The Sun.
London, England, 1868-12-25 00:00:00

FINANCING IN NEW YORK.

(From the Anglo-American Times.)
The swindles brought to light in London during
and after the panic in 1866, although prodigious in
the amount out of which the public were de-

frauded, and horrible in the ruin into which
hitherto prosperous families were plunged, yet
evinced no originality, nothing upon which even
an " Artful Dodger" could pride himself. They
were grounded upon poor, mean, lies ; audacious in
the openness of the falsehood asserted, and remark-
able for the respectability of the names by which
they were guaranteed. By a double deed only and
by a great reputation was OVEREND, GURNEY

floated ; by acts which brought the Manager into a

convict cell was the Joint Stock Discount broken ;

by untruthful prospectuses, advertisements, and
by puffing, did the Financial Companies, the
_ .

leading Banks, and other institutions succeed in
gathering flocks into each Limited Liability pen
from which each sheep emerged, however woolly

and fat before, lean and miserable, clipped in many
instances so badly as to be not only minus its
wool, but having great scars, which showed where

the shears had taken out its skin as well.

We

grant that the mode was effectual in wringing the
life-blood from the people, bat so clumsy that most

of the precious drops being lost few benefited, and

those few in a degree wholly disp.oportionate to
the fearful suffering caused. In New York there
i 3 at least some grandeur and originality in sc ,un-

drelism in the and ►city with which the plunderers
defy all men—Mike s2ttiug at naught law and

society, their own and their country's credit. In
both, religion is the best guise; for he can cheat
most who prays loule3t in public, ani bull's con-

spicuous churches as advertising monuments of la's
piety. It is only necessary briefly to trace the
great Erie Swindle to show how New Yorkers sur-
pass Cockneys in ingenuity, in grandeur of con-
ception, and in boldness of execution. But, agiin,
it is only necessary to relate this history to
show that such proceedings would be impossible in
London,---for, if villainy be not there secret, as-

sunning the shape of conspiracy, society would crush
it, and all concerned—while the lying prospec-
tuses, with their poor devices of rigging the Share

Market would be impossible in New York, as

American birds are not to be caught with such chaff.

The Nation graphically tells the story :—A year
and a half ago the fine harvest weather made every-
thing buoyant, raising the people into that hopeful
mood wherein they bought largely for investment,

speculating on the good tuna coming.

Among

other Stocks eagerly purchased was that of the
Erie, and this was the occasion seized by the direc-
Under the advice of an able but unscrupulous
awyer, and, knowing the composition of the local

ors.

courts, without a shadow of legality, they issued and
secretly sold fresh shares to an amount nearly doub-
ling the original Stock of the Company. The pro-
ceeds, ameunting to $10,000,000, became the sinews
of their war ag host the public. Not only wa3 buoy-
ancy in Erie checked by the large sales, but prices so
declined that dealers became alarmed, a feeling in-
creased on the sudden appearance of " the newly-
issued certificates in the exchange, about which offi-
cial inquiries were answered by the brazen-faced

acknowledgment of the fraudulent issue, aceompa-

uied by a diguisei threat that more were in pre-
paration. The fright was of coarse greil, and t'le

further fall marked and immediate. Then thos-.t
who got early information rushed in to deal, fol-

lowing the example of the Erie Executive Com-
mittee, and many brokers and others pressed specu-
lative sales, selling short, as it is termed ; that is,
shares for future delivery not then in their
possession. A combination of " bears" are liable
to be caught when they take this course, unless
they can create a panic, and frighten the real

holders of shares into getting ril of them at any

price. An oversold stock has to be bought back
for delivery, and the reaction upwards is then likely
to be greater than the depression, particularly if it be
well known among the shareholders that a combi-
nation is committed to deliver shares in large nuin-
bers on a certain d ty. By the National Bank Act
it is obligatory on the National Banks to hold a
reserve in currency equal to 25 per cent. of indebt-
edness. It was autumn, when the money market
in New York is peculiarly sensitive, owing to the
efflux of cash South and West to move the crops.
The banks then lend to their utmost, and any
draft upon their reserve compels them to call

in loans to' re-adjust the proportion, for every
dollar in their cellars represents three lent, and their
power of helping trade is crippled in that proportion
on the reduction of the reserve. Sales of Erie had
reduced the price of stock from seventy in July to
forty in October, and given to the directors a vast
sum, which they distributed among the banks of
the City. Suddenly cheques were presented for the
515,000,000 thus held, and the greenbacks were
withdrawn at the critical moment from the Bank
reserve. The effect, as the Nation says, was elec-
trical ; every bank saw its reserve in danger, but
none could see the next step, while the mystery in
which the operation was shrou led added to the
terror its boldness inspired. Each, thought only of
strengthening himself, loans were called in, and
money became almost unobtainable, so those who
had borrowed on stocks were compelled to sell them
to meet commitments. Trade was brought to a
stand-still, and money could only be procured on
the best security, as high, it is said, as a half per
cent. per day. Merchants were cut off from bank
facilities, and it was thought at one moment that
the banks themselves must succumb. As in Eng-
land at such a crisis, the Treasury was compelled to
step in with the declaration of the Secretary, that,
if needed, relief would be forthcoming. But though
this perhaps saved the crash of that delicate erec-
tion of civilization the financial fabric, it did not
save proprietors from heavy losses. Railroad
and other stocks fell in value by one-third or
one-fourth, and holders in many instances had
been frightened into selling at these prices.
Even Government Bends had declined 5 or 6 per
cent. in a day, and in Wall-street the prices of
everything went down 10, 20, or 30 per cent. ;
among them Erie had been depress2d to $35 a
share, and it was in this panic that the authors of
the mischief were enabled to buy back the shares
they had sold, and many more, at an enormous pro-
fit, and thus Act 1 ended in a brilliant success.
Shares in scores of thousands had been sold at high
rates for future delivery, and not only bought back
at h X the su:n, but the market had been place 1 in
An advantageous position for investment to those
.vho had money in hand and a knowledge of the
:nanner in which th,l, panic had been brought about.
But the Eric directors were not satisfied with half
Ineasures ; as yet they had but played the We of
' bears," and everything was beautiful for Act 2,
that of " bulls." Numbers who bad been narrowly
watching the clique and acting with them imagined
that the shares were worthless, and this impression
being carefully fostered by the directors they went
on selling while the emissaries of the clique were sec-
retly buying. While leading their outside coadju-
tors and others into the free sale of Erie for future
, delivery they turned their attention to Gold, the