introduced, however, failed in producing an adequate supply of money to meet the expenses of the government. In 1691, a plan was suggested by William Paterson, a Scotchman, which was supported by London merchants; but the government failing to support the scheme, no action was taken. In 1694, at the request of King William, Paterson again formulated a plan, which was put in definite shape by Montagu and resulted in the incorporation of the Bank of England, the official title being The Governor and Company of the Bank of England. The act incorporating it provided that commissioners were to be appointed by the king to receive subscriptions for the sum of £1,200,000, from any person or body; that the sum of £100,000 was to be set apart and paid by the government annually to the subscribers of this fund; that the amount subscribed was to be loaned to the government to carry on the war with France; that the king was to authorize the subscribers to the loan to transfer their interest to a corporation to be called The Governor and Company of the Bank of England, with all the usual privileges of a corporation, together with the power to acquire and hold lands in as full a manner as any private individual; that the corporation was to be allowed to issue notes to the full amount of the loan, to deal in bills of exchange, to buy or sell bullion, gold or silver, to lend money on goods or merchandise, and to sell such goods and merchandise if the advance were not paid within 3 months of the time agreed on; that if the corporation should purchase any Crown lands or lend money to the Crown, except by permission of Parliament, it was to forfeit treble the value of all such advances.
The managers of the bank enjoyed, from the outset, three privileges that gave them an immense advantage over all competitors: They received the government balance; they enjoyed the privilege of limited liability, i. e., stockholders were liable for the debts of the bank only to the amount of their investment, and not for its entire liability; they were able to loan money in excess of their deposits by reason of the circulating notes they were allowed to issue against the government debt. The bank was called on to weather many
