CHAPTER XV.
Loan to Guatemala.—-Dispute concerning it.—Greek Loan.—Its Mismanagement.—Asserted Jobbing.—Mr. Hume.—Dr. Bowring.—Quarterly Review.—Proposed Tax on Transfers.
Loan to Guatemala.—-Dispute concerning it.—Greek Loan.—Its Mismanagement.—Asserted Jobbing.—Mr. Hume.—Dr. Bowring.—Quarterly Review.—Proposed Tax on Transfers.
Guatemala was a further specimen of loan-making. According to custom, Barclay & Co. announced that they were appointed agents to the above state, and were prepared to receive tenders for a loan to the amount of £1,500,000. The house of Powles & Co. stood highest on the list; and it was publicly stated that their offer of sixty-eight per cent. was accepted. The first payment was to be made on the 22d of September, 1825; and should either of the instalments not be paid, those previously received were to be forfeited. The price was considered low; and Mr. Alderman Thompson took £10,000 of the loan, at an advance of fiveper cent., paying £4000 as a deposit to Barclay & Co., as the agents. When the sixth instalment became due, Powles & Co. advised Mr. Thompson not to pay it, as a serious disagreement had arisen between the government of Guatemala and their agents.
It appeared that Barclay & Co. had induced Powles & Co. to allow their names to appear as contractors for the whole, while Barclays were the real possessors of a million of that stock, the whole of which they publicly announced had been taken by Powles. The news, however, reached South America; and the government, indignant at this conduct, repudiated the acts of Barclay, refusing to pay any dividend on the loan. Under these circumstances, the purchaser declined to pay any more instalments, and Barclay declared the previous deposits to be forfeited.
Mr. Thompson appealed to the courts of law; but law and equity rarely go hand in hand. The defendants contended that six per cent. was usurious; the justice of the case was one thing, but international law was another; and it was, therefore, a triumph,—but one which few would envy,—when the Vice-Chancellor “confessed that the case appeared such as would entitle the plaintiff to the equitable relief prayed; but, as contracts for loans were illegal if the contractors were at war with an ally of England, it could not be entertained as a subject of suit.”
It is not to be wondered at that this willingness to lend found a corresponding willingness to borrow. It was not alone the South American states that came into the market; nor was it only republican dictators who were anxious to borrow. Denmark accepted £3,000,000, Portugal took £1,500,000, and Russia £3,500,000.
From this period up to 1825, loans to foreign places—foreign powers they cannot be called—were very frequent. Brazil borrowed £3,686,200 in 1824, and in 1825 two millions more. Buenos Ayres followed the good example, received one million, and then omitted to pay the dividend; while Mexico took £6,400,000. The emancipation of this country from the yoke of Spain was a fair specimen of the liberal principles of the Liberals of this period. Augustin Iturbide matured a plan to emancipate Mexico; and, having expelled the Spaniards, established a regency, nominated by himself, formed of his own creatures, and controlled by his own will. The army was with him, the usurpation of the throne followed, and the dictator was proclaimed emperor. The crown was made hereditary, his sons were to be princes, a million and a half of dollars were settled on him, and all the accessories of royalty were established.
A million and a half of dollars were more easily voted than procured. Money was scarce, and the new emperor exacted it with severity. The people grew disgusted; the opposition saw its time; disaffection spread to the troops; and Iturbide tendered his resignation to the senate he had formed. It need scarcely be added, that the dividends were as difficult to get from Mexico as they were from Peru.
But the Greek loan was the most extraordinary feature of the period; and with it is concluded the present rapid sketch of the bubbles of 1825.
