[This passage has been excerpted from Dale H. Porter, The Thames Embankment: Environment, Technology, and Society in Victorian London. Akron, Ohio: University of Akron Press, 1998, which is reviewed eleswhere in the Victorian Web GPL.]

decorated capital 'D' uring the nineteenth century, the Bank of England (image) only gradually built up its institutional control over the London money market. Until the 1840s, it competed with other private banks, both in the capital and in the provinces, and sometimes speculated as irresponsibly as any other investor. But the bank had the only sizable gold reserves and came to monopolize government stock issues and short-term loans. Along with the East India Company and a few large insurance firms, it administered the financing of the national debt, subscribing its share through competitive bidding and then reselling it in small amounts to ordinary investors at a premium. The smaller City banks, private and independent, acted as agents for provincial investors, rural estate mortgage funds with private industrial and business capital. After the Joint-Stock Act of 1833, the latter type of banking proliferated and led to speculative surges and crises. In the troubled economic climate of the late 18305, Robert Peel and other business-oriented political leaders saw the need for tighter credit control. The Bank Act of 1844 retained the decentralized system of private provincial banks but allowed the Bank of England to compete with them in the speculative loan market, on the theory that it would stabilize rates of interest.

Unfortunately, the bank's competition had exactly the opposite effect. Coupled with the railway mania of the 1840s, it led to a stock market panic and financial crash in 1847. Thereafter, the bank withdrew from the speculative market, fixing instead a minimum discount rate that, along with a statutory level of gold reserves for currency issues, controlled to some extent the expansion and contraction of credit.[148]


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