USA > Massachusetts > Suffolk County > Professional and industrial history of Suffolk County, Massachusetts, Volume II > Part 36
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384
SUFFOLK COUNTY.
original number thirty reserved by it never having been used. The Bank of the Metropolis, number thirty-eight, ceased to be a member and discontinued business as a corporation in 1863, the proprietor, S. A. Way, continuing as a private bank under the old name. The Mav- erick Bank, number thirty-five, failed and was expelled from the asso- ciation November 2, 1891. This is the first and only failure that has ever occurred among the banks associated in the Boston Clearing- house. Great care has generally been exercised in admitting banks to the privileges of the association.
In 1876 A. I. Benyon, who had been cashier and then president of the Exchange Bank, was removed from the presidency of this bank be- cause of alleged irregularities if not criminal practices. Publie (mer- cantile and business) opinion at the time was considerably divided as to the degree of his moral culpability; at any rate, there were enough who had confidence in Mr. Benyon, to enable him and others within about a year, on November 12, 1877, to establish the Pacific National Bank, of which he was president. The Clearing-house Association refused first in 1877 and again in 1818 to admit this bank into its membership, and the Pacific was obliged to clear through another bank. Although this action was said by many to be because of ill-advised personal feeling against Mr. Benyon, it was fully justified by the result, as the bank suspended in November, 1881. The bank (its affairs having been partial- ly adjusted) resumed business March 18, 1882, but was for the third time refused admission to the Clearing-house and continued only until May 20, 1882, about three months, when its complete failure brought ruin to a number of well known persons. The examinations that fol- lowed developed the rascality of Benyon, who was thenceforth a fugi- tive from justice; but the effect of the failure upon the business com- munity in general was said to have been by no means as serions as it would have been, had not the action of the Clearing-house kept this bank from ever obtaining the status of the other banks, by allowing it to come into the association.
The names and numbers of the present members of the Clearing- house ( June, 1893) are as follows:
1. Massachusetts National Bank
When Established. 1784
2. National Union 1792
3. Old Boston National
1803
4. State National
1811
5. New England National 1813
6. Tremont 1814
385
BOSTON CLEARING-HOUSE.
When Established.
7. Columbian National Bank 1822
8. National Eagle
1822
9. National City ..
1822
10. Washington National 1825
11. North
1825
12. Atlantic 1825
13. Merchants' 4 4
1831
14. Traders'
1831
15. Hamilton
1832
16. Market
1832
17. Second ٠٠
1833
18. Atlas 4 4
1834
19. Shoeand Leather National "
1836
20. Shawmut
1836
21. National Exchange ..
1847
22. National Bank of Commerce
1850
23. National Bank of North America
1850
24. Faneuil Hall National Bank
1851
25. National Webster Bank
1853
26. Eliot National
1853
27. Howard " ..
1853
28. Suffolk
1818
29. Globe . 4
1824
31. Freeman's National Bank
1836
32. Boylston 4 1
1845
33. Blackstone
1851
34, Boston
1853
36. National Hide and Leather Bank
1858
37. National Bank of Redemption
1858
39. First National Bank (Safety Fund). 1858
40. National Revere Bank 1859
41. National Bank of the Republic 1860
42. Continental National Bank
1860
43. Mount Vernon ..
1860
44. Third ٠٠
1864
45. Everett 4
1865
46. National Security
1868
47. Broadway National 1853
48. National Bank of the Commonwealth 1871
49. Central National Bank 1873
50. Manufacturers' National Bank 1873
51. Fourth 1875
52, Metropolitan
1875
53. Winthrop . 4 (Merchandise) 1875
54. Lincoln
1883
55. Mechanics'
1836
56. Commercial
1888
(Granite)
1
1
49
386
SUFFOLK COUNTY.
The whole number of different banks that have belonged to the Clearing-house since its organization has been fifty-five, and the pres- ent number is fifty-three, with a capital of $52,200,000.
Besides the banks belonging to the Clearing-house forty-two other banks and trust companies effeet their exchanges through members of the Clearing-house, so that its transactions now (April, 1893) inelude the exchanges of ninety-three banks with a capital of about $645,000.00. The banks outside thus availing themselves of the Clearing-house, their location and clearing agents are as follows:
Charles River National Bank, ... Cambridge, )
Monument .. Charlestown,
Cambridgeport
Cambridge,
Bunker Hill
Charlestown, .. Second National Bank.
