USA > Kansas > A standard history of Kansas and Kansans, Volume II > Part 41
Note: The text from this book was generated using artificial intelligence so there may be some errors. The full pages can be found on Archive.org (link on the Part 1 page).
Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 | Part 10 | Part 11 | Part 12 | Part 13 | Part 14 | Part 15 | Part 16 | Part 17 | Part 18 | Part 19 | Part 20 | Part 21 | Part 22 | Part 23 | Part 24 | Part 25 | Part 26 | Part 27 | Part 28 | Part 29 | Part 30 | Part 31 | Part 32 | Part 33 | Part 34 | Part 35 | Part 36 | Part 37 | Part 38 | Part 39 | Part 40 | Part 41 | Part 42 | Part 43 | Part 44 | Part 45 | Part 46 | Part 47 | Part 48 | Part 49 | Part 50 | Part 51 | Part 52 | Part 53 | Part 54 | Part 55 | Part 56 | Part 57 | Part 58 | Part 59 | Part 60 | Part 61 | Part 62 | Part 63 | Part 64 | Part 65
973
KANSAS AND KANSANS
any officer of a bank receiving deposits, or assenting to the creation of debts when such bank shall be in an insolvent condition, should be deemed guilty of larceny and "punished in the same manner and to the same extent as is provided by law for stealing the same amount of money deposited, or other valuable thing, or if loss occur by reason of such deposit."
The conditions which prevailed two years before the passage of the State Banking Law of 1891, and which made it so necessary that such a measure be inaugurated at once, are thus set forth by Governor Hum- phrey in his message to the Legislature of 1889: "We have no law regulating the important subject of banks and banking. Banks of dis- count and deposit are referred to, as banks of issue are forbidden by the constitution, except by a vote of the people. Even the general cor- poration law does not include banking as one of the many purposes for which corporations may be formed, and the only provision on the subject is Article 16, Chapter 23, General Statutes, being an act of six sections for the organization and incorporation of savings associations. The right to incorporate banks under this act for the purpose of carrying on a general banking business has been questioned, and even the constitu- tionality of the act assailed in the case of Pape vs. Capital Bank, 20 K. 440.
"Notwithstanding this, hundreds of banks over the state have been organized and incorporated, not as savings banks, in fact, but to carry on a general business. In justice to those who desire to form banking corporations, there should be some adequate provision of law for that purpose; and in justice to them, as well as to the business public, there should be an act regulating the subject of banks and banking generally, with some power of examination, inspection and supervision, which might be lodged with a bank commissioner, or with the present superintendent of insurance."
Nothing was done at that session, but in 1891 the Legislature passed a general banking law which formed the foundation of the system which, as elaborated, is now in force. Its most important provision, Section 21, was the creation of a bank commissioner, in conformity with the gov- ernor's recommendation. Four years constituted the term of the new official, who was to be appointed by the governor and confirmed by the Senate. A deputy bank commissioner was also provided for. No person connected with a bank, or interested financially in it, was eligible for either office. The commissioner and the deputy are required to furnish $20,000 and $10,000 bonds respectively. Every bank doing business in the state except national banks, must be visited by the commissioner, or his deputy, at least once a year, or oftener if necessary, for an investiga- tion into the financial standing of the institution.
By the provisions of the law, the commissioner and his deputy are empowered to investigate all persons connected with banks when making an investigation and report the same in writing. A graduated fee was to be charged for these examinations, ranging from $5 for banks of $5,000 capital stock to $20 for banks of $50,000 capital stock and over.
974
KANSAS AND KANSANS
It was also provided that the bank commissioner could call on all banks, except national, at any time for a report of their condition, and four sueh reports were to be made each year. When a bank became insolvent it was made the duty of the bank commissioner to take charge of it until a receiver could be appointed. By the law ereating the office of com- missioner, he was required in each even numbered year to report to the governor the "names of the owners or principal officers, the paid-up capital of each, the number of banks in the state, the name and location of each, and the number and dates of examination and reports of and by each."
