USA > Massachusetts > Suffolk County > Boston > The memorial history of Boston : including Suffolk County, Massachusetts. 1630-1880, Vol. IV > Part 22
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 | Part 66 | Part 67 | Part 68 | Part 69 | Part 70 | Part 71 | Part 72 | Part 73 | Part 74 | Part 75 | Part 76 | Part 77 | Part 78 | Part 79 | Part 80 | Part 81 | Part 82 | Part 83 | Part 84 | Part 85 | Part 86 | Part 87 | Part 88 | Part 89 | Part 90 | Part 91 | Part 92 | Part 93 | Part 94 | Part 95 | Part 96 | Part 97
There are now sixty-one national banks in Boston, with an aggregate capital stock of $52,300,000, and accumulated profits amounting to more
I73
FINANCE IN BOSTON.
than $15,000,000. The Merchants' National Bank has the largest capital among the Boston banks, amounting to $3,000,000; the State and Tremont banks have each a capital of $2,000,000; and there are nine others with a capital of $1,500,000 each. The largest amount of bank loan ever reported by the Clearing House Association - comprising, as has been said, nearly all the national banks and all the large ones - was $166, 110,700, which was the average for the week ended Aug. 20, 1881. The individual deposits at the same time amounted to $68,304, i00, which was not the largest sum ever reported, the amount having been at one time over $70,000,000; and the amount due to other banks, being the deposits mostly of New England country banks, was $42,145,900. These figures show an enormous busi- ness, and are greatly in excess of those for any other city in the United States, excepting New York. But they do not show the full amount of the banking business of Boston. There are several trust companies doing a general banking business, receiving money on deposit subject to check, and discounting business paper, but issuing no circulation. Moreover, there are many private banking firms, some of them with large capital, whose operations are on an extensive scale, and whose credit is recog- nized all over the world.
The financial crisis of 1873 offers no matter for particular mention of Boston's share in its disasters and distresses. The causes of the panic were no doubt as much promoted by the course of business and speculation in Boston as by what happened in other parts of the country, and not more. Trade was carried on and financial affairs were managed with as much, perhaps not with more, prudence here than elsewhere. If there was. any difference it was in our favor, since it can be said with truth that the majority of the failures among individuals, firms, and corporations were later in point of time than in most of the large cities; but in the end Bos- ton suffered not less than her sister cities. She has also shared to the full extent in the revival of business which preceded, by a little, the resumption of specie payments by the Banks and the Government, after a suspension of more than fifteen years. Indeed, it is believed by many persons that Boston was the first to enjoy the season of returning prosperity. It is cer- tain that the sudden and surprising recovery of confidence and business by some of the great railroads of the West in which Boston men chiefly were the stockholders and owners of the mortgage securities, - such as the Burlington & Missouri River, in Nebraska (now consolidated with the Chicago, Burlington, & Quincy), and the Atchison, Topeka, & Santa Fé roads, - anticipated by months the appreciation of the stocks of roads in which other cities were chiefly interested. .
Mention should, however, be made of one class of disasters which affected Massachusetts peculiarly at this time. The savings-bank system of New England was more highly developed than that of any other part of the country. In Massachusetts it had been under a most pervasive and efficient control. These banks, receiving as they did the scanty earnings of the poor,
174
THE MEMORIAL HISTORY OF BOSTON.
who were least fitted either by education or by opportunities to investigate the safety of the institutions to which they committed their hard-earned savings, were justly deemed by the State authorities to be the most proper objects of vigilant watchfulness. The confidence inspired by this system was increased by the promptness with which they had met all their con- stantly increasing liabilities. The very excellence of the rules and restric- tions under which they were managed, however, was in a certain sense the cause of disaster. They were required to invest a large part of the deposits committed to them in mortgages of real estate in Massachusetts. Unfortu- nately they were not all careful to what proportion of the actual value of such property they lent money upon this security ; and when, in the prog- ress of the long-continued depression, real estate took its turn at deprecia- tion, the margin of value above the mortgages was in many cases wiped out, and the banks suffered loss. The first institution to succumb to the pres- sure was that at Lancaster; the West Boston Bank came next, - both fail- ures having occurred within a fortnight of each other, at the end of 1875. The West Boston Bank, however, soon resumed, as it was believed that ar- rangements had been made by which further difficulties could be overcome ; but later it was forced again to close its doors and to wind up its affairs. In 1877 the Mechanics' Bank of Boston, chartered after the panic of 1873, found its business unprofitable and retired. In the same year the North Bridgewater Bank of Brockton failed on account of the dishonesty of an officer, in April. In July the City Bank of Haverhill was obliged to sus- pend, after a run upon it. But the really serious troubles of the savings- banks began when, in August, there was a run upon the Sandwich Bank. Shortly afterward the Barnstable Bank was attacked and overcome, and the Hyannis Bank followed.
