Till Time's Last Sand

by David Kynaston

  Exercising control over the City? Not helped by its high turnover of governors, and despite Lidderdale’s man-of-the-hour moment in 1890, the Bank did not yet exercise over the rest of the City a huge amount of moral suasion, or what would subsequently be known as the governor raising his eyebrows. Indeed, it is probably fair to say that at this stage the widespread perception in the City was that the Bank was run along distinctly backward, old-fashioned lines – a perception hardly encouraging a sense of deference. ‘A very bad day,’ recorded the working diary in March 1900 of the bill brokers Smith St Aubyn:

  Money absolutely unobtainable. We were obliged to go to the Bank for £115,000. They say that they will charge 5% for advances as they want their loans repaid by the market, & they also refuse to discount short bills. This is a distinct attempt of Gladstone’s the Governor to extort usury from the market. In consequence of this individual’s action we took 15m down to S, P & S [the bank Smith, Payne & Smiths] who discounted them for us at 4%.

  ‘The sooner Gladstone returns to his petroleum tanks the better,’ concluded the entry, ‘as this is simply another instance of the misuse of public money by him.’17

  Co-operating with other national banks? ‘At first sight the Bank was an extraordinarily insular institution,’ observes Sayers in his magisterial overview of ‘The Bank and its world’ between 1890 and 1914. ‘Neither Governors nor officials made any visits to other countries on official business, and visitors to the Bank from other countries were ordinarily paying only courtesy visits. Very rarely a “top hat” letter would come in French from the Bank of France, but knowledge of foreign languages was not regarded as a necessary qualification for anyone in the Bank’s service.’ It was, insists Sayers, an ‘illusory’ appearance, given that the Bank well knew that nothing so intimately affected its ‘guardianship of the gold standard’ as ‘the current of world events’. Nevertheless, as he fully concedes, there was little if any of the almost continuous dialogue and often co-operation with other national banks that would characterise long stretches of the post-1914 era. The deputy governor may in December 1900 have written to the newly appointed director general of the Bank of Italy, offering ‘felicitations’ and assuring him that ‘nothing shall be wanting’ on the Bank of England’s part to keep relations with the Bank of Italy ‘on as pleasant a footing in the future as they have been in the past’, but the actual relationship with this and other national banks was altogether more distant. Occasionally there was an exception – in 1898 the Bank agreed with the Bank of France to help German banks in difficulty and thus ease pressure in the Berlin money market; during the difficulties of 1907, the Bank was grateful for assistance from the Bank of France – but that was all it was. Instead, on a more day-to-day basis, ‘the theory was,’ reflects Sayers, ‘that through the action of the banking system the Bank would sense the tides of world affairs and, in so far as personal knowledge was necessary, the Directors with their varied and widespread business connections could answer any questions the Governor had to ask’.18

  One should not exaggerate. Notwithstanding all four disclaimers, the fact was that the pre-1914 Bank saw itself – quite rightly – as something very special globally as well as nationally, and not just purely a commercial organisation. A nice reflection of underlying assumptions surfaced in September 1900, as the Boxer Rebellion raged in China and the Bank optimistically envisaged the eventual restoration there of ‘peace and quietude’. ‘The Bank,’ a surprisingly forthcoming director confided in the financial press about that happy eventuality, ‘would be appointed the vehicle for the transfusion of Western civilisation into that ancient community, and they would enjoy the honour of being bankers to two-thirds of the human race. Dividends were a very interesting and satisfactory point with them; but these national connections and services greatly added to the value of their proprietary stock.’19

  No one expressed the seemingly immutable gold standard verities more eloquently than John Maynard Keynes retrospectively (calling the Bank the conductor of the world’s financial orchestra) or Winston Churchill at the time. Addressing his Manchester constituents in April 1908, the newly appointed president of the Board of Trade evoked a world destined soon to disappear, a world of broadly open economies in equilibrium with each other, and with a benign, all-seeing Bank of England at its eternal beating heart:

  In the transactions of States scarcely any money passes. The goods which are bought and sold between great powers are not paid for in money. They are exchanged one with the other. And if England buys from America or Germany more than she has intended to buy, having regard to our own productions, instantly there is a cause for the shipments of bullion, and bullion is shipped to supply the deficiency. Then the Bank rate is put up in order to prevent the movements of bullion, and the rise of the Bank rate immediately corrects and arrests the very trade which has given rise to the disparity. (Hear, hear.)

