IV.
Lucia reached Palenella again about midday, and rode into the village holding in her hand the kerchief she usually wore on her head, a circumstance which of itself would have been enough to attract attention, since uncovered heads were rarely seen in the village. But, as the absence of the kerchief revealed the fact that her heavy plait had disappeared leaving only a short, stubbly stump to show where once it had been, it was not many minutes before the whole village was exclaiming, “Lucia’s hair has been cut off!”
The news had spread like wild fire even before Lucia reached her own door, and was speedily confirmed, if confirmation were needed, by the fearful outburst of weeping and wailing with which Mother Ceprano received her disfigured daughter.
The old woman wrung her hands, tore her hair, uttered maledictions, screamed and howled so wildly that she was heard even in the farthermost houses, and the whole population speedily collected round the house.
Lucia had not yet dismounted, and there she now sat on the mule, looking perfectly calm and collected, while the children danced round her mocking and jeering, and the men and women whispered and gazed in astonishment.
It must be confessed that the villagers’ first feeling was one of hearty satisfaction in the proud Lucia’s humiliation. But they quite expected to see some young man appear waving the plait in triumph, and when they found this did not happen, their gratification gave way to wrath and indignation against the unknown person who had done the deed. The pride of the whole community was hurt, and wild voices were heard shouting, “Whoever it was he shall not go unpunished! A girl of our village—he has insulted us all, every one—he shall make it good or pay for it with his life!”
The men doubled their fists and raised their arms, uttering savage threats and imprecations, as they pressed round Lucia who sat like a statue, watching the growing excitement and tumult with intense interest.
“Who was it? who did it?” they shouted to her from all sides. “Do you know him? Who has dared to insult you and all of us? You must say who it is!” were the cries uttered in various tones by a hundred angry men and women.
“He must marry you, he must, or he shall die! Who was it? who?”
“A man in Palene,”answered Lucia in a clear voice.
“Palene? he shall die if he won’t do his duty. But what is his name?”
“Don Ernano!”
“What, he? a foreigner! the light-haired man! the sportsman!” cried several voices.
“It’s all the same,” screamed others, “it’s just the same. It would make no difference if he were a townsman—he shall die if he won’t do you justice and restore you to honor; yes, he shall die by our hands,” cried all, old and young, with angry, flashing eyes.
“He must give the village satisfaction at once,” cried one who had taken the lead; “I will go to him now. Take your knives, my men, and say who’ll go with me?”
“I! I!”cried at least twenty voices and a number of men separated from the rest and started off at a rapid pace along the road to Palene.
Lucia now dismounted, led the mule into his stable and retreated to her dismal little room out of her mother’s way. Here she sat down quite exhausted on the only chair it contained, and drew a deep breath.
“Now no one can kill him for marrying me, for they will make him,” she said softly to herself, “and he won’t refuse. He likes me, I’m sure of that now, and Pietro Antonio won’t dare to touch him, for he would have the whole village against him.”
It was about an hour after all this commotion that the first of the Palenella peasants entered Don Ernano’s wineshop and called for a tumbler of wine. In a few seconds more another came in, and then a third, and before the barber knew where he was, his room was filled with peasants, all of whom carried knives in their gay-colored sashes, and looked very menacing.
Don Lugeno, though peaceably disposed, was a brave man enough, but he could not help feeling somewhat aghast on the present occasion, for there was evidently something strange about his visitors.
“Don Ernano,” began the spokesman, “you have cut off the plait of one of our girls—eh? is it so?”
“Yes!”returned the barber with some embarrassment, but without the slightest suspicion of what was meant, or what the question boded.
“Have you the plait?”
“Yes, I have.”
“Then please to show it to us.”
The barber went and fetched it from the cupboard and held it up, saying, “Here it is.”
“You know the girl?”they inquired further.
“Yes, it is Lucia Ceprano; I have known her a long time.”
“Good! Will you marry her?”inquired the leader suddenly stepping up to the barber.
“Marry—Lucia Ceprano?” exclaimed Don Ernano quite taken a-back.
“Will you?” and a dozen large knives flashed into the air, while in an instant the men had closed the entrance into the shop, surrounded the terrified owner and driven him into a corner.
“Yes or no?” said they in suppressed tones.
Lugeno looked from one to the other and tried to collect himself. He saw plainly enough that it was no laughing matter, for the men were looking at him with an expression of deadly hatred in their eyes, and they looked so sullen and determined that he felt he had never before been so immediately face to face with death. He could hardly breathe, but he struggled to say, “Only tell me——”
“Still, man,”whispered the ringleader; “no shirking, and no unnecessary words. Answer me; will you marry Lucia Ceprano of Palenella, whose plait you have cut off, or not? Say you will, now, this instant, without any humbug, or in two minutes you are a dead man, as sure as we all stand here!”
A gleam of joy and relief came into Don Ernano’s eyes; he breathed more freely, and wiping his forehead, said with a smile, “Why, of course I will, my men, with all my heart, if she will have me.”
“She must!”was the rejoinder, spoken in tones of as much determination as before. “Then you swear, here before us, to marry Lucia, as soon as possible, at all events within the month, and you will be married in our church, by our priest?”
“I swear it,”said the barber with great alacrity.
“That’s well; and you have acted wisely, master, let me tell you, for you would not have left your shop alive otherwise!”
Thereupon the men put up their knives, ordered some wine, each separately drank to the health of the still bewildered Don Ernano, bade him a polite farewell, and returned to the village. The evening was not far advanced when they reached Palenella, and going straight to Mother Ceprano’s house, they found her still lamenting and vituperating the rascal who had done the evil deed, while Lucia was sitting contentedly at the table eating her supper with a good appetite.
