The President of the United States, in his message to Congress in , pointed to London as

the centre of the credit system ;

the introduction of a new bank into the most distant of our villages places the business of that village within the influence of the money-power in England.

money-power

The Jews and the Lombards were the earliest money-dealers in England. The former were settled here in the Saxon times, and as early as A.D. . In the reigns of the Norman kings they appear to have lived undisturbed, but from the commencement of Stephen's reign they began to be cruelly persecuted, and about , in the reign of Edward I., they were banished the kingdom. Hume remarks that the Jews, being then held infamous on account of their religion, and their industry and frugality having put them into possession of the ready money of the country, the lending of this money at interest, which passed by the invidious name of usury, fell into their hands. It was not until that the taking of interest was rendered legal--the rate was fixed at per cent. In the statute was repealed, but was re-enacted in . In the legal rate of interest was reduced to per cent.; in to per cent.; in to per cent. In the paid per cent. on sterling in its hands belonging to the East India Company.

The Lombards are understood as comprising the merchants from the Italian republics of Genoa, Lucca, Florence, and Venice. Stow, describing the streets in the vicinity of the Bank, says,

Then have ye

Lombard Street

, so called of the Longobards and other merchants, strangers of divers nations, assembling there twice every day.

It is probable that the greatest amount of money-dealing during the middle ages was carried on by the Royal Exchangers. There were laws against exporting English coin; and as the exchanging of the coin of the realm for foreign coin or bullion was held to be an especial royal prerogative, a

flower of the crown,

changer, exchanger, and outchanger ;

goldsmitherie;

for above

thirty

years past it has been the usual practice of those exchanging goldsmiths to make their servants run every morning from shop to shop to buy up all weighty coins for the mints of Holland and the East countries, whereby the King's mint has stood still.

Soon after the Revolution several schemes were suggested by different individuals for the establishment of a national bank. The plan adopted was that of Mr. William Paterson, a Scotch gentleman, who, according to his own account, commenced his exertions for the establishment of a national bank in . He had in view, from the , the support of public credit, and the relief of the Government from the ruinous terms upon which the raising of the supplies and other financial operations were then conducted. The lowest rate, he tells us, at which advances used to be obtained from capitalists, even upon the land-tax, was per cent., although repayment was made within the year, and premiums were generally granted to subscribers. On anticipations of other taxes, counting premiums, discount, and interest, the public had sometimes to pay , , and even per cent.; nor was the money easily obtained when wanted, even on such terms. It was no uncommon thing for Ministers to be obliged to solicit the Common Council of the city of London for so small a sum as or , to be repaid from the returns of the land-tax; and

towards carrying on the war with France,

The advantages that the King and all concerned in tallies had from the Bank were soon so sensibly felt that all people saw into the secret reasons that made the enemies of the constitution set themselves with so much earnestness against it.

gave life and currency to double or treble the value of its capital ;

In the subscription for a loan to Government was made at the Bank instead of at the Treasury, and it has long had the entire management of the public debt. Since the allowance for that service has been reduced to a-year, having previously been ; but before it was at a still higher rate, a reduction having then taken place from to per million: the original allowance, however, was not less than per million. In the Bank charter was renewed until ; in it was further continued to ; in to ; in to ; in to ; in to ; in to ; and in it was renewed until , with a proviso that if, in , Parliament thought fit, and the money owing by the

Almost as soon as it had been established the Bank was called upon to assist the government and the country in the entire recoinage of the silver money. The notes of the new bank and Montague's Exchequer bills were destined to fill up the vacuum occasioned by the calling in of the old coin; but as these notes were payable on demand, they were returned faster than coin could be obtained from the Mint, and during the Bank was forced to resort to a plan tantamount to a suspension of payment-giving coin for its notes, by instalments of per cent. once a fortnight, and afterwards only at the rate of per cent. once in months. The Directors also advertised that, while the silver was recoining,

Such as think it fit, for their convenience, to keep an account in a book with the Bank, may transfer any sum under

5l.

from his own to another man's account.

