[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.]
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]
Last modified 2002