RAILWAY AUDIT. 
 
 A PLAN 
 
 AUDIT OF ACCOUNTS 
 
 aftmlfoti)) nnH otfjcv 3>ofut=stocL fflompam'cs. 
 
 DANIEL HARD CASTLE, Jun. 
 
 AUTHOR OF “BANKS AND BANKERS. 
 
 LONDON: 
 
 WHITTAKER AND CO„ AYE MARIA LANE. 
 1850, 
 
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 V\A-\lp 
 
 LONDON: 
 
 STEVENS AND €0., PRINTERS, BELL VARP, 
 TEMPLE BAR. 
 
RAILWAY AUDIT. 
 
 A few years ago, when the Banking interests were rush¬ 
 ing fast and mightily on, as the Americans say, “to 
 immortal smash,” the number and amount of the bank¬ 
 ruptcies that took place induced me to examine the 
 subject somewhat in detail, and to publish the result of 
 my inquiries. My volume, entitled “Banks and Bank¬ 
 ers,” was published by Messrs. Whittaker, and well 
 spoken of by the newspapers. Some of the things 
 which I pointed out as desirable have since been adopted 
 by the government, and are now everywhere put in force 
 by the law of the laud. Others remained unnoticed, or, 
 at least, unadopted. I make the remark here, because 
 amongst the latter was one of which the joint-stock 
 banks stood much in need, and which will still be found 
 equally demanded by them, by railway and all other com¬ 
 panies incorporated for purposes of trade. 
 
 I shall, perhaps, best explain myself by quoting what 
 I wrote upon this point in 1842. At page 307 of 
 “Banks and Bankers,” I said, “I would have them 
 (the joint-stock banks) make public a quarterly account 
 of their assets and liabilities according to a prescribed 
 form, which, without being too searching or improperly 
 revealing details, should present a fair view of the con¬ 
 dition and resources of every bank. I would insist upon 
 
4 
 
 a full audit, once a year, of the whole affairs of the com¬ 
 pany by competent persons, specially appointed for the 
 purpose, not by the directors hut by the shareholders, at 
 a public meeting; and I would have the balance-sheet of 
 the accounts, after having been thus audited, subscribed 
 before a magistrate by the auditors, upon their solemn 
 asseveration, in lieu of an oath, with a certificate annexed 
 as to the correctness of their audit, the correspondence 
 of the accounts themselves with the quarterly returns, 
 to be published as already sumrested. and the general 
 conformity of the transactions with legitimate banking 
 principles. I would make it a misdemeanor upon the 
 part of the auditors to give a false or wilfully incorrect 
 certificate, and whenever a joint-stock hank failed I 
 would have its affairs wound up by a public ofiicer.” 
 
 Such was my recommendation in 1842, and not only 
 are all joint-stock banks now required to publish pe¬ 
 riodical statements of their circulation, hut every joint- 
 stock company, when unable to meet its engagements, 
 may he made bankrupt with as much ease and expedi¬ 
 tion as any private firm. 
 
 These have been found useful improvements. Had 
 the further step of an audit, such as was then recom¬ 
 mended, been provided by law, vast are the sums of 
 money which would have been saved to the nation, and 
 far from light the amount of peculation that would have 
 been uncommitted by individuals. The desire to make 
 myself useful prompts me to resume the subject, and 
 on this occasion to apply my arguments to all the 
 departments of joint-stock enterprise. For if there 
 be one thing clear in these matters, it is this: if 
 we would deal with the question effectively, we must 
 include in our plans and corrections not companies of 
 
one class but of all classes; for the mischief is not 
 special or particular—it is general; it has shown itself 
 in all companies; and if the public attention now con¬ 
 fines itself to the financial irregularities of our railway- 
 bodies, it is only because these happen to present the 
 last form in which the mischief has made its appear¬ 
 ance ; the truth being, that all our companies have ex¬ 
 hibited its ravages in their turn. 
 
 Hence it is that the present demand for a government 
 audit of railway accounts resembles many another cry 
 that has been raised and sunk again of late years, pro¬ 
 ducing only a temporary effect. There is scarcely a 
 department of combined enterprise in which the free¬ 
 dom we enjoy to speculate as we please, more than 
 other nations, has not led to flagrant abuses. As these 
 have been detected and exposed they have called down 
 the loud voice of public censure upon the offenders, and 
 they have repeatedly prompted the suggestion that. all 
 undertakings of the kind could be much better ordered 
 by the government than by individuals. The evil, there¬ 
 fore, as well as its cure, is rather an old affair, and woidd 
 be intolerable, but that its visits have been intermittent 
 and its forms somewhat varied. 
 
 There is then in the present complaint nothing new, 
 nor anything exceptional. What has happened recently 
 in our railway affairs has occurred over and over again, 
 not only after the same fashion, but almost under iden¬ 
 tical circumstances—in mines, in canals, in banks, and 
 every other form of joint-stock combination. If there 
 be any one curious to ascertain how very little of novelty 
 there is in the existing state of our railway interests, and 
 in the train of circumstances which have brought it so 
 low, he should consult two works, easily to be procured 
 
at the circulating libraries,—"The History of the Bank 
 of England,” and “ Chronicles of the Stock Exchange,” 
 by Mr. Francis. It will there be seen that our railway 
 adventures, mishaps, reverses, and misdeeds, all included, 
 are but simple reproductions of a piece of extravagance, 
 which the people of England have been in the habit of 
 playing at periodical intervals for the last two centuries, 
 and with so few changes of circumstance or variety of 
 result, that, when we have examined the chain of events 
 throughout, striking and calamitous as we shall find the 
 particulars, the whole, to a certain extent, will appear 
 somewhat stupifying from the dull uniformity of repe¬ 
 tition. Over and over again we meet with the same 
 thing, and nothing hut the same thing. The trick is 
 always played in one way. The only wonder is, how 
 the same people could do precisely the same thing so 
 very often, in precisely the same way, and always with 
 the same hurt and damage to themselves. 
 
