The Institute of Bankers.

NOVEMBER, 1884.

THE First Meeting of the Seventh Session of the Institute was held at the London Institution, Finsbury Circus, on Wednesday evening, October 15th,

RICHARD B. MARTIN, Esq., M.P., President, in the Chair.

ML DaNAINEN. I will venture before calling on Mr. Barnett,

SPECIAL NOTICE.

THE Library and Reading Room at 2, St. Michael's House is now open daily for the use of Members. The attention of Country Members especially is directed to the convenience of the room, as a place to which they may have their letters addressed, or in which they may write letters during their visits to London. In addition to the privileges of the Circulating Library, most of the books in the Reference Library, which has been recently very largely increased, may now be borrowed for short periods. It is hoped that Members will make these advantages generally known.

also remind you that our friend Mr. Unaimers, wno nas uone so muen for us, has been appointed County Court Judge at Birmingham. I should like to ask you to pass a vote of congratulation to Mr. Chalmers on his appointment. He has done so much for the Institute that I think he would appreciate it as a compliment. [A vote of congratulation was then carried unanimously.] With regard to the coming session, in addition to the paper which Mr. Barnett has prepared at our request, in November we hope Mr. Palgrave will read a paper on the reform of the coinage, a subject which the Government unsuccessfully endeavoured to deal with last session, and about which I will say a few words presently. In December, Mr. Hansard will read a paper on "Prices," and in January, Professor Chandler Roberts will read a paper on "Assays," a branch of knowledge which cannot fail to be interesting to us. In February, Mr. Moxon will read a paper on "Practical Banking." We also hope that Mr. Giffen will give us a paper, and that an arrangement may be made, also, for a paper on "Indian Finance," so that we have the promise of a number of papers, I hope I may say, of more than usual interest. During the

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past year one or two events of interest to bankers have taken place, the most notable of which have been the proposal of the Chancellor of the Exchequer to reduce the interest on the National Debt by an operation of considerable magnitude, the result of which, as you are aware, has not yet been made known. One point with regard to this subject which bankers may well consider is the increased value which will be given to other investments. In diminishing the interest from 3 to 2 per cent. it cannot but establish a higher relative standard of value in debenture stock and in first-class securities of that nature, Such a result has taken place to a large extent up to this time, and will undoubtedly do so still more hereafter. Then another fact that, I think, as bankers, we may take note of, and that is, there has been, no doubt, a large amount of Consols sold by private holders who are the backbone of Consols, and they have reinvested their money, not in 2 per cents., but in railway debenture stock, corporation stock, and securities of that class. The consequence is, I believe, there is an unusually large amount of Consols held by bankers and men of business. Possibly we may see the price of Consols less steady hereafter than it has been. Then with regard to the other very important question of the coinage which we here take so much interest in. As you know, the scheme of the Chancellor of the Exchequer fell through. It met with a considerable amount of support from thoughtful people who had made the subject their study, but with a good deal of popular disapproval. I should hardly think, therefore, it will be put forward in exactly the same form again. We, as bankers, perfectly understand it is a legitimate scheme to make the half-sovereign a token whereby it would be kept as a local coin and not as an international coin to be melted up at the requirement of every country. I think it very advisable for us in the Institute of Bankers not to relax our efforts to get the coinage set on a proper basis simply because the scheme of the Chancellor of the Exchequer has, for the moment, fallen through, It is entirely in our hands. I beg you to remember for a moment that if the bankers combined, which they would be perfectly justified in doing, in carrying out the letter of the law as it now stands in refusing to take any coins except they were of full weight, the inconvenience would cause such a general outcry that Government would be obliged to take some measures to set the coinage right. It is possible that we shall be able to agree as to the plan which will most effectually carry out the necessary reform after hearing the paper that Mr. Palgrave has promised to read to us in November. My own impression is that the weight of the feeling of the country would compel the Consolidated Fund to put the coinage into a proper condition. It is quite intolerable, after the very exhaustive analysis which was made of the state of the coinage through the medium of this Institute, that it should continue to exist in its present position, and we are certainly as capable of taking the matter up as any other body of people.

The Institute of Bankers.

R. B. MARTIN, Esq., M.P., President, in the Chair.

ON THE ACTION OF THE NEW YORK CLEARING HOUSE ASSOCIATION DURING THE RECENT CRISIS.

By ROBERT W. BARNETT.

[Read before the Bankers' Institute, Wednesday, Oct. 15th, 1884.]

HE panic of May last was so entirely confined to one class of the mercantile community, and that a class not altogether indispensable to the trade of the country, that we might have been pardoned if we had given it but slight consideration, or even passed it by without discussion. But, although it was emphatically a Wall Street panic, and began and ended there, circumstances unfortunately so involved two or three of the banks of New York as to cause a general, though momentary, suspicion as to the whole system, and considerable apprehension of very extended mischief. In this conjuncture prompt and decisive resolution was taken by the Associated Banks to assume a collective responsibility, and to afford mutual assistance, in the same way that had been done some eleven years before. It has been thought that the particulars of the occasion, and of the steps taken, would be both interesting and valuable to the Institute, and, at the invitation of our Council, I have undertaken to lay them before you this evening. In doing so, I shall make it my aim not so much to express opinions upon the points that will suggest themselves, as to furnish an opportunity for an instructive discussion upon a practical subject.

