London by Edward Rutherfurd
“Money, Eugene. Money.” He grinned. “You see, while Napoleon was turning Europe upside down, every foreigner with money to spare sent it to London for safe keeping – including the French! Old Boney made us the money centre of the world.” And he chuckled at the thought of the striking phenomenon of capital flight.
The following afternoon, announcing that, as he had business to attend to, this would be their last expedition together for a while, Fleming led Eugene along Cheapside to the Poultry, and there, with scarcely suppressed excitement, he paused. Ahead of them at the foot of Cornhill was the imposing outer façade of the Royal Exchange. To their right stood a splendid classical house. “The Mansion House,” Fleming explained. “The Lord Mayor’s official residence. Built in my father’s day.” His tone changed entirely as he pointed to another long, blank Roman façade, to the left of the Exchange and separated from it by a narrow lane known as Threadneedle Street.
“That, Eugene,” he said with hushed reverence, “is the Bank of England.”
Since it began its life in the Mercers Hall as a joint stock company, the Bank of England had outlasted all its rivals. “The South Sea Company burst with the South Sea Bubble of 1720,” Fleming reminded him. Even the mighty East India Company had been so mismanaged that the Bank had helped the government take it over. Time and again, as England was forced into wars, the Bank had found the funds and seen the country through. His godfather proudly described the way it had helped the government through every crisis, how its clerks now administered most of the government’s accounts, paid the army and navy overseas, and even administered the state lotteries. Though the Bank was, strictly speaking, a private company, it had become practically part of the constitution.
“So mighty are its reserves, and so carefully managed, that all the money houses and merchants in London look to it for funds when they need them,” Fleming explained. “The Bank’s authority is complete. It’s only the Bank, in London, that has a charter to issue banknotes for the general public. And that’s because money must be sound, you see. For a note from the Bank of England, Eugene, is as sound as … why, as sound as …” Here, at last, words failed him.
“And this soundness was achieved through caution, Eugene,” the clerk cried, with a kind of ecstasy. “The Bank is cautious.” He beamed. “Caution, Eugene, is the key to life.”
Eugene was just about to thank him politely for this information when Fleming, with a look of immense satisfaction, continued: “I have some news for you now, Eugene. Thanks to an old friend of mine, I have been able to secure you a position.” He paused for what was, to him, a delicious moment. “A position, Eugene, in the Bank of England.”
“The Bank?”
“Yes.” He smiled happily. “The Bank itself.” He even laughed with delight at what he had been able to do for his godson. “Security for life, Eugene!”
Eugene had to think quickly what he should say. He was not a brilliant young man, but he was quite ambitious and, like his Huguenot forebears, very persistent. He had sensed quickly that his godfather’s idea of a good position and his own were not the same. “If I joined the Bank of England,” he asked cautiously, “how well could I do?”
“Oh, quite well. As a senior man you could live . . .” Fleming spread his hands to indicate that his own circumstances were not to be sneezed at.
“The trouble is, sir,” Eugene gently began, “I had something else in mind. I have come to make my fortune.”
“Your fortune, Penny? You are sure of this?”
“Yes. I am.”
“Ah.” Jeremy Fleming fell silent for a time.
As they walked home, Eugene was afraid that Fleming had been offended, but that evening, over a supper of pickled herrings, the older man calmly enquired: “Was it stockbroking, or one of the private banks you had in mind?”
What followed surprised Eugene even more. In his quiet way, Fleming seemed almost pleased by his godson’s initiative, and a new look, quite a sharp one, came into his eyes as he discussed the merits and drawbacks of the various firms.
“Amongst the stockbrokers, on the whole, I think the Quaker houses are the soundest, but I don’t suppose you’d care to become a Quaker. As for the private banks, there’s Baring’s of course – very grand, but as you’ve no great connections that mightn’t do. Rothschild’s all family. What I really think you need is a go-ahead little house, active in all the new markets.” He tapped his fingers on the table thoughtfully. “Give me a day or two to ask around. In the meantime, young man,” he remarked with a briskness that was entirely new, “no offence, but you don’t know much.”
Fleming taught Eugene all the following day; and the next, and the one after. He explained the operation of the markets, the politics of the City and its conventions. Spicing his conversation with all the liveliest gossip of the last forty years, he outlined the financial virtues to be cultivated and described in detail all the meanest of the dealers’ tricks with a quiet relish. At the end of the third day, Eugene ventured to say: “I’m surprised, godfather, that you never went into business for yourself.”
Fleming gave a little smile. “I dreamed of it once, Eugene.”
“But you did not do so?”
“No.” And here Fleming sighed. “Want of courage, Eugene,” he confessed regretfully. Then he brightened. “By the way, you have an interview tomorrow.”
Meredith’s Bank was a tall brick house set in a narrow courtyard, reached by a little lane off Cornhill. It was typical of many small city firms of its day in that while the building itself was severely Georgian, the arrangements within it were still essentially medieval. On the ground floor was the counting-house, a large room, fitted with a counter and several desks and high stools for the clerks. Above this level lived not only Mr Meredith and his family, but the junior clerks, just like apprentices. In a comfortable parlour off the first landing Eugene found himself sitting opposite a handsome gentleman in his thirties, who introduced himself as Mr Meredith, and a much older gentleman in a wing chair, who seemed to be watching the proceedings as if it were some kind of sporting event.
