Essays upon several projects: or, effectual ways for advancing the interest of the nation.:
Defoe, Daniel, 1661?-1731.
Page  36

Of BANKS.

BANKS, without question, if rightly manag'd, are, or may be, of great Advantage, especially to a Trading People, as the English are; and among many others, this is one particular case in which that Bene|fit appears, That they bring down the Interest of Money, and take from the Goldsmiths, Scriveners, and others, who have command of running Cash, their most delicious Trade of making advantage of the necessities of the Merchant, in extravagant Discounts, and Premio's for advance of Money, when either large Customs or Foreign Remittances, call for Disbursements be|yond his common Ability; for by the easiness of Terms on which the Merchant may have Money, he is en|courag'd to venture further in Trade Page  37 than otherwise he would do; not but that there are other great advantages a Royal Bank might procure in this Kingdom, as has been seen in part by this, As advancing Money to the Ex|chequer upon Parliamentary Funds and Securities, by which in time of a War our Preparations for any Expedition need not be in danger of Miscarriage for want of Money, though the Taxes rais'd be not speedily paid, nor the Exchequer burthen'd with the excessive Interests paid in former Reigns upon Anticipations of the Revenue; Land|ed Men might be supplied with Mo|neys upon Securities on easier Terms, which would prevent the Loss of mul|titudes of Estates, now ruin'd and de|vour'd by insolent and merciless Mort|gagees and the like. But now we un|happily see a Royal Bank Establish'd by Act of Parliament, and another with a large Fund upon the OrphansPage  38 Stock; and yet these Advantages, or others, which we expected, not answer'd, tho' the pretensions in Both have not been wanting at such time as they found it needful to introduce them|selves into publick Esteem, by giving out Prints of what they were rather able to do, than really intended to practice. So that our having Two Banks at this time settl'd, and more Erecting, has not yet been able to re|duce the Interest of Money; not be|cause the Nature and Foundation of their Constitution does not tend to|wards it; but because, finding their Hands full of better business, they are wiser than by being slaves to old ob|selete Proposals, to lose the advan|tage of the great Improvement they can make of their Stock.

This however, does not at all re|flect on the Nature of a Bank, nor of the Benefit it would be to the Page  39 publick Trading-part of the King|dom, whatever it may seem to do on the practice of the present. We find Four or Five Banks now in view to be settl'd; I confess I expect no more from those to come, than we have found from the past; and I think I make no breach on either my Charity or good Manners, in saying so; and I reflect not upon any of the Banks that are or shall be Establish'd for not doing what I mention, but for making such publications of what they would do. I cannot think any Man had expected the Royal Bank shou'd Lend Money on Mortgages at 4 per Cent. nor was it much the bet|ter for them to make publication they wou'd do so, from the beginning of January next after their Settlement; since to this day, as I am inform'd, they have not Lent one Farthing in that manner.

Page  40 Our Banks are indeed nothing but so many Goldsmiths Shops, where the Credit being high (and the Dire|ctors as high) People lodge their Mo|ney; and They, the Directors I mean, make their advantage of it; if you lay it at Demand, they allow you no|thing; if at Time, 3 per Cent. and so wou'd any Goldsmith in Lombardstreet have done before; but the very Banks themselves are so aukward in Lend|ing; so strict, so tedions, so inquisitive, and withal so publick in their taking Securities, that Men who are any thing tender, won't go to them; and so the easiness of Borrowing Money, so much design'd, is defeated; for here is a private Interest to be made, tho' it be a publick one; and, in short, 'tis only a great Trade carri'd on for the private Gain of a few con|cern'd in the Original Stock; and tho' we are to hope for great things, Page  41 because they have promis'd them; yet they are all Future that we know of.

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 Publick Authority, would oblige them to take the Publick Good into equal Concern with their Private Interest.

To explain what I mean;

Banks being establish'd by Publick Authority, ought also, as all Publick 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 Improve|ment of the Stock in Particular, would make a Bank a Useful, Profitable Thing indeed.