The history of its mismanagement is one of those strange records ofwhich the writer has seen so many during his search into the by-ways of financial history. It must be in the memory of many, that, for some years previous to 1824, the arm of the Greek was lifted in resolute, though almost hopeless, resistance against the Ottoman. When the intelligence reached England, that the nation whose tongue was classic, whose statuary was regarded with despairing wonder, whose records formed one of the finest pages of history, was, after centuries of subjugation, striving to obtain freedom, a genuine enthusiasm pervaded English society. The antique grandeur of Greece was remembered; the ancient glory of her people brought to mind; names which had roused the enthusiasm of schoolboys were repeated; the clime which had produced the great men of a great age was in every man’s thought; dreams of renewed glory were in every man’s brain; and on every man’s tongue, and in every man’s heart, were the virtues of that past world revived. Of this feeling the subtle Greek availed himself, and negotiations were entered into to procure a loan. The proposal was favorably received by the Stock Exchange. In 1824, two agents of the Greek government, or deputies, as they were popularly called, arrived in London; and loans to the amount of £1,602,000 were raised for the service of Greece. This sum was not placed uncontrolled in the power of the deputies, the sanction of Mr. Edward Ellice, Mr. Joseph Hume, and another, being necessary to its appropriation. After much hesitation, 50,000 sovereigns were despatched to aid the cause; but when they arrived, the government of that unhappy country refused to give any pledge as to their worthy employment. The emissaries declined to part with their treasure without; and, to the alarm of the Greeks, they saw this large amount sailing from their shore. Any pledge would now have been given; and the English emissaries were followed with protestations and promises, which meant nothing but an earnest desire for the gold. Scarcely had the ill-fated vessel returned, ere the yellow fever attacked the crew. Helpless and dying, they reached the Asiatic coast; and their money was taken by the Greek government with an avidity which did not affect disguise.
Mismanagement marked the progress of the cause in Europe as in Asia. Two excellent Swedish vessels were offered for £47,000. Time was success, and, instead of purchasing vessels ready for action, contracts were made with America for two frigates at £160,000. A cavalry officer was appointed to superintend the naval department, and in two months and a half five steamboats were to be placed at the disposal of Lord Cochrane. “Within a few weeks,” said Mr. Ellice, rather more pompously than to the purpose, “Lord Cochrane will be at Constantinople, and burn the Turkish vessels at that port. Cochrane will suffice for admiral and general. He will clear Greece of the Turk.” “Give yourselves no further concern about the matter,” said Sir Francis Burdett, speaking as familiarly of war as of reform; “your country shall be saved.” But though Sir Francis Burdett and Mr. Ellice said it, the country was not saved. After spending £155,000 on two frigates, £50,000 more were required to finish them. This was not forthcoming, and the vessels were seized. All seemed anarchy and confusion.Schemes of the most extravagant character were propounded. Three very important towns were to be besieged and carried by one thousand men. A free press was to shed light and lustre around. Improvements which were impracticable, and a constitution which could not be carried, were promised.
During this unhappy period, the news of cities burned to the ground, and forts stormed, of besieged places sacked after months of heroic resistance, aroused the public; and a storm of indignation was poured upon projectors, deputies, and proprietors. The flagrant enormities of the management were exposed, the military projects discussed, the financial artifices denounced; and attention was pointed, through the report of the committee, at two, whose voices, loud in the cause of Greece, were said to be louder in their own. Joseph Hume, a member of the senate, and John Bowring, a linguist and a scholar, were on the committee. Reports which touched the honor of both were in free circulation. Political feeling, perhaps, prompted many of the remarks; and the public press asserted that to which no honorable man could submit. Mr. Merle, at a public meeting, said “he had been told that certain portions of the Greek loan had been appropriated to Mr. Hume; that those bonds had not been taken up; and that they had afterwards been sold at a great loss to the Greek government.”
“Mr. Hume,” wrote a daily paper, “has been publicly accused of fraud and hypocrisy, in throwing upon the Greek nation the loss which attended a speculation of his own, while acting in the assumed character of a friend to the cause.”
It was proved that one million had been wasted in commissions and military preparations, in Stock Exchange transactions and Stock Exchange jobbing. The Greek deputies received allowances larger than those paid to the diplomatic agents from great courts. Mr. Hume, in his ardor for Greece, had £10,000 assigned him of the first loan. The price fell sixteen per cent., and his ardor was said to have fallen in proportion. Alarmed at a loss so great, the senator endeavoured to release himself from the burden; but when he applied to the deputies and contractors, he was met with the reply, that, had the stock risen, he would not have returned the gain. The argument was sound, but the head is obtuse when the purse is endangered; and Mr. Hume—clear-headed generally—could not see the fairness of the position. After some correspondence, the deputies agreed to take it off Mr. Hume’s hands, at thirteen instead of sixteen per cent. discount; thereby saving Mr. Hume £300 out of the loss of £1,600 which he first feared. In time, the Greek cause grew prosperous, the stock rose to par, and Mr. Hume, with a singular power of perception compared with his previous notions, claimed the £1,300 which he had lost. The surprise of the deputies may be imagined, and they must have had curious ideas of the way in which the friends of Greece wished to serve her. Mr. Hume, however, was powerful; Mr. Hume was a senator; and to Mr. Hume was accorded a privilege for which others might have looked in vain. But a further question arose. Mr. Hume, remarkable for the closeness of his calculations, discovered that £54 was due for interest. This he applied for, and this was granted.
