9

Wonderfully Youthful in Spirit – Considering

The Baring Crisis had, among other things, thrown into sharp, Bagehot-like relief the question of the Bank’s palpably inadequate reserves of gold, less than £11 million as the crisis broke.¹ Amid a plethora of ‘schemes’ in the air, Lidderdale had typically strong views, as related by Hamilton after a conversation in the early days of 1891:

He was prepared to try the experiment of £1 notes … but he doubted if the addition by this means of more gold in the bank cellars would be any great gain … The only way of increasing the spare cash of this country, the smallness of which was our real danger, was to take steps whereby the Joint Stock Banks would be made to keep larger balances; and the least objectionable manner of securing this end would probably be to require them to publish frequently their balances … Lidderdale is prepared to go on as Governor for a third year, notwithstanding that it means a considerable private loss: he is wrapped up in the work at the Bank, and is fully alive not only to the interest but to the importance of the post. I don’t think he greatly appreciates the Chancellor of the Exchequer, of whose extreme sensitiveness and at times want of courage he complains. I admitted that it was a pity Goschen was thin-skinned. ‘Thin-skinned,’ said Lidderdale. ‘Why, he has no skin at all; he is nothing, but nerves and bones.’

The governor later in January sought to fortify the chancellor – complaining about the country’s ‘very inadequate Banking Reserves’, highlighting the invidiousness of the Bank’s position given that the larger its own reserve ‘the less Bankers like to keep their money unused’, and even expressing quasi-regret for having helped the bankers the previous autumn, calling them ‘a stiff-necked & rebellious race each caring only for his own corporation’ – with the result that Goschen in late January made a major speech at Leeds on the whole thorny subject. After noting the relative smallness of English bullion reserves compared to those in France, Germany and the United States, as well as the fact that London being the world’s only free gold market left it peculiarly exposed, and declaring that it was ‘a false system and a dangerous system to rely significantly upon the aid the Bank of England can give in a crisis’, he put forward three key proposals: that the banks should maintain greater cash reserves (presumably, albeit unstated, at the Bank of England); that the banks should reveal the extent of their reserves more frequently; and that the reintroduction of £1 notes would, by taking the place of sovereigns in people’s pockets, have the effect of increasing the amount of gold at the Bank of England.

The story of the next year was of the failure of Goschen’s plan (apart from the banks agreeing to monthly – but not weekly – publication of their balance sheets), a failure partly attributable to his own lack of resolve, but mainly to hardening opposition from an instinctively conservative, change-averse City. The leader of the resistance was Bertram Currie, arguing throughout that banks entrusting greater reserves to the Bank benefited only one institution, the Bank itself. ‘That the Bank should desire to increase the balances of its customers is natural and laudable,’ he wrote in May to the governor in the course of a less than good-tempered correspondence, ‘but how the public, other than the holders of Bank Stock, are to be benefited, I fail to see.’ To which Lidderdale (who indeed stayed on for a third year) responded: ‘Somebody who once was sick wanted to be a Monk, but changed his mind on recovery. Similarly, the Bankers increased their balances after the Leeds speech … but this soon became too much for their virtue.’ Unfortunately, Lidderdale’s heavy-handedness was part of the problem, with Hamilton observing soon afterwards that he had been ‘preaching at the Joint Stock Banks again’. Nor did it help the governor that the scheme had such patchy support from his own colleagues. ‘Notwithstanding that the measure has the cordial approval of the Governor himself, the majority of the Court appears to be very lukewarm about it, if not hostile to it,’ recorded Hamilton later that year after conversations with ‘sundry’ Bank directors. ‘It is a case of “laissez nous faire”. “We have got on well enough up till now, why not leave us alone?”’ Indeed, Lidderdale’s own soundings revealed a substantial minority (eleven out of twenty-six) explicitly hostile, with a future governor, the merchant Samuel Gladstone, declaring that ‘Mr Goschen’s proposal would have as much effect on foreign exchanges as King Canute’s orders had on the waves of the sea,’ while a former governor, Edward Howley Palmer, offered a historical warning about the practicality of small notes, referring gravely to ‘the danger and risk to the working classes of the forgeries which existed so extensively when they were last in circulation’. The governor’s tone, reporting back to Goschen on his findings, was understandably weary: ‘Do you expect enthusiastic support from the Bank to anything? We are not a very youthful body of men, though wonderfully youthful in spirit – considering.’

By early 1892, the scheme was effectively dead, its demise further ensured by a lack of support from the shadow chancellor, the abrasive Sir William Harcourt. ‘I don’t find that the City at all share your admiration of Lidderdale,’ he wrote that winter to Hamilton. ‘I have had letters from persons whom you would recognise as being of the highest authority who regard the recent scheme as a mere Bank of England job to increase the profits of the Bank of England …’ Even so, if £1 notes were no longer up for debate for the foreseeable future, that was far from the case in terms of the central reserve. During the 1880s there had been little appetite for challenging Bagehot’s conclusion that there was no plausible alternative to a single-reserve system; but it was a significant pointer when the Bankers’ Magazine asserted in March 1892 that instead of banks concentrating all their reserves at the Bank, ‘we shall have to revert to the older methods – to causing each bank to maintain an adequate cash reserve of its own’. Or as Currie privately reflected some months later, ‘the time for living under the patronage of the Bank of England seems to be passing & the other Banks would act wisely in recognising this fact & in making provision for future troubles before they arrive’. Over the next two decades, the question of the reserve would stubbornly – and sometimes tediously – persist; and it came to symbolise the shifting balance of power not only between the Bank and the rapidly growing joint-stock clearing banks (capital of over £50 million by 1891, compared with £35 million ten years earlier, and almost a thousand more branches), but also in some sense between a deeply entrenched City establishment and an unwelcome bunch of muscle-flexing upstarts often with strong provincial roots.²

More generally, despite widespread praise for its role in resolving the Baring Crisis, the first half of the 1890s was a far from happy time for the Bank. 1892 saw a Charter renewal in which the Bank found itself distinctly squeezed by the Treasury in terms of payment for its day-to-day services; governor from that year until 1895 (a third year added because of his deputy’s serious illness) was David Powell, a rather unimaginative, obstinate merchant; and his governorship almost exactly coincided with Harcourt’s tenure as chancellor in the Liberal ministries of first Gladstone and then Lord Rosebery. ‘The Bank will, I see, need to be carefully handled,’ reflected Hamilton after a visit to Threadneedle Street in August 1893. ‘They have not got over (what they consider to be) the hard bargain which we drove with them last year, and there is not a single Director who is politically friendly towards the Government.’ Careful handling was never the chancellor’s forte, spoiling anyway as he was for a showdown with what he regarded as one of the last great unreformed vested interests; and the following week, while on holiday, Hamilton was presumably dismayed to receive a Harcourt special:

In your absence I have fought a great fight with the dragons of the Bank parlour.

I sent for the Governor who came supported by that valiant champion Deputy Governor Wigram. After some polite beating about the bush we came to close quarters on the rate of interest on Ways & Means advances.

I blandly threw out a ½ per cent above the rate on deficiency advances which at the present discount rates would have been 2½ p.c.

The two pundits looked at one another in blank dismay and revealed the fact that they had come with instructions to ask 3½ p.c.; thereupon I poured upon them the vials of my wrath; I showed them that such a rate had never been paid when the Bank Rate was 4%; I asked them with indignation how they dare behave in such a way to a customer who kept an average balance of £5,000,000 in their hands; I told them point blank that nothing would induce me to listen to such an exorbitant demand and I said it would become my duty to enquire what ‘other persons’ there were in the City of London who might be ready & willing to accommodate HM’s Govt at a reasonable rate. I said I had hitherto been unwilling to open a Govt account elsewhere than at the B of England but that such demands might make it necessary to look in other quarters for reasonable accommodation. This was quite enough to indicate the proximity of New Court [home of Rothschilds] to Threadneedle St and they trembled at the notion of the Ch of the Exch dealing with Jews less extortionate than themselves. After I had exhibited this bug bear sufficiently I was prepared to dismiss them with the question whether I was to take their proposal as an ultimatum, upon which the ferocious Powell hinted that I might write and suggest 3% and they would give it anxious consideration.

The two gentlemen who looked for all the world like the picture of the money lenders at Windsor then retired. The valiant Wigram looked daggers – but used none.

I accordingly wrote a polite note splitting the difference which has been graciously acceded to, they endeavouring to cover their retreat by alleging ‘the change in the condition of the money market’ as the reason of their climbing down …

A few days later, Harcourt was in no more forgiving mood, informing Hamilton that the Bank’s ‘scandalous conduct’ was something he would not forget, accusing it of having ‘practically robbed the public of ¾% on £2,000,000’, promising that he would have ‘as little dealings as I can help with these gentlemen in the future’, and again raising the tactic of borrowing from Rothschilds in order to ‘show up these Bank gentlemen to the public for what they are’.³

