187

The „Money Market Review“. Jahrgang 1866.

Saturday. May 19. 1866. N. 311. Panic. Bank o. E.

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The Money Market Review, 19. Mai 1866. S. 659.
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Money Market.  Zusatz von Marx.
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(Reserve of B.o.E.)

On Friday evening (11. May) Gladstone stated in the H.o.C. that the reserve of the B.o.E. fell that day from close upon 6 millions to 3, and the Bank Return shows that in the course of the entire week it has fallen from nearly 6 millions to one. The demand for loans, after removal of Bank Act ⦗a few hours more of intense panic would have absorbed this reserve altogether⦘ during the week more than 10 millions, greater than ever known in any previous week of the Bank[’]s history.

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The Money Market Review, 19. Mai 1866. S. 659/660.
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The Recent Panic and Bank Act Suspension.

Kein solcher Panic seit 1825. For a long time previously, day after day, and week after week, persistent endeavours in the Times to bring all the financial associations into disrepute. Continual repetition of damaging insinuations could not fail to prove injurious to the credit of these Cos. and depreciate to some extent the value of their shares, as well as the value of the securities on which their advances had been made. When the favourable moment arrived, therefore, when the disreputable doings of the Joint Stock Discount Co. and the Contract Corporation had excited a large amount of public suspicion and distrust, and the imminence of a great Continental War was added, the speculators for a fall in the Stock Exchange had every inducement to extend immensely their operations, and every reason to calculate upon their success. These operations, it is said, have resulted in the realisation of large fortunes by many of the adverse speculators. For the Cos which were at all „financially weak“ – the effect was crushing. The depreciation in the market price of their shares was certain to be accompanied by a corresponding depreciation in the market value of the securities on which their investments had been made, and the depreciation of both led their customers to a withdrawal of deposits. This the result calculated upon by the speculators, and enforced. But as the conduct of these unscrupulous gamblers, that of some directors of these Cos has been infinitely more reprehensible. It is freely said that some of these directors, like certain animals which are known to follow in the trail of other beasts of prey, more savage and courageous than themselves, for the chance of partaking of the offal that may be left behind, have been following the lead of the Bears, and selling on Speculation the shares of their own Cos. These have been attempted to justify or palliate on the shallow pretext. Feeling certain that the operations of the „bears“ must frighten the public and induce them to sell, and a fall of prices must therefore ensue, they have followed the movement and have sold also, thereby accelerating and increasing the fall. Suchten dieß to justify or palliate on the shallow pretence that, by subsequently buying back their shares at the reduced prices and whilst pocketing the profits – or, in other words, sharing with the bears in the plunder of their own shareholders they have been sustaining the market.

On Thursday, the 10, the panic, which till then might be said to be still „looming in the distance“, fairly set in: at 1/2 4 o’clock had culminated in the stoppage of Overend, Gurney, et Co. News flew like wildfire in all directions, in an instant telegraphed to all parts of the country. Dense masses congregated in the streets around the doors. It was clearly perceived that this Overend stoppage would be the signal for the commencement on the following morning of a „run“ upon every other banking and financial establishment, whose credit had been called into question. „Not even in the panics of 1847 and 1857“, said the Daily News, „was the apprehension shown this day equalled. The circulation of mercantile bills, however good, is completely paralysed. Merchants who have the most |188 undoubted paper find themselves under the risk of inability to meet their engagements by reason of the partial or complete collapse of the money market.“ Even the Times City Editor declared that „unless prompt steps were taken, the close of that week would be marked by disasters such as had never been equalled in our commercial history“. Means must be devised, he urged, for stemming the insane torrent of the panic, or it „would not only affect the metropolis and all the great provincial centres of our commerce, as well as our Indian colonial and the foreign markets, but would at once lead to a suspension of public works throughout the kingdom, and in every district throw thousands of people out of employment.“

The time for action had arrived. The only action possible was, in the first instance, a deputation to Gladstone (Chancellor of the Exchequer) composed of representatives of the leading institutions and firms of the City, to urge him, not in terms to suspend the Bk. Act again, but in fact and in effect to supersede it. Friday Morning (11 May) came the anticipated run upon the other banks and financial institutions, and such a pressure upon the discount Department of the B.o.E. as had never been experienced before. Under this pressure the Bk. raised the rate of discount from 8 to 9%, and as regards advances on stock to 10%, and even upon those exorbitant terms it was only on the most unexceptionable bills that money could be obtained. Partially known on Thursday evening the closure of the Joint Stock Bank, its liabilities only about 8 Mill. £. This announcement was followed on Friday Morning (11 May) by the suspension of Peto, Betts, and Co (mit liabilities to £4,000,000) and of W. Shrimpton, railway contractor, for £200,000. In the course of the day it became known that Imperial Mercantile Credit Association had succumbed, the Consolidated Discount Co. has suspended. Several banks severely pressed, but the „run“ was well met. Lombard-Street was thronged in a most extraordinary manner by crowds and gazers, watching the movements at several banks. So great these crowds that the streets almost impassable … constant streams of depositors and customers with anxious faces as they passed and repassed through the doorways of the banks …

Several informal communications from the bankers of the City made to Gladstone during the day, urging the immediate suspension of the Bank Act, but the Bank (o. E.) Directors had made no application, nor expressed any desire on that subject, and Gladstone unwilling to determine anything without some formal application. In the meantime the pressure upon the Discount Department of the Bank such as without parallel in all its previous history. In that single day the Bank extended its loans and discounts to a sum of more than £4,000,000, so as to reduce the reserve from 5 millions and 3/4 mill. to about 3 millions. These facts communicated to Gladstone on Friday evening, and on that evening Gladstone was waited upon by a deputation representing the Joint Stock Banks in the City, who were more urgent for a suspension of the Act. Gladstone then decided to send suspensory letter to Governor and Deputy Governor of the B.o.E. He announced this to the H. o. Commons on Friday (same day of 11 May) night. … Thus the Bankact for 3d time suspended.

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The Money Market Review, 19. Mai 1866. S. 660/661.
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The Panic and its Remedy.

If the Bankact had not been suspended then, the B.o.E. itself would have forewith forthwith suspended payment. Three millions out of a reserve of less than 6 mill. went on Friday, and, with a panic becoming more intense every hour as the reserve attenuated, there is no doubt that before the close of banking business on Saturday the B. o. Egd. must have closed its doors.  Von Marx übernommen in seinen Brief an Collet Dobson Collet vom 13. November 1868.
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If the leading members of Gvt had been out of the way, as is sometimes the case when Parliament is not sitting, … the B.o.E. would have stopped payment. It certainly seems strange that the commerce of a great commercial nation should be paralysed because a Minister or two might not be at their posts; but the law, as it stands, may entail a catastrophe thus momentous for a cause so insignificant.

Jezt sagen die defenders des Act of 1844: its peculiar advantage is that it will stop any Panic as soon as the Act is defunct. … The speculation in cotton, in produce, in iron; the institution of Finance Cos., „Lloyds Bonds“, and contractors’ loans, are certainly not the inventions of the Act of 1844. |189 The „phantom“ Reserve of B.o.E. Notes had suddenly fallen to such a panic point as induced a scramble for the Remnant. … Attempt to limit the supply of money, when it was most needed.

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The Money Market Review, 19. Mai 1866. S. 661/662.
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What to do with the Act of 1844?

It does no harm so long as it is doing nothing; it never does any good; it never comes into actual operation without producing evil. It is raising the Bank rate of discount that checks a foreign drain upon our gold reserves, and checks and moderates undue speculation, when it is to be checked … . It is most humiliating to reflect – that the whole of the banking, and financial, and trading interests of this country should hang suspended in the feeble grasp of a body of bank directors, supposed ⦗by the defenders of the Act⦘ to be perpetually oscillating between abject fear and reckless indiscretion. … Banks and bankers imagine that the Bank Act works well for them, and for all the money-lending community, however hardly it may operate upon the money-borrowing public, by keeping up and raising to a permanently higher level the value of loanable money. … The tendency of these frequently recurring periods of pressure and panic is to convert the industrious and enterprising classes into speculative and reckless gamblers …

The landed interest owns less than 1/6 of the national wealth, and pays less than 1/6 of the national taxation.

 Die unter dieser Überschrift versammelten Exzerpte verwendete Marx ausführlich im Brief an Collet Dobson Collet vom 13. November 1868.
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The Times and the Panic.

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The Money Market Review, 19. Mai 1866. S. 662–664.
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Influence that Journal can exercise in bringing about a panic.

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The Money Market Review, 19. Mai 1866. S. 662–664.
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On Thursday evening (10 May) frigtened frightened by the Panic wants something official being done[,] urges deputations from leading banks and firms to press at once upon the Chancellor of Exchequer, warns the Gvt etc[.]

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The Money Market Review, 19. Mai 1866. S. 662–664.
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Friday night (11 May) Bank Act suspended. Saturday Morning (12 May) Times declares that the suspension was not necessary, „and if, as we expect, confidence be speedily restored, we shall attribute it to natural causes rather than to the interference of the Executive Gvt … The Panic would have subsided of itself.“ „The suspension of the Act coincided with the Restoration of Confidence. Confidence would have been surely and speedily restored had the law been preserved in all its integrity.“

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The Money Market Review, 19. Mai 1866. S. 662–664.
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Monday Morning (13 May) ⦗in point of fact, already in its evening edition of Saturday⦘: „To suppose that the panic could have subsided of itself, especially when the news of the condition of London, and of the State of the Bank Reserve had reached the provinces, would have been tantamount to waiting for a miracle.“ And in its leader columns on the same day: „The panic far exceeded the proportions to which delicacy and discretion reduced it in the newspapers, though even they told a sad tale.“ „The concession of the Chancellor of the Exchequer came not an hour too early.“

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The Money Market Review, 26. Mai 1866. S. 687/688.
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It was falsely announced that the Ambassadors of Prussia and Austria had mutually withdrawn. Hence perturbation on the Stock Exchange. Then the Times announcement that „there was not one word of truth in the announcement“.

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The Money Market Review, 26. Mai 1866. S. 687/688.
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Times City Article of 25 May.  Zusammenfassung von Marx.
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Again an article, full of „deliberately false and grossly exaggerating representations of the affairs in the City“, with the transparent purpose to „write up“ the Panic, and set it again a-going.
In that article it is said: „The authority to suspend the Bk. Act has not allayed the panic … the state of embarrassment at the present moment seems to have reached a much worse point than before.“

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The Money Market Review, 26. Mai 1866. S. 688/689.
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In another article the Times has the impudence to represent the „distressed“ London bankers as begging assistance from the B.o.E., while they were calling for „their“ money at the Bank. Speaks of „bankers in distress“, while the B.o.E. was the Bank „in distress“.

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The Money Market Review, 4. August 1866. S. 132/133.
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 The Money Market Review: „City article of Monday“. Gemeint war also die Ausgabe der „Times“ vom 30. Juli 1866.
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On the 1st August (City article)
(on occasion of Mr. Watkin’s motion for a Royal Commission of Inquiry into the Bank Act) the Times  Zusammenfassende Bemerkung von Marx.
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declares all Inquiry useless, and the Act perfect
.

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The Money Market Review, 4. August 1866. S. 131/132.
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On the  Siehe The Times, 2. August 1866. S. 8.
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2nd August
it says: (Leading Article) „The fortunate possessors of capital and credit, whether in Threadneedlestreet or Lombardstreet, sit aloof and administer their power upon purely selfish principles. When money is abundant, they underbid one another, and the B.o.E. lends at 2%, thereby encouraging speculation. When the evil tree is beginning to bear its evil fruit; when enterprise has gone to its utmost limits; when money is gone and ordinary credit falls into suspicion, then the Bank of England trafficks upon the fatal excesses it has provoked, and exacts 10% from its own victims. The other moneylenders do the same, but it is the Bank that sets the example. As a public institution it realises the questionable maxim that private vices are public benefits, for it thrives upon the folly of private speculators, and the 10% which accumulates the Bank ‚Rest‘ and raises the price of Bankstock to £250 means universal difficulty and general disaster. Certainly, there is something invidious in being the chief example of a trade the profit of which is founded upon misfortune.“|

190

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The Money Market Review, 19. Mai 1866. S. 664.
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Investors Losses from „Bear“ Frights.

Recently the current of speculation in the Stock Exchange has set all one way. Prices have fallen – in some instances on merits; z.B. für die Joint Stock Discount shares und Contract Corporation Shares. But upon this comparatively small basis the Stock Exchange „bears“ have erected a huge structure intended to crush all finance and discount Cos. … The bears of the hour not only sell as the old „bears“ were wont to sell, but they combine, and sell in masses, and they back up their sales by endless rumours. If one Co. makes a call, all are reported to be likely to make calls. If „Lloyd’s Bonds“ are held largely by One Co., all are said to hold „Lloyd’s Bonds“. If one Co. has railway contractors for creditors, all are reported to „be in“ deeply with railway contractors. In the peculiarly sensitive condition of the market at present a few rumours of this description, coupled with a smart decline in the price of the shares, bring real and frightened sellers into the market; whereupon depositors get frightened also, and a complete panic sets in. … There has, during the last week, been a dead set against the Alliance Bank, the Agra and Masterman’s Bank, the Credit Foncier and Mobilier of England.

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The Money Market Review, 19. Mai 1866. S. 664.
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The Stock Markets of the Week.

Gvt. Stocks have had a great rally, despite the immense sales forced by banks in hourly fear of a „run“. That investment has been rapidly absorbed by the public, and Consols are restored to a very fair price for a 3% security. … The public have eagerly taken all the Railway Stock which a pressure from the North had thrown upon the market. London Chatham and Dover stock has risen. The German sales of American Stocks seem for the moment suspended, while the American demand continues, so that 5-20 Bonds have shared, although very meagrely, in the general rise.

The variations in Agra and Masterman’s Bank shares tremendous, but after touching 20, the price seems now recovering. In London and County Bank Shares recovery of £10. Speculators for a fall in Consolidated Bank shares were forced last „account“ to pay 10s. „backwardation“.

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The Money Market Review, 19. Mai 1866. S. 664/665.
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The Limited Liability Act of 1862.

So far, indeed, it seems passed for the especial benefit of clever promoters, financiers, and liquidators to the injury of the real investors. The liability, in many instances, has operated as a share. The bona fide shareholder has practically no protection against either unscrupulous directors or against a wholesale system of nominees or „men of straw“, put up as his co-partners in Cos. which have only a trifling amount of capital paid up. Thus the so called Reserve of unpaid capital may be no reserve at all. No real audit. There are some figures which must be published at least once a year; but, in some instances, if not absolutely false they have been grossly deceptive, and in nearly all cases, they are grouped under a few heads in such a way as to convey little or no information – not even to the most acute accountant in the world – as to the real character, or the extent of the commitments of the Co. The securities held against advances sometimes actually involve a liability, and may, in fact, become heavy liabilities instead of securities, without the shareholders having slightest idea of such a risk. … On the creditor side of the account should be given the amount of advances on securities not fully paid up, on securities of works in progress, and on securities representing fully paid up shares in Cos. or Loans brought out by the Co. distinct from those of other cos., also, the amount of cash at call, at interest, also that at the B.o.E., and in hand.

The shareholders selbst grossen Theils am Dreck Schuld. They blindly support directors who admit having transacted such a description of business that secrecy is actually necessary to preserve the Co. as well as the client. Shareholders are led away by plausible observations from the directors as to the evils of exposing details to the public or their rivals; recent disclosures have proved that secrecy allows unprincipled directors and managers to carry on abominably reckless transactions, of which the shareholders are in ignorance until the Co. is ruined. Even when it is ruined, a balance-sheet in accordance with the requirements of the present Act can at the very last moment be issued, showing a profitable position, as was the case with the Joint Stock Discount Co. With regard |191 to the appointment and re-election of directors (the latter being a ceremony which has almost degenerated into a mere form) they are selected because of their names being prominent as guinea-pigs, oder weil sie political, municipal, official, und mercantile duties have in combination with the responsibilities of a directorship over 5, 10, 15 other cos of varying nature with the most diversified objects. There should also be an end to reserve funds being used as capital. If it be clear profit, and is yet wanted for use in the business, let it be added to the paid up capital or invested so a as to prove a real reserve fund in case of need.

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The Money Market Review, 19. Mai 1866. S. 665/666.
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Railways.  Zusatz von Marx.
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(don’t pay)

In these 25 years we have more than doubled our wealth. Sicher the securities which represent about 450 millions of Railway properties would not realise at the existing market rate their original cost. The investors in British railway property are losers. For many years past subscribers for new railways could not be found. There were, however, lawyers, contractors, and promoters. Devices invented whereby, by „Lloyd’s Bonds“ and Finance Cos., and the issue of railway securities at enormous discounts, and the payment to contractors of prices for their work and materials far in excess of the value, some railways have been made, or partly made. But, as Lord Redesdale said in the H. o. Lords last Monday, the system has fairly broken down.

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The Money Market Review, 19. Mai 1866. S. 666/667.
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The Reports of the Asiatic Banking Co., and the Bank of Hindostan, China and Japan (Limited.)

The disastrous crisis at Bombay last year (1865) has told upon the balance sheets and dividends of the various Indian Banks. All have suffered, some severely. Mit Numerous failures amongst firms of the highest standing and greatest repute, and prolonged depreciation of all description of Indian produce the Banks could not escape heavy losses. So sehr bedeutende losses der „Commercial Bank Corporation of India and the East“, ebenso, obgleich nicht so groß, in den beiden oben genannten Banks. Losses of Asiatic Banking Co: £142,000 against profits realised of £61,494. Hatte aber, fortunately, reserve fund of £175,000.

Net profits of the Bank of Hindostan etc for the year £23,485, whole swallowed up by the losses, which have also absorbed £87,794 transferred from the reserve fund. In addition, £70,000 loss anticipated. Sonst sound.

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The Money Market Review, 19. Mai 1866. S. 668.
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The Economy of B.o.E. Notes. 1000£ Notes.

The B.o.E. directors suchen constantly economy of banknotes, so as to keep as small an amount as possible in the hands of the public, and as many in the reserve as they can contrive. A large amount of the whole circulation, perhaps 1/10 (say 2 mill. £. St.) consists of notes of £1000 each, and nearly all these are in the tills of bankers within half a mile of Lothbury. They are of little or no use, except to settle balances among the banking houses themselves, or occasionally for lawyers to pass when they sell real estate.



May 26, 1866. N. 312.

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The Money Market Review. 26. Mai 1866. S. 688/689.
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The Bank of England and the London Bankers in the Panic.

Friends of the Bankact of 1844: If it has been suspended, it has not failed; if it has failed, it was good, very good, that it should have failed; and that it fails as beautifully and beneficently as it operates. Economist selbst muß aber sagen: „Indeed if it had not been broken this month it must have been repealed next month. The panic took the matter in its own hands.“

In the letter of the Governor and Deputy Governor of the Bank to the Chancellor of Exchequer , on the 11. May, they have the impudence to state: „We commenced this morning with a reserve of £5,727,000, which had been drawn upon so largely that we cannot calculate upon having so much as 3 Mill. £. St. this evening, making a fair allowance for what may be remaining at the branches, and unless the money taken from the Bank is entirely withdrawn from circulation there is no |192 reason to suppose that this reserve is insufficient.“ Dieß als »Troops of bankers were coming up from all parts of the country in order to provide themselves with gold and banknotes.[«] The balances of the London Bankers, lodged in the B.o.E., usually from 3 to 5 Mill., and it was clear that, had the Bank Act not been suspended, they would have been compelled to withdraw every 6d. of those balances to meet a tremendous „run“. All those balances must have come out of the Bank reserve of 3 Mill. £.

The Deputy Governor of the Bank was exceedingly reluctant at the conference with Gladstone to admit that there was any necessity whatever for the suspension of the Act, until he was curtly reminded by one of the joint-stock bank directors present that „they could draw a couple of cheques to-morrow morning, which would compel the B.o.E. to close its doors“. Gladstone interposed, „but you will not do it“.

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The Money Market Review, 26. Mai 1866. S. 689/690.
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Lord Clarendon on the Panic.

The panic of 1866 possesses one essential characteristic which did not belong to its predecessors. Continental capitalists have in this instance become alarmed, and, contrary to all precedent, on the seeming verge of a colossal European war, withdraw their money from London as a measure of security, instead of sending it to London for safety, as in previous periods of convulsion. Clarendon , on the morning after the issue of the Gvt. letter, indited his circular to the British embassies and legations throughout Europe, with the view of staying undue panic on the Continent as to British solvency.

We have been taught to think that the withdrawal of a million or two of bullion from the Bank of England is a very serious affair, and that the addition of a million or 2 is the occasion for national congratulation. … The precious metals always have and always will flow backwards and forwards from one country to another, and all law is powerless to stem this natural course … Clarendon tells Europe that long-continued prosperity in commercial affairs and the general wealth consequent on it have produced their ordinary results in encouraging speculation, especially of a monetary and financial character, and in fostering hopes of acquiring wealth by more speedy means than are presented by ordinary methods of commercial industry. …

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The Money Market Review, 26. Mai 1866. S. 690/691.
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Transfer of Business of the Bank of London to the Consolidated Bk.

The London Bank Reserve Fund in its last balance-sheet upwards of £300,000. In April 1864 it paid dividends at the rate of 15% p. annum, price of its shares £122, or £72 premium und damals addition of £200,000 made to the capital by the creation and issue of 2000 new shares. These shares issued to the then existing shareholders at premium of £70 p. share, and the £140,000 realised by these premiums was carried to the reserve funds. At its last half yearly meeting paid dividend of 20%.  Zusammenfassung von Marx in eigenen Worten.
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Came to deadlock
by  The Money Market Review: dealing
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dabbling
in financial transactions.  Zusatz von Marx. The Money Market Review: Such an arrangement is somewhat novel and curious, but, under the circumstances, it is perhaps the best that could have been made.
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Dummes
arrangement mit der Consolidated Bank. Transfer ihr 22 May, evening, the current and deposit accounts of their customers mit ample assets to cover them. Consolidated Bk. undertook the charge of these accounts, but assumed no responsibility für die acceptances der B. o. London. Diese daher unpaid return.  Kommentar von Marx. The Money Market Review: it must be owned that some very nice legal points might be raised in regard to this arrangement, were it worth the while of any party to raise them.
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⦗Dieß ungesetzlich; giving one creditor privilege gegen den other.⦘
Der Fehler to invest Banking Funds, which may be any day withdrawn, upon Railway Contracts or Lloyds Bonds, or other securities based on public works in a progressive but unfinished state. These works may be long in progress, the capital to complete them may not be readily obtainable, the works may never be finished. Until their completion all such securities not only liable to great fluctuation in value, but extremely difficult to deal with as available securities, even if they can be dealt with, as such, at all.

It is the business of a financial association to lend money, or lend its credit for the raising of money, upon securities not immediately convertible, and repayable at longer dates than those at which a banker justified in lending his money. The financial association, lending at longer dates, and on less marketable securities, incurs therefore greater risk, and obtains therefore larger profits than the banker. If the business well managed, higher profits cover the larger possible losses, and enable it to pay higher interest and dividends to the shareholders. But the financial association ought not to take deposits repayable on demand, or at short notice, because their investments not immediately convertible, in case of emergency for the repayment of these deposits. The mischiefs of intermingling the system of the Banking institution mit financial operations lamentably illustrated in the cases of the Joint Stock Discount Co. and the Bk. of London, the London Financial and the Imperial Mercantile Credit Associations.|

193

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The Money Market Review, 26. Mai 1866. S. 690/691.
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Loss in Investments since beginning of 1866 – May 26.

The recent failures and the general depreciation in the value of joint stock investments, since the commencement of the present year, has involved loss at 130 mill. £. St.

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The Money Market Review, 26. Mai 1866, S. 692/693.
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The Stock Markets of the Week.

A steady drain of bullion to the Continent continues, partly to pay for the stock with which Continental holders have lately loaded our market, and partly because the machinery of the Foreign Exchanges is out of gear. Consols are weaker, but only to a trifling extent.

The speculators for a fall have altogether had a good harvest the this week. Individuals or cliques sell in combination large quantities of shares in an undertaking whose very existence depends upon its credit, and then comment on the depreciation in price which they have caused, in a way to bring the credit of such concern into question, and cap the whole proceeding by circulating false and defamatory reports. It is said that men of high standing in the City of London are not ashamed to pocket the profits of these transactions. Such men pick out a high priced bank as their next victim, and repurchase with glee the stock out of which they have frightened timid shareholders.

With the exception of Italian, which seems to have fallen as low as it well can go, Foreign Stocks are all weaker. The fall in Railway Stocks very severe. London and Northwestern have been the greatest sufferers.

The great interest of the week has centered in the market for Bankshares, where the fluctuations have been terrible. The crisis under which India is still suffering afforded a pretext for heavy sales of Agra and Masterman[’]s shares, touched at one time 10l. per share, or 15 discount; but a great rebound has taken place, and they close at £20.

Persons who have locked up their property in their cash-boxes can so invest mit immense profits.

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The Money Market Review, 26. Mai 1866. S. 694/695.
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What is a Five-Twenty Bond?  Zusatz von Marx.
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(Neue Art Convertibility for paper currency)

The Gvt of the U. States have the option of redeeming this part of their debt at par, or 100, after 5 years from the date of issue, and at any period between 5 years and 20 [years] from the date of issue; but, at the expiration of the 20 years, the holder of five-twenty bonds can claim the principal or par value. Similar condition für die ten-forty Bonds, the option of the State continuing in this case after the first 10 years up to 40 years. On both these kinds of bonds the interest is payable in gold, on the former at 6, on the latter at 5% p. annum.

Seventy-thirty Bonds: Interest on them payable in greenbacks, at the rate of 73/10% p. an. (say 7$ 30 cents p. 100 dollars). These bonds exchangeable, at the option of the holder, after 3 years from the date of issue, into five-twenty bonds. By the last advices the relative prices of five-twenty and ten-forty bonds in New York were 102 und 96. Before long – das scheme schon brought forward by McCulloch, the Gvt. will issue a 5% stock at par, and thus exercise the option they have of paying off the five-twenty 6% or substituting a 5% in their place. Chase gave the holders of „greenbacks“ the option of conversion into five-twenties. He could not make his „greenbacks“ equal in value to gold, but to five-twenties, and that he did; and so he paid for the greatest and the most costly war the world ever knew. This is a form of convertibility for paper currency never before devised. But the money was raised at war rates. A „greenback“ issued in payment for cannon and gunpowder when gold was at 100% premium was, when converted into five-twenties, virtually raised at 12%. The purchase-power of the „greenback“ was only 50 p. 100, and upon that 100 6% interest was payable p. annum. Um später dieß to correct hielt Chase dem Staat die option der Rückzahlung etc vor. Mr. Chase’s option of redemption in 5 or 10 years, will be found supremely economical; in the course of a few years we may see a 41/2 or 5% stock substituted for the existing 6% five-twenties and ten-forties.|

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The Money Market Review, 26. Mai 1866. S. 695/696.
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The Annual Circular of the American Commercial Agency.  Zusatz von Marx.
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(Vehmgericht)

Issued from New York. The American Commercial Agency erstreckt sich nicht nur auf U. States, sondern auch British North American Provinces. The review takes the form of an everyday ledger account, the substance of what is known in favour of and against all large merchants and shopkeepers being regularly entered up. This Agency has long proved a terror to mercantile evil doers. In no large American town is it possible for anyone to embark in business without receiving an early call from a representative of the Agency, who puts questions about the previous place of business of the members of the firm, their capital, and their expectations. Into the ledger of the Agency the answers are duly posted, and beneath them such corroboration as the Agency may think proper to obtain. All the entries, in the name of any firm, are accessible to the other firms connected with the Agency, but inaccessible to the firm concerned. (Der Economist hat aus diesem Annual Circular Zahlen über die American failures genommen.) The considerable increase of failures in 1865, compared mit 63’ und 64’, is chiefly to be accounted for by the depreciation of the Currency.

