When a bank goes bust

When the Tipperary Bank failed in February 1856, old men wept in the streets of Thurles and women knelt to ask God if they were to be beggared for ever.

Another bank, the Munster, would fail in 1885 and would be taken over by the Munster and Leinster, a parent of AIB, but the collapse of Sadleir’s Bank, as it was generally known, remains the greatest Irish banking scandal until our own times.

The story began 175 years ago, in the autumn of 1838, when John Sadleir, a 24-year-old partner in a prosperous family legal practice in Dublin saw an opportunity to “tap the humble hoards of the farming classes in his native Tipperary” as the contemporary writer AM Sullivan put it.

He successfully encouraged relatives and friends to revive a private bank run by his grandfather James Scully as a joint stock bank with up to 100 partners and it opened in Tipperary town before the year end. A branch in Nenagh followed early in 1839 and eventually there were nine. It issued Bank of Ireland notes and acted as an agent for the Dublin institution, but was entirely independent. It also paid good interest and high dividends and was regarded with as much confidence as the Bank of England. To quote Sullivan again, it became the depository for marriage potions from the Shannon to the Suir. Nobody seemed to notice that it didn’t lend much to the local farmers and shopkeepers.

Meanwhile, John’s career prospered. In 1846, he moved to London and became the parliamentary agent for a number of railway companies. Next year, he was elected the Liberal MP for Carlow and, following the introduction of the Encumbered Estates Act in 1848, he became involved in a scheme to buy bankrupt estates at bargain prices and sell them on when the market recovered.

In 1851, parliament passed a law banning the use of territorial titles by churchmen other than Anglicans. This caused a furore in Ireland and Sadleir became a leading member of the Irish Brigade or, more sceptically, the Pope’s Brass Band, a group of MPs pledged to oppose the measure. They were also pledged not to take jobs in government but John and his colleague William Keogh did so early in 1853 and, in accordance with the practice at the time, he had to resign and stand for re-election. He was defeated in a rough campaign during which he procured the false imprisonment of a man called Dowling.

Later, he was elected in Sligo but Dowling sued him and won and he was forced to give up his ministry job early in 1854.

Until then, he had a reputation for the Midas touch in his numerous speculations involving railways, tallow, sugar and land, but vague rumours began to spread about his affairs and about the bank which was now run by his brother James. Matters came to a head early in February 1856 when a London bank, Glyn & Co, refused to cash a draft drawn on the Tipperary bank. By then, John had withdrawn more than £200,000, without giving security and it was hopelessly insolvent. On the night of Saturday, February 16th, he wrote letters of regret and next morning he went to Hampstead Heath where he swallowed prussic acid.

The bank closed its doors within a few days.The biggest loser was the Bank of Ireland.

Others included a priest who lost £2,000 he had collected to build a church, a Poor Law Union that couldn’t buy dinners for paupers and 800 people with savings of less than £50. A farmer who blamed his wife for leaving £350 on deposit beat her to death.

In April, the official manager appointed to wind up the bank estimated that it had liabilities of £400,000 and assets of only £35,000.

As the partners had unlimited liability, those who didn’t or couldn’t put their assets beyond the reach of the manager were wiped out.

James was expelled from the House of Commons where he represented Tipperary and fled to the Continent. He was murdered in Zurich in 1881.

In total, John had raised £1,250,000 by forging deeds, share certificates, conveyances and bills and using the bank as his private treasury. In the words of the Times he was a national calamity. Efforts to untangle his affairs continued until the 1880s.

There were rumours that he had forged his own death but, at any rate, he had a sort of after life as the model for Mr Merdle in Charles Dickens's Little Dorrit.