Year: 1873

state of things which made the bank
possible dates from as far back as 1911.
The credit of the English government
had always been tolerably good until
under the Cabal administration of Charles
the second it was almost destroyed by
an act of gross perfdy. The credit
of the state was, in old times, better
than any other credit, and the gold
smiths, who were then the only bank
ers, used to give their money to the
government to take care of. This mon
ey Charles II. refused to pay back to
them, and the goldsmiths were ruined.
Thus the goose, English credit, which
had always laid the golden egg, was
killed by those foolish or wicked min
listers. The state could borrow no
more money.


In 1894, William ILL.,, 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 bea desperate and revolution
airy scheme. There was fierce opposi-
ton to the bank on the part of the
lords, who considerable strengthening
Of the moneyed power at the ex-
pense of the landed interest But the
money had to be raised; the need was
SO urgent that the aristocracy were
compelled to sacrifice their class scru-
pies 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 he had
been a missionary; his enemies said he
had been a buccaneer. He was an
ingenious and ardent person, gifted
with great powers of persu aston. The
scheme which he had first proposed in
1851, 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
thousand pounds at eight per cent.
which was then very moderate rate,
and which would have been very favor
BILE to the borrowers. In order to in
duce capitalists to advance, the sub
scribers were to be incorporated into a
company to be called 1.-The Governor
and Company of the Bank of England" ="
There was much fierce opposition, but
the dream of the obscure adventurer
soon became solid fact.


This was the origin of that great in
stitution, which is now the greatest
moneyed power in the world, and which
was for many years the bulwark of the
English government. During the wars
in which France was endeavoring to
force the Pretender 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 resisting
him. The bank was therefore greatly
interested in upholding the existing
government. 1t was, through some gen
erations, whig institution.


So important part has the Bank of
England played in history, that it is diff
fcult for us to understand that it is a
private and not state establishment.
1t is like any other bank, except that
the government has granted it some
privileges and immuniIies. These are
three. In the first place, the govern
ment balances are in the possession of
the Bank of England. The bank orig
inally gave credit to the government, as
we have seen, but now the government
give credit to the bank. Men are in
clined to follow the example of gov
ernment, and believe that it is wiser
than they. They think that if the gov
ernment trusts its great balance to 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 liza
BILE for only the amount of their stock,
that it is difficult to understand how
Englishmen can have regarded this
limited liability as wrong. A bank
would have to go begging 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 careful merchants to be directors
who would not have consented to serve
had their fortunes been liable.


The third privilege Of the Bank of
England is, that it is the only bank that
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 except the
Bank of England has ever been permit
ted to issue notes. The law said that
the bank was to have the right of =" ex-
elusive banking" England has suffer-
ed for years from misinterpretation of
the phrase L" exclusive banking" When
the law was passed banking meant
issuing notes, and the term did not
include the acceptance of sums on de-