USA > Michigan > Wayne County > Detroit > The city of Detroit, Michigan, 1701-1922, Vol. I > Part 65
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"It is a well established fact that the demand for houses and tenements within the city has been such that capital vested in dwelling houses and other buildings yields from twelve to twenty per cent to the owner, and the demand for houses continues almost unabated notwithstanding that the navigation is being closed.
"The value of property, or the incentive to acquire it, is greatly diminished unless it can be represented by a fair proportion of monied capital wherever it may be situated. The assessed value of property in the city alone is nearly two million dollars. The amount of the capital stock paid in the two banks now in operation here is said to be three hundred thousand dollars and even allowing for the excess which they are permitted to issue by the provisions of their respective charters, it is evident that their capital must be entirely in- adequate to the circumstances of the country or the wants of the community at large, inasmuch as a large proportion of their issues are loaned to inhabitants of Ohio and the whole interior of the Territory.
"For these and various other good reasons that may be adduced, your Memorialists beg leave to ask your Honorable Body to grant an act to incor-
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porate a bank to be located in the City of Detroit, with a capital of two hundred thousand dollars-with privilege to increase the same under certain regulations to five hundred thousand dollars, to be styled the State Bank of Michigan."
The charter for the bank was granted March 26, 1835. The original incor- porators were John R. Williams, John Hale, Robert McMillen, Edward C. Mathews, Ellis Doty, Barnabas Campau, Abraham S. Schoolcraft, Cullen Brown and John Truax. The capital stock was fixed at one hundred thousand dollars, one-tenth to be paid in specie. The capital might be increased to five hundred thousand dollars. The official name of the company was changed somewhat from the memorial, and was "The President, Directors & Company of the Michigan State Bank."
In one particular General Williams carried out a provision that he desired and that he found lacking in the charter of the Bank of Michigan, and that was that the majority of the directors should be residents of Michigan.
The existence of the bank was limited to twenty years from March 26, 1835.
The bank had great encouragement from New York capitalists at once. General Williams was so well and so favorably known that people of means were willing to go into almost any enterprise in which he was interested. He placed the matter of the organization of the bank before Thomas W. Olcott, one of the wealthy men of Albany and at that time cashier of the Farmers & Mechanics' Bank of Albany. Mr. Olcott's reply to Williams' proposal was as follows:
"Albany, May 16, 1835.
"John R. Williams, Esq.
"Dear Sir:
"Since the receipt of your letter, in which you intimated a desire to have some of your bank stock taken in this quarter, I have mentioned the matter to Erastus Corning, Esq., President of the City Bank at this place, John Dela- field, Esq., Cashier of the Phenix Bank of New York and two other gentlemen, James Porter and Lot Clark, who have consented to take with me $10,000 ยท each, making $50,000, or one-half of your capital stock. This alliance will embrace interests here the nature and importance of which to your Bank and to those concerned in it, you will know how to appreciate, and I would add that it will give us pleasure to furnish such reasonable and temporary facilities as you and your friends may require to enable you to take an interest equal to your wishes in the stock of the bank. We do not suppose that you will be pressed with applications for stock, but in case you are we should not particularly object to having our share reduced to $7,000 or SS,000 each though we should prefer each $10,000. For the subscription money for us and for yourself and friends, should it be required, please draw at sight on Mr. Corning and myself. I presume you can, without inconvenience, obtain the specie at the Banks in your place.
"On receipt of this please write me what we have to expect and believe me, whether we obtain stock or not,
"With great regards, "Yr. O. B. S., "Tho. W. Olcott.
"I do not wish our name mentioned or used unless there is a clear prospect of success. If you use the names, which you are authorized to do, I repeat they are Erastus Corning, Jno. Delafield, Lot Clark, James Porter and my own."
