|
THE period with which we
have now to deal, namely, that extending from the great crisis of 1866
to the (in some respects) even more disastrous convulsion of 1878, is
full of stirring incidents in the political, commercial, and financial
world. Early in 1867, Fenianism developed itself to such an extent as
considerably to retard trade (especially that of British manufacturers
with Ireland), and seriously to alarm the public mind. Towards the close
of that year the first of those dastardly conspiracies, which
subsequently became so common in pursuance of the so-called "policy of
dynamite," was manifested in a fatal explosion at the Clerkenwell House
of Detention in London. Wars, in which Britain was either directly
engaged, or seriously interested, succeeded each other with but little
intermission. The French troubles in Mexico in 1867, although the sequel
to British action in connection with France, did not compromise this
country; but, in the succeeding year, Britain was forced to undertake a
military expedition to Abyssinia, which, under the direction of General
Napier, fortunately proved a great success. The cost was, however, very
serious.
Next year the Eastern
question again became troublesome; and in 1870-71 the great struggle
between France and Germany, with its attendant disorganisation of
commerce and finance, took place. This was immediately followed by the
outbreak of hitherto suppressed villainy in Paris, which manifested
itself in the temporary establishment of the Commune. In 1873-74 Britain
was engaged in war against the Ashantees in Africa. Soon afterwards the
Eastern question assumed a very grave aspect; and, to aid Egypt and to
protect her Indian interests, Britain effected the purchase, in 1876, of
the Khedive's Suez Canal shares at a cost of about £4,000,000. Next year
hostilities broke out between Russia and Turkey, and ended, in 1878, by
the submission of the latter State. In the readjustment of matters
Britain took a leading part; but the warlike policy of this country,
though necessary, was very costly. In the closing months of the latter
year, India was engaged in an expedition to Afghanistan, which was
successfully conducted under General Roberts.
Meanwhile the arts of
peace had not been neglected. There was a great Exhibition of the
products of all the world in Paris in 1867, at which this country was
well represented. Several great industrial works were accomplished, such
as the Union Pacific Railway in the United States, and the navigable
canal from the Mediterranean to the Red Sea, both of which, but
especially the latter, were destined to greatly influence the commerce
of Britain. They were both opened in 1869. In Scotland, a great
engineering feat was accomplished by the opening of a railway viaduct
across the river Tay at Dundee. But, unlike all other great engineering
projects carried out in Britain, the sequel was destined to make this
bridge more a type of inferior workmanship than a monument of national
enterprise.
The crisis of 1866 was
mainly financial in character. Trade, both home and foreign, was good at
the time when it occurred. A change, however, speedily followed on the
distrust engendered by the financial disasters which took place. This
was increased by a railway crisis which occurred in the middle of 1867,
and by the pressure of calls in connection with joint-stock companies
formed in great numbers previous to the crisis. It is noticeable,
however, that the trade of Scotland did not so readily lose its
vitality. The crisis had not affected it to a serious extent; but
eventually it suffered in sympathy with the trade of England. Depression
lasted until the middle of 1870, four years after the crisis, and then a
decided revival occurred. The Franco-German war had a bad influence; and
in the next year there was much disturbance on account of the payment of
the indemnity and the loans negotiated in connection therewith. But no
sooner had matters been fairly settled, than trade at home and abroad
expanded, almost suddenly, to unparalleled proportions. For fully a year
this high-pressure trade was continued. But the harvest of 1872 was
deficient, and there was a turn in the tide of prosperity. It soon
became evident that there had been great inflation. The last five years
of the period marked increasing depression. By the month of June 1875,
the bad state of Indian trade manifested itself conspicuously in the
collapse of the great house of Alexander Collie & Co. Following, as it
did, a series of heavy failures in the iron trade, this disaster
produced a semi-crisis, in the course of which a considerable number of
other firms came down. Heavy losses were entailed on bankers, one or two
Scotch banks suffering severely.
For some time after the
crisis of 1866 the state of banking was, as might naturally be expected,
very unsatisfactory. There was a prevalence of low rates, and much
difficulty in profitably employing capital. But this state of matters
gradually wore off, and banking in Scotland entered on a new phase of
extension. So early in the period as 1869 about a hundred additional
branches had been opened, many of them being sub-offices in Edinburgh
and Glasgow. During the height of commercial prosperity, the number of
bank offices rose to nearly nine hundred, or an increase of nearly three
hundred in seven years. But the process was not checked by the cessation
of prosperity, for year by year the number rose until, in 1878, there
were fully nine hundred and fifty bank offices.
In view of the rampant
speculation in bank shares which had been manifested prior to 1866, an
Act (popularly known as Leeman's Act) was passed in 1867, prohibiting
the purchase and sale of bank stock, unless the specific stock to be
transferred was definitely indicated, and misrepresentation was made a
misdemeanour. Although the intention of the Legislature in this matter
was highly laudable, the Act has not proved a success. It does not
appear that it is unworkable, or even unsuitable to the requirements of
investors, but it is so uncongenial to speculators that they
systematically evade it. This they can do very easily, as there is no
one whose special interest or duty it is to question their actions.
There is reason, however, to believe that, in a passive way, the Act has
had a beneficial tendency; for, although speculation in bank shares is
still carried on, there is a prevailing feeling against it. The
comparative neglect of bank shares by speculators may be due in great
part to the greater attractions of other securities; but undoubtedly the
spirit of the directions of the Legislature is often followed in the
business world when the letter seems to be directly violated.
