In March, 1863, Mr. Gladstone brought forward once more his propositions relating to the investment of Savings Bank money. He moved—
“That it is expedient to amend the laws relating to the investment of the moneys of Saving Banks, and to create a charge for such Savings Banks upon the Consolidated Fund, in place of certain perpetual annuities now standing in the names of the Commissioners of the National Debt; to give the power for converting certain other amounts of such perpetual annuities into certain other annuities, and to provide for the due payment out of the Consolidated Fund of any deficiency which may arise from insufficiency of the securities to meet the legal claims of the trustees of such Savings Banks.”
After considerable discussion, the bill (26 and 27 Vict. c. 25) was sent up to the Lords under the charge of Lord Stanley of Alderley, and received the Royal Assent on the 8th of June, 1863.
We come now to the last item of legislation on the subject of Savings Banks. On the 14th of April, 1863, Sir H. Willoughby and Mr. Ayrton obtained leave to introduce the bill which, according to promise, had been prepared by a convention of Savings Bank managers. To a great extent this measure“to Consolidate and Amend the Laws relating to Savings Banks,”was identical with the one which Mr. Estcourt introduced and withdrew during the previous session. The managers had met during the recess, and had consolidated into one the eight Acts, or parts of Acts, which then governed their establishments. Mr. Tidd Pratt, on being consulted in the matter, certified that the new Act“would constitute a fair and just measure of improvement.”Mr. Gladstone, too, it seems, had been furnished with a copy, had suggested some trifling emendations, which had been frankly adopted and embodied, and was therefore disposed to offer no captious opposition to it. Not only so, but he thought it creditable to the gentlemen who had it in charge, and, so far as it went, likely to be effectual. Several clauses were altered, struck out, or inserted, and the bill, known as the“Consolidation Act,”received the Royal Assent on the 28th of July, 1863. Of this Act (26 and 27 Vict. c. 87, a full description of which will be found in the Appendix)[113]we shall speak in a subsequent chapter, when we come to consider the law at present regulating Savings Banks.
[69]In a case that arose out of the Carnarvon Bank fraud of 1824, in the Court of Bankruptcy, both the Commissioners, Sir John Cross and Sir George Rose, expressed very strong opinions on the point as against trustees. The former judge, after giving a decision against the trustees in the case, said,“The case could not be made too public,”and he“trusted that it would operate as a warning to the trustees of Savings Banks generally.”Sir George Rose“fully concurred”in the observations of his colleague. He thought“it should be borne in mind that deposits were made by parties, not on the faith of the persons acting as actuary or cashier, but upon the faith of the gentlemen who acted as trustees; where such persons neglected the duties which were incumbent upon them, their conduct was deeply deserving of censure. If, therefore, the clerk, or other person employed by them, were guilty of peculation, they were themselves liable for any defalcation that might ensue.”
[70]Speaking of Mr. Goulburn, when he first took office, a contemporary said,“He possesses that degree of talent which renders him highly respectable without exciting any invidious feeling. He is content to be useful without aspiring to the reputation of an innovator; and, if he shall introduce nothing new, he will at least abstain from anything that is dangerous.”Mr. Goulburn's legislation for Savings Banks scarcely bears out this estimate.
[71]This arrangement, which was quietly dropped before the bill became law, owing to the pressure which managers of Savings Banks brought to bear upon the House, was strongly urged by Mr. Tidd Pratt. That gentleman and Mr. Higham, Comptroller of the National Debt Office, prepared this bill. In the Committee of 1848, Mr. Pratt gave it as his opinion (140), that no depositor should be allowed to put in more than 10l.in one year, instead of 30l., or it might go to 15l.;“but I am quite sure that this latter sum is as much as the small savings of the industrious classes can amount to.”He also proposed to limit the total amount to 100l.
[72]In this same Committee, Mr. Pratt stated that in the course of his investigations in Ireland he had found one man who had had seventeen books out of one Savings Bank, and money to the extent of 520l.lodged there, altogether his own property, but which he represented himself as holding in trust.
[73]Only four sets of directors of banks, and these banks of very insignificant size, made a declaration of the kind in question between 1844 and 1848.
[74]It was during the passage of this bill that the managers and trustees of the different Savings Banks in the country first combined to influence the action of the Legislature. On this occasion it can be shown that they made their influence felt, and provoked several divisions in both Houses. With the House of Lords they were most successful, owing, no doubt, to the great number of peers who were honorary officers of Savings Banks. For example, in the House of Commons they succeeded in dividing the House twice on the question of the rate of interest. They wished no reduction to be made in that rate; but, when it was decided that the rate should be reduced, amendments making it 3l.6s.8d.to trustees and 3l.0s.0d.to depositors, and 3l.5s.0d.and 2l.18s.4d.were proposed against the Government plan, eventually carried, of 3l.5s.0d.and 3l.0s.10d.respectively. It was declared that the difference of 4s.2d.only would not defray the cost of management. It was objected also, and not without reason, that the Government erred in not naming the exact sum, instead not more than 3l.0s.10d.per cent. which should be given to depositors; that this was a matter which ought not to have been left in any sense to the trustees. Much unpleasantness might have been saved if the sum had been definitely stated, and instead of twenty or thirty different rates of interest, all had been paid alike, and there had not been left any doubt as to what depositors should consider their right in the matter. Out of doors there was a regular combination; deputations waited upon the Chancellor of the Exchequer, and gentlemen from all the leading Savings Banks in England, Scotland, and Ireland, met in London to concert those schemes of defence to which we have just alluded. A meeting was held, at the important institution in St. Martin's place, with Sir Henry Willoughby as Chairman, when the following resolutions, among many others, were agreed to by the deputies from banks representing 5,000,000l.of deposits. Nothing could of course better show how the action of the Legislature was regarded by the managers of the institutions in question:—
1.“That the proposed reductions in the amount of deposits from 30l.to 20l.in each year, and the total amount of deposits from 150l.to 120l.will be highly injurious to the interests of the depositors.”
2d.“That the reduction in the rate of interest from 2½d.per cent. per day to 2d.is far too great, out of proportion to the reduction of the interest in the Funds, and would be extremely prejudicial to the depositors in all Savings Banks, but more especially to those in the smaller banks, throughout the kingdom.”
3d.“That clause 7, requiring the production of the books of every depositor once a year, will cause annoyance to depositors, is not capable of being enforced, and is no efficient security.”
