An Essay Upon Projects

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.

By the moderatest computation that can be, these wines cost the merchant as follows: —

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.

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