“Quite right, my lady! Ah, Indira… it occurs to me that you mentioned an unspecific sum when you talked of your legacy. ‘Some’ hundreds of thousands, you said. I do not suppose you know exactly how many?”
“Fifteen, Francis. I had thought to surprise you.”
“You just have. When we reach America I shall speak to our lawyers and write the sum into trust, to be used by you in your lifetime and to be the inheritance of the younger children. Frank, as the eldest, will inherit from me, by English and American tradition.”
“But what if something happens and you need the money?”
“It, and you, are protected from anything that may happen. That is the aim of a trust fund. If I am foolish, or unlucky, then you and the family will be safe.”
It was very strange, but if that was the way it must be, then so be it; she would have a massive income and would spend it properly for the benefit of her husband and family.
Wolverstone was beset by another afterthought – ‘her jewels’, just what did she mean by that? She had personal jewellery, of course, and a great deal of it, as was normal to a lady of her station in any princely state, but he wondered if that was entirely what she meant. Amravati produced both rubies and sapphires from the gravel banks of five separate small rivers; they were neither of the largest nor the best quality, but they accounted for the wealth of the small state. A substantial proportion of the output was taken in tax by the rajah, some indeed was mined by his own workers on lands belonging to his private estates; Wolverstone had never been able to determine the exact totals involved – because the figures had been skilfully concealed from him, he was certain. He wondered just what weight of cut and uncut stones had gravitated into his lady wife’s possession. Better not to ask, perhaps – it might be to seek unnecessary trouble.
The family left India on an American barquentine, sole passengers, apart from a ‘few servants’ brought along by Indira, sufficient in number to populate a small village. The hold was no more than half filled with bales of silk and various other valuables which included her ivories, both carved miniatures and whole tusks.
“Perhaps a fortunate thing that the days of pirates are over,” Major Wolverstone idly commented to the captain as the wherries came alongside and more and more valuables came aboard.
“It is, by God, sir! I confess, sir, I had wondered why I was offered so very generous a charter by your people. Now I know. I have a sternchaser aboard, a pivot gun, and six hands trained to use it. I shall, I believe, purchase an extra barrel or two of black powder before we sail. Sums as large as these we are carrying might turn the heads of normally honest seamen, and there is still a very substantial slave trade in the Indian Ocean and slavers are at best one step removed from the pirate.”
“I suspect you may find that a dozen or so of the male servants you see are handy with a musket and sword, captain. I cannot imagine that my lady would ever travel without an armed guard to hand to protect me and the children.”
“You are lucky in your lady, sir!”
“That I have known for some little time, captain. Rarely fortunate!”
David Mostyn wished that he might be able to say the same, surveying the accounts forwarded to him from Florence, of all places. It was a town in Italy, he believed, and he was vaguely of the opinion that it was in some way notable for art, of which he knew little and cared less. His wife had evidently spent some time – and a lot of money – there. He could afford it, he supposed, he had the cash to cover her bills, but he rather thought that he should not have to. There was no choice, however; the good name of the bank would be tarnished if he was to repudiate her debts. He wished he could send her a letter to remind her that they had agreed an income and that she was far outstripping it, but he could not even guess what her current location might be. He might perhaps send a circular to all of the Mostyns branches in Europe, begging them if they came into contact with Mrs David Mostyn to ask her to spend less profligately; he could imagine just what that would do to his reputation in the firm, just how hard they would laugh.
David shrugged and turned to the more profitable, but perhaps even more disturbing, consideration of the China Trade. The damned Chinese were acting up again – endeavouring to assert themselves as a sovereign nation with rights over foreigners.
“Bloody Chinks! Who do they think they are?”
The mandarin Lin, who had been appointed to attempt to bring order to the corrupt confusion of Canton, wondered the same. The Westerners, or ‘foreign devils’ if one preferred melodrama, which he did not, were by law confined to their ‘factories’ where their factors conducted their legitimate trade in tea and silks and porcelain and rhubarb. They ignored this restriction almost openly and traded their opium as and where they wished, displaying contempt for those Chinese officials who attempted to apply the laws banning illicit trade. Most of the officials simply took the bribes they were offered and turned a blind eye. The situation had got wholly out of hand, hence Lin’s appointment by the Imperial Court.
The problem was very simply one of silver. No Western goods were imported into China, by order and probably by the preference of the great mass of those who possessed money. Western traders, originally almost wholly the East India Company but now including many Americans and a number of English firms, ‘country merchants’ from India mostly, bought their goods for taels of silver. Silver was in increasingly short supply, a situation worsened by the Chinese habit of hoarding; perhaps one half of the free silver on Earth had been sat in strongrooms in Imperial China, until opium was brought in. Now the Chinese were buying so much opium that they were actually sending bullion out of the Empire; silver was flowing out of the country.
