The New York herald., 1879-08-09
HISTORY OF THE PRESENT CRIsIs-wHY AND
HOW THE CRASH CAME.

HOW THE CRASH CAME.
lBY TELEGRAPH TO THE HERALD
MONTREAL. August g. 1879.
The crash which has overtaken several Montreal
banks and produced . great excitement here
and in other. parts Of the Dominion to-day
need create no uneasiness in the United
States. It is local Candian misfortune, chiefly
confined to this city. but destined to affect many
business and individual interests throughout Can
ada. The Consolidated Bank. which closed its doors
the 31st ut is the second the list of failures
following the Mechanics Bank. The Consolidated
Bank took its name from the union of the City Bank
of Montreal, CT the Oldest banking institutions
in Lower Canada (now the Province OF Queboc). with
the Royal Canadian Bank Of Ontario. The latter
bank met with loss in Toronto last spring owing
to the failure Of Galbraith & Christie. Mr.. Gal.
braith member of the firm being q director Of the
bank at the time Sir Francis Hncks, president
of the Consolidated Bank. subsequently went
to Ottawa to ask the government to include in o
Banking bill to be submitted to Parliament section
giving general authority to bank directors to reduce
the capital of their banks by their motion. The
clause thus proposed was stricken out by the Bank
ing Committee.
ATTEMPT REMEDY DRPEcTs
Sir Francis then went TO the House. which sus-
pended it's rules for the passage Of special act re-
ducing the capital of the Consolidated Bank forty
per cent-that is. to six per cent of its original
capital OF $3500,0oO. 1t was hoped that this would
accomplish the object in view; but conf
dencc was shaken. and at the next annual
meeting of shareholders dividends declared.
New blood however was infused into the Board of
Directors with the purpose Of giving the institution
new life. The old manager, Mr.. Kenny. rendered his
resignation. 1t accepted and Mr.. Campbell. OF
Toronto, banker of experience. was ap-
pointed In his place. Investigation showed q
worse condition Of the banks affairs than had been
supposed. Money had been loaned to parties Of
questionable financial standing. overdrafs large
amounts had been paid for which there was unsat-
isfactory security. and. although q syndicate
of directors was formed to keep up the
stock, it continued to go down until the
recent failure. As evidence of the rapid with
drawal of confidence for preceding month it is
stated that the liabilities of the bank the form Of
bills, circulation and deposits decreased nearly
S2,V0O.OO0.
EXCHANGE BANK.
The Exchange Bank. which closed yesterday, was
new bank. started In 1872 a capital Of 81 200 OoO
Its directors were all men Of means, holding for
themselves or others about one-third OF the entire
CAPITAL They were unfortunate ut first In
selecting q manager who got the bank
into difficulty Four years ago Mr.. MUIR
ray of the Bank of Commerce. Hamilton.
was appointed manager; but three months ago Mr.
Murray disappeared. when it was found that he had
spcculated largely in stocks and had left deficit of
somo $30.0OO behind him. Inquiry showed that the
bank had obtained as collaterals a very
large amount OF Montreal telegraph stock
taken ut the time when q Arm, the Bond
Brothers. had been builing tho market ana
when the stock ranged high. The failure Of Bond
Brothers left the bank, along with many other inst
tutions with burden Of inflated stocks which col
iapscd immediately. The directors. unwilling to
sell at sacrifice held to this collateral II IL un
derstood, until yesterday although 1t is now worth
sixty per cent OF the price originally paid
for IL. The Exchange Bank might have kept
open some time longer. for the Bank of Montreal
and the Bank of British North America offered to
advance 100000 to sustain 1t for awhile on the
conditions that the directors should give their
personal security well tho banks
collateral for the loan and agree to wind
up the bank at last. The directors concluded
that IL the bank was to wind up its affairs
at oil Il might as well do of once without incur.
ring further liabilities. There to be a general
In the cases of both the Consolidated and Exchange
Banks depositoraond billholders thought to be
perfectly safe and t IL believed that in
the Exchange Bank Will not lose more than forty
per cent OF their capital
TWO SMALL BANKS.
For some days past the Vile Marie and hochelaga
banks, two Of the smaller institutions OF the city