"Mr. Hodgson says that £1,000,000 of securities were taken of the most extraordinary nature for any bank to hold that he ever saw; that £1,000,000 of securities, which was the only tangible asset which they had against the £2,600,000 of liabilities, consisted of" £350,000 of the Derwent Iron Company's obligations, £250,000 being debentures, and £'100,000 mortgage on the plant. They had besides these, £100,000 on a building speculation at Elswick, near Newcastle, which however was not a primary mortgage, there being a mortgage of £20,000 on that land belonging to Mr. Hodgson Hinde. They had also another £100,000 on other building land and houses in the neighbourhood of Newcastle. They had about £350,000 in securities of works and manufactures of different sorts, and they had about £50,000 in navigation bonds guaranteed by the railway, but which railway was the only security to which they could look in any given time to realize any sum of money; that made about £1,000,000 altogether. The other securities were absolutely unmarketable. This bank had derived assistance from the Bank of England in the former crisis, that of 1847. Almost exactly the same circumstances arose then which arose in 1857, and almost from the same cause. The bank, however, applied at that time to the agent of the Bank of England at Newcastle, and he, on his own responsibility, made them a very large advance, which carried them through; he taking at the same time a very considerable security from them in various mortgages, pretty much of the character which has been above mentioned, but better in quality, although not any more banking securities than these; between £700,000 and £800,000 altogether.
"'The whole of the advance made in 1847 was repaid to the Bank of England, was it not?'-' Yes. With regard to the late occasion I represented at the same time that, though the bank could not be assisted, yet the fact of its failing, which it would do the moment it was known that the Bank of England would not help it, would be at that moment a very serious thing for the district, because it was so much connected with the collieries and ironworks that it paid every week, either for persons who had balances with it, or for persons whose bills it discounted, and thus gave them the money, about £35,000, on which the wages of 30,000 people were dependent; and as their pay-day was on the Friday, and the bank would stop on the Thursday, it was very desirable that something should be done to prevent the confusion which would arise if there was no preparation made for that conjuncture. In consequence of that the Bank of England requested me to go down again that night, with full powers to make arrangements with all persons who might have any tangible and good security, though, perhaps, not perfectly regular security, so as to provide them with the means of making their pays on the Friday. I went down accordingly, and arranged with almost everybody, or with everybody, I may say, to make such advances as would enable them to meet the pays for that week and for the next, should it be necessary. I also advised the manager of the savings bank to open his bank on Saturday for payments, though it was not the usual day, and authorized him to draw upon the Bank of England for any sum of money which he might require for the purpose of making any payment; but owing to the fact of the Bank of England thus enabling the proprietors, the coal mines, and the works, to make their weekly payments, there was no run whatever upon the savings bank, and everything passed off quite quietly.'
""Was there any limit to the authority which you had from the Bank of England to give assistance in Newcastle?'-' No, there was no limit, it was left to my discretion to do what might be necessary. "We knew very well that it could not amount to a sum, under any circumstances, of much more than from £50,000 to £70,000.'
"'Are there any other particulars connected with the Newcastle Bank which you are able to lay before the committee?' - 'I will, if the committee wish, give them the actual result of the accounts of the bank when it was finally wound up in January this year, as compared with those in November, 1857: it will show a little difference. In November, 1857, the liabilities of the bank were £2,600,000; these consisted of deposits, £1,350,000; accounts current, £1,150,000; and estimated liabilities on rediscounts, £100,000. In January, when the bank was positively wound up and the thing ascertained, it appeared that there were of deposits £1,256,000, in accounts current, £766,000, and in liabilities on rediscounts, £231,000. The only great difference was in the accounts current, which were diminished about £400,000. This was principally, I believe, from the fact that many persons who had accounts current had deposit accounts also; they kept two accounts, one of which had a balance in its favour, and the other was overdrawn; therefore, one account being set against the other, it diminished it by so much, and at the same time diminished the amount of overdrawn accounts; the assets which were estimated in November at £2,500,000 had fallen in January to £2,000,000; and there was one peculiarity, which was, that while the debt of the Derwent Iron Company was taken as an asset in November at £750,000, in January it was taken as an asset at £947,000, and that it is an asset of a very doubtful nature; the position of the bank is much worse in reality than is shown by the statement of the figures.'
"This disclosure was the result of an examination which lasted about two hours; yet the bank had declared, at the last half-yearly meeting, a dividend of seven per cent., making to the shareholders a statement the substance of which showed a very prosperous state of things. Mr. Hodgson mentions that he remarked on the fact of their having declared a dividend in June, when it was admitted that half the capital was lost, and he asked how they could have done so; it was stated, in reply, that there were so many persons who depended entirely for their livelihood on the dividends received, that they really could not bear to face them without paying any dividend.