History of Chicago. From the earliest period to the present time, Part 147

Author: Andreas, Alfred Theodore
Publication date: 1884
Publisher: Chicago, A. T. Andreas
Number of Pages: 1340

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(5). Any number of stockholders, not less than fifteen, who shall be proprietors of not less than fifty shares, shall have power to call a general meeting of the stockholders for purposes relative to the institution, by giving at least thirty days' notice in one or more of the publie newspapers of the Territory, specifying in such notice the object or objects of such meeting, and may, moreover, appoint three of their members as a committee to examine into the state and condition of the bank, and the manner in which its affairs have been conducted: Provided, That no member of such com- mittee shall be a director, president or other officer of any other bank.

(6). Every cashier, before he enters upon the duties of his office, shall be required to give bond with two or more sureties to the sat- isfaction of the directors in a sum not less than $10,000, conditioned for his good behavior aud the faithful performance of his duties to the said corporation; and the other officers and servants shall also enter into bond and security in such sum as the president and directors may prescribe.

(7). The lands, tenements, and hereditaments which it shall be lawful for the said corporation to hold, shall be only such as shall be requisite for its immediate accommodation in relation to the con- venient transaction of its business, and such as shall have been bona fide mortgaged to it by way of security, or conveyed to it in satisfaction of debts previously contracted in course of its dealings, or purchased upon judgments which shall have been obtained for such debts.

(8). The total amount of debts which the said corporation shall at any time owe, whether by bond, bill or note or other con- tract, shall not exceed twice the amount of their capital actually paid over and above the moneys then actually deposited in the bank for safe keeping; and in case of excess the directors, under whose administration it shall happen, shall be liable for the same in their natural and private capacities, and an action of debt may be brought against them, their or any of their heirs, executors or administra- tors, in any court competent to try the same, or either of them, by any creditor or creditors of the said corporation; but this provision shall not be construed to exempt the said corporation, or the lands, tenements, goods or chattels of the same from being liable for and chargeahle with the said excess; such of the said directors who may have been absent when the said excess was contracted or created, or who may have dissented from the resolution or act whereby it was contracted or created, may respectively exonerate themselves from being so liable by forthwith giving notice of the fact, and of their absence or dissent, at a general meeting of the stockholders, which they shall have power to call for that purpose.

(9). The said corporation shall not directly or indirectly deal or trade in anything except bills of exchange, goldl or silver, or in sale of goods really and truly pledged for money lent and not legally re- deemed in due time, or of goods which shall be the produce of its lands; neither shall the said corporation take more than at the rate of six per cent per annum for or upon its loans or discounts.

(To). The shares of the capital stock of the said corporation shall he assignable and transferable at any time, according to such rules as shall be established in that behalf, by the laws and ordi-

nances of the same; but no stock shall be transferred, the holder thereof being indebted to the bank, until such debts be satisfied. except the president and directors shall otherwise order it.

(11). The bills obligatory and of credit, under the seal of said corporation, which shall be made payable to any person or persons, shall be assignable by an endorsement thereupon, and shall possess the like qualities as to negotiability, and the holders thereof shall have and maintain the like actions thereon as if such bills obligatory and of credit had been made by or on behalf of a natural person: . and all bills or notes which may be issued by order of the said cor- poration, signed by the president and countersigned by the princi- pal cashier or treasurer thereof, promising the payment of money to any person or persons, his, her or their order, or to bearer, though not under the seal of the said corporation, shall be binding and obligatory upon the same, in like manner and with like force and effect as upon any private person or persons, il issued by him, her or them, in his, her or their private or natural capacity or capacities, and shall be assignable and negotiable in the like man- ner as if they were so issued by such private person or persons- that is to say, which shall be payable to any person or persons, his. her or their order-shall be assignable by endorsement, in like manner and with like effect as bills of exchange now are; and those which are payable to bearer shall be assignable and negotiable by delivery only.

(12). Half yearly dividends shall be made of so much of the profits of the bank as shall be deemed expedient and proper: and once in every three years the directors shall lay before the stock- holders, at a general meeting, an exact and particular statement of the debts which shall have remained unpaid. after the expiration of the original credit, for a period of treble the time of that credit. and of surplus of profit (if any) after deducting losses and divi- dends. If there shall be a failure in the payment of any part of any sum subscribed to the capital stock of said bank, the party fail- ing shall lose the dividend which may have accrued prior to the time of making such payment during the delay of the same.