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The bank was most unfortunate in beginning business just before the general financial collapse that followed the year 1836. It was unable to stand the pressure of the hard times and in 1839 it was forced into the hands of an assignee. It was indebted to the State of Michigan in the sum of $500,000. In February, 1840, the legislature authorized the auditor general, state treasurer and secretary of state to settle with the bank on the best available terms. The charter of the bank had been declared forfeited because of its failure to pay in specie as provided in the charter. The bank refused to settle with the state until its charter was renewed or its forfeiture annulled. A month later (March, 1840) another act was passed revoking the annulment of the bank charter on condition that it settle with the state and resume specie payment before April 1, 1841. It was subsequently decided by the supreme court that the state could not invalidate the bank's charter for the cause alleged. The bank re- sumed specie payment within the required time, but did not undertake to resume the banking business as the suit with the state, over the settlement of its ac- counts, was pending in the courts. During the years of waiting it redeemed its circulation. Its stock was sold at about fifteen per cent of its face value to a new set of stockholders and in 1845 the bank was again ready to open its doors with a ready capital of $70,000 and a prospect of $100,000 in a short time. The men who were now connected with the bank were Henry P. Baldwin, James F. Joy, Henry Ledyard, Frederick Buhl, George F. Porter, Zachariah Chandler and Christian H. Buhl. Charles C. Trowbridge was the president and Alexander H. Adams, cashier.
As soon as it was ascertained that the bank was preparing to begin anew, Gov. John S. Barry called the attention of the attorney-general, Henry N. Walker, to the matter by a letter dated October 6, 1845, in which he said: "I am decidedly of opinion that the revival of this institution will be attended with the most disastrous consequences to the public and that it is your duty at once to institute the necessary judicial proceedings to prevent such a result by procuring a forfeiture of its charter to be judicially declared, if on examina- tion of the subject a reasonable probability of success shall be found to exist." The attorney-general began suit October 14, 1845, to test the right of the bank to continue in business. This bank continued until the charter expired in 1855 ..
FIRST GENERAL BANKING LAW BY WILLIAM STOCKING
When the territory of Michigan made ready for statehood, there were in existence fifteen incorporated banks, four or five of which had branches. The total amount of capital which they were authorized to employ was about $7,000,000, which would seem to be ample for a population of less than one hundred thousand in sparsely settled territory. But the speculative spirit was rampant and there was a cry for more money. To meet the demand the Legislature of 1837 passed a general law, granting what was practically free banking but containing safeguards which were thought to be sufficient. It permitted any twelve or more freeholders residing within a county to organize, take subscriptions to the stock of a bank and to select directors and officers. The minimum capital allowed was $50,000 and the maximum $300,000. Before any bank could go into operation, the whole capital stock was required to be subscribed, and thirty per cent on each share paid in specie. Before an associ- ation commenced banking it was the duty of the bank commissioner to visit
Vol. 1-41
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the banking house, count the specie, and make such examinations into its affairs and condition as would satisfy him that the requirements of the act had been complied with in good faith; and, if he should be satisfied with regard to these facts, to make certificate of the same, and give publie notice of it in the state paper, and in the county newspaper, and give a like certificate to the association.
The directors, before entering upon the duties of office, were required to make oath or affirmation that they would, once at least every three months, examine fully into the condition and operations of the bank, and write in a book kept for the purpose a true statement of its condition, and subscribe their names to the same; and that they would faithfully perform all the duties of their offices, and faithfully report to the bank commissioner whenever they should discover any violation or abuse of privilege granted the association by the act. When the preliminary requisitions of the act had been complied with by the president, dircetors and stockholders they were to file a certificate in the office of the secretary of state, stating the name, location, and amount of capital stock of the association, of which the secretary of state was required to give public notice. The amount of bills and notes issued or put in circulation as money, or the amount of loans and discounts at any time was never to exceed two and a half times the capital stock then paid in and actually possessed.
Provision was made for the appointment of three commissioners, whose duties were prescribed by law, and every association was prohibited from issuing any bill or note without the endorsement of a bank commissioner's name upon the back of the same, in his official capacity. Before he endorsed any bill or note he was required to examine the vault of the banking association and ascertain the amount of specie then on hand, and administer an oath to a majority of the directors to the effect that a certain amount named was on that day possessed in specie by the bank, and that it was the property of the bank, that it had been paid in by its stockholders toward the payment of their respective shares, or that the same had been received in legitimate business and . not for any other purposes, and that it was intended to remain a part or whole of the capital of the association. The commissioners were further required to make an examination of every bank at least once in three months, and whenever required by the Governor.
