■ ■.-.• ' Zl ■ J I.J Date Due SS !^t DO£S iSJ^lI ClRCUlATE 4Hft rM LTQ6 3 M <*# FRAGILE DOES NOT CIRCULATE MM CASE FRAGILE PAPER Please handle this book with care, as the paper is brittle. 7»V1 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030197234 o z < Chap. XVI. — Peace of 1815 — Continuation of Restriction — Commercial Difficul- ties — Bonus on the Capital — Partial Resumption of Cash Paj-ments — Le- gal Decisions — Mr. Peel's Currency Bill — Return to Cash Payments — The Dead Weight — Pension List — Diminution of Dividend — Forgery of Fauxt- leroy, . . . . . . . . ir>s Chaf. XVII. — Prosperity of the Country — Reduction of Interest — Circulation of One Pound Notes — Foreign Loans — Eagerness to subscribe — High Price of Shares — Delusive Companies — History of the Peruvian Loan — Remarks in the House of Commons, . . . . 18:; Chap. XVIII. — Bubble Companies — Abundance of Money — Increase of Pros- perity — Commencement of the Panic— Failures of Country and London Bankers — Panic in London — Scene at the Discount Office — Great Distress — General Discredit — Demand for Gold — Comments of " Tlie Times" — Riots in the Country — George Canning — Mr. Rothschild — Assistance of the Bank — Issue of One Pound Notes — Anecdotes of the Panic — Opinions of the Cause, ... . . . . 183 Chap. XIX. — Effects of the Panic — Alteration in the Charter — Parliamentary Debates — Opinions on the Currency — Assistance to the Mercantile Inter- est — Table of Advances — Legal Decision — Extension of the Branches — Jealousy of the Country Bankers — New Three and a Half Per Cents — Uses of Bank Notes — Danger of the Bank — Its Origin— Run upon the Bank — Political Causes, . . . . 211 Chap. XX. — Forgery — Endeavor to prevent it — Committee Appointed — In- crease of the Crime — Sir Samuel Romillt and Sir James Mackintosh — Progress of Opinion — Petition of the Bankers — Inefficacy of the Punish- ment — Instance of it — Forgeries of Bonaparte, . . 227 Chap. XXI. — The New Charter— Its Conditions— Extraordinary Discovery- Holidays Abolished — Failure of the Governor — London and Westminster Bank — Speculations in 1836— Panic— Demand for Bullion — Its Cause, . 2KB Chap. XXII. — Loss of the Northern and Central Bank — Application for As- sistance—Stipulations Demanded— Directors at Manchester — Private Led- ger Application of Mr. Freshfield — Its success — Curious Discoveries — Failure of Esdaile & Co. — Alarm and Assistance of the Bankers— Difficul- ties of American Houses— Suspension — Foreign Credit — Drain of Gold — Restoration of Confidence — New Mode of Manifolding Bank Notes, . . 24:i Chap. XXIII. — Exchequer Bill Forgeries— New Discovery — Legal Decision — Internal Alteration in the Circulation and National Debt Department — Great Continental Conspiracy— Its Development and Discovery— Fate of the Perpetrators— Tribute to " The Times," 25'i vi Contents. Chap. XXIV.— The Income Tax— Its Payment on Annuities— The Bank Char- ter Act of 1844 — Its Provisions— Speech of Sir Robert Peel — Jones Lloyd — The Country Bankers — Petition of the London Bankers — Its Eesult — New Arrangements — Will Forgeries, ....■• 272 ( 'h \r. XXV. — Fortunate Discovery — Forgery of Burgess — Escape to America — The Pursuit — Romantic Events — Railway Mania— Its Progress and De- velopment, .... . . ... 28/ Chap. XXVI. — Traditions concerning the Bank— Stolen Notes — Stratagem of the Duke de Choiseul — Lost Note — Description of the Bank — Weighing Machine — Internal Arrangements, . .... ■ 300 APPENDIX. Bank Shares, Bank Dividends, Consols — Tabular Statement, showing the low- est and highest market rate of the Bank of England Shares, from 1731 to 1 860 ; the rate of Bank Dividends semi-annually during the same period, and the lowest and highest prices of Consols during each year, . 313 The London Joint-Stock Banks, . . 315 Tabular Statement, showing the Circulation, Deposits, Loans, Bullion, Reserve and Rest (Surplus Profits) of the Bank of England at the close of Febru- ary, each year, from 1778 to 1840, and at the end of March, from 1841 to 1844, .... . . .317 The origin of the Bank of England. By T. Babingtox Macaulat. From Mac- aulay's fourth volume of the History of England. — I. Financial Difficulties of the Year 1693.— II. The Lottery Loan.— III. Private Bankers of the Seventeenth Century. — IV. Opposition to the Private Banking System. — V. First Suggestions for a National Bank.— VI. The Land Bank. — VII. Insecurity of Land as a Basis of Currency. — VIII. William Patterson, the Originator of the Bank of England. — IX. His Plan for a Bank. — X.. Consummation of the Act — its complete success, . . . . 319 A Visit to the Bank of England, 1849. From Hogg's Weekly Instructor, 329 The Bank of England, 1844-1861. Statement showing — I. The Circulation Outstanding. — II. Public Deposits. — III. Private Deposits. — IV. Public Securities held. — V. Other Securities. — VI. Bullion and Coin held. — VII. Reserve of Notes : at each period when a change in the rate of discount was adopted by the Bank, . 336 Directors of the Bank of England, from 1694 to 1861, 340 Contents. vii Governor, Deputy-Governor ,and Directors of the Bank of England, elected April, 1861, with the dates when they were respectively elected, 34a Duties, Qualifications, Chap. VIII.— Years 1858, 1859, 1860— The Bank Act of 1844— Failures of 1857 —Loans to Bill-Brokers— Forced Issue of £2,000,000 Bank Notes— Bank Failures in Scotland — Crisis in Ireland— Crisis in Liverpool — Continental Banks — Price of Gold — Opinions of Lord Overstoxe — Yearly Average of Notes, 1844-1858 — Evidence of Bank Directors — Failures of Commercial Houses— Joint-Stock Banks — Fluctuations in Prices — Continental Banking —Death of Mr. Tooke, . . . . . 438 Conclusion. — The frequent alterations of the Minimum rate of Discount of the Bank of England, during eight years, 1847-1855 — Comments thereon of the Lords' Report, 461 ERRATA— Page 313. Bank of England dividend, October, 1860 — For 4J read 5 per cent. April, 1861— For 4 J read 5 per cent. October, 1861— For i\ read 5 per cent. HISTORY BANK OF ENGLAND BY JOHN TEANCIS. CHAPTER I. INVENTION OF BILLS OF EXCHANGE — INTEREST FORBIDDEN — NEAPOLITAN LENDING HOUSES — DEFENCE OF THE HEBREW NECESSITY OF HENRY III. SUCCESS OF THE HEBREW BANE OF VENICE—THE LOMBARDS IN ENGLAND THEIR PERSECUTION COMPLAINTS AGAINST THEM ENGLISH COMPANIES ADVANCE IN COMMERCE — ROUTE TO CHINA — ABOLITION OF FOREIGN LOANS. Commerce, the precursor of banking, was in a low condition at the date of the Norman conquest, when the English were a pastoral people. The devastating wars which ensued prevented population from increas- ing, and commerce from improving. Land, also, to a great degree, re- mained untilled. The fertilization now extending over hill and dale was then wanting. The graceful glebe, the cultivated country, with all the luxurious evidences of a mature civilization, were absent. The place of these was supplied by forests, rich with the hues of their varied occu- pants, and by wild extensive tracts of land, which afforded profitable and often picturesque pasturage for large droves of sheep and horned cattle. The hides and wool derived from these were the staple articles of merchandise, forming the principal revenue of the proprietor ; and Flan- ders, even then a manufacturing country of comparative importance, was their chief recipient. As continental languages were almost unknown in London, the business was conducted by foreigners ; but the trade of a whole year only amounted to one or two hundred thousand pounds ; and for the first two centuries after the conquest, rarely, if ever, exceeded two hundred and fifty thousand. During this period, then, it is obvious that no other bank, save the stronghold of the castle, or the treasury of the convent, was required. In the proportion, however, that population increased, that fresh branches of commerce were formed, and that the powers of the country began to develop themselves, a new want was likely to arise. It was, in all probability, during such a period, that the deficiency of money first 2 14 History of the Bank of England. made the Jew remarked for the great business capacity which distin- guishes him up to the present time, and which even then enabled him to make advances on security. The members of this race, who have always taken the initiative in money getting, had the misfortune, m an age com- paratively rude, to attract the cupidity of their masters. . . " When a whole people," says the elder D'Israeli, in his <* emu | ot Judaism," " devote themselves to one great pursuit, one single art, they open sources of invention, they reach to a noble perfection. Unhappily for the present professors, that great pursuit, that single art, was the commerce of money ; and to render fortunes invisible, their genius pro- duced the wonderful invention of bills of exchange ; an object, like the art of printing, become too familiar to be admired ; the miracle has ceased, and its utility only remains ; yet both are sources of civilization, and connect together, as in one commonwealth, the whole universe. Their successful pursuits worked their own fatality. The Hebrews be- came the reservoirs of the wealth of the strange lands where they were found. For the steel-clad baron they were sponges to suck in as much water as they could hold, that his protecting hand, as he listed, might squeeze them to their last drop ; for the luxurious abbots and the rosy canons, who heaped up their improvident bonds on the Hebrew affecting the poverty he was to relieve, the Jews became the creditors of a whole province." By a decree of Edward the Confessor, the taking of interest was first prohibited. For a long period the prejudices of priest and people had struggled with the growing wants of trade. To receive interest for money lent, was to incur the invidious name of usurer. "With this had each successive phase of commerce wrestled. By this had each growing effort of business been injured. With this, also, had even the lending houses of Italy to contend, when, with a spirit worthy the Christianity he professed, the Neapolitan of the sixteenth century attempted to de- liver the poor and the needy from the grasp of the extortioner.* The religionist, who took too limited a view of the Scripture he professed to expound, argued that, by the decree of the Israelitish legislator, it was a direct violation of the will of heaven to receive interest for money bor- rowed. This fallacy is most conclusively answered by Mr. Gilbart, in * "The lending house at Naples was first established in 1539 or 1840. Two rich citizens, Aubelio Paparo and Leonardo or Nakdo bi Palma, redeemed all the pledges which were at that time in the hands of the Jews, and offered to deliver them to the owners without interest, provided they would return the money which had been advanced on them. More opulent persons soon followed their example ; many bequeathed large sums for this benevolent purpose ; and Toledo, the viceroy, who drove the Jews from the kingdom, supported it by every method possible. This lending house, which has indeed undergone many variations, is the largest in Europe ; and it contains such an immense number of different articles, many of them exceedingly valuable, that it may be considered as a repository of the most important part of the movables of the whole nation. About the year 1635 another establishment of the like kind was formed, under the title of banco dV poveri. At first this bank advanced money without interest, only to relieve confined debtors. Afterwards, as its capital increased, it lent upon pledges, but not above the sum of five ducats, without interest. For larger sums the usual interest was demanded." — BeeTcmamis History of Inventions, vol. 2. Defence of the Hebrew. 1 5 his "History of Banting." "It was the object of the Jewish legislator to make the Jews a purely agricultural people. The promotion of agri- culture was, as Montesquieu would say, the spirit of his laws. Hence he prohibited the taking of interest for the loan of money. By this means he interdicted commerce. His design was to prevent the Israelites associating with the surrounding nations, and learning their idolatrous practices. But even Moses permitted the Jews to take interest for money lent to strangers — a circumstance which proves that the prohibition was a political, and not a moral precept." During the period to which we have alluded, the Hebrews may almost be regarded as the compulsory bankers of the luxurious monarch and the iron chief ; for not only were this patient people at the absolute disposal of the regal oppressor ; the warlike baron also looked down from his stronghold upon the suffering Jew, as a source of revenue to be measured only by his own wants, or the capacity of his victim. "The prejudices of the age," says Hume, "had made the lending of money on interest pass by the name of usury ; yet the necessity of the practice had still continued it, and the greater part of that kind of deal- ing fell every where into the hands of the Jews, who being already infa- mous on account of their religion, had no honor to lose, and were apt to exercise a profession odious in itself by every kind of rigor, and some- times by rapine and extortion." "We are prone to judge the actions of a preceding age by the precepts which guide our own. " Rapine and extortion" unhappily marked the path of the Christian in his dealings with the Hebrew. History teems with relations to which " rigor" would be far too mild a term to apply. John had no charter, save that of the strong hand, to extract the teeth from the Jew who refused to be unrighteously robbed. Henry III. had no right save that of might to wring from this people their hard-earned money, in a series of cruel exactions which lasted for half a century. The bold but barbarous baron, licentious alike in all his dealings, asked only his own evil passions for permission to outrage his fellow man. The Hebrew, acting after the knowledge vouchsafed to him, willing to grasp the only power he was allowed to exercise, happy also in being able to retaliate on the hated race that wronged him, sought and seized on every opportunity which enabled him to gratify at once his love of vengeance and of money. In a note to Rapin's History, Tindal says, ".The King of England was wont to draw a considerable revenue from the Jews residing in this realm, namely : by tallage (or assessment) and fines relating to law proceedings, by amerciaments for misdemeanors, and by fines, ransoms, compositions, which they were forced to pay for having the king's benevolence; for pro- tection, for license to trade, for discharges, for imprisonment, and the like. He would tallage the whole community or body at pleasure, and make them answer the tallage for one another. In short, the king seemed to be absolute lord of their estates and effects, of their persons, their wives and children." In this brief passage there is a goodly list of excuses for the exercises of might over right. A goodly list of apologies^ with which the Christian attempted to justify his conscience, while he satiated his lust after money.. 16 History of the Bank of England. But " the peculiar people" were neither allowed to leave the land in which they were pursued with so much malignity, or to rest in peace while they remained there. Henry III., their persecutor and their pest, betrayed his evil passions when memorialized by this people for permis- sion to quit England, in the exclamation : " Is it to be marvelled at that I covet money ! It is a horrible thing to imagine the debts wherein I am bound. By the head of God they amount to two hundred thousand marks, and if I should say three hundred, I should not exceed the truth. I am deceived on every side ; I am a maimed and abridged Mng, yea, now but half a king. There is a necessity for me to have money, gotten from what place soever, and by lohat means soever, and from whom soever." History is replete with the oppression of the Hebrew people, written in characters of blood. They were, indeed, the great source of revenue. They were made use of on all ordinary and extraordinary occasions. " Their command of cash, combined with their acute and business habits, enabled them," says a modern writer, " almost to monopolize the business of traders and money-dealers, and, of course, their profits were very great. This was their compensation for the state of subjection in which they were held, and that which induced them to remain in the kingdom, not- withstanding all the exactions of the crown. It was an engine, neverthe- less, which there was some art and management required in working. On the one hand these Jews were not to be treated with so much severity as to make them wish to quit the country. They were to be tempted to remain in it. For this purpose, the process in which they acted so im- portant a part, while it largely benefited the king, was to be allowed to be also somewhat profitable to themselves. The pressure of the royal grasp was not to be carried so far as to wring from them the whole amount of their extortionate gains. Above all, they were to be protected by the law in those rights, without the enforcement of which they could not have satisfied the rapacity of their oppressor. But, on the other hand, the hatred with which they were naturally regarded by the people was also to be maintained and cherished ; for without this, it would have been impossible for the sovereign power to have continued to treat them in the arbitrary and tyrannical manner we have described. It was, no doubt, found to be somewhat difficult to effect these two objects at the same time, namely, to grant to the Jews the perfect protection of the law against every one else, except the king, and yet to keep the popular feeling against them in so inflamed a state, that it was always ready to approve whatever cruelty and oppression that single and licensed power might exercise upon them." Another reason, besides " the possession of all the ready money," of their remarkable success in trade, was the quiet energy with which they pursued their calling. Undisturbed by love of country, for they were an outcast people ; unstimulated by the love of war, for they were a peaceful race ; uncalled upon by Norman baron or Saxon chief to assist him, save with cash and credit, for other help from them was worthless ; they de- voted themselves with undivided mind to a pursuit which, while it excited the inexorable passions of their masters, made the Hebrews the possessors of that wealth, which was alike their consolation and their curse. The Lombards of England. 11 It appears, then, from the slight sketch given of this remarkable body, that the writer is justified in terming them the compulsory bankers o the period. Their earliest known persecution occurred in 1189, during the reign of Richard Cceur de Lion, about the period that the first European bank, the Bank of Venice, was established. While the rude barbarism of the North resorted to the policy shortly to be described, Venice, with all the grandeur of an advanced commercial knowledge, established, upon a scale so just that it has since served as a model for its successors, the earliest bank in Europe. Towards the end of the thirteenth century, the country ceased to re- ceive support from the Hebrew. Edward I., unable to resist a grant from Parliament, and stimulated by the prospect of an immediate booty, consented to the expulsion of this people from England. With what circumstances of degradation and cruelty it was conducted, let the chroni- cles of the time repeat ; but from this period to their re-admission, during the government of the great and politic Cromwell, in the seventeenth century, they ceased to interfere with the monetary or commercial trans- actions of the English community. It is, we think, difficult to account, excepting by the bigotry of the age, for the intense hatred borne to this insulted race. It would, per- haps, be still more difficult to find a reason for the great folly which prompted their expulsion, at the expense of a revenue so easily obtained,* were it not possible that some light may be thrown on, and some excuse made for, this great political error, by the fact that, in the same century, the Lombards — by which general term the early Italian merchants of Genoa, Florence and Venice were known — came over and established themselves in the street which still bears their name. With them came many of the arts and the skill of trade ; with them came the only know- ledge of banking then possessed ; with them came into more common use " the wonderful invention" of bills of exchange, by the agency of which they remitted money to their own country. Success followed ex- ertion ; a firm footing was obtained by the skilful Lombard ; he was the first who, uniting to the art of the goldsmith the science of the banker, took the initiative in that business, which has since been the agency of so much good, and which has been found to increase with the trade and commerce of the country. The success of the Lombard was not un- marked by the third Edward. With the false policy of a barbarous age, this monarch sought to supply the necessities of the crown by treating the Lombard as his predecessors had treated the Israelite. The reign of Edward was marked by a lavish expenditure of blood and money. The hardy Scot felt his prowess at Halidon Hill. The village of Crecy wit- nessed the triumph which is yet talked of at our English firesides, and from which the first prince of royal blood derives his motto at the present day. Poictiers, in the capture of the French monarch, was the com- * " During a space of only about seven years, from the 17th of December, in the fiftieth year of Henry III., till the Tuesday in Shrovetide, in the second year of Edward I., the crown is stated to have extorted from the Jews (amounting in all to probablynot more than five hundred families) the immense sum of £420,000 15s. 4d.'' — Popular Tumults. 1 8 History of the Bank of England. pletion of the great series of conquests, which, while it shed a nearly un- paralleled glory over British arras, made the conqueror feel most keenly the want of that money which had hitherto been principally supplied by extortions from the Jew. Monarchs rarely allow the absence of a reason to stand between them and their desire. If the industry of the Lombards had produced wealth, wealth produced persecution. To apply the words which the elder D'Israeli wrote upon another topic : " It was their calamity to excel in the arts their neighbors prac- ticed. A society which becomes too powerful by their wealth has ever been marked out for the spoil of the government or the people ; there are so many passions in human nature which are allied against a flourish- ing body. First hated, and then calumniated, they become the victims of State, and justice veils her eyes during the popular suppression or destruction. Such was the fate of the order of the Templars, of the English monastic institutions, of the Jesuits throughout Europe. _ The historical problem is of no difficult solution. Whenever a heavy price is proclaimed to discover offenders, however innocent, offenders will be found ; and for the informers there can be no higher price than a share in the confiscation." Under the pretext that the Lombards were extortioners, Edward III. seized their property and estates. " Perhaps," remarks Maitland, very shrewdly, " the necessity for furnishing him with money for his lavish expenditure might have urged him to this step." The enmity of the monarch stimulated fresh complaints from his people. Those to whom we are indebted are seldom regarded favorably by us; and probably the debtor was more to blame than the creditor. The de- fective laws of ( the period enabled the former occasionally to evade his just debts ; this naturally produced a treble vengeance from the money- lender, in the form of increased interest, if the occasion offered, and in imprisonment, if he failed to meet the demand of the Lombard on the appointed day ; if not, the wronger is always harsh in his judgment of the man he has wronged. Persecution produced its accustomed fruits. The Lombards increased in wealth, power and position. They had gained so much importance by the fifteenth century, that we find them advancing a large sum for the service of the State on the security of the customs. " They dealt," says Bobertson, " largely as bankers. They carried on this, as well as other branches of their commerce, with somewhat of that rapacious spirit which is natural to monopolists, who are not re- strained by the concurrence of rivals." " Accordingly, we find it was usual to demand twenty per cent, for the use of money, in the thirteenth century." "They enjoyed great privileges, and carried on extensive commerce, particularly as bankers." It was from such bodies as these, and the " Steel-yard merchants," our masters in the art of commerce, that the kings of England, on any sud- den exigency, sought and obtained their principal supplies, on what now appears an exorbitant interest. The importantbody of Steel-yard merchants was cherished with great and peculiar privileges. If great privileges were granted, however, great Route to Vhina. 19 services were often claimed in return. " The Steel-yard company," re- marks Mr. Gilbart, " was a kind of bank to our kings, whenever they wanted money on any sudden emergency ; but the company was sure, in the end, to be well paid for such assistance." The merchants of the Staple, (so called from their Stapelhoff, or general house of trade for the German nation,) the mercers, whose ex- istence as a body may be traced to the twelfth century ; the merchant adventurers, who boldly steered their vessels to unknown shores in search of commerce; the traders of Flanders, then in the pride and pomp of wealth derived from successful industry, had all successively ministered to the service of the State. Nor had the citizens failed in supplying similar assistance. When Edward III. resolved upon an expedition to France the wards advanced, according to their several ability, twenty thousand marks, which the Parliament voted, in order that the warlike adventures of the monarch might be successfully pursued. The reign of Henry VII. was distinguished by a great advance in commerce. This politic sovereign endeavored to raise and cherish the Commons as an important barrier against the power of the baron. The .ndependence of the latter was troublesome to peace; but as the serf grew with the favor of the monarch, and the increase of commerce and agriculture, (the latter of which Henry particularly affected, as the " vigor and nerves of the English state,") so was the baron compelled to retire within his natural and proper boundary. The great discovery of the greatest man of his, or perhaps any age, ■occurred this century. The new world was made known to the old by Christopher Colon, commonly called Columbus ; and though the mind revolts at the cruelties which followed the adventures of the Geno- ese, yet it is incumbent on us to own the impulse received by commerce throughout that which was termed the civilized world. The movement could not fail to be felt in England ; and John Cabot, a Venetian, set sail with his three sons, under a license granted by Henry VII., for the discovery of unknown lands. In the year 1505, the twentieth of this monarch's reign, the first char- ter was granted for establishing the " Fellowship of Merchant Adven- turers." During this century also the Newfoundland and other fisheries, the Turkish trade, and a trade to Russia, were established, and in its last year was incorporated the East India Company. It was also within the same period that Sir Hugh Willoughby, with three vessels, set sail to discover a near route to China. By the sudden approach of winter he was compelled to seek refuge within an obscure harbor in Russian Lap- land, where, with the crew of two of his vessels, he was frozen to death ; and when the Laplanders, in pursuance of their annual custom, sought the sea-coast in summer, for the sake of its fishery, they found the re- mains of the unhappy adventurer, who, meditating a great discovery, had met with an obscure death. It is a touching picture to contemplate him as he was found, sitting with his diary and papers before him as in life, and to think how little his aspiring, but noble ambition, meditated so melancholy a fate. The expedition was not without its benefit, as one vessel escaped. Richard Chancellor, its commander, landed near Archangel, and in- 20 History of the Bank of England. clined the Czar, Ivan Bazilowitz, then engaged in the Livonian war, to grant considerable commercial privileges to the English. Such was the state of commerce, when, after the lapse of half a cen- tury, a great man arose. The mild, but childish Edward, the persecut- ing Mart, and the politic Elizabeth, found it equally to their interest to employ the enlarged mind and great talents of Thomas Gresham. The reign of Elizabeth was marked no less by an advance in poetry and philosophy than by a rapid increase in the science of money. It almost seemed as if nature, hitherto checked in her development by in- ternal convulsions and unhealthy strife, used extraordinary efforts to re- pair the evils produced by civil war. Amid the names which adorn the period, that of Gresham takes a noble position. To this great citizen we owe the abolition of loans from foreign States. By his agency the financial difficulties of the reign were ably met. The peremptory neces- sity which compelled the government to borrow, produced a difficulty on the part of the lender, in exact proportion to the exigency of the bor- rower. The value arose with the necessity ; twelve and even fourteen per cent, was paid for the accommodation. " After negotiating several loans," says the historian of the Eoyal Exchange, " Gresham felt that, instead of sending such large sums abroad, it would be a desirable thing to secure them for the capitalist at home. With the eye of a statesman, he saw that it would be more convenient for the borrower." By his counsel Elizabeth was induced, when a loan was necessary, " not to use strangers, but her own subjects, that it might be seen what a prince of power she was." Her first applications to the citizens were not met with sufficient alac- rity to please the imperious queen. She who could imprison a favorite for life, or send a rival to the block, was checked by her plebeian, but wealthy, subjects. The pride of the eighth Henry had descended with his crown to his daughter, and she caused it to be intimated to the un- willing merchants that, to borrow their moDey "was a matter of great grace and favor." On another occasion, the haughty Tudor incarcerated a resolute citizen, who was too modest to place himself under so great an obligation. It is scarcely possible to bestow too much praise on the princely merchant who originated the idea which saved the kingdom from foreign loans, which gave the large interest paid by the State to the English trader, and which, at the same time, offered to the crown a security never possessed through the agency of means so legitimate. It was owing to his active exertions that the principle was carried out, and the objections of the citizens conquered. The accommodation was found to be in some measure reciprocal ; at a late period the merchants trading to Turkey acted as bankers to the nation, by borrowing a considerable amount of bullion previously lying idle in the tower. That the character of Gresham has not been overrated is proved by the scheme he devised at Antwerp, for operating on the exchanges, so as to render them favorable to England. He promised Edward VI., during the reign of whom this occurred, that if he might pursue his own views, he would remove all his sovereign's difficulties in two years. The fo lowing is his plan, relieved from its antiquated spelling : " My request shall be to his majesty and you, to appoint me out, w ee kly Exchange Operation. 21 twelve or thirteen hundred pounds, to be secretly received at one man's hands, so that it may be kept secret, and that I may thereunto trust, and that I. may make my reckoning thereof assuredly. I shall so use the matter here in the town of Antwerp, that every day I will be sure to take up two or three hundred pounds sterling by exchange. And thus doing, it shall not be perceived, nor yet shall be occasion to make the exchange fall. For that it shall be taken up in my name. And so by these means, in working by deliberation and time, the merchant's turn also shall be served. As also this should bring all merchants out of suspicion, who do nothing towards payment of the king's debts, and will not stick to say, that ere the payment of the king's debt be made, it will bring down the exchange to 13s. 4d., which I trust never to see that day. So that by this you may perceive if that I do but take up every day but d£200 sterling, it will amount in one year to £72,000, and the king's majesty oweth here at this present £108,000, with the interest money that was prolonged before this time. So that, by these means, in two years, things will be compassed accordingly, and my purpose set forth." " How correct," says Mr. Burgon, in his " Life and Times of Sir Thomas Gresham," " he was in the results he anticipated, from these and similar measures, appeared in the sequel by the success which attended them. He found means in a short space to raise the exchange from sixteen shil- lings Flemish for the pound sterling to twenty-two shillings, at which rate he discharged all the king's debts, and by this means money was rendered plentiful and trade prosperous, while the credit of the crown became established on a firmer basis abroad than it had ever been before." 2 2 History of the Bank of England. CHAPTER II. DANGER OF CHARLES I.-SEIZURE OF THE MERCHANTS' MONEY-ROYAL EXCHANGER-ABOLI- TION OF THE OFFICE-THE HEBREW IN ENGLAND-HOSTILITY TO THE HEBREW— THE PROTECTOR'S DESCENT-GOLDSMITHS' NOTES— THE FIRST BANKER— DIFFICULTIES OF CHARLES II.— EXACTION OF THE GOLDSMITH— FIRST RUN ON THE BANKERS— EXPEDIENT OF CLIFFORD— PANIC IN THE CITY— PUBLIC INDIGNATION— INTEREST ALLOWED. The robberies successively exercised upon the Jew and the Lombard, in the dark ages of the Plantagenets, were successfully imitated at a later and more polite period by the Stuarts ; but the very blow which appeared likely to crush the infant spirit of banking proved its support. _ The new features, which in the seventeenth century were developed in its history, arose from a repetition of one of those tyrannical acts which, in their own opinion, too often form " the right divine of kings." An evil spirit— the spirit of contention— was abroad. The people were beginning to arouse themselves from the apathy with which they had hitherto borne the suc- cessive despotic acts of their sovereigns. " Genius and capacity of all kinds," according to Hume, " began to exert themselves, and to be distin- guished by the public." The danger environing Charles from an opposi- tion which ranked among its members the " sagacity of Pym, and the ardor of St. John, the daring impetuosity of Hollis, the chivalric valor of Hampden, the brilliant eccentricity of Vane, and the profound sub- tlety, yet magnificent ambition of the future master of them all — Crom- ' well" — rendered money necessary to the monarch. The treasure arising from the accumulated gains of the merchants had been deposited by them in the mint, then within the tower, with a perfect conviction of its safety. If the short-sighted policy of the earlier kings of England had extorted money from the Jew and the Lombard, at least they borrowed from their English subjects ; it remained for the polished Charles to sully his fair fame by robbing them. Yet, let him not be judged too harshly. Eight and wrong assume new aspects under varying circumstances. The monarch trembled on his throne. His prerogatives were denied. His favorite minister was im- peached. The claims of his children were endangered. A discontented people were opposed to a perfidious court. An irritated Parliament were thwarting a proud aristocracy. The supplies were stopped, and levies were made in vain. To compass these dangers money was required ; to gain it by ordinary means was impracticable. Ere judgment be passed, let these things be remembered. Rank, family, life, were in the balance, and the monarch yielded. The money placed by the merchants in the mint, amounting to two hundred thousand pounds, was seized ; the sanctuary of a people's commercial faith was violated to supply the royal necessities. Another palliation to the mind of Charles might perhaps be in the consideration that the money belonged to the merchants ; that the mer- chants were mostly citizens ; and that the citizens were strenuous sup- The Hebrew in England. 23 porters of the opposition. Some idea of their feelings toward the mon- arch may be gathered from the following picture, by the first essayist of the day : " The people of this great city had long been thoroughly de- voted to the national cause. Their houses, their purses, their pikes, were at the command of the representatives of the nation. London was in arms all night. The next day the shops were closed ; the streets were filled with immense crowds ; the multitude pressed around the king's coach, and insulted him with opprobrious cries." The knowledge that the seizure of the merchants' money might crip- ple their power, that in its possession he would gain an important addi- tion to his own strength, and that it was only to be regarded as an equitable punishment for their defalcation, must be accepted as some extenuation of this great wrong. A sufficient amount of evil, which no sophistry can palliate and no excuse mitigate, rests upon that " gray, discrowned head," without adding another heavy accusation to the many justly brought against him, " whose popularity with the present generation," says Macaulay, " is owing to his Vandyke dress, his handsome face and his peaked beard." The office of royal exchanger must not be omitted. Up to the reign of Henry VII. this prerogative of the monarch continued to be ex- ercised. English coins were not allowed to be exported, and the right of exchanging them for other money belonged to the crown. The royal exchanger was alone entitled to give the native for foreign coin, or for bullion. During the reign of Henry VIII. the circulation became so debased as to be difficult of exchange by any one, and the office fell into disuse ; the goldsmiths took advantage of this, and, deserting to a great extent their accustomed calling, began to deal in the debased money, exchanging for it plate and foreign coin. This was continued until the reign of Charles I., a monarch to whom a prerogative or a monopoly was almost as dear as his crown. In 1627 he re-established it by royal proclamation; but this interference with the trade of the goldsmith was received with so little satisfaction, that the king authorized the publication of a pamphlet, vindi- cating his rights, asserting that " the prerogative had always been a flower of the crown ;" " that the goldsmiths had left off their proper trade, and turned exchangers of plate and foreign coins, for our English coins, al- though they had no right." All the important bodies of the city, who could quickly perceive the evil arising from a monopoly in which they were not allowed to partici- pate, petitioned against the revival of the office ; but petitioning was in vain. The duties of " changer, exchanger and outchanger" were given to one, who twice betrayed his royal master in return, to the handsomest peer and the basest apostate of a period remarkable for its apostacy. Henry Eich, first Earl of Holland, was installed in possession of the privilege. With the troubles of Charles the office' was abolished ; it has not been since established, having yielded to institutions which have grown out of the circumstances and character of the times. The return of the Hebrew to that country, from which he had been ignominiously driven, is usually attributed to Cromwell. After the first Charles had paid the melancholy penalty for his dissimulation, a nego- 24 History of the Bank of England. tiation is stated to have taken place with Parliament. The demand of the Israelites was, that the laws against them should be repealed, and, provided the Bodleian library were made over to them, with an additional permission to possess St. Paul's Cathedral, as a synagogue, they would pay £500,000. However outrageous this proposal seems, if a letter in the Thurloe State papers may be trusted, it was absolutely discussed, and several debates occurred upon it. The larger sum of £800,000 was demanded ; the Hebrews refused to increase their offer, and the negotia- tion was broken off. The promotion of Cromwell to the Protectorate once more excited the hopes of the exiled Israelites. The favor this great man evinced towards religious toleration, the grandeur of disposition which led him to the support of principles, requiring two centuries even partially to de- velop, was not overlooked. In 1654 the French ambassador in Holland, writing to the French minister in England, says : " A Jew of Amsterdam informed me for certain, that the three generals of the fleet have pre- sented a petition to his highness the Protector, to obtain that their nation may be received in England to draw the commerce thither." The mind of Cromwell was undoubtedly aware of all the advantages to be gained by the return of this commercial people. Permission was given to Rabbi Menasseh Ben Israel to reside in London. In all probability this permission was made with the view of testing the feelings of the people. While in England he presented a petition to Cromwell, praying, for the Jew, a free exercise of his religion, a permission to exercise the faith of his fathers, and a license to erect synagogues for public worship ; at the same time he appealed to the trading propensities of the nation, by a declaration to the Commonwealth, exhibiting the advantages which would accrue to commerce from the return of his nation. A council was appointed, and, in the fashion of the time, disputations were held. Those who were supposed to be most interested were summoned to the debate. Law, trade and divinity had their representatives. The first was favorable, the second undecided, but the third opposed the return of this people with all the rancor of an ignorant intolerance. The text- quoting fashion of the period — the spirit which led men to dispute in conventicles, and wrest words from their right meanings — the narrow- ness which only regarded the Hebrew as the outcast, while it forgot that he had been the favored of God — were all brought into full exercise. For four days were texts, which had been uttered in a more genial spirit, narrowed and perverted to party feeling, and for four days must Crom- well's enlarged mind have been eminently annoyed by the prophetic denunciations of the divinity of the land. At last it appears that some- thing of the determined spirit which had displayed itself on other fields, cut the debate short— -Cromwell telling them, in very plain lan- guage, that they had made the question more intricate than ever ; that though he wished no more reasoning, he yet begged an interest in their prayers. No definite step appears to have resulted from this conference, and the general feeling of hostility which prevailed against the return of the Hebrews was increased by the discovery of a somewhat similar proposi- tion from their Asiatic brethren. The avowed design of a mission from The Protector's Descent — Goldsmiths' Notes, 25 some of their rabbis was, the establishment of a company to trade to the Levant; but the real object of their visit appears to have been, an exami- nation of the pedigree of the Protector, in hopes of tracing a Jewish origin, and of proving him to be the Messiah after whom the people yearned. "Whether Cromwell encouraged this idea or not appears quite uncertain ; but they obtained permission to repair to Cambridge and examine the library. They then went to Huntington, the birth- place of the Protector, to investigate his descent. Some rumors of this design soon propagated, and Cromwell, aware of the ridicule and sar- casm to which he would be rendered liable, ordered them to return to London, from which place they soon departed. At this time, however, the Hebrews obtained admission into England, and in 1689 they must have increased considerably, as, in a petition from some merchants, com- plaining that the Jews were not subject to the alien duty, it was stated that £10,000 were lost yearly from the export alien duty not being levied. The next resource of the merchants, after the violent seizure of their treasure by " the royal martyr," was to keep their cash in their own houses.. To do this they were obliged to trust their servants and ap- prentices. As the civil war advanced, however, the love of fighting often overcame the love of honesty, and they, with the money intrusted to them, disappeared. From the evil arose the remedy. The goldsmiths, up to this period, were employed, with some exceptions, in the ordinary way of their voca- tion. They were a rich body, and it was natural that the richest should be most trusted. Those servants, therefore, who yet remained in charge of their master's money, lent it, at 4d. per cent, per diem, to the goldsmith, who saw a new branch of business opening, and caught the first glimpse of modern banking. The troubles of the time, which prevented country gentlemen from keeping their rents in their own mansions, made them glad to remit it to persons of responsibility. The goldsmith was equally glad to pay a small interest, with the prospect of lending it at an increased profit ; the necessitous merchant applied for loans at a high usance ; the rich deposited their cash, for security, without interest ; the widow and the orphan received four per cent.'; and, with the money thus obtained, the goldsmith was able to increase his business by the somewhat new branch of discounting bills. They thus became money borrowers and receivers of rents. " They lent money to the king on the security of the taxes. The receipts they issued, for the money lodged at their houses, circulated from hand to hand, and were known by the name of goldsmiths' notes. These may be considered the first kind of bank notes issued in England." A business, at once profitable and safe, increased with the increase of commerce, and, under the prosperous sway of the Protector, must have been found a great convenience. The goldsmiths gradually arose in repu- tation with the extension of their transactions ; they took the lead in monetary business ; and, as they allowed interest on cash, however short the period of the loan, it must have been found an important assistance to all those who required a secure depositary for their gains. The modern principles of banking may thus be traced to the increased 26 History of the Bank of England. importance of business ; to the additional facilities required bythe latter, and to the disturbed spirit of the time, which gave to it an impulse it might otherwise have wanted. Maitland remarks that, even in his day, there were several eminent bankers who united to the department of banking the keeping of goldsmiths' shops, although they were more fre- quently separate. Great part of the wealth of Sir Thomas Gresham was found at his death to be comprised in gold chains ; while, in 1593, a German writes, that he visited England, and saw, in Lombard-street, " all sorts' of gold and silver vessels exposed to sale, as well as ancient and modern coins, in such quantities as must surprise a man the first time he sees and considers them." The celebrity of the first banking-house belongs, by common consent, to Mr. Francis Child. This gentleman, who was the father of his pro- fession and possessed of large property, began business shortly after the restoration. He was, originally, apprentice to "William Wheeler, gpld- smith and banker, whose shop was on the site of the present banking- house. The foundation of his importance arose from the good old fashion of marrying his master's daughter, and through this he succeeded to the estate and business. The latter he subsequently confined entirely to the banking department. The principles on which he founded it, and the remarkable clauses in his will, by which he regulated its future conduct, are well known. It has maintained to the present day, amid all the chances and changes of banking, the same position and the same respectability which he be- queathed it. By the year 166 1 ? the banking business, which had increased in some proportion with commerce, had attained considerable importance. Wealthy bodies must always hold an important position in the State, and, under a needy government, an influential one. The luxury of the court of the second Charles, combined with his careless disposition, compelled him to have recourse to the goldsmith. The goldsmith made him pay interest and premium to an enormous extent. Thus, a great portion of the supplies voted by the houses of Parliament came into the possession of this increasing body. The benefit which should have been derived from the parliamentary grants, was largely absorbed by the ne- cessity which unfortunately existed of obtaining the money immedi- ately. And how could such necessities fail to exist, when the dissipation of Charles produced those scenes of extravagance which were a disgrace to the king and a dishonor to the people ! The pages of Pepys and the private records of the reign, lately published, tend to prove that the pen- sioner of Louis Quatorze must have been utterly and completely at the mercy of the usurer. In a curious pamphlet, published in 1676, it may be seen that the goldsmith took great advantage of the necessities of Charles. The monarch who lives beyond his revenue must pay the same penalty as the subject who outruns his income. He found himself at the mercy of the rich goldsmith, who made the royal debtor pay ten, twenty and thirty per cent, for accommodation, while he allowed only six per cent, for the money which went to alleviate the difficulties of the " merry monarch." A business so profitable induced the goldsmith " more and more to become First Run on the Bankers. 27 lender to the king, to anticipate all the revenue, to take every grant of Parliament into pawn as soon as it was given ; also, to outvie each other in buying and taking to pawn bills, orders and tallies, so that, in effect, all the revenue passed through their hands." The extravagant luxury of the court, however, together with the utter want of principle of Charles, produced a nearly fatal result upon this important interest. The imbecility with which the contest with Holland had been carried on, had involved the nation in debt and dishonor. " The government of Charles," says Mr. T. Babington Macaulay,* " had suffered a succession of humiliating disasters. The extravagance of the court had dissipated all the means which Parliament had supplied for the purpose of carrying on offensive hostilities. It was determined to wage only defensive war ; and even for defensive war the vast resources of England were found insufficient. The Dutch insulted the British coast, sailed up the Thames, took Sheerness, and carried their ravages to Chatham. The blaze of the ships burning in the river was seen at Lon- don ; it was rumored that a foreign army had landed at Gravesend ; and military men seriously proposed to abandon the tower. To such a depth of infamy had a bad administration reduced that proud and victorious community, which, a few years before, had dictated its pleasure to Ma- zarine, to the States General, and to the Vatican." The people, accustomed to the secure reign of Cromwell, were in utter consternation. The moneyed portion of the community were seized with a panic. The country was in danger. London itself might be invaded. What security was there, then, for the money advanced to the crown ? The people flocked to their debtors ; they demanded their deposits ; and London witnessed the first run upon the bankers. The fears of the people proved fallacious, as the goldsmiths met all demands made upon them. Confidence was restored by a proclamation from the king, stating that the demands on the exchequer should be met as usual ; and the run ceased. From this period up to 16'72, the goldsmiths continued their money- making trade. The difficulties of Charles had increased ; he wanted money without the aid of Parliament. He was ambitious of absolute power ; and his reign had been a succession of abortive attempts to ob- tain it. The infamous cabal ministry were in office ; nothing was too bad for them to attempt. If there were some palliations for Charles I. when he seized the money deposited in the mint, what can be urged for Charles II. ? His throne was secure ; his person popular; money was freely ad- vanced to him on the security of his revenues. No necessity of the monarch justified the act we have to record. Charles I., under the pressure of unexampled necessity, had made a forced loan. Charles II., to gratify his immoderate passions, ordered the exchequer to be closed and no payments, made. Were this not vouched for by contemporary his- tory, we should hesitate, as we now blush, to recite it. The relation of Hume is worthy repeating. " The king had declared that the staff of treasurer was ready for any one that could find an expe- * For Macaulay's chapter on the Bank, see Appendix to this volume. 28 History of the Bank of England. dient for supplying the present necessities. Shaftesbury dropped a hint to Clifford, which the latter immediately seized and carried to the king, who granted him the promised reward, together with a peerage. This expedient was the shutting up of the exchequer, and the retaining of all the payments which should be made into ,it. "It had been usual for the bankers to carry their money to the ex- chequer, and to advance it on security of the funds, by which they were afterwards reimbursed when the money was levied on the public ; the bankers by this traffic got eight, sometimes ten per cent., for sums which either had been consigned to them without interest, or which they had borrowed at six per cent. ; profits which they dearly paid for by this egregious breach of public faith. The measure was so suddenly taken that none had warning of the danger ; a general confusion prevailed in the city, followed by the ruin of many ; the bankers stopped payment ; the merchants could answer no bills ; distrust took place every where ; and men full of dismal apprehensions asked each other, what must be the scope of those mysterious counsels, whence the Parliament and all men of honor were excluded ; and which commenced by the forfeiture of public credit, and an open violation of the most solemn engage- ments." The goldsmiths were ruined, and their clients ruined with them. Both had fallen by an act which stamped the monarch and his minions with infamy. But a general burst of honest indignation arose. The large sum of one million three hundred thousand pounds affected, directly or collaterally, the remotest provinces of the kingdom. The bankers were besieged ; but they, innocent of this great transgression, could yield no redress. A thousand families were deprived of bread. The widow and the orphan suffered with the merchant and the trader. The universal feeling which spread throughout the length and breadth of the land, had it been resolved into words, would have uttered, with one loud voice, in the solemn warning of the psalmist, " Put not your trust in princes." The press was resorted to, and language, stronger than the Stuarts liked or usually permitted, was boldly circulated among the people. Several pamphlets, and one octavo volume, were published, and it is a proof of the general feeling of the nation, that one writer ventured to say, " A step of this kind could proceed from nothing less than a resolution of the court to borrow no more hereafter, but to take." The outcry assumed so much importance, that Charles was compelled to yield, and we learn that six per cent., out of the hereditary excise, was paid for this sum during the remainder of his reign. It is a curious cir- cumstance that, only two years after this, the king was able to borrow money at eight per cent., being nominally the same rate of interest charged before that event. The principal was never repaid. It was, however, made part of the national debt by William ; this act was confirmed by Anne, and the stock ultimately became part of the celebrated South Sea Fund. We abridge from " Knight's Pictorial History of England," a remarka- bly clear and succinct account of the progress of the debt. " Interest had been originally paid upon this sum at six per cent, up to the last year of Charles' reign. From which time no provision was Interest Allowed, 2'S •Made for it till 1701, the last of William's reign, when interest was granted on the whole from 1705, at three per cent., and the principal made redeemable on payment of half its amount. The entire amount* to which the unfortunate bankers and merchants were plundered by this arrangement exceeded thre« millions. The £664,263 thus ultimately awarded, in satisfaction of equitable claims to six times the amount, was called the bankers' debt, and still remains undischarged with other public debts, of which it may be regarded the foundation." * The details connected with the English national debt possess much interest, and we propose to group those figures which are most frequently required for gene- ral reference. The following table is extracted from a parliamentary return granted on the motion of Lord Goderich, in 1859, which enters fully into all particulars of the national debt, and occupies upwards of a hundred pages, distinguishing the years of peace or war. The first item is in 1691, when there was an unfunded debt of £3,130,000. No funded debt existed until 1694, when it commenced with the comparatively trifling sum of £1,200,000, the total amount of funded and unfunded debt in that year being £6,734,297. The epochs selected below furnish abundant matter for reflection : Annual years. War or Peace. National Debt. Interest. 1691,. 1697,. 1702,. 1713,. 1718,. 1721,. 1739,. 1742, . 1748,. 1756,. 1763,. 1775,. 1783,. 1793,. 1802,. 1803,. 1815,. 1854,. 1856,. 1859,. .War with France, .Peace of Ryswick, ...... .War of the Spanish succession,. .Peace of Utrecht,. .War with Spain, .Peace, .War of right of search with Spain,. .War of the Austrian succession, .Peace of Aix-la-Chapelle, .Commencement of the seven years' war, . . . .Termination of the seven years' war, .Commencement of war with America, .Termination of war with America, .Commencement of first revolutionary war with France,. .Peace of Amiens, .Second revolutionary war with France, .... .Termination of the French and American wars, > .War with Russia, .Termination of war with Russia, ..... .Peace, £ 3,130,000 14,522,925 12,767,225 34,699,847 40,3'79,684 54,405,108 46,613,883 51,847,323 75,812,132 74,575,025 132,716,049 126,842,811 231,843,631 247,874,434 537,663,008 547,732,796 861,039,049 775,215,519 808,108,722 805,078,554 £ 232,000 1,322,519 1,215,324 8,004,287 2,965,889 2,855,380 2,030,884 2,157,136 3,U5,165 2,753,566 6,032,733 4,703,619 9,065,585 9,711,238 20,268,551 20,812,962 32,645,618 2'7,363,889 28,550,039 28,204,299 These figures speak volumes. It is war, and war alone, that has saddled England With this mountain of debt, equivalent, at this moment, to four thousand millions of dollars, at 3£ per cent, interest.