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 15
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"All the banks in Illinois and Wisconsin except the Marine and the Chicago of this city (which to their honor, be it said, have the coin on demand for all their issues) virtually suspended specie pay- ments, yet our bankers received at par the bills of all the country banks and thus saved the business of the city from utter stagnation and ruin."-(Annual Review of Chicago, January, 1858.)
It was noted that nearly all business continued in 1857 about as
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usual. The shipments of wheat were about 100,000 bushels per day. "When coin and exchange became dear, our merchants took currency from their customers, bought wheat with it, and made ex- change for themselves. Such an example of Western energy and shrewdness was duly appreciated by the creditors of Chicago dealers upon the seaboard."-(Review of Chicago.)
The panic of 1857 was one of money, not of poverty.
"The Northwest was entirely solvent-was teeming with wealth in her products. Her farmers had full granaries and storehouses and were ready to sell at a fair price. Parties whose interest it was to influence the market published and most industriously circulated reports said to have been 'carefully made up from actual observa- tion' that there was comparatively no grain in the country, that our surplus was exhausted, that the mighty Northwest had neither money nor produce. These slanders were most eagerly caught up by the journals of the East and extensively published under the head of 'Eastern Distrust of the West.' The effect was instantly felt. Our bankers stood appalled by the drain on them from the East. Large sums of money which had been sent forward for the purpose of moving the crops were at once withdrawn."
Early in 1858 the bank note list issued by E. Keach & Co. gave a complete valuation of all the bills in circulation in Chicago. This and other similar lists were invaluable to business men and brokers. No transaction was made that did not take into consideration under compulsion the current value of a score of different bills of vital importance to all business where cash was required.
By May, 1858, exchange on New York had fallen to about 1 per cent. premium, with gold the same. In May the Bank Note Reporter was issued by E. K. Willard & Young, bankers, at 74 Dearborn street. This also supplied a want that had not been filled by any previous bank list, because it gave a great deal of valuable informa- tion concerning business and banking operations in addition to the correct quotations of all current and uncurrent money. In August, 1858, a large meeting of bankers and merchants considered the advisability of throwing out of circulation all Wisconsin bank bills affected by the late free banking law of that State. Six of the Chi- cago security banks resolved to discontinue the receipt of such bills. Brokers, however, were not affected and accordingly took no action except to make deeper shaves whenever that money passed through their hands. One of the resolutions passed at this meeting was as follows :
"Resolved, That we believe Wisconsin currency to be well secured, and if any of the banks in that State refuse to redeem, we will nevertheless take the money at par, and place it in the hands of some banker who will send it home for redemption."
In March, 1859, among the leading bankers and brokers were the following: L. E. Alexander & Co., Ernst Prussing, Granger
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Weldon & Co., E. I. Tinkham & Co., Charles H. Ham & Co., Hoff- man & Gelpcke, Uldrich & Geudtner, A. C. Hertel, Officer & Broth- ers, Aiken & Norton, George Smith, G. C. Whitney & Co., T. C. Barbour, B. W. Phillips, H. A. Tucker & Co., and Morford Brothers.
As a matter of fact banks of issue operating strictly under the spirit of the State law found it hard to exist at this time. The security banks had ceased to emit bills, but the irregular banks poured upon the community large quantities of their funds and usu- ally adopted the method of circulating the same rapidly at some distant point before the true nature of the institution issuing them could be learned. The only security bank of issue in 1858 was the Marine. At this date currency was very scarce and mostly came from distant points. It should be noted that late in November, 1858, New York exchange sold at par with the best currency.
In June, 1859, exchange on New York and gold were both at 21/2 per cent. premium. In August it had risen to 3 per cent. premi- um. This was not so much due to the impending panic as it was to the fact that business was extremely prosperous. Business men demanded money and exchange and this requirement forced sky- ward the requests upon bankers and brokers for short loans. By the latter part of September, 1859, exchange had fallen to less than 1 per cent. premium. It was said at the time that the demand for money in the fall of 1859 was the most urgent ever experienced in this city up to that date. It was further stated that the demand was wholly legitimate and largely sprang from the lack of sufficient banking capital here. More than one business house in October received in one day over $100,000 worth of produce paper besides paying the checks of customers. Naturally during this enormous demand for money bankers and brokers did their utmost to supply the wants of business men. Late in October New York exchange was quoted at 1/2 per cent. premium.
