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Leader (1850-1860), 14th August 1858, Edition 2 of 2, Page 24, ital eiht times much deposits as the Ban...

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      The London Joint-Stock Banks. The Extrao...

      capital eight times as much deposits as the Bank of England . This is a serious matter . There is a wide difference in the mod « 3 of conducting banking business , and as the advantages offered to the public are on th « side of the joint-stock banks , they receive , in truth , a much larger share than the Bank of England of the capital which fosters trade . It has been supposed and asserted that this practice of allowing interest on deposits is a novelty . This is a mistake . The Bank of England , when it was first established , allowed interest on deposits , and the public writers of the day wished that the Bank should be prohibited from " allowing interest on running cash , bea m «» ~«& j * ¦ av ^^ f- * ^ A * % ^» Afi rm a wiA iff 4 \ M \ / I A n Am ^ O rto ¦ - V > . ^ % U rt »* mw A r ~ E ^ v % * -im -

      cause the ease of having 3 or 4 percent , without trouble must be a continuous bar to industry . " At that time the Sank frequently borrowed money on notes bearing interest . The very essence of its monopoly was , that otber companies were forbidden to borrow at interest for less than six months . The goldsmiths , too , before the Bank was established , allowed interest on money if it remained a single month in their hands . * "When the Bank ceased to allow interest on " running cash , " we are not aware ; the Scotch banks appear unbrokenly to have continued the practice . The banks in America have done it for a long period , if not always . Why the mercantile classes in England , and other depositors in banks , should have suffered themselves to be worse

      treated than other bank clients , till the old practice was revived by the joint-stock banks , -we cannot say ; unless it were that they had a great reverence for the Bank of England , and that this dignified body , as it became more and more identified with the Government , aad never allowed interest on public deposits , which came to be at times a large part of its resources , made non-allowance the general rule of its conduct ; and in this other bankers delightfally , and the mercantile classes humbly , acquiesced . Nowj however , that the practice has been

      revived , found generally advantageous , and not incompatible -with security , it seems likely to become general . Why should the Bank of England , which makes the public pay interest on all it advances on Deficiency bills , not pay interest on the large sums of public rnoney it frequently has in its hands ? At least , we have long heard it said by high authorities , and believe that the Bank of England will ere long consent to do as the joint-stock banks do , and allow interest oh deposits , or get very few except those which must be ¦ pl aced in it .

      If we may decide from the conduct of the New York hanks , this seems now to be a necessity . In March , forty-three out of the forty-six banks in that city , wlule yet smarting under the general stoppage which had been forced on them by their depositors in the previous autumn , entered into a written agreement not to allow interest on deposits . They could not , however , persuade the Bank of Commerce , the Bank of the State of New York , and the Bank of St . Nicholas to act with them

      and so the agreement fell to the ground . It is the business of a banker to borrow money at one rate of interest and lend it at another ; and the objecting banks of New York were aware that if the existing establishments refused to allow interest on deposits , other establishments , perhaps under a different name , would certainly do it , and , in the end , to carry out such an agreement would be merely destroying themselves . The New York banks , therefore , by consenting to give interest on deposits , secured to themselves the advantage of dealing with their clients '

      money . It is also remarkable that the London joint-stock banks , though , their profits are greater than those of the Bank of England , are not allowed to share its exclusive privilege of issuing bank-notes . The joint-stock banks issue none . Probably the prohibition to issue them is not disadvantageous to the banks . It necessarily limits their obli gations to porsona of considerable means . They are not indebted , like the Bank , to the promiscuous and timid multitude . Whatever may be the case- with the public at large , who would be benefited by perfectly free competition amongst bankers , and would then habitually obtain loans on easier terms , the joint-stock , banks lose nothing by boing denied the coveted power of issuing notes . They have no interest , and other bankers have no interest , in getting rid of the existing monopoly , and those persons who dosire free trade in banking should not trust the cause to the advocacy of bankers .

      It will be found , on exami ning the accounts of these banks , that the London Joint-Stock , of which the paidup capital is the smallest in proportion to the amount of deposits , uniformly pays the highest rate of dividend ; and the Commercial Bank of London , of which the capital is the largest in proportion to the amount of deposits , uniformly pays the lowest rate of dividend . The source , therefore , of the profits of the joint-stock banks is the money placed in their keeping . TUoy trade -with the deposits on which they pay interest , and are obliged , therefore , in order to prosper , to make the best possible use of the money . In proportion as their own capital is large their profits diminish . Their character , ensuring them the confidence of tho public , is their best and largest capital . Their shareholders , a fluctunting and unkno wn body , offer very little guarantee to th « public , * See tho Anttals of Commerce , or British Review for AjorU , 1858 .

