LOMRARD-STREET.

Tuapeka Times, Volume VI, Issue 329, 11 February 1874, Page 3

LOMRARD-STREET.

Lombard -Street. A Descripton of the Money Market. By Walter Bagehot- Henry S. Kiug and Co. , Cornhill. London.

Lombard-stroefc, the third street whlcll tranches from the poultry, and which emerges, as all good citizens know, closely on the Mansion House , the Royal Exchange, and the Old Lady of Threadneedle street, is of foreign origin, as its name denotes. The Lombards, the great money changers of former times, came out of Italy, and planted themselves here before 1614. Money-lenders are generally hard men. The Lombards were no exception to the rule ; and at length their extortions, or, perhaps quite as correctly, the urgent needs of Edward the Second, compelled the latter to seize on their estates and to enrich himself at their expence. They flourished. They were so opulent in the days of Henry VI. as to be able to supply him with money ; but they took care to have the customs mortgaged to them by wny of security, In fact they were the Baron Reuters of those early days, and, we can well believe, did much to promote the prosperity, material and commercial, of the nation. England owes much of her wealth to foreigners, and it would have fared ill with her had she given in to the cry often raised by weak ignorant men against foreign nations and foreign inventions.

The great families of merchant princes, such as those of Venice and Genoa, who inherited nice cultivations, as well as great wealth, and who, to some extent, combined the tastes of an aristocracy with the insight and nerve of men. of business — these are pushed out, he confesses, "by the dirty crowd of little men. After a generation or two they retire into idle luxury. Upon their immense capital they can only obtain low profits, and these they do not think enough to compensate them for the rough companions and rude manners they must meet in business. This constant levelling of our commercial houses is too unfavorable to commercial morality." This picture is not a pleasant one, but it is to be feared it is not incorrect. Great firms, says our author, with a reputation which they have received from the past, cannot be guilty of small frauds. They live by a continuity of trade, which detected fraud would spoil. When we scrutinise the reason of the impaioed reputation of English goods, we find it is the fault of new men with little money of their own created by Bank discounts. Mr. Bagenot has collected facts an dfigures which will be new to many of readers. For instance, what an idea he gives us of THE EESOTJHCBB OP XOMBAED-STBEET. The briefest and truest way of describing Lombard-street is to say that it is by far the greatest combination of economical power and economical delicacy that the world has ever seen. Of the greatness of the power there will be no doubt. Money is economical power. Every one is aware that England is the greatest moneyed country in the world ; everyone admits that it has much -more immediately disposable and ready cash than any other country. But very few persons are aware how much greater the ready balance — the floating loan-fund, which can be lent to anyone or for any purpose — is in England than it is anywhere else in the world. A very few figures will show how large the London loan-fund is, and how much greater it is than any other. The known deposits — the deposits of banks which publish their accounts — are, in London (31st Dec, 1872) ... £120,000,000 Paris (27th Feb., 1873) ... 13,000,000 New York (Feb., 1173) ... 40,000,000 German Empire (31st Jan., 1873) 8,000,000 And the unknown deposits — the deposits in banks which do not puplish their accounts — are in London much greater than those in any other of these cities. ' The bankers' deposits of London are many times greater than those of any other city — those ■of Great Britau many times greater than those of any other country. Of course the deposits of bankers are not a strictly accurate measure of the resources of a Money market. On the contrary, much more cash exists out of banks in France and Germany, and in all non banking countries, than could, be found in England and Scotland where banking is developed. But that cash is not, so to speak, "money-market money ; " it is not attainable. Nothing but their immense misfortunes, nothing but a vast loan in their own securities, could have extracted the hoards of France from the French people. The offer of no other securities could have tempted them, for they had confidence in no other securities. For all other purposes the j money hoarded was useless, and might as well no,t have been hoarded. But the English money is ".borrowable " money. Our people are bolder in dealing with their money than any continental nation, and .even if they were not bolder, the mere fact that their money is deposited ia a bank makes it far more abtainable. A miUisn in -the hands of a single banker is a great ; he can .at once lond it where he jwill, and borrowers «an come to him because they know or believe that he has it. But the same sum /Scattered iv tens and fifties through * .

whole nation is- no power at all : no one knows where to find it, or whom to ask for it. Concentration of money in banks, though not the sole cause, is the principal cause which has made the Money Market of England so exceedingly rich, so much beyond that of other countries.

