Heft „London 1868“. X. The Money Market Review 1867, Januar–Juni

Nach der Handschrift, MEGAdigital (MEGA² IV/19).¹ Traducción al español

The Money Market Review. Jahrgang 1867.

5 January, 1867. N. 344.

Barned’s Bank etc. Public Official Audits. (Overends und Times)

Professional Accountants make things pleasant to the people by whom they are employed. Overends’ case „typical“. With official accountants, it would have found its way into the Bankruptcy Court. The liquidators, acting in concert with the partners and the solicitors of the old firm, and the new one, have hitherto contrived to baffle all the endeavours of the shareholders or others to obtain an insight into the real state of affairs past or present. A few weeks ago the partners of the old firm denounced in the leading type (by Justitia) of the Times, if not in the leading columns of the Times as criminals of the deepest dye, and the new directors as swindlers, who ought to be forthwith arraigned at the Old Bailey. But, a few days after, another writer in the leading columns of the Times, upon precisely the same state of facts and information, laboured to exculpate both the partners of the old firm and the directors of the new Co. from all moral imputation, and even from all legal responsibility. Still more recently – Times of 27. December 1866 – the City Editor of that Journal without any additional facts or information, not only exculpates all these parties, but this to show that the old firm was not insolvent at all at the time when the transfer took place. Es existiren immer noch no official figures as to the liability of the old firm. Times City editor says: Liabilities taken over were £4,199,000 and assets handed over £4,887,000.

Those assets, says City Editor:

Der City Editor of the Times seeks to make out, daß nach dieser Rechnung die firm was not insolvent at the time of transfer; that „there was no insolvency of any kind“.

Woher dann »the present (undisputed) insolvency«? Not consequent upon losses or bad business of the new Co., for it is boasted that they made a profit on their legitimate business during their 9 or 10 months’ existence, of some £200,000. Aber the whole of the capital (of the new Co.) is gone, and there are still 5 Mill. £ St. unliquidated. Towards the liquidation of these, already call made upon the shareholders of 1 Mill. £, and two other calls of 1 Million each, are expected. How this, with the solvency of the old firm and 200 000£ profit of the new one? …

As to the bills taken over, great number of them, which were taken as good, have been renewed from time to time, and were bad, and known to be bad, or at least doubtful at the time, and are still unpaid. The „goodwill“, as encumbered not only with the legitimate discount business, but with the bad business too, was a mere fiction. According to the examination of John Henry Gurney they were loosing year after year before the transfer. The „balance due to partners“, in the books of the old firm – a myth. This no mere question of bookkeeping. Of what was that £940,000 composed? Of undrawn profits, it is said. But, first, we were led to believe that this £940,000 were profits accumulated during the years following 1861, in which no profits were divided, but now we learn that no profits were made, and could, therefore, not accumulate. Again, it is said, these socalled profits are largely composed of nominal half-yearly additions of enormous rates of interest upon those millions of bad debts. If so, these profits as bad as the bad debts themselves.

The Cotton Circulars.

Decline in the prices of raw cotton in 1866 unusual, but not extraordinary.

Quotations 29 Dec. 1866. From Msrs Smith, Edwards, and Co’s Circular.

Stock of Raw Cotton in Ports of Great Britain, taken from Ellison and Heywood’s Circular.

Imports into Great Britain. (Ellison and Heywood)

British Imports and Exports of Raw Cotton. (Ellison et Heywood)

Decline of 1866 not so great as might have been expected. Gross and net import larger than in any of the 5 years. But cotton market still supported by rumours of very limited supply of the U. St.

Separation of Acceptances from Deposits in Bank Balance Sheets.

With exception of a few Banks, like London and Westminster, these items thrown together in the public Bank accounts. Acceptances represent the liability of a Bank to be called up to pay that sum; deposits money actually deposited by the Public. The latter show the confidence of the Public in the Bank; the acceptances the confidence of the Bank in the issuers or guarantees of the Bills they accept. During the recent crisis, when Bankrate at 10%, the rates „out of doors“ for the very best Bankers bills varied often from 1 to 3% below the Threadneedlestreet minimum. This variation entirely owing to the respective amounts which each billbroker held of the bills of each bank. The bank, of whose acceptances his portfolio was full, had to pay more or [was] declined at all.

The worst features of the recent troubles may be traced to the undue facilities which existed for issuing and placing acceptances.

The Conservative Land Society.

Macht seit 15 Jahren sehr gute Geschäfte. Hauptzweck den Arbeitern Wohnung zu verschaffen und sie zu proprietors dieser Wohnung zu machen. Hat gekauft bis 1866 (Ende) 67 estates in 26 different counties, besides assisting individual shareholders and depositors to leasehold and freehold houses and villas. While paying 4% (yearly) to depositors, and 5% (nebst additional 1% bonus for the first year) annually to shareholders, enable workmen to acquire property at a cost little more than the rent they would otherwise have to pay year by year.

Overends. (Friends of the Co.)

Thought the parties implicated did not themselves dare to do anything that might have betrayed a fatal consciousness of delinquency, yet their friends and confidants carried their deposits out almost at the same moment (9 May) at which Oppenheim was carrying his investment (15,000£) in.

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12 January 1867. N. 345.

Proposed Expansive Clause in the Bank Act of 1844.

Economist, under J. Wilson , antagonist des Bank Act. Then, it „ratted“, became its supporter. Latterly, again backsliding. Globe, after supporting the Act for more than 20 years, has turned against it, demands its repeal. Economist, less courageous, demands expansive clause (so daß minister Chancellor of Exchequer by law ihn suspendiren können). Wants, therefore, partial abrogation of the Act. J. Mills (Manchester) (at meeting of Social Science Congress und Fowler „The Crisis of 1866“ verlangen dasselbe. Beide Kerls affirm, that there would be nothing inconsistent with the Act in the existence of a permanent power to abrogate it! in a specific provision for the violation of its principle! Economist says „that power is not contrary to principle unless the suspensions of the Act are so“. A suspension of the law by Ministers is a violation of the law by sufferance, which the Economist himself elsewhere designated as a misdemeanour, although an excusable one. The Bankact has only one essential principle – the limitation of the bankissues to 14 (now 15) millions, except against gold. The „crisis clause“ would abrogate this „sound“ principle in the only case where it can come into play. Ausserdem: The power (known to exist on 11 May 1866, and not preventing the panic) would never be exercised except at the last moment, just to prevent the worst effects of a panic. Nach J. St. Mill die theory und practical arrangements des Bank Act adapted nur to the case where drain of gold originates in a rise of prices produced by an undue expansion of the currency or credit, but in no other case.

Evidence of John Henry Gurney and Mr. Robert Birkbeck before Vice-Chancellor Malins.

Dieser meek und pious swindler, J. H. Gurney, admitted vor Gericht, in his evidence the damning fact, viz: that during the whole period von 1861 to the time of transfer no profits whatever were made by the old firm, but, on the contrary, large losses. Practice, nach dieser evidence, of the firm für years, in making up their annual accounts, to add interests upon all debts owing to the firm, bad as well as good debts. After 1863 this practice discontinued. Balance sheet for 1864 exhibits dead loss of £348,000. This ratio of loss increased in 1865 down to the moment of transfer to the new Co. In 7 months von January to July 1865 (inclusive), balance of losses £295,000, being at the rate of £506,000 p. annum. In this period of 19 months, therefore, the firm was receiving and wasting or sinking irrecoverably the money of their depositors to £643,000. All this elicited during the examination of John Henry Gurney. And 500,000£ goodwill paid by the new firm for this business!

Cotton Market. Past and Present.

Import value of cotton landed last year at Liverpool estimated at more than 80 Mill. £, larger than in any previous year; quantity of cotton manufactured (1866) larger than in any previous year, auch its export. With an import value of more than 80 Mill. £, there were fluctuations in the market price, in the course of a few months, von 40 to 50%, und prices at close of 1866, though firm for the moment, 25 to 30% lower than at beginning of 1866. Hence, during that year, prodigious losses und gains of cotton sellers!

