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1852. Effect of Loss on Investments by the Poor.
every bankrupt railway-every fraudulent or clumsy building league-every chimerical or mismanaged land association — preaches a sermon on the folly of frugality and providence, not soon forgotten and not easily counteracted. Of late these lessons have multiplied with fearful rapidity, and been delivered with a most mischievous emphasis. Why should I save?' (asks the jovial footman). My fellow-servant, the butler, pinched himself in every conceivable fashion, earned the character of a niggard and a miser, that he might store up a couple of hundred pounds, to set up a shop and marry upon. He invested it in the Rochdale Savings' Bank: the manager made away with • 90,000l. of the funds intrusted to him; the trustees, it seems, C are not answerable for the defalcations; and I have now the 'satisfaction of knowing that my fellow-servant is as poor as myself, and that all his long years of self-denial are thrown away.' Truly, as Solomon says, 'The wise man's eyes are in his head, and the fool walketh in darkness; yet one event happeneth to them all.'-'I have done with economy' (says the plodding clerk with his 2007. a-year); I rose early, went to bed late, and was contented with the scantiest fare: I invested ‹ my hard earnings in the Midland Railway Consols at 1907. — then the most reputed line in the kingdom. Now 150l. of this is gone, and by no fault of mine; -while my companion - who took his ease, eat, drank, and was merry, never thought ' of the morrow, never tasked his strength, or denied himself any recreation-jeers me from morning till night.' And he, too, quotes from the same Hebrew fountain of disheartening and melancholy wisdom. There is nothing better for a man than that he should eat and drink, and make his soul enjoy good in his labour.'-You have been advising me for some years, sir,' (said a factory artisan to us the other day) to lay by some money against sickness or old age. Well, I took your advice; I saved, week by week, about 501., and sub<scribed the money to Feargus O'Connor's land scheme, which was to secure me a cottage and a few acres of ground for my 'old age; and I am now told, not only that I may never get ← them, but that if I do, I cannot live upon them; and that, moreover, Mr. O'Connor may, if he pleases, keep all my money ❝ for himself. I wish I had never saved a farthing.'-Now these cases are neither imaginary nor few. They come before us in scores, in hundreds, in thousands; and are terribly eloquent in praise of self-indulgence and improvidence.
The double complaint, then, made by the humbler classes, or on their behalf, is, that sufficient care has not been taken to render safe such modes of investment as are peculiarly open to
VOL. XCV. NO. CXCIV.
their small means, and that from other investments which are profitable and desirable, they are debarred by impediments which have either been created, or might easily be removed, by legislative interference. We propose to examine some of these cases, and to point out a few of those arrangements or alterations in our law which it seems just to ask for, and desirable to grant, in order that the working classes may be at liberty, fully and practically, to employ their savings in whatever manner they please, provided only that it be not inconsistent with the general interests of the community.
The first and simplest mode of disposing of small savings is to invest them in some quarter in small sums and at simple interest, with liberty of withdrawal at the will of the depositor. Such an investment is afforded by Savings' Banks, which date from the beginning of the century, and were originally established by benevolent individuals for the direct purpose of taking charge of weekly or monthly sums of a smaller amount than ordinary banks in England at least were willing to charge themselves with. These institutions were sanctioned by act of parliament in the reign of Geo. IV.; and by arrangements then established, and subsequently slightly modified, all sums paid into savings' banks are to be invested in Government securities, and to receive interest at the rate of 3 per cent. the same time, in order to prevent their being diverted from their original design, of providing ready reception for the savings of the poor, no individual is allowed to deposit more than 1507. in all, nor more than 30%. in any one year; and when his deposits amount, with compound interest, to 2007, no further interest is to be paid to him; it being very properly presumed that for so large a sum a more suitable investment may easily be found; or at all events that the owner of such a sum is no longer entitled to the privileges of poverty. The extent to which these institutions have been made use of the amount standing to the credit of individual depositors having at one time reached to nearly twenty-nine millions-shows the wide prevalence of the want which they were established to meet, and the value set upon the facilities they offer. Of late, however, much distress and mistrust have arisen from the numerous, and apparently simultaneous, defalcations which occurred in many of them. In 1849 and 1850, the treasurers of several savings' banks, both here and in Ireland, were discovered to have employed for their private purposes the funds intrusted to them, instead of placing them, as legally bound to do, in the hands of the Bank of England for investment in the Funds. Hundreds of the poor and industrious found themselves thus
Defalcations in Savings Banks.
suddenly deprived of their painfully-hoarded savings by the dishonesty of officers, whom they had been taught to trust with implicit confidence, and whom they seemed justified in so trusting. It then became known, to the surprise of most, and the dismay of all, that the trustees of these savings' banks gentlemen, generally, of wealth, benevolence, and repute in their respective neighbourhoods were in no way legally responsible for the money which had been entrusted to their keeping, and that Government, which was popularly supposed to be the recipient of all the deposits the moment they were paid into the bank, was, naturally enough, answerable only for the sums which it had actually received. The treasurer, a clerk appointed by the local trustees, was, in fact, discovered to be the only party responsible for the safe keeping of the deposits; and he was the very man who had made away with them. It is true that he had to find sureties before obtaining his appointment; but these sureties, though sufficient to make good the loss of any temporary balance which might remain in his hands, were seldom adequate to meet defalcations arising from continuous and systematic fraud.
