The Sun.
London, England, 1866-11-30 00:00:00

-40.--
TRIES.--The story of Overend, Gurney, and Co.,
as told by one of themselves, is a narrative of deep
and painful interest. In many an impoverished
household in this kingdom it will be read with feel-
ings into which indignation and resentment will
largely enter, nor are we indeed prepared, notwith-
standing much that calls for commiseration, to say
that such feelings are without warrant in the facts
before us. The foundation of the great establish-
ment the fall of which has shaken the financial
world, was laid in the last century, and for 50 years
at least its business was conducted with extraordinary
success, reputation, and profit. The transactions of
the house were stupendous. At one time it used to be
said that a couple of millions passed through its cof-
fers every week, and the gains of the partners were
on a scale commensurate with the extent of the trade.
The Gurneys became one of the richest mercantile
families in England, and the renown of their wealth
was combined with signal respectability of character
and position. So, too, things continued with them
until the year 1857, after which period a new
management under a new system introduced the
decline recently consummated in a most appal-
ling ruin. To this part of the narrative we must
invite especial attention. One of the partners un-
der whose superintendence the affairs of the house
had so marvellously prospered died iu 1856; another
retired in the year following. Their successors ap-
pear almost at once to have entered upon a descrip-
tion of business known in later days as "financing."
They made enormous advances to adventurous cus-
tomers on exceptional securities, until at length an
immense amount of capital was placed in jeopardy.
We must now state—and it is one of the most no-
table features of the case—that though the business
of the great house in Lombard-street was committed
to new and, as events proved, incautious managers,
there were still partners in existence whose experi-
ence and wisdom might have insured better things.
But " the Norfolk people," as they were called, pre-
ferred conducting local banks in their own county,
and only occasionally, or, as it appears, under
alarm, took cognisance of the London business,
which they were still competent to control. Thus
it was not until the beginning of the year 1861
that Mr. John Henry Gurney became fully ac-
quainted with the dangerous accounts to which
the Lombard-street house had committed itself.
Then, however, he seems to have insisted that until
these accounts were liquidated no further division
of profits should be made, and that arrangement
was accepted, though it does not appear that
any interdict was placed for the future on the class
of transactions which had led to this necessity.
However, the partners divided no more money,
although the divisible amount had actually averaged,
for the five years ending with 1860, no less than
£190,000 per annum. We find, therefore, that the
great firm of Overend, Gurney, and Co. were re-
duced, so long ago as 1861, to a suspension of divi-
dends among themselves in order that a fund might
be provided in compensation for losses incurred.
But this proceeding was insufficient for the purpose,
and we are now brought to the second chapter of the
story. The house in Lombard-street was seriously
shaken. A large amount of its assets was locked up ;
heavy losses had been experienced and more might
be apprehended. At this conjuncture, therefore, it
was considered, says Mr. J. H. Gurney, " desirable
that the business should be strengthened by fresh
capital," and it was determined " that the mode of
accomplishing that object should be by the forma-
tion of a joint-stock company (limited), which
might take over the whole assets and liabilities of
the firm." This project was accordingly carried
out, and in it the first step was of course to ascer-
tain by what figures these assets and liabilities were
respectively represented. To do the old partners
justice, we can discern no suppression of the truth
in the revelations which they made to the incoming
directors of the new concern. It was found and
confessed that, on certain balances of the ageregate
amountof £4,199,000 due to the old firm, an aggre-
gate loss of not less than £3,117,000 was to be an-
ticipated. Besides this, the firm had become surety
for other parties in certain transactions, though
these risks, at the time of calculation, were believed
to be covered by securities in hand. The question
was what the old firm was to do for the new limited
company with respect to these ugly accounts, and
it was agreed that all the private estates and sale-
able property of the old partners should be held
liable for the sum. On this footing the new com-
pany of Overend, Gurney, and Co. (Limited) was
established in August, 1865, the articles of the nego-
tiation being contained and expressed in two sepa-
rate deeds. One of these duly conveyed the busi-
ness of the old firm to the new company in conside-
ration of £500,000 purchase money ; the other
provided for the liquidation of the exceptional ac-
counts at the private expense of the old partners, as
before described. But when the public were in-
vited to find capital for the new concern, the first
half only of these negotiations was revealed to
them. The subs.Tibers to the fresh capital of
£5,000,000 knew nothing of the proceedings by
which the old capital had been squandered, of the
arrangements by which the losses were to be made
good. Ve think the public was hardly used.. In
the sale and transfer of the business the old firm
appears to have acted with honesty, and though
its estimate of securities may not have been
realized, that kind of disappointment cannot be
thought surprising. Indeed, iu the whole crash there
are no greater victims than the Gurneys. They have
been sold up to the last stick and stone, and one of
the chief houses of our mercantile aristocracy has
been utterly ruined. How it could ever have hap-
pened that experienced and wary partners should
commit to less competent or cautious hands the ma
nagement of a business in which their all was in,

