CHAPTER XI.
Unfounded Charge.—Joint-Stock Companies.—Speculators.—Mark Sprot.—Sketch of the House of Baring.—Policies on the Life of Bonaparte.—Rumors of his Death.—David Ricardo.—Forgery of Benjamin Walsh.—Excitement of the Nation.—Increase of the National Debt.—Sinking Fund.—Unclaimed Dividends.—Francis Baily.
Unfounded Charge.—Joint-Stock Companies.—Speculators.—Mark Sprot.—Sketch of the House of Baring.—Policies on the Life of Bonaparte.—Rumors of his Death.—David Ricardo.—Forgery of Benjamin Walsh.—Excitement of the Nation.—Increase of the National Debt.—Sinking Fund.—Unclaimed Dividends.—Francis Baily.
Although shares in life assurance companies form part of the professed business of the Stock Exchange, yet the better class rarely reach the hands of the brokers. They are held in such high and deserved estimation, that they remain in the possession of families for generations, passing as heirlooms, with the same confidence in their value as if they were freehold. As an instance of this, it was noticed in the papers that the first public sale of the stock of the Royal Exchange Assurance Corporation occurred in 1812.
The charge of employing official information to speculate in the funds has often been brought against public men. These accusations haveoften been made with cause, but generally with caution. In August, 1805, however, a letter was received by the head of the government, signed by Ambrose Charles, a clerk in the employment of the directors of the Bank of England, in which Lord Moira, a cabinet minister, was accused of availing himself of his official information to speculate in the stocks. The name of the broker employed by his Lordship was given; and letters which implicated him were said to have been publicly exhibited on ’Change. The underlings of newspapers were declared to be in communication with the accused nobleman; and the document concluded with the offer of proving these assertions, should Lord Grenville require further information.
The letter was too important to be overlooked; and the prime minister gave the required interview to the writer, who, persisting in his assertion, calmly and confidently declared its truth; and was proceeding with his story, when, with a dramatic effect rarely witnessed off the stage, the door of an adjoining apartment was opened, and the accused confronted his accuser. There appears to be no other evidence of what passed at this interview than that given by Ambrose Charles, which, being entirely favorable to himself, cannot be trusted. No proof was tendered of the assertion; but the morning on which the letter had been sent, the writer remarked to a fellow-clerk, “I have done a deed which will immortalize me.” The subject was made a matter of legal inquiry; affidavits from all who had been named as having inculpated his Lordship evinced his complete innocence, and the entire evidence proved the falsehood and folly of the criminator. The charge was eventually dismissed as untenable; and the whole affair can only be regarded as one of those morbid cravings after notoriety which arise equally from a diseased brain and an idle vanity.
In 1807 and 1808, a general and feverish love of speculation was abroad. Joint-stock companies were the feature of the day; canals, bridges, and life assurance being the great favorites, which, if injurious to the speculator, were beneficial to the country. To this period London owes Waterloo and Vauxhall bridges, with many more of those public works forming to the foreigner objects of so much interest.
It has lately been the custom to speak with contempt of joint-stock associations, although it is to such bodies that England is indebted for her greatest and her grandest undertakings. The Bank of England, which has been called the bank of the world,—the railways, which bear comfort and civilization to the remotest hamlets,—the canals, which convey our commerce and irrigate our lands,—our docks, which contain the wealth of the East and of the West,—our life-assurance companies, which comfort many a desolate hearth and home,—are the result of joint-stock companies. The evil is passing; but the good is permanent.
A similar outcry is always raised against projectors and speculators. Swift employed his pen in ridiculing them; Scott introduced one to turn him into contempt; Addison employed his fine genius in satirizing them; Steele wrote one of his best essays on them. The smaller herd of wits have swelled the cry; and they to whom mankind are preëminently indebtedare named with contempt, and treated with derision. The projectors of all great works have been disdainfully regarded at one period or another. The men who first planned our bridges have been neglected; the promoters of railways, which are now paying well, and rejoicing our rural homesteads with the polish and the luxury of cities, were a by-word to the mass. And yet the finest minds of the day are employed in projecting. The discoverer of steam-power was a projector; Arkwright was only a projector; Thomas Gray was the same. What does not England owe to men who bore the burden and the heat of the day in the introduction of projects, which, once household luxuries, they have made household necessities! The cottage of the poor is comforted, the mansion of the rich is gladdened, with works for which projectors were ridiculed and speculators ruined. We cannot cast our eyes around without these works meeting our view. They add a grace to our persons, they cheapen our luxuries, they adorn our homes.
