Galway Banks and Bankers

By Samuel J. Maguire

Loan Funds

During the Napoleonic War the circulating money in County Galway was almost exclusively country bankers' notes, chiefly Lord Ffrench and Co., and those of Messrs.Joyce and Co., and such confidence was reposed in the stability of both firms that preference was given to their notes by the county people to those of the Bank of Ireland. The reader is reminded that in the eighteenth and early years of the nineteenth centuries the need for a circulating medium was so little felt by the majority of the people that practically no currency circulated in the county. The bulk of the population was made up of the families of cottiers and very small farmers - all more or less self-supporting. Outside the few towns the exchange of commodities was carried on by tally payments. Under this system purchases were made at the highest rate without the purchaser realising it, and so finding himself at the mercy of the local usurer.

With a view to remove or diminish the dependence of small farmers upon local usurers, loan funds were established in many districts of the county. The charge for a loan was in general sixpence, in some cases a shilling, in the pound, deducted from the loan at the time of advancing it. The repayment was generally required to be made by twenty weekly instalments of a shilling in the pound on the amount lent, and the sureties were required to join with the borrower to secure the regular repayment of the loan. In practice, the borrower was frequently obliged to remunerate his sureties in some way or other for their risk and trouble.

It was common for the same individuals, by changing their position of principle and sureties, to borrow as many different sums of money as there were individuals engaged in the transactions. The various expenses, added to the loss of time incurred by attendance at the loan fund office, increased the actual cost of loans very much above the rate of interest actually paid to the loan fund office. The fines imposed on those who paid their instalments irregularly increased the burden; and in addition to the loss of time incurred by paying weekly instalments, that method of payment was ill suited to small farmers and cottiers, because they had not, in general, any means of raising small sums of money at frequent intervals. This did not apply in the cases of labourers in constant employment, mechanics, or those small farmers who had constant market for their dairy produce.

James H. Burke, Land Proprietor and Magistrate, in his evidence before the Devon Commission, stated:

"I think these loan funds are a very great nuisance; it is easy to get money, but hard to pay it back. I saw them at work when I was mayor of the town of Galway; I did not think that they did any good. It was a continual scene of pawning. After they spent the money they went to the pawn office to raise the money to pay it back. The late Archbishop of Tuam was at the head of one in Galway, and gave it up, and did not think that it did any good to the town."

Denis H. Kelly, Land Proprietor and Deputy Lieutenant, of Ballygar, stated:

"I am one of the trustees of the Reproductive Loan Fund for the County Galway, and in consequence of that I know what the loan funds belonging to the County of Galway are. There are seven: one at Woodford, one at Loughrea, another at my place, Ballygar, another at Ballinasloe, one at Castle Hackett, one at Galway and one at Mr. Read's at Mount Shannon."

Usury Among the Farming Classes

From the evidence given on the subject of capital as applicable to farming - there was an absolute deficiency among the farming classes. Rent was often paid by discounting three months' bills, which were frequently renewed; and that the interest paid by the small farmer and cottier to local usurers frequently ranged from 25 to 100 per cent. - these local usurers being generally meal mongers. It was the custom for the borrower to negotiate his loan with the meal monger by purchasing a certain quantity of meal on credit at twice its value, giving his obligation and security and then selling it back to the usurer at the market price for ready money. One witness stated that he had known the same bag of meal to be sold and resold in this way to twelve or fifteen successive persons. There was great ingenuity on the part of local usurers in defeating the usury laws while they still applied to bill transactions. Portion of the borrower's farm was occasionally transferred to the lender as a security for the repayment of the debt, and the use of the land was received instead of interest. In such cases the usurers treated the land with even less tenderness than the tenants themselves. Another method of raising the instalments was for the farmers and cottiers to sell a small portion of turf or potatoes, or pawn their clothes. Improvident habits arose through the readiness of obtaining money to meet temporary difficulties. While the evils of loan funds arose from their abuse and mismanagement they were less ruinous than private usurers.

Pawnbrokers

It would appear from the reports of state prosecutions that many tricks were tried out by pawnbrokers, many of them successful too, in spite of the vigilance of the authorities. A pawnbroker was allowed to charge a halfpenny for each "ticket" where the money advanced was less than five shillings. In order to increase their profits many of them were in the habit of dividing articles brought to them so as to require more "tickets" than one. In the case of one prosecution the pawnbroker divided a clock into three by giving separate "tickets" for the pendulum and weights.