4th.“That the proposed alteration respecting the liability of trustees and managers of Savings Banks seems highly objectionable. The present provision, of no trustee responsible except for his wilful default or neglect, is well understood as applicable to all cases of voluntary trusts, and should undergo no alteration.”
5th.“That it is not expedient that trust accounts be altogether abolished, but that provision should be introduced to meet the case of fictitious deposits and the abuse of trusts.”
And so on throughout almost all the clauses.
[75]On one occasion, about this time, Mr. Hume had complained of the“impudent conduct”of some Government official, to which Sir Robert Peel, as Premier, replied. Sir Robert said, he“would not quarrel with the hon. gentleman,”(an experiment he had often tried without much success,)“considering him a good judge as to how far impudence might be carried with impunity.”Mr. Hume at once owned the soft impeachment.“If I had not had the impudence of the devil,”said he,“I should never have done any good in this House.”The Times, the next day, give it to Mr. Hume smartly, as was its wont, and congratulated him“on his generous, though rather startling, acknowledgment of the source of all his strength.”
[76]His speech on the occasion does not seem to have been fully reported.
[77]The trustees of four small banks made the declaration: those of Tonbridge, Ashby-de-la-Zouch, Fareham, and Carshalton in Surrey.
[78]At a meeting of the managers of the principal Savings Banks held on the 29th of August, 1819, it was resolved:“That this meeting has read with mingled feelings of pain and alarm the clause in the proposed bill virtually requiring trustees and managers of Savings Banks to give security or 100l.each, and making such trustees and managers responsible to an indefinite extent if they should neglect to limit their responsibility to that sum, as pointed out in the Act.”
[79]Mr. Brotherton, the member for Salford, soon after stated that the managers of the Manchester Savings Bank, with 20,000 depositors, insisted upon every person bringing his book to the office annually, as a precaution against fraud.
[80]The Committee of 1848 went very fully into the changes which were needed in Ireland, and many witnesses were asked what they would propose. For example (1579), Mr. W. Keating Clay was asked:“Do you believe, in consequence of the Cuffe Street bank, the deposits will decrease in Dublin and neighbourhood if the law is not amended?”and replied,“I should say they will be altogether withdrawn. I don't think the other Savings Banks in Dublin, which have conducted their business faultlessly all through, can exist another year under the present law.”Another witness, in answer to a similar question, said (1205):“I am quite satisfied that the Savings Bank system in Ireland will crumble to dust unless there is legislation.”A third witness said, nothing would do but trustees fully liable, and a system of Government inspection and regular audit of the accounts.
[81]The TimesandMorning Chroniclestrongly advocated the same view.
[82]Hansard,vol. civ, pp. 22-54.
[83]During the interval, Mr. Reynolds, member for Dublin, who had obtained the Committee originally, became Lord Mayor of Dublin, and Mr. Gibson Craig became Sir W. Gibson Craig. Mr. J. A. Smith was appointed chairman on each occasion.
[84]For example, in August, 1852, Mr. Reynolds again brought the subject before the House by proposing that the remaining money due to depositors should be paid by the State. On this occasion he told how he had had the honour, in 1846, placing Her Majesty's Government twice in the same night in a minority on this subject; but, unlike other members who had done the same thing, he had not received Her Majesty's commands to form a new ministry. This style of banter was scarcely suited to his subject, but more serious appeals were equally unavailing.
[85]The following remark had already been made from the judicial bench:“I find that country gentlemen,&c.were willing to lend their names as trustees, in the establishment of banks for the deposits of saving of the poor, but were negligent, in too many instances, in giving their personal services, whereby the business fell almost entirely under the exclusive management of the person appointed as actuary.”—Sir John Cross.
[86]“Nearly all the frauds, and all the loss which had occurred in Savings Banks,”said the Chancellor,“were owing to the actuary or secretary receiving money irregularly, sometimes at his own house, and very often out of office hours.”
[87]Even in seaport towns this inspection of pass-books might be accomplished without much trouble; if there was any difficulty in getting in the books, such an inspection might be made as would be sufficient to test the general accuracy of the accounts. Thus at Cork, the year before (1849), 6,623 pass-books had been sent in for examination, and only 1,164 did not come in. The accuracy of the larger number was ample test of the accuracy of all.
[88]The Chancellor here pointed out that theaveragerate of interest given to depositors at that time (1850) was but 2l.18s.4d.and that the reduction would be scarcely felt by any class; that reduction, however, would not only provide against the Government losing any more money, but would meet the expense of the proposed Government treasurers of Savings Banks.
[89]Hansard,vol. cx., third series; andTimes, 1850.
[90]It must not be assumed that there was no difference of opinion on these points, even among Savings Bank managers. The following letter, read by Sir Charles Wood during his speech in 1850, is conclusive to the contrary. The writer, who was manager of a large provincial Savings Bank, wrote:“I have had occasion to remark that the chief inducement to deposit money by those for whom Savings Banks are intended, consists in having asafe placefor deposit, and that the amount of interest for the most part is but a secondary consideration; whereas those persons whose means are greater, and who do not actually require Savings Banks, use them to suit their convenience when the Funds are high, and take out their money from the Savings Banks to invest in the Funds when low, just at that very time when the withdrawal occasions loss to the country.”He then expressed an opinion almost identical with one which Mr. Tidd Pratt has often given, that“20l.would be quite sufficient to allow a person to deposit in one year,”and that,“when the deposits reach 100l.there is no necessity to allow further deposits to be made.”Again, the Rev. W. Rowan, Treasurer of the Tralee Bank, when asked in the Committee of 1849, if he thought changes were necessary in Savings Banks, answered that,“The Savings Bank system must either become a general failure, and the funds invested in them withdrawn, or you must place it upon an entirely different footing with respect to inspection and working.”
[91]A bill to continue the Act of 1848,“for Amending the Laws relating to Savings Banks in Ireland,”was carried through Parliament in this session.