      -up cap , petty mocking driblets called a guarantee or reserved fund , is a very poor security . I n the case of the London Joint-Stock Bank , the two together only amount to 7 . 67 per cent , of the deposits ; and in the case of the London and "Westminster , only 9 . 36 per cent , of the deposits ; and the public places its confidence neither in the paid-up capital nor in the guarantee fund , nor in the respectable body of shareholders , but in the character acquired by tho banks . Confidence , or credit , then , is as essential to success in trade as capital ; and it is not in vain that honesty and fair dealing are inculcated on traders , though they need the injunction no more than other classes , for without them success cannot be assured ; — — . ^ ^ *

      All such great and successful enterprises spring , it is good to remember , from some great social fact or some great want ; and it is not difficult to trace the success of the joint-stock banks to the vast increase of capital in the community , particularly of share capital , within the last few years . The chief securities in which the public could invest savings at the beginning of the century were the Funds , the Stock of the East India Company , * of the Bank of England , and the South Sea Company . Now there are scores of -well accredited railways foreign and

      native , joint-stock banks , miscellaneous companies , & c , with a capital altogether not much less than the national debt . All this serves banking purposes . The vast income derived from it passes into the hands of bankers ; much of the dividends as they are paid , and capital , as it otherwise accumulates , are invested in them , as opportunities are favourable , and till then the money is lodged with the banker . The joint-stock banks , therefore , though they have contributed to the general movement of society , are its creatures , and especially the creatures of the great increase of share and other capital .

      It must be remembered , however , that except as companies may be necessary ^ o ensure ; a largo number of clients , and stand up against the Bank of England—the great privileged joint-stock bank of the empire and the world—private banks would have answered , and have to some extent answered the same end as joint-stock banks . The banking accommodation required could have been given by an increase of private bankers . We may suspect , indeed , from the success of the joint-stock banks being due chiefly to character and competition , that individuals , in whom the sense of responsibility is stronger than in companies , would have done at least as well as joint-stock banks all that these have done for

      society . It is now thoroughly ascertained that the outcry against private banks , and tho demand for jointstock banks in 1826 , from which period they all date in England , were founded on errors , and we know that the legislation which then called them into existence , and the subsequent legislation of 18 & 4 on the same subject , led to many miscreations , like the Royal British Bank , and to many disastrous failures . That they have lately succeeded so well in London is obviously more due to the care of the individual managers than the legislative principle of their existence , which did not prevent the Great Northern Bank , the Liverpool Borough Bank , and several others , from inflicting great injury On large masses of careless shareholders and credulous clients .

      The first of the successful banks , the London and Westminster , was established in 1834 , the Union in 1837 , and the London Joint-Stock in 1840 . In 1850 , the total deposits in the whole of them was only 12 , 525 , 000 / . ; in the summer of 1857 , the deposits amounted to 43 , 100 , 000 J . If such a sudden and vast accumulation of power should have turned the heads of their managers , it would not have been surprising . Lord Palmerston , from a less success , forgot his duties and lost his place . Probably , the competition betwixt them saved them from such an extreme disaster . They arc accused , however , and not unjustly , of having fostered excessive speculation by a reckless use of the great means entrusted to their keeping . If they helped to give consistency to some of ttie accommodation paper , of which the spurious system that came to an end in 1857 was erected , they took care to get out of the way bofore it fell .

      On Wednesday , a meeting of the Oriental Inland Steam Company took place , when the report was adopted unanimously . Two steam trains , consisting of twelve vessels in all , have been despatched to India with a supply of the necessary stores , provisions , & c , usually provided in England , sufficient for the first six months ' consumption . About sixty carefully selected workmen have also been sent to form the nucleus of an establishment to put the ve ssels together on their arrival , and to keep them in thorough working order . A barrack has been provided for the accommodation of the men , and nil the requisite araangements have been carried out in

      a way calculated materially to abridge the difficulties which must necessarily bo encountered in India . An agreement has been executed with tho East India Company , by which a subsidy of 5000 / 1 ia granted for ton years , on tho condition that two trains nro established yearly on the Indus . An incrensed subsidy of 10 , 000 / ., with four trains instead of two , was offered by the Government , but declined . The chairman and mnnuging director are about to proceed to India to inaugurate tlio company ' s operations . The accounts show a balance of cash in hand , at iuterest , & c , of 25-11 $ / ., without any outstanding liabilities .

