The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1866-08-17

Here we commenced to sufier-not much at
hIst but after time our losses got serious.
Cotton had, perhaps, been shipped in India,
a. a supposed value, OF shilling q pound,
and bills TO the value of, perhaps, ninepence
pound had been drawn against 1t, the coun-
tervalne being paid by one of our Indian
branches, and the bill sent home to us. But
by the time it reached England the cotton
which 1t represented had. perhaps, fallen to
seven or tightpence pound, the market having
what Is called a downward tendency Some
times the parties upon whom the bills were
drawn would not accept them, and thus the
cotton was left on cur hands to be sold-almost
bills were accepted, but before they arrived at
maturity the parties who ought TO have paid
them failed, and again We were left with cotton
on our hands TO be sold at n ruinous price. On
the other slde-in India-things got blacker and
blaCker. Goods sent from England were sold
at less than a fourth of their value, and our
branches there lost much in the same way
(only in greater proporhons) that the head
establishment in London suffered. To MAKE
matters worse, a temporary insanity seemed 70
have seized upon the managers of our Indian
branches. They had-as we afterwards found
out when too late advanced large sums Of
money upon utterly worthless Indian shares,
as well as upon buildings, lands, and other
kinds of securities which q bank ought never to
touch. The consequence of this folly was, that
when we expected remittances from India to
provide TOR bad bills and failures in London, we
found that our funCs were locked up in the
East for n considerable time to come, and that
even when they became available, the secu-
rites would not probably realize a tenth OF
the money that had been advanced upon them.
For this new trouble we directors could hardly
be blamed, for it was as impossible TOR us to
be IN London and India at the same time, as it
would have been to work bank of this kind
ana not leave the different managers abroad
power to act to the best OF their Judgment 1t
is an axiom. and very proper one, in commerce,
that every principal is bound by the acts OF his
acknowledged agent, and consequently we. the
directors OF the board at the head office in Lon
con, were obliged to confirm the doings OF our
managers in the East, no matter how much we
dsapproved Of those acts Against this Kind
OF misfortune there Is no positive or certain
guarantee. The directors OF company can
always or in great measure at any rate,
insure their shareholders against the dishonest
acts of a subordinate and IN all cases insist
upon persons so employed finding a proper
guarantee for considerable sum. But to guard
against dsobedience OF orders Is impossible,
and If no actual fraud can be discovered, the
utmost punishment they can iniict upon the
subordinate who sights their directions, is to
dismiss him from their service.
But the British shareholder is the last man to
listen to reason If he believes his pocket Is to
be touched, and in most cases, he, by his own
yelling, brings down the house upon his own
head. Our next meeting was by 40 means q
pleasant one. All kinds of Indian securities
we're getting lower and lower, and our shares,
being those of young bank, fell very consider
ably. The board of directors were accused of
all sorts OF negligence and some of the intell-
gent individuals present went so far as to hint
that we, no doubt, ''stood in to win" something
considerable by the depreciation of these same
shares. 1t was in VAN that we offered to prove
by the books of the bank that we were all large
shareholders in the concern, and that some of
us who had bought in when the shares were at
premium were very heavy losers indeed. In
my own case l had purchased no less than
fifteen hundred shares when they we're quoted
at one pound premium, and now they were
at three pounds discount, being loss of tour
pounds per SHARE or &6C00 upon the transac-
ton. In place OF the twenty per cent.
interest, and the few years work in London,
by which hoped to purchase my estate, the
money had brought home from India was
reduced by more than fourth. So much Tor
amateur banking by those who however good
their intentions may be, do not understand the
science.
By some means or other chiefly by turning
deaf ears to the insults passed upon us by
many of the shareholders-we managed TO get
over this meeting, and determined to do or
DIE during the next SIX months, so as to present
a better oalance-sheet and to raise the price OF
our shares. There was but one way of etfecting
tins change, and in adopting the method we
did but follow the example set US by MANY of
the banks and other monetary institutions
around us. l allude TO the system of ''fnan-
eng, which had become so very common with
number, not only of finance" companies, but
also with numerous banks, dseountlng esta-
blishments, and the like. To "hnance"-so
Tar as the art is understood in England where
it has been but partially developed as yet--is to
charge high interest and commission for
accepting CT becoming responsible tor pecunary
liaDiliues, which, if only from the long date of
the securities, can hardly be termed good. Thus
amongst many other instances, builder that
was erecting a new square, or street, was in
want OF money to complete his work. he
came TO us, and gave us mortgage upon these
houses which as yet were but halt finished, and
in return we accepted the bills he drew upon
us, which bills he got discounted elsewhere,
and fcr which transaction we charged him
at the rate of 80, 40, or so per cent,
without having parted with any cash, and hold
ing IN our hands mortgages of double the amount
OF the bills We had accepted. To the unini-
tiated this may seem most profitable business,
and so IL is so long as there is no panic
there is any difficulty about discounting bills,
the builder, as a matter of course, fails, and
those who have given their acceptances are left
to provide for the same, with nothing to fall
back on except mortgage which cannot be
turned into money Tor, perhaps many months.
AS matter OF course, we, the directors oi
Tine Malabar and Yokohama Bank, Limited, "
did not give out publicly that we were
financing no bank ever does But we worked
the newly discovered mine, which we believed
10 be meXhaustible, and as the money market
was once pretty easy, we managed to make up
on paper-tor the losses we had incurred during
the previous half year. At the first general
meeting held after the "fnancingn system had
been commenced, we were able TO declare a
dividend at the rate of fifteen per cent per
annum, and the value of our shares rose in a few
days rom three discount to three premium. AS a
matter Of course nothing could be more cordial
than the reception which we directors received
nj that meeting from our shareholders. Whether
they would have greeted us so well mad they
known the serious risks we were running, is
another question. But this much l will say,
which IS that the board of directors, one and
all, believed firmly that the ultimate results OF