XI B RARY OF THL UNIVLRSITY Of ILLINOIS A FEW FACTS AND REASONS \^ IN FAVOUR OF JOINT STOCK BANKS; IN " A REPLY TO THE PAMPHLET OP GEORGE FARREN, ESQ. OF THE ASYLUM ASSURANCE COMPANY," ON TTIR ALLEGED " LEGAL, PRACTICAL, AND COMMERCIAL DIFFI- CULTIES ATTENDING THE FOUNDATION AND MANAGEMKNt" OF THOSE ESTABLISHMENTS. BY C I V I s. " Ne sutor, ultra crepidam." " A chiel's amang ye takin notes, " An' faith he'll prent 'em !" — Burns. I. O N D O N : EFFINGHAM WILSON, ROYAL EXCHANGE. 1833. PRICE ONE SHILLING. HIIOYAI A['i r^T^^*^ r TO GEORGE FARREN, ESQ. ^'(?. ^c. ^c. Sir, In sitting down to the task I have imposed upon myself of replying to your " Hints," &c., I find it difficult to decide where I am to begin ; for, although you announce yourself to the world as a " Resident" Director, your style is certainly very discursive. However, al- though you havejurabled the three " difficulties" together << In most admired disorder," — yet we know what you mean to urge ; I will not, therefore, stop at present to criticise, but meet you at once upon the question of the necessity for the establishment of Joint Stock Banks ; for I presume even you will admit, that, if a case of such necessity be made out, it will be the bounden duty of the Govern- ment to remove all the " legal difficulties" in the way of their formation. In your developement of these " legal'? difficulties, you impart nothing new. Any solicitor of the humblest pretensions to professional knowledge (indeed, any mercantile person of ordinary information) knew already as much as you publish with so much ostentation, and as to the " practical" and " commercial" difficulties ; 1 think, I shall presently shew that your pamphlet is wholly innocent of all knowledge of either the one or the other. In the first place, then. Sir, I understand you to mean, that the present system of private Banking in London is so perfect as not to require the obtrusion of Joint Stock Banks ; and you even go the length of saying, that if " Aflj/ cases of failure among Bankers" occurred, it would not shake your faith in the system ; as it would do " no more than prove the improvidence with which the particular establishments had been conducted." Why, Sir, this surpasses Burke's definition of the faith of a " British Merchant" :— " His faith is in his Banker /" — Your faith is in all the Bankers. But let us examine this burst of faith. Your love of the system of private Banks in London would survive " the failure oi fifty of them !" Would it ? Pray, Sir, do you know that we have, altogether, but forty-nine Bankers of Deposit in London and West- minster ? And so, if fifty (one morr than the whole NUMBER !) were to fail, your faith in the remainder would be unshaken ! Now, I should have thought, that, as the failure of any one Bank would prove (even to yoii) " the improvidence with which the particular establishment was conducted," the failure of every one of the *^ particular"" establishments forming the whole, would prove that the whole were improvidently conducted: — but no ; your faith would survive even this shock ! and your confidence be undiminished ! Jfiyi^m ynn jbooJ?"' ) I will now, however, set before the public a few of my " Facts in favour of Joint Stock Banks ;" let the public, afterwards, judge between your "Hints" and these details ; and let each man who has money to deposit decide for himself, rnnll .! 1 find that, at the close of the year 1810, there were in London and Westminster the following seventy Bankers of Deposit : - '^^ 1. Anderson, J. and A. 2. Austen, Maunde and Co. 3. Barclay, Tritton and Co. 4. Biddulphs and Co. 5. Birch, Chambers and Co. 6. Bolderos and Lushing ton. 7. Bond, Sons, and Pattisall. 8. Bosanquet and Co. 9. Brickmood and Co. 10. Brown, Cobb and Co. 1 1 . Bromn, Langhorne and Co. 12. Chatteris and Co. 13. Child and Co. 14. Coutts and Co. 15. Coxe, Merle and Co. 16. Davison, Noel and Co. 17. Dawson, Brooks and Co. 18. Dimsdale and Co. ^ 19. Dorrien and Co. 20. Down, Thornton and Co. 21. Drummond and Co. 22. Esdaile and Co. 23. Everett and Co. 24. Forsters, Lubbock and Co. 25. Fry and Sons. 26. Fuller and Co. 27. Glyn and Co. 28. Goslings and Sharpe. 29. Hammersley and Co. 30. Hankey and Co. 31. Harrison, Price and Co. 32. Herries and Co. 33. Hoare, Barnetts and Co. 34. Hoare, H. H., and Co. 35. Hodsoll and Stirling. 