Chapter XVIII, of Cassells Illustrated History of England, Volume 9 page 4

So persevering and wide-spread an agitation in pursuit of a political object in a country constitutionally governed, must have disposed the Conservative Government, even if originally averse to mooting the question, to make the question of Parliamentary Reform the serious subject of their councils. But we have already seen, from the speech of Mr. Disraeli in Buckinghamshire, that, although the Government regarded itself as wholly unpledged, the question of Reform was one which had no terrors for the versatile and experienced leader of the party in the House of Commons; and in the course of the winter it became known that the Ministry were engaged in framing a large and comprehensive measure, and would introduce it early in the ensuing session.

One of the severest commercial crises ever known in this country will make the months of May and June, 1866, for ever memorable in the history of banking and finance. The crash which caused so many goodly and solid- seeming commercial and financial structures to topple over and collapse in irretrievable ruin, was the natural reaction after a period of feverish, over-sanguine, and partly unsound speculation. The year 1865 had witnessed the launch on the money market of a vast number of new undertakings, carried on by companies offering the advantage of limited liability to their shareholders, and professing to hold out to the fortunate investor opportunities of enriching himself beyond the wildest dream of avarice. As the spring of 1866 wore on, the solvency and utility of some of these speculations came seriously into question, and a tendency to realise manifested itself. There was one immense financing firm which in the magnitude of its discounts had no equal in the City. This was the Limited Liability Company of Overend, Gurney, and Co., the shareholders of which had, as a great privilege, purchased the good-will of the business of the well-known firm of Overend and Gurney the year before, for the sum of £500,000. At the time they thus sold their business, the firm, as the subsequent judicial investigation proved, was hopelessly insolvent to the extent of many millions. The representatives of the new company must have been either quixotically confiding, or culpably remiss, or financially incompetent, not to have obtained some inkling, at the time of the negotiations for the purchase, of the real state of affairs; it seems certain, however, that their ignorance was as complete as that of the world outside. In March or April, it became known that certain firms and companies, with which Overend, Gurney, and Co. had had large transactions, Were in difficulties or had suspended payment; a feeling of uneasiness arose; the shares of the company, which had been quoted at a good premium, fell below par; and some of the new shareholders, becoming alarmed, commenced to sell out. An immediate further depreciation of the shares was, of course, the consequence; this led to increased alarm, and to pressure from the company's creditors. The directors, perceiving ruin to be imminent, sought assistance from the Bank of England; but the authorities of that establishment, after investigating the affairs of the company sufficiently to convince themselves that no slight or temporary measures of relief would be of the least avail, declined to grant the accommodation requested. Meantime, the run upon them was increasing, and the price of the shares continually falling; and on the afternoon of May 10th, the company had no choice but to close its doors and suspend payment. The liabilities were stated at the enormous sum of £11,000,000; the assets, it was feared, and with great reason, as the events proved, would, even if realised under the most favourable circumstances, leave an enormous margin of indebtedness. Friday morning ushered in a day of universal panic and consternation in the City, such as had not been seen since the disastrous year of 1857. The vast multitude of buyers and sellers, bulls and bears, knaves and dupes, brokers and investors, who j swarm during the business hours of the day in the streets which surround the Royal Exchange, consented! together, as if by a tacit understanding, to call the day " Black Friday." Every half-hour some well-known firm or company, which but the day before had presented a smiling and prosperous front to the world, was announced to have suspended payment. Crowds of despairing depositors collected round the door of Overend, Gurney, and Co., in Lombard Street, and discussed in tones of anger or despondency the prospects of the bankruptcy. Upon all the private banks the run was in- I tensely severe; the managers of these sought assistance from the Bank of England, and, when the securities were unexceptionable, were in no instance refused. But the consequence was that the Bank, whose reserves at the beginning of the day were close upon £7,000,000, although it charged 9 per cent, all day for accommodation, found itself, when the business of the day was over, with the reserves reduced to little over £3,000,000. What measures the Bank authorities were driven to in face of this alarming