Chapter IV (2)

It was seen from the commencement of Savings Bank operations that the first and most imperative element should be complete and unquestionable security. When Government undertook to legislate for Savings Banks it did so with a view to their protection from those frauds which must necessarily overtake some of a great number of semi-private undertakings. In 1817 the Banks were rapidly increasing in number and importance, and it was only natural to suppose and assume that abuses would creep into the management. To meet the probability of a misapplication of the funds, Government agreed to take all the money deposited with the trustees of Savings Banks, and to guarantee a certain fixed rate of interest for it, even above that which the fund directly obtained for itself. This was at once an encouragement to the frugal and a perfect security for such sums as were paid to the National Debt Commissioners. In the interval, however, between the payment of the sums by the depositors and the second payment by the trustees, no safeguard was provided beyond the vigilance of the same voluntary and unpaid trustees. Those trustees were completely irresponsible after the year 1828. Before that time we can only assume their responsibility, not from the ordinary reading of the enactment, but from a decision which was given in a court of law. That decision was to the effect "that deposits are made by persons, not on the faith of the person acting as cashier or actuary, but upon the faith of the gentlemen who act as trustees.... If, therefore, the clerk or other person employed by them (the trustees) is guilty of peculation, they are themselves liable for any defalcation which may ensue." Whether this decision was right in law or not matters little now, inasmuch as the Act of 1828 released the trustees from any such obligation entirely, declaring as it did that "no trustee or manager should be personally liable, except for his own acts or deeds, or for anything done by him;" and even this was again limited "to cases where he should be guilty of _wilful neglect or default_." The valueless character of the safeguards granted to those who of all classes most needed ample security for that for which they had pinched and economized soon began to be seen.

Having limited the period of our survey in this chapter to the year 1844, we cannot here introduce the case of the great frauds in Savings Banks which created such painful sensations all over the country as one by one the most monstrous iniquities practised on the most deserving of the poor came to light. Our only reference here will therefore be to one such case in Ireland, and the first instance of the kind in England.

The case of the Cuffe Street Bank in Dublin, which, so far as we can find, was the first serious defalcation committed on Savings Banks made public, was also one of the most ingenious instances of an accumulation of frauds on record. The other case occurred in connexion with the Hertford Savings Bank in 1835. The Dublin fraud brought to light earlier than this date deserves the first place, not only on this ground, but because it was greater in extent and deeper in villany. No one can read of the numerous cases of fraud which have occurred at different times in connexion with the Irish Savings Banks without feelings of deep indignation. The influence, it is quite clear, is felt in Ireland to this day. The Irish people are quite an exceptional people, with whom forethought and self-control are not indigenous. One of the most important organs of public opinion in Ireland, in alluding to such topics, has said that "nothing can be expected from the Irish peasant until he learns to restrain his irregular impulses--impulses often generous, but too often impetuous and ill-directed--until he learns to make the gratifications of the present yield to considerations for the future." For many years the Irish poor were left to themselves, and the result was shown in their reckless and determined improvidence. The institution of Savings Banks is described as having come to the Irish industrial population like a ray of hope. Great improvement took place. The Irish labourer has never been worth so much as the English one,--the wages of many at the period of which we are speaking being generally sixpence, and scarcely ever more than a shilling a day,--and yet it can be proved that this very class had managed to contribute to the Savings Banks in Ireland, up to the year 1841, no less a sum than 2,000,000_l._ out of the total of 2,800,000_l._ then remaining in Irish Banks. It is impossible for pen to describe the result of a bank failure, occasioned by the worst possible circumstances of fraud, upon such classes as these. The actual failures spread dismay over the entire country. The loss they sustained was their ruin; for, so wronged, scores of them were thrown back despairing on their former recklessness, and referred to their treatment as full excuse for any amount of subsequent improvidence. And men will hesitate before they blame them.

