The Period of Monopoly, 1708 to 1826. T he Bank of England, which is managed by a Governor, Sub-Governor, and twenty-four Directors, was incorporated in 1694 at the suggestion of a Scotsman, William Paterson, a man of roving disposition, whose Darien expedition proved a miserable fiasco, cost Scotland some £400,000, and shattered the health of Paterson, who died in London at the beginning of 1719, if not in poverty at least stripped of nearly all his fortune. Schemes relating to the Isthmus of D

Before and After the Act of 1844. W e have seen that part of the Bank of England's monopoly was annulled in 1826, and that in 1833 a clause was inserted in the charter to the effect that joint stock banks of unlimited liability could open in London, provided they did not issue notes; and though the state of the law still allowed the Bank to harass and annoy the new companies, its power was thoroughly broken, and its monopoly of joint stock banking gone—fortunately for ever. The country enjoyed a

The Bank's Weekly Return. F or the nonce we have finished with history, and will turn our attention to the Bank of England as it now stands in the centre of the Money Market. The joint stock banks publish their balance sheets either annually or half-yearly; but the Bank of England, in compliance with the Act, compiles a weekly statement to the close of business each Wednesday. This Return or Balance Sheet is submitted to the directors on the following day, and, when passed by them, is exhibited

The Issue and Banking Departments Combined. I n the preceding chapter the Issue and Banking Departments of the Bank of England have been discussed separately. Strictly speaking they can, of course, only be so treated, as each division stands alone; yet the notes in the Banking Department undoubtedly form a connecting link between the two divisions, seeing that they make the one department by far the largest single creditor of the other. Therefore it is intended in this chapter to discuss the ret

The Store in the Issue Department. W e next have to consider the amount of gold coin and bullion in the Issue Department—to wit, £33,617,330, and we must remember that this accumulation is the national store, that the cash reserves of all the banks in England, Scotland, and Ireland are dependent thereupon, and that, consequently, the solvency of the nation is decided thereby. The indebtedness of the English, Scotch, and Irish Banks to the public at December, 1901, as shown by their balance sheet

Weekly Differences in the Return. I t were better, before proceeding further, to give a copy of the Bank Return as it appears in the daily papers each Friday, when comparisons are made with the figures of the preceding week, and the various differences carried into distinctive columns. That for the week ended Wednesday, 1st October, 1902, has been selected, in order that the figures may be the same throughout this volume. The statement is given below: Issue Department. Banking Department. Why, i

The Bank of England as Agent of the Mint. I n theory any person can take gold bullion to the Mint, which, under the Coinage Act, is compelled to give him in exchange sovereigns containing an equal quantity of gold to that left; but nobody ever does, and practically the Bank of England acts as the Mint's agent. By the Bank Act he receives £3 17s. 9d. per ounce, instead of £3 17s. 10-1/2d., the full Mint price, the deduction of 1-1/2d. being about equal to the loss of interest incurred, for the Mi

The Principal Currency Drains. T he principal currency drains occur during the holiday season and at harvest time, more especially during the latter period, when large amounts of cash are sent into the country to satisfy the requirements of labour. Early in November a demand for gold arises in Scotland, owing to the fact that rents there fall due at Martinmas (11th November); and as the Scotch banks, by the Act of 1845, are compelled to hold gold against notes circulated in excess of their autho

Banks and the Creation of Credit. W e have seen how the Bank of England came to occupy so commanding a position in the money market, and we now have to consider why its rate of discount is still a fairly reliable index to the value of loanable capital. Its advent was extremely distasteful to the private bankers, who then reigned supreme in London, and who were not slow to recognise in the new corporation a formidable competitor, for a company which financed the Government was obviously to be fea

The Battle of the Banks. B ut little has hitherto been said concerning the relations of the Bank of England with its rivals in the money market, and in order to trace the movement from its beginning we must return to 1826, in which year joint stock banks could be established in England at a greater distance than sixty-five miles from London. The Bank stoutly resisted this innovation, but the Government, in consequence of the constant failures of the country private bankers, passed the Act of 182

The London Money Market. I t is usual, when describing the Money Market, to assert that it consists of the numerous banks in the City of London; but it seems to me that, in reality, the money market extends throughout the United Kingdom, for wherever there is a bank or a branch bank there is a market for money. Moreover, the demand arising for loanable capital in the provinces largely influences the rates of interest ruling from time to time in London, because, if demand is brisk in the country,

The Bank Rate and Stock Exchange Securities. A t the present time large advances are made by the banking companies to members of the Stock Exchange, and it is supposed that at the beginning of 1894, when the Bank rate fell to two per cent., and an investment of surplus funds in the London short loan market brought in very poor returns, the banks, tempted by higher rates, largely increased their loans to the Stock Exchange. In 1890 rumour had it that a few of the banks made rather heavy losses in

The Banks as Stockbrokers. W ere business on the Stock Exchange solely of an investment nature, it has been suggested that that institution could dispense with over fifty per cent. of its members, for, during recent years, a large amount of the investment business of the country has drifted to the banks, which place their orders in the hands of a few brokers, with whom they divide the usual one-eighth per cent. commission. The large banking companies are outside brokers, and so eager are some of

The Short Loan Fund and the Price of Securities. A certain proportion of the capital which flows into the London short loan fund is invested in securities by the bill brokers and the discount houses, and, as the said securities are deposited with the bankers from time to time against temporary advances, it follows that their choice is largely restricted to those of and guaranteed by the British Government, because the margin exacted on the so-called gilt-edged varieties is considerably less than

Panic Years. W hen in 1667 a Dutch fleet sailed up the Medway, demolished a fort at Sheerness, and, forcing a way into Chatham Docks, burnt all the ships assembled therein, to the consternation of the inhabitants of London, there was a run upon the banks; but a Stuart regarded both events with equanimity, for "Old Rowley" had a mind above trifles of this description, possibly because he had learnt many bitter truths in a world seldom understood by Kings. Cynics are not born—they are made; and Ch

The Banks and the Public. W e have seen that the history of the Bank of England may be divided into two periods. From 1708 to 1826 the Bank enjoyed the monopoly of joint stock banking in England. After 1826 it had to adapt itself to a constantly changing environment. England, in fact, outgrew the Bank, just as the financial world has outgrown London. The directors of the Bank of England were City merchants, whose ideas usually run in a particular groove. It is not, therefore, in the least remark

Bank Stock. W hen the trade of the country is prosperous, we expect to see banking companies paying high dividends, because rising prices stimulate borrowing on the part of the public; and, consequently, as the resources of the banks are limited, the increased demand for loanable capital sends up rates, with the result that distributions are enhanced, and that the prices of bank shares advance in sympathy with improving dividends. We all know that there is a link which binds industries together,