[92]The gentleman to whom reference was here made is the present Comptroller-General, the veteran public servant Sir Alexander Young Spearman. This gentleman, of whom all parties speak as a man of irreproachable character and eminent abilities, has now (1866) been fifty-eight years in the public service. To him is no little owing the efficiency with which his department is now managed, and the increased facilities which have been given to the public in all things connected with the provident habits of the people. It may not be out of place here to state, with reference to the office held by this gentleman, that it was formed about the commencement of the present century, whereas the Commissioners date from the creation of the Sinking Fund in 1786. Sir Alexander Spearman succeeded Mr. Higham in the position. As more than one of the witnesses at the Committee of 1858 did not know who formed the Board of Commissioners, of whom they were constantly speaking, and another did not know whether the Board ever met, it may be new to some readers, if we say that the Commissioners for the Reduction of the National Debt consist of the Speaker of the House of Commons, the Master of the Rolls, the Chief Baron of the Exchequer, the Chancellor of the Exchequer, the Accountant-General of the Court of Chancery, and the Governor and Deputy-Governor of the Bank of England. The Board held a meeting once in each quarter. Three Commissioners form a quorum, and their powers are defined by Act of Parliament. The Comptroller-General acts in the capacity of Secretary to the Board, and is entrusted with the carrying out of its orders. The expenditure of the National Debt Office amounted, in 1856, to about 14,000l.; but must have increased considerably since that date.
[93]“To amend the Laws relating to Savings Banks, and, in certain cases, to give the guarantee of Government to the depositors for the repayment of the sums legally deposited in such Savings Banks.”
[94]In a long petition to the House of Commons from the Trustees and Managers of the St. Martin's Place Savings Bank, this bill is strongly opposed, thus showing that Mr. Gladstone had not succeeded with the managers of that institution. Speaking of the direct Government guarantee proposed to be given, the managers say that they“find the proposed change fettered with such a variety of intricate and cumbersome official regulations, as cannot fail in practice to prove greatly annoying and vexatious to depositors, and perplexing to the managers of the banks and their officers, upon whom will still devolve duties and responsibilities ill-defined under the provisions of this bill, and not capable of being sufficiently understood or explained; subversive, as the proposed change will also prove, in this and many other well-regulated Savings Banks, of those systems of entry and check under which their present accuracy of accounts is so admirably and indisputably maintained.”They objected to the reduction in the rate of interest, treated of several other minor matters, and again prayed that a full inquiry should be made by a committee before any bill was passed.
[95]“You take the money of these depositors, and you give them the entire security of the State for their money. They cannot have a better security; and if you give them that, they have no interest in the employment of the money: it does not signify to them if you fling it to the bottom of the sea. So long as the Treasury of the country is sound, it does not matter one rush what the Chancellor of the Exchequer does with the money. If he invests it well, they are no richer; and if he plays all the tricks of the mountebank, or disposes of it with the artifice of the swindler, they are none the poorer. The depositor in Savings Banks have nothing to do with the question, and it is only weakening and impairing their position to make them depend upon the prudence of the minister, instead of upon the credit of the British public.”Savings Bank managers held a strong opinion against what they called jobbing with their funds. They said Mr. Goulburn had promised that the practice should be stopped; and it was, in 1844; but that Mr. Gladstone had revived the practice illegally in 1853. These bills were not introduced in 1855.
[96]Hansard,vol. cxxxvi.1854.
[97]Hansard,vol. cxliv,p.1292.
[98]A clause was added to the bill now introduced to prohibit the assumption of the title of“Savings Banks,”by institutions not established under the Savings Bank Acts.
[99]A few days after this, Sir George Lewis gave a pledge to Viscount Goderich that, if the bill passed, the Committee should be appointed to consider every question that Sir H. Willoughby had raised.
[100]The trustees of the principal Savings Banks again petitioned against the bill. The petition from the St. Martin's Place institution prayed“your honourable House to pause ere you pass such an Act as would assuredly compel your petitioners, and, in their view, all parties similarly situated, to resign the charge which they have hitherto had so much pleasure in fulfilling, and, as they may venture to assert, with entire satisfaction to the parties pecuniarily interested.”In their opinion“considerably more importance has been attached to the terms 'Government security,' and 'Government guarantee,' than the facts of the case would require.”
[101]Mr. Sikes said (2,628),“I believe that one great essential for the future progress and prosperity of Savings Banks would be the guarantee of the Government for every deposit duly made in the hours of business.”Mr. Wortley said (1,570) that he thought it a desirable thing, and also Government auditors or inspectors. Mr. Hope Nield (1,937) thought it“desirable decidedly, if it can be obtained without trammelling or destroying the operations of the banks.”Mr. Maitland“had no doubt whatever about it being a desirable thing, if it can be safely given”(2,153). Sir Alexander Spearman gave his opinion at greater length (4,368).“There will be no satisfactory amendment of the law unless the security of Government is given to depositors. I think it is impossible that the present state of things should be allowed to continue. The question has often been discussed, and depositors in many cases have believed that they had the security of Government, and found to their cost that they had not; complaints are constantly arising; applications are constantly made to know whether they have the security of Government or not. I think myself that depositors are entitled to have the real protection of a Government security, but I think also that it will be quite impossible to give this security without at the same time giving to the officers of Government a very different power of dealing with the management of Savings Banks. It would be idle to talk of the one without the other.”So weighty are the conclusions to which the Committee of Inquiry came on the subject of this guarantee that we present them herein extenso.“A very general impression prevails throughout the country that the Government is bound to make good a deficiency whenever a deficiency occurs; a claim accordingly has been made, in several instances, on Parliament to replace the money of depositors in cases of defalcation. This impression is not warranted by the laws which regulate Savings Banks. It is difficult, however, 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 their bank. It appears to your Committee that an alternative ought to be given, and freely offered to the choice of trustees, either to secure the guarantee of Parliament upon such conditions as the commission shall prescribe, or themselves to undergo the same liability in regard to Savings Banks as was enacted by 9Geo. IV.c. 92, s. 9. The able actuaries connected with various large banks, who have attended your Committee, have detailed various methods by which imposition and error may be rendered almost impossible in large establishments; but in the case of the smaller banks, where the funds are not adequate to provide a staff of paid officers, it will be for the Commission to see what arrangements they can make to check misconduct, and to afford to depositors, at least once a year, a certainty that their money has been duly lodged with the Government, for which purpose some valuable suggestions were made by several of the witnesses experienced in the practical management of banks. In one point all the witnesses concur; and your Committee must record their own opinion to the same effect, 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 on its infringement.”