Mssrs. Leech, Harrison, and Forwood’s Review of cotton trade in 1866 shows that that year commenced with stock of raw cotton at Liverpool of 402,630 bales, which declined, on 16 March, to 340,250 bales, the minimum of the year, then rose, on 25 May, to 1,205,330 bls, the maximum of the year, and closed at 516,770 bales on 28 Dec. 1866. The course of market values thus described in outline:

Quantity of Cotton imported in U. Kingd. in 1866: bales 3,749,041, or 1,556,952,589 lbs, against 2,755,321 bls. in 1865. The increase in 1866 thus about 32%. Of this imported quantity supplied, at a cost to this country, as under:

Home consumption, or quantity of raw cotton delivered from the port of Liverpool to consumers, i.e. manufacturers, in 1866 was 2,436,344 bales, or 46,853 bales per week, against 39,129 in 1865, and 30,822 bales in 1864.

Contrasted, quantities of cotton imported and used for home consumption during the last 7 years (but that of 1864 is omitted, for reasons not given,) stands thus:

One prominent feature in this year: the large export of raw cotton to the Continent. In 1866: 1,136,565 bales, or a weekly average of 21,850 bales, against 890,830 bls in 1865, or 17,100 bls per week on the average.

Exports of manufactured cotton goods from the Un. Kingd. during first 11 months of last 3 years nach den Board of Trade Returns.

Liverpool stock of raw cotton at end of the last 7 years, except 1864. (Bales)

Most of our spinners have adopted their machinery to the use of Indian cotton, and not altered it, will not alter it, until the supply of American cotton is proved certain and abundant.

Increasing consumption of raw cotton on Continent. Owing to the low wages there current, continental manufactures enabled to compete successfully with ours, it is said, in many of the coarser classes of cotton goods. Introduce also English machinery on extensive scale into their manufactories, so that feared as competitors in all classes of cotton goods unless „a great change takes place in our labour market“.

The tendency in this country is, and will be, towards dearer labour. The Prices of food, house rent, and indeed of all the necessaries of life increase in this country year by year, and must continue to increase so long as the present rate of production of the precious metals goes on, and so long also as we possess such vast colonial dependencies which, together with the U. St., are bidding treble or double the value for labour which in this country we can afford to pay.

Thomson Hankey: (formerly Governor of B.o.E.) „The Principles of Banking, its Utility and Economy; with Remarks on the Working and Management of the Bank of England“. Lond. 1867 .

Nichts brauchbar hierin als die explanation and description der organisation der different offices der B.o.E. Im Uebrigen Peel man. He considers Act of ’44 as „perfectly successful“.

Bill and mortgage, sagt Money Market Review, both promises to pay at fixed dates, and both are transferable, though by different modes of transfer. In the one case the debt always attaches to the property or commodity mortgaged, and need not necessarily to be paid at the time fixed; whilst, in case of bill of exchange, the debt is transferred from person to person, though each still remains liable to pay it, at the fixed date.

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19 January, 1867. N. 346.

The Overends. Evidence of J. H. Gurney as to the Sale and Transfer of the Norwich Bank.

At time of transfer old firm handed to the new list of assets which were indeed bad debts, no less than £4,199,000. The management and liquidation of these debts was made the subject of a separate and special arrangement which was embodied in the private deed of arrangement so carefully concealed from the shareholders and the public. The losses upon those debts were said to be amply provided for by the so called guarantee of the partners and their private estates etc . (Sieh Seite 245 dieses Hefts) The Private estates were given at £2,320,000. But, so far as we can learn, there was, in fact, no conveyance or assignment of these private estates, nor any mortgage, trust, or charge upon them, which rendered them subject or liable to make good these losses. The partners, it is true, in the deed of arrangement, covenant to guarantee 20s. in the pound upon these assets, and they seem to have shown, on paper, that, besides the other items enumerated, they had private estates which they estimated or valued at £2,320,000, and it does not at present appear that they were ever called upon to do more. The properties appear to have been left in the hands of the owners to dispose of as they might think fit; and, as to one part at least, they have done it.

The sum of £2,320,000 is made up of several items, two of which relate to the Norwich Bank (with its 25 branches). The Norwich Bank estate figures for nearly half the aggregate amount of the private estates ⦗Goodwill: £300,000, Undrawn balances due to the respective partners £,767,000. Zusammen £1,067,000.⦘ Now the Norwich Bank and all its belongings had, by virtue of these transactions, become the equitable property of the new Co. until all the obligations of the old firm had been liquidated and discharged. But we now learn from the lips of John Henry Gurney that this property and interest in the Norwich Bank which had been thus pledged as a guarantee to the new Co. was on 1 March, 1866, actually sold and disposed of by the partners in the old firm to Henry Ford Barclay , one of the directors of the new Co., and to Samuel Gurney Buxton , who was one of the promoters of the new co., and signed the articles of association. In February 1866, it had become apparent, Mr. Gurney admitted, that there would be little or no surplus (!), as the losses would be more disastrous than they had led the new Co. to expect. And at that moment the partners in the old firm and their friends on the new direction were only intent to secure something for themselves. In the transfer of the Norwich Bank, Barclay and Buxton were only to pay the £300,000 for the goodwill on 1st March 1870; ditto the whole or a larger proportion of the £760,000 to be postponed until the same period; and the payment of either of them, even at that time, is to be contingent upon the business and the profits and losses of the concern in the meantime. These larger amounts are to be retained by Barclay and Buxton, as a „material guarantee“ against possible losses from any deficiency of assets of these Norwich Banks until March 1, 1870. And the unrealised portion of the other „private estates“ are, we believe, in like manner, pledged to the same parties, and for the same period, as a further guarantee on the part of the vendors, in favour of the purchasers of this Norwich Bank business. The partners in the old firm, after pledging this private estate to the depositors and creditors of the limited Co., had no right to sell and dispose it to a couple of their private friends and relatives. Nor had Barclay, one of the promoters and directors of the limited Co., and Buxton, one of its promoters, a right to purchase it for their own benefit. The liquidators, solicitors in „winding up“ etc hielten dieß willig geheim, denied all access to the books etc.

Joint Stock Discount Co. and its late managing Director, Wilkinson.

Wilkinson , the scapegoat of public virtue, for having fraudulently applied to his own use, property of the Co. (i.e. in diesem Fall cheques paid to stockbrokers in discharge of his own private debts) verurtheilt to 5 years penal servitude. Die Sache kam heraus beim winding up in chancery. James Freeling Wilkinson, formerly billbroker. 1863 a joint stock Co formed for taking over that business; he became its managing director mit minimum salary of £3000 a year. 80,000l. bills were abstracted from the billcase, and became utterly lost to the Co.

Kleman, a commission agent in the City, had many and large transactions with the Joint Stock Disc. Co. as well as other Cos in the city. Kleman has left the country without leaving any „address“, being heavily indebted to all of them.

According to Mr. Henry White, the director who had signed these fraudulent cheques, Wilkinson had power to grant loans, and to take securities which in ordinary transactions were not submitted to the directors. Any special matter might be referred to the directors at their weekly meeting, „but that reference would depend upon Mr. Wilkinson making it“. „Each director“, says White, „attended a week in rotation at the bank“, and Wilkinson says that „ordinarily the director who was on the weekly rota for signing cheques, when he went to the office, would go up-stairs and sign a lot of cheques, and then go away.“ These were all blank cheques which Wilkinson could fill up and sign, and deliver to whomsoever he pleased, and Wilkinson „believed that the cheques for the advances that appeared to Kleman’s debt in the loan ledger were signed in that manner.“ The advances to Kleman increased from 30 000£ to £108,000 between 1st Jan. and 1st Feb. 1866, without any security. Further advance to Kleman of £12,000 on 3d of Febr. 1866, without security. Ebenso subsequent advances to Kleman, during the month of February, when the Co. was struggling in extremis, which raised the total amount of Kleman’s debt to £184,838? Wilkinson had a private account with Kleman, but declined to show it or say anything about it. Were there any other such private accounts?

The Overends. (Swindlers) (Old firm in the new directorate)

In the board of 7, the 3 members of the private firm were sufficient to form a quorum, one of them, moreover, being chairman, and the 2 others being the managing directors.

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26 Jan. 1867. N. 347.

Foreign and Colonial Loans.