 The proverb may be true which says that the burned 
 child dreads the fire—but evidently the force of the 
 adage does not extend to grown-up children, for they 
 have been burning their fingers ever so often in the 
 matter before us, and the only lesson they have drawn 
 from their experience seems to be an itch for burning 
 them again. Perhaps, however, the intention is not 
 altogether so bad as that,—our people, it is possible, 
 are not so very stupid as they would then be proved 
 to be. They only try perhaps, after all, to learn how to 
 hold their hands to a burning fire without getting them 
 burned. Still, as the experiment invariably ends with 
 a scorch and a blister, and sometimes with the loss of 
 the limb itself, the foolhardiness that will persist in the 
 risk is, to say the least of it, a strong instance of the wil- 
 
ful obstinacy of poor human nature, as exemplified in 
 the character of John Bull. 
 
 Whenever the fingers are burned, a cure is always 
 lustily called for by those who have been burned the 
 must severely, and their object in this, as in the diver¬ 
 sion that has hurt them, is always the same—they call 
 for the appointment of a government oificer, who shall 
 from time to time regulate how they shall hold their 
 hands to the fire without being burned. Whether this 
 special interference shall be crowned with success by 
 beeping down the heat of the fire, or by increasing 
 the distance at which the venturesome hand shall be 
 allowed to approach it, is a perplexing difficulty which 
 has not as yet been solved. When duly considered, 
 that difficulty must be held to be not a little perplexing; 
 for evidently, if the heat of the fire should be kept so 
 low, or the distance from it so great, as that no hands can 
 be burned, why then there will be no fun in the thing, 
 and the government officer will enjoy a sinecure. This 
 seems absurd to read,—but it is quite true;—for such is 
 poor human nature. Truth is stranger than fiction— 
 folly so foolish that it would appear incredible if it was 
 always painted as it really is. 
 
 As we have seen, and are unquestionably destined 
 still to see, a great deal of the money mania and the 
 panics produced by that national diversion, a few peculiar 
 facts arc to be mentioned which have hitherto presented 
 themselves whenever it has appeared. There would 
 seem to be something like a law for the production of 
 these visitations periodically. The intervals at which 
 they occur, moreover, are circles of ten years;—that is, 
 if no great political convulsion should take place (such 
 as the wars of the French revolution) to disturb and dis- 
 
s 
 
 place all ordinary transactions and their legitimate in¬ 
 fluences, it would appear as if a plethora of money will 
 be forthcoming every tenth year, and give rise to an ex¬ 
 cess of speculation and gambling in some newfangled 
 schemes for making a fortune in a moment, which again 
 will bring on a terrible reaction, including a fall in the 
 prices of all monetary securities, an extreme scarcity of 
 gold, and severe restrictions on the current of trade and 
 commerce, with the usual accompaniments of penury, 
 depression, bankruptcy, and suffering in all direc¬ 
 tions. , 
 
 Mr.Tooke, in his “ History of Prices,” notices two de¬ 
 cennial epochs of panic—those of 1782 and 1792. These 
 were both produced by an enlarged issue of notes from 
 the Bank of England. In 1781, the average circulation 
 of the bank was 7,624,765/., with an average stock of 
 coin and bullion of 3,071,265/. In 1782, the directors 
 pushed the circulation up to 9,600,000/.: a mania was 
 thus created, and was immediately followed by a panic, 
 when the notes in circulation were reduced in nine 
 months to 5,994,000/., and the stock of bullion sunk to 
 955,635/. 
 
 Our wars with Napoleon, diverting the natural flow of 
 our currency and our trade in all its ramifications, con¬ 
 stitute an exceptional period. But it is particularly 
 worthy of notice that, the peace of Europe having been 
 settled in 1815, we had a frightful panic immediately 
 afterwards, and have had ever since a decennial period of 
 flourishing plenty immediately succeeded by an exhaust¬ 
 ing panic. We were in a state of heyday hope and 
 confidence when we heat Napoleon, and our long war 
 with him was for ns gloriously closed; but that was 
 quickly overtaken by a panic in 1815 : thenceforward 
 
9 
 
 the years 1825-C, 1835-6, and 1845-6, substantiate the 
 theory strongly enough. On each of these occasions 
 millions were won and still more lost. 
 
 Not the least curious thing observable in these recur¬ 
 rences is the invariable rise and interference of circum¬ 
 stances not previously apprehended, nor growing out of 
 events immediately antecedent, which stave off the time 
 of plethora until we have wound round the full circle of 
 ten years more. For instance, the immediate cause of 
 the panic ceases to operate, the currency so lately de¬ 
 ranged flows in a full and regular channel, credit revives, 
 trade is active, and we appear to stand once more on the 
 verge of prosperity; but some strong and sweeping 
 action, of which no one had thought, and for which all 
 are unprepared, suddenly takes place, and the good time 
 coming is still held aloof, the golden age is still deferred. 
 Any one who will take the trouble to look back and 
 mark the series of events which affected the money 
 market between the years 1826 and 1835, and between 
 1836 and 1845, will be sure to find sufficient foundation 
 for the remark here made. Of our state since 1846 it will 
 be enough to point to the good condition of the currency in 
 the last two years, to the potato rot in Ireland, and the 
 continental revolutions of 1848, as matters still further 
 suggestive of the correctness of the theory as far as 
 relates to the subsequent time. In the whole there 
 is but one thing that seems to be certain—it is a neces¬ 
 sary precedent of a plethora of money and a consequent 
 mania, that we should have at least two good harvests in 
 succession. All other things may favour the grand 
 result, but there is no way of giving money to the masses 
 until the plenty which springs from a good harvest has 
 spread throughout the land. When the wants of all 
 
10 
 
 classes have been supplied, when there is comfort and 
 something over amongst the poor, then you really may 
 count on a national surplus; and when that happy point 
 has been attained, you may be pretty sure that the whole 
 population, high and low, will soon fall to play at pitch 
 and toss with their loose money. 
 
