Let No Dog Bark (eBook)

Josiah’s Unwise Decision

The year 1873 continued the progression of the bank’s fortunes and at the same time those of Josiah Raines. A few years earlier, some of the bank’s customers had begun investing privately in the American railways, which were rapidly developing. They had urged Josiah to join them, but he was a cautious man and needed more convincing of the long-term prospects of the venture. The group did well and put more and more cash into this single venture. The pressure on Josiah to join the group mounted until some of the bank’s assets were invested in the railroad stocks. There followed several years of increasing returns and investment by the bank. There seemed to be no end to the bonanza. Each year the bank invested more and more until in early 1873, Josiah began to get an uncomfortable feeling about the American railroads. He did some calculations after his 1872 audit and realised that if the railroads failed, so too would the bank. The money could not be taken out of the investment, only the stocks could be sold, which would have entailed heavy losses. The more recent the investment the higher the price that had to be paid for the stock.

Josiah spent a little time thinking back 165 years to the bursting of the South Sea Bubble; the joint stock company, ‘The South Sea Company’. The shares increased spectacularly in value until 1720, when they reverted overnight to the issue price. The South Sea Company was an English Company founded in 1711 for the sole purpose of trading with the Spanish West Indies. The trade was assumed to be almost exclusively in slaves. In 1711 Spanish law made this illegal, but the upcoming Treaty of Utrecht was expected to legalize the trade. In the expectation of a bonanza, shares multiplied in value by a factor of eight to one in the first eight months. The company’s earnings were nothing, so it had to artificially create a demand for more shares to keep everything going. They did this by continually raising interest rates until they reached 100%. The ensuing hysteria to acquire more and more shares drove the price up to 1000 pounds each. They had no intrinsic value, merely an expectation of large dividends to come. Legalization would enable the South Sea Company to start earning money. With no income, any expenditure had to be paid for by selling more and more shares. This was the first example of ‘the Ponzi Scheme’.

Josiah felt a cold shiver run down his spine as he contemplated the thought of such a catastrophe over what had become the bulk of his investments. A multitude of investors were ruined. The company went on trading for a hundred years, but the bubble had inflated and burst. Could this happen to the American railroads?

Josiah tried to draw comparisons, but he remained confused. Discretely, he sought a buyer who would pay anywhere near the market price, but there were no takers. Josiah put all his hopes into the fact that a second transcontinental rail-link was being planned in America, and this would inevitably need financing. The principal bank supporting railroad developments in the United States was Jay Cooke, and they had begun negotiations with the American government for a loan of $100,000,000. All was looking good until toward the end of October 1873, when a rumour spread that Jay Cooke was unable to meet its dues.

Negotiations were suspended, the loan fell through, and the second transcontinental link was never begun. It wasn’t the railroads that failed but the bank that supported them, Jay Cooke, was bankrupt as were many of its clients including Josiah and his bank. The crash was worse than the South Sea Bubble and the ensuing depression lasted in England for two decades.

The receivers were called in and their first action was to change all the locks on the bank and seal up the place. From there they went to Josiah’s house to do the same thing. The first sign that Henry had of trouble brewing was when a group of men arrived, one of whom was brandishing a court order that gave them access to every part of the house. The servants were herded into the servants’ dining room where they were soon joined by Josiah, his wife, and daughter.

They were told they must all remain in the servants’ quarters until the officials had finished their inspection and the locks had been changed. Josiah was visibly in shock. When he had recovered his composure a little, he tried to explain what had happened. The explanation was not too coherent but was sufficient for everyone to realise that the bank, the source of the family’s wealth, had been ruined by some overseas investments. The bank and the family were bankrupt!

As Josiah was saying that he had no idea what would happen next, the family and servants were ushered out onto the street. There they just stood and looked blankly at each other. The only one to preserve any equanimity was Mrs. Raines. In all her life she had never been in a position where she had to think about money. There was always plenty. She could not believe that there was now none, and there were no prospects of acquiring any. Still, like Mr. Micawber, in David Copperfield, she was certain that ‘something would turn up’. As we would say today, she was in denial.

Ann had first met her husband, Josiah, when she accompanied her father to one of Josiah’s social gatherings. Her father was an investor with Josiah’s bank. Ann enjoyed the social outing, and her father promised to take her again. Her mother had died two years earlier and her father was pleased to have some company for a social occasion. Josiah was unattached, and Ann was an attractive young lady who was a good companion.

Ann became a regular visitor, and several times Josiah was tempted to ask her out. In the end, he asked her father if he would have any objection to him inviting Ann to the theatre. Mr. Stephens was pleased with the offer as there was not a lot of social activity in his life, which made it difficult for Ann to meet new people.

The invitation was issued and readily accepted and the two went off for a pleasant evening. When he delivered her back home, Josiah invited Ann out the following week and again his offer was accepted. This became a regular event and they both became very relaxed and comfortable in each other’s company. One evening when Josiah arrived to collect her, Ann asked him to come in. This had never happened before; they had always gone straight to the theatre or wherever they were bound. Ann said that her father had gone to the north of England on business and was going to be away for two or three days. She planned for the two of them to spend some domestic time together while she cooked him a meal. It was probably not the most memorable meal he had ever eaten, but the unexpected nature of being in her home instead of going out made the occasion very special. Over the meal they spoke freely and exchanged long held glances.

They ended up spending the nights together and what memorable nights they were; being careful to leave no tell-tale evidence of their behaviour her father might find when he returned home, their subterfuge remained secret, or so they thought. The next time Ann and Josiah planned to go out, he arrived at his usual time and the door was answered by Ann’s father. He invited Josiah in to wait while Ann finished getting ready. While they waited, Josiah asked whether he had had a successful business trip. Mr. Stephens, Ann’s father, replied “I stayed in London at the Savoy, giving you two privacy. I was not away on business.”

Josiah was a bit mystified “I must have misunderstood what Ann had told me.”

“There was no misunderstanding.” He spoke with a twinkle in his eye.

It seems that Ann’s father had been using some subterfuge of his own. He knew his daughter well and was aware that she was crazy about Josiah. He suspected that Josiah felt the same about her, so he decided to give nature a hand. His meaning suddenly became clear to Josiah who was red with embarrassment. When he had composed himself, Josiah said, “Can I assume from what you have just told me that you would have no objection to me asking Ann to marry me?”

“If Ann is happy, I will be delighted,” her father replied.

When Ann joined them, Josiah explained the game her father had played. Now it was Ann’s turn to be red with embarrassment. In front of her father, Josiah went down on his knee and proposed on the spur of the moment. By the time he finished, she had her answer ready. It was, of course, an emphatic – “YES!” And that was how Ann became Mrs. Josiah Raines and how she came to have a place in this narrative.

After that digression I can return to the dispossessed family and their servants standing on the pavement outside of what used to be their home. The embarrassment of everyone standing out on the street was total. None of the staff had ever been in this position before. Josiah’s home had provided safety and shelter for them all.

They all shared similar thoughts at that moment; inability to settle one’s debts was a criminal offence and the debtor usually ended up in Newgate Prison. Newgate was the repository, not only for debtors but for criminals condemned to death. Through the night before an execution, the ‘Bellman’ made the rounds of the prison twelve times calling out each time:

“All you that in the condemned hold do lie,

Prepare you, for...