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 13
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Sheldon's Bank Note Detector stated in December, 1852, that there were on Clark street over twenty bankers and banking houses the most of which issued their own bills. In fact several fake banks were started about this time. One of them was called the Fusillers' Bank of Chicago. Interest at this date was usually 10 per cent. People found it so easy to get money that they speculated-largely in real estate. The people of this city believed that they could do nothing better with their surplus than to put it into Chicago prop- erty. The papers of this date declared that real estate speculation was greater here than at any time since 1836. Everybody noted the difference between the condition of financial affairs at this date and what it had been but two or three years before. Late in the forties money was hard to get ; was scarce and much of it was worth- less. Under the new law everybody had money; the banks were
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literally overflowing with it, so that business men found no diffi- culty in securing all they wanted, such as it was, not only for legiti- mate purposes' but for speculation as well. People invested exten- sively in stocks of all kinds at this date. In fact holders of stocks which a few years before were considered absolutely worthless brought them out, dusted them off and found a ready sale for them at comparatively good prices. There was one complaint at this date -exchange on New York was too high. It was usually about 2 per cent. premium. Business men argued that it should not be over 1 per cent. and that 1/2 of 1 per cent. was nearer the proper figure.
In December, 1852, several so-called banking houses were indicted for issuing shinplasters. The banks organized under the State bank- ing law were called security banks; all others were called irregular banks. The latter had no right to issue money, but they managed to do so by evading the law. It was their custom to use every arti- fice to depreciate the value of the bills issued by banks organized under the State law. When the price was sufficiently reduced they would purchase all they could get, take them to the bank which had issued them and demand specie in exchange for them.
In 1852 Seth Paine began to issue a magazine named the Chris- tian Banker. This periodical called out sarcastic comments from the newspapers. The Democratic Press said : "As to the system of wild-cat bank it is established to support, please take notice we look to the Legislature to clap a summary extinguisher upon it among its earliest acts. The prospectus of the magazine is a curiosity and . well worth preserving as a souvenir of the times."
Upon accepting the presidency of the Bank of Chicago, Ira B. Eddy made the following public announcement: "Its mission is a great one-no less than to assist directly in lifting up and bringing forth to the light the now dormant energies of the mechanics and common people, so-called, to the knowledge of their own power and position of strength. The people have been crushed by the aristoc- racy of the money power and with money and a union bank now guided by the spirit of the Almighty in heaven the fiat has now gone forth that time with the wicked shall be no longer. We begin small, very small, but like all beginnings with the people we now with God's blessing start the work."
The Democratic Press of January 14, 1853, said : "The Christian Banker .- The second number of this paper appeared yesterday. We have read it with attention. It certainly is a curiosity in its way. Such a strange mixture of assumed benevolence and ma- lignity, sanctity and slander, we have seldom seen. Give it a clear track for it must have its way."
Early in 1853 a change came over the financial situation in the West; money grew scarce. It was seen that speculation and plenty of money was certain to bring about reaction and that moment had arrived. Bankers began to exercise caution; speculators were de-
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HISTORY OF COOK COUNTY
clined loans; and in a short time banks refused to discount the best paper. There was no excitement, but trouble was in the air. At this time also a strong movement to drive out shinplasters was made. The Legislature was petitioned to pass a law that would prevent all illegal banking in the State. People were tired of wild-cat money. It was a time when all illegal bankers became alarmed lest their business should be taken from them. One of the newspapers said : "The cats are lying low and looking wild." Among the most con- spicuous of the illegal institutions was the "Spiritual Bank" of Paine and Eddy. On one occasion when an officer of this bank refused to redeem its bills when presented by its enemies, a crowd gathered to which Mr. Paine made a speech, promising that the bills would be duly honored. A little later Ira B. Eddy of this bank was placed on trial and was found to be insane by a jury. Mr. Paine later met the same fate after several trials. It was a war to the finish be- tween the security banks and the wild-cat concerns. One of the newspapers said, "It is the impression here that there is not a hole for the smallest kind of an animal to crawl through and that the days of the cats are numbered." It was charged and generally believed that both Paine and Eddy had been made insane over spir- itualism. That was the era when spiritualism in the United States made its first great advancement. It seemed to pass in a convulsive wave over the whole country. Slate writing, rapping, etc., were the order of the hour. Seances and public exhibitions generally capped the climax of superstition and folly. Messrs. Paine and Eddy were so influenced by the manifestations that seances were held in the rear room of their bank. Thus the institution was properly dubbed "Spiritual Bank." But Paine and Eddy were not the only wild-cat bankers. There were more than a dozen such establishments here and all prospered in spite of the law. They made no attempt to se- cure their issues. It was not necessary, because people accepted their money if issued by an institution back of which there were reputable men or men who were supposed to be reputable.
