A Great Engine of State

‘The Bank was comfortable,’ Sir John Clapham would write about the 1730s – that decade of almost unbroken peace, of Sir Robert Walpole still managing for the most part to let sleeping dogs lie. One City man, the public-spirited MP and marine insurance underwriter Sir John Barnard, was less comfortable. Urging that the key to national prosperity and lower taxation lay in reducing the interest on the national debt, he put forward in March 1737 a plan that envisaged a reduction from 4 to 3 per cent, including on the government’s debt to the Bank. That institution, he told the Commons, was a ‘powerful and rich company’ whose stockholders ‘of late years’ had ‘in some measure become masters of the public credit of the nation’; and he plausibly predicted that they would ‘certainly oppose, with all their might, a scheme concerted for the ruin of their company, and for making every particular man in it lose at least 50 per cent of what he may then call himself worth’.

That was on the 14th, and over the next six weeks or so a short, intense squall played out. ‘The House of Commons this day confirmed that the national debts shall be reduced to 3 per cent, against which the moneyed men clamour exceedingly, and this day there was a run on the Bank,’ noted the Earl of Egmont in his diary on 30 March, as gold began to drain from the Bank. The following evening he heard the latest from his brother: ‘He said he had been in the city, where the run continued on the Bank and every face appeared confounded; that the stocks continued to fall; that the Bank directors held a court this morning to depute a committee to Sir Robert Walpole …’ Things had barely improved a week later, with another observer, Sir Thomas Robinson, recording on 7 April that ‘the Stocks begin to rise again, but the run still continues on the Bank, and they pay in silver all demands above 50 pounds’. All now turned on Walpole: albeit privately sympathetic to Barnard’s scheme, he decided that the City’s – including the Bank’s – opposition was too fierce to be challenged. By the 21st he was reported as being ‘determined to throw it out’; and just over a week later, on the 29th, he ensured that Barnard’s Bill was decisively rejected by the Commons. ‘Great rejoicings were made in the City,’ noted Egmont next day, adding that not only was Barnard ‘burnt in effigy’, but the cry went up ‘Long live Sir Robert Walpole for ever.’1

Five years later, the country was at war again (the War of the Austrian Succession), Walpole had lost power, the state needed money, and it was time for that ritualistic dance that was the periodic renewal of the Bank’s Charter. ‘Resolved,’ stated the minutes of the Court of Directors in March 1742,

That it is the opinion of this Court, That the Bank may advance the sum of Twelve Hundred Thousand Pounds for the Service of the Publick, on their present Annuity of One Hundred Thousand Pounds payable the 1st of August 1743, in Order to purchase a Term of 21 Years longer from that time for the Existence of the Corporation of the Bank, and a prolongation of their Priviledge of Exclusive Banking for the same time, together with a Confirmation of all the Clauses and other Priviledges granted them by their Charter, or Acts of Parliament, now in force, and with such further Advantages as shall be hereafter Agreed on …

In the event, the Treasury successfully held out for a £1.6 million loan as the price of renewal, taking the government’s debt to the Bank to a total of £10.7 million; the Bank in turn increased its own capital by £840,000, taking it up to a total of £9.8 million; and that telling phrase ‘exclusive banking’ was duly incorporated in the 1742 Act, its first appearance in an English statute. Yet arguably 1742 was more significant in the Bank’s history because it was from this year that, in a war context, there began a series of publicly subscribed long-term loans to the government that were entered at the Bank in special subscription ledgers and, more generally, were entirely administered by the Bank.2 Put another way, the demands of war finance were starting to become too big for the Bank to be able to continue its role as a principal direct supplier to government. Rather, its future now lay in facilitating, in organising, in enabling; and as such, it rapidly became indispensable to the functioning of a national financial war machine that was soon the envy of all rival powers.

It was the course of the war, and specifically the defeat of the Allies at Fontenoy, that gave the green light to the Jacobite rebellion of 1745 under the leadership of the ‘Young Pretender’. On 21 September, Prince Charles Edward Stuart’s Highlanders defeated Hanoverian troops at Prestonpans, news of which caused serious alarm in London, including the almost inevitable run on the Bank – ‘a hurry’ that the Gentleman’s Magazine subsequently sought to explain: ‘’Twas said to be occasioned by the Papists and Jacobites, with design to hurt credit as much as was in their power and to get gold to send to the rebels; in which the directors wisely disappointed them, by ordering payment in silver.’ Paying demands for cash with silver shillings and sixpences was a tactic out of the 1720 playbook, but on the 26th the directors also ordered that ‘no Bills of Exchange be discounted which have more than a Month to run, and those only with such persons who keep Cash with the Bank’. The key intervention, though, came later that day:

Several very eminent merchants of London, considerable traders and proprietors of the publick funds, met, about noon, at Garraway’s coffee-house [reported the Gentleman’s Magazine], and with the utmost alacrity came to the following agreement, for supporting the public credit. ‘We the undersign’d merchants and others, being sensible how necessary the preservation of public credit is at this time, do hereby declare, that we will not refuse to receive bank notes in payment of any sum of money to be paid to us. And we will use our utmost endeavours to make all our payments in the same manner’; and by five next afternoon 1140 had sign’d it.

This Change Alley démarche did much to restore confidence during the autumn, but it was not quite the end of the story. By 4 December the Young Pretender had reached Derby, causing a fresh wave of metropolitan panic; and just over a week later, in order to boost the Bank’s depleted bullion reserve, the directors called in 20 per cent from those who had subscribed to the ‘last subscription for circulating Exchequer Bills’. The following month, January 1746, saw a £1 million loan to government, a tacit recognition that the Bank needed to do its bit in the suppression of the Scottish rebels; in February the stockholders (aka proprietors) voted that a not hugely handsome £1,000 be contributed to a City fund ‘for the relief, support and encouragement of His Majesty’s forces’; and two months later, the rebellion ended bloodily enough at Culloden.3 The Hanoverian settlement, and all the mercantile prosperity that flowed from it, was at last safe.