At which delicate point ‘certain irregularities’, as the recurrent phrase went, were discovered in the Chief Cashier’s Office – a phrase that masked what was arguably the Bank’s worst ever internal scandal.⁴ The culprit was the chief cashier himself, Frank May, autocratic holder since 1873 of that powerful post. ‘Mr May,’ an admiring profile in the Bankers’ Magazine had noted in the late 1880s, ‘is said to despise what is known as popularity, and, still more, the insincerity of word and manner sometimes made to the charge of men who flinch from what may be their strict, although unpleasant, duty to their fellow-workers’; earlier in 1893, he had been one of three authors of an internal report on the Bank’s administration, highlighting the twin problems of ‘the irregularity of the work, which is subject to periods of considerable pressure and slackness, not only within the year but within the day’, and ‘the employment, for some of the duties in the Bank, of a class of persons not always well fitted for such duties’. May’s transgression, it emerged from a report submitted by Lidderdale, Greene and James Currie to the Committee of Treasury in November 1893, had been for several years past to make large unauthorised advances – with recipients, it would subsequently transpire, including the City editor of The Times and May’s own son, of the stockbrokers Coleman & May, intimately involved with the investment trust companies that had flourished on the back of the late 1880s boom but subsequently perished amid the protracted fallout from the Baring Crisis. For the time being, Powell and his colleagues were able to hush up the cause of May’s abrupt departure from the Bank – ‘a surprise,’ mildly commented the Financial Times, calling him ‘the stationary point round which revolved the ring of ephemeral Governors’ – but for the governor of the day, Powell, there was no avoiding an interview with the dreaded Harcourt, who naturally (noted Hamilton) ‘spoke his mind out very strongly’ in ‘rather too hectoring a tone’ when told the circumstances. Indeed, although the Bank itself had decided that May’s offences were not actionable, Harcourt was even minded for a time to refer the case to the public prosecutor, until persuaded by his mandarins, including Hamilton, that this might seriously damage the Bank’s reputation.⁵

Eventually, however, the fourth estate had its say. ‘A Paralytic Bank of England’ was the unfriendly title of a seventeen-page blast by A. J. Wilson, appearing in his Investors’ Review at the start of 1894 after several weeks of swirling rumours. ‘Little of the true condition of the Bank can be known until daylight is let in on its accounts,’ he declared:

The Bank publishes no balance-sheet – nothing whatever except the meagre weekly returns. There is no outside audit of its books; its stockholders have no control whatever over the management. Under the charter shareholders are supposed to meet and elect directors and governors at stated periods, but this power has dwindled into mere routine or pantomime. The ‘House List’, as it is called, is always elected as a matter of course, so that the board is really co-optative. It is thus, in great measure, ‘a family party’. The son follows the father, the nephew the uncle, or a lucky marriage brings with it a seat at the board. At best tradition prevails, and the new director is never a banker, rarely a man trained in the hard school of competitive business.

Emphasising the danger of making May the scapegoat, Wilson itemised in some detail the close connections of several Bank directors with various investment trust companies, accusing them of having ‘dabbled in the dirty waters of the City’, and generally condemned the Bank for ‘its isolated position, its business ineptitudes, and its appalling absence of anything like consistent, or even decently intelligent, direction’. For the institution itself, this was an intensely uncomfortable experience. ‘London was humming with his stories about Threadneedle-street,’ reported the Daily Chronicle a day or two later about the impact of Wilson’s article, ‘and, fearful to tell, newsboys were exhibiting sensational posters, and doing a brisk trade on the strength of them, under the very noses of the dignified gentlemen in livery who stand outside the Bank.’ Wilson himself, speaking to the paper, was in trenchant mood:

The Bank of England is protected by the prestige of 200 years’ existence and of a great national institution. Why, its prescriptive right of keeping its position in the dark is looked upon as a sort of guarantee of infallibility. What can you expect of such a system? Any human institution which gets divorced from the general movement of things goes mouldy and moth-eaten in time until a breath of life comes along from the world …

The first thing to be done is to let in the light. Not one bank manager in ten, I venture to say, could make head or tail of the weekly statement which is issued by the Bank. A balance-sheet is never presented from year’s end to year’s end. There is no outside audit and no representative of the chief customers of the Bank – namely, the bankers of the country – on the governing body. Can anyone in his senses contend that this is a proper footing for a vast national institution in the present day? …

The best of Governors is never able to make any permanent impression upon the management of the Bank’s business. They all come and go, these Governors, like mere cogs in a wheel. Routine controls them in most things, and where routine is master abuses thrive … The Government ought to step in at once and get the affairs of the Bank thoroughly overhauled, so that everything may be brought to the light. There is nothing else for it that I can see, unless the country is to wait with hands folded for the inevitable catastrophe.

Soon afterwards there appeared a classic Punch cartoon by John Tenniel. Entitled ‘A Dirty Crossing’, it depicted the inevitable old lady peering down at ‘Mismanagement’ below her dress, and saying, ‘O DEAR, O DEAR! I WISH I WERE OUT OF THIS NASTY MESS!’ That was on 8 January; and though The Times the same day sought to offer a sense of perspective – ‘the Bank directors are not gods, but they are not black-beetles either’ – Harcourt soon afterwards treated Powell to another earful, demanding to know ‘what changes in the system of the management of the Bank are in contemplation’.

The immediate upshot was a power struggle, with Hamilton ascertaining later in January that Everard Hambro, supported by Charles Goschen (the former chancellor’s younger brother) and some of the junior directors, was proposing to change the Committee of Treasury from an ex officio body of past governors to one elected from the directors as a whole. ‘It is believed,’ he noted, ‘that the present ex-governors are too averse to so radical a step to admit of its being taken.’ So they were; and after Powell had been careful to circulate to all directors a letter to him from Henry Hucks Gibbs insisting that ‘it is wholly beneath the dignity of the Court that any of its members should be influenced by the ignorant comments of the Press’, the Court voted on 1 February against Hambro’s initiative. Instead, the emphasis was put on a different sort of internal reform, with the creation by April of an Audit Department supervised by an Audit Committee, the latter comprising the deputy governor and five directors. By then the proprietors, at their regular half-yearly General Court, had given Powell and his colleagues a vote of confidence, after the governor had provided some hard information about May’s misdemeanours, including his speculations on the Stock Exchange, and had informed them that the Bank had set aside £250,000 to meet possible losses. ‘There may have been some fault in the system,’ conceded Powell, ‘but the directors have always had the best interests of the Bank thoroughly at heart, and they have tried, and will always try in the future, to do their best.’⁶

Altogether, it was not brilliant timing for the bicentenary that July; and Herbert de Fraine ruefully remembered how the staff, convinced they would each receive an anniversary gift of one whole year’s salary, in fact got nothing at all – ‘absolutely shattering’ to those who had pinned all their financial hopes on a lump sum, and without a word of explanation either. There would be disappointment too at the top, as recorded by Harcourt’s son in March 1895, just as Powell was preparing to step down: ‘The wife of the Governor of the Bank of England (who looked like a Regent St prostitute) came to see Ch Ex [Harcourt] this morning to ask that some “honour” should be given to him on his retirement from the Bank …’⁷ Harcourt’s reply is sadly not recorded, but in any case the surprise visit proved fruitless.

In the event, the bicentenary was marked by something entirely different – the employment from the summer of 1894 of about two dozen women, initially to sort and count banknotes. The motive was largely financial, part of cost-cutting in the wake of the harsh 1892 settlement; and the explicit rule was that all new female recruits were to be aged between eighteen and twenty-four, were to be unmarried or widows, and ‘will be required to resign their appointments on marriage’. ‘Our path’, recalled Janet Hogarth (later Courtney), the Oxford-educated first superintendent of women clerks, ‘wasn’t always smooth’:

Those were the early days of women’s entry into business and they were not accorded a wide welcome – one can’t wonder at it. They did indeed displace men … So my sympathy goes out retrospectively to the elderly clerks and superintendents who tried to make out that we were inefficient, though we did with a staff of forty [the number of female clerks by 1896] what had before occupied sixty, and got away for the most part punctually at 4 p.m. instead of being kept till 6 p.m. to adjust a lost balance. ‘Balance out’ was seldom the cry as I got to the end of totting up the day’s total. Yet high officials were informed that we had ‘failed’ over work that had never been given to us, or that our health record was faulty, or our thoughts wandering, or what not. More than once we were in danger of extinction. But Mr [James] Currie remained our firm friend, and a free lunch did away with most of the health trouble. I remember his coming in to ask me whether that, or an extra £10 a year, would be most beneficial. I said firmly, ‘The lunch – if you give them the money they’ll spend it on hats and go on eating buns just the same.’

In 1898 some of Hogarth’s charges qualified as typists; but broadly speaking the Bank remained until 1914 a male domain, as did the City at large, with Hogarth herself not unhappy to leave in 1906 and become librarian of the Times Book Club. ‘In the end I grew weary even of the comfort and the consideration – we were too closely segregated and confined to one narrow outlet. Ambition had little scope. Sex disability seemed likely always to bar preferment.’ That was undoubtedly true, yet the very existence of female clerical staff had made a significant difference to the late-Victorian Bank. The key witness is the notably dispassionate de Fraine. Noting that their ‘advent was very unreasonably resented’, he argues that this ‘infiltration’ was in its effect ‘much more far-reaching than was, I imagine, foreseen by anybody’: ‘It meant in fact the end of all the old easy-going methods. It would be of no use in future a Principal’s not knowing what sort of staff he had in the office, or even what numbers he employed.’ And de Fraine adds that ‘actually the tightening-up was long overdue, as must have been perfectly well known to everybody’.⁸

During the City’s increasingly prosperous mid-1890s, epitomised by the frantic speculation in 1895 in South African gold-mining shares that led to remarkable scenes in the Stock Exchange’s ‘Kaffir Circus’, few Bank staff of either sex, and indeed possibly not all that many directors, concerned themselves unduly with the notoriously recondite question of bimetallism. Back in 1892 there had been an inconclusive international conference at Brussels, with no formal Bank representation; in 1895, the year that Miss Prism warned Cecily (in Oscar Wilde’s The Importance of Being Earnest) that ‘even these metallic problems have their melodramatic side’, the Bimetallic League again pushed hard, leading to a memorial from the newly formed Gold Standard Defence Association, though with relatively few Bank signatories; and finally, in 1897, the controversy enjoyed more or less its final fling.

