History of Chicago. From the earliest period to the present time, Part 150

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

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There was very little popular distrust of the bank after this date. 1ts circulation was still further increased in amount, and for the succeeding three years was the favorite currency throughout the West.

The Chicago Democrat was at this time violently opposed to banks and banking as carried on in the West, whether legal or illegal, and kept up a constant fusilade against them all. It represented, however, quite fairly the different phases of the business as they transpired. The following excerpts are deemed of his- toric value:

Issue of April 16, 1849:

" Chicago Temperance Saving Association .- Deposits from a dollar, upwards, received, drawing seven per cent interest, payable half yearly. William H. Brown, president; Charles Walker, vice-president; J. Wilcox, secretary; T. B. Carter, treasurer; Alfred Cowles, attor- ney. Loaning Committee: B. W. Raymond, Thomas Richmond, Henry Smith."

June 26 .- " A new banking and exchange house has been opened in this city by Messrs. Curtiss & Tink- ham who, having command of considerable funds in Ohio and other currency. it is expected by the produce operators and others, will be able to extend the facili- ties now afforded for the purchase of the productions of the country. E. I. Tinkham, late cashier of Wiscon- sin Marine & Fire Insurance Company, is a partner in the firm."

September 19, under the head of " Money Table: "

" Bills bankable and commanding specie at one per cent : New England banks in good credit, New York State banks in good credit, New Jersey and Maryland banks in good credit, Ohio, Indiana and Kentucky bank- in good credit, Michigan, Virginia and Missouri banks

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in good credit, Wisconsin Marine and Fire Insurance Company certificates, Pennsylvania banks, not over one per cent, discount in New York.

" Uncurrent .- Canada, three per cent . discount, Pennsylvania, par to three per cent discount, Tennessee, not taken, State Bank of Illinois, fifty per cent dis- count, State Bank of Shawneetown, seventy-five per cent discount."

" Scrip .- Chicago city orders, par to five per cent discount; Cook County orders, thirty to thirty-five per cent discount; auditor's warrants, ten to fifteen per cent discount; one hundred and sixty acre land war- rants, $132 to $154 each.

" Exchange .- On New York, Albany and Boston, one and a half per cent premium for currency; on New York, Albany and Boston, one per cent for specie; on Buffalo, three-quarters of one per cent premium for currency; on Buffalo, one-quarter of one per cent premium for specie; on England, $5.10, the pound ster- ling, in sums to suit."

In the same issue (September 19) R. K. Swift advertised as follows:

"R. K. Swift will receive deposits of money and allow interest as follows: On certificates payable five days after demand, four per cent ; ten days, five per cent ; fifteen days, six per cent; twenty days, seven per cent ; twenty-five days, eight per cent; thirty days, nine per cent ; forty-five days, ten per cent. If the sum or sums deposited by one person should exceed $1,000, the time of demand is to be arranged by special con- tract. A deposit book will be opened from r till 2 P. M. every day (holidays and Sunday excepted) at the resi- dence of the subscriber, 48 Michigan Avenue, for the benefit of ladies, and one per cent more will be allowed them over the rates above named.

" R. K. SWIFT, " Office over Kohn's store, 111 Lake Street."

Mr. Swift was the first banker in Chicago to inaugu- rate banking exchanges with California and the Pacific coast. In the same paper from which the above is . quoted appears the following:

Q. F. Shift

" California Loan Office .- Parties who make loans or discounts of the undersigned may, if they desire, contract to make payments at the office of E. & R. K. Swift, San Francisco, and have interest stopped pro ruta from the date of such payment; or to make pay- ment by drafts to be drawn on the subscriber by said E. & R. K. Swift, of San Francisco; and such drafts to be received as payments and stop interest pro rata, either from date, sight, or maturity of the same, as may be contracted at the time of making the loans or dis- count. The rate of interest will necessarily be high, and the most rigid scrutiny will be required.

"R. K. SWIFT, 111 Lake Street."

" Exchange Office-San Francisco-E. & R. K. Swift will remit money to and from San Francisco, and will also receive deposits of money at San Francisco and cause the same to be remitted to any of the leading cities in the United States, Canada or Europe, and will

ship packages of goods from Chicago, by way of New York and Cape Horn, to San Francisco.

" R. K. SWIFT, Chicago. " ELIJAH SWIFT, San Francisco."