The Cuffe Street Savings Bank at Dublin was originally established in 1818 as the St. Peter's Parish Savings Bank. It was started by several of the most influential gentlemen in Dublin, who formed themselves into trustees and managers. The then Archbishop of Dublin, Archdeacon Torrens, Judge Johnson, and Serjeant (afterwards Lord Chief Justice) Lefroy being among the most prominent. On the strength of the well-known character and wealth of the trustees, this bank from its commencement did a very large business; so much so, that it was calculated to have received in deposits in one year (1831, when the bank was at its best,) no less than 100,000_l._ The bank began on an unpretending scale enough, to judge by the appointment and pay of its only salaried official.[62] This person was a Mr. Dunn, who combined in 1818 the functions of sexton to the parish with which the bank was immediately associated, with that of actuary of the bank, at a salary of five pounds a-year. The rector of the parish was security for Dunn; but all such considerations troubled the trustees but little. On the strength of this person's religious character, for "he was a very correct man,"[63] he soon became factotum. Almost from the first a boy of the name of Ballance, whom Dunn had taken from a charity school, was his book-keeper. This lad was also a kind of general servant of Dunn's, living with him in his house, and soon became his perfect tool. Without making him his confidant--for the actuary was too cunning, as it seems, for that--he used him exactly as if he had been one. For eight years Dunn managed solely the affairs of the bank, giving the most perfect satisfaction to every one, depositors as well as trustees. In 1826, however, a Mr. Lannigan, a barrister, comes prominently upon the scene. This gentleman was a trustee, and seems to have been dissatisfied with being one merely in name. Mr. Lannigan began, therefore, a little "meddling," and from the way his interference was received, this trustee, shrewder than the rest, began to suspect something not quite right. He then looked narrowly into the system of keeping accounts, and was not long in finding sufficient to awaken the strongest suspicions of Dunn's malpractices. Dunn, however, had not been asleep all this time. He not only with great ingenuity kept his accounts as square as possible, but operated upon the credulity of the other working trustees, and succeeded in getting a party among the number to form a wall round him. On Mr. Lannigan mentioning his suspicions to his brother trustees, Dunn's machinations stood him in good stead: they would not hear anything to the prejudice of this "very correct man." Mr. Lannigan repeated his attempts with the same effect; was considered a suspicious and troublesome fellow, and got no little abuse for his pains.[64] For five years it is said this unseemly contest went on, and although this trustee succeeded so far as to get more than one sub-committee appointed, nothing came of it: the committee were too prejudiced in favour of their servant to go the right way to work in investigating the matter, or they were too easily blindfolded by him to find anything out. Mr. Lannigan, however, persevered in his opposition, and was rewarded by Dunn's retiring, amidst the condolences of the whole parish, which evidently thought him a very ill-used man. Soon the tables turned; and grief of this cheap sort gave place to bitter indignation. Immediately after the man had resigned a depositor applied for some money, when, on comparing his pass-book with the ledger, the account was found to be open in the former and closed in the latter. Hereupon the _ci-devant_ parish sexton absconded. With eyes at length wide open, the trustees called for the books of other depositors, and without as yet making any noise, soon found that Dunn had appropriated 6,000_l._ to his own use. The trustees then communicated with the National Debt Commissioners, and asked their advice in the emergency, suggesting that some one should be sent over to inquire into the circumstances of the bank, and to close it, if it were found necessary to do so. Mr. Foot, one of the trustees, a Director of the Bank of Ireland, who had been one of Dunn's strongest friends, and who was now one of the most anxious that the position of the bank should be retrieved, took the communication to London, and succeeded in securing the services of Mr. Tidd Pratt. That gentleman went to Dublin, however, not to investigate the case; but simply to make awards, stating how far and in what cases the trustees were liable to pay the depositors. He adjudged in 208 cases, and to the amount of 11,864_l._ Of this sum 7,500_l._ were to be paid by the trustees out of the funds remaining in the bank, while the rest claimed up to that time did not consist of legal claims, as the money had been paid to Dunn out of office hours, at his private residence, and even in the street.

