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Till times last sand a history of the bank of england 1694 2013


TILLTIME’SLASTSAND



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ThusatthyhelmofGold,thyshort-liv’dPride,
Noabler,trustierpilot-handcouldguide:
ThatfairFoundationRoyal,that(ifmy
ToopoorPropheticksmaydarespeaksohigh)
Beyondheryettoonarrowleaseshallstand
Withitsunshakenhead,tilltime’slastsand;
Whosecirculatingwarmthshallnevercease,
AtoncethenervesofWarandveinsofPeace:
Commerce,Arts,Arms,allherownfairincrease,
ATreasury,fromwhosediffusivemine
Ourglebeshallfatten,andourThroneshallshine.
FromElkanahSettle,‘AugustaLachrymans:aFuneralTeartotheMemoryoftheWorthy
andHonour’dMichaelGodfrey,Esq.’(1695)




Ioncehadthetemeritytoaskacentralbankerthesecretofhiscraft.‘Italldepends,’hesaid,
‘on making the right-sounding noises at the right time.’ He then abruptly changed the subject,
andstarteddiscussingwithpatentlyspuriousanimationtheprospectsofSussexintheCounty
CricketChampionship.
‘LombardLane’,Punch,14August1963


Preface
Iwashonouredtobeaskedin2009bythethengovernor,MervynKing,toundertakea
single-volume history of the Bank of England. Other commitments and unavoidable
circumstances have delayed the book’s preparation, but the work itself has been both
challenging and enjoyable. From the start we were agreed that I would retain complete
independence of judgement; and the Bank has admirably kept to its word. We were also
agreed that this would be a book for the general reader, not the specialist, and I am very
conscious that - for all its length - this is a far from comprehensive account of the Bank’s
activitiesovertheyears.Thereaderwhowishestogowideranddeepershouldinthe irst
instanceconsultthenotableseriesofbooksonspeci icperiodsoftheBank’shistory:SirJohn
Clapham(1944)on1694to1914;RichardSayers(1976)on1891to1944;JohnFforde(1992)
on1941to1958;andForrestCapie(2010)onthe1950sto1979.Inaddition,onthedomestic
sideoftheBank,thereaderwantingmoreshouldgotoW.MarstonAcres(1931)forthe irst
twocenturiesorsoandtoElizabethHennessy(1992)for1930to1960.Ihavedrawnheavily
onthepioneeringworkofallthesehistorians,asIalsohaveonmyownfour-volumehistory
of the City of London, for each volume of which I did a considerable amount of archival
researchattheBank.Attheendofwritingthisbook,I indmyselfthinking-notforthe irst
time-ofthehauntingwordsthatRichardSayerswroteoncompletinghishistory:‘Iamalltoo
awareofitsimperfectionsandshortcomings,andcanonlyplead,inthephraseofHippocrates
andChaucer,“soshortthelife,solongthecrafttolearn”.’
March2017


PROLOGUE
ItMustNowNecessarilybeaBank
‘TheCommissionersforthenewBankcamethismorningtoMercers’Chapel,wherethe
books were opened,’ noted the dogged chronicler Narcissus Luttrell on Thursday, 21 June
1694.”Tissaid,’headded,‘thesubscriptionsalreadyamounttoPS300,000.’Luttrellwasright:
the capital-raising process for the putative Bank of England was off to a cracking start. In
addition to King William and Queen Mary (jointly contributing PS10,000, the maximum
permitted), other irst-day subscribers included the irst lord of the Treasury (Lord
Godolphin,PS4,000),aclockmaker(JohnEbsworth,PS1,000),asalter(JohnEnglish,PS500),
anapothecary(NicholasGambier,PS600),ahostofmerchants,anda‘gentleman’from‘the
townofStAlbansinthecountyofHertfordshire’(JohnGape,PS500).ThefollowingTuesdaya
friendtoldthepoliticalphilosopherJohnLockethathehadsubscribedPS300-which,Locke
then informed another friend, ‘made me subscribe PS500’ - while even before that, on the
25th, one of the opponents of the new institution had faced up to painful reality. ‘I am
informed,’theDukeofLeedswrotefromhisYorkshirefastnesstohisLondonbankers,‘That
subscriptionstotheBankdo illsofast,thattheirisatthisdaynear700‘000subscribed,so
thatitmustnownesesarilybeabank.Itherforedesirethatyouwillsubscribefourethousand
poundformee…’TheoveralltargetwasPS1.2million(25percentpayableincash),andit
wasreachedatMercers’HallinCheapsideonthetenthday,2July,withthelastofthe1,268
subscribersbeingJudithShirleyofPrestoninSussex,stakingamodestPS75.1
ThreemenaboveallhadbeenresponsibleforgettingtheBank(astheBankofEngland
would in time be familiarly called) to this promising point. William Paterson, a remarkable
andresilientScot,isbestdescribedasa‘projector’-or,inthewordsofoneofhisbiographers,
someone ‘more skilful at promoting his plans than at executing his projects, and more
interested in his own self-advancement than in carrying through the consequences of his
ideas’.Inanycase,whateverthemotivation,itwasPatersonwhohadthepersistenceandthe
lairtoputtheideaofanEnglishbankofcredit-noteissuingandabletolendtothestate,
unlike the Dutch model - irmly on the table. Such a bank would, he insisted in his key
pamphlet A Brief Account of the Intended Bank of England, be ‘for the convenience and
securityofgreatPayments,andthebettertofacilitatethecirculationofMoney,inandaround
thisgreatandoppulentCity’.By1694,andprobablyearlier,histwokeyallieswereCharles
Montagu,adif icultbuthugelyableTreasuryministerwhomarshalledthepoliticalsupport,
andMichaelGodfrey,asubstantialmerchantwhodidmuchthesameintheCityofLondon.On
25 April, the much contested Bill that became generally known as the Tonnage Act passed
through both Houses of Parliament. Among other things it declared that if half the pledged
sumofPS1.2millionwaslenttothestateat8percentbythestartofAugust,thesubscribers
weretobeincorporatedundertheGreatSealas‘theGovernorandCompanyoftheBankeof
England’.2
There followed the successful subscription of late June and early July, ensuring that it
wouldbeacertainty.On5July,threedaysafterthebookshadclosed,anannouncementinthe


LondonGazettesummonedallsubscribersofPS500ormoretomeetonthe10that8amat
Mercers’ Hall. There, after swearing that the sum subscribed had been their ‘own proper
money’,theywereto‘giveinRiting,Rolledup,theNamesofTwoSuchPersonsastheythink
it’, one to be governor of the new bank, the other deputy governor. The election duly
happened,resultinginGodfrey(anPS8,000subscriber)beingnameddeputygovernor,with
another prominent City merchant, Sir John Houblon (a PS10,000 subscriber), as governor.
Nextdaytheprocesswasrepeated,withtwenty-fourofthesubscribersbeingchosenasthe
Bank’s irst set of directors. Governor, deputy governor and most of the directors then
assembledatMercers’Halljustoverafortnightlater,ontheafternoonofFriday,27July,for
their irst‘Court’,hoursaftertheBank’sCharterhadbeenformallysealedattheLincoln’sInn
FieldshouseofSirJohnSomers,lordkeeperoftheGreatSeal.Theimmediateissuefacedby
the ledglingbodywastodeterminetheappropriatemethod‘ofgivingReceiptsforrunning
Cash’:
UponputtingtheQuestionafteralongDebate,ItwasResolved,ThatthesethreeMethods
shallbeobserved&noneother
1st To give out Running=Cash=Notes, and to endorse on them what is paid off in
part
2ndTokeepanAccomptwithyeCreditor:inaBookorPaperofhisowne
3rdToacceptNotesdrawnonyeBank
AnditisOrderedthatnoCreditorshalluseanytwoofthesaidmethods…
The second option was in effect pass-book banking, the third option cheque-book
banking;butalmostcertainlythepreferredoptionwasthe irst-arecognitionof(inDerrick
Byatt’s1994words,referringtothegoldsmith-bankerswhohademergedinLondonsincethe
1630s) ‘the advantage to commerce generally of the goldsmith’s note payable to a named
depositorororder(later,orbearer)’.And‘thus,’headded,‘waslaidthefoundationstonefor
theBank’sseriesofnoteissuesdownthecenturies’.3