We pass on to , the year of the rebellion, when the march of the Pretender's army into England threw London into consternation, and a run on the Bank for gold was the consequence. Its affairs were highly prosperous, and its capital exceeded , but, unfortunately, it was not abundantly provided with specie, and the Directors, in order to gain time, resorted to the expedient of paying in silver, and even did not disdain the advantage of using sixpences to accomplish this object. During the riots of a danger of another kind was experienced, and the Bank was certainly in some risk of being plundered. Since this affair a party of the foot-guards is stationed within the walls of the Bank every evening, and the Directors keep a table for the officer in command.

By far the most important epoch in the history of the Bank occurred in . The precious metals may be transmitted to any of the great commercial capitals of the continent at an expense of or per cent.; and whenever the balance of payments to those capitals is adverse to this country to such an extent as to render it more economical to send gold than to remit bills, the Bank is drained of its treasure. In this way there was a great efflux of bullion in and , which was increased by the necessity of importing foreign corn and by the enormous prices to which competition with the French had raised the price of naval stores in the Baltic. The domestic circumstances of the country aggravated the effect of this drain of the precious metals. The transition from peace to war had suddenly interrupted the labours of many great branches of industry; and a number of country banks had failed, spreading consternation and

ill-founded and exaggerated alarms in different parts of the country;

should forbear any cash in payment until the sense of Parliament can be taken on that subject, and the proper measures thereupon adopted for maintaining the means of circulation, and supporting the public and commercial credit of the kingdom at this important juncture.

The next morning the crowds assembled at the Bank with a view of demanding gold, received a hand-bill containing an official notice, in which the Directors stated that, in pursuance of the order in council communicated to them on the previous evening, they would

continue their usual discounts for the accommodation of the commercial interest, paying the amount in

bank-notes

; and the dividend warrants will be paid in the same manner.

the general concerns of the Bank were in a most affluent and prosperous situation, and such as to preclude any doubt as to the security of its notes.

The consequences of the Bank suspension are memorable, and a number of important monetary operations immediately became necessary. On the the Bank announced that they were ready to issue dollars valued at each. They were Spanish dollars, with the impress of the London Mint. Before they were issued it was ascertained that their value was about twopence more than stated, and on the another notice appeared, stating that they would be issued at each. In the Bank issued dollars, and subsequently

tokens

The Bank Restriction Act was passed on the following the suspension of cash payments. It indemnified the Bank Directors against the consequences of complying with the order in council, and prohibited them

At length the great struggle was brought to a close; but being a period of great commercial distress and embarrassment, the Bank restriction was continued until . In , the Bank gave notice that after the ensuing all notes of and , dated prior to the , would be paid in cash; and in September of the same year the Directors stated that they would be prepared to pay cash for notes of every description dated prior to . While the Bank was fulfilling these engagements a Bill was carried through both Houses of Parliament, in , in days, restraining it from paying away more of its gold in pursuance of the notices of April and . Above millions sterling in gold had already been paid, the greater part of which had been re-exported and coined in foreign money. The bill commonly known as Peel's Act was passed in the same year. It provided for the absolute resumption of cash payments by the , continuing the restriction as to payments in paper until ; and in the intervening period from the latter date to , the Bank was required to pay its notes in bullion of standard fineness, but was not to be liable to a demand for a less quantity than ounces at time. The Bank Directors had now to raise sterling of gold from foreign countries in the course of years, to pay off their own notes, amounting to , and then the small notes of the country bankers, about more, besides providing for the convertibility of all their own liabilities. After the , they commenced paying off their notes under in a new gold coinage, consisting of sovereigns and half-sovereigns, of which above sterling had been received from the Mint. In the Bank was prepared to pay off the country small notes, when,

without any communication with the Bank, the Government thought proper to authorize a continuation of the country small notes until

1833

.

In , occurred the

Great Panic.