Lin was an intelligent man, although he believed that China had a powerful army and fleet, an erroneous tenet as he later discovered; opium was unlawful in China, forbidden on pain of death, and it was smuggled into the Empire. The solution was clear in Lin’s eyes and he mobilised a force of men and junks and descended upon the main trading bases and the factories and confiscated opium by the ton and burned it, to the value of perhaps twenty millions sterling, thus, Lin thought, bringing the trade to an end.
The information was in the documents David Mostyn had just received.
“Twenty millions! A vast sum! And none of it ours!”
Mostyns had taken no overt part in the opium trade for the previous four years, David having decided that it was becoming too great a risk. American competition had driven the price down and the old days of two and three hundred per centum profits were gone; it had been time to become wholly respectable. Mostyns made loans to the shipping industry and financed cargoes of silk and occasionally tea, all at a steady rate of twenty or thirty per centum, which was sufficient to turn a profit three or four times that available in London. The bank had not been interested in cargoes of porcelain, the breakage rates unpredictable and often intolerably high; it need only a single storm at sea to destroy the whole profit of a voyage. The bank had obtained a very respectable reputation for probity and risk avoidance that had translated into greater volumes of business from the staider firms in India. The exporters of saltpetre and rice and indigo and furniture woods all availed themselves of Mostyns’ services and could be expected to continue to do so for generations.
Mostyns therefore had funds to hand and no expectation of any abnormal rates of default on its existing loans. Banks that had financed the opium smugglers – effectively all of his competitors – would not see their money back unless the British government decided that the Chinese had committed an act of war and chose to reimburse British citizens who had suffered losses. That might happen, but it would not occur for many months, probably not within the decade. The years since the East India Company had been forced to relax its monopoly had seen the growth of several new banks, all of which had sought the high returns of opium to make their early years profitable; all of them would now be in trouble.
David called his senior clerks together and in
structed them to make personal contact with all of Mostyns’ borrowers and to reassure them that there would be no call for early repayment of their loans. All was well with Mostyns and there would be no interruptions to the supply of ordinary commercial credit, nor would there be an increase in interest rates demanded.
“Mostyns is as safe as the Bank of England, gentlemen. Say those exact words to our customers, if you please! They will remember them in future years – Mostyns will not let down its valued clients.”
The senior clerk raised a hand, begging permission to speak.
“Honoured sir, there have already been informal, unofficial, approaches from unfortunate men employed by our foolish competitors. I have been asked whether it was possible that Mostyns might, as one might say, come to the rescue of a troubled bank. It goes, I hope, without saying, sir, that I denied all knowledge of any such policy, saying that all such decisions must rest entirely with my honoured master.”
“Well done, sir! Your loyalty is to be commended, but, I must add, it is in no way a surprise to me. Your response was precisely correct and should be mirrored by all of your colleagues. I will say, in our normal confidence, that I have expected such an eventuality and have laid plans for it. Mostyns may well come to the aid of some – certainly not all – of our competitors, but only at a price!”
There was a nod of approval – the foolish must pay for their stupidity.
“Any loan that we make will be against the most stringent security. The banks will have investments in the form of loans to the Honourable East India Company or even to the Crown authorities in India; they will have shareholdings in other companies in India; they will possess Consols in London; they may have ownership even of plantations arising from defaulted loans; they will assign those assets in security or they will not see a single rupee from Mostyns!”
There was an outburst of restrained applause, genteel clapping of the hands, from the men assembled – they were pleased and proud to be made party to Mostyns’ great successes to come.
“So, gentlemen, should any other whisper into your ear in confidence, then you must tell them to come knocking on my door – which, I know, is exactly what you would do in any case. Some will leave the premises with the expectation of survival; others, I am afraid, will not. We may expect Mostyns to grow bigger, to expand its presence throughout the Presidencies, opening perhaps new branches, certainly employing more men. It will not be my intention to hire unknown people from failed competitors – I have always sought to bring in more of the relatives, the sons and brothers and nephews, of my existing and loyal staff, and will continue that policy. I very much hope to be able to bring new prosperity to your families.”
More applause followed.
The first failing banker sought a brief meeting with David just two days later. There had been time for the senior clerks to pass the message to their peers in other banks and for the words to have reached the ears of the proprietors and David had wondered just which would lead the race to his office. Mostyns could not possibly have capital enough to meet the needs of all of the failing banks and they would expect first come, first served to prevail.
“Mr Manston, I believe this is the first time we have met, other than as distant acquaintances at dinners and other functions. Please to take a seat. Tea, coffee, something a little more vigorous, perhaps?”
Mr Manston took tea – no reputable banker could be seen to venture upon alcohol in the hours of daylight.
“These damned Chinese, Mr Mostyn! Word has come to me from no fewer than four of my clients of cargoes stolen and burned in front of their very eyes. More than half a million sterling gone up in flames, sir!”
“Unfortunate, Mr Manston, but almost inevitable that it must happen. The Chinese could not turn the blind eye forever. The situation has of course been exacerbated by the presence of the Americans, they having recently taken to landing their cargoes outside of the city of Canton in order to avoid paying bribes to the Customs officials there. Clearly this must have caused a retaliation from mandarins who have lost much of their income.”