reduction, will presently be related. The crash of falling houses was resounding all day in the financial ear. The English Joint-Stock Company was one of the first to go, dragging down with it thirty-one provincial branches in its fall. Failures for less than half a million were so comparatively unimportant as to arouse little attention. The convulsion reached its climax towards the close of the day, when the stoppage of the great firm of railway contractors, Peto, Betts, and Co., with liabilities exceeding £4,000,000, was announced. The authorities of the Bank of England communicated to the Treasury, as in duty bound, the drain which menaced the exhaustion of their reserves. The emergency was so serious that Lord Russell and Mr. Gladstone, after conferring with a great number of bankers and directors of finance companies, agreed to allow the credit of the country to be employed, though the permission involved an infringement of the law, in order that the Bank might continue to relieve the wants of capitalists, who, possessing ample securities, were embarrassed by the suddenness of the demands made upon them by timid depositors and creditors. Late on Friday night Mr. Gladstone announced in the House of Commons that an authority would be / sent next morning from the Treasury to the Bank, to I continue discounting good bills, even though their reserves should thereby be reduced below the minimum required by law, provided that they made no such discounts at a lower rate of interest than 10 per cent. The panic in the City was greatly allayed when the decision of the Government was made known; confidence began to revive; and eventually (as has been already mentioned) the Bank did not find it necessary to infringe the law. Yet one more gigantic failure occurred before the crisis passed. This was the stoppage of Agra and Masterman's Bank, a house of old standing, and with a most extensive Indian connection, the business of which, as in the case of Overend and Gurney, had been lately transferred by its former proprietors to a Limited Liability Company. The run on this particular bank was so persistent, that, in the four weeks which intervened between the commencement of the crisis and their own stoppage, they paid away more than £3,000,000 over the counter, yet were unable to avert the catastrophe.

In consequence of the disasters thus described, and many other minor failures which we have not noticed, numbers of families found themselves reduced from affluence to poverty; many had to descend to a lower position in society, and an extensive contraction of expenditure took place^ the effects of which were felt through all the channels of trade, and especially by those who minister to the amusements and luxuries of the affluent. It was remarked that the principle of limited liability, which, when first introduced, was held to confer so great a boon upon investors, inasmuch as it sheltered the individual proprietors of any joint-stock adventure from that awful responsibility for the whole debts of the concern, which the law, as it formerly stood, imposed upon them, had come to be so worked in practice as to make this immunity from risk, in numberless cases, illusory. It had become customary to announce a new company with a nominal share capital of largo amount, but to state in the prospectus that only one or two pounds would be called up on each share, and skilfully to induce the belief, by glowing accounts tending to impress the reader with a sense of the safe and lucrative character of the speculation, that no further calls would require to be made. Suppose there to be five new companies, each coming out with a share capital of £200,000, in £20 shares, and calling up £1 per share, with an intimation that it was not probable that any further call would be necessary, but that under no possible circumstances, so certain was the prospect of speedy and ample profits, could the calls exceed £3 per share. A man who had saved £3,000 might think he was following a wise and safe course by investing part of that sum in the shares of the five companies, buying, let us say, two hundred shares in each, on which he would have to pay up £1,000, and supposing that, if the worst came to the worst, he would not be called upon for more than his £3,000. But a commercial crisis arrives; the companies get into difficulties; they have, perhaps, launched out into expense far exceeding the amount paid upon the shares, and every one who has a claim upon them turns round and presses for his money. Under these circumstances, whether the companies suspend payment or not, they are obliged to make fresh calls upon the unpaid portion of the shares. Thus our imaginary investor may find himself, in an extreme case, called upon to furnish £20,000 upon his shares, instead of the £3,000 which he had fondly fancied to be the utmost that would ever be demanded of him. It was in this way that the shareholders of many limited liability companies found themselves, unless persons of large capital, face to face with ruin, because they had unthinkingly entangled themselves in a liability which, limited as it was, yet, when pressed to its full extent, was more than they could sustain.

