We have had as yet in London, happily, no example of this; indeed, we have hardly as yet had the opportunity.  Till now private banks have been small; small as we now reckon banks.  For their exigencies a moderate degree of ability and an anxious caution will suffice.  But if the size of the banks is augmented and greater ability is required, the constant difficulty of an hereditary government will begin to be felt.  ’The father had great brains and created the business:  but the son had less brains and lost or lessened it.’  This is the history of all great monarchies, and it may be the history of great private banks.  The peculiarity in the case of Overend, Gurney and Co. at least, one peculiarity is that the evil was soon discovered.  The richest partners had least concern in the management; and when they found that incredible losses were ruining them, they stopped the concern and turned it into a company.  But they had done nothing; if at least they had only prevented farther losses, the firm might have been in existence and in the highest credit now.  It was the publicity of their losses which ruined them.  But if they had continued to be a private partnership they need not have disclosed those losses:  they might have written them off quietly out of the immense profits they could have accumulated.  They had some ten millions of other people’s money in their hands which no one thought of disturbing.  The perturbation through the country which their failure caused in the end, shows how diffused and how unimpaired their popular reputation was.  No one in the rural districts (as I know by experience) would ever believe a word against them, say what you might.  The catastrophe came because at the change the partners in the old private firmthe Gurney family especiallyhad guaranteed the new company against the previous losses:  those losses turned out to be much greater than was expected.  To pay what was necessary the ‘Gurneys’ had to sell their estates, and their visible ruin destroyed the credit of the concern.  But if there had been no such guarantee, and no sale of estates, if the great losses had slept a quiet sleep in a hidden ledger, no one would have been alarmed, and the credit and the business of ‘Overends’ might have existed till now, and their name still continued to be one of our first names.  The difficulty of propagating a good management by inheritance for generations is greatest in private banks and discount firms because of their essential secrecy.

The danger may indeed be surmounted by the continual infusion of new and able partners.  The deterioration of the old blood may be compensated by the excellent quality of the fresh blood.  But to this again there is an objection, of little value perhaps in seeming, but of much real influence in practice.  The infusion of new partners requires from the old partners a considerable sacrifice of income; the old must give up that which the new receive, and the old will not like this.  The effectual remedy is so painful that I fear it often may be postponed too long.