USA > Louisiana > Orleans Parish > New Orleans > Standard history of New Orleans, Louisiana, giving a description of the natural advantages, natural history settlement, Indians, Creoles, municipal and military history, mercantile and commercial interests, banking, transportation, etc. > Part 62
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The imports were above the exports, and there was a steady balance of trade against the United States, which, however, was not felt at first because many of the States issued bonds, and these almost settled the balance against us. This method of business could not be carried on forever, and when, in 1837, conservative people, aroused at the overtrading and speculation that prevailed, demanded specie instead of bank notes, the crash came. Exchange on England ran up to 20 or 25 per cent, and the newer banks and companies began to go down before the storm.
The panic was worse in the West and Southwest, where the greatest propor- tional amount of banking capital had been created. New Orleans, which was then the financial capital of the Southwest, was naturally one of the worst victims; and the situation in this city was aggravated by the fact that about the same time that this financial flurry came upon the country the region tributary to New Orleans suffered from other causes, changes in the tariff unfavorable to sugar and other crops grown there and injury from crevasse and overflow-1840 was the worst flood year known up to that time.
The panic struck New Orleans May 13, 1837, when there was a run on the banks of the city, and fourteen of them, all save the Merchants' Bank, suspended specic payment, thereby forfeiting their charters under the conditions contained therein, that any suspension of specie payments for more than ninety days should, pro facto, wind up their affairs. For the next eight years the Legislature worked on this prob- lem, finally succeeding in building up a new banking system and framing a banking law that was a model of its kind.
How to do in the meanwhile, however, was a difficult problem. The city had been suffering from a plethora of currency; it found itself, by the suspension of the banks, without enough to carry on its legitimate business. In this cmergency, and in order to afford the community some relief, even if temporary,the three munic- ipalities which then constituted the city of New Orleans, issued bills from the value of one bit (12} cents) to four dollars, which were put in circulation. Then followed an era of "Shinplasters," as they were called, a number of companies, and
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STANDARD HISTORY OF NEW ORLEANS.
even private individuals, claiming the same privilege, so that the State was flooded with "rag money."
The Legislature appointed a commission to examine into and report upon the condition of the suspended banks. In 1839, however, the banks had resumed specic payments, and the Legislature, recognizing that their suspension was not due to local causes or any mismanagement on the part of their officers and directors, but "the result of a general derangement of the monetary system of the country," re- instated them in their chartered rights and privileges. This resumption of specic payment, however, was only temporary. The banks were still badly involved. They had issued large quantities of notes and their securities were difficult to realize on, while in many cases the property upon which money had been loaned was only a fraction of the value given it, and often altogether unsalable.
This financial crisis continued for practically eight years in New Orleans, from 1837 to 1845. During that time legitimate commerce, the handling of the produce of the interior and its shipment to market, continued as large as cver, but under some inconveniences, in consequence of the disarrangement of financial matters. There were many failures and bankruptcies of firms and individuals, and a large proportion of business houses in the Southwest and West had to take advantage of the Federal bankruptcy law of 1842 to get on their feet again.
The run on the banks and their suspension came, as already stated, in May, 1837, but they resumed specie payments in 1839. The Associated Banks of New Or- leans then reached an agreement for a general interchange, by which the notes of all the banks obtained an equal currency in the market, all of them being bound to sus- tain this circulation. It was a union whereby the stronger banks sustained the weaker ones. This rule was not formally repealed until February, 1842. It was a temporary expedient which resulted in the end in loss to the public, for the notes of the weaker banks remained in circulation, while those of the stronger ones were being retired.
At the beginning of December, 1841, the depreciation in bank paper was from three to four per cent, and by March 1, 1842, even the paper of the strongest and best banks had gone down to seven or eight per cent. This was brought about largely by a law requiring the banks to resume specie payment on a fixed date. On March 2, 1842, notes of the Exchange Bank were at a discount of from 15 to 25 per cent, and those of the three other discredited banks at a discount of from 10 to 15 per cent.
