_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 five per 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 of
which 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 an OVER-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 for _the 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 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 10_s._ 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.