SCANDAL SHEET William Crosby and Truth As a Defence

I believe that the term “governor” and “corruption” have been synonymous since at least 70 B.C. when Cicero made the legal case against Caius Verres, the Roman governor of Sicily. Amongst a host of other allegations, Cicero charged that Verres had famously stripped the interior of that contented island of everything of value, and then forced the city of Syracuse to build and crew a new ship each year to transport Verres’ plunder from the island back to Rome, where he kept the plunder and sold the ship - and kept the money. Before Cicero had even finished presenting his case, on the advice of his own lawyer, Verres fled Italy with a fair part of his wealth still intact. We know this because years later Mark Anthony had Verres executed, in order to steal what Verres had stolen from Sicily. The murder of corrupt Roman officials by other corrupt Roman officials had, by then, become part of the circle of Roman life. 

Fifteen hundred years later the image of the corrupt governor had changed very little, except in nationality. The new prime example was William Crosby, who was English governor of Minorca (the name means “the lesser island”). The strategic little spot of dry land was 200 miles off the coast from Barcelona, Spain and 300 miles west of Sardinia. The British Navy had seized the place from the Spanish in 1708, but the Treaty of Utrecht had not officially awarded it to England until 1713, leaving the Spanish population far from resigned to British rule. So in 1718 the British government could not afford to just look the other way when the first English Governor of the island, William Crosby, seized a shipload of snuff, valued at nine thousand pounds sterling, for non-payment of import duties.

The problem was that Crosby had just mugged a local power broker. His name was Bonaventura Capedvilla, a Portuguese merchant, and it had been his snuff that had been filched by Crosby. Capedvilla contended that he had paid the import duties on the snuff, and when the local authorities began to ask questions, Governor Crosby simply refused to allow them access to government documents, sort of like Donald Trump refusing to show his paperwork at his impeachment trial.  But Capedvilla was wealthy enough and powerful enough to fight back. Besides, at that moment Portugal was an English ally in their war against Spain, and the British government really could not afford to offend one of Portugal's richest citizens. So Señor Capedvilla appealed directly to the Privy Counsel in London, and eventually, in 1722, the Council demanded to look at the documents.

When Crosby eventually responded, (in 1724) it was immediately clear that the importation papers he offered up had been “tampered” with. In other words they had been forged by Crosby. The Privy Council eventually (in 1728) ordered Crosby to pay Capedvilla ten thousand pounds sterling. He did, but it did great damage to his personal bank account. The Council also decided that perhaps it would be better if Crosby were governor of some other island not quite so vital to the security of Great Britain. And that could end up hurting Crosby's bank account even more.

In 1730, as Governor Crosby was packing his bags in preparation to take up his new posting as Governor to the Leeward Islands (off the north coast of Venezuela), he received word that John Montgomerie, the royal Governor of New York and New Jersey in America, had just dropped dead of a stroke. Immediately William Crosby made his way to London, to pay a visit to Thomas Pelham-Holles, the duke of Newcastle.

Newcastle had been the secretary of state for the Southern Department, which included everything in America south of Canada. He was also a first cousin to Grace Montague, who was Cosby’s wife. And Newcastle was ever happy to see another relative doing well in government service. He secured Crosby's appointment to America.

And that was why, in 1731, William Crosby arrived among the startled residents of New York and New Jersey, armed with the royal seal of approval and carrying his own particular brand of insensitive and clumsy avariciousness. To quote one of Crosby’s staunchest critics, "The Government of New York... came seasonably in (Crosby’s) way to repair his broken fortune."

When a New Yorker later pointed out that one of Crosby’s actions was illegal, he answered directly. “How, gentlemen, do you think I mind that: alas! I have great interests in England, of the Dukes of New Castle, Montague and Lord Halifax." Now that is arrogance with its mask off. Again, much like Donald Trump after his Senate accuital.  And Crosby quickly showed his bare face to the citizens of New York.

When Montgomerie had died, 71 year old Rip Van Dam had been asked by the colonial council to step in to manage the colony until the new governor arrived. Shortly after his arrival in New York, William Crosby asked Van Dam to turn over half of the salary he had collected since Montgomerie’s death. Now, that was actually a fairly common practice in the British Empire. But Van Dam was a survivor of the Dutch power structure. The Dutch had founded the colony, and Van Dam did not take kindly to the rude manners and uneducated brashness of the new English royal governor. He told Crosby, that by his calculations, Crosby actually owed him four thousand pounds.