The intensity of the hatred which the Democrat cherished toward wild-cat currency is evinced in the following, which appeared in the issue of December 1, 1849:

" Private Banking .- We understand that before long we shall be blessed (?) with more home-made money. Among those who intend to issue bills we have heard mentioned: R. K. Swift (we have not learned the name of his hank), I. H. Burch, Esq. (Chicago Bank, we sup- pose), and J. Y. Scammon, Esq. (Chicago Marine & Fire Insurance Company). Glorious times, bye and bye, if paper money will make thetn."

The above brought the following response from Mr. Scammon, which was published December 8;

" BANKING OFFICE OF CHICAGO MARINE & FIRE INSUR- ANCE COMPANY, December 1, 1849. To Editor of Democrat : In your paper of this morning I find my name as connected with this institution included among those who intend to issue bills. Permit me to say through the same medium that it is not my inten- tion to issue bills or any other circulation. The object and design of the Board of Directors of this company are to establish a sub- stantial and responsible marine insurance company, in which our citizens shall be interested, and which shall be chiefly owned and managed here. Besides the business of insurance, the company will receive money on deposit, and loan it and the capital of the in- stitution, and it is our intention to organize a savings department, under sucb guarantees as will make it undoubtedly safe to de- positors. Your obedient servant,

" J. YOUNG SCAMMON."

As further proof that the Chicago Marine & Fire Insurance Company did not intend to issue bills, the following, which appeared in the Democrat of December 6, 1849, is given:

"Chicago Marine & Fire Insurance Company .- At a meeting of the Board of Directors of the Chicago Marine & Fire Insurance Company, held November 26, 1849, the following resolutions were read and adopted:

" Resolved, That the business of this institution shall be divided into two general departments: one to be styled the Insurance De- partment, and the other the Deposit and Loan Department. The business of the first department shall be mainly confined for the present to marine insurance; that of the second to the receiving of money on deposit and the loaning of the same. The second de- partment shall be subdivided into a general deposit department and a savings department.

" Resolved, That for the protection and security of all persons who shall make deposits in the savings department of this institu- tion, it is hereby declared, and the company do hereby contract and agree that all such sums of money as shall be deposited in the saviogs department of this institution shall be held in trust for said depositors, and shall not be mingled with the general funds of the institution, but shall be kept. used and invested by this company as a distinct fund, the principal thereof belonging in equity to such depositors respectively, and not to the institution, so that, in no event, shall such funds be jeopardized by other traos- actions of this institution, this institution agreeing to return such deposits with interest, at the rate stipulated in the respective deposit books or certificates of deposit, but this institution and all its property and funds shall nevertheless be liable for the payment of such deposits.

"Resolved, That it is not the design or intention of this in-ti- tion to exercise any doubtful powers, or to do any act not clearly within the limits of its charter.

"J.YOUNG SCAMMON, President. "E. B. MICCAGG, Secretary.

In the same issue (December 6, 1849), appears the following advertisement:

"Exchange Bank. S. Bronson & Co .. 60 Clark Street. Col- lections and remittances made on all parts of the United States. Deposit accounts kept. Lots and farms for sale. Drafts on New York at one per cent. Premium for currency."

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" The subscribers are selling exchange on New York, Albany and Boston, for currency at one per cent premiums; for Eastern bills at one-half per cent premium. GEORGE SMITH & CO."

BANKING UNDER THE STATE LAW (1851 to 1861). - The period from 1843 to 1860 was one of marked growth in business and population, and it is not strange that acute financiers should have discovered that the deprivation of a local circulation was becoming each year, as business increased, an increasing loss to the State. In 1851, the business of the State, and especially of the northern part, of which Chicago had become the trade center, had so increased that a new banking law had become an imperative necessity. The irresponsible issues of individual bankers, however well secured, and the currency of banks outside the State were not con- sidered adequate, safe or profitable, for the best busi- ness interests of the commonwealth. Accordingly in 1851, the Legislature passed a general law, under which legal banking was again established. The law was passed February 15, 1851, and amended February 10, 1853.

It was copied in its essential provisions after that of the State of New York, and is so generally familiar to the intelligent reader as to render it unnecessary to give it entire. The general provisions were as follows:

The State Auditor was authorized and required to cause to be printed and engraved, in the best manner to guard against counterfeiting such quantity of cir- culating notes, in similitude of bank notes, in blank of different denominations, not less than one dollar, as he might from time to time deem necessary to carry into effect the provisions of the act. These blank bills were to be countersigned and registered, and, when given out under the provisions of the law became the legal money of the State.

