THE TALE OF THE HOUSE THAT SNOW BUILT.
Th man who looks the worst often proves, when you know him better, to be not so bad as he seems. The account rendered in the
case of Strahan, Paul, and Bates, at the adjourned examination meeting this week, shows that the individual partners erred more from weakness, and less than most of us have supposed from de- liberate bad intent. The report, in fact, throws a very interest- ing light upon the whole history of the bank as well as of the in- dividual partners. The very frailties that they exhibited in their collective capacity appear to be hereditary in the firm. Strahan himself was not a stranger, but was one of the old original family of Brio*, having changed his name on inheriting a considerable property from an uncle in 1831. The practice of accepting a no- zainal partnership did not begin with Mr. Bates ; but Sir John Dean Paul, while still Mr. Paul, accepted a nominal partnership in 1823, taking no share of the profits until the death of his father, nearly thirty years later. The indebted position of the partners was of long standing. It begins with the very earliest date in the report. A partnership was reformed in 1813, of Robert Snow, William Sandby, and John Dean Paul; and on the death of Mr. Sandby, three years later, all the partners were indebted to the bank—John Dean Paul, the junior partner, to the smallest extent. Robert Snow then owed 16,1801.; ten years later, Robert Snow's debt had increased to more than 36,000/. ; Sir John Dean Paul's, to more than 17,000/. ; and this debt was represented by a joint note of the two. Mean- while, the debt of William Sandby, nearly 90001., had been paid off by his executors ; and a small, portion of the joint debt of the two remaining partners being carried to the profit and loss account annually, the debt was reduced at the death of the late Sir John Dean Paul from 53,5001. to 28,5001.; and it was reduced 50001.
more by the date of the bankruptcy. Thus, as we find a nominal partnership existing before Bates's time, so we find a debt from the partners to the bank existing from 1816, and probably from a yet earlier period ; we find a portion of it paid off by a partner who died, and the remaining portion reduced; while the balance of the debt was represented by that joint note which had been lying in the bank ever since 1816. "Indebtedness," as our Trans- atlantic cousins call it, was therefore a permanent characteristic of the bank; yet the bank went on, and not altogether without hope of being in a better position, bank and debt equally immortal. The bank had got involved in a practice of permitting debts to be contracted upon a set-off. This is legitimate banking when the
security is perfectly certain ; but there is a temptation to go be-
yond that line, and to pass from banking to speculation. Sir John Dean Paul, who owed the bank his share of the 23,0001. balance, had unencumbered property to the extent of 30,000/. ; Strahan
had property to the extent of 100,000/. ; and Bates had enough to cover his debt to the bank—for he too had borrowed. In the
same way, the bank had lent to Lord Mostyn 67,500/. ; and it con- sented to accept the lease and usufruct of the Mostyn colliery as security and set-off. The bank borrowed money to work the col- liery, and had brought that enterprise to a condition so productive that " it covered its expenses and interest" ! The banking firm, therefore, had become colliers. The acting partner of the house of Halford and Co. was unable to continue the business ; Sir John Dean Paul undertook it ; and the firm became army-agents. Messrs. J. H. and E. H. Gandell entered into speculative contracts
for the construction of railways in France and Spain and the
drainage of the Lake Capestang in the South of France ; and the bank made an advance. This connexion was exceedingly charac- teristic. A debt to the bank was contracted by J. H. Gandell in 1850 to the amount of 18001., which was thought bad; but the promise of interest and of a percentage, and the payment of this bad bebt, induced the bank to make the first advance to Messrs.
Gandell. Their affairs subsequently proved to be in a bad condi- tion; and then Strahan, Paul, and Bates, thought it necessary to
continue their advance for the purpose of enabling Messrs. Gan- dell to complete the works and recover the original advance. Thus, one debt led to another, and drew the bank into becoming, by itself or by proxy, colliers, army-agents, railway and drainage contractors.
The bank, like most Chancellors of the Exchequer, was familiar with deficiency—it seems to have been one of the standing institu- tions. In the ultimate deficiency, the balance due on joint-note
figures, the Gandell and Mostyn liabilities, makes 483,0001.; so that there is nearly half a million of the deficiency represented by those ancient and extraneous transactions. When the Gandell liabilities had become "gigantic," the partners perceived that they could no longer meet their liabilities, and they began to give ac- ceptances for the purpose of meeting heavy periodical demands. These acceptances became somewhat conspicuous in the market, and new means were required. From a lavish issue of paper, the next step was the pawning of property—always with the hope of recovering it. And so it was that the Danish Bonds of Dr. Grif- fith found their way to the money-lender.
The history of the bank is like that of an individual. One can almost imagine the house near Temple Bar to have had its hopes, its weaknesses, its temptations, its despondencies, its trusting in "something" that would "turn up." The latest liabilities of the house might be traced to youthful indiscretions committed long before the latest partners were in being. Most of them had seen such things from the first; and had seen that the bank stood, was trusted, and was in fact a model of permanency, notwithstanding these cankers. To men in such a position the contrivances which, when detected, are thought so monstrous, must have seemed only like pardonable licence—an extension of very ancient practices, which had not affected the existence of the bank. Such a canker would have been practically impossible under the guaranteed pub- licity of the joint-stock bank : but did not joint-stock enterprises smash in 1825, while the ancient house of "Snow the Goldsmith" weathered that storm, as well as the South Sea hurricane ? Strahan and Paul are expiating their shame at Milbank; and yet perhaps they scarcely stretched a point beyond the morals of the first Snow, who contrived to sell South Sea Bonds and yet to make and keep a fortune for himself. Epithets are not bad enough for the gentlemen who reside at Milbank ; yet in principle they were no worse than the man who is immortalized as the founder of their house and the object of Gay's satire. For, somehow or other, the poet had hit the right nail on the head, and had worked the accounts something like a century before Mr. Turquand enabled us to point the moral.