Crosby did not find that very funny. In August of 1732 he sued Van Dam for half of his salary. Crosby was of course, not going to allow a jury to tell him what was legal. So he instructed the three judges of the Colonies' Supreme Court to hear the case. Van Dam challenged the legality of that order, and his challenge was argued before…the three judges of the Supreme Court. As was perfectly predictable, their vote was two-to-one, in Crosby’s favor.

Crosby then ordered the dismissal of Chief Justice Lewis Morris, the only court member with the courage to vote against the governor. Justice Morris laid out his reasons for opposing Crosby’s actions in a letter he paid to have printed up on a "broadsheet", by the “second” printer in the colony, Mr. John Peter Zenger.

Broadsheets were single pages, printed in mass, and posted on public squares throughout the colony, and even read aloud by town criers, for the benefit of the illiterate. The success of Judge Morris' broadsheet in rallying the citizens against Cosby convinced certain wealthy citizens there might be a profit made in starting an opposition newspaper. They called their new weekly venture the “New York Gazette”. And again  they used the printing press owned by Mr. Zenger. Crosby paid little attention, as he was busy stealing land from the Indians, from the original Dutch settlers and from recent English immigrants. But eventually, after certain colonists complained about him to London, Crosby decided to take direct action.

In November of 1734 he ordered the printer Peter Zenger arrested. And that is how a lowly German immigrant - Peter Zenger - who could barely spell in English, became the center of the first great confrontation between Americans seeking “Liberty and Justice” and the caprice of a Royal prerogative. In the trial on 5 August, 1734, an American jury decided that the truth of an allegation was a valid defense against libel, and they found Zenger not guilty.

"Truth" was not an accepted legal argument against libel at the time, and it would be some years before what the New York Colonial court had decided would gain acceptance elsewhere. And long before that happened Governor William Crosby had answered to a higher court.

In early March of 1736 the greedy Crosby died of tuberculosis at the Governor’s house, in New York City. He was buried in St. George’s Chapel. But he did not stay there. In 1788 the post-revolutionary American governor of New York had the last word on the old royal governor, when he ordered Crosby's remains be moved to the graveyard at St. Paul’s Church, and dumped there, in an unmarked grave.

And good riddance, to him.

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HIS MASTER'S VOICE Joe Kennedy Gets Rich

I never believed old Joe Kennedy’s story about getting a stock tip from a shoe shine boy. Joe claimed that when a kid offered him insider info on a stock Joe knew that if the kid knew, then everybody knew. And that meant that the good times were over. So, Joe said, he sold most of his stocks just before the Black Friday crash of 29 October, 1929. And that was why, Joe said, when the market bottomed out he still had cash to pick up stocks for a song, That was how he made his fortune, he said. It's a good story. It makes him sound very smart. It was a load of Irish manure.

In October of  1929 Joe’s fortune was already estimated at $4 million. He had just sold most of his stock portfolio, not because of some tip from a shoe shine boy but as part of the game of stock manipulation that was standard practice on Wall Street during the 1920's. In fact Joe used to tell friends they all had to cash in on the game, because someday, soon, it would be made illegal. In fact Joe and most of the other insiders knew a crash was inevitable. All of them just figured they were smart enough to get out in time. But smart turned out to have nothing to do with it.

It was sheer blind luck that the market crashed just as Joe was heavily liquid (short on stocks and long on cash) . Still, like most successful moguls, in retrospect Joe’s luck became, in his self justification version of reality, a shrewd investment move.  And by 1935, feasting on the financial corpses of his unlucky competitors, the Kennedy fortune was said to be worth $180 million. Of course if his timing had been a little bit slower or faster Joe would have been wiped out like all those other shrewd Wall Street investors. The only time people truly get in trouble on Wall Street is when they start thinking their master's voice is their own genius and not the collective cacophony of fools.

The classic example of the games played in those days was the Radio Corporation of America stock pool, formed by the brokerage house M.J. Meehan and Company. Joe was part of this game. In the modern vernacular the process is called “a pump and dump”. In the slang of 1929 it was “painting the tape”, as in ticker tape which read out changing stock quotes before LED's light boards.  First the stock was quietly accumulated by the pool members, who also sold the stock “long”, meaning they made a behind the scenes bet that the price would go up. Then the reputation of the stock was made to look better than it actually was by well publicized sales between pool members at inflated prices, and by articles planted in newspapers and magazines promising inside info on the next hot stock - in this case, RCA.

