Till Time's Last Sand

by David Kynaston

  Rome was not built in a day, and January 1792 saw the unwelcome discovery that two clerks, Richard Hands and Shadrach Shaw, had been systematically defrauding the Bank through forged stock transfers, disguising their crime by using their own money to pay dividends to the real owners. Although Hands got away, Shaw found himself being sentenced at the Old Bailey to seven years’ transportation; and, in a perhaps surprisingly generous gesture, the Bank sent £50 to the captain of the Royal Admiral ‘for extra expenses which he will incur in affording some comforts and conveniences to Shadrach Shaw who is to go to Botany Bay as a convict on board such ship’. Before their fall from grace, Hands and Shaw would have been just in time to see the handsome outfits worn by the newly recruited day porters, in the event eleven of them. ‘The said Day Porters to be furnished with coats and badges,’ recorded the Court minutes in May 1791, with the high probability that this was when what became a familiar and famous uniform (salmon-pink tailed jacket, red waistcoat, black trousers, silk top hat) began to be worn. Who designed it? At least one Bank historian has speculated that John Soane may well have had a leading hand in the choice of livery; and given that over the years it would set off so well against his great banking halls, only the pedantic or curmudgeonly might wish to find evidence showing otherwise.13

  4

  An Elderly Lady in the City

  In 1797 a Scottish MP called Alexander Allardyce penned An Address to the Proprietors of the Bank. Noting that he himself had become a proprietor ‘some years ago’, he related how on doing so he had sought to find out about the management of the institution in which he now had a financial stake. ‘As to the state of affairs of the Bank, it was a perfect mystery, said to be known only to the Court of Directors. Every body said, that the Bank must be possessed of an immense hoard of wealth, which was continually increasing; but, when asked for what this hoard and its accumulations were intended, nobody could tell but the Directors, and they were not accustomed to answer questions of that nature.’ Allardyce willingly conceded – as over the years did most of the Bank’s critics – that ‘the present Directors are men of integrity and honour’, but the sense of exasperation was palpable. In fact, even as Allardyce wrote, the fundamentals were changing. The war with France that began in February 1793 and lasted a generation not only precipitated monetary turmoil, but also placed the Bank and its affairs beneath an unprecedented public gaze.

  Turmoil certainly characterised the first few months of the war. ‘An alarming effect upon the public credit was brought by the check given to our trade and manufactures,’ noted the director Samuel Thornton in January 1794 in his private overview of the previous year. ‘But for the successful interference of Parliament, by the issue and loan of a new species of Exchequer bills, the effect would have been fatal to the mercantile part of the community.’ Even so, he added, ‘the number of bankruptcies in the last year exceeds all former example’. Thornton himself had been a member of an eleven-strong ad hoc City committee that in April had urgently pressed on Pitt the large-scale issue of Exchequer bills, which sound but hard-pressed merchants and traders could discount at once at the Bank; before that, amid what was one of the century’s most serious financial and commercial crises (already brewing during the winter of 1792–3), credits from the Bank had helped in March to save some of the City’s key merchants. According to Sir Francis Baring’s retrospective account of the crisis, these credits involved a significant change of policy. ‘In the distress of 1793,’ he explained, ‘they [the Bank] committed a fatal error by deciding that all merchants and traders were entitled to their proportion of accommodation as the Bank was a public body and ought not to discriminate between individuals.’ Put another way, houses now receiving their ‘proportion of accommodation’ included Jewish houses – unwelcome to Baring, but a signal moment in the City’s development as an international financial centre, with war poised to recruit to London from Germany and the Low Countries an array of talented outsiders (many of them Jewish) from Nathan Rothschild downwards.

