The Sun.
London, England, 1866-06-09 00:00:00

P E

SPIRIT OF THE PUBLIC jOURNALR

TIMES.--There are, probably, many shareholders
as well as many creditors of Overend, Gurney, and
Co. (Limited) who will learn for the first time from
the provisional report of Messrs. Turquand and
Harding what they ought to have ascertained be-
fore investing or lending their money. A very
cursory perusal of this document is sufficient to
show not only that no considerable portion of the
paid-up capital will ever be recovered, but that no
company ever ought to have purchased the concern
at all. The truth is that Messrs. Overend and Gur-
ney had not a sound business to dispose of on the
31st of July last, and, instead of receiving £500,000
for the goodwill of it, should have been thankful to
pay a handsome sum to any company which should
take it off their hands. The position of the old Rrm
at this time is clearly indicated in the supplementary
statement issued by the official liquidators, which is
the real key to the subsequent history of the com-
pany. " The total on the credit side of the account
then stood at £15,552,003, and on the debit side at
£14,425,678, exclusive of the balance to the credit
of the partners in the private ledger, amounting to
£1,126,325." There were, however, further liabili-
ties of various kinds to the extent of nearly £9,000,000
more, which seem to have been excluded from the
debit side of the account because they were contin-
gent on the default of other houses which were pre-
sumed to be solvent, or because they were otherwise
supposed to be covered by adequate securities. It
was hoped that ample provision had been made
against any losses, arising from bad debts or other
causes, by the apparent difference of more than
£1,000,000 between liabilities and assets, by the
balance in the private ledger already mentioned,
and by the value of the separate estates of the
partners. Unfortunately, this expectation has
proved quite illusory. A deficiency has arisen,
" from depreciation in values and from other
causes," which is likely to amount to at least
£700,000, after all the assets, joint as well as
several, shall have been realized. Though it is not
very easy to follow this part of Mews. Turquand
and Harding's report, wegather from it that whereas
the partners of the old firm have already contributed
about £650,000 towards a guarantee fund out of
their private estates, and will have to contribute
£1,250,000 more, yet the demands upon the new
company have been such as to absorb the whole of
it and to leave a deficit of £700,000. If we now
turn to the " approximate statement of the affairs
of the company in liquidation," we find assets osten-
sibly exceed liabilities by about £400,000, and this
is the sum which, subject to much certain delay and
many probable deductions, the shareholders ought
to get back out of their lost £1,500,000. The ex-
perience of the official liquidators, however, enables
them to point out a number of possible slips between
Ithe cup and the lip which might scarcely have oc-
curred to the uninitiated. They warn all parties
concerned at the outset that "at the present time
the most carefully framed estimates may prove fal-
lacious." This is just one of those paradoxes which
Lord Dundreary might be pardoned for saying that
" no fellow can understand," but which is really
very simple if we only look at it only in detail. For
instance, the largest item in the liabilities of the
company is "to liability on bills rediscounted
£8,266,048," and another large item represents
debts to persons holding security. Now, it is obvi-
ous that in the former case much depends on the
ability of other firms to pay the bills in full as they,
arrive at maturity, and that, in the latter, the com-
pany may either realize a surplus or be called on to
make good a loss, according as the realized value
of the security exceeds or falls short of the
creditor's claim. In the present " very excep-
tional state of commercial affairs," Messrs. Tur-
quand and Harding decline to pledge themselves
to any definite opinion as to the propor-
tion of bills which may be returned unpaid. They
express a belief that the character of those held by
creditors as security is, on the whole, good, but they
remind the shareholders that interest is payable on
them, and must be subtracted from the surplus of
£266,000, which might otherwise be expected to
accrue from them. They predict, on the other
hand, that " a large amount of the bills " redis-
counted" will be thrown back on the Company,
and will, "in the first instance, rank against the
estate for the full amount." We have here one
secret of commercial failures, and an intelligible
answer to the question so often asked of late—

" Where does the money go ?" The money goes in
loans, at high rates of interest, to contractors and
companies who may ultimately be able to repay it,
but who cannot repay it at short notice. It is locked

up in works that require years for their completion,
and, for the purpose of meeting a sudden call, it
might just as well be at the bottom of the sea.
There is one sentence in the report before us that
explains in a few words the reason why firms of the
highest credit, but which have tampered with the
new system of financing, may collapse at any mo-

ment,-without any premonitory symptoms of weak-
ness. They have assets, and they have liabilities,
and they have, let us suppose, carefully preserved a
due relation between them, " but in many instances
the former can only be realised with time, whereas
the latter require prompt payment." Then money
has to be borrowed at any sacrifice, credit breaks
down, and the inevitable fate of the house that is
built on the sand overtakes the concern, not, per-
haps, because it is intrinsically rotten, but because
the pressure upon it is present and the means of
resistance prospective. If it be true that a profit
of more than £200,000 was fairly earned by the
limited Company of "Overend, Gurney, and Co."
during the nine months of its existence,
we must attribute its failure chiefly to em-
barrassments of this kind, inherited from the
old firm. It would have had a far better
chance of success had it started without the
goodwill for which it paid £500,000, but with a clear
balance-sheet ;as it was it could hardly have
weathered the storm of last month, even had the
" bears " not conspired to undermine it. The case
of the Agra and Masterman's Bank, in which thee_r
families of so manylndian officers had invested their
savings, appears to have been very different.
its ruin
is every reason to believe that, although it
may have been precipitated
was directly
Overend and Gurney, yet that
who had
speculators brought about by unprincipled sPeces.
This infamous
made time bargains upon its shares. by tihte downfall of
darto such lengths as
practice has of late been
An instance mentioned lathe
manner in which it is
to shock even the eonseieuceaeornorfretchietyStAoerktinElexcohfange
yes-
terday will serve to
who had a large deposit
inca rtrhiend
o Agra .3-1. at the Louvre Hotel in Paris,
to be residinc,c:rnwnainanls Bank, and who hap-
pened andA genltssltehe
purporting to proceed from a dis-
interested' ondent, warning him to withdraw
correspondent, received
as the bank was in imminent
the money at once,
real motive was to get
up a
Of course, the .
a letter.
peril.
general panic, to depreciate the shares, and thus to
enable stock-jobbers who had " speculated for a
fall" to make a fortune by purchasing, for next to
nothing, shares which a few days back commanded
a good price. Now, we do not here deny that it
may be legitimate for a man to contract for the sale
of what he has not in his own possession, in the hope
of turning a profit by the chance of its falling in
value before the time comes for its delivery. This
may be an honest trade, but it certainly exposes
those who engage in it to great temptations. From
the moment that such a transaction is concluded it
becomes the direct interest of the seller to " bear