The mere man of routine thinks it a sacred duty to laugh at those of whose services he is glad to avail himself; while the banker, the merchant, and the moneyed tradesman first treat him as an intruder, and then buy shares in the discovery they disdainfully rejected. The world is rich in the names of those who have benefited and been neglected by their fellow-men.
One of the greatest capitalists of the reign of George III. died in 1808. Mark Sprot, a name which will recall many a pleasant anecdote to members of the Stock Exchange, born a younger brother, with a younger brother’s portion, achieved, by his own exertions, one of those fortunes which arose out of the loans of the French war. In 1780 he settled in London, with moderate means; and, from occasional visits to the Bank and Stock Exchange, formed an intimacy with the members of the moneyed interest. He soon saw that, with small risk, he might make great gain, and commenced a career which ended in splendid success. In 1799, he was one of the contractors for the lottery; and, in 1800 and the three following years, he was at the head of those who bid for the loans.
During the trial of Lord Melville, Mark Sprot was examined, in consequence of having borrowed money from Mr. Trotter. The latter, on a comparatively trifling income, had built a splendid mansion; and as attention had been drawn to the circumstance, Mr. Sprot’s name was involved. When examined by the committee, and asked whether he did not act as banker to members of both Houses, “I never do business with privileged persons,” was the shrewd, but daring reply. This answer originated, probably, from the following anecdote.
On one occasion a broker applied to Mr. Sprot, and with great sorrow told him that he was a ruined man. Mr. Sprot was surprised, for he knew the speaker was careful, industrious, and not likely to speculate. He asked the cause, and the broker replied, that he had been employed largely by a principal, who, the prices having gone against him, had refused to pay his losses. Mr. Sprot immediately inquired his name; and on being told it was a noble earl, of whose resources he was well aware, could scarcely believe he heard correctly.
He knew him to be in possession of large landed estates; and, when informed that his Lordship had refused to give any reason except that it was not convenient, Mr. Sprot told his visitor not to be alarmed, that he would not press his claim, and concluded by making an engagement with him to visit his Lordship.
Together they went, and were received with patrician dignity. Mr. Sprot deliberately detailed his business, and received the cool reply, that it was not convenient to pay. But the energetic jobber was not a man to bow before rank, unless accompanied by worth; and Mr. Sprot unhesitatingly declared, that, if the account were not settled by a certain hour next day, he would post his Lordship as a defaulter. The latter grew alarmed, and attempted to conciliate; but the conference closed with the repeated determination of Mr. Sprot to post him. Long before the hour appointed, however, his Lordship’s solicitor waited on the broker to arrange the payment; and thus the honor of the earl was preserved, and the credit of the broker saved in the money-market, through the acuteness and determination of Mark Sprot.
In 1810, an application was made to Parliament for permission to erect and secure to the public the right of admission to an open market for the sale and purchase of national securities, on the ground that the public ought not to be excluded from the room in which business in the public funds is contracted. The bill was introduced by Sir William Curtis, and rejected by the senate.
The history of the house of Baring—which, though generally regarded as mercantile, is largely connected with the loans—has been termed an evidence of the power of a few active young men to advance themselves to immense fortune, and to distinguished marks of favor from the sovereign. Various origins are attributed to the members of the firm, and the Herald’s College has been employed to give the dignity of ancestral honors to the family. In 1793, the first baronet of the name was created, and the signal services of Sir Francis to the East India Company, of which he was a director, were greatly appreciated.
It has been stated,—but as the writer is uncertain of his authority, he gives it with caution,—that they were originally German weavers, who came over to London, and, being successful in business, were, through the interest of William Bingham, of Philadelphia, appointed agents to the American government. Considering, therefore, the large resources at their command, it is not surprising that, during the loyalty loan in 1797, the head of the house made one hundred thousand pounds for three consecutive days; or that, in 1806, it was sarcastically said, “Sir Francis Baring is extending his purchases so largely in Hampshire, that he soon expects to be able to inclose the country with his own park paling.”