Mr. Pratt found out in making his awards that almost every legislative enactment relating to Savings Banks had here been systematically violated; that the bank itself had rules founded upon the Act, but that they had all been evaded. Depositors had placed as much as 200_l._ in the bank in one year, and had received interest upon all they had deposited; the same individuals were also found to have had two different accounts in the bank. In all cases of this kind where a deficiency existed Mr. Pratt ruled that the depositors could not legally recover, but he recommended in his private capacity, that if the bank were carried on, such sums might be paid out of the accruing yearly profits. Mr. Pratt is said to have recommended in the same way that the bank might go on under a fresh management, and seems to have appointed another set of trustees for the purpose; at the same time informing them that the National Debt Commissioners would _receive without remark_ the yearly statements as usual, though those statements must of necessity for some time to come exhibit an increase of liabilities over assets. The bank was carried on, and against Mr. Pratt's advice the whole of the claims were at once met, "with a view," as the trustees said, "to induce a more perfect confidence." In 1845, the Government observing that year by year the bank was getting into a worse financial position,[65] made an attempt to close it; but on the case being submitted to the Attorney and Solicitor General, they found they could not do so unless the Annual Returns were _not sent_. The Returns, worthless as they were, had been regularly sent, and thus the Executive was powerless. After another crisis at this period, the bank finally went down in 1848, the liabilities amounting to the sum of 56,000_l._ and about 90_l._ to meet it. The number of depositors who had accounts with the bank at the time was 1,900, nine-tenths of whom were poor people. In a debate which occurred in the House of Commons immediately after this failure, Mr. Reynolds, the member for Dublin, commented in strong terms on the conduct of the National Debt Commissioners, who had known the state the bank was in for fifteen years, and had never zealously interfered.[66] This member also stated his intention to move for a Select Committee to investigate the whole question. The Chancellor of the Exchequer said he saw no objection to such a committee, and it was subsequently appointed. The proceedings of that committee, and the assistance which was given to the defrauded depositors after much debate, will be referred to in their proper place in the next chapter.

The results of this fraud in Dublin and the neighbourhood was most disastrous; not only so, but years afterwards, in remote parts of England as well as Ireland, this case of fraud was referred to with considerable bitterness, and urged as an excuse for prodigality and recklessness. There was at the time a still more important Savings Bank, with several branches, in Dublin; and so great was the effect of the fraud, that nearly all the money deposited in this bank was withdrawn within four weeks, and it was a considerable period before it recovered its position. The depositors in the Cuffe Street bank were of the poorest classes, and the effect upon them when they found they had been robbed of all they had is described as painful in the extreme. "Dealing with the case, and the details of it," said one influential gentleman, "I have never seen anything more calculated to excite painful feelings than this was; some of the depositors were on the very verge of wretchedness and destitution, without a shilling to support them." According to another excellent authority[67] some died of want and distress, and many of them had to seek the shelter of the workhouse. Before the case came on for discussion in Parliament, several petitions were presented to the House of Commons, praying for help, and setting the pitiable situation in which the frauds had placed many of the depositors before the public; and one, signed by 5,076 citizens of Dublin, with the Protestant and Catholic Archbishops of Dublin heading the names, bore out in full the facts to which we have just alluded.

