Editing South Sea Company (section)

=== Bubble Act ===
{{main|Bubble Act}}
The South Sea Company was by no means the only company seeking to raise money from investors in 1720. A large number of other joint-stock companies, making extravagant (sometimes fraudulent) claims about foreign or other ventures or bizarre schemes, had been created. Others represented potentially sound, although novel, schemes, such as for founding insurance companies. These were nicknamed "Bubbles". Some of the companies had no legal basis, while others (such as the [[Hollow Sword Blade Company]], which acted as the South Sea Company's banker), used existing chartered companies for purposes entirely different from those designated at their creation. The York Buildings Company was set up to provide water to London, but was purchased by Case Billingsley who used it to purchase confiscated Jacobite estates in Scotland, which then formed the assets of an insurance company.<ref name="auto1">Carswell, pp. 116–117</ref>

On 22 February 1720, John Hungerford raised the question of bubble companies in the House of Commons, and persuaded the House to set up a committee, which he chaired, to investigate. He identified a number of companies which between them sought to raise £40 million in capital. The committee investigated the companies, establishing a principle that companies should not be operating outside the objects specified in their charters. A potential embarrassment for the South Sea was avoided when the question of the Hollow Sword Blade Company arose. Difficulty was avoided by flooding the committee with MPs who were supporters of the South Sea, and voting down by 75 to 25 the proposal to investigate the Hollow Sword. (At this time, committees of the House were either 'Open' or 'secret'. A secret committee was one with a fixed set of members who could vote on its proceedings. By contrast, any MP could join in with an 'open' committee and vote on its proceedings.) Stanhope, who was a member of the committee, received £50,000 of the 'resaleable' South Sea stock from Sawbridge, a director of the Hollow Sword, at about this time. Hungerford had previously been expelled from the Commons for accepting a bribe.<ref name="auto1" />

Amongst the bubble companies investigated were two supported by Lords Onslow and Chetwynd respectively, for insuring shipping. These were criticised heavily, and the questionable dealings of the Attorney-General and Solicitor-General in trying to obtain charters for the companies led to both being replaced. However, the schemes had the support of [[Robert Walpole|Walpole]] and [[James Craggs the Younger|Craggs]], so that the larger part of the Bubble Act (which finally resulted in June 1720 from the committee's investigations) was devoted to creating charters for the [[Royal Exchange Assurance Corporation]] or London Assurance Corporation. The companies were required to pay £300,000 for the privilege. The act required that a joint stock company could be incorporated only by act of Parliament or [[royal charter]]. The prohibition on unauthorised joint stock ventures was not repealed until 1825.<ref>Carswell, pp. 138–140</ref>

The passing of the Act gave a boost to the South Sea Company, its shares leaping to £890 in early June. This peak encouraged people to start to sell; to counterbalance this the company's directors ordered their agents to buy, which succeeded in propping the price up at around £750.