_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 is melancholy 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 vessel brought 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 then
asked, “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:—
1718 £505,995
1719 312,737
1720 500,000
1721 1,000,000
1725 500,000
1726 370,000
1727 1,750,000
1728 1,230,000
1729 550,000
1730 1,200,000
1731 500,000
—————————
£8,418,732
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 preserving the 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
1717 £323,439
From 1717 to 1726, both inclusive 577,614
” 1727 ” 1736 ” 1,132,251
” 1737 ” 1746 ” 1,062,170
” 1747 ” 1756 ” 1,356,578
” 1757 ” 1766 ” 2,059,406
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,
suffered disastrous 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
official accounts 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 6_s._ 3_d._ was under the sole direction of the
Earl of Orford for secret-service money, of which £50,077 18_s._ 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 four brokers 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.