CHAPTER IV.
Charitable Corporation Fraud.—Its Discovery.—Appalling Effects and Remedy.—Marlborough’s Victories, their History, and the Loans they brought.—Augmented Importance of the Stock Exchange.—Dislike to the Members.—Increased Loans.—Difficulties in procuring them.—Statement of Sir Robert Walpole.—Gifts of Contractors to Clothiers.—First Payment of Dividends by the Bank.—South-Sea Anecdotes.
Charitable Corporation Fraud.—Its Discovery.—Appalling Effects and Remedy.—Marlborough’s Victories, their History, and the Loans they brought.—Augmented Importance of the Stock Exchange.—Dislike to the Members.—Increased Loans.—Difficulties in procuring them.—Statement of Sir Robert Walpole.—Gifts of Contractors to Clothiers.—First Payment of Dividends by the Bank.—South-Sea Anecdotes.
In the early part of the eighteenth century, a prospectus was issued to the commercial world and the members of ’Change Alley, in which the wants of the needy and the infamy of the pawnbrokers, the purest philanthropy and a positive five per cent., were skilfully blended. It was shown that then, as now, the poor were compelled to pay a greater interest than the rich; that thirty per cent. was constantly given by the former on a security which the usurer took care should be ample; and it was proposed that the wealthy capitalist should advance, for the benefit of the needy, a sufficient sum to enable the company to lend money at five or six per cent. The proposal proved eminently successful. A capital of £30,000 was immediately subscribed, a charter obtained, and the “Charitable Corporation,” the object of whose care was the necessitous and industrious poor, appeared to flourish. For some years the concern answered, the poor received the assistance which they required, and the company was conducted with integrity. In 1719, however, their number was enlarged; their capital increased to £600,000; an augmentation of business was looked for; cash credits were granted to gentlemen of supposed substance; and the importance of the corporation was unhappily recognized by that numerous class of persons compelled to pay in maturity for the excesses of youth. They acted also as bankers, and received deposits from persons of all classes and conditions. Its direction boasted men of rank, its proprietary men of substance, and its executive men of more capacity than character. The cashier of the company was a member of the senate; Sir Robert Sutton, a director, was one of his Majesty’s Privy Council; and Sir Archibald Grant, who took a prominent part in the affairs of the corporation, was also a member of the lower house. Every confidence was reposed in such a body, and it was regarded as a rich and prosperous society.
Under these circumstances, the surprise of the public may be conceived when it was first whispered, and then openly announced, that the cashier, with one of the chief officers, had disappeared in company. The alarm spread to the proprietors; the public participated; the poor assembled in crowds; the rich clamored for information; a meeting was called to inquire into the case, when a most pernicious, but scarcely comprehensible, piece of villany was unravelled, and a most disgraceful tissue of fraud discovered. £30,000 alone remained out of half a million. The books were falsified; money was lent to the directors onfictitious pledges; men of rank and reputation were implicated; suspicion and censure followed persons of importance. Some managers were found to have connived at scenes so disgraceful, that their character was lost for ever. Many had concerted active plans of fraud, which ended alike in their own ruin and the ruin of the corporation; while others were guilty of personally embezzling the funds of the company. Petition after petition was presented to the Commons. A bill was brought in to prevent the defaulters from leaving the kingdom; and the scorn of all England pointed at the men who, under the guise of charity, had enriched themselves. The interest which was taken in the discovery by the entire country attracted the attention of the Jacobites; and, as one of the party had fled to Rome with the spoils, the Pretender endeavoured to enlist the sympathy of the nation, through one Signor Belloni, who wrote to the committee, stating that the refugee had been seized and placed in the castle of St. Angelo. The Whig party, ever jealous of the Pretender, voted that the letter should be burned by the hangman at the Royal Exchange.
The distress occasioned by this bankruptcy was appalling, pervading nearly every class of society. Large sums had been borrowed at high interest. The small capitalist was entirely ruined; and there was scarcely a class in English life which had not its representative and its sufferer. The poor were unable to get their goods; the rich were robbed of their jewels; families accustomed to affluence were starving; delicate women, hitherto irreproachable, were compelled to exchange their persons for bread. Similar evils have been known to exist during sieges; and, in the public streets of Lisbon, women of unblemished virtue offered themselves for sale during its occupation by the French; but the writer believes there is no other parallel in commercial history.
