CHAPTER VI.
Origin of New Loans.—Fraud of a Stock-broker.—East India Stock.—Sketch of Sampson Gideon, the great Jew Broker.—East India Company.—Restriction of its Dividends.—Liberality to its Clerks.—Important Decision.—Robbery at Jonathan’s.—Curious Calculation concerning the National Debt.
Origin of New Loans.—Fraud of a Stock-broker.—East India Stock.—Sketch of Sampson Gideon, the great Jew Broker.—East India Company.—Restriction of its Dividends.—Liberality to its Clerks.—Important Decision.—Robbery at Jonathan’s.—Curious Calculation concerning the National Debt.
The Spanish war, and the war of the Austrian succession, was the origin of the next increase of the national debt. It was alleged that the commerce and the merchants of Great Britain were injured by the Spaniards; that the subjects of England were sent to the Spanish mines; and though one remonstrance followed another to the court of Madrid, promises were more plentiful than performances from the haughty Spaniard. The people were excited to believe that their honor was insulted; a dramatic exhibition was made at the bar of the House of Commons; and this war, partly to please the populace, partly to heal the wounded national pride, and partly to secure British subjects from the right of search in American seas, was openly declared in 1739. The heralds were attended in their progress by the chiefs of the opposition, and the Prince of Wales drank success to England at Temple Bar; but Sir Robert Walpole, as he heard the merry peal from the city steeples, muttered, “They may ring their bells now, they will wring their hands before long.”
The misfortunes with which the campaign opened justified the minister’s prophecy, and the war was violently attacked in the House; but the majority of Sir Robert was an irresistible argument, and calamity continued to mark the progress of the British arms. An armament, with 15,000 sailors, and as many soldiers, completely equipped, failed disgracefully before Carthagena. The squadrons of our admirals were dispersed. Fontenoy witnessed a signal defeat, and Tournay was taken. Scotland was entered by a Stuart, under circumstances which promised success. England was threatened with invasion; the vast armies of the English allies, paid by English money, raised by loans through the Stock Exchange, were inactive or defeated; and it was only when a more promising aspect was shed over our efforts, when the assistance of Russia would have assured a supremacy, and British fleets had intercepted the treasures of France and Spain, that the ministry, tired of a war which brought so many reverses, and alarmed at the voice of public opinion, consented to treat for peace.
But their treaty was as disgraceful as their war. The principal cause of the latter, the right of search, was not even alluded to; no equivalent was received for forts restored to the enemy; and, for the last time in English history, the nobles of the land were given as pledges for the country’s faith. “The whole treaty,” says one historian, “is a lasting memorial of precipitate counsel and English disgrace.” It ismelancholy to add, that this unhappy war added £31,333,689 to the permanent debt, took £15,080,000 in taxes, and, says a pamphleteer of the day, “increased the contemptible crew of ’Change Alley.”
The early mode of raising money was somewhat curious. When a new tax was imposed by Parliament, any person might advance any sum not less than £100. For this, a tally was given at the Exchequer, with an order for repayment of the principal, and the payment of interest. The sums thus advanced were to be paid off in regular order, as the money arising from the tax was received. But as this was generally found to be insufficient to redeem the loan, it became necessary either to prolong the term, or raise a new loan to pay off the old one.
The interest on loans during the reigns of Anne and William was very uncertain. In the reign of George II. a new principle was adopted. Instead of varying it according to the state of the money-market, the rate was generally fixed at 3 or 3½ per cent., and the necessary variation made in the sum funded. In consequence of this practice having prevailed, the principal of the debt now existing amounts to nearly two fifths more than the sum actually advanced.
As early as 1762, a stock-broker, named John Rice, met the fearful penalty so liberally awarded to crime by the civil code of the eighteenth century. A client of Rice, for whom he was accustomed to receive her dividends, was, under false pretences, induced to grant a power to sell as well as to receive the interest. As the temptation to speculate on the Stock Exchange is great, the temptation to divert property from its legitimate channel is equally so, when confidence or carelessness has granted the power. The stock-broker sold all his client’s money, employed it to meet his losses, and kept up his deception by sending her the dividends as usual. The lady, moved by doubt, or by some cogent but unknown cause, intimated to Rice her intention of visiting the city. Unable to restore the money, the conscience of Rice took the alarm, and he fled, leaving with his wife £5,000 of the misappropriated property. Ignorant of his evil deeds, and anxious to join her husband, she embarked for Holland. The weather proved rough; the vessel was driven back; and the persons sent in search of the husband apprehended the wife, who yielded the money in her possession, leaving herself entirely destitute; and it is to the credit of the directors of the South-Sea Company, that they settled a small pension on the unhappy woman.
