March 14. 1868.

The Economist, 14. März 1868. S. 294/295.
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Sir Morton Peto’s Examination in Bankruptcy.

Has begun during 2 days, as to the claim of the London, Chatham, and Dover Railway against his firm.

Bankrupts are debited mit £4,403,442 cash paid by the Railway Co to them or on their account, und mit £11,594,557 of stocks and debentures taken and realised by them; on the other hand credited mit 2 sums of £2,171,336 und £4,171,450 received in cash from them and the public, und mit £2,993,264 for work done, leaving a balance of £6,661,941, exclusive of interest, for which the present claim is made. Sir M. P. bis jezt examined is mainly that portion of the claim arising out of the Metropolitan Extension, so far as concern certain A and B shares and debentures; the inquiry of the C shares and subsequent proceedings having only commenced. The Nominal Capital dealt with £1,650,000 for shares, und 550,000£ for debentures, on which account the Co claims £962,500 – the difference between the par value and the sums they actually got.

Metropolitan Extension Act passed 1860. Sofort die arrangements made. Peto’s firm were to be the contractors. They should accept payment in Shares at par less a Commission of 25%. They were also to advance money, apparently for the purchase of land, on shares and stocks, which they were to place at their option for a similar commission. In short, out of £; £2,200,000 they were to get 550,000. Yet, while arranging to make this large deduction, Peto did not know that the works authorised could be completed even by the capital to be raised, though he knew in 3 or 4 months afterwards that the amount would not be sufficient.

The formal proposal to carry out this understanding or plade plan made in September, 1860, but in the agreements of 1. und 5. October, actually signed on Octob. 30, there were one or 2 material alterations. The contract prices were „somewhat“ (Peto’s expression) higher. The rate per mile for the permanent way, f.i., was increased from £5,107 to £6,180, a rise of 20 P.Ct. More important still, the provision that the Co. were to take the shares at par was omitted from the signed contract, an omission for which Peto cannot give any reason. There was another point in the agreement. The contractors were to pay a guaranteed interest of 6 P.Ct. on the B shares, half the total number, during the construction of the line, though Peto could not say whether he was aware at the time that the Act prohibited „the payment of interest or dividend out of money raised or borrowed.“ The Legislature never authorised a certain capital on the understanding that 25 P.Ct. would be absorbed in discounts for placing the shares and debentures.

An important part of the plan was the „placing“ of the shares and debentures, which necessarily brought in the general public. Without their aid the combination must have failed, for the contractors never contemplated being the holders of the line they made. Peto says he was not responsible for the Prospectus issued to the public. He „only“ „revised it to see that his interests were protected.“

The first offer to the public was of B Shares, on which there was a guaranteed interest, and the Prospectus told them that the A Shares were all taken. In fact, the A shares had not been taken, but only subscribed for. So the B shares and debentures were all got rid of at par. At one place, Peto speaks vaguely of the changes incidental to placing so large an amount of capital, and he also describes an arrangement with Knight and Coleman, the Co’s brokers, who were „associated with a large number of brokers“, by which they were to get 10 P.Ct. for their share in the business of „placing“. Business succeeded, money was got. Deceit of the public, misinformed as to the A. shares, paid interest on B shares so as to induce them to take them up, not cognisant of the Discount arrangements.

What became of the A Shares? They could hardly be disposed of at all. In July, 1862, Peto proposed that he should get a rebate of 50 P.Ct. on account of their „postponement“. Ultimately they were purchased at 37£ 10s. Peto explains, he was to have a commission of 25 P.Ct. on the whole capital, and the purchase of the A shares at 37l. 10s. „would make the commission larger, the nominal capital on these shares being £850,000“. Although he only gets 37l. 10s., Peto still deducts 25£., his commission being on the „whole capital“. In other words, whatever the sum of cash got, his commission remains the same, and it must have amount on the Ashares to more than 50 P.Ct. The upshot was, that out of the total authorised capital of £2,200,000 only £1,237,500 remained to carry on the works. Difference of £550,000 taken by Peto, according to his own confession, less £190,000 which he states to have been the broker’s Discount on the B shares, debentures, and works.|