 It is matter of hope that wise men may always be 
 found, but it is matter of certainty that there will be 
 foolish ones, while the world lasts, and society turns it 
 to account somehow or other. This proposition might 
 be proved mathematically, because, from the multitude 
 in which the latter appear, compared with the paucity 
 of the former, it is demonstrable that cap and bells will 
 never disappear in the wear and tear of the human race. 
 Another remark to be safely made, is that the heroes of 
 speculation, who give animation and activity to the 
 masses, or dead weight of our social system, never fail 
 to present themselves when the occasion arises. History 
 has made the South Sea scheme immortal, and crowned 
 the genius of Law with a reputation commensurate with 
 the ingenuity and boldness of his inventive faculties. All 
 that artistic finance can discover or display was evolved 
 in the career of that subtle adventurer. But when 
 his feats were exhibited, and their moral pointed, the in¬ 
 terest of the subject was exhausted—for, though always 
 preserved and continued, the fulness of his performance 
 left his followers nothing new to produce; and our his¬ 
 torians, recoiling from the insipidity of a twice-told tale, 
 have passed over in silence a train of incessant enormi¬ 
 ties—for the family, of which Law may be recognised as 
 the head, has never ceased to run an active race. He 
 was the first, and it is perhaps only as the first that he 
 is to be regarded as the greatest of that fertile family. 
 
11 
 
 Others, less known at the present day, if they did not 
 eclipse certainly equalled him in the refinement of their 
 contrivances, and the vastness of their views and opera¬ 
 tions. The frauds of the Charitable Corporation were to 
 the full as gross as any that have ever been committed. 
 Alexander Fordycc was, in his time, as consummate a 
 speculator as his fellow-countryman Law; and George 
 Hudson has just shown us that the field for adventurers 
 of this kind has been in no ways contracted, and also 
 that the talent for turning it to advantage has not been 
 lost amongst us. 
 
 Neither a history nor even an outline of the progress 
 and extent of speculation and its heavy penalties in 
 England can be given here; but, as the past is our war¬ 
 rant for assuming that these are things with which we 
 are sure to be frequently visited, and as the present 
 seems to be a very favourable opportunity for the con¬ 
 trivance of means by which the future may be rendered 
 somewhat tolerable in these respects, let us briefly note 
 the salient points of the three memorable epochs al¬ 
 ready mentioned—182S-26, 1835-36, 1845-46. 
 
 In 1825, there were 350 schemes propounded, with a 
 proposed capital of 350 millions; of this amount it 
 was calculated, a few years afterwards, that something 
 under 50 millions was paid up: so much for the ma¬ 
 nia. When the panic came, there was a daily calendar 
 of bankrupt banks, merchants, and commercial disasters. 
 City news and money matters engrossed the attention of 
 the public so vividly, that the newspapers found it ne¬ 
 cessary to devote a separate column every morning to 
 intelligence of that kind. It is to the panic of 1S25 
 that we are to refer the origin of the “ City Article,” as 
 it is termed in the Times and other daily papers. From 
 
12 
 
 the month of November, 1825, to February, 182G, the 
 funds fell twenty per cent., eight of which were in the 
 former year. The Bank of England, yielding to the 
 urgent counsel of the government, made extraordinary- 
 efforts to overcome this state of things. Three millions 
 were advanced by way of temporary accommodation to 
 trade; and the circulation, which on December 3, 1S25, 
 was 17,477,294/., was raised, by December 31, 1825, to 
 25,709,425/., or eight millions, in a month. But all in 
 vain: distress was not removed, nor confidence re¬ 
 stored, by these proceedings. Banks and mercantile 
 firms continued to break all through the year 1S26; 
 manufacturers stopped their works; and the labouring 
 classes rose in large bodies, taking a violent revenge, for 
 the sufferings they had to endure, upon the property 
 from which they conceived they ought to have derived 
 subsistence. In one week, as many as 850 power-looms 
 were destroyed by the mob in Lancashire. On one day, 
 the stock of gold in the Bank of England was as low 
 as £40,000; and that was the property of two country 
 bankers, who had procured it to meet their own wants. 
 
 In 1835, the number of schemes brought forward was 
 300, of which the chief were for railways. The total 
 capital proposed to be raised was under 150 millions, 
 and the number of shares to be issued was 2,538,090. 
 As 1825 had not been quite forgotten, the shadow of 
 this panic was foreseen; but it could not be prevented, 
 though at the time not a few expedients were resorted 
 to for the purpose. The Bank of England first tried 
 to arrest its progress by raising the circulation: a mil¬ 
 lion of notes were issued; but they availed nothing. 
 
 The bank of Esdaile and Co., one of the most respect¬ 
 able in London, became involved, and all the city bank- 
 
13 
 
 ers, with two exceptions—Jones Loyd and Grotes— 
 subscribed 50001. each, to save their brother in distress; 
 but to no purpose: Esdaile’s stopped payment, and 
 others followed rapidly in its wake. Consols fell four 
 per cent. The Bank of England tried, but could not 
 sell the dead weight; distrust became general, and 
 credit all but extinct. In vain was silver sent abroad to 
 bring back gold in exchange; the discount and commis¬ 
 sion on the very first hills in the London market rose to 
 eight per cent., while those of the second class were 
 hardly discountable at any price. Of the bankruptcies 
 that now took place, and the extreme depression of ma¬ 
 nufactures and commerce, it would he impossible to 
 convey an account at once faithful and particular. 
 Prices fell forty per cent.; in the manufacturing dis¬ 
 tricts there was no employment, and merchants stopped 
 payment in multitudes,—many of them, not because 
 they were bankrupt and had no property, but because 
 no market was to be had for their goods, no discount 
 for their bills, no advance upon their stocks. 130 pri¬ 
 vate banks disappeared in this crisis, the majority of 
 which merged into joint-stock concerns. 
 
 I purposely avoid an account or description of the 
 mania of 1845, and the panic it begot. No counting up 
 of the number of schemes then put forward, or the num¬ 
 ber of shares thrown upon the market—no computation 
 of the premiums to which they were pushed, or the 
 discounts to which they afterwards fell—no summary of 
 the consecjuent derangement of our financial affairs, and 
 our mercantile sufferings, could avail to produce upon the 
 mind of any reader of these pages a stronger or deeper 
 impression than his own experience of the subject, and the 
 time will in all probability supply. It is talked of every- 
 
14 
 
 where; go where you will—in public places, and in pri¬ 
 vate society, the railway mania, railway losses, and rail¬ 
 way frauds, are the never-failing topics of astonishment 
 and reprobation. To judge by what one hears every 
 day, or rather hour, it might be supposed that until we 
 speculated in railways we had been the most inexpe¬ 
 rienced and innocent of adventurers; had never before 
 played at a game of chance, staked money unbecom¬ 
 ingly, or become embarrassed, if not defiled, by gam¬ 
 bling transactions. Let us, by way of a wholesome remi¬ 
 niscence, sum up the diversions of our own age in one 
 other line—the banking one. We have gone chin-deep 
 into the thing in twenty other ways—but we shall take 
 this as a sample. 
 