Nach Disraeli the financial crisis of 1866 attributable to a want of capital. Now what is the fact? Russia applied to the money market the other day for a loan of 6 Mill. £. St., and immediately capitalists were to be found ready to supply Russia with the amount several times told. Chili demanded 2 millions; 17 were offered in the course of a few days. A small colonial railway – the Melbourne and Hobson’s Bay united – wanted 50,000£, immediately subscribed. Several other Colonial loans immediately supplied. Italy, Portugal, and the Danubian principalities ask for money … If Disraeli had said last August that there was a dearth of security instead of capital, he would have been right. … Colonial Loans the best securities. 6%. They have never failed to meet their engagements. Foreign war for them impossible. The money borrowed by them for railways, harbours, and other productive investments.

Overends. Before Court of Chancery.

„It is admitted“, said Vice-Chancellor Malins , „that the old firm of Overend etc was insolvent to the extent of 3 Mill. £, with private property, as a guarantee, upon which there was no lien. No man in his senses, if he had known that, would have taken a single share.“ The prospectus was prepared and put forth by the partners in the old firm, who knew the whole truth, and by the friends whom they had selected and appointed as their colleagues in the direction of the new Co. The future shareholders had no voice in the appointment of these directors, auditors, solicitors, or other officials, nor any opportunity to ascertain the statements of the prospectus. Malins stated: „If the true nature of the suspense account of 4 Mill. £ had been stated, one deed would have been sufficient;“ but, as the true nature of that suspense account was to be concealed, two deeds became necessary. „The first deed“, said the Attorney General (Advokat von Oakes, one of the parties who sought to have their names removed from the register of shareholders, and list of contributories in the liquidation) „raised no suspicion that the old firm was insolvent, whilst the second deed, known only to the members of the old firm and the directors of the limited Co., proved that the concern … had not made any profit for years, and was actually in a state of collapse.“ As to the private estates, they were put down as follows:

Landed Estate £.556,000; Personal Property, including chapels!! £603,000. Reversionary Interests £92,000. Life interests under settlements: £97,000. Moneys in the Norwich Bank: £767,000. Share of goodwill of the Norwich Bank business: £300,000. Zusammen £2,425,000.

Consolidation of all Railways of Gr. Brit. under one management.

This suggested by Charles Baylis in a pamphlet, with the general objects of increased facilities for travelling, lower fares and tolls, increased profits, and consolidation of the various stocks and shares, with the view to negotiability.

In the management of our railway system, there is a vast interest involved, conferring upon the managers large emoluments, and in order to break up and consolidate the existing system, many snug berths must be swept away, and much opposition encountered from the incumbents. The real labour of all railway directorates is performed by efficient officers, which the directors give to their business an occasional hour or two.

Bill Brokering and Money Dealing.

Bill brokering seems to have had its origin with the house of Overend, Gurney, et Co , or their predecessors, Richardson, Overend, et Co. ( Samuel Gurney ✝ 1856). In later years the confidence in the Overend Gurney led to large accumulation of deposit money in their hands seeking employment from time to time. Money dealing or discounting on their own account, lending on securities or other modes of investment, being found to yield a larger profit than to be derived from simple brokerage business, their transactions gradually took the more lucrative shape, and bill brokering with them was continued only in name. It was their large money dealing business that brought to their doors the surplus funds of bankers and others in town and country, and laid the foundation of the £200,000 per annum they were able at one period to divide.

A broker … one who acts for another, a factor, agent, or intermediate party, who knows who wants to buy in the cheapest market, and who wants to sell in the dearest, any particular commodity, be it a bill or a bale; he concludes a bargain, and thus earns his commission or brokerage. In other words, he reconciles the conflicting interests of buyer and seller. Or he may, without direct communication with either party, as in the article of produce, offer what is to be disposed of to public competition. He is at the same time an irresponsible party, unless where, under exceptional circumstances, he guarantees payment for an extra commission. Bill brokering proper with its ⅛ or ¼ commission does not admit of such colossal futures being made … As it is conducted at present, the principal part of the profit or discount goes to the bank supplying the money, which probably has a large amount from customers on current account, at little or no interest. The broker – who, by the way, is not strictly speaking a broker at all, but an intermediate discounter – comes in for only what he can make, over and above the rate of discount he has to pay. He does not work for a brokerage or commission upon the amount discounted, or passing from hand to hand, with freedom from responsibility, but is understood to guarantee payment of all bills he may rediscount, either by endorsement or otherwise.

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February 2, 1867. N. 348.

Venial Offences and Convenient Scapegoats.

There is always something very curious to be observed in the (so zu sagen criminal Revelation) pages of commercial panic in the remarkable cleverness and facility with which some of the chief delinquents manage to escape, and the fatality with which some one or more of their comparatively innocent colleagues or instruments are made to „stand committed“. Directors misapply or otherwise squander the funds of the shareholders and destroy their property, and the unlucky manager or somebody else is put in the pillory, and the chief offenders are tarred and feathered by deputy. The scapegoat has carried away their sins, perhaps to bury them in the desert sands of a penal settlement, and „the law is satisfied“ and „justice is appeased“. Wilkinson is convicted of fraudulently misappropriating a cheque, but the director who signed the cheque, escapes unhurt … Peto auch scapegoat für die directors, solicitors, auditors, der Chatham etc railway Co. Bei der falschen Transaction der Co., bei dem issue der debentures (um zu prove that part of their sharecapital subscribed paid up). As none of that capital had been really subscribed, it was necessary that a sham subscription list should be made up, and sworn to before a magistrate, and this was done by an exchange of receipts between Peto et Betts and the Co, the Co. acknowledging the receipt of so much on account of so many shares, and Peto and Betts acknowledging the receipt of so much on account of their contracts. Thereupon two gentlemen, one from the office of Freshfield et Newman (solicitors), and the other from the office of Peto and Betts, appear before a magistrate, and depose to the bona fide subscription of a certain proportion of the capital. Gross Fraud upon the Legislature. But it is alleged that railway Cos. and their solicitors, however respectable, never regard this as an obligation to be strictly performed, and that for many years past almost every subscription list got up in compliance with it has been more or less a sham. Hence it seems to have been imagined that no great crime was committed by anyone in the transaction. But the committee of investigation bring this up as charge against the contractors, but not against the solicitors, one of whom must not only have had knowledge of it, but must have sanctioned and advised it. O Freshfield, Freshfield! Trotz dem verlogenen Brief (in Times oder so), statement of 3 or 4 persons shows daß Dein partner Newman advised and sanctioned the transaction.

Joint Stock Financing.

The „International Financial Society“, pioneer of the modern finance associations, first imitator of the Paris model, paid first 25% dividends, gradually less, is compelled at length to admit that there is nothing wherewith to pay any dividend. The accounts for 1866 are duly audited. All the securities valued at the lowest market price. There was a profit last Midsummer „brought forward“ which has been „absorbed“, and a loss of £23,934 incurred, which has been written off against the Reserve Fund reducing it to £4,846. At this time last year (1866) it was 10 × the amount, and at one time was more than that. Aber the severe financial pressure was met without a call upon the shareholders. Its capital seems intact. (of ¾ of mill. £) It seems chiefly the possibility of calls that renders the ¾ Mill. £ paid by the shareholders worth in the market only 10s. per £. The greater portion of the securities on which advances have been made by the London Financial Association represent railway property, u.a. on more than 20 completed British railways.

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9 February, 1867. N. 349.

The National Freehold Land Society.

Building Societies have become a great institution. The National Freehold Land Society is 17 years old, originated from a desire to extend the electoral franchise. In 1856, in order to meet legal requirements, the property committee of the society was converted into the British Land Co. A separate capital was raised and a separate organisation established. From that period – Sept. 13, 1856 – the National Freehold Land Society’s sole business has been to receive deposits and to make advances on real security, and the British Land Co. has been its largest customer. Gute Geschäfte, high dividends, no losses incurred.

London, Chatham and Dover. (Peto)

Peto made speech in Bristol in October ’66; darin he read a letter from Mr. Morgan, the accountant of the Co, stating that he himself attended before the magistrate with a gentleman from office of Freshfield et Newman to make the necessary deposition. So it was on the oath of the official representative of Co., and of the representative of their legal advisers that the debentures were issued.

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16 February 1867. N. 350.

Overend, Gurney et Co. Further Disclosures. (Judgment of Malins.)