This attracted buyers from outside the pool who were either fooled by the games or who suspected what was actually happening and gambled they could read the “smart money” and get out before the dump. Of course the pool members were already quietly selling the stock short, betting it would go down, which, of course, they were about to insure that it did. In the final act the pool members would suddenly dump all of their stock, making the insiders richer, and the outsiders poorer.

The RCA pool started pumping on Saturday 9 March, 1929, (the NYSE met for half day sessions on Saturdays at the time). Shares of RCA were selling at $93 each. Two weeks later, Saturday 30 March,  the stock was selling for $109.75 a share.  It was time to pull the dump. Almost overnight the stock fell to $80 a share. And for what was in essence two weeks work the pool members made $5 million ($60 million in today's value).

The only problem was that the $5 million the “smart money” had just squeezed out of the market had to come from someplace.  Lots of the “suckers” who had bought RCA on a standard 10% margin were suddenly caught short by the switch to the “dump” mode. They would now either have to pay the 90% they still owed for the stock at the pumped up price (which most could not afford to do) or come up with another 10% to maintain their margins. If they did that, they simply accumulated debt, which made them even more likely to go broke at the next pump and dump.  

The rush to raise cash to meet the margin calls did two things at once. First,  people sold other stocks to meet their short calls on RCA,. That drove down the price of lots of other stocks. The New York Daily News called it a “selling avalanche”. And two: those who either could not or chose not to sell other stocks to meet the “margin calls” on RCA, now looked for the cash to meet their raised margins. Their demand for cash drove the price of loans (the interest rates charged) higher and higher. It was an instant liquidity crises - sound familiar?

In a single day, Monday, 25 March, 1929, the market abruptly dropped 4% across the board. What stopped Monday, 25 March, 1929 from becoming Black Monday was that on Tuesday, 26 March, 1929 at about 1:30 in the afternoon, as the panic was still spreading across the floor of the stock exchange, Charles "Sunshine Charley" Mitchell, president of CitiBank and a member of the Federal Reserve Board, boldly walked onto the trading floor and placed a loud “buy” order for U.S. Steel at higher than the then depressed market price. He also announced that he had $25 million to stabilize the market ($300 million in today's value). Immediately the panic on Wall Street calmed, and conservative Democratic Senator Carter Glass called for Mitchell’s resignation because he had violated "purity" of the market. By saving it.

The famous “Sleeping Prophet” Edgar Cayce would write a letter in the first weeks of April 1929 famously predicting the October collapse of Wall Street. In fact the near collapse at the end of March was repeated again with another 4% drop in value on 22 May and again on 27 May and yet again on 9 August and yet a fifth 4% drop on 3 October, followed by a 6.3% plummet on 23 October. After every drop there was a recovery. And all of these drops preceded the infamous Black Monday collapse, when in a single day the market dropped 12% of its total value. You would have had to been deluded not to have seen the greater market collapse was just around the corner. But if you were looking for some genius to believe in, and the mystic attracts you, then you might choose to follow Edgar Cayce.  He's probably no more accurate than any other Wall Street master. 

Or, if you were of a mercenary mindset, you could choose to listen to the voice of Joe Kennedy and his fellows. Joe continued to believe that he was smart enough to avoid getting caught in the next market downturn. He wasn't, of course. But fortunately for Joe, Wall Street was filled with desperate, deluded people who for lots of reasons refused to see the approaching abyss any clearer than Joe did. Ever since the October 1929 collapse of Wall Street Edgar Cayce has been making converts, based on his mystical prediction that doesn’t seem so mystical when you know the full history. The same can be said of Joe Kennedy. And the list of the well connected and well informed experts who continued to predict in 1929 that all would be well on Wall Street was almost endless.  Like it is today.

On Friday, 18  October, the editor of the Wall Street Journal said in a speech that stock manipulations on Wall Street were “impossible”.  Yale Economics professor Irving Fisher observed that “Stock prices have reached what looks like a permanently high plateau”.  And every time one of these “experts” predicted that the dark skies were going to clear up, the market would bounce back from the brink of disaster, reaching its (then) all time peak index on 3  September, 1929 of 381.17. Then came the big crash.

After the 1929 crash the NYSE would not return to the 300 level until 1954.  In the immediate aftermath of the debacle  Senator Carter Glass helped fashion legislation (The Glass-Steagall Act) that divorced commercial banks from intimate ties with brokerage houses, the source of a lot of the cash used in speculation and one of the primary fuels in the collapse, and the reason it spread so far so fast. That was a major violation of the purity of the market, and it was designed by Carter Glass, the same Senator who had called for "Sunshine Charley's firing,  And it was Joe Kennedy who would soon help write new rules that banned “insider trading” and pump and dumps, such as the RCA pool he had profited from.