The Treaty of Aix-la-Chapelle in 1748 finally brought the war to an end, by which time the national debt had risen to some £77 million, with all its attendant servicing costs, compared to £46 million before the war. The chancellor was the much underrated Henry Pelham, who in the course of 1749 steered through Parliament a bill to reduce the interest on the 4 per cent Funds to 3½ per cent from 1750 and then to 3 per cent from 1757. The landed interest naturally welcomed the prospect of lower taxes, the moneyed interest for the moment stayed its hand, the Bank was apparently not consulted, and the deadline set for fundholders to signify their consent to Pelham’s scheme was the end of February 1750. Everyone knew that the crux would be the attitude of the three moneyed companies (the South Sea Company and the East India Company as well as the Bank itself): although the debt due to them comprised barely a quarter of the overall funded debt, the justifiable assumption was that individual fundholders would look to the companies for guidance and almost certainly follow their example.

By the time the Bank’s General Court assembled on the morning of 31 January 1750 at Merchant Taylors’ Hall in Threadneedle Street, the equivalent bodies of the other two companies had already indicated a significant degree of resistance. The governor, William Hunt, began proceedings by recommending that ‘their Debates on the Proposals be carried on with Calmness of Temper and Respect to one another as becomes Gentlemen who have but one view or Design which is the Prosperity and Safety of their Corporation’. The directors themselves do not seem to have participated in the ensuing discussion, while a contemporary press report revealed that among the Bank’s proprietors arguing for an acceptance of the scheme was the great Jewish financier Samson Gideon, a key Pelham ally. The report also revealed the outcome: ‘After some Debates, the Majority (which was at least Five to One) were against the Question.’ Given that a lower rate of interest meant lower profits for what was still a private organisation, this was not on the face of it a surprising outcome.

Could Pelham turn it round? His other key ally was the indomitable Barnard, who a week after the Bank’s overwhelming negative brought out a pamphlet, Considerations on the Proposals for Reducing the Interest on the National Debt, that cogently argued both a moral-cum-political case (the unfortunate implications of flouting the authority of Parliament) and a financial case (that 3 per cent was now the normal market rate of interest, enabling the government if necessary to raise a loan to pay off those who did not come in). ‘Tom Telltruth’, calling himself ‘a Bank Proprietor’, grumbled in a letter to the General Advertiser on 19 February – ‘the Generality of the publick Contracts hitherto made between the Legislature and the Bank, have been to the Prejudice of the Bank Proprietors’ – but by the time the General Court reassembled at Merchant Taylors’ Hall on the 27th, the resistance was already starting to weaken. At that meeting, Hunt made it clear that the view of the Court of Directors was in favour of accepting Pelham’s proposals; Gideon again took a prominent role in the debate; and in the words of the General Advertiser’s report, ‘the question being put, it was by a very great Majority carried in the Affirmative’.

The inner story of the Bank’s volte-face is impossible to uncover. ‘It would be nice to know,’ wistfully reflects one historian, ‘what arts Gideon used to turn the lion of January into the lamb of February.’ But, in any case, the success of Pelham’s scheme was now assured; and in 1752 much of the national debt was consolidated into one fund which became known as ‘Consols’, with their entire management entrusted to the Bank. For whatever mixture of motives, the proprietors – a significant minority of them foreign, mainly Dutch, although not voting unless prepared to travel to London – had done a good day’s work.4

Indeed, Pelham’s scheme could hardly have been more timely, for it was not long before the fife and drum were heard again. The Seven Years War (1756–63) had of course its splendidly patriotic, empire-building aspect – ‘Our bells are worn threadbare with ringing from victories,’ observed Horace Walpole at one point – and was in many ways a tribute to the development since the 1690s of the state’s financial sinews of power, not least through the offices of the Bank. Some, though, continued to worry about the ever-steeper rise in the national debt, up to £139 million by the end of hostilities, a rise that inevitably much increased the Bank’s daily workload. As ever, war put pressure on the Bank’s holdings of gold and silver, so that in 1759 notes for £10 and £15 were issued for the first time (the previous lowest denomination being £20) in an attempt to relieve that pressure. And in the event, the financial crisis that many had been dreading came not during the war, but in its immediate wake.

The 1763 crisis, starting to unfold within months of the Peace of Paris being signed in February, was essentially Continental in origin – above all, the collapse of some twenty of Amsterdam’s major mercantile houses, in turn leading to a series of bankruptcies in London. Almost certainly the consequences could, but for the Bank, have been far worse. ‘The British merchants,’ declared David Macpherson in his 1805 Annals of Commerce, ‘acted with the most honorable liberality by giving large credit to their [European] correspondents … and even sending large remittances for their support, which they were enabled to do by the no less liberal determination of the Bank of England and the principal bankers to support payment of their own bills’; while, according to George Chalmers in his 1812 Comparative Strength of Great Britain and Ireland, the Bank during the crisis discounted bills of exchange in large amounts, in effect supplying emergency credit. Quantitative analysis by the historian Michael Lovell supports these assertions: even though its reserve ratio (the ratio of bullion to notes in circulation) fell to an alarming 6.9 per cent by August 1763, compared to almost 52 per cent a year earlier, the Bank’s high level of discount operations during the crisis unambiguously indicates that, in Lovell’s words, ‘it stood by willing to provide aid in large proportions’ – that, in fact, it was ‘serving as lender of last resort’, probably for the first time. Did this represent a deliberate policy shift? There is nothing in the minutes of the Court of Directors to confirm that this was the case; and Lovell may well be right when he suggests that the liberal approach reflected the behaviour of an institution now instinctively feeling more secure in its position, as well as less apprehensive about its ability to maintain convertibility into cash (gold or silver) on its notes. Either way, acting as lender of last resort marked a signal moment: whether consciously or otherwise, it was the Bank’s ‘first step’ (to quote Lovell again) ‘towards the adoption of the powers and responsibilities of central banking’.5

Contemporary observers occasionally let themselves go. The Bank of England, claimed the London Chronicle in 1765, was the ‘grandest, as well as the most commodious repository of wealth and business in Europe, if not the whole world’. Still, it was a grandness that, financially speaking, had to be taken largely on trust, given that before the 1790s the Bank was muteness itself when it came to explaining and detailing its activities and ambitions to the outside world. Almost two centuries later, the economist Joseph Schumpeter would reflect on this ‘reticence of its official spokesmen who, even when they were forced to say something, did their best to confine themselves to innocuous trivialities that would give as little scope to hostile criticism as possible’. After noting that ‘practitioners of business are rarely able to formulate their own behaviour correctly’, he went on:

The Bank had few friends. Control is now [circa 1950] a popular word. It was the reverse of popular in the epoch of intact capitalism. To say openly that the Bank was trying to control the banking system, let alone to manage the general business situation, would have evoked laughter if not indignation: the thing to say was that the Bank was modestly looking after its own business; that it simply followed the market; and that it harbored no pretensions at controlling anything or anybody. Moreover, in the formative stage of its policy, it would have been madness to assume in so many words the responsibilities that we now attribute to a central bank as a matter of course. This would have meant commitments which the Bank could not have been sure of being able to fulfil. Moreover, any spectacular announcement of policy would have brought down upon directors hosts of unbidden advisers, every one of them convinced that he knew much better what the Bank ought to do – and there would have been the danger of public outcries for legislation to force the Bank to take, or to refrain from taking, particular courses of action.

