, 1878-10-24
FAILURE OF THE BANK OF GLASGOW.


The suspension of the Bank of
Glasgow, with liabilities to the oN
tent of $jO,OOO,OOO, can scarcely fail
to create some furry IN English II.
uancial circles. There are practically
bat eleven banks in all Scotland.
Their development has been in the
direction ofbrauches. These branches
ran in 1873 from nineteen to one
hundred and twenty-five per bank.
The average was about seyenty.elgh
The Bank OF Glasgow is stated to
have had 1913 branches, indicating a
recent large expansion, and beyond
question belong to the first rank.
Scotch banking by reason of the
great skill with which it has been
managed has won many encomIums
from the fnanciers. Previous to
1855 it was conducted on the free
principle. 1t was the same kind of
banking that was known among us
as wild cat. Jevons, in the "Mech
anism of Exchange" calls attention
to the fact that very few bankrupt
cies occurred under it, but that does
not correspond with our experience.
1t was based on the notion that a
man or a corporation had right to
issue as many promises to pay as peo-
pie will take, which appears to be
sound enough in law, though very
doubtful in finance,
In 1915, however, the Bank Char
ter Act was passed, which limited
the paper circulation in the United
Kingdom. Under it the Bank Of
England was allowed (lS73) to issue
915,000,000 Of notes in excess Of the
gold on hand the joint stock banks
of England and Wales, fG,460,000 /;
the banks of Ireland, e6, 100000,
and the banks of Scotland, f2,750,,
900. All the banks in addition have
the power OF issuing notes to the
full extent of the coin which they
possess. There is here a possible ex.
pansion Of paper equal in our money
to fl52,S0O,000, based practically on
nothing. Whenever pinch comes,
Parliament intervenes in favor OF the
Bank of England, but all the others
have to keep their heads above water
the best way they can. Inglis Pal.
grave, in the " Statistical Journal"
Of 1878, estimated that the banks of
the United Kingdom never have
more coin and Bank of England
notes on hand than from 4 to 5 per
cent. of their liabilities. Mr.. Moxon
Of Manchester, two years later, upon
a more thorough examination, raised
the average to z per cent. A finan,
ciai writer of distinction has ad-
mitted that the financial structure of
the United Kingdom reposes simply
on the improbability that depositors
and merchants will require more
than z per cent. Of the funds in the
banks in gold on any one day. Many
think that this arrangement is a
triumph of financial skill, but it has
been productive of grand crash
about once in ten years during the
whole of the present century.
The Scotch Banks, though more
speculative than those of England,
have been regarded as the best rep
resentatives Of the system. They
have been so closely allied that all
efforts to establish a twelfth bank
have heretofore proven failures. By
their sagacity and keenness, they
have been gradually monopolizing
the banking business Of India and
Australia. The causes of the failure
of the Bank of Glasgow are variously
stated. The first assigned was fall
in American securities, grain and
real estate in which il had largely
invested. But this can hardly be
the true or whole cause. There was
a slight furry in American securities
at the time the Silver Bill was under
discussion and before its scope was
understood, but it did not last long.
There has always been a market for
them in this country. The second
statement is that f5,000,0OO had
heen advanced to East India mer-
chants who are not able to paw up.
The finances of that great depend
ency of the English Crown have
long been in a disordered condition
il consequence of the decline in the
value of silver. But whatever be
the true cause, the wreck is an enor.
nous one. A failure for $j0,OOO,O0O
throws all our explosions completely
in the shade. The &lOO shares of
the Bank of Glasgow we're recently
selling for $3.50. They were selling
within the week for G2OO. The ruin