THE POWER OF PANIC.

Globe, Volume XX, Issue 1574, 6 March 1879, Page 4

THE POWER OF PANIC.

[" The World."]

There has seldom been a more glaring illustration of the power of panic than is furnished by the compulsion laid upon the Caledonian Bank to go into liquidation. It has had to stop business, and its shareholders have probably lost their capital, because it held four £IOO shares in the City of Glasgow Bank Its business was perfectly sound ; its capital was untouched; its stability was not sin pectfid; and it is morally certain it could hare continued prosperous and flourishing, doing a safe banking business on sound principles, and meeting all its liabilities with the utmost ease, those resulting from the Q-lasgow Bank calls included. It could have done so, and would have done so ; but people would not believe it, and their disbelief compelled its directors to put up the shutters. In an evil day for all its interests the manager received, in security for an advance to a miller near Wairn, to enable that individual to start a mill for manufacturing farina from Sotatoes, four shares of the City of Glasgow lank. The Caledonian Bank directors, all unconscious of their danger and coming doom, continued to hold the shares which they might have sold at a profit often since 1875, the year they received them. At length came the Q-lasgow smash, and the Caledonian Bank directors gave immediate assurance that they could meet all calls in respect of the four shares with the greatest ease. So recently as only a week before the bank was forced into liquidation, they issued a circular showing that, though calls to the extent of £3OOO per share should be made, the bank would have no difficulty in pajing the amount. They were even ready to assign over £IOO,OOO to tho Glasgow Bank liquidators to meet calls if they might thereby win their discharge. But the liquidators could not give a discharge, bocause they were wholly unable to fix the maximum contribution, and a conditional discharge would not havt* arrested the process of waning confidence in the minds of the publio in consequence of the uncertainty. The shareholders of the Caledonian Bank who rushed to sell their shares are responsible for the disaster. Their panic sales forced down prices, and as the liquidators of the Glasgow Bank saw substantial shareholders being rapidly transformed into men of straw, they felt bound to interpose. The customers of the bank caught the alarm, and its business was in swift, course of destruction. If the share register could have boon closed, all might have been well; but that could not be done ; and with the indefinite liability of the Glasgow Bank in prospect, customers would have gone on withdrawing their deposit*. The dire necessity had therefore to be faced of winding up a sound business, not because the bank could not meet its liabilities, but because it was impossible to estimate what the amount of those would be, or—equally fatal catastrophe—when they would have to be met. The Caledonian Bank was ruined by the Glasgow Bank, but the immediate agent was the irrational terror of its own panicstrioken shareholders. Its revival would be practicable if there were a speedy liquidation of the Glasgow Bank on the basis of a composition, as advocated in these columns ; but if the hideous wreck be left cumbering the ground for long years the hope of such a roault must toon vanish away.