“We have good news for you, Lucia,” cried a dozen voices; “he’ll marry you. He has solemnly sworn to marry you within the month. You may be quite easy about it, for he will do all that is right by you, and he will give us satisfaction. He is a clever man, much respected, and as good as anyone in the village.”
“Thank you, my friends, I am quite satisfied. You have done me a good turn and I’ll never forget it,”said Lucia, looking positively radiant with happiness.
That night the village was a long time in settling down to its usual state of quietness; for the men felt they had achieved a grand victory and could do no less than celebrate it, little guessing, of course, that they had been outwitted by a girl, and that so far from being the victors they had actually been defeated, and had had their own weapons turned against them.
Meanwhile, in spite of her happiness, Lucia was feeling a little uneasy as to the way in which Don Lugeno might view her conduct, and very early in the morning she was in the shop again. So early was she, indeed, that he did not hear her enter, as he was busy with his coffee in the kitchen.
“Don Ernano,” began Lucia in a humble, tremulous tone, “can you forgive me?”
The barber turned round like a flash of lightning.
“Lucia! Lucia!” he exclaimed joyously; “but, my dear girl, do for mercy’s sake tell me what it all means. Is it true? Am I really to marry you?”
“Do you mind very much, signore? I thought—I fancied—”said poor Lucia, trembling, and panting for breath.
“Mind! Ah, signorina, it is not that; I am only too happy to think I am to have such a dear, good, beautiful wife,” said Lugeno consolingly, and his manner was so hearty as to leave no room for doubt as to his sincerity. “My dearest girl, don’t cry; this happiness has come upon me like a—like a thunder-bolt. You’re the very wife I should have chosen above all others; but I don’t understand what has happened, or how it has all come about. Why, I have been forced to accept happiness such as I dared not even dream of at the point of twenty knives! How is it, dear signorina? And why did you make me cut off your plait?”
Don Ernano spoke so kindly and pleasantly that Lucia had soon dried her tears, and now looking up at him with a beaming face, she said, “I will tell you all about it, Don Ernano. You see I was obliged to do as I did, or you could not have married me without incurring the vengeance of that wicked Pietro who is very angry at my refusing him. Now you are under the protection of the whole village, and he will take good care not to come in your way.”
Then Lucia went on to tell her lover all the ins and outs of the affair, and how, after Pietro’s attempt two nights ago, she had made up her mind to get him to cut off her hair rather than let anyone else do so.
“And now will you forgive me?” she asked in a gentle, shame faced tone.
“Forgive? I’ll thank you with all my heart, you dear, brave, clever girl. I declare you are wiser and cleverer than the wisest lawyer,” and drawing the tall, handsome village maiden to him, he gave her a long kiss, which was cordially returned.
“What a pity about your beautiful hair! I wish it were grown again,” said he, tenderly stroking his bride’s close-cropped head.
“Well, you are a hair-dresser, so you must see what you can do,” said Lucia; “but I have made a good exchange. Where is the girl who would not sacrifice the finest head of hair for a good husband, especially,” she added shyly, “when the lover himself cut it off?”
While Lucia and Don Ernano were thus pleasantly engaged, there had been a great disturbance at Palenella. Pietro Antonio, having just heard all that had happened, had hurried to the village in a furious passion. First he poured out his wrath on the peasants for their stupidity, and then tried to set them against the barber, whom he had always hated, and now of course detested more than ever. He told the peasants that he was a crafty rascal, that he and the girl understood one another, and had acted in concert, and that he only wanted her money.
But he soon found that this would not do. The villagers had no mind to be robbed of their triumph, and were quite certain they understood the matter better than he did, and they used such forcible arguments to convince Pietro of the justice of their views, that he retired to his bed for a fortnight, and after that, not only gave Palenella a very wide berth, but soon left the district and went to Naples.
Mother Ceprano behaved in a most amiable and polite manner to her future son-in-law, who, by Lucia’s advice, determined to let the little property at Palenella and allow his mother-in-law the rent of it for her life. Also he made up his mind to sell his business in Palene and have a nice barber’s shop and small café in Rome, where he and Lucia would do their utmost to please their customers.
Three weeks later the marriage was celebrated with much firing of guns and rockets in the presence not only of the whole village, but of most of the inhabitants of the town of Palene, and there was every reason to hope that it would prove a happy one, in spite of the strange way in which bride and bridegroom had been brought together.—Belgravia.
[THE BANK OF ENGLAND.]
BY HENRY MAY.
The simple definition of banking is money-dealing. A banker properly so called is but a tradesman engaged in buying and selling money, that symbol of wealth which in all civilised countries facilitates or renders possible the exchange of commodities, which are wealth itself. A banker produces nothing, nor does he, except in a most indirect manner, add anything to the wealth of the country. His business is the collection and distribution of that general representative of merchandise, money, much in the same way as an ordinary shopkeeper collects and distributes the special articles of his individual trade. Joint-stock banks, then, are but co-operative distributing associations formed for the purpose of fighting against some real or fancied oppression, and of competing, to the supposed advantage of the public, with private enterprise. They are formed for the purpose of competing with private bankers whose business they appear to be gradually absorbing, possibly by a sort of process of the survival of the fittest. In this way the origin, in 1694, of the Bank of England, the parent joint-stock bank of the kingdom, and the largest and most important money-dealing institution in the world, may be traced to the combination of the Government, merchants, traders, and the general public to oppose the exactions, usury, and financial tyranny of the goldsmiths and stock-jobbers of the period. A very limited acquaintance with pamphlets published at the time of the Great Revolution will show that the Bank of England was the natural outcome of necessity, a necessity which guaranteed its success if honestly and prudently managed. Through its means the foundation of a safe paper currency was secured, the national credit maintained, and the system of usury and extortion prevalent throughout the country undermined—at the expense, it is true, of many so-called bankers, stock-jobbers, and goldsmiths, but to the great gain of the nation, its commerce, and the general public. Of the originator of the Bank of England—Mr. W. Paterson, who remained a director only for a year or two—we know really very little, except that he was equally the founder of the ill-fated Darien Expedition of 1698, that he was an able, honorable, and enthusiastic man, and that he died in Scotland, where, “pitied, respected, but neglected,” he lived for many years.
