Page 49 of Murder at Somerset House (A Wrexford & Sloane Mystery #9)
“I no longer think the threat is simply a French misinformation campaign to cause consols prices to drop. Misinformation alone would have been relatively easy for us to monitor and combat.”
His expression turned even more serious. “I fear what we have is something infinitely more dangerous—a full-scale French-coordinated ‘bear raid’ on the market for English government debt.”
“B-Bear raid?” repeated Raven. Like Sheffield, he appeared utterly confused.
“It’s the name of a tactic used in the financial world,” explained Ricardo.
“The term bear derives from the old adage to sell the bear skin before one has caught the bear . That was shortened to bearskin jobber and then simply bear around a hundred years ago. It refers to someone who attacks a company by selling stock they do not own, betting that the price will drop. In other words, a raiding short seller. But Bears, when they start attacking a target, can absolutely destroy it. Others jump in, increasing the short selling in anticipation that the raid will continue and force the price to keep dropping, thus reaping a quick profit.”
His jaw clenched for an instant. “Companies rarely survive a full-scale, well-executed bear raid.”
“And in this case?” Sheffield inquired.
“It has the potential to be … absolutely catastrophic,” replied Ricardo. The note of icy calm in his voice belied the flicker of shadows beneath his lashes. “The value of British consols could be caught in a downward price spiral and fall into complete collapse due to the short selling.”
He closed his eyes for an instant. “A collapse of the consol would render a number of the weaker banking institutions insolvent, because a large amount of their assets is in the form of consols. Because these banks are indebted to the larger, healthier banks, their failure would threaten even these solid banking institutions, thus beginning a sort of domino effect of failing financial institutions.”
Sheffield’s breath leaked out in a shaky exhale.
“The banking firms in turn are all private partnerships, and their partners—the leading financial families in England—would be on the hook for the debts of these now ruined banks, not to mention that these individuals would themselves be devastated financially as huge holders of government debt.”
“Correct,” uttered Ricardo. “And given current events, this would all be occurring exactly when the British government needs to go to the market to raise to raise a loan of unprecedented size in order to be able to field an army against Napoleon. So you see, I can’t overstate the potential consequences here. ”
Ricardo paused and looked at Raven. “When you thought that you overheard De Groot repeatedly saying ‘goddamn’ that night at the warehouse, I’ll wager that what you really heard was him saying ‘Gaudin’ in his heavily accented English.
For as I’ve mentioned before, I suspect that all of this is being orchestrated by Gaudin, Napoleon’s brilliant finance minister. ”
“B-But aren’t the Dutch on our side?” protested Raven.
“Yes, in theory,” responded Ricardo. “But where there are business opportunities—a chance of huge profits—there are always some bankers who will seize the chance, no matter the consequences of their actions.”
“Shouldn’t we immediately inform the British government and have them put a stop to all of this?” pressed Raven.
“On the contrary—that’s the last thing we should do,” answered Ricardo.
“This bear attack has been elaborately orchestrated. Gaudin is no doubt using a network of agents through which to conduct his short selling, and many of them are likely perfectly reputable firms and individuals who may not even know the identity of the client on whose behalf they are doing the short selling.”
“Mind you, short selling is legal,” injected Sheffield.
“The presence of De Groot and his colleagues tells me that Gaudin has been very careful to have his agents comply carefully with the law and best practices,” continued Ricardo.
“The Dutch bankers are known to hold a large quantity of British consols, so my guess is he has gone to the trouble of borrowing the actual securities he is selling short from them.”
He shook his head. “It would take weeks or months to try to prove that Gaudin was behind all of this. Moreover, just the smallest hint that this is all happening would plunge the market into total chaos and collapse. We would only be doing Gaudin’s work for him by publicizing what’s going on.”
“S-So, he’s already won?” stammered Raven.
“Not by a long shot, lad.” A martial gleam lit in Ricardo’s eyes. “I’m simply saying that we’re going to have to fix this ourselves.”
He thought for a moment. “Why don’t you both head off—not together, mind you—and meet me back at Nicholas Lane in three hours. By then I will have some next steps to propose.”
The afternoon’s light was deepening as Wrexford returned to Berkeley Square, the play of elongated shadows mirroring his own unsettled mood. Fogg had been away from his office, and his assistant had primly refused to answer any questions about where he was.
“Wrexford!”
The earl turned to see his friend Norwood hurry across the pavement and join him on the central garden’s walkway leading to the other side of the Square.
“How are things going across the Channel?” he asked before the fellow could add a greeting.
His friend’s expression tightened. “Not well. Word is, Napoleon’s reassembled military might now number close to 200,000 men, many of them experienced veterans from previous campaigns.
And it’s just been given a name—L’Armée du Nord.
” A grimace. “There seems little doubt that it will soon be on the move to confront the overmatched forces of Wellington.”
Wrexford muttered an oath.
“Actually, I was just coming to see if you were at home. I, too, have a question.” Norwood glanced around. “A highly confidential one.”
“I think you know that you can trust my discretion.”
“Indeed, that’s why I’m here.” Norwood hesitated for an instant. “I know that you’re occasionally consulted on government matters. Would you perchance be able to tell me if Elias Fogg has reason to request copies of the latest high-level dispatches from our military allies?”
