LONDON PRIVATE BANKERS, 1720-4735

BY D. M. JOSLIN

in the country, have been more often prejudged than investigated.

Just as the Bubble Act is often held to have inhibited industrial
developments more generally, so the cost of the Bank of England’s
monopoly of joint stock banking in England has been emphasized by
indicating the weaknesses of the private banking structure. Here a
tentative sketch of some developments in London private banking is
offered as a preliminary piece of fact ﬁnding before any ﬁrm judgement
can be made either of the eﬂiciency and importance of the private bankers,
or of the cost of the late development of joint stock banking in the
nineteenth century}

THE private bankers of the eighteenth century, both in London and

I

That banking developments should have occurred in London long before
the clear rise of bankers in the country at large is not surprising. London
dominated the commercial and political life of England in the late seven-
teenth and early eighteenth centuries, as perhaps at no other time. As the
political capital and the seat of justice it attracted a growing stream of
visitors from the provinces. The bulk of the aristocracy and gentry came
increasingly regularly to sit in Parliament, to seek oﬂice at court, to order
the legal affairs of their estates, or to arrange the marriages of their
sons and daughters in the increasingly perfect marriage market of the
metropolis. With these myriad attractions bringing them and keeping
them in town, for career, for business, for pleasure, most likely for all
three, landowners came to appreciate not only the safety and security,
but also the simple convenience of transferring a sizeable part of their
incomes to be held and spent in London. A second stream of income ﬂowed
alongside the ﬁrst; to the centre of government were remitted the proceeds
of the customs and taxes of the kingdom. Thirdly, and most important,

London dominated both the foreign commerce and the inland trade of A

England. Payments for large business transactions between London and
the provinces, or even between one place in the provinces and another,
came increasingly to be made through London. Though in the late seven-
teenth century it did not yet rival Amsterdam as the international centre
for shipping, re—exports or the provision of ﬁnancial and insurance facilities,
yet its growing export and re—export trades demanded a parallel increase
in ﬁnancial facilities. London therefore was also the focus for borrowers;

1 For recent views on the Bubble Act, see A. H. John, ‘ Insurance Investment and the London
Money Market of the Eighteenth Century’, Econamica, May 1953, p. I 38; J. A. Schumpeter,
Business Cycle: (1939), I, 248, n. 2. On the issue of the Bank of England’s monopoly and joint
stock banking, see Adam Smith, The Wealth of Nations (Everyman edition), 11, 242, and the
comments of W. R. Scott, English joint Stock Companies to 1720, I, 4.4.8 et seq.

167


168 THE ECONOMIC’ HISTORY REVIEW

the government, the joint-stock companies, the needy aristocrat and others
all tapped here the resources which derived largely from London’s metro-
politan position}

The question of the origins of banking in England is to some extent still
obscure. Credit was common in medieval transactions and obviously
there existed banking services long before the doer of those services took
on the name of banker. Traders with a strong reputation and with capital
to spare could undertake acceptance business, discount bills or make
advances to fellow merchants. Wealthy aristocrats, merchants, money-
lenders and scriveners arranged loans or lent to landowners needing
accommodation. Goldsmiths and merchants made remittances abroad, and
traders could make payments within the country. Among such groups
there is evidence of the holding of credit balances or the receipt of deposits.
But the crucial innovations in English banking history seem to have been
mainly the work of the goldsmith bankers in the middle decades of the
seventeenth century. They accepted deposits both on current and time
accounts from merchants and landowners; they made loans and discounted
bills; above all they learnt to issue promissory notes and made their
deposits transferable by ‘drawn note’ or cheque; so credit might be
created either by note issue or by the creation of deposits, against which only
a proportionate cash reserve was held? The signiﬁcance of the goldsmith
bankers in this respect should not however obscure the equally im-
portant fact that at this period they were only a group among a whole
host of ﬁnancial intermediaries, scriveners, brokers and merchants whose
role in the embryo money market of the seventeenth century may be
underestimated because their lineal descendants are either less signiﬁcant
in monetary history or less easy to single out.3

While the emergence of deposit banking, cheques and note issue‘ are
fundamental developments in English banking, the particular shaping

1 See F. J. Fisher, ‘The Rise of London as a Centre of Conspicuous Consumption’, Trans. Roy.
Hist. Soc. 4th ser. xxx‘ (194.8), 37-50; K. G. Davies, ‘Joint Stock Investment in the Late
Seventeenth Century’, Econ. Hist. Rev. 2nd ser. v (1952), 283-301;, C. Davenant, Works, ed.
Sir Charles Whitworth (1771), x, 59-60; Davenant, Two Manuscripts, ed. A. P. Usher (Baltimore,
15942), pp. 73—4- -

3 See R. H. Tawney, Introduction to Thomas Wilson’: Discourse on Uswgy (1926); R. D. Richards
77:: Early History of Banking in England (I929); D. K. Clarke, ‘A Restoration Banking House’,
in Essays in Honour of W. C. Abbott (194.1), pp. 3~48; A. V. Judges, ‘The Origins of Banking in
England’, Histmy, XVI (1931), 138-45.

3 D. C. Coleman, ‘ London Scriveners and the Estate Market in the later Seventeenth Century ’,
Econ. Hist. Rev. 2nd ser. IV (1951), 221-31.

4 In Child’s Bank, a fragmentary balance-sheet, undated, but clearly of the mid-168o’s gives
a clear picture of the size and distribution of business of Francis Child, a prominent goldsmith-
banker. The total assets as revealed amount to just over £100,000; roughly a half, ,5 57,622 was
held ‘in cash’; total loans came to £29,619. 85. 4a'.; the remainder was the working capital of
the goldsmith’s business, diamonds, rings, jewels, pearls and plate. In view of the variations in
business and of size described later, this can only be regarded as an isolated instance. But it is
at least clear that Sir Francis Child was not a large lender, and that his cash reserves repre-
sented a very substantial fraction of his deposits. These ﬁgures are taken from an account
headed, ‘Casting up of Shopp’. I am greatly indebted to Messrs Glyn Mills and Co., Child’s
Branch, No. 1 Fleet Street, for permission to consult the MSS. in their possession. Other
acknowledgements are due for permission to consult manuscripts; to Messrs Charles Hoare and
Company, 37 Fleet Street, for permission to use their records; to Martin’s Bank Limited, for the


LONDON BANKERS 1 69

of the institutional structure within which eighteenth-century banking
was to operate, occurred largely after 1688. The events are familiar enough
in themselves; they are rehearsed here to spotlight their-effects on ﬁnancial
history. The most obvious, and in some ways most revolutionary, change
was the almost completely altered character of government ﬁnance. With
Parliamentary control of taxation and with it the ear-marking of particular
funds as backing for the payment of interest on loans began a radical shift