[102]The Committee sat six days deliberating on their Report after all the witnesses had been examined. Draft reports were proposed by Mr. Ayrton, Sir Henry Willoughby, and the Chairman, the report ultimately carried, after a few emendations, being that by Mr. Estcourt.
[103]Sir Alexander Spearman, who clearly explained the facts to the Committee of 1858, also described the routine gone through when Savings Banks made investments with Government. They first certify the appointment of trustees; then, appoint an agent in London, generally a banker, through whose hands the money passes. When the trustees of a Savings Bank wish to invest, they send up a notice to their agent, who presents it at the National Debt Office, where an order is given to the Bank of England to receive the stipulated sum and place it to the account of the fund for the Banks for Savings. Next morning a receipt is sent from the Bank of England to the National Debt Office, and from thence to the trustees who remitted the money. A somewhat similar proceeding takes place on the trustees of any Savings Bank wishing to withdraw money. It is done through the agent, who gives the necessary notice of withdrawal. No money is paid or received at the National Debt Office, but at the Bank of England, the Commissioner simply keeping the accounts.
[104]“Suppose any bank should question the way in which their funds had been invested?”—“My answer would be,”said Sir A. Spearman (4,029),“that this was a matter which did not in the least concern them. I am not aware that the Act of Parliament in any shape or in any manner makes the Commissioners or their officers responsible in the slightest degree to the trustees of Savings Banks.”When asked if,“Supposing the money were used for financial purposes, or not invested at all, or invested so as to produce little interest, would Savings banks have a right to complain?”this witness answered, he“did not think so. What the Commissioners are responsible for is, to repay to the trustees of Savings Banks the amount received from them, together with the amount of interest due, whenever they call for it.”“They are responsible for that, and nothing more.”
[105]A little prior to this, Lord Monteagle had spoken at great length and with great animation on the same subject in the House of Lords. He then went the length of saying, that,“now the money was coveted not so much on account of inculcating the growth of provident habits, but that it should afford the Chancellor of the Exchequer a large capital, which might be sold, bought, exchanged, or invested in Exchequer bills, or in stock, at the will and pleasure of the financial minister; and, consequently, that he could thus be enabled, as he saw fit, to influence the Money-market to an extent which no individual or combination of capitalists could possibly either equal or counteract.”He added, that he could have no objection to the mere buying and selling of securities, so far as the Savings Banks were concerned; what he objected to was, that these transactions should be so carried on as to affect the value of the public securities and influence the Stock-Market—“rig the market,”as a member of the House of Commons said at the same time.
[106]Sir Francis Baring, Sir Charles Wood, Mr. Gladstone, Mr. Disraeli, and Sir George C. Lewis.
[107]Exchequer-bill purchases, as we gather from the evidence taken before the Committee of Inquiry, are made in two modes. If the purchases are to be made in the market, the Cashier of the bank is directed in the same manner as when he is told to purchase Stock; pays for the bills out of the Savings Bank fund, and carries them to the credit of the Commissioners. The other mode is, by the issue of temporary Exchequer bills, such as Deficiency bills, or Ways and Means bills. Deficiency bills are bills issued under the authority of 57 GeorgeIII., to enable the Government to provide for a temporary deficiency of money in the Exchequer. Deficiency bills are issued either to the Bank of England, or held temporarily by the National Debt Commissioners through the bank, the bank paying the money to the Exchequer, and paying itself the next day out of the Savings Bank fund. Ways and Means bills are of a pretty similar character, but chargeable to the revenue of the next succeeding quarter, and not, as in the former case, of the current one. Supply bills are of a still more permanent character, and are often held on from year to year, and are exchanged from year to year.
[108]Mr. Boodle was for allowing part of the money to be otherwise invested than with Government. He suggested land drainage. Mr. Sturrock and Mr. Sikes were for keeping one-third of the money in the hands of trustees, to be invested“in freehold securities of unquestionable character,”or in railway debentures. Mr. Deaker, Mr. Jameson, and Mr. Finney agreed. Lord Monteagle was“driven to the conclusion”of saying that in investing Savings Bank deposits,“you ought to deal in State securities and nothing else.”The opinion of the Committee on the subject may of course be gathered from the digest of their report already given.
[109]The indefatigable bank managers of London again sent round petitions against the proposals, and when they were presented to the House, one member, Mr. Hubbard, remarked they“were all apparently from one mint:”and indeed no secret was made of its being so.
[110]So convinced was one individual organ—accustomed to treat largely of such subjects—that the bill now proposed would fail to accomplish any good, that it insisted upon its being called a“Bill to provide for the speedy extinction of all old Savings Banks, and to give a heavy blow and great discouragement to the trustees and managers thereof.”
[111]Hansard,vol. clxvi.p.1394.
[112]Hansard,vol. clxvi.p.1974. It is not often that Mr. Griffith speaks the sentiments of the generality of English people, but he almost did so in this instance. No amount of tinkering could now make the old banks as simple, secure, and efficacious as those on the new plan. Mr. Griffith not having gone the length of mentioning any time, his prophecy was eminently a safe one. No one is more to blame, if indeed any one is to blame at all for such a state of things, than the authorities of Savings Banks themselves. Whilst they were systematically opposing with suicidal obstructiveness every measure of amendment, the whole ground was suddenly cut from under them by the institution of Postal Banks.
[113]Appendix B.
A CHAPTER ON SAVINGS BANK FRAUDS.
“There is such a powerful element of failure in all human affairs, that a shrewd man is always saying to himself, 'What shall I do, if that which I count upon does not come out as I expect?' This foresight dwarfs and crushes all but men of great resolution.”—Companions of my Solitude.
Inthis chapter it is our intention to describe with more or less minuteness the principal cases of frauds in Savings Banks pretty much in the order of their occurrence, and also to speak to some extent of the results which followed from them. How the progress of legislation was affected by these frauds has been already shown; and with the object of making more clear the legislation of 1844 and 1848, we have already entered into the details of the notorious Cuffe Street Bank failure, and one occurring in England prior to those dates. So far as we have been able to ascertain, the first case of fraud in a Savings Bank occurred at Carnarvon in the year 1824. In this case the actuary received deposits to a large extent for which he in no way accounted. Up to 1848 no less than ten cases, other than those already referred to, occurred, in all of which the trustees promptly paid the claims. These cases include the frauds which took place in Carmarthenshire, Northamptonshire, and Cumberland, one at Mildenhall in Suffolk, and another at Mitcham in the same county. In the latter case the secretary managed to embezzle a sum amounting to near12,000l., and then made off; Mr. Hoare, the eminent brewer, paying down no less a sum than 7,000l.to atone for his neglect, and the other trustees making up the amount by subscriptions of 1,000l.and 500l.each. Into any further particulars of the above cases it is impossible to enter, inasmuch as they have never been allowed to transpire,—precautions which, so long as there were no efficient remedies at hand, were both wise and magnanimous. The catalogue, however, can be made black enough and full enough without such cases; and it is to others which have been exposed in all the fulness of their iniquity down to the minutest details that we will now turn. Claiming priority in all respects was the fraud on the County of Kerry Savings Bank at Tralee.
