MEGAdigital. Online-Angebot der historisch-kritischen Gesamtausgabe von Karl Marx und Friedrich Engels

June 2, 1866. N. 313.

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.
Schließen (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.

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.

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.

The Consolidated Bank (limited)

Kommentar von Marx.
Schließen 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.

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 …|

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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.

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.

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.

America. U. St. Zusatz von Marx.
Schließen (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.

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“.

19 January, 1867. N. 346.

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.

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?

The Overends. Zusatz von Marx.
Schließen (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.