USA > Illinois > Cook County > History of Cook County, Illinois : being a general survey of Cook County history, including a condensed history of Chicago and special account of districts outside the city limits : from the earliest settlement to the present time, volume II > Part 12
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"The Evils of Banking."-At no time are we better able to scrutinize the evils of the banking system, discover its defects, scan its numberless means of fraud and piracy, than at a time when some momentary panic has caused a doubt in the public as to its solvency. . Gold and silver are money-real, tangible, valua- ble commodities. Paper promises, however, are not money. The banker issues ad libitum, or he issues to an extent sufficient to raise the value of every article of exchange. He is thus clothed with the power of giving to one man the advantage of the market while he takes it from another. There comes a culminating point. To save itself the bank stops issue."-(Democrat, December 6, 1849.)
In 1849 S. Bronson & Co. conducted an exchange office and bank at 60 Clark street. At this time Mr. Swift offered to sell specie at 1/2 per cent. premium to farmers, laborers, mechanics and tradesmen for Wisconsin funds. George Smith & Co. did a large banking business here in 1849.
At the March term of the Cook county court arrangements with the Chicago Marine and Fire Insurance company to redeem county orders at not less than 75 cents on the $1 were made. At this
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HISTORY OF COOK COUNTY
time I. H. Burch & Co. conducted the Chicago Savings bank at 125 Lake street. R. K. Swift moved his private bank from Lake street to Clark street in October, 1850. In December, 1850, Can- ada money for the first time was at par in this city. The county about this time was flooded with counterfeit bills. A thorough investigation by detectives disclosed the fact that the counterfeits on the bills of the Ohio, New York and Indiana banks were made in a mechanics' saloon near the Lake hotel on the North Side.
In 1850-51 Mr. Dyer, of this city, introduced in the Legislature a bill for the establishment of a banking system in this State. "Notice of protest of the city's paper to the amount of upwards of $800 by George Smith & Co. was presented to the council at their last meeting."-(Democrat, October 30, 1850.)
"We would remark that there is a kind of banking operation under cover of the projected loan (a loan of $100,000 by the city). The scrip is to be engraved and to be in the form and similitude of bank bills. Now, while we have State laws against banking, our city authorities should be slow to set an example of lawbreaking."- (Democrat, February 15, 1850).
Among the bankers doing business in the spring of 1851 were R. K. Swift & Co., George Smith & Co., A. Brant & Co., Chicago Savings bank, I. H. Burch & Co., Chicago Marine and Fire Insur- ance company, Tucker, Bronson & Co., and R. C. Bristol. At this date both city scrip and county orders were at 5 per cent. discount.
The panic of September and October, 1851, did not affect Chi- cago. Very little trouble was experienced here and the hard times occurred mainly in the East. The newspapers noticed a stringency here, but aside from that no inconvenience was felt. The bankers were slow in making loans, while all business men seemed anxious to borrow money. Late in 1851, when it was found that the new banking law had been adopted, the Democrat said: "The banking law is safe; now bring on your 'two dollars a day and roast beef,' gentlemen."
"Business paper ranges from 10 to 24 per cent. per annum, and purchasers are particularly cautious in buying, even at the greatest shave. These rates are ruinous, but they are freely submitted to." -(New York Herald, September 26, 1851.)
"The stringency of the money market East has not affected the market in this city in that degree which many were led to suppose." -(Democrat, October 10, 1851.)
"Confidence in skillful and prudent management is one of the best bases of bank credit; remove it and the best security appears to be of little worth. We consequently anticipate no trouble in Chicago as far as the legitimate business of the country is concerned."- (Democrat, October 10, 1851.)
"This panic, it is to be hoped, will at least have a good effect in teaching our own traders one lesson that they will be wise not to
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HISTORY OF COOK COUNTY
neglect, and that is, it is not safe to go beyond their means, even when there is no actual danger of a momentary crisis."-( Demo- crat, November, 1851.)
"Under the influence of the improvement East the money market in this city has been easier and discounts are more readily obtained, although the more stable of our institutions still continue cautious in making advances for speculative purposes either as regard oper- ations in produce or other departments of trade. We notice the 'wild-cat' issues still continue to fill up the vacuum caused by the withdrawal of the better descriptions of currency. This may yet lead to serious consequences and we fear it will."-(Democrat, October 17, 1851.)
