sill ■11 |ll!iiliit,llliir: Cornell University Library HG 1891.S4 A practical treatise on savings banks, co 3 1924 014 533 289 Cornell University Library The original of tliis book is in tlie Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924014533289 A PRACTICAL TREATISE SAVINGS BANKS, CONTAINING A REVIEW OF THEIR PAST HISTORY AND PRESENT CONDITION, AND OF LEGISLATION ON THE SUBJECT, Exposition of the Measures required for their complete re-Organization, and for placing them on a sound Financial Basis. ARTHUR SCRATCHIEY, M.A., Of the Inner Temple, Barrister-at-Law ; Formerly Fellow and Sadlerian Lecturer of Queen's College, Cambridge, Author of a *' Treatise on Industrial Investments," Sec. LONDON : LONGMAN, GREEN, LONGMAN, AND ROBERTS. JIDCCOLX. ERRATA. Page 20, line 4 from bottom ;— /or " 1,049 " read "T,049." The 1 is negative— there being a decrease of 951 in the number of Depositors under the column. „ 110, Note : line 2 from bottom ; for " ou " read " on." ,, 256, line 3 from bottom ; for " pale" read " place.'' NOTICE. I.— Ten years have elapsed since the publication of our "Suggestions on the Savings Bank Question,'' in which we proposed measures likely to prevent the recurrence of such frauds as had been discovered during the years 1848 and 1849. Though the Bill, which we drew on that occasion to give effect to those suggestions, came to no result in a legis- lative form, yet the lapse of time has shewn that the principles upon which it was based were well calculated to attain the desired object. One advantage, moreover, has arisen from the delay: it has afforded opportunity to persons interested in Savings Banks, or engaged in their management, to give full consideration to the views we then advocated, and to the various measures that have been proposed by successive Go- vernments, and, more recently, by the Parliamentary Com- mittee of 1858. The public are also better prepared to appre- ciate the arguments that may be advanced on *either side with regard to any particular steps towards the reorganization of these institutions. II. — The Committee of 1858 examined several witnesses of experience with great patience, and at much length ; but the chaotic state of the q_uestion, and the necessarily limited time devoted to their inquiries, appear to have prevented them from doing more, in their Report, than giving an abstract of the evidence. The Committee, however, concluded with one main * [Some of these arguments will be found in the valuable Report of the Committee, before which we were prevented by temporary ill-health from attending to give evidence. The Committee was excellently con- stituted. The list of Members comprised the names of Mr. Bonham Carter, and Mr. Adderley, who have taken so active a part in Friendly Society legislation; Mr. Fagan, who exerted himself very nobly on behalf of the unfortunate Cuffe Street Depositors; Mr. Grogan, Mr. Baring, Mr. Henley, Mr, Bouverie, with others (the Right Hon. Sotheron Estcourt, Chairman, Mr. Ayrton, Sir H. Willoughby, &c.), whose names will be found mentioned in suksequent pages.] iv NOTICE. recommendation, viz. that a Savings Bank Commissioti should be appointed, to whose future deliberations they seem to have deemed it better to leave all measures actually to be adopted in the future, whether to obviate the recurrence of frauds, or to terminate the errors in pohtical finance that may be said to be at the root of the present Savings Bank system. III. — In this *treatise we have endeavoured to give to those, who may desire thoroughly to understand the subject of Savings Banks, all the information necessary for their purpose, in a systematic form ; and we have stated the prin- ciples by which, as we conceive, their internal and financial reorganization should be guided. This information cannot be said to have been hitherto accessible. It could only be obtained by wading through voluminous Blue Books ; by a careful study of the numerous returns made to Parliament during the last twenty-five years from the banks and from the National Debt Commissioners ; by an analysis of the mass of Parliamentary evidence dispersed in every variety of form through thousands of answers, abounding in erroneous statements, and embodying conflicting opinions on almost every point ; and, lastly, by reference to the rules of the banks themselves (with which we have ac- quainted ourselves by an examination of every clause in the rules of all the banks but six in the United Kingdom). Such a study, necessarily laborious, would probably be irksome and distasteful to most persons, as well as perplexing to the non- professional inquirer. IV. — We have, besides, endeavoured to make this volume the exponent, not only of the views we have ourselves so long advocated, but of those of a large number of Savings Bank officials, who have, during the period mentioned, favoured us with letters on the subject — more particularly since the Com- * [No systematic Treatise on the question exists either in England or in foreign countries : the numerous publications on the subject have been only in the nature of Essays and Lectures.] NOTICE. V mittee's Report — in reply to a *circular issued, at our suggestion, by the Friendly Societies Institute. These communications display much ability and knowledge of the subject, and, in our selection from the mass of matter thus placed at our disposal, we have given most prominence to those opinions which derive weight from the experience of those who hold them. V. — Keeping in view the object indicated above we have traced retrospectively the history and law of Savings Banks, although the impending legislation will doubtless introduce great changes. With the same motive, our analysis of past financialt errors is accompanied by explana- * [In order to make the investigation as complete as possible, we issued, also, a circular, containing a variety of questions, to the officials of the principal Savings Banks abroad. In every instance, with striking courtesy, answers were readily returned, and at great length ; and a vast number of documents relating to foreign and colonial Savings Banks was sent to the Friendly Societies Institute. The information they afford is, however, too elaborate and extensive to be brought forward in any satisfactory shape in the few pages we are able to devote to it in this Volume, without delaying its publication. We have been compelled, therefore, to confine ourselves to a short sketch, in the Introduction, of the condition and progress of the leading banks. The documents furnished have been of much service to us, however, for we have been enabled to trace the actual practical working in foreign banks of some of the amendments we have recommended for adoption in this country. In a future Volume, which will be published with the new Savings Bank Act, when passed, we contemplate giving a more full resume of these documents, and of the Laws relating to Non-Government Banks of Deposit. The perusal of the Reports, and a comparison of a large number of foreign rules with those of the Eng'hsh banks, has shewn us that a similarity of plan exists in all ; which is probably attributable to the fact that they appear to have had for original model the rules and plan of operations in this country. In several instances, however, they have given earlier attention to those defects of principle and practice that have caused such mischief in ICngUsh banks, and they have sought to intro- duce remedial modifications of the parental system.] t [The calculations are based on the returns for 1858 where those for 1859 are incomplete or not published.] VI NOTICE. tions, which some may deem too elementary, as the work would not fulfil its purpose, as a text-book for future Savings Bank Actuaries and others, if these points were not discussed. The present volume is, consequently, divided into several Parts, as follows : — I. — Past History and Present System of Savings Banks. II. — The Frauds in Savings Banks, their evil consequences, and the Remedy. III. — Financial errors in the present Savings Bank system. IV. — The financial re-organization of Savings Banks on a sound basis. v.— The " Post Ofiice Savings Bank Plan," and the facilities offered by Savings Banks for the extension of Life Assurance and Sick Benefits among the Industrious Classes. VI. — Non- Government Banks of Deposits and the AudiJ; of Public Institutions. In the Appendix, a chapter has been added on the subject of applying a portion of Savings Bank funds to assist Societies for the Improvement of Industrial Dwellings. We have also given a short resume of the history of the National Debt, the security in which, under the present law, all Savings Bank funds are invested. *^* In the preparation of this work, we, have received the greatest assistance from many eminent and experienced per- sons interested in the subject : to two of them not mentioned in the text, a recognition of our obligation is specially due : The varied acquirements and rare financial ability of our friend, Mr. W. J. Reynolds (of Chelsea), M.A., have been of the utmost service to us. "We have also been fortunate in having had the active co-operation of Mr. E. W. Brabrook, the Corresponding Secretary of the Friendly Societies Institute, whose intimate acquaintance with the Savmgs Bank question has enabled him to lighten the task of collecting, comparing, and digesting the mass of materials involved. 6 Essex Court, Temple, January 1800. INDEX. PAGE Accounts : Uniformity desirable, 90 Acts of Parliament 12 Actuaries 92 America xlvii Rules of Deposit Banks . . . 280 Attempts at Legislation . . 11, 78 Audit of Public Institutions . . 283 Australia liii Austria xl Banks of Deposit 268 Belgium xxxiv Branches 228 Committee of 1858 17 Declaration on Depositing . . 103 Defalcations xxi., 49 Cuffe Street Savings Bank, Dublin 60 Extent of the Frauds ... 55 Rochdale Savings Bank . . 65 Deferred Annuities 251 Recommendations .... 258 Deficiency in Savings Bank Fund : — Correct Principle for Valuing Securities 115 Amount of the Deficiency . .318 Its Causes 122 How to be prevented in future, 178 Deposits and Depositors : — Class of persons who should be Depositors x Legal provisions in regard to the amount of deposits . . 33 PAGE Unclaimed deposits .... 38 Deposits out of bank hours, 52, 107 Future limit 197 Conversion into Stock . . . 200 Exchequer Bills — Appendix . . 34 Laws relating to Purchase and Funding 147 Debate of March 1859 ... 159 Exchequer Bonds— Appendix . 35 Expenses of Management : — Savings Banks 39 National Debt Office ... 44 Future Government allowance, 191 Field for Savings Banks . . . 168 Financial Operations of Chancel- lors of the Exchequer . 135, 152 Financial Reorganization : — Fundamental Principles . ,165 Alterations desirable . . .183 Foreign Countries .... xxxi Formation of Savings Banks . 25 Prance xxxi Frauds, how to be prevented . . 287 Government Guarantee : Belief of the Public 70 Government Inspection ... 81 Hamburg xxxvii Holland xlii Inspectors 81, 99, 289 INDEX. paoe Interest : Rate allowed . . 30 Excess paid to Trustees over the amount received by the Commissioners . . . .128 Uniformity of Calculation . . 307 Investment : — Early Methods 7 Losses attending Sale and Purchase of Stock . . . 131 Difficulty of obtainuig Securi- ties 171 Investment through a newly Constituted Commission . 186 Improvement of Industrial Dwellings — Appendix . 1, 28 Non-Government Banks . . 273 Life Assurance through Savings Banks 231, 247 Manufacturing Trades — Appen- dix 27 Massachusetts 1 Military and Naval Savings Banks 21 Model Lodging Houses — Ap- pendix 13 Money Order Offices .... 223 National Debt — Appendix . . 31 National Debt Commissioners: . their Relation to Savings Banks 143 New Jersey lii New York xlvii Non-Government Banks PAGE . 263 Origin of Savings Banks ... 3 Parish Friendly Societies . . . 334 Pass Books, Inspection of . . 97 Penny Banks 23 Poors Assurance Office . . . 239 Post Office Savings Bank Plan, 215 Progress of Savings Banks, xxvii, 20 Prospective Interest Plan . . . 209 Provisions for Old Age . . 251 Prussia xxxviii Pubhc Playgrounds— Appendix, 20 Remedy for Defects of Manage- ment 76 Rules and Annual Statements, 36, 108 Russia xlv Separate Surplus Fund ... 34 Suburban Villages — Appendix, 10 Sweden xliii Switzerland xxvi Town Life : its Unhealthiness — Appendix 24 Treasurers 29, 31 Government Treasurers . . 84 Trust Accounts 28, 203 Trustees and Managers, xviii, 50, 93 112 Whitbread, Mr., his Bill (1807), 11 216, 239 Withdrawals 105 A PRACTICAL TREATISE SAYINGS BANKS. INTRODUCTION. I —Nature of ^HE Subject of Industrial investments in Savings the Subject. Banks is one of those complicated questions of every-day life, that fall within that branch of political economy of which a writer (whose distinguished abilities have lately elevated him to the financial administration of our Indian empire) has so justly said* that it is difficult to those only who are disposed to give to it but superficial consideration. There are, indeed, in the Savings Bank question, as in that of banking generally, numerous points of the highest importance, which are of a character too abstruse to command, under ordinary cir- cumstances, sufficient consideration from the public at large ; so that, as Mr. Wilson remarks, " the only time, when we can hope usefully and entirely to arrest attention to them is when the current events of the day clothe them with more than usual interest." The present may, perhaps, be deemed such a juncture in the • [Capital, Currency, and Banking, by the Eight. Hon. .1. Wilson, M.P.] b X INTRODUCTION. history of Savings Banks, when a consolidation of the Acts relating to them, with material amendments in their con- stitution, is anticipated, and recognised as necessary. The subject of Savings Banks is indeed one well deserving of study by all classes, for these institutions form one of the most remarkable features of the present age. Its importance is admitted by the most eminent *political economists in this country and abroad, many of whom, in their admirable con- tributions to the discussion of some of the leading financial principles involved, have displayed the genius that charac^ terizes all their writings. n.-of the kind Wc wiU here, in a few words, direct the reader's of persons who , ^ n ,\, are Depositors, attention to the joolittco-soctai a.s]pect 01 the ques- tion of Savings Banks. He will at once see that it is one of peculiar delicacy and importance, and that there is a pressing necessity for amending imperfect or erroneous legislation on the subject. For this purpose we may regard the population * [Adam Smith, Ricardo, Malthua, Parnell, Buchanan, and Stuart Mill, with others at home. The most complete essays on the subject are by foreign writers, viz. Baron Charles Dupin and M. Agathon Prevost- Valuable suggestions occur in the works of numerous other authors : — MM. Gustave du Puynode — Coquelin (in his able work " Du CrSdit et des Banques") — Lemontey (in a popular Tract, " Les bans effets de la caisse d'Epargne") — Gamier — Francoeur (formerly Professor at the Ecole Poh/technique), and Jomard (in Eeports to the Sociiti pour le progris de V Instruction Mimentaire) — Navier, the celebrated mathematician, in a paper read before the AeadSmie des Sciences— the excellent Cardinal de Cheverus (in his Orations) — MM. Emile de Girardin, B. Salverte, Felix Bodin (in the periodical journals) — le Due de Larochefoucauld {"Dia- logue entre Alexandre et BenoU "), in France ; and Dr Otto Hubner, of Berlin, and Dr. Stubenrauch, of Vienna, may be specially mentioned as having made important contributions. Many others have furnished argu- ments or illustrations to the views advanced in this Treatise, and their names are mentioned in subsequent pages. Indeed, it would not be easy to exhaust the list of distinguished writers whose attention has been arrested, in a greater or less degree, by the subject of Savings Banks.] INTRODUCTION. xi of this country as divided into three classes. Of one of these, the members (relatively limited in number) are so rich and prosperous, that in their domestic arrangements they do not even notice whether the prices of bread and meat are rising or falling. Another is composed of a large mass of persons destitute of suificient resources for their existence. They, of course, have nothing to put in a Savings Bank ; they live by public charity, or at least require aid from other sources for what their own exertions are insufficient to supply, and are a charge on the community to the extent of nine millions a-year in poors' rates. Between these two classes is the great bulk of the popu- lation, which lives honourably on the fruit of its labour, whether of the mind or the body ; the latter (by custom rather than with correctness of language) being termed the working or industrious classes. The members of this " working" class are the persons for whom Savings Banks were originated, and to whose requirements they are adapted ; and their in- creasing providence may be measured by the fact of their having advanced their *Savings Bank deposits from four- teen millions in 1828 to forty-one millions at the present time. Great, indeed, must have been the industry and self-denial that have enabled them to achieve such results ; and com- mensurate therewith is the keen anxiety they experience for the safety of their money — for they are not without the natural jealousy which gives rise to suspicions on the part of those who are weak, towards those who are strong ; suspicions of a class which is open to injury, towards those who, they imagine, may do them disservice. Any inattention, therefore, to evils affecting the places of deposit, into which they have been invited to put trust, is fraught with disadvantage. * [Except where otherwise stated, the deposits of Friendly Societies, direct with the Commissioners, are included under this denomination.] 62 xii I'NTRODUCTIOX. iii.-of iDst,i- If it is by the men of business, the extensive ma- ■videntpurposes. nufacturers, the wealthy bankers and merchants," the large capitalists of this country, that commercial enter- prises of magnitude and importance are originated and set on foot, so that the effect of its industry and the weight of its power are felt at every extremity of the globe, it is mainly to the efforts of all ranks united — to the landed proprietors, the gentry and clergy as well, that we owe other landmarks of progress, by which mankind has *advanced to civilization : it is to their benevolent spirit that we are indebted for nu- merous institutions which are specially designed to encourage provident habits among the industrious classes, and have for object to serve as banks for temporary deposits. Whether they be established under the sanction and control of Govern- ment, or by private enterprise merely, their purpose is the same : to afford to persons whose time and attention are other- wise occupied, the opportunity of obtaining, with as little expense as possible, a remunerative investment for their savings — under such a system, and with such a security, as shall present little doubt of their money being safely laid oat. That this is both practicable and desirable we have pointed out in Division *II. of the Treatise on Associations for Provi- dent Investment, and shewn that, while it is usually im- * [" A mesure que les societes avancent dans les voies de la civilisation, le travail tend a y occuper une place plus elevee. Le principe g-uerrier qui est entre si avant dans la constitution sociale de la vieille Europe aemble se retirer devant les progrea du priacipe industriel qui, chaque jour, se developpe et grandit. On a commence a comprendre que les conquetes de I'homme sur la nature sont les plus vraies, les seules durables, les seules qui forment la base de la prosperite des nations comme des individus." (L. Lemaitre • Preface to Condy-Raguet on Banks and Circulation.] * [Treatise on Benefit Building Societies, Tontines, and Emigration. Third Edition.] INTRODUCTION. Xlll possible for a private individual to obtain an advantageous accumulating interest for the small sums of money he can spare from time to time from his expenses, an aggregation of such amounts, contributed by a number of persons, may be as readily and profitably invested as the larger savings of a richer man. Without such associations, however, each accretion is so small that something of the ridiculous is felt in looking upon it as usefully available towards forming a fund for the future, and it would too often be applied to satisfy some present and seemingly pressing want. Where the transactions of the association are independent of any question of life or death of the Depositors, the power of withdrawal of the money contributed, with accumulated interest, is almost always conceded ; and the large number of millions standing to the credit of the industrious classes in the particular kind at present under our notice, is evidence of the popularity of such institutions. ,„ _. ^. .. " The secret of their success,''* remarks M. Prevost, IV. — Distinctive ' ' fcrTedbfsa!""' " i^' *^^' ^ Savings Bank may bet entered and quitted ving» Banks. y^]^en and how a man pleases ; as long as the money * [Essay on Savings Banks in the " Cent TraitSs," translated with much ability by Mr. W. Hatton, Actuary to the Brighton Savings Bank.] t ["At present," wrote Mr. Malthus in the year 1803, " the few labourers, who save a little money, are often greatly at a loss to know what to do with it, and under such circumstances we cannot be much surprised that it should sometimes be ill employed, and last but a short time. It would probably be essential to the success of any plan of this kind, that the labourer should be able to draw out his money whenever he wanted it, and have the most perfect liberty of disposing of it in every respect as he pleased. Though we may re^Tet that money so hardly earned should sometimes be spent to little purpose, yet it seems to be a case in which we have no right to interfere, nor, if we had, would it, in a general view, be advantageous ; because the knowledge of possessing this hberty would be of more use in encouraging the practice of saving, than any restriction of it in preventing the misuse of money so saved."] xiv INTEODUCTION. remains deposited, it is continually increasing for the benefit of the Depositor. Do his wants require the whole or a part ? by simply making the demand, he receives what he requires. If in the interval between the demand and the payment his temporary necessity has ceased to exist ; if, as it sometimes happens, a salutary thought interposes, and triumphs over a transient whim, the Savings Bank, with a paternal feeling to the" Depositor, con- siders the demand as not having taken place, and retains the de- posit without expense or loss of interest, thus encouraging, with all its power, perseverance in the wise paths of economy and saving." Savings Banks, as they at present exist, differ from the other channels of industrial investment, discussed in the re- maining divisions of the Treatise on Associations for Provi- dent Investment, from the fact of their management and -supervision being entirely out of the hands of the parties whose money is at stake, and from their presenting no element either of speculative assurance affecting relatively the deposits of members (as in Friendly Societies for sickness or life contingencies), or of commercial trading (as in Benefit Building and other co-operative Investment Societies). Further, the numerous Friendly Societies in the United Kingdom only partially meet the provident requirements of the industrious classes, as it is not to every one that the benefits they afford are an object of necessity or desire ; and the peculiar features of their operations, such as an allowance during sickness, Sec, are only an actual money benefit to those members who happen to fall ill ; thus presenting, from the nature of the case, the circumstance of many persons con- tributing for years, who, by the blessing of continued health, receive but little in return out of the funds of the Society. On the other hand, those self-supporting and self-managing Industrial Associations, of which Benefit Building Societies are a specimen, offer the attractions of possible greater INTEODUCTION. XV profit than can be obtained by more secure institutions; but every subscriber, in becoming entitled to share in the prospective profits of the Association, would, if he inquired, find that he had also become a participator in the con- tingencies of loss. These distinctive objections to the re- spective systems of Friendly Assurance and Benefit Building Societies do not apply to that of Savings Banks. v.-Effeotot I'l reality, therefore, it is by Savings Banks that men?of Savings tli^ Only Opportunity is offered to the working man to be provident, in the sense of accumulating with certainty a sum of money for use in the future, as dis- tinguished from the contingent advantages offered by Benefit Clubs and Building Societies. Before Savings Banks were established, there were no systematic means of en- couragement to thrift, and no provision was made for its gatherings. Through long years of hard saving, and scraping together, and hoarding in his old stocking, some cottager, bent with age, may here and there have attained the end of his desire by the purchase of the freehold of his cottage and garden ; but this, in the nature of things, could not be general, and, in our highly artificial civilization,' per- haps not desirable, when labour can be so often more profitably employed in service or the work of an artisan. Now, however, those among the labouring population of England, whose industry and frugality enables them to lay aside a portion of their earnings, have (as was remarked by Mr. G. R. Porter, in his " Progress of the Nation,") " a readier, and, as regards the community, a far better opportunity for the profitable employment of their money, than can be generally procured by the purchase of a bit of land ;" for the Savings Bank is open to receive their deposits, and to yield a moderate, but certain return of interest upon them. A much greater incentive to prudence is thus offered than would generally be XV) INTKODUCTION, found in the desire of acquiring a rood of ground: besides which, the unwise laws and complicated systems that still continue to regulate the *transfer and possession of real property in this kingdom are so intricate in their operation, surrounded by so many difficulties, and attended by so much cost, that it would be quite incompatible with prudence for any poor man. to venture upon a speculation dependent on the validity of a title, even if the expensiveness of the deeds rendered such a course possible to him. The success which has attended Freehold Land Societies does not invalidate the argument; for if they have to some extent smoothed legal difficulties by lowering the relative cost of transfer, the move- ment is altogether partial in its results. They have been con- fined in their land dealings to the neighbourhood of large towns, where small building sites were in demand by well-oif artizans and tradesmen ; they have made no dealings in land specially designed to yield the labouring man a livelihood by tillage. Moreover, as Mr. Porter observes : — " Savings Banks [when honestly conducted] can never in- volve those, who therein deposit their savings, in any expense, or in the risk proverbial to those who touch bricks and mortar: so long as the money continues in deposit, it produces a small reve- nue to the owner, unaccompanied by any contingencies of seasons or fluctuations in the money market as far as he is concerned, and, at any moment when the whole amount, or part of it, is required to meet any extraordinary exigency, it is -forthcoming, without being subject to any deduction of any kind whatever." Without habits of forethought and frugality the working- man cannot provide against the ever-recurring contingency of bis existence — misfortune; and in forming such habits Savings Banlcs have done and are doing incalculable good. * [See on this subject the introduction and appendices to our "Treatise on the Enfranchisement of Copyhold and Church Property." Fourth Edition.] INTRODUCTION. XVU Archbishop *Whately remarks that " if they had become general some ten or twenty years earlier, at the time when wages were at the highest, they would have saved probably much moral degradation resulting from the distress which followed. It happens, as a fortunately countervailing circumstance, that in those very employments which are the most liable to fluctuation, wages are, generally speaking, the highest : so that, in prosperous times, the workman of steady habits, and not, like the savage, a slave to present gratification and thoughtless of the future, may accumulate a little store, which, when employment falls short, may either enable him to subsist till times improve again, or till he shall have acquired a competent skill in some other kindred art ; or else to remove with his family to some place where he can earn support." In times of pressure, the money he has deposited in a Savings Bank allows the working man to look forward to better days : he gains a habit of self-reliance, of depending on his own efforts and foresight for the means of extrication from a difBcult but passing crisis ; and his very nature is thus ele- vated by the feeling of his own strength and independence. f For him who looks only to the labour of his hands for his daily bread, it is an absolute necessity to provide against the day when by the failure of work, by sickness, or by the gathering infirmities of age, his earnings may be suspended or terminated. * [Lectures on Political Economy, p. 194.] t [An excellent prize essay has recently been largely distributed by the Managers of the Glasgow Savings Bank, in which is pointed out the gene- ral superiority of the workmen who have deposit accounts over those who have none. The former are invited to use every means in their power to lead to the Savings Banks those who have not yet tried them. The sound argument is suggested that the workman, who possesses a little money, is always in a good position to make a stand for fair wages for his labour ; whilst the artisan, who is pressed by necessity, is forced to accept what- ever is offered, and it is put out of his power to profit by a favourable op- portunity when there is a demand for labour.] XVlli INTEODUCTION. "What," says M. Agaihon Pr'evost, in the admirable Essay before quoted, "will the labourer then do, if, in his careless thoughtlessness, he has laid up nothing ? if he has lived from hand to mouth, without troubling himself for a mo- ment about the difficulties he must sooner or later encounter in his way ? Will he beg relief from public charity — a relief which is degrading to any one who ought to be able to do without it, and which he requires entirely through his own fault ? Would it not be better for him to provide, long before- hand, for the evil day, and, even at the risk of present privations, prepare himself to meet it?" This point of view shows well the advantage of *institutions that serve as a stimulus, a constant reminder of the duty of saving : for it is unfortunately frequently that which is useful. * [It is not right to overlook that a few men of eminence doubt the existence of any advantages derived by the working classes from the establishment of Banks for Savings. One learned writer, who has given great attention to the subject — Dr. Hubner, of Berlin, says : — " If we may credit the testimony of history, the habit of saving was not less prevalent before than after the estaUishment of such institutions. Formerly the little savings of the poorer classes were deposited with tradespeople and master mechanics. The rate of interest was, perhaps, not higher than that now given by the Savings Banks, but the Depositor had the double advantage of acquiring a friend, a connection with his capital. The interest was not the only profit derived from saving and in- dustry ; they also generated mutual trust and confidence in case of need or want of money in business and trade, and the artisan was always morally sure to find reciprocity in his transactions with old customers, to whose hands he had entrusted his former savings. There is no compensation for such social benefits in the Savings Banks, where the clerks receive the httle savings, hardly looking at the Depositor, or even granting him the least mark of civility. All he gets from the representative of humanity is a shp of paper, and his savings and hard earnings go to the strono- box but not to the lieart of the receiver. Being in need and pressed for money before the time, he receives it back with a reduction of interest (according to the practice of the Prussian banks in reference to withdrawal). A half life-time of saving and industry does not procure him either friend or credit."] INTBODUCTION. XIX if not indeed necessary, which must be retrenched with an eye to the future. How much, it may be asked, of the im- mense amount deposited would have been saved, had not these institutions existed? VI.— Of the So- A provision for the inexorable necessities of cial Effects of '■ Economy. the future having been once completed, then follows the natural desire on the part of the Depositor still further to improve his worldly condition. Each hopes that he may escape in times of commercial depression the necessity of touching his little hoard, and that he may anticipate the day, when, possessed of sufficient capital, he will be enabled to take a small business of his own, become a master, and have workmen under him.* Thus it is that -[Capital, which is nothing but the * ["The young workman," observes M. Droz, {Principes de la Science des Sichesses, 2nd Edit. p. 46,) "whose only possession is the gains of his labour, can never, if he dissipate all his earnings, improve his position. But the intelligent and well-conducted young man, who quaHfles himself to work on his own account, may in time save enough to take the lease of a shop, and to become himself an employer of labour." Dr. Chalmers had a great idea of giving to every man, if possible, a stake in the country, and thus a sense of the value of social order : " Br. CMlmers," says Mr. Mill, " inculcated on capitalists the practice of a moral restraint in reference to the pursuit of gain ; while Sismondi deprecates machinery, and the various inventions which increase pro- ductive power. They both maintain that accumulation of capital may proceed too fast, not merely for the moral, but for the material interests of those who produce and accumulate ; and they enjoin the rich to guard against this evil by an ample productive consumption. Yet, re- marked M. Roftderer, in his Memoires sur quelques poiats d'Economie Pubhque (p. 67) :— " Une epargne ne peut se faire que par des privations, ou en se me- nageant Tine grande surabondance de consommation par un travail qui passe la mesure des besoins actuels. Or on ne cherche a obtenir un su- perflu par le travail ou par des privations, qu'afia d'etendre par la ses jouissances a venir. " Ainsi, sans esperance de profit, point d'epargnes, point de capitaux, point de culture au dela des besoins des proprietaires et de leur serviteurs."] t [" Le capital," said M. Bastiat {Harmonies Economiques, pp. 2B5, XX INTRODUCTION. produce of labour saved, marks the progress of society, and, as Adam Smith pointed out before Savings Banks were set on foot, every man, who wastes his money, is a public enemy who diminishes the profits of intelligent labour, while he who saves it ought to be regarded as a benefactor to society. vii.-of security ■"■* '^ straugo that while the most eminent members for Savings. ^£ ^^^.y^ jjQ^ggg^ ^s individuals, recognise the great extent to which the self-denying economy of the body of the people tends, not only to the increase of the national wealth, but also to great moral improvement, yet they have, in their collective capacity as legislators, neglected, for eleven years, to provide the necessary security for the deposits they have invited ; — not that they can say that none is required, when they have still ringing in their ears the sad complaints of numerous unfortunate Depositors as to the unfairness with which the nation has allowed them — miserably poor as they were — to lose the money of which they have been defrauded. (See Part II.) One of the first cares of every Legislature should be not only to promote habits of frugality among the labouring popu- lation, but to provide a secure depository for the savings of their industry. If there be a public fiind of a more sacred 286), "a sa racine dans trois attributa de I'homme: la Prevoyance, I'ln- telligence et la Frugalite. Pour se determiner a former un capital, il faut en efFet prevoir I'avenir, lui sacrifler le present, exercer un noble empire sur soi-meme et sur ses appetits, reaister non seulement a I'appat des jouissanoes actuelles, mais encore aux aiguillons de la vanite II faut surtout etre anime de I'esprit de famille et ne pas reculer devant des sacrifices dont le fruit sera recueilli par les etres cheris qu'on laissera apres soi. " Capitaliser c'est preparer le vivre, le convert, I'abri, le loisir, I'in- struction, I'independance, la dignite aux generations futures. Rien de tout cela ne se pent faire sans mettre en exercice les vertus les plus ^ociales, qui plus est, sans les convertir en habitudes."] INTRODUCTION. XXI character than another, or to which inviolability should attach, it is that which poor men have accumulated with so much toil and almost heroic self-denial. This inviolability is obviously essential as an incentive to saving. Any one, who has mixed largely with working men still ignorant of provident notions, will readily testify that the first obstacle opposed to lessons of economy is the ever-recur- ring doubt of security for their savings — that, in fact, the funda- mental difficulty with operatives, and all who receive wages, is to induce them to make a beginning in habits of order, fore- sight, and economy. If a servant or an artisan can once be per- suaded to place in a bank, week by week, his smaller economies of a shilling or so, he will keep on accumulating with the hope of having pounds, where at first only shillings are stored, and we may be certain, that before that result is obtained, he will have acquired a knowledge of the advantage of saving, a taste for it, and a desire to continue it. To use a common French ex- pression, he is no longer " un proletaire sans avenir,^' but has joined the ranks of those who are marked by the excellence of their conduct and by their habits of morality ; and he is found a better workman, a better husband, and a better * citizen. * [The director of the Paris Saving's Bank stated, in proof of this, that not a single Depositor in that Institution had ever been prosecuted for joining in any political disturbance — a notable circumstance in France. Whatever amehoration there might be in the material condition, or in the inner hfe of the working classes, he attributed quite as much to the in- fluence of Savings Banks, as to the spread of elementary education. It cannot be overlooked, however, that these agents of progress have much to eifect in the United Kingdom : for direct investigation shews, that, of the population of 30,000,000, no less than 173,000 may be taken to belong' to the criminal classes, whose yearly depredations average £14,400,000, or £8-2 to each individual. If to these be added the paupers, 1,300,000, who cost annually £9,000,000 in poors rates, we obtain ;e23,000,000 of money as the yearly loss to the nation by the useless portion of its population, exclusive of the expenses of looking' after and punishing their malpractices.] SXll INTKODUCTION. rai.-praise of Until recent events, the Legislature was sup- ma of Honorary posed to havo done all it could, by successive Managers. euactments, to place these admirable institutions on a sound footing. So much was this opinion general, that when the Chambers of France were discussing a projet de hi for the regulation of Savings Banks in that country, one of their most eminent economists pronounced the following high eulogium to the assembled Peers on the bold measures of encouragement adopted by the English Parliament — so different, as he said, from the sentiments of fear which occu- pied the mind of the French Legislature, lest some great and sudden financial difficulties should arise, from too much liberty of principle being adopted with regard to the Depositors : — * " Savez vous ce qui fait la force et le salut du gouverne- ment Anglais ? Cest le mSme sentiment qui faisait, au plus beau temps du peuple-roi, la force et le salut du s6nat Romain : il croit en lui ; il croit d la fortune virile de l'ew.pire hri- tannique ; il vendrait le champ occup6 par un nouvel Annibal, celui-ci fut-il aux portes de Londres. II a confiance dans la nation et la nation I'en recompense en triomphant, sous sa conduite, de difficultes et de dangers que I'univers entier repute insurmontables.'' These sentiments were not only largely shared by those for whose benefit these institutions were devised, but multi- plied throughout the land among all classes — and eminent writersf accorded a high place and praise to the existing Savings Bank system, proclaiming : — That " the labouring classes may now feel assured that their savings, and the interest accumulated upon them, would be faith- fully preserved to meet their future wants.'' * [M. Charles Dupin, Chamber of Peers, 17 July 1843.] + [Mr. M«Culloch's Statistical Account of the British Empire, II., p. 668. See also sec. 4, chap. III. of this Treatise.] INTEODUCTION. XXIU Much praise, at home and abroad, was also considered due to the excellent men of all classes, who, carrying oat the design of the Legislature, heartily co-operated in the establishment of banks for savings, and subscribed considerable sums to defray necessary expenses of management in the smaller places ; be- sides making it their duty, for many years together, to give their personal services gratuitously in supervising the com- monest operations. Many of them, though engaged in affairs of the greatest moment, were known to be regular in their attendance on the days fixed for them by rotation, and to be discharging with untiring patience the minor duties connected with the receiving and registration of the most trifling sums : content if, by their presence in the office of the bank, they gave confidence and encouragement to the industrious classes.* * [" L'artisan qui veut placer la petite somme economisee dans la semaine," — remarks M. Dupin, with something of a rhetorical expansion of the facts — "s'il vient an bureau de la caisse d'epargne, au lieu d'un employe subalterns, trouve a tour de role les citoyens les plus eminents, des magistrats, des fonctionnaires, des savants, des manufacturiers, des com- mer5ants. Foil& les commis du peuple, qui derobent a leur vie laborieuse des moments precieux, pour en faire un admirable Usage, en insorivant de leur main les versements de I'ouvrier. En meme temps, nos plus riches capitalistes sont flers de presider a la compatibilite d'un etabUssement qui revolt avec bonheur les moindres economies de l'artisan et du soldat, comme les plus humbles depots de I'orphelin et de la veuve. Tel est I'etablissement que s'enorgueillissait a juste titre de presider, I'illustre due de Larochefoucauld-Liancourtj oelui qui, non content d'apporter la vaccine aux enfans du peuple frangais, aspirait a leur assurer I'aisance dans I'age mur, et le confort dans la viellesse." " Savings Banks have, above all, an inestimable advantage in forming a bond of fraternity and of Christian charity between rich and poor— between all classes of society. When men, distinguished by their wealth, by their position at the bar, in the magistracy, in learning, or in arts- many of them the bearers of those historical names which form one of the glorious inheritance of France,— when these men are seen voluntarily devoting .themselves to the administration of the Savings Banks ; giving up to them their time, their atteiition, and even their money; con- stituting themselves the servants of the poor man, and occupying them- XXIV INTRODUCTION. IX - Such -^ series of facts, however, subsequently brought to uSversluy me. UgH shewed. Unhappily, that all Trustees and Ma- nagers did not, after the first enth\isiasm was over, continue the effective discharge of the duties for which they were receiving public esteem and admiration. It was also found that the Legislature — while endeavouring to give practical effect to the wide sympathies between class and class, which honourably distinguish our age from all others in the world's history — had not in its efforts at social law-giving been invariably suc' cessful, and had not always sufficiently regarded the simplest principles of political economy. After thirty years (up to 1848) had been devoted to develop- ing, in what was thought a satisfactory manner, the progress of Savings Banks, the friends of these excellent institutions imagined that no improvement could be necessary, unless, perhaps, to give greater facilities to the public. Within the last twelve years, however, the reputation of Savings Banks has undergone a change ; to the praise that used to be awarded to them has succeeded censure of the most bitter kind ; to the confidence, which was universal, has succeeded distrust. It has been found, not only that their system of management has become imperfect and given rise to frauds and losses, but also that considerable* financial errors have been committed in the selves with his interest with a zeal as enlightened as it is indefatigable • the labourers— that numerous class which earns its bread by the sweat of its brow, throw aside the feelings of hate which evil suggestions seek in vain to inspire. They see that, if they are not the eldest sons of the great human family, they are not, after all, entirely disinherited : they see that there are sympathetic hearts to love them, and good dispositions to serve them ; thus they reconcile themselves to an order of things which none can change : and should Savings Banks have produced no other good they would even thus deserve the gratitude of mankind." Prevost.'\ * [In Part III. Art. 19. it will be, shewn that errors in the fundamental principles of finance have produced a Deficiency of over 4 J millions on the 41 millions due (20 November 1859) to Savings Banks and Friendly INTRODUCTION. XXV principles upon which the Goyernment has dealt with Savings Banks. _Effe t f "^^^ panic that ensued on the discovery of the Panic. ^jjg Saviugs Bank frauds would, but for the serious character of the delusion, form no unamusing chapter in the history of popular credulity. The one leading fact disclosed was that the public really knew little of the legal position of what was deenled so simple a mattei?, coming home to the experience of every-day life, as a Savings Bank. *Complete ignorance prevailed of the funda- mental natiu'e of these institutions, and of the relation which subsisted between the Depositors on the one hand and the Government on the other. The delusions which existed in the public mind were not confined to the illiterate, but were participated in by persons eminent from the high political positions they had filled. The alarm which followed was re-echoed by the Press, and loud were the clamours of the hour for change, dictated more by pressing fears, than by due regard to the reasons which really existed for a change ; but public fear, when the first apprehension of the imminence of greater disasters had passed away, was more tempered with rationality than public faith had been, for it set itself with commendable promptitude and calmness to the task of in- quiring into the facts of the case. Societies, which is equivalent to £10 . 13s. 7d. in every £100 that the nation has taken charge of. The operations of the Chancellor of the Exchequer will be shewn to have produced a Deficiency of £315,801, ■tt^hich is equivalent to £1 . 4s. id. per cent. Up to 20th November 3858, the following causes had assisted in creating this Deficiency : — 1 . Faying more interest than received: over 3J millions. (Art. 14. Part III.) 2. Loss on purchases and sales of stocks : ■ . ^ofamil. (Art. 16. Part III.) The discovered Frauds amounted to .... i of a mil. (Art. 9. Part II.) } * [See illustrations of this in Sect. 4, Chap. 3.] XXVI INTRODUCTION. Thus the great panic, which, about ten years ago, threatened to be such a check, financially and morally, to the future provident habits of the labouring classes, has not been without beneficial results. It has proved, what does not seem to have been thought of before, that large and difScult questions, legal and economical, are mixed up with a matter apparently so simple as the accumulation and safe deposit of odd pence and shillings, saved up by thrifty labouring men. This is abundantly evidenced by the grave and patient con- sideration, which Parliament has been compelled to give to the measures introduced, session after session, and by the nume- rous pamphlets and essays that have been written on the sub- ject of late. The public has thus had placed within reach the means of acquiring a better knowledge of the actual and legal relations between the Savings Banks and the Government, and is able to guard against the false and unsound confidence in which it previously reposed. The working classes have learnt how delusive and how dangerous was their faith in the security of the State for the safe keeping of the fruits of their economy. The disclosures of the criminal tribunals and the discussions in Parliament have demonstrated how completely divided re- sponsibility has set at naught whatever of security, it may have been designed to provide by the original acts of legislation. Yet the public has still very much to learn respecting the con- stitution and operations of prudential institutions, although the faith of ignorance is giving way to the good faith that comes of knowledge, and although there is reasonable ground to believe that all classes of the nation, whether the governing or the governed, have made no inconsiderable advance, in the decade that is just closing, in appreciation of the principles that ought to regulate the safe custody and increase of the savings of the people. We may therefore hope that the discovery of the accidental defects in institutions in themselves so beneficial INTRODUCTION. XXVU and beneficent, will lead to a reorganization that may effec- tually obviate the recurrence of the calamities of that period, to assist in the consideration of which, we have given, in our Chapter on Savings Bank Frauds, very fall details of the various circumstances by which the unsound elements in the constitution and management of these banks were brought to light. xi.