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

July 6. 1867. N. 370.

Barned’s Banking Co. (Lim.)

Infamous swindling. The private Bank of Israel Barned et Co, oldestablished, wellknown private bank, since 1809. 1865 Prospectus for formation of Limited Liability Co. with 2 Mill. £. Capital, 40,000 shares, 50£ p. share, for the purchase of this business and to organise it on a broader basis. 160,000£ purchase money, payable by instalments in 2 years, guarantee by the Barneds of the assets taken over, „a moderate payment for a lucrative business“. Dieß alles im Prospect. The assets taken over were utterly rotten, the guarantee utterly worthless. At that moment the firm Barned consisted of Mr. Charles Mozley and Mr. Lewin Barned Mozley. It had then been recently discovered that the Bank defrauded by more than 100,000£ by a relative of one of the partners. To repair these losses Lewin Barned Mozley brought a further capital of £20,000 into the Bank, and Charles Mozley £100,000. But this latter sum, as afterwards transpired, borrowed from the Bk. o. Engd. on the guarantee of 10 Liverpool merchants, who had taken a mortgage on Charles Mozley’s property for that amount. The business, instead of being, as represented, „a large and continually increasing business“, had for some time previously been carried on without profit, if not on annual loss. The profits were variously stated at different times, but the representations always gross misrepresentations. The profits stated 60 or 70, or 50, or 40,000£ a year. But when more closely looked into – there were no profits at all for the last 3 years. Closely pressed, Mozley said that from the balance sheet prepared in 1865 he was not prepared to say that they had lost money, although he could not say that they had made any profit. At the time of transfer the old firm had lost more than all its capital; carrying on business for several years without any profit; it was under advances to several Liverpool firms, all of whom have since failed to £700,000; and their private property deeply mortgaged to provide the means of keeping the bank afloat. Yet these partners presented their profits at sums varying from 40 to 70,000£ a year. Lewin Barned Mozley said „he had just looked into the thing, and found that 20 000£ would cover the losses of the last 3 years“. When Mr. Bencke, one of the directors, evinced a disposition also „just to look into the thing“, he was told by Ch. Mozley that „in transactions of that kind it was unusual and highly improper to ask to see private books of accounts“. „The directors of Barned’s Bk. Co.“, says Ch. Mozley, „never made any inquiry into the private property of the partners in the firm of I. Barned et Co. They had confidence in the position they held, and the property which was patent to the town at large.“ So die new directors duped. The scheme was elaborately planned and cunningly worked out. Of the 40,000 shares, 20,000 or one half, representing 1 Mill. St., were subscribed for, in pursuance of a previous and secret arrangement, by 2 Cos. – Contract Corporation and Joint Stock Discount Co – which had no legal power to subscribe, since then became insolvent, and incapable of performing their engagements. The whole of the debts of this socalled Co, therefore fall upon a limited number of bona fide holders of shares, caught by these gross and fraudulent misrepresentations. Hitherto contributions of enormous amount levied upon these shareholders, until the whole of those placed upon the list of contributories exhausted or utterly ruined, and still the creditors have only received a fraction of their demand. Liquidators wollen nun die packen, die ihre shares verkauft haben within 12 months prior to the winding up order. (aber diese nur liable für debts contracted at the time when they were shareholders.)

July 13. 1867. N. 371.

„The Financial Lessons of 1866.“ A letter addressed (by permission) to the R. H. W. E. Gladstone. By a City Manager. London 1867. (Smith, Elder, and Co. Cornhill)

He denounces certain corrupt practices which seem to have prevailed for some time past between the promoters and directors of Joint Stock schemes, and the managers of the Joint Stock Banks and financial associations of this City. He avows: the key to so much bad business having been done in the way of joint-stock-Cos. is to be found in the fact that „it has been made the interest of those to whom was confided the management of other people’s money (i.e. the bankers of the City) to do the bad business“. He says, „he is not making a hasty, vague, and indefinite charge which can only be true in a few exceptional cases“; he vouches for it as a fact within his own personal knowledge and experience that this charge is true in the vast majority of cases. „The giving of bribes“, he says, „to the chairman, deputy-chairman, manager, secretary, confidential legal adviser, or whoever the important man or men may be, in the conduct of the business of the bank from which the money is to be borrowed for a Co. already in existence, or to be introduced to the public, is a regular, established usage and custom in the City of London.“ The cases in which this charge not true constitute »a most insignificant minority«. So general have these corrupt and scandalous practices become, that they seem to be regarded as legitimate by men of ordinary commercial repute, und diese bribes selbst made for legitimate business. Die Money Market Review remarks dazu: »The honest man who refuses such overtures is in many respects at a great disadvantage as compared with the man who accepts them; for, while the former remains poor, and has no financial power, the other acquires financial power and strength, which he uses occasionally for the apparent benefit of his Co., and by which he also earns the repute of talent and success, and, consequently, the increasing confidence of his shareholders – until the bubble bursts.«

Barned’s Bank. (lim.)

9 July the Master of the Rolls said „this Co. (Barned’s) was got up in June, 1865, in promoting which the Corporation Co. was very active. It was puffed in various ways, and great efforts were made by the Corporation Co. and its friends to raise it in the estimation of the world. They encouraged others to join the concern, and now, when the winding up came, they turned round etc.“

July 20, 1867. N. 372.

„The Financial Lessons of 1866. etc. By the City Manager.“ Continued.

Recent disclosures have shown that half of the Railway Cos. in the kingdom have been under the management of grossly incompetent or corrupt boards of directors, whose jobbing and speculations have brought the properties of the shareholders and the securities of their creditors to the verge of extinction. The records of our banking and finance Cos. tell the same story; either the shareholders or the creditors must be ruined; and the question which it shall be, is the knotty question, which the winding up courts are now vainly endeavouring to determine.

The „city manager“ does not seem to recognise that the party who considers the Bank Act of 1844 „a monument of human wisdom“ is constituted of a small but active and influential minority of the commercial world, in whose favour, as capitalists and dealers in money, the Act operates most beneficially at the very time when it is operating most disastrously upon the other party, who are dealers in merchandise and manufactures, and constitute the great majority of the commercial community. The „suspension“ of the Bank Act produced more serious results in 1866, than in 1857 and 1847, because there was a far greater amount of foreign money on deposit in this country. And this amount is yearly increasing. ⦗Dieß neuer Beweis für Carey, daß das Geld den Punkt sucht, wo rate of interest am niedrigsten. Er war am höchsten in England in den letzten Jahren.⦘

Der „City Manager“ says: The deposits „on call“ or at short notice in the banks of the U.K. amount to 350 Millions £, whilst the total amount of sovereigns in the country estimated at only 120 millions. Nach Returns published by Sir John Lubbock „out of each million of nominal money which passes through the London Bankers Clearing House only £27,710 consists of legal currency; and of this small percentage only the paltry sum of £6,210 consists of coin – the balance, or £21,500, being B.o.E. notes. Thus, of the cheques and other promises to pay which pass through the Clearing House, 2% are represented by the promises to pay of the B.o.E.; and, of all the vast sums of ‚money‘ for which credit is thus daily given and taken, only the fabulously small fractional percentage of six-tenths (of a pound) (also  6/10%) has any real existence. Upon this slender foundation of 12s. for every 100£ St. is the huge fabric of credit built up.“

„City Manager“ wants a large increase in the gold Reserves of the B.o.E., wegen den proportionately large drains which must occasionally occur to meet the temporary balances of international indebtedness. Bank soll statt den Gvt. Securities 15 Millions mehr Gold halten.

August 3. 1867. N. 374.

The Leeds Banking Frauds. Pardon and Release of Convict Manager Greenland.

Leeds astonished über diese release.

The Leeds Banking Co was old and prosperous concern of 30 years standing; Greenland for 20 years its manager, it stopped payment in autumn 1864. The legitimate business of the Bank good, to the last it paid 25% to its shareholders. Cause of failure: fraudulent conduct et proceedings of Greenland, who had allowed the most extraordinary credit facilities to a number of persons of notorious bad repute. Many of the bills discounted for these persons were forgeries of the most transparent character, as Greenland knew, when discounting them. All these illegitimate and fraudulent transactions were concealed from the directors and kept in secret books, to which they were denied all access. The annual statements and reports were false and fraudulent concoctions, and, at the time the Bank stopped, the directors were engaged in making a further issue of shares amongst their shareholders at a high premium, all of which eagerly taken up on the strength of the false balance-sheets and 25% dividends. Trotz alledem das Schwein nicht prosecuted. Shareholders dazu zu poor, creditors too anxious to be paid, official liquidators would not take upon themselves responsibility, no public prosecutor. Wenn discovered, daß Greenland was in habit of making false returns to the Board of Inland revenue of yearly note issues of the Bank, and swearing to them as true, Gvt ought to have prosecuted, did not, Leeds Bank of Commerce did, Mr. Darnton Lupton, in his address to the Chamber of Commerce said: „he held in his hand list of the shareholders in the Leeds Banking Co; a melancholy list, for there were not two of them consecutively who were not now reduced to wretchedness or misery or were dead. At the time of the stoppage of the Bank 243 shareholders, of whom there remained only 51; but there were about 20 estates of deceased shareholders. 25 died, directly or indirectly, of the losses; 2 or 3 had committed suicide … there were the widows and orphans, aged clergy and lonely females, who lost their all by these frauds, and now objects of wretchedness and misery.“ Dieß beast also pardoned. Chamber of Commerce (Leeds) petitions House of Commons on reasons of this pardon. The conduct of Gvt. only the more extraordinary when compared with its conduct in another case. In the prison, from which Greenland released, there was and is still another convict, named Skaife. He was a poor half-witted young fellow, clerk to one Marsden, one of the swindlers and forgers to whom Greenland advanced 100ds of 1000ds of £, the moneys of the Bank. When the Bank failed, Marsden escaped to America. Poor Skaife remained and frankly confessed that bills to £20 or 30,000£, found in the Bank, had been signed by him by Marsden’s direction. He knew they were forgeries, but said Marsden knew it, and Greenland knew it, and he had done it solely at his master’s instigation, and derived no profit whatever from it. Poor knave was tried for forgery, and convicted, partly on Greenland’s evidence, and was sentenced not to 15 months imprisonment but to 15 years penal servitude. It now appears, from a letter of Beecroft , M.P. for Leeds, that some time ago he presented a memorial to Gaw. Hardy (Home minister) for remission of sentence upon Skaife, but refused by Hardy. Skaife, therefore, remains in Armley Gaol , while Greenland, but for whom he would never have been forger or felon, set free.