The circulation, in England, as in New York, of a kind of Lloyd’s register of the seaworthiness of firms, would provoke proceedings in the Courts of Law. But as long as we resist the supervision of the Agency, and America submits to it, wir haben keinen Grund für our aspersions on American credit.

In diesem Augenblick great Consignments von Liverpool to New York. Diese consignments are stored in the bonded warehouses, for payment of duties; and the large amount of those duties keeps the market itself bare of stocks. Where realisations are demanded, such consignments take precedence of other sales, and a slight advantage in price – i.e., a moderate discount – universally attracts the jobbers. It is absolutely prejudicial to the standing of a firm to realise on terms of sacrifice; and no house of respectability will obey such instructions. Das Circular sagt u.a: „From all points of view, the prospect warrants the conclusion that the entire production in the U. States in 1866 will be nearly, if not quite double that of 1865.“ Dießmal, nach Ende des Kriegs, very few „drummers“ (commercial travelers) have been sent from the North to the South, sondern der South has gone to the North. Southern buyers have revisited the North, and made their own proposals to sellers. To New new and unknown men sales have chiefly taken the form of cash or produce, or collateral security of some kind – the assignment of planters’ notes, or mortgages, or of merchants’ notes, or mortgages. Old and known men well received, when they appeared with proposals for immediate or partial liquidation of old claims; but there has been no pressing of sales, as in former days.

The opening words of the Annual Circular state that last year (1865) was one of remarkable success in all commercial pursuits, or that seldom or ever has the increase in the surplus of merchants been so considerable or so universal.

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The Money Market Review, 26. Mai 1866. S. 697.
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Act of 1844 and Bank of England.

Our trade £500,000,000 p.a., und amount of capital held on deposit in Bank, payable at demand, not less than 400 Mill. £. St. Surely of greater moment that convertibility should be preserved for such a mass of capital than £7,000,000 should be locked up in the B.o.E. as security for the note.

Nach der Theory des Acts von 1844 the value of money should fluctuate and depend on the variations in the currency. 2 August 1865 Bankreserve £6,461,318, rate of discount 4%. On 9 May 1866 Bankreserve £5,811,745, rate of discount 8%, showing a reduction of £649,573 in the amount of reserve, and an advance of 100% in the value of money. The theory, therefore, of regulating the value of money by the amount of reserve admits of the most capricious exercise.

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The Money Market Review, 26. Mai 1866. S. 697.
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A Pluralist Director.

Thomas Dakin, alderman of the City of London, is a director und auditor in some 20 or 30 Cos, was a druggist, but left that to go to the directories, derives some 1000£ a year from it.|

195

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The Money Market Review, 26. Mai 1866. S. 697.
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The Directors of failed Cos.

The bears may make a dead set at the shares of the Bank of London and the Agra and Masterman, but they know that some of the directors of both these banks are directors of the Imperial Mercantile Credit Association , who managed in January last to carry forward a supposed sum of £100,000 undivided profit; in April to make a call equal in amount to the paid-up capital; and in May to wreck the Co.



June 2, 1866. N. 313.

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The Money Market Review, 2. Juni 1866. S. 720.
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John C. G. Hubbard, M.P. On the Bank Act and the Currency. (Letter to the Times on 14 May.)

He brings the pretentions of the Act down to one single principle „that of securing the convertibility of the banknote“. Aber dieß is no principle at all. Die absolute practical convertibility nur to be secured by limiting the issues of notes to the amount of gold available for the purpose; whereas the Act of 1844 authorises the issue of 14 mill. £ Notes  Zusatz von Marx.
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(jezt 15)
beyond that amount. Hubbard avows that the promoters of the Act „confidently affirmed that, with the enactment which limited all the credit issues of the country, and secured the convertibility of the notes of the B.o.E., would result an immunity from speculations, crises, and panics.“ Aber, sagt Hubbard, in fact: „The Act professed to quiet panics only where panic arose from suspicion as to the validity of the B.o.E. note.“ What necessity, then, for passing the Act? Was the note „suspect“ in 1844? No panic ever did arise from such suspicion. Hubbard sagt: „Men now transact business to 10 × and 20 × the measure of their means; in banking the uninvested deposits are committed on interest to a money broker, who, gathering the surplus of many bankers, lends them against higher interest, and without reserve, so that, when the depositor calls upon the banker and the banker upon the broker, the broker is unable to refund.“

It is the limitation of Bank note issues which causes and aggravates panics, and it is not that limitation which stops a drain of gold, whether internal or external, which is the main object Hubbard has in view. It is the rate of discount which effects that object now, und it can do it without the limitation of issues. The rate of discount, regulated by the reserve of gold, is sufficient.

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The Money Market Review, 2. Juni 1866. S. 720–722.
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The Theory of Panic etc.

All traders require a reserve of ready cash; this reserve[, instead] of being kept about the person or in some hiding place, is put into a bank. The banker can afford to pay the possessor something for the use of it, and makes a profit upon lending it again. Those to whom the banker lends again make use of the money and again make profit; and so it goes on, and the first deposit with a banker is used over and over again. This is credit. Upon this credit basis our trade has increased and wealth accumulated. A cheque upon a banker answers the purpose of banknotes; and the substitution of cheques for banknotes during the past 20 years has enabled us to dispense with banknotes. There are „banking facilities“. In a word, increased banking is increased currency. The restricted currency of the Bankact of 1844 has been corrected by increased banking faculties. … In the ordinary course bankers can calculate with tolerable accuracy the average deposits of their customers. If the balance of one customer is smaller than usual, that of another is larger, and the medium average is fairly calculable. Bankers, therefore, as a rule, lend again the loans of their depositors, retaining as a reserve for emergencies 10 to 12% of the whole, and thus, in an average condition of credit, the same deposits of a banker are used over again performing the functions of currency by cheques equally with banknotes. … In Zeit of discredit, wie jezt: Our currency, as expressed by bankers’ balances, is thus, or has been, in process of contraction, and, in proportion as deposits are withdrawn by timid customers, bankers have less and less to lend. Moreover, if some depositors draw out money from banks, others may; and bankers must be more cautious than usual, and must increase their reserves by holding more notes and gold. The whole credit machine has been put out of gear … The deposits mit British bankers probably 200 mill. or more. What |196 portion of this currency of credit is now practically extinguished by the panic no one can tell … The 20 or 25 Mill. of Bk.o.E. notes nominally constituting the chief paper currency of the country, is a mere bagatelle by comparison mit other forms of credit fulfilling the functions of currency … Destroy this banking system by impaired credit, and the chief part of this form of currency is swept away. This is panic. … In France the credit-structure is diminutive by comparison with our own, and consequently there is much less open to destruction when discredit comes, and much less room for discredit …

By law of 1844, in this country, the basis of all our credit is made the accidental cash balance at the Bk. of England. By this law, and the usages of that law, cash balance of 20 mill., or so much gold und silver at the Bank o. E., is considered more than ample for any superstructure of credit, and British bankers lend 100, 200, or 300 mill. of deposit freely, and the rate of discount low. It is a question [of] how borrowers can be found. On the other hand, metallic cash balance at B.o.E. of only 10 Mill. £, instead of 20, is regarded as ruinous, and the credit fabric vanishes. British bankers lend nothing, call in their outstanding debts, lose their deposits, and make panic; then the question arises where lenders are to be found of any money on any security. The bankers cannot lend. Both ridiculous extremes, they belong alone to the law of 1844.

French commerce has not been educated by law to build much upon a purely accidental stock of bullion, whether large of small. Our banking facilities are virtually a system of currency, open to extreme expansion and contraction. Its expansion within reasonable terms assists national progress; undue contraction of credit checks it. Under law of 1844, the expansion and contraction of credit and currency are made to rest chiefly upon the accidental stock of the precious metals at the Bk.o.E.

A paper pound sterling is not a pound sterling if not convertible into a coined piece of gold such as it professes to represent; and, therefore, the price of gold must continue to express the precise value of the paper promise. But it is a question whether this ought to be more than an expression of value.

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The Money Market Review, 2. Juni 1866. S. 722.
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Board of Trade Returns.

The anomaly is that, while we are receiving enormous quantities of cotton from America, we are also drawing heavy amounts of gold from her.

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The Money Market Review, 2. Juni 1866. S. 722/723.
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The Consolidated Bank (limited)

 Kommentar von Marx.
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Stopped foolishly paymed payment after the transfer to it of the Bank of London.

Consolidate Bank formed of amalgamations at different times between the Bank of Manchester, a Joint Stock Bank, and the private firms of Heywood, Kennard et Co (Manchester) and Messrs. Hankey et Co.

Bank of Manchester established 1829, stopped payment in 1842, suspended business. Reopened in 1852, carried on with profit. In 1860 adopted itself to the Liability Act of 1858 , nearly doubled its shareholders, increased largely current and deposit account. Shares of £10 each, on which £4 paid. 1 Jan. 1863 fusion mit Heywood, Kennard et Co, Lombardstreet. The business of Hankey, established nearly 200 years, was amalgamated in August 1863. Neue shares. Branch established in Norwich. The partners of the private banks became directors of the „Consolidated“. In Sept. 1863 Mr. Brone selected as manager. Die Bank zahlte seit June 1863 10% for year, 1864 161/4% und 1865 161/4%. The deposits held nach last return £3,037,436 und die acceptances £780,564. 22 May 1866 announced on the doors of the Bk. of London that the Consolidated Bank (lim.) had taken possession, and would „protect“ the current and deposit accounts of the B. o. London. Step led to difficulties. Shut on May 27.

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The Money Market Review, 2. Juni 1866. S. 723/724.
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American Exchanges and Grain Trade.

Owing to the backwardness of the American spring, the influence of the American Grain Trade will not be felt upon the exchanges until middle or end of June. In other words, until then there will not be any considerable amount of grain bills offering in New York on London, either to operate as set-offs against our shipments of merchandise, or against our transfer of U. St. and other securities for realisation at the other side … This year Canada comes in direct trade mit England, durch abolition des reciprocity treaty mit den U. St. Under that treaty, the bulk of the produce of Canada passed into consumption in the U. St, and was paid either in cash or by draft on New York, daher in former years stets numerous Canada bills in New York …|

197

In the course of last season the oldest fashioned goods – goods of all kinds which had been unsaleable for years – were cleared out in Canada for cash at high prices to American buyers.

From best information, probable that the American grain trade of 1866 will fall below the usual average. … it is stated in New York that shipments of flour from the French ports to New York are either in contemplation or in progress. … the wet weather, during and after last harvest, destroyed large quantities of wheat; in consequence, good wheat is scare scarce, and sought for eagerly at the moment and for future delivery; Ohio and Indiana, in former years extensive shippers of wheat, are this year buyers in Wisconsin and Illinois. The reason of so much interest at the other side of the Atlantic to the grain trade is, that it is a new and appreciable element of disturbances in the exchanges. If sterling bills are to be sold low, gold will decline; if sterling bills are to rise, gold will rise.

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The Money Market Review, 2. Juni 1866. S. 724–726.
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Pressure and securities.

Pressure in monetary circles forces even the best securities on the market; in fact, none but the least are available at such periods, and the shares of the Ocean Marine Co. have doubtless suffered with many others from this cause.

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The Money Market Review, 2. Juni 1866. S. 727.
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Variations between Prospectus and Articles. The Russian Iron Works Co. (lim.)

In den Articles der Russian Iron Works Co power der directors to increase, without the shareholders, the capital of the Co. to the extent of £500,000. Nichts davon im Prospect. Daher illegal. Und shareholders repudiate the shares. Ausserdem the objects in Memorandum und Articles differ materially from those stated in Prospectus.

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The Money Market Review, 2. Juni 1866. S. 728.
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America. U. St.  Zusatz von Marx.
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(Trade)

All English capital which can be withdrawn from U. St. recalled, because wanted, and value of money is greater here than there. The same cause has led to the return to New York for realization of a large proportion of the 5-20 bonds, railroad shares, and other American securities held here and in Germany since the war. With the exception of some £30,000 of petroleum per week, their present exports very light, not exceeding £100,000 per week, all told. Their cotton shipments are over, the stocks left not exceeding the wants of their own manufacturers. Price in New York higher than in Liverpool und 30 May large purchases made at Liverpool for American account. Till now the proceeds of the stock of cotton on hand at the conclusion of the war, über 2 Mill. bales, furnished them the means of paying their debts to Europe. That being now exhausted, shipments of gold have commenced, schon £2 Mill. already shipped.

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The Money Market Review, 2. Juni 1866. S. 728/729.
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Bearing.

Times says in City Article: „Circulars have been sent to all parts of the country with the words: ‚withdraw your deposits from – – bank‘, the name of the bank inserted being that of any special establishment to be attacked on a particular day. Papers with a similar inscription have been freely scattered in the streets and public places; and letters with forged signatures have been addressed to brokers ordering them to sell 500 shares of such and such Co etc.“

These conspirators furnish themselves with a list of the shareholders in a respectable Co, paying 10, 15, 20% p.a., examine carefully how many of the shareholders are women, clergymen etc who know nothing of commercial affairs – estimate continually how many of these poor creatures can be terrified into selling their shares at any conceivable price, |198 calculate with precision what effect this will have on the Co. itself, and if the shares on which £25 have been paid are now fairly worth £50, undertake to deliver, a fortnight hence, a given number of these shares at £40 p. share. This will probably produce the effect of inducing 1/10 of the widows, orphans etc who are proprietors to sell at £20 p. share. This reduction frightens another 1/10 into selling at £10 p. share. This further reduction brings in another tenth thankfull to sell at or below par and this will stop the concern absolutely, and reduce to beggary the remaining shareholders. Thus the „bears“ will be able to re-purchase the shares at a profit of £50 or upwards per share. The Times acquits them of all „moral delinquency“.



July 21, 1866. N. 320.

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The Money Market Review, 21. Juli 1866. S. 68/69.
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The Bank Rate and Bank Act. Deputation to the Chancellor of the Exchequer.

Watkin moved address for the appointment of Royal Commission of Enquiry into the pressure, the 10% discount etc. Deputation from Glasgow Chambers of Commerce to Disraeli mit memorial, on 18 July. Sie sagen u.a. „Only last week £200,000 shipped to France. Here 10% rate, dort 4%.[“] Mr. Graham, one of the members for Glasgow said: „There was a widespread opinion that the present system favoured the monied interest rather than mercantile.“

Neither want of capital, nor want of currency, but want of credit.

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The Money Market Review, 21. Juli 1866. S. 69/70.
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The Gvt. Debt to the Bank of England a Legalised Fraud upon the Country.

The Bk. commenced its career as a „Government convenience“ by lending the whole of its capital, £1,200,000 to the State at 8% interest, with an allowance of £4000 yearly towards the cost of managing its own business. The Bank empowered to raise an equivalent amount of capital (to that lent to the State) to trade with, by the issue of B.o.E. notes, and the Gvt. contracted to pay in addition to the 8% interest on the loan, £4000 towards defraying the expenses attending the issue and management of the notes on which, in fact, the loan had been raised by the Bank. Such origin and first transaction of the B.o.E., and origin of the Gvt. Debt to the Bank, 170 years ago. This first advance has never been paid off; country, through all its vicissitudes, paying interest on that £1,200,000 to the present day and upon a number of other loans advanced from time to time by the Bank to the Gvt., together £11,015,100, the present amount of the Gvt. Debt to the Bank. Now all these advances or loans made by the Bk. to the Gvt. were raised and made by the issue of banknotes, which the Gvt. authorised and empowered the Bank to issue, and to the validity of which the credit of the Gvt. itself has always, virtually stood pledged. Without that Gvt. sanction and authorisation, and the monopoly of banking and metropolitan banknote issues, the Gvt. secured to the B.o.E., that establishment could not have raised those amounts and lent them to Gvt.

The Gvt. of the country was, therefore, really raising and borrowing money from its own people, and upon its own credit; but through the medium and instrumentality of a banker, from whom it nevertheless received it as a loan, to whom accordingly it acknowledged itself indebted, and to whom it has ever since paid interest upon the amount for periods varying from 170 to 50 years, the last advance having been made in 1816. The banknotes whereon the Bank raised the money which it advanced to the Gvt have never been paid, but remained outstanding in the hands of the public upon the credit of the Bank, but virtually endorsed and guaranteed by the Gvt, down to the present moment. The banknotes actually issued in the first instance, have, of course, come in for payment, but they have all been paid only by the issue of other banknotes for the like or other accounts, in perpetual succession, and have never in any other sense been paid or redeemed. The Bk.o.E. have, therefore, received 20s. in the |199 pound upon those notes; and the Gvt. is still liable to pay them 20s. in the pound upon the whole amount, to the extent of 11 mill. and upwards. The country wanted 11 mill. and upwards of currency beyond the „current coin of the realm.“ realm“ in circulation, and having obtained these B.o.E. notes, indirectly guaranteed by Gvt., they have constantly held and retained them in circulation, and not a single note in that amount has ever been paid off. The whole has remained in permanent circulation, in the hands of the public until the present moment. The B.o.E. receives the interest upon those 11 mill. of money to which it has no claim. The Bk. can only say that they did raise and pay over to the Gvt. 11 mill., in the sense as it would be true for a billbroker or commission agent to say that he had raised and paid over the amount of the bill he had negotiated for his principal. The credit of the Gvt. gave the B.o.E. notes its currency and provided for its payment … ensured its perpetual currency without payment. Zudem during 20 years Bank expressly relieved by Gvt from that liability to pay by a special law. Shortly after the B.o.E. note was made a legal tender. By this the notes placed upon a par with the current coin of the realm. This entirely superseded all question as to their payment or convertibility. From this moment they were the inconvertible notes of the Gvt. Schon hiedurch the „Gvt. Debt to the Bank“, if it had existed before, was cancelled. It is true, that the Bk. is still nominally liable to payment on demand. But even that nominal liability does not attach to the notes issued in respect of these 11 mill., because they never come to the Bk., and cannot come in for payment, for the most disastrous pressure has never reduced the circulation so low as 11 millions, not lower than 15 or 16. Why, therefore, still claims the B.o.E. to hold the Gvt. to be its debtor to 11 mill. and upwards? Of the whole of that sum the B.o.E. did not advance one single 6d. out of its own moneys. The whole of it was raised upon its bank or promissory notes, every one of which still remains, down to the present moment, wholly unpaid and unredeemed. But received interest from Gvt. upon them, as if it had really paid the whole of them. Its note circulation has never been less than the Gvt. debt, but, on the contrary, it has at all times been greater than that debt. The credit, which held them in continuous circulation and exempted them from payment, was the Gvt. credit; and of legislature Acts.

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The Money Market Review, 21. Juli 1866. S. 70/71.
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Bears.

Among the winners by panics the banking and money lending class, und that wary and wealthy fraternity who keep their resources at command when the storm threatens, and use them freely when the hurricane comes.

We have seen quite enough lately of the infamous prostitution of the Court of Chancery by nominal shareholders in joint stock Cos to feel certain that it has been abused, not in the interest of shareholders, but to swell the illgotten gains of gamblers upon falling markets at the cost or ruin of shareholders.

A real fright, cleverly contrived, can scarcely fail to bring down the most trustworthy joint stock bank under the existing system of time bargains.

The writer of ‚Profits of Panics‘ has substantially written the truth … there is no doubt whatever.

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The Money Market Review, 21. Juli 1866. S. 71/72.
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Joint Stock Co. Promoting and Financing. Bernard Salomon Bernard.

Lord Chief justice of the Queen’s Bench und Special Jury occupied 3 days in case, wo der plaintiff swindler. Bernard Salomon Bernard – his original name Salomon only – had heard of a certain iron mine, at St. Columb, in Cornwall, of which Carter, banker at St. Columb, was the principal owner. He had heard also of one Gill, supposed to be a gentleman „of great influence“ in certain quarters in London. He conceived the idea of introducing the one to the other, getting up a jointstock Co., and getting himself a handsome sum from the transaction. Bernard saw Gill, represented him |200 the mine especially rich in a species of iron called „spathose“, peculiarly adapted for making steel.

It does not appear whether Carter ever authorised or empowered him to sell the mine, but Bernard assured Gill that he could get a contract for the sale of it. Gill thereupon saw Captain Blakeley respecting it, and as Blakeley was largely invested in the making of steel guns, and as the one of this mine was adapted for the manufacture of steel by the Bessemer process, the captain readily agreed to become party to the acquisition of the mine with a view to forming a jointstock Co. and working it in connection with his Ordnance Company. Bernard entered into a contract to sell, as the agent of Carter, agreed to sell the property to himself and Gill for £75,000. According to Bernard, £60,000 was to be paid to Carter, and 15,000 was to belong to himself. A Co. was then to be formed, with a nominal capital of £250,000, and a working capital of £125,000, to which Co. the promoters were to resell the mine for £125,000, and thus realise a trifling profit of £50,000 for themselves. The names of Blakeley and Bessemer were relied upon to float the Co., a financial Co. would find the money, and, as the cost of raising the iron would be only £2 p. ton, which, when converted into Steel by the Bessemer process, would be worth £100 a ton, the profits of the shareholders must be ‚prodigious‘. But, when the lawyers come to look into the matter, small difficulty discovered. Carter not the sole owner, had not solely power to sell, had never empowered Bernard to enter into contract on his behalf, and there were other parties, some of them ladies, who had never been consulted on the matter. Fresh negotiations for the sale of the property by all the parties interested at £110,000. Bernard insisted now that the name of his brother Salomon should be inserted into the contract with that of Gill, which Gill would not consent to. Captain Blakeley and the Finance Co., it was said, would not have anything to do with the concern until wholly in Gill’s hands. Gill willing to bring out the Co. in 3 months upon 3 conditions. 1) that the contract for sale be made to him; 2) ditto the negotiations for resale through him; and 3) that „we shall share the profits in equal moieties – half to me and the other half to you“. To these terms Salomon, the brother of Bernard consented, but Bernard, the brother of Salomon, refused to assert, and therefore wrote to the Finance Co. to put a stop to the arrangement. Gill thereupon declined to have anything more to do with the matter. Nothing more of the contract of sale. Nevertheless, Bernard Salomon Bernard, the plaintiff, brought action against Carter to recover „the sum of £23,750 for services in connection with the Perron Iron Mines“. Das Vieh was of course non-suited. Er hatte nur acted in the character of a purchaser, nicht an agent for the seller. Im lezten case, sagte der Chief Justice „his conduct would have been scandalous in stipulating for a share of the profits on the resale of the mine, for in that case he would have a direct interest in keeping down the price, in order to increase the difference“.



28 July 1866. N. 321.

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The Money Market Review, 28. Juli 1866. S. 99/100.
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Banking Act of 1844 etc.  Zusatz von Marx.
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(No Royal Commission, discussion in Parliament)

Erst Watkin’s motion postponed from Friday last to Monday, Monday he was again foiled.

Reason for no Royal Commission of Inquiry „that a time of panic is not a fit one for such an investigation“. In fact, on some pretext, the inquiry is to be shirked. B. o. France does not find it necessary … to impose upon commerce 1/3 of the changes in discount as the B.o.E.

Report of the Associated Chambers of Commerce in their annual meeting in London (Febr. last) gegen den Act. Vgl. British Quarterly Review. (July 1866)

Bk. o. Fr. has reduced its interest von 4 to 31/2%. 61/2 und 7% Market Rate of Discount (Bankrate 10%) für best bills in London.|

201

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The Money Market Review, 28. Juli 1866. S. 101.
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The Drain of Capital for New Investments.

Nach Table sent von Spackman et Son to times Times:

Cos formed Capital authorised Capital Offered. Deposits.
Half Year ended June 30. 1865 160 £.56,302,000 £41,492,000 £.6,551,870
Ditto … 1866 32 8,220,000 6,635,000 1,649,000

Company making is thus shown to be, for the time, almost extinguished.

The figures of the past 31/2 years are thus given by Spackman:

Cos. Capital authorised Capital Offered. Deposits.
1863 263 £.100,053,000 £.78,135,000 £.8,875,550
1864 282 155,887,500 106,523,000 12,545,800
1865 287 106,995,000 75,578,900 12,174,790
1866. Half Year. 32 8,220,000 6,635,000 1,649,000
Total. 31/2 year. 864 £.371,155,500 266,871,900 £.35,245,140.

Diese figures stellen nicht allen drain upon the resources of the country in the shape of new investments dar; for they do not comprise foreign and colonial loans raised partly or wholly in England, some new issues of shares created entirely, and some new Companies omitted by  Zusatz von Marx.
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the illustrious
Spackman.

Also zuzufügen, ohne auf 63’, 64’, 65’ Rücksicht zu nehmen, nur für First Halfyear 1866.

    Foreign and Colonial Loans advertised between 1 Jan. und 30 June 1866.
  • Argentine £500,000.
  • Two Egyptian: £6,321,700.
  • Queensland Debentures.
  • Cape of Good Hope Debentures.
  • Chilian.
  • New Zealand etc
    New Cos advertised in first Halfyear 1866 (omitted ditto by Spackman.)
  • London Meat Consumers.
  • National Coal.
  • London and Suburban Land.
  • Staffordshire Wheel and Axle.
  • United English and Scottish life.
  • South Buckley Coal.
  • South Cornwall Mines.
  • Buckley Mountain Co.
  • Terras Open Workings Co.
  • Ehehardt’s Gunpowder, Montpellier Mining.
  • North Eastern Waggon.

Putting all this together, the drain upon the investment resources of U. Kingd., nominal or real, nearly as follows:

For Half Year ended 30 June last.
Capital offered, as rendered by Spackman … £6,635,000
Other Capital offered, not included by Spackman 12,400,000. Summe £19,000,000.
Deposits, as rendered by Spackman £.1,649,000
Deposits and calls 21,500,000
Foreign Loans partly subscribed in England to £4,000,000
Calls in the same Half year 1866: for Foreign Loans in England nearly £15,000,000

As regards Foreign Loans, a large portion of the proceeds is remitted in arms, ships, munitions of war, machinery, and railway iron; while of the ostensible amount of capital for new Cos only a percentage ever raised and paid upon.|

202

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The Money Market Review, 28. Juli 1866. S. 102/103.
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American Money Matters.  Zusatz von Marx.
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(Specie Drain)

A New York Bankers’ Circular d.d. July 6 says: „The heavy specie shipments to Europe, which were going on at the date of our last circular, June 6, suddenly ceased at the close of the succeeding week, and have since been not only moderate in amount but less than the current receipts of gold and silver bullion from Australia.“ In other words, the specie drain from the U. St. to Europe has been checked by the changes in the price on gold, which on 5 June was 146, and on 5 July 153%. A fluctuation of 7% apparently separates the two periods – one of efflux, the other of stagnation – with no contraction of notes, no action on prices, and no parliamentary or other generalship to balk the enemy. The recent specie movement from the U. St. dates from 1st May. On that date, it may be fairly assumed, the first notes of alarm were sounded in private letters from England. But the U. States Treasury was then well stocked with specie, so that 35 Mill. dollars were thrown on the market, in response to the demand. Parting with that sum, the U. States Treasury withdrew from the „Gold-room“ and left the continuing wants of commerce to be provided on the usual terms of demand and supply. From 1251/2, at the opening of the „Gold-room“ on May 1st, the price was carried to 1681/2 on June 18, to recede, however, as stated, to 153 on 6. July. Thus the precious Metals were acted on in the U. St. as mere articles of commerce. Prohibitory Acts, 1st passed by State of New York (Feb. 18, 1863) prohibited loans on gold coin or bullion, 2nd , passed by Congress, (March 3, 1863) restricted the sale and price of gold; the 3d , passed by Congress (June 17, 1864) absolutely prohibited in certain cases the sale of gold. It so defeated its intended object, that formally repeated on 2nd July, 1864, 15 days only after its enactment.) At no period whatever have banknotes and coin in the U. St. stood in anything like the relation maintained in this country. So, obviously, the exchanges control themselves in the U. St. The banking in New York has been deliberately accepted by the Congress as the model for the national banking system.

