock daily, and they are 
 required to remain until all that part of the business of the 
 day which is usually referred to them is concluded. All 
 
 i
 
 BANK OF ENGLAND. 243 
 
 bills offered for discount in London are submitted to this 
 committee, and all bills discounted at the country branches, 
 except local bills, are shown to them on the following day. 
 They have likewise charge of all bullion not required by 
 the cashiers for daily wants. 
 
 The committee for law suits and the management of 
 the branch banks attend to all business arising from prose- 
 cutions relating to forgeries, etc., and to everything 
 appertaining to the ordinary administration of the 
 branches. 
 
 The committee for the house and servants and the 
 examination of clerks examine and pass the tradesmen's 
 bills and accounts, order the payment of the salaries of the 
 clerks and of the pensions, and in addition, examine all 
 candidates for admission into the service, and consider 
 the periodical reports upon the recently elected clerks 
 during their term of probation. 
 
 The clerical machinery of this vast hive is divided 
 into the "cash side" and the "accountant's side." The 
 former, under the immediate supervision of the chief 
 cashier, comprises the transaction of all business where 
 actual cash is concerned, together with the necessary book- 
 keeping which it involves ; the latter, under charge of the 
 chief accountant, takes cognizance of all matters of pure 
 bookkeeping, where no actual cash is concerned, such as 
 those which relate to the national debt accounts, the regis- 
 tration of bank notes and kindred work. In olden times, 
 these important divisions were kept much more distinct 
 than they are at present. There was, years ago, a certain 
 antagonism between the two chiefs, which, however, has 
 long since disappeared, and they now live and work to-
 
 244 HISTORY OF THE 
 
 gethcr in a state of remarkable harmony, without even 
 fighting over the question of precedence, which the chief 
 accountant is supposed to claim, mainly, it is said, on al- 
 phabetical grounds, because A comes before C. The su- 
 pervision of each office on both " sides " of the bank is 
 intrusted to a principal and assistant principal, who are 
 accountable to the chief cashier or accountant, as the case 
 may be, and afterwards to a commitee of directors. 
 
 The secretary is a separate officer of the bank. He 
 nurses the charter, and sees that its forms and ceremonies 
 are complied with. He also records the proceedings of 
 the courts, summons and attends all committee meetings. 
 The secretary waits upon the governors of the bank, per- 
 forms all necessary literary work, puts the candidates for 
 clerkship through their preliminary examination, collects 
 income tax, grants orders to visit the bank, etc. His 
 duties are multifarious and exacting. 
 
 In the secretary's office the loss of bank notes, bills, 
 dividend warrants, etc., is registered, and all matters and 
 correspondence arising out of them, is conducted. It 
 may be mentioned that as many as 2,700 notes have been 
 recorded as lost in the course of a single year. Applica- 
 tions for payment of lost notes, under indemnity, are also 
 investigated, and the necessary declarations and bonds 
 prepared. 
 
 Record is kept in the secretary's office of all the offi- 
 cers, clerks and others in the employ of the bank, with 
 their salaries, securities, etc.; and it is the secretary's duty 
 to prepare and issue to the various offices lists of the sal- 
 aries and pensions for payment monthly or quarterly, as 
 they become due.
 
 BANK OF ENGLAND. 245 
 
 The secretary conducts the examination of all can- 
 didates for admission into the service, and has under his 
 control about one hundred newly-elected clerks, who are 
 not at first attached to any particular office, but are lent 
 to the different departments as their services are re- 
 quired. 
 
 The secretary has the control of the clerk of works' 
 department, and records and generally supervises all con- 
 tracts and expenditures connected therewith. He also 
 examines and records all other expenses of the house, 
 bringing the whole before the committee at their periodi- 
 cal meetings of inspection. 
 
 The business connected with the bank provident 
 society, which was established many years ago, to pro- 
 mote life insurance among the members of the staff, and 
 the payment of the annuitants on the directors' fund 
 for widows of bank clerks and porters, are also included 
 in the work of the office. 
 
 The extreme accuracy and dispatch with which the 
 clerical labor involved in the business of the Bank of Eng- 
 land is performed is almost marvelous, and reflects the 
 highest credit on the administrative machinery of the 
 bank. Every possible expedient is resorted to for the pur- 
 pose of facilitating the work and guarding against errors. 
 
 The total number of employees in the Bank of Eng- 
 land is upwards of i,i6o persons, including those at the 
 head office and the branches, and counting in the clerks, 
 porters, mechanics and those engaged in printing the 
 notes. The annual salaries amount to about ^^300,000, or 
 $1,500,000, besides pensions to superannuated officers 
 which amount to about ;^45,OQO more. The salaries to the
 
 246 HISTORY OF THE 
 
 governors and the directors amount to ;^i4,ooo per annum. 
 Everything in and about the bank is conducted on a very 
 liberal basis, and the aggregate of the annual expenses are 
 something enormous. Officials, clerks and the general 
 employees of the bank are generally well paid. 
 
 There is a well appointed library and reading room 
 in the bank, and they are thoroughly supplied with the 
 standard books, periodicals and papers of the world. The 
 works of reference this library contains is second to none. 
 There are about 18,000 volumes in the library. The direct- 
 ors are liberal in their contribution of money for these. 
 It mi""ht also be well to state in its connection that there 
 are -also a Clerks' Widow's Fund, a fund established by 
 the clerks with the assistance of the bank. We take the 
 following from "Gilbart's Practical Treatise on Banking:" — 
 *' In the year 1841, the Bank of England took measures for 
 discontinuing the system of requiring securities from the 
 clerks. Every clerk subscribed annually two shillings per 
 cent, upon the amount of his surety bond. When he had 
 subscribed in the course of five years (or immediately if 
 he chose) ten shillings per cent., the liability of his sure- 
 ties ceased. Every new clerk subscribes, when admitted, 
 ten shillings per cent, on the amount of the bond he would 
 otherwise give. These contributions are invested in 
 standard securities. This fund is fixed at ;^6,000. When 
 at this amount, the interest is given to the clerks' wid- 
 ow's fund. When the claims have reduced the fund 
 below ;^6,ooo, the interest goes to this fund until it has 
 increased to this amount. If the claims reduce the fund 
 so low as ^4,700, then the clerks are required to make a 
 further contribution until the fund is again raised to ;^6,000.
 
 BANK OF ENGLAND. 247 
 
 But this contribution is never more than two shillings per 
 cent, per annum on the amount of their respective bonds." 
 
 Connected with the above is "The United Guarantee 
 and Life Insurance Company," the object of which is to 
 grant policies for fidelity of trust, combined with policies 
 of insurance on life, or with deferred annuities or endow- 
 ments. The bank also has an apartment where its 
 employees can dine cheaply and well. The directors of 
 the Bank of England at all times manifest a kindness and 
 good will towards their clerks. 
 
 The Bank of England has a physician who attends 
 daily and is called the medical officer. He looks after the 
 health of the clerks and other employees. Every clerk, 
 when appointed, is carefully examined, to ascertain the 
 condition of his health. If he applies for leave of absence 
 on the ground of ill health, he undergoes a medical exam- 
 ination. If absent from illness he is visited by the medical 
 officer, who reports his condition to the bank officials. 
 If a clerk complains that his employment is injurious to 
 his health, he is examined, and in some cases his employ- 
 ment is changed. If a clerk applies for a pension on 
 account of age or illness, he is also examined. 
 
 The clerical force of the Bank of England is 
 employed on a strictly civil service or competitive plan. 
 Young men employed in subordidate positions have time 
 and again reached the limit, spending their entire lives in 
 the service of the bank. Politics or favoritism cut no 
 figure, and merit alone insures permanency and advance- 
 ment. 
 
 Besides the governor, deputy governor and twenty- 
 four directors, the Bank of England is officered by the fol-
 
 248 HISTORY O^^ THE 
 
 lowing named departments, many of which are subdivided, 
 until the business of the bank works as accurately and har- 
 moniously as a well regulated clock : 
 
 Chief accountant, deputy accountant, assistant ac- 
 countant ; chief cashier and deputy and assistant ; secre- 
 tary and deputy and assistant ; discount office, branch 
 banks office, bank note office, bank stock office, consols 
 office, India office, register office, power of attorney office, 
 unclaimed dividend office, cheque office, superintendent of 
 cashiers' store, numbering and dating office, bullion office, 
 bill office, public drawing office, private drawing office, 
 securities office, solicitors, medical officer, architect, etc. 
 
 The Bank of England is one of the most revered of 
 institutions, and the visitor to London regards it with lit- 
 tle less awe tlian he feels when he looks on the halls in 
 which the liberty of England was nursed at Westminster. 
 Locally speaking, it is a centre of London ; in a larger 
 sense, it is the pivot of the world. 
 
 Lombard street, Cornhill, Cheapside, King William 
 street and Queen Victoria street have their confluence 
 here, and empty into an irregular space, with the Cor- 
 inthian portico of the Royal Exchange on one side, the 
 similar architecture of the Mansion House nearly opposite, 
 and the front of the great monetary institution on the 
 third. The jam of traffic in the streets about the bank at 
 times becomes hopelessly entangled. The illustration of 
 the bank given in this volume is first-class in every par- 
 ticular. 
 
 The Royal Exchange and the Mansion House have 
 architectural pretensions, while the Bank of England has 
 none whatever. The bank has no windows in either of its
 
 BANK OF ENGLAND. 249 
 
 fronts, but receives light from above or from its courts. 
 Its exterior gives one the impression of a strongly-built 
 granite inclosure, treated with heavy Ionic decoration, 
 pierced with a ponderous gate, and surrounded by a 
 weighty iron railing, which separates it by a foot or two 
 from the sidewalk. Like everything else in London, it is 
 blackened by the soot-laden atmosphere, and its general 
 aspect is unprepossessing. Within is a court yard, 
 guarded by a sentinel or porter, arrayed in flowing crim- 
 son and gold lace, and bearing a staff. From this court 
 yard there are doors or gates by which the various di- 
 visions of the inclosure are reached, all of them low, solidly 
 constructed, and modest, and grouped about, in all, nine 
 court yards. Of these, one contains one or two stal- 
 wart elms, which in early summer seem to fill the entire 
 spaceof it with bright and luxuriant verdure, while beneath 
 them is a fountain, a neat bit of soft, well-kept turf, and 
 clusters and hedges of rhododendrons. The visitor is 
 hardly prepared to find a green court yard, great robust 
 trees, and the sentimental music of a fountain in the 
 heart of the greatest bank in the world. Probably no 
 other trees in the w^orld grow in such expensive soil, and 
 to the visitor who sees them for the first time the incon- 
 gruity of their position is very striking. 
 
