CHAPTER V.
Life of Thomas Guy.—Imposition in Sailors’ Tickets.—Foreign Loan attempted.—Sir John Barnard.—Expresses of the Jobbers.—Foreign Commissions.—Origin of Time-Bargains.—Attempt to stop them.—Its Inadequacy.—Proposal to reduce the Interest on the National Debt.—Opposition of Sir Robert Walpole.—New Mode of raising Loans.—Comparative Interest in Land and Funds.—Punishment of Manasseh Lopez.—The first Reduction of Interest.—Life of Sir John Barnard.
Life of Thomas Guy.—Imposition in Sailors’ Tickets.—Foreign Loan attempted.—Sir John Barnard.—Expresses of the Jobbers.—Foreign Commissions.—Origin of Time-Bargains.—Attempt to stop them.—Its Inadequacy.—Proposal to reduce the Interest on the National Debt.—Opposition of Sir Robert Walpole.—New Mode of raising Loans.—Comparative Interest in Land and Funds.—Punishment of Manasseh Lopez.—The first Reduction of Interest.—Life of Sir John Barnard.
In 1724 died the founder of Guy’s Hospital, and a sketch of this remarkable man’s career is a curious picture of the period. The son of a lighterman and member of the senate,—one year the penurious diner on a shop-counter, with a newspaper for a table-cloth, and the next the founder of the finest hospital in England,—at one time a usurious speculator, and at another the dispenser of princely charities,—the wearer of patched garments, but the largest dealer in the Alley,—beginning life with hundreds, and ending it with hundreds of thousands,—Thomas Guy was one of the many remarkable men who, tempted from their legitimate pursuit, entered into competition with the jobbers of the Stock Exchange, and one of the few who devoted their profits to the benefit of a future generation.
His principal dealings were in those tickets with which, from the time of the second Charles, the seamen had been remunerated. After years of great endurance and of greater labor, the defenders of the land were paid with inconvertible paper, and the seamen—too often improvident—were compelled to part with their wages at any discount which the conscience of the usurer would offer. Men who had gone the round of the world, like Drake, or had fought hand to hand with Tromp, were unable to compete with the keen agent of the usurer, who, decoying them into the low haunts of Rotherhithe, purchased their tickets at the lowest possible price; and skilled seamen, the glory of England’s navy, were thus robbed, and ruined, and compelled to transfer their services to foreign states.
In these tickets did Thomas Guy deal; and on the wrongs of these men was the vast superstructure of his fortune reared. But jobbing in them was as frequent in the high places of England as in ’Change Alley. The seaman was poor and uninfluential, and the orders which were refused payment to him were paid to the wealthy jobber, who parted with some of his plunder as a premium to the treasury to disgorge the remainder. By these means, and by fortunate speculations during the South-Sea bubble, Mr. Guy realized a fortune of £500,000.
It must be borne in mind, that, a century and a quarter ago, half a million was almost a fabulous fortune. It was only to be acquired by speculation in the funds, and by ventures which merely commercial dealings failed to produce. In the literature of the past century, a “plum”is mentioned as the great prize of a lifetime, and as the extent of mercantile ambition. The enormous sums lately realized were then almost unknown, or arose from some chivalrous adventure, such as marked the lives of a Robert Clive or a Warren Hastings; and it was left for the present century to witness the achievement of fortunes which in the past would have been beyond credence.
In attaining so great a result, Mr. Guy was doubtless assisted by his penurious habits; but he did not possess a penurious mind. The endower of a princely charity, the founder of alms-houses, the enricher of Christ’s Hospital, the support of his relations, and the friend of the poor, must be regarded as one of those contradictory characters which, at all periods and in all portions of the world, have marked the human race. His dealings in the Stock Exchange were continued to a late period of his existence. In 1720, he speculated largely in the South-Sea Stock; and in 1724 he died, at the age of eighty-one, leaving by will £240,000 to the hospital which bears his name. His body lay in state at Mercer’s Chapel, was carried with great funeral pomp to St. Thomas’s Hospital, and on February 13th, 1734, just ten years after his death, a statue was erected to his memory in the square of that asylum, partially raised by profits from the hard earnings of English seamen.
