ABSTRACT
Roused into reflection by the recent menace of a common peril, the joint-stock banks took a step towards unity. An Association of Joint-Stock Banks was formed in 1838, and all such establishments in England, Wales, and Ireland were invited to be represented at a meeting in London. The meeting appointed a committee to “ communicate with the Government and to promote the passing of such laws as would be beneficial to joint-stock banks.” Meanwhile the Bank of England steadily pursued its policy of disciplinary discrimination and supervisory co-ordination up to the limits of its power. Its financial predominance was for a time beyond challenge, however much its erstwhile monopoly might be encroached upon. Even the encroachment upon its monopoly was to be money in its pocket. It is a financial paradox that while the Act of 1833 brought into existence a small army of capable rivals of the Bank of England, it was destined also to make every one of them into a useful client of the Bank. It would have seemed inconceivable in 1833 that banks which had been established in practical defiance of Thread-needle Street, should in days to come provide the Old Lady with no small part of her resources. There were always the envious voices. “ The power of the currency is vested,” said a hostile critic–the President of the Manchester Chamber of Commerce–“in twenty-six irresponsible individuals, for the exclusive benefit of a body of Bank proprietors.” But whatever jealousy might allege, it is a fact that in the period during which this financial supremacy lasted, the prestige of the Bank was 344so firmly consolidated that when (in the ’seventies) the Bank ceased to retain the premier position as a holder of deposits, its moral predominance–as we shall see–became more pronounced than ever. In the ’forties, it had assumed a quasi-parental attitude. It had begun to welcome co-operation and to reciprocate by granting advantages. A number of the country bankers worked with Bank of England notes exclusively, having fixed amounts of credit assigned them at 3 per cent. 1 The banks in Liverpool which were established before 1844 made an arrangement with the Bank of England under which they restricted their issues to its notes, and in return the Bank gave them the privilege of always having bills under discount with it, to an agreed maximum amount, at f per cent, below the minimum of the day. 2 But already the practice of the Bank of England was much stricter than that of the joint-stock banks. The 1841 Committee was told that the branches never allowed an account to be overdrawn. The inflexible refusal of interest on deposits, again, was a costly factor of the Bank’s policy, deliberately adopted in its determination to “ make common cause with the country.” The idea put to the Committee was that if the Bank took steps to attract more money it would have to mitigate its conservative methods or it would drain funds out of circulation. Glimpses behind the scenes show an equally resolute private procedure. Largely as a consequence of their conservative policy–and also, naturally, of their kinship with Threadneedle Street–the Bank’s provincial branches have always maintained a kind of suzerainty over those of the joint-stock banks. Whenever a joint-stock bank applied to the Liverpool branch of the Bank of England, Turner (the manager) always insisted 3 on having a copy of the deed of settlement and a list of the shareholders. “ I myself correspond,” said he, “ with the Bank [of England, head office] as to whether the great mass of the shareholders are respectable parties : whether they are 345parties who are personally known to me to be of wealth and consequence, or whether (as in some instances) they are persons of very little calibre and are very second-rate people : I give my opinion whether the account ought or ought not to be granted.” The Bank’s hint to Turner in the matter of the “ three W’s ” has already been recounted. Paul Moon James, himself a private banker, acknowledged the salutary results of the Bank’s policy. “ The Bank of England’s rules are very sound, though they are not altogether adapted to the general trade of the country, but they are always corrective, and the influence is beneficial; there is no doubt of it.” 1 Of course the Bank enjoyed many advantages. It could buy securities with its own notes, which country bankers could not do. Hence Hobhouse argued that the Bank could create capital by buying securities, though the country bankers could not. 2
