Receipts from Goldsmiths for storage in strong
boxes had become a de facto paper currency. But when the
Goldsmiths had no more money to lend, the Bank of England was
founded in 1694 under whig auspices to provide money for war. It
was the first institution to issue notes in excess of its total
deposits. However, it was not allowed to lend money to the Crown
without the consent of Parliament. It was incorporated as the
first English joint-stock bank and had about 1,300 shareholders.
These original subscribers were individuals from London from many
walks of life, including well-to-do tradesmen and about 12% of
whom were women: wives, widows, or spinsters. Not many
corporations were original subscribers. Holders of at least 500
pounds could vote, of 2000 pounds could be directors, and of 4000
pounds could be Governor. The Bank issued notes payable to bearer
and discounted bills, but these were not legal tender. It lent at
8% to the Crown and occasionally to corporations. Money was also
borrowed by offering annuities on single lives. This was the first
time the government borrowed directly from the public on a long-
term basis.
In 1695 there was inflation due to over issue by the Bank because
of inexperience, pressure from government, and the Bank's greed
for business. After a dividend of 5% in 1695, the next year there
was no dividend and so the bank stock price fell.
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