Overend, Gurney and Company
From Wikipedia, the free encyclopedia
| Overend, Gurney and Company | |
|---|---|
| Formation | 1800 |
| Extinction | 1866 |
| Location | London |
Overend, Gurney & Company was a London wholesale discount bank, known as "the bankers' bank", which collapsed in 1866 owing about 11 million pounds (£828 million at 2003 prices.[1]). Until events at Northern Rock in September 2007, it was the last run on a British bank.
Contents |
[edit] History
[edit] Early years
The business was founded in 1800 as Richardson, Overend and Company by Thomas Richardson, clerk to a London bill-discounter, and John Overend, chief clerk in the bank of Smith, Payne & Company at Nottingham, with the Gurneys supplying the capital. At that time, bill-discounting was carried on in a spasmodic fashion by the ordinary merchant in addition to his regular business, but Richardson considered that there was room for a London house which should devote itself entirely to the trade in bills. This, at that time, novel idea proved an instant success.[2] Samuel Gurney joined the firm in 1807 and took control of Overend, Gurney and Co. in 1809. The Gurneys were a well known Quaker family that had founded the Gurney bank in Norwich.[3]
The bank's core business was the buying and selling of bills of exchange at a discount. It was well respected, and expanded rapidly, reaching a turnover double its competitors combined. For forty years it was the greatest discounting-house in the world. During the financial crisis of 1825, the firm able to make short loans to many other bankers. The house indeed became known as "the bankers' banker," and secured many of the previous clients of the Bank of England. Samuel Gurney died in 1856.[2]
[edit] Liquidation
After Samuel Gurney's retirement, the bank expanded its investment portfolio, and took on substantial investments in railways and other long term investments rather than holding short term cash reserves as was necessary for their role. It found itself with liabilities of around £4 million, and liquid assets of only £1 million. In an effort to recover its liquidity, the business was incorporated as a limited company in July 1865 and sold its £15 shares at a £9 premium, taking advantage of the buoyant market during the years of 1864-66. However, this period was followed by a rapid collapse in stock and bond prices, accompanied by a tightening of commercial credit. Railway stocks were particularly badly affected.[4]
Overend Gurney's monetary difficulties increased, and it requested assistance from the Bank of England, but this was refused. The bank suspended payments on 10 May 1866. Panic spread across London, Liverpool, Manchester, Norwich, Derby and Bristol the following day, with large crowds around Overend Gurney's head offices at 65 Lombard Street.[5] The failure of Overend Gurney was the most significant casualty of the credit crisis.[6] The bank went into liquidation in June 1866.[7] The financial crisis following the collapse saw the bank rate rise to 10 per cent for three months. More than 200 companies, including other banks, failed as a result.
The directors of the company were tried at the Old Bailey for fraud based on false statements in the prospectus for the 1865 offering of shares. However, the Lord Chief Justice Sir Alexander Cockburn said that they were guilty only of "grave error" rather than criminal behaviour, and the jury acquitted them. The advisor was found to be guilty. Although some of the Gurneys lost their fortunes in the bank's collapse, the Norwich cousins succeeded in insulating themselves from the bank's problems, and the Gurney bank escaped significant damage to its business and reputation.[7]
[edit] References
- ^ O‘Donoghue, J. et al. (2004). "Consumer Price Inflation since 1750". Economic Trends 604: 38–46, March.
- ^ a b Encyclopedia Brittanica article on the Gurneys, accessed 25 Oct 2007
- ^ Gurney family wealth: In Gilbert and Sullivan's 1875 comic opera Trial by Jury, a character describes his accumulation of wealth until at length I became as rich as the Gurneys. Elliott, p.235
- ^ The Times, 21 December 1866, p. 8; Issue 25687; col E, 'Two embarrassed Railway Companies' (noting that railway joint stock companies had led the earlier boom, but in the subsequent revaluation both the London, Chatham and Dover Railway and the North British Railway fell insolvent during 1866)
- ^ The Times, 12 May 1866, p. 12; Issue 25496; col C "The Panic". A further article on 14 May 1866, p. 7; Issue 25497; col C, also entitled "The Panic", reported that events were calming down a bit.
- ^ Fenn's Compendium of the English and foreign funds Introduction to the 10th edition, 1869
- ^ a b Ackrill, Margaret and Leslie Hannah. Barclays: The Business of Banking, 1690-1996 (2001) Cambridge University Press, Chapter 1 ISBN 0521790352
[edit] Bibliography
- Collins, M. (1992) "Overend Gurney crisis, 1866", in Newman, P. (ed.) (1992). The New Palgrave Dictionary of Money and Finance. Palgrave Macmillan. ISBN 0-333-52722-4.
- Elliott, Geoffrey (2006). The Mystery of Overend & Gurney: A Financial Scandal in Victorian London. London: Methuen. ISBN 0-413-77573-9.
- Michie, E. B. (2001). "Buying brains: Trollope, Oliphant, and vulgar Victorian commerce". Victorian Studies 44(1): 77–97. doi:.
- Patterson, R.H. (1866). "The panic in the City". Blackwood’s Edinburgh Magazine 100: 79.
- "On our home monetary drains, and the crisis of 1866" (1870). Journal of the Statistical Society of London 33(2): 216–242.
- Taylor, J. (2003). Limited liability on trial: the commercial crisis of 1866 and its aftermath (DOC). Retrieved on 2006-07-04.