It was, indeed, to this improvidence in supplying funds to meet the demands for the navy that the South-Sea Company owed its origin. So largely had the unpaid sailors’ tickets increased, that nine millions were unprovided for. Cash was scarce, the holders were clamorous, and Parliament, as a premium for forbearance, erected them into that body which ended so disastrously for the commercial interests of England.
In 1730, a loan of £400,000 was attempted for the Emperor of Germany. ’Change Alley was ready to advance it on sufficient interest and sound security; but Sir Robert Walpole brought in a bill to prohibit his Majesty’s subjects and others resident in the kingdom from advancing money to any foreign state, without license from the king under his privy seal. The opposition experienced by the minister was very strong. The great city commoner spoke against the bill, and it required all the power of Sir Robert Walpole to counterbalance the influence of Sir John Barnard in a matter pertaining to business.
It was very natural that men’s minds should be turned to that portion of the town which, ever and anon, gave signal symptoms of great frauds, great gains, and great gambling; and Sir John Barnard endeavoured, in 1732, to draw the attention of the House of Commons to the dealings and the doings of the Stock Exchange. It had, even at this early period, a complete and organized system. The expresses of its rich members came from every court in Europe, and beat—as the expresses of jobbers always have—the messengers of the government. Sir Robert Walpole not only declared this, but with greatnaïvetéadded, “It is because they are better paid and better appointed.” The very fact that brokers did beat the government despatches was regarded as a crime; and the public continued, year by year, to pour its maledictions on the frequenters of ’Change Alley.
The funds were said to be the nursery of fraud. In the leading companiesthe interest of the citizen was sacrificed to the jobber. The whole town was converted into a corporation of brokers and usurers, which could lie the government into credit one week and out of it the next. The magistracy of the city encouraged it, and the aristocracy of the city pursued it. ’Change Alley was called a gaming-house publicly set up in the middle of London, towards which the heads of our merchants and tradesmen were turned instead of to their legitimate pursuit; and it was said that £80,000 were paid annually by foreigners in the shape of commissions to the brokers of the Alley. But it was to the bargains for time that public attention was principally pointed by the city member. The origin of these bargains is obvious, and may be traced to the period of six weeks in each quarter, when the bank books were—as it was then thought—necessarily closed to prepare for the payment of the dividend. As no transfer could be made during this period, it naturally enough became a practice to buy and sell for the opening. The habit grew by what it fed on; and, in time, periodical dates for the payment of funds, purchased or sold when it could not be transferred, were fixed on by the Stock Exchange Committee, at intervals of about six weeks. As in these transactions the possession of stock was unnecessary, and the payment of the difference in the price was sufficient, bargains for time became common, and not only English, but foreign capitalists, were attracted by the chance of gain, while the Hebrews flocked to ’Change Alley from every quarter under heaven.
In consequence of the view which Sir John Barnard took of these facts, he succeeded in carrying that enactment which, intended to prevent gambling in the funds, has been utterly and singularly powerless in its effect. It provided that no loss in bargains for time should be recoverable in the courts, and placed without the pale of the law all such speculations. One hundred and sixteen years have passed, the act is still in force, and speculative bargains have not only increased, but form the chief business of the Stock Exchange. The greatest corporation in the world has availed itself of the principle, and the effect of the statute is, not to prevent respectable men from speculating, but to make rogues refuse to pay their losses, knowing that, while the law is inefficient, the blackboard of the Stock Exchange is their only punishment. To such men such punishment is ridiculous; they only feel through the purse, and in that they know they are safe by virtue of an act in which they rejoice.
That a feeling of gambling was encouraged is indisputable, and the attempt of Sir John Barnard was, therefore, honorable. But this propensity seems a natural principle of humanity. The savage in a state of nature, and the peer at the highest point of civilization, alike indulge in it. Every man who trades beyond his power to pay, every merchant who purchases goods on delivery, is, strictly speaking, a gambler; and it is well known to be a common practice of the first merchants to buy goods for arrival without the slightest intention of receiving them, and directly a profit can be gained, or too great a loss averted, they are resold without even the bill of lading being visible to the buyer.