  That is the known established theory of international trade, and everyone knows, every single business man knows, it works delicately, automatically, universally, and instantaneously. It is the same now as in January 1906 [the date of the Liberal landslide at the general election], and it will be the same as it is in 1908 when the year 2000 has dawned upon the world. As long as men trade from one nation to another and are grouped in national communities you will find the differences of free trading are adjusted almost instantaneously by shipments of bullion corrected by an alteration in the Bank rate.

  Sadly, it is only very occasionally during this quarter-century or so before 1914 that the records enable one to see the Bank fully in action, outlining the circumstances and weighing up the options before it decides to take a particular course of action. Probably the closest we come is through letters that the veteran and highly respected director Benjamin Buck Greene sent to colleagues in the mid-1890s, in the specific context of the Japanese government having deposited at the Bank a huge indemnity payment following its victorious war against China. ‘I am curious to see what is to happen to the Japanese Money,’ Greene wrote in November 1895 to Mark Collet, fellow-member of the Committee of Treasury as well as of the Court:

  No doubt we shall lose control of the greater part though still with us. If a persistent attempt be made to employ money must go to nowhere – & yet until it leaves the Country somebody must hold it without interest.

  The U.S.A. are again shipping gold – & if she continues the same Currency policy she may issue more gold Bands [Bonds?] to share the same fate in due time for which they have to pay interest – but as they can afford it it does not signify to them.

  The payment by the Hong Kong & Shanghai Bank of a further 2 Millions made a temporary flutter in the market – but now it looks as if we shall have what is called increased ‘ease’ again & next month gold will return from the internal Currency.

  The following autumn, in September 1896 the day after a Bank rate rise, and too infirm himself to be in the City, Greene was writing from his home near Reading to governor Sandeman:

  If the 5½ Millions of gold we have lost since the 22nd July had been taken away by the Japanese and exported, thereby reducing their deposits by that amount, it would not have signified so much and any movement on our part would have been less necessary. How long it will remain with us or in this Country, we know not, therefore on looking at our position in the event of its withdrawal it seems that the time had come or nearly so to consider the question.

  Our total deposits stood on the 9th Inst at £57,365m

  Reserve " " 32,380m

  Proportion 56.9 [per cent]

  Take away the Japanese deposit of £12,523m without disturbing any other account we should have £44,842m. Reducing our Reserve by same amt to £19,857m, [we should have] Proportion to 44.1, which I think under Existing Circumstances is about the minimum we should aim at to let it go to without taking action …

  As we do not know yet what is to become of it [the Japanese money] we ought to legislate as if it were certain to be exported directly
or indirectly at any moment and though perhaps your move yesterday [increasing Bank rate] was not urgent it was at any rate safe while we do not yet know to what amount the present drain may extend & particularly in view of the decline we usually have in our Reserve after about the 22 Sept. Of course there are other Variations that may crop up and require consideration. The Bank of France has lost Gold since the 19th Augt to the Extent of nearly two Millions Sterling.

  I do not think your move will interfere at present with the demand upon you for discounts (though the outside Market may be better) unless you put up your unpublished rates which perhaps would check them.

  In answer to your question I do not think at present it would be useful or desirable to take cheap money off the Market, the Bankers are too rich for that having still large balances with us, besides having so much more money in their tills than they used to have …

  A coda comes from Sandeman himself, who three months later wrote to the chancellor, Hicks Beach, asking if he would ‘obtain for us some precise information as to the intentions of the Japanese Government in connexion with the large amount which they have at the present moment on deposit with us’, adding that ‘lately the Japanese Government had withdrawn a certain amount in gold for export’. ‘It has been done,’ noted the governor, ‘in a very discreet manner, but, should these withdrawals assume large proportions, and become generally known, they might easily create alarm,’ that is, in the money market. The Treasury obliged, but probably only to a degree, to judge by the letter that Sandeman sent soon afterwards, in January 1897, to Hamilton: ‘I am much obliged for your suggestions as to means that might be adopted for ascertaining something definite as to the Japanese intentions, from the Legation, but I fear it would not do to reopen the question now, as we have already declined to depart from our “traditions”.’20