, in the status of government as borrower. Despite the ﬁnancial difficulties

of the wars under William and Mary and under Anne, two features stand
out. The solvency of government in peace-timevwas established; in war-
time not only were there heavier taxes, but a regular method of deﬁcit
ﬁnancing was established by Montagu and Godolphin and their advisers.
There was to be no state issue of paper money; the Exchequer Bills might
easily have developed in this way, and did in fact circulate in the City.
In addition to this short-term government paper, there were various
types of more permanent security created by the longer-term issues,
mainly Annuities. For the private banker as for the mercantile community
generally, two major new groups of securities had been created which might
be held in his portfolio. The Exchequer Bill bore interest and was highly
liquid. The govemment’s- long annuities tended to depreciate in value, but
were again fairly liquid. With the increasing weight of taxation and the
more regular methods of departmental borrowing came two other conse-
quences. The' ﬂow of tax income from the provincial receivers was often
remitted to the London banker, who might of course be a tax-receiver
himself; so the growing ﬂow of taxes often.paused to swell the deposits of
the private banker. Of the various departmental issues (Navy and Vic-
tualling Bills, Ordnance debentures), which ﬂooded the market in time of
war the banker, if skilled in handling them, might take advantage, for they
were often purchasable at a heavy discount, redeemable at par, and mean-
while bore interest. Lastly, the process of funding, which increased the
debt owed by the State to the Bank of England, the East India and South
Sea Companies, provided a tremendous addition to the volume of liquid,
interest-bearing securities; these‘ had a major disadvantage, for they were
subject to heavy ﬂuctuations in capital value, especially in wartime. The
eighteenth-century money market was therefore radically different from
earlier times, as the various issues of government paper provided a wide
variety of liquid securities both for investment or for use as collateral
security for loans} ’

The immediate needs of government ﬁnance were the proximate cause
of the founding of the Bank of ‘England in I 694, though the long preceding
discussions of Dutch ﬁnance suggest that the foundation of some sort of
national bank was highly probable. In the early and more experimental

use of their records at 68 Lombard Street; to Mr W. D. Gosling of Gosling’s Branch of Barclays’

"Bank, for permission to use the eighteenth-century records of the ﬁrm; to Messrs Glyn, Mills

and Company for the use of records relating both to Glyn and Hallifax, and to Currie’s Bank.
My thanks are also due to Mr E. M. Forster for permission to consult the diaries and letters of
Henry Thornton. ‘Detailed references and statistics will be provided" elsewhere.

1 A. H. John, lac. cit. has a useful summary of the various governmental issues.

I2 Econ. Hist. vu


1 70 THE ECONOMIC HIS TOR Y RE VIE W

years the Bank’s business varied a great deal, but certain features stand
out. It received deposits and made a variety of loans to government
oﬂicials or to private persons; but the bulk of its lending was to the
government. Above all, it diﬂered from national banks elsewhere in
being a bank of note issue. By its immense size, its privileged position in
relation to government ﬁnance, and by the large volume of notes it issued,
it came immediately to occupy a unique place in the London money
market. How its operations aﬁected those of the goldsmith-bankers or
merchants of the time is still far from clear. But it is arguable that the
transition to the use of the Bank of England note as the major bank-note
circulation in the metropolis was extremely rapid. Unfortunately there
are no good or continuous estimates of the Bank of England’s total issue of
notes and sealed bills down to 1 720. At least this much is clear. The Bank’s
issues are known for the following years:1

1696 Sealed bills. 893,800. Notes 764,196
1698 ,, 1,340,000
1 720 ,, 2,480,000

While it is impossible to attempt any estimate of the total note issue of the
goldsmith-bankers of the few ﬁrms whose records happen to have survived,

more particularly as they were not great discounters of bills, we do know
that the amount of Bearer notes issued by Hoare’s Bank before 1 720

ﬂuctuated around the level of ,5: 10,000. When we ﬁrst have evidence of the

note issue of a City discounting bank, Martins, in 1 731, the volume of notes

issued is ,€ 19,476. Though the note issue of these banks, if multiplied by

the total number of other banks in existence, cannot have been a negligible

sum, yet it is highly unlikely that the total note issue of goldsmith-bankers

was more than a fraction of that of the Bank of England by I 720 at the very
latest. London bankers continued to issue notes down to the early decades
of the nineteenth century, but the volume of notes issued does not, in the case
of any ﬁrm so far studied, assume really major proportions. The security of
the Bank of England note was much greater than that of any but the most

respected private banker, and the latter may well have been discouraged

from heavy note issue by the extreme likelihood of such notes being cashed

in time of crisis, 1 720, 1 745, and perhaps ﬁnally ‘in 1 772-3. In the

early years of its existence the Bank’s discounts were rather low andvthe

mortgage business never amounted to a great deal. It seems 'a reasonable

deduction, in view of the rising volume of demand for both discounts and

loans on mortgage in this period, that these ﬁelds were occupied more

effectively by the London bankers, together with the merchants and

scriveners, so that the Bank was unable to break into them with major

success.

' The provisions of the Bank’s re-charter of 1708 deﬁned more clearly the

Bank’s privileges; no corporation or partnership exceeding the number of
six persons in England was to ‘ borrow, owe or take up any sum or sums of

6 money on their bills or notes, payable at demand or at a less time than six

1 Sir john Clapham, The Bank of England (Cambridge, 1944), 1, 44, 143, 295.


LONDON BANKERS :7;

months from the borrowing thereof’. The interpretation of these provisions
remained unchallenged until the early nineteenth century; the Bank was
held to possess a monopoly of joint-stock banking in England. While this
did not prevent the possibility of interlocking partnerships, these did not
achieve any signiﬁcance until they were used to link London with country
bankers later in the eighteenth century, The eﬁect was to conﬁrm the
existing system of unit banking in London which was not to change until
after 1833. Alongside this major provision, two other legal decisions were
important for the private banker. In 1704. promissory notes were made
assignable to a third person by statute law, reversing the decision of
C.  Holt. Secondly, the legal maximum rate of interest was lowered to
5 per cent in 1714; though the usury law was often evaded in the eigh-
teenth century, it was to have important consequences in war~tirne for
those bankers who lent on mortgage.

The market for joint-stock securities in the late seventeenth century
seems to have been a personal and somewhat haphazard affair. But by
I 720 in View of heavy additions to the number of joint-stock companies, in
addition to government issues, there was in operation a regular market for
stocks and shares, which enabled the banker both to operate in it more
efficiently and made his investments in securities more ‘shuntab1'e’.1
Within this widened range of non-governmental paper the East India
Bonds, short-dated, bearing interest, and not subject to fluctuations in
capital value, was to play an important role as a lucrative and safe short-
term investment for bankers, particularly if the supply of Exchequer Bills
was limited. With the increasing number of stocks to be invested in, and
with the London money market drawing upon the available funds of the
provinces and of Dutch investors the use of ‘Powers of Attorney’ enabled
the London banker or any London agent both to purchase securities and
transfer them to a client, and to collect dividends on their behalf?

Records of both Hoare’s Bank and Child’s Bank span the period
when these changes _.were working themselves out. The very survival,
and success of the ﬁrms, as well as their special position in the money
market make them somewhat untypical, for the London goldsrnith-
bankers were notoriously unstable. The disappearance or bankruptcy of
ﬁrms was quite common down to about I 710, and after a slight pause in
the second decade of the century, a wholesale group of failures occurred
during and after the Bubble year, when nearly a third of the previously
listed ‘goldsmiths keeping running cashes’ disappeared. Yet the shifts in
both businesses are interesting, and may have reﬂected a more general
trend. In Hoare’s Bank there was a fairly steady movement away from the
mixture of goldsmithery, pawnbroking, dealing in diamonds, speculation
in ships which were inextricably mixed up with the deposit, note issue and
lending business in the ﬁrst decade of the century. The bank was becoming
increasingly a bank for the aristocracy and gentry, and mercantile links,

1 K. G. Davies, lac. cit. p. 295; L. S. Sutherland, The East India Company in Eighteenth Centwgy
Politic: (Oxford, 1952), pp. I 1, 4.1.