Edward Greenland’s Pardon. H.o.C. Continued. (Money Market Review 10 Aug., 1867)

It is an undeniable fact, that there has of late years been a great deal of very lax morality prevalent amongst the managers and directors of joint stock Banks and other Cos., much of it very closely bordering upon crime, and much of it actually overstepping the line which divides mere immorality from positive criminality … The successful operators in these transactions become objects of envy and examples for imitation to numerous other coveters of wealth and aspirants for fame, and the ranks of our mercantile classes have become thickly studded with men who have gone through these desperate ventures with more or less success, or who are ready to plunge into them when opportunities offer. Hence we have the downright frauds and scandalous robberies which are now almost daily exposed in the winding up courts. … It must be admitted that the law has almost lost all its influence as a deterrent, and for the plain reason that it is almost useless for the prevention or detection of these joint-stock and commercial frauds. In many cases where the fraud is undeniable a prosecution, it is said, „would not hold“; in other cases, where a prosecution might be sustained, there being no public prosecutor, no one else is willing to undertake the invidious task; and, even where a prosecution has been instituted and succeeded, ends of justice may subsequently be defeated by the capricious intervention of an incompetent Secretary of State, as in the present case.

Lord Frederick Cavendish, one of the M.P. für North-West Riding of Yorkshire, sprach über Greenland case in H.o.C. „Greenland had been prosecuted for perjury in reference to the banknotes issues“ and „when the Board of Inland Revenue were applied to“ durch Leeds Chamber of Commerce, „and urged to prosecute, they declined, but stated that they would afford assistance to any persons who chose to undertake the prosecution“, viz. at their own expense. „The judge at the trial had expressed his surprise that the prosecution of such a case had fallen upon private persons.“ Lord F. Cavendish continued: „When Greenland was taken to prison, he was placed in the hospital, where he remained for 3 months, but, in consequence of the report to the visiting justices, he was removed to one of the cells. The visiting justices were therefore greatly astonished when they afterwards received intelligence that Greenland had obtained a free pardon.“ That pardon was obtained by Greenland’s solicitor, upon the strength of a memorial which he addressed to the Home Secretary and came up to London to present in person. Lord Cavendish said: „Doubts would arise whether, in the administration of justice, distinctions were not made between different classes. It was difficult to believe that a poor man who had no solicitor would have received a remission of the greater part of his sentence because he was in a state of health which, in the opinion of the (prison) surgeon, would not justify his removal to the hospital of the prison.“ Hardy said im trial „the Jury had recommended Greenland to mercy on account of his age etc.“ Mr. Hardy, „with the report of the trial at the Central Criminal Court before him“, knew perfectly well that the recommendation of the jury was to the mercy of the judge, and that the judge had given effect to it by giving the dog only 15 months imprisonment instead of 15 years penal servitude. W. Morrison drew the attention of the House „to the fact that the perjury of which this old man had been convicted had extended for a period of nearly 20 years“. »If Greenland had had not an able solicitor and wealthy and influential friends, he would have been permitted to serve out the remainder of his short sentence.« Other criminals, who have committed only one single act of perjury, are sentenced to penal servitude, and unless they happen to have made money enough by their frauds to retain a clever attorney, are compelled to undergo their allotted sentence. … The plea of humanity and mercy becomes mere cant in solchem Fall. It is an hypocritical abuse to apply them to the wealthier of the criminal classes alone, whilst in effect denying them to the poorer. During the past week (ending August 3, 1867) an inquest was held on the body of a pauper in one of our metropolitan workhouses who, at the age of 80, had been compelled to turn out and work at drawing a dust-cart, in a drenching rain. The poor wretch was seized with cold shivers and died, and before he died he was wicked and ungrateful enough to declare that „that cart and that rain had killed him“, and that the brutal officer who had compelled him to the task was guilty of his death. That man’s only crimes were poverty and old age – great crimes no doubt in a human and Christian county – but still the old man could not very well help either. If that old man had lived a riotous and extravagant life, committing frauds et perjuries during a period of 20 years, to the utter ruin or impoverishment of a 1000 innocent victims, and had thus made himself a well-to-do criminal instead of a beggarly pauper, humanity would have taken much more interest in him and „much better care of him“.

Limited Liability Act of 1867. (for amendment of Act of 1862)

Enthält no clause whatever to afford additional protection against fraud or misrepresentation on the part of the promoters of new Cos.

August 17, 1867. N. 376.

Overend, Gurney et Co. (Judgment of H. o. Lords für creditors gegen shareholders)

On 15 August this judgment der Lords on the appeals. Das judgment gefällt im Sinne des Vice Chancellor Sir R. Malins durch die 3 alten Esel (law lords) Lord Chancellor (Chelmsford), Lord Cranworth und Lord Colonsay, the Scotch judge. Lord Westbury, Lord Romilly, and Lord Justice Cairns, also law lords, each of whom had previously given or concurred in judgments in equity in conflict with that [of] Malins, neither of them was present.

Credit Foncier of England (limit.)

Those undertakings obstructed and thwarted by a condition of panic, followed by a state of chronic distrust. The present stage is that of a slow revival, held to some extent in check by the caution and timidity that constitute the natural reaction from the recent experiences. Credit Foncier balance for past half year of £62,000, of which the directors propose £30,000 to distribution of profit, or 3s. per share, free of income tax, and to carry over the remainder. The following are 6 of the principal investments of the Co. as they now stand in the books:

City of Milan Improvements Co.£: 243,615
Varna and Rustchuck Railway196,467
Belgian Public Works107,279
Irrigation Co of France282,740
Imperial Land Co of Marseilles225,666
Millwall Docks145,526.

August 31, 1867. N. 378.

The New Act (1867) to amend „The Companies Act“ 1862.

Dieser miserable bungling act erlaubt keiner Co. ihre nominellen shares herabzusetzen, ohne durch Chancery Court (Winding up) zu gehn. Dank dem Lord Overstone, as leader of a knot of 16 lords, verwarf das Oberhaus 1866 Milner Gibson’s (then President of Board of Trade) rationelles Amendment, wodurch die ganze Sache ohne Kosten etc mit Board of Trade abgemacht werden konnte.

Zweitens, was fraudulenten Schwindelcharakter betrifft, enthält nur den silly Paragraph, daß die „dates and names of parties to any contract be entered into prospectus, or the promoters, directors, or trustees thereof, before the issue of such prospectus or notice.“ It does not require that the subject matter of the contract should be stated, nor that the subject matter should have any relation to the business or purpose of the Co., or its undertaking. Ferner heißts in dieser Klausel: „and any prospectus or notice not specifying the same (names and dates) shall be deemed fraudulent on the part of the promoters, directors, and officers of the Co. knowingly issuing the same, as regards any person taking shares in the Co. on the faith of such prospectus, unless he shall have had notice of such contract.“

Secretaries, clerks, or officers may know that there are such contracts, but not know the dates or names of the parties. Ferner, what is to constitute, für die shareholders, notice of such contracts? The only notice of such contracts which the statute requires is notice of their dates and the names of the parties to them, without any knowledge of their substance or contents. Silly nonsense!

The Judgment of the Lords in the Overends Case (für die Creditors) (Money Market Review Aug. 31, 1867)

Consecrates fraud. The argument that shareholders under such circumstances must be held liable is tantamount to saying that a man must pay a cheque stolen from him because a creditor of the thief should plead that he parted with property on the strength of the drawer’s name, and that therefore the drawer had no right to stop payment at the bank it was drawn upon.

Das motive der lordships was fear – the fear of consequences – the fear that the joint-stock system could not bear the test of justice, but that, like Satan at the touch of the angel’s spear, it must appear in all its corrupt deformity, and that creditors – that terrible bugbear at which justice itself turns pale – must be satisfied at all cost. Truly, Englishmen may well deserve the title of a money-getting race, in the most offensive sense of the term, when the socalled rights of creditors are assisted to ride rough-shod over every other equities by the highest judicial tribunal in the land. Aber ihr Lordships „rewarded by the almost unanimous recommendations of the press“.

Der Case war sehr simple. Nach dem Limited Liability Act of 1862 hat der creditor no hold on the personal shareholder, sondern nur auf den corporate body, die Co. Nun sagten die shareholders – dieß war die question – sie seien nicht members dieser fraudulenten Co, die ursprünglich nur aus den 7 Directoren bestand. Die shareholders hatten keinen Ertrag erhalten, die creditors ihr eingezahltes Kapital bereits gefressen. Die Co. war bankrott, bei ihrem Beginn (eh shareholders drin waren) July 1865 so gut wie May 1866. Mit ganz wenigen Ausnahmen alle Creditors waren die identical creditors der old firm. Sie wurden also durch den fraud – nach dem Judgment erst des Malins, dann der Lords, bezahlt, und steckten vielleicht mit in dem Hokus Pokus! Die Presse war fast ganz gekauft, Times und Economist an der Spitze, durch die creditors. Dieß Urtheil zugleich gegen die durch die Lords selbst anerkannten Precedents!

Diese 4 law lords have decided that contracts induced by fraud are binding obligations upon the party defrauded. Dieß war absichtliche perversion, kept up im judgment durch deliberate perversion of facts and cases, garbled quotations of previous decisions, and the wholesale suppression of adverse judgments, sogar in derselben Parlamentssitzung gefällt von denselben Lords und andern.

Untainted Creditors had no place in the record; at all events, the liquidators had not proved a single claim as being extraneous to the fraud itself; neither creditors nor liquidators had alleged that Mr. Oakes’s £1250 on his 25 shares, or even Mr. Peek’s £100,000 on his 2,000 shares, would be required for paying to Oppenheim and others 20s. in the pound, with interest. Oakes und Peek waren die 2 contributories, welche die Sache vor Gericht bis zum Last Appellate Court der Lords brachten.

14 September. 1867. N. 380.

The (1867) Act for the Amendment of Cos. Act of 1862, and the Merchant Bank Co of London (lim.)

This sehr well to do Co, has weathered panic at all. Aber its shares at present £100 each with 25 paid, and liability of £75. Directors und Shareholders (General Meeting Sept. ’67) wünschen daher reduction in nominal amount of their capital, and subdivision of their shares. Aber nun der neue Akt; came into Operation 1 st Sept. ’67. Chairman said: „Impossible to act upon the Act. First the whole thing must go into Chancery Court, and this utter ruin for a Co. depending on its credit. Their creditors spread over the whole world, and their debtors also, and impossible to do what required by the Act. That Act greatly complicated the previous law upon the subject.“ It is a burlesque upon commercial legislation. But Graves, one of the commercial members for Liverpool, seriously told Liverpool Chamber of Commerce, it was „the one Act“ „next to the Reform Act“. Times outstrips him in eulogy of Act and Gvt. which passed it, says, it was carried through Parliament almost „without discussion and without alteration“. Fact is that the Bill had been completely gutted in its transit, all those clauses empowering the Board of Trade to effect the reduction of the Capital of Cos. being entirely expunged, and all those clauses handing the Cos. over to the winding up Courts in Chancery, of which nobody had ever heard anything before, being substituted in their place. This was passing the Bill without discussion certainly, but scarcely without alteration! The Economist equally lavish in its encomiums upon this miserable abortion of an Act.

