Chapter XL: The Bank of England (1)

The Jews and the Lombards--The Goldsmiths the first London
Bankers--William Paterson, Founder of the Bank of England--Difficult
Parturition of the Bank Bill--Whig Principles of the Bank of
England--The Great Company described by Addison--A Crisis at the
Bank--Effects of a Silver Re-coinage--Paterson quits the Bank of
England--The Ministry resolves that it shall be enlarged--The Credit
of the Bank shaken--The Whigs to the Rescue--Effects of the
Sacheverell Riots--The South Sea Company--The Cost of a New
Charter--Forged Bank Notes--The Foundation of the "Three per Cent.
Consols"--Anecdotes relating to the Bank of England and Bank
Notes--Description of the Building--Statue of William III.--Bank
Clearing House--Dividend Day at the Bank.

The English Jews, that eminently commercial race, were, as we have shown in our chapter on Old Jewry, our first bankers and usurers. To them, in immediate succession, followed the enterprising Lombards, a term including the merchants and goldsmiths of Genoa, Florence, and Venice. Utterly blind to all sense of true liberty and justice, the strong-handed king seems to have resolved to squeeze and crush them, as he had squeezed and crushed their unfortunate predecessors. They were rich and they were strangers--that was enough for a king who wanted money badly. At one fell swoop Edward seized the Lombards' property and estates. Their debtors naturally approved of the king's summary measure. But the Lombards grew and flourished, like the trampled camomile, and in the fifteenth century advanced a loan to the state on the security of the Customs. The Steelyard merchants also advanced loans to our kings, and were always found to be available for national emergencies, and so were the Merchants of the Staple, the Mercers' Company, the Merchant Adventurers, and the traders of Flanders.

Up to a late period in the reign of Charles I. the London merchants seem to have deposited their surplus cash in the Mint, the business of which was carried on in the Tower. But when Charles I., in an agony of impecuniosity, seized like a robber the L200,000 there deposited, calling it a loan, the London goldsmiths, who ever since 1386 had been always more or less bankers, now monopolised the whole banking business. Some merchants, distrustful of the goldsmiths in these stormy times, entrusted their money to their clerks and apprentices, who too often cried, "Boot, saddle and horse, and away!" and at once started with their spoil to join Rupert and his pillaging Cavaliers. About 1645 the citizens returned almost entirely to the goldsmiths, who now gave interest for money placed in their care, bought coins, and sold plate. The Company was not particular. The Parliament, out of plate and old coin, had coined gold, and seven millions of half-crowns. The goldsmiths culled out the heavier pieces, melted them down, and exported them. The merchants' clerks, to whom their masters' ready cash was still sometimes entrusted, actually had frequently the brazen impudence to lend money to the goldsmiths, at fourpence per cent. per diem; so that the merchants were often actually lent their own money, and had to pay for the use of it. The goldsmiths also began now to receive rent and allow interest for it. They gave receipts for the sums they received, and these receipts were to all intents and purposes marketable as bank-notes.

Grown rich by these means, the goldsmiths were often able to help Cromwell with money in advance on the revenues, a patriotic act for which we may be sure they took good care not to suffer. When the great national disgrace occurred--the Dutch sailed up the Medway and burned some of our ships--there was a run upon the goldsmiths, but they stood firm, and met all demands. The infamous seizure by Charles II. of L1,300,000, deposited by the London goldsmiths in the Exchequer, all but ruined these too confiding men, but clamour and pressure compelled the royal embezzler to at last pay six per cent. on the sum appropriated. In the last year of William's reign, interest was granted on the whole sum at three per cent., and the debt still remains undischarged. At last a Bank of England, which had been talked about and wished for by commercial men ever since the year 1678, was actually started, and came into operation.

That great financial genius, William Paterson, the founder of the Bank of England, was born in 1658, of a good family, at Lochnaber, in Dumfriesshire. He is supposed, in early life, to have preached among the persecuted Covenanters. He lived a good deal in Holland, and is believed to have been a wealthy merchant in New Providence (the Bahamas), and seems to have shared in Sir William Phipps' successful undertaking of raising a Spanish galleon with L300,000 worth of sunken treasure. It is absurdly stated that he was at one time a buccaneer, and so gained a knowledge of Darien and the ports of the Spanish main. That he knew and obtained information from Captains Sharpe, Dampier, Wafer, and Sir Henry Morgan (the taker of Panama), is probable. He worked zealously for the Restoration of 1688, and he was the founder of the Darien scheme. He advocated the union of Scotland, and the establishment of a Board of Trade.