The background, from the Bank’s perspective, was partly the way in which increased global economic activity meant an end to its temporary abundance of gold (itself much stimulated by the influx of new gold from the Rand), and partly the impact in July 1897 of a visiting American pro-silver delegation to London, led by Senator Wolcott, banging the old drum of an international bimetallist agreement. Neither the chancellor, Sir Michael Hicks Beach, nor the governor, Hugh Colin Smith, was willing to budge in any fundamental way from the monometallist faith; but at the end of July the latter did inform the former that, following their conversation, the Bank was ‘prepared to carry out what is laid down as permissible in the Bank Charter – namely, to hold one-fifth of the bullion held against the Note issue in silver, provided always that the French Mint is again open for the free coinage of silver and that the prices at which the silver is procurable and saleable are satisfactory’. Some seven weeks later, at a meeting of the General Court, Smith in effect informed the world at large of this ‘one-fifth’ concession – and the consequence was an immediate City storm. A prominent merchant banker, Robert Benson, at once sold his Bank stock, as did Gladstone’s future biographer, the Liberal politician John Morley; Hamilton reflected that ‘the reception of the announcement, which is regarded as an imprudent flirtation of the “Old Lady” with bimetallism, shows how exceedingly sensitive the great City world is about any suspicion of tampering with our currency system’; the Financial Times declared that the Bank had ‘no business to be coquetting with bi-metallism at their time of life’; and the Committee of London Clearing Bankers passed ‘with practical unanimity’ a resolution condemning the Bank’s proposal. The reasons for that initiative would remain unclear – Benson at the time reckoning that many of the directors had been ‘entirely ignorant of the Governor’s action’, that of ‘a wharfinger & not a banker’ – but in any case the storm proved to be of the teacup variety, with the government making clear by October its wholesale rejection of the bimetallist agenda.⁹

These were also the years of cheap money, with Bank rate at only 2 per cent from February 1894 to September 1896, further reducing the Bank’s already squeezed income. How to increase it? The obvious answer was to grow the Bank’s business in its provincial branches (several now housed in splendid buildings, such as Hardwick’s Italian-style Leeds branch), an approach that would also do at least something to redress the balance in relation to the ever-vaster resources and thus potential leverage of the joint-stock banks. It was a policy that engendered predictable resentments. ‘We do not complain about fair competition but this is fostered by free money costing the lender nothing at all,’ one leading provincial banker, Beckett Faber of Beckett & Co, asserted in May 1896 to the Central Association of Bankers. ‘How can we country bankers who pay well for our deposits meet such competition as this? Our loans are taken from us; our bills no longer exist in our cases and our current accounts are “touted” for …’ Faber finished with a dark warning: ‘The time is already arriving, if it has not already arrived, when the Bank of England must choose whether to be the banker for the Government or a commercial bank. It cannot be both …’ Over the next year or so the Bank did hold out the occasional olive branch, at one point promising Faber it would instruct its agents not to compete ‘unduly’ with their neighbours. But from March 1897 the man in overall charge of the branches was Ernest Edye, one of the more driven figures in the Bank’s history, operating semi-autonomously and producing in his first seven years an annual average profit of some £145,000, almost double what it had been over the previous nine years. ‘I hear from all sides that at the Branches they have adopted an aggressive and an irritating policy,’ a well-informed London bill broker told a visiting country banker in May 1899, adding that ‘I suppose they have too much regard for the power of the London Banks to go on similar lines here.’ That may well have been true; but the underlying reality by this time was not only that the great joint-stock banks had been getting vexed by the Bank’s competitive policy in the provinces, but also that they had become, by virtue of their enormous balances, so dominant in the London money market that they naturally wished for a tangible expression of that power. What better stick with which to beat the Old Lady than gold reserves? Later that summer both the Central Association of Bankers and the Committee of the London Clearing Bankers voted to set up committees on the subject; and in August the Bankers’ Magazine floated the idea of the joint-stock banks keeping their own bullion reserve at the Bank – but ‘withdrawable only by the associated banks, and held apart from the uncontrolled discretion of the Bank of England’.¹⁰

That autumn saw the start of the Boer War. ‘The clearest and most dramatic instance of the operation of the world-wide forces of international finance,’ would be J. A. Hobson’s famous verdict soon afterwards on its causes; and over the years historians have sought to establish – often on slender empirical evidence – connections, whether in the City or in the official mind, between London as the world’s only free gold market, the unsatisfactory state of the bullion reserve and the long-term ensuring of a regular supply of gold from South Africa. Yet even if there is no smoking gun, and even if one concedes (as one should) that there was a significant non-economic dimension to government policy, it is hard to deny the proximity of the two facts that South Africa meant gold and that gold had become the very pivot of the City’s existence. Certainly, during the febrile days of October 1899, the City was firmly to the fore of popular support for the war, culminating in a mass meeting at the Guildhall loudly backing the Tory government’s strong line. Among those making speeches were Samuel Gladstone the present governor, his predecessor but one A. G. Sandeman (‘the merchants of the City of London and of Great Britain are very adverse to having their affairs unsettled by war, but when the occasion arises, when the necessity is seen, as in this case, they rise as one man’), and William Lidderdale, who in a more nuanced speech regretfully saw no alternative and called for ‘a merciful victory’.

Meanwhile, discussion continued for some time about the gold reserves question, until early in 1900 the Union Bank of London’s Felix Schuster, emerging as a dominant figure in the banking world, announced that it could not be systematically considered again until after the war. That did not stop him, speaking a few months later at the Institute of Bankers, from offering some broader thoughts:

What we require is co-operation, and not legislation. More harmonious working together, although we compete with one another; more harmonious working towards one common end is absolutely necessary, not only between outside bankers, but between us and the Bank of England. In every foreign country, I believe, the State Bank has on its Board representatives of all the other great Joint Stock institutions in the banking world. The State Banks are practically managed, or supervised, by those whose special experience lies in the banking line. I hardly think that such a thing is practicable here – I would not advocate it for a moment – that is not in my mind; but I should think some means could be devised by which the Bank of England, instead of holding itself rather aloof from other banks, should periodically meet us and tell us what their views of the situation are, and that we should from time to time discuss a common policy, and act harmoniously with one another, instead of acting in the dark, as we are doing now, quite unaware of what may be in the minds of the Bank of England …¹¹

In short, though Schuster refrained from spelling it out, the time was fast approaching for the company of merchants to accept, at last, him and his joint-stock counterparts as first-class citizens.

The financing of the conflict did not on the whole enhance the Bank’s authority. ‘An addition to Consols’ rather than ‘a separate Stock’ was, governor Gladstone advised Hicks Beach in February 1900, ‘the best way for Government to raise the money to pay for this South African War’; but counselled also by Sir Ernest Cassel, the great cosmopolitan financier, Hicks Beach decided that a separate stock would appeal to a significantly broader public. The governor – senior partner of the East India merchants Ogilvy, Gillanders & Co, a first cousin of William Ewart Gladstone, and described by a leading bill broker as ‘unfortunately very self-opinionated’ – did not react well. ‘In conclusion,’ ended his response to Hamilton in early March on the draft prospectus for the £30 million loan, ‘I feel regret that the loan is not to be raised by an addition to Consols and would have preferred a terminable 3% annuity at par to a 2¾% one at a heavy discount …’ Nor was he any less disgruntled when, just as the prospectus was published, Hicks Beach summoned to his presence not just Gladstone himself but the City’s top bankers. ‘In my humble opinion,’ he told Hamilton, ‘their patriotism is a mere matter of price – make that attractive enough and there will be no danger of the loan not being subscribed.’ In the event the ‘Khaki’ loan proved a roaring success, with the chief cashier (H. G. Bowen, May’s successor) reporting that ‘scores of clerks are here every night until 10, 11, 12 and even ½ past one o’clock’ – work that would have been less demanding (albeit less profitable) if Gladstone had not successfully resisted the Treasury’s suggestion that applications could be made to the main London clearing banks as well as to the Bank itself: ‘I hope it will not be pressed. It is not necessary & therefore undesirable: please leave this paragraph alone & turn a deaf ear to the suggestions of other Bankers.’¹²

The war’s second loan, raising almost £10 million, came towards the end of the summer and again was not without some ill-feeling. Once more, Gladstone took with Hicks Beach a strongly pro-Consols line (‘would be more popular with the City and the public than any other form’); and once more the chancellor was swayed by Cassel, this time settling on Exchequer bonds. Significantly, in an initiative apparently owing little to the governor, just over half of the new loan was placed in advance in America, in the knowledge that this would attract large quantities of gold to London, at a point when the Bank’s reserve was at its lowest for the time of year for seven years. The Treasury’s view was that that advance placing should have been stated in the prospectus, but, noted Hamilton, ‘the Bank of England are averse to this, and think we can arrange the matter by closing the list as soon as the sum required has been applied for’. The upshot was intense City criticism, with the Bank not only accused of withholding material information but also of angering some key players through its surely reasonable decision to close the lists as soon as it knew that the balance had been subscribed. ‘The Bank of England!’ privately groaned one leading merchant banker. ‘If that old institution is not reorganised on some better basis it will bring us into trouble yet.’

Things proceeded rather more smoothly for the rest of the war, including major tranches of Consols (at last) being issued in April 1901 and April 1902, raising between them over £86 million. Both were thoroughly international operations, involving a New York syndicate headed by Morgans and a London syndicate headed by Rothschilds, with the Bank helping to arrange matters, as well as each time itself taking up several millions.¹³ Even so, for those in the City who kept a close eye on such things, it was already clear enough from the circumstances of the earlier loans that the Bank now needed to raise its game.