To meet the condition of affairs prevailing, and to put an end to the financial
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STANDARD HISTORY OF NEW ORLEANS.
embarrassment, the Legislature passed a law restoring the charters of the suspended banks, all of which had been annulled because of their failure to pay in specie, in which it was provided that in the event they resumed specie payment before Novem- ber, 1842, their charters would not be considered forfeited. As it was recognized that the capital of several of the banks had been made much greater than necessary, and as only a very small part of the capital in those concerns had been subscribed, there was a very considerable reduction made. The circulation of the Carrollton Exchange and Improvement Banks was reduced to $250,000 each, that of the Bank of Orleans and the Atchafalaya Bank to $150,000 each. The circulation of the other banks was fixed as follows: Union, $800,000; Citizens', $700,000; Louisiana, $700,000; Louisiana State, $500,000; Consolidated Planters' Association, $500,000; Canal, $500,000; Commercial, $500,000; City Bank, $500,000; Mechanics and Traders', $400,000. The banking laws prepared by a Board of Currency created by the Legis- lature were not well received with favor in New Orleans, where they were regarded as hostile to the banks ; and there was even a public meeting called to protest against them, as threatening the ruin of legitimate business.
When the banks opened for business on February 21, the notes of four of them generally classed as weak-the Orleans, Exchange, Improvement and Atcha- falaya Banks-were refused by the others, either in payment or on deposit, which naturally sent these notes still further down, their holders being glad to dispose of them at 30 per cent discount.
The provision of the Legislature extending the charters of the banks on the condition that they resume specie payment by November, 1842, was accepted by five-the Citizens', Improvement, Louisiana State, Consolidated Planters' and Carrollton Banks; but rejected by eleven-the Union, City, Commercial, Gas, Or- leans, Canal, Louisiana, Exchange, Atchafalaya, Merchants and Mechanics' and Traders' Banks. The Carrollton Bank accepted the condition for the avowed pur- pose of going into liquidation. The objection of the banks to the law was for the purpose of testing its constitutionality, and under their pressure the time allowed for the resumption of specie payments was extended to December 1, 1842.
When it became known that the paying teller of the Atchafalaya Bank was a defaulter to the amount of $120,000, and that there were in addition overdrafts to the amount of $70,000, the notes of that institution depreciated 50 or 60 per cent. The Attorney General brought proceedings against the bank, as well as against the Orleans and Exchange Banks, whose doors were closed, their notes being quoted at from 50 to 55 per cent discount, and those of the Improvement Bank at from 30
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STANDARD HISTORY OF NEW ORLEANS.
to 35 per cent discount. This action on the part of the State naturally created great confusion and had a most deleterious effect on business.
After considerable finessing the banks finally accepted the act of the Legisla- ture and opened, with one exception, to renew specie payments on December 1. They anticipated that date, however, and began paying out specie in May. This action brought discredit on the notes issued by the several municipalities to the amount of $1,000,000, and which had been the chief currency of the city during the interim. These municipal notes depreciated in value, and as they were held mainly by the poorer classes they caused great popular excitement, resulting in a mob forming and several riotous acts being committed. The riotous spirit was finally quelled to a large extent by the issue of certificates by the municipalities, which were generally taken at a discount of 8 or 9 per cent.
The banks resumed specie payments May 20. The Citizens' and Louisiana Banks again suspended May 29, after a rush on them ; the Commercial, Consolidated Planters' and Canal Banks on June 1; the City Bank on June 2; the Carrollton Bank on June 9, leaving only three continuing business-the Union, the Louisiana and the Mechanics and Traders'.
The New Orleans banks imported specie and in December, 1842, it was possible to put into operation the law in regard to resumption. This was further facilitated by the action of the municipalities in settling and destroying a large quantity of their notes.
On June 1, 1843, eight banks-the Louisiana, Canal, Carrollton, City, Com- mercial, Louisiana State, Mechanics and Traders' and Union-had resumed specie payments, with assets amounting to $6,975,314, while the Citizens' and Consoli- dated Association, with $359,006 of assets, had not yet resumed. This may be considered as the end of the panic, or at least of the suspension of the banks, for Governor Roman announced in his message to the Legislature (January 3, 1843,) that the banks were in good condition again, having not less than $4,565,925 of specie and an actual circulation of only $1,261,514.