The project of a Bank of England seems to have been often discussed during the Commonwealth, and was seriously proposed at the meeting of the First Council of Trade at Mercers' Hall after the Restoration. Paterson has himself described the first starting of the Bank, in his "Proceedings at the Imaginary Wednesday's Club," 1717. The first proposition of a Bank of England was made in July, 1691, when the Government had contracted L3,000,000 of debt in three years, and the Ministers even stooped, hat in hand, to borrow L100,000 or L200,000 at a time of the Common Council of London, on the first payment of the land-tax, and all payable with the year, the common councillors going round and soliciting from house to house. The first project was badly received, as people expected an immediate peace, and disliked a scheme which had come from Holland--"they had too many Dutch things already." They also doubted the stability of William's Government. The money, at this time, was terribly debased, and the national debt increasing yearly. The ministers preferred ready money by annuities for ninety-nine years, and by a lottery. At last they ventured to try the Bank, on the express condition that if a moiety, L1,200,000, was not collected by August, 1699, there should be no Bank, and the whole L1,200,000 should be struck in halves for the managers to dispose of at their pleasure. So great was the opposition, that the very night before, some City men wagered deeply that one-third of the L1,200,000 would never be subscribed. Nevertheless, the next day L346,000, with a fourth paid in at once, was subscribed, and the remainder in a few days after. The whole subscription was completed in ten days, and paid into the Exchequer in rather more than ten weeks. Paterson expressly tells us that the Bank Act would have been quashed in the Privy Council but for Queen Mary, who, following the wish of her husband, expressed firmly in a letter from Flanders, pressed the commission forward, after a six hours' sitting.

The Bank Bill, timidly brought forward, purported only to impose a new duty on tonnage, for the benefit of such loyal persons as should advance money towards carrying on the war. The plan was for the Government to borrow L1,200,000, at the modest interest of eight per cent. To encourage capitalists, the subscribers were to be incorporated by the name of the Governor and Company of the Bank of England. Both Tories and Whigs broke into a fury at the scheme. The goldsmiths and pawnbrokers, says Macaulay, set up a howl of rage. The Tories declared that banks were republican institutions; the Whigs predicted ruin and despotism. The whole wealth of the nation would be in the hands of the "Tonnage Bank," and the Bank would be in the hands of the Sovereign. It was worse than the Star Chamber, worse than Oliver's 50,000 soldiers. The power of the purse would be transferred from the House of Commons to the Governor and Directors of the new Company. Bending to this last objection, a clause was inserted, inhibiting the Bank from advancing money to the House without authority from Parliament. Every infraction of this rule was to be punished by a forfeiture of three times the sum advanced, without the king having power to remit the penalty. Charles Montague, an able man, afterwards First Lord of the Treasury, carried the bill through the House; and Michael Godfrey (the brother of the celebrated Sir Edmondbury Godfrey, supposed to have been murdered by the Papists), an upright merchant and a zealous Whig, propitiated the City. In the Lords (always the more prejudiced and conservative body than the Commons) the bill met with great opposition. Some noblemen imagined that the Bank was intended to exalt the moneyed interest and debase the landed interest; and others imagined the bill was intended to enrich usurers, who would prefer banking their money to lending it on mortgage. "Something was said," says Macaulay, "about the danger of setting up a gigantic corporation, which might soon give laws to the King and the three estates of the realm." Eventually the Lords, afraid to leave the King without money, passed the bill. During several generations the Bank of England was emphatically a Whig body. The Stuarts would at once have repudiated the debt, and the Bank of England, knowing that their return implied ruin, remained loyal to William, Anne, and George. "It is hardly too much to say," writes Macaulay, "that during many years the weight of the Bank, which was constantly in the scale of the Whigs, almost counterbalanced the weight of the Church, which was as constantly in the scale of the Tories." "Seventeen years after the passing of the Tonnage Bill," says the same eminent writer, to show the reliance of the Whigs on the Bank of England, "Addison, in one of his most ingenious and graceful little allegories, described the situation of the great company through which the immense wealth of London was constantly circulating. He saw Public Credit on her throne in Grocers' Hall, the Great Charter over her head, the Act of Settlement full in her view. Her touch turned everything to gold. Behind her seat bags filled with coin were piled up to the ceiling. On her right and on her left the floor was hidden by pyramids of guineas. On a sudden the door flies open, the Pretender rushes in, a sponge in one hand, in the other a sword, which he shakes at the Act of Settlement. The beautiful Queen sinks down fainting; the spell by which she has turned all things around her into treasure is broken; the money-bags shrink like pricked bladders; the piles of gold pieces are turned into bundles of rags, or fagots of wooden tallies."

In 1696 (very soon after its birth) the Bank experienced a crisis. There was a want of money in England. The clipped silver had been called in, and the new money was not ready. Even rich people were living on credit, and issued promissory notes. The stock of the Bank of England had gone rapidly down from 110 to 83. The goldsmiths, who detested the corporation that had broken in on their system of private banking, now tried to destroy the new company. They plotted, and on the same day they crowded to Grocers' Hall, where the Bank was located from 1694 to 1734, and insisted on immediate payment--one goldsmith alone demanding L30,000. The directors paid all their honest creditors, but refused to cash the goldsmiths' notes, and left them their remedy in Westminster Hall. The goldsmiths triumphed in scurrilous pasquinades entitled, "The Last Will and Testament," "The Epitaph," "The Inquest on the Bank of England." The directors, finding it impossible to procure silver enough to pay every claim, had recourse to an expedient. They made a call of 20 per cent. on the proprietors, and thus raised a sum enabling them to pay every applicant 15 per cent. in milled money on what was due to him, and they returned him his note, after making a minute upon it that part had been paid. A few notes thus marked, says Macaulay, are still preserved among the archives of the Bank, as memorials of that terrible year. The alternations were frightful. The discount, at one time 6 per cent., was presently 24. A L10 note, taken for more than L9 in the morning, was before night worth less than L8.