— Am. Ed. 30 History of the Bank of England. CHAPTER III. NATIONAL BANK REQUIRED — BANK OF CREDIT — SPECULATION IN 1694— BUBBLE COMPANIES NEW RIVER COMPANY — BANK OF ENGLAND — WILLIAM PATERSON — BUCCANEERS OT DARIEN — SCOTTISH ENTHUSIASM — PATERSON'S LIBERALITY THE DARLEN EXPEDITION ITS FAILURE — GREATNESS OF THE SCHEME FATE OF THE PROJECTOR. Thk important position assumed by England towards the middle of tbe seventeenth century, renders the absence of a national bank somewhat surprising. Under the sagacious government of Cromwell, the nation had increased in commercial and political greatness ; and although several projects were issued for banks, one of which was to have branches in every important town throughout the country, yet a necessity for their formation not being absolutely felt, the proposals were dismissed. Dur- ing the Protectorate, however, Parliament, taking into consideration the rate of interest, which was higher in England than abroad, and that trade was thereby rendered comparatively disadvantageous to the English mer- chant, reduced the legal rate from eight to six per cent., and this measure, although it had been carried by the Parliament of Cromwell, almost every act of which proved odious in the eyes of the Stuarts, was never- theless confirmed by the legislature of Charles II. In 1546, the pay- ment of interest had been rendered legal, and fixed at ten per cent. In 2624, the rate had been reduced to eight per cent. ; and with the advance of commercial prosperity it has been found advisable to lower it still further. 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. It was desirable as a method of reducing the rate of interest paid by the State ; a rate so high that, ac- cording to Anderson, men were induced to take their money out of trade for the purpose of securing it ; an operation " big with mischief." The truth is, that the times required it. The theorist may prove to demon- stration the perfection of his theory ; the speculator may show the cer- tainty of its success ; but unless it be a necessity, called for by the onward progress of society, it must eventually fall to the ground. That the want of such an establishment was felt, is certain. But as such firms as Childs — the books of whom go back to the year 1620, and refer to prior documents — Hoares, dating from 1680, and Snows, from 1685 — were able to assist the public demand, although at the exorbitant interest of the period, it does not occasion so much surprise that the at- tempt made to meet the increasing requirements of trade proved insuffi- cient. In 1678, however, sixteen years previous to the foundation of the Bank of England, " proposals for a large model of a bank" were published, and in 1683, a "National Bank of Credit" was brought forward. In a rare pamphlet, entitled "Bank credit; or, the usefulness and security of the bank of credit examined, in a dialogue between a country gentleman and a London merchant," this idea is warmly defended. It was, how- ever, simply to have been one of credit ; nor was it proposed to form a Bank of Credit. 31 bank of deposit, although by the following remark of the country gentle- man, it is evident that such an establishment, on a secure scale, was desirable. He says : " Could they not, without damage to themselves, have secured the running cash of the nobility, gentry, merchants and traders of this city and kingdom, from all hazard, which would have been a great benefit to all concerned, who know not where to deposit their cash securely." To this, which time has proved to be a reasonable suggestion, the fol- lowing reply is made by the London merchant : " They are unwilling to meddle with money, because the scarcity of it would, perhaps, by ignorant or malicious men, be imputed to them. Possibly, for the sake of ease and convenience, they may be induced to receive and secure the running cash of such as shall desire it, yet dealing in money is not the business they purpose." One of the objects was, "that tradesmen, when they have a considera- ble quantity of goods or wares made, may, by the help of thisbank, deposit their goods by raising a credit on their own dead stock, employ their servants, and increase their trade, till they get a good market, instead of selling them at a loss." In other words, this bank was to act as a great capitalist for the mer- chant, and enable the speculative man to inflict on the country the evils of over-trading. However desirable such an establishment may be as a resource on an emergency, it is far from being so ordinarily, as it would invariably tend to increase the mischief arising from undue speculation. The directors proposed also, to encourage any " ingenious invention" tending to the promotion of linen, woollen, silk, lace or other useful manufactures. The danger of forgery, a fearful question, and involving many interests, is met by a reply of which time has unhappily proved the fallacy. " I am well assured," calmly and confidently replies the London merchant, " that the bills are so contrived, that it is morally impossible that they should be counterfeited." The pages of the Newgate Calendar afford a melancholy, but conclusive reply to this assertion. After much trouble this bank of credit was established at Devonshire House, in Bishopsgate-street. Its object, as we have related, being prin- cipally to advance money to tradesmen and manufacturers on the security of goods. Three-fourths of the value was lent on these, and bills for their amount given to the depositor. In order to render these bills current, an appointed number of persons in each trade was formed into a society to regulate commercial concerns. Any individual possessed of such bills might, therefore, obtain from this company goods or merchandise, with as much ease as if they offered current coin. The bank of credit does not appear to have flourished. The machin- ery was too complicated, and the risk of depreciation in the value of manufactures too great. It was next to impossible for such a company to exist, after the Bank of England came with its low discounts and free accommodations. The wild spirit of speculation, that spirit which at various periods has created fearful crises in the commercial world, commenced in 1694. The a 32 History of the Bank of England. fever which from time to time has flushed the mind of the moneyed man, and given a fierce excitement to the almost penniless adventurer, was then and in the following year in full operation. The great South Sea scheme in 1720, which it will be our melancholy duty to refer to, is ordinarily considered the earliest display of this reckless spirit. But a quarter of a century before, equal ingenuity and equal villainy were ex- ercised. Obscure men, whose sole capital was their enormous impudence, invented similar schemes, promised similar advantages, and used similar arts to entice the capitalist, which were employed with so much success at a later period. The want of a great banking association was sure to be made a pretext. Two " land banks" and a " London bank," to be managed by the magistrates, with several other proposals, were, there- fore, put promisingly forward. One of these was for another " bank of credit;" and a pamphlet, published in 1694, under the title of "Eng- land's Glory," will give some idea of its nature. " If a person desires money to be returned at Coventry or York, he pays it at the office in London, and receives a bill of credit after their form, written upon marble paper, indenturewise, or on other paper, as may be contrived, to prevent counterfeiting." It was also proposed that government should share the profits ; but neither of the projects were carried out. The people neglected their calling. The legitimate desire of money grew into a fierce and fatal spirit of avarice. The arts so common at a later day were had recourse to. Project begat project. Copper was to be turned into brass. Fortunes were to be realized by lotteries. The sea was to yield the treasures it had engulphed. Pearl fisheries were to pay impossible per centages. " Lottery on lottery," says a writer of the day, " engine on engine, multiplied wonderfully. If any person got considerably by a happy and useful invention, others followed in spite of the patent, and published printed proposals, filling the daily newspapers therewith, thus going on to jostle one another, and abuse the credulity of the people." Anderson, the historian of English commerce, says, " the projectors of these made a great noise in town, for drawing on people to join with them, making use of various tricks and stratagems. At first they pretend a mighty vein of gold, silver or copper, to have been discovered in a piece of ground of their knowledge ; then they agree with the lord or patentee for a small yearly rent, or a part reserved to him, to grant them a lease for twenty-one years, to dig that ground, which they immediately fall to, and give out it is a very rich mine. Next they settle a company, and divide it usually into four hundred shares, and pretend to carry on the work for the benefit of all the proprietors, who, at the beginning, purchase shares at a low rate, say ten or twenty shillings ; then all on a sudden they run up the share to £3, £5, £10 and £15. When those originally and princi- pally concerned sell out their interest, and by this and other under-hand dealings, tricking and sharping on one another, the whole falls to the ground, and is abandoned by every body." Thus it would seem that they who lived m the " good old times" were not deficient in craft, cun- ning and duplicity. Amid the many delusive and impracticable schemes were two impo>-' William Paterson. 33 ant projects, which have conferred great benefits on the English people. The first of these was the New Biver Company, the conception of Sir Hugh Middleton ; the second was the corporation of the Bank of Eng- land. Nature, and the great nations of antiquity, suggested the former ; the force and pressure of the times demanded the latter. It is from such demands that our chief institutions arise. By precept we may be taught their propriety ; by example we may see their advantages. But until the necessity is personally felt, they are sure to be neglected ; and men wonder at their want of prescience, and upbraid their shortsighted- ness, when, with a sudden and sometimes startling success, they arise through the energy of another. William Paterson, one of those men whose capacity is measured by failure or success, was the originator of the new bank ; and it is per- haps unfortunate for his fame that no biography exists of this remarkable person. As the projector of the present Bank of Scotland, as the very soul of the celebrated Darien Company, and as the founder of the Bank of England, he deserves notice. A speculative as well as an adventurous man, he proved his practicability of the Darien scheme by accompany- ing that unfortunate expedition ; and the formation of the Bank of Eng- land was the object of his desires and the subject of his thoughts for a long time previous to its establishment. William Paterson was born in Traillflatt, in the county of Dum- fries, in 1658. Having been educated for the church, he indulged a na- turally adventurous disposition by visiting the West Indian Islands, under pretext of converting the Indians. His real occupation is stated, how- ever, to have been very different, as he mingled with, and perhaps formed part of those daring buccaneers, the exploits of whom form so romantic a chapter in the byways of history. During this period Paterson made himself thoroughly acquainted with the capabilities of the Isthmus of Darien, better known as the Isthmus of Panama. " This place, which is between Mexico and Peru," says a modern writer, " is within six weeks' sail of most parts of Europe, the East Indies and a part of China. It is in the heart of the West India Islands, and not far from North America. It is one of the best situations for a colony from a trading and manufac- turing country on the face of the earth." The same opinion was enter- tained by Paterson, who must have been thoroughly acquainted with the position and natural advantages of the place, and from his youth con- templated its colonization. " The expense of navigation to China, Japan, the Spice Islands, and the far greatest part of the East Indies will be lessened more than half, and the consumption of European commodities and manufactures will soon be more than doubled. Trade will increase trade, money will beget money, and this trading world shall need no more to want work for their hands, but will rather want hands for their work." While roving about the beautiful islands of the western Indies, Paterson loved to listen to the buccaneers, who, after a stormy and eventful career, delighted in relating the glories of their early achieve- ments ; and with memories which still lingered on their past lives, re- counted with transport the ease with which they had passed from one sea to another, driving before them the plunder they had acquired. From them he heard of precious metals in the bowels of the earth, of 34 History of the Bank of England. fine tracts of land little known to Europeans, and of rivers sparkling over sands of gold. The romance which fired the imagination of the youth was productive, in the maturity of his manhood, of the unfortunate Darien expedition, as before leaving he satisfied himself that there was one portion of this fine country which still belonged to the Indians, the original proprietors of the soil, from whom it had never been alienated. The situation was between Portobello and Cartbagena, and although under a tropical sun, the air was temperate. The soil also was rich and productive, yielding almost spontaneously the refreshing fruits of a warm and luxuriant climate. A desire to participate in advantages similar to those enjoyed by the East India Company, was prevalent among many commercial nations, about the end of the seventeenth century. This feeling being noticed by Paterson, he first mentioned his project to the English people, by whom it was coldly received. He then proposed it, through the agency of a rich Walloon banker, to several European States, but without success. On his return to London he formed a friendship with Mr. Fletcher, of Saltoun, a man who " hated England, because he loved Scotland to ex- cess." Struck with the proposal, the advantages of which he was anxious to secure for his country, Fletcher, took Paterson to Edin- burgh, and introduced him to the minister for Scotland, who, with the secretaries of State, warmly countenanced the project. The prospect of participating in the profits of the East India Company stirred all the ac- cumulative propensities of human nature. Every thought of a nation, remarkable for an absence of undue speculation, was embarked in a scheme which promised universal riches. " The phrensy," says Sir John Dalrtmple, " of the Scotch nation to sign the solemn league and covenant, never exceeded the rapidity with which they ran to subscribe to the Darien Company. The nobility, the gentry, the merchants, the people, the royal burghs, without the exception of one, and most of the other public bodies, subscribed. Young women threw their little for- tunes into the stock ; widows sold their jointures to get the command of money for the same purpose." Four hundred thousand pounds — half the cash in Scotland — was subscribed. To this, England added three hundred thousand, and Hamburgh and Holland two hundred thousand more. An agreement had been entered into, by which Paterson was to be paid two per cent, on the stock, and three per cent, on the profits ; but, in the greatness of this success, he tendered a discharge of both claims — a testimony to his entire disinterestedness. In doing so, Paterson con- trived to throw a grandeur of expression over a simple law release. " It was not suspicion of the justice or gratitude of the company, nor a con- sciousness that my services could ever become useless to them, but the ingratitude of some individuals, which made it common prudence to ask a retribution for six years time, and ten thousand pounds spent, in pro- moting the establishment of the company. But now I see it standing on the authority of Parliament, and supported by so many great and good men, I release all claim to that retribution, happy in the noble con- cessions made to me, but happier in the return I now make for it." The English were startled at the enthusiasm of their neighbors. The Scottish Enthusiasm — Darien Expedition. 35 East India Company remonstrated. The Parliament impeached some of their countrymen for joining it. The king grew alarmed, and said " he had been ill-advised in Scotland," changed his Scotch ministry, and with- drew the promised aid. The Scottish people, far from being depressed, were animated by this. They regarded the profit as likely to be greater; undertook the vast project themselves ; and neighboring nations, with surprise and respect, saw the poorest country in Europe send forth the most gallant and numerous colony which had ever passed from the old to the new world. The 26th July, 1698, is a day memorable in the annals of Scotland, when twelve hundred persons — three hundred of whom were men of birth and influence — embarked in five stout vessels from Leith. The en tire population of Edinburgh thronged to witness their departure. Tears mingled with smiles, and praises of their courage were blended with prayers for their safety. Many a fond heart looked forward with confident anticipation ; and none among that earnest crowd had power to weaken the present joy with anticipations of future sorrow. Those who had been refused for want of room, hid themselves in the ships, and clung to the ropes and timbers, imploring permission to accompany the expedition. The eyes of that anxious crowd followed the white sails of the vessels as they left the harbor, and few who were interested in their progress left the pier of Leith so long as they could trace the course of these bold adventurers. September witnessed their arrival at the proposed colony. Paterson honorably purchased land of its Indian possessors, sent messages of amity to the Spanish settlers, and, to his eternal honor, he who at an earlier period had said, " A people and their industry are the true riches of a nation," proclaimed, as the two great principles of his common- wealth, freedom of faith and freedom of trade to all sects and to all nations. The new settlers built a fort, established a station, and conse- crated both with mingled feelings of hope and love — hope for the place where they had cast their destinies — love for the home which a Scot never forgets. They found the land of unequal surface, varied by swell- ing hills and fair valleys, abounding with rivers, brooks and springs. Delighted with the beauty of its situation, the golden sands of its rivers, and the treasures assigned by tradition, which Paterson, at a later period, had witnessed, they worked with all the strong good-will of set- tlers anxious to make a fruitful harvest from the fertile soil, and the earnestness of men willing to earn their bread by the sweat of their brow. And as the followers of " stout Cortes," " Silent upon a peak of Dariea," gazed in " mute surprise" upon the broad Pacific, so, upon many a fair summer's eve did the companions of Paterson find themselves on the summit of the loftiest " peak," gazing through the clear air of that fine climate towards the bleak mountains of their northern home. In the watch-tower which they had built upon a mountain a mile above the surface of the sea, Dalrtmple says, they often sat, enjoying the beauti- ful air and speculating upon their future prospects. 36 Eistory of the Bank of England. The first letters from the colony were written with enthusiasm. " Tbe wealth, fruitfulness, health and good situation of the country are much above our expectation." " In fruitfulness this country seems not to give place to any in the world." One river was named the Golden River. Another place was called the Golden Island. The seas were filled with turtle. Hunting, fowling and fishing were abundant. Grand and stately trees, without any underwood, enabled a horseman to ride for miles be- neath the pleasant shade, so acceptable to the inhabitants of a sultry climate. " Strong in body and hardy in habits," says a writer in " Cham- bers' Journal," they behaved differently to the effeminate Spaniards in a similar situation. In place of shrinking with disdain from the labor which could alone command success, the Caledonian settlers nerved themselves to their task. Unhappily their stock of provisions ran low, and they were compelled to accept the hospitality of the Indians, who hunted and fished to supply their necessities. Summer brought disease ; provisions grew scarcer ; "the other colonists were forbidden to trade with them. With a deficient supply of food, their numbers daily diminishing beneath the wasting sun of a tropical climate, the bold Scots began to shrink from the dangers they had dared. But worse and more perilous evils were in reserve. The fort was attacked by the Spaniards^ from an- other portion of the isthmus, who were said to be covertly instigated by the English monarch ; their numbers were thinned by disease ; the rem- nant were weakened by famine ; and the unhappy settlers, commanded by Captain Campbell, after gallantly supporting the credit of the national name, had no resource but to surrender. The terms were favorable. The honors of war and safety for personal property were guaranteed them. This, added perhaps to the strong home feelings which a Scot- tish exile ever cherishes, decided their homeward course ; and William Paterson, the first to leave his native soil at Leith, and the last to quit Darien, saw, with an anguish almost inexpressible, the failure of his cherished scheme. His conduct was worthy of his character. A letter of the period says : " The colonists gave Paterson due praise, for he had been diligent and true to the end. He looks more like a skeleton than a man." The following is a touching picture, drawn by his own pen : " When the rest were preparing to go away, I was left alone on shore in a weak condition. None visited me, except Captain Drummonl\ who, with me, still lamented the thoughts of our leaving the place, and prayed God that we might hear from our country before we left the coast." The utmost precaution could not have guarded against the miseries which assailed them. So weak were they when they left this inhospitable spot, that they were unable to weigh the anchor of the leaky vessel destined to convey them home. Thirty only of those who left the pier of Leith, with such bounding yet honorable ambition, again set foot on their native soil. The projector, though seized with temporary de- rangement during the voyage, was one of them. With him, the great- ness of the failure was in proportion to the vast grandeur with which his imagination had invested the scheme. Not a family in Scotland escaped. In cash or kindred all suffered. It was a national calamity, which fell alike on peer and peasant. That it was not the mere dream of a speculative enthusiast, is certain from the interest taken in dis- Darien Expedition — Fate of the Projector. 3 1 ? couragiDg it. That it was eminently practical, is almost proved from a people, so cautious as the Scotch, adventuring so freely. The mere fact that Paterson embarked in it, if not a direct evidence in its favor, is at least a direct proof of his faith in its practicability. It appears, indeed, to have been a remarkably grand scheme — grand in its conception — grand in its attempted execution — and was worthy the mind of that man with whom the idea of the Bank of England originated. The accounts of Paterson's after life are various. One historian re- ports that he assisted in forming the union between England and Scot- land ; that he was recommended by the Scottish Parliament to Queen Anne; and that he received an appointment in connection with the South Sea scheme ; while another says, " Paterson* survived many years in Scotland, pitied, respected, but neglected." It is equally doubtful whether any reparation was made, as Anderson states, that for his great merit and public services the House of Commons voted him £18,241 10s. as a compensation ; but Sir John Dalrtmple writes, " After the union he claimed reparation for his losses from the equivalent money given by the English to the Darien Company, but got nothing, because," he adds bitterly, "a grant to him from a public fund would have been only an act of humanity, and not a political job." Thus ended the attempt of the founder of the Bank of England to colonize Darien, an expedition so im- portant, and at the same time so disastrous, that it lives in the memory of the Scottish peasant, and forms a part of his familiar superstitions to the present day. Robert Chambers says, the peasantry of Torwoodlee, in Roxburghshire, yet believe that on anight — afterwards ascertained to be that of the death of the laird's son at Darien — all the bells in Tor- woodlee house rang violently and simultaneously, without the appearance of mortal agency. * Patebson's conduct, on his return to Scotland, was admirable. He set vigor- ously to work to frame a new plan for the colony; and wrote, in 1701, an interest, ing work hitherto attributed to the notorious John Law, entitled "Proposals and Reasons for constituting a Council of Trade." On his return to London, in 1701, he met with a friendly reoeption from King William ; but the death of that monarch, shortly afterwards, cast a temporary cloud over Paterson's future prospects. He had an important share in the union of the English and Scottish Parliaments, as able tracts from his pen still attest ; he was unremitting in his endeavors to relieve the distress of his native country ; he had a sharp controversy with John Law on paper money ; and was elected member of Parliament for Dumfries, in 1708. At the treaty of Union, an indemnity in favor of Paterson was recommended to Queen AsNE^by the Scottish Parliament, in consideration of his losses in connection with the Darien company, and of his " carrying on other matters of a public nature, muph to his country's service." George I. had ascended the throne, however, before this indemnity was gained. The remainder of his years were spent at "Westminster, in the metropolis, in unavailing hostility to the ruinous schemes of his relative and old financial foe, John Law. Paterson died in January, 1719. — Mncy. Brit. vol. xvii. . See William Paterson, the Merchant Statesman and Founder of the Bank of England, his Life and Trials, by S. Bannister, Edinburgh, 1868. Paterson's biographer, who has industriously collected all available information regarding him, also advertises The Writings of William Paterson, with a Biographical Introduction, 2 vols. 8vo„ 1858. 38 History of the Bank of England. CHAPTER IV. OPPOSITION TO THE BANK — SCARCITY OF SUPPLIES — DISTRESS OF THE ARMY — VARYING OPINIONS — ESTABLISHMENT OF THE BANK — ANALYSIS OF THE ACT — BANK AT GROCERS HALL BENEFICIAL EFFECTS TRIAL OF THE BANK WILL OF THE BANK DEATH OF THE FIRST DEPUTY-GOVERNOR — JEALOUSY OF THE GOLDSMITHS. From that political change which has been so justly termed the "great revolution," to the establishment of the Bank of England, the new gov- ernment were in constant difficulties ; and the ministerial mode of pro- curing money was degrading to a great people. The duties in support of the war waged for liberty and protestantism were required before they were levied. The city corporation was usually applied to for an advance ; interest, which varied probably according to the necessity of the borrower rather than to the real value of money, was paid for the accommodation. The officers of the city went round in their turn to the separate wards, and re-borrowed in smaller amounts the money they had advanced to the State. Interest and premiums were thus often paid to the extent of twen- ty-five and even thirty per cent., according to the exigency of the case, and the trader found his pocket filled at the expense of the public. Mr. Paterson gives a graphic description : " The erection of this famous bank not only relieved the ministerial managers from their frequent pro- cessions into the city, for borrowing of money on the best and nearest public securities, at ten or twelve per cent, per annum, but likewise gave life and currency to double or treble the value of its capital in other branches of public credit, and so, under God, became the principal means of the success of the campaign in 1695 : as particularly in reducing the important fortress of Namur, the first material step towards the peace con- cluded in 1697." To remedy this evil the Bank of England was projected, and, after much labor, William Paterson", aided by Mr. Michael Godfrey, procured from government a consideration of the proposal. The k'ng was abroad when the scheme was laid before the council, but the que ,n occupied his place. Here considerable opposition occurred. Paterson found it more difficult to procure consent than he anticipated, and all those who feared an invasion of their interests united to stop its progress. The goldsmith foresaw the destruction of his monopoly, and he opposed it from self-in- terest. The Tory foresaw an easier mode of gaining money for the gov- ernment he abhorred, with a firmer hold on the people for the monarch he despised ; and his antagonism bore all the energy of political parti- sanship. 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 contracts, and he vehemently and virtuously opposed it on public principles. Loud, therefore, were the outcries, and great the exertions of all parties, when the bill was first introduced in the House of Commons. But outcries are vain, and exertions futile in oppo- Opposition to the Bank. 39 sition to a dominant and powerful party. A majority had been secured for the measure, and they who opposed its progress covered their defeat with vehement denunciations and vague prophecies. The prophets are in their graves, and their predictions only survive in the history of that establishment, the downfall of which they proclaimed. " The scheme of a national bank," says Smollett, "had been recommended to the minis- try for the credit and security of the government, and the increase of trade and circulation. William Paterson was author of that which was carried into execution. When it was properly digested in the cabi- net, and a majority in Parliament secured, it was introduced into the House of Commons. The supporters said it would rescue the nation out of the hands of extortioners ; lower interest ; raise the value of land ; revive public credit ; extend circulation ; improve commerce ; facilitate the annual supplies, and connect the people more closely with government. The project was violently opposed by a strong party, who affirmed that it would become a monopoly, and engross the whole money of the king- dom ; that it might be employed to the worst purposes of arbitrary power ; that it would weaken commerce by tempting people to withdraw their money from trade ; that brokers and jobbers would prey on their fellow creatures ; encourage fraud and gaming, and corrupt the morals of the nation." Previous governments had raised money with comparative ease be- cause they were legitimate. That of William was felt to be precarious. It was feared by the money-lender that a similar convulsion to the one which had borne him so easily on the throne of a great nation, might waft him back to the shores of that Holland he so dearly loved. Thus, the very circumstances which made supplies necessary also made them scarce. In addition to these things his person was unpopular. His phlegmatic Dutch habits compared unpleasingly with those of the grace- ful Stuarts, whose evil qualities were forgotten in the remembrance of their showy characteristics. Neither his Dutch followers nor his Dutch manners were regarded with favor ; and had it not been for his eminent kingly capacity, these things would have proved as dangerous to the throne as they tended to make the sovereign unpopular. In a pamphlet, published a few years after the establishment of the new corporation, is the following vivid picture of this monarch's government: "In spite of the most glorious prince, and most vigilant general the world had ever seen, yet the enemy gained upon us every year ; the funds were run down, the credit jobbed away in Change Alley, the king and his troops devoured by mechanics and sold to usury, tallies lay bundled up like Bath faggots in the hands of brokers, and stock jobbers ; the Parliament gave taxes, levied funds, but the loans were at the mercy of those inen— the jobbers — and they showed their mercy, indeed, by devouring the king and the army, the Parliament, and indeed the whole nation ; bringing their great prince sometimes to that exigence, through inexpressible ex- tortions that were put upon him, that he has even gone into the fields without his equipage, nay, even without his army ; the regiments have been unclothed when the king has been in the field, and the willing, brave English spirits, eager to honor their country and follow such a king, have marched even to battle without either stockings or shoes, while his ser- 40 History of the Bank of England. vants have been every day working in Exchange Alley to get his men money of the stock jobbers, even after all the horrible demands of dis- count have been allowed ; and at last, scarce 50 per cent, of the money granted by Parliament has come into the hands of the exchequer, and that late, too late for service, and by driblets, till the king has been tired with the delay." This is a strange picture ; beating even Mr. Paterson s account of the " processions in the city" to gain money, and adds another convincing proof of the necessity which then existed for some establish- ment, capable of advancing money at a reasonable rate, on the security of parliamentary grants. The scheme proposed by William Paterson was too important not to meet with many enemies, and it appears from a pamphlet by Mr. God- feet, the first deputy-governor, that " some pretended to dislike the bank only for fear it should disappoint their majesties of the supplies proposed to be raised." That " all the several companies of oppressors are strangely alarmed, and exclaim at the bank, and seemed to have joined in a confed- eracy against it." That " extortion, usury and oppression were never so attacked, as they are likely to be by the bank." That " others pretend the bank will join with the prince to make him absolute. That the con- cern have too good a bargain, and that it would be prejudicial to trade." In Bishop Bctrnet's "History of his' Own Times," we read an evidence of Mr. Godfrey's truth. " It was visible that all the enemies of govern- ment set themselves against it with such a vehemence of zeal, that this alone convinced all people that they saw the strength that our affairs would receive from it. I had heard the Dutch often reckon the great advantage they had had from their banks, and they concluded that as long as England remained jealous of her government, a bank could never be settled among us, nor gain credit among us to support itself, and upon that they judged that the superiority in trade must still be on their side. " The advantages that the king and all concerned in tallies had from the bank were soon so sensibly felt, that all people saw into the secret rea- sons that made the enemies of the constitution set themselves with. so much earnestness against it." Another writer says : " Some prophetic politicians intimated their apprehensions, that an institution of this kind would soon become a mere creature of government ; that care would bo taken to give it none but government operations ; that on any sudden emergency, or even general panic, the bank might be unable to answer the demands of its creditors, and that the failure of a national bank must be attended with national ruin ; that such an institution, under the influence of the executive government, would throw more real power into its hands, and add more facility to the projects of arbitrary and despotic ministers, not to say monarchs, than the erection of a citadel ; that the shutting up of the exchequer in the last reign but one, after the bankers had been induced to deposit the money there, was alone sufficient to mani- fest the danger of trusting any mighty mass of wealth within the reach of power ; and that from the time this now wheel was added to the machine of government, all its motions would be mysterious and unintelligible ; and a very little cunning might serve to destroy what all the wisdom and virtue of the nation could never restore." Establishment of the Banh-^-Analysis of the Act. 41 All these varied interests were vainly exerted to prevent the bill from receiving the royal sanction, and the Bank of England, founded on the same principles which guided the banks of Venice and Genoa, was incor- porated by royal charter, dated the 27th July, 1694. From Mr. Gil- dart's " History and Principles of Banking" we present the following brief analysis of this important act : " The act of Parliament by which the bank was established is entitled ' An Act for granting to their maj- esties 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 fifteen hundred thousand pounds towards carrying on the war with France.' " After a variety of enactments relative to the duties upon tonnage of ships and vessels, and upon beer, ale and other li- quors, the act authorizes the raising of £1,200,000 by voluntary sub- scription, the subscribers to be formed into a corporation, and be styled " The Governor and Company of the Bank of England." The sum of £300,000 was also to be raised by subscription, and the contributors to receive instead annuities for one, two or three lives. Towards the £1,200,000 no one person was to subscribe more than £10,000 be- fore the first day of July next ensuing, nor at any time more than £20,000. The corporation were to lend their whole capital to govern- ment, for which they were to receive interest at the rate of eight per cent, per annum, and £4,000 per annum for management ; being £100,000 per annum on the whole. The corporation were not allowed to borrow or owe more than the amount of their capital, and if they did so, the indi- vidual members became liable to the creditors in proportion to the amount of their stock. The corporation were not to trade in any "goods, wares or merchandise whatever, but they were allowed to deal in bills of exchange, gold or silver bullion, and to sell any goods, wares or merchandise upon which they had advanced money, and which had not been redeemed within three months after the time agreed upon." The whole of the subscription was filled in a few days ; twenty-five per cent, paid down ; and, as we have seen, a charter was issued on the 27th of July, 1694,* of which the following are the most important points : " That the management and government of the corporation be commit- ted to the governor, deputy-governor, and twenty-four directors, who shall be elected between the 25th day of March and the 25th day of April each year, from among the members 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 out of the said capital stock or fund, or by such dealing as is allowed by act of Parliament. "They must be natural born subjects of England, or naturalized sub- jects; they shall have in their own name and for their own use,-severally, viz., the governor at least £4,000, the deputy-governor £3,000, and each director £2,000, of the capital stock of the said corporation. * Passed April 25th, 1694, (according to Lawson's History of Banting, p. 40, Boston, 1862,) when king William went in state to the House of Lords and gave the royal assent in the usual form. — Am. Ed. 42 History of the Bank of England. " That thirteen or more of the said governors or directors (of which the governor or deputy-governor shall be always 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 consider reasonable. " Every elector must have, in his own name, and for his own _ use, 66500, or more, capital stock, and can only give one vote ; he must, if re- quired by any member present, take the oath of stock, or the declaration of stock, if it be one of those people called Quakers. " Four general courts to be held in every year in the months of Sep- tember, December, April and July. A general court may be summoned at any time, upon 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 corpo- ration, provided that such by-laws and ordinances be not repugnant to the laws of the kingdom, and be confirmed and approved according to the statutes in such case made and provided." When the payment was completed, it was handed into the exchequer, and the bank procured from other quarters the funds which it required. It employed the same means which the bankers had done at the exchange, with this difference, that the latter traded with personal property, while the bank traded with the deposits of their customers. It was from the circulation of a capital so formed that the bank derived their profit. It is evident, however, from the pamphlet of the first deputy-governor, that at this period they allowed interest to their depositors; and another writer, D'Avenant, makes it a subject of complaint. " It would be for the general good of trade if the bank were restrained from allowing inter- est for running cash ; for the ease of having three and four per cent, without trouble, must be a continual bar to industry." In Grocers' Hall, since razed for the erection of a more stately struc- ture, the Bank of England commenced operations. Here, in one room, with almost primitive simplicity, were gathered all who performed the duties of the establishment. " I looked into the great hall where the bank is kept," says the graceful essayist of the day, " and was not a little pleased to see the directors, secretaries and clerks, with all the other members of that wealthy corporation, ranged in their several stations according to the parts they hold in that just and regular economy." The secretaries and clerks altogether numbered but fifty-four, while their united salaries did not exceed £4,350. But the picture is a pleasant one, and though so much unlike present usages, it is a doubtful question whether our forefathers did not derive more benefit from intimate associ- ation with and kindly feeling toward their inferiors, than their descend- ants receive from the broad line of demarcation adopted at the present day. The effect of the new corporation was almost immediately experienced. On the 8th August, in the year of its establishment, the rate of discount on foreign bills were six per cent. ; and although this was the hio-hest legal interest, yet much higher rates had been previously demanded. The name of William Pateeson was not long upon the list of directors. The Land Bank. 43 The tank was established in 1694, and for that year only was its founder among those who managed its proceedings. A century and a half has passed. The facts which led to his departure from the honorable post of director are difficult to collect ; but it is not at all improbable that the character of Paterson was too speculative for those with whom he was joined in companionship. Sir John Dalrymple remarks : " The persons to whom he applied made use of his ideas, took the honor to themselves, were civil to him awhile, and neglected him afterwards." Another writer says : " The friendless Scot was intrigued out of his post, and out of the honors he had earned." These assertions must be received with caution ; accusations against a great body are easily made ; and as it is rarely consistent with the dignity of the latter to reply, they are received as truths either because people are too idle to examine, or because there is no opportunity of investigating them. Success provoked competition. A bank was proposed by Dr. Hugh Chamberlain to advance money on the security of landed property ; and though the Bank of England had no occasion to fear rivalry, they petitioned against it, and were heard by their counsel. A pamphleteer of the day says : " Estates, to a very great value, were subscribed in a short space, a deed settled, a company formed, and all things disposed to put this wonderful project into execution." All that the projectors re- quired was money ; and as that was not ready at the appointed period, " the romantic Land Bank" failed. The pamphlet of Mr. Michael God- frey offers some particulars of the Bank of England, which may account for this failure. We learn " that the directors had no fixed remunera- tion, but submitted themselves to what the general court chose to allow them ; that such a reputation had been given to tallies, they were cur- rently taken by private persons at fifteen and twenty per cent, less dis- count than they were previous to the establishment of the bank ; that it was the only fund ever settled in England which had lowered the interest of money ; that though the nation had been engaged in an expensive war, though thirty millions had been expended in it, and several millions captured by the enemy, yet there was a fall in interest since the bank had exerted itself; and previous to it interest had been constantly rising, and must have come to a strange exorbitancy, without the bank ; that in the short space of thirty years, between two and three millions had been lost to the people by the goldsmiths breaking." With such a list of benefits conferred by one bank, the moneyed men, who believed the other to be impracticable, were wise enough to refuse their support. A paper war was carried on between the supporters of the rival companies, and the following extract will prove that, however great the sarcasm, it was at least surpassed by the ill-nature of the writer. It is entitled, " The trial and condemnation of the Land Bank at Exeter Change, for murdering the Bank of England at Grocers' Hall." A will, by no means compliment- ary to the directors of the latter, is supposed to be produced at the trial. "Know all our creditors by these presents, that we, the governor and company of the Bank of England, being weak in body through the wounds received from the Land Bank at Exeter Change, to whom we lay our death, but of as good sense as ever we were, finding ourselves im- paired in our credit and reputation, and despairing of recovery, do make 44 History of the Bunk of England* our last will and testament. 1st. We bequeath our soul to the devil, in order to serve the public out of our creditors' money ; and as to the qualities of our mind, we dispose them as follows, namely, all our skill in foreign exchanges, and our probity and candor in making up the accounts of the loss thereof, we give to all and every of our directors, except four or five, jointly and severally, to hold to them, and to their successors, as heir looms, and indelible monuments of their skill and probity for ever. All our obstinacy and blunders we give unto our present governor, upon trust, that he shall employ one equal third part thereof as one of the lords of the Admiralty, and the other part thereof as governor of the Bank of England. All our oaths, impudence, &c, we give unto our present deputy-governor and our dear Sir Henrt FuRNEaE, to hold in joint partnership during their lives, and the survivor to have the whole. All our shuffling tricks we give to our dear Sir William Gore. All our cynicalness and self-conceit we give to our directors. Sir John Ward and Sir Gilbert Heathcote, equally to be divided betwixt them, share and share alike, as tenants in common. All our blindness and fear we give unto our dear Obadiah Sedgwick, and we also give him £5 in money to buy him a new cloth coat, a new half-beaver hat, a second-hand periwig, and an old black sword to solicit with in the lobby, and also to buy him a pair of spectacles to write letters to lords with. As to the residue of our temporal estate, (besides the said £5,) we dispose thereof as fob loweth : Imprimis, we devise to our own members (when they shall have paid in their whole £100 per cent.) our fund of £100,000 per annum, charged and chargeable, nevertheless, with the sum of £1,200,000, for which it stands mortgaged, by bank bills, in full satisfaction of all their great expectations from the probity and skill of our directors, advising them to accept a redemption thereof by Parliament, whenever they can have it. Item — all our ready moneys, before any of our debts are paid, we give to our executors, hereinafter named, in trust, that they shall, from time to time, until 1st August, 1696, lend the same into the ex* chequer, upon condition to defeat the establishment of the Land Bank ; and from and after the said 1st August, then to lend out the same into the said exchequer, upon security of premises to establish our executors the next session, instead of the Land Bank, and for such other premiums as our said executors can give to themselves, for doing thereof. And we do direct our said executors to continue the stock and pensions already allowed to our past friends — they know where. And after all our ready moneys so disposed, we leave the residue of our effects for payment of bills and notes, at such days and hours, and in such manner and propor- tion, and with such preferences, as our said executors shall think fit. And we do hereby constitute our directors executors of this our will, giving each of them power, out of our cash, to discount their own tallies, bills and notes at par ; and the bills and notes of other of our creditors at the highest discount they can get for the same. And our body we commit to be burned, with all privacy, lest our creditors arrest our corpse. In witness whereof, we have hereunto set our common seal, 4th May, 1696." " The epitaph succeeded only in being coarse and dull ; and the two," says Malcolm, in his " History of London," " may serve to excite aston* ishment that an institution which has baffled every art, foreign and do* Difficulties of the Directors. 45 mestic, aimed at its ruin, should have attained such a pinnacle of splendor in little more than 100 years. " Here lies the body of the Bank of England, who was born in the year 1694, died May 5th, 1696, in the third year of its age. They had issue legitimate by their common seal, 1,200,000 called bank bills, and by their cashier two million sons of called Speed's notes." The small extent of the affairs of the company at the commencement of its existence, compared with their present magnitude, appears from an account delivered to the House of Commons on 4th December, 1696, by which the balance in favor of the bank amounted to £125,315 2s. By an act to regulate their proceedings, the bank were authorized, from 25th March, 1698, to pay their dividends half yearly, instead of quarterly, as they had been accustomed to do up to that period. Mr. Michael Godfrey, whose pamphlet has been quoted, and to whose exertions, with those of William Paterson, may be traced the success- ful establishment of the bank, met with a somewhat singular fate in 1695. Previously to this year, the allied armies had retreated before the wisdom of Louis, and the bravery of his soldiers. The funds supplied by the new corporation changed the scene ; but the transmission of specie was difficult and full of hazard, and Mr. Godfrey left his peaceful avocations to visit Namur, then vigorously besieged by the English monarch. The deputy-governor, willing to flatter the king, anxious to forward his mis- sion, or possibly imagining the vicinity of the sovereign to be the safest place he could choose, ventured into the trenches. " As you are no ad- venturer in the trade of war, Mr. Godfrey," said William, " I think you should not expose yourself to the hazard «f it." " Not being more exposed than your majesty," was the courtly reply, " should I be excusable if I showed more concern?" " Yes !" returned William, " I am in my duty, and therefore have a more reasonable claim to preservation." A cannon-ball at this moment answered the " reasonable claim to pres- ervation," by killing Mr. Godfrey, with several officers near the king ; and it requires no great stretch of imagination to fancy a saturnine smile pass- ing over the countenance of the monarch, as he beheld the fate of the citi- zen who paid so heavy a penalty for playing the courtier in the trenches of Namur. Tradition states that Mr. Godfrey's remains, which were buried in the church-yard of St. Christopher le Stocks, were disinterred, to make room for the enlargement of that prosperous establishment in which he once felt so deep an interest, and in the service of which he may be said to have fallen. The journals of the period prove that the bank had no pleasant path to pursue. The goldsmiths were jealous of their great competitor. Their business was diminished ; their discounts were lowered ; their transactions with government had passed to their opponents. The writer has seen sufficient evidence to convince him of the great difficulties, arising out of foreign feuds and internal division, experienced by the directors of the bank for the first ten years. Nothing but strong will, unconquerable en- ergy, and a healthy perseverance, could have borne them on to so trium- phant an issue. Looking upon the bank in its present pre-eminent posi- tion, it is difficult to imagine it borne down by jealous rivalry, struggling 4 46 History of the Bank of England. for a precarious existence ; its notes at a heavy discount, without specie to meet the demands of its creditors, compelled to advertise for default- ers, and actually obliged to cash the notes payable on demand in quarter- ly instalments. With a government always borrowing* and always exi- gent, even they who so zealously supported the interest of the corporation must sometimes have shrunk from the responsibility — must sometimes have feared for the result. The plans adopted during the first few years were very different to those in use at present. The great responsibility undertaken by the direction was then unknown. Courts of proprietors were suddenly called to discuss loans to government. Emergencies which must arise in every establishment, were not met by the directors, but by meetings of the proprietors. Novel positions — and the position of the directors must have been eminently novel — were placed before the assembled courts and discussed by them. Their first and greatest diffi- culty has now to be related. * The leading eventB of a commercial and financial character, preceding the charter of the Bank of England, were the following : 1661— 1670. — Hearth money voted (1661) to Charles II. Coffee introduced into France. 1662. Hackney-coaches first licensed in England. The gold of Guinea freely coined into one, two and five-guinea pieces. The English first cut logwood in Honduras. Bomhay and Tangier ceded to England, and free trade with Brazil. 1663. The profits of the English post-office and wine licenses granted to the Duke of York. The first saw-mill in England erected. The finances, manufactures, com- merce, marine and colonial systems of France improved under Colbert. 1 664. French prohibitory tariffs established. French East India Company began to trade. 1665. London afflicted by the plague, April 28. 1666. Great fire in London, from Sep- tember 2 to September 6 ; property destroyed valued at £8,000,000. 1667. A tax of twelve pence levied on every ton of coal brought into London, January 18, to aid the rebuilding of London. The first stone of the new Royal Exchange laid (August 23) by Charles II. The Eoyal Observatory, Paris, erected. 1669. Formation of the Hudson Bay Company. 1670. Shoe-buckles introduced into England, and muslins introduced from India. Bayonets invented at Bayonne. 1671— 1680.— The money in the Exchequer (12th January, 1672) seized by Charles II. ; great confusion and commercial distress followed. 1673. Guineas rise in value to 30s. First plate-glass factory in England, at Lambeth. 1674. To- bacco monopoly vested in the Crown. 1676. Calico-printing and the Dutch loom- engine introduced into England. 1677. The Dutch expelled from Cayenne by the French. 1680. The publication of newspapers and pamphlets without a license declared (May 16) to be illegal in England. First ship sent to China by the East India Company. Tea becoming known in England. The slave trade flourishing in the American colonies ; the English took 300,000 from Africa in twenty years. 1681— 1690.— A penny-post first established in London, (1683,) by a private in- dividual named Murray. 1685. The Pope of Borne, by compulsory process, reduced the rates of interest on the public debt from four to three per cent Chinese ports declared open to foreigners. 1686. Hudson's Bay Company's forts in America destroyed by the Dutch. 1688. The Venetians made further progress in Dalmatia Bank of Stockholm founded. 1691— 1700.— Maritime trade of England suffers (1691) from French privateers 1692. Commencement of the English national debt. Poll-tax authorized in England Rice produced largely in Carolina. 