-Astopro- In spite of all the discouragement to Savings fress of Savings -p* i i i i i /> i t . i auks. lianks, caused by the neglect of the Legislature to provide for the complete security of their deposits, the degree in which the labouring classes are willing to avail themselves of these institutions is shewn in a remarkable manner by nu- merous facts ; and the rapid increase in the number of small Depositors is a very satisfactory feature of the inquiry. Even in respect to the larger deposits, it is probable that their owners have accumulated them by a long and *patient economy. It appears from the parliamentary returns that the Invest- ments in England and Wales are in proportion of about £1.12*. to each person of the gross population, and that the average amount to each Depositor is about £26. That one in sixteen of the population of England and Wales are Depositors in Savings Banks, and that this proportion is on the increase. * [" Combien de vertus cachees, combien d' empire sur soi-meme, com- bien de resistance aux seductions du plaisir, aux entrainements de la debauche, combien d'amour filial, combien d 'amour patemel et matemel, combien d'inspirations providentielles et de sentiments religieux sont caches sous ce tresor de cent millions epargnes, centime a centime, et gagiies a la sueur du front des classes laborieuses 1" — Lecture of Baron Charles Dupin '•sur hs Progrls moraux de la Population Parisiettne depuis I'itablissement des Caisees d'E^argne.'] c 2 XXVUl INTRODUCTION. That the number of Depositors (as compared with the *popu- lation) is less, and the amount of individual deposit much smaller, in f Scotland than in England. That in Ireland the banks are fewer than in Great Britain, but the average of deposits is higher. Various attempts have been made to classify the Deposi- tors according to occupation; but from difficulties of definition, no absolutely certain results can be obtained, and the Parlia- mentary classification is fall of confusion. Thus in one class, amounting to nearly one-fourth of the whole Depositors, two distinct elements are imfortunately mixed up : tradesmen and farmers being aggregated with certain artisans.j For want of better published information, the following Table is deduced from the Parliamentary Report for 1858, and from returns we have obtained from some of the largest banks. Approx- imate results show that, speaking generally, only one-third of the total number of Depositors may be deemed " working- men:" more than one-third axe females, and one-sixth minors, making, for females and minors, more than one-half of the total amount of deposits. Not 3 in 100 are gentlemen, pro- fessional men, or teachers. • [The following are the proportions of the population, in other countries, who are Depositors : — France (Report to the Emperor^, year 1858 . . 1 in 37 Belgium 1 in 8J Germany (Dr. Hubner's Treatise) . . . 1 in 42 America — New York 1 in 14 „ Massachusetts 1 in 6] t [Although the balance due in the Glasgow Savings Bank to 35,838 Depositors on the 20th November 1858, was £724,280 . \5s. Id., or an average of ^30 to each, yet out of 92,743 receipts from Depositors during the currency of the year, no fewer than 76,435 consisted of sums varying from Is. to £5.] I [The author of an article in the eighth edition of the EncyclopEedia Britannica, published in 1859, based upon the Committee's Report of 185^ seems to have overlooked these circumstances (as well as the general inaccuracy of such descriptions as " minors," &c.), and to have relied on the imperfect Table there given as the basis of certain arguments.] INTRODUCTION. XXIX- Class. Occupations. Numier belong-, ing to each class in every 100 Depositors. Per-centage of the total Deposits (ex- clusive of Friendly Societies that their ^accounts amount to. I. Charwomen, Dressmakers, Female Artisans, Laundresses, Milliners, Needlewomen, Nurses, Sempstresses, Servants and their wives, Shopwomen. 26 ■per cent. 26 II. Artisans and Mechanics (not described as Journeymen) Small Farmers, Tradesmen and their Assistants, and their wives. 24 26 III. Minors having accounts in their own names (including apprentices) . 15 8 IV. Carmen, Carriers, Farm Servants, Journeymen Mechanics, Labourers, Porters, and their wives. 124 14 V. Females, described as Married Wo- men, Widows, or Spinsters. 12 14 VI. Miscellaneous, not included in other Classes. 5 44 VII. Clerks and Employes in public and other oflSces, Gentlemen, or persons of independent means, Persons engaged in education, Professional men and their wives. 3 3 VIII. Boatmen, Fishermen, Letter Carriers, Mariners and Soldiers {exclusive of Military Banks), Pensioners, Policemen, Railmay men. Revenue Officers, Steamboat, Cab, and Omnibus men, and their mves. 2 3 IX. Trust monies and Joint Accounts, li u 100 100 XXX INTRODUCTION. We find also that : — Classes 1 and 7 are proportionately greatest in the metro- politan divisions of England. Class 2 is least, and class 3 greatest, in the agricultural counties. Class 4 preponderates in Scotland and the manufacturing districts. Class 5 is greatest, and class 6 least, in Ireland. Classes 8 and 9 are least in Scotland. INTRODUCTION. xxxi *AS TO THE PRACTICE OP SAVINGS BANKS IN FOREIGN COUNTRIES. 1. — France, Savings Banks in France require for their establishment the authorization of the Government, which exercises a surveillance over their management and accounts. Their funds are deposited in account current with the " Caisse des Dcpdts et Consignations," which is administered under fguarantee of the public treasury, and pays the interest ; they are not, properly speaking, " Govern- ment Institutions," as the Depositors have no other security than tliat of the Savings Bank itself, which is conducted on the volun- * [All foreign systems appear to be based upon principles and rules of EngKsli origin, which are still followed very closely ; but, starting from that point, they have introduced many improvements. In respect to account-keeping, personal examination has satisfied us that the best system is that in use in the Paris Savings Bank, of which M. Prevost is justly proud. We are indebted to Dr. E. H. Michelsen, of the Board of Trade (an accomplished linguist), for assistance in pi-ocuring from abroad official information of the most reliable character ; and to Mr. L. Fradersdorff, of Hamburg, for valuable details in reference to the German, Swedish, and several other continental Savings Banks.] t [During the Revolution of 1848 the Provisional Government found itself in great difficulties, the amount due to Depositors being 3.56,000,000£, with only 66,000,000 of specie in the Treasury to provide for it. The rate of interest was in consequence raised to 5 per cent.; and aU Depositors above lOOf. were compelled to take a per-centage of the amount due to them in Treasury Bonds at four and six months' date, and in coupons of rente at 5 per cent. Ultimately, under the empire, the loss incurred by the Depositors on sale of these securities was reimbursed to them.] XXXli INTRODUCTION. tary system, as in England, by a Board of Directeurs, who su- pervise the *management, and by a number of Administrateurs, who attend at the office of the bank to witness receipts and pay- ments. The following Acts of Legislation apply to them : — Laws of 28 Floreal, An VII., 5th June 183.5, 31st March 1837, and 22nd June 1845; Ordonnanoe of 28th July 1846; Law of 30th June 1851; Decree of 15th April 1852 (which regulates the system of account keeping) ; Law of 7th May 1853 ; and Decree ofl5th May 1858. On the 1st January 1859 there were 379 Savings Banks in operation in France : thirty more had been authorized by the Government, but were not yet opened at that date. The account of a single Depositor is limited to lOOOf. t(.£40) ; and no sum beyond 300f. can be paid in at one time. The rate of interest granted to the banks by the Caisse des Depots et Consignations is fixed at 4 per cent, by Art. 1 of the Law of 1853. Of this sum 177 banks retain |, and 202 retain J per cent., for expenses of management ; the statutory limit, by the law of 1851, is | per cent, in the provinces, and 1 per cent, for the Paris Bank. A few cases of malversation have occurred, but of trifling im- portance : they were, however, sufficient to attract the attention of the Government, and led to the system of Uniform account-keeping * [The Parliamentary Committee of 1858 were given to understand by one of the witnesses that French Saving Bank Depositors have a State guarantee, but this is not the case. The Committee also gathered that there were no Trustees or Managers, hut the law is as follows : — " Les operations de chaque caisse d'epargne sont dirigees et surveillees par unconseil de directeurs ou d' administrateurs. Les statuts determinent la composition et les fonctions de ce conseil." {Decree, 18.53, art. 1.) In the Paris Banks there are about 1200 administrateurs, and in the pro- vincial banks there are altogether about 6800.] f [When a deposit account exceeds 1000 f., either by interest or by fresh deposits, a portion, sufficient to buy 10 f. of rente, is transferred from it, and the Depositor is made a proprietor of stock to that amount. See Part IV.] SAVINGS BANKS IN FRANCE. XXXUl and surveillance prescribed in 1852. To this is added periodic inspection by the Government ' Inspecteurs de Finance.'* With the exception of the Paris Savings Bank (which is a private undertaking, authorized by the Government as an ' establish- ment of tpublic utility/ and is administered by a Council of twenty- five Directors, annually elected) they are municipal establish- ments combibing, however, the voluntary system of unpaid Ma- nagers. The bank officials are required to deposit actual money or government stock by way of security. Each year the jMinister of Agriculture, Commerce, and Public Works, publishes a report to the Emperor, accompanied by statistical documents on the con- dition and operations of the Savings Banks.§ * [" Les caisses d'epargne sont soumises aux verifications des inspec- tem-s de finances. Les inspecteurs peuvent porter leur examen et leurs investigations sur banks conducted under the super- vision of the municipal or'county (XVej's) authorities, whose rules are required (according to the law of 12th December 1838) to be confirmed (bestdtigt) by the provincial Government. The local authorities have, however, been urged in several rescripts to en- courage Savings Banks, and in some counties the tax-receivers have become agents to the Savings Banks, and collect deposits with the taxes. This plan Dr. Otto Hubner, of Berlin, Director of the Royal Statistical Central Archives (to whom we are in- debted for this information) states to have been very useful, and to ofier, particularly in country parts, increased facilities to investors. The rate of interest allowed by the Prussian banks* varies with the expenses of each Institution, the law requiring that it shall be fixed so as to leave a balance between the interest paid by the banks and that received on their investments, to cover expenses of management, and to furnish a small surplus to be accumulated to a guarantee fund. The maximum amount of fdeposit for any one year varies con- siderably, but Depositors may hold accounts to the extent of 500 thlrs. (£75), although many banks enforce as low a limit as 200 thlrs. ( J30). * [In the province of Brandenburg the rate allowed averages 2J to 3i per cent. Many banks which originally granted a higher rate have re- duced it to these figures.] t [In some banks when the deposits have attained a certain amount, they are converted into stock (under the provisions of the law relating to pupillarische security) without notice being given to the Depositor. He continues to receive the Savings Bank rate of interest, but is hable to the losses, and entitled to any profit that may arise in the course of exchange.— (Zeitschrift des Centralvereins, pp. 397,409)] xl INTBODUCTIONi The report for .1857 shews that there were invested at the end of that year for the whole of Prussia ; — On Mortgages in Towns Ditto in Country Districts . . . In Public Securities ........ In Personal ditto .* In Dead Pledge {Faustpfand) With Public Corporations Thalers. 9,732,683 9,762,056 10,263,084 4,697,231 3,202,901 4,086,460 £ 1,459,902 1,464,308 1,539,463 704,585 480,435 612,969 41,744,415 6,261,662 6. — Austria- Savings Banks in Austria are established either by Joint- Stock Companies or by Civic Corporations; but they are all placed under the supervision of Government, especially as to the employment of their funds and the strict observance of the rules and regulations. The funds may be invested in loans on landed property of double the value (provided the buildings be previously insured), to be repaid by certain fixed instalments ; in advances on, or pur- chase of. Government stocks and bonds bearing interest ; also in advances to Monts de Piete or Pawn and Credit Institutions ; and on private Bills of Exchange, bearing three good signatures. The largest investments are made in loans and mortgage or landed property, and the total of such investments amounted in 1858 to about £7,300,000 (or about four-fifths of the whole). The average rate of interest allowed for deposits is about 4 per cent. The withdrawal of deposits of .£10 or more requires one month's notice, while lesser sums are repaid on demand. The Savings Banks weie first introduced at Vienna in 1819 on a very Small scale, but are spreading gradually throughout the empire. The number of Savings Banks has increased from 14 in 1842 to 66 in 1855. The amount of deposits has increased in the same period from £4,286,805 to £9,036,773, while the amount of withdrawals has increased from £969,808 to £3,013,677. The savings' banks in AUSTRIA. xli Reserve Fund has increased from £236,731 to £652,584. The number of Depositors has increased from 73,630 to 903,677. ■ The average amount due to each Depositor is about £10. There are in Austria and Prussia other institutions for savings, under the title of " Spar-und-Consumo Fereine," the principle of ■which will be found described in Professor von Stubenrauch's work (pp. 162 — 167). Their operations will perhaps be best understood by quoting the following preamble to the Rules adopted by some of them : — " The members propose to themselves, as a common object, to make savings fxom their daily earnings for the jjutpose of investing them each meek in a Savings Bank, and of buying, for the support of existence during the winter, provisions wholesale, especially bread, fuel, and potatoes." They are also referred to by M. Moreau-Christophe, as having produced satisfactory results. He says : — " Lafoiirmi met de cotS, pendant I'StS, de quoi se nourrir quand la bise est venue. Telle est I'idee mere des societes d'epargne qui se sont etablies a Berlin, et de la dans les autres villas de la Prusse et dans les autres Etats germaniques, depuis plusieurs annees. Ces societes, partout ou elles existent, procurent a leurs associes une economie de cent pour cent sur les denrees de premiere necessite. Les distributions qui se font ainsi sont doutlement preferables a celles qui se pratiquent en quelques lieux, au moyen de magasins que des personnes bienfaisantes ont etabUs pour vendre a prix coutant les denrees d'un usage habituel. Elles ont, sur ce dernier mode, I'avantage de ne pas participer du caractere de I'aumone, et aurtout celui de faire, de la prevoyance qu'elles reclament, la condition des res- sources qu'eUes oiFrent." • [For further information respecting the Austrian Banks the reader is referred to ' Sonnleithnei' — Erlaiiterung der Statuten und des Eeglements der, mit der ersten Oesterreichischen Sparcasse vereinigten Versofgungs- anstalt,' Vienna 1826, and ' Gesohichtliclie Darstellung der Entstehung und des Wirkens der ersten Oesterreichischen Sparcasse,' Vienna, 1854. The particulars given above are from the elaborate Statistical Treatise of Professor Moritz von Stubenraucb, who has, with the greatest kmdness, answered our inquiries in reference to the Savings Banks of Austria.] 2 [Du Probleme de la Misere, et de sa Solution chez les Peuples anciens et modernes," torn. 3, pp, 306, 307. See also Annates de la Charite, 1847 note by Dr. Julius, '' sm- les Societes d'Epargne," p. 034 et seq.] xlii INTRODUCTION. It was partly with a similar object— viz. to establish Co-opera- tive Stores — that Mr. Slaney's Industrial and Provident Societies' Act was passed in 1852. That it has not been acted upon to any great extent is attributable (as much as to any other cause) to the fact that the members of societies, registered under it, are exposed to unlimited liability, whilst ordinary joint-stock companies are enabled, by a recent Act, to limit the responsibility of their shareholders. VII. — Holland. In Holland there were 127 Savings Banks in operation in the year 1857. There are no Acts of Legislation specially relating to them. They are wholly private undertakings, but are considered bene- volent institutions, and the Directors are bound by an article of the Poor-law to make annual *returns of their operations. The rate of interest usually allowed is 3 per cent., although a few banks allow 4 per cent. The investments are made in Government stocks, on mortgages, and on loans on the public funds for short terms. Some years ago, from depreciation of securities, several fbariks had to suspend pay- ment. * [Digest in the Statistical Annual, Amsterdam 1858.] T [Mr. J. Langerhuizen, Manager of the Dutch Society for Life Assur- ance at Amsterdam, writes to us that : — In 1830, the then existing Savings Bank at Amsterdam failed, by the fall of the national funds, in which the money was placed. The disap- pointment was great, and to win back the confidence of the public, another Savings Bank was set on foot as a private vmdertaking ; a guarantee capital of 400,000 guilders being subscribed by private individuals, to bear interest at 2i per cent., and to be liable to the losses of the bank ; but to receive no further dividend out of its profits, if any.] HOLLAND. SWEDEN.. xliii " The leading Savings Bank, that at Rotterdam," according to an account with which Mr. W. Six, of the Central Statistical Com- mission at the Hague, has favoured us, " is conducted like those in many other cities, by some members of a philanthropic Society called ' Maatschappy tot Nut van het Algemeen ' (Society for public benefit or general utility). In that bank the smallest sum which is accepted on deposit is two-pence : interest is allowed, on sums of one guilder {\s. Qd.) and upwards, at 3 per cent., which is added to the capital three times a year, viz. on the last days of April, August, and December. " Deposits are received twice a-week, but they can only be with- drawn twice a-month. " Principal and interest are entered at the same time, in the books of the bank and in the pass-books kept by each Depositor. "Sums of 25 guilders {£2, .\s. 8d.) and more will not be re- turned until after giving notice.* " Disputes between the officers of the bank and the Depositors, if they take place, are settled, not by the justices, but always by the Directors of the ' Maatschappy.' " The Rotterdam Bank began its operations in the year 1818. On the 30th April 1819 there had been invested by 466 Depositors a sum of 18,558 guilders (£1550), and on the 30th April 1858, these figures were respectively increased to 10,064 Depositors, and 1,788,790 guilders (£150,000). VIII. — Sweden (exclusive of Norway). There were reported to be 130 Savings Banks in Sweden at the * [In the Amsterdam bank the maximum deposit allowed is £100, and the interest paid is 4 per cent, in quarterly instalments. For withdrawals notice is required From 10 guilders (16«. Sd.) to 50 guilders (£4 . Ss. id.) 1 week. „ 50 „ (£4. 3s.) to 200 „ (£ 16 . 13«.) 3 weeks. „ 200 „ (£16.13«.) to 600 „ (£50) and above, 4 weeks. It is prescribed in this bank that not more than ith of the capital shall be placed in Government securities.] d2 xliv INTRODUCTION. end of the year 1 838 : 13 of these had been opened during the year. The amount of deposits at that date was 26,102,360 rixdollars (.£1,491,500),* the increase during the year being only .£1400. There is no general Act of Legislation relating to these banks, but each institution obtains a special statute from the Government authorising the carrying out of the particular views of its pro- moters ; and any change, that may afterwards be considered neces- sary by the Directors in the statutes, is submitted to the Government for revisal. . The Savings Banks, like all other charitable institutions in Sweden, are exempt from any tax or contribution to the Govern- ment. They are wholly private undertakings, with subscribed capital for the necessary guarantee funds, and are managed by Directors elected among the founders, or by those who are voted to replace them. The functions of Governors or Directors are gratuitous. There is no uniform system of book-keeping, but many banks have obtained foims of account from the Stockholm bank as models. Deposits may be made in that bank, once a week, for as small an amount as 26 ore (about 4d.). The total amount that may be paid in, in a year, is 300 Rd. (£17). A Depositor may hold an account to the extent of 2000 Rd. (.£115). Deposits may be withdrawn at a week's notice, though * [The Eepoi-ts of the Savings Banks in the larger towns are published every year in the papers. The Stockholm Bank also prints a pamphlet separately. Its return for 1858 shows that to 20,624 Depositors there was due a balance of ... . .... £184,000 Deposited during the year 32,000 Surplus Fund (excess of assets over liabilities) . . . 17,000 Out of the whole funds of this bank only .... 2,900 is invested in Government securities. It appears that in the city of Stock- holm, which has a population of 90,000, one person in every 4 inhabitants is a Depositor.] SAVINGS BANKS IN RUSSIA. xlv power is reserved to require longer* notice if circumstances render it necessary. For the accommodation of Depositors who are not able to attend at the banks during the week-days, payment is allowed of money to delegates in their own parish before service on Sundays. Interest is calculated from the 1st of the month after the deposit is made, and is added to the capital at the end of the year. In the Stockholm Savings Bank the rate of interest allowed was 5 per cent, from 1821, when the Bank was established, until 1830, when- it was reducedf to 4 per cent., which rate still continues. In some banks the interest is higher, but in no case exceeds 6 per cent. The banlis invest their moneys (within fixed limits) on mort- gages, and in Government stock, or in bonds issued by corporations sanctioned by Government. Private bonds with personal security are not accepted. In case of need, they have a privilege to diawl on the Bank of Sweden to a fixed amount, and they may also deposit money at 3 per cent interest.^ IX. — Russia. There are but two Savings Banks in Russia— at St. Petersburg and Moscow. (The HColleges of Public Charity in Russia, and the * [Deposits unclaimed after ten years cease to bear interest ; but power is reserved to the Direction to waive this regulation. Deposits of deceased persons, leaving no representatives, are forfeited to the Bank. (Stock- holm Savings Bank Rules, as revised, 15th July 1859.)] + [In 1857, the Christiania Savings Bank (Norway), adopted the same course: the result, however, was an excess of withdrawal during the year of £28,000 sterling.] ■^ [In the year 1857, several of the banks found it necessary, through the large amount of withdrawals demanded, to avail themselves of this privilege.] § [For much information relating to Sweden, we are indebted to Dr. F. T. Berg and to M . Herman Arosenius, *ho have very obligingly forwarded to U8 copies of the forms in use in the Stockholm and other Savings Banks. H [For its rules, see Russian Code of Laws, vol. xiii. §§ 1. to 1711.] xlvi INTRODUCTION. Agricultural Bank in the Baltic province of Courland, are autho- rised to accept deposits, but their operations are of another nature, and with different objects.) They are entirely Government institutions, under the Imperial regulation of 30th October 1841, inserted in the Russian Code of Laws (vol. xi), under the Chapter entitled "Rules of Credit Esta- blishments," §§ 1636 — 1666, and are directed by the Council of the Orphan Asylum (called " Lombard "). . In the course of the reforms now in progress in the Russian legis- lation on banks generally, modifications are expected to be intro- duced in the regulations of the Savings Banks. The system of account-keeping is the same in both banks. *The amount that may be deposited at a time ranges between 50 copecks silver (Is. 8d.), and 25 rubles silver (^4 . 3s. 4rf.), but not more than 50 lubles (^8 . 6s. 8d.) can be received in the course of a year ; and the total amount that a Depositor may have to his credit is 750 rubles silver (;£125). Deposits are under the guarantee of the Lombard. Interest is allowed at the rate of 3 per cent, per annum (com- pound) : previous to the 1st November 1857, 4 per cent, was given, but the rate was reduced by Imperial Ukase of 20th July 1857. The following is from the Report of the Minister of Finance on the Russian Establishments of Credit for 1858, laid before the Council at its annual meeting, 15th June 1859 : — " Savings BANifs. " J858, 1st January — • silver Kubles. £ " Amount of Capital deposited . . . 3,456,388 .. 576,065 " New sums deposited during the year 1858 1,566,0H6 .. 261,016 "Paid back 1,458,278 .. 243,046 " 1859, 1st January— '■ Balance remaining in Savings Banks, including Interest up to this date . 3,634,320 ,. 605,703 " Number of Accounts open . . 46,644 " Average of each account , . £13 * [For information in reference to Russia we are indebted to the kindness of Mr. James Thai, of St. Petersburg."] AMERICA. xlvii In the capital of Russian Poland (Warsaw), a Savings Bank is formed, having 10,830 Depositors, and a capital of £78,000, or, on the average, £1 to each Depositor. United States of America. We find, by a perusal of the *rules of American Savings Banks, that their plans of operation present great similarity. The most complete arrangements for securing sound management and prosperity are observable in the rules of the banks of New York, Massachusetts, and New Jersey : we subjoin a short state- ment of their operations : — X. — State of New York. The number of Savings Banks in operation in this State was 57 on the t31st December 1858. Each of these institutions is or- ganized under separate jActs of the Legislature, passed during various Sessions. The provisions of these Acts do not materially differ in respect to their powers, and in all cases provide for the appointment of a Board of Managing Trustees ; but the ||Govern- * [The reader will find a variety of Clauses from Rules of American Savings Banks dispersed throug'h this Treatise.] t [Superintendent's Report, 9th February 1859.] X [The laws 1835 (May 9); 1839 (May 6); 1847 (December 15); 1850 (March 25); 1853 (April 15 and June 30); and 1857, cap. 136; apply to all Savings Banks. It is remarkable how frequently the American Statutes are altered, thereby carrying out the ample precedent furnished by England. Indeed, the Acts are sometimes altered twice or thrice in the same Session.] II [The Act of 1857, however, appointed an officer (Mr. James M. Cook) the Superintendent of the Banking Department, whose official resi- dence is in the City of Albany, to supervise and report annually upon the condition of the Savings Banks in the State. It is also part of his duty to suggest, from time to time, any amendments in the law which he may think desirable.] xlviii INTRODUCTION. nient does not interfere with or control the action of such Trustees, and the Savings Banks are wholly private institutions. Some of the Savings Banks allow 6 per cent, per annum on sums of 500 dollars (£100) and under, and 5 per cenf. on larger deposits. Others allow 5 per cent, up to 500 dollars, and 4 per cent, on larger amounts, with an occasional bonus. The law of the State permits an accumulation of a surplus fund up to 10 per cent, on the whole amount of deposits. The Trustees of each bank declare the rates of interest according to its profits. They have, as a rule, been as above stated. Investments are required to be made, generally, in Government securities, or public stock, created under any of the laws of the United States, or of the several States of the Union, or by the cities of the State of New York (when authorised by the Legis- lature), and on bond and mortgage on improved unencumbered real estate of double the value of the amount loaned. No invest- ments are allowed to be made on merely personal security, Some of the Savings Banks lipiit the original deposit of one person to an amount not exceeding 1000 dollars, others not ex- ceeding 3000 dollars, but allow the accumulation of interest, which is treated as principal if not withdrawn. In most of the banks, however, there is no limit to the amount of a deposit, except that a Depositor can have but one account standing in bis own name, though he may have accounts as Trustee for members of his family, or other persons. The Trustees of the banks, however, discourage large deposits, and the lowering the rates of interest operates, also, as a check upon them. No frauds have been officially reported : it is known, however, that there have been some, but they were not remarkable in cha- racter, or of sufficient magnitude to affect the deposits, either in principal or interest.* * [For the information given above we are indebted to Mr. Andrew Warner, of the Institution for the Savings of Merchants' Clerks, and Mr. Charles Newcomb, of the Mercantile Mutual Insurance Company, New York. A large number of rules and statements issued by the various Savings Banks have been forwarded to us in the most obliging manner by those gentlemen.! NEW YORK. xlix A remarkable agitation has been carried, on for some years, having for oHject the transfer to the State of the deposits remaining unclaimed after a period often years. It was, in fact, asserted *in the Senate, and for several years reiterated, " that more than 20 millions of dollars were locked up in Savings Banks for which no claimants could be found." During recent Sessions it was found " that an impression existed in the minds of many of the Members, that large unclaimed de- posits were lying in the vaults of these institution?,, and the Speaker of the House, with other Members of large legislative ex- perience, expressed similar views." This attempt, however, has been warmly resisted by the Trustees of the banks, who have urged, very properly, that money in a Savings Bank, being the absolute property of the Depositor, may he, and frequently is, claimed after a long interval of years. By the Trustees of the fSeamen's Bank for Savings, New York (February 7, 1859), it was alleged " that these attempts in the Le- gislature to appropriate unclaimed balances in the Savings Banks had caused a much more general habit than formerly of presenting books to be written up, by which accounts were renewed ; while, from the same cause, many accounts had been withdrawn alto- gether ; and that the amount of unclaimed deposits was too small to be an object to the State, even if they could reconcile their views to a measure which would be abhorrent to the feelings of the community at large, and would greatly diminii^h the confidence of Depositors." In the Report for 1859 of the Chamber of Commerce of New York (pp. 266, 267), it was remarked, that the continued efforts made in the Legislature to deprive Savings Banks of the un- claimed deposits could only be chaiacterized as equivalent to * [Protest of Mr. Thomas Jeremiah, President, and Mr. Giles H Coggeshall, Secretary, on behalf of the Bowery Savings Bank, 1859.] t [Statement of Mr. P. Perit, President, and Mr. W. H. Macy, Vice- President, on behalf of the Seamen's Bank.] 1 INTEODUCTION. " repudiation," and, indeed, " couiiscation ;" and the * Chamber ' invoked " public disapprobation against that legislative action which would weaken general confidence in what are vested rights." So strong, indeed, was the opposition to the measure, that, if not finally abandoned, it will have to be very much modified before it can pass into law. The average of *deposits per account in the State of New York is £41, and the proportion of Depositors (230,074) to population (2,880,000) is 1 in 13. 11. — Commonwealth of Massachusetts. In this State there are 86 Savings Institutions. They are in- corporated companies, each created by special Charter. They are partly private and partly public institutions. The members of the corporation elect their own associates and successors, and have the entire management and control of its affairs, although they have no compensation or profits ; and the Depositors have the whole profits and earnings, but no voice in the management of the cor- poration ; and in these particulars the institutions may be called private. They are created by special Acts of the Legislature, and these Acts may be altered, amended, or repealed by the same power ;t they are also regulated by the general laws of the State, * [It is remarkable that the average deposit in the Philadelphia Savings Bank is nearly the same, viz. £40. In Baltimore there are one or two banks, however, with an average of £60.] t {Revision of the general Statutes of Massachusetts. Report of Commissioners (Joel Parker and William A. Richardson), 1858, No. 2, cap. 67, pp. 179 to 211, and cap. 68, pp. 317 to 337. See also Judge Richardson's admirable Compendium of the Banking Laws of Massa- chusetts (Lowell, 185.o). To this gentleman, whose opinion is acknow- ledged as of the highest authority on these matters, we are indebted (through the kindness of Dr. Josiah Curtis, of Boston, who has forwarded to us voluminous valuable returns, Statutes, and other documents) for the information contained in the text.] MASSACHUSETTS. li are subject to examination by the Bank *Commissioners appointed by the Governor, and the members of the corporations having no compensation or profits are supposed to labour wholly for the public good. In these particulars the , institutions may be called public. No great changes in the law are contemplated : in- dividuals often propose some change in detail, but none of very great importance. The "bye-laws" of the several institutions difiFer as to tlie payment of interest. Some few pay all the earn- ings every six months in equal proportions among the Depositors, reserving only a small sum for contingencies. Most of the in- stitutions pay a. fixed rate of interest, semi-annually, from 2 to 3 per cent. (2 and 2| being the most common), and at the ex- piration of three or five years divide the surplus earnings in equitable proportions among the Depositors. The law relating to investment of funds is extremely liberal : it allows, under certain restrictions, loans upon bank and railway stock, and even personal security.f By Statute, no Savings Institution can " hold at the same time more than 1000 dollars (^200) of one Depositor, other than a religious or charitable corporation j" and by the bye-laws of some institutions the amount is limited to 500 dollars, but there is no annual limit. The Treasurer of one small Savings Bank has recently proved a defaulter to the amount of about 15,000 dollars (^3000), but it is supposed this may be fully secured by his ofiBicial bond and his private property. No other remarkable frauds have taken place. The total deposits in the 86 Savings Banks of the State Jamount to 33,914,972 dollars (nearly 7 millions sterling), be- * [These functionaries were first appointed in 1851. In the year ending 30th September 1858, they report that they have examined into the condition of forty-two Savings Banks, and that " their general ma- nao'ement is higlily creditable to the officers, aiid reflects credit on the Commonwealth." (Public Document No. 6, 1858, pp. 100—126, 128.] t [Revised Statutes, cap. 57. ss. 138. to 141., No. 2, pp. 206, 207.] i [Abstract of Returns to the last Saturday in October 1858, prepared by Oliver Warner, Secretary of the Commonwealth. Public Document, No. 7, p. 121.] lii INTRODUCTION. longing to 182,655 Depositors, or an average of 186 dollars (^37) to each. The population of the State (census 1855) is 1,132,369, giving an average Sa\fings Bank deposit of 30 dollars to each individual. The dividends (paid as interest to Depositors) have averaged, for the last five years, 6| per cent., and the expenses of management are equivalent to Gs. 3d. in every ^100 sterling de- posited. 3. — State of New Jersey. The banks in this State are 7 in number, each governed by a Charter, and bearing the same relations to the GoVernment and to Depositors as in the States already detailed. The management of the banks corresponds almost entirely with that of the leading Savings Institutions in the State of New York. Six per cent, in- terest is granted on all deposits in the Newark Savings Bank. Investments are made chiefly on bonds and mortgages. There is no limit to the amount of deposits receivable from individuals. No frauds have occurred.* The " Provident Institution for Savings," which has a capital of 340,000 dollars, grants interest to its Depositors on the following excellent scale of graduation : — Sums not exceeding 500 dollars (^100) . 6 per cent. Not exceeding 1000 dollars, on the excess above 500 dollars, . . . .5 ,, On the excess above 1000 dollars, for any amount . . . . . . 4 ,, * [We are indebted to Charles King, Esq., Treasurer of this bank, for a complete set of the forms and regulations adopted therein, and to B. C. Miller, Esq., of the Mutual Benefit Life Insurance Company, New Jersey, and Charles Newcomb, Esq., of the Mercantile Mutual Insurance Com- pany, New York, for a large amount of information, including the above.] INTRODUCTION. liii Australia. 13. — Colony of Victoria. There are 8 Savings Batiks in this colony, viz, at Melbourne, Geelong, Portland, Belfast, Castlemaine, Sandhurst, Ballarat, and Maryborough. One is about being opened at Warnambool. They are governed by the provisions of the *" Savings Bank Act, 1853," (16 Vict. c. 37.), which appointed a Board of five Com- missioners and a fComptroller, to manage the investments of the Savings Banks and superintend their operations. The Com- missioners supply the banks with pass-books, books of account, and forms for returns. They invest partly in Government De- bentures of the Colony, partly in bank fixed deposit receipts (12 months), and partly in mortgage of freehold estate. The Commissioners do not, however, propose to lend moneys in future on mortgage securities. The maximum rate of interest permitted by the Act is 4 per cent.,which is the rate allowed by all the banks during the last five years; lut when an account is closed during a financial year only 2J per cent, per annum is added to the balance due on the previous 1st July. There is no annual limit, and a Depositor may have as much as ,£1000 to his credit, but interest is not allowed on more than £500. No frauds whatever have taken place. The Commissioners annually appoint Auditors to examine the accounts of each bank, and the Depositors' hooks. On the 30th June 1858, the number of Depositors in the Colony was 7732, and tlie balance due to them £432,250, • [This Act very ably consolidated all the previous enactments. Its provisions correspond very closely with those of the Eng-lish law, bjit it provided, seven years ago, the very same central authority which we pro- posed in 1851, and is now recommended in the Report of the English Committee.] t [The office of Comptroller is at present held by Mr. Charles Flaxman, who has, in the most obliging' manner, answered our inquiries, and (through Mr. W. H. Archer, Registrar-General of the Colony, whose great abilities as an Actuary were well known to his friends in this country) foiwarded to us copies of the Annual Reports of the Com- missioners, and of the various regulations they have made for the guidance of the banks.] PART I. PAST HISTORY AND PRESENT SYSTEM OP SAVINGS BANKS. CONTENTS OF PART I. Chap. I. History of Savings Banhls. § 1. Origin ..-.-..3 § 2. Early Methods of Investment - - - 7 § 3. Course of Legislation ----- 10 § 4. Committee of the House of Commons of 1858, 17 § 6. Present Condition ----- 30 ^ 6. Military and Naval Savings Banks - - 21 § 7. Penny Banks ------ 22 Chap. II. Present Constitution. § 1. Formation - - . . . 25 § 2. Rules -- .-..--26 § 3. Officers --.-...29 I 4. Rate of Interest allowed . - . - 30 5) 5. Balance in Treasurers' hands - - -31 § 6. Limitation of Deposits - - - - . 33 § 7. Separate Surplus Fund ... 34 % 8. Profits of Savings Banks . - . . 36 § 9. Deposits Unclaimed - .... 38 § 10. Expenses - - - . . ..39 CHAPTER I. HISTORY OF SAVINGS BANKS. Section 1. — Origin. Art. 1. — In order that our readers may have a right understanding of the present condition of Savings Banks (which will be found investigated hereafter), it is necessary to consider their past history, and the various steps of legislation which have preceded their existing constitution. We propose, there- fore, to give a rapid review of the measures that have been devised, both by the Legislature and by benevolent private individuals, to benefit the industrious classes in respect to Savings Bank deposits. The credit of introducing these excellent institutions into *Great Britain is claimed on behalf of at least three different persons ; but we do not doubt that there may be earlier unre- corded instances of arrangements having been made to receive * [The first institution of the kind, it is generally believed, was foi-med at Berne, in Switzerland, in the year 1787. It is remarked, as worthy of notice, by M. le Baron Dupin (in "La Caisse d'Epargne et les Ouvriers :" Leqon donnke au Conservatoire royal des arts et metiers, le 22 Mars 1837) that " it was not an opulent country in which these new establish- ments originated, but one, which for its rocks, its climate, and, above all, for the spirit of its inhabitants, might very well be called the Scotland of the Continent." M. Gustave du Puynode, however, in his learned work " De la Monnaie, du Credit, et de I'lmpot," (Tome i., p. 413. Paris, 1853.) states that a Savings Bank was founded at Hamburg so early as 1778.] B 2 4 ORIGIN OF small savings from the poor and to return them, on demand, with interest. 2. — In the year 1798, a "Friendly Society for the benefit of Women and Children," was established at Tottenham High Cross, under the superintendence of Mrs. Priscilla Wakefield ; and before the year 1801 there had been combined with its main design two other objects, viz. a fund for loans and a bank for savings. The principal rules were as follows : — " *The honorary members pay five shillings on entrance and twelve shillings annually. " The benefited members pay two shillings on entrance : they are divided into three classes according to their age. The first class, which consists of those between twenty and thirty, pay six- pence monthly; those of the second class are between thirty and forty, and pay ninepence monthly ; those of the third class are between forty and fifty, and pay one shilling monthly. " No one is lo contribute after sixty. From sixty-five to seventy, each member is to receive a pension of one shilling weekly ; and,from seventy to the end of their lives two shillings weekly, even should they be obliged to retire into a workhouse. In case of sickness, four shillings weekly are allowed for four months in one year and two shillings afterwards ; and if a member dies, after having subscribed six years, thirty shillings are allowed for the funeral. " The honorary members, thinking themselves entitled to risk part of their contributions, have authorized the Stewardesses, at their discretion, to lend small sums from five shillings to thirty to the benefited members, on such occasions as they may approve. These loans are directed particularly to enabling them to purchase necessaries at the wholesale price, or to supply themselves with * [Reports of the Society for Bettering the Condition and Increasing' the Comforts of the Poor, vol. 3, p. 186.] SAVINGS BANKS. 5 articles for sale, materials for work, a pig, or any other thing likely to produce a profit. These loans are repaid in small monthly payments. " Children of either sex, or whatever age, whether belonging to a member or not, are permitted to bring any sum above one penny to the monthly meeting of the Stewardesses, to be laid up in the fund of the society, where their small earnings may accumu- late in security till wanted for an apprentice fee, clothing on going to service, or some such important purpose ; and in case of death, the sum laid up is returned to the parents of the child. "The business of the society is managed by six Stewardesses and a Treasurer, who meet monthly : four of the Stewardesses are chosen from the honorary members, and two from the benefited members. These offices are filled in alphabetical order at an annual meeting of the whole Society. It should be added, that great attention is paid to the moral character of those who are admitted members ; and a notorious irregularity of conduct in- curs expulsion." In 1804 this Bank for Savings was more regularly or- ganized, and Trustees were appointed, viz. Mr. Eardley Wilmot, M.P., and Mr. Spurling. 3. — A prior claim is raised, however, on behalf of the Rev. Joseph Smith, of Wendover, who, in the year 1799, circulated in his parish *proposals to receive any sums in deposit during the summer, and " to return the amount at Christmas, with the addition of one-third to the whole as a bounty upon the Depositors' economy. " It was expressly and wisely stipulated that the Depositors might receive back the sums respectively due to them at any time before Christmas, on demand ; and that the fruit of their economy should not exclude them from parish relief in case * Ibid. No. 59. 6 OKIGIN OP of sickness or want of employment ; a comfortable addition at home to the family Christmas dinner was to finish the year's account. These curious proposals were ushered in by a text, which, though not applied to its original purpose, was, as a motto, sufficiently appropriate — ' Upon the first day of the week, let every one of you lay by him in store, as God hath prospered him.' The peasantry of the parish readily em- braced the offer held out to them, and, during the first season, sixty subscribers brought their weekly savings with great regularity." This institution, however, though highly praiseworthy in its way, must be held to be the precursor of the modern " Penny Banks" (see § 7), rather than of the more important Savings Bank system. 4. — The first publication in this country of the idea of a Savings Bank is also attributed to the celebrated Jeremy Bentham, in whose well-known schemes for the management of paupers (1797)* was included a systemof Frugality Banks, as he called them. The suggestions of Mr. Bentham were, hoW" ever, never acted upon. 5. — The Society next formed, of which we have any ac- count, was opened in 1808, at f Bath (chiefly through the instrumentality of ladies), for receiving deposits from female servants. In 1806 the | Provident Institution of London was established by the exertions of Mr. Barber Beaumont, Manag- ing Director of the County Fire Office, for Loans, Life Assur- * [Arthur Young's Annab of Agriculture, 1797 ; Pauper Management Improved, 8vo., 1813 ; Report of Commons Committee on Penitentiary Houses, 1811., App.] t [Porter's Progress of the Nation.] I [Essay on Provident or Parish Banks, by Barber Beaumont, 1816.] SAVINGS BANKS. 7 ance, and Deferred Ainmities. To this undertaking a Savings Bank was at first attached, but it was shortly afterwards dis- continued, and the institution became simply a Life Assurance office. 6. — In 1810, the first Savings Bank in Scotland was formed by the Rev. Henry Duncan, minister of Ruthwell, Dumfries- shire. Various papers were published by him upon the subject of forming banks for savings in the different parishes of the country, and the regular and simple organization of his " Parish Bank " served as a model for other institutions. He communicated the rules to the Edinburgh Society for the Suppression of Mendicity, and the result was the establishment, in 1814, of the Edinburgh Savings Bank, under the auspices of Mr. Forbes. Similar institutions were, about the same time, commenced at Kelso and Hawick. In gratitude to Mr. Duncan, who died in 1846, a Savings Bank house was shortly after erected to his memory in the county town of Dumfiries. In Nov. 1815, the Provident Institution of Southampton was established, to which the zeal and influence of the Right Hon. George Rose in a great degree contributed. Section 2. — ^s to early Methods of Investment. j^jjT 7.— It will be interesting to notice, here, the methods which were employed in the early days of Savings Banks, before their adoption by the Government, to procure for the depositors a safe, intelligible, and remunerative means of investment. The founders of these institutions considered that — as it was not customary in England for ordinary private banks to allow interest on the deposits made with them, and as in 8 EARLY METHODS OF INVESTMENT other private mvestments, where interest might be obtained, the security would not always be good — the only source whence interest could be derived with a due measure of safety was the public funds. Lord Monteaglcj who has filled the high official position of Chancellor of the Exchequer, in his evidence before the Select Committee on Savings Banks in 1858, speaking of' the advantages and disadvantages of this medium of investmentj said : — " Fortunately the accumulation of wealth in this country has been so great, that there has been what may be called an appetite for Three per Cents, that seems insatiable, so that you can, as a general principle, assume that, on a series of years, you will seldom find a time when the market is not in that condition gladly to take off Three per Cents. ; but all that is a speculation, and it is against speculation in these matters that I take the liberty of yery earnestly and very firmly protesting. The more the management of th^ thirty-eight millions of Savings Banks deposits is freed, as a matter of business, from speculation, the better. And remember, after all, you are trustees for these funds, and ' speculation ' is just the word which ought to be excluded from the room in which trustees meet to transact the business of their cestui que trust." 