36. Jones, Lloyd and Co. 37. Jones, John, and Sons. 38. Kensington and Co. 39. Ladbrokes and Co. 40- Langston and Co. 41. Lees, Satterthwaite and Co. 42. Lefevre, Curries and Co. 43. Manmairing and Co. 44. Marsh, Sibbald and Co. 45. Martin, Stone and Co. 46. Masterman and Co. 48. Perring and Co. 47. Morland and Co. 49. Praeds, Mackworth and Co. 50. Prescott and Co. 51. Pybus, Call and Co. 52. Ramsbottoms and Co. 53. Robarts, Curtis and Co. 54. Rogers, Olding and Co. 55. Sansom and Co. 56. Sikes, Snaith and Co. 57. Smith, Payne and Co. 58. Snow and Co. 59. Spooner, Attwood and Co. 00. Stephejison and Co. 61. Stevensons and Salt. 62. Taylor, Hanbury and Co. 63. Veres and Co. 64. Were, Bruce and Co. 65. Weston, Pinhorn and Co. 66. WJiiiehead and Co. 67. Williams, Son and Co. 68. Willis and Co. 69. Wright and Co. 70. Young and Sons. Of these seventy Bankers existing in 1810, 1 find that no fewer than twenty-two have since stopped payment ! — being 32 per cent, of the whole number I Three of the twenty-two subsequently paid in full, and the following NINETEEN became insolvent.* They failed for about the average of £350,000 each estate ! and have paid the Dividends opposite to their respective names :-^ s. d. 1. Anderson, J. and A 11 4| 2. Austen, Maunde and Co '. I . .'J V None. 3. Chambers and Son, late Birch and Co None. 4. Bolderos and Co 6 9 5. Bond, Sons and Co 15 6. Brickwood and Co ..iti Uivi 5 10| 7. Coxe,Furler and Co., late Coxe, Merle and Co. 12 6 8. Frys and Chapman ; 3 9. Kensingtons and Co 14 7:; 10. Langhorn and Co., late Brown and Co. 1 Their names are printed in italics in the preceding list. 8 11. Perring and Co About 18 12. Pole, Thornton and Co., late Down and Co. .. 11 3 13. ManwairingandCo About 6 14. Marsh, Stracey and Co 8 4 Separate Estate — Fauntleroy 11 7 15. Morland and Co ► 6 16. Sansom and Co •..^.. .....<>•;>••. * None, as yet. 17. Sikes, Sikes and Co. 10 8 18. Remington and Co., late Stephenson and Co. 10 10 Separate Estate — E. Stephenson 3 6 19. Whitehead and Co 16 10^ We have in this list the results to the public of these insolvencies. They present a total of debts due at the times of failure of £'J,S50,0(K) in Deposits paid in by Customers ! who, like you, had " faith in their Bankers ;" and as ihe dividends paid do not, on the average, amount to eight shillings «wrf three- pence in the pound, the LOSS by these insolvent Bankers exceeds the prodigious sum of £4,000,000 Sterling ! A very pretty tax upon the London community. Why, Sir, this sum would suffice for the paid-up capital of four veri/ large Joint Stock Banks of Deposit ; but it is whistled away to the winds, and will never again reach the pockete of, the confiding suiferers. hf r •'^'^•r«f fofT .^ But, admitting, as I am, willing to do, that the private Banksremaining, are sufficiently solid to justify all your praises, and alL your faith in their durability; let us inquire whether there be not room for another Banking establishment ? and to do this ; let us compare the past with the present. If we revert once more to the close of 1810, or the beginning of 1811, and contrast that year with 1832, we are presented with the following results : — We see on the one side that — in 1811 —in 1832 Tlie Population of "^ London and its Vi- J 1,000,516 — 1,474,069 Increase 47 per Cent. cinihj was j Great Kritai.! was ) ' -/^0>^>^G4 - 16,537,393 Increase 30 per Cent. The Circulation of Bank of EiKland in n Notes {vide Report f *" *" Bank Charier), and )■ 38,286,850 — 60,819,000 Increase 60 perCent.* Coin {fide Pebrer's Tables, p 3G 1, Note P.) was . . . The number of Sworn Brokers in Lon- \ 1,000 — 1,200 Increase 20 per Cenf. don was . RN "i We see on the other side, that — Tlie number of PRI- 1 VATE BANKERS off „^ '^ t..^^„,,.^t, , ,, Deposit f,i LoWo« r ^0 - 40 DECREASE 31 i per Cent. was 3 So that whilst the population, tlio circulation , and the transactions ('(he last proved by the multiplication of Sworn Brokers,) of London have all increased so prodi- * Besides which, the following account of tlie Amount of Bank Notes and Coin paid to llie Branch Banks of the Bank of England, for the credit of London Bankers, — and ro-issued to them in London, — will shew the va»t tendency of Money (o the Metropolis in the present time. In four years it has encreased Five Millions ! 