Randolph
Randolph, /
National Hide and Leather Bank.
First Ward
East Boston, )
Bay State Trust Co., Boston, }
New England Trust Co.,
Mt. Wollaston National Bank, Quincy, )
Massachusetts Loan and Trust Co., Boston,
National Bank of the Commonwealth.
Home National Bank,
Brockton,
Dedham “
Dedham, J
International Trust Co.,
Boston, .Shawmut National Bank.
Rockland National Bank, Roxbury, )
First
West Newton,
Blue Hill
Milton,
Natick
Natick, J
First National Bank, ('helsea,
First
Cambridge,
Cambridge National Bank.
Lechmere
First
Malden,
People's
Roxbury.
South Weymouth, First
National Granite
Quincy,
Union Market National Bank, Watertown, __ Fourth National Bank.
Waltham =
Waltham, .. Boston
Brockton
Brockton,
Winnisimmet
Chelsea,
Cambridge, National City
American Loan and Trust Co., Boston,
State Street Safe Dep. and Trust Co.,
Brookline National Bank, Brookline,
Newton
Newton,
Boston Safe Deposit and Trust Co., Boston,
Stoneham National Bank, Stoneham, National Bank of the Republic. First Woburn,
Clearing Agent.
National Exchange Bank.
Merchants' National Bank.
Shoe and Leather National Bank.
National Bank of Redemption.
Third National Bank.
First National Bank.
387
BOSTON CLEARING-HOUSE.
Union Safe Deposit Vaults, Boston, __ National Union Bank. South End National Bank, . Globe National
Old Colony Trust Co,,
.. National Bank of Commerce.
Mattapan Deposit and Trust Co., South " . Tremont National Bank.
Melrose National Bank, Melrose, .National City
Private banks were not formerly admitted to the privileges of the association, either directly or indirectly, these privileges being restrict- ed to incorporated banks. The only exception ever made until recent- ly was in the ease of Way, Warren & Co., doing business under the name of the Bank of the Metropolis, which, having formerly been a member, was allowed in 1866 to clear through the Hide and Leather National Bank.
The Clearing-house had been established only about a year and a half when the financial crisis of 1857 furnished an additional demon- stration of its necessity and usefulness. Many of the banks of New York city suspended specie payments October 13, 1857, and the residne with those of Boston suspended October 14. On this latter date the Clearing-house Committee met and resolved to recommend to the as- sociated banks as an aid in effecting their daily settlements that the bills of any of the associated banks be received in liquidation of their daily balances, instead of specie, within the following limits:
For banks having capital of $ 300,000 or under, not exceeding $ 20,000
500,000
25,000
560,000
28,000
600,000
30,000
. .
4 4
00,000
32,000
750,000
34,000
900,000
36,000
1,000,000
40,000
. .
1,250,000
45,000
1,500,000
50,000
44
. 4
.. 1,800,000
..
60,000
2,000,000
60,000
4,000,000
100,000
Suffolk
100,000
..
4 4
Any excess of balances above these figures was to be paid in specic as usual. The notes so received in settlement of balances were to be sent to the Clearing-house with the exchanges of the next day, and the committee was to have the right to call upon any bank for satisfactory collateral security to secure the payment of its bills so received, these bills being so received and held at the joint risk of the associated banks
388
SUFFOLK COUNTY.
in proportion to the amount of their respective capitals. The interest on the notes so paid in was to be settled daily in the payment of bal- ances. An agreement embodying these recommendations was drawn up and signed by the banks. This measure produced at once a favor- able effect in enabling the banks to extend a degree of aid and accom- modation to their customers which they could not otherwise have done. The moral effect of such a step in checking the panic was also impor- tant. The results were most satisfactory and fully met the expecta- tions of its projectors. The Clearing-house report of 1858 says: "By no other form or association among the banks could such a spirit of harmony and concert of action have been inspired and kept in being as that which grew out and resulted from our present clearing-house sys- tem, and under which we feel confident much evil has been averted that otherwise must have been felt in our business circles."