21 September, 1867. N. 381.

Overend, Gurney et Co. (lim.) (English Legislation gegen grosse Schwindler)

By Statute 24 und 25 Vict. cap. 96, section 89, enacted daß directors, managers or public officers of any corporate body or public Co. die circulate, publish, or concur drin „any written statement or account which he shall know to be false in any material particular, with intent to deceive or defraud any member, shareholder, or creditor of such body corporate or Public Co., or with intent to induce any person to become a shareholder, or partner therein, or to intrust or advance any property to such body corporate or public Co., or to enter into any security for the benefit thereof, shall be liable etc to penal servitude for 7 years.“ Danach also die Overends etc faßbar. Aber nach Sect. 85 desselben Act „no person shall be liable to be convicted of any of the misdemeanours in any of the said sections mentioned, by any evidence whatever of any act done by him (vor irgend einem Gericht), if he shall at any time previously to his being charged with such offence have first disclosed such act on oath, in consequence of any compulsory process of any Court of law or equity, in any action, suit, or proceeding which shall have been bona fide instituted by any party aggrieved; or if he shall have first disclosed the same in any compulsory examination or deposition before any Court upon the hearing of any matter in bankruptcy or insolvency“. The Legislature (composed of swindlers) appears to have considered it of far greater importance to obtain full disclosures of such transactions than to prosecute and punish the actors in them. It, therefore, denies them the privilege of pleading that they are not bound to answer because their answers may tend to criminate themselves, and, at the same time, tempts them to a full confession by the offer of a plenary pardon. This law is a standing incitation to even the most culpable of mercantile delinquents to come and confess and be absolved without the infliction of any penalties. Dieß rettet Overend et Co Directors, puts them out of criminal proceedings. Aber law absolves sie nicht of their civil liabilities. Sie sind liable to each shareholder for all the money they have paid, and all the damage sustained in consequence of the fraud. Some of the directors are said to be ruined; but it is certain that this is not the case with all of them. It is now pretty certain that these latter parties realised very large sums in the shape of the premiums on the shares which were allotted to them and their nominees, and these large sums they still retain. It certainly seems to be a hard case and a shameful thing that, whilst so many of the unfortunate shareholders reduced to absolute beggary and destitution to liquidate the debts thus fraudulently imposed upon them, the parties by whom they have been defrauded should still be permitted to retain unchallenged the profits they made by the scheme.

Down to the present moment the shareholders, the members of the Co., have never been permitted to know who their creditors are, or in what right, or what their respective claims amount to.

Credit Mobilier Co. of Paris.

In its difficulty, B.o.F. appealed for 3 Mill. £ St., but B.o.F. giebt nur Hälfte, und has exacted all the security that was offered in the first instance. Immediate Cause of Breakdown des Credit Mobilier arises from its large advances to Compagnie Immobilière, one of the many affiliations sprung up from the original present establishment. The Co’s funds locked up in „inconvertible securities“ or „inoperative accounts“. This was always the weak point in the constitution of the concern.

Credit Mobilier und Credit Foncier were the 2 grand financial „idées Napoleoniennes“, and they were coeval mit dem Empire itself. Decree of authorisation für Credit Mobilier: Nov. 18, 1852; Credit Foncier , of same date. One of the projects rejected by the Council of State, the other seriously opposed in same quarter, Emperor put down all objection. Credit Foncier had an even and profitable career.

Credit Mobilier a grand experiment in the St. Simonian school of finance, the principles of which have been given by a friendly hand as „in contradistinction to those of the old school, not to extort money from governments and individuals, but, whilst enriching the authors, to augment to an incalculable degree the public and private fortunes. Their object is to lower as much as possible the interest on capital, and to place credit within the reach of all industrious men“. With such a programme the Credit Mobilier started at a time when it was the custom of the country to hoard money, and transact all kinds of business in a petty and peddling fashion. British capital and labour had already been imported to make the first great network of railways that was constructed. The new school of financiers, Badinguet amongst the number, conceived that these enterprises were quite within the power of the French people themselves, and Credit Mobilier founded to propagate »this doctrine«. (!!) This revolution now complete. Paris has become a financial centre, competing often successfully with the wealth and prestige of London itself. Frankfort and Amsterdam have, to a certain extent, given way, and the influence of French finance is coextensive with the Continent; indeed, it has spread to Egypt and beyond the Indies. Paris capitalists are now amongst the boldest operators of the world. The commercial classes of France have vastly increased in wealth and numbers; people develop previously unknown activity of trade and industry. The Credit Mobilier was the prime mover in this great change. Its capital £2,400,000 in shares and an equal amount in bonds. Its deposits generally figured of late years for about £4,000,000.

28 September, 1867. N. 382.

Gold mines of Victoria. (Kitto: „The Goldminers of Victoria.“ Lond. ’67) Expropriation of Individual Labour. (Property)

Kitto was 11 years a miner and manager of mines in Victoria, 7 years a Gvt mining surveyor. His conviction: The occupation of the mere digger is drawing to an end, while that of the practised miner is being rapidly developed under large profits already achieved. Goldmining in Australia no longer a fortuitous game, to be played by adventurers possessed of a pick-axe and a pan, but a sound business-capital and skilled labour. One third of the gold yielded by Victoria during 1866 was the result of quartz-crushing. Nach Official „Mineral Statistics of Victoria for 1866“ quartz crushed (1866) 861,468 tons, and the average yield of gold per ton: 10 dwt. 16.2 gr. The price paid for treating the quartz von 4s. to £1. 10s. per ton. (Dieß jedoch nur exceptional Minimum und Maximum limits.) The average cost of treating the Quartz, which embraces of course much more than the cost of crushing, nach T. Eyre, manager of the Catharine Reef Co.: „For the 6 months ending Febr. 28, 1867, the average cost of raising and crushing, including all charges in the mine, 13s. 3d. per ton, and for the 6 months previously 12s. 11d per ton, or 13s. 1d for the last 12 months.“ This statement coincides with that given by the manager of the Port Phillip and Colonial Gold Mining Co, the best conducted property in the Colony. Says that 13s. p. ton. They crushed 4,654 tons during June 1867 which yielded average of 12 dwts. 5 grs. per ton. The pennyweight of gold in mining arithmetic is equivalent to 4 shillings, so that 3¼ dwts. is the average cost of treating the quartz. Kitto gives an estimate based on an outlay of £25,000 for a mining and quartz-crushing establishment, and that only 7 dwts. or 28 shilling per ton on average are obtained. Allowing £10,900 for contingencies, such as loss of time through accidents to machinery etc, dennoch clear profit of £12,500 or 50% would accrue to the shareholders. As Kitto says: „In a few years individual mining, as it is called, will be no more known; the quartz mines and deep leads will become the property of the capitalist, and will be worked with science and skill; … and once more the social system will be properly regulated.“ Im Anfang glaubte man, daß die alluvial goldfields in which the gold had been deposited, broken off from the mother rock by the operations of nature carried on during countless ages, were the only localities worth the attention of the gold-seeker; and that, once ransacked and made to yield up their spoil, nothing would be left on which to rear a permanent industry. A Commission of the Victorian Gvt., 1856, to report on the state of the mines, declared that mining for gold to great depths in quartz reefs would be unprofitable; useless, they said, to go below 10 miner’s fathoms or 60 feet. Dieß theory false, as proved in California and Australia. A Californian mine is now being worked at a depth of 1,250 feet from the surface, and is producing better ore than ever. Kitto gives a long list of quartz reefs in Victoria worked at depths varying from 200 to 600 feet, where result in all cases very profitable. In one instance 105 tons of stone, obtained from depth of 500 feet, yielded average of more than 14½ oz. gold to the ton. Selwyn, the Government (i.e. Victoria Gvt) geologist, asserts that there is in Victoria an area of 30,348 □ miles, „in any part of which there is a possibility of remunerative gold deposits being found“. Of this vast extent only 870 □ miles, or about  1/33 have been mined upon, and of this  1/33 only ⅙, or about  1/200 of the entire auriferous distinct, was occupied at the end of last year (1866). Kitto, from personal knowledge, states that at least 2 × the area in present occupation of miners is quite as valuable for gold as any now claimed and worked. As a Capital, the mining property at the colony now estimated at 22 mill. £.

Public Debt of Russia. Consul Michell’s Report.

Michell friendly to Russia, partly appointed Consul there by influence of Russian Gvt.

Between 1832 and 1852 annual deficits more than 4 Millions £ a year, von 1852 to 1856, time of Crimean war, annual deficit of nearly 28 Mill. £, represents, says Michell, far less than the additional cost to the Empire of that war. Increase of Revenue during the whole period, total in 1852 being 44% more than in 1832, but in the same interval Rate of Expenditure increased at least 97%. Nach Michell Russia owed in 1866 Public Debt of 1,810 Millions of roubles (£286,604,000), annual charge upon this debt: £10,961,142. Of this total the Foreign Loans, in round numbers, 520 Millions of roubles, and the internal debt to the residue, or nearly 1,300 millions roubles.

A work on Budget of 1866, attributed to Senator Hagemeister, states increase of expenditure zwischen 1845 and 1866 as follows:

  1. Army. Increase: 70%. 2) Navy: 70%. 3) Home Office: 100%. 4) Public Instruction 150%. 5) Foreign Office 10%. 6) Justice 100%. 7) Church 90%. 8) Pensions 130% 9) Grants of Land. 10%

During this same interval, 1845–1866, liabilities of the Russian Treasury increased 172% und mit dem second lottery loan, 193%. The issue of paper money, now practically inconvertible, during the same period, 300%. In the same 20 years Increase of Population 11%, and of Ordinary Revenue 75% (from 197 to 345 Millions Roubles). In the same 20 years „the foreign trade of the country almost remained stationary“. The Budgets of the Russian Finance Ministers invariably anticipate a deficit, but fall always short of its amount. In the 5 years von 1862–1866 (incl.), the deficits, were estimated at nearly 141 millions roubles, turned out about 501 Millions, as indicated by the „Extraordinary Resources“ or loans raised to meet the deficiency in revenue for the requirements of the Gvt.