In 1805 this gentleman, the first algebraist of the day, retired from business with a princely fortune, and shortly afterwards died, full of years and honors. A green old age, a career closed at the pinnacle of prosperity, and a death-bed surrounded by sons and daughters, whom the descendant of the German weaver had lived to place in splendid independence, was his enviable lot. The great commercial house which he had raised to so proud a position was continued by his sons, and may beconsidered the most important mercantile establishment in the empire. Freehold estates to the amount of half a million, besides enormous personal property, rewarded his great capacity, and his yet greater integrity.
The house of Baring, notwithstanding some periods when doubt and almost dismay hung over it, yet retains the power and position bequeathed by Sir Francis; and, as an instance of the fortune and capacity of its members, it may be mentioned that the late Lord Ashburton, when bearing, as Sir Robert Peel feelingly expressed it, the honored name of Alexander Baring, realized £170,000 in two years by his combinations in FrenchRentes.
From 1810 to 1815, the business in every department of the Stock Exchange increased greatly. Loan after loan came rapidly forward, was as rapidly taken, went to a premium, was merged in the funded debt, and was succeeded by fresh demands for fresh loans. The public feeling was so strong, even during those fearful campaigns which preceded the fatal field of Austerlitz, when the futile threat of invasion was frequent, and “the army of England” assembled at Boulogne, that no ministry could have maintained its power unless it had been a war ministry. And when the event of that battle, known as the “battle of the three emperors,” was made public, when the entire powers of the Continent were at the feet of Napoleon, and William Pitt, the soul of the coalition, died from fear of the calamities that threatened, the people of England were unchanged in their resolute defiance. Enmity towards the French was an article of faith. Hatred to their leader was taken from the mother’s breast, and nourished by the stories which day by day engrossed the public mind, or violated public feeling. At one time, the commercial world was excited with the story that all the specie in all the private banks of France had been seized. At another, some cruelty which outraged humanity passed current with the vulgar. Stories of the conscription harrowed the feelings of parents; tales of insurrection, suppressed with heartless cruelty, raised the indignation of the child. The evening fireside derived its great attraction from the talk about Bonaparte; and it is no exaggeration to say, that nurses stilled their querulous charges, or that mothers hushed their children, with that dreaded name. Policies were opened on his life; and so uncertain was it considered in 1804, that fifty-five guineas per cent. were paid to insure it for one year. No fiction was more favorite or more frequent than that which detailed his death; and in this the powerful invention of the romancer was often proved. Poison and steel, the dagger of the conspirator and the bullet of the republican, were constantly asserted to have ended his career. On one occasion, it was universally credited that the great Corsican was no more. A despatch had been received by Lord Grenville announcing his death, and circumstantially detailing its manner. No doubt was entertained; the funds rose, and the news spread. Some very loyal persons set the bells ringing in a suburban village, and the whole affair bore the aspect of truth. The story circulated wore an appearance of romance entirely in keeping with the career of the man whose death was announced. It was stated that Napoleon, having called a council of war, to which he had invited one of the wild chiefs of the desert, who professedattachment till he could procure revenge, had been shot by him in open council; and, on the signal thus given, the wild hordes of the desert had slain Bonaparte and his devoted followers in the land so recklessly invaded. News was not then so frequent, information was not so widely diffused; and the document was credited much longer than it would have been a quarter of a century later. It deserves to be mentioned as a curiosity, that the forgery was not attributed to members of the Stock Exchange, but to a pair of “state speculators,” assisted by “members of the lower House.” But though it was not caused by them, they felt its effect in the fluctuating price, and several were ruined by the ingenious device of these “state speculators” and “members of the lower House.”
