History of Chicago. From the earliest period to the present time, Part 151

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

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On the 6th of May it said:

"The people are becoming very much excited upon the subject of the banks not redeeming in specie. We have talked with our bankers upon this subject. Each alone says there ought to be spe- cie payment, but each is afraid of his rivals. Each is afraid that if he pays specie some of his rivals will make a run upon him. There is some plausibility in these pleas, but there is a way to obvi- ate them all. Let there be a common day to all. Let our Board of Trade take hold of this matter. Let there be a committee appointed to see all the banks in the city and make an amicable arrangement whereby all the banks shall commence paying by June I, or at fartherest by July 1. Our Legislature ought to take hold of this subject, as it is clearly embraced within the terms of the Gior- ernor's proclamation; and it is in their power to stop all illegal banking. The Marine Bank is paying specie now, and several of the other bankers have authorized us to say that they are ready and willing to begin whenever a day shall be agreed upon."

From the Democrat of May 24:

"We have conversed with the most of our bankers upon the subject (of paying specie) and they have all said that they would pay specie the moment Mr. Smith did; that they could not pay spe- cie unless he did, for it was in his power to ruin them. Mr. Smith is now here, and is willing to make any arrangement that will give him an equal chance with the other banks, but any arrangement

made must be adhered to in good faith and strictly adhered to by every one. A combination of merchants, to deposit with no one who issues bills not equivalent to specie or to New York exchange at one-half per cent premium, is on foot and should be resorted to. The Chicago & Galena Railroad and canal trustees have the matter under advisement of taking no bills not equal to specie here. If our bankers have no respect for themselves; if they do not value their own notes at par, it is time they were taught to do so. A people are not free whilst they submit to have a currency that those who issve it at par will not take back at par. Our Legislature is soon to convene, when a stringent law against present abuses should be passed, and there should be no law to collect a note given for such stuff as we are having now for money."

From the foregoing extracts it appears that at that time Mr. Smith, with his illegal issue, was master of the · situation, and, with the exception of the Marine Bank, could dictate terms to the legal banks of the city. The proposed arrangement with him fell through. To estab- lish a clearing-house, as was proposed, and exchange bills, would have been in defiance of the very law under which the other banks had been organized.

As the banking law seemed inadequate to drive out of circulation Smith's certificates of deposit, some of the banks decided to avail themselves of the advantages of this system of banking as well as their own, and thus reap the advantage of a larger circulation than was authorized under the law. How many banks entered into this double-headed system of banking, or the amount of their issues cannot now be ascertained.

The Merchants' & Mechanics' Bank did quite a thriving business. The Democrat, August 20, 1852, .stated that there were counterfeits of the bank afloat, and warned its readers to take no bills not countersigned by the register, John Neal. In the issue of the next day, the president of the bank, L. D. Boone, replied that there were no counterfeits on his bank, and that he supposed the bill alluded to as a counterfeit was "a cer- tificate of deposit, which the bank was prepared to redeem at any time." An indignant citizen, in answerto Mr. Boone's avowal, wrote that. "these certificates, in arrangements, vignettes, figures, and stamps are well calculated to deceive the unfortunate receiver. Such an issue is void, because unauthorized by law, and worthless because the illegal acts of the officers cannot bind the stockholders." The editor added: "If the banking law of Illinois is worth anything, it is in com- pelling those who issue a paper currency to put up some sort of security to the bill holder with the Auditor."

In the Democrat, September 3, 1852, appeared the following:

" 'Damn Shinplasters.'-Excuse us, dear reader-we are in bad humor. ' We cannot see deception substituted for fair dealing so long as open honesty is the only sure road to success. The Merchants' & Mechanics' Bank of Chicago has issued a shinplaster exactly like their notes which are secured as the law requires. The Western papers call it a "dangerous counterfeit." 'T'is worse, 'tis a device, a deception, a fraud, and the only way to avoid it is to refuse all notes on the Merchants' & Mechanics' Bank of Chicago. We have quoted it a doubtful (D). D) ) and dashed it on our list, and so long as the safety of our readers requires this course we will pursue it.'