8. — It was first proposed that each Depositor should be paid whatever the funds produced. The inconvenience of this sys- tem, however, arising from the fiuctuatioris of price, was speedily found to be too great, and a fixed rate of interest was given ; but the difficulty arose, on withdi-awals, of the loss attending the rise and fall of the securities on which the Savings Banks money would be invested. Many and various were the schemes devised for this difficulty. The plan upon which Dr. Haygarth proceeded, in the bank which his strenuous exer- tionswere the means of setting onfoot in Bath, was to make every Depositor to the value of one or more pounds of stock a pro- prietor of, stock to that amount, entitling him to receive, OF SAVINGS BANK DEPOSITS. 9 every six months, the same dividends as those paid at the Bank of England, one-sixth being deducted for the expenses of the institution. In the constitution* of this bank, no part of the management, and no control over it, were given to the De- positors. Several Trustees and Managers were constituted, with powers of supplying vacancies ; and the money of the deposi- tors was vested in the public funds in the names of a certain number of the Trustees. 9. — The Southampton Bank, which was formed on very nearly the same plan as that at Edinburgh, was composed of a large number of noblemen and gentlemen, who formed them- selves into an association for banking the money of the poor ; excluding entirely the intervention of the Depositors. It dif- fered from the bank established at Bath, which gave the De- positors a proportion of the dividends, and left them to the chance of gain or loss by the fluctuation of the stock which their money had purchased. The Southamptc n Bank, though it vested the money in Government Securities, undertook to pay a fixed rate of interest of 4 per cent, on each sum of I2s. 6d.; and to repay the deposit when demanded without diminution. The bank, in this way, took upon itself the chance of any rise or fall in the price of the funds. This bank, like the one at Edinburgh, placed a limit to the deposits which it would receive from any one individual, and fixed the amount at ,£25. 10. — These local and limited attempts were followed by others on a more extensive scale. The " Society for Bettering the Condition of the Poor " took measures for interesting a sufficient number of noblemen and gentlemen to establish a * [Article on Savings Banks in the 1824 edition of the EncyclopEedia Britannica.] 10 EARLY METHODS OF INVESTMENT large Savings Banlt (or Provident Institution, which was deemed a preferable name), for the whole of the western metropolis. Several meetings were held during the month of March 1816. The plan of the bank of Southampton, to pay a certain fixed rate of interest, and return the net deposit on demand, was first proposed. This, with regard to the facility of giving satisfaction to the contributors and of avoiding misconception on their part, injurious to the prosperity of the institution, was highly desirable. But, after a due consideration of the danger to which the bank would, on this plan, be exposed, in the event of any great depression in the price of stock, it was resolved to follow the example of Bath — to render each Depositor a stockholder, and consequently to make him liable to either the profit or the loss, which the fluctuation of stock might occasion. This institution was composed of the noblemen and gentlemen by whom it was promoted, who formed themselves into an association, consisting of a Presi- dent, Trustees, and Managers ; wholly excluding the co-opera- tion of the Depositors, and all intervention and control on their part. It is said by Mr. Willich to have been commenced in a very humble way, in a room over a butcher's shop in Panton Street, Haymarket, on the 15th April following; and it is now the St. Martin's Place Savings Bank, the largest as well as the oldest of the metropolitan banks, with deposits at the present time to the extent of more than a million and a half. Section 3. — As to the course of Legislation to the end of the Year 1859. Akt. 11.— We now arrive at the era of the first legisla- tion on the subject. The first Act, in relation to Savings Banks, was passed in 1817; and, up to the time of the passing of that Act, there OF SAVINGS BANK DEPOSITS. 1 1 had been formed, by the voluntary association of benevolent persons, no less than seventy banks in England, four in Wales, and four in Ireland. The first Act affecting the Scottish banks was not passed till two years later. Unsuccessful attempts had been made previously, even before Savings Funds were thought of, to obtain a legislative encouragement of provident habits among the industrial classes. In 1773, a Bill passed the House of Commons, on the motion of Mr. Dowdeswell, to enable the purchase of deferred annuities or provisions for old age to be secured out of the poors rates of the parish ,to which the purchasers belonged, in case the fimds subscribed should prove insufficient to pay the annuities. This Bill was thrown out by the Lords, fi-om its defective character; for, among other things, it made no provision against the very probable case of a too limited number of annuity purchasers being found to protect the poors rates from loss. Another Bill, prepared in 1789, had for its object, mainly, to enable the labouring poor to provide support for themselves in old age by small weekly savings. This Bill also was re- jected by the House of Lords. In 1807, Mr "Whitbread intro- duced into the House of Commons a Bill of a most comprehen- sive character, for the creation of an office in the metropolis, under Government control and guarantee, to afford advantages to the provident working classes, very similar to those at pre- sent held out by the Savings Banks. This *Bill was ultimately withdrawn. 12. — At last, however, " the fLegislature appear to have be- come sensible of the advantages, that would arise to the public * [See Part V., in which we have given this Bill at length, on account of the remarkaile plan contained in it for facilitating the receipt ofdeposUs by the agency of the Post Office.] t [Tidd Pratt's History of Savings Banks.] 12 THE COURSE OF LEGISLATION at large, from judiciously fostering the provident spirit which was gradually developing itself among the industrious classes. Legislative protection and encouragement were felt to he desirable, not only as affording positive advantages to the poor, whom it was professed to have principally in view, but to secure certain collateral benefits, which would be of no mean im- portance to the whole community. It was seen that every per- son, who had vested his savings in the public funds, had a stake in the security of the country, measured not merely by the sum total of those savings, but by the value of that amount to himself, and that he would be deterred from abetting in or compassing disturbance in his native land by a personal motive, added to the influence of duty ; — that he would also feel the importance of public peace and public credit through that strong conviction which individual interest never fails to inspire; — and that the fair answer to any objection, on the part of those who might be jealous of the support thus accorded to the ruling powers, was, that he who possesses property in a country is not interested in the mere stability of any particular administration, but in the perpetuation of universal order and goo'd government." 13. — Acting under these convictions, the Acts 57 Geo, III. c. 105., " To encourage the establishment of Banks for Savings in Ireland," and c. 130,, for the like purpose in " England," were passed by both Houses, and followed, in 1819, by the Statute 59 Geo. III., c, 62,, " for the Protection of Banks for Savings in Scotland."* These Acts defined the associations, for whose benefit they * [The advantages aiforded by this last Act, however, related principally to exemptions from stamp duties. The privilege of depositing with the Commissioners was not extended to Scotland till 1836, in consequence. Previous to that date, Savings Banks in that country existed only on a very limited scale. Now they are considerably more flourishing than in Ireland.] ON SAVINGS BANKS. 13 were enacted, as "any society for the purpose of establishing and maintaining any institution, in the nature of a bank to receive deposits of money for the benefit of tlie persons depositing the same, to accumulate the produce of so much thereof as shall not be required by the Depositors, their executors, or administrators, at compound interest, and to return the whole, or any part of such deposit, and the produce thereof, to the Depositors, their executors, or administrators (deducting out of such produce so much as shall be required for the necessary expenses attending the management of such institution), but deriving no benefit whatever from any such deposit, or the produce thereof"* (s. 1,). 14. — In 1818, an amending Act, the 58 Geo. III. c. 48., relating to England only, was passed, providing for the deposit of funds that had accrued before the passing of the Act(s. 15.); *[Re-enacted These Acts provided for the' filing' of Rules (ss. 2.) ; by 9 Geo. that the Trustees and Managers must derive no benefit IV. c. 92. from the funds (ss. 3.) ; the Rules to be legally binding s. 2. (ss. 4.) ; that the savings of minors might be invested (ss. 5 ) ; s. 3. that' Friendly Societies might subscribe to Savings Banks s. 6. (ss.6.) ; for the taking of security from officers (ss. 7.) ; the s. 25. effects of the bank to be vested in the Trustees (ss. 8.) ; funds s. 28 2Q. to be deposited in the Bank of England and Ireland (ss. 9.), g_ 7_ to the credit of a " Fund for the Banks for Savings " (ss. 10.), g 3_ by an order of two of the Trustees (ss. 11.), and to be in- s 11. vested by the National Debt Commissioners in Bank An- g ]^j_ nuities only (ss. 14.) ; penalties for depositing under a false g j5_ declaration (ss. 17.) ; for the responsibility of the Treasurer s. 14. *^ ^° funds in his hands (c. 105., s. 23 : c. 130, s. 21.) ; for g 2Q_ exempting members of Friendly Societies from forfeiture g 30 (c. 105., 8. 24. ; c. 130., s. 22.) ; for paying over deposits of g 4j intestates under £20 without expense of probate (c. 105., g 43 s. 26. ; c. 130., s. 24.) ; for indemnifying the banks against g_ 44 future claims in such cases (c. 105., s. 27. ; c. 130., s. 25.) ; g g2 for exempting all documents from stamp duty (c. 105., s.'28. ; c. 130., s. 26.) ; and for their recognition as public Acts (c. 106., s. 30. ; c. 130., s. 28.). To the aceoimt in the Bank of England the whole of the monies of the English Savings Banks were to be paid in, and no sum, or sums, to be paid or laid out by the Trustees of the bank in any other manner, or upon any 14 THE COURSE OF LEGISLATION for the establishment of Branch Banks (s. 16.) ; and that the Rules of Savings Banks must be submitted for the approval of 8. 4. (repealed by the Justices at Sessions (s. 17.)' Another, in 7 & 8 Vict c -i- 83. S3. 18., 19.). 1820, the 1 Geo. Iv. c. 83., made regulations ®- ■"^' as to the calculation of interest (s. 3.); and as s. 61.. to the employment by the Commissioners of clerks and oiEcers (s, 19.); and extending the privileges re- lating to investments to those made by Friendly Societies (s. 18.). If allowed charitahle institutions to deposit without limit as to amount (s. 12.) ; but this was repealed in 1824, by the *5 Geo. IV. c. 62., s. 24., and has since been re- enacted in 1859. other security whatever (s. 9.), providing, however, that not less than £50 should be paid in at one time. In the Irish Act, on the contrary, per- mission was given to invest one-fifth of the total funds of every bank in the hands of any banker, at interest, after the rate of £6 per cent, per annum ; and the Bank of Ireland was not to receive less, in one sum, than £100. When the Acts were consoUdated, in 1828 (9 Geo. IV. c. 92., s. 11.), these conflicting provisions were harmonized by allowing all banks to deposit with the Commissioners not less than £50 at a time, and to re- tain in the Treasurers' hands such sums of money as may be necessary to answer exigencies. The provision as to Irish investments with private bankers had been previously abolished by 5 Geo. IV. c 62.] * [The following provisions of the Act of 1820 were confirmed and extended to Ireland by the Act of 1824, which applied to both countries, s. 14, 1. The appointment of an agent by each bank to receive money from the Commissioners (s. 4.). s. 18. 3. Revocation and fresh appointment (s. 15.). s. 19. 3. Withdrawals from Commissioners to be made by Trustees' drafts (s. 6.). 8. 21. 4. Trustees may attend in person for the purpose (1 Geo. IV. c. 83., s. 7. ; 5 Geo. IV. c. 62., s. 17.). s. 20. 6. Drafts for large amounts to he signed by more Trustees (1 Geo. IV. c. 83., s. 16. ; 5 Geo. IV. c. 63., s. 14.). s. 41. 6. Sums under £50 to be exempted from probate duty (1 Geo. IV. c. 83., s. 16. ; 5 Geo. IV. c. 62., s. 14.). s. 31, 42. 7. Payment to the person appearing to be next of kin valid as regards the banks (1 Geo. IV. c. 83., s. 17. ; 5 Geo IV. c. 63., s. 19.). ON SAVINGS BANKS. 15 15. — All these Acts were consolidated, with amendments, in 1828, by the 9 Geo. IV. c. 92., and many additional clauses* The further leading provisions of the Act of 1824 were — s. 32. ^- That no anonymous accounts were to be opened (s. 20,). s. 35. 2. Deposits to be limited to £30 a-year(s. 21.). s. 33. 3- ^or deposits made on behalf of others (s. 23.). s. 34. *• ^ Declaration to be made on opening an account (s. 25.). g^ 39, 5. For the transfer of deposits to other hanks (s. 26.) s. 46. 6- Saving-s Banks to make annual returns to the Na- tional Debt Office (3 29.). s. 47. 7. A duplicate to be fixed in the offices of the banks (3. 30.). s. 49. 8. Interest to be computed to the 20th May and 20th No- vember in every year (s. 31.). s. 48. 9. Accounts of the Fund to be annually laid before Parlia- ment (s. 32.). s. 55. 10. In case of pressure the Treasury may issue Exchequer Bills to assist the Fund (s. 33.). 8. 56. II. The bank may make advances on such Bills (s. 34.). s. 67. 12. The Bills to he paid oif out of the deposits or out of the sinking fund (s. 35.). s. 57. 13. If out of the Sinking Fund, stock be transferred fi-om the Savings-Bank Fund to make up (s. 36.). s. 20. 14. Large demands by Trustees of banks not to be paid without notice (s. 37.). s. 59. 15. All forms &c. to be settled by the National Debt Commissioners (s. 38.). , s. 60. 16. The Commissioners to be indemnified for their deeds under the Acts (s. 39.;.] * [1. The sanction of Justices at Sessions and of the Commissioners re- quired to the formation of new banks (s. 2.). 2. Fees to be paid to Clerk of the Peace on enrolment (s. 3.). 3. Rules to be submitted to the Barristers for certificate (s. 4.). 4. No Trustee or Manager to be responsible except for his own wilful neglect or default (s. 9.). 5. Trustees may receive money from Depositors to be applied in any way authorized by the rules (s. 12.). 6. The officer of the Commissioners to pay to no Bank in one day more than £10,000 (s. 21.). 16 LEGISLATION ON SAVINGS BANKS. were then introduced. This last Act has given, as it were, their peculiar character to Savings Banks in this country. In 1833, an amending Act was passed, which provided for the purchase of Government Annuities, through the medium of Savings Banks (ss, 1. to 24., 26., and 27.) ; for priority of claim on the estates of deceased or insolvent officials (s. 28.) ; for the publication of the names of banks neglecting to transmit annual statements in the Gazette (s. 30.) ; and for the extension of the Act to Guernsey, Jersey, &c. (ss. 34., 35.) ; and, in 1835, the provisions of these Acts were extended to Scotland (5 and 6 William IV. c, 57.). In 1844, another amending Act (7 and 8 Vict. c. 83.), was passed, reducing the interest to £3 • 5s. as regards the Depo- sitors (s. 2.) ; limiting the responsibility of Trustees and Ma- nagers (s. 6.) ; providing for the punishment of defaulting Actuaries (s. 4.) ; the payment of trust accounts (s. 7.) ; of deposits of intestates (s. 10.); illegitimates (s. 11.), and mar- ried women (s. 12.) ; for the settlement of disputes .(s. 14.), and repealing all the provisions relating to depositing the rules with the Clerk of the Peace and Justices (ss. 18., 19.). 7. The surplus fund to be ascertained and appropriated (s. 22.). 8. Separate surplus fund to be created (s. 23.). 9. Charitable Societies may invest up to £100 a year, or £300 altogether (S.27.). 10. No deposits to be received above £150 (s. 37.) ; no interest to be paid on accounts exceeding £200 (s. 35.) ; but this provision not to affect any deposits of above £200 at the time of the passing of the Act (s. 36.). ' 11. No draft, order, or appointment of agent, &c., to be liable to stamp duty (s. 44.). 12. Depositors entitled on payment of one penny to printed copy of annual statement (s. 47.). 13. Commissioners may purchase Exchequer Bills (s. 50.); pi'ovisions for tlie funding (ss. 51., 52.), cancelling (s. 53.), and sale (s. 54.), of the Bills. 14. Provision for payment in England to the credit of the Bank of Ireland (s. 58.).] ( 17 ) Section 4. — As to the Committee q/'1858 of the House of Commons, Art. 16. — The next event, in the order of time, in the history of Savings Banks was the discovery of the great frauds in 1848 and subsequently, to the consideration of which we have devoted a Chapter in Part II. From that date to the present time various *attempts at Savings Bank legislation have been made, and suggestions furnished to Parliament, but little good resulted until the appointment of the Select Committee of 1858 to " inquire into the Acts relating to Savings Banks, and the operation thereof." * [For the abortive attempts, see Part 2, art. 30—33. The actual legis- lation of the period has been as follows : — ••• On the 5th September 1848, the 11 & 13 Vict. c. 133., was passed as a special Act for Ireland, in consequence of the grievous Cuife Street frauds. The 17 & 18 Vict. c. 50. (24th July 1854) continues the special Act for Ireland, and 12 Vict. c. 133., until 1st of January 1858, and until the end of the then next ensuing Session of Parliament. It also enacts that funds of Friendly Societies may be deposited in Savings Banks to any amount. The Irish Act has since again been renewed for a like term by an Act passed in the Session of 1858, by which Act (21 & 22 Vict. c. 133.),— Section 1. repeals for Ireland clause of former Act as to the non- liability of Trustees ; but Section 2. allows Trustees and Managers to fix extent from £100 of liabiUty. Section 3. appoints auditors (for Ireland). Section 5. Depositors in Ireland must produce books on one of at least two days in the year, or their accounts will be closed. On the 4th August 1853, the 16 & 17 Vict. c. 45. was passed as the new Act for Savings Bank Annuities, Since the report of the Committee, a short Act, 22 k 23 Vict. c. 53., has been passed (13th August 1859), by which Charitable and Provident Societies and "Penny Banks" may invest all their proceeds in Savings Banks. Certain official restrictions, however,have been introduced, which are said to have the effect of depriving the boon of a great part of its value. ^ 18 THE COMMITTEE OF 1858. In determining the course of evidence, the Committee en- deavoured to embrace all the material points of the Acts relating to Savings Banks. which are or have been in force. In addition to the information which the officers of the Go- vernment aiforded on this point, the Committee allowed an opportunity to the Trustees and Managers of Savings Banks to give expression to opinions they had long been known to entertain respecting the manner in which the finances of Savings Banks had been managed, and to bring forward various suggestions for an improved system both of central and local administration. 17. — ^They examined Mr. Tidd Pratt, as to the history and course of legislation; Sir Alexander Spearman and Lord Monteagle as to the mode of investment and the history of the financial operations ; 3lr. Boodle, the Actuary of the St. Martin's Place Savings Bank, as to the impressions which prevail among persons practically connected with Savings Banks on the subject j fifteen other Actuaries and Managers as to practical details ; and Mr. Taylor, of Rochdale, as to the circumstances attending the defalcation there. The report of the Committee was divided into the following heads : — 1st. The course of legislation from 1817 to 1857. 2d. The central authority of the National Debt Office, and the practice with respect to investment and repayment of balances. 3d. The question of Parliamentary guarantee, and the relations between the Central and Local Offices. 4th. The mode of providing for future expenditure. As to the state of the law, they reported that it was " unsatisfactory and uncertain, diffused through Acts, partially rescinded, which nowhere present a clear and distinct announcement of the duties, liabihties, or rights of any of the parties concerned in the management and welfare of these institutions ;" and they recommended that the whole should be amended and consolidated. 18. — On the subject of the investments of the National Debt Commissioners, the report stated : — ON SAVINGS BANKS. 19 " The Commission consists of the Speaker of the House of Commons, the Chief Baron of the Exchequer, the Master of the Rolls, the Account- ant-General of the Court of Chancery, the Chancellor of the Exchequer, the Governor and the Deputy-Governor of the Bank of England. The Acts that constitute the Commission require that Boards should be held, and that there should he in attendance a quorum of three Commissioners, 58 Geo. III., cap. 66. sect. 1., and 3 & 4 Will. IV., cap. 14. sect. 22.; it is, however, shewn by a return presented to the House of Commons, that such Board of late years has met only quarterly ; and the Speaker of the House of Commons, the Chief Baron of the Exchequer, the Master of the Rolls, and the Aocountant-General, having important duties elsewhere, rarely, if ever, attend any meeting. " It thus appears that large financial *operations have been carried on by means of the capital of Savings Banks which was at the command of the Exchequer, in purchasing, selling, and varying securities. " It is alleged by several witnesses that such a mode of dealing with that capital is not warranted by the terms of any statute ; that it has resulted in a deficiency of assets, as compared with the liabdities of the fund ; and that such deficiency might have been materially reduced, if the Commis- sioners had treated the money of Savings Banks as simple Trustees. " It was shown to your Committee, that since the time when pubhc attention was drawn to the existence of a deficiency in the aggregate funds, great dissatisfaction has been felt throughout the local banks ; and that, owing to the complicated form in which the annual returns are laid before Parliament, though doubtless they are strictly correct, yet local Managers have been unable to check them, and the loss incurred by the nation upon the general results has been naturally exaggerated, and sup- posed to be even greater than in fact it is. " Your Committee is therefore of opinion it would be advisable to re- peal all the sections of the Savings Banks Acts which relate to the con- version of Exchequer Bills into Stock, leaving that question to be dealt with separately. " Your Committee propose that in future the Commissioners of the National Debt shall be relieved from the office of investing the monies of Savings Banks ; that this duty shall be confided to a Commission of five persons, of whom the Chancellor of the Exchequer and the Governor of the Bank shall always be members, and that the other three shall be nominated by the Crown. " Your Committee believe that ample control and margin wUl thus be reserved to the Executive Government in directing the choice of securities, in which that part of the balances shall be invested, which it is necessary * [See Chap. VIII. for a detailed examination of these operations.] C 2 20 PRESENT CONDITION OP SAVINGS BANKS. to keep in such a state that they may be easily convertible into money on demand; and, on the other hand, that by the provisions which they-re- commend Parliament to adopt, a sufficient check will be imposed upon the facility of dealing' in the Public Funds, by shifting the money of Savings Banks from one kind of security to another." (For Legislation since 1859, see Part VII. et seq.) Section 5, — As to the present condition of Havings Banks. Akt. 19. — Notwithstanding legislative conflicts and internal frauds, Savings Banks have progressed; and it is desirable that the following facts should be recollected : — That during the seventeen years from 1840 to 1857, 116 millions of money have been received from Depositors by the Trustees; and 119 millions (including interest) returned to them. That 36 millions remained (1858) to the credit of 1,400,000 Depositors in the 600 banks, exclusive of nearly two millions received from Friendly Societies direct by the Commis- sioners. The following Table is interesting, as shewing to how large an extent the number of persons holding small accounts prepon- derates over the number of larger Depositors, and is increasing. Table A. No. of D 20th Nov. 1850. epositors. 20th Nov. 1858. Increase in 8 years. Total Deposited 1858. Not exceeding . 20 50 100 150 200 Exceeding . . 2U0 Add for Char. Inst, and Yt. Socs. depositing in Savings Ban Ics . . 677,969 251,131' 106,510 35,609 18,914 2,448 870,987 307,008 131,869 45,281 2fi,560 1,497 193,018 55,877 25,359 9,672 7,646 1,049 4,994,909 9,523,255 9,m,76S 5,452,660 4,511,645 327,644 1,092,581 20,418 1,383,202 25,362 290,621 4,944 33,921,881 2,292,241 1,112,999 1,408,561 295,565 36,214,122 MILITARY AND NAVAL SAVINGS BANKS. 2 1 Such is the history of Savings Banks in the United Kingdom, presenting a record of industrial prosperity and progress un- equalled by any other country in the world, and of an elas- ticity sufficient to surmount obstacles and disasters, which any- where else would have been fatal. None the less necessary is it, however, that these dangers, of which we shall shortly speak, should be guarded against for the future ; for such pre- cautions will render all the more hopeful any sound attempt at still further improvement. ' (^For later statistics, see other parts of this Treatise.') Section 6. — As to Military and Naval Savings Banks. Art. 20. — The law relating to Military Savings Banks has been recently consolidated into one Act, the 22 & 23 Vict. c. 20. (passed 13th August 1859). The funds of these banks are deposited by the Secretary at War with the *National Debt Commissioners, but in a separate account, called " The j-Fund for the Military Savings Banks;" and they are expressly f exempted from the operation of the Savings Bank Acts. The amount that may be deposited is unlimited ; but sums in excess of £30 received in any one year will § not bear interest for that year, except in the case of gratuities awarded for good conduct or otherwise; and when a deposit amounts to £200, it ceases to bear any in- terest. The rate allowed to the Depositors is not to exceed £3 . 15*. per cent. The dividends received by the Commis- sioners from their investments are || exempted from Stamp Duty. The regulations of the banks are settled from time to time * [Sect. 7.] T [Raised under the 8 & 9 Vic-t. c. 27. (1845).] I [Sect. 1-4.] § [Sect. 4.] || [Sect. 8 ] 22 PENNY BANKS. by the Secretary at War, with the concurrence of the Horse Guards and the Lords of the Treasury. These banks were first established in 1842, by the Act 5 & 6 Yict. c. 71. ; and in 1849, the old Regimental Benefit Societies were finally dis- solved, and incorporated with the Military Savings Banks (12 & 13 Vict. c. 71.). Returns of the transactions of these banks are annually laid before Parliament. From a return by the War Office it appears, that on the 31st March 1857, the sum of £161,354 was accumulated in the various Regimental Savings Banks. In the Seamen's Savings Banks, established under the Merchant Shipping Act of 1854, and the 19 & 20 Yict. c. 41. (1856), there is already £12,444 deposited. Section 7. — As to Penny Banks. Art. 21. — The establishment of Penny Banks may, almost, be called a recent event, and is one of the most gratifying further developments of the economical organization of labour, which may be made to carry into hundreds of thousands of homes the excellent advantages that have attended the establish- ment of Savings Banks; for the shillings of the skilled artisan can be multiplied ten thousand fold, " when the *unskilled labourer in field and street comes to learn the power of pence to meet the ' rainy day,' which he cannot avoid anticipating in full knowledge of all its chill realities." * [For a history of Penny Banks the reader is referred to two ad- mirable papers— admirahle for the generous sentiments exhibited in dealing with the economics of labour — one in Household Words, vol. i. page 464, and the other in All the Year Sound, vol. i. p. 334. A very good draft of a plan has been published by Mr. Clarke of Southampton.] PENNY BANKS. 23 22. — The Penny Bank movement originated some ten or a dozen years ago in one of the poor parishes of East London, through the practical benevolence of its clergyman. It has already acquired goodly proportions. " In evidence of the fact that poor people want to put by savings, too small to justify the opening of an account with the ordinary Savings Bank (says a writer in "All the Year Round ") let these results be taken. " At the Birmingham Savings Bank, seventeen pounds is the average balance owned by each Depositor ; at the Bir- mingham Penny Bank it is not seventeen shillings ; and a sum now rapidly growing towards a hundred thousand pounds has passed through that Penny Bank in deposits of small savings averaging less than three shillings a-piece. At Halifax, the average amount paid in at once has not been two shillings. At Scarborough it has been only eightpence, and the average balance kept in the bank by its customers is six and fourpence. At Shenstone, near Lichfield, threepence halfpenny is the average sum paid in by each customer. Yet on such terms throughout the country many thousands of accounts are opened." 23. — It may be mentioned, further, that — in a Penny Bank established by Mr. James Crocker at Gateshead in October 1859, open for two hours every Saturday evening — 1150 deposit accounts were commenced in the first month, and £170 lodged by the humble investors — an average of 2s. ll^d. The constitution of a Penny Bank is very simple ; and the following rules have been adopted by several that have already been established : — I. The Bank to be open every Friday Evening, from Seven till Eight. Deposits may be made from ] d. to 2s. 6d. ; or 10s. for the first deposit. II. Any sum reaching £5 will be transferred to the Savings Bank, but deposits may be continued. 24 PENNY BANKS. III. Persons wishing to withdraw any sum to give a week's notice, unless the Treasurer has funds in hand. IV. Three per cent, per annum will be allowed half-yearly, on all sums exceeding 5«. Hrf. V. One penny will be charged for the Deposit-book, also .1 d, for a copy of the rules, and \d. for tlie annual statement, if they are required. VI. The production of the Deposi1>book will authorise any person, if known, to deposit or withdraw. VII. All expenses to be paid out of the surplus interest allowed to the Bank, and from donations. VIII. The Managers of the Fund will be at liberty to refuse or discontinue the receipt of deposits from any individual. ( 25 ) CHAPTER II. PRESENT CONSTITUTION. Section 1. — As to the Formation of Savings Banks. Art. 24. — The account we have given of the origin of Savings Banks will have shewn that they are, in general, formed at the suggestion of benevolent persons of influence, who unite together in the locality of their residences, and agree to become Trustees and Managers of the Bank. They themselves make, perhaps, a deposit, by way of advance towards the preliminary expenses, and as an encou- ragement to humbler classes to join the infant institution. 25. — To give it a legal existence, application is made for the sanction of the Commissioners for the Reduction of the National Debt (according to 9 Geo. 4. c. 93. s. 2.), or, on their behalf, of the Comptroller-General (Sir A. Y. Spearman) or the Assistant Comptroller (Mr. Higham). The power to give or withhold consent* to the establish- ment of a Savings Bank has been reserved to the Com- missioners, from the proper desire to prevent the formation of * [The Acts do not require the Commissioners to give a reason for withholding their consent, and, of course, it is only required for Savings Banks that desire to be entitled to the privileges of the Act.] 26 RULES or opposition Savings Banks in small localities,* and thus to avoid a system, which would act prejudicially to both, by preventing the concentration of the expenses of management in either institution. 26. — The permission of the Commissioners for the formation of the new bank having been obtained, a set of rules is prepared, embodying the main regulations provided by the Acts of Parliament in force, and the personal laws deemed advisable for its management. These rules require (by 7 & 8 Vict. c. 83. s. 19.) the certificate of the Barrister-at-law appointed to carry out the purposes of the 9 Geo. 4. c. 92, (at present Mr. John Tidd Pratt) that they are strictly in accordance with the Statutes : and Mr. Pratt examines a rough copy (for which service a fee of one guinea is allowed by the 9 Geo. 4. c. 92. s. 4), supplies such statutory clauses as he conceives to have been omitted, and then returns the draft to the pro- moters, that they may make two fair copies, and send them up to him (signed by two Trustees) for his final certificate. The certificate being granted, one copy is returned to the bank ; the other is kept by the National Debt Commissioners, under whom Mr. Tidd Pratt acts, for the purpose of reference. The copy, returned to the bank, must be kept open for the inspection of depositors. Section 2. — As to the Rules. Art. 27. — The rules may contain the following provisions: — 1st. To enable the Trustees to receive sums of any amount from Depositors for investment either in the purchase of stock or otherwise, or for any other purpose, except to be paid in to the account with the Commissioners; in other words, to * [It is not necessary, however, that all the Depositors should be resident in the locality of the Bank.] SAVINGS BANKS. 27 act as agents for the working classes in their investments* (9 Geo. 4. c. 92. s. 12.). •2nd. As to making new rules and alterations of rules (s. 3.). 3rd. To pay salaries to officers, not being Trustees, Trea-, surersj or Managers (s. 6.). 4th. To dispose of surplus funds (s. 22.). 5th. To provide for payment to representatives of deceased Depositors, whose effects do not exceed ^50, without Probate or Letters of Administration (s. 41.). 6th. To fix a time for payment of deposits by General Receivers (7 & 8 Vict. c. 83. s. 4.). 7th. To direct as to the disposal of monies received by Trustees and Managers (7 & 8 Vict. c. 83. s. 6.). 28. — The following clauses are required by the Acts to be inserted in the rules of a Savings Bank : — 1st. That no person or persons, being Treasurer, Trustee, or Manager, or having any control in the management of the bank, shall derive any benefit from any deposit made in the bank, save only and except such salaries and allowances, or other necessary expenses, as are provided in these rules for the charges of management, exclusive of the Treasurer or Treasurers, Trustee or Trustees, Manager or Managers, or other person having direction or management of the bank, who shall not, directly or indirectly, have any salary, allow- ance, profit, or benefit whatsoever therefrom, beyond their actual expenses for the purposes of the bank (9 Geo. 4. c. 92. s. 6.). 2nd. That no fTrustee or Manager of the bank shall be * [This has not been done in more than three or four instances, of which the only English one is the Exeter Bank, where stock is bought for Depositors to any amount. (See Tidd Pratt's Evidence, Rep. Com. H. C. 1858, qu.-18— 26, and Part VI.)] t [See the next section of this Chapter, and Part IV., as to Trustees.] 28 RULES OF SAVINGS BANKS. liable to make good any deficiency which may arise in its funds, unless he shall have declared, by writing under his hand, deposited with the Commissioners for the Reduction of the National Debt, that he is willing so to be answerable ; and he may limit his responsibility, or the Trustees and Managers may limit their collective responsibility to any sum specified in such instrument ; but every Trustee and Manager is personally responsible and liable for all moneys actually received by him on account of, or to and for, the use of the bank, and not paid over and disposed of according to these rules (7 & 8 Vict. c. 83. s. 6.). 3rd. That when deposits shall be made by a *trustee on behalf of another, the sum must be invested in the name of such Trustee and the name of the person on whose. account such sum shall be so deposited ; and repayment of the same, or any part thereof, will not be made by the Trustees or Ma- nagers of the bank without the receipt and receipts of the said Ttustee, and the person on whose account such deposit may have been made, or the survivor or survivors, or the executors or' administrators of such survivor, whose receipt and receipts, either in person or by agent appointed by power of attorney, which power of attorney is valid if executed by an infant of or exceeding the age of fourteen years, are alone a good and valid discharge to the said Trustees and Managers, except in case of the insanity or imbecility of the party on whose behalf the deposit has been made ; upon proof of which to the satisfaction of the said Trustees or Managers, repay- ment will be made to the said Trustee (7 & 8 Vict. c. 83. s. 7.). 29. — The other provisions vary according to local circum- stances and the views of the promoters. If, at any time, the rules are amended, the same proceedings as to registration are necessary. * [By this is meant, not a Trustee of the Bank, but any person acting as Trustee for another. See P art IV. ,respecti7ig future regulations for Minors.'] ( 29 ) Section 3. — As to the Officers. Art. 30. — The gentlemen who have constituted and en- rolled themselves as Trustees and il/awa^rer*, or who may be subseq[uently appointed, have different powers and liabilities which we will briefly explain. The first act of their authority is to appoint a Treasurer, Actuary, or Secretary, and clerks, who give such security as two of the Trustees and three of the Managers decide to be sufficient (7 & 8 Vict. c. 83. s. 17.). The security is made by bond to the Comp- troller-General of the National Debt, and lodged in his office. It is endorsed in the following manner : — " We, two of the Trustees and three of the Managers, hereby approve of the within bond being given as good and sufficient." The amount of security given by the various officers (except the Treasurer, who is always an honorary officer) depends very much on the amount of their respective salaries, and varies from £5 to £3000. 31. — The Treasurer is, in large towns, usually a banker; in others a clergyman or person of similar position, to whom the Manager of the day, who attends at the office to super- intend the receipts and withdrawals, pays over all monies ; either taking it himself, or sending it by the Actuary, with a notice-paper, which he has signed, informing the Treasurer how much he is to receive. The Treasurer from time to time lodges at the Bank of England or Ireland, in the names of the Commissioners of the National Debt, the sums received by him; usually re- taining under his care such a sum as he is desired by the Managers to keep available for the current requirements of the bank. In every annual statement he has to sign a cer- tificate that the amount mentioned in the accounts is in his 30 EATi; OF INTEREST ALLOWED. possession (3 Wm. 4. c. 14. s. 32.) ; and, upon demand made by two Trustees and three Managers, he has to give up all property of the Bank that may be in his hands (9 Geo. 4. c. 92. s. 10.). 32. — The Savings Bank is thus under the control and management of a body of Trustees and Managers, an Actuary or a Secretary, aided by the requisite number of clerks. The Trustees are usually noblemen or persons of high standing ; in large banks about twelve in number, who alone have the power to draw out money from the hands of the National Debt Commissioners : and it may be mentioned incidentally, that when they are appointed, each Trustee signs his name to a form, which, being duly witnessed by two Managers, is forwarded to the National Debt Office, in order that the signatures may be ready for verification, before orders for the paying in or drawing out of money are acknowledged by the Comptroller of the National Debt. Thi Managers are usually drawn from the superior trades- people of the locality, and from clergymen and private gen- tlemen. They are very often forty or fifty in number, and in some cases much more : for instjance, in the case of the Exeter Bank, there are 203.— (Return 55, 1858, p. 165). Section 4. — As to the Rate of Interest allowed. Art. 33.— By the Act 9 Geo. IV. c. 92. s. 11. all monies belonging to the banks — not wanted for immediate purposes, and not intended by the Depositors to be otherwise invested (s. 12.) under some special provision of the rules (a power which has been exercised in England in only a single case) — are required to be paid over to the credit of the Commissioners for the reduction of the National Debt; and by the 15th BALANCE IN TREASUEEKS' HANDS. 31 section of the same Act, the investment of such monies by the Commissioners is restricted to the purchase of Bank Annuities and Exchequer Bills. By the 7 & 8 Vict. c. 83. the rate of interest paid by the Commissioners to the Trustees of the banks, was reduced* from 20th November 1844, to £3 ■ 5s. per cent per annum; and the rate payable to the Depositors was not to exceed ^3 -Os. lOd. per cent, per annum, or 2d. per diem. Very few banks, however, give to their Depositors the full rate of £3 • Os. lOd. per centf 34. — The allowing a rate of interest of ^3 . 5s. per cent, is attended with loss to the nation, unless the average price of the Savings Bank Stock be bought by the National Debt Commissioners at a price not exceeding 92|, since £100 worth of stock bought at that price would pay the purchaser £3 • 5s. a year. Section 5. — As to the Balances in Treasurer's hands. Art. 35. — The Savings Banks in general keep a balance in their Treasurers' hands for current purposes, and in some cases the amount is large, the average for each bank being now * [By tlie 57 Geo. III. e. 105. s. 11., and by the 57 Geo. III. c 130. s. 11., one relating to Ireland and the other to England, the interest pay- able to the Trustees was at the rate of Zd. per cent, per diem, which was £4 • lis. 3d. per cent, per annum, but there was no fixed interest payable to Depositors. By the 9 Geo. IV. c. 92., the interest payable to the Trustees was 2id. per cent, per diem, of which the interest payable to the Depositors was not to exceed 2|cZ. per cent, per diem, and the Savings Banks were re- quired to compute the interest half-yearly or yearly.] t [See Sect. 10. of this Chapter for statistics as to the rates of interest allowed by the various banks.] 32 BALANCE IN TKEASUKEES HANDS. nearly £590. As a rule, these balances* are totally unproduc- tive of interest, and hence arises a small loss to the banks, which has to be made good out of the margin between the in- terest received from the Commissioners and that paid to the Depositors. In some Scotch ^ases, it is stated that the banks receive in- terest on the portion of their funds returned as " in the Trea- surers' hands," but this is exceptional. 36. — In his evidence before the Committee of 1858 (Qu. 507), Sir A. Spearman stated that, in his opinion, these balances are sometimes left in the hands of the Treasurer, with the view of compensatLag him for the trouble he is put to in connection with his office. We concur with the able Comptroller in con- sidering that this is an improper principle to proceed upon. * [Amount of the balances remaining in the hands of the Treasurers and officers of Savings Banks on 20th November of the years Table B. 1852 1857 England . . . Scotland . . . Ireland .... Channel Islands . £222,000 14,900 15,900 1,500 £240,913 65,667 48,499 755 £254,300 £355,834 The loss of interest to the banks from this cause (at £3 . 5s. per cent.) is nearly £11,565 a year.] ( 33 ) Section 6. — Limitation of Deposits, Art. 37.— Since the 20th November 1828 * deposits can- not exceed £30 in any year ending the 20th November, nor £150 in the whole; and when deposits and interest amount to £200, the interest is to cease, except with respect to deposits amounting to or exceeding £200 on the 28th July 1828, but no such Depositor is allowed to make a further deposit so long as his deposits amount to or exceed £150. Depositors were allowed to withdraw their deposits, and again subscribe, pro- vided the amount did not, in any one year, exceed £30, but this provision was repealed by the 3 William IV. c. 14., and now no money, whether such money shall have been previously withdrawn or not, can at any time be received from any • * [By the 57 Geo. III. c. 105. (1817), Friendly Societies might subscribe the whole or any part of their funds, but no in- dividual Depositor (in Ireland) was allowed to deposit more than ^50 in any one year, and there was no limit as to the total amount. By the 57 Geo. III. c. 130., Fi-iendly Societies were allowed to subscribe the whole or any portion of their funds, but no individual Depositor (in England) could deposit more than £100 in the first year, and £50 in every year afterwards. By the 58 Oeo. III. c. 48., no person, after the 1st October 1818, was to deposit any sum ex- ceeding ^10 in a year by ticket or number, of otherwise, with- out disclosing his or her name. By the 1 Geo. IV. c. 83., Chari- table Societies were allowed to subscribe any portion of their funds to a Savings Bank. By the 5 Geo. IV. c. 62., the deposits of any one Depositor were not to exceed £50 in the year ending 20th November 1825, and £30 in any subsequent year, and were not to go beyond £200 in the aggi-egate, exclusive of interest. Depositors having made their full deposit might withdraw the whole, and again subscribe to a like amount. By the same Act, the provision that no person should deposit more than £50 in any one year in Ireland was repealed.] D 34 LIMITATION OF DEPOSITS. Depositor, which shall in any one year ending the 20th Novem- ber, exceed £30. • 38.— By a recent Act (1859) the 22 & 23 Vict. c. 53., the funds of Penny Savings Banks, Charitable and Provident In- stitutions, and all charitable donations or beqiiests for the main- tenance, education, or benefit of the poor, are allowed to be invested in Savings Banks; thus the Act is a recurrence to the legislation of the 1 Geo. IV., which was *repealed in 1828. Friendly Societies, if duly enrolled, were allowed to invest any amount; but if enrolled after the 28th of July 18 28, the deposits were limited to £300, until the passing of the 7 & 8 Vict, c. 83., which repealed the limitation. Section 7. — Separate Surplus Fund. Aet 39. — The 4*. 2d. or more per cent, per annum — arising out of the difference between the £3 . 5*. paid by the Com- missioners to the Trustees and that credited to the Depositors by the bank — is applied, in the first place, to the payment of the expenses of the institution, and if any surplus remain, it must (under the t9 Geo. IV. c. 92. s. 23.) be paid over within six months from the 20th November in each year, to the Com- missioners for the reductibn of the National Debt, it being * [This is a notable Olustration of the way in which important pro- visions in Acts of Parliament are frequently cancelled from an insuf- ficient appreciation of their effect. It is to he hoped that such an error wiU be avoided in the approaching consolidation, of the Savings Bank Acts.] + [ By the 1 Geo. iv. c. 83., Trustees were authorized to make rules for the application of increased stock or property, and by the 5 Geo. iv., e. 62, no application of the surplus fund of any Savings Bank in England or Ireland was to be made until ten years after the establishment of the bank : one half of such surplus was always to be reserved to provide for deficiencies, and thirty days' notice of the intentioji of making any appli- cation of the surplus was to be given to the Commissioners for the re- SEPARATE SURPLUS FUND. 35 provided that the Trustees and Managers might claim and receive from the Commissioners for the purposes of the insti- tution (upon such certificate as the Commissioners should appoint) any sum of money equal to the whole or any part of the principal monies which might have been discharged from the account of the Savings Bank as surplus ; but no mention appears in this or other clauses as to the National Debt Com- missioners being liable to pay interest. 40. — Hence the amounts so paid in by the banks are carried by the Commissioners to a separate surplus fund account, and cease to bear interest. Many banks have large credits in this fund, and they could afford, therefore, to allow the full rate of £3 . Os \Qd. to their Depositors. The rate of interest actually allowed by the Commissioners on the general funds is reduced, by the non-payment of interest on the surplus fund, from £3 . 5s. to £3 . 4*. \d. per cent. The wisdom of this system — viz. the non-payment of interest on the separate surplus fund — is open to question. The payment would assist the future expenses of the banks ; for although they have saved in the past, a like saving is not to duction of the National Debt ; then, by the 9 Geo. iv., c. 92., it was declared, that within six weeks after the 30th of November 1821, the Trustees were to ascertain the amount of the surplus fund, and to dis- ti'ibute or appropriate the same in the manner provided by their respective rules ; and in the event of no provision being made, then in such manner as the Trustees or Managers, or a major part of them assembled at a general meeting, should think fit and proper. The surplus fund does not seem to be increasing in amount. On the 20th November 1848, 582 banks possessed a separate surplus fund of £358,436, or an average of £616 to each institution : now (20th Nov. 1858) the banks exceed 600 in number, but the surplus fund is only £346,792, or less than £572 on an average. The largest credit in the Separate Surplus Fund is held by the Worcester Bank, which has dE15,118 surplus on its £300,000 of deposits. Only two banks in Scotland have any amount in this Fund, vix. Dunfermline and Dundee ; this, of course, arises from the practice of the Scotch Joint-Stock Banks in allowing interest.'] d2 36 PEOFITS OF SAVINGS BANKS. be calculated upon for the future. The non-payment of interest causes complication and difficulty, and opens the door to error in the Government accounts. Section 8. — Profits of Savings Banks. Abt. 41. — Savings Banks obtain a margin applicable to their expenses, and to the creation of a surplus fund, from the circum- stance that when deposits amount to £200 they cease to bear interest in favour of the Depositor, while interest_thereon is still credited to the bank by the Commissioners.