First, A Bank ought to be of a Magnitude proportion'd to the Trade of the Countrey it is in; which this Page  42 Bank is so far from, that 'tis no more to the Whole, than the least Gold|smith's Cash in Lombardstreet is to the Bank: From whence it comes to pass, that already more Banks are contri|ving; and I question not but Banks in London will e're 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. 'Tis true, the Bank of England has a Ca|pital Stock; but yet was that Stock wholly clear of the Publick 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, tho' 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.

Page  43 I suppose no body will take this Discourse for an Invective against the Bank of England; I believe it is a ve|ry 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 inform'd 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 An|ticipations 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 1200 000 Pounds sterling or (to make Page  44 it speak French) of above Fifteen Mil|lions, which was all paid Voluntarily into the Exchequer, in less than 〈1 span left blank〉 Besides this, I believe the present Bank of England has been ve|ry 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 it self. 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 propos'd Benefit, the low'r|ing the Interest of Money: Whereas all Foreign Banks absolutely govern the Interest, both at Amsterdam, Ge|noa, and other places. And this De|fect I conceive the Multiplicity of Banks cannot supply, unless a perfect Understanding could be secur'd be|tween them.

To remedy this Defect, several Page  45 Methods might be propos'd: Some I shall take the Freedom to hint at.

First, That the present Bank in|crease their Stock to at least Five Mil|lions 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 al|ways Ten Millions sterling: A Sum that every body who can talk of, does not understand.

But then to find Business for all this Stock; which though it be a Page  46 strange thing to think of, is neverthe|less easy when it comes to be exa|min'd. And first for the Business; This Bank shou'd enlarge the Number of their Directors as they do of their Stock; and should then establish seve|ral Sub-Committees, compos'd of their own Members, who should have the directing of several Offices rela|ting to the distinct sorts of Business they referr'd to; to be over-rul'd and govern'd by the Governor and Di|rectors 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 order'd, that the Merchant might with ease pay the highest Customs down; and so by al|lowing the Bank 4 per Cent. Advance, be first sure to secure the 10 l. per Cent. which the King allows for Prompt Page  47 Payment at the Custom-house; and be also freed from the troublesome work of finding Bonds-Men, and Securi|ties for the Money; which has expos'd many a Man to the Tyranny of Ex|tents 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 'tis the easiest thing in the world to make the Bank the Paymaster of all the Large Customs, and yet the Mer|chant 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 Page  48 Tobacco to Import, whose Customs by several Duties comes to 1000 l. 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 entred by the Bank, shall give them Title enough to any part, or the whole, without the trou|ble of Bills of Sale, or Conveyances, Defeazances, and the like. The Goods are carried to a Warehouse at the Wa|terside, where the Merchant has a Free and Publick Access to them, as if in his own Warehouse, and an ho|nourable Liberty to sell and deliver either the Whole (paying their Dis|burse) 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 Purcha|ser, or any other way, he may clear the same, without any Exactions, but Page  49 of 4 l. per Cent. and the rest are his own.

The ease this wou'd bring to Trade, the deliverance it wou'd bring to the Merchants from the insults of Gold|smiths, &c. and the honour it wou'd give to our management of Publick Imposts, with the advantages to the Custom-House it self, and the utter destruction of Extortion, wou'd be such as wou'd give a due value to the Bank, and make all Mankind acknow|ledge it to be a publick good. The Grievance of Exactions upon Mer|chants in this case is very great; and when I lay the blame on the Gold|smiths, 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 Mer|chant. I my self have known a Gold|smith in Lumbardstreet Lend a Man Page  50 700 l. to pay the Customs of a Hun|dred Pipes of Spanish Wines; the Wines were made over to him for Se|curity by Bill of Sale, and put into a Cellar, of which the Goldsmith kept the Key; the Merchant was to pay 6 l. per Cent. Interest on the Bond, and to allow 10 l. per Cent. Premio for advancing the Money: When he had the Wines in Possession, the Owner cou'd not send his Cooper to look after them, but the Goldsmith's Man must attend all the while, for which he wou'd be paid 5 s. 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 cou'd 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 soPage  51 he wou'd have none Sold, but the whole Parcel together; by this usage the Goods lay on hand, and every Month the Money remain'd, the Gold|smith 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 forc'd to consent to the Sale, and the Goods being reduc'd to Seventy Pipes sound Wine, and Four un|sound (the rest being sunk for filling up) were Sold for 13 l. per Pipe the Sound, and 3 l. the Unsound, which amounted to 922 l. together:

