Chronicles and characters of the stock exchange

by of the Bank of England John Francis

The following picture of wholesale jobbing, drawn from public and private documents, from correspondence, from newspapers, and from Parliamentary history, will show that gambling was equally pursued in high places as in ’Change Alley.

Letters from abroad, containing false intelligence, were forwarded to, or forged by, senators; names of importance were fraudulently used; the news was promulgated, and funds raised or lowered according to the wish of the contriver. But if the jobber was cheated in one way, he took his revenge in another. The domestics of public men were bribed by him; the secretaries of men in office were paid by him; the mistresses of ministers were accessible to him; and, it is said, even their wives were not seldom in the pay of members of the Stock Exchange. Nor did many hesitate to declare that men in office not only made profit of the news they really received, but that they promulgated false intelligence, knowing, from their position, it would be received as true, at the expense of their own character, and to the ruin of the men who trusted them.

Another practice had obtained a notoriety so bad and baleful, that it became necessary to stop its progress. Directly it was known that any great man was seriously ill, insurances on his life, at rates in proportion to his chance of recovery, were made. These bargains were reported in the papers; and the effect on an invalid who knew his health to be precarious may be imagined, when he saw in the Whitehall Evening Post, that “Lord —— might be considered in great danger, as his life could only be insured in the Alley at ninety per cent.” The custom grew so rapidly, and the evil was so serious, that the principal merchants and underwriters refused to transact business with brokers who engaged in such practices.

Of a less questionable character was the habit of insuring property in any besieged city; or the yet more common mode of paying a premium to receive a certain sum, should the city be taken by the day named in the contract. The Spanish ambassador was accused of insuring £30,000 on Minorca, during the seven years’ war, when the despatches announcing its capture were in his pocket.

The newspapers were the vehicles generally employed to spread false intelligence; and an almost invariable success attended those who made use of the press to promulgate, in bold type and inflated language, “bloody engagement,” “rumored invasion,” or “great victory,” to assist their city operations. Every class, from the maiden who jobbed her lottery-ticket, to the minister who jobbed his intelligence, was involved in the pursuit. All these bargains were for time, and continued to prove that the act by which Sir John Barnard hoped to abolish gambling was useless; and it is an anomaly in the history of our great debt, that bargains in the very funds which were raised to support the national credit are disallowed by the national legislature. It is a law which has been tried and found wanting. It does not prevent, in the smallest or slightest degree, the system it was meant to crush; and it adds to the immorality of the speculator and the risk of the broker, by allowing the former to repudiate his bargain at the expense of the latter.

Under the early loan-acts, tallies were delivered to the first contractors. When a sale was effected, the name of the purchaser was indorsed upon the tally, and from that entered into the government books, for the convenience of paying the dividends to the right person. This clumsy machinery was afterwards abolished; but though, in 1717, the transfers and dividends of the national debt were first undertaken by the Bank, it was not until 1783 that the present method of transfer was adopted.

The origin of the blackboard—that moral pillory—of the Stock Exchange occurred in 1787. “There were no less than twenty-five lame ducks,” said the Whitehall Evening Post, “who waddled out of the Alley.” Their deficiency was estimated at £250,000; and it was upon this occasion the above plan was first proposed, and a very full meeting resolved, that those who did not either pay their deficiencies or name their principals should be publicly exposed on a blackboard to be ordered for the occasion. Thus the above deficiencies—larger than had been previously known—alarmed the gentlemen of ’Change Alley, and produced that system which is yet regarded with wholesome awe.

During the administration of Mr. Pitt, in 1786, a sinking fund was again attempted; the various branches of revenue being united under the title of the Consolidated Fund. One million was annually taken from it, and placed in the hands of the Commissioners for the Redemption of the National Debt, and was applied in purchasing such funds as might be deemed expedient at the prices of the day. The interest of the debt thus redeemed, the life-annuities which fell in, or the annuities which expired, were added to the fund, the interest of which, when the principal amounted to four millions, was no longer to be applied to it, but remain at the disposal of Parliament.

