considerable. The connections which they formed in different parts of Europe, by furnishing them with the productions of their own industry, led them to engage in another branch of trade, that of banking. In this they soon became so eminent, that the money transactions of almost every kingdom in Europe passed through their hands, and in many of them they were intrusted with the collection and administration of the public revenues. In consequence of the activity and success with which they conducted their manufactures and money transactions the former always attended with certain though moderate profit, the latter lucrative in a high degree, at a period when neither the interest of money nor the premium on bills of exchange were settled with accuracy-Florence became one of the first cities in Christendom, and some of its citizens extremely opulent." * Cosmo di Medici was reckoned the most wealthy merchant ever known in Europe, and in a treaty whereby Louis XI. engaged to pay Edward IV. fifty thousand crowns annually, it was expressly stipulated that the king of France should engage the partners of the Bank of Medici to become bound for the faithful and regular performance of this agreement on the part of himself and his heirs.† Although the business of banking has probably always been carried on by private individuals before it has been carried on by a public company, yet most countries have found it useful to establish a public or national bank. Some of these banks have been founded for the purpose of facilitating commerce, others to serve the government. The most ancient bank was that of Venice. It is supposed to have been established in 1157. The State being involved in debt, through a long and severe war, the public creditors were formed into a corporation, with peculiar privileges, and the debts were allowed to be transferred from one name to another, much in the same way as our public funds, or the stock of our public banks. It was made a particular regulation that all payments of wholesale merchandise, and bills of exchange, should be in bank money; and that all debtors and creditors should be obliged, the one to carry their money to the bank, the other to receive their payments in banco, so that payments * Robertson's Disquisition on India, page 113. + Macpherson's History of Commerce, vol. i. page 698. were made by a simple transfer of stock from one account to the other. This bank may be deemed a wonder for the twel:th century, but requiring much alteration to adapt it to the modes and manners of the nineteenth.* So early as the year 1319 the business of banking was carried on by the drapers of Barcelona, who were probably the most wealthy class of merchants in that city. But by an ordinance of the king of Arragon, they were not allowed to commence this branch of trade until they had first given sufficient security. In the year 1401 a public bank was established by the magistrates, and the city funds were responsible for the money placed in the bank. They exchanged money, received deposits and discounted bills of exchange, both for the citizens and for foreigners.† The bank of Genoa was established in 1407. This bank, like that of Venice, owed its origin to the debts of the State. Considerable confusion had arisen from the multitude of loans which the republic had contracted with its citizens. These various loans were now formed into one total amount, and made the capital of the bank. This bank was called the Chamber of St. George, and its management was intrusted to eight directors, elected by the proprietors of the stock. As a security for the debt, the State made over to the bank several cities and territories, among which were the port of Caffa and the little kingdom of Corsica. The bank of Amsterdam was founded in the year 1609. It was occasioned by the vast quantity of worn and clipped coins then in circulation, in consequence of which the value of the currency was reduced above nine per cent. below that of good money fresh from the mint. The bank received these deficient coins at nearly their intrinsic value, and made all its issues in coin of the standard weight and fineness. At the same * See Montefiore's Commercial Dictionary, Article Bank. It was not until 1587 that the Bank of Venice became a bank in the modern sense of the word. The extensive foreign trade of the city brought thither coins of all countries, and in every state of wear. To remedy the loss and inconvenience thus caused, the merchants were ordered to bring their coins to the Bank, where they were weighed, the merchants receiving notes, promising to pay the bearer on demand bullion of the proper or standard fineness, equal to the value of the coins paid in. The Bank was a Bank of Deposit solely—exchanging notes for bullion, and bullion for notes. + Macpherson's History of Commerce, vol. i. pp. 540, 612. time a law was made that all foreign bills of exchange should be paid in bank money. This law raised the value of bills on Holland in foreign countries, and compelled every merchant to keep an account at the bank, in order that he might at all times have legal money to pay his foreign bills. The premium (called the Agio) on bank money was regulated by the market price of gold, and was subject to considerable fluctuations. To prevent the gambling to which these fluctuations gave rise, the bank at length determined to sell bank money for currency at five per cent. agio, and to buy it again at four per cent. From this and other sources of profit the bank is supposed to have gained a considerable revenue. It was the entire property of the city of Amsterdam, and was placed under the direction of four burgomasters, who were changed every year.* The bank of Amsterdam was the model on which were formed most of the European banks now in existence; but they have varied very considerably from each other, according to the circumstances of the respective countries in which they have been established. SECTION II. THE RISE OF BANKING IN ENGLAND. THE exchanging of money; the lending of money; the borrowing of money; the transmitting of money, are the four principal branches of the business of modern banking, and in most countries they seem to have taken their rise in the order in which they are here named. MONEY-CHANGING. For several centuries the only coin current in England was made of silver, and the highest denomination was the silver penny. This coin contained about half as much silver as one of our sixpences. There were also silver half-pence and silver farthings, and frequently the silver pennies were cut into halves and quarters to serve the purpose of half-pence and farthings, until laws were made to prohibit the practice. Copper was not coined in England until the year 1609, and then the small * Adam Smith's Wealth of Nations, vol. ii. p. 220. Edition 1812. leaden tokens previously issued by private individuals were suppressed. * Gold was first coined in England in 1257, but soon went out of circulation, and did not enter permanently into currency until 1344, when Edward III. issued gold nobles, half nobles, and farthing nobles; the noble to pass for 68. 