Ontheoccasionofanearlieranniversary,the250thin1944,amorecelebratedhistorian
oftheBank,SirJohnClapham,openedhisaccountwithasentencethatwouldbecomemuch
quoted:‘TheestablishmentoftheBankofEnglandcanbetreated,likemanyhistoricalevents
bothgreatandsmall,eitherascuriouslyaccidentalorasallbutinevitable.’Andhewenton:
‘Hadthecountrynotbeenatwarin1694,thegovernmentwouldhardlyhavebeendisposed
toofferafavourablechartertoacorporationwhichproposedtolenditmoney.HadCharles
Montagu, a Lord of the Treasury, and from [May] 1694 Chancellor of the Exchequer, not
thought that, out of several scores of inancial schemes submitted to him, this was on the
whole the most promising, there would again have been no charter or perhaps quite a
different one.’ Context is often all, and perhaps peculiarly so in the case of this quasiaccidentalinstitutionthatwouldachieveararepermanence.
Thecardinalcontextwasindeedwar-speci ically,theNineYears’WaragainstFrance
thatfollowedonfromWilliamandMary’saccessiontothethronein1688,awarthatresulted


inpublicexpenditureduringthe1690srunningatwellovertwicethelevelithadinthe1680s.
Taxationnaturallyincreased,uptoaroundPS4millionayearbythemid-1690s,butthatstill
leftanannualshortfallofsomePS2million.GiventhattheKinghadnointentionofmaking
whathesawasaprematurepeace-andgiventheunderlyingtruthofthepoliticaleconomist
Charles Davenant’s contemporary observation that ‘the whole Art of War is in a manner
reducedtoMoney’,sothat‘thatPrince,whocanbest indMoneytofeed,cloath,andpayhis
Army,nothethathasthemostValiantTroops,issurestofSuccessandConquest’-theneedto
illthegapwas,toputitmildly,urgent.Whattodo?Withmeansofrepaymentincreasingly
non-existent, and a range of short-term expedients already tried, the obvious answer was
long-term borrowing: the beginning, in effect, of the funded (aka national) debt. Lottery
tickets and lottery-like tontine annuities were tried, with mixed success, before inally the
‘specialbonds’solution:namely,PS1.2millionbonds,notonly(inthewordsofthe inancial
historianLarryNeal)‘carryingaguaranteedeightpercentrateofinterestandfundedfrom
speci ic taxes assigned to that purpose by Parliament’, but ‘sold only to subscribers in the
proposednewBankofEngland’.Thisdidnotquitemeettheshortfall,butcruciallyitmeant
thattheKing’swillcouldbedoneandthewarcontinue.
NotthattheKing’swillwasquitewhatithadbeen,giventhat1694wasonlysixyears
after England’s ‘Glorious Revolution’ - that decisive shift towards constitutional monarchy
and in due course something starting to resemble parliamentary democracy, a shift that
Williamhimselfhadnoalternativebuttoacceptasthepriceofhiskingship.Undoubtedly,the
Bankitselfwasoneofthemostpalpableimmediateconsequencesoftherevolution;andit
wasexplicitlyinrelationtothisnewinstitutionanditslikely inancialmusclethaton8July,
sixdaysafterthesubscriptionbookshadclosed,thefutureDukeofChandos,JamesBrydges,
candidlyinformedhisJacobite-inclinedfatherthat‘theopinionofmostpersonshereaswell
asstrangersabroad’wasthattherewasnow‘nolikelihood’ofthegovernmentoftheday‘ever
changing in favour of King James’. There was also by this time a speci ically party political
aspect:whereastheToriesstoodfoursquarefortheprimacyoflandandwereinstinctively
hostiletotheCityandallits inancialwiles-incomprehensible,dangerous,evenrepublicantheincreasinglypowerfulWhigsweredevelopingapoliticaleconomythat(inthewordsof
Steve Pincus, historian of England’s ‘First Modern Revolution’) ‘embraced urban culture,
manufacturing, and economic imperialism’. In short, the Bank was ‘a Whig creation against
Tory resistance’, a creation that marked the triumph of the commercially minded and the
unsentimentalforcesofthenew.4
Arguably paramount among those forces was what was rapidly emerging by the late
seventeenth century as a profound inancial revolution, parallel to the political one. Key
elements included a rapidly growing securities market, now poised to trade in long-term
governmentdebt;Lloyd’sinsurance,withEdwardLloydin1691movinghiscoffeehousefrom
neartherivertoLombardStreetinordertobeclosetotheGeneralPostOf ice,aprimesource
of shipping intelligence; and an increasingly enmeshed web of bankers and merchants,
enjoyingasymbioticandmutuallybene icialrelationship.Theglaringabsencewasclearlya
nationalbank,callittheBankofEngland.Butastopreciselywhatsortofanimalitwasatthe
pointofcreationinJuly1694,thatwaslessclear-cut.
Partly through the legislation, partly through the Charter and partly through what was


tacitlyunderstood,thefollowing(baldlysummarised)seemstohavebeenthecase:thatthe
Bank,inreturnforitsPS1.2millionloan,notonlyreceived8percentannualinterestanda
PS4,000annualmanagementfee,butarangeofprivileges,includinga)seldomaccordedjointstock status; b) in effect limited liability; c) the right to maximise its pro its through
undertaking a general banking business, including through issuing paper money, taking
deposits,lendingonmortgagesanddealinginbillsofexchangeaswellasgoldandsilver;and
d)therighttochooseitsowntoppersonnel.Thedealwasnotquiteopensesame-theCharter
wasguaranteedforonlyelevenyears,theBankwasnotyetformallythegovernment’sbanker,
anditdidnotyethaveamonopolyoneitherjoint-stockbankingornoteissue-butthiswas
stillaprettyattractivepackage.5
Lookedatintheround,fromalargerviewpointaswellasjusttheBank’s,thetemptation
istoseethewholeprocessassmooth,Whiggish(literally)andinevitable,allcomingtogether
toformavirtuouscircle.‘Thestate’sblessingaffordedgeneralcirculationtotheBank’snotes,’
commentsFelixMartinonthis‘public/private’partnership.‘Thecommercialownershipand
management of the Bank improved the state’s creditworthiness.’6 Yet ultimately, as
economists and even economic historians sometimes forget, it takes people to make
somethingwork-andpeople,mercifully,areneitheruniformnorpredictable.

Who,tostartwith,werethe1,268initialsubscribers?Weknowquitealot.7Onehundred
and ninety ‘esquires’ contributed 25 per cent of the total PS1.2 million; 201 merchants
contributed21percent;sixty-threetitledaristocratscontributed15percent;almost70per
centofsubscriberscontributedunderPS1,000;12percentofthesubscriberswerewomen,
responsibleforabout6percentofthecapital;some123ofthesubscriberswereHuguenots
(PS104,000), but only about half a dozen were Jews (PS4,100); and although the lists did
feature a range of tradesmen and artisans, including carriers, clothworkers, embroiderers,
farmers,marinersandwhar ingers,generallythesubscribers(inthewordsofAnneMurphy)
‘belonged to the mercantile middle classes of London’, albeit with ‘important ancillary
contributionsfromlawyers,of ice-holders,andclergyoftheChurchofEngland’.Barely2per
centofthecapitalwassubscribedforfromabroad;over87percentofthesubscriberslivedin
London,Middlesex,SurreyandHertfordshire;andalmost55percentofthesubscriberswere
basedintheCityitself,thehistoricsquaremile.Astomotivation,whatJonathanSwiftwould
recallas‘thebaitoflargeInterest’wasalmostcertainlytheprimeinducement,atatimeof
waranddislocationdrawingin‘agreatNumberofthosewhoseMoneybytheDangersand
Dif icultiesofTradelaydeadupontheirhands’.OrastheanonymousauthorofRemarksupon
theBankofEnglandwouldrecallin1706,‘the8perCent.Alone,(whentheLegalInterestwas
but6,andtheclearproduceofLandseldom4)wasofitselfasuf icientEncouragementtothis
Undertaking;especiallyconsideringthatthiswasExemptfromTaxes,towhichotherMoney,
andStock,andLandwasliable’.Evenso,formanyofthesubscribersitwasnotjustaboutthe
8 per cent - it was also about getting in on the ground loor of an incorporated joint-stock
companywithrich inancialpotential.‘Theywereattracted,’asSirAlbertFeavearyearwrote
many years later, ‘by the opportunity which the foundation of the irst joint-stock bank in
Englandprovidedoftakingahandinthebusinessofbanking,abusinesswhichinthelast ifty