1693. First lottery grant in England. Origin of the Bank of England, (1694, 25th April,) under WilllIm III. S Suspension of the Bank. 41 CHAPTEE V. SUSPENSION OF THE BANK — ITS NOTES AT A DISCOUNT — COMMENCEMENT OF STOCK JOB- BING EXTENSION OF THE CHARTER, ACCUSATIONS AGAINST THE DIRECTORS THEIR DEFENCE — ATTEMPT TO INJURE TnE BANK — PROPOSALS FOR BRANCH BANKS — PROJECTED INVASION — RUN UPON THE BANK — ASSISTANCE RENDERED. - The rash scheme of the Land Bank had done some mischief to the young establishment ; the re-coinage of the silver did more. This im- portant measure was supported by Mr. Montague, who acted under the advice of Sir Isaac Newton ; and although the enemies of the expedient urged all the reasons their imagination could suggest, the proposition, after long and vehement debates, was passed. The difficulties which al- ready environed the bank, partly from a prevalent feeling of discontent, and partly from the efforts of an opposition, which saw its cause grow weaker in proportion as the corporation assisted the government, were considerably increased by the new measure, which prevented them from meeting tbeir engagements to pay their notes in cash. It is probable, also, that their funds were partially locked up in advances on merchan- dise ; as, on the 6th May, 1695, an advertisement appeared in the "Lon- don Gazette" that the " court of directors of the Bank of England give notice they will lend money on plate, lead, tin, copper, steel and iron, at four per cent, per annum." The coins had been diminished by clipping and filing ; many of the shillings contained only three pence in silver — an enormity attributed to the goldsmiths, who appear to have been rather sharp traders ; counterfeit coins had also been clipped and filed, that they might pass the more readily. While the coinage was proceed- ing, money grew scarce. The bank was placed in a peculiar position. They had received the clipped money at its full value ; they had taken guineas at thirty shillings, and when the notes issued by them in ex- change came in, there was not sufficient specie to meet the daily demand. Had they paid in full they must soon have been drained of specie, and they resorted to the plan of paying cash, at first in instalments of ten per cent, once a fortnight, and afterwards, three per cent, once in three months. But that this was only a temporary pressure, arising from extraordinary circumstances and not discredit, was proved from sealed bills, bearing interest, being received by their creditors in lieu of specie. Bank notes were advertised at twenty per cent, discount, but it must be remembered that guineas were at fifty per cent, premium. The energy with which the bank directors met these difficulties, and the vigor with which they were assisted by the ministry, prevented the evil from spreading. They made two separate calls on their shareholders of twenty per cent, each, and issued bills, bearing interest at the rate of six per cent., which they gave in exchange for bank notes. That the calls on their proprietary were not responded to by all, is proved by the following advertisement on the 6th May, 1697, to pay " the last call of twenty per cent., which 48 History of the Bank of England. should have been paid by 10th November, 1696 : and also those indebted to the bank on mortgages, pawns, notes, bills or other securities, to pay in the said twenty per cent., and the principal and interest of these securities by 1st June next." So late as the 22d June, 1697, we read in a well-known newspaper of that date, " Bank notes were yesterday at thirteen and fourteen per cent, discount." The bank advertised also, "that for the convenience of trade while silver is re-coining, such as think fit to keep an account in a book with the bank, may transfer any sum under £5 from his own to another man's account." This was a plan originally adopted by the Bank of Amsterdam, and in all probability copied from it. Exchequer bills were also issued for £5 and £10 ; and as they were received in payment of the revenue, they passed as ready money, and were of great service during the crisis. Exchequer tallies had been at forty, fifty and sixty per cent, discount in 1696. The duties granted by Parliament frequently proved less than the amount advanced on them. This deficiency was soon observed by the moneyed men. They also noticed the remoteness of the payments on other advances ; that the tallies varied in value, and a new trade arose in government securities. Forty and fifty per cent, was frequently lost if the owner was compelled to part with them, and the moneyed man availed himself of his capital to become the tally or stock-jobber of that day. With the notes of the national bank at twenty per cent, discount, and public securities thirty per cent, worse, we must suppose the public credit to have been insecure. William III. was far from popular, and frequent conspiracies were formed against his person and his throne. The Jacobites were still a numerous and important body. The Stuart family were yet the desire of many who disliked the present monarch. If it be added that the expenses of the war were greater than the parlia- mentary supplies, no further reason can be required to account for the disrepute into which the credit of the country had fallen. The evil called loudly for a remedy, and the difficulty was boldly met. The government empowered the corporation to add £1,001,171 10s. to their original :«tock, and public faith was restored by four-fifths of the subscriptions feeing received in tallies and orders, and one^fifth in bank notes at their full value, although both were at a heavy discount in the market. The past services of the bank were not forgotten. The ministry re- -solved that it should be enlarged by new subscriptions ; that provision should be made for paying the principal of the tallies subscribed in the ■bank ; that eight per cent, should be allowed on all such tallies, to meet which, a duty on salt was imposed ; that the charter should be prolonged >to August, 1710 ; that before the beginning of the new subscriptions the ■old capital should be made up to each member one hundred per cent, and what might exceed that value should be divided among the new members ; that the bank might circulate additional notes to the amount subscribed, provided they were payable on demand ; and in default, they were to be paid by the exchequer out of the first money due to the bank ; that no other bank should be allowed, by act of Parliament, during the continuance of the Bank of England ; that it should be exempt from all tax or imposition ; that no contract made for any bank stock to be bought or sold should be valid, unless registered in the bank books, and trans- Accusations against the Directors. 49 ferred within fourteen days. It was also enacted, that not above two- thirds of the directors of the preceding year should be re-elected in the succeeding year. These vigorous measures were thoroughly successful. " The nation," says Smollett, " did not know its own strength till it was put to trial." The corporation, also,, were not to owe more than the total amount of all their increased capital. With these arrangements, the charter was extend- ed until 1710, nor could it then be taken away until government paid the debt owing by them to the bank. By this act, the forgery of the company's seal, notes or bills, was made felony without benefit of clergy. Great gains were made ; great fortunes even were won by the capitalists of the day. Sir Gilbert Heathcote, one of the bank directors, gained £60,000 by the liberal scheme ; and numerous estates were raised in a shorter time than was ever known. A pamphleteer of the period states that the bank offered to lend a mil- lion without interest, for twenty-one years, if government would extend the charter to the same period. The writer good-naturedly adds, " As the bank discount at four per cent., the directors will have more command to this favor, and beyond others. They, therefore, or any of them, being merchants, easily foreseeing the great advantages by monopolizing several commodities, will be able to provide themselves, and thus monopolies may be spread." Time has pronounced this to be an unworthy objection. It may, as a principle, be confidently asserted, that, up to the present time, no accommodation has been afforded to a director by virtue solely of his office, which would not have been awarded him as a merchant of the city of London. Another writer, in " A letter concerning the bank and the credit of the nation," says, " The directors, upon a pressing occasion of the king's, had stretched their credit to a degree that could not con- sist with any measure of prudence, nor could the directors answer it to their members, had it been for any less occasion than the preservation of the kingdom." The reason given is sufficient excuse for the offence. The " preservation of the kingdom" was the preservation of the Bank of England. But the most triumphant answer which could be given to all these attacks was the remarkable fact, that bank stocks, given to the pro- prietors in exchange for tallies at fifty per cent, discount, rose to one hun- dred and twelve per cent. There is no reply to a fallacy so' triumphant as a fact, no rejoinder to a sparkling sophism so unanswerable as a plain truth. Nothing can mark more strongly the triumph of this corporation over its enemies, nothing can more plainly evince that it was founded on safe principles, than that bank stock maintained so great a value. In ad- dition to these things, it must be remembered that money, which ten years before had borne so high a rate of interest, was sufficiently plentiful to realize the prophecies contained in the pamphlet of Mr. Michael God- frey. " The bank will infallibly lower the interest of money." " And now the bank is established, all who want money and have security will know where to be supplied, and the terms ; and there cannot be such advantages made in the public or private men's necessities for the fu- ture." The truth of these remarks is to be found in the fact, that, on the 1 6th of January, 1695, foreign bills, having three months to run, were dis- counted at six per cent. ; and to those who kept accounts at the bank 50 History of the Bank of England. only three per cent, was charged ; that on the 19th of May running notes and bills were discounted at three per cent., and that money was ad- vanced on merchandise at four per cent. So early as 1697, in " Some thoughts of the interest of England," a proposal was made " that the Bank of England be branched into every city and market-town in England, and that the several branches be ac- countable to the general bank in London for the profits of their respect- ive branches." Had this plan been carried into effect, some of those crises which have borne ruin into many happy homes would have been averted. The entire circulation would have been in the hands of an es- tablishment equal in stability to the government. The " London Ga- zette" would not have borne testimony to the ill-fortune or faithlessness of many firms with which the profits of a life were placed. The prov- inces would not have rung with the desolation which penetrated to the hearth and heart of the English peasantry. The cottager, who had hoard- ed his gains, earned by the waste of sinew and of strength, would not have been crushed by the intelligence that the banker of his district had failed in his great trust. The father, who left his home with alight heart, would not have returned with news which he dreaded to communicate. The grandsire and the infant, the widow and the fatherless, the maiden and the matron, would have been saved the stony bread of charity ; nor would society have been startlod by so many disgraceful monetary fail- ures, had the Bank of England possessed the entire management of that circulation which, as a responsible body, should have been placed under its control. At a later period Mr. Horner stated, in the House of Com- mons, that the destruction of country bank paper had given rise to a uni- versality of wretchedness only to be equalled by the bursting of the Mis- sissippi bubble. " Thousands upon thousands found themselves sunk, as if by enchantment, and without any fault of their own, in the abyss of poverty." Next to a government, with which, from various reasons, it would be most unwise to place it, the greatest bank of the empire has an indisputable claim to the circulation of the country. By the various extracts given above, it may be seen that the directors did not repose upon a bed of roses. Constantly invited to aid a needy government, and as constantly abused and upbraided by those inimical to it, they had but one path — the path of probity and rectitude — to pursue ; and by it they attained a triumphant success. During their early career, the violence with which they were assailed by their opponents stimulated their efforts. It is probable, and the course of nature justifies the suppo- sition, that had they been unopposed, they would have failed in attaining equal importance. Uninterrupted prosperity produces presumption, and presumption is often the precursor of failure. An arrogant confidence in their good fortune, therefore, might have produced the practical convic- tion that they were fallible to the precise extent they considered them- selves infallible. Opposition, however, induced caution, stimulated their energies, and produced an eminent and honorable success. The ambitious spirit of France was signally displayed in 1700, to the injury of the credit of the nation. The alarm of all Europe, indeed, was excited by Louis, who, under the pretence of a will in favor of his grand- son, seized upon the entire Spanish monarchy. By the possession of the Projected Invasion. 51 imperial fiefs in Italy, the empire was concerned. By his grasp on the Spanish Netherlands, the Dutch were deprived of their barrier against his ambition. By his hold on Spain, the great Mediterranean commerce rested at his mercy. Terror spread throughout the land ; the public funds were affected, and the credit of the Bank of England, which has always paid a heavy penalty in times of national fear, for its connection with government, was shaken with the general apprehension. The same effect was produced in 1704, and the prices of public securities were again lowered. From an insurrection in Hungary, and the invasion of the German empire by the French, great evils were apprehended, which so much affected the public faith that the bank directors were once more obliged to issue sealed bills, bearing interest, for a large sum, in order to keep up their credit. The scene, however, soon changed. Blenheim witnessed our superiority ; the proud fortress of Gibraltar yielded before British prowess ; and the public credit of the country arose with her vic- tories. The sealed bills enabled the bank to bear up until happier times, when its character was restored, and its usefulness once more experienced by the community. In the year 1V07, one of those invasions which were periodically threatened by the Pretender excited the accustomed alarm. The expe- dition was assisted by Louis XIV., and great splendor was affected in the appointments. The head of the holy Catholic faith subscribed to- wards the expedition. Sumptuous tents, rich tapestries and splendid liveries gave it the appearance of a triumph for a kingdom won, rather than a trial to regain an empire lost. Religious mottoes were wrought upon the standards, which looked more like the colors of a crusade than those of a political enterprise. Louis, with a grace that distinguished him, and with a compliment worthy his finished grace, " trusted he should never see the royal adventurer again." Alarm spread throughout the country. It is difficult to say whether, at the period, the Pope, the devil or the Pretender, was feared the most. The probability of an in- vasion by the chevalier startled the people, and a demand was immedi- ately and extensively made for gold by the excited populace. " The late hurry of an expected invasion," says a pamphlet, entitled " The Anatomy of Exchange Alley," " sunk the price of stocks fourteen or fifteen per cent. Who were the men that made a run upon the Bank of England, and pushed at them with some particular pique, too, if possible to have run them down, and brought them to a stop of payment? Is not this disabling the government, discouraging the king's friends, and a visible encouragement of the king's enemies?" The feelings of the private bankers towards their great rival do not appear to have been very con- ciliatory. The same writer says, " I humbly refer to a case recent in memory, of two goldsmiths, (knights also, and one of them member of Parliament, too,) in Fleet-street, who pushed at the Bank of England at the time of the Pretender's invasion from France. One of them, it was said, had gathered a quantity of bank bills to the value of near £100,000, and the other a great sum, though not so many, and, it was said, resolved to demand them all at once. Let the gentlemen I point at inquire with what difficulty Sir R. Hoare wiped off the imputation of being a favorer of the rebellion, and how often in vain he protested he did it with no 52 History of the Bank of England. such view, and how hard the whigs were to believe him. Sir Francis Child, indeed, carried it with a higher hand, and afterwards pretended to refuse the bills of the bank, but still declared he did it as a goldsmith, and as a piece of justice to himself, on some points in which the bank had, as he alleged, used him ill." The proposed invasion proved the esteem with which the bank* was regarded by those whose good opinion was worth possessing. It was found that the Protestant succession had supporters as ardent as the adherents to the house of Stuart. When the run took place, many, instead of withdrawing their deposits, carried all their cash to assist the establishment. The Lord Treasurer, Godol- phin, who, as an astute and able financier, felt that the credit of the country was connected with that of the bank, informed the directors that the queen would allow, for six months, an interest of six per cent, on their sealed bills. Nor was this all ; the Dukes of Marlborough, New- castle and Somerset, with others of the nobility, offered to advance con- siderable sums of money to the corporation. A private individual, who had but £500, carried it to the bank; and on the story being told to the queen, she sent him £100, with an obligation on the Treasury to repay the whole £500. It is pleasant to read of such chivalrous devotion re- paid in so royal a manner. Encouragement such as this gave a firmness to the establishment, and, united with a call of twenty per cent, on the proprietors, enabled the directors to meet their difficulties and preserve their credit. * The progress of geographical knowledge rapidly increased throughout Europe during the eighteenth century ; and important projects were entertained, with a view to settle remote colonies, and thus extend the commerce with other nations. The Darien expedition, under William Patekson, had left Scotland in the year 1698. This gave rise to the South Sea Company in 1710 — 1712, and further gave rise to many of the monopolies granted early in the century. The Dutch, the Swedes and the Danes all strove to extend their commerce in the East Indies ; and vigorous efforts were made by the French and the English to attain the ascendancy in the West Indies. Anson, Vancouver and Cook made their noted voyages of discovery. The century was further distinguished for the introduction of cotton from Jamaica and other West India islands into Europe, and its conversion into wearing apparel, as a substitute for the use of woollen and linen goods. Before the collision between England and her colonies, Arkwright had made known his important improvement in cotton-spinning ; and, soon after, the more important invention of Whitney accomplished for the American planter the great labor-saving machine known as the cotton gin. 1701 — 1710. — A "Council of Trade" suggested by William Paterson. In 1702 an income tax and other taxes levied in England. Manufactures were established in Russia and Denmark. 1704. The Boston News Letter published — the first news- paper in the American colonies. 1706. Porcelain was first made at Dresden. Ex- chequer bills, this year, were first circulated by the Bank of England. 1707. Great financial distress prevailed in France. Paper money issued and sold at 53 per cent, discount. 1708. Bank of England charter renewed, and again in 1713. 1709. Copy- right act in England, 8 Anne. 1710. The South Sea Company originated, 6th May. Review of the Bank. 53 CHAPTER VI. PRIVILEGES OF THE BANK RENEWED AND EXTENDED — DISGRACEFUL TRANSACTIONS OF THE MINE ADVENTURERS' COMPANY BANK CAPITAL INCREASED THE SAOHEVERELL RIOTS AND PROPOSED ATTACK ON THE BANK — IMPORTANCE OF THE BANK — RUN UPON THE BANK — RENEWAL OF THE CHARTER — REDUCTION OF INTEREST — FIRST SUBCRIPTION TO GOVERNMENT LOANS. Prior to 1708, the government had paid off the principal and interest of the additional debt incurred in 1697 ; by this, the capital of the bank was reduced to its original amount, and in the first-named year the ex- tension of the charter was again proposed till 1732. The same plans of passive and active resistance which had hitherto been pursued by the opponents of the bank — an opposition renewed whenever the opportunity has offered — were again resorted to with great energy. Pamphlets bearing such titles as " Remarks upon the Bank of England ;" " A Short View of the Apparent Danger and Mischief from the Bank of England ;" " Rea- sons Against the Continuance of the Bank of England;" poured from the press with a vehemence that must have proved dangerous to the young establishment, had it not been based upon a firmer foundation than the breath of popular opinion. An answer was written by Na- thaniel Tench, whose name forms one of the earliest directors. Stow says, " The chief purpose of this defence was to vindicate the corporation and the management thereof. Not so much from the crimes they had already been guilty of in the experiment of eleven or twelve years, as the fear of what they might do hereafter." This pamphlet contained a very able defence of the directors, and an enumeration of their services, of which the following is the conclusion, tending to prove that there were in this, as in most cases, two sides to the question : " It might be, with truth, concluded that, since their first establishment, they never bought one foot of land ; they never monopo- lized any one commodity ; that they had been so far from obstructing trade that 'they had very much encouraged and enlarged it. That they had never put any hardships upon the government, as those authors would insinuate, but had at all times served it to the utmost of their power. That they had been so far from raising the interest of money, that they were the great, if not the only cause, of lowering it. That they had never concerned themselves in the election of any one member of Parliament, nor never advanced a single penny to influence any elec- tion. Neither could any man complain that he did not receive his money on demand that called for it. In short, that notwithstanding the clamor and noise their adversaries made against them, they had not brought any instance that they had been guilty of any base or unworthy action, in any one fact committed by them since their first establishment ; so that all the clamor of their ill-willers had been raised upon a bare suspi- cion of what their successors might do hereafter." It is satisfactory to read such a succession of services emanating from an establishment not fourteen years of age, penned also by one who could well appreciate the 54 History of the Bank of England. troubles of his brother directors. There was another champion in the field, who published "Reasons for encouraging the Bank of England." "The bank," remarks the writer, "has been the sole cause of lowering the interest of money, which is the only fund that ever lowered it — and that, too, in time of war, when interest usually rises — by which the nation, since the bank was erected, has saved a great sum of money, having been supplied at a much cheaper rate than formerly, which doth excite indus- try, raise the value of land and increase trade." The eminent services of the Bank of England to the political and com- mercial community, the integrity with which it had ever been conducted, and the aid rendered to government, the importance of which it had as- sisted to maintain, were now to be acknowledged and rewarded. Its " important banking privileges," as Mr. Fenit, in his " English and For- eign Funds," truly terms them, were conveyed in return for these. By the act of 1708 their charter was extended until 1732, and it was therein provided, " That, during the continuance of the said corporation of the governor and company of the Bank of England, it shall not be lawful for any body politic or corporate whatsoever created, or to be created, other than the said governor and company, or for any other persons whatever, united or to be united in covenant or partnership exceeding the number of six persons in England, to borrow, owe, or take up any sum or sums of money on their bills or notes, payable on demand, or at a less time than six months from the borrowing thereof." A circumstance which appeared to threaten the prosperity of the bank tended to produce the above favorable clause. The " Company of Mine Adventurers," at the head of which were peers and baronets, but which, nevertheless, proved a most melancholy bubble, arrogated many preroga- tives belonging to the corporation. They erected themselves into a money bank, issued cash notes, and circulated sealed bills, until restrained by the above act. The hopes of the proprietors had been stimulated by Sir Humphrey Mackworth, the projector, who carried on his chicanery with an ability worthy a better cause. He imposed upon the proprietors for five years by " false and sham calculations of their profits — by purchasing lead from other persons' mines and declaring it to be digged from the company's mines, and by buying silver extracted from other men's lead and getting it coined in the king's mint, as coming from the company's mines." So dishonorable a course could not be pursued without discov- ery, and the scheme met with the fate it merited. Like the South Sea Company at a later period, it was pronounced a bubble by the House of Commons, who voted that Sir Humphrey Mackworth was guilty of " scandalous frauds," and brought in a bill to prevent the secretary and treasurer from leaving the kingdom. The bill, however, did not pass the House of Lords, for Sir Humphrey was a high Tory, and the Tories were in power. Another object was gained by the government in the above charter. They were desirous of circulating exchequer bills on the security of the house duties, and the bank undertook to cancel £1,500,000 at six per cent, interest until redemption of the principal, in consideration of the privi- leges granted them ; this, with interest, amounted to £1,775,027 17s. 10£d. The measure procured the favor of the government, as it tended New Subscription of 1708 — Sacheverell Riots. 55 to relieve the ministers from difficulty. It was the first time that the bank had undertaken the circulation of exchequer bills, and they again issued sealed bills at an interest of 2d. per cent, per diem. These transac- tions rendered a new subscription of £1,001,171 10s., and another of £2,201,171 10s. necessary, which, with a call on the proprietors of fif- teen per cent, amounting to £656,204 Is. 9d., increased the total capital to £5,058,547 Is. 9d. Anderson gives some curious particulars : "The bank," he says, " continued to permit new subscriptions for the doubling their present stock, by selling the additional stock at the rate of £115 for every £100 subscribed. All which was subscribed for between the hours of nine in the morning and one in the afternoon. Nearly one million more could have been subscribed on the same day, so great was the crowd of people coming with their money to the books." The bank obliged themselves to advance to government £400,000 with- out interest, which made their original capital of £1,200,000 at eight per cent, amount to £1,600,000 at six per cent, to commence from 1st Au- gust, 1711. Discount being allowed on the said £400,000 till the 1st August, 1711, and the'fifteen per cent, advance on the sale of their addi- tional stock enabled them to pay this £400,000 to the public. In 1709 a new danger arose to the Bank of England. The importance of the corporation, and the great wealth possessed in its treasury, have always rendered it liable to attack in times of political excitement. Large bodies, collected in haste, and agitated with passion, are rarely dis- criminatory. There are always a number of idle and profligate men to whom the very name of the bank possesses a charm ; and up to the pres- ent day it has been periodically liable to attacks from the mobocracy. In the present case the piety of the people created a religious riot. One Dr. Henry Sacheverell, an apostate Whig, was appointed to preach the annual sermon at St. Paul's, before the Lord Mayor and court of al- dermen. An apostate is usually violent in proportion to his apostacy, and Dr. Henry Sacheverell was no exception to the rule. The sermon was used as an engine of attack upon some of the members of her majes- ty's government. Among others, the Lord Treasurer was characterized as Volpone. The measureless impudence of the preacher attracted attention, and Sir Gilbert Heathcote, a director of the Bank of England, and a wise man in his generation — for we have seen he made sixty thousand pounds by one transaction — protested against it ; nor did the city author- ities make the ordinary request to have it published. But, as publicity was the worthy doctor's object, and the truth of no importance, he pretended that Garrard, the Lord Mayor, had desired him to print it, and to him he dedicated it, with an inflammatory epistle. Impudence is generally successful for a time, and the doctor attracted at- tention. He was arrested and impeached, in revenge for the liberties he had taken with government. " I know," says Lord Dartmouth, " neither the doctor nor the doctrine had been called in question, if the word Vol- pone had been left out of the sermon." The populace — skilful judges of a sermon — chose to support the divine, and London became a scene of confusion. To the lower class the prospect of a riot is generally pleas- ant ; and, if they can flatter themselves that it is for the cause of religion, they are doubly riotous. They now determined to support the worthy 56 History of the Bank of England. doctor ; and a body-guard of London butchers accompanied him to his trial at Westminster Hall, which the queen honored with her presence. " God bless the Church and Dr. Sacheverell" was echoed from mouth to mouth among the pious populace. Multitudes followed, pressing about him, and striving to kiss his hand. Money was thrown among them, by some of the better classes, who followed in hackney coaches. The anxie- ty of the bank directors during this period of tumult must have been great, as every day rendered them liable to attack. The divine, inflated with his popularity, looked upon himself as half hero and half martyr. The people sought the dissenting chapels, collected the hymn-books and bi- bles, broke up the pews and tore down the pulpits, and made a great bon- fire in Lincoln's Inn Fields. There was one trifling error in destroying a church for a chapel, owing to its wanting a steeple ; but the populace are not nice discriminators. Bishop Burnet only escaped by the bold and determined courage of some of the more respectable inhabitants, and their great ambition was to place a dissenting minister on the top of one of the piles ; but in this they were disappointed. The queen and court were in the utmost consternation. The citizens were in equal alarm. Intelligence reached the bank directors that the rioters were moving towards their locality. As a pious mob was no more to be trusted than a political one, the court assembled to " con- cert measures proper to be taken, and sent to the principal Secretary of State for a guard to prevent any attempt they might make on the bank." When the message was received, the Earl of Sunderland made its tenor known to the queen, who immediately ordered both horse and foot out to quell the tumult, leaving her own person without any protection. '' God will be my guard," was her regal reply, when reminded of her danger. A detachment under Captain Horsey was immediately ordered into the city to prevent the meditated attack on the alarmed directors. " Am I to preach or fight ?" was the question of the blunt soldier, on re- ceiving his instructions. There proved to be no occasion for either. The rioters retreated in alarm ; the bank was saved from pillage, by the self-sacrifice and devotion of the queen ; and the affair, which was a trial of party strength, terminated without difficulty. Much inconvenience having been experienced from directors of the East India Company being also in the direction of the bank, it was de- creed by a clause in the 9th act of Queen Anne, 1712, that no person should be governor, deputy-governor or director of the Bank of England and the East India Company at the same time. The bank first undertook to receive the contributions to a lottery, con- sisting of 150,000 tickets, at £10 each, in 1710. A great rise took place in bank stock. The nation had been depressed by war, which, though victorious, was expensive. The pride of the French had been humbled by the triumphs of the allies, and they were compelled to sue for peace — a prospect so gratifying to the nation, that on the mere probability, bank stock rose from 110 to 129. The prospect proved illusive. Louis resolved to risk another campaign ; and on the negotiation being broken off, the stock fell to 107. From " The Life and Times of Bishop Bur- net," a remark may be gleaned, which strongly illustrates the opinion entertained by government of the importance of the Bank of England. Extension of the Charter — Run on the Bank. 57 "The queen's intention to make a change in her ministers now began to break out. In June she dismissed the Earl of Sunderland from being Secretary of State, and presented the seals to Lord Dartmouth, a Tory. This gave the alarm, both at home and abroad ; but the queen, to lessen that, said to her subjects here, in particular to the governor of the Bank of England, that she should make no other changes." These few words mark the importance of the bank to the State ; nor do they show less strikingly the political tendencies of the corporation, which regarded with suspicion a change of ministry, as paving the way to power of the exiled Stuarts. These tendencies are also a sufficient reason for the panics which have seized the English people, when an invasion in favor of this family was expected. It will be seen that, on all such occasions, the bank has experienced a call for its gold. In 17 13 this effect was produced, when, at her ancient palace of Windsor, the queen was seized with an alarming illness. The buoyant hopes of the malcontents arose. An armament was reported to be ready in the ports of France. The directors of the bank were overwhelmed with consternation by a great run made upon them ; and the imminence of their position may be conceived from the fact, that one of their body was sent immediately to the treasurer, to announce the danger which threatened public credit. Measures were promptly taken for its support ; the health of the queen was soon hap- pily renewed; the armament proved an idle alarm; the Pretender was in Lorraine ; and the phantom which threatened the safety of the bank ceased with the fears which had given rise, to it. The same year was marked by a renewal of the charter until 1742 — an extension of the privileges of the bank for ten years. Of course the proprietors had to pay for the extension. The reign of Queen Anne had been gilded by the splendid victories of Marlborough and the chival- rous achievements of Peterborough; but victories and achievements must be paid for. An act was, therefore, passed, to raise £1,200,000 for public uses, by circulating a further sum in exchequer bills, which the managers of the great corporation — for the establishment already de- served the title — undertook, at three per cent., in consideration of their renewed privileges. They were also to receive £8,000 yearly, until all the exchequer bills in existence should he paid off. To enable the direct- ors of the bank to effect this, they were allowed to call in money from the proprietors to form additional stock, and the corporation was to con- tinue until the government debt was paid off— twelve month's notice being given from the 1st of August, 1742. In the following year the last monarch of the unfortunate house of Stoabt was approaching her end, and London became a scene of con- fusion and intrigue. The succession was uncertain, and it was equally doubtful whether the queen would name the exiled chevalier, or whether the house of Hanover would obtain the splendid prize. In 1714 she died ; her death-bed agitated by the wrangling and plotting of political partisans. The fine genius of Bolingbroke and the sagacity of Oxford failed before the bold energy of their opponents. Letters were sent to the elector of Brunswick ; a squadron was prepared to convey him to England ; the heralds-at-arms were kept in waiting to proclaim the new kinn- ; the malcontents were overawed in Scotland; and the head of the 58 History of Ike Bank of England. house of Brunswick ascended the English throne as George I. A period fraught with so much anxiety to the whole kingdom could not fail to affect its great monetary establishment. The uncertainty of the future dynasty produced a run upon it, which lasted, without intermission, for several days, although without any unfavorable result, as its resources were equal to the demand. The price of bank stock, however, fell from 126 to 116. The accession of the first George must have caused some uneasiness to the friends of the bank. The policy of the new king was unknown, and it appeared equally uncertain whether he would endeavor to win over the great landed proprietors, and with them all the important Jacobites, or, to use the words of Smollett, " declare himself the head of a faction, which leaned for support on those who were enemies to the church and monarchy, on the bank and moneyed interest, raised on usury, and main- tained by corruption." The race of Brunswick, however, like previous princes, found that a wealthy body, which could assist in procuring sup- plies, was worthy the support of the State. A power was given to the latter which it once wanted, and the bank maintained in return a close connection with government, which gave additional confidence in their credit, additional importance to their establishment, and additional divi- dends to their proprietary. The rebellion of 1*715 being checked before any demonstration could be made in England, it produced no effect upon the bank, and the excite- ment, kept alive by numerous trials, and exasperated by successive exe- cutions, was soon subdued. Tranquillity being thoroughly restored, the ministry and Parliament determined to reduce the legal rate of interest from six to five per cent. To do this, the aid of the directors of the bank was necessary, as well as that of the other powerful monetary bodies, and they agreed to provide cash for those creditors preferring their prin- cipal to a reduced interest. Three bills passed, under the names of the South Sea Act, the Bank Act and the General Fund Act. The former, (established in 1711,) by some advances to government, procured several advantages. By the bank act, the governor and company accepted an annuity of £88,751 7s. 10£d., or the principal of £1,775,027 17s. 10£d. in lieu of the present annuity of £106,501 13s. 5d. They likewise can- celled as many exchequer bills as amounted to £2,000,000, at five per cent., redeemable after one year's notice, and agreed to circulate the re- maining exchequer bills at three per cent, and one penny per day. It was enacted that the former allowances should be continued to Christ- mas, and then the bank should have, for circulating the £2,561,025 re- maining exchequer bills, the last named interest. By the same act the bank was required to advance, at five per cent., part or all of £2,500,000, towards discharging the national debt. The legal rate of interest was thus easily reduced ; and it is worthy of remark, that all the fundholders accepted the terms proposed. In 1718, subscriptions for government loans were first received at the establishment ; and this practice being beneficial for various reasons, is still continued. Mississippi Scheme — Royal Bank. 59 CHAPTER VII. THE MISSISSIPPI COMPANY FINANCIAL DIFFICULTIES — ROYAL BANK — PRIVILEGES OF THE COMPANY OF THE WEST — INFATUATION OF ALL CLASSES — INCREASE OF LUXURY — COUNT VAN HORN — MURDER OF A STOCK BROKER ENORMOUS PROFITS — DEMAND FOR SPECIE. PANIC COMMENCES — THE BANK BESIEGED — UNPOPULARITY OF LAW — DESTRUCTION OF THE COMPANY. A history of the Bank of England and its times would scarcely be complete without a report of that monetary convulsion which shook France to the centre, and preceded the bubble of the South Sea scheme.* The unfortunate interference of the regent of France with the Mississippi Company is too remarkable an evidence of the evils which may rise from the circulation of a country being under the entire control of the State, not to demand a place in the present work. John Law, the son of a Scotch goldsmith, was born in Edinburgh. From an early age his attention was directed to the somewhat abstruse studies of public and private credit, the state of trade and manufactures, the theory of taxation, and other matters connected with political economy. His early life was marked by irregularities, and after a career noticeable for its dissipation, he proposed a scheme to the Scottish people for the circulation of notes on the security of land. The project was re- jected, and in a few years Law found himself in Paris, about the period of the death of Louis XlV.f To a nation like France, Law was a dangerous visitor. The country groaned beneath its debt. The luxuri- ous court of Louis had burthened the people with taxes, which yet fell short of the necessity. The nation was on the verge of bankruptcy. The circulation of the country was injured. Industry was checked and trade destroyed. The financial difficulties of the regent werej great. During the last years of Louis, the expenditure of the nation had reached 260,000,000 livres. Paper money was issued on the credit of the State, but it sunk to an enormous discount. To supply cash, offices were cre- ated, and then sold. A comptrollership for piling wood, and an inspec- torship of wigs, may offer some idea of the extreme difficulty which could compel a great government to resort to means so ludicrous. At this moment Law came forward and proposed a paper circulation on the security of landed property and the royal revenues. The project was declined ; and Law, not a man to be easily discouraged, procured letters patent to establish a bank, which proved so fortunate, that while the * 1711 — X'720. f Died September 1, 1715, aged seventy-seven years, and was succeeded by his great-grandson, Louis XV., aged five years. X At this time, 1716, Moailles was Minister of Finance, and opposed Law's schemes. 60 History of the Bank of England. notes of the State were at a heavy discount, those of Law's bant were at fifteen per cent, premium. The regent D'Orleans grew jealous of this success. By an arbitrary decree, in 1718, he abolished it, and established a Royal Bank, of which he made John Law director-general. The notes rose to one per cent, premium, and the Dnc D'Orleans became impressed with the idea that he had only to issue notes according to his necessities. From this period Law's cherished project began to be developed. The scheme that rang throughout Europe as the Mississippi scheme was near its accomplishment. The proposition which he made to the regent was to vest the privi- leges and possessions of all the foreign trading companies, the great farms, the mint, the king's revenues and the management of the bank, in one company, which, having all the trade and royal revenues, might mul- tiply the notes of the bank to any extent, doubling, or even trebling, at will, the circulating medium, and, by the vastness of their funds, carry foreign trade and colonial improvements to a height hitherto unattain- able. This monopoly, alike unparalleled and impracticable, met the ap- probation of the regent ; and letters patent were granted to a commer- cial company, under the title of the " Company of the West." The whole province of Louisiana, watered by the noble river Mississippi, was granted to the association, and 200,000 shares were issued, of 500 livres each, and billets d'etat, then at sixty to seventy per cent, discount, were received at their full value in payment. So liberal a scheme, together with the prospect held out by Law of 120 per cent, per annum, procured a favorable opinion not only from the speculative, but from the thinking. The shares were filled up, and the company, became creditors to the State to the extent of a hundred millions of livres ; the interest of which was settled at four per cent. Law, who enjoyed the regent's favor, was made director-general of the new association, which assumed the title of the Company of the In- dies, from the exclusive privileges of the East India Company being added to its already extensive prerogatives. Fifty thousand new shares were issued at 550 livres each, and they immediately rose to 1,000. Ever volatile and inconsiderate, the French people received Law's prom- ises as gospel. The new shares were applied for with avidity. The dirty street Quincampoix, in which Law resided, was impassable. Peo- ple of the highest rank clustered about his dwelling to learn their destiny, and delicate women braved all weathers with the hope of enriching themselves. 300,000 applications were made for 50,000 shares ; and the destiny of an empire, remarkable for its national hauteur, seemed in the hands of John Law, the son of a Scottish jeweller. Advantage was taken of this eagerness. 300,000 new shares were issued at 5,000 livres each, and the regent availed himself of the popular excitement to pay off the national debt. The whole of the foreign trade was placed in the possession of the company, and the public ran with increased eagerness at each creation of stock. Prelates, marshals and peers of that old aris- tocracy which once boasted a Bayard ; cringed to the lackeys, and swarmed in the ante-chamber of a Scottish adventurer. A rumor of his indisposition sent the stock down nearly 200 per cent., and the announce- ment of his recovery sent it up in the same proportion. The frenzy be- Increase of Luxury. 61 came general. A rage for shares infatuated every rank. The price reached 10,000 livres in September, 1819, and the air echoed with Mis- sissippi and Quincampoix. There appeared but one aim and one pursuit. From six in the morning until eight in the evening the street was filled with fervent worshippers of mammon. The dissolute courtiers of the yet more dissolute regent shared in the spoil. The princes of the blood were not too proud to participate. They mingled with the eager crowd ; they added their voices to the Babel-like confusion ; and when they won the money of the canaille, thought they did them too much honor in ac- cepting it. The ante-chamber of Law was crowded by women of rank and beauty — the mistress of Law was flattered by ladies as irreproachable as the court of the regent would allow them to be — and interviews with Law were sought with so much assiduity, that one lady caused her car- riage to be upset to attract his attention ; and another stopped before his hotel, and ordered her servants to raise the cry of " Fire." The people emulated one another in luxury. Equipages more remarkable for splen- dor than taste rolled about the streets. Footmen got up behind their own carriages, so accustomed were they to that position. One of those who had done so, recollected himself in time to cover his mistake by saying he wished to see if room could be made for two or three more lackeys, whom he had resolved to hire. The son of a baker, wishing a service of plate, sent the contents of a jeweller's shop to his wife, with directions to arrange the articles properly for supper. The opera was crowded with cooks, ladies' maids, and grisettes, dressed in the superbest style of fashion, who had fallen from a garret into a carriage. The Rue Quincampoix became too confined for the mighty fever which infested the metropolis, and the Place Vendome, chosen in its stead, soon presented the appearance of a fair. But Law was again compelled to move, owing to the complaint of the Chancellor, who could not hear the pleading of the advocates. The projector then purchased the Hotel de Soissons, and in its beautiful gardens established his temple. " In the midst, among the trees," says Dr. Mackat, "about five hundred small tents and pavilions were erected. Their various colors, their gay ribbons and banners, the busy crowd which passed in and out, the hum of voices, the noise, the music, the strange mixture of business and pleasure, com- bined to give the place the air of enchantment." The various anecdotes of contemporary literature attest the mania. The private letters of the period confirm it. A few hours often witnessed an alteration in the price of ten, twenty and thirty per cent. A servant who was sent by his master to sell two hundred and fifty shares, found the value had risen sufficiently to enable him to make ,£20,000 sterling by the difference, with which he departed. The nobility sought alliance with many of the vulgar rich ; and that feeling, so nearly allied to con- tempt, with which they too often regard the poor, though refined men, faded away before an eager desire to associate with and profit by the rich, but coarse, speculator. Law's coachman made a fortune ; and when his master requested him to supply a substitute, brought two, saying, which- ever the projector refused he would take for himself. Luxury reigned pre-eminent. The arts were encouraged. Beautiful paintings were im- ported. The graceful bust, the sculptured marble, the pictured tapestry, 5 62 History of the Bank of England. were no more the exclusive property of the peer. The aristocracy were no longer the sole possessors of the elegancies which refine the mind. " Money lightly gained was lightly spent," says Chambkrs ; " palaces rose on all sides with the rapidity of enchantment ; fortunes were lavished on furniture, equipages, dress and jewels ; and entertainments were habitually given, which seemed to have had their prototypes in the fairy tales." Paris was filled with foreigners, tempted by the reports which circulated far and wide. Nearly half a million were located there at one time. In vain did Marshal Villars, with more zeal than discretion, harangue the people in the open street upon their " disgusting avarice." They indulged themselves with a laugh, as they hurried towards the mart of mammon, to purchase shares in this unrivalled bubble. That the passion for paper was carried to a great length may be collected from the phrase- ology of the day. To the question, " Have you any gold ?" " Nothing to do with it," was the regular answer. The herald's college was disre- garded. The armorial bearings of a peer were placed on the carriage of a parvenu. Folly came in the train of wealth ; and the gaiety of the people was great. But the provinces grew envious of the profits of the capital. Land was sold for any price it would bring ; and the proprietors hastened to Paris with the proceeds to make or mar their fortune. Bishops consecrated by partaking of the follies, and the clergy forgot the precepts which they enjoined in the practice they pursued. " At that epoch of scandal and opprobrium," says M. de Tocqueville, " there was no folly or vice in which the high society did not take the lead. The degradation of men's minds was equal to the corruption of their manners." Assassinations and robberies were common. The Count Antoine Van Horn, brother to a reigning prince, related to half the noble families of France, and connected with the Regent Orleans, was an evidence of the crime produced by this epoch. The description given of Van Horn is striking : " His face was as pale and as beautifully chiselled as that of an antique statue, and a pair of singularly wild and brilliant eyes shed over the whole what might have seemed preternatural light." A contemporary states that the ladies of the period — with whom Van Horn was a greater favorite than with their husbands or brothers — declared that it was " almost impossible to support his ardent gaze." The man thus remarkable for beauty became yet more remarkable for crime. The gay city of Paris was suddenly startled by a rumor that a Hebrew stock-broker had been robbed of property worth one hundred thousand crowns, and afterwards murdered ; not in some lonely and un- frequented place, but in the broad day, in a crowded house, and in the very heart of the city. The rumor spread ; the excitement increased ; a name, more known than respected, was whispered, and Count Antoine Van Horn, the scion of one of the haughtiest houses in Europe, was openly accused of the murder. The unfortunate broker had been al- lured to a cabaret ; cries were heard from the interior of the room ; the waiter locked the door ; and the aristocratic count was taken almost red- handed. The trial of Van Horn commenced on the following day, and " the relatives of the accused," says Chambers, " now adopted a plan which throws a curious light upon the feelings and manners of the time. On Increase of Luxury — Fate of Van, Horn. 63 the day of the trial, they assembled at the place of justice in a body of fifty- seven, both male and female, and lined the long corridor which led to the court room. As the judges passed through this proud array, they were saluted in a mournful and supplicatory manner by the highest and noblest of Europe, and passed into the hall of trial with their minds strongly impressed, even if their hearts were not melted, by the imposing scene." The evidence was clear, and the punishment of being broken alive on the wheel was awarded to the criminal. Disappointed in their efforts in one way, the nobility connected with the house of Van Horn attempted another mode of saving the assassin. A petition, praying for mercy on the ground of insanity, signed by cardinals, archbishops, dukes and marquisses, was presented to the regent. Many were not sufficiently noble to sign the paper, and the honor of claiming blood-relationship with a murderer was keenly contested. The regent was, however, inex- orable ; and when, as a last resource, it was represented that, in the armorial bearings of his mother, there was the escutcheon of Van Horn, he only signified his will by saying, " Very well, gentlemen, I will then share the disgrace with you." Another writer says his reply was in the words of Corneille : " Le crime fait la honte, et non pas l'echafaud." The prince remained firm, and the murderer perished on the wheel, after refusing to take a cup of poison, handed to him by one of his rela- tives. In the mean time, the mania continued. The profits acquired by Law were enormous. Fourteen estates, the titles of which were attached, were purchased by him. The Marquisate of Rosny, a title originally belonging to the illustrious Sully, he who honored Henri Qdatre by being his minister and friend, was amongst the number. The people of the Scottish capital were proud of calling him fellow-citizen, and con- veyed the freedom of the good town in a golden snuff-box. The only obstacle to the projector's advancement to the highest offices of the State, was his religion ; and Law, who probably would have turned Hindoo as easily, changed his profession of faith from protestant to catholic, to se- cure the comptroller-generalship of the finances. Scientific academies honored him by electing him a member, says a modern writer, and " the flattering incense of poetry was offered up at the same shrine with the homage of an infatuated people." In one week, Law paid the Count D'Evreux for the Compte of Tancarville, 80,000 livres ; offered to the Prince of Carignan 1,100,000 for the Hotel de Soissons; 500,000 to the Marchioness Beuvron for her estate of Lillebonne, and 1,700,000 livres to the Marquis of Sully for his Marquisate of Eosny. The credit of the bank was at its height in November, 1719, when six shares were sold for ten thousand livres, and the directors lent any amount of money at two per cent. The first blow was struck by the Prince de Conti, who sent an enormous quantity of paper to change into metal. Three wagons were required to remove it, and Law drew the attention of the regent to the mischief such conduct must occasion ; two- thirds of the specie, by a despotic decree, were ordered to be refunded. 64 History of the Bank of England. But there were others who saw the coming storm and acted more judi- ciously. One house, famous for their funded operations.^ sent notes qui- etly and by degrees, and when they had amassed a sufficient quantity of treasure, placed it in a cart, covered it with straw, and carried it off in triumph ; others purchased extensive jewelry and sent it to England or Belgium, whither they soon followed. These symptoms increased. There was a constant drain of bullion from the bank. The speculators began to think of realizing their immense profits. It was computed that five hundred millions of livres, in specie, were sent out of the country. " Knowing no means," says Mr. Gaspey, in his " Pictorial History of France," " by which he could arrest the great and alarming decline in price which speedily commenced, Law prevailed on the regent to issue an ordinance proscribing the use of gold and silver as money, and forbid- ding private individuals to keep in their houses more than five hundred livres, in specie. This odious measure caused, in the course of a single month, forty millions to be deposited in the coffers of the bank. But it was not by such means that damaged credit could be restored. The distrust of the paper constantly increased ; every one sought more anxiously from day to day to convert his notes into cash ; and in conse- quence of this an order was issued, dated May 21st, 1720, which reduced their value one-half, and suspended their payment by authority. Then rose the cry of rage, wild and menacing, against the author of the system, and against those who had taken him under their patronage. They had, however, allowed the payment of notes of ten livres. The men of the market-halls, sailors and others, bought these at low prices, and pressed towards the doors of the bank, making a passage for themselves by blows. None but such persons could venture to approach. On 17th July, 1720, three men were killed in the crowd. Sinister voices were heard to exclaim, "If there are any who are weary of life, let them follow us." Notes like the following were sent from house to house. " Sir, or Madam : Notice is hereby given that it is intended to make an- other St. Bartholomew on Saturday or Sunday. Do not go out yourself, nor suffer your servants to do so. God preserve you from fire. Make your neighbors acquainted with this. — May 25th, 1720." In the month of September, for a single mark of gold, 1,800 livres, in bank notes, were given, which, ten months before, were valued at 160,000 livres in specie ; and all the ecclesiastics and hospitals in France were prohibited from de- positing their money in any security excepting Mississippi stock. Still it continued to decline. Various means were tried to prevent this : the sole property in one island was given to the company ; and pamphlets published to demonstrate to the proprietors that the stock had no right to fall. On 21st May, the fatal decree just alluded to came out. Under pretence of having lowered the value of coin, it was declared necessary to reduce the nominal value of the notes and India stock, the former to half, and the latter from nine thousand livres a share to five thousand. Bank notes instantly lost their currency ; and, to prevent tumults, the guards were placed everywhere. The Parliament remonstrated, and another de- cree revoked the former. On 29th May, 1720, Law resigned his office of Comptroller-General of Finance, and it was thought necessary to allow Suspension of Payments — Unpopularity of Law, 65 him a detachment of Swiss soldiers, to save him from being torn to pieces by the populace. Every three or four days some new decree was issued. A sufficient number to fill two quarto volumes were circulated, and are now collected. The people were filled with indescribable terror, and began to send their valuables abroad, and a decree came out to prevent them. Merchants be- gan to refuse the notes at any price, and a decree was immediately pro- mulgated forbidding any one to reject them. This made the possessors run with them to the bank, and then another decree decided " that, owing to the tumult at the bank, on account of paying the notes, the re- ' gent thought fit to suspend the payment of them till further orders." "There was not cash in the bank," says Anderson, " to pay the fiftieth part of them." Persons were forbidden from meeting or assembling to- gether under any pretence, and the military were placed in various situa- tions to disperse them. A consternation, soon converted into rage, seized all ranks. Disorder and confusion reigned everywhere. Inflammatory libels were posted up, and seditious papers distributed. The life of the regent was threatened. Great allowances must be made, however, as upwards of ninety millions of notes were in circulation when the bank stopped, and all classes and all conditions were in a state of bankruptcy. The depreciation of this paper was so great that a man might have starved with a hundred mil- lions in his pocket. Law was compelled to seek interviews with the re- gent by night, as he had, on one occasion, narrowly escaped with life from the enraged multitude. Fifteen people were pressed to death at the doors of the bank, in their eagerness to obtain specie, and eight or nine thou- sand of the indignant sufferers proceeded, with three of the bodies, to the gardens of the Palais Eoyal, where they destroyed the coach of Law, and demanded his punishment. The Chamber of Deputies was sitting, and the report spread of the destruction of the carriage. Such was the vin- dictive feeling that one account says, " the members rose simultaneously, and expressed their joy by a loud shout ; while one man, more zealous in his hatred than the rest, exclaimed, ' And Law himself, is he torn to pieces?'" Another report says, the president, overpowered with joy, was seized with the spirit of rhyme, if not of poetry, exclaiming, " Messieurs 1 Messieurs ! bonne nouvelle ! Le carosse de Lass est reduit en Canelle !" The death-blow to all hopes that the company would redeem its credit came in November, 1720. Their privileges were taken from them, and they were reduced to a mere private company. Law left the kingdom, escorted by some horse-guards, after declining the assistance proffered by the regent. It is a remarkable proof of this man's faith in the suc- cess of his plan, that whatever money he had made during the infatua- tion, he invested in the soil of France ; and that, when he left the coun- try, the only property he carried with him was a diamond worth about o£5,000. Various other methods of abating the evil were adopted. Commissioners and tribunals were instituted. Six hundred millions of notes were turned into stock, and many large sums created into termi- nable and life annuities. All the malversations which had been com- 66 History of the Bank of England. mitted with impunity during the excitement were rigidly inquired into. Many dishonest deeds were brought to light. Some peculators were fined, and others imprisoned. An abbe and a master of requests were con- demned to decapitation. By these and other means, together with the consolation which time ever brings, the good people of Paris recovered their gaiety. After a short residence on the continent, Law came to England, where he dwelt during the existence of that bubble, which must have forcibly reminded him of his own career, and which followed in the train of the Mississippi scheme. It seemed as if they who had escaped from Paris had brought the epidemic* with them ; and that the sober London citi- zens were seized with the same mania which, but a few months before, had turned all the heads in Paris. Many who, away from that furious frenzy, had laughed with national heartiness at the Parisians, found themselves, at a later period, weeping and wailing at their madness in following the example. It is difficult to calculate to what extent the English bubblef may have resulted from the French project. It is certain that the Mississippi Com- pany arose in some degree from the Darien undertaking. Mr. Law con- fessed that the facility with which he saw the love of enterprise commu- nicate itself throughout all classes of Scottish society, convinced him of the ease with which a similar effect, on a grander scale, might be pro- duced ; and this knowledge increased, if it did not cause, the great de- lusion of which he was the officiating high priest. As the Mississippi project was encouraged in some degree by the Darien scheme, so may the fever of the South Sea bubble have been caught from the contagion, and magnified by the proximity of the company of the West. For this reason, a slight sketch has been given of that enormous fraud, which pre- ceded the project about to be related. * To add to the accumulated evils of the time, the plague raged at Marseilles nearly ten months of this year. t The ostensible purpose was for improving the public credit of England, and providing for the floating debt, then £10,000,000. According to Haulers scheme, the whole unfunded debt, including exchequer bills and all other debentures, was to be thrown into one fund, bearing an interest of six per cent. ; and in addition to this boon, the holders were to enjoy the monopoly of a trade to the shores of South America, which, it was hoped, would prove not less lucrative than the commerce to the East Indies. The spirit of speculation was further indicated in 1712-18, when Queen Anne, of England, announced to Parliament that a new market for slaves, in Spanish America, had been opened by, and secured to Englishmen. In 1711, the Irish Linen Board was formed. In 1713, English newspapers were first stamped. At this period (1714) " The Crisis," by Dick Steele, and " The Public Spirit of the Times," by Swift, caused great excitement. The publisher of the latter was pun- ished. The rate of interest this year (1714) was fixed at five per cent. Specula- tion was also rife on the continent. The Bank of Vienna was established the same year. Among other literary celebrities of the day was De Foe's " Kobinson Cru- soe," issued in 1716.