" The above, from Thompson's Bank Note Reporter is plain talk. We insert it, not so much to injure this one bank in partic- ular, but because others of our city banks are going into the same operation. The thing ought to be stopped at once. Under our new binking law the bill holder is secured, but there is no security for the depositor. So people who prefer security to no security will hereafter take the legal countersigned bills, instead of the illegal certificates of deposit."

By September I, an irrepressible conflict had been worked up between the legal and illegal bank interests. At about this date a new element of financial disturb- ance was added. All banking in Chicago had, whether legal or illegal, been heretofore conducted on worldly principles and for the object, more or less sordid, of

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HISTORY OF CHICAGO.

worldly gain. A new departure in the business was inaugurated by Seth Paine & Co.

The senior partner, Seth Paine, was a native of New England, and, when a young man, came West. He left Montpelier, Vt., in April, 1834, in company with Chester Smith, who was at that time an Illinois merchant, being a partner of a Mr. Goss at Walker's Grove, now Plainfield. He traveled with him on his western journey by stage, canal and schooner as far as Detroit, where they separated, Smith going through to Chicago by stage, and Paine taking the longer but less expensive route in the schooner " Commerce," by way of the lake. It took his last dollar to pay his deck passage to Chicago, where he arrived after a rough voyage of twelve days, with no capital except health, strength, and a most earnest endeavor to do his work in life according to his eccentric views of right. He was tall and straight. He had a frank, open coun- tenance, and a pleasing and prepossessing address. His conversational powers were excellent, and as a public speaker he was far above mediocrity. He was good humored, and made friends rapidly. He hired out with the firm of Taylor, Breese & Co., and was for a time a partner. Subsequently he entered into a copartnership with Theron Norton, under the firm name of. Paine & Norton. They did a fairly successful business for several years. Paine sold out to Norton July 1, 1842, and retired from mercantile business in Chicago. He was married in Chicago on Thursday evening, August 25, 1837, to Mrs. Francis Jones, eldest daughter of Major Whitlock. Paine was always a rabid and uncompromising Abolitionist, and, subsequent to the dissolution of the firm of Paine & Norton, became a convert to the socialistic theories of Fourier, went into Lake County, where he bought a large farm, christened the place " Lake Zurich," and in company with other kindred reformers attempted to carry into practice the socialistic theories he had accepted. How well or poorly he succeeded is not known. It is certain, however, that the enterprise did not prove ruinous nor so discouraging to him as to break his faith in the Fourierite doctrines. He was also for a time a heavy owner and one of the managers of the Illinois River Bank, an unchartered bank at LaSalle, Ill. On the first appearance of what are now termed "spiritual manifestations," in the form of rappings or knockings at Rochester, N. Y., through the mediumship of the Fox girls, he became deeply interested in the phe- nomena, and soon after became an ardent convert and earnest advocate and believer in modern spiritualism- so ardent and earnest as to render him a credulous victim of the many designing mountebanks who attached themselves to that much abused and little understood philosophy. The character of Paine was naturally radical, and molded and fashioned by the many uot- side isms he had embraced, could but impel him to the adoption of modes and methods of action quite at variance with those prevailing, in whatever he might undertake. To his vision the affairs of this world were badly out of joint. They were sadly in need of re-or- ganization, and it required Seth l'aine to adjust things properly. So he left " Lake Zurich " and his farm, and returned to Chicago to teach his old friends and the world at large how banking could be carried on in accordance with what he deemed a higher law than the banking law of Illinois-the law of humanity.

THE BANK OF THE CITY OF CHICAGO .- The firm of Seth l'aine & Co. was formed early in August, 1852. The following announcement appeared in the Democrat of August 10: "Seth Paine & Co. are about to open a

banking and exchange office in Eddy's new building. adjoining the old post-office, on Clark Street." The firm was composed of Seth Paine, who put in about $1,100, and Ira B. Eddy, who put in something over $4,000. The capital stock of the concern never ex- ceeded $6,000, although it was believed that it was backed by capitalists of some strength and character, and at the start it had such financial standing as to obtain quite a number of depositors.