2 C. H. Wilson, Anglo-Dutch Commerce and Finance in the Eighteenth Centmy (Cambridge, 194.0),
pp. 95-102; L. S. Sutherland, op. cit. pp. 43-4.

12".?’


I 72 THE ECONOMIC HIS TORT REVIEW

are somewhat less typical of the general run of the business. In the case of
Child’s Bank, City legend, not refuted by the records, has it that Sir
Francis Child was the ﬁrst goldsmith-banker to shed the goldsmith’s side
of his interests. The ﬁrm retained a strong connexion with the East India
Company, but, like Hoare’s, was building up its clientele of gentlemanly
and aristocratic landowners. At present no records of banking ﬁrms with
strong mercantile links have been discovered which span this period, but
it is at least suggestive that both the ﬁrms to be known as Martin’s and
Gosling’s respectively, had shed their goldsrnith’s business by 1720.

II

In the absence of banking statistics we are driven to make a tentative
delineation of the growing and changing structure of London private
banking after 1720 by using the information gained from a few detailed
inquiries into certain ﬁrms to illustrate the changes shown in the published
lists of London bankers.‘ Such a procedure is admittedly a makeshift,
rendered the more precarious by the continued performance throughout
the century of banking services by merchants and scriveners apart from the
formal title of -banker. Yet the decisions of merchants and traders to expand
the banking side of their activities and hive them off into a separate ﬁrm,
or to found banking partnerships, were most likely to "take place when the
demand for credit was rising fairly fast, and prospects of proﬁts ran high.
So the totals of banking ﬁrms in existence at Various times and the approxi-
mate timing of the formation of new partnerships must serve, together with
the statistics gleaned from surviving records, as a rough indicator of
changes in the direction of banking business. Apart from these difficulties,
thereremains the defectiveness of the lists themselves. They sometimes list
bankers rather than banking houses, so they have to be scrutinized in the
light of the known evidence of partnerships to reduce them to totals of
separate business units. For example, in I 736 Christopher Arnold is listed
separately from Henry Hoare, though they were in partnership. Apart

. from this, omissions in many of the lists are numerous; the listing improves

as the century proceeds, but intermittent omissions must be carefully
guarded against, for the increasing eﬂiciency of listing is easy to mistake
for a rise in banking, or worse, the omissions and reappearances exaggerate
an impression of instability which is partly attributable to defective infor-
mation. Again to illustrate the point: Messrs Fowler and Rocke are given
as bankers at the sign of the Three Squirrels in Fleet Street in I 725; there
is no further mention of a bank at this address until I754. when«Messrs
Gosling and Bennett _are named, yet the records of the ﬁrm reveal
continuity despite the changing partnerships of the intervening years? By

1 For this purpose Hilton Price’s lists have been used, but corrected, where possible. The earlier
lists, which were compiled from data at his disposal, which were probably derived from his researches
into Child’s Bank, may well be weighted in favour of the Fleet Street and Strand bankers. The
totals here arrived at should  treated only for the purpose for which they were compiled, to
try and assess the increases in banking ﬁrms; as absolute ﬁgures they are clearly too low.

2 See 1’. Matthews and A. W. Tuke, History qf Barclays Bank (1926), p. 99 for details of
partnerships.


LONDON BANKERS x73

collating all names of banks and bankers in the lists with what can be
discovered of the ﬁrm’s history a new set of totals has been arrived at.
There are, it is true, a number of shadowy ﬁrms and persons who appear
in one or two lists, and then disappear, leaving no trace; their existence
does emphasize the ﬂuidity of the fringes of the banking world, but they
are in marked contrast to the stability and continuity of a majority of the
older established houses. Secondly, the years (or approximate years) of
new foundations have been analysed in an attempt to throw some light,
however dim, upon fluctuations in banking promotions. The totals are as
follows:

I725; 24; 1736,27; I740; 31; 1745; 27; 1754,29; I759; 32;
1763,32; I755; 36; I770; 42; 1776,51; I781; 51; I786; 52-

However cautiously approached the ﬁgures reveal a marked though
uneven long-term increase, from about twenty-four in I 725 to ﬁfty-two in
1785. The timing of the few occasions when an increase failed to occur is
at least suggestive. The totals drop slightly in the I74.o’s, and are roughly
stationary from 17 59 to 1763 and again from 1781 to 1785. This suggests-
no more can be argued from fragile evidence—the possibility that in years
of war, or during the later years of war, when monetary conditions were
difficult, the rate of increase was clamped down, and new foundations
merely balanced defections through bankruptcy. Otherwise the story of
the decades down to the late I76o’s is of fairly regular accessions to the
number of bankers. Some half a dozen new ﬁrms can be traced to the
period from I 725 to I 740, followed by a gap in new foundations from I 739
to 1748. From 174.8 to 1756 a further half-dozen banks come into view,
followed by a fairly clear bunch of four new ﬁrms in 1758-9; the pace of
foundations was quickening in the I75o’s. After a lull with only three
new ﬁrms traceable to the early and mid I 76o’s there follows a torrent, no
fewer than thirteeninew partnerships were formed from‘ 1769 to 1772,
years which witnessed a rapid extension of trade and industry, together
with a speculative boom in East India Stock and much kite-flying in
Anglo-Scottish ﬁnancial relations. After the crises of I 772 and 1773 there
is a small knot of new foundations in 1773, presumably partly to replace
defections in the crash. Thereafter a new bank comes into being every year
until I 779, but from 1 780 to I 783 only one new foundation is visible. After
the end of the war, in I 784 and I 785 there is a further burst of half a dozen
new ﬁrms. So the uneven increase went on until a peak total of eighty-
three ﬁrms was reached in 1810, after which failures particularly in 1815
and I 825 thin out the ranks, and amalgamations reduce the totals until the
whole framework of London- banking was changed by the legislation of
1833 allowing non-issuing joint-stock banks to be established in London.
However dubious their arithmetical accuracy, these ﬁgures of totals and
new foundations agree quite closely in the story of growth and do reveal
the crucial importance of the foundations of I 769-73 in creating a major
addition to the banking structure. V


_174 THE ECONOMIC HISTORY REVIEW

Of the instability of bankers in these years it is even more difficult to
speak with any precision} The ending of a partnership need not imply
disaster, and the bankruptcy returns are not an entirely safe guide. It may,
however, be worth while recording the following impressions; bankruptcies
or suspicious disappearances are not uncommon down to _I74.5; they were
particularly heavy in I720 and 1721; again from I739 to 1742 when ﬁve
ﬁrms failed and during the panic year of 1745 which accounted for two
more. Thereafter the number of clear failures is appreciably less; from I 74.5
to 1771 only ﬁve ﬁrms of bankers have been traced as bankrupts. But'the
crisis year and the years of the American war tell a very different story;
a group of failures in the crisis was followed by a steady trickle, a bank each
year, down to the end of the American war. It is curious that no bank-
ruptcies have been found for the crisis years 1763-4 or 1 783-4, but as these
were mainly external drains of bullion, it is probable that merchant houses
felt the strain more heavily. While some of these failures are easily corre-
lated with the onset of war, 1739-42, or ﬁnancial crisis in I 745 and I 772-3,
it is equally clear that many of the failures are not explicable in this
way. The practice of banking was‘ still carried on alongside other trading
ventures, and too many of its practitioners paid the penalty for rash
speculation in commodities, like Sir George Colebroke’s unsuccessful
attempt to corner alum supplies, or else lacked the expertise necessary to
distinguish between various types of assets, or to keep the requisite reserves
of cash? This combination of other interests and inexperience probably
accounts for the high mortality among ﬁrms which came into existence
from 1769 to 1773.