Page  52
  l. s. d.
The Coopers Bill came to 30 0 0
The Cellerage a Year and Half to 18 0 0
Interests on the Bond to 63 0 0
The Goldsmith's Men for Attendance 08 0 0
Allowance for Advance of the Money, and Forbearance 74 0 0
  193 0 0
Principal Money Borrow'd 700 0 0
  893 0 0
Due to the Merchant 29 0 0
  922 0 0

By the modetatest Computation that can be, these Wines Cost the Merchant as follows:

First Cost with Charges on Board l. s. d.
In Lisbon 15 Mille Reis per Pipe is 1500 Mill. Re. Exchange, at 6 s. 4 d. per Mille Rei 475 0 0
Freight to London—then at 3 l. per Ton 150 0 0
Assurance on 500 l. at 2 per C. 10 0 0
Petty Charges 05 0 0
  640 0 0

Page  53 So that 'tis manifest by the Extorti|on of this Banker, the poor Man lost the whole Capital with Freight and Charges, and made but 29 l. produce of a Hunder'd Pipes of Wine.

One other Office of this Bank, and which wou'd take up a considerable branch of the Stock, is for Lending Mo|ney upon Pledges, which shou'd have annex'd to it a Warehouse and Factory, where all sorts of Goods might pub|lickly be Sold by the Consent of the Owners, to the great Advantage of the Owner, the Bank receiving 4 l. per Cent. Interest, and 2 per Cent. Com|mission for Sale of the Goods.

A Third Office shou'd be appoint|ed for Discounting Bills, Tallies, and Notes, by which all Tallies of the Exchequer, and any part of the Reve|nue, shou'd at stated Allowances be ready Money to any Person, to the great Advantage of the Government, Page  54 and ease of all such as are any ways concern'd in publick Undertakings.

A Fourth Office for Lending Mo|ney upon Land-Securities at 4 per Cent. Interest; by which the Cruelty and Injustice of Mortgagees wou'd be wholly restrain'd, 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 'twill not be impro|per to consider, that this Method will most effectually answer all the Noti|ons and Proposals of County-Banks; for by this Office they wou'd be all render'd useless and unprofitable; since One Bank, of the Magnitude I men|tion, with a Branch of its Office set apart for that Business, might with Page  55 ease Manage all the Inland-Exchange of the Kingdom.

By which such a Correspondence with all the Trading-Towns in Eng|land might be maintain'd, as that the whole Kingdom shou'd Trade with the Bank. Under the Direction of this Office a Publick Cashier shou'd 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, shou'd be return'd on the Bank in London, and from the Bank again on their Cashier in every respective County or Town, at the small Exchange of ½ per Cent. by which means all loss of Money carri'd upon the Road, to the encouragement of Robbers, and Ruin|ing of the Countrey, who are Su'd for those Robberies, wou'd be more effectually prevented, than by all the Page  56 Statutes against Highway-Men that are or can be made.

As to Publick Advancings of Mo|ney 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 cou'd offer some very good Rea|sons, why this way of Management by particular Offices for every particu|lar sort of Business, is not only the easiest, but the safest way of execu|ting an Affair of such variety and consequence; also I cou'd state a Me|thod for the Proceedings of those private Offices, their Conjunction with, and Dependence on the General Page  57 Court of the Directors, and how the various Accompts shou'd Center 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 thorough 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 wou'd be Manag'd by running-Bills, and those the longest abroad of any, their distance keeping them out, to the In|creasing the Credit, and consequently the Stock of the Bank.

