USA > Connecticut > Tercentenary pamphlet series, v. 3 The Beginnings of Roman Catholicism in Connecticut > Part 4
Note: The text from this book was generated using artificial intelligence so there may be some errors. The full pages can be found on Archive.org (link on the Part 1 page).
Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 | Part 10 | Part 11 | Part 12 | Part 13 | Part 14 | Part 15 | Part 16 | Part 17 | Part 18 | Part 19 | Part 20 | Part 21 | Part 22 | Part 23 | Part 24 | Part 25 | Part 26 | Part 27 | Part 28 | Part 29 | Part 30 | Part 31 | Part 32 | Part 33 | Part 34 | Part 35 | Part 36 | Part 37 | Part 38 | Part 39 | Part 40 | Part 41 | Part 42 | Part 43 | Part 44 | Part 45 | Part 46 | Part 47
The mutual savings bank theory was popular (it had been first put in practice in Dumfriesshire, Scotland, in 1810), and the Norwich Savings Society was chartered in 1824, the Middletown Savings Bank in 1825, and the Savings Bank of New London in 1827. The charters of these institutions also conformed to that of the Society for Savings.
It is unnecessary to describe in detail the development of the mutual savings banks in Connecticut. Suffice it to say that their growth has been conservative, and of great extent. They have been of inestimable benefit to the people. They have suffered little, if at all, from the es- tablishment of building and loan associations or from the
13
later development of savings departments in trust com- panies and national banks. There were seventy-three mutual savings banks in Connecticut with aggregate deposits, on September 29, 1934, of $667,148,747.77 and assets of $740,569,074.76.
VII
IN 1818, there were ten state banks of discount in Con- necticut. One factor which supported the steadiness of the Connecticut banks during the ups and downs of these years was the establishment in Massachusetts, by the Suffolk Bank, of what came to be known as the Suffolk System. In 1819 this bank began to deal in uncurrent money-that is, the notes, generally of distant banks, the redemption value of which was dependent on the issuing banks' credit. The Suffolk Bank offered to redeem the notes of country banks which might be presented to it for payment, allowing the promisor bank the discount at which such a note might be purchased. This offer was conditioned upon the agreement by each bank which entered into the plan to keep on deposit with the Suffolk Bank $5,000-later reduced to $2,000. The scheme was at first unpopular and the Boston banks that in 1824 joined with the Suffolk, appointing it their agent, were derisively called "The Holy Alliance," but the advan- tages of the system soon became apparent. It gave a certain stability and liquidity to a part, at least, of the uncertain currency with which our ancestors were afflicted, and it furnished a check on undue expansion. The discount on most New England notes disappeared. Notes of Connecticut participating banks were at par wherever Boston funds were at par.
In 1827 confidence began to emerge after the dis- turbances culminating in 1825. In the former year and
I4
those immediately following the general assembly char- tered seven new banks, not counting the Quinebaug Canal Bank which never went into operation. But President Jackson's successful opposition to extending the charter, which expired in 1836, of the second Bank of the United States, and the subsequent deposit of public moneys in "pet banks" again confused the financial situation. Furthermore, the discontinuance of the second Bank of the United States resulted in an attempt to fill the gap by state banking expansion throughout the country. In Connecticut, comparatively speaking, this expansion was mild. The Jacksonian party secured con- trol, in 1833, of the general assembly, which in that year incorporated six additional Connecticut banks; in 1834 four more were authorized, though by that time there had been a reversal of sentiment and the anti-Jackson party was in the ascendant in Connecticut. Confidence was soon restored but accompanied, as usual, by specu- lation, especially in the newly opened western and south- ern lands. The history of the period following the discontinuance of the first Bank of the United States was repeated; the country had learned nothing from that experience. The alternation of hopefulness (with ac- companying speculation) and gloom in this period is bewildering. Jackson's famous "specie circular," pro- viding in substance that payments for new lands must be made in specie, except in cases of bona fide settlers or residents of the state in question, was issued in the sum- mer of 1836. Its intent was sound but practically it precipitated another crisis. The New York banks sus- pended specie payments on May 10, 1837, and the follow- ing day the banks of Philadelphia and of Connecticut- except the City Bank of New Haven, the Union Bank of New London, and the Mystic and Stonington Banks-
15
joined in the suspension. Massachusetts followed on May 12. However, no Connecticut bank failed in these trying days and by 1838 the immediate resources of all the state banks were more than half of the liabilities, and the specie on hand was twenty-seven per cent of the outstanding circulation. Specie payments were resumed in May, 1838.
