He lambasted the Bank’s acting “hesitatingly, reluctantly and with misgiving”.2 Henry Gibbs, Governor of the Bank from 1875 to 1877, highlighted the Overend experience as “the Bank’s only real blunder”.3 Yet the Bank had also learned from this experience. It had discovered that its role could be neither commercial nor competitive. Instead its role was as guardian of the financial system as a whole, protecting banks from what is today called systemic risk. In Bagehot’s words, the Bank should act as last resort lender to solvent institutions against good collateral at a penalty rate. It has done so ever since. The Bank did not have to wait long to put its new-found role into practice. On Saturday 8 November 1890 the Bank Governor of the day, William Lidderdale, summoned his Directors. This itself aroused suspicion. Bank directors were never seen at work at the weekend. They typically departed for the country around Friday lunchtime. (Let me tell you, things have changed for Bank of England Directors since then.) What Lidderdale told his Directors was electric. There were serious liquidity problems at another big and famous bank, Baring Brothers and Company. But the Bank had not the faintest clue as to Barings’ true financial position. To rectify that, Lidderdale ordered an accountant’s report on Barings to be brought to him with immediate effect. And with that, he departed to London Zoo with his son. 1  Kynaston (1994) Vol. 1. p200. 2  Bagehot (1873). 3  Wood (1999).
However we need to acknowledge that the benefits of globalisation have been very unevenly distributed, even in the most developed economies where many wage earners have not seen a real increase in wages for decades and have lost their jobs and security. This is what populism feeds on whilst certainly not offering solutions intended to ensure social justice. Economic growth is only a means to the ultimate end of providing a higher standard of living and confidence about the future for all citizens. But it is an absolutely necessary means. Page 8 of 8