SEC. S. And be it further enacted, That the said corporation shall not at any time suspend or refuse payment in gold and silver, or of any of its notes, bills or obligations, nor of any moneys re- ceived upon deposit in said bank or in its office of discount and de- posit: and if the said corporation shall at any time refuse or neglect to pay on demand any bill, note or obligation issued by the cor- poration according to contract, promise or undertaking therein ex- pressed, or shall neglect or refuse to pay on demand any moneys received in said bank, or in its office aforesaid or deposit, the person or persons entitled to receive the same, then, and in every such case, the holder of any such note, bill or obligation, or the person or persons entitled to demand and receive the same, shall recover interest in the said bills, notes, obligations or moneys until the same shall be fully paid and satisfied at the rate of twelve per centum per annum from the time of such demand as aforesaid: Provided, That the Legislatute of this Territory may, at any time hereafter, enact laws to enforce and regulate the recovery of the amount of the notes, bills, obligations, or debts, of which payment shall have been refused as aforesaid, with the rate of interest above mentioned; vesting jurisdiction for that purpose in any courts either of law or equity within this Territory.

SEC. 9. Be it further enacted, That John Marshall, David Apperson, Samuel Hays, Leonard White and Samuel R. Campbell, or any three of them, shall be commissioners for the purpose of receiving subscriptions and who shall have power to appoint a per- son to receive the money required to be paid at the time of sub- scribing. and the said receiver shall, as soon as the directors are appointed, pay over the same into the hands of such person as the directors may direct.

SEC. 10. Be it further enacted, That the aforesaid corporation shall not be dissolved previous to the expiration of their charter. nor until their debts, contracts, notes, bills of exchange, and under- takings in their corporate capacity, shall he finally and faithfully settled: Provided, also, That after the expiration of their charter. they shall not transact business, according to the true intent and meaning of this act, further than to settle and close their contracts as above provided. This act to take effect from and after its passage. WILLIS HARGRAVE, Speaker of the House of Representatives. PIERRE MENARD. President of the Legislative Council. Approved December 28, 1816.

NIMIAN EDWARDS. (Governor.)

Under the Territorial Government, two other banks were chartered, one at Edwardsville and one at Cairo. under charters the provisions of which were similar to that above quoted. Their existence had ceased before Chicago became an element in the banking of the State. l'he Cairo Bank had a somewhat mythical existence until :836, at which time it was brought into actual life

526

HISTORY OF CHICAGO.

for speculative purposes, issued its full quota of paper money, flourished for a time, and finally succumbed to the rough financial storms of the times. Its charter was repealed on the 4th of March, 1843.

The Edwardsville Bank and the Bank of Illinois at Shawneetown became banks of deposit, and received the public moneys arising from the sale of public lands in Illinois. The Edwardsville Bank failed in 1819-20, owing large sums to depositors, which it never paid. The United States brought suit against the bank for its deposits and obtained a judgment for $54,000, which proved valueless. The bills, of course, became worth- less. The bank at Shawneetown showed more vitality, being under more skillful financial management. It went into business immediately after its charter was granted, and being a repository of Government funds, acquired an extensive credit, which it kept unimpaired until the general failure of all the Kentucky banks in 1821. It was one of the last to suspend, which it did August 21, and was one of the very few banks of the time that ever paid even a dividend on its indebtedness. It managed to compromise its debts both public and private, by means it is not necessary here to explain, and save its franchises under its charter. It remained dormant until February 12, 1835, at which time an act was passed to extend its charter for twenty years, from the first day of January, 1837. Under the extended charter the bank was authorized to receive interest for loans made: "On loans for six months or under, at the rate of six per cent per annum; and on loans over six months at the rate of eight per cent per annum." All stock not responding to the calls to be forfeited, and the one hundred thousand dollars of stock reserved to the State to be sold to the highest bidder, and the proceeds paid over to the State Treasurer for the benefit of the State. In lieu of all other taxes, the Bank was to pay into the State Treasury, annually, one-half of one per cent on the capital stock paid in.

STATE BANKS .- On the adoption of the State Con- stitution, August 26, 1818, there was in existence within the bounds of the State, only the bank of Shawneetown, then in good credit, and the Edwardsville Bank already in the throes of dissolution. The constitution first adopted declared that there should be no other banks or moneyed institutions in Illinois, but those already pro- vided by law, except a State Bank and its branches.