In 1822 Connecticut banks had been required to file with the comptroller annual statements showing their general condition, but no forms were specified and the returns were not uniform or complete. At the assembly's May session in 1836 a special committee, consisting of the state treasurer, the comptroller, and the commis- sioner of the school fund, was appointed to examine the state banks and report the following year. The committee examined thirty of the thirty-one banks then operating in the state. One refused to submit to the examination but afterward repented. As a result of the committee's report, which adversely criticized some of the informal practices then prevailing, the first bank commissioners- John C. Palmer and Chauncey F. Cleveland, afterward governor-were appointed in May, 1838. In 1836 and 1837 the general assembly passed acts looking to a more businesslike conduct of banking in the state. Thus, the policy of assuming a measure of responsibility for the management of the state's financial institutions may be attributed to the assemblies of 1837 and 1838.
The occurrences of these troubled years may have in- stigated the inquisitiveness of the legislators as to Con- necticut banking practices. There was trouble again-or a culmination of trouble-in the autumn of 1839 when three hundred and forty-three banks, chiefly in the West and South, failed. The Bank of the United States in Pennsylvania, which had taken over the business and good will of the discontinued second Bank of the United
16
States, suspended in October of that year and in 1841 its dubious career came to an end. Connecticut may justi- fiably point with pride to the stability of its banks, then as well as now. Two sentences from the report for May, 1844, of the Connecticut bank commissioners are worth reading and pondering today :
From the lowest depths of commercial distress and embar- rassment the country is now rising; the laws of trade, without aid from government, have obtained the supremacy, and prices are governed chiefly by demand and supply; business is active ... and capital is again in demand. That the soundness of the currency is the best and only effectual regulator of the ex- changes, the experience of the past seems to have demonstrated.
In 1852 the general banking act of Connecticut, known as the Free Banking Act, became law. It followed the fashion set by New York and its purpose was to allow the general organization of banks under its terms, without the necessity of securing special charters. Its most sig- nificant provision was that requiring the deposit with the state treasurer of federal and certain state and municipal securities, against which notes were issued. Thus, for a time, there came to be two distinct types of banks in the state: those which issued a currency, limited to be sure, but unsecured (aside from the assets of the respective banks), and those whose notes were secured by definite investments held by the state as trustee. The security provisions of the act (reminiscent of later federal legisla- tion) seem a reassuring and healthy factor, but the law as a whole was unpopular. It was nullified in 1855 when pro- vision was made that no banks should be organized there- after under it. The fourteen banks that had been estab- lished according to its provisions were allowed to have special charters on payment of a two per cent bonus to
I7
the state. The collateral deposited by them was to be returned when outstanding notes secured thereby were surrendered.
VIII
THE Erie Canal had been opened in 1825, and three years later the Farmington Canal was doing business. But canal transportation, on which high hopes had been founded, was soon superseded by railroads. Enthusiasm for both these enterprises resulted in overbuilding and speculation in their securities. These factors, with undue expansion of the currency, brought about the panic of 1857 which was serious, though brief. Banks had made large loans on collateral that shrank in value, many western banks suspended, factories were closed with resulting unemployment. The circulation of Connecticut banks contracted in the amount of more than $6,000,000, mostly between July I and November 1, 1857. In 1853 two Connecticut banks had failed-in Killingly and Wood- bury-both because of the failure of a New York broker.
Readjustment came about fairly rapidly, however, after the 1857 panic-at least in this state where specie payments, which had been generally suspended, were resumed on December 14. The bank commissioners' report to the general assembly of 1858 listed seventy-six Connecticut banks, not counting the Granite Bank of Voluntown, a fraudulent enterprise which was put out of business by the bank commissioners who discovered its headquarters in a saloon in New York. Another bank, the Mattatuck of Waterbury, financed by New York inter- ests, was declared insolvent by the courts. By this time it must have occurred to the Connecticut banking frater- nity that New York connections should be scrutinized with care.
