USA > Massachusetts > Suffolk County > Boston > Metropolitan Boston; a modern history; Volume II > Part 5
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On January 1, 1927, the deposits of the bank amounted to $111,642,270, the surplus and profits to $4,568,890, and the total resources had reached $138,648,700.
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A HISTORY OF BANKING IN BOSTON
The Merchants' National Bank-Fourth in size among Boston's Na- tional banks is the Merchants' National, which was originally chartered as a State bank in March, 1831, and which opened its doors in July of the same year. Its first published statement, made in October, 1831, showed deposits of $350,000, a capital of $500,000 and total resources of $1,065,- 000. The original capital was increased from time to time, until just before the Civil War it was $4,000,000.
When the National Bank Act became operative in 1863 the officials of the bank immediately moved to place its prestige and resources, as one of the best known banks in the country and the largest bank in New England, in support of the new system, and thus aid the Government in the prosecution of the Civil War. There was unavoidable delay in ob- taining a National bank charter, however, as a considerable portion of the bank stock was held abroad.
The foreign stockholders, distrusting the ability of the Federal Gov- ernment to survive the war, opposed the conversion of the institution into a National bank. The difficulty finally was overcome by an Act of the Massachusetts Legislature, reducing the capital to $3,000,000, and retiring the shares held abroad, at a premium. The bank then became converted over into a National bank on July 18, 1864.
Franklin Haven, who was the bank's first cashier, became its presi- dent in 1837. He resigned in 1883, and was succeeded by his son, Frank- lin Haven, Jr., who continued as president until his death in 1908. Thus the name of the Merchants Bank and of Franklin Haven had been synon- ymous for more than three-quarters of a century.
Although the close of the nineteenth century saw the beginnings in the era of bank consolidations in Boston, it was not until 1912 that the Merchants National sought to expand by this means. In that year it added the business of the State National Bank and its personnel, to its growing institution. The State National was one of the old Boston banks, having been incorporated in 18II, and changed to a National bank on May 1, 1865. Two years later, in 1914, the National Bank of Com- merce, founded in 1850 and changed to a National bank on November 17, 1864, was added. In 1915 the Winthrop National Bank, founded as the Merchandise National in 1875, but which had changed its name to the Winthrop National in 1890, became a part of the Merchants National.
A direct connection with the earliest banking days of the State was established in 1916, when the Old Boston National Bank was consoli- dated with the Merchants National. The Old Boston National was founded as the Boston Bank, under State charter in 1803. Of its original capital of $1,800,000, one-third was held by the State. The bank's charter expired in October, 1812, and it was rechartered with the same capital
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and under the same arrangement. In February of 1817 the bank bought out the State's interest, reducing its capital to $1,200,000. This was sub- sequently reduced to $600,000, and then $300,000 was added, making the capital $900,000 at the time of the Civil War. When it became a National bank in December, 1864, it paid an extra dividend of twenty percent, and a similar amount a year later.
The first location of the Merchants Bank was at No. 87 State Street, but the bank grew so rapidly that new quarters were soon needed. Presi- dent Andrew Jackson's attacks on the United States Bank resulted in Congress refusing to grant a renewal of its charter, which made avail- able the United States Bank's branch building at No. 28 State Street. This was purchased by the Merchants Bank for $82,500. Adjoining lots of land were purchased later, and in 1857 the granite building familiar to Bostonians for a half a century, was erected. It was demolished in 1912 to make way for the bank's present building.
With the exception of construction periods, the bank has occupied its present site continuously since 1837, a period of ninety years. During the World War the Merchants National Bank aided the Government in every possible way, and subscribed for nearly $50,000,000 of United States Government securities, in addition to supplying its customers with all reasonable credit.
Alfred L. Ripley is the president of the institution, and the vice-presi- dents are A. P. Weeks, E. H. Gleason, George B. Bacon, C. J. Swenson, John N. Eaton, and Frederick C. Waite. At the beginning of 1927, with a capital of $3,000,000, the total resources of the Merchants National amounted to $74,041,680, its surplus and profits, $6,160,510, and its de- posits $57,263,130.