  If that was presumably a reference to traditional relationships with customers, an even more inviolable tradition remained that of the rotation of governors. Every now and then the notion was floated of a permanent governor, for instance by Hamilton to Lidderdale shortly after the Baring Crisis: ‘He said, on the whole “no”. It was difficult enough now to get good men to serve as Directors, and if you deprived them of the chance of occupying the chair, which to many was a coveted distinction, you would probably get even less good men to enter the Bank.’ It is impossible to be certain how fair that was as an estimate of the calibre of the Bank’s direction; but through the prosopographical research of Youssef Cassis we can at least make certain generalisations about the nature of the Court between 1890 and 1914. Cassis finds that merchants (as opposed to merchant bankers) still occupied nearly half the positions; that it was still very English and Anglican; that it still had a strongly hereditary element, with Evelyn Hubbard even explicitly stating that he had ‘inherited’ his directorship from his father; that its political affiliation was almost unflaggingly Conservative or Liberal Unionist; that by some way the most popular club to belong to was the Carlton, followed by the Athenaeum; and that in terms of society as a whole there were some directors enjoying considerable prestige, including the Roehampton set living in substantial residences, but others, for instance the wine merchant Albert Sandeman, who were far from social high-flyers.

  There was perhaps no such thing as the ‘typical’ director, but a certain flavour comes through in Vanity Fair’s mid-1890s profile of Henry Cosmo Bonsor, who had been elected to the Court in 1885 and would not depart until 1929:

  He is an Eton boy (who played in the football Eleven and rowed in the Boats), a Director of the Bank of England, a County Alderman for Surrey, a Lieutenant for the City of London, a Justice of the Peace and Deputy-Lieutenant for Surrey, and he has sat in the Commons for the North-East, or Wimbledon, Division of Surrey since December 1885 … Chairman of the South-Eastern Railway and of Watney and Company Limited, and a partner in Combe and Co (brewers), he is perhaps best known as the popular and energetic Treasurer of Guy’s … He is a man of great daring, even to the extent of brown boots, a billycock hat, and a cheery good-natured person … With all his business he still finds time to be a sportsman. He is suspected of knowing something about racehorses; he has been seen at Monte Carlo; he can play an occasional rubber; and if the grouse on the Yorkshire moors do not like him they are much appreciated in the wards of Guy’s Hospital. Altogether he is a thoroughly good fellow.

  He is still a boy: of more than six feet; and though he is a Freemason he is a typical Englishman who disdains white gloves.

  An occupational breakdown of the governors themselves – in turn impacting on the composition of the Committee of Treasury – is revealing. Of the dozen governors between 1890 and 1914, all but one or two were from essentially ‘mercantile’ firms – and seldom possessing any obvious banking expertise. One of the Edwardian governors was said to use his room at the Bank to receive his travellers with their samples; while in October 1902, when the governor was Augustus Prevost of the declining firm of merchants Morris, Prevost & Co and his deputy was Samuel Morley of the warehousemen I & R Morley, one merchant banker, fairly or unfairly, let himself go. ‘The Governors are charming fellows,’ Herbert Gibbs wrote to his father Lord Aldenham (the former Henry Hucks Gibbs, no longer a director), ‘& I would leave them in charge of a roast chestnut business with the most absolute confidence, but the same rules do not quite apply to the centre of the Commercial centre of the world.’21