The original capital of the Bank was £1,200,000, which was subscribed in a few days. The whole of this amount was, as a condition of the charter, lent to the Government at eight per cent., the Bank being allowed an additional £4,000 a year for the management of the Government accounts. The necessary capital for carrying on the banking business appears to have been obtained from the public by the issue of bank bills, termed by some flippant writers of the period “Speed’s notes,” from the name of the first chief cashier. These bills were evidently a sort of “deposit receipt,” bearing interest at the rate of twopence per cent. per diem, or at the rate of three per cent. per annum, and they appear to have given sore offence to the goldsmiths. The Bank of England commenced business in the Mercers’ Hall, Cheapside, where the first “General Court of Proprietors” was held. But after a few months, this situation being found inconvenient, an agreement was made with the Grocers’ Company (which appears to have been in difficulties) for the use of their hall in Princes Street. The original working staff of the Bank consisted of fifty-four clerks, whose united salaries amounted to the modest sum of £4,340 a year, averaging a little more than £80 a year each. The chief cashier (Mr. T. Speed), the chief accountant, and the secretary received £250 a year each, and one clerk is scheduled in the pay-sheet as working “gratis.” Addison, in No. 3 of the Spectator, gives us the following pleasant little glimpse of the Bank at work in 1710: “In one of my late rambles, or rather speculations, I looked into the great hall where the Bank is kept, 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 act in that just and regular economy.” From which it would seem that the Bank dignitaries of old had a firm belief in the virtues of the “master’s eye,” scorned bank parlors and private rooms, and were content to work with their servants coram populo—a good, homely, old-fashioned practice, no doubt, but one scarcely adapted to modern banking requirements. Bank of England directors in those days, however, had a good deal more to do with mere clerical duties than they have at present. They by no means shirked the most practical responsibilities of office, for we find that at that period, and for many years afterwards, even the warrants for the payments of dividends were signed by two of their body.
It was not until after the Bank had existed some forty years that the directors found the business so completely outgrow the accommodation afforded by the Grocers’ Hall as to necessitate a separate building of its own. The foundation of the present building was laid in 1732 on the site of the residence of Sir John Houblon, the first governor of the Bank, and business was commenced in the new premises in 1734. The edifice was greatly enlarged between the years 1770 and 1786, and was completed, pretty much as it now stands, in 1786, an Act having been procured in 1780 to enable the directors to purchase the adjoining church, land, and parsonage—in fact the whole parish—of St. Christopher le Stocks, to the rector of which non-existent parish the Bank pay £400 a year to this day. The drawing office now stands on the site of the old church, the garden being the churchyard. In 1800, when Princes Street was widened, the present wall-screen round the Bank was erected by Sir John Soane giving a uniform appearance to the exterior of the building. There is much in the architectural interior of the Bank which is well worthy of admiration; for instance the quadrangle called the bullion-yard, in Lothbury, the garden, rotunda, and court rooms, &c. The long prison-like stone-colored passages and offices devoted to public business, however, are singularly cold and cheerless, owing chiefly to some apparent, yet unaccountable, objection of the authorities to employ color as a decorative auxiliary; possibly from a fixed but mistaken idea that color is antagonistic to cleanliness and brightness to business.
Although the necessities of the State contributed to the establishment of the Bank of England, they were, at intervals of every few years, compelled, after making a feeble resistance, to purchase the continuance of their privileges on exceedingly onerous terms. The history of the seven renewals of the charter between 1694 and 1800, and of the accordance of permission to increase the capital of the Bank, is one continuous record of State exactions. The Bank, as a condition of State patronage, were on each successive occasion forced to increase their loans to the Government at low rates of interest or without any interest whatever, three millions sterling being lent for six years without interest in 1800. Interest on previous loans was reduced, exchequer bills were cancelled, and on one occasion a free gift of £110,000 was made to the State. As a consequence the Government debt to the Bank increased at a rapid rate, till it amounted at last to upwards of fourteen and a half millions sterling, or rather more than the whole capital of the Corporation. In 1833 the Government paid off one-fourth of this debt in reduced annuities, and thereby reduced it to £11,015,100, at which amount it now stands. While Ministry after Ministry thus accurately tested the pliability of the “Governor and Company,” and relentlessly preyed on their fears as to the continuance of their monopoly, it is pleasant to read of the intense feeling of loyalty which actuated the directors in all their dealings with the State. When, after the Rebellion of 1715, the Government proposed to reduce the interest on the National Debt from six to five per cent., the Bank testified to their desire to assist the measure by at once agreeing to accept the lower rate, and to provide money to pay off those creditors who declined to submit to the reduction. Again, when a further reduction in the interest on part of the National Debt was proposed in 1750, the Bank at once assented, and arranged to find a sum of money to pay off the dissentients. The passive attitude lately assumed by the Bank directors towards the conversion scheme of the present Chancellor of the Exchequer contrasts somewhat unfavorably with the loyal attachment of the Bank to the State in olden times. The transactions of the Bank of England with Government for a period of one hundred and twenty years ending with 1816 are but a series of loans and advances by the Bank in anticipation of the revenue, or of payments of treasury bills drawn by the Government agents abroad. These large advances and payments were entirely independent of the permanent loan made to the Government by the Bank, and were supposed to be but temporary assistance rendered to the State in times of sore need, to be repaid periodically as the revenue was collected. But repayment was not made. Again and again did the Governor and Company represent to the Ministers that they were unable to continue to increase the floating debt without endangering the safety of the Bank. Coaxed and bullied in turn (especially by Pitt), they allowed their loyalty to outrun their prudence, and yielded more or less gracefully time after time, till at last in 1797 they were compelled to suspend cash payments, entirely through their exertions to aid the Government. Undoubtedly the exclusive privileges which the Bank in the infancy of banking enjoyed were in some sense a quid pro quo for their services to the State, and the fear of losing their charter may have been a strong incentive to loyalty. The subsequent gradual enfranchisement of banking by the various enactments between 1826 and 1858 and the enormous progress which banking has since made throughout the country, have, however, considerably lessened the value of these privileges, and from a mere proprietor’s point of view it is quite possible that the Bank of England might profitably forego their charter altogether, now that they are in no fear of losing it, and, so far as pure banking is concerned, they no longer enjoy a monopoly. These considerations may have tempered the loyalty of the directors, and may account for the very independent fashion in which they nowadays approach the Government for the transaction of business upon which, in the olden time, they were accustomed to enter with fear and trembling.
