The Sun.
London, England, 1866-12-03 00:00:00

A Fraud Panic.

li. a. im •

There has THEbeen
a bCaßoloSdiSdeOalFof discussionlB66. as to
what pre-fix would justly describe the panic of
1866. It has been termed a financial or credit
panic. By this word it was intended to imply that
it was the bad business of the dealers in money
which had mainly brought the calamities on the
laud. It was not a commercial panic produced by
les
over-trading or by over-manufacturing, Allto moneyPa
are credit panics, in
nics, and resolve thesel
difficulties, whether the cause arises frorn
sin pecu
in produce, or from speculating in stocks and shares.
If the panic had arisen out of the bad business of
dealers in money when the concerns on which the
directors had brought ruin had been found out and
passed into liquidation, taking with them the mass
of bad paper floating about, a more healthy state
would have supervened, and confidence gradually
have been restored. Though millions upox millions
have been lost--though companies by the score have
been swept into bankruptcy and disappeared, exer.
cising in themselves no longer a pernicious iniluenee
—the tone of the market at this moment is, if any-
thing, worse than at any former period of the panic.
Theut t marvel rwvietlh isg
otlhda, to
ft hai s
of thedi s
c ofaceun
to of bwaenrk,
bothtills
rateglisin
here and on the Continent, than has been known
for years, and with every appearance of an abund-
ance of money continuing for a lengthened period.
Nor can political complications be said to
exercise any pernicious effect. The world is
at peace, and though nations are arr-4ino.
there is no sound reason advanced why this peace
should not continue. What, then, is the cause of
the unsatisfactory state of things on the Stock Ex_
change ? We believe that the true pre-fix for the
panic of 1866 has not yet been given. It may lie
humiliating to English pride to have to acknowledge
the real cause. There was a time when the word of
a respectable English merchant was said to -weigh
as heavily as his bond ; when honour was hie guide,
and his well-known commercial integrity gave him
the greatest facility in concluding contracts ; when,
ti ni 0
no nse
wwh
iocrdh hah
ve e itnhsi
sp ir e
year d c
co
on
nfi dee
oc e.
light TThe
vt r ae
given
this feeling the rudest shako it has yet experi-
enced. Bitter as may be the truth to those whose
honour is still preserved among the people to
whom the nation has confided its financial transac-
tions, there is no disguising the fact that the crisis
has been produced and is now kept up by fraud.
The panic has been a fraud panic. People in the
City have no belief in each other's word. Published
reports are looked on as mere traps to catch the
credulous and unwary ; the more solemn the state-
ment, the greater the suspicion with which it is re-
garded. It is in vain for accountants to certify to
the truth of balance-sheets, when they have a hun-
dred times before certified to statements which a
few months have shown to be a concoction of lies.
The law relating to joint-stock enterprise is alike
unsatisfactory to shareholders and to creditors. The
struggle is between the shareholders and creditors,
who are both likely to become victims, while the
open swindling of promoters and of directors
will probably pass-unpunished. It is, indeed, hu-
miliating to think that this great centre of the
commerce of the universe should be reduced to such
a position. While the savings of the nation are
accumulating, the money is hoarded wherever the
owner considers he can place it with safety, instead
of finding a natural outlet in the channels of pro-
ductive industry. The most difficult problem that
suggests itself to the minds of those in the posses-
sion of available means is how to invest their
money. At the same time that every kind of pro-
perty is a drug iu the market, and no better time has
existed within the memory of man for picking up
securities that will return an immense interest on
the capital employed, few dare invest. And why ?
Because they have no confidence in the honesty or
in the truth of those who manage the various con-
cerns which have absorbed the joint-stock enter-
prise of the day. It is almost impossible to exag-
gerate the terrible blow given to credit by the col-
lapse of such concerns as OVEItEND, GURNEY, and
Co., and the London, Chatham, and Dover Rail-
way. Voth stand prominently forward as samples
of incredible mismanagement and dishonesty—the
one, the greatest of our money-dealing houses,
the other among the greatest of our railways.
Among numerous enterprises a few dishonest
concerns may rationally be looked for, but the
commercial world may well stand aghast, when
in the highest places the worst specimens are re-
vealed, and little surprise can be felt that under the
evsiuteniprgoo p of
osre summel da
stronger
arhaogannevemgfe ueorlu sproutedthan
htraei
nnesa
y,:ioul
blacksystemnn
go susloistfa.
eldtyifoh.wuaweibnhl
gNdei
veuoahfay a
mst: h
. A
nparbol
e-
oupseead—,
hsupported
supporters by y fi na nocfi aal
hcoodny-
epei
ds ni
cc
eorunl ds
hfaalift
of contractors who seemed to have but one object
in view—to extract money from the public regard-
less of results—has been a main cause of the present
total prostration of credit. Never was the truth of
the proverb that " Honesty is the best policy" more
clearly illustrated than in these disastrous proceed-
ings. The contractors seem, with few exceptions, to
have broken down, the railway system to have col-
lapsed, the financial institutions to be paralysed,
and all engaged in this bad and disgraceful business
to have met the fate which sooner or later seems
sure to overtake such culpable practices. The
miserable part of the story is the ruin in which it
has involved thousands of honest investors. The
losses have fallen where they are least deserved,
and most felt by Half-pay, officers, country
clergymen, small shopkeepers, and widows form
the mass of those who are caught in the end.
Surprise has sometimes been expressed at this fact,
though the reason is obvious enough. People whose
capital is very small are compelled to seek the in-
vestments which
pay the highest interest. With
little knowledge of the dangers, and urged by the
immediate gains, such classes invest and having
no means of knowing the under-tide which
is sure eventually to bring a flood of disaster to the
surface, they remain in a pleasing state of security,
lulled with the satisfactory reports put forth by the
companies in which they are interested. They
awake from their dream only when caught in the full
force of the current, and in too many cases it will
be found that the very men who had recommended
to them the investment had themselves cleared out
like rats from a falling house. It is a pity that the
statistics of the ruin wrought by these concerns
cannot accurately be ascertained and laid before
the public, as well as the lists of promoters and the
gains netted by that class. Could the misery
caused for the sake of the comparatively small gains
be laid bare, it is probable that much of the d .-
honesty would have been checked, for even the most
unscrupulous, if anything human remains in his
nature, would recoil from the perpetration of such
wholesale cruelty. W 'hen Parliament meets the
causes and results of this frightful panic must be
fully discussed, with the object, if possible, of apply..
•e. a legal remedy. But no remedy can have any
not bring within the tightest
that does
real force
law, promoters who issue lying
grip of the
pros-
pectuses, and directors who lend their names to
negligent and dishonest management. As the law
now stands the results of joint-stock enterprise may
be summel up in these words—" License to rob."

A Paris telegram through Mr. Reuter's agency
informs us that,
in consequence of an understand-
ing between the English and French Governments,
the Extradition Treaty of 1813, which expires on
the 4th of December next, will continue in force
until the beginning of September, 1867.
The Pall-Mali Gazette says that speculation in
public securities is carried on to an enormous extent
in Paris at the present moment. Not only is there
the Bourse proper, but there is also the Petite
Bourse, a sort of Stag's-alley, which may be seen in
full operation on the asphalte of the Boulevards
after the regular establishment is closed for the day.
From this little Bourse it is a common enough thing
for a passer-by to see a man expelled by a kick, but
it is an unusual if not an unprecedented event to
have 16 defaulters expelled en masse on one day, as
was the case a few days back at the Bourse de Paris.
The affair, as may be supposed, has excited a good
deal of consternation among the stock-jobbing and
fulaueiering fraternity.