March 22, 1819, the first State bank was incorpor- ated under the name and style of the "President, Directors and Company of the State Bank of Illinois." The amount of capital was limited to five hundred thousand dollars, all of which was owned by the State, which through the Legislature was invested with its entire management and control. The president and directors were to be elected by the Senate and House of Representatives, on a joint ballnt, and the cashiers appointed by a majority of the directors. The property, lands and faith of the State were pledged without any restrictions for the redemption of the bills issued, and the State was pledged, at or before the expiration of the ten years the time of its charter , to redeem all bills presented in gold or silver. The bills were declared legal tender for all debts due the State. The school- fund and all specie, or "land-office money," were required to be deposited in the principal bank. Two thousand dollars was appropriated to procure plates and start the financial institution on its career of benefi- cence. Three hundred thousand dollars was to be put in circulation. It was to be distributed in the several districts in ratio with the population. The bills were to be loaned on notes, secured by mortgage, at the rate of

six per cent per annum. As the bills themselves bore an interest of two per cent per annum the borrower virtually paid but four per cent. for his money. No person was entitled to a loan of more than one thousand dollars. The officers of the bank were entitled for their services to banking accommodations, on approved security, at two per cent per annum, in the following amounts : President of the principal bank, $2,000 ; the president of each branch, St,ooo ; and each director, $750. Four branches were established : At Edwards- ville, Madison County; at Brownsville, Jackson County ; at Shawneetown, Gallatin County ; and at the seat of justice in Edwards County.

The currency soon flooded the State and .all gold and silver disappeared as a circulating medium, and, as was quite natural, did not enter the vaults of the wild-cat bank or any of its branches. The money was scarcely in circulation before it depreciated to seventy cents on the dollar, then to fifty and so on down to twenty-five cents, when it disappeared from circulation and found its way into the hands of shrewd speculators who looked to its ultimate redemption by the State. There was subsequently a special law passed legalizing the payment of the officers of the State government in this depreciated paper at its current value. As under the terms of the charter all taxes and revenue of the State were payable in these bills, the State at last became hopelessly entangled in its own financial system and was forced to withdraw the circulation. This was begun in 1824, but the currency continued to circulate in the channels of the State receipts and disbursements until the expiration of the charter in 1831, when the State closed its banking business at a loss exceeding the full amount of the original issue. Governor Thomas Ford, in his History of Illinois, sums up the result as follows :

" In the course of ten years, it (the State) must have lost more than $150,000 by receiving a depreciated cur- rency. $150,000 more by paying it out, and $100,ooo of the loans, which were never repaid by the borrowers, and which the State had to make good, by receiving the bills of the bank for taxes, by funding some at six per cent interest, and paying a part in cash, in the year 1831. In closing up the affairs of the bank the State borrowed of one Samuel Wiggins, January 29, 1831, the sum of SIoo,ooo. It is stated by contemporary writers that the shrewd and provident Wiggins paid over a large part of the loan to the State in bills of the old State Bank which had been bought up by him at a low price and which the State now redeemed at par. The loan was at the time extremely unpopular, and threats of repudiation were rife for years afterward. It was however, paid ultimately, principal and interest, and the credit of the State saved from blemish."

For two or three years succeeding the closing up of the old State Bank no bank legislation was had. 'l'he citizens of the State were wholly engrossed in the Indian troubles which culminated in the Black Hawk War, so called. The treaties which followed its close opened up a vast domain for settlement, and, in 1834, the tide of emigration from the East set strongly through Chi- cago toward the region lying west and northwest, soon to be open for settlement. Many on reaching Chicago cut short their prospective tours and found their per- manent home here, thus swelling the population and making a most thriving village, which even then gave promise of becoming the center of trade for the great crowds of prospectors which were passing through. Thus during the short space of two years Chicago grew from a small and unimportant hamlet, with little trade

527

BANKS AND BANKING.

or commerce, to be an exceedingly busy center of trade, with a resident population, according to the State cen- sus taken in 1835, of three thousand two hundred and sixty-five inhabitants. All were filled with the intense desire to better their condition by availing themselves of the opportunities afforded in a new and rich country rapidly filling up with sturdy and thrifty settlers. In- spired with courage and hope adequate to the brilliant prospects offered, Chicago that year put on the armor of enterprise in which she has fought through flood, and fire, and war, and financial disaster, unflinchingly and with no backward step, to the proud position of the inland metropolis of the nation; a city, with its suburbs, of seven hundred and fifty thousand souls, as busy, as persistent, as sturdy, and with faith in its future yet beyond, as strong as appeared to the pioneer denizens of the little Chicago of fifty years ago.