Among the names conspicuous in the city for character and capacity, stands that of the great political economist, David Ricardo, who, at the early age of fourteen, was introduced by his father, a Hebrew of the Hebrews, to the mysteries of the Stock Exchange. The mind of the younger Ricardo was of an inquiring character. He began to study the principles of the creed in which he had been educated. The result was his secession from the faith of the ancient people, and his abandonment to his own resources by his father. Those resources were small; but his conduct and character had interested the members of Capel Court, and, to their honor, with a liberality which not unfrequently distinguishes them, the oldest and most influential came to his assistance. The extraordinary powers of Mr. Ricardo were soon developed in the acquisition of a considerable fortune; and, having hitherto employed but little time in study, he amply and nobly redeemed his lost hours. At twenty-five he commenced mathematics, and with great application studied chemistry and mineralogy, fitted up a laboratory, formed a collection of minerals, and bestirred himself with all the energy of his character. These sciences, however, he soon abandoned, and, having accidentally become acquainted with Adam Smith’s “Wealth of Nations,” he employed his great thought upon the subject of political economy, in which he soon became distinguished. He led the van in the bullion controversy; his principles were those on which the present bank charter is founded; and, in 1817, he published that great work on his favorite science so familiar to the commercial reader.
His reputation preceded him to the senate; and his opinions on the above subjects were deferred to with respect. When Mr. Peel’s bill was introduced, in 1819, his name was called for from all sides of the House; and, in 1823, David Ricardo, an acute, patient, and comprehensive thinker, a firm and faithful friend, and an honor to the body of which he was a member, died, at the early age of fifty-two.
Few trials, which were not for life, have excited so much interest in the city, as that in which Benjamin Walsh—a member of the senate, a member of the Stock Exchange, and a confessed felon—stood at the bar of the Old Bailey, on the charge of defrauding Sir Thomas Plomer. The bench was crowded with the rank and respectability of the city. The melancholy appearance of the prisoner, his grave bearing, and dejected countenance, excited the interest of the spectators, and spoke the regret of the culprit.
In 1811, Sir Thomas informed his broker, Mr. Benjamin Walsh, M. P., that, having bought an estate, it would be necessary to sell out a large amount of stock to complete the purchase. Mr. Walsh advised Sir Thomas not to sell directly, as there was every prospect of the funds rising; and, the title of the estate not being complete, this advice was complied with. About the middle of November, however, Mr. Walsh changed his opinion, and repeatedly urged Sir Thomas to sell his stock, alleging his belief that the price would fall. Again the broker’s suggestion was complied with; but, as it was sold before the money was required for the estate, it was recommended by the prisoner that, to prevent it from lying idle, exchequer-bills should be purchased with the proceeds. Sir Thomas again consented, and gave a check amounting to £22,000 to Mr. Walsh, who promised to lodge the notes at Goslings’, the bankers to Sir Thomas, and hand the latter their receipt. In the evening, however, he presented their acknowledgment for only £6,000, and making some excuse for not having paid in the remaining exchequer-bills, promised to deliver them on the following day; adding that, as he had not settled for them, he had repaid the difference to the account of Sir Thomas. The latter, on his way home, called at his bankers’, and found that, though the £6,000 in exchequer-bills had been deposited, the check of Mr. Walsh for the £16,000 had been received too late for presentation. No suspicion was, however, attached to the transaction until next day, when the check was refused payment. Sir Thomas was immediately informed, and an inquiry instituted. It was soon found that the money thus iniquitously gained, had been disposed of in paying his brother £1,000, in purchasing £11,000 American stock, and in investing £500 in Portuguese doubloons. The prisoner was found guilty; but certain points, reserved for the judges, being interpreted favorably, he was discharged from Newgate, and expelled from the House of Commons.
In 1813, Mr. Vansittart introduced a modification of Mr. Pitt’s sinking fund; and, among other objects, proposed to rescind the alterations of 1786 and 1792, and to restore them to the position in which they would have stood if no such alteration had taken place. By this Mr. Vansittart designed to provide that relief which the public would have obtained from the original plan,to restrain the excessive increase of the sinking fund, and to secure the redemption of each loan within a period of forty-five years from its commencement. For these purposes it was proposed,—
1st. That, as a sum equal to the debt of 1786, bearing an interest nearly equal to the interest of that debt, is now vested in the hands of the commissioners, so soon as the interest of the redeemed debt shall be equal to that of the debt of 1786, that debt shall be declared discharged; and the sums hitherto appropriated for the interest and sinking fund shall be appropriated to bear the charge of future wars; and that no new taxes shall be imposed for new loans till the same amount to a sum equal to the interest of that released.