Equally as signiﬁcant as these arithmeticalchanges are the continuing
specialization of function among private bankers, together with the changes
in the personnel of partnerships, so it is to the internal structure of indi-
vidual ﬁrms that we must turn. But ﬁrst a glance at the Bank of England.3
In I 781 Lord North could refer to it as ‘ a part of the constitution’ and ‘to
all intents and purposes the public exchequer’. In addition to its short-
term advances to government, it regularly helped the Treasury to nego-
tiate with the City ﬁnanciers and bankers the terms on which new
government loans were ﬂoated. The domination of government ﬁnance
by direct borrowing from the great monied companies was but a phase,
and by the end of the War of the Austrian Succession borrowing from the
public by subscription had become the rule. With the successive additions
to the National Debt, the Bank gained in importance from its management
of the ﬂoating debt, and handled the service payments on the bulk of the
funded debt. By the I78o’s it was regularly lending to private persons to

1 Information about bankruptcies can be found in Hilton Price, Handbook of London Bankers
( 1890); the London Magazine and the Gentleman’: Jl/Iagazine published lists of bankrupts. These
were the main sources used. Mr L. E. Pressnell, of University College, London, has compiled
a more thorough list from the records of the Court of Bankruptcy; while his ﬁgures do not differ
substantially from mine, I wish to express my gratitude to him for allowing me to see them.

2 Sec L. S. Sutherland, ‘Sir George Colebroke’s Corner in Alum’, Econ. Hist. Supp. to Econ. _7.
In (X935). 237-58-

3 Clapham, The Bank qfErzgland, I. Also H. Clapham, ‘The Private Business of the Bank of
England, 1744-1800’, Econ. Hist. Rev. xx (1941), 77-89.


LONDON BANKERS I 75

enable them to meet successive calls upon government stock. Again many,

though not all, departmental balances were held by the Bank, which also
kept the accounts of some provincial tax-receivers.

Besides this role, so vital to the money market in a period characterized
by heavy governmental borrowings in war-time, the Bank had come to
provide the prime method of making business payments in the metropolis
by its note issue. This, though ﬂuctuating somewhat, had shown a marked
increase in the I72o’s and again during and after the 17.6o’s; by 1785 its
circulation stood at approximately six million pounds. And behind the
note issue lay its bullion reserves; by 1785 it clearly held a substantial
fraction of the nation’s bullion stock, and was treated as the .ultimate
provider of cash in time of crisis. For the ﬁrst half of the eighteenth century
its private business was rather limited. Lending on mortgage disappeared;
loans to private individuals dwindled and the Bank’s advances were largely
to the great tradingucorporations particularly the East India Company.
There remain the discounts, which, in common with other aspects of its
private business, decreased steadily down to I 745. One wonders whether
its regulations were perhaps a little demanding in these years, for com-
merce was expanding down to the early I74o’s. Thereafter the discount
business increased to substantial proportions, particularly in the crisis
years of 1763 and 1772—3, and inithe later years of war from 1746-7 to
1748-9, 1758-9 to 1763—4 and from 1780-1 to 1784-5, when the private
bankers tended to be more restrictive in their policies. Of course the
precise composition of its discounts is uncertain; the war increases probably
reﬂect a substantial volume of discounts of Navy Bills, Ordnance Deben-
tures and other departmental issues. But there is little doubt that it acted
as the Bank of London in its commercial discounting, for it discounted
only for traders living in London. Despite these ﬂuctuations and restric-
tions, the immensely higher level of its discounts during and after the
I76o’s, while to some extent reﬂecting the rising volume of internal and
foreign trade, does suggest that the Bank was now competing far more
successfully with the London private bankers and merchants. By 1785
a radical change in its position had occurred: it was easily the largest
single discounter in the City, whereas some forty years earlier its
bill portfolio may easily have been smaller than those of its private
competitors}

In the structure of London private banking two major groups of banks
are immediately distinguishable, differentiated both by their location and
increasingly by the direction of their business. First we can take the group
sometimes referred to as ‘West end’ bankers, the bulk of whose business
was later described by one of them as ‘not with mercantile men’. The
shift away from mercantile dealings did not occur in all of them until the
very end of the eighteenth century, but some revealed this tendency very
early. In 172 5 Hilton Price gives a total of thirteen ﬁrms in this sector,
mainly in Fleet Street and the Strand; in 1785 there were some ﬁfteen

‘ Clapham, Bank of England, I, 78. In the unusually slack year of 1743-4. Clapham estimated
the Bank’s average bill portfolio at £63,500.


1 76 THE ECONOMIC HIS TOR T RE VIE W

ﬁrms in this area, but the composition had very largely changed.‘ Most
of the best documented ﬁrms so far examined were in this group.

By 1720 the goldsmith-banking ﬁrm created by James Hoare and Sir
Richard Hoare had shed its active goldsrnith’s business. Sir Richard was
followed in the. bank by a series of partnerships in which, with a single
exception intheieighteenth century, only members of the Hoare family
participated. It rapidly became one of the great banks for the aristocracy
and gentry} Working closely with the estate stewards of the landowners, it
regularly received rents from their estates all over the country. Large
balances were held in London and drawn on by note or by bill when
required. The ﬁrm came to handle investments in the stocks and collect
dividends for their customers. With its clientele among the richest group in
the kingdom, the business grew to a considerable size. In 172 5 the
liabilities, which were mainly deposits, totalled £209,074; on the asset
side their loans and investments (mainly loans) stood at £90,868 while
the liabilities were backed by a very healthy reserve of cash, £89,474.
By 1785, after more than half a century of growth interrupted only by the
wars, deposits and other liabilities stood at ,5‘ 82 1,002; total loans, advances
and investments were ,6 599,220; overdrawn accounts came to £47,: 16;
with again a substantial though lower cash reserve of ,€ 156,363. Despite
shifts in emphasis during the period covered, certain generalizations are
valid. As its depositors and customers became increasingly specialized
among the landowners and lawyers, mercantile links became less impor-
tant. The bulk of its lending was on mortgage and bond, again mainly to
the gentry and aristocracy. If it could not meet their needs directly, it
sought for lenders on mortgage among its ‘Friends’ who had investible
funds, and so continuedto play the role of intermediary in the mortgage
market. As a second line of business there was a stream of advances, for
one or more months to City men upon a variety of securities, East India
Stock, South Sea Stock, tea warrants, and Bank stock. The bank’s own
investments were largely in this range of securities. Discounting was not
a major feature of its activities, though discounts occasionally reached
substantial absolute totals simply because of the bank’s size. It was a well
conducted, cautious and entirely dependable ﬁrm which had ridden out,
and was to ride out, all the crises from 167 3 onwards. In a passage in the
Essay on Commerce, Richard Cantillon, who was a banker, and had dealings
with Hoare’s, drew distinctions between the reserve ratios which a banker
should keep, depending on the type of customers, and their liability to
withdraw sums at short notice; he instances a bank whose customers were

. ‘landowners or economical gentlemen’ and argues that such a bank could

afford to work on lower cash reserves than one dealing with merchants
whose withdrawals were more sudden._ ‘Some trust one banker, some
another. The most fortunate is the banker who has for clients rich gentle-
men who are always looking out for safe employment for their money