— Am. Ed. South Sea Bubble. 67 CHAPTER VIII. SOUTH SEA BUBBLE — ITS COMMENCEMENT — RIVALRY WITH THE BANK OF ENGLAND — LUXURY OF THE PERIOD NEW COMPANIES — EXTRACTS FROM CONTEMPORARY LITERA- TURE ROYAL EXCHANGE AND LONDON ASSURANCE CORPORATIONS — BANK CONTRACT — PANIC OF THE PEOPLE — PARLIAMENTARY INQUIRY AND PUNISHMENT OF THE PECULATORS. The history of the year 1720* is the history of the South Sea delu- sion. Anderson says : " It is a year remarkable beyond any other which can be pitched upon for extraordinary and romantic projects." It is a history of wild excitement, and of wilder despair. It extended to all ages and to all classes ; it created hopes which it never realized ; it changed magnificent dreams into dark realities. We have seen, in our own time, how a fierce lust after money has overcome the calm calcula- tion of the financier, the cool deduction of the mathematician, and the equability of the Christian. How the caution of the capitalist has yielded to the frenzy of desire ; how the merchant, whose name stood highest in the annals of commerce, and whose credit was only limited by his con- science, has placed both name and credit in the hands of the unscrupu- lous adventurer. We have seen the names of men whom their country delighted to honor, stand side by side with those whose reputation was more than dark or doubtful. We have seen the man who, in his regular business, would cautiously weigh and coldly scan every circumstance that might affect the gain of fifty pounds, throw the honorable profits of a life into a scheme which promised fifty per cent. Such are the fevers and inflammations of commercial life at present, and they were the same a century ago. " Were it not, in its consequences, so full of the materials that make tragedy," remarks a writer of the present day, " the South Sea bubble might have been represented on the stage as an admirable farce, satirizing more broadly than comedy would have thought befitting her dignity, or the common sense of probability, the eternal passion for wealth." Al- though the propriety of public competition is as unquestionable in gov- ernments as in individuals, yet the doubt may fairly arise how far it is to be encouraged to the prejudice of a valuable assistant, or to what extent the bidder, who offers extravagant advantages, is to be supported. We pause before we enter the shop of the man who marks his goods be- low the cost price ; we respect the trader who keeps the even tenor of his way, without professing to sell at enormous sacrifices. How much longer, then, should a State hesitate to accept proposals which are not only extravagant, but utterly impracticable. Upon these grounds the ministers of 1720 are chargeable with the ruin and the wretchedness shortly to be related. Smollett writes: * Bremen had teen recently (1716) sold to George I., the Elector of Hanover, and King of Great Britain. Newfoundland, Hudson's Bay and Acadia had been ceded to Great Britain by France ; and the spirit of foreign adventure was not con- fined to the South Sea scheme and the Mississippi bubble (1716.) 68 History of the Bank of England. " The king having recommended to the Commons the consideration of proper means for lessening the national debt, was a prelude to the famous South Sea Act. The scheme was projected by Sir John Blunt, who had been bred a scrivener, and was possessed of all the cunning, plausi- bility and boldness requisite for such an undertaking ; he communicated his plan to Mr. Aislabib, the Chancellor of the Exchequer, as well as one of the secretaries of State ; he answered all their objections, and the project was adopted ; they foresaw their own private advantage in the execution of the design, which was imparted in the name of the South Sea Company, of which Blunt was a director, who influenced all their proceedings." The pretence for the scheme was to discharge the national debt* by reducing all the funds into one. Upon the 22d of January, 1720, the House of Commons resolved itself into a committee, to take the subject into consideration ; and a subse- quent proposition, made by the South Sea Company, to unite the whole of the debts of the State — amounting to £30,981,712 — at five per cent, until 1727, and after that period at four per cent., for which they were to pay three millions and a half, met with great approbation from the mem- bers of the government. But the Bank of England had many friends in the House of Commons. The great services rendered by this corpora- tion were brought forward ; a strong representation was made of the in- justice of thrusting so important a body aside for those who had done nothing to assist the State ; and a postponement of the question for five days was obtained. This time was not lost upon the bank authorities, who offered five millions for the same privileges, being an advance of one million and a half on the proposition of the South Sea Company. The government found that the delay was highly favorable ; no sooner was the offer of the bank known, than the directors of the South Sea Com- pany called a meeting ; and at a general court, they were instructed to obtain the preference at any cost ; their offer of three millions and a half was increased to upwards of seven and a half millions. But the members of the first monetary establishment in the kingdom were not to be outdone ; and, seized with the same emulation which animated the South Sea Company, they proposed more advantageously in several respects, and offered to give £1,700 bank stock for ever hundred pounds irredeemable long annuities. " Let any one," says Andeeson, " consider how this was possible." Fortunately for the Bank of England, but un- fortunately for the country, the offer of the South Sea Company met with most favor. The former ceased its bidding ; the latter remained in pos- session of its dangerous bargain. At one time there appears to have been some idea of dividing the advantage between the bank and the South Sea Company ; but Sir John Blunt is stated to have exclaimed, " No, Sir ! we will never divide the child." The very rumor, in I7l9,f that the South Sea Company were ambitious * The SinMng Fund act, projected by Walpole, had been passed in the year 1717. The same year, guineas were reduced from 22 to 21 shillings. There was then prevalent in England a commercial jealousy of the Dutch. In 1718 the London custom-house was burnt. f In November, 1719, peace had followed the war between Holland and England ; one million of dollars was to be paid by Hanover for the cession of Bremen and Yerden. Luxury of the Period. 69 of incorporating with their own all the funds of the bant, East India Company and Exchequer, raised the price of their stock to 126 ; and no sooner was the preference given to them over their competitors known, than a signal frenzy marked alike the city and the suburb. Large pre- miums were paid for the refusal of stock at high prices, and on the 2d of June, 1720,* it rose to 890. Some of the directors were created bar- onets for "their great services;" and in a short time it reached 1,000. Artifice and exaggeration were resorted to, to maintain this unnatural elevation. Fifty per cent, was confidently predicted ; inestimable mar- kets and valuable acquisitions in the South Seas were promised ; and mines of hidden treasure mysteriously alluded to by the agents of the scheme. The public mind was dazzled ; all the available resources of the kingdom were embarked in wild speculations and rash undertakings. Change Alley was crowded with peers of the realm, who forgot their pride ; country gentlemen, who forsook their homes ; clergymen, who disregarded the dignity of their calling ; and ladies, who forgot their natural timidity, in the hope of making money. The monarch was said to have profited by it. His ill-favored German mistresses made great fortunes and sent them over to Hanover ; and the only exceptions among the ministry and nobility of the day were asserted to be the Dukes of Argyll and Koxburgh, and Lord Stanhope. On the 5th August, may be read in a contemporary journal, " Our South Sea equipages increase every day ; the city ladies buy South Sea jewels ; hire South Sea maids ; take new country South Sea houses ; the gentlemen set up South Sea coaches, and buy South Sea estates; they neither examine the situation, the nature or quality of the soil, or price of the purchase, only the annual rent and the title ; for the rest, they take all by the lump, and pay forty or fifty years purchase." That the king favored this unhappy scheme may be gathered from the correspondence of the day. On the 18th of April, 1720, the Duchess of Ormond wrote to Swift, " You remember, and so do I, when the South Sea was said to be my Lord Oxford's brat, and must be starved at nurse. Now, the king has adopted it arid calls it his beloved child ; though perhaps you may say, if he loves it no better than his son, it may not be saying much ; but he loves it as well as he does the Duchess of Kendal, and that is saying a good deal. I wish it may thrive, for some of my friends are deep in it; I wish you were so too!" What a proof is the latter sentence of the prevailing madness. Prior writes, " I am tired of politics, and lost in the South Sea. The roaring of the waves, and the madness of the people, were justly put together. It is all wilder than St. Anthony's dream ; and the bagatelle is more solid than any thing that has been endeavored here this year." And all these anticipations were indulged in, of a scheme which, ac- cording to Smollett, promised no commercial advantages of importance, and was buoyed up by nothing but the folly and rapacity of individuals. He says, "During the infatuation produced, luxury, vice and profligacy * The restoration of peace between Great Britain and Spain, by treaty concluded in January, 1*720, gave an additional impulse to speculation in commerce, foreign mines, and manufactures. 1 History of the Bank of England. increased to a shocking degree of extravagance. The adventurers, intox- icated by their imaginary wealth, pampered themselves with the rarest dainties, and the most expensive wines that could be imported ; they pur- chased the most sumptuous furniture, equipage and apparel, though with- out taste or discernment ; they indulged their criminal passions to the most scandalous excess ; their discourse was the language of pride, inso- lence and the most ridiculous ostentation. They affected to scoff at religion and morality, and even to set heaven at defiance." In the periodicals of the time the course of the fraud may almost be traced. At first gay and satirical, we read : " In London stands a famous pile, And near that pile an alley, Where merry crowds for riches toil, And wisdom stoops to folly; Here sad and joyful, high and low, Court fortune for her graces ; And as"she smiles, or frowns, they show Their gestures and grimaces. Here stars and garters, too, appear, Among our lords the rabble ; To buy and sell, to see and hear, * The jews and gentiles squabble; Our greatest ladies hither come, And ply in chariots daily, Or pawn their jewels for a sum To venture in the alley ; longheads may thrive by sober rules, Because they think and drink not ; But headlongs are our thriving fools, Who only drink and think not. What need have we of Indian wealth, Or commerce with our neighbors ? Our constitution is in health, And riches crown our labors." Where credulity is plentiful promises are equally so ; where men de- sire money they appear to credit any falsehood, however monstrous, pro- vided only it be plausible ; " the wish is father to the thought," and while they imagine they are cheating, they often become the cheated. Exchange Alley was thronged with the duper and the duped, and Corn- hill was impassable for fools and knaves. Ballads were sung about the streets, and the caricaturist was busy in his legitimate calling of satirizing the folly and the vices of the people. But who cares for caricatures when money is to be made ? The spirit which levels rank and destroys distinctions — which ruins virtue and engenders vice — that fierce thirst which " grows by what it feeds on," continued to spread. The South Sea Company was a legitimate trade to some of the speculations which arose. Schemes were proposed which would have been extravagant in 1825, and which stamped the minds of those who entertained them with what may be truly termed a commercial lunacy. One was for the " discovery of perpetual motion." Another for subscribing two millions and a half to " a promising design hereafter to be promulgated." A third was a New Companies — Epigram. 71 " Company for carrying on an undertaking of great advantage, but nobody to know what it is ; every subscriber wbo deposits £2 per share to be entitled to £100 per annum." Even this insolent attempt on the credulity of the nation succeeded ; and, when the arch-rogue opened his shop, the house was beset with applicants. In five hours £2,000 were de- posited in the hands of the projector, and from that day he ceased to be heard of in England. Projects like these enlisted the lowest with the highest. On some sixpence, and on others one shilling, per cent, was paid; and, as no capital was required, the comparative beggar might in- dulge in the same adventurous gambling, and enjoy the same bright cas- tles in the air which marked the dreams of the rich and the great. Some came so low as to ask only one shilling deposit on every thousand pounds. Persons of quality, of both sexes, were engaged in these. Avarice tri- umphed over dignity; gentlemen met their brokers at taverns; ladies at their milliner's shops. The English historian says, "All distinctions of party, religion, sex, character and circumstance were swallowed up in this universal concern, or in some such pecuniary project. Exchange Al- ley was filled with a strange concourse of statesmen and clergymen, churchmen and dissenters, Whigs and Tories, physicians, lawyers, trades- men and even multitudes of females. All other professions and employ- ments were utterly rejected; the people's attention wholly engrossed by this and other chimerical schemes, which were known by the denomina- tion of bubbles. Among the schemes advertised in derision of the propensity of the day, was one " for making butter from beech trees ;" another for " an en- gine to remove the South Sea House to Moorfields ;" a third " for teach- ing wise men to cast nativities." The clerks of the South Sea Company found it a prosperous period. As the lapse of a day might make 100 per cent, difference, a £20 note was frequently given to expedite the transaction. These perquisites were so great that the projectors wore lace dresses, and answered, when remonstrated with, that, " if they did not put gold upon their clothes, they could not make away with half their earnings." The following is selected from among the many epigrams of the period, to prove that a few yet retained their senses : " A wise man laughed to see an ass Eat thistles and neglect good grass ; But had the sage beheld the folly Of late transacted in Change Alley, He might have seen worse asses there Give solid gold for empty air !" But while the speculator " put money in his purse," he little heeded the admonitions of the satirist. It is evident, from the following, that there were some who shrewdly guessed the advantages which the direct- ors proposed taking to themselves : "As fishes on each other prey, The great ones swallowing up the small, So fares it in the southern sea, But whale-directors eat up all. 72 History of the Bank of England. " Oh ! would these patriots be so kind, Here in the deep to wash their hands ; Then, like Pactolus, we should find The sea indeed had golden sands. " The nation, too, too late will find, Computing all their cost and trouble, Directors promises but wind, South Sea, at best, a mighty bubble." New companies started up every day under the countenance of the prime nobility. The Prince of Wales was constituted governor of the Welsh Copper Company ; (by which he made sixty thousand pounds, and then withdrew his name ;) the Duke of Bridgewater formed an asso- ciation for building houses in London and Westminster ; and the Duke of Chandos appeared at the head of the York Buildings Company. Another ingenious fraud consisted of the " Globe permits," square bits of playing-card, on which were impressed in wax the Globe tavern, and inscribed on them " sail-cloth permits." These cards were merely per- missions to subscribe to some future sail-cloth company, and were cur- rently sold at sixty guineas each. The confusion and crowd were so great that the same shares were sometimes sold at the same moment £10 higher in one part of the alley than another. It is impossible to peruse the contemporary papers without surprise. The absurdity seems too glaring to excite any thing but ridicule. The London Journal of the 11th of June says : " The hurry of our stock- jobbing bubblers has been so great this week that it has exceeded all that was ever known. There has been nothing but running about from one coffee-house to another, and from one tavern to another, to subscribe, with- out examining what the proposals were. The general cry has been, ' For G — 's sake let us but subscribe to something, we don't care what it is.' So that, in short, many have taken them at their words, and entered them adventurers in some of the grossest cheats and improbable undertakings that ever the world heard of; and yet, by all these, the projectors have got money, and have had their subscriptions full as soon as desired." Mr. Maceat, in his " Memoirs of Popular Delusions," says : " Besides these bubbles, many others sprung up daily, in spite of the condemnation of the government and the ridicule of the still sane portion of the public. The print-shops teemed with caricatures, and the newspapers with epi- grams and satires, upon the prevalent folly. An ingenious card-maker published a pack of South Sea playing cards, which are now extremely rare, each card containing, besides the usual figures, of a very small size, in one corner, a caricature of a bubble company, with appropriate verses beneath. One of the most famous bubbles was ' Puckle's Machine Com- pany,' for discharging round and square cannon balls and bullets, and making a total revolution in the art of war. Its pretensions to public favor were thus summed up in the eight of spades ; ' A rare invention to destroy the crowd Of fools at home, instead of fools abroad. Fear not, my friends, this terrible machine, They're only wounded who have shares therein.' South Sea Cards — Assurance Companies. 73 The nine of hearts -was a caricature of the English Copper and Brass Company, -with the following epigram : ' The headlong fool that wants to be a swopper Of gold and silver coin for English copper, May, in Change Alley, prove himself an ass, And give rich metal for adulterate brass.' The eight of diamonds celebrated the company for the colonization of Acadia, with this doggrel. The reader cannot fail to admire the ease and elegance of the rhyme : ' He that is rich and wants to fool away A good round sum in North America, Let him subscribe himself a headlong sharer, And asses' ears shall honor him or bearer.' And in a similar style every card of the pack exposed some knavish scheme and ridiculed the persons who were its dupes. It was computed that the total amount of the sums proposed for carrying on these projects was upwards of three hundred millions sterling, a sum so immense that it exceeded the value of all the lands in England at twenty years' pur- chase." It would be curious, were it practicable, to know the feelings of the directors of the Bank of England during this important period. It seems almost impossible for them to have escaped the universal fever. A golden prize appeared in the possession, and human nature must have repined at the success of their opponents. During a time so full of excitement it was almost impossible to argue calmly.; and they probably looked upon the gigantic success of the rival company as calculated to injure their own corporation, if not utterly to destroy it. But whatever their ideas were, the revulsion which followed must have more than compensated for them by their entire security, when the remainder of London was one great commercial wreck. Out of this universal frenzy arose two great corpo- rate bodies. The Koyal Exchange and London Assurance Companies owe their origin to this speculative period. The civil list was in arrears, and the heads of the above companies offered £600,000, on condition of obtaining charters. There is rarely great evil without accompanying good ; and these bodies, which have tended to so much individual ad- vantage, the benefits of which have been moral as well as pecuniary ; which have provided for so many sorrows and dried so many tears, as much by their own transactions as by the great impulse afforded to the principle of life assurances, have, in some respects, atoned for the despair which followed the " delusion and the drunkenness" described.* The evil was confined to a few years ; the good will be spread over centuries. While the excitement was at its height, the Royal Exchange and London Assurance shares were respectively forced up to £250 and £175. East India stock, under the same influence, rose to 445, and bank stock to 260 per cent. But the South Sea Company grew jealous of their rivals, and com- * In April, 1V20, appeared the royal proclamation against " The Hell-Fire Club." 74 His tory of the Bank of England. menced legal proceedings against some of the companies. This brought the whole affair to an issue, and a general panic seized the conductors of the bubbles. The "York buildings" fell at once 100 per cent. ; and in two days, this company, with some others which were specially named, had no buyers at any price whatever. The more bare-faced bubbles im- mediately shrunk to their natural nothingness. The various offices were shut up ; the contractors disappeared ; and Change Alley was a com- parative wilderness. When the law proceedings began, South Sea stock was 850 per cent., and from that time it rapidly declined, until, on the 29th September, the following month, it fell to 175. The directors grew alarmed. In vain they promised that the Christ- mas dividend should be at the rate of 60 per cent., and that 50 per cent, should be guaranteed for the following twelve years. The public refused to believe, and men ran to and fro, alarm and terror in their countenance, their imaginations filled with dismal pictures of calamity. The fear was in proportion to the hope ; and no one knew where the evil would cease. Thousands of families were reduced to beggary. Many were not able to withstand the shock, but died broken-hearted. Others withdrew to re- mote parts of the world, and perished in exile. The very name of a South Sea director was an abomination,* nor could one of them appear in the streets without danger of being insulted. In the London Journal we read, " There appeared the utmost consterna- tion in Change Alley, the day the act for suppressing them took place, which, because of the terror and confusion it struck among those brethren in iniquity, they called the day of judgment. Many of those who have been most assiduous in drawing other poor wretches into their ruin, have, besides their wealth, acquired an infamy they can never wipe off; they being followed with the reproaches, threats and bitterest curses of the poor people they have deluded to their destruction." The Weekly Packet says of the schemers, " they have been used to such dishonest ways of living, and hardly will take up with any course of life that is not so ; insomuch that it is feared many of them will go out marauding ; then stand clear the Bristol mail." Public credit sustained a tremendous shock. Many bankers and gold- smiths, who had lent money on the security of the stock, were compelled to stop payment through its depreciation ; and the sword-blade associa- tion, hitherto the chief cashiers of the company, followed their example. There was but one hope left to the nation. The directors of the Bank of England, always applied to in distress, and not always remembered in prosperity, were persuaded, at the instance of Sir Robert Walpole, to come forward during the early part of the panic. A general court was held, at which the governor and directors were empowered, without a dis- sentient voice, to agree with the South Sea Company to circulate their bonds, in hopes of sustaining the credit of the country. A memorandum was hastily drawn up, to be the foundation of a future agreement, by which the bank undertook to circulate £3,500,000 at 400 per cent. The * It is a curious feature in the history of the times, that Law's Mississippi scheme and the South Sea scheme, both conceived about the same time, exploded within a few days of each other. The first deluged France with bankruptcy, and the latter spread insolvency throughout England. Parliamentary Inquiry. 75 mania, which affected all England must have seized partially on the pro- prietary, or so high a rate would never have been allowed. Fortunately the memorandum had not been legally ratified. The first effect of this arrangement was to support the price of the stock. Books were opened at the bank to receive subscriptions, and large sums were brought in. The bankruptcy of some large companies, however, produced a run upon the bank, and the directors renounced the agreement. The losing party commenced legal proceedings, but a hundred reasons prevented a con- tinuance. The fear of publicity ; the knowledge of their own nefarious transactions ; the conviction that they had been and were acting dishon- estly ; the influence of those parties in power who had profited by the rascality of the transaction ; the certainty that every thing would be brought to light, and that they could not (to use an expressive but homely phrase) " go into court with clean hands," wrought upon the directors of the South Sea Company ; and legal proceedings were quickly abandoned. The managers of the Bank of England retained the even tenor of their course. They had wrought no evil, they feared no reverses. They had not entered the market to raise or depress the stock ; and, without alarm, they saw it daily fall in value. The South Sea Company had commenced into a distinct and positive rivalry with them. They had sought to obtain from government those advantages which had been paid for at a high rate by their competitors, and which could only be procured by their injury. If, therefore, a certain degree of satisfaction pervaded the minds of the bank directors at the downfall of their rivals, it reflects a higher degree of credit on them, that, setting aside the littleness of jeal- ousy, they came promptly forward to render all the assistance in their power. When they found the terms, hastily named, were more in accord- ance with the inordinate ambition of the South Sea directors, than with the intrinsic worth of the stock, it was a duty which they owed to them- selves, to their proprietary, and to the nation, to abandon the connection at once, rather than add to the misery of the people, by being engulfed in the whirlpool. " The overbearing insolence of ignorant men," says Dr. Mackay, " who had risen to sudden wealth by successful gambling, made men of true gentility of mind and manners blush that gold should have power to raise the unworthy in the scale of society. The haughti- ness of some of these "cyphering cits," as they were termed by Sir Richard Steele, was remembered against them in the day of their ad- versity. In the parliamentary inquiry, many of the directors suffered more for their insolence than their peculation. One of them, who, in the full blown pride of an ignorant rich man, had said that he would feed his horse upon gold, was reduced almost to bread and water for himself; every haughty look, every overbearing speech, was set down, and repaid them a hundred fold in humiliation." One of the members made a mo- tion concerning this man, whose name was Grigsby, to the following effect : " That, since that upstart had been so prodigally vain as to bid his coachman feed his horses with gold, no doubt he could feed on it himself; and, therefore, he moved that he might be allowed as much gold as he could eat, and the rest of his estate go towards the relief of the sufferers." During this period the king had been in Germany ; but the confusion 76 History of the Bank of England. of the nation compelled him to return, and on the 11th of November he arrived in England. Many expedients were started, when the bank, fear- ful of compromising their own safety, withdrew from the field. _ Amongst others, an engraftment of nine millions of the South Sea stock into bank, and nine into East India stock. Warm and varied debates occurred at the courts ; and the proposition, though at last agreed to, and confirmed by act of Parliament, was afterwards abandoned. In the mean time, the most infamous transactions were discovered ; and parliamentar/language was not much regarded in the debates. A few of the speeches indulged in by the senators strike somewhat curiously on the modern ear. The Bishop of Rochester said, "the scheme was like a pestilence." The Duke of Wharton added, that " he would give up his dearest friend if engaged in the project." Lord Stanhope thought " every farthing of the criminals' property ought to be confiscated ;" and Lord Molesworth, with a fine philanthropic spirit, remarked that "the directors ought to be tied in a sack, and thrown into the Thames." Mr. Shippen, the Jaco- bite member, said "he was glad to see a British House of Commons re- suming its pristine vigor ; and that there were other men, in high station, who were not less guilty than the directors." Mr. Craggs, Secretary of State, against whom this inuendo was directed, arose, and offered to de- monstrate his innocence by fighting any man in or out of the house. Lord Molesworth " wondered at his boldness ; but though he was past sixty s there were plenty of young men who would not be afraid to look Mr. Craggs in the face." Vociferous cries of order arose ; Mr. Craggs was compelled to apologize ; and a secret committee appointed to inquire into the transactions of the South Sea Company. It was found impossible to please the losers, who absolutely besieged the House of Commons. On one occasion the tumult was so great that the members could not proceed with the ordinary business. The riot act was read; and one from the crowd called out, with the bitter boldness of a ruined man, " You pick our pockets, and then imprison us for com- plaining." The governors, directors and officers of the company were brought before the bar of the House of Commons. The treasurer, who was deeply implicated, absconded ; and, fear being entertained that the directors might follow his example, a proclamation was issued that none of them should leave the kingdom. General Ross, with more energy than elegance, informed the house a train of the deepest villainy that hell ever invented to ruin a nation had been discovered. Bribery had been effected in procuring the act to be passed ; and all officers of this company holding government situations were immediately removed from them. It had, indeed, been a delusion from beginning to end. A fictitious stock, amounting to £574,000, had been created, and distributed among secretaries of state, chancellors of the exchequer, duchesses, earls and countesses. The conduct of Mr. Aislabie, Chancellor of the Exchequer, was more infamous than that of any other, as he had advised the company to increase their second sub- scription half a million, without any other authority than their own, and appears to have benefited to the amount of £800,000. His punishment rapidly and deservedly followed his crime. He was ignominiously ex- pelled the house, sent to the Tower, restrained for a year from leaving Punishment of the Peculators. 77 the kingdom, and ordered to make a correct account of his estate for the benefit of the sufferers. Dwellings were illuminated in testimony of de- light at the sentence ; a mob assembled on Tower Hill to witness his degradation ; bonfires were kindled in all parts of the city, and London wore the appearance of a great festivity. The hand of Providence was on the betrayers of their country. Several members of the lower house, directors of the company, were expelled. Mr. Secretary Ckaggs and his father died while proceedings were pending, the latter leaving a million and a half for those he had assisted to ruin. The legislature restrained the persons of the directors, and marked their characters with ignominy. An impartial tribunal was scarcely to be expected. Those who had lost money were revengeful. Those who had gained endeavored to hide it under the appearance of zeal. The devices of party, the application in the name of friendship, the appeal under the plea of kindred, were all used to shield the guilty, and, in some instances, were successful in pro- curing a small majority. The more violent recommended hanging; and one of the members most pathetically lamented that " after all there was nobody's blood shed !" The great historian of the " Decline and Fall of the Eoman Empire" complains, " Instead of the calm solemnity of a judicial inquiry, the for- tune and honor of thirty-three Englishmen were made the topics of hasty conversation, the sport of a lawless majority ; and the basest member of the committee, by a malicious word or silent vote, might indulge his general spleen or personal animosity. Injury was aggravated by insult, and insult was embittered by pleasantry. Allowances of £20 or one shil- ling were facetiously moved. A vague report that a director had former- ly been concerned in another project, by which some unknown persons had lost their money, was admitted as a proof of his actual guilt. One man was ruined because he was grown so proud that, one day, at the treasury, he had refused a civil answer to persons much above him. All were condemned, absent and unheard, in arbitrary fines and forfeitures, which swept away the greatest part of their substance." The pens which had been employed in prophesying mischief, were not backward in affecting commiseration for the sufferers. The following is another, and the last specimen of the literature of the South Sea bubble : " Behold a poor dejected wretch, Who kept a South Sea coach of late, But now is glad to humbly catch A penny at the prison gate. " 'Tis strange one set of knaves should sour A nation famed for wealth and wit ; But stranger still that men in power Should give a sanction to the cheat. " Fools lost when the directors won, But now the poor directors lose ; And where the South Sea stock will run, Old Nick, the first projector, knows." The most difficult process was yet to come ; it was easier to punish the delinquents than to relieve the sufferers. Through the abilities of 6 78 History of the Bank of England. Mr. Robert Walpole, however, this was adjusted. It was partially done by giving to the public seven millions of the money which belonged to the company in their corporate capacity, being the profits arising from the delusion. Of their capital stock a sufficient sum to pay the claimants £33 6s. 8d. per cent., amounting to £8,900,000, was taken ; and this was necessarily a great relief. Of a debt of eleven millions sterling, ad- vanced by the company to the public on stock, the latter were relieved on paying ten per cent, on it. Thus the company would have received £1,100,000 instead of eleven millions, had all consented to the agree- ment, but many debtors refused to make any payment whatever. Who can read these things and not mourn ? They are not asked_ to deplore rapid reverses ; they are not called upon to grieve for the rich man, made suddenly poor, for luxury turned to want, or the insolent man made humble ; but they are called upon to grieve for our common humanity. For that melancholy madness which crushed all good feel- ing, which made the poor man insane from the hope of riches, and the rich man mad from the hope of extravagant wealth ; which trampled alike upon human ties and natural desires, and embarked all England in a scheme destructive of moral feeling and national strength. Thus ended this delusion, alike memorable and melancholy. There are no fine deeds standing prominently forward to redeem it ; there are no noble acts which, while we deplore the cause, make us admire the effect ; there is no unselfish sacrifice tending to make us proud of human nature. The prospect is one wide waste of degradation ; there is nothing to sanctify, there is nothing to redeem it. The course of this history may lead to new instances of intense thirst for gold. Speculative epochs may again occur ; the events of the past may re-appear in the future. Legitimate business may again be deserted for unlawful callings, and the history of that which is gone cease to be received as a warning. Yet will the great delusion of this period stand alone in its infamy, its disgrace and its misery. And though we dare not venture to hope that the spirit which shook the country to its centre has passed away — for nations, like individuals, are liable to their fevers and their crimes — yet let it be hoped that, if witnessed again in Eng- land, a prince of the blood may not sanction it ; an officer of State profit by it ; members of the Senate be bribed with it ; peers of the realm be disgraced through it ; or a chancellor of the exchequer be denounced, degraded and dishonored in its discovery. The following copy of an agreement, entered into with the Duke of Eutland, will serve to show the form of compact : " I promise to pay to the Duke of Rutland £10,000, upon his transferring to me, or my order, 1,000 capital South Sea stock, some time on or before the shutting of the company's books for the next Christmas dividend." More than two millions were confiscated.* The following deductions are rather in proportion to the delinquency of the speculators than to the magnitude of their estates : * For copious review of this scheme, see " Mackay's Memoirs of Extraordinary Delusions," London, 1852. "Encyclopedia Britannica," 1860. Confiscation. 19 PERSONS. ESTATES. Sir John Fellows, Sub. Gov., £243,096 Os. 6d. Charles Joye, Esq., Dep. Gov 40,105 2 Mr. Astell, 27,750 19 8f Sir John Blunt 183,349 10 8| Sir Lawrence Blackwell, 83,529 17 11 Sir Robert Chaplin, 45,875 14 5 Sir William Chapman, 39,161 6 8£ Mr. Chester, 140,372 15 6 Mr. Child,* 52,437 19 1 Mr. Eyles 34,329 16 7 Mr. Gibbon, 106,543 5 6 Mr. Hawes, 40,031 2f Sir Theodore Janssen, 243,244 3 11 Sir John Lambert, 72,508 1 5 Mr. Read, 117,297 16 Mr. Surman, Dep. Cash., 121,321 10 ALLOWANCES. £10,000 5,000 5,000 1,000 10,000 10,000 10,000 10,000 10,000 20,000 10,000 31 60,000 5,000 10,000 5,000 * " Among the earliest goldsmiths whose business was subsequently merged into that of banking, as at present conducted, was Mr. Francis Child, citizen and gold- smith, who established himself in Fleet-street, at the east corner of Temple Bar, and on the same spot where the business is still carried on. He lived to a great age, and was a person of large fortune and a most respectable character. The next in point of antiquity was the present house of Strahan, Paul & Co. This bank was originally founded by Mr. Jeremiah Snow, who carried on business as a goldsmith, or what in modern phraseology is better known by the name of pawnbroker. His name appears among the goldsmiths or bankers who were robbed by Charles II. By the kindness of the gentleman at present carrying on the business of the bank, we have been favored with the privilege of inspecting the books of the bank so early as the year 1672. They show that the nobility of the land were in the habit of fre- quenting their shop, and borrowing money on the deposit of various gold and silver articles, such as gold and silver tankards, golden thimbles, and other valuables of a very miscellaneous and sometimes comical description. " Not many years after the London bankers had ceased to issue notes, the incon- venience 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 adjust- ing each other's daily payments by an interchange of liabilities was adopted as the best mode of economizing the use of money. " At first the system adopted was of the most primitive kind, and certainly not the safest. The clerks of the various banking-houses used to perform the operation of exchanges at the corners of streets and on the top of a post. They then 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 near the old post-office, in Lombard-street. This house was called. the Clearing-House: " The bearing of devices over the doors of shops, and other places of business, was a very common practice before the introduction of the plan of numbering the houses, which did not take place till about the year 1770. " The sign of the house in Bread-street, where Milton's father resided, was a spread eagle, which appears to have been the arms of that family. "Remains of this custom are still' to be observed in several parts of the metropo- lis ; and, in reference to that particular vocation which forms the subject of our pages, the reader is informed that Messrs. Hoares, the bankers, in Fleet-street, re- tain to this day over the door the symbol of a leather bottle, gilt ; and the same was also represented on their notes which they formerly issued. " Messrs. Gostlings also retain their sign of three squirrels, and Strahan, Paul & Co., the sign of the golden anchor. — Lawson's History of Banking. SO History of the Bank of England. CHAPTEE IX. PURCHASE OF SOUTH SEA ANNUITIES INCEEASED CAPITAL COMMENCEMENT OF THE REST CONSPIRACY AND RUN UPON THE BANK CONFIDENCE RESTORED ADVANCES TO GOVERNMENT NEW BUILDING ORIGIN OF POST BILLS NEW CHARTER INVASION OF 1745 RUN UPON THE BANK EXPEDIENT TO MEET IT ATTEMPT TO INJURE CREDIT ASSISTANCE TO GOVERNMENT. In 1722, the South Sea Company were allowed to sell £200,000 gov- ernment annuities, and the Bank of England took the whole at twenty years' purchase, at a price equal to par. To meet the payment, amount- ing to four millions, their corporate capital was increased £3,400,000, by £3,389,830 being subscribed for at 118 per cent. By this transaction the bank made a profit of £610,169, and the capital amounted to £8,959,995. This year may be regarded as somewhat memorable.* In all commercial bodies, a reserve fund, in proportion to the importance of the partnership, is desirable. Unexpected liabilities and losses must fre- quently take place, and periods of difficulty, demanding extensive capi- tal, must occasionally arise. The dividends of the corporation had hitherto varied considerably, as extra losses could only be met by decreas- ing the interest. If such claims occurred in the earlier part of the half- year, it is probable that they were only to be met by disposing of valu- able securities at a serious sacrifice. That some such cause was in ope- ration is evident, from the bank, for the first time in its history, main- taining a reserve fund, which, under the name of best, has increased with the business of the house, and has frequently proved of invaluable service. In the earlier history of the bank, a want of money must have been sometimes experienced, as the subscribed capital was lent to government in payment of the charter. The importance given by the latter, the growing requirements of trade, the interest allowed on deposits, together with private influence, produced clients to the young establishment. In exchange for deposits, notes were issued to the public, which readily cir- culated. The deposits, cash and credit, together with the notes, formed, indeed, the chief fund upon which the corporation traded ; but as the profits made in the first few years were nearly, if not altogether, con- sumed by the expenses, the dividends continued, until 1698, at the rate paid by government, of eight per cent. The preliminary expenses in ob- taining a charter, the outlay prior to the establishment, the incomes of the officers, together with the rent and bad debts, must have greatly diminished the early banking profits. It was during this period that its notes were at a discount ; that the * Industrial associations were more productive. Thread was, in 1722, first made at Paisley. In 1723 the first agricultural society in Scotland was instituted. In Russia, patronage and bounties were extended to manufactures of woollen and linen dothB. Conspiracy — Run on the Bank. 81 most strenuous efforts were made to destroy it; and that its opponents were most zealous in their attempts to crush that bant which they hated as much as they feared. When the business augmented, an increased, though certain dividend was paid, which necessarily varied with the profits, as there was no fund to meet extraordinary claims, and the gold- smiths and bankers, jealous of the importance of their competitor, were not to be relied on for assistance. It is always desirable to have a steady dividend, as many of the shareholders rely on it for their support. The variations of the interest, therefore, were probably inconveniently felt. It is, indeed, a question how much the credit of a corporation is benefited by an uncertain dividend ; and an addition to an uniform rate may always be appended as a bonus. A large reserved capital prevented the interest from fluctuating ; and while it added stability to the bank, was of great importance to the direction, by giving them confidence in their resources, and enabling them to triumph over those perils which must ever surround a new establishment, and which are often only dan- gerous in proportion to the smallness of its capital. It is true that calls might have been made on the proprietary when- ever an urgency occurred ; but this would not have been in character with the great respectability already acquired by the Bank of England. For such reasons a reserve fund was desirable ; and for these, with other and more powerful causes, the rest, that great capital which has often been attacked, and more often envied, was commenced in the year 1722. It has been already seen that conspiracies against the State have usually produced an effect upon the bank. The confidence reposed in it vanishes rapidly under the appearance of difficulty ; and the more im- plicit the previous trust the greater the alarm when the balance of the public mind is disturbed. Men act when they should reason ; and the hazard of the bank is in proportion to the mystery which confuses the people, rather than to the danger which environs the State. An obscure conspiracy which ended, as it was perhaps founded, in nothing, was com- municated by the Duke of Orleans to King George I., and was stated to be formed against the person and throne of the latter. A proclama- tion of the exiled Pretender was gravely produced, which as gravely pro- posed a peaceable cession of the throne, by the English monarch, who, in return, was to be made king of his native States. Every effort, both foreign and domestic, was reported to have been made. The people were to be intrigued with ; government was to be subverted ; money was said to be provided ; officers engaged from abroad ; arms and ammu- nition procured ; and the city of London was to be marked with blood- shed and confusion. The Royal Exchange was to witness the proclama- tion of the Pretender ; the exchequer was to be seized, and the Bank of England to be plundered. At this period the Jacobites were a numerous, and even a powerful party ; and a plot conveyed from so important a personage as the Regent of France, struck alarm throughout the nation ; and once more the bank paid the penalty of its greatness by the public running to demand its cash. The stock fell in value. South Sea funds sympathized, and decreased in price. Vigorous measures were had re- course to, to meet an evil so sudden and alarming. A camp was formed in Hyde Park. Troops were ordered from Ireland. The States of Hoi- 82 History of the Bank of England. land prepared to embark their guarantee troops. The Bishop of Roches- ter and Bishop Atterbury, with some of the nobility, were seized. The proclamation of the Pretender was burned at the Eoyal Exchange, and the House of Commons passed a bill in support of the means adopted. These proceedings overawed the malcontents ; the run upon the bank soon ceased, and the city was restored to its propriety. In 1725, the bank consented to reduce the interest on two millions, advanced in 1716, from five to four per cent. ; and in 1728,* govern- ment again resorted to the Bank of England to assist in meeting a vote of four millions, to pay the expenses of the preceding year. In times of war the ministry have always applied to this establishment to support them during those periods of danger and distrust, which must ever arise in a long contest with a powerful enemy. But that danger had ceased, and the nation had enjoyed a period of profound quiet. Notwithstand- ing this, the directors were again applied to for assistance in the above year ; and the application was met by an advance of £1,750,000, (on the security of the coal and culm duties,) at four per cent, per annum. They were enabled to advance this large sum without a further call on their proprietary, in consequence of one million having been repaid them, in 1727,f of the previous debt. In the following year they advanced a further sum of £1,250,000, at four per cent., on security of the lottery, and were repaid £775,027 for redemption of the remainder of the capi- tal, due to them for cancelling exchequer bills in 1709 ; and also £500,000 towards redeeming the capital of two millions, due for ex- chequer bills, delivered up in 1717. The notes issued at this period were made out in the various names of the public ; and as part only was printed, it was the duty of the clerk to enter that portion which was not engraved. No note was circulated for less than £20 ; and though the demand was limited, this mode must have added materially to the business of the officers. If we may judge, also, from the dividends, the directors did not shrink from their share of work, as each warrant was signed by two of their body. The num- ber of fund-holders was considerable, and the labor, therefore, was not of a trifling character. Prior to the year 1732, the court of directors had carried on their business within the hall of the Grocers' Company. They had commenced their career unostentatiously, and they had met with their reward. With fifty-four assistants, whose names and salaries are recorded in the ap- pendix, they had gone on prospering, until the business demanded a building exclusively devoted to its interests. The time had now arrived when an enlarged edifice was not only advisable but necessary ; and on 20th January, 1732,J it was unanimously resolved to erect a hall and * 'Warm debate this year on the national debt. Walpole, Premier, represented that a reduction, to the extent of £2,698,000, had occurred since 1716. f In this year the Eoyal Bank of Scotland was incorporated. The Dublin Linen Hall was opened, and the first establishment for the manufacture of Irish cambric, at Dundalk, occurred in the following year, (1728.) \ Commercial activity was renewed and public confidence was restored, in the years 1730 — 1732. In 1730, tin plate was first made in England. In 1732, a char- ter was granted for the colony of Georgia. Statue of William III. 83 office in Threadneedle-street ; and the site chosen for the new edifice was that of the house and garden of Sir John Houblon, first governor of the bank. The structure was contracted for by Dunn & Townshend, emi- nent builders of the day, after designs by Mr. George Sampson. On Thursday, the 3d of August, at one o'clock in the afternoon, the new building was commenced, a stone, on which the names of the di- rectors were placed, being made the foundation for one of the pillars. Twenty guineas were presented to the workmen for distribution, and, on the 5th of June, 1734, business was commenced in that edifice, the pre- sent importance of which is unparalleled in the history of monetary establishments. Notwithstanding the sagacity of those who governed its concerns, it may reasonably be questioned whether they imagined the time would ever arrive when its buildings would occupy acres ; when the movements of its governors, in the words of the historiographer of London, would influence the whole body of the public, its offices expel a church from its site, and emulate the palaces of emperors ; when their determination, according to Richard Cobden, would affect all the mar- kets in the world ; and the representatives of commerce in the East, and the pioneers of trade and civilization in the West, watch earnestly and anxiously the proceedings of the directors of the Bank of England. " I happened to be travelling in Turkey and Greece, in the spring of 1837," said this gentleman, in his evidence on banks of issue, "and I saw, in the little island of Syra, the Greek merchants there, with their telescopes in their hands, looking out anxiously for the arrival of a vessel from Trieste, giving an account of the proceedings of the Bank of Enp* land, as a merchant, on the Exchange at Manchester, would watch for the arrival of the mail, to know what the next step to be taken by the bank directors would be ; and we know that, in the message of the president of the United States, in 1837, and in the addresses of some of the governors of the States — New-York in particular — the Bank of England was not only mentioned by name, but a considerable space given to the discussion of its policy." On the 1st of January, 1735,* the marble statue of the founder of the corporation, by Cheere, which the reader has probably often seen, was placed upon its pedestal, and a volley fired by the servants of the bank, in honor of the founder. The following is a translation of the in- scription : "FOR RESTORING EFFICACY TO THE LATVS, AUTHORITY TO THE COURTS OB 1 JUSTICE, DIGNITY TO THE PARLIAMENT, TO ALL HIS SUBJECTS THEIR RELIGION AND LIBERTIES, AND FOR CONFIRMING THESE TO POSTERITY BY THE SUCCESSION OP THE ILLUSTRIOUS HOUSE OF HANOVER TO THE BRITISH THRONE, TO THE BEST OF PRINCES, WILLIAM III., 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 MDCOXXXIV., AND THE FIRST YEAR OF THIS BUILDING." * The counterfeiting of bank bills was this year made a felony. 