Aus:
The Money Market Review, 28. Juli 1866. S. 105/106.
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Coal Export from Port of Newcastle von 1854 to 1864. (in Tons)

Coastwise. Tons. Intercolonial and Foreign. Total. Increase over previous Year. (Tons) Decrease over Previous Year (Tons)
1854 49,880 44,751 94,631
1855 65,870 47,101 112,971 18,340
1856 61,364 70,786 131,150 19,179
1857 60,998 84,553 145,551 13,401
1858 70,385 69,553 139,938 5,613
1859 91,201 150,125 241,326 101,388
1860 104,383 179,453 283,836 42,510
1861 85,060 170,880 255,940 27,896
1862 127,613 229,810 357,423 101,483
1863 140,387 229,856 370,243 12,820
1864 160,710 229,150 459,860 89,617
1865 159,640 302,362 462,002 2,142
Total. 1,177,491 1,878,380 3,055,871

Nur in 1858 und 1861 decrease, diese years periods of strife between masters and men in regard to wages. 1864 rendered memorable in the coal trade of Australia Colonies as the year of the great „lock out“, when the whole of the mines were laid off for a period of 8 weeks.|

203

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The Money Market Review, 28. Juli 1866. S. 106/107.
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Demand for Money and Demand for Capital.

An increase of the monetary requirements of the country is by no means synonymous with an increased demand for capital. The former does often coexist with a decrease in the demand for capital. Notably during every commercial crisis. (sc. panic.) When large failures or suspensions take place, demand für capital diminishes, demand for currency increases. These events diminish the amount of business, hence for the use of capital on loan. The suspended firms cease business, the distrust occasioned induces other forms to contract their operations. Hence demand for capital lessened. But the monetary requirements of the commercial classes increase. Bills, by means of which trade is carried on, become temporarily distrusted. The bills of all merchants connected in business mit den suspended firms are looked upon with distrust both by the banks and by the public. The parties dealing with such firms refuse to accept bills from them and require payment in banknotes. Hence increased supply of banknotes required, although the ordinary amount of business is diminished. But such increase of banknotes only to be obtained from the B.o.E. But when increased demand for its notes, Bank raises the rate of discount. Legal limit of notes, decrease of reserves points to the approximation to that limit. Hence raising of rate of discount. The Bank says not: „we cannot lend so much capital“; it say: says: „we have not enough of notes wherewith to transfer the capital“ to make the loans. Thus rate of interest rises contemporaneously with a diminished demand for capital throughout the country. Every rise in the rate of discount depresses the markets, at once depreciating the value of goods of all kinds, and still further contracting credit. Hence failures and suspensions multiply, and, with every new failure, bills become more distrusted, and banknotes are more called for in payment. Another diminution in the Bank reserve of notes, up again goes the rate of discount. Thus a momentary commercial difficulty aggravated into a serious crisis, mercantile firms go down in scores, the trade of the country is immensely diminished, 10 of 1000nds of the working class thrown out of employment. The legal limitation of Banknotes has totally upset the natural course of things, and made the rate of interest to depend, not so much upon the supply of capital, and the demand for it, as upon the artificially made fluctuations in the amount of the medium (banknotes) by which capital is transferred.



August 4. 1866. N. 322.

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The Money Market Review, 4. August 1866. S. 131/132.
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Currency and Banking.  Zusatz von Marx.
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(Watkin’s Motion. 31 July)

On Tuesday last (31. July 1866), Watkin (member for Stockport) moved for the issue of a Royal Commission to investigate die causes der late Pressure, the continuance for a long period of minimum Bankrate of 10%, and the loans at present affecting currency and banking in the U. Kingd., and to report what alterations had become expedient thereon. The Gvt. had previously determined not to assent to, and accordingly opposed it. Disraeli hatte der Recent Deputation (von Glasgow) gewissermassen diese commission versprochen. Aber  Zusatz von Marx.
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dull
Sir Stafford Northcote (President of the Board of Trade) opposed it. (On the part of gvt.) Obgleich der Act 3 × suspended, „there is no cause for inquiry“. Traders and manufacturers throughout the land are deprived of the ordinary means of transacting their businesses, and their businesses are declining; orders are being curtailed or withdrawn, and their workpeople in considerable number deprived of their employment. The B.o.E., meanwhile, is making a market of the general distress, though every 1000 pounds it makes cost the country a million. Watkins Watkin sagte u.a., daß nicht nur Disraeli und Gladstone (vor ihm) |204 sich gewissermassen pledged for inquiry, sondern: „The Chambers of Commerce throughout the country, including those of Leeds, Manchester, and Birmingham, had associated themselves together, and memorialised the Gvt., and instructed their members to move in the matter … his sympathies were with that great mass of capitalists of the 2nd and 3d class, composed of substantial and respectable men, who, while these things were going on, were brought down to ruin from no fault of their own, and were, in fact, the victims of the laws for which they were in no way accountable.“ A 10% tax, he said, meant a tax of more than double the annual amount upon 300 Mill. £ St. It meant further, Watkins Watkin said, a depreciation in the value of commodities and securities, estimated über 100 Mill. £. St., and although that loss of course did not fall on the large capitalists who could afford to hold their property yet the smaller man, who had to meet his engagements without the power of holding them over, suffered very severely. The loss fell most heavily, not upon those most able to bear it, but upon those least able to bear it. He urged that during all this time when commerce taxes, prices depreciated, large numbers of the working classes entirely thrown out of employment, the profits of the B.o.E. largely augmented. The amount of the Rest on 9. May, 2 days before the panic, £3,237,587; whereas, on 28 July, £3,742,406, increase of no less than £504,819, being a profit of more than 1/2 mill. in 11 weeks. Ferner the advantage, für the B.o.E., shown in the improving value of Bank Stock. In 1844 the price of B.o.E. stock £195, 1847 £180, 1865, after the experience of 2 panics, no less than £250. Comments der Times hierüber on 2 August (sieh p. 189). Watkin said ferner: „during the last 20 years, 3 panics, in 1847, 1857, 1866; and if the House would look at the rates of discount and the times of their continuance at each of those periods … every succeeding panic was of greater severity than its predecessor. 1847, penal rate of discount fixed by the Gvt letter 8%, and endured for 4 weeks. 1857 the penal rate 10%, endured for 6 weeks; 1866 10%, had already endured for 3 months.“ Daher must be some cause or law at work, which, at every recurrence of these crises, aggravated their pressure. Nach Report des Committee des H. o. Lords von 1857 the labouring classes suffer most von der destruction of credit and confidence on which commercial transactions are based.

„What had the Bank done with the authority entrusted to them by Gladstone on May 11th? Our present trade was double its value in 1857.[“] The Bank had not advanced one shilling beyond the fixed amount, während in 1857, they advanced 2 Mill. l. St. the moment they received the Gvt. letter. In order to avoid infringing the Act, they „sent round and borrowed banknotes from their customers“, and were thus enabled to defeat the object of the letter, and cheat the commerce of this country. Motion seconded by Mr. Akroyd; opposed by Northcote , Fawcett , Hubbard , (bk.o.E. director, früher governor of it) und Gladstone. Alle diese fellows admitted the necessity of inquiry.

Northcote’s main objection: that an inquiry now would be premature, would follow to too close upon the panic itself, and »that it would«, if now constituted, »be necessary to examine the partners and investigate the transactions and affairs of the firms which had suffered from but survived the shock«. Flippant remarks of Fawcett , feeble and hacknied arguments of Gladstone . Wegen absence des  Zusatz von Marx.
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graussen
G. J. Göschen , Debatte adjourned.  Zusatz von Marx.
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Elendes
Argument der Times, daß banknotes merely the representatives of gold, or certificates for so much pounds of gold coined at the mint – and the 15 mill. not based upon gold? |208 Diese legal issue must be expanding and contracting je nach den requirements of the public. Der City Kerl der Times giebt in demselben Artikel zu (30 July) daß „14 mill. £ St. notes not represented by gold.“



11 August, 1866. N. 323.

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The Money Market Review, 11. August 1866. S. 167–169.
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Count out on Watkin’s Motion for Enquiry.

Pitiful exhibition of this country in the eyes of foreigners.

Merchants and traders who had nothing do with share speculations or financial shares have been compelled to countermand their orders, manufacturers obliged to discharge their workmen, trade and commerce paralysed throughout the country, because money could not be had to meet engagements and pay wages. Our Foreign minister wrote to our foreign creditors, telling them that we had been overtrading and speculating, and were in temporary difficulties. 10% rate cause of the protracted discredit. The adjourned debate, which should have been resumed by Mr. J. B. Smith , on 3 August, was met by a „count out“. Resolved to shelve all inquiry. Der  Zusatz von Marx.
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würdige
Northcote: „Can you, or ought you, to make money when money is scarce? … There are those who say that the money that there is in the country represents the capital, the loanable capital, or gold, or this or that or the other, for there are different theories as to what money really is … the other school says, that money is only a form of credit.“ A small amount of wit goes a long way in the H.o.C. This These empty remarks excited the laughter of the H.o.C. „It is hopeless for you to investigate practical questions tending to legislation unless you have made up your mind on which of the 2 theories you intend to proceed“ (says Northcote)[.] These different argument arguments secundum Northcote „arguments against inquiry“. Millions of money „labouriously“,  Zusatz von Marx.
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says the Money Market Review
„and honestly  Zusatz von Marx.
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(!)
acquired by the mercantile and industrious classes, periodically filched from their pockets to enrich the pockets of the moneylender“[.] Gladstone (summus!) added that „whatever the nature of the report, he was quite sure, that so far as it dealt with principles and causes, it would not weigh with the H.o.C.“

Fawcett said that the „panic had been produced by the reckless spirit of commercial gambling which had spread itself over the country“. Gladstone (obgleich gegen inquiry) said „that commerce so far as he had observed, had been in a sound and satisfactory state. The charge of excessive speculation and recklessness was not applicable to the manner in which for some years past the general commerce of this country had been carried on.“ Gladstone further says: „we must recognise the great benefits derived from the working of this Act.“ „At any rate the convertibility of the banknote – the first object of currency laws – has been placed beyond the smallest question – not only beyond the absolute reach of dangers, but beyond the slightest taint of danger or suspicion.“ True? The suspension of the Bank Act has preserved the convertibility of the Note. The Banknote was endangered by the Bank Act during each of the 3 panics it has brought upon us, for it brought in view the bankruptcy of the Bank itself. If the doors of the Banking Department were once closed, as they would have been but for the suspension of the Act, how long does Gladstone imagine it would have taken to exhaust the gold in the issue department? When the 10 or 12 mill. of gold withdrawn, there would still be 14 mill. of notes to come in for gold, and there would be no gold to meet them. And the Bankact has preserved the Banknote!

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The Money Market Review, 11. August 1866. S. 169/170.
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Ministerial Opposition to any Change in the Bank Act.

The banking interest is powerful, and as a body is identified with the Act of 1844. The Bank has a plethora of gold, which cannot be touched, and thus it has so long maintained a 10% rate.  Zusammenfassung von Marx.
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Throw the 2 departments together! It |209 is foolish to make the Bank promise to pay in gold, notes issued upon the Gvt. debt to it only!

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The Money Market Review, 11. August 1866. S. 172/173.
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Clearing Houses for Banking.  Zusatz von Marx.
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(Country Clearing)

A few years back the private bankers of London alone used the Clearing House. Then, joint stock banks admitted, and, sill still more recently, established in London a „country clearing“, but only partial in its operations at present. A country banker having cheques upon another banker in the same place presents them over the counter for payment in notes or coin, and thus, in the settlement of the account between these bankers, notes and coins are required. The London bankers settle their accounts by an interchange of cheques and bills, and this economy of notes belongs alone to the Clearing House.

Sir John Lubbock , banker, honorary Secretary to the London Bankers, was the author of the country clearing, and in June (1866 1865) read  Diesen Titel notierte Marx in „Heft 3. 1868“ der „Hefte zur Agrikultur“ (MEGA² IV/18. S. 728.12). Er exzerpierte darüber in seinen Auszügen aus R[obert] H[ogarth] Patterson: The Science of Finance (ebenda. S. 750.36–37 und 755.20–21).
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paper upon this subject before the Statistical Society
. In diesem paper Lubbock took an amount of  Diese Angabe und die folgende Tabelle exzerpierte Marx bereits in seinen Auszügen aus R[obert] H[ogarth] Patterson: The Science of Finance (MEGA² IV/18. S. 750.36–37).
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£23,095,000
, which passed through his bank in a few days, and found that it was made up as follows:

Clearing £.16,346,000
Cheques et bills which did not pass through the clearing 5,394,000
Banknotes 1,137,000
Coin 139,000
Country Notes 79 000
£.23,095,000

These figures taken at the close of 1864, approximately represented the general average of the transactions of all clearing banks, and, upon that assumption: 70% of the whole (£700,000 in each million £) passes through the clearing house. Of the second 5,394,000 – £3,603,000 included transfers made from the account of one customer to another, and the remainder, or £1,791,000, represented cheques and bills on banks which did not clear. Also: 70% of the whole passed through the Clearing House; 94% of the whole was done without the aid of what is usually termed money – notes and coin. 6% was done in notes and coins, in the following proportions:

B.o.E. notes 84%
Country notes 6  
Coin 10  
100. 

These figures show the proportion of the transactions of bankers which passes through the Clearing House. Subsequently, he shows the proportions made in banknotes or coin by the public in London, and the following are the figures he supplies of payments by his customers into his bank:

Cheques and bills £18,395,000 or 97%
Banknotes £408,000
Countrynotes 79,000
Coin 118,000 3%
£.19,000,000 = 100

Estimated by both tests, at least 9/10 of that large portion of English commerce, settled by London bankers is performed by methods of currency other than banknotes and coin. The country clearing, established by Lubbock|210 belongs only to a particular class of country bankers. To use Lubbock’s words: „the country banker, A, receiving a cheque drawn on another country Banker, B, sent the cheque by post direct to B. B then requested C, his banker in London, to pay the amount to D, the London correspondent of A.“ In 1858 Lubbock thought that the complication of this system might be avoided by the establishment of a central office in London, for the special purpose of clearing country cheques, established in November (1858) the Country Clearing House at London. But this economy does not yet attach to a very large proportion of provincial business. Liverpool should have its own Clearing House, for cheques and bills between Liverpool bankers, so should Manchester, Glasgow etc. The requirements of banknotes whereby commerce is expressed has been gradually reduced, relatively to the magnitude of our commerce, by the banking facilities we have described. If our commerce depended, in fact, at this moment, upon banknotes as much as in 1844, when Peel’s Act passed, it would be simply extinguished.

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The Money Market Review, 11. August 1866. S. 174.
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Glasgow Chamber of Commerce on Banking.

That the Bankact of 1708, limiting all banking cos., except B.o.E., to 6 partners, produced numerous weak banks, subject to failure in all times of difficulty;

the exclusive privilege of issuing banknotes in London obliges the B.o.E. – and this impracticable – to hold a stock of bullion not only for its own transactions, but for those of all other banks and financial cos;

It has led to the establishment of Great Joint Stock lending Cos., who issue credit, in all other forms, except banknotes, without obligation of holding stocks of bullion corresponding to their credit;

that, by abolishing monopoly, all banks would be on an equal footing etc.

In Scotland, proved by long experience, that the keener the competition among banks, the smaller has been the amount of banknote issues.

It is only issues of credits for 2, 3, or 6 months which, by exciting speculation, derange prices and the foreign exchanges.



August 18. 1868. N. 324.

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The Money Market Review, 18. August 1866. S. 191/192.
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Reduction of Bankrate of Discount to 8% (16 August)

The Times said: that „as to the rate of discount, the circumstance of its being so high showed that a high rate of profit was being realised, and that again showed that both capital and labour were meeting with a bountiful reward.“ Herr Hubbard in der bisher erwähnten Debatte (gegen Watkin) in H.o.C.: „If the borrowers have suffered, the lenders have gained, and he begged the House to remember that, as both were citizens of the same country, the gain as well as the loss would be felt throughout the empire.“ Er läugnet, daß high rate of interest could impede large mercantile transactions and arrest the employment of labour. Schön, da: the avowed purpose and object of the currency school, by the high interest, consequent upon the operations of the Bank Act, to contract mercantile operations and diminish the employment of labour, and to force the sale of the stocks of commodities on hand at reduced prices. „throughout the past quarter (sagt Times of 17 August) trade has been working, so to speak, half time.“ |211 „Everyone“, sagt die Times ib., „– bankers, merchants, manufacturers – gave as little credit, kept as small a stock, and did as limited a trade as possible.“

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The Money Market Review, 18. August 1866. S. 193/194.
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Misrepresentation in Prospectus of Joint Stock Cos.

Action brought by the Glamorganshire Coal and Iron Co. against Mr. Irvine, shareholder, to recover amount of call made upon him. The defendant pleaded that he had been induced to become a shareholder by the fraud and misrepresentations of the plaintiff … The Co. formed in June last for the working of a coal and iron mine. In [»]prospectus stated that the estimated quantity of coal in the mine was 7,000,000 tons, that the value of the mine was £48,000, that the probable annual produce of coal would be 93,000 tons; the annual profit upon the coal £14,000 and upon the iron £12,700; minimum dividend 10%, payable halfyearly.« These representations false and fraudulent. According to the report of a committee of inquiry, quantity of coal only 1,500,000 tons; the coal not worth the cost of raising, or at best inconsiderable profit; no profit to be made upon the iron, consequently impossible these could be any dividend payable to the shareholders. The defendant called evidence on those points, also showed that £10,000 had been paid to the attorneys for getting up the Co; that the whole concern was enormously in debt, and in fact insolvent; the only parties who had derived any benefit from the Co. were the attorneys and their friends, the directors; that „dummy“ shareholders had been got up to a large amount; and that by such means the shares had been worked up to a fictitious value when in fact and reality they were worth nothing whatever. Of course verdict for defendant against the Co. Letztre, durch ihren Secretair, gab zu, daß die £10,000 paid to the attorneys – for getting up the Co. A Mr. Baylis, who had been managing director, had got £1000 a year. Another director (auch evidence für die Co) was compelled to admit that he had also received £200 from somebody, though „he declared he had no idea where it came from“.

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The Money Market Review, 18. August 1866. S. 196/197.
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Royal Insurance Co. Incendiarism.

The Royal represents an unexampled rate of increase in the life department. The sums ensured in the last 5 quinquennial periods were respectively £272,796, £.733,408, £1,655,678 und £3,439,215. At this rate the business effected in the present quinquennial period will be more than ever on record in insurance office in this country. … Incendiarism is on the increase, and amongst the potent incentives to the crime the directors of the Royal very properly enumerate in their report the „irrational competition for business among new and unskilled officers“. … The average ratio of loss which fell in 1865 on several leading fire offices was no less than 87% of the premiums received; in many offices all the profits were swallowed up, and the reserve funds seriously encroached upon. The loss of the Royal, a prominent sufferer, was 77% of the premiums received, yet gain on the years’ transactions of nearly £10000. The actual outlay made by the Royal in the payment of claims amounted to £318,946. After declaring a dividend of 171/2% on the original capital, the credit balance of the profit and loss account is found to amount to £62,076, in addition to the reserve fund of nearly 2 × that amount.



25 August, 1866. N. 325.

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The Money Market Review, 25. August 1866. S. 220/221.
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Railway Debentures falling due in a Money Panic.

In a circular the directors of London, Chatham, and Dover Railway Co. announce that they are unable to renew debentures which have recently matured to the amount of £400,000, or to pay the interest last month on any of their debentures; also that the Court of Chancery has appointed, on behalf of the creditors, a receiver and manager, who take the entire income of the Co., and, after payment of the working expenses, hold the residue at the order of the court. All the rolling stock, plant, and movable chattels are assigned to other creditors, to prevent their seizure and appropriation by any special creditors.|

212

Debentures of railway Cos. are always falling due, in good times as well as bad. When the times good, the renewal is easy, when bad, very difficult or impossible. Laing , when chairman of the Brighton Co., attempted to correct the evil by giving a higher rate of interest for long terms of years; but longdated debentures may fall due in bad times, even if the periods of their renewal are less frequent. Then arose the notion of debenture stock (originated with the Bristol and Exeter Co) whereby the debenture debt virtually converted into a permanent stock, requiring no renewal in good or bad times. The Great Northern Co. has made wonderful use of this method of converting debenture debt into a simple annuity, the principal of which can never be demanded by the creditor. The London and North Western and other cos. have also availed themselves of it to some extent. With all this, the amount of railway debentures payable at fixed periods and now outstanding, is very large, and in a crisis such as that from which we are now emerging, has been a grievous source of difficulty and discredit. Debenture stocks are generally at a discount, and the conversion from debenture debenture bonds, the principal of which is guaranteed is, therefore, nearly impossible just now.

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The Money Market Review, 25. August 1866. S. 221.
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The Increase and Employment of Capital.  Zusatz von Marx.
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(Cos) (Law of partnership)

Not overtrading in merchandise and manufactures, which enrich rather than impoverish, but overtrading in too numerous schemes and projects, many of which are crumbling to pieces every day.

Roads and railways lock up capital irrecoverably, since they are almost valueless except for the purposes for which they are used.

What an enormous amount of capital has been dissipated by many of the Cos. which of late years have sprung up. The public fail to see that many of such cos. have their foundation not on capital but on credit, and induce those of a speculative tendency to embark in schemes neither required nor calculated to become useful or productive. It is the business of such Cos. to foster and encourage credit. … Large sums divided among the directors of such Cos und der avarice of the shareholders for large dividends.

There is a wide difference between capital as originally drawn from various channels, and concentrated for and employed in legitimate purposes, and capital swelled out to enormous proportions by premiums on shares and exorbitant dividends. There is no increase of real capital to the country under such circumstances of fictitious value.

It may be thought, prima facie, that the best law of partnership, is the one which enables persons to associate themselves together for the purposes of trade and commerce with the least amount of restrictions as to the manner in which they choose to combine. This may be the case where private partnerships alone are concerned … But public Cos., dealing with vast interests, and in which a large body of shareholders are virtually governed absolutely by a board practically irresponsible for their acts, require a certain amount of organization, and at this point the law steps in, and defines the obligations of the Co. in a rigid manner. … Die directors, Governors, proprietors der B.o.E., which is a Limited Co., only responsible to the amount of the Bankstock they hold.



1 Sept. 1866. N. 326.

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The Money Market Review, 1. September 1866. S. 247/248.
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Paper of Leone Levi (Prof.) read at British Association at Nottingham.  Zusatz von Marx.
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(Rate of Interest.)

Abolition of Usury Laws in 1839. Levi shows that during the last 20 years since Act of 1844 the average rate of interest has been progressively rising.

Von 1845–49 Average Rate £3 s.11 d.7
1850–54 dto 3 15 6
1855–59 dto 4 11 8
1860–64 dto 4 15 3
to 1865 dto 4 16 0

It is not the higher average, but the sudden, frequent, and extreme fluctuations that constitutes constitute the evil of Act of 1844.|

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During the last 37 years: first 12 years average about equal für Banks of England and France;
9 years lower für B.o.E. than B.o.F.
last 15 years higher für B.o.E. than B.o.F.

Aber Levi giebt no sufficient reason: besonders auch nicht für difference in der Rate der B.o.E. und dem der of France. Principal Reason: Act of 44?

Die Reasons of Levi für den rise des Average in England sind:

1) Large Increase in English Trade:

  • 1849 Exports: £63 Mill., 1865 £165,860,000
  • 1854. Imports: 152£ Mill. 1865. 271,000,000.

Shipping has increased in the same proportion. Levi forgets, that with this increase of trade, concurrent increase in profit, wealth and amount of loanable capital. Die Advocates of the Bank Act say, that an increase of trade necessitates no increase of currency, but only an increase of capital. In one sense they are right. The same amount of currency will be sufficient, if currency eked out by an expansion of credit, and the holders of „loanable capital“ be thereby enabled to command higher rates of discount for the temporary use of it. That is the object of the arbitrary limitation upon the banknote issues, and it has answered, as shown by the higher average rate, and the extreme fluctuations. As to the increase of trade per se, so French trade in last 20 years increased in the same proportion. Dennoch in France 4%, while in England 10%, in France now 3, while in England 6%.

2) Annual Export of precious metals for the East. Zeigt nichts für den average der last 15 or 20 years. Silver did not return, but we obtained, in exchange for it, something else, which we exported to other countries for equal or greater amount of silver and gold, and, therefore, the temporary abstraction of those amounts will not account for a permanent rise.

3) Immense Number of Joint Stock Cos: In 1864 and 1865 were 832 Cos. formed mit authorised capital of £362,935,000, much of that capital invested or prepared to be invested in public works. But, the capital of a Joint Stock Co. is not so much capital taken out of the country, nor so much currency taken out of circulations; it is only so much money transferred from the names of the respective subscribers to it, at their bankers, to the credit of the Co. as their bankers. The formation of a new joint stock Co., and the aggregation of their capital, differs in no material respects, from the formation of a new firm of bankers, merchants, or traders, and the combinations of their capitals.

Aus:
The Money Market Review, 1. September 1866. S. 248/249.
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„Great Authorities“ on the Bank Act of 1844.  Zusatz von Marx.
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Money or Capital wanted? (in Crisis)

One authority Bonamy Price (in Economist und Daily News)[.]  Zusammenfassender Kommentar von Marx.
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Dieß Vieh entdeckt, daß Notes nicht Kapital sind, und daß in den Crisen nicht money, sondern capital was wanted.

The capital, bankers deal in, is in the shape of money. Money not only represents, but commands capital; therefore, the term used as synonymous with capital. If it be commodities or capital which traders want during a crisis, and not gold or banknotes, perhaps Mr. Price will tell us how it happens that gold and banknotes and not capital or commodities are always found to be the appropriate remedy? When banknotes are issued, commerce relieved, panic at end.

Aus:
The Money Market Review, 1. September 1866. S. 251/252.
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Great Eastern Railway. Ditto London, Chatham and Dover.

Great Eastern expended during past year on capital account more than £800,000, its receipts of capital were nearly £700,000 less at 30 June 1866 than 30 June 1865. On 30 June 1865 cash balance of more than £400,000 in hand, at 30 June. June 1866 cash account in debt more than 1 Mill. Money crisis had its effect upon Great Eastern. They have not been able to renew their debentures as they fell due, and found the utmost difficulty in paying off that part of their mortgages which fell due in the late crisis. The preference charges are this half year not met from revenue; charges have been made to capital for calling stock etc and by such means dividends, never earned, have been paid. This last half year no dividends paid, because capital account never so much overdrawn.

For last half year:

  • Increase of Expenses £150,911 (£103,454 in Preference Charges, 47,452 in working expenses)
  • Increase in Gross Revenue: £14,151. Balance against Dividends: £136,760.

