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 deposits, and though, collectively, the deposits of the other banks of the country which have offices in London many times overpass its own. Some idea of the strength of its position may be gained from the fact that stocks are now inscribed in the bank books to an amount exceeding 1250 millions sterling.

In one sense, the power of the Bank of England is greater now than ever. By the act of 1844, regulating the note-issue of the country, the Bank of England became the sole source from which legal tender notes can be obtained; a power important at all times, but pre-eminently so in times of pressure. The authority to supply the notes required, when the notes needed by the public exceed in amount the limit fixed by the act of 1844, was granted by the government at the request of the bank on three occasions only between 1844 and 1906. Hence the Bank of England becomes the centre of interest in times of pressure when a “treasury letter” permitting an excess issue is required, and holds then a power the force of which can hardly be estimated.

One main feature of the act of 1844 was the manner in which the issue of notes was dealt with, as described by Sir Robert Peel in parliament on the 6th of May 1844:—“Two departments of the bank will be constituted: one for the issue of notes, the other for the transaction of the ordinary business of banking. The bullion now in the possession of the bank will be transferred to the issue department. The issue of notes will be restricted to an issue of £14,000,000 upon securities—the remainder being issued upon bullion and governed in amount by the fluctuations in the stock of bullion.” The bank was required to issue weekly returns in a specified form (previously to the act of 1844 it was necessary only to publish every month a balance-sheet for the previous quarter), and the first of such returns was issued on the 7th of September 1844. The old form of return contained merely a statement of the liabilities and assets of the bank, but in the new form the balance-sheets of the Issue Department and the Banking Department are shown separately. A copy of the weekly return in both the old and new forms will be found in A History of the Bank of England, p. 290, by A. Andréadès (Eng. trans., 1909); see also R. H. I. Palgrave, Bank Rate and the Money Market, p. 297.

One result of the division of the accounts of the bank into two departments is that, if through any circumstance the Bank of England be called on for a larger sum in notes or specie than the notes held in its banking department (technically spoken of as the “Reserve”) amount to, permission has to be obtained from the government to “suspend the Bank Act” in order to allow the demand to be met, whatever the amount of specie in the “issue department” may be. Three times since the passing of the Bank Act—during the crises of 1847, 1857 and 1866—authority has been given for the suspension of that act. On one of these dates only, in 1857, the limits of the act were exceeded; on the other two occasions the fact that the permission had been given stayed the alarm. It should be remembered, whenever the act of 1844 is criticized, that since it came into force there has been no anxiety as to payment in specie of the note circulation; but the division of the specie held into two parts is an arrangement not without disadvantages. Certainly since the act of 1844 became law, the liability to constant fluctuations in the Bank’s rate of discount—one main characteristic of the English money market—has greatly increased. To charge the responsibility of the increase in the number of those fluctuations on the Bank Act alone would not be justifiable, but the working of the act appears to have an influence in that direction, as the effect of the act is to cut the specie reserve held by the bank into two parts and to cause the smaller of these parts to receive the whole strain of any demands either for notes or for specie. Meanwhile the demands on the English money market are greater and more continuous than those on any other money market in the world. Of late years the changes in the bank rate have been frequent, and the fluctuations even in ordinary years very severe. From the day when the act came into operation in 1844, to the close of the year 1906, there had been more than 400 changes in the rate. The hopes which Sir Robert Peel expressed in 1844, that after the act came into force commercial crises would cease, have not been realized.

The number of changes in the bank rate from 1876 to 1906 in England, France, Germany, Holland and Belgium were as follows:—

There has been frequent discussion among bankers and occasionally with the government as to the advantage it might be to grant the Bank of England an automatic power to augment the note issue on securities when necessary, similar to that possessed by the Bank of Germany (Reichsbank). One of the hindrances to the success of such a plan has been that the government, acting on the advice of the treasury, required an extremely high rate of interest, of which it would reap the advantage, to be paid on the advances made under these conditions. Those who made these suggestions did not bear in mind that the mere fact of so high a rate of interest being demanded intensifies the panic, a high rate being associated as a rule with risks in business. The object of the arrangement made between the Reichsbank and the treasury of the empire of Germany is a different one—to provide the banking accommodation required and to prevent panic, hence a rate of only 5% has been generally charged, though in 1899 the rate was 7% for a short time. As is often the case in business, a moderate rate has been accompanied by higher profit. The duty on the extra issue between 1881, when the circulation of the Bank of Germany first exceeded the authorized limit, and the close of the year 1906 amounted to £839,052. Thus a considerable sum was provided for the relief of taxation, while business proceeded on its normal course. The proposal made by Mr Lowe (afterwards Lord Sherbrooke) in 1873 was to charge 12%, a rate which presupposes panic. Hence the negotiations came to nothing. The act of 1844 remains unaltered. The issue on securities allowed by it to the Bank of England was originally £14,000,000. This has since been increased under the provisions of the act to £18,450,000 (29th March 1901). Hence against the notes issued by the bank less gold by £4,450,000 is now held by the bank than would have been the case had the arrangements as to the securities remained as they were in 1844.

The Bank of England has, from the date of its establishment, possessed a practical, though perhaps not an absolutely legal, monopoly of issuing notes in London. It became gradually surrounded by a circle of private banks, some of considerable power.

The state papers included in F. G. Hilton Price’s Handbook of London Bankers (1876) contain some of the earliest records about the establishment of banking in England. The first of these is a petition, printed in the original Italian, to Queen Elizabeth, of Christopher Hagenbuck and his partners in November 1581, representing “that he had found out a method and form in which it will be possible to institute an office into which shall enter every year a very large sum of money without expense to your Majesty,” so “that not only your Majesty will be able to be always provided with whatever notable sum of money your Majesty may wish, but by this means your State and people also; and it shall keep the country in abundance and remove the extreme usuries that devour your Majesty and your people.” Hagenbuck proposed to explain his plan on condition that he should receive “6% every year of the whole mass of money” received by the office for twenty years. The queen agreed “to grant to the said Christopher and partners 4% for a term of twenty years, and to confirm the said grant under the great seal.” The document is signed by Francis Walsingham, but nothing further appears to have come of it. When we compare the date of this document with that of the establishment of the Banco della Piazza di Rialto at Venice, it is not unlikely that the idea of the establishment of a bank was floating in the minds of people connected with business and had become familiar to Hagenbuck from commerce with Venice. Other state papers in 1621 and 1622 and again in 1662 and 1666 contain somewhat similar proposals which however were never carried into practice.

The little London Directory, 1677, contains a list of goldsmiths mentioned as keeping “running cashes.” Of these firms described in 1677, five houses were carrying on business in 1876. Three of these, or firms immediately descended from them, Child & Co. of Temple Bar, Martin & Co. of Lombard Street (as Martin’s Bank, Ltd.), and Hoare & Co. of Fleet Street, are still carrying on business. Barnetts, Hoare & Co. and Willis, Percival & Co. have been absorbed since 1876, the first by Lloyds Bank (1884), the second by the Capital and Counties (1878). Many of the goldsmiths carried on a considerable business. Thus the books of Edward Blackwell, who was an eminent goldsmith and banker in the reign of Charles II., show that the king himself, the queen mother, Henrietta Maria, James, duke of York, the prince of Orange, Samuel Pepys, the East India Company, the Goldsmiths’ Company and other city companies did business with him. Sir John Houblon, the first governor of the Bank of England, kept an account with Blackwell, who was, however, ruined by the closing of the exchequer in 1672. But his son married into the family of Sir Francis Child, and his grandsons became partners in Child’s Bank.