  Yet was the Bank, in purely financial terms, being too liberal in its approach, notwithstanding the severity of the crisis? ‘If not the whole by farr the greater part of the accommodation intended for the merchant Bankers & traders resident within the Kingdom of Great Britain (by the bye a pretty comprehensive description) must as surely come from the Coffers of the B. of E. without the Least necessity for any application for the consent of the directors as if the Court of Directors had with the most unbounded Liberality of sentiment offered to advance the whole money,’ Benjamin Winthrop, a former and future director (‘give me credit for the purity of my motives’), wrote darkly to the Committee of Treasury in early May ahead of the implementation of the Exchequer bills scheme, even as parliamentary critics claimed loudly that the Bank was not doing enough. And Winthrop found instruction if not consolation in history: ‘King Alfred divided his Loaf with the Pilgrim but he did not make an offer of his whole Loaf to the Pilgrim.’ In fact, the scheme worked a treat, as did the introduction of the £5 note (a temporary measure that proved to have staying power), and Winthrop’s fears were unfounded; but the crisis as a whole was yet another reminder of the difficulty of pleasing everyone.1

  The war itself inevitably put fresh strains on the Bank’s already difficult relationship with the relentlessly demanding Pitt. He for his part was ultimately prepared to defend the Bank when necessary – even on one occasion telling the Commons that it was ‘a private trading company’ that would regard any attempt to have a governor and deputy governor cross-examined by the House as ‘highly unjust and violent’ – but generally treated it with a large degree of ruthlessness and at times deviousness. The relationship’s worst year was 1795, as the war’s financial pressures deepened. In January the governor and deputy governor, Godfrey Thornton and Daniel Giles respectively, ‘waited on Mr. P.’ (in the latter’s words) ‘to acquaint him that it was their wish to bring to his consideration that he would so settle his arrangements of Finance for the present year so as not to depend on any further assistance from the Bank beyond the 4 millions already agreed upon & that the advances on the Treasury bills cannot be allowed at any time to exceed the sum of five hundred thousand pounds’; by June the Bank was threatening to withhold all further advances on Treasury bills; in July it warned gravely about its liabilities starting dangerously to exceed its reserves of specie; and in August it refused a request for a further advance on Exchequer paper, with Giles, now governor, reminding Pitt that ‘a provident care for their Establishment must precede all other Objects’. Giles, indeed, seems to have had a gratifyingly combative streak, in October even asking Pitt face to face whether he actually knew how the nation’s reserves of gold stood; to which, according to the Committee of Treasury’s discreetly pencilled minutes, the great man ‘really took shame to himself for having never formed any idea on that subject so as to leave him to judge of it with any accuracy’.

  In fact, the Bank’s treasure by this time was rapidly shrinking, not least in the context of the French government’s determined attempt to restore its own gold standard after the collapse of the assignat. What to do? Winthrop, a director again, had his say in a characteristic letter to Giles at the start of December. Arguing that ‘the unexampled Efflux of Specie & Bullion from the Bank in the course of the last Six Months’ was likely to continue or even intensify, and declaring that the Bank’s own ‘Safety’ was ‘a Consideration in my Mind far superior & paramount to all others’, he urgently called for the Bank ‘to endeavour to contract our Advances to Government at this time’. In the middle of a patriotic war, that was always going to be easier said than done; but four weeks later, on New Year’s Eve, the Bank did seek to retrench, with the directors resolving ‘to adopt some Measures that will be effectual to enable the Court at all times to restrain the Amount of the Discounts within such Limits as they shall from Time to Time prescribe’, in practice through a system of weekly limits.2 The directors had a far from easy line to tread: tighteni
ng commercial credit might easily trigger alarm and in turn another financial crisis; yet doing nothing to check the flight of gold was hardly an attractive alternative.

  The year 1796 proved a predictably stressful one, with an internal drain on gold replacing the external drain and taking the Bank’s treasure, which had stood at some £7 million back in 1794, down to below £2 million by the autumn. For the City as a whole, though, the greater preoccupation – and bone of contention – was the Bank’s new discount-restriction policy. In February a group of Bank proprietors lodged a complaint, only to be informed haughtily by the Committee of Treasury that it was ‘quite unusual in the Bank to give particular reasons for any measures which they, after mature deliberation, may think fit to adopt’; and when in April a City committee (that included the versatile financier Walter Boyd, close to Pitt and no friend of the Bank) sought to establish a board of twenty-five members that would be authorised by Parliament and issue promissory notes, ‘for the express purpose of furnishing to trade a temporary assistance which the Bank of England do not find it convenient, or perhaps do not think themselves sufficiently authorised, under their present powers, to give’, the Bank made a dead set against it and successfully persuaded Pitt to offer it no encouragement. Not that the Pitt/Bank relationship was suddenly harmonious. Take the memorial that the directors presented to him in late July after they had agreed, with intense reluctance, to his latest pressing request for a substantial advance:

  They beg leave to declare, that nothing could induce them, under the present circumstances, to comply with the demand now made upon them, but the dread that their refusal might be productive of a greater evil, and nothing but the extreme pressure and exigencies of the case can in any shape justify them for acceding to this measure, and they apprehend, that in so doing, they render themselves totally incapable of granting any further assistance to Government during the remainder of this year, and unable even to make the usual advances on the land and mort for the ensuing year …

  ‘Money is extremely scarce in the City,’ noted next week the diarist Joseph Farington (not a City man, but with his ears close to the ground), adding, ‘Bank Directors much out of humour with Pitt’. By autumn the prevailing City mood was one of anxiety and grumbling. ‘The apprehension of an invasion of this country seems to have taken possession of men’s minds so strongly that even in every company it becomes a subject of conversation,’ reported The Times in September, an apprehension naturally contributing much to the hoarding of gold, as guineas were withdrawn rapidly from the country banks as well as from the Bank itself. As for grumbling, supplementing anxiety, Farington received an instructive visit at the start of October from a Mr Berwick, woollen draper as well as Cornhill banker:

  There are great difficulties in the City from a want of money, – He blames in some degree some of the Directors of the Bank, who are supposed to be unfriendly to government, and who may have an interest in promoting occasional difficulties. – He also said that the Capital of the Bank is not proportioned to the business done, which is a cause of hesitation in discounting there from an apprehension that if the times become precarious from the alarms of invasion &c. a run might be made which the Bank could not answer, not having specie equal to its discounts or in such proportion as to secure its safety in such an emergency.

  Despite the success of Pitt’s so-called Loyalty Loan in December – the Bank showing the way by contributing £1 million, plus £½ million from individual directors – neither government nor people, City nor Bank, entered 1797 in optimistic mood.3

  ‘I have found my health decline through anxiety and application,’ reflected Samuel Thornton in January, writing his customary retrospective of the previous year. ‘The duties I have to fulfil at the Bank, and the office of deputy governor upon which I am entering [he was due to take up the position in the spring], call indeed for all my attention.’ So they already did, and so they increasingly would. The early weeks of 1797 were essentially more of the same – rumours of imminent invasion, flight of gold, money tight – before a dramatic endgame began during the last full week of February. A series of country banks stopped payment; specie drained from the Bank at the rate of some £100,000 a day; a substantial enemy fleet was sighted off Beachy Head, a sighting that did its damage before proving false; the price of Consols tumbled; and a handful of the Bank’s main men – usually including governor Daniel Giles, deputy governor Thomas Raikes, veteran director Samuel Bosanquet and Thornton himself – were in seemingly ceaseless conclave with Pitt, giving him regular updates about the loss of gold, as the treasure threatened to dip below £1 million. Thus on Tuesday the 21st the Bank’s deputation, having explained ‘exactly to him how the Cash [specie] is circumstanced’, urged ‘that he may, if possible and proper, strike out some means of alleviating the public alarms, and stopping this apparent disposition in people’s minds for having a large deposit of Cash in their houses’; three days later, the Bank’s representatives waited on Pitt not only to impart the latest alarming bullion figures (£130,000 withdrawn that Friday), but ‘to ask him how far he thought the Bank might venture to go on paying Cash, and when he would think it necessary to interfere before our Cash was so reduced as might be detrimental to the immediate service of the State’. The ball, in other words, was firmly placed in Pitt’s court – and next morning, Saturday the 25th, as news reached London that French troops had landed at Fishguard, he resolved to take decisive action, probably to the relief of the Bank.4