The effect is seen constantly. We are asked to lend, and do lend, vast sums, which it would be impossible to obtain elsewhere. It is sometimes said that any foreign country can borrow in Lombard-street at a price. Some countries can borrow much cheaper than others $ but all, it is said, can have some money if they choose to pay enough for it. Perhaps this is an exaggeration ; but confined, as of course it was menfc to be, to civilised governments, it is not much of an exaggeration, There are very few civilised governments "that could not borrow considerable sums of us if they choose, and most of them seem more and more likely to choose. If any nation wants even to make a railway — especially if at all a poor nation — it is sure to come to this country — to the country of banks — for the money. It ia true that English bankers are not themselves very great lenders to foreign states. But they are great lenders to those who lend. They advance on foreign stocks, as the phrase is, with " a margin ;" that is, they find eighty per cent of the money, and the nominal lender finds the rest. And it is in this way that vast works are achieved with English aid, which but for . that aid would never have been planned. But after all, Lombard-street falls bock upon Threadneedlc-street, as all the bankers keep their reserve at the Bank of England, and are liable to fail if it fails. Three times Peel's Aut has been suspended because the Banking Department was empty. Before the Act was broken in 1847 the Banking Department was reduced to £1,994,000 ; in 1857 to £1,462,000 ; and in 1866 to £3,000,000 ; but it is not Lombard-street alone which comes to the Bank of England. Since the Franco-German war we may be said to keep the European reserve also. Deposit banking is indeed so small on the Continent that no large reserve need be held on account of it. Our next extract refers to THE OBIGIN OP THE BANK OF ENGLAND. The monarchcial form of Lombard-street is due also to the note issue. The origin of the Bank of England has been told by Macauly, and it is never wise for an ordinary writer to tell again what he has told so much better. Nor is it necessary, for his writings are in every one's hands. Still I must remind my readers of the curious story. Of all institutions in the world the Bank of England is now probably the most remote from party politics and from "financing." But in its origtn it was not only a finance company, but a Whig finance company. It was founded by a Whig Government because it was in desperate want of money, and supported by the " City," because the " City " was Whig. Very briefly, the story wan t.liis : The_Gtoyernmo*»* o£ onaiies 11* (under the Cabal ministry) had brought the credit of the English State to the lowest possible point. It had perpetrated one of those monstrous frauds, which are likewise gross blunders, -the goldsmiths, who then carried on upon a trifling scale what we should now call banking, used to deposit their reserve of treasure in the " Exchequer," with the sanction and under the care of the Government. In many European countries the credit of the State had been so much better than any other credit, that it had been used to strengthen the beginnings of banking. The credit of the State had been so used in England : though there had lately been a civil war and several revolutions, the honesty of the English Government was trusted implicitly. But Charles 11. showed that it was trusted undeservedly. He shut up the " Exchequer," would pay no one, and so the " goldsmiths were ruined. The credit of the Stuart Government never recovered from this monstrous robbery, and the government created by the revolution of 1688 could hardly expect to be more trusted with money than its predecessor. A government created by a revolution hardly ever is. There is a taint of violence which capitalists dread instinctively, and there is always a rational apprehension that the government which one revolution thought fit to set up another revolution may think fit to pull down. In 1694, the credit of William HL/s Govern'inent was bo low in London that it was impossible for it to borrow any large sum ; and the evil was the greater, because in consequence of the French war the financial straits of the Government were extreme. At last a scheme was hit upon which would relieve their necessities. " The plan," says Mocaulay, " was that twelve hundred thousand pounds should be raised at what was then considered as the moderate rate of 8 per cent." In order to induce the subscribers to advance the money promptly on terms so unfavourable to the public, the subscribers were to be incorporated by the name of the Governor and Company of the Bank of England. They were so incorporated, and the £1,200,000 was obtained. — " Otago Christian Record."