1812, When Big Banks Could Go Bankrupt

2nd of January, 1812. London was the world’s financial capital, and “Boldero and Lushington” were one of the biggest and best known financial firms in 19th century London.

Photograph of two winged statues joining hands at an angle on top of the National Audit Office in London
National audit Office, London, photographed by the author February 2011

The firm started in 1738, under the name of “Thomas Miners.” In 1742, when Charles Boldero joined the firm, it became “Miners and Boldero.”  As the Boldero family’s influence in the firm increased, so did both their fortunes.

So it was a huge surprise when, on January 2nd 1812, Boldero, Lusington, Boldero and co. stopped making payments.

Boldero and co, as they were often called by the papers, was no insignificant local bank.  They owed one million pounds to investors in Irish annuities, and much more to bigger creditors. (And a million was worth a lot more back then.)  Boldero and co had strong connections to at least 13 smaller banks around the country, not including insurance firms, charitable trusts, and other organisations that depended on Boldero.  The firm had recently been one of the three top bidders to carry Britain’s national debt.

In the early 19th century, if you were buying stocks in Portsmouth’s water works, or investing in some other big public offering, “Boldero, Lushington, Boldero and co” was probably your first stop.  They were literally on top of the list.

So why did the firm stop paying? Were there no safeguards?

Well, in late 1811, when funds ran short, Boldero and co had apparently applied for assistance to the Bank of England (roughly the equivalent of the Fed) and were denied.

The Bankers

The Boldero name goes back to medieval England.  It seems to be a noble Saxon warrior name, which may have been latinized at the court of William the Conqueror.

The bank, while not that old, was one of the oldest in the city.  Charles Boldero took over in the early days from a partner, and then it seems a son in law of one of the Boldero’s, a Mr Lushington, later joined the firm and inherited some of Charles’ Boldero’s overseas real estate empire.

Edward Gale Boldero

The biggest personality in the Boldero and Lushington firm appeared to be Edward Gale Boldero. Edward Gale Boldero dined with royalty and war heroes, held prayer meetings with the Prince of Wales, was involved at high levels in high profile charities, and led a lavish and well known lifestyle – with mansions throughout England. Up until late December 1811, advertisements for “Lying in Charity for Delivering Poor Married Women at their Own Habitations” listed Edward Gale Boldero as a Vice President and the “Philanthropic Society” listed him as their treasurer.

In addition to the family bank and charities, Edward Gale Boldero had a stake in insurance firms, such as the Pelican Life Insurance Office.

However, when he was given a choice, this Boldero styled himself a goldsmith rather than a banker. And that’s the way he’s listed on many family trees.

Stephen Lushington Sr.

Stephen Lushington Senior was made full a partner in 1801, but had died years before the failure. He married into the Boldero family, and became an heir of the great Charles Boldero (his wife Hester’s father.) Stephen Lushington Senior was an MP, and later made Baronet.

Two of Stephen Lushington Senior’s sons are well known to historians. Stephen Lushington Jr. was a lawyer and later an MP. As he was younger, he didn’t inherit the title of Baronet.

The oldest son, Henry, named after his vicar grandfather, was the one who ended up following his father into banking.

The Lushingtons and Bolderos owned plantations in the Caribbean, but it appears that the Lushingtons had a greater influence in these. Many slaves on these plantations were given the Lushington surname.

The Money

Ok, so if there was no bail out, how did the bank’s creditors get paid?

The bank itself didn’t have enough assets. That’s why it stopped payment.

So, the Committee in charge of paying off those who the bank owed money to went after the bankers themselves.

The lease to a family Boldero mansion in central London was put up for auction. Here are some excerpts from one of the advertisements:

A most substantial and excellent family mansion, […]  a back drawing room 27 feet by 18 feet [ there were at least two of these, this was the smaller one …] in central London.[…]
with numerous good bedchambers[…]
3 arched vaults, servants hall, butler’s room, housekeeper’s room, footman’s room […]
temporary wine cellar, convenient detached light kitchen, scullery, pantry, back area, wash house, and large beer cellar; a lofty laundry, stabling for five horses, double coach house with coachman’s room and loft over […]

Plantations as far away as the Caribbean were also confiscated and used to pay off creditors.