The Webster and Atlas National Bank-The Webster and Atlas Na- tional Bank was created in 1904 by the merger of two historic old Boston institutions, both of which originated under State charter and had sur- vived the panics of the city's early banking history. The oldest of the two was the Atlas, which was founded in 1833, with a capital of $500,000. Heading the list of stockholders was Samuel Adams Wells, president of the old Atlas Insurance Company, and a grandson of Samuel Adams. Others included in the list of founders were Edward Eldredge, James Harris, Phineas Sprague, John Borland, Edward Cruft, Robert Edes, B. A. Gould, Bradford Lincoln and Richard Fletcher.
When the institution was only four years old, the panic of 1837 de- veloped from the tremendous over-issue of paper currency by the banks of the country, much of which had little or no value. The bank success- fully withstood the demands of the time, and when the National Bank
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FAIRCHILD AERIAL SURVEYI
LOWER MUNICIPAL BOSTON, SHOWING WATERFRONT AND CUSTOM HOUSE TOWER
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Act was passed became converted into a National bank on February I, 1865.
The old Webster Bank was incorporated in 1853, shortly after the death of Daniel Webster, by a group of friends who desired to perpetuate his name. The incorporators were William Thomas, who became its first president, George B. Upton, Albert Fearing, William B. Bacon, James M. Beebe, William A. Crocker, John H. Forbes, H. H. Hunnewell, George H. Kuhn, L. W. Tappan and William F. Weld.
Like the bank with which it was to merge years later, the Webster was called upon to weather a panic-that of 1857-when it was only four years old. There were 253 failures in Boston during this panic, with liabilities of $41,000,000, which gives some idea of the situation at the time. The bank survived, however, and became a National bank on Sep- tember 1, 1865, continuing with its original capital of $1,500,000.
When the banks merged in 1904, the new institution started with a capital of $1,000,000, and with John P. Lyman as president. Mr. Lyman died in 1914, and was succeeded by Amory Eliot, who later became chair- man of the board of directors and was succeeded by Raymond B. Cox as president.
The Webster & Atlas National has enjoyed a steady, conservative growth. Its deposits were less than $4,000,000 at the time of the merger, and had grown to $12,026,000 on January 1, 1927. At that time, with the capital remaining the same, the total resources were $15,458,040, and the surplus and profits amounted to $1,249,060.
Joseph L. Foster, vice-president and cashier of the institution, has been with it for more than half a century. The other officers include Ed- ward M. Howland, vice-president; Henry B. Kingman, vice-president ; Addison L. Winship, vice-president; Frank B. Butts, assistant cashier ; Arthur W. Lane, assistant cashier, and Harold A. Yeames, assistant cashier.
The National Rockland Bank-The National Rockland Bank was founded as a State bank in Roxbury in 1853, and still occupies as a branch its original site at No. 2343 Washington Street. Its original capital of $100,000 was increased to $300,000 when it became a National bank on January 1, 1865. In the seventy-four years of its history it has had but four presidents.
In April, 1925, the bank moved its headquarters downtown, to No. 50 Congress Street, and since that time. the growth of the institution has been little short of phenomenal. On April 6, 1925, its deposits were $8,- 842,525. In less than three months, to June 30, of the same year, the deposits had grown to $14,299,438, an increase of 61.7 per cent. Mean- while the bank's capital had been increased from $300,000 to $1,000,000.
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On April 12, 1926, the deposits were $21,525,529, so that one year after making the change, the deposits had grown 143.4 per cent.
Frederic W. Rugg, president of the National Rockland, entered the bank as a boy in 1880, and worked his way up through the various posi- tions until he became the head of the institution in 1907. The other officers are Robert B. Rugg, vice-president ; Anselm L. Bacon, vice-presi- dent ; Harrie I. Brett, vice-president and cashier ; Gordon M. Crowe, As- sistant cashier; Harrison E. Deyo, assistant cashier, and Percy E. Try- der, assistant trust officer.
On January I, 1927, with a capital of $1,000,000, the bank had total resources of $25,547,220, deposits amounting to $21,811,500, and undi- vided profits of $2,622,720, together with surplus.