Sir Richard Malins , Vice chancellor, on 9 Feb. refused die motions of Oakes und Peck to have their names removed from the list of contributories. 7 directors in the Co und one gentleman who signed the articles of association for 600 shares, but did not become a director. Bei der formation der new Co., Barclay, Gibb , Gordon and Rennie consented to become directors; the fullest disclosure was made to them of the actual state of the concern. They were told that the firm insolvent to 2–3 Mill. £. St. J. H. Gurney told them that from 1860 the total result of all the operations of the firm was a loss. There was a positive deficiency of at least £3,117,000. Malins declared that the conduct der 4 new directors „was a fraud“. Nebst all dem andern, den Lügen des Prospectus etc, they told the shareholders „that they could inspect the memorandum and articles of association and the deed of covenant, whereas there were really two deeds, only one of which was offered for inspection.“ The 9 members of the old firm conspired of course mit den 4 new directors in the false representations made to the public.

Debts: £5,250,000 (nach den liquidators) Uncalled capital of Shares 3,500,000. £.

Conviction of Greenland, late manager of the Leeds Bkg. Co.

Disastrous failure dieser Co in autumn of 1864; in Folge von frauds und forgeries, carried on for long time by Greenland (auch Frommer), the manager, who made ciphers of the directors, and engrossed to himself the entire control of the business of the bank. Up to the time of its failure, the Bank paid 25% dividend p. an. The first call – nach stoppage – for 70l. p. share, the 2nd for 40. Widespread misery. In many cases sudden deaths from suicide or broken hearts. Einzige Cause: Greenland, and the knaves and forgers with whom he had associated himself. The forgers had escaped. A poor half witted clerk to one of them (Marsden) was prosecuted for forging an acceptance, and though it was proved that he did it by direction of his employer, and that both Greenland and the bankclerks knew that it was a forgery at the time when it was received, he [was] sentenced to 15 years’ penal servitude. At length, the Leeds Chamber of Commerce, failing to obtain evidence of his many other crimes, discovered that Greenland had been in the habit of making false returns to the Gvt. in regard to the note issues of the Bank. Indicted and tried at the Central Criminal Court, the Leeds chamber of commerce being the prosecutors. He now sentenced to 15 months imprisonment with hard labour. Das Vieh ist verging upon 70.

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23 February 1867. N. 351.

The Overends etc. (1915)

Mr. Harry George Gordon , despite of motion of some shareholders, and City articles in Daily News remains Chairman of the Oriental Bank Corporation. (Obgleich on 9 Feb. Malins ihn cum aliis guilty of fraud erklärt.) He originally moulded the prospectus.

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2 March 1867. N. 352.

The Joint Stock Co’s Directory for 1867. London. Charles Barker et Sons. 8, Birchin-lane.

The importance of directors as a body in the State has often been a subject of remark, and in some matters they absolutely rule the H.o.C. Their number in U. Kingd. 9,932.

Official Return of Cos under the Limited Liability Act: 1864: 992 Cos, with proposed capital 237,391,818£. 5 Cos. registered without nominal capital, total 997. 1865: 1,013 Cos. registered, proposed capital of £205,391,818; 20 Cos without nominal capital, total 1,033. 1866: 758 Cos registered, proposed capital £76,599,823; 10 Cos without nominal capital, – total 768.

Overends. Report of Liquidators and Report of Defence Committee.

Nach dem Report der Liquidators the liabilities, at the date of suspension, £18,000,000, now reduced to £3,640,655. Davon 1 mill. further ab für ½ Mill. already in hand, and other ½ produce of assets actually disposed of, but not yet paid for. Dann noch verschiedne respective Einnahmen berechnet für Payments on bills, proceeds of securities not yet realised etc.

Leeman’s Bill respecting Dealings in Bank Shares.

A clique or cliques of „speculators for the fall“ fastened upon certain Banks etc, in 1866, made to fail by the operation of these unscrupulous tricksters. Thus Agra and Masterman’s Bank. A telegram was sent out to India by the operator to a certain clique that it had failed. At that time not the smallest foundation for that rumour. Effect run upon the different branch banks in India (by depositors); London bank unable to meet them, chiefly owing to the great distance; result failure of the London bank. … dealings for time at Stock Exchange, i.e. speculators who have no shares allowed to make fictitious sales of shares they do not possess, for delivery at some remote date, upon the prospect of buying them at a lower price, in the interval. Before the said telegram was sent to India, a clique of speculators had sold the shares largely for future delivery, and this was one of the expedients resorted to in order to render those operations profitable. In order that these miscreants should pocket their illgotten gains, widows, orphans, and dependent persons have been ruined or brought to the verge of ruin. If, from any cause, as mit der Agra and Masterman’s Bank, there should be a sudden demand for all the money lodged by the depositors, while the money lent can only be recovered by instalments as they fall due, no bank could meet such pressure. In 1866 no less than 51,000 persons in England and Wales registered as the holders of shares in joint stock banks, including persons in every grade of life. Aber die number of depositors, 20, 30, perhaps 50 × greater. We do not want banknotes if we can keep banking accounts and make our payments by cheques.

Limited Liability. High Nominal Shares.

Small sum paid upon deposit. Few intended to be permanent investors. All thought that, if ever a period of adversity arrived, some one else would have to bear the brunt of it; besonders so long as premiums reigned. The experience of last crisis has shown that there is no market for shares of heavy nominal amount of which only a little is paid. The terror of coming calls has outweighed all intrinsic merit; £100 shares with £10 paid, were, and still are, unsaleable.

London, Chatham and Dover Railway Co. (faux frais)

Mit Bezug auf die Section called „The General Undertaking“: Of £6,710,000 capital issued, the enormous amount of £2,945,296 for interest, commission, and „loss on issue“; which means that, in paying away to contractors for work performed securities of the nominal value of £6,710,100, they were received by the contractors as only £3,763,804 in cash. There is one item of £1,500,000 of ordinary stock which is put down as issued at a loss of £1,113,663; that is, the 1 million and ½ of stock went for £386,337.

Plethora of money.

There is always a large amount of floating capital in the country which is never invested, so to speak, but only laid out from day to day, or, at all events, in the very shortest-dated securities. So long as trade is brisk, this money proves remunerative enough for the purpose for which it is intended … But although a good deal of our capital is not available for investment in permanent securities, there is still a very considerable amount kept out of employment by sheer distrust.

1915 on Overends. (David Barclay Chapman)

The fellow, redolent as he is of the history of 1853–58, macht ein enthusiastic revival of himself. Aber in fact, he secured upwards of £27,000 on 3. Aug. 1865 (out of the House). The stigma on the „revered“ brows, that they had surreptitiously rescued all their connections and friends from bitter loss, and involved others in bitter loss, for the comfort of all their connections and friends.

London, Chatham et Dover (Zusammensetzung des Investigation Committee) (Solicitors) (Scapegoats)

Dieß Committee speaks only of contractors, nicht of the directors, and still less of the solicitors. Now, auf dem first meeting in St. James Hall, „a cut and dried“ committee proposed by Cornelius Surgey, and enforced. (He intimated that he had many proxies.) This Surgey himself is or was the broker to Messrs. Freshfield and Newman; another member of the committee is a near relative of Surgey’s own partner; another most active member was for years a partner of Newman’s brother-in-law, Newman being the principal manager of the business of Freshfield and Newman. Ferner: the new board is composed of the members of this committee, with the addition of Lord Harris as a figure-head. The board remains practically Surgey’s committee. Then this Surgey, who professed in his long speeches at St. Martin’s Hall to know nothing of the Co. and its past management, turns now out to be the very man upon whose advice the board raised loans on the new stock created in 1864 rather than sell it to the proprietors and the public, when it could have been disposed at [a] far better price than it would have fetched since, viz. about £40 instead of which it was eventually sold for £27. 10s., after the Co. had paid enormous amounts for interest and commissions on temporary loans. … Within the last few years an amount closely approximating to ¼ Mill. St. has been paid to the solicitors of the Co. for their own charges, not including amounts paid to other parities. If this amount was not paid for the purpose of keeping the Co. right in legal matters, what was it paid for?

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9 March, 1867. N. 353.

