The history of Detroit and Michigan; or, The metropolis illustrated; a chronological cyclopedia of the past and present, Vol I, Part 132

Author: Farmer, Silas, 1839-1902
Publication date: 1889
Publisher: Detroit, S. Farmer & co
Number of Pages: 1096

USA > Michigan > Wayne County > Detroit > The history of Detroit and Michigan; or, The metropolis illustrated; a chronological cyclopedia of the past and present, Vol I > Part 132

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The usual currency of this and other trading posts was the peltries of various animals; they were the chief productions, and were readily exchanged at Montreal and Quebec for goods of every kind. In earlier days there was little variation in the price of skins, and as the demand usually kept pace with the supply, there was but little depreciation in the cur- rency. Accounts were often kept in beaver-skins, and other furs were reckoned according to their value in such skins. Otter skins were reckoned at six shillings each, and martins at one shilling and sixpence. A stroud-blanket cost ten beaver-skins, a white blanket eight, a pound of powder two, a pound of shot or ball one, a gun twenty, a one- pound axe two, and a knife one beaver-skin.

Buck and doe skins succeeded the beaver cur- rency as a medium of exchange. Until the present century a good deerskin was equivalent to about a dollar.

During revolutionary days accounts were usually kept in York currency, so called because issued by the Provincial Congress of New York, which, even at that day, was a controlling factor in the commerce of the country. The first York currency was issued

under Act of September 2, 1776. The notes were of the denomination of fifty cents, and one, two, three, five, and ten dollars. Soon after, notes for one ninth, one sixteenth, one third, and one fourth of a dollar were issued. It was usual to reckon these notes at $2.50 to the pound. Halifax cur- rency was estimated at $4.00 to the pound. Spanish dollars were the most valuable.

On September 12, 1781, A. & W. Macomb sold Andrews, Graverat, & Visger eight hundred and seventy-five Spanish dollars at ten shillings each.

Skins, as currency, were supplanted in 1779 by bills issued by merchants under authority of the governor. Each merchant was allowed to issue paper money, or due bills, to the value of the prop- erty he had on hand, and on a given day they exchanged with each other the bills they had received. This was the beginning of the clearing-house system.

In the old Macomb ledgers of 1780 and 1781 there are frequent entries of "cash destroyed," the amounts evidently referring to the destruction of the bills of the firm after they had been redeemed. The same sort of currency was continued under the earlier years of American rule, and was adopted as a means of driving out of circulation the "cut money,"-silver pieces that had been cut into many parts, and otherwise so mutilated that they were no longer desirable as a circulating medium.

In the old records of the Court of General Quarter Sessions of the Peace for Wayne County for May 10, 1798, there is the following notice :

Whereas the Grand Jury of the County of Wayne presented, at the last general quarter sessions of the peace, the cut money then in circulation as a nuisance, as tending to promote fraud, and whereas the Court publicly recommend that the circulation of the aforesaid money should be stopped, as dangerous to the community. Now, the Court ordain that after the fourth day of, June next (1798) all cut money - not being a legal tender in the country - may and ought to be refused as payment of any debts whatsoever.

And that the Court inform the inhabitants of the County of Wayne that at their next general quarter sessions of the peace, they will and shall adopt the necessary means to establish upon a solid basis a currency of small bills of credit from four to twelve pence each, which bills shall be redeemed with cash on presenta- tion, as the signer or signers of said bills shall give unquestion- able security before issuing them.

During the years immediately prior to and suc- ceeding 1812, the money in circulation was chiefly

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Spanish silver pieces, and a few French and Portu- guese gold coins. The coin was kept in kegs and boxes, which oftentimes stood open under the coun- ters of the merchants. After the capture of Detroit the currency was inflated by the "fiat money" of General Proctor. His proclamation of March 25, 1813, ordered that army and commissariat bills be received and accepted as "a legal tender and of the same value as gold or silver, under a penalty of two hundred dollars, on the oath of one credible witness aside from the informer."

During this war and up to 1817, much Ohio cur- rency was in circulation, and was subject to a discount of twenty-five per cent in New York. Notwithstanding this fact, the Government made use of the money, and as the goods of Detroit merchants were chiefly procured at New York, all who received Ohio bills in payment were obliged to charge a large extra percentage. During this same period many private firms and individuals issued their due-bills as money.

