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CHAPTER III.

THE INCORPORATION OF THE BANK OF ENGLAND SETTLES THE QUESTION.

In 1677 and 1678 Mark Lewis published four pamphlets on the subject of banking. In “Proposals to the King and Parliament etc”¹ he eulogized the Bank of Venice, where bank credits were, he said, at 120. He recommended that banks should be erected in every country town and would have these banks appointed to receive the money which was about to be collected by taxation. To every collector of taxes who should bring in money to the bank, he would have bills of credit issued, to the effect that the country was indebted to him the amount of money which he had brought in. “Suppose,” he said, “the quota of the Parish, collected of the several Inhabitants to be Fifty Pounds; the Collector receives from the Bankers a Bill of Fifty Pounds, or five bills of ten pounds a bill; or ten bills of five pounds a bill, as he judges convenient and the Collector distributes these to the neighborhood according to their proportion, as they have paid their rate.” Parliament was to give these bills the benefit of its endorsement, pledging the public faith that they should be redeemed if desired, and thus cause them to pass current as money.

In “Proposals to increase Trade &c.”² he puts forth

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a proposition that the “Chamber of London” should set up a loan office on commodities, the idea being that certificates thus issued would pass current, the bills to be exchanged by the office if desired into money at 4 per cent.

In a “Short Model of a Bank”,¹ Lewis lays down a plan for a bank, or a set of banks, located in precincts, at which it should be compulsory to make all payments. To stimulate the deposit of funds in these banks, such deposits were to be safe from confiscation or forfeiture. They were to be represented by bills of credit and to increase public confidence in these bills, the credit of the precinct was to be back of them.

The same plan. was promulgated by him in 1678, in “Proposals to the King and Parliament, or a large Model of a Bank.”²

We have seen that Robinson and Cradocke both worked with the Bank of Amsterdam as their model. Lewis had learned his lesson from a study of the Bank of Venice. Encyclopedic accounts of both of these banks are common. They are, however, as a rule, too brief to serve the purpose of an inquirer who is seeking for information upon technical points.

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Professor Charles F. Dunbar has published accounts of both of these banks, which are probably, in each instance, the most complete presentation of the working of the respective banks which have been furnished to the English reading public.¹

The twenty-sixth query in Sir William Petty’s Quantulumcunque² is, “What Remedy is there if we have too little money?”

The answer is “We must erect a Bank which well computed, doth almost double the effect of our coin money: And we have in England Materials for a Bank, which shall furnish stock enough to drive the Trade of the whole commercial world.”

The language used by Sir William Petty in this connection is easily to be traced to one of his essays written by him under the general title “Political Arithmetick”, which for political reasons were withheld from publication over his name during his life, but which were grouped together by his son and published, after his death, under the title “Several Essays in Political Arithmetick.” In this essay, while speaking apparently of the Hollanders, he uses the following language:³

“Their third Policy is their Bank, the use whereof is to encrease Money, or rather to make a small Summ

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equivalent in Trade to a greater, for the effecting whereof these things are to be considered. 1. How much Money will drive the Trade of the Nation. 2. How much current Money there is actually in the Nation. 3. How much Money will serve to make all payments of under Fifty Pounds or any more convenient Summ throughout the Year.” These particulars being known “then it may also be known, how much of the ready Money above-mentioned may safely and profitably be lodged in the Bank, and to how much ready current Money the said deposited Money is equivalent.” From the example which he gives it may be inferred that if you deduct the amount required in section three from that found in section two and deposit the balance in Bank, you will have the answer to section one. The contemplated result, however, depends upon a fourth consideration, viz.: that “the keepers of the Bank are unquestionable security” for the deposits. In the example given in the Essay forty thousand pounds deposited in Bank are made the equivalent of eighty thousand pounds, to meet the requirements of trade. This doubling the function of the forty thousand pounds seemed to require some explanation. Sir William therefore adds: “Note that the Bank-keepers must be responsible for double the summ entrusted with them, and must have Power to levy upon the general, what they happen to loose upon particular Men.” This re[s]ponsibility he adds would permit the Bank-keepers to use the deposits.

