The King's Mistress: The True & Scandalous Story of the Woman Who Stole the Heart of George I

by Gold, Claudia

  The origins of the Bubble can be found in 1711, with the rather innocuous establishment of a joint-stock company, the South Sea Company. As a part of the Peace of Utrecht of 1713 with Spain, the company was granted exclusive trading rights to Spanish South America – ‘the South Seas’. The Company had been formed out of the imagination of the Tory Robert Harley to offset the power of the Whiggish Bank of England. It was fundamentally a finance company and by 1714 it had acquired absolute respectability.

  The heart of the operation was South Sea House, in the City, at the corner of Bishopsgate and Threadneedle Street. The directors had given Queen Anne substantial shares, which became George’s property when he succeeded her. It was Georg August who took over the governorship of the company in 1714, with George only taking the position in 1718 after the breach between father and son. The Duchess of Ormond wrote pointedly to Jonathan Swift: ‘You remember how the South Sea was said to be Lord Oxford’s brat, now the King has adopted it and called it his beloved child.’3

  It was, in Hatton’s words, ‘one of the three pillars, with the Bank of England and the East India Company, of the credit structure of Britain’. But in reality the company was trading in futures, everything nebulous and nothing tangible, betting on finding gold and establishing trade in the New World.

  Since Columbus’s ‘discovery’ of America in the fifteenth century, that continent had become linked in the minds of Europeans with an abundance of riches as they saw gold and jewels travelling back to the Old World. Even the most cautious of early eighteenth-century speculators believed they could grab a share of the wealth, and astonishing numbers bought into the scheme. In return for their monopoly, the South Sea Company undertook, in April 1720, to pay off a large portion of the national debt – £31 million – which proved irresistible to the ministry, not least because the company agreed to charge only a modest interest rate of 5 per cent. John Aislabie, the Chancellor of the Exchequer, had such confidence in the scheme that he guaranteed that the national debt would be paid off within twenty-five years.

  The company did not deal only in the promise of riches in gold. It also dealt in human traffic, and transported Africans to the Americas through the notorious ‘middle passage’, a route westwards across the Atlantic that claimed the lives of thousands of people. As early as 1712 Queen Anne told parliament: ‘I have insisted and obtained that the asiento or contract for furnishing the Spanish West Indies with negroes shall be made with us for thirty years.’4 The South Sea Company undertook to deliver 4,800 slaves every year for thirty years. The historian Hugh Thomas describes the company’s complicity:

  The South Sea Company agreed to buy in Africa the slaves required from the old RAC [Royal Africa Company]; take them to Jamaica, where the weakest, the ‘refuse’ slaves, would be eliminated (left to die uncared for on the dock, in many cases); and then carry the prime slaves to Spanish markets.

  The ministers had been influenced by contemporary events in France, by the huge and similar success of John Law’s Mississippi Scheme. As Charles Mackay eloquently put it:

  It was while Law’s plan was at its greatest height of popularity, while people were crowding in thousands to the Rue Quincampoix, and ruining themselves with frantic eagerness, that the South-Sea directors laid before parliament their famous plan for paying off the national debt . . . The English commenced their career of extravagance somewhat later than the French; but as soon as the delirium seized upon them, they were determined not to be outdone . . .5

  To obtain their monopoly the Company had bribed heavily, encouraged by James Craggs, Secretary of State for the South. Melusine and Sophia Charlotte, both perceived by the Company’s directors to be highly influential with the king, each received £15,000 worth of stock, for which £120 would be paid for each point the stock price rose above £154. Contemporaries believed that Craggs was Sophia Charlotte’s lover, and if it is true, this may be why she received the stock. She had not nearly as much influence with George as Melusine, but Craggs may have exaggerated to get her a cash gift. Young Melusine and Trudchen received £5,000 each, and George was elected governor of the Company in 1718. Contemporaries believed that he too had received a cash bribe, but his biographer, Ragnhild Hatton, has disproved this. The politicians also received enormous gifts of stock. Stanhope got £60,000, Sunderland £50,000, James Craggs the elder, the Postmaster General and father of James Craggs, £30,000, and Aislabie £20,000.

