Bank of England.

Waikato Times, Volume 121, Issue 20260, 31 July 1937, Page 15 (Supplement)

Bank of England.

Why It Was Founded :: A Remarkable Story.

Founded as a handy means of raising money to pay the debts of hard-pressed William 111, it is a far cry from the political expedient of 1694 to the organisation of 1937—the Bank of England—one of the world’s most powerful and firmly entrenched institutions. In its long history, the bank has been the sport of bellicose kings, stupid politicians and indiscreet diplomats. More than once, imperious statesmen have raided its vaults, and brought it to the verge of ruin. Many times it has saved the over-sanguine speculator from the consequences of his folly and has helped the reckless trader off the rocks of bankruptcy. Through long years of change and vicissitude, the bank has gathered strength, until it stands as a symbol of Britain’s Integrity and Solidity. It has buttressed kings and empires and its influence is a factor in the far-flung markets of the earth. The romantic and adventurous story of the bank is admirably told by Mr Bowman in his book, “The Story of the Bank of England,” which cannot fail to excite interest. The dying years of the seventeenth century saw growing unrest among London’s merchants, who were tired of seeing the King pilfer their profits and more tired still of paying 30 per cent, and more to goldsmiths and money-lenders for financial accommodation. Corruption was rife in high places, and money went like water till England was faced with a grave problem of finance. A shrewd Scotsman, William Patterson, came forward with a scheme to lend the Government £1,200,000 in exchange for the privilege of founding a bank, issuing notes and receiving £IOO,OOO a year from the Government by way of interest. After much bickering and many setbacks, the scheme was adopted because William had to have the money anyway and saw no other means of getting it.

The bank's charter was granted on July 17, 1694, a few weeks after subscription lists had been opened. Occupying the Grocer's Hall, the bank opened its doors on January 1, 1695, its control being vested in a governor, a deputy-governor and twenty-four directors. There were fifty-four clerks, their salaries amounting to £4350. Although the Tories said that the bank enslaved the Constitution to moneyed Whig interests, the bank soon showed that it was non-party, and just as useful a moneylender to any party. One important effect of the bank’s creation was the power it gave to the House of Commons through controlling revenue through the Treasury, and at the same time the King’s power was curtailed because he could no longer get money with the same facility. The bank soon settled down to business, paid over the £1,200,000 and started to lend money on mortgages, on pawns and other securities and to discount inland and foreign bills of exchange. A big worry was the debased coinage in circulation, and it was this that led to the Bank’s First Crisis. Ponding the fulfilment of a Treasury promise that the currency would be reformed, the request of the Treasury, the debased - v - Trio

wave of prosperity swept over the land. With it came a wave of feverish and crazy speculation, and the immense South Sea Bubble fraud was born. This gigantic company, formed to prosper trading ventures, was nothing but a Swindle From Start to Finish, but was so impressive that the Government allowed the company to take over the National Debt and collect gigantic sums a& capital. When the inflated shares collapsed, thirty million pounds’ worth of stock became worthless, and it was only the intervention of the bank that saved a much greater national disaster. The bank took over the shares and paid out a percentage of their par value, saving thousands from ruin and, incidentally, nearly ruining itself. The administration of the great Sir Robert Walpole saw the establishment of a reserve fund, which had not hitherto existed, as all the bank’s profits were paid to the shareholders. August 3, 1732, marked the bank’s first association with the famoui Threadneedle Street site, thus beginning an honourable association of more than two hundred years. In 1797, the bank was again Brought Close to Bankruptcy by the actions of William Pitt, who, through sheer trickery, secured the authorisation of borrowing from the bank without Government sanction. The result was disastrous for the bank, but not for Pitt, who dragged millions from the vaults at the expense of the shareholders. Finally, at the instigation of the shareholders, the King intervened, and the sequel was the Restriction Act, which saved the bank and prohibited cash payments, paper currency being substituted. This Act remained in force till May 1, 1821, when metallic currency was restored amidst jubilation. Many great banking frauds have been connected with the Bank of England, mostly, through the activities of forgers. Henry Fauntleroy, managing partner in Berners Street Bank, found himself in deep water as a result of misappropriation between 1814 and 1824. After ruining his bank, Fauntleroy was hanged for defrauding the Bank of England of £170,000 by means of forgeries. An American gang, headed by George Bidwell, operated in January and February, 1873, with forged foreign bills of exchange which netted them £102,217, of which more than £IOO,OOO had been drawn on the Bank of England. A tell-tale signature on a sheet of blotting paper gave the gang away, but not before they had got wind of police interest. The gang fled, but Bidwell, his brother, and two others were tried at the Old Bailey and were sentenced to penal servitude for life. With the changing years, many reforma have been made in the bank’s practices and activities, until to-day it Meets the Practical Need of the Nation. Bit by bit, as difficulties have arisen, alterations or modifications have been made, and it is in this sense that the bank so closely exhibits the British character. “We cannot doubt,” the author says, “that there are other come, and that the bank Imm-liih-!:;it':-e "f