But, although the banks were on their feet again, it took fully three years to restore public confidence and to get rid of those institutions which had fallen by the wayside. The old banking system was at fault, and it was found necessary to construct a new one. Acts were passed to facilitate the liquidation of the in- solvent banks, especially the property banks, and to settle the involved relations between the State of Louisiana and such institutions as had received the assistance of its credit. Under the act, passed in 1845, for the adjustment and liquidation of the
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STANDARD HISTORY OF NEW ORLEANS.
debts of the State, there was an adjustment of mutual obligations, a renunciation by the State of all interferences in bank management. By this arrangement the State was relieved of about $3,000,000 of indebtedness. The banks also extin- guished their bonded debts, and the city of New Orleans retired its depreciated promises to pay. Public credit was completely restored, a sound currency was established and the State Treasury was brought to a most prosperous condition.
These eight years of suspension and financial demoralization, however dis- tressing during their continuance, had a most beneficial effect. They taught New Orleans safe banking, and the result of this bitter experience was the adoption of a banking system that proved perfect and of a banking law which continued unchanged up to the time of the Civil War, and proved so satisfactory in every way that it was adopted by half a dozen States and even by the General Govern- ment in part.
The banking history of the period 1845-1860 is free of incident. There were no failures or suspensions of any moment. When the Civil War came on there were no banks in the country in better condition or more solid than those of New Orleans, as the following table will show, giving their condition on Jan- uary 1, 1860 :
Circulation.
Deposits.
Specie.
Citizens' Bank
$ 4,089,780
$ 4,262,705
$ 3,416,034
Louisiana State
. 2,593,775
4,812,483
2,746,644
Bank of Louisiana
736,629
3,640,544
1,588,342
Canal
1,238,365
1,374,795
1,299,305
New Orleans
630,975
1,006,225
629,641
Union
558,200
1,225,865
601,213
Mechanics and Traders'
412,505
920,661
420,632
Merchants'
491,065
522,771
331,909
Southern
305,575
434,819
242,269
Crescent City
282,224
379,936
261,049
Bank of America
240,240
1,188,002
518,387
Total
$11,579,313
$19,768,806
$12,055,425
After fifteen years of peace, quiet and prosperity the banks of New Orleans entered, in 1861, upon more serious troubles than those they had undergone during the period 1837-45, when Louisiana seceded and the Civil War broke out. Although the officers and directors of the banks sympathized with the Southern cause, they felt that their obligations to their stockholders required them to pursue a con-
601
STANDARD HISTORY OF NEW ORLEANS.
servative course. They stuck manfully to their charters, which required them to pay in specie; but on September 16 they yielded to the pressure of popular senti- ment, which required that they should accept Confederate notes as a proof of their . loyalty to the Southern cause. Some of them suspended specie payment in conse- quence, and those who did not at first, deemed it advisable to do so soon after for their own protection. At that time their condition was still excellent, and they were doing a fair business, in spite of the commercial demoralization that existed. Their circulation was only $6,481,916, or a little over half what it had been a year before, because the banks had deemed it advisable to call in as many of their notes as possible; but on the other hand the specie held by them was $14,- 173,258, or more than in 1860. The deposits had shrunk some five millions to $14,710,698, this representing the money withdrawn by timid persons, who feared what the war might bring forth. The Citizens' Bank was still the strongest, with $4,086,819 of specie, while the State and Louisiana banks had each close upon $3,000,000 of specie.
It is doubtful if the bank officials wished to accept Confederate notes; but public opinion, which was very intense at the time, would not allow them to do otherwise. After the suspension of specie payment and the acceptance of Con- federate notes, nearly all the business of the city was done with the latter, and the bills of the banks were seldom seen. The banks threw their fortune, willingly or unwillingly, with the Southern cause. They contributed a large amount to the defense fund of New Orleans, and when the forts were passed by Farragut's fleet they sent some $4,000,000 in specie into the Confederacy to prevent its falling into the enemy's hands.