Meredith was careful to put Eugene at his ease, talking pleasantly about his business before he asked about his family and name. When Penny explained its Huguenot origins, Meredith seemed well satisfied. “There are many Huguenots in finance you know,” he observed. “They do well. I expect you work hard.” Eugene assured him that he did. “And you want to rise?”
Eugene did not want to seem to be pushing himself too aggressively, but he confessed that, if he could prove his ability, he hoped to rise.
“Quite right,” said Meredith obligingly. “It’ll all depend upon how useful you can make yourself, you know. All of us here” – he grinned at the old man in the wing chair – “are free to rise – or fall.”
He went on to ask a number of questions to determine what Eugene knew about the rules of finance, which thanks to his godfather’s coaching, Eugene was able to answer. They had just come to the end of their interview when the old man suddenly spoke.
“What does he think about free trade?” he demanded.
The question was so abrupt that Eugene was almost startled. But Meredith only smiled. “Lord St James would like to know your view on free trade,” he said.
Thank God, thought Eugene, thank God indeed for Fleming. Because of him he knew who the old man was and also what he must say. “I agree with the Whigs, my lord, that free trade in principle must be for the betterment of mankind, but until it is reciprocated by our trading rivals, English merchants may need some protection here and there.” This was, of course, exactly the view of the Whigs’ merchant and city supporters: they were all for free trade – as long as it suited them.
“That was all right, St James,” Meredith laughed. But it seemed the earl meant to have a little more sport. Fixing Eugene with his sharp old eye, just as if he had been a horse he was thinking of betting on, he rapped out: “So what about the gold standard, young man, eh? What do you think
Once again, Eugene silently blessed his godfather. If there was one subject in the year 1819 that could be calculated to raise tempers in the city and in Parliament, it was the great question of gold.
Traditionally, when banknotes were issued, they represented gold bullion for which they could always be exchanged. This limited the number of notes in circulation and kept the currency sound. But early in the conflict with revolutionary France, the English government, through the Bank, had to borrow so much money – and therefore issue so many promissory notes – that the amount of money circulating in the London market swelled enormously. Indeed, by the end of the Napoleonic Wars, about 90 per cent of government income went in paying interest. In these circumstances there was simply not enough bullion to back all the banknotes needed; and so the Bank of England had been allowed to print money that was no longer, strictly, backed by gold.
These banknotes were still sound. They had the Bank’s massive credibility, and the government’s ability to raise money through taxes, behind them. But to many solid Tories in the country, the whole thing seemed like a trick.
“If it’s not gold it’s not real,” they complained. “And besides,” the sharper of them pointed out, “if there’s no gold behind the currency, how can we trust these fellows not to print money whenever it suits them?” If this insulted the integrity of the Chancellor of the Exchequer and the governors of the Bank of England, they couldn’t care less. In the summer of 1819 they had got their way. Parliament had declared that over the next few years it would return to gold. But there was one difficulty.
“Gold is sound, my lord,” Eugene now said carefully. “But I think the sudden return to it is dangerous. The Bank will have to reduce the amount of currency in circulation to match it to the limited bullion. That means that with less money about prices will fall. All businesses will be hurt. Worse, with all this money being sucked out of the market, our merchants, already in trouble, will find it impossible to get credit to tide them over. The whole system could collapse.”
This was precisely the view of the City. It had been urged repeatedly upon Parliament by Rothschild and other great bankers. The collapse they feared would be known to a later age only too well as a classic depression, caused by contracting the money supply.
Eugene’s response drew from the Earl of St James a single word. “Remarkable.”
Eugene had talked himself into a job.
1822
Lucy was four when her brother was born, one cold December dawn. At first they thought he would die.
“We’ll call him Horatio,” her father said. “After Nelson.” Perhaps, they all hoped, the great hero’s name would give the baby strength to live, and it seemed to have worked. Lucy would always remember the day, a month later, when her mother, judging that the child would live, told her: “This baby is yours too. You’ll always look after him, won’t you?” He had been hers ever since.
Death and hardship were no strangers to the Doggets. The children’s father William had been only three when his father, old Sep Dogget the fireman had been killed when a blazing house collapsed. Will’s mother had been Sep’s second wife and she had done her best to bring him up alone. Will’s elder half-brother had helped, but not much, since he had his own children, including Silas, to care for. By the time he was a young man, Will had drifted into the huge parish of St Pancras where he occupied three rooms with his wife and Lucy and sickly Horatio, the only two of his five children to survive. Infant mortality was an urban curse. Fewer than half of London’s children reached the age of six.
He shouldn’t worry, Penny told himself. After all, it was only a shot in the dark. Meredith undoubtedly knew what he was doing. Eugene had asked his godfather what he thought, but Fleming had advised him not to concern himself.