  The extravagance of the heady days of early summer before the Bubble burst was reflected in an especially profligate London season. Ridiculous amounts of money were spent; the governors of the South Sea Company were socially the most sought-after guests in London, more so than the king’s ministers. One director was reputed to have made £3 million in three months and Georg August presented another director, said to be worth half a million, with a diamond ring.6 And the South Sea was the major topic of conversation amongst the cognoscenti. At the end of March Oxford’s daughter Abigail, Countess of Kinnoull, wrote to her father: ‘The town [London] is quite mad about the South Sea . . . one can hear nothing else talked of . . . It is very unfashionable not to be in the South Sea.’7 Edward Harley junior reported to his sister: ‘I find that there are few in London that mind anything but the rising and falling of the stocks, upon which all the news and talk of the town turns, so that unless I bring South Sea, African Bank, cert. per cent., par, etc, and such stuff into my letter I shall neither be fashionable nor fill it up . . .’8

  In July, at the height of the craze, Craggs wrote to Stanhope of the mania that had overtaken everyday life: ‘It is impossible to tell you, what a rage prevails here for South Sea subscriptions at any price. The crowd of those that possess the redeemable annuitys is so great, that the bank, who are obliged to take them in, has been forced to set tables with clerks in the streets.’9

  The ubiquitous lavishness was also reflected at court. George’s birthday party that year was the most fabulous to date. Melusine spent a fortune on a ‘hundred dozen’ bottles of claret. Mary Cowper claimed the crowd was the largest she had ever seen at a royal birthday celebration, which took place at St James’s at the end of May. Melusine delivered the coup de grâce by appearing in a dress studded with jewels valued at £5,000 and her extravagance was reported in the newspapers.10

  The Reverend Laurence Eusden read his congratulatory ode to the king, rejoicing in the riches the South Seas had brought:

  Hence (for in his peculiar reign were laid

  Schemes, that produc’d the sure increase of trade)

  Shall generations, yet unborn, be told,

  Who gifted them with silver mines and gold;

  Who gave them all the commerce of the Main,

  And made South Seas send home the wealth of Spain.11

  Few had any idea that they were just days away from ruin.

  When Melusine and George went to Hanover for their summer holiday they left the management of their stock in John Aislabie’s hands – after all, who better than the Chancellor of the Exchequer? The holiday was desperately needed. Melusine had been very ill in April. One newspaper reported: ‘The Duchess of Kendal has been so ill for this week past, that her life was once thought to be in danger . . .’12 Furthermore George’s granddaughter Princess Anne had contracted smallpox in the same month. It had been a stressful time for the family and they looked forward to leaving for Hanover. Melusine was particularly pleased that Johann Matthias was to join them, and in July The Weekly Packet reported: ‘The King of Great Britain set out for Pyrmont on the 10th instant; [accompanied by] . . . the Duchess of Kendal, Lieutenant-General Schulenburg, with his Lady; but none of the ministers are gone thither, because his Majesty hath no mind to be troubled with matters of state, while he is drinking the waters . . .’

  But while Melusine and George embarked for Germany, the Bubble began to deflate. As the South Sea furore had swelled in Britain during the early summer, the similar bubble in France – John Law’s Mississippi bubble – had burst in May. L
iselotte wrote to Caroline from St Cloud on 31 May 1720: ‘Law, whom people here have worshipped like a god, had to be removed from his post by my son. It is necessary to guard him, for his life is not safe, and the man is terribly frightened.’ In Britain the stock reached its peak at the end of June, when stock was valued at just over £1,000, and then it gradually began to come down. But its fall was so slow at first that few seemed to notice.

  Melusine and George, buoyed by the Bubble delirium and the recovery of Princess Anne, made a merry party in Hanover that summer. Young Sophia Dorothea and her husband joined them at Ghörde, as did George’s brother Ernst-August (he had been prince-bishop of Osnabrück since the death of the Catholic incumbent Charles Joseph of Lorraine in 1715 and resided in its palace) and his grandson Frederick, who had remained behind in Hanover in 1714. At least one of Melusine’s sisters came too, and the girls of course were there. Trudchen’s courtship with Joanne Sophie’s son continued during the heady sunny days at the family’s holiday home. After hunting at Ghörde, the party went to Herrenhausen for balls, plays and celebrations. But the happy family holiday was a brief hiatus before catastrophe broke their idyll.

