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

direction OF a newly formed Finance Company,
the shares OF the concern Immediately rose ~
each on the Stock Exchange.
The Directors OF "The Malabar and 1oka-
hama Bank, Limited" were neither dishonest
nor needy men. As times went they discharged
their duties conscentiously. and without any
atter-thought of individual gain. They took 1t IN
regular turns to attend the bank every day, IN
addition 10 the board meetings, wblch were, oil
course, held every week. Nothing was dOLe' no
draft accepted or paid-eXceptlng, otcourse, the
current accounts OF customers that had balances
TO their credit-without being signed by
director and countersigned by the manager.
II bills were brought Tor discount, and the bills
OF ladng, invoices, and insurauCes OF the goods
which those bills represented were deposited Mt
the bank, we made an advance upon them,
always leaving wide margin in our own favor
to provide for any possible losses. In short,
nothing could be safer Oh more sure than the
business we were doing, and yet at the end OF
the first hali-yegr although our expenses had
been very great on account of what are called
preliminary expenses we were able TO declare
dividend at the rate OF 10 per cent. per annum,
and to put by some $4,000 towards the formation
OF reserve fund. AT the same meeting, our
chairman dec Jared to the assembled share.
holders that lie would Dever rest contented
until he was able to declare a dividend at the
rate OF 70 per cent. per annum, and to put by at
least &lO,OO0 every haltyear TO the reserve fund.
As a matter Of course, the frs general meeting
OF the bank passed over pleasantly enough, and
in consequence OF our extremely favorable
balance-sheet, the shares of 1.-The Malabar and
I
IN single week. But as there are many OF
my readers who will not unders tand by the
foregoing what is the nature of the business
done in an Anplo-Indlan Bank / will explain
for their satisfaction what it chiefly consists Ol
and how the profits are made
Let us suppose that the London firm of Jones
d Co. receives from Bombay correspondents
Messrs. Horsmasiie Damasiie, LCursetiie, "
Manchester. Glasgow, Sheffield, or fancy goods,
to the amount of 100000. Now, although
the house has far amount of working
capital, it would certainty not suit Messr5.
Jones to pay 100000 down, and be that sum
out OF pocket until the good ship Alice Black
arrives at Bombay-whch, as she is sailing
vessel, and proceeds around the Cape OF Good
Hope. will not be less than four monhs-unul
the goods are delivered TO Messrs, Hormasiie,
and until the last-named firm can remit them
the amount due tor such goods. What is then
10 be done p? IfJones d CO. were to ask Messrs.
Hormasne TO remit the amount of the invoice
before they shipped the goods that illustrious
Parsee firm would IN all probability cease then
and there from ordering anything more from
them. And yet Messrs. Jones u Co.. having
tour or five similar orders on hand every month,
have certainly not the capital wherewlth to pay
such immense sums of money, and be out of
their funds for so considerable a time. They
therefore manage IN this wise-and nOte that
the transaction is deemed perfectly legitimate
III trade, both in England, in India, and all
over the commercial world.
Messr5. Jones & Co., being a firm on good
credit, purchased the goods they want upon
short credit say nom fourteen days to month.
When bought, these goods are at once shipped,
and when shipped bills OF ladlng are given by
the captain of the ship, without producing
which the goods would not be delivered up at
the place OF the vessels destination. These bills
OF ladmg are then taken by Messrs. Jones to the
bank, and bills for three-tourths. or two-thirds,
or perhaps four ffths of the value of the ship
ment are drawn upon Messrs. Hormasiie of
Bombay, the bank retaining the bills OF lading
as security, and sending them out to their
branch bank at Bombay, with orders not to
deliver them up-and consequently not to
deliver up the goods-until the bills which
are drawn against the bills of lading are
paid. The arrangement suits every one, and
may be termed the real oil by which the
wheels of trade are kept in motion. 1t suits
Messrs. Jones ~ Co., because they at once
obtain from the bank two-thrds, or thTee-fourths,
OF the amount of money they have to pay, and
are therefore able to meet their engagements
whilst only out OF pocket comparatively very
small sum. 1t suits the bank, for that establish
| ment has in hand more than security enough to
| cover any probable loss by depreciation OF the
value Of the goods, and at the same time charges
| interest, commission, and goodness know what
besides, Tor the advance, or rather for discount
| ing the bill. 1t suits the Parsee merchants out
| in Bombay, for the bill upon them is drawn at
| three, four, or six months after sight, and as
the goods will be all that time getting out to
| India VIA the Cape of Good Hope, they (Messrs.
HOrmasjie), will only be obliged to pay tor them
| about the time they arrive at Bombay. In short
no banking transaction could be more legti-
| mate, more profitable to the bank, and at the
| same time more secure, than those of a like
| nature. 1t is by similar advances thus secured,
| that Indian banks make the enormous fortunes
they do, and, until lately, pay their shareholders
| such very large dividends.
| IL would have been well for ''The Malabar
| and Yokohama Bank, Limited - If we had stuck
to this line. of business. But like all boards of
| directors at the time l write of-some two years
| ago. or rather more-we were bitten with the
mania of making large profits in q short space
| of time. Our chairman had said he would
| never rest cOntented until we could declare a
| dividend of 20 per cent. per annum, and 20 per
| cent. we were bound to make, even if-as an
| American would say-"we cracked up" in our
| endeayors to do so.
| At the present day, when the storm which
over-speculation caused has burst over our heads,
| 1t is easy enough for shareholders to turn round
| and abuse directors Tor mismanagement OF their
| funds, but If the truth had TO pe told, were not
| the 1ormer equally to blame with the latter
| If at general meeting OF the company-of any
| company, whether bank or other-the directors
| declared small or even a comparatively small
| dividend, did not the wrath OF the shareholders
fall on their devoted heads / am quite sure that
| both at our own and other BOARD rooms of Joint
stock banks, whenever cautious measure or are
| ful dealing was advocated, 1t was overruled
| purely from lear OF what the shareholders
| would say II large dividend was not forth
| coming at the end of the half year. And
! therefore 1T was that banks whose legitimate
! business would probably have carried through
| almost any amount OF trouble were led into
| transactions which, though perfectly lawful in
| themselves, were not such as they had either
| the capital or the connection to carry on and
| Whlcn ended, as we all know, more or less, by
! their ruin.
lneed hardly say that by the time "The Malabar
| ana 1okahama Bank, Limited - had been SIX on,