      Ital Eiht Times Much Deposits As The Ban...

      and their paid italwith the and 816 THE LEADER . _ [ No . 438 , August U , 1353 *« «« » 3 A . l « _ £ ... — — . I J ^ - — - A - _ - _•^ a 1 mm « _ . . ^^^^^^^^^^^^^^^^^^^^^^ B ^^^ Mfca ^^ M

      The London ^ And ^ Nor'th-Westerir The K...

      THE LONDON ^ AND ^ NOR'TH-WESTERir The kss of 176 , OO 0 Z ., less 12 , 000 / . by reductions m working expenses , was a matter that the n «? prietorsof London and North- Western Stock I ! ,, ? a right to call upon their directors to account for in the * fullest manner ; but the public at lame had a deeper interest m being put into possession of tl , * circumstances which of late years have had a constant and an injurious action upon tlie value nf railway property , and which , if permitted to eon tinue , appear not unlikely to reduce dividends to the vanishing point , and to prostrate an interest second only to the funded interest in amount— . W first , however , if numbers , influence , and effect on national progress and prosperity are taken into combined account . The lucid and practical speech of the Marquis of Chaados , chairman of the London and North Western Railway , yesterday officially enlightened the shareholders and the public as to the causes which have occasioned the reduction in the traffic and led to the general depreciation of railway property . It " will be well if the railway interest at large lend a serious car to the statements of the noble chairman , and to the remedies he suggests as tlie best and only practical means of putting an end to a condition of things which was truly described as " disgraceful to " all parties concerned . "

      We have already indicated , in previous articles , and to-day iii another portion of our journal , that the policy of the London and North-Western Company is to be regarded as a " defensive" policy •—and , of course , that tlie policy of its rivals is to be viewed as an " aggressive "policy . This will not be ah unfair distinction , when it is recollected that the Jjondon andNorth-WWern was the first to occupy a particular district , and that it lms had throughout to defend the traffic of that district from younger , and of course competitive assailants . Bearing this distinction in mind , we shall be able to Understand the value of the noble

      chairman s statement—the force of his facts and explanations , and the importance of his remedial suggestions . Commencing with- tlie diminution of traffic , the noble chairman clearly showed that no weight could be attached to the suggestion that the diminution ought to have been met by reduction of expenditure—that suggestion fceing impracticable , because , as regards the weight of goods carried , an equal or a larger amount was carried this year as compared with last year . Adverting to the causes or * this diminution of traffic ,

      the noble chairman laid it down broadly— " That no > rules of policy to guide railway companies , in case of disputes , had been laid down by Government , and that until Parliament shall adopt some better rule for guiding- committees to their decisions titan that of individual opinion and individual views , it \ vas hopeless to expect any modification of the existing state of things . " The only way to rc-cstablisli railway prosperity , to put an end to railway contests , costly and uncertain in their results , was for Parliament " to lay down some definite rule , and to adhere to it permanently . " The noble chairman

      clearly indicated that the primary source of mischief to railway property was to be found in Parliamentary legislation . Let the public bear this in mind ; it is in that direction they must bring the weight of public opinion to "bear , and , once brought to bear , the remedy will immediately follow . The noble chairman pointed out the difficulty of dealing with Parliament , declaring that he should despair of success until all parties combined—railway directors , shareholders , and the public at large—but with such a legitimate combination success was sure . Tho origin of the rivalry for the Manchester traffic was then dotailcd . Hero Parliament again was the very head and front of the mischief , by granting to a

      rival company the power to establish a second route , without taking tho slightest security ngftinst reckless competition and miaous rates . The London and North-Westcrn directors , in defenco of the proprietors' interests , set on foot negotiations with their rival , but they failed from causes which may he easily understood . By the help of a few pit " figures , the noble chairman disposed of tho assertion that the rival company accommodated tho public on a more liberal scale , and established the fact that the London and North-Western gavo at least equal facilities and at lower rates . , Then came that port ion of the noble chairmim s speech in which tho public will take tho most , be-

  • Citation
    • Leader (1850-1860), Aug. 14, 1858, page 24, in the Nineteenth-Century Serials Edition (2008; 2018) ncse-os.kdl.kcl.ac.uk/periodicals/l/issues/cld_14081858/page/24/