There were many reasons for the establishment of a national bank. It was necessary for the sake of a secure paper currency. It was required for the support of the national credit. It was desirable as a method of reducing the rate of interest paid by the state; a rate so high that, according to Anderson, men were induced to take their money out of trade, for the sake of securing it; an operation "big with mischief." The truth is that the times required it. The theorist may prove to demonstration the perfection of his theory; the speculator may show the certainty of its success: but unless it be a necessity called for by the onward progress of society, it must eventually fall to the ground.
That the want of such an establishment was felt is certain. But while such firms as Childs—the books of whom go back to the year 1620, and refer to prior documents; Hoares, dating from 1680; and Snows, from 1685—were able to assist the public demand, although at the exorbitant interest of the period, it does not occasion so much surprise that the attempt made to meet the increasing requirements of trade proved insufficient. In 1678, sixteen years previous to the foundation of the Bank of England, "proposals for a large model of a bank" were published; and, in 1683 a "national bank of credit" was brought forward. In a rare pamphlet entitled Bank Credit; or the usefullness and security of The Bank of Credit, examined in a dialogue between a Country Gentleman and a London Merchant, this idea is warmly defended. It was, however, simply to have one of credit, nor was it proposed to form a bank of deposit; although, by the following remark of the "Country Gentleman," it is evident that such an establishment on a secure scale was desirable. He says:
"Could they not without damage to themselves have secured the running cash of the nobility, gentry, merchants, and the traders of the city and kingdom, from all hazard, which would have been a great benefit to all concerned, who know not where to deposit their cash securely?"
After much trouble this bank of credit was established at Devonshire House, in Bishopsgate Street; its object, as we have related, being principally to advance money to tradesmen and manufacturers on the security of goods. Three-fourths of the value was lent on these, and bills for their amount given to the depositor. In order to render them current, an appointed number of persons in each trade was formed into a society to regulate commercial concerns. Any individual possessed of such bills might therefore obtain from this company goods or merchandise with as much ease as if he offered current coin.
The bank of credit does not appear to have flourished. The machinery was too complicated, and the risk of depreciation and the value of manufactures too great. It was next to impossible for such a company to exist after the Bank of England came with its low discount and free accommodations.
The wild spirit of speculation—that spirit which at various periods has created fearful crises in the commercial world—commenced in 1694. The fever which from time to time has flushed the mind of the moneyed man, and given a fierce excitement to the almost penniless adventurer, was then and in the following year in full operation. The great South Sea scheme in 1720 is ordinarily considered the earliest display of this reckless spirit. But a quarter of a century before, equal ingenuity and equal villany were exercised. Obscure men, whose sole capital was their enormous impudence, invented similar schemes, promised similar advantages, and used similar arts to entice the capitalists, which were employed with so much success at a later period.
The want of a great banking association was sure to be made a pretext. Two "land banks," and a "London bank" to be managed by the magistrates, with several other proposals, were therefore put promisingly forward. One of these was for another "bank of credit"; and a pamphlet published in 1694, under the title of England's Glory, will give some idea of its nature:
"If a person desires money to be returned at Coventry or York he pays it at the office in London, and receives a bill of credit after their form written upon marble paper, indenturewise, or on other as may be contrived to prevent counterfeiting." It was also proposed that the Government should share the profits; but neither of the projects was carried out.
The people neglected their calling. The legitimate desire of money grew into a fierce and fatal spirit of avarice. The arts so common at a later day were had recourse to. Project begat project, copper was to be turned into brass. Fortunes were to be realized by lotteries. The sea was to yield the treasures it had engulfed. Pearl-fisheries were to pay impossible percentages. "Lottery on lottery," says a writer of the day, "engine on engine, multiplied wonderfully. If any person got considerably by a happy and useful invention, others followed in spite of the patent, and published printed proposals, filling the daily newspapers therewith, thus going on to jostle one another, and abuse the credulity of the people."
Amid the many delusive and impracticable schemes were two important projects which have conferred great benefits on the English people. The first of these was the New River Company, the conception of Sir Hugh Middleton; the second was the corporation of the Bank of England. Nature and the great nations of antiquity suggested the former; the force and pressure of the times demanded the latter. It is from such demands that our chief institutions arise. By precept we may be taught their propriety; by example we may see their advantages. But until the necessity is personally felt they are sure to be neglected; and men wonder at their want of prescience and upbraid their shortsightedness when, with a sudden and sometimes startling success, the proposal they have slighted arises through the energy of another.