How ironically prescient that I get hold of this research report on how the Bank of Glasgow collapsed in 1878. Just few days ago, we had a bank run in the UK when we saw long queue's in front of Northern Rock. The wonderful economic managers (Gordon Brown, Alistair Darling, FSA and the Bank of England) all managed to turn the reputation of our country into one of a banana republic. What does this tell us? it tells us that we do not learn. Sad, or what?
The Death Blow to Unlimited Liability in Victorian Britain:
The City of Glasgow Failure, Graeme G. Acheson & John D. Turner, Explorations in Economic History
Abstract
In 1878, one of Britain’s largest banks, the City of Glasgow Bank, collapsed, leaving a huge deficit between its assets and liabilities. As this bank, similar to many other contemporary British banks, had unlimited liability, its failure was accompanied by the bankruptcy of the vast majority of its stockholders. It is generally believed that
the collapse of this depository institution revealed the extent to which ownership in large joint-stock banks had been diffused to investors of very modest means. It is also believed that the failure resulted in bank shareholders dumping their shares unto the
market. Our evidence, garnered from ownership records, trading data, and stock prices, offers no support for these widely-held beliefs.
“It [City of Glasgow failure] was a calamity so unlooked for, so huge and disastrous, that it riveted men’s gaze and made their hearts stand still, and we shall all remember it to our dying day as a landmark in the history of our generation.”
A. J. Wilson (1879, p.46)
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