yearshadraisedupmorejuniorclerksandscrivenerstobewealthyaldermenthanhadany
otherintreblethetime.Mostofthesubscribers,inshort,werespeculators,menof“quality”
andmenofbusiness,whosawachanceofbigdividends.’8
Some of the keenest to enjoy those dividends were almost certainly the original
directors, about whom we again have a reasonable degree of background knowledge.9 The
great majority were City-based merchants of considerable substance; about a third were
merchants trading with Portugal merchants, concentrating largely on the wine trade; half a
dozen were of Huguenot background, while there was also a signi icant Dutch connection;
abouthalfwerefromthedissentinginterest;andthereexistedanoverwhelmingaf iliation
with the Whigs. An exception was Sir William Gore, a Tory alderman whose turnover the
following year was estimated at an impressive PS64,000, helped by his Court connections
securinghimpro itablecontractssupplyingthearmedforces;butpoliticallymoretypicalwas
SirThomasAbney,afutureWhigMPfortheCitywhohadmadehiswayupinthemercantile
world after originally being a linen draper and would eventually give his name to a north
Londoncemetery.Probablythechiefmerchantprinceamongthenewdirectors-andpossibly
even in the City as a whole - was Gilbert Heathcote. The eldest son of a Chester ield
ironmonger,andbythe1690saWest Indies and Baltic merchant of immense wealth, he is
described by his biographer as ‘one of the inner group’ that had promoted the Bank’s
charteringand lotation-anactivitythathewouldnothavespentvaluabletimeonpurelyout
of sentiment or for the public good, to judge by Alexander Pope’s subsequent deathless
couplet:‘ThegraveSirGilbertholdsitforarule/Thateverymaninwantisknaveorfool…’
Therewasnodoubting,though,whowasthemainman,andindeedthemainfamily,in
July1694.‘Itwasamightyprettysight,’recordedSamuelPepysbackinthe1660s,‘toseeold
MrHoublonwhomIneversawbefore,andallhissonsabouthim;allgoodMerchants.’Sothey
were,mainlyinMediterraneantrade(especiallyIberian),andtwoofthebrothers,SirJames
and Abraham, were among the irst directors while another brother, Sir John Houblon,
became at the age of sixty-two the irst governor. The brothers were fourth-generation
Walloonimmigrants,theirgreat-grandfatherhavingbeenthesonofaLillemerchantwhoin
the1560shadfoundasyluminEnglandfromCatholicpersecution;theirpoliticalsympathies
were moderate Whiggish (John himself being MP for Bodmin); and they were all major
subscribers to the new institution. Pepys’s particular friend was James - ‘a pretty serious
man’, thought the diarist on their irst encounter, though soon ‘a man I love mightily’.
Unquestionablythethreebrotherswereallverywealthymen:afterdiningwithJames,Pepys
notedthatnoneofthefoodorwinehadoriginatedfromanywherecloserthanPersia,China
and the Cape of Good Hope, and another diarist, John Evelyn, observed after a similar
occasionthatthemerchantlived‘enprince‘.Butalltheevidencesuggeststhatthiswasalsoa
family with, perhaps because of its distinctive Protestant roots, a strong sense of duty and
publicresponsibility;andwhenSirJohndiedin1712intheThreadneedleStreethouse(site
ofthepresentBank)wherehehadlivedandworked,hewasfound-atleastaccordingtothe
familybiographer-inhischamberintheattitudeofprayer.
Solid,unimaginative,breathingtheairforthemostpartofasomewhatlimitedcirclethat
seldom questioned its own worth or purpose, merchants would continue to dominate the
leadershipandgovernanceoftheBankofEnglandforthenexttwocenturiesandmore.Yetit


istooeasytobecondescending.In1711,introducingthemembersoftheimaginarySpectator
Club,theessayistRichardSteeledescribedoneofthem,SirAndrewFreeport.‘AMerchantof
great Eminence in the City of London’, he was a man ‘acquainted with Commerce in all its
Parts’who,asafavouritejest,‘callstheSeatheBritishCommon‘.SirAndrew,re lectedSteele
inhisportrait,wasproofofthepropositionthat‘aGeneralTraderofgoodSense,ispleasanter
Company than a general Scholar’, having ‘a natural unaffected Eloquence’, so that ‘the
PerspicuityofhisDiscoursegivesthesamePleasurethatWitwouldinanotherMan’.10Sadly,
it is not always possible to get as close as one would like to the words of the real-life
merchants.Muchmoreampleistheevidenceoftheirdeeds,includingtheirdeedsatwhatwas
notyetremotelyacentralbank;anditisbytheirdeedsthatthesepracticalmenmustlargely
bejudged.


PARTONE
1694-1815


1
ServicestotheNation
Business began for real during the week starting 30 July 1694. That day, the directors
decidedthattheBank’sCommonSealwastorepresent‘BritaniasittingandlookingonaBank
of mony’ - a decision that in turn meant that Britannia would henceforth appear on all the
Bank’sprintednotes.ThatsameMonday,thedirectorsappointedthe irstnineteen‘Servants
ofthisHouse’,includinga‘SecretaryandSollicitor’(JohnInce),a‘FirstAccomptant’(Thomas
Mercer) and a ‘First Cashier’ (John Kendrick): these were the three key staff appointments
(though Kendrick lasted only a few weeks), anticipating how until well into the twentieth
centurytheBankinaday-to-daysensewouldessentiallyberunalongtripartitelines,under
thesecretary,thechiefaccountantandthechiefcashier.Overthenextfewmonths,mostof
the infant institution’s business concerned funding the government, mainly through the
originalsubscriptiontotheBank.Crucially,thePS1.2millionloanpromisedtotheTreasury
waspaidnotincoin,butinpaper-at irstintheformofso-called‘sealedbills’,theninthe
formof‘runningcashnotes’issuedbytheBank.TheBankwasthusfromthestartanengineto
createcredit,albeitanengineinevitablysomewhatresentedbyLondon’sgoldsmith-bankers,
whoneverthelessoftenstillfounditconvenienttohaveanaccountthere.Nodoubttheyread
the runes, and despite the odd setback the price of Bank stock steadily rose during the
autumn and into 1695. It was also telling that by December the Bank was based in larger
premises, having taken out a lease - though initially only for a cautious eleven years, the
period of the Charter - on Grocers’ Hall, governor Houblon’s livery company. ‘A very
convenientplace,’DanielDefoewouldnoteinthe1720saboutthisenclosedbuildingroughly
halfway between Poultry and Lothbury, ‘and considering its situation, so near the [Royal]
Exchange,averyspacious,commodiousplace.’1
TheBank’senjoymentofitsnewhomemayhavebeenmarredduring1695bya lurryof
anti-Bankbroadsheetsandpamphlets.ReasonsHumblyOffer’dtoTheHonourableHouseof
Commons, By Eminent Merchants and Citizens of the City of London: Shewing The
Inconveniences that may arise by the Bank was the restrained title of one, apparently coauthoredbytheprominentTorygoldsmith-bankerRichardHoareandaccusingtheBankof
beingpoisedto‘EngrossmostoftheReadyMoneyinandneartheCityofLondon,whichisthe
Heart of Trade, and so will amount in effect to a Monopoly’; an anonymous pamphleteer
claimedthattheBank’snoteissuewas‘almostaFraudontheSubject’;whileaccordingtothe
equallyanonymousauthorofAngliaeTutamen:ortheSafetyofEngland,‘thegreatDividends
theBankhasalreadymade,andispreparingtomake…tellalltheWorldinhonestEnglish,
thatonePartoftheNationpreysupont’other’,withtheauthorbroad-mindedlyaddingthat‘if
wecouldextractPro itsfromForeigners‘twoulddowell,butfromoneanother,enrichesnot
thePublickonejot’.EvenJohnLockehadhisdoubts.‘ThemoneyintheBankis,andIconclude
always will be, managed by London merchants,’ he declared to Whig friends in February,
promptinghimtopredictthatasaresult‘thegreatestpartofourtradewillinalittlewhileby
secret combinations be got into a few hands’, whereas ‘money might be better distributed