The Tralee Savings Bank was established in 1823, many of the noblemen and leading gentlemen of the neighbourhood taking part in its formation. The secretary from the commencement was Mr. John Lynch, who was appointed by a majority of the trustees at a salary of 60l.per annum. From the commencement the bank was held at the house of the secretary, and was open from two till four every Monday.[114]Among the directors there were five clergymen, and the rest were highly respectable gentlemen of Tralee. The same might be said of the twenty managers, nearly half of whom were clergymen. The Rev. A. B. Rowan was treasurer of the bank. In the pass-books were abstracts of the Rules and Regulations of the bank, and these were headed by the following motto:—
"For age and want save while you may,No morning sun lasts a whole day."
Other useful injunctions were given in sober prose, such as“Examine your pass-book, and see that the entry is correct.”“If you lose this book, give immediate notice at the bank, otherwise you may be defrauded.”[115]With what feelings the pages of the books containing this sage advice would be turned subsequently, we leave the reader to judge after he has learnt more. Of course, Lynch was highly respected in the town: one witness describes him as, from the first of his connexion with the bank till the exposure, a man abovesuspicion; and Mr. Rowan, the treasurer, told the Committee of 1848, that he believed the public generally“had more confidence in Mr. Lynch than they had in many, or any, of the trustees themselves.”(839.) That he was clever, as well as“correct,”is manifest from the fact that he succeeded for sixteen years in carrying on, unsuspected by anybody, a complete system of frauds of different kinds, by which he appropriated to his own use during that time no less than an average of 2,000l.a year. He seems to have commenced his dishonest practices soon after the formation of the bank; but until 1832 his peculations were of small amount. From 1832 to 1847 he practised every possible description of fraud, and though some of them might have been detected by a rigid system of check, nearly all of them were remarkable for the ingenuity they displayed:“The contrivance and adroitness with which he managed these frauds,”says one who subsequently went over the accounts of the bank,“were so ingenious as almost to defy detection.”One of his practices was to account for a less sum than he received from a depositor, and this description of fraud he managed as follows (and this is a case which actually occurred): He received for lodgment three sums of 30l., 15l., and 27l.in one day, without any assistance or supervision from trustee or manager. These amounts he entered in his books as 3l., 5l., and 7l.respectively, and pocketed the difference. The manager at the close of the day, in examining and certifying the business done, marked the three entries as correct, as he found that they tallied exactly with the amount of money received into the bank. No sooner, however, was the bank closed and the acting manager left, than Lynch completed the case he had commenced by securing himself against exposure in the event ofthe depositor seeking to withdraw any of the sums named. The burden of the fraud was made to fall upon the funds of the bank by the actuary now altering the bank books to make them agree with the money actually deposited; and this he did in the cases in question by putting an 0 after the figure 3, the figure 1 before the 5, and 2 before the 7. In this way Lynch netted, with little or no risk of detection, a matter of 57l. in one day. This was only one mode adopted. He likewise received money out of office hours, which he never entered in any day-book or accounted for to the manager. To preserve himself, however, as in the previous case, he never forgot to post the amount in the ledger, so that whenever it might be claimed it would appear to the debit of the bank and at once be paid. Of course, there was here the absence of everything like check or audit.[116]Other descriptions of fraud may be left to be given in the culprit's own words.
Lynch held uninterrupted sway of the Tralee bank for a long series of years, contriving to make away during the time with many thousands of pounds; but retribution, though long in coming, arrived at last.“The mill of God grinds late,”says the Spanish proverb,“but it grinds to powder,”and the proverb meets with its exemplification here. A trifling incident, as has often been the case before, led the way to the full exposure. Lynch fell ill, to an extent which, though the bank was held at his own house, precluded him from giving those precise instructions which are eminently necessary indealing with such fragile machinery as that with which he had managed to work so long. It was usual, it seems, to make weekly requisitions to the treasurer of the bank for money to meet the demands upon its funds, and the subordinate on the occasion in question asked for more money from that functionary than had been credited to him altogether. The treasurer, the Rev. A. Rowan, like the rest, had unbounded confidence in the secretary, and had given himself little trouble over the affairs of the bank. At a time when it must have been evident to all that several thousand pounds sterling stood to the credit of depositors, Mr. Rowan was satisfied to think that two or three thousand pounds formed the capital of the bank. It is on record that he several times spoke of the small amount of money in the bank, and innocently pointed to the fact“as a sign of the depressed state of the country.”[117]How this illusion was at length dispelled we leave Mr. Rowan, himself to tell.[118]“As I knew that the requisition of April3dwas for more money than there was in the bank, I went to Mr. Lynch, and said there must be some mistake somewhere, and told them to stop taking in any more money till it was cleared up. The next day Mr. Lynch being ill in bed, sent for me, and made a confession that he had committed frauds; but he stated no amount. I then seized his books and papers and everything I found connected with the bank, and swore information as to the facts.”The books were then subjected to a thorough examination, and“frauds of every possible character,”to the extent of 36,000l., were found to have been committed. At the trial which ensued, Lynch pleaded guilty, and was sentenced to fourteen years' transportation.