In January, 1853, the legitimate or standard stock security banks numbered about a dozen. The bills of these banks were at par with the best current funds. "Shinplaster banks," as they were called, were conducted by I. H. Burch & Co., Bradley, Curtiss & Co. and a dozen others. It was about this time that the security banks began to throw out of circulation the bills of all banks that were not properly secured. The old bank-war movement was one to obtain better security for bank issues. The Democratic Press of February 26, 1853, said, "The banks have been alarmed; the public has been excited; there appears to be an underlayer of spite or ill will towards banks and banking in this city." This statement repre- sents the actual condition in Chicago at that date. No doubt Mr. Wentworth was in a measure responsible for this state of public opinion. For years he had been one of the leaders of public opinion,
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HISTORY OF COOK COUNTY
not only as Congressman, but as the editor of his newspaper here. Thousands of the best citizens had imbibed his financial policies which were founded upon the Jacksonian hostility to the United States bank. Mr. Wentworth scarcely ever had a kind word to say concerning any banking institution. There can be no doubt that in a large measure he was responsible for the hostility shown in this community to all banking enterprises. Credit, the basis of modern business transactions, was daily damaged by his philippics. But Wentworth was not alone in the hostility shown to the banks. Many others here had likewise accepted the banking policy, or rather the no-bank policy, of Jackson and Van Buren.
Early in 1853 an effort to establish a bank with an immense capital was undertaken here. It was designed to form an institu- tion in which all of the best citizens would own stock. The capital was fixed at $2,000,000 and the bank was to be known as the Metro- politan. It did not materialize.
The abuse of banks was so sharp at this date that all banks and all bank issues were regarded with suspicion. Sound institutions suffered unjustly from this suspicion. Solvent banks which were thus suspected had their money returned to them for redemption. Brokers were in ecstasies. To them the times were bright and auspicious. There were in circulation here bills worth all degrees of discount and premium. It was the custom of brokers and had been for years to run down the value of good bank issues in order to buy the same at a small figure so that they could secure par from the banks of issue. In April, 1853, the bills of the Merchants and Mechanics bank were at 1 per cent. discount; the same of the banks of I. H. Burch and Bradley, Curtiss & Co. The certificates of deposit of the Wisconsin Marine and Fire Insurance company, which circulated as money, were thus likewise at 1 per cent. dis- count.
"Money remains close in the city. The banks are in a safe con- dition and are determined to incur no risks by extending the line of their discounts beyond the smallest amount that will accommo- date their customers."-(Democratic Press, March 21, 1853. )
"There is decidedly a better feeling in Clark street. Advices from the Eastern cities are favorable and it is confidently believed that the crisis is past and we have better times ahead. The people have not generally felt the pressure as yet, and we doubt whether they will. It is the opinion that the closeness was caused in part by the brokers of New York who wished to create a crisis in order to secure higher rates of interest. The rates of interest at the banks are as usual and the brokers are supplying their customers at 10 and 12 per cent. In the streets the rate is 2 per cent. a month and we think something more has been paid during the month."- (Democratic Press, April 5, 1853.)
"We note a remarkable degree of carefulness, not only among
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HISTORY OF COOK COUNTY
bankers and brokers, but also among those engaged in street opera- tions, to guard against a speculative spirit." -- (Democratic Press, April 11, 1853.)
