Little Bits of History

Bank of England

Posted in History by patriciahysell on July 27, 2014
Bank of England

Bank of England

July 27, 1694: The Bank of England receives a Royal Charter. In 1690, France steamrolled over England with the naval battles proving to be England’s downfall. She desperately needed to rebuild her navy. King William III’s government was unable to borrow funds but needed £1.2 million (at 8% interest). To get funds, subscriptions were incorporated by the name of the Governor and Company of the Bank of England (its official name). The bank was given exclusive rights to the government’s balances and was the only limited-liability corporation permitted to issue bank notes. Lenders gave the government cash (bullion) and were issued notes against the government bonds, which could be lent again. The monies were raised in twelve days and half was used to rebuild the navy.

With all the construction, supplying businesses sprang up – from nail making to agriculture needed to feed the new sailors. The nave quadrupled in size and an industrial boom fueled the economy. All this led to increased power at home and eventually to a global naval presence. The bank was the brainchild of William Paterso who put forth the idea three years earlier. Nothing was done until Charles Montagu, 1st Earl of Halifax resurrected the idea. The Royal Charter was granted on this day with the passage of the Tonnage Act 1694. The first governor of the bank was Sir John Houblon. The charter was renewed in 1742, 1764, and 1781.

The bank was originally located in Walbrook, in the City of London but moved to Threadneedle Street in 1734. During the 1700s, the idea of a National Debt came into play and this was also managed by the Bank. The gold standard was upheld until February 27, 1797 when war debts climbed and the nation’s gold reserves were so meager that the bank was not permitted to pay out gold. That lasted until 1821. Another crisis took place in 1780 when rioters in London attempted to storm the building. Every night – until 1973 – a detachment of soldiers patrolled the perimeters to protect the nation’s supply of gold.

Today the Bank of England is an independent public organization owned entirely by the Treasury Solicitor on behalf of the government. They are one of eight banks authorized to issue banknotes in the United Kingdom. They have a monopoly on issuing banknotes in England and Wales and regulate the commercial banks of Scotland and Northern Ireland. The Bank’s Monetary Policy Committee does what their name implies but works with both the Treasury and Parliament. Mark Carney is the current governor and has been since July 1, 2013. He is Canadian and will serve an initial five year term rather than the normal eight years. He is seeking UK citizenship. He is the first non-British person to hold the post. The bank has reserves of £403,003,000,000. The British pound sterling is used throughout the UK and in nine British territories.

At the heart of banking is a suicidal strategy. Banks take money from the public or each other on call, skim it for their own reward and then lock the rest up in volatile, insecure and illiquid loans that at times they cannot redeem without public aid. – James Buchan

I have always been afraid of banks. – Andrew Jackson

The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks. – Lord Acton

The process by which banks create money is so simple that the mind is repelled. – John Kenneth Galbraith

Also on this day: What’s up Doc? – In 1940, Bugs Bunny made it to the silver screen.
Reign of Terror – In 1794, Maximilien Robespierre was arrested.
Smoke Gets in Your Eyes – In 1586, Sir Walter Raleigh brings tobacco to England.
Olympic Bomb – In 1996, a bomb goes off at the Atlanta Summer Olympics.

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