USA > Missouri > Missouri the center state, 1821-1915 > Part 52
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The Bank of the State of Missouri.
When the legislature met in 1837 the first bill introduced was to charter the Union Bank of Missouri. The name was changed by amendment to The Bank Vol. 1-24
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of the State of Missouri. So great was the popular demand that within thirty days the bill became law.
In those days the establishment of a bank was attended with much formality. A bank was a semi-public institution. Subscriptions were received by commis- sioners. Everybody was interested. The management of the branch was still a pleasing reminiscence. Upon the commission was placed the man who had made the branch so successful, John O'Fallon. With him were associated Hugh O'Neill, Henry Walton, John B. Sarpy and George K. McGunnegle. The quick- ness of the responses proved the strength of sentiment behind the movement. The commissioners who took the subscriptions to the old Bank of St. Louis in 1815 and 1816 were two years or more in getting the capital together. John O'Fallon and his associates were but a few days beyond two months. The "State Bank," as it became known familiarly, opened for business the middle of April, 1837. Recognizing the force of public sentiment the Cincinnati Com- mercial agency turned over the St. Louis business to the new bank and with- drew from the State. Public interest in the Bank of Missouri was more than sentimental. The State held one-third of the stock. There were provisions for branches and eight of them were established. Two members of the board of directors were appointed by the governor. The limit on the capital stock was $5,000,000. John Brady Smith was made president. The location was on the west side of Main street in what was then the business center of the city.
The legislature which chartered the Bank of Missouri manifested a dis- position to keep out of Missouri such institutions as the Cincinnati Commercial agency. Sentiment of the legislators was against foreign capital doing banking in the State. The house passed a bill to expel foreign banking agencies. In December, 1836, the business men of St. Louis were called together in town meeting. Dr. Hardage Lane was chosen chairman and Charles D. Drake was made secretary. John F. Darby talked. Ex-Mayor William Carr Lane offered the resolution expressive of the sense of the meeting and it was adopted: "That in the opinion of this meeting it will be highly inexpedient in the general assem- bly to remove or lessen the banking facilities now possessed by the manufacturing and commercial community by removing the bank agencies located amongst us, and that we deprecate any presentation in the general assembly on the subject as tending inevitably to the great injury of every class of our citizens."
In policy and in practice, the Bank of Missouri preserved the traditions of the management of the branch bank. John O'Fallon was a member of the board. Edward Walsh was another director. These two men, with John Brady Smith, the president, taught St. Louis safe banking. For twenty years the Bank of Missouri was the only bank of issue in St. Louis. Its notes circulated as far to the southwest as Chihuahua. They were better than gold and so esteemed. They were as good as gold in value and easier to carry. Times of inflation came when the management of the Bank of Missouri was counter to public sentiment. Regulations were adopted against which the business community protested strenuously. At one period, after a meeting of business men had so advised, many leading depositors withdrew their accounts from the Bank of Missouri and put their money with insurance companies and with the St. Louis Gaslight Company which was doing a banking business. This was in 1840. Between that time and 1843 the country passed through a period of depression which wiped
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out $600,000,000 in debts through actual bankruptcy proceedings, and in which the decline of values was estimated at $2,000,000,000. The Bank of Missouri pursued its policy of safety and weathered the storm.
The Flood of "Dog" Currency from Other States.
In that period St. Louis was flooded with paper currency from other States. The name of "shinplaster" for such currency was born of the conditions. These bills, as they depreciated in value, were contemptuously known as "white dog," "blue dog," "blue pup," according to the color. The conflict between the business men and the Bank of Missouri started with the refusal to accept the paper cur- rency of certain outside banks in settlement of loans. On the 12th of November, 1839, the directors of the Bank of Missouri resolved "that the bank will in future receive from and pay only to individuals her own notes and specie, or the notes of species paying banks."