"All our bankers are doing a good business. A fact of great importance to the development of the resources of Illinois is the entire confidence felt by the East in our railroad securities." -- (Democratic Press, June 20, 1853.)
Outside small bank bills were very bad during the summer of 1853, so banks here posted up this notice :
"On and after the first of August, 1853, no bills under $5, except those of the banks of this State, and no circulation prohibited by law, will be received on deposit or in payment at this office."
"Here we have the death knell of all shinplasters and the cer- tainty of a legalized currency amply secured in its stead. The public have abundant reason for thankfulness that they have escaped from the reign of such a currency with so little loss. Our general bank- ing law was universally condemned by our 'generous confidence' financiers, and it was said that no one could or would do a banking business under it; but we think that experience has shown that all such fears were groundless. In the short space of a few months a large number of banks have come into existence and are doing a successful business."-(Democratic Press, July 23, 1853. )
"The law was wise, as it gave all persons full time to get rid of foreign small bills and was intended to drive out all wild-cat issues," said the Democratic Press.
"The merchants of this city alone have been shaved by this wild- cat currency to an extent of probably not less than $100,000 per annum. If all persons are prohibited from paying small bills of foreign banks, they must use specie or small bills that are convertible into specie here." --- (Democratic Press, August 2, 1853.)
"The small bill law has gone into operation since our last issue. So far as we can learn there is a general disposition to obey it, and sometimes much vexation, inconvenience and trouble ensue. Our banks we believe, with a single exception perhaps, vote it a nuisance, and if we mistake not it is so regarded by the people generally. We predict its early repeal at the next legislature. The shinplasters have most happily made their exit, we hope never to return1. We presume the few stragglers still in the hands of the people will be redeemed. While we rejoice at their departure, we would speak of them with due respect, for they have served a most important purpose in the development of the West. The Wisconsin Marine and Fire Insur- ance company name is to appear no more on every other bill you meet. Though it has always been a financial nondescript, there can be no doubt as to the facilities it has afforded to the business com- munity of Chicago and the people of the Northwest generally." -- (Democratic Press, August 8, 1853.)
By the act of August 1, 1853, a supplemental law to the banking
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act was passed, to the effect that no persons could become incorpor- ated under said act until they should first have deposited with the State auditor United States or State stocks so that its capital stock would amount to the sum of $50,000. No persons could emit money "other than the bills or notes of banks of this State."
"At this season for the last four years money has always been close in this city. The canal sales are to take place next week and will absorb all the spare means in the hands of our citizens. This money of a very large amount is sent forward to New York to pay the canal bondholders. We hope the canal trustees will sell all out at once. The system heretofore pursued of their bidding against buyers is execrable and we have good reason to believe cannot be justified before a judicial tribunal. If they sell all the lands in their hands, as it is thought they are legally bound to do, three years will wipe out all these payments and we shall have no such drains as now to cripple our energies."-(Democratic Press, May 7, 1853.)
"The Christian Banker has again made its appearance. Since its long 'nap' many of the spirits have apparently been cast out, as it is far less extravagant than when first issued. Where is the Christian Shoemaker? Will it not listen for one encouraging rap?"-(Demo- cratic Press, May 14, 1853.)
"Money is close as we expected. The land sales have closed and after a few weeks we may expect easier times. The amount of the sales is nearly $1,000,000. The first payment is $200,000. It was a fact remarked by everyone that a majority of the purchases were made by our citizens. However, the feeling in Clark street is buoy- ant."-(Democratic Press, May 14, 1853.)
"The small bill law has partially become a dead letter. So far as our information extends nobody pretends to regard it. Even the precaution at first used by the banks to receive them from depositors 'for collection' is no longer taken and the small bills of all good banks circulate about as freely as ever. We doubt whether the very executors of the law have not violated it repeatedly. Brokers charge from 2 to 4 per cent. a month; regular rates 10 per cent. per an- num."-(Democratic Press, September 12, 1853.)