The other modes of enriching himself to which we have not yet referred may be given in Lynch's own words. Soon after his apprehension he made a confession of his malpractices, in order to exonerate a clerk of the bank who had been arrested at the same time, and who was at first thought to be an accomplice, and we take the man's own account of his ingenious trafficking in forged pass-books as the most lucid one that could possibly be given.“A depositor lodged money with me,”said the actuary;“I entered it in the pass-book, but not in the receipt-book. He subsequently lodged more, say with Mr. Fitzgerald, and it was duly entered in the pass-book and the receipt-book. For these depositors there necessarily was no account to be found in the bank books, and the party paying him upon notice given would thus be presumptively implicated.”He proceeded to give another instance of his artifice:“I frequently took an old pass-book and tore out thebonâ fidedeposit leaf; I made an entry therein in a fictitious name, and aquasideposit, as if it were some years antecedent. During bank hours I used to hand in those books to whoever might be in the bank, directing notice to be given for the amount, as though the depositor had left it with me for that purpose, as it were, some days antecedently. The manager entering such notice was thus presumptively implicated; and as the course of the bank unfortunately was to 'keep' and not relodge sums 'noticed for,' the manager of the day marked it as 'kept,' which meant, given to me to give to thequasidepositor.”“Kept!”What a fund of irony there is in that one word so applied! In one or other of the modes described, this actuary,“respected by all who knew him,”contrived to“keep,”and, what is worse, to spend, 36,000l. of the hard-earned savings of the poorest classes around him. Hisestate at the time of his apprehension was worth something like 3,000l.; this property Lynch offered to give up in full,“leaving not even a bed for his daughter;”but on Mr. Pratt's being applied to for advice, that gentleman recommended the treasurer not to fall in with the offer, inasmuch as it would be“a compounding of the felony.”(825.)[119]Mr. Pratt had arrived by this time at Tralee, and was engaged in the investigation of the affairs of the bank, and in making his awards in the case. That investigation showed the most culpable neglect on the part of the managers and trustees: Lynch had been engaged in his nefarious practices for fifteen years, and yet till the day he made his confession a breath of suspicion never reached one of them. The confidence of the trustees in the man was so unbounded, that one trustee would sign anything he wished; and the other, who generally acted, signed because he saw the name of his fellow-trustee. Mr. Pratt ascertained that here, as at Cuffe Street, the law had been systematically violated; depositors had put in money to any extent; they had deposited their money at all times, and under all kinds of circumstances; charitable institutions deposited their funds without any limitation, one fund having at one time had as much as 5,000l. in the bank. Mr. Pratt, in making his awards, had to take all these facts into consideration, giving satisfaction so far as it was in his power to those who had made their deposits legally, and refusing it in all other cases. In this way he made awards on the trustees of the bank to the sum of over 16,000l. The trustees disputed their liability on the strengthof the Act of 1844, and when the case was brought before the Court of Queen's Bench the decision of the barrister was set aside. To this day, we believe, the unfortunate depositors in the Tralee Bank have in no sense, either by private benevolence or Government aid, been recompensed for their loss.
When the blow first fell with all its crushing weight upon the people, they are described as having borne it“with wonderful patience;”then this state of things was followed by a period of stolid indifference to all the ordinary maxims of thrift and prudence, as if their treatment had destroyed the growth of provident habits. So much is evident from the statements of a respectable solicitor at Tralee who was examined before the Committee of 1848:—
“Can you state (Mr. Herbert to Mr. Justin Supple, 872), from your own knowledge, what class of persons the depositors are, generally speaking?—Generally speaking, they are composed of servants, artisans, mechanics, and small shopkeepers. There are a few of a higher class, but they are very few indeed. I have pass-books with me amounting to about 16,000l., and I assure the Committee that there is not a case in which I could not point out a more or less considerable degree of hardship.”He then stated several cases.
(878)“Can you state from the general feeling of the country, what evil consequence will be the result of the failure?—Taking the failure,”says the witness,“in connexion with the years of famine, I think the consequence will be to drive the classes which have been hitherto industrious and economical in their habits, to vice and wickedness, because the dissipated characters who have saved nothing, or did not take the trouble of saving, now look upon the poor industrious creature who has been cheated, laugh at him, and tell him that they have spent their own money, while the industrious man has had somebody else to spend his for him.”
* * * * *
The agitation was at its height in Tralee when news came that the neighbouring Savings Bank at Killarney had stopped payment. Mr. Pratt had not even finished his awards in the one case before he was required to investigate this fresh iniquity. It would seem that the exposure of the one actuary had led tocloser investigation on the part of the trustees of the Killarney bank, and the earlier development of the fraudulent proceedings of the other official. Here again the frauds were found to be of an ingenious character, and might have been continued over an indefinite period, but that the trustees were compelled by the force of public opinion in the neighbourhood to do the work they had taken upon themselves. As it was, the deficiency was found to amount to 20,000l.: the entire liabilities of the Killarney bank were 36,000l., but the money in hand and the property of the actuary, who decamped, which was calculated to realize about 5000l., reduced the loss to the former sum. As the average amount due to each person was 45l.we may well conclude that the majority of the depositors were of the poorer classes. Though the real loss was less than in the case of the Tralee Bank, the bank at Killarney was found to have been managed with greater carelessness; the trustees and managers professed to make a yearly audit of accounts, but this to all intents and purposes meant nothing more than taking the actuary's word for everything. The details of this fraud have never, so far as we can find, been made the subject of a searching public investigation, so that little more is known than that the frauds in question were of the usual character. Mr. Pratt, in a short report which he presented to the Lords of the Treasury after he had visited the place, said that he found the one case to be very similar to the other (Tralee), both as regards the actuary and the managers. In both cases the accounts of the treasurer were correct, and in both had the trustees grossly neglected their duties. Here again he made awards against the bank to a large amount, and in one respect these awards were much called in question. This public officer received much blame,both in and out of Parliament, for the character of his decision, whereas it seems quite evident now that he simply endeavoured to carry out the regulations of a most imperfect law.
The law of 1844, there can be no doubt, was unjust in the case of one class of depositors at Killarney. On the clauses of this Act, Mr. Pratt was compelled to award to those depositors who had contributed their money after 1844, only the surplus money which was left after the depositors who had made legal deposits[120]before 1844 had been paid their claims in full. This decision was, of course, come to on the ground that the trustees had not assumed the responsibility provided by Mr. Goulburn's Act. In this way the depositors before 1844 got 20s. in the pound, whereas those coming after that year only got 3s. in the pound, and a further small instalment afterwards when the actuary's property was realized. The decision might be right in the eyes of the law, but the law was most unjust that rendered such a decision possible, or proper.