*The Citizens National Bank-The Citizens National Bank is one of the younger institutions of Boston, which has shown a healthy develop- ment, however, almost from its start. It received its charter and opened for business on June 19, 1919, with Guy Andrews Ham as president. Mr. Ham, who had served for fifteen years as president of the Stoughton Trust Company, eleven years as president of the Canton Trust Company, and was director in many institutions, died in May, 1926.
The deposits of the bank on January 1, 1920, six months after the bank opened, were $1,669,670. A steady annual growth followed, with the result that on January I, 1927, the deposits had increased to $8,172,- 680. On that date, with a capital of $750,000, its total resources amounted to $9,901,890, and its surplus and profits were $485,020.
For a brief space after Mr. Ham's death, the office of president was filled by his brother, Harry H. Ham, senior member of the law firm of Ham, Willard and Taylor. He then resigned and accepted the office of chairman of the board of directors. Frank DeW. Washburn was elected president of the Citizens National on September 21, 1926. He was form- erly president of the Haymarket National Bank, and a director of the Massachusetts Trust Company.
The bank has a main office at 179 Summer Street, almost opposite the South Terminal Station, and has the distinction of being the only bank in Boston which keeps its savings department open from 8:30 A. M. to 6 P. M. daily, including Saturdays, which is a distinct accommodation to the thousands of commuters who pass its doors each day. Banking rooms are also maintained at No. 148 State Street, which is in the heart of the financial and market districts. In addition to its other depart- ments, it has Vacation and Christmas Clubs with about 13,000 members.
The Federal Reserve Bank of Boston-The Federal Reserve Bank of Boston, which serves Federal Reserve District No. I, comprising all of
*Absorbed by National Shawmut Bank, 1927, since this history was compiled.
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the New England States with the exception of Fairfield County in Con- necticut, which is in the second or New York District, was organized on May 18, 1914, and began operations on November 16 of the same year, along with the other eleven regional banks of the country. It has proved to be a great boon to the National and commercial banks of New England through its primary functions-the rediscounting of commercial paper or making loans to member banks, providing elastic currency and through open market operations. Nor are these the only benefits derived from it, for through its connections with the other eleven Federal Reserve banks, it has become a Nation-wide clearing house for check collections, for the collection of notes, drafts, bonds and coupons, for arranging exchange and transfer drafts, for the wire transfer of funds. It supplies coin and currency to member banks on their orders, acts as custodian of securities, maintains foreign agencies and is the fiscal agency of the government.
In its first report the Boston institution described the conditions which it found when it opened on November 16, 1914. "There was out- standing in this district on that date," the report states, "about $31,000- 000 of emergency currency, consisting of Aldrich-Vreeland notes and clearing house certificates. The Boston banks showed a deficit with their reserve agents and only a moderate excess in cash. The comptroller's call of October 31, 1914, showed bills payable and notes rediscounted of about $6,000,000, most of this being borrowed by the country banks. At the date of the call many of these banks were running below their re- serves and the total surplus reserve of the banks in the district was ab- normally low. Money rates were high. Demand money to brokers ranged from 51/2 to 7 percent, and the commercial borrower was obliged to pay 6 per cent and even higher for accommodation up to six months. Member banks were restricting their own customers and were out of the market for outside paper.
"The Boston Stock Exchange was closed except for dealings through a committee, and only limited transactions were allowed. The associated banks of Boston were paying balances through the Boston Clearing House in clearing house certificates and bank notes. Within a few days after the opening of the Federal Reserve Bank, call money was lending at 472 to 5 percent, and commercial paper was moving fairly freely at 51/2 to 6 percent. The new reserve requirements, which went into effect at the date of the opening of the bank, were materially felt throughout the district."
Temporary banking rooms were obtained at No. 101 Milk Street, and vaults were hired from the New England Trust Company. By-laws had been adopted on November 5, 1914. The first payment on capital stock was received at the subtreasury on November 2, and amounted to $1,618,- 924.99. The first Federal Reserve notes arrived and were stored at the
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Boston subtreasury until permanent vaults were made ready for occu- pancy.