Appointment of Parliamentary Committee on Limited Liability Acts and their Operation. (Gerichtssporteln)

Dieß auf Watkin’s Vorschlag (motion). Er gab some statistics: There are now 2200 Joint Stock Cos. in this country, with capital of not less than 1000 millions £, 750,000 shareholders, 12,500 directors. Since the passing of the Limited Liability Act the Cos. formed under it nominal capital of 150 mill. £. St., paid up capital of 30 mill.; large proportion of this capital, nearly ⅓ , appertains to Cos. now in liquidation.

The periodic recurrence of speculative manias, and their tendency to promote transactions either positively fraudulent or verging upon fraud, have become familiar historic facts.

There are now 4 Courts of primary jurisdiction engaged in winding up joint-stock Cos., their decisions often in striking conflict not only with each other, but with the decisions of the Courts of Appeal. The expenses of these proceedings enormous, a scandal and disgrace to the law and its administration. „The fees of the Chief Clerks“, said Watkin, „are high, but they are nothing compared with those of the official liquidators“; and he instanced the case of a Bk. Co. which had failed, but at the end of 5 months had been reopened. The claim of the official liquidator in that case, for 5 months’ work, during which he had employed 12 clerks, whilst he himself had been employed in a host of other concerns as well as the Co. in question, amounted to the modest sum of £38,000. Formerly, official liquidators were paid by a percentage, but latterly, they demand remuneration by the day, and, as Watkin stated, „many of them have been suddenly struck with the great importance of proceeding with due deliberation“. Mr. Morrison urged inquiry into the proceeding in voluntary liquidations without the supervision of the Court, „for he had heard of cases of extortion against Cos. which he should like to see brought to the test of truth“. Alderman Salomons said: „As to the liquidators, they were a public nuisance. They caused great delay, and no information could be obtained from them.“

Leeman’s Bill. Vote of H.o.C. (5 March 1867) (Stock Exchange)

By law there shall be no more „time“ dealings in bank shares.

Durch den Stockexchange pass at least 500 millions of other people’s money annually. The Stock Exchange close body, like a club; about 1000 members, governed by a committee of 30, annually elected. The admission of members vested in the Committee etc. The body consists of brokers and jobbers. A stockjobber is simply a stock or share merchant. No capital would suffice for him to hold a stock to meet the wants of the public at large, and so rapid are the fluctuations in the prices of securities that no man of sense, if he had the means, would lay in such a stock. The sharemerchant must therefore be prepared to sell to as well as buy of all comers. This necessity, and the extraordinary pressure of business, have originated a system unknown in any other market. The jobber ascertains the momentary value of a security, and, as it is called, „makes a price“. F.i., a holder of Great Western Railway Stock instructs his broker to sell £5000. The broker goes into the market, and asks a jobber to „make him a price in £5000 Great Westerns“. The latter, knowing that the stock has been recently dealt in at 50, „makes“ 49¾ to 50¼ – that is, he undertakes to give the former price for that amount of stock, or to sell it at the latter. If the business is concluded on these terms, the jobber’s only object – unless he happens to have sold the stock previously – is to turn it over at a profit. Of course, if sales preponderate, he may be unable to part with his purchase except at a loss, or may have to find the necessary capital to pay for it at the settling day. Looking at an isolated transaction in this matter, the risk would seem to be very great, but it is in reality less than it appears. So frequent and so enormous are the transactions of the Stock exchange (for all the share operations of the kingdom centre in it) that in most instances a moderate profit is easily realised. Besides, it is not only in London that a jobber deals, and, if unable to close a bargain here, he frequently succeeds in doing so by telegraphing to his correspondents on the various country Exchanges.

The jobbers take different „lines“; some deal in Consols, some in Foreign Stocks, some in Bankshares, others in Indian railway securities, some in colonial bonds, some in the Northern, some in the Southern English lines, others in financial and miscellaneous undertakings. By habit and for convenience, a certain portion of the large room (forming the Stock Exchange) is occupied by the dealers in each different class of property, and a member knows at once that in one corner he will be able to deal in Consols and in another in mining shares. As a rule a jobber devotes himself, for the time, to one class of security, changing his market occasionally, as the business in one falls off or in another increases. Certain firms and individuals, however, possessed of unusually large capital, deal through their partners or authorised clerks (clerks whom they invest with special power to deal on their account) in nearly every class of security that is quoted; and there are a few jobbing millionaires who have correspondents all over the world, and transact business by telegraph in Paris, Vienna, and New York as well as London. The only possible mode of executing his client’s order expeditiously consists – for the broker – in the free market which the jobber creates. The dastardly plots (as against the Agra Bank) were formed outside, and entirely independent of the Stock Exchange, by bankrupt speculators in the City, by desperadoes who had nothing to lose, occasionally by haunters of West-end clubs, and in some cases they originated with directors themselves who, foreseeing the ruin from the information they possessed, sold freely, and even induced others to sell. The Stock Exchange only the unwitting instruments of their schemes.

Board of Trade Returns. (their incompleteness)

They omit much that is exported and imported. F.i. in 1866 we were large importers of 5-20 Bonds, and other American Securities; we lent money to all our colonies, and to most of the world, against which we imported securities; those securities do not figure in the Return. Ebenso, the exports of foreign and colonial merchandise not manufactured – a very large proportion of our exports – are not valued by the Board of Trade. So impossible to strike any accurate „Balance of Trade“.

Imports of Articles Enumerated. Month ended 30 November.

Deducting raw cotton and cereals – the 2 great items of disturbance – Imports of the 11 months of the 3 years valued as nearly as possible alike.

Exports of British and Irish Produce. Month ended 31 Dec.

The reports from many quarters state that trade is bad, labour cannot find employment, factories are closed or worked short time; but there is nothing in these figures to illustrate this. Exports of 1866 valued at 189 mill. gegen 166 in 1865, and 160½ in 1864. Apart from export of linen and cotton fabrics, the value of the exports during the last 3 years again singularly similar.

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March 16, 1867. N. 354.

South Eastern Railway Dividend

An increase in the capital during the last 5 years from 12½ to 18 mill., nearly the whole of which has been raised in some form of priority overriding the dividend, and at rates of interest exceeding the average rate of net earning upon the entire capital spent. The dividend has fallen nominally from 5% p.a. to 3; but the actual decline is more than this, and having regard to the altered method of accounts, questionable whether the dividend of 1867 is not almost a myth.

Commercial Morality. (Overends)

Meeting of English and American Bank on 5 March, London Tavern, Chairman William Scholefield, M.P. (perhaps 100 leading commercial men present). He (Scholefield) said took the chair, because their chairman Gordon (one of the Overend Swindlers) became suddenly ill. „Mr. Gordon was extremely anxious to be present to-day, to state what he had done in reference to his connexion with this and other Cos.“ Der grosse Gordon „has, with the frankness and sincerity of purpose which always marked (!) him, placed himself entirely in the hands of the directors, to do what they please with respect to his resignation“. Sie werden aber take no steps „especially as our confidence in Mr. Gordon’s integrity is untouched in the slightest degree. I should mention to you, as a matter of some importance, that Mr. Gordon has taken the same course with other Cos with which he is connected that he has taken with regard to this, and in every instance the determination which has been come to by the directors interested has been that it is no part of their duty to take any steps whatever with reference to his resignation or the dissolution of his connexion with the Cos. (Cheers)“. (Gordon had not given his resignation, but only declared his willingness to withdraw, if his co-directors etc should declare that he ought to do so.)

Ueber diese Farce bemerkt 1915 u.a:

Vice Chancellor’s Malins charge of „fraud“ against the Directors in general of Overend, Gurney et. Co. (Lim.) involves this same Gordon. In the face of such a judgment, the „unabated and unbounded confidence“ – a very strong generality certainly under the special circumstances – can only rank as an illustrative certificate of character. Scholefield sagte that Gordon, but for „sudden and severe illness“ „was extremely anxious to be present to-day to answer any questions“, aber Scholefield afterwards added, that „Gordon’s official advisers have most strongly forbidden any action as matters at present stand“. How is the anxiety to speak to be reconciled with the prohibition of speaking? If Gordon, barring „sudden and severe illness“, be really eager to answer questions, he will enjoy the chance at the annual April meeting of the Oriental Bank Corporation. … Scholefield says that Gordon „has had no opportunity of saying a word in his own defence“.