Paterson attributes this danger of the Bank to bad and partial payments, the giving and allowing exorbitant interest, high premiums and discounts, contracting dear and bad bargains; the general debasing and corrupting of coin, and such like, by which means things were brought to such a pass that even 8 per cent. interest on the land-tax, although payable within the year, would not answer. Guineas, he says, on a sudden rose to 30s. per piece, or more; all currency of other money was stopped, hardly any had wherewith to pay; public securities sank to about a moiety of their original values, and buyers were hard to be found even at those prices. No man knew what he was worth; the course of trade and correspondence almost universally stopped; the poorer sort of people were plunged into irrepressible distress, and as it were left perishing, whilst even the richer had hardly wherewith to go to market for obtaining the common conveniences of life.

The King, in Flanders, was in great want of money. The Land Bank could not do much. The Bank, at last, generously offered to advance L200,000 in gold and silver to meet the King's necessities. Sir Isaac Newton, the new Master of the Mint, hastened on the re-coinage. Several of the ministers, immediately after the Bank meeting (over which Sir John Houblon presided), purchased stock, as a proof of their gratitude to the body which had rendered so great a service to the State.

The diminution of the old hammered money continued to increase, and public credit began to be put to a stand. The opposers of Paterson wished to alter the denomination of the money, so that 9d. of silver should pass for 1s., but at last agreed to let sterling silver pass at 5s. 2d. an ounce, being the equivalent of the milled money. The loss of the re-coinage to the nation was about L3,000,000. Paterson, who was one of the first Directors of the Bank of England, upon a qualification of L2,000 stock, disagreed with his colleagues on the question of the Bank's legitimate operations, and sold out in 1695. In 1701, Paterson says, after the peace of Ryswick, he had an audience of King William, and drew his attention to the importance of three great measures--the union with Scotland, the seizing the principal Spanish ports in the West Indies, and the holding a commission of inquiry into the conduct of those who had mismanaged the King's affairs during his absence in Flanders. Paterson died in 1719, on the eve of the fatal South Sea Bubble.

When the notes of the Bank were at 20 per cent. discount, the Government (says Francis) empowered the corporation to add L1,001,171 10s. to their original stock, and public faith was restored by four-fifths of the subscriptions being received in tallies and orders, and one-fifth in bank-notes at their full value, although both were at a heavy discount in the market.

The past services of the Bank were not forgotten. The Ministry resolved that it should be enlarged by new subscriptions; that provision should be made for paying the principal of the tallies subscribed in the Bank; that 8 per cent. should be allowed on all such tallies, to meet which a duty on salt was imposed; that the charter should be prolonged to August, 1710; that before the beginning of the new subscriptions the old capital should be made up to each member 100 per cent.; and what might exceed that value should be divided among the new members; that the Bank might circulate additional notes to the amount subscribed, provided they were payable on demand, and in default they were to be paid by the Exchequer out of the first money due to the Bank; that no other bank should be allowed by Act of Parliament during the continuance of the Bank of England; that it should be exempt from all tax or imposition; and that no contract made for any Bank stock to be bought or sold should be valid unless registered in the Bank books, and transferred within fourteen days. It was also enacted that not above two-thirds of the directors should be re-elected in the succeeding year. These vigorous measures were thoroughly successful.

The charter was at the same time extended to 1710, and not even then to be withdrawn, unless Government paid the full debt. Forgery of the Company's seal, notes, or bills was made felony without benefit of clergy. Sir Gilbert Heathcote, one of the Bank Directors, gained L60,000 by this scheme. The Bank is said to have offered the King at this time the loan of a million without interest for twenty-one years, if the Government would extend the charter for that time. Bank stock, given to the proprietors in exchange for tallies at 50 per cent. discount, rose to 112. The Bank had lowered the interest of money. As early as 1697 it had proposed to have branch Banks in every city and market town of England.

In 1700-1704, the conquests of Louis XIV. alarmed England, and shook the credit of the Bank. In the latter year the Bank Directors were once more obliged to issue sealed bills bearing interest for a large sum, in order to keep up their credit. In 1707 the fears of an invasion threatened by the Pretender brought down stocks 14 or 15 per cent. The goldsmiths then gathered up Bank bills, and tried to press the Directors. Hoare and Child both joined in the attack, and the latter pretended to refuse the bills of the Bank. The loyal Whigs, however, instead of withdrawing their deposits, helped it with all their available cash. The Dukes of Marlborough, Newcastle, and Somerset, with others of the nobility, hurried to the Bank with their coaches brimming with heavy bags of long hoarded guineas. A private individual, who had but L500, carried it to the Bank; and on the story being told to the Queen, she sent him L100, with an obligation on the Treasury to repay the whole L500. Lord Godolphin, seeing the crisis, astutely persuaded Queen Anne to allow the Bank for six months an interest of 6 per cent. on their sealed bills. This, and a call of 20 per cent. on the proprietors, saved the credit of the Bank.

In 1708 the charter was extended to 1732. This concession was again vehemently opposed by the enemies of the Bank. Nathaniel Tench, who wrote a reply for the directors, proved that the Bank had never bought land, or monopolised any other commodity, and had, on the contrary, increased and encouraged trade. He asserted that they had never influenced an elector, and had been the chief cause of lowering the interest of money, even in war time. The Government wishing to circulate Exchequer bills, the Bank raised their capital by new subscriptions to L5,000,000. The new subscriptions were raised in a few hours, and nearly one million more could have been obtained on the same day.