If the Great Eastern could only banish all lawyers, contractors and engineers from their domain, they might do very good.|

214

Was die London, Chatham und Dover angeht, so haben sie, instead of applying the earnings of the Beckenham and Dover Line (the socalled „general undertaking“) to the debentures of that particular section, to which they belong, applied them to the loss in the Kent Coast of the Metropolitan Extensions, the Lease of Sevenoacks Line and other matters with which the Debenture holders on the Beckenham and Dover line have nothing to do.



8 September 1866. N. 327.

Aus:
The Money Market Review, 8. September 1866. S. 280/281.
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English Capacity.

English Gvt the most costly in the world, and the worst.

If we look to our legislation and administration, as affecting national defense, national finance, army and navy, Bk.o.E., railways etc, in all we shall see the same lamentable indications of utter incapacity. The „ruling families“ have lost the art of ruling, and the leading political parties the art of legislating and governing.

Besides the great leading parties of Liberal and Conservative, which manage to impede and obstruct all legislation on general topics, the House is split up into smaller sections, representing the particular rights of some private interest, which in general means some special wrong affecting the public interest. We have the great landed interest, and the Church party, the Irish party, and the railway interest, and the banking interest, and the director interest – comprising the directors of the water, and gas, and other jointstocCos jointstock Cos; and these sections, by occasional combinations for the protection of each other, can generally manage to defeat any attempt to protect the public against their wrongdoings. We have a deficient watersupply in India, and a defective water supply in London; both urgent evils for years, remain urgent evils, and in consequence we have at this moment 100dns of 1000ds dying of starvation in India, and of 1000nds either dying or subject to disease from the foul and pestilent water supplied by unscrupulous water Cos. in London. We want roads and railroads and canals for transit and for irrigation in India, and we have been spending millions of money to obtain them, but we have not obtained them, nevertheless. Our army and navy the most costly in the world, and yet we have scarcely a ship to send to sea to impede the passage of an invader. Sir John Pakington, one of the great mismanagers, startled the H.o.C. by telling us that, although we have been spending 10 mill. a year for the last 10 years, we have no naval reserve nor ships sufficient to relieve the vessels coming home from foreign stations! „There is“, says Mr. Scholefield, „an amount of incompetence and almost imbecility, of confused accounts and reckless extravagant extravagance to be found in the Navy Department not to be found perhaps  Zusatz von Marx.
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(!)
in any other part of the Gvt. Administration.[“]

Blödsinnige Jointstock Cos. Legislation. We cannot have them worked in an honest and business[-]like way when they are formed; nor get them wound up without an enormous amount of trouble and expense when they fail. Promoters can job and manage pretty much as they please until the Co. is fully formed, and the directors can job and mismanage the funds of the shareholders pretty much as they please afterwards, and the shareholders and public are comparatively helpless against both of them. The same remarks apply to our Bankruptcy Laws.

For a man to purchase a seat in the H.o.C. by the most extravagant bribery and corruption is no shame to him or disgrace to the House, but he forthwith becomes an „honourable member“ of that assembly. For merchants, and bankers, and directors, and managers of joint stock Cos to embark in the wildest speculations … with the money of others is no longer morally or commercially wrong, provided only they succeed in making themselves rich by the process. Success covers the „multitude of sins“ which the achievement involved.

Aus:
The Money Market Review, 8. September 1866. S. 281.
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U. States Bonds.

5-20 bonds. Their price now 73%, rate of interest 6%, payable in specie in New York, yielding to the buyer more than 8% upon the purchase price guaranteed by the Gvt. of the U. St. The principal too is redeemable at 100 at the option of that Gvt. either in 5 or 20 years from the date of issue, but at the expiration of the 20 years the redemption is |215 compulsory upon the State. Therefore, in addition to the 81/3% interest which the purchase price of 73 yields to the buyer, there remains the difference between 73 and 100, or 27%, to be made good to the buyer within perhaps 15 or 17 years. Altogether 5-10 bonds yield the investor, at present prices, a minimum of 10%.

Aus:
The Money Market Review, 8. September 1866. S. 282.
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Agra and Masterman’s Bank.

Cause of its failure a run upon the Indian branches, consequent upon a telegram sent by a clique of speculators in London to India stating that the parent bank in London had stopped payment. Subscribed capital 3 Mill. St, in 60,000 shares. The last price at which business was done, 4£ p. 50£ share, upon which 25l. paid, also still liability of £25 p. share. The 4 last dividends paid 18, 22, 16, and 16% p.a., and, after the last dividend, there was stated to remain a „rest“ or surplus of undivided profits, of £510,254.

Aus:
The Money Market Review, 8. September 1866. S. 282.
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Paying amongst new limited Cos.

    Waggon Cos:
  • Gloucester Co, £10 shares, all paid up. Dividend 8 to 12% p.a., market price about 113/4.
  • Birmingham Waggon Co. Dividends from 61/2 to 10%, 10£ shares paid up; market value par or fractional premium.
  • Scottish Waggon Co. 10 to 121/2% dividend. 10l. share paid up, market price about £14.
  • Railway Carriage Co 10 to 20% dividend, of £10 shares 3£ paid, market price about 43/11.
    Manufacturing Cos (Lim.)
  • Hopkins, Gilks and Co (lim.) 10% div., of 15£ share 8l. 10s. paidup, market value £6, 10s.
  • John Crossley and Sons (lim.) 15% div., price 18l. für 15l. share, with 10l. paid.
  • Avonside Engine Co (lim.) pays 121/2 to 15%, price of £10 share mit £7 paid, 8£. p. share.
  • Patent Shaft and Axle Co (Lim.) 15% p.a. from commencement, 10£ share fully paid, market price £16.
  • Runcorn Soap et Alcali Co (Limit.) 15% p.a., 25£ share, 20£ paid, market price 171/2.
  • Patent Nut and Bolt Co (lim.) 15%, £10 share, fully paid, market price £9.
    New Marine Insurance Cos:
  • British et Foreign Co (lim.) 10 to 15% p.a., 20£ shares, (2£ paid) worth 23/4. Reserve: £207,667.
  • London and Provincial Marine Co (Lim.) 10 to 15%, 20£ shares, 2£ paid, worth 21/4. Reserve £125,000.
  • Thames and Mersey: 10 to 20%, 20£ share, 2£ paid, with 71/4, Reserve: £527,394, or more than double the capital paid up.
Aus:
The Money Market Review, 8. September 1866. S. 285.
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Cotton Trade. (Prices)

Price of middling Orleans cotton at the close of August (1866) by contrast with 12 months past, now lb 14d., then 253/4d. Decline of nearly 1sh. a lb in one month. Before the American war price was 5d. or 6d. a lb … The quantity of cotton consumed by our own mills have averaged 45,610 bales per week throughout the first 8 months of this year, by contrast with 36,227 bales p. week in the same months last year, and thus far we may assume that the demand for cotton fabrics has been unusually large. Spinners bought cautiously upon a declining market, from „hand to mouth“. Questionable whether this scale of consumption will continue. Fact deserving notice, the decline in the prices of manufactured cotton goods, in which there is little or no speculation, has exceeded that in raw cotton during the last month.


216

Sept. 15, 1866. N. 328.

Aus:
The Money Market Review, 15. September 1866. S. 303/304.
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Bankact of 1844.  Zusatz von Marx.
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(Raising Rate of Discount.) (Bonamy Price) Want of Capital or Money?

Was Gladstone, „Economist“ etc an dem Bankact rühmen ist: »The Policy of raising the Bankrate of Discount in the case of a foreign drain«, aber dieß nicht »the limitation of the Banknote issues in that case«. Nun, was der Akt wirklich vorschreibt, ist die limitation des Banknote issue, während das raising of discount mit drain etc »is not a specific policy or mode of proceeding prescribed or imposed by the Bank Act, but is left entirely in the discretion of the directors, as well under the provisions of the Act of 1844 as it was before that Act was passed, and as it would be if that Act were now repealed.« Seit der Crise von 1783 (incl.) never any danger from apprehension as to convertibility of note Zusatz von Marx.
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!

Great Authority – the  Kommentar von Marx.
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blockhead
Bonamy Price  Zusatz von Marx.
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(!),
as a director of the Turin and Savona Railway Co., of the Aberama Iron Works, and several other Joint Stock Cos. He set himself up to maintain that „the cause of the pressure in the money market was a deficiency not of sovereigns and notes, but of capital, commodities, or the products of human industry.“ He was called upon to explain, therefore, how it was that, if commodities were deficient, in relation to the demand, they did not rise in price, instead of falling in price? He is asked to say of what use commodities, instead of banknotes or sovereigns, would have been on the great day which followed the fall of Overend etc?

Aus:
The Money Market Review, 15. September 1866. S. 303.
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Bullion Drain.  Zusatz von Marx.
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(Reversion of Current)

The current of the precious metals suddenly reversed. It was recently, and has been for many years, from West to East, and it is now from East to West. The accustomed „drain of silver for the East“ is at an end, and from the East we now receive gold; while to the Unit. States we now export gold. Probable causes: 1) that our remittances for Indian cotton have exceeded what was required, especially as so large a store of raw cotton has been discovered in the U. St., and that the money is coming back again from India; 2) that our active purchases of American cotton, and of American securities „for gold by next steamer“, necessitate a preponderance of cash payments to the West.



22 September, 1866 N. 329.

Aus:
The Money Market Review, 22. September 1866. S. 327/328.
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Profits of Panic to the Bk.o.E.

13% p. annum dividend (20 Sept. ’66) von 1706 to present time, with single exception of 1708, when it was 121/2% p.a., the dividend had never exceeded 11% p.a., and for many years not 41/2%. If the industrious classes have lost a million, the Bankproprietors have gained it; but what of that? „they are both citizens of the same country.“ Ausser der Bk.o.E., other lenders gained many millions; but the sum total of these gains falls very short of the sum total of losses incurred. These „variations in the currency“, and the transfer of these few millions involve the depreciation and destruction of property to the amount of 100dns of millions. As these „variations“ the result of an artificial and unjust law, they are „gigantic robberies“. The plan (by Hubbard) of common citizenship would be as good in the mouth of the pickpocket and the burglar. The plundered and the plunderers are in both cases citizens of the same country.

Aus:
The Money Market Review, 22. September 1866. S. 330.
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Abuse and Use of Bankers[’] Deposits.

An increase in the deposits of 9 joint-stock banks in London von £8,850,774 in 1847 to £43,100,724 in 1857 was one of the prominent causes assigned by the Committee on Bank Acts for the panic of November, 1857. Of course, this the doctrine of the Bank Parlour (B.o.E.) and |217 the private banking circles opposed to the modern plan of allowing interest on deposits.

In 1866, 5 of our London Joint Stock Bank Banks held, instead of 9, more than 78 millions deposits.

Deposits and Acceptances.
June 30 last (1866)
London and Westminster £.22,298,454
Union 19,424,532
London Joint-Stock 18,764,578
London and County 12,750,974
City 5,408,838
£78,647,376.

The ready cash of the multitude has been accumulating gradually for some years in the hands of bankers, and by them has been utilised instead of lying idle as before. The practice has become quite an institution … The history of the recent failures among the receivers of deposits may be written in a few words. They have either lent them on insufficient securities, or in securities which cannot be realised in time of need – that is, the borrowers of deposits bound themselves to pay principal on demand or at fixed dates, and employed that principal in securities which either were not worth the money borrowed, or not realisable when most wanted – locked up.



29 September 1866. N. 330.

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The Money Market Review, 29. September 1866. S. 351.
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Reduction of Minimum Rate to 41/2% (27 Sept. 66’)

There is very little difference between the wealth and capital of 2 months, but the difference in the value of money by which wealth and value are expressed is more marked and sudden than at any previous period of like duration. Vor 2 months 10%, now 41/2.

With very dear money for more than 2 years, we had an enormous speculative business in Stock exchange securities, in produce of all sorts, besonders cotton, but now, with an unprecedentedly rapid fall in the value of money, promising almost nominal rates, there is an extreme absence of speculative business.

We must not have B.o.E. notes of the present character palmed off upon us as national banknotes.

Aus:
The Money Market Review, 29. September 1866. S. 352/353.
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Losses by Shares in Liquidation.  Zusatz von Marx.
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(Bankrupt private Concerns converted into Cos. Losses upon them.[)]

After a few years of Company-making and promoting, we have entered now upon a like period of company destruction and liquidation. There are many more calls to come (from the liquidators appointed by the Court of Chancery), and this is only an early stage of much suffering. The share mania through which we have passed has been extreme, and the other extreme of depression and exhaustion is present and in prospect. Zu many new Joint Stock Banks founded; dann Finance Cos. Dann: With the aid of the share mania, numerous insolvent undertakings, perhaps otherwise doomed to bankruptcy at the next money crisis, were foisted upon the public by ingenious proprietors as solvent and prosperous; and credulous shareholders now awake to the conviction, not only that they have been deceived, but, perchance, are ruined. Daher auch Confidence into in really sound jointstock shares is wanting. There was too much confidence, now too little, but much of the distrust is fully justified.|

218
As a speciemen of a few cos. in course of liquidation:
Present Loss to Original Subscribers.
No. of shares. Called p. share in liquidation.  Marx hat diese Spalte angekreuzt.
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Before paid
Per Share. Total.
English Joint Stock Bk. 20,000 £4 £10 £.14 £.280,000
Humber Iron Works 20,000 20 20 40 800,000
Imp. Mercantile Credit 100,000 5 10 15 1,500,000
Overend, Gurney, et Co. 100,000 10 15 25 2,500,000
Joint Stock Discount 80,000 7l. 10s. 10 17. 10 1,800,000
Contract Corporation 20,000 30 10 40 800,000
Land Credit Co. (Ireland) 10,000 2 5 7 70,000
£.7,750,000

Here is an absolute loss to shareholders of nearly 8 millions, and they have still much more to pay. Yet, there is not one of these Cos. that did not either spring from private undertakings of reputed wealth and prosperity, or commenced business under favourable circumstances. The distress which followed the railway mania of 1845 and 1846 was intense, and, whatever the amount of calls paid, it was, for the time, swept away in depreciated market value; but these calls were represented by some value; there was the freehold of the land, upon which the rails were laid, and the rails, the lodgings, and a certain monopoly of traffick which must belong to every railway. But in this share crisis of 1866 the money called up under liquidation is utterly lost to the contributories. It all goes to pay for losses which can never be recovered, and against which there is no asset. It is gone, too, in several cases, to pay losses long concealed, and artfully made to wear the aspect of gains, or almost wilfully contracted by reckless management. The share crisis of 1866 is, therefore, peculiarly disheartening, und daher all new shares distrusted. If the Rothschilds, the Barings, and the Glyns were now to attempt to convert their firms into limited Cos, they would scarcely find bona fide subscribers. The share of such conversions has been too palpable, and the heavy blow under which credulous shareholders now suffer has been too stirring for confidence in anything „limited“.

Aus:
The Money Market Review, 29. September 1866. S. 353/354.
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Depreciation of shares and Railway stock (this week).

Even London and Westminster, London and County, Alliance and Union Bank have each fallen 1£.

The most market marked feature fall of railway stock. Railway directors, by recklessly expending the enormous sums which the public as recklessly entrusted them in Parliamentrary contests, and by undertaking schemes simply recommended by their extravagant magnificence, have forfeited all confidence which in the time of cheap money was reposed in them. Ferner: public sees that it not only exposed to mismanagement, but to chances of fraud. The system of a huge floating debt altes Uebel, must lead to the consolidation of all the floating railway debt. The issue of fictitious promises to pay will then be rendered impossible. Distrust of public promoted by announcement der North British railway Co. that they have not sufficient funds to pay the 1% dividend recently announced, and that the shareholders are to receive |219 deferred dividend warrants in lieu of cash. The fall has been rapid and disastrous, and the stocks in good and bad repute have suffered alike.



October 6, 1866. N. 331.

Aus:
The Money Market Review, 6. Oktober 1866. S. 379/380.
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The English Joint Stock Bank Lim.  Zusatz von Marx.
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Disclosures.

Into this concern 5 old unlimited banks, with all their branches, were merged, premiums paid for the acquisition of all. After 18 months’ existence, proved that the old banks valueless, or worse than valueless. Concern now hopelessly bankrupt. During its 18 months published 3 Reports, with statements of account, showing great prosperity, with good dividends, endorsed by a directorate composed of most respectable gentlemen.

The Co. formed in 1864 as the South Eastern Banking Co (lim.) in order to take over the business of Messrs Mangles, carried on at Guilford and other places, and established in 1836. Capital first fixed at £500,000, in 20,000 shares of £25 each, and £5 p. share was paid up. Directors were:

James Abbiss (Alderman, City), Sir Charles W. Blunt, Baronet, Sussex, (Director of the Imperial Gas Co.), J. Canham (Ramsgate, late Burgess, Canham and Co. bankers), W. Conningham Coningham (Director of London, Brighton and South Coast Railway), A. Lawrie (Director of the City Bk.), Captain Mangles (Chairman of London and South Western Railway, and the Royal Mail Steampacket Cos.) Th. Bradshaw, Esq. (Hampton Court), Charles D. Manning (Mssrs Manning et Anderson, Lothbury), E. G. Swann (Director of the Oriental Commercial Co.) G. Young (Mssrs Begbie, Young and Begbie.)

Shortly after formation of that Co. the business of the Ramsgate Bank, carried on by Burgess and Canham, taken over. First general meeting held on 6 Feb. 1865, there announced that 15 new branches and 3 agencies had been opened, making in all 26 places of business; that the capital paid up was £95,365, Gross profits £14,118, net profits £3,364, dividend 6% p.a., leaving rest of £977. June 1865 the name of English J. St. Bank taken. July 1865 business of the Bideford Bank taken over. August 1865 second general meeting, profit declared of half year, including premiums on new shares, at £24,965, second dividend at 6% p.a declared. Sept. 1865 business of the Nottinghamshire Bank taken over, belonging to Hart, Fellows et Co, and Fellows joined the board of directors. Feb. 1866, 3d general meeting, directors declared that, in order to transact their own London business, they had acquired the old established business of Olding, Osborne et Co, and that this together with the other acquisitions „proved highly advantageous“. Gross Profit of the half year stated £46,437, dividend of 6% p.a. declared. Capital paidup at 31 Dec. 1865, was £168,525, Reserve £6,000, Deposits £901,469, Cash in hand £197,901, Securities 747,395, and other property £140,897.

On 11 May (’66, „Black Friday[“]) Bank stopped payment. In June a committee of shareholders made report to the effect that Co. was solvent at time of stoppage, and arrangements would be made to continue business. Last month the liquidators under the Court of Chancery announced first dividend of 8sh. in £; 1 October meeting for »resuscitation«, but then came the disclosures.|

220

Mr. Chatters, one of the liquidators declared, that the West Surey Surrey branches ought never to have been purchased for £16,000 goodwill, and that on the day the bank stopped, or on the following day £12,000 worth of bills were abstracted from the Bank. Guilty parties not yet discovered. Half Year preceding the stoppage there was a loss on the Aldershot branch of £630, besides £6000 more in consequence of the fraudulent conduct of their manager; at Eastbourne branch 100l., and 6000 locked up as a loan to a building society etc etc[.] Total loss of the half year: £63,348. Ferner: the bank holds as security property found to have been previously mortgaged. The managers had given acceptances for £2000, of which no notice was taken. One director owed the Bank 8000£ which he could not pay. The liquidators now hold bills dishonoured for more than £100,000. Ueber 200,000£ loss, leaving out of the question the „goodwills“, for the Ramsgate, Bideford, Nottinghamshire, and London banks. Impossible to understand, how so late as last February, the capital of the Co. was in official document represented as intact, gross profit declared £46,437, dividend of 6% p.a., £3,688 written off from the cost, £5000 added to Reserve Fund, and £4,180 carried over!

Aus:
The Money Market Review, 6. Oktober 1866. S. 381/382.
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Spirit of Cotton Circulars.  Zusatz von Marx.
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(False American Rumours.)

On 1st Oct. cotton crop always underestimated. Mssrs. Ellison and Haywood remark in their circular: „Americans never admit, and of course never publish, the probability of a good harvest, until the arrivals at the ports have placed the matter beyond doubt of contradiction; and even when the receipts are heavy, they cry out that we shall soon witness a heavy falling off. During the season they ‚seriously damage‘ and sometimes ‚almost destroy‘ the crops 3 or 4 × over. The plant is punished in a variety of ways; the rain drowns it, the weeds choke it, the drought parches it, the worms devour it; or, if it escape all these and sundry other disasters, the frost kills it.“

Aus:
The Money Market Review, 6. Oktober 1866. S. 382/383.
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Commercial Credit and Commercial Debt Insurance.

In London alone it is estimated that 6–8000 merchants and wholesale dealers carry business on, more or less, upon credit, and in the provinces and country towns, at least 30,000 more. The losses sustained by these 36–38,000 merchants and traders immense; they are computed to amount in London to at least 30 Mill. £. a year, and in the country to at least 30 Mill. a year more, making a total loss from bad debts of 60 Mill. l. Mr. Moffatt in his recent publication on the Bankrupt Act of England says: „The cost to trading community in losses by insolvency, were estimated in 1849 at 50 Mill. St.; but, considering etc and the frauds facilitated by the existing laws, as shown by the Parliamentary Returns, probable annual net loss of 100 Mill. £. St., more than 3 × the cost of the National Debt.“

From pamphlet of John Bath public accountant („On the Insurance of Merchants and Wholesale Traders’ Commercial Debts[“], London 1866), we learn that different attempts made to establish Insurance Offices for such losses. They failed all. „One Co., and then another and another was formed for this purpose; but, after very few years’ experience, found that established upon false principles, and thus serious loss was accruing.“|

221

These Cos., for premium of say 10s. Per Ct. upon the total of the annual sales of the mercantile House, undertook to pay all the losses from bad debts. The creditors, therefore, were left free to trust anybody to any amount, and the imprudent firms entailed terrific losses upon the Cos, paid out of the premiums contributed by the more careful and competing neighbours. The natural result followed. The prudent firms declined to pay premiums to be expended in paying the losses of their reckless competitors, and the Cos. themselves soon obliged to wind up.

Aus:
The Money Market Review, 6. Oktober 1866. S. 385/386.
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Indian Banks and Banking.

Joint Stock Banking in India more than quadrupled its original value since the sudden impetus it received from the cotton famine. Originally its growth slow. Previous to 1833, the old East India Co. kept backs back. The Banks of Bengal, Madras, and Bombay brought out under the auspices of the East India Co. The Banks holding Charters from the crown are merely tolerated by the Indian Gvt, and not permitted to designate their offices in India as branches, but agencies. Their business is also restricted to exchange, deposit, and remittance. It is questionable, in a legal point of view, whether the Charters are strictly applicable to India, as limiting the liability of the shareholders to double the amount of their shares.

1809: First Joint Stock Bank established in India, viz … the Bank o. Bengal. East India Co. patronised it, took shares to a certain extent, and had the nomination of 3 members of the board of directors, such members being civil servants of the Co. 1809 dann established Bank of Madras und Bank of Bombay, in 1840; both constituted on the same principles as Bank o. Bengal, holding charters from the East India Co., limiting the liability of the shareholders to amount of their respective shares. Durch den transfer des East India Co’s property to the Crown, the latter got also the partnership in the 3 Gvt. Banks, which continues to this day; jedoch Gvt. only responsible to the amount of its shares in the Banks.

Agra and United Service Bank in 1833, and the Union Bank of Calcutta about the same time. The latter bank, having advanced a great portion of its capital upon Indigo and Sugarfactories, was obliged in a few years to succumb. The Delhi Bank (now Delhi and London) formed in 1836. In 1842 the Bank of Western India (now the Oriental Bank Corporation) was established at Bombay; in 1846, the Commercial Bank of India, in 1852, the Chartered Bank of India, Australia, and China, in London; in 1853, the Mercantile Bank of India, (Bombay, now the Chartered Mercantile Bank of India, London, and China); 1860, the Central Bank of Western India; 1862 the Bank of Hindustan, China, and Japan, in London; 1864, the Asiatic Banking Corporation (originally the Bombay Joint Stock Bank), and the National Bank of India, with which the Scinde, Punjaub, and Delhi Bank is now being amalgamated. |223 During the „golden age“ of cotton, and exciting times of high prices, a great variety of large and small banking and finance Cos. sprang up, the majority of which gone or in course of being wound up.

Without the great banking element, money, no banks; yet what blindness and infatuation is it to suppose that banking profits can be made without trade and commerce Zusatz von Marx.
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There may be an accumulation of money to superabundance, and banks may be established ad libitum under such circumstances; but the possession of such resources without employment for them will not pay a dividend; and when safe and legitimate employment cannot be obtained, all kinds of expedients involving risk and ruin are resorted to. Bombay, by squandering the immense money wealth poured into it, has derived little substantial benefit from it. A few years ago a modest but flourishing port of Western India, it bade fair to become, in an incredibly short space of time, as by the stroke of the magician’s wand, a City of Palaces, ambitious enough to arrest the progress of the mighty ocean itself. Back Bay under a costly scheme of reclamation, is soon doomed to be brought under the subjection of a moneyed Co. of speculators. Speculative mania in that city. All classes more or less imbued with it. New houses and public buildings crowds crowd up in rapid succession. Gay and glittering equipages within the reach of the once most humble and servile. Increase in price in all articles of daily consumption, and necessaries of life. Those dependent upon fixed incomes encumbered by high house rents and other additions to their expenditure. Still additional wealth teeming in, and, in imitation of England, gigantic credit and finance Cos spring into existence, shares of which soon attain a high premium, and enable men holding Gvt., Bank, and other appointments, on a few 100 rupees a month, who have the good fortune to realise, to a mass large fortunes, and either retire altogether, or go into business on their own account. The money amassed both by European and native speculators in, and shippers of cotton during the period of high of high prices, amounted to fabulous dimensions, taxing ingenuity to discover ways and means of employing it.

At last the commercial hurricane came, swept away many of the recent Indian banks, including now the Asiatic Banking Corporation , leaving with a few exceptions the old Banks only. This state of things traceable to the unexampled acquisition of wealth in Bombay, in particular, consequent upon the civil war in America, the high prices to which Indian cotton attained, and the misappropriation of the wealth derived therefrom. Article – cotton – 4 years ago only 4 to 5d. p. lb – rose gradually to 4 or 5 × this value. India was the largest participator in such advance, Bombay export place of the bulk of this cotton. Thus inundated with money. Such an influx of capital, within so short a period of time, never fell to the lot of any |224 place or country. One of the first applications of this superabundant capital was to manufacture banking and finance Cos of every possible character and name, and to work with the resources so lavishly bestowed in the way most likely to dissipate and render them unproductive. The native disposition for speculation and restless trading has lasted too long, and is too well known to be wondered at. Aber leading European merchants enroll themselves as directors of speculative land and finance Cos., managers and other officers of banks give up their appointments to take part in such concerns, and banks spring up in connection with them for the purposes of making advances on their shares. A Gvt bank even is tempted to depart from the rigid conditions of its charter to foster such unsound and hazardous schemes.

The banks which have held their ground have had severe trials to pass through, and having losses to contend against, consequent upon the failure of many East India houses long established, of high character and credit. Indian banking has its seasons of profitable opportunity, as well as drawbacks and disadvantages. A bank, with its head office and board of directors in London, cannot be alive at the moment to what is going on at a distance of 10,000 or 15,000 miles; much to be left to the executive on the spot, which, in many of the bank branches, consists of an inexperienced, halddespotic halfdespotic manager. Much must [be] left to their judgment and discretion. Then, nearly all our enterprising men who have founded and successfully managed Indian banks, want to return as soon as possible home. No sooner a bank set up in Bombay or Calcutta bidding fair to become a prosperous concern when than it must have its head office established in London, and run away, as it were, from the most important part of its business and most legitimate sphere of operation. A tempting salary is held out as the London manager’s income. An influential board of directors has to be got together at London, and attractive place of business rented or purchased.