The Press and Tribune of November 15, 1859, had the following notice: "The Illinois and Wisconsin bank notes are not readily con- verted into coin or exchange. The banks of those States furnish almost all the currency in circulation west of Indiana. They are opposed on principle to redeeming their issues; and the brokers of Chicago are in favor of the high rates of exchange, as it enables them to realize two or three times the legal rates of interest. By loaning to their customers for a short time Western currency and making them pay back in New York funds they draw 20 to 30 per cent. interest instead of 10 which the law allows. The banks only redeem at the tail end of a chancery suit, but as their issues are 'stock- secured,' they are considered ultimately good and consequently pass freely. There will be no low rates of exchange in this city while the brokers are herded together to keep it up, and the banks allowed to avoid prompt redemption."
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During the fall of 1860 it became apparent to thoughtful and experienced financiers and business men that the political agitation then convulsing the country might seriously injure business opera- tions during the coming winter. It was realized that the bills of the security banks of Illinois were largely based upon the stocks of many of the Southern states. It was seen that should the South adopt ordinances of secession, inaugurate war and withdraw from the Union the value of the stocks held as security by the banks of Illinois would become greatly reduced and in fact might become worthless. Accordingly business men generally looked with misgiv- ings upon what the future should bring forth. In October, 1860, exchange on New York jumped to 11/2 per cent. premium. The Tribune and Press about this time said, "More than twenty banks have come into operation under our general banking law within the last few months. The next Legislature should provide some effectual check to this unlimited expansion of the currency." It was the opinion of business men here that the banking law of the State should at once be amended on the following points: To pro- vide. for the redemption of bills of doubtful security ; to prevent banks and brokers from charging excessive exchange rates; that a discrimination against banks which evaded the law should be made ; that banks which failed should be compelled to liquidate and redeem their bills, and that all banks should be required to deposit with the State auditor Illinois or United States stocks. At a busi- ness meeting held here concerning the monetary situation the fol- lowing was one of the conclusions :
"WHEREAS, In our opinion the present monetary crisis in our State is the direct result of our banking system, which discriminates against the interests of our own citizens in its practical workings by giving to a few irresponsible bankers (in most cases) the inter- est upon $15,000,000 of stocks, while the people are compelled to pay for them and submit to the conversion of every dollar of their surplus products into bank bills with no other basis but those stocks till from $5,000,000 in 1857 they have increased to $12,000,000, $3,000,000 of the increase being from this year's surplus crop, and
WHEREAS, From the nature of the evil the commercial interests of the State are compelled to bear the burden of its depreciated currency."
The last report of the auditor before November 1, 1860, showed that only twenty of the eighty-four banks in the State had any de- posits, and those banks receiving deposits were confined to one half- dozen leading cities of the State. The total deposits of these banks about November, 1860, was $832,354. The circulation of the eighty-four banks was $9,610,084. This illustrates to what an ex- traordinary degree the State had been flooded with rag money. After the presidential election of November, 1860, exchange began to mount upward and although currency was discounted heavily
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business men continued to borrow and to widen operations. On November 16 gold and exchange were quoted at from 3 per cent. to 5 per cent. premium to customers and to others from 5 to 6 per cent. premium. The next day exchange mounted from 5 per cent. to 7 per cent. premium selling. On November 19 exchange reached 10 per cent. premium selling, while gold was quoted at from 5 per cent. to 10 per cent. premium.