Also, the remainder of the lease on Edward Boldero’s personal London digs was advertised.

The Valuable Lease of the substantial Brick Dwelling-House and Premises, the residence of Edward Gale Boldero, Esq; most desirably and eligibly situate No. 10, Saville-row, Burlington Gardens; comprising four excellent attics, three spacious best bed chambers, with appropriate dressing room and closets, a suit[e] of lofty elegant drawing rooms connected by folding doors, windows down to the floor, and balconies in front, an excellent dining parlour, neat library, Gentleman’s dressing room, spacious paved entrance hall, two staircases, three well placed water closets, very convenient and well arranged domestic offices, laundry, and spacious paved yard. Term expired 27 1/2 years, at Midsummer next, at per annum only 160l.

But it didn’t end there. Many other properties were auctioned off.  Edward Gale Boldero lost his furniture, including his painting, books, chairs and his “fine tuned piano forte with the additional keys.”

Limited liability, as we know it today, didn’t seem to be an option for the Bolderos or Lushingtons. “The bankrupts” were made to pay back every penny they owed.

Even their family member’s properties weren’t safe.  Edward Gale Boldero had put some property in the name of his daughter, Sophia.  In order to try to get that property, his creditors claimed that ‘the bankrupt’ had known of his impending financial problems before the transaction took place. To keep her own property, Miss Boldero had to prove that she wasn’t sharing her means with ‘the bankrupt.’

And the employees and smaller banks?

Banks in Britain at the time were self regulating. This didn’t mean they could do what they liked, but that they took responsibility for their own industry.

They feared a possible ‘run’ on the small country banks, of the kind that would be depicted in the film “It’s a Wonderful Life” a century later. If all the creditors of connected banks tried to take out their cash at once, other banks could fail.

Smaller banks did not have enough cash in hand to pay off their creditors in the event of such a ‘run.’ The money was usually invested elsewhere. (In fact, Boldero and Lushington’s problem seemed to start with cash flow problems related to a Northern Bank.)

In order to prevent a run on the smaller banks, the other large London Banks decided to organise their resources to ensure that lenders did not rush in and take all their money out at once.

Not all the banks were saved. Liverpool, Yorkshire and Lincolnshire were hit with similar failures.

Boldero’s creditors had pity on Boldero’s former employees. The now unemployed clerks were given the equivalent of their paycheck until they could find new work.

“The Assignees of Boldero and Co. have come to the generous determination of paying the clerks’ salaries up to Lady-Day, in consideration of their being so suddenly thrown out of employ; and we are further given to understand, the affairs of that house will turn out much better than was expected.”

They were under no obligation to do such a thing, it just seemed to be the right thing to do.

What happened to the bankers?

Edward Gale Boldero seems to have disappeared into history. Many family trees don’t even give a date of death.  However, the Boldero family tree shows a healthy group of English descendants who had great successes in many fields (but not a lot of bankers.)

Henry Lushington Sr, second Baronet.

Henry Lushington never grew into the notable abolitionist campaigner that his younger brother was. In fact, some years later his son, Henry Lushington Jr., seems to have been involved in a lawsuit related to getting back the Lushington plantations in Grenada and elsewhere, complete with hundreds of slaves.

The bankrupt banker, Henry Lushington Sr, was able to get another big job in 1817: he was made British consul to Naples, otherwise known as the Kingdom of two Sicilies.

There he hosted a few aspiring writers and grabbed a small place in literary history.

Effect on the economy

The strangest thing about this bank’s failure is that it seems to have had no real effect on the British economy as a whole. Unlike more recent bank failures, Boldero and Lushington was quickly forgotten.

Of much greater financial concern to ordinary Brits were the Orders in Council, which hurt trade with America, and the Luddite Riots in Northern England (which were in response to rapid technological changes that left many skilled workers unemployed.)

The failure of Boldero, Lushington and co. did cause some “consternation throughout the city”, but the fair distribution of the failed bankers’ assets helped prevent a financial crisis.

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