From this time on the failures were numerous; but it was evident that in many cases the disaster to banks was the result merely of panic. Their investments were properly of a character which did not allow of their re- sponding promptly to all demands. No matter how safe and strong they were, they could not collect debts not yet due. Under these circumstances the Legislature interposed with a law which permitted the Savings-Bank Commissioners to give orders restricting the amount of money which banks might pay on deposits; and in the course of two years many 1 of the banks availed themselves of the law. The result was that of all the banks which took advantage of the law, all but one had resumed pay- ments in full and were doing business as usual before the end of 1880. But the evil had overtaken many banks before the benefits of this restric- tion were permitted to them; about twenty of them, in various parts of the State, having been previously enjoined perpetually from doing any business, were wound up. The losses to depositors, however, were not as great as might have been at first feared. The deposits in the banks which failed were a little short of ten millions ($9,976,229). Up to the begin-
1 About twenty in the whole State.
175
FINANCE IN BOSTON.
ning of 1880 there had been distributed in dividends the sum of $6,568,- 799, and there remained in the hands of receivers assets estimated to be worth $2,417,440; so that the entire loss was but about $1,100,000, or eleven per cent. Under the new legislation, the necessity for which was fully proved by the events of the last few years, a repetition of these dis- asters is almost impossible, and the banks are now in a fair way to gain more than the confidence which they enjoyed up to the period when the troubles began.1
A consideration of the present financial position of Boston will give an opportunity for a brief reference to some features of the trade of the city which have been necessarily omitted thus far. In certain branches of busi- ness Boston has now, and has always held, a position of pre-eminence among the cities of the country. By far the most important of these is the boot and shoe trade. Much more than one half of all the boots and shoes . made in the United States are the product of Massachusetts. The factories are owned in Boston for the most part, and the manufactured articles are sold here. Boston is also the largest wool market of the country, and it is the headquarters of the fish business. For many years it has been losing the leadership it once enjoyed in the domestic dry-goods trade, although the amount of business done in this department is still very large. It is second only to New York in the ownership of Western and Southern rail- road stocks and other securities. The Boston Stock Exchange has the lead of all Exchanges in the country, except that of New York, in the extent and variety of the list of securities dealt in, and in the amount of business done.2
Its commerce, although conducted for the most part in foreign steam- ships, is large and growing. Its imports from abroad are in value far in excess of those at any other port save that of New York; and of its ex- ports of general merchandise the same remark is true, - New Orleans sur- passing it only by her very heavy exports of cotton. With many regular lines of steamships to Europe, the sailings of which very nearly average one a day, a great growth in their number, and in the value of the trade of which they are the medium, is only prevented by the necessary slowness of creating dock accommodations for them. The coastwise trade gives profitable employment to a large number of sailing and steam vessels.
1 The growth of the Savings-Banks of Mas- That was high-water mark. In 1878 there was a sachusetts is a very interesting and gratifying reduction in deposits of no less than $34,735,- 983. A further reduction took place in 1879, followed by a recovery in 1880. The last re- turns, those for the end of 1880, show that there were then one hundred and sixty-four banks doing business, having deposits amounting to the sum of $218,047,922. exhibit. In 1834, when the returns first began to be made systematically according to law, there were twenty-two banks, having deposits amounting to $3,407,773. The system grew, with- out the interruption of a single year, until 1860, when there were eighty-nine banks with deposits aggregating $45,054,236. In 1861, and again in 2 [There is a record of its development in Mr. J. G. Martin's Seventy-three Years' History of the Boston Stock Market, from Jan. 1, 1798, to Fan. 1, 1871 ; with notes, and also with an annual appendix from 1870 to the present time. - ED.] 1865, there was a decrease; but with these ex- ceptions there was an annual growth until 1877, when there were one hundred and seventy-nine banks, having gross deposits of $244,596,614.