 The interior of the bank has little of special interest, 
 and a description of same would be of no particular value 
 to anyone. It is full of respectability and business. 
 Its air is one of conservative solemnity and decorous ac- 
 tivity, and the demeanor of its employees and various 
 officials is saturated with formal propriety. The various 
 halls are spacious and modern in appearance, and the
 
 250 HISTORY OF THE 
 
 transactions during business hours seldom involve any 
 crowding. There are files of clerks paying out money 
 and receiving money from all sorts of people, other clerks 
 bending over ledgers with intense application, and bank 
 messengers in waiting, who are dressed in swallow-tail 
 coats of a delicate salmon-color, with silver buttons, flam- 
 ing scarlet waistcoats, black trousers and high silk hats. 
 So much is open to the world ; and even if the spectator 
 is provided with a director's order to view the bank — a 
 privilege not loosely granted — there is little of real inter- 
 est for him to see ; everything is commonplace, stern 
 and secure. 
 
 The citizen who passes it on his way to his business, 
 the merchant who considers it as an edifice where he gets 
 his bills discounted or lodges his cash for security, the 
 banker who visits it daily, look on the immense building 
 with an indifferent eye. Even to a stranger, its external 
 appearance is almost lost in contemplating the nobler 
 structures that surround it. The Bank of England occu- 
 pies a few feet more than eight acres. When the visitor 
 passes from building to building, and notes each place 
 devoted to its separate uses, yet all of them links in one 
 chain, he cannot fail to be affected with the grandeur of 
 that body which can command so extensive a service. 
 The first stone of the original building was laid in 1732, 
 and later additions bring it to its present size. The bank 
 measures on the south side 365 feet; on the w^est side, 440 
 feet; on the north side, 410 feet; and the east side, 245 
 feet-. The principal entrance to the bank is from Thread- 
 needle street, opening by a large arched gateway into a 
 quadrangular paved court, with which all the leading com- 
 munications are connected. 
 
 i
 
 BANK OF KNGLAND. 251 
 
 On the establishment of the bank in 1694, the direct- 
 ors engaged the hall of the Grocers' Company for the pur- 
 poses of their business, and continued to occupy it until 
 the year 1732, when, having made a proposition to the 
 Grocers' Company for a renewal of their lease, the terms 
 of which were not approved of, the directors were author- 
 ized to "build a new bank in Threadneedle street, and to 
 erect an equestrian statue of King William before it." 
 
 In August, 1732, the foundation stone was laid, on 
 which was the following inscription : — 
 
 " The foundation of this building of the Bank of 
 England was laid Aiignst ist, 17 J2, in the sixth year of 
 the reign of King George the Second. Sir Edward Bell- 
 amy, Knight and Alderman, Governor; the Honorable 
 Horatio Townshend, Esq., Deputy Governor ; " together 
 with the names of the several directors. 
 
 Soon after the completion of the building, the pro- 
 prietors of the bank caused a statue to be erected in the 
 great hall, in commemoration of its founder, with a latin 
 inscription of which the following is a translation : — 
 
 For Restoring Efficacy to the Laws ; 
 
 Authority to the Courts of Justice ; 
 
 Dignity to Parliament ; 
 
 To all his subjects their Religion and Liberties ; 
 
 And confirming these to posterity, 
 
 By the succession of the Illustrious House of Hanover 
 
 To the British Throne : 
 
 To the best of princes, William the Third, 
 
 Founder of the Bank, 
 
 This Corporation, from a sense of gratitude, 
 
 Has erected this Statue ; 
 
 And dedicated it to his Memory 
 
 In the year of our Lord 1734, 
 
 And the first year of this Building.
 
 252 HISTORY OF THE 
 
 In the basement of the bank arc the barracks, wherein 
 thirt}--six soldiers are quartered from seven o'clock every 
 evening until the next morning-, for the protection of the 
 bank. It has heen the custom to quarter soldiers in the 
 bank since the Lord George Gordon riots, when it was 
 threatened by a mob. Besides these, is a body of 
 watchmen, all whom are trained to the use of the ample 
 arrangements provided for in case of fire. 
 
 The building occupied by the Bank of England bears 
 an estimated rental of ^'70,000 a year. The two principal 
 officers of the bank, the Chief Accountant and the Chief 
 Cashier, have residences within its walls ; and although it 
 is understood that they or their deputies shall always be 
 in their residence, the bank premises are never left with- 
 out the superintendence of other responsible agents — 
 clerks of character and standing being appointed to attend 
 every night during the year, and on Sundays and on bank- 
 holidays. 
 
 The gradual enfranchisement of banking by the vari- 
 ous enactments between 1826 and 1858, and the enormous 
 progress which banking has since made throughout Great 
 Britain, have, however, considerably lessened the value of 
 the exclusive banking privileges accorded to the Bank of 
 England, and, from a mere proprietor's point of view, it is 
 quite possible that the Bank of England might profitably 
 forego their charter altogether now that they are in no fear 
 of losing it, and, so far as pure banking is concerned, they 
 no longer enjoy a monopoly. 
 
 The eminent services of the Bank of England to the 
 political, commercial and financial world, the integrity and 
 success with which it has been conducted, has long ago
 
 253 
 
 BANK OF ENGI.AM'. 
 
 been reeo.nized by the whole world. Generations and 
 centuries come and go, but the Bank of England remams 
 and moves along with a stability and precision that .s 
 truly wonderful. The workings and history of the Bank 
 of England one hundred years hence will be substantially 
 the same as to-day.
 
 CHAPTER XX. 
 
 ENGLISH AND SCOTCH BANKS. 
 
 Scotch Banks Not Affected by the Bank of Englarid — 
 First Scotch Bank — Its Foiuider — Capital and Dis- 
 tribution of Shares — Origin of British Linen Bank — 
 Passing Through Commercial Crises — Minimnm De- 
 posit Received — Allowing Interest on Deposits — 
 Responsibility of Shareholders — Superior Banking 
 System — Taking Advantage of an Old Law — A 
 Scotch Cash Credit — General Solidity of Scotch 
 Banks — Responsibility of Bank Partners — Lazv on 
 Attaching a Debtors Property — Scotch and Irish 
 Banks in Lojidon. 
 
 The monopoly given to the Bank of England by par- 
 liament by the Act of 1708, preventing more than six in- 
 dividuals from entering into a partnership for carrying on 
 the business of banking, did not extend to Scotland. In 
 consequence of the exemption, many banking companies, 
 with numerous bodies of partners, have existed for a 
 lengthened period in that part of the empire. 
 
 The earliest banking institution in North Britain was 
 tlic Bank of Scotland. It was projected by a Mr. John 
 Holland, of London, assisted by William Paterson, founder 
 
 i
 
 BANK OF ENGLAND. 
 
 
 of the Bank of England, and was establisheos Ivp Acti^f >''^^^c \ ' 
 the Scotch Parh'ament, in 1694. It was kno\\?Kl^ theX^ / -.~^. ^ 
 name of the Governor and Company of the Bank orSi;;o€V/y ^'<-^ \i 
 land, and modeled in many particulars after the Bank or**-»i=; 
 England. Its original capital was i^i,ooo,ooo, or £100,- 
 000 sterling, distributed in shares of ^1,000 Scotch, or 
 ^63., 6s., 8d., sterling, each. In 1727 came the Royal 
 Bank of Scotland ; in 1746, the British Linen Company, 
 for the purpose, as its name implies, of undertaking the 
 manufacture of linen. But the views in which it origi- 
 nated were speedily abandoned, and it became a banking 
 company only. In 18 10 came the Commercial Bank, and 
 in 1825 the National Bank. Joint-stock banks have been 
 established freely. These Scotch banks have passed 
 readily through commercial crises which have destroyed 
 large numbers of such institutions in England, The 
 affairs of the banks are uniformly conducted by a board of 
 directors, annually chosen by shareholders. The Bank of 
 Scotland began to issue £1 notes so early as 1704, and 
 their issue has since been continued without interruption. 
 In England no notes below £<, are issued. 
 
 All the Scotch banks receive deposits of as low a 
 value as ^10, and often lower, and allow interest upon 
 them. The interest allowed by the banks upon deposits 
 varies, from time to time, according to the variations in 
 the currency rate of interest. 
 
 The Bank of Scotland and the Bank of England are 
 almost identical in management and principle. 
 
 The bill creating the Bank of Scotland exempted its 
 capital from all public burdens, and gave it the exclusive 
 banking in Scotland for twenty-one years, or until 17 16.
 
 250 HISTORY OF THE 
 
 The objects for which the bank was instituted, and its 
 mode of management, were intended to be, and have been 
 in most respects, similar to those of the Bank of England. 
 The responsibility of the shareholders is limited to the 
 amount of their shares. The capital of the bank was 
 increased to ;^20O,0OO in 1774, and in 1804 was made 
 ^i,5CX3,ooo, its present amount, although the capital was 
 increased to ^3.000,000 in 1873, by private act. 
 
 The Bank of Scotland is the only Scotch bank con- 
 stituted by Act of Parliament. It began at a very early 
 period to receive deposits on interest, and to grant credit 
 on cash accounts, a minute of the directors with respect 
 to the mode of keeping the latter being dated as far back 
 as 1729. It is, therefore, entitled to the credit of having 
 introduced and set on foot the distinctive principles of the 
 Scotch banking system, which, whatever may be its 
 defects, is superior to most other systems hitherto estab- 
 lished. Generally speaking, the Bank of Scotland has 
 been cautiously and skilfully conducted ; and there can 
 be no doubt that it has been productive, both directly and 
 as an example to other banking establishments, of much 
 public utility and advantage. 
 
 It may be worth mentioning that the law creating 
 the Bank of Scotland declared that all foreigners who 
 became partners in the bank, should by doing so become, 
 to all intents and purposes, naturalized Scotchmen. After 
 being for a long time forgotten, this clause was taken ad- 
 vantage of in 18 18, when several aliens acquired property 
 in the bank in order to secure the benefit of naturalization. 
 I^ut after being suspended, the privilege was finally can- 
 celled in 1822. 
 
 1 
 
 I
 
 BANK OF ENGLAND. 257 
 
 The loans or advances made by the Scotch banks are 
 either in the shape of discounts, or upon cash credits, or, 
 as they arc more commonly termed, " cash accounts." 
 
