New-York daily tribune., 1858-10-04
ReITTsR COMMERCE AND FIyANcE.
.pondence Of The N. Y. Tribune.

Of the Committee appointed by the Hou' e of Com
mons. We have first, shown the runV' ~ tendenc'e'
Of Sir Robert Peel. Bank act, and secondly done
swav with the false notion, attrI utng to banks oi
issue the power Of affecting g. neral prlces D! an
arbitrary expansion or con- -raehon OF 'ho PaPo'
,urrency. We arrive men. at the question:
What were the real G. uses OF the crlsisf ihe
Committee state thai they have established - 70
4" their satisfaction that the recent commercial
crisis in this GOV ntry, as well ~ IN America and
in the North Europe, was mainly owing 70
excessive sP culatiOn and abuse Of credit. Ihe
value of this solution is certainly not IN the least
impaired b the circumstance that 10 find it out
the worH have not waited upon the Parliamentary
COMM tee and that all the profit society m'y pos
sibly derive from the revelation must at ms tme
be fnuy discounted. Granted the truth OF the
DR. ,positiou-and we are far from cOntestlng t.
oes il solve the social problem, or does II hut
change the terms of the question Tor a System
sf fictitious credit to spring up, Two parties are al
vs,. r,ouisii.- borrowers and lenders. 1ha- the
orrncr party should at all times be eager al trading
upon the other peoples capital, and endeavor To
enrich themselves al other peoples risk, seems 50
exceedingly simple tendency that the 0f pV'lte
one would beWildcr our understanding 1hc qucs-
ton is rather how II happens that, among al mod
crn industrial nations, people are cau9h, a' II
were by periodical fl of parting with theiT prop
sIty upon the most transparent deluslons, ana IN
spite of tremendous warnings repeated IL drcrh-
NAL iutervals What are D." social circumstances
reproducing. almost rccva 'y, these Seasons 0i
general self deiuslon, oi over speculation ana hc-
f,t0us credit If they were once traced 0ut, We
,bsuld arrive IT a very plain alternative Either
fhey may be controlled by s0ciey, Or the} are IN
here nj IN the present system OF production. In
the first case society may avert crises; in the
second, so long the system lasts, they murt be
borne with, lbe the natural changes OF the seasons
We consider this 10 be the essential defect not
only Of the recent Parliamentary Report but OF
the REPORT on the Commercial Distress Of loi7 y
and all the other similar reports which pr ceded
them--that they treat every Crisis as aI insu-
htcd phenomenon, appearing tor the hrst time on
the social horizon and, therefore, to be accounted
for by incidents. movements and sgencles altogether
peculiar, or presumed to be peculiar, to the one
period Just elapsed between the penultlmatt and
the ultimate revulson. If natural philosophers
had proceeded by the same puerilc method the
world Weuld be taken by surprise on the reappear-
sDce even of II comet. In the attempt at laying
bare the laws by which crises of the market Of the
world governed, not only their periodical char
sctcr, but the exact dates of that perOdlcty must
b. accounted for. The distinctive features, more
over, peculiar to every commercial crisis, must
not be allowed to OyershadOw the aspects common
tO all of them We should oyerstep the limits ard
the purpose of our present task, were even TO
give the faintest outline Of such an inquiry. This
much seems undisputcd that the Commons Com
mittee, so far from solving the question, has not
even put it in its adequate terms.
The facts dwelt upon by the Committee, with
view to illustrate the system of fictitious credit,
hack, of course the interest of novelty. Tie sys-
TEN itself was in England carried by very
simple machinery. The fictitious credit was created
81 tt., A n.lsffn Ii,
ter were discounted principally by joint stock
country banks. which rcdscOunicd them With the
London bill brokers. The London bill brokers,
looking only tO the indOrsemen 0i the Bank not 10
the bnls Themselves, in their turn relied not upeD
their own reserves but upon the facilities afforded
to them BY the Bank of England. The principles
Of the London bill brokers may be understood from
the following anecdote. related to tbe Committee
by Mr. Dixon the late Manager Director Oi the
Liverpool Borough Bank: In Incidental conycr-
satiOn about the whole affair one Oi the bill brokers
made the remark that il IT had not been for Sir
Robert Pcel's act the BOrongh Bank need not have
suspended. In reply to that, said that whatever
might be the merits If Sir Robert Peers act, for nay
own part would not have been willing To hlt.a
finger 10 assist the Borough Bank through It's diih-
oultcs if the 80 doing had NONed the continuance
af such wretched system of business as had been
practiced, and said if ! had only known half MS
much of the proceedings of the Borough Bank be-
fore became Managing Director, You must
have known, by seeing great many Of the bills o
the Borough Bank discounted, you would never
have caught me being stakeholder. The re-
ionder to which was: "Nor would you have caught
me being stockholder: II was very well for me Ia
discount the bills but ] would not have been
shareholder either"
The Borough Bank in Liverpool, the Western
Bank of Scotland, in Glasgow, the Northumber-
baud and Durhsn District Bank into the operations
of which three banks the Committee instituted
the strictest inquiry, seem 70 have carried the
palm in the race of mismanagemcnt. The Western
Bank in Glasgow, which h ioi branches through
out Scotland and connections ia America, allowed
lo draw upon il for the mere sake of the com
mission raised il dividend in 1881 from To : per
cent; in 1896 from to per cent. and declared a
dividend of per cent. still in June 1857, when
the greater part of its capital gone. Its dis
counts which in 1883 were fl4,9>7 900 had been
increased in le57 To- $50 69l. geo. The redScOuntS
OF the bank in London amounting iii lS52 20
i4O7 ,C00 had risen in l-j6 To fj,i05 0Oo. The
whole capital of the bank being but El 500 CO0
the sum of IL ,603, 900 appeared on It's failure IN
Nov. 1857, TO BE- owed to il by the four instamcnt
houses alone of Mcdonald Monteith. Wallace and
Pattison. One of the principal operations oi the
bank consisted in making advances upon - III
tcTests." that is to say, manufacturers were pro-
yided with capital. the security for which consist
I'd in the eventual sale OF The produce to De creaed
through the means of the loan advanced The levlty
With which the discount business was managed.
appears from the circumstance That McDonalds
bills accepted by ~ difiercnt par les: only
N being inquired about the report ON ~ of which
turned out unsatisfactory or positively bad. Still
MDOnad's credit continued uudiminshed. Since
lS4-, substitution was made IN the books of the
bank by which debts were turned into credits, and
losses INTO assets "1he modes says the Report