-
176
THE MEMORIAL HISTORY OF BOSTON.
The enterprise with which Boston capitalists seek new investments of a promising character is proverbial. Sometimes these investments have been extremely fortunate and profitable, as in the case of many Western rail- roads, to which reference has already been made. Other investments have been notably unfortunate, as for example those in the copper mines of Lake Superior. A few of these latter have nevertheless returned large profits to investors; and in one instance, that of the Calumet & Hecla company, the exception is a brilliant one, exhibiting, as it has done, the rare combination of a valuable mine, handled with scientific skill and busi-
JOHN ELIOT THAYER.1
ness sagacity, and with wonderfully successful results. The most impor- tant feature of outside Boston investments of a new character, or rather in a new field, at present, is the construction of railroads in the Republic of Mexico. Capital in heavy amounts has gone from Boston for this pur- pose, the investors displaying great boldness, and the companies which have their headquarters in the city managing their affairs with masterly skill and ability.
A large measure of the success which Boston has had in the race for
1 [This cut follows a large photograph by sors in business, Messrs. Kidder, Peabody, & Whipple, hanging in the offices of his succes- Co .- ED.]
177
FINANCE IN BOSTON.
wealth - a race in which she has succeeded to a far greater extent than her population or her geographical situation would have justified- has been gained by the character of the men who have represented her in the finan- cial and commercial world. Volumes might be filled with the commenda- tions which the merchants of Boston have received, from orators and writers in all parts of the land, for their integrity and faithfulness to high principle. And it has not been meaningless and undeserved praise. There has always been a strong public sentiment in Massachusetts which first created and afterward sustained the tradition that a Boston merchant or financier was expected to be honest. " Sharp," he might be in driving a bargain; but when the bargain was made, he must observe all the obligations which it laid upon him, both in letter and in spirit. It is to a tradition of a similar kind that we may trace the origin and the steadiness of the high credit both of the city of Boston and of the Commonwealth. It is held as a principle, about which no argument can be tolerated, that lawful debts are to be paid. When the National Government issued its legal-tender notes, and made them available for the payment of all debts incurred before as well as after the issue, neither the city nor the State took advantage of the privilege, but religiously paid both interest and principal in coin, at no matter what cost for premium on gold. The idea of repudiation, or of creating money out of nothing by the fiat of the Government, has never been able to obtain even a hearing in Boston; and the heretical notions about money which were encouraged by the long-continued use of irre- deemable paper currency, have been less prevalent in Massachusetts than in almost any other State of the Union.
To all these generally true remarks there have been notable exceptions. There have been swindling banks and dishonest managers, defaulting cashiers and treasurers, merchants who sold worthless goods and gave short measure, fraudulent bankrupts, and cheats and rogues who succeeded for a long time in concealing their true characters. They have, however, been exceptions to the rule. When their real characters have been tardily exposed, they have suffered not only the severe penalties which the law imposes, but the indignant reprobation of an outraged community. The courts have never been guilty-or, if at all, in very rare instances-of al- lowing the previous reputation of a detected rogue to mitigate the. pun- ishment which should be meted out to all alike. Men who had occupied high station in mercantile affairs or in State concerns have been pitilessly pursued by the process of Massachusetts courts to their hiding places, tried with rigid severity, and condemned to take their appropriate places with the ordinary thieves and other miscreants to whose level they had abased themselves.
All the elements of strength which have conduced to the prosperity of Boston are still present to insure the continued progress of the city in wealth and importance. Her manufactures rule the markets for some of the articles in most constant and universal demand ; her financial institutions
VOL. IV. - 23.
178
THE MEMORIAL HISTORY OF BOSTON.
are among the safest and most famous in the land; her commerce, both internal and external, is extending as rapidly as it has ever done at any period in its history. It is entirely safe to predict, that while the enter- prise of Boston capitalists shows no diminution, and while high principle continues to govern public sentiment, the era of growth and prosperity will also continue.
CHAPTER VII.
THE RISE AND PROGRESS OF INSURANCE IN BOSTON.
BY OSBORNE HOWES, JR., Secretary of the Boston Fire Underwriters' Union.