  All things considered, it was probably fortunate that the Bank by the early twentieth century also had an emerging cadre of high-class functionaries. The exemplar was undoubtedly Gordon Nairne. Born in 1861, and employed first at the Kirkcudbright branch of the National Bank of Scotland, he entered the Bank’s service in 1880 on the nomination of Thomson Hankey. He rose rapidly and in 1902 became chief cashier, by this time acknowledged as the senior position to chief accountant. Between then and the war, culminating in his knighthood in June 1914, he was almost certainly year in, year out the single most important figure at the Bank, apart from occasionally the governor or deputy governor, being renowned for his attention to detail, his close supervision of those below him and his severe disciplinary streak. He was not, as Sayers nicely puts it, ‘the man to foster an innovation not engaging his sympathies’; and shortly before the war, when the Bank tentatively experimented with recruiting university graduates as permanent staff, it seems to have been Nairne who made sure that this initiative did not get very far, dismayed as he was by careless handwriting not up to the Bank’s standard.22 Put another way, it did not yet pay – and would not for a long time whether in the Bank or in the wider City – to wear one’s intelligence on one’s sleeve.

  The first full year of peace after the Boer War, and of telephones installed in the Bank, featured two notable episodes. May 1903 saw a £30 million loan for the Transvaal, marked by chaotic scenes outside the Bank – queues four deep from the Threadneedle Street doorway to the Bartholomew Lane entrance – on the day it issued the prospectus. The loan was massively oversubscribed, and Lee Goodier, working in the Chief Cashier’s Office, would recall that ‘my working hours during the ten days the work on this lasted totalled more than 158’:

  We began on Thursday, the 7th May, by working from 9 a.m. until midnight, and finished with a day of fourteen hours on Monday, the 18th. Our longest day was on the 12th, a Tuesday when, starting at 9 a.m. we worked until 5.50 on the following morning, 20 hours 50 minutes, beginning the next day’s work at 9 a.m. It was decided to finish early on that Wednesday only because of the physical exhaustion of the Staff. We were reduced to kicking each other under the desks to keep each other awake and in the circumstances the risk of serious errors was considered too great.

  Some six months later, on 24 November, shots were fired at the future author of The Wind in the Willows. Born in 1859, the son of a lawyer, Kenneth Grahame had joined the Bank in 1878, rising to become secretary in 1898, successor but one to Chubb, and remembered by de Fraine as ‘popular but distant’. The 1903 drama was d
escribed next day by the Financial Times:

  A respectably dressed man of medium height and ordinary appearance, apparently some thirty years of age, who subsequently gave the name of George Frederick Robinson, entered the Bank and made his way to the Discount Office, where he asked to see Sir Augustus Prevost, the ex-Governor. The man was shown into the Library, where the Secretary, Mr Grahame, inquired as to his business.

  Robinson tendered what appeared to be a scroll containing a petition, and asked Mr Grahame to read it, but the latter replied that he had not time. Robinson remarked, ‘Oh, then, you will not read my petition!’, pulled out a revolver and fired three shots at Mr Grahame, dancing about and attitudinising wildly as he did so. Luckily the Secretary was near the door, and was able to escape, locking the door behind him, leaving his assailant a prisoner.

  The police were summoned, and there was something of a dilemma as to the best method of securing so dangerous an intruder, but the ingenious suggestion of one of the clerks to turn the fire hose on him was promptly adopted. On the door being cautiously opened to admit the hose, Robinson fired a fourth shot, again, fortunately, without hitting anybody. A well-directed stream of water, under high pressure, instantly knocked him over, and he was quickly secured and handcuffed, though in the struggle damage was done to the room. The revolver was thrown through a bookcase, and a chair was also smashed in the mêlée …

  ‘Mr Grahame, we are glad to say, suffered no injury at all,’ concluded the report. ‘He is absolutely at a loss to account for the attack, and it is believed that Robinson was in a demented state and quite unaccountable for his actions, though there is some suggestion that he expressed Anarchist ideas.’

  Less than five years later, in June 1908, Grahame would abruptly leave the Bank. His letter of resignation referred to ‘constant strain’ and a ‘deterioration of brain and nerve’; but the Bank’s medical officer could find on examination little supporting evidence, and he was accorded a pension of only £400 a year. Why did he decide to go? There is some evidence that he had had a run-in with one of the directors, culminating in the secretary saying to him, ‘You’re no gentleman’; if so, the director may well have been Walter Cunliffe, a notorious bully. In any case, four months after he left Threadneedle Street, the adventures of Ratty et al were revealed to the world, and Grahame joined the literary immortals.23