One of the World’s Most Famous Financial Institutions Was Born From Stolen Treasure
The governor who watched the witch hunts in Salem was the same man who would help the formation of the Bank of England.
Phips’ Lust For Treasure
The Bank of England is one of the world’s most renowned financial institutions. Having been in operation for over 300 years with over 4.7 billion notes in circulation - valued at nearly 82 billion pounds - it is a bastion of the financial world.
Founded in 1694, it may come as a surprise to many that the Bank of England has spent most of its history as a private corporation. Having been private, it features an interesting history. Few things in its history are more interesting than how it came to be in the first place.
Sir William Phips is commonly associated with his role during the infamous colonial witch hunts known as the Salem Witch Trials. However, before serving as Governor of Massachusetts, the Maine-born colonist tried his hand at entrepreneurship.
Only Phips’ treasure-hunting voyages were in reality little more than a form of piracy. Making several trips to England to secure funding for his voyages, Phips was hungry for treasure. Many of this ventures were a bust.
Undeterred, Phips turned to the Duke of Albermarle. Known for gambling, the duke and Phips were a match made in heaven. With the duke’s funds, Phips took a crew and crudely constructed submarines in search of a sunken Spanish ship.
Our Lady of the Conception, was a Spanish ship that was considered as Sir Francis Drake’s most famous prize. It was loaded with gold and silver. The ship had sunk near the Bahamas a half century earlier. Just as Phips and his crew were to give up their search, in January of 1687, luck struck.
A Treasure Hunt That Changed the World
Resting on the seafloor was 34 metric tons of gold and silver. Investors who had funded the voyage received dividends to the value of 10,000 percent return. One such investor who struck pay dirt was William Patterson.
Patterson took his earnings and seeded a plan for a new private bank. A bank to fund the British navy. A navy that was needed to protect Britian’s invaluable trade routes - most notably from their rivals, the French.
England was recovering from a crushing defeat to the French. The difference maker was the superior naval forces the French possessed. This reality set in during the Battle of Beachy Head in 1690.
Construction of the type of fleet necessary to rival the French fleet was not going to be cheap. And England was facing a shortage of public funds and low credit. Their credit was so low that it couldn’t borrow the 1.2 million pounds at 8% interest it estimated it needed for the fleet.
It’s All About the Timing
Patterson’s timing couldn’t have been more perfect. The money from Phips’ discovery was beginning to flood the English financial markets. News of the investors’ amazing returns created an appetite to invest. What better place to invest than in a new bank.
From the salvaged treasure from a sunken Spanish ship, the Bank of England raised the today equivalent of 1 billion pounds. It would establish itself as a prominent private financial institution and continue that way until 1946.
In 1946, the Bank of England became a part of the national government. As a part of the transition, the original private investors were paid their interest. Though long dead, their progeny reaped incredible rewards from their ancestor’s speculative gamble. Interest on initial investments was paid at 420,000 percent.
Wrecked on a coral reef in 1641, the Spanish ship, Our Lady of the Conception, sunk to the ocean floor. It took with her Spanish treasure. The same Spanish treasure that one William Phips would discover and return to England to start one of the world’s most notable financial institutions. One could posit the famous Bank of England was born from pirate gold.
History for the Hurried:
November 3, 1918: Part of the German fleet mutinied at Kiel in the closing days of World War I.
November 3, 1957: Soviet Russia launched the world's first inhabited space capsule, Sputnik II, which carried a dog named Laika. This was just the beginning of the Space Race and it would further the bifurcation of competing global super powers.