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 14
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In December, 1854, Thomas H. Noble, a teller in the office of George Smith & Co., became defaulter for about $9,000. In De- cember, 1854, while money was close, business was prosperous and there was general confidence in the future. The Farmers' bank had failed and the three banks-City, Farmers' and Phoenix-were still closed late in December, 1854. During the winter of 1854-5, as might have been expected, many workmen were thrown out of employment. The city did everything in its power to relieve them in their distress. Extra shifts of workmen were put at various jobs, such as cleaning the streets, etc. Late in December, 1854, the bills of the City, Farmers', Phoenix and Union banks were quoted at 25 per cent. discount. The City bank had been conducted by Bradley, Curtiss & Co. and the Union Bank by Forrest, Brothers & Co. Sev- eral small private banks failed here during the fall and winter. In January, 1855, Mark Skinner, receiver, was occupied in winding up the affairs of the City, Union, Phoenix and Farmers' banks. It was claimed that the bank commissioners failed in their duty by not taking immediate posession of those banks as soon as failure was announced. It was pointed out that these banks left to themselves had managed to absorb and conceal what resources they had left, to the injury of their creditors. In the month of January, 1855, there were many business failures throughout the country. The failure of Wadsworth & Sheldon, of New York City, for about $2,500,000 involved the Exchange Bank of Chicago and other busi- ness institutions here. In January, 1855, J. H. Kedzie opened a banking house at 24 Clark street. At this time J. C. Barbour was conducting a banking and exchange office at 42 Clark street. He had previously been a cashier in the Marine bank. In March, 1855, E. I. Tinkham opened a banking establishment. He had previously been connected with George Smith & Co. and had been cashier of the Marine bank. Early in 1855 the State auditor was authorized to exchange the security of the suspended banks here (City, Union,
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Farmers' and Phonix) for their notes at par. About the year 1855 the custom of paying interest on deposits was introduced here gen- erally. The Democratic Press argued against the custom, saying, "It is borrowing money when the real function of banking is to loan."
In April, 1855, the bills of the ten security banks here were all at par. J. M. Adsit offered from 1/4 of 1 per cent. premium for the sus- pended bank bills. He did this because the State auditor was then redeeming those bills with gold. J. C. Barbour made the same offer. About this time Morford Brothers began banking here. They were located at Clark and Lake streets. One of the brothers had been connected with the F. Granger Adams banking house for two years.
"Business in this city is brisk and the demand for money very active. The banks are supplying their customers on short time for strictly business purposes at the legal rates, viz. : ten per cent."- (Democratic Press, September 18, 1854.)
"Just now financial prospects look decidedly squally. The banks of the city have shut down on their best customers and of course it is hardly possible to borrow money on any terms. Collections come in very slowly and some are utterly unable to pay though worth thousands of dollars. How long is this state of things to continue? Are we to have a financial crisis, or will this squall blow over in a week or two?"-(Democratic Press, October 25, 1854.)
"Money is, if possible, closer than ever. We doubt whether there has been a note discounted in Clark street during the past week. Of course money is not to be had."-( Democratic Press, October 30, 1854.)
"The banks have again stopped discounting, and of course money is not to be had except in small amounts by 'the people who happen to get in'."-(Democratic Press, November 13, 1854.)
Among the banking establishments here in June, 1855, were the following: G. C. Whitney & Sons, Exchange Bank of America, Chicago, Merchants and Mechanics, Commercial, City, Marine, Farmers', Union, Henry and Elias Greenebaum, Gwynne, Day & Co., Morford Brothers. Officer & Brothers. At this time the bills of the Phoenix, City, Farmers', Union and Marine banks were at a slight discount. All the other stock banks were at par.