Coinage in the Late Eighteenth Century

When the Bank of Ireland opened for business in 1783, it accepted the notes and drafts of the reputable private banks, and some months later a system of clearing notes and post bills was adopted, and remittances were paid in specie regularly every day. The Irish pound was valued at 18/51/2 (English) and the English pound at 1 15s. 8d. (Irish). Ireland had no gold or silver coinage of her own. The standard coins in circulation were English, guinea and half-guinea gold coins, crown, half-crown, shilling and six-penny silver coins. The minting of gold and silver coins in Ireland has been discontinued during the reign of Edward IV, and shortage of coins was so prevalent in Ireland that the great importation of gold and silver coins from London in 1770 instead of solving the problem accentuated it, and the new good coins rapidly disappeared from circulation, being replaced by the very oldest and worst coins. These silver shillings and sixpences left in circulation, were a kind of counterfeits, composed of tin and copper, slightly covered over to give them the appearance of silver, and a kind of small paper money called a ticket, or I.O.U. that ranged in nominal amount from three pence to six shillings, were issued by merchants, shopkeepers and others, in any kind of credit, and when they amounted to a pound, if presented were paid by them. This currency, although fictitious and objectionable in many ways, enabled the people to carry on their business in the towns. This ticket system was replaced by the silver issue of the Bank of Ireland, called tokens, and were of the value of five pence, ten pence, and six shillings. The six shillings token was originally a Spanish dollar worth four shillings and sixpence, extended in circumference, and bore the impression of the bank as an I.O.U. for six shillings.

The country people were ignorant of the fist principles of money due to the great scarcity of coin. There was also the extraordinary practice of pawning money for less than its full value. Professor George O'Brien cites the following from J.C. Foster's letters on the Condition of the People of Ireland:

"In Galway I was assured, so little do the people know the commercial value of money, that they are constantly in the habit of pawning it... I went to a pawnbrokers' shop: and on asking the question the shopman told me it was quite a common thing to have money pawned; and he produced a drawer containing a 10 Bank of England note pawned for a shilling; a 1 Provincial Bank note pawned for six shillings; a guinea in gold of the reign of George III pawned for fifteen shillings two months ago."

Notes in the Late Eighteenth Century

As already stated people preferred the Galway bank notes to those of the Bank of Ireland due probably to the idea that forgeries were more easily detected as one of the partners of the Galway banks or their clerks attended all fairs for the purpose of discounting bills, and exchanging their own paper for Bank of Ireland notes.

"These private banks kept in hands some quantity of Bank of Ireland paper, which, however, they never issue when they can avoid doing so. they all draw bills upon London at thirty-one days, which is a premium of one half per cent; and one cause of their only paying their notes at their own banks, is to secure this profit."

Failure of Two Private Banks in Galway and Tuam

Referring to the two private banks in Galway and Tuam, Dutton states,

"this tide of success flowed only for a limited period, and both establishments stopped payment for a large amount and spread ruin and misery throughout this country. The principals of both establishments died a few years since (1824). Of Mr. Joyce's (Galway) debts, I believe almost ten shillings in the pound have been paid, and it was the general opinion, that from his highly honourable character, activity, and skill in business, had he lived, the remainder would in a few years have been paid. Of the affairs of the Tuam bank little is known. The estates of the partners have been sold, but how far they will go to liquidate the large amount of the failure I am ignorant. That the facility with which discounts were made gave an extraordinary impulse to business in the province of Connaught, will not be denied, but like all violent efforts, the reaction debilitated the constitution... Gold coin has nearly disappeared, and all the minor concerns are transacted by Bank of Ireland tokens of different values. Those that are under the necessity of taking bills, find a considerable difficulty in discounting them. There are, I believe, only two discounting houses in the county, both in Galway where bills on Dublin or Bank of Ireland paper may be had for such bills as are of undoubted solvency ... Mr. Walter Joyce also, at the period of the failure of his brothers bank, transacted a considerable share of separate business in Galway, but was not affected by those disasters. He has retired from the banking business with a large independent fortune. At present scarcely any but Bank of Ireland notes will be taken in any money transactions."

The failure of these banks was undoubtedly due to lack of capital, loss of investments, failure to retain sufficient liquid assets, and to ignorance of elementary banking principles rather than to fraud. They conducted more or less a local business and the failure of the crops in the county or the bankruptcy of a merchant tended to cause a panic. These factors and these bankers' investments of their surplus funds in land helped to undermine public confidence in the banking system. By the Bank Act of 1759 the entire estates of the proprietor of a private bank were subject to the bank debts.

Bank of Ireland in the First Half of the Nineteenth Century

In 1825 when branches were established in provincial towns by the Provincial Bank of Ireland, in self-defence the Bank of Ireland began to appoint agents in the principal towns. During the month of May 1830, John and Barry O'Hara were appointed as joint agents of the Galway branch of the Bank of Ireland, which commenced business on the 1st of June following. "From time to time it was mentioned at meetings of the Court of Governors of the Bank that business conditions in the West of Ireland were far from satisfactory."

