A Book with Legs: Episode Summary – Anne Murphy on "Virtuous Bankers"

In the September 2, 2024 episode of the "A Book with Legs" podcast, hosted by Cole Smead of Smead Capital Management, the conversation centers around Anne Murphy’s insightful 2023 publication, Virtuous Bankers: A Day in the Life of the 18th Century Bank of England. Anne Murphy, a Professor of History and Executive Dean at the University of Portsmouth, brings a rich academic perspective coupled with practical experience from her 12-year tenure trading interest rates and foreign exchange derivatives in the City of London.

1. Inspiration and Purpose Behind "Virtuous Bankers"

Anne Murphy delves into her motivation for writing Virtuous Bankers, emphasizing her academic curiosity sparked during her PhD studies. She was particularly fascinated by the intricate day-to-day operations of the 18th-century Bank of England—a topic rarely detailed in conventional banking histories.

“I was really intrigued by the process, by how things worked on a day to day level.”
— Anne Murphy [02:50]

Murphy aimed to uncover the minutiae of banking operations, such as the workings of bills of exchange, the filing processes, and the printing of banknotes, to provide a comprehensive understanding of historical banking practices.

2. Decoding "Virtuous Bankers"

The title Virtuous Bankers initially caused some hesitation for Murphy, who contemplated alternative titles before publishers insisted on retaining it. Contrary to what some might assume, the term "virtuous" is not a direct commentary on modern banking ethics but rather reflects the Bank of England's esteemed reputation in the 18th century.

“Why the bank of England's directors could characterize the bank as something that demanded almost religious veneration.”
— Anne Murphy [03:04]

Murphy explores how the Bank's directors viewed the institution with profound reverence, considering it worthy of national protection and respect—a stark contrast to the more guarded and scrutinized central banks of today.

3. The Bank of England in Historical Context

Founded in 1694 by Prince William III, the Bank of England emerged as a pivotal institution amidst the English financial revolution post-Glorious Revolution. Unlike its Dutch counterparts, the Bank was a joint-stock company from its inception and a note-issuing entity, setting it apart in structure and function.

Ann Murphy highlights the Bank's unique position as both a private company and a key financial contractor for the British government, managing public debt with greater efficiency than government mechanisms of the time.

“It is a true contractual arrangement here that continues right up until the mid part of the 19th century.”
— Anne Murphy [06:46]

4. Contractor Status and Government Relations

The term "contractor" in this context refers to the Bank of England’s role in managing services the government could not efficiently handle, such as public debt management. This contractor relationship persisted until the mid-19th century when central banking functions became more entrenched.

“They are supplying a service that the treasury at this time or the Exchequer cannot provide for itself.”
— Anne Murphy [06:46]

Murphy posits that the Bank’s effectiveness in this role cemented its longevity and importance within the British financial system.

5. Evolution of Location and Architectural Growth

Initially operating from borrowed premises near Grocer's Hall, the Bank of England gradually relocated to Threadneedle Street, eventually occupying an entire block. This expansion was driven by the need for more space to accommodate growing operations and enhance security against threats like fire and civil unrest.

“They need protection from fire, they need protection from rioters.”
— Anne Murphy [10:31]

The Bank’s physical growth paralleled the transformation of London’s financial district, influencing the urban landscape significantly.

6. Symbolism: Britannia and Lady Credit

Murphy draws a fascinating parallel between symbolism and gender roles in finance during the 18th century. The Bank of England adopted Britannia as its emblem, embodying virtues such as stability, protection of the Protestant nation, and economic integrity. In contrast, Lady Credit personifies the fluctuating nature of credit and lending—sometimes dependable, sometimes unreliable.

“Britannia represents the Protestant nation... Lady Credit behaves very badly. She's very fickle.”
— Anne Murphy [14:49]

This dichotomy highlights how gendered perceptions influenced the Bank’s public image and functional representation.