During the absurd Tory riots of 1709 the Bank was in considerable danger. A vain, mischievous High Church clergyman named Sacheverell had been foolishly prosecuted for attacking the Whig Government, and calling the Lord Treasurer Godolphin "Volpone" (a character in a celebrated play written by Ben Jonson). A guard of butchers escorted the firebrand to his trial at Westminster Hall, at which Queen Anne was present. Riots then broke out, and the High Church mob sacked several Dissenting chapels, burning the pews and pulpits in Lincoln's Inn Fields, Holborn, and elsewhere, and even threatened to use a Dissenting preacher as a holocaust. The rioters at last threatened the Bank. The Queen at once sent her guards, horse and foot, to the City, and left herself unprotected. "Am I to preach or fight?" was the first question of Captain Horsey, who led the cavalry. But the question needed no answer, for the rioters at once dispersed.

In 1713 the Bank charter was renewed until 1742. The great catastrophe of the South Sea Bubble in 1720, which we shall sketch fully in another chapter, did not injure the Bank. The directors generously tried to save the fallen company, but (as might have been expected) utterly failed. With prudence, perhaps, gained from this national cataclysm, the Bank, in 1722, commenced keeping a reserve--the "rest"--that rock on which unshakable credit has ever since been proudly built. In 1728 no notes were issued by the Bank for less than L20, and as part of the note only was printed the clerk's pen supplied the remainder.

In 1742, when the charter was renewed till 1762, the loan of L1,600,000, without interest, was required by the Government for the favour. By the act of renewal forging bank-notes, &c., was declared punishable with death.

The Bank was at this time a small and modest building, surrounded by houses, and almost invisible to passers by. There was a church called Christopher le Stocks, afterwards pulled down for fear it should ever be occupied by rioters, and three taverns, too, on the south side, in Bartholomew Lane, just where the chief entrance now is, and about fifteen or twenty private buildings. A few years later visitors used to be shown in the bullion office the original bank chest, no larger than a seamen's, and the original shelves and cases for the books of business, to show the extraordinary rapidity with which the institution had struck root and borne fruit.

In 1746, the capital on which the Bank stock proprietors divided amounted to L10,780,000. It had been more than octupled in little more than half a century. The year 1752 is remarkable as that in which the foundation of the present "Three per Cent. Consols" was laid. "The stock," says Francis, "was thus termed from the balance of some annuities granted by George I. being consolidated into one fund with a Three per Cent. stock formed in 1731."

In 1759 bank-notes of a smaller value than L20 were first circulated. In 1764 the Bank charter was renewed on a gift of L110,000, and an advance of one million for Exchequer bills for two years, at 3 per cent. interest. It was at the same time made felony without benefit of clergy to forge powers of attorney for receiving dividends, transferring or selling stock. The Government, which had won twelve millions before the Seven Years' War, annihilated the navy of France, and wrested India from the French sway, was glad to recruit its treasury by so profitable a bargain with the Bank. In 1773 an Act was passed making it punishable with death to copy the water-mark of the bank-note paper. By an Act of 1775 notes of a less amount than twenty shillings were prohibited, and two years afterwards the amount was limited to L5.

During the formidable riots of 1780 the Bank was in considerable danger. In one night there rose the flames of six-and-thirty fires. The Catholic chapels and the tallow-chandlers' shops were universally destroyed; Newgate was sacked and burned. The mob, half thieves, at last decided to march upon the Bank, but precautions had been taken there. The courts and roof of the building were defended by armed clerks and volunteers, and there were soldiers ready outside. The old pewter inkstands had been melted into bullets. The rioters made two rushes; the first was checked by a volley from the soldiers; at the second, which was less violent, Wilkes rushed out, and with his own hand dragged in some of the ringleaders. Leaving several killed and many wounded, the discomfited mob at last retired.

In 1781, the Bank charter having nearly expired, Lord North proposed a renewal for twenty-five years, the terms being a loan of two millions for three years, at 3 per cent., to pay off the navy debt. In 1783 the notes and bills of the Bank were exempted from the operation of the Stamp Act, on consideration of an annual payment of L12,000. The Government allowance of L562 10s. per million for managing the National Debt was reduced at this time to L450. Five years later our debt was calculated at 242 millions, which, taken in L10 notes, would weigh, it was curiously calculated, 47,265 lbs.

It was about 1784 that the first attempts at forgery on a tremendous scale were discovered by the Bank. A rogue of genius, generally known, from his favourite disguise, as "Old Patch," by a long series of forgeries secured a sum of more than L200,000. He was the son of an old clothes' man in Monmouth Street; and had been a lottery-office keeper, stockbroker, and gambler. At one time he was a partner with Foote, the celebrated comedian, in a brewery. He made his own ink, manufactured his own paper, and with a private press worked off his own notes. His mistress was his only confidante. His disguises were numerous and perfect. His servants or boys, hired from the street, always presented the forged notes. When seized and thrown into prison, Old Patch hung himself in his cell.