It was a reticence that Adam Anderson for one sympathised with. In his pioneering 1764 survey, An Historical and Chronological Deduction of the Origin of Commerce, his section on the Bank of England included this tellingly cautionary passage:

Some might possibly be so much farther inquisitive, as to form Conjectures, (for they can be no other) concerning the proportion which the Quantum of ready Cash always necessary to be reserved in this or any other public or private Bank … We can see no Benefit which can arise by any such minute Enquiries, to the Generality of Men; neither do we apprehend them proper to be enquired into at all, without there should arise any reasonable Suspicion for Fraud. For, as it has been a political Observation of long standing, That even the reputation of great and powerful Monarchies and States often subsists more by common Fame or Opinion than by real Strength or Ability, so it may more strictly and properly be applicable to a Bank and Bankers6

Perhaps inevitably, and for a mixture of reasons, the eighteenth century remains the part of the Bank’s history we know the least about; but it is still possible to summarise its main day-to-day functions during its first half-century or so in Threadneedle Street.

A starting point is its management of almost three-quarters of the national debt, a task involving considerable administrative complexity – or, at the least, attention to detail – in return for an annual management fee. By 1774, in addition to managing the debt owed by the state to the Bank itself as a corporation (amounting to £11.7 million), the Bank had responsibility for five classes of loan: in essence, acting as the government’s agent by on the one hand registering ownership and transfers of stock, on the other hand distributing interest, usually half-yearly. As itemised by J. E. D. Binney in his invaluable study of British public finance in the late eighteenth century, these five loan stocks were: the Civil List 3 Per Cents of 1726; 3 Per Cent Consolidated stock (Consols), whose market price was ‘the yardstick by which government credit was customarily measured’; the 3 Per Cents Reduced; the 3½ Per Cents of 1758 (whose rate of interest was due to reduce to 3 per cent in 1782); and the 4 Per Cents of 1760–2 (again due to reduce to 3 per cent in 1782). The Bank in 1774 also managed the so-called ‘Long Annuities’, which derived from the ninety-nine-year annuities of 1761 and were due to expire in 1860. Importantly, the Bank from the late 1760s also provided a bespoke marketplace, the newly built Brokers’ Exchange (also known as the Rotunda), in order to stimulate trading in the national debt and thereby a sufficiently liquid secondary market – in turn facilitating the issuance of new debt in the highly probable event that it should be needed. Significantly, the Bank’s transfer and dividend offices, where the public went to register stock transactions and to collect dividends, were physically close to the Rotunda; and the historian Anne Murphy is surely right to suggest that this publicly accessible and highly visible mixture of market liquidity and ‘a one-stop shop’ for the efficient execution of ‘all business relating to the public debt’ made a key contribution to the enhanced credibility of public credit. In short, ‘the Bank was undeniably a space in which public credit was put on display and the financial integrity of the state was demonstrated’.7

That said, the area of the Bank’s real dominance in relation to government lay in short-term lending – an area where there was little doubt which party enjoyed the thick end of the wedge. ‘The Exchequer Bill contract,’ complained a government informant in 1754, ‘is signed annually in July and is advantageous to the Bank; because as they are Cashiers to the Exchequer, and have seldom less in their hands than a million of Exchequer Cash, they lend the Government their own Money. For this they lodge in the Tellers hands, by way of Security, Exchequer Bills for the Value.’ Admittedly, government received each year a reliable £1–3 million, as the Bank agreed to take and circulate Exchequer bills up to a certain maximum; but given the Bank’s increasingly central position as the government’s bank (with accounts held there by the middle of the century including for the Army, Navy and Ordnance, as well as for many collectors of revenue), it was a not unreasonable charge that the Bank was in effect lending the government’s own money to the government. Moreover, the annual process of renewing ‘the Subscription for the Circulation’ was in itself an undeniably nice little earner for the Bank’s inner circle. ‘The Subscription has been filled for the most Part, by People in the Management and their Favourites,’ observed the Dutch financier Nicholas Magens in 1753. ‘Those who have interest to procure it commonly dispose of it at a handsome advance, before even they have paid in their subscription money … it being thought no Risque.’ Other ways in which the Bank was able to provide government with ready money included taking Navy and Ordnance bills, while it was also willing to make substantial advances (almost £5 million in 1777) on the two most reliable taxes, ‘Land and Malt’, with government paying back the advances as those taxes were collected.8 In sum, the Bank’s short-term financial help may have been self-interested to a degree; but from the state’s point of view it could hardly have discharged its responsibilities without that help.

Another Bank activity that by the second half of the eighteenth century increasingly had ‘public’ implications concerned the money supply. Outside London, it was country-bank notes that were the main medium of exchange, in line with the rapid growth of provincial private banks (up to nearly 400 by the 1790s); but in London significant payments usually involved Bank of England notes, though occasionally the notes of London private banks. Importantly, the latter notes were convertible to Bank of England notes, which were themselves convertible to gold on demand – what has been called the Pre-classical Gold Standard, functioning from 1717 (when Sir Isaac Newton, master of the Royal Mint, introduced a revised gold–silver ratio in such a way as to put Britain on a de facto gold standard) through to almost the end of the century. From a Bank perspective, it was a far from straightforward regime to operate. The export of bullion may have been illegal, but in practice, as Elisa Newby observes in her pioneering study of the Bank’s gold reserve policy in this era, ‘British monetary gold was withdrawn from the Bank and smuggled to the continent when the exchanges were unfavourable and the price of gold abroad was higher than at home.’ And she goes on: ‘Disruptions in gold supply and shipping conditions, especially during warfare on the sea, made the gold convertibility rule a challenging task to follow. Bank runs and financial panics were relatively common and demand for gold was at its highest during political disruption. If there were simultaneous gold supply blockades, the Bank of England was in danger of exhausting its gold reserves.’9