Charles F. Johnson of Oskaloosa was the first bank commissioner, who served from 1891 to 1893. He was succeeded by John W. Briedenthal of Chetopa, whose term covered 1893-1900. Then came Morton Albaugh of Kingman, 1901-04; William S. Albright, Leavenworth, 1904-05: Joseph N. Dolley, Maplehill, 1909-1913; Charles M. Sawyer, Norton, 1913-14; William F. Benson, El Dorado, 1914-17; Walter E. Wilson, Washington, 1917-
A second law was passed in 1897 by which banks were required to secure a charter of incorporation from the state, and when all its require- ments were complied with, the commissioner was empowered to issue a eer- tificate anthorizing the bank to transaet business. The law of 1897 was far more comprehensive than that of 1891. Of its sixty-five sections. perhaps the chief provisions are as follows: Giving five or more persons power to form a corporation for banking purposes; no two banks in the state to be permitted to operate under the same name; the building owned by the bank as a place of business not to equal in value more than one-third of the capital stock; stockholders to be liable for a sum equal to the par value of their holdings; banks organized prior to the passage of the act to conform to its provisions; receiving deposits by any offieer after knowledge of the bank's insolveney, or impending insolvency, making the offender liable to a fine not exceeding $5,000, or imprisonment in the penitentiary from one to five years, or both; no bank to be per- mitted to do business without legislative authority, and the bank com- missioner to retain the duties previously conferred upon him.
The act of 1901 placed trust companies under the banking laws of the state, especially as regards the impairment of capital and insolvency ; that of 1903 provided that no bank should be established with a capital of less than $10,000, and that every officer of an incorporated bank should hold at least $500 of its stock as long as he was thus identified with it.
The act of March 6, 1909, has been defined as "doubtless the most radical and far-reaching law on the subject of banking ever passed by the Kansas Legislature." It provides for the security of depositors in the incorporated banks of the state, creates the bank depositors' guaranty fund of the State of Kansas, and lays down regulations and penalties. Principal features of the law: Any incorporated state bank with a paid-up surplus equal to one-tenth of its capital might participate in the benefits of the guaranty fund, and the bank commissioner was authorized
975
KANSAS AND KANSANS
to issue a certificate to that effeet; before such certificate be issued, the bank was required to deposit with the state treasurer for each $100,000 of deposits, or fraction thereof, $500 in bonds of the United States, the State of Kansas, or some minor politieal division of the state, and in addition pay a sum equal to one-twentieth of 1 per cent of the average deposits; when any bank should be found insolvent the bank eommis- sioner to take charge, issue to the depositors a certificate bearing interest at the rate of 6 per cent per annum, and if the bank's assets should prove insufficient to pay the depositors, then the certificates should be redeemed from the guaranty fund; national banks, by reorganizing, might become guaranty banks; any bank guaranteed under the provisions of the aet that should receive deposits continuously for six months in exeess of ten times its capital and surplus should be deemed guilty of violating the law and forfeit its guaranty rights and privileges.
Regarding the opposition which developed on the part of the national banks, during that period, a writer of the times says: "Soon after the passage of the law, opposition on the part of the national banks of the state developed, because it was feared that the guarantee of deposits in the state banks would give those institutions an undne advantage. Governor Stubbs, Bank Commissioner Dolley and Attorney-General Jackson went to Washington to confer with the United States attorney- general, and some national banks went also to present their side of the case. Attorney-General Wickersham upheld the law, and when it became apparent that it was the intention of the opponents of the law to bring an action in the Federal Court, the state forestalled the movement early in August, 1909, by instituting proceedings to enjoin certain persons and bankers from interfering in any way with the enforcement of the law. At the same time the attorney-general asked the Supreme Court for a writ of mandamus to make it necessary for the bank commissioner and the state treasurer to carry out the provisions of the law. The question, however, was finally carried to the Supreme Court of the United States. which upheld the law, and the state banks of Kansas were thus placed upon a basis of security surpassed by no state in the Union."
In common with all the states of the Union, Kansas was radically affected by the national financial legislation of 1915, especially by the passage of the Federal Reserve Aet, by which the vast financial resources of the United States guaranteed the security of its banks, and the farmer was enabled to borrow money in promotion of his interests on the most favorable terms. The nation was divided into twelve districts, with a central reserve bank in each district. The Tenth distriet included Kansas, Nebraska, Colorado, Wyoming and parts of Missouri, Oklahoma and New Mexico, its eentral bank being established at Kansas City, Missouri. The third annual report of the Federal Reserve Board for the period covering July 15-December 31, 1916, indicated that the banks in the twelve Federal Reserve eities had handled 28,884,676 items repre- senting $12,538,260,555, of which the Kansas City Bank had handled 1.562,860 items valued at $845,154,257.