The fraud in connexion with the Hertford Savings Bank was one of the earliest cases that occurred in England, the particulars of which have been made known. This bank, as will be remembered, was one of the first formed in this country. Like many more of the original banks, this one was conducted on the principle of making it a Head office for the surrounding district, with branch banks radiating from it as from a centre. Clergymen, as has already been stated, almost exclusively acted as the Agents for these branch banks. The Rev. Mr. Small, a clergyman at St. Albans, acted in this capacity in that town, and in the course of a connexion with this bank, extending over a period of several years, contrived to embezzle the money entrusted to him to the extent of 24,000_l._ This he did in two different ways. In the one case, he received deposits and did not remit them; and in the other, acting with due clerical discretion, he applied to the Head bank for sums in the names of depositors for which he had not received their warrants. The systematic frauds of this reverend gentleman were found out when the St. Albans Bank was detached from the parent stock under the erroneous impression that it was strong enough to commence business on its own account. It appears that in this way the trustees of the principal bank were only liable for half the amount of the defalcations; but it ought to be placed on honourable record, that eventually, through the liberality of the trustees, who, fortunately, were principally rich noblemen, the poor depositors were reimbursed of their losses in full. We have gathered the above facts from statements made in the House of Lords in 1835, and as the question of the liability of trustees and the security of deposits was then largely introduced, it may be interesting to follow up the story with a few remarks to which the case gave rise. The Marquis of Salisbury, one of the trustees, asked the premier, Lord Melbourne, if the law, as it then stood, could not be altered. The liability of trustees, inculpating, as it might, innocent men, rendered many gentlemen most anxious to withdraw their names from such offices. This was one horn of the dilemma. The other was, how depositors could be made to feel secure. "It was no trifling matter. When Savings Banks were first formed, but few individuals could ever have expected that the sums subscribed would amount to what they now were."[68] It was high time that the security of these savings, and as to who was liable for them, should be once for all distinctly settled. Lord Salisbury was sure no one would like to remain a trustee without knowing the amount of his liability. He then appealed to Viscount Melbourne--who with himself was a trustee of the Hertfordshire Bank, and would have to pay a share of the loss--whether he would not have a bill brought in to remedy the grievance. Lord Melbourne thought it was not necessary. Much as he lamented, for his own sake and that of the country, what had occurred down in Hertfordshire, he did not think that in consequence of this one misfortune they should interfere with the general business of the Savings Banks in the country. Let them look sharper after the management, and then such things would not occur. Lord Brougham believed there had been great carelessness in the case of this particular bank, "but was happy to find that the trustees were such undoubtedly solvent men." Lord Salisbury and the Duke of Richmond were certain, if nothing had to be done, that many trustees would at once withdraw their names, "and then," said the latter, "the body of depositors would withdraw their money." Lord Denman reminded his noble friends that, if the trustees acted so, their responsibility would, in all probability, follow them into their retirement,--"he was by no means sure that their withdrawal would put an end to their responsibility." The Earl of Wicklow hoped that nothing would be said or done which would destroy the confidence of the public in Savings Banks. He trusted that, in this instance, "the trustees would be found liable for the whole of the deficiency." Lord Salisbury thanked the noble Earl for his kind wish, but explained how it was not possible that this could occur. An alteration in the law was eventually made, but the consideration of this change we leave till the next chapter.

[45] _Cobbett's Register._ January, 1817.

[46] Nearly, but not quite. Injury is still done by false and
mischievous teachers of working men; and the latter resent what
they consider their wrongs and grievances in ways which are
equally unjustifiable, if not exactly similar to those adopted by
their fathers. Those who would do real service to the working
classes are those who take up and expose the fallacies of living
demagogues, by which the latter are misguided and led to injure
themselves by strikes, combinations, and hostility to capital and
machinery. And educational reformers will do the State good
service in endeavouring to get lessons taught in political economy
to those who will be at some future day our mechanics and
artisans, and who from continued ignorance of the inevitable laws
of supply and demand, of the value, even to them, of the security
of property, of the laws which regulate the operations of the
market, may possibly fall into the errors and the mistakes of
their predecessors.

[47] _Report of the Committee appointed by the Highland Society of
Scotland to consider what is the best mode of forming institutions
of the nature of Savings Banks, for receiving the deposits of
labourers and others._ Edinburgh, 1815.

[48] Nine-tenths of the existing Benefit Societies are still held
at public houses. This arrangement must always be, so long as it
exists, a theme for reprobation. There cannot be many greater
anomalies than this of the association of the club and the cup,
the bane and the antidote, saving and wasting. Speaking on this
point, the Rev. J. B. Owen justly remarks that the strange
association "together verify the old pagan fable of the tub of
Danaus full of holes, whose daughters were condemned to be
perpetually filling it, while all that was so laboriously poured
in as wastefully and hopelessly ran out." Or, as some one else has
put it who has employed the same figure more strikingly:--

"Like Danaus' tub
Is the public house club:
Their customers' mouths are the holes;
Ill spared is the 'chink'
That's wasted in drink,
To the bane of their bodies and souls."

[49] See next page.

[50] _Quarterly Review_, vol. xxxii. p. 189.

[51] "Many a man in that year," (1825), says Miss Martineau, "set
up for a banker who would, at another time, have as soon thought
of setting up for a king."--_History of the Thirty Years' Peace._
Lord Liverpool complained afterwards of the system "which allowed
any petty tradesman, any cobbler or cheesemonger, to usurp the
royal prerogative, and issue money without check or control."