1828 £1,288,718 1829 3,491,561 1830 4,637,973 1831 6,255,466 B 10 giously in the last twenty-two years, the number of private Bankers has decreased nearly one-third ! Now, Sir,^ can you venture, after this, to assert that there are no grounds for establishing other Banks ? No, Sir, you cannot venture such an assertion. Neither would one word of objection have been foisted upon the public eye, if you, or your friends, had only heard that one or two private Banking establishments were in progress. ■'T Here, then, we reach the very point at issue between us. If the Banking establishments admit of increase ; ought they to be private Banks ? (such as those now existing), or ought they to be Joint Stock Banks? In discussing this part of the question you help me to an an- swer to your own objections ; for, in pp. 6 and 7, you quote from Smollett the cavillings urged by the adver- saries of the Bank of England, upon the promulgation of the plan for its formation ; and you add — " Notwithstanding this, the Bill made its way through " the two Houses, establishing the funds for the security " and advantage of Subscribers !" Objections equally untenable are urged by you against the formation of Joint Stock Banks at present. How are these objections to be met ? By reference to facts. Jn an appeal to Members of Parliament, put forth in July, 1833, by " the Directors of the Manchester and Liver- pool District Banking Company,"* it is stated, in para- * This Company has a paid-up capital of above £400,000, contributed bj about " 900 partners," many of whom are men of large fortunes ; and this in despite of the fact that the whole fortune of each partner is liable for the Debts of the Bank ! n graph 3, that, " the Bank has been Established above " three years. Notwithstanding the prejudices with " which it hdiA Jirsi to contend, the great utility of the in- " stitution is now universally admitted. Its business is " rapidly increasing, the result of a growing confidence " on the part of the Public;" and in the Annual Report of the Directors for 1831, printed in the Appendix to the Report upon the Bank Charter, it is stated, that " the " number of the Customers of the Bank in Manchester " was upwards of 7OO ; the great majority of whom were " not Proprietors !" and this in a Town where there are private Bankers of undoubted stability ! So here we have the case of a Joint Stock Bank established in the teeth of strong prejudices, and surviving them all until its utility is " universally admitted." And tc/ii/ may toe not anti- cipate similar results to the formation of such bodies in London ? Your horror of such Companies is, however, excessive ; and that you may try to shield the too sanguine from the consequences of their own rash calculations, you press into your semce every conceivable hypothetical calamity ! -mo") • . fdfjl vp/. '^fft nodv/ The "property of the partner^ may not be sufficient to satisfy the judgments against the Bank ;" (and, then, your consistency : You first assume the part- ners to be PAUPERS, and next you " warn" them not to join the Banks for fear of losing their property !) -^he, therefore, who gets a judgment against a part- ner, may get nothing by his motion ; the Public officer " may not have any funds ;" the Directors " may abstract all the monies ;" the different pro- prietors may " live a life of endless squabbles amongst 12 themselves." But do you not see, Sir, that the whole of your argument is based upon the supposition, that it is more likely to find 60,000 Partners insolvent than 6 ! and that it is not easy (indeed not possible) to find twenty- four Directors who will not " misapply the monies*' of the Bank ! Your argument amounts to just what I state ; but really it requires no answer, for there is nothing to- refute. In reply to your " Squabbles," it is only necessary ia remind you, that by referring to the Reported Cases in our Courts of Law, we find very few indeed in which Bankers are parties. In point of fad very little litigatio-n results from Banking transactions ; and quarrels are much. l«ss likely to happen with a body of Directors unswayed: by passion, than with individuals however remarkable for> meekness or forbearance. -. uvj^iixo^i Joint Stock