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Leader (1850-1860), 14th August 1858, Edition 1 of 2, Page 816

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      Thus At The End Of Last Year, When The G...

      capital eight times as much deposits as the Bank of England . This is a serious matter . There is a wide difference in the modes of conducting banking business , and as the advantages offered to the public are on the 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 , because the ease of having 3 or 4 per cent , -without trouble

      must be a continuous bar to industry . " At that time the Bank frequently borrowed , money on notes bearing interest . The very essence of its monopoly -was , that other companies yrere 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 4 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 ia America have done it for a long period , if not always . Why the mercantile classes in England , and other depositors in banks , should hare 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 lad a great reverence for the Bank of England , and that this dignified , bodv , as it became more

      and more identified with the Government , and 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 delightfully , and the mercantile classes humbly , acquiesced . Now , however , that the practice lias 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 money 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 placed in it .

      If we may decide from the conduct of the New York banks , this seems now to be a necessity . In March , forty-three out of the forty-six banks in that city , while yet smarting under the general stoppage -which had been for « ed on tliem by their depositors in tie 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 ia 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 awaro 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 hot 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 obligations to persons 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 bo benefited by perfectly free competition amongst bankers , and -would then habitually obtain loans on eneier terms , the joint-stock banks lose nothing by being denied the coveted power of issuing notes . They liave no interest , and other bankers have no interest , in getting rid of the existing monopoly , and those persons -who desire free trade in banking should not trust the cause to the advocacy of bankers .

      It 'will be found , on examining the accounts of these banks , that the London Joint-Stock , of wlich 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 Bource , therefore , of the profits of the joint-stock banks is the money placed in their keeping . They trado with the deposits on which they pay interest , and arc obliged , therefore , in order to prosper , to mnko the best possible use cf the money . In proportion as their own capital is large their profits diminish . Their character , ensuring them the confidence of tho public , ia thoir best and largest capital . Their shareholders , a fluctuating and unknown body , offer very little guaranteo to tho public ,

      and their paid-up capital , -with the petty and mocking driblets called a guarantee or reserved fund , is a very poor security . In 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 aud Westminster , only 9 . 3 G 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 tue banks . Confidence , or CTedit , 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 seme 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 ., w it ' ll a capital altogether not much less than the national debt . All this serves nauking 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 he remembered , however , that except as companies may be necessary to ensure a large 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 sarue 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 ia 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 the demand for jointstoek 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 1844 : 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 G reat Northern Bank , tne 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 / . 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 are 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 the accommodation paper , of which the spurious system that came to an end in 1857 was erected , they toolc care to get out of the way before

      it fell . On Wedneaday , a meeting of tho Oriental Inland Steam Company took place , -when the report was adopted unanimously . Two steam trains , consisting of twelve vessels in all r 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 tho vessels together on their arrival , and to keep thorn in thorough working order . A barrack has been provided for tho accommodation of the men , and

      nil the requisite araangements have been carried out in a way calculated materially to abridge tho difficulties which must necessarily be encountered in India . An agreement bus been executed with tho East India Company , by which a subsidy of 6000 / . is granted for ten years , on the condition that two trains arc established yearly on tho Indus . An increased subsidy of 10 , 000 / ., with four trains instead of two , was offered by tho Government , but declined . Tho chairman and mnnuging director are nbout to proceed to India to inaugurate tho company ' s operations . The accounts aliow a balance of cash in hand , at iutercst , & c , of 2541 )? ., without any outstanding liabilities .

      816 The Leader. [No. 438, Atottst 1&, Is...

      816 THE LEADER . [ No . 438 , Atottst 1 & , isss

      * See The Annals Of Commerce, Or Sritluh...

      * See the Annals of Commerce , or Sritluh Review for April , 1858 . J

      The London And North-Western Railway. N ...

      THE LONDON AND NORTH-WESTERN RAILWAY . N Toe loss of . 176 , 000 / ., less 12 , 000 * ' by reductions 111 -working expenses , was a matter that the m > o prietors of London aud North-Western Stock hid a right to call upon , their directors to account for in the fullest manner ; but the public at lam-e haa a deeper interest in being put into possession ^ the circumstances which of late years have had a constant and an injurious action upon the value of railway property , and which , if permitted to con tniue , appear not unlikely to reduce dividends to the vanishing point , and to prostrate an interest second only to the funded interest in amount—but 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 Cliandos , chairman of the London and Nortli-Western Railway , yesterday officially enlightened tho shareholders and the public as to the causes which have ' occasioned the reduction in the traffic and led to the general depreciation of rail way property . It will be well if the railway interest at lar « c lend a serious ear to the statements of the noble ° chairman , and to the remedies he suggests as the 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 in 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 the policy of its rivals is to be viewed as _ " aggressive" policy . This will not be an unfair distinction , when it is recollected that the London and North-Western was the first to occupy a particular district , and that it has had throughout to defend the traffic of that district from younger , aud 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 the diminution of traffic , the noble chairman clearly showed that no weight could he attached to the suggestion that the diminution ought to have been nict ¦ 'by ' reduction of expenditure—that suggestion being 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 of this diminutiou 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 coinmittccs to their decisions than that of individual opinion and individual views , it was hopeless to expect any modification of the existing state of things . ' * The only way to re-establish 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 ia mind '; it is in that direction tlicy 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 . The origin of the rivalry for tlic Manchester traffic was then detailed . 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 the slightest security against reckless competition and ruinous rates . The London and North-Western directors , in defence of the proprietors' interests , set on foot negotiations with their rival , but they failed from causes which may be easily understood . By the help of a few plain figures , the noblo chairman disposed of tho assort ion that the rival company accommodated the public on a more liberal scale , and established tho fact that . the London and North-Wcstern guvc at least equal facilities and at lower rates . Then camo that portion of tho noble chairman a spceoh in which tho public will take tho most , bc-

  • Citation
    • Leader (1850-1860), Aug. 14, 1858, page 816, in the Nineteenth-Century Serials Edition (2008; 2018) ncse-os.kdl.kcl.ac.uk/periodicals/l/issues/ldr_14081858/page/24/