Late in November, 1860, many bankers were called upon to strengthen their security. This was due to the fact that the securi- ties themselves had depreciated and were still depreciating in value. The time to make good was fixed at thirty-five days. About Novem- ber 22 many bankers of Virginia suspended, as did also several in Washington, D. C. On November 23 exchange was quoted at 7 per cent. premium selling and gold at 10 per cent. premium selling. At this date stocks were recovering a little. Late in November Mr. Tinkham offered to buy much of the discarded. Illinois issues at 80 cents on the $1. About this time other Illinois bank bills were thrown out of circulation here. Late in November the banks of Missouri, except those of St. Louis, suspended specie payments. Small change in Chicago was so scarce that merchants themselves issued small "promises to pay." About December all discarded Illinois issues were quoted at 15 per cent. discount, Geor- gia at 10 per cent. discount, the two Carolinas at 5 per cent. dis- count, Virginia and Tennessee at 3 per cent. discount, Missouri and Free Indiana at 1 per cent. discount, Iowa at 3 per cent. pre- mium, Michigan, Canada and Louisiana at 5 per cent. premium ; Ohio, Kentucky and Indiana also at 5 per cent. premium; New York and New England banks, 5 per cent. premium ; gold from 7 to 8 per cent. premium selling, and New York exchange the same.
Late in December, 1860, 120 merchants and business houses signed a call for a business meeting to be held at Bryan hall to con- sider the state of the money market and "to consult as to what legis- lation is necessary in view of the financial and general condition of our State."
Upon the passage of the ordinance of secession by South Carolina in December, 1860, there was not such a financial panic as had been anticipated. However, as time passed and one after another of the Southern states followed the course marked out by South Caro- lina, the bills of all banks with Southern security began to depreci- ate in value. In fact the bills of banks with Northern security but of doubtful strength also began to decline in value. By about the first of February, 1861, exchange on New York was 6 per cent. premium buying and 7 per cent. selling; New York and New Eng- land solvent banks, 6 per cent. premium; Louisiana, Ohio, Kentucky, Indiana State, Michigan, Canada, New Jersey and Iowa, 5 per cent. premium; Tennessee, Maryland and Free Indiana, 2 per cent. premi- um; Missouri, par ; gold, 6 per cent. premium. Uncurrent money
Max Lustr
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had fallen immensely. Discredited Illinois bank bills were quoted at 2 per cent. discount ; Virginia, North Carolina, Alabama, Georgia, old Tennessee, South Carolina and the stock bank bills of Tennessse were quoted at 5 per cent. discount. .
So great was the diversity in bank bill quotations at this time that scavenger brokers began a systematic attempt to depreciate the bills of good banks in order to secure the same for redemption at par upon presentation later to the banks themselves. They also bought up such bills and sold the same to laborers and servant girls at 10 per cent. premium.
Early in 1861 the State Legislature duly considered the changes asked for in the State banking law by Chicagoans. J. Y. Scammon . then represented Cook county in the House and was the leader there in banking reforms. At this time pandemonium reigned in Chi- cago business circles owing to the constant fluctuations in currency rates and to the excited condition of the country. In February, 1861, Mack's bank bill became a law.
At a meeting of the bankers of Chicago held on February 27, 1861, it was resolved to receive at par the bills of all Illinois banks put in liquidation by the State auditor. The discredited bank bills remained at 20 per cent. discount. By March 27, 1861, New York exchange and gold had fallen to from 31/2 to 5 per cent. premium.
The Chicago bankers had carried inferior Illinois money-issues of rags, as they were termed-until the burden became unbearable, when all were finally thrown out of circulation. At first the issues of thirty-two banks were thus discarded and later others were added to the issues under the ban.
"The wholesale slaughtering of the Illinois banks on Saturday evening produced considerable excitement to-day; but all things considered there was much less than might have been expected. Comparatively few were disposed to sacrifice their money. The bills of these banks have now been, or will be, reduced to what the bonds on which they are based make them worth according to prices ruling in the New York market."-(Tribune, April 2, 1861.)
Early in 1861 the banks of Chicago were publicly thanked by a mass meeting of the merchants for throwing out the poor rag money of Illinois banks. In April, 1861, the Merchants' association was incorporated with full banking powers and with a capital of $1,000,- 000. During April all bonds and stocks, with few exceptions, dropped sharply in value. About the middle of April brokers of- fered 75 cents on the $1 for bills of rejected banks. Two days later they offered only 70 cents on the $1. On that date there was strong talk that the issues of thirteen more Illinois banks would be thrown out of circulation. At this time exchange on New York was quoted at from 7 to 8 per cent. premium selling and was very unsettled; gold was quoted at from 6 to 10 per cent. premium selling.