What, then, was the relationship, if any, between the Bank’s note issue on the one hand and its ‘cash’ (that is, gold) holding on the other? ‘Is it now, or was it ever your Understanding or Opinion, that the Bank of England, kept Cash equal, or nearly equal, to the Amount of the Sums secured by all the Bank Notes in Circulation?’ a parliamentary inquiry in the 1790s asked Samuel Hoare, a prominent London banker who was also a shareholder in the Bank of England. ‘No,’ answered Hoare. ‘My opinion is, that they generally preserved a Proportion, as 3 to 5, that is, if they had three Millions Sterling they might Issue five Millions Paper in Times of Security.’ Responding to the same inquiry, a Bank director and former governor, Samuel Bosanquet, reflected something of the strain involved, noting that ‘it is possible for the Bank to be in a much safer Situation, with a much smaller Sum in Specie when Public Affairs are prosperous, than with a much larger Sum and an apprehension that that Sum is draining away’. And: ‘Whenever there is an Influx of Bullion into the Country, the Bank have nothing to fear; when a Drain takes place from the Country, is in general the Period for them to be alarmed.’ The sense of apprehension was eloquent, and Clapham reckons that towards the end of the century anxiety usually set in when the Bank’s gold reserves fell significantly below £5 million, out of a national bullion stock of perhaps £15–20 million. Given which, a reply in the affirmative might have been expected when the inquiry asked the governor of the day, Daniel Giles, whether the Bank had ‘any system of measures’ for acquiring bullion. Instead, Giles merely replied: ‘When it is advantageous to bring it in, individuals will bring it.’ Or, as Clapham comments, that was a remark exemplifying what had become ‘the established policy of letting external forces play on the Bank rather than attempting to guide them’.10 No doubt there was the occasional exception – not least the vigorous response to the 1763 crisis – but the broader truth seems to hold.

That response in 1763 had taken the form of liberal discounting (buying) of bills, and indeed it was particularly from the 1760s that the Bank’s discount business really grew as a core and increasingly profitable activity that at the same time was invaluable to the functioning of the City. ‘As a general rule,’ notes Clapham, ‘it felt bound to oblige anyone – any business person that is – introduced by a Director [of the Bank] and offering paper with “two good London names” on it. It might show reluctance to do business with particular firms for precise reasons, and it never dealt in very long-dated bills; but apart from that it was open-handed … the greatest and most accessible haven of refuge for storm-tossed traders and, at the last, bankers also.’ So, a much appreciated, indeed indispensable, ‘haven of refuge’, offering short-term credit (usually thirty or sixty days) at 5 per cent (for most of the century the legal maximum rate of interest). Even so, Clapham’s phrase about ‘particular firms for precise reasons’ is also suggestive. Here the key witness is Sir Francis Baring, as a young man the founder in 1763 of what became the prestigious merchant bank Baring Brothers & Co, and on his death in 1810 described as ‘unquestionably the first merchant in Europe’. Towards the end of his life, he recalled how ‘before the Revolution [of 1789 in France] our Bank (of England) was the centre upon which all credit and circulation depended, and it was at that time in the power of the Bank to affect the credit of individuals in a very great degree of refusing their paper’. Who had their paper refused? Presumably it could be a range of people and firms, for a range of reasons, but the historian Stanley Chapman has no hesitation in making a key identification. ‘Through the eighteenth century,’ he observes in his history of the highly successful Raphael banking-cum-stockbroking family, ‘the Bank of England stood at the apex of commercial credit in England and world trade, and the Bank’s directors were known to be anti-Semitic. There was no secret about this; it was a recognised feature of their policy.’11 Almost certainly he is right. A degree of anti-Semitism – perhaps never virulent, but seldom entirely absent – would be an integral part of the Bank’s culture for its first two and a half centuries, and arguably even a little longer.

What else did the Bank do (or not do)? The other main activity was private loans, prior to the 1760s usually producing an income greater than that from discounting. Importantly, these loans were neither to small businesses nor to fund the embryonic Industrial Revolution. Rather, as Clapham explains: ‘Described as private, the chief of these loans were really of a semi-public character. Very few names of individual borrowers are to be found in the Court Books in normal times. The great borrower was, as it always had been, the East India Company …’ Other regular loans, sometimes indeed in the form of running loans, were to the South Sea Company, the Hudson’s Bay Company and the Royal Bank of Scotland. By contrast, in terms of another potential area of business, the Bank by the late eighteenth century seems to have been still some way from having made itself into the automatic banker’s bank. ‘Only a minority, and a rather small minority at that, of the London bankers certainly had drawing accounts in Threadneedle Street in 1774,’ notes Clapham, adding that ‘not quite half had such accounts in 1794’. That development awaited. Yet, taking the Bank’s activities as a whole during its formative Threadneedle Street decades, the Scottish economist Adam Smith was surely justified in reaching in 1776 his celebrated verdict – a verdict that pointed clear-sightedly to how the institution’s future would ultimately lie in the public rather than the private realm. After calling the Bank ‘the greatest bank of circulation in Europe’, he went on in his seminal An Inquiry into the Nature and Causes of the Wealth of Nations:

The stability of the bank of England is equal to that of the British government. All that it has advanced to the publick must be lost before its creditors can sustain any loss. No other banking company in England can be established by act of parliament, or can consist of more than six members. It acts, not only as an ordinary bank, but as a great engine of state.12

What about the directors themselves? Thanks to the diligence of W. Marston Acres, whose findings appeared in Notes and Queries during the darkest days of the Second World War, we know something – though in some cases not very much – about each of the 133 men who were directors of the Bank at some stage between 1735 and 1792 inclusive. Their average age on becoming a director was 43.9 years old, with the youngest being 25, the oldest 77; if they became governor, the average age on attaining that office was 56.7, with the youngest being 40, the oldest 71; and the average length of time between becoming a director and finally stopping being a director was 19.7 years, with those lengths varying between one year or less and 56 years. As for occupation, this is identified by Acres for just over half of them, with fifty-six being merchants, while among the other eleven, three were bankers, one was an ironmaster, one was a barrister, one was a wholesale grocer and one was a Blackwall Hall factor. So far so more or less predictable, but fortunately it is possible, on the basis of Acres and other sources, to flesh out the picture further.

