BANKS, without question, if rightly managed are, or may be, of great
advantage, especially to a trading people, as the English are; and, among
many others, this is one particular case in which that benefit appears:
that they bring down the interest of money, and take from the goldsmiths,
scriveners, and others, who have command of running cash, their most
delicious trade of making advantage of the necessities of the merchant in
extravagant discounts and premiums for advance of money, when either
large customs or foreign remittances call for disbursements beyond his
common ability; for by the easiness of terms on which the merchant may
have money, he is encouraged to venture further in trade than otherwise
he would do. Not but that there are other great advantages a Royal Bank
might procure in this kingdom, as has been seen in part by this; as
advancing money to the Exchequer upon Parliamentary funds and securities,
by which in time of a war our preparations for any expedition need not be
in danger of miscarriage for want of money, though the taxes raised be
not speedily paid, nor the Exchequer burthened with the excessive
interests paid in former reigns upon anticipations of the revenue; landed
men might be supplied with moneys upon securities on easier terms, which
would prevent the loss of multitudes of estates, now ruined and devoured
by insolent and merciless mortgagees, and the like. But now we unhappily
see a Royal Bank established by Act of Parliament, and another with a
large fund upon the Orphans’ stock; and yet these advantages, or others,
which we expected, not answered, though the pretensions in both have not
been wanting at such time as they found it needful to introduce
themselves into public esteem, by giving out prints of what they were
rather able to do than really intended to practise. So that our having
two banks at this time settled, and more erecting, has not yet been able
to reduce the interest of money, not because the nature and foundation of
their constitution does not tend towards it, but because, finding their
hands full of better business, they are wiser than by being slaves to old
obsolete proposals to lose the advantage of the great improvement they
can make of their stock.
This, however, does not at all reflect on the nature of a bank, nor of
the benefit it would be to the public trading part of the kingdom,
whatever it may seem to do on the practice of the present. We find four
or five banks now in view to be settled. I confess I expect no more from
those to come than we have found from the past, and I think I make no
broach on either my charity or good manners in saying so; and I reflect
not upon any of the banks that are or shall be established for not doing
what I mention, but for making such publications of what they would do.
I cannot think any man had expected the Royal Bank should lend money on
mortgages at 4 per cent. (nor was it much the better for them to make
publication they would do so from the beginning of January next after
their settlement), since to this day, as I am informed, they have not
lent one farthing in that manner.
Our banks are indeed nothing but so many goldsmiths’ shops, where the
credit being high (and the directors as high) people lodge their money;
and they—the directors, I mean—make their advantage of it. If you lay it
at demand, they allow you nothing; if at time, 3 per cent.; and so would
any goldsmith in Lombard Street have done before. But the very banks
themselves are so awkward in lending, so strict, so tedious, so
inquisitive, and withal so public in their taking securities, that men
who are anything tender won’t go to them; and so the easiness of
borrowing money, so much designed, is defeated. For here is a private
interest to be made, though it be a public one; and, in short, it is only
a great trade carried on for the private gain of a few concerned in the
original stock; and though we are to hope for great things, because they
have promised them, yet they are all future that we know of.
And yet all this while a bank might be very beneficial to this kingdom;
and this might be so, if either their own ingenuity or public authority
would oblige them to take the public good into equal concern with their
private interest.
To explain what I mean; banks, being established by public authority,
ought also, as all public things are, to be under limitations and
restrictions from that authority; and those limitations being regulated
with a proper regard to the ease of trade in general, and the improvement
of the stock in particular, would make a bank a useful, profitable thing
indeed.
First, a bank ought to be of a magnitude proportioned to the trade of the
country it is in, which this bank is so far from that it is no more to
the whole than the least goldsmith’s cash in Lombard Street is to the
bank, from whence it comes to pass that already more banks are
contriving. And I question not but banks in London will ere long be as
frequent as lotteries; the consequence of which, in all probability, will
be the diminishing their reputation, or a civil war with one another. It
is true, the Bank of England has a capital stock; but yet, was that stock
wholly clear of the public concern of the Government, it is not above a
fifth part of what would be necessary to manage the whole business of the
town—which it ought, though not to do, at least to be able to do. And I
suppose I may venture to say above one-half of the stock of the present
bank is taken up in the affairs of the Exchequer.