In deprecation of this practice, a communication in The Detroit Gazette for September 5, 1817, signed "Common Sense," says :

The issuing of small bills has of late grown so fashionable that even strangers are willing to lend us their assistance and furnish funds for our necessities the moment they arrive among us. Their names may be said to be first learned from seeing them on the margin of their bills.

The article was prefaced with a few comments from the editor, declaring that

The vast quantity in circulation tends to embarrass trade. * * * Some have said that if every merchant, mechanic, inn- keeper, and huckster in the city would issue these facilities it would glut the market and have the effect of producing an arrangement that would be satisfactory on all parts. As printers merely, we should recommend such an experiment, but as citizens of Detroit, solicitous for its good name and the prosperity of its inhabitants, we hope no citizen will think of throwing any more embarrassments in the way of trade.

These articles did not correct the evil, and in January, 1819, there was an unusually large quan- tity of "shinplasters " or "small bills " in circulation, some of them, issued by Judge Woodward, being for one and two cents each. At a meeting of citi- zens it was resolved "that the issuing of small change by individuals, who do not redeem them at sight, is an evil" which should be corrected. It was also resolved that thereafter persons intending to issue small bills should first give security for their redemption.

During this year Rev. Gabriel Richard began the erection of St. Anne's Church, and very naturally he did what many others were doing, -issued his own money, paying out large quantities to the workmen. The types with which the shinplasters were printed were stolen from the Gazette office by a printer

named Cooper, who issued a quantity, with the counterfeit signature of Father Richard. The worthy father redeemed them as far as he was able, and his refusal to receive several hundred dollars of what was said to be counterfeit scrip is stated to have made a lasting breach between him and certain per- sons of his parish. The man Cooper subsequently enlisted in the United States Artillery, and the stolen types were found under the floor of one of the buildings of the cantonment on August 7, 1819. In order to inflate the currency and aid the con- tractors who were then building the Court House or Capitol, the Governor and Judges also began to issue scrip; the first issue was dated 1819, the last 1826, and they issued a total of $22,500, in sums of from $2.00 to $20.00.

Good for fifty cents

No. 470.

Gabriel Nichons

FAC-SIMILE OF ONE OF FATHER RICHARD'S SHINPLASTERS.

From time to time the bills of Eastern and Southern States were circulated to some extent in the Territory, and on May 29, 1819, the Secretary of the Treasury notified the receiver of the Land Office not to receive the bills of the Bank of Balti -. more, nor those of the Franklin Bank of Alexandria, Va., as they had refused to redeem their notes in specie.

On October 22, 1819, the money in circulation was chiefly bills of Ohio banks, and of these The Gazette classified seven as "good;" twelve others were named, and classified respectively as "decent," "middling," and "good-for-nothing." On Decem- ber 4 a committee of five citizens, consisting of James Abbott, John P. Sheldon, Peter J. Desnoyers, Thomas Palmer, and Thomas Rowland, was ap- pointed "to obtain and diffuse intelligence relating to the value of bills of the various banks circulating in the Territory." At this time there was a dearth of money and much distress among almost all classes. From 1820 to 1830 there was a great lack of funds for nearly all enterprises.

During all these years the circulation of cut coins continued, and their use was so inconvenient that on August 17, 1821, at a meeting of citizens at Wood-

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worth's Hotel, seventy of the principal business men pledged themselves not to receive or pass cut coins except by weight. Currency continued to be so scarce that individuals, and corporations large and small, issued their promises to pay, in sums of from six and a quarter cents to five dollars, but on August 31, 1822, a citizens' meeting resolved to discoun- tenance the further circulation of bills of less than one dollar made by individuals ; and gradually the practice ceased.