The war against shinplaster issues was continued during 1855 with unabated vigor and intensity. The security banks and the best element among the business men made every effort to drive out the wild-cat issue and in a large measure succeeded. Brokers acting in their own interests aided them in the attempt to depreciate the value of shinplaster currency. The brokers carried the matter so far that a financial panic was threatened and was narrowly averted. At this time the regular rate of interest was 10 per cent., but brokers charged from 2 to 5 per cent. a month. At this time a concerted attack upon Smith's Georgia banks was made by the security banks :
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but the newspapers spoke well of the institution managed by Mr. Smith, notwithstanding the fact that his issues were shinplasters. It was alleged that Smith's Georgia banks had issued an immense quantity of unsecured bills and that his bank in Chicago had under- taken to float them in this community and had largely succeeded. Many declared that in a short time these banks themselves would fail and the money they had issued not being secured would prove worthless. Late in December 109 business men and houses signed a call "to aid in suppressing and driving out of circulation all Geor- gia and Tennessee money." This was the culmination of the attack upon the issues of George Sinith & Co. Mr. Smith was the owner of the Interior and Atlanta banks of Georgia. H. A. Tucker & Co. of Chicago owned the Merchants Bank of Macon, Ga., I. H. Burch & Co. owned the La Grange Bank of Georgia and the Mer- chants and Mechanics Bank of Chicago owned the Cherokee Insur- ance company of Dolton, Ga. It was believed that these banks in a short time would fail and that their issues would become worthless, and that as Cook county was flooded with their bills the result here might be disastrous to business calculations.
"We have nothing new from our suspended banks. They adopt the 'mum' policy for reasons of course best known to themselves. Their bill holders are becoming impatient."-(Democratic Press, January 1, 1855.)
"We have to note a further improvement in most of the Illinois suspended banks. They are now purchased at only 5 per cent. dis- count by our principal brokers. This fact shows the excellence of our banking system and speaks volumes in its favor."-(Press, March 26, 1855.)
"Business of all kinds is active and consequently the demands upon our bankers are large. Currency is very scarce and probably must continue so for a short time longer. What Chica- go most needs is capital and men to do the business that is con- stantly pouring in upon her like a mighty avalanche."-(Daily Press, April 7, 1855.)
The Legislature in February, 1855, passed a law "to allow the auditor to give up the bonds of the suspended banks to the bill hold- ers. This will greatly relieve our brokers and business men."- (Daily Press, February 19, 1855.)
The business men of Chicago met in the rooms of the Board of Trade January 6, 1855, "to consult upon ways and means to do away with the circulation of illegitimate bank notes, and to secure such-new laws and amendments to the present banking law as will secure for this city and State a sound (banking) currency, con- vertible into exchange at fair cost, and at the same time afford ample remuneration to the banker and the investment of capital in bank- ing." Resolutions to this effect and directed to the Legislature were adopted. Present: B. W. Raymond, J. H. Reed, J. H. Dunham,
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James A. Smith, M. D. Gilman, J. C. Williams, Nelson Tuttle, Aaron Haven, E. Baker, and W. A. Baldwin. Mr. Raymond was elected chairman of the meeting.
"With all the run on the banks of George Smith & Co. no man, so far as we have been able to learn, doubts their solvency for a mo- ment; indeed the class of business done by this firm renders it almost impossible to affect their credit in the least. It is known to every one who has any knowledge of their mode of doing business that they never touch any paper which is not above suspicion, hence they make no losses. Men who are not perfectly good, who do not meet their notes promptly, can get no accommodation of them. Hence the bitterness and malignity manifested against them in certain quarters."-(Daily Press, October 6, 1855. )
"The tricks to which those who are endeavoring to produce finan- cial crisis in the West are ready to resort are sufficiently mean and contemptible. Certain wire pullers were determined to pass at the State fair a series of resolutions which they desired to publish as coming from the farmers of the State, condemning in strong lan- guage the issues of George Smith & Co. and the other banks in Georgia which are owned by parties in this city. Accordingly a few got together, passed the resolutions in course, and harangued the crowd on the importance of the Industrial League. As to the At- lanta and Interior banks we have never heard any well-informed business man express the opinion that all the enemies of George Smith & Co. put together had power enough to break them. In- deed they don't expect it. They hope simply to cripple them and buy their notes at a heavy discount."-(Daily Press, October 16, 1855.) "CHICAGO, November 17, 1855.
"Sir-The undersigned bankers in Chicago respectfully invite your institution to. unite with us in carrying into effect an arrange- ment whereby all the banks in this State shall provide for the redemption of their notes in gold at their place of issue, and in Chi- cago or St. Louis by a responsible agent, upon the following terms : At St. Louis in specie funds and at Chicago in sight exchange on New York at the usual rate among bankers. The object is to dis- criminate between banks of substantial capital and those of issue merely having little or no means beyond the stocks deposited with the auditor of State, and also that a prompt and reliable redemption may be obtained when desired. Banks desiring to participate in this arrangement may signify it to either of the undersigned and by giving continual public notice through their agents in St. Louis or Chicago according to the places they may select. The notes of any bank declining to redeem as aforesaid will not be treated as cur- rency after the 30th inst. It is understood that bankers presenting notes for redemption shall receive in return their own notes or those they may be interested in circulating."