For the purpose of avoiding the inconvenience and risk of handling coin in paying balances, the Clearing-house early in its history adopted the policy of making one of its members a depository to receive coin from the other members and issue clearing-house certificates against it to be used in settling the daily balances. The Merchants' Bank was selected as this depository of coin, and it had at the time of the annual meeting, March 21, 1860, issued certificates to the amount of $14, 590,500, of which $11,750,000 had been redeemed, leaving $2,840,000 in circula- tion, as compared with $3,160,000, March 31, 1859, and $3, 425,000, March 31, 1858. The great financial changes wrought by the war, in- cluding the disappearance of coin from circulation and the establish- ment of a legal tender paper currency, made the further use of coin certificates needless and impracticable, and they ceased to be issued. Their place was subsequently supplied by United States certificates of deposit issued pursuant to Act of Congress, approved June 8, 1842, in denominations of not less than $10,000, and expressly made available for the payment of Clearing-house balances, and also as a part of the reserve of national banking associations.
In 1879, after the resumption of specie payments, the Merchants' National Bank was again selected as a depository of coin, and issued Clearing-house certificates for paying balances, first in denominations of $5,000 and later of $1,000. October 19, 1881, it declined to act longer as a depository.
Soon after the breaking out of the war the value of our clearing- house machinery became specially manifest, as it enabled the banks to
389
BOSTON CLEARING-HOUSE.
combine their resources for the purpose of assisting the government, to which the associated banks of the three cities of New York, Boston and Philadelphia in 1861 advanced $150,000,000 in three amounts of $50,000,000 each, taking in return obligations which they distributed among the people. This was done during the early months of the war and before the government had succeeded in getting its financial arrangements adjusted to the tremendous efforts it was compelled to make. But for this timely relief the government would have been well nigh paralyzed for want of funds on the very threshold of the war. Throughout the great struggle the clearing-house machinery gave strength and regularity to the nation's financial operations, which were strikingly in contrast with the conditions prevailing during the war of 1812, when no such bulwark to our financial system existed.
The value of union and organization among the banks in the Clear- ing-house was strikingly illustrated during the financial crisis of 1873. The storm, which culminated at New York on September 18, 18:3, in the failure of J. Cooke & Company and other large banking-houses, did not begin to produce serious disturbances in the money market of Boston until the latter part of September, when a steady drain of greenbaeks, in payment of cheeks from New York and other cities, set in, which threatened speedily to exhaust the bank reserves. With a view to the highest utilization of their resources, a meeting of the presidents of the banks of Boston was held at the Clearing-house on Saturday afternoon, September 2%, 1843, at which every bank in the city was represented. After some discussion the following resolutions were unanimously adopted :
WHEREAS, the banks in all the large cities in the United States have deemed it prudent and expedient to suspend currency payment for large amounts, therefore,
Resolved, That the Boston banks, as a precautionary measure for themselves and the mercantile community, and to prevent the consequent drain of currency from them, do, from this date and until further notice, adopt the same measure.
Resolved, That a committee of five be appointed by the chair who shall have the power to issue loan certificates to the amount of $10,000,000 upon substantially the same basis as they are issued by the banks of New York city.
In accordance with the last resolution, the chair appointed Messrs. Franklin Haven, George C. Richardson, Benjamin E. Bates, Thomas Lamb, A. 1. Benyon, and James H. Beal as a committee to issue these certificates. By Tuesday, September 30, the certificates, which were in denominations of $5,000 and $10,000, began to be issued. Each bank
390
SUFFOLK COUNTY.
desiring them was required to deliver to the committee acceptable securities, for which it received in certificates 75 per cent. of the face value of the securities less the interest, which was paid for sixty days in advance at the rate of 133, per cent. per annum. The banks had the privilege of taking up these certificates previous to December 1, if they desired. Each bank that received the certificates was obliged to guar- antee the committee jointly and severally against any loss that might arise from a change in the market value of the securities held by them as collateral for the loan certificate issued to such bank, and in case of depreciation in the value of the securities, to furnish additional or other securities satisfactory to the committee. For the further protection of their reserves the banks also adopted the practice, which continued to a greater or less degree for nearly two months, of paying all checks through the Clearing-house, and one individual from the country notic- ing the inscription on his check " Payable only through the Clearing- house," actually went to the Clearing-house to get his check cashed. The total number of certificates issued to October 20 had reached $4,800,000, by which time enrrency which had been previously hoarded had begun to return to the ordinary channels of circulation. The
measures adopted by the associated banks proved highly successful in protecting their reserves and in enabling them to extend the necessary assistance to the mercantile community. Their reserve of legal tenders, which was $9,016,300 for the week ending September 15, and $8, 182, - 700 the week following, reached its minimun in the week ending Oc- tober 20, when it was $2, 850,900, showing a loss as compared with September 15 of $1,165, 400. The recovery was rapid, and by the week ending, November 3, the reserve had more than recovered its former figures and stood at $9,045,400.
