Till Time's Last Sand

by David Kynaston

  By early 1892, the scheme was effectively dead, its demise further ensured by a lack of support from the shadow chancellor, the abrasive Sir William Harcourt. ‘I don’t find that the City at all share your admiration of Lidderdale,’ he wrote that winter to Hamilton. ‘I have had letters from persons whom you would recognise as being of the highest authority who regard the recent scheme as a mere Bank of England job to increase the profits of the Bank of England …’ Even so, if £1 notes were no longer up for debate for the foreseeable future, that was far from the case in terms of the central reserve. During the 1880s there had been little appetite for challenging Bagehot’s conclusion that there was no plausible alternative to a single-reserve system; but it was a significant pointer when the Bankers’ Magazine asserted in March 1892 that instead of banks concentrating all their reserves at the Bank, ‘we shall have to revert to the older methods – to causing each bank to maintain an adequate cash reserve of its own’. Or as Currie privately reflected some months later, ‘the time for living under the patronage of the Bank of England seems to be passing & the other Banks would act wisely in recognising this fact & in making provision for future troubles before they arrive’. Over the next two decades, the question of the reserve would stubbornly – and sometimes tediously – persist; and it came to symbolise the shifting balance of power not only between the Bank and the rapidly growing joint-stock clearing banks (capital of over £50 million by 1891, compared with £35 million ten years earlier, and almost a thousand more branches), but also in some sense between a deeply entrenched City establishment and an unwelcome bunch of muscle-flexing upstarts often with strong provincial roots.2

  More generally, despite widespread praise for its role in resolving the Baring Crisis, the first half of the 1890s was a far from happy time for the Bank. 1892 saw a Charter renewal in which the Bank found itself distinctly squeezed by the Treasury in terms of payment for its day-to-day services; governor from that year until 1895 (a third year added because of his deputy’s serious illness) was David Powell, a rather unimaginative, obstinate merchant; and his governorship almost exactly coincided with Harcourt’s tenure as chancellor in the Liberal ministries of first Gladstone and then Lord Rosebery. ‘The Bank will, I see, need to be carefully handled,’ reflected Hamilton after a visit to Threadneedle Street in August 1893. ‘They have not got over (what they consider to be) the hard bargain which we drove with them last year, and there is not a single Director who is politically friendly towards the Government.’ Careful handling was never the chancellor’s forte, spoiling anyway as he was for a showdown with what he regarded as one of the last great unreformed vested interests; and the following week, while on holiday, Hamilton was presumably dismayed to receive a Harcourt special:

  In your absence I have fought a great fight with the dragons of the Bank parlour.

  I sent for the Governor who came supported by that valiant champion Deputy Governor Wigram. After some polite beating about the bush we came to close quarters on the rate of interest on Ways & Means advances.

  I blandly threw out a ½ per cent above the rate on deficiency advances which at the present discount rates would have been 2½ p.c.

  The two pundits looked at one another in blank dismay and revealed the fact that they had come with instructions to ask 3½ p.c.; thereupon I poured upon them the vials of my wrath; I showed them that such a rate had never been paid when the Bank Rate was 4%; I asked them with indignation how they dare behave in such a way to a customer who kept an average balance of £5,000,000 in their hands; I told them point blank that nothing would induce me to listen to such an exorbitant demand and I said it would become my duty to enquire what ‘other persons’ there were in the City of London who might be ready & willing to accommodate HM’s Govt at a reasonable rate. I said I had hitherto been unwilling to open a Govt account elsewhere than at the B of England but that such demands might make it necessary to look in other quarters for reasonable accommodation. This was quite enough to indicate the proximity of New Court [home of Rothschilds] to Threadneedle St and they trembled at the notion of the Ch of the Exch dealing with Jews less extortionate than themselves. After I had exhibited this bug bear sufficiently I was prepared to dismiss them with the question whether I was to take their proposal as an ultimatum, upon which the ferocious Powell hinted that I might write and suggest 3% and they would give it anxious consideration.

  The two gentlemen who looked for all the world like the picture of the money lenders at Windsor then retired. The valiant Wigram looked daggers – but used none.