The bill passed the Legislature with only four negative votes, one of which was east by Alpheus Felch, who, as one of the first bank commissioners, was afterwards instrumental in exposing abuses and breaking up the system ..
"THE WILD CAT BANKS"
The law remained in force only about a year, but in that time forty-nine banks were organized with aggregate capital of $4,000,000. This, with the chartered banks, gave a total capital of $11,000,000, at least three times as much as the legitimate business of the state called for.
Although the law seemed, on the face of it, to be well guarded, every one of its restraining provisions was recklessly disregarded. When the commis- sioners came to make their examinations a few weeks later they were led a merry chase. It was learned afterwards that when they started on their tour of examination they were trailed by spies, and their movements were antici- pated so that accounts could be cooked up to await their inspection. A number of the devices to which resort was had were illustrated in the Bank of Brest.
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This was located in a paper town at the mouth of Swan Creek, seven miles from Monroe, a town that was never on any authentic map of Michigan. The bank was organized with a nominal capital of $100,000. On August 2, 1837, the commissioners examined the bank and found that its principal resources consisted of loans on bonds, $16,000; bank stock, $10,000; specie, $12,900. It appears that of the specie $10,500 belonged to Lewis Godard, and had been received by the bank the day before examination, and was drawn out the day after examination. The $16,000 loan on bond and mortgage was a loan to secure the trustees of the town of Brest, to secure which the bank received an assignment of the bonds executed by Lewis Godard for the sum of $35,400, and also of mortgages of 118 eity lots in Brest. On the day after the examination the directors assigned the bond and mortgage back to the trustees of Brest, having received nothing for the same. Seven days later an unexpected investi- gation of the affairs of the bank showed that the amount of specie on hand amounted to $138.89, while the whole amount of bills of the bank which were in circulation was $84,241. The same $10,900 in specie that was counted in the assets of this bank did similar service a few days later in the Bank of Clinton, where it reposed during the one day when the examiners were there, and was taken away the next day.
The bank of Sandstone at Jackson never had any specie, and although its liabilities exceeded $38,000 it had no assets of any kind at the time when it was examined. The Exchange Bank of Shiawassee threw open its safe to dis- close only seven coppers and a very small amount of paper, while it had bills in circulation to the amount of $22,261. The Jackson County Bank placed before the commissioners a number of ponderous and well-filled boxes, but on opening them and examining their contents the top was found covered with silver dollars, but below was nothing but nails and glass. Another box con- taining silver was then brought from another room and sworn to by a director, but he afterward brought an action for it against the receiver of the bank, claiming it as his own individual property. This bank, with an indebtedness of some $70,000, had not more than $5,000 of available assets. The use of stock notes for capital and specie certificates and specie cheeks in lieu of coin was common. Perjury and fraud prevailed throughout the system, and in the windup not one of the forty-nine banks met all its obligations. The memory of these "wild cat" banks and currency remained for long a stain upon the financial reputation of the state.
One result of this orgy was that the constitution of 1850 contained a clause prohibiting the enactment of any general banking law without first submitting it to popular vote, as though a referendum could always insure wise legislation and vote integrity into the men who are to act under it. It was under that provision that the banking laws of 1858 and 1888 were adopted. The latter was modeled largely upon the National Bank Aet of 1862, and under its pro- visions has grown up the system of solid state banks now existing.
The complete failure of the wild cat banks discredited the charter banks. At the end of 1839 only four of these and four organized under the general law survived, and of these eight, four failed within the next year. The banking system had to be built up anew. Of the ultimate result of this experience Judge Cooley said in his "History of Michigan": "But the lessons it taught needed to be learned at some time and were not likely to be learned except with experience as teacher. One of its lessons was that neither real estate nor
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anything else not immediately convertible into money can support the credit of bank currency. But for the experience in several states in 1837-38 who shall say that the National Currency Act, when it came to be passed, might not have been as little guarded against dangerous schemes as some of its state predecessors?"
