The Sun.
London, England, 1864-10-04 00:00:00

The Leeds Banking Company.

(From the Economist.)

The affairs of the Leeds Banking Company are of the
greatest interest, both because they afford a signal indica-
tion of the possible extent and inevitable result of reckless
banking, and because the sort of reckless banking which
they exhibit is the very sort which is now most to be dreaded.
As long as a bank is lending actual money—the money of
its shareholders or of its depositors—there are plain safe.
guards from error, and there are close limits to recklessness;
but when a bank is giving acceptances and endorsements—
when it is lending its name—there is no close limit; crimi-
nal folly and criminal wildness may soon and easily accu-
mulate liabilities which far exceed and swahew up any pail
up capital or reserve fund.
There are three questions to be asked en iho failure of
every joint-stock bank—l. Whatimoney has been lost ? 2.
How it has been lost? 3. What additional money must be
paid up by the shareholders if the public: is to be paid in
full ? he accounts presented by the professional gentlemen
to the meeting certainly give the means of answering these
questions, but their form is involved and complicated, end
very few, if any, men of business will sr.,:te the time to work
out and solve them. We may therefore be of use in throw-
ing the matter into an easy and popular shape.
The sum for which the Leeds Banking Company are
liable—the sum they had to dispose of—is close on three
millions, and is shown at a single view by the following
account :

LIABILITIES,
To Shareholders.
Cir, ital.... £llo,loo 0 0
Reserve and contingent
fund 106,655 9 6
Premium on shares sold 27,304 5 0
Unclaimed dividends
Balance of profit and loss
account, charges to ba
entered, and sundries
unclaimed

To the Public.

Doposit on current or
other accounts .. 5,9,903 410
Sundry hankers 59,383 15 8
Creditorsholdingsecurity 90,971 12 1
Liabilities on endorse-
ments of bills of ex-
change 1919,991 14 3

£314,050 3 1

2,650,300 6 10

Total liabilities
And against this they have to show :

ASSETS.

£ s. d.
15,327 8 7

Cash
Estimated produce of bills receivable un-
pledged
Debts, good and unpledged.
Bills endorsed by the bank which it is
believed will be paid by the acceptors
at maturity 919,991 14 3
Bills endorsed by the bank which it is
believed will be ultimately recovered
from the acceptor or the drawers,
though not paid at maturity 400,003 0 0
Securities held by special creditors
Charges due from customers
Stationery, &0...

Tut d assets £2,146,687 3 0
showing a deficiency of £817,663 6s lid, which, therefore,
is the sum the managers of the bank have made away with.
It is eight times the capital of the bank, and exceeds by
nearly 50 per cent. the legitimate liabilities of the bank—
its liabilities to depositors. We do not remember to have
seen before a first account in which the deficit of the bank
without circulation was more than the money deposited
with it.

How, then, has it been lost ? The figures speak for
themselves. Though the capital of the bank was only
£lOO,OOO, it has been giving endorsements, lending its name
and credit for all but two millions, and these two millions
were of so bad a character that the accountant divides thus :

To be paid at maturity
Not to be paid at maturity 1,000,000 0 0

£1,919,991 14 3
What possible recklessness could have induced a bank with
£lOO,OOO of capital to give its endorsements to two millions
of bills, of which 50 per cent, of which one million will not
be paid when due,is at first sight hard to conceive. It is true
a considerable part, say £600,000 of these bills, are esti-
mated to be ultimately paid, but even that leaves a loss of
£lOO,OOO, or four times the bank capital. And when a bank
is lending its name on a scale so prodigious, ultimate pay-
ment has nothing to do with the matter. Instant payment
by the acceptor of the bill is essential to the safety of the
bank. As soon as an acceptor dishonours a bill, the
holder looks for the best endorser. He sees the en-
dorsement of a bank—the bank doors are always open—he
presents the bill, and it must be paid or the bank stops.
The Leeds Banking Company were liable by endorsement
on £1,000,000 of bills, which would not be paid on matu-
rity by the acceptors, which, therefore, they would have
to pay. And what had they to pay with ? Not a penny of
Consols, not a penny to call in London which they could
use, and only £15,000 of cash in the bank. We should
inquire not how such a concern came at last to stop, bur
how, during so many months of dear money and critical
credit, it has contrived to shiver on.