"Happy .- Our people were very happy yesterday in view of the adoption of the general banking law. May their happiness all be honestly realized. May every poor man have money at 6 per cent. without security and without endorsement, and may the note run forever."-(Democrat, November 6, 1851.)
VOTE ON THE PROPOSED BANKING LAW.
SOUTH CHICAGO.
For Bank. Against Bank.
Courthouse
927
38
New York House
157
1
Southern Hotel
100
1
WEST CHICAGO.
Engine House No. 5.
321
10
Engine House No. 6 ..
126
10
NORTH CHICAGO.
376
14
9th Ward
115
5
TOWNS.
Northfield
33
14
Jefferson
16
11
Palatine
18
11
Wheeling
76
ยท
5
Lemont
6
10
Thornton
5
12
Maine
23
5
Proviso
2
g
Leyden
26
8
Rich
13
11
Elk Grove
11
13
Worth
16
13
Palos
33
5
Bremen
5
16
New Trier
1
32
Bloom
0
17
Barrington
22
3
Schaumberg
10
11
Lake
11
2
Orland
12
8
Ridgeville
7
12
Hanover
23
1
Lyons
33
1
Total
2,524
289
-
8th Ward
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HISTORY OF COOK COUNTY
"A bank under the general banking law has been organized under the name of the 'Merchants and Mechanics Bank of Chicago,' cap- ital $100,000. At a meeting of the stockholders, Dr. L. D. Boone was elected president and Stephen Bronson, Jr., cashier. The fol- lowing are the directors : Dr. L. D. Boone, Rice Fay, John Dennis- ton and Benjamin F. Sherman of Chicago and Aylmer Keith of Naperville. It is the intention to commence business as soon as a suitable building can be obtained and the stocks and plates pro- cured."-(Democrat, December 18, 1851.)
"The days of 'wild cat' and 'yellow dog' are fast coming upon us. Brass in a man's face has become banking capital and he is the greatest financier who can suggest the best method of staving off his promises. All money in circulation ought to have some place in Chicago where it is redeemable in specie at 1 per cent. or in bills that are redeemable at 1 per cent. Now we call upon all these recently established banks to have some place of redemption here-permanent redemption. Who redeems the bills of the Illi- nois River bank in our city and will continue so to do? No institu- tion was ever started that gained so extensive a circulation in so short a time. They come to us from all quarters. We see it stated that this institution has filed the necessary papers to have a bank. But we see it nowhere stated that it has filed the necessary securi- ties."-(Democrat, December 20, 1851.)
"Tax the people to get money to put in the banks as banking capital. Chicago borrowed $350,000 at 10 per cent. This money is then deposited in the banks and loaned back to the people at 12 per cent. But the banks pay the city no interest."-(Democrat, January 8, 1852.)
"The Bank Law .- After all that was said prior to the passage of the late bank law, not 1 per cent. of securities has yet been filed by men intending to do a banking business and the belief is general that not 1 per cent. will be."-(Democrat, January 28, 1852.)
"The desire to get our city deposits for banking capital is over- riding all the other questions, and we never saw the like of the present contest, and it will grow hotter and hotter until the election is over. Who shall have the deposits? This is the entire question. The two candidates for mayor already announced having refused to make any pledge concerning the deposits, the bankers of our city through their private stockholders, confidential attorneys, and money borrowers are bringing out candidates both for mayor and treas- urer, and keeping the other offices to trade upon. As high as $1 per man was paid on Saturday for signatures to calls for men who want to run and will not come out unless their friends in the banks will get them a certain number of names to start with. As high as $5 per name can easily be got this weck if people will only hold back their names and give frec competition among the candidates of the different banks. The banks can well afford to pay high for
-
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HISTORY OF COOK COUNTY
names if they only get the deposits at last, as some of those applying will not have any capital unless they do get them."-(Democrat, February 2, 1852.)