  Stanhope and Sunderland joined them later in the summer. Sunderland arrived in early September but amazingly, considering that he was First Lord of the Treasury, with a large financial stake in the South Sea Company, he failed to communicate to George or to Melusine the looming crisis; for by the time he arrived at Herrenhausen, the stock had sunk alarmingly from £775 to £500. The bankruptcy listings in the London Gazette of mid-August were through the roof and people began to lose their fortunes. By the end of September the stock had fallen to a dismal £135.

  The historian of the South Sea Bubble, John Carswell, is incredulous at Sunderland’s failure to inform the king:

  His sublime indifference and exuberant confidence cannot be excused, like the King’s, by lack of information. He was receiving regular reports and even his wife . . . wrote anxiously about the family investments asking if there was anything she ought to do. ‘The stock will mend’, he assured her, ‘the stock will rise again’ . . .13

  So he said nothing.

  And neither did George’s Regency Council in London, who only notified the king of ‘the very extraordinary case which hath happened in the last fortnight’ on 21 September. They asked George to set out for London straight away. But it was too late. Even had he left immediately, it was impossible that he could arrive in London before the end of October, so large was his household and so feckless the winds demanded for a successful crossing.

  George and Stanhope, absorbed in foreign policy, failed to appreciate the gravity of the looming crisis and asked the ministers in London to ‘Give us a week to settle the most urgent matters . . .’ despite Bothmer’s pleas that unless the king return, the English might revolt.14

  Meanwhile Melusine, keeping an eye on George’s interests as well as on her own, trusted Aislabie to sell their stock at the most advantageous price possible. But the Chancellor, wishing not to antagonize the king and his mistress, was overly cautious, to Melusine’s annoyance. She wrote him a barbed letter from Herrenhausen on 27 September. She was incensed that he had wasted time in writing to Hanover for further instructions, and reminded him that he had been entrusted to act on his own initiative. She told him to stop wasting time and ‘to sell or buy as you would think it the most profitable and convenient . . . if the best occasion is missed you will be pleased to make use of those that shall offer themselves for the future without expecting any new advices’. She went on to chide him with the quietly devastating words:

  I and my two nieces give you many thanks for what you have been pleased to subscribe and pay on our account at the third subscription. If we had been present in England, we would not have failed to sell them out, when they were at such an advantageous Price, and I wish you had been so kind as to do it for us, the more when you judged and saw they was [sic] not to rise but fall as they have done. I am sorry our Absence made us miss that good Opportunity; and I hope you will be so kind as to take a little Care of our Interest if it is not to[o] great a disadvantage in your other Affairs.15

  But Melusine’s reprimand reached England too late, at the end of September. Aislabie did not sell the stock, as he felt he could not do so ‘without increasing the public clamour upon myself, or without prejudice to the king’s affairs’.16 Contrary to public opinion, and despite her detractors’ claims that she made a fortune out of the Bubble, Melusine and George actually made substantial losses with the crash. George believed that through Aislabie’s inertia he had lost £35,704. But Melusine, ever discreet, did not even hint at her financial fears to Johann Matthias, saying that she was ‘well content’ with what she had, considering she had thought at one stage that she would lose everything.17

  Subsidiary bubbles which had formed on the back of the success of the South Sea began to deflate at the same time. Some of the companies were legitimate; most were not. Amazingly, such was the mania for financial speculation, a company that had established itself in the summer of 1720 ‘for carrying on an undertaking of great advantage, but nobody to know what it is’ attracted numerous investors.18 Mackay tells us that according to this company’s prospectus:

  the required capital was half a million, in five thousand shares of 100 pounds each, deposit 2 pounds per share. Each subscriber, paying his [or her] deposit, was entitled to condescend to inform [the buyers] at that time, but promised that in a month full particulars should be duly announced, and a call made for the remaining 98 pounds of the subscription. Next morning, at nine o’clock, this great man opened an office in Cornhill. Crowds of people beset his door, and when he shut up at three o’clock, he found that no less than one thousand shares had been subscribed for, and the deposits paid. He was thus, in five hours, the winner of 2000 pounds. He was philosophical enough to be contented with his venture, and set off the same evening for the Continent. He was never heard of again.19

  The real beneficiaries of the summer of madness of 1720 were characters such as this.