 A cash credit is a credit given to an individual by a 
 banking- company for a limited sum, seldom under /^lOO 
 or ^200, upon his own security, and that of two or three 
 individuals approved by the bank, who become securities 
 for its payment. The individual who has obtained such a 
 credit is enabled to draw the wdiole sum, or any part of it, 
 when he pleases, replacing it, or portions of it, according 
 as he finds it convenient, interest being charged upon 
 such part only as he draws out. 
 
 Joseph Hume, in his Essay on Balance of Trade, says: 
 "If a man borrows ;^5,ooo from a private hand, besides 
 that it is not always to be found when required, he pays 
 interest for it whether he be using it or not. His bank 
 credit costs him nothing, except during the moment it is 
 of service to him, and this circumstance is of equal ad- 
 vantage, as if he had borrowed money at a much lower 
 rate of interest." 
 
 Th's is plainly one of the most commodious forms in 
 which advances can be made. Cash credits are not, how- 
 ever, intended to be "dead loans;" and they are not 
 granted except to persons in business, or to those who are 
 frequently drawing out and paying in money. 
 
 The system of cash credits has been very well des- 
 cribed in the report of the Lords' Committee of 1826, on 
 Scotch and Irish banking. " There is, also," say their 
 lordships, "one part of their system which is stated by all 
 the witnesses to have had the best effects upon the peo- 
 ple of Scotland, and particularly upon the middling and
 
 258 HISTORY OF THE 
 
 poorer classes of society, in producing and encouraging 
 habits of frugality and industry. The practice referred to 
 is that of cash credits. Any person who applies to a 
 bank for a cash credit is called upon to produce two or 
 more competent sureties, who are jointly bound ; and 
 after a full inquiry into the character of the applicant, the 
 nature of his business, and the sufficiency of his securities, 
 he is allowed to open a credit, and to draw upon the bank 
 for the whole of its amount, or for such part as his daily 
 transactions may require. To the credit of the account 
 he pays in such sums as he may not have occasion to use, 
 and interest is charged or credited upon the daily balance, 
 as the case may be. From the facility which these cash 
 credits give to all the small transactions of the country, 
 and from the opportunities which they afford to persons 
 who begin business with little or no capital but their 
 character, to employ profitably the minutest products of 
 their industry, it cannot be doubted that the most im- 
 portant advantages are derived to the whole community. 
 The advantage to the banks that give these cash credits 
 arises from the call which they continually produce for 
 the issue of their paper, and from the opportunity which 
 they afford for the profitable employment of a part of 
 their deposits." 
 
 The expense of a bond for a cash credit of i5"50O is 1 2s. 
 6d. stamp duty, and a charge of from 5^. to lOi-. 6d. per 
 cent, for preparing it. 
 
 There have been, on the whole, comparatively few 
 failures among the Scotch banks. In 1793 and 1825, when 
 so many of the English banks were swept off, there was 
 not a single establishment in Scotland that gave way. It 
 
 I
 
 BANK or ENGLAND. 259 
 
 Is thought, however, that the long familiarity of the inhab- 
 itants with banks and paper money, and the less risk that 
 has attended the business of banking in. Scotland, have 
 been the principal causes of the greater stability of the 
 Scotch banks. 
 
 This superior solidity appears to have been owing to 
 various causes, — partly to the banks having, for the most 
 part, large bodies of partners, who, being conjointly ai*d 
 individually bound for the debts of the companies to which 
 they belong, go far to render their ultimate security all 
 but unquestionable, and partly to the facility afforded by 
 the law of Scotland of attaching a debtor's property, 
 whether it consist of land or movables, and making it 
 available for the payment of his debts. 
 
 A creditor in Scotland is empowered to attach the 
 real and heritable as well as the personal estate of his 
 debtor, for payment of personal debts, among which may 
 be classed debts due by bills and promissory notes ; and 
 recourse may be had, for the purpose of procuring pay- 
 ment, to each description of property at the same time. 
 Execution is not confined to the real property of a debtor 
 merely during his life, but proceeds with equal effect upon 
 that property after his decease. 
 
 The law relating to the establishment of records gives 
 ready means of procuring information with respect to the 
 real and heritable estate of which any person in Scotland 
 may be possessed. No purchase of an estate in that coun- 
 try is secure until the sasine (that is, the instrument cer- 
 tifying that actual delivery has been given) is put on 
 record, nor is any mortgage effectual until the deed is in 
 like manner recorded.
 
 200 HISTORY OF THF. BANK OF ENGLAND. 
 
 In the case of conflicting pecuniary claims upon real 
 property, the preference is not regulated by the date of 
 the transaction, but /y ///i' da/e of its record. These 
 records arc accessible to all persons ; and thus the public 
 can with ease ascertain the effective means which a bank- 
 ing company possesses of discharging its obligations ; and 
 the partners in that company are enabled to determine, 
 with tolerable accuracy, the degree of risk and responsi- 
 bility to which the private property of each is exposed. 
 
 English joint-stock banks of issue are debarred from 
 setting up branches in London, or within sixty-five miles 
 of it, a prohibition originally imposed on them in the 
 interest of the Bank of England as a bank of issue. 
 There is no such prohibition affecting Scotch and Irish 
 banks, which can set up offices in London or elsewhere in 
 England subject to the single condition affecting all bank- 
 ing establishments set up in England since 1844, that 
 notes other than Bank of England notes are not issued at 
 such offices ; and it is obvious that a Scotch or Irish bank- 
 ing company establishing a head office in London would 
 be able to give it at once a large agency business, and 
 would be able to feed it continuously with new connec- 
 tions, owing to the flow of immigration from Scotland and 
 Ireland to London. Accordingly, the directors of the 
 National Bank of Ireland began to conduct the general 
 business of banking at their head office in London in 
 1854, and they have subsequently set up branches in the 
 metropolis, each of which is understood to be the centre 
 of much business. This example was so far followed, 
 that the National Bank of Scotland started an office in 
 London in 1864 ; the Bank of Scotland did the same in 
 1867; and the Royal Bank in 1874, and others followed later.
 
 CHAPTER XXI. 
 
 A FINANCIAL PRESSURE. 
 
 Definition of a Pressure — Dates of Principal Pressures — 
 Speculation the Alain Cansc — Gilbart on Pressures — 
 The Duties of a Banker — Pressure of i8^y — Report 
 of the Lords' Committee — The Government Asks the 
 Bank of England for Assistance — Correspondence 
 Betiveen the Bank and the Goveriiment. 
 
 A PRESSURE on the money market may be defined a 
 difficulty of getting money, either by way of discounting 
 bills, or of loans upon government securities. This diffi- 
 culty is usually accompanied by an unfavorable course of 
 exchange, a contraction of the circulation of the Bank of 
 England, and a high rate of interest. These three cir- 
 cumstances have the relation to each other of cause and 
 effect. The unfavorable course of exchange induces the 
 Bank of England to contract her circulation ; and the 
 contraction of the circulation, by rendering money more 
 scarce, increases its value, and leads to an advanced rate 
 of interest. The removal of the pressure is in the same 
 order — the foreign exchange become favorable, the Bank 
 of England then extends her circulation, money becomes 
 more abundant, and the rate of interest falls. The degree
 
 2G2 
 
 HISTORY OF THE 
 
 to which the exchanges arc unfavorable is indicated by 
 the stock of gold in the Bank of England ; and when this 
 is at its lowest amount, the pressure may be considered 
 to have attained its extreme point ; for, as the amount 
 of <^old increases, the bank will extend her circulation, 
 and the pressure will subside. The principal pressures 
 that have occurred of late years have been those of 1825, 
 1836, 1839, 1847, 1857 and 1866. 
 
 A season of pressure has always been preceded by 
 one of speculation ; and hence it follows that a banker 
 who wishes to be easy in a time of pressure must act 
 wisely in the previous season of speculation. It requires 
 no ordinary firmness to do this. But unless a banker act 
 wisely in the previous time of speculation, his wisdom 
 will probably be of little avail when the pressure arrives. 
 
 Gilbart, in his " Treatise on Banking," has considerable 
 to say about pressures, and we reproduce a few of his 
 remarks and suggestions : — 
 
 "While, therefore, money is still abundant, the public 
 funds high, and other bankers liberal in accommodation, 
 he should be doubly cautious in times of pressure or of pan- 
 ics, and also when a severe stringency of the money market 
 is apparent, against taking bills of a doubtful character, or 
 making advances upon irregular securities. He should 
 not suffer the desire of employing his funds, or the fear of 
 offending his customers, to induce him to deviate from 
 sound banking principles. He should also take this oppor- 
 tunity of calling up all dead or doubtful loans, and of get- 
 ting rid of all weak customers. He should also, under 
 any circumstances, avoid making advances for any length 
 of time, and investments in securities that are not at all
 
 BANK OF ENGLAND. 263 
 
 times convertible, or the price of which is likely to sustain 
 a great fall on the occurrence of a pressure. The discount 
 of first-rate commercial bills having a short time to run, 
 or short loans on stock or other undesirable security, how- 
 ever low the interest received, seem to be the most safe 
 and advantageous transactions. 
 
 " When the aspect of affairs seems to threaten that 
 money will be still more in demand, and the failure of a 
 number of merchants and traders may consequently be 
 apprehended, it behooves him to prepare for approaching 
 events by avoiding all discounts of bills of an inferior 
 class, and by keeping his funds in an available state. 
 With a view to these objects, he will review all his loan 
 and discount accounts, call up his loans of long standing, 
 where it can be done without injury to the interest or rep- 
 utation of his bank, avoid all overdrawn accounts, and 
 reduce the amount of discounts on the inferior class of 
 accounts. In performing these operations, he will 
 exercise due judgment and discretion, making proper 
 distinction between his customers and reducing chiefly 
 those bills which are of an unbusiness character, or which 
 are drawn on doubtful people, or upon parties that he 
 knows nothing about; he will also mark particularly those 
 accounts which require large discounts, but keep no cor- 
 responding balance to the credit of their current accounts. 
 As the pressure advances he will find that there are three 
 demands upon his funds. First, his customers will re- 
 duce their balances, and keep less money in his hands. 
 Money lodged at interest will be taken away, because the 
 parties can make higher interest elsewhere, or they will 
 be tempted by the low price of stock to invest it in gov-
 
 264 HISTORY OF THE 
 
 crnmcnt securities. Secondly, he Avill have a greater 
 demand for loans and discounts, not merely from weak 
 i:)cople whom he might not care about refusing, but from 
 persons of known wealth, whom it is his interest and his 
 inclination to oblige. Thirdly, he will think it prudent to 
 guard against sudden demands by keeping a larger 
 amount of bank notes in his possession. To meet all 
 these demands, he will be compelled to realize on some of 
 his securities, and he will realize those first on which he 
 will sustain no loss. 
 