During the wars with France Pitt was always soliciting the help of the Bank. In 1796, great alarm was felt at the diminution of gold, and Tom Paine wrote a pamphlet to prove that the Bank cellars could not hold more than a million of specie, while there were sixty millions of bank-notes in circulation. It was, however, proved that the specie amounted to about three millions, and the circulation to only nine or ten. Early in 1796, when the specie sank to L1,272,000, the Bank suspended cash payments, and notes under L5 were issued, and dollars prepared for circulation. The Bank Restriction Act was soon after passed, discontinuing cash payments till the conclusion of the war. For the renewal of the charter in 1800, the Bank proposed to lend three millions for six years, without interest, a right being reserved to them of claiming repayment at any time before the expiration of six years, if Consols should be at or above 80 per cent. In 1802, Mr. Addington said in the House of Commons that since 1797 the forgeries of bank-notes had so alarmingly increased as to require seventy additional clerks merely to detect them, and that every year no less than thirty or forty persons had been executed for forgery.

In 1807, the celebrated chief cashier of the Bank, Abraham Newland, the hero of Dibdin's well-known song--

"Sham Abraham you may,
But you mustn't sham Abraham Newland,"

retired from his duties, obtained a pension, and the same year died. His property amounted to L200,000, besides L1,000 a year landed estate. He had made large sums by loans during the war, a certain amount of which were always reserved for the cashier's office. It is supposed the faithful old Bank servant had lent large sums to the Goldsmiths, the great stockbrokers, the contractors for many of these loans, as he left them L500 each to buy mourning-rings.

The Bullion Committee of 1809 was moved for by Mr. Horner to ascertain if the rise in the price of gold did not arise from the over-issue of notes. There was a growing feeling that bank-notes did not represent the specified amount of gold, and the committee recommended a speedy return to cash payments. In Parliament Mr. Fuller, that butt of the House, proposed if the guinea was really worth 24s., to raise it at once to that price. Guineas at this time were exported to France in large numbers by smugglers in boats made especially for the purpose. The Bank, which had before issued dollars, now circulated silver tokens for 5s. 6d., 3s., and 1s. 6d.

Peel's currency bill of 1819 secured a gradual return of cash payments, and the old metallic standard was restored. It was Peel's great principle that a national bank should always be prepared to pay specie for its notes on demand, a principle he afterwards worked out in the Bank Charter. The same year a new plan was devised to prevent bank-notes being forged. The Committee's report says:--"A number of squares will appear in chequer-work upon the note, filled with hair lines in elliptic curves of various degrees of eccentricity, the squares to be alternately of red and black lines; the perfect mathematical coincidence of the extremity of the lines of different colours on the sides of the squares will be effected by machinery of singular fidelity. But even with the use of this machinery a person who has not the key to the proper disposition would make millions of experiments to no purpose. Other obstacles to imitation will also be presented in the structure of the note; but this is the one principally relied upon. It is plain that any failure in the imitation will be made manifest to the observation of the most careless, and the most skilful merchants who have seen the operation declare that the note cannot be imitated. The remarkable machine works with three cylinders, and the impression is made by small convex cylindrical plates."

In 1821 the real re-commencement of specie payments took place. In 1822 Turner, a Bank clerk, stole L10,000 by altering the transfer book. The rascal, however, was too clever for the Bank, and escaped. In 1822 Mr. Pascoe Grenfell put the profits of the Bank at twenty-five millions, in twenty-five years, after seven per cent. was divided.

By Fauntleroy's (the banker) forgeries in 1824, the Bank lost L360,000, and the interest alone, which was regularly paid, had amounted to L9,000 or L10,000 a year. Fauntleroy's bank was in Berners Street. He had forged powers of attorney to enable him to sell out stock. An epicure and a voluptuary, he had lived in extraordinary luxury. In a private desk was found a list of his forgeries, ending with these words: "The Bank first began to refuse our acceptances, thereby destroying the credit of our house. The Bank shall smart for it." After Fauntleroy was hung at Newgate there were obscure rumours in the City that he had been saved by a silver tube being placed in his throat, and that he had escaped to Paris.

Having given a summary of the history of the Bank of England, we now propose to select a series of anecdotes, arranged by dates, which will convey a fuller and more detailed notion of the romance and the vicissitudes of banking life.

The Bank was first established (says Francis) in Mercers' Hall, and afterwards in Grocers' Hall, since razed for the erection of a more stately structure. Here, in one room, with almost primitive simplicity, were gathered all who performed the duties of the establishment. "I looked into the great hall where the Bank is kept," says the graceful essayist of the day, "and was not a little pleased to see the directors, secretaries, and clerks, with all the other members of that wealthy corporation, ranged in their several stations according to the parts they hold in that just and regular economy."

Mr. Michael Godfrey, to whose exertions, with those of William Paterson, may be traced the successful establishment of the Bank, met with a somewhat singular fate, on the 17th of July, 1695. At that time the transmission of specie was difficult and full of hazard, and Mr. Godfrey left his peaceful avocations to visit Namur, then vigorously besieged by the English monarch. The deputy-governor, willing to flatter the King, anxious to forward his mission, or possibly imagining the vicinity of the Sovereign to be the safest place he could choose, ventured into the trenches. "As you are no adventurer in the trade of war, Mr. Godfrey," said William, "I think you should not expose yourself to the hazard of it." "Not being more exposed than your Majesty," was the courtly reply, "should I be excusable if I showed more concern?" "Yes," returned William; "I am in my duty, and therefore have a more reasonable claim to preservation." A cannon-ball at this moment answered the "reasonable claim to preservation" by killing Mr. Godfrey; and it requires no great stretch of imagination to fancy a saturnine smile passing over the countenance of the monarch, as he beheld the fate of the citizen who paid so heavy a penalty for playing the courtier in the trenches of Namur.

