Bank of England. armies, the Excise Laws, the funding system, and other grievous calamities, wanted money to carry on a vigorous war against the French. An act passed, inviting people to make voluntary advances to the amount of £1,500,000; and, for securing the payment of the interest, taxes were laid upon beer, ale, and other liquors. Upon condition of £1,200,000 of this sum being advanced within a certain time, the subscribers were to be incorporated; and this being done, the incorporation took place, and the subscribers were formed into a trading company, called "The Governor and Company of the Bank of England." The charter of corporation was executed July 27, 1694; and directs, among other things, that a governor or deputy-governor, and twenty-four directors, shall be chosen for conducting the establishment. For the £1,200,000 lent to government, they were to receive yearly £100,000; £96,000, the interest at eight per cent. and £4000 for the charges of management. Their loan to government might be redeemed on a year's notice, and in that case the charter and company were to expire. Such was the origin of the Bank, on which one or two remarks may be made. It is clear from the act of incorporation, the 5th and 6th of William and Mary, that nothing more than the establishment of a company of traders or pawnbrokers was intended; and that it never was surmised that they would ever form a part of, or have any dominant influence in the Government. The act specifies very particularly the sort of trade they were to carry on: they were not to trade in goods or merchandise, but to employ their capital in discounting bills of exchange, and the buying and selling of gold and silver bullion; with a permission, however, to sell such goods as were mortgaged or pawned to them, and not redeemed within three months after the expiration of the time of redemption. But still further to confine these traders and pawnbrokers to their province, and prevent any further connexion with the Executive, of which the parliament of that day appears to have been somewhat apprehensive, the same law of William and Mary imposes a penalty upon the Directors if they purchase, on account of the Corporation, any crown lands, or if they advance to his Majesty any sum of money, by way of loan or anticipation on any branch of the public revenue, other than on such funds only on which a credit is or shall be granted by parliament. Contrary to this clause, and notwithstanding the penalty, the Directors continued to make advances from time to time, on treasury bills, to the year 1793. In that year, Mr. Bosanquet was Governor; he had some doubt of the legality of these Bank of England. advances; and applied for a bill of indemnity: the Bank having then become an essential part of the Government, this was easily obtained; and an act was passed to protect the Governor and Company from any penalties they had incurred, or might incur in future, on account of any advances to Government. Another peculiar circumstance connected with the early history of the Bank, is in the mode of issuing its notes. For above 60 years no notes were issued for a less sum than £20; and these were made payable, not to any particular person, but to the bearer, on demand; and for the amount of which notes, in the legal coin of the realm, the Bank was liable to be sued and arrested. As the Bank enlarged its advances to Government, it became necessary to lower the denomination of its notes. A different reason has been assigned, but this no doubt is the true one. It is clear indeed, that the real capital of the Bank being a limited sum, it could only have money to lend to Government by increasing its fictitious capital; in other words, by extending its issues of paper; which again could only be done by lowering the denomination of its notes. While £20 notes alone were issued, their circulation, from their amount, being limited to the commercial and trading classes, no great quantity of paper could possibly be emitted; but when notes of the value of 15, 10, 5, and 1 pound were issued, their circulation extending through all classes of the community, the issue of Bank paper would proportionately increase. Government, therefore, in order to obtain advances from the Bank, readily permitted the issuing of notes of smaller value. In the war of 1755, the Bank began to put out notes of the value of £15; and before the conclusion of that war, notes of the value of £10. At the commencement of the Anti-Jacobin war, in 1793, they were still further indulged, and allowed to issue £5 notes; and, lastly, in the year 1797, came the £1 and £2 notes.* Rents, wages, salaries, taxes, and every thing else, could now be paid in Bank paper; and the Restriction Act having protected the Bank from the necessity of taking up their own notes, they were issued in prodigious quantities; and in exactly the same proportion the Bank enlarged its advances to Government. The following statement, extracted from the Report of the Bank Committee, of the amount of Bank paper in circulation in different years; and of the amount of the sums advanced to Government on exchequer bills, and other government securities, will show the connexion which has subsisted between the issue of paper and advances to Government : *The act, allowing the Bank to issue notes under £5, passed on the 3d of March, only five days after the Stoppage. Having shown the causes which led to the issue of small notes, and the connexion betwixt the issue of Bank paper and advances to government, we shall now mention some other points connected with the history of this Company. Without the assistance of the Bank the immense fabric of debt and taxation could not have been reared. Of this Government appears to have been soon sensible, from the numerous laws enacted for its encouragement and protection. To prevent competition, by the statute 6th of Queen Anne, it is enacted, that no other banking company of more than six persons, should issue notes payable in less than six months. Innumerable acts have passed, imposing the penalty of death for forging Bank notes; others, the punishment of transportation, on persons having them in their possession. The English code has been made the bloodiest in the world, in order to uphold the Bank, and its laws more savage than those of Draco. But of these, and also the Restriction Act, we will speak