Northern Times.
Liverpool, Merseyside, England, 1857-12-07 00:00:00

TO THE EDITOR OF THE NORTHERN TIMES.

Sir,—ln your leading columns, to-day, I find the
following :
Mr. Macfie, for instance, in accounting for the con-
temptible failure of the Bank Charter Act, and the Bill
of 1819, says :—" No doubt there had been over-trading,"
and Mr. Aikin assures us, with great solemnity, that
" Panics have their origin in commercial imprudence,
and not in legislative enactments." But we will take
the leading articles of import which tell most heavily on
our reserves of bullion—breadstuffs, cotton, silk, wool,
sugar, tea, coffee, indigo and other dye-stuffs. and timber
—and we would ask those gentlemen if there has been any
" over-trading" in any one of those commodities within
the last three years?
_ _

In the above quotation there is, first, an inquiry,
which I answer:—Markets may not, at any time,
in late years, have been over-supplied ; stocks may
not now bo excessive—indeed, the very reverse may
be the case—and yet individual merchants may
have grossly over-4zaded ; that is, they may have
been doing business to an extent not warranted by
their capital. We all know that not a few firms
have thus overstepped the bounds of prudence,
safety. and fair trade. I have no doubt the existence
and effects of this grave commercial error have
aggravated the crisis.
But, secondly, you assume that I blamed this
over trading for the " failure of the Bank Charter
Act and the Bill of 1819." What I did say at the
meeting of the Chamber of Commerce referred to
was, that, granted there has been over trading, yet I
apprehended the imperfect working of the Bank
Act of 1841 would have been made manifest by a
like crisis or " fix," altogether independently of
that aggravation. And I stated that my object
in rising was, in some degree to meet
or supplement the observations of a previous
speaker, to whose opinions this community always
pay respect, which, I feared, miglat be too strongly
interpreted by out-and-out supporters of that act
(if any there be) as indications in its favour.
Without entering on the general question, which /
could not venture to do, Icontented myself with ad-
verting to the fact that the late run on Scotch Banks
—as, indeed, a run on banks is generally—was in its
main and most dangerous features a withdrawal of
deposits, and not a demand for payment of notes,
and thence, contending that a great defect in the act
is this—that, whereas, stringent and hitherto succes-
ful provision has been made to secure convertibility
into gold for the latter—the notes—no correspond-
ing or adequate care has been taken to so protect
the former—the deposits, [I look on both liabilities
transferable receipts for deposits], and I remarked
that a national bank or depot, for custody of the
precious metals, ought to be always as able and
ready to give gold to the bankers and others when
they present their deposit receipts or cheques, as a
public warehouse keeper is to deliver produce to
the holder of a produce warrant. Practically, this
defect seems to correspond to what writers on the
bank management object to as letting the reserve
fall too low.

While I may be excused for thus answering your
appeal, I hope public discussions of these subjects
will be left to others more able, and no further can
made, even by the Editor of the NORTHERN TIMES,
on, Sir, your very obedient servant, R. A. M.
Liverpool, 4th Dec., 1857.

THE MONETARY CRISIS.

TO THE EDITOR OF THE NORTHERN TIMES.

Sir,—ltis amusing to listen to the passing opinions
of individuals in one's daily intercourse, that wo
are recovering from the effect of the present Mone-
tary Crisis ; that on the turn of the year we shall
have attained to a healthy condition, and in the
spring we shall have a heavy business, and money
will be very cheap. No doubt good times will in
time return to us ; but before closing our books as
to past transactions, the public are interested in
the question, on what condition business is to be
resumed ? and it would be well if some mercantile
men would make a record of the past and present
for their future guidance. The cause has been
manifestly proved to an over anxiety to get " rich in
a day," and too much ready assistance by Joint
Stock Banks—without the latter the former could

