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CONTINUING our reference
to private bankers, the next firm which falls to be treated of is that
so well known in the early years of last century as Ramsays, Bonars &
Co. The business dates from the year 1738, and the founder was James
Mansfield, who is designated as a "little draper"; but whether the
adjective had a personal or a business signification is not stated.
[From Sir William Forbes' references it would appear that his drapery
business was of a humble character.] One of the partners, John
Mansfield, died in September 1760, and, presumably in consequence of
that event, in 1761 the firm appears as Mansfield, Hunter & Co. It was
subsequently changed to Mansfield, Ramsay & Co., and so remained until
in 1807 it became Ramsays, Bonars & Co. This continued as the style
until the dissolution of the firm in 1837—an event brought about partly
by losses in speculations, and partly by the growing public disfavour
with which private banks were regarded. The partners, however, continued
in the enjoyment of considerable wealth. In the twelve years from 1826
to 1838 the number of private firms was largely reduced, seven having
merged in joint-stock companies, six having failed, and two having
voluntarily given up business. Only six private banks survived this
period; and all of them, except Alex. Allan & Co. (who were extant in
1855) disappeared within a few years thereafter — two through failure,
and three by amalgamation. Joint-stock banks were springing up all over
the land, and the older banks were pushing out their branches. Private
banks were looked on—not without reason—with increasing suspicion; and
their joint-stock rivals —many of whom were hardly more deserving of
confidence—enjoyed in inverse ratio the esteem of the public. From 1825
to 1840 a fever, or rather mania, raged in Scotland regarding the
profitableness of joint-stock banking; and during that time eighteen new
establishments were formed, of which number only six now exist. This
was, of course, only a manifestation of the general joint-stock epidemic
rampant in the United Kingdom at the time. Much reckless competition and
general mismanagement characterised the direction of these new
companies; and although only two—the Western and the City—reached the
point of stopping payment, several of those which were absorbed by
stronger offices have been generally considered as in an insolvent
condition when they transferred their businesses.
It does not appear
whether or not the two firms who stand out as the pioneers of private
banking in Scotland had any rivals during their early years. It is
possible that one or two houses, such as the Fairholmes and the Cumings,
were not much if at all behind them; but on this point there is no
certainty. A. dozen or more firms were in business fifteen years later,
who all disappeared ere the close of the century, for the most part in
the memorable year 1772. With very few exceptions these firms were
merchants and commission agents as well as bankers—a combination of
business which characterised Scottish private banking more or less
throughout its career, and which proved very destructive to it. They
were, moreover, not exactly in the position of competing with the
joint-stock banks. While transacting all the operations of bankers, they
acted as a sort of medium between the latter and the public. On the one
hand, they were always customers of one or other of the public banks,
whose notes they issued (it was not until a later period that some firms
issued their own notes), and whose funds they borrowed to lend out on
their own responsibility. We shall find that this system resulted in a
very grave danger; but it continued uninterruptedly for the greater part
of a century.
Notwithstanding the
efforts of the two banking corporations and their private coadjutors and
rivals, the trade and manufactures of Scotland do not seem to have
thriven to any considerable extent during the first half of the
eighteenth century. It is probable that the people were generally more
comfortable than they had been previously, as the comparative serenity
of political affairs permitted them to work to more advantage than they
had been able to do at any former time. But they were still very poor,
and far behind their English neighbours in the arts of civilisation.
Even the Irish appear to have been ahead of them in some branches of
manufacture. A contemporary writer even goes the length of stating, in
what it may be hoped is somewhat exaggerated language, that "luxury,
corruption, avarice, and ambition are as rampant as ever. Our taxes are
as high, and our debts, I am afraid, not much diminished. Our trade and
manufactures continue in the same languishing condition . . These causes
have spread a face of poverty over the whole nation, especially the
distant manufacturing ones, which hath excited multitudes of poor
wretches to several acts of violence, notwithstanding our army, as well
as the Riot and Black Acts." [Scots Magazine, 1739, p. 9.]