The years and were remarkable for the feverish excitement with which all sorts of projects for the profitable employment of money were regarded.

England had not been in such a whirligig of speculation since the unfortunate South Sea scheme above a century before. Besides many millions of foreign loans which were contracted for, the total number of joint-stock projects amounted to , and to have carried them all into execution would have required a capital of sterling.[n.24.1]  There were not fewer than mining companies, with an aggregate capital of sterling. The imagination revelled in visions of unbounded wealth to be realized from the mines of Mexico, of Brazil, of Peru, of Chili, of the Rio de la Plata, or from or other of the schemes which dazzled the eyes of the public.

In all these speculations only a small instalment, seldom exceeding

5

per cent., was paid at

first

; so that a very moderate rise on the price of the shares produced a large profit on the sum actually invested. If, for instance, shares of

100l.

, on which

5l.

had been paid, rose to a premium of

40l.

, this yielded on every share a profit equal to

eight

times the money which had been paid. This possibility of .enormous profit by risking a small sum was a bait too tempting to be resisted; all the gambling propensities of human nature were consequently solicited into action; and crowds of individuals of every description hastened to venture some portion of their property in schemes of which scarcely anything was known except the name.

At length the tide turned, and there was a fearful transition from unbounded credit and confidence to general discredit and distrust. In , the bullion in the Bank had been reduced by some sterling since the commencement of the previous October, but it still amounted to In consequence, however, of the previous heavy demand for the produce of other countries the exchanges were unfavourable, and the drain of bullion still continued. In August the Bank treasure was diminished to ; and thus, when the period of discredit arrived, and such a reaction was the necessary consequence of the previous madness of speculation, the Bank was ill able to sustain the violent pressure. The real panic began on the , when a London bank failed at which the agency of above country banks was transacted. The effect of this single event was tremendous. was filled with persons hastening to the different.banks to withdraw their investments or to ascertain if they had succumbed to the general shock. On the several other banks failed. The Bank had ceased to issue its own notes for sums under ; but the country bankers, whose small notes were still in circulation, were subject to a run in every part of the country, and the demands for gold through so many channels of course finally affected the Bank; but it boldly kept its course, paying away gold as soon as called for in bags of sovereigns each.[n.24.3]  Instead of contracting their issues, as the Directors

We took in stock as security; we purchased Exchequer bills; we not only discounted outright, but we made advances on deposits of bills of exchange to an immense amount; and we were not upon some occasions over nice, seeing the dreadful state in which the public were.

Upon that Saturday night (

17th December

) we were actually expecting gold on the Monday; but what was much more important, whether from fatigue or whether from being satisfied, the public mind had yielded to circumstances, and the tide turned at the moment on that Saturday night.

During the week ending on the

24th

there was a demand; but the supply that came in fully equalised it, if it did not do more; and the confidence had become as nearly as possible perfect by the evening of the=

24th

.

As far as my judgment goes, it saved the credit of the- country.

Bullion came in and the mint coined; they worked double tides; in short, they were at work night and day, and we were perpetually receiving gold from abroad and coin from the mint.

On the , the Government made a communication to the Bank Directors, proposing the establishment of branch banks in some of the principal towns, and that the corporation should surrender its exclusive privilege restricting the number of partners in a bank, except within a certain distance of London, thus paving the way for the introduction of Joint-Stock Banks. In pursuance of those suggestions the Bank established branches at Gloucester, Manchester, when in gold was paid, the tellers counted sovereigns into scale and into the other, and if they balanced continued the operation until there were in each scale. In this way can be paid in a few minutes. The weight of sovereigns is lbs.: bank notes weigh lb.

