Episode 25 - The Old Lady on Threadneedle Street
The origin story behind the beloved nickname of the Bank of England.
Intro
Welcome to The Bankster Podcast. I’m your host, Alexander Bagehot. Every episode we dive into what I call The Centralverse! The incredibly fascinating and ever more consequential world of central banking. This is Episode 25 - The Old Lady of Threadneedle Street.
The day after the previous episode aired I moved apartments. The new location is a wonderful upgrade with beautiful large windows that allow me to wake up with the sun. It didn’t take long to feel like home. However, this also means a new location for recording the podcast. Don’t be afraid to write in and let me know if you hear a difference in the quality of the podcast’s audio. Coming from someone that listens to dozens of hours of podcasts a week, I know how important sound quality is. I can be reached directly at alexander@thebanksterpodcast.com. Ok, let’s dive into today’s episode.
The Old Lady of Threadneedle Street
Do you remember Lombard Street? This is the name of one of the quintessential central banking books, written by the one and only Walter Bagehot. If you’ve forgotten the story of Lombard Street and Mr Bagehot, I highly recommend you head back to Episode 6 where we walked through a brief overview of Mr Bagehot and how his ideas continue to shape modern central banking policy.
If you remember, Mr Bagehot named his book Lombard Street after the famous financial street of London. Well, today’s podcast comes from a street very near Lombard Street. The street is a stone’s throw away from one of the busiest train stations in London.
Bank Station, the tube stop at the heart of the financial district, sits at the center of an intersection of no fewer than 8 streets. One of those street’s is called Threadneedle Street. The name may have come from a shop sign with Three Needles that hung on the door of a business some 500 years ago. It also could have been from the famous Taylor company that occupied the street from as early as the mid 14th century.
But however the street got its name it would be forever changed by a new occupant in the year 1734 - the new home of the Bank of England. It has been over 280 years since the opening of the Bank of England’s doors on Threadneedle street. The address would become an even more integral part to the world’s second oldest central bank with the inception of its nickname - The Old Lady of Threadneedle Street. But where did the nickname come from?
Well, in order to answer that question we have to turn our clocks back to the end of the 18th century. The American Revolution had ended, the British signed over the New World. Then shortly following the war across the ocean concluded, another war with their neighbors across the channel, France, began. And if there’s one thing we know about wars, it’s that they cost money, a lot of money. That sets the scene for the emergence of the beloved nickname of the Bank of England.
At the time, the Bank of England was bound to a strict gold standard. A monetary policy rule for those of you who have tuned into the last few episodes. And the following experience is a prime example for why a gold standard is nearly universally accepted by economists as a bad idea. When the French invaded on the Welsh coast, it sparked a panic throughout all of the country and in the financial capital of the world at the time - London. Depositors and noteholders rushed to Threadneedle Street to withdraw, in gold, their money at the Bank of England in exchange for the bank’s notes.
The usual series of events unfolded as they usually do in financial panics. The lines grew at the Bank of England, and the reserve levels quickly depleted from their peak of 16M Pounds to 2M Pounds. In order to stop the hemorrhaging of gold and reserves an order was passed called the “Restriction of Cash Payments”, releasing the Bank of England from the requirement to exchange gold for bank notes.
In economics term, this was not an unsound practice. Being tied to the gold standard added fuel to the fire of the panic, and loosening the monetary rule was wise. However, to those from the political party not in power at the time, the “Restriction” was seen as unpardonable. One of the more vocal MP’s of the opposition, Richard Sheridan, gave an impassioned speech in the House of Commons “describ[ing] the Bank [of England] as ‘an elderly Lady in the City who had...unfortunately fallen into bad company.’” (Bank of England Paper).
A political cartoonist of the day, one James Gillray, used MP Sheridan’s speech as inspiration for a cartoon mocking the Prime Minister, his government, and even the Bank of England herself.
The image was described recently this way by a journalist from The Guardian, “ [the cartoon] shows the old lady in modish Georgian costume made of bank notes, sitting on a double padlocked chest holding the gold reserves. She is fighting off the advances of a spindly, spotty, freckly youth who would have been instantly recognisable to the chortling contemporary audience as the man who became prime minister at the age of 24, William Pitt the Younger.”
And that’s where the nickname, The Old Lady on Threadneedle Street, came from. A political cartoon favoring the opposition party in government. And like many nicknames that start out as trying to offend, this one has stuck and become almost endearing to the Bank of England itself. To the point where they use not only the nickname but the image of the old lady herself in the original cartoon on the cover of their pamphlets.
Conclusion
As always, feel free to drop me a line with comments and questions about the Centralverse or the Bankster Podcast via email (alexander@thebanksterpodcast.com) or Twitter or Facebook.
At the website you can sign up to receive the show notes to every episode of The Bankster Podcast. On this week’s edition of the show notes I will include a link to the source for the majority of today’s content, an article written in the Quarterly Bulletin of the Bank of England in 2013. Also, most importantly I will include an image of the original cartoon!
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Today’s episode was written, edited, and produced by me, Alexander Bagehot. I dedicate this episode to the many hands that helped me move - I owe you all! To the rest of you, thanks for listening! I’m Alexander Bagehot, and I’ll see you next time on The Bankster Podcast!