Meanwhile, his life at Meredith’s was delightful. The first two years, he lived in Meredith’s house, visiting Fleming or sometimes his parents in Rochester on Saturdays and Sundays. He was like an elder brother to Meredith’s four boisterous children; secretly he was in love with pretty Mrs Meredith – of course, she and her husband were well aware of this – and if one day he could live as they did, he thought, he would be a lucky man indeed.
Though it held balances for a number of country gentlemen, the business of Meredith’s, like most private banking houses, was in making commercial loans mostly to merchants in the import and export trade. None were made to manufacturers: “For then I should have to understand what they do,” Meredith said. The manufacturers of the early Industrial Revolution raised their capital from friends or sometimes from aristocratic backers, hardly ever from banks. Short-term loans for cargoes, letters of credit, the discounting of bills – this was the bread and butter of small banks like Meredith’s.
Business was not easy; the City’s fears about the gold standard had been partly justified. There was less money about, credit was tight, stock prices were down, and everyone was jittery. “We need new clients. Look for specialist merchants; they often survive,” Meredith told his clerks. Eugene had found several, including a trader who specialized in Indian dyes, and in tortoiseshell and mother-of-pearl. But the huge growth, in which he dreamed of involving Meredith’s, came from the great foreign loans.
These were massive: loans to governments like France, Prussia and, most lately, the South American countries. Far too big for any one bank, this lucrative business was syndicated, numerous banks each taking a share, including Meredith’s.
“But it’s the agent banks, the ones who put the deal together, who really make a fortune,” Meredith explained, “because they get fees as well.” Baring’s and Rothschild’s were the leaders here because with their international connections they could arrange for banks all over Europe to participate. “Baring’s are slipping, though,” Meredith would say. By 1820, it was common knowledge that the younger generation of Barings with their grand country estates were not paying enough attention to the details of their business.
Some people, Eugene knew, felt that sending money out of the country like this was somewhat unpatriotic. But the banker explained: “Money knows no boundaries, Eugene. After all,” he pointed out, “in times past the Lombards and other foreigners lent money to England. Now it’s our turn to be the bankers. And long may it last!” he added.
The counting-house was a merry environment. The six clerks, all under thirty, went out drinking together most evenings. The City was also a great place for practical jokes. One favourite was to go round to the Royal Exchange and offer obviously bogus stocks. Any unwary taker was then hooted with derision by all the onlookers. One offer – Chinese Turnpikes – was so successful it was tried on newcomers regularly. A more serious case that year had been an enterprising rogue’s offer of bonds in a South American country he had invented, called Proesia. Having taken a considerable amount of money, he then vanished. Two unlucky investors had actually been ruined, but Meredith’s traders were young and brutal: they howled with mirth.
But though he was enjoying himself day to day, Eugene never lost sight of his objective. What was he worth? This was the expression one heard every day in the City. How else, in a financial community, could a man be measured? So far, apart from the modest amount he would one day inherit from his parents, the answer was: not much. True, it was early days yet, but there were plenty of stories of ambitious young men working their way into partnership and riches in less than ten years. “Look sharp about you, Eugene,” the other clerks told him. “That’s the name of the game.”
One way to make a little on the side was to dabble in stocks, but with very limited funds he was not sure how to get started. A young stockbroker friend enlightened him. “Futures, Eugene,” he assured him. “I’ll show you how they work.”
The futures market was a lively business. Instead of buying a stock or bond and holding it, a man could agree to buy it at a future date, in effect taking a bet on what its price would be then. But then, if he could find another buyer, he could sell thi
Eugene soon found it was a good way to train himself in the intricacies of taking risks. He kept a little book detailing all his trades, and after a year he was starting not only to show a modest profit but to develop strategies for offsetting one risk against another. “You’re getting the idea,” his friend told him. “It’s just like hedging your bets at the races!” Yet it was this kind of training that gave rise to Eugene’s first feeling of disquiet.
Without particularly meaning to, Eugene realized that he was forming a picture of the Meredith Bank’s activities, too. He began to make a catalogue of the principal people they dealt with and started to assess their businesses. And slowly he found himself coming to a rather uncomfortable conclusion. “I can’t be sure,” he had told Fleming, “but if some of these firms were to fail, I think Meredith could go under, too.”
“But you must assume,” Fleming comforted him, “that the Earl of St James is behind him.” As everyone at the bank knew, it was Meredith’s grandfather who had brought up the old earl and as a debt of gratitude St James had staked Meredith when he started his bank. The old man still liked to drop by from time to time: the business seemed to amuse him. “So I dare say,” concluded Fleming, “he’ll see you through.”
Besides the Bank and the Royal Exchange, there was one other growing place of business in the City. Housed only recently in premises close by the Bank in a narrow enclave called Capel Court, this extended trading room was known as the Stock Exchange and was mainly used by the men dealing in the innumerable issues of government debt. Its inmates had decided they were going to live like perpetual schoolboys. They even had a big stall that sold them cream buns, doughnuts and candies. But perhaps its most surprising feature was number 2 Capel Court, which the great prize-fighter Mendoza ran as a boxing saloon where young brokers and other young bloods could come and take a turn either with each other or with a professional bruiser.