Wrexford took a moment before answering. “Not that I know of,” he said. “But the Foreign Office does have an interest in knowing if there are any overt tensions within our Coalition members.”
“True.” Norwood looked thoughtful. “It just seems a sudden change in policy.”
“As it happens, I have reason to meet with Fogg in the next day or two,” replied Wrexford. “Let me see what I can learn for you.”
“Much obliged.” Norwood touched the brim of his hat in salute. “It is likely just the way the wheels of bureaucracy turn these days. But I suppose we’re all feeling a little jumpy at the moment.”
“One can’t be too careful,” said the earl.
A nod, and then his friend turned and headed back toward Green Park.
Feeling even more unsettled—the news from Europe was disheartening—he slipped in through one of the side entrances and quietly made his way to his workroom. Perhaps a wee dram of Scottish malt would loosen the knot of dread that was forming in his chest.
Death and destruction . Damn the hubris of a single man whose unyielding ambition and lust for glory was about to plunge Europe back into war.
The splash of spirits seemed a terrible harbinger of all the blood that was soon to be shed.
“You’re back.” Charlotte looked into the room.
“Yes.” A heavy sigh. “But I give you fair warning that I’m not going to be good company at the moment.”
She came and took a seat on the arm of his chair. Threading her fingers through his hair, she brushed a wind-ruffled tangle back from his brow and bestowed a quick kiss.
Wrexford caught her hand and gave it a squeeze, savoring the warmth and the strength that her presence always brought to him.
Charlotte allowed a few more moments of silence before leaning back. “I take it your meeting with Fogg didn’t go well?”
“I was told he was out. But given what I have just learned, I shall try again tomorrow.” He told her about his encounter with Norwood.
“I fear that when the news about L’Armée du Nord reaches the Fleet Street scribblers, they will do their best to whip up fear and frenzy simply to sell their cursed newspapers.
It will cause panic and instability just when the government can least afford it. ”
His jaw clenched for an instant. “Official denials won’t help. The public will assume the government is lying to cover up the truth.”
“Yes …” Charlotte’s eyes look on a martial gleam. “But coming from A. J. Quill, who can remind the public that his pen has always been exceedingly good at digging out the truth, a satirical commentary downplaying the threat may go a long way to calming the country.”
Wrexford pulled her into a hug. “That’s a stroke of genius.”
“Let us hope so.” Charlotte wiggled free. “I had better get to work.”
Raven and Sheffield entered Ricardo’s place of business at the appointed hour and found their mentor seated at the table in the main room, his expression carefully schooled to give nothing away.
After inviting them to sit, he was quick to begin.
“Our next steps are clear, but not easily accomplished. The French will no doubt increase their short-selling efforts as war nears. So my efforts to stabilize consol prices have to increase accordingly. I will need to enlist other stockjobbers and investors in the effort.”
He pursed his lips in thought. “But, as I said this morning, we can’t let word of the situation get out, so I will need to think of how we might accomplish our objectives without also tipping off the market—or French—as to what we’re doing. And that will be challenging.”
Their mentor leaned back in his chair. “I also need to consider whether any syndicate can be formed to float the massive loan for the government, given the fraught political and military situation. For that I will need some mathematical assistance from Mrs. Sheffield and you, Master Sloane.”
“We are at your service, sir,” said Raven.
“Finally, I must stress that everything I’ve suggested about detecting a bear raid by the French is based on conjecture.
The visiting Dutch bankers … my sense of a slowly increasing ‘sell’ pressure on the consol …
our young friend hearing ‘goddamn’ or ‘Gaudin’ at the time of the shooting—it’s all merely a surmise of how they all tie together. ”
Ricardo allowed a long pause. “Which brings me to you, Master Sloane.”
Raven’s eyes widened in anticipation.
“Here’s my dilemma, lad,” said their mentor. “I need to know whether De Groot is in possession of a large number of British consols, and whether they are being used for transactional purposes. That information is likely locked in his temporary office on the top floor of the Stock Exchange.”
Ricardo looked a little uncomfortable. “On principle, I don’t endorse burglary.
But this is war.” He cleared his throat.
“Just so you know, there is a watchman’s station at the front of the building where a guard stands sentry.
However, the Dutchman’s office is at the back of the building, which overlooks an alleyway.
As you’ve no doubt noticed, there is decorative stonework running up the four corners of the building, and a narrow ornamental ledge beneath each row of windows—”
“If you’re asking whether I can get in and out without being caught, the answer is yes.” Raven grinned. “Trust me, it’s child’s play compared to a number of other places I’ve had to crack.”
Ricardo released a pent-up breath. “I was hoping you would say that.”
“What will I be looking for?” asked Raven.
“A ledger book, which will contain the names of various trusts and partnerships which you will not recognize. Don’t worry about that—all I need to know is whether the ledger indicates any transactions with these entities involving consol bonds.
You may also find a portfolio of the bonds themselves. I can show you some examples.”
“That sounds simple enough, sir.”
“I don’t want you to take anything—indeed, it’s imperative that De Groot doesn’t suspect the items have been touched. I simply need to confirm their existence. That will dispel any doubts that my analysis is correct and that the countermeasures I am proposing are the correct ones.”
“Understood,” said Raven.
Ricardo hesitated. “Now, the next obstacle is gaining Lord and Lady Wrexford’s consent—”
“Leave that to me,” said Sheffield.