Inevitably, family connections and influence continued to be strong, though no single family quite matched the example of the Houblons from the Bank’s pioneering era. Take three families: the Rapers, the Thellussons and the Thorntons. Matthew and Moses Raper were the two sons of Matthew Raper, an ironmonger who was himself briefly a director of the Bank in the 1710s. The younger son Moses was a silk merchant, became a Bank director in 1716 in his mid-thirties, left the Court in 1742 and on his death six years later was president of Guy’s Hospital; his brother Matthew became a director in 1730 in his mid-fifties and died in harness in 1748, having made perhaps his biggest mark on public life as treasurer of the Unitarian Chapel in Newington Green. For the Thellussons, it was not just family but a whole intricate network around them. Peter Thellusson came to London from Paris as a young man in the early 1760s, established a highly successful merchanting business, and was closely linked with his fellow-Huguenot Martyn Fonnereau (a director 1771–83 and himself the grandson of a director) in the victualling of the garrison at Gibraltar; while Peter’s eldest son Peter Isaac grew up in his father’s business and was elected a director in 1787 in his mid-twenties, having four years earlier married Elizabeth Cornwall, daughter of a former Bank director (John Cornwall) and cousin of a clutch of Thorntons, all of them present or future directors. The Thorntons themselves were seemingly ubiquitous. Robert Thornton, ‘a merchant of London and of Clapham’ (Acres), was the eldest son of a Hull merchant and served as a director from 1732 until his death at the start of 1748; later that year, his younger brother Godfrey, likewise a merchant, became a director, before his own death in 1752; Godfrey’s third son, also Godfrey, was elected a director in 1772 and in due course governor; and from 1780 another Thornton director (and future governor) was his cousin Samuel – born in 1754, eldest son of the remarkable merchant John Thornton (a founder of the evangelical movement and said on his death in 1790 to have been the second richest man in Europe), and himself a partner in the family firm from 1776, allotted a one-third share of his father’s profits.

Of course, the larger question remains. Was the Bank directorate, as it evolved through the eighteenth century, a broadly ‘open’ or a broadly ‘closed’ body of men? Certainly it was closed to Jews, notwithstanding their increasing importance in the City, as exemplified by Samson Gideon; more generally, Daniel Abramson has offered an unflattering picture of a Court that by the end of the century ‘no longer consisted of ambitious, daring, new City of London men’, but instead ‘represented the City’s oligarchic establishment’, as ‘webs of inter-marriage conserved wealth and status within a limited circle of families’.13 That verdict may be a little harsh, underestimating the quality as well as sense of duty of some of the individual directors, yet it is probably fair enough about the rather ossifying direction of travel.

What about, though, these Bank men and society at large? Here, Abramson’s claim that ‘from being the embodiment of dynamic capitalist innovation, the Bank of England’s directorate evolved into almost a quasi-aristocratic backwater’ is surely a stretch, at least as far as the period up to the 1790s is concerned. Undoubtedly ‘money’ and ‘land’ were moving closer together during the eighteenth century, though often experiencing a chequered, fractured sort of relationship; but analysis of the 133 directors suggests that there was still a certain distance between the two. Take the question of whom the directors married. Of the twenty-three for whom we have reasonably precise information, eleven married into the London business world (the daughter of a London merchant, the daughter of a London haberdasher, the daughter of a ‘citizen and vintner of London’, and so on), compared to only six marrying into what seem to have been gentry-cum-aristocratic families (the daughter of the first Earl of Scarborough, the daughter of Henry Thompson of Kirby Hall, Yorkshire, and so on). Moreover, most of the missing 110 were far likelier to have married into the former category than the latter. Or take the question of where the directors lived. Undeniably there was the occasional flavour of country house and rolling acres (Lilling Hall, Yorkshire or Waltham Place, Berkshire or Spondon, Derbyshire or Thorpe, Norfolk); but much more common was a prosperous suburban or quasi-suburban location (Fleetwood House, Stoke Newington or Wall Street, Hackney or Dacre House, Lee or unspecified residences at such places as Clapham, East Sheen, Richmond, Highgate and Hendon).14

Nor, in terms of exercising a broader sway, did many directors become MPs: only fifteen out of the 133 did so. However, a man from the Bank was sometimes just what the government of the day – or, more specifically, the Treasury – badly needed in order to boost its financial authority and expertise. In April 1759 the senior secretary to the Treasury, James West, sent his chief, the Duke of Newcastle, a briefing note on possible City candidates for the vacant Cornish seat of Camelford. They included two Bank directors, Charles Savage (a former governor) and Bartholomew Burton (the current deputy governor). Savage, alas, had ‘no inclination to come into Parliament, and tho’ a good Whig and very rich, has peevishness and singularity in many things to a high degree’; instead, the choice ultimately fell on Burton, ‘a very good sensible man’, albeit ‘I do not think of any great weight in the City’. Probably a more substantial Bank MP was William Ewer, a Turkey merchant who became a director in 1763 and governor in 1781, while sitting for Dorchester between 1765 and his death in 1789. He is recorded as subscribing during the 1770s very large sums to government loans; and in his final Commons speech, in May 1788, he presented a petition of London merchants exalting the national benefits derived from the slave trade.15

A happier remembrance is those directors with a rich hinterland. James Theobald, for instance, was a substantial timber merchant and a director from 1743 to 1756; but his passions were his multifaceted activities as a natural historian and his leading role in the Royal Society, ‘generously contributing’ (in a biographer’s words) to its ‘knowledge and activities for over 33 years’. The passions of Gustavus Brander, who spent much of his life as a merchant operating out of White Lion Court, Cornhill, are caught in his 1787 obituary in the Gentleman’s Magazine. Describing him as ‘a very considerable Bank-stock-holder’, it went on: ‘He was for several years [1761–79] a Director of the Bank; but, having inherited the accumulated fortune of his uncle Mr. Speaker, he indulged his favourite pursuits in literature and the fine arts.’ And it cited as a particularly notable acquisition ‘the magnificent chair in which the first emperors of Germany used to be crowned’. The truly systematic acquirer, though, was Lyde Browne, a prosperous Foster Lane merchant and silver refiner who was a director between 1768 and his death in 1787. One of the age’s most assiduous pursuers of antique sculpture, gathered together about 200 strong at his home (Cannizaro House in Wimbledon), he eventually sold much of his collection to Catherine the Great. Yet for Ruth Guilding, author of a recent authoritative study of the collectors of antique sculpture, he is a far from admirable figure. Calling Browne ‘a businessman in antiquary’s clothing’, she writes of how he ‘joined the ranks of the connoisseurs and boasted of the antique sculptures housed in his museum at Wimbledon, but then traded them like the merchant that he was’ – an ‘easy, mercenary attitude’ that ‘challenged the whole idea of connoisseurship’. And she quotes as self-condemnatory his frank observation: ‘All Virtu will be bought in future for present enjoyment, and to be parted with when satiated with the possession thereof.’