 " During a pressure a banker will have to give a great 
 many refusals, and some discretion will be necessary in 
 the form of giving these refusals. Let him refuse in what 
 way he may at such a season, he will be sure to give 
 offence. And the party refused will possibly repeat the 
 refusal to his business acquaintances, and, from motives of 
 ignorance or malignity, represent the refusal as having 
 arisen from want of means, and possibly may circulate a 
 report that the banker is about to stop payment. Hence 
 rumors about banks are always rife in seasons of pressure, 
 and they add to the general want of confidence which 
 then prevails. As far as past experience goes, all panics 
 or pressures have resulted in a subsequent abundance of 
 money. It would be a grand thing for a banker if he 
 could know beforehand at what precise point this change 
 would take place. But this he cannot know, and he had 
 better not speculate on the subject, but just follow the 
 course of events as they occur. 
 
 " The pressure of 1847 will be briefly traced. At the 
 meeting of Parliament in the latter end of 1847, commit- 
 tees were appointed by both the House of Lords and the
 
 BANK OF EXGI-AND. 265 
 
 House of Commons, to "inquire into the causes of the dis- 
 tress which has for some time prevailed among the 
 commercial classes ; and how far it has been affected by 
 the laws for regulating the issue of bank notes payable on 
 demand." 
 
 Following is an extract from the report of the Lord's 
 Committee as to the causes of the pressure: — 
 
 "A sudden and unexampled demand for foreign corn, 
 produced by a failure in many descriptions of agricultural 
 produce throughout the United Kingdom, coincided with 
 the unprecedented extent of speculation i)roduced by in- 
 creased facilities of credit and a low rate of interest, 
 had for some time occasioned over-trading in many 
 branches of commerce. This was more especially felt in 
 railroads, for which calls to a large amount were daily be- 
 coming payable, without corresponding funds to meet 
 them, except by the withdrawal of capital from other pur- 
 suits and investments. These causes account for much 
 of the pressure under which many of the weaker com- 
 mercial firms were doomed to sink, and which was felt 
 even by the strongest. To these causes may be added a 
 contemporaneous rise of price in cotton ; and, with re- 
 spect to houses connected with the East and West India 
 trade, a sudden and extensive fall in the price of sugar, by 
 which the value of their most readily available assets un- 
 derwent great depreciation. Some of these causes are 
 obviously beyond the reach of legislative control. But 
 upon those which are connected with the extension of 
 commercial speculation, encouraged or checked by the 
 facility or the difficulty of obtaining credit, by the advance 
 of capital and the discount of bills, the powers and posi-
 
 266 HISTORY OF THE 
 
 tion of the Bank of England must at all times enable that 
 corporation to exercise an important influence. The com- 
 mittee have consequently felt it to be their duty to inquire 
 into the course pursued by the bank, and they have come 
 to the conclusion that the recent panic was materially ag- 
 gravated by the operation of that statute, and by the pro- 
 ceedings of the bank itself This effect may be traced 
 directly to the Act of 1844, in the legislative restriction 
 imposed on the means of accommodation, whilst a large 
 amount of bullion was held in the coffers of the bank, and 
 during a time of favorable exchanges ; and it may be 
 traced to the same cause, indirectly, as a consequence of 
 great fluctuations in the rate of discount, and of capital 
 previously advanced at an unusually low rate of interest. 
 This course the bank would hardly have felt itself justified 
 in taking, had not an impression existed that, by the sep- 
 aration of the issue and the banking departments, one in- 
 flexible rule for regulating the bank issues has been sub- 
 stituted by law in place of the discretion formerly invested 
 in the bank." 
 
 To tide over the "pressure" it was found necessary 
 on the part of the government to call on the Bank of Eng- 
 land again. We have been furnished a copy of the cor- 
 respondence between the First Lord of the Treasury and 
 the Chancellor of the Exchequer and the Bank of Eng- 
 land, respecting the suspension of the Act of 1844 • — 
 
 " Downing Street, Oct. 25, 1847. 
 " To the Governor and Deputy-Governor of the Bank of 
 
 England: — 
 
 " Gentlemen : — Her Majesty's Government has 
 seen with the deepest regret the pressure which has
 
 BANK OF ENGLAND. 267 
 
 existed for some weeks upon the commercial interests of 
 the country, and that this pressure has been aggravated 
 by a want of that confidence which is necessary for carry- 
 ing on the ordinary deahngs of trade. 
 
 " They have been in hopes that the check given to 
 transactions of a speculative character, the transfer of cap- 
 ital from other countries, the influx of bullion, and the 
 feeling which a knowledge of these circumstances might 
 have been expected to produce, would have removed the 
 prevailing distrust. 
 
 " They were encouraged in this expectation by the 
 speedy cessation of a similar state of feehng in the month 
 of April last. 
 
 " These hopes have, however, been disappointed, and 
 Her Majesty's Government has come to the conclusion, 
 that the time has arrived when it ought to attempt, by 
 some extraordinary and temporary measure, to restore 
 confidence to the mercantile and manufacturing commu- 
 nity. 
 
 " For this purpose, they recommend to the directors 
 of the Bank of England, in the present emergency, to 
 enlarge the amount of their discounts and advances upon 
 approved security; but that, in order to retain this opera- 
 tion within reasonable limits, a high rate of interest 
 should be charged. 
 
 "In present circumstances, they would suggest that 
 the rate of interest should not be less than 8 per cent. 
 
 "If this course should lead to any infringement of the 
 existing law, Her Majesty's Government will be prepared 
 to propose to Parliament on its meeting, a Bill of Indem- 
 nity. They will rely upon the discretion of the directors
 
 268 HISTORY OF THE 
 
 to reduce as soon as possible the amount of their notes, if 
 any extraordinary issue should take place, within the 
 limits prescribed by law. 
 
 "Her Majesty's Government are of opinion that any 
 extra profit derived from this measure should be carried 
 to the account of the public, but the precise mode of 
 doing so much must be left to future arrangement. 
 
 "Her Majesty's Government are not insensible of the 
 evil of any departure from the law which has placed the 
 currency of this country upon a sound basis; but they 
 feel confident that, in the present circumstances, the 
 measure which they have proposed may be safely 
 adopted, and at the same time the main provisions of that 
 law, and the vital principle of preserving the convertibility 
 of the bank note, may be firmly maintained. 
 "We have the honor to be, gentlemen, 
 "Your obedient humble servants, 
 
 [Signed] "J. RusSELL. 
 
 •'Charles Wood." 
 
 «' To the First Lord of the Treasiiry and the Chancellor of 
 
 the Exchequer: — 
 
 "Bank of England, Oct. 25, 1847. 
 
 "Gentlemen: — We have the honor to acknowledge 
 }-our letter of this day's date, which we have submitted fo 
 the Court of Directors, and we enclose a copy of its reso- 
 lutions therein: — 
 
 ''Resolved, i. — That this Court do .accede to the recom- 
 mendation contained in the letter from the First Lord of 
 the Treasury and the Chancellor of the Exchequer, dated 
 this day, and addressed to the governor and deputy gov- 
 ernor of the Bank of England, which has just been read.
 
 BANK OF ENGLAND. 2Gy 
 
 "2. — That the minimum rate of discount on bills not 
 having more than ninety-five days to run be eight per 
 cent. 
 
 " 3. — That the advances be made on bills of exchange, 
 on stock, exchequer bills, and other approved securities, 
 in sums of not less than two thousand pounds, and for a 
 period to be fixed by the governors, at the rate of eight 
 per cent, per annum. 
 
 "We have the honor to be, gentlemen, 
 "Your most obedient servants: 
 
 "James Morris, Governor. 
 "H. J. Prescott, Deputy Governor." 
 
 " To the Governor and Deputy Governor of the Bank of 
 England: — 
 
 "Downing Street, Nov. 23, 1847. 
 
 " Gentlemen — Her Majesty's Government have 
 watched, with the deepest interest, the gradual revival of 
 confidence in the commercial classes of the country. 
 
 " They have the satisfaction of believing that the 
 course adopted by the Bank of England, on their recom- 
 mendation, has contributed to produce the result, whilst 
 it has led to no infringement of the law. 
 
 " It appears, from the accounts which j-ou have trans- 
 mitted to us, that the reserve of the Bank of England has 
 been for some time steadily increasing, and now amounts 
 to ^5.000,000. This increase has, in a great measure, 
 arisen from the return of notes and coin from the country. 
 
 "The bullion exceeds ^10,000,000, and the state of 
 the exchanges promises a further influx of the precious 
 metals.
 
 270 HISTORY OF THE KANK OF ENGLAND. 
 
 " The knowledge of these facts by the pubhc is cal- 
 culated to inspire still further confidence. 
 
 "In these circumstances, it appears to Her Majesty's 
 Government, that the purpose which they had in view in 
 the letter which we addressed to you on Oct. 25, has been 
 fully answered, and that it is unnecessary to continue that 
 letter any longer in force. 
 
 "We have the honor to be, gentlemen, 
 " Your obedient, humble servants, 
 [Signed] "J. RusSELL, 
 
 " Chas. Wood." 
 
 " To the First Lord of the Treasury and the Chancellor oj 
 the Exchequer: — 
 
 " Bank of England, Nov. 23, 1847. 
 " Gentlemen — W^e have the honor to acknowledge 
 the receipt of your letter of this day's date, in which you 
 communicate to us that in consequence of the gradual re- 
 vival of confidence in the commercial classes of the 
 country, it appears to Her Majesty's Government that the 
 object they had in view in the letter they addressed to us 
 on Oct. 25th has been fully answered, and that it is un- 
 necessary to continue that letter any longer in force. 
 " We have the honor to be, gentlemen, 
 " Your obedient, humble servants, 
 [Signed] "James Morris, Governor. 
 
 " H. J. Prescott, Deputy Governor."
 
 CHAPTER XXII. 
 
 A COPY OF THE CORRESPONDENCE 
 
 BETWEEN THE 
 
 CHANCELLOR OF THE EXCHEQUER 
 
 AND THE 
 RELATIVE TO THE 
 
 RENEWAL OF THE CHARTER OF 1844, 
 
 ■Which is Treated at Length in Chapter IX, beginning on page 125. 
 
 To the Governor and Dep7ity Governor of the Bank of 
 
 Englaiici : — 
 
 Downing Street, i6th April, 1844. 
 