intothecountry,andotherports,andtradingpartsofEngland’.Amidallthis,theBank’smain
defender was its deputy governor, Michael Godfrey, responsible for A Short Account of the
BankofEngland.Lowerinterestrates,anenhancedpriceforland,a inancialstrengtheningof
themonarchy-thesewereamongthemany‘servicestothenation’,heinsistedinadetailed
exposition,thattheBankwasalreadyprovidingandwouldcontinuetoprovide.Godfreyalso
challengedthegoldsmith-bankers:‘Iftherebeanadvantagetobemadebytherunningcashof
thekingdom,it’sfitterfortheBanktohaveit;whichconsistsofthirteenhundredpersons,and
whoemployittoservethenationingeneral,byloweringtheinterestofmoney;thanthatit
shouldbegiventoafewprivatemen,whohavealreadymadeuseofit,somuchtothenation’s
prejudice.’ In short, he concluded, the Bank ‘will and must be preserved and maintained,
becauseofitsgreatusetothewholerealm’.2
Dulyjustifyingitsexistence,theBankcontinuedthrough1695tolendtothegovernment:
eitherdirectlytotheTreasury-withtheBankreceivinginreturnexchequer‘tallies’(sticksof
notchedwoodthatwereineffectIOUs)-ormoreindirectlybydiscounting(whichistosay
purchasing) tallies and Navy paper (bills based on the security of the English Navy). Two
human dramas, meanwhile, played out. The irst involved the Bank’s original ‘projector’,
WilliamPaterson,whohadbeenelectedasoneoftheoriginaldirectorsbutbyearly1695was
almostcertainlygettingitchyfeet.Hislatestschemewasforanotherbank,tobecalledthe
Orphans’Bank,andon12FebruaryhiscolleaguesatGrocers’Hallinformedhimunequivocally
that‘hisproceedinginthebusinessoftheOrphansEstate,inConjunctionwiththosehetold
the Court were known enemies of the bank, is not becoming a Director of this Court, but a
BreachofhisTrust’.Afewdayslater,PatersonclaimedthattheOrphans’Bank,dealinginland
nottrade,wouldbenothreattotheBankofEngland;butbytheendofthemonthhewasgone.
TheotherhumandramastemmedfromthedecisioninMaytoestablishanagencyinAntwerp
inordertopaythetroopsinFlanders,withasmallsub-committee,includingMichaelGodfrey,
James Houblon and Sir William Scawen, being ‘empowered to goe over to Antwerpe’. Two
monthslater,on17July,thedeputygovernorfoundhimselfinthetrenchesinthecompanyof
hismonarch,watchingthesiegeofNamuratalltooclosequarters:
William:MrGodfrey,yououghtnottorunthesehazards;youarenotasoldier;you
canbeofnousetoushere.
Godfrey:Sir,Irunnomorehazardthanyourmajesty!
William: Not so; I am where it is my duty to be, and I may without presumption
commitmylifetoGod’skeeping;butyou—.
At which point, relates Macaulay in his immortal account, a cannon ball from the
rampartslaidGodfrey’sheadatWilliam’sfeet.Bankstockimmediatelyfell2percent,oncethe
newsreachedLondon;andScawen,whoapparentlyhadbeenstandingonlytwoyardsaway,
waselectedasthenewdeputygovernor.3
He and his colleagues now confronted the exceptionally challenging circumstances of
1696 - in effect, a two-pronged attack on the very existence of the Bank, or at the least its
credibility. The irst prong derived from the consequences of the Recoinage Act of January
thatyear:althoughnecessaryinitsownterms,inordertotacklethescandalouslydebased


condition of England’s silver coin, the solution - recalling and reminting all silver coin inevitablyledtotheBankitselfbecomingseriouslyshortofspecieandsoon indingitdif icult
to meet demands for cash. Hoare would later deny the charge, but some of his fellow
goldsmith-bankersdidnothesitateintheirattempttowreakmaximumdamage,culminating
on 6 May when they, according to Macaulay, ‘ locked to Grocers’ Hall and insisted on
immediatepayment’:thatis,ofbullion(silverorgold)forbillsandnotesissuedbytheBank
thattheyhadbeenassiduouslystoringaheadofthisorchestrateddemarche.Atwhichpoint,
thedirectors‘refusedtocashtheNoteswhichhadbeenthusmaliciouslypresented’,whereas
‘other creditors, who came in good faith to ask for their due, were paid’. Put another way,
therehadbeenarunontheBank-andpartialsuspensionofpayments.Aweeklater,onthe
13th,ScawengravelyinformedtheGeneralCourt(ameetingoftheBank’sstockholders)that
‘a greater demand is made att present than is possible att present to be answer’d by the
moneycoined’;andthat‘ifanypersonbeunderanyuneasinesseforwantofhismoney,The
BankiswillingtoGivesuchpersonGoodTallies[IOUs]forhisnotes’.Whereupon,itwasnot
onlyresolvedthat‘everyMemberoftheCorporationwhohasanygoldsmithsnotesshouldbe
desiredtobringthemintotheBank&ChangethemforBankNotes’,butalso‘recommended
toalltheMemberstokeepetheirCash&TransactalltheirbusinesseintheBank’.4
TheotherprongwastheLandBankthreat.Conceivedspeci icallyasarivaltotheBankof
England,andsupportedlargelybythe‘country’interest(anti-Whig,anti-City),theLandBank
hadasitscentralpremiseanoteissueonthesecurityofland.‘HowaLandBankshallsupply
theKingwithreadymoneyIdoenotwellsee,’re lectedLockeon14February,shortlyaftera
HouseofCommonscommitteehadbothagreedtoanationallandbankgoingaheadand(in
Narcissus Luttrell’s words) ‘ordered that none concerned in the Bank of England have any
thingtodoeinit’.TothistheBankrespondedproactively,offeringtolendthegovernmentthe
sameamount(PS2.56million)promisedbytheLandBank,butatalowerrateofinterest.The
offer, however, was rejected, and on 10 March the Commons accepted its committee’s
recommendation.‘TheGovernourinformedtheCourt,’recordedtheGeneralCourt’sminutes
on29AprilindetailingtheBank’sreponse,‘thattho’theActofParliamtwaspassed[on27
April]fortheEstablishingofaLandBank,yetthattheBankofEnglanddoestillremainein
goodCreditt-AndthattheCourtofDirectorshaveandwilldoeallthingsintheirpowerfor
theInterestoftheBank.’Fightingtalk,butthesewerebaddays,andon4May,justforty-eight
hoursbeforetherunontheBankcausedbytherecoinagecrisis,thereappearedawould-be
propheticpamphletcalledTheTrialandCondemnationoftheLandBankatExeterChangefor
murderingtheBankofEnglandatGrocers’Hall.Thelevelofpersonalabusewashighevenby
the standards of the day - there were references to Sir John Houblon’s ‘obstinacy and
blunders’, Sir William Gore’s ‘shuf ling tricks’, Sir Gilbert Heathcote’s ‘cynicalness and self
conceit’ - and just at this moment the prospect of a Grocers’ Hall corpse seemed far from
impossible.5
In the event, the would-be rival proved one of the more spectacular lops in inancial
history. ‘People generally despair of the Land Bank and think it will come to nothing,’
observed Lord Godolphin (until recently irst lord of the Treasury) shortly after the
subscription books opened on 4 June - and within weeks the whole thing was dead in the
water,withbarelyPS7,000subscribed.Evenso,theBankwasstillinaverytightspot,given