The explanation of such seemingly inexplicable wildness
is a very wild one, of which there have been hundreds of
examples before, and of which while human nature remains
what it is there will always be a certain number. The
manager of the bank, the uncontrolled manager, for the
directors did not control him, was frightened by the most
pressing of banking dangers. He had lent a good deal of
money to certain insolvent persons, and he did not dare to
bring those insolvents to a stand for fear of stopping the
bank. Some years ago an enterprising broker, who after-
wards failed, gave his acceptance payable at a bank which
also has long since stopped, and said, " Oh, the bank will
discount it." On trial the bank would not discount it, and
the hclder brought it back to:the drawer. " Wou't they
discount it ?" ho replied, "there must be a mistake. Hero
is my cheque for the same amunt. See if they do not cash
that " Aud they did cash it, not daring for their own cre•
dit to refuse; the amount he owed them was so enormous.
The end of this is certain. When, as now at Leeds, some
half dozen unprincipled but sharp men feel a bank must
at its peril give them what money they like, they like to
have an immense deal. They go on asking and asking
till the credit of the bank stops. Several worthless firms
were in this powerful position over the Leeds Bank ; they
had already borrowed so much that they could borrow
what they chose. The directors appear to have known
little about it, and the manager must have known far more
than he chose to ten.
In subordinate parts of the accounts the same reckless
ness is evident generally, indeed wildness of this magnitude
runs through all details where it once begins. It is not
worth while taking much care of pence when you know that
you are squandering pounds on pounds. The bills on hand
receivable in a bank ought to bo in the main good ; that of
the Leeds Banking Company were in amount £225,232 16s
1161 at the stoppage. Of this—
There will be recovered, it is said £135,224 14 7
There will not be recovered

Total
so that two-fifths of the bills were bad.
The loans are batter, but in any other statement we
should consider them culpably bad. The "dettor balsnces,',
as the accountants call them, at the close were £766,925

lls 21
£ s. d.
Of which there were bad „.. ...
74,724 6 4
Doubtful (£104,861 i6s 61) taken at lOs in

the pound
Held as security by creditors

Unavoidable for general creditors
Available

Total
so that nearly one-filth were bad, and nearly another fifth
pawned.
As to the sum which the shareholders will have to pay if
the public is not to lose, we can at present only conjecture.
The deficiency of £816,100, or eight times the capital, is
only a first estimate ; and looking to the nature of the busi-
ness, we doubt its sufficiency Very bad business always
gets worse the more you look at it. Where a manager has
been guilty of recklessness so wild, so culpable, so prodigious
as here, calm and quiet men of business have great difficulty
in estimating or believing how bad it is. If the shareholders
get off with any such loss as this, we shall consider them to
have escaped easily from a calamity so formidable.

General Garibaldi has written the following
lett€r to the editor of the 111ovimento :—" Caprera, Sept.
26.—Sir,—I beg of you to insert the following in your ex
cellent journal. It is said that there are circulating in
England hills of exchange, purporting to bear my signature.
I beg t 3 say that such signatures are false. as I have not
signed any bills of exchange for any sum or for any person.
G. GARIEALDI."

THE PHOSPHORESCENCE OF THE SEA.—The
phosphorescence of the sea is due to two kindred causes,
ono being the light emitted by certain living creatures
which have the faculty of becoming luminous—a faculty
incidental to the discharge of their vital functions ; the other
being the light given out by the bodies of the same
creatures whilst undergoing the process of decomposi-
tion. Which of these exercises the larger share in illu-
minating the ocean, is yet unc!rtain, and the point
is not, perhaps, muct material ; but, what is more
to the purpose is, that among the former are to be found
three distinct genera, subdivided, in the case of infusoria,
into alm- st infinite species. These three genera aro the
Acaleph as (Illedut as and Cyancoa families) among zoophytes,
certain molluscs and infusoria. Of the Acalepbas, or Sea-
nettles, the Mammal is scintillans is the most remarkable.
It is, when fully grown, no larger than a pin's head,
and yet has a lustre which makes it almost as
brilliant as the brightest star. It is more especially
an inhabitant of the tropics, and is a great contributor to
the glory which the sea in those latitudes has over the
waters of colder z0ne5...... Ehrenberg managed to keep
two luminous infusoria, taken from the Baltic, alive at Ber-
lin for two months, and he was enabled to make very close
observations upon the conditions most favourable to the
manifestation of their powers. Ile found that when they
were exhausted, and ceased to emit sparks, they renewed
their flashing on the addition of acids or of alcohol to the
_ aes water in which they wi.ro C,,,,,vnbei s's foal nal.