It had happened long, long before in our history, in 1765, when a similar “bailout” was defeated by Patrick Henry. I had written about it in Sparrowhawk, Book Four: Empire, finished in 2001.*
It matters not which organizations or entities are the beneficiaries of a government plan to “rescue” them from their incompetence, insolvency, and government-enticed avarice: financial institutions and banks, mortgage companies, automakers, insurance companies, airlines, aircraft manufacturers….or Virginia planters. The freshman burgess from Louisa County introduced his Stamp Act Resolves in May 1765 in the House of Burgesses. The Resolves altogether comprised an affirmation of the rights of Englishmen to their liberties and to self-governance, and whose later dissemination throughout the colonies served to unite them for the first time in a common cause, which was to oppose and defy Parliamentary authority.
But Henry first tackled the “loan office” scheme that was proposed by the Tidewater gentry in the House and favored by the colony’s biggest planters.
Virginia then was the largest and richest of all the British colonies, but, within the confining system of the mercantilist system, was in no better economic and fiscal shape than the smallest and poorest. All the colonies, but especially Virginia, experienced a continuing credit crisis with British merchants and the mother country, whose laws guaranteed that the colonies would remain in constant debt. Commerce and trade with any country other than Britain was forbidden; only British-made goods could be imported into the colonies, while colonial goods, mostly tobacco, lumber, rope and raw materials could be exported only on British merchant vessels and were forced to be landed in Britain first before going on to any other country.
All these movements and transactions were taxed, as well, and charged to the credit accounts of colonial merchants, entrepreneurs and planters.
Virginia plantations were renowned in the 18th century for the size of their lands and their ostentatious beauty. Many were in effect small towns of workers and slaves. They grew tobacco, as well as wheat and other marketable crops. But virtually every plantation rode on credit and never-ending debt. In the early 1760’s, after the French and Indian War, and when they owed nearly a million pounds sterling to Britain, most Virginia planters sought a way out of these straits and colluded with several powerful men in the General Assembly to propose to borrow £250,000 from British merchants which would be overseen by a loan office. The Virginia legislature had been granted the right to issue paper notes in lieu of British pounds during the war, but these were to have been retired from circulation and destroyed by the Treasurer and Speaker of the House, John Robinson, who also conceived of the loan office scheme.
To my knowledge, neither the passage of the Stamp Act in Parliament, nor the passage of Patrick Henry’s Resolves had ever been dramatized in fiction. What follows are excerpts from Sparrowhawk, Book Four: Empire, that illustrate the parallels.
Lieutenant-Governor Francis Fauquier warned his friends in the House about the obstacles facing a loan office bill if one were introduced.
“Be warned, my friend: I will not sign another bill without it having a suspending clause. And Mr. Robinson and his friends should not breathe easier if the bill is passed. The Board of Trade must approve it, and then the merchants, who must then introduce in the Commons a companion bill and secure its passage. It may be two or more years before any borrowed sterling reaches these shores.”
That daunting schedule does not discourage the bill’s advocates. However, George Washington, a burgess in the House, is asked by George Wythe, Williamsburg’s leading attorney and an influential burgess, for his thoughts on the bill. Washington answers:
“What little has been said about it, sir, I dislike. True, a loan to us by British merchants would bring us some true sterling here. God knows, we need such money in these parts. But I must ask this: For how long would that sterling stay in our purses, before it was whisked away in duties and taxes and the debts we already owe those gentlemen?…I am not in favor of increasing our debt to them. My children and grandchildren would needs spend their whole lives paying it off, living on their own property as mere tenants of absentee landlords in London, for that would be the only end consequence.”
“I see,” said Wythe. “And…on the Stamp Act?”
“With all due respect to our host [Fauquier] and the Crown, I believe it is as villainous a piece of legislation as can be imagined.”
Edmund Pendleton, another power in the House, defends the loan office idea on May 24th, 1765, recommending that it be assigned to a committee to be introduced as a bill to be debated and voted on. In answer to questions about the value of the loan office, he replies:
“…The depressing circumstances of this colony -- the present low price of tobacco, the recent ban on our ability to issue money, the nullification of so many patents on land west of the Blue Ridge -- all these factors, and others, have obliged so many persons here of substantial property to enter into great debts, which, if their payments were severely demanded, would ruin those men and their families and all who depend on them, and their ruin would certainly harbinge the ruin of men of lesser and other circumstances throughout this colony. A loan office, supervised by men of the strictest virtue, would enable those more substantial persons to pay their necessary debts with greater ease, and help to put this colony on a firmer and unassailable footing.”
Hugh [Kenrick, a hero of the series and a burgess] observed that Pendleton’s answer was more a plea than an answer. He wondered if Pendleton was one of those men of “substantial property.” The man was a key member of the Loyal Land Company and had title to thousands of acres of land in the now-forbidden Ohio Valley and beyond. Many other burgesses in the chamber were also speculators. There were no looks of confusion on their faces, he noted, only a common one composed of hope, patience, and made-up minds.
Hugh suspects that more is behind the loan office scheme than a ploy to save the colony’s credit standing and its largest planters from bankruptcy. Walking from the Capitol building with his fellow burgess from Queen Anne County, he discusses the loan office scheme. He asks his companion:
“All those paper notes that were issued during the war and which were supposed to have been retired and destroyed -- is there any evidence that they were destroyed?”
Cullis searched his memory for a moment, then emitted a slow gasp. “Why…well, I don’t know….Mr. Robinson is the Treasurer….But, now that you mention it, well, I don’t recall that he ever reported to the House that it was done….I see what you are suggesting. And now I know why Mr. Henry was so coy in his accusations today….It puzzled me, why he was not more forward in his opposition to the scheme….”
