The Ayr Bank Crash

 by Roberta McGee

Douglas, Heron & Company was a Scottish Bank with its Head Offices in Ayr. Also known as the Ayr Bank it had a small branch in Glaisnock Street, Old Cumnock. The bank opened in 1769 and folded in 1772, reopening briefly between September 1772 and August 1773, but on 12th August 1773 it was dissolved. 

The 1760s in Scotland brought many improvements to agriculture and manufacturing. More investment was required and credit was becoming harder to get. The two main Scottish banks. the Bank of Scotland and the Royal Bank of Scotland, were unwilling to make large advances so Douglas, Heron & Company stepped into the void to increase the supply of credit. 

Many of the 131 original partners were substantial landowners based in the south-west of Scotland. This made the Company seem very secure because the deposits were backed by the partners' lands as collateral. However, there were problems from the start. When the Ayr Bank was formed the nominal capital of the Company was £159,000 of which £96,000 was immediately subscribed. However, no more that 80% of the capital was ever subscribed. In addition, there was a lack of central control with each Branch acting independently of Head Office and having their own Board of Directors. 

None of the partners had much practical banking experience nor were they protected by limited liability. They had a rather cavalier attitude to lending and loans were handed out in abundance. Six months later they discovered that a great deal of money had flowed out and very little had been taken in. The Bank had granted many loans to favoured customers and issued bank notes to cover its position. It became akin to an Old Boys' Club. By June 1772 it had issued £1.2 million through advances and bills of exchange accounting for two thirds of Scotland's currency. The Bank relied on credit from the London bank Neal, James, Fordyce and Down which collapsed during the crisis of 1772. 

Heavily in debt and unable to meet demands for cash on its banknotes, the Ayr Bank closed on 25th June 1772. The Bank briefly reopened for a year but was eventually dissolved permanently. It took at least twenty years to be wound up. The collapse had a significant impact on Scottish landowning families, some of whom were forced to sell their lands to cover their debts. Those who could not cover their debts faced prison.

'The essential errors of the Ayr Bank were trading beyond their means; divided control by permitting branches to act independently; forcing the circulation of their notes; giving credit too easily; ignorance of the principles of business; and carelessness or iniquity of officers.

(Source: History of Banking in Scotland - William Kerr)

After its failure one of the observations during the inquest was that 'much of this credit was diverted into foreign trade, speculation in West Indian land, and expensive houses in Edinburgh rather than being invested in agriculture, manufactures etc.'

(Source: Precipitation and Fall of Messrs. Douglas, Heron & Co. Report, 1778)

Two local men who were forced into bankruptcy because of the failure of the Ayr Bank were John Mitchell of Sunnyside of Wallacetoun, who was sequestrated on 9th March 1774 and Alexander Mitchell of Hallglenmuir, who was named as Factor in John Mitchell's sequestration notice. Whether John Mitchell and Alexander Mitchell were related is uncertain.

The London Gazette 12/3/1774 

A few years later Alexander Mitchell himself suffered bankruptcy. His relative, Robert Boswell, Writer to the Signet, attempted to borrow money to aid Hallglenmuir. 

'Mr Robert Boswell to try if £1000 can be borrowed by me to relieve Hallglenmuir. (Alexander Mitchell of Hallglenmuir, a kinsman, was ruined in the failure of the Douglas, Heron Bank)'

Source: Catalogue of the Papers of James Boswell at Yale University - Vol. 2

'Alexander Mitchell (died between 1780 & 1795) was owner of the Estate of Hallglenmuir in Auchinleck Parish. The lands were sold to Hugh Logan of Logan c1775-1779 and Mitchell went abroad to escape his creditors in 1780. On a letter from Mitchell dated 18/5/1780 and written aboard the ship on which he was fleeing the country James Boswell wrote N.B. - he died abroad"

Source: The General Correspondence of James Boswell 1766-1769

Hugh Logan of Logan was also a victim of the Ayr Bank crash and had to sell off property including Logan House.

So where did Alexander Mitchell abscond to?

His parent were John Mitchell and Elizabeth Boswell, sister of John of Knockroon. One of Elizabeth's brothers was Charles Boswell. Charles emigrated to Jamaica about 1745 and was the resident attorney to the very wealthy Dawkins family of sugar planters. He was also attorney for the Worcester and Roundhill Plantations of William Hall from 1775 to 1793.

Perhaps Alexander Mitchell joined his uncle in Jamaica.

Charles, who was married, died in 1796 at St James, Montego Bay, Jamaica. He was 77 years old and had lived in Jamaica for fifty years.

An interesting entry in Cumnock Kirk Sessions

Cumnock History Group

Dr Patrick Douglas of Garrallan was another investor in Douglas, Heron & Co. and he faced potential ruin when it collapsed. He managed to hold on to both his Ayrshire and Jamaican properties through the expertise of the banker John Ballantine who helped him avoid financial ruin.

Patrick had extensive trading links with Virginia and Jamaica. His younger brother William Douglas had emigrated to Virginia about 1750 and owned the plantations of Garrallan, which lay along the Potomac River, and Montressor, both in Loudoun County, Virginia. These were probably tobacco plantations relying heavily on enslaved labour. When the British colonists arrived in Virginia they divided the land into large areas suitable for farming. The land was often taken from the Indians through cancelled treaties or violence. In 1782 William Douglas died a very wealthy man in Virginia. In his Will he left "the Negro wench Molly" her freedom. 

When the American War of Independence (1775-1783) interrupted his business in Virginia Patrick expanded his interests in Jamaica.

Another young brother, Charles Douglas, had left Scotland as a young man to become the resident manager of their Jamaican estates a few miles inland of Port Antonio. Between 1777 and 1799 they had several properties. The main property was Ayr Mount, a sugar plantation, whose mansion house was Springbank, a smaller one for animals called Nightingale Grove and Finches, which was 160 acres. Charles was also attorney to other plantations. 

1786 was Robert Burns's annus horribilis. He was short of money because Mossgiel farm was so unproductive and he and his brother Gilbert were barely scraping a living. His girlfriend Jean Armour was pregnant and her angry father, who was opposed to his daughter marrying a poor farmer, was looking for a financial settlement. So his way of dealing with his troubles was to embark on an affair with Highland Mary Campbell and to make his escape to Jamaica. 

John Ballantine was a patron of Rabbie's and was also a good friend of Patrick Douglas. He asked Patrick if his brother Charles in Jamaica might have a position for Rabbie. He did - as a book-keeper. However, a book-keeper on the plantation did not work with a pen and ink, he worked with a whip and dogs. Rabbie's job would have been to oversee the slaves. Whether he was aware of this or not is uncertain. Three times he was booked to sail to Jamaica but could not raise the nine guineas to pay for the fare so Gavin Hamilton suggested he try and sell his poems to raise the money. Rabbie took his advice and his book "Poems, Briefly in the Scottish Dialect", commonly known as the Kilmarnock Edition, became an overnight success. 

Jean Armour gave birth to their twins in September 1786 and they decided to remain together. Rabbie's plans to go to Jamaica were abandoned and an orphan boy, known to the Douglas family, went in his place.

When Charles Douglas died at Springbank, Ayr Mount, Port Antonio, Jamaica in 1815 he left his Jamaican properties to his brother Patrick's daughter, his niece, Jean Douglas who had married Hamilton Boswell in 1807. Hamilton's father was John Boswell of Knockroon who sold his property to James Boswell of Auchinleck on the failure of Douglas, Heron & Co. When Jean and Hamilton married it was written into their marriage contract that he must take the name 'Douglas' so he became Hamilton Douglas Boswell.