13 October. 1866. N. 332.

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The Money Market Review, 13. Oktober 1866. S. 409/410.
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The Case of the Shareholders in Overend, Gurney et Co.

Deficiency des old concern, when converted into Limited Liability Co. of 3 mill. The old firm had received 250,000£ in cash since the transfer of the business, besides cash to a large amount on the sale of shares at a premium, yet „when the lim. Co. stopped payment, the books showed still the deficiency at upwards of 3 Mill. £. St.[“] Alle faulen Schulden figurirten as assets „to pay the liabilities transferred to the limited Co.[“] Den faulen Schulden unter denselben Rubriken noch zugefügt durch die limited liability Co.

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The Money Market Review, 13. Oktober 1866. S. 410/411.
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Journal des Débats on Act of ’44.

„That system renders a panic inevitable, as soon as the public perceives that the limit (of the quantity of banknotes) is being approached. Then bankruptcies accumulate … and the entire commerce of the most opulent nation in the world struck with discredit on all the Exchanges to such a point that hardly any one at Paris, Amsterdam, Frankfort, or Hamburg will buy paper on London.“

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The Money Market Review, 13. Oktober 1866. S. 413/414.
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Limited Liability as Applied to Banking.

Paid plan that followed till now (last 10 years) to have only a small proportion of the capital paid up. It was done: 1) to attract shareholders by the expectation that on their part no further advance would be required; 2) by the unpaid reserve to afford a ground of confidence to creditors.

Kömmt nun call, oder its prospect, many (schlechtbeschlagne shareholders) rush to the broker. Shares are pressed on the market; the price falls, and drops lower day by day. |225 Simultaneously, another process commences. As the value of the shares drops, the depositors and customers become alarmed. As fast as they withdraw their money the shares decline lower and lower, till the final catastrophe arrives. In some cases, such was the alarm which the mere idea of raising more capital excited, that it became impossible to make a call, however imperatively required, the directors avowing that, by such a course, more money would be frightened away, on the one hand, than obtained, on the other. Where, then, to these Cos. the advantage of the uncalled margin? It has only been prejudicial to the shareholder. Depositor, perhaps secured from ultimate loss, but the long delay of liquidation etc. If Capital paid up in full , the prospect of a call could never be employed to depreciate the share. Directors and managers, knowing to be without reserve, obliged to be entirely careful in the conduct of their business. Mit a reserve, an absolutely rotten concern – da jeder, der mit ihm handelt auf die Reserve rechnet – may be patched and supported for a time by trading on the credit of others. Should a banking Co. trade on its capital, or on the credit of its shareholders?



20 October, 1866. N. 333.

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The Money Market Review, 20. Oktober 1866. S. 435/436.
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Overend, Gurney et Co. Fraudulent Misrepresentation.

There have been concealment, frauds and misrepresentations. The public would never have become shareholders, if they had even suspected the true state of the affairs at the time of the transfer. The old firm was at that time absolutely and irretrievably insolvent; it was worth several mill. St. less than nothing; for several years it had carried on business without any profit, at a very heavy annual loss; a large proportion of the assets they had to transfer was composed of the fictitious debts of bankrupts and insolvents and men of straw. The public believed, and were induced to believe by the prospectus, that the old concern prosperous; the goodwill cheap at 1/2 mill. St.; and that, after paying that price, the business was such „in the opinion of the directors could not fail to insure a highly remunerative return to the shareholders“. The shareholders are now seeking to be relieved from the liabilities they incurred. Contracts obtained by frauds and false representations not binding in equity. The Co. failed in May. Till now (October) the official liquidators did not disclose the true state of things, although this a necessary preliminary before settling the list of contributors. These official liquidators appointed as their solicitors, and, until within the last few days, have been acting under the legal advice of, the firm who were the solicitors also, to the old firm of Overend etc.

Three of the directors who put forth the prospecting (der new Co.) were three of the acting members of the old firm, they knew the insolvent condition of business which the Co. were purchasing; the other 4 directors ought to have ascertained it. How could they take the bad debts of the bankrupt Howard, David Leopold Lewis, and Mssrs. O’Beirne and others as assets? One paragraph of the prospectus is, indeed, to the effect that „the vendors guarantee the Co. against any loss on the assets and liabilities transferred[“]; but the guarantees were insolvent. Among the assets there were merely nominal debts based upon the accommodation bills of men of straw.|

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The Money Market Review, 20. Oktober 1866. S. 436/437.
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Joint-Stock Discount Co. Scandals. Necessity for Public Official Audit of the J. St. Cos’ Accounts.

Not even the „unprotected female“ so helpless as jointstock cos. shareholders. Greedy and unscrupulous promoters dig their pitfalls and lay their traps to catch them, – prospectuses. The haunters of the Stock Exchange, in the guise of bulls, and bears, and stags, „make game of them“, and job them, and mercilessly slaughter them in detail as in murderous battues. Boards of directors possess themselves of their properties and funds, and use and appropriate them as they, in their ignorance and incapacity, or their cupidity and self-seeking, may please. The shrewdest adept in „artful dodging“ and „hocuss-pocussing“ is generally made the chairman and spokesman of the board; or a tinsel lord „in need of tin“ … is caught and put in the chair to keep the turbulent shareholders in order, and by timely address to repress any rising disposition to make impertinent questions about the business of the Co. or the proceedings of the board. Clever managers conceal the true position of the co. in mystifying and unmeaning reports or unintelligible balance-sheets, and accommodating auditors are very ready to certify that „all is right“ and perfectly satisfactory. At the public meetings of the Co. every shareholder who attends is expected to „conduct himself as a gentleman“; and then he learns that to be a gentleman he must be silent, submissive, and confiding, and that the most ungentlemanly conduct of which anyone can be guilty is to exhibit a curious or distrustful disposition, or to put obtrusive questions about the business of the Co., or the conduct or management of the honourable board. The shareholder knows nothing of the secret articles and private arrangements made with the promoters of the Co., and he wants to know 50 other things about its origin, progress, and prospect, but he must not inquire about them. They are all matters in the hands of „the board“, and sure to receive their best consideration. He must be content, therefore, with such information as the board may vouchsafe to give him, and the board takes care to give him as little as possible. If the shareholder becomes urgent he is treated as rude. The chairman rises with dignity, and asks if the honourable gentleman means to insinuate etc, or means to impute etc, and he is expected to shake in his shoes when told that the board would feel compelled to regard his motion as a vote of censure or of want of confidence. If he should not be sufficiently awed by this threat, there are 20 hands in the meeting ready to „bonnet“ him, or to „shut him up“ by some other summary process, lest his impertinent inquiries should lead to impolitic disclosures and unfavourable rumours which might damage the property of the shareholders in the market. If he goes to the offices of the Co, he is probably snubbed by a supercilious manager, a flippant secretary, or an impudent clerk. They are the humble servants or subservient tools of the magnificent board, he is only one of the shareholders. It may be true that the board, the manager, the officials, and the Co. itself are but the creatures of the shareholders; but all power and authority are concentrated in the board; the individual shareholder is but one of many; and, therefore, even his servants and subordinate subordinates will scarcely deign to recognise him.

The general result of all this is, that the great body of j. st. co. shareholders – the owners of the 100dns of mill. £. invested in joint-stock enterprise – are entirely without any efficient control over the use, employment, expenditure of these vast funds. A comparatively small number amongst them, who occupy the position of directors, arrogate to themselves the entire management, and exercise a virtually irresponsible power and authority over the whole. The consequence, in but too many lamentable instances – grossest mismanagement, most unscrupulous perversion of the funds to other purposes than the proper business of the Co., most reckless jobbing and extravagant expenditure, and an almost total subordination of the property and interests of the shareholders to the primary objects and designs of the directors and their associates. Hence the scandalous disclosures brought to light by the failure of the Joint-Stock-Discount-Co , in which the directors had recklessly misappropriated the capital which the shareholders had subscribed for the discounting of commercial bills to advances on so called financial securities. Hence the Overends scandals only revealed in October, months after the failure occurred. Hence the complicated commercial and financial abuses for years carried on by London Chatham Dover Railway Co.

If shareholders cannot manage their own affairs themselves, and cannot get honest and capable boards of directors to manage for them, which it is clear they cannot, the Legislature ought to provide some kind of supervision over the conduct and accounts of joint stock Cos. Independent Public Auditors, appointed by Gvt for the audit, at stated intervals, of the accounts of all joint st. Cos. Professional accountants – appointed by directors or the shareholders – as |227 the Times City Editor remarked – have acquired „such a confirmed habit of putting affairs in the light most agreeable to their clients that their reports and certificates are no longer deemed trustworthy, and are now usually received with a certain degree of allowance“.

The accounts of the Joint Stock Disct. Co. were „duly credited“. Thus the accounts of the London, Chatham and Dover Railway , down to the last period, and by one of the most eminent professional accountants in the City. It is absolutely necessary that we should have some competent and thoroughly independent body of auditors, to whom should be committed the audit and supervision of all the railway and other joint-stock cos. in the kingdom. Board of Trade ought to nominate the auditors. „The Audit Office of the Board of Trade.“

Would, with such an office, the directors of the notorious West Hartlepool Harbour Railway Co. have been able to issue 2 millions of debenture bonds in excess of their borrowing powers without detection?

In Australia the directors of all the banks and branches thereof have to deposit, quarterly or halfyearly, at the Gvt. office, a balance sheet setting forth a summary account of the assets and liabilities of the bank, the cash in notes and gold, amount of deposits, advances on bills etc, and increase or decrease in these items during the quarter or half-year just ended. These asccounts, having been audited and found regular and correct, are forthwith published in the papers of the respective locality, where the bank or its branch established.

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The Money Market Review, 20. Oktober 1866. S. 437/438.
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The Gain to India by our Cotton Famine.

The American civil war raised the price of cotton, shut up the Lancashire mills, starved the Lancashire operatives, caused a huge speculation, and prodigious drain of the precious metals from Gr. Brit., gave a vast National Debt to U. St. – and it has given to British India a new commercial existence. Our high prices great incentive to Indian cotton production. Bombay, the great centre of cotton dealing in India, with such comparatively small aid as the railways terminating at Bombay now confer, made huge fortunes upon the opportunity, and then Bombay lost much of what had been made. … Bombay and India have found a great necessity in Liverpool and Manchester … .

The great speculation at Bombay began in the 2nd year of the American war when the Lancashire spinners were fairly roused to a true appreciation of their position and their pressing wants. Our high prices and our urgent needs gave fabulous profits to the intermediate traders between the ryot producer, and the Manchester consumer, and Bombay and Liverpool grew nominally rich. Here (England) not only the cotton speculation, but speculation in various other forms ran riot, and collapse has followed.

At Bombay, relatively to the population, the mania set on foot by our cotton wants was of giant proportions compared to our own. Finance Cos., Banking Cos., Reclamation Cos., sent for their shares by the million to eager all others, and the quantities of shares, the premiums, and the scale of apparent gains during 3 years dwarfed our own experience of such matters into insignificance. One poor Gvt. clerc won 2 millions £ in a few months. Other poor Gvt. clercs became great directors and financiers, with millions upon millions under their control. Even the poor ryot, who always had lived from hand to mouth, and could never raise a crop without the aid of the money lender, bought his horses and his vehicles, and loaded himself and his belongings with costly jewels and ornaments of the precious metals. His crops bought and the money paid almost as soon as he sowed the seed. For fully 3 years we have paid little short of a 100 millions a year for raw cotton, and our Board of Trade returns show us that about 1/2 of that supply came from British India, which in effect signifies Bombay.|

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The collapse came of course. With it, Bombay speculators who had been millionaires in name failed en masse, together with the banks, and the finance, and all other cos. Western India is clearly roused from the lethargy of centuries. The Parsee and Hindoo are, after the cotton mania, more productive beings than they were, and have learnt to be producers, not alone for immediate wants, as of old, but to supply the wants of other nations.

Wilson saw that railways India’s greatest need, and forthwith drew up that agreement between the State and the railway cos. which has inaugurated a railway system in India.

Bombay is built on a narrow peninsula joined to the mainland by a still narrower isthmus, which, combined, constitutes one side of the spacious harbour. The commerce of the place is at present conducted in what is called „The Fort“ and, in a word, the commerce of the few narrow streets of the Fort of Bombay is the commerce of Western India. The shipping discharge their cargoes in the Bay into lighters, and again discharge them at the wharves, which are inadequate for the trade. The only extension of Bombay possible is either by building beyond the isthmus on the mainland, or by filling in shallow portions of the harbour for the erection of warehouses and wharves; and it is the supply of these pressing necessities which has called forth the various reclamation projects in which so much money has been won and lost. The reclamation of the waste lands in the harbour of Bombay is, therefore, a great want, with corresponding profits, if judiciously executed.

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The Money Market Review, 20. Oktober 1866. S. 441/442.
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Lance. Letter (Third) on American Railways. (Published Oct. 1866)

Great Britain had in operation on 1st Jan. (1866) 13,000 miles of railway, cost to that date: 413 Mill. £. St.
U. States at same date 35,000, cost 278 Mill. £.

Lance gives the following survey of the American Railways:

System of Railways. Group. Cost per mile. Earnings per mile.
New England. 1 £10,015 1352.  
      Do. 2 11,528 969.6
      Do. 3 6,843 681.9
      Do. 4 7,280 785.6
      Do. 5 8,087 1101.6
Grand Trunk of Canada 16,522 849.9
New York Central 15,454 2612
      Do.    Connections. 4,971 685.1
Erie 14,181 2186.7
Do.    Connections. 8,368 1157.4
Pennsylvania 13,435 2796.9
   Do.    Connections. 20,505 3918.6
Philadelphia and Reading. 18,201 3025.2
Baltimore and Ohio 15,763 1880.3
Intermediate Western 1 6,917 1855.6
      Do. 2 9,924 576.  
Western 1 7,778 1020.2
   Do. 2 9,872 1847.5
   Do. 3 9,714 618.9
   Do. 4 10,290 1646.4
   Do. 5 9,423 475.6
Southern 1 6,414 802   
   Do. 2 4,995 871.2 |
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Was die Atlantic and Great Western angeht built by capital raised in anticipation of the issue of the bonds and shares. Calculations zunächst baffled by American Civil War, and the bad credit into which American railway securities had fallen by the diversion from their professed objects of various subscriptions in the London market. The Atlantic and Great Western, at present in its infancy, only opened since a year; but its traffick receipts far exceed expectation.

As the different sections of the Atlantic and Great Western Railway were constructed, the money was for the most part borrowed in this country upon the bonds issued, and thus in the recent money-famine there was an undue pressure of sales by the lenders tending to a ridiculous depreciation of the bonds. Steady investors too became frightened, as the bonds fell, and added to the general panic by their sales.

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The Money Market Review, 20. Oktober 1866. S. 444.
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Foreign Loans. and Panics

Now that money is getting plentiful, rumours of foreign loans, due to the leviathans of the money market and the whole fry of premium hunters. No doubt, it is a fine thing for certain millionaire firms to take this opportunity of palming upon us loans for foreign Powers to the tune of several millions, for if they but get the English public committed to such transactions by a stiff deposit of, say, 20%, they are secure of their commission of 21/2% on the nominal amount of the said loans, of an annual percentage on payment of dividends, and of being for several years to come well in hand from from the funds of their „royal“ and „imperial“ constituents, not to mention other pickings. Then cry of overtrading, panic – a period most favourable for our plutocracy to lay out at high interest the fortunes made by financing for kings and emperors, and to make the most exorbitant demands in the way of securities. A panic follows, then a plethora of money, and then fresh loans. During all the late crisis these millionaires of European celebrity had no difficulty in getting from the continent whatever money they wanted at 3 or 4%, so that, whichever way the wind blows, it blows in at their barn door.



27 October 1866. N. 334.

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The Money Market Review, 27. Oktober 1866. S. 463/464.
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Overend, Gurney et Co.  Zusatz von Marx.
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(Shareholder and Creditor.)

Mr. Denton, of firm of Maynard et Co., the new solicitors of the liquidators, depreciated any delay, mentioned that, „on recently going into a conveyancing office, he had seen a deed conveying £300,000 to 3 children in consequence of enormous liabilities to Overend, Gurney et. Co.“ … The Capital of £1,500,000 raised by the shareholders, entirely gone and entirely absorbed by the creditors; to that amount they have already benefited from the fraud upon the shareholders. The legal question not between these 2 parties. The right of the creditor is against the Co. and the Co’s Assets only. The sole question is, whether the shareholder was really a lawful member of the Co.|

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The Money Market Review, 27. Oktober 1866. S. 464/465.
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How is Money to be employed.

The mania of 1864 and 1865 and the attendant panic of 1866 are over. Investors some months back sold Consols and Exchequer Bills, and all the good prudent things, and bought finance and bank share and almost any „limited“ shares which appeared to promise fabulous rates of interest upon the purchase prices. There was, for a time, a vision of sudden wealth which a few months have utterly destroyed. As a rule, the mania in other shares has extended to railways. Even now, the minimum both of dividend and market value has not yet been attained in a number of cases. For the time very little railway debenture money is forthcoming from the public, as the overdrawn balances at the bankers show in the lately published accounts; and it seems quite a question whether, in some instances, revenue will not be absorbed to meet capital engagements in the absence of that constant supply of capital upon debentures.

There is little field for speculation except Indian and Colonial Railway Shares, and U. States Stock.

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The Money Market Review, 27. Oktober 1866. S. 465/466.
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Influence of the Weather upon the Money Market.

Since 1st August bad weather, prospect of bad harvest, and consequent depression of Stock Exchange. Why should the crops, during harvesting, depend on the atmosphere? Farmers will say that the Corn, when out, must go through a certain drying process in the open air, and if the open air will not admit of that preparation, the corn must be spoilt A coffee grower from Ceylon wrote to the Times that when his coffee crops liable to risk from rain, he placed them under cover, provided especially against such emergencies.



10 November. 1866. N. 336.

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The Money Market Review, 10. November 1866. S. 519/520.
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North British Railway.  Zusatz von Marx.
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(Imitated from Hudson)

Report of Committee of Investigation. Dividends systematically paid out of capital, with the connivance of 1 or 2 subordinates, and under the direction of one guiding spirit, who has presided over all the proceedings in Parliament, all the contracting for new lines, all the manipulations of accounts, whereby dividends have been provided;

In April 1849, a Committee of Investigation upon the affairs of the Eastern Counties Railway Co. made the following statement: „It is evident that no accounts of the half year, which did not terminate until 4 January 1846, could have been completed by the 22d Dec. 1845 … when the accounts were made up in accordance with the books, they did not show that any such dividend had been earned; and, in order to justify the foregone conclusion of the Board, the traffick accounts were altered, and the expenses squared to suit the dividend, not the dividend to suit the expenses.“

Again, in April 1849, the assistant accountant of the Eastern Counties Co declared „it was a generally understood thing that capital was to bear what revenue could not.“

Again, there was a traffic manager of the Eastern Counties Co who took the half years’ account ended 4 July, 1848, to Hudson at Albertgate, and who stated to the Committee of Investigation: „Mr. Hudson directed me to tell them at the office to carry £10,000 to the ensuing half-year; that is to say to make the expenditure in the printed report appear to be £10,000 less than was actually incurred.“

Thus 20 years ago, and now the almost ridiculous reproduction of the same thing. Although not earned, dividends of the North British Railway paid for years at the dictation of the chairman Hodgson.|

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In January 1865, July 1865, Jan. 1866, July 1866, the same system of account cooking to bring out the dividend wanted. Mr. Walker, the secretary, wrote to Hodgson on 21. Febr. 1866, that the members of the Finance Committee „charged with the duty of providing the ways and means for the Co.“ ought to be informed of the real state of things. To him, Hodgson, in true Palmerston Style, replies:

„As to the knowledge of the Finance Committee, a little knowledge is a dangerous thing, and in some cases much knowledge would be more dangerous. I think they know quite enough.“ They were thus designedly kept in the dark.

„Keep their eyes bandaged, Martin“, was the memorable trust committed by one chairman of the South Eastern Railway to the deputy chairman when he desired the shareholders should not understand the position of their property, but that hardly comes up to this bandaging of the Finance Committee of the North Brit. Railway .

Other parallel between the administrations of Hudson and Hodgson. They both have had a remarkable propensity for leases, amalgamations, and extensions. In Hudson’s case the personal motive was apparent enough. The Bristol and Birmingham, the Leeds and Bradford, the Great Northern of England, and the NewCastle and Berwick, and the Hull and Selly, were all leased and amalgamated with at, perhaps, 3 or 4 times their value; but, if so, the enhanced value of the lease or amalgamation went to someone. Mr. Hudson himself was found tolerably well charged with the shares in most of these good things before any lease or amalgamation was contemplated, excepting by himself.

The Committee of Investigation remark that the North Brit. Railway in 1844 a mere project for 58 miles of line, with capital of 1 million; it is now a system of 781 miles open for traffic, und 147 miles partly under construction, with an authorised share and loan capital of £22,210,713. The Edinburgh, Perth, and Dundee have been absorbed, ditto Edinburgh and Glasgow, and other lines, and branches in all directions constructed or partly constructed. Contractor influences among the directors. In einem Brief an Hodgson der Secretary insists f.i. that money would be thrown away on the Forth Bridge; that no possible traffic would compensate for the outlay; and yet the outlay was to have been made in the interest of some one, by Hodgson’s command. The directors of the Edinburgh and Glasgow Section of the North Brit. Co. resolved at recent meeting „That the Reports by the Committee of Investigation … discloses a course of systematic and fraudulent deception and deliberate falsification of accounts on the part of the chairman of that Co., by means whereof he induced this board and the shareholders of the Edinburgh and Glasgow Railway Co. to agree to an amalgamation of the two Cos., to the great detriment of the Edinburgh and Glasgow Co. … call the attention of the Lord Avocate to the report etc.“

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The Money Market Review, 10. November 1866. S. 520/521.
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Great Eastern Railway.

Turner, present chairman, one of the Investigation Commissioners that drove out the old directors. Now he wants 41/4 mill. £ in 61/2% preference stocks and debentures, at such a moment of general railway distrust, and of special Great Eastern discredit. Points to conclusion that, in direct antagonism to the interests of shareholders, some one or some clique has a positive interest in promoting Parliamentary Bills, and in the construction of new railways.|

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The Money Market Review, 10. November 1866. S. 521/522.
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Joint-Stock-Discount-Co.

A suit has been instituted by the official liquidator against the directors to hold them personally responsible, as for a breach of trust, for the loss sustained by the Co. by the investment of £30,000 in the shares of Barned’s Banking Co. The bill alleged that the Discount Co. established for carrying on the business of a bill broker and scrivener. Barned’s Bkg. Co. was formed for taking over the business of 2 old banking firms at Liverpool, and the Joint Stock Disc. Co., to aid in bringing it out, agreed to subscribe for 10,000 shares, and had 3000 shares actually allotted to them. On these shares they had paid for deposits and call £10 per share, or £30,000, and by a subsequent arrangement they agreed, in consideration of 500 shares by way of bonus, not to sell any of their shares under a certain premium before July, 1866. These transactions concealed from, and never sanctioned by, the Co. Hence the suit against the directors.

Zugleich der unglückliche Mr. James F. Wilkinson, the late managing director of the Co., charged mit misdemeanor.  Zusatz von Marx. Siehe S. 250.
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(Verurtheilt später to penal servitude, später frei als unschuldig.)

Aus:
The Money Market Review, 10. November 1866. S. 524.
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Cardigan and Carmarthen Railway Co.

This week a large amount of Lloyd’s bonds of said Co. are declared to be fraudulent and valueless.

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The Money Market Review, 10. November 1866. S. 524.
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Food Supply.

High price of flesh meat. Now bad prospects of bread supply. In America no surplus available, wheat being, on the contrary, dearer at the present moment in New York than in Europe; and the latest reports represent the spring wheat as fully 2/3 damaged in a greater or less degree. French have deficiency of 4 Mill. qrs. wheat, are now, with Belgian, Dutch, and others, competing with us in the Baltic and Black Sea. Cereal harvest everywhere bad except in Southern Russia. French have had the start of us, as they have been enabled, by means of the  Über die Entstehung einer französischen Agrarstatistik informierte sich Marx im „Großheft 1865/1866“ der „Hefte zur Agrikultur“ in seinen Exzerpten aus L[ouis] Mouniers „De l’agriculture en France, d’après les documents officiel avec des Remarques par M[aurice] Rubichon“ (Paris 1846) (siehe MEGA² IV/18. S. 969).
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system of agricultural statistics
which they possess, to learn the probable deficiencies in their crops, and take prompt measures for obtaining supplies when prices were comparatively low; while we, in absence of such statistics, in being obliged to pay much higher prices, the rise in price of grain within the last 3 months 45 to 50%.



17 November 1866. N. 337.

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The Money Market Review, 17. November 1866. S. 547.
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Railway difficulties.

Railway collapse of 1866 scarcely less memorable than that of 1845. In 1845 a railway bond holder believed he had, as security for his money, the mortgage of the freehold of a railway. In 1866 bonds not the securities they were supposed to be in 1845. Then have turned up „Lloyds Bonds“, which did not exist in 1845. In 1866 it is discovered that not one, but many railway cos. have issued bonds without any legal authority. Then have arisen question of priority; debentures, Lloyds bonds, Preference shares, ordinary shares. Lloyds bonds are only „acknowledgements of indebtedness“ (mostly paid to the contractors, contractors.) Die Carmarthen and Cardigan Railway Co. issued bonds (Lloyds) to 200,000l., in duplicate numbers. Which are legal and which not?

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The Money Market Review, 17. November 1866. S. 551/552.
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Large Uncalled Capitals in Limited Liability Cos.

Disadvantage of large uncalled capitals. The practice, from 1862 to 1864, to fix the shares of the leading Cos. then formed at a high denomination, 50 to 100£ each. With a large uncalled capital you buy or sell not an asset, but a liability, with a small uncalled capital, not a liability, but a property.


233

 Aus dieser Ausgabe zitierte Marx zwei Stellen im Brief an Collet Dobson Collet vom 19. November 1868, die sich nicht vollständig in den vorliegenden Exzerpten befinden.
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24 November, 1866. N. 338
.

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The Money Market Review, 24. November 1866. S. 575/576.
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The Overends. (Their Guarantee Account)

The suspense and guarantee account amounts to £4,213,896. 16s. 4d. Darunter parties, wie Atlantic Royal Mail Steam Packet Co (for £839,344), Millwall Iron Works Co. and C. J. Mare (£422,565)[,] East India and London Shipping Co (£397,653) Thomas Howard (£331,765) „Greek and Oriental Steam Navigation“ Co (144,144), David Leopold Lewis (£341,559), Nelson, Tritton and Co (291,391), J. E. C. Koch (railway accounts, actually belonging to the firm but under the care of Koch) (243,069), Lawrence and Fry (148,543)[,] T. and G. Garraway (190,977), Charles Joyce and Co (78,728) Halliday, Fox et Co (34,628) und Z. C. Pearson (35,693) – firms that had failed previous to the transfer of the business, and whose estates were then being, or had been, wound up, either in bankruptcy or arrangement. Besides these bad debts thus transferred to the new Co. as assets, the old firm were under liabilities on bills rediscounted, bills payable, credits granted, and guarantees, to the extent of £8,808,699, 8s. 3d. for which no provision was made in the arrangement. Many of these liabilities were on account of parties who had at that time failed, and upon which, therefore, it must have been well known that an ultimate loss would arise, and in respect to these the new Co. has been called upon to pay a large amount, for which no provision had been made.

