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