The difficulties which every minister met in every new loan, were more in proportion to the power of the opposition, than to the fairness or necessity of the demand. In unpopular wars, these difficulties were doubly increased. In the American contest, the whole population demanded peace; and nothing but the obstinacy of “the best farmer and worst king,”—nothing but a corrupt Parliament, wholesale places, a dominant aristocracy, and large premiums to the moneyed interest,—could have carried Lord North through the session, enlivened by his humor, and the enmity created by the war. The loans, therefore, of this period were fiercely attacked; ’Change Alley fiercely denounced; and the plans of the government hotly contested. The mode of conducting the loans was then, as before, made conducive to the majority of the ministry, at the expense of the people. Out of 60,000 lottery-tickets, 22,000 were given to a few members, producing £44,000 profit. When the system was attacked, precedent, the bane of official people, was quoted; and because it was known that, in 1763, Mr. Fox had £100,000, Mr. Calcraft and Mr. Drummond £70,000, the Governor of the Bank £150,000 for the corporation, and £50,000 for himself, and other members similar sums, it was deemed a sufficient and an unanswerable defence. But though by such methods the minister got the votes of the House, he found it more difficult to get the money from the public after it was voted. In 1779, he was greatly troubled to procure it on reasonable terms. From bankers he went to contractors, from contractors to stock-jobbers, and from stock-jobbers he went back to the bankers, paying a much higher rate than they at first demanded. “It was but yesterday,” writes Horace Walpole, “that Lord North could tell the House he had got the money on the loan, and is happy to get it under eight per cent.” The loan of 1780 brought them again into disrepute. Half was given to members of the House of Commons; more than three millions was allotted to one person; and, without regard to the welfare of the nation, the price was determined at a rate so favorable to the contractors, that, from no cause save the low terms on which it had been taken, the scrip arose at once to eleven premium. In 1781, it was said that Lord North had made an infamous bargain in a bungling manner; and that, in 1782, he had made a bungling bargain in an infamous manner; and this was solemnly protested against as an improvident operation, a corrupt job, and a partial distribution. There cannot be a doubt that the mode of conducting these loans was detrimental to the national interest, and conducive to that of the Stock Exchange. There were three plans up to this period. The first was in the offers of private individuals, stating the sum each would advance; the second was an open subscription at the treasury; and the third a close subscription with a few. By the first, the members of Parliament were bribed; and by the third, the bankers; then the principal contractors were enriched. Their interest, and it was great, with their votes in the House, and they were many, were, therefore, at the disposal of the government. In 1783, out of a loan for £12,000,000, £7,700,000 were given to bankers. So disgraceful was the whole affair, that Lord John Cavendish was compelled to apologize for the terms on which it had been granted, because “the former minister had left the treasury without a shilling.” By attempting to please men of all parties, Lord John, as usual, pleased none. He was abused by some for dividing it among so small a number; he was rated by others for allowing so many to have a share. Mr. Smith, of the house of Smith & Payne, made a formal complaint that he had been neglected in the allotment; that his firm was the only one left out; and that, in consequence, a stigma of a very disagreeable character was attached to it. By the explanation, it appeared that another house of the same name had been accused of tempting customers from the various bankers, by giving portions of the loan to those who would secede. The meanness had been attributed to Smith, Payne, & Co., and Lord John omitted them in consequence from his list. Mr. Smith was very irate on the subject; and although his Lordship explained, as the explanation was unaccompanied by a share of the loan, it was, probably, very unacceptable to the indignant banker. Although this gentleman saw no harm in receiving a portion of the loan, other bankers had higher views. Mr. Martin, believing that, as a senator, he ought not to contract, lest it might bias his votes, conscientiously refused to accept any portion of loan or contract; and thus sacrificed his pocket to his principle.

When jobbing occurred in the senate, who can wonder at the jobbing in the funds, or at the strong feeling which such contemptible squabbling created, and which fell upon the members of the House of ’Change as fiercely as on the members of the House of Commons?