2d. That, as loans to the extent of £86,796,375 were charged on the consolidated fund in 1802, without any sinking fund attached to them, it is proposed, in order to place the public creditors in a position equal tothat they held in 1792, that the one per cent. sinking fund on the above sums be replaced to it.
3d. That, as the amount of exchequer-bills has much increased, a sinking fund of one per cent. shall be annually provided for any addition to the exchequer-bills in circulation, for the discharge of which no funds are provided.
4th. That, instead of allotting the sinking fund of one per cent. to discharge each separate loan, the whole funds shall be united, and applied to discharge the first contracted loan; and that each successive loan shall be redeemed, and its charge released, in the order of its contraction, by the united produce of the sinking funds appropriated for the redemption of the loans contracted since 1792; but the whole sinking fund created by the act of 1786 to be continued, and applied until the total redemption of the debt.
During the latter part of Bonaparte’s career, the price of the funds varied enormously. In the course of an hour, a difference of eight and ten per cent. was not unknown. The loans were as eagerly sought as they were frequently made; nor is this surprising, when it is remembered that eighteen and twenty per cent. occasionally rewarded the scrip-holder.
The pulse of the people was feverish, and easily excited; and the papers of the day display the intense anxiety which hung over the public mind during the eventful years of 1814 and 1815. The prices of the funds dropped and rose like a barometer. It is scarcely an exaggeration to say, that they were regarded as an oracle; and, while the public professed to disbelieve all Stock Exchange rumors, simply because they were so, they continued to inquire the variations in the price, and almost regarded them as a cause rather than a consequence. The annals of the world contain no more exciting period. For years, the English had seen battle after battle won by the great conqueror. They had seen disciplined armies vanquished by raw levies; veteran troops cut to pieces by young conscripts; and the prestige of his name had haunted them for the fourth part of a century. To destroy his power, they had submitted to painful privations; they had borne with taxation which almost amounted to tyranny; they had levied loans which enriched the few and impoverished the many.
The national debt had increased to 800 millions; and now the reward had come, and the people read with undisguised and unlimited pleasure, of field after field yielding to British prowess; of towns stormed; of achievements which made them proud of the name they bore; until that prophecy, which had been derided for years, became a lasting fact; British troops paraded in triumph through the streets of Paris; and men felt that their sufferings and their sorrows had not been vain, but that the treasure they had lavished had reaped its reward.
So important to our financial department was the close of this war, that the decrease of the expenditure was at once declared to be two millions per month; and, accustomed as the money power of England had been to loan succeeding loan, the Stock Exchange could scarcely understand the declaration of the Chancellor, that he neither intended toask for money, nor to touch the sinking fund. The immediate effect of the battle of Waterloo on the funds was only three per cent., nor was it until the capture of Napoleon became positively known, that they rose to their previous price.
It is not unworthy of remark, that, from 1688 to 1814, sixty-three years witnessed bloody and expensive wars, while only sixty-one years were employed in recovering from the effects of so demoralizing a system.
The well-known attempt to defraud the Stock Exchange occurred in 1814; but the features of the hoax were so like that of 1806, and its effects so similar on the members, that a brief notice is deemed sufficient. Prior to February, 1814, various brokers were employed by persons, some of whom were not accustomed to speculate in Capel Court, to purchase government securities to the amount of £826,000. Among other and less important individuals, were Lord Cochrane and Mr. Cochrane Johnstone, M. P., who, when information arrived that some French officers had landed at Dover, with the news of Bonaparte’s death, took advantage of the consequent rise, to sell the stock they had previously purchased. In a short time, however, it was discovered that the “French officers” were fictitious, and that the news was false. Every endeavour was made to discover the inventors of the plot; suspicion was pointed at persons who had bought so largely and sold so well; and Lord Cochrane, Mr. Johnstone, M. P., with several more, were tried for conspiracy, and found guilty. The committee of the Stock Exchange did not, as in the previous case, cancel the bargains made, but left the parties to the remedy which the law provided. Mr. Johnstone fled from the country, and Lord Cochrane was dismissed from the navy. But public opinion has reversed the decree, and reinstated his Lordship in that service of which he was the pride and the ornament.