The most marvellous part of transaction that Peto never met with any difficulty. The contract prices were raised 20 P.Ct. above the original proposal, on the mere „suggestion of Mr. Betts“. When Peto applied for a rebate of 50% on the A shares, at once conceded. One of the most formidable difficulties was the necessity of a subscription contract, in order to use the compulsory powers of the Act. Got over by the simple expedient of Peto et Co. subscribing the contract themselves, and paying £206,000 into the Union Bank as the first deposit on 82,000 shares. But whence came the money? On the same day, on which he paid the money, he got from the Railway Directors 100,000l., and on the following day 51,000l als Commission on the deposit of shares. Peto pays a deposit on certain shares, but gets back most of the cash he parts with in the name of commission, so that the deposit became a mere form.

The Economist, 14. März 1868. S. 295.
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Negotiation of Foreign Bills of Exchange in London.

At present, Foreign Bills of Exchange, drawn in this country on places abroad, are mostly negotiated in the following Manner:

The seller or manufacturer of the goods – say A – at Bradford draws, as per agreement, on his customer, – say X – at Lisbon, and hands the set of Bills to B, a local banker at Bradford, who endorses them over to C, a Banking House in London, acting as B’s agent. C sells them through a broker on the Royal Exchange on some Tuesday or Friday – the 2 days set apart by long custom for the market for Foreign Bills. The buyer of the Bills – say D – is drawn upon by C for the proceeds, and the draft is payable on the following „Post Day“ – that is, Friday or Tuesday. In other words, the Buyer D gets possession of the Bills in time to be sent abroad on Tuesday evening; and he does not pay for them for 3 days. This gratuitous credit wünscht Bradford Chamber of Commerce abgeschafft.

For all practical purposes the Tuesday and Friday „Changes“ are quite sufficient, and more advantageous to Sellers, because the they collect on the same spot at the same time all the important buyers, and, therefore, establish a real quotation.

I) U. Kingdom.