thelargernationalsituation.‘ThemonthsofJulyandAugust1696,’notesonehistorian,‘were
themostdesperateofthewar’;andon15Augustitneededamasterlyspeechbythegovernor
topersuadetheGeneralCourttovotethroughaPS200,000loantothegovernment.Although
hefullyacknowledgedthattheBankcontinuedtosufferfromthat‘wantofSpeciewhichat
thistimeisthecommonCalamityofthewholenation’,theessentialfactwas,hewenton,that
thegovernmentnowacknowledgedtheBankasindispensable,withtheLordsoftheTreasury
having‘informedtheCourtofDirectors(whichisagreattruth)thatneithertheGovernment
northetradeofEnglandcanbecarriedonwithoutCreditt,andthattheyknoweiftheCreditt
oftheBankbenotmaintained,nootherCredittcanbesupported’.Nevertheless,theso-called
‘patriotic’ loan further intensi ied the Bank’s shortage of cash (gold or silver coin), and by
OctoberthepriceofBankstockwasdownto60(havingstoodatparatthestartoftheyear),
with the Bank resorting to understandable delaying tactics. ‘All Notes of PS5 and under,’
resolvedthedirectors,‘bepaidoffinfullalphabetically,beginninguponWednesdaythe28th
dayofOctoberinstantwithNotespayabletonamesofAandB,andsoonWednesdayofevery
weektwolettersthroughthealphabet.’Meanwhile,thegovernment’sneedforcashtopaythe
troopsremainedacute,andbyearlyDecember,afewmonthsafterhehadcreatedthe irst
issueofExchequerbills,thechancellorCharlesMontagudecidedfurthertochancehisarm,
proposing his so-called ‘engrafting’ scheme: that the outstanding tallies (IOUs) would be
addedtotheBank’sstockthroughanewsubscription,withtheBankbeingpaidintereston
thosetallies.‘Heisverycon identin his Scheme,’ John Freke, a Whig barrister, reported to
Lockeon5December,addingthat‘lastnighthewenttotheDirectorsoftheBanktoproposeit
tothem’.WouldMontagugethisway?Frekedidnotknow,buthad‘nodoubt’thathewould
‘threaten them’ if ‘they would not comply’. Perhaps he did, but it seems that the Houblon
faction(anephew,brother-in-lawandcousinbeingdirectors,aswellasthethreebrothers)in
particularstood irm,apparentlyapprehensivethatengraftingwouldnotonlyoverburdenthe
Bank but also reduce their personal stakes; and on the 7th the General Court rejected the
scheme.6
There ensued during the early weeks and months of 1697 some arguably risky
brinkmanship,astheBanktooktheopportunitytoexerciseasigni icantdegreeofleverage
andintheprocessconsolidateitslong-termfuture.Inessence,having irstatthestartofthe
year declined outright to lend some PS21/2 million, the Bank did now consent to take PS1
millionofshort-termdebtoffthegovernment’shandsthroughacapital-enlarging‘engrafting’
process-butonlyinreturnforfourkeyconditionsbeingmet:thattheoriginalChartershould
be extended to 1711; that the Bank should be exempt from taxation; that the government
would initiate measures against the counterfeiting of Bank notes, which was becoming a
serious problem (such forgery was later made a capital offence); and above all that, in the
Bank’sownwordsasitformulateditsdemands,‘nootherBankoranyConstitutionwhatever
in the nature of a Bank, be Erected or Established, permitted or allowed, within this
Kingdome, during the continuance of the Bank of England’. The Bank did not quite get
everythingitsownway-withtheCommonsinsistingthat‘atallfutureElectionsthereshall
notbechosenabovetwo-thirdsofthosewhowereDirectorsthepreviousyear’-butoverall
thelegislationpassedthatspringmarkedadecisivevictoryforthe ledglinginstitutioninits
relationshipwithgovernment.


The resulting capital enlargement, involving government creditors exchanging their
short-termdebt(tallies)forBankstock,ledtoasigni icantsocialbroadeningoftheBank’s
shareholders,with irst-timeproprietorsincludingaPlaistowwaterman(JohnWells,PS625)
and a Horsley Down mealwoman (Martha Thomson, PS250); while the Bank’s newly
strengthened position saw the price of Bank stock rapidly climbing back towards par. The
irst elections under the new dispensation took place in July, with Scawen being chosen as
governor and Nathaniel Tench as deputy governor; and two months later, the Treaty of
RyswickmarkedtheendoftheNineYears’War.7Thisparticularcon lictwasover,butoneof
itsmostimportantby-productswasheretostay.

Thepleasuresofpeacedidnotlastverylong.Evenastheywerestill‘lookingbackwith
Horrour on the heavy Load of Debts they had contracted’, recalled Jonathan Swift in 1711
abouttheEnglishpeopleduringtheaftermathoftheNineYears’War,they,‘withoutgiving
themselves time to breath, would again enter into a more dangerous, chargeable, and
expensiveWar’.ThisnewwarwastheWaroftheSpanishSuccession,lastingfrom1702to
1714-andanotheropportunityfortheBanktoshowitsprowessinwar inance,especially
throughloanstoapredictablystrappedstate.‘Thegovernmentwhichischie lysuppliedby
them,canscarceexpectforthefuturetobesupportedwithoutthem,’observedin1706one
pamphleteer, the Duke of Marlborough’s chaplain John Broughton, of its apparently everincreasingdependencyonthemenrunningtheBank.Thatdependencywasintensi iedfrom
1707,whenineffecttheBanktookoverresponsibilityforcirculatingnewissuesofExchequer
bills secured on taxes, a service it performed not only for a handsome allowance for bills
outstanding,butalsowiththepreciseinterestonbillsleftentirelytoitsowndiscretion.‘What
extraordinary pro it must have accrued to the bank by this operation, every one must
perceive,’notedwithgrudgingadmirationthepoliticaleconomistSirJamesSteuartoverhalf
acenturylater,addingthat‘almostthewholeaccumulatedinterestpaid,becameapurepro it
tothebank,aswellasagreataugmentationofthenationaldebt’.
Inaddition,1707wastheyearoftheActofUnion,involvingtheBankinalesspro itable
service to the state. The agreement, far from popular north of the border, included the
provision that the Scots, as an ‘equivalent’ for their contribution to repaying England’s
nationaldebt,wouldreceivesomePS100,000incashandPS300,000inExchequerbills;and
thatsummer,aheavilyguardedpartyoftwelvewagons,accompaniedbythreeBankof icials,
made its way from London to Edinburgh. There they were met by four English
commissioners,includingJamesHoublon,sonoftheformerBankdirectorSirJames.‘Agood
share of ye Mob are very Angry,’ he reported to his brother on 5 August after the wagons’
arrival,‘&threwStonesatyeBank-Of icers&Coachmen.’Apparentlythemobbelievedthat
thewagonscontainedammunition.SuchwastheuncertainstandingofExchequerbillsthat
thecommissionershadtorequesttheBanktosendafurtherPS50,000incoin,resultingina
secondconvoy(againattendedbythreeBankof icials)laterinthesummer.Thetailpieceto
thestoryinvolvedanunseemlysquabble.BackinLondon,thewagondriversdemandedfrom
theBankanextraPS22perman;theBank’sofferofanextraPS10wasrefused;thesecretary,
JohnInce,complainedtotheTreasurythatthedriverswere‘veryrudeandtroublesome’;and


althoughthedocumentationrunsoutatthispoint,nodoubtacompromisewasreached.
Meanwhile,awarfamousforitsresonantbattlenames(Blenheim1704,Ramillies1706,
Oudenarde1708,Malplaquet1709)continuedtodrag on - and just as a decade earlier, the
BanktookadvantageoftheWhiggovernment’sneedforimmediatefundstosecureforitselfa
new,enhancedagreement.Embeddedinlegislationin1708-9,therewerethreekeyaspects
fromtheBank’spointofview: irst,itsCharterwasextendedto1733,almostaquarterofa
centuryaway;second,itsmonopolyoverjoint-stockbankingwasstrengthened,atthesame
time con ining private banking to organisations of six partners or fewer; and third, its
authorisedcapitalwasdoubledtoPS4.4million,immediatelyresultinginahighlysuccessful
subscriptionprocessatGrocers’Hall.NoneofthismeantthattheBankhadsuddenlybecome
auniversallyaccepted,letalonewelcomed,institution.‘ThemalignityoftheBankisofthat
extentthatIknownotwellwheretobeginmyaccountofit,’declaredin1708theanonymous
author of a public letter to an MP, Arguments against Prolonging the Bank, Showing the
Dangerous Consequences of it to our Constitution and Trade. Still, in terms of prevailing
sentiment, in the City anyway, that same year a London correspondent of Thomas Pitt at
Madrassurelyhadtherightofit.‘TheBank,’hewrote,‘notonlyinmyownopinionbutofall
myacquaintance,isthoughtthesurestestate,andscarceanymoney’dmanbuthasashare
whichhelooksuponashisnestegg.’8