This was prompted by the suspension of specie payments on the part of many eastern, southern and western banks. Thousands of dollars in bills of banks which had suspended specie payments were in the hands of St. Louis business men. The action of the Bank of Missouri caused great indignation. The Missouri Republican reported the conditions :
"The bank excitement continued very high yesterday. In fact, it is the only subject matter of conversation or consideration. The merchants, it might literally be said, have forsaken their counting rooms, and the mechanics their shops. Wherever two or three met, the action of the bank was the theme of conversation, and in every circle that we have fallen in with, whatever might be the politics of those composing it, the resolution of the directors was condemned without measure or reserve. In truth, there never has been in this community so universal and unanimous a condemnation of any measure as this. Execrations loud and deep are freely uttered in every quarter and by men of all parties."
The panic of 1837 followed a period of wild speculation in city and town real-estate. A great firm in New Orleans failed on account of the decline of cotton. In New York, house after house with southern connections failed. Banks in New York, Philadelphia and Baltimore suspended. St. Louis suffered in paralysis of business. Two years of depression and of futile attempts to get back to specie basis in the east followed. The action of the Bank of Missouri was one of self-preservation but at the same time business men of the city felt bitterly about it. In November, 1839, a meeting was held at the courthouse. Edward Tracy was president. The meeting resolved that "as the sense of this meeting, it will be no discredit to any individual having paper maturing this day at the Bank of Missouri to allow said paper to go to protest if a tender is made at bank, or to the notary, of currency hitherto bankable and is refused."
The merchants appealed to the bank to accept payment on the discounted paper then in hand as in the past and to make the rule apply only on future business. This the bank declined, as it did also a proposition offering a bond of wealthy citizens against loss on the bank notes which it might receive if the specie rule was modified. Efforts of business men and bank to get together failed. The Bank of Missouri preserved its soundness but it lost a great deal of business. To merchants who were utterly unable to meet obligations in specie at the bank some concessions were made. But the result of the clash was to
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give impetus to the establishment of private banks. The Bank of Missouri kept on in the even tenor of its way teaching St. Louis the lesson of absolute security.
A fact that is clear in the history of banking in St. Louis is that the city suffered from but did not contribute to the panic of 1837. If there was error in the banking methods of St. Louis it was error on the side of conservatism. Money was lost through depression in business. No money was lost by de- preciation of currency put out by St. Louis. All of the confusion and trouble through which the community passed was forced upon it from the outside.
Missouri Money and Missouri Trade.
Up the Missouri to Westport landing, thence over the Santa Fe trail, even beyond the city of the Holy Faith into Chihuahua, merchants of St. Louis sent goods to supply the needs and luxurious desires of the wealthy owners of ranches and haciendas. This was long before the railroads. When days of settlement came, back over the trail and down the river was brought to St. Louis the actual cash. Exchange in that trade was not known. Paper money was often of uncer- tain reputation. The money to pay for goods to be bought or already received on credit was sent to St. Louis in the form of silver dollars. The "cartwheels" were put up in stout wooden boxes. Sometimes the Mexican came with his remittance. Occasionally he reinforced the ordinary protection with a guard of his own. The shipments of coin ran from $10,000 to $100,000. A single re- mittance of $50,000 to the St. Louis merchant or banker was not unusual in the buying season. When the boat reached the St. Louis wharf a dray was called. The heavy boxes beside which the Mexican guard had watched and slept all the way down the Missouri were rolled over the gang plank and up the end of the dray. The dray was driven through the business streets, the Mexicans, with their queer, old-fashioned, wide-muzzled muskets on their shoulders, march- ing on either side of the dray. If the shipment was of unusual amount, the Mex- ican merchant, with his rifle in hand might accompany the dray. Sometimes as many as six of the guards came the long journey to insure safe delivery. When the dray, with its precious load, drew up in front of the store or bank where delivery was to be made there was most courteous reception accorded. The Mex- ican or Spanish merchant became an honored guest. His escort was taken care of. The deposit of silver dollars of Mexican minting was placed to the merchant's credit. In the traditions of trade this commerce with the Santa Fe and Chi- huahua country is remembered as of great profit to St. Louis. These buyers from the northern Mexico territory were men of excellent business traits, re- liable and honorable in their settlements.
Flush Days of 1849.