I suppose nobody will take this discourse for an invective against the
Bank of England. I believe it is a very good fund, a very useful one,
and a very profitable one. It has been useful to the Government, and it
is profitable to the proprietors; and the establishing it at such a
juncture, when our enemies were making great boasts of our poverty and
want of money, was a particular glory to our nation, and the city in
particular. That when the Paris Gazette informed the world that the
Parliament had indeed given the king grants for raising money in funds to
be paid in remote years, but money was so scarce that no anticipations
could be procured; that just then, besides three millions paid into the
Exchequer that spring on other taxes by way of advance, there was an
overplus-stock to be found of £1,200,000 sterling, or (to make it speak
French) of above fifteen millions, which was all paid voluntarily into
the Exchequer. Besides this, I believe the present Bank of England has
been very useful to the Exchequer, and to supply the king with
remittances for the payment of the army in Flanders, which has also, by
the way, been very profitable to itself. But still this bank is not of
that bulk that the business done here requires, nor is it able, with all
the stock it has, to procure the great proposed benefit, the lowering the
interest of money: whereas all foreign banks absolutely govern the
interest, both at Amsterdam, Genoa, and other places. And this defect I
conceive the multiplicity of banks cannot supply, unless a perfect
understanding could be secured between them.
To remedy this defect, several methods might be proposed. Some I shall
take the freedom to hint at:—
First, that the present bank increase their stock to at least five
millions sterling, to be settled as they are already, with some small
limitations to make the methods more beneficial.
Five millions sterling is an immense sum; to which add the credit of
their cash, which would supply them with all the overplus-money in the
town, and probably might amount to half as much more; and then the credit
of running bills, which by circulating would, no question, be an
equivalent to the other half: so that in stock, credit, and bank-bills
the balance of their cash would be always ten millions sterling—a sum
that everybody who can talk of does not understand.
But then to find business for all this stock, which, though it be a
strange thing to think of, is nevertheless easy when it comes to be
examined. And first for the business; this bank should enlarge the
number of their directors, as they do of their stock, and should then
establish several sub-committees, composed of their own members, who
should have the directing of several offices relating to the distinct
sorts of business they referred to, to be overruled and governed by the
governor and directors in a body, but to have a conclusive power as to
contracts. Of these there should be—
One office for loan of money for customs of goods, which by a plain
method might be so ordered that the merchant might with ease pay the
highest customs down, and so, by allowing the bank 4 per cent. advance,
be first sure to secure the £10 per cent. which the king allows for
prompt payment at the Custom House, and be also freed from the
troublesome work of finding bondsmen and securities for the money—which
has exposed many a man to the tyranny of extents, either for himself or
his friend, to his utter ruin, who under a more moderate prosecution had
been able to pay all his debts, and by this method has been torn to
pieces and disabled from making any tolerable proposal to his creditors.
This is a scene of large business, and would, in proportion, employ a
large cash, and it is the easiest thing in the world to make the bank the
paymaster of all the large customs, and yet the merchant have so
honourable a possession of his goods, as may be neither any diminution to
his reputation or any hindrance to their sale.
As, for example, suppose I have 100 hogsheads of tobacco to import, whose
customs by several duties come to £1,000, and want cash to clear them. I
go with my bill of loading to the bank, who appoint their officer to
enter the goods and pay the duties, which goods, so entered by the bank,
shall give them title enough to any part, or the whole, without the
trouble of bills of sale, or conveyances, defeasances, and the like. The
goods are carried to a warehouse at the waterside, where the merchant has
a free and public access to them, as if in his own warehouse and an
honourable liberty to sell and deliver either the whole (paying their
disburse) or a part without it, leaving but sufficient for the payment,
and out of that part delivered, either by notes under the hand of the
purchaser, or any other way, he may clear the same, without any
exactions, but of £4 per cent., and the rest are his own.
