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worth five hundred thousand pounds and so of others proportionally.

In his " Humble Proposals " the author makes the pregnant
suggestion that obstructions in law to transferring bills be removed,
" to which purpose there is a Petition it seems already presented ; "
and in the " Essay " he makes a distinct proposition for a land
bank, of which this is a summary : —

1. That 100 places be appointed for payments to be made, etc.

2. That all payments above 10/. or 20/. be required to be made in Bank
credit.

3. That there be no way to raise this credit in Bank but by the mortgaging
of land at 6 per cent.

Besides giving landed men credit at two per cent (.-') and a
large revenue to the public, this would avoid " all danger of sur-
prise (as lately in Holland), there being (by the law of the Bank)
no money to rest there."

Of very different character is the following : —

" Seasonable Observations Humbly offered to his Highness the Lord Pro-
tector. By Sajnnel Lainbe, of Lotidon, Merchant. Printed at the Author's charge
for the Use and Benefit of the English Nation, and to be considered of and put in
execution as the High Court of Parliament, in their great Wisdoms shall think
meet. Jan. 27, 1659."^

Having in mind the rivalry of the Dutch, Lambe finds a bank
the best means of coping with them : —

A bank is a certain Number of sufficient Men of Estates and Credit joined
together in a joint Stock, being, as it were, the general Cash-keepers or Treas-
urers of that Place where they are settled, letting out imaginary Money at Interest
at 2 and i or 3/. per Cent to Tradesmen, or others, that agree with them for the

^ Reprinted in the Soiners Tracts, ii. 164, or in Scott's edition, ii. 446.



J38 ESSAYS

same, and making Payment thereof by Assignation, and passing each Man's
Account from one to another with much FaciHty and Ease, and saving much
Trouble in receiving and paying of Money, besides many Suits in Law and other
Losses and Inconveniences which do much hinder Trade.

He proposes that the management of the bank should be given
to merchants chosen by the great trading companies of London,
like the East India, the Turkey, and the Muscovy companies.

That all be at Liberty to bring in any Money into Bank or not, and if any
that have Money there, desire to have it again in Kind, should have it at
Demand. . . .

That they let out imaginary Money on Credit, upon Ticket, at 2j and 3/. per
cent at the most.

That all Bills of Exchange be received and paid in Bank.

That all the Profits of the Bank go to the good Men that manage the same,
in lieu of their great Care and Pains, and defraying Bank Charges, and Officers'
Salaries, or so much as shall be thought fitting to be reserved towards the
Increase of the Stock ; and as the Bank increaseth in Credit, so the Reservation
to increase to augment the Stock, but the Stock always to remain whole and intire.

Lambe vv^as satisfied that such a bank would so encourage trade
and be so convenient that others would soon be called for at Edin-
burgh, Dublin, York, Bristol, and Exeter, " for the Furtherance
of Trade, by holding Correspondence with each other, than which
I do not apprehend or know any way better to equal the Dutch in
Trade, both at home and abroad."

Next, we have, —

" An Expedient for taking away all Impositions and for raising a Revenue
without Taxes, by Francis Cradocke. London, 1660.'" 12 pp. 4to.

Also, —

"Wealth Discovered : Or, an essay upon a late expedient &c., by F. C.
London, 1661." pp. viii. 44. 4to.

In the former of these pamphlets, which is addressed to Charles
II., the author gives, with little change, the definition of a bank
already cited from Lambe, and then states his own plan, which is
somewhat elaborated in "Wealth Discovered." He proposes to
divide the kingdom into one hundred registry districts, and to make
the registration of titles and conveyances of real estate compulsory ;
then to establish a bank, which shall lend its credit upon deposit
of goods or pledge of lands ; this credit to be by law " as undeniably



EARLY BANKING SCHEMES IN ENGLAND 139

current in payment " of debts or for goods as gold or silver, and to
be given out at three per cent ; but money not to be drawn from
the bank.

Now that such credit is as good as Money will appear, if it be observed, that
Money itself is nothing else but a kind of security which men receive upon parting
with their Commodities, on a ground of hope or assurance that they shall be
repayed in some other Commodity : since no man would either sell or part with
any for the best Money, but in hopes thereby to procure some other Commodity
or Necessity, (p. 14.)