Having thus delineated the complications and difficulties which at-
976
KANSAS AND KANSANS
tended the establishment of the banking system of Kansas, with a notice of some of the more important measures which promoted its devel- opment, the reader may reasonably expect mention of the pioneer banks of the state from which those now in existence have sprung. No better record of such has been made than by George W. Martin, the lameuted secretary of the Kansas State Historical Society, in a paper read before the Kansas Bankers' Association at its annual meeting held at Topeka, May 23, 1912. From it the writer makes the following generous extract : "When we consider the strength and importance of the banking interests of Kansas today, as in other lines of activity, the wonder is how a start was ever made. The first advertisement of a bank in Kansas appeared in the Leavenworth Herald of July 12, 1856. It was called the 'Banking and Exchange Office of C. P. Bailey, Jr., & Co., Delaware street, Leaven- worth.' It reads thus: 'Buy and sell time and sight bills on the prin- cipal cities in the United States at the most favorable rate. Collections made and proceeds promptly remitted at current rates of exchange. Interest allowed on time deposits. Exchange for sale on the Royal Bank of London.' Then followed a list of ten references. In his History of Leavenworth County, H. Miles Moore says: 'Mr. Bailey opened up in a little one-story frame building on the north side of Delaware street between Main and Second. Mr. Bailey was a timid man and his money more so. As things progressed rapidly in the summer and the boys began to get a little gay with their guns, he thought the town was getting too rapid for him, and he pulled up stakes and returned to Ohio, bank and all.' Cutler's History mentions this as the first bank, but says its life was neither long nor vigorous.
"The first bank failure was that of the City Bank of Leavenworth. It was opened in the winter of 1856-57. Henry J. Adams, the first Free State mayor of Leavenworth, was president; A. C. Swift, cashier, and F. G. Adams, a brother of the president and for twenty-four years secretary of the State Historical Society, was also interested. It was a bank of issue, and was located on Delaware street between Second and Third. It failed during the crisis of 1857, with heavy loss to its owners. A number of red-back two dollar bills of this bank are still in existence.
"In Sutherland's directory of the city of Leavenworth for 1859-60 there are eight banks advertised. In the list are the following, which made great fame subsequently, in various ways: D. R. Anthony ; Clark, Gruber & Company ; J. C. Hemingray & Company ; Scott, Kerr & Com- pany, and Smoot, Russell & Company. From other sources it is learned that from 1857 to 1859 four other attempts at banking were made, two of which left their mark-J. M. Larimer and J. W. Morris.
"Smoot, Russell & Company opened a bank in the fall of 1855 at the southeast corner of Main and Shawnce, in a stone building, the north wall of which still stands This was one of the largest and most im- portant private banks in the West. When the Majors, Russell & Wad- dell government freighting concern was removed, the bank was suc- ceeded by that of J. C. Hemingray & Company in the same place. L. R. Smoot, W. II. Russell and W. B. Waddell were directors of the Atchi-
977
KANSAS AND KANSANS
son branch of the Kansas Valley Bank of Leavenworth, which was authorized by act of the Legislature of 1857, but never materialized, although the Atchison branch was organized.
"In this connection, it is proper to speak of the immense business opened up in Leavenworth, in the fall of 1855, by the Government Over- land Transportation Company of Majors, Russell & Company. It built stores, blacksmith shops, wagon and repair shops, and employed annually over four hundred wagons, 7,500 head of cattle and about 1,000 men. In 1858, upon receiving a contract for the Government freighting for General A. S. Johnston's army to Utah, it increased operations to the employment of 4,000 men, 3,500 wagons and teams, with over 40,000 oxen and 1,000 mules to haul the supplies. This company also had a contract with the Government for beef cattle, and, it is said, had many contracts, to the amount of more than $1,000,000 a year. For the years 1855 and 1856 their profits footed up to about $300,000. W. H. Russell was the financial genius of the firm, as well as of the Central Overland California & Pike's Peak Express Company, of which he was president and man- ager. The founder of the freighting concern, Alexander Majors, the transportation genius, had begun his career freighting to Santa Fe in 1848, with an outfit of six teams. There is a memorial window in his honor in the dome of the capitol at Denver, where he died in 1899.
"On January 29, 1857, the Territorial Legislature passed an act pro- viding that every company or association of persons formed for banking purposes within the territory, and without an act of the Legislature authorizing the same, should be deemed unlawful. The first bank author- ized by legislative act was that of the Kansas Valley Bank of Leaven- worth, capital stock $800,000, with five branches at Atchison, Lecompton, Doniphan, Fort Scott and Shawnee, Johnson County. The capital stock of the branches was to be $300,000 each. For the Leavenworth bank the following men were named to take subscriptions to the capital stock : William F. Russell, A. J. Isaacs, William H. Rogers, William F. Dyer, F. J. Marshall and James M. Lyle. The Leavenworth bank never was formed, and the Atchison branch was the first to start out under act of the Legislature.