The search continued for Rice, who was discovered in the old town of Cambray, where he had taken up his residence. The English ambassador at Paris applied for his delivery; the misguided man found that Cambray was no city of refuge for him; and the last sad penalty of the law was enacted on the body of John Rice, the stock-broker.
In February, 1674, the jobbers were taken by surprise, and a sudden fall of fourteen per cent. in India Stock occurred, owing to an unexpected war in the East. The incident is only remarkable, that from this period, marked by a fall in their stock to so large an extent, commenced the political greatness of the Company. A violent dispute had arisen between Lord Clive and the directors; but their foreign affairs assumed so serious an aspect, that the latter were forced to yield. Every vesselbrought alarming tidings. The natives, unable to bear the oppressive exactions to which they were subject, arose and defied the government. The directors of the Company grew alarmed. They forgot their feuds, they remembered only their dividends, and called Clive to their rescue. But Clive refused to act so long as one Sullivan, his bitter enemy, occupied the position of chairman; and as the proprietors would have removed the whole court of directors rather than miss the services of Clive, Sullivan not only lost his chairmanship, but was within a single vote of losing his seat as director. During this exciting period, so great was the bustle, that Cornhill and Cheapside were filled with the carriages of the voters; and from this dispute, which commenced with so ominous a fall in their stock, may the territorial dignity of the East India Company be dated.
Sampson Gideon, the great Jew broker, as he was called in the city, and the founder of the house of Eardley, as he is known to genealogists, died in 1762. This name, as the financial friend of Sir Robert Walpole, the oracle and leader of ’Change Alley, and the determined opponent of Sir John Barnard, was as familiar to city circles in the last century as the names of Goldsmid and Rothschild are to the present. A shrewd, sarcastic man, possessing a rich vein of humor, the anecdotes preserved of him are, unhappily, few and far between. “Never grant a life-annuity to an old woman,” he would say; “they wither, but they never die.” And if the proposed annuitant coughed with a violent asthmatic cough on approaching the room-door, Gideon would call out, “Ay, ay, you may cough, but it sha’n’t save you six months’ purchase!”
In one of his dealings with Mr. Snow, the banker,—immortalized by Dean Swift,—the latter lent Gideon £20,000. Shortly afterwards, the “forty-five” broke out; the success of the Pretender seemed certain; and Mr. Snow, alarmed for his beloved property, addressed a piteous epistle to the Jew. A run upon his house, a stoppage, and a bankruptcy, were the least the banker’s imagination pictured; and the whole concluded with an earnest request for his money. Gideon went to the bank, procured twenty notes, sent for a phial of hartshorn, rolled the phial in the notes, and thus grotesquely Mr. Snow received the money he had lent.
The greatest hit Gideon ever made was when the’ rebel army approached London; when the king was trembling; when the prime minister was undetermined, and stocks were sold at any price. Unhesitatingly he went to Jonathan’s, bought all in the market, advanced every guinea he possessed, pledged his name and reputation for more, and held as much as the remainder of the members held together. When the Pretender retreated, and stocks rose, the Jew experienced the advantage of his foresight.
Like Guy, and most men whose minds are absorbed in one engrossing pursuit, Mr. Gideon was no great regarder of the outward man. In a humorous essay of the period, the author makes his hero say, “Neither he nor Mr. Sampson Gideon ever regarded dress.” He educated his children in the Christian faith, but said he was too old himself to change. Being desirous to know the proficiency of his son in his new creed, he asked, “Who made him?” and the boy replied, “God.” He thenasked, “Who redeemed him?” to which the fitting response was given. Not knowing what else to say, he stammered out, “Who—who—who gave you that hat?” when the boy, with parrot-like precision, replied in the third person of the Trinity. The story was related with great unction at the period.