  I accordingly wrote a polite note splitting the difference which has been graciously acceded to, they endeavouring to cover their retreat by alleging ‘the change in the condition of the money market’ as the reason of their climbing down …

  A few days later, Harcourt was in no more forgiving mood, informing Hamilton that the Bank’s ‘scandalous conduct’ was something he would not forget, accusing it of having ‘practically robbed the public of ¾% on £2,000,000’, promising that he would have ‘as little dealings as I can help with these gentlemen in the future’, and again raising the tactic of borrowing from Rothschilds in order to ‘show up these Bank gentlemen to the public for what they are’.3

  At which delicate point ‘certain irregularities’, as the recurrent phrase went, were discovered in the Chief Cashier’s Office – a phrase that masked what was arguably the Bank’s worst ever internal scandal.4 The culprit was the chief cashier himself, Frank May, autocratic holder since 1873 of that powerful post. ‘Mr May,’ an admiring profile in the Bankers’ Magazine had noted in the late 1880s, ‘is said to despise what is known as popularity, and, still more, the insincerity of word and manner sometimes made to the charge of men who flinch from what may be their strict, although unpleasant, duty to their fellow-workers’; earlier in 1893, he had been one of three authors of an internal report on the Bank’s administration, highlighting the twin problems of ‘the irregularity of the work, which is subject to periods of considerable pressure and slackness, not only within the year but within the day’, and ‘the employment, for some of the duties in the Bank, of a class of persons not always well fitted for such duties’. May’s transgression, it emerged from a report submitted by Lidderdale, Greene and James Currie to the Committee of Treasury in November 1893, had been for several years past to make large unauthorised advances – with recipients, it would subsequently transpire, including the City editor of The Times and May’s own son, of the stockbrokers Coleman & May, intimately involved with the investment trust companies that had flourished on the back of the late 1880s boom but subsequently perished amid the protracted fallout from the Baring Crisis. For the time being, Powell and his colleagues were able to hush up the cause of May’s abrupt departure from the Bank – ‘a surprise,’ mildly commented the Financial Times, calling him ‘the stationary point round which revolved the ring of ephemeral Governors’ – but for the governor of the day, Powell, there was no avoiding an interview with the dreaded Harcourt, who naturally (noted Hamilton) ‘spoke his mind out very strongly’ in ‘rather too hectoring a tone’ when told the circumstances. Indeed, although the Bank itself had decided that May’s offences were not actionable, Harcourt was even minded for a time to refer the case to the public prosecutor, until persuaded by his mandarins, including Hamilton, that this might seriously damage the Bank’s reputation.5

  Eventually, however, the fourth estate had its say. ‘A Paralytic Bank of England’ was the unfriendly title of a seventeen-page blast by A. J. Wilson, appearing in his Investors’ Review at the start of 1894 after several weeks of swirling rumours. ‘Little of the true condition of the Bank can be known until daylight is let in on its accounts,’ he declared:

  The Bank publishes no balance-sheet – nothing whatever except the meagre weekly returns. There is no outside audit of its books; its stockholders have no control whatever over the management. Under the charter shareholders are supposed to meet and elect directors and governors at s
tated periods, but this power has dwindled into mere routine or pantomime. The ‘House List’, as it is called, is always elected as a matter of course, so that the board is really co-optative. It is thus, in great measure, ‘a family party’. The son follows the father, the nephew the uncle, or a lucky marriage brings with it a seat at the board. At best tradition prevails, and the new director is never a banker, rarely a man trained in the hard school of competitive business.

  Emphasising the danger of making May the scapegoat, Wilson itemised in some detail the close connections of several Bank directors with various investment trust companies, accusing them of having ‘dabbled in the dirty waters of the City’, and generally condemned the Bank for ‘its isolated position, its business ineptitudes, and its appalling absence of anything like consistent, or even decently intelligent, direction’. For the institution itself, this was an intensely uncomfortable experience. ‘London was humming with his stories about Threadneedle-street,’ reported the Daily Chronicle a day or two later about the impact of Wilson’s article, ‘and, fearful to tell, newsboys were exhibiting sensational posters, and doing a brisk trade on the strength of them, under the very noses of the dignified gentlemen in livery who stand outside the Bank.’ Wilson himself, speaking to the paper, was in trenchant mood:

  The Bank of England is protected by the prestige of 200 years’ existence and of a great national institution. Why, its prescriptive right of keeping its position in the dark is looked upon as a sort of guarantee of infallibility. What can you expect of such a system? Any human institution which gets divorced from the general movement of things goes mouldy and moth-eaten in time until a breath of life comes along from the world …