‘The Bank all through gave an extraordinary impression of wealth, quality, permanence,’ recalled Janet Hogarth, evoking how ‘it was almost unbelievably soothing to sit in a quiet upper room with walls about two feet thick, looking into a soundless inner court, with nothing to do but lay out bank-notes in patterns like Patience cards, learning all about the little marks on them, crossing them up in piles like card-houses, sorting them into numerical order, counting them in sixties and finally entering their numbers in beautiful ledgers made of the very best paper, as if intended to last out the ages’. Yet for her, with a particularly strong sense of the possibilities of life outside Soane’s walls, the accumulated weight of the years cut both ways:

The Bank was full of eighteenth-century, and even earlier, survivals. The dress of its gate porters, the ‘nightly watch’ going round with Guy Fawkes lanterns (I once asked them, when I met them at 4 o’clock on a summer Saturday afternoon, why they did this and they seemed hardly to know, except that it was an immemorial custom); the company of Guards coming in at sunset, their sentinels stationed in the courtyard; the Bank cats which a parsimonious Governor put down by docking their ‘allowance’; the great bars of gold and silver in the fortress-like bullion vaults, brought in from Lothbury under guard through an archway which looked as if it ought to have a portcullis; the almost human gold-weighing machines, which spat out light sovereigns sideways and let the rest fall in a steady stream into copper vessels like coal pans – all the significant evidence of Britain’s wealth and British solidity, so picturesque, so historic, so reassuring and, in the long run, so unbearably tedious. I used to wish a bomb would explode and wreck the Bank as the only way to get out of it …

That was not a perspective shared by de Fraine, unambiguously proud of the Bank’s historic traditions. In 1898, having already worked in several offices (including at the Law Courts branch, which had been opened in 1881), he was posted to the Chief Cashier’s Office, staying there until 1907 and finding it a pleasingly unhurried contrast to the ‘rough and tumble’ of the Bill Office, ‘where the great thing was to get the cheques into the Clearing House, and where there was always a small staff hunting out “differences” which were bound to occur owing to the frantic speed with which we had to make entries’. He also found the functions of the Chief Cashier’s Office enjoyably various, with in his case the work involving ‘a spell on “The Books”’, in other words collating all the figures necessary each week for the Committee of Treasury (meeting on Wednesdays) and the Court of Directors (meeting on Thursdays):

These Books, showing in detail all the figures of the week’s working, became my responsibility in due course. They were so numerous that I had to have a messenger to help me carry them. They were put beside the Governor’s chair in the Parlour a few minutes before the time of the meeting, and I had to have them removed immediately afterwards. It was also my job to take in a Book to the Governor, and another to the Deputy Governor, every morning, showing the previous day’s transactions. I was on ‘The Books’ for two years, and thus got to know by name at least a few of the Directors, which didn’t fall to the lot of most of the Old Lady’s brood.

During these two years, de Fraine introduced in the Bank (‘a little behind the times, perhaps’) the first graphs, making it easier for the governor of the day to grasp more easily the implications of the returns. ‘In time, there were quite a number, and he kept them in a special upright box standing by the side of his chair, which I saw every day.’¹⁴

Was that pre-1914 governor presiding over something recognisably akin to what later generations would call a ‘central bank’? In at least four distinct respects, the answer is surely in the negative:

A public body? For all its many important wider responsibilities, most of the time willingly shouldered, the Bank remained before the First World War a part-public, part-private institution, wholly making its own senior appointments and largely unaccountable to government or Parliament. ‘The Bank of England is trying to serve two masters,’ persuasively argued the Financial News in 1893, shortly before the May scandal broke:

One of these masters is the body of its own shareholders, whose dividends depend upon the amount of discount business done by the Bank, and who do not like to see their prospects injured by the successful competition of the open market; and the other is the vast interest of British credit, represented in the City mind by the amount of gold in the Bank’s vaults. The policy of the directors, as exemplified in their latest exploit of reducing the minimum official rate to 3 per cent, is too obviously the policy that animated Mr Facing-both-ways in Bunyon’s allegory. They want to get some of the business which now drifts into other channels, and they do not want to encourage withdrawals of bullion by foreign customers. As usual in similar attempts, they have adopted a compromise course which is not at all certain to achieve either of the desired ends …

The paper called in strong terms for the Bank’s precise character to be more clearly defined. In practice, however, little was done in that direction over the next twenty years; as for the Bank’s daily operations over that period, John Pippenger’s detailed analysis has shown that, despite its ultimate and abiding commitment to maintaining convertibility into gold, the necessity of continuing to make profits and thus to pay dividends significantly affected policy. ‘Like a normal commercial bank,’ he explains, ‘the Bank of England reduced reserves and the proportion [of reserves to deposits] as interest rates increased. The tendency to reduce the proportion as interest rates rose and raise it as nominal income increased meant that the Bank followed conflicting policies over the business cycle.’¹⁵

Attentive to the broader national economy? In reality it seems to have been entirely up to the Bank itself to what extent it prioritised the concerns of the UK economy. Certainly there was little government interference. ‘In pre-war days,’ recalled Sir Otto Niemeyer (a major figure at both the Treasury and the Bank) in 1929, ‘a change in Bank rate was no more regarded as the business of the Treasury than the colour which the Bank painted its front door.’ Yet on the part of British industry itself, certainly by the 1900s, a striking critique was starting to emerge. ‘That the constant and violent fluctuations in the Bank of England rate of discount are injurious to trade and commerce,’ declared in 1907 a motion at the annual meeting of the Association of Chambers of Commerce, carried once the mover had agreed to substitute the more tactful ‘frequent’ for ‘constant and violent’; later that year, the Association pushed for three representatives of the state to be co-opted on to the Bank’s Court, in order to judge whether Bank policy was ‘conducive to the welfare of the country and the advantage of trade and business’. Of course, the Bank was not wholly oblivious to the domestic implications of Bank rate rises made in order to protect its reserves or to forestall trouble. Indeed, it seems that sometimes, ‘out of tenderness for home trade’ (to quote R. S. Sayers), the Bank resorted to other, less damaging devices than Bank rate, such as intervention in the gold market, in order to raise rates in the money market. Even so, in the most thorough examination we have of the issue, another historian, Dieter Ziegler, has found relatively little evidence, on either a micro or a macro level, of such ‘tenderness’ – and, in particular, he stresses the absence of any appetite on the Bank’s part to use interest rates in a helpfully counter-cyclical way.¹⁶

Exercising control over the City? Not helped by its high turnover of governors, and despite Lidderdale’s man-of-the-hour moment in 1890, the Bank did not yet exercise over the rest of the City a huge amount of moral suasion, or what would subsequently be known as the governor raising his eyebrows. Indeed, it is probably fair to say that at this stage the widespread perception in the City was that the Bank was run along distinctly backward, old-fashioned lines – a perception hardly encouraging a sense of deference. ‘A very bad day,’ recorded the working diary in March 1900 of the bill brokers Smith St Aubyn:

Money absolutely unobtainable. We were obliged to go to the Bank for £115,000. They say that they will charge 5% for advances as they want their loans repaid by the market, & they also refuse to discount short bills. This is a distinct attempt of Gladstone’s the Governor to extort usury from the market. In consequence of this individual’s action we took 15^m down to S, P & S [the bank Smith, Payne & Smiths] who discounted them for us at 4%.

‘The sooner Gladstone returns to his petroleum tanks the better,’ concluded the entry, ‘as this is simply another instance of the misuse of public money by him.’¹⁷

Co-operating with other national banks? ‘At first sight the Bank was an extraordinarily insular institution,’ observes Sayers in his magisterial overview of ‘The Bank and its world’ between 1890 and 1914. ‘Neither Governors nor officials made any visits to other countries on official business, and visitors to the Bank from other countries were ordinarily paying only courtesy visits. Very rarely a “top hat” letter would come in French from the Bank of France, but knowledge of foreign languages was not regarded as a necessary qualification for anyone in the Bank’s service.’ It was, insists Sayers, an ‘illusory’ appearance, given that the Bank well knew that nothing so intimately affected its ‘guardianship of the gold standard’ as ‘the current of world events’. Nevertheless, as he fully concedes, there was little if any of the almost continuous dialogue and often co-operation with other national banks that would characterise long stretches of the post-1914 era. The deputy governor may in December 1900 have written to the newly appointed director general of the Bank of Italy, offering ‘felicitations’ and assuring him that ‘nothing shall be wanting’ on the Bank of England’s part to keep relations with the Bank of Italy ‘on as pleasant a footing in the future as they have been in the past’, but the actual relationship with this and other national banks was altogether more distant. Occasionally there was an exception – in 1898 the Bank agreed with the Bank of France to help German banks in difficulty and thus ease pressure in the Berlin money market; during the difficulties of 1907, the Bank was grateful for assistance from the Bank of France – but that was all it was. Instead, on a more day-to-day basis, ‘the theory was,’ reflects Sayers, ‘that through the action of the banking system the Bank would sense the tides of world affairs and, in so far as personal knowledge was necessary, the Directors with their varied and widespread business connections could answer any questions the Governor had to ask’.¹⁸

One should not exaggerate. Notwithstanding all four disclaimers, the fact was that the pre-1914 Bank saw itself – quite rightly – as something very special globally as well as nationally, and not just purely a commercial organisation. A nice reflection of underlying assumptions surfaced in September 1900, as the Boxer Rebellion raged in China and the Bank optimistically envisaged the eventual restoration there of ‘peace and quietude’. ‘The Bank,’ a surprisingly forthcoming director confided in the financial press about that happy eventuality, ‘would be appointed the vehicle for the transfusion of Western civilisation into that ancient community, and they would enjoy the honour of being bankers to two-thirds of the human race. Dividends were a very interesting and satisfactory point with them; but these national connections and services greatly added to the value of their proprietary stock.’¹⁹

No one expressed the seemingly immutable gold standard verities more eloquently than John Maynard Keynes retrospectively (calling the Bank the conductor of the world’s financial orchestra) or Winston Churchill at the time. Addressing his Manchester constituents in April 1908, the newly appointed president of the Board of Trade evoked a world destined soon to disappear, a world of broadly open economies in equilibrium with each other, and with a benign, all-seeing Bank of England at its eternal beating heart:

In the transactions of States scarcely any money passes. The goods which are bought and sold between great powers are not paid for in money. They are exchanged one with the other. And if England buys from America or Germany more than she has intended to buy, having regard to our own productions, instantly there is a cause for the shipments of bullion, and bullion is shipped to supply the deficiency. Then the Bank rate is put up in order to prevent the movements of bullion, and the rise of the Bank rate immediately corrects and arrests the very trade which has given rise to the disparity. (Hear, hear.)