7. The 1783-1784 Bank Inspection

Amidst scrutiny similar to that faced by the East India Company, the Bank of England conducted a comprehensive inspection from March 1783 to 1784. Three directors meticulously examined all facets of the Bank’s operations, ensuring transparency and integrity.

“They can call any papers or any employees that they choose. And they do that very thoroughly.”
— Anne Murphy [20:31]

This proactive approach aimed to preempt potential governmental takeovers and reinforce the Bank’s commitment to ethical practices.

8. Daily Operations and Employee Accountability

The Bank’s operational day began early, with preparations that included unlocking safes, setting up ledgers, and ensuring all tools (like quill pens) were ready. Employee punctuality was strictly monitored, with a 10-minute grace period before tardiness was reported to a disciplinary committee.

“The doorkeeper... draws a line in that book at 10 minutes after 9 and a note is then made of the people who come after that.”
— Anne Murphy [28:35]

Personal accountability was paramount, with employees required to bond personally against losses and misconduct, fostering a culture of responsibility and trust.

9. Customer Demographics and Gender Roles

Contrary to modern assumptions, women played a significant role in interacting with the Bank of England. Approximately 15-20% of transactions in public debt involved women, often acting as agents for their families or managing finances on behalf of absent members.

“Some women you see there with men... single women who are acting for themselves.”
— Anne Murphy [56:49]

This inclusivity reflects the broader societal roles and the essential participation of women in financial matters during that era.

10. Managing Public Debt and Pelham's Conversion

Pelham's Conversion was a strategic move in the late 1740s to lower interest rates by consolidating various debt instruments into more uniform, lower-yielding bonds. This initiative not only streamlined debt management but also facilitated a more active and transparent secondary market, essential for efficient government borrowing, especially during wartime.

“This creates a really active secondary market and really allows the government's debt to become much more transparent.”
— Anne Murphy [65:55]

11. Security Measures: Locks, Keys, and Preventing Theft

Security in the 18th-century Bank of England was a complex affair, relying heavily on physical locks and keys. Each employee had access to multiple keys, and the management of these keys symbolized power and control within the institution. Remarkably, despite the high-value transactions and numerous employees, Murphy found no records of significant bank heists during this period.

“It's really difficult to manage because of 18th century technology.”
— Anne Murphy [74:33]

This robust security framework underscored the Bank's dedication to maintaining the integrity and safety of its operations.

12. Reflections on Modern Banking Practices

Murphy offers a thoughtful comparison between historical and modern banking, particularly regarding transparency and information flow. While increased transparency today aims to build trust, Murphy suggests it may also lead to challenges like over-speculation and rapid, sometimes unmanageable responses to information.

“Crisis in the 18th century... allows a much more measured set of responses than we necessarily have now.”
— Anne Murphy [69:18]

This reflection invites listeners to consider the balance between transparency and stability in contemporary financial systems.

Notable Quotes with Timestamps

• “I was really intrigued by the process, by how things worked on a day to day level.”
  — Anne Murphy [02:50]

• “They say this is an entity and an institution that we should protect with everything within our power.”
  — Anne Murphy [03:04]

• “Everything speaks to creating a sense of your personal connection to the corporate body...”
  — Anne Murphy [35:10]

• “Britannia represents the Protestant nation... Lady Credit behaves very badly. She's very fickle.”
  — Anne Murphy [14:49]

Conclusion and Further Reading

Anne Murphy emphasizes the enduring relevance of historical banking practices in understanding modern finance. She encourages listeners to explore her work further and highlights the accessibility of Virtuous Bankers.

“Virtuous Bankers is out in paperback. Soon it will be much more reasonably priced.”
— Anne Murphy [77:19]

Listeners interested in the intersection of history and finance will find Murphy’s detailed exploration both educational and enlightening.

Anne Murphy's "Virtuous Bankers" offers a compelling glimpse into the operational intricacies and societal impacts of the Bank of England in the 18th century. Through meticulous research and engaging storytelling, Murphy bridges the past and present, providing valuable lessons for today's financial institutions.