30 November, 1867. N. 1266.

The Economist, 30. November 1867. S. 1352.
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Financing. The Details of an Actual Example. (London, Chatham, and Dover Railway und Peto)

Vor May 1866 system in vogue to raise money in the discount markets for „financing“ purposes by the creation of fictitious bills purporting to be drawn on the Continent, America, and elsewhere; Accommodation bills of the very worst character – of persons trading under false pretences and Credit.

Early, in 1866, the London, Chatham and Dover Railway was in extremis, violent effort made to avert the crash. By a certain elaborate machinery of trusts, the Railway Co. purported to contract to sell to Peto certain lands at Blackfriars said to be surpland surplus land, aber nach evidence der parties now before the Courts, not surplus or available land at all. Upon the security of these alleged available lands, Peto arranged on 21 Febr. 1866, for an advance of 135,000l. from the then Imperial Mercantile Credit Association, which failed in June, 1866, and for 190,000l. (in all 325,000l.) from the General Credit and Finance Company. These 2 Cos. were not to advance any actual money at all. They were to give their acceptance to Bills to be drawn from time to time during a twelvemonth by „firms or individuals resident on the Continent of Europe, and in that behalf approved by the Credit Cos.“; and the bills so drawn and accepted were to be handed to the Borrowers „for Discount“. The Credit cos. were to be paid a commission of 5% for the twelvemonth; i.e. 6,750l. as commission on the 135,000l. und 9,500l. as commission on the 190,000l.; and in the untoward event of the Finance Cos. being at any time under actual cash advance, the rate of interest to be charged by them was to be 4% p. annum above the minimum Bankrate; such rate never to be computed for this purpose at less than 8% p.a.; so that for the use of actual cash, the Borrowers had to pay 12% interest and 5% commission.

The following are the actual clauses of the Deed of 21 Feb. 1866:

3) „The Credit Co. (Mercantile Credit Association) will advance to the said Sir M. Peto the sum of 135,000l., and such advance shall be made by Bills of Exchange to be from time to time drawn by firms or individuals resident on the Continent of Europe and on that behalf approved by the Credit Co, who shall accept the same accordingly, and deliver the same to the said trustees for discount.“

4) „The said advance and credit shall continue for the space of 12 Calendar Months from the 21 Febr. 1866, and during that period all Bills to be accepted by the Credit Co. as aforesaid, shall be satisfied out of the proceeds from fresh Bills to be drawn on and accepted by the Credit Company as aforesaid, so that the Credit Co. shall never be called on to pay the said Bills or any of them.“

6) „The said Sir M. Peto shall pay all stamps in respect of the said Bills, and all costs and charges and expenses of, or in anywise incident to, the said loan or transaction.“

7) „The said Sir M. Peto shall, as and when the Bills for the said sum of 135,000l. be presented for acceptance, as the consideration for such acceptance, pay to the Credit Co a commission of 5l. p.c. on the amount thereof for the whole period of 12 months.[“]

8) In case the Credit Co. shall pay any of the Bills so drawn as foresaid, the said Sir M. Peto will forthwith repay to them the amount paid by them, with interest thereon at the rate of 4l. p.c. above the current rate of discount at the time being, at the Bank of England, from the time of such payment to the time of such repayment as aforesaid, such Bankrates never to be computed at less than 8%.

The 325,000l. in money was to be taken from the Discount Market, at any rates which might be necessary, and applied to the purchase of materials for partly finishing |178 a London Railway. But the transaction was to be disguised by procuring Bills to be drawn from abroad in amounts, appearance, and dates, as nearly like ordinary mercantile Bills as possible, and the process was to go on by means of renewals for at least a year. The Finance Co. came forward as the intermediate party, and carried off 5% commission for the use of his name.

We see, in this case, the exact details of the kind of transactions by means of which the Rate of Discount was carried to and maintained at the exorbitant figures which prevailed so long before the final collapse of May 1866. So long as Overend and Co.  Zusatz von Marx.
(und andre!)
could keep their credit, there was a place in London where Bills of the kind in question were not too severely criticised.

The Finance Co. fared badly by this transaction. Of course the „firms or individuals resident on the Continent of Europe“ being mostly boys in offices signing Bills at a few shillings a quire were quite unprepared to provide 325,000l. Peto was still less prepared – and the London, Chatham, and Dover Railway even still less than Peto. The Finance Cos., therefore, were left to find the money as well as they could, claim now against Peto and the Railway, for the principal, interests, and Commission. It was alleged last Session before the Parliamentary Committee on the London, Chatham, and Dover Bill, that the Borrowers, so far, were more acute than the Lenders; that not only was the alleged surplus land not really available, but that the same pieces or plot of land were positively made to do duty as security on the same day to the 2 lending Cos., that is to say, the land was pledged twice over.

The Economist, 30. November 1867. S. 1357.
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Landlord and Yearly Tenants.

Wm. Walton, (farmer) of Clawton, near Alton, Hants, writes to the papers: „It is neither the want of capital, industry, nor judgement that keeps the farmer poor and the land half cultivated, but it [is] the want of security for the extra capital employed upon the land. All landlords who do not give sufficient security for capital laid out upon their farms, particularly cold clays, are the whole and sole cause of the land not being properly cultivated. 1/3 or 1/2 more corn, beef, mutton, pork, and all other food for men, could be produced in old England by this little word security.“


  • London. 1868.
  • 1866 „The Economist“ (Jahrgang 1866) vol. XXIV.
  • The Social Economist, 1. Oktober 1868
  • „The Economist“ (Jahrgang 1866) (Fortsetzung)
  • Jahrgang 1867.
  • Register der obigen Auszüge aus dem Economist für 1866 und 1867.
  • The „Money Market Review“. Jahrgang 1866.
  • The Money Market Review. Jahrgang 1867.
  • Register Money Market Review Jahrgänge 1866 und 1867