When General Ben F. Butler took possession of New Orleans he became involved at once in an interminable squabble with the bank officials, who found him a very hard customer to deal with. He demanded of them an explanation of their conduct in sending out of the city their specie, which was intended, he claimed, as a protection for the depositors, and several of the presidents ad- mitted that it had been "unadvisedly carried away." An attempt made to secure the return of the specie proved a failure, as the Confederate authorities would not permit its return ; but the banks were allowed to transact business upon the basis of this absent coin, "just as though it was in their own vaults."
In regard to the Confederate bonds and notes which had almost completely ousted the bank bills from circulation, it was provided at first by an order issued May 1, 1862, that no Confederate bonds or obligations payable in Confederate
602
STANDARD HISTORY OF NEW ORLEANS.
notes should be accepted; but the notes themselves, as they constituted almost the only circulation of the city, were allowed to pass until the financial situation im- proved. On May 16 a second order was issued by General Butler, in which he pro- hibited the use of any Confederate notes after May 26. This was immediately followed by a notice from the banks, given through the newspapers, advising all persons who had deposits with them in Confederate notes to withdraw them before May 27, and stating that all balances not withdrawn by that date would be at the risk of the owners.
This action of the banks General Butler refused to approve. He insisted that the banks had violated their charters in September, 1861, in suspending specie payments and introducing Confederate notes as currency, which, he declared in his peculiar manner, they had purchased at a discount with their own bills. These notes had obtained a wide circulation, and the action of the banks in accepting them over their counter, but refusing to receive them in deposit, would throw all the loss upon the public. Order No. 30, therefore, required that the banks in- corporated, private banks and savings banks, should pay out no more Confederate notes, but that all depositors should be paid in valid money, in bank bills, U. S. Treasury notes or gold or silver. Relative to the "shin-plasters" or private currency, with which the city had been flooded, it was provided that all persons who had issued this "money" should redeem their notes at once under penalty of confiscation of their property and imprisonment at hard labor.
By a subsequent order General Butler seized all the money in the New Or- leans banks to the credit of the Confederate government or any of its agents, and in August imposed on the banks as a penalty for "having aided the rebellion" (that is the Confederate cause), an assessment equal to their investment in the defense bonds of the city. This fine was collected in four installments of 25 per cent each, and the money was used in furnishing with rations the large number of negroes who had refugeed in New Orleans from the neighboring country, and who re- mained in the city during the continuance of the Civil War, the majority of them idle and indeed unwilling to work, believing that emancipation meant freedom from labor.
During all of General Butler's administration of the affairs of New Orleans, as well as those of his successor, General Banks, the financial history of the city is filled with quarrels between the banks and the military authorities, and an im- mense number of claims resulted and much litigation growing out of them. Many of these suits are still on trial, and it would take pages to explain them. Even
603
STANDARD HISTORY OF NEW ORLEANS.
after the restoration of peace, and when the banks got to business again, these complications continued. The Legislature was appcaled to frequently to amend their charters; and the history of the Citizens' Bank alone would furnish a large and interesting book of the changes in the methods of banking in New Orleans.
Under these circumstances it is impossible to give a general history of bank- ing in the city after the war; and this can be best done in detail. There was no general panic and smash up, as in 1837, nor was there any such complications as during the Civil War. The New Orleans banks suffered from the general finan- cial flurries which swept over the country in 1877 and 1893, and on such occasions were compelled to adopt the same precautions for their safety as the banks in other cities ; but the crisis was never as general or as acute as it had been before. Banks went down, it is true, but they went down from their own inherent weakness or mismanagement, not as a part of a general crash. The bank history of the post-bellum period can best be considered under the several banks which grew up and prospered or failed.
The First National Bank, the first to take advantage of the national banking laws, had a short and inglorious career. An investigation into its affairs was ordered in May, 1867. At that time it was discovered that the affairs of the bank were tangled up with those of its president, Mr. Thomas May, who was U. S. Assistant Treasurer at the time, and in whose office a defalcation of $1,077,079 was found by the special agents of the Treasury Department. The bank accord- ingly passed into the hands of a receiver at once, but its affairs were not fully set- tled until 1880.
The Louisiana National Bank was chartered in 1865.
The Germania National Bank was organized as the City Bank in 1865, but changed its name to Germania in 1869.
