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49 West of Eng.& S.Wales DiitrictSk,

50 Wilts & Dorset Banking Companj

51 West Biding Union Banking Co...
51 Whitchurch and EUesmere Bk. Co.

53 Worcester Citj and Coantjr Bk. Co.

54 Tork Union Banking Companj ...

55 York Citj and County Banking Co.
5^ Yorkshire Banking Company ...


July 19.

July XI.







































Jrfel^ anH *coti& Circulation ^Retnrnsi*

4verageOireulation,and Coin held hy the Irish a»(l Sootcb BAVKS^mtsf tk/itf
we«it« ending Saturday, the 9th day of August^ 187S.



Bank of Ireland

Provincial Bank of Ireland

Belfast Bank

Northern Bank ....•

Ulster Bank

The National Bank

Totals (Irish Banks)


Bank of Scotland

Royal Bank of Scotland ...
British Linen Company......

Commercial Bk. of Scotland
National Bank of Scotland..
Union Bank of Scotland ...
Aberdeen Town and Co.B.
North of Scotland Bk.Co...
Clydesdale Banking Co. ••>

City of Glasgow Bank

Caledonian BHnkin^ Co. ••
Totals (Scotch Banks) .

CirnUtioB .



AvenseCiretriaSioa 4«riBs P«mr W«*ka







485. 3»3

6,354,494 3.7*3,168 i.796«i66


343.4*8 193.5a* 445>3^4

216,451 228,336 451.774

438,024 I75.*7i 358,599

374,880 200,677 514,359

297,024 164,996 383.495

454.346 a30,662 5>7,o79

70,133 70,760 95,466

t54t3>9 "3.3»* 136,620

274.3*1 "65.645 342>3l84

72,921 202,823 410,738

53.434 3*. 58' 58,536

93 t. 046
454. «*



6,519,335 |».5^**^


1.788,583 I3,714,274>

680, no


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^anxml ai tl^t P0mg Parhel*

OOTOBEB, 1873.

The intelligence which has reached us of heavy failures in New
York, Philadelphia, and Washington has been of coarse re-
garded with some anxiety. From the partictdars at present to
Hand we may conclude that the position has been one of con-
siderable gravity. The list of suspensions includes a number of
very important establishments ; and the closing of the Gold
Clearing House and the Stock Exchange is sufficient indica-
tion of the general derangement of business. It is, however,
satisfactory to hear that the intensity of the panic has com-
pletely passed away, and it is to be hoped that the steps taken
by the Government will prove sufficient to prevent any revival
of the crisis : some time must, .however, of necessity elapse be-
fore confidence can be fully restored, and the details of the
recent disasters are, of course, eagerly awaited. In the mean-
time it may be interesting to trace, as far as possible with the
knowledge at our disposal, the causes which have contributed to
these caLeonities, and the nature of the banking organization
which has been thus severely strained. Briefly stated, the proxi-
mate cause of the difficulties appears to be the large absorption
of capital in railway enterprises. This is the cause assigned
for the stoppage of more than one great house. It is said that
the Messrs. Jay Cooke & Co.'s suspension was mainly caused by
the heavy calls of the Northern Pacific Eailroad to meet the
expenses of construction ; the embarrassments of Messrs. Fiak
& JSatch are understood to be chiefly due to large advances
made to the Chesapeake and Ohio Bailroad, now in course of oon-
struction ; and the involvements of the XTnionTrust Company

VOL. XXXIII. ^ooalp

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918 The Panic in the United Stales.

