THE CAUSES OF PECUNIARY CREDULITY.
WE are, of course, not about to discuss the guilt or innocence of Mr. Banner Oakley, late the head of the Co-operative Credit Bank, and now under examination on the charge of obtaining money on false pretences. He may have been the victim of his own belief in a "system," for anything we have at present to say to the contrary, but the evidence adduced against him brings out in a clear way a feature in English life on which too much light cannot be thrown, and that is, the extent to which pecuniary credulity-prevails among otherwise sensible people. It is as cer- tain as any commercial statement can be, that whether a banker be honest or no, he cannot, in this country and in this age of the world, make a profit out of deposits at call on which he pays 18 per cent. per annum. If he could, why should not Bankers, who borrow at three, deposit the money with him, and so make fifteen? Nevertheless, men presumably of intelligence—one a clergyman, another a tradesman, and a third a General—testified to their belief that Mr. Oakley could pay that interest, and there is no reason to suspect them of misrepresentation, either wilful or involuntary. They did believe it, and the point is to ascertain, if possible, why. They knew, all of them, that Bankers generally could only afford 3 per cent., and yet they thought this particular Banker could, and would, it,,y them 18. -Why ? The usual explanation is, that they were either ignorant or were tempted by high interest till they lost the control of their judgments, and if the occurrence had stood alone, this explanation might be satisfactory, but the in- stance is only one of hundreds, just a little less glaring, in which neither of these explanations will suffice. People who do under- stand money and business to a certain extent constantly make absurd investments at 5 per cent. Clergymen, widows, and small country Renders are supposed to be the persons who are usually attracted by new companies, and glowing prospectuses, and spe- cious promises, and no doubt they are very often caught by high interest, for they suffer from a special temptation, a sense that with low interest their money is of no use to them. They do not seem to themselves to benefit by their £1,000 unless they can obtain at least £100 a year for it, and as money is obtainable for any certain undertaking for half that interest, they flock to the speculators who offer them what they want more even than security. They feel that safety is no good to them if safety will not give them enough to eat. But there are forms of pecuniary credulity exceedingly common in England in which the temptation is not high interest at all. Masses of money are lent every day at 5 per cent. without any security worth mentioning. No one familiar only with London would believe the ways in which money is often " in- vested " in the country, and especially in small country towns. Every now and then a lawyer, or an " agent," or a " speculator " in building breaks up, and then it is discovered that he owes twenty, forty, or, in cases we have known, eighty thou- sand pounds, to persons who have trusted him, not with goods in the way of business, or with saleable properties in the way of speculation, but with sums of hard cash, varying from £500 up to £10,000, for which the lenders have positively no security at all. They have trusted Mr. Smith, as they would a big bank, not from affection, or friendship, or any other cause disturbing to the judgment, but simply because they thought his promise just as good as the promise of a group of rich shareholders. They do not get more than 5 per cent. from Mr. Smith, and would distrust him greatly if he offered more ; but they get that, they tell you, " regularly." They do not know or care what he is going to do with the money, though if asked, they will reply vaguely, "Oh, he uses it to extend his business ;" and as long as the interest comes in regularly, and sometimes when it is irregularly paid, they are perfectly happy about their cash. "My lawyer gets me 5 per cent.," we heard a lady say recently, who had not an idea whether the interest was secured on a landed estate or on Honduras bonds. It is, in their minds, on deposit at their bankers'. The lawyers of course borrow most easily, because they know clients' means, and because they are supposed by a country superstition always to know where to go for bargains, but they are not the only men who are trusted in this way. Builders are believed in greatly, we suppose because their property, probably mortgaged, is so visible. The money lent to shopkeepers to incrse their stock—but on no security except "the business," that is, practically, a good-will, which may be pawned a dozen times over—would be amazing, did we not remember the sums advanced to contrac- tors on the security of contracts which may or may not prove profitable, and of " plant " which intrinsically is worth only a few hundred pounds. The lender is promised 5 per cent. by a quiet tradesman, whose " business " may be yielding £1,000 a year, or £2 a week, for anything anybody but himself can tell, and forth- with advances, say, a couple of thousand pounds, and restvfor years quite tranquil, because the interest is paid. Of course, tee security for the interest may be very good, the shop returning £10 for every £100 put into it ; but the security for the principal can never be perfect, and whether it is good or bad the lender does not know. The shop-keeper may have paid for his stock,
or may not, may have a dozen debts, or only one, may be driving a " roaring" trade, or selling at prices which just enable him to pay his way. We believe, on the evidence of cases brought before us, that in some country towns a very con- siderable proportion of all the capital possessed by people of moderate means is invested in this careless way, and that a lawyer's or prominent shopkeeper's failure often scatters ruin more severe and complete, though in a smaller circle, than that which follows the closing of a London bank. The lenders lose all they have of capital, and are thenceforward face to face with the world, possessed of their earnings and nothing else. In one such case,
dwe believe, upwards of seventy families were ruined, and it is oubtful to this hour whether the borrower was a wilfully dis- honest man, while it is not doubtful that half his creditors were persons in trade or familiar with business, men,—not women—of average sense and caution. Why did they lend so much, on such slight security ?