The carrying out of these arrangements involved much labor in the calculation of so much interest and the adjustment of it as between the different banks. At the end of the term for which the certificates were issued, an extension of those outstanding (then about $5,000,000), was authorized for the further period of sixty days, but it was not found necessary to use this privilege to the full extent, and before the end of December the banks had begun to take up and cancel their certificates. Notice was issued that interest would cease on the certificates after Monday, December 29. The legal tender reserve of the banks for the week ending December 15, was $10,789,000, and on the 18th of Decem-
391
BOSTON CLEARING-HOUSE.
ber, for the first time after the issue of the certificates commenced, the banks made their settlements wholly in greenbacks.
During a portion of this period a remarkable condition of things cx- isted. The banks had suspended currency payments, and loans of eur- rency often commanded two per cent. interest per month. Yet bank notes resting upon the credit of the government were everywhere re- ceived on a par with the legal tender currency, thus affording an illus- tration of one of the great benefits of the national banking system. During this period legal tenders and national bank notes were alike hard to obtain, and frequently commanded a premium of two or three per cent. The currency of the mercantile community for all large amounts consisted for a considerable time almost wholly of certified checks, payable only through the Clearing-house. Without the strength and confidence inspired by the union of the banks in the Clearing- house, such a circulating medium could never have obtained the credit which enabled it to perform for so long a period the functions of money.
During the severe stringency prevailing in the autumn of 1890, simi- lar loan certificates were again issued. On the 11th day of November, 1890, at a meeting of the Clearing-house Association the following reso- lution was unanimously adopted.
Resolved, That a committee of five be appointed by the chair, of which committee the chairman shall also be a member, to receive from banks, members of the associa- tion, bills receivable and other securities, to he approved by said committee, who shall be authorized to issue therefor to such depositing banks, loan certificates, bear- ing interest at seven and three-tenths per cent. per annum, and such loan certificates shall not be in excess of seventy-five per cent. of the market value of the securities or bills receivable so deposited, and such certificates shall be received and paid in set- tlement of balances at the Clearing-house.
Resolved, That any loss arising from the issue of loan certificates shall be borne by the banks comprising the Clearing-house Association pro rata, according to the aver- age daily amount which each bank shall have sent to the Clearing-house during the preceding year.
It was also voted that this resolution shall be ratified by the board of directors of the respective banks belonging to the association, and a certified copy of such consent delivered to the chairman of the loan committee.
The form of the loan certificates issued under the resolution alluded to was as follows:
39%
SUFFOLK COUNTY.
No. . ...... $5,000.
LOAN COMMITTEE OF THE BOSTON CLEARING-HOUSE ASSOCIATION.
FIVE THOUSAND DOLLARS.
Boston, 189- This certifies that the NATIONAL BANK has deposited with this committee securities in accordance with the proceedings of a meeting of the association held November 17, 1890, upon which this certificate is issued.
This certificate will be received in payment of balances at the Clearing-house for the sum of five thousand dollars from any mem- ber of the Clearing-house Association.
On surrender of this certificate by the depositing bank above named, the committee will indorse the amount as a payment on the obligation of said bank held by them, and surrender a propor- tionate share of the collateral securities held.
$5,000.
Committee.
Any bank desiring these loan certificates was required to deposit the necessary security and also to execute and deliver an obligation in the following form :
'The. National Bank has this day received of loan committee of the Boston Clearing-house Association loan certificates issued by said committee in pursuance of a vote of said association, passed November 17, 1890, to the amount of thousand dollars, and has deposited with said committee the securities, a
statement whereof is hereto annexed, and the said bank received said loan certificates on the terms set forth in said vote, and agrees to pay the amount of said certificate with interest thereon as provided in said vote.
The loan certificates authorized by the foregoing resolution were first issued on November 19, 1890, and the last were issued on December 6, 1890, at which latter date the issue had reached its maximum of $5, - 065,000. The last of the issue was withdrawn from circulation on Jan- uary 6, 1891.