In 1849 came the gold excitement in California. The business of St. Louis expanded enormously. The Bank of Missouri pursued its conservative course, limiting its issues of notes and its lines of credit to keep always on the safe side. There wasn't currency to do the business which offered. The banking facilities offered by the chartered institution did not permit the merchants to take advan- tage of what appeared to them great opportunities. And so the private banks, one after another, came into the field. To meet the demands for a sufficient volume of money with which to do the business of the city these private banks
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handled paper money freely. When the gold placers of California began to yield, St. Louis was almost the first trade center to realize the benefits. Overland freighting grew into large proportions. Purchases in the St. Louis stores and markets were on an unprecedented scale. Profits were fascinating. The flow of wealth into the city encouraged great enterprises.
A Legislative Investigation.
In 1852 a committee of the legislature examined the condition of the Bank of Missouri, at St. Louis, and the branches out in the State. The committee found the assets of the parent bank in St. Louis to be $3,983,131. The circulation issued and outstanding was $1,461,090. The net profits from May 8, 1837, to June 30, 1852, were $1,227,659. The profits were not excessive but the bank was sound and its notes were everywhere as good as gold. The "Old State Bank" had a good name as far as St. Louis was known. Two years after it began business the bank sustained a serious loss, the mystery of which was never solved. Coin to the amount of $120,000 disappeared from the vaults. The money was not recovered.
No over-speculation, no failure, no dishonest methods at home ever have precipitated panic in St. Louis. There have been local bank failures but they were not of such importance as to shake general confidence in the financial institutions of the city. There has been individual dishonesty but so rare and so exceptional as not to disturb faith in the honesty of the bankers of St. Louis. No wild wave of speculation ever swept over the city. Financial straits have had their beginning elsewhere and St. Louis has shared in them through sympathy or through cir- cumstances beyond her control. So it was in 1855.
There were no wildcat banks in St. Louis but a flood of wildcat currency flowed into the city from outside of Missouri. From the east side of the river. whence had come population and civilization, came also the notes of banks estab- lished under laws with the minimum of restrictions. They operated under law which permitted the issue of bank notes on state bonds, on county bonds, on city bonds, on township bonds, on canal bonds, on railroad bonds. These notes came to St. Louis, a veritable deluge of currency. They passed into trade. They paid for goods, for machinery, for food supplies. They passed from par quickly to discount, dropping three, five, ten and more per cent until they were worth not over fifty cents on the dollar.
Banking Law of 1857.
The year 1857 saw the regeneration of banking in St. Louis. Then came into existence, with beginnings almost infantile compared with present strength, the great financial institutions of St. Louis' present. Back to 1857 the Mechanics- American, the Merchants-Laclede, the National Bank of Commerce and the Third National look for their birthdays. It is a record of fifty-seven years. Ten years earlier the St. Louis Boatmen's Savings Institution, in 1847, had been established. It was without capital. It was to be a bank "where boatmen and other industrious classes can safely deposit at interest their earnings." Profits were to be divided among the depositors who deposited $100 or more within the first six months and allowed the money to remain. The institution was managed by trustees. In 1856 the institution took a new charter and with a capital of $400,000 entered the regular banking field.
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The regeneration of the banking business in 1857 came about through a general banking law passed by the legislature that year. This law provided for the organization of banks. It authorized the issue of two dollars in paper for each dollar of paid up capital. Banks were made subject to inspection by a state commissioner. Six banks were started in St. Louis under this law. Three of the six are today among the strongest institutions of the city. The Merchants then, is the Merchants-Laclede today. The Mechanics of 1857 is the Mechanics- American now. The Southern of that year took a national bank charter when the national banking law was enacted and is today the Third National.
The other three of the six banks organized under this state law of 1857 were the Exchange, Union and St. Louis. Two years before this banking law was passed, the State Savings Association, in 1855, was given a charter as a savings bank and went into operation. It became the State National.
The same year that the six banks started, the National Bank of Com- merce had its beginning under the name of the St. Louis Building and Sav- ings Association. It was organized under a charter which gave it banking priv- ileges and was a bank from the beginning. In 1869 the name of Bank of Com- merce was taken. Still later the St. Louis National Bank was absorbed by the Bank of Commerce, so that this institution may be said to have started in 1857 from two roots.