“Gideon is dead,” writes one of his contemporaries, in 1762, “worth more than the whole land of Canaan. He has left the reversion of all his milk and honey, after his son and daughter, and their children, to the Duke of Devonshire, without insisting on the Duke taking his name, or being circumcised.” That he was a man of liberal views, may be gathered from his annual donation to the Sons of the Clergy, from his legacy of £2,000 to the same charity, and of £1,000 to the London Hospital. He died in the faith of his fathers, leaving £1,000 to the Jewish synagogue, on condition of being interred in the burying-place of the chosen people.”
The question of the sinking fund has greatly occupied the attention of financial men, and upon few schemes have so many and such various opinions been given. To view the subject by the light of common sense, it seems palpably absurd that more money than was necessary should be borrowed for the sake of paying it again, or that, while a surplus fund remained in the Exchequer, new loans should be raised. Paine afterwards declared it was like a man with a wooden leg running after a hare,—the more he ran, the farther he was off.
The first sinking fund is usually called Sir Robert Walpole’s, because it was adopted by him; but its author was the Earl of Stanhope. The taxes, which had at first been for limited periods, being rendered perpetual, proved greater than the charges they were meant to defray. The surpluses, therefore, were united under the name of the Sinking Fund, and appropriated for the discharge of the national debt.
The opinion which Dr. Price has since so strongly urged was very prevalent; and as much anxiety concerning the debt existed, it was considered important to apply this surplus invariably to the discharge of the great debt, and to borrow by new loans when the public exigencies required it. Thus, although from 1718 to 1731 was a period of peace, the following sums were borrowed:—
The money procured by the sinking fund for the discharge of the national debt, from 1716 to 1728, amounted to £6,648,000, being a trifle more than the debt contracted during the same period.
In 1728, it was found that the principle could not be preserved; and the interest of the loan of that and the following year was charged on the fund, while the additional taxes imposed to pay the interest of the loans were applied to increase it. A short time after, the plan of preservingthe sinking fund inviolate was abandoned; and in 1733, £500,000 was taken to meet the expenses of the year; in 1734, £1,200,000 was taken for the same purpose; and in 1735, it was even anticipated, and the principle, in effect, abandoned. From that time its operations grew feeble, its produce was often devoted to other purposes, and it was found necessary to have recourse to it when the expenses exceeded the revenue, and no new taxes were imposed. In the peace which followed the treaty of Utrecht,—a period of twenty-six years,—£7,231,508 was the amount of debt discharged by the sinking fund; and in war the produce was applied to the expenses of the year,—loans being raised for the additional sums required.
This fund produced at its commencement, in
The further and feeble operations of this fund are unnecessary to trace, as, although it continued nominally in the accounts of the Exchequer until 1786, when Mr. Pitt’s sinking fund was introduced, it did little in peace, and nothing in war. From 1717 to 1772 it produced but twenty millions, being about £357,000 annually.
If the increase to the debt last recorded was caused by a disgraceful war and a powerless ministry, that which followed was no less remarkable for the brilliancy of its operations and the greatness of its achievements. Since the treaty of Aix-la-Chapelle, the English and French East India Companies had been fighting for supremacy, and the animosity spread to the colonies. A British force was cut off in America, and some French vessels were taken on the West India seas. War seemed necessary, and, when commenced, proved at first sufficiently humiliating. Hanover was attacked by France, and petty German princes were subsidized to defend it. Minorca, commanded by Blakeney, a superannuated general, was taken by Richelieu, a superannuated fop. Braddock was defeated in America; Admiral Byng refused to engage the French fleet; and an outcry arose for his life, which appalled the men who governed the councils of the country. Shops were filled with libels; walls were covered with satires. The English people, rarely yielding to the thirst for blood, demanded that of the unpopular admiral; and the prime minister trembled for his neck. Our navy could scarcely keep the sea, and the army was commanded by men desirous only of seeking emolument and avoiding risk. Enterprise and energy were absent. In the West, our power was paralyzed; in the East it was endangered. From every county in the kingdom, from every town in the empire, vengeance was demanded. The Duke of Newcastle vacated the place of prime minister; a change was effected; and from that period a succession of conquests filled the kingdom with pride, and raised the fame of the country. The accession of Mr. Pitt to the post of prime minister was felt in every department. France, attacked on some, and menaced on all points, suffereddisastrous defeats, retired from Germany, and saw her West and East Indian colonies wrested from her. In one action, thirty-six sail of the line, fifty frigates, and forty-five sloops were taken or destroyed, and the sea swept clear of the fleets that had insulted our coasts and our colonies. Triumph after triumph, conquest after conquest, and, it must be added, loan after loan, were witnessed. Goree and Guadaloupe were taken. The Heights of Abraham beheld the fall of Wolfe and of Quebec; Montreal was subdued; and the total cession of Canada followed. The fleet to which the French court had confided its American possessions was destroyed, and captured standards were borne through the streets amidst triumphant shouts, which deadened the roar of the cannon.
