The pleasures of peace did not last very long. Even as they were still ‘looking back with Horrour on the heavy Load of Debts they had contracted’, recalled Jonathan Swift in 1711 about the English people during the aftermath of the Nine Years’ War, they, ‘without giving themselves time to breath, would again enter into a more dangerous, chargeable, and expensive War’. This new war was the War of the Spanish Succession, lasting from 1702 to 1714 – and another opportunity for the Bank to show its prowess in war finance, especially through loans to a predictably strapped state. ‘The government which is chiefly supplied by them, can scarce expect for the future to be supported without them,’ observed in 1706 one pamphleteer, the Duke of Marlborough’s chaplain John Broughton, of its apparently ever-increasing dependency on the men running the Bank. That dependency was intensified from 1707, when in effect the Bank took over responsibility for circulating new issues of Exchequer bills secured on taxes, a service it performed not only for a handsome allowance for bills outstanding, but also with the precise interest on bills left entirely to its own discretion. ‘What extraordinary profit must have accrued to the bank by this operation, every one must perceive,’ noted with grudging admiration the political economist Sir James Steuart over half a century later, adding that ‘almost the whole accumulated interest paid, became a pure profit to the bank, as well as a great augmentation of the national debt’.
In addition, 1707 was the year of the Act of Union, involving the Bank in a less profitable service to the state. The agreement, far from popular north of the border, included the provision that the Scots, as an ‘equivalent’ for their contribution to repaying England’s national debt, would receive some £100,000 in cash and £300,000 in Exchequer bills; and that summer, a heavily guarded party of twelve wagons, accompanied by three Bank officials, made its way from London to Edinburgh. There they were met by four English commissioners, including James Houblon, son of the former Bank director Sir James. ‘A good share of ye Mob are very Angry,’ he reported to his brother on 5 August after the wagons’ arrival, ‘& threw Stones at ye Bank-Officers & Coachmen.’ Apparently the mob believed that the wagons contained ammunition. Such was the uncertain standing of Exchequer bills that the commissioners had to request the Bank to send a further £50,000 in coin, resulting in a second convoy (again attended by three Bank officials) later in the summer. The tailpiece to the story involved an unseemly squabble. Back in London, the wagon drivers demanded from the Bank an extra £22 per man; the Bank’s offer of an extra £10 was refused; the secretary, John Ince, complained to the Treasury that the drivers were ‘very rude and troublesome’; and although the documentation runs out at this point, no doubt a compromise was reached.
Meanwhile, a war famous for its resonant battle names (Blenheim 1704, Ramillies 1706, Oudenarde 1708, Malplaquet 1709) continued to drag on – and just as a decade earlier, the Bank took advantage of the Whig government’s need for immediate funds to secure for itself a new, enhanced agreement. Embedded in legislation in 1708–9, there were three key aspects from the Bank’s point of view: first, its Charter was extended to 1733, almost a quarter of a century away; second, its monopoly over joint-stock banking was strengthened, at the same time confining private banking to organisations of six partners or fewer; and third, its authorised capital was doubled to £4.4 million, immediately resulting in a highly successful subscription process at Grocers’ Hall. None of this meant that the Bank had suddenly become a universally accepted, let alone welcomed, institution. ‘The malignity of the Bank is of that extent that I know not well where to begin my account of it,’ declared in 1708 the anonymous author of a public letter to an MP, Arguments against Prolonging the Bank, Showing the Dangerous Consequences of it to our Constitution and Trade. Still, in terms of prevailing sentiment, in the City anyway, that same year a London correspondent of Thomas Pitt at Madras surely had the right of it. ‘The Bank,’ he wrote, ‘not only in my own opinion but of all my acquaintance, is thought the surest estate, and scarce any money’d man but has a share which he looks upon as his nest egg.’8
What sort of place was the Bank by the time this new deal was struck? ‘I looked into the Great Hall,’ Joseph Addison would note a year or two later in the Spectator, ‘and was not a little pleased to see the Directors, Secretaries and Clerks, with all the other Members of that Wealthy Corporation, ranged in their several stations, according to the Parts they act in that just and regular Oeconomy.’ The directors remained predominantly merchants, typified by Francis Eyles, a Wiltshire clothier’s son who became a prominent Levant and colonial merchant and, having been elected a director in 1697, served as governor for what was becoming the usual two-year term, in his case 1707 to 1709. But in terms of the conduct of the Bank’s day-to-day business, the people who really mattered during these formative years were not ‘the Direction’ (as it came to be called) but its first generation of permanent, full-time staff.