Exit the Old State Bank.
With the establishment of national banks, the legislature of Missouri decided that the time had come for the State to go out of the banking business. In 1866 the State sold its stock in the old State Bank of Missouri. That institution had stood for nineteen years as the financial Gibraltar of St. Louis. It had been anathematized for ultra-conservatism at times by the business men. But its management had been sane and safe. The first president was John Brady Smith. Afterwards Mr. Smith was the state and county collector, and still later the first surveyor of the port of St. Louis when the city attained that importance in for- eign trade. With his strict sense of business honor and stern integrity, John Brady Smith was an ideal president for a bank such as the "old State" was intended to be. His appearance, serious, dignified, sturdy, with coat almost invariably buttoned to his chin, personified the man who could be firm when the question involving trust was presented to him. John Brady Smith came of fine stock. His father, William Smith, was from Culpeper County, Virginia. He came to St. Louis with his family in 1810. At that time John Brady Smith, who had been born in Lexington, Kentucky, while his father was in business there, was twelve years old. William Smith, the father, was a director in the first bank started in St. Louis. While holding that position and when he was counted one of the foremost citizens of St. Louis, William Smith fell a sacrifice to the intense feeling aroused in the city by the Benton-Lucas duel. On Septem- ber 28, 1817, the day following the duel, a group of business men stood in front of the Washington Hotel, on Main and Pine streets, discussing the event of the previous day. William Thorp became angry at an expression of opinion by William Smith, drew his pistol and killed him.
The State's stock in the Bank of Missouri was purchased by a syndicate of capitalists headed by James B. Eads. The bank was made national. Through
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PIERRE LACLEDE, THE FOUNDER OF ST. LOUIS, 1764
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investments in enterprises like the bridge the capital of the bank became impaired. In 1876 the capital stock was reduced from $3,410,300 to $2,500,000. The next election of directors brought new blood into the board. A committee made an examination of the assets which had suffered in the general shrinkage of securi- ties throughout the country. Upon the committee's report the directors decided to ask the comptroller of the currency for a receiver and to liquidate. The "old State Bank," which had weathered financial stress after stress, which had sup- plied paper money more highly esteemed than gold, passed out of existence.
After the panic of 1873, Missouri pioneered the way for other States in the way of laws to insure safe banking. The legislature acted. Bills were passed providing for the publication of bank statements periodically. Banks were com- pelled to stop doing business when the capital was impaired to the extent of more than twenty-five per cent. At least half of the subscribed capital must be paid up. Dividends were forbidden wlien capital had been impaired. These and other wholesome provisions went into effect the summer of 1877. Stringent penalties for mismanagement were imposed.
Suicide of Governor Reynolds.
The state election of 1840 was squarely between Democrats and Whigs. Thomas Reynolds was elected governor by a majority of 7,413 over John B. Clark. The vote was: Reynolds, 29,625; Clark, 22,212. In his inaugural mes- sage to the legislature Governor Reynolds denounced abolitionists. He recom- mended life imprisonment in the penitentiary for those persons who seduce slaves from their masters and aid them in escaping. Governor Reynolds was of Kentucky birth. He had been judge of the supreme court of Illinois before he came to Missouri. In this State he was a member of the legislature and a judge before his election as governor. On the 9th of February, 1844, he com- mitted suicide at Jefferson City, shooting himself in the head. He gave as the reason the violence of political enemies. He had been in poor health. Lieu- tenant Governor M. M. Marmaduke was governor the remainder of the term.
William F. Switzler connected the suicide of Governor Reynolds with the selection of David R. Atchison to be United States Senator in place of Lewis F. Linn, who died at Ste. Genevieve, October 3, 1843. He said: "The governor appointed Atchison, which was unexpected and opposed by many of the gov- ernor's political friends. In fact, it was roundly denounced, and the governor severely criticised for making it. Although a man of large experience in official life and of recognized ability, Governor Reynolds was acutely sensitive to public criticism, and therefore possessed the weakness of being rendered very unhappy by it. It was the cankering plague spot of his existence. When therefore he committed suicide by a rifle shot in his office on February 9, 1844, many supposed that the chief, if not the only cause of the sad catastrophe was the abuse he had received, principally on account of the appointment of Atchison. The thirteenth general assembly met on November 18, 1844, Claiborne F. Jackson, speaker; M. M. Marmaduke, acting governor. On the next day the two houses met in joint session to elect a United States Senator to fill the vacancy caused by the death of Dr. L. F. Linn and also a Senator to succeed Thomas H. Benton, whose term expired March 4, 1845. All objections and unfavorable environments to
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the contrary, Atchison was elected for four years, the remainder of Dr. Linn's term."