 Gentlemen — As under the provisions of the 3 and 4 
 W. IV. c. 98, the 1st of August is the day after which it 
 will be competent to the House of Commons to give a 
 notice to the Bank of England as to the termination, 
 within a limited period, of their present exclusive priv- 
 ileges, Her Majesty's Government judge it advisable to
 
 272 HISTORY OF THE 
 
 endeavor to come to an understanding with the bank as to 
 their future relation to the government, rather than to 
 terminate the existing arrangements by recurring to the 
 notice required by the Act of Parliament. 
 
 In submitting to you the views of tlie government, I 
 would premise that the main object of the government in 
 any new arrangement is one in the success of which thebank 
 can be scarcely less interested than the government ; 
 namely, to place the general circulation of the country on a 
 sounder footing, and to prevent, as much as possible, fluc- 
 tuations in the currency, of the nature of those which 
 have, at different times, occasioned hazard to the bank 
 and embarrassment to the country. 
 
 It appears highly desirable that any new arrange- 
 ment should be founded on the basis of an entire 
 separation of the business of the issue of notes from that 
 of banking. This measure might be effected by the 
 establishment of a Public Department for the issue of 
 notes independent altogether of the bank; but Her 
 Majesty's Government is willing, in the first instance, to 
 consider whether this can be effected by a division of the 
 bank into two distinct and separate departments — to con- 
 duct exclusively, one the business of issue, the other that 
 of banking. The first question for the bank to consider 
 is, how far they are willing to undertake this duty. 
 Should they be disposed to administer the functions of 
 issue, it would be desirable that the following principle 
 should be adhered to: — That a certain amount of notes 
 should be issued on securities, and that all other notes 
 required beyond that amount should be issued only in ex- 
 change for bullion — that the securities should be, to a
 
 BANK OF ENGLAND. 273 
 
 certain extent, of such a nature as to admit of ready con- 
 vertibility, and should not be increased beyond the 
 amount originally fixed, except under circumstances to be 
 stated by the bank to the government ; and after the 
 consent of certain members of the government, namely, 
 the First Lord of the Treasury, the Chancellor of the 
 Exchequer, and the Master of the Mint, shall have been 
 signified. 
 
 It is proposed from henceforth to prohibit the estab- 
 lishment of any new bank of issue; to restrict the issue of 
 their own notes to those banks at present exercising that 
 privilege, and to limit the issue of such banks to the 
 amount of notes issued by them on an average of a given 
 preceding period, and in the event of their failure or 
 liquidation, to prohibit under any circumstances, the re- 
 sumption of their own circulation. The void created by 
 the withdrawal of any existing private or joint-stock bank 
 circulation, either voluntarily or under the circumstances 
 adverted to, should be supplied, if necessary, by the sub- 
 stitution of notes of the Bank of England ; and, in such a 
 case, the bank acting in concert with the government, as 
 provided for in a preceding paragraph, might be author- 
 ized to make a proportionate increase in the amount of 
 those securities which constitute the foundation of the 
 issue of paper; the whole net profit derived from this 
 additional issue would be carried to the account of the 
 government, and would be in addition to the annual pay- 
 ment which the bank may agree to make. 
 
 It is intended that a weekly publication should take 
 place, showing the state of both the issue and banking de- 
 partments of the bank, and it will be required that each
 
 274 HISTORY OF THE 
 
 private and joint-stock bank issuing its own notes, should 
 make once a week a publication of the amount of their 
 notes in circulation. 
 
 Under such an arrangement, it is obvious that the 
 bank will not merely retain its existing privileges of hav- 
 ing no bank of more than six partners issuing notes within 
 sixty-five miles of London, but will be secured against the 
 competition within that district, of any new banks of issue, 
 even with less than six partners, which might otherwise 
 be established ; and although, as the profit of any increased 
 issue will be placed henceforth to the account of the gov- 
 ernment, the bank will not derive direct pecuniary advan- 
 tage, yet the extension of business and of confidence in 
 the bank (which must result from the extension of its 
 notes consequent upon this further exclusion) must be to 
 the bank a source of no inconsiderable benefit. 
 
 I must add, that it is not proposed to continue the 
 prohibition which is now in force as to the drawing, accept- 
 ing, or paying bills, within the sixty-five mile circle around 
 London. 
 
 Should an arrangement on these principles meet the 
 views of the bank, the points remaining for consideration 
 will be, the period for which the bank charter shall be re- 
 newed, and the amount of the payment which ought to 
 be made by the bank to the public during the period of its 
 continuance. 
 
 Her Majesty's Government considers it advisable that 
 the charter should be granted for ten years, from the ist 
 of August, 1845, and should, at the expiration of that 
 period, be terminable at any time upon a notice of twelve 
 months, but, until such notice be given, should continue
 
 BANK OF ENGLAND. 275 
 
 in force. The amount of payment to be made to the 
 public by the bank will depend upon a joint consideration 
 of the benefits secured by this arrang^ement to the 
 banking department of the bank, and of the pro- 
 portion of the profits of the issue or circulation de- 
 partment, which the public is entitled to claim. As 
 bankers, the bank will retain the management of the pub- 
 lic debt, and the advantage of the government deposits 
 and the balances of the several public accounts at the 
 bank. It must, however, be distinctly understood, that 
 the government retains an entire discretion as to the 
 amount of such deposits to be left in the hands of the 
 bank, and as to a participation in the profits of such de- 
 posits, if they should, from any circumstances, be materi- 
 ally increased. 
 
 With respect to the profits of the circulation depart- 
 ment, supposing the fixed amount of securities to be i^i4,- 
 000,000, the profit would, obviously, be the ciifiference be- 
 tween the interest received on those securities and the ex- 
 penditure required for the manufacture and issue of the 
 notes, the keeping of the accounts connected with them, and 
 the receipt and custody of the bullion, which might, from 
 time to time, come into the hands of that department. 
 
 Assuming three per cent, as the rate of interest, the 
 gross profit of the circulation department would be ^420,- 
 000. 
 
 It was stated by the bank, in a paper presented to the 
 committee on the bank charter in 1832, that the expense 
 of the circulation was at that time ^106,000. It would be 
 desirable that the items constituting this aggregate sum 
 should be separately considered, with a view of ascertain-
 
 276 HISTORY OF THE 
 
 ing whether, without diminishing the advantages now 
 afforded to the public, a reduction might not be effected 
 in the amount. I will, however, assume it, for my present 
 purpose, as amounting to ;^icxd,ooo. 
 
 A sum of ^320,000 would then remain as the profit of 
 the circulation department, from which would have to be 
 further deducted the amount of stamp duty paid on the 
 notes of the Bank of England, being about ;^6o,ooo, and 
 the sum, whatever it may be, which the bank now allows 
 to those banks of issue which have substituted Bank of 
 England notes for their own paper, and which I assume, 
 for the purpose of discussion, as about ^^'20,000, The net 
 profits, therefore, in which the public would have a right 
 to share, would be a sum of ^^240,000, or, if it were thought 
 more advisable to remove the stamp duty on the notes of 
 the bank, ;^300,ooo. In fixing the proportion of this 
 amount which ought to be paid to the public, I do not on 
 the one hand put out of view the fair claim of the bank to 
 compensation, as managers on behalf of the public of the 
 circulation of the country ; but, on the other hand, the 
 bank will not fail to bear in mind that, by the advance of 
 their capitalof;i^i 1,000,000 to the public at 3 percent., they 
 have hitherto virtually paid to the public a sum little 
 short of one per cent, on that amount ; and that now, 
 owing to the present circumstances of the country, that 
 advance is no longer any sacrifice on the part of the bank, 
 nor any compensation to the public for the benefit derived 
 to the bank from its connection with the government. It 
 may, therefore, justly become a question, whether that 
 debt of the public to the bank should be continued at its 
 present amount, or at its present rate of interest.
 
 BANK OF ENGLAND. 277 
 
 It appears to me, therefore, that in claiming for the 
 public an annual payment exceeding that now made by 
 the bank, while I reserve also to the public the net profit 
 which may result from any addition hereafter to be made 
 to the amount of fixed securities, I am not claiming more 
 than the bank will deem a just compensation for the ad- 
 vantages secured to them. 
 
 It appears to me that the real interests of the bank, 
 taking a comprehensive view of those interests, will be 
 materially promoted by the proposed arrangement. It 
 proposes to leave to them the management of the circula- 
 tion; it gives a new and decisive proof of the public 
 confidence reposed in them, while the measure itself is 
 calculated, by increasing the control of the bank over the 
 paper currency of the country, to secure them from much 
 expense and danger to which they have hitherto been 
 exposed. 
 
 I have the honor to be, 
 
 gentlemen. 
 Your very faithful and obedient servant, 
 [Signed] Henry Goulburn. 
 
 To the RigJit Honorable , the Chancellor of the Ex- 
 chequer, M. P. 
 
 Bank of England, April 30, 1884. 
 
 Sir: — We have the honor to acknowledge the 
 receipt of your letter of the 26th instant, which we have 
 submitted to the consideration of the Committee of Treas- 
 ury and of the Court of Directors, and we are desired to 
 assure you that they, in common with ourselves, are duly 
 impressed with the importance of an early settlement of 
 the question affecting the circulation of the country, and
 
 2*78 HISTORY OF THE 
 
 arc satisfied that the bank, relinquishing its claim to the 
 notice prescribed by law, will give its most favorable con- 
 sideration to any proposal from Her Majesty's Ministers 
 having for its object to place the circulation of the 
 country on a sounder footing. 
 
 To the "Entire separation of the business of Issue of 
 Notes from that of Banking," we are not disposed to offer 
 any objection, and are of opinion that a division of the 
 bank into two distinct and separate departments for that 
 object, can be affected without difficulty ; neither do we 
 differ respecting the principles of the intended measures 
 detailed in your letter. 
 
 It is now proposed to take from the bank all the future 
 advantages that may arise from the substitution of its 
 notes for the present issues of joint-stock and private 
 banks. We are prepared to admit the favorable impres- 
 sion which the public opinion will receive from the fact 
 of the bank having no pecuniary interest in the more gen- 
 eral adoption of its notes. It must, however, be recol- 
 lected that under the arrangement of 1833, by which it 
 was agreed to allow to the public ;^i 20,000 per annum, 
 very considerable advantages were held out to the bank 
 from the extension of its circulation ; these were never 
 realized, in consequence of the declared inability of the 
 government to carry into effect the measures on which 
 that speculation was founded. 
 