And "Sunshine Charley, the man who saved the market in March of 1929?  He died flat broke in 1955. His was just one more of the millions of lives ravaged and destroyed worldwide by the Great Depression; hunger, lost education opportunities, violence, even World War Two. It seems a very high price to pay to make Joe Kennedy a little richer.

The Glass-Steagall Act was largely repealed in 1999, because the mystics on Wall Street are still selling the idea that secret knowledge and mystical skill or now computer savy can trump luck on Wall Street.  Eight years later came proof, yet again, that the mystics, the experts and the "master of the Universe" are always ultimately wrong,  And yet there are always those who want to believe and are willing to pay for their faith, especially when they are using the public's money. 

And where ever he is at this moment, in heaven or hell, Old Joe Kennedy must be having a very good laugh about the “spike” in oil prices that the experts assured us was certainly not the product of speculation. They went on selling the load of manure , that the financial collapse of 2008 could never happen again, not if we just have faith in the purity of the market.

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THE END OF THE WORLD - AGAIN.

I wonder if you are aware that the the world ended on 5 April, 1761. If you haven't heard of this tragic event, well, your ancestors were either not English or were just not paying attention. In a world where most people still believed in the literal history of a real Adam and Eve, a certain William Bell, trooper in the Life Guards Horse Cavalry, went about London telling everyone and anyone who would listen that doomsday was nigh. And on the date predicted thousands, perhaps tens of thousands of people listened and believed him. And what was amazing was that Corporal Bell was right. The world did end on that Sunday. But  Corporal Bell was right for the wrong reasons. And the reason made all the difference. 

The eighth day of February  1761 dawned cold, as was to be expected in a world still in the grip of “The Little Ice Age”. Most winters the Thames froze over allowing people to ignore London Bridge and cross on the ice.  And the great city was chocking on her own coal smoke to keep warm. This Sunday The “Picadilly Butchers”, as the members of the Life Guards Household Cavalry were called, were gathering for their parade, set then, as now, on every Sunday, for 11:30 A.M.Then, from Greenwich below London on the south bank, to Richmond, on the upstream north shore, the entire Thames valley shuddered. In Hampstead and Highgate houses shook. Among the ship construction ways in Limehouse the chandler’s tools were vibrated off their frames.In the tiny village of Poplar across from the Isle of Dogs in the great bend of the Thames River, chimneys were shaken apart, their bricks crashing to the ground. In ‘The City’ itself pewter keepsakes slipped off mantles and chairs were upended. It was over in a few seconds. The dust settled. Nerves calmed. Normality returned.

Then on Sunday, March 8, 1761, between five and six on in the morning, the Thames valley shuddered again. This time the shaking was stronger and lasted longer, roiling from north to south and back again.

In St. James Park a section of an abandoned canal in the private gardens behind Buckingham House (above) collapsed. In the churches of London, words of reassurance offered after the first quake, now fell on deaf ears.Reason and logic were forgotten. All that people could think of was their fear. Panicked, the richest and poorest citizens of central London ran from their beds at the slightest suggestion of another quake, convinced their homes were about to collapse around their heads, as some already had.But the most well known collapse caused by the twin London earthquakes of 1761 was the collapse of sanity in the person of William Bell. He was one of the “Tinned Fruit”, aka a “Picadilly Butcher", a corporal in the Household Cavalry. And he became convinced that the shaking of 8 February (the second Sunday in the month) and 8 March (the second Sunday in that month), would be followed by a truly catastrophic shaker on the second Sunday in April - the twelfth.

Bell, in his mind,  saw the earth split open. The mighty Thames River boiled and roiled. The bridges cracked and fell. The fires of damnation burst forth from the bowels of the earth. Sinners and Saints were cowed before the angels of the Lord. Spirits of the dead rose up. And the earth was laid bare, swept clean of the sins and works of man. Corporal Bell's visions became so intense and detailed, that he began to share them with any and all who would listen. He related them with such passion that Bell's visions took hold of the entire city like a fever.