The establishment of branches by the Bank of England in 1826 was a direct consequence of the great panic of 1825, caused, as the Government alleged, by reckless speculation encouraged and fostered by private banks, and by the overissue of country bank notes. In a correspondence with the Bank, the Government expressed their determination to “improve the circulation of the country paper,” and, after paying the Bank the complement of saying, “We believe that much of the prosperity of the country is to be attributed to the general wisdom, justice, and fairness of the dealings of the Bank,” suggested that the Bank of England should establish branches of their own in different parts of the country, and should, moreover, yield part of their exclusive privilege of joint-stock banking by permitting the formation of banks with more than six partners, except in or within sixty-five miles of the metropolis. After a vain attempt to obtain some compensation for the concession of their monopoly for joint-stock banking the Bank yielded on both points, and an Act was passed authorising the establishment of Bank of England branches and the formation of country joint-stock banks. The circulation of one and two pound notes was also prohibited by this Act.
The Bank charter was again renewed in 1833, when Bank of England notes were first made a legal tender, and the usury laws repealed so far as they affected three months’ bills. The most important clause in this charter, however, was that which legalised the establishment of joint-stock banks in and within sixty-five miles of London. This led to the establishment of the London and Westminster Bank in 1834, the first of those numerous metropolitan joint-stock banks which now so extensively and beneficially administer to the commercial wants of the country. Up to about this time it had been universally considered that the Bank of England enjoyed the exclusive privilege of joint-stock banking within the above radius, but now the astonishing discovery was made that this was not so, and in fact never had been so; and this discovery was confirmed by the law officers of the Crown. The directors protested, but resistance was useless. The Bank lost its supposed privilege, though it is very questionable whether the Government behaved quite straightforwardly in the matter. This Act, together with one or two subsequent banking Acts, thus completely enfranchised banking, and abolished a monopoly which was, after all, obstructive both to financial and commercial progress. The abolishment of any monopoly is invariably but a question of education and time, and, in accordance with the doctrine of experience, it does not appear that the Bank have really lost anything by the competition engendered by the enfranchisement of joint-stock banking, while commerce and the community have undoubtedly gained enormously.
We come now to Sir Robert Peel’s famous Bank Charter Act of 1844, entitled “An Act to regulate the issue of Bank Notes, and for giving to the Governor and Company of the Bank of England certain privileges for a limited period.” It confirms the curtailed privileges of the Bank for eleven years, subject afterwards to redemption on twelve months’ notice being given and the repayment of the debt due by the Government to the Bank. A clause in the subsequent National Debt Act of 1870, however, provides that the Bank of England shall continue to be a corporation until all the public Funds shall be redeemed by Parliament, thus practically granting it a lease in perpetuity. The Act of 1844—to some of the special provisions of which I shall presently refer—practically regulates the whole banking system of the country, and at the present time governs the Bank of England in the conduct of their business. In accordance with its provisions, the issue of Bank of England notes was first kept distinct from the banking business proper by the creation of the “Issue Department” and the “Banking Department,” with which probably most of my readers are perfectly familiar, at least by name. Besides these Issue and Banking Departments, there is in the Bank a third most important department, devoted to what is generally, though somewhat inaccurately, termed “the management of the National Debt.” In their capacity of bankers to the State the governor and company of the Bank of England have always acted as the financial agents of the Government for distributing, and paying the dividends on, the funded debt, as well as for the performance of other book-keeping duties in connection therewith. Of late years the Bank have undertaken similar duties for the Indian and several Colonial Governments, for the Metropolitan Board of Works, and for various corporations and municipalities. The considerable portion of the Bank premises devoted to this agency business is now generally spoken of by financial and banking writers as “The Department for the Management of the National Debt”—an imposing title doubtless, which says a good deal more than it means, and one, for aught I know, adopted nowadays by the Bank themselves; but, possibly influenced by the recollections of days long gone by, I confess my partiality for the old familiar title of “Stock Offices.”
