This council of war was held in my room in the Grosvenor. I had arrived from Paris at 6 o'clock. Mac and I breakfasted together at 8. George joined us at 9, and we talked until 10, then we set out together for the bank. Arriving there, they remained outside, watching for my reappearance. Entering the bank, I sent in my card (F. A. Warren) by a liveried flunkey, and was immediately ushered into the manager's parlor. He has long since gone over to the majority, so here I will not so much as name or describe him. Sufficient to say, that as soon as I set eyes upon him I thought that we would have no particular difficulty in carrying out our plans, save only so far as details went.
The manager, who had been told that I was a railroad contractor, expressed himself highly gratified to have me do my business through the bank, and said they would do all in their power to accommodate me. I told him that, of course, I was financing large sums, and would require more or less discounts before the year was out. Then I came away, and meeting my two friends outside of the bank, in answer to their eager inquiries as to what had transpired, I told them that, so far as the bank officials were concerned, our way to the vaults of the bank was wide open.
So ended the last scene of Act I.
The next day I went to the Continental Bank, in Lombard street, and bought sight exchange on Paris for 200,000 francs, paying for it by a check on the Bank of England. I was given a note of identification to the Paris agent of the bank.
That night I left Victoria Station for Paris. At 10 the next morning I had my money, and, going to the Place de la Bourse, near the Exchange, I commissioned a broker, who was a member of the Exchange, to purchase bills on London for £8,000. I cautioned him to buy bills drawn only on well-known banking houses. About 3 o'clock he had the bills ready. I paid him the amount, along with his commission, and, examining the paper, found that he had purchased for me about what I wanted.
I will explain, for the benefit of any reader not conversant with financial transactions, that if John Russell, cotton broker in Savannah, ships a thousand bales of cotton to a firm in Manchester, England, the firm in Manchester authorizes him to draw a bill of exchange on their firm, payable at some London bank at three or six months' time, for the value of the cotton. We will say the price is £10,000. Russell draws ten bills for £1,000 each, say payable at the Union Bank of London. He gives these bills to a money broker in Savannah, who sells them on the Exchange and gets for them whatever the rate of exchange may then be on London. The president of the Georgia Central Railroad may have ordered a thousand tons of steel rail in England for his road, and to pay for them he orders a broker to buy for him bills on London to the amount of the cost of the rails. He purchases the Russell bills, and these bills of exchange he sends in payment to the steel rail manufacturers in England, so, as a matter of fact, the president of the Georgia Central pays Russell for his thousand bales of cotton, but has the bills of exchange. So, in place of £10,000 in gold being freighted twice across the ocean, the ten pieces of paper cross only once. These ten bills for £1,000 each, drawn on the Union Bank of London at six months, in due time are presented, duly accepted and paid at maturity by the bank.
Instead of commercial notes or bills they are now known as acceptances, and are just as good as a bank note. Therefore, if the owner—no matter who it is—wants the money at once, any bank will discount all or either for the face value less the interest. In every commercial centre of the world these accepted bills are being discounted by banks and moneyed corporations for enormous sums, but by no bank in the world in such huge amounts as by the Bank of England. Their daily discounts run into the millions.
What our plan was will be made clear later.