A pamphlet was issued in London in 1682 the purpose of which was to demonstrate that the credit of the City of London could be utilized for a bank of credit.¹

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The matter of the establishment of a bank in London was apparently examined by the city government of London in 1682, and the report of a committee setting forth the advantage to be derived therefrom was published that year.¹

In 1683, an anonymous pamphlet was issued in which “the Bank of Credit so much and so long talked of” is discussed in the form of a dialogue.² The proposed bank was apparently to be incorporated in connection with the Royal Fishery Company. The alleged purpose of this juncture of forces was that the bank would thereby become entitled to all the privileges of the Fishery Company. The names of the persons connected with the proposed enterprise are stated to have been: “Sir Edward Abney, Sir John Lawrence, Sir Benjamin Newland, Sir Henry Johnson, George Pitt, Esq. and several other considerable for reputation and estates.” The bank which they proposed to establish was, in the language of the pamphlet, a more general bank than that which Dr. Chamberlayne and Robert Murray³ had endeavored to establish. It was urged that there could be no more solid foundation for

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credit than goods and lands and that if it should be issued upon such a basis, it would be essentially secure, since it was not proposed that the full value of the property pledged should be issued to the borrower. To the objection that such bills could never be current unless convertible into gold and silver, it was replied that the governors of the bank would agree to receive the bills at all times in all payments to be made to them. They were unwilling to meddle with money because credit in trade would circulate more than money.

A sort of a prospectus of this bank was issued in 1683, in the form of a duodecimo pamphlet of fourteen pages in length.¹ It was stated therein that divers persons of reputation and estate had become incorporated with the Company of the Royal Fisheries of England and were by the said company under their common seal constituted to be and be called by the name of “The Governours or Masters of the Bank of Credit, in the Company of the Royal Fisheries of England”. It was also alleged that the governours had resolved to enter into the business and by means of a series of questions and answers the character of the proposed scheme was revealed to the reader.

To the first question, “What is the Bank of Credit?” the following answer is given:—

“It is a fund of goods, and Assurance of Lands, Tenements and Hereditaments deposited for raising of Credit thereupon, under the greatest security, as to the Constitution, and Persons imployed in the management of it, that can be devised; upon which Fund the Depositor is furnished with Bank Bills of Credit (hereafter

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explained) for supply of his Occasions, which will be as useful as Money to him.”

The sixth question was, “What is it you call Bank-Bills of Credit?” The answer to this question stated that they bound the said bank and company for the value received and remaining in the said bank, to accept the same in any payment in or to the said bank for the sum in such bills mentioned.

From this it would seem that the bank did not hold itself forth as prepared to redeem these bills at any time, but simply agreed to accept them in payments of amounts due the bank. The method of redemption was covered by the seventh question, “I have occasion for Money in specie—How shall I be supplyed?” A person in such straits was informed that if he should be desirous to change his bills into money, he might be directed at the office how to be supplied.

An abstract of the agreement between the Company of the Royal Fishery of England of the one part and Sir Edward Abney, Knight, etc., of the other part, is given in Lord Somers’s tracts.¹ It appears that Sir Edward submitted certain proposals on the twelfth of March. These were amended and altered in some respects after discussion and as amended were ratified and confirmed April 2, 1683. Under this agreement the bank of credit was to receive all the powers, privileges and securities which it was capable of receiving by reason of the incorporation of the Company of the Royal Fishery. Action was suspended by reason of the death of Charles the Second.

Hutchinson² in his History of Massachusetts refers

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to a project for a private bank published in London in 1684. In 1714, a pamphlet containing “a model for erecting a Bank of Credit, etc.” was printed in Boston and the statement was made upon the title page that it was a re-print of a pamphlet originally printed in London in 1688¹. There are good reasons for thinking that copies of this pamphlet were in circulation in the colony prior to 1688. Hutchinson’s date, 1684, is therefore, in all probability, the date of its original publication. It contains a detailed plan for the establishment of a land bank, but its consideration may more appropriately be had in connection with the subject of banking in the colony, since it was evidently prepared for use there and not with the intention of influencing opinion in England.

A pamphlet entitled, “England’s Wants, etc.,” is printed in Lord Somers’s collection of tracts which in the index is attributed to “Dr. Chamberlyne.”² It was issued in 1685.

The first method proposed by the author to supply the wants of the nation was to raise a public stock which was to be put in the hands of a commission and to be expended in various ways as thereinafter suggested. A part of this sum was to be applied “for erecting in London, and other great cities, Banks or Mounts of Piety, (as have long been used in Italy and

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in Flanders and other Countries) whereby the intolerable Oppression of public and private Brokers and Pawn-Takers, that grind the Faces of the Poor, scruing out of them yearly 40 or 50 per cent. may be utterly abolished.”

In 1691-92 a proposal was submitted by William Paterson and considered by a committee of the House of Commons. Paterson’s proposition was, in the language of the House Journal,¹ as follows:

“That on settling a yearly rent of sixty-five thousand pounds should be advanced one million, and sixty thousand pounds thereof to be for interest, and five thousand pounds for management, so as the subscribers may be the Trustees; and that their bills of property should be cut rent. In which case they offer to advance two hundred thousand pounds, to be ready as a bank to exchange such current bills as should be brought to be exchanged, the better to give credit thereunto, and make the said bills better to circulate; and so as there be allowed five pounds per cent. for the said two hundred thousand pounds for the first year only, and a Tally to the said Trustees to pay themselves for the same.”