"Isett, Brewster & Company conducted the first legitimate banking business at Leavenworth, in a building erected for that purpose alone, and still standing in 1906. John Kerr was the company and manager. In three years Isett & Brewster sold out their interest to Lyman Scott, Sr., and the bank became Scott, Kerr & Company. Mr. Kerr sold to the Scotts (1865-66) and moved to Texas, where he continued in the banking business. Scott & Company continued until 1874, when the bank was absorbed by the First National Bank. The Scotts held the con- trolling interest in these banks for many years. They were Lyman, Sr .. Lyman, Jr., and Lucian, who was either president or cashier for over twenty-five years.
"The First National Bank of Leavenworth, organized in 1863 or 1864 (chartered in 1863-Editor), was also the first national bank in the state. Its history is peculiar in the personnel of its officers and direc- Vol. II-25
978
KANSAS AND KANSANS
torate, and their connection with affairs of state. Thomas Carney, gover- nor in 1863-64, was the first president and one of the organizers and directors. At a most critical time in the state's history, he advanced his private means and saved the credit of the state. He gave $1,000 for relief of the Quantrill-raid victims, and made the first subscription of $5,000 to the State University. Politics in the end got him. Robert Crozier, cashier in 1871, was district attorney in 1861, chief justice in 1864, United States senator in 1873-74, and judge of the First district, 1877-93. It was May 24, 1871, while he was cashier of the bank, that he, in behalf of the bankers of Leavenworth, requested Governor Harvey to issue a proclamation declaring May 30th a day for public fasting and thanks- giving, thus calling out the first proclamation for the observance of Decoration day in this state. (A footnote here states that Decoration day originated with General John A. Logan, who, on May 5, 1868, as com- mander-in-chief of the Grand Army of the Republic, issued an order appointing May 30th of that year to be set aside for decorating the graves of the comrades of that body-Editor.) This letter is filed in the archives department of the State Historical Society, with a copy of the proclamation.
"Edmund N. Morrill, who succeeded Lucian Scott as president of the First National, was congressman in 1883-91, governor 1895-97, a member of the Free State Legislature of 1858, major in the Civil War, state senator for two terms, organizer of the first bank in Hiawatha (1871, Barnett, Morrill & Company), and a director of the Interstate National Bank of Kansas City, Mo. Alexander Caldwell succeeded Governor Morrill as president in 1897. He had been a banker in Pennsylvania ; came to Leavenworth in 1861, where he organized the firm of A. Caldwell & Company, United States transportation contractors. This firm did an immense business freighting government supplies to the frontier forts, requiring the use of 5,000 wagons, 50,000 animals and the employment of from 5,000 to 10,000 men. Mr. Caldwell was president or vice president of two railroads, a builder of railroads and bridges and head of the Kansas Manufacturing Company and of the Idaho & Oregon Improve- ment Company for location of towns, canals and irrigating ditches.
"The First National Bank absorbed the bank of Insley, Shire & Company. This was a private bank, organized in 1872, by M. H. Insley, Daniel Shire and E. F. Kellogg. In 1875 Mr. Kellogg retired and W. H. Carson became cashier. After the death of Mr. Insley the bank merged into the First National. The First National absorbed the German bank also.
"It is interesting to note that one of the early business men of Leaven- worth, John F. Richards, an officer and stockholder in the German Bank, was quoted a few weeks ago in the Kansas City papers as the owner of $525,000 in stock in a Kansas City bank, and that his stock is today worth six times its face value and twenty-four times its original eost twenty- five years ago. Mr. Richards established in Leavenworth the largest wholesale hardware honse west of St. Louis in 1856, and at a later date the great wholesale house of Richards. Conover & Company maintained a branch in Kansas City.
979
KANSAS AND KANSANS
"The bank of Clark, Gruber & Company maintained a branch in Denver and at one time M. E. Clark, who was in charge from 1860 to 1863, established a private mint for coining gold, which was the nucleus of the present mint in that city.
"There is much interesting detail that must be passed over. Burke's History of Leavenworth made the following summing up to the year 1880: 'As a money center and a base of supplies for the West and the Southwest, the financial importance of Leavenworth during the War and for years after excelled that of most cities five times its population. Between the elose of the Civil War and the panie of 1873 there were eight banks, representing a total capital of about $800,000. In 1880 only three banks had survived that panic, the drought and failure of crops and the grasshopper scourge. They were the First National, the German Bank and Insley, Shire & Company (now all absorbed in the First National), and the total capital was $350,000.'
