The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1866-05-25

for the reserve OF the bank is rather larger than
usual, The panic, therefore, is not due to the
causes which have operated on other occasions,
Dut is due to other causes which it is not iii
cult to detect, but which it is highly important
TO understand accurately Every one SAYS and
says With truth, that the financing system Is the
cause OF 1T all; but let us try to state clearly
what this means. The legitimate business of
Overend, Gurney 4 Co was to discount bille
which, to people possessed of the necessary
capital and experience, Is one Of the safest ways
OF making money that can be imagined, and one
by which the members of the old firm had at one
time accumulated fabulous wealth.
Unlucklly, however, Tor tn -mselves and the
public, they took to advancing money in immense
sums TO finance companies, and similar bodies
on securities which could not possibly be con.
Verted into money Tor many months perhaps
even for years. In order TO enable them to do
this, large numbers of bankers and other per.
sons deposited with them their surplus cash
which could be called in either on demand or nj
very short notice, and we have reason to believe
ina! when they stopped payment their position
nSHe Deen aepresented not very incorrectly
by the following figures They had a capital of
tl,OOO,OOO They had deposits which were I'M
secured, and Tor which, accordingly, they were
immediately liable of G3,500, 0O0. They had
also $1,000, 900 of deposits Tor which The denosi.
tols held securities. They had less than half a
million OF approved bills or other securities in
their hands, on which money could be advanced
by any prudent company.
What their claims upon their own debtors
were we 90 not pretend to know. The shares of
the company, as every one knows, were at ten
premium not long since, but by some of those
fluctuations, ana 1t may be by some OF those in.
genlous mannuvres which flourish on the Stock
Exchange, they began to fail some time ago
When the fail had once set in il had tendency
to increase, as the shareholders did not under.
stand II, and did understand the immense labil-
ties which they had incurred. AS the shares
fell, the deDositors with the house became
alarmed, and locked up all their funds in secu.
rites which were for practical purposes incon.
n. fhn n1,tlF rkx,.
applied. as everv one knows, to the Bank of
England Tor assistance, and it might perhaps
be suggested that in order to avoid a great
calamity the bank might perhaps have ma lie a
special effort to sustain them.
W" believe, however, that the suggestion that
anything that ought to have been done was not
done would be entirely untrue and unjust and
tnat the managers OF the bank have only done
what prudence positively required them to do.
The available securities which Overend, Gurney
~ Co. had to offer, amounted, as we have reason
to believe, TO less than half million; and. as
their immediate liabilities were seven times as
much, 1t was maniestly impossible to keen
them on their legs. The whole history of Owe
rend, Gurney & Co.'s failure may be given in a
very few words. Their way OF doing business
was to lend ior long terms aud at enormous in
terest money whicn they had borrowed from
Others Tor short terms, and at lower interest So
long as the loans tor snort terms were forth
coming, they no doubt made great profits, but
as soon as they were withdrawn, ruin was in
evitable. "
1t is easy 10 see how a catastrophe of this sort
works round upon others. The bankers who
were known to have made deposits with Overend,
Gurney d Co. to large amount were of course
supposed to be themselves in danger and hence
came run upon them. They in their turn
nave had to apply in some instances for assist
ance to the Bank OF ENGLAND, and though that
assistance has been most literally giyeu-We
belleVe that the number of bills discounted YES
terday was greater than had ever been known
betore-the Bank Charter act prevented a GER
LOT t.,,,,,
We are not amongst those who deny the sound.
ness OF the principle on which that enactment
rests, nor should we be disposed to advocate The
suspension OF 1t II the panic had arisen from
other circumstances.
Weighty arguments, which il is not necessary
to discuss ON the present occasion, may be
brought TO show that when a panic is caused,
either by loss or by improvident purchases in
foreign counties, which have to be paid for in
gold, the suspension OF the Bank Charter act in
creases, IN the long run, the evils which it was
intended to diminish, and tends to reproduce
them IN an aggravated form at later period;
put however this may be, the case at present is
different There is no loss and no drain ofgold.
and the securities which the bankers who re-
qulre assistance are prepared to offer, are per-
lectly good. 1t would be mere prudery to nam I
tam regulation intended to meet quite q differ
ent state of things when the result of doing so
would be to prevent a banker whose solvency |
is undoubted from selling Consols in order to
meet a run which he would be perfectly able to
meet II he could sell them. We are glad that |
this view of the case has been taken by the Gov.
and that steps have been taken 10 |
enable the bank TO exceed the limits imposed
upon 1t by the Bank Charter act in favor of
those who have undoubted security to offer.
The bank, OF course, could not, with due regard
10 lis own interests, or to those OF the public,
bolster up really insolvent concerns, but it is
highly important that they should be enabled
to give assistance to those who are ready and
willing to purchase it by proper consideration.