The Foreign Debt of the Russian Empire is thus condensed:

Original Amount.Annual Interest in 1866.Annual Repayment of Principal in 1866.Capital Outstanding Jan. 1, 1866
In£ St.£35,937,800£1,499,432334,95033,792,800
Florins140,533,0003,752,2751,981,00075,535,000
Roubles290,000,00010,568,2826,711,889208,661,660

To this to be added the Internal Debt of 1,290,490,321 Roubles. Total: 1,810,132,823 Roubles (£286,604,363, nämlich 519,642,502 Roubles Foreign Debt und Roubles 1,290,490,321 Internal Debt.) Rates of interest on Foreign Debt von 3 to 5 %, und the annual sinking funds from 1 to 2½%; on Internal Debt from 4 to 6%, and the annual sinking funds from ½ to 5% p.a.

Robert Knight: Letter to the Right Honourable Sir Stafford Northcote on the Present Condition of Bombay. Lond. 1867.

Collapse (Commercial) at Bombay. Scarcely anticipated the degree of prostration in this „city of millionaires“.

India cotton Exports etc in Folge des American Civil War. Bombay was the centre and outlet of the cotton growing districts of Western India, the chief port from which England drew its supply. Darauf based huge speculation. Raw cotton, which in Interior of Bombay presidency had been worth 80 rupees per candy before the American war, rose to 600 rupees afterwards. For a time gains to producers and middlemen – i.e. merchants and brokers of Bombay – prodigious. This sudden accession of wealth produced insatiable desire for more; Result wie gewöhnlich Time Bargains. Finance Cos., oder, wie sie in Bombay heissen „joint-stockery“, in every form. Some for useful projects; but the common ruin enveloped legitimate enterprise mit bubble Cos. Bombay built upon island too small for its population and commerce. Harbour magnificent, by position and other natural advantages, greatest port for Ocean communication between India and Europe. Large tract of land around the city covered only by a few feet of water, leicht to reclaim, Joint Stock Co, während des Schwindels, formed to this purpose. Large portion of the work has been done; but, up to the present time, obgleich millions sunk upon these works, not a shilling of the outlay has yet been rendered available. Not a single house or warehouse can be erected upon the halffinished work, except that small portion whereon stands the terminus of the Great Indian Peninsula Railway. The Gvt. of India, by its contract with that Co., had to provide a terminus 50 acres in extent for goods traffick. Bombay Island alone could not supply the land wanted, hence „Elphinstone Co“ formed to effect the object in view. Performed substantial work, for which it paid hard cash. It reclaimed the whole site required for the terminus, and also a large area of land on the harbour shore. In Bombay a perfect glut of shares, some quite valueless on demerits, the aggregate amount far beyond the capacity of the place for legitimate business. Hence Elphinstone Co. Shares find no buyers oder at ruinous prices for the holders. No bank in India will advance a farthing on them. No capitalists want them, because, mit 400 rupees paid on them, there is a further liability of 600 rupees upon each share. Several Cos were (während dem Schwindel) formed for reclamation of land around the island of Bombay, but majority have failed, nur 2 have spent much money – the „Elphinstone“ und die „United Victoria“.

Limited Liability Cos formed since 1865.

Part of them to establish new businesses, and the other to prosecute old businesses with greater means and wider connections.

5 October. 1867. N. 383.

Joint Stock Cos. Management.

Good et successful management have been exception. We have a natural propensity for blundering, muddling and bungling. Shareholders in general have elected as directors men with „handles to their names“, oder any undertaking men in quite different line of business, merchants and manufacturers as directors for banking, financial, railway Cos und bankers und successful speculators for mercantile und manufacturing undertaking. Such men eagerly sought and solicited by the promoters of Cos. Shareholders thought the more of them the better, obgleich numerous directorates nuisances. The most plausible speaker (brass) elected chairman, oder noble as head-figure. Shareholders complain that directors who ought to be their servants are their masters. Their own fault. Give absolute power to the directors and absolutely defer to it. Statt 3 oder 4 in most Cos. 6 or 8, or even 10 or 12 directors. Efficient management mainly dependent upon efficiency of the manager. He should be more responsible to them, less to the directors. As an instance of numerous directorate City Offices Co. At their last halfyearly meeting shareholders demanded that number und pay der 8 directors should be reduced. Die directors deigned, weil Hon. J. St. Wortley had given demission, not to fill up the vacancy, and reduce remuneration by ⅛, and, in event of further vacancy occurring, not fill it up, until remuneration brought down to 1500£ a year. One shareholder thinks 800£ mit 200£ extra für directors would do. Another shareholder, adverting to the heavy payments of directors, points out that salaries only 900£, also staff insufficient und underpaid. Nach dem neuen liability Amendment Act (1867) können die shareholders insist upon the unlimited liability der directors, or manager, or managing directors.

We want the issue of shares to bearer which are not fully paid up. In France shares mostly of smaller amount than in England, and the Cos may issue them to bearer when ⅖ of nominal amount paid. Amount called up in France generally bears much larger proportion to nominal amount. Thus increased facilities for transfer of shares. In true spirit of landocracy our Legislature provided that the stamp duty payment on transfer of shares same as on transfer of land. Shares as many times bought and sold in days as land in years. Dann stampduty levied upon nominal value of shares etc. This is the way in which our landlords facilitate the economical transfer of shares issued to bearer. The first person to whom the share warrant are issued will have to pay 3 times the amount of a most exorbitant stampduty, and all the subsequent transferees will go duty free. (Diese Geschichte mit dem warrant wegen des häufigen Wechsels der transfer of shares.)

Money Market Review. 12 Oct. 1867.

Shares. (Paid to Vendors etc)

It is a very common practice on the formation of a Jointstock Co. for the purchase of a concession or contract, or the goodwill and stock of an existing business, or of a patent-right, for the vendor to agree to take either the whole or a portion of the purchase money in the shares of the intended Co., either fully paidup or with £5 or £10 or other sum per share paid thereon.

19 October 1867. N. 385.

Fall in Value of Gold, Rise in Price of Commodities.

M. Chevalier predicted that „the transition (from fall of gold value) would be an interval painful to pass, and would be marked by innumerable shocks and sufferings“. The value of all properties, he said, „would be subjected to a painful uncertainty and injurious fluctuations. It would be still worse for persons whose incomes consisted of a sum of money fixed in advance. They would live in a perpetual state of trouble, anxiety, and uneasiness“. Er unterstellt stets that gold would fall to half of its recognised value. The fixed income man „would be flung headlong, without rule or measure, down to a lower station, and without the chance of preparation, as it was of the very essence of changes of this kind, subject to so many opposing influences, to pursue an irregular and disorderly course“. His assumption und reasoning equally absurd. Change nothwendig slow und very gradual. Die opposing influences could not but produce compensating circumstances.

The general rise in prices since 1853 is indisputable and now almost universal, and the inference of a corresponding fall of gold is inevitable. If increased supplies of gold accompanied by a corresponding increase in the demand for gold, there would have been no disparity between demand et supply. There would have been no relative increase, no excess of supply over demand. The excess from California and Australia was absorbed in new fields by the enlarged commerce of England, America, and other countries. Then American Civil War. The war expenditure absorbed the greenbacks. Sobald England gold received from Australia et California, passed over to France und other countries, in exchange for silver, transmitted to India in payment for cotton und other commodities. Durch dieß enlargement of trade rise in wages und dadurch allmählig in prices of commodities.

The Chambers of Commerce of Rouen and Liverpool on Commercial Crise. (Conversion of productive Capital in Bankers Capital)

The Rouen Chamber of Commerce anxious about the commercial crisis which for some time past pressing upon industry of great part of France. Its President wrote to President of the Liverpool Chamber of Commerce, on their opinions. Rawlins, the President, answers in name der Liverpooler Handelskammer: (10 Oct. 1867): Common Causes in France und England, nach Rawlins: 1) American War, 2) Protective duties of U. St. 3) Disorganisation in Southern parts of U. St. 4) Unsettled State of Europe, annual cost of armies about 80 mill. £ St. jährlich. Unter den spezifisch englischen Ursachen führt Rawlins an: 1) Premature investment von 1862–1866 in railway enterprises, not now, nor probably für many years, giving revenues to shareholders; 2) Excessive Speculation and Overtrading, especially of late years. Traders who conduct their business disproportionately on borrowed capital are, in the event of a small depreciation in prices or pressure in the money market, compelled to suspend payment. 3) Reckless investment of Capital in Jt. Stock Cos. 4) Collapse of several Banks. 5) These causes aggravated by 2 deficient harvests, enhancing price of wheat by 50% over average of the three previous years. Those who conduct their business disproportionately on borrowed capital, sagt Money Market Review , »constitute the great mass of English traders, manufacturers, shopkeepers«. Three months of 10% Discount Minimum, for them 20 or 30%, equal to 2, 3, or 4 × the profits they were making, hat diese Hände ruinirt. Viele dieser Kerls so ruinirt. All their accumulated wealth has been converted into money capital, and is in the hands of the banker, bill discounter, or other moneyed capitalist. Henceforth the latter is the owner and possessor of it; but he is willing to lend if the former classes are willing to borrow, and to become „traders upon borrowed capital“. On the first hint of distrust, capital seeks to fly back to its owner und dann new ruin unter jenen Traders und creation, for next period, of more traders upon borrowed capital.

A. King: „Smith, Knight et Co. lim.“ Lond. 1867.

Late Co. of Smith, Knight, et Co , insolvent, with unlimited prospect before them of insolvency, formed this limited Co., in the first instance, to extricate themselves, und, in the second, to pay their creditors ! The prospectus stated that business valuable, that the vendors required bonus as the selling value, including plant, of £230,000 in cash und shares, und that capital required to conduct the business of 2 Mill. £. St., in a first issue of 40,000 shares of £50 each. Shares came out at premium, i.e. demand for these 40,000 shares seemed larger than their supply. For a time this alleged value seemed real. In Nov. 1864 first dividend of 5% paid on account, d.h. ohne Rechnungsablage. April, 1865, statement of profit und loss rendered, und dividend declared of 8% p.a. (mit Abzug der „on account“ gezahlten 5%.) Zugleich aber call for £5 per share. Price der shares fell to something like nil, even mit der addition of £5 paid on them. Shareholders appointed Committee of Investigation; this Committee reported in Oct. 1865 that the good will etc, for which £230,000 paid in cash und shares, was of no value, that the contracts were burdensome rather than profitable. Directors gave flat contradiction. Contracts taken over showed all „an estimated profit“; the only contract then completed exhibited profit of 15%; they could, however, not obtain payment for work performed and materials supplied for the Royal Sardinian Railway, dieß chief cause des call £5 (additional). But concern, they said, promising. At meeting November 1865 embarrassment officially admitted; new directors were appointed, darunter 2 members of Parliament. February, 1866, 2 further calls announced – viz. £5 p. share, payable on April 10, und £2 in July – making in all £17 p. share paid. March 1866 officially notified that the £2 call coming due in July would be the last call made. May 1866, directors issued a Report stating that the Co. had undertaken no new works, and contracts in hand were approaching completion; bonds received from the Royal Sardinian Railway Co had been offered to the Creditors, assets and liabilities were alike, about £800,000 etc. In Oct. 1866 A. J. King filed a bill in Chancery against the Directors, and at meeting of shareholders in Nov. 1866 a Defence Committee formed.