In the conduct of their business, then, the Bank of England perform three distinct and important functions—that of financial agents, that of issuers of notes under the control of the State, and that of Government and general bankers. The duties involved in these functions are discharged, severally, towards the State and the various governments and corporations for whom they are agents; towards the general public, from or to whom they buy or sell notes and gold; and towards the Government and customers for whom they act as ordinary bankers. I will consider briefly the system by which these three functions are discharged. The offices comprised in the department for the management of the National Debt are the various stock offices in which are kept the stock ledgers and the transfer books, the Dividend Office, the Cheque Office, the Unclaimed Dividend Office, the Power of Attorney Office, and the Will or Register Office. The nature of the business transacted in these different offices is sufficiently indicated by their names, with the exception of the Cheque Office, which, on the lucus a non lucendo principle, is probably so called because it has nothing whatever to do with “cheques,” but is devoted, for the most part, to the purpose of checking the amounts and totals of the dividend warrants paid by the “Dividend Pay Office,” an office which belongs to the Banking Department. Some idea of the amount of work done in the various Stock Offices may be gathered from the circumstance that they employ the services of some 450 clerks. Nearly 2,000 books are in constant use in some ten or twelve rooms. The dividend warrants on the funded debt alone number about half a million a year, and are, when paid, sent to Somerset House for verification, together with a duplicate copy of the dividend book. As a remuneration for its services in connection with the National Debt, the Bank is paid a commission of £300 per million on the first six hundred millions of the amount and £150 per million on the remainder. Since the funded debt is now altogether about £628,500,000, the Bank receives on this account about £184,000 per annum, a remuneration which cannot be considered excessive.
The extreme accuracy and dispatch with which the clerical labor involved in the business of the Stock Offices is performed, is almost marvellous, and reflects the highest credit on the administrative machinery of the Bank. Every possible expedient is resorted to for the purpose of facilitating the work and guarding against error, even to the free employment of the Bank’s printing-office and the use of the stereotype process in the preparation of the dividend books in duplicate. It is worth mentioning that all the old stock ledgers, transfer books, vouchers, and documents connected with the various stocks which have been created since the establishment of the Bank are carefully preserved and systematically arranged for ready reference in the Stock Office Library under the charge of a librarian, whose duties, however, though involving great responsibility, are more monotonous than onerous.
The “Issue Department” of the Bank of England is the outcome of the determination expressed by the Government in 1844 “to regulate the issue of bank notes.” The experience of former years, more particularly that of 1825, had fully demonstrated how undesirable, and even dangerous, it was to leave the circulation of bank notes to the uncontrolled discretion of country bankers, and though there can be no reason to doubt that the Bank of England had hitherto used the power which they possessed of expanding or contracting their circulation at will with great judgment, and substantially to the benefit of the mercantile community, it was thought desirable that the control of the whole circulation in the country should be practically vested in the State, and be governed by some sound financial principle. The theoretical basis of the Act of 1844 is the principle that bank notes should not be mere symbols of credit—simple I O U’s, as it were, which are a confession of a want of cash—but of actual “ear-marked” gold; of ready money, which alone regulates, or should regulate, the extent of the commerce of the country. The soundness of this principle is doubted by many financial authorities on the ground that it checks the proper expansion of trade and in times of crisis has failed in practice. I cannot, however, here discuss the large subject of currency, but must accept the law as I find it, merely stating that in my opinion it affords the only safe basis upon which any sound currency can be regulated. To carry out this law effectually, then, it was obviously necessary that the Government should create or select some establishment from which bank notes might be issued, and in which the gold that these notes represented should be set apart or stored. As the State Bank, the Bank of England was naturally entrusted with these functions. Hence the creation of the “Issue Department.” But in order to afford some elasticity to the circulation, and to deal gently with the “vested interests” of the Bank of England and country bankers alike, the Act provides that no banks of issue shall be permitted other than those in existence in May, 1844, and that an average of the note circulation of these banks shall be taken, which shall in future be the maximum circulation allowed to them. This maximum was subsequently fixed at about eight and three-quarter millions. Provisions are also made by which, on certain terms, issuing banks may cede their privilege of issue to the Bank or forfeit them altogether in case of bankruptcy or certain changes in the constitution of their partnerships. The total amount of these “lapsed issues” since 1844 is about two and three-quarter millions, leaving the present authorized maximum circulation of the country banks at about six millions. No stipulation is made that any proportion of this circulation shall be based upon gold. This matter is left entirely to the judgment of the bankers themselves, whose discretion, however, there seems no reason to question, since from the weekly returns supplied to the Government in conformity with the Act, it appears that not more than one-half the notes of the maximum issue are in actual circulation. With regard to the Bank of England, permission is accorded to the Issue Department to issue notes to the amount of fourteen millions upon securities—including the £11,015,100 due by the Government to the Bank—to be set apart for the purpose of guarantee. The Bank is furthermore permitted to increase the amount of notes issued on securities to the extent of two-thirds of the lapsed issues of country banks. The extra issue thus acquired is now £1,750,000, which brings up the total amount of issue on securities to £15,750,000, inclusive of the Government debt. Any further issue of notes must be represented by an equal amount of bullion or gold coin transferred to the separate vaults of the Issue Department, but one-fourth of the amount so transferred may consist of silver bullion.