I8
The Civil War period was notable, of course, for the organization and establishment of the national banking system; also for the somewhat surprising fact that, as the bank commissioners put it in their report to the general assembly of 1863 (the year of the institution of the bureau of currency in the treasury department and of the national banking law), the state had never been so prosperous as then; stocks were higher and dividends larger than ever. Deposits in Connecticut banks on April 1, 1863, amounted to $9,573,074.82, an increase of over fifty per cent during the past year. This was an extraordinary recovery from the depression in the first year of the war, but the in- flationary policy, evidenced by the "greenback" issues, must be taken into account here. In the absence of a general demand for loans, and with the desire to sustain the federal government, the banks had invested approxi- mately six-and-one-half million dollars in government obligations-more than one fourth of their entire capital.
The creditable history of the Connecticut banks had been due very largely in the commissioners' opinion (expressed in their report in 1865) to the specie reserve requirements. The national banking acts of 1863 and 1864 offered relief from this, substituting the deposit with the government of securities held against circulation, and the ten per cent tax on circulation by state banks, adversely criticized by the bank commissioners, made the issuance of currency by state banks practically pro- hibitory. A stampede toward nationalization set in. The report to the general assembly of 1866 gave the whole number of banks in the state as ninety, of which eighty- two were national, with an aggregate capitalization of about $24,000,000, leaving eight state banks, capitalized at approximately $2,000,000. By 1870 only four state banks were doing business in Connecticut; namely, the
19
City and the Mechanics Banks in New Haven, and in Hartford the State Bank, and the Connecticut River Banking Company which held a unique and valuable state charter. This, however, does not include trust companies, then in an embryo stage.
IX
TRUST companies had long existed in this country, but it was only in the late 'sixties of the last century that their possibilities of usefulness and therefore of development were at all adequately foreseen. Gradually the advantages to the public of the fiduciary organization combined with discount-banking activities came to be appreciated, but many of the early trust companies were fiduciary institu- tions only rhetorically. In 1875 there were four state banks and ten trust companies in Connecticut; in the bank commissioner's report for 1934 every state bank except three carried the word "trust" in its title, and used its trust powers in the restrictive and legitimate sense. This takes no account of the national banks, each one of which, under the present national banking law, may engage in fiduciary activities, as most of them do.
In Connecticut the first trust company to appear was the Fairfield Loan and Trust Company, organized Octo- ber 20, 1837, as a joint stock association under the general act passed June 10, 1837. In the modern sense of the words it was not a trust company at all. It was given powers which today seem obviously dangerous, and one is not surprised at the statement in the bank commis- sioners' report as of January 1, 1872, when there were five trust companies doing business in the state, that it was not contemplated that the business of banking should be organized under the general joint-stock laws, though several so-called trust companies had so organ-
20
ized. Most of the trust companies in the early stages combined the functions of banks of discount and savings banks, although two confined their activity entirely to real estate loans. They paid interest on all deposits. The Fairfield institution was legislated out of existence in 1880.
In 1867 the Hartford Trust Company was chartered, the act being amended the following year. That year, 1868, saw an outburst of trust company organization, comprising the formation of the National Railway and Trust Company, the Continental Railway and Trust Company, the Union Trust and Safe Deposit Company (New Haven), and the Charter Oak Trust Company (Hartford). The last-named, under its changed title of Security Company, did an almost entirely trust business during its first twenty-five years. The first two were, primarily, disguised railroads, and have long since faded out of the picture. The title of the Union Trust and Safe Deposit Company was shortened the year after the date of its charter to the Union Trust Company, which later consolidated with the New Haven Trust Company to form the Union and New Haven Trust Company, now the possessor of an enviable reputation and a large business. The name of the Charter Oak Trust Company was soon changed, as stated above, to the Security Company, later to the Security Trust Company, which through a series of consolidations, including the Fidelity, another trust company, is now comprised in the organiza- tion of the Hartford National Bank and Trust Company, the largest bank in the state. Likewise the Hartford Trust Company, after a long and honorable career, con- solidated with the Connecticut Trust and Safe Deposit Company to become the present Hartford-Connecticut Trust Company, the leading institution in Connecticut
2I
in the number and amount of its trust accounts. It was all a clear case of the survival of the fittest among these pioneer institutions of their kind; it also may be taken as a refreshing illustration of the enduring values, through the vicissitudes of nearly seventy years, of honest and capable management when applied to a useful enterprise.