That is the known established theory of international trade, and everyone knows, every single business man knows, it works delicately, automatically, universally, and instantaneously. It is the same now as in January 1906 [the date of the Liberal landslide at the general election], and it will be the same as it is in 1908 when the year 2000 has dawned upon the world. As long as men trade from one nation to another and are grouped in national communities you will find the differences of free trading are adjusted almost instantaneously by shipments of bullion corrected by an alteration in the Bank rate.

Sadly, it is only very occasionally during this quarter-century or so before 1914 that the records enable one to see the Bank fully in action, outlining the circumstances and weighing up the options before it decides to take a particular course of action. Probably the closest we come is through letters that the veteran and highly respected director Benjamin Buck Greene sent to colleagues in the mid-1890s, in the specific context of the Japanese government having deposited at the Bank a huge indemnity payment following its victorious war against China. ‘I am curious to see what is to happen to the Japanese Money,’ Greene wrote in November 1895 to Mark Collet, fellow-member of the Committee of Treasury as well as of the Court:

No doubt we shall lose control of the greater part though still with us. If a persistent attempt be made to employ money must go to nowhere – & yet until it leaves the Country somebody must hold it without interest.

The U.S.A. are again shipping gold – & if she continues the same Currency policy she may issue more gold Bands [Bonds?] to share the same fate in due time for which they have to pay interest – but as they can afford it it does not signify to them.

The payment by the Hong Kong & Shanghai Bank of a further 2 Millions made a temporary flutter in the market – but now it looks as if we shall have what is called increased ‘ease’ again & next month gold will return from the internal Currency.

The following autumn, in September 1896 the day after a Bank rate rise, and too infirm himself to be in the City, Greene was writing from his home near Reading to governor Sandeman:

If the 5½ Millions of gold we have lost since the 22^nd July had been taken away by the Japanese and exported, thereby reducing their deposits by that amount, it would not have signified so much and any movement on our part would have been less necessary. How long it will remain with us or in this Country, we know not, therefore on looking at our position in the event of its withdrawal it seems that the time had come or nearly so to consider the question.

Our total deposits stood on the 9^th Ins^t at £57,365^m

Reserve " " 32,380^m

Proportion 56.9 [per cent]

Take away the Japanese deposit of £12,523^m without disturbing any other account we should have £44,842^m. Reducing our Reserve by same am^t to £19,857^m, [we should have] Proportion to 44.1, which I think under Existing Circumstances is about the minimum we should aim at to let it go to without taking action …

As we do not know yet what is to become of it [the Japanese money] we ought to legislate as if it were certain to be exported directly or indirectly at any moment and though perhaps your move yesterday [increasing Bank rate] was not urgent it was at any rate safe while we do not yet know to what amount the present drain may extend & particularly in view of the decline we usually have in our Reserve after about the 22 Sep^t. Of course there are other Variations that may crop up and require consideration. The Bank of France has lost Gold since the 19^th Aug^t to the Extent of nearly two Millions Sterling.

I do not think your move will interfere at present with the demand upon you for discounts (though the outside Market may be better) unless you put up your unpublished rates which perhaps would check them.

In answer to your question I do not think at present it would be useful or desirable to take cheap money off the Market, the Bankers are too rich for that having still large balances with us, besides having so much more money in their tills than they used to have …

A coda comes from Sandeman himself, who three months later wrote to the chancellor, Hicks Beach, asking if he would ‘obtain for us some precise information as to the intentions of the Japanese Government in connexion with the large amount which they have at the present moment on deposit with us’, adding that ‘lately the Japanese Government had withdrawn a certain amount in gold for export’. ‘It has been done,’ noted the governor, ‘in a very discreet manner, but, should these withdrawals assume large proportions, and become generally known, they might easily create alarm,’ that is, in the money market. The Treasury obliged, but probably only to a degree, to judge by the letter that Sandeman sent soon afterwards, in January 1897, to Hamilton: ‘I am much obliged for your suggestions as to means that might be adopted for ascertaining something definite as to the Japanese intentions, from the Legation, but I fear it would not do to reopen the question now, as we have already declined to depart from our “traditions”.’²⁰

If that was presumably a reference to traditional relationships with customers, an even more inviolable tradition remained that of the rotation of governors. Every now and then the notion was floated of a permanent governor, for instance by Hamilton to Lidderdale shortly after the Baring Crisis: ‘He said, on the whole “no”. It was difficult enough now to get good men to serve as Directors, and if you deprived them of the chance of occupying the chair, which to many was a coveted distinction, you would probably get even less good men to enter the Bank.’ It is impossible to be certain how fair that was as an estimate of the calibre of the Bank’s direction; but through the prosopographical research of Youssef Cassis we can at least make certain generalisations about the nature of the Court between 1890 and 1914. Cassis finds that merchants (as opposed to merchant bankers) still occupied nearly half the positions; that it was still very English and Anglican; that it still had a strongly hereditary element, with Evelyn Hubbard even explicitly stating that he had ‘inherited’ his directorship from his father; that its political affiliation was almost unflaggingly Conservative or Liberal Unionist; that by some way the most popular club to belong to was the Carlton, followed by the Athenaeum; and that in terms of society as a whole there were some directors enjoying considerable prestige, including the Roehampton set living in substantial residences, but others, for instance the wine merchant Albert Sandeman, who were far from social high-flyers.

There was perhaps no such thing as the ‘typical’ director, but a certain flavour comes through in Vanity Fair’s mid-1890s profile of Henry Cosmo Bonsor, who had been elected to the Court in 1885 and would not depart until 1929:

He is an Eton boy (who played in the football Eleven and rowed in the Boats), a Director of the Bank of England, a County Alderman for Surrey, a Lieutenant for the City of London, a Justice of the Peace and Deputy-Lieutenant for Surrey, and he has sat in the Commons for the North-East, or Wimbledon, Division of Surrey since December 1885 … Chairman of the South-Eastern Railway and of Watney and Company Limited, and a partner in Combe and Co (brewers), he is perhaps best known as the popular and energetic Treasurer of Guy’s … He is a man of great daring, even to the extent of brown boots, a billycock hat, and a cheery good-natured person … With all his business he still finds time to be a sportsman. He is suspected of knowing something about racehorses; he has been seen at Monte Carlo; he can play an occasional rubber; and if the grouse on the Yorkshire moors do not like him they are much appreciated in the wards of Guy’s Hospital. Altogether he is a thoroughly good fellow.

He is still a boy: of more than six feet; and though he is a Freemason he is a typical Englishman who disdains white gloves.

An occupational breakdown of the governors themselves – in turn impacting on the composition of the Committee of Treasury – is revealing. Of the dozen governors between 1890 and 1914, all but one or two were from essentially ‘mercantile’ firms – and seldom possessing any obvious banking expertise. One of the Edwardian governors was said to use his room at the Bank to receive his travellers with their samples; while in October 1902, when the governor was Augustus Prevost of the declining firm of merchants Morris, Prevost & Co and his deputy was Samuel Morley of the warehousemen I & R Morley, one merchant banker, fairly or unfairly, let himself go. ‘The Governors are charming fellows,’ Herbert Gibbs wrote to his father Lord Aldenham (the former Henry Hucks Gibbs, no longer a director), ‘& I would leave them in charge of a roast chestnut business with the most absolute confidence, but the same rules do not quite apply to the centre of the Commercial centre of the world.’²¹

All things considered, it was probably fortunate that the Bank by the early twentieth century also had an emerging cadre of high-class functionaries. The exemplar was undoubtedly Gordon Nairne. Born in 1861, and employed first at the Kirkcudbright branch of the National Bank of Scotland, he entered the Bank’s service in 1880 on the nomination of Thomson Hankey. He rose rapidly and in 1902 became chief cashier, by this time acknowledged as the senior position to chief accountant. Between then and the war, culminating in his knighthood in June 1914, he was almost certainly year in, year out the single most important figure at the Bank, apart from occasionally the governor or deputy governor, being renowned for his attention to detail, his close supervision of those below him and his severe disciplinary streak. He was not, as Sayers nicely puts it, ‘the man to foster an innovation not engaging his sympathies’; and shortly before the war, when the Bank tentatively experimented with recruiting university graduates as permanent staff, it seems to have been Nairne who made sure that this initiative did not get very far, dismayed as he was by careless handwriting not up to the Bank’s standard.²² Put another way, it did not yet pay – and would not for a long time whether in the Bank or in the wider City – to wear one’s intelligence on one’s sleeve.

The first full year of peace after the Boer War, and of telephones installed in the Bank, featured two notable episodes. May 1903 saw a £30 million loan for the Transvaal, marked by chaotic scenes outside the Bank – queues four deep from the Threadneedle Street doorway to the Bartholomew Lane entrance – on the day it issued the prospectus. The loan was massively oversubscribed, and Lee Goodier, working in the Chief Cashier’s Office, would recall that ‘my working hours during the ten days the work on this lasted totalled more than 158’:

We began on Thursday, the 7th May, by working from 9 a.m. until midnight, and finished with a day of fourteen hours on Monday, the 18th. Our longest day was on the 12th, a Tuesday when, starting at 9 a.m. we worked until 5.50 on the following morning, 20 hours 50 minutes, beginning the next day’s work at 9 a.m. It was decided to finish early on that Wednesday only because of the physical exhaustion of the Staff. We were reduced to kicking each other under the desks to keep each other awake and in the circumstances the risk of serious errors was considered too great.

