No. 286.
Mr. Adee
to Mr. Fish.
Madrid, November 8, 1876. (Received November 27.)
Sir: One of the chief topics of conversation in Madrid for some weeks past has been the establishment of a mysterious institution of credit by a woman named Doña Baldomera Larra, in one of the lower wards of the city, where sums are received on deposit and interest paid thereon in advance at the rate of 20 per cent, a month or more. She opened her doors to depositors about eighteen months ago. Her business soon became noised about. From small beginnings money flowed in till as much as 80,000 hard dollars have passed to her coffers in a single day. The effect on the lower and more frugal classes is disastrous; Workmen cease to labor and place their little savings of years with Dona Baldomera, living recklessly on the advance interest received. In Toledo and other provinces, land and cattle are sold by small proprietors, the proceeds finding their way to “la señora.” Other savings-banks have sprung up in Madrid and the provinces, paying as high as 35 per cent, a month, and distributing lottery-tickets and prizes to new subscribers as an inducement to attract deposits. Long queues of persons, men, women, and children, with sums large and small, besiege the doors [Page 486] of these places, sometimes requiring the intervention of the police to preserve order.
Doña Baldomera has played her hand in this matter hitherto with singular shrewdness. One day announcement was made that she had paid out $60,000 on a forged deposit-book. On another it was rumored that she had left Madrid. Each time there was a run for repayment. All demands were promptly met; in an hour the tide turned, Confidence was restored, and those who had carried off their hoard in the morning were only too glad to bring it back by nightfall, so as not to lose a single day’s precious interest.
Of course, the transparency of the fraud is apparent. The same thing has already occurred in Italy. The “bank” goes on well so long as the deposits increase in such ratio that the income of one month covers interest and capital of those preceding. But the limit of this rapidly increasing progression must soon be reached, and then, as in Italy, the “bank” must close its doors.
The matter is a public scandal in Madrid. The press calls upon the government to interfere. It replies that it cannot do so until an offense against the laws is perpetrated. Doña Baldomera has been required to take out a banking license at the maximum rate, and has done so under protest. A “delegate” has been named to inspect the establishment, and he reports that no banking business is transacted besides the regular payment of interest and reception of deposits, especially the latter. On occasion of his first visit there was a disturbance among those in waiting, but “la señora,” with admirable tact, at once closed her doors to all except those who wanted to draw out money, and none came. The next day all went on as before.
The utmost publicity is given to the affair, and would-be depositors are warned of the unsafe character of their investments. They are told that the last must pay for all. This does not deter but rather incites them. Each fondly gives himself the credit of possessing shrewdness enough to withdraw in time, and thus get rich at the expense of those who came later in the game. It is, in this aspect, more exciting than the lottery or the green cloth.
The end, however, can not be far off. The director of one of the minor 35 per cent, places has already closed his establishment and disappeared. The question in every mouth is, when will Dona Baldomera abscond, and can she be prevented?*
I report this, partly as matter of general interest, and partly because a scheme of fraud like this is too ingenious and too sure of success not to find its way across the Atlantic to the Spanish American States, or, it may be, to our own.
I have, &c.,
- Dona Baldomera disappeared from Madrid some weeks subsequent to the date of this dispatch. Her gains were said to have reached $700,000. This is probably largely overestimated.↩