A LTHOUGH the general system of insurance may be traced back for several centuries in England and on the continent of Europe, its adoption in this country is of comparatively recent date. Indeed, when one considers how essential this method of mutual protection is to the well-being of society, and to the security of mercantile communities, it is hard to understand how those who lived in Boston less than one hundred years ago could have been so blind, or so indifferent to its advantages, as the records of that and of earlier times prove them to have been. Not less strange is the tentative and groping manner in which the first essays at in- surance were made. It was, it is true, a new undertaking to insure life and property against death and destruction by shipwreck and fire; but at the present day we adapt with such ease the business customs of other coun- tries to our own uses, when they are found to be desirable, that the slowness and inflexibility of our forefathers seems, by comparison, hardly credible.
Mr. Joseph Marion appears to have been the first underwriter ever known in Boston; and, what is more, the first person in America to enter definitely into this business. From the fact that he had received a commis- sion as notary public from the Archbishop of Canterbury, the presumption is that he must have acquired some insight into the business while on a visit to England. In 1724 he established what was termed an insurance office, though beyond the fact that such an office was opened there is little evi- dence obtainable. It may be safe to assume that this enterprise took form in consequence of the demands of local trade. While the commercial relations of the colony were confined closely to trade between it and the mother country, it was probably thought best to obtain the needed insur- ance upon the vessels making these transatlantic voyages in the insurance associations of England; but as time passed on, and the colony began to build up an ocean commerce of its own, to send its vessels upon fishing
180
THE MEMORIAL HISTORY OF BOSTON.
trips and coasting voyages, the inadequacy of the then prevailing method made itself manifest. The insurance had to be effected in London, and contracts made at such a distance were always expensive to' the insured ; while it must often have happened that those who desired the protection which a policy of insurance would have given them, were obliged to assume the risk themselves. Under these circumstances it is not strange that an insurance office should have been started ; for now, under similar conditions, such a demand would be answered in a less number of days than it then required years to bring about. The office was, beyond question, a marine one, and carried on what is known as a personal underwriting business ; that is, it copied the method then and now in vogue at the Lloyd's Ex- change in London. A policy of insurance was made out describing the ship, the voyage, the rate of premium, the amount to be taken, and the conditions to which both parties to the contract were to be bound. To this those who chose to take a share in the risk subscribed their names, with the amounts they were willing to assume, the list remaining open until the entire sum had been made up.
It is highly probable that Mr. Marion found his business a thriving one, for four years after he had started in it -in 1728 - he made an attempt to develop it on an exceedingly comprehensive scale. He then proposed to erect, as it was termed, an assurance office to insure houses and house- hold goods in any part of the province from loss and damage by fire; the organization to be called the " Sun Fire Office in Boston." The effort was an ambitious one, but Mr. Marion seems to have failed to find the support needed to carry it to a successful conclusion; at least, there is nothing to show that the enterprise ever went beyond its initiatory stages. That the projector of this fire office keenly regretted his failure may well be believed, for, thirty-two years later, his name is found among those who were suffer- ers by the great fire of 1760.
In all probability marine-insurance contracts, made in the manner men- tioned above, were the only policies of insurance written in Boston for seventy years after Mr. Marion first opened his office. As these operations were carried on without license or authorization of any kind, it is impossible to determine the extent of the business; but as the commerce of Boston and the neighboring seaports increased greatly in volume during the years of the last century which preceded and followed the Revolution, and as the desirability, not to say necessity, of procuring guarantees of this kind against loss became more and more apparent, the business must, be- fore the advent of the present century, have expanded vastly beyond what was done prior to 1750. The Revolution broke off the business connec- tions with London existing previous to 1775; and, so far as the marine insurance of Boston is concerned, they do not appear ever to have been re-established.
These early underwriters must have borrowed the forms of policy and their methods of carrying on business wholly from the Lloyd's Association.
18I
RISE AND PROGRESS OF INSURANCE IN BOSTON.