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The Money Market Review, 24. November 1866. S. 576/577.
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Railway Debentures.

Debentures outstanding.
At end of 1865 At Midsummer 1866
Great Northern £1,063,500 £1,258,062
Lancashire and Yorkshire 4,870,242 5,067,523
London and North Western 10,365,508 10,862,188
Great Western 12,959,633 13,181,938
London, Brighton etc 2,156,285 2,500,590
Total £31,415,168 £32,870,301.

Increase in debentures outstanding during half year = £1,455,133, more than 41/2%. These 5 Cos. – specimen of their class – have enormous floating debts, the principal of which is continuously falling due. The collective debts of the 5 Cos nearly 33 mill., – that is, each Co of the five has on the average an unfunded debt nearly equal to the unfunded debt of Great Britain now outstanding in Exchequer bills … The total unfunded debt der Railways perhaps 150 to 200 millions, 20 × or 25 × the unfunded debt of Gr. Britain.

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The Money Market Review, 24. November 1866. S. 577/578.
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Directors’ Fees.

Many Cos. only brought out for the benefit of promoters and directors. The General Credit and Finance Co fairly illustrates this. Directors davon, by the articles of association, entitled to 1/10 of the net profits. Under this clause they took £15,000 for 1864, and £20,000 for 1866 for themselves. In May last, when panic, their management unequal to the occasion, and soon after call, the shares being quoted at 5 to 7sh. each. Now the directors invite the shareholders into the new Co., and ask them, by proxy (indirectly) to bind themselves to new articles of association. In diesen, N. 67 makes beyond the 1/10 of the net |234 profits, nämlich a provision for the directors „of all travelling expenses, and other actual outlay, a fixed salary of 3000l. p.a. and 1/10 of the ultimate surplus profits“.

The Russian Anglo-Dutch 5% Loan for £6,000,000.

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The Money Market Review, 24. November 1866. S. 578.
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 Von Marx zitiert im Brief an Collet Dobson Collet vom 19. November 1868. Marx ergänzte dort einen weiteren Satz aus der Quelle, den er nicht exzerpiert hat: „It is said that English applications alone for this loan amount to between 20 and 30 millions ... there is no doubt that a very large amount of British Capital has been offered for this investment.“
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It is said that the English applications alone for this loan amount to between 20 and 30 millions.
Where then is Disraeli[’]s want of capital? There cannot surely be a want of capital or money upon such evidence.

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The Money Market Review, 24. November 1866. S. 584.
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 Zusatz von Marx.
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Ein Foreign Bondholder schreibt über dasselbe Thema in diese Nummer:
No sooner have we an easy money market, and no sooner do dividend paying foreign stocks, from their  Money Market Review: absurdly
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absolutely
low prices, begin to attract the attention of people who are seeking investments, than forward come intimations of fresh foreign loans – as if enough of British Capital had not already been lent to foreign States. We thus help to depreciate the Foreign Securities we hold.

The Russian Gvt. now seek a new Five P.Ct. Loan of 6 Mill. £, at the nominal price of £86. Now Russian Five P.Ct. of the 1822 Loan were once as high as 115. Why have they fallen to 88£, their present price? There has never been any doubt as to a dividend; on the contrary, to the everlasting Credit of the Russians, the dividends were punctually paid even during the Crimean war. The reason is this, that from 1850 Russia has been continually borrowing, and instead of the one Five P.Ct. Loan of 1822, we have now no less than 5 other Russian stocks quoted on the London Stock Exchange! The same may be said of the Brazilian, Ejyptian, Peruvian, and Turkish bonds.

If this Russian Loan be floated at 86, what security is there that another will not be introduced next year at 80? And so from time to time are existing interests deteriorated. An attempt was made not long ago by Mssrs. Barings to introduce a Six p.Ct. Loan for the Argentine Republic at 75, when Buenos Ayres Six P.Ct. were at about 88. What was the consequence? Down went the price of the latter stock, because there was a rush to sell by subscribers to the new loan; but, after all, it proved to be a failure, and but a small portion of it could be floated. … It is not the thing for any State to come to us for new Loans whilst their old debts are below the prices at which they were issued, and it is too bad to seek to borrow on terms below the market value of bonds of former loans, as is the case now with Russia.



December 1. 1866. N. 339.

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The Money Market Review, 1. Dezember 1866. S. 606/607.
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Estate Investment Co. Misrepresentation in Prospectus.

Nach judgment des Vice Chancellor Sir W. Page Wood „the plaintiffs contract to take 10 shares rescinded, deposit money returned to him, his name removed from the register of the Co, the defendants to pay the costs of the suit“.

This Co. promoted by one Sarl. Purpose set forth in Prospectus to buy Land for building near metropolis etc[.] The capital of the Co was to £250,000, in 10,000 shares of £10 each, the prospectus stating that the first issue would be of „5000 shares of which more than half has been subscribed“; that upwards of 70,000£ had been expended upon the Selhurst Estate (at North Norwood) by the vendor Sarl; and that a binding contract had been entered into for the purchase of the Leyton stone Estate (within 6 miles of London etc). Alles dieß gelogen. Sarl himself (promoter und agent der directors) had agreed to take 2,510 shares. The directors told the public that they had got rid of, while Sarl was afterwards found pushing these 2,500 shares in the market, and |235 inducing the public to buy that which they were assured by the prospectus had been already taken up.

The New Russian Loan.

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The Money Market Review, 1. Dezember 1866. S. 608/609.
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The returns of the Banks of England and France show a glut of money … yet, so thoroughly the basis of public confidence sapped, that prices (on Stock etc Share markets) without any sign of animation. Dulness and distrust prevail, in face of the fact that the Board of Trade returns show the commerce of the country in more active condition than is generally believed.  Von Marx mit Auslassungen und Ergänzungen aus der Quelle zitiert im Brief an Collet Dobson Collet vom 19. November 1868.
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Holders of money are afraid – afraid, at least of all the old channels of investment, and capital is only to be tempted for the moment by foreign or colonial loan. Of this the enormous applications for the Russian, and the marked success of the New Zealand, Victoria, and Queensland Loans are proofs. Employment of this kind will not long be wanting for our capital. The Lombardo-Venetian Railway Co are about to issue bonds for £3,600,000, and doubtless several needy Governments will not delay following in the wake of the Russian. It is a gain, at all events, that there is at length some renewal of investment
, and we must continue to wait patiently until the need for interest shall make itself sufficiently felt to force into employment the unremunerative hoards which are now accumulated in bankers’ vaults.

 Zusatz von Marx.
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Der oben citirte Foreign Bondholder schreibt in dieser Nummer über die New Russian Loan:

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The Money Market Review, 1. Dezember 1866. S. 611/612.
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The New Russian Loan „a success“; that is to say, before allotment, it has been dealt in largely at a premium, as was the case invariably a year or 2 ago with all the limited liability Cos now being wound up under the orders of the Court of Chancery. I predict, this new loan will go to a discount, as the monthly instalments of £15 become due … Its introduction has had the effect, not only of checking the rise, which was general, in all foreign stocks, but of causing a fall in Consols, and a fall of 2 to 3% in all classes of Russian bonds. It is now stated that various other foreign loans are about to be introduced, Austria is in need – also Brazil, Portugal, Italy, and, as John Bull’s coffers are once more filling, there will be no end of applications for the surplus wealth of the nation … The public for the moment care little about foreign stocks as investments, yet send in their applications for a slice of the New Russian Loan, tempted, as in the days of the late mania, by the hope of realising a premium on the scrip.

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The Money Market Review, 1. Dezember 1866. S. 611.
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 „1915“ ist das Pseudonym eines Verfassers einer Reihe von Leserbriefen an die „Money Market Review“.
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1915.
On the Overends.

The personal guarantee was expressly given, not as against the 4 millions and upwards of the secret instrument at all, but solely against the 19 mill. and upwards of the comparatively public deed of transfer. Even the pledge of the private estates of the old firm was not to be redeemed before 31st Dec. 1868.


236

 Aus dieser Ausgabe zitierte Marx eine Stelle nach der Quelle im Brief an Collet Dobson Collet vom 19. November 1868, die sich nicht in den vorliegenden Exzerpten befindet.
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8 December 1866. N. 340
.

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The Money Market Review, 8. Dezember 1866. S. 636–638.
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 Titel von Marx notiert in „Heft 3. 1868“ der „Hefte zur Agrikultur“ (MEGA² IV/18. S. 587.35), einem Exzerptheft 1878 (IISG, Marx-Engels-Nachlass, Sign. B 148) und im Notizbuch 1878/1879 (IISG, Marx-Engels-Nachlass, Sign. B 152). – Verzeichnet im Katalog der SPD-Bibliothek (Nr. 41745).
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John Benjamin Smith, M.P. An Inquiry into the Causes of Monetary Panics etc[.] Letter addressed to Malcolm Ross, President of Manchester Chamber of Commerce. London. (1866)

Nach Smith „the currency question“ is „the only question which is incomprehensible“.

(Smith was the first chairman of the Anti-Corn-Law League, and von 1839–1841, President of the Manchester Chamber of Commerce.)

In 1840 charges der Manchester Chamber of Commerce against B.o.E. that, against her own acknowledged rule to hold a reserve of gold in the proportion of 1/3 to its liabilities, „the directors continually acted in direct violation of their own principle – fostered speculation and overtrading by large and injudicious loans, and then, by suddenly calling them in, produced a panic, a fall in the prices of all commodities, and serious losses to the whole commercial community“. In illustration he mentions, that in 1836 Bullion of the Bank reduced to 4 Mill. St., whilst its circulation and deposits 30 Mill. £. To replenish their stock of gold, a course of restriction was commenced, resulting in panic of 1837, by which losses of capital in the 5 great staples of cotton, woollen, silk, linen, and hardware, estimated at 40 Mill. £. The same thing occurred in 1839. To remedy these evils the Bank Act of 1844 was passed, but, says Smith „22 years have since elapsed, – and the evils now complained of … appear like a mere recital of the complaints of 1840“.

Now, nach Smith , reason davon, daß die London Joint Stock Cos. keep not large enough money reserve.  Zusammenfassung von Marx.
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But, Smith, great Smith, 1847 panic! but at that time deposits in the 9 leading joint stock banks less than 9 mill. Then, Smith, 1857, panic!
and the Inquiry Committee of 1857 considered the increase of deposits in the Joint Stock Banks as one of its causes, but failed to adduce any evidence – because there was none. And, finally,  Zusammenfassung von Marx.
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Smith, immense Smith, according to thyself,
in 1866 June 30, those Joint Stock Banks denounced not only not failed, but paid 25, 29, 50 p.ct. p.a. on their respective capitals. Smith utterly fails to show that the large deposits in the Joint Stock Banks, or the amount of their reserves had anything whatever to do with the last crises. But Smith feels it a hardship, that they should have drawn so largely, at such a time, on their own balances in the B.o.E.  Zusammenfassung von Marx.
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But, Smith, Smith!, couldst thou complain if thy creditor drew largely upon thine reserves at the time he wants his money?

 Kommentar von Marx.
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Smith is evidently a damned and solemn and presumptuous ass!

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The Money Market Review, 8. Dezember 1866. S. 642.
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Spirit of the Cotton Circulars.

Decline (gradual) in the price of raw cotton. Manchester manufacturers are losing money, have no confidence in current values, and begin to put their mills on short time.|

237

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The Money Market Review, 8. Dezember 1866. S. 642–644.
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Ebbw Vale Co. (Lim.)

Great Colliery owner und iron master; territorial magnate and powerful capitalist. Employs more than 15,000 persons, representing population of 50,000. 6 different collieries and iron works in Monmouthshire (3,254 acres of freehold land and mines; 9,352 acres of leasehold properties, besides properties in Gloucester and Somerset – the former in the Forest of Dean to the extent of 700 acres (inexhaustible coalfields), and the latter in Somersetshire to 3000 acres.[)] On its freehold and leasehold estates 2000 houses and cottages; its rental alone from lands, farms, and houses beyond 14,000 a year. 23 blast furnaces yielded 152,000 tons of pig iron annually, 100,000 tons of railway and finished iron turned out in the year. Collieries 850,000 tons of coal yearly, the mines 280,000 tons of ironstone annually. Besides, at the shipping ports there were ample appliances for a vast and increasing trade by sea. All this was private property when taken over by present Co.

The Co. among the first to apply the furnace gases to the saving of heat in the production of iron – applications that have since been carried to such perfection in South Wales, Staffordshire, and Cleveland.



December 15, 1866. N. 341.

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The Money Market Review, 15. Dezember 1866. S. 667/668.
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The Overends. „Justitia“ in „Times“ (11 December) „On Commercial Morality.“

 Zusammenfassende Bemerkung von Marx.
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Die Times indeed defender der Overends. Ausnahmsweis for sensation sale jener Artikel. Es heißt darin u.a:

The old firm saw ruin imminent, and they seriously set themselves to the task of averting the dreadful catastrophe. They had already wasted a great part of their own fortunes, and squandered in foolish speculation 3 millions of other people’s money; what were they to do? Craft and subtlety were to be employed to stave off the evil. Their own firm was ruined, but their name was still a potent spell, and that they believed they could persuade a credulous public to buy and so to save themselves. That by this process they might bring ruin upon thousands of helpless innocent people was apparently of no consideration to these „pious bankrupts in fortune and in honour“. They determined to obtain for themselves a large sum for their name and their goodwill, and then to transfer all liabilities to the new. new Co. To do this the public had to be deceived, „and this was done in a mode that in more savage times than ours would have brought to the gallows the perpetrators of the dead.“

In the prospectus issued by the directors of the new Co. no statement of the circumstances either of the old or new co.; nothing said of the 3 millions of liabilities; no hint of the actual insolvency of the firm for whose business they engaged to give £500,000. The public were cajoled into buying shares in a concern utterly bankrupt by persons thoroughly cognisant of the |238 fraud they were committing. The private arrangement (secret article) contained a full description of the actual state of the old firm, and set forth in „damning figures“ all the liabilities and debts of the bankrupt sellers. Who, asks Justitia, are the criminals? The members of the old firm and the directors of the new Co. They concocted and executed the whole scheme, etc. „These“, he says, „are the criminals, and their crime is that of obtaining money under false and fraudulent pretenses – or swindling – and for that they ought to be placed on the criminal charge at the bar of the Old Bailey.“

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The Money Market Review, 15. Dezember 1866. S. 668/669.
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 Titel von Marx notiert in „Heft 3. 1868“ der „Hefte zur Agrikultur“ (MEGA² IV/18. S. 587.39), einem Exzerptheft 1878 (IISG, Marx-Engels-Nachlass, Sign. B 148) und im Notizbuch 1878/1879 (IISG, Marx-Engels-Nachlass, Sign. B 152).
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The Crisis of 1866: A Financial Essay. By W. Fowler. (1866.)

Defends Peel’s Act, Overstone etc. A panic, he says, is invariably the result of the opposite extreme. Too much confidence – undue inflation of credit – invariably followed by distrust, but in all cases there must be one immediate cause – one culminating point – which precedes the crises. Before the panic of 1847 great railway mania which necessitated money borrowing to an extreme extent, then panic, with the attendant export of precious metals to buy food, which was the immediate cause of suspension of Peel’s Act. Before panic of 1857 extreme speculation in the Un. States, which extended to this country, and the immediate cause of the suspension of the Bank Act then was the failure of various banks and colossal commercial houses connected with the American trade. Before the panic of 1866, great speculation in cotton, finance Cos, banks, limited liability Cos of all sorts, and in merchandise of various descriptions, and pinnacle of the crisis stoppage of Overend etc, 11 May, necessitating for 3d time the suspension of Peel’s Act.

Fowler so far right,  The Money Market Review: but we cannot go with him in his declaration
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but fool when asserting
: that the B.o.E. was prepared for the emergency because the Act of 1844 had compelled her to take the utmost caution in the management of her business, and that, guiding herself, by the state of her reserve, she maintained the high rate of interest which counteracted an adverse tendency in the foreign exchanges.

1) As to the necessity for a high rate of interest as a means of retaining gold in the country and of counteracting adverse foreign exchanges … B.o.E. minimum rate of discount 10% from 12 May to 15 Aug., and in that interval the Bank increased its stock of coin and bullion from less than 13 to less than 14 mill. In the same interval the B.o.F. minimum rate from 3 to 4%, but its stock of coin and bullion increased in those 3 eventful months from 201/2 to 291/4 mill. Ten % brought the B.o.E. virtually no gold at all; 3 and 4% brought the Bank of France nearly 9 mill. From 15 Aug. to now (15 Dec.) the minimum bankrate of discount at the B.o.E. reduced from 10 to 4%, and from about 14 mill. on 15. Aug. B.o.E. holds now 18 mill. It is clear that a high interest does not always attract gold; and that, after the panic of last May, it was worse than inoperative. It was mischievous to all but the B.o.E. and some other banks. Rest and dividends of B.o.E. good.|

239

2) Old, old theory that „the convertibility of the note“ secured by 10% rate for 3 months, that the 10% kept enough gold, and that convertibility was never in danger. Nonsense! The convertibility was more in danger from the 10% than from any other cause. Was the convertibility of the French note in danger from 3 to 4%, while ours was 10; or with 30 mill. of gold to back it, while B.o.E. could not get half the amount with 10%. If from 12 May to 15 Aug. the B.o.E. had acted up to the letter of the law, it must have stopped payment. And then the convertibility of the Note went to the wall. It was only by throwing the Act of 1844 overboard that the Convertibility of the note was preserved.

3) Fowler tells that there must be a limitation of notes, and that the power of relaxation must rest with the minister of the day. Where existed the power of limitation in the recent crisis? Country bankers would have big B.o.E. notes in their tills so long as the 10% rate lasted, as the return made to the H.o.C. at the instance of Alderman Salomons amply shows. It was not for the B.o.E. to choose. The B.o.E., during those fatal 3 months of 10%, had outstanding obligations to pay gold on demand to an amount far larger than it had gold to pay, and all these debts might have been demanded in full at short notice. If the B.o.E. had only been a little more obstinate and a little less accommodating, their gold creditors would have demanded prompt payments, and where would the B.o.E. have been then?

Fowler says that the Bank Act of 1844 point points to a limit to the available supply of money, and thereby is a wholesome check to speculation. Might it not also be said that when the Bank coffers are full, as they are now, and will probably continue, the Act of ’44’ ’44 stimulates speculation? This law has taught us that, with 18 millions of bullion and coin in the B.o.E., we may regard money as dirt |240 cheap, and that with 12 mill. it must be at panic prices. Was there ever anything so supremely ridiculous in the shape of a law framed to regulate the commerce of the greatest commercial nation of the world?

 Nummerierung von Marx.
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4)
Furthermore, we are told that the limitation of banknotes relatively to the accidental stock of bullion in the Bank vaults ought to exist by law, and that the law of 1844, therefore, a wise and expedient measure. Yet, nevertheless, that some relaxing power is necessary in times of emergency, but that the power of relaxation, meaning an extension of the paper money beyond the limits of the Act of 1844, should rest, at as it now rests, with the Gvt. of the day, and not be an integral part of our Currency Law. This means, in fact, that our currency system ought to be regulated by a stringent law, but that, however stringent that law may be in easy times, it should invariably be abrogated in difficult times, and should no longer be law at all. We are told that on three occasions of 1847, 1857, and 1866, the Treasury Letter suspending the Bankact of 1844 has sufficed, „as by magic“, to stop all panic, and quickly to restore the normal state of monetary affairs; and that, as this magical suspension is sometimes imperative, a general power should be given to the First Lord of the Treasury and to the Chancellor of the Exchequer to give the needful authority to the Bank to suspend the law at their discretion. That is, in fact, that the law should be sustained upon the statute book, but that it should never be really put in operation. One of the aims and objects of the law of 44’ was to provide against those crise crises from one of which we have just emerged, and we are now told that whenever such emergencies arise there must be no such law at all. The law was meant to meet all such emergencies, but it is now argued by this most earnest advocate for the law that the emergency must be met by suspending the law.

Yet again we are told that a high rate of discount will not put a stop to speculative operations so long as it is profitable to pay it, but that the Act of 1844 will and does check such transactions, because in points it points out, in a way that cannot be mistaken, that there is a limit to the available supply of money in the country, and that, however good may be the bills offered, it is not certain that money will be procurable just when and to the extent required.|

241

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The Money Market Review, 15. Dezember 1866. S. 669/670.
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Lloyd’s Bonds  Zusatz von Marx.
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(Railway Debenture)

Lloyd’s Bonds are, or ought to be, an acknowledgement, under seal, of a debt due for work performed or materials supplied, and in that form are held to be lawful; but in cases in which they have been used as a means of borrowing, as distinguished from the discharge of debt incurred before their issue, they have been held invalid.

In the last session of Parliament Law was passed rendering compulsory the public registration, on and after January 1867, of railway debentures and all other loans; and this same Act requires that after 21st  January 1867 every mortgage deed, bond, and certificate of debenture stock issued shall be endorsed by 2 directors and 1 officer of the Co., with a certification that the issue is made under Parliamentary Powers. These 2 directors and the officer are liable to fine and imprisonment if they certify falsely. Presently, 45% of the net revenue is the maximum of the debenture interest, while the minimum is 73/4%, and the average less than 23%. (Dieß nach Coles’ Tables.)

Mr. Coles has prepared tables for 26 Cos (the most important:): important): In substance these figures amount broadly to the facts that the 26 Cos. have raised in all 348 Mill. St., of which 79 millions is, virtually, at this moment, in the form of debentures.

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The Money Market Review, 15. Dezember 1866. S. 672/673.
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Bills of Lading.  Zusatz von Marx.
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(Frachtbriefe) (Handelsschwindel)

At the bottom of all transactions there is money. In a rough kind of way the business community may be divided into 2 great sections, the one dealing with money and the other with merchandise. The 2 live by one another. The capitalist is always ready to lend, and the merchant willing to borrow, the fundamental basis of dealing being security. This is provided by certain well known contracts formulated upon acknowledged instruments of trade, such as bills of exchange, bills of lading, dock warrants, and the like, which pass current generally „to order“, and by simple endorsement from hand to hand. These, when complete, are recognised as valued transfers of value. Bills of lading, for convenience, are drawn in sets of 2, 3, 4, and sometimes 5 parts. The number of parts is stated upon the face of each, and the captain certifies that he had signed the number indicated. The important part of the contract between the captain and all other parties to the bill of lading is that he engages to deliver the merchandise in good order, „in witness whereof the master of the said ship hath affirmed to ―― bills of lading, all of this tenor and date; the one of which being accomplished, the others to stand void“.

Now the course of dealing is ordinarily after this fashion: A merchant in India buys a parcel of cotton for which he engages to pay. He ships the purchase to London, obtains the bills of lading, and negotiates with an Exchange Bank to draw on the correspondent to whom he consigns the cotton, and assigns the shipping documents as collateral security for the due honor of his draft. In return, the banker pays the amount agreed for, which enables the merchant to meet his engagements. In other words, the bank buys the |242 bills of exchange, reserving power of recourse against all parties as well as against the goods in case of need. The bill is then remitted to the London office, and presented to the merchant’s correspondent, who, being duly advised, accepts the same. In due course the vessel arrives, and the agent sends his cotton to a storekeeper or to a dock warehouse. The storekeeper holds the cotton as bailee for the captain until payment of freight, and, after notice, for the bank who claim a lien for the advances made. The agent next pays the acceptance he has given and takes possession of the documents. He then lodges one bill of lading and a release from the captain’s claim for freight, and obtains from the storekeeper a dock warrant or wharf note, as the case may be. He then possesses a clear title to the goods, and if he should consider the markets unfavourable for immediate operation he can wait, when the certainty of being able to obtain a loan upon the document should need a rise. The storekeeper makes himself responsible for the delivery of the goods on receiving one only of the set of bills of lading, and he does this in virtue of the understanding that „one of which being accomplished the others to stand void“.

Nun schöner case of Meyerstein vs. Barber. J. C. Azemar et Co, respectable firm, lately transferred their business to one Abraham, formerly in their employ and known in London first as their manager, and afterwards as their successor. A parcel of cotton came to him drawn against in the usual manner. The cotton arrived and was landed under Abraham’s direction, but he appeared to lack the means to obtain the shipping documents. Consequently he could not deal with the merchandise, and had to contrive some scheme to meet the difficulty. He went to the bank and paid the bill by a cheque upon his own banker. He thus released the documents and immediately negotiated with Meyerstein for an advance upon them. This was successful, and, Meyerstein’s check being paid into Abraham’s credit, enabled his bankers to liquidate the cheque already given by Abraham. So far no harm done. The scheme was bold, but it had gone through, and all parties stood to come out right. But here the mischief begins. Abraham had deposited two bills of lading with Meyerstein, and one still remained in his possession. Meyerstein at this time was in the dark as to the arrival of the ship. Meanwhile, Abraham became active. He had been in communication with Mssrs. Barber as to a loan, in the first instance, but the negotiation had dropped, for want of agreement as to the amount. This was no longer of consequence, and the matter was resumed and concluded, eventually, upon Msrs. Barber’s first proposals. Every precaution was taken; the merchandise was inspected, and, being found free of all liens, the advance was made, the one bill of lading lodged, and the wharfinger issued the customary warrant. The mortgagees, being thus in possession of the cotton, sold it in their capacity of brokers and repaid themselves out of the proceeds. Part of the cotton was sold by order of Abraham, but somewhere about this part of the business he disappeared or absconded. His flight roused Meyerstein, who instituted inquiry, and finding how the case stood, made his claim on the Barber for the net proceeds of the sale, on the ground that the property in the cotton passed to him with the transfer of the 2 bills of lading.



22 December, 1866. N. 342.

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The Money Market Review, 22. Dezember 1866. S. 700–702.
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Overend, Gurney et. Co.  Zusatz von Marx.
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(Times veering about.)

Times of 18 Dec. (’66) leading article sees nothing legally or morally wrong in the conduct of the partners of the old firm, nor of the new directors. Früher feebleness and indecision in its articles. „a disposition to wink at commercial delinquencies“, „shrinking timidity“, „moral cowardice.“ Then Justitia. Now: Fraudulent concealment and wilful and deliberate misrepresentation, for the purpose of taking the public in, if the public could not be taken in without them, are, according to the Times, neither legal crimes nor moral offences, but fair and |243 allowable mercantile transactions. That is the orthodox commercial morality of the Times.

Aus:
The Money Market Review, 22. Dezember 1866. S. 702/703.
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The Manchester Chamber of Commerce on the Bank Act and the Currency.

Motion was put into the recent crisis and the working of Act of 1844. President (Malcolm Ross) declared  Zusatz von Marx.
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that he was an ass
, that he had received 72 pamphlets and communications on the subject (one pamphlet proposing to allow banks to issue notes, taking pig iron as a basis) and  Zusammenfassung von Marx. „Mir wird von allem dem so dumm, Als ging’ mir ein Mühlrad im Kopf herum“ ist ein Ausspruch des Schülers von Mephisto in Goethes „Faust“.
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daß ihm ward von all dem so dumm, als ging ihm ein Mühlrad im Kopf herum.

This the extraordinary commencement. Dann the resolution moved by Henry Ashworth, who stated he did not wish to address the meeting, not being in possession of sufficient knowledge to enable him to express any definite idea on the subject. His seconder, Mr. Bannermann seconded it, because he was of opinion the inquiry would be of „no practical use“, having made up his mind that „the crisis had been caused, not by the Bank Act, but by overtrading“. Ferguson supported because no investigation was necessary, because the public were able to judge for themselves as to the cause of the panic, the immediate cause being the failure of Overend et Co, the proximate causes the speculations of the public in the shares of the limited liability Cos, and the action of the financial Cos.