On the 31st of August, 1731, a scene was presented which strongly marks the infatuation and ignorance of lottery adventurers. The tickets for the State lottery were delivered out to the subscribers at the Bank of England; when the crowd becoming so great as to obstruct the clerks, they told them, "We deliver blanks to-day, but to-morrow we shall deliver the prizes;" upon which many, who were by no means for blanks, retired, and by this bold stratagem the clerks obtained room to proceed in their business. In this lottery, we read, "Her Majesty presented his Royal Highness the Duke with ten tickets."

In 1738 the roads were so infested by highwaymen, and mails were so frequently stopped by the gentlemen in the black masks, that the post-master made a representation to the Bank upon the subject, and the directors in consequence advertised an issue of bills payable at "seven days' sight," that, in case of the mail being robbed, the proprietor of stolen bills might have time to give notice.

The effect of the arrival, in 1745, of Charles Edward at Derby, upon the National Bank, was alarming indeed. Its interests were involved in those of the State, and the creditors flocked in crowds to obtain payment for their notes. The directors, unprepared for such a casualty, had recourse to a justifiable stratagem; and it was only by this that they escaped bankruptcy. Payment was not refused, but the corporation retained its specie, by employing agents to enter with notes, who, to gain time, were paid in sixpences; and as those who came first were entitled to priority of payment, the agents went out at one door with the specie they had received, and brought it back by another, so that the _bona-fide_ holders of notes could never get near enough to present them. "By this artifice," says our authority, somewhat quaintly, "the Bank preserved its credit, and literally faced its creditors."

An extraordinary affair happened about the year 1740. One of the directors, a very rich man, had occasion for L30,000, which he was to pay as the price of an estate he had just bought. To facilitate the matter, he carried the sum with him to the Bank, and obtained for it a bank-note. On his return home he was suddenly called out upon particular business; he threw the note carelessly on the chimney, but when he came back a few minutes afterwards to lock it up, it was not to be found. No one had entered the room; he could not, therefore, suspect any person. At last, after much ineffectual search, he was persuaded that it had fallen from the chimney into the fire. The director went to acquaint his colleagues with the misfortune that had happened to him; and as he was known to be a perfectly honourable man, he was readily believed. It was only about twenty-four hours from the time that he had deposited the money; they thought, therefore, that it would be hard to refuse his request for a second bill. He received it upon giving an obligation to restore the first bill, if it should ever be found, or to pay the money himself, if it should be presented by any stranger. About thirty years afterwards (the director having been long dead, and his heirs in possession of his fortune) an unknown person presented the lost bill at the Bank, and demanded payment. It was in vain that they mentioned to this person the transaction by which that bill was annulled; he would not listen to it. He maintained that it came to him from abroad, and insisted upon immediate payment. The note was payable to bearer, and the L30,000 were paid him. The heirs of the director would not listen to any demands of restitution, and the Bank was obliged to sustain the loss. It was discovered afterwards that an architect having purchased the director's house, and taken it down, in order to build another upon the same spot, had found the note in a crevice of the chimney, and made his discovery an engine for robbing the Bank.

In the early part of last century, the practice of bankers was to deliver in exchange for money deposited a receipt, which might be circulated like a modern cheque. Bank-notes were then at a discount; and the Bank of England, jealous of Childs' reputation, secretly collected the receipts of their rivals, determined, when they had procured a very large number, suddenly to demand money for them, hoping that Childs' would not be able to meet their liabilities. Fortunately for the latter, they got scent of this plot; and in great alarm applied to the celebrated Duchess of Marlborough, who gave them a single cheque of L700,000 on their opponents. Thus armed, Childs' waited the arrival of the enemy. It was arranged that this business should be transacted by one of the partners, and that a confidential clerk, on a given signal, should proceed with all speed to the Bank to get the cheque cashed. At last a clerk from the Bank of England appeared, with a full bag, and demanded money for a large number of receipts. The partner was called, who desired him to present them singly. The signal was given; the confidential clerk hurried on his mission; the partner was very deliberate in his movements, and long before he had taken an account of all the receipts, his emissary returned with L700,000; and the whole amount of L500,000 or L600,000 was paid by Childs' in Bank of England notes. In addition to the triumph of this manoeuvre, Childs' must have made a large sum, from Bank paper being at a considerable discount.

The day on which a forged note was first presented at the Bank of England forms a remarkable era in its history; and to Richard William Vaughan, a Stafford linendraper, belongs the melancholy celebrity of having led the van in this new phase of crime, in the year 1758. The records of his life do not show want, beggary, or starvation urging him, but a simple desire to seem greater than he was. By one of the artists employed--and there were several engaged on different parts of the notes--the discovery was made. The criminal had filled up to the number of twenty, and deposited them in the hands of a young lady, to whom he was attached, as a proof of his wealth. There is no calculating how much longer Bank notes might have been free from imitation, had this man not shown with what ease they might be counterfeited. (Francis.)