By the middle of October, the bank was opened for business, as appears by the following notice in the weekly Democrat of October 18 : "The Bank of Chicago has determined upon issuing certificates of deposit, and issues are now out, which for artistic skill and beauty of finish are not exceeded by any bills we have seen. On the right of the ones is a beautifully executed portrait of Senator Douglas, engraved by the well-known Tappan, Carpenter, Cassilear & Co. On the right of the twos is Washington crossing the Dela- ware, and on the threes a fine portrait of Henry Clay. Mr. Paine, who is at the head of the banking house of Seth Paine & Co., is president and W. T. Muier is cashier."

So soon as the bank commenced business it was apparent that Paine's theory of banking was as unique as were his other theories, and, if carried out, would be equally subversive of the interests of both legal and illegal banking; indeed, it was his idea to work as radical a change in banking, as he believed would come to society as a whole by the adoption of the theories of Fourier.

The prospectus of the bank, written by Paine him- self, gives the high moral grounds on which the bank was to be conducted. It read as follows :

" BANK OF CHICAGO. " PAINE, BROS. & Co.

" Rates of discount according to time and circumstances-six per cent being the highest.

" We loan to no one to pay debts.

" We loan to no one to aid in murder of anything which has life.

"We loan to no man to aid in speculating in that which is necessary to life.

"We loan nothing on real estate-believing that real estate cannot be bought and sold ; and that possession with use, is the only title. "We loan nothing to aid in making or selling intoxicating liquors, or tobacco in any of its forms.

" We loan nothing to gamblers or usurers who borrow to loan again.

" We loan nothing except for aiding the natural exchange between the producer and consumer, whether of body, soul or spirit-and for the time necessary to produce the exchange.

" Our basis for making loans is the established character of the borrower. He must be a temperate, honest and religious man or woman, with a mind sufficiently developed to understand his business. We are prepared to loan any amount needed for such business by such men. Our money corresponds in commerce, to the blood in the human system. It is the circulating medium. When money is used for the purposes of slaughter and shedding of blood, it makes the blood run cold ; and it stagnates, and ceases to be healthy, and does not circulate freely, and finally ends in death.

" When used by any of the other classes excluded, it also ends in death. We want no business done which is death to the human body, or hell to the soul: and we would as soon furnish a rope to out brother for hanging himself, as the money to buy it with. We would as soon kill ourselves, as lend our money to aid in killing. We would as soon drink ourselves, as lend our money to drunkard -. We woukl as soon take high rates of interest, as loan the usurer facilities to do the same thing. We would as soon take the life of our brother, as lend our aid to speculators in the hread of life, who may starve him into a living death, while they permit not the prayer for desolution. All has its foundation in Hate; and ' He that hateth his brother is a murderer! '-We will no longer mur- der!"

" His established rate of interest was not to exceed

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six per cent per annum. He proposed to loan his certi- ficates on satisfactory security, for three-fourths of the amount, and an even exchange of the other one-fourth in current bank notes (such as the certificates were pay- able in) with the agreement on the part of the borrower that as often as one-tenth of the amount borrowed was returned for redemption, he should take them again, giving in exchange current bank notes. The plan, in other terms, was to make each borrower a sort of fiscal agent of the bank, pledged to keep in circulation or redeem so much of the money as he had borrowed and put in circulation. Had the people given Seth Paine their confidence and supported in as full measure as did the people of the Loyal States the Government during the war, and had Seth Paine's fiat money been

quarters of as ardent a set of Spiritualists as could be found in the country. Both Paine and Eddy, his mon- eyed partner, were bright and shining lights of this Spir- itual Church, and prominent and loud exhorters at the frequent meetings held over the bank. It was not long before the bank became so identified with the spiritual- istic views of the proprietors as to be inseparable in the minds of the outside community.

January 1, 1853, Mr. Paine issued the first number of a paper styled the Christian Banker. The articles were somewhat incoherent, abounded in wit and sar- casm, and so intermingled spiritualism, banking, and anti-monopoly, that it is no wonder many believed Paine had gone stark mad. In addition to his polem- ical articles, he was bitterly personal, and in his efforts

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ENDIVIDUAL WABILITY

FAC-SIMILE OF SETH PAINE'S THREE DOLLAR BILL.

backed by a power co-equal to that of the General Government : and had Paine possessed the power, as did the Government to put out of circulation all other issues save his own, his money would have proved as good as greenbacks. Unhappily for Paine, none of these conditions indispensable to success as a fiat-money man- ufacturer were vouchsafed to him.