The instructions to open on November 16 were received from the Sec- retary of the Treasury, and on this date the first payment of reserves was received at the subtreasury, amounting to about $15,000,000, of which $9,300,000 was paid in gold, as requested by members of the Federal Re- serve Board. There were 439 member banks on the date of opening.
Before listing the first officers of the bank, it is perhaps desirable to first show what the Federal Reserve System is, how it functions, what the personnel consists of, and how the officers are selected. Krickel K. Carrick, secretary of the Federal Reserve Bank of Boston, in a brochure prepared in 1926, concisely describes the system as follows :
"Listing them in the order in which they will be treated here, it may be said that (1) the Federal Reserve Board, (2) the Federal Advisory Council, (3) the Federal Reserve Banks, and (4) the Member Banks, make up the Federal Reserve system, created to achieve the various purposes of the Federal Reserve Act, passed by Congress in 1913 and ap- proved on December 23, of that year.
"The function of the Federal Reserve Board may be best summed up by the statement that the Board is the supervisory and governing body of the system. It is composed of eight members ; two members, the sec- retary of the treasury and the comptroller of the currency, are members ex-officio and the other six members are appointed by the President for terms of ten years each. The President, in selecting the six appointive members, is required to have due regard to the financial, agricultural, industrial and commercial interests and the geographical divisions of the country, and no two appointive members may be from the same Federal Reserve district. Many specific grants of authority are conferred upon the board, such as the power to require the writing off of doubtful or worthless assets of the Federal Reserve banks, to remove for cause any officer or director of a reserve bank, and many other important powers mentioned elsewhere in connection with the organization and operations of Federal Reserve banks. In addition, the board is empowered 'to exer- cise general supervision' over the Federal Reserve banks, a grant of power which constitutes simply a right through general oversight and inspection to see that the Federal Reserve banks operate in accordance with the provisions of law rather than responsibility for the detail man- agement of the banks. While the board formulates credit policies in gen- eral, it does not pass on individual credit applications, that function being performed by the directors of the banks and their authorized officers and agents.
"The Federal Advisory Council is composed of twelve members, one from each Federal Reserve district, appointed by the board of directors
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of the Federal Reserve bank of the district. The Council is required to meet in Washington at least four times each year and oftener if called by the Federal Reserve Board, and it acts, as the name implies, in an advis- ory capacity, conferring directly with the board on general business con- ditions and making recommendations concerning matters within the board's jurisdiction and the general affairs of the system.
"The country is divided geographically into twelve Federal Reserve districts and in each district there is a Federal Reserve bank, named for the city where located. The first Federal Reserve district consists of the New England States, with the exception of Fairfield County in Connecti- cut, which is in the second or New York district, and the bank, being in Boston, is called the Federal Reserve Bank of Boston. The other reserve banks are located at New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco, each of them with the exception of Philadelphia and Boston having one or more branches.
"Originally. each Federal Reserve bank was chartered for twenty years from the date of its organization, but under an act of Congress approved February 25, 1927, each Federal Reserve bank has succession until dissolved by act of Congress or until forfeiture of franchise for violation of law. Each is a corporation separate and distinct from the other eleven reserve banks. It may make contracts, sue and be sued, appoint its officers and employees, adopt by-laws for the conduct of business, exercise all powers specifically conferred by law, exercise such incidental powers as necessary to banking within the limitations of the act, and issue its own bank notes. In all such acts, it is conducted under the supervision and control of a board of directors. That board performs the duties usually appertaining to directors and, save only as their powers are curtailed by the Federal Reserve Act or by specific grants of authority conferred upon the Federal Reserve Board by the act, the directors have the same powers as bank directors ordinarily possess. They appoint the officers, define their duties, fix the salaries of officers and employees subject to approval by the Federal Reserve Board, and from time to time, subject to review and determination of the Federal Reserve Board, establish rates of discount to be charged on each class of paper, etc.