 The panic of 1825-6 shattered banks and bankers in 
 all directions. Men of straw were they, and houses of 
 sand, and they were all blown down by the rough blast 
 which they were never formed to withstand. The popular 
 vent of speculation at that time, and for many years 
 afterwards, was through banking: hence the failures, and 
 the detected frauds in banking. The exact particulars 
 are not easily given which show the extent to which 
 these prevailed. There was a motion made on agricul¬ 
 tural distress in 1830, by the Duke of Richmond, in 
 the course of which the Duke of Buckingham said that 
 165 country bankers had been obliged to suspend their 
 payments in the panic of 1825-6. Sir M. White Ridley, 
 himself a banker, estimated the number at sixty-three. 
 Mr. Tooke, in his “History of Prices,” vol. ii. p. 161, 
 says nearly seventy banks stopped payment in the course 
 of the single month of December, 1825. Mr. Gilbart, 
 “History and Principles of Banking,” p. 103, states 
 the number of commissions in bankruptcy issued 
 
15 
 
 against country bankers to have been, in 1825, thirty- 
 seven, and in 182G, forty-three. I myself have made 
 some inquiries, the result of which leads me to say that 
 160 banks stopped payment in this panic, of which fifty- 
 six were gazetted bankrupts. 
 
 The damage then done to such establishments is fur¬ 
 ther shown hy a reference to the number of licences 
 granted to country bankers by the stamp officers. These 
 were, 940 in the year 1814; 752 in the year 1816; and 
 552 in the year 1826. Such was the rate of extinction 
 amongst the country bankers twenty-five years ago, and 
 they have gone on failing and dying away ever since; exhi¬ 
 biting, as they vanished from time to time, circumstances 
 of fraud, misconduct, and disgrace, as flagrant and unques¬ 
 tionable as it is possible to conceive. There was the case 
 of Rowland Stevenson, in 1828,'where the debts proved 
 were 485,000?., of which 367,0007. were cash balances. 
 Joseph, John, and William Foster, of Carlisle, broke in 
 1836, and then it was admitted that they had not made 
 up a statement or balance-sheet of their affairs for the 
 preceding twelve years; and when that document was 
 at last made out, the debtor side of it amounted to 
 556,1387. Esdailc’s, as already stated, failed in 1837 
 for 900,0007. In 1840, Sparkes, of Guildford, threw 
 himself into the river, after fraudulently selling out cus¬ 
 tomers’ stock to the amount of 58,9187. John Wright 
 and Co., in 1840, furnished another noted case; and so, 
 in the same year, did Ridge and Newland, Chichester; 
 Hammersleys, in Pall Mall; and Daintry, Ryle, and Ra- 
 venscroft, Manchester; Ilobhouse, of Bath, in 1841; and 
 Wigney’s, of Brighton, in 1842. Wigney had his cus¬ 
 tomers’ money in a brewery at Brighton, and in a shawl 
 factory at Glasgow; Hammersley, in a soap factory in 
 
16 
 
 the Borough; Foster, in mining shares: in a word, all 
 sorts of misapplications and abuses of trust were shown, 
 and, after having been denounced and deplored in their 
 turns, they passed from the public mind and were 
 talked of no longer. 
 
 This brings us to the mania in joint-stock-hanks: 
 these, as is well known, had their origin in the convul¬ 
 sion occasioned by the numerous failures amongst the 
 private bankers at the end of 1825. Their progress 
 towards 1836 was excessive. Mr. P. Thompson, after¬ 
 wards Lord Sydenham, was then President of the Board 
 of Trade, and he caused a register to be kept of the 
 number of joint-stock banks projected up to that year. 
 It thus .appeared that the number was between 300 and 
 400, with, amongst them, a proposed capital of 200 mil¬ 
 lions. It is unnecessary to say how many of these never 
 formed establishments; or how many, having entered 
 upon business, were obliged to stop under circumstances 
 of disgraceful misconduct and culpable negligence. It 
 will be enough to indicate what might he urged in this 
 respect, by naming the suspension of the Imperial and 
 Commercial Banks at Manchester; the Walsall and 
 Marylehone Banks; the Bank of Manchester, and the 
 Eoyal Bank at Liverpool. In all these cases, and in 
 others too numerous to mention, there must have been 
 frightful losses of money; and there is, I will add, no 
 security against the recurrence of these, either for the 
 shareholders or for the public, but in an efficient audit, 
 by auditors elected independently, and made personally 
 responsible for the correctness of their own audit. 
 
 And now a word upon speculation in banking—private 
 and joint-stock—because it is nothing but the counter¬ 
 part of all that is said and feared respecting railways. 
 
What was the case made out against the private hankers? 
 Why that they violated the trust reposed in them, mis¬ 
 applied their customers’ money, and became fraudulent 
 traders,—sweeping, when they fell, whole towns and 
 counties into one common ruin. What was the case made 
 out against the joint-stock hanks? Just the same in 
 substance, though not exactly so in form: either ma¬ 
 nagers made free with the cash, or the directors as a 
 body neglected their duty, by transferring to a few 
 individuals the important functions committed to the 
 whole board, and then credit was unduly given to rela¬ 
 tions, and particular connections were favoured with 
 advances; until, made reckless and desperate by the 
 extent of the accommodation afforded them, and the 
 difficulties thus engendered, bankruptcy ensued; and at 
 last the bank, coming in to claim its share of the wreck, 
 had to exhibit trust betrayed, shareholders abused, and 
 worst of all, false reports and false accounts from time 
 to time of the state of its affairs; now, facts suppressed, 
 and now facts distorted. 
 