Another call of £5 ordered by the Liquidators of the Co, making 25£ p. share, or one million called up on the 40,000 shares. King states, that prior to this call, only £367,000 were paid up, that the present call will make the total £400,000 instead of a million. In brief, it comes to this, that the majority of the shareholders cannot or will not pay calls, and that minority will have to pay all. Trotzdem creditors have only been paid 2sh. in £. King adds that there were claims of creditors in Sept. 1865 which, with interest, amounting to £376,947 would represent now nearly the same sum. So bulk of £50 p. share will be called upon by the liquidators, so that shareholders will lose every farthing of their money, and even the creditors not fully paid. No farthing left for the shareholders.

King asserts that the register (of shareholders) is rotten, and that ⅚ of the names enrolled are owned by men of straw who are merely nominees of the vendors and the Syndicate, nämlich a number of persons interested to combine in order to support the price of the shares in the market, subscribing a common fund for the purpose; hence the money said to be paid by the shareholders never paid at all. This proved by the nonpayment of calls. He alleges that no less than £72,000 spent as „secret service money“ – ostensibly given as commission on certain contracts. King gives the names of some of these recipients. Entries in the books, or in the dates of the invoices, falsified by a clerk who was discharged; dieser jedoch mere tool, acted simply at the direction of his employers.

October 26, 1867. N. 386

Royal Bank of Liverpool. (Illimited Liability)

On October 22 (’67) Stoppage officially announced.

Shareholders not numerous, but wealthy. Unlimited Liability. This Bank founded 1836. Suspended during Railway Panic of 1847, in consequence of reckless advances to a large amount to a few individuals. Reopened on 1 Dec. 1847. In Directors Report to 31st Dec. 1866 stated that despite „an extraordinary series of banking and commercial disasters“ on the operations of year ending Dec. 31, 1866, gross credit balance of £83,809. 3s. 11d, and a net profit, after various deductions, u.a. 7% interest on the preference Capital, of £50,546. 15s. 7d. H. A. Withers had a penchant for „large accounts“. Financing. Upwards of £300,000 advanced and locked up in ships of about 40,000 tons, now trading to various parts of the world; large sums said to have been advanced upon cotton bills. The acceptances of this Bank, 12 months ago, reached 2 Millions. One of the shareholders on meeting of Oct. 23 said: „Taking in consideration the interest he had been getting for many years in connection mit der Bank, he could afford to lose the capital invested in it. People looked upon property of this sort as though it was as secure, so far as income goes, as if it were land; but it was not so.“ etc. It is the immense greedy of the shareholders which directors und shareholders pander to. Speculative und gambling business daher, besonders by Liverpool Banks.

Re-establishment of 6 months’ Sight Usance in Indian Trade.

Almost unanimously accepted by the Indian Banks.

Failure of the Commercial Bank of Canada

Announced during last days. Involved by lock up in railway securities.

9 November, 1867. N. 388

Gassiot: Monetary Panics and the Remedy (1867) (Dieser Gassiot merchant in City of long experience, and director of oldest and largest Jt. Stock Bank in London)

„At any time after 12 o’clock on 11 May 1866“ (says Gassiot, when it was confidently reported that Gladstone had declined to suspend or interfere mit dem Bank Act) „there was probably no price for which the B.o.E., or other banks or bankers, could have obtained B.o.E. Notes for any amount of Gvt. Stock.“ Hoarding had commenced, because of fear that no more banknotes could be obtained. Ohne die legal limitation des Note supply, nobody would have dreamt of hoarding. The suspension of Act produced immediate relief. „High rates of interest“ – so Gladstone’s 10% Mr. Rate – „entail distress“, says Gassiot, „on the merchant, trader and manufacturer, but more particularly on those employers of labour who require large sums of money to pay weekly wages, and whose only safety from ruin, when money is raised to an exorbitant rate, too often rests on discharging large masses of the hardworking industrious mechanics employed in their extensive works.“ In proof and illustration of this, he refers to the record of the Mansion-house Committee, the closing of the workshops on Bank of Thames, and the multitudes throughout Kingdom even now without employment, and driven to the utmost privation.

Suspensions of the Bank Act, says Gassiot, „have ever resulted in obtaining enormous profits for every description of money-dealers, from the proprietors of B.o.E. Stock, and bankers of all descriptions, down to the petty usurer who discounts the bills of those whose necessities compel them in such times to obtain money at the rate of 20 and 30% p.a.“ Mentions that B.o.E. paid in October 1866 13% p.a. on Capital of £14,533,000, whilst in previous halfyear ending April 1866 nur 10½ und in corresponding half year of 1865 10%.

The object of the Bank Directors was to avail themselves of the exorbitant rate of 10%, for their own benefit, without exceeding the limits of their fixed issues for the benefit of commerce. In case they exceeded the limits, the profits, nach Gladstone’s letter, of overissue went to Gvt; if not exceeded, the whole profit of the 10% rate went into their pockets. J. B. Smith stated in the H.o.C.: „They (the Bank of England) sent to their customers and borrowed banknotes from them, in order to prevent the infringement of the Act, and the Act was therefore not infringed.“ Frazer’s Magazine (August 1866) says: „The letter of the law was only saved by the London bankers responding to an appeal from the Bank o. E. Court to pay every night to the banking department all the notes which, under ordinary circumstances, would have remained in the tills of the bankers themselves.“ So the directors secured to their proprietors all the advantage of the high rate. With all these means, the credit of the Bank Act could not be saved. „On the 30th May“, says Gassiot, „its Reserve was reduced to £415,865, and at that time the Bank was entirely dependent upon the nightly assistance of the London bankers, and on the forbearance of its depositors, to avoid the use of the Gvt. letter.“ The principle of the Act as much violated by such reduction of Reserve, as if the limits of issue exceeded by millions.

The Times in leading Article of 13 Nov. 1857, on the panic of that year, said: „Yesterday the commercial public received the news that the Bk. Charter Act had been suspended. The commercial interests of the country should not be submitted to a system by which a law is obeyed so long as obedience is easy, and temporarily swept away as often as pressure or panic intervenes. The houses which in 1847 and 1857 have stopped payment before the relaxation of the law, may well complain that, whilst they have been crushed by the operation of the Bk. Charter Act, others not more solvent or of higher standing than themselves have been saved by the suspension of the Act … . The defenders of the present system will have to face the fact that the Act has been twice suspended in two successive Panics.“

Annual Losses of Fire Assurance. Incendiary Fires.

Extraordinary increase of fires of late in London und Counties, und other countries ausser England. Buildings now generally constructed of less combustible materials. In London 1840 number of fires 681, 1 to 2,800 inhabitants, und 1 to every 379 houses; 1850 868 fires, 1 to 2,673 inhabitants und 1 to every 347 houses. In 1860 number of fires 1,056, 1 to every 2,613 inhabitants und 1 to every 335 houses. In 1865 1502 fires, 1 to every 1900 inhabitants und 1 to every 250 houses. In 33 Jahren von 1833 to 1865 recorded fires in London 29,069 und Capt. Shaw has compiled a table showing the causes of those fires. Candles caused 11%, Curtains nearly 10%, Gas nearly 8%, Flues nearly 8%, Sparks from Pipes 4½%, Children playing mit fire 1½%, Lucifer matches 1½%, Smoking Tobacco 1½%, Stoves 1½%, Spontaneous Ignition nearly 1%, und other known causes 19½, while the unknown causes were 33%. But the proportion in London fires, of unknown causes has increased from 25% in 1850 to 41% in 1860 und 44% in 1866. Of the 589 fires from unknown causes in London, 1866, no less than 480 were on property insured against loss or damage by fire in one or other of the insurance offices. The latter know not how many of them willfully caused, but more than ⅓ of all the fires in London are regarded by the insurance offices und der fire brigade as involved in suspicion. … The idea that in any civilised (!) country there could be wretches so abandoned as to trade in fire, to contrive and design the letting loose of an agent so uncontrollable and so destructive in its ravages for the infamous purpose of making a profit by it, is a fearful idea to contemplate; yet considerable number of such wretches amongst us. Besides a number of employees who, having committed frauds und depredations upon the property of their employers, afterwards set fire to the premises to conceal their crimes, there are organised gangs of fraudulent persons who get their living by incendiarism and frauds upon insurance offices. „Their stocks“, it is said, „consist principally of dummies or imitation goods made of plaster of Paris, of half tubs of butter, of rolls of cloth made up of straw of parcels filled with sawdust, of bottles of coloured water and the like.“ These being duly insured, are duly set fire to afterwards, and the insurance office is called upon to pay, not the real value of the property destroyed, but the highest value the felonious incendiary is able to put upon it. These losses did not enter into the calculations of the Cos. when they fixed their insurance premiums. Sie finden nun, daß daher considerable addition to their rates necessary. They do not like to prosecute; they do not like to object to pay; gets them bad name und Prosecution very hazardous thing. Difficult to get legal evidence. Numbers of these claims therefore are paid trotz moral conviction des Office.