X
IT seems to be a general rule that the aftermath of a war brings three successive economic developments-a period of adjustment with its attendant confusion, a revival of apparent prosperity, accompanied by speculation and overproduction, and then the inevitable reaction into stagnation and depression.
The events following the close of the Civil War fur- nished the most striking illustration of this sequence up to that time. The period of adjustment was comparatively brief and was followed by tremendous expansion, par- ticularly in the railroad field. The results of overproduc- tion and overbuilding were not slow in arriving, acceler- ated by the demands for money incident to the Chicago and Boston conflagrations (in October, 1872, the New York banks were more than one million dollars under their reserve requirements), the lowering of the war tariffs, foreign competition, contraction of foreign loans, falling prices as overproduction exerted its effect, and unemployment that followed efforts to counteract the consequences of that overproduction, together with the attempts of the government to deflate the overexpanded currency. In 1873, congress, in passing the coinage act in an effort to systematize the currency, omitted silver, which had been in little use, and this became known as "the crime of '73." The failure, in September, of Jay Cooke and Company, who had been financing the build-
22
ing of the Union Pacific Railroad, precipitated the crisis. This brought other failures in its train. The stock ex- change closed and several New York banks collapsed.
The effect was, of course, felt throughout the country, and in Connecticut as much as elsewhere, but the banks in the state stood up well. Perhaps the greatest uneasi- ness was felt at that time in connection with the savings banks. They had not then had, naturally, the educative experience they possess today, nor had they the protec- tive laws, the results of that experience, which, in so large a measure, give them the strength they now so conspicuously exhibit. But they had proved popular, had had immense growth, and there had been much competi- tion. Deposits in mutual savings banks had increased to more than $55,000,000 on January 1, 1871. Since the repeal of the old usury law some of these institutions had advanced their interest rate on real estate loans from six to eight per cent. In the stress of competition some were paying larger dividends than their earnings justified. In 1872 the small Staffordville Savings Bank failed. The general assembly took the savings banks matter in hand promptly and appointed special bank commissioners to investigate. These commissioners reported in 1874, and as a result a more healthy condition was brought about. It was not possible, however, to save the situation en- tirely and a year after the panic started the Townsend Savings Bank of New Haven, one of the largest institu- tions in the state, with about twelve thousand depositors, was forced to close its doors.
The panic of 1873 had its lessons. In particular, there may be dated from that time higher ethical standards in banking. These have been stimulated in Connecticut by the vigilance of the authorities which has characterized the state banking department and made the Connecticut
23
system of supervision certainly one of the most efficient in the country, without dictatorial excesses or unreason- able restriction of individual initiative. It would be un- fair to attribute to all the savings banks in the state the abuses which the commissioners found in some. The older and more conservative institutions came through the crisis in excellent condition. On January 1, 1873, there were seventy-eight savings banks in Connecticut; a year later there were seventy-nine, with deposits of more than $70,000,000, an increase of nearly $2,250,000, and a growth in surplus of about $170,000.
The four state discount banks weathered the storm creditably. The report of the comptroller of the currency showed eighty national banks operating in Connecticut during 1872 with paid-in capital of $25,291,820. For the following two years the number was the same. (By 1883 the number had grown to eighty-eight.) On January I, 1874, the state bank commissioners' report showed ten trust companies doing business. One of these (in New London) accepted no deposits or trust accounts but limited its business to loaning on western real estate; another (in Norwich) also loaned on the same security, but had a small deposit business which, the commis- sioners noted, "it does not desire." Aside from these two, the commissioners stated that the Connecticut trust companies' business "is very nearly that of ordinary banking."
XI
THE panic of 1873 subsided into a depression which was perhaps most evident throughout the industrial domain. Connecticut, rapidly developing as an industrial state, had to bear its burden of stagnation and unemployment. Gradually, however, conditions improved, but then the
24
ch
D
0
silver question became a financial and political issue which was to agitate the country and the banks till the situation was eased by the election of William McKinley as president following the panic of 1893.