Charles Mackay’s excellent book, “Memoirs of Extraordinary Popular Delusions and the Madness of Crowds” (Harmony Books – 1843) records that, “…all the villages within a circuit of twenty miles …(of London, were) crowded with panic-stricken fugitives, who paid exorbitant prices for accommodation to the housekeepers of these secure retreats. Such as could not afford to pay for lodgings at any of those places, remained in London until two or three days before the time, and then encamped in the surrounding fields......and hundreds who had laughed at the prediction a week before, packed up their goods, when they saw others doing so, and hastened away. The river was thought to be a place of great security, and all the merchant-vessels in the port were filled with people, who passed the night between the 4th and 5th on board, expecting every instant to see St. Paul’s totter, and the towers of Westminster Abby rock in the wind and fall amid a cloud of dust.”One enterprising chemist even advertised pills which he claimed to be “good against earthquakes”, although exactly how the pills proposed to save the swallower, was never fully explained.Needless to say, the world did not actually end on Sunday 12 April, 1761, at least not in the way Corporal Bell had anticipated. As Mackay recorded, “The greater part of the fugitives returned on the following day, convinced that the prophet was a false one; but many judged it more prudent to allow a week to elapse before they trusted their dear limbs in London.”Corporal Bell became a man scorned, a repository for all those angry with themselves for having believed his prediction. And although he tried his hand at other doomsday prognostications, Corporal Bell was confined for some months in an insane asylum, probably, in part, for his own protection. Edward W. Brayley recorded in his book “Londoninania” (Hurst, Chance and Company – 1829) that Bell “…afterward kept a hosier’s shop in Holborn Hill during many years, and …retired to the neighborhood of Edgeware where he died a few years ago”.Some things did change because of the twin quakes. His royal highness King George II picked up the damaged Buckingham House at a bargain price.He kept the gardens but filled in the collapsed canal behind the structure and turned it into the Parade for the Household Cavalry. He renamed the residence “The Queen’s House”, but over the years, as additional wings were added, the old name returned and it became known as “Buckingham Palace”.The channel between the Isle of Dogs and the hamlet of Poplar was bridged at two points and eventually the inside of the bend in the Themes became the East End of London (above). But something more fundamental had changed with the Earthquakes of 1761, and while the superstitions of William Bell were largely forgotten, another man was inspired, in part by the quakes  to a vision which indeed gave birth to a new world.His name was James Hutton. He was an ugly little man with a great big brain who was trained as a lawyer, a chemist, a doctor of Medicine, a businessman, and late in his life, a farmer. But the earthquakes of 1761 had awakened his curiosity as to what had caused them.He had already come to the observation that the forces of erosion he saw on his farm, (streams and rivers, wind and rain) must be have been working in the time of Adam and Eve. But how long ago was that? Hutton did not know - nobody did -  but Hutton was curious and sure enough of his God given brain to believe that he could understand the process. He allowed the idea to percolate in his mind until 1788, when he went sightseeing with the mathematician John Playfair. And while walking at the cliff edge at Siccar Point in Scotland, Hutton saw a single formation of rock that utterly lifted the veil of superstition from his eyes.There, in front of Hutton (above), was a bed of schistus, (to the right) thrusting up vertically from below. And sitting directly on top of this was a bed of sandstone, (left side of picture) lying in opposition to the schist. The junction point between the two kinds of rocks came to be called an “Angular Unconformity.” They were different kinds of rock and they could not have been formed in the same place or the same time, or even close to each other in time or place. Something between them must be missing; that something was the unconformity.Sandstone is produced by compressing desert or beach sand under tons of more dessert sand or other rocks. Any water present will chemically alter the rock, so we know this particular sandstone had to be formed when England was at the same latitude as the Sierra Desert is today, and looked very similar.The schist was created by lava cooling deep under water, then reheating the rock almost to the melting point and letting it to cool, still under pressure but without the presence of liquid water. Each of these processes takes millions of years by themselves. But the schist rock must form in the presence of water, and the sandstone in the absence of water. So the missing layers at the angular junction of the two beds were  like the missing pages in a book, missing pages that must tell a story of mountains perhaps rising and wearing down to nothing, of seas and river valleys  filling in and closing. Those millions of years whose record had been destroyed were what was missing between the crystals of the schist and the grains of the sandstone.The Angular Unconformity that Hutton stood over that day demanded an untold millions of years, and hinted at why earthquakes happen in England -  not because God is seeking to destroy a sinful humanity, but because that is how God made the world, with earthquakes, one after another, millions of them over the  last four billion years. 

And how she is remaking it every day, out of the remains of the day before, a single grain of sand and a single crystal of schist at a time - the same way our minds were formed, and out of the same stuff. It is a world without end, because everything in it is reused, time and time again, Even us. Even time.

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