16 November 1867. N. 389.

Royal Bank of Liverpool. „Hushing up of Commercial Delinquencies.“

Entire loss of capital (paid up) und Reserves. Ausserdem Estimated Deficiency of £382,470. Interest und Expenses will make this £100,000 more. Call made of £10 per share. One Lady mit 900 shares will have to pay 90,000£. Ruin brought about by grossest mismanagement; besonders manager, submanager und managing director, und culpable neglect der other directors. Large sums advanced upon shipping. Much of this shipping was actually in the hands of the directors, and they were working it under agreements mit den owners, to whom they had made advances upon it. In the case of one of these shipowners, „the directors had entered into an agreement with him for the working of his estate und property for 5 years upon certain terms, and that agreement is still subsisting, and the debtor claims to have it carried out.“ In addition to such advances upon such securities as these, the Bank have for some time past been gambling in their own shares, and lost £46,000 upon those transactions. Original shares to the number of 1280 have been purchased since May 1860, besides preference shares to the number of 264, which the Bank have acquired by purchase or otherwise since 1858. These dealings in their own shares rendered legal by a special clause in the Co’s Deed. But most scandalous transactions of the Bank those with their own officers und directors. The manager is debtor to the Bank to £6,000, balance due upon 1000 shares which he had been allowed to take up, and for which he had paid only £2,850, the original debt having been £10,700. Submanager debtor to amount of £500, on account of 50 shares which he had bought. Of the directors, Bibby and Rae never indebted to the Bank; Holm indebted to the Bank for an old account in connection with McCormack, for which they held securities; Shand, another director, besides being a holder of 4000 shares, indebted to the Bank on his business account; Hutchinson, the managing director, besides being holder of 200 shares, considerable debt on business account. By him, Banner said, Bank would sustain heavy loss. Said ferner: „The agreements before alluded to were executed early in 1860; did not come before the general board; Bibby, Holme und Rae heard only of them after the stoppage of the Bank; they were carried out by the management, did not come upon the minutes of the general board.“ Banner said: It would be asked, what had become of the money? „He had the full particulars of the losses, and the names of these through whom they had been sustained, but it could do no good to publish them.“ „They could not blow up these debtors without doing an injury to themselves.“ He recommended, therefore, „the avoidance of all ill feeling and recrimination … he recommended a voluntary in preference to a compulsory winding up, because by the former they would avoid publicity being given to their documents und affairs.“ Shocking und Banner one of the most respectable men in Liverpool, und so his audience too ! Nach dem law it is a criminal offence to compound a felony. Banner’s arguments have been used, and with fatal effect, for many years past by many boards of railway directors, and, under cover of it, (thus to get more out of the debtors) the duped and quiescent shareholders and debenture holders have been defrauded of millions invested in those undertakings. The same sort of thing has been practised in most of the recent Bank and other failures, and under cover of it the delinquent directors, the causes of those disasters, have escaped without a scratch. The same disposition „to make things smooth“, to „hush up“ observable amongst traders in bankruptcy courts, und still more outside these courts, where merchants und traders annually mulcted of millions of money, the loss of which they are content to put up with, in order to avoid publicity. All this has a most corrupting und pernicious influence. Bankmanagers und Bankdirectors, und traders who get into the confidence of banks with view and for the purpose of swindling them, und managers und directors of other Jt Stock Cos, all know und tempted to calculate upon this disposition of the shareholders, liquidators, und creditors to hush up. They are told that the larger their transactions the stronger will be the disposition to cloak und cover them, to avoid publicity. Times of 13 Nov. (67) says: „These unscrupulous operators upon the banks [know] that if they can but get heavily into debt to a bank, the bank, when a certain stage of peril has been reached, will not dare to allow them to drop, and that when the final crash comes they may count upon the strenuous efforts of all the sufferers, not merely to palliate their proceedings, but to uphold them. Hence, amidst all the desolation they have caused, they not only escape reproach, but are usually favoured mit complimentary expressions of confidence, and not unfrequently the consequence is that when the storm has passed, they reappear, backed, in some cases, by advantageous family settlements made in previous times, as influential merchants or directors of new enterprises.“

23 November 1867. N. 390

London and Mediterranean Bank. Extraordinary Report of Liquidator to Shareholders.

Shareholders und Creditors of this concern in a „fix“ between shareholders und creditors of 2 other unfortunate concerns, the Continental Bank Corporation und die London, Bombay, and Mediterranean Bank. The London und Mediterranean Bank first agreed to take over and absorb the Continental Bank, and then the London und Bombay Bank agreed to take over and absorb them both. But, except as to Assets, assimilation imperfectly performed in both cases. Hence the appearance of the trio in the winding up court. Continental Bank Corporation founded Jan. 1863, 5000 shares of £100 each, subsequently increased to 10,000 shares of like amount, thus making a capital of 1 Mill. £, wholly subscribed. On the first 5000 shares £25 p. share called up, on the second 5000 shares £15 p. share. Bank had thus paid up capital of £200,000. Within 2 years, viz. by the early part of 1865, this Bank had lost the whole of its capital, and was considerably in debt besides; yet, at that moment, the directors in their Report to shareholders, with a most pretentious affectation of candour, regretted that they had sustained considerable losses, „deemed it their duty to make the shareholders acquired with the precise condition of their affairs, and to exhibit the whole losses incurred“, and then confessed that „the total loss amounted to £19,500“. It amounted [to] über £200,000. In order to meet these difficulties, the London und Mediterranean Bank was formed April, 1865, mit capital of 2 mill., in 100,000 shares of £20 each, of which it was stated in prospectus that „80,000 shares had been already subscribed“. Object of the Co. to take over the business of Continental Bk., converting its 100£ shares into £20 ones; and also to take over the banking business of Messrs. Landau et Co., of Alexandria, „and to facilitate commercial and financial transactions between this Country, Continent, and Egypt“. But statement that 80,000 shares subscribed, utterly false. The bona fide applications for the new shares only 1800 shares in number. Yet the promoters obtained a nominal quotation of the shares at a considerable premium. To obtain a settlement on the Stock Exchange, „the fictitious issue of a large number of shares“ was resorted to, in order to make up the requisite proportion of their capital, and, as a necessary adjunct to this, „the parties engaged in this scheme did not hesitate to manufacture a book, purporting to be a banker’s pass book, in order to carry out the pretence of payments of deposits on the fictitious subscription of shares.“ The report further shows that „a large sum, nearly approaching £40,000, was lost out of the assets of the Continental Bank Corporation in the purchase of its own shares “. Trotzdem no settlement, scheme broke down. Landau et Co. discovered that „there was no real substance in the new Bank“, and, although they had received no less than £60,000 to carry on the business, they ultimately obtained an abrogation of the agreement. That transaction mit Messrs. Landau resulted in direct loss of £22,000 to the shareholders, beyond loss of £40,000 on the purchase of the shares in the Continental Bank, making a total loss of over £60,000 on the Landau purchase. But the transfer to the London und Mediterranean Bank of the business und liabilities of the Continental Bank had been so far carried out, that in the course of time the whole of the obligations of the Continental Bank were actually paid or turned into liabilities of the Mediterranean Bank, to the exoneration der Continental Bank, except a claim of London und County Bank, of which £30,000 und interest still undischarged. The liquidation of the Continental Bank entrusted to Maxwell, Cargill, Routh, and Cumming, all of whom had been directors; und diese gentlemen, notwithstanding the resolution to windup from 1st of May had still carried on business till 31 Aug. 1865; und zwar in such a way, that when at the latter date they actually handed over the Continental Bk. Estate to the Mediterranean Bank, it was £64,000 [worse] than on 1st May, when it ought to have been handed over. But, inasmuch as the liquidators of the Continental Bk. were also the liquidators of the Mediterranean Bk., and the shareholders in both Cos. were nobodies, that small addition to their liabilities was of no account. Bank N. 2 having thus failed the purpose of raising new capital, the promoters looked out for some Co. with the requisite Capital already raised with which they might amalgamate. This they found in „London and Bombay Bank and General Financial and Insurance Agency Corporation. Limited“, which had „paid up Capital of 150,000£ nearly untouched“. This bank fought at first rather shy of their would-be partners, but in the end consented to „take over“ the business of the Mediterranean Bank und on Sept. 7, 1865 agreement executed between the 2 Banks for that purpose. Between Sept. 1865 und April, 1866, the whole of the Capital of the London and Bombay Bank applied in meeting the pressing demands of the Continental Bk., or of the London and Mediterranean Bank, in respect of the original obligations of the Continental Bank. This process of pumping commenced „immediately after the agreement of 7. Sept“. „The same cause that brought about the destruction of the Mediterranean – the obligations of the Continental Bank, accumulated by the mismanagement of its liquidation, soon brought about the failure of the London and Bombay Bank, which went into liquidation July, 1866.“

The European Bank (Lim.) Meeting of Shareholders 19 Nov. (67) Appointment of Committee of Investigation.

Bk. o. Europe stopped payment 19 May, ’66. It was first known, for brief period, als „Union Bank of England and France“. Its prospectus appeared November 1862, and it proposed to raise a capital of 1 Mill. £ in 10,000 shares of 100£ each, in order to meet „the growing wants“ of the extended trade between England und France expected to arise out of the commercial treaty with France. Schon its birth shows extraordinary disposition to appropriate or „take over“ other people’s businesses instead of minding its own, by „taking over“ an existing business which had been established for several months. After carrying on business mit moderate success for about 7 months, this Union Bk. o. E. and F. contemplated another union, found in the „English, Belgian, and Netherlands Bank“ a mate in every way worthy of its alliance. This latter lady was somewhat younger than the intended spouse, its prospectus having only appeared in March 1863. It was first the „English and Belgian Bank“ only, but agreed to embrace the Netherlands also; with Capital of 1 Mill. £, in 20,000 shares of £50 each. Before it had organised commencement of its business, invited to alliance mit der Union Bank, Sept. 1863 definitively amalgamated. Henceforth the 2 wedded Cos took the title of „European Bank“, mit united Capital of £2,000,000, in 40,000 shares of 50£ each, of which 20,000 had been subscribed, £10 p. share paid upon them, zusammen £200,000. The amalgamated Co. had commenced business in October 1863 und in May 1864 they concluded an arrangement for the amalgamation with them of the „English and Irish Bank“. This Bk. established in Nov. 1862, Capital 2 Mill. £, in 20,000 shares of £100 each, of which 7,282 shares had been subscribed. Board composed of Sir Robert Walter Carden , chairman, Alderman Rose, then Lord Mayor, and a number of other city men of commercial repute. Had for some time some success, very moderate too. Concern now „European Bank“, nominal capital of 2 Mill. £, of which 34,443 shares subscribed, and £10 p. share paid thereon, making paid up capital of £344,420. Now amalgamation arranged mit London, Birmingham, and South Staffordshire Bank – a Co. started in Dec. 1862 mit Capital of 1 Mill. £, in shares of £100 each, had commenced business in Cheapside in early part of 1863 mit paid up capital of £120,000. Result of this last operation: Nominal Capital of the European raised to 42,966 shares, 15£ p. share paid, paid up Capital of £644,490. Accounts of June 30, 1865 show that the Bk. was then doing a considerable business, deposits über £780,000 und bills payable über £844,000. On 31 Dec. 1865 balance sheet showed deposits to £1,138,319 und bills payable £974,520. In June 1865 dividend paid 5%, in December ’65 3%, zusammen 8% p.a. und Reserve of £45,000. Shares, nevertheless, fell to heavy discount in 1866, und in Folge von call of £5 per share still lower; 19th May 1866 Bank stopped payment. Now what has become of the large paid up Capital of the Co. and its Reservefund? Mr. Conybeare at the meeting of 19 Nov. ’67 said: „the manner in which this Bank had been conducted, was a disgrace to the mercantile community.“ Liquidation had gone on for 12 months, creditors had only yet received 5s. in £. Sir R. W. Carden , he said, one of the directors, ought to be removed from the liquidation. Mr. Kintrea (also a shareholder) said: In the last balance sheet said that the concern was paying 10%, and was in a position to pay other 10%, „but that document“, inducing many to buy shares, „one of the grossest illusions perpetrated. He, for one, desired to bring the directors to a court of justice, to compel them to repay him“. Charges against the directors, besonders the chairman und Sir R. Carden of the gravest character. Mr. Finley said that at the very last meeting of the Co. he was advised by the directors to buy more shares. The chairman of the meeting said that „he had called upon Sir R. Carden on the day before the day on which the Bk. stopped payment, and that Carden had then assured him, on the honour of a gentleman, that the Bank was perfectly sound“.