For a few weeks after it was opened for business, the bank did a quiet and unostentatious business with a class of very respectable citizens, who believed in the applications of moral principles to banking, as incul- cated in Paine's manifesto, and who were not suffi- ciently practical to foresee the obstacles to be encoun- tered in establishing the institution in a not over moral community, made up largely of men who drank spirit- uous liquors, smoked and chewed tobacco, butchered cattle and hogs, and ate the meat, speculated in bread stuffs and other articles of food. bought, sold, mort- gaged and owned land, loaned money at over six per cent, and otherwise brought contempt upon the code of morals on which the bank had been set up.

Perhaps Paine's overweening confidence and often ill-timed advocacy of the many vagaries which he cher- ished, and which in a most illogical manner he man- aged to attach to, or mingle with his banking business, had something to do with precipitating the calamities that hefell the institution.

Over the bank was "Harmony Hall," the head-

to pull down the strongholds of sin, spared none who stood in the way. The articles became more vituper- ative with each succeeding issue, as increasing outside annoyance gave fresh cause, from his view, for righteous

Sith Paine

indignation. As showing the mental condition of Paine at this period in his banking career, and as relics of the time, quite copious extracts from the Christian Banker, Vol. I. No. 4. date January 29, 1853, are here given.

Extracts from the Christian Banker:

" Our Pulpit .- We preach daily (Sunday excepted, when we talk, as the spirit moves, in Harmony Hall, at half-past ten in the morning and seven in the evening in the Bank of Chicago. Our hearers give increasing evidence of hope within thir souls, and go forth as radiators of new light. If a cigar-smoker or a rum- sucker, or hog-cater comes in for there are such men in Chicago yet), who not only have so little respect for themselves, but actually intrude such offensive influence before us as would make a dog puke ; we refuse to do business with them, but send them right over to Swift, who smokes to drown conscience, which has been vio- lated so long by huge shaves of his fellow-men, that

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HISTORY OF CHICAGO.

the hair has all come off over that organ .- See Eddy on phrenological bumps. There all smokers can find sympathy.

" Our pulpit brings faith and works together. Igno- rance supposes we would loan our bills for the sake of money. But intelligence radiates from our pulpit, and permeates their addled brains as far as wholesome truth can reach a tobacco bloat or a sucker of rum, and tells them that our faith is true, and they can't borrow for love or money. Some come in to exchange our bills for something which our addle-headed bankers take on deposit, (they take nothing which goes out at less than ten per cent)-that being their standard of both faith and dumplings. Well, Illinois River bills are bankable, and why should they not be? Taylor is interested in him, especially in this crisis, for they regard him as a great manager.

"So we give them bankable bills-Illinois River bills. Our bills are signed by Seth Paine, president, . and are issued in pursuance of law. Those bills are signed by Seth Paine, treasurer of the Salisbury Plank Road, which was never built or intended to be-and my responsibility passed from the concern long ago. Churchill Coffing was president, but he, too, has sold out, and we both know there has been no responsibility there since. Taylor & Gurnee make a newspaper adver- tisement saying that they are responsible-but this amounts to nothing-they are not legally holden, and they have no moral responsibility-and if they had both, they are unable to pay their own debts, much less to give responsibility for several hundred thousand dol- lars, which they have loaned to themselves and others, and which they never intend to pay. This trash is bankable, and so Seth Paine, plank-road treasurer, goes for his subsequent issues. This shows the need of our pulpit-the need of light. * * * From present indi- cations preaching is still needed. So bring on your bills for redemption, and when objection is made to the various trash paid out by Tucker, Burch, Smith and other chaps here, we will open our mouth or the Lord will open the mouth of Balaam's Ass to keep you from being shaved twelve per cent by the Great Mogul and his undertrappers, who, next to R. K., pursue the peo- ple with Swiftest destruction, and keep you trotting over here with bills for redemption, till you wear out more shoe leather than Jo. Kenyon's whole stock amounts to-all because you don't know any better than to keep your accounts with men who throw us out because we reduce rates."

