The New York herald., 1878-10-04
Failure or the Glasgow Bank.

still heavier capital. The failure of those
two important Scotch banks in 1857 brought
on the general monetary panic OF that year
in Great Britian, by creating large sudden
demand for gold, which led to q contraction
of bank accommodation in England. The
Western Bank was utterly prostrated, but
the Bank Of the City Of Glasgow re-
covered from that calamity, and has
since had career of such high
apparent prosperity that on the very
day before this recent failure its stock was
selling in the market at more than two
hundred per cent above par, having for
long time past paid regular annual divi-
dends of twelve per cent. It is not sur
prising that the closing of its doors caused
sudden shock, although an attempt is
made by the London press to smooth it
over by statements that an inner circle of
bankers had some previous knowledge of
its tottering condition.
1t is legitimate enough for the English
press to try to allay apprehensions, but two
or three days must elapse before the extent
of the consequences can be measured. The
stockholders, like those of all the Scotch
banks, are individually liable, SO that its
depositors will probably receive at last the
full amount due them. But meanwhile
their business, because their resources for
conducting business will be locked up until
after the conclusion Of dilatory legal pro-
ceedings. The merchants who have forty
million dollars deposited in the Bank Of the
City Of Glasgow are deprived Of their means
of transacting business or meeting their
maturing liabilities, and it is in the natural
course of things that there should
be . large crop of mercantile failures.
Among other imprudent transactions
the Glasgow bank has been making
heavy acceptances Of India bills. The
first important consequence of shutting the
doors Of the bank was the failure in London
yesterday of Smith, Fleming & Co., one of
the largest and oldest East India houses,
with liabilities amounting to several mill
ion dollars. There will probably be other
large failures Of houses engaged in the
India and the Australian trade, which are
the two branches in which the Glasgow
bank has committed it's most fatal indis-
cretions. The full consequences of the
failure will not be disclosed until the mer-
camille houses involved have had few days
to look about them, see how they stand,
and ascertain whether they cannot find
friends or resources to tide them over this
sudden disaster.
The ultimate recovery from the stocls
holders Of the amount due to the depositors
will be but partial reparation of their
losses There are probably q large num-
Der Of opulent men among the stockhold-
ers, and all stockholders are liable to the
full extent of their property, both real and
personal. But there are probably large
number Of stockholders of moderate means
who have been tempted by the twelve per
cent dividends to purchase shares in this
apparently solid and prosperous bank.
Their unlimited liability will bring dis
tress and ruin upon the small stockholders.
At any rate, this was one of the
effects of the failure of the Western
Bank of Glasgow in 1857, thousands of
people Of moderate means having been re-
duced to want and beggary by the collapse
Of that institution. They lost not only
their shares but all of their other property.
This second failure of the Bank of the
City Of Glasgow is supposed to be absolute
and irretrievable and will bring great dis
tress upon all who have been connected
with the bank either as stockholders or as
depositors, or who have become otherwise
entangled with it.
re- A. Al a.
circle there will be no general alarm in
England, and the failure will not cause
even o ripple in the business Of the United
States. But it is premature to pronounce
with any confidence that the distress viii
be confined to the immediate victims of
the failure. Nobody can yet say that other
British banks have not been conducting
business on the same false and hazardous
principles The mercantile affairs of the
United Kingdom have been for several
years in q most unsatisfactory state. Brit
ish trade has been universally depressed by
o curtailment of markets, by low prices, by
q general stagnation in all the leading
branches of production, by widespread
strikes and dissatisfaction among the la
boring classes, and by loss Of profits on the
remnant Of business which has been done.
In such state of things the proprictors of
mines and manufactures must have been
compelled, in many cases, to stretch their
credit to the utmost to keep their limited
business going. II, in this state Of univer-
sal depression and loss of profits, banks
have been too indulgent and benevolent to
their customers in making acceptances or
dscounting their paper, they will be warned
by the great Glasgow failure to contract
their accommodations, and many houses
which have been struggling on in hope of
better times may be compelled to go down.
There are no symptoms of general re-