Every now and then, the authentic voice of the typical City man – commonsensical, sceptical, unassuming, prosaic, pragmatic – comes through loud and clear. Charles Palmer was a merchant who became a director in 1739, then governor in 1754, and left the Court in 1763, retiring to Pinner. But he maintained close links with the Bank, writing regularly over the next few years to a trusted senior clerk, Thomas Hulley. A few extracts from the letters speak of an almost timeless sensibility. On the formation of the Rockingham government:

As to this great revolution in the Ministry and the further changes that may be expected to be made, I do not trouble myself much about them. The late outs are now the inns and will do all they can to keep themselves where they are, and those they have outed will do their utmost to pay them in their own coin, and thus our political affairs are likely to go, and have gone, all my time, and I see no likelihood of its being otherwise.

On Rockingham’s fall a year later:

I am obliged for your news of a new Administration. I do not find that it is quite settled yet, but I suppose it must be soon. A state of uncertainty is a bad one on all accounts, both public and private.

On the press:

I long to hear news that I may make some sort of dependence upon, for I have not been in the way lately of hearing anything but what the newspapers tell me, and that does not go for much with me.

On a summer stay in Tunbridge Wells, taking the waters:

We have had several showers and to-day it seems to be set in for rain; but I shall not wish it to continue much longer than to-day for this is a terrible place in continued wet weather. Here is a pritty deal of company, but not near so much as last year, and but little quality.

And again:

By the help of fine weather, which we now have, and a good horse to carry me abroad in it, and some few old acquaintances I have met with here, added to my own family (not to speak of the pleasure I take in being an idle spectator and admirer of the Gay World) my time rubs on pritty well.

And finally, that same increasingly hot August, after commiserating with Hulley for being ‘shut up and stew’d in a public office in London’:

But we ought, and must indeed, affect the philosopher so far as to endeavour as much as we can to make the lott that falls to our share in the world as easy and light as may be, and leave the rest to time and fate.16

Palmer was writing in 1765, the year after the Bank’s Charter was renewed for a further twenty-one years. It does not seem on the whole to have been a particularly contentious process, with the Treasury getting if anything the better of the bargain. The Bank agreed to advance £1 million on Exchequer bills at 3 per cent; it also agreed to make an outright gift to the Exchequer of £110,000, with no interest attached; and Charles Jenkinson, who as joint secretary to the Treasury had helped to draft the bill, would subsequently reveal how ‘an eminent merchant’ and Bank proprietor, Sir William Baker, had at the time ‘strongly opposed’ the ‘bargain’, though perhaps only in private, ‘on the ground of its being too hard a one for the Bank’. From the Bank’s point of view, a significant plus in the legislation was a tighter wording about fraudulent transfers of stock – a concern recently highlighted by the systematically fraudulent activities of a broker called John Rice, who had eventually fled to the Continent, where he was pursued by representatives of the Bank and of the South Sea Company, before being arrested at Cambrai in January 1763, put on trial at the Old Bailey and compelled to pay the ultimate penalty.17

The rest of the 1760s were uneventful, but as usual the next financial crisis was not far away. That of 1772 was possibly the most fraught since the South Sea Bubble, and during its most acute phase the London Chronicle offered an all-too-plausible analysis. ‘The present calamity,’ declared the paper in late June, ‘is owing to several concurring circumstances, the chief of which is generally reckoned to be a pernicious practice, that has been encreasing for some years, and which of late has been carried to a great height, that of drawing bills on London on fictitious credit for the purpose of raising money.’ Earlier in the year, the Bank had in fact sought to limit discounts and thereby check speculation, earning it some anonymous public abuse about virtuous traders being malignly ‘oppressed by one man or a set of men who devote a few hours in the day to business and call themselves Directors’; but during June itself, as panic and emptiness grew almost hourly following the failure on the 10th of the London banking house Neale & Co (whose leading partner, Alexander Fordyce, had particularly intimate connections with the Scottish banking and commercial world), the Bank reprised its 1763 policy and began to discount more liberally. In the wake of the collapse of the major Edinburgh house of William Alexander and Sons (which held the contract for the export of tobacco to France), the very worst day was Monday the 22nd, as one of the City’s most respectable private banks, Glyn and Hallifax, was compelled to stop payments, fortunately only temporarily. ‘It is beyond the power of words to describe the general consternation of the metropolis yesterday,’ reported the Evening Post next day. ‘No event for these thirty years past has been remembered to have given so fatal a blow to both our trade and credit as a nation. An universal bankruptcy was expected; the stoppage of every banker’s house in London was looked for. The whole city was in an uproar: the whole city was in tears.’ At this point the Bank accelerated its discounting dramatically: whereas between January and May there had been only nine occasions when the daily business had exceeded £200,000, on 23 June the day’s business was £387,756, and on 25 June it was £529,265 – ‘nearly as much,’ notes Clapham, ‘as in the busiest whole week of 1763’. That same day, the 25th, the seriously over-ambitious and over-extended Scottish bank Douglas, Heron & Co, commonly known as the Ayr Bank, was forced to suspend payments, described by one historian as ‘a major catastrophe for Scotland, since many influential people, both landed and mercantile, were either shareholders or customers of the bank’.

