The New York herald., 1878-10-05
swindling In scStland Under the
Name OF Banking.

City OF Glasgow it would be harsh to de-
nounce it's managers as intentional swim
dlers, since there are many men in the
financial world who have been deluded
into the belief that unlimited credit
is equivalent to an unlimited possess
sion Of cash. The managers OF the
Glasgow bank no doubt entertained
this error and pushed it rs far as it would
60 but besides this mistaken view Of the
power Of credit they were as deficient in in
tegrlty MS common thieves. The intellec-
tual error may be considered apart from
the fagitious moral turpitude. 1t is an
error which is shared, in different form, by
our own crazy infiationists and by the
whole breed Of loose financial thinkers who
have no true conception of the nature of
credit
Among the diverting recitals in the i'm
mortal history Of Don Quixote is the ac-
count of certain suit which came before
Sancho Panza for his adjudication while he
was Governor of tho island of Barataria.
The plaintiff in that renowned suit was
rustic and the defendant Q tailor. The
rustic had brought to the tailor
bit of cloth and asked whether it
was sufficient to make cap. After
measurement by the tailor the re-
ply was, Yes. But the rustic, fearing
that the tailor was making allowance for
what in English is called cabbage" asked
if the cloth was not sufficient for two caps
Another Yes. The rustic, encouraged to
take an expansive view, kept rising in his
proposals, receiving always the same uni
form answer until he brought the tailor to
engage to make five caps of the bit of
cloth which seemed scant pattern for
one. When the rustic brought the suit
the tailor professed his readiness to
his left hand from beneath his mantle ex-
hibited tiny cap on the end of each finger,
supplying an amusing proof that it is i'm
possible to get more out of piece of mate
rial than it contains. This is so obvious in
most matters that only a rustic simpleton
could expect anything different, but on the
subject of credit there are thousands of
men, neither rustics nor tools, who fail to
see that if you cut five pairs of trousers out
Of u scant pattern for one they must be too
small fer use.
Many banks besides that mismanaged one
at Glasgow have acted more or less under
this delusion, which is the main reason why
bank failures are SO frequent. Fancying
that there is some magical power in credit
they expand their operations beyond the
limits imposed by their capital and stretch
the cord until it breaks. The result is
generally fatal when a bank is Sc
duced into giving long credits When
merchants are not strictly reined in
by the sound rule of sixty or at most
ninety days, they are tempted to go into
speculative operations. II the speculations
prove unfortunate they besiege the bank
for extensions of time, and rather than
lose debt by precipitating a mer-
chant into bankruptcy an extension is
granted which affords ground for
similar applications by others until the
bank loses control Of its resources and finds
itself in as bad condition as the merchants
it is favoring. BY aiding them to play
game OF hazard it makes its own business
game Of hazard. 1t then attempts to ex-
tricate itself by using credit as fictitious
as theirs. The bubble grows thin in pro-
portion to its swelling size and necessarily
breaks and collapses. We suppose this to
be correct account of majority Of bank
failures the world over.
Superadded to this feature, which is
common to all such cases, the failure of the
IS of hos fhar fao
lures which disclose not merely bad judg-
ment and recklessly venturesome spirit.
but a fagitious and protracted purpose to
overreach the public and swindle its own
shareholders. 1t has long been known to
few Of the initiated that this bank
was rotten, and the heavy shareholders
who were in the secret were given
an opportunity to stand from under before
the stupendous crash. Dishonest means
were resorted to for giving fictitious credit
to the bank during the period while the
opulent shareholders were quietly and in
dustriously disposing of their stock by un-
loading it apon the victims who are now
ruined The bank, after its managers
knew it to be insolvent, kept increas-
ing its dividends to give a false
appearance of prosperity, these fc-
titious dividends being paid out Of
the money due to depositors. and not
out of profits, for there had long ceased to
be anything but losses. The consequence
was that those who were let into the secret
or had shrewdness enough to suspect il
unloaded their shares upon o community
Of confiding dupes, who not only lose the
enormous price they. paid for the stock.
but are made liable, so far as their remain
ing property goes, for the colossal debts of
this swindiing institution.
Our cable dispatches from Glasgow pre-
sent picture of heartless depravity which
perhaps has no parallel certainly none on
% colossal n scala The naarest estimata