The New Orleans National Bank was organized in 1871.
The Mutual National Bank was organized in 1871, but went down in 1898, in the bank flurry which carried down three of the financial institutions of New Orleans.
The American National Bank was organized in 1889, but failed at the same time as the Mutual.
The State National Bank was organized in 1871. Originally the Louisiana State National Bank, it changed its name to State, dropping the Louisiana in order to avoid confusion with the Louisiana National.
The Whitney National Bank was organized in November, 1883.
604
STANDARD HISTORY OF NEW ORLEANS.
The Hibernia National Bank was organized as a State bank in 1870, but became a national bank in 1873. It swallowed up the - National Bank in 1896.
The Metropolitan Bank is a State institution, doing both a commercial and savings business, and was organized in 1870.
The People's Bank is a State institution, and was established in 1869.
The Bank of Commerce was established as a State bank in 1887, but went down in 1898, in the same flurry that broke the Mutual and American National Banks.
At the time of the Civil War New Orleans had two savings banks :
The New Orleans Savings Institution, incorporated March 15, 1855.
The Crescent City Savings Institution, incorporated March 13, 1857.
The New Orleans Savings Institution did a splendid business immediately after the Civil War, but its very bad failure in 1876 had a demoralizing influence on the savings bank business for some years, and the city was altogether without these banks or with very weak ones until the Germania Savings Bank entered the field in 1879 and restored public confidence in savings banks, which had been very much tried by the failure of former institutions.
Under the encouragement given by it and the very successful business it has enjoyed three new savings banks have sprung up in New Orleans, as follows :
Teutonia Savings Bank, chartered in April, 1893.
Bondent Savings and Safe Deposit Bank, chartered in 1893.
United States Trust and Savings Bank, chartered in April, 1893.
Of the other banks it is unnecessary to speak, as they are doing business under their old charters as State banks, such as the Canal and Citizens' Banks, or have taken out national bank charters like the Union.
The New Orleans Clearing House Association was organized May 8, 1872, and the first exchanges were made on June 1 of that year. Originally composed of thirteen members, the Association subsequently included all the commercial banks of New Orleans. In the panic of 1893 and on other occasions of financial flurry, when the market was in a frightened condition, the Clearing House proved of great advantage, not only to the banks, but to the entire business community by providing for the issue of clearing-house certificates, which were accepted by all and tided over the strained financial conditions that prevailed. The trans- actions of the Clearing House for the first year it did business, September 1, 1872, to August 31, 1873, was $501,716,239.06. It has varied but slightly from these figures since then, reaching its maximum in 1890-1, when the clearance ran
605
STANDARD HISTORY OF NEW ORLEANS.
up to $536,038,535.85, and its minimum in 1884-5, when they sank as low as $393,452,741.10.
While the foreign insurance companies have always done a large business in New Orleans, the home companies have handled a great deal of insurance, not only for the city and the State of Louisiana, but for all the neighboring States, and even for some distant ones. The companies are :
Sun Insurance Company, chartered in 1855; capital, $500,000.
Germania Insurance Company, chartered in 1866, but reorganized in 1891; capital, $500,000.
Crescent City Insurance Company, organized as the Crescent Mutual in 1849; capital, $240,000. It has liquidated its affairs.
Merchants' Insurance Company, organized in 1835. From 1854 to 1893 it was the Merchants' Mutual; capital, $300,000.
Mechanics and Traders' Insurance Company ; capital, $375,000.
New Orleans Insurance Association, organized in 1869, reorganized in 1874, with a capital of $200,000. Its business has been taken by the Sun Insurance Company.
Home Insurance Company, organized in 1878; capital, $400,000.
Teutonia Insurance Company, organized in 1871, with a capital of $250,000.
Lafayette Fire Insurance Company, organized in 1869, with a capital of $150,000.
Hibernia Insurance Company.
Southern Insurance Company, organized in 1883 ; capital, $300,000.
The Louisiana Homestead League was organized in 1891, and includes the following Homestead companies :
People's Homestead Association, organized in 1882.
American Homestead Company, organized in 1883.
Louisiana Homestead Association, organized in 1885.
Firemen's Building Association, organized in 1886.
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