* Again, a margin frequently arises from the small f fractional advan- tages in the calculation of interest on each deposit account. *[[The number of such accounts was 1497 oi^ the 20th November 1868, and the amount of cash, not costing the Savings Banks any thing for interest, was £327,644, on which the banks received £10,648 a-year.] t [The lowest amount bearing interest ranges from Is. up to 30s. as the following table, made out from a return printed by order of the ^ouse of Commons, wiU shew :- _ s. d. 1 Bank allows interest on 1 10 n 77 2 6 1 » 7? 4 49 u V 5 4 1) 77 7 6 32 J) tl 10 1 )) 77 12 6 1 » 77 14 1 )> 77 14 7§ 12 » 77 14 8 2 >9 77 14 9 321 » 77 15 1 » 7; 15 4 ] n 73 15 6 1 jj 7 16 8 72 j> 73 20 39 » 73 30 2 allow on those fractions of £1 which produce exact pence of interest. PKOriTS OF SAVINGS BANKS. 37 In a great many Savings Banks the interest is com- puted by weekly or fortnightly intervals. In other instances, however, * monthly periods of time are adopted. In the latter case the 20th is usually taken as the commencement of the month ; and if the 20th has just passed, the computation is made from the 20th of the following month,- so that if the deposit be withdrawn before that date, no interest whatever is allowed. 42. — As Savings Banks are credited with interest from the day each investment is made with the National Debt Com- missioners, and up to the day of withdrawal, there is derived by these means a trifling compensation for the trouble attending deposits and repayments. Several banks, however, credit interest in advance continually throughout the year, on what is termedf " the prospective plan" and amalgamate it with the principal upon every transaction. It will thus be seen that the rate of interest nominally given according to the returns is not the same thing with the real rate actually received by the Depositors. For example, a bank declaring £3 per cent, interest, computed by the month, on even pounds, gives in eifect within a fraction of £2 . 18s. id. per cent.; so that it would retain as much as another baiik ivith precisely the same capital, paying the latter rate, computed by the day, on a small amount of principal.] * [See Division ii., or Treatise on Building Societies, for various Tables, shewing the remarkable effect of interest being allowed monthly or weekly, and the equivalent rates for a year. Our readers will, also, find therein several practical and mathematical chapters on the Doctrine of Compoimd Interest ] "t [For Eceplanation of the " Prospective Plan," see Part IV. The accounts of the Bishopsgate Savings Bank for the year 1857 shew that, whilst the interest paid to Depositors is only £2 . 17s. 6d. a separate surplus fund of £5000 has been accumulated out of the margin.] ( 38 ) Section 9. — *As to Deposits unclaimed. Art. 43. — These are not much to be depended upon as a source of profit, as the banks are in general liable to be called upon for the amount standing to the credit of any Depositor, however long ago it may be that the last transac- tion took place on his account. The following is from a return recently published, " shew- ing the number of accounts, and the total amount at the credit of such accounts, in Savings Banks, in respect of which no withdrawal has taken place, nor any payment been made in, by Depositors during the ten years ending the 20th day of November, 1858." TABLE C. TOTAL, UNITED KINGDOM. Male. Female. Trust Accounts. Total. No. Amount. No. Amount. No. Amount. No. Amount. 35,691 264,306 27,643 269,717 8,620 114,329 71,954 648,3S2 In the returns from some of the Savings Banks to the order of the House of Commons it is stated, that although on some of the accounts no payment has been made in, nor any money withdrawn, during the ten years, yet in many cases the Depositors have produced their deposit-books, in order that the interest might be written therein to the credit of the accounts. 44. — It has, however, been contended that a period should be fixed when future interest on deposits unclaimed may go towards liquidating the expenses of the bank; — reserving * [See Section on American Banks in the Introduction for some curious particulars respecting unclaimed deposits.] EXPENSES OF SAVINGS BANKS. 39 intact not only the principal, but all interest accrued up to the date specified.* This is done in the Stockholm and other foreign Savings Banks. Section 10. — Js to Expenses. Akt. 45. — The figures given f below shew that the total expenses of all the banks in the United Kingdom (except fifteen, which have made no returns) amount to £119,790 a-year, which, compared with the capital invested on 20th November 1857— £34,377,392— is equal to Is. per cent., thus reducing the available interest allowed by the Govern- ment to £2 . 18«. per cent. This is the average rate, but many banks are obliged to give less interest to their Depositors, in consequence of their expenses exceeding considerably the amount which the Is. per cent, would produce. In only thirty-eight banks is the full rate of £3 . 0*. \Qd. allowed to the Depositors. 46. — Sir Alexander Spearman remarks that by some means or otherit happens thatall the Savings Banks in the country are self- * [In some banks it is provided " that a deposit, if unclaimed for six years after the death of the Depositor, shall be forfeited." In the Chiches- ter and Coleraine Banks, all sums unclaimed for seven years after notice given in the county papers, are transferred to the Surplus Fund.] t Table D. lis 111 IB Total paid for Salaries during year ending 20th Nov. 1857. n » CO CO C^ o ira m o 00 t- o ca e-J (M CO CM e-a (M o o ■« -^ O O 00 CO CO eo gJ "M (a) O O O CO o o o -« wo i-H C«) 0-1 o -qC-joooooiioi— "inoa o joooomusmwtoc^t- c^ i« ^ c^ as ca o »n CO is ^lOODCaCDC^t—COOm r-i O t— I ■^ CO ■* 00 o •# — *&* lO r-H ■* CO — I O <^ CO ■<*« tT CD CO COCOQOOlOC'ie>»tD*3' OS gjjjcooi— "i>.aa.— 'in— ico o^ •mojaiqojo AJ'BT'Bg ■AY iO'-'OOOOO'^CO r-Oiooooooo t-'^b-"*irtcom?C'^ ■4j U So s ^111 1— II— 'COb-ifBOO^HOiO O ■-* 1— t vra as 00 T« CO ^ CO at ^^.—iin^MoocooO'^co lo "«'OT05ocD"TTeot* m t— t^coco W -^O-^OlftiO cos I— I coooeo CD ir3iocJO*>— iri p ll essrAos 05 ■do smureni -9J 8}arioo -ovjooN -"^ ll-S s OS as I 3 as CO I -^ d ej : « ^ -3 .s a .£ H U5_Hcci^j£_S ^^^ Jt-o^^coea to o-aoo -^.o ^a o as .— • t*< eo o SCOCOi«INCO tfS OflOO-dOOrlO OS OSOOOO QO 3 C?J^ -^ Tp "^_^ (N OS^ O 3 O 0_ 3 0,0 So www i eo"ca-<* eo'co f-T o fcj o"io' - '^'~' — ■" m &== fe a 3 ^ 65 fl a l-f s^aS^oas 08" (a) See art. 40, and note thereto, where the flguTes are brought down to 1858. \h) This bank also possesses £5411 in 3 per cents (reduced), and £200 in the Bank of England. PART 11. OF FRAUDS IN SAVINGS BANKS; THEIR EVIL CONSEQUENCES AND THE REMEDIES. CONTENTS OP PART II. Chap. III. Defects in the Management of Savings Banks, PAGE § 1. Bemarks upon the Frauds on Saving's Banka - 49 § 2. Extent of the Frauds 55 § 3. As to the Remarkable Gases of Fraud - - - 59 I. The Cuffe Street Fraud - - - 60 II. The Tralee Fraud - - - - 64 III. The Rochdale Fraud - 65 IV. The Brighton Fraud . - . 68 V. The Beading Fraud - - 69 § 4. Belief of the Public that the Banks had Govern- ment Security - „ ... - 70 Chap. IV. The Hemedy — In the appointment of Government Inspectors and Auditors, with the guarantee of the State for Savings Bank Deposits § 1. As to what is really desirable - - - 76 § 2. As to the attempts at Legislation, 1850 to 1857 78 § 3. As to Government Inspection - - - - 81 § 4. As to Government Treasurers - - - - 84 Chap. V. .4* to Improvements in the Internal Management of Savings Banks - . - . . go Chap. VI. As to sundry points of Internal Management - - 101 CHAPTER III. DEFECTS IN THE MANAGEMENT OF SAVINGS BANKS Section 1. — Remarks upon the Frauds on Savings Banks. Art. 1. — The title ofthis chapter brings us to the considera- tion of those painful frauds, which, following close upon each other, have been discovered during the last ten or twelve years to have been perpetrated in so many Savings Banks, and have caused so much distress in various parts of the kingdom. The system of internal management and supervision which was ap- plicable to these institutions, during the early years of their existence, has been found in many respects inadequate for their safe guidance, now that they have progressed to a gigantic maturity. With the detection of the frauds which we shall pro- ceed to describe, came the discovery of the disheartening fact, that the zeal and earnestness of the promoters of these excel- lent institutions — as too frequently is the case in volimtary benevolent associations — had become slackened by degrees, and that no such regular and continuous attention had been bestowed upon their inner management, as would be indispensable for the security of the depositors ; so that many unfortunate persons, without any fault of their own, have been, in consequence of the reliance they had placed on the stability of the Savings Bank, reduced to a state of destitution. 2. — The earliest important cases, that awakened public in- dignation, came to light in the years 1848 to 1851. E 50 NEGLECT OF TRUSTEES. It was then ascertained that a great number of Actuaries, both in this country and in Ireland, had appropr'iated to their private uses the funds entrusted to the Savings Bank, instead of placing them, as the law requires, in the hands of the pro- per Government Receivers in London or Dublin. Numbers of poor and industrious persons found themselves thus suddenly- deprived of the savings they had set aside with much patience and self-denial, and were informed that their ruin was caused by the dishonesty of those very officials whom they had been taught to trust with implicit confidence, and whom, from the countenance given them by Honorary Trustees and Managers of influence and high position, they seemed in every way justified in so trusting. From these cases it became known to the dismay of many^ and to the surprise of all, that the Trustees of these Savings Banks, — these gentlemen of wealth, distinction, or repute, to whom, by the rules, the sole control had been reserved, — were in no way legally responsible for the money which they had undertaken to receive through their Actuary; and that the Government of this country, which was popularly supposed to have guaranteed the safety of all the deposits the moment they were paid into the Bank, was really answerable only for the sums that might have been paid over to its custody. The Actuary was discovered to be the only party practically charged with the safe keeping of the money ; and he was the very man who had made away with it. It is true that he had (under 7 & 8 Vict. c. 83. s. 17.) to find sureties before obtaining his appointment; but these sureties were bound for very much smaller sums than* the defalcations * [In the DuUin case, the Actuary embezzled £20,000, (which increased afterwards to £56,000), but the security he had given was only for £1000. In the Tralee case, the defalcations amounted to £36,000 ; and in Kil- larney, to £20,000 ; and the securities given by the defaulting Actuaries were trifles in comparison with these amounts.] DEFECTS IN THE LAW. 51 amounted to; arising as they did from continuous and syste- matic fraud. 3. — Since the year 1817, it was found that the Government had made itself responsible for the safe custody of such monies as were transmitted to the National Debt Commissioners, but for nothing more. It did not under the then existing law, (nor could it under the present) take upon itself any losses which might occur from the misfeasance or neglect of parties whom it did not appoint, and over whom it had no control. Moreover, hy the Act q/"1828, the liability of the Trustees of the Banks, was confined to instances of wilful neglect or fraud on their part, and in 1844,* even that liability was removed, unless they should specially sign an undertaking to be liable for an agreed amount. 4. — This great defect in the Law only added to the increas- ing tendency of Trustees and Managers to neglect their duties. In the majority of instances they soon ceased to give any * [Section 6. of the Act of 7 & 8 Vict. c. 83. is as follows :— " Be it enacted, That no Trustee or Manager of any Savings Bank shall be hable to make good any Deficiency which may hereafter arise in the Funds of any Savings Bank, unless such persons shall have respec- tively declared, by writing under their hands, and deposited with the Commissioners for the Reduction of the National Debt, that they are will- ing so to be answerable ; and it shall be lawful for each of such Persons, or for such Persons collectively, to limit his or their responsibiUty to such sum as shall be specified in any such Instrument : Provided always, that the Trustee and Manager of any such Institution shall be, and is hereby declared to be personally responsible and liable for all monies actually re- ceived by him on account of, or to, and for the use of such Institution, and not paid over or disposed of in the manner directed by the Rules of the said Institution ; and an Abstract of the above Provisions shall be en- rolled as one of the Rules of the Institution." In Ibbland the mhtimum of aBSPONSisiLiTY is fixed by the Act of 1848, at £100 to each Manager or Trustee. This, of course, is inadequate to provide for any extensive fraud. In the present Dublin Savings Bank (Abbey Street) there are forty-eight Trustees and Managers, and the whole £4800 to which their responsibility amounts is not 10 per cent, of the loss in the Cuife Street Bank.] e2 52 DEFECTS IN THE LAW. regular attention to the Banks, and left them wholly to the Actuary or Clerk, so that any real check upon his conduct came to an end,, and — as if such laxity needed any extension — the Trustees in certain establishments, which , enjoyed the re- putation of being by no means ill-managed, were in the habit of signing blank forms and Cheques, to be filled up by the nominally acting Manager at his sole discretion, without pro- viding any restraint upon his conduct with reference to them. 5. — The Legislature, in addition, as if to encourage one fruitful source of fraud, actually gave its express sanction to irregular practices,* by inserting in the 7 & 8 Vict. c. 83. s. 4. the following clause — " If any Actuary or other Officer shall receive money out of Bank hours, and shall not, the next time the Sank is open, pay it over to the Treasure)- or proper Officer, he shall be guilty of a mis- demeanour." Thus, instead of public prohibition under some severe penalty, of the Actuary's receiving any Deposits whatever out of Bank hours, here was a positive recognition and distinct sanction of the very practice by which the largest and longest-undetected systems of fraudf have been carried on. 6. — The discovery of these frauds has created a feeling of distrust in the minds of Depositors in all Savings Banks, and * [See remarks on Trust accounts in Part IV.] + [In the case of the On^'a?" Savings Bank, " unbounded confidence had been placed in Richardson, the defaulting Actuary, both by the Managers of the Bank and by the public, and it was from the shelter which this afforded him, that he was enabled to escape that rigid and zealous examina- tion, which must otherwise, in an early stage, have detected his nefarious proceedings. After the banking hours were over, many persons paid him their savings with as much sense of security as if they had been placed in the hands of the Eeceiving Manager during the banking hours, and with these he had, of course, an almost unlimited scope for fraud."] FKAUDS IN SAVINGS BANKS. 53 bas greatly staken their credit. It has elicited, moreover, strong and general expressions of opinion that the working- classes have not been quite fairly dealt with in the matter ; and that the nominal Managers and Trustees, on the faith of whose character for vigilance and integrity the poor had committed their little property to the Banks, had no moral right to be thus exempt from all legal responsibility. In the forcible words of Mr. *Greg, the Depositors naturally asked, " To whom did we entrust our money, if not to the " gentlemen whose names were published as Managers of the " Institution, and to the Government, which, we are told, " had, by the Act of Parliament, constituted itself receiver of " the funds ? As to the Receiving Clerk, we did not appoint " him ; we know nothing of him ; and we never conceived " that we were to look upon him as our banker." 7. — The practical discouragements to the virtue of eco- nomy, which have resulted from these disasters, can be appre- ciated only by those who have come into close contact with the operative poor. Every defaulting Savings, Bank has been a sermon on the folly of frugality not easily to be for- gotten ;t and these lessons have multiplied with a fearful rapidity, and been delivered with a most mischievous em- phasis. * [See his admirable pamphlet on Industrial Investments, 1852.] t [Mr. Justin Supple, of Tralee, in his evidence before the Committee of 1848, in answer to the question, " Can you state, from the general feeling of the country, what evil consequence will be the necessary result of this failure ?" said, " Taking this failure in connection with the fears of famine, which have been upon the people for the last two or three years, I think the consequence will be to drive the class, which have been hitherto industrious and economical in their habits, into vice and wicked- ness, because the dissipated characters who have saved nothing, now look upon the poor industrious creature who has been cheated, laugh at him, and tell him they have spent their own money, while the industrious man has had somebody else to spend his for him."— Report JS^o. 21, 184 9. qu. 878.] 54 FRAUDS IN SAVINGS BANKS. " Why should I save ?" asks the jovial footman in Mr Greg's pamphlet; "my fellow-servant, the butler, pinched " himself in every conceivable fashion, earned the character of " a niggard and a miser, that he might store up a couple « of hundred pounds to set up a shop and marry upon. " He invested it in the Rochdale Savings Bank : the Manager " made away with £70,000 of the funds entrusted to him ; " the Trustees, it seems, are not answerable for the defalcations ; *' and I have now the satisfaction of knowing that my fellow- " servant is as poor as myself, and that all his long years " of self-denial have been thrown away." Such cases as these are neither imaginary nor few. They come before us in scores and in hundreds, and are terribly eloquent in the praise of self-indulgence and improvidence. 8. — Little evidence is required of the frauds having been pro- ductive of distress of the most serious kind.* The Depositors of the St Peter's Parish, or Cuffe Street Savings Bank, Dublin, stated, in an address to the Lord Lieutenant, in 1849, that " in consequence of its failure, the * [In the debate on the Savings Bank measure of 1850, Mr. H. A. Herbert, a Member of the Parliamentary Committees on Saving's Banks in 1848 and 1849, in alluding to the case of the Tralee Bank, said — " Here was a case where a number of industrious persons had been reduced to the most deplorable state of beggary and destitution, not through any fault of their own, but actually owing to their possession of those qualities which it was the duty of every good Government to foster and encourage, in, consequence of their habits of temperance, industry, and self-reliance. What was the use of preaching to the poor the duty of being honest, industrious, and self-dependent, if the fruits of their hard earnings were thus to be swept away ? He had witnessed the sufferings of these people ; he had seen in the workhouse people who had spent a life of toil, and never dreamed of being compelled to seek parochial relief ; he had seen one who, with a hardy spirit, asked if there were any chance of justice, being wrung from the Government ; and another who had lost his in- tellect in consequence of the shock occasioned by the failure of one of these Banks."] EXTENT OE THE EKAUDS. 55 Poorhouse had become the reluctant asylum of the industrious mechanic and Ms family ; that many a heart had been broken ; and, in not a few instances, even premature death had been the result." Section 2. — Extent of the Frauds. Art. 9. — From the Parliamentary returns, which were pub- lished in the Sessions of 1852 and 1857 respectively, and from communications addressed to us through the Friendly So- cieties' Institute, we have been enabled to obtain an estimate that may be relied on, as to the amount of loss that has been sustained by Savings Banks, not only through those defalcations which have come to the knowledge of the National-Debt Com- missioners, and thus been made public, but through others that would have been equally losses had they not been made good by the Trustees and Managers. The frauds made public amount to .£229,482. The first of the above returns includes a period of seven years, namely, from 1844 to 1851, and contains the follow- ing statement : — " The Commissioners for the Reduction of the National Debt, having no authority by law to examine into the accounts of the transactions of Savings Banks with Depositors therein, nor any legal title to call for and compare the books of Depositors with the ledgers and account-books of Savings Banks, there are no records in this department from which any account could be prepared, so as to shew whether in any of the cases deficiencies had occurred, and losses been sustained, by the Depositors, and if so, to what extent. * [Return 1852 .... £159,557 „ 1857 .... 13,925 Cuffe Street .... 56,000 Total Frauds . . . £229,482] 56 EXTENT OF THE FRAUDS " To procui'e such information, however, as far as was possible, a copy of the order has been addressed to some one or other of the Trustees formerly connected with the discontinued Banks." 10. — This return shews that, although the amount of vo- luntary subscriptions towards the relief of the Depositors amounted to £26,220, there still had arisen, during the short period of seven years, a net loss to the Depositors of £109,452, exclusive of the gigantic Dublin case, which ex- ceeded £56,000. The average discovered annual loss by defalcations, as far as could be ascertained by the Commissioners, during the seven years from 1844 to 1851, was upwards of £27,000. The following is an abstract of the 1852 return : — Name of Bank. Total ascertained Defalcation. Loss sus- tained by Depositors. Great Bkitain : Woolwich Dockyard . . . H^ligate- Spusby Mitcham Rochdale Monquhitter Poole St. Helen's Reeth Upper Albany Street (about) Newtown Carried forward . . . - £ 2 700 3,213 5,600 71,715 336 6,221 12,932 230 250 180 £ 3,436 37,433 5,663 6,680 147 180 101,379 52,539 * [The following is the Balance Sheet of the Poole Savings Bank, on the 12th August 1850, as prepared by the eminent Accountant, Mr. Grey, who was one of the Commissioners appointed to apportion the Parlia- mentary Grant in the Cuffe Street case :— LIABILITIES. Amount due (including interest to 20th May 1850) to 862 Depositors, whose pass-books have been produced,£34,860 18 5' Ditto to 56 Depositors, whose pass-books have not been produced . . . ' . . . . 634 2 j Total Liabilities £35,495 6j IN SAVINGS BANKS. 57 Total Loss sus- Name of Banh. ascertained tained by Defalcation. Depositors. £ £ Brought forward . 101,379 52,539 Ibeland : Kilkeel 976 976 Tralee 36,000 36,000 Killarney , 20,370 19,105 Nenagh 832 832 Mallow i Castle Townsend . . . . i No Re turns. Cuffe Street, UubHn . . . See for ward. 159,557 109,452 In Ireland there are about 50 Banks, and 4 have failed. In Scotland the only known defalcation has been at Auchterarder.* ASSETS (POOLB SAVINGS BANK). Amount invested on General Account with the N. D. C. (including in- terest to 20th May 1850 . £28,513 8 11 Amount invested as Surplus Fund, on which no interest is payable . 535 3 3 Amount in the Treasurer's hand Total Assets Deficiency £29,048 12 224 19 . £29,273 11 8 . £6,221 8 10 In the Parliamentary Blue Book there seems to have been omitted the special report of Mr. W. H. Grey on the affairs of the Poole Savings Bank, although it was one of those ordered by the House of Commons to be printed. We have, however, been favoured by that gentleman with a copy, from which the above is taken.] * [This was a Branch of the Perth Bank. The frauds amounted to between £1300 and £1400, and were effected by short entries in the books of monies received of Depositors, and by overentries in the same books of monies paid to Depositors, spreading over a period of two years, (qu. 2943.) By a subscription among the local Trustees,-the de- ficiency was reduced to £430 ; and eventually, in 1848, the Depositors were paid off at the rate of 18*. in the pound. (Evidence of Mr. Jameson, qu. 2901—2906.)] 58 EXTENT OF THE FRAUDS 11. — The second return, dated 4th June 1857, describes 11 defalcations, discovered during a period of 6 years, as follows : — Name of Bank. Ongar (Branch of Romford Bank) Dunmow Isle of Wi^ht Runcorn Bradford, Wilts Southport Yoxall and Barton Rug'by West London Bromley Leicester Total ascertained Defalcation £ 690 16 8,156 98 400 200 200 1,438 1,106 933 689 jel3,925 £7,860 Loss, sustained by Depositors. £ 7,850 From this return, it appears that in the 6 years (1851 — 1857) £2715 was voluntarily subscribed to meet the defalcations of Actuaries, &c., and that the total embezzlements discovered averaged £2321 a year. In the instances of Dunmow, Bradford, Southport, and Leicester, the sureties of the defaulting Actuary paid up the deficiency. 12. — Numerous instances of jfraud, originating in the absence of a proper system of audit and inspection, have escaped pub- licity through unwillingness on the part of the Trustees or Managers to destroy the confidence of Depositors in their Bank ; and they have very naturally preferred the personal sacrifice necessary to make good the deficiency, to incurring the censure that would justly have been passed on the laxity of management which had rendered such frauds possible. The sums so contributed by Trustees have occasionally been very large. In one instance, Mr. Hoare, the brewer, paid £7000; others have paid, some, £1000, some, £500. In all cases but those returned to the Commissioners, and in- cluded in the Parliamentary Papers, as far as we have ascer- IN SAVINGS BANKS. 59 tained, whatever deficiency has taken place has been provided for by the voluntary subscriptions of the Trustees or their neigh- bours. The word voluntary is not applicable to the case of the Bank at Carnarvon, which failed in 1824, as at that time the Trustees were liable under the law for the whole amount of the Deposits. To our own knowledge, however, more recent large defal- cations in Wales have been made up in this manner. Section, 3. — As to the Remarkable Cases of Fraud. Akt. 13, — In consequence of the public belief in Government responsibility to. Savings Banks Depositors, various attempts were made to obtain indemnity at its hands. These were re- peated in Parliament, but were of no use, except in one instance. The. case of the frauds on the Cuffe Street Bank, in Dublin, partly from their extent, and partly because they were among the earliest that became known, caused such an expression of feeling and opinion on the subject, that the legislature made a special grant of £30,000 to assist the unfortunate Depositors, so as to return them about 10 shillings in the pound of their loss. The extent of the frauds in this Bank, and the false position of the National Debt Commissioners with reference to it, gave rise to Committees of Investigation in the House of Commons upon the subject (in 1848 and 1849), and to the introduction of a Bill by the Chancellor of the Exchequer, Sir C. Wood, in 1850, for the better regulation of Savings Banks. The pe- culiarity of the Cuffe Street defalcations will, at all times, be worthy of special study, as a comphcated instance of neglect and peculation, which may be said to comprise every species of individual fraud, that has taken place in other insti- 60 THE EEMAKKABLE CASES OP FRAUD. tutions ; nor will a study of the other cases prove to be without interest or advantage to Savings Bank officials, as an accurate knowledge of the circumstances of past frauds must be the first step towards preventing future ones. It will also help our readers to discern the defects in the constitution of Savings Banks in general, and to follow our dis- cussion of the most appropriate remedies, if we narrate the manner in which they became insolvent, beginning with the case in Dublin. I.— The Cuffe Street Fraud. Art. 14. — In 1818, according to an account given by Dr. Hancock, " the Sf. Peter's Parish Savings Bank was established in CufFe Street, Dublin, and a Mr. Dunne, the parish sexton, was appointed cashier and book-keeper, at a salary of .£5 a year. The Trustees and Managers of the Bank included some of the most influential and respectable of the inhabitants of Dublin. The late Archdeacon Torrens was a Trustee, and a surety for Mr. Dunne ; the late Judge Johnson was also a Trustee ; and the pre- sent Lord Chief Justice, then Sergeant Lefroy, was another. " Under such influential patronage the Bank rose in importance, and large sums of money were lodged which must have amounted in 1831 to upwards of £100,000. " In 1826 one of the Managers began to suspect that all was not right, and that Mr. Dunne was making away with some of the money. A dispute then commenced in the Committee of Manage- ment as to Mr. Dunne's character, and it took the Committee exactly five years to ascertain whether Mr. Dunne was worthy to be trusted or not. " In February 1831, the defalcation was finally discovered, in a manner described by one of the Managers thus : — ' I think the Board came to the decision that Mr. Dunne should not be continued, after an immense deal of battling for a year or two, and I think Mr. Dunne was got to resign. He had not many days resigned be- THE CUFFE STREET FKAUD. 61 fore an account came in, a pass-book was presented for payment, and on investigating and comparing it with the ledger, this ac- count was found to be closed in the ledger though open in the pass-book, and Mr. Dunne then suddenly absconded.' The first step the Managers took on this event was a very proper one; they issued a notice of the Actuary having absconded, and called on the Depositors to produce their books. A number of claims at once appeared. They at first thought the defalcation would not amount to more than £1000: they soon found it to exceed J20,000. " The Managers then proceeded to consult the Commissioners for reducing the National Debt, as to what they should do. They drew up a statement of what had happened ; asking the Com- missioners for advice and assistance; suggesting that a Com- missioner should be appointed to inquire into the management of the Bank, and the cause of the fi-auds ; and either remodel or close the Bank. This statement one of the Managers took to London, and on waiting on the Secretary of the Commissioners, was re- ferred by him to Mr. Tidd Pratt, the barrister appointed to certify the rules of Savings Banks, and to act as arbitrator in all disputes between Depositors and Managers. " This gentleman then filled, and still fills, an office in which judicial and executive functions are mingled. The Managers applied to him in his executive capacity, as law adviser of the Commissioners in matters relating to Savings Banks. He enter- tained their application in his judicial capacity ; and offered to decide any disputes between the Managers and the Depositors, many of which had arisen as to the rights of parties who had en- trusted their money to Mr. Dunne, but which had not been duly lodged by him. Mr. Pratt, accordingly proceeded to Dublin, in his judicial capacity, and awarded £7500 to be paid by the Managers. He also awarded that ^64274 claimed was not a legal charge against the Managers, as that amount had been lodged with Mr. Dunne out of the Bank, and out of Bank hours. Taking a strictly judicial view of his duties, Mr. Pratt did not decide whether the Managers had been guilty of wilful neglect or default, as that question was not directly raised. But though, in 62 THE CUFFE STREET FRAUD. this matter, he confined himself to acting in his judicial capacity, he offered advice in his executive capacity ; firstly, that the ^4274, which was not a legal charge on the funds of the institution, should be paid out of the future profits ; and secondly, that the Managers ought to carry on the Bank, as the future surpl us would realize enough to pay all deficiencies. The Bank was accordingly carried on ; and the Managers, no doubt with a view of gaining confidence, did not wait for the future profits, but at once paid out of incoming deposits the .£4274, which Mr. Pratt had decided was not a legal charge. They also, with a view to keep up their credit, omitted to post in the office the yearly statement of accounts, as required by the Act of Parliament, from 1831 till 1848. These accounts they furnished annually, however, to th ~ Commissioners for the reduction of the National Debt ; shewing, after 1832, in every year a deficiency. The Managers had asked Mr. Tidd Pratt whether the Commissioners would receive the accounts short, and he said they would." The result was, that when the evil day at last came, in 1848, the deficiency, which had its origin in the ,£20,000 appropriated by Mr. Dunne, had grown to the enormous sum of £56,000. 15. — It also transpired that, in this Bank, the Acts of Parlia- ment for the guidance of Savings Banks, and the Rules of the Bank founded on the same, had been violated to a very con- siderable extent : — 1. In receiving from individuals sums exceeding £30 (in some cases even more than £200) in one year. 2. In receiving sums exceeding £150 in the whole. 3. In allowing interest on accounts exceeding ^2200. 4. In receiving re-lodgments of a large amount. 5. In opening accounts without calling upon Depositors to sign the Declaration required by Act of Parliament. 6. In opening second accounts for the sariie individuals. 7. In failing publicly to affix and exhibit in the office, as directed, the annual statement of the bank, with a list of the Trustees and Managers. THE CUiTE STREET FRAUD. 63 8. In refusing to supply to Depositors a copy of the said an- nual statement, and list of Trustees and Managers. 9. In failing to observe the requirements of 7 & 8 Vict. c. 83. s. 6., by omitting to place an Abstract thereof amongst the Rules of the institution. 10. In receiving from a charitable institution, in a period of fom- years, sums exceeding ^2000 in the whole, (the legal limits at that time being ^100 fer annum, and £300 in the whole.) 11. In paying money to Depositors without taking any receipt whatever for the money so paid ; thus opening a door to fraud, without supplying any adequate means for detecting it. 16. — It may be mentioned further — and to this we draw the special attention of our readers — that in the returns of De- positors in the Cuffe Street Bank, supplied from year to year to the National Debt Office, there were numerous absurd dis- crepancies that can have escaped notice only because it was nobody's business to attend to them ; for instance — Year ending 20th Nov., 1831. Depositors above £20 and not exceeding £50 — Number .... 1066 Amount .... £16,835 when the amount must have been at least £21,320. 1840.— Depositors aJoue £200 . . 4 Amount .... £793 1847. — Above £100 and not exceeding £l50 — Depositors .... 320 Amount Deposited . . £13,173 instead of £32,000, at least ! 64 THE TRALEE FRAUD. II.— The Tralee Fraud. Art. 17. — In the case of the Tralee Savings Bank Fraud, which was discovered in 1848, the deficiency amounted to £36,000, and the defaulting Actuary was prosecuted, and sentenced to fourteen years' transportation. Here, according to the Parliamentary evidence, fraud was committed — " By representing certain accounts as closed that were not so; by receiving money in the absence of the Honorary Manager ; and by falsifying the entries in the books. Thus^-Supposing there were three depositors, A, B, and C. A would be put down as having paid £3, B as having paid £6, and C as having paid £1. By the close of the day there would have been a gi-eat many other Deposi- tors, and perhaps the receipts would amount to £260. The fact is, A had paid £30, B had paid £15, and C had paid £27. It ap- peared that the books had been kept by the Actuary, with the proper amounts, that is, he had entered the proper amount in the ledger ; but after the Manager had gone away, he had put a figure after the 3, a figure 1 before the 5, and a figure 2 before the 7 ; so that on coming to cast up the total, if they had been properly audited, this fi-aud would have been discovered." In this Bank the law regulating the amount of Deposits was entirely disregarded. The sum of £5000 was received in one amount from a Society called the Irish Reproductive Loan Fund. 18. — There was also a case of " a poor woman, who had £900 accumulated by the sale of old clothes : she had actually given notice for her money, and it was provided for her, and sent down to the Bank among the notices of the day upon that occasion ; but Mr. Lynch, the Actuary, advised her to leave it where it was, and she lost it all." It is also stated that " the Manager of the day used to tell the Depositors — *' ' You cannot pay more than £30 in your own name, THE KOCHDALE FRAUD. 65 but have you not a wife, or a child, 'or some relation ?' and he would receive any amount they chose to invest, it being really and truly, and he knowing it to be, the money of the Depositor." Very nearly the same remarks will apply to the Killarney Savings Bank, and to many others. III. — The Rochdale fraud. Art. 19. — In 1818, the Rochdale Savings Bank was esta- blished, and Mr. John Haworth was elected Actuary. At his death, his son, George Haworth, was appointed to the ofBee, and he died in November 1849, having held the situation more than twenty years. His character for honour and integrity was high in the esti- mation of all his employers.*: — " He managed to deceive everybody by an appearance of wealth; he kept a carriage ; and any thing scientific or charitable, or any matter of that sort, he always patronised as far as he could, though not himself a particularly talented man. " He did an extensive business in wool (the staple trade of the town) by selling it on commission : be was agent for Guinness, and one of the London houses, for the sale of porter. At the time of his death he was also agent to the Sun Fire Office ; he likewise acted as agent for two very large estates in Rochdale, and for sundry minor estates ; he was the valuer and receiver of rents for the Lancashire and Yorkshire Railway Company ; he was also a land agent, and be had a large cotton-mill. " For honesty, probity, and wealth, there was no man in Roch- dale who stood higher : and when surprise was expressed that he should officiate as Actuary to the Savings Bank, he represented that be did it merely as a matter of charity, and this was believed by everybody." [* Evidence of Edward Taylor— qu. 3114.] P 66 THE ROCHDALE FRAUD. 20. — Till his death there was not a suspicion of fraud or deficiency in the funds of the bank, but it was then immedi- ately discovered that he had kept two sets of books — one set, purposely to deceive the Trustees and Managers. The deposit books were called in, and the claims by Depositors amounted to £100,403, to meet which there was only £28,686, in the Government Funds and the Treasurer's hands : the Actuary having appropriated no less than £71,717. His property, when sold, realised £16,000, and the Trustees and others subscribed £17,430, so that the loss to the Depositors is still £38,287. Of the Depositors, 1014 were women ; 191 sick clubs ; 37 trust accounts ; 539 labouring men ; and 1184 under 21 years of age. From a report in this case, it would appear that the fraud had been accomplished in the following manner : — " Haworth, (according to an account published at the time,) acting both as Manager and Actuary, entered in one of the two sets of books the monies which he took to Mr. Royds, as Treasurer, while in the other set he entered those deposits which he appro- priated to his own use ; so that he became the treasurer of nearly two-thirds of the Deposits. Haworth picked the depositors, and generally entered in his private book those who had the largest sums invested, and who were generally bringing in money, and taking little out. In his ledger account, when he took any money from a Depositor, he wrote ' withdrawn,' naming the sum, and de- biting himself in his cash-book with that amount. In Haworth's book, all the items which were not entered in the Trustee's ledger were distinguished by a mark, by which the eye might easily separate them from the other items. Had the Managers acted in rotation, as is the custom in other banks, to receive and repay Deposits, it would have been difficult to accomplish his purpose. It should, however, be stated that the Bank opened for four hours (an unusually long time) on Mondays and Saturdays, viz. from three to seven o'clock. " The following is another instance of Haworth's cunning and THE ROCHDALE ERAUD. 67 duplicity. A friendly society of plougliboys deposited on a given day i£30, which, was properly entered in the book, and laid before the Trustees, but shortly afterwards the Actuary erased the word 'deposited,' and substituted 'withdrawn,' at the same time placing the figure ' 1 ' before the ' 30,' thus making it ap- pear that the Society, instead of depositing ^30, had withdrawn £130. In one case, in which a lodge of Odd Fellows had deposited £30, the item was not carried into either of the Trustees' or Actuary's private ledger. The reason of this, it is supposed, was, that the Actuary was aware that such a Society is not recognised by law, and could have no legal claim upon the bank." 21. — Upon the discovery of the frauds the Depositors were called together* and informed of the position of the bant. They very generously resolved to make no distinction between the deposits which had been properly made and those irregular ones in respect of which the bank had no legal liability, to return in full those sums which had been paid in during the two days that the bank was open after the death of Haworth, and to wind up the Institution without litigation. The result was a dividend of 12s. 6d. in the pound on all the Depositors' money. The deficiency was afterwards made up by the Government to those of the Depositors who had served in the army or navy, but to no others. The moral effect of this distressing case is described by Mr. Taylor to be lamentable even yet in the case of young men and voung women. " We will spend our money," the ex- pression is, " rather than a George f Haworth shall have it." * [Evidence of Mr. Edward Taylor, Chairman of the Depositors' Com- mittee.— Qu. 3094—3106, Report of 1858.] -)■ [Haworth's astonishing proceeding's in respect to the appointment of Managers cannot be passed over. Mr. Taylor says (Qu. 3114 to 3120, 3179 to 3182) :— " The original Trustees and Managers being dead, he slowly introduced E 2 68 THE BRIGHTON FRAUD. No attempt has since been made to establish a new Savings Bank in Rochdale : and that at Heywood, in the neighbour- hood, was closed entirely from the panic caused by this fraud. IV. — The Brighton Fraud. Art. 22. — The Frauds in this Bank amounted to between '£3000 and £4000, and were discovered in the following manner : — " At the annual meeting, one of the Managers rose, and said he was not satisfied with the balance-sheet ; and he moved that the meeting should adjourn, for the purpose" of examining the balance-sheet more thoroughly. This alarmed the Actuary (Mr. BuckoU), so much, that when he found the Managers were be- coming active in the matter, and that they were going into the accounts, he decamped, leaving a letter stating that he had been people — elected them himself in fact ; and the manner in which he did it was, he put their names down in an Annual Report, but never let them know that they were made Manag-ers. To take my own case : I have a Report here for 1838, in which my name is printed as a Manager ; but I never was aware of the fact that I was a Manager till the bank failed. I never was at any meeting, and I was never called upon to attend any meeting, and I can name several others in the same way. I will take another case, which occurred to a gentleman named Chadwick. George Haworth said to him as he was passing, ' I want thee,' (he was a member of the Society of Friends) : wilt thou come in and sign a return ?' Mr. Chadwick said, 'I cannot, I have nothing to do with the bank.' 'Oh, but thou art a Manager,' said George Haworth, shewing him his name : he then got him to look at the accounts, which Mr. Chadwick verified, and put his initials to every item: and when he had done that, Mr. Haworth said, " Wow, if thou wilt take that paper, 1 wUl call over the items,' which he did from another paper. Having done that, ' Now,' he said, ' thou wilt have to sign this ;' and Mr. Chadwick did it, and believed he was signing the duphcate paper of that which he had exa- mined ; but it was discovered afterwards that Haworth had substituted a falsified return.'' " I know of another instance, in which he availed on a gentleman with a view to get him to be a Trustee : the gentleman said, ' I do not like it : THE BRIGHTON AND READING FRAUDS. 69 unworthy of the position he had filled. The fraucls were committed by means of false entries in the pass-books, and corresponding false entries in the ledgers, extending over a period of seven years : the Actuary would also call upon his friends, and represent that a poor Depositor wished to withdraw so much money from the bank that he himself could not act as agent for the Depositor, and would Mr. So-and-so oblige him by attending to receive the money for the Depositor who could not attend."— (Evidence of Mr. W. Hatton, qu. 3236 to 3278). Ultimately the deficiency was made up, ^3000 having belonged to the " Separate Surplus Fund," and £600 being obtained from Mr. BuckoU's sureties. V. — The Reading Fraud. Art. 23. — In 1842, suspicions were excited among the Ma- nagers of this bank as to the conduct of their Secretary and Accountant, and an investigation was set on foot, revealing a deficiency of about £3000. " A portion of this the Secretary was allowed to refiind ; the re- mainder was raised by subscription among the Trustees and Ma- nagers, Mr. Richard Benyon de Beauvoir giving £1000. This occurred before 1844, while the Trustees and Managers had still a personal responsibility." — (Evidence of Mr. Hatton, qu. 3299 to 3314). I do not like my time to be taken up with business I cannot attend to, and I do not like the responsibility of it.' He said, ' Thou knowest there will be no responsibility by and bye, for the Government are passing an Act to take away the responsibility ;' and afterwards waited upon him and shewed him the Act, which convinced him there was no responsibihty. Then the question was, ' What is my work V Haworth said, ' All thou hast to do is to sign the orders for withdrawing the money invested with the Government which have been audited and looked at by the Managers : thou wilt have to send thy signature, as a sort of check against the Ma- nagers : the Managers manage the Bank.' "] 70 THE BEADING FKAUD. 24. — The high reputation of many of these defaulting Actuaries, before their frauds were discovered, is a circum- stance worthy of notice. In reference to one case, that of Mr. William Wheeler Yelf, Actuary to the Isle-of- Wight Savings Bank, whose defal- cations extended to £8156, out of deposits amoimting to £60,000, it is stated that he was — " Generally much respected in the island : for many years he was distributor of stamps, and had a large printing establishment, and was a Wesley an preacher !" In similar instances of fraud, at Scarborough, at Ongar in Essex, and elsewhere, the defaulters were persons in equally good repute. Section 4. — Belief of the Public that the Banks had Government Security. Art. 25. — We have before stated that, under the existing statutes, starting from the year 1817, it has not been com- petent for the Government, without a special vote of the Legislature, to make itself responsible to the Depositors for the amount of their savings. It is, nevertheless, a remarkable fact, that until the Report of the Committee upon the great Irish frauds, the almost universal belief, not only of the Depo- sitors themselves, but of persons of high standing and wide information, was, that for the sums lodged in Savings Banks they had the security of the nation. In that report it was, however, correctly stated — " That the *only powers vested * {The law is more stringent in the State of New York. By the Savinffs Bank Act, 20 March, 1857, it was enacted that:—" If any BELIEF IN GOVERNMENT SECURITY. 71 by law in the Commissioners for the correction or repression of misconduct in the management of Savings Banks, appeared to be : — " 1. That of giving notice in the Gazette, in the event of irregularity in furnishing the annual accounts. " 2. Closing the account of the bank in default with the Commissioners ; in other words, refusing to receive further monies on account of such bank." Sect. 46. 9 Geo. IV. cap. 92. 26. — On the important subject of this section, we propose to bring forward the opinions of eminent persons, partly for their historical value, but chiefly because we believe that to estabhsh the fact that menof acknowledged standing and judg- ment considered it a matter of course that Savings Bank De- positors had a National Guarantee, is to furnish an irresistible argument in favour of an Act being now passed to secure such Guarantee. That the public mind was not at all pre- pared for the disclosure, that the Government had no control over and was not responsible for the internal management of Savings Banks, is perfectly manifest from the speeches of Mr. Hume and Colonel Thompson in debates in the House of Commons on the subject, (Hansard, 3d Series) : — I. Mr. Hume said (1850), " He thought the public had a right to complain of the Government in this matter, because it was always understood that the Government were pledged to the De- positors, and thus the public were deluded. He said dehberately, the public were deluded, because they had been led to believe that Savings Bank, or institution for savings shall fail to furnish to the Super- intendent of the Bank Department, it's reports at the time herein stated, it shall forfeit the sum of one hundred dollars per day for every day such report shall be so delayed ; and the said Superiiltendent may maintain an action in his name of office to recover such penalty, and when collected, the same shall be paid into the treasury of the State."] 