The bank credit, he thinks, will not raise the prices of com-
modities, for they can be imported, but will raise land and lower
interest. Cradocke says that the books which he has seen on banks
are Malynes, " Les Mercatoria," Lewis Roberts, " Mappe of Com-
merce," 1 Henry Robertson [sic^, " Trade's Increase," ^ and Lambe,
" Seasonable Observations." But all these he finds merely en-
courage imitation of other countries without proposing increase of
revenue, whereas by his bank he computes that the public would
gain a revenue upon loans of ;^ 1,730, 000 with little expense. He
notices Potter, and thinks him an ingenious person, and refers to
"the shops of Lombard Street (which are banks in effect)."
That his bank should be erected without the use of money he finds
to be an advantage ; for gold and silver have their dangers, and so
have banks which are based on them, whereas land can be made
to answer much better.

In "Wealth Discovered" it is stated that April 12, 1661, Cra-
docke's plan was referred to the Council for consideration ; and
added to the Council are Francis Cradocke, William Godolphin,
George Monk, Samuel Hartlib, Henry Ford, Sir Peter Leare, Sir
WiUiam Petty ; but the matter appears to have gone no farther.^

1 Lewis Roberts, "The Merchant's Mappe of Commerce, wherein the Universal
Manner and Matter of Trade is compendiously handled. London, 1638." Fol.

^ Henry Robinson, "England's Safety in Trade's Increase. London, 1641." 4to.

^ In the Calendar of State Papers, Domestic, 1661-1662, p. 7S, under date of August,
1661, note is made of a brief description by Sir B. Gerbier d'Ouvilly, of "a Bank of
Exchange as very beneficial. . . . To make the credit of English merchants equal to
that of foreign, there should be a bank, with a large stock, under fitting governors, such
as to remove all jealousy of its falling into the hands of those who hold the militia, with
a coinage of its own, called bank money, and ability to lend on real estate." Sir Bal-
thasar Gerbier probably made this proposition as the result of his sojourn in the Nether-
lands during the Commonwealth.



140 ESSAYS

In a postscript, Cradocke explains to his readers that he is
the son, not of Cradocke the preacher to Cromwell, but of another
of that name who lived " about seventeen years since " in Somer-
setshire, near Glastonbury, had an estate of ;£5oo per year, and
lost his life in the service of the king. He also makes a reference
to his present " short stay in England."

The impression produced by the success of the Bank of Venice
appears strongly in the pamphlets of Matthew Lewis, published
in 1677 and 1678 : —

" Proposals to increase Trade And to Advance his Majestie''s Revenue with-
out any hazard or charge to anybody, and with apparent profit to everybody.
By M. Lewis. London, printed for Henry Million at the Sign of the Bible in
Fleet Street. MDCLXXVIL" 16 pp.

This pamphlet proposes the establishment of an office with
warehouses, where advances in bills of credit may be made upon
goods for not exceeding twelve months, the bills to be exchanged
[discounted .-*] by the office, if desired, " into Money at four per
cent." The example of Venice is more than once referred to ; as,
e.g. (p. 12), " Men desire Credit at Venice (though never answered
out of the Bank in specie) rather than Money ; because it is more
safe and more transferrable than Money." Of the moderate
charge to borrowers, the author says that " this is nothing like
the borrowing Money to the Scrivener, where the Security is
usually sealed at a Tavern, and the Borrower pays the Reckon-
ing."

'* Proposals to the King and Parliament how this Tax of one hundred and
sixty thousand pounds per Aloneth, may be raised, by a Monethly Tax, for one
Year, without any Charge to any particular person, and with great advantage to
the whole Nation. This may be done, by setting up Banks here, like the Bank at
Venice. By M. Lewis, D.D. London. Printed in the Year 1677." 7 pp. 8vo.

Of this pamphlet, nearly half is taken up with an account of
the Bank of Venice, apparently resting on the authority of " my
Intelligencer," but sustainable by " several Venetian Merchants,
that have lived many years upon the place, and made it their
business to understand the nature and constitution of this Bank,
called. Banco dc al gcro ; A Bank of transferring Credit."

The writer's plan is that a tax of ;!^ 160,000 per month should
be laid for one year ; that banks in every country town should



EARLY BANKING SCHEMES IN ENGLAND 141

receive the money, and that the taxpayers should receive bills of
credit in exchange, these bills to be made current money, and
Parliament to pledge its faith that money should be raised in
specie to answer the bills, " if ever it be desired." The case of
Venice is relied upon to show that, while the government could
thus have the use of the money obtained by this levy, its credit
would be a practical and advantageous substitute, saving the tax-
payers from any inconvenience.