The Bank are required to furnish the Government with a weekly report of the accounts of the Issue and Banking departments. This report, which is popularly called “The Bank Return,” is published each Thursday afternoon, and is copied in the morning newspapers of Friday, together with the comments and deductions, more or less speculative and intelligent, of the different City editors. The Bank Return, so far as it regards the Issue department, is simplicity itself. Let the reader put one of them before him. On the one side he will find the total amount of notes issued, and on the other the bases of the issue, divided into the “Government debt,” the “other securities” (which together make up the total of £15,750,000, above mentioned), “gold coin and bullion,” and “silver bullion,” if there be any, which is very seldom the case. The simple term “bullion” signifies gold bullion, or gold in bars, which the Bank are compelled to receive from any person tendering it, in exchange for notes, at the rate of £3 17s. 9d. per ounce of 22 parts out of 24 of pure gold.
It is evident that the amount of bank notes issued varies in exact proportion to the amount of gold in the Issue Department, the issue against the Government debt and other securities being invariable. Roughly speaking, the contraction or expansion of the circulation indicates a corresponding curtailment or increase in commercial facilities or requirements. Hence the Issue Department return becomes an important guide to the operations of bankers, brokers, and financial firms, by whom it is carefully watched, since the increase or diminution of the stock of gold may be said respectively to be a signal of safety or danger. The receipts or withdrawals of gold in any large quantity by or from the Bank are of two kinds, inland and foreign. The former for the most part occur at certain regular periods of the year, such as the harvest season, Scotch “term-time,” &c. They exercise but a very modified and temporary influence on the money market, for the laws by which they are governed are very fairly understood and recognised, and the amount of gold actually in the kingdom remains unaltered. It is far different, however, with the demand or supply of gold from foreign countries, the importance of which to the financial world is so great that the amount of gold received or delivered by the Bank on foreign account is by them made known day by day, and is duly chronicled in the City articles of the morning papers. The exports and imports of gold (which practically, regulate the note issue) are governed by the state of the foreign exchanges, which are probably a mystery to many of my readers, but which up to a certain point may be readily understood. Approaching the subject as tenderly and in as elementary a manner as possible, I will at once simplify matters by saying that, with a few exceptions (such as regard India, Russia, China, &c.), the foreign rates of exchange represent the amount of money in its own currency (be it paper or gold) that the specified financial centre of each country is willing to give for a pound sterling on London. They vary almost daily, and are indications either of indebtedness or of the abundance or scarcity of money, and are described as favorable or unfavorable to this country according to whether they are high or low. A rate of exchange is an indication of indebtedness, according to the position of the balance of trade or indebtedness between the country fixing it and England. When in any given country this indebtedness is in favor of England, it is obvious that in that country bills on London for the purpose of remittance will be in demand, and will fetch more money; consequently the rate at which they will be purchased rises. When the balance of trade is against England, it is equally evident that bills on London are not so much wanted, and the price of them—that is the rate of exchange—consequently falls.
But I have said that a rate of exchange may be an indication of abundance or scarcity of money in the country quoting it; and it is often so in this manner. Let us suppose that there is no balance of trade to settle between a given country and England, but that the rate, of discount, or value of money, in the former is, say, three per cent., while in England it is, say, four per cent. It follows that primâ facie it is more profitable to send surplus money to England for employment than to keep it at home. In the absence of trade bills a demand for drafts transferring money to London sets in, and the rate of exchange rises. Let us now reverse this condition of things. Suppose money to be dearer in a given country than in England; it is evident in that case that capitalists here would find it more profitable to employ their money in that country than at home, and that the foreign rate of exchange would consequently fall. I have spoken hitherto of remittances by bills or drafts only, but it is obvious that a scarcity of these vehicles for the transfer of money may so drive up the rate of exchange that it becomes more profitable to send gold. When this point is reached the foreign rate of exchange is said to stand at “gold point.” If I have made myself clearly understood, the reader will now see how the rate of discount by attracting or repelling money affects the movement of gold in the Bank of England, and why, when the Bank desire to either simply protect their stock of gold or their “reserve,” and so prevent any contraction of the note issue, or to attract gold from abroad and so expand the circulation, or increase the “reserve,” they raise the official rate of discount step by step until the desired end is accomplished; or why, when the stock of gold is large and the note issue may with safety be contracted, they facilitate the trade of the country by lowering their minimum rate, at the risk of gold being required for export. He will, too, gain some slight idea of how the world’s stock of gold is moved about from country to country at the call of commerce, and how true it is that the trade of any country is, or ought to be, regulated solely by its supply of gold, or ready money.
The offices comprised in the Issue Department of the Bank are the Hall, the Bullion Office, and the Gold-weighing Room. In the Hall, notes and gold are exchanged by the public one for the other, and notes are exchanged for other notes of a higher or lower denomination. In the Bullion Office bar-gold is bought at the rate of £3 17s. 9d. per ounce, or exchanged for sovereigns at the rate of £3 17s. 10-1/2d. per ounce, at which rate bullion is also sold. Nearly all the imports of gold and silver to this country are taken to the Bank of England for delivery to the consignees. The duties connected with these consignments are undertaken by the Bullion Office, where small charges are made for weighing, packing, and collecting freight, &c. In the Gold-weighing Room gold coin is weighed automatically, at the rate of about 2,000 pieces an hour each, by about a dozen beautiful little machines worked by an atmospheric engine. Bank notes are not re-issued after having been once paid, and in the Bank Note Office registers are kept in which are recorded the dates of issue and return to the Bank of each respective note. The particulars of the payment of any note can be ascertained by a reference to the Bank Note Library, where the paid and cancelled notes are kept for seven years, after which they are burnt on the Bank premises. For the privilege of issuing the £15,750,000 against securities, and for exemption from stamp duty, the Bank pay an annual sum of about £200,000, together with any profit which they may derive from the notes issued against gold to the Government. The paper on which bank notes are printed is manufactured expressly for the Bank of England at Laverstock in Hampshire, but the dies from which the water-mark is made, as well as the plates from which the notes are printed, are made at the Bank. The notes are all printed at the Bank’s own printing-office under the care of the printing superintendent, the quantity of notes required from time to time being regulated by the chief cashier, who is responsible for their safe custody as soon as, by a second process of printing, the numbers and dates have been filled in for the purpose of issue. The average number of bank notes paid and cancelled each day is more than 40,000, and no less than 80,000,000 cancelled notes may be found as a rule, stored and sorted for reference, in the Bank Note Library. The Bank of England also undertakes the printing of “rupee paper” for the Indian Government.