All that the wisdom of the senate could devise was attempted to mitigate the evil. The revenge of the losers was appeased by several members being expelled the house; their fear of loss was reduced by the confiscation of the estates of the offending parties; a lottery was granted for the advantage of the sufferers; and though a dividend of nearly ten shillings was eventually paid, the fraud of the Charitable Corporation was remembered long after the evils caused by it had ceased to exist.
The next great increase of debt was through the War of Succession in Spain, to the crown of which several princes laid claim. According to the ordinary rule of inheritance, the Dauphin, by virtue of the marriage of Louis XIV. with the eldest sister of the king, should have succeeded; but as all right to the throne had been solemnly renounced on the marriage, it was supposed that the claim was vacated; and the principal powers of Europe, knowing the necessity that so great an inheritance should not descend to any state possessed of territorial importance, formed the celebrated partition treaty.
By this, France, England, and Holland agreed that Spain, the Indies, and the Netherlands should descend to the Archduke Charles, and, in return, that France should be possessed of the rich province of Lorraine. There is no doubt that governments regard treaties in proportion to the physical rather than the moral necessity to abide by them; and France,under Louis Quatorze, was no exception to the rule. A succession of cabals in Spain gave the latter the influence he required. His ambassador won the court and city; the Archbishop of Toledo was of his party, and gained the Spanish king, who, sick body and soul, priest-ridden, a prey to mental and physical agony, was, after a succession of intrigues, induced to fix his name to that will which annexed the splendid possession of the empire of Spain to the grandeur of France.
At once Louis violated the partition treaty, accepted the noble legacy for his grandson, and sent the whole court of France to accompany him to the Pyrenees, that frontier which he said in his pride had ceased to exist. When the news reached William, he was at the Hague, but instantly returned to London. Vigorous preparations were made; but he did not live to see the declaration of the war, which began in 1782, agitated Europe for thirteen years, and added so much to the great debt of which this volume treats.
England, Holland, and the Empire were opposed to France, Spain, and Bavaria; and the war thus commenced was a memorable contest. Marlborough and Peterborough, than whom England boasts none greater, made her name a word of dread for many years. The knight-errantry of Peterborough conceived schemes which only his ardent and fiery imagination could achieve. He took towns by storm, under circumstances little less than marvellous; he reduced the largest and strongest cities of Europe with a handful of soldiers; he made forced marches, shared the fatigues of his men, and took entire reinforcements prisoners. With 3,000 troops he harassed a regular army, cut off communications, and raised sieges; he forced towns with horse-soldiers, and chivalrously mortgaged his estates to pay the expenses incurred in the cause of his country.
The victories of John Churchill, Duke of Marlborough, were more important to the nation than those of the adventurous Peterborough; and if his glory was tarnished by the love of gold, yet the name of Marlborough as a captain is unsullied. The battle of Blenheim was his first great achievement in the War of Succession, and it made the people consent to pay the additional taxes imposed upon them. Innumerable trophies,—hundreds of flags and standards, tents, cannon and mortars, casks and barrels filled with the precious metals,—evinced the glory of the contest, and added to the pride of the nation. The thanks of the House were voted to the Duke; medals were struck in his honor; Addison celebrated him in poetry; but dearer far to Marlborough than medal, poetry, or thanks, was the rich manor and the noble mansion of Woodstock, voted to him by the nation. Scarcely had the people recovered from the joy occasioned by the battle of Blenheim, and from the increased taxation which ensued, than another battle—that of Ramilies—seized them with delight. Forgetful of the consequences, men talked of the old days of England,—of the ancient victories of her armies,—of the time when the great Cromwell made the English name terrible,—and, in their excitement, they magnified the grandeur, and diminished the cost. The pride of Louis was indeed humbled. He made proposals for a congress; he tampered with the Dutch; he besought the interposition of the Head of the Church; he offered to cedeSpain, Milan, Naples, or Sicily; and felt bitterly the consequences of having provoked the vengeance of the island he hated. Ambition had, however, seized upon the nation; conquest only was thought of; and, remembering the glory of the past, the English people deemed themselves entitled to some privilege for the blood which was shed. They forgot that a new campaign would bring new costs; and they forgot, what their successors yet feel, that every fresh victory brought a fresh loan. Oudenarde, the third of that splendid series of victories which has made the name of Marlborough renowned in the land, was followed by Malplaquet, the glory of which was superior to its results, and the blood of which was shed to maintain the court influence of the Duke.