  Events over the rest of the weekend moved with notably clockwork precision. Pitt later on Saturday despatched a message to King George III at Windsor, urgently asking him to return to London the next morning; noon on Sunday saw a meeting of the Privy Council, attended also by Giles and his three colleagues, at which the decision was reached to suspend cash payments; and at the Bank on Sunday evening, eleven directors (including the lord mayor, Brook Watson) assembled to wait for the formal communication from the Privy Council. This duly arrived at half-past seven, containing an Order in Council stating that it was the ‘unanimous Opinion’ of that body that it was ‘indispensably necessary for the Publick Service, that the Directors of the Bank of England, should forbear issuing any Cash in Payment until the Sense of Parliament can be taken on that Subject, and the proper Measures adopted thereupon, for maintaining the Means of Circulation, and supporting the Publick and Commercial Credit of the Kingdom at this important Conjuncture’. Whereupon, after Abraham Newland had been called in and ‘directed to pay Obedience’ to the new dispensation, the lord mayor was ‘desired to send round to all the Bankers in the City this Evening a Copy of the Injunction of the Privy Council’. Overnight, printed circulars were prepared for posting at the doors of the Bank – containing not only the text of the Order in Council, but a resolute and reassuring message from the Bank itself in consequence of that Order:

  The Governor, Deputy Governor, and Directors of the BANK of ENGLAND, think it their Duty to inform the Proprietors of BANK STOCK, as well as the PUBLICK at large, that the general Concerns of the BANK are in the most affluent and prosperous Situation, and such as to preclude every Doubt as to the Security of its Notes.

  The directors mean to continue their usual Discounts for the Accommodation of the Commercial Interest, paying the Amount in Bank Notes, and the Dividend Warrants will be paid in the same Manner.

  A new, paper-money era was beginning, though amid huge uncertainty and with no one knowing – or even able plausibly to guess – for how long.

  The lord mayor on the Sunday evening was also requested to ask the City’s bankers to meet at the Mansion House at 11 o’clock on Monday morning. There, they carried a resolution, almost at once bearing about a thousand signatures, that had deliberately strong echoes of 1745 in its statement that, in order to ‘prevent embarrassments to Publick Credit’ and ‘to support it with the utmost Exertions at the present important Conjuncture’, the signatories ‘do most readily hereby declare, that we will not refuse to receive Bank Note
s in Payment of any Sum of Money to be paid to us, and we will use our utmost Endeavours to make all our Payments in the same Manner’. Other similar meetings and declarations, almost all intensely patriotic in tone, rapidly followed in many cities and towns; and the contemporary evidence strongly suggests a broad acceptance in these weeks of Bank of England notes even if they were no longer backed by gold, with the notes themselves soon including £1 and £2 denominations. One inevitable consequence was at the supply end. ‘Before the present urgency there were 5 printing presses used in printing Bank notes,’ whereas ‘now there are 16 presses employed night & day, and 14 more are to be added,’ recorded Farington as early as 16 March. Legislation, meanwhile, gave full sanction to the new situation, with the Restriction Bill of 9 March (becoming law on 3 May) indemnifying the Bank against the direct consequences of suspension of cash payments. Predictably, if perhaps illogically, many now hoarded what gold they had left; and less than three weeks after suspension, Samuel Thornton confessed to his brother-in-law, Lord Balgonie, that ‘I wish I could comply with your request & send you a bag of gold, but no such thing is to be obtained …’5

  The Bank was also busy in these weeks supplying witnesses to the ‘secret’ parliamentary committees investigating the events leading up to suspension. ‘When did you first perceive a diminution of the usual quantity of Bank Notes in circulation?’ the Commons Committee asked its first witness, Thomas Raikes, on 4 March, less than a week after the event. ‘I cannot recollect,’ replied the deputy governor, and his next few answers were not all that much more helpful:

  Did that diminution take place, to any considerable degree, before the Bank began to lessen their Discounts? – I fancy not.