The ease this would bring to trade, the deliverance it would bring to the
merchants from the insults of goldsmiths, &c., and the honour it would
give to our management of public imposts, with the advantages to the
Custom House itself, and the utter destruction of extortion, would be
such as would give a due value to the bank, and make all mankind
acknowledge it to be a public good. The grievance of exactions upon
merchants in this case is very great, and when I lay the blame on the
goldsmiths, because they are the principal people made use of in such
occasions, I include a great many other sorts of brokers and
money-jobbing artists, who all get a snip out of the merchant. I myself
have known a goldsmith in Lombard Street lend a man £700 to pay the
customs of a hundred pipes of Spanish wines; the wines were made over to
him for security by bill of sale, and put into a cellar, of which the
goldsmith kept the key; the merchant was to pay £6 per cent. interest on
the bond, and to allow £10 percent. premium for advancing the money.
When he had the wines in possession the owner could not send his cooper
to look after them, but the goldsmith’s man must attend all the while,
for which he would be paid 5s. a day. If he brought a customer to see
them, the goldsmith’s man must show them. The money was lent for two
months. He could not be admitted to sell or deliver a pipe of wine out
single, or two or three at a time, as he might have sold them; but on a
word or two spoken amiss to the goldsmith (or which he was pleased to
take so), he would have none sold but the whole parcel together. By this
usage the goods lay on hand, and every month the money remained the
goldsmith demanded a guinea per cent. forbearance, besides the interest,
till at last by leakage, decay, and other accidents, the wines began to
lessen. Then the goldsmith begins to tell the merchant he is afraid the
wines are not worth the money he has lent, and demands further security,
and in a little while, growing higher and rougher, he tells him he must
have his money. The merchant—too much at his mercy, because he cannot
provide the money—is forced to consent to the sale; and the goods, being
reduced to seventy pipes sound—wine and four unsound (the rest being sunk
for filling up), were sold for £13 per pipe the sound, and £3 the
unsound, which amounted to £922 together.
£ s. d.
The cooper’s bill came to 30 0 0
The cellarage a year and a half to 18 0 0
Interests on the bond to 63 0 0
The goldsmith’s men for attendance 8 0 0
Allowance for advance of the money and 74 0 0
forbearance
193 0 0
Principal money borrowed 700 0 0
893 0 0
Due to the merchant 29 0 0
922 0 0
By the moderatest computation that can be, these wines cost the merchant
as follows:—
_First Cost with Charges on Board_. £ s. d.
In Lisbon 15 mille reis per pipe is 1,500 475 0 0
mille reis; exchange, at 6s. 4d. per mille
rei
Freight to London, then at £3 per ton 150 0 0
Assurance on £500 at 2 per cent. 10 0 0
Petty charges 5 0 0
640 0 0
So that it is manifest by the extortion of this banker, the poor man lost
the whole capital with freight and charges, and made but £29 produce of a
hundred pipes of wine.
One other office of this bank, and which would take up a considerable
branch of the stock, is for lending money upon pledges, which should have
annexed to it a warehouse and factory, where all sorts of goods might
publicly be sold by the consent of the owners, to the great advantage of
the owner, the bank receiving £4 per cent. interest., and 2 per cent.
commission for sale of the goods.
A third office should be appointed for discounting bills, tallies, and
notes, by which all tallies of the Exchequer, and any part of the
revenue, should at stated allowances be ready money to any person, to the
great advantage of the Government, and ease of all such as are any ways
concerned in public undertakings.
A fourth office for lending money upon land securities at 4 per cent.
interest, by which the cruelty and injustice of mortgagees would be
wholly restrained, and a register of mortgages might be very well kept,
to prevent frauds.
A fifth office for exchanges and foreign correspondences.
A sixth for inland exchanges, where a very large field of business lies
before them.
Under this head it will not be improper to consider that this method will
most effectually answer all the notions and proposals of county banks;
for by this office they would be all rendered useless and unprofitable,
since one bank of the magnitude I mention, with a branch of its office
set apart for that business, might with ease manage all the inland
exchange of the kingdom.
