Pricing Moses Montefiore

This article revisits an early episode from the life of Moses Montefiore (1784–1885). Montefiore is a prominent figure in Jewish history, well known to historians for having been an influential leader of Anglo-Jewish humanitarianism and famous beyond the historical profession for his promotion of Jewish settlements in the Levant and for the role he played in the long chain of events that resulted in the creation of the State of Israel. Before this career unfolded, however, he was a member of the London Stock Exchange and, at a time when he was an unknown broker only 23 years of age, he briefly captured the limelight by falling victim to a stock exchange swindle committed on August 20, 1806, by one of his clients, Joseph Elkin Daniels. The historical question with which I engage in this article concerns the extent to which the so-called "Daniels fraud" is important to understanding Montefiore's subsequent career and notably his later interventions in humanitarianism and imperialism. This article answers positively and, in so doing, it revisits—through the prism of a swindle and its financial and cultural consequences—existing stories of Montefiore, of the London Stock Exchange, of British humanitarianism, and of British imperialism writ large.

The Daniels fraud left its victim with painful memories, as is evident in Montefiore's diaries. In one entry, he described August 20 as the anniversary of the fateful day when "JED" had "robbed [him] of all that [he] possessed in the world, and left [him] deeply in debt."¹ The lament attracted the interest of biographers, most notably Abigail Green who, in her recent Moses Montefiore: Jewish Liberator, Imperial Hero, devotes a small part of a chapter that deals with Montefiore's stock exchange career to the fraud. In her account of the Daniels fraud, Green focuses on the manner in which Montefiore survived the calamity. Despite this "crushing blow," Montefiore managed to recover, eventually building a fortune in the stock exchange that he later used in support of his humanitarian interventions. In other words, the Daniels fraud interests Green for the way it illustrates the character of her hero in the face of adversity.

But there is another set of reasons that this episode commands our attention: the swindle exposed the fragilities of the London Stock Exchange at the time. The instrument at the root of the fraud was a forward contract, then a widely used financial product in the London Stock Exchange, but one that had also been outlawed by the Act of Barnard of 1734. Traders, having agreed to forward trades, could not turn to courts of justice should their counterparty default on a pledge. This created serious challenges for traders who happened to deal, as Montefiore had in the case of Daniels, with individuals prepared to take advantage of the law. In practice, this situation invited a variety of solutions to mitigate the hazard, ranging from reliance on networks of trust to the institutionalization of extra-judicial enforcement through the General Purposes Committee, the de facto government of the London Stock Exchange and its court of arbitration. Similar mechanisms of "self-regulation" in the London Stock Exchange and in other markets have been the subject of a number of economic studies and, more recently, they have come to the attention of a branch of analytical economic history described as the study of the micro-structures of financial markets.² By rights, the Daniels fraud belongs to this literature.

Thus, Montefiore and the Daniels fraud stand at the intersection of two stories which have, so far, been conceived as separate. On the one hand, there is the historian's story: that of the broker Montefiore, who lost a fortune by a stroke of fate but managed to recover from it and later got involved in charity and became an actor in British imperialism. On the other hand, there is the economist's story, this one so far not fully told—though as we show later, the contours that it might take can easily be extrapolated. This economist's history would focus on the machinery of the stock exchange and...