shortly; let us now only attend to those laws for upholding the credit of its paper. After the Restriction Act, the Bank ceased to be an independent Con * Perhaps it is unnecessary to inform any of our readers, that the term "advances" signifies no more than the amount of debt due from the Government to the Bank, arising from the money advanced by the latter, on the credit of the annual duties, exchequer bills, and other government paper. We may also remark here, that the increase in the Bank issues at different periods exactly corresponds with the times at which they lowered the denomination of their notes. From a statement, in the Supplement to the Encyclopædia Britannica, it appears, that the Bank paper in circulation in the year 1718, twenty-four years after the establishment of the Bank, amounted only to £1,829,930. In the year 1754, it amounted to £3,836,890; in six years after, namely, in 1761, when the Bank put out £ 15 and £10 notes, it suddenly increased to £5,863,290; and lastly, after the £5 notes were issued, it amounted, in 1794, to nore than £10,000,000. Bank of England. pany; it was a mere Government Office, of which the Governor and Directors had the management; and which issued a forced government paper. Paper issued under such circumstances would necessarily depreciate; and this was an evil which it was of importance to Government, as far as possible, to prevent. Having by force kept bank-notes in circulation, it seemed a slight extension of the same desperate principle to attempt also by force to maintain their credit. Various laws were passed for this purpose. After the Restriction Act, a law passed to protect debtors from arrest, who tendered payment in notes, though they still continued liable to a common action for debt, to compel payment in guineas. This was the first attempt of the Boroughmongers to render Bank paper a legal tender, and old rags equivalent to gold. In 1810, when paper had depreciated 30 per cent, and guineas sold for from 25s. to 28s. in bank notes, a law passed to punish persons pursuing this traffic, and imposing penalties on those who sold them for their real value in paper. Tenants, who offered notes for rent, were protected from distress, though liable to a common action of debt or ejectment. At length, in 1811, Lord King having given notice to his tenants to pay their rents in guineas, the legal coin of the realm, an act passed to protect persons, tendering payment in notes, from all further proceedings. This was the finish. Bank paper was now a legal tender to all intents and purposes, and by the fiat of the Oligarchy linen rags were metamorphosed into gold. Let us now revert to the capital part of Bank legislation-the Restriction Act. It is proper the Black Book should contain some record of that black and unprincipled transaction. It was truly a swindle on a "broad scale,” a national swindle. We shall merely, however, give the outline, and not enter into any minute details of this memorable fraud. By turning to page 247, and observing the amount of the Bank advances to government in the year 1796, and reflecting on the various laws enacted in favour of the Company, it will appear that an intimate connexion and mutual dependence had been created betwixt the Bank and Government, before the Restriction Act, in 1797; that law, however, completely incorporated the Bank with Church and State. The causes which produced the Stoppage were briefly these: From the commencement of the year 1797, great apprehensions were entertained of a French invasion: the people were alarmed for the stability of the government, consequently for the stability of the Bank, which depended upon the government: a run upon the Bank ensued: the credit of the establishment was endangered; and suspicion, which PAINE justly Bauk of England. denominates credit asleep, was now awakened. The run on the Bank continued hourly to increase, till Saturday, the 25th of February, 1797. This was the last day the Bank was compelled to pay their notes on demand, agreeably to the tenor of these notes, and the conditions on which they had been issued. The alarm not being likely to subside, and the run continuing to increase till the latest hour the Bank was open, on the next day, Sunday, an order was issued from the Privy Council, requiring the Bank to forbear issuing any more cash, till the sense of parliament could be taken on the subject. This order, as might be expected, was instantly obeyed. A few days more would have drawn out of the Bank coffers the last farthing of cash and bullion. The company wished anxiously to conceal the amount of specie in their possession at the time of the stoppage; but by an ingenious calculation of Mr, ALLARDYCE, this point was subsequently ascertained almost to a certainty. It appears, that, on the 25th of February, the last day of payment, the notes in circulation amounted to £8,640,250, and the total amount of cash and bullion in the Bank, to only one million two hundred and seventy-two thousand pounds. The Bank, like true traders, has always manifested great anxiety about the credit of the house, and endeavoured to make it appear, that the stoppage did not originate in the necessities of the Bank, but the necessities of the government. In the Resolutions of a Court of Directors on the 25th March, 1819, affixed to the second Report of the Bank Committee, it is said, "That the Restriction on Cash Payments was altogether a measure of STATE NECESSITY." Whether it originated in the necessities of the Bank, or the Boroughmongers, or both-the latter appears most probable-it is not very material to inquire: but it appears, that on the last day of payment the Bank had little more than a million of cash and bullion to pay more than eight millions of their notes; and how, under such circumstances, the Bank could have met their creditors, or what could have protected them from arrest for debt, but the interference of government, it is not easy to conceive. But the fact is, the stoppage was concerted betwixt Mr. Pitt and the Directors. Sometime before the Order in Council was issued, Mr. Bosanquet and other Directors had had repeated interviews with that minister to consult how the run could be stayed, and the Company saved from impending bankruptcy. The last interview was on the 22d of February; the Directors were then in a terrible fright; they told the minister they |