Inevitably their numbers increased (over sixty by 1700), though it would be a long time before their total reached three figures; as for their functions, the clerical staff were mainly divided into those working in the Accountant’s Office, those in the Cashier’s Office, those in the Secretary’s Office, those in the Discount Office, and the tellers. The heaviest burden probably lay on the last group: over twenty of them by the early 1700s, situated in the handsome banking hall at Grocers’ Hall, and in effect the public face of the bank – accepting deposits and loan payments, cashing notes and bills, and from 1704 subject to a detailed four-page ‘Orders for the Observance of the Tellers of the Bank’. Theirs was demanding work, not helped by poor-quality coinage and the ever-present danger of forgery of paper instruments of exchange, and one of the many specific stipulations was that ‘the Teller Indorse the persons name to whom they pay mony on Notes payable to Order, and if unbeknown the place of his abode’. There were also of course non-clerical staff, comprising by 1704 two messengers and doorkeepers, one gate-porter, two house-porters, one house-cleaner, one gardener and six watchmen, with the gate-porter provided by this time with ‘a crimson cloth gowne lined with orange, and a large Bamboo cane with a silver head’. Discipline was generally strict: not only were ‘the servants of the House’ (whether clerical or non-clerical) under threat of instant dismissal for failure to comply with the rules of the Bank, but they were required on pain of suspension to report on any fellow-employees guilty of ‘prophaneness, immorality, loose or scandalous living’ in their personal conduct; and although the pay was respectable (the average teller getting around £55 a year, somewhat above what a schoolmaster earned), Anne Murphy’s verdict that ‘on balance the majority of the Bank’s employees would have found its management practices to be more about the stick than the carrot’ is surely correct. Still, there were always the consolations of home: an evocative 1704 list shows that although a handful of the most senior staff lived at the Bank, Thomas Jones could retreat to ‘his Mothers a Coffeehouse in Starre-Court in Breadstreete’, William Deards to ‘his owne house in Naggshead Court in Bartholomew Lane by ye Exchange’, Robert Lloyde to ‘the Middle Temple in Essex Court in the Staircase No. 4 up one paire of staires at Mr. Scroopes chamber’, and Thomas Cowell to ‘Hony Lane market, at ye Bell a Publick House’.9
What exactly, then, was the nature of the Bank’s day-to-day business during its first fifteen or so years? Elements of mystery remain, but essentially what it did – as a private (as opposed to public) bank, in addition to its ever-closer connection with government – was to provide a range of indispensable services for the London mercantile community. These services included issuing banknotes and other paper credit instruments; providing deposit, account and payment transfer facilities; making carefully selected loans; and discounting bills of exchange. As for services on behalf of government, over and above making regular loans and advances as well as its facilitating role in relation to Exchequer bills, the Bank did not yet manage the long-term national debt. But it did increasingly act as banker to what Clapham ca
lls ‘the great national accounts’, such as ‘during Marlborough’s wars the Paymaster of the Army, the Paymaster of Guards and Garrisons, the Treasurer of the Ordnance Office and the Treasurer of the Navy’. All in all, whether for the mercantile community or for government, but especially for the latter, it was a profitable business; and between 1697 and 1709, the annual dividend payment to stockholders invariably amounted to at least 7 per cent and was often significantly more.