Immediately after the fall of Fort Sumter all stocks declined Vol. II-11.
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about 5 per cent., but nearly all immediately recovered to the figure they were before the surrender of that fort. Gold remained high, however; on the 17th it sold as high as 10 per cent. premium; on April 16 exchange also jumped at 10 per cent. premium, gold re- maining the same. On April 17 exchange remained at 10 per cent. premium selling, but gold jumped to 12 per cent. premium selling. At this date brokers were offering 50 cents on the $1 for rejected bank bills. No currency was worth over 90 cents on the $1, because gold was at 10 per cent. premium. By April 23 the bankers of Chicago refused to sell exchange on New York except upon such high terms as were ruinous to business men. Exchange was officially quoted at 15 per cent. premium selling, but fluctuated 4 or 5 per cent. above and below that figure. Gold at this time was selling as high as 20 per cent. premium.
"The money market is entirely unsettled and almost indescribable. The banks have an abundance of currency. Most of the banks re- fuse to sell exchange on any terms. What little was doled out to customers was at 15 per cent. premium. Gold as near as we can give was 15 per cent. buying and 20 per cent. selling."-(Tribune, April 23, 1861.)
"The money market for the past week has been entirely unsettled and the most gloomy forebodings were indulged in regard to our entire financial system. It was seriously feared that banks and business would all go to the bottom together."-(Tribune, April 29, 1861.)
On April 2 the leading bankers and merchants in mass meeting assembled entered into an agreement to receive the bills of Illinois banks not on the rejected list as currency during the continuance of the war. This act it will be seen rendered it impossible for brokers or others to arbitrarily throw out the bills of good banks. A little later a strong effort to break this agreement was made and suc- ceeded. The merchants of Chicago sent a committee to Springfield to urge the passage of a law for the State to guarantee the bills of good State banks.
By April 30, 1861, gold had risen to 10 per cent. premium selling and exchange the same. By May 14 the bills of all banks based on Southern stocks had fallen so low that in a few instances they were comparatively worthless. This was due to the decline in the State stocks held as security by those banks. On May 14 Missouri State stocks were quoted at 35 cents on the $1, Tennessee stocks at 45 cents on the $1, and Virginia stocks at 43 cents on the $1, in New York. The previous act of the bankers and merchants was modified on May 14 at a large meeting held for that purpose. It was agreed that all bills should be received for what they were worth in open market; that no bills should be thrown out wholly and that 1 per cent. should be added to cover expenses of business transactions. It was argued that what any bills would buy in ex- change on New York was a fair basis of their actual worth.
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About the middle of May intense excitement followed a sudden and rapid decline in stocks, exchange and gold. On the morning of May 15 New York exchange sold for from 24 to 26 per cent. pre- mium and during the afternoon of the same day the figure on the street was placed at 30 per cent. premium selling. It was now real- ized that in all probability all Southern securities were worthless. This meant an immense hardship upon bankers and business men throughout the North. As the excitement grew and money con- tinued to fall several large meetings of merchants, bankers, railway officials and board of trade operators were held for the purpose of deciding upon some basis of monetary valuation. At one meeting it was resolved as follows: "That the bills of solvent Northern banks should be worth 95 cents on the $1; Tennessee, Kentucky and North Carolina issues, 50 cents on the $1; bills of the North and South mixed, 75 cents on the $1; Missouri and Virginia, 40 cents on the $1." But this schedule had scarcely been adopted ere it was found necessary to change it, owing to the continued, wide and uncertain fluctuations. About this time merchants received good currency at from 70 cents to 80 cents on the $1. All bills and stock ebbed and flowed with every change in the tide of the New York stock and money market. Attempt after attempt to grade bank issues was made, but perhaps the next day the attempt was rendered nu- gatory by a vast change in the quotations. It was noted during the latter part of the month of May that the currency question in Chi- cago was even more important than that of the war itself.
At another large meeting held on May 2 the merchants and busi- ness men adopted what became known as the Union list ; however, many preferred the railroad list, believing it to be a better gradua- tion.