"The contest for the deposits grows stronger and stronger. There are gentlemen in our city who will agree to divide a sum equal to the salary of both the mayor and treasurer between the two orphan asylums in our city if they can but keep the deposits for a single year. And they agree to give good security. There are several embryo candidates for both mayor and treasurer. Calls are out for them. Like candidates who think they have a chance for election, they do not come out openly and announce themselves. But they are waiting to see how many callers they can get first. Yesterday a large number of persons got their street tax paid, and we believe it is now the settled price for signing a call to come out for office that the candidate pays the street tax. People are saying that they can now tell when a man gets discounts by the candidates he supports, there being no other question prevailing than who shall get the deposits."-(Democrat, February 3, 1852.)
"Candidates are abandoning the practice of paying men to go about after signers to calls for them to come out for office. This practice did very well for respectable humbug when new. It is now old and is the meanest kind of humbug. Children and fools now understand the whole game. It is to get men pledged on paper so that they cannot back out if a man that would suit them better should come out. A respectable banker yesterday publicly stated that if the city deposits and hydraulic deposits were put up to the one who would give the best security and pay the most therefor, our city would realize $5,000 at least from them next year. The mayor and treasurer are the offices that control the deposits, and we want to know why our city as well as the banks cannot be profited by them."-(Democrat, February 4, 1852.)
"Banking on stocks is going to drive all the specie from the country. It is all hoarded in the banks now; and when stocks are substituted for it in banks, it will leave the country. Banking upon State and corporate debts is but little safer than banking upon - individual debts. Take the whole United States, and the specie will not average 10 cents to the dollar."-(Democrat, April 5, 1852.)
It was reported in March, 1852, that the Michigan Southern Railway company intended to establish a large bank here. The Democrat of March 22 said: "We are glad of this as the few banks we-now have are exerting too much power, and it is very important that more competition be had. This bank will settle the question, 'Who is to have the deposits of the Southern Michigan Railway company ?' which caused no little excitement at our late election. When Chicago has about twelve banks, our bankers will be the most polite and accommodating men in town. They will take no part in our railroad quarrels or our elections. But they will en- deavor to be 'all things to all men.'"
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HISTORY OF COOK COUNTY
"Banks are now getting as thick as groceries and saloons in our city and at the progress of last year, they will soon outnumber them. And as we are to have them, the more we have the greater will be the competition and the lower the shaves. We will here add that we take the paper of all our city banks who advertise with us at par and then in turn take ours at par."-(Democrat of May 6, 1852.)
"Our people-have been swindled long enough by an irredeemable currency. The Board of Trade of this city were very anxious to have a general banking law passed and predicted that its passage would drive all irredeemable shinplasters out of circulation. But thus far these worthless rags have increased rather than diminished. Yet it is in the power of the Board of Trade to correct the evil. A few reckless speculators among them - oppose this step. At the proper time we intend to hold these men up to the scorn of the com- munity. The most of our bankers say they will pay specie the mo- ment Mr. Smith will-that they cannot pay specie unless he does, for it is in his power to ruin them. Mr. Smith, who is now here, is willing to make any arrangement that will give him an equal chance with the other bankers. If our bankers have no respect for themselves-if they do not value their own notes at par-it is time that they were taught to do so. We must have a currency which when issued at par must be taken back at par."- (Adapted from Democrat, May 24, 1852.)
"Damn the 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 Mer- chants and 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. "Tis worse-'tis a device, a deception, a fraud, and the only way to avoid it is to refuse all notes on the Merchants and Mechanics Bank of Chicago."- (Thompson's Reporter, August, 1852.)
"We insert the above not so much to injure this one bank in particular, but because others of our city banks are going into the same operation. This thing ought to be stopped at once and we caution people upon the subject. Under our new banking law the bill holder is secured, but there is no security at all 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." -(Democrat, September 3, 1852.)
"But few understand the extent to which bank bills are now being mutilated for fraudulent purposes in this city. The thing has within the last few weeks been reduced to a science and is likely unless it meets the stern opposition of business men to become a very suc- cessful swindle."-(Democrat, September 16, 1852.)
Four bills of $5 each were torn in two and then so pasted together that an additional $5 bill was gained.
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HISTORY OF COOK COUNTY
"The way some of the shinplasters read is enough to condemn them, admitting that the foundation upon which they are issued is as good as their grammar. Several of the genus read, 'we will pay,' etc., while they are signed by only one person."-(Democrat, De- cember 10, 1852.)