and the National Trust Company are also referred mainly
to loans on railway stocks and bonds which have crippled their
available resources. Such, it would appear^ are the immediate
causes of the panic ; but the evil has no doubt been intensified
by the fundamental defects in the constitution of the American
banking system as defined by the State, and the restricted
amount of currency. In attempting to appreciate the value of
the present action of the United States* Government with the
view of allaying the excitement, it is essential to understand, at
least in ouuine, the manner in which banking business is con-
ducted on the other side of the Atlantic, and the principal
provisions adoptedby the Legislature for the regulation of oankrans'
accounts. The existing system may be dated from the Civil
War. The first important Act of Congress relating to the esta-
blishment of a national paper currency was passed in Febroazy,
1863 ; but this was subsequently repiealed in 1864, and an Acf^
bearing date the 4th June of that year, substituted, which, now
forms the basis of existing currency legislation. This Act
created the office of ^'Comptroller of the Currency,'' at the head of
a special department of the Treasury, to be called '^ The CnxreoBj
Bureau;"and which was established for the purpose of ieg;isteri]ic
banking corporations under the provisions of the Act^ and
examining into the title of new companies to commence busineM
as provided by the law. A deposit of United States' Bonds was
made obligatory in the case of all banks of issue^ such bonds
being lodged with the Treasury as security for the note circalar
tion ; that department undertaking the printing and supply of
notes to the authorised associations. It was further enacted^ that
all banking companies carrying on busiijess in certain apeoified
cities should not be empowered to increase their loans or diBcnqnti
when the amount of legal tender in hand fell short of 25 per
cent, of the circulation and deposits, and for all other banking
companies the limit was fixed at 15 per cent. Further than lUs,
companies having less than the prescribed cash reserve were
prolubited from paying any dividend until the legal proportiaii
was restored ; but it was provided that three-fifths of the reawe
may consist of balances due from associations approved by the
Comptroller of the Currency, and carrying on business in oertain
spec&ed cities. The penalties incurred by transgiesaioiis of
these provisions are exceedingly stringent, the GomptroUer
being empowered, at his discretion, to order the campnlsoiy
winding-up of any banking association which within thirty days'
notice shall fail to restore its reserve in legal tender to Sie
stipulated proportion. Such is briefly an outline of the principal
features of banking law in the United States, and tma mudi
being understood, the nature of a monetary pressure wUl be better

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The Panic in the United States. 919

appreciated. The effect of this system •in times of stringency
is very important. The law aims at the maintenance of ample
cash reserves, and although a certain amount of evasion has been
not uncommon, the object sought has been generally attained.
These large cash reserves cannot, however, be drawn upon to
relieve a panic ; as soon as the legal limit of advances has been
reached, further accommodation must cease, and the serious
results of suddenly withholding all relief at the times of special
demand, and when confidence is impaired, are too evident to
need comment. The great danger to be guarded against in
America is the development of currency panics, and this must
be kept clearly in view in considering the present crisis. From
advices receiyed from New York, it appears that on the 6th
instant the published accounts of the New York banks afforded '
evidence of considerable pressure. At that date the aggregate
liabilities amounted to 240,123,000 dollars, with reserves in
gold and legal tenders of 60,446,000 dollars, or rather over 25
per cent., the stipulated minimnm of their reserves ; however,
the portion held in legal tender amounted to only 38,680,000
dollars, or about 16 per cent, of the UabUities, having diminished
6,049,000 dollars in one week. There was, therefore, at this
tbne an active demand for money, while the banks, as we have
seen, had reached the limit of their power to make advances,
and sufficient causes are therefore fully apparent to account for
the panic which followed a fortnight later. The measures
adopted in the emergency by the Government seem to have
proved effectual. The purchase of bonds to a large amount,
and the suspension of the legislative restrictions as regards
bankers' reserves, have afforded timely relief; and, taking into
consideration the usual monetary movements observed in ordi-
nary times at this season of the year, it may fairly be pre-
aomed that the pressure will very rapidly disappear. It should
be borne in mind that the greatest strmgency is usually ex-
perienced in New York during the month of August, and that
from that time until November the bankers' accounts show a
continiiAl decline in the amount of loans and discounts, so that
it may be expected that this ordinary movement will yery
shortly restore the money market to a normal condition.
Indeed the latest adyices assure us that the worst of the crisis
has passed, and that there will be immediately a healthy restora*
tioQ to financial and mercantile activity.

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Like many of our own railway lines, the Erie Company has
passed through some very troublous times. Its interests had up
to a certain date been much neglected, whilst its name and
shares have been the sport of the most unscrupulous and daring
gang of speculators ever yet brought to book. A magnificent
property in itself, it has at the same time that need common to
most railways — viz., a sympathy, if not direct alliance, with
certain adjacent lines, whose route and traffic seem inevitably
to suggest joint action and commingled administration.

This is the strong point in the report of Mr. Peter Watson,
the new President of the line. He describes the position of the
Erie Railway, as respects its powers for the future development
of traffic, as extremely critical. He reports amalgamation as
rife and complete with nearly all lines of importance in
America. The Pennsylvanian Road was the first to act on this
principle, and in the t^ years during which the policy has been
pursued, it has obtained the controlling power over many
thousands of miles of railroads, so that its system has become
a network of connections, from Canada in the north to 4e
extreme western points of the United States. Later on, Hr.
Vanderbilt adopted the same system, and the result on his line—
the New York Central — has been most beneficial to shareholden.
The only line of first rank not similarly dealt with is tbe
Atlantic and Great Western, and with it Mr. Watson urges
immediate and effective alliance. He is all the stronger in this
demand, from the fact of its being understood that the only
main line, which, by its branches and leased roads, seemed to
meet the requirements in the shape of extension of the Erie
line, has been recently brought within the control of the
Atlantic. The road in question is the Cleveland, Columbia,
Cincinnati, and Indianapolis. It has 1,139 miles^ half of which
is freehold, the remainder leased. It pays 7 per cent., and
having a close connection with the Atlantic and Great Western
at Cleveland, is in all respects an undertaking witib. which alli-
ance cannot but be extremely beneficial. The President draws
attention to the fact that very recently fresh amalgrnnations
have been effected by the New York Central and Pennaylvanian
Companies, and that if this opportunity of securing union with
the lines he recommends is not utilised, he sees the destiny of
the Erie as simply and perpetually that of a local line, with its
traffic incapable of further development, and its action hampered ^
by the well-arranged network of railways, economically wixked •