One important gradation of currency was attempted by the united railway officials and was as follows: 1. Best currency at par ; 2. 90 cents on the $1; 3. 80 cents on the $1; 4. 70 cents on the $1; 5. 60 cents on the $1; 6. 50 cents on the $1. Under each one of the six grades were mentioned the issues that were embraced therein. All depreciated currency at this date, and there was none other, was called "stump tail."
"The bankers begin to feel that they made a capital blunder in not following the market and selling exchange for what it was worth, currency being the standard."-(Tribune, May 16, 1861.)
"The action of the railroads, the warehousemen, the agents of the propeller lines, and the merchants in relation to the secession or discredited currency yesterday, is decisive of its fate. It may now be considered as dead, and no efforts of the banks can galvanize it into life. From this day it will cease to pass in any transactions at its nominal value, here or in the country."-(Tribune, May 18, 1861.)
On May 23, 1861, the Board of Trade determined upon a bold
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and what was considered at the time a hazardous movement. They determined thereafter that all transactions by their body should be upon a specie basis-that coin should be the par circulating medium and that all stump tail currency, railway list, union list, rejected and discredited, should be buried out of sight and placed where they be- longed as compared with gold and silver. The board declared that it was unfair to denominate 80 cents as a dollar. They duly con- sidered what should be done with the $6,000,000 par value of stump tail currency circulating throughout the State. This action was extremely important and the only sound step properly to be taken in the dilemma. The relief felt in Chicago was also instan- taneous, because business men and bankers saw at once that it fur- nished a firm, substantial and reliable basis upon which to establish all business transactions and supplied the only solution to the chaos existing here. At first several bodies of the citizens opposed the measures of the board of trade; but ere long all realized the wisdom of the movement and began anew their business calculations with coin as the basis. Immediately the question arose, How should bankers settle with depositors? If a depositor had placed with the bank $1 in currency that was actually worth but 80 cents, how much should he receive for his $1 upon the new gold basis?
Immediately thereafter E. K. Willard promptly offered New York exchange at par for gold and silver. He also made no distinction between coin and the best Eastern bills and the best bills of Ohio, . Indiana, Michigan, Iowa, Canada, Pittsburg, Philadelphia and New Jersey. Other banking establishments made practically the same offers. Thus light instantly appeared where before all had been doubt and gloom.
The Board of Trade, May 23, 1861, resolved that all transactions on Exchange are to be henceforth taken as having been made on a specie basis. Stump tail, long lists, short lists, Union lists, railway lists, preferred and discredited, were all buried out of sight. Eighty cents has ceased to be a dollar. But there is $6,000,000 of this stuff in the hands of the people. How to get something out of it is the question."-(Tribune.)
"As to Illinois currency, almost everybody is glad that the agony is over. The people, like one dreading some long, painful operation, feel relieved that they now know the worst and can provide for it. They know there is energy enough in our commercial system to rally. Already the healthy symptoms begin to appear."-(Tribune, May 23, 1861.)
Immediately upon the adoption of a railway and union list of graduated currency a number of financial sharks prepared a list and marked all bills 10 per cent. below the gradation furnished by the railway and union meetings. They shrewdly called their gra- dation the "merchants list," and endeavored to induce the poorer class of people to part with their currency upon such a basis.
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Immediately after the general adoption of the policy of the board of trade notices like the following appeared in the financial journals : "On the board of trade exchange was sold at 1/2 per cent. premium for Indiana currency and at 11/2 per cent. discount for gold. On 'change and in the street, exchange sells at 1/4 per cent to 1 per cent. premium for currency and 1/4 per cent. to 34 per cent. discount for gold."
"Wanted in Chicago .- A bank conducted on a specie basis. The mercantile community requires a bank which shall receive and pay 100 cents every time it shall receive and pay out a dollar. They require a bank which shall have no dealings with futures which may be money or merchandise according to circumstances. They require a bank which will not be conducted on the principle of giving from 1 to 10 per cent. out of each check offered at its counter in payment of Eastern acceptances."-(Chicago Tribune, July 3, 1861.)
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