84 History of the Bank of England. This is a graceful homage to the man who was the origin of its great- ness. It is a testimony of more worth than the engraven marble which records a conquest. It is a tribute of higher honor than the brass by the way-side, which tells of goodly cities sacked. The past age did not — even the present may not— fully appreciate this ; but the progressive spirit of the times renders it certain, that, at some future period, the name of "William III. will be regarded with more honor as the founder of the Bank of England, than as the soldier who fought in the trenches at Namur, or the statesman who organized the grand alliance of Eu- ropean powers against the house of Bourbon. The inefficiency of the police a century ago is a matter of history. It is difficult to say whether murders or robberies most abounded. The records of the period bear witness that both were committed with compara- tive impunity ; that " highwaymen," who were then peculiar to^the time, flourished in all the gay insouciance which arises from a precarious mode of existence. The literature of the day is full of allusions to them ; and an opera, commemorating the heroism of one of the fraternity, was per- formed on the stage, and applauded by lords and ladies, until it became a fashion. Amid these scenes of crime, that of robbing the mail was a favorite occupation, as it not only required, but also rewarded, boldness. These robberies grew to such a height, by 1738, that the postmaster made a representation to the bank upon the subject ; and the directors, in consequence, advertised an issue of bills, payable at seven days' sight, " that in case of the mail being robbed, the proprietor may have time to give notice." In 1742* the period for the reconstruction of the bank charter had ar- rived. The renewal of the privileges of the company created the usual consideration of what amount might be gained by the State in payment, and of how hard a bargain might be made with the corporation when compelled to sue for a favor. The latter were obliged to buy, and the government determined to sell at as high a price as practicable. The loan of one million six hundred thousand pounds, without interest, was required by the State, too frequently a hard task-master in its transactions with the corporation. It was effected by blending this sum with the previous loan of £1,600,000, at six per cent., and the united sum of £3,200,000 bore the diminished interest of three per cent. In compensation, the exclusive banking privileges were renewed till August, 1764. By this act "per- sons forging, counterfeiting, or altering any bank note, bill of exchange, dividend warrant, or any bond or obligation under the bank seal, shall suffer death :" and also, " the company's servants, breaking their trust to the company, shall suffer death." Another danger arose with the times. Since the run on the bankers, when the States' admiral swept our commerce from the Thames, and menaced our strongholds, London had been free from the danger of in- vasion. The rebellion of 1715 had been quelled with ease; but that which followed, in the memorable year of 1745, was impressive from its * Walpole resigned the seals of office February 11th, (died 18th March, 1745, gaed 68.) Rebellion of 11 '45 — Popularity of the Chevalier. 85 picturesque features, while it was dangerous only from the paralytic fear which seized the nation. It has ever been a feature in the history of the bank, that, although not, strictly speaking, a government establishment, it has always been a point of attack for the political rabble in times of tu- mult ; while, during crises which should only affect the State, doubts have been thrown on its credit, and senseless clamor made for its gold. That which is now to be related was one of the most important periods of its career. The relation may be considered prolix ; but a mere an- nouncement that, in the year 1V45,* a great demand for gold occurred, would be as uninstructive as uninteresting. The adventurous daring which occasioned it, the panic which seized peer as well as peasant, the moral and the mental features of the period, are all necessary to explain why the directors of the Bank of England were compelled to have re- course to stratagem to meet the demands made upon their specie. The expedition of Charles Edward was as romantic as it was remark- able. Landing in the wilds of Moidart, attended by only seven devoted gentlemen, he succeeded in striking a terror throughout England. The prize for which he struck was a kingdom. The spirit with which he contended was worthy the prize. His march was one scene of triumph. From highland to lowland, from barren height and fertile vale, he gath- ered strength, until, with a solitary guinea in his pocket, the gallant ad- venturer entered the fair city of Perth. From Perth he passed on to the capital of Scotland ; and the old walls of Holyrood, the antique palace of the Scottish monarchs, resounded once more with the sounds of joy. The lofty loyalty of the people of Scotland responded to the claims of the unfortunate house, and the tartan of the clan Stuart waved a joyous welcome from street and square of the city of palaces. The person of the Pretender, his chivalrous adventure, his princely bearing, won him "gold- en opinions." Men fought for him. Women embraced him. At Doune some Scottish lasses kissed his hand ; and one, with the romantic enthusiasm of girlhood, begged permission to kiss the royal lips. The favor was graciously granted by the young chevalier, who, taking the loyal lady in his arms, " kissed her blushing face from ear to ear," to the great vexation, adds Chambers, of the other ladies who had been con- tented with a less liberal allowance of his princely grace. These things are related because they prove the great devotion evinced throughout Scotland, and explain why, with a mere handful of men, Charles Ed- ward had, even then, struck a panic into the commercial heart of Eng- land. When, therefore, Carlisle had capitulated, when Penrith was in- vested, and Manchester,. with its thirty thousand inhabitants, " was taken by a sergeant, a drummer, and a girl," the English were seized with dismay. London expected, in two or three days, to witness the triumphant en- try of the rebel army, the seizure of her treasure, and the plunder of her citizens. The adherents of the young adventurer had printed his decla- jation to the people of Great Britain, and throughout the capital, in the highways and byways, in the streets of the town, in the dwellings of its inhabitants, were these declarations mysteriously spread. Men found * Bank of England post-billa were this year in part paid in gold. 86 History of the Bank of England. them in their houses ; they were placed under their doorways ; they penetrated the sanctuary of their homes. It was a time of great rejoicing for the stanch Jacobite. It was a period of dread for the loyal and peaceable citizen. Consternation obtained throughout the capital. The Duke of Newcastle, Secretary of State for the War Department, whose name was said, by Sir Robert Walpole, to be perfidy, shut himself in his closet for three days to decide on his conduct, uncertain whether he should support his monarch or declare for the prince. The first Catholic peer of the realm was ready to join the invader. The inhabitants fled to the country with their most precious effects. The ting caused his valu- ables to be removed to a yacht by the Tower, and was prepared to effect an escape. A proclamation was issued for a general fast. A run com- menced upon the bank, for which the directors were not prepared ; and there appeared every prospect of its destruction. The funds fell ; the quotations -of the day do not show so great a decline as might have been expected ; but the probability is that they were but nominal. The second article of the manifesto issued by the Pretender stated, that though the national debt " was contracted under an unlawful gov- ernment, and was a most heavy load unto the nation, yet his father would take the advice of his Parliament." This was deemed small comfort for the fundholders, who placed no faith in the honesty of a Senate, called upon to act in a period of convulsion, under an arbitrary Stuart. The sins of the sire were visited upon the children. The seizure of the money in the mint by the first Charles, and the shutting up the ex- chequer by his dissolute son, were remembered to the injury of their descendant. But more alarming news was in store for the citizens. The town of Derby, only one hundred and twenty miles from the capital, was occu- pied by the rebels. The magistrates had fled in terror. London, with all her treasure, was temptingly exposed. The alarm of the citizens magnified the reports, and the reports increased in proportion to the alarm. During the whole of one day passed in Derby, the Highlanders fought for precedency in getting their claymores sharpened at the shops of the cutlers. The habitants of London looked on the rebels as wild men, coming from the depths of interminable forests, where they dwelt in caverns, and lived on human flesh. Mothers wept over their children ; and substantial traders exaggerated the alarm that spread throughout the shops and the counting-houses of the great city. With these prospects the merchants outvied each other in liberal subscriptions, which, while they were recorded as the fruits of loyalty, were really the offspring of fear. The day on which the news arrived that the rebels were at Derby, was known in London as black Friday. The gates of the city were shut. The train-bands were placed on duty night and day. The guards were ordered out. The Tower was closed before its time. The shops were unopened ; and no business was done excepting at the bank. Many of the inhabitants collected their valuables, and fled from the country. The Stuarts had always been partial to obtaining money by the strong hand, and Charles Edward had imitated the profitable example. The Lon- doners had heard of £5,000 raised in Glasgow ; of heavy contributions Artifice of the Bank. 87 levied in Manchester ; of £2,500 procured in Derby, with minor sums in other places ; and they watched, with almost breathless interest, the advance of the Pretender, in full expectation of similar results. The effect upon the national bank was as usual. Its interests were in- volved in those of the State ; and the creditors flocked in crowds to ob- tain payment for their notes. The directors, unprepared for such a casualty, (who could have foreseen that a few thousand men would over- run half England 1) had recourse to a justifiable artifice. The Chevalier Johnston, whose evidence was collected immediately after the battle of Culloden, says, that the bank only escaped bankruptcy by a stratagem. Payment was not refused ; but the corporation retained its specie, by employing agents to enter with notes, who, to gain time, were paid in sixpences ; and as those who came first were entitled to priority of pay- ment, the agents went out at one door with the specie they had received, and brought it back by another, so that the bona fide holders of notes could never get near enough to present them. " By this artifice," says the Chevalier, somewhat quaintly, "the bank preserved its credit, and literally faced its creditors." The wisdom of the artifice was witnessed in its effect. The London merchants, with honorable promptitude, called a meeting of their body at Gakhaway's coffee-house. They expressed their confidence in the bank corporation, and agreed to receive its notes in payment. The following was their resolution, and deserves to be re- corded : " We, the undersigned, merchants and others, being sensible how necessary the preservation of public credit is at this time, do hereby de- clare that we will not refuse to receive bank notes in payment of any sum of money to be paid to us ; and we will use our utmost endeavors to make our payments in the same manner. " 26th Sept., 1745." The feeling which dictated this resolution was very general, as, by four o'clock in the afternoon, it was signed by one thousand one hundred and forty merchants, large traders and proprietors of the public funds. His- tory records the retreat of the young Pretender from Derby, the news of which stopped the run, and brought confidence to the homes of the citizens. The policy of Charles Edward has been questioned. Doubt- less a march upon the capital would have been worthy the noble prize for which he contended ; and it is the opinion of many that he must have been successful. This might have been the case ; but it is scarcely probable that the religion which gave William the English crown would have submitted once more to the despotic sway of a Stuart ; and still less is it to be imagined that the Stuart would have forgotten those dreams of absolute power which had driven him from the throne, and still lingered with him in the mock monarchy of St. Germain's. It must have been another period of fear and dread to the supporters of the bank. Had Charles Edward reached the capital, a levy on it would have been his first act; and that levy would have been in proportion to his own power, the hatred which he bore it for supporting the revolution, and the rapacity of the exiled house. The danger passed away with the crisis. The adventurer lost his only chance of a crown, and commenced a dis- 88 History of the Bank of England. astrous retreat, which was closed by his escape from Scotland. Confi- dence was once more restored. The shops were re-opened. The citizens grew suddenly brave. The courtiers grew doubly loyal. The vigor of the people returned, and London was a scene of rejoicing._ Commerce resumed its pristine strength ; and the only memorials which remained of the past panic were to be found in the punishment of those misguided men who, under a sense of duty, had supported the scion of their ancient monarchical race. The particulars which led to this panic have been fully recounted ; for it is the last instance of a run occasioned solely by the fear of invasion ; and the last time that Englishmen lost faith in their political institutions, or sought to empty their bankers' coffers from fear of foreign or domestic warfare. The following anecdote, given by Mr. Ireland, who says he received it from an authority not to be doubted, is, if true, curiously illustrative of the evil spirit which, only a century ago, influenced public bodies. It is probably a partial statement. " It is well known that, in the year 1745, on account of the domestic confusion which .prevailed in the northern part of this island, bank notes were at a considerable discount. The notes, however, which were issued by Child's house, as well as those of Hoake & Co., still maintained their credit, and were circulated at par. The bank directors, alarmed at the depreciation of their paper, and attributing it to the high estimation in which the house of Messrs. Child still remained, attempted, by very unfair artifices, to ruin their reputation. This plan they endeavored to accomplish by collecting a very large quantity of their notes, and pouring them in all together for payment on the same day. Before the project was executed, the Duchess of Marlborough, who had received some inti- mation of it, imparted the information to Mr. Child, and supplied him with a sum of money more than sufficient to answer the amplest demand that could be made upon them. In consequence of this scheme, the notes were sent by the bank, and were paid in their own paper ; a cir- cumstance which occasioned considerable loss to that corporation, their paper being circulated considerably below par. Perhaps this anecdote will be confirmed by the well-known circumstance of the hostility of her Grace to the administrators of that trust." The precision with which this account is given, must be accepted as a reason for its insertion. It is, however, most difficult of belief, that any body of honorable men would act so disgraceful a part. The story has, in all probability, arisen out of some financial operation, the object of which was perverted by the oppo- nents of the bank, because it was beyond their comprehension. The rebellion was scarcely over when the government were compelled to apply once more for assistance. The cost of the war, which had been fiercely contested with France, in order to preserve the integrity of the Hanoverian Electorate, together with the expenses attending the invasion, had pressed heavily on the resources of the State. The ministers endeavored to meet their difficulties by opening a public subscription, in 1746 ; but the moneyed interest did not respond. The great support given to the credit of the bank by the mercantile commu- nity had been thoroughly successful, and the company were enabled to Reduction of Interest. 89 offer that assistance, which the State found it difficult otherwise to procure. One million was advanced to government at four per cent, interest ; and the court of proprietors authorized the directors to draw up proposals for converting £986,000, held by them in exchequer bills, into an annuity, at four cent. ; and for creating new stock to the same amount. The pro- posal was accepted, and an act passed to authorize it. A call of ten per cent, was made upon the proprietary, and the bank capital increased to £10,780,000. Even at this late period, some of the proprietors neglected to answer the call, and the directors sold a sufficient amount of their stock (about £12,000) to produce the required sura. In 1746, the capital, on which the 1 bank stock proprietors divided, amounted to £10,780,000. In a little more than half a century it had been more than octupled, so great had been the prosperity of the cor- poration. The dividends had varied with the success ; and though at one period ten and a half per cent, for the half-year was paid, the average amount was greatly below this; and, in 1746, the half-yearly dividend had fallen to two and three-quarters. The value of money, also, which had been so enormous previous to the new establishment, had been re- duced considerably. At first, the rate of discount was from four and a half to six per cent., and a less amount was charged to those who kept accounts with the bank ; inland bills being discounted for them at four and a half, and foreign bills at three per cent. ; while six per cent, was charged for bills of all kinds to other persons. The rates of discount were afterwards equalized, and varied from four to five per cent, till 1775, when the latter sum was fixed upon, at which it remained till 1822. This reduced value of money was advantageously experienced by government receiving the same benefit in 1745 for three per cent., for which, before 1690, they had paid twenty-five to thirty per cent. It has not been con- sidered necessary to detail on each occasion the rise or fall of the divi- dends, given to the proprietary, as a clearer and more comprehensive view may be obtained in the appendix. Another reduction of the interest on the national debt was effected in 1750;* a meeting of the corporation was called at Merchant Tailors' Hall, at which the proposals of the ministry were acceded to, and three instead of four per cent, agreed to be received on £8,486,800 of the government debt. In addition, the company consented to advance a sufficient amount to pay off the dissentients ; and to raise this they estab- lished a "bank circulation." As the amount to be required was uncer- tain, books were opened to the public, and any individual was allowed to enter the sum he proposed to lend, in case it should be called for. When the books were closed, the bank had the power of calling for all or any part of the sum so subscribed. Two shillings per cent, was to be paid on the amount proposed, and four pounds per cent, on the sum advanced. The payment required by government for those who did not consent to the reduction, amounted to £1,190,041. For this sum, exchequer bills, bearing interest at £3 per cent., were received in exchange. * The failure of the Bank of Genoa was announced this year. The manufacture of carpets in England was commenced by some French artisans. The semi-annual dividends of the bank this year were 2^ per cent, each, the stock selling at 131 to 136. 90 History of the Bank of England. The course of this history will not record the many transactions in which the bank have been concerned for government in the creation of stock The year 1752, in which the foundation of the present "three per cent, consols" was laid, is, however, sufficiently interesting to attract attention. This stock was thus termed from the balance of some annuities, granted by George I., being consolidated into one fund with a three per cent, stock, formed in 1731. The amount of this security at the present time is upwards of 360 millions, to so large a superstructure has it grown from a small foundation. The same observation will also apply to the year 1757, when the stock, which had borne four per_ cent, interest till 1750, and from that period paid three and a half, was reduced to three per cent. ; from this operation the name of the " three per cents reduced" is derived. This stock is much smaller than the former, as it amounts to little more than £123,500,000. A correspondent of the " Gentleman's Magazine" gives the following particulars of the external appearance of the bank in 1757. "When I came to London, and lived near it, it was comparatively a small structure, almost invisible to passers by, being surrounded by many others, viz., a church called St. Christopher le Stocks, since pulled down ; three taverns, two on the south side, one (the Fountain) in Bartholomew Lane, facing the church there, just where the great door of entrance is now placed, and about fifteen or twenty private dwelling-houses. Visitors are sometimes shown in the bullion office the identical old chest, somewhat larger than a common seaman's, also the original shelves or cases, where the cash, notes, papers and books of business* were kept ; and well are they pre- served, as pregnant vouchers no less of the bank's pristine simplicity and confined exertions, than of the amazing rapidity of its modern extension, and almost boundless accommodation of the moneyed interest and com- mercial world." * Our draper now became famous for his extraordinary command of money, and his correspondence extended as far as Preston, in Lancashire. The profits thus arising seemed boundless, and the next step was taken by our adventurous shopkeeper : he allowed a small interest to his friends, the depositors. The new business flourished to such an extent that it swallowed up the old one, and our draper at length became a hanker proper, and no more a shopkeeper. Such was the origin of the Smiths. First confined to the town of Nottingham, afterwards extended to Hull and Lincoln, the business of the firm required a Lon- don correspondent entirely in their interest, and such they found in the late Mr. Payne. And thus was founded the well-known firm of Smith, Payne & Smith, whose prosperous career it is not our business to follow. The increase of banks throughout the country was actively encouraged by the private bankers of London, and indeed the existence of a great national bank like that of the Bank of England naturally assisted the creation of smaller establish- ments. In all those places, the trade of which has been sufficient to encourage a plurality of banks, it has been found that the competition has contributed to the public ac- commodation, there being in all large manufacturing and commercial towns rival firms, whose financial operations could not, with propriety, be intrusted to the same house. " It is not by augmenting the capital of the country, but by rendering a great part of that capital more active and productive than it would otherwise be, that the most judicious operations of banking can increase the industry of the country. That part of his capital, which a dealer is obliged to keep by him unemployed and in ready money, for answering occasional demands, is so much dead stock, which so long as it remains in this situation, produces nothing either to him or to the coun- try." — Lawson's History of Banking. The First Forged Note. 91 CHAPTER X. THE FIRST FORGED NOTE LEGAL DECISION — ISSUE OF NOTE3— NEW CHARTER — GREAT PANIC AND FAILURE OF BANKERS IN 1772 — THE GORDON RIOTS — CONFUSION OF THE TEOPLE — SUSPENSION OF TRADE IN THE CITY ATTACK ON THE BANK — ITS REPULSE — BEHAVIOR OF WILKES EXTRAORDINARY SERIES OF FORGERIES — DETECTION OF THE FORGER HIS FATE — MORLAND THE PAINTER — LIBERALITY OF THE DIRECTORS. The day on which a forged note was first presented at the Bank of England forms a memorable era in its history. For sixty-four years the establishment had circulated its paper with freedom ; and during this period no attempt had been made to imitate it. He who takes the ini- tiative in a new line of wrong-doing, has more than the simple act to answer for ; and to Richard William Vaughan, a Stafford linen-draper, belongs the melancholy celebrity of having led the van in this new phase of crime, in the year 1758.* The records of his life do not show want, beggary, or starvation urging him, but a simple desire to seem greater than he was. By one of the artists employed, and there were several engaged on different parts of the notes, the discovery was made. The criminal 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 calculating how much longer bank 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 the 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 forger, tended to excite that morbid sympathy which, up to the present day, is evinced for any extraordinary criminal. It is, therefore, possible, that if Vaughan had not been induced by cir- cumstances 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 year was also memorable for a judgment passed by the Lord Chief-Justice, in connection with some notes which were stolen from one of the mails. The robber, after stopping the coach and taking out all the money contained in the letters, went boldly to a Mr. Miller, at the Hatfield post-office, who unhesitatingly exchanged one of them. Here he ordered a post-chaise with four horses, and at several stages passed off the remainder. They were, however, stopped at the bank, and an action was brought by the possessor to recover the money. The question was an important one ; and it was decided by the law authorities, " That any person paying a valuable consideration for a bank note, payable to bearer, * "Vaughan was executed for this crime. 92 History of the Bank of England. in a fair course of business, has an undoubted right to recover the money of the bank." The action was maintained upon the plea that the figure 11, denoting the date, had been converted by the robber to a 4. In 1759,* bank notes, to a smaller amount than £20, were first circu- lated; and the directors commenced issues of £15 and £10, to meet the necessity experienced by the community. In January, lY64,f the charter, granted to the bank in 1745, had nearly expired, and the question of its renewal was again agitated. The cus- tomary process of extension, that process which has procured a good price from the corporation for all the favors granted, was once more under consideration. The terms on which government consented to place the exclusive power of the bank again in its possession, were suf- ficiently onerous. By this agreement the directors were to advance cash for exchequer bills to the amount of one million, at three per cent, in- terest, till the year 1766, when the bills were to be discharged. They were also to pay £110,000, and for this they were to receive neither in- terest nor repayment. In consideration of these sums they were to con- tinue a body corporate, with all their advantages, till the redemption of the debt, due to them by government, and one year's notice, from the first of August, 1786. By the same act it was made felony, without benefit of clergy, to forge powers of attorney or other authorities, for re- ceiving dividends, transferring or selling stock, or for personating the proprietors of any stock, for such purpose. The falling in of the bank charter at this period was a piece of great good fortune to the government. A successful but costly war had pressed upon the nation. During this contest important islands had been con- quered ; great battles gained ; forts, castles and fortified cities had yielded to our prowess. Twelve millions had been acquired in plunder, and cap- tured standards were borne in triumph to St. Paul's, amid the shouts of assembled multitudes. The navy of France was annihilated. Spain loathed a contest which produced only reverses. Portugal was anxious for peace. The fall of the French colonies was consummated at Martin- ique. The empire of the East had been wrested from French sway, and conquests, rivalling those of the "great captain," accomplished by a youth bred to a writing-desk. France was exhausted. The treasury of the " great nation" was empty. The plate of "the most Christian king" was converted into money ; and England triumphed in a treaty which consolidated her strength ; which gave her a great pre-eminence among the nations ; which added to her name a splendor she has since retained, and which the confidence of her ministry in the resources of the country, and the assistance of the Bank of England, greatly tended to produce. The expenses pressed heavily upon the people. A loan, therefore, of £3,000,000, with an absolute gift of £110,000, were no unimportant ad- * Further indications of prosperity existed this year in the establishment of thread and gauze manufactures at Paisley. Arkwkight's first patented spinning- frame was made known. Improvements were also made in the stocking-loom The national debt at this time was £78,000,000. f The first stamp act for America was this year introduced by Geenvillb and passed March 22, 1765. Alarming Panic. 93 dition to those sources, which had been drained by the glorious and suc- cessful seven years' war. A new crime was discovered in 1161. The notice of the clerks at the bank had been attracted by the habit of William Guest, a teller, pick- ing new from old guineas, without assigning any reason. An indefinite suspicion, increased by the knowledge that an ingot of gold had been seen in Guest's possession, was attracted ; and although he asserted that it came from Holland, it was remarked to be very unlike the regular bars of gold, and that it had a considerable quantity of copper on the back. Attention being thus drawn to the behavior of Guest, he was observed to hand one Kichard Still some guineas, which he took from a private drawer, and placed with the others on the table. Still was instantly followed, and on the examination of his money, three of the guineas in his possession were deficient in weight. An inquiry was immediately in- stituted, and forty of the guineas in the charge of Guest looked fresher than the others upon the edges, and weighed much less than the legiti- mate amount. On searching his home, four pounds eleven ounces of gold filings were found, with some instruments, calculated to produce ar- tificial edges. Proofs soon multiplied, and the prisoner was found guilty. The instrument with which he had effected his fraud, of which one of the witnesses asserted it was the greatest improvement he had ever seen, is said to be yet in the mint, a memento of the prisoner's capacity and crime. In June, 1112, one of those panics occurred with which London is un- happily so familiar. On the 10th of the month, Neale and Co., bank- ers in Threadneedle-street, stopped payment. Other failures resulted in consequence ; and throughout the city there was a general consternation. The timely interposition of the bank, and the generous assistance of the merchants, prevented many of the expected stoppages, and trade appeared restored to its former security. It was, however, only an appearance ; for, on Monday, the 22d of the same month, may be read, in a contemporary authority, a description of the prevailing agitation, which forcibly reminds us of a few years ago. " It is beyond the power of words to describe the general consternation of the metropolis at this instant. No event for fifty years has been remembered to give so fatal a blow to trade and public credit. An universal bankruptcy was expected. The stoppage of almost every banker's house in London was looked for. The whole city was in an uproar. Many of the first families were in tears. This melancholy scene began with a rumor that one of the greatest bankers in London had stopped ; which afterwards proved true. A report at the same time was propagated that an immediate stop of the greatest must take place. Happily this proved groundless ; the principal merchants assembled, and means were concerted to revive trade and preserve the national credit." The resumption of payment by many houses, at first compelled to bend before the storm, is in singular contrast with the following event, which took place in France three years previously. The extract is from the " Gentleman's Magazine." " A considerable banker at Paris, having a draft brought to him from a public office in that city for a large sum, which he could not answer, after cramming down the draft into a loaded pistol, called to the gentleman who brought it, and telling him, ' This, 1 94 History of the Bank of England. Sir, is the way that persons -who have no money pay bills that are due,' instantly clapped the pistol to his ear, and shot himself dead." Although the crisis had passed in- England, the spirit of " launching into rash and boundless projects in commerce," says Macpherson, " which were to be supplied by artificial credit, and the madness of towering speculation in the public funds, spread all over Europe. The evil, which had reached its height in England in 1112* burst out on the Continent in the end of that, and the beginning of the following year, with such an extensive crash, that there seemed to be an universal wreck of credit throughout Europe, to the amount of ten millions sterling. In this time of general distress, a happy mixture of generosity and prudence in most leading nations, though without any previous concert, averted many of the fatal consequences, and prevented the mischief from spreading. The Dutch merchants, where the evil was greatest, acted with their usual com- mercial wisdom. The bank of Stockholm gave support to every house of real responsibility; and the Empress of Eussia gave credit to the Brit- ish merchants at Petersburgh, by giving them a credit on her own banker, for such sums as they needed." The cloud soon passed away for the sunshine, and commercial faith took the place of commercial distrust. It is worthy of notice that the circumstances to which allusion has been made, were the first instances of the failures of bankers in London; and this may excite wonder when it is seen, by the following extract from " Anderson's History of Commerce," that firms often traded upon capital somewhat incommensurate with the importance of their transactions. "At the breaking up and dividing the profits of an eminent partnership, many years ago, of a private city banking-house, which for many years had divided a profit of several thousands, on valuing all the real stock of the partnership, the whole did not amount to above three or four hun- dred pounds, consisting entirely of shop instruments and furniture." In this year, an action, interesting to the public, was brought against the bank. It appeared from the evidence that some stock stood in the joint names of a man and his wife; and, by the rules of the corporation, the signatures of both were required before it could be transferred. To this the husband objected; and claimed the right of selling without his wife's signature or consent in any form. The Court of King's Bench de- cided in favor of the plaintiff, with full costs of suit ; Lord Mansfield de- claring that " it was highly cruel and oppressive to withhold from the husband his right of transferring." The words italicized were unnecessary. One object of the bank is the attainment of the public good. It is, how- ever, a prejudice which attaches itself to juries — and sometimes even to judges — to view with jaundiced eyes the proceedings of large corpora- tions ; and for this reason the verdicts occasionally given are only com- patible with a very small reasoning power, or a very extensive vindictive feeling. In l7*73,f an act was passed making it death to copy the water-mark * Among the events of the year were, the first manufacture of calico, in Lan- cashire ; the use of passage boats on the Bridgewater Canal, and the establishment of Lloyd's Coffee House, London. f The exportation of cotton machinery was this year prohibited. The Company of British Plate Glass Manufacturers was established at Eavenhead, Lancashire. Preservation of Credit — The Gordon Riots. 95 of the bank note paper ; and, in order to prevent imitation, it was enacted that no person should prepare any engraved bill or promissory note con- taining the words "Bank of England," or "Bank post-bill," or express- ing any sum in white letters on black ground in resemblance of " bank paper," under the penalty of imprisonment for six months. By an act, passed in 1775, notes of a less amount than twenty shillings were prohib- ited; and two years afterwards, by the 1 7th George III., the amount was limited to £5.* . On Friday, the 2d of June, 1780, commenced those riots which form so disgraceful a portion of the English history, and which, had it not been for the resolute daring of the London citizens, might have been fatal to the bank. On that day, a large body of men, calling themselves the " Protestant Association," headed by Lord George Gordon, a no- bleman whom some termed a fanatic, and others a fool, but who was, in truth, a mixture of both, with the great merit of being in earnest, assem- bled, about half-past two, before the Houses of Parliament, to make a demonstration against a bill in favor of Catholicism, then in progress, and to present a petition against it. After uttering a loud shout, more expressive of animal strength than moral power, the arbitrary authority of an excited populace was exercised. They obliged the members of both Houses to put blue cockades in their hats, and to call out " No Popery." Some were compelled to take whatever oaths they chose to administer, and some were personally abused in the full insolence of un- checked power. Twice they attempted to force an entrance into the Senate House. The Archbishop of York was saluted with hisses, groans and hootings. Lord Bathurst was kicked and Lord Mansfield buf- feted. The watch of the Duke of Northumberland was stolen by this " No Popery" immaculate mob. The gown of the Bishop of Lichfield was torn off, and the Bishop of Lincoln was compelled to escape in dis- guise. Lords Townshend and Hillsborough were sent into Parliament without those important appendages of gentlemen, their bags, while their hair, hanging loosely in unpicturesque disorder on their shoulders, con- veyed a vivid picture to the assembled Senate of the " majesty of the people." The coach of Lord Stormont was destroyed, and his lordship only saved from personal damage by the appeal of a gentleman, who harangued the mob into temporary good humor. Lord Boston was so long in the power of the populace, that the peers, with some remnant of that chivalric feeling which bade one knight couch his lance against a multitude, proposed to sally forth to the rescue, and were only prevented by his lordship's timely escape from the rudeness of the rioters. The mob, after finding their favorite petition rejected by the large majority of 192 to 6, dispersed to various quarters of the town, where they effected all the mischief compatible with an absence of danger. The following day, Saturday, was comparatively quiet; but on Sun- day, acting upon the proverb, " the better the day the better the deed," the crowd gave vent to an ignorant fanaticism, by destroying the chap- * The two brothers Perreau were executed for forgery in 1776. Br. Dodd waa executed Jane 27, 1777, for the same offence. In 1777 the Mont de Pi&e, at Paris, was established. 96 History of the Bank of England. els and homes of the Catholics. The insignia of the worshippers of the ancient faith was insulted, the pulpits destroyed, the missals burned, and the altars desecrated. Nor did they, in the purity of their Protestant- ism, forget to seize the images of silver and vessels of gold, which lay temptingly exposed to view. The military were inactive, and the magis- tracy ceased to be a terror to evil-doers. Scenes such as these ; the reports which, from time to time, greatly alarmed the directors of the bank ; the informati#n that large masses of men, uncontrolled save by their own passions, were destroying all that they approached, must have greatly affected the friends of the corpora- tion. The knowledge that the military were useless ; that there was no efficient power to protect their building ; that an application for a regi- ment would be futile ; and that, therefore, their defence must rest on their resources, greatly added to their responsibility. Monday saw tallow-chandlers' shops and Catholic chapels alike at- tacked. The organs of destruction were in active play, and their owners would not be disappointed. Tuesday witnessed the military out to pro- tect the senators ; but it also witnessed a peer of the realm wounded, his carriage demolished, and his life with difficulty saved. The cry soon arose, " to Newgate ;" and at six o'clock, street, square and lane saw ser- ried masses of fierce and desperate men rushing to the work of destruc- tion. It was a popular cry. Who, among that wild and violent crowd, did not hate and dread the very name ? The furniture of the governor was piled in a heap and burned. The building was fired, and the crimi- nals, made worse by their residence, were released to join their brethren in crime. From Tyburn to Whitehall the shops were shut ; business was suspended at all places, save the bank ; and the courts of law were abandoned. The houses of Sir John Fieldino and Justice Cox were destroyed. The children of the prime minister were taken from their beds and placed on the table of the horse-guards. Fragments of the Catholic chapels were borne in triumphal procession, and the detenus of the new prison were liberated. The elegant mansion of Lord Mansfield was consumed, and, with a barbaric contempt of literature, his library, the labor of a life, was thrown into the flames, while three hundred sol- diers stood calmly by and witnessed its destruction. As the day closed, a spectacle almost grand, save from its cause, was witnessed. From prison and from private building — from Catholic chapel and Catholic dwelling-house — in every quarter of the great metropolis — rolled clouds of smoke, from which pillars of fire arose with a sad and almost solemn sublimity. In one night the flames of six-and-thirty fires created a wild and fearful illumination. With such desolation and fury reigning unchecked, the Bank of Eng- land was sure to feel and pay for its importance. It is only to be at- tributed to the thoughtlessness of the mob, that this establishment was not attacked when the defence was insufficient for its protection. When the news came that the rioters, headed by a man on horseback, capari- soned with the trophies of Newgate, were on their way, the governor was absent; he soon reached his post, however, and preparations were made for their reception. The old inkstands were cast into bullets ; a strong force was placed The City after the Riots. 97 within, while the military awaited their arrival without the walls. The officers of the establishment were called upon to assist, and another force was placed on the roof, to fire upon the assailants if they entered. Every possible arrangement was made for the defence of a building, far more important to the credit of the country than any in the capital. If the mob could have penetrated through all this force, the loss would have been immense. But the citizens of London had formed a volunteer corps ; and with the military, who had shaken off their lethargy, distinguished themselves in defending the bank. When the rioters, fierce in the exer- cise of their mad passions, and fierce in the possession of uncontrolled power, saw the display made by the directors, their attacks were feebly conducted. It was one thing to destroy an unresisting Catholic gentle- man's property ; it was another to attack a body of resolute men. It was one thing to fire a prison, and another to receive the fire of disciplined soldiers. Wilkes is said, on this occasion, to have rushed out during the pauses which occurred in the attack, and dragged some of the ring- leaders from their fellow-rabble. A witness of the scene says, "When the ministers trembled and remained inactive ; when the magistrates durst not venture out of their houses, he was seen presenting himself before that unprincipled rabble, and braving death in order to preserve the bank, which they were about to pillage. Prayers, representations and threats he successfully made use of, and even carried his intrepidity so far as to seize some of the ringleaders. This bold and patriotic action, in such circumstances, restored to him the favor of his sovereign, who had borne him for twenty years a mortal hatred." It is added, that Wilkes received the thanks of the council for his conduct during the riots. The first fire of the military repulsed the mob ; their second at- tempt was unsuccessful ; nor did they hazard a third. Several were killed and many wounded in the skirmish. "Had the bank," says the Annual Register, "been the first object of their fury, there can be little doubt but that they would have succeed- ed ; and what the consequence would have been, let any rational mind figure to itself." It seems, indeed, little short of a miracle, that a place like the bank should have been so long relieved from attack. It was probably owing to a want of organization among the rioters ; for a leader, who failed to obtain possession of the sinews of war, must have been very unworthy the name. At any rate, it was a remarkable salvation of private property and public credit. But the most vivid representation of the danger which the Bank of England had happily escaped, is to be found in the following particu- lars of the appearance of the city after the riots. " The metropolis pre- sented in many places the image of a city recently stormed and sacked ; all business at an end ; houses and shops shut up ; the Boyal Exchange, public buildings and streets possessed and occupied by the troops ; smok- ing and burning ruins, with a dreadful void and silence, in scenes of the greatest hurry, noise and business." The cause of all this riot, the scion of the ducal house of Gordon, proved the durability of his love for Protest- antism, by professing the Hebrew faith ; his last hours embittered by the dread of his remains being interred in any other than the sepulchres of the ancient people of Israel. 98 History of the Bank of England. " Since the danger which the bank so happily escaped, a military force has been placed nightly in the interior of the establishment. A dinner is provided for the officer on guard and two friends. A snug, plain, excellent dinner it is," says Mr. Weir, in " Knight's Pictorial London," " brought daily from one of the best taverns in the neighborhood. The store which the guards set by this dinner, excellent though it be, speaks volumes for the ennui which broods over the period during which they are stationed at the Tower. Some time ago, a regiment of the line was marched into the Tower, and the battalion of guards withdrawn. All the other duties of the place were gladly and unreluctantly given up to the new comers, with the solitary exception of the inlying piquet at the bank. The duty might have been given up, but to relinquish the dinner was impossible. And, on this account, so long as the Tower remained denuded of the presence of the guards, the bank piquet regularly detailed from the far west end, duly and daily threaded the crowded Strand, passed under Temple Bar, jostled over Fleet-street, scrambled up Lud- gate Hill, rounded St. Paul's, and over Cheapside, erst the scene of tournaments, charged home to the Bank of England. The cynosure of attraction to the weary sub on duty — the magnet which drew him to encounter this long and toilsome march, and worse, the incarceration of four-and-twenty mortal hours within the walls of the bank, was not the ingots piled within these walls — his high spirit disdained them ; not the bright eye of city maid or dame, these must now be sought in the sub- urbs ; it was the substantial savory fare of the city — the genuine roast beef of Old England, and the city's ancient port, far surpassing the French cookery and French wine of St. James'." The proclamation of peace in 1783 was indirectly an expense to the bank, although hailed with enthusiasm by the populace. The war with America had assumed an aspect which, with all thinking men, crushed every hope of conquest. It was, therefore, amid a general shout of joy, that on Monday, 1st October, 1783, the ceremonial took place. A vast multitude attended, and the people were delighted with the suspension of war. The concourse was so great that Temple Bar was opened with difficulty, and the Lord Mayor's coachman was kept one hour before he was able to turn his vehicle. The bank only had reason to regret, or at least not to sympathize so freely, with the public joy. During the hurry attendant on the proclamation of the Royal Exchange, when it may be supposed the sound of the music and the noise of the trumpet occupied the attention of the clerk more than was beneficial for the interest of his employers, fourteen notes, of £50 each, were presented at the office, and cash paid for them. The next day they were found to be forged, and there was no mode of discovering the person who had defrauded the establishment. The losses occurring to the bank from forged notes and other fraudu- lent documents were commensurate with the greatness of its transactions. Many of these were mixed up with much of the romance of life ; the attempts of some were successful through great good fortune; others were detected at once ; while many, by their dexterity, either defied dis- covery or baffled the bank for years. It is one of the latter which will now be related. Constant references are made in the journals of the Attempts at Detection — Disguise of the Forger. 99 time to some unknown power which defrauded the Bant of England ; of some mysterious agent who laughed at precautions and escaped exposure; of new modes of robbery which, from time to time, startled alike both clerks and directors. Such is the story now to be related ; too dramatic for the stage, and too startling for an appearance of probability. Charles Price was one of those men whose whole abilities are em- ployed in defrauding. At the age of seventeen he left his home to seek a fortune, and threw himself on the world with the determination to live by it. He soon learned to play many parts ; now a comedian ; andnow a gentleman's servant. At one time a rogue, and the companion of rogues ; and then a fraudulent brewer or a fraudulent bankrupt. Great talent was employed in enormous crimes ; and great evil was the result. After trying his hand as lottery-office keeper, stock broker and gambler, he attained sufficient importance to grace a work entitled, "The Swin- dlers' Chronicle." From this the step was easy to the " Newgate Calen- dar," and he embarked in a bold, skilful and resolute career of fraud on the bank. His only confidant was his mistress. He practised engraving till he became proficient. He made his own ink. He manufactured his own paper. With a private press he worked his own notes, and he counterfeited the signatures of the cashiers, until the resemblance was complete. Master of all that could successfully deceive, he defied alike fortune and the bank directors ; and even these operations in his own house were transacted in a disguise sufficient to baffle the most pene- trating. About the year 1Y80,* a note was brought to the bank for payment. So complete were all its parts, so masterly the engraving, so correct the signatures, so skilful the water-mark, that it was promptly paid ; and only discovered to be a forgery when it reached a particular department. From that period forged paper continued to be presented, especially at the time of lottery drawing. Consultations were held with the police. Plans were laid to insure detection. Every effort was made to trace the forger. Clarke, the Forrester of his day, went, like a sluth-hound, on the track ; for in those days the expressive word " blood-money" was known. Up to a certain point there was little difficulty ; but beyond this the most consummate art defied the ingenuity of the officer. In whatever way the notes came, the train of discovery always paused at the lottery-offices. Advertisements offering large rewards were circulated ; but the unknown forger baffled detection, at the expense of the corpo- ration. Among other advertisements in the "Daily Advertiser," in 1780, might be seen one for a servant ; to which an answer was sent by a young man, in the employment of a musical instrument-maker, who, some time after, was called upon by a coachman, and informed that the advertiser was waiting in a coach to see the candidate for the situation. The young man went, and was desired to enter the conveyance, where he saw a per- son with something of the appearance of a foreigner, sixty or seventy years old, apparently troubled with the gout, as some yards of flannel * A lottery this year was granted to raise £12,000,000. The exportation of woollen goods from Ireland was this year permitted. 100 History of the Bank of England. were wrapped around his legs. A camlet snrtout was buttoned round his mouth ; a large patch placed over his left eye ; and nearly every part of his face was concealed. He affected much infirmity, and a faint hectic cough ; and invariably presented the patched side to the view of the servant. After some conversation, in the course of which he represented himself as guardian to a young nobleman of great fortune, the interview concluded with the engagement of the applicant, and the new servant was directed to call on Mr. Brank — the name by which he designated himself — at 29 Titchfield-street, Oxford-street. At this interview Brank inveighed against his whimsical ward for his love of speculating in lottery-tickets, and told the servant that his princi- pal duty would be to purchase them. After one or two meetings, at each of which Brank kept his face muffled, he handed a £40 and £20 bank note ; told the servant to be very careful not to lose them ; and directed him to buy lottery-tickets at separate offices. The young man went, fulfilled his instructions, and at the moment he was returning, was suddenly called by his employer from the other side of the street, con- gratulated on his rapidity, and then told to go to various offices in the neighborhood of the Royal Exchange, and purchase more shares. To do this, £400 in Bank of England notes were handed him, and the wishes of the mysterious Mr. Brank were satisfactorily effected. These scenes were continually enacted. Notes to a large amount were thus circulated ; lottery-tickets purchased ; and Mr. Brank, always in a coach, with his face studiously concealed, ready on the spot to receive them. The sur- prise of the servant was somewhat excited ; but had he known that from the period he left his master to purchase the tickets, one female figure accompanied all his movements ; that when he entered the offices, it waited at the door, peered cautiously in at the window, hovered around him like a second shadow, watched him carefully, and never left him until once more he was in the company of his employer, that surprise would have been greatly increased. Again and again were these extraordinary scenes rehearsed ; again and again were lottery-tickets procured ; and again and again was the ser- vant allowed only to see the patched side of his master's face. At last the bank obtained a clue, and the servant was taken into custody, his simple statement disregarded, and his person incarcerated. The direct- ors imagined that at last they had secured the actor in so many parts ; that the flood of forged notes which had inundated the establishment would cease. Their hopes proved fallacious, and it was found that "old Patch" had been sufficiently clever to baffle the bank directors. The house in Titchfield-street was searched ; but Mr. Brank had deserted it. The servant was discharged from custody, with a present of £20 ; the advertisements re-appeared ; rewards were again freely offered ; but in vain. The extraordinary Mr. Brank remained as inaccessible as ever, and the forgeries, as usual, became more plentiful about the period of the lotteries. But the mind of this man — a master in the art of crime — invented a new method of fraud. In 1785 the public prints report the following : " On the 17th of December £10 was paid into the bank, for which the clerk, as usual, gave a ticket to receive a bank note of equal value. This Morland, the Painter. 101 ticket ought to have been carried immediately to the cashier ; instead of which, the bearer took it home, and curiously added an to the original sum, and, returning, presented it, so altered, to the cashier, for which he received a note of £100. In the evening, the clerks found a deficiency in the accounts, and, on examining the tickets of the day, not only that, but two others, were discovered to have been obtained in the same man- ner. In the one, the figure 1 was altered to 4, and in another, to 5 ; by which the artist received, upon the whole, near £1,000." The contriver of this ingenious fraud proved to be the same individual who had so long baffled the police ; but in a short time his career was closed. One of the notes, given in pledge for costly articles of plate, with which he graced expensive entertainments, was traced to the silversmith, and, after innumerable names, innumerable lodgings, and innumerable disguises, the end of Charles Peice was fast approaching. With great ingenuity he procured the destruction of his implements, through the agency of his mistress, notwithstanding the acuteness of the police. The as- surance of this man, in the safety of his transformations, had been complete. It has been said that his accomplice in crime watched the person he employed, while Prtce was waiting close to the spot. Had any sus- picious appearance occurred at the lottery-office, she would immediately have given a signal to Price, who would have torn off his dress as old Patch, and appeared in his own character. He seems to have been thoroughly known as " Patch," (from the covering over his eye,) but his identity with Price, the lottery-office keeper and stock-jobber, was not suspected. His end was worthy his life. He employed his son to pro- cure the necessary implements of destruction, and, on the following morning, he was found hanging. A jury sat upon the body — on which the old barbaric custom was enacted — and midnight witnessed the lonely cross-road receive the remains of the forger. The desire of the directors to discover the makers of forged notes pro- duced a considerable amount of anxiety to one whose name is indelibly associated with British art. George Morland — a name rarely men- tioned but with feelings of admiration and regret — had, in his eagerness to avoid incarceration for debt, retired to an obscure hiding-place, in the suburbs of London. The description of Allan Cunningham is vivid. " On one occasion," says this biographer, " he hid himself in Hackney, where his anxious looks and secluded manner of life induced some of his charitable neighbors to believe him a maker of forged notes. The di- rectors of the bank despatched two of their most dexterous emissaries to inquire, reconnoitre, search and seize. The men arrived, and began to draw lines of circumvallation round the painter's retreat. He was not, however, to be surprised; mistaking those agents of evil mien for bailiffs, he escaped from behind as they approached in front, fled into Hoxton, and never halted till he had hid himself in London. Nothing was found to justify suspicion ; and when Mrs. Morland, who was his companion in this retreat, told them who her husband was, and showed them some unfinished pictures, they made such a report at the bank, that the directors presented him with a couple of bank notes of twenty pounds each, by way of compensation for the alarm they had given him." 102 History of the Bank of England. CHAPTER XI. LEGAL OPINION — ABOLITION OF TALLIES — FORGERY — EXTENSION OF THE CHARTER OPIN- IONS OF LORD NORTH INCREASE OF CAPITAL LEGAL DECISION CONCERNING FORGED NOTES — STAMP DUTIES — NATIONAL DEBT — CURIOUS ANECDOTES — FRAUD AND FORGERT UNCLAIMED DIVIDENDS — DISTRESS OF 1793 — ISSUE OF EXCHEQUER BILLS — LOYALTY. LOAN. Up to the year 1780, bank stock was transferred to legatees -without the interposition of executors. The opinion of Lord Eldon seems unde- cided as to the justice of altering this arrangement. " I have always doubted," he said, " whether the legislature, who meant to give a pecu- liar value to stock in the life of the party, did not also mean that he should have the power of devising it ; and that it should go to the devi- see, not through the executor or administrator, but by the effect of the devise ; and that it should go to the executor or administrator only in fault of the devise directed by the statute." It is now settled that it passes to the executor, the assent of whom is necessary before the lega- tee can receive. In 1783 an act was passed which arranged for the abolition of tallies. The word has been so often used, that the following description may not prove uninteresting : "A tally is a cleft piece of wood, used to score an account upon by notches, and was given at the exchequer to those who pay money there upon loans. Another part was called the counterfoil, or counter-stock, and was kept by an officer of the exchequer. The first contractors were authorized to transfer their interest by endorsements on these tallies, and the endorsements were entered in the bank books. The entries in the books were only to inform the government to whom the dividends were payable, the right of these persons depending on the tally." The act passed in 1783 abolished tallies for a better method of transacting business, and they are now only known by tradition. The notes of a banking establishment are always liable to imitation ; and as the paper of a national bank circulates as freely as coin, it is not surprising that men of desperate hopes have successfully attempted to gain by fraud that which they were denied by fortune. From time to time the public records bear testimony to this ; and so numerous did the forgeries become, that it will be only the more important or the more curious with which the patience of the reader will be tried. John Mathison was a man of great mechanical capacity, who, becom- ing acquainted with an engraver, unhappily acquired that art which ulti- mately proved his ruin. A yet more dangerous qualification was his of imitating signatures with inconceivable accuracy. Tempted by the hope of sudden wealth, his first forgeries were the notes of the Darlington Bank. This fraud was soon discovered ; and a reward being offered, with a description of his person, he escaped to Scotland. There, scorning to let his talents lie idle, he counterfeited the notes of the Eoyal Bank of Detection of the Forger. 