THE OLDEST BANK IN MICHIGAN
In a special souvenir booklet written for distribution at the time of the removal of the bank to its new quarters at State and Griswold, Mr. George B. Catlin wrote as follows concerning the Detroit Savings Bank:
"On March 5, 1849, the Detroit Savings Fund Institute was founded and articles of incorporation were filed. Governor Epaphroditus Ransom, who signed the authorizing act, appointed the following trustees to take charge of the affairs of the new institution: Elon Farnsworth, ex-chancellor of the state, Shubael Conant, Dr. Zina Pitcher, David Smart, Charles Moran, George M. Rich, John Palmer, Levi Cook, James A. Hicks, Benjamin B. Kercheval and Gurdon Williams. The Savings Fund Institute differed from the other banks in that it was a simple trust, without capital stock and modeled after the early banking systems in New England. There is still a survival of this system in New York and some other states where the state banks have no capitalization or stockholders, the latter being represented by depositors who share alike in the profits under a strictly cooperative plan.
"The late Alpheus Felch, governor of Michigan in 1845-47, wrote as follows regarding Chancellor Farnsworth: 'When the court of chancery was established in 1836, public attention was at once directed to him as the man most eminently qualified for the duties of the presiding officer of a court of equity. Always calm, deliberate and cautious, counsel and litigants had perfect confidence in his ability and integrity. None but those who were in the wrong ever feared the result of his deliberations or the announcement of his decision. So satis- factorily did he discharge the duties of this office that although compelled to resign in 1843, he was urgently pressed to resume the position, and thence- forward he continued as chancellor until the court was abolished. Soon after this, when the Detroit Savings Fund Institute was incorporated by special act of the legislature, he was induced to accept the presidency and remained in office until his death in 1877, a period of twenty-eight years.
" 'The characteristics governing him as chancellor were carried into the administration of the bank during its formative period and have always influ- enced his successors. As a banker he was clear-headed, prudent, of sound judgment, inflexible in the discharge of his duties, straightforward and above reproach. He left a record most clean as a man of spotless honor and com- plete integrity.'
"Chancellor Farnsworth became president in March, 1849, and Alexander H. Adams cashier in April, 1855. Up to the year 1855 the bank had no cashier. Mr. Adams came to Detroit from Cincinnati in 1836. For a time he was con- nected with the Michigan Central Railway and later he became cashier of the old Michigan State Bank. He was junior warden and treasurer of Christ Church from the time of its organization up to the time of his death in 1883. He lived at 207 East Larned Street forty-five years, and he was widely known and universally respected. The other incorporators are men whose names have figured prominently and honorably in the upbuilding of the City of Detroit.
OLD RUSSELL HOUSE (SITE OF FIRST NATIONAL BANK BUILDING)
r
DEMOLITION OF PONTCHARTRAIN HOTEL FOR THE NEW FIRST NATIONAL BANK BUILDING, MAY 15, 1920
RUSSELL HOUSE IN 1881
PONTCHARTRAIN HOTEL
THE NEW FIRST NATIONAL BANK BUILDING ERECTED 1921 ON SITE OF OLD RUSSELL HOUSE AND PONTCHAR- TRAIN HOTEL
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"For a long time after its founding, the bank had no competition in its chosen field and it was the sole place of deposit for wage earners and small tradesmen, the purpose for which it was originally intended. The following men subsequently held office as trustees of the bank as the original members of the board passed away: Henry N. Walker, Governor Henry P. Baldwin, Henry Ledyard, Samuel Lewis, Henry P. Bridge, Edward Lyon, Willard Parker, Edmund Trowbridge, Alex Chapoton, Sr., Thomas Ferguson, George Jerome, W. K. Muir, Alex. Lewis and Sidney D. Miller. All these men have joined the great majority, leaving behind them honorable records as men and citizens.