One should not exaggerate the reach of the early Bank of England – after all, for much of the eighteenth century it was quite often referred to as the ‘Bank of London’. Moreover, unlike the appreciably older Bank of Amsterdam, the Bank ‘did not’, to quote the historians Larry Neal and Stephen Quinn, ‘dominate the local bill market, it did not act as a large-scale clearing house, and no bills were required to pass through it’. Instead, notwithstanding its other services to the mercantile community, it was a ‘note-issuing bank, committed to serving the British Treasury’. Undoubtedly a key aspect of that service was the part the Bank played in helping the development of what other historians have called ‘credible commitment’ – that key post-1688 evolution of an institutional structure by which the new dispensation of parliamentary government could be more widely trusted than had ever been the case in the age of Crown-dominated public finance. Or put more specifically, the Bank’s role in almost all new loans to government was soon so central that in effect it acted as guarantor of responsible behaviour, not least in relation to the prompt payment of interest. Yet at the time, it must be re-emphasised, not everyone saw the Bank in such a favourable, public-interest light. ‘Its status was contested, its monopoly at risk, and it remained highly vulnerable to the whim of Parliament’: even after the 1709 enhanced deal, Murphy’s salutary words still apply.10 And indeed the Bank at this point had still to face perhaps the biggest threat of all to its very existence.
The sequence of events that eventually led to that threat began in 1710 – a year of intense political drama, with the Bank under the take-no-prisoners leadership of Sir Gilbert Heathcote (governor from 1709) positioned uncomfortably close to the drama’s centre. The larger context helps to explain the febrile atmosphere. Public finances under increasing strain, bad harvests, a seemingly endless war (with Heathcote stubbornly insisting to Godolphin, back in office as first lord of the Treasury, that any peace failing to secure war aims in Spain would be ‘a rotten peace’), Queen Anne in the ninth year of her reign believing the time at last ripe to get rid of the detestable Whigs – all this, and Dr Henry Sacheverell too. On 27 February the trial began (for seditious libel) of this eloquent high churchman and fierce anti-Whig; within days the Sacheverell Riots were under way; and the mob – intent on looting and burning Grocers’ Hall – was thwarted only by the arrival of the Grenadier Guards, whose Captain Orrell had reputedly declared, ‘Gentlemen, it is better to have all the [dissenting] meeting-houses destroyed than the Bank.’ Sacheverell himself was virtually acquitted, and the Tories by early summer had the wind firmly in their sails, to the alarm of the money men.
Over the next few months, the Bank twice tried to halt political change and twice failed. The first intervention came on 15 June, with Heathcote and three colleagues personally informing the Queen of their ‘desire’, following the dismissal of the Earl of Sunderland from the government, that ‘she would make no further alterations in the ministry which much affect all the public credit’; some seven weeks later, a further Bank deputation, this time to the Treasury and seeking to shore up the position of Godolphin (a pro-Bank moderate Tory who had become increasingly close to the Whigs), only had the effect of goading Anne into dismissing him. That same deputation also demanded an assurance against an early dissolution of the Commons – and again the Bank’s wishes were ignored, with an October election resulting in a Tory landslide. Did Heathcote repent at all of the Bank’s interventions? Probably not. ‘If we err’d,’ he confided to a prominent Whig, ‘t’was in failure of our judg’ments, and God of his mercy grant that that may be the case, but I cannot help being still of the same mind.’11
That autumn the politics of the City could hardly have been more charged, with Heathcote in the thick of it. In late September, in the midst of a controversial count and a riot at the mayoral Common Hall, Heathcote was chosen as the next lord mayor; the following month, in the City’s parliamentary election, he was one of the four Whig candidates (all of them present or past Bank directors, and three of them, including Heathcote, sitting MPs) swept aside by the four Tory candidates (including Sir Richard Hoare), after a five-day poll marked by, in the words of one historian of the City, ‘an atmosphere of rhetorical and physical violence unmatched since the Revolution’. The Bank itself continued to dig in its heels and make life as difficult as possible for Robert Harley’s new Tory government – not only still refusing to discount bills of exchange for military pay officers, but also now refusing to discount overseas bills of exchange. ‘It is only pique and revenge of Heathcote’s and his party who now govern the Bank absolutely,’ a banker-ally of Harley informed him in November, almost certainly accurately.