Some six months later, on 24 November, shots were fired at the future author of The Wind in the Willows. Born in 1859, the son of a lawyer, Kenneth Grahame had joined the Bank in 1878, rising to become secretary in 1898, successor but one to Chubb, and remembered by de Fraine as ‘popular but distant’. The 1903 drama was described next day by the Financial Times:

A respectably dressed man of medium height and ordinary appearance, apparently some thirty years of age, who subsequently gave the name of George Frederick Robinson, entered the Bank and made his way to the Discount Office, where he asked to see Sir Augustus Prevost, the ex-Governor. The man was shown into the Library, where the Secretary, Mr Grahame, inquired as to his business.

Robinson tendered what appeared to be a scroll containing a petition, and asked Mr Grahame to read it, but the latter replied that he had not time. Robinson remarked, ‘Oh, then, you will not read my petition!’, pulled out a revolver and fired three shots at Mr Grahame, dancing about and attitudinising wildly as he did so. Luckily the Secretary was near the door, and was able to escape, locking the door behind him, leaving his assailant a prisoner.

The police were summoned, and there was something of a dilemma as to the best method of securing so dangerous an intruder, but the ingenious suggestion of one of the clerks to turn the fire hose on him was promptly adopted. On the door being cautiously opened to admit the hose, Robinson fired a fourth shot, again, fortunately, without hitting anybody. A well-directed stream of water, under high pressure, instantly knocked him over, and he was quickly secured and handcuffed, though in the struggle damage was done to the room. The revolver was thrown through a bookcase, and a chair was also smashed in the mêlée …

‘Mr Grahame, we are glad to say, suffered no injury at all,’ concluded the report. ‘He is absolutely at a loss to account for the attack, and it is believed that Robinson was in a demented state and quite unaccountable for his actions, though there is some suggestion that he expressed Anarchist ideas.’

Less than five years later, in June 1908, Grahame would abruptly leave the Bank. His letter of resignation referred to ‘constant strain’ and a ‘deterioration of brain and nerve’; but the Bank’s medical officer could find on examination little supporting evidence, and he was accorded a pension of only £400 a year. Why did he decide to go? There is some evidence that he had had a run-in with one of the directors, culminating in the secretary saying to him, ‘You’re no gentleman’; if so, the director may well have been Walter Cunliffe, a notorious bully. In any case, four months after he left Threadneedle Street, the adventures of Ratty et al were revealed to the world, and Grahame joined the literary immortals.²³

He had already while at the Bank published The Golden Age (a childhood memoir, reportedly a favourite book of the Kaiser’s), and during the mid-1900s there was seldom any respite from the gold reserves question. In February 1904 the Institute of Bankers heard Alfred Cole, a plain-speaking merchant who had been a Bank director since 1895, tell the assembled company that, in order to increase the country’s gold reserves, the banks ‘must agree that, instead of calling in their loans temporarily, they must all keep permanently larger balances at the Bank of England’; some two years later, the new Liberal chancellor, H. Asquith, briefly considered setting up a broad-based royal commission to examine the whole issue. ‘It is quite true I have spoken to 2 or 3 City men about the gold inquiry,’ he told Hamilton. ‘In what other way one is to get any independent opinion of any value, I fail to see. The truth is all these people, & not least the Bank directors, are as jealous of one another as a set of old maids in a Cathedral town.’ Later in 1906, at a big City dinner that July at the Ritz, the major speech was made by Viscount Goschen, almost half a century after he had joined the Court before becoming a politician. In a classic piece of elder statesmanship, he cogently outlined the options:

The bankers ought to hold more reserves themselves. The Bank of England ought to hold more gold. (Hear, hear.) I see the majority are in favour of making the shareholders of the Bank of England responsible for the increased cost. Well, that is the question. I am not controversial; after dinner I will never be controversial; but I am putting the various alternatives. There is the Bank of England or there are the bankers. Then there is the Government. Perhaps there will be greater unanimity there, because now the representatives of the Bank can join with the representatives of the bankers in saying it is the Government who ought to bear the increased cost. Well, gentlemen, those are difficult questions, but I do think it would be worthy of the City of London – that it would be worthy of this great community who are responsible for the finance of the country – if they could agree to go upon some plan by which, perhaps by mutual sacrifice, by mutual compromise, by wise counsels, they might discover some method by which the present position might be remedied.

‘It was significant,’ noted the Financial News in its report, ‘that there was dead silence, in an audience largely composed of bankers, when he spoke of the possible duty of the joint-stock banks in this connection, loud applause when he suggested the Bank of England as an alternative sufferer, and vehement cheers when the Government was mentioned as a last resort.’

As it happened, the events of the next year and a half, including a mini-crisis and a more testing crisis, brought the issue even more to the fore. The mini-crisis was in the autumn of 1906, against a background of feverish speculation in New York and an increasingly worrying drain of gold from London across the herring pond. ‘Threadneedle Street has, of course, arrived at the season when the demands upon it from abroad are usually keenest, and naturally a Reserve of under 19 millions makes the market sensitive to every rumour of possible further withdrawals,’ observed the Financial Times on Friday, 19 October, after Bank rate had been increased from 4 to 5 per cent; later that day, it was put up to 6 per cent, precipitated by a heavy demand for gold from Egypt, following a bumper cotton crop there. Eventually the danger passed, but in January 1907 Schuster’s emerging rival as the great joint-stock banker of the day, the combative Edward Holden of London City and Midland Bank, put forward a complicated scheme by which the joint-stock banks would have a gold reserve created for themselves – a scheme that the Economist roundly condemned, declaring that the joint-stock banks ‘do not scruple to ask that the Bank of England and the public should be fleeced for their benefit, but their profits are to be held sacred’. The bankers themselves were far from united, and soon afterwards the London Joint Stock Bank’s Charles Gow expressed himself satisfied with the existing constitutional arrangements: ‘The Bank of England is by our system the holder of the only gold reserve in the Country which is of practical use, that is to say, which can be drawn upon in need, and which can be replenished by the action of the exchanges influenced by the Bank rate.’²⁴

The real crisis came that autumn, again in the context of American irrational exuberance, with the failure on 22 October of the important Knickerbocker Trust Co the catalyst for near-panic in London, compounded from the 28th by the severe drain of gold from London to the States. Bank rate went up on the 31st from 4½ to 5½ per cent, but the drain still continued. Then, on Monday, 4 November, the governor, William Campbell, walked into the Bank, inspected the figures, and did two things. First, wholly off his own bat, he raised the rate to 6 per cent, a ‘Governor’s rise’ that much impressed the newest director, Mark Collet’s grandson Montagu Norman. And second, he sent for Lord (‘Natty’) Rothschild, head of the London house, and asked him to secure via Rothschilds in Paris a major tranche of gold from the Bank of France. With the reserve dipping dangerously below £20 million, this was duly done by Tuesday. Yet, as large withdrawals of gold by New York continued, Campbell and his colleagues saw no alternative on Thursday the 7th but to raise Bank rate to 7 per cent, its highest level since 1873. Soon afterwards, the American authorities at last got a grip on the situation, through the issuing of Treasury securities; and over the rest of the year, with the worst of the crisis over, gold flowed into London. ‘Does the raising of the Bank Rate ever fail to attract gold and change the course of exchanges?’ the US Senate’s National Monetary Commission would subsequently ask the Bank. ‘Experience seems to prove,’ it reassuringly answered, ‘that the raising of the Bank Rate to a sufficient level never fails to attract Gold, provided the higher rate is kept effective.’ Or as the tag now went in the money market, ‘7 per cent brings gold from the moon.’²⁵

On the eternal question, and despite the recent alarms, nothing much happened over the next few years, which included the cautious governorship of the coffee merchant Reginald Johnston, grandfather not of a future governor but of a famous cricket commentator. His successor, from the spring of 1911, was Cole, an altogether larger figure and determined to resolve the gold-reserve impasse. So it seemed were the bankers also, and that summer it was as if peace was suddenly breaking out. ‘I am one of those who have always refused to believe that the interests of the bankers are opposed to those of the Bank of England,’ Cole on 21 July, one of the hottest days of a ferociously hot spell, told the lord mayor’s banquet:

There is no conflict of interests between the banks and the central institution, and I have hailed with the utmost satisfaction a proposal that has been made unanimously by the representatives of the London Clearing Bankers that will bring the Governor of the Bank into more direct personal relations with the Clearing Banks. The resolution is that there should be quarterly meetings of the representatives of the London Clearing Banks at the Bank of England …

The timing was propitious, given the fast-moving events just about to happen – events that Cole would subsequently relate to the Court:

On Saturday, the 22^nd July, I received a telegram in the country [Cole’s out-of-town home being West Woodhay House near Newbury] from the Chief Cashier stating that Sir Edward Holden had sent over to the Bank as he wished to see me on important business. When he heard I was absent he proposed to motor down to call on me. I replied by telegram that I could see him at any time on the following day, Sunday, the 23^rd, but my telegram was not in time to reach him on the Saturday. I arranged to see him at the Bank on Monday morning. He then informed me that, in his opinion, the condition of the affairs of the Yorkshire Penny Bank was serious … Sir Edward Holden informed me that he had communicated with the Chairman of the Union of London and Smiths Bank and the National Provincial Bank; also that he had prepared a scheme by which the business of the Yorkshire Penny Bank should be taken over by a group of Bankers, if those Bankers would agree to raise a capital of £2,000,000 sterling so as to ensure the safety of the Yorkshire Penny Bank on a reconstituted basis. He asked me as Governor of the Bank to assist him in raising the Capital.