"The banking interests at Atchison had a commencement under equally interesting circumstances as had those of Leavenworth, because of the character of those engaged and the great enterprises associated with banking. The Atchison branch of the Kansas Valley Bank, the first one to be formed under the legislative act, being authorized Feb- ruary 19, 1857, with a capital stock of $300,000 and securities of $100,000. In the act, John H. Stringfellow, Joseph Plean and Samuel Dickson were named to open subscription books. An organization was effected in the spring of 1858, and the capital stock fixed at $52,000. The Board of Directors included S. C. Pomeroy (president), W. H. Russell, L. R. Smoot, W. B. Waddell, F. G. Adams, S. Dickson and W. E. Gaylord. In denial of the statement made by rival towns of Sumner and Doniphan that the bank was about to suspend, the directors published a statement of its condition soon after starting, showing that the assets were $36,638 and liabilities $20,118. The archives department of the Historical Society possesses three documents, dated July 14 and August 3, 1857, concerning the appointment of L. S. Boling, of Lecompton, to examine and report on the affairs of the Atchison branch of the Kansas Valley Bank-the first proceeding of the kind in Kansas.
"S. C. Pomeroy resigned as president before the year 1858 was ended. He was United States senator from 1861 to 1873, and worked for and secured the passage of every land grant made to a Kansas railroad during his first term. In 1860-61 he was agent of the Kansas Relief Committee for the receiving and distribution of funds and supplies furnished by eastern states. G. II. Fairchild was the treasurer of the committee, and the cash receipts from October 1, 1860, to March 15, 1861, were $83.869.52. Mr. Pomeroy was succeeded as president of the Atchison branch of the Kansas Valley Bank by William II. Russell, of the con- tracting firms of A. Majors & Company and Smoot, Russell & Company. In 1861 this bank, then called the Kansas Valley Bank, had its name changed by the Legislature to the Bank of the State of Kansas. William H. Russell resided at Leavenworth, and was in 1856 the treasurer of the executive committee to raise funds to make Kansas a slave state. The
980
KANSAS AND KANSANS
Bank of the State of Kansas continued until 1866, when the stockholders wound up its affairs. Mr. Russell lost heavily in his Overland Pony Express Company and the California Pike's Peak Stage Company, Ben Holliday, of Missouri and New York, securing control of the latter. It was said that he received $500,000 a year for earrying the United States mail between Atehison and Salt Lake, and sold the stage line to Wells- Fargo for $1,800,000. Atchison had an enormous business in those days derived from the trade of the West, being the starting point of the stage line, the Butterfield Overland Dispateh, and the parallel road to the Kansas gold mines near Pike's Peak.
"I have always believed that Samuel C. Pomeroy was a greatly wronged man. George W. Gliek, a Demoerat, was a very warm friend to Pomeroy, and he always expressed great indignation when he heard 'Old Pom,' as we all called him, abused about the aid business. He wit- nessed Pomeroy, several times, divide out aid as it eame, and made men- tion of the abuse heaped on him by the beggars when he could not meet their demands for a wagonload in all to divide. Pomeroy's fall was the result of a conspiracy, and not because of general bribery. Dave Butterfield was a sawmill hand at Junction City. He left his wife there to hustle for herself, which she did by sewing. She made some shirts for me. After a year or so, Butterfield turned up on Wall Street, where he raised $6,000,000 to stoek the Butterfield Overland Dispatch, to the amazement of all his old associates. The eoaches, mules and equipment were the most extravagant. He was killed at Fort Smith by a street- ear employee with whom he had quarreled.
"The Exchange National Bank of Atchison, the oldest banking insti- tution of Atehison, was established in 1859 as Hetherington's Exchange Bank. Its founder was William Hetherington. Save for one year dur- ing the war, its doors have been open daily. Repeated attempts to plunder it at that time indueed Mr. Hetherington to elose out his busi- ness and wait for better days. In 1869 it was removed to the fine build- ing on the corner of Fourth and Commercial, erected by Mr. Hether- ington for the express use of his banking business. In 1876 Mr. Hetherington admitted his son, Webster W. Hetherington, who had been for a long time a clerk in the bank, to a partnership, and in 1881 another son, Clifford S. Hetherington, beeame associated in the business. The Exchange Bank of William Hetherington & Co. was changed to the Exchange National Bank of Atchison, August 1, 1882. The formal ehange was made July 21st, when the incorporators deposited with the comptroller of the eurreney $100,000 in government bonds, and eom- pleted the steps required by law, but the bank did not commence busi- ness until August 13th. The directors were William Hetherington, Webster W. Hetherington, B. P. Waggener, Frank Bier and J. S. Gal- braith. Ex-Governor W. J. Bailey is now viee president of this bank.
Need help finding more records? Try our genealogical records directory which has more than 1 million sources to help you more easily locate the available records.