Mr. Hoskins, another shareholder said that in 1866 Charles Bye Colchester, the Chairman of the Bank, had stated that „the Bk. was in such a prosperous condition that he would recommend anyone who, as a trustee, had funds to invest, to invest them in this Bank“. On his question to Colchester what their liabilities were on Foreign Securities, he stated them to be between £70 and 80,000, whereas it now appeared that they were at the time £280,000.

At the meeting der shareholders (19 Nov.) chairman Potter said: Carden had told them they would have von £7 to 10£ per share of their capital returned to them. Stattdessen they were called upon for instalment of £2. 10s. to meet their liabilities, other calls would follow in quick succession. Oliver says: all the original directors of the European Bank , who were so at the time of the amalgamation, had all withdrawn, except Thompson. They had also, at different periods, got rid of their shares. The „English und Irish Bank“, when they absorbed it (June 1864) had up to that time paid no dividend but incurred losses etc. At last meeting, March 1866, Sir W. Carden presided, made highly favourable statement, dividend 6%, Reserve fund 13–14,000£. A retired colonel bought 100 shares on Carden’s Representations. Harding und Morgan, their auditors, at same meeting told, that they were doing profitable business. It was necessary to investigate the transactions with M. Lafitte et Co und namentlich mit der St. Nazaire Co. Die original proprietors der St. Nazaire Co were 8 men, seven of whom held 1 share each; und advance of £120,000 made to it before it was registered. It now appears that another Co. puts in a claim to the land assigned to the Bk. as a security for the advance in question, und die St. Nazaire Co., instead of aiding the Bk. to realise that property, turned round and said they considered they were freed from all liability, since the suspension of the European Bank had led to their embarrassments. … Since it became known that a call of £2. 10s. was about to be made, a great many shares had been transferred to men of straw. There were 2 or 3 clerks in the office whose names now on the register for a large number of shares. One held 200, another 250 (a nephew to Colchester who never held a share while the Bank was a going concern, diese 250 shares). Colchester selbst (der chairman) »who held 2,467 shares, does not hold a single share now.« Kintrea (shareholder) says: „Colchester the high priest of the sacrifice of the Bank; was it true that for getting the advance made to the St. Nazaire Co. he obtained 600 paid up shares in that Co … During the whole time the shareholders were being propitiated by high dividends und deluded by favourable statements, they made loss after loss. There was so much rottenness und foul play going on in the management of the concern that it was questionable if a criminal court was not the proper tribunal to inquire into what had taken place.“

7 December 1867. N. 392.

Incendiary fires. Blue Books of Parliamentary Committee of Inquiry, published in last Session. (1867)

P. M. Dove, manager und actuary of the Royal Insurance Co, says in his Evidence: had in 1865–66: 3,036 fires; causes ascertained 1,732 cases, oder 57%, but in 1176 or 38% „causes unknown or unsatisfactory“, great proportion of them suspicious. Amount paid on policies, where causes satisfactorily explained, nur 24%, auf andre 61%. Many of these fires their „frightful source“ in deliberate design of warehousemen or servants, to conceal robberies perpetrated upon their employers. In Liverpool, says Dove, „viele solche fires durch warehousemen; when the time came to take stock, best method of getting rid of the difficulty, to fire the premises. One of those men tried, confessed his crime, sentenced to 10 years’ penal servitude.“ In other case: Culprit of 4 brothers, who seem to have devoted themselves to the business of insurance and incendiarism as trade to live und thrive by. „One of the brothers has had 2 fires in 1 town; another 1 fire in another town; the third 1 fire in another town, all of which were insured in other Cos, and 4th brother had an insurance with the Royal.“

Bank Shares. Recent Variations in prices. Dividends.

National Provincial Bank of England announces dividend und bonus of 20% p.a. for current half year, 22% in corresponding period last year. Die London and County Bank have all the advantages of London Banks as regards obtaining deposits on the lowest terms that prevail und can avail themselves of the higher rates charged in the agricultural districts for accommodation, which, even in times as the present, rarely descend much, if at all, below the old orthodox 5% p.a., with the usual commissions.

W. Abbott in seiner Stock Exchange monthly price list, gives dividends last paid (first half year 1867) und Prices of stocks und shares. Dividends varying zwischen 4⅜ und 11⅜% p.a. ⦗reckoned on present prices⦘, the average return from 31 foreign and colonial banks: 7£. 16s. 3d. %. On the quotations of 1st July ’67 the Return would average about £7, 15s. 10d %, at Dec. 1 1866 average £8. 13s. %, on 2 July ’66 £8, 10s. 8d %, on Dec. 1. 1865 £7, 12s. 6d %. Shares of London und Westminster before issue of the new shares £96, now £100. Shares of London Joint Stock Bank on June 1 £46, on 1st Dec. 67 £37½ ex the new shares, or, with  1/9 of the present premium on the new shares, at £38½. London and County Bank shares on 1st June 61, 1st Dec. 54; Union Bank at corresponding dates £46 und £35 respectively. The variations in these 4 Banks as follows: London und Westminster advanced 4⅛%, the others declined, London et County 11½%, London Jt. Stock Bank 18½%, Union Bank 24%. This decline in great measure due to prevailing despondency in the markets for all Joint Stock Bank undertakings. Shares have been brought to market to provide for calls in other Cos.

21 Dec. 1867. N. 394.

President’s (Andrew Johnson’s) Message on American Currency and Finance. (Ursprüngliche Accumulation at Publick Expense.)

Sagt u.a: „It is well and publicly known that enormous frauds have been perpetrated on the Treasury, and that colossal fortunes have been made at the public expense. This species of corruption has increased, is increasing, and, if not diminished, will soon bring us into total ruin and disgrace.“ „Some of the taxes are so laid as to present irresistible temptation to evade payment. The great sums which officers may win by connivance at fraud.“ He complains that, by the present system of finance, the metallic currency, when collected, is reserved for one class of Gvt. creditors only, who, holding its bonds, receive their interest in coin from the national treasury. „Our circulation now embraces: 1) Notes of the National Banks, receivable for all dues to the Gvt., and by all its creditors, excepting in payment of interest upon its bonds and securities themselves; 2) Legal tender-notes issued by the U. St., and legally to be received as well in payment of all debts between citizens as of all Gvt. dues, excepting imposts; 3) Gold and Silver.“

At the beginning of the Rebellion 200,000,000$ banknote circulation of the country; jezt circulation of National Banknotes und Legal-tender Notes $700,000,000. Compared with Gold und Silver, nach Johnson, diese $700,000,000 Notes nur werth 350,000,000$, also depreciated by 50%. He then shows that the Production of the Precious Metals in U. States von 1849 to 1867 (incl.) = $1,174,000, amount of specie coined during the same period $874,000,000. The net exports of specie (1849-’67) only $741,000,000, leaving an Excess of Production over Exports of $433,000,000. Then, taking the amount of coin in Treasury, and estimating the amount in National and other banks – in all about $160,000,000 –, and also taking into account the specie in the country prior to 1849, he says there are more than $300,000,000 not accounted for by Exportation, and therefore may yet remain in the country.

28 December 1867. N. 395.

Winding up of Joint Stock Cos. in Courts of Chancery. Scandal and Waste attending it.

About 1846 was started a Railway Project called the Warwick and Worcester Railway Co., did not succeed in raising its capital, came never to anything except being wound up in the Court of Chancery. May 1849, order made to wind it up, and it is not quite wound up yet. After nearly 19 years of protracted and costly litigation, a circular issued this month, December 1867, announcing the payment of a first and last dividend. Dieß durchaus keine Exception. Many cases, originally of the simplest character, have lasted ¼, ½ oder 1 whole century. Another Joint Stock Co. – the Agriculturist Cattle Insurance Co – was also started about 1846, fell into the jaws of this insatiate Court, not yet wound up, without any nearer prospect of that most desirable end than when it first entered. Of all the tribunals of the Country, Chancery Court least adapted for winding up Joint Stock Cos. Yet, in spite of all this, und trotz experience of the utter incapacity of the Bankruptcy Courts, which were modified Courts of Chancery, to administer the simple estates of ordinary traders, the Legislature committed the far more complicated estates of Jt. St. Cos. to the Courts of Chancery. Have no officers for such administrative duties. Can only act through official liquidators und their attornies, their counsel and their witnesses, so that every step in the process of winding up is encumbered and embarrassed by the needless forms and ceremonials of the Court, and the costly array of its adjuncts, both in 19 cases out of 20, nothing but expensive, dilatory, and wasteful impediments. Public at this moment experiencing, to their heavy cost, the result of this legislative folly and judicial blundering. Cos. are being continually drawn within the vortex of the Court of Chancery, where engulphed, hopeless for either shareholders or creditors to expect a final release. These torments and delay, calls and costs, and dread of them, verlängern our present financial paralysis. London, Chatham und Dover Railway Beispiel of extent to which the assets are likely to be squandered in actions at law and suits in equity, in preposterous conflicts on technical grounds between the various opposing parties. As City Editor in Times remarks: „every writer on the subject correctly points to the trade which a certain set of accountants and attorneys are enjoying upon the general ruin.“ The liquidators are encouraged to place themselves, and their clients, and the estate, in the hands of the attornies. The attornies very naturally relieve themselves from all responsibility by „taking the opinion of counsel“, and counsel, quite as naturally, are continually advising bills and petitions and motions and applications to the Court which, if not wholly unnecessary, might be avoided. In this way liquidators are constantly occupied in embroiling their clients in litigious proceedings, and involving the estate in the cost of it. Year after year the various Chambers of Commerce have been clamouring for an Act to confer upon the creditors and their official nominee the right and the power to administer themselves the estates of their bankrupt debtors, but their object always frustrated and postponed. There is a „lawyer power“ in Parliament which is wholly inimical to the „commercial influence“ there. Hence the difficulties in obtaining either a bankrupt law or Jt. St. Co. Law at all adapted to mercantile requirements.

Joint Stock Co. Law. Misrepresentation in Prospectus. Sir Edmund Lacon’s Case.