The “Banking Department” of the Bank of England is the separation of the ordinary banking business from the business of financial agency and issuing notes. In a speech on the renewal of the Bank charter in 1844 Sir Robert Peel said, “With respect to the banking business of the Bank, I propose that it should be governed on precisely the same principles as would regulate any other body dealing with Bank of England notes.” The Bank Act of 1844, then, does not touch the management of the Banking Department in any way beyond requiring that a weekly statement of its assets and liabilities shall be published. This statement—which forms part of the “Bank Return”—may be thus analysed. On the left hand side are the liabilities, divided into the liability towards the proprietors of the Bank as shown by the amounts of “Proprietors’ Capital” and “Rest” (which latter is practically an addition to the capital); the liability to the Government, as shown by the amount of “Public Deposits,” which are the balances of different Government accounts; the liability to the customers as shown by the amount of the “Other Deposits,” which are the sum of the balances of the current or “drawing” accounts; and the liability to the holders of the Bank’s acceptances as shown by the amount of “Seven-day and other Bills” in circulation. On the other side of the statement are the assets by which these liabilities are represented, divided into “Government Securities,” which show the amount of the banking capital invested in Government securities; the “Other Securities,” which show the amount of other investments made by the Bank; and, separately, the “notes” and “gold and silver coin,” which show the amount of cash in hand for the current purposes of the Banking Department. This sum of notes and gold and silver coin forms, so to speak, the cash assets of the Bank, and the proportion which it bears to the current liabilities disclosed by the public and other deposits and seven-day bills is called the proportion of reserve to liabilities, and is always a matter of great interest, and often of great anxiety, to the City on Thursdays.
The question of the proportion which these cash assets should bear to liabilities is one of extreme importance to a prudent banker. It is generally considered that it should be about one-third, but a proportion of reserve to liabilities of only 33 per cent. in the Bank Return would create considerable anxiety, while in an ordinary joint-stock bank’s accounts it would, I fancy, be abnormally great, far greater than that disclosed by the half-yearly accounts submitted to the shareholders, which may naturally be supposed to represent the financial position in the most favorable light. The publication of the weekly Bank Return is so useful and important to commerce, banking, and finance that it is to be regretted that the law which calls for it is not extended to all joint-stock if not to private banks. We might then hope to see an end put to that faulty system of banking which in good times, in order to pay extraordinary dividends, encourages over-trading by giving every possible facility to speculation, and, when a reaction comes, suddenly cuts off all “accommodation,” calls in all resources, and drives its customers to the Bank of England, in the hope of obtaining that ready money which it is no longer willing itself to supply. The Bank of England, through their Banking Department, undertake duties merely towards their own customers and the Government. Their banking business is conducted for the most part (in theory, at all events) on the same lines as any other banking institution. It is unreasonable, therefore, to suppose that it is any part of their duty, in times of panic or crisis, to find ready money for a public shunted over to them by its own bankers, who from an inordinate desire to pay large dividends have placed themselves in a position of inability or unwillingness to find it themselves. And yet some such theory as this is advanced by many well-known writers on banking and finance. Bankers, probably knowing the weak points in their system, become sadly selfish, and are quick to take fright at the first signs of a panic, which they often do much to increase. The suspension of the Bank Act is to them the only true solution of the difficulties caused by over-trading, over-speculation, and inflation of general business. At their earnest entreaty—not at the solicitation of the Bank of England—has the Act been thrice suspended: not, as subsequent events proved, because any suspension of the Act was really necessary, but because bankers hesitated to do their duty to their customers, except under the shelter of its protecting wing. Nothing can be more erroneous, or, indeed, more mischievous, than the doctrine that it is the duty of the Bank of England to keep the “reserve” of the whole country, simply on the ground that, for Clearing House purposes, it suits the convenience of bankers to entrust them with large balances, and because they act as agents for the Government in automatically regulating the note issue of the kingdom.