It was not until 1835 that a banker could have found a paying business in Chicago. During that year began the great mania for land speculation which, from the pine forests of Maine swept the country to the prairies west of the great lakes. The purchase and sale of city lots in paper cities, and claims to vast tracts of land, at constantly enhancing prices, became the absorbing business of the times. The titles to the land in many cases was no less fictitious than the prices they realized; yet the immense volume of business transacted required a certain amount of money "to facilitate exchanges " if not sufficient to do a cash business, which at the time was not thought of. Chicago then felt for the first time in its history the sore need of money, and yearned for a bank of issue.

ANOTHER STATE BANK .- Chastened into some slight degree of cantion, but by no means disheartened by the outcome of the business of the old State Bank, the Legislature, February 12, 1835, in addition to extending the charter of the Shawneetown Bank, as before mentioned, incorporated another State bank. The Legislature did not, as before, take upon itself in behalf of the State the responsibility of managing the bank, nor did it assume the payment of its obliga- tions or the redemption of its bills in specie, either on demand or at any future period. With the wisdom which comes from experience it was content to leave the entire management of the bank to private enterprise. Following is a summary of the more important pro- visions of the charter. The title of the act was: "An Act to incorporate the subscribers to the bank of the State of Illinois;" the capital was to be $1,500,000, divided into shares of one hundred dollars each; SI,- 400,000 to be subscribed by individuals, while $100,000 should be reserved to be subscribed for by the State, whenever the Legislature might deem it proper to sub- scribe the whole or such parts thereof as the condition of the treasury might justify. It was further provided that the capital stock might be increased $1,000,000 by individual subscriptions. The style of the corporate body was: " The President. Directors and Company of the State Bank of Illinois," and the corporation was to continue until January 1, 1860. The principal bank was to be located at Springfield, with branches, not to exceed six in number, to be located within the State at such points as the president and directors should deter- mine.

The bank was forbidden to commence business until $250,000 of the capital stock should have been paid in in specie : rates of interest on loans for sixty days or less, six per cent ; on loans over six months and under twelve, eight per cent per annum.

The amount of bills or notes in circulation was

limited to twice and a half the amount of capital stock paid in and possessed, exclusive of the sum dne on de- posits; and its loans and discounts were never to ex- ceed three times the amount of such stock, exclusive of the deposits aforesaid. Directors were declared liable in their natural and private capacity for any transgres- sion of the above limits. The section concerning the redemption of bills read as follows:

"SECTION 25. If, at any time, the corporation hereby created, shall neglect or refuse, for ten days after demand, at the banking house, during the regular hours of business, to redeem, in specie, any evidence of debt issued by the said corporation, the said cor- poration shall discontinue and close all its operations of business except the securing and collecting of debts due or to become due to the said corporation, and the charter hereby granted shall be forfeited.

"SECTION 26. The said corporation shall be liable to pay to the holders of every evidence of debt made by it-the payment of which shall have been refused, damages for the non-payment thereof, in lieu of interest at and after the rate of ten per centum per annum, from the time of such refusal until the payment of such evidences of debt and the damages thereon."

It was further provided, that whenever the State should have subscribed for and paid the amount of $100,000, for stock reserved for it, the Governor should nominate two directors to represent the interests of the State in the corporation. The issuing of bills of a less denomination than five dollars was forbidden under for- feiture of charter. The bank was to pay annually, on January 1. into the State treasury, one-half of one per cent on the amount of the capital stock actually paid in by individuals, in lien of all taxes whatever. Inter- ference on the part of the bank with the election of State officers forfeited the charter of the bank. Supplemen- tary to this act, January 16, 1836, the bank was author- ized to increase the number of its branches to nine; the time for redeeming its bills, without forfeiture of its charter, was extended from ten to fifty days. As a con- sideration for these favors the bank agreed to redeem what was known as the "Wiggins loan." together with what interest might thereafter accrue thereon. This, a part of the burden left by the old State Bank, became the heritage of its successor.