Of the Multiplicity of Banks.

What is touch'd at in the foregoing part of this Chapter, refers to OnePage  58Bank-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 ma|ny Banks cou'd without clashing main|tain a constant Correspondence with one another, in passing each others Bills as Current from one to another, I know not but it might be better per|form'd by Many, than by One; for as Harmony makes Musick in Sound, so it produces Success in Business.

A Civil War among Merchants is always the Ruin of Trade: I cannot think a Multitude of Banks cou'd so consist with one another in England, as to join Interests, and uphold one ano|ther's Credit, without joining Stocks too; I confess, if it cou'd be done, the Convenience to Trade wou'd be Visible.

Page  59 If I were to Propose which way these Banks shou'd be Establish'd; I answer, Allowing a due regard to some Gentlemen who have had thoughts of the same, whose Methods I shall not so much as touch upon, much less discover; My thoughts run upon quite different Methods, both for the Fund, and the Establishment.

Every principal Town in England is a Corporation, upon which the Fund may be settled; which will suf|ficiently answer the difficult and charge|able work of Suing for a Corporation by Patent or Act of Parliament.

A general Subscription of Stock be|ing made, and by Deeds of Settle|ment plac'd in the Mayor and Alder|men of the City or Corporation for the time being, in Trust, to be de|clared by Deeds of Uses, some of the Directors being always made Mem|bers of the said Corporation, and Page  60 join'd in the Trust, the Bank hereby becomes the Publick Stock of the Town, something like what they call the Rents of the Town-House in France, and is Manag'd in the Name of the said Corporation, to whom the Directors are Accountable, and they back again to the General Court.

For Example:

Suppose the Gentlemen, or Trades|men, of the County of Norfolk, by a Subscription of Cash, design to Esta|blish a Bank: The Subscriptions be|ing made, the Stock is paid into the Chamber of the City of Norwich, and manag'd by a Court of Directors, as all Banks are, and chosen out of the Subscribers, the Mayor only of the City to be always one; to be mana|ged in the Name of the Corporation of the City of Norwich, but for the Uses in a Deed of Trust to be made by the Subscribers, and Mayor and Page  61 Aldermen, at large mentioned. I make no question but a Bank thus settled, wou'd have as firm a Foun|dation as any Bank need to have, and every way answer the Ends of a Cor|poration.

Of these sorts of Banks England might very well establish Fifteen, at the several Towns hereafter mention'd. Some of which, tho they are not the Capital Towns of the Counties, yet are more the Center of Trade, which in England runs in Veins, like Mines of Metal in the Earth.

  • Canterbury.
  • Salisbury.
  • Exeter.
  • Bristol.
  • Worcester.
  • Shrewsbury.
  • Manchester.
  • Newcastle upon Tyne.
  • Leeds, or Halifax, or York.
  • Nottingham.
  • Warwick, or Bir|mingham.
  • Oxford, or Rea|ding.
  • Bedford.
  • Norwich.
  • Colchester.

Page  62 Every one of these Banks to have a Cashier in London, unless they cou'd all have a general Correspondence and Credit with the Bank-Royal.