1 Hilton Price, op. cit.

2 For the early years and for a general account see H. P. R. l-loare, Home’: Bank, a Record
1673-1932 (1932)-


LONDON BANKERS 1 77

without wishing to invest it at interest while they wait.’ 1 By these canons
Hoare’s Bank was well placed, though it was not unique._

Child’s Bank, like Hoare’s, was to become a. favourite bank for the
landed groups. Among the depositors aristocracy and gentry came to
loom large; again rents were received, investments in stocks made and
dividends collected. Together with a sizeable group of mercantile cus-
tomers in London, there are quite a few country correspondents, mainly
traders, or, as in the case of Livesey Hargreaves of Manchester, identi-
ﬁable as manufacturers. But it is unlikely that by the end of the period
covered mercantile interests accounted for more than a fraction of the
ﬁrm’s business. From admittedly incomplete evidence, it seems that the
asset structure increasingly resembled that of Hoare’s. Loans were made
to the aristocracy and gentry upon mortgage or assignments of mortgage,
upon personal bonds or upon the deposit of stock at collateral security.
After 1720 there are, it is true, a very few loans of the traditional gold-
smith type, on the security of silver or gold plate and precious stones, but
they were insigniﬁcant. There were important advances made to City
dealers, upon parcels of stock. For the rest, the ﬁrm’s heavy investments
in East India securities are eloquent of the connexions of the partners with
the politics and ﬁnance of the East India Company. Sir Robert Child was
a Director of the Company in 1719-20, and Sir Francis Child in 1731.
Robert Devon, a partner, was one of the ﬁnancial powers behind Lawrence
Sulivan in his struggle for control of the Company. But the evidence of the
strong links with the East India business is incomplete. We know little of
the discounts in the early part of the period, and from the 1 760’s it is clear
that the ﬁrm disliked discounting for its provincial customers. It is unfor-
tunately impossible to give any accurate estimate of the size of the business;
we do know, however, that in 1712 the total assets were over £100,000,
with loans and interest outstanding totalling £47,777, 2:. 9d. and the cash
at £59,982. 3:. 4a’.; by 1829 total assets had risen to £1 -7 millions. A guess,
based on the remaining accounts of annual proﬁts, together with the
volume of ‘loans and investments, coupled with its growing similarity in
asset structure to Hoare’s, would suggest that it was of comparable size
with Hoare’s by the end of our period?

A much more ﬂexible policy, despite its location and ultimate similarity,
is to be found in the third bank in Fleet Street. When in 1742 Francis
Gosling ‘entered the ﬁrm which was ultimately to bear his name, the con-
cern wasstill a small one. The goldsmith size of the businessrhad died out
before 1720; the proﬁt and loss accounts suggest that the ﬁrm had been
rather less prosperous in the late 1 730’s than previously. However, when
we can ﬁrst make an overall survey of the business in September 1742,
total deposits were no more than £38,754, with a further liability on notes
issued of £660; the assets were fairly evenly distributed between invest-
ments in securities and loans to clients ‘amounting to approximately
£14,000 each; the remainder consisted of some bill discounts and hard cash.

1 R. Cantillon, Essay on Commerce, ed. H. Higgs (1931).
2 F. G. Hilton Price, The Mmygald by Temple Bar (1902) ; Sutherland, East India Company, p. 102.


I 78 THE ECONOMIC HIS TORT RE VIE W

The ﬁrm held just over a hundred accounts at that date, including country '

people, gentry and of course, some of the local lawyers. The connexions of
the new bank partners with the structure and clientele of the business are
striking. Francis Gosling was a man of some substance, having been
a bookseller and printer in Fleet Street. A few remaining letters from this

part of his career suggest that he may have been in the habit of making

payments on behalf of customers who held credits with him. In I 743, his

original partner having died, he was joined in the bank by Sam Bennett,

a retired East India trader. With Gosling the links of the ﬁrm "with
publishers and authors are clearly visible, Rivingtons, Longmans, Lintot,

Tonson, Edward Gibbon and Samuel Richardson all had accounts at the
bank. There is a slight trace of previous East India connexions in the
person of Diamond Pitt, but Sam Bennett solicited further business from

his East India acquaintances. A letter of I 744/ 5 written to the bank from
Fort St George speaks of 'Mr Bennett as ‘desirous of having money matters
recommended from his Indian acquaintances, that might engage them to

you’. The ﬁrm received remittances home from Company servants in
India, and carried out a wide variety of services for these distant acquain-
tances and correspondents; the knowledge of aﬁairs in India sent from
correspondents on the spot ‘must have been useful in the activities of the
ﬁrm in East India Company politics at home. For they too became
involved in the contest between Clive and Sulivan; Sir Francis Gosling
became one of Clive’s'ﬁnancial agents, and in I 762 when Bennett retired,
George Clive, a cousin of Lord Clive, was brought into the partnership.
It is not surprising that the ﬁrm was to‘ number some of the ‘nabobs’

among its customers—Clive, Wedderburn-, Impey, Hastings among the
great, and a large number of lesser ﬁgures. By 1790 the ﬁrm had over
a thousand customers, which is, indicative of its speed of growth; among
them are a steadily increasing number of gentlemen and aristocrats. With
its mercantile links the firm moved heavily into the discount business, and re-
mained heavily in the discount market until the last decade of the eighteenth
century. Yet this was only part of its business; the rest. consisted in the usual

advances to its City and aristocratic customers, on the security of stock,

or notes; mortgages became increasingly common as the ﬁrm acquired its
aristocratic customers and became sufﬁciently large to tie up a portion of
its resources in this way. Thirdly, there was the usual range of investments,

Annuities, East India Bonds, Bank Stock, Navy Bills and Exchequer Bills.

By 1785 the bank’s total liabilities were £476,399. 13:. 8d.; of these the
bulk were ordinary deposits; just over £26,000 were the balances of
country bankers, while the note issue was just below £4000}

How similar these ﬁrms were to the remainder in the West End can only
be discovered by more detailed research. At least this is clear; while the
asset structure of Gosling’s differed substantially from the other two, the
trend of landowners as customers, and loans on mortgage is apparent in
all three. By the end of the century it is fairly certain that, alongside
its connexions with Scottish banking, Coutts Bank resembled these and