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The Erie Railway Oompany^s Bepart 921

and effectively administered under the united control of some
one or two of the leading lines.

The means of procuring the control of the road he refers to
would appear to be simple enough, consisting of the purchase,
in the open market, of sufficient stock, which he says can be
obtained at from 80 to 90 per cent, of its par value. We shoidd
have thought, however, that the succession of large purchases
necessary to carry out so vast a transaction would have raised
the value of the stock to a figure possibly far beyond par, when
it would become a question whether the arrangement was not a
too-costly one. Much, however, would depend upon the amount
of stock needful to a control of its management, and of this we
are of course unaware. '

I^aturally, this proposition of amalgamation renders itself
into one of fresh capital ; and a large portion of this, when
raised, would be required in rehabilitating the permanent-way
and altering the gauge. This reduction of gauge from 6 feet
to 4 feet 8i inches is made by the proposer a Hne qua non, since
extension beyond its present limits would otherwise be an

The capitol and bonded debt of the line is now but 25 mil-
lions sterling, and Mr. Watson' reckons the cost of improve-
ment and extension of the road, together with its equipment,
at about £8,000,000. For the thorough renovation of such a
property, and for its successful amalgamation with those lines
which would ensure diminished working expenses, with a largely-
extended area of operations, we should esteem the demand not
only a moderate one, but should look upon the creation of the
additional capital as the opening-up of a good investment.

It must ever be borne in mind that America is a growing
country beyond all the ability and powers of Europe to compete
with. ' Her period of completion as a commercial absorbent of
the spare energies and capital of the Eastern Hemisphere is
many generations ahead ; and all moneys entrusted to commer-
cial undertakings, especially those engaged in the transit of the
very means by which commerce is promoted, must be, so long
as reasonable honesty prevails in the nature of things, a safe and
profitable deposit. English opinion of the Erie Eailway is
tolerably well expressed in the jprice at which a line paying
only 1 per cent, on its present capital siistains its stock. There
must be good expectations of the future when Erie shares stand
at 47.

Full and ample returns of the working of the company in all
its departments are given in a series of tables issued Mrith the

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922 Ths Erie Railway Company* a Beport.

report. That dedicated to the earnings^ wluck are stated oom-
paratively for the two periods of mne months ending 30ih June,
1872 and 1873, exhibits an increase, under the aeveral heads
of freight, passengers, and mails, of something like 11 per oeni
The coal traffic is the only one showing a decrease, and tiiat is
but slight.

An analysed statement of the freight business for the same
period shows an increase of 250,000 tons carried, or 6 percent,
additional traffic. The passenger returns show an increase of 5^
per cent, in number, and of 10 per cent, in revenue. As we
find at home, the great test of the value to profits of increased
gross revenue is the additional cost by way of working expenses
at which that has been obtained. In the case of the ErieBsil-
way, the growth of working charges has been £55,000, which,
as against the increase in revenue of £220,000, leaves a dear
gain of £16^,000, — a very handsome testimony to the economical
management of the traffic department.

The total working expenses are, it appears, about 67 per cent
of the gross revenue, which is, of course, a very high rat^ but
et very much loss than hitherto, and still largely decreaaiiig.
n the statement of ^liabilities the main cause of the backward
commercial position of the line is at once seen. It is one with
which we at home are painfully familiar. The costs of ooa-
struction of main line and feeders have been tremeDdooa,
amounting in the aggregate to 90 per cent, of the whole capital
raised. Its interest on debt is just 50 per cent, of its net eain-
ings ; but the rapid increase of these latter, out of all proportioa
to the additional cost of traffic, promises, if sustained, to place
in a far more favourable proportion the respective items of
interest payable and revenue available for division.

