The actual cash received on account of this loan appears, though the Committee's figures are difficult to follow, to have come to just over half a million. Out of the half million £16,850 went in cash commission, and £106,000 in interest and sinking fund, leaving about £380,000 for the railway contractors and the Government. On this loan the Committee observes that the commission paid, of £108,500 bonds, and £16,850 in cash was "greatly in excess of what is usually charged by contractors for loans."

So far it was only a case of a thoroughly speculative transaction carried through by means of the usual accompaniments. A defaulting State believed to be possessed of great potential wealth, thought, or was induced to think, that by building a railway it could tap that wealth. The whole thing was a pure possibility. If the loan had been successfully placed at the issue price it would have sufficed to build the first section (fifty-three miles) of railway, and to leave something over for work in the mahogany forests. It is barely possible that in time the railway might have enabled the Government to produce enough stuff out of its forests to meet the charges of the loan. But the possibility was so remote that the terms offered had to be so liberal that they frightened the public, which happened to be in a sensible mood, until it was induced to buy by the creation of a market on the Stock Exchange; the employment of intermediaries on disastrous terms, and finally default, as soon as the loan charge could no longer be paid out of the proceeds of the loan, completed the tale.

In May, 1869, the Minister for Honduras in Paris, M. H----, "took steps" to issue a loan for 62,250,060 francs, or £2,490,000. Out of it a small sum (about £62,000) was paid to the railway contractors in London, but little of it seems to have been genuinely placed, since, when the Franco-German war broke out in July, 1870, M. H---- sent 2,500,000 francs in cash (£100,000), and 39,000,000 francs in bonds, to Messrs. B---- and G---- in London. Messrs. B---- and others made an agreement with Mr. C. L----, presumably the gentleman who had taken over and dealt with the unplaced balance of the First London Loan. By its terms the net price to be paid by him for each 300 francs (£12) bond issued originally at 225 francs (£9), was 124 francs (not quite £5). He succeeded in selling bonds enough to realize £408,460, and he, together with Messrs. B---- and G----, received £51,852 in commission for so doing.

In the spring of 1870, the Honduras Government, still hankering after its railway and the wealth that it was to open up, determined to try again with another loan. Something had to be done to encourage investors to take it. A few days before the prospectus appeared a statement was published in a London newspaper to the effect that two ships had arrived in the West India Docks from Truxillo (Honduras) with cargoes of mahogany and fustic consigned to Messrs. B---- and G----on account of the Honduras Railway Loan, and that two others were loading at Truxillo with similar cargoes on the same account. These cargoes had not been cut by the Honduras Government. It had bought them from timber merchants, and they were found to be of most inferior quality. In the opinion of the Committee "the purchase of these cargoes and the announcement of their arrival in the form above referred to, were intended to induce, and did induce, the public to believe that the hypothecated forests were providing means for paying the interest upon the loan."

With the help of this fraud, and with a free and extensive market made on the Stock Exchange, the 1870 Honduras 10 per cent. loan for £2,500,000 nominal was successfully issued at 80. It also had a sinking fund of 3 per cent., which was to pay it off in fifteen years. Mr. L---- again handled the operation, having taken over the contract from Messrs. B---- and G----. But the success of the issue was more than hollow. It was empty. For Mr. L----, in the process of making the market to promote it, had bought nearly the whole loan. Applicants had evidently sold nearly as fast as they applied; for on the 15th December, when the last instalment was to be paid, less than £200,000 bonds remained in the hands of the public. Nevertheless by October, 1872, nearly the whole of the loan had been somehow disposed of to investors or speculators. One of the means taken to stimulate the demand for them was the announcement of extra drawings of bonds at par, over and above the operation of the 3 per cent, sinking fund, provided by the prospectus.

There is no need to linger over the complicated details of this sordid story. The Committee's report sums up, as follows, the net results of the 1869 and 1870 loans of Honduras:—

"In tracing the disposal of the proceeds of the 1869 and 1870 loans, it must be remembered that your Committee had no evidence before them relating to the funds resulting from three-fifths of the loan of 1869; only two-fifths of the loan was realized in this country, the remainder was disposed of in Paris before August, 1870, and no account of the application of the funds resulting from such portion of the loan could be obtained.

"The two-fifths of the 1869 loan, and the whole of the loan of 1870, produced net £2,051,511; out of this sum only £145,254 has been paid to the railway contractors; a sum of £923,184 would have been sufficient to discharge the interest and sinking fund in respect of the issued bonds of the three loans, yet the trustees ... paid to Mr. L----£1,339,752 or £416,568 beyond the sum so required to be paid upon the issued bonds of the loans.