We distrust the usual answers, and believe that almost all the cultivated men who moralise on such cases, and more especially solicitors and counsel, generalise about the value attached to money a great deal too much. They feel they would them- selves be cautious ; they see that the majority of man- kind are a little over-prudent about money ; and they think everybody who loses by rash investment must be either ignorant, or greedy, or the victim of deliberate sharping. We doubt if it is so. A majority of persons are timid about money, but only a majority. We believe there are thousands of people in this country who have very little care about their money, who no more fear about its safety than they fear about their health or their future state, and who accept any in- vestment they may casually meet very much as they would accept an invitation to ride in a gig, with no thought of any results whatever except a ride. They do not want to lose their money, and are, may be, wretched when it is lost, but they are not so anxious but that any temptation puts their anxiety to sleep. Some of them like a lazy way of investing their cash. If anybody will give them 5 per cent., sending it half-yearly by a cheque without their having any bother, that is very comfortable, and they will take that man's acknowledgment. To men who every day witness the anxiety of their friends about money, who see journeys undertaken and long inquiries made to save or to acquire a few pounds, the existence of other men utterly lazy about their money may seem incredible ; bat they exist, just as certainly as Henry Cavendish, the chemist, did, who swore at his bankers for worrying him by the inquiry whether he would not like part of his overgrown balance-1200,000 —invested in Consols. He did not want to be bored by con- siderations of that kind, and neither do they. They are just as placid about an investment as about an epidemic, and just as confident that misfortune will not come their way. Others, again, are a good deal moved by a desire to patronise and con- fer favours, without, as they think, incurring any loss; and others, by a kind of self-conceit. There is, we suspect, no cause for pecuniary credulity quite so strong as that. Money, like house- building and religion, is a thing everybody feels competent to form an opinion on; and when everybody feels competent, the first ordinary guarantee against folly, the instinctive desire for a leader or guide, ceases to operate. The lender chuckles to himself at his own astuteness in finding an investment which yields so much, or a borrower who offers such pleasant terms, or a security so completely " out of the way of business," a phrase which for some people has a positive charm, that is not altogether unknown to those who borrow of them. "A banker," said a borrower, in the writer's hearing, " would not look at the security, because it could not be sold by auction, but you will see how good it is," and the argument constantly finds acceptance. The leader's amour propre is, in fact, soothed, instead of his pecuniary caution being startled. That has been satisfied by the fact that the borrower only offers 5 per cent. "I am only getting 5 per cent.," says the lender to his friends, and feels that low interest is proof in itself of good security, a superstition which constantly affects the kind of men who regu- late their conduct by maxims, and do not thoroughly understand them. We have not a doubt the majority of the people who lent Kenney to the Co-operative Credit Bank felt, when they had lent it, And still more when they received their first interest, a sensation of gratified vanity, as of men who have received proof positive that they are wiser and cleverer than their fellows, and very little that if Mr. Oakley had offered only five he would have received twice the amount he did.
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