On the 11 June (1866), when the only formal assemblage of the limited Co. took place, I (1915) asked the new directors, Barclay, Gibb, Gordon , and Rennie to explain their doings with respect to the transfer. Trotz 4 × Wiederholung der Frage no answer. Gordon, not only silent, but changed his seat. 6 Months afterwards, 11 December (1866) Justitia’s Letter in Times. Gordon might have endeavoured to refute the writing, or prosecuted the writer. He adopted neither alternative. He penned to Times a most „lame and impotent“ promise to purge by oath. Gegen Ende des above said meeting, Robinson, a shareholder, would save Gordon by representing him not as a decoy but as a dupe. This Gordon, however, was a party to the 2 documents – the delusive prospectus and the secret deed. Nay, as to the former, he was more deeply concerned than any one else having drafted it in a form too bold even for the consciences of his accomplices in the business. According to the crossexamination of John Henry Gurney this Gordon did all this with his eyes open. His rough sketch had referred to „profits so long earned“. Now there had been only loss; and Gurney said as witness Gordon must have had in mind the period anterior to 1861.

The assets (des Overend Concern) have been reduced since 10. May last by 2¼ mill. How, when, and where has this sum disappeared?

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23 March. 1867. N. 355.

Commercial Morality. (Continued) (Overends)

1915 sagt u.a: As to Scholefield’s (member of Parliament for Birmingham) „unabated and unbounded confidence“ in Harry George Gordon, I might have reminded Scholefield how „unabated and unbounded confidence“ in a colossal delinquent had, not many years ago, dragged the Birmingham Bank, with which the same Scholefield connected, to the very brink of ruin; and, to cite a more recent instance, the shareholders of the Bank of Australasia expelled a director for his „unabated and unbounded confidence“ in James Freeling Wilkinson, notwithstanding the „unabated and unbounded“ confidence of his colleagues, as distinguished from his constituents.

It was Gordon’s Position at the „Oriental Bk. Corporation“, as head of the foremost establishment of its class, which has procured to him a seat at so many boards, and more expressly at the board of Overend, Gurney et Co (lim.). Nay, in the delusive prospectus itself, he stands stereotyped for ever, as challenging, in that capacity alone, the „unabated and unbounded confidence“ of the public. To many, the Oriental Bank Corporation became so the finger-post that marked the road to ruin. Hence special duty dieser Corporation den Gordon herauszuschmeissen.

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30 March 1867. N. 356.

Commercial Morality. (Continued) (The Overends.)

The comments of some of the London newspapers on this Overend affair, and the no-comments of others are equally significant. The Times City luminary, and others, denounce generally (declamiren gegen) all new Cos., legitimate or illegitimate. That „sort of thing“ easy. Aber in this case of one of the most gigantic and unmitigated frauds ever recorded in our mercantile history, Times all soft sawder. No mitigation in judgment possible for the 3 new directors. Never was a clearer case of deliberate misrepresentation so indubitably brought home to any parties. Times and Economist are continually discussing this as a common and ordinary case of misadventure or miscalculation only for which nobody ought to be blamed or punished. They constantly and vehemently denounce the shareholders in not submitting with proper resignation to a further process of fleecing (and allowing Kerls like Oppenheim to win by a legal fraud), whilst depreciating any further investigation into the mysteries of the affair. They do their utmost to slur over its iniquity, and to whitewash and rehabilitate the delinquent directors. The Economist, last week (23 March) emphatically explains that it „does not mean to impute to the new directors or the old partners the slightest formed intention to deceive the public“. Unformed intention perhaps? „The sellers“, he says, „thought they were selling a good thing; the buyers thought they were buying one; and both joined in telling the world what they thought.“ Most outrageous perversion of truth! Neither the sellers (old firm) nor the buyers (new firm) thought any such thing; both of them knew the contrary, and, therefore, instead of „both joining to tell the world what they thought“, they both joined in executing a secret deed to conceal from the world what they knew, and that fact reveals to us what they really thought. Economist again repeats that it „does not mean to impute a hint at conscious fraud, in the minds of either the new directors who bought or the old partners who sold“. Unconscious fraud? And, therefore, the evident consciousness of the necessity for concealment? Poor perversions, shifty arguments, shallow sophistries. Speech of Scholefield (at the meeting of English and American Bank) asinine. If the new directors were men of ordinary business capacity, they were not deceived, also fraudulent. If they were deceived, how fit to be directors as utterly wanting in ordinary business capacity.

1915 sagt u.a.: Scholefield and 7 Confederate Boards endeavour to save their protégé. Gordon had no deposit in the concern nor any shares beyond his bare qualification as official recipient of £500 a year. He was a party to the secret deed of arrangement by which the separate estates were to fill the gap of insolvency by 31 Dec. 1868 at the latest. He was subsequently privy to the sale of the Norwich Bank, whereby its goodwill and assets, besides being payable only on certain conditions, were not to be realised before 1 March 1870, 14 months beyond the stipulated time for final adjustment as between private firm and limited Co. He knew that, in connexion with the sale which thus virtually annihilated nearly ½ of the separate estates, the remaining portion of the same was assigned as a guarantee to the purchasers of the Norwich Bank, just as it had been previously assigned to the limited Co. At or about the sale of the Norwich Bk. Gordon sanctioned an exceptional loan of £150,000 to the private firm beyond even the requirements of the secret deed of arrangement. In his affidavit (November 1866) Gordon constantly recognised Mr. William Rennie alone among the directors as his associate in the negotiations and investigations, which led to the transfer of the business from the private firm to the limited Co.

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April 6. 1867. N. 357.

Commercial Morality. (Overends) (Continued)

The total number of creditors of Overend etc about 1500, old and new, about 1000, or ⅔ creditors of the old Co., at the time of the transfer. Old Co. carried on their business until 31 July 1865, the new Co commenced business on the following day, 1st August 1865. But according to the recitals in the deeds, the New Co. formed, and „established and incorporated on and from 12. July, under a memorandum of association with articles thereunto annexed, pursuant to the Cos.’ Act of 1862“, and this was 19 days or nearly 3 weeks before the actual transfer and the commencement of business took place. On 12 July ditto all the terms of arrangements as to the transfer of the old firm to the new Co. definitely arranged. At that time the promoters, who had constituted themselves the directors of the new Co., had become fully aware of the actual state and condition of the old firm. The fraud was complete and entire, on 12 July 1865, before one single shareholder had joined the Co., and before one single application had been made for shares. Whilst the applications for shares, on the false and fraudulent prospectus, were flowing in, the promoters and directors were occupied in maturing the documents by which the fraudulent compact was to be carried out. Darin activ Messrs Young, Jones, Vallings, and Roberts, the solicitors of the old firms, who also acted as the solicitors of the new Co. The prospectus, dated 12 July (and issued on that day) stated that „the deed of covenant in relation to the transfer of the business could be inspected at the offices of the solicitors of the Co.“, but that deed was only executed on July 27. Hitherto believed that although the secret deed was not offered to inspection at all, the deed of covenant was so, whereas it now appears that neither of these deeds executed, also existing, before July 27. Diese deeds, however, bound nobody except the partners of the old firm and promoters and directors of the new Co. On the same 12 July, notices were sent by the partners in the old firm and the promoters and directors of the new Co., in their corporate capacity, apprising the creditors of the old firm of the proposed transfer, and asking their assent to it, and to that transfer they assented. By that assent they released the old firm, and accepted as their debtors the new Co. as then incorporated. In the meantime they fished for shares by false prospectus, but no shares were allotted to any of these applicants until 31 July 1865, and the letters of allotment were not issued to them until 3d August, and the scrip certificates not until about a month after that. The register of shareholders would not be completed for a further period, and the share certificates were not issued until February, 1866. To whom then were the creditors giving credit during all this interval? Not to the socalled shareholders, but to the members incorporated on 12 July.

1915 remarks that Gordon nun eliminated von 2 aus 7 Cos., nämlich Ebbw Vale Co. und Société Financière d’Egypte. Henry Edmund Gurney is 1 director und 2 trustees; sein Bruder, Samuel Gurney, in virtue of his seniority in the family, is one president, 2 trustees, 9 directors. Is this not pretty well for 2 individuals, who, as hopelessly insolvent debtors at once in Overend etc (Lim.) und Norwich Bank, and many more concerns besides, cannot creditably hold one farthing of the requisite qualification in any of the cases cited?