It is these things which lead to disgraceful bankruptcies. The intelligent author of “Partnership en Commandite” says:—“On the banksof the Danube, the Vistula, the Rhine, and the Tagus,—on the shores of the Baltic and the Mediterranean,—on the plains of Poland,—I have met with men who have asked me for charity, because they had been ruined by connection with some of the first English houses.”
The first effect of Sir John Barnard’s Act was serious; and bargains for time, or the “race-horses of ’Change Alley,” as they were termed, were said to have expired. It was soon found, however, that to make the brokers responsible would answer every purpose; and business flourished as gayly as if the father of the city had never had an existence.
Though this measure was with difficulty passed, the wonder is that it passed at all, as the reasoning brought in its favor was very slight; and the following is a fair specimen of the speeches in its behalf:—
“The broker comes to the merchant, talks of the many fatigues and dangers, the great trouble and small profits in the way of trade. He then tells him if he will allow him to dig in the rich mine of ’Change Alley, he could get more in a day than he could by his trade in twelve months. The merchant is persuaded, he engages, goes in for some time, and is quite undone. His just creditors are surprised. ‘What,’ say they, ‘this man had a good stock to begin with, and he has had a good trade for several years; he never lived extravagantly; what is become of his effects and his money?’ They inquire, and find that the whole was gamed away in ’Change Alley.”
The fears of the brokers outran their discretion as soon as the bill passed into law; and the maledictions poured upon Sir John were loud, deep, and frequent. They thought that the principal and most profitable part of their trade was departed; and it was declared—how truly, time has since shown—that it would be only possible to get an estate by the slow, dull way of commerce. Every effort was made to ruin his reputation and his character; but both were too firmly established to receive any injury from the malevolent stories which were currently circulated.
A proposition was made in 1737, by the same gentleman, to reduce the interest on the national debt from four to three per cent. Nothing could be more just than this, as the public might either receive their principal in full, or one per cent. less interest. The House was at first disposed to entertain the proposal with the fairness it merited; but the moneyed men rose in a body, and Sir Robert Walpole, fearing to disoblige them, fearing to lose those votes on which he had hitherto relied, and envying also the popularity Sir John might acquire, determined to crush the scheme. He interested the king and queen; he employed his ministerial power; he intimidated some, he bribed others, he puzzled and persuaded more; until, his purpose being effected, the bill—than which nothing could be more reasonable—was rejected. The popular feeling attributed this opposition to the royal family, who possessed great funded property; but to popular feeling, unless it rose to a storm, as with the Excise Bill, Sir Robert Walpole was very indifferent.
In the same year, an inquiry being instituted into the books of the Bank of England, it was calculated that ten millions were held by foreigners in the English funds; a remarkable proportion of the amount at which the national debt then stood.
In the reign of George II. a new mode of raising loans was adopted. Instead of varying the interest according to the state of the money-market, the rate was fixed from three to five per cent., and the subscribers remunerated by an additional amount of stock. It was the first public announcement that the debt was perpetual; and has made the present principal two fifths more than the sum originally advanced. In the earlier history of borrowing, the government named its own terms; and as this generally afforded a profit, the loan was soon filled. If, however, the ministerial proposals were not sufficiently liberal, the executive altered the terms to the real value of money; and it is by no means an uninstructive fact, that it was found in 1748, after a close calculation, that for thirty previous years land had produced a higher interest than the funds.
Although an act had been passed by which it was declared illegal for one individual to have more than twenty lottery-tickets allowed him, it soon became notorious that the rule was flagrantly and frequently violated. Manasseh Lopez, whose dealings on the Stock Exchange entitled him to be termed a leader, had bribed the commissioners to permit an indirect violation of the law, by accepting a long list of feigned names as candidates for tickets. He was prosecuted by the Attorney-General, and sued in the Court of King’s Bench. A fine of one thousand pounds was awarded as punishment; but as he had made more than fifty times the amount, it might be regarded as a very successful speculation.