"The affairs of the Detroit Savings Institute were always managed con- servatively and it soon became one of the city's solid financial institutions. It was reorganized July 10, 1871, under a statute approved at the session of Legislature immediately preceding. A new charter was taken out under the title 'The Detroit Savings Bank,' with a capital of two hundred thousand dollars and with the double liability clause incorporated in the new law for the protection of depositors in savings institutions. On the death of Chancellor Farnsworth in 1877, Alex. H. Adams was elected president, and he also acted as cashier until 1882, when he resigned that office but continued to act as president until his death in 1883. During all these years Mr. Adams was practical manager of the bank with unlimited power and discretion. The trustees of the old institution and the directors of the bank which succeeded it having entire confidence in his ability and good judgment.
"Upon the death of Mr. Adams, the board of trustees elected Sidney D. Miller as his successor. Mr. Miller had been a trustee and attorney for the board since 1855. Mr. Miller was a native of Michigan, having been born at Monroe in 1830. His father, Dan Bramble Miller, known as "Honest Dan," had a bank, a flour mill and a general store at Monroe. Mr. Miller graduated from Michigan University in the literary class of 1848 and afterward studied law at Harvard. He was a practicing attorney when he became a member of the board of trustees of the Detroit Savings Fund Institute. Before that ap- pointment he had been attorney for the Michigan State Bank and in 1861 he married Mrs. Katherine Rodgers, daughter of Charles C. Trowbridge, president of that bank. He had acted as counsellor and attorney for railway and other large corporations but his service with the Detroit Savings Fund Institute was his first banking connection. After he became president of the Detroit Savings Bank he gave up the practice of law.
"For 'more than thirty-five years Mr. Miller was a vestryman of Christ Episcopal Church and a member of the standing committee of the diocese. He was president of the Young Men's Society when it was the leading literary organization of Detroit and it was largely through his efforts, while a member of the board of education that the public library was founded. He was also a member of the police board from 1868 until 1891 and in that capacity he was instrumental in the establishment of the signal box system. Like his prede- cessor in office Mr. Miller had the entire confidence of the board of directors and the management of the bank was left largely to his discretion.
"The present directors of the Detroit Savings Bank are: Paul F. Bagley, George S. Baker, David S. Carter, D. C. Delamater, Charles A. Dean, Frederick T. Ducharme, John M. Dwyer, George T. Hendrie, Robert Henkel, Sidney T. Miller, James T. McMillan, Francis Palms, Jerome H. Remick, Ralph Stoepel and David M. Whitney. The officers are: D. C. Delamater, chairman of the
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board; George S. Baker, president; Charles A. Dean, vice president; John M. Dwyer, chairman of executive committee; James H. Doherty, vice president and cashier; Thomas F. Hancock, John C. Dilworth, Wilson Fleming, William H. Watson and Kenneth Paton, assistant cashiers; Edward J. Dee, superin- tendent of branch banks; Fred C. Andrews, eredit manager; H. N. Baxendale, auditor; and Clarence D. Atwood, auditor of branches."
This bank, which rightfully styles itself now as the "oldest bank in Michigan," moved, in the early part of 1921, from its old location in the Penobscot Building to the former Chamber of Commerce Building, which structure has been renamed the Detroit Savings Bank Building. The capital stock of the bank is now $1,500,000.
FIRST NATIONAL BANK IN DETROIT
With the passage of the National Bank Aet in 1862 commenced the history of modern banking. From that time on Detroit became more and more the banking and business center of the state and the remainder of this history will concern chiefly the institutions in this metropolis.
The Articles of Association of the First National Bank were signed June 21, 1863, the first meeting of the stockholders was held September 2d and the bank opened for business October 5th. The capital was $100,000, Philo Parsons was president and Henry C. Kibbee, cashier. In December, 1864, the State Bank of Michigan acquired a majority of the stock of the First National, and the business of the two was combined with Samuel P. Brady as president, Loranzo E. Clark, vice president and Emory Wendell, cashier. In 1865 the capital was increased to $200,000. Three years later the old and wealthy Insurance Bank was consolidated with the First National and the capital was further increased to half a million. The history of the First National continued as it had begun to be one of consolidation and absorption. It acquired suc- cessively the business of the Commercial National Bank and the Merchants' & Manufacturers' Bank, the former of which had already absorbed the Preston National. In 1913, previous to its merger with the Old Detroit, the First had capital and surplus of $3,000,000, deposits $24,960,000, and total resources of $29,508,000.
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