Читать книгу Banks and Their Customers - Henry Warren - Страница 5

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We owe a great deal to the financial instinct of the Jew, who, having no country of his own, has developed an acquisitive mania for the goods of those people among whom he dwells, thanks to a progressive civilization of which he was the pioneer, in comparative safety; and, by an irony of fate, we are also indebted to him for a religion, which his more subtle mind rejects; yet, stranger still, it is a civilization based on commerce that keeps the whole world moderately sane, and tends to at least hold in check the latent savagery of the blind enthusiast who would still, but for her intervention, indulge in a bloody crusade against all who hold opposite opinions. A true civilization spells toleration; and though a creditor can scarcely hope to be popular with his debtors, he is at least entitled to the protection of the law of the land in which he lives.

The Jews, who are supposed to have come over to England about the time of the Conquest, gradually possessed themselves of the greater part of the coin of the country; and the early English kings constantly resorted to them for loans. As it was thought unchristian to charge usury or interest, the business of a money-lender was consequently held in abhorrence, with the result that the Jews monopolized the trade, and acquired immense fortunes by their dealings. Their wealth naturally excited the intense cupidity of their Christian neighbours, who, making a pretext of their so-called abominations, raided from time to time the Jewish quarters of the various towns, in the hopes of annexing the fabulous treasure in Jewry.

Under the ban of the Church, and detested by the people, the popular feeling against the usurers became so embittered that Edward I, under whose protection they lived, after having in vain attempted to persuade the Jews to accept Christianity, was compelled to banish them from England; and from 1290 to the time of the Commonwealth (a period of about 360 years) the prohibition remained in force. But the money-lender is a necessary evil; and after the departure of the Jews certain Italian merchants, known as Lombards, who had previously settled in England, immediately filled their place; and Lombard Street became as notorious for usury as had been the Jewry.

The Jew may be described as a money-lender, and the Lombard as a merchant-banker, though neither was a banker as the word is now understood. Both, however, lent money at high rates of interest. A banker, in the English sense of the word, is a middleman who borrows from one set of persons at a rate in order to lend to another set at a greater rate, the difference between the two rates being his margin of profit; and banking in this sense was not practised in England until quite the end of the first Charles’s reign, when certain goldsmiths, who were originally dealers in plate and in bullion, became private bankers. The first run upon them was made in 1667, when a Dutch fleet sailed up the Medway; and, later, in 1672 Charles II closed the Exchequer, refusing to pay the bankers either their principal or interest, with the result that failures were numerous.

We are now approaching a new banking era; and in 1694 the Bank of England, which was the first joint-stock bank established in the three kingdoms, was incorporated. The private bankers, instantly recognizing in her a formidable rival, were actively hostile; but all to no purpose; and in a very little while they grouped themselves round the Old Lady, who reduced their rates and kept them in order. Hoares and Childs were in being before the Bank; but the goldsmiths, long before the new movement was a brilliant success, had few direct descendants in London; and the majority of those private bankers who opposed the Act of 1833 belonged to another generation. At its inception the Bank did not enjoy a monopoly; but upon the renewal of its charter in 1708 it was granted the monopoly of joint-stock banking in England, while the partners in a private bank could not exceed six in number. This number was increased to ten in 1857.

Country banking developed slowly in England; and it was not until towards the close of the eighteenth century that private firms began to multiply in the provinces; but the Bank of England’s iniquitous monopoly kept them small and weak, and between 1792 and 1820 over one thousand private bankers came to grief, while the crisis of 1825 further thinned their ranks and almost emptied the vaults of the Bank of England, when it dawned upon the Government that the state of the money-market was distinctly rotten, and that it would remain so until the Bank’s monopoly disappeared. The result was the usual committee and the usual compromise.