The accession of George III. did not interfere with the conduct of the war. Nineteen millions were voted the first year of his reign; and though Mr. Pitt retired from the councils of his Majesty, the contest was carried on with the same energy; while the system of subsidies was continued with a profusion which has been rarely paralleled. Triumphs such as these produced their effects on the opponents of England. Spain and Portugal were anxious for peace; France was impoverished, the plate of her monarch converted into money; and, in 1762, a just and honorable peace was concluded.
It is remarkable, also, that public distress was never less apparent than during this war; and the rare picture was presented of a people supporting without murmurs the trials and the taxes of a wide and costly contest. Prosperity and wealth at home hid the price at which the victories were purchased abroad. London was never more thriving; and the importance of several manufacturing districts dates from the success of the seven years’ war. During this period, the whole continent of America fell into our power. Twenty-five islands were captured; twelve great battles won; nine fortified cities, and forty forts and castles, taken. One hundred ships of war and twelve millions of specie acquired; sixty millions added to the national debt, and fifty-two millions raised by taxes.
To produce the peace which followed this contest, bribery was resorted to, and the public money wasted. “The peace of 1763,” said John Ross Mackay, private secretary to the Earl of Bute, and afterwards Treasurer to the Ordnance, “was carried through and approved by a pecuniary distribution. Nothing else could have surmounted the difficulty. I was myself the channel through which the money passed. With my own hand I secured above one hundred and twenty votes on that vital question. Eighty thousand pounds were set apart for the purpose. Forty members of the House of Commons received from me a thousand pounds each. To eighty others I paid five hundred pounds apiece.”
The continued corruptions produced continued irregularity. George II. said he was the only master who did not see his servants remunerated; adding, to Mr. Pelham, that if the civil list were not paid, he would find another minister. Remonstrances on the injury to the national and individual interest were so frequent, that the king declared he would inspect the accounts himself.
The Duke of Newcastle, then prime minister, bowed, and promised to send the papers; and the following morning, a cart loaded with officialaccounts was paraded in the court-yard of the palace. With much violence, the monarch demanded the cause of the display. “They form a portion of the accounts your Majesty desired to inspect,” was the reply; “there is another wagon-full on the road.”
One specimen of the accounts his Majesty had offered to investigate was, however, quite sufficient; and the public complaint remained unalleviated.
In 1742, £1,384,000 6s.3d.was under the sole direction of the Earl of Orford for secret-service money, of which £50,077 18s.went to the newspapers; and the amount of this supply expended in the six weeks preceding the resignation of the Earl of Orford was more than during the three previous years.