72 BELIEF OF THE PUBLIC their money was safe from the moment it was paid into the bank ; whereas it appeared that the Act of Parliament only enabled the Government to receive the money from the Trustees, and they were only responsible for the sum which was received. Now, this was a matter which the unfortunate Depositors did not know, and they believed that all the money deposited was placed under the control of the Government from the moment it was placed in the bank. It appeared to him that the Government ought to undertake one of two things, either, to leave Savings Banks altogether alone, or else to insure perfect security to the Depositors, which he saw no difficulty in doing." Previous to the above, March 14, 1828, Mr. Hume observed: — " The money of the Depositors in Savings Banks was vested with Government." II. General Thompson, in 1848, said: — " It had struck him with profound astonishment to hear that the Savings Banks were not what in popular parlance was called as ' good as the bank.' He should as soon have dreamed of having payment of dividends at the Bank of England refused be- cause a clerk had gone to America. On the numerous occasions where he had advised servants and others in the less' wealthy classes to invest their savings in the Savings Banks, he would assuredly have done no such thing if he had had the slightest conception they had any thing but Government security for their money." III. On April 17th, 1833, in reply to Mr. Pease, Lord Althorp stated: — " That the accounts of all Savings Banks were annually laid before Government ; and where any bank neglected to do so, the Commissioners exercised the power (one or two instances of which had occurred since he came into office) of closing such bank, till its accounts were sent up." IN GOVEENMENT SECUEITT. 73 IV. On July 26th, 1844, Mr. Goulburn said:— " They (the Savings Banks) were established by benevolent in- dividuals, to encourage habits of economy and industry among the humble classes in their neighbourhoods, and when the Government determined to legislate on the subject, it was with the view of giving greater encouragement to Depositors, by giving greater security for deposits." V. That generally accurate writer, so often quoted by public speakers, the late Mr. G. R. Porter, said in his " Progress of the Nation:" — " The Savings Banks, on the contrary, can never involve those who there deposit their savings in any risk or expense : the safety of the money is guaranteed by the State." VI. A distinguished writer in the "Quarterly Review" has said: — " But the grand bonus was the privilege, to the poor man, of being enabled to place, without trouble or expense, every single shilling, ^s he could save it, in the strong box of the nation, with the hundred arms of Government to protect it from others." VII. In that widely circulated periodical " Chambers' Jour- nal," we have : — " Remember this, that as soon as you place money in a Savings Bank, you become, by the possession of your deposit book, the creditor of the nation." VIII. The Irish School-books published by the Commis- sioners of National Education for Ireland, in the fourth Book of Lessons, at Lesson 8, " On Taxes," state — " When a poor man deposits his money in a Savings' Bank, he is then one of the Government creditors, and receives his share of the taxes." 74 GRIEVOUS CONSEQUENCES The above quotations speak so plainly, that it is need- less to produce further evidence of the obvious fact, that the one impression on the public mind was that the nation, through the Government, was responsible for the money of Savings' Bank Depositors. Nor is it at all surprising that such an impression should have existed, seeing that the Legis- lature gave rise to the mistake by the very *language used in tha Act of Parliament — " That it is expedient to give protec- tion to such institutions, and the funds thereby established." (9 Geo. 4. c. 92. s. 2.) This, coupled with the provision for the investment of Savings Bank funds in Government secu- rities, and the power, although limited, that was vested in the N. D. C, caused the misapprehension ; excusable in the poorer classes, since it prevailed amongst highly-educated persons also. It should not, moreover, be overlooked that, however much the latter have now been undeceived, the uneducated Depositors in localities where frauds have not yet occurred or have not yet been detected, still labour under the impres- sion that their money is safe — " having been placed in the Government Bank." 27. — In concluding this Chapter, we urge upon our readers to consider the cruelly unfair position, in which the defrauded Depositors in the various banks have been left. The year, in which the Guffe Street failure happened, was, apart from such a calamity, one of considerable distress ; and the labour- ing classes of Dublin were ill prepared, after the disastrous years of 1846 and 1847, to meet with a further loss of nearly £60,000. It is true that £30,000 was voted by the House of Commons * [On the Depositors' pass-books of the Moorfields Bank the words are printed, " Under Government control." See evidence of Mr. Saintsbuiy, qu. 1837. The Glasgow and other large banks in Scotland bear the title of " National Security Savings Bank."] OF THE FRAUPS. 75 towards the deficiency, but even this was not done till the year 1851 ; and the remaining £30,000 is still unpaid, the House having since distinctly negatived a further vote. This case is one of peculiar hardship, inasmuch as for seventeen years pre- viously the representatives of the government in London had been made aware that a deficiency existed, yet had taken no steps to arrest its progress; and although in 1845 informed of the utterly insolvent state of the bank, yet, * contrary to law, they allowed it to continue its ruinous operations. In the cases of Rochdale (deficiency £37,433), Tralee (£36,000), Killarney (19,000), &c., nothing whatever has been done by the Government to repay the losses. * [It is right to say that this occurred before the administration of the present comptroller, Sir A. Y. Spearman, who, applying the results of his large financial experience, has endeavoured, with the most watchful care, to improve the system of Savings Banks ever since they have been placed under his control. Nor is it easy to know where to fix the blame ; for, as remarks a mem- ber who has given much attention to questions of public finance, Sir H. Willoughby, M.P., " What was the government in these cases 1 Why, it was supposed to be the Commissioners for the Eeduction of the Na- tional Debt, who held their offices ex officio ; but the Commission being composed of persons like Mr. Speaker, the Master of the Rolls, and the Chief Baron of the Exchequer, they were never called upon to perform any active duty. All they had to do was to meet about four days in the year, for the purpose of adjusting the surplus income apphcable to the reduction of the national debt. Now, how was it possible for these gentlemen to attend to the interests of 600 Savings Banks ?"— Hansard, vol. cxxix, 3rd series, p. 541.] ( 76 ) CHAPTER IV. THE REMEDY- IN THE ArPOlNTMENT OP GOVEEBTMBNT INSPECTOES AND AUDITOES, WITH THE GUARANTEE OF THE STATE FOE SAVINGS BANKS DEPOSITS. .:. V, Section 1. — As to what is really desirable, Aet. 28. — It is manifest, from the circumstances described in the previous chapter, that the whole success of Savings Banks, as a means of encouraging a habit of saving, depends on their affording a perfectly safe place of deposit, and on their being so managed as to warrant the labouring classes in believing that their money is faithfully preserved for them,* It is equally plain that Savings Banks will not make the poor more careful of the public credit, unless the public credit is strictly observed towards themselves : in other words, unless their deposits, in institutions where the' Government has as- sumed a share in the management, are perfectly safe. The whole success of Savings Banks, the probability of their attaining the objects for which they have been established, the benefit that they can possibly confer on the community, all depend on the security which the Depositors have for their money. * [See Dr. Hancock on the Cuffe Street Bank frauds.] WHAT IS REALLY DESIRABLE. 77 In the words of- the Right Hon. Sotheron Estcourt, M.P., to whose perfect knowledge of the requirements of the indus- trious classes in their associations, we owe many improvements in Friendly Society legislation : — " It is difficult to maintain that Parliament, having released local Trustees from their liability, should not be bound to provide some other guarantee for the money of Depositors, who have no share themselves in the management of the bank." 29. — For this anomalous state of things, if Savings Banks are to remain, in any way, convected with the Government, there is but one remedy, viz. National security ; for Deposi- tors require, not an exorbitant rate of interest, such as can only be given at the cost of the public exchequer, but an adequate amount of profit from the investment of their funds, combined with perfect security : and none can so nearly ap- proach to perfection as that of the nation. This should be extended to all deposits in Savings Banks from the moment of their being committed to the custody of the Managers and Trustees, or their officers. Those wlio support this view, urge that such a guarantee is easy of com- prehension to the industrious classes : that it relieves them from the task they are unable Adequately to fulfil, of inquiring into the responsibility of the persons who receive their money, and that it offers that encouragement to them, in the exercise of provident habits, which it is fit the nation should afford, and no more. * [An eminent writer remarks, "If the banks were either private or joint- stock concerns, and the Depositors had a share in their management, they would find perhaps more favour, for a time, with many among the working-classes. But it requires no prophet to foresee that from such a state of things mismanagement and frauds would ensue, and the esta- blishments share the fate of many other schemes founded on appeals to the prejudices, ig-norance, and cupidity of the people."] 78 ATTEMPTS AT LEGISLATION, 1850 TO 1857. On the crther hand, there are some who contend that the establishment of banks with a State guarantee is not only un- sound in principle, but might tend to foster in the minds of the mass of the people ^those erroneous ideas of the nature and functions of Government which have proved so injurious to the peace and welfare of society in bther countries. They recommend, instead, independent ' Banks of Deposit^ such as we shall discuss in Part VI. Section 2. — Js to the Attempts at Legislation, 1850 to 1857. Akt. 30.- — It is a strong proof that great need was admitted for some decisive step being taken by the Government with re- gard to the management and conduct of Savings Banks, that we find Bills introduced to Parliament on the subject in the years 1850, 1853, 1854, and 1857. The first of these Bills, intro- duced by the Russell Ministry, was, " To amend the law relating to Savings Banks." The leading feature of this Bill was, that the Commissioners should appoint a Treasurer to each Savings Bank, who should be at liberty to appoint an Agent or Clerk to act on his behalf. Such Treasurer (or deputy) was to attend at the office of the Savings Bank, and to receive and pay all moneys. The Act provided, also, for the appointment of Auditors by the Trustees, and empowered the Commissioners to send their own Inspector at any mo- ment to audit and examine the accounts of any bank. In bringing forward the Bill the Chancellor of the Ex- chequer said — " It was not surprising that new regulations should be called for, or that a scheme which had answered when the transactions of these establishments were of small amount, should be found to re- ATTEMPTS AT LEGISLATION, 1850 TO 1857. 79 quire fiirther adjustment when they had attained their present gigantic extent. Much of the necessity of legislation arose, in his opinion, from these causes j but there was another circumstance which he thought had contributed to the same result in these in- stitutions, and he believed that the same cause operated in all vo- luntary establishments. Although, in the formation of benevolent and other institutions like these, the zeal of philanthropic in- dividuals might be successful in founding and starting the infant institution, he was afraid that, after the warmth of the first feeling had cooled, parties were not willing to give that constant and regular attention to the working of the system which was indis- pensably necessary to its continued usefulness and prosperity. He must observe, with regard to all persons who had taken part in the management of the affairs of those institutions, that, however active and energetic might have been the zeal of individuals in forming the establishment, it was exceedingly difficult to insure their regular attention to its concerns for any length of time. Without being disposed to attribute blame to individual Trustees for the management of Savings Banks — for if he were to do that, he believed he should himself come in for a fair share of it — he was afraid that, with some exceptions, the general practice was, that no very regular attendance was given, and that the affairs of the bank were left very much to the management of the Secretary, Treasurer, Clerk, or by whatever name the person left in charge was called, and that that salutary check was not exercised by the Trustees or Managers, which was perfectly indispensable to the proper management of the establishment." The Bill, however, at a subsequent stage, was ordered to be postponed, and was eventually lost. 31. — The next movement made by the Legislature in the cause of Savings Bank reform was in 1853, when the Aberdeen Government introduced " A Bill to amend the laws relating to Savings Banks, and in certain cases to give the guarantee of the Government to the Depositors for the repayment of the 80 ATTEMPTS AT LEGISLATION. sums legally deposited." Among the distinguishing cha- racteristics of this Bill may be mentioned the following: — That every Savings Bank established after the passing of the Act, if the Government were to be responsible to the De- positors, should have a Treasurer appointed by the National Debt Commissioners for receiving and paying all moneys That if the Trustees and Managers were not willing to have a Treasurer, so appointed, they should themselves be answer- able for all deposits paid into the bank. That with respect to Savings Banks existing at the time of the passing of the Act, if the Trustees and Managers did not within three months avail themselves of the offer of a Government Treasurer and Government security, they should, ipso facto, themselves be- come jointly and severally liable for all deposits entrusted to their care. These provisions formed the substance of the Bill in question, which, like its predecessor, was postponed and lost. 32. — In the Session of 1854, also, a Bill was introduced " To make further provision for the investment and security of the moneys received by the Commissioners for the Re- duction of the National Debt, from Savings Banks and Friendly Societies." This Bill, however, did not become law. 33. — Another Bill was prepared in 1857, of which the main object was to provide for the establishment of " Government Security Savings Banks." The existing Banks were to be allowed, on proof of their solvency, to use this title. As regards those who did not, no alteration was to be made in the present law : but all Government Security Banks were to pro- vide for the annual production of every Depositor's book, on penalty of loss of interest. They were to be entirely under the control of the National Debt Commissioners, who were to be empowered to close any bank in which a deficiency was found to arise. This Bill also was withdrawn. ( 81 ) Section 3. — As to Government Inspection. Aet. 34. — The guarantee of the nation may be safely ac- corded to Savings Banks if a proper control over their in- ternal management be in exchange allowed to the Government, a control which would be sufficiently secured by the appoint- ment of efficient Inspectors, possessed of practical experience in the examination of accounts, acting independently of the Trustees, and empowered to enter the banks at any time, without previous notice, for the purpose of examining into every detail and of making frequently recurring audits.* They should become the visitors of these institutions, and be invested with ample power for -[-inspecting the books and accounts, — enforcing the strict observance of their own regu- lations, and for seeing that the staff of each institution is pro- * [Burwood Godlee, Esq., Chairman of Lewes Savings Bank, 4th A.ugTi9t 1858 — Mj. W. W. Heathcote, Secretary, Hackney Savings Bank, 21st April 1858 — Mr. David Prain, Actuary, N. S. Savings Bank, Brechin, 14th May 1858— Mr. Anthony Gibson, Keswick S. B., 8th May 1858— Mr. James Hall, EnniskillenS. B., 15th May 1858— Mr. A. Johnson, Leigh S. B., 24th May 1858— Mr. James Mudie, Actuary, N. SI Savings Bank, Montrose, 29th May 1858- Mr. Edward P. Southall, Leominster, April 23rd, 1858— Mr. Henry Stocks, Rye Savings Bank, and the Officers of St. Clement Danes, Stockport, Congleton, Belfast, and other banks, have expressed to us their concurrence in this view.] + [Audit, without inspection, is not a security to be relied on. The experience of numerous Joint Stock Companies has shewn that Audi- tors are too apt to act in a perfunctory way, forgetting the real spirit of their duties. From a desire to prevent a shock that would ruin " the credit of the Company," they have been known to abstain from reporting on improprieties or irregularities in the management, and to have saii nothing respecting deficiencies in the funds, — sometimes from a species of foolish sympathy, — sometimes from a bona fide sort of idea that the concern could recover itself. Had the Auditors properly discharged their duties, or been possessed of sufficient powers of inspection, the Eoyal British Bank, and other grievous frauds would not have been perpe- trated. See Part VI. on the Audit of Public Institutions.] G 82 REMEDY FOE FRAUDS. perly maintained, that the *law has not been disobeyed — that the respective duties of each officer are efficiently dis- charged — that their salaries are proportioned to their respec- tive services — and that no larger sums remain in the Trea- surer's hands than are requisite for the ordinary working of the bank : in short, to adopt a phrase used in the Report on Savings Banks in France, they should examine " toute la gestion," that is, the whole of the management of each bank, as well as its financial condition. By the arrangements proposed in Section 4, page 97, further on, a gradual detailed examination of every Deposi- tor's Book would be made, and a check at once put upon any course likely to lead to inaccuracy or fraud. Even though some months may elapse before all pass-books are examined, the regular inspection at random of such books as are pre- sented by the Depositors for payments in or withdrawals, and of those books called for in their order, would sufiice to make it a probability approaching certainty, that by the operation of * [The Saving's Banks accounts, ordered by law to be published, afford no check which can be applied by an individual Depositor, and therefore no guarantee against falsification. The present system of publication, moreover, is not adequate ; and in many cases the provisions of the Act are entirely disregarded, no accounts being published at all. The Cuife Street Bank published no accounts for seventeen years ! That some inquiry into the legality of the proceedings of the banks is necessary, may be illustrated by two facts : — In one Savings Bank (although the Rules themselves are correctly drawn), at page 11 of the Abstract it is said : — " No sum, knowingly deposited under a false name, or description, shall bear interest ; and such sum shall he returned to the Depositor." Whereas the Act provides that the money shall be 'forfeited' to the Sinking Fund. In another institution — although, according to law, all Savings Bank monies are to be invested with the Commissioners for the Reduction of the National Debt— their Balance Sheet shews that they have more than four times as much invested at interest in certain Joint Stock Banking Companies as in the legal securities.] GOVEKNMENT INSPECTION. 83 the " Law of AverE^e " the others still to be examined are equally accurate. To each Inspector should be attached one or more account- ants and clerksj to assist him in the inspection of the pass- books. The Inspector should be the general medium of communica' tion between the Commissioners and the Trustees and Mana- gers of each bank; and their reports should be collated together into an abstract, for the purpose of an annual report to Parliament. They should have the power of taking evi- dence on oath. 35, — In addition, a Local Professional Accountant ap- pointed by the Government Commissioners, should be attached to each bank which is too small to keep a proper staff of officials. His duty should be to audit its operations, quite in- dependent of the supervision to be exercised by the Travelling Inspectors. A statement of the business transacted each week, and of the disposal of the balance, countersigned by the Auditor, should be transmitted weekly to the Government ofHce. 36. — If this plan be adopted, then, where the accounts were found incorrect, the system of book-keeping imperfect, the state of the bank unsatisfactory, or the management lax, notice thereof would be given to the Trustees and Managers by the Inspector; and, if in all or any of these respects the necessary remedies were not applied without delay after such notice, the Government guarantee should be withdrawn. On the other hand, the approval of the Inspector would be found greatly to promote the welfare of that bank which he reported as conducted with good and careful management. 37, J^s to Appointment of the Banh Officials in Guaran- teed Banks. — The Trustees and Managers of each Guaranteed Bank should be allowed to elect their chief officer, subject to the confirmation of the Government; the other officers and 84 GOVERNMENT TREASURERS. clerks being appointed by them as at present. All the officers and clerks should. give security to the satisfaction of the Go- vernment Commissioners. The Trustees should be required to adopt the method of business prescribed as likely to insure the good management of their bank, and should be expected to afford the voluntary check of attending during bank hours in rotation. Section 4. — As to Government Treasurers. Art. 38.— The preceding propositions will, perhaps, not at first sight be approved by those members of the Legislature, who supported the various Bills which have been brought into Parliament since 1850, by successive Chancellors of the Exchequer, for, as we have stated in Sect. 2., these Bills made it a condition, precedent to the assumption by Govern- ment of further responsibility in respect to Savings Bank funds, that the safe receipt of deposits should be delegated to paid Treasurers, * resident in each locality, appointed by and acting as the agents of the Commissioners, It was proposed that the Treasurer, by himself or deputy, should attend during the business hours of the bank to receive and pay money — and that the Government should then become liable for the amount paid in by Depositors during such hours, to be verified in the pass-books by the signature of the acting Treasurer. 39. — One of the most eminent members of the present Government, the Right Hon. W. E. Gladstone, used the following forcible language upon this point in relation to the Bill of 1853 : — ■" The great evil with respect to the pre- sent condition of Savings Banks is not so much any gross, or * [In his explanatory speech of 1850, Sir Charles Wood stated that a local banker would generally be preferable for this office.] GOTERNMENT TREASURERS. 85 flagrant, or glaring abuse connected with them, as the want of that perfect security which every one must feel that they ought to afford. If we look at the enormous amount of money deposited in the various Savings Banks, and then take the mere figures which represent the total losses that have been incurred by Depositors, no doubt the amount of those losses, in relation to the total deposited, is very insignificant ; but the evil that is done in -particular cases is, unfortunately, not to be measured by the actual amount of money loss. There is an amount of evil* such as figures can convey no idea of; and besides, it is impossible that the public confidence in those in- stitutions can be that which it ought to be while those losses are liable to occur at all. What Parliament should desire to secure is, not that those losses should be rare, but that they should be altogether unknown — that no such thing should be allowed to take place. That being so, the question arises, how can that absolute security, which is so essential, be given? There is no doubt that where a body of Trustees, such as most of the bodies of Trustees of Savings Banks are, could be induced to give their own unlimited personal security, that would afford safety to the Depositors. But it is hardly * [An intelligeBt artisan, who was examined before the Select Com- mittee on the savings of the middle and working classes, thus stated the effect produced by the Rochdale catastrophe : — " I was in Lancashire " some time ago, meeting with large bodies of working men, at the time " of the failure, and I shall not soon forget some remarks that were made " about the Government as to the want of security. One man said, " ' Doctor M'Dpwall, came here, and told us that the Government wds a " 'set of robbers, that they did not care about the property of the work- « ' ing men." He said, ' I did not beUeve M'Dowall then, but when I see " 'that there is no security for the savings of the working-men in the " ' Savings Banks, and we supposed that the Government had them «' under their protection, I beheve now that M'Dowall was right, and " ' that the Government cares nothing about either the poor men or their^ " ' savings.' " This distrust is evidenced by the fact that the aggregate increase of annual receipts in Savings Banks, during the last twelve years, has only been 7^ per c?nt. of what they were previously.] 86 GOVERNMENT TREASURERS. reasonable to expect that they should be found willing to give that absolute security. If it were, Parliament might be glad that there should be no further intervention of Government, and I need not then trouble you with minute details, or endea- vour to introduce any sensible degree of Government control. That, however, is not be looked for as a general rule. There is then but one other way of giving an absolute security to the Depositors, and that is by affording ihem that which is the best that can be given in this country — ^namely, the guarantee of the Government. But it will be admitted on all hands, that if the guarantee of the Government should be given to those Depositors, it could only be upon very distinct and definite grounds ; and I am hound to express at once my dissent from the proposition which has been put forward by the Managers of Savings Banks — not generally, but in certain cases — that the Government guarantee should be given to Depositors, the security taken by the Government in return being the appointment of auditors to the Savings Banks. / do not hesitate to Say that I believe, if I were to make such a proposition to the House of Commons, the House of Commons would reject it, hut at the same time I tnust frankly and openly say that nothing would induce me to make such a pro- position. It is absolutely necessary, if the guarantee of liie State is to be given to the Depositors in Savings Banks, that the State should have a sufficient control over the receipt and payment of the money itself — not merely the power of calling for accounts at certain intervals, but control over therreceipt and payment of the money itself; and that cannot be had without the full control off the Government over some person in the banks who shallbe a paxty to every receipt and every payment." 40. — Notwithstanding these remarks of Mr. Gladstone, we yet venture to affirm froin our experience, that, (even as- suming that the appointing of Government Treasurers would produce no serious inconvenience,) yet such a measure is un- GOVERNMENT TKEASUKERS. 87 necessary and inexpedient, and that it is not clear that any appreciably greater security against fraud would be obtained by the appointment of such officials than exists under the present system. It would be inexpedient, because utterly in- consistent with the continuance of Honorary Trustees and *ManagerSj whose connection with the bank is productive of so great indirect advantage to industrial interests, that their resignation would be a subject of just regret; and unnecessary, because a sufficient guarantee can be otherwise provided, viz. by the plan of Government f Inspectors. As regards this last point, there can be no doubt that the moral and practical effect of a system of imapprised inspectoral visits would tend to the complete prevention of fraud : they would supply that ad- ditional check which has been hitherto wanting in the organi- zation of Savings Banks. 41. — We concur entirely with Mr. Gladstone's remark that "the amount of the losses is very insignificant, but the evil .... is not to be measured by the actual amount of money loss ;" and we deduce from it a subsidiary argument, at no mean weight in a financial point of view, in favour of the guarantee of the State for Savings Bank deposits. For, even on the as- sumption that the future defalcations will, on the average, be equally large with those of past years, their magnitude, al- though fatal to the particular hanh in which they might occur, would be a mere trifle to the national resources, even if the whole liability were from this moment adopted by the Govern- * \The following Resolution was adopted hy a meeting held at the St. Martin's Place Savings Bank : — " That, in the opinion of tlis meeting, the proposed introduction into the Saving's Banks of a Treasurer and clerks, not under the control of Trustees and Managers, and the consequent existence, in the same esta- blishment, of two sets of officers and clerks, with divided and undefined responsibility, and, acting under different heads, must lead to great con- fusion, and eventually to the disruption of these valuable institutions.'"] "t [Particularly, if combined with the measure proposed in Art. 7.] 88 GOVERNMENT TEEASUEEES. ment. From the Parliamentary Returns we have quoted, it appears that during the 13 years, from 1844 to 1857, the total frauds in Savings Banks in the United Kingdom, (ex- clusive of Ireland,) were £115,304, or, on the average of the 13 years, £8870 per annum. In previous and succeeding years, (of which we have no official return,) they were un- doubtedly much less, and the annual average was probably below the half of the sum above stated. With respect to Ireland, the three cases of Dublin, Tralee, and Killamey were so audacious in their defiance of the law, and were obviously caused by so great negligence, that they could not possibly recur under any organised system of exter- ■ nal inspection, however desultory. We may therefore venture to apticipate (and the experience of the last 6 or 7 years bears us out) that a margin of f£8000 per annum on the £38,000,000 invested would be amply sufficient to cover the risk of fraud on the part of Savings Banks officials ; in other words, that it would pay any Guarantee Society to insure the safety of t^jp whole £38,000,000 deposited in Savings Banks, at a premium of sixpence per cent, per annum. * [This diminution in the number and amount of frauds may be attri- butable partly to the greater attention now bestowed by Trustees and Managers on the affairs of Savings Banks, and their more regular attend- ance during the receipt and payment of deposits, and partly to the kind of lull that usually follows any signal exposures of mismanagement and defalcation. Should the watchfulness of the public become slackened, or some system of regular inspection not speedily be adopted, it may be confidently pre- dicted that, ere 10 years more are passed, cases of extensive fraud wiU recur.] t [The above figures refer to the average amount of fraud, before the assets and security of the defaulting Actuaries are taken into account. The average of the actual ^autfs committed in the period specified is in fact double the average annual loss. But even £8000 a-year would be less than a farthing in the pound, or one pound in a thousand of the Poors Hates.] GOVERNMENT TEEASUKEKS. 89 42. — When it is considered (as we shall shew at length in Chap. 9.) that the State is at present paying, in the form of excess of interest, the sum of £69,000 per annum for the encouragement of deposits in Savings Banks, it will seem unnecessary to urge further a point involving so trifling an ex- penditure of public money. And when we observe the praise- worthy readiness of the Legislature to make large grants for the benefit of the industrious classes, the spread of educa- tion, and the encouragement of provident habits; when we remember that eight millions a year are paid for poors rates, thirty-seven for army and war, and two millions for the ad- ministration of justice and repression of offences — we can scarcely believe that they will hesitate to incur an infinitesimal annual risk, in order to give absolute security to the savings of the poor. CHAPTER V. AS TO IMPROVEMENTS IN THE INTERNAL MANAGEMENT OP SAVINGS BANKS. PAGE. Section 1. — As to Uniformity of Accounts in Savings Banks, 90 „ 2. — As to Actuaries ------ 92 „ 3.— As to Trustees - - - - 93 „ 4.-T-AS to production of Pass Books - 97 Sect. 1. — As to the Uniformity of Jccounts in Savings Banks. Akt. 43. — In order to facilitate the inspection of accounts, a uniform system of book-keeping should be adopted by all Savings Banks.* It is well known that, in this country, as it was in France until of late years, the endless diversity in the books and in the mode of keeping them is the great obstacle in the way * [In a future part of this Treatise will be given precedents of the forms to be adopted for this purpose, as well as a set of model rules for Savings Banks. They have been revised after comparison with the forms obtained from Paris, Germany, and the United States, &c. (See also Art. 62, further on.) In France, we are informed by M. Dupin, that " M. Emile de Girardin, 1' un des plus eclaires et des plus zeles promoteurs de 1' Institution des caisses d'epargne, proposa d' aj outer a 1' art. 7 la disposition suivante : ' Les livrets ainsi que tous les registres, bordereaux et impressions neces- saires a la comptabilite des caisses d'epargne, seront fournis annuellement UNIFORMITY OF ACCOUNTS. 91 of a systematic inspection of Savings Bank accounts, by which alone fraud is susceptible of detection, and what is still more vitally necessary, of prevention. The great importance of a uniform system of account-keeping, therefore, cannot be too highly appreciated, and is confirmed from the benefit that has resulted from the recent *French regulations, which render compulsory the adoption of uniformity in the books and accounts. To see how the adoption of such a plan would px'oduce advantage, it should be remembered, that, under the present system, there is no check on the paid officer, if (as is still occasionally the case, in spite of public indignation at the mischief caused by the frauds) the rotation Manager fails to attend in his regular turn to superintend the receipt and pay- ment of deposits. The Actuary may, as we have seen was done at Rochdale, receive double the amount accounted for, and that, too, without any fear of detection, if he falsified, as under such circumstances he probably would do, the ledger accounts, so as to make them agree with the Depositors' books. He might also draw upon the funds of the bank, as was the case at Brighton and at other places, by means of created accounts in the ledger, and false pass-books to correspond with such accounts, even though a Manager should be in attendance. par I'imprimerie royale, sur une allocation speciale portee a son budg-et.' Ce serait a coup sur, dit il, une immense economie que de produire tous les imprimes necessaires a pres de cent caisses autorisees maintenant, et bientot nous I'esperons, a deux cents autres qui manquent encore, avec la seule depense d'une composition unique, et d'un tirage unifonne, dans une meme imprimerie. Si le. gouvemement voulait accorder un tel bienfait aux caiisses d'epargne, la somme totale ne serait pas exorbitante, et I'economie relative, nous le repetons, serait considerable pour cbaque caisse prise en particulier."] * [Decret du IS Avril 1833, Article 6.] ( 92 ) Section 2. — As to Actuaries of guaranteed Savings Banks. Art. 44. — No Actuary of a Savings Bank (or like official, by whatever name he be designated, such as comptroller, registrar, secretary, or clerk,) should be allowed to follow any other occupation, in which capital is required; or to become re- sponsible for the actions, debts, or obligations of others, except with the consent of the Trustees and Managers. From the smallnessof the remuneration* that can be afforded by the lesser banks, it necessarily arises that their Actuaries depend on some other source of income for support ; and the case of Rochdale shews that, where their other business is one requiring capital, the temptation is great to appropriate the funds of the bank. Such employments as that of an accountant or clerk, or those of a professional character, should therefore alone be allowed to be entered upon by the Actuary. There are a variety of Government appointments, such as for example, RegistrarsJiips of Births, Deaths, and Marriages, &c., and many others that do not involve the receipt of money, to which Savings Bank Actuaries might be appointed where their income is insufficient. They should be reckoned civil servants of the Crown, and be entitled to superannuation allowances, like other Government officials. (See Part IV. as to proposed grants for expenses.) If a uniform system of accounts were adopted, it would (as remarked by Mr. Porter) prove not only a stimulus to am- bition, but a check against fraud, to give the officials promotion from one bank to a larger. To give an idea of the amount of work done by them we may mention, that the returns shew that the number of trans- actions in Savings Banks, during the year 1857 was 2,372,095, of which 1,559,607 were payments in and 812,488 withdrawals. * [It is desirable that something should be done to place the salaries of Savings Banks Actuaries on a better footing. The Inspector should have power to recommend an increase of salary, or a gratuity, to the Actuary, where he finds the accounts satisfactorily kept and the bank efficiently managed.] ( 93 ) Section 3. — As to Trustees and Managers. Art. 45. — ^*Trustees, or others, signing blank orders of invest- ment or withdrawal should be ipso facto disquahfied from holding office, and their appointments should become thereby void, and the fact be notified in the ofBces of the Bank. * [Nearly all the various frauds, which have been practised upon the depositors of Savings Banks are traceable, directly or indirectly, to the Legislature permitting persons to assume the authority and invest themselves with the character of Trustees, without attending to their duties, when it had, pre- viously, released them from that responsibility which the Court of Chancery, consulting the best interests of society, had for more than 300 .years inseparably attached to that ofiice. The mischievous consequences, which the Court of Chancery foresaw and foretold would inevitably result from such a practice, have been realized in this particular instance. Ex- perience has shewn that it would be better to have no Trustees at all, than that they should be inefficient or neglectful. Indeed, if approaching changes in the law of Savings Banks should deter individuals from lending their names to institu- tions of this kind, without previously counting the cost, without deliberately determining that their patronage and superin- tendence shall be not nominal or illusory, but real and effective, we believe that a very beneficial result will have been attained. On this subject the State Superintendent of Banks, New York, remarks, in his report for 1859, p. 3 :— " The responsibility resting upon those gentlemen who manage this great trust fund should be well con- sidered before entering upon their duties ; and it should call forth a careful attention to them, not less than they apply to their own private interests. The result of careless management, bad investments, or de- falcations of officers, that should produce a general panic among the De- positors in our Savings Banks, would be more disastrous in its efFect, and more wide spread in its results, than any monetary misfortune that could overtake our citizens." ] 94 TRUSTEES- AND MANAGERS. 46. — It does notj however, appear desirable or necessary that the Trustees and Managers should be required to sign under- takings of responsibility, even (as proposed by some of the witnesses) with the provision, " that if any loss arise, which has to be made good by them, then the parties to be first applied to, to contribute to the requisite amount of their undertakings, should be those Trustees or Managers during whose rotation term of office the origin of the loss may occur." The necessity for their responsibility will no longer exist, when the system of each bank is made subject to the regulations of account keeping and supervision which the Commission shall prescribe, unless the Trustees or Managers neglect to attend in their turn at the bank. 47. — It is well, perhaps, to remark that the proposition of requiring Managers and Trustees of Savings Banks to be responsible has been objected to on the ground that none of them derive any benefit from their office, and also that it seems scarcely fair that those Managers who con- scientiously discharge the duties they have consented to per- form, should be required (as has been the case in several instances of award by the Savings Bank Barrister), to malie good, in equal ratio, the loss created by the neglect and omission of brother Managers or Trustees. In reply to this it is argued that any apparent unfairness might be ob- viated by making the first call on those Trustees or Managers to whose neglect the fraud or loss might be traced. We cite the objection, that the reader may consider how frauds appear to originate wholly in the system of *Rotation- Managers coming into attendance at long intervals, whereby * [See Part IT., on the advantag'es of an Executive Committee. In the Paris Savings Bank, the Committee of Manag'ement and the Com- mittee of Supervision each sit twice every week. See Agathon Prevost's Manuel des Caisses d'Epargne, p. 15.] TRUSTEES AND MANAGERS. 95 the Actuary is the only person able to explain the working of his books, or to give the clue to a watchful inspection of the accuracy of his entries. 48. — On one point,* all the witnesses before the Committee of 1858 concurred, viz. that the most effectual restraint upon malversation is to be found in the presence of a '\second party in every transaction where money is paid or received ; and that a rule to this effect ought to be imperative in all banks, under a penalty for its infringement. It is consequently contended that those Trustees or Ma- nagers who are absent, after having been duly summoned in their turn, and do not provide substitutes from others of their body, should be fined ; and if loss or fraud occur, should be jointly liable with the person who received or paid the money for all transactions on that day. If this responsibility) which they can avoid by attending) be * [It was, however, stated by Mr. Hatton of the Brigliton Bank, that, according to his experience at Reading and at B|righton, and investigation of accounts there, the attendance of the Managers is no check — " since it is difficult for a gentleman attending a Savings Bank only occasionally to know whether the sum appearing to be due to a Depositor is a sum actually due by the bank ; and whether the person presenting the Depo- sitor's book is the real Depositor or not." (qu. 3352, 3353.) He recommended (qu. 3379) that the Depositor's book should be issued by Government, and be uniform throughout the country ; and that on the outside of the cover there should be printed in large characters an injunc- tion for the Depositor to satisfy himself that a proper Government receipt stamp was affixed to the entry before he left the office. — See note to Art. iZfw the views of M. Emile de Oirardin on this head.] t [In the rules of the Portsmouth and other Banks it is provided that such second party should be an unpaid Manager. The Nottingham Bank has an excellent provision, viz. that the certificate for the Trea- surer must be made out in the attending Manager's own handwriting. The Beturn of 9th February 1858 shews, however, that in many Banks the attendance of the Managers is very irregular, some of the institutions having been thirty or forty days in the year 1856 without the presence of a single unpaid official.] 96 TRUSTEES AND MANAGERS. objected to, then no alternative would remain, but that a paid officer should attend on each occasion of the bank being open, to check the payments and receipts. This of course would have the effect of causing the Trustees and Managers to cease to take any active interest in the operations of the day, another official being present to do their duty, whose authority would seem to override theirs. As this cessation of interest would open the door -to possible collusion between the paid Auditor and the Actuary, the supervision of Visiting Insp'ec- tors would be doubly necessary. 49. — As to Payment of Managers. — Sec. 6. of the 10 Geo.IV., which forbids any Trustee or Manager to derive any personal advantage from the funds of the Savings Bank, is of ques- tionable advantage, and it would be better for the Government to sanction the payment of a fee out of the allowance for ex- penses (see Part IV.) to the Manager of the day for his labour in what (if really well done) is an onerous duty. However indifferent some of the Trustees and Managers may be to remuneration, by far the large majority are persons to whom payment for a certain number of hours' work would be but fair and proper. Many accountants and other respect- able persons engaged in book-keeping might be invited to be- come rotation Managers, if payment were offered. It was very justly remarked by the late Sir J. Cross, in a judicial decision, that " Country gentlemen are willing to lend their names as Trus- tees in the establishment of banks for the deposit of the savings of the poor, but are negligent, in too many instances, in giving their personal services, by which means the business falls almost en- tirely under the management of the person appointed as Actuary." Me Jones : Court of Review in Bankruptcy, 2Qth Dec. 1825. ( 97 ) Section 4. — As to production of Pass Books. Art. 50.