The game-changer was the news just before Christmas that Lord Stanhope’s army had surrendered at Brihuega – in effect, spelling an end to any serious hopes of conquering Spain and of thereby avoiding Heathcote’s ‘rotten peace’. By early 1711 there was a palpable spirit of compromise and co-operation between the Tory government and the Whig-supporting Bank, much helped by a successful internal rebellion against Heathcote during the last few months of his governorship, a rebellion apparently led by two former governors, John Ward and Sir James Bateman. Even so, at the annual election in April of new directors, Tories in the City still tried to stage a coup, leading to a much heavier turn-out by stockholders than usual. The coup failed – in Clapham’s words, ‘the crowds of proprietors voted for the men they knew’ – and accordingly it was very much the old Whiggish guard that was returned, including Nathaniel Goulde as governor and John Rudge as deputy governor, both of whom had joined the Court back in the 1690s. A more successful Tory initiative was the formation later in 1711 of the South Sea Company, intended from the start as a counterweight to the Bank and designed in essence as a vehicle for converting into perpetual annuities a large chunk of the government’s floating debt, with the vaunted South Sea trading-company aspect being little more than a façade. Revealingly, and befitting his reputation as a pragmatic operator, Harley went to great lengths to ensure that the Bank did not feel unduly threatened by the new creation. He was well aware that a rapprochement with the heart of the monied interest, even if that interest was still defiantly Whiggish, was too important to be thrown away lightly.12
Over the rest of the decade, the Bank largely consolidated its position. In July 1713, three months after the Treaty of Utrecht had at last ended a war that had seen the national debt triple in size to £52 million, a new act extended the Charter to 1743 in return for the Bank agreeing to circulate a further £1.2 million of Exchequer bills. Politically, the dominant fact was increasingly the Queen’s ailing health and fears of a Jacobite-supporting French invasion, leading to at least two significant runs on the Bank. But when Anne did die in August 1714, the Hanoverian succession proceeded, to the Bank’s relief, entirely peacefully; and though in May 1715 the Jacobite plan was apparently for ‘three mobs to assemble at Smithfield, proclaim the Pretender, seize the Bank of England and set it on fire, assassinate some of the Chief Magistrates (including Sir Gilbert Heathcote) and raise a general insurrection’, not only did that dramatic scenario fail to unfold, but later in the year, during the failed actual Jacobite rebellion, the Bank found itself under little serious pressure. Indeed, it was in 1715 itself that the Bank’s remit was crucially extended, with the government asking it to handle a supply loan of £910,000 – the first major step in the Bank establishing control over long-term government borrowing. What about the South Sea Company? Relations between it and the Bank were generally reasonable, with the Bank ev
en coming in effect to act as the upstart company’s bankers; but by the autumn of 1719 the directors of that company were, in Clapham’s words, ‘planning great and daring ventures’.13
In essence, as its scheme evolved that winter, the South Sea Company (SSC) proposed to take over the national debt (excluding that part owed to the Bank and the East India Company) in return for making a substantial one-off payment into the Exchequer – cash that would enable a financially hard-pressed government to redeem other long-term public debt, including that held by the Bank. What was in it for the SSC? Why might it be so advantageous to have a major swathe of the national debt converted into newly issued shares in the Company? Accounts of the ensuing infamous South Sea Bubble have tended to emphasise the motive of stock market speculation and manipulation; but the historian Richard Kleer has argued that the ambitious debt-conversion project of 1720 had an equally powerful motivation: namely, an attempt by the SSC ‘to direct vast new amounts of public money through its coffers and at the same time deprive the Bank of England of most its public cash flow’ – so that ultimately, further argues Kleer, the Company would ‘supplant the Bank of England and assume the latter’s longstanding status as the state’s principal lender’. ‘Longstanding’ is perhaps an exaggeration, given the Bank was still barely a quarter of a century old, but it is a compelling interpretation of what the Bank itself undoubtedly perceived as a very real and very present threat. ‘Now they stand ready,’ observed Daniel Defoe at the time about the architects of the scheme, ‘as occasion offers, and profit presents, to stock-job the nation, cozen the Parliament, ruffle the Bank, run up and down stocks, and put the dice upon the whole town.’14
Till Time's Last Sand Page 3