WhatsortofplacewastheBankbythetimethisnewdealwasstruck?‘Ilookedintothe
GreatHall,’JosephAddisonwouldnoteayearortwolaterintheSpectator,‘andwasnotalittle
pleased to see the Directors, Secretaries and Clerks, with all the other Members of that
WealthyCorporation,rangedintheirseveralstations,accordingtothePartstheyactinthat
just and regular Oeconomy.’ The directors remained predominantly merchants, typi ied by
Francis Eyles, a Wiltshire clothier’s son who became a prominent Levant and colonial
merchant and, having been elected a director in 1697, served as governor for what was
becomingtheusualtwo-yearterm,inhiscase1707to1709.Butintermsoftheconductofthe
Bank’s day-to-day business, the people who really mattered during these formative years
werenot‘theDirection’(asitcametobecalled)butits irstgenerationofpermanent,fulltimestaff.
Inevitablytheirnumbersincreased(oversixtyby1700),thoughitwouldbealongtime
beforetheirtotalreachedthree igures;asfortheirfunctions,theclericalstaffweremainly
dividedintothoseworkingintheAccountant’sOf ice,thoseintheCashier’sOf ice,thosein
the Secretary’s Of ice, those in the Discount Of ice, and the tellers. The heaviest burden
probably lay on the last group: over twenty of them by the early 1700s, situated in the
handsomebankinghallatGrocers’Hall,andineffectthepublicfaceofthebank-accepting
depositsandloanpayments,cashingnotesandbills,andfrom1704subjecttoadetailedfourpage‘OrdersfortheObservanceoftheTellersoftheBank’.Theirswasdemandingwork,not
helpedbypoor-qualitycoinageandtheever-presentdangerofforgeryofpaperinstruments
ofexchange,andoneofthemanyspeci icstipulationswasthat‘theTellerIndorsethepersons
nametowhomtheypaymonyonNotespayabletoOrder,andifunbeknowntheplaceofhis
abode’.Therewerealsoofcoursenon-clericalstaff,comprisingby1704twomessengersand


doorkeepers, one gate-porter, two house-porters, one house-cleaner, one gardener and six
watchmen,withthegate-porterprovidedbythistimewith‘acrimsonclothgownelinedwith
orange,andalargeBamboocanewithasilverhead’.Disciplinewasgenerallystrict:notonly
were ‘the servants of the House’ (whether clerical or non-clerical) under threat of instant
dismissalforfailuretocomplywiththerulesoftheBank,buttheywererequiredonpainof
suspensiontoreportonanyfellow-employeesguiltyof‘prophaneness,immorality,looseor
scandalous living’ in their personal conduct; and although the pay was respectable (the
average teller getting around PS55 a year, somewhat above what a schoolmaster earned),
Anne Murphy’s verdict that ‘on balance the majority of the Bank’s employees would have
founditsmanagementpracticestobemoreaboutthestickthanthecarrot’issurelycorrect.
Still,therewerealwaystheconsolationsofhome:anevocative1704listshowsthatalthough
ahandfulofthemostseniorstafflivedattheBank,ThomasJonescouldretreatto‘hisMothers
a Coffeehouse in Starre-Court in Breadstreete’, William Deards to ‘his owne house in
NaggsheadCourtinBartholomewLanebyyeExchange’,RobertLloydeto‘theMiddleTemple
in Essex Court in the Staircase No. 4 up one paire of staires at Mr. Scroopes chamber’, and
ThomasCowellto‘HonyLanemarket,atyeBellaPublickHouse’.9
What exactly, then, was the nature of the Bank’s day-to-day business during its irst
ifteenorsoyears?Elementsofmysteryremain,butessentiallywhatitdid-asaprivate(as
opposedtopublic)bank,inadditiontoitsever-closerconnectionwithgovernment-wasto
provide a range of indispensable services for the London mercantile community. These
servicesincludedissuingbanknotesandotherpapercreditinstruments;providingdeposit,
accountandpaymenttransferfacilities;makingcarefullyselectedloans;anddiscountingbills
ofexchange.Asforservicesonbehalfofgovernment,overandabovemakingregularloans
andadvancesaswellasitsfacilitatingroleinrelationtoExchequerbills,theBankdidnotyet
manage the long-term national debt. But it did increasingly act as banker to what Clapham
calls‘thegreatnationalaccounts’,suchas‘duringMarlborough’swarsthePaymasterofthe
Army,thePaymasterofGuardsandGarrisons,theTreasureroftheOrdnanceOf iceandthe
TreasureroftheNavy’.Allinall,whetherforthemercantilecommunityorforgovernment,
but especially for the latter, it was a pro itable business; and between 1697 and 1709, the
annualdividendpaymenttostockholdersinvariablyamountedtoatleast7percentandwas
oftensignificantlymore.
OneshouldnotexaggeratethereachoftheearlyBankofEngland-afterall,formuchof
theeighteenthcenturyitwasquiteoftenreferredtoasthe‘BankofLondon’.Moreover,unlike
the appreciably older Bank of Amsterdam, the Bank ‘did not’, to quote the historians Larry
NealandStephenQuinn,‘dominatethelocalbillmarket,itdidnotactasalarge-scaleclearing
house, and no bills were required to pass through it’. Instead, notwithstanding its other
servicestothemercantilecommunity,itwasa‘note-issuingbank,committedtoservingthe
BritishTreasury’.UndoubtedlyakeyaspectofthatservicewastheparttheBankplayedin
helping the development of what other historians have called ‘credible commitment’ - that
key post-1688 evolution of an institutional structure by which the new dispensation of
parliamentarygovernmentcouldbemorewidelytrustedthanhadeverbeenthecaseinthe
ageofCrown-dominatedpublic inance.Orputmorespeci ically,theBank’sroleinalmostall
new loans to government was soon so central that in effect it acted as guarantor of


responsiblebehaviour,notleastinrelationtothepromptpaymentofinterest.Yetatthetime,
it must be re-emphasised, not everyone saw the Bank in such a favourable, public-interest
light.‘Itsstatuswascontested,itsmonopolyatrisk,anditremainedhighlyvulnerabletothe
whim of Parliament’: even after the 1709 enhanced deal, Murphy’s salutary words still
apply.10AndindeedtheBankatthispointhadstilltofaceperhapsthebiggestthreatofallto
itsveryexistence.

Thesequenceofeventsthateventuallyledtothatthreatbeganin1710-ayearofintense
politicaldrama,withtheBankunderthetake-no-prisonersleadershipofSirGilbertHeathcote
(governor from 1709) positioned uncomfortably close to the drama’s centre. The larger
contexthelpstoexplainthefebrileatmosphere.Public inancesunderincreasingstrain,bad
harvests,aseeminglyendlesswar(withHeathcotestubbornlyinsistingtoGodolphin,backin
of iceas irstlordoftheTreasury,thatanypeacefailingtosecurewaraimsinSpainwouldbe
‘arottenpeace’),QueenAnneintheninthyearofherreignbelievingthetimeatlastripeto
getridofthedetestableWhigs-allthis,andDrHenrySacheverelltoo.On27Februarythetrial
began(forseditiouslibel)ofthiseloquenthighchurchmanand ierceanti-Whig;withindays
theSacheverellRiotswereunderway;andthemob-intentonlootingandburningGrocers’
Hall - was thwarted only by the arrival of the Grenadier Guards, whose Captain Orrell had
reputedly declared, ‘Gentlemen, it is better to have all the [dissenting] meeting-houses
destroyedthantheBank.’Sacheverellhimselfwasvirtuallyacquitted,andtheToriesbyearly
summerhadthewindfirmlyintheirsails,tothealarmofthemoneymen.
Overthenextfewmonths,theBanktwicetriedtohaltpoliticalchangeandtwicefailed.
The irst intervention came on 15 June, with Heathcote and three colleagues personally
informingtheQueenoftheir‘desire’,followingthedismissaloftheEarlofSunderlandfrom
the government, that ‘she would make no further alterations in the ministry which much
affectallthepubliccredit’;somesevenweekslater,afurtherBankdeputation,thistimetothe
TreasuryandseekingtoshoreupthepositionofGodolphin(apro-BankmoderateTorywho
had become increasingly close to the Whigs), only had the effect of goading Anne into
dismissing him. That same deputation also demanded an assurance against an early
dissolution of the Commons - and again the Bank’s wishes were ignored, with an October
electionresultinginaTorylandslide.DidHeathcoterepentatalloftheBank’sinterventions?
Probablynot.‘Ifweerr’d,’hecon idedtoaprominentWhig,‘t’wasinfailureofourjudg’ments,
andGodofhismercygrantthatthatmaybethecase,butIcannothelpbeingstillofthesame
mind.’11
That autumn the politics of the City could hardly have been more charged, with
Heathcoteinthethickofit.InlateSeptember,inthemidstofacontroversialcountandariot
at the mayoral Common Hall, Heathcote was chosen as the next lord mayor; the following
month, in the City’s parliamentary election, he was one of the four Whig candidates (all of
them present or past Bank directors, and three of them, including Heathcote, sitting MPs)
sweptasidebythefourTorycandidates(includingSirRichardHoare),aftera ive-daypoll
markedby,inthewordsofonehistorianoftheCity,‘anatmosphereofrhetoricalandphysical
violence unmatched since the Revolution’. The Bank itself continued to dig in its heels and