This was signed by George Smith & Co .; E. W. Willard, cashier
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Bank of America; B. F. Carver, cashier Marine bank and secretary of Chicago Marine and Fire Insurance Company; H. A. Tucker & Co .; I. H. Burch & Co. by I. H. Burch, cashier Chicago bank; A. Gilbert, cashier Commercial bank and secretary of Commercial Exchange Company ; Francis A. Hoffman; Officer & Brother ; Ed- ward I. Tinkham & Co.
At the time this circular was issued the Press bitterly denounced it as a measure originated by the wild-cats and calculated to injure and cripple the stock-secured banks.
"For fifteen years George Smith was the only banker in the city. His currency was the Milwaukee Marine and Fire Insurance com- pany's wild-cat bills. The last four or five years he has been the principal and largest banker in the city and has furnished a circu- lation in the main for all this city and region. No man has ever lost a dollar by his failure or refusal to redeem the circulation he put forth."-(Daily Press, December 27, 1855. )
"We have observed with regret an effort on the part of some of our newspapers and brokers, as well as of people at a distance, to discredit and render useless the currency upon which this city has mainly relied and used in the various transactions of business."- (Daily Press, January 5, 1856.)
"The money market for the past week has been quite stringent, and bankers have been discounting to a very small extent. Our mer- chants generally are in a very flourishing condition and quite inde- pendent of bank assistance. We hear of South Water and Lake street merchants buying up their own paper, and we know of some of them taking funds to New York to buy up all their paper that can be had on advantageous terms and may be bought in that city. This speaks volumes for the responsibility of our Chicago men, and should inspire, great confidence in their ability, and no doubt will rather surprise those gentlemen who have been preaching panic, ruin and bankruptcy to the traders of this city. Speculators are very short of funds. Bankers are discounting very sparingly. Brokers are buying first-class business papers at 2 per cent. per month. Currency is in fair supply. with very little Georgia in cir- culation. Brokers are not now sorting many of the bills of country banks to draw coin on them, as the abundant supply of gold and exchange prevents it being so profitable as heretofore. We have therefore a large amount of our own State money now in circula- tion. The discrediting of Georgia and Tennessee money after the 15th inst. will not alter the money market : bankers' rates are 10 per cent. for thirty days : brokers' rates are 20 to 24 per cent. pavable in sixty to ninety davs."-(J. K. Swift Johnson & Co. in Daily News, January 3, 1856. )
The most noticeable fact connected with the banking interests of the city during the '50s was the enormous increase in the amount of business done. The banking business in reality increased during
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that period at a greater ratio than did the growth in population. The number of active banking institutions quadrupled. Busi- ness men were overwhelmed with orders for goods and they in turn so overwhelmed the banks that the latter greatly increased their capital. In 1856 the leading banking establishments were as fol- lows: Officer & Brothers; Wheeler, Bunker & Co .; Gwynne, Day & Co .; Brewster, Hay & Co .; Hoffman & Gelpcke; R. K. Swift Johnston & Co .; Wadsworth & Hitz; Greenebaum Brothers; E. Aiken; Strong & Wiley; Morford Brothers; T. C. Barbour ; E. R. Hinckley & Co .; Cotes, Dyhrenfurth & Co .; Davisson, McCalla & Co .; G. C. Whitney & Son; E. I. Tinkham & Co .; I. H. Burch ; George Smith & Co., and Gurley & Farlin.
During the summer of 1856 money was extremely tight, owing to the condition of affairs in the East as well as to the lack of suffi- cient banking capital here to meet business requirements. In Au- gust, 1856, the Board of Trade took action to improve the banking law of the State. Thomas Richmond was at the head of this move- ment. This course was rendered necessary by the fact that illegiti- mate banking was extensively conducted by evasion of the new banking law and business men were at the mercy of brokers.