By which such a correspondence with all the trading towns in England
might be maintained, as that the whole kingdom should trade with the
bank. Under the direction of this office a public cashier should be
appointed in every county, to reside in the capital town as to trade (and
in some counties more), through whose hands all the cash of the revenue
of the gentry and of trade should be returned on the bank in London, and
from the bank again on their cashier in every respective county or town,
at the small exchange of 0.5 per cent., by which means all loss of money
carried upon the road, to the encouragement of robbers and ruining of the
country, who are sued for those robberies, would be more effectually
prevented than by all the statutes against highwaymen that are or can be
made.
As to public advancings of money to the Government, they may be left to
the directors in a body, as all other disputes and contingent cases are;
and whoever examines these heads of business apart, and has any judgment
in the particulars, will, I suppose, allow that a stock of ten millions
may find employment in them, though it be indeed a very great sum.
I could offer some very good reasons why this way of management by
particular offices for every particular sort of business is not only the
easiest, but the safest, way of executing an affair of such variety and
consequence; also I could state a method for the proceedings of those
private offices, their conjunction with and dependence on the general
court of the directors, and how the various accounts should centre in one
general capital account of stock, with regulations and appeals; but I
believe them to be needless—at least, in this place.
If it be objected here that it is impossible for one joint-stock to go
through the whole business of the kingdom, I answer, I believe it is not
either impossible or impracticable, particularly on this one account:
that almost all the country business would be managed by running bills,
and those the longest abroad of any, their distance keeping them out, to
the increasing the credit, and consequently the stock of the bank.
_Of the Multiplicity of Banks_.
What is touched at in the foregoing part of this chapter refers to one
bank royal to preside, as it were, over the whole cash of the kingdom:
but because some people do suppose this work fitter for many banks than
for one, I must a little consider that head. And first, allowing those
many banks could, without clashing, maintain a constant correspondence
with one another, in passing each other’s bills as current from one to
another, I know not but it might be better performed by many than by one;
for as harmony makes music in sound, so it produces success in business.
A civil war among merchants is always the rain of trade: I cannot think a
multitude of banks could so consist with one another in England as to
join interests and uphold one another’s credit, without joining stocks
too; I confess, if it could be done, the convenience to trade would be
visible.
If I were to propose which way these banks should be established, I
answer, allowing a due regard to some gentlemen who have had thoughts of
the same (whose methods I shall not so much as touch upon, much less
discover; my thoughts run upon quite different methods, both for the fund
and the establishment).
Every principal town in England is a corporation, upon which the fund may
be settled, which will sufficiently answer the difficult and chargeable
work of suing for a corporation by patent or Act of Parliament.
A general subscription of stock being made, and by deeds of settlement
placed in the mayor and aldermen of the city or corporation for the time
being, in trust, to be declared by deeds of uses, some of the directors
being always made members of the said corporation, and joined in the
trust; the bank hereby becomes the public stock of the town (something
like what they call the _rentes_ of the town-house in France), and is
managed in the name of the said corporation, to whom the directors are
accountable, and they back again to the general court.
For example: suppose the gentlemen or tradesmen of the county of Norfolk,
by a subscription of cash, design to establish a bank. The subscriptions
being made, the stock is paid into the chamber of the city of Norwich,
and managed by a court of directors, as all banks are, and chosen out of
the subscribers, the mayor only of the city to be always one; to be
managed in the name of the corporation of the city of Norwich, but for
the uses in a deed of trust to be made by the subscribers, and mayor and
aldermen, at large mentioned. I make no question but a bank thus settled
would have as firm a foundation as any bank need to have, and every way
answer the ends of a corporation.
Of these sorts of banks England might very well establish fifteen, at the
several towns hereafter mentioned. Some of which, though they are not
the capital towns of the counties, yet are more the centre of trade,
which in England runs in veins, like mines of metal in the earth:
Canterbury. Salisbury. Exeter. Bristol. Worcester. Shrewsbury.
Manchester. Newcastle-upon-Tyne. Leeds, or Halifax, or York. Warwick
or Birmingham. Oxford or Reading. Bedford. Norwich. Colchester.