make life as dif icult as possible for Robert Harley’s new Tory government - not only still
refusing to discount bills of exchange for military pay of icers, but also now refusing to
discountoverseasbillsofexchange.‘ItisonlypiqueandrevengeofHeathcote’sandhisparty
who now govern the Bank absolutely,’ a banker-ally of Harley informed him in November,
almostcertainlyaccurately.
The game-changer was the news just before Christmas that Lord Stanhope’s army had
surrenderedatBrihuega-ineffect,spellinganendtoanyserioushopesofconqueringSpain
andoftherebyavoidingHeathcote’s‘rottenpeace’.Byearly1711therewasapalpablespirit
of compromise and co-operation between the Tory government and the Whig-supporting
Bank, much helped by a successful internal rebellion against Heathcote during the last few
monthsofhisgovernorship,arebellionapparentlyledbytwoformergovernors,JohnWard
andSirJamesBateman.Evenso,attheannualelectioninAprilofnewdirectors,Toriesinthe
Citystilltriedtostageacoup,leadingtoamuchheavierturn-outbystockholdersthanusual.
Thecoupfailed-inClapham’swords,‘thecrowdsofproprietorsvotedforthementheyknew’
- and accordingly it was very much the old Whiggish guard that was returned, including
NathanielGouldeasgovernorandJohnRudgeasdeputygovernor,bothofwhomhadjoined
theCourtbackinthe1690s.AmoresuccessfulToryinitiativewastheformationlaterin1711
of the South Sea Company, intended from the start as a counterweight to the Bank and
designedinessenceasavehicleforconvertingintoperpetualannuitiesalargechunkofthe
government’s loatingdebt,withthevauntedSouthSeatrading-companyaspectbeinglittle
morethanafacade.Revealingly,andbe ittinghisreputationasapragmaticoperator,Harley
went to great lengths to ensure that the Bank did not feel unduly threatened by the new
creation.Hewaswellawarethatarapprochementwiththeheartofthemoniedinterest,even
ifthatinterestwasstilldefiantlyWhiggish,wastooimportanttobethrownawaylightly.12
Overtherestofthedecade,theBanklargelyconsolidateditsposition.InJuly1713,three
monthsaftertheTreatyofUtrechthadatlastendedawarthathadseenthenationaldebt
tripleinsizetoPS52million,anewactextendedtheCharterto1743inreturnfortheBank
agreeingtocirculateafurtherPS1.2millionofExchequerbills.Politically,thedominantfact
wasincreasinglytheQueen’sailinghealthandfearsofaJacobite-supportingFrenchinvasion,
leadingtoatleasttwosigni icantrunsontheBank.ButwhenAnnediddieinAugust1714,the
Hanoveriansuccessionproceeded,totheBank’srelief,entirelypeacefully;andthoughinMay
1715theJacobiteplanwasapparentlyfor‘threemobstoassembleatSmith ield,proclaimthe
Pretender, seize the Bank of England and set it on ire, assassinate some of the Chief
Magistrates(includingSirGilbertHeathcote)andraiseageneralinsurrection’,notonlydid
that dramatic scenario fail to unfold, but later in the year, during the failed actual Jacobite
rebellion,theBankfounditselfunderlittleseriouspressure.Indeed,itwasin1715itselfthat
the Bank’s remit was crucially extended, with the government asking it to handle a supply
loan of PS910,000 - the irst major step in the Bank establishing control over long-term
government borrowing. What about the South Sea Company? Relations between it and the
Bank were generally reasonable, with the Bank even coming in effect to act as the upstart
company’s bankers; but by the autumn of 1719 the directors of that company were, in
Clapham’swords,‘planninggreatanddaringventures’.13
Inessence,asitsschemeevolvedthatwinter,theSouthSeaCompany(SSC)proposedto


take over the national debt (excluding that part owed to the Bank and the East India
Company)inreturnformakingasubstantialone-offpaymentintotheExchequer-cashthat
wouldenablea inanciallyhard-pressedgovernmenttoredeemotherlong-termpublicdebt,
includingthatheldbytheBank.WhatwasinitfortheSSC?Whymightitbesoadvantageous
to have a major swathe of the national debt converted into newly issued shares in the
Company?AccountsoftheensuinginfamousSouthSeaBubblehavetendedtoemphasisethe
motive of stock market speculation and manipulation; but the historian Richard Kleer has
argued that the ambitious debt-conversion project of 1720 had an equally powerful
motivation: namely, an attempt by the SSC ‘to direct vast new amounts of public money
throughitscoffersandatthesametimedeprivetheBankofEnglandofmostitspubliccash
low’ - so that ultimately, further argues Kleer, the Company would ‘supplant the Bank of
England and assume the latter’s longstanding status as the state’s principal lender’.
‘Longstanding’ is perhaps an exaggeration, given the Bank was still barely a quarter of a
century old, but it is a compelling interpretation of what the Bank itself undoubtedly
perceived as a very real and very present threat. ‘Now they stand ready,’ observed Daniel
Defoeatthetimeaboutthearchitectsofthescheme,‘asoccasionoffers,andpro itpresents,
tostock-jobthenation,cozentheParliament,ruf letheBank,runupanddownstocks,andput
thediceuponthewholetown.’14
BattlebetweentheSSCandtheBankwasjoinedinlateJanuaryandearlyFebruary,asthe
tworivalsbidagainsteachother-and,indeed,seriouslyover-bid-fortherighttoconvert
governmentdebt.Itwasahecticfewdays.Ontheafternoonof27January,theSSCpresenteda
PS31/2 million offer before the Commons; that same afternoon, the Bank (whose directors
hadmetearlierinthedayatWaghorn’sCoffeeHouse)offereduptoPS51/2millionforthe
privilegeofenablingholdersoflong-termgovernmentdebttoconvertintoBankstock.The
intrinsiceconomicsmaynothavebeensound,commentsJohnCarswellinhisauthoritative
narrativeoftheSouthSeaBubble,but‘fortheBankthedevisingofacounter-proposalseemed
amatteroflifeanddeath’.Thenon1FebruarytheSSCreturnedtothetablewithanofferthat
wasnotonlyworthuptoPS71/2million,butincludedapromise(directlyaimedagainstthe
Bank)tocirculatePS1millionofExchequerbillswithoutcharginginterestoramanagement
fee.Meanwhile,theBankitselfwasnowbroadlystickingtoitsPS51/2millionoffer,nolonger
enough; and next day, the 2nd, against the wishes of the rising Whig politician Robert
Walpole,theCommonsacceptedtheSSC’sproposal,immediatelycausingthepriceofitsstock
toriseinExchangeAlleyfrom129to160.MoraleatGrocers’Hallslumped.‘Icouldhearonlya
few broken words,’ reported James Milner, a merchant and MP, about a visit to the Bank
probably not long afterwards. ‘“Buy long annuities, lock up our cash, distress, upstarts,
revengeandruin,&c.”’
Butelsewhere,aswintergavewaytospringandearlysummer,theSSC-andaplethoraof
companiesformedinthewakeofitsapparentcoup-bubbledawaymerrily.‘Surprizingscene
in Change Alley,’ noted an observer by early June. ‘S. Sea in the morning above 900 …
Professions & shops are forgot, all goe thither as to the mines of Potosi. Nobility, Ladys,
Brokers, & footmen all upon a level. Great equipages set up, the prizes of things rose
exorbitantly.SucharenversementoftheorderofNatureassucceedingagescanhavenoIdea
of.’ As for its battle with the Bank, predictably the SSC continued to make all the running -