But a change of ministry brought a change of measures; and a Tory government refused to maintain a Whig policy. The ministers triumphed, and the treaty of Utrecht was concluded. Then arose that war of words which enlisted the pens of Steele, of Addison, of Swift, and of a host of other and lesser spirits. The Tories said the Whigs had sold us to the Dutch, to fill the pockets of Marlborough. The Whigs said the Tories had sold us to the French, to facilitate the return of the Pretender. The waste of life, the suspension of trade, the accumulation of debt, without an adequate return, were so terribly evident, that the Commons remonstrated, and told her Majesty that £35,302,107 of the supplies were not accounted for.
It must be evident that every fresh war, every new loan, and every public peculation, increased the importance of the members of the Stock Exchange; and when men saw the broker and jobber assuming a position the public was unwilling to grant, they mistook the effect for the cause; and a hundred voices were raised, and a hundred essays written, to prove that the brokers of ’Change Alley were the bane of the nation. A member could hardly make a financial speech, a pamphleteer write a political pamphlet, or a dramatist employ his pen for the public, without dragging in the jobber as an illustration and a cause of the misery of England. Those who had lost their money in the many speculations with which the ’Change abounded, deemed also they had earned a right to decry it. The following is a specimen of their opinion:—“It is a complete system of knavery, founded in fraud, born of deceit, and nourished by trick, cheat, wheedle, forgeries, falsehoods, and all sorts of delusions; coining false news, whispering imaginary terrors, and preying upon those they have elevated or depressed.” Archibald Hutcheson, whose life was afterwards endangered from the determined manner in which he opposed the South-Sea bubble, says that the jobbers vied with the first nobility in the kingdom. Pope wrote,—
“Statesmen and patriots ply alike the Stocks,Peeress and butler share alike the box;And judges job, and bishops bite the town;And mighty dukes pack cards for half-a-crown.”
“Statesmen and patriots ply alike the Stocks,Peeress and butler share alike the box;And judges job, and bishops bite the town;And mighty dukes pack cards for half-a-crown.”
“Statesmen and patriots ply alike the Stocks,Peeress and butler share alike the box;And judges job, and bishops bite the town;And mighty dukes pack cards for half-a-crown.”
“Statesmen and patriots ply alike the Stocks,
Peeress and butler share alike the box;
And judges job, and bishops bite the town;
And mighty dukes pack cards for half-a-crown.”
At any rate, it is certain that, if the national glory was aggrandized, the national debt increased in proportion. From 16 millions to 54 was fearfully felt,—thirty-seven millions and a half being raised by loan, besides thirty millions in taxes, during the war of the Spanish succession.
In 1716, great difficulty was experienced in procuring a loan of £600,000. The interest offered was four per cent.; and while the propriety of the loan was being debated on the second evening, Mr. Lechmere entered the House hastily, and told them that only £45,000 had been subscribed. Sir Robert Walpole instantly rose, and said, “I know that the members of the Stock Exchange have combined not to advance money on the loan. Every one is aware how the administration of this country has been distressed by stock-jobbers.” The interest of four per cent. appeared so low to men accustomed to the enormous premiums of a few years previous, that they treated the proposed terms with contempt, and enlisted the sympathy of the public by reporting that it was the first step towards the reduction of the interest on the national debt. When the same minister proposed a loan of £1,700,000, to supply a deficiency, the opposition was so great, that, had not Sir Robert appealed to an empty exchequer, and declared that the debt had been incurred by a previous government, he would have been refused. The feelings of the House were greatly incensed by the discovery that the money was jobbed away with unequalled recklessness; and public-spirited men were not wanting to resist, in the name of the country, such shameless expenditure. They protested, because—and the protest drawn in 1729 would do for 1849—“the national debt ought not to be increased when the taxes are heavily felt in all parts of the country; when our foreign trade is encumbered and diminished; when our manufactures decay; when our poor daily multiply; and when national calamities surround us.” The report of the commissioners appointed to inquire into public accounts sanctioned the opposition which such men as Sir John Barnard gave to unjust demands. They proved that colonels received large sums from clothing contractors, as premiums for their favor, and that £1,400 had been given for a single contract. “The practice,” said the report, “is so notorious and universal, that it wants no representation.” Some barefaced practices were related in the same document; nor can there be any wonder that, with such gross mismanagement, it was said,—“The army was in the field, no money in the treasury,—none of the remitters would contract again. The Bank refused to lend £100,000 on good security. The navy was 11 millions in debt, and the yearly income greatly deficient.”
