The Moral of the Failed Bank: Professional Plots in the Victorian Money Market

Abstract

A bank failure can be interpreted in at least two different ways: as an exceptional example of how not to manage a financial nstitution, or as a symptom of something more generally wrong with the money market. In Victorian Britain, when people were still adjusting to the idea of depositing their savings with a distantjoint-stock bank as opposed to a well-known local private banker, choosing between these two diagnoses of bank failure was a matter of far-reaching dispute. Was the failed bank little more than an outlier on the rising curve of commercial prosperity experienced by Britain during the nineteenth century? If so, the rest of the banks, as well as their shareholders and depositors, could breathe easier, safe in the assumption that existing administrative checks and sound rules of were being followed by all but the occasional inept or dishonest financier. Individual failures could then provide occasions for self-congratulation on the part of the survivors and a mild warning about mistakes to be avoided in the future. This was how most economists and members of the financial press preferred to interpret a failure in their midst. Conversely, the failed bank might signify much more: an early augury of institutional decay brought on by generations of commercialization. That was the diagnosis of mid-Victorian novelists and moralists, who inserted bank failures into more general narratives that criticized the excesses of industrial society. As an alternative to the capitalist institutions as they presently stood (and occasionally fell), these writers offered the institution of the domestic household in an attempt to reintroduce a sense of personal responsibility into modern life. If the Victorian bank failure offered a temporary text for moralizing, either of the optimistic or pessimistic variety, it provided a more lasting problem for the emergent banking profession. In the 1830s and 1840s, when news of failure among large commercial banks first began to appear in Britain, the profession was little more than a loose

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