A slight run on the Bank occurred in , when the Reform Bill received a check. The largest sum paid in day in exchange for notes was

Little or no alteration has been made in the constitution of the Bank since it was incorporated. The Government of the Bank rests entirely with the Governor and Deputy-Governor and Directors, of whom go out every year, and others are elected by proprietors holding of Bank Stock; but, practically, the who come in are nominated by the whole court, --that is, a

house list

Bank parlour

Independent of their capital lent to Government, now amounting to about , on which the Bank receives interest at per cent., and a sum generally amounting to about , called the

rest,

rest

Of course a very large staff of clerks and heads of departments is required to manage this enormous establishment. In there were employed clerks and porters, and printers and engravers, and there were also pensioners, chiefly superannuated clerks, who received in pensions , averaging each. In the same year the salaries to persons, including at the branches in the country, amounted to , averaging each. The house expenses amounted to , exclusive of the allowance of to the Directors. During the existence of the Bank Restriction Act a still larger number of clerks was required, and their number is said at time to have been . A very strong corps of volunteers was formed entirely of officers and clerks of the Bank. In , when the abolition of small notes took place, the Bank gave liberal pensions or an equivalent payment in ready money to those clerks whose services were no longer required. The name of Abraham Newland will here probably occur to many readers. He was appointed a clerk in the Bank in , was made chief cashier in , and resigned his office in , having accumulated a fortune of as a servant of the Bank during nearly years. For years he never slept beyond its walls. The Bank clerks are admitted between the ages of and , on the nomination of a Director. At the age of the salary is , increasing every year until the clerk is , and after that age the increase is yearly till he is , and then is extended to annually until it attains the maximum of The promotion is by seniority, except as respects some of the principal, situations.[n.27.1]  The number of clerks in private banks varies from or to about a .

Before the Bank issued notes for no lower sum than , but in that year it commenced issuing notes for and ; in notes for ; and in its whole economy was changed by,the restriction of cash payments, and the issue of . and notes. In it had in circulation in notes. In August,

The apparatus consists of a series of brass discs, of which the rim is divided by channels into projecting compartments, each containing a figure. The numbers

1

to

9

having been printed in the course of the revolution of the

first

disc, and this disc having returned to figure

1

, the

second

disc comes into play, and presents a

0

, and the

two

together therefore print

10

. The

first

disc now remains stationary, until, in the course of the revolution of the

second

disc, the numbers

1

to

19

have been printed, when it presents the figure

2

, and does not again move until another revolution of the

second

disc completes the numbers

20

to

29

. Thus the

two

discs proceed until

99

notes have been numbered, when the

third

disc comes into operation, and with the

two

first

produces

100

, consequently the

first

disc performs

one hundred

revolutions to

ten

of the

second

, and

one

of the

third

.

The forgery of a bank-note occurred in , when the person who forged it was convicted and executed. In it was decided that the Bank was not liable for the payment of forged notes. A more easily fabricated instrument was never issued, and detection only ensued when the note reached a certain department of the Bank, where its spuriousness was detected from certain marks. The consequence was that forgery, which was a comparatively rare crime before , became a very common offence; and every year public feeling was outraged by the execution of numerous victims to the facility with which the wretchedly-engraved notes of the Bank were imitated. In there were persons convicted of forgery, and for having forged notes in their possession. In the number of persons executed for forgery was . remarkable cases of forgery by which the Bank was a loser to a large amount occurred in and . In the former year Mr. Astlett, of the chief cashiers, by re-issuing Exchequer bills, defrauded the Bank to the amount of The other case was that of Mr. Fauntleroy, the acting partner of a bank in , who, in order to keep up the credit of the house, forged powers of attorney, by which he sold out of the funds large sums of money belonging to different persons, continuing to pay the dividends upon them until his detection. A statement was found at the banking-house, in Fauntleroy's hand-writing, acknowledging his crime. It was dated , and a postscript was added to the following effect:--

The Bank began

first

to refuse to discount our acceptance, and to destroy the credit of our house: the Bank shall smart for it.