"The money market continues very close. Short produce paper is taken at the banks, but outside operators find it exceedingly diffi- cult to obtain accommodations. All speculation paper is virtually rejected, and no money can be had on it except at ruinous rates. Some of the brokers are discounting at 2 per cent. a month, and 3 and 5 per cent. have been offered. The general business of the city is, however, in a healthy condition."-(Democratic Press, Septem- ber, 1853.)
"The money market is tight, very tight. The pressure is, we be- lieve, as for some months past, confined mainly to the banks and monied men, as the people have more actual cash in hand than for years previous."-(Democratic Press, October 24, 1853.)
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The law of 1853 discriminated against the small bills of banks outside of Illinois. The object was to drive from the State all shin- plasters, and time until August 1, 1853 was given, so that no hard- ship would result. The shave on the small foreign bills had been enormous. "The merchants of this city alone have been shaved by this wild-cat currency to an extent probably of not less than $100,- 000 per annum. If all persons should be prohibited from paying small bills of foreign banks, they must pay specie or small bills that are convertible into specie here."-(Democratic Press, August 2, 1853.)
In the fall of 1853 Chicago business men demanded more bank capital. The city had grown so enormously that notwithstanding the fact that the banks also had increased in numbers there was still felt a serious lack in ready money. It should be noted that at the time the new banking law took effect on August 1, 1853, every newspaper of the city refused thereafter to insert any notices or ad- vertisements from the shinplaster banks. In August all the security banks of the city united and sorted out all outside shinplasters and rated them accordingly to what they seemed worth. The Marine bank issued $50,000 in small bills. The Union bank also issued bills of small denomination. The Farmers' bank went into operation in September, 1853.
The hard times began to be manifested here by October and No- vember, 1853. The stringency became so great that a severe hard- ship . was entailed upon commercial transactions. The banks were extremely cautious and in some instances refused to grant any dis- counts whatever. Men that received favors considered themselves extremely fortunate. The sound banks organized under the State law were called "Illinois Stock Security Banks." Paul B. Ring was president of the Farmers' bank and C. H. Chan cashier. They issued bills of the denominations of $1, $2, and $5. A genuine bank scare or panic was seriously threatened by the last of Septem- ber. At this date several counterfeiters were caught in the toils in this city. They had counterfeited bills of Chicago banks and also of several outside institutions.
In February, 1854, money was exceedingly scarce. At this time the Merchants and Mechanics bank added $100,000 to its capital. The new Phoenix bank, with L. Reynolds president and N. C. Coe cashier, began business about this date. Its capital was $50,000. It issued $1, $2, $3 and $5 bills. The Commercial Exchange company, at the corner of Clark and Randolph streets, began business about this time with Henry Moore as president. The banking hours in early times extended from 9 o'clock in the morning till 4 o'clock in the afternoon; but early in the '50s the time was changed to 10 o'clock in the morning till 3 o'clock in the afternoon. The bank- ers unitedly desired to go back to the former time, but were opposed by their clerks. In 1854 the following bankers were in operation Vol. II-10.
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here: Commercial Exchange, F. Granger Adams, J. M. Adsit, Ma- rine Bank, George Smith & Co., Chicago Exchange Bank, Phoenix Bank, Farmers' Bank, I. H. Burch & Co., R. K. Swift & Co., E. H. Huntington & Co., Merchants and Mechanics bank, Union Bank, Bradley, Curtiss & Co., and others.