103 Scotland, amused himself by negotiating them during a pleasure excur- sion through the country, and reached London, supported by his imitative talent. Here a fine sphere opened for his genius, which was so active, that in twelve days he had bought the copper, engraved it, fabricated notes, forged the water-mark, printed and negotiated several. When he had a sufficient number, he travelled from one end of the kingdom to the other, disposing of them. Having been in the habit of procuring notes from the bank, (the more accurately to copy them,) he chanced to be there when a clerk from the excise office paid in 7,000 guineas, one of which was scrupled. Mathison, from a distance, said it was a good one. " Then," said the bank clerk, on the trial, " I recollected him." The frequent visits of Mathison, who was very incautious, together with other circumstances, created some suspicion that he might be con- nected with those notes, which, since his first appearance, had been pre- sented at the bank. 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 he was known, with some knowledge of the forgeries. Further suspicion was excited, and directions were given to detain him at some future period. The follow- ing day, the teller was informed that " his friend Maxwell," as he was styled ironically, was in Cornhill. The clerk instantly went ; and under the pretence of having paid Mathison a guinea too much on a previous occasion, and of losing his situation if the mistake were not rectified by the books, induced him to return with him to the hall ; from which place he was taken before the directors, and afterwards to Sir John Fielding. To all the inquiries he replied, " He had a reason for declining to an- swer. He was a citizen of the world, and knew not how he had come into it, or how he should go out of it." Being detained during a consulta- tion with the bank solicitor, he suddenly lifted up the sash, and jumped out of the window. On being taken and asked his motive, if innocent, he said "it was his humor." In the progress of the inquiry, the Darlington paper, containing his description, was read to him, when he turned pale, burst into tears, and saying he was a dead man, added, " now I will confess all." He was, indeed, found guilty only on his own acknowledgment, which stated he could accomplish the whole of a note in one day. It was asserted at the time, that, had it not been for this confession, he could not have been con- victed. He offered to explain the secret of his discovery of the water- mark, provided the corporation would spare his life ; but his proposal was rejected, and he paid the penalty of his crime. The charter of the company, being within five years of its expiration, was discussed in 1781. The experience of years had proved that the re- newal of the privileges was only to be obtained by payment. The min- istry of 1781 were not likely to be less urgent than their predecessors. The position of Great Britain, also, was somewhat precarious. Mr. Alison says of the period : " French diplomacy acquired the lead in Europe ; the dreams of the philosopher were exchanged for the skilful combinations of experienced statesmen. Russia, Sweden, Denmark were united in a hostile league; America, Spain and France in an armed con- federacy against Great Britain. The combined fleets rode triumphant 104 History of the Bank of England. in the British channel ; and however strange it may sound to modern t ears, it is historically true, that England was more nearly subdued by the ' wisdom of Louis XVI. and the talent of Vergennes than by the genius of Napoleon and the address of Talleyrand." To maintain such a war money was absolutely necessary, and once more the authorities were called on to bargain with a necessitous State. The first charter had been expressly granted by William, in return for the loan of £1,200,000. On its extension, in 1697, no payment was asked in return. The services of the bank were felt because they were novel ; and they were acknow- ledged because they were felt. The great financier of that day, Mr. Montesquieu, with the " wise Lord Godolphin," were, in the first flush of gratitude, sufficiently honest to enunciate a principle, which they were equally honest to act upon. They, with other great men of the day, declared, in 1696, "that the establishment and prosperity of the bank were so much a national benefit, that they were of opinion that no fine ought to be expected for a renewal, but that the company should al- ways be supported and cherished by the public." The directors had learned by experience, however, that statesmen's views, like lover's vows, are mutable. The terms they proposed for an extension of the charter, for twenty-five years, were a loan of two millions for three years, at three per cent. Vehement opposition was the result. Some objected to the amount of payment ; others resisted the principle of a renewal. It is, indeed, surprising, that so moderate an offer was accepted. The remarks of Lord North, however, betray how much the money was required. " I propose to pay off two millions of navy debt with the two millions now offered ; a debt which has ever hung like a millstone round the neck of public credit." The whole of this speech is worth recording, for it marks, in strong and energetic language, the opinion which this statesman entertained of the services of the corporation. " The bank, by prudent management, by judicious conduct, wise plans, and punctuality in establishing its credit, had contributed very essentially to promote national credit; a matter equally advantageous to this country at home and abroad. It might be said by some, if the present banking company will not give more institute a new company. They knew not the solid advantages resulting to the public from its connection with the present company. They were not aware of the dreadful consequences that might attend the attempt to incorporate a new one. And were it possible, how materially might the national credit be affected, from many years elapsing before a new company could establish its character and credit in so eminent a degree as the present bank. So dreadful would be the consequence of breaking up the present bank, that he hoped never to hear of a new company. From being the banker of the public, the bank un- doubtedly derived advantages ; but the public derived advantages equally considerable from the important accommodation which the bank afforded. It had given him great satisfaction to hear that, in consequence of the bargain being in agitation, not a navy bill was to be bought ; if so, it had already produced one great effect." Sir George Saville said, that " the noble lord had spoken of the connection between the public and the bank as if he had been describing conjugal love, and enlarging upon the affection of a man and his wife. Increase of Dividend — Legal Decision. 105 He desired to know if the public were about to take a new wife ; whether it was fair to say your great-grandfather married the great-grandmother of the young lady without a fortune ; your grandfather also married her grandmother without a fortune ; your father married her mother with a small fortune ; and therefore you ought to marry the daughter with a very trifling increase of portion ? It was much fairer for the public to say, ' Aye, indeed, were my ancestors so improvident ? I will not copy their example. The young lady's father is grown rich ; he can afford to give his daughter a good fortune, and a good fortune I will have, or I will not marry the young lady.' " Mr. Ewer, governor of the bank, declared that the proposition of the directors was such as he could meet on public ground. He thought the bank offered fairly and handsomely when they tendered the public a loan of two millions, at three per cent, interest, for three years. After some further debates the proposals of the bank were accepted ; and the bill renewing the charter for twenty-six years passed into a law. In 1781* a general court was held at the bank to inform the proprietors that government had consented to renew the charter on the terms stated ; and in the same year the proprietors held a general meeting to determine the question of increasing the dividend from five and a half to six per cent. It may be assumed that this was against the wishes of the direc- tors, as it was carried by ballot. On the following day they met to con- firm the vote, and to make a call of eight per cent, on the capital, which was thus increased to £11,642,400. A new question arose this year, and was tried by a special jury before Lord Mansfield. From the period of the first forgery the paper of the Bank of England had been abund- antly imitated. The legal liability of the directors to cash these notes soon became an important point ; and a case was tried in which, though it was proved that the cashiers' names were so artfully copied that it was almost as difficult to own as to deny them, yet, being also proved that the notes for which payment was sought had not been issued by the bank, a verdict was given which effectually destroyed the hopes of those who held them. It appears strange that any one could be found to press such a claim. We believe that the directors of the Bank of Austria pay without demur the notes forged in imitation of those issued by them. But this must be a question of policy, and not of justice, as it is impos- sible to contend that the managers of any bank should pay notes which are formed out of their establishment, which do not bear the signatures of their officers, and for which they have received no consideration. An act for enlarging the stamp duties was passed in June, 1783. By this the notes and bills of the bank were exempted from its operation, in consequence of the company engaging to pay £12,000 yearly for the privilege ; the government allowance of £362 10s. per million, for man- aging the national debt, was reduced to £450. Of this, which has usu- ally been regarded as a moral rather than a physical weight, a curious * In this year Mr. Pitt made his maiden speech in support of reform. The Eng- lish nation became clamorous for peace with Holland, and the national debt was in- creasing rapidly, in view of the war with America. In 1775 the debt was an- nounced as £122,963,000; whereas, in 1783, it was reported at £238,231,000. 106 History of the Bank of England. estimate was made in 1788. The debt was calculated at 242 millions, and divided into £10 notes; 512 of which weighing one pound, the whole debt amounted to 47,265 lbs. During a great part of 1782, and part of 1784, the cash, and bullion in the bank were very low. The drain proceeded from the great extension of commerce which followed the peace ; and so large was the export of merchandise that the circulation could scarcely support it. But it was evident to the directors that the return of the amount of the exports would amply compensate for the preceding diminution. Without, there- fore, consulting the ministry, they took the bold step of refusing to make advances on the loan of 1783. Their judgment proved just. By an alteration in the exchanges their anxiety was relieved, and the soundness of the circulation restored. There are many trifles which an anxious search into contemporaneous documents has brought before the writer. A few of these will be given, before proceeding to the most important periods of the history of the bank. Some are curious in themselves ; others possess an interest from their allusion to the times; and all are more or less in connection with an account of the bank. Thus we read in a magazine of 1796, it was calcu- lated that the average balances of the banking houses, including the Bank of England, amounted to £100,000 each; and that the interest of £11,665,440 on the national debt, was one shilling in the pound on £233,308,800, the annual income of the country.* The following is a curious instance of the " vile use" to which bank notes may occasionally be placed, from ignorance of their value. A gentleman who had missed his path in Hertford, rode up to a cottage for directions. Here, with an old ballad stuck against a broken window-pane, was a bank note for £20. The aged couple to whom it belonged could neither read nor write, and were overjoyed at the money of which they had been in ignorant posses- sion. The fascinations of fraud must be great. Half the ingenuity which is experienced in deception, or half the talent which persons of damaged reputation employ to gain a living dishonestly, could not fail to win wealth, repute and the world's applause. In 1780, a gentleman of eminence in the mercantile world was grieved by the contents of a letter which he received from a correspondent at Hamburgh, the post-mark of which it bore. From the statement it con- tained, it appeared that a person most minutely described had defrauded the writer, under extraordinary circumstances, of £3,000. The letter continued to say, information had been obtained that the defrauder — the dress and person of whom it described — was occasionally to be seen on the Dutch Walk of the Royal Exchange. The object of the writer was to induce his correspondent to invite the party to dinner; and, by any moral force which could be used, compel him to return the money ; add- ing that, if he should be found amenable to reason, and evince any signs of repentance, he might be dismissed with a friendly caution and five hundred pounds, as he was a near relation of the writer. As the gentle- * Mr. W. Ray Smee, in hia pamphlet on the income tax, in 1846, after some elab- orate calculations, estimates the present income of Great Britain at 488 millions. Origin of Country Banks. 107 man whose name it bore was a profitable correspondent, the London merchant kept a keen watch on the Dutch Walk, and was at last success- ful in meeting and being introduced to the cheat. The invitation to dine was accepted ; and the host, having previously given notice to his family to quit the table soon after dinner, acquainted his visitor with his know- ledge of the fraud. Alarm and horror were depicted in the countenance of the young man, who, with tones apparently tremulous from emotion, begged his disgrace might not be made public. To this the merchant consented, provided the £3,000 were returned. The visitorsighed deeply, but said that to return all was impossible, as he had unfortunately spent part of the amount. The remainder, however, he proposed to yield in- stantly, and the notes were handed to the merchant, who, after dilating upon the goodness of the man he had robbed, concluded his moral lesson by handing a check for £500 as a proof of his beneficence. The following morning the gentleman went to the banker to deposit the money he had received, when, to his great surprise, he was told that the notes were counterfeit. His next inquiries were concerning the check, but that had been cashed shortly after the opening of the bank. He immediately sent an express to his Hamburgh correspondent, who replied, that the letter was a forgery, and that no fraud had been committed upon him. The whole affair had been plotted by a gang, some of whom were on the continent, and some in England. From a pamphlet, published a quarter of a century ago, the following description of the probable origin of country banking is presented. Banking in the country, like that in the metropolis, first originated among the more opulent and respectable class of traders and merchants. In every town, and in many villages, there existed, prior to what were afterwards termed banks, some trader, manufacturer, or shopkeeper, who acted, in many respects, as a banker to the neighborhood. The shop- keeper, for example, being in the habit of drawing bills on London, and of remitting bills there, for the purpose of his own trade, and receiving also much money at his shop, would occasionally give gold to his custom- ers, taking in return their bills on the metropolis, which were mixed with his other bills, and sent to his London correspondent. Persons who were not customers, being also found to want money for bills, or bills for money, the shopkeeper was led to charge something for his trouble in accommodating them ; and the trade of taking and drawing bills being thus rendered profitable, it became an object to increase it. For the sake of drawing customers to his house, the shopkeeper, having yet, possibly, little or no view to the issuing of bank notes, printed " the bank," over his door, and engraved these words on the checks, on which he drew his bills. It may be assumed also to have been common, before country banks were established, for the principal trader in a town to take at interest some of the money of his neighbors, on condition, however, that he should not be required to give it back without notice. The money thus depos- ited, or borrowed by him, might either be thrown into his trade, or em- ployed in discounting bills soon to become due ; but the latter would evidently be the most safe and prudent way of investing it. The transition from this capacity to that of the modern country banker 108 History of the Bank of England. is so obvious, that it is not necessary to trace it through, the several grades by which it was made. It was some time, however, before the practice of issuing notes payable to bearer on demand, was adopted, and which only became general in the interval between the French and American war. The country was then in a state of great prosperity, confi- dence was high, commerce and trade had gradually extended, the income and expenditure of individuals had augmented, and every branch of the banking business naturally enlarged itself. An increase had been made in the number of London bankers ; and some of them took active meas- ures to encourage the formation of small banks in the country, with a view to the benefit expected from a connection with them. These new establishments having taken place, various country traders, who had before made use of their own correspondents in London, fell into the practice of transacting their business with the metropolis, through the medium of their country bankers, with whom they kept their cash. The country banker drew largely on a London banker on the account of the country trader, and the London banker was willing to execute the extensive country business which he thus acquired, in consideration of a much lower commission than had before been paid by the several country traders to their separate correspondents in London, who had been, for the most part, London merchants. Such are the most material facts in the origin and progress of the pro- vincial banks, and the general substitution of a paper for a metallic cur- rency. They naturally grew out of the circumstances of the country, and are an effect of the division of labor, which takes place in every opulent community. In 1789 an ingenious fraud was perpetrated by Francis Fonton, a clerk in the establishment, one of those men whose real sin is covered by an appearance of sanctity. Having been requested by a friend to pur- chase £50 stock, Fonton gave him a forged receipt, and induced him, in addition, to sign a transfer for £450, under the idea that it was an ac- ceptance of the £50. He remarked to a friend, shortly after his con- viction, that " he had taken care of his soul, and did not mind what they did with his body ;" which was dealt with according to law." On the 15th December, 1790,* Mr. Pitt made his first attempt upon * The original sinking fund of 1786, consisting of an annual grant of £1,000,000 from the consolidated fund, increased, in 1792, to £1,200,000, together with the in- terest of the debt redeemed, and annuities for lives or years which might expire, but limited not to exceed £4,000,000, was appropriated for the redemption of the debt then existing, of £238,231,248 ; and, therefore, when a sum of redeemed debt to that amount should be vested in the hands of the commissioners, that debt was to be considered as discharged. In 1792, when the war with France commenced, and new loans became neces- sary, a sinking fund of one per cent, was created on the nominal sum of each loan, which, it was estimated, would redeem it within forty-five years, at farthest, from its contraction. In the succeeding years, this system was so far deviated from, that loans, to the amount of £86,796,375 were contracted, without any sinking fund being provided for their discharge. Had the original system of 1786 and 1792 been adhered to, so soon as the debt of 1786 was redeemed, the nation would have been eased of taxes to the amount of the interest of that debt, and of the sum appropriated to the first sinking fund ; or these sums, or any part of them, might have been reserved for the charge of such loans, as the exigencies of the times should require. Unclaimed Dividends, 109 the dividends of those fundholders who had allowed them to remain un- claimed. In 1727, the balance of this fund was £43,000 ; in 1752, £60,000; in 1774, £292,000; in 1776, £314,000; and in 1789, £547,000. In consequence of these accumulations, Mr. Pitt proposed to take all, ex- cepting a floating balance of £50,000, to be left in the hands of the bank. It caused indignation, not usual in collective bodies, to spread through the bank stock proprietary ; courts were held, at which the proposition was denounced ; counsels, opinions stated, speeches uttered, which blended national insecurity with the seizure of the unclaimed dividends, and the destruction of public faith with the invasion of the corporation coffers ; and all with that earnest eloquence which is born of invaded rights or diminished purses. But the measure was introduced into Par- liament, and the opposition became more energetic. The fine mind of Burke was employed in ridiculing the proposal, and the great Whig leader argued strenuously against its injustice. Meetings of the pro- prietors were again held, and the conduct of Mr. Pitt reprobated in no measured terms. It was called " so miserable a financial operation, that the world would think we were at the end of our resources." A pro- posal was made by the governor to lend £500,000, without interest, until the unclaimed dividends should be less than £600,000, on condition of an abandonment of the claim. The prescient mind of Mr. Pitt, which saw the improbability of their decrease, induced him to accept the proposal, and thus ended the first attempt upon the unclaimed divi- dends. It is probable that the bank proprietors regarded them as the property of the corporation, and this may account for the lively interest excited at the prospect of their removal. The question appears a very simple one. In the absence of a claimant, they belonged either to the bank or to the State. If to the bank, it must have been by special agreement. As mere paymasters of the government, they could not pos- sess the slightest claim. It was an accumulated fund, which belonged to the government in the absence of the owner. It is, however, impossible to read the objections raised against the government, for demanding their own property, without wondering at the party-spirit which could warp the clear views of statesmen like Mr. Fox and Mr. Burke, and induce them to oppose a claim, the justice of which was indisputable. In 1791, in consequence of this question being mooted, a list of those persons en- titled to unclaimed dividends was first published. It has proved in many cases a benefit of the utmost importance, and should be circulated to the greatest possible extent, as it is probable that, at the present moment, many creditors of government are languishing in poverty, from an igno- rance of their just claims. In 1793 an act was passed protecting the governor and company from any penalty on account of their having advanced, or advancing in future, any sums of money in payment of bills of exchange, not charged on any branch of the revenue. In the same year the East India annuities were placed under the management of the bank, and in the following- year the government of Ireland negotiated a loan, with an option to the subscribers of receiving their dividends and transferring their stock in London. The management of such dividends and transfers was under- taken by the directors of the bank, and the agreement received the sanc- 8 110 History of the Bank of England. tion of Parliament. In 1795 the corporation commenced an issue of £5 notes. During the year 1793, one of those seasons of distress, which occur from time to "time, shed a gloom throughout England. A period of peace had produced great apparent prosperity. From the American war to the French revolution, England had enjoyed a state of profound re- pose. The eminently commercial minds of the people had employed this period in extending the trade, and in seeking fresh employment for the accumulating capital. Building, machinery and inland navigation employed part of it, and the augmented business of the country de- manded new banks, which, b}' the additional facilities they gave to com- merce, tended greatly to improve it. For eight or nine years it had progressively increased; but at the end of 1*792 wide commercial misery spread throughout England. " On Tuesday evening, the 19th February, 1793," says Chalmers, "the Bank of England threw out the paper of Lane, Son & Fkaser, and next morning they stopped payment to the amount of almost a million of money. This great failure involved the fate of several very substantial traders." Merchants, with ample but unavailable funds, were compelled to bend before the storm. Bankers of unquestionable solidity ceased payment under the influence of the panic. Every man was suspicious of his neighbor. The value of property seemed annihilated in the doubt and dread of the people. Gloomy apprehensions seized on all ; and those who had money preferred rather to hoard than to risk it. The country banks were the greatest sufferers ; and the ruin they experienced spread like a plague among the interests which had trusted them. They had pushed their notes eagerly into circulation, and were the chief cause of the great drain of cash from the Bank of England, which exceeded any demand of the kind for more than ten years. Upwards of one hundred country banks failed. Mr. Tooke considers the distress of this period to have been exaggerated,; but the failure of so many banks must have in- volved an incalculable amount of misery. Chalmers believes the whole mischief to have arisen from the in- creased number and reckless operations of the country banks, one of which was in nearly every market town. Of these establishments, 204 out of 279 issued what were termed optional notes, payable either in the metropolis or in the country. " They came oftener," he says, " and in greater numbers, to London, than were welcome in the shops of London. These notes became discredited, not only in proportion as the supply was greater than the demand, but as the banks were distant and unknown. The projects and arts by which those notes were pushed into the circle of trade, were regarded with a very evil eye by those who, in this man- agement, saw great imprudence in many, and a little fraudulence in ■some. When suspicion stalked out to create alarm, and alarm ran about to create panic, more than 300 country banks in England sustained a shock." The alarm grew so universal, that government were compelled to take notice of the applications made for assistance. The restoration of confi- dence was an important point : Mr. Pitt, therefore, called a meeting at his private residence, to consider the propriety of a parliamentary advance Exchequer Bills Advanced. Ill of exchequer bills, on sufficient security, to those persons by whom the pressure of the times was felt.* Various opinions were broached ; and, after a lengthened discussion, it was resolved that a meeting should be held at the Mansion-house, to consider the plan proposed by the minis- ter. Here another discussion ensued, which ended in the unanimous adoption of a resolution, "that the interposition of Parliament was neces- sary, and that an issue of exchequer bills was the best practical remedy." _ The position of trade at this juncture was unquestionably critical. The discredit of the country paper had produced a deficiency of the circulating medium, and mercantile transactions were greatly impeded by it. The bankers, anxious to retain their own credit immaculate, kept larger sums in their possession than was necessary, so that a considerable part of the circulation was withdrawn ; and those merchants who required discounts on long-dated bills found a difficulty in procuring them. Houses, with sufficient securities to meet all their creditors, and, probably, leave an overplus of hundreds of thousands, wore compelled to suspend payment. Manufacturers could neither dispose of their goods nor raise money on them. The two great chartered banks of Scotland felt the difficulty. Those of Glasgow, Paisley and Greenock had ceased to discount to any extent, as their notes were returned for gold, and their power crippled. On these, and similar grounds, a committee recommended that five mil- lions should be advanced in exchequer bills, on security approved of by the commissioners, or on the deposit of goods of double the value of the sums advanced. The effect of this measure was immediate and universal. The capitalists, who had held back when help was required, came forward directly government proffered its assistance. " The very first intimation of the intention of the legislature," says Macpherson, " to support the merchants, operated all over the country like a charm, and in a great de- gree superseded the necessity of the relief, by an almost instantaneous restoration of mercantile confidence." Out of the five millions voted, only £2,202,200 were advanced, which was all ultimately repaid ; and, though two hundred and thirty-eight persons were assisted, only two became bankrupt. By the end of the year, confidence was restored, and the fa : cilities for raising money were as usual. A drain upon the gold of the bank, arising from these causes, commenced in June, 1792, and lasted till the following March. The bank increased their discounts ; and the * The present sinking fund was established under Mr. Pitt's administration, in 1786. The various branches of revenue then existing were united under the name of the consolidated fund. Ono million, taken from that fund, was vested annually in the hands of commissioners for the redemption of the national debt, to be applied for purchasing capital in such stocks as they should judge expedient, at the market prices. To this fund was to be added the interest of the debt redeemed, and annuities fallen in by the failure of lives, or the close of the terms for which they were granted, and life annuities fallen in by the failure of lives, or the close of the terms for which they were granted ; and life annuities unclaimed for three years were con- sidered as expired, and added to the sinking fund. When this fund amounted to £4,000,000, it was enacted that the interest of the redeemed debt, and annuities fallen in, were no longer to be applied to it, "but remain at the disposal of Parlia- ment. 112 History of the Batik of England. amount of cast and bullion gradually arose until it reached the amount from which it had commenced declining. A writer of the present century, now no more, but one whose losses in American securities were a great gain to literature, wrote with his une- qualled pen, " The warlike power of every country depends on their three per cents. If Caesar were to reappear on earth, Wettenhall s list would be more important than his ' Commentaries ;' Rothschild would open and shut the Temple of Janus ; Thomas Baring, or Bates, would probably command the tenth legion ; and the soldiers would march to battle with loud cries of scrip and omnium, reduced, consols, and Caesar." The following fact is some testimony of the truth of these remarks of the witty canon of St. Paul's. In 1796, the wealth of England was demon- strated in an extraordinary degree. The correspondence of Lord Malmes- burt has proved that Mr. Pitt was always willing to enter into a negoti- ation for peace. The French directory, however, fancying that the riches of England were evaporating, were reluctant to come to terms. The be- lief spread throughout the country that this arose from an opinion that the resources of England were nearly exhausted, and Mr. Pitt determined to avail himself of the feeling, by demanding a loan of £18,000,000. The following were the terms proposed : " Every person subscribing £100 to receive £112 in five per cent, stock, to be unredeemable, unless with the consent of the owner, until the expiration of three years after the present five per cents shall have been redeemed, but, with the option of the holder, to be paid at par, at any shorter period, not less than two years from the conclusion of the definitive treaty of peace." On the first day of December the subscription opened. The bank subscribed one million, and each of the directors £400,000. The first day saw five mil- lions subscribed, and in the second the subscription reached nearly twelve millions. The anxiety continued on the third ; and on the follow- ing Monday, the names received from the country were added before the opening of the doors, when, so great was the crowd, that numbers could not get near the books, but called out to their more fortunate brethren to enter their names. In an hour and twenty minutes the subscription was filled. " So great and so general," says Mr. Weir, " was the desire* to subscribe, that the room was a scene of the utmost confusion. Persons continued to come long afterwards ; and a vast number of orders were sent by post, which were too late to be executed. It is a curious fact that the subscription for this enormous sum was completed in fifteen hours and twenty minutes. The loan, from the stimulus of national excitement under which it was raised, was called " the Loyalty Loan." * The three per cents, from 57, at the close of the war with America, had risen to 99; and the overflowing wealth of the capital was already finding its way into the most circuitous foreign trades and hazardous distant investments. The national revenue amounted to £16,000,000, and the army included 32,000 soldiers in the British Isles, besides an equal force in the East and West Indies, and thirty-six regiments of yeomanry. But these forces were rapidly augmented after the com- mencement of the war; and before 1796 the regular army of Britain amounted to two hundred and six thousand men, including forty-two thousand militia. — Aiison's Europe, vol. 1, p. 168. Historical Sketch of the Cessation of Cash Payments. 113 CHAPTEK XII. HISTORICAL SKETCH OF THE CESSATION OF CASH PAYMENTS — APPLICATION OF ME. PITT — ASSISTANCE RENDERED BY THE COURT OF DIRECTORS — DIMINUTION OF DISCOUNTS — POLITICAL POSITION OF THE COUNTRY — DRAIN OF BULLION, A history of the cessation of cash payments, in 1797, would be in- complete, 'without a sketch of the political events which tended to pro- duce it. Thirty years of peace, thirty years of social, moral and physical progress, have enabled the present generation to judge calmly of the events of half a century ago. » Up to the year 1789, the spirit of the times was monarchical. The existing European dynasties possessed great, and, in many instances, irresponsible power. That power was wielded harshly. The great les- son had yet to be learned, that the real strength of a king is the love of his people. In that year, the upheavings of the moral earthquake, which was to create a change in all the institutions of Europe, were felt in Paris. At first, a generous love of liberty pervaded the nation ; and the inhabi- tants of England sympathized with their neighbors. But anarchy suc- ceeded to revolution ; the capital was convulsed ; the reign of terror fol- lowed ; and they who had been loudest in their applause were the most rapid in their recantation. " Even in its first hours it showed a thirst for slaughter," says Dr. Crolt, "which stamped its nature. The acclama- tions of Europe, which, struck with its sudden vigor, its lofty protesta- tions, and the bold rapidity of its strides over the wrecks of feudalism, had followed its early progress, soon died away ; men could not wade after it so deep in gore. Still it rushed on, flinging aside at every step some portion of that Jesuitical mask which it first wore ; hourly rending away, with a more contemptuous hand, some fragment of those ties which allied it to the common families of nations ; until at length it scaled the steps of the throne, tore down its unfortunate possessor, and, with the guillotine for its footstool, and the populace for its ministers, seated itself in full supremacy of ruin." England, with the English nation, felt the shock ; a desire for political change spread throughout the country. But the people witnessed the thirst for blood which seized their neighbors, and the sound English heart recoiled from the horrors of the guillotine, from the barbarities of the convention and from the reign of terror. The powers of the conti- nent were stricken with alarm, and united to quench the democratic fuivy of the republic. But the energy of the French citizens pervaded the soldiery, and they sent the invaders in confusion from the soil of France. From this period a fierce and expensive war shook Europe to her centre ; and England bore the burthen. In six months, William Pitt concluded seven treaties and six subsidies ; and France saw her territories invaded by three hundred and fifty thousand of the most warlike troops in Europe. But the pressure fell fearfully upon the people of Great Britain. The national debt was doubled ; the national taxes were increased ; the na- 114 History of the Bank of England. tional industry was checked ; and, more dangerous than all, national credit was difficult to maintain. Gold grew scarce throughout the coun- try ; bullion fled from the bank coffers ; and the corporation, urged by "William Pitt, strained credit, means and almost character, to support the government, of which he was the leader. It was, indeed, a question of national existence. A dishonorable peace might have been obtained ; but no true Englishman thought of that. It was a question also of exist- ence for the bank, whose life was bound up with that of the State. It is not too much to say that the bank directors were the support of the country's credit. Bills, for which no forethought of the ministry could provide, were met by them. Sudden emergencies of the State were never disregarded by them. The credit of the treasury was main- tained ; the army and the navy were supported by them. They acted as generous bankers to the government ; and bore the displeasure of their proprietary, to whom, had they been disposed to be selfish, they might have pointed, while they exclaimed, " We do perceive here a divided duty." They were the nerves and sinews of the State. This is no overcharged picture, drawn by a partial testimony. The evidence of the bankers, and other great men of the city, vouch for it. The letters of William Pitt verify it. The censure of some of the pro- prietary, who shortsightedly preferred a large dividend to the salvation of their country, proves it. But the court of directors were not passive tools. Because no remon- strances appeared, it is not to be concluded that none were made. On the 15th January, 1795, two years before the cessation of cash payments, they came to a resolution to inform the chancellor of the exchequer, " it was their wish that he would settle his arrangements for the present year, so as not to depend on any further assistance from them ; and that the stipula- tion for the future advances for payment of treasury bills of exchange be strictly adhered to, as they could not allow it to exceed £500,000." On 16th April, the governor and deputy-governor were requested by the court "to wait on the chancellor of the exchequer, and express their un- easiness at being in advance for so long a period, of from one and a half to two millions on the treasury bills." It was added, "The court cannot allow any disbursement exceeding £500,000 ; and they request the chan- cellor of the exchequer to order the same to be paid." On the 5th of June, a note from the governor and deputy-governor informed Mr. Pitt, that though he had promised the advance on the treasury bills should not exceed £500,000, yet they were in advance on them £1,210,015; that by next week it would be £168,467 ; and they hoped he would give directions in future to prevent it." On the 30th July it was resolved, ".That the governor and deputy-governor request the chancellor of the exchequer to adopt some other mode of paying the treasury bills ; and that the court is determined to order their cashiers to refuse payment of all bills whenever the advance shall amount to £500,000." The* only reply from Mr. Pitt was a request for a further accommoda- tion, on the credit of the consolidated fund, which the court refused to sanction, until they had received satisfaction on the topic of the treasury bills, and requested Mr. Pitt to enter into a full explanation on this subject, which was not even touched upon in his letter. This resolution Communications with Mr. Pitt. 115 being communicated, Mr. Pitt wrote to the governor and deputy-gover- nor on the 12th August, that "they might depend upon measures being immediately taken for the payment of one million, and a further pay- ment, to the amount of one million, being made in September, Oc- tober and November, in such proportions as might be found con- venient. But, as fresh bills might arrive, he was under the necessity of requesting a latitude to an amount not exceeding one million." About the same period the court " desired the governor and deputy-governor would express their earnest desire that some other means might be adopted for the future payment of bills of exchange drawn on the trea- sury." On the 8th of October Mr. Pitt was desired to reimburse the bank one million, conformably to his agreement, together with two mil- lions and a half lent him on the consolidated fund. On the 23d October the governor mentioned to the chancellor that he had heard there might be annexed to a proposed loan, one of £1,400,000 to the Emperor of Germany. Mr. Pitt replied, that he had not at present the most distant idea of it. The governor said, " he received the answer with pleasure, thinking, as he did, that another loan of that sort would go nigh to ruin the country." The governor also acquainted Mr. Pitt that there was a drain on the cash, which was likely to continue while the bills from abroad were drawn on the treasury. There is no servility in these communications. They are such as any honorable body, jealous of its own credit, and desirous of the country's reputation, could not fail to make. But their appeals grew more serious. On the 18th November " the governor informed Mr. Pitt that gold was £4 2s. per ounce, that the daily large drains of specie from the bank filled the minds of the directors with serious apprehensions, and that he must not rely on any aid from them." In a communication of 20th No- vember, the governor repeated to Mr. Pitt the " absolute determination of the court to have the advance on the treasury bills quite cleared off," and that it would be utterly out of the power of the court to make the advance on the vote of credit. On the 28th January, 1796, the gover- nor informed the court that £201,000 treasury bills would fall due for payment at the bank on 3d February, and that the sum now in advance was £1, 157,000. The court came. to the bold resolution, "That the governor give directions to the cashiers not to advance any money for the payment of these bills, nor to discharge any part of the same, unless money shall be sent for the same." To this resolution the directors adhered, and for once the chancellor of the exchequer, after dwelling on the great inconvenience it would cause him, said, " he would arrange his affairs so as to provide the money in time for the payment of the treasury, bills." Compulsion like this was not very pleasing to the " heaven-born minister ;" and on 12th February, 1796, Mr. Pitt made the following ominous remark, in reply to a com- munication from the governor : " It lay with the court of directors to judge whether they chose to accommodate the public or not." About the commencement of this year it was proposed to raise a loan in Germany, for the emperor, to be assisted by a guarantee from the English Parliament. It was soon discovered, however, that the loan might as well be procured in England, as the guarantee would have 116 History of the Bank of England. nearly the same effect as raising it in this country. The directors were alarmed at the prospect of the gold diminishing, and came to the follow- ing resolution : " It is the opinion of this court, that if any further loan or advance of money to the emperor, or any other foreign State, should, in the present state of affairs, take place, it will in all probability prove fatal to the Bank of England. The court of directors do therefore most earnestly deprecate the adoption of any such measure, and they solemnly protest against any responsibility for the calamitous consequences that may follow thereupon." On the 20th of July Mr. Pitt wrote a letter to the governor. The following is an abstract of some of the most marked sentences, and demonstrates the importance attached by Mr. Pitt to the advances for which he asked : " I shall consider it as a great accommodation." " I am also under the indispensable necessity of expressing my earnest hope that the court will be induced to make a present advance of £800,000 on the consoli- dated fund." " I shall also be obliged to request a further advance of £800,000, on the same security, in August." The conclusion is remark- able : " It gives me much concern to be obliged to apply for an accom- modation to so large an extent; but I cannot too strongly represent how necessary it is for the public service." One week only after this he wrote even more ardently, with a request for assistance, stating, "He felt it an indispensable duty to represent to them, in the most earnest man- ner, that it would be impossible to avoid the most serious and distress- ing embarrassments to the public service," unless his request could be complied with. This appeal was met by the resolution, that the " court do agree to advance, for the service of the public, the sum of eight hun- dred thousand pounds, on the security of the exchequer bills." But the almost solemn tone of the letter from Mr. Pitt alarmed the directors, and they resolved "that this court do expect that the chancel- lor of the exchequer will give a promise that a new mode of paying the treasury bills shall be adopted immediately on the meeting of Parliament, as this court will not continue discharging them any longer." It was also accompanied by the following memorial : " The court of directors of the Bank of England, fully sensible of the alarming and dangerous situa- tion of the public credit of this kingdom, and deeply impressed by the communication made to them by the Bight Honorable William Pitt, are very willing and desirous to do every thing in their power to support the national credit ; but in complying with the request made them by the Bight Honorable William Pitt, they think they should be wanting in their duty to the proprietors and to the public, if that compliance was not accompanied with the following most serious and solemn remon- strance, which, for the justification of their court, they desire may be laid before his majesty's cabinet. " They beg leave to declare, that nothing could induce them, under the present circumstances, to comply with the demand now made upon them, but from the dread that 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 the measure ; and they apprehend that, in so doing, they render themselves totally incapa- ble of granting any further assistance to government during the remain- Advances to Government — Drain of Bullion. 117 der of this year ; and unable even to make the usual advances on the land and malt for the ensuing year, should those bills be passed before Christmas. They likewise consent to this measure, in a firm reliance that the repeated promises, so frequently made to them, that the ad- vances on the treasury bills should be completely done away, may be ac- tually 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." This important declaration should be remembered. It marks strong good-will on the part of the directors towards the country, which govern- ment should always have borne in mind. On 31st January, 1797, the governor and deputy-governor waited on the chancellor of the exchequer, to represent to him how uneasy the court were at their large advances, and to require that some effective measures should be immediately taken for the payment. On the 10th February, the committee, startled at the prospect of a loan of one million and a half for Ireland, a great part of which would be made in specie, resolved to ask a reduction of the follow- ing advances to government : Arrears of advance on land and malt, 1794, £ 837,000 " " " " 1795, 491,000 1796, 2,392,000 Exchequer bills on vote of credit, 968,000 on consolidated fund, 1796, 1,323,000 Treasury bills paid, 1,674,645 £7,185,645 Arrears of interest, 400,000 £ 7,585,645 This statement was immediately placed before Mr. Pitt, accompanied with a desire that the sums specified might be repaid, or arranged before the settlement of the Irish loan, which was then contemplated. On the 18th of the same month, the governor was requested by the directors to assure Mr. Pitt that this loan " would most probably bring them under the necessity of shutting up their doors." On the 21st, a minute of the meeting of the court expressed the conviction impressed upon them " by the constant calls of bankers from all parts of the town, for cash, that there must be some extraordinary reasons for this drain." It is impossible to read these communications, and not remark the assistance afforded to the State, through a series of years. That Mr. Pitt was fully sensible of it, is proved by the proposition he made to the House, to give bank notes the guarantee of the national security. As it was a crisis in the history of the corporation, caused solely by the ad- vances made to government, so it could only be removed or remedied by the chancellor of the exchequer, in his public character. It is due to this gentleman to say, that he did not shrink from the responsibility, but met the galling fire, with which his opponents assailed him, with great gallantry. The fine rhetoric of Mr. Fox, the wit and the eloquence of Mr. 118 History of the Bank of England. Sheridan, were all borne with an equanimity that resulted equally from the possession of a great mind and a great majority. While these proceedings were pending, other causes were also in active operation. The drain of bullion continued. From month to month the bank found its stock decreasing. From month to month the directors were alarmed by the foreshadow of that which afterwards over- took them. Whether the plan they adopted to avert the difficulty was ad- visable, is an open question. In 1795 they began to limit their discounts. On the last day of that year the court of directors came to the following resolution, which was ordered to be placed in the discount office : "Bank of England, 31st December, 1795. " Pursuant to an order of the court of directors, notice is hereby given, "That no bills will be taken in for discount at this office, after 12 o'clock at noon, or notes after 12 o'clock on Wednesday. " That in future, whenever the bills sent in for discount shall on any day amount to a larger sum than it shall be resolved to discount on that day, a pro rata proportion of such bills in each parcel as are not other- wise objectionable, will be returned to the person sending the same, without regard to the respectability of the party sending in the bills, or the solidity of the bills themselves. " The same regulations will be observed as to notes." The diminution of gold ; the price of bullion compared with the value of coin ; the alarm occasioned by the position of the country, still main- taining its doubtful struggle with an unscrupulous enemy ; the expensive operations of the war, which demanded extensive loans, and the subsidies to foreign powers, which carried the gold out of the country ; must be accepted as reasons for the diminution of discounts which preceded the panic of 1797. Many competent persons have been persuaded that the decrease of the circulation from 1795, so far from preventing what is popu- larly known as a run on the bank, possessed a contrary tendency. They asserted that, by reducing the requisite issue, and diminishing the gene- ral accommodation, a pressing demand for specie was occasioned. This idea is supported by the fact, that, from March, 1792, to June, 1793, there was a drain of cash and bullion considerably larger than in the same period during the crisis ; but instead of lowering, the directors raised the amount of their discounts, and an almost immediate result was an increase of cash and bullion. There was then, however, no distrust in our political relations. The French revolution* had not assumed the ap- pearance which, in 1797, shed a gloom over all the continent, nor were government called upon to subsidize half the powers of Europe for the sake of checking an universal anarchy. Another cause tended to alarm the people. A man named Thomas Paine possessed a certain degree * The blowing up of the French currency of " assignats" was the first and last of Mr. Pitt's triumphs. When the campaign of 1793 was commencing, everybody re- garded the conquest and dismemberment of France as certain. Burke had de- clared that she should be " blotted from the map of Europe." Pitt had described her as " in the gulf of bankruptcy." The pious king, with the whole clergy and aristocracy, had pronounced the "regicide government" to be " utterly abandoned of God." — Doubleday's Financial Review. Diminution of Bullion. 119 of unenviable notoriety. In 1796 he wrote an inflammatory pamphlet, termed " The Decline and Fall of the English System of Finance," in which he attempted to prove that the cellars of the Bank of England " could not contain so much as two millions of specie ; most probably not more than one million." The following is a part of the reasoning by which he arrived at this false conclusion. After arguing that there could not be more than sixteen millions of gold and silver coin in England, he thus proceeds : " But admitting there be sixteen millions, not more than a fourth part thereof can be in London, when it is considered that every city, town, village and farm-house in the nation must have a part of it; and that all the great manufactories, which most require cash, are out of London. Of this four millions in London, every banker, merchant, tradesman, in short, every individual, must have some. He must be a poor shopkeeper indeed who has not a few guineas in his till. The quantity of the cash, therefore, can never, on the evidence of circum- stances, be so much as two millions ; most probably not more than one million." The same writer then endeavored to prove that the total amount of bank notes in circulation amounted to sixty millions. These assertions, speciously supported, and put forward at a time when the national anxiety was extreme, produced considerable effect amongst those who required support in their faith in the bank. It was the small holder of bank notes who most needed encouragement, and it was the small holder to whom this pamphlet was addressed, and who was most particularly affected by it. At the very period when it was pronounced that there was most probably only one million of specie in the bank, and sixty millions of notes in circulation, it was afterwards proved that the specie was about three, and the circulation only from nine to ten millions. But the mere assertion that sixty millions were circulating, with only one million of cash to meet the payment, must have produced a want of con- fidence in the people of England, by many of whom the author was re- garded as an authority. The public mind, indeed, was altogether agi- tated.