These painful disclosures - so many of which occurred about the same time-not only created a very general and wellwarranted feeling of insecurity on the part of the depositors in savings' banks, and greatly shook the credit of these institutions, but induced a pretty unanimous expression of public opinion that the people had not been quite fairly dealt with in the matter; and that those parties, on the faith of whose character for vigilance and integrity the poor had committed their little property to the banks of which they were the nominal managers and trustees, ought not to be thus exempt from all legal responsibility. The people naturally asked: To whom did we entrust the money, if not to the gentlemen whose names were published as 'managers of the institution, and to the Government, which, we were told, had, by Act of Parliament, constituted itself receiver of the funds? As to the receiving clerk, we did not appoint him; we knew nothing of him; and we never con'ceived that we were to look upon him as our banker." So
* I was in Lancashire some time ago, meeting with large bodies of working men, at the time of the failure of the Rochdale Savings' Bank; and I shall not soon forget some remarks that were made about the Government, as to the want of security. One man in Ashton-under-Lyne, said, "Dr. M'Dowall came here and told us that "the Government was a set of robbers; that they did not care about "the property of working men. I did not believe M'Dowall then ; "but when I see that there is no security for the savings of the
general was the disgust at this slippery and inadequate arrangement, and so just was it felt to be, that the Chancellor of the Exchequer last year introduced a Bill into the House of Commons to enable the Government to take upon itself the charge of the safe keeping of all deposits in savings' banks, on condition of having the appointment of the treasurer who should receive them, without claiming to interfere in any other manner with the local arrangements. By this arrangement every individual would virtually have paid his instalments directly into the hands of the nation, and his mite would have been as secure as national wealth and honour could make it. On the part of the trustees and local managers, however, the Bill, which would perfectly have attained the object in view, met with a jealous opposition, which we forbear to characterise by its fitting adjective: it was alleged that it cast a stigma on their reputation for integrity; it was felt that it would deprive them of a certain amount of patronage and local influence; and these miserable pleas were so vehemently urged, that Government thought it better to abandon the Bill than to risk the breaking up of the institutions altogether, as they were scarcely prepared to take them entirely into their own hands. The matter cannot, however, rest here; and we trust that Sir C. Wood's promise to legislate on the subject this Session will be acted on, either by himself or his present successor. It is of the greatest importance that the question should be settled without delay, and that the public should know distinctly to whom they are to look for the safe keeping of their hard-won savings. When this is once arranged on an intelligible and satisfactory basis, these institutions may have before them a career of long-continued and increasing usefulness.
Next in order come Friendly Societies, Sick Clubs, and the like, which are institutions of mutual assurance against incapacity arising from casualty, sickness, or old age. Each member contributes a certain sum weekly, monthly, or annually, while employed and in health, and receives from the Society in return a certain pension or allowance when age, accident, or illness deprives him of his usual maintenance. Nothing, it is obvious, can be more unobjectionable than the principle of these associations, or more beneficial than their operation, when conducted
"working men in the Savings' Banks, which we supposed that the "Government had under their protection, I believe now that M'Dowall "was right, and that Government cares nothing about either the poor men or their savings." -Mr. W. Cooper's Evidence, Com
mittee on Investment. Q. 586.
1852. Friendly Societies and their Privileges.
upon sound and just rules. The rapid and vast extension of them indicate that the working-classes have a clear perception of the mighty strength and security which lie hid in the principle of association. Comforts far beyond the reach of their individual means, provisions against possible or probable contingencies, which would overwhelm them if isolated units, are, through the instrumentality of these institutions, brought within the power of the poorest among them. Next to Trades' Unions, of which the object is to secure some provision for times when they may be out of work, and of which we do not propose here to speak, Friendly Societies are the especial favourites of the working-classes, partly because they meet the exigencies to which every man feels his own special liability, and partly also because they are their own contrivance, and the management of them lies in their own hands. Every man feels that (apart from premature death) the incapacity of old age is an evil which is certain to befall him; that accident may, and that sickness probably will, lay him upon his back at some period or other of his career: so if he have any foresight and self-denial, he willingly lays by a portion of his earnings for such inescapable emergencies. He does this the more willingly, because the rules according to which, and the officers through whom, the common fund is administered, are the selection of his own will.
In the early history of these associations, their usefulness was much impaired by errors in their constitution, and inadequacy in the legal powers needed for their self-protection. Gradually, however, both these defects have been remedied; and by successive Acts of Parliament, provision has been made, that any of these Societies, whose rules shall be approved of by the officer appointed by Government to revise them, may be registered or enrolled, and thus become entitled to certain privileges and exemptions. An Act passed last Session (13 and 14 Vict. c. cxv.) consolidated a number of previous laws, and extended the purposes for which these Societies were legalised. It declared that all should be entitled to the benefit of its provisions, which were established for the following objects:
1. For insuring a sum of money to be paid on the death of a member, to the widow and widower of said member; or to the child, executors, administrators, or assigns of such member; or for defraying the expense of the burial of such member, or his wife, husband, child, or kinsman.
2. For relief, maintenance, or endowment of members or their kindred, in infancy, old age, sickness, widowhood, or any other natural state of which the probability may be calculated by way of