  In France the economic devastation was compounded by an outbreak of plague in Marseille, adding to the general panic throughout France. And eighteen months later, when many were still left shattered after the crisis both in France and England, Liselotte wrote to von Harling: ‘Monsieur Law will probably leave for Holland, but I do not believe that he will be permitted to go to England, because his name is mud there.’ Melusine and George had departed for Hanover while England was riding on an economic high, but they came back to desolation and chaos.

  Swift parodied the misery of those suffering financial chaos at Garraway’s coffee house, which became ‘on Garraway’s cliffs’, as ‘A savage race by shipwrecks fed’.20 Families lost fortunes, and William Windham noted: ‘You can’t imagine the number of families undone . . . many a £100,000 man not worth a groat, and it grieves me to think of some of them.’21 In November 1720 William Pulteney wrote to his son Daniel: ‘I assure you, that I have done nothing, nor thought of nothing, for these last two months, but South Sea stock, and yet I am not myself any great sufferer by it; but so many of my acquaintance are ruined and undone, that I am under as much anxiety and uneasiness of mind, as if I was so myself.’ And Daniel in turn received a letter lamenting that: ‘There are many and considerable familys reduced by extravagant bargains . . . The dukes of Wharton and Bolton are great sufferers; and indeed even the South Sea directors included, hardly one in 20 are gainers.’22

  For many families the distress of bankruptcy through the failure of the scheme, and the cries for scapegoats, were enough to raise the spectre of revolution. In September one Thomas Broderick wrote to his friend Middleton: ‘Thousands of families will be reduced to beggary, what the consequences of that will bee, time must shew . . . The consternation is inexpressible, the rage beyond expression, and the case so desperate that I doe nott see any plan or scheme . . . for averting the blow, soe that I can’t pretend to guese att what is next to be do
ne.’23

  George and Melusine stayed calm on their return, and united with Walpole to brave it out. A Select Committee was formed to establish and assign blame. But when Robert Knight, the Treasurer of the South Sea Company, appeared before the Committee on 21 January, he revealed the extent of the bribes with which the Company had bought the good will of the great and the good. He further disclosed that he had ‘cooked the books’ by entering false names and fabricated amounts. Knight, charming and discreet, had wooed the glitterati during the heady days before the Bubble burst, and a contemporary recorded that: ‘Whigs and Tories made their court to Robert Knight . . . with more assiduity and complacence than we see at the levees of Prime Ministers.’24 When Knight emphatically refused to give the names of those the Company had bribed, the Committee, frustrated, agreed to adjourn for the weekend. Melusine shuddered; she knew she would be on the list.

  The events that followed were astonishing and read like a crime caper. Knight fled the country to Calais, taking his list of names with him. There he was met by the son of John Law, the Mississippi bubble swindler. Carswell speculates, intriguingly, that ‘some further great scheme in partnership was being contemplated’ and we can only wonder at what the brains behind two of the greatest European financial swindles in history would have devised together had such a plan materialized.

  Contemporaries blamed Melusine for his flight, and even speculated that she gave him the use of one of her properties in Germany, but these claims were untrue. She was, as ever, parodied in the press. The Brabant Screen, a satirical print drawn in the wake of the crisis, puts the blame squarely on Melusine. It shows her hiding behind a screen in a richly decorated and beautifully opulent room – she was certainly not suffering financially, as so many thousands were! – handing over money to Knight. The Company’s treasurer stands expectantly, riding-whip in hand, poised to escape into exile. The table is inscribed with the words: ‘Patience and Time and Money set everything to rights’.