In an article on taxation the editor says:

" In our first number, I said we would pay no more taxes-and on that lovely spot at Lake Zurich, the Lord of Hosts and the devotees of Mammon shall measure swords, and test the right of a set of vampires to prey upon my substance.

"We well considered what we said, and we have been greatly strengthened in our convictions since that time. We say that man has an inalienable right to as much soil as he can occupy and cultivate ; that he can- not acquire any title to more, nor be restricted in his title to less. Any attempt to acquire more is as great a crime as to submit your right to less.

" It was a great crime in the Jews to crucify Jesus, yet no greater than for a man to attempt holding this earth by a parchment claim. * *

" I claim the right to my land by the right of nature. God gave it to me, and I say to those who claim it, ' show me the title superior to God.' If I have a right to the soil I have to my sinews, and the turnips which those sinews and God's rains and sunshine produce.

They are either God's or mine. If God's, levy your taxes on Him, take the turnips if you dare, for taxes or anything else. If they are mine, take them if you can."

The opening paragraph of a lengthy article on " Spiritualism," shows that Paine believed that the directors of his bank were not all taxpayers or property owners in Chicago. It read :

" The subject (Spiritualism) may hardly seem appro- priate in even the .Christian Banker,' but when men come to an understanding of the truth as it is in Jesus, they will see clearly that it is appropriate and necessary. When men come to know of the connection and ex- changes between mind and matter, surely they will not wonder that we have sustained our position against the entire moneyed hosts, and in the face of falsehood, detraction, Grand Juries, corrupted Judges and bribed lawyers. No, if the dark minds of Clark-street bankers were open to the knowledge of our minds, and the hosts of God who are managing this whole matter, and could only be made aware how little and how dark their point of vision, they would no more think of contending against us than of an attempt to dethrone Almighty God.

"We have not only direct communication with God, but we are surrounded by the mightiest intellects who have swayed this world and this country. Thus armed, it is not us, but God, against whom you fight. We have no feeling or war against any banker in this city. We regard every one a brother, and would rather do him good than anything else, but our course is rendered necessary by the false attitude they assume and the false position in which they have placed themselves. The scourges which we have and shall inflict, are all for their present and eternal good, and the moment they assume a true and teachable position, we shall show them this by impressions which will be made by the spirits upon their own minds. But they must let reason and charity, not passion and avarice, be their guiding star."

The prospects of " Union Stores " was discussed thus :

" Be patient, brothers. The good time is close at hand. Lying, cheating and stealing, as competition needs and cannot live without, shall give place to truth, love, and honesty. We will soon have the matter in hand. You selfish fellows may as well wind up before we administer on your estates."

Following are extracts from his " Market Reports": "We commence our market report this week, and it will be seen there is a strange coincidence between the high prices of pork and preaching, money and false- hood, and the great difference between theory and practice, talk and work, intelligence and ignorance, priest and people, saint and sinner, shaver and shaved, gouger and gouged, banker and customer, dancer and fiddler, twelve per cent and upwards and six per cent and downwards, man and hogs, God and the Devil. Christian bankers and Christian shoemakers,* the Chi- cago Press and common honesty, the higher law and the lower law, and many articles offered in Chicago at the board of brokers, and in the higher and more spiritual circles, at the board of robbers, which public sentiment tolerates and keeps in being, while it will be seen that in proportion to the rise in steeples has been the fall in morals.

"There has been but little Christianity in market, and much that is offered is of the scurvy order. This kind, however, bears a much better price than the more

* I'nder this name a paper was issued a few weeks as a travesty on Paine's " Christian Banker."

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perfect, as the tastes of consumers have been destroyed by rum and smoke, until their heads and hams are in a perfect pickle.

" Christianity being the purest and scarcest metal, like gold among bankers, we take it for our standard ; and everything and everybody which does not come up to that standard, we quote below par, until they reach the point where neither zero nor Nero can measure them.

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History of Chicago. From the earliest period to the present time, Part 151

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