The circulation of L1 notes led to much forgery, and to a melancholy waste of human life. Considering the advances made in the mechanical arts, small notes were rough, and even rude in their execution. Easily imitated, they were also easily circulated, and from 1797 the executions for forgery augmented to an extent which bore no proportion to any other class of crime. During six years prior to their issue there was but one capital conviction; during the four following years eighty-five occurred. The great increase produced inquiry, which resulted in an Act "For the better prevention of the forgery of the notes and bills of exchange of persons carrying on the business of banker."

In the year 1758 a judgment was given by the Lord Chief Justice in connection with some notes which were stolen from one of the mails. The robber, after stopping the coach and taking out all the money contained in the letters, went boldly to a Mr. Miller, at the Hatfield post-office, who unhesitatingly exchanged one of them. Here he ordered a post-chaise, with four horses, and at several stages passed off the remainder. They were, however, stopped at the Bank, and an action was brought by the possessor to recover the money. The question was an important one, and it was decided by the law authorities, "that any person paying a valuable consideration for a Bank note, payable to bearer, in a fair course of business, has an undoubted right to recover the money of the Bank." The action was maintained upon the plea that the figure 11, denoting the date, had been converted by the robber to a 4.

A new crime was discovered in 1767. The notice of the clerks at the Bank had been attracted by the habit of William Guest, a teller, of picking new from old guineas without assigning any reason. An indefinite suspicion--increased by the knowledge that an ingot of gold had been seen in Guest's possession--arose, and although he asserted that it came from Holland, it was very unlike the regular bars of gold, and had a large quantity of copper at the back. Attention being thus drawn to the behaviour of Guest, he was observed to hand one Richard Still some guineas, which he took from a private drawer, and placed with the others on the table. Still was immediately followed, and on the examination of his money three of the guineas in his possession were deficient in weight. An inquiry was immediately instituted. Forty of the guineas in the charge of Guest looked fresher than the others upon the edges, and weighed much less than the legitimate amount. On searching his house some gold filings were found, with instruments calculated to produce artificial edges. Proofs soon multiplied, and the prisoner was found guilty. The instrument with which he had effected his fraud, of which one of the witnesses asserted it was the greatest improvement he had ever seen, is said to be yet in the Mint.

In 1772 an action interesting to the public was brought against the Bank. It appeared from the evidence that some stock stood in the joint names of a man and his wife; and by the rules of the corporation the signatures of both were required before it could be transferred. To this the husband objected, and claimed the right of selling without his wife's signature or consent. The Court of King's Bench decided in favour of the plaintiff, with full costs of suit, Lord Mansfield believing that "it was highly _cruel and oppressive_ to withhold from the husband his right of transferring."

On the 10th of June, 1772, Neale and Co., bankers, in Threadneedle Street, stopped payment; other failures resulted in consequence, and throughout the City there was a general consternation. The timely interposition of the Bank, and the generous assistance of the merchants, prevented many of the expected stoppages, and trade appeared restored to its former security. It was, however, only an appearance; for on Monday, the 22nd of the same month, may be read, in a contemporary authority, a description of the prevailing agitation, which forcibly reminds us of a few years ago. "It is beyond the power of words to describe the general consternation of the metropolis at this instant. No event for fifty years has been remembered to give so fatal a blow to trade and public credit. A universal bankruptcy was expected; the stoppage of almost every banker's house in London was looked for; the whole city was in an uproar; many of the first families were in tears. This melancholy scene began with a rumour that one of the greatest bankers in London had stopped, which afterwards proved true. A report at the same time was propagated that an immediate stoppage of the greatest Bank of all must take place. Happily this proved groundless; the principal merchants assembled, and means were concocted to revive trade and preserve the national credit."

The desire of the directors to discover the makers of forged notes produced a considerable amount of anxiety to one whose name is indelibly associated with British art. George Morland--a name rarely mentioned but with feelings of pity and regret--had, in his eagerness to avoid incarceration for debt, retired to an obscure hiding-place in the suburbs of London. "On one occasion," says Allan Cunningham, "he hid himself in Hackney, where his anxious looks and secluded manner of life induced some of his charitable neighbours to believe him a maker of forged notes. The directors of the Bank dispatched two of their most dexterous emissaries to inquire, reconnoitre, search and seize. The men arrived, and began to draw lines of circumvallation round the painter's retreat. He was not, however, to be surprised: mistaking those agents of evil mien for bailiffs, he escaped from behind as they approached in front, fled into Hoxton, and never halted till he had hid himself in London. Nothing was found to justify suspicion; and when Mrs. Morland, who was his companion in this retreat, told them who her husband was, and showed them some unfinished pictures, they made such a report at the Bank, that the directors presented him with a couple of Bank notes of L20 each, by way of compensation for the alarm they had given him."