“And that the Committee were of opinion, not to receive any proposal, which required the making the Bills of property current, so as to force them on payment on any without their consent; but acquainted Mr. Paterson, who had made this proposal, that they would receive any proposal for advancing One million upon a perpetual fund of Interest, to be in the nature of a purchase; where they might assign their interest, as they please, to any who consented thereunto.”

Paterson was the originator of the scheme which resulted in the establishment of the Bank of England, and we have here one of the preliminary steps which led to that result. Apparently, he proposed to establish a bank with a capital of £200,000. five per cent. interest on which was to be paid by the government for one year only. This bank was to furnish the government with Bills amounting to one million on which the government was to pay six per cent. interest and the bank was to make provision for their redemption.

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The interest doubtless, was to go to the holder of the bill, as was the case with the notes of the first issue of the Bank of England. As a further compensation to the bank five thousand pounds per annum was to be allowed to cover cost of management. To insure the circulation of the bills they were to be made “current”, the meaning of which is sufficiently indicated in the report of the committee. Their circulation was to be made compulsory.

We have already seen that in 1683, steps were taken towards the organization of a bank of credit in connection with the Company of the Royal Fishery. From a petition presented to the House of Commons in 1693 we learn that in 1691, “Doctor Hugh Chamberlaine” and others had submitted a proposition for “the Constituting by Parliament, a Bank of Credit, upon Land, for raising a Stock to establish a general Fishery in this Nation”. This petition it was stated then met with the approval of the committee of the house to which it was referred.¹

Chamberlaine’s proposition in 1693 was as follows:

“That in consideration of the Free holders bringing their Lands into this Bank, for a fund of current credit, to be established by Act of Parliament; It is now proposed that for every 150 l. per Annum, secured for 150 years, for but one hundred yearly payments of 100 l. per Annum, free from all manner of Taxes and deductions whatsoever, every such Freeholder shall receive 4000 l. in said current credit; and shall have 2000 l. more put into the said Fishery Stock for his proper Benefit; And there may be further 2000 l. reserved, at the Parliament’s disposal, towards the carrying on the present war.”

“That the Rent for the 100 years must only be paid in the said current credit; and is not to commence till the first 4000 l. is paid to the Freeholder, who is never to quit the possession of his said estate unless the yearly Rent happens to be in Arrear; and then only till it is paid; so that after a Hundred yearly Payments, as above said, the Estate will he forever discharged from this Incumbrance.”

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This apparently means that for 100 payments of 100 l. each, the freeholder was to receive the same returns as those offered in 1691 for 150 payments of 150 l. each. It will be observed that the credit was spoken of as “current,” the meaning of which has already been inferred from the language used by the committee in their report on Paterson’s proposition. “Chamberlaine’s” proposition was certainly tempting, if the credit could really be made current, even without the bait of the stock in the fishery.

The establishment of the Bank of England in 1694 furnishes a natural stopping place for an examination of the opinions of English financiers concerning banks of issue. The question assumes at this point an experimental stage and the career of the bank from this time forward furnished an object lesson to the colonists. They could take heed by the mistakes which were made; they could note the dangers which threatened to check the progress of the bank; they could observe the changes which it was found necessary to make; and they could profit by the successful management which avoided these dangers, overcame all obstructions and so adapted the bank to the necessities of the times that its life was preserved. The record of so much of this as intervened between 1694 and 1740 was open to the inspection and study of those who advocated the Land Bank in Massachusetts at this latter date, and they are to be held to accountability for running after will-of-the-wisps instead of following an example which promised success.

It must be borne in mind, however, that the success of the Bank of England was not immediate and that English opinion did not at once consolidate for its support. On the contrary, the organization of this institution

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seemed to stimulate those who sought to establish credits on lands. The last few years of the century were prolific with pamphlet literature upon the subject. Organizations for the purpose of issuing such credits were carried through to completion and the approval of parliament was secured in the form of legislative enactments actually incorporating a National Land Bank. If the citizens of the province of the Massachusetts Bay studied English opinion with a view of guiding their own actions by the course taken by their friends and fellow countrymen in London, it would seem as if they turned rather to Dr. Chamberlayne than to William Paterson for instruction. We cannot, therefore, close this branch of the subject without a brief survey of the efforts of the advocates of land-bank schemes at this juncture.