"We notice that the banking business in this city is increasing in an immense ratio. A great deal of capital is coming in here. We hear of one gentleman from Scotland who has invested half a mil- lion of dollars. To give an idea of the immense business in money done in this city we mention that one house-the Marine bank-in this city pays out from $350,000 to $400,000 on checks daily. Tak- ing the whole of our banking houses the amount of money turned daily must be very large."-(Daily Democrat, October 14, 1856.)
In October, 1856, brokers and owners of stock effected an organ- ization to protect their mutual interests with Buckner S. Morris as president and George T. Pearson as secretary and treasurer. In November, 1856, exchange on New York was quoted at 11/4 per cent. premium. Late in the fall of 1856 and early in 1857, financiers here predicted serious trouble in business affairs.
"Before this (banking) law was passed, we had none before George Smith & Co., H. T. Tucker & Co., and I. H. Burch & Co., men of unquestionable integrity, commanding an immense capital, and for many years known to the public as shrewd and far-seeing bankers, who established banks in other States, in every respect legal and legitimate institutions. and from the entire confidence which the people had in their financial skill and abundant wealth they secured for their issues a wide circulation. They used the bills of banks located in another State (Georgia), but made themselves personally responsible. These bills were in circulation when our general bank- ing law was passed. We regarded the Georgia system as temporary, and one that could in a few years, when our own law was perfected,
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be gradually abandoned. It was regarded by its bitterest enemies as perfectly safe. When the bank war raged two years ago, they were approved by our largest and wisest business men. But as soon as the brokers had time to scan our general banking law, they in- augurated an organized and persistent war against our Georgia bankers. Their bills were sent home by hundreds of thousands of dollars, but they were all promptly redeemed in exchange or coin. Months passed on and the Georgia currency was mainly withdrawn and the sharpers and stock jobbers were left in an open field for their schemes of chicanery and plunder. Behold the result! Those in the secret have now to puff stocks as long as they can possibly bear it, lend them to stool pigeons, have them deposited with the auditor, and get bills issued by the million and put them in circula- tion. The game works beautifully, the auditor takes the securities, and the people take the bills. Soon they are quoted at 'current rates,' and everything goes on swimmingly. Suddenly it is discovered that the stock given as security is worthless and then the trouble be- gins. It is moreover mysteriously found out that the banks are re- deeming bills under $10 one by one in small new silver coin and that. each bill must be protested separately. In fact everything is out of joint with the law, and all possible efforts are exhausted to get up a panic. Then the people will have sensible evidence of their schemes. The bills of the People's (stock) Bank of Carmi are now bought at 12 per cent. discount as an example, and the wishes of certain bro- kers and quack financiers are that half of the banks of the State shall follow the same lead. Our banking law needs radical amendment." -(Daily Press, January 29, 1857.)
The act of January 28, 1857, incorporated the Merchants Savings, Loan and Trust company with a capital of $500,000 and with the following incorporators: William B. Ogden, F. B. Cooley, N. R. Wilder, Henry Farnham, Samuel R. Officer, John Hight, Jr., Eras- tus S. Williams, Henry W. Hinsdale, John W. Stanley, John R. Babcock, Charles Hitchcock, D. R. Holt, and R. W. Officer. They were authorized to increase their capital to $2,000,000, to borrow and lend money, to receive deposits and buy and sell exchange, bills, notes, bonds, etc., to hold coin and to accept trusts whether fiduciary or otherwise, and to hold the real estate necessary, etc.
The Chicago Savings Institution and Trust company was incor- porated on February 14, 1857, by Peter Page, Walter S. Gurnee, Charles Harmon, John P. Chapin, Thomas Heale, Benj. W. Ray- mond, Edward K. Rodgers, Amos G. Throop, William H. Brown, Edward I. Tinkham, Thomas Richmond, James Peck, Tuthill King, E. D. Taylor, Philo Carpenter, George W. Dole, Grant Goodrich, and Walter L. Newberry.
The new banking law provided that all bonds should be received at 10 per cent. less than their New York value; that when notes were presented for redemption the redemption should be instanter in gold;
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that notes when payment was refused should be protested in aggre- gate; that banks should do business in the place where they were established and could receive 10 per cent. interest; that no bank should be established with less than $50,000 capital paid up.
