A crash to remember

One of the lessons taught in these pages over many years by Christopher Fildes was that, because financial markets are human nature in action, anything that goes wrong in them is almost certain to have happened before and highly likely to happen again. Technology may advance, the language and methods of business may evolve, the objects of speculative desire may transmute from tulip bulbs in one era to dotcom shares in another, but the propensity to err remains constant. As Geoffrey Elliott puts it at the beginning of this entertaining account of the greatest upset of the Victorian City: ‘Money muddles always start the same way, when judgment is fuddled by greed, ambition and overweening self-confidence; then when problems arise, there follows an obstinate refusal to admit mistakes or the imminence of disaster.’

So it was with the catastrophic failure in May 1866 of Overend, Gurney & Co, a discount house and ‘banker’s bank’ with a turnover double that of all its competitors combined and second only to the Bank of England’s, and a reputation for the ‘shrewd probity’ that was particularly associated with Quakerism. The Gurneys of Norfolk were one of the most respected banking dynasties in England — and indeed both their name and their fortune survived this scandal sufficiently undented to allow them to become founding partners in Barclays Bank 30 years later.

And yet in the space of three years the six partners of Overend, Gurney had ruined themselves and almost brought London’s barely regulated banking system crashing down around them. They had indulged in a series of grossly ill-judged speculations on railways, ships, shipyards and other ventures; they had been seduced by an exotic gallery of rogues, bankrupts, fraudsters and middlemen, including a Greek novelist and a wheeler-dealing Irish parish priest.