These Banks in their respective Counties should be a General Staple and Factory for the Manufactures of the said County; where every man that had Goods made, might have Money at a small Interest for Ad|vance; the Goods in the mean time being sent forward to Market, to a Warehouse for that purpose erected in London, where they shou'd be dispos'd of to all the Advantages the Owner cou'd expect, paying only 1 per Cent. Commission. Or if the Maker want|ed Credit in London either for Spanish Wool, Cotton, Oyl, or any Goods, while his Goods were in the Warehouse of the said Bank, his Bill shou'd be paid by the Bank to the full Value of his Goods, or at least within a small Page  63 matter. These Banks, either by Cor|respondence with each other, or an Order to their Cashier in London, might with ease so pass each other's Bills, that a man who has Cash at Plymouth, and wants Money at Ber|wick, may transfer his Cash at Ply|mouth to Newcastle in half an hours time, without either Hazard, or Charge, or Time, allowing only ½ per Cent. Exchange; and so of all the most distant parts of the Kingdom. Or if he wants Money at Newcastle, and has Goods at Worcester, or at any other Cloathing-Town, sending his Goods to be sold by the Factory of the Bank of Worcester, he may remit by the Bank to Newcastle, or any where else, as readily as if his Goods were sold and paid for; and no Exactions made upon him for the Convenience he en|joys.

This Discourse of Banks the Rea|der Page  64 is to understand to have no rela|tion to the present Posture of Affairs, with respect to the Scarcity of Currant Money, which seems to have put a stop to that part of a Stock we call Credit; which always is, and indeed must be the most essential part of a Bank, and without which no Bank can pretend to subsist, at least to Ad|vantage.

A Bank is only a Great Stock of Money put together, to be employ'd by some of the Subscribers, in the name of the rest, for the Benefit of the Whole. This Stock of Money subsists not barely on the Profits of its own Stock, for that wou'd be incon|siderable, but upon the Contingences and Accidents which Multiplicity of Business occasions: As for Instance; A man that comes for Money, and knows he may have it To-morrow, perhaps he is in haste, and won't take Page  65 it to day: Only that he may be sure of it to morrow, he takes a Memo|randum under the Hand of the Offi|cer, That he shall have it whenever he calls for it; and this Memorandum we call a Bill. To morrow when he Intended to fetch his Money, comes a Man to him for Money; and to save himself the labour of Telling, he gives him the Memorandum or Bill aforesaid for his Money; this Second Man does as the First, and a Third does as he did, and so the Bill runs about a Month, Two or Three; and this is that we call Credit; for by the Circulation of a quantity of these Bills, the Bank enjoys the full Bene|fit of as much Stock in real Value, as the supposititious Value of the Bills amounts to; and where-ever this Cre|dit fails, this Advantage fails; for im|mediately all men come for their Money, and the Bank must die of it Page  66 self; for I am sure no Bank by the simple Improvement of their single Stock, can ever make any consider|able Advantage.

I confess a Bank who can lay a Fund for the Security of their Bills, which shall produce, first an Annual Profit to the Owner, and yet make good the Passant-Bill, may stand, and be advantageous too, because there is a Real and a Supposititious Value both, and the Real always ready to make good the Supposititious; and this I know no way to bring to pass, but by Land, which at the same time that it lies Transferr'd to secure the Value of every Bill given out, brings in a separate Profit to the Owner; and this way no question but the whole King|dom might be a Bank to it self, tho' no ready Money were to be found in it.

I had gone on in some Sheets Page  67 with my Notion of Land, being the best bottom for Publick Banks, and the easiness of bringing it to answer all the Ends of Money deposited, with double Advantage; but I find my self happily prevented by a Gen|tleman, who has publish'd the very same, tho' since this was Wrote; and I was always Master of so much Wit, as to hold my Tongue while they spoke who understood the thing bet|ter than my self.

Mr. John Asgill of Lincolns-Inn, in a small Tract, Entituled, Seve|ral Assertions prov'd, in Order to Create another Species of Money than Gold and Silver, has so distinctly hand|led this very Case, with such strength of Argument, such clearness of Rea|son, such a Judgment, and such a Stile, as all the Ingenious part of the World must acknowledge themselves extremely Oblig'd to him for that Piece.

Page  68 At the sight of which Book I laid by all that had been written by me on that Subject; for I had much rather confess my self incapable of handling that Point like him, than have con|vinc'd the World of it by my imper|tinence.