  The first thing to be done is to let in the light. Not one bank manager in ten, I venture to say, could make head or tail of the weekly statement which is issued by the Bank. A balance-sheet is never presented from year’s end to year’s end. There is no outside audit and no representative of the chief customers of the Bank – namely, the bankers of the country – on the governing body. Can anyone in his senses contend that this is a proper footing for a vast national institution in the present day? …

  The best of Governors is never able to make any permanent impression upon the management of the Bank’s business. They all come and go, these Governors, like mere cogs in a wheel. Routine controls them in most things, and where routine is master abuses thrive … The Government ought to step in at once and get the affairs of the Bank thoroughly overhauled, so that everything may be brought to the light. There is nothing else for it that I can see, unless the country is to wait with hands folded for the inevitable catastrophe.

  Soon afterwards there appeared a classic Punch cartoon by John Tenniel. Entitled ‘A Dirty Crossing’, it depicted the inevitable old lady peering down at ‘Mismanagement’ below her dress, and saying, ‘O DEAR, O DEAR! I WISH I WERE OUT OF THIS NASTY MESS!’ That was on 8 January; and though The Times the same day sought to offer a sense of perspective – ‘the Bank directors are not gods, but they are not black-beetles either’ – Harcourt soon afterwards treated Powell to another earful, demanding to know ‘what changes in the system of the management of the Bank are in contemplation’.

  The immediate upshot was a power struggle, with Hamilton ascertaining later in January that Everard Hambro, supported by Charles Goschen (the former chancellor’s younger brother) and some of the junior directors, was proposing to change the Committee of Treasury from an ex officio body of past governors to one elected from the directors as a whole. ‘It is believed,’ he noted, ‘that the present ex-governors are too averse to so radical a step to admit of its being taken.’ So they were; and after Powell had been careful to circulate to all directors a letter to him from Henry Hucks Gibbs insisting that ‘it is wholly beneath the dignity of the Court that any of its members should be influenced by the ignorant comments of the Press’, the Court voted on 1 February against Hambro’s initiative. Instead, the emphasis was put on a different sort of internal reform, with the creation by April of an Audit Department supervised by an Audit Committee, the latter comprising the deputy governor and five directors. By then the proprietors, at their regular half-yearly General Court, had given Powell and his colleagues a vote of confidence, after the governor had provided some hard information about May’s misdemeanours, including his speculations on the Stock Exchange, and had informed them that the Bank had set aside £250,000 to meet possible losses. ‘There may have been some fault in the system,’ conceded Powell, ‘but the directors have always had the best interests of the Bank thoroughly at heart, and they have tried, and will always try in the future, to do their best.’6

  Altogether, it was not brilliant timing for the bicentenary that July; and Herbert de Fraine ruefully remembered how the staff, convinced they would each receive an anniversary gift of one whole year’s salary, in fact got nothing at all – ‘absolutely shattering’ to those who had pinned all their financial hopes on a lump sum, and without a word of explanation either. There would be disappointment too at the top, as recorded by Harcourt’s son in March 1895, just as Powell was preparing to step down: ‘The wife of the Governor of the Bank of England (who looked like a Regent St prostitute) came to see Ch Ex [Harcourt] this morning to ask that some “honour” should be given to him on his retirement from the Bank …’7 Harcourt’s reply is sadly not recorded, but in any case the surprise visit proved fruitless.

  In the event, the bicentenary was marked by something entirely different – the employment from the summer of 1894 of about two dozen women, initially to sort and count banknotes. The motive was largely financial, part of cost-cutting in the wake of the harsh 1892 settlement; and the explicit rule was that all new female recruits were to be aged between eighteen and twenty-four, were to be unmarried or widows, and ‘will be required to resign their appointments on marriage’. ‘Our path’, recalled Janet Hogarth (later Courtney), the Oxford-educated first superintendent of women clerks, ‘wasn’t always smooth’:

  Those were the early days of women’s entry into business and they were not accorded a wide welcome – one can’t wonder at it. They did indeed displace men … So my sympathy goes out retrospectively to the elderly clerks and superintendents who tried to make out that we were inefficient, though we did with a staff of forty [the number of female clerks by 1896] what had before occupied sixty, and got away for the most part punctually at 4 p.m. instead of being kept till 6 p.m. to adjust a lost balance. ‘Balance out’ was seldom the cry as I got to the end of totting up the day’s total. Yet high officials were informed that we had ‘failed’ over work that had never been given to us, or that our health record was faulty, or our thoughts wandering, or what not. More than once we were in danger of extinction. But Mr [James] Currie remained our firm friend, and a free lunch did away with most of the health trouble. I remember his coming in to ask me whether that, or an extra £10 a year, would be most beneficial. I said firmly, ‘The lunch – if you give them the money they’ll spend it on hats and go on eating buns just the same.’

  In 1898 some of Hogarth’s charges qualified as typists; but broadly speaking the Bank remained until 1914 a male domain, as did the City at large, with Hogarth herself not unhappy to leave in 1906 and become librarian of the Times Book Club. ‘In the end I grew weary even of the comfort and the consideration – we were too closely segregated and confined to one narrow outlet. Ambition had little scope. Sex disability seemed likely always to bar preferment.’ That was undoubtedly true, yet the very existence of female clerical staff had made a significant difference to the late-Victorian Bank. The key witness is the notably dispassionate de Fraine. Noting that their ‘advent was very unreasonably resented’, he argues that this ‘infiltration’ was in its effect ‘much more far-reaching than was, I imagine, foreseen by anybody’: ‘It meant in fact the end of all the old easy-going methods. It would be of no use in future a Principal’s not knowing what sort of staff he had in the office, or even what numbers he employed.’ And
de Fraine adds that ‘actually the tightening-up was long overdue, as must have been perfectly well known to everybody’.8

  During the City’s increasingly prosperous mid-1890s, epitomised by the frantic speculation in 1895 in South African gold-mining shares that led to remarkable scenes in the Stock Exchange’s ‘Kaffir Circus’, few Bank staff of either sex, and indeed possibly not all that many directors, concerned themselves unduly with the notoriously recondite question of bimetallism. Back in 1892 there had been an inconclusive international conference at Brussels, with no formal Bank representation; in 1895, the year that Miss Prism warned Cecily (in Oscar Wilde’s The Importance of Being Earnest) that ‘even these metallic problems have their melodramatic side’, the Bimetallic League again pushed hard, leading to a memorial from the newly formed Gold Standard Defence Association, though with relatively few Bank signatories; and finally, in 1897, the controversy enjoyed more or less its final fling.

  The background, from the Bank’s perspective, was partly the way in which increased global economic activity meant an end to its temporary abundance of gold (itself much stimulated by the influx of new gold from the Rand), and partly the impact in July 1897 of a visiting American pro-silver delegation to London, led by Senator Wolcott, banging the old drum of an international bimetallist agreement. Neither the chancellor, Sir Michael Hicks Beach, nor the governor, Hugh Colin Smith, was willing to budge in any fundamental way from the monometallist faith; but at the end of July the latter did inform the former that, following their conversation, the Bank was ‘prepared to carry out what is laid down as permissible in the Bank Charter – namely, to hold one-fifth of the bullion held against the Note issue in silver, provided always that the French Mint is again open for the free coinage of silver and that the prices at which the silver is procurable and saleable are satisfactory’. Some seven weeks later, at a meeting of the General Court, Smith in effect informed the world at large of this ‘one-fifth’ concession – and the consequence was an immediate City storm. A prominent merchant banker, Robert Benson, at once sold his Bank stock, as did Gladstone’s future biographer, the Liberal politician John Morley; Hamilton reflected that ‘the reception of the announcement, which is regarded as an imprudent flirtation of the “Old Lady” with bimetallism, shows how exceedingly sensitive the great City world is about any suspicion of tampering with our currency system’; the Financial Times declared that the Bank had ‘no business to be coquetting with bi-metallism at their time of life’; and the Committee of London Clearing Bankers passed ‘with practical unanimity’ a resolution condemning the Bank’s proposal. The reasons for that initiative would remain unclear – Benson at the time reckoning that many of the directors had been ‘entirely ignorant of the Governor’s action’, that of ‘a wharfinger & not a banker’ – but in any case the storm proved to be of the teacup variety, with the government making clear by October its wholesale rejection of the bimetallist agenda.9