"Since the issue of our circular of March 31 we have passed through one of the closest, if not the closest, week of the season. For ten days past it has been next to impossible to get paper dis- counted at the banks. Deposits were down to the lowest point of the year."-(R. K. Swift, Brother & Johnson in Daily Press, April 8, 1857.)
Early in 1857 C. M. James and Alfred Hyde endeavored to es- tablish a fraudulent bank, but they were soon discovered and com- pelled to quit business. Late in January, 1857, exchange on New York was from 11/2 to 3 per cent. premium. At this time Tinkham & Co. withdrew much of their issues from circulation. The bills of Illinois banks that had failed were quoted at 10 per cent discount. A. F. Sherman & Co. were doing a banking business in February, 1857. About this time the Legislature considered incorporating a savings institution here with a capital of $2,000,000. Among the incorporators were W. B. Ogden, J. H. Dunham, W. L. Newberry and J. H. Foster. In April, 1857, Forrest Brothers & Co., who had previously failed, resumed banking operations with honor. In May, 1857, J. M. Adsit, Taylor & Kreigh, and Louis J. Hertz were en- gaged in banking here. In July, 1857, the Bank of Commerce con- ducted by E. R. Hinckley & Co. failed to open its doors. It was claimed they had become involved in an immense corn speculation on the Board of Trade. Several indictments were returned against the various members of that bank. In July, 1857, $500,000 was added to the banking capital of the Marine bank. B. F. Carver was cashier of this institution. In July, 1857, H. A. Smith, of the Chicago Joint Stock company, was indicted for conducting a lot- tery and was fined heavily. The failure of E. R. Hinckley & Co. was followed by runs upon many of the other banking establish- ments. On August 11, Cotes & Brother, formerly Cotes, Dyhren- furth & Co., closed their doors. Country depositors had with- drawn their deposits and the city had done the same, which act left the institution destitute of sufficient currency to meet the de- mands of depositors. In August banks throughout the country began to fail. About the first of September all banking accommo- dations were stopped and the banks absolutely refused all discount. Business men here could not understand why this should be so, in view of the good crops and generally of the prosperous condi- tion of the country. On September 29 E. I. Tinkham & Co. closed their doors. There followed a drastic run on R. K. Swift, Brother & Johnson, who were likewise compelled to close on September 30. Later they announced that they would liquidate and not resume operations. On October 12 Wadsworth & Co. closed their doors.
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"The money market is still unsettled and great caution is exer- cised by our bankers in all their movements. In our own city the money market continues uncomfortably close, but every- thing is entirely quiet and the streets are alive with business and bustle."-(Chicago Press, September 9, 1857.)
"The past week has been one of great anxiety and caution. At no time in the history of our city has there been so complete a stop- page of all bank accommodations. For the past week the banks, with but few exceptions, peremptorily refused all discounts. They have, of course, been further strengthening themselves against any further contingency."-(Chicago Press, September 14, 1857.)
"Our bankers and citizens generally take matters very coolly and seem to be prepared for the worst. Confidence in the wealth and the abundant resources of the Northwest does not waver for a moment. Why should it? We have the wheat and the corn, the pork and the beef, and, come what will, the dependent East must purchase our surplus of these commodities."-(Chicago Press, September 29, 1857.)
"It is with pride that we record the fact that Chicago still stands."-(Chicago Press, October 15, 1857.)
"Exchange continues very scarce and the market is variable and unsettled. Some of our leading bankers charge 5 per cent on col- lections and some charge 10. The general trade of the city, all things considered, is healthy and active. The question may arise, how our wholesale dealers can stand the rates of exchange. The high rates, the well grounded distrust of most Eastern currency, and the fact that the bills of the Illinois and Wisconsin banks could not be used at seaboard, and that they are taken here at par, added to the still further fact that they were for a time discredited in St. Louis, have given our wholesale dealers an immense trade." --- (Chicago Press, October 26, 1857.)
A meeting of the merchants was called for January 20, 1858, "For the purpose of taking into consideration the state of our cur- rency and exchange market with the view of devising some plan which may prove beneficial to the interests of this city and vicinity. and give us equal facilities with our neighboring cities. The experi- ence of the last few months in wild-cat currency and the unprece- dented high rates of exchange will suggest the importance of such considerations."-(Signed by Nelson Tuttle, Edwin Hempstead, George M. Wells and John V. Farwell.)
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