 As the government considers that " A weekly publi- 
 cation should take place of the state both of the issue 
 and banking departments of the bank, and that each joint 
 stock and private bank, issuing its own paper, should make, 
 once a week, a pubHcation of the amount of its notes in 
 
 3
 
 BANK OF ENGLAND. 279 
 
 circulation," the court would raise no objection to that ar- 
 rangement ; but we would suggest, for the consideration 
 of the government, if the publication of the banking ac- 
 counts can be regarded as essential ? 
 
 By the removal of "The prohibition now in force, as 
 to the drawing, accepting, or paying bills within the sixty- 
 five mile circle around London," the bank may incur some 
 loss in its banking department ; but more serious incon- 
 venience will result, if the power to accept should be ex- 
 ercised for the purpose of circulation, and thus interfere 
 with the great object of the projected measures ; a ques- 
 tion deserving the most serious consideration. 
 
 On the subject of the proposed grant of the bank 
 charter for ten years from the ist August, 1845, subject 
 at the end of that period to terminate upon a notice of 
 twelve months, but until such notice be given to continue 
 in force ; we would suggest as a preferable plan, that if 
 notice shall not be given by the government at the end 
 of ten years, the charter should continue until after the 
 expiration of an additional period of ten years. It seems 
 to us that sufficient power of control would thus be re- 
 tained by the government, and that the inconvenience ar- 
 ising from repeated, if not annual, discussions on the sub- 
 ject, would thus be avoided. 
 
 The possession of the ^{J' 1 1 ,000,000 advanced by the 
 bank has ever been considered as affording additional se- 
 curity to the public, and contributing to that entire con- 
 fidence at all times placed in the solidity of the bank ; 
 and, although, at an interest of 3 per cent., the loan may 
 not at this moment impose any pecuniary sacrifice on the 
 bank, we see no benefit likely to arise to the public from
 
 280 HISTORY OF THE 
 
 its repayment. We, therefore, think it for the public 
 good that it should still be retained ; and we would, at 
 the same time, remark that any reduction in the interest 
 on this loan will necessarily diminish to a corresponding 
 extent, the profit in the issue department of the bank. 
 
 Referring to the estimate of the profit to be derived 
 from the department of issue, we must remark that we 
 calculate its actual expense at ^113,000 per annum; a 
 large outlay being incurred for the sole accommodation of 
 the public by bank notes, not being reissued in London; 
 by the complete registration of the issue and cancelment 
 of each note; by the preservation of the cancelled notes 
 for ten years for the purpose of legal reference, so that 
 each note can, in case of need, be traced, and frauds thus 
 be detected; and finally, by the ready supply of notes for 
 bullion or coin, besides various other arrangements 
 adopted solely for the public convenience. A reissue of 
 notes was commenced, as a measure of economy, in the 
 year 1838, but so much inconvenience was experienced by 
 the bankers and the public, that it was abandoned; and 
 the bank now issues about 20,000 notes, averaging in 
 amount from six to seven hundred thousand pounds, can- 
 celling also the same number and value, daily. 
 
 The allowance at present made to those joint-stock 
 and private banks under engagement to issue only Bank 
 of England paper, will, at one per cent., amount to 
 twenty-four thousand pounds, as appears by the Parlia- 
 mentary return ; and we submit the following as the 
 correct calculation, viz.: —
 
 BANK OF ENGLAND. 281 
 
 ^i4,ocxD,cxDO at 3 per cent. - - ^^420,000 
 
 Deduct the expense - ^113,000 
 Present allowance to the banks and 
 
 banking companies 24,000 137,000 
 
 ;^283,ooo 
 before any payment is made to the government. 
 
 In reference to the position of the bank, as having the 
 management of the public debt and the benefit of the 
 government deposits, we wish to state that the advantage 
 from the former is diminished by the great risk of forgery, 
 and from the latter by the alteration of the exchequer 
 accounts in 1834, which considerably reduced the amount 
 of the public balances ; but, in reply to the proposed 
 understanding that the government will retain an entire 
 discretion as to the amount of such deposits, as to a par- 
 ticipation in the profits arising from them, if they should, 
 from any circumstances, be materially increased, we beg 
 to say that we should not object to this, provided it is 
 conceded by the government that an allowance will be 
 made to the bank if the balances are reduced below their 
 present amount. 
 
 The benefits to the bank will also be further reduced 
 by the expenses which will be incurred in the collection 
 of the ordinary revenue ; and, in reference to these, it 
 should be stated that, in the year 1843, the clerks of the 
 bank travelled on the revenue account, 75,090 miles, Avith 
 the risk attending the custody and transit of ;!^9,047,ooo, 
 the money being brought immediately to the credit of the 
 government, saving to the public a considerable amount 
 of interest and risk. Taking these circumstances into con-
 
 282 HISTORY OK THE 
 
 sidcration, and bearing in mind that, under the proposed 
 arrangement, the bank will derive no advantage from the 
 extension of its circulation, with all the responsibility, an 
 abatement from the i^ 120,000 hitherto allowed to the pub- 
 lic may reasonably be expected ; for if the bank continue 
 this payment to the government, together with a liability 
 to the estimated amount of the stamp duty on the notes 
 issued on the fourteen millions of securities, viz., ;^49,ooo, 
 making a total of ^169,000, and incur, besides, the whole 
 responsibility of the extended circulation without profit, 
 the court is of opinion that it will be called upon to make 
 a larger sacrifice than in reason and justice can be 
 required. 
 
 We have the honor to be. 
 
 Sir, 
 Your very faithful and obedient servants, 
 [Signed] WILLIAM COTTON, Governor. 
 
 J. B. Heath, Deputy Governor. 
 
 To the Governor and Deputy Governor of the Bank of 
 England : — 
 
 Downing Street, May 2, 1844. 
 
 Gentlemen — I have the honor to acknowledge the 
 receipt of your letter of the 30th ultimo. 
 
 It is satisfactory to Her Majesty's Government to learn 
 that there is on the part of the Bank of England a general 
 concurrence in the principle of the proposal conveyed in 
 my letter of the 27th ultimo, and a readiness to coope- 
 rate in giving effect to them. 
 
 They observe with pleasure that, notwithstanding the 
 doubts which you suggested as to its utility, you offer no 
 objection to a weekly publication of the state of the bank- 
 ing as well as of the issue department.
 
 BANK OF ENGLAND. 
 
 283 
 
 That measure was recommended to you on behalf of 
 the government, under the conviction that such a publica- 
 tion would be advantageous to the public, and would carry 
 with it the strongest evidence of the stability and credit 
 of the institution over which your preside, and upon the 
 same grounds it still appears to the government to be of 
 essential importance. 
 
 I agree with you that if the removal of the existing 
 prohibition against accepting bills within the sixty-five 
 mile circle around London should lead to the introduction 
 of a new paper circulation, it might materially interefcre 
 with the object of the proposed arrangement. An at- 
 tempt might undoubtedly be made now to guard against 
 such an evil consequence, by imposing generally, and in 
 the case of all banking establishments, a limit upon the 
 sum for which the bills to be accepted might be drawn, or 
 by extending the dates at which they might become pay- 
 able. But, while such a measure might fail in proving an 
 effective check upon future evasions, it is calculated to 
 raise impediments in the way of legitimate banking busi- 
 ness. It appears, therefore, more advisable to trust for a 
 remedy for so serious an evil to the power of the govern- 
 ment — a power which will not fail to be exercised if the 
 abuse should arise — of applying by new legislative enact- 
 ment an adequate corrective. 
 
 Her Majesty's Government has well weighed the 
 reasons which you have urged for preferring a renewal of 
 the charter upon the terms granted in 1833, nnmel}-, for 
 twenty years, with the power of terminating it at a notice 
 given at the expiration of ten. 
 
 In making the proposal contained in my letter of the
 
 284 HISTORY or THE 
 
 27th ultimo, the government was mainly influenced by 
 the consideration, to which you appear also to attach 
 much weight, that it was not advisable unnecessarily to 
 agitate questions affecting the banking interests and the 
 currency of the country. 
 
 We confidently hope that the arrangements now to 
 be made will be found at the end of ten years to have 
 satisfied public expectation, and in that case there would 
 probably be a disposition, encouraged by the knowledge 
 that the subject was at any time open to discussion, to 
 forbear from proposing a change in the existing system. 
 But on the other hand, if the opportunity of revision 
 afforded at the end often years were not again to occur 
 till the expiration of a similiar period, the necessity of 
 reviewing what was otherwise to be for so long a time 
 irrevocable, could scarcely be denied. 
 
 On those grounds Her Majesty's Government con- 
 siders that it would be more for the public interests that 
 the charter should be continued as proposed in my former 
 letter. 
 
 The reasons offered by you for the retention by the 
 public of the ^11,000,000 advanced by the bank, are 
 entitled to considerable weight; and in the event of the 
 acquiescence of the bank in the terms proposed, Her 
 Majesty's Government is prepared to consent to that 
 debt remaining during the further continuance of the 
 charter on its present footing. 
 
 With respect to the public balances in the hands of 
 the bank, I deem it unnecessary to make any observation. 
 The government must necessarily retain an unfettered 
 discretion as to the amount which it may be proper to
 
 BANK OF ENGLAND. 285 
 
 keep in the bank, and in the event of any extraordinary 
 accumulation beyond the usual amount, it would be here- 
 after, as it has been heretofore, competent to them to 
 make any arrangement with the bank which might ap- 
 pear to them conducive to the public interests. 
 
 With reference to the expense of the department of 
 issue, I readily admit the importance of not discontinuing 
 any one of the facilities which the bank has hitherto 
 afforded to the public, although necessarily attended with 
 an increase of charge. Nor, after a due consideration of 
 the detail of the expenditure of ^113,000, which you have 
 assigned to the issue department, am I prepared to state 
 that it is excessive. 
 
 But after making the deductions which you have 
 specified, the profit of the issue department still amounts 
 to i;983,ooo. 
 
 Under these circumstances, I cannot feel myself 
 authorized to hold out to the bank any expectation of an 
 abatement from the sum of iJ"i 20,000, which they now 
 allow to the public ; nor can I admit the payment of ^^49,- 
 000 to be an adequate compensation for the sum which 
 would accrue to the public from leaving the Bank of Eng- 
 land notes still subject to stamp duty. The sum latterly 
 received on this account has been, as I previously stated, 
 ;^6o,ooo. I should certainly have preferred the continued 
 payment by the bank of duty on the amount of notes in 
 circulation. By the arrangement, however, which I have 
 proposed, the public will henceforth be entitled to receive 
 the whole net profit of any issue of notes founded on any 
 addition to the fixed amount of securities. 
 