CHICAGO GETS HER FIRST BANK .- The citizens of Chicago immediately moved to secure the location of one of the branches of the State Bank in their town. Their efforts were successful, and the announcement was made as early as June, IS35, that a branch was to be established there. December 5, 1835, the officers of the " Chicago branch of the Illinois State Bank " were announced in the American as follows: Directors-John H. Kinzie, president ; G. S. Hubbard, Peter Pruyne, E. K. Hubbard, R. J. Hamilton, Walter Kimball, H. B. Clarke, G. W. Dole, E. D. Taylor; Cashier, W. H.

In A. Brown

Brown. The bank was open for business about the middle of December, in the four-story brick block then owned by Garrett. Brown & Bro., at the corner of La- Salle and South Water streets, and immediately started off with a flourishing business. The cashier advertised in the American, February 13, 1836, that the bank was to be kept open for business from 9 o'clock A.M., to 1 o'clock p. M., that " discount days" were Tuesdays and Fridays, and that all paper should be offered on Mon- days and Thursdays. As an index of the magnitude of some of the accounts as well as the heavy business then

528

HISTORY OF CHICAGO.

done by one of the leading firms it was stated in the American of March 12. 1836, that the Messrs. Garrett, Brown & Bro., from December 30, 1835, to February 27, 1836, deposited with the Chicago Branch Bank the sum of $34,359-31. This was nearly an average of seven hundred dollars per day, and at that time was an item of news that reflected great credit upon the enter- prising firm that did the immense business evinced by their huge deposits, as well as upon the solid financial institutions that could be trusted by them with such a fabulous amount.

Although the Chicago Branch was the only bank in the city at the beginning of 1836, the bills of the Illinois State Bank furnished but a small part of the currency in circulation. The value of the bills in circulation de- pended more on the facility with which they could be circulated than upon any knowledge as to their intrinsic worth. Anything that would go at the bank or that was not questioned on the street would do. The Shaw- neetown Bank, the Bank of Green Bay, working under charter from the Michigan Territorial Legislature and other banks, sufficiently remote for safety, helped to swell the volume of currency and buoy up the inflated trade of the times.

Things went on swimmingly all through 1836 and until the spring of 1837. Then came the sudden crash in the East, a decline in values, a general suspension or failure of banks, and individual ruin on every hand. The far West was at first believed to be too remote to be drawn into the Eastern whirlpool of destruction. Its banks had no circulation in the Eastern States, and there- fore were not subject to the sudden and overwhelming demand for redemption and liquidation which fell upon the Eastern banks without warning. The banks of Illinois and the speculation in Western lands seemed to have little in common with the speculative craze in the far East, except that it was a psychological development of the same mental disorder. It was reasoned that with her own money and her own lands, and her own prices, Illinois might float securely in her own tub. Forthwith the wise men set about fortifying for the coming storm. The bank was, of course, the palladium of safety. It was determined to have money of home manufacture in sufficient quantity to keep the Illinois tub afloat. In the summer and fall of 1836, in connection with the great speculative excitement then near its culminating point, a great system of public improvements began to be discussed. It embraced the stupendous work of pledging the public credit to such an amount as might complete a water way from Chicago to the Mississippi River, and cover the whole State with a system of rail- roads that would reach nearly every prominent paper city which had been laid out, and which only needed railroad facilities to make them habitable as well as in- habited. The necessity of a population in order to keep up prices, began to dawn upon the people of Illinois almost simultaneously, with the determination to create through the banks an ample supply of money. The two ideas seemed to have a correlative fitness to together raise the State to the highest point of prosperity at once. The building of the railroads and the canal and the improvement of the river navigation, would open up the country to immediate and rapid settlement, and the highest hopes of the wildest speculators thus find fruition. Public meetings were held in most of the towns, where the plan was discussed and resolutions favoring the project passed, and, from most of the counties, delegates appointed to attend an Internal Improvement convention, to be held at the capital. The convention assembled at the same time as did the Legis-

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History of Chicago. From the earliest period to the present time, Part 147

Author: Andreas, Alfred Theodore Publication date: 1884 Publisher: Chicago, A. T. Andreas Number of Pages: 1340

Author: Andreas, Alfred Theodore
Publication date: 1884
Publisher: Chicago, A. T. Andreas
Number of Pages: 1340