It is curious to notice their close adhesion to what may be termed the ec- centricities of the English underwriters. These latter had copied their system of marine insurance from the Lombards, who, in connection with their banking business, began insuring vessels and cargoes in England as early as 1425. Even the word "policy" is a direct derivative from the term polizza, a promise, used by the Lombards. So, too, in their policies to this day the Lloyd's Association say: " And it is agreed by us the in- surers, that this writing or policy of assurance, shall be of as much force and effect as the surest writing or policy of assurance made in Lombard Street," - a guarantee which at the present time is equivocal, to say the least, when it is taken into account that policies are no longer written in that thorough- fare. But this meaningless form seems to have been thought an essential part of the contract, and in some of the earlier American policies was cop- ied verbatim. Later on, particularly after the Revolution, it was thought necessary to adopt some other enforcing clause; and hence some of the marine policies of the latter part of the last century read that the document was to have "as much force and effect as the surest writing or policy of insurance heretofore made," or " the surest writing, etc., heretofore made in any of the United States or elsewhere." This form does not seem, in Bos- ton, to have survived the eighteenth century, the insured probably coming to the conclusion that the policy was only worth the value given to it by the credit of its guarantors, and that the comparative protestation, however forcible, did not strengthen it. Another feature, which does not seem to have been wholly borrowed from transatlantic authorities, was the abiding faith held by these old underwriters in the immediate supervision in mun- dane affairs of a Supreme Ruler. The policies grant insurance of such an amount on "the good ship . . . whereof ... is master, under God, for the present voyage." And then go on to say: "And the assured, in case of loss (which God forbid! ) to abate two per cent, and such loss to be paid in sixty days after proof thereof."
The marine-insurance business of that period was in the character of the risks assumed, - a very different occupation from that carried on by marine underwriters at the present time. These old policies give a striking illus- tration of the various hazards incident to a sea voyage no longer than one hundred years ago. The ship-merchant then had to encounter other risks than the ordinary ones of the sea; and to guard against these the policies read : " Touching the Adventures and Perils which we the Insurers are contented to bear, and do take upon us in this Voyage, they are of the. Seas, Men-of-War, Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Let- ters of Mark and Counter-Mark, Surprisals, Takings at Sea, Arrests, Re- straints and Detainments of all Kings, Princes, and People, of what Nation, Condition, or Quality soever, Barratry of the Master (unless the Assured be owner of said vessel) and Mariners, and of all other Perils, Losses, and Misfortunes that have or shall come to the Hurt, Detriment, or Damage of the said Ship." As this, like most of the other parts of the policy, was a
.
182
THE MEMORIAL HISTORY OF BOSTON.
copy from the form then used by the Lloyd's Association, it might be assumed that it was held to more by force of custom than of necessity ; but in opposition to this view it may be urged that the underwriters of that time were in all probability no more willing than their successors of to-day to take upon themselves an unnecessary liability ; and if the insured had not desired this measure of protection it is not at all likely that it would have been granted. At that time these various interferences were positive perils to be guarded against; gradually their mention dropped from the policies made in our Boston offices, so that in those dating shortly after the War of 1812 no trace of them is found, the insurance companies and associations, then as now, insuring only against what may be called the ordinary perils of a sea voyage. And yet, in spite of these many dangers, the rates of premium asked for insuring vessels making long voyages were by no means high, being, as a rule, about the same as those charged at the present day for in- suring similar ventures. This certainly speaks well for the seamanship of the officers and crews of the Boston merchant-marine of this early period. But in insuring vessels engaged in coasting voyages the scale of rates, as contrasted with our modern experience, seems to have been very high. Voyages to Norfolk were evidently looked upon as almost as hazardous as those up the Baltic; while the rate asked to insure a small craft on a trip around Cape Cod to New York was six or eight times larger than would be asked by the marine offices on State Street to-day. One does not have to look far for the cause of this difference. The vessels, though small, were stanchly built, the mariners were skilful navigators; but the various aids to commerce now existing in the shape of carefully drawn charts, beacons, buoys, and lighthouses, which reduce to a minimum the dangers of sailing along our northern coast, were wholly wanting; while in the event of a wreck, not only was the vessel hopelessly lost, but the wreckers along the shore from Maine to South Carolina were sufficiently active to prevent the underwriters from obtaining much salvage either upon hull or cargo. But the growth of our local commerce, added to the dangers to which those who were en- gaged in it were exposed, must have given to our marine underwriters during the latter part of the last century a large amount of business; for when, in 1795, the Massachusetts Fire and Marine Company was incorpo- rated, and in 1799 the Boston Marine Company, they both found a wide field for operation.
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.