1 Matthews and Tuke, History of Barclays Bank, pp. 79-96; Sutherland, op. cit. p. I02.


LONDON BANKERS :79

probably so did Drummonds. Thomas Coutts constantly sought aristo-
cratic customers, and declared that he was averse to dealing with industry.
Meanwhile one of the newer foundations, Herries Bank in Stjames Street,
was specializing in the issue of traveller’s cheques for the special convenience
of wealthy gentlemen going on the Grand Tour. In this sector of bankers
personal friendship, family links, political colour or religious persuasion
mattered a great deal in attracting and holding customers. For example,
Wright’s Bank in Covent Garden specialized in the Catholic gentry}
Moving out of this area which, despite certain speciﬁc links with the
East India Company or the mercantile world, was increasingly devoted
to serving the landowning groups, we come into the very distinct world of
the City, where bankers clustered in and around Lombard Street. Most
of the banks in this area in the early eighteenth century were the creation
of goldsmiths. We know that by 1714. in the partnership of Surman and
Stone, the bulk of the older business of goldsmithery had died away, for
the partnership agreement of that year makes no mention of it, but speciﬁes
that the capital of the firm was to be employed ‘ at interest, or in Discompt
of Bills, Buying Stocks or Securitys’. The partners were not to be actively
associated with any other bank or with any other trade. In 1731 the
surviving accounts permit increasing precision about the nature of its
operations. The depositors and customers were largely City men, and in
addition there were a number of country correspondents; there are no
aristocrats easily identiﬁable in the early years. Instead there are well-
known mercantile ﬁnancial ﬁrms and names—Sir Matthew Decker, Iron-
side and Co., William Braund, together with a goodly sprinkling of Anglo-
Dutch and Anglo-Portuguese personalities, Van Neck, Van Notten, de
Vries, Crellius, da Costa, Lopez, Suasso and the ubiquitous Samson
Gideon. Yet in comparison with Hoare’s, or even Child’s, it was not an
immense concern. At Christmas I 731 total deposits stood at ,5 I 39,99 5 and
notes were outstanding to the value of ,5 19,476. Almost half these liabili-
ties were covered by cash, while the income producing assets were fairly
widely distributed; ﬁrst, loans to City men and more occasionally to
country correspondents upon the security of parcels of stock or personal
bonds; secondly, there were the bill discounts——the main part of the
business; then investments in a wide variety of securities, Bank Stock,
East India and South Sea Stock, lottery tickets and departmental issues;
lastly, loans on Respondentia bonds which increased in the I75o’s. As
might be expected both from the clientele and the direction of the business
mortgages were extremely rare. By 1789 the ﬁrm had grown, fairly
steadily but not very spectacularly, so that its deposits now totalled
£370,210. Though there were slight modiﬁcations in the type of customer
——some gentry are now identiﬁable, and there is an occasional mortgage—
there were no major shifts in the internal structure of the business. Note
issue was on a modest scale, usually below £10,000 issued to bearer. The

1 See E. H._Coleridge, The Life qf Thoma: Coulis, Banker (1920); Sir VVi1liam Forbes, Alemoirs
of a Banking House (Edinburgh, 1860) pp. I 7 et seq.; VV. F. Crick and J. E. Wadsworth, A Hundred
Tears of joint Stock Banking (1936), p. 287. _


180 THE ECONOMIC HISTORY REVIEW

ﬁrm continued as a stable and cautious bank, mainly devoted to serving
the City merchant by advances and discounts. It took an important part
in making up lists of subscribers to loans during the Seven Years War, and
its relations with the Bank of England were friendly, for it participated in
the lucrative business of the Subscription to the Circulation.

But the country customers of the bank should not be overlooked. Bills
drawn on a London house or accepted in London were sent to Martin’s
who credited the customer’s account with the sum due, when it was paid,
unless of course it was drawn on a banker and immediately payable. In
its turn the bank granted acceptances to the customer’s bills or notes,
provided such acceptances did not exceed the cash balance on the account.
If they exceeded this sum, the bank discounted sufficient bills payable to
the customer to cover the difference. Or else the bank might discount
bills at the request of the correspondent, and would make arrangements for
payments he might have to make out of London. The rules of the house
were strict; it reserved the right to limit the discounting it did‘ for its
correspondents, more particularly reserving the right to refuse to discount
ﬁnance bills. It consistently refused to negotiate bills, regarding this as the
proper function of the City merchants. In addition to conducting the
account in this way, the bank would include the names of correspondents
on its lists for new ﬂotations, and performed the usual functions of pur-
chasing securities and collecting dividends. Advice about investments
was mingled in its letters with the latest political or East India gossip.
Occasionally they acted as intermediaries, informing a borrower of the
possibility of accommodation among their ‘friends’, but this does not
seem to have been a very usual practice. Lastly, the Country correspon-
dent had access to the bank’s usual lending facilities, but it was ﬁrm in its
refusals to lend money on mortgage. For these various services the bank
charged no commission, but expected a fairly substantial deposit of cash
upon the account, which it could proﬁtably employ}

At present there is insuﬁicient evidence to judge how similar this bank

A was to the other, older City bankers. That its dealings in the City itself were

fairly typical, seems highly probable from the structure of its business. But
of the country correspondence we cannot be so sure; in striking contrast to
the majority of City banks it did not accept the agency to country bankers,
though among its country correspondents there were probably many who
either entered that business or were carrying it as a sideline.

So far, both in the West End and in the City we have dealt with ﬁrms of
long standing", however much, as in the case of Gosling and Bennett, new
partners brought fresh energy and a different thrust to the business. It
remains to" sketch the origins, and, where this is at present possible, the
business of a few of the newer eighteenth—century foundations. A small
number of the new ﬁrms were the result of divergences in existing partner-
ships. The bank of Surman, Dineley and Cliffe was formed by the break-
away of a partner, possibly an ex-clerk and a customer of Martin’s in

1 J. B. Martin, The Grasshopper in Lombard Street (1892); L. B. Namier, The Structure of Politics at
the Accession of George III (1929), pp. 69, 241.


LONDON BANKERS 181

I 749; in I 756 an internal disagreement caused William Backwell to secede
from the partnership of Child and Backwell to form a separate ﬁrm; in
1770 the bank of Boldero, Carter and Co.’ seems to have split into two
separate partnerships. There are several banks in which the senior partner
was previously in another ﬁrm, though the reasons for his leaving it are
unknown. Such were Vere, Glyn and Hallifax (I753); Wickenden, Mof-
fatt, Kensington and Boler-(I 775) ; Raymond, Harley, Lloyd and Cameron
(1778) ; and Dorsett and Mackworth (1785). Secondly, there are the
London banks founded by existing country banks, who moved into London
in order to manage their own agency there, Smith, Payne, Smith; Han-
bury, Taylor, Lloyd and Bowman and Jones Loyd. Still keeping within
the range of bankers, there are ample cases of bankers moving from one
partnership, or a failed partnership, into another; so James from Messrs
Roffey, Neale, James and Fordyce entered the new ﬁrm of Mason, Currie,
James and Yallowley (1773) or J. H. Tritton, a junior partner in Brown,
Collinson and Tritton, which failed in 1782, joined Barclay, Bevan and
Company. Or again the translations or promotions of clerks to partner-
ships was common. Outside the range of existing bankers and their clerks
a few minor categories are visible; an army agent might make the transi-
tion to banking, or a landed gentleman, Sir William Pulteney, might
become a bank partner. But apart from the existing bankers, many of
whom were either engaged actively in trade, like Sir George Colebroke,
all other sources fade into relative insigniﬁcance compared with the mer-
cantile and manufacturing origins of the bulk of the new partners and
ﬁrms. Often it implied merely specializing a little further in banking
services previously performed. Brewers and distillers, Roffey, Currie,
Lefevre; the son of a linen-draper, Barclay; the son of a great merchant
and remitter, Thornton; a glass manufacturer, Rogers; together with
a number diﬂicult to classify, being engaged in trade and ﬁnance, Herries,
Hanbury, Magens, Amyand. They were almost invariably men of con-
siderable substance, for a bank partnership needed considerable capital,
estimated ‘at ,5 20,000 by a contemporary writer}

The personal history of Henry Thornton is well documented; the ﬁrm
he joined was founded in 1774. under the style of Marlar, Lascelles, Pell
and Down. In its early years it must have been a fairly small concern for
its proﬁts were between ,5,‘ 1,500 and £2,000 a year. In 1784 the ﬁrm was
joined by Hem'y Thornton and became known as Down, Thornton and
Free. Thornton wrote of his own background: ‘ We are all City people and
connected with merchants and nothing but merchantson every side.’ The
young Henry was apprenticed from 1778 to 1780 to a near relation,
Godfrey Thornton, and was employed in his ﬁrm ‘ chieﬂy in carrying out
bills to be accepted and taking the weight of hemp, ﬂax, etc. at the Custom
House, or in mere copying in the Counting House ’. Thereafter he entered

‘ These remarks are mainly based on Hilton Price, op. cit. and on London Directories covering
the period. The movement of mercantile men towards ﬁnancial interests after 174.0 is remarked
on in L. B. Namier, ‘Brice Fisher, a Mid-Eighteenth Century Merchant’, Eng. Hist. Rev. xLn,
516 and L. S. Sutherland, An Eighteenth Century Merchant (x933), ‘pp. 15-15.