not be •'.one—and therefore to the Banking system
I may be attributed much of the present misery.
No man is justified in trading beyond a certain
credit due to the just and legitimate amount of his
capital ; and to satisfy himself as to this amount of
credit, is to take into consideration at all times, if,
when credit becomes due, whether his assets will
meet his obligations, and why should it not
be the ease ? No man has a right—and, in
short, it is dishonesty itself, and of the worst
possible description—to go beyond these reasonable
bounds. It is not honest in a man starting the
world with comparatively no means, and, by force
of circumstances, at once to thrust himself before
the public as a " princely merchant," sustaining that
character by large appearances. It is against the
spirit of the law ; it is nothing better than contract-
ing debts by false pretence. When such a man
suspends payment, the very fact of the magnitude
of his operations, and the effect his suspension may
have upon others, screen him from that strict public
investigation of his conduct and management of
his business affairs which should in all eases take
place. In some quiet nook his affairs are wound up
by what is called " under private inspection," which,
in practice, means himself. Within two or three
months he receives from his inspectors a final
release, and this, generally, before a distribution can
be made of his meagre assets ; he is a free man;
the game he has played, if successful, the benefit
would have been his own ; if loss accrued, it falls
to his creditors. It may probably be asked, how
does such a man manage so far to gull the public ?
It has been answered over and again within the
last six weeks—by the Joint Stock Banking system;
and it has been more especially shown by those
banks which have broken up. Like their
ambitious and speculative customer, thole banks
wish periodically to make (if not to show) great
gains for their shareholders, in the shape of hand-
some dividends. At their ,meetings a flourishing
report is read, the dividend declared, and thanks
follow, as of course, to the manager. Whilst a
large dividend is declared, the internal condition
of the concern is not inquired into, and the risks
run to obtain the profits. In short, it requires an
exceedingly strong and stubborn minded man, in
the face of a handsome dividend, and a satisfied
proptietory, to put any question. The ambitious
and speculative trader, being more adventurous,

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has had a great advantage over the quiet-going
honest dealer, starting with his limited but solid
capital, who wishes gradually to improve his
circumstances, and in doing so estimates his bank
commission. The former character should be
classed with our Brother Jonathan, and designated
" a fast man." He keeps pace with the banking
system ; and large dividend commissions, whilst
he has ready accommodation, aro never thought of.
In time he becomes a welcome visitor at the bank
parlour—a gentleman of consequence. A friendly
and confidential feeling springs up between him
and the managers ;—accommodation goes on—it
aggregates and increases. The bank then changes
place with the customer. He not only asks,
but demands accommodation, or threatens
to suspend—the Bank is then powerless ; to him
is committed the..direction ; the Bank, in quiet self-
defenee—an I here the mischief towards innocent
parties arises to be felt—holds him up, getting
what they can, and watching for an opportunity
still further to reduce their claim. The bubble
bursts when large dividends are not forthcoming;
the crisis comes, and then, we, the public, are
simply told, " this great man is in with his Bank
for a good round sum." Another move then comes
on the card ; so serious will be his downfall, that
for the sake of others involved, there must be no
public investigation, but a private arrangement.
This is by no means en exaggerated statement ;
daily amounts have proved it to be true.
Now to the remedy ; let there be no disguise
in the winding-up of the dealings of these adven-
turous gentlemen. Insist on public investigation,
and do not screen the Bankers who have so abused
the confidence of their shareholders. No honest
man, who may have been drawn into the meshes
of such Bankers and their customer, need be afraid
of tha consequences to himself personally. That
as regards Banks, insist upon a law that in all
cases of suspension, as public institutions, they
shall undergo the.ordeal of being wound up by
legal authority having publicity ; and, further, as
they possess large means of doing injury to inno-
sent parties, such as widows and orphans, let their
conduct, where culpable mismanagement has taken
place, be visited with suitable punishment. This
will go far to cure the present wholesale distrust,
and will tend to prevent the recurrence of the
weighty mercantile failures which have periodically
taken place. It will bring bankers to the know-
ledge and practice of it, that the well-being of their
system does not depend upon taking the great
adventurous speculator by the hand, but that the
true system is to give limited credit by way of
advancement to the honest capitalist, whose ope-
rations may not be so large. Business will then
be spread over a greater area, and credit risk will
be reduced, creating,a more healthy condition in our
mercantile system ; and, in the long-run, it will
produce, even to the shareholders of banks,
remunerative dividends, without the risk of losing
their " all." A. B.
2nd December. 1857.