Seldom, if ever before, has a crisis of such intensity culminated so rapidly, or subsided so soon. Although the first failure occurred on the 6th of May, no general alarm was felt till the 13th of the month,

and by the 17th all appearance of serious danger was over. During the first days of May there appears to have been no apprehension of coming disasters. During the month just closed the Stock markets had been unprecedentedly low, especially in the railroad department, and there had been recently a slight increase in the rates for call loans, but not more than might be attributed to the fact of the banks having but a small surplus of reserve. At noon on the 6th of May, the Marine National Bank stopped payment, and immediately afterwards the suspension of the banking and broking firm of Grant & Ward became known. These occurrences, or at least the stoppage of the bank, appear to have been a complete surprise. The directors of the bank, who had met as usual, and separated shortly before, had no knowledge of any difficulties. The president alone, Mr. James D. Fish, and one of the directors, Ferdinand Ward, were acquainted with the reasons, and even with the necessity, for suspension. It subsequently transpired that Grant & Ward had made large overdrafts amounting to £150,000, and that the bank was unable to complete its settlement at the Clearing House. The connection of the bank with Grant & Ward was very intimate, and very well known. The firm was one of some importance in its particular business as bankers and brokers, and had received large sums upon deposit, which were used in speculation in stocks, especially mining stocks. Besides General U. S. Grant and his son, the firm comprised James D. Fish and Ferdinand Ward, who were also respectively president and director of the Marine Bank. These latter were men reputed to be of considerable wealth, and were also the moving spirits of both concerns. Mr. Fish, in particular, was very well known in the financial world, being director of several important railroads and other institutions, and having been for twenty-six years at the head of the Marine Bank. The bank had been established thirty-two years, and enjoyed good repute as to its management, doing a good general business, and holding some important public deposits. The liabilities and assets of the bank, as reported a fortnight before, had showed a surplus of more than £50,000, upon a capital of £80,000. Its note circulation was about £50,000, whilst the net deposits were somewhat over one million sterling, against which it was supposed to hold more than a quarter of a million in specie and legal-tender. On the face of these facts, together with the high position of the parties concerned, both in the bank and the firm, it was at first supposed that the suspension would be merely temporary, a sort of occurrence that is not so uncommon in New York as here.

During the first following days, however, some circumstances came to light that seemed to show that transactions between the bank and Grant & Ward, and also between that firm and the public, had not been of quite so straightforward a character as had been supposed. On the day of the stoppage, the First National Bank was involved in

a serious loss by the Marine Bank, in a manner very nearly approaching to fraud. In the exchanges delivered at the Clearing House by the Marine Bank to the First National, were included cheques drawn by Ferdinand Ward upon the latter bank for £43,000, whilst his balance with them was less than £400. By the time that the First National Bank had examined its exchanges, and returned these cheques unpaid, in the usual manner, direct to the Marine Bank, that establishment had closed its doors. As it was obvious that the Marine Bank, or the principal acting members of the board, had a perfect knowledge that the cheques would not be paid, the First National applied to the Clearing House to readjust their balance to the extent of this amount. According to the rules of the Association this could not be done, and so the First National Bank remained saddled with the loss. Subsequent investigation into the affairs of Grant & Ward showed that their liabilities amounted to nearly two millions sterling, that these liabilities had been most recklessly contracted, and that the Marine Bank was irretrievably involved in them. Beyond the gradual disentanglement of these matters, and successive revelations of hopeless loss, no fresh causes of alarm occurred for some days. But, on the 13th, it became known that the Second National Bank was in difficulties, and that another brokerage firm was deeply involved. In this case the bank in its normal business might be presumed to be free from stock speculation. Its office was in a fashionable quarter of the city, and its accounts were principally those of private and wealthy individuals. But the affairs of the bank had been to an almost unlimited extent in the hands of the president, Mr. John C. Eno, and it was now found that he had been using the funds of the bank in private speculations, and had lost about £400,000. It appeared that the paper purchased by the bank had been kept by the president at his own office "down town," and that he had applied any or all of it to his own purposes. The credit of the bank was saved by the intervention of Mr. Amos R. Eno, the father of the president, one of the heaviest stockholders in the bank, and a man of great wealth, who immediately made good the amount of his son's defalcation. A new president having been elected by the board, a notice was issued that the bank was prepared to meet its obligations.

The following day, Wednesday, the 14th, opened with a feeling of great anxiety upon the Stock Exchange. The broking firm of Dyett & Co. had stopped payment, after the closing of the Exchange upon the previous day, and business was now but scarcely begun when the chairman announced the suspension of Nelson Robinson & Co., bankers and brokers, which was almost immediately followed by those of Bogart & Co., bill and stockbrokers, and of Goffe & Randle, also stockbrokers. Following these in quick succession were similar announcements respecting Hatch & Foote, and J. C. Williams; and an hour before noon it became known that