In consequence of the above fraud, it became necessary to serve certain law processes on many of the members; and an attorney’s clerk, ignorant of the custom of the Stock Exchange, or confident in the sanctity of his mission, ventured boldly in. The solemn character of the law was no defence, and scarcely was his errand known, when he felt as willing to retire as he had been anxious to enter. The disgraceful mode in which a stranger is usually treated by the jobbers and brokers was carried out in its fullest extent, and it was not until he had received his initiation into the manners of the members that he was allowed to leave the mart dedicated to Mammon.
In 1815, the first French loan was negotiated in London. The fall of Napoleon, the return of Louis le Gros, the personal expenses of the monarch, and the pecuniary concessions of the government, demanded a supply to which French capitalists were unequal; and a successful attempt was made to borrow in the English market.
In the following year an act was passed, authorizing the transfer of stock upon which no dividend had been claimed for ten years, to the commissioners for the reduction of the national debt.
It has been the writer’s duty in another work to advocate the cause of the holders of unclaimed dividends. The unfairness with which they aretreated is neither to be palliated nor justified. The eagerness and anxiety of government to obtain money is too often gratified at the expense of morality; and it is thus with the unclaimed dividends. Every difficulty is thrown in the way of the public; and, though the above act distinctly ordains that,immediately after the transfer, the names, residences, descriptions, and amount shall be kept open for inspection at the Bank, it is useless for the public to apply, as they are politely, but peremptorily, refused all information. It is only fair to conclude that this is at the instance of government, as the Bank receive no benefit from their violation of the act of Parliament.
It is not often that the repudiation of a dividend causes a rise in the price of the stock; such, however, was the case in a loan of five millions to Austria, the interest of which was to be remitted by the Emperor. Shortly before it became due, intelligence arrived that Austria was unable to meet the claim. The stock at once rose two per cent., as it was known that the faith of England was pledged to the fundholder, and that henceforth the interest must be provided by the English government.
A laudable endeavour was made in 1821 to abolish the system of gambling known as options; and, after a serious consideration, the committee of the Stock Exchange resolved, that any member guilty of the practice should be expelled the house. It was soon found that rules are more easily made than followed; and a powerful opposition was organized, in which the Hebrew party took the lead. Large sums were subscribed towards the erection of a new building; and the schism grew so serious, and numbered such important parties in its ranks, that the committee deemed it wise to make an amicable arrangement, and abandon the resolution they had so hastily made.
Up to 1822, the Royal Exchange was the theatre in which business in the foreign funds was transacted. When, however, this business became a feature of sufficient importance, a foreign Stock Exchange was formed in connection with Capel Court.
A very important question became mooted concerning these loans. On several occasions, when bargains for time were made, and the loser refused to pay his differences, the broker made them good, believing his principal was not liable under the act of Sir John Barnard. At last the question was legally argued; and it was ascertained from the decision of several judges, that the provisions of the above act did not extend to loans for foreign countries.
Francis Baily—a name as well known in the scientific as in the monetary world—retired from the Stock Exchange in 1825, and the man who, in the midst of the most exciting pursuit in the world, was worthily chosen president of the Royal Astronomical Society, sheds an honor on the class to which he belonged, and should have been an exemplar to the men with whom he associated.
As a boy, studious beyond his years, he was called—half jestingly, half seriously—the philosopher of Newbury; and, having left school at fourteen, remained in a mercantile situation until he was twenty-two, when, for the mere love of adventure, he embarked for the New World, travelled through a great part of the far West, and passed eleven monthsamong the aborigines, without once meeting the shelter of a civilized roof.
In 1800, he went on the money market, where he soon became conspicuous, publishing, within a few years, many works which were justly regarded with great favor; and, in 1806, defended, though unsuccessfully, the rights of the brokers. In 1814, he drew up the report of the committee on the great fraud of that year, arranged the evidence against the perpetrators completely and conclusively, and was one of those men of whom the Stock Exchange—from which he retired with a fortune won by uprightness and intelligence—was not worthy.
The triumphs of Mr. Baily in his favorite pursuit are recorded in the minds of all who prize the science which he so dearly loved. A list of his labors would be misplaced in the present volume; but Sir John Herschel has recorded them in his memoir of the scientific member of that place which is too much open to the reproach, that it narrows men’s minds as much as it enlarges their purses.