It would seem, therefore, that the Galway branch was something of a disappointment to the Directors. In accordance with the terms of the Bank Act of 1845 Galway was one of the towns recognised by the Commissioners of Stamps and Taxes as a place for the distribution of specie throughout the province of Connacht. The failure of the potato crop in the years 1845, 1846 and 1847, culminating with the Great Famine caused widespread horror and suffering throughout Ireland. To help relieve the situation the Government issued a loan, raised in London during the Spring of 1847. it was arranged that the Bank of Ireland would act as agent for the Board of Public Works in the handling of relief funds. 80,000, the amount of the first transaction, arrived in Galway in H.M.S. Comet, in August, 1846, and was delivered at the Banks branch in Eyre Square - the sum allotted to Galway for distribution amounted to 35,000 and was made up of: 500 of half-crowns; 1,500 of shillings; 2,300 of sixpenny pieces; and 700 of four penny pieces.

Loss of Confidence in Banking

By the end of 1865 there was a serious loss of confidence in the Irish banks and the entire system of "financial companies" was unsound. The bank rate was raised to ten per cent. In 1866 and the winding up of Overend,Gurney and Company of London and other concerns which crashed caused another panic. In the subsequent liquidation of Overend, Gurney and Company it was found "that one of its ventures was the Galway Steamship Company which incurred a published loss of 1,417,342, and it was hinted that the real loss was considerably more.

Atlantic Company

In 1859, under the regime of Lord Eglinton, a contract was sanctioned with the Atlantic Company, subsidising a line of steamships direct to America. It was considered that this was an attempt to improve the condition of the country, and to introduce capital, and that the Government by its action, had brought down on it the wrath of Liverpool and Glasgow. It would seem, however, that the company was got up by men of straw, and its principal was a Mr. Lever, who, on the strength of it was elected Member of Parliament for Galway.

Galway was led to believe that the establishment of a company communicating directly with America would be the means of promoting extensive business and employment. The contract, as already stated, had fallen into the hands of men of straw, who did not possess the requisite capital. The ships were bad; the terms of the contract were not observed; fine after fine was imposed by the Post Office for delay in transport of mails, and at last Lord Stanley of Alderly, the Postmaster-General of Lord Palmerston's Cabinet closed the contract. Father Peter Daly, P.P., went to London and aroused the Irish Members of Parliament. At an interview with Lord Palmerston he threatened the Government with the opposition of their Irish Liberal supporters, unless the subsidy to the Atlantic Company was restored. A committee of the House was appointed to inquire into the circumstances. The members reported while they justified the action of the Postmaster General

"that the Atlantic Packet Company was deserving of the favourable consideration of her Majesty's Government."

Upon this the subsidy was restored, and another trial was given; but so hopelessly insolvent was the company that it soon broke down. Mention has already been made of the published loss incurred as shown in the liquidation of Overend, Gurney and Company. It is interesting to note from The Irish Law Times of 1869 that during the prosecution of Overend, Gurney and Co., it was, apparent, that when the limited company was formed the firm was, and was known by the directors to be, insolvent to the extent of about 3,000,000. This fact, however, was concealed from the public, who were invited to take shares in it. Bad debts were transferred from the old to the new company, and were taken in discharge of liabilities due from the old to the new company to the amount of 4,200,000.

Note on Ffrench's Bank:

The Bank of Ireland, 1783-1946,
By F.G. Hall, pp.125-126.

"In the year 1814, a commercial crisis occurred which caused the collapse of the important private banking firm of Ffrench and Company. This bank was established in Tuam, County Galway, about the year, 1804, by Sir Thomas Ffrench, who succeeded to a peerage in 1805. The Ffrench family was held in high regard throughout the entire province of Connaught, and was long identified with the Catholic Emancipation Movement. In 1807, the firm was reorganised, and Michael Morris, William Keary and the Hon. Charles Ffrench were taken in as partners. At the same time a Dublin branch was opened at 21 Lower Dominick Street. This firm made extensive issues of bank notes, which were said to have "constituted the whole circulation of the province of Connaught". On the 9th December, 1814, the principal partner, Lord Ffrench committed suicide and the shock to public credit, on the discovery of the Banks insolvent position, was such that business came to a standstill. In view of the confidence previously enjoyed by this firm, the failure caused widespread distress. It would appear that in the winding-up no dividend was paid to the creditors."

The Bank of Ireland, 1783-1946,
By F.G. Hall, pp.125-126.