  • 1) Money Market, Bank o. E. etc, Currency. Exchange.
    • Movement at Bank o. England and Clearing House. 1868. (p. 3–10) Notes to same. (13–18)
    • Capital of Bank o. E. (44) Profits of (29) Joint Stock Banks Profits und Rate of Discount (23, 28) Banking Progress, First Half Year ’68 (39)
    • Money Market. Anfang 1868 (59) March (64) October (47, 48) August. Alleged Influence of French Loan (78)
    • Bank Act. 1844 and Gold Export. (4 41)
    • Changes in Rates of Discounts. Action and Reaction. (50) 28 Nov. und Dec. 5 (54)
    • Annual Average Minimum Discount Rates of B.o.E. (42)
    • Influences of Prices of Articles on Money Market (65)
    • Gold, Silver, and Copper coined 1853–’67 (75)
    • Gold Imported und Exported. U. Kingd. 1858–1867. (75)
    • Worn Coin (31)
    • Seignorage on Coin (46)
    • Amount and Condition of Gold Coinage in U. Kingd. (Jevons) (80–84)
    • Foreign Settlements on London Stock Exchange. (53)
    • Negotiations of Foreign Bills of Exchange in London (65)
  • 2) Crisis of 1866 und Nachwirkungen.
    • Das Jahr 1867. Bullion movement. (42) Rate of Discount (19) Dates of ’67 (21) Silk. Agricultural Implements. (22) Its Commercial etc aspects (19) Alterations in values of securities (20, 23)
    • Causes of Present Depression (22, 25), Influence of Commercial Depression on Railway Revenue (44, 45)
    • Crisis of ’66 und Nachwehn. (31) Fall of Revenue ’68 (70)
    • Panic and investments. (40) Market Value of Financial Co’s. Shares (33–35)
    • Fall in Prices since ’66. (59)
    • Nature of Commercial Crises. (61) Agra and Masterman’s Bank (40)
  • 3) Commercial Morality.
  • 4) Railways.
    • State Control (21)
    • Caledonian (21) (28, 29) Accounts. Ersatz des Verschleisses (24)
    • Midland Rail. Börsenmogelei und Directors. (24)
    • Brighton Railway Verschleiß von steamers (25) Falsification of Accounts. Working Expenses (34) Wear and Tear (31) Paying weight, dead weight (28) Construction and Management (31) Steel and Iron rails. (26)
    • Patterson: Railway Finance (27) (29)
    • Railway Trains. 1866. (25, 30)
    • Capital of Railways in U. Kingd. 1866 (24, 42) in 1867 etc (55, 56)
    • Bird: Railway Accounts. (27) Estimate of intrinsic Value id. (38, 39) Railways Accounts defended durch Saturday Revue (27)
    • Railway Profits. Delusive Gvt. figures. Their Competition. (22)|
    • 88
    • Railways, 1845–46. Hudson. (37, 38)
    • Banks and Railway Cos. (24) Lawyers and Rail. (24)
    • Chatham, Lond., Dover and Landed Property (45)
    • Rates charged on goods in Ireland on a main line. (84)
    • New Act of ’68 (41)
    • Injuries from vibration und smoke of Railways (34)
  • 5) Cotton.
    • Cotton Prices 1866, ’67, 68 (28) Manchester Trade Circular Jan. 1868 (27)
    • Import, Export. 1867. (30)
    • Market 1868 (32, 43, 48, 49, 50, 56)
    • Cotton in U. States. (57, 58)
    • Cotton Statistics Bill. (35, 37, 40, 68)
  • 6) Wheat.
    • Importations. 1868 (43) Imports ’66, ’67, 68 (53)
    • Average Cornprices. (67)
    • Sources from which U. Kingd. draws wheat. Rangliste der in U. Kingd. wheat importirenden Ländern changed in last years. U. St. Russia. Germ. (71, 72)
    • Contract price per cwt. for Bread. Board of Guardians of Whitechapel 1864–68 (73)
  • 7) Notes on Trade. (facts, Statistics)
    • Board of Trade Returns. (29, 31, 40, 44, 48)
    • Foreign Trade. First Half Year ’66, ’67, ’68 (43, 52, 53)
    • Imports, Exports ’68. (62)
    • Wool Trade. Oct. 68 (45)
  • 8) Land
    • Freetrade in. (Fawcett) (58)
    • Rent and Value of Land. (60)
    • Peasantry Proprietors. (61, 62)
    • Ownership and Occupation of land (72, 73)
    • Paternal Landlordism. (86)
  • 9) Wages, Pauperism, Unions etc. Incomes, Taxes etc.
    • Insolvency of Trades’ Unions. (69)
    • Bonus System (68, 69) Industrial Partnership etc (71)
    • Meeting of Ironmasters. Reduction of Wages. (66)
    • Collieries. Insurance (56)
    • Pauper Expenditure in Metropoles since 1863. (68)
    • Labor of Superintendence (Venezuela) (38)
    • Bill for abolishing Houses unfit for human habitation. (70)
    • National Income. (Dudley Baxter) (26, 27)
    • State Revenue and its sources. (51, 52) The Succession Duties. (60)
  • 9) Miscellaneous.
    • Fires and Incendiarism. (58)
    • Council of Foreign Bondholders (49)
    • Conversion of Iron into steel. (46, 47, 49, 50, 54, 56)
    • Annual Rate of Mortality U. K. 1867 (60)
  • 10) Ireland.
    • Income Tax (39)
    • Emigration. Wages etc (67, 68)
    • Annual Report of Poor Law Commissioners 1852–1867 (74)


  • Inhaltsverzeichnis von Friedrich Engels
  • 1869 I Heft
  • Money Market. 1868.
  • Money Market Review. Jahrgang 1868.
  • The Economist. Jahrgang 1868. Nachträge
    • The Economist. Jahrgang 1868.
    • Inhaltsregister für 1868 Jahrgang. („Money Market Review“ und „Economist“.)
    • Kommentar zu George Joachim Goschen
      • George J. Goschen: The Theory of the Foreign Exchange. 7th edit. London 1866.
      • Friedrich Ernst Feller, Carl Gustav Odermann: Das Ganze der kaufmännischen Arithmetik
      • Inhalt.