Ninety-three was indeed a bad year, and caused more distress than the crisis of twenty years before. Fifty-four closed banks throughout the country never reopened and the failures were three times as many. Connecticut saw the issuance by manufacturing and other corporations of 'pay checks" which circulated freely as money. Clearing- house certificates also were used. In general, Connecticut banks exhibited commendable stability. The commis- sioners' report of January 1, 1894, stated: "Not even a suspicion of weakness had been displayed by any of the banks," nor had there been any impairment of capital. The savings banks, though finally forced to invoke the withdrawal notice, in order to stop "foolish and senseless runs in certain localities," had proved to be in a sound condition, and their management wise and conservative. "During the hardest time, the deposits of the poorest classes reflected a temporary cessation of additions to their savings, rather than a steady withdrawal of funds already accumulated." Nevertheless there were tight places. Perhaps this report was a little optimistic. A Willimantic savings bank finally succumbed, owing to bad management and manipulation by its executive officer. This did not appear of record till the report of the following year when the bank commissioners, Edward R. Doyle and Sidney W. Crofut, issued a review which de- serves approbation, for it outspokenly called attention to some questionable practices and recommended various changes in the banking laws, particularly as to savings banks; it advocated more exact and thorough audits, examinations, and reports; it frankly admitted that there
25
were some banks that would have to be "nursed along" because of losses arising from bad investments made in the past. Altogether it was a sane document, with no false glamor about it, reflecting a close and fearless study of the situation, and it had a definite influence toward stricter practices. The next year, 1896, the same commis- sioners were able to compliment the banks on their "efficient, conservative methods" and the general condi- tion of the banking institutions was stated to be emi- nently satisfactory. That this was sincere commendation no one who reads the commissioners' comment of the previous year can doubt.
The report for January 1, 1894, showed that the eight state banks had increased their surplus and undivided profits during the previous year by $58,296.35 and trust companies had gained in the same items $69,548.63. The report of the comptroller of the currency for October 31, 1893, showed the total number of national banks in Connecticut as ninety-eight, of which eighty-four were in operation and fourteen were in process of liquidation, though none appears to have failed in the years 1893 and 1894.
The result of the 1896 election brought the beginning of recovery, and the state and the nation entered the new century with high hopes under the first Roosevelt, whose antagonism to trusts did not prevent the beginnings of a period of bank consolidations. This was slow in develop- ing in this conservative state and did not become evident in any extended way till some years later. In the mean- time, came the "bank panic" of 1907, which never should have occurred, and was called, by a writer in the New York Times, "the shame of 1907." It was a real panic, for fear was its dominant characteristic; but, if sharp, it was short, and its effects in Connecticut, after a year or two,
26
seemed negligible, for no depression followed. There was, however, in 1908 a general decrease in the assets of savings banks and a shrinkage of deposits aggregating $4,273,284. The only instance of capital impairment among the discount banks occurred in a trust company in a small city.
Two years previously the bank commissioners noted the fact that ten trust companies were soliciting savings deposits, with considerable success. They recommended the application of the savings bank laws as to investment to such savings departments and advised other restric- tions as to safety, which were subsequently adopted.
The panic of 1907, like many unpleasant experiences, had several beneficial effects, the most enduring and profitable of which was the realization by the banks and the business world of the need of some strong general reservoir or reservoirs of reserve. After years of study, trial and error, after the Aldrich-Vreeland bill and the monetary commission, came the Federal Reserve Act ap- proved December 23, 1913. This was a direct outgrowth of the experience of 1907 when, to quote the New York Times again, the New York banks stopped payment though they had $220,000,000 of cash, or a twenty per cent reserve. But the reserves were not widely available, because each bank clung to its own, and the New York banks called frantically upon Europe for gold. The pri- mary cause of the trouble was the rivalry for control of railroads, industries (e.g., the Tennessee Coal and Iron Company), and banks by warring interests; but what brought the crash was the constriction of reserves.
Need help finding more records? Try our genealogical records directory which has more than 1 million sources to help you more easily locate the available records.