— Under sec. 5. of 7 & 8 Vict. cap. 83. it is enacted that every Depositor shall, once in every year at least, cause his deposit-book to be produced at the office of the bank for examination, but no penalty is provided in case of omission to do so. This section has scarcely ever been acted on, and many persons are of opinion that an important check against fraud has been neglected. Hence it has been suggested, that in the new Act a clause should be passed depriving the Depositors of of the State guarantee, and of a portion of the interest to which they are entitled, if they do not once in each year bring in their pass-books for examination. It is held that the risk of loss to the bank from fraud would thus be limited as much as possible, and its range would be reduced to the current year. The adoption of this suggestion was not decided upon by the Committee of the House of Commons in 1858, for they thought, that however practicable the annual production of pass-books might be in small banks, there would be some difficulty in carrying out the system in those of extensive operations. Some of the Actuaries also urged that there would be harshness in enforcing it " on thousands of Deposi- tors who are at sea, or travelling, or reside at a distance from the bank, or are not at their own disposal as regards time, or are illiterate," and from one or other of these causes* neglect to bring in their books for inspection. Mr. Ayrton, M.P., however, forcibly contended that " wherever a bank is not carried on upon a scale so large as to admit of a * [The Finsbury Bank (June 1850), the Devonport Bank (June 1853), the Edinburgh Bank (July 1853), urged that it "would inflict a severe penalty upon the Depositors, seriously disturb their confidence, entail H 98' PRODUCTION OF PASS BOOKS. continuous audit of the accounts, the annual comparison of the Depositor's pass-book with his account in the bank books, made by some other person than the stipendiary officer of the bank, is the great labour upon the banks, great obstruction to their other business, and inconvenient and vexatious interference with the Depositors' ac- counts." The Alford Bank, the Belfast Banks, Mr. W. Gard of Devonport, the Managers of the Glasgow Bank (9th April 1858), and Mr. Alfred Huband, Actuary of the Evesham Savings Bank (24th May 1858), ex- press the same views. The " Reporter " newspaper (July 1855), on the other hand, argued, " The indifference or ignorance of some few Depositors in almost every bank is perfectly unaccountable, seeing that their pecuniary interests, upon which our countrymen are usually particularly sharp, are involved. Unless incapacitated by distance, idiotcy, or death, Depositors should be compelled to look after their own interests. The provision wiU regularly bring in the books of all sane people at the appropriate time." Mr. Henry Stocks, Secretary to the Rye Savings Bank, writes to us : — " The duplicate cannot be produced yearly for inspection, as I may say they are all over the world. I know some belonging to Depositors in this bank are in America. Depositors have an objection to produce then- books (in the country where they are known) in the day time : they like to sUp in and deposit their money, and ' be no more seen ' till they want to with- draw or deposit." The Bury St. Edmund's bank urge that " in the case of country banks the range is very wide, extending often to a distance of fifteen miles," and that it would therefore be impossible to get in the Depositor's books within a limited time. Mr. James HaU, Actuary to the Enniskillen Savings Bank, writes (1 5th May 1858), in reference to the law in Ireland : — " We find it to be a great inconvenience and dissatisfaction to the Depositors ; there being only one Savings Bank in the county (as is the case in several other counties in Ireland), the Depositors having necessarily to come long distances — many from 10 to 20 miles — often withdraw their sums altogether. Al- though the Trustees have power, in certain cases of difficulty in attending, to allow interest, the applications are so numerous, that they have deter- mined not to make use of the privilege in any case whatever ; so that many persons, such as constabulary pohce, servants (who often cannot attend), the ilUterate, and some removed to distant parts of the world lose their interest for a long term. The Chancellor of the Exchequer is reported to have told a deputation who waited upon him on the subject that ' this law worked well in Ireland :' I only wish this gentleman had a PEODUCTION OF PASS BOOK. 99 best safeguard against fraud." He recommended that it should be provided, " that whatever loss may arise from the neglect of the Depositor to comply with this rule, should be borne by himself, and not by the funds of the bank. Thus the risk of loss to the Trustees or the funds of the bank would be limited to the current year." 51. — The periodical inspection of the Depositors' books and their comparison with the bank ledgers are, indeed, vital elements in any system of audit, and we cannot but ex- press our opinion that their production should he required by the Inspectors from time to time, so that once at least in 18 or 24 months each should be examined, and stamped by him accordingly. And, to prevent any preparation of the office books to correspond with the inspection, arrangements should be so made that the bank officials should not know beforehand in what order they will be sent for or required. There would be no difficulty in devising and organising some satisfactory plan to carry out such a principle.* But it will be useless to make regulations if they are not to be attended to : in the Bank at Abbey Street, Dublin, we find that, in the year 1858, personal trial of its working' for one year, it would put such a notion out of hia head faster than any argument that could be offered. We think, however, that, had Mr. Ayrton's motion been adopted, it would have worked satisfactorily." Burwood Godlee, Esq., Chairman of the Lewes Savings Bank, writes on behalf of the Acting Committee (4th May 1858), " We know by expe- rience that the annual production of the pass-books, even to a Committee of Managers, is no check at all to their accuracy."] * [The following anecdote is related by the Actuary of a country Savings Bank : — " When our duplicates were called in three or four years ago for exa- mination, a poor woman from a neighbouring village came, and when the door was opened by the porter for her admission, she caught sight of the back of a gentleman, and she immediately inquired of the porter if that was Dr. . He said, ' Yes.' She then closed the door without entering, and said, ' I shall not go in. If Dr. knows I have got money here he will not give me any more soup.' Dr. is the Vicar H 2 100 PRODUCTION OF PASS BOOK. only £90,000 worth of books out of £20^8,000 deposited were presented for examination. Of the books only 3279 out of 9727 were produced, in direct contravention of the special statute for Ireland. 52. — In large banks, with a good system of book keeping, and a sufficient number of officers acting as mutual checks, the Inspectors might be satisfied after having examined each year 20 per cent, of the books in circulation ; but in banks managed by only two individuals, or on a less satisfactory system the Inspector should continue his examination until he had verified perhaps t70 or 80 per cent. Mr. Meikle, the able Actuary to the Glasgow Savings Bank, whose testimony is remarkably careful and full of information, states at qu. 2324, in his evidence, " We have done so in Glasgow on three several occasions, and the same practice has been fol- lowed in other banks. The first examination at Glasgow was made in the year 1850 ; the Directors personally attended within the bank office, and with the assistance of an accountant, distinct from their own officers, compared the ledger with the pass-books of the Depositors passing through the usual current of business ; and in that year, between the 12th of January and the 15th April, they examined 10,373 books. These books contained ^204,087. In 1852 the Directors and Accountant attended from 2nd January to the 18th February, a period of seven weeks, and examined of her parish, and gives soup away in the cold weather to his poor pa- rishioners." A Depositor, writing to us from Norfolk, says, " I deposit in London, and I live 128 miles from the metropolis. The going to London with my book would be to me an impossibility. The losing the interest would be less than the expense. I should withdraw my deposits if such a Bill were to pass." Many persons prefer depositing where they do not reside, lest their neighbours should know they have money.] t [Mr. Shopland, Actuary to the Exeter Bank, stated in his evidence (qu. 1401 — 1415), that certain false entries in the books of one of their branches at Ilfracombe were discovered by the accidental presentation at the head office of a deposit book for examination.] PEODTJCTION OF PASS BOOK. 101 9422 books out of 27,160 in circulation ; in 1855 that attended from 12th May to the 16th June, five weeks, and examined 10,131 books out of 32,203. In the first of these years they called in the books by public advertisement, but finding that that alarmed the Depositors, they did not advertise in subsequent years, but simply took the books of Depositors as tbey were presented in the ordinary course of business." Again : — " To examine 30 per cent, of our books would require a period of about seven weeks. In not a single instance, out of 29,926 accounts examined, was there the slightest discrepancy discovered, and yet our transactions we. forty fer cent, more numerous than those of any other Savings Bank. This arises from the fact that we afford more ample facilities, and have, in consequence, at- tracted a larger proportion of small Depositors than any other Savings Bank, with the exception of that of Edinburgh. In our bank 76 per cent, of the Depositors belong to the class whose balances do not exceed ^30 ; but in other large Savings Banks that class constitutes only 70 per cent. (qu. 2324-2406.)" 53. The Depositors might easily be saved the trouble of coming to the bank with their pass-books, if they were furnished on the covers of those books, with the printed form of a return which they should be required to fill up each year, and send, addressed " To THE Savings Bank Inspector, Post-Office, To be left till called for." These forms should be kept at the post-office, and not de- livered at the Savings Bank, so as to prevent their being tampered with. There would be no difficulty in filling them up, with the particulars required, viz. the amount of deposit and interest, CHAPTER VI. AS TO SUJSTDRY POINTS OF INTERNAL MANAGEMENT. Section 1. — As to Declarations -.-... 103 „ 2. — As to Withdrawals - - ... 105 „ 3.— As to Money Payments out of Office Hours - - 107 „ 4. — As to the Rules and Annual Statements - - 108 „ 5. — As to Books of Account - - - - 110 We now propose to advert to sundry minor details of internal management, a disregard of which, by a large number of the smaller country banks, has been productive of errors or loss. Section 1. — As to Declarations. Art. 54. — The* declaration, required by the Act to be made by each Depositor on opening an account, should be carefully • [As an illustration of the ambiguity that attends legal phraseology in Acts of Parliament,— in one of the very large Banks, the clause relating to the printing of the Form of Declaration in the Deposit Books (7 & 8 Vict. c. 83. s. 3. which says that the declaration " shall he annexed to or printed at the beginning of the Deposit Booh") — is understood to mean annexed to the Deposit Book, or printed at the beginning of the Deposit Booh ; and the declaration is nevertheless printed at the end ; whereas the Committee read the phrase as meaning " annexed to the beginning, if not printed at the beginning !] 1 04 DECLAKATIONS. kept in a book, and referred to for comparison by the attending Manager and the Actuary before paying out money on with- drawal. In some banks it has been found that the declarations have been put away in bundles, as of no value. Mr. Grey, who has had larger experience than any man in England in investigating Savings Bank frauds, writes to us on this subject: — "A little experience in examining signatures will shew how difficult it is, generally speaking, and especially among the class of persons of which Savings Bank Depositors consist, to imitate the writing of another person ; and how great a safeguard, therefore, the handwriting affords against an attempt at personation. It is true that many Savings Bank Depositors cannot write at all ; but even in these cases a little precaution affords means of identifica- tion which are hardly mistakeable. " These persons make a mark to their declarations : when this is done, some short description of their person, especially of any peculiarity, should be noted in a space to be provided in the Declaration Book for that purpose, and certain inquiries should be made, such as the age — the birthday — the birth-place — names of parents — and any other points which only themselves are likely to be acquainted with. The answers to these should also be written down ; and the correct *repetition of these answers when money is to be withdrawn, affords the next best identification to that of the hand-writing." * [" 11 est de la plus grande importance de ne jamais porter sur le livret aucun des renseignements propres k etablir I'identite du deposant et qui sont exclusivement reserves aux registres matricules. II faut surtout s'abatenir de faire signer le titulaire, soit en tete du livret, soit a la men- •tion d'un remboursement quelconque.'' Agathon Prevost, Manuel des Caisses d'Eparg'ne, p. 24.] ( 105 ) Section 2. — ^s to Withdrawals. ° Akt. 55. — The rules for this adopted by the best Savings Banks are as follows, and should not be omitted : — " Depositors shall personally attend to receive whatever sums they may wish to draw out, unless prevented by illness or any other sufficient cause, in which case they shall send an order, signed by themselves in the presence of the officiating Minister of the parish wherein such person shall reside, or of a Justice of the Peace, or one of the Managers of this Institution. "Deposits fraudulently withdrawn. — The Trustees and Managers, and the Actuary, will diligently endeavour to prevent fraud, and to identify every Depositor transacting business at this bank ; but in case any person presenting a Depositor's book, and stating him- self or herself to be the Depositor named therein, or producing an order purporting to bear the signature of the Depositor, shall un- lawfully obtain any deposit or sum of money from the Actuary, or any Manager, during the hours of business, they will not be responsible for the loss so sustained by any Depositor, nor will this Institution be liable to make good the same." 56. — It is the business of the bank officers to take every precaution that they do not pay away money improperly. The production of the pass-book is frequently, however, con- sidered a sufficient authority for claiming the amount de- posited, or any part of it ; but this is not a very safe mode of proceeding. A pass-book may be lost or stolen, and the de- posit may be claimed by some one who has no right whatever to receive it. The application should be made in a given form, and should be witnessed, where necessary, by some known person, to whom reference could be made. If the De- positor cannot write, the particulars required to be stated in 106 WITHDKAWALS. making the declaration upon admission (see Section 5), should also be appended and *compared. The Trustees and Managers of the day -should be pecuni- arily responsible to the Commissioners for allf loss arising under this head, and for the indemnification of the parties withdrawing, if these precautions be neglected. 57. — In no case when a Depositor is ill, or unable to attend, should a written t order be accepted, unless his signature (or mark if he cannot write) be witnessed by some person of respectability as mentioned in the rules quoted, or by his surgeon, or a substantial householder, whose signature can be identified, and who knows the Depositor ; and in such cases the sum withdrawn should not exceed £20 within intervals of seven days. This limit of £20 might, however, on special application, be extended by the Manager of the day, on his own respon- sibility, if he should think fit ; but an entry of the circum- , stances should be at once made in the journal or book of orders to be kept at the bank, for reference. * [" Une regie absolue, et qui ne souffre jamais d'exception, est qu'aucun payement, quelque minime qu'il soit, partiel ou total, n'est opere sans le rapprochement prealable de la signature de la demande avec celle du registre-matricule ou du registre des autorisations." Agathon Prevost, Manuel, pp. 30, 31.] t [Many frauds are stated to have been perpetrated by Actuaries with- drawing money on behalf of real or fictitious Depositors, and appro- priating it to their own use.] X [" Les autorisations produites, soit par les representants qui ont verse pour le compte d'un tiers, soit par des femmes mariees, a I'effet de verser pour la premiere fois, sont classees dans leur ordre numerique, et reliees pour former des registres, divises, comme les matricules, en nu- meros impairs et en numeros pairs." Agathon Prevost, Manuel, p. 22 ] ( 107 ) Section 3. — As to Money Payments out of Office Sours. Art. 58. — In Arts. 4 and 5, we have adverted to the danger of frauds, arising from the circumstance that, at present, the business in the smaller banks is not unfrequently conducted at the i'esidence of the Actuary, and that larger sums are often received at irregular times than during the prescribed days and hours of business. To prevent this, it should be enacted : — 1. That no money be received, nor business transacted, except in the presence of at least one Officer of the bank besides the Actuary, such as a Trustee or Manager, or other independent official appointed for the purpose. The Actuary should be strictly prohibited from either paying or receiving money in their absence.* 2. That if money be accepted out of office hours or of the bank premises, by any one being, or pretending to be, an officer of the Commissioners or of the bank, he shall be guilty of a misdemeanour, and punishable accordingly, even if he afterwards account for the same. 3. That no person shall have any claim in respect to a deposit, unless it shall have been made at the office during the published office hours ; and 4. That any officer encouraging Depositors to infringe the law, shall be held to be guilty of a misdemeanour. 59. — A printed notice of the office hours should be publicly exhibited in every room occupied by the bank, and in the win- * [This has been urged in letters to us from the Rev. W. H. Owen, St. Asaph; R.Wheeler, Esq., High Wycombe; Mr. Stocks, Actuary of the Rye Savings Bank ; the Manager of the Hemel Hempstead Savings Bank, and others.] 108 PAYMENT OUT OP OFFICE HOURS. dow of the office;* and as regards guaranteed Savings Banks in England, the " bank hours " should be registered at the office of the Commissioners. It is worthy of notice, that in many Savings Banks, the period allowed for transacting business is very limited. By a Parliamentary return it appears that about fifty Savings Banks are open for only/owr hours monthly, that 120 are open for one hour per week, and 142 open for two hours per week. There are 97 whose total number of receipts from Depositors for the year 1854 were under 300 each, i. e. each bank re- ceived an average of six sums per week. There are 77 banks receiving an average of eight sums per week ; and 157 banks receiving fifteen sums per week: making altogether 331 Savings Banks where receipts from Depositors average about a dozen per week. Section 4. — As to the Rules and Annual Statements. Art. 60. — The Rules and Bye-Laws of the bank, or an ab- stract of them, to be approved by the certifying Barrister, should be fprinted in every deposit-book, and also suspended together with all notices issued from time to time by the Com- missioners, in some conspicuous place in the office of the bank. An abstract, clearly drawn up, might be preferable to the Rules at length. It should be in large type. * [See the cases of the Cuffe Street, Killarney, and Tralee frauds, where persons were encouraged to deposit more than the limit allowed by the law, and thus to risk the entire loss of their money, with the view of increasing the margin for the expenses of the bank.] t [The Devonport Savings Bank, and the Edinburgh Savings Bank, among others, in 185.3, wrote to support this view. Most Savings Banks act upon it, though not by law required to "do so.] RULES AND ANNUAL STATEMENT. 109 It cannot be too strongly urged upon the Depositors in Savings Banks to make themselves acquainted with their Rules. In the words of Mr. Porter :* " If they have not done so already, it is time they should do it now ; and as they pass from Rule to Rule, if it be one imposing a duty on themselves, let them ask have they complied with such duty ? and if it be one imposing a duty on the bank, and the Trustees and Managers, have they seen that it is obeyed? If they have been negligent in those duties, and if they have allowed year after year to roll on without passing a thought on so vital a subject, is it fair to superadd the blame which fairly attaches to themselves, to that which belongs to those Trustees and Managers who confidingly believed that, be- cause the Depositors seemed happy and satisfied, therefore all was safe and satisfactory ? And as to such Trustees and Managers as now wake for the time under a sense of responsibility, it may be asked, what steps have they taken to see that the Depositors were not allowed to place themselves in a false position, and thus involve themselves and their families in, perhaps, irretrievable ruin ?" 61, — A statement should be hung up in the bank, and, if thought necessary, printed for distribution among the Depo- sitors, of the wholef of the balances, at the end of every half- year, referred to by the number of each book, and, if re- quisite, by the iaitials of the | Depositor's name. * [Savings Banks : their Defects and Remedies.'] t [This is supported by Kobert Wheeler, Esq., Treasurer, and Mr. W. H. Butler, Secretary, of the High Wycombe Savings Bank (which publishes such accounts annually), Burwood Godlee, Esq., Chairman of the Lewes Savings Bank, (4th May 1858), Mr. Taylor of Rochdale, and Mr. Sikes of Huddersfield, in opinions to the Committee. It is done in the Ely Bank and a few others.] X [Great care should be taken to secure the accuracy of the annual statements. At Rugby, Mr. Grey reported that " the former Actuary has been in the habit of making up the annual statement in a very un- truthful manner," and " annually fabricated the classified statement of balances required by the National Debt Office, so as to make it appear 1 10 BOOKS OF ACCOUNT. When the transactions are very numerous, so that one sheet would be inconveniently large, progressive groups of numbers might be. printed on separate sheets. The statutory penny (10 Geo. IV., c. 92., s. 47.) should not be demanded from Depositors applying for printed copies of the annual statement, but they should be supplied gratis, as is done at the banks at St. Martin's Place, Exeter, Worcester, and many others. Section 5. — ^s to Books of Accounts. Art. 62. — There should be an *index to names, whereby the that the liabihties of the Bank corresponded exactly with its assets." The Actuaiy would, no doubt, have continued to conceal the difference between the assets and liabilities as he had done " before, bi/ falsifying tlie classified statement ofbalances." These were in 1853 and 1855 also fictitious. Mr. Grey reported as to the Farringdon Street Savings Bank — " There is no sign whatever that the ledger entries have ever been called cmer vAth the cash journal! The consequence is that the ledgers are full of errors." " Payments were made on closed accounts, and others on open accounts which have never been posted." In 1854 the balances due to Depositors " were stated at £567 . 2s. less than the truth." This reduction was ac- complished by dropping £30, £40, or £50, each, from some of the larger balances, until the whole was brought down to the sum which (allowing for the known deficiency) would meet the assets on hand. Mr. Wortley also mentions a case in which Auditors had passed errors of con- siderable amount : in another he found Auditors and an Actuary who had n^ener seen the customary half-yearly vouchers from the Government for money in their hands. He related many other instances in which the accounts never balance accurately, and in which the method of book- keeping was such that it was next to impossible they should do so.] * [" II arrive fort souvent qu'on a besoin de trouver le compte d'un Deposant sans avoir entre les mains son livret, et sans eavoir quel est son numero : ou a recours alors au repertoire. " Le nombre des -Deposants etant trop considerable pour que les BOOKS OF ACCOUNTS. Ill numbers of the corresponding pass-books may be found. Mr. Grey concurs with us, however, in thinking that " It is quite unnecessary that the current amounts in the ledger and pass-books of any Savings Bank should shew (as many still do) debtor and creditor sides. Sayings Bank de- posit accounts are never in debt or overdrawn. The balance, if there be one, is always to the credit of the Depositor." One page consisting of two * money columns is sufficient to shew what that credit is. Further deposits, and f interest on those already in hand, are easily added from time to time to the balance ; and any withdrawal is as easily deducted from it when it occurs, stiU shewing, after each transaction, the balance in hand, without the necessity of totalling two sides of an account, and deducting one from another. This arrange- ment also greatly economises space in the ledgers; an im- portant consideration when the accounts become numerous. reclierches euasent ete faciles dans un repertoire etabli sur des registres, le repertoire est mobile, et se compose de cartes dont chacune porte le nom d'un deposant, ses prenoms, la serie et le numero de son livret. Ces cartes sont placees dans des boites ou elles sont classees et mainteuues dans I'ordre alphabetique le plus exact." Ag-atbon Prevost, Manuel, p. 13. This plan is considered in France to be preferable to an Index Book.] * [" Quant aux comptes particuliers, ils flgurent, comme on I'a vu, sur des registres separes, qui ne sont pas tenus par debit et credit, mais par addition, et soustraction." Agathon Prevost, Manuel, p. 12.] t [See Part IV. for an explanation of the Prospective Interest plan.] 112 MANAGERS AND ACTUARIES. * * " ' While revising the proof-sheets of the foregoing Part, the idea occurred to us that a cursory perusal of it may convey, to some, an impression that we have treated the subject of the requi- site limitations "and checks on the actions of Savings Bank Managers and Actuaries, on the supposition that they have all been generally negligent in the discharge of their duties — that none of the former duly appreciate their responsibility, and that the latter have manifested (so to speak) a proclivity to the committal of fraud. We here very earnestly disclaim any opinions vi^hich could give colour to such an imputation : they would be altogether at variance with those we actually hold, and have derived fi'om a sufficiently extensive experience : and if the painful individual cases we have had to discusss have really given an unfavourable turn to public opinion with regard to men almost universally of personal honour and business integrity, and (in numerous in- stances) of striking ability, we consider such an effect is to be classed among their most lamentable results. PART III. FINANCIAL DEFECTS IN THE PRESENT SAVINGS BANK SYSTEM. CO^■TENTS OF PART III. PAGE Chap. VII. How the deficiency in Savings Bank Assets has arisen, and as to the loss experienced by the JN'ation -..--. - H5 Chap. VIII. The operations of Chancellors of the Exchequer, and their effect on Savinsrs Banks - 135 CHAPTER VII. HOW THE DEFICIENCY IN SAVINGS BANK ASSETS HAS ARISEN, AND REMARKS ON THE LOSS EXPERIENCED BY THE NATION. OONTEKTS OP CHAP. I. } 1. Preliminary Considei-ations as to the correct principles for FaZMiM^ Securities ----- 115 § 2. Statement of the Deficiency in Savings Bank Securities, and of the Errors of the System _ - - - 118 § 3. Statement of the Causes of the Deficiency 122 § 4. Remarks on the Loss arising from the I'ate ot Interest allowed to Savings Banks by the Nation . . - - 123 J 5. Remarks on the Losses attending Purchases and Sales of Stock for Depositors' purposes only - - 131 Section 1. — Preliminary Considerations as to the correct prin- ciples for valuing Securities. Art. 1. — The Government Plan. — The rule prescribed by the annual order of Parliament for the valuation of the securities, held by the National Debt Commissioners on behalf of Savings Banks and Friendly Societies, consists in adopting the price of stock (whatever it may happen to be) on the 2Qth November in each year as the basis of every estimate. The application of this unsound principle on the 2Qlh November 1858, when Consols were high, viz. 98|, made the cash deficiency to ap- pear to be only £3,099,714 in their value as compared with the amount due on deposits. 2. — It is evident, that as the estimated value of the secu- I 2 116 . COEEECT PRINCIPLES FOR rities depends solely on the price of stock, it must be materially lessened if there be any fall, consequent on a panic or an unexpected demand for money ; and the estimated deficiency of assets is thus liable at any time to be greatly increased. Thus, for instance, if the funds were to sink to what they were, no longer ago than January 1856 or October 1857, namely, £86 per cent., there would be an apparent cash deficiency of £6,182,594 in the amount of stock Government has in hand to meet its liabilities to Depositors. 3. — The result of the plan of valuation adopted by the National Debt Commissioners has been, that in the successive Parliamentary returns to the 20th November of each year the *deficiency has sometimes appeared greater than it really was, and at other times less — just as the funds have happened to be either low or high on the day of valuation. Thus, in 1847, stock was only worth 83| on the 20th No- vember, and, although the deposits were then but thirty-two millions, the deficiency was returned to Parliament as being £5,462,300. * [Those, who prepared the order of the House, do not seem to have reflected that any investments, made at one price, will shew a deficiency if valued when the market has fallen lower. In illustration of this we may mention a case of a purchase of £10,000 stock made by a Society in July 1857, which cost £9600. On a valuation being made in November 1857, when the flmds had temporarily fallen to about 88, it would have appeared, if that reduced price had been adopted in the calculation, that the stock was only worth £8800, and a loss of £800 would have been shewn. In the same way with the Savings Bank funds : if the whole £38,37 -2,090 had been invested in the funds at the price of safety, viz. when they were at £92 . 6s. 'Zd (which is the price at which £100 cash invested in 3 per cent, stock would produce £3 . 6s. a-year, and thus enabh the Commissioners to pay the present rate of interest withbut loss to the nation), the stock bought would have been £41,569,761. This amount, if valued afterwards when the funds were at 85, would shew a deficiency of £3,037,793, and this without any " dabbling " by Chancel- lors of the Exchequer, on whom many seem by this word to desire to throw the responsibility of the greater part of the existing deficiency. (See c. 8. in this part. On the Operations of Chancellors of the Exchequer. "X VALUING SECUKITIES. 117 4. — As to an Average Period. — It requires, therefore, little argument to shew that a deficiency or surplus, as the case may be, in Savings Banks securities cannot be fairly deduced from an estimate based on the price of stocks on a particular *day of the year, but must be taken on such a principle as will allow for fluctuations of successive years. This is complied with by taking for basis the average of the prices, that stock has borne during a sufficiently long period of time (such as twenty-five years) to allow for compensating influences in the money- market. The results of a valuation, so made, would undergo but little alteration, though considerable fluctuations of price might occur in the course of a subsequent equally lengthened interval, and a variation, in any particular year, would only affect the average price of the stock by one twenty-sixth of the difi^erence between the average price of stock for the whole twenty-five years and that for the twenty-sixth year alone. In respect to Savings Banks stock there is a peculiarity, that it has in general to be bought when the funds are high, and sold when they are low (see sect. 5.) ; hence the average result of their operations differs from that of the public funds generally. Again, although the claims of Savings Banks and Friendly Societies on the National Debt Commissioners amount to more than £38,000,000, represented by securities, which are nearly all in the 3 per cents., yet of this the average amount sold for the requirements of Depositors, in the course of twelve months is but small, and judging from the fpast, not likely in any year, to exceed five millions ; hence the prices * [Of the £786,801,000 of the National or FundedDebt,-but a very small portion, in the course of each year, is exposed to the fluctuations of value by sales ; the remainder resting for series of years in the same hands, and passing at death to the heirs without a sale. Hence the price of the day is no guide to the value of the nation's liability to its creditors for the public debt. See Appendix on the National Debt, at the end of this Treatise.] t [See Art. 18, where the real averag-e is shewn to be muchlower,]. 118 STATEMENT OF DEFICIENCY. realised by the sale of these few millions are no guide to the value of the whole thirty-eight. Savings Banks deposits being subject to exceptional influ- ences, the corresponding securities must be measured by the average of such influences, so that the value of the portion, not likely to he called for at depreciating periods, will be mea- sured properly by taking the average prices of the funds generally for twenty-five years, whilst the *value of the extreme amount — say seven millions — ^likely to be withdrawn, should be measured by the average of the prices of past sales during a similar period. Section 2. — Statement of the Deficiency in Savings Bank Securities, and of the Errors of the System. Art 5. — Having determined the principles upon which Savings Bank securities should be valued, we will now consider the financial condition of the Savings Banks and Friendly Societies of the United Kingdom, depositing with the National Debt Commissioners, and the state of their ffunds in the Commissioners' hands on the 20th November 1858. From the absence of sufficient published data for ascertaining the exact proportion liable to be thrown upon the market in each year by withdrawals on behalf of the Depo- sitors only, we have taken the whole value of the stocks at the average price of 3 per cent. Consols for the last twenty- Jive years. This, according to the Journal of the Statistical Society, happens curiously enough to be £92f, almost exactly the price that will produce |£3 . 5«. a-year interest per cent, on the money invested. * [The proportion of the actual sales to the total deposits differs very largely from year to year : for instance, in 18i55, it was. i ; in 1858, sfej. t [Exclusive of the Deferred Annuities account, for which see further on, Pto V. c. 14. s. 3 ] X [See Table B, and remarks on this point in note to Art. 16.] ACCOUNT OF DEFICIENCY. l->. O F-l CO CO o CO n -* O — O OS ■* CO 1— N O 00 ■rj CO M oo c^ >n Oi "3 'O oi" oT — ^ — " CO Ph (•^ ■-« X so CO -* u Oi -T p4 o EC CO ated 3 per C do. do. per Cents. ( er Cents. (I o 8 a S cd I 15 » i& o ^ ■f « s § c«H d fl § J^ IS- Fl CO CO S ft i " -»3 CD S 3 S - .3 ° 3 ■ "e • '. ■" >- cS a ll .2'B EC to ■s .=« s m •9 S s ^•S|,§ S 2 „ 60 i '-M tS'pSq n s ■•= .9 « o J* - SS '1' ec ft^ OS •^ F- •"* &4 ■« *=< CO OJ ,— ( o ' 04 rH ■a •s §-^ •^64 JS .2 «a CO CO _ ^ !3 120 STATEMENT OF DEFICIENCY In other words, on the 20th November 1858 there re- mained due by the National Debt Commissioners to the Trustees of Savings Banks, for deposits received in cash and for sums credited by way of interest : — Great Britain ... - £34,577,011 Ireland 1,814,397 Friendly Societies, direct , - - 1,980,682 Total - - 38,372,090 Deficiency (See Art. 19) - - 4,413,917 6. — To appreciate the causes that have given rise to this £4,413,917 deficiency of assets, we will ask our readers to suppose a case, viz. that a banker had received, at various times, sums amounting to £10,000 altogether, on the under- standing that he was to pay a high rate of interest thereon, and yet to invest the money in securities, for the benefit of the Depositor: — such securities to be restricted to a particular kind, viz. the public funds, and yet to be available for repay- ment of the amount deposited on demand, and at par. Suppose that, in lieu of investing the amount received, the banker retained various sums, amounting in the whole to £920, and only invested £9080, purchasing with it 3 per cent, stock at a price of 94f per cent., by which he obtained £9583 stock. Suppose that, some years afterwards, the Depositor were to inquire into the value of the securities held by the banker for his money, he would find that it depended upon the price at which they could be realized. Suppose, by that time it happened to be 92f, so that the value of the £9583 stock was only £8852, shewing a deficiency of £1148 on the £10,000 which he had entrusted to the banker to invest. Suppose the banker were asked to account for this deficiency, and he acknowledged that it arose partly from his having IN SAVINGS BANK ASSETS. 121 kept back ^920 of the money entrusted to him, and partly from the unavoidable fluctuations in value that attend public securities. Suppose that, when asked why he had kept back the ^920, he answered that he had done so by degrees, mainly becai^se he had undertaken to pay the Depositor a higher rate of interest than he had been able to realize on the money, which, therefore, he had paid out of capital, and partly because he *wanted to take up the bills of another cus- tomer of his, so that too many of them might not come into the market and be depreciated in value. Suppose he also, added that a portion ofthe loss had arisen from the Depositor having drawn some of his money out and paid it in again, when the funds were at various prices. Suppose he concluded by saying, that, after all, the apparent deficiency was of no moment to the Depositor, as he, the banker, was able and willing to acknowledge his liability to repay in full all the money that had been entrusted to his care. 7. — Now, in the preceding illustration, if we put, for^lO,000, .£38,372,090, the amount of Savings Bank and Friendly Society deposits; for the banker, the National Debt Com- missioners ; for the other customer, the nation ; and for the bill discounting, the operations of the Chancellor of the Exchequer in Exchequer Bills, &c. ; we shall obtain a clear perception of the causes of the financial position of Savings Banks at the present time. It appears, in fact, that out of the .£4,413,917 deficiency in the Savings Bank and Friendly Society assets, on the 20th November, 1858, as shewn by the preceding balance sheet, no less a sum than £3,476,330 was a cash deficiency, arising from the fact of the National Debt * {See, in Chapter VIII., the remarks of the Right Hon. Mr. Disraeli on this question.] 122 CAUSES OF THE DEFICIENCY Commissioners not having been able to lay out or keep in- vested in stock on behalf of the Depositors,* inclusive of the money in hand, more than £34,895,760 out of the £38,372,090 they had received from the Trustees, which is equivalent to a loss of £9 in every £100. The remaining £937,587 of the deficiency is to be accounted for by the fact, that when the stock is valued by the average price for twenty-five years, viz. £92| per cent., it is worth even less than the cost, from the purchases having been made at a higher price. to Sectioti 3. — jis to the Causes of the Deficiency. Akt. 8. — If the origin of the deficiency of £4,413,917 be traced in its minute details, we arrive, without difficulty, at three main causes why the amount of Savings Banks and Friendly Society securities in the hands of the National Debt Commissioners is insufficient to meet their liabilities. As they are fundamental errors in the present system, and several general principles will be evolved by a discussion of them, we commend them to the attention of our readers. They are : — I. The granting hy the nation to the banks of a higher rate of Interest than the securities produced. * [The amount invested in stock up to 2()th Novem- £ ber 1857 (according to the return 198, Session 1858), Savings Banks only .... 32,283,662 Transactions of 1858 (return 262—1., 1S59 :— £ Paid for Purctases 1,134,586 Less received for Sale 692,075 Friendly Societies (return 262, 1859) : — Amount due 1,980,682 Less loss by interest 440,558 i ..mn^ '- — 1,040,124 Balance of cash in hand . ... 629 463 34,895,760 442,511 IN SAVINGS BANK ASSETS. 123 II. The 'restriction which limits the investment of Savings Bank money to Government securities, such as stock and Exchequer Bills. III. The undertaking to repay all deposits on demand, and at par, whatever lie the price of the funds. It has been alleged that there is yet another cause of con- siderable loss, viz. the dealings with Savings Banks funds by- successive Chancellors of the Exchequer for national purposes. These transactions are so intricate and important as to require a separate Chapter for their consideration. (See chapter 8.) 9. — The three errors stated above have been allowed to exist in consequence of a disregard in the past administration of Savings Banks of the simplest axioms of sound practical finance ; one of the most elementary of which is, that it is impossible for any, who re- ceive money for investment, to pay to Depositors, without incurring loss, the full amount of interest they themselves realize, while simul- taneously guaranteeing the repayment of the deposits on demand, and at par. In the succeeding sections of this chapter we have given an estimate of the actual loss resulting from each of these causes : we may here, however, offer some remarks to confirm what we have asserted. 10. — It is a well understood principle that, down to a cer- tain limit, with, cceteris paribus, equally good security, the rate of interest payable by banks or investment institutions on deposits must be less, the f shorter the notice that is cove- * [By Se'ct. 15 of 9 Geo. IV., c. 93.] t [At present, sums under £10,000 can be demanded by the Trustees from the Commissioners at five days' notice (9 Geo. IV. c. 92. s. 19.), and sums exceeding £10,000 at the expiration of fourteen days' notice (s. 20.) ; but no Savings Bank can receive, on any one day, from the Com- missioners, more than £10,000 (s. 21.). The following is the clause 124 CAUSES OF THK DEJ'ICIENCY nanted to be given before a withdrawal can be made ; in fact, Savings Banks are the only Investment Societies which pay- out money on demand and yet allow to Depositors the full interest realised after paying expenses. By way of illustration : From 4 to 5 per cent, are the or- dinary limiting rates of interest obtainable upon mortgages, on which six months notice of withdrawal is required ; whilst banks, which allow interest on deposits with only a few days' notice of withdrawal, usually limit their rates to a range from 1 to 2J per cent, per annum, and pay no interest on by far the larger part of their accounts, which being withdrawable on demand, are termed " ctirrent." In certain cases (such, for instance, as the public funds), where a rate between the ex- tremes already quoted is obtainable, the power of withdrawal is virtually restricted, since the stockholder is exposed to the loss of a portion of the principal, if, on selling, the market price should be lower than that at which he bought. (See note to Art 6, Fart YI.) 11. — Generally speaking, in times of peace and plenty. adopted by most Savings Banks in reference to the notice of withdrawal required by them from their Depositors : — " Deposits of £5 and under will be paid on demand to those found entitled or duly authorized to receive them, on any of the days appointed for receiving deposits ; and deposits above £5, and not exceeding £15, will be paid on seven days' notice ; and deposits above £16 will be paid on fourteen days' notice ; but such payments can only be made to the Depositor personally, and on his or her I'eceipt, or to the bearer of the book, with an order signed by the Depositor. Provided, however, that in cases of urgent necessity, such as illness, or death in the family, or sudden removal of a Depositor to a distant part of the country, a sum not exceeding £15 may be withdrawn without notice, on production of evi- dence, satisfactory to the Actuary, of the existence of such necessity." The notice required is so short as to amount, practically, to payment on demand. In some flrst-class banks, however, as, for example, the Leeds Savings Bank, a month's notice is required before withdrawing any sum above £10, and a fortnight for any sum from £'3 to XIO.] IN SAVINGS BANK ASSETS. 125 when money is abundant, trade brisk, and the price of the funds high, deposits in Savings Banks increase, and thus necessitate purchases of stock at a high rate; *but in periods ofiinancial difficulty, when the labouring population do not obtain good wages, the funds fall to a low price, and yet that is the time when the necessity for ^withdrawal arises. Thus the Com- missioners, under the present system, are compelled continually to buy in the dearest, and sell in the cheapest market. 12. — At an early period (before the year 1844), when these * [An extraordinary notion was suggested by one or two of the witnesses before the Cogamittee, viz. that the Depositors withdraw their money when the funds are low for the purpose of " buying in stock.'' Any one with the least experience in industrial investments would know, that while Building Societies, and other similar associations, are in operation, purchases of stock are about the last thing they would think of. (See Part IV., Chap, xii.)] + [There is, however, a restorative element at work on the prices of public stock ; for when the poorer classes are compelled to withdraw, and stock is sold for them, the richer classes buy, because men experienced in money matters are in the habit of advising people who seek to make a profit by speculating in the funds, to buy in when the price of stock is 89 or under, and to sell when it passes 96. This is one of the causes why — apart from political considerations or monetary fluctuations — the funds tend to recovery when they get below 89, and tend to fall when they pass 96. The converse takes place with regard to persons of limited means, like the Depositors in Savings Banks. " I do not include in the general loan fund of the country, (Mr. Stuart Mill, Pol. Econ., vol. 2, p. 184, remarks) "the capitals, large as they sometimes are, which are habitually employed in speculatively buying and selling the public funds and other securities. It is true, that all who buy securities add, for the time, to the general amount of money on loan, and lower pro tanto the rate of interest. But as the persons I speak of buy only to sell again at a higher price, they are alternately in the position of lenders and of bor- rowers : their operations raise the rate of interest at one time, exactly as much as they lower it at another. Like all persons who buy and sell on speculation, their function is to equalize, not to raise or lower, the value of the commodity. When they speculate prudently, they temper the fluc- tuations ofprice."'\ 126 CAUSES OF THE DEFICIENCY errors had not yet excited public attention in England, they were ably pointed out in an eloquent speech by Baron Dupin, as follows : — " The British Parliament has not feared to establish in favour of Savings Banks a legal interest of ^3. 16s. per cent., which, compared with the interest on the public funds and Exchequer Bills, is equivalent to an annual loss of ^120,000. From 1817 to the present time, the funds having always risen, the loss sus- tained upon the interest may have been compensated by the profit on the capital. But let adverse circumstances occur— a war, or great social commotion, which will depress the price of stock — then the profit will vanish, at the very moment that the panic will cause a simultaneous rush upon the Savings Banks for repayment. It is an error to place the Savings Batik funds in the funded debt by means of purchases at the price of the day. The operations of the Government are then nothing else than speculations for a rise. Since 1817 circumstances have been prosperous, but the system itself can only exist by these favourable cii'cumstances Let them change, the system crumbles and perishes ; for it is exclusively founded upon a rise ; it cannot survive a fall If war should arise — an event which certainly ought to enter into the calculations of every Government — the funds will fall, and the present Savings Bank svstem in England will be annihilated Another will re- place it, and the State will have to bear the *expen?e." * [M. Dupin, however, congratulated his countrymen that they had avoided the financial error of the English LegiBlature, by placing the deposits in the Caisse des Depots et Consignations (or floating debt), in- stead of the funded debt. This would be the same thing as if the invest- ments in England were made only in Exchequer Bills, which are payable at par. M.TDupin overlooks, that if a demand were made upon the French Government to return a very lai-ge amount of deposits on short notice, they could only obtain the necessary money by selling other securities or borrowing at a loss. (See Section on France, in the Introduction.) It was remarked by the Committee of the Corps Legislatif in France, of which M. Louvet was president, in their admirable Report in 1852 : — " L'Angleterre, il est vrai, n'absorbe pas les oapitaux de ses caisses d'Epai'gne dan sa dette flottante, comme nous le faisons en France pour IN SAVINGS BANK ASSETS. 127 This prediction, made in the year 1843, is practically being verified at the present day. 13. — The effect of rises and falls of the public funds on the purchases or withdrawals for Savings Bank Depositors is shewn very clearly in Parliamentary Paper, No, 441, 1858, p. 35:— By way of example, we see that, in the quarter ending April 1844, about £650,000 more was deposited than with- drawn, the stock being at 97i. On the other hand, in July 1 848 the Savings Bank money was reduced, by an excess of withdrawals over receipts of (about) ^1,420,000, the price of stock being but 83J. In the previous quarter, the price of stock had fallen as low as 80|, which may perhaps indicate that the necessities of the Depositors in Savings Banks require some short period of time to be acted upon by the circumstances that produce a fall in the public stocks, to such a degree as to cause the withdrawal of deposits. This leads to the reflection that a prudent ad- ministration of Savings Bank deposits might, in times of crisis, prepare for withdrawals. le majeure partiede ces capitaux ; elle les fait administrer par une com- mission speciale, appelee commission de la reduction de la dette nationale. Cette commission emploie les capitaux qui lui sont verses par les caisses d'Epargne en achats de rentes sur I'Etat ou en negociations de bons de I'echiquier, mais presque toujours en rentes sur I'Etat. Ce mode de pro- ceder a ses avantag'es. Beaucoup de bons esprits desirent qu'il soit ap- plique en France : mais il a aussi ses inconvenients. En definitive c'est toujours I'Etat qui est le seul veritable debiteur dans les deux pays ; et si tous les remboursements etaient demandes, I'embarras de I'Ang-leterre ne serait guere moins grand que le notre." M. Gustave du Puynode remarks, in his learned work before quoted (p. 388) :— " Les depots des caisses d'epargne constituent, sous notre legislation actuelle, un grave, un enorme peril pour le trdsor ; ils le sou- mettent sans cesse a des demandes innombrables de remboursement. C'est une lettre de change de plusieurs centaines de miUions tiree sur lui, et chaquejour a echeance. Personne, sans doute, ne contesterait, depuis notre demiere revolution, le danger qu'ils creent."] ( 128 ) Section 4. — As to the loss attending the rate of Interest allowed to Savings Banks by the nation. Akt. 14. — From the subjoined Table A* it will be perceived, that a very large portion of the deficiency has arisen from the great excess of interest paid and credited to the Trustees of Savings Banks, including direct Friendly Societies, over that received by the Commissioners from their investments. This excess amounted on the 20th November 1858 to: — £2,845,968 for Savings Banks, \ for Friendly Societies making their invest- 440,558 > ments direct with the National Debt Com- ; missioners. £3,286,526 15. — Apart from the question of the rate being too high, a loss in interest annually arises from the total securities * As to Savings Banks only : — Table A. Year ending 20lh November. Annual loss of Interest. iate per cent, of interest granted by the Nation to Trustees of Total Interest paid in excess during the whole period when Average loss of Interest for each year of the Savings Banks. such rate was allowed. period. 