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13 April 1867. N. 358.

Commercial Morality. (Overends) (Continued)Progress of Railway Dilemma. (Directors)

9 March meeting of shareholders of Brighton Railway Co at London Tavern; decided to appoint a defence committee of large shareholders. Sir Charles Jackson pointed out that in July 1865, the Directors in their Report said that the Surrey and Sussexline was promoted by an independent Co, that it was a useful scheme, and that they had accordingly entered into a working arrangement with the promoters. Then, at the next meeting, it appeared that the whole capital for this railway was to be provided by the Brighton Co alone upon the plea that it was to make a third main line from London to Brighton. The same story appears to apply to the other lines in question, and Sir Ch. Jackson stated that the directors intended not only taking over these 3 undertakings, but all their liabilities at par. As to their ever paying a fair rate of interest for the money expended, out of question. „He feared that the directors were interested in those lines, that they were directors’ lines, and that they wanted the Co. to invest their money in them.“

London and Northwestern Railway Co is prosecuting a new line to Sheffield. Dazu meeting for to-day (13 April) berufen. Notices of the meeting (aber without its purpose) reached the shareholders on 2nd instant, and prior to that there had been a canvass for the proxies of the larger shareholders – in some cases by directors themselves. Most expensive undertaking which, as it has to compete with the line already in operation, without possibility of paying working expenses. Who is to gain by this new line at the cost of dividends? At all events, not the shareholders. Ebenso Midland Railway Co . Large extensions proposed. Chairman (at meeting of 15 Febr. Derby) did his best to commit the Co. to this expenditure of millions, and amalgamations; and positively declined to put the amendments. Based this decision of what he regarded as a „show of hands“; when poll demanded, he took no notice of it. Mr. Shepherd states in Daily News that within the last 2 years the Midland Co. have spent capital to nearly 4½ mill.; at the end of 1862, the capital applied to all purposes, 18½ mill., and since that time (i.e. in course of 4 Parliament sessions) the directors have raised, or obtained power to raise, 10 mill. more. The Acts obtained in last session alone involve outlay of £3,600,000; and upon the works thus authorised there is at this moment not one shilling expended. – In all cases excessive expenditure of capital beyond the growth of revenue. Railway directors, from one cause or other, are eager beyond all reason for an unlimited expenditure of capital, in utter disregard of the interests of shareholders. Manifest antagonism between the administrative body and the proprietary.

North British Railway.

The new board have issued circular to shareholders, proposing the creation of nearly 2 millions pre-preference stock, to override every existing priority.

Humber Iron Works Co. (Limit.) (E. Watkin, M.P.)

Meeting of shareholders 22 March, Guildhall Tavern: Chairman, C. H. Knight said that the Defence Association thought, good case against the directors. Mr. Jacomb reported für die Defence Association. Some 14 months ago circular of the directors, calling meeting of shareholders for resolution to wind up Co., and dispose of the work, for the purchase of which, it was stated, a proposition was made to the directors. Dieß meeting held 20 Jan. 1866. Mr. Jacomb showed at this meeting (of 20 Jan.) that it was illegal, because of non-compliance with the articles of association. Solicitor der Co. pooh-poohed him. E. Watkin (M.P., late chairman of the Co, who was not chairman of the meeting) produced a statement of accounts showing that, subject to a deduction of £60,615, the whole capital of the Co. was intact. Some shareholders forced out of the directors the admission that the reason for winding up was not the sale stated in the circular, but the financial difficulties of the Co. It was known, in fact, that the negotiations for the sale of the undertaking had fallen through before meeting was held. Directors knew that the concern on the verge of bankruptcy. Watkin was the principal spokesman of the directors, and produced this account. Watkin (M.P.) had transferred the last of his shares the day before the meeting, so that it now turned out he was not even a shareholder, and had no right to be present. The resolution for the winding up of the Co. passed. But 1 or 2 days afterwards the solicitor of the Co. found Jacomb’s view correct, so

New meeting called for 3d February. Chairman said that they were only £10,000 worse than in preceding May, and the before mentioned account showing deficiency of only £60,615 again produced. Jacomb said that if the account correct, no reason for winding up Co; if such reason, the account false. Wanted correct balance sheet to be prepared; moved resolution to that effect, but the proxies in the hands of directors were sufficient to neutralise any attempt at investigation. Jacomb objected also to Child being appointed as liquidator, because that man was the auditor of the accounts which would be impeached, and also the negotiator for Msrs Pile in reference for the sale of concern.

Meeting on 20 Febr. Jacomb took the same course, but the power of the directors was too great, and Child’s appointment as liquidator was confirmed.

Some time after petition presented to Court of Chancery for winding up the Co. On his application to the Court Child was removed.

In July 1866 call made by the new liquidator; a certain number of shareholders formed Defence Association, the first under Limited Liability Act of 1862. Jacomb instructed to attend before chief clerk on the making of the call by the liquidator. Produced Watkin’s account in meeting of 20 Jan. showing deficiency only of £60,615, und stated that if accurate, there could be no necessity for call; da angeblich Co’s. property intact. The official Liquidator, on examining the account, declared it fallacious, and wrote that word and his initials on the account. Jacomb paid then call.

31 Oct. 1866 official liquidator summoned meeting of shareholders, produced true statement. Statt 60,615, Deficit of £259,000; deducting £130,000, reduction in the value of assets, as estimated in both accounts, blieb balance of £69,000 unaccounted for by the directors. Ferner liquidator showed that since the resolution to windup the Co. the trading had been carried on at a profit. Hence the further loss of £69,000 must have taken place before 20 Jan. The Committee of Defence Association found out that 25,000£ had been paid to the vendors for the property in excess of the amount agreed to. The first communication made by the Directors report for extraordinary meeting on July 13, 1864. In that report they stated that shareholders would have early opportunity of examining the works of the Co. That was followed by invitation to the shareholders to go to Hull to witness the launch of the ship „Annie“. A great flourish of trumpets made about that vessel, but what had since transpired? Why the Annie mortgaged for £10,000 by the vendors at the time when sold to the Co. Directors knew it. Not a word of it came out before meeting of 30 May 1865. The Annie cost £12,000, and a lot of litigation, and was sold for £8,500. At the time the Co. was started the shareholders were led to believe that they purchased a property, but it turned out that they only bought an equity of redemption, and that there were mortgages to the extent of £88,000, including the 10,000 on the Annie. So the Co. had never a good title to the property, and when they got into difficulties they were unable to take it into the market and raise money on it to relieve them from their embarrassments. Many other instances of mismanagement and misrepresentation. The Co. was born in concealment and fraud. That system was carried on throughout the whole history of the undertaking. They proposed proceedings against the directors, in accordance with the opinion received from counsel. Dagegen spricht Morris (shareholder und solicitor.) Jacomb zeigt daß dieser Kerl had been connected with the Co. in 6 different capacities. Viele Statements in Prospectus flagrantly untrue, f.i. that 10,000 shares had been allotted, that a railroad ran into the yard, that contracts for 300 000£ had been entered into at remunerative prices, upon which dividend of 20% was confidently anticipated. No such contracts existed, except on paper. Uebrigens not 3 of the directors worth 500£. Some of them completely ruined by their connection mit this and other Cos.

Ein Correspondent bemerkt in der Money Market Review über dieß meeting:

No better evidence before the Committee of the H.o.C. of the manner in which the Limited Liability Act of ’62 used to decoy the public into those fictitious schemes which have resulted in such wide-spread ruin and misery, no better evidence than E. Watkin, M.P. This man who spoke so pathetically in his oration at Sheffield of the „fatherless and the widows“ – played prominent part in the formation and management of the Humber Iron Works (of which he was chairman) up to the time of its disastrous collapse.

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April 20, 1867. N. 359.

The Panic about „Calls“.

The fear about calls has become almost a panic. Question with shareholder now, not what profits may accrue upon his investment, but, as a measure of the extent of his losses, what calls he may have to pay upon his shares. Z.B. City Offices Co. (Limited ) possesses already an annual income of 26,000£ a year, which will increase. Concern well managed; and yet the £20 paid is worth only now £5 or 6. But these shares are of the nominal amount of £50 each.