On the Monday, at a meeting at the Bank attended by Cole, Holden and Schuster among others, ‘it was decided to proceed on the lines of Sir Edward Holden’s scheme’; and over the rest of the week, Cole and Holden worked ‘day and night’ to prevent a ‘debacle’ that would ‘lay in ashes the whole of Yorkshire and a great deal of Lancashire’, to quote Holden’s reports to the chancellor, David Lloyd George. Between them, Cole and Holden succeeded in rescuing the Penny Bank, with the leading joint-stock banks injecting £2 million of working capital and the Bank heading a guarantee fund of £1 million.²⁶ All in all, it seemed that Holden, Schuster and the others had at last arrived on the stage as acknowledged – not least by the Bank – members of the City elite.

The new spirit of amity lasted only until 1913. That February, shortly before the end of his governorship, Cole for the final time took the chair of the by now well-established quarterly meeting between the Bank and the leading joint-stock bankers; and he proceeded, with supporting statistical evidence, to argue that although the Bank had done its bit in maintaining a respectable proportion of cash to liabilities, the bankers had not followed its example. The upshot was the formation of a new Clearing Bankers’ Gold Reserves Committee (CBGRC), to be chaired by Lord Aldwyn, the former Hicks Beach. It had made little progress by January 1914, at which point Holden in his annual address to shareholders dropped his bombshell: in essence, that his bank would henceforth increase the holdings of gold in its own vaults, independently of the Bank – a move instantly and widely viewed as an assertion of a larger independence. Schuster meanwhile continued to plug away at his idea of strengthening the central reserve through establishing a secondary gold reserve – comprising an agreed proportion of each bank’s liabilities – that was in the Bank’s physical custody. For if, he contended, ‘we each of us say we will maintain sufficient gold reserves of our own, then we assume a responsibility to the community which is not properly ours, and we relieve the Bank of England from the responsibility which is theirs’. At this point, critically, Cole’s successor, Cunliffe, failed to persuade a waiting-on-events Court to allow him to attend the CBGRC – no doubt with the directors well aware of his potentially damaging tactlessness. In any case, the slighted bankers now came together, and that summer Schuster, Holden and Herbert Tritton of Barclays laid before the CBGRC their joint scheme by which the banks would secure Parliament’s assent to their holding 5 per cent of their liabilities in gold. ‘He had had a strong aversion to any legislative requirements being mooted,’ explained Tritton in a short speech that said much. ‘But after the action of the Bank of England in refusing to participate in the discussion and formulation of a scheme, he had concluded that the line of least resistance was to … leave nothing to the discretion or goodwill of the Bank of England …’²⁷

That was on 22 July 1914, while a largely unconcerned Bank pursued – like a largely unconcerned City – the daily round. The overwhelming majority of the Bank’s 700 or so officials and clerks in Threadneedle Street continued to work under either the chief cashier or the chief accountant: those in the former category including the ninety in the Private Drawing Office, the fifty in the Bill Office, the twenty-seven in the Public Drawing Office, the twenty-seven in the Dividend Pay Office, the eighteen in the Securities Office, the fifteen in the Issue Office, the ten in-tellers; those in the latter category including the fifty-seven in the Dividends Office, the forty-five in the Consols Office, the thirty-two in the Bank Note Office, the thirty-one and twenty-eight in the Colonial and Corporation Stock and Bank Stock Offices … Sometimes the work was heavy, often it was not. A final glimpse of the pre-war Bank comes from the Financier’s profile in 1910 of the Stock Transfer Office:

In each ‘pulpit’ sit two stern-looking gentlemen, looking uncommonly like schoolmasters watching over a large class. And, in point of fact, that is exactly what they are, for their only business seems to be that the staff are not playing cards, or ‘noughts and crosses’, or ‘blind man’s buff’, instead of checking and entering the transfers in the books. Time must hang very heavily on their hands during the long hours between 10 and 4! But at 3.55 principals and clerks are alike very busy, for then begin hasty preparations for departure. Here is the program: 3.55, coat-brushing; 3.57, hat-brushing; 3.59, putting on gloves; 4, hats on, and – exeunt omnes.²⁸

Two Bank directors and the current governor were among those who in the winter of 1911–12 gave evidence to the Committee of Imperial Defence, conducting an inquiry into the financial and commercial consequences if war broke out between England and Germany. The first director was the energetic Frederick Huth Jackson of the merchant bank Frederick Huth & Co. ‘To suspend the export of gold even for twenty-four hours might be to jeopardise our position as the principal bankers of the world,’ he insisted; and generally he argued that provided London got through the first few days of war then all would be well, because by raising Bank rate it would be able to call in gold from all quarters of the globe. The other director was Lord Revelstoke, son of the main culprit of 1890 and now head of the resuscitated Barings. Predicting that a declaration of war ‘would create such chaos as would result in the ruin of most, if not of all, accepting houses’, he declared that ‘the only way to remedy such a state of affairs would be a moratorium’. Whereupon this exchange followed:

And a moratorium not in the realm of the Bank of England, but between private individuals and banks in this country; that is the sort of moratorium you mean, is it not? – No moratorium could affect the Bank of England, of course. The Bank of England really is the source of the whole credit of the British Empire.

The governor was Cole, who like Huth Jackson strongly deprecated any idea of a wartime embargo on the export of gold, given that it was the ‘free market for gold’ that more than anything had made London ‘the international banking centre of the world’; and, after optimistically asserting that ‘the City as a whole would escape any great financial disaster’ if the worst did happen, he concluded with some reassuring rhetoric about how, in terms of defending the gold standard, ‘the adjustment of the discount rate to meet the ever-varying circumstances of each moment’ was a mechanism that had ‘never failed us in the past’ and ‘might be relied on in almost any conceivable eventuality, so long as we retained command of the sea’.²⁹

In the summer of 1914, it all played out for real. ‘The general feeling seems to be that there will not be war on the Continent, but it is by no means certain,’ Brien Cokayne, another Bank director and a partner in the merchant bank Antony Gibbs, informed a correspondent on Monday, 27 July, with Serbia having just rejected Austria’s ultimatum. But the City as a whole was now starting to get distinctly nervous, compounded by the joint-stock banks – in a way that they would find difficult to defend afterwards – not only in a panicky way calling in loans from discount houses and Stock Exchange firms, but starting to withdraw gold from the Bank in significant quantities. As for the Bank itself during the first half of the week (which included the news on Tuesday afternoon that Austria had formally declared war), it did its best to provide liquidity to the money market, with Natty Rothschild somewhat grudgingly noting on Wednesday the 29th that it had been ‘advancing money against gold shipments from New York which is the wisest thing they have done for a long time’. That same day, a Treasury party went to the Bank to meet Cunliffe, Cole and a trio of senior merchant bankers. ‘The opinion of the Governor, confirmed by the other Directors present,’ noted the Treasury’s permanent secretary, Sir John Bradbury, ‘was that the Bank of England was in a very strong position, and that any special steps would be unnecessary, and indeed harmful as tending to excite apprehensions.’ ‘The Bank,’ he added, ‘had the situation in hand.’ And ‘opinion was also expressed that it were better that the Governor should not go to visit the Chancellor of the Exchequer lest alarming inferences be drawn’. In short, steady as she goes – or, as another Treasury official, Basil Blackett, put it in his diary, the message from the Bank was that ‘all was quite comfortable, though Bank Rate would be put up to 4 p.c. tomorrow by way of precaution’.³⁰

And so it was put up, on Thursday, 30 July, the day that in the City’s inner parlours serious unease turned into an awareness that there was now an outright financial crisis. That awareness was also starting to spread more widely. ‘A very bad day,’ recorded the bill brokers Smith St Aubyn. ‘People are getting really alarmed and are flocking to the Bank of England to change notes for gold.’ They were indeed, with again the joint-stock banks playing a less than helpful (if perhaps understandable) role. ‘There is a general run on all the banks,’ the general manager of Lloyds, Henry Bell, told the eminent financial journalist Sir George Paish, adding that ‘customers are asking for gold, but we are paying out in notes and telling them to go to the Bank of England to change them’. On which news, recorded Paish, ‘I hurried round to the Bank of England and there found an immense queue waiting to cash their notes’: ‘They filled the Issue Department of the Bank and spilled out, four deep, through the courtyard, down Threadneedle Street and half way up Princes Street. Hundreds and hundreds of people waiting as patiently as possible to see if their money was still safe!’³¹

Inside the Bank, it was now largely down to Walter Cunliffe, governor since the previous year, a director since 1895 and founder with his two brothers of the firm of Cunliffe Bros, concentrating mainly on accepting. A large man with a walrus moustache, he was asked once how he knew which bills to approve, to which he replied as a true City man, ‘I smell them.’ Rude, arrogant and a bully, he was hardly the most popular of men – ‘a little of Mr Cunliffe’s society fills me up for the year,’ a Bank director, E. C. (‘Teddy’) Grenfell of Morgan Grenfell, remarked in 1908. A small flavour comes through in the curt letter he sent in October 1912 from the Bank, while deputy governor, to someone at Kensington Palace. It reads in toto: ‘I shall be much obliged if you will kindly return at your convenience, the catalogue of my silver which I sent you in April last.’ There was, though, a more positive side, as Grenfell, for all his innate distaste, acknowledged some years after the 1914 crisis. Cunliffe had, he wrote, ‘an intimate knowledge of banking, bill broking, Stock Ex, accepting & though not the greatest expert in all, yet he combined the knowledge of these spheres of finance to an unique degree’. Moreover, he also had a ‘wonderful physique enabling him to work as few younger men could do’. Against that, ‘he had no gift of public speaking, was always at a loss for words, had very bad manners & suspected everyone who differed with him, of having ulterior motives’. And of course, seemingly unable to help himself, ‘he was rude & abrupt with his colleagues, the bankers & the ministers’.³² All in all, the governor may or may not have been the man for the hour, but he was certainly not burdened with self-doubt about being the man of the hour.