A most healthy point in the accounts of the line is the
amount reclaimed and rcclaimable from those who have abused
their position and the confidence of the shareholders. Real
and personal property is already in the hands of the company,
under this head, to the extent of £460,000. Actions at law are
also pending which will result in the restoration of yet larger
sums to the coffers of the line ; and, so far, not a penny of it has
been carried to profit and loss, but has been wisely reserved for
such future disposition as may seem fitting in the views of share-

The labour of extracting order from the chaos into which
designing and negligent officials had thrown the accounts has,
doubtless, been immense, wholesome law in America adding to
the burden thus thrown on the present staff heavy demand^ in
the shape of voluminous returns*

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The Bepreaentation ^Labour, 923

A very important question is dealt with at much length by
the President. There prevails in America a law which permits
a directorial supervision and service, described as "classified/*
by which the body of management is not liable to frequent total
change — ^which implies almost of necessity changes of policy
and management, — ^but is, on the contrary, only partially altered
annually by a certain proportion of its directorate alone becom-
ing liable to the ordeal of re-election. This law at one time was
in vogue with the Erie Board, but the hostility of the share-
holders to that board destroyed both them and the system, and
the President strictly insists on its re-establishment.

From a careful perusal of the report,, we deem shareholders
in the Erie Eailway essentially fortunate in having a President
of the calibre of Mr. Watson. The document throughout
breathes the determination to throw all possible vigour into
the operations for rendering the line a successful competitor
with the many railways which for long have offered a safe and
remunerative investment to shareholders. There is no question
about the traffic ; it only waits development and utilisation.

Mr. Watson strenuously advocates union with two of the
eading lines right in the track of the Erie in its course to the
east and west. It was not a proposition to buy up useless trunks
or branches merely to prevent their falling to competing com-
panies. That is a course only too frequently adopted in the
past history of our own lines. It is amalgamation rather than
competition that is prayed for, and we quite see the force of the
appeal, and appreciate the wisdom which dictates it.

(From the BuUionisi.)

In the struggle now unquestionably inaugurated between
Capital and Labour, it is assumed by the working-classes that
it would be an immense advantage to Labour if it coidd attain
to a distinct representation in the Legislature. Men have not
only held their own in the contest with masters for pay and
hours of work, but they have obtained in the controversy
accompanying each effort at improvement a considerable moral
elevation in their relationship to their employers. A few short
years of such disturbed and shifting connections have worked a
marvellous change in the comparative standing of men to masters,
and vice versa*

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924 The Representation of Labour.

Whilst trades-tmionsy and societies of every description, have
been formed for the support and promotion of the caoise of
Labour, Capital has brought to bear no new forces, no noTel
argument, but has had to encounter its opponents with the
simple natural superiority that the laws df political economy
and the constitution of society afford it. It will be admitted
88 beyond question that Capital is fidly represented in the House
of Commons, the several interests of trade having numerous
and efficient mouthpieces in that assembly. It is difficult to see,
therefore, how Capital could be made stronger in its resistance
to the demands and encroachments of Labour, and we regard
the position of the capitalist as one, doubtless, exceedingly good,
but incapable of any fresh accessions of strength.

The result is that each fresh onslaught of kibour, whether in
the shape of renewed demand for higher wages, or else by the
entreaty for lighter hours of work or some other privilege,
weakens the prestige of money, and narrows more and more die
margin between those whe employ labour and those who are the
redpients of wages.

That this tendency is undesirable and may be carried to a
disastrous limit we quite foresee, but can only look for an
antidote in that rearrangement of relationship following on
altogether altered circumstances of trade. Now, whilst the
expansion of our commerce has reached figures unprecedented
and utterly unlocked for, since the demand for labour has for
long been well sustained, it was quite in the nature of things
that corresponding progress should attach to the poseessois of
that commodity so unexpectedly brought into such request.
For some years past there has been a continuous advance in the
wages of working-men, and with the exception of a slight
t^heck here and there, the position of that class has never

The lower in the scale of society the individual who— pos-
sibly from his own efforts to a great extent, but mainly nom
the fortuitous current of events — ^bas experienced inordinate
and rapid progress in his career, the more likely is he to deem
the upward movement as necessarily an improvement of a per-
manent character, and the less inclined is ne to admit that a
reversion to the pre-existing state of things can be either pos-
sible or proper.

We may expect then to hear of widespread discontent, should
the ups and downs of commerce enforce one of those painfully
practical lessons, in the shape of reduced wages following upoo
reduced profits and heavy losses, which are the inevitable accom-
paniment of commercial reaction.

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The Bepresentation of Labour: 925

With the keenness each day more evidently the character-
istic of the worldng^lasses; that section of the community is
striving to strengthen their position. In skilful policy and in
controversy they have shown themselves at all events the equals

Online LibraryJohn Tilden PrinceThe Bankers' magazine → online text (page 121 of 150)