182 THE ECONOMIC HISTORY REVIEW

the private counting house of his father John Thornton, who carried this
business on separately from his partnership in the ﬁrm of Thornton,
Cornwall and Co.; here he observed his father’s operations, speculating in
wheat and tobacco——unsuccessfully, or making a handsome proﬁt in which
Henry shared, in contracting for loans during the American War. So
when he became a banker, Thornton knew the working of trade in
commodities, understood the business of bills of exchange, had operated in
the market for government paper, and was accustomed to the large corre-
spondence system of merchants. It is not surprising to discover his bank
dealing in acceptances, in government paper, or ‘having the wisdom to
become connected with the rising country bankers of the time’.1

Next the case of a manufacturer acquiring an interest in banking as
a sideline. In 1 773 the partnership of Mason, Currie,James and Yallowley
was founded. Of John Mason the senior partner little is known; according
to Hilton Price, Charles James was a partner in the ﬁrm of Neale, Roﬁey,
James and F ordyce which had failed in the crisis of I 772 ; Jacob Yallowley
was a clerk in this ﬁrm; William Currie was a distiller. It is noteworthy
at least that Neale and Roffey, James’s former partners were brewers. By
June I 774, the ﬁrst surviving balance sheet enables one to see the new ﬁrm
at work. The number of customers was small, just under a hundred, but
total deposits were just over £87,000. Presumably some of the Bank’s
clientele were former customers in James’s previous bank. Of those who
lived in London and can be identiﬁed, the major depositors and borrowers
were traders and manufacturers; the largest groups are merchants, linen-
drapers, and wool-drapers, followed by smaller but still visible categories,
the distillers and brewers, Manchester warehousemen’, Blackwell Hall
Factors, together with other ancillaries of the textile and foodindustries,
silk brokers, hatters, packers, tea dealers, meal and hop factors. The links
of the partnership with the particular groups from which a partner emerged
and still served, are clear. William Currie the distiller ‘was wont to speak
rather contemptuously of it (the bank) saying that one good back of spirits
was worth more than a year’s proﬁt in Cornhill’. But the distilling was
important to the bank: ‘The large purchases of barley which he had to
make in the course of trade as a distiller gave him a good deal of inﬂuence
in the corn market, and when (his descendant B. W. Currie) ﬁrst came to
Cornhill in 1816 we still had the accounts of many Mark Lane cornfactors
on our books.’2 The ﬁrm tapped the spare cash of substantial tradesmen
and merchants, including some in the provinces, and provided working
capital for the same group by the discounting of bills. For in its early years
the bank was almost entirely concerned with discounting, which made up
the vast bulk of its assets. There are few investments in securities, and no
loans on mortgage, but by the I78o’s the bank was making advances, not
only to London merchants, but also to a major London consumption
industry—brewing and distilling. With the existing connexions of an

1 Henry Thornton, An Inquiry into the Nature and Eﬂects of the Paper Credit of Great Britain, edited
with an Introduction by F. A. von Hayek, p. 24.
3 B. VV. Currie, Recollections (privately printed).


LONDON BANKERS .133

ex-banker, and with the wide correspondence carried on by a man like
Currie in his distilling business, the ﬁrm possessed the necessary expertise

both to enter the discounting business and to begin accepting the London

agency to a few country banks.

Or thirdly, there is the ﬁrm of Vere, Glyn and Hallifax, which came into
being in I 753. Joseph Vere had been a banker in partnership with Charles
Asgill; Richard Glyn was a drysalter; Thomas Hallifax was an ex-clerk
in Martin’s bank; the bank therefore again combined the banking links
and experience of two of its partners with the mercantile connexions of
another. According to its historian, the ﬁrm’s business was largely with
mercantile men; it discounted bills, entered into connexions with Scottish
bankers in the late 176o’s, and lent money to an industrialist, Francis
Garbett, on the security of Carron stock. In addition to its City connexions,
it too attracted to itself in the later decades of the eighteenth century an
increasing number of country bankers to whom it acted as agent}

After I 7 50 there was a rapid increase in the number of country banking
ﬁrms, which often were again only specializing still further in the business
of discounting bills or making remittances, in which they had long since been
engaged. These country ﬁrms employed a London agent, usually a banking
house, to honour their bills drawn on London, to cash their notes payable
in London, and either to make investments in securities for them or to send
cash into the country. The London banker held a deposit of cash from the
country agent which could be proﬁtably employed, or else charged a com-
mission for these services. Considering the similarity of their origins, in
trade and manufacturing, with many of their country counterparts, it is
noteworthy that it was the newer London bankers, with existing mercan-
tile connexions and correspondences, who tended to specialize in the
business of the London agency to the country ﬁrms. Though many of the
old established houses in the West End had country correspondents for
whom they did business, yet this group did not respond to the opportunities
offered by the agency business. While there may have been a certain
amount of sorting out in the interim, by 1797 (the ﬁrst year for which
a reliable list has been found and analysed) the London reaction was quite
clear. At that date seventeen London banks, just short of a quarter of the
total, did not appear as London agent to a single country banker. The vast
majority of West End bankers are to be found in this group; Anderson,
Chambers, Denne, Devaynes, Drummond, ‘Edwards, Hoare, Hodsoll,
Marsh, and Wright held no agencies. Most of the few remaining ﬁrms in
this area held only a handful; Childs had one agency, Goslings had four.
None were or became_ agents for a large number of ﬁrms. Among the
abstainers from this business were also a few of the older City ﬁrms,
Martins and their offshoot, Walpole, Clarke and Sisson. The «vast bulk of
the City bankers entered the agency business; forty-four London banks,
both in the City and the VVest End held between one and ten agencies.
But equally as signiﬁcant are the giants of the country agency business,
each holding above ten agencies, Down, Esdaile, Robarts, Forster, Master-

1 R. Fulford, Glyn’: 1753-1953 (x953).


I 84. THE ECONOMIC HIS TORT RE VIE W

man, Sanderson and Barclays. Of these all but one were ﬁrms created
either during the banking boom of I 769-73, or afterwards. The exception
is Barclays. Here doubtless their ties of religion and of consanguinity with
the Quakers in the provinces who became bankers‘ goes far, to explain
their prominence. It is clear that the rise of country banking created
a marked change in the structure of London banking; though at present
it cannot be proved in detail, it may be suggested that the increasing weight
of inland correspondence and with it, the tendency to act as London agent
to a country ﬁrm, may have led, in part, to the creation of this fresh sector
of the London banking world in the decade after 1770. The business was
new and risky; it needed commercial knowledge; and the willingness to
take risks and the expertise needed was more likely to be found among the
newer bankers. The following letter, written by Childs’ Bank to an
applicant country banker at Durham on May 4.th 1.784 sums up the history
and attitude of an old established ﬁrm.

