The true northerner. [volume] (Paw Paw, Mich.) 1855-1920, 1878-10-11
THE CITY OF GLASGOW BANK.
Reckless Gambling with Other Peoples
Money the Cause of the Great Failure

From the London Times. Oct. A.
The City of Glasgow Bank had 1873
branches. 1t has paid progressively
increasing dividend for several years
past, until it reached II per cent. 1t
would be incorrect to say that the dis
aster was unexpected. On the contrary,
it created in banking circles no surprise,
for the bank had been losing credit
gradually for ten years past, yet the
Scotch banks in London were not in
possession of information which showed
that the end was actually near until
Tuesday morning. Rumors of the bank
being in difficulty had been SO often cir
culated before, within strictly banking
circles, that the repetition OF them did
not excite particular interest on this oc-
casion. The business of the bank had
been conducted, for years, upon very
unsound principles, and, from the fact of
the other Scotch banks having decided
to let the bank stop, it is inferred that
it is very bad case. Operations upon
an enormous scale had been indirectly
entered into in Indian produce and Aus
tralian wool, some $14,000,000 of bills
having been accepted for account of
three firms. Very large advances had
been made to firms in the iron
trade in the North, and an utterly reck-
less support appears to have been given
to builders. The immediate cause of
the failure was the impossibility of any
longer getting bills draw from India on
the bank in Glasgow discounted in the
London markell circumstance which
explains, to some extent, the feverish
oscillations for some months past in the
rates demanded for loans. These bills
had been sold i'll India to the Indian
banks, ostensibly against the shipment
of product, and ultimately came
upon the discount market. The
terms demanded for negotiating
them having steadily advanced, instruc
tions were at length telegraphed to the
Indian branches to take no more bills,
and as soon as it was no longer possible
to keep the open-credit system going
and the paper afoat, the bank closed its
doors. The Liabilities of the bank are
estimated at $50000,000: acceptances,
slightly below $15,OO0,000; deposits,
$40,000,O00. The unlimited liability of
the shareholders may, perhaps, secure
the depositors. The authorized note
circulation was only e72,000, but, ac-
cording to the last accounts, the issue
was between 100000 and 100000,
against nearly all of which the law COM
pels the bank TO have gold. We believe
we are correct i'll saying this deplorable
catastrophe is, with reference to the
Scotch banks as whole, entirely an ex-
ception, and that no other banking in
stitution in Scotland is in any way
mixed up with the City of Glasgow
Bank, or has been engaged in business
of the kind which led to this failure.
Altogether the City of Glasgow Bank
lent f5,S23,000 to four firms, the repu-
tation of one or two of which has been
anything but good for years past. The
opinion expressed by the bank manag-
ers is that more reckless course of
gambling with other peoples money has
never been pursued by any body of
managers or directors, and that such en-
gagements as these could never have
been entered into had there not been
either the weakest or most willful sane
ton of the speculations of these four
firms, coupled with negligent system
of supervision which is hardly short of
criminal. The bank, it is estimated,
will show deficit of some f3,000,OOO
sterling, which to the knowledge of the
managers had been accumulating for
years past, yet the dividends had been
increased.