Part II of our series on the origins of the Bank of England – its from the book London – Volume 3 published in 1824 by Sholto and Reuben Percy – Brothers of the Benedictine Monastery.
The Bank of England – Part II
The relief of Parliament became necessary, and a new act was passed, authorizing the bank to increase its capital to £2,201,171.10s and other privileges being granted to the company, its credit was completely restored; so much so that the bank stock, which had been given in exchange for exchequer tallies, then at a discount of from forty to fifty per cent rose twelve per cent, above par. The exchequer tallies were afterwards paid off by the bank, at par, by which means many persons, who had bought them when at a great discount, amassed large fortunes: one gentleman, Sir Gilbert Heathcote, is said to have gained £60,000. by the fluctuation.
The bank had hitherto been a corporation, assisting, but not connected with the State further than in the relation of a lender to a borrower, but in the year , it became the direct and immediate agent of government by undertaking to issue exchequer bills to the amount of a million and a half, which paid as in later times an interest of two-pence per diem for every £100.
The Bank of England now became prosperous; and the act passed in 1708, for preventing more than six persons engaging in a firm, though now a law of questionable policy, did much service to the company, so that in the following year, when the bank was empowered to double its capital, the sum of £2,201,171,10s was subscribed in the course of five hours, at an advance of fifteen per cent. This advance in the price of bank stock was however nothing to what took place when the South Sea bubble had frenzied the British capitalists, and bank stock was actually sold at 260 per cent.
Successive acts of Parliament were passed to enable the bank to increase its capital, and on all occasions when the government required aid, the bank was willing to accommodate it on terms of reciprocal advantage. The affairs of the company were highly prosperous, and its capital stock more than ten millions when the rebellion of 1745 threatened to paralyse its operations. In the first moment of alarm, persons became anxious to obtain cash for their notes, and crowded to the bank for that purpose. Unfortunately the bank was not at that time very well supplied with the precious metals, and certainly not, in any thing like the quantity necessary to exchange the notes issued: some expedient was necessary, and in order to gain time, the directors paid the notes in silver, and wherever they could in sixpences, which rendered the process slow and tedious. But although the demands on the bank were numerous they were not very heavy, and the merchants and bankers in London felt so assured of its stability, that eleven hundred of the most respectable signed a declaration, expressive of their confidence in the safety of the bank, and of their determination to support its credit by receiving the notes in all payments, and circulating them on all occasions.
Excerpt from London Volume 3 1824 by Sholto and Reuben Percy – Brothers of the Benedictine Monastery
Further reading and external links