Any person or association of persons formed for the purpose of banking under the act were required to legally transfer to and deposit with the Auditor any portion of the public stock issued or to be issued by the United States or any State stocks on which full interest is annually paid, or the stocks of the State of Illinois- the State stocks to be valued at a rate twenty per centum less in value than the market price of such stocks to be estimated and governed by the average rate at which such stocks have been sold in the city of New York, within the previous six months preceding the time when such stocks may be left on deposit with the Auditor. The Auditor was forbidden to issue bills for banking pur- poses on the security of any State bonds, on which less than six per cent per annum was not regularly paid, except at least two dollars in such bonds, exclusive of interest, be deposited for one dollar of bills so issued.

At the valuation thus prescribed the corporators were entitled to receive a like amount of bills, which on being countersigned by the officers of the bank thus created, they were authorized to loan and circulate as money, such bills being made payable on demand, at the place of business, in the State, where the bank had been established.

In case any bank should fail to redeem its bills on presentation, and on formal complaint thereof, made in manner prescribed in the act, the said bank was to be restrained from doing further business and the securi- ties deposited were to be applied first, to the redemp- tion of the outstanding circulation, and the residue, if any should remain, to the payment of other liabilities of the bank.

Each stockholder was made individually liable in proportion to the full amount of capital stock owned by him. The banks were to be examined annually by a

board of commissioners, and a detailed report of the financial condition of each bank doing business under the act filed with the Auditor. Quarterly reports were also to be made by the officers of such banks to the Auditor.

The law was submitted to the people for ratification, at the fall election, and ratified. The vote in the State was: for the banking law, 37.578; against, 31,321. The majority in Cook County for the law was 2.332.

Pending the ratification of the law the Gem of the Prairie, November 15, 1851, said:

" Our local currency is now supplied by the follow- ing banks : The Wisconsin, Marine & Fire Insurance Company, the Chicago bank of 1. H. Burch & Co., the city bank of Bradley & Curtiss, the Southwestern Plank Road Company, Macomb County Bank, Michi- gan, Oswego & State Line Plank Road Company, and the Illinois River Bank. The bills of these banks passed readily among us. They were called into exist- ence by the necessities of the times, and, although every- body is dissatisfied with the establishment of money institutions in our midst, without the sanction and con- trol of law, they have met the sanction and countenance of the community, and will continue to do so, unless it shail turn out that the State has adopted a general banking law. In that case, we apprehend that what- ever banking institutions may be in Illinois must com- ply with the law, or their bills will be forced out of circulation."

In advocacy of a general banking law the Gem of the Prairie, October 26, 1851, said :

" Illinois is flooded with the issues of foreign banks. Our people pay several hundred thousand dollars for a currency, the whole of which goes to enrich private cor- porations of the Eastern States. The general banking law, on which we are to vote in a week or two provides securities far superior to those of a large majority of the banks.whose issues go to make up our present cur- rency, and it effectually guards against over issues. It . will furnish us with a home currency to be kept under the control of laws of our own making, the interest of which will be retained in the State, augmenting the general wealth, instead of being carried off, thereby impoverishing our people to the tune of hundreds of * thousands of dollars annually." * have this or that ? That is really the question before * "Shall we us. One or the other we must and will have."

Under the provisions of the act passed and ratified by the people, what was termed legal banking was again begun in Illinois. The first bank organized in Chicago was the Marine Bank. It filed its certificate of organization January 13. 1852. Its capital was at that time $50,000, which was increased May 20 by an addition of $500,000. Bonds were deposited, accord -- ing to the Auditor's report, October 20, 1852, to secure a circulation of $99.044. J. Y. Scammon was the pres- ident of the institution and Edward I. Tinkham its cashier. The first appearance of its bills was announced in the Democrat of April 21. 1852, as follows :

" MARINE BANK .- The bills of this bank, the first issue under the General Banking law, made their ap- pearance on Saturday April 17). The plate is a very fine one and will not be an easy one to counterfeit."