Companies are nevertheless " the pillows upon which you resolve to rest your resentment ;" and accordingly your indignation is levelled against them: but may 1 venture to ask you, Sir, where slumbered all this indignation when the Asylum Assurance Com- pany was brought into life?, Why, Sir, you are like the man in Hogarth's *' Contested Election," who is sawing down the adverse sign, without once considering that the saw is between him and the wall ! For, if Kve ought not to have Joint Stock Banks of Deposit, with "large subscribed Capitals, and small paid-up ones," why should we have Joint Stock Insurance Companies ? Many oF tkem have considerable awiscriZ^ec? Capitals, and moderate paid-ftp ones ; and why? because it is proper to secure ta the public the utmost facility of recovering any just claim 13 wliich individuals may have upon the body, therefore thei subscribed Capital ought to be sufficiently ample to cover every possible amount : but as it is not likelj/ that these claims will ever be excessive at any one period, it is ?.^\\% Why, Sir, your knowledge of Bankers is pretty much on a par with your knowledge of Banking ; and your knowledge of Bank Directors rivals both : for oi these you plainly intimate, in pp. 30 — 31, that some have, upon all occasions, betrayed the confidence reposed in their honour by those houses who have gone to the Bank for assistance. But are you quite sure that the whisperings you speak of sprang originally in every case (or in any case) from a Bank Director ? Is it not much more likely that the whisperings began with the private Banker of the parties ? There is a freemasonry amongst the body of Bankers. They tell each other all they know of the private affairs of any Customer about whom one Banker makes inquiry of another; The Banker who asks the question puts it in nine cases out of ten at the request of some Customer of his own, — who is required to trust the party about whom the inquiry is made ; — and thus it gets round Change very speedily," if application be made to the Bank :" a circumstance which seldom or never happens vie without a previous application to the private Banker of the house. I have myself heard in this way some very odd things, and I can readily account for the rumours in question, without branding the body of honourable men in the Bank direction with the imputation of bad faith. I know not what knowledge yov, have acquired of Mem- bers of that Board, b?it I know some, who noio have seats at it, and some who now, alas ! have not ; and I venture to assert that there is not one amongst those to whom I allude, who would not prefer a death of torture to the betrayal of any confidence reposed in his honour^ — Christian charity enjoins (for it "thinketh no evil,") that I should give equal credit to those, of that body, who are unknown to me ; nor will my confidence in the honour of these men be diminished, until I have better proofs of their turpitude than are afforded by your rambling assertions. Vou deal, Sir ! with these accusations as if they were light things ; whereas, the crimes you impute are disT honourable in the last degree ; and I hold that he pays but a bad compliment to his otvn sense of probity, who can lightly or rashly permit himself to ascribe unworthy deeds to others, without clear and indisputable evidence of their perpetration. . (jj&jvj But your libellings of the Bank Directors are not con- fined to imputations upon their honour, you libel their hearts, and suppose the majority to be little less than demons: for, in p. 31, you say: — " Would the Bank of " England (and the private Banks) quietly submit to " rivalry from Joint Stock Bankers in London ? — Is it *' not notorious that the Bank of England could, by the " sale of Exchequer Bills, withdraw nearly altogether " their Notes from circulation in London ? And ought 17 " they to permit repeated acts of aggression against " them, without severe retaliation ?" — " Severe retalia- tion," Sir, means Revenge ! the passion of devils ; and you would have us to believe, that if Joint Stock Banks be established in Lfondon, the Bank of England would, out of "revenge," withdraw " almost all " their Notes from circulation," and thus send the cry of distress from one end of the kingdom to the other ; lower prices and wages