The defence of Mr. Hume was comprised in the assertion, that, some of his actions having been misinterpreted, because he was a proprietor of stock, he had determined to part with it. The deputies offered to save the friend of the cause so great a loss; and Mr. Hume thought the conclusion at which they had arrived a sound one. After some correspondence, they agreed to take his stock at thirteen per cent. discount, the market price of sixteen per cent. being but nominal. Mr. Hume wished to be relieved entirely; but this the deputies declined. Shortly after, Mr. Hume was informed that these gentlemen would pay him the sum he was deficient; and as he considered this as fair, and not as a favor, he also considered he was entitled to the interest. “The worst that any one can say of me,” concluded Mr. Hume, “is, that I may have evinced anOVER-ANXIETY TO AVOID A PECUNIARY LOSS.” Mr. Hume probably remembers his over-anxiety to the present day.
The case of Dr. Bowring was equally memorable. The sum of £25,000 had been allotted to this gentleman, and his horror and alarm may be conceived when he saw it decline to a discount of eighteen per cent. The doctor was very vehement in his applications. He represented his great services; he worried the unhappy deputies; he placed his cause before them in such vivid colors, that the stock, which had fallen to eighteen per cent., was taken off his hands at only ten per cent. loss. When it rose to par, he imitated his illustrious fellow-laborer, and applied to have it returned. He was reminded that he had parted with his stock; but the doctor, blessed with a short memory, professed to have forgotten the very circumstance which it had cost him an agony to compass. The letters of Dr. Bowring were somewhat naïve. “I am still the holder of a considerable sum, and I hope we shall see the loan rise to a good price forthe benefit of every body.” “As the difference to me is a serious one, and to the Greek government of little importance, I hope you will oblige me by allowing the return of the £25,000 scrip.”
There were statements and counter-statements in the journals; there were pleadings and special pleadings in the magazines; there were eloquent papers in the Westminster Review, to prove it was all right; and there were powerful articles in the Quarterly, to prove it was all wrong. “The economical Mr. Hume’s over-anxiety for scrip,” said the latter, “the erudite Mr. Bowring’s various translations of stock, the romantic partiality displayed for per cents by Orlando, have been sufficiently discussed. Public opinion is quite made up in all these details; and when the sacred cause of insurrection all over the world shall again need a loan, the suffering patriots may allow such statesmen to plead their cause, to clamor about their wrongs, to weep over their miseries, to dabble in metaphysical, poetical, and periodical departments, provided they do not meddle with the pecuniary.”
A poem was extensively circulated, in ridicule of the affair, and with an extract, the present account of the Greek loan is concluded:—
“O, when the bubble burst, ’t were sweet to markHow cash and cant roared in alternate bark!Here, ‘Missolonghi’s fall the spirit shocks’;There, ‘Were that all,—but, O, the price of stocks!’Here, ‘Brimful now is misery’s fatal cup,The Turks have blown another fortress up!’There, ‘Forts blown up? I’ve heavier news to tell;The scrip, the scrip will be blown up as well!’One cries, ‘The cause is lost!’ Another, ‘Zounds,Who cares? I’ve lost my four-and-fifty pounds!’Snuffles a saint, ‘I sorrow for the cross;But nineteen discount is a serious loss.’Whispers a sinner, ‘Why, the thing must fall;But, ’t was a very pretty bubble after all!’”
“O, when the bubble burst, ’t were sweet to markHow cash and cant roared in alternate bark!Here, ‘Missolonghi’s fall the spirit shocks’;There, ‘Were that all,—but, O, the price of stocks!’Here, ‘Brimful now is misery’s fatal cup,The Turks have blown another fortress up!’There, ‘Forts blown up? I’ve heavier news to tell;The scrip, the scrip will be blown up as well!’One cries, ‘The cause is lost!’ Another, ‘Zounds,Who cares? I’ve lost my four-and-fifty pounds!’Snuffles a saint, ‘I sorrow for the cross;But nineteen discount is a serious loss.’Whispers a sinner, ‘Why, the thing must fall;But, ’t was a very pretty bubble after all!’”