volved we cannot understand, but that is not a ques-
tion of public interest. It must rather be asked whe-
ther there was good justification for the invitation
given to the public by those managers of the new
company who knew the history of the old firm.
When people all over the country—ladies, clerks,
servants, and workmen—wereasked to embark their
savings in the new establishment, they could not have
suspected the real truth of the affair. They never
supposed themselves to be strengthening a shattered
concern by fresh capital drawn from their little
hoards. They believed themselves to be entering
into participation in the large and well-established
profits of an approved and stable house, and we
cannot see how it is tobe denied that their subscrip-
tions were given under a misapprehension of the
truth. Of course it will be said that to have pub-
lished the second deed, and divulged the history of
' the firm for five years previous, would have been
fatal to the new undertaking. Granted ; but this
very argument assumes that if thepublic had known
what they were doing they would never have done it.
The new directors, no doubt, concluded that they
had balanced the liabilities of the old firm by the
private property of the old partners which had been
assigned to them, and then assumed that the ordi-
nary profits of the business would yield a handsome
revenue available for dividend. The whole question
of profits appears to us obscure, nor can we well
understand what were the net gains of the firm for
the five years preceding the transfer. Apart, how-
ever, from this point, on which the new directors
may be supposed to have informed themselves, it
is certainly unfortunate, as events have happened,
that so very much should have been disguised of a
bargain which the unsuspecting public was invited
to share, and this fact alone is enough to explain
the distrust and aversion with which all such invest-

ments are now regarded. Who, after this precedent,
can assure himself that behind an attractive pro-
spectus there may not lie a few secret articles affect-
ing the complexion of the whole affair? Who can
tell that the directors of a concern submitted with

apparent confidence to his approbation may not be
cognisant of circumstances which, if openly known,
would deter him from the bargain Tha assumed
excuse of commercial necessity, good as far as it
goes, will carry very little consolation to a ruined
investor. In this case the public were asked to con-
tribute a capital of no less than £5,000,000, in
100,000 £5O shares, and, as on each of these shares
£35 was left unpaid, the liability of the subscribers
was virtually unlimited, and it is now, indeed, but
too painfully felt to be. Into this terrible risk the

subscribers practically went blindfold ; and it is
said, as said it may be, that except with this re-
ticence the new Limited Company would never have
been established, our answer is that under such con-
ditions its establishment should never have been
attempted.

POST. —Of all the points submitted to the Re-
cruiting Commission for their consideration, un-
doubtedly the most important was that which re-
lated to the formation of a reserve force ; but the
commissioners not unnaturally felt that this very
importance made it impossible for a body consti-
tuted as they were to come to auy practical useful
decision upon so " very large" a question. The
consequence is that, as regards the means to be
adopted in order to create an efficient army of re-
serve, we are no further advanced than we were

before the commission was appointed. The report,
however, although it indicates no plan of proceed-
ing, points out the necessity for something being
done, and if it only has the effect of calling atten-
tion to the subject we shall have cause to be grate-
ful for the short paragraphs which have been de-

voted to the reserve force. " The military history
of this country shows," we are told, " that it has
been our practice during periods of peace to reduce
all our military establishments to the lowest pos-
sible point. . . . No preparations for a state of

war were thought of, and the consequence has been
that when war occurred everything had to be done
in a hurry at the most lavish expense." Such a
state of things, it must be admitted, cau hardly at