by paying off the loan in the year 1705, government might-if it so desired-extinguish the Bank's Charter, giving a year's notice to the corporation of its intention to do so.

The tallies of previous loans had represented the investment; but what was new in the present plan was the funding principle. Originally it was the practice to borrow on the security of some tax to be set apart as a fund to pay the principal and interest. Funds therefore originally meant the tax appropriated to the discharge of a loan; but as the practice grew, it came to mean, as now, the principal of the loan. The plan of the Bank (based upon that of St. George's Bank of Genoa), by means of which it was now proposed to supply the money required for the war in Holland, was due to William Paterson, a Scotsman, and was suggested by him. in 1691 to his city friends. But the idea of a London bank was not a new one; for many years the more enlightened of the merchants had advocated such a scheme. A merchant of the name of Cradock had even put forward such a proposal as early as 1660, while among the great men of the Restoration, Sir William Petty was well known as far in advance of his time for his schemes in this direction; but it was only now adopted by the government on the advice of Montague. By means of the funds with which the Bank supplied him, William III. was able to continue the campaign in the Netherlands without being obliged to call upon the country to the full amount of his necessities. For instance, he obtained a loan from the City for £1,200,000, the yearly interest of which at 8 per cent.-together with 4000 a year which was allowed to the Bank for expenses of management-now cost the taxpayer only £100,000 per annum. The jealousy and distrust with which the scheme of the money men 'was regarded was nevertheless so great, that its promoters carried it

through the House of Lords with the bare majority of twelve; and all were amazed when in the City itself it met with an instant and immense success.1 The fear entertained by many, that the ordinary enterprises of commerce and trade would suffer by great sums of money being diverted into these fresh channels, was proved to be unfounded; the demand created the supply, and money in plenty was forthcoming so soon as the loan was placed on the market. The books were opened for 1694 subscriptions on the 21st of June 1694, at Mercers' Hall, when, in the words of Luttrell, some large sums were immediately subscribed.

2

'The Lords of the Treasury attended personally,' he writes, and subscribed £10,000 for the Queen; Sir Robert Howard and his son £18,000, Sir John Houblon £10,000, and so several others.' After this, subscriptions came pouring in, the success of the scheme was secured, and the conditions upon which the charter was to be granted, were fulfilled."

In the light of present-day business, and of the millions now dealt with in the City of London, the sums of money embarked by the pioneers of modern finance two hundred years ago appear as mean and insignificant. But in those days they were in truth great sums of money; and the courage which inspired those who ventured their fortunes in this manner was the greater, that the success of their undertaking was dependent upon the chances of war. Indeed Hamilton, in his Inquiry on the National Debt (1818), affirms that

1 Macaulay.

2 Cunningham, The Growth of English Industry and Commerce in Modern Times, p. 392.

3 Luttrell, ii. 331, 1694.

4 The original stock raised by subscription (not exceeding £20,000 in one name) was £1,200,000. See R. Hamilton, An Inquiry concerning the Rise, Progress, etc., of the National Debt. Edinburgh, 1818.

The Booke contayning the names, etc. . . . as shall voluntarily advance ye sume of fifteen hundred thousand pounds towards the carrying on the War with France'—is in the Bank of England.

'more difficulty was found in raising the comparatively moderate sums required in King William's reign than in obtaining much larger loans in later times,' and this fact he attributes partly to the inferiority of the national wealth and the great value of money, and partly to the 'novelty of the system and want of public confidence.'

In an old tract of 1694, a list of the Commissioners appointed by the King and Queen 'For taking subscriptions for £1,200,000 pursuant to the Act of Parliament' is given. Four of the Houblons were among the number of these Commissioners. They were authorised under the Great Seal, and their Majesties promised, that so soon as the required amount should be subscribed, they would 'incorporate the subscribers by the name aforesaid,' viz. 'the Governor and Company of the Bank of England; and that the whole sum subscribed and paid, should be the capital stock.'" By the abstract of the Bank Charter given in the tract, we find that provision is made for the 'better ordering of the corporation, and for a succession of persons to be governor, deputy-governor, and directors thereof, with such powers as are hereafter mentioned.' These persons were to continue in their offices till March 25, 1696, 'unless any of them shall dye,' and their names 'shall be inserted in our royal charter of incorporation to be granted as aforesaid, and shall thereby be made and constituted the first governor, deputy-governor, and directors of the company.' Subsequently, officers were to remain in office for the space of one year only. Great powers were given to the governors and directors as to the management of the affairs of the Bank. They were to hold courts of directors, and to summon general

1 R. Hamilton, An Inquiry concerning the Rise, Progress, etc. of the

National Debt.

2 The Bank was at first called the Tunnage Bank, because the Act 'made in Parliament had granted to their Majesties several rates and duties upon the tonnage of ships,' etc. The Commission for taking Subscriptions, etc.' Tract (Crawford Library) 1694.

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Q

courts as often as they saw cause. They were to direct and manage all affairs of the Corporation in borrowing, receiving monies, and giving securities under the common seal, and in their dealing in bills of exchange, buying or selling bullion, gold, or silver, or selling goods deposited for money lent, and in selling goods being the produce of lands purchased, or in lending any monies and taking securities for the same; . . . and generally to act and do in all matters which by the act may be done, which they shall judge necessary for the well ordering and managing the corporation.'1 Finally, it was agreed that 'this charter shall be made and sealed without any fine or fee, great or small, to be paid to their Majesties in their Hanaper or elsewhere.'

2

On the 12th of July Luttrell was able to give the list of directors for the new Bank. They were 'chose by ballotting' from among those subscribers and promoters who had contributed 2000 and upward to the undertaking. The first three names given on the list in the order of election, were those of Sir James Houblon, Sir William Scawen, and Sir John Houblon. It was not till the 27th of July that the Bank Charter was sealed. Meanwhile Sir John Houblon was elected Governor by ballot, and at the same time the Deputy-Governor chosen was Michael Godfrey, who had been one of those most concerned in forwarding the scheme of the Bank. Although Paterson was elected a director he soon retired, withdrawing his money (£2000). The first entry in the court minutes of the Bank records that Sir John 1 'The Commission for taking Subscriptions, etc.' Tract (Crawford Library) 1694.

2 He succeeded Sir John Houblon three years later as governor of the Bank. 3 Luttrell, iii. 242.

He was one of the 'forty substantial men' named for the jury for the trial of Lord Shaftesbury, see p. 227.

5 It has been suggested that the jealousy of his colleagues caused this retirement; but Paterson's was a creative genius, and it is more likely he wanted both his time and his money for the Darien Scheme now occupying his thoughts. See T. A. Stephens, A Bibliography of the Bank of England, 1897, 160, 161.