* Towards the close of 1796, and the commencement of 1797, fears of an invasion were very prevalent. Rumors of descent on various parts of the coast were freely propagated. The public were in so feverish a state that they were inclined to believe all they heard, and those possessed of pub- lic securities became anxious to receive gold in exchange. The occasion * The aspect of public affairs in Britain had never been so clouded since the com- mencement of the war, nor, indeed, during the whole of the 19th century, as they were at the opening of the year 1797. The return of Lord Malmesbory from Paris had closed every hope of terminating a contest, in which the national burdens were daily increasing, while the prospect of success was continually diminishing. Party- spirit raged with uncommon violence in every part of the empire. Insurrections prevailed in many districts of Ireland ; discontents and suffering in all. Commercial embarrassments were rapidly increasing, and the continued pressure on the bank threatened a total dissolution of public credit. The consequence of this accumula- tion of disasters was a rapid fall of the public securities. The three per cents were sold as low as 51, having fallen to that from 98, at which they stood at the com- mencement of the contest. Petitions for a change of ministers and an alteration of government were presented from almost every city of note in the empire ; and that general distrust and depression prevailed, which is at once the cause and effect of public misfortune.— Alison's Europe. 120 History of the Bank of England. was a pressing one. The position of the directors was most responsible. The well-being of the commercial state was at issue. The drain of cash continued, and the dwindling coffers were difficult to replenish. In March, 1796, the stock of bullion was £2,972,000. By June it had fallen to £2,582,000. In September it lowered to £2,532,000. In December it was £2,508,000, and on 25th February, 1797, it had fallen to £1,272,000. Thus diminished and diminishing, the directors had but one course to pursue. The government, which had reduced their means, was alone capable of supplying a remedy. The chancellor of the exchequer was, therefore, made acquainted with their present position, and with their fears for the future ; and to his judgment was left the proposal of a plan to obviate the evil. It does not appear that any proposition was made by the bank directors, but that their danger was simply placed before him. On the 24th of February, the deputy-governor, with one of the directors, waited on him, to ask how long the bank might venture to pay cash before he would think it necessary to interfere. Mr. Pitt replied, that it was a matter of great importance, and that he must be prepared with some resolution to bring before the council, for a proclamation to stop cash payments at the bank. At the same time, he added, it would be necessary to appoint a committee of inquiry into their affairs. No objection was offered to this proposition. On the contrary, it was inti- mated that every assistance would be rendered. In addition to foreign force, domestic treachery was justifiably feared. Corresponding societies, Friends of the People, and Jacobin societies, were spreading a poison and a pestilence through the minds of the nation. It was well known that a number of discontented men would gladly hail the appearance of a French fleet off the English coast. Ire- land was approaching an open insurrection. Disaffection had seized upon our seamen. The Nore witnessed an open mutiny. The only defence from invasion appeared to fail the country, and men knew not where the evil would pause, or how far the seeds of treason were spread, when that navy, which was familiarly and affectionately termed " the wooden walls of old England," forsook the nation in its dark and perilous hour. The fireside of the yeoman heard these things, and a vague oppressive terror agitated the beautiful homesteads of England. The difficulties of the great London bank, the dissatisfaction of the metropolis, the fear of invasion, the disaffection at the Nore, were exaggerated in journals and reported in villages, and a feverish desire to hoard manifested itself. The small tradesman took his notes to the banker, and kept the specie in his house, until the aspect of the times was determined. The cottager heard the report, caught the infection, and followed the example. The country banker grew anxious, and sent for gold, rather in proportion to his fears than his necessities. The London banker applied to the Bank of England upon the same principle, and thus the gold of the corporation became unnecessarily decreased. The inhabitants of the remote parts of the empire are always prone to needless alarm. Their information is more vague, their judgment less cultivated ; they are more easily acted on by reports than the dwellers in large cities ; and thus a great portion of the notes were presented through the groundless fears of an ignorant impulse. Suspension, of Cash Payments. 121 CHAPTER XIII. ORDER IN COUNCIL — SUSPENSION OF CASH PAYMENTS — MEETING OP THE MERCHANTS PARLIAMENTARY DEBATES ISSUE OF DOLLARS — ENLARGED . DISCOUNTS REQUIRED — THE RESTRICTION ACT PASSED ISSUE OF ONE AND TWO POUND NOTES — BANK OF FRANCE — THE REST RENEWAL OF THE CHARTER — OPINION OF MR. PITT AND OTHER MINISTERS. The evening of Saturday, the 24th February, 1797, was a gloomy period for most of the merchants and traders of London. More than all must the directors of the bank have felt their important and respon- sible position. They had seen during the week a heavy demand made on their diminished cash. They had marked their small stock of bullion decreasing day after day. They had witnessed and participated in the dismay which preyed upon the people. They knew that the demand would continue unless some method could be adopted to check it ; and they felt that the period had arrived when, for the first time in their his- tory, they must altogether cease payment of their notes ; for the first time since 1697 they must fail in meeting the demands of their creditors. On the following day, Sunday, a cabinet council was held at Whitehall ; and it is said that the only occasion on which the monarch violated the Sabbath was this great one. He attended the council at this important crisis ; and the presence of royalty gave a high sanction to the proceed- ings. Immediately after the meeting, the members of the government met the governor, deputy-governor, Mr. Thornton and Mr. Bosanquet, in Downing-street, to inform them of the result of their deliberation, when the following resolution was communicated : "At the Council Chamber, Whitehall, Feb. 26, 1797. " By the lords of his majesty's most honorable privy council. " Upon the representation of the chancellor of the exchequer, stating that, from the result of the information which he has received, and the inquiries which it has been his duty to make, respecting the effect of the unusual demands for specie that have been made upon the metropolis, in consequence of ill-founded or exaggerated 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 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 directors of the Bank of England should forbear issuing any cash in pay- ment until the sense of Parliament can be taken on that subject, and the proper measures adopted thereupon for maintaining the means of circu- lation, and supporting the public and commercial credit of the kingdom at this important conjuncture. And it is ordered, that a copy of this minute be transmitted to the directors of the Bank of England ; and they are hereby required, on the grounds of the exigency of the case, to conform thereto, until the sense of Parliament can be taken, as aforesaid." 122 History of the Bank of England. On Monday morning, the 27th of February, at the earliest period of commencing business, the office was crowded. Bullion was vociferously demanded. ° The notes of the bank were eagerly proffered in exchange for gold. The notice of the previous day was placed conspicuously in the hall ; but men will not easily see that to which it is their interest to be blind. Officers were in waiting to repress any indecent ebullition of feeling. Copies of. the order in council were distributed, and the an- nouncement of the suspension of specie payments passed off as quietly as its nature would allow. To pacify the natural alarm, the following notice was freely circulated, and advertised in all the daily papers : " Bank of England, February 21 th, 1797. " The governor, deputy-governor and directors of the Bank of Eng- land think it their duty to inform the proprietors of bank stock, as well as the public at large, that the general concerns of the bank are in the most affluent and prosperous situation, 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 commercial interest, paying the amount in bank notes, and the dividend warrants will be paid in the same manner." The rumor that the bank had stopped payment spread throughout London. Those persons who were unacquainted with business looked upon it as tending to universal ruin. The better informed saw the im- portance of the proceeding, and, with them, there was every effort made to support the credit of the corporation. Notwithstanding the terror which possessed the less instructed portion of the community ; notwithstanding the severe language which Mr. Fox used in the House, when he said that " the measure had destroyed the credit of the baDk;" that, for the " first time since the revolution, an act was done which struck at the foundation of the public credit, by seizing the money belonging to individuals ;" notwithstanding his triumphant question of " What can restore that public credit ?" it appeared as if, now that the blow was struck, a feeling of security was produced, which the mercantile community had long required. For, notwithstanding these things ; notwithstanding even the oratory of Mr. Sheridan, of which the chancellor of the exchequer remarked, " it would be atrocious arrogance in him to attempt to answer what it would be unpardonable arrogance to attempt to understand ;" a great authority of that day, Mr. Henrt Thornton, said, before a committee of the House of Commons, " I con- ceive the distress, for some time preceding, and especially for two days before, to nave been so great, that the relief given by the discounts on the Monday more than compensated, in the minds of most of the mer- cantile world, for any alarm occasioned by the stoppage." Throughout the evidence of this gentleman, the conviction that the bank should have increased its circulation, instead of diminishing it, was constantly ex- pressed. The question yet remains unsettled. On the day succeeding the suspension, the discounts were augmented, and the feeling of se- curity, which has already been mentioned, confirms the opinion of Mr. Thornton. A meeting of the merchants was promptly called, and, on the 27th of Decrease of Discounts — Opinions on it. 123 February, they proved their desire to support the credit of the bank, by voting the following : " Resolved, unanimously, That we, the undersigned, being highly sensi- ble how necessary the preservation is of public credit at this time, do most readily hereby declare, that we will not refuse to receive bank notes in payment of any sum of money to be paid to us, and we will use our utmost endeavors to make all our payments in the same manner." The " Gentleman's Magazine" speaking of the above, says, " We never remember to have witnessed a more loyal meeting ;" four thou- sand of the best names in the city were soon attached to this resolution. On the following day a paper, nearly similar, which was published by the lords of the privy council, tended greatly to relieve the public mind, and confidence, to some extent, was restored. On the 25th of February the discounts were reduced to one-fourth of the sum at which they stood in the beginning of the year, and the de- creased accommodation of the bank compelled a similar decrease in the discounts of the private banker. This joint restriction, at the very crisis when an increase was desirable, tended to augment, if not to produce, the demand for cash. The advances made to Mr. Pitt were specially as- serted by the governor to have originated the embarrassments. The voluminous correspondence, which has been abridged, amply proves that it was of the utmost importance for the bank directors to be relieved from the incessant claims of the chancellor ; the urgent tone of their letters, and the earnest appeals of their personal representatives, are only to be equalled by the demands of Mr. Pitt. But the energy of his applications to the loyalty of the directors almost demonstrates that the continuance of their advances was imperatively required for the 'safety of the commonwealth. Many of the practical men, besides Mr. Thornton, summoned before the committee of the House of Commons, considered the great diminution of discounts as the cause of the run upon gold, and thus, indirectly, bclamed the policy of the bank. It must be remembered that the directors were in a critical position. An embarrassed government urged them to make advances for the safety of the country. Extensive mercantile operations demanded extensive discounts. To meet both demands was, in their opinion, imprudent. Every reason which could operate tended to the former. The extracts from the correspondence with the chancellor of the exchequer prove that it was no servile wish to court a powerful friend, but a positive necessity, wrung from them by the pressure of the application. In the evidence before the secret committee, Mr. Walter Boyd says : " I attribute the drain chiefly to that line of conduct which, I believe, the directors of the bank have pursued since the month of December, 1795, when they announced to the public, by an advertisement, certain changes in the quantity and manner of conducting their business of discount." " The diminution of discounts has diminished the powers of commercial houses, and diminished the value of public securities." Mr. Henry Thornton remarked, "It was the want of bank notes, and not of guineas, that had been felt, and no anxiety seemed to be entertained in the city, if bank notes were brought into circulation, respecting the manner of con- 124 History of the Bank of England. trivingto effect the smaller payments." On another occasion this gentle- man expressed his conviction that, if the quantity of bank notes had re- mained as they were, or without any material alteration, the inconven- ience would have resulted, though in a less degree, as the increased trans- actions of commerce required an increased circulation. This gentleman also stated that an enlarged number of notes, proportioned to the occasion for them, would prevent a demand for guineas ; but if fewer notes were issued than the mercantile world required, it would occasion a demand for gold. The measure had now to be justified and reported to the House of Commons. On the evening of the day that this announcement was issued to the public, Mr. Pitt brought down a message from his majesty, to the " experienced wisdom and firmness of his Parliament." At the same time he announced his conviction that the resources of the bank were most abundant, and proposed, as an aid to public faith, to give the security of the State to its engagements. The rhetoric of Mr. Fox, and the oratory of Mr. Sheridan, were employed to reprobate the course of the ministry : but rhetoric and oratory are feeble assailants when truth and justice are opposed to them. On the following day the message was taken into consideration, and a motion carried for a committee to ascer- tain the affairs of the company. Mr. Fox again attacked the policy of Mr. Pitt with vehement eloquence, and in the same speech gave due credit to the conduct and importance of the bank. He added : " The effect of this measure I will not describe by saying that it has impaired — that is.but a weak word — it has destroyed the credit of the bank." " For the first time since the Eevolution an act has been done in the king's name which has struck at the foundation of the public credit, by seizing the public money, belonging to individuals, deposited in the public treas- ury of the public creditor." No time was lost by the committee ; and on the 3d of March they reported " that the total amount of demands on the bank, on the 25th February, was £13,770,390, and that the total amount of funds (not including £11,686,800 due from government) was £17,597,280 ; leaving a surplus of £3,826,890, exclusive of the govern- ment debt." The necessity of an issue of notes under £5 being greatly felt by the commercial interest, an act was passed by the 3d of March, authorizing it; and by the 10th of the same month notes for £1 and £2 were ready for delivery. The country bankers also circulated notes under £5, owing to the repeal of the act passed in 1777. The report of the secret committee had satisfied the minds of the most doubtful, but among the less informed branches of the community great uneasiness continued. Some anxiety was, therefore, relieved when the following, bearing date the 6th of March, appeared : " In order to accom- modate the public with a further supply of coin for small payments, a quantity of dollars, which have been supplied by the bank, and stamped at the mint, are now ready to be issued at the bank, at the price of 4s. 6d. per dollar, and a further quantity is preparing." A discovery was made, however, in time to prevent the issue. It was found that 4s. 6d. would be 2d. under their value in the market as bul- lion ; and this great error was rectified by the following notice on the Issue of Dollars — Extension of Discounts. 125 9th of March : " In consequence of its appearing to be the general opin- ion that the dollars will be more conveniently circulated at the rate of 4s. 9d. than at that of 4s. 6d., notice is hereby given, that dollars are now ready to be delivered at 4s. 9d. per dollar." The dollars were Spanish, and bore a small king's head stamped on the Spanish king's neck. The debates in the senate attracted attention ; and the public mind, ready to start at shadows, was depressed by the language of the opposi- tion. The enemies of the ministry had sought to depreciate the value of bank paper; the announcement, therefore, that dollars would be issued in exchange, created great satisfaction to the holders of notes. On the first morning appointed for their delivery the office was crowded with appli- cants; the cashiers saw the public several deep waiting for dollars ; the usual striving and struggling which, to the present day, distinguishes the claim for cash, was acted, and many had to wait some hours before they could be supplied. The knowledge that the bank was filled with claim- ants increased the alarm of others. The following days witnessed the same scene ; but, as there appeared no hesitation in supplying all the applica- tions, and as there seemed no want of the metal, the claims soon abated. The report of the committee gradually produced its proper effect; and the call for dollars decreased every day. In less than a month the de- mand was measured by the wants and not the fears of the people; and on the 31st of October, 1797, these dollars, of which 2,325,099 had been issued in eight months, were called in. Since their circulation a large number had been imported into the country, and stamped in resemblance of those sent from the mint. When the latter were paid in it was al- most impossible to distinguish the true from the false ; and after some vain and futile attempts to do so, the bank were compelled to receive, with- out discrimination, all stamped dollars at 4s. 9d. Notwithstanding the increased accommodation granted to the mercan- tile interest on the 27th of February, and stated by Mr. Thornton to have more than balanced the distrust occasioned by the cessation of payments in specie, it appears to have been generally considered that the increased amount of business demanded enlarged discounts. A meeting, therefore, at which the principal merchants attended, took place at the London Tav- ern. Mr. Alderman Lushington presided, and some resolutions, of which the following are the heads, were agreed to : "That the accommodation afforded by the Bank of England, in discount of bills and notes, is inade- quate to the present extended commerce of the country." " That without an extension of the circulating medium of the kingdom, by discount of mercantile bills and notes, the general commerce of the country will be exposed to the most serious, immediate and alarming evil." " That the recent mark of confidence reposed in the Bank of England by the respecta- ble association for receiving their notes, notwithstanding the order of council of 26th February, has given the merchants and traders a fair claim to reasonable and necessary accommodation." On the 24th March another meeting was held, at which it was resolved, "That in the opinion of this meeting, the capital employed in the export and import trade of Great Britain has amounted, on an average of the last six years, to forty-five millions per annum ; and that there is always two months' supply of this merchandise in the custody of the merchants 9 126 History of the Bank of England. and traders, and that a discount accommodation to such proportion may be afforded without risk, backed by this security." These resolutions were forwarded to the directors of the bank ; but the reply was not con- sidered satisfactory. On the following week a third meeting was held, at which it was resolved, " That though well satisfied with the sentiments expressed by the bank, they considered that the practice of discounts should be extended upon the scale mentioned at the previous meeting." The reply of the bank directors to these resolutions was to the effect that they declined pledging themselves to any specific sum ; that though they were perfectly apprised of the larger discounts required by the trade of the country, it would be impossible to meet the views expressed in the resolutions until government had paid off a considerable portion of the debt due to them. But should this occur, they would have a greater latitude, and feel strongly inclined to avail themselves of it in favor of the merchants. On the 3d of May, notwithstanding the great opposition made, and the blame thrown on government, "The Bank Restriction Act" was passed. This, which is the 37th George III., is entitled "An act for continuing for a limited time the restriction contained in the minute of council of 26th of February, 1797." By it the bank directors were not permitted to issue cash except for sums under twenty shillings. But if any person lodged specie in the bank, he might be repaid to the extent of three-fourths of the sum lodged, if it exceeded £500. The directors were also allowed to advance to the bankers any sum not exceeding alto- gether £100,000. They were also permitted to lend £25,000 each to the bank and Royal Bank of Scotland. The act was only to remain in force till the 24th of June. On the 22d of that month, however, another was passed, continuing the restriction of cash payments until one month after the commencement of the following session ; and in November a third act was passed, limiting it to the somewhat indefinite period of six months after the conclusion of the war. On the 17th of November, a report from the committee of secrecy was ordered to be printed, of which the following is an abstract. The total amount of outstanding demands on the bank on the 11th of November, was £17,578,910, while the funds for discharging the same, (not includ- ing £11,686,800 due from government,) was £21,418,460. The bankers and traders, who might have claimed three-fourths of their deposits in cash, had only demanded one-sixteenth. Notwithstanding, however, all these favorable circumstances, the committee concluded by saying, "they were led tothinkit would be expedient to continue the restric- tion," from the political circumstances of the period. The last act was deemed politic by the government ; but a court of proprietors was held in the same month ; and Mr. Raises, after saying, that by the report of the secret committee, there was a net balance in favor of the bank, exclusive of the government stock of £3,839,000, added, that the bank was in so affluent a state as to be ready to pay all the demands on it in specie whenever called upon. The consent of the proprietors was also asked for advancing the amount on the land and malt tax of .£2,750,000, which was unanimously agreed to. By the act passed in November, the power of paying in cash was Political Causes — Bank of France. 127 taken from the hands of the directors. The ministers, viewing it princi- pally in a political light, and regarding the war, which was then furiously raging, as one which was almost as doubtful as it was determined, adopted the policy, which, whatever its faults, led to, if it did not produce, some of the finest results which ever inspired the pen of the historian. Let it be remembered that, during the whole of the time, prohibitory of cash payments, we were waging a fierce but eminently triumphant contest with a memorable spirit and with a memorable man. The spirit was that of the French revolution ; the man was Napoleon Bonaparte. Let us remember, also, that during the existence of that system, which has been so much censured, we were alone in the contest with him, whose name was for many years synonymous with success. The thunders of the Vatican were silenced. The military pride of Prussia was humbled. The power of Austria lay prostrate at his feet. Eussia embraced the universal conqueror. England stood alone in her resolute defiance. She strengthened the weak and encouraged the wavering. "Wherever the free spirit of a people arose, her gold gave strength to their arms ; her wisdom enlightened their councils. Her navy swept the seas, and crip- pled the commerce of her adversary. And when her unconquerable resolution once more stirred the prostrate powers of Europe — when, through her exertions, " the little island of St. Helena confined him, for whom a world was once too small," the law passed in 1797 was in active existence. These things are not written to defend; thev are only penned to mitigate the wrath which has been poured upon the bank restriction act. Extraordinary events require extraordinary measures, and our his- tory from 1797 to 1815 is unsurpassed in the annals of nations. The haste with which the one and two pound notes had been executed, together with the ease with which they were received by the public, pro- duced extensive forgeries. In January, 1799, the bank advertised that all notes of the above amount, dated before July, 1798, might be received in cash, or exchanged for new notes, and that all odd sums not exceeding £5, might be received in specie. The first fruits of the restriction on cash payments occurred this year, as the proprietary received a bonus of ten per cent, on their capital in five per cents, 1797. It is curious, and sometimes not uninteresting, to notice in what man- ner other establishments have acted under similar circumstances. In January, 1814, the national bank of France experienced a demand for bullion. The star of Napoleon was on the wane ; the climate of Eussia had destroyed the confidence in his success. He was engaged in a des- perate strife with those he had so often subdued ; and the conviction was felt that the glory had departed from him. The holders of the notes of the French bank, uncertain how far a change of dynasty might affect them, went eagerly to- require payment in gold, until £600,000 only re- mained. With the sanction of the emperor, the bank determined not to pay more than £20,000 a day ; and to effect this, the prefect of police announced that no one might apply for gold unless he should be the bearer of a number, to be supplied him by the mayor of his quarter. It has already been seen that the government were constantly pressed for money, and in 1798 an act was passed to legalize voluntary contribu- tions for carrying on the war. Merchants and manufacturers vied with 1 28 History of the Bank of England. each other in subscribing. A temporary office was erected under the east piazza of the Royal Exchange to receive contributions. The Bank of England offered £200,000 ; the city of London gave £10,000. The place was filled with all classes and conditions, eagerly crowding to con- tribute. £300,000 were remitted from India, with the promise of a similar annual repetition during the war ; and upwards of two millions, exclusive of this sum, were contributed to support the dignity of the empire against the aggressions of the enemy. The question of preserving the rest* was disputed in 1798, by a por- tion of the proprietors. The maintenance of a. reserved capital has been argued in another place, and time has tested its wisdom. A strenuous exertion was, however, made by Mr. Allardyce, who published a quarto volume, and called courts of proprietors to his aid, to compel the division of this fund. The question is a simple one ; and as the proprietor de- rives part of his half-yearly interest from the reserved capital, while the value of the stock is in some proportion to it, he has no just cause of complaint. Should such a proposal ever be carried out, the price of the stock would be deteriorated, and the dividends would vacillate as they did a century and a half ago. A great fraud like that of Astlett, or a series of colossal forgeries like Fauntleroy's, might engross the whole of the half year's profits, and send the proprietors from their half-yearly meeting discontented and without a dividend. The reasons which actuated Mr. Samuel Thornton, then governor, and the court of directors, to moot the renewal of the charter at so earlyf a period as 1800, when it had twelve years to run, are to be found in the acknowledgment that they considered it a favorable moment, because ministers, pressed by the expenses of the war, were disposed to accept terms which, under more favorable auspices, would be rejected. For more than a hundred years the name of Thornton appears in the list of the direction, and the house of Thornton constantly occupied an important mercantile position. During the governorship, therefore, of such a man, with whom the capacity of direction was almost hereditary, there was * Or balance of undivided profits. \ The widest and most comprehensive experience shows, that no set of men have ever been invested with the power of making unrestricted issues of paper money without abusing it ; or, which is the same thing, without issuing it in inordi- nate quantities. Should the power to supply the State with paper money be vested in the managers of a private banking company, then to suppose that they should, by limiting their issues, endeavor constantly to sustain the value of their paper, would really be to suppose that they should be extremely attentive to the public interests, and .extremely inattentive to their own. It is quite certain, that the re-enactment of the restriction on cash payments by the Bank of England, and the rendering of it perpetual, would not have the least effect on the value of our paper currency, provided its quantity was not at the same time increased. * * * -In this quarter of the world we are much too eager, in the pursuit of fortune, to be in any degree affected by such scruples. It is indispensable, therefore, that the issuers of paper money should be placed under some efficient check or control ; and the comparative steadiness of the value of the precious metals at once suggests, that no check can be so effectual as to subject the issuers of paper money to the obligation of exchanging their notes, at the pleasure of the holder, for a given and unvarying quantity, either of gold or silver. — Edin- burgh Review, 1825, p. 266. Opinions of Statesmen. 129 every chance of the bank receiving its due proportion of justice from the government. The period also was propitious. The services rendered by the bank to the State had been so important that Mr. Pitt, in all his pride of place, was compelled to acknowledge their 1 necessity. They were so recent that they could not be forgotten. The ministry to which they had been rendered were still in power, and still compelled to seek assistance; and, to crown all, the undeniable fact that the bank had stopped payment through its endeavors to aid government, was in the remembrance of every one. These, then, were claims to a just consider- ation, the remembrance of which was calculated to lead to a fair and favorable result. The reasons assigned by Mr. Thornton, in the House of Commons, were to the following effect : That the first overtures had come from the governor and directors, because they were convinced that a renewal at such a period would prove of utility to the bank and the country. A motion had been made for the establishment of a rival bank. Meetings had been held ; endeavors had been made ; pamphlets had been written in its support ; and the renewal of the charter would be the most effectual check to so idle a measure. Bat no considerations have ever prevented a ministry from making a good bargain with a bank. It has grown into a habit, and custom is too often a cloak for injustice. In 1708, when the charter was renewed for twenty-two years, the renewal was paid for with a loan of £400,000, with- out interest, and the cancelling of a million and a half of exchequer bills. In 1713, when found expedient to extend it for a further ten years, the ba.nk undertook, in return, to circulate nearly a million and a quarter more of these bills. In 1*742, on a renewal of twenty-two years, £1,600,000 were lent, without interest, in perpetuity. The year 1764 witnessed an equal exertion of the screw, and, for a farther extension of a similar period, £110,000 were paid, and one million lent to govern- ment. In 1781 a loan of two millions for three years was claimed for the same service. That statesmen regarded these agreements with the eyes of traders, is evident, from a remark of Mr. Grenville, that " he thought the last-named contract a good bargain for the nation." But is this the light in which such matters should be regarded ? Is it worthy a great nation to fly to a corporate body in the hour of need, and, when met honorably and liberally with the requisite supplies, to turn around and bargain like a miser with its benefactor ? Is it befiting the charac- ter of a great statesman to make a company pay a tax for their charter, and then, in the time of panic and peril, demand increased assistance, which carries danger and distress with it ? The government either have no right to claim payment for the privileges they grant, or they have no right peremptorily to demand further assistance. It has been already seen that Mr. Montague and Lord Godolphin were decidedly of opinion, " that no fine ought to be expected for a renewal." This is the principle they propounded ; but this is not the principle upon which their succes- sors have acted.* * War and Suspension of Payment. — Mr. J. ~W. Gilbabt, in his testimony before Sir Robert Peel, in 1843, being cross-questioned on this ticklish topic, gave the follow- ing veritable and manly explanation : " If I were prime-minister, I would imme- 130 History of the Bank of England. For the renewal of the charter, in 1800, the bant proposed to lend three millions for six yeas, without interest — a right being reserved to them of claiming re-payment at any time before the expiration of six years, if consols should be at or above eighty per cent. In the event of such re-payment, they were to allow six per cent, per annum on the sum re-paid, for such part of the six years as might remain. This proposal was deemed liberal by Mr. Pitt, who considered the profits to amount to six or seven hundred thousand pounds " on dry calculation," and not the actual gain, which would probably be much more. In return for this payment, Mr. Pitt expressly enumerated, among the advantages to be enjoyed, and for which they made the government a remuneration, that of holding the public balances in their possession. This minister stated that " the public had derived great assistance by the aid of the bank, and would do so again under any similar pressure." Such was the opinion of William Pitt — such was the persuasion of Lord North — such was the declaration of Mr. Grbnvillb — at the renewal of each successive charter. Yet, at each period, a heavy sum has been claimed ; and, in the present instance, six or seven hundred thousand pounds were paid by the proprietors of the Bank of England for the privilege of bene- fiting the people of Great Britain; and it will be seen, at a later period, that the State made a further claim upon the bank many years before the charter had expired.* diately, on the commencement of war, issue an order in council for the bank to stop payment. I stated, also, that I spoke as a politician, not as a banker. The orily war that has occurred, in my memory, is the war of twenty years with France ; that is the war to which I referred. Now, under such a war as that, it appeared to me that a suspension of payments would be advisable. I recollect, some time ago, investigating the circumstances attending the suspension of 1797. I came to the conclusion that, under the circumstances, a suspension of cash payments was not a matter of choice, but of necessity. That is the opinion at which I arrived, after a careful investigation of the circumstances." * The leading financial and commercial features of the half century, ending with this period, (1800,) were as follows : 1751. — An act of Parliament (1751, 24 George II.) orders the Gregorian (or new) style to be used in Great Britain. Canal from Stockholm to Gottenburg finished. Treaty of commerce between England and Spain. 1753. — Two thousand bales of cotton exported by Jamaica. 1754. — Commencement of war between England and France, and military operations under Washington, in Virginia, was found guilty of forging «. bond, in the name of Lord Chesteeeield, for £4,200. The greatest interest was made, and the highest influence was exerted to save him; but, when the case came before the council, the minister of the day said to Geobge III., " If your majesty pardon Dr. Dodd, you will have murdered the Peeeeaus ;" and he was hung, accordingly, June 27th, 1 777. John Hatfield, a heartless impostor, who had inveigled " Maby of But- termere," the celebrated beauty, into a marriage with him, was hung for forgery at Carlisle, September 3, 1803. Mr. Henry Fauntleeoy, a London banker, was hung November 30, 1824. Joseph Hunton, a Quaker merchant, suffered death De- cember 8th, 1828. The last criminal hung for forgery at the Old Bayley was Thomas Maynaed, December 31st, 1829. " Mr. Basil Montagu states justly that mankind are less deterred from crime by calculation of consequences than by involuntary sympathy with others, and by the natural sense of right and wrong. The first has little influence, except in conjunc- tion with the last, and it may be well that it is so ; since, if all sorts of arbitrary and capricious commands were of absolute force and validity in themselves, unsec- onded by opinion or conscience, there would be no end of 'the fantastic tricks which man, dressed in a little brief authority, might play before high Heaven to make the angels weep.' There has been too much of this work already ; and a very little of the same spirit in future will be more than is wanted. There is enough of it lurking in the prejudices and vindictive passions of men ; and it need not be fomented by panders and sophists. No punishment, we believe, will in the end be found to be wise or humane, or just or effectual, that is not the natural reaction of a man's own conduet on his own head, or the making him feel in his own person the consequences of the injury he has meditated against others. It is impossible to force this sentiment, in the individual or the community, up to the same degree of horror against the smallest as against the highest crimes by a positive law." — Edin- burgh Review, 1826. The subject of forgery and the punishment therefor was fully discussed in the Edinburgh Review, vols. 31 and 52; Eraser's Magazine, vol. 11 ; Eclectic Magazine, vol. 21, p. 660; Monthly Review, vol. 1 ; Blackwood's Magazine,vol. 69, pp. 461, 605, and in Linen's Museum, vol. 36. Prosperity of the Country. 183 CHAPTEK XVII. PROSPERITY OF THE COUNTRY — REDUCTION OF INTEREST — CIRCULATION OF ONE POUND NOTES FOREIGN LOANS — EAGERNESS TO SUBSCRIBE — HIGH PRICE OF SHARES — DELU- SIVE COMPANIES — HISTORY OF THE PERUVIAN LOAN — REMARKS IN THE HOUSE OF COMMONS. The year 1823 witnessed the early dawning of a prosperity,* which, regarded as solid by many, ended in an almost national ruin. In the previous year, with a view of reviving speculation, then dormant, the bant, at the instance of the State, had issued about four millions in ad- vances to the government, and in enlarged discounts ; but, in Mr. Horsley Palmer's opinion, the first step towards the excitement was lowering the interest on public securities, which was effected in 1822, by reducing the navy five per cents to four per cent., and a smaller stock to three and a half per cent. This reduction in the interest of upwards of two hundred millions caused some distress and great dissatisfaction. To meet the dis- sentients the bank advanced five millions, to be repaid in quarterly in- stalments. Many persons who had hitherto been contented with the div- idend they had received, were compelled either to reduce their expenses to meet a diminished revenue, or endeavor to obtain a larger interest than was offered by government. A feverish feeling was thus excited, and as there are always plenty of schemes, which, if not safe, are specious, the discon- tented man embarked his capital in speculations, the great promises of which blinded him as to their insecurity. Unwilling to reduce his expenses, he thought he saw a safe mode of enlarging his income, and he " entertained any proposition for investment, however absurd, which was tendered." In the year 1822 another cause occurred, of which the en- tire responsibility must rest with the government. This was the act of Parliament extending the circulation of the small notes of country bankers till 1833, instead of ceasing at the period allotted to them by the bill of Mr. Peel. That act, said Mr. Canning, hedged the one pound note with a divinity which was never supposed to belong to it before. Only six op- ponents were seen arrayed against the bill. The bank had made a pro- * A parliamentary debate occurred in 1811, on the state of the trade and manufac- tures of the nation, the scope and aim of which will at once appear from the resolu- tions which Mr. Brougham moved, and which were negatived by a majority of 55, the numbers being 118 to 63. 1. That the trade and manufactures of the country are reduced to a state of such unexampled difficulty as demands the serious atten- tion of this house. 2. That those difficulties are materially increased by the policy pursued with respect to our foreign commerce, and that a revision of this system ought forthwith to be undertaken by the house. S. That the continuance of th ose difficulties is materially increased by the severe pressure of taxation under which the country labors, and which ought by every practicable means to be lightened. 4. That the system of foreign policy pursued by his majesty's ministers has not been such as to obtain for the people of this country those commercial advantages which the influence of Great Britain in foreign courts fairly entitled them to expect. — Al- ison's Europe, vol. 6, p. 107. 184 History of the Bank of England. vision of bullion for the country notes, with the full conviction that the law would remain unaltered. In the memorandum delivered to the House of Commons the directors state, " the consequence of that measure was to leave in the possession of the bank* an inordinate quantity of bul- lion ; £14,200,000 in January, 1824 ; and further to afford the power of extension to the country banker's issues, which it is believed were greatly extended from 1823 to 1825." Mr. Richards, in his evidence before the committee of the House of Commons in 1832, bore testimony to the efforts of the bank in preparing to meet its outstanding engagements. " When it was determined that the country should return to cash pay- ments, a vast deal of anxiety was created in the minds of the public. As the period approached that anxiety greatly increased, and many who. had previously issued freely, and given fair and legitimate accommodation, were afraid to continue. The bank had put itself in a position faithfully and honestly to fulfil that law — that I assert most fearlessly — and suc- ceeded in procuring a large quantity of bullion. They anticipated the period when, by law, they were bound to return to cash payments, and enabled themselves to assist the country bankers to meet their engage- ments in gold." In 1822 the aggregate currency was low;f but no sooner was the country banker allowed to issue more small notes, than it began to in- crease, and with it an apparent prosperity as dangerous as it was delu- sive. In 1825 the issues of the country bankers were fifty per cent, more than in 1822. From the middle of the latter year to the com- mencement of 1825, prices of commodities improved, in some cases twenty-five, and in others fifty per cent. At the end of 1824 the stock of manufactures was shorter than usual. The whole country wore a promising^ appearance, and every one became ready to embark his capi- *The dividends of the bank, from 1807 to 1822, were at the rate of ten percent, per annum. f Mr. Lewis Lloyd, a gentleman whose opinion on such subjects is entitled to the greatest deference, from his long experience as a partner in one of the first banking houses in the kingdom, (Jones, Lloyd & Co.,) estimated the reduction of country bank paper in 1816, as compared with its amount in 1814, at about a half; (Com- mons' Report, 1819, p. 170.) Perhaps, however, the estimate of Mr. Sedgwick, Chairman of the Board of Stamps, may be the most accurate, who reckoned, from computations founded on the number of stamps issued to the country bankers, that the amount of the notes in circulation from 1810 to 1818, both inclusive, had been as under : 1810, £ 21,819,000 1812, 19,944,000 1813, 22,597,000 1814, 22,709,000 1815, £ 19,011,000 1816, 15,096,000 1817 15,898,000 1818, 20,507,000 This table sets the vicious nature of the existing system in the clearest point of view. — Edinburgh Review, vol. 43, p. 272. % Only two years before, or on 7th March, 1821, Mr. Goooh brought forward a motion for the appointment of a parliamentary committee to inquire into agricultu- ral distress; and in the course of the debate Mr. Cukwen observed, " In the flour- ishing days of the empire, the income of the nation was £400,000,000, and tho tax- ation was £80,000,000 annually. At present the income is only £300,000,000, yet the taxation was nearly the same. In what situation was the farmer ? The aver- age of wheat, if properly taken, was not more than 62s., the consequence of which Joint Stock Companies. 185 tal in any thing which promised great profit. The people congratulated themselves on being -wiser than their forefathers ; and part of the press, at first, re-echoed their congratulations. Every one seemed smiling and satisfied. The shopkeeper sold his goods. The merchant made large profits. The manufacturer could not produce sufficiently fast. " Even country gentlemen, the most querulous of all classes," says a periodical, " the least accustomed to suffer, and the most incapable of struggling with difficulties, could no longer complain." The South Sea bubble was a tradition about which many talked, who knew nothing but the name. Those who were familiar with the story little expected to see a repetition of scenes which had shaken the foun- dations of commerce. " The schemes so lately afloat," says a writer at the time, " carried with them a much greater mass of fraud and decep- tion, in the aggregate, than the South Sea bubble." It is instructive to read the comments of a portion of the press. The following extract from the " Annual Register" as a calm survey of the events of the year, aspiring to the dignity of history, may be regarded as most important, from the time allotted it, to form an opinion : " There was in the present year no diminution of that prosperity which the country had enjoyed throughout the whole of 1823. All agricultu- ral produce was slowly but steadily on the rise. In the cotton trade there was a rapid increase ; and the manufacturers of wool, iron and hardware were equally prosperous. The abundance of capital led to the formation of numerous joint-stock companies, directed, some of them, towards schemes of internal industry ; others of them towards speculations in distant countries. The ' mines of Mexico' was a phrase which suggested to the imagination of every one unbounded wealth ; and three companies, the Real del Monte Association, the United Mexican and the Anglo-Mexican, were formed for the purpose of extracting wealth from their bowels, by English capital, machinery and skill. Similar companies were formed in the course of the year for working the mines of Chili, of Brazil and Peru, and of the province of Rio de la Plata. In the month of March there were upwards of thirty bills before the House of Commons, for the purpose of giving legal existence to different companies. In all these speculations* only a small instalment, seldom exceeding five per cent., was paid at first; so that a very moder- was, that the farmer lost 3s. by every quarter of wheat he grew. On the article of wheat alone, the agricultural interest had lost £15,000,000, and on barley and oats, £15,000,000 more. In addition to this, the value of farming stock had been dimin- ished by £10,000,000 ; so that in England alone there was a diminution of £40,000,000 a year. The diminution on the value of agricultural produce in Scotland and Ireland cannot be less than £15,000,000; so that the total loss to the agriculturists of the two islands cannot be taken at less than £55,000,000. — Alison's Europe, vol. 5, p. 354. * The doctrine of free trade, afterwards so largely acted upon by the British legislature, first began in 1820 to engross the thoughts not only of persons engaged in commerce and manufactures, but of the heads of the government. On 8th May, 1820, Mr. Baring presented a petition on this subject from the merchants of Lon- don ; and on the 16th, Mr. Kikkman Finlay, a Glasgow merchant, equally remark- able for the extent of his transactions and the liberality of his view9, brought for- ward a petition from the Chamber of Commerce of Glasgow, which set forth, in strong terms, the evils arising from the restricted state of the trade with China and 186 History of the Bank of England. ate rise in the price of shares produced a large profit on the sum actu- ally invested. If, for instance, shares of £100, on which £5 had been paid, rose to a premium of £40, this yielded on every share a profit equal to eight times the amount of the money which had been paid. This possibility of enormous profit, by risking a small sum, was a bait too tempting to be resisted. All the gambling propensities of human nature were constantly solicited into action ; and crowds of individuals of every description, the credulous and the suspicious, the crafty and the bold, the raw and the inexperienced, the intelligent and the ignorant, princes, nobles, politicians, placemen, patriots, lawyers, physicians, di- vines, philosophers, poets, intermingled with women of all ranks and de- grees, spinsters, wives and widows, hastened to venture some portion of their property in schemes, of which scarcely any thing was known but' the name." The speech from the throne evidenced the general feeling of security and satisfaction. It congratulated the Commons and Lords on the " pros- perous condition of the country. There never was a period in its history when all the great interests of the nation were in so thriving a condition. An increasing activity pervades almost every branch of manufactures." But another source of high profit appeared to offer through the acknow- ledgment of the independence of the South American States.* Any petty commonwealth putting forth pretences to a popular govern- ment, had only to publish magnificent assertions, and yet more magnifi- cent promises, and loans were made as freely as required. "Upwards of thirty-two millions were thus subscribed by infatuated men, the principal of which will never be seen ; while a pretence of keeping up the interest is scarcely made. The following will afford some idea as to the mode in which these loans were managed, and will yield an insight into the mad- ness to which a state of monetary excitement will sometimes lead sober- minded men. This desire to invest capital in foreign loans amounted to a mania. The way in which the Peruvian loan was arranged, together with the circumstances which attended it, may serve as a specimen of others. No sooner was it understood that the State of Peru had con- sented to borrow, than the utmost anxiety prevailed to lend. The osten- sible contractor was overwhelmed with applications. The reply was, that he would dispose of the scrip in the open market. At the time ap- pointed, a crowd of speculators surrounded him, begging to know the terms, and pressing for an early delivery. All voices were lost in the the East Indies, and the advantages over British subjects which the Americans enjoyed in that respect, and urged the repeal of the usury laws, and the reduction or removal of the duties on the importation of several foreign commodities. These views were so favorably received in both houses of Parliament that Lord Lansdowne was encouraged, a few days after, to bring forward a motion for the appointment of a committee to take into consideration the means of extending our foreign commerce. He dwelt, in an especial manner, on the inconveniences to which the trade of the country was now exposed by the numerous duties which restricted it in every direc- tion, and argued, that " whatever brought the foreign merchant to this country, and made it a general mart for the merchandise of the world, was beneficial to our trade, and enriched the industrious population of our ports." — Alison. * Mr. Canning announced January 1, 1825, as the period for recognition of the South American States. Peruvian Loan. 187 confusion, and the agent calmly waited the bidding of the eager multi- tude. Various prices were vociferated, but the contractor maintained a reserved silence. By this it was understood that the point desired was not reached. After a pause, eighty-eight was named by him. This was known to be a premium of eight per cent, on the contracting price, and a storm of indignation arose at the idea of any one, but the assembly, making so large a profit. " Shame, shame !" " Gross extortion !" met the contractor's ears. Still there was an eager pressure to get near him, and those who could approach sufficiently close considered themselves fortunate in taking sums varying from £5,000 to £10,000. The practi- cal reception of his terms appeared so satisfactory that the contractor soon advanced the price to eighty-nine ; on which he was once more met with the same expressive language. Again, however, his acuteness proved- correct, and some of the scrip was taken at the increased rate. The noise became so great, and the confusion so excessive, that few could be supplied ; and though many applications were made, there was no answer. The attention of the crowd was soon diverted by the offer of a broker to supply any person, who required the scrip, at eighty-eight. The speculator was taken at his word, and very large amounts were sold. By this time the news had reached the stock exchange ;* and in a short period a considerable number of the members assembled, and pressing round the contractor, with great indignation, moved him and his agents from one part of the edifice to another. The crowd soon became so ex- asperated, that they forced them out of the building. A desperate struggle followed, and at last they were allowed to re-enter. Being tumultuously called upon to name a price, one of them mentioned ninety as the minimum. Soon after this they left ; with their departure the mania appeared to subside ; and many of the purchasers, fancying their bargains were imprudent, actually sold on the spot at a lower price than they had given. Such was the anxiety to obtain a portion of the loan to be granted to Peru, a loan which now bears no interest whatever. The year 1825, like its predecessor, was ushered in with a flourish of trumpets. The ancient golden age had revived. Gladness and gaiety were in the land. "The hum of successful industry was heard through- out the fields ; every man was contented and happy ; joy beamed in every face ;" and, as Lord Leveson Gower expressed himself, his poetic spirit waxing warm within him, " distress had vanished from the face of the land." The delusion was general. The song of triumph universal. The Earl of Liverpool rejoiced in the success which had attended that great measure, introduced, with his sanction, by Mr. Peel. " The task had been accomplished ; we were enjoying our reward." Lord Dudley said : " The country now reaped in honor and in repose all that they had sown in courage, in constancy and in wisdom." " Our prosperity ex- tended to all orders, all professions, all districts, enhanced by those arts which ministered to human comfort, and by those inventions by which man seemed to have obtained a mastery over nature by the application of her own powers." * Mr. Josephs was expelled from the stock exchange for improper conduct, con- nected with shares in the Lower Rhine Steam Navigation Company, August, 1825. 188 History of the Bank of England. The contagion spread to the Commons. No year had ever exceeded that of 1824* in its exports ; and the chancellor of the exchequer, in an exultant tone of triumph, congratulated the house on the auspicious cir- cumstances of the period, adding, " we may safely venture to contemplate with instructive admiration, the harmony of its proportions and the solidity of its basis." Joint-stock companies of every conceivable de- scription were put prominently forward.f In 1824and 1825J six hun- dred and twenty-four new ones made their appearance. Royal and im- perial mines ; a mint company, to coin the gold when it should be pro- cured from Mexico ; associations to provide bread ; with others, which rivalled one another in outrageous assertions and extravagant protesta- tions, possessed the public mind. The upper classes found their repre- sentatives in the direction of these companies. A violent love of lucre was as prevalent among the higher as the lower ranks. Mr. Grenfell asserted, in the House of Commons, that he had seen the prospectus of a new speculation, to which the name of a prince of the blood was at- tached. Another bore the title of the Archbishop of Canterbury. The highest mercantile names in the land were in the direction of others. All were confident, and all hoped to reap enormous profits. A Mr. Peter Moore boldly said, in the House of Commons, " Upon his honor, he believed that not one of the companies with which he was connected had less probity or less stability than the Bank of England." Every de- scription of property rose greatly. The artisan was in full employment. New buildings were in progress of erection. Men of enterprise, without capital, could command funds for any plausible undertaking. When introducing his motion on the address to the king, Lord Leve- son Gower said : " Such is the general state of prosperity at which the country has arrived, that I feel at a loss how to proceed, whether to give precedence to our agriculture, which is the main support of the country, to our manufactures, which have increased to a most unexampled extent, or to our commerce, which distributes them to the ends of the earth, which finds daily new outlets for their distribution, and new sources of national wealth and prosperity." * The bank this year announced its intention of investing money on mortgages, and the security of public stock, April. I- The contemporary annalists have recorded facts which demonstrate that this glowing picture was not the creation of the orator's imagination, but the faithful portrait of the time in which he lived. "Agricultural distress," says the Annual Register, " had disappeared ; the persons engaged in the cotton and woollen manu- factures were in full employment ; the various branches of the iron trade were in a state of activity ; on all sides new buildings were in a state of erection ; and money was so abundant, that men of enterprise, though without capital, found no difficulty in commanding funds for any plausible undertaking. This substantial and solid prosperity was stimulated to an additional extent by the operation of the many joint-stock banks and companies which had sprung into sudden existence in the for- mer year. Some of them had put in motion a considerable quantity of industry, and increased the demand for various articles of consumption ; and all of them, at their commencement, and for some time afterward, tended to throw a certain sum of money into more active circulation, and to multiply their transfers from one hand to another." — Alison's Europe. \ The anti-corn law agitation commenced this year. Bubble Companies. 