 All these things have happened repeatedly: the Bank 
 of Manchester failed in 1842, showing losses to the 
 extent of 800,000?., in consequence of misdoings falling 
 within the general description just given; and the Royal 
 Bank of Liverpool, more recently, got into a similar pre¬ 
 dicament. It was a necessary consequence, on both 
 occasions, that there should be a great sensation; all 
 the organs of public opinion thought it becoming to 
 read the public grave and severe lectures; every man who 
 spoke raised his voice to a pitch of indignation: on all 
 sides we were told that something must be done, that the 
 government must interfere; but nothing was done, and 
 why ?—because, in truth, it was not the impropriety of 
 
18 
 
 the acts committed, but the magnitude of the amount 
 lost in each of these cases, that stunned men’s minds. 
 The people were not moved by a sense of the culpability 
 of the guilty parties; they were only shocked at the 
 idea of 800,000/. having been lost. It was the amount 
 that staggered: and such is still the temper of the public 
 mind. No series of events however numerous, prolonged, 
 or decided in character, will excite much attention ; unless 
 there be in each a certain amount of enormity. The 
 constitution of modem society is so lethargic that it 
 requires a galvanic battery to rouse it into active exertion. 
 The malpractices, in the case of the Bank of Man¬ 
 chester and the Royal Bank of Liverpool, were no worse, 
 whether we regard banking, or morals, or law, than had 
 been disclosed in many preceding cases; such, for in¬ 
 stance, as the Phcenix, Walsall, and Marylebone Banks; 
 but in these the misdeeds were on a small scale—the ruin 
 then fell upon small people. When nearly a million 
 went in one fell swoop, all hands were held up,'and all 
 tongues let loose. The magnitude of the money made 
 the offence respectable, and drew towards it a certain 
 amount of public sympathy, which evaporated m due 
 course; and there the matter ended. 
 
 A great deal of virtuous indignation has been ex¬ 
 pended in declaiming against the bribery and corruption 
 of railway companies; and beyond all doubt there have 
 been bribery and corruption, and a good deal of both. 
 But what is there in all this that is either new or strange 1 
 Asa people, we have always been addicted to bribery and 
 corruption. It may be too much to say that we shall 
 never cease to practise them, but to a certainty they are 
 in our day very common offences. Will government 
 auditors be proof against the influence of a vice that has 
 
19 
 
 gathered all rants into its close embraces? Charles 
 II. and his ministers were bribed by France. Since the 
 revolution we have been content to bribe one another. 
 'When there were no longer pensions and titles to be 
 conferred—loans, lotteries, and contracts were resorted 
 to with a lavish prodigality. The public were then 
 plundered in the taxes. Tens and hundreds of thou¬ 
 sands, nay millions, were squandered in this way during 
 a single year, and all by government. Peers, members 
 of parliament, bankers, men of all ranks, claimed and 
 obtained their shares of the public spoil. Like all things 
 pushed to excess, this system of venality was ultimately 
 corrected by its own enormities. Men at last grew 
 ashamed of making so much money in so unworthy a 
 manner. A reform of signal value took place in the 
 character of our public men, and the government was 
 left to the patronage of office alone for its means of 
 seducing patriotism from its purity, and winning aspir¬ 
 ing talent to the service of party politics. For this 
 reason, especially, it behoves every man to avoid, as an 
 obligation of public duty, the advocacy of any measures 
 which tend to increase the patronage of government. 
 Give patronage enough, and a minister, equally Clevel¬ 
 and unscrupulous, may band together his faction, reck¬ 
 less of principle and indifferent to the reclamations of 
 the people—for a term of years at least. The thing has 
 been done before and may be done again. But this is a 
 digression. When loans and lotteries no longer afforded 
 facilities for gambling, the joint-stock system oppor¬ 
 tunely presented itself, and, spreading out its branching 
 arms, reproduced itself in endless varieties. Bribery 
 and corruption took up fresh leases for a new career, 
 and their seducing practices were continued on as exten- 
 
sive a scale, and with results as formidable, as any that 
 had previously appeared. Mines have had their day, 
 and so have canals. Who forgets the mining mania of 
 1825, when the Bank of England actually ratified the 
 speculation by lending money on mining shares 1 Are 
 not the ten per cent, dividends, and the cent, per cent, 
 premiums, of our canal companies registered indelibly ? 
 The course of bribery and corruption was now reversed. 
 The minister could no longer bribe members of parlia¬ 
 ment, bank directors, and citizens of sway, at the 
 expense of the people; but the thing was so delightful, 
 that the people took it up voluntarily and did it them¬ 
 selves, Habit was second nature: when the govern¬ 
 ment renounced it, thousands of cliques and coteries set 
 their little goes to work, and ere long the numbers told. 
 Does any man pretend to be acquainted with the pro¬ 
 gress of speculation, and the joint-stock system, in this 
 country for the last five-and-thirty years, and affect not 
 to know that members and men in office have been 
 bribed with shares ? Share-spoil has cost a chairman 
 of committees his place and salary in the House of Com¬ 
 mons, and it has enforced other men in office, some to 
 change their situations, and others to resign and retire 
 into private life. So general, in point of fact, has this 
 sort of thing been, that it is impossible to name a place 
 into which it has not penetrated, directly or indirectly. 
 So far here it was the public conspired to plunder them¬ 
 selves ; and so far their cf.se is much less deserving of 
 pity than when the plunder was involuntary upon their 
 parts, and the minister of the day made its distribution 
 part of the patronage of his office. The records of the 
 Queen’s Bench might be made to supply a long and 
 stinging chain of corroborative evidence upon this part 
 
21 
 
 of the case. But it is not wanted; no fact or argu¬ 
 ment will avail to carry conviction to the mind which can 
 resist the impressions which the current of events has 
 of itself contributed to produce. 
 