The linen trade, however,
received much attention, and seemed only to require the application of
capital to develop into a national industry of a remunerative nature. An
Englishman, writing in 1739, and subscribing himself "A hearty
well-wisher to Scotland," alludes to a satisfactory increase and
improvement in that branch of manufacture, and states that "the increase
and improvement lately made in the linen manufacture of Scotland, has
afforded the most solid satisfaction to every friend of the interest of
Great Britain. And the quantities of fine cloth that have been sent
hither of late hath very much altered the judgment of people here, who,
from the large parcels of slight goods you have hitherto sent us, were
apt to conclude you incapable of furnishing linen of any considerable
fineness." [Ibid. p. 361.] He goes on to recommend the establishment of
a society in Edinburgh for the prosecution and encouragement of the
trade. As we shall see, this idea was realised a few years later, though
on somewhat different lines from those suggested.
Meanwhile the rebellion
of 1745 broke out, and thoughts of mercantile and financial progress
gave place to the instincts of safety. All the records seem to show that
the sympathies of the Lowland middle class and the townspeople generally
were on the side of the reigning power. The little progress they had
made was owing to the security and peace they had enjoyed at home (the
almost continual foreign wars were borne as a chronic evil immeasurably
preferable to the constant unrest at home from which the nation formerly
suffered), so they were little disposed to rejoice at the advent of
their legitimate sovereign, although his efforts were aimed at their
unloved English rulers. Accordingly, we find that the approach of the
rebels upon Edinburgh was regarded with dread by the citizens; and the
banks and some private persons, as well as the Government departments,
removed their effects into the Castle for safety. This was about the
14th September. Three days later the Pretender's army took possession of
the city. In a contemporary account, it is recorded that on the 25th
September "a proclamation was issued, in which, upon a narrative that
great inconveniences had attended the removal of the two banks into the
Castle, and from an opinion industriously spread, as if the Chevalier
intended to seize on money wherever it was to be found; he declared that
the money lodged in the banks should be entirely sure under his
protection, and free from all contribution to be exacted by him in any
time coming, so that the banks might return to their former business
with safety; and that he himself should contribute so far in the
re-establishment of publick credit, as to receive and issue bank-notes
in payments." Notwithstanding this polite, but by no means
disinterested, manifesto, the bank directors continued to regard the
security of stone walls and cannon as more reliable than the words of a
prince.
They were not left
undisturbed, however, for, finding invitations and assurances of no
avail, Prince Charles Edward sent his officers to the bank managers,
demanding payment of a considerable amount of their notes in specie.
Many interviews took place, and eventually it was agreed that, if safe
access could be got to the castle, payment would be made. To understand
the position aright, it must be remembered that the Prince's power
extended from Holyrood House to the city end of the castle esplanade,
and intermittent conflict raged between that point and the fortress. A
truce having been arranged between the Government forces and the rebels,
the bank managers, with their assistants, advanced under a white flag,
and were admitted to the castle. Having counted out the necessary amount
of coin, they proceeded to utilise the opportunity by destroying notes
which they had deposited with the coin; but it would seem that the
authorities of the castle were anxious to get rid of them, and so
hastened them that they had time only to tear the notes in pieces
instead of burning them. Perhaps the Government commanders disliked this
wholesale destruction of negotiable securities, which, at some turn of
Fortune's wheel, might prove useful to them. These visits were repeated
on several occasions, as the rebels were doubtless anxious to convert
the Scotch notes they possessed into a more marketable commodity, in
prospect of their advance into England. It seems a little curious that
the Government authorities should have allowed the Prince thus to secure
the sinews of war; but, perhaps, their object was to avoid reprisals on
the city.
The battle of Prestonpans
took place on the 21st September, five days after the prince entered
Edinburgh ; and on the 31st October he left it with his army for the
south. By the middle of November, the law officers and other Government
authorities had returned to the city from Berwick, where they had sought
safety, and the banks resumed business. It was not until February of the
succeeding year, however, that affairs were so far settled as to allow
of the full resumption of their operations by the banks.