partly through muscling into the Bank’s customary domain of circulating Exchequer bills,
partlythrougharrangingtobringintocirculationsigni icantamountsofitsownbonds,orin
Kleer’swords‘layingthegroundworkforapushtodisplaceBanknotesfromtheirpositionas
thenation’spremier iduciarycurrency’.Indeed,sogenerallyrattledwastheBankthatinMay
itcommittedwhatClaphamcallsthe‘gravemistake’offollowingtheexampleoftheSSCby
startingtolendonthesecurityofitsownstock,sothatoverthenextfewmonthsmorethan
PS1millionwaslentbytheBanktoitsownproprietors-anotunimportantcontributionto
theprevailingcreditin lation.AndfortheSSCitself,itmusthavebeenasweetmomentwhen
inJulytheBankwasamongtheholdersoftheredeemablenationaldebtthatnowputthose
redeemablesattheCompany’sdisposal,intheBank’scaseuptothevalueofPS300,000:not
hugeperhaps,buthugelysymbolic.15
In fact, the tide was already starting to turn. Parliamentary action in June against the
bubblecompaniesimpactedalsoontheSSC,whosesharepricepeakedatjustover1,000by
theendofthemonth,beforesteadilysubsidingto775bythestartofSeptemberand520a
fortnight later. ‘All is loating, all falling, the directors are curst, the top adventurers broke,’
observedacontemporarythatmonth;foronegiftedyoungartist,WilliamHogarth,his irst
greatsubjectwasathand,withhissubsequentprintofTheSouthSeaSchemeshowingSelf
InterestbreakingHonestyonthewheel,Villainy loggingHonour,andTradelyingraggedand
abandoned.
That autumn of 1720, as the SSC’s price continued southwards, to 290 at the start of
October and 170 by mid-October, before picking up a little, the Bank’s role in starting to
resolvewhatwasageneralcrisisofpubliccreditisnoteasytochartwithcertainty.During
negotiations from 15 to 23 September that eventually led to the so-called ‘Bank Contract’
undertheoverallauspicesofWalpole,theBank(withtheindomitableHeathcotetothefore)
imposedtwokeyconditionsforagreeingtocirculatePS3millioninSSCbonds: irst,thatthe
CompanywouldhenceforthkeepitscashwiththeBank-or,asHeathcoteputit,‘iftheSouth
Sea Company be wedded to the Bank, he ought not to be allowed to keep a mistress’; and
second,thattheBankwouldbeallowedtoexchangeforSouthSeastockitsPS3.8millionof
redeemabledebt.‘Ineffect,’commentsKleer,‘thismeantthattheBankwouldkeepitsexisting
cash lowandgetaccesstothewholeofthenew lowsassociatedwiththedebt-conversion
project,’ which in turn meant that ‘the Bank would also retain its current position as the
government’schiefcreditpurveyor’.Thenextfewweeksweredif icult:suchwasthemarket’s
gloomypost-BubblestatethatsubscriptionstothenewlycreatedBankContractstockfellwell
shortoftheintendedPS3million;theBankitselfwasunderpressurefromaseriousrun,even
asitcalledinloansandincreaseditsbullionstock;whileamongmanymerchantsandothers
nowgoingdownwasSirJustusBeck,aleadingdirectoroftheRoyalExchangeandaformer
directoroftheBank.‘HowterribleacalamitythefallofSouthSeaStockhasproducedinafew
days,’lamentedJosephMoyle,writingon12OctobertohiscousinHumphryMorice,aBank
director and a Whig MP, big in the Africa trade (gold, ivory, slaves) and very friendly with
Walpole.Evenso,therewasprobablysometruthinwhatMoylethenadded:‘Iamhowever
very glad that the Bank made so noble a stand in such ticklish times, and has showed
themselves,asindeedtheyare,theonlySupportofcredit,andthetrueBalanceofthenation’s
interest.’16


Furthertwistsandturnslayaheadinwhatbecameaprotractedprocess,notleastafter
theBankitselfinNovemberhadcontroversiallyrepudiatedtheBankContract,onthepossibly
dubious - and certainly belated - grounds of changed circumstances. Eventually, in October
1722, the so-called ‘Bank Treaty’ saw the Bank agreeing to pay (through the issue of new
stock) PS4.2 million for PS200,000 per annum of the SSC’s ‘Exchequer annuity’, at last
enabling the SSC to get back into the black and start to pay off its bond debt. The SSC was
saved-butwouldneveragainbeamajor inancialforce.Asforpubliccreditmoregenerally,
the Bank signed earlier that year an important new contract with the Treasury over the
circulationofExchequerbills;while,despitethe iascooftheSSCitself,thebene icialfactwas
thattheconversionofamassofilliquidannuitiesintoliquidandtradableSouthSeaannuities
leftthelegacyofahugelyenhancedsecondarymarket,aboveallforgovernmentdebt.There
wasalsoofcourseapersonaldimensiontotheBubble’saftermath.Amongthosefoundguilty
bytheHouseofCommonsin1721forhavingbeenpartlyresponsibleforthedramaticchain
of events was Sir Theodore Janssen, a founder-director of the Bank and on the Court as
recentlyas1719.‘Ihadnohandincontrivingthescheme,’heprotestedtoMPs;andalthough
he had his estate con iscated, he was permitted to retain PS50,000 out of his considerable
fortune-someconsolationashelivedouthislasttwenty-sevenyearsuntilhisdeathin1748,
thelastofthemenof1694.17

Daniel Defoe in 1724 not only described the Bank’s home in Grocers’ Hall as ‘a very
spacious,commodiousplace’.Healsonotedadmiringlythat‘hereBusinessisdispatchedwith
such Exactness, and such Expedition and so much of it too, that it is really prodigious; no
Confusion,nobodyiseitherdeniedordelayedPayment,theMerchantswhokeeptheircash
there,aresuretohavetheirBillsalwayspaid,andevenAdvancesmadeoneasyTerms,ifthey
have Occasion’. In short: ‘No Accounts in the World are more exactly kept, no place in the
World has so much Business done, with so much Ease.’ It was a glowing tribute to an
organisation that during the post-Bubble decade was becoming increasingly indispensable,
notleasttogovernment.Managingalargepartofthenationaldebt,takingresponsibilityfor
underwritingandpayingtheinterestonExchequerbillsontheannualtaxes,makingshorttermloans(tothepaymastergeneraloftheforces,tothetreasureroftheNavy,aboveallto
thelordsoftheTreasuryduringtheselargelypeacefulyearsunderWalpole’s‘Robinocracy’),
managingarangeofgovernmentsecurities(followingonfromthe1717establishmentofa
sinkingfund),respondingtotheMaccles ieldscandalof1725(involvingtheimpeachmentof
alordchancellor)bytakingchargeofallChancerymoniesandsecurities-intheseandmany
otherways,includinginrelationtoprivatecommerce,theBankjusti ieditsplaceinnational
lifeas,toquotethehistorianPaulLangford,‘auniquelyfavouredcorporation’.
Unsurprisingly,dividendswerereassuringlysolid,from1721to1733invariablybetween
51/2and6percent,promptingJohnHanger,governorduringtheBubbleandstilladirector,
tore lectin1731that‘theprosperityoftheBank’was‘veryagreeabletome’.Hangerhimself
wasbythistimeamongsome8,000ormorestockholders,withforeigners(especiallyDutch)
owning perhaps some 17 per cent of the capital stock, but still with the overwhelming
majorityoftheBank’sproprietorsbeingindividualslivinginLondonortheHomeCounties-


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