universally ; — in a word, injure most of the opulent, ruin many of the industrious, and de- prive whole masses of the laborious of bread ; and all this, because some other persons started a Joint Stock Bank! If this would not be punishing the innocent for the sins of the guilty, I know not what retribution is ! It beats the Somersetshire peasant hollow, and he " bate " goslin' chicks, 'cause goslin' chicks feythur boite " him !" — for here the party jmnished were at least the offspring of the aggressor. But, Sir, your zeal blinds your perception ; or else you could not but see that such diabolical conduct as you would ascribe to the Bank Directors would punish themselves. What is their great scource of profit, pray ? Interest upon their issues. If they call in their Notes, and keep them in, away goes half a Million of Interest per Annum ; and then whence are the Dividends to come ? But if the Directors even were to be so weak, so blind, or so] wicked, as to do this thing, do you suppose that the Government, or the Nation, would be quiet spectators of their own ruin ? How much the Directors of the Bank of England are in your debt for your confidence in their honour, your notions of 18 their humamli/, and your ideas of their management ! That body may manifest its sense of obligation to you in any form which it may choose, and to them I leave you, for 1 have no more to add upon this division of your pamphlet. But before we part, I must say a word or two in reply to your assertions respecting the losses likely to accrue to Proprietors of Joint Stock Banks. In proof of these probable losses, you instance the cases of /Aree failures amongst the Scotch establishments. This reasoning is inconsistent and disingenuous. Inconsistent ; because you have asserted, in the commencement of your pamph- let, that if " FIFTY cases of failure" happened amongst the private Banks which you patronize, it would not change your views of their excellence (^although there are not fifty of them altogether !) — and yet from the failure of three joint Stock Banks, you deduce the in- security of all others. Disingenuous ; because whilist you dwell upon the failure of the three Scotch Banks you instance, you studiously avoid all mention of the other Joint Stock establishments in Great Britain,, which have had a success so distinguished, that their Shares bear high premiums, as may be seen in the following list of some of them :-4 tiiWi i . dt &i isdV/ . , f.(iMl.){7i(l' Of'; Birmingham • • Halifax .....^.... ...,•• Huddersfield Lancaster ^. ........... Liverpool & Manchester District Manchester ......... ........ Bank of Scotland . . . . : Royal Bank of Scotland , . British Linen Company Commerei^l •••»•.• tilasgoV 'Union .....'.;..;.!.. National . . . . « ,....:.... Western Bank of Scotland .... Provincial Bank of Ireland , . , . Amount paid PreSeittValue Profit on Original up per SI are. per Share. Subscription. £. s. d. £. s. d. £. 5 13 160 per Cent. 5 21 320 -- lU.M 20 SO 50 — 10 16 60 — 10 12 15 30 — 15 19 10 SO — 83 6 8 150 80 -r- 100 154 54 — 100 225 125 — 100 162 62 — 50 54 8 — 10 IS 15 38 — SO 34 13 — 25 36 47 — m I think that the preceding particulars give a very sufficient reply to this division of this " result ;" but you go on and say, in page 26, that *' Banking must be ** whilst Usury Laws exist" (by the way they are virtually repealed by the Bank Charter Bill) *' less profitable than *• the lowest business in the Catalogue of Trades." Sir ! I submit that, iftrue^ this proves too much. For if Bank- ing Incomes be so very low, by what means are all the establishments of the many partners in each firm sup- ported ? Your expression of " Joint Stock Charnel Houses," in the introduction to your second edition (which is equally judicious and well-bred) might justify me (did 1 not anxiously wish to avoid expressions cal- culated to hurt the feelings of others) in following up my own query further : I will not, however, allow myself to be led on by your example of supporting my argument by injurious animadversions ; but should you be so ill- advised, as to carry further your habitual inuendos, and unfounded insinuations, against bodies of honourable men, I may consider myself justified in answering them, by statements of other ^'■Facts'' bearing upon the question