We cannot afford much space for an account of the extensive pile of buildings in which the business of the Bank is carried on. Sir John Soane, the late architect to the Bank, fixed the fair amount of rent which he thought should be paid for the Bank at , and for fixtures, &c., making a total rental

The exterior walls of the south side measure feet; the length of the west side is feet; of the north side feet; and of the east side feet. This area comprises open courts--the Rotunda, committee-rooms, apartments for officers and servants, and the rooms appropriated to business. The principal suite of rooms is on the ground-floor, and, having no apartments over them, the light is admitted from above by lantern lights and domes. The number of rooms beneath this floor and below the surface of the ground is greater than of those above ground. Here are the vaults in which the Bank treasure is deposited. The material used throughout the greater part of the edifice is stone, and every means have been taken to render it indestructible by fire. Any person may walk into the Rotunda and most of the principal apartments.

Speaking of the Pay Hall, where bank-notes are issued and exchanged for cash, Baron Dupin, in his says,

The administration of a French bureau, with all its

inaccessibilities

, would be startled at the view of this hall.

the founder of the Bank,

The Court Room is a handsome apartment of the Composite order from Sir Robert design. It is lighted on the south side by Venetian windows, looking out upon a pleasant area planted with trees and shrubs, which was formerly the churchyard of St. Christopher's.

The private bankers of London are the successors of the

new-fashioned bankers,

He bore little resemblance to his modern successor: he was a man of serious manners, plain apparel, the steadiest conduct, and a rigid observer of formalities. As you looked in his face you could read, in intelligible characters, that the ruling maxim of his life, the

one

to which he turned all his thoughts, and by which he shaped all his actions, was, that he who would be trusted with the money of other men, should look as if he deserved the trust, and be an ostensible pattern to society of probity, exactness, frugality, and decorum. He lived--if not the whole of the year, at least the greater part of the year-at his banking-house; was punctual to the hours of business, and always to be found at his desk. The fashionable society at the west end of the town, and the amusements of high life, he never dreamed of enjoying.

There are few persons of wealth or who are engaged in trade who do not find the advantage and convenience of having an account at a banker's. Ordinarily -, or even so little as -, of the capital belonging to the firm or to its customers is sufficient for current demands. The remainder is invested in securities which are readily convertible, and in discounting mercantile bills. The London bankers are also the agents of the country banks. The annual profits of the most prosperous private banks in London are estimated at each. Coutts's bank and Glyn's, the former in , the latter in , are very fair representations of a class--the bank of the wealthy aristocracy and that of the commercial world.

Coutts's,

resembles not a few of the greatest establishments this country has produced, in having sprung from a small beginning, and owed its fortune to the sagacity and perseverance of an humble individual, who was remarkable at the outset of his career for strict economy. It is principally a bank of deposit, and can hardly be said to have a commercial character. The number of its discount accounts is small, and perhaps there is not a house in London in which fewer bills are cashed during the year. The only branch of general banking business in which it at all enters into competition with the principal firms in the City, is the agency to country banks. Coutts's have always done the town business of some of the best Scotch bail

2s.

Everywhere in England, and particularly in London, all great things go in tides. Coutts's has for years been the bank of the monied portion of the nobility--of persons who are seldom without having sums of

10,000

., and even

100,000l.

, lying to their credit. Early in the reign of George III. different members of the royal family, and many of the landed aristocracy of England and Scotland, began to bank at Coutts's, and they have since increased to a multitude. Enormous balances are thus accumulated,

and the safest and most profitable description of business in which a banker can be engaged is steadily transacted by the firm.

Glyn's is a complete contrast to Coutts's: here, in addition to a large portion of the accounts of the nobility and landed gentry, is the greatest number of commercial accounts.in London; and here scenes of bustle and animation take place daily of which it is not easy to convey an adequate idea. About

three

o'clock all is life, activity, and vigour; the place is a fair, and more like a great change than the

Royal Exchange

itself used to be. Though the bank is spacious, and the counters are packed with clerks as close as--they can stand together, you may sometimes have to wait

twenty

minutes before your turn to be served arrives.