 "We have here run hastily over the experience of five- 
 and-thirty years, and the facts prominent within that 
 interval of time teach us another lesson of importance, 
 
 ■—namely, that the government of the day, and its 
 agencies, directly and indirectly, have had a decided 
 and most material influence in producing the convul¬ 
 sions that have been so strikingly and injudiciously 
 developed. No man can look into the panic of 1815, 
 and examine the circumstances out of which it arose, 
 without plainly seeing the government of the day hard 
 at work in it. The same remark applies still more 
 strongly to the mania of 1825, and to the panic of 182G. 
 The infatuation of the former year, and the misery of 
 the latter, may almost he said to have been moulded by 
 the hands of the ministers in Downing Street. The 
 directors of the Bank of England were to blame no 
 doubt; but they were the agents of a higher power. If 
 the latter had been specially instructed, nay hired at a 
 stated price, to ensure the occurrences that took place, 
 they could not have acted more systematically than they 
 did for the purpose of producing the two effects. In 
 point of fact, the measures that caused both were part 
 and parcel of the ministerial politics of the time. The 
 play of party tactics, the triumph of particular states¬ 
 men, demanded the operation, and on that account it 
 was accomplished. Personal ambition was gratified, 
 and the essential good of the country was either lost 
 sight of for the time, or not cared for. 
 
 This truth should never he lost sight of. The idea of 
 
an effective government interference at such moments is 
 a delusion, or rather a fraud. Of what avail would be 
 the ministerial power to check speculation, when it is 
 the policy of the cabinet that speculation should go 
 a-head? At such a moment the government official is 
 the very last man to be trusted for the purpose of re¬ 
 pression or exposure. He will naturally take his cue 
 from his superior, and act accordingly. The directors 
 of the Bank of England, in the years 1815 and 1825, 
 were independent of the government, and might, if their 
 virtue had been resolute enough, have discharged their 
 duty without putting in jeopardy the public credit and 
 the very existence of our commerce; but they yielded 
 to the minister—they threw themselves into his arms— 
 they embraced his party policy, and flung away all the 
 considerations of prudence and duty that belonged to 
 their office. They were corrupted, if not bribed. And 
 if that was the case with them—if men of fortune and 
 the highest standing in the city were thus overcome, 
 would it not be folly to suppose that a set of inferior 
 placemen, living by the small emoluments of their situ¬ 
 ations, and with no hope or prospect of improving their 
 fortunes except by pleasing their superiors—would it 
 not be the extreme of folly to suppose that such men 
 would, in a time of excitement, sacrifice themselves to 
 save the public? The idea is a sheer absurdity, and 
 mere clap-trap, where it is not designed to mislead. 
 
 We may plead guilty to all that is charged against 
 breaches of trust, many frauds committed, and confess 
 to enormous losses as the consequence of our propensity 
 to embark in joint-stock companies of late, as of old. 
 Rogues, fools, and gamblers have been fully occupied in 
 this amusement, without let or hindrance; and having 
 
fared ill, they are one and all complaining vociferously. 
 The fool who dreamed that a fortune was to he won in 
 an hour, and the gambler who imagined that if directors 
 had only kept the game alive a little longer, and enabled 
 him to play out his stake, he too would have realized 
 largely: all are disappointed, broken in heart and purse, 
 and malignant accordingly. For them there is no pity: 
 they deserve their fate. To others—to those who have 
 been partially bitten by the mania—to those who have 
 fairly placed their savings in shares, hoping to derive a 
 legitimate profit from the investment—a few words of 
 advice may be seasonable and well applied. 
 
 Is there not a law of nature, according to which much 
 of what has happened was unavoidable 1 Does not that 
 law provide at all times, and in all cases, that fortune 
 and misfortune, prosperity and misery, shall always 
 travel the same highway, and bear to each other certain 
 relations? When bank notes flourished, did not the 
 crime of forgery increase as our paper issues were en¬ 
 larged? Have not our poor-houses grown with our 
 wealth? Without offering an excuse for forgery, or 
 making a merit of poverty, may we not reasonably admit 
 that both are to a certain extent natural ills ; mitigable, 
 it is true, as is the fever that rages under a tropical sun, 
 or the plague that oppresses the densely-crowded haunts 
 of eastern commerce; hut unavoidable under given cir¬ 
 cumstances. 
 
 Let us recollect what we have done. "We have paid 
 down more than two hundred millions of money for 
 railways in the short space of twenty years or so. 
 When, in ancient or modern times, has the like been 
 done before ? Was such an achievement possible with¬ 
 out a corresponding excitement ? Can we ripen grapes 
 
2i 
 
 without sunshine? Does not the hottest summer give 
 the largest harvest? That is God’s providence: and 
 whose but His is the analogous law which decrees that 
 it is the height and intenseness of these our speculations 
 that commands proportionate results ? 
 
 We must then put the good and the ill together, and 
 bear the one for the sake of the other. The capitals of 
 three kingdoms—London, Edinburgh, and Dublin—are 
 brought within a journey of a dozen hours; and we may 
 send a message five hundred miles in five minutes for as 
 many shillings! Surely these are national advantages, 
 and of inappreciable value in the acquisition of private 
 wealth, which every man may avail himself of. Are we, 
 then, justified in grumbling that we have paid rather 
 dearly for a boon so great, that it almost seems like a 
 miracle when we look back and try to replace things in 
 the mind’s eye as they were before this great change took 
 place? This, too, is to be borne in mind—that the gain 
 is positive: it remains, and must continue in profitable 
 use—the loss has vanished, and will soon be forgotten. 
 
 We have all heard of the millions made by the cotton 
 manufacture. The estimate which set down the net profits 
 of one good year’s business, within a circle of ten miles 
 round Manchester, at thirteen millions has passed into a 
 proverb, as one of the wonders of our time. But who has 
 ever calculated the losses in that trade, or counted the 
 number of men who have failed as mill-owners, spinners, 
 and weavers? Who has totted up the sums that have 
 been invested in those operations, and disappeared with¬ 
 out returning a single shilling of profit ? No one has 
 done this; and yet millions have thus been squandered, 
 often insanely, often criminally. Such excesses have oc¬ 
 casionally been noted for censure. We have heard of 
 
trade carried too far, and markets glutted; and then the 
 mischief of over-production has been sharply rebuked. 
 But the season of folly passes away, and the anger of 
 the statesman vanishes with the first rays of returning 
 prosperity. The public follow his pleasant example 
 with lively footsteps ; while every face is turned com¬ 
 placently to the bright side of the picture. And not 
 unwisely is this done; for there is good in all these 
 cases to be found by way of compensation for the ill 
 sustained, and so shall we soon find it to he with our 
 railways. They have gone through their ordeals; their 
 working is now thoroughly understood in all its ramifi¬ 
 cations, and they will be much better and move securely 
 managed for the future than they have ever been. Even 
 as they are, they constitute the greatest combination of 
 intellect, utility, and wealth that the genius of man and 
 'the progress of human improvement has developed. 
 What, if they have their defects! Is it in the nature 
 of the Englishmen who made them to discover and 
 confess palpable defects in their great work, and yet 
 allow these to remain uncorrected for any length of 
 time ? 
 