"The board of directors is composed of nine members equally divided into three classes, which are designated by the letters A, B and C. The members or stockholding banks are divided by the Federal Reserve Board into three groups, each group being composed as far as possible of banks of similar size and each group choosing one class A director and one class B director. In other words, the member banks elect six of the nine directors. Class A directors must be representative of the stockhold-
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ing banks and may be and usually are executive officials of member banks and obviously, since they represent banks, they represent the principal leading element in the community. Class B directors may not be officers, directors or employees of any bank and must be 'actively engaged in their district in commerce, agriculture or some other industrial pursuit,' so that they may naturally be expected to represent the borrowing element in the community. The three class C directors are appointed by the Fed- eral Reserve Board and since they may not be either officers, directors, employees or stockholders of any bank, are representative of the public and its general economic interest. One of the class C directors has a dual capacity, being designated chairman of the board of directors and 'Fed- eral Reserve agent,' in which latter capacity he is required to maintain an office of the Federal Reserve Board on the premises of the bank. Another of the class C directors is designated deputy chairman and exer- cises the powers of the chairman when necessary. The terms of office of all directors are three years, so arranged that the term of one director of each class expires each year.
"The officers of a Federal Reserve bank are much the same as in a commercial bank, the principal difference being that the chief executive officer of a Federal Reserve bank is called governor and his first assistant, deputy governor. The stockholders, the depositors and the services of the reserve banks will be described in turn.
"All National banks in existence when the Act was passed were given a certain period within which to determine whether they would become member banks by subscribing for stock in their district reserve banks, or discontinue operation under National charters. As a matter of record it should be noted that the National banks then in existence elected, in a spirit of open-mindedness and with conspicuously few exceptions, to sub- scribe for membership and, though some of them may not at first have been enthusiastic, they have since become staunch supporters of the system, of which they are the backbone. National banks since organized subscribe for stock at the time of organization. The amount of stock for which subscription is made is a sum equal to 6 percent of the subscrib- ing bank's capital and surplus, and a bank which increases its capital and surplus after becoming a member is required to subscribe for additional stock in the same proportion. Under the regulations of the Federal Re- serve Board, one half of each subscription must be paid in cash ; the other half is subject to call by the board, but its payment has never been called. In addition to the National banks, there are many State banking institu- tions which are members. Any State bank or trust company which is of specified size may apply to the Federal Reserve Board for admission to the system and, subject to such conditions as the Board may prescribe, may be admitted to membership. Its application must be for the same
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amount of stock as required of a National bank. The number of member banks of the entire system is approximately only one-third of the total number of banking institutions in the country, the latter number includ- ing mutual savings banks and similar institutions which are not eligible for membership; but the total member bank resources are about two- thirds of the total banking resources of the nation or three-quarters of the total commercial banking resources. These National and State bank members are the only stockholders in the Federal Reserve banks, and their capital stock subscriptions, just as in an ordinary bank, constitute the first source of funds with which the reserve banks operate.
"The second source of funds used by a Federal Reserve bank is in the reserve deposits of member banks. The country having found by ex- perience that scattered reserves could not be of maximum usefulness, the Federal Reserve Act has brought about a pooling of such funds by requir- ing every member bank, National or State, to carry all of its legal re- serve on deposit with its Federal Reserve bank. It may carry such money in its own vault as its officers think best, but the only money which now counts as legal reserve is that which is left with the reserve bank. However, since a pooled reserve need not be as large as one indi- vidually held, the original requirements of the act were reduced below the reserves required of a National bank before the system was started and later the act was amended so as to reduce still further the reserve required, partly because it was concluded that a lower reserve would suffice and partly to compensate member banks for inability to count cash in vault as reserve. To most member banks these two reductions meant that a large amount of funds was freed for them to loan or invest. The reserve which a member bank must now keep with its reserve bank is a sum equal to three percent of the member bank's time deposits plus seven, ten or thirteen percent of deposits payable on demand, depending on the location of the member bank. In the first Federal Reserve district, the percentage of demand deposits required is ten in the case of Boston banks and seven in the case of banks located elsewhere. These reserve deposits of member banks constitute, with the exception of a relatively small amount of government deposits and non-member clearing accounts and a comparatively insignificant amount of foreign bank accounts, the only deposits in a Federal Reserve bank, so that member banks are by way of being the only stockholders and practically the only depositors."
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