of Banking, which I should regret to feel called upon by your intemperate zeal to publish,— but which you, and those as whose champion you appear, would much more regret to see. I shall content myself, for the present, with urging that Joint Stock Banks are preferable to private Banks, as not being subject to fluctuations of for- tune. Individuals may die or part with their Shares.; the Capital of the Bank is unchanged by either event, and the Depositor is never placed in the false position in which he may find himself by deaths in the firm of his private Banker. I humbly submit. Sir, that these 20 considerations greatly outweigh the minor '' difficulties'^'^ upon which you dwell, and that it is better to incur the lisk of letting a rival Merchant, who is a Director, have a chance of looking at one's transactions, (and no Mer- chant likely to be elected a Director of any respectable Company would degrade himself by such an inquisition), than have the mind exposed for one moment to painful doubts of the safety of one's Deposits. Customers of Joint Stock Banks, y&u say, would expe- rience " uncertainty — want of facility ;" but the reverse of both is inevitable. In the most difficult times. Joint Stock Banks mu«t have greater ability to assist their Cus- tomers than private Bankers, however strong. In the Panic there were private Bankers (who are now re- spectable Bankers) who would not discount the most indisputable Banker's acceptances, having only a fort- night or three weeks to run I Indeed, in those days, securities, however indisputable, were of no use in nu- merous cases at the counters of private Bankers. This could not happen if we had Joint Stock Banks, Their solidity ( I am speaking of such as shall be properly administered) would never be called in question ; and the very fright which might withdraw money from private Bankers, and so diminish their powers of doing good, would send the money into the coffers of the Joint Stock establishments, and there form a reservoir for general accommodation. The private Customers of each Bank would, of course, have a prior claim for assistance, and would doubtless at all times have it freely and promptly afforded upon proper security. 21 You wind up with the following finishing " Result ;" and I doubt not that, as your youngest born, you regard that paragraph as the / •?; '' Crown of all your glory.*' " To THE Mercantile world generally, agitation — " speculation — litigation: any thing but reparation " or consolation !" ' Now, Sir, when I read this flippant passage, and remembered at the same time the gravity of the question you were handling ; I could not help feeling that you degrade a most important and vital subject of discussion, by closing it with frivolity so unbecoming the matter at issue. I contend that in place of the three disastrous results you anticipate, the following will be the three rea/ results of Joint Stock Banks in LonBom, if properly administered : — 1st. Increased facility to Commerce, 2nd. Perfect security to the Public. 3rd. Profit and convenience to Shareholders and Depositors. In giving this Reply to the offensive matter contained in your Pamphlet, 1 do not consider that any apology can be due to you. The opinions you express might 22 have been published, free from the calamniou's tone which you have chosen to adopt, and which would justify severer comments ; but should 1 have been led into more details than may be pleasant to others^ I must ground my justification, for giving those details, upon public considerations. The benefits of, and necessity for, Joint Stock Banks in London, have for many years appeared to rne self-evident ; yet it never would have entered into my mind to notice any thing in the shape of fair rivalry with them, or fair opposition to their introduction : but you come forth to assail those boSdies in a vituperative strain : your assumptions and Assertions might be deemed to be well grounded, if left without reply; and as I happen to have strong opinions upon the subject, I have felt compelled to justify those opinions, by the promul- gation of some of the <' Facts" of which I am possessed; but which I did not intend to put before the public until I read your Pamphlet. I am. Sir, Your most obedient Servant, CIVIS. London, Oct. Wth, 1833.