 I have spoken of three epochs—let me add, that I 
 was present and observed them all; and that they have 
 often occupied my thoughts. The conclusions they have 
 brought me to I am now about to explain. I felt, ten years 
 ago, the want of a check and regulator—not in the manage¬ 
 ment of our railways only, but in the conduct and opera¬ 
 tions of our whole joint-stock system. This want, more¬ 
 over, if it is to produce the desired effect, if it is not to 
 turn good into evil, must be homogeneous in its nature : 
 it must consist and harmonize in its character and main 
 appliances with its proper subject. If it be foreign or 
 
irreconcilable with that it will inevitably injure, and 
 may, ere long, destroy the great original: it will not 
 correct, and may extinguish. An effective audit of all 
 onr railway and joint-stock transactions is absolutely 
 needed; but every man, who is not either weak-witted, a 
 place-hnnter, or a used-up gambler, will eschew an audit 
 by government officers. At a time of crisis, and when¬ 
 ever it was worth while, they, too, would be corrupted; 
 and, in times of no crisis, they would surely become lax 
 and inefficient. We come thus to see that there is no 
 security attainable but by giving the chief power to those 
 whose interests are most at stake—that is, to the share¬ 
 holders themselves. Experience shows that the ma¬ 
 chinery in use is defective; it is our duty and our 
 interest to see that it is improved forthwith. But we 
 must impose this obligation upon ourselves. It is our 
 business, and not the business of government. 
 
 It is with this conviction strongly impressed upon my 
 mind that I venture to revive my plan of 1842, with 
 some additions suggested by the subsequent course of 
 affairs. We want a short act of parliament to provide 
 as follows:— 
 
 1. Every joint-stock company, of every kind, shall ap¬ 
 point two auditors, who shall be neither shareholders 
 nor bondholders, and who shall always have access to 
 the books, and shall continuously audit the accounts of 
 the company, made up to June 30 and December 31. 
 
 2. These auditors shall, in every company, be ap¬ 
 pointed by the shareholders; and no director or officer, 
 or other person employed by the company, shall vote or 
 hold proxies for the election of auditors. 
 
 3. The form in which the accounts of these companies 
 shall be made up shall be prescribed from time to time 
 
by the Board of Trade, who shall advertise such forms 
 in the “ London Gazette.” 
 
 4. Every auditor shall, after making out his audit in 
 the form prescribed by the Board of Trade, go before a 
 magistrate, and annex to the statement of accounts a 
 solemn declaration, in lieu of an oath, deposing that the 
 accounts have been accurately and faithfully audited, 
 without any suppression or perversion of facts or figures; 
 and every auditor, who shall be convicted of having made 
 any false declaration in these respects, shall be deemed 
 guilty of a misdemeanor and punished accordingly, with 
 fine or imprisonment, at the discretion of the judge. 
 
 5. The salaries of all auditors shall be paid by the 
 company, and proportioned to the labour of the audit; 
 and in the event of any of the auditors of the company 
 being dissatisfied with the amount of the remuneration 
 given to them, they shall be at liberty to apply to the 
 Board of Trade, who shall order such addition to be made 
 to such remuneration, not exceeding one half the amount 
 allowed by the company, as to them shall seem just. 
 
 Let us now shortly advert to the grounds upon which 
 such a system of audit as this may he held to claim gene¬ 
 ral and decided support. They are principally two1, 
 the appointment is given to the shareholders and not to 
 thp government; and 2, the auditors are made legally 
 responsible for the correctness of their audit. 
 
 The policy of this arrangement is to be vindicated by 
 the strongest reasons ; but I have only room to mention 
 a few of them. I give the appointment of auditors to 
 the shareholders,,in the first place, because nothing is 
 more likely to be better done in this world than by the 
 persons who are most interested in its being well done. 
 If the general body of shareholders in every joint-stock 
 
28 
 
 company could sit down and audit their own accounts, no 
 other audit would be more searching; but, as such a pro¬ 
 cess is impossible, I would confer upon them alone the 
 power of committing the task to competent persons, other¬ 
 wise unconnected with the company; and I would exclude 
 the directors and servants of the undertaking altogether 
 from this proceeding, because it necessarily involves a 
 sort of trial of the directors, who, as it is their accounts 
 that are to be passed, ought not to be allowed to bring 
 their weight to bear upon the result in any way. 
 
 I insist upon a liberal remuneration being made to 
 these auditors, because to he effective the audit should 
 be continuous, and no man of talent will devote himself 
 to so onerous a labour if he be not well paid for it. At 
 times the shareholders might not be disposed to reward 
 him adequately;—on that account, and also because his 
 reward is the measure of every man’s efficiency, I give 
 the Board of Trade a limited power of adding to the 
 auditor’s salary. I am satisfied that the smallness of 
 the sums paid for auditing the accounts of many of our 
 joint-stock companies leads every year to a summary, a 
 slovenly, and a culpable discharge of that very important 
 
 I also give the B v rd of Trade power to fix the form 
 in which the account-; of all joint-stock companies shall 
 be audited. By this means, every body engaged in joint- 
 stock operations will be subjected to the sway of one 
 ruling principle, which, while it respects the unques¬ 
 tionable rights of private enterprise, and admits of no 
 officious interference with its avocations, upon the part 
 of-the state, will ensure to every instance a complete per- 
 foririance-of the benefit demanded. And here we may, 
 in my opinion, lay down and accurately define the essln- 
 
29 
 
 tial line which marks and distinguishes the bounds 
 beyond which a government cannot, in these matters, 
 legitimately go. On no pretence ought the government 
 to be allowed to do the business of private enterprise, 
 or any part of it; but where there is reason to believe 
 that private enterprise fails to perform its own functions, 
 to an extent that affects the public good, the state with 
 great propriety may then step in, and without under¬ 
 taking the work itself, or by its own officers, it may pre¬ 
 scribe to the parties engaged a mode of doing it, which 
 shall for the future prevent the public good from being 
 injuriously affected. 
 
