THE POWER OF PANIC.

Thames Star, Volume X, Issue 3180, 29 April 1879, Page 1

THE POWER OF PANIC.

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 hare probably lost their capital, because it held four £100 shares in the City of Glasgow Bank. Its business was perfectly sound; its capital was untouched; its stability wbb not suspected; 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 Glasgow Bank calls included. It could have done so, and would hare done so; but people would not believe it, and their disbelief compelled its directors to put up tho shutters. In an evil day for all its interests the manager received, in security for an advance to a miller near Nairn, to enable that' individual to start a mill for manufacturing farina from potatoes, four shares of the City of Glasgow Bank. The Caledonian Bank directors, all unconscious of their danger and coming doom, continued to hold the v shares which they might have sold a! a profit often since 1875, the year they received; them. ! At' length came the Glasgow smash, and the Caledonion 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 shoving that, though calls to the extent.of £3000 per share should be made the bank would have no difficulty paying the amount. They were even ready to assign over £100,000 to the Glasgow Bank liquidators to meet calls if they might thereby win their discharge. But the liquidators could not give a dig. charge, because they were wholly unable to fix the maximum contribution, and a conditional discharge would not have arrested the process of waning confidence in the minds of the public 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 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 hare, been .closed, all might have been wejl;. but that could not be done; and with the indefinite liability of the Glasgow Bank in prospect, customers would; have gone on withdrawing their deposits. 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 impossible to estimate what the amount of those would be, or—equally fatal catas; trophe—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 panic-stricken 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 that hideous wreck be left cumbering tho ground for long years the hope of such a result must soon vanish away.—World.