 The stamp duty on such notes would necessarily be a
 
 286 HISTORY OF THE 
 
 deduction from the profit for which the bank have to 
 account ; and I anticipate considerable difficulty, in the 
 case of such additional issue, of ascertaining the precise 
 proportion of such issue which might be in circulation, and 
 on which alone the duty would attach. I am, therefore, 
 prepared, on behalf of the government, to accept, as com- 
 pensation for the stamp duty a sum of ^60,000. 
 
 If, therefore, the Bank of England is prepared to 
 make a fixed annual payment to the public, amounting in 
 the whole to ;^ 180,000, subject to the several conditions 
 which I have in this and in my former letter submitted to 
 you. Her Majesty's Government will be prepared to 
 recommend to Parliament the continuance of the charter 
 for the period for which I have specified. 
 I have the honor to be, 
 
 gentlemen, 
 Your most obedient servant, 
 
 [Signed] Henry Goulburn. 
 
 To the Right Honorable, the Cha7tcellor of the Ex- 
 chequer: — 
 
 Bank of England, May 3, 1844, 
 Sir: — We have the honor to acknowedge your letter 
 of the 2d inst., which we have submitted to the considera- 
 ation of the Court of Directors; and although they are 
 still of the opinion that some abatement from the ^120,000 
 allowed to the public might reasonably have been ex- 
 pected, they have resolved, in order that no obstacle may 
 be presented by them to the measures which are consid- 
 ered desirable by Her Majesty's Ministers to place the
 
 BANK OF ENGLAND. "^^' 
 
 currency on a sounder footing, to recommend to the Court 
 of Proprietors to accede to the proposals of the govern- 
 
 ment. 
 
 We have the honor to be, 
 
 Sir, 
 Your very faithful and obedient servants, 
 [Signed] William Cotton, Governor. 
 
 J. B. Heath, Deputy Governor.
 
 CHAPTER XXIII. 
 
 AMERICAN AND ENGLISH BANKERS ASSOCIATIONS. 
 
 Constitution of the American Bankers' Association — WJio 
 are Eligible to Membership — Its Objects — How Con- 
 ducted — The English Institute of Bankers — Its Con- 
 stitution — Facilities Afforded to Members — Detailed 
 Account of the Maimer of Conducting Business. 
 
 DECLARATION. 
 
 In order to promote the general welfare and useful- 
 ness of banks and banking institutions, and to secure uni- 
 formity of action, together with the practical benefits to 
 be derived from personal acquaintance and from the 
 discussion of subjects of importance to the banking and 
 commercial interests of the country ; and especially in 
 order to secure the proper consideration of questions re- 
 garding the financial and commercial usages, customs and 
 laws which affect the banking interests of the entire 
 country, and for protection against loss by crime, we have 
 to submit the following Constitution and By-Laws for 
 " The American Bankers Association :"
 
 BANK OF ENGLAND, 289 
 
 CONSTITUTION. 
 
 Article I. 
 
 Section r. This Association shall be called " THE 
 American Bankers Association." 
 
 Article II. 
 
 Sec. I. Any National or State Bank, Trust Company, 
 Savings Bank or Banking Firm may become a member of 
 this Association upon the payment of such annual dues 
 as shall be provided by the by-laws, and may send one 
 delegate to the annual meetings of the Association ; and 
 any member may be expelled from the Association upon 
 a vote of two-thirds of those present at any regular 
 meeting. 
 
 Sec. 2. Delegates shall be an officer or director, or 
 trustee of the institutions they represent, or a member of 
 a banking firm, or an individual doing business as a bank. 
 
 Sec. 3. Delegates shall vote in person ; no voting by 
 proxy shall be allowed. 
 
 Sec. 4. All votes shall be viva voce, unless otherwise 
 
 ordered ; any delegate may demand a division of the 
 
 house. 
 
 Article III. 
 
 Sec. I. The administration of the affairs of this As- 
 sociation shall be vested in the President and V^icc-Presi- 
 dent of this Association, and one Vice-President for each 
 State and Territory which may be represented in this 
 Association, and in an Executive Council, composed of 
 twenty-one members of this Association, who shall be 
 elected at the annual meetings, and who shall serve until 
 their successors are chosen or appointed, but none of
 
 290 HISTORY OF THE 
 
 whom shall hereafter be eligible for election to the same 
 office for more than three consecutive years. 
 
 Sec. 2. The vice-presidents shall have the supervision 
 of the business of the Association in the States and Ter- 
 ritories where they reside, and may call meetings when 
 they may deem the same necessary ; and in case of 
 absence or disability of the president or first vice-presi- 
 dent of the Association to preside, they may designate 
 one of their number to act as president p7'o tern.; and 
 said president /^^ tein. shall, in case of death or other dis- 
 ability of the president, be invested with all the power of 
 president until a successor shall be duly elected or ap- 
 pointed. 
 
 Sec. 3. The executive council of twenty-one shall 
 take charge of the general business of the Association, 
 receive communications, arrange for holding meetings, 
 procure and arrange subjects for discussion in the order 
 in which they may come before the convention, provide 
 for speakers, and carry out the resolutions passed. They 
 shall also act as a financial committee for raising and dis- 
 bursing moneys. The attendance of five members of the 
 executive council shall constitute a quorum for the trans- 
 action of business. 
 
 Sec. 4. The executive council of twenty-one may ap- 
 point and discharge the secretary and treasurer, or other 
 employees of the Association, at their discretion. 
 
 Sec. 5. Special meetings of the executive council 
 may be called by request of three of its own members, 
 giving two weeks' notice to the secretary desiring him to 
 call such special meeting. The council shall have power 
 to fill vacancies that may occur in their own body.
 
 BAXK OF ENGLAND. 291 
 
 Sec. 6. The executive council shall provide — ist, for 
 keeping the records of the proceedings of their own meet- 
 ings, as well as that of the Association's annual or special 
 meetings; 2d, they shall submit to each annual meeting a 
 report, covering their own official acts as well as a state- 
 ment of any new or unfinished business requiring 
 attention ; 3d, they shall make full statements of the 
 financial condition of the Association; and 4th, submit an 
 estimate of the amount required to carry on the affairs of 
 the Association according to their judgmemt of the busi- 
 ness to be done, and recommend means for raising money 
 to carry out such plans as may be resolved upon by the 
 Association. 
 
 Sec. 7. The secretary shall make and have charge of 
 the records of the Association, as well as those of the 
 council, and of the correspondence of the executive 
 council and standing protective committee, and shall 
 promptly send to each member of the Association a 
 synopsis of reports received by him of attempted or 
 accomplished crime against any member of the Associa- 
 tion. Such records shall be the property of this 
 Association, and be held subject at all times to the order 
 of the executive council. 
 
 Sec. 8. The treasurer shall receive and account for 
 all moneys belonging to the Association, and collect dues; 
 but shall pay out moneys only upon vouchers counter- 
 signed and approved by the president of the Association, 
 or by the secretary appointed by the executive council. 
 
 Article IY. 
 
 Sec. I. The executive council shall appoint a Stand- 
 ing Protective Committee of three persons, whose names
 
 292 HISTORY OF THE 
 
 shall not be made public. The said committee shall con- 
 trol all action looking to the detection, prosecution and 
 punishment of persons attempting to cause or causing 
 loss, by crime, to any member of the Association. 
 
 Sec. 2. The said committee, when called upon for 
 aid, by any member of the Association, through the sec- 
 retary, shall forthwith take such steps as it shall deem 
 proper to arrest and prosecute the party charged with 
 crime. 
 
 Sec. 3. The said committee is prohibited from com- 
 promising or compounding with parties charged with 
 crime, or with their agents or attorneys. 
 
 Sec. 4. All detective and legal expenses and costs 
 shall be paid by the Association out of any moneys in 
 the treasury not otherwise appropriated ; subject, how- 
 ever, to the approval of a quorum of the executive 
 council. 
 
 Sec. 5. All members of the Association, when called 
 upon by the secretary in behaf of the protective com- 
 mittee for information or aid, shall promptly respond by 
 giving all assistance in their power ; and all members 
 shall, at all times, notify the secretary, who shall promptly 
 notify the committee, of any attempted or accomplished 
 crime reported to him as likely to affect other members of 
 
 the Association. 
 
 Article V. 
 
 Sec. I. Annual meetings of the Association shall be 
 held at such times and places as shall be determined by 
 the executive council. Special meetings may be called 
 by the council if, in their opinion, circumstances require 
 them, giving two weeks' notice of the time and place of
 
 BANK OF r:NGLAND. 293 
 
 meeting, together with the subject matter of business to 
 come before such special meeting. The executive coun- 
 cil shall meet to arrange the order of business on the day- 
 preceding meeting of Association. 
 
 Artici.k VI. 
 * 
 Sec. I. The expenses of the executive council 
 
 of the Association, in carrying out the business to 
 be done by them, shall be provided for by the annual 
 dues of the members of the Association ; provided, 
 however, that the executive council shall have no au- 
 thority to incur or contract on behalf of this Association 
 any liability whatever beyond the annual dues hereby au- 
 thorized, and only that for the purposes hereby designated. 
 
 Article VII. 
 
 Sec. I. Resolutions or subjects for discussion (except 
 those referring to points of order or matters of courtesy) 
 must be submitted to the executive council in writing 
 at least tliii'ty days before any general meeting of the 
 Association ; but any person desiring to submit any reso- 
 lution or business in open convention can do so upon a 
 two-thirds vote of the delegates present, referring the 
 resolution to the executive council or committee on 
 resolutions to report upon immediately. 
 
 Article VIII. 
 
 Any one failing to pay within three months the 
 annual dues for carrying on the business of the ^Vssocia- 
 tion, shall be considered as having withdrawn from mem- 
 bership, but may be reinstated upon application to the 
 treasurer, and paying all dues in arrears, with consent of 
 the president.
 
 294 IIISIOKY OF THE 
 
 Artici.k IX. 
 
 This constitution may be altered or amended at any 
 annual meeting by a vote of two-thirds of the members 
 present, notice of the proposed amendment having been 
 first submitted to the secretary at least thirty days before 
 the annual meeting, to be placed by him before the execu- 
 tive council, that they may arrange for bringing it before 
 the convention under the regular order of business. 
 
 BY-LAWS 
 
 OF THE AMERICAN BANKERS ASSOCIATION. 
 
