The king's speech, at the opening of the session of 1717, made pointed allusion to the state of public credit, and recommended that proper measures should be taken to reduce the national debt. The two great monetary corporations, the South-Sea Company and the Bank of England, made proposals to parliament on the 20th of May ensuing. The South-Sea Company prayed that their capital stock of ten millions might be increased to twelve, by subscription or otherwise, and offered to accept five per cent instead of six upon the whole amount. The bank made proposals equally advantageous. The house debated for some time, and finally three acts were passed, called the South-Sea Act, the Bank Act, and the General Fund Act. By the first, the proposals of the South-Sea Company were accepted, and that body held itself ready to advance the sum of two millions towards discharging the principal and interest of the debt due by the state for the four lottery funds, of the ninth and tenth years of Queen Anne. By the second act, the bank received a lower rate of interest for the sum of 1,775,027l. 15s. due to it by the state, and agreed to deliver up to be cancelled as many exchequer bills as amounted to two millions sterling, and to accept of an annuity of one hundred thousand pounds, being after the rate of five per cent, the whole redeemable at one year's notice. They were further required to be ready to advance, in case of need, a sum not exceeding 2,500,000l. upon the same terms of five per cent interest, redeemable by parliament. The General Fund Act recited the various deficiencies, which were to be made good by the aids derived from the foregoing sources.
The name of the South-Sea Company was thus continually before the public. Though their trade with the South American States produced little or no augmentation of their revenues, they continued to flourish as a monetary corporation. Their stock was in high request, and the directors, buoyed up with success, began to think of new means for extending their influence. The Mississippi scheme of John Law, which so dazzled and captivated the French people, inspired them with an idea that they could carry on the same game in England. The anticipated failure of his plans did not divert them from their intention. Wise in their own conceit, they imagined they could avoid his faults, carry on their schemes for ever, and stretch the cord of credit to its extremest tension, without causing it to snap asunder.
It was while Law's plan was at its greatest height of popularity, while people were crowding in thousands to the Rue Quincampoix, and ruining themselves with frantic eagerness, that the South-Sea directors laid before parliament their famous plan for paying off the national debt. Visions of boundless wealth floated before the fascinated eyes of the people in the two most celebrated countries of