In 1766, the House of Commons compelled the East India Company to rescind a vote which the excitement of the time had induced them to pass. The success of Lord Clive, the important commercial consequences to which it led, and the plunder which rewarded the victories of the soldier, had fired the brains of the East India proprietary. The most extravagant reports were promulgated, and half-yearly dividends of fifty per cent. were confidently promised. The value of the stock rose enormously; and the directors divided at the rate of thirteen per cent. per annum. When it was found that the corporation were enabled to divide thus liberally, Parliament, under the pretence that it might lead to a dangerous panic, interposed with a strong hand, directed that the annual dividend of the Company should be limited to ten per cent., and that all accumulations beyond should accrue to the state. Great opposition was evinced. The corporation, having paid liberally for their charter, would not quietly submit to an interference which so materially decreased its value; and, having formerly bribed with success, tried the same process, but without the same result. The changes in the opinion of the “independent” members, as they were bribed by the Company or awed by the minister, were somewhat curious; and the cause of Charles Townshend’s tergiversations was probably only a type of many. Having dealt largely in India Stock, he cried up the Company’s claims to serve himself. He then sold out at a profit, and cried them down to serve his friends. It was a complete South-Sea year. A third of the House of Commons was deeply engaged in the traffic; and jobbing was the thermometer by which patriots were made or marred. “From the Alley to the House,” said Walpole, “is like a path of ants.” Most of the members were in Mr. Townshend’s position, and the East India Company were, therefore, restricted in their dividends. The result was, that this corporation is worthy the study of others in the liberality with which it rewards the labors of its clerks. Acting on the fine Mosaic principle, that the ox shall not be muzzled which treadeth out the corn, the Company have made their servants’ interests their own; they have made them understand that their old age shall be liberally protected if they faithfully serve; they have made them know that their widows and orphans shall not be forsaken; and they have, therefore, made them feel that the service of such a company is a pleasure, and not a pain; a love, and not a labor.
It is the curse of English commerce, of English banking, and of English trading generally, that, while large fortunes are made by the principals, the clerks are often remunerated at a rate inferior to that which the merchant pays his favorite domestic. The small number necessary to produce a great income takes away all excuse for this penury; and as four or five are frequently sufficient to produce annual thousands, it is to be regretted that, while the principal seeks the most luxurious abode which wealth can produce, the clerk goes to some cheap suburban home, in which, with his family, he can scarcely unite respectability with life.
In corporations and in public offices this is peculiarly hard. The additional salary would not be felt, and there is a responsibility on the clerks which demands that their payment should be proportioned to it. It is an honor to them that, with the lax notions entertained of corporate and national property, the frauds should be so rare; but it is a dishonor to commercial nature, that, considering the profits made by merchants, the daily intercourse they hold with their clerks, and the trust they are compelled to place in them, they pay in so small, and work in so great a degree. It is a most suggestive fact, that, where the functionaries are remunerated the worst, the frauds are most numerous.
But there is another evil felt by the stipendiary. His personal treatment is not in accordance with his claims as an educated man. The coldest look and the haughtiest answer are reserved for him. The smallest amount of intercourse necessary to business is awarded him. The common courtesies of life are denied him. The merchant too often enters his counting-house without recognition, and leaves it without an adieu.
In similar establishments abroad, the clerks are treated with care and kindness. They are not made hourly to feel the great gulf between them and their wealthy superiors. They visit the homes of the latter; they are confidentially consulted; they are allowed time to think; they are treated as men, not as animals. And thus it was in England in the olden time. The merchant of that school invited his clerk to his home, took an interest in his affairs, and recognized him as a friend. They worked the fortunes of the house together, and, if the merchant was repaid by his clerk’s fidelity, the latter was often admitted into the firm he had served. This is not so now. But the master is the greatest loser; for there is no service so fruitful as that which arises from kindness, or so grateful as that which has its root in affectionate respect.
An important point was decided against the presumed privilege of the city in 1767. Two gentlemen, wishing to purchase stock, employed friends, not brokers, to procure it. The chamberlain, deeming this an invasion of the civic prerogatives, commenced proceedings against them. In both cases, however, the defendants gained the day. “And,” says the authority, “it is now settled that every person is at liberty to employ his friends to buy or sell government securities without employing a broker.”
Some of the frequenters of Jonathan’s were dexterous manipulators, and, however the speculator might congratulate himself on his success in the Alley, it occasionally happened that he found himself lightened of his profit. Thus, in one day in the above year, no fewer than fourbrokers were robbed of their pocketbooks, containing large amounts of property. The thief was taken; but, in place of expressing contrition, he gave a voluntary and unexpected opinion, that one man had as much right to rob as another, and that he was only acting as an honorary magistrate, in taking that of which they had cheated their neighbours.
In 1771, a somewhat curious calculation was made, that if the debt of 130 millions were counted in shillings at the rate of 100 a minute, it would occupy one person 49 years, 158 days, and 7 hours. The same person also declared its weight in the same coin to be 41,935,484 troy pounds; and that it would require 279,570 men to carry it.