On the following day the Democrat described the bill as follows :

" We received yesterday in the course of business a S5 bill of the Marine Bank. It is finely engraved, hav- ing for a vignette, the bust of that distinguished philos- opher and theologian, Baron Swedenborg. with rays emanating therefrom, placed between two beautiful

*كيه

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HISTORY OF CHICAGO.

women. The only thing we objected to in the bill is the embellishing it with ladies-emblems of innocence -as though there were anything innocent about bank- ing institutions. The bills are secured by stock depos- ited with the Auditor."

The Democrat of February 18, 1852, announced the organization of the Merchant's and Mechanic's Banks of Chicago.

" Banking House, No. 5, Clark Street ; Levi D. Boone, president ; Stephen Bronson, Jr., cashier."

Messrs. I. H. Burch & Co., proprietors of the Chi- cago Bank, promptly legalized their institution. The Democrat, July 7, 1852, announced the fact :

" Messrs. I. H. Burch & Co., of the Chicago Bank have filed the necessary papers for the organization of their bank under the general law of the State, with a capital of $r,ooo,ooo. Mr. Burch has done busi- ness in this city for a number of years, and earned an enviable reputation."

October 9, the same paper said:

" The Chicago Bank is now in full operation, $108,- ooo of State stock having been deposited with the Auditor as a basis of circulation. Additional deposits of stock will be made soon. The nominal capital is $1,000,000. The following is the list of officers : Thomas Burch, president ; Alfred Spink, vice-president; I. H. Burch, cashier."

The Southwestern Plank Road Company filed the necessary papers with the Auditor to render it a legal bank, in the latter part of May, 1852, and was there- after known as the Commercial Bank.

Messrs. Bradley & Curtiss started banking under the law in June. Their bank was known as the Chicago City Bank.

In May, Forrest Brothers & Co., opened a new banking house. On the announcement, the Democrat of May 6, 1852, says : " They have done business both in this and the old country, which will give them advan- tage on foreign exchange. Banks are now getting as thick as groceries in our city, and, as we are to have them, the more we have the greater the competition and the less the shave." This banking house did business as the Union Bank. The Democrat of August 19 said concerning it: "A new bank is that of Forrest Brothers & Co., which commenced business with a cap- ital of $200,000. The gentlemen connected with this establishment have long been well known in this city. The stocks have been purchased, the company organ- ized and they will proceed to business as soon as the notes can be engraved. The officers are : Andrew J. Brown, president, and Henry L. Forrest and Thomas L. Forrest, joint cashiers.

The Democrat of August 5, 1852, announced: " The old post-office building has been refitted by Dr. Davis- son, and is now occupied by Messrs. Davisson & McCalla as a banking office, under the name of the Bank of Commerce." The announcement in the same paper, October 7, 1852, shows that at that time, it was doing, or preparing to do, a legal business. It read as follows: " The Bank of Commerce is now organized under the general banking law, with a capital of $600,- 000. A. W. Davisson is president and T. McCalla, cashier."

Chase Brothers & Co., advertised in the Democrat, December 25, 1852, that the Farmer's Bank, No. 100 Randolph Street, was opened and ready for business.

Foreign banking institutions also advertised offices of redemption in Chicago. The bills of the Bank of the City of Washington, D. C., were redeemed at 104 Randolph Street., " in current funds or bank

bills," by S. Vrooms. The Mechanic's Bank, George- town, D. C., pledged a contingent Safety Fund of United States stock for the redemption of its bills. The Democrat of October 8, 1852, in which the above information appeared, said: The Mechanic's Bank, of Georgetown, comes into our market to compete with our bankers and brokers, in the fiscal transactions grow- ing out of our large trade and commerce."

Bills purporting to be issued by the Bank of America, Washington, D. C., were redeemed by George Smith, who had bought a controlling interest in the institution in April, 1852, and became its president. He organ- ized a bank under the same name under the State law, July 19, 1852, depositing bonds sufficient for the redemption of a circulation of $50,000. Between the two he floated a large circulation.

THE TRANSITION PERIOD .- As has already ap- peared the capitalists of Chicago who believed in legal banking were not slow to avail themselves of the bene- fits of the new law. During 1852, the following Chi- cago banks were organized:

Marine Bank, January 13, 1851, J. Y. Scammon, president; Edward I. Tinkham, cashier.

