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.
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-