Meantime ten years passed away, and financial difficulties of larger proportions began to trouble all the land. The beginnings of these difficulties dated from the Act which incorporated the United States Bank, February 8, 1791. The charter expired on March 4, 1811, an unsuccessful effort having been made in 1808 to obtain a renewal. The second bank of the United States was chartered on April 3, 1816, for twenty years, and went into operation on January 7, 1817. In 1829 it was doing a pros- perous business with a capital $35,000,000, one fifth of which was owned by the Government. It had branches in all the States and its notes were at par throughout the Union,-were even used to buy teas in China,-and the bank was regarded as impregna- ble. In 1829 President Jackson, in his first message, expressed strong doubts as to the constitutionality of the charter, and repeated the doubt in his messages of 1830 and 1831. Notwithstanding this, Congress, in 1832, passed a law renewing the charter, but the President vetoed the bill and recommended the removal of the public deposits from the bank, and the next year urged Mr. Duane, the Secretary of the Treasury, to remove them. That officer declined to act and refused to resign. On September 23, 1833, the President removed him, and appointed the late Chief-Justice Roger B. Taney in his stead, and in December, on a positive order from the President, the deposits were withdrawn.

This action so alarmed private banks throughout the country that, not knowing what might happen next, they refused all discounts. A public meeting was held in the old Capitol in Detroit on April 4, 1834, to condemn the removal of the deposits, and all was anxiety and unrest.

The President next undertook to prove that the functions of the United States Bank could be per- formed by the private or State banks. To this end the Secretary of the Treasury entered into corre- spondence with several banks, offering to constitute them the fiscal agents of the Government, and to authorize them to perform such service as had been performed by the old United States Bank. The State banks eagerly embraced the opportunity, and in each of the principal cities of the Union one or more of them was appointed depository of the public revenue and disburser of the public funds.

Mr. Taney issued a circular, in which he said, " The deposits of the public money will enable you to afford increased facilities to commerce and to ex- tend your accommodations to individuals ; " and President Jackson, in a message to Congress, said, "It is considered against the genius of our free institutions to lock up in vaults the treasure of the nation." Evidently neither the President nor his Secretary saw the fatal snare into which they were running. They forgot that the revenue could not be used "to extend accommodations to individuals" and at the same time be garnered in vaults awaiting the demands of the nation. Mr. Woodbury, who succeeded Mr. Taney as Secretary of the Treasury, issued a circular in which he expressly recommended the lending of the public moneys to the people, in order to demonstrate that a Bank of the United States was not a necessary fiscal agent.

Meanwhile, in order to regulate the deposit banks, Congress passed a law with conditions so onerous that we look back with astonishment upon the blindness of that day. The deposit banks were required to pay interest at the rate of two per cent per annum upon daily balances, to be responsible for all bank-notes received by them on government account and to treat them as gold; also to hold themselves in readiness to pay at sight the whole sum due to the United States, or to transmit it to any part of the Union at their own risk and expense. In Michigan, the Farmers and Mechanics' Bank and the Bank of Michigan were made deposit banks, and the public officers in the Territory made deposits in each on alternate weeks. From this source the Farmers and Mechanics' Bank received large amounts, often as much as $1,500,000. These sums, with its capital, it used to afford large discounts in conformity with the request that had been made.

The country was bewildered with prosperity. The entire war debt of 1815, amounting to twenty- four millions of dollars, had been paid out of the government revenues, and there remained a surplus of more than forty millions in the treasury. Appar- ently the Government had no use for the money, and in June, 1836, Congress resolved to divide it among the States according to population, and twenty-eight millions, in quarterly instalments, were actually so disbursed. As a natural consequence of this abun- dant supply of money, the price of everything was abnormally increased. Emigration from East to West was encouraged. Importation was greatly increased; manufacture was stimulated; the rage for fine buildings, fine equipage, fine furniture, fine dress, and luxurious living spread throughout the country. This unhealthful activity began to show itself in 1834, and grew rapidly in 1835 and 1836. In this last year the charter of the United States Bank expired, but practically the same bank was

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rechartered by the State of Pennsylvania, under the name of the United States Bank of Pennsylvania.

This new institution took the securities and assumed the responsibilities of the defunct bank. The old bank had returned the ten millions of government deposits, and the new one was required to refund the seven millions of capital owned by the United States. Notwithstanding this tremen- dous draft, it undertook to compete with the State deposit banks for the trade of the country, and especially for the control of the cotton crop. At first all went smoothly, but it was soon discovered that the prestige of the new bank was gone. The diminution of its power by the withdrawal of the seventeen millions of government money, the return from a wide field of its own notes, the hostility of the party in power, the reckless loans made to speculators in produce, and wild land schemes, all fostered the panic which was drawing near.