Every one of these banks to have a cashier in London, unless they could
all have a general correspondence and credit with the bank royal.
These banks in their respective counties should be a general staple and
factory for the manufactures of the said county, where every man that had
goods made, might have money at a small interest for advance, the goods
in the meantime being sent forward to market, to a warehouse for that
purpose erected in London, where they should be disposed of to all the
advantages the owner could expect, paying only 1 per cent. commission.
Or if the maker wanted credit in London either for Spanish wool, cotton,
oil, or any goods, while his goods were in the warehouse of the said
bank, his bill should be paid by the bank to the full value of his goods,
or at least within a small matter. These banks, either by correspondence
with each other, or an order to their cashier in London, might with ease
so pass each other’s bills that a man who has cash at Plymouth, and wants
money at Berwick, may transfer his cash at Plymouth to Newcastle in
half-an-hour’s time, without either hazard, or charge, or time, allowing
only 0.5 per cent. exchange; and so of all the most distant parts of the
kingdom. Or if he wants money at Newcastle, and has goods at Worcester
or at any other clothing town, sending his goods to be sold by the
factory of the bank of Worcester, he may remit by the bank to Newcastle,
or anywhere else, as readily as if his goods were sold and paid for and
no exactions made upon him for the convenience he enjoys.
This discourse of banks, the reader is to understand, to have no relation
to the present posture of affairs, with respect to the scarcity of
current money, which seems to have put a stop to that part of a stock we
call credit, which always is, and indeed must be, the most essential part
of a bank, and without which no bank can pretend to subsist—at least, to
advantage.
A bank is only a great stock of money put together, to be employed by
some of the subscribers, in the name of the rest, for the benefit of the
whole. This stock of money subsists not barely on the profits of its own
stock (for that would be inconsiderable), but upon the contingencies and
accidents which multiplicity of business occasions. As, for instance, a
man that comes for money, and knows he may have it to-morrow; perhaps he
is in haste, and won’t take it to-day: only, that he may be sure of it
to-morrow, he takes a memorandum under the hand of the officer, that he
shall have it whenever he calls for it, and this memorandum we call a
bill. To-morrow, when he intended to fetch his money, comes a man to him
for money, and, to save himself the labour of telling, he gives him the
memorandum or bill aforesaid for his money; this second man does as the
first, and a third does as he did, and so the bill runs about a mouth,
two or three. And this is that we call credit, for by the circulation of
a quantity of these bills, the bank enjoys the full benefit of as much
stock in real value as the suppositious value of the bills amounts to;
and wherever this credit fails, this advantage fails; for immediately all
men come for their money, and the bank must die of itself: for I am sure
no bank, by the simple improvement of their single stock, can ever make
any considerable advantage.
I confess, a bank who can lay a fund for the security of their bills,
which shall produce first an annual profit to the owner, and yet make
good the passant bill, may stand, and be advantageous, too, because there
is a real and a suppositious value both, and the real always ready to
make good the suppositious: and this I know no way to bring to pass but
by land, which, at the same time that it lies transferred to secure the
value of every bill given out, brings in a separate profit to the owner;
and this way no question but the whole kingdom might be a bank to itself,
though no ready money were to be found in it.
I had gone on in some sheets with my notion of land being the best bottom
for public banks, and the easiness of bringing it to answer all the ends
of money deposited with double advantage, but I find myself happily
prevented by a gentleman who has published the very same, though since
this was wrote; and I was always master of so much wit as to hold my
tongue while they spoke who understood the thing better than myself.
Mr. John Asgill, of Lincoln’s Inn, in a small tract entitled, “Several
Assertions proved, in order to create another Species of Money than Gold
and Silver,” has so distinctly handled this very case, with such strength
of argument, such clearness of reason, such a judgment, and such a style,
as all the ingenious part of the world must acknowledge themselves
extremely obliged to him for that piece.
At the sight of which book I laid by all that had been written by me on
that subject, for I had much rather confess myself incapable of handling
that point like him, than have convinced the world of it by my
impertinence.