In 1868, the beginning of
the end of the liquidation of the Western Bank of Scotland came into
view. In that year there were two payments, the one of £7 : 10s. and the
other of 13 per share, made to the solvent shareholders by way of return
of surplus funds. This completed eight returns, amounting in all to 16 8
per share, on which £175 in all had been called, including the original
sum of 150. In other words, £250 per cent had been called for the
purposes of the liquidation; and of this £136 per cent had been
returned. In 1870, the outstanding liabilities were assumed by the
National Bank of Scotland in consideration of a payment of £8448 : 1 :
4. The final completion of the liquidation was, however, delayed for
other three years by the dependence of litigation with wealthy
ex-directors.
The extension of Scottish
Banking, to which we have already referred, was not wholly confined to
Scotland. The National Bank of Scotland had opened an office in London
in 1864. This step having seemingly been attended with much success, the
Bank of Scotland imitated the example set a few years later. The Royal
Bank of Scotland, in 1874, also opened an office in London, having
obtained a special Act of Parliament, authorising them to do so, in the
previous year. These successive movements were by no means relished by
the London bankers, and they were also jealously objected to by English
provincial bankers, who felt themselves aggrieved by the permission
given to Scotch issuing-banks to establish themselves in London, while
retaining their powers of note-issuing elsewhere—a privilege which was
denied to English bankers. The heat of opposition was, however,
gradually expending itself, when the Clydesdale Banking Company made a
sudden raid on the English preserves by planting three branches in
Cumberland, nominally for the convenience of their customers in the
South of Scotland. This was the signal for the renewal of the contest on
a grand scale. The battle became general all along the line. London
bankers, London and provincial bankers, and English provincial bankers,
joined in protecting their common interest. The conflict was carried
into Parliament, where Mr. Goschen introduced (1875) a bill, the object
of which was to drive the Scottish banks back to their own country. His
efforts, however, although strongly supported, ended in the temporary
compromise of a select committee "to consider ad report upon the
restrictions imposed and privileges conferred by law on bankers
authorised to make and issue notes in England, Scotland, and Ireland
respectively." After arduous labours, and the accumulation of a large
mass of more or less valuable information, the committee reported to the
House without making any recommendation other than their reappointment
next session. This suggestion was not, however, acted on; and very soon
all the other large Scottish banks, except the Commercial Bank of
Scotland, opened offices in London without more opposition than that
conveyed in indignant growls and threats of future vengeance. The
Commercial Bank saw fit to join the concert in July 1883.
Much interest was
excited, towards the close of 1866, by the discovery of a forgery of the
£1 notes of the Union Bank. The perpetrators were John Henry Greatrex, a
photographer in Glasgow, Sewell Grimshaw, an engraver, and Thomas
Grimshaw, who financed the adventure. The manufacture was carried on in
Greatrex's premises; and several months were spent in the process.
Photography was first tried, but discarded in favour of engraving on a
copperplate and transferring to a stone for printing. Lithography seems
thus to have been the finally approved system, with the numbers type
printed, and the signatures written. It is stated that nearly 1400 notes
were prepared; but the evidence of witnesses indicates a much larger
number. It does not appear, however, that many were actually passed
before the forgery was discovered. Greatrex, who had gone to Aberdeen in
happy confidence of having achieved success, was greatly surprised at
the early detection; and, leaving his wife and child, fled to New York.
He was accompanied by one of the women in his employment, Jane Weir,
whom he had taken into his unholy confidence. The police followed him to
New York, but lost his trail. A bogus advertisement for a first class
photographer, however, lured him from his den. He walked into the trap,
and was brought back to Scotland, where his confederates had already
been arrested in the act of uttering the spurious notes. The trio were
tried in the High Court, Edinburgh, on 9th to 11th May 1867, and were
sentenced,—Greatrex to 20 years' and the others to 15 years' penal
servitude.
A few minor banking
incidents fall to be recorded. The Bank of Scotland opened an office in
London on 15th April 1867; and they purchased, in 1868, the business of
the Central Bank of Scotland, whose head office was in Perth. This bank
had ten years previously a paid-up capital of £78,125, on which a
dividend of 8 per cent was paid; and about the time of the amalgamation
the capital was £100,000 in £40 shares which sold at £111. The dividend
in 1867 was 12½ per cent. The bank had nine branches. In 1873, the same
bank obtained a seventh Act of Parliament, increasing its authorised
capital from £1,500,000 to £4,500,000. The extra powers thus given have
as yet only been availed of to the extent of £375,000, of which £250,000
was called up. This issue of stock was made in April 1876, and, as it
was made at a premium of £375,000, the bank was enabled to raise its
reserve fund to £750,000, and also to write off the balance of the price
paid for the Central Bank business.
During the currency of
this period, the volume of Scottish banking business had largely
increased. In 1865, the total liabilities were about 77 millions. Seven
years later they were 96½ millions. In 1877, they reached their highest
point, namely, 108¾ millions. Next year they dropped to 106 millions,
even including the balance sheets of the City of Glasgow and Caledonian
Banks. This reduction, however, was more probably owing to withdrawals
from certain banks who balanced after the crisis of 1878 than to any
general decrease in the liabilities of the banks during the year. |