On the 16th April 1746,
the rebellion practically ended with the battle of Culloden; and soon
thereafter we find that the suspended proceedings in connection with the
linen trade were resumed. This manufacture had for long been the most
important in Scotland; but it would seem that at the time of the
formation of the Board of Trustees for Manufactures (1727) it had very
largely fallen off. By a system of premiums and bounties, they
endeavoured to encourage it in a similar way to that pursued in Ireland,
although not at a proportionate cost to the State. Whether owing to this
nursing, or to the more satisfactory process of spontaneous energy on
the part of the people, a gradual improvement manifested itself. During
the five years, 1727-32, the value of linen cloth stamped for sale
within Scotland is stated to have amounted to £662,938; and so rapidly
did the trade increase that, in the five years 1746-51, it had risen to
£1,607,680. In this latter period, several manufacturing companies were
formed for the prosecution of trades hardly attempted previously. Among
these were rope and sailcloth manufactories, ironworks, gold and silver
lace companies, sugar refineries, herring and whale fisheries. We are,
however, principally concerned with the establishment of a corporation
for the encouragement of the linen trade, but which has for fully a
hundred and twenty years been better, if not exclusively, known as a
bank.
The British Linen Company
was incorporated by charter of George II., dated 5th July 1746. The
authorised capital was £100,000, but of this only £50,000 was offered
for subscription at the outset. No decisive movement appears to have
been made until 17th September, when a general court of the proprietors
(presumably few in number) was held to settle "the method of proceedings
at elections, the forms of oaths, and several other rules and bye-laws."
It was agreed "that a seal be made for the company in the figure of a
Pallas," and that the subscription books for the capital should be kept
open at Edinburgh and London until £50,000 were subscribed for. Of these
subscriptions 10 per cent was to be paid by 1st December, and the court
of directors was authorised to borrow money, "in case of need," on bills
or bonds under the company's seal, and they were required to meet at
least once a week. The first managers appointed were Ebenezer Macculloh
and William Tod, merchants in Edinburgh. In the warehouse there were to
be "a book-keeper and an accomptant, two staplers to give out the yarn
and receive the cloth, and a porter." These four officers were endowed
with "salaries not exceeding £150 in whole"; and they were prohibited
from receiving gratuities or keeping public-houses or pawnshops.
In the disposal of
profits a more liberal system was adopted, and it was evident that the
projectors calculated on a very remunerative business from the outset.
The proprietors were to get 5 per cent per annum on their paid - up
stock preferentially. The managers were to get 2 per cent, and the
directors ½ per cent, on the sales, and losses were to be provided for
out of the remainder. [Report of meeting, Scots Magazine, 1746, p. 624.]
To our modern ideas these arrangements savour of reckoning without the
host; but doubtless the company knew very well what they were about.
They gradually engrafted banking on to their original business. In 1750
they began issuing their own notes, and they doubtless engaged in
general financial business from an early period; but, although their
name occurs in the earliest lists of Edinburgh bankers, their banking
business seems to have been (until a comparatively late period) of a
semi-private nature, and to have resembled that of contemporary private
bankers. They gradually withdrew from all mercantile and manufacturing
operations, which were brought to a close in the year 1763. But it was
not until 19th March 1849, when they obtained a new charter, that they
were formally recognised as a banking corporation.
Ten years later than
Messrs. Mansfield & Co., another important private banking house arose.
It was that of Messrs. Thomas Kinnear & Sons, who first began their
business as bankers in 1748. The house maintained a good position during
all the private banking era, but signs of weakness seem to have shown
themselves towards the close of their career. They passed through the
fiery trial of the Douglas, Heron, & Co. period, when almost all the
private banks in Edinburgh were swept away; but they could not withstand
the current of the public mind towards joint-stock banking, which became
strongly developed in the first quarter of the present century. In 1831
they were joined by the much younger firm of Donald Smith & Co., as
Kinnears, Smith & Co.; but the amalgamation was of little avail, for on
the 24th July 1834 the firm closed their doors. They did not issue their
own notes, but used those of the Bank of Scotland.
About this period
forgeries of bank notes appear to have been frequent. The punishment
inflicted was usually transportation to the plantations; but
occasionally the more summary and effective preventative of hanging was
inflicted. In the former case, if the convict returned to the country,
he was to be whipped periodically until re-transported. These forgeries
seem, however, to have been poorly executed and readily detected. |