In 1717 the Bank first undertook the payment of dividends to the national creditors, previous to which they were paid quarterly; when, however, they were undertaken by the Bank, this plan was found inconvenient, and since that period they have been paid half-yearly.
Sir John Blunt was the projector of the South-Sea bubble, which, in 1720, produced such extraordinary effects in England. As the scheme did not at first prove successful, rumors were spread that Gibraltar and Port Mahon would be exchanged for Peru. The stock soon rose to 1,000 per cent., and the excitement lasted till September, by which time it had sunk to 150. Several eminent goldsmiths and bankers were obliged to abscond; and every family in the kingdom felt the shock.
In other works the anecdotes of this memorable period have been presented in proportion to their effects upon commerce; in the present, thoseonly will be given which either affect the Stock Exchange or possess a general interest.
On May 15th, 1719, the king went abroad, and many who went with him sold all their funds. The Bank of England was accused of assisting the bubble by lending money, for the first time, on the security of its stock; “and this,” said Mr. Aislabie, “furnished an additional supply of money to gamesters in the Alley.” The stories of the period are very widely spread, and prove how all ranks were affected. The Marquis of Chandos embarked £300,000 in it, and the Duke of Newcastle advised him to sell when he could make the tolerable profit of cent. per cent. The Marquis was greedy, hoped to make it half a million, and the advice was declined. The panic came, and the entire investment went in the shock.
Samuel Chandler, the eminent nonconformist divine, risked his whole fortune in the bubble, lost it, and was obliged to serve in a bookseller’s shop for two or three years, while he continued to discharge his ministerial duty.
The elder Scraggs gave Gay £1,000 stock, and, as the poet had been a previous purchaser, his gain at one time amounted to £20,000. He consulted Dr. Arbuthnot, who strongly advised him to sell out. The bard doubted, hesitated, and lost all. The doctor who gave such shrewd advice was too irresolute to act on his own opinion, and lost £2,000; but, with an enviable philosophy, comforted himself by saying it would be only 2,000 more pairs of stairs to ascend.
Thomas Hudson, a native of Leeds, came to London, and filled the situation of government clerk. Having been left a large fortune, he retired to the country, where he lived until, tempted to adventure in the scheme, he embarked the whole of his fortune in it. After his loss he came to London, became insane, and Tom of Ten Thousand, as he called himself, wandered through the public streets, a piteous and pitiable object of charity.
One tradesman, who had invested his entire resources in the stock, came to town to dispose of it when it reached 1,000. On his arrival it had fallen to 900, and as he had decided to sell at 1,000, he determined to wait. The stock continued to decline, the tradesman continued to hold, and became, as he deserved, a ruined man.
Others were more fortunate. The fine mansion of Sir Gregory Page, at Blackheath, was made out of the profit made by his guardians; and two maiden sisters, who sold the stock at 970, reinvested their money in navy-bills, at a discount of 25 per cent., which in a very short time were paid off at par.
The wags of the day were not idle. A pretended office was opened in ’Change Alley to receive subscriptions for raising one million. The people flocked in, paid five shillings for every thousand they subscribed, fully believing they would make their fortunes. After a large sum had been subscribed, an advertisement was published, that the people might have their money without any deduction, as it was only a trial to see how many fools might be caught in one day.
Similar anecdotes to these are scattered over the private and the public histories of the period; but they have been rendered too familiar by recent works to narrate them in the present volume.