A variety of minor incidents falling under the year 1866 may here be briefly noticed. The House of Commons gave proof of its unabated loyal attachment to the House of Hanover, by voting to the Princess Helena, on the occasion of the announcement of her intended marriage to Prince Christian of Schleswig-Holstein-Sonderburg- Augustenburg, an annual allowance of £6,000 a year, and a dowry of £30,000 - a donation similar to that which had been granted to the Princess Alice. The marriage took place at Windsor Castle on the 5th July. Another marriage, which excited much popular interest - for the well-known geniality and good-nature of the bride made her a universal favourite - was that of the Princess Mary of Cambridge, at Kew, on the 12th June, to the Prince von Teck. The great Banda and Kirwee prize-money case was argued, and decided in this year. From the magnitude of the booty which was the subject of litigation, and the number and position of the claimants, the pleadings were followed with interest. In the course of the campaign of 1858 in Central India, which stamped out the last remains of the mutiny in that region, General Whitlock had led a British force to Banda, driven out the Nawab, and taken possession of a rich booty in gold and jewels collected there, the value of which was estimated at not less than £800,000. The question to be decided was - to whom did this booty of right belong? Ought it to be awarded to General Whitlock's force exclusively, by which Banda was taken - or were other divisions, even though serving at a distance, entitled to their share, on the ground that it was by their co-operation that the taking of Banda was rendered possible? The family of Lord Clyde, who was Commander-in-Chief in India at the time, also appeared as claimants. On one of the days of hearing, Mr. Bovill advanced a curious precedent, which he had found in the Old Testament, touching the equitable distribution of prize-money. In the Book of Samuel it was narrated that David with a part of his army pursued the Amalekites, and took much spoil; and since some portions of David's army had remained in charge of the baggage, while the remainder pursued the enemy, the question arose whether the pursuers alone should monopolise the booty, or whether they should share it with those that remained behind. King David decided that " as his part is that goeth down to the battle, so shall his part be that tarrieth by the stuff; they shall part alike." By parity of reasoning, Mr. Bovill maintained that his clients had borne a necessary part in the scheme of capture through which Banda fell to General Whitlock, and that they had, therefore, a right to participate in the spoil. Dr. Lushington delivered judgment in the case on the 30th June. He seems to have admitted the force of Mr. Bovill's scriptural argument in so far that he included under the description of " General Whitlock's forces," to whom he awarded the sum in litigation, " any troops left by General Whitlock on his march, but which at the time of the capture formed a portion of his division, and were still under his command." Lord Clyde and his staff were also declared entitled to share in the booty captured at Banda and Kirwee; but the claim of Sir Hugh Rose and his army, employed at the time in the important collateral operation of the siege of Jhansi, but who had never effected an actual junction with General Whitlock - and all other claims - were disallowed. The foundering of the London, a large iron steamship, in the Bay of Biscay, in the January of this year, with a loss of two hundred and twenty lives, including Dr. Woolley, the principal of the new Sydney University, and the well-known actor,Gustavus Brooke, was memorable for the calm courage displayed by the captain, Captain Martin, who sent off his chief engineer in the only boat which could be launched, saying that his own duty was to stay by the ship. This boat, with nineteen persons on board, was picked up by a passing vessel. The wonderful procession of meteors, radiating from a point in the north-eastern sky, seen on the night of the 13th November, though not a proper subject for a political and social history, could never be forgotten by any that witnessed it. A deficient harvest deepened the painful impression which the monetary disasters of 1866 had left on the minds of the people. In the critical months of August and September the weather was unusually wet and stormy, and the wheat crop suffered much in consequence. A great deal of corn was housed in bad condition, and no inconsiderable portion wasted or spoiled. The result was a yield considerably below the average, and the prices of grain were consequently much enhanced. The prices of other necessaries were also raised; although this was probably due to a permanent cause, with which the bad harvest had nothing to do - we refer to that gradual rise in the price of all articles of necessary consumption, which the continual influx of gold, in quantities before unknown, into the markets of the world, commencing from the discovery of the gold-fields of California, has slowly but surely effected. These untoward circumstances, combined with a contraction of the demand for labour, arising from commercial failures and discredit, made the winter of 1866 - 7 a period of considerable suffering to the poor in England.