In the next year, the indefatigable author produced two more
pamphlets, of which the first is the best known of the series : —

" Proposals to the King and Parliament, or a large Model of a Bank, Shew-
ing how a Fund of a Bank may be made without much charge or any hazard,
that may give out Bills of Credit to a vast extent, that all Europe will accept of,
rather than Money. Together with some general proposals in order to an Act
of Parliament for the establishing this Bank. Also many of the great advan-
tages that will accrue to the Nation, to the Crown, and to the People, are men-
tioned, with an answer to the Objections, that may be made against it. By
M. L. D.D. London. Printed for Henry Million at the sign of the Bible in
Fleet Street 1678." pp. 48. 4to.

The author here proposes that no payment oi £\(X> or upward
should be good in law, unless made in bank; that the bank should
lend upon either personal or real security, but should be wary at
first in giving out credit except for money ; that it should be
empowered to buy lands and ships, to set up "a lomber," and to
engross the stock of tin and make it into money or ingots to be
money at the market price. That good security may be had for
loans, he proposes that the registration of ships, houses, and lands
should be authorized, all adverse claims to be barred, if not
brought in within six months after notice given of registration.
The advantages of registration are discussed incidentally ; and it
is complained that estates are settled privately and titles made
uncertain, so that land formerly worth twenty years' purchase or
more is little above sixteen, though interest is at six per cent.

Lewis enlarges on the case of the Bank of Venice, which, he
says, sprung from the dishonesty of bankers. " The Bankers at
Venice did just as our Bankers have done here, they got Men's
money into their hands at Interest " and lent it to insolvents or
"laid it out in desperate cases as our Bankers did"; they broke
and fled from the territories " as ours do into the Kins:s BencJty The



142



ESSAYS



State therefore set up the bank, which he believes to be " a perfect
Credit Bank and its Fund a meer imaginary thing," and yet
" credit in Bank is more safe, more portable, and more transferable
than money in specie, and so of greater value, as Gold is better
than Silver." On the difference in rate between bank credit and
currency, both at Venice and Amsterdam, he dwells at some
length, returning, however, to the above explanation.

"A Short Model of a Bank Shewing how a Bank may be erected without
much trouble, and without any charge or hazard to any body, and with apparent
profit to every body, except Theeves, Brokers, and griping Usurers, which Bank
will be able to give out Bills of Credit to a vast extent that all persons will accept
of rather than Money. By M. Lewis, D.D." [No place or date.] 8 pp.

This pamphlet refers the reader to " a larger discourse of this
Model at Mr. Million's," and then gives a summary as follows: —

The Epitome of this Compendium is, when the Nation is divided into
Precincts, erect an Office in each Precinct to return Money.

Order all greater Payments to be made at these Offices, where any person
may leave his Money without interest, and take a Bill of Credit for it of the
Office, which shall be made transferrable.

That the Bill of Credit may be current ; let the whole Precinct be obliged to
make good the acts of their Office, as in case of Robbing.

That the Precinct may not be damnified, let them choose their own Officers,
who shall give security to them.

They shall also choose four and twenty substantial persons to meet once a
Month to supervise their stated Officers.

These four and twenty shall dispense Money lying dead in the Office, as oft
as they please.

Much of the running cash of the Nation will in a little time pass througli
these offices, and all that can will leave it there, and take a Bill of Credit
of the Office : because this Bill of Credit will be more .safe, more portable, more
transferable, and so of greater value than Money, as Gold is (for these reasons)
better than Silver.

Hence these Officers will have a vast Credit, which is equivalent to so much
Money in specie, and may do whatever any can do, that have an inexhaustible
treasure.

To these notes the better known schemes of Briscoe and Cham-
berlayne are the proper sequel ; but it is unnecessary to pursue
the subject. Before the close of the seventeenth century, the rise
of private banking had done much to clear the public mind, the
land bank scheme was sanctioned only in modified form, and
the establishment of the Bank of England had come about as the
natural result of experience and the final prevalence of sound ideas.