Up to the time of the issuing of President Jack- son's Specie Circular of July 11, 1836, which directed that all public officers should receive and pay out coin only, the banks generally were prosperous, their notes were used without question, and were promptly redeemed, on presentation, in such funds as were called for. The Specie Circular put everything on a coin basis, and the banks were compelled to arrange their business accordingly. As a result, all business came to a standstill. On October 15, 1836, and for several months before, the banks of Detroit would not discount the best paper offered. To convert uncurrent money into available funds a premium of from one to five per cent had to be paid.

In January, 1837, disasters came thicker and faster. Even the best paper went to protest. "Paper cities," by the score, collapsed, wild lands . were returned for unpaid taxes, banks curtailed their loans ; circulating notes were returned for coin; and the large sums due the United States for the proceeds of public lands sold or duties collected were required to be transferred to the East. The State depositories, which were trembling under the pressure, and needed strengthening, were thus left to their own resources. The government account, that at first had promised so much, in the end proved one of the most unfortunate and disastrous of accounts. The banks were obliged to pay the Government, but could not collect the loans they had made. Manufacturers suspended, and whole- sale and retail merchants toppled over like rows of bricks.

In February the contraction became more serious, and failures still more frequent. In March the pos- sibility of a suspension of specie payments became a subject of discussion. In April that event had come to be regarded as probable. On May 10 the blow fell; the banks of New York City refused

to redeem. There was then no telegraph, and few railroads, but the news was spread rapidly by couriers.

For weeks the banks all over the country had been struggling against suspension, but at last the blow had fallen. The news reached Detroit on May 16. Sidney Ketchum, who arrived from New York on the morning of that day, brought news of the suspension. Handbills soon announced a meet- ing at the City Hall, and there Mr. Ketchum told the story, and showed printed copies of the pro- ceedings in some of the eastern towns. The citizens passed the stereotype resolution, calling on the banks to suspend to save their specie, and the next day the following advertisement appeared :

TO THE PUBLIC.

BANK NOTICE .- At a meeting of the Board of Directors of all the banks in the city this afternoon, it was

Resolved, that in consequence of intelligence of a general sus- pension of specie payments in the Eastern States, it has been deemed a course of proper precaution on the part of the banks of Detroit and their branches to adopt a like measure until further notice ; and in the meantime the business of the banks will in other respects be conducted as usual.

DETROIT, May 17, 1837.

On May 20 the following notice appeared :

At a meeting of the Directors of the Detroit city banks on Friday, the 19th May, 1837, Honorable Levi Cook in the chair, and John Norton, Jr., secretary,

Resolved, that this meeting has heard with surprise that a report had obtained currency in the city of the intention of the banks to take advantage of the present crisis in selling their coin at a high premium. *

Resolved, each Board for its own institution, that the alleged connection between the banks of this city and the brokers therein is wholly without foundation and utterly untrue.

Resolved, that from and after the first day of June next the banks in this city will open at nine o'clock A. M. and close at two o'clock P. M. for the day.

Resolved, that the above be published in the several news- papers of this city.

JOHN NORTON, JR., Secretary. LEVI COOK, Chairman.

After the suspension a sense of relief pervaded the community, but only for a little while, for sus- pension of specie payments was soon found to be suspension of all payment.

In June 1837, Mr. Van Buren called an extra session of Congress. Time for payment was ex- tended to the deposit banks, but the President pro- posed to withdraw the public moneys from the State banks, to establish the sub-treasury, and to make it a penal offence on the part of disbursing officers to receive or pay out the bills of any State bank. The subject, of course, became a political one, and on July 11, while . Daniel Webster was in Detroit, visiting his son, Daniel F. Webster, a lawyer then residing here, he delivered an address in opposition to the policy of the Government.