Mr. Wood thought the passing of the resolution would not be for the credit of the Manchester Chamber, for it would simply show that they in Manchester were „ignorant of the causes etc“[.] He and Ferguson full of encomiums upon the Bank Act. Dennoch he and Ferguson voted for the resolution. Wood denied that the Act had been suspended more than once. The same Wood gave the following anecdote of Lord Overstone: „On the first occasion“, he says, „he asked Lord Overstone whether the suspension of the Act was sought, and Overstone replied that the authorisation was undoubtedly right, for there existed at that period a state of panic which, if it had not been allayed, would have swept everything away before it, producing a run upon the Bank of England which might have endangered the payment of the notes in gold.“ And it is said that the Act has secured the convertibility of the note from all danger! The Act works well in raising the price of the capitalists’ money, and in lowering the price of the merchants’ and manufacturers’ goods.

Bazley, übrigens auch für den Act, said u.a: This year greater exports than ever before, but imports exceeded them by 30 Mill. £. But Bazley ought not to be ignorant of the fact that it is the balance of indebtedness, and not the balance of exports and imports which governs the exchanges, and that the balance of trade may be and frequently is against us, whilst the balance of indebtedness is greatly in our favour.

Bazley sagt selbst, daß „it was our industry that bought the gold from every market … The B.o.E. could not do it of itself; it might possibly depress prices, and compel English manufactures to be sold at very low prices, in order that gold might be bought at very high rates.“

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The Money Market Review, 22. Dezember 1866. S. 708.
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Overends.  Zusatz von Marx.
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(Gordon and Rennie)

From the affidavit of those men (Gordon and Rennie) follows, that the Gurneys had told these 2 directors  Zusatz von Marx.
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(im Ganzen 7?)
their damnable secret on the transfer of the business.

In the Joint Stock Cos. Act of 1862 it is laid down: „Any fraudulent statement or concealment of fact ⦗in prospectuses⦘ will subject the persons putting it forward to criminal proceedings.“|

244

Is it in the power of any 8 persons, by means of the Limited Liability Act, to saddle unconscious individuals with the Debts of an insolvent firm, luring them by a flattering prospectus, whilst concealing the peril in which they are placed?

29 December 1866. N. 343.

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The Money Market Review, 29. Dezember 1866. S. 731.
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Bank Act of 1844.  Zusatz von Marx.
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(Reserve)

While we 10%, the B.o.F. 31/2 to 4%. It had not one farthing of Reserve in our acceptation of the word. That is to say, the notes issued and payable on demand in coin were generally in excess of the State Securities held and the coin and bullion in possession. The B.o.F. cares nothing for what we call „Reserve“, and yet during these 3 months accumulated an additional share of upwards of 9 Mill. £. St. … Throughout the history of the B.o.E., the smaller the Reserve of notes, coin and bullion, the larger have been the deposits and the actual circulation … It was not that the commerce of Gr. Britain wanted more notes, but that it feared there might be a stoppage of the supply altogether.

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The Money Market Review, 29. Dezember 1866. S. 733/734.
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The Railway Cos. Securities Act of 1866.

The money penalties against railway Cos. for non compliance with the Act singularly small, but two useful clauses. 1) the holder of a railway bond may demand a certificate from 2 directors and an officer of the Co (secretary or other officer registered at the office of the Registrar of Joint Stock Cos., authorised to sign the railway debentures of the Co.) that it is legally issued; 2) if certification wrongfully given, the directors and the officer may be imprisoned.



The Money Market Review. Jahrgang 1867.

5 January, 1867. N. 344.

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The Money Market Review, 5. Januar 1867. S. 5/6.
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Barned’s Bank etc. Public Official Audits.  Zusatz von Marx.
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(Overends und Times)

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

Those assets, says City Editor:

Securities held against liabilities: £1,082,000
Private Estates: 2,320,000
Goodwill 500,000
Premises in Lombard street 45,000
Balances due to partners in books of the old firm 940,000
Total: £4,887,000

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

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

246

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

Aus:
The Money Market Review, 5. Januar 1867. S. 7.
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The Cotton Circulars.

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

Quotations 29 Dec. 1866. From Msrs Smith, Edwards, and Co’s Circular.
1865 1866
Orleans. Middling. 21.1/4d. 153/8d.
Brazil. – Peruvian 201/2d 15d.
Fair Dhollerah 171/2d. 123/8d.
Bengal. fair. 121/2d. 87/8d.
Stock of Raw Cotton in Ports of Great Britain, taken from Ellison and Heywood’s Circular.
31 December 1862 Bales 433,900 Bales
1863 Bales 327,500
1864 Bales 575,727
1865 Bales 405,488
1866 Bales 581,570
Imports into Great Britain. (Ellison and Heywood)
In 1862 1,445,000
1863 1,377,600
1864 1,606,390
1865 2,034,730
1866 2,436,394
British Imports and Exports of Raw Cotton. (Ellison et Heywood)
Imports: bales 1862: 1,445,000 1863: 1,377,600 1864: 1,606,390 1865: 2,034,730 1866: 2,436,394
Exports: bales: 1862: 564,900 1863: 661,000 1864: 732,480 1865: 890,830 1866: 1,136,565
Net Imports: 880,100 716,600 873,910 1,143,900 1,229,829 1,299,829

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

247

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The Money Market Review, 5. Januar 1867. S. 7.
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Separation of Acceptances from Deposits in Bank Balance Sheets.

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

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

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The Money Market Review, 5. Januar 1867. S. 9/10.
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The Conservative Land Society.

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

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The Money Market Review, 5. Januar 1867. S. 12.
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Overends.  Zusatz von Marx.
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(Friends of the Co.)

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



12 January 1867. N. 345.

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The Money Market Review, 12. Januar 1867. S. 35/36.
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Proposed Expansive Clause in the Bank Act of 1844.

Economist,  Zusatz von Marx.
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under J. Wilson
, antagonist des Bank Act. Then, it „ratted“, became its supporter. Latterly, again backsliding. Globe, after supporting the Act for more than 20 years, has turned against it, demands its repeal. Economist, less courageous, demands expansive clause (so daß minister Chancellor of Exchequer by law ihn suspendiren können). Wants, therefore, partial abrogation of the Act. J. Mills (Manchester) (at meeting of Social Science Congress und Fowler „The Crisis of 1866 verlangen dasselbe. Beide Kerls affirm, that there would be nothing inconsistent with the Act in the existence of a permanent power to abrogate it! in a specific provision for the violation of its principle! Economist says „that power is not contrary to principle unless the suspensions of the Act are so“. A suspension of the law by Ministers is a violation of the law by sufferance, which the Economist himself elsewhere designated as a misdemeanour, although an excusable one. The Bankact has only one essential principlethe limitation of the bankissues to 14 (now 15) millions, except against gold. The „crisis clause“ would abrogate this „sound“ |248 principle in the only case where it can come into play. Ausserdem: The power (known to exist on 11 May 1866, and not preventing the panic) would never be exercised except at the last moment, just to prevent the worst effects of a panic. Nach J. St. Mill die theory und practical arrangements des Bank Act adapted  Zusatz von Marx.
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nur
to the case where drain of gold originates in a rise of prices produced by an undue expansion of the currency or credit, but in no other case.

Aus:
The Money Market Review, 12. Januar 1867. S. 38/39.
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Evidence of John Henry Gurney and Mr. Robert Birnbeck Birkbeck before Vice-Chancellor Malins.

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

Aus:
The Money Market Review, 12. Januar 1867. S. 39/40.
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Cotton Market. Past and Present.

Import value of cotton landed last year at Liverpool estimated at more than 80 Mill. £, larger than in any previous year; quantity of cotton manufactured (1866) larger than in any previous year, auch its export. With an import value of more than 80 Mill. £, there were fluctuations in the market price, in the course of a few months, von 40 to 50%, und prices at close of 1866, though firm for the moment, 20 25 to 30% lower than at beginning of 1866. Hence, during that year, prodigious losses und gains of cotton sellers Zusatz von Marx.
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!

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

Range of Prices in 1866 Middling Orleans, per lb. Fair Dhollerah. Per lb.
Highest, Jan. 5, the first prices of the year 21d. to 211/8d. 183/4d to 187/8d.
Lowest, May 25, when the stock at maximum 131/2d to 135/8 91/2d to 95/8d.
Last, Dec. 28 161/4 to 163/8d. 131/2d to 135/8d.

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

United States: Bales: 1,156,130 British India. Bls: 1,847,739 Egypt bls: 167,451 Brazil. bls: 407,646 Smyrna bls. 32,770. Peru, Mexico, Westindies 111,820
Un. States: Cost: £35 35 Mill. £ St. India Cost: 33 Mill. £ St. Egypt et Levant. Cost 6,600,000£. Brazil. Cost: 5 Mill. £ St. Westindies etc 21/2 Mill. £ St.
Total Cost: £82,100,000

Home consumption, or quantity of raw cotton delivered from the port of Liverpool to consumers, i.e. manufacturers, in 1866 was 2,436,444 2,436,344 bales, or 46,853 bales per week, against 39,129 in 1865, and 30,822 bales in 1864.

Contrasted, quantities of cotton imported and used for home consumption during the last 7 years (but that of 1864 is omitted, for reasons not given,) stands thus: |249

Imported lbs. Consumed at home lbs
 Marx verwendete die Angaben über die importierte Rohbaumwolle der Jahre 1860 und 1861 in Manuskript II zum zweiten Buch des „Kapital“ (MEGA² II/11. S. 67.38–39) als Indikator für die These, dass „[d]as Jahr 1860 und Theil des Jahrs 1861 [...] bekanntlich die Zenithjahre der englischen Baumwollindustrie [waren]“ (ebenda. S. 67.30–32).
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1860
1,429,697,450 1,068,727,600
 Marx verwendete die Angaben über die importierte Rohbaumwolle der Jahre 1860 und 1861 in Manuskript II zum zweiten Buch des „Kapital“ (MEGA² II/11. S. 67.38–39) als Indikator für die These, dass „[d]as Jahr 1860 und Theil des Jahrs 1861 [...] bekanntlich die Zenithjahre der englischen Baumwollindustrie [waren]“ (ebenda. S. 67.30–32).
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1861
1,359,823,120 988,051,900
1862 533,223,819 414,905,150
1863 703,306,968 467,183,800
1865 965,727,070 718,428,470
1866 1,356,952,389 915,748,679

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

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

1866 2,341,747,710 Yards Piece Goods 126,000,000 Yarns. Lbs.
1865 1,805,814,998 94,000,000
1864 1,617,050,947 69,000,000
Liverpool stock of raw cotton at end of the last 7 years, except 1864. (Bales)
1860. 1861 1862 1863 1865 1866
594,400 bls 699,300 433,900 327,500 405,488 581,570.

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

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

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

Aus:
The Money Market Review, 12. Januar 1867. S. 40/41.
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Thomson Hankey: (formerly Governor of B.o.E.)  Titel von Marx notiert in einem Exzerptheft 1878 (IISG, Marx-Engels-Nachlass, Sign. B 148).
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„The Principles of Banking, its Utility and Economy; with Remarks on the the Working and Management of the Bank of England[“]. Lond. 1867
.

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

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


250

19 January, 1867. N. 346.

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The Money Market Review, 19. Januar 1867. S. 63/64.
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The Overends. Evidence of J. H. Gurney as to the Sale and Transfer of the Norwich Bank.

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

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

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The Money Market Review, 19. Januar 1867. S. 64/65.
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Joint Stock Discount Co. and its late managing Director, Wilkinson.

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

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

According to Mr. Henry White, the director who had signed these fraudulent cheques, Wilkinson had power to grant loans, and to take securities which in ordinary transactions were not submitted to the directors. |251 Any special matter might be referred to the directors at their weekly meeting, „but that reference would depend upon Mr. Wilkinson making it“. „Each director“, says White, „attended a week in rotation at the bank“, and Wilkinson says that „ordinarily the director who was on the weekly rota for signing cheques, when he went to the office, would go up-stairs and sign a lot of cheques, and then go away.“ These were all blank cheques which Wilkinson could fill up and sign, and deliver to whomsoever he pleased“ pleased, and Wilkinson „believed that the cheques for the advances that appeared to Kleman’s debt in the loan ledger were signed in that manner.“ The advances on to Kleman increased from 30 000£ to £108,000 between 1st Jan. and 1st Feb. 1866, without any security. Further advance to Kleman of £12,000 on 3d of Febr. 1866, without security. Ebenso subsequent advances to Kleman, during the month of February, when the Co. was struggling in extremis, which raised the total amount of Kleman’s debt to £184,838? Wilkinson had a private account with Kleman, but declined to show it or say anything about it. Were there any other such private accounts?

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The Money Market Review, 19. Januar 1867. S. 70.
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The Overends.  Zusatz von Marx.
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(Swindlers) (Old firm in the new directorate)

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



26 Jan. 1867. N. 347.

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The Money Market Review, 26. Januar 1867. S. 99/100.
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Foreign and Colonial Loans.

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

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The Money Market Review, 26. Januar 1867. S. 100/101.
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Overends. Before Court of Chancery.

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

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

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The Money Market Review, 26. Januar 1867. S. 101/102.
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Consolidation of all Railways of Gr. Brit. under one management.

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

252

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

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The Money Market Review, 26. Januar 1867. S. 107.
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Bill Brokering and Money Dealing.

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

A broker … one who acts for another, a factor, agent, or intermediate party, who knows who wants to buy in the cheapest market, and who wants to sell in the dearest, any particular commodity, be it a bill or a bale; he concludes a bargain, and thus earns his commission or brokerage. In other words, he reconciles the conflicting interests of buyer and seller. Or he may, without direct communication with either party, as in the article of produce, offer what is to be disposed of to public competition. He is at the same time an irresponsible party, unless where, under exceptional circumstances, he guarantees payment for an extra commission. Bill brokering proper with its 1/8 or 1/4 commission does not admit of such colossal futures being made … As it is conducted at present, the principal part of the profit or discount goes to the bank supplying the money, which probably has a large amount from customers on current account, at little or no interest. The broker – who, by the way, is not strictly speaking a broker at all, but an intermediate discounter – comes in for only what he can make, over and above the rate of discount he has to pay. He does not work for a brokerage or commission upon the amount discounted, or passing from hand to hand, with freedom from responsibility, but is understood to guarantee payment of all bills he may rediscount, either by endorsement or otherwise.



February 2, 1867. N. 348.

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The Money Market Review, 2. Februar 1867. S. 136/137.
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Venial Offences and Convenient Scapegoats.

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

253

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The Money Market Review, 2. Februar 1867. S. 137/138.
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Joint Stock Financing.

The International Financial Society, pioneer of the modern finance associations, first imitator of the Paris model, paid first 25% dividends, gradually less, is compelled at length to admit that there is nothing wherewith to pay any dividend. The accounts for 1866 are duly audited. All the securities valued at the lowest market price. There was a profit last Midsummer „brought forward“ which has been „absorbed“, and a loss of £23,934 incurred, which has been written off against the Reserve Fund reducing it to £4,846. At this time last year (1866) it was 10 × the amount, and at one time was more than that. Aber the severe financial pressure was met without a call upon the shareholders. Its capital seems intact. (of 3/4 of mill. £) It seems chiefly the possibility of calls that renders the 3/4 Mill. £ paid by the shareholders worth in the market only 10s. per £. The greater portion of the securities on which advances have been made by the London Financial Association represent railway property, u.a. on more than 20 completed British railways.



9 February, 1867. N. 349.

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The Money Market Review, 9. Februar 1867. S. 173/174.
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The National Freehold Land Society.

Building Societies have become a great institution. The National Freehold Land Society is 17 years old, originated from a desire to extend the electoral franchise. In 1856, in order to meet legal requirements, the property committee of the society was converted into the British Land Co. A separate capital was raised and a separate organisation established. From that period – Sept. 3 13, 1856 – the National Freehold Land Society’s sole business has been to receive deposits and to make advances on real security, and the British Land Co. has been its largest customer. Gute Geschäfte, high dividends, no losses incurred.

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The Money Market Review, 9. Februar 1867. S. 175.
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London, Chatham and Dover. (Peto)

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



16 February 1866 1867 . N. 350.

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The Money Market Review, 16. Februar 1867. S. 203/204.
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Overend, Gurney et Co. Further Disclosures.  Zusatz von Marx.
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(Judgment of Malins.)

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

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

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The Money Market Review, 16. Februar 1867. S. 206/207.
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Conviction of Greenland, late manager of the Leeds Bkg. Co.

Disastrous failure dieser Co in autumn of 1864; in Folge von frauds und forgeries, carried on for long time by Greenland (auch Frommer(?)), the manager, who made ciphers of the directors, and engrossed to himself the entire control of the business of the bank. Up to the time of its failure, the Bank paid 25% dividend p. an. The first call – nach stoppage – for 70l. p. share, the 2nd for 40. Widespread misery. In many cases sudden deaths from suicide or broken hearts. Einzige Cause: Greenland, and the knaves and forgers with whom he had associated himself. The forgers had escaped. A poor half witted clerk to one of them (Marsden) was prosecuted for forging an acceptance, and though it was proved that he did it by direction of his employer, and that both Greenland and the bankclerks knew that it was a forgery at the time when it was received, he [was] sentenced to 15 years’ penal servitude. At length, the |254 Leeds Chamber of Commerce, failing to obtain evidence of his many other crimes, discovered that Greenland had been in the habit of making false returns to the Gvt. in regard to the note issues of the Bank. Indicted and tried at the Central Criminal Court, the Leeds chamber of commerce being the prosecutors. He now sentenced to 15 months imprisonment with hard labour.  Es geht um das Alter von Greenland: Er ist beinahe 70 Jahre alt.
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Das Vieh ist verging upon 70.



23 February 1867. N. 351.

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The Money Market Review, 23. Februar 1867. S. 231/232.
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The Overends etc.  „1915“ ist das Pseudonym eines Verfassers einer Reihe von Leserbriefen an die „Money Market Review“.
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(1915)

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



2 March 1867. N. 352.

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The Money Market Review, 23. Februar 1867. S. 237.
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The Joint Stock Co’s Directory for 1867. London. Charles Barker et Sons. 8, Birchin-lane.

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

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

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The Money Market Review, 2. März 1867. S. 263/264.
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Overends. Report of Liquidators and Report of Defence Committee.

Nach dem Report der Liquidators the liabilities, at the date of suspension, £18,000,000, now reduced to £3,640,655. Davon 1 mill. further ab für 1/2 Mill. already in hand, and other 1/2 produce of assets actually disposed of, but not yet paid for. Dann noch verschiedne respective Einnahmen berechnet für Payments on bills, proceeds of securities not yet realised etc.

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The Money Market Review, 2. März 1867. S. 265.
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Leeman’s Bill respecting Dealings in Bank Shares.

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

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The Money Market Review, 2. März 1867. S. 266/267.
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Limited Liability. High Nominal Shares.

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

255

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The Money Market Review, 2. März 1867. S. 268.
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London, Chatham and Dover Railway Co.  Zusatz von Marx.
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(faux frais)

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

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The Money Market Review, 2. März 1867. S. 269.
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Plethora of money.

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

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The Money Market Review, 2. März 1867. S. 270/271.
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 „1915“ ist das Pseudonym eines Verfassers einer Reihe von Leserbriefen an die „Money Market Review“.
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1915
on Overends.  Zusatz von Marx.
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(David Barclay Chapman)

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

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The Money Market Review, 2. März 1867. S. 271/272.
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London, Chatham et Dover  Zusatz von Marx.
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(Zusammensetzung des Investigation Committee) (Solicitors) (Scapegoats)

Dieß Committee speaks only of contractors, nicht of the directors, and still less of the solicitors. Now, auf dem first meeting in St. James Hall, „a cut and dried“ committee proposed by Cornelius Surgey, and enforced. (He intimated that he had many proxies.) This Surgey himself is or was the broker to Messrs. Freshfield and Newman; another member of the committee is a near relative of Surgey’s own partner; another most active member was for years a partner of Newman’s brother-in-law, Newman being the principal manager of the business of Freshfield and Newman. Ferner: the new board is composed of the members of this committee, with the addition of Lord Harris as a figure-head. The board remains practically Surgey’s committee. Then this Surgey, who professed in his long speeches at St. Martin’s Hall to know nothing of the Co. and its past management, turns now out to be the very man upon whose advice the board raised loans on the new stock created in 1864 rather than sell it to the proprietors and the public, when it could have been disposed at [a] far better price than it would have fetched since, viz. about £40 instead of which it was eventually sold for £27. 10s., after the Co. had paid enormous amounts for interest and commissions on temporary loans. … Within the last few years an amount closely approximating to 1/4 Mill. St. has been paid to the solicitors of the Co. for their own charges, not including amounts paid to other parities. If this amount was not paid for the purpose of keeping the Co. right in legal matters, what was it paid for?



9 March, 1867. N. 353.

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The Money Market Review, 9. März 1867. S. 295–297.
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Appointment of Parliamentary Committee on Limited Liability Acts and their Operation.  Zusatz von Marx.
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(Gerichtssporteln)

Dieß auf Watkin’s Vorschlag (motion). Er gab some statistics: There are now 2200 Joint Stock Cos. in this country, with capital of not less than 1000 millions £, 750,000 shareholders, 12,500 directors. Since the passing of the Limited Liability Act the Cos. formed under it nominal capital of 150 mill. £. St., paid up capital of 30 mill.; large proportion of this capital, nearly 1/3 , appertains to Cos. now in liquidation.|

256

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

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

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The Money Market Review, 9. März 1867. S. 297/298.
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Leeman’s Bill. Vote of H.o.C. (5 March 1867)  Zusatz von Marx.
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(Stock Exchange)

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

Durch den Stockexchange pass at least 500 millions of other people’s money annually. The Stock Exchange close body, like a club; about 1000 members, governed by a committee of 30, annually elected. The admission of members vested in the Committee etc. The body consists of brokers and jobbers. A stockjobber is simply a stock or share merchant. No capital would suffice for him to hold a stock to meet the wants of the public at large, and so rapid are the fluctuations in the prices of securities that no man of sense, if he had the means, would lay in such a stock. The sharemerchant must therefore be prepared to sell to as well as buy of all comers. This necessity, and the extraordinary pressure of business, have originated a system unknown in any other market. The jobber ascertains the momentary value of a security, and, as it is called, „makes a price“. F.i., a holder of Great Western Railway Stock instructs his broker to sell £5000. The broker goes into the market, and asks a jobber to „make him a price in £5000 Great Westerns“. The latter, knowing that the stock has been recently dealt in at 50, „makes“ 493/4 to 501/4 – that is, he undertakes to give the former price for that amount of stock, or to sell it at the latter. If the business is concluded on these terms, the jobber’s only object – unless he happens to have sold the stock previously – is to turn it over at a profit. Of course, if sales preponderate, he may be unable to part with his purchase except at a loss, or may have to find the necessary capital to pay for it at the settling day. Looking at an isolated transaction in this matter, the risk would seem to be very great, but it is in reality less than it appears. So frequent and so enormous are the transactions of the Stock exchange (for all the share operations of the kingdom centre in it) that in most instances a moderate profit is easily realised. Besides, it is not only in London that a jobber deals, and, if unable to close a bargain here, he frequently succeeds in doing so by telegraphing to his correspondents on the various country Exchanges.

The jobbers take different „lines“; some deal in Consols, some in Foreign Stocks, some in Bankshares, other others in Indian railway securities, some in colonial bonds, some in the Northern, some in the Southern English lines, others in financial and miscellaneous undertakings. By habit and for convenience, a certain portion of the large room (forming the Stock Exchange) is occupied by the dealers in each different class of property, and a member knows at once that in one corner he will be able to deal in Consols and in another in mining shares. As a rule a jobber devotes himself, for the time, to one class of security, changing his market occasionally, as the business in one falls off or in another increases. Certain firms and individuals, however, possessed of unusually large capital, deal through their partners or authorised clerks (clerks whom they invest with special power to deal on their account) in nearly every class of security that is quoted; and there are a few jobbing millionaires who have correspondents all over the world, and transact business by telegraph in Paris, Vienna, and New York as well as London. The only possible mode of executing his client’s order expeditiously consists – for the broker – in the free market which the jobber creates. The dastardly plots (as against the Agra Bank) were formed outside, and entirely independent of the Stock Exchange, by bankrupt speculators in the City, by  The Money Market Review: desperate men
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desperadoes
who had nothing to lose, occasionally by haunters of West-end clubs, and in some cases they originated with directors themselves who, foreseeing the ruin from the information they possessed, sold freely, and even induced others to  |257 sell. The Stock Exchange only the unwitting instruments of their schemes.

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The Money Market Review, 9. März 1867. S. 299.
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Board of Trade Returns.  Zusatz von Marx.
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(their incompleteness)

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

Imports of Articles Enumerated. Month ended 30 November.
1864 1865 1866
Computed Value £16,164,570 £.19,910,403 £17,841,738
Eleven Months ended 30th November.
Computed Value £197,448,426 £.180,820,357 £211,539,785
Deduct: Raw Cotton 66,991,418 49,294,092 70,665,438
£130,457,008 £131,526,265 £140,874,347
Deduct. Cereals 18,600,191 17,908,052 26,001,033
£111,856,817 £113,618,213 £114,873,314

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

Exports of British and Irish Produce. Month ended 31 Dec.
1864 1865 1866
Declared Value. £.12,095,437 £.15,030,088 £14,914,563
Year ended 31 Dec.
Declared Value. £.160,449,053 £.165,835,357 £.188,827,785
Deduct Cotton Manufactures 45,799,090 46,923,384 60,865,022
£.114,649,963 £.118,912,341 £127,962,763
Deduct Linen Manufactures. 8,172,813 9,156,990 9,576,163
£106,477,150 £109,755,351 £118,386,600

The reports from many quarters state that trade is bad, labour cannot find employment, factories are closed or worked short time; but there is nothing in these figures to illustrate this. Exports of 1866 valued at 189 mill. gegen 166 in 1865, and 1601/2 in 1864. Apart from export of linen and cotton fabrics, the value of the exports during the last 3 year years again singularly similar.



March 16, 1867. N. 354.

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The Money Market Review, 16. März 1867. S. 331/332.
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South Eastern Railway Dividend

An increase in the capital during the last 5 years from 121/2 to 18 mill., nearly the whole of which has been raised in some form of priority overriding the dividend, and at rates of interest exceeding the average rate of net earning upon the entire capital spent. The dividend has fallen nominally from 5% p.a. to 3; but the actual decline is more than this, and having regard to the altered method of accounts, questionable whether the dividend of 1867 is not almost a myth.|

258

Commercial Morality. (Overends)

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The Money Market Review, 9. März 1867. S. 306/307.
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Meeting of English and American Bank on 5 March, London Tavern, Chairman William Scholefield, M.P. (perhaps 100 leading commercial men present). He (Scholefield) said took the chair, because their chairman Gordon  Zusatz von Marx.
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(one of the Overend Swindlers)
became suddenly ill. „Mr. Gordon was extremely anxious to be present to-day, to state what he had done in reference to his connexion with this and other Cos.“ Der  Zusatz von Marx.
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grosse
Gordon „has, with the frankness and sincerity of purpose which always marked  Zusatz von Marx.
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(!)
him, placed himself entirely in the hands of the directors, to do what they please with respect to his resignation“. Sie werden aber take no steps „especially as our confidence in Mr. Gordon’s integrity is untouched in the slightest degree. I should mention to you, as a matter of some importance, that Mr. Gordon has taken the same course with other Cos with which he is connected that he has taken with regard to this, and in every instance the determination which has been come to by the directors interested has been that it is no part of their duty to take any steps whatever with reference to his resignation or the dissolution of his connexion with the Cos. (Cheers)“.  Zusammenfassung von Marx aus: The Money Market Review, 16. März 1867. S. 335.
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(Gordon had not given his resignation, but only declared his willingness to withdraw, if his co-directors etc should declare that he ought to do so.)