 The annual dues to the Association shall be consid- 
 ered due at the beginning of the year, which year shall 
 commence with the regular annual meeting, it being 
 understood that absent members from such annual meet- 
 ing shall not forfeit their membership nor the right to 
 become members, provided they comply with the consti- 
 tution and by-laws, and remit the amount of the dues to 
 the treasurer within three months after such annual meet- 
 ing. 
 
 The annual dues of all banks and trust companies 
 having less than $ido,ooo capital, and of all private bank- 
 ers, regardless of the amount of capital, shall be $5, and of 
 all banks and trust companies having a capital of $100,000 
 and upwards, $10.
 
 BANK OF ENGLAND. 295 
 
 CONSTITUTION 
 
 OF THE 
 
 Institute of Bankers. 
 
 1. The name of the Institue is "The Institute of 
 Bankers." (Was founded in London in 1879.) 
 
 2. The Institute is an association of gentlemen con- 
 nected with the various branches of banking. Its primary- 
 object is to facilitate the consideration and discussion of 
 matters of interest to the profession, and, where advisable, 
 to take measures to further the decisions arrived at ; and 
 its secondary object is to afford opportunities for the 
 acquisition of a knowledge of the theory of banking. 
 
 3. The Institute shall afford facilities for the read- 
 ing, discussion, and publication of approved papers by 
 members and others ; shall, when desirable, recognize 
 and arrange for the delivery of lectures on banking, mer- 
 cantile law, political economy, and other kindred sub- 
 jects ; shall issue certificates to those who may pass 
 examinations approved of from time to time by the 
 council of the Institute; and shall found a library, con- 
 sisting of works on banking, commerce, finance, and 
 political economy. 
 
 4. If the council shall at any time, or from time to 
 time, think it desirable to acquire for the purposes of the 
 Institute the whole or part of any building or buildings, 
 they shall have power to purchase or lease the same upon
 
 296 HISTORV Ol-' THE 
 
 such terms as they shall think fit, and they shall also have 
 power from time to time to sell or surrender any premises 
 which, in their judgment, are no longer required for such 
 objects. 
 
 5. The members of the Institute are Fellows, Asso- 
 ciates, and Ordinary Members: — 
 
 Fellows shall be elected by the council. Each appli- 
 cant for admission as a fellow shall be nominated by two 
 or more fellows, who shall certify in writing that the can- 
 didate is a fit person to be elected a Fellow of the 
 Institute of Bankers. 
 
 The council shall have power to elect as honorary 
 fellows men of distinction in the practice or literature of 
 banking, mercantile law, political economy, or other kind- 
 red subjects. 
 
 Associates shall in future be elected by the council 
 from those "v\ho have been not less than ten years in the 
 service of any bank; or from those who have passed the 
 examination instituted or recognized by the council, or 
 from those who, being on the staff of a bank, are gradu- 
 ates of any university. Each applicant for admission as 
 an associate shall in every case be proposed by two fel- 
 lows of the Institute, who shall certify in writing that the 
 candidate is a fit person to be elected an Associate of the 
 Institute of Bankers. 
 
 Ordinary Members— clerks on the staff of any bank- 
 ing establishment, and who shall be approved by the 
 council. 
 
 6. Associate and ordinary members, as well as fel- 
 lows, shall have the right to be present at the various 
 meetings of the Institute; but in any case when any election
 
 BANK OF l-.NGLAND. L'UT 
 
 IS to be made, or the opinion or decision of the Institute 
 is to be taken on any subject or question by vote, at any 
 meeting, ordinary or special, the fellows and associates 
 of the Institute shall, except where otherwise specially 
 provided by the constitution, alone be entitled to vote. 
 
 .7. The control of the Institute shall be vested in the 
 president, vice-presidents, treasurer, and council for the 
 time being. 
 
 8. The president, vice-presidents, and treasurer 
 shall cx-officio be members of the council. They shall be 
 elected each year, at the annual general meeting, from 
 among the fellows of the Institute. Each shall be eligi- 
 ble for re-election, and shall hold office until his suc- 
 cessor is appointed. 
 
 The council shall be not more than twenty-four in 
 number, exclusive of the president, vice-presidents, and 
 treasurer. At each annual general meeting six mem- 
 bers of the council shall retire from office. The order of 
 retirement shall be determined by the council. Each 
 shall be eligible for re-election. At each annual general 
 meeting, a sufficient number of members of council shall 
 be elected from among the fellows to supply the places 
 of those retiring. 
 
 The notice convening the annual general meeting 
 shall state the names of those recommended by the coun- 
 cil for election as president, vice-presidents, treasurer, 
 and as members of council to supply the places of those 
 retiring. 
 
 9. On any extraordinary vacancy of the office of the 
 president, or any officer other than trustee of the Insti- 
 tute, or in the council, a meeting of the council shall be
 
 298 HISTORY OF THE 
 
 summoned with as little delay as possible, and shall choose 
 a new president or other officer of the Institute, or mem- 
 ber of the council, as the case may be, to hold office until 
 the next annual general meeting. 
 
 10. Auditors — At the annual general meeting in 
 each year, two fellows of the Institute, not being members 
 of the council, shall be elected to act as auditors for the 
 ensuing year. 
 
 The auditors shall hold office until the next annual 
 general meeting, and shall be eligible for re-election. 
 
 1 1. Trustees — The property of the Institute shall be 
 vested in three trustees, and a resolution of the council 
 shall, in all cases, be a sufficient authority and protection 
 to the trustees for and in respect of any conveyance, 
 transfer, payment, or other act thereby directed. Each 
 trustee, whether already appointed or to be appointed, 
 shall hold such office until his death, resignation or 
 removal. 
 
 Any trustee may retire from office on giving a writ- 
 ten notice, addressed to the council, of his desire so to do. 
 Any trustee may be removed, at a special general meet- 
 ing, if it shall be determined at the meeting that sufficient 
 cause exists for such removal, and any vacancy in the 
 office of trustee may be supplied from among the fellows 
 at the same or any other special general meeting. 
 
 12. The council shall appoint two or more of their 
 number to be honorary secretaries, and engage such paid 
 officers as they from time to time deem necessary. 
 
 13. The council shall meet once a month, or oftener, 
 as may be requisite. Five members to be a quorum. 
 
 14. The council may, from time to time, issue a jour-
 
 HANK OF KNGLAND. 299 
 
 nal or such other publication as they may think desirable, 
 and for this purpose appoint one of their members to be 
 honorary editor, and engage such paid assistance, and 
 apply in paying the expenses of the journal such part of 
 the funds of the Institute as in their judgment may be 
 necessary. 
 
 15. The subscriptions to the Institute shall be two 
 guineas for fellows, one guinea for associates, and ten 
 shillings and sixpence for ordinary members, payable 
 annually, in advance, on the ist of January in each year, 
 which may be compounded for by payment, at any one 
 time, of twenty guineas for fellows and ten guineas for 
 associates. One year's subscription shall be payable on 
 admission, unless the date of admission be later than the 
 30th of June, when only a half year's subscription shall be 
 so payable. 
 
 16. Any fellow, associate, or ordinary member who 
 shall not have paid his subscription before the ist of 
 March in any year, may be declared a defaulter by the 
 council, whereupon he shall cease to be a member of the 
 Institute. 
 
 17. Any fellow, associate, or ordinary member may 
 resign, on giving notice of his intention, in writing, to the 
 council ; but no one can withdraw his name from the 
 books of the Institute unless his subscription shall have 
 been paid for the year in which the notice of his resigna- 
 tion is received. 
 
 18. A majority of not less than three-fourths of the 
 council present at a meeting, special notice having been 
 given for that purpose, may remove from the books of the 
 Institute the name of any fellow, associate, or ordinary
 
 300 HISTORY OK THE 
 
 member, who, in their judgment, shall have been guilty 
 of any act derogatory to his character, reputation, and cal- 
 culated to bring discredit on the Institute, and he shall 
 thereupon cease to be a member of the Institute. 
 
 19. The ordinary general meeting of the Institute 
 shall be monthly or oftener during the session, which shall 
 be from October to May, both inclusive, on such days and at 
 such hours as the council shall declare. The council 
 may, when it appears to be necessary, and shall, on the 
 written requisition of not less than fifty members of the 
 Institute, of whom not less than fifteen shall be fellows, 
 call a special general meeting of the Institute. 
 
 20. A general meeting of fellows, associates, and 
 ordinary members shall be held once in every year, at 
 such time as the council may determine, to receive the 
 report of- the council and the treasurer's accounts, to 
 elect the officers of the Institute, and to decide questions 
 concerning its rules and management. 
 
 21. All elections, whether by the council, or other- 
 wise, shall be by ballot, and, except where the constitution 
 shall otherwise provide, all elections and all questions 
 shall be determined by a majority of votes. 
 
 22. A majority of the fellows, associates, and mem- 
 bers present at a special general meeting shall have power 
 to make, from time to time, any alterations in the consti- 
 tution, not inconsistent with its main object, but no 
 alteration shall be made without notice of the proposed 
 alteration having been given in the notice convening the 
 meeting, nor until the minutes of such meeting have been 
 confirmed at a subsequent general meeting, ordinary or 
 special, at which subsequent meeting ordinary members.
 
 BANK OK ENGLAND. 301 
 
 as well as fellows and associates, shall have the ric^dit to 
 vote. 
 
 23. All notices of general meetings shall be either 
 delivered at, or sent by post to, the last known place of 
 business of each member of the Institute ten days at least 
 before the day of the meeting. Every notice of a special 
 general meeting shall specify the object with which such 
 meeting is convened. 
 
 24. The council may, from time to time, make such 
 by-laws, not inconsistent \\ith this constitution, as in 
 their judgment may be necessary or desirable in the 
 interests of the Institute. 
 
 25. All persons, admitted either as fellows, asso- 
 ciates, or ordinary members, shall, upon their admissions, 
 sign a declaration (in the form annexed) to observe the 
 rules, regulations, and by-laws of the Institute for the 
 time being in force. 
 
 DECLARATION OF MEMBERSHIP. 
 
 I do hereby declare that I will endeavor to further the 
 good of the Institute of Bankers and the ends for which 
 the same has been founded, and that I will keep and fulfill 
 the rules and orders of the Institute, provided that 
 whensoever I shall make known in writing under m}' 
 hand, to the Council for the time being, that I desire to 
 withdraw from the Institute, I shall be free thenceforward 
 from this obligation.
 
 i
 
 I
 
 UNIVERSITY OF CALIFORNIA AT LOS ANGELES 
 
 THE UNIVERSITY LIBRARY 
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 ^M 2 9 1952 
 
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