Up to this time the business activity of 1834 to

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1837 had been regarded as a healthy development of American energy. The reaction was fearful. Confidence was lost, values were unsettled. Great distress ensued, and the streets were crowded with unfortunate and able-bodied men who were unable to procure work, and a man would no more buy a parcel of unproductive real estate, subject to taxes, than he would fondle a rattlesnake. Those who were in debt, and they constituted a majority of the population, were in despair. To tell them that their creditors had confidence in their integrity, and would wait, was to hold before their eyes a picture of un- ending torture. Under such circumstances the debtor class were ready to approve and adopt any measure of relief, without regard to its legality or commercial soundness. The Legislature of Michi- gan was appealed to, and passed a law providing that when lands were levied upon under execution, the sheriff should have them appraised, and the creditors take them in payment at two thirds of the appraisal. Under the operations of this law the prices of lands which had been bought in the heat of the speculating mania were kept up by debtors who had purchased them. Others who were in debt, with the aid of friends or from reserved means, often bought up tracts of wild land at government prices, and turned them over to the sheriff to be appraised at ten times their cost, and transferred to creditors at six times their value. Deception and dishonesty seemed to be at a premium. While these methods were being pursued, most of the eastern banks re- sumed, and on May 16, 1838, the Bank of Michigan and the Farmers and Mechanics' Bank again paid specie.

All this financiering and all the remedial and stay laws failed to bring relief. The mountain of debt, increased by interest and taxes, grew larger. Many creditors declined to accept payment in the way provided by law; the debtor class therefore remained in trouble, and no absolute relief came until 1841, when the Bankrupt Act was passed. Meanwhile, in order to relieve existing distress and establish a value for lands, the Legislature, by Act of March 15, and amended Act of December 30, 1837, provided for an unlimited number of so-called banks. Of the nominal capital of these " wildcats," only ten per cent in specie was required to be paid when sub- scriptions to the stock were made, and twenty per cent additional in specie when the bank commenced business. For the further security of the notes the stockholders were to give first mortgages upon real estate, to be estimated at its cash value by at least three county officers, and these mortgages were to be filed with the auditor-general as collateral security for the notes to be issued. First one and then three commissioners were appointed to superintend the organization of these banks and attest the legality

of their proceedings, and upon the certificate of either of them, the auditor-general was to counter- sign and deliver to the bank circulating notes to the extent of two and a half times the amount of capi- tal certified to have been paid in. Under the Acts, at first twelve, and then any number of persons, upon signing an agreement to that effect, became a banking corporation, and almost any one might be a director. This monstrous banking system was welcomed alike by those who were hopelessly bank- rupt and by those who saw a chance for unlimited knavery ; and in a few months wherever two roads crossed, a bank was established. Many of the so- called banks had neither books nor office, and stock was transferred to, and represented as owned by persons who knew not that they were stockholders in these enterprising corporations. In most cases there was no coin to exhibit to the bank commis- sioner. "Specie certificates, verified by oath, were everywhere substituted, the identical certificates having been cancelled as soon as created by a draft for the same amount." In some cases certificates or specie would be borrowed to show to the commis- sioner. If specie, as soon as it had been examined in one bank, a fast team would take it to the woods where some other bank was located, and there it would again be counted as bank capital. The loan of specie by established corporations to these sham institutions became part of the regular banking business of the period, and banks put in operation by these fraudulent transactions were themselves in turn parents of similar offspring. In the language of an official report, "There is no species of fraud and evasion of law which the ingenuity of dishonest corporations has ever devised that has not been practiced under this Act." So utterly reckless did some of the operators become that they exhibited to the commissioner coin boxes filled with nails and window-glass, in lieu of specie. They hurried to New York in scores to urge the engravers to deliver without delay their circulating notes, which were issued to them by the auditor as rapidly as their so- called securities were perfected.

The first bank established under the Act was the Farmers' Bank at Homer, Calhoun County. The articles were filed on August 19, 1837. In a little over four months nineteen more banks were created ; in 1838 they were more plentiful than mushrooms and grew as rapidly. Forty-nine banks organized and nearly forty went into operation in one year, with a professed capital of $1,745,000 ; thirty per cent was claimed to be paid in. In a few months two millions of dollars were distributed about the State, of which probably not one dollar was secured by bona fide capital, paid in for legitimate banking purposes. In order to make good their credit, these new banks demanded that the old territorial banks

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The history of Detroit and Michigan; or, The metropolis illustrated; a chronological cyclopedia of the past and present, Vol I, Part 132

Author: Farmer, Silas, 1839-1902 Publication date: 1889 Publisher: Detroit, S. Farmer & co Number of Pages: 1096

Author: Farmer, Silas, 1839-1902
Publication date: 1889
Publisher: Detroit, S. Farmer & co
Number of Pages: 1096