 Zusatz von Marx. „1915“ ist das Pseudonym eines Verfassers einer Reihe von Leserbriefen an die „Money Market Review“.
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Ueber diese Farce bemerkt 1915 u.a:

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The Money Market Review, 16. März 1867. S. 335/336.
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Vice Chancellor’s Malins charge of „fraud“ against the Directors in general of Overend, Gurney et. Co. (Lim.) involves this same Gordon. In the face of such a judgment, the „unabated and unbounded confidence“ – a very strong generality certainly under the special circumstances – can only rank as an illustrative certificate of character. Scholefield sagte that Gordon, but for „sudden and severe illness“ „was extremely anxious to be present to-day to answer any questions“, aber Scholefield afterwards added, that „Gordon’s official advisers have most strongly forbidden any action as matters at present stand“. How is the anxiety to speak to be reconciled with the prohibition of speaking? If Gordon, barring „sudden and severe illness“, be really eager to answer questions, he will enjoy the chance at the annual April meeting of the Oriental Bank Corporation. … Scholefield says that Gordon „has had no opportunity of saying a word in his own defence“.

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

The assets (des Overend Concern) have been reduced since 10. May last by 21/4 mill. How, when, and where has this sum disappeared?



23 March. 1867. N. 355.

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The Money Market Review, 23. März 1867. S. 362.
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Commercial Morality. (Continued) (Overends)

 Zusatz von Marx. „1915“ ist das Pseudonym eines Verfassers einer Reihe von Leserbriefen an die „Money Market Review“.
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1915 sagt u.a:
As to Scholefield’s (member of Parliament for Birmingham) „unabated and unbounded confidence“ in Harry George Gordon, I might have reminded Scholefield how „unabated and unbounded confidence“ in a colossal delinquent had, not many years ago, dragged the Birmingham Bank, with which the same Scholefield connected, |259 to the very brink of ruin; and, to cite a more recent instance, the shareholders of the Bank of Australasia expelled a director for his „unabated and unbounded confidence“ in James Freeling Wilkinson, notwithstanding the „unabated and unbounded“ confidence of his colleagues, as distinguished from his constituents.

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



30 March 1867. N. 356.

Commercial Morality. (Continued) (The Overends.)

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The Money Market Review, 30. März 1867. S. 387/388.
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The comments of some of the London newspapers on this Overend affair, and the no-comments of others are equally significant. The Times City luminary, and others, denounce generally (declamiren gegen) all new Cos., legitimate or illegitimate. That „sort of thing“ easy. Aber in this case of one of the most gigantic and unmitigated frauds ever recorded in our mercantile history, Times all soft sawder. No mitigation in judgment possible for the 3 new directors. Never was a clearer case of deliberate misrepresentation so indubitably brought home to any parties. Times and Economist are continually discussing this as a common and ordinary case of misadventure or miscalculation only for which nobody ought to be blamed or punished. They constantly and vehemently denounce the shareholders in not submitting with proper resignation to a further process of fleecing (and allowing Kerls like Oppenheim to win by a legal fraud), whilst depreciating any further investigation into the mysteries of the affair. They do their utmost to slur over its iniquity, and to whitewash and rehabilitate the delinquent directors. The Economist, last week (23 March) emphatically explains that it „does not mean to impute to the new directors or the old partners the slightest formed intention to deceive the public“. Unformed intention perhaps? „The sellers“, he says, „thought they were selling a good thing; the buyers thought they were buying one; and both joined in telling the world what they thought.“ Most outrageous perversion of truth! Neither the sellers (old firm) nor the buyers (new firm) thought any such thing; both of them knew the contrary, and, therefore, instead of „both joining to tell the world what they thought“, they both joined in executing a secret deed to conceal from the world what they knew, and that fact reveals to us what they really thought. Economist again repeats that it „does not mean to impute a hint at conscious fraud, in the minds of either the new directors who bought or the old partners who sold“. Unconscious fraud? And, therefore, the evident consciousness of the necessity for concealment? Poor perversions, shifty arguments, shallow sophistries. Speech of Scholefield (at the meeting of English and American Bank) asinine. If the new directors were men of ordinary business capacity, they were not deceived, also fraudulent. If they were deceived, how fit to be directors as utterly wanting in ordinary business capacity.

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The Money Market Review, 30. März 1867. S. 393/394.
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 Zusatz von Marx. „1915“ ist das Pseudonym eines Verfassers einer Reihe von Leserbriefen an die „Money Market Review“.
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1915 sagt u.a.:
Scholefield and 7 Confederate Boards endeavour to save their protégé. Gordon had no deposit in the concern nor any shares beyond his bare qualification as official recipient of £500 a year. He was a party to the secret deed of arrangement by which the separate estates were to fill the gap of insolvency by 31 Dec. 1868 at the latest. He was subsequently privy to the sale of the Norwich Bank, whereby its goodwill and assets, besides being payable only on certain conditions, were not to be realised before 1 March 1870, 14 months beyond the stipulated time for final adjustment as between private firm and limited Co. He knew that, in connexion with the sale which thus virtually annihilated nearly 1/2 of the separate estates, the remaining portion of the same was assigned as a guarantee to the purchasers of the Norwich Bank, just as it had been previously assigned to the limited Co. At or about |260 the sale of the Norwich Bk. Gordon sanctioned an exceptional loan of £150,000 to the private firm beyond even the requirements of the secret deed of arrangement. In his affidavit (November 1866) Gordon constantly recognised Mr. William Rennie alone among the directors as his associate in the negotiations and investigations, which led to the transfer of the business from the private firm to the limited Co.



April 6. 1867. N. 357.

Commercial Morality. (Overends) (Continued)

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The Money Market Review, 6. April 1867. S. 424/425.
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The total number of creditors of Overend etc about 1500, old and new, about 1000, or 2/3 creditors of the old Co., at the time of the transfer. Old Co. carried on their business until 31 July 1865, the new Co commenced business on the following day, 1st August 1865. But according to the recitals in the deeds, the New. Co New Co. formed, and „established and incorporated on and from 12. July, under a memorandum of association with articles thereunto annexed, pursuant to the Cos.’ Act of 1862“, and this was 19 days or nearly 3 weeks before the actual transfer and the commencement of business took place. On 12 July ditto all the terms of arrangements as to the transfer of the old firm to the new Co. definitely arranged. At that time the promoters, who had constituted themselves the directors of the new Co., had become fully aware of the actual state and condition of the old firm. The fraud was complete and entire, on 12 July 1865, before one single shareholder had joined the Co., and before one single application had been made for shares. Whilst the applications for shares, on the false and fraudulent prospectus, were flowing in, the promoters and directors were occupied in maturing the documents by which the fraudulent compact was to be carried out. Darin activ Messrs Young, Jones, Vallings, and Roberts, the solicitors of the old firms, who also acted as the solicitors of the new Co. The prospectus, dated 12 July (and issued on that day) stated that „the deed of covenant in relation to the transfer of the business could be inspected at the offices of the solicitors of the Co.“, but that deed was only executed on July 27. Hitherto believed that although the secret deed was not offered to inspection at all, the deed of covenant was so, whereas it now appears that neither of these deeds executed, also existing, before July 27. Diese deeds, however, bound nobody except the partners of the old firm and promoters and directors of the new Co. On the same 12 July, notices were sent by the partners in the old firm and the promoters and directors of the new Co., in their corporate capacity, apprising the creditors of the old firm of the proposed transfer, and asking their assent to it, and to that transfer they assented. By that assent they released the old firm, and accepted as their debtors the new Co. as then incorporated. In the meantime they fished for shares by false prospectus, but no shares were allotted to any of these applicants until 31 July 1865, and the letters of allotment were not issued to them until 3d August, and the scrip certificates not until about a month after that. The register of shareholders would not be completed for a further period, and the share certificates were not issued until February, 1866. To whom then were the creditors giving credit during all this interval? Not to the socalled shareholders, but to the members incorporated on 12 July.

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The Money Market Review, 6. April 1867. S. 435.
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 „1915“ ist das Pseudonym eines Verfassers einer Reihe von Leserbriefen an die „Money Market Review“.
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1915
remarks that Gordon nun eliminated von 2 aus 7 Cos., nämlich Ebbw Vale Co. und Société Financière d’Egypte. Henry Edmund Gurney is 1 director und 2 trustees; sein Bruder, Samuel Gurney, in virtue of his seniority in the family, is one president, 2 trustees, 9 directors. Is this not pretty well for 2 individuals, who, as hopelessly insolvent debtors at once in Overend etc (Lim.) und Norwich Bank, and many more concerns besides, cannot creditably hold one farthing of the requisite qualification in any of the cases cited?


261

13 April 1867. N. 358.

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The Money Market Review, 13. April 1867. S. 448/449.
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Commercial Morality. (Overends) (Continued)Progress of Railway Dilemma.  Zusatz von Marx.
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(Directors)

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

London and Northwestern Railway Co is prosecuting a new line to Sheffield. Dazu meeting for to-day (13 April) berufen. Notices of the meeting (aber without its purpose) reached the shareholders on 2nd instant, and prior to that there had been a canvass for the proxies of the larger shareholders – in some cases by directors themselves. Most expensive undertaking which, as it has to compete with the line already in operation, without possibility of paying working expenses. Who is to gain by this new line at the cost of dividends? At all events, not the shareholders. Ebenso Midland Railway Co. Large extensions proposed. Chairman (at meeting of 15 Febr. Derby) did his best to commit the Co. to this expenditure of millions, and amalgamations; and positively declined to put the amendments. Based this decision of what he regarded as a „show of hands“; when poll demanded, he took no notice of it. Mr. Shepherd states in Daily News that within the last 2 years the Midland Co. have spent capital to nearly 41/2 mill.; at the end of 1862, the capital applied to all purposes, 181/2 mill., and since that time (i.e. in course of 4 Parliament sessions) the directors have raised, or obtained power to raise, 10 mill. more. The Acts obtained in last session alone involve outlay of £3,600,000; and upon the works thus authorised there is at this moment not one shilling expended. – In all cases excessive expenditure of capital beyond the growth of revenue. Railway directors, from one cause or other, are eager beyond all reason for an unlimited expenditure of capital, in utter disregard of the interests of shareholders. Manifest antagonism between the administrative body and the proprietary.

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The Money Market Review, 13. April 1867. S. 450/451.
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North British Railway.

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

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

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The Money Market Review, 30. März 1867. S. 408–410.
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Meeting of shareholders 22 March, Guildhall Tavern: Chairman, C. H. Knight said that the Defence Association thought, good case against the directors. Mr. Jacomb reported für die Defence Association. Some 14 months ago circular of the directors, calling meeting of shareholders for resolution to wind up Co., and dispose of the work, for the purchase of which, it was stated, a proposition was made to the directors. Dieß meeting held 20 Jan. 1866. Mr. Jacomb showed at this meeting (of 20 Jan.) that it was illegal, because of non-compliance with the articles of association. Solicitor der Co. pooh-poohed him. E. Watkin (M.P., late chairman of the Co, who was not chairman of the |262 meeting, meeting) produced a statement of accounts showing that, subject to a deduction of £60,615, the whole capital of the Co. was intact. Some shareholders forced out of the directors the admission that the reason for winding up was not the sale stated in the circular, but the financial difficulties of the Co. It was known, in fact, that the negotiations for the sale of the undertaking had fallen through before meeting was held. Directors knew that the concern on the verge of bankruptcy. Watkin was the principal spokesman of the directors, and produced this account. Watkin (M.P.) had transferred the last of his shares the day before the meeting, so that it now turned out he was not even a shareholder, and had no right to be present. The resolution for the winding up of the Co. passed. But 1 or 2 days afterwards the solicitor of the Co. found Jacomb’s view correct, so

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

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

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

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

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

263

 Zusatz von Marx.
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Ein Correspondent bemerkt in der Money Market Review über dieß meeting:

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The Money Market Review, 13. April 1867. S. 455.
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No better evidence before the Committee of the H.o.C. of the manner in which the Limited Liability Act of ’62 used to decoy the public into those fictitious schemes which have resulted in such wide-spread ruin and misery, no better evidence than E. Watkin, M.P. This man who spoke so pathetically in his oration at Sheffield of the „fatherless and the widows“ – played prominent part in the formation and management of the Humber Iron Works (of which he was chairman) up to the time of its disastrous collapse.



April 20, 1867. N. 359.

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The Money Market Review, 20. April 1867. S. 473.
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The Panic about „Calls“.

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

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The Money Market Review, 20. April 1867. S. 479.
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The Directors of Overend, Gurney, and Co. (lim.)

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

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The Money Market Review, 20. April 1867. S. 481.
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The Bears of Bank Shares.

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

[April 27, 1867. N. 360.]

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The Money Market Review, 27. April 1867. S. 499/500.
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Commercial Morality (Continued) (Overend)

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



May 4, 1867. N. 361.

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The Money Market Review, 4. Mai 1867. S. 530/531.
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Railway Directors. in H.o.C.

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



11 May 1867. N. 362.

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The Money Market Review, 11. Mai 1867. S. 560.
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Liquidators.

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



25 May. 1867. N. 364.

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The Money Market Review, 25. Mai 1867. S. 607/608.
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Excessive Liability of Limited Liability Cos Shares  Zusatz von Marx.
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(Overstone) (Watkin)
.

Milner Gibson, as President of Board Trade, pressed and passed a Bill through H.o.C. to enable Cos, without diminishing their capitals, to divide those capitals into a greater number of shares. The Bill thrown out by Lord Overstone und Earl Grey (mit  The Money Market Review: 16 noble
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14 dummy
Lords als followers.) E. Watkin proposed the Limited Liability Co.’s Committee.

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The Money Market Review, 25. Mai 1867. S. 609/610.
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Statistics of the London Clearing House.  Zusatz von Marx.
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(Inland Bills.)

The Committee of Bankers decided to issue weekly Returns, simultaneously mit B.o.E., on the transactions of the Clearing House. This due to Sir John Lubbock. 4th each month – the principal day of settlement for Inland Bills – will give an indication of the relative activity of our inland trade. The 4th of month may also be occasionally a |264 „heavy day“ for foreign and colonial as well as for inland bills. Cheques are often multiplied even for one and the same transaction. F.e., the import and export trade of London is almost entirely done through agents or brokers, and as a consequence, each sale or purchase, when settled, necessitates 2 cheques; therefore the operation is represented by double the amount of money in cheques at the Clearing House. Again, the transactions in discounts and loans, such as are negotiated through brokers, always require at least 2 cheques, while a purchase on the Stock Exchange, through a broker, invariably involves the drawing of cheques by 3 separate parties, and sometimes 4, owing to the intervention of the jobber between the buying and the selling brokers. Thus a single transaction may be represented at the Clearing House by a quadruple amount in cheques. F.i. the buyer of stock pays a crossed cheque to the his broker, the broker a second cheque to the jobber, the latter a third cheque to the selling broker, who then hands a fourth cheque to the original seller.

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

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

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

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

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

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

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The Money Market Review, 25. Mai 1867. S. 614.
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The City Offices Co. (Lim.)  Zusatz von Marx.
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(Directors)

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


265

June 8, 1867. N. 366.

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The Money Market Review, 8. Juni 1867. S. 665.
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London and Westminster Bank.  Zusatz von Marx.
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(Liability and Security)
(Communicated)

Issues new shares. In der That diese most successful Bank, has only become so by incurring £22,672,559 of liability, whilst the share capital and reserve fund were together less than 11/2 millions. Is this not enormous overtrading such as has not been afforded hitherto by any Bank in the Kingdom? The system of creating new shares at a premium, so readily adopted by joint-stock banks, in order avowedly to raise a factitious reserve fund – for reserve funds are not such unless created out of profits – is becoming so general as to suggest an unpleasant comparison of the position of jointstockbanks with that of railway Cos., which latter have gone on creating new shares and borrowing money etc … So long as the deposits continue to increase in amount, and new shares can be issued at a premium, dividends may be declared of 10 to 100% p.a. All goes well as long as the joint-stock banks can increase their indebtedness to the public.



15 June. 1867. N. 367.

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The Money Market Review, 15. Juni 1867. S. 699.
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The Years’ Fall of Railway Property.

During the last 12 months – shutting out from consideration all the previous depreciation – several descriptions have fallen 20%, and some of these are in the best credit. Great Northern Stock fell 7%, but the A stock of the Co. 23%; Caledonian 18%, London and Southwestern 19%. These Cos. have apparently only suffered from the prevailing disquietude. London, Brighton and South Coast fell 40%, North British 19, Cumbrian 17, Manchester, Sheffield and Lincolnshire 111/2, Bristol and Exeter , Great Eastern and North London, 10%, South Eastern 9, Glasgow and Southwestern , London, Chatham, and Dover, and the Metropolitan 8, North Eastern 6, Lancashire and Yorkshire , and London and Northwestern 4 each.



22 June 1867. N. 368.

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The Money Market Review, 22. Juni 1867. S. 722.
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The Gellivara Co. (limit.)  Zusatz von Marx.
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(Directors.)

On 14 August 1866 the directors stated: (Report): £130,640 received in deposits and calls, £130,640 £139,640 of debentures due June 1867; and £50,747 due on mortgage. Total: £320,807. The chairman further stated that £288,000 required to complete the works, less £50,000 already expended. What has been done with the difference between 50,000 expended, and the £320,807 obtained from shareholders, or borrowed at their cost? Has this 270,807 been paid for the mine? Who were the owners of this mine? Were any of our projectors or directors proprietors of the mine? If so, they were vendors for themselves and purchasers for us,  The Money Market Review: a peculiarly perilous position for themselves morally, and a peculiarly perilous position for us financially
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a position for themselves morally, and for us financially perilous position
. The mine useless, unless upwards of 1/4 mill. l. St. laid out in forming a communication between it and the coast.



29 June. 1867. N. 369.

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The Money Market Review, 29. Juni 1867. S. 746.
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City Offices. Co. (Lim.)  Zusatz von Marx.
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(Directors)

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



July 6. 1867. N. 370.

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The Money Market Review, 6. Juli 1867. S. 6/7.
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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, |266 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.

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The Money Market Review, 13. Juli 1867. S. 31/32.
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 Titel von Marx notiert in „Heft 3. 1868“ der „Hefte zur Agrikultur“ (MEGA² IV/18. S. 728.13–14) und einem Exzerptheft 1878 (IISG, Marx-Engels-Nachlass, Sign. B 148).
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„The Financial Lessons of 1866.“ A letter addressed (by permission) to the R. H. E. W. 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.  Zusatz von Marx.
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Die Money Market Review remarks dazu:
 |267 [»]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.«

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The Money Market Review, 13. Juli 1867. S. 38.
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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.

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The Money Market Review, 20. Juli 1867. S. 56/57.
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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 consider 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.  Kommentar von Marx.
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⦗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.



July 27. 1867. N. 373. August 3. 1867. N. 374.

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The Money Market Review, 3. August 1867. S. 113/114.
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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 |268 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 Beekroft 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 Goal Gaol , while Greenland, but for whom he would never have been forger or felon, set free.



[August 10. 1867. N. 375.]

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The Money Market Review, 10. August 1867. S. 139/140.
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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 |269 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 its 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[“].


270

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The Money Market Review, 10. August 1867. S. 141/142.
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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.

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The Money Market Review, 17. August 1867. S. 167/168.
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Overend, Gurney et Co.  Zusatz von Marx.
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(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.

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The Money Market Review, 17. August 1867. S. 172/173.
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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 Railway 196,467
Belgian Public Works 107,279
Irrigation Co of France 282,740
Imperial Land Co of Marseilles 225,666
Millwall Docks 145,526.


August 31, 1867. N. 378.

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The Money Market Review, 31. August 1867. S. 223/224.
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The New Act (1867) to amend „The Companies Act“ 1862.

 Zusammenfassender Kommentar von Marx.
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Dieser miserable bungling act erlaubt keiner Co. ihr 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.

 Zusatz von Marx.
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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.  Zusatz von Marx.
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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, |271 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.  Kommentar von Marx.
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Silly nonsense!



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

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The Money Market Review, 31. August 1867. S. 232.
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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 of 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.

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The Money Market Review, 31. August 1867. S. 232.
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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“.

 Kommentar von Marx.
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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!


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The Money Market Review, 31. August 1867. S. 227.
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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.


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The Money Market Review, 7. September 1867. S. 262/263.
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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.  Zusatz von Marx.
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Oakes und Peeks Peek waren die 2 contributories, welche die Sache vor Gericht bis zum Last Appellate Court der Lords brachten.


272

14 September. 1867. N. 380.

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The Money Market Review, 14. September 1867. S. 275/276.
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The (1867) Act for the Amendment of Cos. Act. Act of 1862, and the Merchant Bank Co of London (lim.)

 Zusammenfassung von Marx in eigenen Worten.
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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 1st 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.

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The Money Market Review, 21. September 1867. S. 301/302.
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Overend, Gurney et Co. (lim.)  Zusatz von Marx.
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(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  Zusatz von Marx. Siehe S. 263 des vorliegenden Exzerpthefts.
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(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|273 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.

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The Money Market Review, 21. September 1867. S. 305.
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Credit Mobilier Co. of Paris.

In its difficulty, B.o.F. appealed for 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,  The Money Market Review: the Emperor
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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« Zusatz von Marx.
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(!!)
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.|

274

28 September, 1867. N. 382.

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The Money Market Review, 28. September 1867. S. 324/325.
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Gold mines of Victoria. (Kitto: „The Goldminers of Victoria.“ Lond. ’67)  Von Marx aus Platzgründen neben die Überschrift „28 September, 1867. N. 382.“ geschrieben, bezieht sich aber auf die vorliegenden Exzerpte.
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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-ax 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 31/4 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 varying 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 141/2 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 1/6, or about 1/1200 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. £.



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The Money Market Review, 28. September 1867. S. 327/328.
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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.|

275
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 £1,499,432 334,950 33,792,800
Florins 140,533,000 3,752,275 1,981,000 75,535,000
Roubles 290,000,000 10,568,282 6,711,889 208,661,660

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 21/2%; on Internal Debt from 4 to 6%, and the annual sinking funds from 1/2 to 5% p.a.



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The Money Market Review, 28. September 1867. S. 328.
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 Titel von Marx notiert in „Heft 3. 1868“ der „Hefte zur Agrikultur“ (MEGA² IV/18. S. 729.7–8), einem Exzerptheft 1878 (IISG, Marx-Engels-Nachlass, Sign. B 148) und im Notizbuch 1878/1879 (IISG, Marx-Engels-Nachlass, Sign. B 152).
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Robert Knight: Letter to the Right. 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 required 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“.



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The Money Market Review, 28. September 1867. S. 329/330.
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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.

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The Money Market Review, 5. Oktober 1867. S. 351/352.
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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  Zusammenfassung von Marx in einem eigenen Wort. The Money Market Review: Men who knew that they had been sought for their names only gave their names, but did not feel bound, therefore, to give their time and their talents also, and would consequently content themselves with dropping in regularly to take their fees, and occasionally to take part in the business of the company.
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(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 11 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 1/8, 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 liability unlimited unlimited liability der directors, or manager, or managing directors.|

276

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The Money Market Review, 5. Oktober 1867. S. 352/353.
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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 2/5 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.  Kommentar von Marx.
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(Diese Geschichte mit dem warrant wegen des häufigen Wechsels der tranfer transfer of shares.)



Money Market Review. 12 Oct. 1867.

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The Money Market Review, 12. Oktober 1867. S. 377.
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Shares.  Zusatz von Marx.
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(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.

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The Money Market Review, 19. Oktober 1867. S. 403/404.
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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.

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The Money Market Review, 19. Oktober 1867. S. 404/405.
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The Chambers of Commerce of Rouen and Liverpool on Commercial Crise.  Zusatz von Marx.
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(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 Rawlinson 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.|

277

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The Money Market Review, 19. Oktober 1867. S. 407/408.
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 Titel von Marx notiert in „Heft 3. 1868“ der „Hefte zur Agrikultur“ (MEGA² IV/18. S. 588.9–10).
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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 Zusatz von Marx.
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!
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 5/6 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 27 26, 1867. N. 386

Aus:
The Money Market Review, 26. Oktober 1867. S. 428/429.
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Royal Bank of Liverpool.  Zusatz von Marx.
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(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.

Aus:
The Money Market Review, 26. Oktober 1867. S. 430/431.
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Re-establishment of 6 months’ Sight Usance in Indian Trade.

 Von Marx verwendet in Manuskript II zum zweiten Buch des „Kapital“ (MEGA² II/11. S. 212.29–30).
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Almost unanimously accepted by the Indian Banks.

Aus:
The Money Market Review, 26. Oktober 1867. S. 431.
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Failure of the Commercial Bank of Canada

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

278

9 November, 1867. N. 388

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The Money Market Review, 9. November 1867. S. 476/477.
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 Titel von Marx notiert in „Heft 3. 1868“ der „Hefte zur Agrikultur“ (MEGA² IV/18. S. 588.11), einem Exzerptheft 1878 (IISG, Marx-Engels-Nachlass, Sign. B 148) und im Notizbuch 1878/1879 (IISG, Marx-Engels-Nachlass, Sign. B 152) sowie exzerpiert im Heft Dezember 1878 bis Januar 1879 (IISG, Marx-Engels-Nachlass, Sign. B 151).
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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 discount 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 101/2 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.“

Aus:
The Money Market Review, 9. November 1867. S. 477–479.
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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 41/2%, Children playing mit fire 11/2%, Lucifer matches 11/2%, Smoking Tobacco 11/2%, Stoves 11/2%, Spontaneous Ignition nearly 1%, und other known causes 191/2, 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 1860 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 1 /3 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  Zusatz von Marx.
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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 |279 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.

Aus:
The Money Market Review, 16. November 1867. S. 503/504.
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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 Zusatz von Marx.
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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 on 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.[“]


280

23 November 1867. N. 390

Aus:
The Money Market Review, 23. November 1867. S. 533/534.
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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 on 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.“|

281

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

Aus:
The Money Market Review, 23. November 1867. S. 534/535.
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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.  Conrybeare 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.

Aus:
The Money Market Review, 23. November 1867. S. 546/547.
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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 |282 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 nowKintrea (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.

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The Money Market Review, 7. Dezember 1867. S. 589–591.
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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.“

Aus:
The Money Market Review, 7. Dezember 1867. S. 591.
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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 43/8 und 113/8% 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 £371/2 ex the new shares, or, with 1/9 of the present premium on the new shares, at £381/2. 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 41/8%, the others declined, London et County 111/2%, London Jt. Stock Bank 181/2%, 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.

Aus:
The Money Market Review, 21. Dezember 1867. S. 646/647.
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President’s (Andrew Johnson’s) Message on American Currency and Finance.  Zusatz von Marx.
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(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.“|

283

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.

Aus:
The Money Market Review, 28. Dezember 1867. S. 671/672.
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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 1/4, 1/2 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.

Aus:
The Money Market Review, 28. Dezember 1867. S. 674/675.
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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 |284 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 failed 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.

Aus:
The Money Market Review, 28. Dezember 1867. S. 677.
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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: £35,000,00 £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.