Notwithstanding that money was exceedingly scarce, business in the spring of 1854 was very brisk. The banks were cautious, but business men managed to secure loans at reasonable rates. The $5 bills of the Phoenix bank were counterfeited quite extensively in 1854. Late in this year there was a sharp panic in financial affairs. The trouble arose over the Indiana free bank bills. Brokers ran them down and then bought them in large quantities for from 50 cents to 75 cents on the $1. Everybody who held them unwittingly sacrificed and the brokers profited thereby. The excitement and panic unjustly extended to the sound Indiana Stock bank, the bills of which were run down by brokers as much as 25 per cent. discount. Within a few months the bills of the Indiana free banks were wholly driven out of this community. In different parts of the country the same conditions prevailed. The panic resulted from the determina- tion of security banks to drive out all shinplaster issues. The first serious result of the panic here was the failure of the Merchants and Mechanics bank, which did not open its doors on November 13. The officers claimed it was in good condition and issued a statement that they would resume business in a short time. On November . 14 the City and Union banks both failed. At this date there were large runs on both of the banks. The citizens became panic-stricken and sacrificed their bills unreasonably and pandemonium reigned in commercial and banking circles. In order to check the panic so far as possible, a number of Chicago business men publicly announced that they would receive the bills of the Chicago stock banks at par. This announcement was signed by hundreds of the best business men. By November 17 the panic had almost wholly subsided. At this time N. C. Coe & Co. announced that the Phoenix bank would continue business as N. C. Coe & Co. Of course the runs on the banks were due to the fact that the banks themselves were unable on short notice to redeem their bills in coin. Brokers took advantage of this state of affairs to run down such bills to as low a figure as possible in order to buy them and later compel the bankers to re- deem them at par. In December, 1854, the Merchants and Me- chanics bank resumed business. Dr. Boone, who had been its pres- ident, resigned and Hon. James H. Woodworth succeeded him as president. The prominence of Mr. Woodworth as Congressman and his known high character as a man seemed to promise excellent conduct for the new concern.
"Three years ago there was not a legitimate banking establish- ment in the whole State of Illinois. Gold and silver were scarce and most of our currency consisted of small notes on Eastern banks.
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Notes of a higher denomination than 1s, 2s and 3s seldom found their way to the inland portion of the State. We have now twenty- nine banks, all working under the general banking law of the State, which provides that the proprietors of each banking establishment issuing notes shall deposit with the auditor of the State United States stocks to the amount of their issue."-(Democratic Press, January 14, 1854. )
The new State banking law as passed was modeled after that of New York. By January, 1854, the following banks had been organ- ized under it :
BANKS.
Bills in Circulation.
Exchange bank
$ 50,000
Marine bank
215,000
Bank of America
50,000
Chicago bank
150,000
Commercial bank
55,000
Farmers' bank
50,000
Union bank
75,000
Merchants and Mechanics bank.
54,700
City bank
60,000
Total
$759,700
"There has been a perfect panic during the week in reference to the Indiana free banks. The city and the surrounding country seem to have been flooded with their bills, and as the brokers have pur- chased them at from 50 to 75 cents on the dollar and have had all they could do at that, large amounts must have been sacrifieed. The trouble with this money seems to be the impossibility of converting it into coin or even into current bills or exchange. The only safe course is to refuse them entirely. Money has been excessively close during the past week. Indeed, it has been almost impossible to borrow on any terms."-(Democratic Press, October 23, 1854. )
"Although our merchants have done a large and profitable busi- ness, and capital within the last five years has been rapidly accumu- lating at this point, the increase has borne no sort of proportion to the rapidly increasing commerce of the city. Our commercial and manufacturing interests have doubled within the last two years. This large increase of business is due mainly to the extension of our railroads in all directions, and the consequent rapid filling up and sudden development of the resources of the country through which they pass. They have brought an amount of business to the city for which the most sanguine were not prepared, and the demands of which very few had the capital to meet. This scarcity of capital is the origin of the deranged state of our currency which. every business man now feels most sensibly. For this reason the Indiana free banks have been able to flood the city and the State with their paper issues. It is utterly impossible for our own bankers to meet the wants of our business men."-( Democratic Press, October 25, 1854. )
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HISTORY OF COOK COUNTY
NOVEMBER 30, 1854.
BANKS.
Had in Circulation.
1
Merchants and Mechanics bank.
$ 58,700
Marine bank
158,901
The City bank
50,000
The Chicago bank
125,081
Commercial bank
54,998
The Bank of America
50,000
The Union bank
74,993
Exchange bank
49,995
The Phoenix bank
50,000
The Farmers' bank
50,000
The most of the securities deposited by these banks to secure their circulation were Virginia and Missouri State stocks at par, Illinois new Internal Improvement stock deposited at 50 per cent., Illinois new Internal Improvement certificates, and Illinois and Michigan canal stocks deposited at 50 per cent.
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