20 October, 1866. N. 333.

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.|


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.

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.|


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.

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 |

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.

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.

[April 27, 1867. N. 360.]

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.


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