Bank's Farsighted Founding Father Who Made London Great; as the Bank of England Delivers Its Interest Rate Decision Today, Author and Historian ANDREW FORRESTER Argues History Has Not Been Kind to the Man Who Founded the Bank More Than 300 Years Ago

The Evening Standard (London, England), June 10, 2004 | Go to article overview

Bank's Farsighted Founding Father Who Made London Great; as the Bank of England Delivers Its Interest Rate Decision Today, Author and Historian ANDREW FORRESTER Argues History Has Not Been Kind to the Man Who Founded the Bank More Than 300 Years Ago


Byline: ANDREW FORRESTER

HAD William Paterson not lived, the world would have been very different. Without him, Great Britain might not exist today and the British Empire may not have happened.

These are bold claims, but quite consistent with Paterson's story. He arrived in the capital in 1691, aged 33, already a successful West Indies merchant and expert on the much admired Dutch business methods. He found England in the throes of a bitter war with Louis XIV of France.

William III was in desperate trouble.

The war was costing more than England could afford and his ministers were frantically searching for new ways to raise funds.

Paterson brought with him a plan to transform the royal finances through the establishment of the Bank of England. His plan was to raise more than [pounds sterling]1 million in gold and silver - then roughly equivalent to the annual royal income from taxes and land - through a long term loan. Most of this would be handed to the Exchequer to pay for the war, but a substantial sum would be set aside as a reserve fund of gold and silver for the new bank.

Paper receipts marked "pay the bearer on demand" would be brought into use as a money to fund trade and business.

These were radical ideas, too much for the Westminster Parliament. In early 1692, Paterson was called before the Commons to explain his scheme.

Few MPs understood it. Were not national banks to be found only in republics? And surely people would never accept paper money? It was thrown out. But Paterson persisted.

He formed a group of the great and good to promote the idea. In 1694, with the help of subterfuge by a supportive Chancellor of the Exchequer, Paterson's scheme got Parliamentary approval. The King and Queen became the first shareholders.

The Bank proved its worth in future years. The 18th century saw long, costly wars with France over who should control America and India and who should have the greater share of world trade. Had it not been for the Bank, which arranged loans as required, England could not have afforded these wars.

Much wealthier and more populous France would probably have won.

But Paterson did not rest on his laurels. He went to Scotland and flung himself into a grander project, aiming to create global wealth through trade. …

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