In the latter part of October, 1891, it coming to the knowledge of the Clearing-house Committee that the Maverick Bank, belonging to the association, was not transacting business in accordance with sound busi- ness principles, they called a meeting of the association, held Novem- ber 2, 1891, at which the bank was expelled from membership in the
Weston Devid.
393
BOSTON CLEARING-HOUSE.
association. The comptroller of the currency, being informed of the condition of affairs, sent to the bank examiner to close the bank, which was done Monday morning, November 2.
The Clearing-house Committee made the following statement :
BOSTON, Nov. 2, 1891.
The National Bank examiner, acting under the instructions of the comptroller of the currency, has closed the Maverick Bank.
The Clearing-house Committee of the Boston banks has called a meeting of the members of the Clearing-house at 9.30 A. M. this morning to take action on a proposi- tion recommended by the committee, that all the banks composing the association unite in making advances in cash to the depositors of the Maverick Bank.
The object of making these advances is to relieve the temporary embarrassment of the depositors.
THOS. P. BEAL. FREDERIC HAVER, jr. ALBERT S. NEWMAN. FRANKLIN PIERCE. MOSES WILLIAAS. Clearing-house Committee.
Chairman Beal of the committee was appointed receiver.
The Clearing-house Association voted to allow each Maverick Bank depositor a certain per cent. of the money he had on deposit in that bank, on condition that he would leave his book as security that he had the amount of money in the bank, after it had been certified by the bank.
The moral effect of the action of the association was to greatly di- minish and allay popular excitement and mental disturbance.
The importance of the Clearing-house Association in sustaining both public and private credit was again demonstrated in a meeting of the associated banks held on Monday, April 24, 1893, to consider what action the Clearing-house would take in reference to sustaining the United States government in its policy of maintaining gold payments for treasury notes. At this meeting George Ripley of the Hide and Leather National Bank presided, and every bank was represented. The following resolution was presented and upon a roll-call unanimously adopted :
The associated banks of Boston, relying upon the ability and determination of the government to maintam gold payments, hereby tender the secretary of the treasury one-half of the gold reserve now held by them in exchange for legal tender notes, and the Clearing-house Committee is hereby directed to carry out the terms of this resolution.
50
394
SUFFOLK COUNTY.
This action, the first of its kind taken by any clearing-house associa- tion in this country, is a matter of no small importance, and must be reckoned as one of the most patriotic and praiseworthy steps ever taken by the association.
For about three months past, from June to September, 1893, the country has been passing through a financial ordeal more nearly re- sembling that of 1843 than anything that has been witnessed for twenty years. Indeed the conditions have been in many respects similar to those then prevailing. Currency payments, owing to general distrust and consequent hoarding of currency, have been partially suspended, and currency has been at a premium of two to three per cent.
The banks of Boston have successfully met this crisis by resorting to the expedients employed in 1843 and 1890. Loan certificates have been issued on a pledge of securities to the amount of $11, 445,000, thus enabling the banks to extend accommodations to their customers to a much larger extent than would otherwise have been possible, -another illustration of the very great value and utility of our clearing-house machinery.
The issue of certificates began about July 1, and the amounts out- standing, as shown by successive statements of the associated banks of Boston, have been as follows:
July 1 $ 3,680,000
4,555,000
Aug. 19 26
10,940,000
11,445,000
15
5.575,000
Sept.
11,435,000
5,575,000
11,305,000
29
8,565,000
16
11,260,000
Aug. 5
10,090,000
23
8,055,000
12
10,350,000
The issue reached its maximum August 26. The acute stage of the crisis is now apparently past, and the banks are rapidly surrendering their certificates, over $3,000,000 having been withdrawn within the last week covered by the above statement.
The Clearing-house Association has had four presidents, as follows: Franklin Haven, 1856-59, three years; Daniel Denny, 1859-11, twelve years; James H. Beal, 1871-88, eighteen years ; George Ripley, 1888 to cate, five years.
Its first secretary was William Thomas, who held the office three years to March 31, 1859, when he was succeeded by Charles G. Nazro, who held the position eleven years until March 31, 1870. He was sue-
395
BOSTON CLEARING-HOUSE.
ceeded by Henry B. Grove, then manager, since which time the offices of secretary and manager have been combined in the same person. Mr. Snelling succeeded Mr. Grove on the death of the latter in 1822. The following named bankers have served as members of the Clearing-honse Committee :
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