The first reduction in the interest of the national debt—from four to three per cent.—was effected in 1750, and was received with a storm of indignation similar to that which arose in 1737, on the mere attempt. Sir John Barnard, to whom every thing connected with the funds was of importance, is mentioned as having proposed it to Mr. Pelham, who brought it forward in the House of Commons. The best men in the city protested against so bold a measure, and the foes of the minister encouraged the opposition of the fundholder; his friends overwhelmed him with entreaties to withdraw the motion; and every engine which could be brought into operation by the moneyed interest was employed. Reasons which time has since repudiated, fallacies which almost repudiated themselves, evils which had no existence save in the brain of the prophet, were freely circulated. It was said that the landed gentry and the noble families of England would be ruined, and their children would become beggars; that the interest of younger sons’ portions would not enable them to associate with the cooks and coachmen of their elder brothers; and that merchants, shopkeepers, and tradesmen would be ruined. The farmers would lose their farms; families would be undone; and such a deluge of distress be brought upon all ranks, that the consequences would be fatal to that “free and happy constitution” which has been so often ruined in the brains and in the prophecies of partisans.
Its first reception was so lukewarm by the minister’s friends, and the opinions of the people so strong, that, coupled with the previous failure of a similar measure, its miscarriage was confidently calculated. “Mr. Pelham,” says the flippant chronicler of the times, “who has flung himselfentirely into Sir John Barnard’s hands, has just miscarried in a scheme for the reduction of interest, by the intrigues of the three great companies and other usurers.” Horace Walpole mistook the voice of his little circle for the voice of the country. The scheme did not miscarry; and it is remarkable that this, the first reduction in the interest of the national debt, was planned in a most masterly manner, and reflected great honor upon Sir John Barnard. A loss of one per cent. upon the income of an annuitant is important, and acts prejudicially upon all with limited means. To obviate this evil, if the fundholder declined receiving his capital, the interest was reduced from 1750 to 1757 only one half per cent., 3½ being paid during that period; after 1757 it was reduced the remaining half per cent. The great resources of England have ever been regarded with wonder by foreign nations; and they looked with astonishment on the power of a people which, after a heavy war and an increased debt, enabled the state to repay its creditors or reduce its interest.
The name of Sir John Barnard, the father of the city, its honest representative for six sessions, the remodeller of the Stock Exchange, and the reducer of the interest on the national debt, occupies a prominent place in all questions connected with the funds. Born of the same persuasion as William Penn, he retained during life much of the simple honesty of the creed he originally professed; and even Sir Robert Walpole respected him, although he was constant in his opposition to bad measures, and could never be bought nor bribed. “I address myself to you, Mr. Speaker, and not to your chair,” he said, when Sir Robert Walpole, secure in a majority, withdrew the attention of the Speaker; “I will be heard; and I call that gentleman to order.” Lord Chatham gave him, half in jest and half in earnest, the proud title which was afterwards appropriated to himself, of “the great Commoner.” His pride was indomitable. The members of the Stock Exchange, who were always spoken of with great contempt by Sir John, thoroughly detested him, and greatly helped to fan the unpopularity which fell upon him when he opposed public feeling, as, with a most unbending integrity, he invariably did, if his conscience prompted. “He grew,” said Horace Walpole on one occasion, “almost as unpopular as Byng.” On commercial subjects his opinion was greatly regarded. When any remarkable feature in financial politics occurred, the town echoed with, “What does Sir John say to this? What is Sir John’s opinion?” And he had the honor of refusing the post of Chancellor of the Exchequer in 1746. It is somewhat at variance with the proud character of the man, that, from the time his statue was erected in the Royal Exchange, he never entered the building, but transacted his business in the front. The blood of Sir John Barnard yet flows in the veins of some of the best houses in the commercial world, his son having married the daughter of a gentleman known in contemporary history as “the great banker, Sir Thomas Hankey.”