The Act of 1826 allowed joint-stock banks of unlimited liability to be formed in England and to carry on business at a greater distance than sixty-five miles from London; but such institutions could not open an office in London. Neither could they issue notes at a place within sixty-five miles thereof, nor draw any bills on London for a less amount than £50. In 1833, however, they were allowed to make their bills and notes for less than £50 payable on demand at their London agents. The demand for these establishments was not at first considerable; and very few were formed until after five or six years of the passing of this Act; but in 1830 the railway movement began in earnest, and from 1833 to 1836 joint-stock banks were established throughout the country in considerable numbers. This sudden boom in banking companies could only have one result; and failures became so numerous that Sir Robert Peel, in 1844, passed his Joint-Stock Banking Act, which, being found worse than the disease itself, was repealed in 1857.

London, we have seen, contained only one banking corporation and numerous private bankers, who, forming a monopoly, were practically rich men’s banks; for they would only accept an account provided the balance was not reduced below a certain sum, while from 1813 to 1833 some twenty of them suspended payment; so stability was not one of their distinguishing characteristics. It soon became apparent that the Bank of England and the private bankers were quite unable to minister to the growing trade of the capital; and in 1833 joint-stock banks were allowed to be formed in London, but upon the distinct understanding that they were to be banks of deposit and not banks of issue. In other words, they could not issue their own notes, so were compelled to use those of the Bank of England. The first London joint-stock bank was the London and Westminster, whose prospectus was issued in 1833; but the shares were subscribed slowly, and the bank did not open its doors to the public until the March of the year following. Then came the London Joint-Stock Bank in 1836, and the Union Bank in 1839.

It is usual, in this little island, to hark back to the good old days, and then, with a sigh, to regret that the old order of things no longer exists; yet it must be confessed that the London private bankers were of no service whatsoever to the small man of business, whom they simply ignored. The joint-stock banks however, ministered to the wants of the small trader; and, by diving into the heart of the masses, proved that a large number of small balances are even more desirable than a small number of large accounts, whilst in the end they practically drove the private banker, handicapped as he was by the law of the land, out of the market, or, at least, reduced him to impotency. But the London joint-stock banks, in those early days, were not without their grievances; and both the private bankers and the Bank of England seized upon every pretext in order to harass them. Being merely common law partnerships, they did not come under the 1826 Act; and until the Act of 1844 they were not relieved from certain restrictions which need not be discussed here.

But the year of banking reform was, of course, 1844, when, fortunately for the trade of the country, the Bank of England was stripped of all its privileges except that relating to the issuing of notes. The Bank Charter Act of 1844 gave the Bank of England the monopoly of issuing notes in London and within sixty-five miles of it. No new bank of issue was to be formed, while a provincial bank, upon opening in London, forfeited its issue. The cheque, however, soon became more powerful than the note; and the larger provincial banking companies gladly made the sacrifice in order to establish themselves in the capital. The next step forward was when the joint-stock banks broke up the cabal of private bankers and were admitted to the Clearing House in 1854; though it is a little remarkable that, having posed as martyrs and vigorously denounced their oppressors, they should now take upon themselves to exclude certain companies which have as good a right as they to enter the sacred portals of the House; but the mote in one’s neighbour’s eye is always so much more apparent than the beam in one’s own.

By the Act of 1858 a joint-stock bank was allowed to limit the liability of its shareholders; but the Act, was not made compulsory; and though all the companies formed subsequently registered under this Act the members of those in existence prior thereto were liable for the debts of the company in which they held shares to their last shilling. Then came the failures of the West of England Bank and the City of Glasgow Bank in 1878; and shareholders in banks of unlimited liability, with the fate of the members of these two institutions before their eyes, began to weigh their responsibilities, with the result that many sold out at panic prices in haste and regretted at leisure. The more prudent, though they held their shares, began an agitation for reform, which gave birth to the Act of 1879. We need not discuss this Act; though it may just be said that every joint-stock bank in the three kingdoms which is not limited by its charter is now a bank of limited liability under the Companies Acts.

At this juncture, perhaps, a few words may be said with reference to the Bank of England, which, with a contempt for evidence that is truly British, the public is convinced cannot suspend payment; yet the Bank’s career has been decidedly checkered; and even after the passing of the Act of 1844 the Old Lady was only saved by the intervention of the Government in 1847, 1857 and 1866, while during the Baring crisis of 1890 she was compelled to borrow from the Bank of France; so, evidently, her system is not by any means a perfect one; but one does not expect perfection in finance. The perfect financial machine and the perfect man are alike impossibilities. As to the latter, did he exist, he would seem positively inhuman.