„Great Yarmouth Royal Hotel Co.“ (Lim.) promoted und got up by a certain Hawes, Febr. 1865, for the purchase, „upon very advantageous terms“ of most valuable properties on the Esplanade at Great Yarmouth, including the „Royal Hotel which for many years had been so well conducted by Mrs. Sizeland“. Capital £25,000 in 2,500 shares of £10 each; defendant named in the prospectus as one of the directors. Hawes was to receive £2,500 for promotion money, out of which, by arrangement mit den directors, he was to pay the first directors’ qualification in the shape of 10 fully paidup shares each, the qualification of the subsequent directors being stated in the articles at 30 shares. It was not „a bubble“. There was a good and bona fide business, but not successful; on 24 Febr. 1866 a winding up order was made. Present proceedings originated in Bill filed by Rev. Mr. Henderson, against Sir. E. Lacon et the other directors, to have his name removed from the list of contributories, and his allotment and deposit money repaid to him, on ground of misrepresentation in prospect, and through the subsequent stages of the Co’s career. Case came before Vice Chancellor Sir W. Page Wood. Wood decided for the plaintiff against Lacon et other directors.

»The prospectus represented that the directors had „concluded an agreement“ for the purchase of the properties; that the Co. would enter into full possession of the hotel „early in the ensuing spring“; that the house, „prior to the ensuing season“, would be remodeled and enlarged; and that „the directors and their friends had subscribed a large portion of the capital“, and offered the remaining shares to the public.« Henderson darauf applied for 50 shares, on 15 March 1865 allotted to him. But May 1865, from circumstances which came to his knowledge, Henderson began to doubt the bona fides and prospectus of the Co.; and having found upon inquiry that only 762 shares had been allotted and only about 430 more agreed to be taken; that the directors were not duly qualified, and that such shares as had been taken had not been subscribed for by the directors and their friends, he wrote, July 1865, for return of his allotment und deposit money, which was refused. On 25 July (65), therefore, he had filed this bill. It appeared by the evidence that „the agreement for purchase“, so far from having been „concluded“ in February, was not concluded until August, and that the business of the Co in the hotel did not commence until July. As to the other statements, Wood, the Vice Chancellor, said it was clear that there had been a misrepresentation in the prospectus as to the „directors and their friends having subscribed a large portion of the capital“. In fact, at the time when the plaintiff made his application no one of the directors had subscribed for shares in any sense of the word, and the friends of the directors, i.e. their business connections, consisted of no more than one firm at Norwich. Wood said „it surprised him that gentlemen of position should consent to authorise what in their private affairs they never would have consented to permit – namely, that their names should be used in this way to carry out a speculation of this kind … it was their plain duty when, on 15 March, they heard of the plaintiff’s application, to have returned to him his proposal, which they must have known had been made upon misrepresentation.“

Mercantile men frequently permit themselves to do, or participate in the doing of things, in their corporate capacity, which they would shrink from in their individual or personal capacity. This is the foulest blot, und the most pernicious und fatal drawback upon the progress and success of Joint Stock Enterprise in this country.

Limited Liability. Joint Stock Cos. Parliamentary Return. (66’–67’) (1 June ’66 to 31 May 67)

Danach: von June 1, 1866 to May 31, 1867 (12 months since Panic ’66): England registered as limited 469, unlimited 5, 474 Cos, dazu 6, which existed prior to passing of Act of 1862, but subsequently registered under the Act as Limited. Nominal Capital about: £35,000,000.

Scotland: limited Cos. registered 22, nominal Capital £897,800; Ireland 22, nominal Capital £400,400, thus making the total number of the Cos. registered under limited liability in U. Kingdom 524. Dazu 13 Cos. for working mines within jurisdiction of the Stannaries’ Court, nominal Capital of £221,000.

There is no longer any doubt that the principle of combination applied to the development of industrial wealth is far more powerful in its influence upon the progress of nations than that of mere individual enterprise. But, when exercised without any legitimate restraint, may be used for the worst of purposes. Under limited liability the nation has, during the last few years, been intoxicated with visions of rapidly acquired wealth. The eagerness, with which a number of speculative persons have sought to enrich themselves at the cost of others has carried with it the seeds of self-destruction, which only required time to develop their fatal results.

Register Money Market Review Jahrgänge 1866 und 1867

1) Banking et Currency.

  • Bank Act of ’44. p. 189, 194, 195, 198. (Bankrate of 10%) (200. 213–14. 216.) „Debats“ on the Act. (224) 244. Expansive Clause (247–8) 249. Profits of Panic to Bk.o.E. 216. Govt Debt to Bank o. Engld. a legalised Fraud. (198), (199)
  • Economy of Banknotes (191) Separation of Acceptances from Deposits (247) Abuse and Use of Bank Deposits (216, 217)
  • Bill brokering et Money dealing (252) Limited Liability applied to Banking (224, 225) Rate of Interest (L. Levi) (212–13) Clearing Houses for Banking. 209, 210, 263–4. Demand for Money and Demand for Capital (203)
  • Influence of Weather on Money Market. (230)
  • Commercial Credit and Commercial Debt Insurance (220, 221) Bills of Lading (Schwindel) (241, 242)
  • Fall in Gold, Rise in Prices of Commodities (276)
  • Joint-Stock Banks. London und Westminster. Liabilities und Securities (265)

2) Crisis of 1866.

  • A) Bank o. England und Act of 44. Reserve of B.o.E. (187) Act Suspension (187, 188) Panic and its Remedy (188) B.o.E. und London Bankers in the Panic (191–2) Times on the Panic (189) Clarendon on the Panic (192) Reduction Bankrate to 8% (Aug. 66) (210–11) to 4½%. (27 Sept. ’66) (217) Watkin’s Motion, 31 July 66. (203–208) Count out (208) Ministerial Opposition (208–9)
  • B.) Theory of Panic. p. 195, 196, 236, 238–40, 266–7, 267, 278. Glasgow Chamber of Commerce on Banking (Aug. ’66) (p. 210.) Manchester Chamber of Commerce Dec. ’66 (p. 243) Rouen und Liverpool Chambers of Commerce (p. 276, 277)
  • C) Securities (Investments) und Panic: Losses. (193) Pressure and Securities (197) Investor Losses from „Bear“ Frights (190) Bears (197, 198, 199) Bears: Leeman’s Bill (254) Stockexchange 256, 263. Stockmarkets: Week ending May 19, ’66 (190) Week ending 26. May ’66 (193) Losses week ending 29 Sept. ’66 (218, 219) Shares and Dividends (1867) (282) Panic about calls (’67 April.) (263) Foreign Loans and Panic (229) Russian Loan. Nov. ’66 (234–5) Colonial Loans (251)
  • D) Joint Stock Banking und other Cos. Schwindel seit 1865 etc. (respective seit 62). Prospectus und Articles: „Russian Iron Works“ (lim.) (197) Promoting und Financing. Bernard Salomon Bernard (199, 200) „Humber Iron Works“ (E. Watkin) (261–63) City Offices Co. (264) Smith, Knight et Co (lim.) (p. 277) Misrepresentation (211) Estates Investments Co (234) Great Yarmouth Railway Hotel Co. (283, 4) Bankrupt Private Concerns converted into Limited Liability Cos. Losses by Shares in Liquidation (217, 218) Directors (194, 195) (Fees 233–4) 254. Railway Dilemma Directors (261) Directors in H. o. Commons (263) Directors und Gellivara Co. (265) Venial Offences und Scapegoats (252) Joint Stock Financing (253) Ditto Management (275, 276) Shares paid to Vendor (276) Increase and Employment of Capital (212) Limited Liability Cos formed since 1865 (275) since May 1866 – about May 67 (284) Drain of Capital for new investments (July ’66). (201) Credit Mobilier of Paris (273) Credit Foncier of England (270) Joint Stock Banks Transfer of Bank of London to Consolidated Bank (192) Failure of Consolidated Bk. (196) Asiatic Bk. Co et. (lim.) (191) English Joint Stock Bk. (lim) Disclosures (219, 220); ditto Scandals (226, 227) Agra and Masterman (215) Joint Stock Discount Co. 232. (Wilkinson) (250–51) Overend et Gurney (224, 225, 229, 233. (Commercial Morality) 235, 237–38, 242, 243–4) Evidence of J. H. Gurney (248) 250, 251, 253, 254, 255, 258, 259, 260. Directors dieses swindling Concern (263) Commercial Morality, 263. H. o. Lords 270, 271, 272–3 Barned’s Bank (245–46, 265–6, 267.) Leeds Banking Co. Conviction of Greenland (253–54) His pardon (267–9) Royal Bank of Liverpool (277, 279) London et Mediterranean Bank (280) European Bk. (281, 282)
  • E.) Railways. Dont pay. (191) Debentures (211, 212) North British (Hudson) (230, 231) (261) Great Eastern (231) Cardigan et Carmarthen (232) Difficulties (232) Lloyd’s Bonds (241) Act of 1866 (244) Consolidation (251–2) London Chatham und Dover (253, 255) Zusammensetzung des Investigation Committees (255) South Eastern Directors (257) Years’ (June ’67) Fall of Railway Property (265)
  • F) Plethora of Money. How to be Employed? (230) Plethora. (255)
  • G.) Limited Liability Act. of 1862 (p. 190, 191) Gerichtssporteln. Parliamentary Committee of Inquiry (255, 256) Liquidators (263) New Act (Amending) of 1867 (270, 270–1, 272) Winding up in Chancery Courts (283) Large uncalled capital in limited liability Cos (232, 254, 263) English Capacity und Blundering (214)

3) Board of Trade Returns.

  • Week ending June 2, ’66 (196) Their Incompleteness (Week ending Nov. ’66 etc (257) Food Supply Nov. ’66. (232)

4) Cotton Trade.

  • Sept. 66 (215) Dec. ’66 (236) Jan. ’67 Circulars (246) Past and Present of Cotton Market Jan. ’67 (248–9)

5) India.

  • Indian Banks and Banking (221–24) Gain to India by Cotton Famine (227–28)

6) U. States.

  • American Exchanges and Grain Trade (June ’66) (196, 197) U. States Trade (July ’66) (p. 197) American Money Matters (202) U. States Bonds (214, 215) American Railways (228–9) American Currency et Finance (282–3) What is a Five-Twenty Bond? (193) Annual Circular of American Commercial Agency (194)

7) Miscellaneous.

  • Insurance and Incendiarism (p. 211. 278–9. 282)
  • Public Debt of Russia (Michell) (274, 275)
  • Goldmines of Victoria (Kitto) (274)
  • Ebbw Co. (Industrial, und Territorial Magnate) (237)
  • Conservative Land Society (247) National Freehold Land Society (253)

  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. ↩