Much helped by the Bank’s discounting policy, the worst of the crisis was over by early July, though a series of bankruptcies continued for the rest of the year; as for two of the main protagonists, the Ayr Bank foolishly declined the Bank’s terms to help re-establish its credit and eventually gave up business in 1773, but Alexanders accepted from the Bank a credit of £160,000 and resumed payments in mid-July. ‘You will find it impossible,’ an anonymous but well-informed observer had warned the Ayr Bank in an open address published in the London Chronicle, ‘to carry on your business as a Banking Company independent of the Bank of England, that being the great source of the British funds and credit, without whose countenance and occasional aid, no banker nor merchant even in London, can do business with safety and profit.’18

A further indication of the Bank’s indispensability came soon after the crisis. Over three-quarters of a century earlier, the great recoinage of 1696 had been essentially concerned with silver, not gold, which by the 1770s was, in Clapham’s apposite words, ‘badly worn’. Accordingly, legislation in 1773–4, in which the good offices of the Bank seem to have been largely taken for granted, involved its bullion office receiving and replacing gold guineas, half-guineas and quarter-guineas that had been cut and defaced, thereby denoting that they were light or counterfeit. Eventually, at least 6½ million such guineas were received – and, to quote Clapham again, ‘what was now in effect the British standard coinage was put into admirable order’. The mid-1770s also saw the start of yet another war: the American War of Independence. Its immediate cause (the dumping on the American market of tons of unsold tea) has been described by one American historian as ‘the direct result of the East India Company’s gross irresponsibility’, so perhaps it might have been better in retrospect if the Bank had managed in 1773 to resist the government’s demand to lend it £1.4 million against Exchequer bills in order that it could bail out the overstretched Company. Initially the new war made relatively little financial impact, but that all changed from 1778, as in turn France, Spain and Holland became involved. By early in the new decade the 3 per cents were rarely above 60, Bank stock struggled to be much above par, and the national debt was rising rapidly. All of which was presumably of some concern to George Washington, who throughout the war continued to be a Bank of England stockholder.19

He might also have noted with interest the events of June 1780. On Friday the 2nd a 60,000-strong crowd, headed by Lord George Gordon, marched on Parliament to present a petition, sponsored by the Protestant Association, demanding the repeal of recent legislation relieving some of the penal laws against Roman Catholics. Over the next few days London trembled, amid multiple disturbances, acts of physical intimidation and the storming of prisons. The Gordon Riots culminated on the night of ‘Black Wednesday’, the 7th, as the mob sought to take the Bank, whose protection lay in the hands of a guard placed in the nearby Royal Exchange. Thomas Holcroft related the outcome in his contemporary account:

They made two attempts upon the Bank; but were so much intimidated by the strength with which they beheld it guarded that their attacks were but feebly conducted. They were led on to the first by a brewer’s servant on horseback, who had decorated his horse with the chains of Newgate [which had been destroyed on the 6th, with all the prisoners released]; but were repulsed at the first fire from the Military, and their second succeeded no better. They made an effort to break into the Pay Office likewise, and met the same fate. Several of them fell in these skirmishes, and many more were wounded, as the importance of these places made it necessary to shew but little lenity.

The first assault was probably at around 11 o’clock at night, and the second in the small hours. Taking part in repulsing the former attempt was the radical City politician John Wilkes in his capacity as a London militiaman (‘killed two rioters directly opposite to the Great Gate of the Bank’, he recorded), while the latter assault was described by the London Chronicle:

A large party of the rioters went down Cheapside in order to attack the Bank, several of them armed with muskets. When they got to Poultry the Horse and Foot Guards were drawn up and stopped them. The rioters fired on the soldiers, and the soldiers returned the fire for several minutes, and killed about eight people and wounded a great many. The mob was so great that they beat off the Horse Guards, but the Foot, by keeping a constant fire, dispersed them.

Altogether, over 200 rioters were shot dead in the capital’s streets that night, while possibly as many died later from their wounds. London’s historian Jerry White justifiably calls it the city’s ‘most terrible crisis in the modern period, not exceeded until the wartime blitz 160 years later’; and unsurprisingly, less than a fortnight after that memorable night, the Bank’s Committee of Treasury ‘considered of the necessity of some defence & security to be established at the Bank’. The upshot was the Bank Picquet: a military guard consisting of a detachment from the Brigade of Guards, mounted almost every night (except during the Second World War) at the Bank, until its eventual withdrawal in 1973, some 70,000 nights later. As an immediate expression of gratitude the Bank in August 1780 ‘gave an elegant entertainment at the Queen’s Arms Tavern in St Paul’s Churchyard to all the officers who have been on duty at the Bank or elsewhere in the City during and since the late riots’ – a dinner that, continued the London Chronicle, ‘consisted of a turtle (which alone cost 23 guineas), a dozen haunches of venison and the first dainties in season, together with all sorts of wines’.20

If riots came and went, the war was less obliging, and the following summer, five years early but owing everything to the financial burden on the state of the continuing American conflict, it was agreed between government and Bank that the Charter should be renewed for a further twenty-six years (four fewer than the Bank had originally demanded) in return for a £2 million loan at 3 per cent against Exchequer bills. Unusually, there ensued a full-scale debate in the Commons, with the prime minister, Lord North, vigorously defending not only the bargain, but renewal itself. ‘The Bank, he said, had been established for near ninety years, and had been conducted in all that time with so much wisdom, so much advantage to the nation, and so much credit to itself, that he could not imagine there was one man living, who, after the long experience of its utility, would deny that it was the duty of parliament to cement and strengthen the connection and union between the Bank and the public as much as possible.’ As for those unhappy with the new Charter’s terms and even wanting to replace the Bank:

They knew not the solid advantages resulting to the public from its connection with the present company, they saw not the difficulty that must now attend the attempt to incorporate a new one; at present the Bank, from long habit and the usage of many years, was a part of the constitution, or if not a part of the constitution, at least it was to all important purposes, the public exchequer; all the many business of the Exchequer being done at the Bank, and as experience had proved, with much greater advantage to the public, than when it had formerly been done at the Exchequer.

