Sir William Paterson, Scottish financier and founder of the Bank Of England, died on the 22nd of January, 1719.
Every schoolboy knows that the Bank of England was founded by a Scot, William Paterson, and that the Bank of Scotland was established by an Englishman, a London merchant called John Holland, although they probably don't know the names. However, most won't realise that William Paterson also had a hand in the founding of the Scottish bank. The Scottish bank came into being in 1696, the year after Paterson returned to his native Scotland and helped to persuade his fellows that there was a need for a bank to support foreign trade. Nevertheless, Paterson is more famous and rightly so, for his having been one of the co-founders of what was then a private English bank. Not only was Paterson a co-founder, the canny Scot, a natural successor to Jinglin' Geordie Heriot, was the conceiver and proposer of the idea, in 1691, three years before the Bank gained its Royal Charter.
The need for a bank willing to lend huge sums to King William II and his Government stemmed from the weakness of public finances. Orange Wullie needed money to pay for his wars and Paterson, with his fellow subscribers, proposed to loan the Government the sum of £1.2m at eight percent interest. Not a bad deal, eh? Paterson and his mates established a joint stock company, incorporated as The Governor and Company of the Bank of England and lent their money to the nation. The national debt became the stock of the Bank of England and it became the Government's banker.
Paterson's other grand idea was the unsuccessful Darien Scheme, which was intended to establish a commercial settlement in Panama. By 1700, tragically, for Paterson personally and for many others of the 1200 settlers who had left Leith in 1698, full of hope and ambition, the Scheme collapsed amidst disease, and due to English intransigence. It was in the aftermath of the financial collapse of Darien, which bankrupted many Scots, that the Act of Union was negotiated.
William Paterson was born in April, 1658, in his parent's farmhouse at Skipmyre, in the Parish of Tinwald, near Dumfries. At the age of seventeen, young Wullie emigrated – yes, that's the word for it prior to 1707 – to Bristol, in England. According to the NNDB website, Wullie's move south was due to “A desire to escape the religious persecution then raging in Scotland, and the immemorial ambition of his race.” The NNDB also quotes a pamphleteer from 1700 as having suggested that Wullie Paterson “ went through England with a pedlar's pack.” Pedlar or not, Wullie certainly had ambition and, whatever that had been in 1675, he achieved a good deal in his life.
From Bristol, Paterson sailed to the American Colonies and lived for a time in the Bahamas. It's unfortunate that so little is known of his time there, but the stories suggest he was a bit of a rogue. Perhaps he was acquainted with another of oor Scottish Wullies; Captain William Kidd, the Scottish privateer who was hanged at Execution Dock in London, for piracy and murder, on the 23rd of May, 1701. In any event, Paterson is said to have been either a member of a religious order or a buccaneer. The first is unlikely! He can't have been all good or all bad, but he was certainly an intellectual and left the Bahamas having become, one way or another, a prosperous merchant.
Paterson returned to England fired up by his Darien Scheme, which he'd conceived as a means of facilitating trade with the Far East, based on creating a trading company in a colony on the isthmus of Panama. If he'd only thought of building a canal. Posterity recollects that Paterson failed to persuade the government of James II to suport his plan, so he trotted off to the Continent and invested in Dutch banks. Paterson then touted his grand scheme around the courts of the Holy Roman Empire and the Dutch Republic like an early form of lobbyist. After visiting Hamburg, Amsterdam and Berlin, oor Wullie Paterson had to accept failure – put his ambitions on hold – and he returned to London.
Back in the capital of England, Paterson re-engaged in his profession as a trader, involved with the Merchant Taylors' Company. Paterson was also involved in the formation of the Hampstead Water Company and he was successful enough to have amassed a decent fortune by the time his next bright idea came to light. As an example of his intellect and influence, Paterson wrote, the better part of a century before Adam Smith published his seminal work, that, “Trade will increase trade, and money will beget money, and the trading world shall no more want work for their hands, but will rather want hands for their work.” Thus spake the future Governor of the Bank of England.
Paterson launched his grand banking idea in 1691, when he published a document called 'A Brief Account of the Intended Bank of England'. The concept was a private bank that would assist Government finance. Strapped for cash, another Wullie, the 2nd of England, by way of Orange, promptly approved the idea. The Bank of England's Royal Charter was gained on the 27th of July, 1694, and its first loan was a king's ransom of £1.2m.
Paterson was the conceiver, a co-founder and one of the original Directors of the Bank of England, but he was never its Governor. In terms of his contribution, William Paterson, Esquire, of London, subscribed with the sum of £2,400 and this fact is recorded in ledger folio 56 as entry reference 304 on page 10. In 1695, owing to a disagreement with his colleagues (according to some, he was removed after a financial scandal), Paterson withdrew from the board and devoted himself to his first grand scheme; that of Darien. Perhaps Paterson's fellow directors had become wary of his endless stream of ideas, one of which had been a plan for the 'Orphan Bank', which must have been seen as a dangerous rival to the emergent Bank of England.
Paterson, with his second wife and their child, were aboard one of the first five ships that left Leith for Darien on the 14th of July, 1698. Fifteen months later, he was back in Edinburgh, a widower and childless, and virtually bankrupt by the disaster of Darien. Thanks mainly to fears of upsetting the Spanish, his kingly namesake and the English Government had let him down by actively prohibiting assistance of the Scots colonists. You'd think then that Paterson would've been against the Act of Union, in 1707. On the contrary, he was an advocate of Union and a key figure in the financial negotiations for the Treaty. Perhaps that was his subtle revenge; engineering a settlement that was financially fairly favourable to Scotland. Under its terms, compensation was paid to those who had lost money in the Darien scheme.
Sir William Paterson died in Westminster, in London, on the 22nd of January, 1719. He was buried back in Scotland, in the graveyard at Sweetheart Abbey, where a commemorative plaque was unveiled, centuries later, in 1974.