‘The only Country banking house we keep cash for is that of Messrs Baker and
Hedley of Newcastle. Their business is conducted much to our satisfaction.
Manycapplications have been made from others, but the plan of their business
was in general so contrary to the line observed in ours, we could not comply with
it. The chief objections to a connection of this kind were that we did not permit
any notes of hand to be addressed to us, that we discount no bills, and that the
cash on the face of the account (exclusive of bills in our hands not due) should at
all times be adequate to the amount of our payments and accepted Drafts.
Another objection was the extensive circulation of small drafts and bills which
Country Banks must fall into. Without a very large credit of cash in town
occasional demands for drafts might create a difﬁculty from only to the extent
of that ballance. The established usage of our house would not admit of the
accomodation required and on a due consideration we tho‘ it right to decline
connections where no advantage could be expected to either party. These

. difficulties always offered to a connection of this sort and I am afraid they would

arise inthat you mentioned.

This policy was maintained, with the obvious consequence that Childs,
in common with most of their West End confréres, remained outside the
agency business.

The rising volume of inter-bank payments, which was in part due to the
increasing country business, led to the establishment, in 1773, of the
London Clearing House. This formalized and facilitated the exchanging
of notes between banks and economized the cash necessary to transact the
business. Only the City bankers took part in its operations and establish-
ment. A list of thirty-one clearing bankers in 1777 includes none of the
West End bankers (who had developed their own method of exchanging
bills and notes by-direct exchanges by peripatetic clerks) but included
most, thirty-one out of thirty-six, of the City bankers, whose transfers were
more important to them, and who needed to formalize the previously
haphazard private exchanges by clerks. And as the habit spread of
London bankers opening accounts with the Bank of England, and of
rediscounting with it, it was again the City bankers rather than those in


LONDON BANKERS 185

the West End who held such accounts. The particular conﬁguration of the
nineteenth-century London money market, with the Bank of England as
the banker’s bank, and the ultimate settling of inter-bank debts by trans-
fers at the Bank of England was foreshadowed in these developments.‘

III

This paper has been conﬁned to the period prior to I 785 partly to emphasize
that London banking in the eighteenth century is liable to be misunderstood
if it is approached primarily from the angle of industrial ﬁnance; the
I78o’s are merely a convenient watershed, for during this decade the
industrial changes were rapidly getting under way. The London money
market had been nurtured upon government ﬁnance and the" needs of
commerce and the landowners. With certain diﬂiculties, a certain restriction
of facilities for private borrowers, the government had been able to borrow
the increasingly large amounts necessary in war-time. Most of the London
firms so far studied participated in the market for government securities;
most switched their resources into them in the later years of each war, from
1745 to‘ 1748, from 1759 to 1763 and from 1778 to 1783, and restricted
credit to their private customers. They were a vital link in the chain of
government borrowing, making up subscription lists to bid for loans or to
appear as ‘boarders’ on the lists of the loan contractors; when the loans
had’ been ﬂoated, they helped to create a wider market for investment in
government securities by making purchases for their customers, and con-
ducting the tedious routine of dividend collection. They were of course,
not alone in these functions, but their partial role in providing credit for
the government in war-time, and that with fairly considerable success,
needs no emphasis. Next to the government it is apparent from the
increasing specialization of West End ﬁrms in aristocratic customers that
from the late seventeenth century onwards the landowning groups were
adequately, perhaps generously, provided for, in peace-time. Further
research from the landowners’ angle alone can determine with any preci-
sion why they borrowed. The best opinion at present available suggests
that some of their borrowings were for consumption purposes, to cover
debts incurred at gaming and high living; they also borrowed to build
and to make the necessary arrangements for marriage settlements. But
whatever its weight in their total borrowings and therefore in the objects
ﬁnanced partly by bank loans, the landowners also borrowed to ﬁnance
enclosures, and to ﬁnance the building of better roads and cutting new
canals.“ Such improvementsin agricultural eﬂiciency and in transporta-
tion were vital to the progress of industrialization, and it is therefore of
prime signiﬁcance that throughout the eighteenth century, save in years

‘ H. T. Easton, The History qfa Banking House (1903), pp. I 10-12 ; J. H. Clapham, Econ. Hist.

Rev. xx, 83. The uneven distribution of country agencies and the existence of a sector of London

Bankers less susceptible to the full weight of an internal drain may throw additional light on the
weaknesses of the banking structure in years of crisis. It is noteworthy that several of theﬁrms
specializing in the agency business failed; Down in 1825, while in 1837 Esdailes suspended
payment.

3 H. J. Habakkuk, ‘Economic Functions of English Landowners in the Seventeenth and
Eighteenth Centuries, Explorations in Entrepreneurial History, V1, g2—-I01 .

1:. Econ. Hist. vn


186 THE ECONOMIC HISTORY RE VIE W

of very heavy government borrowing, a ﬁrst-class market existed in London
for borrowing on real securities at rates which were only slightly above the
yield on long dated government securities. In this market the West End
London banker played an important role, either as leader or as inter-
mediary. The suggestion that such borrowings for investment purposes
were perhaps only a fraction of total borrowings, though a highly signiﬁcant
one, may throw some light on the relative ease with which these banks
could cut off their lending in war-time -in this direction, either substan-
tially reducing its volume by their action, ordriving the landowner to non-
institutional sources of loans. As some of this lending for consumption
purposes in peace-time may have sustained effective demand, so its lessening
in war-time may provide one clue to the relatively slight degree of inﬂation-
occurring during the wars of the eighteenth century.‘

How efficiently the London bankers assisted trade and industry it is
even more difficult to judge with any conﬁdence. It is probable that
throughout the eighteenth century a substantial volume of lending and
discounting was carried on between merchants, traders and industrialists
without the interposition of a banker. The London bankers so far examined,
particularly Gosling’s and Currie"s, contributed mainly to the provision of
working capital for commerce and industry by discount, and in the case of
Currie’s by advances,‘ though the instances of the provision of long-term
help to important pioneer ventures, such as the assistance given by Glyn
Mills to Francis Garbett in 1772-3, or Child’s loan’s for the Duke of
Bridgewater’s canal building, are not negligible. Yet because of the partial
role of the banks as discounters, their discount rates should be treated with
caution. These discount rates appear to have been particularly inﬂexible;
5 per cent was normal for inland bills. The Bank of England, whose
discounts expanded rapidly after the turn of the half century, charged
5 per cent on inland bills from 174.2 to 1823. The foreign bill, a more
reliableinstrument, was discounted by the Bank at 4 per cent from 1722
to I 742' and from I 746 to I 773; thereafter the rate stood at 5 per cent until
1 823. If the poor organization of the bill market and deﬁcient commercial
intelligence partially explain the high rate on the inland bill, then such
deﬁciencies persisted over a very long period. This argument is less easily
applicable to the foreign bill. After 1773 there is more than a suggestion
that the rapid extension of internal and foreign trade strained the resources
of the banking structure to the utmost. It is equally clear that ﬂuctuations
in bank lending are vital in this period rather than variations in discount
rates. It may therefore be that the private banking structure was less
successful in bearing the weightof rapid economic expansion in wars and
post-war depressions, and that these imperfections persisted and were so
apparent to its early nineteenth-century critics.

Pembroke College, Cambridge

‘ Available statistics of bills for turnpike trusts, enclosures and canal building show a marked
dip in the later years of the American War of Independence, which tends to conﬁrm a
connexion between ease of borrowing and investment in agriculture and transportation at this
period.