1819: The Bank and the Chancellor

Abstract

On the morning of Sunday, 26 February 1797, an emergency meeting of Cabinet had sanctioned a striking innovation in the British monetary system. The previous day had seen a run on the coin and bullion reserves of the Bank of England, a run engendered by fear concerning the invasion of Ireland by the French. With the Bank expecting it would not be able to meet its liabilities when trading resumed on the Monday, Cabinet issued an Order in Council which restrained the Bank from paying gold on demand to holders of its notes. The Order received immediate support from a meeting of London merchants who undertook to accept bank notes and use them in payments, despite their non-convertibility. Confidence re turned speedily, and the Bank began the issue of one-pound notes to supplement those of larger denomination to which its paper currency had been confined previously.

The corporation of the Bank of England had, during a period of twenty-two years, accumulated an enormous mass of wealth at the expense of the public, without the performance of any public service that could entitle them to that exclusive benefit … they had accumulated wealth during a shorter period, and to a greater amount, than any body of men had been ever able to do in any banking or commercial country, since banking or commerce had been established in the world.

Pascoe Grenfell House of Commons, 26 January 1819