The proclamation of peace in 1783, says Francis, was indirectly an expense to the Bank, although hailed with enthusiasm by the populace. The war with America had assumed an aspect which, with all thinking men, crushed every hope of conquest. It was therefore amid a general shout of joy that on Monday, the 1st of October, 1783, the ceremonial took place. A vast multitude attended, and the people were delighted with the suspension of war. The concourse was so great that Temple Bar was opened with difficulty, and the Lord Mayor's coachman was kept one hour before he was able to turn his vehicle. The Bank only had reason to regret, or at least not to sympathise so freely with the public joy. During the hurry attendant on the proclamation at the Royal Exchange, when it may be supposed the sound of the music and the noise of the trumpet occupied the attention of the clerk more than was beneficial for the interests of his employers, fourteen notes of L50 each were presented at the office and cash paid for them. The next day they were found to be forged.

In 1783 Mathison's celebrated forgeries were committed. John Mathison was a man of great mechanical capacity, who, becoming acquainted with an engraver, unhappily acquired that art which ultimately proved his ruin. A yet more dangerous qualification was his of imitating signatures with remarkable accuracy. Tempted by the hope of sudden wealth, his first forgeries were the notes of the Darlington Bank. This fraud was soon discovered, and a reward being offered, with a description of his person, he escaped to Scotland. There, scorning to let his talents lie idle, he counterfeited the notes of the Royal Bank of Edinburgh, amused himself by negotiating them during a pleasure excursion through the country, and reached London, supported by his imitative talent. Here a fine sphere opened for his genius, which was so active, that in twelve days he had bought the copper, engraved it, fabricated notes, forged the water-mark, printed and negotiated several. When he had a sufficient number, he travelled from one end of the kingdom to the other, disposing of them. Having been in the habit of procuring notes from the Bank (the more accurately to copy them), he chanced to be there when a clerk from the Excise Office paid in 7,000 guineas, one of which was scrupled. Mathison, from a distance, said it was a good one; "then," said the Bank clerk, on the trial, "I recollected him." The frequent visits of Mathison, who was very incautious, together with other circumstances, created some suspicion that he might be connected with those notes, which, since his first appearance, had been presented at the Bank. On another occasion, when Mathison was there, a forged note of his own was presented, and the teller, half in jest and half in earnest, charged Maxwell, the name by which he was known, with some knowledge of the forgeries. Further suspicion was excited, and directions were given to detain him at some future period. The following day the teller was informed that "his friend Maxwell," as he was styled ironically, was in Cornhill. The clerk instantly went, and under pretence of having paid Mathison a guinea too much on a previous occasion, and of losing his situation if the mistake were not rectified in the books, induced him to return with him to the hall; from which place he was taken before the directors, and afterwards to Sir John Fielding. To all the inquiries he replied, "He had a reason for declining to answer. He was a citizen of the world, and knew not how he had come into it, or how he should go out of it." Being detained during a consultation with the Bank solicitor, he suddenly lifted up the sash and jumped out of the window. On being taken and asked his motive, if innocent, he said, "It was his humour."

In the progress of the inquiry, the Darlington paper, containing his description, was read to him, when he turned pale, burst into tears, and saying he was a dead man, added, "Now I will confess all." He was, indeed, found guilty only on his own acknowledgment, which stated he could accomplish the whole of a note in one day. It was asserted at the time, that, had it not been for his confession, he could not have been convicted. He offered to explain the secret of his discovery of the method of imitating the water-mark, on the condition that the corporation would spare his life; but his proposal was rejected, and he subsequently paid the full penalty of his crime.

The conviction that some check was necessary grew more and more peremptory as the evils of the system were exposed. In fourteen years from the first issue of small notes, the number of convictions had been centupled. In the first ten years of the present century, L101,061 were refused payment, on the plea of forgery. In the two years preceding the appointment of the commission directed by Government to inquire into the facts connected with forging notes, nearly L60,000 were presented, being an increase of 300 per cent. In 1797, the entire cost of prosecutions for forgeries was L1,500, and in the last three months of 1818 it was near L20,000. Sir Samuel Romilly said that "pardons were sometimes found necessary; but few were granted except under circumstances of peculiar qualification and mitigation. He believed the sense and feeling of the people of England were against the punishment of death for forgery. It was clear the severity of the punishment had not prevented the crimes."

The first instance of fraud, to a great amount, was perpetrated by one of the confidential servants of the corporation. In the year 1803, Mr. Bish, a member of the Stock Exchange, was applied to by Mr. Robert Astlett, cashier of the Bank of England, to dispose of some Exchequer bills. When they were delivered into Mr. Bish's hands, he was greatly astonished to find not only that these bills had been previously in his possession, but that they had been also delivered to the Bank. Surprised at this, he immediately opened a communication with the directors, which led to the discovery of the fraud and the apprehension of Robert Astlett. By the evidence produced on the trial, it appeared that the prisoner had been placed in charge of all the Exchequer bills brought into the Bank, and when a certain number were collected, it was his duty to arrange them in bundles, and deliver them to the directors in the parlour, where they were counted and a receipt given to the cashier. This practice had been strictly adhered to; but the prisoner, from his acquaintance with business, had induced the directors to believe that he had handed them bills to the amount of L700,000, when they were only in possession of L500,000. So completely had he deceived these gentlemen, that two of the body vouched by their signatures for the delivery of the larger amount.

He was tried for the felonious embezzlement of three bills of exchange of L1,000 each. He escaped hanging, but remained a miserable prisoner in Newgate for many years.