The next Savings Bank failure in the order of its occurrence, which has been made the subject of any investigation, was that at Auchterarder, in Scotland, in 1848. The Committee of 1849 were appointed to inquire into the case, as well as the Irish cases already spoken of, but we do not find that any evidence was taken on the failure in question. It seems, however, that the Auchterarder Savings Bank was a branch of the important institution at Perth: notwithstanding this, it was locally managed, the local trustees, furthermore, being held responsible for any irregularity. This small bankwas originally established in 1841, the principal landed proprietors and ministers of various denominations taking part in its organization. In seven years the number of depositors had reached to 2,000, and as the total amount standing to the credit of each person was less than the average of 10l. they must have consisted of the very poorest part of the population of this rural district. The number of managers amounted in all to forty; but the ruling power was John Findlay, cashier and parochial schoolmaster, and the sole paid officer of the bank. In December, 1848, a trifling inaccuracy was found out in his accounts, when he lost no time in absconding. It was then seen that he had within seven years appropriated 1,500l. to his own use. The liabilities of the bank were 4,300l., whilst the available assets only realized 2,774l. The dividend, given out of this money, a subscription entered into by the trustees and their friends, and the sale of the defaulting actuary's small estate, ultimately reached to eighteen shillings in the pound. What benefit it was to the poor people at Auchterarder to be connected, as one of several branches, with the flourishing concern in the neighbouring county town, we are at a loss to understand. This connexion did not preserve the accounts from being tampered with; it seems to have afforded no check: and when a paltry sum of 150l. was needed to reimburse this deserving population in full, the Perth institution came forward with—nothing better than advice![121]It surely cannot be a matter of surprise that the bank was“never re-opened,”and that“no private gentlemen could be found to undertake the troubleor risk for the future.”
We have hitherto been concerned almost entirely with Irish Bank frauds; henceforth we shall have to deal exclusively with English ones. Not only on account of the date of its occurrence, but from its magnitude and enormity, the fraud on the Rochdale Savings Bank deserves the first place. It is not too much to say that no Savings Bank defalcation equalled this one in the depth of its iniquity and cunning, and in the disastrous effects which followed, affecting as they did the growth of provident habits not merely in that particular locality, but throughout the entire kingdom.
The Rochdale Savings Bank was commenced in 1818, or immediately after those institutions were recognised by the State. It seems to have been started in the usual way, and to have progressed with great rapidity,—the community about Rochdale forming a very favourable specimen of the Lancashire people. In 1822, George Haworth, a young man of twenty-one, succeeded his father, John Haworth, who had been actuary of the bank since its commencement. As the son remained with the bank almost till its affairs were wound up in 1849, he may be said to have been associated with it through its whole course of thirty years. When very young, this man appears to have shown extraordinary energy and talent for business, and each year he not only added to his engagements, but seemed to accomplish all he undertook with equal readiness. In addition to his duties at the bank, he first took an agency for the sale of wool, then, as now, the staple trade of the town; then he obtained an agency for the sale of porter, both from a Dublin and a London house. Latterly, however, he had advanced himself to the dignity of cotton spinner, and was occupier of a large factory; was at the same time a land agent, estate agent for several gentlemenwho possessed large properties in the neighbourhood, an insurance agent, and valuer and receiver of rents for the Lancashire and Yorkshire Railway Company. Not less on account of his more private character than from those multifarious matters with which he was connected, Mr. Haworth was a man of mark in the place. He was a member of the Society of Friends, and this of itself was a password to the trust and confidence of many men.[122]Whenever anybody wanted a chairman, or sought a little patronage for anything literary, scientific, or charitable, resort was had to“Friend Haworth;”“he always patronised such things as far as he could;”and who could do more, especially one who was“not himself a particularly talented man?”[123]“Talented”he might not be in the ordinary acceptation of the term, nor indeed need he have been, to do this much; but never was there a man more talented in the art of deception.“He deceived everybody by an appearance of wealth.”He lived handsomely,“though scarcely with any particular extravagance;”he was above mere“gig respectability,”and rode in his carriage.“For the reputation of honesty, probity, and wealth,”said Mr. Taylor,“there was no man in Rochdale who stoodhigher;”and so far did he disguise his real character, that his most intimate friends were those who were most deceived by him.“He was not only,”says a friend of ours, who himself suffered by his frauds,“never suspected of doing wrong, but he was regarded as above suspicion and uncommonly safe.”
It is true that some persons now and then expressed their surprise that George Haworth should act as actuary to a Savings Bank, and moreover attend so closely to his duties there when his hands were otherwise so full; but Haworth deceived even these people by putting his connexion with the bank on the ground of charity, and an anxious desire to promote the happiness of his poor fellow-tradesmen,—for whom indeed he was each day laying up increased stores of untold misery. Clever to the last, but supposed by some—of course wise after the event—to have gradually failed in heart and strength after losing his father-in-law, who it now seems was his confidential assistant and accomplice, he escaped his justly-merited punishment in this world, and by an inscrutable Providence was allowed to die unmolested on the 19th of November, 1849. Deluded to the last, his fellow-townsmen considered his loss irreparable; it was a general feeling that this man should have a public funeral, and it was nearly being so concluded when the relatives of the deceased stepped in and wisely put their veto upon it. Strange to say, but only in keeping with the unnatural strangeness of the whole affair, suspicion never entered into the heads of any one, high or low, in connexion with the bank, till this man was far beyond the reach either of earthly anger or law. The trustees and managers were called together after the funeral; and so ignorant were they of the real state of the case and the true nature of their late actuary, that they thought they were met simplyto elect his successor, and were actually prepared with different nominations, and not to hear from the dead man's attorney that the“wealthy and respected man”had been for twenty years trading on the falsest of false pretences, and fattening on the hardly-earned scrapings of the poor whom he had so patronized.