Dr. Hugh Chamberlayne, Robert Murray and John Brisco each contributed schemes for the foundation of Land Banks about this time. Chamberlayne’s contributions were numerous. We have already seen that he had been before a committee of the House of Commons in 1691 and again in 1693. His last effort was followed up by a petition to the House of Commons, containing a statement of his views upon the subject, printed probably about 1694.¹

Murray, who has already appeared as the author of a pamphlet in 1676, and who was referred to in 1683 in connection with Dr. Chamberlayne as having attempted to establish a bank, furnished a proposal for a national

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bank consisting of land or any other valuable securities, depositions, etc., while Brisco published proposals for supplying their Majesties with money on easy terms by a National Land Bank.¹

There was published in 1695, a tract which set forth in detail what was termed “the settlement of the Land Bank, established Anno Dom. 1695.”² It contained in substance the articles of the proposed or actual bank, for it is spoken of throughout the pamphlet as if the organization had actually been consummated.

The first article contains the names of the “Trustees and Managers of the Land Bank hereby established” who are said to have been “elected by the stock of Monies hereinafter mentioned.” The name of “The right Honourable Thomas Lord Jermyn, Baron of Bury”, leads the list. Then follow those of Sir Thomas Mompesson, of Bathampton, in the County of Wilts; Sir Charles Hedges, Kt. Doctor of Laws, Judge of the

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High Court of Admiralty; Sir Leonard Robinson, Kt. Chamberlain of the City of London, which are in turn succeeded by the names of seventeen others, gentlemen, lawyers and merchants.

The assertion is made that “bills or notes of credit given out upon the Fund or Security of perpetual Interest (redeemable) are accepted and taken as ready money, and are preferred to Money in Specie.”

They declare that on or before the thirtieth of August, 1695, they will provide and set up in or near the city of London an office to be called “The Office of the Land Bank, established Anno Dom. 1695”. The Trustees assumed the name “The Trustees and Managers of the Land Bank, established Anno Dom. 1695”. The articles of settlement were to be enrolled in the high court of chancery.

Estates when valued were to be entered in two books, one of which was to be termed the “value of register” and in this, three-quarters of the appraised value was to be entered. The other was to be termed “equity of redemption” and in that, one-quarter of the appraised value was to be entered. These values could be augmented or reduced and difficult and intricate methods were prescribed for these processes. Attempts also were made to cover the possible case of the redemption of an estate leaving the specific bills issued against the estate outstanding.

The bill which it was proposed to issue read as follows:—

“This Bill pursuant to the Settlement of the Land Bank, enrolled in Chancery, Anno Dom. 1695 doth charge One hundred Pounds value of the Register, secured upon the Lands, Rents, and Estates, entered in Libro A No. 1 and the Stock of Monies and Funds of Insurance annexed to the said Bank, with the Payment of One hundred Pounds, and Interest, etc. (or without Interest) to A. B., etc. By order of the Trustees and Managers.”

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A stock of £100.000 was said to have been subscribed and agreed to be raised and paid “for the circulating and maintaining the credit of the said Bank.” Twenty per cent. of this was to be paid October 19th, and a transferable credit was to be opened for this payment.

In the Fourth Report of the Royal Commission on Historical Manuscripts,¹ the following entry is to be found:

“Temp. Charles II. A paper endorsed ‘list of the names of the persons concerned in the late Bancke being Governors thereof, beginning with Lord Jermyn’.”

This document is in the Archives of Westminster Abbey. It has no date and its assignment to the time of Charles the Second is the work of the person who prepared the Calendar. The endorsement reads “persons concerned in the land Bancke” instead of “persons concerned in the late Bancke.” It loses much of its interest to identify it with the scheme of which we have just had a resumé, but there can be no doubt that it is a rough memorandum connected with the same enterprise.

In “the Settlement” there are twenty one trustees as managers and the name of Lord Jermyn heads the list. In this paper the names of twenty-one governors are given and the first is “Lord Jermyn, in Deane Streete Soehoe.” Of the remaining twenty, sixteen can be identified as mentioned in both documents. The paper, therefore, is a memorandum of the contemplated organization of this bank, made at an earlier stage of proceedings, in which the names of four persons are given who subsequently abandoned the scheme.²

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In 1696, an act was passed by Parliament incorporating a National Land Bank.¹ This incorporation was appended to an act continuing certain duties for carrying on the war in France. Owing to failure in obtaining the necessary subscriptions the enterprise failed.

At this point we may well leave the consideration of English opinion upon the subject of banking and recur to what had taken place meantime in New England and review the actual state of knowledge upon the subject then existing on this side of the Atlantic.

A list of names of the psons concerned in the land Bancke being Governors thereof.

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