The South Sea Bubble page 3

On January 26, 1720, it was resolved by the Lords Spiritual and Temporal in Parliament Assembled that: "The taking in of stock belonging to the South-Sea Company or giving credit for same without a valuable consideration actually paid, or sufficiently secured, or the purchasing of stock by any director or agent of the South-Sea Company for the use or benefit of any person in the administration, or any Member of either House of Parliament, during such time as the late Bill was depending last year in Parliament, was a dangerous and most notorious corruption."

And in that last phrase of the resolution the very worst was made known. For, as it was later proved beyond all doubt, the Bill itself was only passed because of bribery and corruption between statesmen and Company officials. Those unexplained and nameless transactions, first discovered in the books, represented nothing more than gifts and favours - bribes of the most dangerous nature - to officials and trusted men of his Majesty's Government, in order that the scheme should be sanctioned. And, as though that were not terrible enough in itself, at the time those bribes were made there was not that amount of free stock available. Fictitious, or anticipated, stock was actually issued. Such, then, was the proud and mighty concern into which the people of the country had entrusted their all. With the King as Governor, and with the backing of the Government, no one could have supposed it to be in any way unsound; but the very backing of the Government was as corrupt as the scheme itself.

Blow after blow fell as the investigation went forward, until all capacity for surprise was exhausted. Members of the Court had accepted bribes of South-Sea stock and John Aislabie, the Chancellor of the Exchequer, when he stood up in the House to propose the initial scheme, was already bribed to do so. The Earl of Sunderland, who had so successfully opposed and overridden the objections of both Houses, was himself involved. Walpole, by buying and selling large blocks of shares, had made himself a fortune with his knowledge. "Young Craggs," Secretary for State, was also guilty. The Company's directors had sold their own stock back to the Company when prices were at their highest, and at the same time had been ordering stock to be bought in, in order to maintain a good value and to secure confidence. Nearly £800,000 worth of stock was found to be standing to the Chancellor's account, and it was he who had encouraged that first issue at £300 per cent. Mr. Knight, the Company's cashier, when he found that there was no longer any chance of escaping discovery, said that were he to disclose all he knew it would open up such a scene that the whole world would be surprised. But there was no stopping it. The world had to know. After the second report of the committee it knew. It was resolved by the House that: "The said John Aislabie, Chancellor of the Exchequer, at a meeting with the late sub-governor and several of the directors of the Company, did advise the taking in of the first money subscription at £300 per cent., and agreed to promote the same." Resolved also that "The said John Aislabie Esquire gave in a list to the late directors of the South-Sea Company the names of persons to be admitted to the third money subscription at £1,000 per cent, for several sums of money amounting to £75,300, and did thereby encourage the said subscription."

It was resolved that: "The said John Aislabie Esquire has encouraged and promoted the dangerous and destructive execution of the late South-Sea Scheme, with a view to his own exorbitant profit, and has combined with the late directors of the South-Sea Company in their pernicious practices, to the detriment of great numbers of his Majesty's subjects, and the ruin of the Public Credit, and the Trade of this Kingdom." Resolved... "That the said John Aislabie Esquire be, for his said offences, expelled the House." And Ordered: "That the said John Aislabie Esquire be committed prisoner to his Majesty's Tower of London, and that Mr. Speaker is to issue his warrants accordingly."

And, on April 3. a deputation of Aldermen and a Sheriff of the City of London attended the House with a petition, thanking the House for what it was doing, telling of the great misery which existed amongst the people, and pleading for further measures to be taken for their help. The petition was read, but a scheme was already under consideration for the relief of sufferers. The House was discussing the possibility of seizing the estates of those responsible, with the object of realising on them and distributing the proceeds to the shareholders.

Terrific controversy arose over this proposed step, because, it was argued, it would not only create a precedent, but would come dangerously near to destroying certain public rights and privileges. The seizing of estates was only then permissible in cases of high treason. On behalf of it, however, it was said that if ever people deserved to be relieved by Parliament, those sufferers did, because Parliament had set the stamp on the Company's honesty. Sir Robert Walpole was quite determined that the step should be taken, in spite of all the difficulties and opposition, and eventually he had his way. Until the very last hour the directors, many of them innocent of the fraud, but tools in the scheme, were led to hope that they would be punished by heavy fines, but Sir Robert was adamant, and he was all-powerful. The Bill passed through the Commons and went to the Lords, and although the opposition there was even greater than before, it was eventually passed. Only 16 lords attended. 10 voted for it, and 6 against it. So with a majority of 4 votes the Bill became law, and the various directors were condemned to lives as miserable and hopeless as they had, through their Company, made for thousands of families throughout the country.

In all there were thirty-four estates to be seized. The sub-governor, the deputy-governor, the cashiers, directors, accountants, stock jobbers, and statesmen proved guilty of conspiracy: all had to pay. It was computed that between ninety and one hundred millions of pounds would not wipe out the usurious and exorbitant contracts and debts which existed, but the realisation of the estates, and the subsequent cancellation of many of those unlawful contracts would in some measure alleviate the great wrong. And so the estates, real and personal, of all the offenders, and, of necessity, many of the innocent directors, were sold. And about £2,000,000 was realised from them. From the Chancellor of the Exchequer and the Postmaster-General alone came several hundred thousand.

Thus did the greatest financial calamity of all time drag slowly to its sordid close. The Postmaster-General and the Secretary of State, father and son, died in the same year, not living to see the curtain rung down. But for Parliamentary allowances for themselves and their families, the proud directors of that once proud company were reduced one by one to poverty.

"... My dwelling house in the Old Jury," ran the inventory of Sir John Fellows, late Sub-Governor.... "A gold snuff-box which I have had several years.... Six coach horses, three cart horses, four saddle horses, a coach, two chariots, and an old chaise and some harness...." Down through the rooms of his home, from linen to plate, everything was recorded - and taken.... Two porringers, a teapot, three teaspoons, and a mustard spoon...."

And so in some small measure was the burden of general misery lifted, and slowly with the years did the public trust and credit improve. The South-Sea Company itself, under the jurisdiction of trustees and new directors, continued to trade with the South Seas, but never again did it reach any peak of prosperity. Finally, in the nineteenth century, it ceased to exist, and to-day it is but a vague memory of the past.