The Bank of England as an integral part of the British constitution was not a concept that appealed to Yorkshire’s MP Sir George Savile, eighth baronet and an independent-minded Whig. Mocking North for having ‘spoken of the connection that subsisted between the public and the Bank with a degree of warmth, as if he had been describing conjugal love’, and declaring his belief that ‘the Bank business was to him something like magic’, he argued forcibly that ‘this moment, when public credit was crippled’, was far too premature for renewal. Other speakers had their say, few of them particularly well informed, but the exception was the MP for Dorchester, who happened to have recently become governor. Pronouncing that the Bank had ‘offered fairly and handsomely’ in negotiating the terms of renewal, and insisting that its profits ‘arose from the industry, the hazard, and management of the directors of the Bank’, William Ewer went on to express his conviction that ‘the public had no more right to those profits than to the profits of the private trade of any individual, or of any private banking company’. What about Savile’s ‘magic’ accusation? ‘Good God,’ expostulated Ewer, ‘could public business be so little known, that at this time of day it should be supposed that the Bank could coin whatever sum they wanted?’ And, somewhat more tactfully, he sought to allay concerns that such a lengthy renewal would make the Bank dangerously independent of government:

The public were by far the best customers the Bank had. Their credit, their power of accommodating government, arose solely from their being the cashiers of the public … If, at any time, the directors acted so ill, so imprudently, or so rashly, as to refuse granting to government every assistance in their power, as often as the occasion of the state rendered such assistance necessary, government would have it in its power to continue the Bank the cashier of the public no longer …

North and Ewer duly carried the day: a decisive vote (109–30) in favour of renewal on the proposed terms saw the Bank’s future assured until 1812.21

The war was effectively over by the early weeks of 1783, but that was still a year of crisis. The Bank’s bullion reserve, having plunged from £4.2 million in August 1780 to £2 million by August 1782, continued to deteriorate, down to £1.3 million by February 1783 (compared to a rising note circulation of £7.7 million) and heading further south. A decade and a half later, a Bank director, Samuel Bosanquet, would explain the larger context, as well as the decisive action that the Bank then took, refusing for about six months to make its customary advances to government:

The drain of cash proceeded from the great extension of commerce which followed the peace, and which occasioned so considerable an export of the commodities of this country that the circulation was hardly sufficient to support it. It was evident that if this drain could be supported for a short time the influx of wealth that must follow from the return of the Exports would amply compensate for the preceding drain, and so it turned out. The Bank Directors, therefore, without opening the state of affairs to the Administration, took a bold step of their own authority, and refused to make the advances on the loan of that year; this answered the purpose of making a temporary suspension in the amount of the drain of the specie. The time at which they had the most ground of alarm was not when their cash was at the lowest, but about April or May, when they refused to advance on the loan, and although in October their cash was lower than before [down by August to £590,000] yet they had such reason to expect a turn in their favour by a favourable alteration of the exchanges, that they were under much less apprehensions than they were in the Spring.

The Bank, it seems, had played a difficult hand with considerable adroitness.

That certainly is the reading by Sir Albert Feavearyear, in his magisterial history of The Pound Sterling, of the Bank’s temporary refusal to finance a large portion of the government’s loan. ‘The remainder of that loan,’ he explains, ‘was therefore thrown immediately upon the resources of the market. This had the effect of tightening money and of curbing the tendency to over-speculation. The exchanges turned in favour of the country and the foreign drain ceased. Later in the year, although their reserve had fallen lower still, the directors were so much more confident of the position that they freely advanced money to relieve the strain upon houses which were feeling the effects of the falling market.’ Plausibly enough, Feavearyear contends that this was ‘the first occasion upon which the Bank definitely attempted to exercise some control of the money market’. And again he elucidates: ‘It discovered a principle which has been of great service on many occasions since, namely that when speculation is reaching a dangerous level credit should be progressively contracted until a definite fall of the market sets in; but when this occurs there need be no more fear, and advances may be made freely to soften the fall.’22

From the mid-1780s the dominant politician was the remarkable – and remarkably determined – William Pitt the Younger. In 1786 he not only introduced an improved sinking fund (privately describing himself as ‘half mad with a project which will give our supplies the effect almost of magic in the reduction of debt’), but prevailed upon the Bank to charge significantly less (£450 per million instead of £562 10s) for managing the national debt. Over the next few years it was a tense enough relationship, including a sparky moment in July 1790 when ‘the Chairs’ (that is, governor, deputy governor and former governors) who formed the Committee of Treasury reluctantly accepted a block of Exchequer bills, but at the same time stated that they ‘wished it to be thoroughly understood that they meant this loan as a temporary assistance to government and not to be renewed on any account’. The real stand-off came soon afterwards. Pitt towards the end of 1790 put forward the argument that the balances of unclaimed dividends left in the Bank’s hands, amounting to some £547,000, belonged by rights not to the Bank but to ‘the temporary use of the public’, which is to say the government; the Bank flatly disagreed; and one of its MP directors, Samuel Thornton, made the strongest possible protest in the Commons, calling Pitt’s claim ‘a stab to public credit’. Neither side blinked during the early months of 1791, with the Bank fortified by a supportive memorandum from an impressively international range of ‘proprietors of the Public Funds’ as well as ‘Agents of many respectable foreigners extensively interested in these Funds’. The Bank followed this up in March with a petition on the 15th to the Commons that described Pitt’s proposal as a raid upon the ‘property of individuals without their consent and without their knowledge’, before on the 24th it decided to play its trump card – the publication of a list of unclaimed dividends dating from before September 1780, predictably causing a huge ‘press to obtain payment’ from dividend owners anxious not to let the government get their money. The eventual outcome, formally endorsed by both sides in May, was a compromise: the Bank offering interest free a ‘perpetual loan’ of £500,000, in return for Pitt abandoning his Bill about unclaimed dividends. The Tory prodigy may have possessed a ‘damned long obstinate top lip’ (in George III’s words) and may indeed have generally held the upper hand in the relationship; but on this occasion the Bank had just about managed to keep him in check.23

By this time the French Revolution, with all its manifold consequences, was under way. For three years, despite lurid accounts of events across the Channel, the British economic mood was largely buoyant, much helped by the booming cotton industry; but by the autumn of 1792 the outlook was perceptibly changing, not least in the City. A poor wheat harvest, country banks issuing implausibly large amounts of paper money, the threat of war, rising bankruptcies – these and other factors caused in November a brief but sharp panic among the brokers, jobbers and speculators who thronged Exchange Alley. Nor was the Bank itself in the best possible place that winter. Its bullion reserve, sometimes called its ‘treasure’, was on another downward curve, dipping below £5 million, while anxiety about French-inspired revolutionary radicalism (centred on the London Corresponding Society) led to its bespoke military guard, so much disliked and perhaps envied by the City authorities, being doubled in strength.24 Then, on 21 January 1793, Louis XVI was executed; and eleven days later, on 1 February, France declared war on Britain. For the Bank, poised to enter its second century, some wholly uncharted waters lay ahead.

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