THE BANK OF VENICE i

An often repeated and long accepted legend respecting the
origin of the Bank of Venice carries back the history of that
remarkable institution to the latter part of the twelfth century,
A public debt, contracted not far from 1171, is said to have been
made transferable like a modern registered debt, then to have been
found useful as a medium of payment, to have become the nucleus
of a system of deposits and transfers of money, and so to have
developed into a bank of deposit of the primitive type, holding a
place of great though variable importance in European commerce
for more than six centuries. With this legend have been joined
confused and often contradictory statements as to a " money of
account " of mysterious nature created by the bank, and the
superiority of this " imaginary money " to actual cash in hand.
Owing, perhaps, to the aversion of the Venetian government to
anything hke pubUcity in the management of its business, even
the Venetian historians were sometimes misled by the tradition ;
and it is, therefore, not surprising that writers in other countries
followed it with little question.

The researches of Lattes and Ferrara in the archives of the
Frari destroyed the familiar legend twenty years ago ; and the date
and manner of the establishment of the Bank of Venice were then
settled as definitely as the chartering of the Bank of England.
The traditional fable has perhaps been more persistent in English
than in any other language, still holding its place in the most
recent encyclopaedias, English and American ; ^ but elsewhere it is
effectually discredited, and ceases to adorn the history of mediaeval
banking. It would hardly be worth while, then, to revive the sub-
ject here, were it not for the light which the documentary evidence

^ Quarterly Journal of Economics, K^trW, 1892.

2 McLeod, " Dictionary of Political Economy," p. 69, rejects the fabled connection
of the Venetian monii of the twelfth and succeeding centuries with the beginning of
public banking in 1587; but his erudition has often failed to command proper attention.

143



144



ESSAYS



throws upon the early practice of private banking in Venice and
upon the place which the public bank and its credit really held in
the commercial organization of the city for the last two centuries
of Venetian independence.

The leading documents relating to this subject, which are now
within reach of the public, may be classified as follows : —

1. A series of acts of the Venetian Senate, nearly forty in
number, ranging from the year 1270 to 1530 and regulating the
business of private bankers, brought to Hght by Professor Elia
Lattes, and reprinted by him, apparently with great fidehty to the
text of the original records, in his work, " La Liberta delle Banche
a Venezia dal secolo XIII al XVII," published at Milan in 1869.

2. A mass of original papers relating to Venetian private
banks from the fourteenth century to the end of the sixteenth,
collected from public and private sources by Professor F. Ferrara,
and published by him in part in the ArcJiivio Vcneto for 1871, and
also used by him as material for a paper on the ancient banks in
Venice, published in the Nuova Antologia for January and Feb-
ruary, 1871.^

3. The acts of the Venetian Senate of 1584 and 1587, under
which the first public bank in that city, the Banco di Rialto, was
established ; several other acts regulating the affairs of that bank ;
a speech made in the Senate, in 1584, by Tommaso Contarini, in
favor of establishing a public bank ; and a speech, by an unknown
senator, opposing such an establishment. These are collected and
printed with great care by Lattes.

4. The act of the Senate of May 3, 1619, establishing by the
side of the Banco di Rialto a second public bank, known as the
Bancogiro, or Banco del Giro, which ultimately became the only
public bank of the city and was famous throughout Europe for gen-
erations as the Bank of Venice. This act is also given by Lattes.^

5. The rules and regulations of the Bancogiro, put in force by
the Senate and published by its authority in 1663, and also given
by Marpergcr, in his " Beschreibung der Banquen."

' Ferrara explains with great frankness that, in his introduction of Volume VI., 2d
Series, of the Biblioteca degli Economisti, he had himself helped to propagate the
favole which Lattes destroyed by irrefragable proofs. See especially Ferrara's " Awer-
tenza Preliminare," in the Archivio Veneto, vol. i.

2 A translation may be found in the Quarterly Journal of Economics, April, 1892.



THE BANK OF VENICE I45

6. A discourse upon the Bancogiro communicated by the
French ambassador in Venice to his own government in 1786, and
referred to by Daru in his " Histoire de Venise," but printed for
the first time in the Appendix of the Quarterly Journal of Eco-
noviics for April, 1892, and containing the fullest contemporary
account yet published of the bank and its methods in the last
years of its existence.