[52] One prospectus of this date sets forth that, in the district
proposed for a mine there was "a vein of tin ore at its bottom, as
pure and as solid as a tin flagon." Another, "Where lumps of pure
gold, weighing from ten to fifty pounds, were lying totally
neglected," the quantity of gold in the mine "being considerably
more than was necessary for the supply of the whole world." Mr.
Canning, in reference to the companies projected, said soon
afterwards, "They fixed the public gaze, and excited the public
avidity so as to cover us, in the eyes of foreign nations, if not
with disgrace, at least with ridicule. They sprang up after the
dawn of the morning, and had passed away before the dews of the
evening descended. They came over the land like a cloud; they rose
like bubbles of vapour towards the heavens, and destroyed by the
puncture of a pin, they sank to the earth and were seen no more."

[53] _Annual Register_, 1826.

[54] _Progress of Savings Banks._ A series of tabular views, 1829
to 1841, by Mr. J. Tidd Pratt. London. 1845.

[55] _Companion to the Almanac_, 1839, p. 131.

[56] See next page.

[57] We give the statistics as relating to England only. Scotland
is out of the question, not merely on account of the slow progress
of Savings Banks there, but more especially because of there being
nothing analogous in Scotland to our English system of Poor Law
relief.

[58] The mortality at the commencement of the present century was
1 in 40; in 1831 it was 1 in 58; and in 1841, 1 in 62; showing
conclusively that the masses of the people were better housed,
better clad, and, best of all, better fed.

[59] Miss Martineau's _History of the Thirty Years' Peace_, vol.
ii. p. 88.

[60] _Times_, September, 1844.

[61] To make this statement more clear, we append a later Return,
which, on other grounds, is interesting, as showing which classes
of the community resort most frequently to Savings Banks. It
speaks volumes as to the culpability of the higher paid English
operative, that the agricultural labourer, with ten or twelve
shillings a week, contrives to save more, relatively, than he does.

+----------------------+---------+--------------+----------------+
| |Number of| No. of |Average Deposits|
| Counties. | Accounts|Depositors to | per head of |
| | open in | every 100 of | Population, |
| | 1858. | Population. | 1858. |
+----------------------+---------+--------------+-----------------+
| AGRICULTURAL:-- | | | £ s. d. |
|Berkshire | 16,393 | 9·64 | 2 12 7 |
|Devonshire | 61,558 | 10·33 | 2 18 11 |
|Dorsetshire | 14,134 | 7·67 | 2 12 2 |
|Yorkshire, East Riding| 25,091 | 11·35 | 3 6 1 |
| | | | |
| MANUFACTURING:-- | | | |
|Lancashire | 117,927 | 5·80 | 1 12 4 |
|Yorkshire, West Riding| 63,334 | 4·77 | 1 5 6 |
+----------------------+---------+--------------+----------------+

Something of this result can of course be traced to the varying
facilities, such as the number of banks, which were not always
established in the most populous localities.

[62] _Vide Report of the Select Committee appointed to Inquire
into and Report upon the circumstances connected with the failure
of the Cuffe Street Savings Bank_, 1849, from which our account is
derived.

[63] "I am certain," said a reverend witness, "that he was a very
correct man until the temptation of such an enormous quantity and
overflow of money got into his hands."--_Report_ (36).

[64] One of the questions asked, by the Chairman of the Committee
just quoted from, of Mr. Fox, curate of St. Peter's, Dublin, was
(32): "Do I understand you to say, that Mr. Lannigan communicated
his suspicions regarding Mr. Dunn to the Board of Trustees?"
"Yes," answered the reverend gentleman, "and we used to have
_extremely warm contests_ there on that account, because he was
not a man very capable of explaining his meaning."

[65] The whole of Dunn's defalcations, which were found ultimately
to amount to about 40,000_l._ were not found out till this year.

[66] Great attempts were made to show, at this time, that the
Government had grievously neglected its duties, and that the
Arbitrator exceeded his. From the anomalous and unsatisfactory
state of the law, which occasionally placed the Commissioners and
the Certifying Barrister in embarrassing positions, a colour was
often lent to these allegations. It is very clear that flagrant
mistakes were palmed upon the National Debt Office, and never
found out, and not less certain that, at this early period, Mr.
Pratt was often hampered by uncertain and incomplete powers.

[67] Dr. Hancock, in a pamphlet entitled, _Duties of the Public
with respect to Charitable Savings Banks_. Dublin, 1856.

[68] About sixteen millions sterling.