David was aware that a number of companies from India had also taken to cheating the officials of their bribes, previously paid for generations to hereditary office-holders. It was easier to blame the Americans, however.
“I was not aware of that, Mr Mostyn. As you say, it explains much.”
David was disappointed by that comment; a banker should know everything, or all that was reasonably possible, of his clients’ businesses. If Manston had been unaware, then he was a poor banker; if he had not been unaware then he was a bad liar. Neither attribute was desirable.
“It does indeed, Mr Manston. Now then, sir, I am sure that you had some other purpose in mind than to lament the perfidy of the Chinese.”
“My bank, Mr Mostyn, has advances to the extent of a quarter of a million which have been jeopardised by the loss of the cargoes. Those loans will not be repaid to time, if ever. It is not impossible that the British government will go to war and force the Chinese to make reparations; it is very likely that they will, in fact. But it will take three, four, perhaps five years for that process to be complete, and the bank will be hard-pressed to survive so long. We have our prudential reserves, as goes without saying, but we shall still be one hundred thousand – sterling, not rupees – short in terms of working capital. I am sure that we could pay twelve per centum on such a loan, Mr Mostyn.”
David snorted his disbelief.
“Twelve? Ridiculous, Mr Manston! Leaving the rate aside for the moment, there must be security for any such loan, sir…”
Manston left after an hour of hard talking, still without a loan or even the promise of favourable consideration but with an appointment for the following week, when he would return with a concrete proposal including due dates and the nature of the investments that would be pledged.
The public would be aware that some banks were in trouble by that time; there would not be a ‘run’ as such, there were too few small account holders, but any number of businessmen would be asking hard questions. There would be a queue of failing bankers at Mostyns’ doors.
David rubbed his hands together in glee – there was nothing like an economic disaster for making profits for the wise man!
A representative of the Governor of Bombay called upon David very early on a Monday morning – the time deliberately chosen, most of the sahibs tending to start work late on that day, recovering from the excesses of the weekend. The gentleman would not be invisible, but fewer of the nabobs would be immediately aware of his activities.
“Mr Mostyn, the Governor might wish to discuss certain matters with you, sir. Particularly he would wish advice on the best way of avoiding a collapse among our businesses here in Bombay and its hinterland. It has come to his attention that yours is the sole bank to be quite unaffected by the recent action of the Chinese authorities in Canton and he wonders if there might be a lesson to be learned from your immunity in this time of travail.”
“There is, of course, sir. That lesson is that one should look to the future, not to the past. Most of my competitors, when considering the opium trade, saw that it had been profitable for the better part of one half of a century. Such being the case, they would seem to have decided, it must continue to be profitable for the next fifty years! I took stock of the trade and Mostyns’ part in it some four years ago and decided that in the words of the old saw, ‘all good things come to an end’. It seemed to me that the time had come to pull out of ventures to China, and so I did.”
That was perhaps an enlightening answer, but it provided no solution to the problems of the day.
“What is to be done, Mr Mostyn?”
“I have offered some degree of assistance to a few of my competitors, on a wholly commercial basis. In return for offering financial support, and one or two outright loans, Mostyns has come into possession of a number of valuable assets. A majority of them will eventually be sold – tea plantations, for example, are
not in our line of business; some, such as a number of commercial buildings and wharves in this and other cities, will remain in our hands as a source of rental incomes. I make no bones about the matter, sir – Mostyns has been prudent and is strong and will take advantage of the opportunities created by the firm’s wisdom.”
The Governor’s aide was a military man and had little appreciation for the finer sides of business; this smacked of profiteering to him.
David saw the poor man’s distaste and was unmoved by it; soldiers had no business to sit in judgement of commercial ethics.
“You will appreciate, sir, that Mostyns has been unable to assist the most needy cases. Where a bank has brought itself close to bankruptcy’s edge then generally it lacks adequate assets to offer as security.”
“Then, what is to be done, Mr Mostyn? Should three, perhaps four, banks fail then a number of leading merchant houses will find themselves deprived of what they refer to as ‘normal working credit’. I am told that they might be forced into failure as a result.”
“Exactly so, sir. The problem is, as I am sure you know, that firms sending goods to England will receive their money after they have been sold – some months delayed by the time of travel, of course. But they must pay their suppliers on receipt of their goods, and provide wages to their employees every month. This has always been the case, of course, and the firms borrow from the banks to tide them over until their income is confirmed. Say six months at sea, then a month to make the sales in London, then three months for the confirmation to reach Bombay on the overland route; ten months between buying in their stock and receiving their cash – and that is a very minimum figure. I normally insist that such credit is taken for twelve months, to cover unfortunate eventualities such as a courier lost on the overland route. If the firms cannot borrow, then they cannot trade and many will simply close their doors, never to open them again.”
The Governor’s aide had not before had the situation explained to him in such simple terms; he understood the problem now.
Victorian Dawn (A Poor Man at the Gate Series, Book 12) Page 17