It need not be said that this sketch of the English banking movement is necessarily imperfect, if only because of the small space into which it is condensed; but the average reader certainly would not trouble to digest two hundred pages on the subject of banking evolution; so possibly it may prove acceptable in this form.

We have seen that the London private banker was a rich man’s banker; but it was otherwise with the country private banker, who was often of great assistance to the small trader, at whom the joint-stock banks will not now look unless he approaches them with his pockets stuffed with securities when anxious to overdraw his account. The maxim of the companies is: “Let the customers take all risks.” And if this rule is broken, then the case is an exceptional one. We need not discuss here whether or not this policy be essential to modern banking; but it is quite evident that the small man of business has lost a good friend in the old-fashioned country banker, whose place has not been taken by that person of peculiar views and training—the bank-manager or clerk-in-charge, whose urbanity must be more than painful to those would-be borrowers without security who ask for bread and are politely offered—a stone.

What we have to discover is why the country banker has been practically forced out of the market by the joint-stock system; and the reason is not difficult to explain. In the first place we know that, since 1857, the partners in a private bank have been limited to ten; consequently, however anxious a banker may have been to extend his system of branches and develop his business, the difficulty of insufficient capital presented itself; whereas his rivals, who can appeal to thousands of small investors, could, once having established their credit, easily obtain as much capital as they required. The private banker, therefore, ministered to the wants of a certain town, district, or county; but the joint-stock banks spread their tentacles throughout the length and breadth of England; and, like an octopus, eventually strangled him in a manner which will be explained.

In London and throughout the provinces there were numerous small firms of private bankers—small, that is to say, when contrasted with their joint-stock competitors. The banks in a manufacturing district or in a busy city would, especially during periods of active trade and rising prices, be called upon to advance large sums to their customers; but if a banker collected his deposits from a few branches within the district whence the demand arose, he would soon find himself unable to meet the requirements of his customers. But the joint-stock banks, which have branches in many counties, can pour their deposits into those centres where demand is active; and it is obvious that a small private banker cannot hope to compete successfully against the superior organization of the companies. With the private banker it soon became a question of restricting advances; and his customers, finding that they could not obtain all the accommodation they required, naturally applied to his rivals, who, if tangible securities were forthcoming, met their demands with ease.

The London and provincial banking companies, which farm both the agricultural and the manufacturing districts, by pouring their surplus capital into the London money-market, speedily obtained all the best business; and those private bankers who did not either amalgamate with, or adopt the system of, their successful rivals found themselves hopelessly out-distanced. Hence the triumph of joint-stock banking and the advent of the director and his humble, most obedient servant, the clerk-in-charge, who “manages” a country branch, but whose power, in reality, is of the smallest, all the applications for advances above a certain sum having to be submitted to the chief office, while he himself is powerless to act until he receives his instructions from headquarters.

This form of competition would be felt less in an agricultural county where the deposits a banker collects are greatly in excess of the demand made upon him for advances; but even there the private banker’s luck has deserted him; for the agricultural depression thinned the ranks of his best customers, and, of course, left him a legacy of bad debts. We should, therefore, expect to see the private bankers disappear from the great towns first, and, finally, from the agricultural centres. The law of the land has kept them small; and the tentacles of the joint-stock companies have almost exterminated a class of men who enjoyed the friendship and confidence of their clients to an extent that a clerk-in-charge upon a salary of from £200 to £500 a year can never even approach.

Though we live in an age of great machines, which, for reasons that will be explained later, can declare huge dividends, every now and again we hear of the inception of a new banking company. The new arrival, perhaps, waxes more than eloquent upon the large dividends paid by the existing companies, and then dwells enthusiastically upon the immense profits it hopes to earn; but can a small company ever establish its credit in face of the network of branches which now cover the land? The person who applies for its shares must certainly be of a most sanguine disposition.

It is the powers that be that always excite the keenest interest, doubtless because of the possibility that a knowledge of their habits and ways may prove of pecuniary benefit to the student; and this object has been kept well in view throughout the following chapters.