The business of the Banking Department—which, except as regards the magnitude of its transactions, and the current accounts of other bankers and of the Government, differs but little from that of any other London banks—is carried on chiefly in the Private Drawing Office, the Public Drawing Office, the Discount Office, and the Bill and Post Bill Offices. Besides these offices there are the Dividend Pay Office, devoted to the cash payment of dividends, and the Chief Cashier’s Office, where advances on securities and the various public loans are initiated, and to which is attached the private room of the chief cashier, which for the most part corresponds with the manager’s room in any ordinary bank. In the Private Drawing Office are kept the private accounts of the general customers of the Bank, a separate counter being reserved for the exclusive convenience of bankers. It is a popular error to suppose that the conditions of keeping an account with the Bank of England differ in any essential particular from those of most of the other banks. A satisfactory introduction will enable any one to open an account, and no restriction is placed upon the amount of balance to be kept, except that if it does not prove remunerative to the Bank a charge is made in proportion to the amount of trouble and expense involved. Roughly speaking, a remunerative balance in ordinary cases is considered to be an average balance throughout the year of one pound for each cheque drawn. Thus if a customer draws two hundred cheques in a year and keeps an average balance of £200 his account is probably considered remunerative. Cheques may be drawn on the Bank of any amount however small, though there was, I believe, many years ago, a sort of understanding that customers should not draw cheques for an amount under five pounds. The Public Drawing Office, as its name implies, is devoted to the custody of the drawing accounts of the Government and various public companies and institutions. The Discount Office is charged with the reception of all bills offered for discount by parties who have opened discount accounts with the Bank. These bills are submitted to a committee of directors (sitting daily for the purpose) who decide upon the amount of accommodation to be granted and the rate of discount to be charged. The net proceeds of the bills discounted are then passed to the credit of the customer’s account, while the bills themselves are entrusted to the care of the Bill Office, which occupies itself with the duty of sorting and arranging them (together with bills belonging to customers) so that they may be duly presented for payment at maturity. In the Post Bill Office the Bank issue to the public their acceptances at seven or sixty days’ sight, technically called “Bank post bills,” for any required amount, in even or uneven sums. The amount of business transacted in this office has considerably diminished of late years, owing to similar facilities being granted by bankers generally throughout the country. The Bank of England have nine country branches, which keep separate accounts for the Issue and Banking departments, and the particulars of each day’s transactions, together with the balance sheets, are posted nightly to the Branch Banks Office in London, through which office all the correspondence and business transactions connected with the branches are carried on. There is also one branch in London at the West-End.
The economy of the Bank of England is controlled by the Governor, the Deputy-Governor, and twenty-four Directors. The clerical machinery is divided into the “Cash side” and the “Accountant’s side.” The former, under the practical charge of the chief cashier, comprises the transaction of all business where actual cash is concerned, together with the necessary book-keeping which it involves; the latter, under the charge of the chief accountant, takes cognizance of all matters of pure book-keeping where no actual cash is concerned, such as those which relate to the National Debt accounts, the registration of Bank notes, and so on. In olden times these divisions were kept much more distinct than they are at present. There was formerly a certain antagonism between the two “chiefs” which, however, has long since disappeared, and they now live together in a state of remarkable harmony, without even fighting over the question of precedence which the chief accountant is supposed to claim—mainly, I fancy, on alphabetical grounds, because A comes before C. The supervision of each office on both “sides” of the Bank, is intrusted to a principal and deputy-principal, who are accountable in the first place to the chief cashier or chief accountant, as the case may be, and afterwards to a committee of directors. The secretary is a separate officer of the Bank. He stands midway, as it were, between the two “sides,” having certain relations with each. He nurses the charter, and sees that its forms and ceremonies are complied with; he records the proceedings of the courts, summons and attends all committees, and “picks up their bits.” He waits upon the governors, and does odd literary jobs, stops notes, puts the candidates for clerkship through their preliminary examination, collects income-tax, and grants orders to view the Bank, &c. His duties, in short, are as multifarious as those of the General Post Office, and it is satisfactory to think that they are as equally well performed by the present incumbent and his staff.
The total number of employés all told in the Bank is about 1,100, and the salary list, including pensions, is about £300,000 per annum. There is an excellent library and reading-room in the Bank, to which the directors have liberally contributed both money and books. There are also a Widows’ Fund and Guarantee Society, a Life Insurance Company, a Volunteer Company, and a Club, or dining room, where clerks can dine cheaply and well, connected with the Bank, which owe very much of their prosperity to the liberality and kind consideration of the directors. The governors and directors of the Bank divide between them £14,000 per annum. Of this the governors receive £1,000 each and the directors £500 each. Beyond the status which their position gives them, they derive no benefit from their office, while they tax themselves most liberally by their contributions towards the welfare of their clerks. The governor and deputy-governor remain in office for two years only, and this short tenure of office is, with considerable reason, thought to be detrimental to the efficient and consistent administration of the functions of government. The great blot of the system seems to be the want of continuity of policy which is engendered. A governor, let us say, is an enlightened financier; for two years his policy is paramount; but his successor then comes, and perhaps reverses everything, and the onus of the change, so far as the Bank customers are concerned, is left to be borne by the permanent officers of the Bank, who have perhaps never been consulted in the matter, or whose opinions, based on the experience of many years, may be ruthlessly ignored. The two years’ system undoubtedly has its advantages in the constant introduction of new blood, it also strengthens the governors from above and below the chair. The directors below the chair give the governor a loyal and hearty support, because they feel that one day their own turn may come, while those above the chair, having passed through the ordeal, know the value of their colleagues’ support. But the result of this is nevertheless the institution of a sort of one-man power, which is well enough when there is a Hubbard, Hodgson, or Crawford in the chair, or if there is a Baring, Hambro, Rothschild, or Goschen to follow, but which may have its disadvantages.
I have thus traced the rise, sketched the progress, and dwelt briefly on the present position of the Bank of England. In spite of the gradual abolition of their monopoly, in spite of the curtailment of their exclusive privileges, and in spite of all consequent competition, the “governor and company” have never failed to lead the van of the banking progress of the kingdom, and to maintain their proud position as the first banking institution in the world. Bill-brokers may occasionally grumble at the late revival of an old rule restricting the periods of advances to six weeks before dividend time, and customers may occasionally smile or fume at the traces of red-tapeism which still linger in the establishment; but no one can look back, as I do, over a period of forty years, without fully appreciating the value of the important and beneficial changes and improvements which have lately been effected in every department of the Bank for the purpose of facilitating the transaction of business and studying the convenience of the public, or without feeling an increased veneration and respect for “the old lady in Threadneedle Street.”—Fortnightly Review.