The City’s worst two days were now at hand. On Friday, 31 July – with Austria mobilising against Russia, the Stock Exchange closed until further notice and the Bank rapidly losing gold to a drain that was both internal and external – Bank rate was doubled from 4 to 8 per cent. ‘A most untimely shock to the public’s nerves,’ would be the verdict of the financial journalist Hartley Withers in his 1915 book War and Lombard Street. ‘Many, who had never heard of Bank Rate before, became aware that something unprecedented and dire had happened in the world of finance.’ Meanwhile, that Friday, ‘the courtyard and the Issue Department of the Bank of England presented a remarkable spectacle’, in the words of The Times reporter, confirmed by the man from the Financial Times, who found ‘a queue of people, some 200 to 250 strong, resignedly awaiting their turn to obtain access to the magical counter where cash [that is, gold sovereigns] was being poured forth in a steady stream’:

There was no visible sign of alarm among the besiegers; rather the matter was treated in the light of a humorous episode … This cheerful demeanour even spread to the usually ultra-sober officials, who were stirred to unprecedented activity, and a quantity of good-natured chaff and banter passed between them and many unsuspecting clients, who, all unconscious of the position, strolled into the Bank with a nonchalant and proprietary air, only to be unceremoniously placed in their legal positions in the queue.

‘Gold, gold, gold, gold,

Bright and yellow; hard and cold.’

This was undoubtedly what was wanted, and when a red-cloaked official shouted ironically, ‘Silver! Anybody want silver? Plenty of silver going cheap,’ a dead silence followed, and on many faces was to be observed a sardonic smile. No, cheap silver was not wanted, and the outflow of the precious yellow metal continued …

‘We were so hard pressed,’ recalled one Bank clerk, ‘that none of us on the Issue Office Counter got out to lunch; instead we had to be content with sandwiches and whiskies and sodas sent down from the Club.’

That afternoon, unbeknown to most, Cunliffe went to the Treasury to see Lloyd George and his senior officials. ‘Very angry,’ noted Blackett, ‘with the Joint Stock Banks for acting against & not with the Bank of England’; and, accusing the bankers of having ‘caused the panic’, he called on the chancellor not just to suspend the Bank Charter Act, but if necessary to suspend cash payments and to introduce a moratorium. The Treasury demurred about the double suspension, and it was agreed to see how much gold the Bank – its reserve down to £17 million – lost next day, with £5 million as the tipping point for at least suspending the Act. As to larger questions of British foreign policy, Cunliffe made it very clear where the Bank and the City stood. ‘The Governor of the Bank of England,’ noted Lloyd George’s confidant Lord Riddell in his diary that day, ‘said to me with tears in his eyes, “Keep us out of it. We shall all be ruined if we are dragged in!”’³³

Saturday, 1 August featured, amid much else, the money market more than ever on the rack; the clearing banks still more or less refusing to pay out sovereigns; an even longer queue than the previous day’s straggling from inside the Bank into its courtyard; Cunliffe returning to the Treasury, warning that the Bank’s reserve was likely to be down by the end of the day to £11 million, and taking away with him a ‘chancellor’s letter’ permitting suspension, if need be, of the Act; Bank rate being hiked by a further two points up to the traditional ‘crisis rate’ of 10 per cent; and the governor at last managing to get the joint-stock banks to agree to stop calling in loans from the discount houses. Cunliffe – what one might call good Cunliffe – was in his element, nicely caught in Blackett’s description of an informal moment at the Treasury as they waited for the letter to be finalised:

The Governor, who was as cool as ever, was chatting about Bank matters & mentioned the Officer commanding the Guard. I asked if that was the Bank Guard & he said yes. Bradbury [the Treasury’s Sir John Bradbury] remarked that he would not need a Guard in a few days [a reference to the Bank’s rapidly vanishing gold reserve] & the Governor’s smile was a delight in tune with the funniness of the joke. While talking with me, he remarked, with a twinkle, that he had had the misfortune to run out of £5 notes this morning. His manner was a rare contrast to the frantic excitement of two members of the Cabinet whom I met just after.

The letter secured, the Governor returned to the Bank, leaving me to telephone to Nairn[e] that ‘the Governor has just started back with all he wanted’. This was the nearest he came all day to telling a soul (except the Deputy Govr) [R. L. Newman, known in the Bank as ‘the port-wine man’ because of his firm’s merchanting speciality] that he had got the fateful letter.

It was left to a youngish director, though, to record the great cardinal fact of the day. ‘Germany v. Russia,’ noted Montagu Norman flatly but meaningfully in his sparsely filled diary.

That Saturday marked the end of what Richard Roberts in his authoritative account of the 1914 financial crisis calls the ‘breakdown’ phase. How had the Bank performed? Arguably its Bank rate policy was, by the end of the week anyway, counter-productive, with the youthful John Maynard Keynes arguing in his retrospective a month or so later that in the ‘special circumstances’ a 10 per cent rate was the worst of both worlds, not only failing to attract gold from abroad but also severely undermining confidence. Where the Bank did well, earning praise from both contemporary commentators and subsequent historians, was in its provision of liquidity to the discount houses and thus in turn to the banks: over the fortnight from 20 July, computes Roberts, its combined discounts and advances rose almost fourfold, from £12 million to £44.8 million. ‘Following the splendidly cool policy it has adopted throughout the crisis,’ noted the Financial Times’s money market report for 31 July, ‘the Bank of England was a free lender.’ Or in Roberts’s summarising words, ‘despite deteriorating relations with the major banks, the Bank of England went on liberally providing liquidity to the market and relieving the situation’.³⁴

Sunday, 2 August was, from the Bank’s point of view, an uneventful day – albeit with no sighting of the governor relaxing at London Zoo – before early on Monday the 3rd, fortuitously enough a bank holiday, about 150 of the City’s leading bankers and merchants gathered in the Court Room, with Cunliffe presiding. The meeting had its moments of drama – Bell of Lloyds at one point shaking his fist at the governor – but there was general agreement (though with Cunliffe himself dubious) that the banks needed to be closed for a further three days in order to enable adequate measures to be taken. The request was passed on to Lloyd George, who agreed, while arrangements were also made to implement a moratorium on bills of exchange, thereby providing immediate relief to the merchant banks. Those things settled, the major financial debate of the day was about the Bank’s wish (backed by the banks) to be able to suspend cash payments – that is to say, the convertibility of notes into gold – as well as the 1844 Act. This was the cue for a decisive intervention by the thirty-one-year-old Keynes, by now ensconced at the Treasury. ‘It is difficult to see how such an extreme and disastrous measure,’ he wrote to Lloyd George, ‘can be justified,’ given how much it would ‘damage our prestige as a free gold market’. All this, however, was overshadowed by the diplomatic situation. That afternoon, against a background of the German ultimatum to Belgium and its rejection, the foreign secretary, Lord Grey, made his historic statement in the Commons that in effect committed Britain to military action. Writing to a former Morgans partner, Grenfell commented that ‘war seems to be an absolute certainty’.³⁵

Keynes apparently swayed Lloyd George, who during the late afternoon and early evening of Tuesday, 4 August attended the first session of the Treasury’s protracted ‘War Conference’ while the banks were shut. Also present were other key politicians and what the minutes described as ‘representative bankers and traders’, including Cunliffe, Newman and Cole from the Bank. The governor was involved in two characteristic exchanges, the first concerning Bank rate. It was due to be lowered on Friday to 6 per cent, but on Holden’s insistence it was agreed to reduce it to 5. Might ‘one or two banks attempt to exploit this?’ wondered the chancellor (with the joint-stock bankers out of the room). ‘Lame ducks, in other words,’ observed the unforgiving Revelstoke. To which Cunliffe roundly responded: ‘If there are lame ducks it does not matter to us. We have to help them over the stile. We cannot afford to let one bank go – not the smallest in the country.’ The other exchange, perhaps involving the governor in a degree of economy with the actualité, was with an unnamed colleague of Holden’s:

A Banker: I understand one of the difficulties today is that the Bank of England cannot help us because they are afraid of a run on the gold supply. It is really a question for the Governor of the Bank of England whether he wants people to come and ask for specie and not get it.

The Governor: It is not true that if the Bank is open today I could not pay my way in gold.

A Banker: I am very glad to hear it.

The Governor: And if you could see the accounts of the Bank which the Chancellor of the Exchequer has seen, you would be surprised that there is so much fuss.

The Bank, in other words, had suddenly changed tack; and of course Cunliffe’s desire not to suspend cash payments, if it could possibly be helped, was sincere and deep rooted. But at the same time, the question of abandoning the gold standard had become the new symbol of a long-running power struggle between the Bank and the bankers. Fortified by the support of Lloyd George and the Treasury, the governor was not someone – at this of all times – to underplay his hand.

Later that evening, the British ultimatum to Germany expired. For the Bank as for the City, the guns of August meant that life would never be quite the same again. Back in January 1912, soon after Norman Angell’s highly influential treatise The Great Illusion had gone into its sixth edition, a crowded Institute of Bankers had heard a paper from its author on ‘The Influence of Banking on International Relations’. At its core was the thesis that finance and commerce were now so inextricably entwined, crossing all national boundaries, that the price of war between nation states must be so high as to make the prospect inconceivable. ‘It is very evident that Mr Norman Angell has carried this meeting almost entirely with him,’ observed one speaker during the discussion. But at the very end Huth Jackson, president of the Institute as well as a director of the Bank, sounded a note of caution: ‘It is all very well to get the bankers on your side, but that is not sufficient. What you have to do is to get the whole body of all the peoples in the world on your side.’ And he concluded: ‘But, gentlemen, bear in mind one thing, and that is that until you get that thing done, there is, I am afraid, little prospect of any change in the international position – that is to say, war will still remain a possibility.’³⁶ Two and a half years later, events proved him horribly right: surrounded by frightened monarchies and restless masses, by the unreason of nationalism, not even the safest, most secure institution in the world was invulnerable.