"Looking to experience and observation as my guides, I found that when a man had real capital to start and capacity and integrity which commanded the confidence of the community (best where best known), it not only aided him but greatly facilitated trade and business among the people to issue his credit in a convenient form for circulation-all based upon his actual capital in hand and the securities which were beyond all question, and loan it to active business men for legitimate commercial purposes. Seeing this, I had engraved in the very best style by the artist a certificate of deposit of the Bank of Chicago (which had been duly organized under the laws of Illinois). When men deemed by one firm to be possessed of integrity, good moral habits and business talents wanted bank facilities, we loaned them these securities on satisfactory terms for three-fourths the amount at 6 per cent. interest and an even exchange for the other one-fourth in current bank notes (such as the certificates of deposit were payable in), with the agreement on their part that as often as one-tenth of the whole was returned to us for redemption, they would give us other current money in ex- change therefor, so continuing during the time for which they bor- rowed the certificates. No sooner did these certificates make their appearance in market, than they were most scurrilously attacked by the issuers of shinplasters which laid no claim to security, legality or even shadow of foundation; which were drawn by men who, for aught we know, were men of straw, upon others just as little known, some accepted and some not, pay at some designated place in this city. The very men who had thus acted for years, loaning out such trash at 10, 12, and 15 per cent., who even had got the multitude of business men under such obligation for this spawn of theirs at these rates as to make them submit to terms of greatest humility and be thankful for such gracious permission, crippling the com- merce of the country as effectually by miserable shinplasters at high rates of interest as they would by leaky ships and high prices on freight, joined with the press, from Thompson's Reporter ( who has shown himself and whom I am prepared to show is not entitled to the least weight when he has a supposed interest at stake) down to some of the most venal of those very papers who had spoken in my praise, by a man who now attacks my credit as a banker. They would if possible move heaven and earth, if by so doing they could prevent us from having a credit-which was reduced to circulation form. We met these attacks from Thompson down to the various scribblers who have showed their hand to the Chicago public and we shall continue to meet them without any nearer approach to person-
149
HISTORY OF COOK COUNTY
ality than self-defense demands. I showed that Thompson had Virginia bonds to sell, which cost him 971/2 cents on the dollar and which by the power of his Reporter he had raised to 100 and 112; and that every $50,000 bank which bought stocks of him was worth $5,000 to $7,000 to him. I showed that this was the real founda- tion for his attack upon the Merchants and Mechanics bank, as well as upon our own. I showed that he had had about one circular and had laid himself open to wicked and malicious libel. I also showed that bankers in this city or elsewhere who raised the hue and cry to put us down were acting upon false pretenses and that they were only influenced by a knowledge that competition in banking like competition in anything else would reduce rates. I told the people that this talk about 'care for their safety' by men whose hands were reeking with the blood of bastard 'wild cats' was a pretense-a sham -- and that we, organized under the law, had a legal right to make an issue-our capital backed by integrity with capacity to manage our business well. All this we said in self-defense, and now we ask a discerning public to decide."-(Seth Paine in Democrat, Decem- ber, 1852.)
"Specie Payments .- The time has now come when all the banking institutions of our city should keep up the appearance of honesty. It is to the disgrace of our city that she alone of all the cities in the Union has not a specie basis for her currency. This, however, is not so much the fault of the bankers as of the people. It is expected that bankers will exact always all that the people will tolerate. The bankers will keep on grinding the noses of the people until they learn that it is time to stop. The people are now beginning to complain. They know of no reason why a dollar should be used up in passing through a broker's hands one hundred times. They know of no reason why a man who pays out a bill of $1 should not receive it back as such. The people are becoming very much ex- cited upon this subject and we would excite them more if we could. The least a banker loans money for to any of our best citizens is 1 per cent. a month. Now this affords profit enough without using an inferior currency. We have talked with our bankers upon this subject. Each alone is ready for specie payments. But each one 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 a way to obviate all this. Let there be a common day to all. Let our board of trade take hold of the matter. Our Legislature should take hold of the subject. It is in its power to stop all illegal banking in our city. 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 any day shall be generally agreed upon."-(Dem- ocrat, May 6, 1852.)
