The Great Events by Famous Historians, Volume 12

by Unknown

William Paterson, one of those men whose capacity is measured by failure or success, was the originator of the new bank; and it is perhaps unfortunate for his fame that no biography exists of this remarkable person. As the projector of the present Bank of Scotland, as the very soul of the celebrated Darien Company, and as the founder of the Bank of England, he deserves notice. A speculator as well as an adventurous man, he proved his belief in the practicability of the Darien scheme by accompanying that unfortunate expedition; and the formation of the Bank of England was the object of his desires and the subject of his thoughts for a long time previous to its establishment.

From that political change which had been so justly termed the "great revolution," to the establishment of the Bank of England, the new Government had been in constant difficulties; and the ministerial mode of procuring money was degrading to a great people. The duties in support of the war waged for liberty and Protestantism were required before they were levied. The city corporation was usually applied to for an advance; interest which varied probably according to the necessity of the borrower rather than to the real value of cash, was paid for the accommodation. The officers of the city went round in their turn to the separate wards, and borrowed in smaller amounts the money they had advanced to the state. Interest and premiums were thus often paid to the extent of 25 and even 30 per cent., in proportion to the exigency of the case, and the trader found his pocket filled at the expense of the public. Mr. Paterson gives a graphic description:

"The erection of this famous bank not only relieved the ministerial managers from their frequent processions into the city, for borrowing of money on the best and nearest public securities, at 10 or 12 per cent. per annum, but likewise gave life and currency to double or treble the value of its capital in other branches of the public credit, and so, under God, became the principal means of the success of the campaign in 1695; as, particularly, in reducing the important fortress of Namur, the first material step toward the peace concluded in 1679."

To remedy this evil the Bank of England was projected; and after much labor, William Paterson, aided by Mr. Michael Godfrey, procured from Government a consideration of the proposal. The King was abroad when the scheme was laid before the council, but the Queen occupied his place. Here considerable opposition occurred. Paterson found it more difficult to procure consent than he anticipated, and all those who feared an invasion of their interests united to stop its progress. The goldsmith foresaw the destruction of his monopoly, and he opposed it from self-interest. The Tory foresaw an easier mode of gaining money for the government he abhorred, with a firmer hold on the people for the monarch he despised, and his antagonism bore all the energy of political partisanship.

The usurer foresaw the destruction of his oppressive extortion, and he resisted it with the vigor of his craft. The rich man foresaw his profits diminished on government contracts, and he vehemently and virtuously opposed it on all public principles. Loud therefore were the outcries and great the exertions of all parties when the bill was first introduced to the House of Commons. But outcries are vain and exertions futile in opposition to a dominant and powerful party. A majority had been secured for the measure; and they who opposed its progress covered their defeat with vehement denunciations and vague prophecies. The prophets are in their graves, and their predictions only survive in the history of that establishment the downfall of which they proclaimed.

"The scheme of a national bank," says Smollett, "had been recommended to the ministry for the credit and security of the Government and the increase of trade and circulation. William Paterson was author of that which was carried into execution. When it was properly digested in the cabinet, and a majority in Parliament secured, it was introduced into the House of Commons. The supporters said it would rescue the nation out of the hands of extortioners; lower interest; raise the value of land; revive public credit; extend circulation; improve commerce; facilitate the annual supplies; and connect the people more closely with Government. The project was violently opposed by a strong party, who affirmed that it would become a monopoly, and engross the whole of the kingdom; that it might be employed to the worst purposes of arbitrary power; that it would weaken commerce by tempting people to withdraw their money from trade; that brokers and jobbers would prey on their fellow-creatures; encourage fraud and gambling; and corrupt the morals of the nation."

Previous governments had raised money with comparative ease because they were legitimate. That of William was felt to be precarious. It was feared by the money-lender that a similar convulsion to the one which had borne him so easily to the throne of a great nation might waft him back to the shores of that Holland he so dearly loved. Thus the very circumstances which made supplies necessary also made them scarce.

In addition to these things his person was unpopular. His phlegmatic Dutch habits contrasted unfavorably with those of the graceful Stuarts, whose evil qualities were forgotten in the remembrance of their showy characteristics. Neither his Dutch followers nor his Dutch manners were regarded with favor; and had it not been for his eminently kingly capacity, these things would have proved as dangerous to the throne as they tended to make the sovereign unpopular. In a pamphlet published a few years after the establishment of the new corporation is the following vivid picture of this monarch's government:

"In spite of the most glorious Prince and most vigilant General the world has ever seen, yet the enemy gained upon us every year; the funds were run down, the credit jobbed away in Change Alley, the King and his troops devoured by mechanics, and sold to usury, tallies lay bundled up like Bath fagots in the hands of brokers and stock-jobbers; the Parliament gave taxes, levied funds, but the loans were at the mercy of those men (the jobbers); and they showed their mercy, indeed, by devouring the King and the army, the Parliament, and indeed the whole nation; bringing their great Prince sometimes to that exigence through inexpressible extortions that were put upon him, that he has even gone into the fields without his equipage, nay even without his army; the regiments have been unclothed when the King had been in the field, and the willing, brave English spirits, eager to honor their country, and follow such a King, have marched even to battle without either stockings or shoes, while his servants have been every day working in Exchange Alley to get his men money of the stock-jobbers, even after all the horrible demands of discount have been allowed; and at last, scarce 50 per cent. of the money granted by Parliament has come into the hands of the Exchequer, and that late, too late for service, and by driblets, till the King has been tired with the delay."

This is a strange picture; beating even Mr. Paterson's account of the "processions in the city," and adds another convincing proof of the necessity which then existed for some establishment, capable of advancing money at a reasonable rate, on the security of Parliamentary grants.