1818-1828 £4 11 3 £744,363 £67,669 1829-1844 3 16 Oi 1,435,567 89,7-.'3 1845 £-20,185 \ 1846 17,277 1847 17,664 1848 29,251 1849 36,857 1850 36,684 1851 43,149 '350 1852 46,227 666,038 47,574 1853 58,097 1854 26,363 1855 101,819 1356 100,791 1857 59,755 1 1858 71,919 £2,845,968 £69,414 KATE OF INTEREST ALLOWED. 129 held by the Government being *short of their liabilities to the banks. As a natural consequence, the dividends which the partial investments yield, even if the rate of interest paid were the same as realized, would be inadequate to the pay- ment of the interest on the larger sum due to the Depositors, Thus the interest made by the Commissioners in the year 1858 was only about £2 . 19s. Id per cent., while they credited to the banks £3 . 5s. {see Table B, next page.) \ ^ * [Future deficiencies will accrue if the present system be continued, even although the present deficit be made up by a public grant, for loss of interest on the present rate of £3 . 5s. per cent, must arise unless two separate events concur in their average results ; — 1. That the average price of the future purchases of stock by the Com- missioners shall not exceed 92| per cent. 2. That the average result of the future sales made for Depositors shall not be below 92| jjer cent. ( See the last paragraph of the next note.) This has never been the case, for the average of past purchases has been at least 2 per cent, above 92|, and the results of the sales have always been below 92|. Sir Alexander Spearman stated (Qu. 3868), that — " Taking the average price of Government securities for each year since 1817, the only years in which the prices appear to have been such as to have produced a rate of interest equal to that at the same time paid to the Trustees, were the years 1847 and 1848 ; but those were years in which, instead of having to invest stock, they had very largely indeed to sell. Those were years in which the drafts of the Trustees were of enormous magnitude." When the National Debt Commissioners were paying £4 . 1 Is. 3d. per cent., as from 1817 to 1828, they should have been able to buy £100 stock for £65 (see Table B. page 130), whereas the average price of stock for the years 1817 to 1828 was 78l. Again, from 1828 to 1844 the rate of interest allowed was £3 . 16s. O^d. per cent., so that the price of stock, in order to escape loss, should not have exceeded £78 ; whereas for the years 1828 to 1844 the average price was 89|. By far the largest portion of the interest allowed is credited to the banks and made capital. The reader will observe, that if the deficiency arising from the interest which the National Debt Commissioners were crediting had been made up from the first by an annual deficiency grant from Parliament, as it should have been, the system would have been ob- jected to long ago ; but as the interest is only credited, and the actual liability deferred, the subject has escaped the attention it should have received.] K 130 RATE OF INTEREST ALLOWED. TABLE B. Slewing the rate of Interest obtainable from 3 per cent. Stock for £100 cash invested according to the price of the day. Amount of Stock •Most recent Price of Stock. Interest which £100 cash obtains. (2.) £100 will purchase, or amount of Stock required to be sold years in which the average price of the 12 (1.) to produce £100. (3.) Months was that of (1.) £ S. d. £ s. d. 60 5 166 13 4 1815 61 4 18 9 163 18 9 1813 62 4 16 9 161 6 10 1816 63 4 15 3 158 14 8 64 4 13 9 156 5 • 1811 66 4 12 3 153 16 11 66 4 10 11 151 10 4 1808 67 4 9 7 149 5 1 1814 68 4 8 3 147 1 2 1820 69 4 7 144 18 7 70 4 3 9 142 17 2 71 4 4 6 140 16 11 72 4 3 4 138 17 8 1819 73 4 2 2 136 19 9 1817 74 4 1 1 135 2 9 1821 75 4 133 6 8 1788 76 3 18 11 131 11 7 1793 77 3 17 11 129 17 5 78 3 16 11 128 4 1 1777 79 3 15 11 126 11 8 1826 80 3 15 125 1831 81 3 14 1 123 9 2 82 3 13 2 121 19 1760 83 3 12 4 120 9 8 1827 84 3 11 5 119 11 1832 85 3 10 7 117 12 11 1848 86 3 9 9 116 5 7 1847 87 3 9 114 18 10 1773 88 3 8 2 113 12 9 1833 89 3 7 5 112 7 2 184] 90 3 6 8 111 2 3 1855 91 3 S 11 109 17 10 1856 92 3 5 3 108 13 11 1842 93 3 4 6 107 10 7 1849 94 3 3 10 106 7 8 1744 95 3 3 2 105 5 3 1843 96 3 2 6 104 3 4 1853 97 3 1 10 103 1 10 1850 98 3 1 3 102 10 1851 99 3 7 101 3 1852 100 3 100 1751 101 { 2 19 4 99 2 1743 * [The average price of stock for the whole of the last 100 years (1759 to 1858) is about 78J. During that period the average price for the whole ( 131 ) Section 5. — ^s to the losses attending the Purchase and Sale of Stock for Depositors' purposes only. Art. 16- — The investigation of this part of our subject is replete with difficulty, from the imperfection of the Parlia- mentary returns ; and there are no means of measuring the actual loss that has attended the operations for purchase and sale. It can, however, be traced indirectly as follows : — We have already estimated the total deficiency on the 20th November 1858, (Art. 5,) at . («)£4,413,917 And we have shewn that the items constituting this deficiency are of two kinds : 1st. Cash losses (arising from the amount ac- tually invested by the Commissioners being less than that due by them to the Trus- tees,) to the extent of (See Art. 7) . . (6)3,476,330 of a year has never been at or above par. The average for several months of the year ] 852 was above 100. It is curious, however, that during^ several years previous to 1759, the average price for the whole of the year was at or above par : thus, in 1733, '42, '50, and '51, it was 100 ; in 1739 and '43, 101 ; in '36, 102 ; '54, 103 ; '38, '52, and '53, 104 ; and in 1737 it was as high as 106". On the other hand, between 1781 and 1815, there were ten years in which the average fell below 60. Between 1823 and 1831, a medium price of about 80 was kept to. Loss of capital stock on sales produces an annual loss of interest : — let the double operation be taken of £1,000,000, (a portion of several millions on which £3 . 5s. per cent, per annum has to be paid) invested in, say July 1856, when the funds were 96, and a like amount realized in October 1857, at a price of 86|. The purchase caused a first loss of £1250 a year in interest, because £31,250 only was received, and £32,500 agreed to be paid : but this loss in interest was raised to £3432 a-year through £1,156,069 stock having, subsequently, to be sold to pay out the £1,000,000 in full. On these operations, the loss of Capital stock was £114,402.] k2 132 PURCHASE AND SALE OF STOCK. 2d. Depreciation arising from the fact that the investments actually made have cost morcj either in fact or in effect, than 92|- for ^100 stock: forming the remainder of thedeficiency,[or (a)less(6)] . . . (c)£937,587 Now, we have seen that a portion of the first, or Cash loss, has arisen from the interest paid and credited to the Trustees having been greater than that received by the Commissioners on their in- vestments, to the amount of (See Art. 14.) . (d)3,286,526 The remainder must therefore be attributed, principally, to the selling of stock at a lower rate than that at which it was purchased, making the *loss under this head [or (&) less (d)] . (e)189,804 Again, the second Depreciation, or loss, like- wise originates in two ways, viz. 1st. Through the money invested having been placed on securities less productive than stocks. We shall shew in Chap. 8. that this is acknow- ledged by the National Debt Office to amount to £342,146 stock, which is equivalent in cash to (/)315,801 2d. Through the purchases of stock, or the funding of Exchequer Bills (which we shall shew in Chap. 8. to be the same thing) having been effected at a higher price than 92|. (the valua- tion average price taken in the Balance Sheet). . (^)621,786 It would thus appear by adding (g) to (e) that a deficiency of more than "three quarters of a million may be fairly estimated as having arisen from the purchase of stock for De- positors' purposes at high prices, and its sale at lower rates. * [In Ms return, p. 329 Committees' Report, Sir A. Spearman estimated this item at £178,915 to 20th Nov. 1857.] PURCHASE AND SALU OP STOCK. 133 17. — The loss may be appreciated better by one illustration, selected from the last official returns (1858) from which it ap- pears, that during the year ending 20th November 1858, the stock Bought amounted to £1,170,000, and cost £1,134,586 Sold „ „ 755,250, realized 692,075 Diiference: Amount £414,750 Price £442,511 In this year the purchasing prices ranged from 951 to 98J and the selling prices from 891 to 94 per cent. Thus we see, that so disadvantageous were these rates, that the balance of stock remaining in hand from the year's transactions, namely, £414,750 had cost £442,511, or, which amounts to the same thing, £106 . 13.v. lid. in cash had been virtually paid for every £100 of this remaining stock. 18. — Direct evidence of a large portion of the three quarters of a million loss, shewn in Art. 16, is afforded by the following Table C, which exhibits the excess of receipts from, over withdrawals by, Trustees (or the reverse, as it happened to be) from 5th January 1840 to 5th January 1858, grouped, for the sake of brevity, into periods of six quarters each, in which corresponding prices prevailed — the quarters, of course, not being consecutive. Nothing can be more conclusive than the evidence which this Table affords, that the position we have advanced is abundantly supported by facts, viz. that it is the peculiar fate of Savings Bank securities that they in general have to be purchased when the funds are high, and to be sold when they are low, and that no compensating operation can be made to neutralize the result : — 134 LOSSES ATTENDING PURCHASE AND SALE OF STOCK. TABLE C. Excess of Receipts over Excess of Withdrawals Witlidrawals in the six over Receipts in the six Average price of 3 per Cent. quarters when the quarters when the Stock during six separat B average price of 3 per Cent, btoclc was as in average price of 3 per quarters of years. Cent. Stoclt was as in fCol. 1.; Col. 1. Col. 1. £ s. d. M s. d. £ £ £80 10 10 to 87 1 6 4.043,247 87 9 8 to 89 1,096,523 89 9 7 to 90 9 8 1,583,659 90 11 5 to 90 16 6 518,240 90 17 10 to 91 17 1,090,482 92 1 9 to 93 8 11 301,102 93 17 7 to 94 10 7 53,457 94 12 11 to 95 12 6 ■384,350 95 15 to 96 10 11 223,663 96 11 10 to 97 15 10 920,486 97 16 9 to 99 10 5 485,005 99 13 8 to 101 8 3 1,312,268 Thus an excess of — £4,043,247 was withdrawn when the funds were at an average of £6i 17 S and £4,643,463, „ „ „ „ 90 6 1 While an excess of — £2,013,494 was ^MreAraed „ „ „ „ 96 10 and £1,312,268 „ „ „ 100 1 10 The average price realised on the balance of sales over pur- chases in the 18 years was only £80 . 18s. 19. — It is, consequently, manifestly unsafe to guarantee the repayment of deposits at par, and to invest them in securities which fluctuate in price, unless a reserve fund be accumu- lated or provided for out of the interest received, or from some other sufficient source. *** Since the preceding was put in type me have received the following in- formation for the year ending 20iA November 1 859 : — Total due to Trustees of Savings Banks and Friendly Societies by the National Debt Commissioners (instead of 38 millions) - £41,180,832 Defioienot in total securities to meet the above (valuation being made on the same principle as in the Balance Sheet, Art. S) 4,496,088 Increase in deficiency between 20th November 1858, and 20th November 1859, £82,171. CHAPTER VIII. THE OPERATIONS OF CHANCELLORS OF THE EXCHEQUER, AND THEIR EFFECT ON SAVINGS BANKS. CONTENTS. } 1. As relates to Saving's Banks . . .p. 135 § 3. As regards the Nation .... 147 Section 1. — As relates to Savings Banks. Art. 20. — As we have stated in Art. 8., some portion of the deficiency in Savings Bank securities has arisen from the fol- lowing cause, viz. the dealing with the deposits for national purposes by Chancellors of the Exchequer. Singular exagge- rations, however, both as to the actual amount of the loss created and its effect upon the fund, are current among even persons of intelligence and practical experience, from an imperfect apprehension of the results of these financial opera- tions ; these erroneous statements were taken up, doubtless without mature consideration, and shaped into positive denunciations of the conduct of the Chancellors, by some of the members of the Committee of 1858. Their opinions were founded on various elaborate memorials published during the last fourteen years by several of the banks in Eng- land and Scotland, in which it was attempted to be proved, by an extensive array of statistics, that the nation had ex- perienced a loss of several millions by the purchases and sales 136 EXCHEQUER OPERATIONS referred to. As injurious effects might result from such state- ments, if left uncorrected, we propose to subjoin, at some length, the details of the actual transactions, so that our readers may have an opportunity of judging for themselves how little cause existed for the popular clamour on this subject, and how even intelligent persons may embrace con- clusions which have been too hastily drawn. Indeed, a certain amount of ill-feehng and an impression of injustice have already been created in the minds of the industrious classes by these ill-judged assertions, and a notion has spread amongst them that their savings have been made a means of gain to the State, and that irresponsible persons connected with the Government have been allowed to tamper with the funds placed for safe keeping in their hands. 21. — One of the principal witnesses before the Committee in 1858 was Mr. Boodle, Comptroller of the St. Martin's Place Savings Bank, who stated in his evidence : — " I have given my attention very much to the subject of invest- ments. I consider that they have been so made as to realize (I will not say to the country, but to the Savings Banks) a very considerable loss — some millions. The system is one of very long standing ; but in the year 1844 the managers of our institution protested against it. They stated that the National Debt Commis- sioners had been in the habit of selling out large amounts of stock when the funds were low, of buying Exchequer Bills, and then funding those Exchequer Bills again when the funds were very high ; so that, up to that period, there was a considerable depre- ciation in the value of securities held by the Commissioners on account of Savings Banks. Within the last six years I should say there has been between £2,000,000 and J3,000,000 lost." I think the provisions of the Act 9 Oeo. IV. c. 92. as to investment, have been wholly disregarded." (Parhamentary Report, Qu. 858-873.) 22.^This witness, in common with some of the others, ON SAVINGS BANK FUNDS. 137 appears to have derived this opinion of the magnitude of the deficiency caused by the operations of the Chancellor of the Exchequer, from its appearing that a very much greater number of purchases and sales of Savings Bank stocks were made by the Commissioners than would answer to the payments and withdrawals made by the Trustees of Savings Banks. This is admitted, and readily appears from the following return to 1857 {Parliamentary Report, pp. v. & vi.) I. Total receipts since the establishment of Savings £ Banks, not including Friendly Societies . . 43,283,915 Total amount of interest paid and credited . . 28,851,993 72,135,908 Total investments in stocks of all kinds, Ex- chequer Bills and Bonds 81,966,006 Investments more than could have been required by the deposits and dividends 9,830,098(a) II. Total withdrawn by Trustees 36,880,197 Stocks of all kinds sold . . . 23,795,252 Exchequer Bills sold . 4,067,700 „ „ funded 8,090,550 „ „ paid off, 16,238,800 28,397,050 52,192,302 Sales more than were required to meet the with- drawals 15,312,105(6) Total amount of operations* (a) and (b) not possibly required lor the purposes of the Savings Banks . 25,142,203 * [The investments and withdrawals did not, in all instances, require to be met by purchases or sales of stock. Hence the amount of the opera- tions not required for Savings Bank purposes would be represented by a larger sum than £25,142,203. In reference to these variations in Savings 138 EXCHEQUER OPEKATIONS 23. — The Committee seem to have been deeply impressed with the necessity of making a thorough investigation into the truth of the complaints which had been made as to the effect of the operations of the Exchequer. They found that the ordi- nary annual and other returns, furnished to Parliament in re- ference to Savings Banks, afforded no means of ascertaining the actual effect of such operations. They, therefore, requested the Comptroller of the National Debt OflBce, Sir Alexander Spearman, Bart., to furnish them with a distinct and cate- gorical statement of what would have been the actual position of the public stocks, standing to the credit of Savings Banks, if no dealings had occurred with them except to meet the re- quirements of Depositors. This statement appears to have been readily furnished, and Sir A. Spearman disposed of the charges in a very clear and satisfactory manner, shewing, by the information he gave in elucidating what had taken place, that although a portion of the Savings Bank money might perhaps appear to have been placed, at various times, at a disadvantage, by having securities transferred from other Government creditors, yet neither the Savings Bank fund nor the nation were damnified thereby to any large extent, (See Art. 25, forward.) 24. — The vyitnesses, indeed, can scarcely have reflected, that it, by no means, followed that the average result of the above purchases and sales, although so extensive and numerous, would be attended by any great loss in respect to the aggregate amount of stock resulting at the end ; as, from the very num- Baak securities, Lord Monteagle remarked (20th May 1858) that "the power vested in the Commissioners to change their securities, and thus to become actire agents in the stock market, with a power limited only by the enormous amount of Savings Bank stock placed at their disposal, is a larger power than ever was possessed, I believe, by any branch of the community, or any combinations of individuals, and affecting, in pro- portion to that power, the public credit and the interests of private parties." (qu. 4394.).] ON SAVINGS BANK FUNDS. 139 ber of the- operations, the law of *' averages ' comes in, and prevents any important effect either way arising. A deficiency of £342,146 is acknowledged by Sir Alex- ander Spearman, which is attributable rather to the insufficiency of interest, arising from the difference of the rates receivable on Exchequer Bills and stock respectively, and to the loss of interest for portions of a year that attends and affects all dealings with the public stocks. The deficiency from these sources could not, therefore, be expected to prove the "millions" suggested by the witnesses. He stated distinctly (qu. 3890) that no such loss had occurred, and added, that it was a marvel that any such statement should have been made to the Committee: there was no truth in the statement that during the last six years there had been a loss of between ^2,000,000 and £3,000,000. Art. 25. — Th^ amount of the Loss. — From the returns furnished by Sir Alexander Spearman, we are able to ascertain, for two periods of time, the amount of the fund that would have been in the hands of the National Debt Com- missioners, if no portion of the monies received by them had ever been applied to the purchase of Exchequer Bills or Bonds, or to any operations in stock not required for Savings Bank purposes ; and we gather from them the extent of the loss to the fund. First, in reference to the whole transactions since 1828, * [If a sum of money were invested in the funds, starting' when they are below par, and, for a sufficiently long period, sales and purchases were made, then it would be found that the investor would be in pretty nearly the same position at the close of the transactions as when he started. This principle of the law of average, though true of ordinary purchases and sales, such as were effected by the Chancellor of the Exchequer for national purposes, does not, however, (as we have shewn in Art. 18) apply to those made for the requirements of Depositors, which are peculiar, and have created (as shewn in Art. 16), a portion of the estimated deficiency ex- ceeding three-quarters of a million.] 140 EXCHEQUER OPERATIONS it appears from the subjoined *retum, that if no Exchequer Bills had been bought and no operations in stock had taken place except for Savings Bank purposes, the fund would have been, on the 20th November 1857 - - £34,794,428 Whereas it was only 34,452,282 Shewing a deficiency of securities equal to - £ 342,146 * [Account shewing the several Capitals of Anhuities standing, on the 20th November 1857, to the credit of the Commissioners for the reduction of the National Debt, on account of the fund for the Banks for Savings ; and shewing also the several Capitals of An- nuities which would have been standing at their credit on the said 20th November, on account of the same fund, supposing that no transaction relating- to Exchequer Bills or Exchequer Bonds had taken place be- tween 6th August 1817 and 20th November 1857, but that all monies received for dividends, together with all monies received from Trustees during that period, had been regularly apphed, week by week, to the payment of Trustees' drafts, or the purchase of annuities, as the case might be, at the prices of such annuities, during each week, in the market, and no stock had been sold at any time over the period, unless the money was required to pay drafts hy Trustees, Stock standing in the name of tlie Commissioners attlie 20th Nov. 1857. Stock which would have been standing if no part of the Cash Balances had been applied to the purchase of Exchequer Bills or Bonds, between the 6th August 1817 and 20th November 1857. Consols Reduced 3 per Cents. . New 3 per Cents. . . Irish New 3 per Cents. 2.J per Cents. . . . £, s. d. 14,386,611 9 6 2,921,610 9 4 16,027,371 7 10 1,031,588 13 7 31,900 £ s. d. 5,955,000 5,913,000 21,845,000 1,031,588 13 7 Uninvested Balance . 34,399,082 3 53,200 2 34,744,588 13 7 49,839 S 7 34,452,282 2 3 34,791,427 19 2 In the accoimt of Capitals of Annuities standing to the credit of the Commissioners on 20th November 1857, the Exchequer Bills held by the Commissioners are assumed to be converted into annuities, under the provisions of the Act 9 Geo. IV. c. 92. s. 50. & 51. National Debt Office, 28th April 1858.] A. Y. Spearman. ON SAVINGS BANK FUNDS. 141 which is therefore the Stock loss suffered by the Savings Bank fund in consequence of the transactions of the Commissioners in Exchequer Bills and stock not required for Depositoi's' purposes, the worth of which estimated in present cash, ac- cording to the principle laid down in Art. 5., is ^315,801. 26, — The second *return, given below, is also very interest- ing, as shewing that the more recent operations of the kind — namely, those since 1853^ — have been attended with actual advantage to the fund; for it amounted, on the 20th November 1857, to ... £34,452,282 Whereas it would have been - 34,249,102 Shewing a profit on the Exchequer operations as regards the period of 4J years, of - - £203,180 instead of the two millions or three millions loss represented by the witnesses as having occurred in the same period. It would appear from these figures, that whilst the earlier transactions, namely, those which terminated in 1849, were un- * [" Stock wHoIl would have been standing if no part of the cash balances had been applied to the purchase of Exchequer Bills or Bonds, between the 53< (NCONOO IN CO t~ CS OD O r^ CO -^ »n • . . . b_ . . ■ . ... .... -^CQ t.^l>. r-1 t~ -^^^-^^CD . ... O^ . . . . I ', '. I I '. I Vo^" t^r-H* ; '.;;<»;; ,' : OS 00 Total of columns 4, 5, 6, being amount of Ex chequer Bills disposed of in each year. 1,000,600 368,000 371,000 100,000 2,600.000 3,650,000 2,075.000 2,581,850 1,288,000 1,601,750 1.222,050 1,858,500 1,026,250 63,350 135,700 139,150 275,250 2,700 28,000 1,247,000 2,400,000 4,253,500 111,000 00 OS CO QO" (6.) .Amount of Exchequer Bills funded in each year. 1,075,000 1,513,500 600,000 500,000 500,000 1,574.600 1,026,250 40,200 14,000 1,247.000 OS CO (5.) Amount of Exchequer Bills sold in each year. 254,000 100,000 1,200,600 300.000 1,039,200 500,600 563,500 111,000 (4.) Amonnt of Exchequer Bills paid off in each year. §1 g II ggggg § ggg ggg gg .00 .0..0 0-H_Ot>^0 OS .r^t^:ii the safer and the higher the position of the Bank, the lower the rate of interest they allow." (Qu. 2702.) The obvious reason of the better class of Banks or Banking Companies allowing only 30s. per cent, interest on their deposits being that they cannot pay more without loss, or without giving up the small margin (10*. per cent.) they keep for their own remuneration. 11. — In estimating the relative merits and advantages of different classes of investments for very large sums of money, care is necessary when we come to the consideration of the Public Funds, the convenience of which as a medium of in- vestment is undeniable, but the public, accustomed for more than thirty-five years past to hear Consols quoted » [Mr. Stuart Mill has suggested one medium of investment which presents some novelty, viz. a National Bank of Deposit and Discount, with ramifications throughout the country ; which he considers might receive any money confided to it, and either fund it at a fixed rate of interest ; or allow interest on a iloating balance, hke the Joint Stock Banks, the in- terest given being of coui'se lower than the rate at which individuals can borrow in proportion to the security of a Government investment, and the expense of the estabhshment being defrayed by the difference between the interest which the bank would pay, and that which it would obtain by lending its deposits on increased landed or other security. " There are (he says), no insuperable objections in principle, and I should think none in practice, to an institution of this sort, as a means of supplying the same convenient mode of investment now afforded by the public funds. It would constitute the State a great Insurance Company to insure that part of the community who Hve on the interest of their property, against the risk of losing it by the bankruptcy of those to whom they might other- wise be under the necessity of confiding it."] 176 FUNDAMENTAL PRINCITLES. at high prices, are apt to look upon these prices as a fair type of what may be realized at any time. Yet the case is far otherwise, and we have but to refer to Table C, Art. 15, Part III., to be convinced that where the sum to be invested is very great, and particularly where larger and larger portions of that sum are likely to be required as the price of stock takes a more and more downward ten- dency, they become a dangerous mode of investment. During the twenty-five years from 1731 to 1755, the average of the 3 per cent. Consols was 97 ; for the following twenty years it was depressed to 86 ; for the forty-eight years next succeeding, it fell as low as 66 ; and yet during the last thirty-five years it has risen again to over 90. To these facts, if we add the considera- tion already urged in Part III., namely, that just in proportion as the price of stock sinks lower, the amount of Savings Bank withdrawals increases, the impropriety of investing the whole of Savings Bank monies in such securities must be admitted. 12. — The difficulties, we have pointed out in the preceding articles, have led many experienced persons to inquire whether, instead of the investment* of Savings Banks money being cen- * [Tn Prance, various curious suggestions have been made, having for their object the obtaining greater interest than the public funds pro- duce. An orator in the Chamber of Deputies, M. Lombard Buffieres, 27th February 1835, said — " II aurait souhaite qu'on organisat, par I'autorite de la loi, toutes les caisses d'epargne, d'apres le modele d'un establissement qui se combine avec les monts-de-piete, et qui, dans une grande ville de I'Est, produit des resultats admirables. M. de Lamartine, also proposed, " d'etabUr une banque universelle, ayant pour capital legal tons les millions accumules par toutes les caisses d'e- pargne du royaume." M. Coquelin also, in his excellent work, " Du Credit et des Banques," made some suggestions :—" Que pourraient faire de leurs fonds ces eta- blissements, a les supposer completement libres? lis remplissent admirable- ment cette premiere fonction .des institutions de credit, de recueillir les epargnes, les Economies disseminees entre toutes les mains, pour en former des capitaux ; mais tout debouche leur manque. OF THE DEFICIENCY. 177 tralized into the hands of Commissioners in London, it might not be possible, by an extension of the principle of Sect. 12. of the present Savings Bank Act, to leave the investment to each individual bank, on the plan which will be found detailed in Part VI. on non-Government Banks. Section 4. — Further Preliminary Considerations. — How a Deficiency is to be prevented in future. Art. 13. — Resume. — The circmnstances described in the pre- ceding section lead to the following conclusions : — I. That, although three-fourths of the Savings Bank funds might he invested without inconvenience in general securities, it is very improbable that sufficient for even one-fourth will be avail- able. II. That, allowing for losses on general securities and ex- penses, delays in investment, S^c, it is highly improbable that the rate of interest that can be made on the whole of the Savings " lis ne pourraient encore, laisses a eux-m^mes, que les porter a la bourse efc au tresor. " Dans mon dernier chapitrej'ai indique une autre voie qui leur sera ouverte bientot, si I'on ne s'y oppose pas. Mais ce ne serait pas encore suffi- sant. II faut apres avoir regu par fractions minimes des mains des travail- leurs d'importants depots, que les eaisses d'epargne les renvoient par fliets pluslargesau commerce, aux manufactures comme a 1' agriculture, les ver- sent a tous les canaux de la production, afln, d'une part, de feconder chaque travail industriel, et de I'autre, qu'U n'y ait plus d'engorgement a redouter. Alors aussi les travailleurs economes seront vraiment devenus les com- manditaires de la production et ils profiteront doublement de I'emploi de leurs fonds, puisque toujours, ou quelque brancbe de I'industrie se deve- loppe, les salaires montent. Je pense, a la verite, que les prets des eaisses d'epargne aux banques agricoles presenteraient le plus d'avantages ; mais pour cela encore qu'elles soient libres et agissent selon leur interet de chaque jour. Et s'il en etait ainsi, loin de craindre de voir la masse des depots s'elever a de trop fortes sommes, ne serait-on pas assure que plus elle serait considerable, plus elle serait feconde ?"J N 178 FUNDAMENTAL PRINCIPLES. Bank deposits, when the average of a number of years is taken, will much exceed 3^ per cent* III. That, as a first step, it will not be wise to assume a higher rate than 3| per cent, to be realizable, w^en the reor- ganization of Savings Banks shall be considered by the Legi. - lature. (See note, page 192.) 14. — It is also perfectly clear, that, whatever investments be found for Savings Bank deposits, and whatever be the annual rate of interest obtainable by the Commissioners, the repayments and withdrawals must be so managed as to tally, if possible, with the receipts from the securities; and some- what less interest than is realized by the investments must be allowed, so as to provide a fmargin for the rise and fall in the securities when purchased or sold, and for the expenses of the banks, in order that the business may be made self- supporting. * [It should be noticed, that although every legal restriction on interest has been removed by the final repeal of the Usury Laws in 1854, yet a com- parison of the rates, through a period sufficiently long to eliminate the effect of fluctuation, shews a progressive diminution, which will probably continue, as a fall of profits and interest naturally takes place with the progress of population and production ; the cause of this dechne in the rate being the increased cost of maintaining labour, the larger amount of capital competing for employment, and the greater security afforded by the absence of troubles in the State. The repealed laws themselves in- directly shew the fact, for in the reign of Ehzabeth an Act was passed limiting the rate of interest to 10 per cent. ; in the reign of James I. it was limited to 8 per cent. ; in that of Charles II. to 6 per cent. ; and in the reign of Anne, the Act, which until recently was the basis of the law, limited the rate of interest to 5 per cent.] t [The plan adopted by the " Bank for Savings in the City of New York," (under the Act 23 April 1831) appears to be based upon sound principles : — " The Board of Trustees of the Bank for Savings in the City of New York, are hereby authorized to accumulate gradually, and hold invested, a surplus fund, not exceeding three per cent, on the amount of the deposits, OF INTEREST LIKELY TO BE RECEIVED. 179 The margin required will not be produced, unless a large portion of the 41 millions be invested in general securities; it would be derived only from that portion, and then only after the contingencies discussed in *Part III. have been provided for. Any aggravation in the circumstances referred to therein during the coming twenty-five years will prevent any reserve being accumulated. Should it be a period of peace and high prices, the rate of interest received for investments will be low, and little margin will be obtained. If the converse, the rate realised may be high, but the cessation of speculative investments, and of the formation of new companies to any extent, would bring to the end that, in case of a reduction in the market price of the public stocks and securities, held or to be held by the said Bank, below the par value thereof, any loss to the Depositors, by reason of such reduction, may be prevented or made good by means of the said fund." The necessity for some such margin is admitted by continental authorities. A learned German economist urges that " under the most exemplary organization tad administration, losses can never be otherwise obviated."] * [There is an impression, that if the present Deficiency be recouped, the rate of interest £3 . 5s. per cent, may safely be conlinued for the future, even if all investments be made in the public funds. This is, however, erroneous, because the average of the purchases is always likely to be above, and the averages of the sales below 92f , the price of safely : hence (as we have explained, in Art. 15, and the note thereto, of Part III.,) a fresh de- ficiency in Savings Bank assets must arise, while no restorative element exists in their operations, nor compensating iniiuence to recoupe the annual loss. The necessity of some margin, as referred to in the text, will be appre- ciated by considering the transactions of 1858, which are set forth in Art. 17. of Part III. It appears that £755,350 stock was bought at the average price of £96 . 19s. 6d per cent., costing £732,391, by which an interest of £3. Is. lOd. was produced (See Table B, p. 130); and on an equal amount sold to meet withdrawals, only £692,075 was realized, or £91 . 13*. per cent. This difference, £40,316, produced a deficiency of £5 . 6s. 6d. in every £100, and it would take more than nine years before a margin, say of even 10s. per cent., would enable the Commissioners to recoupe the loss made by the sales of that one year.— /See No. 9 of the Compound In- terest Tables in the Building Society Treatise.] n2 180 FUNDAMENTAL PRINCIPLES. other capital into the mortgage and parliamentary securities market to compete with the money of Depositors waiting in the hands of the Savings Bank Commissioners for investment. 15. — This question of the rate of interest that should be allowed to Savings Bank Depositors has been discussed by different persons from directly opposite points of view. On the one hand, there are those who, arguing from the considerations into which we have entered at length in the Section on Expenses, Part I., as to the greater costliness of small accounts, and the large amount of unremunerated trouble they occasion, would reduce the rate of interest on the smaller deposits, such as those not exceeding £20, to £2 . 10*. per cent., giving to the Depositors of larger sums a rate of £3. On the other side, there are many who object to the Government guaranteeing so large an annual rate of in- terest as £3 . 5s. per cent.,* and who urge, with perfect justice, that Depositors, whose savings are large, are not of the class of persons who require the aid of the nation in encouraging provident habits : and that, if a premium is to be offered to provident habits by the Government of the country, its advantages should be confined to those who really belong to the poorer classes. They argue, therefore, that a low rate of interest, such as 2 per cent., is all that need be allowed to the larger Depo- sitors, while the full rate of 3 per cent, should be credited to those accounts which do not exceed £20. 16. — To decide between these two opposite views, it is not * [" Ba outre," observes M. du Puynode, " on ne peut douter, que dans un temps, plus ou moins prochain, I'interet de la rente ne diminue (cela est arrivS) — et dans ce cas I'Etat, continuant a employer les depots comme il le fait, ne refevrait plus ce qu'il devrait remettre, ce qui donnerait aux caisses d'epargne le caractere d'etablissements d'aumone." (Des Lois du travail et des classes ouvri&res.)] OF INTEREST AND WITHDRAWALS. 181 unimportant to consider that although, in principle. Depositors desire the advantage resulting from compound interest, it does not appear that the rate itself has an appreciable influence on the amount of their deposits. The Legislature has, by suc- cessive enactments, lowered the interest allowed, yet the deposits have, notwithstanding, continued to increase from year to year. Many Savings Banks in Scotland have, for a long time, allowed only 2 J per cent. ; and yet their deposits, when added to those of the like class in Joint Stock Banks, are, in proportion, more numerous and larger than for a similar population in England. Interest is, no doubt, a pre- mium to economy, which it encourages, rewards, and thus contributes to maintain ; but a high rate need not be looked upon as a condition indispensable to the prosperity of Savings Banks. The Superintendant of the banking department of New York remarks, in his Report relative to Savings Banks, that " The primary motive which induces deposits in these banks is entire security of the sum deposited; the secondary motive, the accumulation of interest. Tlie first overrides the second, and is the main condition. The difference between the legal rate of interest and that allowed by these institutions is of little or no importance to the Depositors individually. The eventual return of the sum deposited is the object sought, and the controlling idea of the Depositor."* * [The opinion of that practical philanthropist, the late Dr. Chalmers, may be cited on this point. " He often spoke to me on the subject," (said one of the witnesses before the Committee, Mr. Maitland), " and his argu- ment used to be, that the ready receipt and payment of small sums of money and their safe custody were every thing, and the rate of interest quite unimportant ; and that the result of high interest had been to swamp our Savings Banks as a national system. That the care taken of the small amounts for investment was the main question." Mr. Deaker also says (Qu. 3627), " I think Depositors of small amounts look more to the safe keeping of their money than to the actual amount of interest they may receive."] 182 FUNDAMENTAL PKINCIPLES. 17. — It is, indeed, idle to suppose that interest is the at- traction which makes the poorer classes come to the Savings Banks, for it is only an attractive element to the recipient when measured in large quantities : 3 per cent, per annum is only one-fifth more than a halfpenny in the pound per month ; so that a Depositor having £5 in the bank for six months would only receive 1*. 6d. If the rate were £2 . lOs. per cent, his interest would be Is. 3d. Where, however, the savings are ^100 or more, the owners begin to think of the profit they can make for it ; and with the feeling of having capital at command they seek for investment in some more lucrative medium than a Savings Bank. Some go into business, others invest in various associations, fancying that they will get at least 6 or 7 per cent, per annum interest, possibly (they think) much more. Once comparatively well off, they do not care for a Government investment, from which, according to their ideas, no such chance of gain can arise. 18. — As to withdrawals, — The difficulty with regard to the investment of the funds, and, at the same time, the necessity of obviating the inconvenience which would follow upon an unexpected demand for large repayments, has given rise to a proposal for modifying the existing rules, and for substituting a proportionate delay, according to the amount to be with- drawn, between the demand and the repayment. It has been proposed to leave to the Depositor the free disposal of a portion of his deposit, either by fixing a certain amount before- hand, such as a fourth, or taking a proportional part, which might be withdrawable at pleasure and on demand, leaving the remaining three-fourths subject to a longer notice.* * [The necessity for such a provision has been long- admitted in Prussia. A ministerial rescript on Slst May, 1849, recommended that not more than £1 . lO*. should be withdrawable on demand ; £7 . 10s. a-fortnight OF WITHDRAWALS. 183 It has been urged that the working classes themselves are not so unreasonable as to expect both profit on then- subscriptions and also immediate repayment of their money on demand. This appears to be sustained by the fact, that if an Investr' ment and Building Society, an Industrial Partnership Asso- ciation, or a Friendly Society, be established anywhere, money pours in from members, anxious to avail themselves of the advantages offered, who readily recognise the propriety of proper notice before withdrawal, or, at all events, the necessity of allowing immediate withdrawals only of a very small fraction of the money deposited. 19. — The liability to *withdrawal of the many millions de- posited with the National Debt Commissioners is undoubtedly a difficulty in the Savings Bank question, which could be overcome by the Trustees having power to require longer notice for sums over a certain amount. With sufficient time, there would be no difficulty in providing funds to meet calls, and securities might be accepted which are not readily ne- gociable, since, during the currency of the notice, withdrawals would be provided for, in most cases, out of the incoming deposits, and no operation of sale would be required. afterwards ; but larger sums should only be repaid after tliree months' notice. This is acted upon in the majority of the Prussian Savings Banks. The previous regulation (promulgated in 1838) was little less stringent : two months' notice being required for all sums exceeding £3 . 15s.] * [It is remarkable that the amount of Savings Bank Deposits appears to have doubled in about 22 years, ending 20th November 1859. This happens to be the time in which the Deposits on hand 22 years ago, would have doubled themselves by the mere addition of compound interest at £3 . 5«. per. cent, if undisturbed : that is to say, the withdrawals dur- ing the period by Trustees of Savings Banks have just equalled the new deposits, and the accruing interest thereon. The number and extent of withdrawals from Savings Banks each year is exceedingly great (see Art. 44, Part II.). Independently of the large sums occasionally withdrawn from the Government by the Trustees, there is required annually, on the average, £1 1 of every £13 that is de- posited, to provide for repayments, and not more than £2 passes into the hands of the Commissioners.] CHAPTER X. AS TO THE ALTERATIONS THAT ARE DESIRABLE IN THE GOVERNMENT CONNECTION WITH SAVINGS BANKS. Section I.— General Rear c/ animation suggested. Art. 20. — The fundamental principles, described in the pre- vious Chapter, lead to the legislative alterations necessary. The changes we suggested in 1851 in the Government con- nection with Savings Banks, without reference to a national guarantee to the .Depositors, are as follows : — 1st. The appointment of a Commission to superintend and manage the general funds of Savings Banks, and the investment of the deposits received by it. 2nd. A grant to be accorded by the Legislature to make up the present *deficiency in Savings Bank securities, estimated on the principle laid down in Part III., on the understanding that. * [It should be remarked, that, in measuring' the Deficiency, the object is not to ascertain what amount of grant should be made to enable an immediate sale of the whole stock in hand to be effected, and the Deposi- tors in Savings Banks paid oif in fuU out of the produce. For it is evi- dent, that in such case the price of stocks would at once fall through so large an amount being thrown upon the market. If handed over to a Comniission, the Deficiency grant should be mea- sxired by the average price for twenty-five years. Any proposal in the coming session to make up the deficiency by a gi'ant at the price of the present year will prove largely insufiicient, as the Funds happen now to be at very near the highest price for the last twenty-five years. (See Table B, Art. 12, Part III.) ALTERATIONS KECOMMENDED, 185 should any surplus arise on the future conversion of the stock into cash, it be applied to recoups the nation for the deficiency- grant ; but should the Stock voted prove insufficient, then a further grant to be made. 3rd. The funds of Savings Banks to be left by the Commission, in the present securities, until more advantageous investments present themselves, and then to be gradually withdrawn to the extent of one-half, and placed (if possible) in others producing a better rate of interest. 4th. The Commission to receive for the deposits exactly what interest their investments realize. 5th. The Commission to have power to replace any amount of the deposits in Government Stock in case other satisfactory in- vestments cannot from time to time be found. 6th. Any financial necessities of the public exchequer (such as are discussed in Chapter VIII. Part III.) to be provided for hy allowing the Chancellor to borrove such money as he may require from the Savings Bank Commissioners, and to replace the same with interest. 7th. The *Commissioners to be instructed to encourage the formation of new Savings Banks in places where none exist. * [In Art. 18. Part I. we have described the constitution of the National Debt Commission. It is, as Lord Monteagle justly remarked, impossible for the high officials who compose it, even with the utmost diligence, consistently with their other avocations, to attend to the affairs of Savings Banks. The narrative contained in previous Parts sufficiently proves that ex-officio Commissioners cannot pay attention to important financial business when they are so fuUy occupied with other and more direct duties. Even should some very important question require their presence, it win be as easily understood how unequal to the business a member of any board would be who does not attend its meetings regularly. He can but try to take up the fragments of a question, of the antecedents of which he is ignorant, and with respect to the future results of which he must likewise be very uncertain. The magnitude of capital involved, and the probability of the further extension and developement which Savings Banks will yet acquire, render it absolutely necessary that there should be some official responsibility answerable to Parliament for due attention to the business to be transacted in coimection with them.] 186 ALTERATIONS EECOMMENDED. 8th. A modification of Mr. Whithread's Post Office Plan to be adopted as a feeder to local banks in large towns from small places where none exist, or where it is not yet expedient to establish independent branches. (For fuller details, see Art. 5, Part. V.) Section 2, — Of the Commission. Art. 21. — That Savings Banks business may be effectually conducted, the Commission ought to be paid. There is no way of enforcing real responsibility, unless there be the power of saying to a man, " I give you so much for a certain duty, and I therefore demand, and shall enforce, the proper discharge of it." No money could be so well ex- pended as in paying a proper remuneration to a well-consti- tuted and effective Board. It should consist of five members, three * to be nominated by the Crown, and to be paid, the others to be ex-officio, viz. the Chancellor of the Exchec[uer and the Governor or Deputy-Governor of the Bank of England. * [The Committee of 1858 recommended that only one of the five Commissioners should be paid ; but all experience shews that it is unadvisable to commit large interests to the keeping' of one paid Manager, controlled only by honorary officials. No supervision is ever effectual unless performed as a duty, and not as a voluntary act. If the dignity of some of the contemplated Commissioners be so high, that the remuneration would not be of importance to them, let there be a sufficient number on the Commission to whom proper and adequate remuneration would be an object, and who will discharge their functions as the business of their life, just as is the case with County Court .Judges, or any other public stipendiary officials. If only one Commissioner were salaried, he would be practically as powerful as if he were sole uncontrolled Manager. The only unpaid members of the Commission should be those who, like the Chancellor of the Exchequer, are ex-officio, entitled to a veto upon its proceedings, and who, by having the right to be present at the Board meetings, could make suggestions.] ALTERATIONS KECOMMENDED. 