Hugh sighed. “It cannot be proven, not unless the Treasurer’s books are very closely examined….Mr. Henry is eager to press for an investigation, but not until the next session. But you see how simple a task of legerdemain it would be for Mr. Robinson to substitute the expected sterling notes for those paper monies, at least in the account books. If there have been secret loans of those condemned notes, their amounts and dates could be altered to conform to the sterling. And then, the paper notes could truly be destroyed -- and with them, any evidence of malfeasance. And it is Mr. Robinson who grants leave for an examination of the books. His own private account books would need to be examined, as well, for that is where the truth would be found….He got away with it last time, as you related to me, by blaming the deficit on delinquent tax collection by the sheriffs. But I do not believe he could fox another inquiry of that kind. Why propose only a two hundred and fifty thousand sterling loan, and not some other amount?”
Further on, Hugh explodes in anger:
He tore off his hat and angrily flung it into the air. “Oh, what a conniving club of uncles, cousins, brothers-in-law, and nephews!” he exclaimed. He faced a startled Cullis and waved a finger at the Capitol far down Duke of Gloucester Street. “It is too much that we are dunned without by petty thieves in London, and sniveled within by that…that rookery of rogues!”
Pendleton’s plea does not resonate with Patrick Henry. Neither John Robinson, nor Edmund Pendleton, nor Peyton Randolph, the Attorney-General, knows what his position is on the loan office scheme. Henry soon disabuses them of their doubts.
He excoriated the complexity of the proposal -- “only a Newton could conceive of such a Gordian labyrinth…or should we say a charlatan?”…He pointed out that not only did British merchants already control the price of the colony’s exported tobacco, but that the scheme would “allow them to pick our pockets afresh with the proposed ten shillings per hogshead levy, for ten long years, in order to pay back the loan.” He ended his speech with the question, boldly addressed alternately to Speaker Robinson and Pendleton: “What, sirs? Is it proposed then to reclaim the spendthrift from his dissipation and extravagance by filling his pockets with money?”
…The burgess for Caroline [Pendleton] and the Attorney-General were not quite certain which was the object of Henry’s rhetorical query: the colonial government, which had a debt of £250,000; or the colony’s largest planters, who owed nearly a million pounds to British merchants and the Crown; or particular planters who would be the beneficiaries of the loan office.
Hugh, Washington, and other burgesses vote against referring the loan office scheme to committee to be introduced as a bill. But the scheme passes by a comfortable margin, and the idea is referred to committee.
On Monday, the 27th, the loan office committee conferred with the Council [the 12-member Governor’s Council, which acted as a senate, much as the House of Lords in Parliament acted as a senate for the Commons]….On Tuesday, the House resumed its business, and the Council returned to it several bills that it had passed and received the Governor’s signature, and one that had not -- the loan office proposal, which was unanimously rejected.
Edmund Pendleton announces his departure for home, and leaves the session in a snit, because of the rejection, telling his allies:
“My work is finished here, and was fruitless. The Council, acting on bad and perhaps slanderous advice, has seen fit to ignore our pleas and scuttle the only accomplishment this session could have boasted.”
Pendleton did not think the Stamp Act would be debated, because he believed no copy of it was in anyone’s possession. But the stage is set for Henry to introduce his Resolves, and it is Pendleton’s absence that allows at least five of them to pass by a bare margin.
Historically, it transpired that upon John Robinson’s death some time later, he had not destroyed the notes as he was obliged to. And it was Edmund Pendleton who discovered the malfeasance when he audited the Treasurer‘s and Robinson‘s personal accounts. He spent the next decade repaying the debts from the late Treasurer’s estate.
Except for the denouement, the parallels with the current bailout “crisis” are uncanny. Just substitute AIG, Goldman Sachs, Washington Mutual, mortgage companies, the automakers and every other person or institution that depended on regulation and government largesse for the planters. Substitute Congress, the present administration and the one to come for John Robinson and his corrupt colleagues in and out of the General Assembly, and one has a cosmic replay of the scandals of 1765.
Speaker of the House Nancy Pelosi of California, for example, was guaranteed a big chunk of the original $700 billion bailout for one of her constituents, Star-Kist. Other Congressmen rushed to guarantee bailout money for their own special political clients. It is likely that many in the Senate and House have or had stock and bond portfolios linked to the failed financial institutions they hurried to “rescue” from collapse.
Doubtless, Patrick Henry’s reported opposition to the loan office scheme gave the Governor’s Council pause for reflection. And, his Stamp Act Resolves gave Virginians and other colonists food for thought. I date the true beginning of the American Revolution to colonial resistance to the Stamp Act, which was repealed exactly a year later in 1766.
What we have today, instead, is an ignorant 500-pound federal gorilla attempting to “stimulate” the economy with the defibulator of unconstitutional, fiat power and an inflatable currency, that is, with force and fraud, with the news media and Congress conveniently forgetting that it was the gorilla that wrecked the economy in the first place.
Note also the various polls of Americans who are opposed to not only the bailout of the automakers, but the overall virtual nationalization of banks, financial institutions, and the automakers, as well, but that Congress and the present and future administrations are ignoring them, just as they have ignored the pitiful handful of Congressmen and journalists who also have opposed Congress’s “loan office” schemes.
Long live Lady Liberty! And let us work to clean out our own “rookery of rogues.”
*Chapters 6-9, pp. 191-220.