These documents present a distinct picture of banking in its
true sense, as an entirely spontaneous growth during the flourish-
ing period of Venetian commerce, carried on by private individuals,
and exhibiting the mixture of advantages and abuses which have
been its familiar results in every country and age ; and they also
show the Bank of Venice to have been established, not by gradual
development or chance, but by deliberate purpose, in order to take
under the guarantee of public authority some of the functions
which for two hundred and seventy years or more had been per-
formed by private bankers.

It is tolerably clear that private banking in Venice began as an
adjunct of the business of the campsores, or dealers in foreign
moneys. In a city having a great and varied trade with many
countries, these dealers necessarily held an important place, close
to the stream of payments which was constantly in motion. As
early as 1270 it was deemed necessary to require them to give
security to the government as the condition of carrying on their
business, but it is not shown that they were then receiving deposits.
In an act of September 24, 13 18, however, entitled " Bancherii
scriptae dent plegiarias consulibus," the receipt of deposits by the
campsores is recognized as an existing practice, and provision is
made for better security for the benefit of depositors.^ Whether
the title of this act is contemporary or not, its text shows that
somewhere between 1270 and 13 18 the money-changers of Venice
were becoming bankers, by a method similar to that by which the
same class of men in Amsterdam a couple of centuries later, and

1 The acts of March 8, 1270, and September 24, 131 8, are given by Lattes, pp. 26,
28. Lattes thinks that the " natural scope " of the former covers security for depositors.
The opinion of Ferrara is to the contrary {Niiova Antologia, January, 1871, p. 183) ; and
it does not appear that any direct evidence has been found to show that in 1270 the
campsores were receiving deposits, although the occasional possession and use of money
belonging to others must have become an incident of their business very early.
L



146



ESSAYS



later still the London goldsmiths, became bankers. More than
once in the next half-century provision was made for some public
oversight of the cainpsorcs, and in the acts the terms bancheruis and
banciis became frequent in what seems to be a technical use. The
number of bankers appears finally to have become considerable ; ^
and the tsrms banais scriptae and bajicJieriiis scriptae came into
use in the sense which, in their Italian equivalents (as banco di
scritta or banco di scrittura\ they held for centuries, denoting the
banker who keeps written accounts of transferable deposits.

The documents brought to light by Lattes and by Ferrara
give us the names and tell something of the checkered fortunes of
a considerable number of these private banks which flourished
between 1348 and 1584, Some of them belonged to families or
men of high standing, as the banks of Soranzo, Priuli, Pisani,
Lippomano, Vendramin, Sanudo, and of Pisani and Tiepolo;
some of them stood in close relations and high favor with the
government of the day ; several of them went through the phases
of failure, reorganization, and resumption more than once ; and,
in fine, of the banks now known by name Ferrara was only able
to find one, the house of Soranzo, which after an existence of over
a century closed its affairs by payment in full, — a trombe e pifferi.
The list as we now have it comprises rather more than twenty
names, including probably the most important. But the speech
of Tommaso Contarini in 1584^ sets the number of banks known
to have existed at one hundred and three, " of which ninety-six
have come to a bad end and only seven have succeeded." And
yet, notwithstanding a train of disasters nearly two centuries and
a half long, the service rendered by the banks to commerce had
been such, on the whole, as to lead Contarini to argue that to pre-
serve the trade of the city without banking was not only difficult,
but impossible.

A series of acts beginning in the fourteenth century and run-
ning through the fifteenth and sixteenth show plainly that this

^ This is to be inferred from the languafje, explicit, if not classical, of the act of
August, 1374, giving the bad condition of the banks as a reason for placing them under
the charge quinquc snpietttuni : "Quia est providendum de necessitate pro bono terrae
nostrae et mercatorum et mercationum etiam nostri communis super facto bancorum
Rivoalti, quae non possent stare in peiori termino eo quod sunt ad praesens Consideratis
damnis et incommodis, quae fiunt toti terrae," etc. See Lattes, p. t,'^.

2 Ibid., p. 1 24.



THE BANK OF VENICE 147

service was rendered by means of deposit accounts. How early
the convenience of making payments by transfers on the books of
a banker was understood there is nothing to show. An act of
1403 ^ recites that great sums are placed in the hands of the
bancherii scriptae ; and an act of 1421^ deals with some evils which
had arisen, in terms which imply not only the receipt and pay-



Online LibraryCharles Franklin DunbarEconomic essays → online text (page 16 of 40)