Year: 1873

generally understood that the state of
things which made the bank possibly dates
from as far back as 1911. The credit Of
the English government had always been
tolerabiy good until under the Cabal ad-
ministration of Charles H., it was almost
destroyed by an act of gross perfdy. The
credit of the state was, in old times, bet
ter than any other cred t, and the gold
smiths, who then were the only bankers,
used to give their money to the govern
ment to take care Of This money Charles
III. refused to pay back to them, and the
godsmiths were ruined. Thus the goose,
English credit, which had always LAID til e
golden egg. was killed by those foolish or
wicked ministers. The state could bor-
row no more money.


| In 1894 William I'LL, who was then on
the throne, was going to war with France
and he greatly needed money. Had it
not been that the credit of the English
government was SO poor, the money might
have been raised without appeal to what
was then considered by many to be des-
perate and revolutionary scheme. There
was fierce opposition to the bank on the
part of the lords, who considered it a
Strengthening of the moneyed power at
the expense of the landed interest. But
the m 3ney had to be raised the need was
so urgent that toe aristocracy were COM
PEELED to sacrifice the class scruples and
interests.


| The inventor of this scheme was Will.
lam Patterson. Scotchman by birth and
West Indian by residence. In the West
Indies his friends said be had been a mis-
sionary his enemies said he had been a
buccaneer. He was an ingenious and ar
dent person, gifted with great powers of
persuasion. The scheme which he had
first proposed In 1891, he succeeded three
years later in getting the great Montague
to take up.


The plan was simply that the govern
ment should borrow twelve hundred thou
sand pounds at 8 per cent. which was then
a very moderate rate, and which would
have been very favorable to the borrowers.
In order to induce cap. talsts to advance,
the subscribers were to be incorporated
into company to be called The Cover
nor and Company of the Bank of Eng
land" There was much fierce opposition,
but the dream Of the obscure adventurer
soon became solid fact.


This Was the origin of that great insti-
tuition, which is now the greatest moneyed
power in the world, and which was for
many years the brlwark of the English
government. During the wars in which
France Was endeavoring to force the Pre-
tender back upon the throne, it was the
bank which supplied the government with
money. Had France succeeded, of course
the new King would have refused to pay
interest on money which Was spent IN re-
sisting him. The bank was therefore
greatly interested in uphoIdlng the exist
ing governm' Mt. 1t was, through some
generations, Wing institution.


So important part has the bank of
cult for us to understand that it is prl-
vate and not state establishment. Ii is
like any other bank, except that the gov
ernmeut has granted 1t some privie- es
and lmmunities. These are three. In the
first place, the government balances are IN
the possession of the Banx of England.
The Bank originally gave credit to the
government. as We have seen, but now the
government gives credit to the bank Men
are inclined to follow the example of a
government, aud to believe that it is wiser
than they. They think that if the gov
ernmene trusts its great balance 10 the
bank, they may surely trust their small
ones there.


!. In the second place, the bank had till
recently monopoly Of the principle OF
limited liability. Here We are so used to
the idea that the stockholders of bank
when the bank fails are liable for only the
amount of their stock, that it is difficult
to understand how Engllshmen can have
regarded this limited liability as wrong.
A bank would have to 90 begging a good
while for stockholders and directors in
/ this country if its failure would involve
the entire private fortunes of its owners
! The English have always thought it right
that the Bank of England should be an
exception This immunity was of great
help to the bank as it induced many care
full merchants to be directors who would
not have consented to serve had their for
tunes been liable.


, The third privilege of the Bank of Eng
! land is, that it is the only bank which can
/ issue notes. Before 1874 it was the only
. joint stock company that could issue notes.
Private bankers might, and indeed did SO
until about 1850, but the bank gradually
forced them out of the field. Legally
however, they might have issued notes up
to 1874, when the privilege was taken
away. But no joint stock company e1-
cept the Bank of England has ever been
permitted to issue notes. The law said
that the bank was to have the right OF
" exclusive banking" England has suf-
fered for years from misinterpretation OF
the phrase Exclusive banking" When
the law was passed banking" meant is
suing notes, and the term did not include
F the acceptance of sums on deposit for
, which no negotiable paper was given. In
: time the taking of deposits came also to
| be called " banking" and was, therefore,
, supposed to be prohibited. For years
, banks We're thus entirely suppressed.
, When fually the misconstruction was dis
: covered, people at once began setting them
, up. Does not this show very curiously
that q nation is only a very big child?
}, have now given sketch of the Bank
/ of England, an institution of which much
3 may be said on both sides. The opinion
| of enlightened economists is generally
, against it. but all admit the impossibility
, Of its abolition. It certainly has done a
great work in its day. and things have
, changed for the better since the time when
] as Macaulay says, " it was necessary" for
= the Chancellor Of the Excheqaer to 60, hat
Q in hand, up and down Cheapslde and Corn


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