Merchants' and Mechanics' Bank, February, 1852, Levi D. Boone, president; Stephen Bronson, cashier,

Commercial Bank, successor to the Southwestern Plank Road Company.

The Bank of Commerce, papers filed in May, 1852; bonds deposited to secure circulation in October, A. W. Davisson, president; T. McCalla, cashier.

City Bank, June, 1852, was a proprietary bank owned by the firm of Bradley & Curtiss.

Chicago Bank, July 1, 1852, was the successor to the banking business of I. H. Burch & Co .; president, Thomas Burch; cashier, I. H. Burch.

Union Bank, August, 1852, owned by Forrest Bros. & Co. Andrew J. Brown, president; Henry L. Forrest and Thomas L. Forrest, joint cashiers.

Bank of America, owned by George Smith & Co. (Elisha W. Willard being the co-partner), July 19, 1852.

Farmer's Bank, December 25, 1852, was established and organized by Messrs. Chase Bros. & Co.

At the beginning of 1853, the new city directory published, contained the names of the following persons and firms, at that time identified with the banking busi- ness of the city:

James M. Adsit, broker, 35 Clark Street.

George J. Brewer (Marine Bank), 37 Clark Street. I. H. Burch & Co. (Chicago Bank), corner of Lake and Clark streets.

Chicago Marine and Fire Insurance Company, 37 Clark Street.

Chicago Bank, corner of Lake and Clark streets.

Marine Bank. 37 Clark Street.

City Bank, 24 Clark Street.

Bank of Commerce (Davisson McCalla & Co.), 50 Clark Street.

Exchange Bank, (H. A. Tucker), corner of Lake and Clark streets.

Bank of Chicago* 'Seth Paine & Co.).

Commercial Exchange Company, 66 Clark Street; David Gamble, with George Smith & Co .; Henry Greenbaum, at R. K. Swift's bank: Elbridge G. Hall. money loaner, 103 Lake Street; Jones & Patrick, bank- ers, 40 Clark Street: Alfred Spink, teller of Chicago Bank; Richard K. Swift, banker, corner of Lake and Clark Streets; George Smith & Co. ; Wisconsin Marine & Fire Insurance Company, and Bank of America ,

* The place of business does not appear in the directory. It was then known as Eddy's new building, adjoining the old post-office building on Clark Street.

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bankers, 41 and 43 Clark Street: John K. Valentine, with George Smith & Co.

The year 1852, which witnessed the reestablishment of banking under the State laws of Illinois, was an ex- citing one in the annals of Chicago banking. It was soon discovered that, although a new and legal currency had been provided, it was not supplanting the well- established and largely-circulated bills issued by the Wisconsin Marine

Fire Insurance Company. "Smith's bills" were still plenty, and were current wherever known, as they were always kept at par with the money of other banks, and redeemable in gold at one per cent discount. Smith had grown rich and some- what arrogant in his consciousness of financial strength. He continued to flaunt his bills in the face of the new banking law in a manner exasperating in the extreme to J. Young Scammon and other stanch and honest advocates of "legal banking" who had established banks in the city. It was not deemed prudent or prac- ticable by the enemies of his bank to repeat the old- time attempts to ruin it by a run. He kept himself constantly fortified against aggressive moves in that line, and could have turned the tables on any bank or combination of bankers who should attempt it, in a way which it was not pleasant to contemplate. There existed, however, from the beginning a determination on the part of the banks doing business in good faith under the State law to drive the illegal issues out of circulation if possible. Meantime a state of armed neutrality prevailed.

Sometime in the early spring complaints became rife among the people at the current charge of one per cent for gold for bank bills. This was the rate which had been established by Mr. Smith, and it was found impracticable for the legal banks to redeem at par, while his money still circulated as currency, as theirs would be constantly returning for gold while Smith's would remain out performing the functions of money.

The following extracts from the Chicago Democrat, not partial to banks, whether legal or illegal, shows something of the public sentiment on the subject. On the 4th of May, 1852, it said:

"We understand that arrangements are now being made by all the banks in our city to bring up their notes to 100 cents to the dollar, instead of keeping them at 99 cents, where they have been for a long time. If all go into this operation, by exchanging notes every Saturday night, they have nothing to fear from each other. Some are afraid of the land sales about to take place in our city. But we think that land warrants will be used at them instead of specie and so this is no objection."

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History of Chicago. From the earliest period to the present time, Part 150

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