Two

mighty streams of money are constantly ebbing and flowing across the counters; and half a million is said to be no uncommon sum for the firm to settle at the Clearing-house of an afternoon.

We shall conclude this paper with a short notice of the Clearing establishment above alluded to, which was set on foot by the private bankers in . The present Clearing-house is situated in the corner of a court at the back of the Guardian Insurance Office, in . The business was previously conducted in an apartment in the banking-house of Messrs. Smith, Payne, and Smiths, and still earlier at the banking-house of Messrs. Barnetts and Co., all in . The object of the Clearing-house is to save time and money. The cheques and bills of exchange, on the authority of which a great part of the money paid and received by bankers is made, are taken from each of the clearing-bankers to the Clearing-house several times in the day, and the cheques and bills drawn on banker are cancelled by those which he holds on others. The joint-stock banks are excluded from this association of private bankers. Some of the private bankers, from the nature of their business, do not require the aid which these clearances afford, and others arc too distant to maintain the necessary rapidity of communication with the Clearing-house. Perhaps there are not more than half-a-dozen persons in London, unconnected with banking, who have entered the precincts of this celebrated establishment; but an authentic detail of its arrangements has recently been published by Mr. Tate, author of the to which we must refer those who desire something more than a general idea of the system.[n.31.1]  The Clearing-house is fitted up with desks for each of the present clearing-bankers, whose names, taking the of each firm, are arranged in alphabetical order as follows, over each desk :

Mr. Tate says,

The rapidity with which the last charges are required to be entered, and the bustle which is created by their swift distribution through the room, are difficult to be conceived. It is, then, on the point of striking

four

, and on days of heavy business, that the beauty of the alphabetical arrangement of the

clearers' desk is to be seen. All the distributors are moving the same way round the room, with no further interference than may arise from the more active pressing upon or outstripping the slower of their fellow-assistants. With equal celerity are their last credits entered by the clearers. A minute or

two

having passed, all the noise has ceased. The deputy-clearers have left with the last charges on their houses; the clearers are silently occupied in casting up the amounts of the accounts in their books, balancing them, and entering the differences in their balance-sheets, until at length announcements begin to be heard of the probable amounts to be received or paid, as a preparation for the final settlement. The

four

o'clock balances having been entered in the balance-sheet, each clearer goes round to check and mark off his accounts with the rest, with

I charge you,

or

I credit you,

according as each balance is in his favour or against him.

In , when banks settled with each other at the Clearing-house, the accounts cancelled in day have sometimes, it is said, amounted to In the Appendix to the Report of the Select Committee of the on Banks, there is a return of the payments made through the Clearing-house for the year , and, omitting all sums under , the total was The average for each day would consequently be rather more than O. sterling (the actual payments range from to ), while that of the sums actually paid was about It has, however, sometimes happened that a single house has had to pay above half a million of money. The payments through the Clearing-house of bankers, in S, ranged from OO, to each.

[n.19.1] Cambium Regius, or the Office of His Majesty's Exchanger Royal.

[n.19.2] No. LXXV., Goldsmiths' Hall p. 398.

[n.20.1] Paterson's Account of his Transactions in Relation to the Bank of England, folio, 1695; quoted in Pict. Hist. of England, vol. iv. p. 692.

[n.23.1] Memorandum by the Bank Directors delivered to the Parliamentary Committee in 1832.

[n.24.1] English's Complete View of the Joint-Stock Companies formed during the years 1824 and 1825.

[n.24.2] Annual Register for 1824.

[n.24.3] The largest amount of gold coin that could be paid during banking hours (from nine to five) in one day, by twenty-five clerks, if counted by hand to the persons demanding it, is about 50,000l. On the 14th of May, 1832,

[n.27.1] The Clerk; forming a number of the Guides to Service and Trade.

[n.28.1] Encyclopaedia Britannica.

[n.30.1] Banks and Bankiing.

[n.31.1] The System of the London Bankers' Clearances Explained and Exemplified.