The England cricket team was once greeted at an Ashes test by an Australian banner with the immortal words ‘WOTHAM IS A BANKER’, the simple genius of the line being that you knew Wotham was being insulted before you had worked out quite who Wotham was, or what exactly he was being accused of. But, as Anne Murphy reminds us, the word ‘banker’ was not always just a word of abuse; it could also denote personal probity, sobriety, a certain nitpicking stolidity of thought, above all a preoccupation with credit and public confidence. It was not automatically oxymoronic to think of ‘virtuous bankers’. Amid all the financial crises of the past two decades, when so many banks and their employees have covered themselves in ordure, this second sense of ‘banker’ has remained alive in relation to the central banks, none more so than the Bank of England.
The Bank, as it quickly became known, had been founded in 1694, the brainchild of William Paterson, a brilliant but unreliable Scottish promoter. King William III had wars to fight, but he was desperately short of the cash to do so. The constitutional settlement of 1688-9 had created a new, composite form of sovereignty – the king-in-parliament – which prevented the monarch from raising serious money without parliamentary consent. That ruled out the forced loans, levies and other barely disguised taxes of the late Charles I, whose execution was still well within living memory. But it also meant that the monarch was now institutionally creditworthy.
Parliament would not allow William to default, and so his promises to repay loans suddenly became credible. The result was that Crown indebtedness rose from £1 million in 1688 to almost £17 million in 1697.