Haworth's solicitor told the unwelcome story of a deficiency. Enough was said to make the trustees at once decide to call in the depositors' books, and in the course of a few days it was ascertained—though it took a much longer time to credit it—that the liabilities of the bank amounted to 100,403l., that the total assets were calculated to realize 28,686l., and that the deficiency amounted to the enormous sum of 71,715l.In the course of two or three weeks the trustees made the announcement of the defalcations to the public, with what result may be better imagined than described. At first the depositors took the matter very calmly—a feeling in which was mingled incredulity; and a disbelief that they would be allowed to lose so much money got possession of the people's mind. The general opinion was, till undeceived, that the Government would have to stand to the loss.[124]Of course this made it all the more deplorable when the real facts became known. One of the witnesses who was examined before Mr. Slaney's Committee on the savings of the middle and working classes (1850), gave the following evidence of the feeling in Rochdale at the time:—“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. One man said, 'Dr. McDowallcame here, and told us that the Government was a set of robbers, and that they did not care about the property of the working men.' He said, 'I did not believe Mr. McDowall then; but when I see there is no security for the savings of the working men in the Savings Bank, and we supposed Government had them under their protection, I believe now that Mr. McDowall was right, and that Government cares nothing about either the poor man or his savings.'”Of course we give this extract simply to show the effects of the fraud on the minds of the poorer classes, for nothing could be more unfair than such conclusions. Soon the depositors came to look the loss fairly in the face; they elected a committee of their number to act for the rest, and Mr. Taylor, the witness before the Committee of 1858, was appointed chairman; they agreed to avoid litigation if possible, and relied on private benevolence and the possibility of a grant from Government to make up the deficiency. The sum of 17,000l.was readily subscribed among the trustees and their friends; another sum of 17,000l.was realized out of Haworth's estate, and ultimately the managers were enabled to give a dividend to depositors of 12s.6d.in the pound.
Thanks to Mr. Taylor's intelligent evidence, we have not only gleaned the above particulars, but we are enabled to give some account of the way the Rochdale frauds, which entailed so much misery and so much loss, were accomplished. As the first question likely to arise in the mind of the reader would be, doubtless, to ask where were the trustees, it would be wise to dispose of it first. Haworth“was exceedingly respected, and everybody had faith in him,”says Mr. Taylor, naïvely;“but from what we discovered, he must have been exceedingly designing for many years.”In no instance thathas come within our notice were the trustees, who ought to have been this man's master, so completely his tools. Haworth was so much the factotum of the bank that he really appointed the trustees; and so“designing”was he, that when he got some one appointed who was likely to attend to his duties, or be otherwise troublesome, he took care to keep the knowledge of the appointment to himself. Mr. Taylor gave his own case in corroboration. This gentleman found out afterwards, that he had been appointed a manager in 1838, and never was aware of the interesting facttill the bank failedin 1849.“I never was at any meeting; I never was called upon to attend any meeting; and I can name several others in the same way.”
Of course Haworth took care to make a show of having trustees. When the same witness was asked (qu. 3,175), if any attended, he said that“one or two attended occasionally; one very old man indeed, who was Haworth's tailor, really was a trustee, and he attended, I dare say, once or twice a month, and sat in the bank; but he was a very imbecile old man, and would do whatever George Haworth told him to do.”Sometimes Haworth had to manœuvre a little in order to get his returns signed, and then he would resort to the trustees whom he in a manner kept in stock. A case in point is recorded. A gentleman named Chadwick was passing the bank during one of Haworth's times of need, and the actuary called him in, and asked him to be kind enough to sign a return. Mr. Chadwick naturally hesitated, as having nothing to do with the bank.“But thou art a manager,”said Haworth, showing him his name, for the first time, in a printed list; and Mr. Chadwick, thinking that he had perhaps just received this mark of the actuary's esteem, at once fell in with his request, and signed the return.
Haworth knew better than neglect to make out and send the proper“returns;”the expedients, however, by which he contrived to get them, false and true, signed, were wonderful for their cunning and daring rascality. It is impossible to spare space to describe them in detail.“Is it your belief,”said Mr. Sotheron Estcourt to the Rochdale witness,“that the returns were always properly furnished?”“I should say so,”said Mr. Taylor;“Mr. Haworthwas exceedingly exact!”When asked why the managers and trustees did not look at the papers to which they put their names, Mr. Taylor said, in justice to these men, that“George Haworth's power of deception was very great, and they were deceived by him.”When it suited him he would deceive a gentleman into taking office, and then constantly deceive him in the execution of the duty allotted to him. He went to one gentleman and asked him to become a trustee; the person excused himself on account of his business occupations and the risk; Haworth said that the responsibility was with Government, and showed him a draft bill which had never been passed into law! Satisfied on this point, the person then inquired as to his duties. The arrant rogue said he wanted his name to act as a check on the managers, and sign orders for money which they had audited;for“the managers manage the bank.”When Haworth had obtained the names of gentlemen to act as trustees,&c., on some false pretence or other, he had the audacity to trade upon their names. If any poor person, on becoming a depositor, began to express any doubt about security, Haworth,“who was much looked up to in the town by the poor,”made answer:“Thou seest the names of these gentlemen; what dost thou think of them?”Having succeeded so thoroughlyin beguiling those persons who ought to have acted as a check upon him, all the rest was comparatively easy to a clever and shrewd person like Haworth. Him task was far easier, indeed, than that of some of the Irish actuaries; and once the ascendency gained over the trustees, nothing but close attention and a vigilantconfidantwere required. The first defalcation was traced back to 1837, and consisted of his forging the receipt of different persons whom he represented as having received certain sums of money. The great bulk of the fraudulent transactions was accomplished, however, by the actuary keeping two sets of books, one of which, marked,“H,”were his private books, and the other the public ones. In his private book were found the accounts of nearly a thousand depositors, who, it seems, had been carefully chosen as having the largest sums in the bank, and who generally were bringing additions to their store, and seldom drawing upon it: these moneys he accounted for,“for he was exceedingly exact,”—but only in his private books; he never entered them in the regular bank books, and they were never acknowledged by any one but himself. Under any sort of supervision or audit from a disinterested second party, the discrepancies must have been found out; the trustees, however, as we have seen, did just as they were ordered, without ever thinking of questioning anything; and the yearly audit, which this“exact”man insisted upon—he made himself!“The following is another instance,”to quote from a little pamphlet published at the time,“of Haworth's cunning and duplicity:—A friendly society of Ploughboys deposited on a given day 30l., which was properly entered in the book, and laid before the trustees. Shortly afterwards the actuary must have erased the word 'deposited' and substituted 'withdrawn,' at the same time placing the figure 1 before the30, thus making it appear that the society, instead of depositing 30l.had withdrawn 130l.”With this last instance of his villany in his raid on the Ploughboys' money, we leave George Haworth to the deliberate judgment of posterity, in the hope that this case may always be the blackest page in the catalogue of such crimes.