“O, when the bubble burst, ’t were sweet to markHow cash and cant roared in alternate bark!Here, ‘Missolonghi’s fall the spirit shocks’;There, ‘Were that all,—but, O, the price of stocks!’Here, ‘Brimful now is misery’s fatal cup,The Turks have blown another fortress up!’There, ‘Forts blown up? I’ve heavier news to tell;The scrip, the scrip will be blown up as well!’One cries, ‘The cause is lost!’ Another, ‘Zounds,Who cares? I’ve lost my four-and-fifty pounds!’Snuffles a saint, ‘I sorrow for the cross;But nineteen discount is a serious loss.’Whispers a sinner, ‘Why, the thing must fall;But, ’t was a very pretty bubble after all!’”
“O, when the bubble burst, ’t were sweet to mark
How cash and cant roared in alternate bark!
Here, ‘Missolonghi’s fall the spirit shocks’;
There, ‘Were that all,—but, O, the price of stocks!’
Here, ‘Brimful now is misery’s fatal cup,
The Turks have blown another fortress up!’
There, ‘Forts blown up? I’ve heavier news to tell;
The scrip, the scrip will be blown up as well!’
One cries, ‘The cause is lost!’ Another, ‘Zounds,
Who cares? I’ve lost my four-and-fifty pounds!’
Snuffles a saint, ‘I sorrow for the cross;
But nineteen discount is a serious loss.’
Whispers a sinner, ‘Why, the thing must fall;
But, ’t was a very pretty bubble after all!’”
The following extract from Dr. Shelton Mackenzie’s “Partnership en Commandite,” will form a fitting conclusion to the history of the foreign loan excitement of 1825:—“Upwards of twenty-five millions sterling were advanced in foreign loans, of which the show of paying even the smallest dividend is scarcely kept up. Taking into account the foreign loans, the investments in foreign funds, and the amount advanced for foreign railways, about 100 millions sterling have gone out of this country in the last twenty-five years. Three fourths of this immense capital are irretrievably sunk.”
“I always,” said a retired financier of great capacity, “tell my brokers to sell when the Whigs come into office, as they are sure to lower consols with the credit of the country.” To intimate that the Whigs were in office in 1831, is to say that their financial difficulties were great. In this year curiosity was raised to know the mode which the Chancellor would adopt to meet the deficient revenue; and great was the surprise of the commercial public when this gentleman boldly proposed, that, upon every transfer of funded property, a tax of 10s.per cent. should be placed. From this source he reckoned upon £800,000. It need hardly be said, that the city received the proposal with such a burst of contemptuous derision, that the unhappy Chancellor in a very short time consented to abandon it.
In the following year the reform question startled many capitalists, and large sales of funded property were made. Some, alarmed at what appeared more like revolution than reform, when they heard of “moral demonstrations” to be made by two hundred and fifty thousand determined men; of soldiers detained in their quarters on Sunday, to sharpen their swords; of mutiny among the Scots Greys; of business suspended, and all the usual accompaniments of great changes,—determined to sell securities which a day might render worthless. The dealers narrowed their personal operations to a limit consistent with safety; while others sold all, and purchased in foreign funds. The feeling of these individuals was evinced by the fact, that they bought chiefly in Russian funds, as affording greater security.
For a considerable number of years, many, who, not members of the Stock Exchange, yet dealt in its securities and acted as brokers, employed the Rotunda of the Bank of England for their transactions. The broker who had no counting-house made it his place of business; and his clients waited there until the transfer was ready, or the business was arranged. As a theatre for jobbing, it interfered with the Bank; but Mr. Curtis, governor of that establishment, turned them out somewhat unceremoniously;and, when he afterwards failed in business, so great was his unpopularity with those he had summarily dismissed, that the news of his bankruptcy was received with three cheers by the members of the Stock Exchange. It is impossible to give a fact more suggestive of the manners of the men from whom so disgraceful a token of triumph emanated.
The great increase in the business of the foreign funds called for additional space; a room was, therefore, opened for the dealers; and from this arose the Foreign Stock Exchange, which for some years maintained a separate committee, chairman, and deputy-chairman. It now forms part of the edifice known as the Stock Exchange.
The number of members varies. It has reached 1,000, it has descended to 400, and it now numbers about 800.