8d., the half noble for 38. 4d., and the farthing noble for 1s. 8d. This coinage seems to have given rise to the office of Royal Exchanger : "It was not so easy a matter in the times we are now considering to exchange gold and silver coins for each other as it is at present, and, therefore, Edward III. and several of his successors took this office into their own hands, to prevent private extortion as well as for their own advantage, and they performed it by appointing certain persons, furnished with a competent quantity of gold and silver coins, in London and other towns, to be the only exchangers of money, at the following rate: -When these royal exchangers gave silver coins for a parcel of gold nobles, for example, they gave one silver penny less for each noble than its current value, and when they gave gold nobles for silver coins they took one penny more, or 6s. 9d. for each noble, by which, in every transaction, they made a profit of 1 1-5th per cent. These royal exchangers had also the exclusive privilege of giving the current coins of the kingdom, in exchange for foreign coins, to accommodate merchant-strangers, and of purchasing light money for the use of the mint. As several laws were made against exporting English coin, the king's exchangers, at the several seaports, furnished merchants and others who were going beyond seas with the coins of the countries to which they were going, in exchange for English money, according to a table which hung up in their office for public inspection. By these various operations they made considerable profits, of which the king had a certain share. The house in which the royal exchanger of any town kept his office was called the Exchange, from which it is probable the public structures where merchants meet for transacting business derive their name." + This institution continued until the middle of the reign of Henry VIII., when it fell into disuse. It was re-established in 1627, by Charles I., who then issued the following proclamation: "Whereas the exchange of all manner of gold and silver current in moneys or otherwise, as the buying, selling, and exchanging of all manner of bullion, in species of foreign coins, billets, ingots, &c., fine, refined, or allayed howsoever, being fit for our mint, hath ever been and ought to be our sole right, as part of our prerogative, royal and ancient revenue, wherein none of our subjects of whatever trade or quality soever, ought at all, without any special licence, to intermeddle, the same being prohibited by divers Acts of Parliament and Proclamations, both ancient and modern. *So named from the noble nature of the metal they were made of. + Henry's History of England, vol. viii. page 347. And whereas ourself and divers of our royal predecessors have, for some time past, tolerated a promiscuous kind of liberty to all, but especially to some of the mystery and trade of goldsmiths in London and elsewhere, not only to make the said exchanges, but to buy and sell all manner of bullion, and from thence some of them have grown to that licentiousness, that they have for divers years presumed, for their private gain, to sort and weigh all sorts of money current within our realm, to the end to cull out the old and new moneys, which, either by not wearing or by any other accident, are weightier than the rest, which weightiest moneys have not only been molten down for the making of plate, &c., but even traded in and sold to merchant-strangers, &c., who have exported the same, whereby the consumption of coins has been greatly occasioned, as also the raising of the silver even of our own moneys to a rate above what they are truly current for, by reason whereof no silver can be brought up to our mint but to the loss of the bringers, &c.-For the reforming of all which abuses we have, by the advice of our Privy Council, determined to assume our said right, for our own profit and the good of the realm, and for this end we do now appoint Henry Earl of Holland and his deputies, to have the office of our changes, exchanges, and out-changes whatsoever, in England, Wales, and Ireland.-And we do hereby strictly charge and command that no goldsmith nor other person whatsoever, other than the said Earl of Holland, do presume to change, &c."* As this measure occasioned some dissatisfaction, the king authorized, in the following year, the publication of a pamphlet, entitled "Cambium Regis, or the Office of his Majesty's Exchanger Royal." In this pamphlet it was attempted to be shown : "That the prerogative of exchange of bullion for coin has always been a flower of the Crown, of which instances are quoted from the time of King Henry I downwards. That King John farmed out that office for no smaller a sum than five thousand marks-that the place or office where the exchange was made in his reign was near St. Paul's Cathedral in London, and gave name to the street still called the Old 'Change-that in succeeding reigns there were several other places for those exchanges besides London-that this method continued to Henry the Eighth's time, who suffered his coin to be so far debased that no regular exchange could be made that the same confusion made way for the London goldsmiths to leave off their proper trade of goldsmithrie, i. e., the working and selling of new gold and silver plate, and manufacture, the sole intents of all their charters, and to turn exchangers of plate and foreign coins for our English coins, although they had no right to buy any gold or silver for any other purpose than for their manufacture aforesaid, neither had any other person but those substituted by the Crown a right to buy the same. The king, therefore, has now resumed this office, not merely to keep up his right so to do, but likewise to prevent those trafficking goldsmiths from culling and sorting all the heavy coin, and selling the same to the mint of Holland, * Anderson's History of Commerce, vol. ii. page 324 |