187 Although the Parliamentary Committee of 1858 did not refer to it, we cannot but think that the Comptroller of the National Debt Office should be one of the Commission —whether ex officio, or not, is, however, a question. It would be, in every way, important to secure to the future administration of Savings Banks the benefit of the experience he must neces- sarily possess. Section 3. — Modes of Investment. Art. 22. — In Art. 8 of the previous chapter we have said, that of the £41,000,000 deposited (1859) by Savings Banks and Friendly Societies with the National Debt Commissioners, a very considerable amount might with strict prudence be in- vested in securities of a less marketable nature than the public funds, but calculated to yield a higher rate of interest, [assuming they can be found to a sufficient extent^ such as ' Parliamentary securities ' having the guarantee of the State, and others like the following (some of which are chargeable under the authority of statutes), viz. : — 1st. On the security of County or Borough Rates authorized to be levied and mortgaged by any Act of Parliament. 2nd. On the security oi Rates, Tolls,Duties, Assessments, Bonds, Debentures, or other securities of any body or company incor- porated by Act of Parliament or charter, which such body or company is authorized by such Act or charter to raise, levy, or mortgage. Under this head would come advances under the Land Drainage Act^ which it is stated would be attended with no *\OfLand as security for advances. — The value of land as security for advances is yearly augmenting, and if, as we have discussed elsewhere, facilities be given for an inexpensive mode of 188 ALTERATIONS BECOMMENDED. risk, because, whatever mortgages or incumbrances there may be upon the lands, the money for drainage is made a first charge. Also, first class Railway Debentures, and the Bonds of the greater dock companies and other corporate bodies of ample revenue. 3rd. In Bank of England Stock. 4i;h. In India Bonds, stock, and loans. 5th. On mortgage of freehold, leasehold, or copyhold property (such leasehold being for a term of years absolute, of which not less than thirty years shall be unexpired, and such copy- dealing with real property, the Savings Bank Commissioners may have a field for profitable loans opened to them. — [See Treatise on the Enfranchisement of Copyhold and Church property, pages vi. to ix. and Appendix.] An elaborate writer on the history of money (Mr. Hodge) remarks, that should the same rate of increase continue for as long a period as it has already been in progress, the annual value of an acre of land in England three hundred years hence will be nearly ^20 sterling ; the revenues of some existing entails, if they can be maintained unbroken, will be reckoned by millions ; and the rental, for a single year,^ of the whole landed property of the United Kingdom, will exceed the present amount of the national debt. Towards the end of the seventeenth century,' rent in England was about six shillings the acre ; and as the average in 1843 was 2 The total rental of England and Wales is estimated to have been — In 1600, £6,000,000 ) By Davenant, vol i., p. 362 (including houses 1680, £14,000,000) and mines). 1771, £16,000,000. .By Arthur Young : Northern Tour, iv. 366 (land only). , By M^CuUoch : Statistical Account of the 1806, £35,900,000 1815, £34,230,000, 1843, £40,167,000 1852, £41,118,000 British Empire, i. 558 (land only). These numbers having been deduced from the property-tax returns, are probably correct ; the accuracy of the others is necessarily very doubtful. » Usury, ij-c, ex'amined by T. Morky : Lond. 1682 ; p. 11. ALTERATIONS RECOMMENDED. 189 hold being copyhold of inheritance in Great Britain or Ire- land.) 6th. On security of heritable property in Scotland. 7th. In any chartered or other public Joint-Stock Bank in Scotland. This last-mentioned medium of investment, although in- cluded in the Friendly Societies' Act, may perhaps be con- not less than * twenty-four shillings the acre, Lord ^ Macaulay is correct in his estimate that it had quadrupled in the interval between the two periods — about a century and a half. It had increased in exactly the same proportion during the nearly similar interval preceding the Revolution : so that, assuming the growth to have been uniform, the annual value of land in England has been doubled once in every period of seventy-five years since the Reformation, being an increase in each year of ^0.934, or 18s. 8d. per cent. The writer quoted adds that : — " It seems probable that, in the reign of James I., the value of land was from twelve to fourteen years purchase ; and as, ac- cording to the scale of progression that has been laid down, the rent would be about Bs. per acre, the selling price average from 36s. to 42s. per acre is not much more than a twentieth part of what, even without any peculiar advantage of situation, is com- monly realized at the present time. As the relative improvement must have been greatest in the manufacturing districts, we may readily believe the assertion that the present amount of the yearly rental of Lancashire would have bought the^e simple of the county in the time of Elizabeth." ■4 In M^Culloch's Statistical Account of the British Empire (vol. i. p. 553), the average rent of land, in 1843, is given for England only at £1 . Ss. 2id. per acre ; but as this result is obtained by dividing the gross rental of the kingdom by the aggregate acreage of the counties, without allowance for roads and wastes, the actual average must be somewhat higher. 5 Hist. Eng. i. 318.] 190 INVESTMENT ACCOUNTS. sidered objectionable, after the recent disastrous failures in Scotch banks. It has been suggested as a readily available, safe, and productive form in which to retain the floating capital, to place it " on deposit at interest among the leading Joint Stock Banks of England, Scotland, and Ireland ;" but in this, for the same reason, we cannot concur. Another eligible kind of investment, as good as many of the above, would be to apply a portion of the Savings Bank capital to assisting Societies for iTnproving the *Dtvellings of the Poor, on the plan detailed at length in the Appendix to this Treatise. Art, 23. — If a f variety of investments be decided on, two accounts should be opened by the Commissioners : , In which half of the Sa- ving's Bank Deposits would be invested in the 1st. A Short I nvestment Account ^ public funds or any easily convertible securities pro- ducing a low rate of in- terest. iln which the other half of the money would, if pos- sible, be invested on gene- , ral securities. * [This was very ably urged by Mr. Christopher Bushell, in his ca- pacity of Chairman of a Section at the 1858 Meeting of the Social Science Association.] f [The money required for Exchequer Loans, to assist public and private improvements, &c., might be obtained from Savings Banks at interest, instead of (out of the produce of taxation) from the Consolidated Fund. This would include the operations of the Public Works Advance Commission, (created by Act 57 Geo. III. c. 34., subject to numerous amending Acts, the last being 20 and 21 Vict. c. 63.). The total sum advanced by them during forty-three years is £13,700,000, on which £4,100,000 principal, and 4300,000 interest, remained due on the 31st March 1869. It would also include the similar fund created for Ireland by the Act 1 and 2 Wm. IV. c. 33., which has made advances amount- ing to 5 millions. (Return No. 30, sess. 2. 1859, p. 65—67).] CHAPTER XI. RECOMMENDATIONS. Sect. 1. — Plan recommended for Payment of Savings Bank Expenses. Art. 24. — In Art. 15, we have adverted to the diversity of opinion, that prevails as to the selection of the rate of interest which shall be right as between small and large De- positors, when regard is had to the question of expenses. The difficulties under which Savings Bank reformers labour, owing to that question, can only be properly obviated by an *annual grant from the Commissioners, out of a fund to be created for the purpose (see note below). This, if taken at £140,000 a-year for the amount of Savings Bank deposits, would not amount to more than Is, 6d. per cent, out of the interest realized, and would suffice to defray the expenses attending the conduct of one Savings Bank, or branch thereof, in every town of the kingdom ; such grant to be taken out of the produce of the investments as an aggregate, and not out of the per-centage of the profits of each bank. By this arrange- ment the Government would be able to say to the Managers, " What matters it that the larger Depositors withdraw, and * [The total expenses, according' to Sect. 10. Chap. II., are at present £119,790. (Returns to 20th November 1857.) The fund for the grant, which will probably have to be increased, can be measured thus :— the aggregate annual interest that the Commis- sioners would have to pay is shewn below, supposing £3 per cent, to be 192 ALLOWANCE FOR EXPENSES. thus produce deficiency in the fund available for expenses ? they are not the class that require the aid of the nation to encourage them to save money, and we will guarantee your expenses." The Commissioners would thus enable the Bank Managers, who at present are crippled from want of re- sources, to give an impulse and activity to the transactions of the bank, and to fairly proportion the remuneration to the labour and duties of their staff. (See Art. 44, Part II. Of Actuaries). allowed on so much of each deposit as amounts to £100, and £2 . 10s. on the excess, as recommended in Sect. 3 of this' chapter. The figures are taken to the 20th November 1858, as no sufficient details are yet pub- lished for 1859. IndiWdual Depositors. Number of Depositors. Total amount due. Annual Interest. Amount. Kate Per cent. Not exceeding £100 Over£l00for£100l worth. . . . s Balance over £100 f 1,809,864 73,338 1 £23,629,932 7,333,800 2,958,149 I ^6928,912 73,954 £3 2 10 Total Individual ( Depositors . . < 1,383,202 33,921,881 - 2,292,241 { 1,980,Q82 1,002,866 68,767 69,420 |3 Add for Charitable Institutions, and Friendly Societies . . Total . . . Expenses . . £38,194,804 (say) 1,131,053 140,000 1,271,053 Now, if on the 38 milhons SJ per cent, average interest be obtained, .... =£1,336,818 there will be a Balance of . . . 65,765 as a yearly Reserve Fund for losses on ■wtthdeawals. But if, as we ourselves believe, 3 J per cent, only he obtained, there will be a large annual deficiency, instead of a margin, and it would be neces- sary to lower still more the rates of interest allowed to Depositors.] ( 193 ) Sect. 2. — Of the Interest recommended to be allowed to Depositors. Art. 25. — When the expenses of each guaranteed Savings Bank are defrayed by a grant out of the general fund from the Savings Banks Commissioners, the interest allowed to them can be reduced to that which they shall offer to their Depositors. Supposing that £3 . 10«. per cent, be the average interest pro- duced on the investments (see Art. 23, p. 190), and 7s. &d. the average annual per centage for expenses, it would be necessary to reduce the rate of interest to Depositors, in order that a proper margin may be provided. That this reduction may be effected in a manner most in accordance with the proper object of Savings Banks, viz. to encourage the smaller deposits, the rate should be £3 per cent, on sums* not exceeding £100, and on so much of larger deposits. For the surplus, up to i£200, it should be £2 . 10s. These rates are preferable to any other, from the facility they afford in calculations. (See Sect. 5 of this Chapter.) ■f With this change in the rate of interest, a change in the * [In the American Banks a distinction is also made between the benefits afforded by way of encouragement to provident habits among the really poorer classes, and those facilities for investment which are opened to per- sons of better means. Clauses Uke the following are generally adopted : — " The said Board of Trustees may also regulate from time to time the interest to be allowed to Depositors, so that the iaterest, allowed to Depo- sitors having five hundred dollars or more deposited with the said bank, shall be at least one per cent, less than the interest or dividend allowed to Depositors having less than 500 dollars deposited therewith."] -f- [Mr. Sikes, in his evidence, recommended a greater reduction, viz. that " interest should be allowed at the rate of 3 per cent, up to d£100 ; and with respect to any balance that exceeded £100, 2 per cent, on such ex- cess over the £100 ; that is, if there be a balance of JE140, 3 per cent, would be allowed on the £100 portion, and 2 per cent on the surplus, that is, on the £40." (qu. 2676.) Mr. Porter considered that the interest should be reduced to " 2 per cent., or even lower."] o [•PWasnqoBSBUj^jjoa^tBjgaq^nisiinBaf eSniABg jaqjo itsotu nt pire Vo13 eypreq aq^ m aojoj m ajB snotijBinSaj a'B[nnTg •sBiiiATg •Hoa jioixaiiisiii iTSAioi »^? jft sanv^Rg; syt wouj; — j/spngpiAip jfiBmp,io sb jCbas. amBS aq^ tn jo pasodBip aq n^qs spuapiAip piBS aqj puB ! sjebjC aAg; .Saipaoajd aq? Suunp s^isodap Jiaq^ no paiuooB aABq jCbui qotqAi. (jeaia^ui aq^ o^ uoi:)jodojd m 'epnapiAip Bjjxa pras aq? JguuBjaap jo atnp aq:) Suipaoaid (jxau 'jSBaj }b JBaX ano jo aoBds sn% joj uoi?n:(psni PP^ ^^^ ^I panreraaj aABq |^Bqs qon:[M. puB '8J'B[[op aAif JO mns aq? paaoxa s^isodap asoqAi 'sioiisodaQ- qons \{v SnoniB puB o? '(5[oo?s iB?idBO aq? pooS daa3[ o? jCiBSsaaan enins aq? puB 'noi?n?i?sni aq? JO sasnadxa jfjcBssaoau aq? 'apBta XpBaJiB epuaptAtp aq? Suponpap Ja?jB) BXBa/i aAg piBS aq? uiq?m patiaooB aABq i^Bui qaiqAi 8?^o.id aq? n" J" puaputp B pajBpap aq i[Bqs ajaq? ' gt J" -^^P aq? moij pajndnioD aq o? ?8jp: aq? 'ejBajf aAij XiaAa jo pua aq? ?y „ ■uotftififsu/ ai/f m utvmau Of spun^ .iwxit nwMdoiim, aso^? o? SdMSaiAia VHIXS:] + Q-8q?noni xis ?8Bd aq? joj pa?rpajo ?saj;a?ut aq? o? ^CpBa^-j^Bq pappB aq o? aABq ppoAV. q?jg-ano -zia 'aidrare aq ppoM snuoq aq? jo uoi?Binoi'BO aqj,] « 'i!ps8psn :^Tio ii85{b; Saiaq apqij 5[08t[0 o^ put? *S5[U'Bg; sSuiA'Bg TIT si'BAV'Bapnim uappns o^ /;iiiq'Bi^ eqj o^BTAqo oj^ — "gg 'xay "I ^ JB J tn o^ P9JJ8J8J sosuadxa sv^ '/{^uatiBasuoo 'pire 's^tvef^ oq:^ JO 9iqnoj; !a\\\ qsiuiaiip ppoAV sjBM'Bjpq^iAi uo jfoaqoj. bv^ ':jmds i^uapiAOjd B JO dn gaidaa5[ aq^ Snt§Bjnoou8 ' a^iqM 'snqj^ •^[SfnoiA8J[d sq;uora xis joj sOB][d ua5[B:j pBq pAV^ipq^iAS, ou qoiqAi uodn 's^unoooB ssoq; s. d. 3 3 4 £ s. d. 4 17 4 40 APPENDIX. that the nation will cease to have to pay after 1860 from the Long Annuities, which expire in that year. (See Art. 7.) Hence, by merely continuing to pay these Long Annuities for 100 years to come, the National Funded Debt might be ex- tinguished! How the liquidation should be carried into effect is a matter for consideration. It wouldprobably be objected that, practically, the present stockholders either would not (or could not, from much of the stock being in settlement) consent to exchange the Interest perpetuity of ^23,629,466 a-year for an increased ter- minable annuity of ^24,926,464. This practical question we do not purpose to argue ; but it may be mentioned that if the nation were to apply the difference between the above ^24,926,464 and the annual cost of interest, to purchase up stocky and the average of such purchases were assumed to cost ^100 per cent., and the interest thereon re-applied, as received, to buying fresh stock, and this process were continued for 100 years, the Chancellor of the Exchequer would find himself in possession of the ^786,801,154 stock at the end of that period. 12. — The following Table shews the vast outlay caused by the existence of a National Debt, and by the necessity for a War Establishment. Thus — talcing an average often years (five of peace and five of war^ — there was annually spent on the National Debt and the Army and Navy, 52 millions ; while, 7f millions is all that was required for general expenditure. In other words, of every ^15 of Revenue, the Civil* Adminis- * [This covers all expenses of Civil Government, Hereditary Pensions, Justice, the Diplomatic Serivce, Public Works, Education, the Colonial Service, and about 2 millions in other miscellaneous items ; but is ex- clusive of payments for Collection of Revenue, which amount on the aver- age to about 4J millions a-year.] ON THE NATIONAL DEBT. 41 tration of the country requires only £,2 ; but ^6 is annually spent in protecting it from foreign nations, and jlH is absorbed in pay- ing interest on the debts incurred for the wars of the past. Average Annual Ex- penditure of the Nation. Average of Five Tears' Peaces 1848—1863. Average of Five Tears' War, 1854-1868. 1. National Debt . 2. A rmy and Navy 3. Civil Charges . Total £28,030,000 15,650,000 6,830,000 £28,710,000 32,480,000 8,680,000 £50,510,000 £69,870,000 DIVISION I of Treatise on Associations for Provident Investment. . A PRACTICAL TREATISE ON SAYINGS BANKS; Containing a Review of THEIE PAST HISTOET AND PEESENT CONDITION; Exposition of the ISIeasures required for their internal re-Organization, and for placing them on a sound Financial Basis. Suggestions in reference to Non- Government Deposit Banks AND The Audit of PulUe Institutions. AETHUE SCEATCHLET, M.A., F.E.A.S., Of the Inner Temple^ Barrister-at~Zaw ; Formerly Fellow and Sadlerian Lectwrer of Queens'' College, Cambridge; Author'of a " Treatise on Industrial Investments," S^c LONDON : LONGMAN, GREEN, LONGMAN, AND ROBERTS. MDCCCLX. Now EEABT, PBicE 7s. pE3, X« O rtT X> O IN*. ESTABLISHED 1846. S. Gibbins, Esq. E. D. Shirtliff, Esq. David Taylor, Esq. Esq., 43, Finsbury-square. H. J. Gibbins, Esq. Thomas Bull, Esq. Henry Simpson, Esq. Jobn Bury, Esq. William Blanford, Esq. L. V. Claye, Esq. Jlfedical Officers — Dr. Waller, 9, Finsbiny-square; A. M. Eandall, jSoZ*ct(ors— Messrs. John and George Barnard, 14, York-road, Lambeth. Bankers — Commercial Bank, Lothbury. Actuary and Secretary— Y>. MacGillivray, Esq., F.S.Sjft This Company embraces all the substantial improvements known In the system of Life Assurance. Life Assurance, Endowments, and Annuities on the most equitable rates, and Premiums calculated to meet every description of risk contingent on human life. A Division of Profits every five years, when seventy-five per cent, thereof is apportioned to the Assured on the participating scale of Premiums. Policies indisputable, except in cases of fraud. Claims on Policies paid <}ne month after proof of death. The Company also lends money upon its policies, and upon real and personal security in connexion with Life Assurance. ThefolUnoing are Specimens of Bonuses declared at the last Division of Profits :— No. of Pre- Age when Annual Bonus. Amount now miums Paid. Assured. Premium. Assured. Assured. £ s. d. S, £ s. d. S, s. d. ' 5 46 71 2000 168 16 8 2158 16 8 5 15 16 6 8 1000 56 6 2 1056 6 2 4, 42 67 11 8 2000 130 7 11 2130 7 11 4 26 20 17 6 1000 60 7 4 1060 7 4 3 86 66 6 8 2000 91 6 8 2091 6 8 3 23 19 15 1000 37 6 6 1037 6 6 2 34 26 11 8 1000 28 16 10 1028 16 10 2 22 19 5 1000 24 19 6 1024 19 6 1 37 14 10 S 600 7 12 4 607 12 4 1 27 10 14 7 600 6 13 3 606 13 8 Prospectuses and Foi-ms of Proposal may be had, or will be sent post ftee, on application. equity $z i.ab) LIFE ASSURANCE SOCIETY, For assuring the lives of persons in every profession and station, wherever resident. Office: Mo. Ze, lJ.NCOXJiS'a TJIfSf TTBUiS, I-ONSON, Vr.C, ESTABLISHED 1844. SCrustes. THE EIGHT HON. LOED CEANWOETH. THE EIGHT HON. LOED MONTEAGLE. THE EIGHT HON. THE LOED CHIEF JUSTICE EELE. THE EIGHT HON. THE LOED CHIEF BAEON. THE EIGHT HON. SIE J. T. COLEEIDGE. NASSAU WILLIAM SENIOE, Esq. CHAELES PUETON COOPEE, Esq., Q.C., L.L.D., F.E.S. GE0E6E CAPEON, Esq. Persons effecting Assurances within six months of their last birthday are allowed a proportionate diminntion in the Premium. The amount of Assurances in force is i£l,400,000; the Annual Income is upwards of ^£64,000 ; and the Invested Funds exceed 46255,000. Four-fifths of the Profits are divided Qninquennially among the Assured. At the last Division, the additions to' the amount assured averaged 54 per cent, upon the Premiums paid during the preceding five years. Prospectuses, Copies of the last Eeport, and every information, may be obtained, and Assurances effected, upon written or personal application to the Office. €agU Xnsurance Company* No. 3, CRESCENT, NEW BRIDGE STREET, BLACEFRIARS, LONDON, E.G. §irtttorfi. CHARLES BISCHOFF, Esq., Chairman. THOMAS BODDINGTON, Esq., Deputy-Chairmcm. John White Cater, Esq. Charles Chatfield, Esq. Thomas Devas, Esq. Sir Jas. Buller East, Bt., M.P. ^Nathaniel Gould, Esq. Robert A- Gray, Esq. William Augustus Guy, M.D. Charles Thos. Holcombe, Esq. Richard Hai-man Lloyd, Esq. Joshua Lockwood, Esq. James Murray, Esq. Sir W. G. Ouseley, K. C. B,, D.C.L. W. Anderson Peacock, Esq. Ralph Charles Price, Esq. Philip Rose, Esq. George Russell, Esq. T. Godfrey Samhrooke, Esq. Right Hon. Sir John Young, Bart Actuary and Secreta/ry—OB.k'RL'E.S JELLICOE, Esq. Realized Assets, Two Millions.— Annual Income, about ^400,000.— Amount assured, Seven Millions. — Number of Policies, Seventeen Thousand.— Eighty per cent, of the surplus returned Quinquennially. — No charge for Stamps or Fees Foreign residence liberally considered. — Reports and Prospectuses fi'ee on application. Cfie €urxipeait ^ssiirante ^ocietp, Empowered by Special Act qf ParHament, FOE THE ASSURANCE OP LIVES, ANNUITIES, AND THE GUARANTEE OF INTEGRITY. Chief Office : 2, WATERLOO PLACE, PALL MALL, LONDON. President— The Right Hon. T. MILNER GIBSON, M.P. Chairman of the Board of i)«>eclristrB. Richard Quain, Esq., M.D., Lend., F.R.C.P., 23, Harley Street. Hy. Hancock, Esq., F.R.C.S., 37, Harley Street, Cavendish Square. FIRE DEPARTMENT. Business is confined to the best classes of Insurance. The Discount allowed by Government on the Duty returned to the Insured. First Class— Premium, Is. 6d. per cent. Second Class — Premium, 2s. 6d. per cent. LIFE DEPARTMENT. The Company is based upon principles which combine the benefits of Mutual Insurance with the guarantee of a large subscribed capital. The Age of the Insured will, at any time, on satisfactory proof, be admitted on a Policy. Policies indisputable, except in cases of fraud. Assignments and transfers of Policies will be registered and acknowledged. Detailed prospectuses may be had on application at the chief office. Parties desirous of becoming Agents are requested to communicate with FRANK M'GEDY, Secretary. 9 Ci)e ilontiott Assurance, INCORPORATED A,D, 1730, FOE LIFE, FIRE, AND MARINE ASSURANCES. HEAD OFFICE: No. 7, ROYAL EXCHANGE, CORNHILL. JOHN ALVES AEBUTHNOT, Esq., Governor. JOHN ALEX. HANKEY, Esq., Sub-Qovernor. BONAMY DOBEEE, Jun., Esq., Sepuln-aovernor. gmrfcnrs. Nath. Alexander, Esq. Kichard Baggallay, Esq. Henry Bonham Bax, Esq, James Blyth, Esq. Edward Budd, Esq. Edward Burmester, Esq. Charles Crawley, Esq. F. G. Dalgety, Esq. William King, Esq. Charles Lyall, Esq. John Ord, Esq. Capt. K. W. Pelly, E.N. David Powell, Esq. P. F. Robertson, Esq. Alex. Trotter, Esq. Lestock P. Wilson, Esq. John Entwisle, Esq. Robert Gillespie, Jun., Esq. Harry Geo. Gordon, Esq. Edwin Gower, Esq. Samuel Gregson, Esq., M.P. A. C. Guthrie, Esq. Edward Hamage, Esq. Louis Huth, Esq. WEST-END OFFICE, No. 7, PALL-MALL. €ammitttz. The Members of the Court in rotation, and HENET KINGSCOTE, Esq., and JOHN TIDD PRATT, Esq. Superintendent— miUF SCOONES, Esq. LIFE DEPARTMENT. ^ctoary— PETEE HAEDT, Esq., F.E.S. This Corporation has granted Assurances ou Lives for a PERIOD EXCEEDING ONE HUNDRED AND THIRTY YEAKS, having issued its first Policy on the 7th of Jnne, 1721. Two-thirds, or 66 PER CENT., of the entire profits are given to the Assured. Policies may be opened under any of the following plans, viz. : — At a low rate of premium, without participatiou in profits, or at a somewhat higher rate, entitling the Assured, either after the first five years to an annual abate- ment of premium for the remainder of life, or, after payment of the first premium, to a participation in the ensuing Quinquennial Bonus. The high character which this ancient Corporation has maintained daring NEARLY A CENTURY AND A HALF, secures to the public a full and faithful declaration of profits. The Corporation bears the whole Expenses of Mahagement, thus giving to the Assured, conjoined with the protection afforded by its Corporate Fund, advantages equal to those of any system of Mutual Assurance. ALL POLICIES ARE ISSUED FREE FROM STAMP DUTY, or from charge of any description whatever, beyond the Premium. The Corporation of the London Assurance give notice to parties whose Lives are Assured in their Office, that no extra Premium will be charged to them on joining any Volnnteer Corps for service in the United Kingdom, and that all Policies will be paid in full where death ensues in consequence of such service. The fees of MEDICAL REFEREES are PAID by the Corporation. ANNUITIES are granted by the Corporation, payable Half- Yearly. FIRE DEPARTMENT. Manager— 'ISOB.B. BATEMAN, Esq. Common Assurances, One Shiliing and Sixpence per Cent. Hazardous Assurances, Two Shillings and Sixpence per Cent. Doubly Hazardous Assurances, Four Shillings and Sixpence per Cent. Foreign and Special Assurances accepted at Moderate Rates. Prospectuses and all other information may be obtained by either a written er personal application to the Actuary, the Manager of the Fire Department, or to the Superintendent of the West-end Office. JOHN LAURENCE, Secretan/. 10 C{)e jEutual LIFE ASSURANCE SOCIETY, 39, KING STREET, CHEAPSIDE, E.G., LONDON. Established 1834. This is a purely MiTTtiAL Life Assorahce Sooiety. On the 1st Januai-y, 1860, the Capital was j£352,903, invested in Government and Keal Securities, created entirely hy the steady accumulation of the Premiums, f^nd all belonging to the Members. The Assurances in force were £1,461,567, and the Income upwards of ^£61,000 per annum. CHARLES INGALL, Actuary. No extra charge to Assurers joining Volunteer Rifle or Artillery Corps. Established 1841. JHetittal, )ht)3altU, AND aENEKAL LIFE OFFICE, 2 5, PAL L MALL, LONDON. EMPOWERED BY SPECIAl ACT OF PARLIAMENT. At the EIGHTEENTH ANNUAL MEETING, held on the 24th of November, 1859, it was shown that, on the 30th of June last, — The Number of Policies in force was 6,110 The Amount Insured was £2j601,925 lOs. Sd. The Annuallncome was £121,263 7s. 7d. The new business transacted during the last five years amounts to £2 482,798 16S. lid., showing an average yearly amount of new business of nearly HALF A MILLION STERLING. The Society has paid for claims by death, since Its establishment in 1841, no less a sum than £503,619. HEALTHY LIVES. — Assurances are effected at home or abroad at as moderate rates as the most recent data will allow. INDIA. — Officers in the Army and civilians proceeding to India, may Insure their lives on the most favourable terms, and every possible facility is afforded for the transaction of business in India.. NAVAL MEN AND MASTER MARINERS are assured at eguitable rates for life, or for a voyage. VOLUNTEERS.— No extra charge for persons serving in any Volunteer or Rifle Corps within the United Kingdom. RESIDENCE ABROAD— Greater facilities given for residence in the Colonies, &c., than by most other Companies. INVALID LIVES assured on scientifically-constructed tables based on extensive data, and a reduction in the premium is made when the causes for an increased rate of premium have ceased. STAMP DUTY.— Policies issued free of every charge but the premiums. Every information may be obtained at the chief office, or on application to any of the Society's agents. C. DOUGLAS SINGER, Secretary. 11 LIFE INSURANCE SOCIETY. INSTITUTED 1808. His Grace the Duke of Cleveland, K.G."" The Eight Hon. the Earl of Rosebeny, K.T. Robt. John Harvey Harvey, Esq. I John Skipper, Esq. W. J. Utten Browne, Esq. | Roger Kerriaon, Esq. John Wright, Esq., President. i Geo. Dnrrant, Esq., John Hilling Barnard, Esq., C. M. Gibson^ Esq.j F.R.C.S., > Committee. W. R. Clarke, Esq., Dr. Ranking. Frank Noverre, Esq. Richard Griffin, Esq. Thomas Beevor, Esq. R. Blake Humfrey, Esq. Dr. Goodwin. Robert Fitch, Esq. Rev. S. F. Bignold. W. H. Clabbum, Esq. Thomas Lucas, Esq. Rev. William Wayman. John Barwell, Esq. Fi'ancis Parmeter, Esq. R. W. Hawkes, Esq. G. E. Frere, Esq., F.R.S. Robt. John Wright, Esq. ^niritcrs — Mr. Eagle Willett, Mr. A. Bailey, Mr. James R. Hardy. ^watar^— Sir S. Bignold. | 'gaxibmx g,g£ttt— C. J. Bunyon, Esti. This Society is one of the very few Mutual Insurance Companies, and having no proprietary to ahBorb the profits of the Institution, offers to its members the full benefit of the system. Its invested Capital exceeds ^2,100,000, and it possesses large reserves applicable to future Bonuses. Its rates are considerably helow those usually charged— under 45 not less so than 10 per cent. Thus, at the medium age of 40, the sum of £33 19s. 2d., which, at the ordinary premium of £3 7s. lid. per cent., will.msure dBl,000, with the Norwich Union will insure £1,095 8s. This is itself equivalent to a considerable immediate Bonus. Insurances may be effected for sums payable either at death or on attaining a given age. One-half of the first five Annual Premiums may remain as a permanent charge upon Policies granted for the whole duration of life. Annuities are granted and special risks undertaken on favourable terms. Policy Stamps are paid by the Office. This Society is wholly distinct from the Norwich Union Fire Office, which is a proprietary body. NORWICH UNION FIRE INSURANCE SOCIETY. John Kitson, Esq. ; Edward Willett, Esq., &c. &c. pmttoxB. President— XAeui-Gen. Sir Robert John Harvey, C.B. Vice-President— ChaxleB Evans, Esq. Edward Steward, Esq. George Durrant, Esq. Robert John Harvey Harvey, Esq. Henry S. Patteson, Esq. John Wright, Esq. ^ttxdux^ — Sir Samuel Bignold. Henry Browne, Esq. W. C. Hotson, Esq. C. E. Tuck, Esq. Donald Dalrymple, Esq. W. R. Clarke, Esq. ^0nbon Jjgcnl — Chas. J. Bunyon, Esq. The Norwich Union Fire Office was established in ITgV. By the constitution of the Society, three-fifths of the surplus Premiums are periodically distributed byway of Bonus to the Assured, who have thus received, firom time to time, returns amounting in the aggregate to nearly £400,000. The advantages of the mutual principle without the liabilities are thus extended to the Fire Insurers in this Company, who are free from all responsibiUty on account of its engagements. The Premiums charged by this Office are upon the most moderate scale, and in no case higher than those required by other Offices making no return to their Insurers. 1856: Duty paid to Government £76,588 1 Farming Stock Insured £10,013,990 1858: Duty paid to Government 79,892 6 Farming Stock Insured 10,107,584 For Forms of Proposal, Prospectuses, and other information, apply to the Societies' Offices, 6, Crescent, New Bridge Street, Blackfriars, London, and Surrey Street, Norwich, 12 professional LIFE ASSURANCE COMPANY, Admitting on Equal Terms Persons of every Class and Degree to all its Benefits and Advantages. CAPITAL, X2S 0,000. (ftl^aiirmstt. JAMES ANDREW DURHAM, Esq. glipntg-ffiBairman. WILLIAM WELLINGTON COOPER, Esq. With a numerons and influential Proprietary. All Policies free of stamp duty. Bates of premium extremely moderate. No extra charge for going to, or residing at (in time of peace), Australasia, Bermuda, Madeira, Cape of Good Hope, Mauritius, and the British North American Colonies. Medical Men in all cases remunerated for their report. A liberal commission allowed to Agents. Prospectuses, with tallies and fullest information, may be had at the Offices of the Company, or any of their Agents. Applications for Agencies requested. G. WINTER, Manager and Secretary. Offices : 41, Pall-Mall, Lonboh, S.W. iK.eUante antr €ast xif €nslanti LIFE OFFICE, 71, KING W^ILLIAM STREET, LONDON, E.G. 18 4 0. THE ENTIRE PROFITS DIVIDED AMONG THE ASSURED. George Ashlin, Esq. "W". W. DufBeld, Esq. J. W. E. Green, Esq. George F. Harris, Esq. Johu James, Esq. John W. Lay, Esq. , G. K. Rowe, Esq., M.D. Major Skinner, R.A. Charles H. Smith, Esq. James Traill, Esq. W. M. Tufoell. Esq. George "Whitmore, Esq. John Ledger, Esq. J. Oxley Parker, Esq. Kev. A. Pearson, M.A. William Phelps, Esq. John Pike, Esq. Henry T. Prinsep, Esq. g,ctnajg— E. Osborne Smith, Esq. ^tflidtiCxrs — ^]^ssrs. Hooke, Street, and Gutteres, Philpot Lane. Messrs. Gepp and Veley, Chelmsford. Life Assurances may he effected upon Equal, Half-Premium, Increasing, or Decreasing Scales ; also by Single Payments, or payments for Limited Periods. Tables specially con- structed for the Army, Navy, and Merchant Services; also for persons voyaging to, or - residing in, any part of the world. The funds of the Society are invested in Government Stock, Mortgages, and other approved securities, the values of which are ascertained and set forth annually. Thefollomng is a specimen of the AllocaUon of Profits. Policy effected in Age. Sum Assured. Bonus added to Policy. Original Premium. Reduced Premium until next Division. 1811 18i6 1849 1853 1856 44 46 IS 30 36 £ 1500 2100 1000 1000 3509 £, s. d. 275 15 335 97 10 £ s. d. 66 10 96 2 3 17 18 4 24 13 4 102 1 8 £ s. d. 19 16 4 84 The age and interest of parties are admitted upon the Policies. EDWARD BUTLER, Secretary. 13 THE RENT GUARANTEE 3, OHAELOTTE" EOW, MAl^SIOE^ HOUSE. ESTABLISHED 1850. CAFITAI., £100,000. 3^otk ^iU Assurance €ommnv, NEW BRIDGE STREET, LONDON. ESTABLISHED IN 1806. Invested Capital upwards of Three Millions Sterling. The Profits diTiSed for the seven years ending on the 20th August, 1864, amounted to £6097,61 17s. 9d. The next di-vision of Profits will be made iu the year 1861. The earlier Policies have been increased by Bonus additions from £100 to £259 lis., and the following examples show the increase made to Policies of a later date. Number of Policy. Assured. Bonus Additions. Total Amount of Claims Paid. * * s. d. £ s. d. 309 600 797 15 1297 16 430 1000 1695 10 2695 10 739 2000 3063 6 8 6063 6 8 689 SOOO 4596 7696 1219 5000 7339 3 4 12339 3 4 No charge made for Entrance Fee or Policy Stamps. Any further information required can be obtained by application to JOHN GODDARD, Actuary, ^tantiarti LIFE ASSURANCE COMPANY. ESTABLISHED 1825. ffODemor— His Grace the DUKE OF BUCCLEUCH AND QUEENSBDKY. Deputy-governor— liie Eight Hon. the EARL OP ELGIN AND KINCARDINE. Chairman of the London Soard— The Eight Hon. the EABL OF ABERDEEN. Ordinary Directors. John Griffith Frith, Esq., Austin-friars. I Lieutenant-Colonel J. D. G. Tulloeh. Alexander Gillespie, Esq., 3, Billiter-court. Francis Le Breton, Esq., 3, Crosby-square. John Scott, Esq., 4, Hyde Park-street. | J. H. Brooking, Esq., 14, New Broad-street. C. Hemery, Esq., 28, Threadneedle-street. Resident Secretarif—B.. Jones 'Williams. Inspector of Agencies — William Bentham. Sums Assured in 1859, exclusive of Annuity transactions ... 610,845 Annual Eevenue for 1859 286,000 Accumulated Fund (1869) 1,684,000 During the last Ten Tears the average amount of new business transacted by the Com- pany annually -was upwards of HALF A MILLION STEELING, and £740,000 lias been paid in claims since 1847. Examples of Bonus Additions. Date of Policy. Sums in Policies. Bonus Additions to 1866. aum in Policies, with Bonus Additions. 16th Nov. 1825 „ 1835 1840 1850 1000 1000 1000 1000 £ s. d. 1162 582 S 347 64 10 £ .9. d. 2162 1582 1347 1064 10 The next Division of Profits will be made as at 15th of November, 1860. ^jjjjlj^yi THOMAS THO.MSON, Manager. H. JONES WILLIAMS, Ses. Secretary. LONDON : 82, Kins WiUiam-street, City. EDINBURGH : 3, George-street (Head Office) . DUBLIN : 66, Upper Sackville-street. 14 INSURANCE COMPANY. QUEEN INSURANCE BUILDINGS, LIVERPOOL. London Branch: 2, ROYAL EXCHANGE BUILDINGS. SmsfttB. THOMAS EDWARDS MOSS, Esq. | CHRISTOPHER BDSHELL, Esq. EDWARD HEATH, Esq. ^DSirtr ai giredttm. CAairmfWi— EDWARD HEATH, Esq. Beputy-Ohmr-man—TS0MA.S B, FORWOOD, Esq. THOMAS F.BENNETT, Esq. -""•--- - ~ FRANCIS A. CLINT, Esq. KENNETH DOWIE, Esq. GEORGE W. EWING, Esq. JOHN L. NEWALL, Esq. JAMES A. PICTON, Esq. T. STAMFORD RAFFLES, Esq. C. R. HALL, Esq. ALEX. HASTIE, Esq. J. H. HIND, Esq. JOSEPHKITCHEN.Esq. Fire and Life Insurance and Annuity Business transacted on liberal terms. Tlie Life Rates lower than those of most other Offices. SPECIAL FEATURES. NON-FORFEITURE OF POLICIES. In case of the inahility of the Assured, from whateTer causes, to continue the premiums on an ordinary Life Policy, the Company would, in consideration of the amount received, after a period of three years from the date of the assurance, issue a paid-up policy for that amoimt, together with any Bonus that may have been added. DAYS OF GRACE. Thirty days are allowed for payment of Life Premiums ; and, in the event of the Assured dying during the days of grace, the sum assured will be paid after the deduction of the premium due. VOLUNTEER RIFLE OR ARTILLERY CORPS. No extra charge made for joining a Volunteer Rifle, Artillery, or Militia Corps, or for active service therein, within the limits of the United Kingdom. The usual Commission allowed to Solicitors and others introdncing Business in either Department. Applications for Agencies to be addressed to W. P. CLIRCHUGH, Manager. %^t i^^al 5htsurant^ Company, 29, LOMBARD STREET, LONDON, AND ROYAL INSURANCE BUILDINGS, LIVERPOOL. Chairman of the London Board— SAMUEL BAKER, Esq. Chairman in Liverpool— GRAJiLES TUKNER, Esq. The Royal Insurance Company is one of the largest fire ofBces in the kingdom. At the annual meeting, held in August, the following satisfactory results were shown :— FIRE DEPARTMENT. The moat gratifying proof of the expansion of the husineas is exhibited in the one follow- • ing fact^that the increase alone of the last three years exceeds the entire husiness of some of the existing, and of many of the recently defunct fire insurance companies of this kingdom. The Premiums for the year 1855 being £130,080 While the Premiums for the year 1868 are 196,148 Showing an acfual increase of 66,068 or upwards of 60 per cent, in three years. The recent returns of duty made by Government for this latter year (1858) again show the Royal as more than maintaining the ratio of its increase as stated in former years. Only one among the London insurance ofBces exhibits an advance to the extent of one-half the increase of the Company, while all the others respectively fall far short of tlie moiety of its advance. The above large increase of business has accrued from natural expansion, wlttiout the purchase of, or amalgamation with, the business of any other ofQce. LIFE DEPARTMENT. The amount of new life premiums received this year is by far the largest received in any similar period since the commencement of the business, and must far exceed the average of amount received by the most successful ofBces in the kingdom. The number of Policies issued In the year was 832, the sum assm-ed £387,762 6s. 8d., and the premium £12,351 3b. 4d. These figures show a very rapid extension of business during the last ten years. Thus :■ No. of Policies. Sum Assured. New Premiums. 1848 98 £48,764 17 *1,380 9 1 1850 190 96,660 9 11 2,627 4 7 1862 422 181,604 10 6 5,828 6 10 1864 408 161,848 13 4 4,694 16 1856 703 297,660 16 8 8,850 3 11 1858 832 387,752 6 8 12,364 3 4 The remarkable increase in the business of the last four years is mainly consequent upon the large bonus declared in 1855, which amounted to no less than £2 per cent, per annum on the sums assured, and averaged 80 per cent upon the premiums paid. PERCY M. DOVE, Manager and Actuary. JOHN B. JOHNSTON, Secretary to the London Board. 15 5Ctittts5) Winion FIRE AND LIFE INSURANCE COMPANY. INSTITUTED 1831, AND INCORPORATED BY ROYAL CHARTER. LONDON OFFICE: 37, CORNHILL, OPPOSITE FINCH LANE. gmrim'S. Philip Anstkuthee, Esq^. H. M. Kemshead, Esq. Charles Balfoue, Esq. John Kingston, Esq. EoBEET CoLLUM, Esq., M.D. J. E. Eobeetson, Esq. J. E. GooDHAET, Esq. Hugh F. Samdeman, Esq. Satttrag — F. G. Smith, Esq. Strlwitors — Messrs. Oliveeson, Lavie, and Peachy. §attli£rs — London Joiht Stock. gtetricd g-btiser— E. W. Duitfin, Esq., M.D. Two-thirds of the profits arising on the participation class of Policies (withont being subject to any charges for management) are divided every five years among those entitled to participate on the most eqnitable principles. Additions made to Policies of various amounts. ^fo. of Policy. Issued in Sum Assured. Total Additions as at let August, 1856. Total Sum Payable. £ £ s. d. * s, d. 812 1834 4,000 1,236 8 4 5,236 8 4 1,060 1835 5,000 1,404 11 11 6,404 11 11 1,190 1835 3,000 886 14 9 3,886 14 9 1,368 1836 5,000 1,290 2 10 6,290 2 10 1,650 1837 2,500 603 6 9 3,103 6 9 2,164 1840 5,000 1,147 12 3 6,147 12 3 The next division of Life Profits will take place in August, 1861. Moderate rates for India and the Colonies. RIFLE VOLUNTEERS. No extra premium charged for Members of Volunteer or Rifle Corps, so long as they remain within the United Kingdom of Great Britain and Ireland. Forms for Proposals and Prospectuses, containing all the necessary particulars, may be had at the Office, or from any of the Company's Agents. F. G. SMITH, 37, Comhill. Secretary to the London Board. 16 MUTUAL (LIFE) ASSURANCE. ESTABLISHED A.D. 1815. EBOWERKD BY SPECIAI ACT OF PAEIAMEIVT. Attention is caUed to tJiefolhwing important pariiciilars with reference to this old and extensive Society : — The sums assured by policies now in force exceed •■. £8,500,000 The amount paid to members' representatives exceeds 3,000^000 The accumulated fund in possession, and invested in first-class securities, is about 3,500,000 The annual income is 425,000 PROFITS. The additions made to policies at past divisions of profits amount to £1,786,971 _ Which divided among the members, have increased the policies, according to their duration, by from 12i to 103 per cent. And were a life assured under one of the policies opened in any year prior to 1819 to die before 31st December next, the policy would carry with it a BONUS OF ONE HUNDRED AND TWENTY-EIGHT PER GENT. Many of the assured have been relieved of the payment of all future premiums by a surrender of a part only of their bonuses, their policies still retaining full right to share in future division of profits. Policy-holders of five years' standing are eatitled to share in the profits, which are declared septennially, but policies entitled to participate becoming claims during the intervening periods, have a full share of profits apportioned to them up to the year of death. FACILITIES AND PRIVILEGES. Surrender value is allowed upon every discontinued policy, although no more than one premium has been paid. Loans of £50 and upwards are made to members, if req^uired, as soon as the value of their policies admit of the same, at a medium rate of interest, as upon first- class securities. Foreign residence and travel allowed in many parts of the world without extra charge, and in other parts at moderate extra rates, suitable to the risk. Policies may be declared indisputable upon the application of members when their policies are of five years' standing. No charge is made for medical examinations, policy stamps, or for registering the assignments of policies. Claims are made payable, free of charge, in any part of the Three Kingdoms. SAMUEL RALEIGH, Manager. WILLIAM LINDESAY, Secretary. Head Ofiice, 5, St. Andrew-square, Edinburgh, September, 1859. LONDON HONORARY BOARD. GEORGE YOUNG, Esq., Mark-lane. SAMUEL LAING, Esq., M.P. CHAS. E. POLLOCK, Esq., Barrister, Temple. Sir JOHN THOMAS BKIGGS, Admiralty. DAVID HILL, Esq., East India House. LEONARD HORNER, Esq., Home Office. J. MURRAY, Esq., Publisher, Albemarle-st. JAS. ANDERSON, Esq., Q.C.,Lincoln'3 Inn. Central Agent— HUGH M'KEAN, 4, Royal Exohange-buildings, Comhill. f MA JOE R. S. RIDGE, 49, Pall Mall, Agent for the "West End District. District Agents .< JAMES HARRIS, 38, St. George's-square, Belgrave-road, Pimlfco. (BENTON SEELEY, Islington Green, Agent for Islington District. 17 i'tate FIEE INSURANCE COMPANY. CHIEF OFFICES : 32, LUDGATE HILL, and 3, PALL-MALL EAST, LONDON. CAPITAL, HALF A MILLION. Chairman— TKE EIGHT HON. LOED KEANE. Managing Direclor— VET ^n MOEEISON, ESQ. FOR FIRE, PLATE GUSS, AND ACCIDENTAL DEATH INSURANCES. The nnmber of Policies issued by this Company, diiring the nine months ending the Slst of March last was 22,901, insuring ^6,389,130, and producing Premiums amounting to £22,716 Is. 9d., being at the rate of upwards of £30,000. The rates of premiiun are exceedingly moderate, being governed in each case by a careful consideration of the risks proposed. Farming Stock insured at 48. per cent., being 20 per cent, lower than is charged by any other office. PLATE GLASS DEPARTMENT. Insures against wilful or accidental breakage — Crown, Sheet, and all other Glass. ACCIDENTAL DEATH AND CASUALTY DEPAETMENT. Insares against accidents of every description, by Road, Rail, Steamer, and the accidents incidental to occupations, with compensation aud medical expenses in cases of non-fatal accidents. . This Company not having any Life business, the Directors invite Agents acting only for Life Companies to represent tlie Company for Fire, Plate Glass, and Accidental Death Insur- ances, to whom a liberal Commission will he allowed. Every information furnished on application to the Secretary, 32, Ludgate Hill, London, E.G. WM. CANWELL, Secreta/ry. LIFE ASSUEANCE COMPANY, 8, WATERLOO PLACE, PALL MALL, LONDON, S.W. The Funds or Property of the Company, as at 31st Dec, 1858, amounted to £652,618 10s. lOd. invested in Government or other approved Securities. THE HONOURABLE FEANOIS SCOTT, Chairman. CHARLES BERWICK CURTIS, Esq., Deputy-Chairman. Invalid Lives. — Persons not in sonnd health may have their lives insured at eqnitable rates. Accommodation in Payment of Premiums. — Only one-half of the Annnal Preminm, when the Insurance is for life, is required to be paid for the first five years, sioaple interest being charged on the balance. Such arrangement is equivalent to an immediate advance of so per Cent, upon the Annual Premium,, without the borrower having recourse to the unpleasant necessity of procuring Sureties, or assigning and thereby parting with his Policy, during the currency of the Loan, irrespective of the great attendant expenses in snch arrangements. The above mode of Insurance has been fonnd most advantageous when Policies have been required to cover monetary transactions, or when incomes applicable for Insurance are at present limited, as it only necessitates half the outlay formerly required by other Companies before the present system was instituted by this Office. Loans are' granted, likewise, on real and personal Securities. Forms of Proposals, and every information afforded, on application to the Resident Director, 8, Waterloo-place, Pall Mall, London, S.W. By order, E. LENNOX BOYD, Resident Director. 18 FIRE AND LIFE ASSURANCE ASSOCIATIONS. CHIEF OFFICES: UNITY BUILDINGS, 8, CANNON STREET, LONDON, E.G. CAPITAL, £3,500,000. gmdors m i^nnbnn. * Directors of the Fire. f Directors of the Life. t Directors of the Fire and Life. {Albert Fkahcis Jacksoit, Esq. 'f Major Martin Mulkern. {Edward Tatloe, Esq. {Thomas Vauohah, Esq. * Thomas Whbatlby, Esq. g-nbites. William Hopwood, Esq., and John Smith, Esq. Pebitttl ®B:m. Charles John Hare, Esq., M.D.; Thomas Hawkslet, Esq., M.D. SoIititBr — Thomas Tayloe, Esq. P!»nsj3« attir Starfarg — Thomas Gray, Esq. Capital in hand ... Fire Income Reserved Fire Insurance Fund Life Income Life Assurance Fund ... {Sir William C. Dalyell, Bart. *Jas. A. Durham, Esq. ^Robert Garland, Esq. *Thos. Caklyle Hayward, Esq. *Thomas Hill, Esq. £78,202 12 65,000 10,661 2 27,600 77,000 Annual Premiums to insure J6100, whole Life. 15 20 With Bonus. Without Bonus. a! With -Bonus. Without Bonus. < With Bonus. Without ' Bonus. £ s. d. 1 14 3 1 18 4 & 5. d. ■ 1 10 4 1 13 11 25 30 £ s. d. 2 2 8 2 8 2 £ s. d. 1 17 10 2 2 11 35 40, * s. d. 2 15 3 3 10 £ s. d. 2 9 3 2 17 4 < With Bonus. Without Bonus. a < With Bonus. Without Bonus. 45 50 £ 1. d. 3 15 7 4 11 1 * s. d. 3 8 2 4 2 6 55 60 £ s. d. 5 11 5 6 18 7 £ 1. d. 5 14 6 6 7 Prospectuses to be obtained, and all information respecting the Company's business will receive prompt attention, on application to the Manager, or any of the recognized Agents of the Company. THOMAS GRAY, Jfatiager and Secretary. The Directors of the Unity Life Assurance Association give notice to parties vrhose lives are assured in that Office, that no extra premium will be charged to them on joining any Volunteer Corps for service in the United Kingdom, and that all Policies will be paid in full where death ensaes in consequence of such service. THOMAS GRAY, Manager and Secretary. 19 Established 1838. WittoxiB. aitU i^egal anti Cximmerttal LIFE ASSURANCE COMPANY, 18, KING WILLIAM STREET, MANSION HOUSE, LONDON. Benjamin Hawes, Esq., Ormond House, Old Kent-road, Ohairman. T. Nbsbitt, Esq. (A. and T. Nesbitt), Phapot-lane, Deputy-Ohairman. W. K. Jameson, Esq., Fen-court, Fenchnrcli- streetj and Camberwell. John Jones, Esq. (Brown, Lennox and Co.), Billiter-aquare. John Nolloth, Esq., Union- terrace, Peckham. Meabum-Staniland, Esq., M.P., Boston, Lin- colnshire. Daniel Sutton, Esq., Earl's-terrace, Kensington. Walter Charles Venning, Esq., Tokenhonse- yard. O'B. Bellingham Woolsey, Esq., 49, West- bourne-terrace, Hyde Park. ' C. Baldwin, Esq., Snsaex-gardens, Hyde Park. George Denny, Esq., Great St. Helens. J. C. Dimsdale, Esq. (Dlmsdale, Drewett and Co.), Bankers, Comhill. WiUiam EUiott, Esq., M.D., Stratford. Robert EUis, Esq., Cowper's- court, Comhill. J. P. Gassiot, Esq., F.B.S. (Martinez, Gassiot and Co.), Mark-lane, and Clapham. John Gladstone, Esq., Stockwell Lodge. Aaron Goldsmid, Esq. , 14, Keppel - street, Russell- square. Sidney Gumey, Esq., Paper-buildings, Temple, and Brighton. Every description of Assurance and Annuity Business is transacted by the Company on liberal terms. Endowment Assurances are granted payable at 60, 65, or any other age, or at death, should that event happen previously. Four-fifths or 80 per Cent, of the entire profits of the Company are appropriated every five years to parties assuring on the profit scale, and who have been assured three clear years. Three Bonuses of considerable amount have already been declared. ■When an Assurance is effected for the whole term of life, one-half Of the Alinual Fremiums may remain on Credit for Five Years at 5 per Cent, per Annum interest, to be paid off at the expiration of the Five Years, or to remain as a charge upon the Policy, as may be agreed upon ; or one-third of the Premiums may remain unpaid tiU death. ^ Advances are made upon the security of Freehold and Leasehold Property of adequate value, of Life Interests, Beversions, and other assignable property or income. WILLIAM RATRAY, Actuary and Secretary. OTiaterlocr %iit Assurance Company. Incorporated 1851. HEAD OFFICE: 3 55, ST BAND,, LONDON. CAPITAL, £400,000, FuUy subscribed for by hundreds of persons of the highest character and respectability. The Directors refer with pleasure to the following extract from a Beport fur- nished them by Peter Habdy, Es