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William Paterson

Founder of the Bank of England

In 1691 Paterson, a London trader, devised a scheme to let the government borrow at good rates of interest; lenders were part of the Company of the Bank of England. His plans became a reality four years later. Paterson was also involved in the Darien debacle in Panama, where Scots tried to establish a colony; he sailed out in 1698 and was among the few bedraggled and broken survivors who came back the next year. He was a vocal supporter of the union in 1707, and established a fund to convert the National Debt in later years.

More About William Paterson. Maybe the prototype for ruthless Scottish tycoonery is William Paterson, born in Dumfriesshire back in 1658. He was destined to change the whole world, for better or worse, by virtually inventing banking. By the time Paterson was 22, he had skipped to England, where he organised the Hampstead Water Company, from which he made a few pennies. He had some bold ideas for banking schemes, but couldn't find any visionaries to finance them. Maybe that turned him against the English. At the time, Scotland and England were under one king, but had separate parliaments, and the London parliament made sure that English merchant-adventurers had a monopoly of overseas investments, and thefts. It was Paterson who founded the Company of Scotland Trading to Africa and the Indies in 1695. Scotland's parliament subsequently passed a law chartering the new company. The
English traders were panic-stricken, and any English investors in Paterson's company were threatened with legal action. They withdrew their capital.

These events made Scotland livid, and when Paterson suggested colonising the Darien peninsula across the Atlantic, he got plenty of Scottish investment. It was a catastrophe. The place had been explored in winter; it was nice. When the expedition arrived in summer, it was a deathtrap of yellow fever, not to mention hostile Spaniards. Over 2000 settlers died before the whole thing was abandoned: the escapade was Scotland's last try at colonisation.

Paterson, who had accompanied the expedition, survived. He lost a substantial part of his investment, though. His later career saw him elected to the Scottish parliament, where he argued for union of Scottish and English assemblies. In 1694, he had been the founder of the Bank of England, and in 1701 he proposed that the government adopt the sinking-fund method of repaying the national debt, under which regular deposits are made into an account for the purpose of paying the creditors.

After the Union of Parliaments, or the absorption of Scotland by England, Paterson was awarded £18,000 by the government to cover his Darien losses. He did not die poor.