The Directors of Overend, Gurney, and Co. (lim.)

Henry Edmund Gurney (Lombard Street); John Henry Gurney (St. James square and Norwich); Robert Birkbeck (Lombardstreet) Henry Ford Barclay (Woodford, Essex); Thomas A. Gibb (Msrs T. A. Gibb et Co) (Old Broad Street) Harry G. Gordon (Chairman of the Oriental Bank Corporation); William Rennie (Mssrs Cavan, Lubbock et Co., Leadenhallstreet.) (This list given in the Co’s Prospectus, published end of July, 1865)

The Bears of Bank Shares.

Leeman’s bill will probably break up entirely the trade of panic-mongering so far as this particular branch is concerned. (Daily News)

Commercial Morality (Continued) (Overend)

For 9 whole months the concocters of this fraudulent scheme had carried the business, in pursuance of the original and fraudulent compact, without any knowledge, sanction etc of the shareholders … By prematurely assenting to the transfer, the creditors of the old firm enabled the concocters of the firm to complete their fraud, of which those creditors now eager to reap the fruits.

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May 4, 1867. N. 361.

Railway Directors. in H.o.C.

179 railway Directors in H.o.C., about 27% of the whole House.

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11 May 1867. N. 362.

Liquidators.

Nach Act von 1862 „any person or persons“ may be appointed to the job. Practically the nomination dieser Kerls emanates from those who have rendered liquidation necessary.

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25 May. 1867. N. 364.

Excessive Liability of Limited Liability Cos Shares (Overstone) (Watkin).

Milner Gibson, as President of Board Trade, pressed and passed a Bill through H.o.C. to enable Cos, without diminishing their capitals, to divide those capitals into a greater number of shares. The Bill thrown out by Lord Overstone und Earl Grey (mit 14 dummy Lords als followers.) E. Watkin proposed the Limited Liability Co.’s Committee.

Statistics of the London Clearing House. (Inland Bills.)

The Committee of Bankers decided to issue weekly Returns, simultaneously mit B.o.E., on the transactions of the Clearing House. This due to Sir John Lubbock. 4th each month – the principal day of settlement for Inland Bills – will give an indication of the relative activity of our inland trade. The 4th of month may also be occasionally a „heavy day“ for foreign and colonial as well as for inland bills. Cheques are often multiplied even for one and the same transaction. F.e., the import and export trade of London is almost entirely done through agents or brokers, and as a consequence, each sale or purchase, when settled, necessitates 2 cheques; therefore the operation is represented by double the amount of money in cheques at the Clearing House. Again, the transactions in discounts and loans, such as are negotiated through brokers, always require at least 2 cheques, while a purchase on the Stock Exchange, through a broker, invariably involves the drawing of cheques by 3 separate parties, and sometimes 4, owing to the intervention of the jobber between the buying and the selling brokers. Thus a single transaction may be represented at the Clearing House by a quadruple amount in cheques. F.i. the buyer of stock pays a crossed cheque to the his broker, the broker a second cheque to the jobber, the latter a third cheque to the selling broker, who then hands a fourth cheque to the original seller.

The institution founded on very exclusive principles in 1775, by a committee of private bankers; joint stock bankers only admitted 1854; erst in 1864 the B.o.E. jointed the association.

Until 1854, when the joint-stock banks joined the Clearing House, the balances or differences were settled in banknotes; and in 1839, the only year for which statistics are given – the total cheques and bills passing through the house amounted to £954,401,600, to settle which banknotes to the extent of £66,275,600, or not quite 7% of the total amount wanted.

Since 1854 the differences settled by cheques on B.o.E., so that banknotes still further economised, and the bulk of the vast transactions of the metropolis settled by transfer of balances standing in the books of the B.o.E. to the credit of the clearing bankers. Average daily clearance in 1839: £3,066,700 und in May 1867: £9,803,790, progress of 220%.

In 1839 total Exports of English und Irish products: £52,701,509, in 1866: £188,827,785, increase of 258%; i.e. each 100£ of exports in 1839 has become £358 in 1866. Imports of 1839: £60,346,066, of 1866: £238,714,094, advance of 296%. Aggregate imports and exports of U. Kingd. 1839: £113,047,575 und 1866: £427,541,879; showing the growth of commerce, between the 2 periods, 278% or 58% more than increase in the Clearing House amounts.

Total balances held by London et Westminster, London Joint Stock, London et County, Union Bank of London at the close of 1839: £3,030,963 und on 31 Dec. 1866: £71,788,555 – increase of 2,268% since 1839.

The total amount of clearances does not embrace all the transactions in London. A few bankers do not clear; large settlements are made with notes and coin; and numerous payments are made between persons keeping accounts at the same bank, which are settled by a mere transfer of balances. On the other hand, a large amount of country cheques and drafts pass through the Clearing House.

The City Offices Co. (Lim.) (Directors)

Wieder call von 5£ über die 20£ paid. Only one dividend, 5s. per share last year; harassed with calls; quotable value of shares reduced to vanishing point, while our directors have been in hot haste to commit us to a wholesale and simultaneous expenditure of money, and been revelling in the pay and patronage of their position. They and their friends hold most of the stock of the Co. I wonder how much of it is at par, and should like to know the average at which it stands them in.

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June 8, 1867. N. 366.

London and Westminster Bank. (Liability and Security) (Communicated)

Issues new shares. In der That diese most successful Bank, has only become so by incurring £22,672,559 of liability, whilst the share capital and reserve fund were together less than 1½ millions. Is this not enormous overtrading such as has not been afforded hitherto by any Bank in the Kingdom? The system of creating new shares at a premium, so readily adopted by joint-stock banks, in order avowedly to raise a factitious reserve fund – for reserve funds are not such unless created out of profits – is becoming so general as to suggest an unpleasant comparison of the position of jointstockbanks with that of railway Cos., which latter have gone on creating new shares and borrowing money etc … So long as the deposits continue to increase in amount, and new shares can be issued at a premium, dividends may be declared of 10 to 100% p.a. All goes well as long as the joint-stock banks can increase their indebtedness to the public.

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15 June. 1867. N. 367.

The Years’ Fall of Railway Property.

During the last 12 months – shutting out from consideration all the previous depreciation – several descriptions have fallen 20%, and some of these are in the best credit. Great Northern Stock fell 7%, but the A stock of the Co. 23%; Caledonian 18%, London and Southwestern 19%. These Cos. have apparently only suffered from the prevailing disquietude. London, Brighton and South Coast fell 40%, North British 19, Cumbrian 17, Manchester, Sheffield and Lincolnshire 11½, Bristol and Exeter , Great Eastern and North London, 10%, South Eastern 9, Glasgow and Southwestern , London, Chatham, and Dover, and the Metropolitan 8, North Eastern 6, Lancashire and Yorkshire , and London and Northwestern 4 each.

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22 June 1867. N. 368.

The Gellivara Co. (limit.) (Directors.)

On 14 August 1866 the directors stated: (Report): £130,640 received in deposits and calls, £139,640 of debentures due June 1867; and £50,747 due on mortgage. Total: £320,807. The chairman further stated that £288,000 required to complete the works, less £50,000 already expended. What has been done with the difference between 50,000 expended, and the £320,807 obtained from shareholders, or borrowed at their cost? Has this 270,807 been paid for the mine? Who were the owners of this mine? Were any of our projectors or directors proprietors of the mine? If so, they were vendors for themselves and purchasers for us, a position for themselves morally, and for us financially perilous position. The mine useless, unless upwards of ¼ mill. l. St. laid out in forming a communication between it and the coast.

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29 June. 1867. N. 369.

City Offices. Co. (Lim.) (Directors)

Before seeing almost the shadow of a dividend, we had to pay, the present call included, 500,000£. Meanwhile the directors thriving. All this has been going on while the directors have had accorded to them and their friends fine opportunities to buy cheap our shares. The directors and their friends now hold the largest stock in the concern.

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1. Text nach MEGAdigital (Berlin-Brandenburgische Akademie der Wissenschaften), MEGA² IV/19, Lizenz CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/); der editorische Apparat der MEGA ist nicht wiedergegeben. ↩