Early in 1852, the Merchants and Mechanics bank. at the head of which was Levi D. Boone, president, and Stephen Bronson, Jr.,
150
HISTORY OF COOK COUNTY
cashier, removed from 5 Clark street to 7, Tremont block. Early in May, 1852, Forrest, Brothers & Co. established a new bank here. At this time also Bradley Curtis & Co. began banking operations and in a short time their one-dollar bills were counter- feited extensively. The Southwestern Plank Road company did a banking business in 1852 under the name of Commercial Bank of Chicago. The capital of the Chicago Marine bank was $50,000; Merchants & Mechanics, $100,000; Commercial Bank of Chicago, $52,000; City Bank of Chicago, $50,000; Marine Bank of Chicago, No. 2, $500,000; Bank of North America, $1,000,000. George Smith had been connected with the old Wisconsin Marine and Fire Insurance Company bank, but in 1852 began operations independ- ently under the new banking law of the State. He began business as the Bank of North America. Nearly all of the old private bank- ers began operations under the new banking law as soon as it came into effect.
In August, 1852, there was considerable complaint that the cer- tificates of deposit of the Merchants & Mechanics bank were thought by many people to be counterfeits and were refused in business transactions. The bank accordingly announced publicly that the certificates were not counterfeits, but were genuine and good. An- drew J. Brown was president of the Marine bank; Henry L. For- rest and Thomas L. Forrest joint cashiers. The Forrest brothers had a private banking business under the name of Forrest, Brothers & Co. The bank of Seth Paine & Co. was in the old post office build- ing on Clark street. The newspapers of that date stated that the Chicago bankers refused to redeem their own torn bills. Thomas Burch was president of the Chicago Bank and T. H. Burch cashier. They had a nominal capital of $1,000,000. Mr. Burch had previ- ously been in business with W. L. Newberry. Seth Paine was presi- dent of the Bank of Chicago and W. T. Miner cashier.
In October, 1852, Illinois Internal Improvement 6 per cent. bonds of 1847 were worth in New York 83 cents. Other Illinois Internal Improvement 6 per cent. bonds were worth 55 cents. Chicago 6 per cent. bonds due in 1876, were worth 981/2 cents. Galena & Chicago railway bonds of 1856 were worth $1.18 and its bonds of 1862 were worth 94 cents.
During 1852 the subjects of credit, capital and banking were thoroughly discussed here by the newspapers. It was an important topic and numerous articles from the citizens were published in the papers. At this time there came on what was called "The bank war." It was due to the fact that irregular or illegal banks had a better opportunity to make money than those which were organized under the State bank law and adhered strictly to its provisions. They could issue money, receive deposits and at the same time do a shaving, brokerage business and could carry wild-cat financial mat- ters to extremes. On the other hand the prudent regular banks
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HISTORY OF COOK COUNTY
were somewhat restricted in their operations and hence lost much of the business which went to the irregular banks. The regular banks accordingly demanded that such a change in the law should be made as would drive the irregular bankers out of business.
"Bank of Chicago .- This institution has determined upon issu- ing 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; on the right of the twos is Washington crossing the Delaware; on the threes a fine portrait of Henry Clay."-(Dem- ocrat, 1852.)
The Marine Bank of Chicago was organized January 13, 1852, with a capital of $50,000. The Merchants & Mechanics Bank of Chicago was organized December 7, 1851, with a capital of $100,- 000. In 1852 the Farmers' bank at 100 Randolph street was estab- lished by Charles Brothers & Co. About the same time F. G. Adams opened a brokerage and exchange office at 44 Clark street.
Under the banking law of 1852 money became very abundant and accordingly people experienced better times. Mr. Wentworth and other Jacksonians had predicted all sorts of disasters succeeding the passage of the law. Accordingly his papers of that date contain numerous sarcastic and critical allusions to the State banking law in particular and to every banking law in general. He had not recov- ered from his hostility to all banking systems. The prosperity suc- ceeding the passage of the State banking law occasioned him great surprise. He still continued to criticize and predicted that before long there would be as much trouble with the new system as there had been before without any system. The prosperity was so great that Illinois stocks, in fact all stocks, increased greatly in value. Money was so abundant that business men engaged in all sorts of speculation. They had no trouble to get money from the banks at reasonable interest and hence there succeeded an era of unusual business prosperity and speculation.
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