 Assuming the form of audit to be complete for the 
 purpose, it is obvious, that if there be not wilful neglect 
 or misrepresentation on the part of the auditors, the 
 financial circumstances of every company, as they truly 
 exist, must become known to the shareholders. I 
 guard against the mischief of concealment or misrepre¬ 
 sentation by making the auditor legally responsible for 
 his own acts. The auditor who passes, without expo¬ 
 sure, an account which either omits payments made, or 
 covers improper charges, or contains items inserted un¬ 
 der false heads, ministers to a fraud, and I would hold 
 him responsible for that offence at the bar of public 
 justice. Few men will be found bold enough to ask 
 another to certify a false acccount, when the conse¬ 
 quences of compliance will he a visit to the Old 
 Bailey, and six months’ imprisonment with hard labour 
 in the house of correction. 
 
 Although I feel that I have now disposed of the ques¬ 
 tion as far as argument and sound policy apply to it, 
 there is yet another consideration which will weigh so 
 heavily with men of experience that I cannot pass it over 
 
in silence—and that is, the almost insurmountable dif¬ 
 ficulty we always experience in bringing the government 
 to alter its course or style of action, or to admit proof of 
 error or misconduct on the part of any of its servants. 
 Let an attempt be made to show the government that 
 it has erred, or is at fault, or that things may be better 
 done than they have been; or let the acts of an official be 
 called in question—the whole administration, chiefs and 
 subordinates, spring to arms in a moment. The cha¬ 
 racter of the cabinet and of the party in power, for wis¬ 
 dom and efficiency, is thrown iuto the same scale with 
 the conduct of its officer—if you impugn him, you 
 reproach them; and all will offer every possible resist¬ 
 ance to the progress of inquiry, and a fair trial of the 
 question raised. This is vindicated upon the old rule— 
 that there can be no stable government unless the au¬ 
 thorities are supported, and to give that rule convenient 
 effect, all the authorities, high and low, stick together 
 through thick and thin whenever one of them is assailed. 
 The man who ventures upon a charge of this kind, will 
 be sure, unless he has indomitable courage and first- 
 rate tact, to be beaten off or beaten down. There are 
 very few persons, I suspect, who, having once essayed to 
 serve the public in this way, will be found willing to try 
 the experiment a second time. The circumstances are 
 altogether different, when a charge is made against an 
 official not connected with the government. Every 
 one backs that readily enough, and the government also. 
 It follows, therefore, that if we had a government auditor 
 of railways and joint-stock banks, and the shareholders 
 had reason to suspect him of partiality, or inefficiency, or 
 corruption, they would have the government defending 
 their own official and resisting the exertions of the share- 
 
holders for an investigation into his conduct. This, 
 obviously, is the last thing to be desired; for the govern¬ 
 ment ought never to appear as the protector of offenders, 
 but always be in a condition to forward the cause of 
 justice. 
 
 For my own part, I mean no disrespect to the great 
 body of government officers, when I say, that as far as 
 I have had an opportunity of becoming acquainted with 
 them, I have found them much the same as other men 
 —open to the same influences, gratified by the same 
 attentions, and subdued by the same temptations. If a 
 government officer was appointed to audit the accounts 
 of a railway company or a bank, of which I was chair¬ 
 man, and if he happened to have a son or a brother 
 much in want of 5001. a year; and if I—having the pa¬ 
 tronage of a situation producing that income—had filled 
 it up, by giving it to this needy son or brother; and if, 
 with him in my employment, I should happen to divert 
 a few thousands of the company’s money to a purpose 
 not warranted; or, if I should be a few thousand pounds 
 in arrear of calls; I should be very much surprised in¬ 
 deed, if my accountants could not so enter these mat¬ 
 ters in the books, as not to disturb the gratitude of my 
 friend the government auditor, whose son or brother 
 held a comfortable situation during my good pleasure. 
 Need I say how differently the case would stand if the 
 auditor was a well-paid officer, dependent for his situa¬ 
 tion upon the shareholders, find responsible to the law 
 for the propriety of his acts ? 
 
 I have been considering this audit question, and the 
 working of a joint-stock system, for a length of time. 
 I remember 1825-6, 1835-6, 1845-6; I looked on while 
 the extreme events of those periods of convulsion were 
 
passing like a moving panorama; I saw the same men 
 wild with the excitement and exultation of the one state 
 of things, and beggared and broken down by the dis¬ 
 tress of the other; and the conviction deeply seated in 
 my mind, as the result of all I have seen and thought 
 upon the subject is,[that private enterprise, embodied in 
 our joint-stock system, constitutes an essential por¬ 
 tion of the national strength and greatness; that any; 
 thing which unduly impedes its action, or narrows its 
 scope, must inevitably reduce and imperil our wealth 
 and being as a nation of superior power; and lastly, 
 that there is no safety or security for the immense ca¬ 
 pital invested in these undertakings, if a sound audit of 
 accounts be not made common to them all. The pre¬ 
 sent moment is especially favourable to the introduction 
 of this improvement. The fortunes of hundreds of 
 thousands of persons are dependent upon its adoption. 
 I therefore invite the public at large, and every holder 
 of a share in a joint-stock company, to consider well the 
 propositions I have here offered; and, above all things, I 
 advise them not to let the coming session of parliament 
 pass, without the enactment of a measure applicable to 
 all companies, and which, if not an effectual remedy for 
 the evils complained of, shall at least take a decided 
 step in another and a better direction than we have 
 hitherto been following. 
 
 , Bell Yard, Temple Bar. 
 
WORKS RECENTLY PUBLISHED. 
 
 IRELAND: 
 
 HISTORICAL AHD STATISTICAL. 
 
 By GEORGE LEWIS SMITH. 
 
 London: Wliittakcr i Co., 3 Yds., demy 8ro., cloth, 35a. 
 OPINION'S OF THE PEESS. 
 
 “The History of Ireland, its Public Works and Joint-stock 
 Enterprises—last, and more than any other to the purpose—the 
 Chapter on Land, with its frightful details of confiscations and 
 forfeitures—the history of tenures j the conduct of landlords, and