189 CHAPTER XVIII. BUBBLE COMPANIES — INCREASE OF PROSPERITY VALUE OF SHARES — COMMENCEMENT OF THE PANIC — FAILURES OF COUNTRY AND LONDON BANKERS — SCENE AT THE DISCOUNT OFFICE MR. BARISG GREAT DISTRESS GENERAL DISCREDIT ASSISTANCE OF THE BANK DECLINE OF THE FUNDS ISSUE OF ONE FOUND NOTES MANSION-HOUSE MEET- ING ANECDOTES OF THE PANIC — KIOTS IN THE COUNTRY — JOINT-STOCK COMPANIES OPINIONS AS TO THE CAUSE OF DISTRESS. The vast quantity of gold expected from the South American mines was so great, that many well-informed persons, according to Mr. Tooke, "believed, and acted on the belief, of a diminished value in gold and silver in consequence." A journalist of the day, writing on what was evidently a feeling, if not a belief, founds on it an essay, of which the following is an extract : " The chancellor of the exchequer was obliged to give up his customary budget, and introduced a new system of duties in kind. I had an opportunity of hearing a right honorable gentleman, who filled that situation, very pathetically lament that the ' over-produc- tion of gold then was as great an evil as the over-production of grain had been formerly.' ' Once,' he added, 'the difficulty was how to get gold ; then the question to be put was how to spend it ; for the nation already resounded with the lamentations of sufferers, forming creditors of the State, but who had been paid off with gold.' " It is in such things as these, which satirize popular opinion in the pursuit of public applause, that the real feeling of a people may often be discovered. The pages of the satirist are a vivid picture of society. As a confirmation of this frenzied desire, another writer of the period says, "The earth was to yield in such quantities of the precious metals, that fears began to be entertained of their' becoming almost valueless." The credulity of the British public was only surpassed by the impu- dence of the. inventor. Men, without any capital but presumption, pro- posed and carried out companies ; and when, by the aid of an important name or two, obtained perhaps under fraudulent pretences, and a prospec- tus full of specious phraseology and definite promises, they had arrived at a premium, the shares were sold, and the association abandoned. In a sa- tirical novel of the day, a bubble, to be called " The Gold, Wine and Olive Joint-Stock Company," is proposed to be projected. From the writer's position, it is very probable that much of his presumed fiction was fact. " Why, you talk," says one of (he characters, " as if we had -any real business to transact. All we have to do 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." The history of the difficulty with which the first instalment of rent was met, amounting to £8 6s. 8d., is unquestionably a picture of the pauperism and poverty which often mingled with the shamelessness of the pretenders. The writer remembers to have seen, some time after- wards, the prospectus of a company, to drain the Red Sea in search of the 13 190 History of the Bank of England. gold and jewels left by the Egyptians in their passage after the Israelites. Many similar jocularities 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 mating large profits. "We are all prone to believe what is agreeable, and the movers in the mania of 1825 were no exception to the rule. Every one appeared to get rich without trouble. The prices of all arti- cles increased in value. Tenfold 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 generally. Money was abundant, and circulated with rapidity. Prices* and profits rose higher and higher, and, in short, ' All went merry as a marriage bell.' ' The newspapers could scarcely contain the announcements which day after day poured from the prolific pens of the schemers. Shares were issued at high premiums ; loan after loan taken at high rates ; but high as they were contracted, the extravagant feeling of the period sent them all higher. The " Real del Monte Mining" shares, the value of which may be known from being quoted shortly after at 317 discount, reached * The rise of prices consequent upon the inflation of this period, is the annexed summary of values in 1823 and in 1825 : Brimstone, rough, per ton, Butchers' beef, per lb., " mutton, " Cochineal, Spanish, " Coffee, British plantation, per cwt., " St. Domingo, " Cotton, Georgia, bowed, per lb., " Bengal and Surat, " Flour, Yarmouth per stone, 14 lb., Indigo, East India, per lb. Iron, per ton, Lead, " Hum, Jamaica, per gall., Extra Jamaica, •« Saltpetre, East India, per cwt., Spices — Cinnamon, per lb., Mace, " Nutmegs, " Pepper, black, « Spelter, (1824.) per ton, Sugar, B. P. Gar., average, per cwt., " white, Havana » Silk, Reggio, per lb., " China, « Tallow, per cwt., Tobacco, Virginia, ordinary,, per lb., Tin block, per cwt.,' Wool, per lb., s period, is indicated by 1823. 1825. £ s. d. £ «. d. 6 10 . 10 4|. 8 4. 10 7} 10 0. 16 6 0. 6 13 4 2 0. 4 8 8i . 1 6} 6}. 1 H 18. 2 6 9 9. 16 6 0. 13 !2 10 . 30 10 2 9. 3 4 3 2. 3 8 14 0. 1 16 16 8. 13 6 5 2. 18 3 1. 12 5} . 9} 10 . 41 15 1 10 . 2 5 2 2 4 0. 2 17 11 6 . 17 10 0. 18 1 11 . 2 3 2* . 6} 3 17 . 5 10 6 6. 9 6 Value of Shares. 1S1 1,400 premium, making a difference of £1,777 per share. The " Bolanos," and other foreign mining companies, mounted to 525 premium. The less the place was known where the mine was to be sunk, the higher the premium reached, the bolder and the more exorbitant were the demands made on the public credulity. The " Tlalpuxahua" was done at £299. Rumors and reports of veins of gold discovered, had only to be fastly propagated, to be freely credited. The following table will give an idea of the height to which the mad- ness of the period had raised the prices of mining shares in one month : Anglo-Mexican, £10 paid. Brazilian, 10 " Columbian, 10 " Real del Monte, 70 " United Mexican, 10 " Pee. 10, 1824. Jan. 11, 1825. £ 33 pm. 10s. dis. £ 158 pm 70 " 19 pm. 550 " 35 " 82 " 1,350 " 155 " 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 exe- cute his commissions. The ordinary business of the funds were disre- garded. The regions of the stock exchange wore an appearance of per- petual bustle.* But a great change was at hand. This desire of adven- ture, and the rising aspect of all markets, created an unfavorable foreign exchange,! which, together with the specie, sent to fulfil the loans made to foreign States, occasioned seven millions and a half of gold to be sub- tracted from the bank coffers by November, 1825. * The following is a statement of the new associations that sprung up after the year 1823, and the nominal capital subscribed for their various undertakings: — Doubleday's Financial History of England : 1i Mining companies, £ 38,370,000 29 Gas companies, 12,077,000 20 Insurance companies,.. 35,820,000 26 Investment companies,. 52,600,000 54 Railway and canal co.'s, 44,051,000 67 Steam companies £ 85,555,000 11 Trading companies,. . . 10,450,000 26 Building companies, . . 13,781,000 23 Provision companies,.. 836,000 202 Miscellaneous, 148,109,000 Making, in one year, a. total of 532 companies, with a nominal capital of £441,649,600 sterling. f It is almost unnecessary to explain, that the par of exchange is fixed on a com- parison of the intrinsic value of the currencies exchanged, and that, upon this princi- ple, in fixing the rate of exchange between Hamburg and this country, thirty-four Hamburg shillings are computed to be equal to a British pound sterling. But if the Hamburg currency should, by any accident, lose one-half of its intrinsic value, thirty-four Hamburg shillings would no longer be equal to a British pound sterling. The exchange with Britain would turn against Hamburg in proportion to the loss of value which its currency had experienced, and it would, of course, be necessary, in remitting from Hamburg to Britain, to pay sixty-eight Hamburg shillings for every British pound. Applying these principles to the British currency, we find, that as the price of bullion rose, or, in other words, as bank notes decreased in value, all our foreign exchanges became proportionally unfavorable; only, however, when remittances were made by means of paper. In that case, when the notes of the Bank of England were exchanged against the pure currencies of Paris, or of Ham- 192 History of the Bank of England. In that month the alarm began. The directors of some of the compa- nies consented to their being dissolved, on condition of retaining one- fourth of the deposits to meet contingent and past expenses. The banks where the deposits of others had been placed were besieged to procure a return. The lord mayor was applied to by many who, rejoicing at first in the prospect of profit, shrank from the chance of loss. From this pe- riod the tide turned. The eyes of the people opened to their marvelous absurdity. The sellers became more numerous than the purchasers ; and by December had arisen a voice of alarm so loud that it reached to the remotest provinces of the empire, and so deep that it penetrated to the heart of the metropolis. By the 23d of November, 1825, greater difficulty existed in obtaining commercial discounts than had been experienced for some years. The extreme caution of the directors of the bank, who, witnessing a decline in the exchanges, feared a fresh exportation of their gold, was the imme- diate cause. The applications of the highest houses, equal in stability to the bank, were only partially complied with. It may be supposed that the coming storm was little anticipated when the following remark was made by a high authority : " They contract the issue of their bank notes with more timidity than, perhaps, the real urgency of the case demands." " The distress occasioned by the limitation exceeds belief." These com- ments, occurring immediately preceding the panic, prove that it was but little expected. But if the directors were compelled to limit their ac- commodation, great care was evinced that credit should not be injured by it. The most eminent firms, the character and wealth of whom placed them beyond suspicion, were selected for reduction, so that no re- proach could be attached to them. In an interview which the bank authorities held with the chancellor of the exchequer, towards the end of November, some high words appear to have passed, in which the chancellor said the bank had brought them- selves into a situation too serious to be treated with disregard, though the evil must work its own cure. The governor reminded him that they had undertaken the dead weight when no one else would do so. Past services are generally forgotten ; and the chancellor replied that it was only a private contract, and had no connection with their corporate privi- leges. The following, from the " Times" will give some idea of the in- tense anxiety to obtain money : " Yesterday was the day for effecting discounts at the bank on London bills. It is customary to leave them the day before, and the answer is returned on Thursday. The decision burg, it was necessary to pay a premium of about twenty per cent, on the sum re- mitted. But when bullion was exchanged against those currencies, the premium on the sum remitted was reduced to between five and eight per cent. ; which pre- mium, therefore, expresses the real amount of the exchange against this country ; for if, when the paper currency of the Bank of England is exchanged against the pure currencies of the continent, a premium of twenty per cent, must be paid in addition to the sum remitted ; and if, when bullion is exchanged, the premium is re- duced to five or eight per cent., to what can this difference be imputed but to the inferior value of the paper. Holding this fact, therefore, to be conclusive as to the depreciation of the paper, the only question that remains to be considered is, the cause of that depreciation. — Edinburgh Review, Feb., 1826, p. 150. Failure of Country Bankers. 193 is usually given before one, at the latest. Long before that hour had struck, the place was besieged ; and when at last the expected time came, notice was given that the answers could not be announced till two. Two o'clock arrived, and the anxiety of those who waited was at the highest pitch ; and then another notice was given, stating that a further delay must take place till half-past two. During the whole of the period the directors were in close deliberation in the bank parlor. By this time the assembly was immense ; and, when intimation was made that the ar- rangements were complete, a rush, similar to that at a theatre, ensued, to gain access to the window at which answers were to be given. The con- fusion was so great that when four o'clock arrived the crowd had not dis- persed, and it could not be ascertained whether the bills were discounted, or part discounted, or rejected. During the ministration of the clerk at the window he was frequently called away to receive fresh instructions. The directors did all in their power, but that power was limited." So great was the emergency, that the principals of some of the first mercantile firms waited in person, in anxious expectation, to hear their fate. The country banking houses were the first to fall. The important York house of Wbntworth & Co. advertised that they were, "under the most painful circumstances, compelled to suspend payments." £200,000 in notes of their issue were said to be circulated ; and the ef- fect of this failure was severe. It was confidently believed at the time that if the London agent had honored Wentwortii's bills, all would have been well. Some curious statements were made concerning these transactions ; but the probability is, that the London bankers were justi- fied in their proceedings, and the fact that Wentworths were unable to resume payment is some proof of their discretion. It was a time for caution, but it was a time also for kindness and sympathy. The evil of an unlimited currency* being permitted to firms not suffi- ciently responsible, was fearfully felt. By an extraordinary anomaly, the bank was without the issue of a single one-pound note ; while country bankers, many of whom were mere retail shopkeepers, deluged the prov- inces with millions. Terrible suffering was spread among the poorest families, with whom these notes circulated. The distress was as hopeless as exteusive. Since the act of 1817, paper had almost supplied the place of gold throughout the provinces. If notes of that kind are to be circulated, wrote the " Times" the bank ought to do it ; not hovels in the country, dignified by the title of "bank" being written over a dairy or a cheesemonger's shop. The notes of one house were openly sold at 15s. in the pound. To support credit, associations were formed, by the most opulent pledging themselves to take the paper of various firms. * So long, therefore, as any individual, or association of individuals, may isaue notes of a low value, to be used in the common transactions of life, without lodging any security for their ultimate payment, so long is it certain that those panics which must necessarily occur every now and then, and against which no effectual precaution can be devised, must occasion the destruction of a greater or smaller number of banking establishments, and, by consequence, a ruinous fluctuation in the supply and value of money. — Edinb. Htview, Feb., 1826. 1 94 History of the Bank of England. The stoppage of the bank* of Sir W. Elford, at Plymouth, while it added to the alarm in London, created a melancholy scene on the spot. The people were almost frantic. The holders of notes crossed and jostled each other in all directions. There was literally a whole population, with food in abundance staring them in the face, unable to procure it, as nothing but gold would be taken. Daybreak witnessed the bank sur- rounded by tumultuous mobs, and the civil power mustered in front. " A night of fearful omen succeeded to many an unfortunate family." The run on the Norwich bank was stopped by the notes of the Bank of England being given in exchange. On the 12th of December, 1825, the crash which struck terror and alarm throughout London, commenced with the partners in the banking house of Sir Peter Pole & Co., which was said to have yielded £40,000 a year for the previous seven years, announcing their incapacity to meet the claims of their creditors. At nine o'clock this stoppage was known, and the exchange was resorted to, to ask the cause, and inquire if other houses were in danger. Forty-four country banks were connected with the firm, and the ruin of many was anticipated. The agitation of the city exceeded every thing that had been witnessed for a century. The funds fluctuated violently. Humors of the failures of other firms spread rapidly. On the 13th an important house, possessed of half a million of undeniable securities, declared, after a most severe pressure, an inability to meet its creditors. On the 14th, a West-end banker advertised, that though compelled to pause for the present in his payments, he hoped to resume on the following Saturday ; and in this he was successful. On the same day the distress was increased by the' stoppage of two firms, known as Sikes, Snaith & Co. and Everett, Walker & Co. The con- fusion spread. Men ran in alarm and dread to draw the balances from the hands of their bankers. Lombard-street was crowded with persons waiting in anxious fear or idle curiosity. A few gazers around a door were sufficient to create the destructive rumor that a run was made upon the establishment. But there was no occasion for rumor. The people seemed to anticipate that the bankers kept all their deposits to answer unreasonable demands, and that the expense of a banking-house was * Greatly as the destruction of private fortunes and the wide-spread mischief and ruin occasioned by the late crisis in the money market are to he lamented, it is no small satisfaction to know that they have not proceeded from any thing affecting the foundations of the wealth and prosperity of the country. The sails and rigging of the vessel of State have been torn and injured by the violence of the tempest, but her timbers are as sound and fresh as ever. The bankruptcy and distress in which so many have been involved have come upon us in the midst of profound peace, and at a period when all the great branches of industry — agriculture, manu- factures and commerce — were in a state of rapid improvement, and when the public revenue was more than sufficient to meet all the wants of the State. No one, indeed, who has given the least attention to the subject, can suppose for a moment that the late crisis was either primarily occasioned, or in any degree aggravated by a falling off in any of the sources of wealth. It is admitted on all hands that it sprung from a totally different cause — from some defect in the system on which the business of banking is conducted in England ; and, while the frightful extent of the evils expe- rienced calls loudly for inquiry into their cause, it at the same time enforces the ne- cessity of adopting some such Bystem as may be fitted to guard effectually against their future occurrence. — Edinb. Review, vol. 43, p. 263. Comments of " The Times" — General Distress. 195 maintained for the sole purpose of benefiting the public. Many a firm, of unimpeachable honor and unquestionable solvency, was compelled to bend before the storm. The merchant looked to his banker for support ; but all the efforts of the latter were directed to save himself from destruc- tion. The usual channels of credit were stopped, and the circulation of the country completely deranged. Checks came pouring in from all quarters ; and it was remarked, that " the question would soon be, not who goes, but who stands ?" On the exchange the names of other firms were openly mentioned ; and no report, however absurd, failed to obtain implicit belief. The " Times," in commenting upon the assistance granted to the house of Pole, Thornton & Co., remarked, " It is not probable that gold, to a great amount, has been in the first instance transmitted to this house. An additional quantity of paper, convertible, no doubt, into cash, on ap- plication to the bank, to the amount of the sum advanced, has been sent into the market. We suppose that the funds possessed by this and other houses, not immediately convertible in the case of a run upon their credit, may consist of mortgages ; and, if so, it is a public evil that bankers, the dealers in paper, should have seized so much of the real property of the kingdom, and not left themselves sufficient to meet an emergency. They resemble pike and other rapacious fish, who pursue and seize a gudgeon, which, when they are on the point of swallowing, a larger pike supervenes and appropriates the victim." The members of the press generally performed their great duty. " It ought to be impressed on all who possess any influence at the present moment," said the " Morning Chronicle" " that a blind selfishness will soon bring its own punishment along with it ; that if all persons rush to the banks to draw out their balances, which the bankers must pay in- stantly, while they cannot compel their debtors to pay the balances due to them, the consequences must be very serious indeed. We can hardly conceive any amount of capital equal to this conflict." The rumor was spread that a firm in Mansion-House-street had stopped, and an immediate rush took place from the Royal Exchange and stock exchange to discover the truth. So great was the crowd that it was necessary to remove them by force. The clerks grew alarmed at the tumult outside, and rushed simultaneously to the outer desk, in appre- hension of a more violent demand than their duty would allow them to meet. " Nefarious attacks," says one, " continue to be made on the credit of other banking houses, by collecting crowds of idle people round their doors, and reporting a run." The distresses of the country people, as day by day, and almost hour by hour, circulars were issued announcing fresh stoppages, baffle belief. Bills might be seen in many of the shops of the different localities, announcing that the banker's notes would be received for goods. One house took £2,000 in this manner. Another was so crowded that the sufferers could only bo admitted one at a time. The doors were besieged, and men might be seen issuing burdened with drapery or grocery which they had bought, in preference to retaining the dishonored paper. A Cambridge bank advertised that " they would keep open an hour or two later, and open the next morning- an hour earlier ; that the holders of their notes, if there be any then in circula- 196 History of the Bank of England. tion, may have them exchanged for gold or hank paper." The Messrs. Gurnet, at Norwich, hy boldness in going beyond their usual line, saved many from ruin, and lost nothing, worthy of notice, through it. But it is to be feared that these are few, though honorable exceptions. An Oxford bank ostentatiously exhibited such a profusion of gold that every one was satisfied, and no person thought of demanding it. Country bankers from all parts of England were in town, trying to se- cure cash. The heads of all the London houses were as regular in their attendance as their clerks. It was common to hear of men, worth £100,000, begging the loan of £1,000 as a personal favor, on unexcep- tionable security. The gloom spread to the exchange. Exchequer bills fell to sixty-five shillings discount, and the brokers closed their books, and refused to engage in any transactions whatever. The bankers from the provinces demanded gold, not to the extent of their circulation, but to the extent of all their engagements of every description, in anticipa- tion of a run. Many packages of gold forwarded to these gentlemen came back unopened. Hundreds of thousands of sovereigns, said Mr. Poulett Thompson, were sent, which were returned unpacked and un- touched, having been provided only to meet the chance of a run. The Bank of England were called on to supply gold for all the notes of these banks, and post-chaises and four were regularly stationed in Lombard- street all the day. The principal stock was closed at the bank, but trans- fers were allowed on this occasion up to the last possible period before making out the dividend. One hundred, an unprecedented number, were effected in one day. The partners of London banking-houses were called out of church to answer the expresses of their correspondents; and the latter often carried off a reserve of gold of fifty per cent, more than they were likely to require. The governor and deputy-governor, with many of the directors, were constantly at their post. " They came early and they left late." The guards also remained all day in the building, in case their exertions should be required. On the 14th December, 1825, a meeting of merchants and traders, only of London, was convened at the Mansion-House, to devise mitiga- ting measures for this calamity. It was stated that the distress arose from want of confidence in men able to pay 40s., 50s. and 60s. in the pound. That those who had any confidence in their bankers ought to continue to pay in their money as usual; and were this done, the whole difficulty would be met. The governor and deputy-governor of the bank* officially communicated to the lord mayor that they would do * It may easily be conceived what, in a great mercantile community, deeply engaged in the most extensive and onerous engagements, must have been the effect of such a sud- den contraction of the currency, at the very time when its expansion was most loudly called for ; but imagination itself can hardly conceive the consternation and distress which followed. The country bankers, whose issues had nearly doubled in the pre- ceding year, having reached the enormous amount of £14,000,000, were the first to be assailed. They were besieged with applications from their numerous customers to make advances ; but the demand for gold was so excessive that their stock of specie was soon exhausted, and they had no resource but to apply to the Bank of England for assistance. It was the magnitude and constant increase of this demand which constituted the source of embarrassment to that establishment. Very natu- Assistance of the Bank. 197 everything in their power to alleviate the city and country bankers, Mr. Alexander Baring, afterwards Lord Ashburton, in a speech, which, from its energy and insight into business, was calculated to produce a great effect, demanded, after an elaborate picture of the panic, " confi- dence ;" and so great was the impression that the assembly, almost sim- ultaneously, re-echoed the word. After a series of resolutions, in which they determined to support the banking interest to the utmost extent of their capacity, the meeting separated. " One establishment," wrote the " Courier," " falls after another. The fabric of our credit is in flames around us. Five great houses have already been sacrificed to panic ; three or four others have suffered immense losses. To withstand a pressure, aid must be given largely and liberally. In the words of Mr. Baring, let us follow general principles in ordinary cases, but in an extraordinary emer- gency, like the present, let us resort to an adequate, though extraordinary, remedy." The distress continued to increase. Trade was at a stand. Doubt brooded everywhere. No one knew who was trustworthy. The million- aire of yesterday might be the bankrupt of today. It was almost im- possible for any man, engaged in business, to know his own position. An order was issued to the officers of the mint to expedite, with all pos- sible dispatch, a coinage of sovereigns; and one hundred and fifty thou- sand a day were made for the space of a week. Gold coin was sent to every town in the kingdom. Then was the mischief felt of the country bankers having been allowed to continue and increase the circulation of their notes of one and two pounds. There was a constant demand for their gold ; and this demand affected the bank, which was, indeed, the only resource ; and every house in London found itself under the neces- sity of meeting the demands made by its depositors, through the medium of the former. Nor were they backward in affording assistance. In a few weeks their discounts rose from five to fifteen millions. Ad- vances were made upon the simple deposits of title-deeds, often without even an examination. Exchequer bills, to an enormous amount, were sold to meet the demand from the mercantile interests. Gold from abroad, and coin from the mint, were constantly arriving at the bank. Mr. Harman said, in his examination before the Parliamentary Com- mittee, " we took stock in as security ; we purchased exchequer bills ; we not only discounted outright, but we made advances on deposits of bills of exchange to an immense amount; and we were not, on some occa- sions, over nice, seeing the dreadful state in which the public were." rally, and, indeed, unavoidably, the bank contracted their issues, which, in the first week of December, were down to £17,000,000. The effect of this was to bring a great number of the private bankers to an immediate stop. In the end of November, the Plymouth Bank failed ; this was followed, on the 5th December, by the failure of the house of Sir Peter Pole & Co., in London, which diffused universal consterna- tion, as it had accounts with forty country banker?. The consequences were disas- trous in the extreme. In the next three weeks, seventy banks in town and conntry suspended payment. The London houses were besieged from morning to night by clamorous applicants, all demanding cash for their notes; the Bank of England it- self had the utmost difficulty in weathering the storm, and repeated applications were made to government for an order in council suspending cash payments. — Ali- son's Europe, vol. 6, p. 248. 198 History of the Bank of England. The course which the directors adopted, though opposite* to that of 1797, appears to have been correct. Within three -weeks they doubled their discounts. From the 11th to the 17th December, 1825, the demand for gold was urgent, incessant and insatiable. A suggestion was made to government for an order in council to restrain the payments in specie, under the apprehension that it might be exhausted. Mr. Canning is re- ported to have replied, in one of his emphatic sentences, that " he would never consent to a thing of that sort." But the most extraordinary features of the application was the advice of Mr. Huskisson to place a paper against their doors, stating they had not gold to pay with, but expected it shortly. It is,- perhaps, more extraordinary that the bank deliberated upon it ; but allowances must be made for the agitation and anxiety of the time. That which, ordinarily, is looked upon as unrea- sonable, assumes a new form under an almost insupportable pressure. For two or three days the most unquestionable security would not procure money; nor could the public funds be said to have a price. There was no market for bank.f there were no buyers of East India stock. It was * The amount of country notes in circulation, in 1825, was at least from thirty to forty per cent, greater than their amount in 1822. It was this excessive addition to the currency that rendered it redundant, and caused a drain for bullion. And this drain having forced the Bank of England to narrow her issues, a shock was in con- sequence given to credit ; the currency of the metropolis became more valuable than that of the country, and the difficulty of obtaining accommodations in London being increased at the very moment that the notes of the country bankers were beginning to be returned upon them, their embarrassments and ruin inevitably followed. A few isolated failures in different parts of the country served to excite a general panic, and so rapid and sweeping was the destruction, that in the short space of five or six weeks, from sixty to seventy banking establishments were compelled to stop payment. — Edinburgh Review, Feb., 1826. f Bank of England stock, which, in 1825, had brought 299, had at one time this year declined to 193. Consols had declined from 96£ to 73J ; the changes from 1821 to 1827 being as follows: Bank Shakes. Consols. Lowest. Highest. 221 240 235 252 204 246 227 245 196 299 193 223 200 217 Lowest. Highest. Bank Dividends 68£ 78| 10 per cent. 75| 83 10 72 85f 8 " 84f 96J 8 75 94± 8 73-2- 84£ 8 76| 89i 8 1821, 1822 1823, 1824, 1825, 1826 1827,.... "The annals of Great Britain, from 1819 to 1825, are fraught with the most im- portant lessons to the reflecting, on which the attention of statesmen in future times should constantly be fixed. They demonstrate at once the all-importance of the currency upon the fortunes of the country, and illustrate, in the most striking man- ner, the double set of dangers to which a monetary system, based entirely upon the retention of the precious metals, is exposed. From the first introduction of the metallic system in 1819, to the extension in 1822, the history of the country is nothing but the narrative of the dreadful effects produced by the contraction of the currency to the extent of above a third of its former amount, and the sooial distress and political agitation consequent on the fall in the price of every article of commerce to little more than the half of its former level. Its annals, from the exten- sion of the currency, in July, 1822, to the dreadful crash of December, 1825, illustrate Riots in the Country. 199 the opinion of Mr. Huskisson that in forty-eight hours all dealings ■would have been stopped between man and man, except by way of bar- ter. Owing to the difference in the money and account prices of con- sols, those banters, who were compelled to sell stock to raise cash, paid at the rate of 72 per cent, for the necessity. On the 13th the bant raised the discount to five per cent. A morning journal remarted, "that to inspire confidence in houses which can at last only repay it by insolvency, is to increase a direct wrong, and dreadfully to enhance a great commercial evil. If a house fails, and pays 15s. in the pound, a foolish cry is raised that a little rea- sonable help would have saved it. Saved what ? A house that was, in relation to its debts, one-quarter worse than nothing. Ought such a house to be left standing in a condition where it was every hour made the de- pository of other people's money ? Even if a banker pays 20s. in the pound, and has no surplus afterwards, he is not a legitimate banter ; he is trading without a capital, and the least mishap, or the least fall in the public funds, if he buy into them with other men's money, may, in one day, mate him an insolvent." The energy of the direction was great in administering relief to worthy applicants. An eminent country banter was some days in town implor- ing a loan of £50,000, for which he offered double the security. During his stay a neighboring bant stopped payment; the alarm of the towns- people grew so strong lest his own should follow the example, that they assembled to force, if possible, the payment of their notes ; nor could they be dispersed without the aid of the military. On this intelligence reaching London, the 50,000 sovereigns were supplied, with which the banker immediately departed to the scene of confusion. " The town was swept of cash," says one writer, " and such a dearth of this neces- the opposite set of dangers with which the same system is fraught when the precious metals flow in in abundance, from the undue encouragement given to speculation of every kind by the general rise of prices for a brief period. To make paper plenti- ful when gold is plentiful, and paper scarce when gold is scarce, is not only a dan- gerous system at all times, and under all circumstances, but is precisely the reverse of what should be established. It alternately aggravates the dangers arising from over-speculation, and induces the distress consequent on over-contraction. The true system would be the very reverse, and it would prevent the whole evils which the preceding pages have unfolded. It would be based on the principle of making paper a supplement to the metallic currency, and a substitute for it when required, not a representative of it ; and plentifully issued when the specie is withdrawn, it should be contracted when it returns." — Alison's Europe, vol. 6, p. 249. Mr. Alison's theory would not work well The only sound principle as to cur- rency is to adapt the volume of paper to the volume of gold ; let them fall or rise together. The latter should always bear a true relation to the former, and thus, when the earliest indications are given of a decline in the basis, (by foreign export, for instance,) then is the time to discourage that over-trading which an undue expan- sion of paper is sure to create. This was clearly exhibited in England in 1822- 1824, (bringing about the revulsion of 1825,) and in the United States in 1 834-1836, (producing, beyond question, the revulsion of 1 83V,) and again in New-York, from 1849-1857, when the bank circulation was rapidly increased fifty-five per cent., or from $21,912,000 to $32,300,000; the latter upon a declining specie reserve and an unfavorable condition of the foreign exchanges, thus producing the revulsion of 1857, by which the property of that State became suddenly depreciated fully three hundred millions of dollars. — Am. Ed. 200 History of the Bank of England. sary commodity ensued, that few persons Lad five pounds to spare for any purpose whatever." Pawnbrokers and money-lenders were resorted to, till their capitals were exhausted. Scarcely a sovereign was to be seen throughout London which was not new ; so active had the authori- ties been at the mint, and so eagerly had the old coinage been carried from the metropolis. The deficiency in sovereigns was said at one time to be so great at the bank that applicants were compelled to receive half sovereigns in payment. The gloom. which pervaded the metropolis was universal.* A vague feeling of uncertainty as to the issue ripened into an indefinite dread of consequences almost as harassing as the worst reality. A general bank- ruptcy seemed impending. The impression — for it scarcely amounted to a conviction — that the bank itself, hitherto regarded as almost sacred, was sharing the danger of the time, added to the general anxiety. Up to this period, with the single exception of 1797, the term bank had been synonymous with safety. When, therefore, it was believed that, amid the general -wreck and ruin, even the Bank of England was in danger, the great hall of the establishment witnessed an eager proffer of notes in exchange for gold, which, however, was met as promptly as it was made. No attempt was offered to withhold, as in 1797 ; no attempt to delay, as in 1745. It was, probably, partly owing to the unhesitating readiness with which the gold was paid as fast as it could be demanded, that the confidence of the public was so quickly restored. Had the holders of the notes felt that there was any thing like hesitation, the alarm would have spread indefinitely, and the bank must have suffered in proportion. The energy displayed in the bank parlor led to the same activity in the executive department. The labor of the clerks was trebled in the discount office ; and in others many were kept working long after the ordinary hours. The counters were besieged, and the attendants were wearied with the constant demand for sovereigns. The drain of notes and specie for the country continued to be prodigious. One provincial banker carried with him £300,000 ; and there was scarcely an establish- ment throughout the empire which did not apply for help. As it has been in most panics, the country bankers took more than they required, and assisted in bringing on many of the town failures. Counterfeit sovereigns, which rivalled in brightness the new issue, were numerous, as any thing which looked like gold was taken without hesitation. The manufacturers rivalled the mint in activity. * This melancholy and lamentable revulsion may, we think, be clearly traceable to the unwiBe expansion of the banks, which, in the first place, encouraged the mania of 1 824-5, for speculation, and superinduced the extravagances of that day. The Bank of England had necessarily contracted its circulation from £27,261,600, in 1815, to £18,172,000, in 1822-3. The country banks, at the same time, had re- duced their circulation from £19,611,000 to £8,416,000, a total reduction of from £46,272,000 to £26,588,000, or more than forty-two per cent. But instead of grad- ually increasing this again, there was an expansion, in 1824, more rapid than the late curtailment; paper money thus giving a sudden and violent impulse to our trading, speculation and gambling. Between 1823 and 1825 the Bank of England unwisely enlarged its circulation to £26,069,000, and the country banks to £14,980,000, making an aggregate of £41,049,000, against £26,588,000, as above stated. — Am, Ed, Remarks of Mr. Richards. 201 The. danger of a run upon any bank cannot be measured. The be- ginning of a demand for gold may be very trifling; but no sooner is it known that a run is occurring on any establishment, however unques- tionable its solidity, than it is indefinitely increased, each man only anxious that the supply should hold out until his claim be satisfied. So great was the demand for one week, that a doubt was seriously enter- tained by all parties that the bank would scarcely be able to stem the torrent. They had, however, determined to pay to their last guinea. " Another such week," said Mr. Richards, emphatically, " and the bank could not have stood it. Gold was expected ; but we were subject to the winds and the waves." Fortunately, on the last day of the week, the tide turned. It must have done so decidedly, for Mr. Richards to have been " able to call out that all was well," when, reeling with fatigue, he sought Lord Liver- pool, with the other members of his majesty's government, on the after- noon of Saturday, the lVth of December, 1825. The following description of the position of the goveror and directors of the bank at this period is from the month of its deputy-governor : "In autumn the bank very seriously began to contemplate what would be the result of the speculations. Not only the bank, but every man's mind connected with the city, was in an extreme state of excite- ment and alarm. I think I can recollect on the first Saturday in December having come home, after a very weary and anxious day, from the bank, receiving a visit from two members of the committee, and one of our bankers of that class, at my own house, stating the difficulty in which a banker's house near the bank was placed. The object was to ascertain my views. I was called upon in consequence of the governor being con- nected with the house of Pole & Co. by marriage, and, other circum- stances. I ventured to encourage these gentlemen, that upon any thing like a fair statement the bank would not let this concern fall through. It was agreed that on the following morning (Sunday) we should meet as many directors as I could get together, with the three gentlemen who had called upon me, and that some eminent merchants, friends of the house, should be called to the meeting, to assist with their opinion. The result was, that the directors authorized their chairs to say, that assist- ance should not be wanting. It was agreed that £300,000 should be placed at the disposal of Pole & Co. the next morning, on the security of a number of bills of exchange and notes of hand, and over and above a mortgage on Sir Peter Pole's property, which was to ride over the ■whole. During that week, I believe, the attention of every man was di- rected much more to the state of that house than to any thing else. They fought through it till Thursday or Friday pretty manfully, and about that time, from a conversation I had with a partner in the house, I was led to fear that it might fail ; however, it fought on till Saturday evening. Sunday passed, and on Monday the storm began, and till Saturday night it raged with an intensity* it is impossible for me to de- * "We were (said Mr. Huskisson) within twenty-four houra of barter." (See Appendix, for a copious review of this important period. — Am. Ed. 202 History of the Bank of England. scribe. On the Saturday night it had somewhat abated. The bank had taken a firm and deliberate resolution to make common cause with the country, as far as their humble efforts would go. On Saturday night it was my happiness, when I went up to the cabinet, reeling with fatigue, to be able just to call out to my Lord Liverpool, and to the members of his majesty's government, then present, that all was well. Then, in the following week, things began to get a little more steady, and by the 24th, what with the one pound notes that had gone out, and other things, people began to get satisfied. Then it was, for the first time in a fort- night, that those who had been busied in that terrible scene could recol- lect that they had families who had some claim upon their attention. It happened to me not to see my children for that week." The incidental mention to one of the directors that there was a box of one pound notes ready for issue, turned the attention of the authorities to the ^propriety of attempting to circulate them ; and the declaration of Mr. Henry Thornton, in 1797, probably occurred, that it was the want of small change, not a necessity for gold, that was felt ; and as the pres- sure on the country banks arose from the holders of the small notes, it was suggested to the government that the public might, perhaps, receive one pound notes in place of sovereigns. The government approved of the idea, and the panic was at its height, when, on Saturday, the 17th of December, 1825, the bank closed its doors, with only £1,027,000* in its cellars.f It has been frequently stated, that by a mere accident the box of one pound notes was discovered. But such was not the case. Mr. Eichards * The changes in the circulation and coin of the bank were as follows, from Feb- ruary, 1823, to December, 1825 : Circulation. Coin and Bullion. 1823,Feb.28, £18,392,000 £10,384,000 1824, Jan. 28 19,736,000 " April, 19,200,000 1825, Feb. 28 20,753,000 " Aug. 31, 19,398,000 " Dec. 3, 17,477,000 " Dec. 24, 25,709,000 14,200,000 13,800,000 8,779,000 3,534,000 2,167,000 1,024,000 On the part of government it was argued, by Lord Liverpool, the chancellor of the exchequer, Mr. Huskisson and Mr. Causing : " The monetary crisis which this country has recently undergone is evidently owing to the mad speculation of the last two years ; and that speculation has-been mainly fostered by the vast increase in the issues of country banker's notes, which took place during that period of de- lusive prosperity. In 1822, before the mania of speculation began, the stamps issued for country bank notes were about £4,200,000 annually ; in 1824, when the mania set in, it rose to £6,000,000 ; and in 1825, when the mania was at its height, it amounted to no less than £8,000,000 annually. This was the amount of stamps usually issued for new notes. The amount actually in circulation was in general about fifty per cent, more at each period, and in 1825 amounted to £14,000,000. The notes of the Bank of England had aiso increased during the same period, but in a much less degree. The increase in that quarter was only £3,000,000 — from £19,000,000, in round numbers, to £22,000,000. The great increase in the currency, therefore, has been in the country bankers' notes ; and they are chargeable with all the disasters which have ensued. The only way to prevent a repetition of the evil, is to lay the axe to the root of the cause from which it sprung. — Alison's Europe. f In the pamphlet lately published by Lord Ashbueion is the following remark- Issue of One Pound Notes. 203 said, " he did not recollect that there were any one pound notes ; they were put by. It was the casual observation that there were such H things in the house, which suggested to the directors that it would be possible to use them." Application was made to government for permission to issue them ; and this was granted, subject to the following stipula- tions : " If, for the purpose of meeting the temporary exigency, occasioned by the sudden withdrawal of the country banks' small notes, the bank are disposed to avail themselves of the power which they have, by law, to issue one pound notes, the government will not object to it, provided it is understood to be strictly temporary ; and provided that the bank shall take the opportunity of the present state of the exchange to pro- cure a greater fund of treasure, and to promote a more extensive circu- lation of gold in the country." The delight with which these notes were received in the country, proved that the want of a secure small currency alone was felt. The knowledge that the provincial banks were constantly breaking, that the parent banks in London were stopping almost as frequently, the fear that universally prevailed with regard to those that were really solvent, brought in the country notes with that rapidity which produced the fearful failures of so many of the body. But that the holders only required to be safe, and that they considered the notes of the corporation eminently so, is proved from the fact of the run suddenly stopping after their intro- duction. In Norwich, the Messrs. Gurnet are said to have staid the plague by merely placing a thick pile of one pound notes of the Bank of England on the counter. "They worked wonders;" said Mr. Harman; "as far as my judgment goes, they saved the country." In most of the provinces they were re- ceived with acclamation. Within a week from their issue the peril and the panic had passed away, and the moneyed interest had time to look around and count the terrible cost of the yet more terrible dangers to which they had been exposed. Seventy-three town and country bankers had failed in one month ; of these, ten resumed payment, their difficul- ties arising solely from the extraordinary alarm of the time. It is gratifying to add the opinions of such men as the late Mr. Roths- child, Mr. George Grote and Mr. George Carr Gltn, upon the con- duct of the bank during the emergency. Mr. Rothschild said, " At the time of the last panic, I think, there was a great deal of credit due to the governor of the bank." On another occasion, he remarked, " I think the bank discounted all the bills sent in as liberally as possible. They discount- ed everything." Mr. George Grote described their conduct "as liberal and daring ; but as judicious as proper." Mr. George Carr Gltn as- serted that " the commercial public were exceedingly indebted to them able paragraph. After saying, " I was called in to counsel with the late Lord Liv- erpool, Mr. Huskisson and the governor of the bank," his lordship proceeds : " The gold of the bank was drained to within a very few thousand pounds; for although the published returns showed a result rather less scandalous, a certain Saturday night closed with nothing worth mentioning remaining." 204 History of the Bank of England. at that time ; they rendered every assistance in their power." Mr. Att- wood " gave great praise to the bank for a remarkable degree of moral firmness during this panic, in throwing its notes out into circulation, which prevented a catastrophe so distressing that he would not attempt to describe it." As a proof of the justice of these opinions, it may be mentioned, that on the 8th December, the discounts amounted to £7,500,000, on the 15th they were £11,500,000, and on the 29th, £15,000,000. In looking over a list of the joint-stock companies formed during this eventful period,* the names which appear in the lists of directors are re- markable. The greatest, the richest and the most honorable in the city, in some ; in others, persons who were borne by the bubbles to the sur- face, but have now sunk to their original nothingness. Mines were pro- posed in all parts of the world. One was issued at a premium avowedly for the benefit of the projector. Another was celebrated "for having a vein of tin ore in its bottom, as pure and solid as a tin flagon." A third was pronounced by the directors as "no speculative undertaking — no problematic or visionary scheme — it was founded on a sure and perma- nent basis, adopted after months of mature consideration, after inquiry, surveys, investigations and reports ;" and this was dissolved almost immediately. Another declared that " lumps of pure gold, weighing from two to fifty pounds, were totally neglected," and that its mines alone would yield " considerably more than the quantity necessary for the sup- ply of the whole world." The romantic aspect of the land was described in a fifth ; while a sixth, proposing to supply England with granite, la- mented, in plausible and poetic strain, the " soft and perishable materials" of the buildings of "the mighty head of a mighty empire." Innumera- ble laborers and artisans were to be employed, " and," continued the prospectus, " perhaps to the efforts of this company the dingy brick fronts, the disgrace of the metropolis, may give way to more durable and magnificent elevations, worthy of the throne of the queen of isles." An utter ignorance was shown of the capability of the countries in which many of the mines were to be worked. Expensive machinery was exported. Liberal salaries were given to every individual connected with * Parliament aided in giving a tone to the mania of the year 1824. At the opening of Parliament, Lord Dudley, in hia response to the king's speech, said, " Our pre- sent prosperity is a prosperity extending to all orders, all professions and all dis- tricts ; enhanced and invigorated by the flourishing state of all those arts which minister to human comfort. * * We have now been fully taught that the great commercial prosperity of England has arisen, not from our commercial restric- tions, but grown up in spite of them." " Agricultural distress (said the Annual Register) had disappeared. * * This substantial and solid prosperity was stimulated to an additional extent by the opera- tions of the many joint-stock banks and companies which had sprung into sudden existence in the former year. * * As these speculations still retained their popularity, the apparent prosperity arising from their artificial stimulus presented an imposing aspect, and augmented the general enchantment." Even the " Quarterly Review" became a convert to the belief that this sudden prosperity was real, not visionary. " The increased wealth of the middle classes is so obvious, that we can neither walk tbe fields, visit the shops, nor examine the workshops and storehouses, without being deeply impressed with the changes which a few years have produced." — See Quarterly Review, 1824. Mr. Canning's Description. 205 the speculations, and Cornish miners, tempted by high wages and higher promises, wandered across the Andes, or tried a fall with the gigantic condor on the " wide, desert plain of Villa Vicencia," as Captain Head, sent out on some such expedition, amusingly relates. But other companies besides mining ones found support. When the bubble burst it was made manifest that an extensive plan of gambling and fraud had been carried on. The old system — for even in defrauding there is nothing new — was adopted. Newspaper puffs, reports and pros- pectuses, raised many of the companies to a high premium. When the shares were sold the company dissolved, and the projectors sought new schemes and new dupes. One member of Parliament was stated to have been the director of nine companies. " The press," says the editor of the " Morning Chronicle" " for the most part by taking shares in these schemes when at a premium, (and we blush to say few editors of news- papers in the metropolis are not to be found in the list of those who bene- fited by them,) had, at all events, no particular interest in opening the eyes of the public." In one company, the two principal charges were the payments of newspaper puffs and legal expenses. To read many of the prospectuses, it appeared only necessary to cut a canal, and it would be laden with barges, bearing the industrial produce of the country; and only necessary to send miners to some place with an unpronounceable name, and gold would attend every touch of the labor- er's implements. "The Mississippi scheme," says a writer of the day, " was a rational project compared with the extravagance of the expecta- tions held by whole armies of speculators. The sea was to contribute its proportion, and treasures, which had been buried for ages, were called from ' the vasty deep ' by the magic and resistless power of steam. In this universal mania men hazarded the savings of a long life of industry ; they gazed only ou the bright side of the future ; they shut their eyes to the reverse. In their region the sun never set." Mr. Hughes, in his "History of England," says that the joint-stock- companies which, in the plenitude of their imaginary power, would have contracted to throw a bridge across the channel, or make a tunnel to the antipodes, were, for the most part, in the Gazette, without a single sub- scriber, or an available shilling. " They fixed the public gaze," said Mr. Canning, in one of his brilliant orations, " and excited the public avidity so as to cover us, in the eyes of foreign nations, if not with disgrace, at least with ridicule. They sprung up after the dawn of the morning, and had passed away before the dews of the evening descended. They came over the land like a cloud ; they rose like bubbles of vapor towards the heavens, and, destroyed by the puncture of a pin, they sunk to the earth and were seen no more." It was openly declared that a member of Parliament received £500 a year from each of two companies, for the protection of their rights. Some senators, for supporting gas companies, had their houses lighted for nothing, while shares which bore a good premium were allotted to others, for their assistance in the Commons. From the pamphlets of Mr. English, published iu 1827, the following list of companies are copied, that the reader may form some idea of the enormous nature of the proposed speculations : 14 206 History of the Bank of England. Existing. Capital. 44 Mining com's,£ 26,776,000 20 Gas do. 9,061,000 14 Insurance do. 28,120,000 49 Miscellaneous, 38,824,600 Present. Amount liable to be called. Amount paid. .£5,455,100 £2,927,350 £21,320,900 . 2,162,000 . . 1,504,625 . . 6,899,000 . 2,247,000 . . 1,606,000 . . 25,873,000 . 6,321,850 . . 3,265,975 . . 33,502,750 127 Abandoned. Capital. 16 Mining companies, £ 5,585,000 9 Investment do 8.550,000 20 Canal, rail-road,