The Hards and the Softs.
John Cummings Edwards, who was elected by the Benton Democrats in 1844, was the youngest of all Missouri's governors. He was not thirty-eight when he took office. Thomas C. Fletcher, elected in 1864, was a few months older. Edwards was of Kentucky birth, had served in the Missouri legislature and in Congress. Very soon after his term expired Governor Edwards joined the gold seekers and passed the rest of his life in California, living there until 1888. Charles H. Allen ran as an independent Democratic candidate against Edwards. He was commonly called "Hoss" Allen, a name he had bestowed upon himself while holding court. Two lawyers got into an argument, and one of them was so noisy that Judge Allen shouted from the bench: "Sit down, sir, and keep your mouth shut." The lawyer sat down with ill grace, saying, "Well, as you are judge of this court, I guess I will obey you this time." The judge roared back, "By -, sir, I'll let you know that I am not only judge of this court, but I'm a hoss besides, and if you don't obey me I'll make you."
In the campaign of 1844 the Democrats of Missouri divided into factions called "the Hards" and "the Softs." The division was on the question of hard or soft money. Senator Benton headed the Hards. He was given the name of "Old Bullion." The Hards were in the majority when the state convention met. Both the Hards and the Softs nominated full tickets. As the candidate of the Hards, John C. Edwards was elected governor over Charles H. Allen by a vote of 36,978 to 31,357.
When he went out of office Governor Edwards sent a valedictory message to the legislature in which he said the governorship was a despicable office for any man to be condemned to hold. He said that two of his predecessors had resigned before their terms were out, that a third had committed suicide and that he had been compelled to go armed at the capitol to protect himself against assassins.
In the account of expenditures by Governor Edwards the legislature of 1846 concluded some explanation was necessary. By resolution the governor was asked to itemize. He replied: "In the next place, with due respect to the honorable mover, the answer is that the expenses of the executive were various. His breakfast, his dinner, or his tea, when he had time and appetite to eat it; an apple, or a sponge-cake, a piece of cheese, or a cracker, a glass of brandy or some old rye when from hard travel, much fatigue or great want of sleep, he was too unwell to take more substantial food, or else from rapid traveling had no time to stop and get it; the blacking of his boots, or the brushing of the dust out of his coat, or hiring a servant to hasten his dinner instead of forcing him to eat through a series of courses; hack hire and omnibus fare, porterage and drayage, stage fare, railroad fare, steamboat fare on the lakes, gulfs, rivers and bays; all these and various other items multiplied many times over, perhaps thousands, in the trips of six thousand miles, make up the items of expense to the executive-a long list hard to get and hard to give."
Senatorial Deadlock.
Missouri was the first State to be represented for a considerable period by only one Senator. Champ Clark's statement of this situation without precedent
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is interesting: "By reason of the unrelenting warfare between the Bentonites and the anti-Bentonites the legislature chosen in 1854 never could and never did elect a Senator, as it was in duty bound to do, so that for two entire years Henry S. Geyer was Missouri's only Senator. What is more, the governor did not appoint or attempt to appoint anyone to fill the vacancy, nobody then dreaming that the governor had such power. But in these latter days several States have followed Missouri's example in failing to elect Senators; and, strange to say, divers governors have insisted on the right to fill vacancies by appointment under similar circumstances, until finally the Senate, after lengthy and ponderous debate, solemnly vindicated the wisdom and knowledge of constitutional law possessed by the governor of Missouri in 1855 and 1856, Sterling Price, by declaring that a governor has no right to make such ad interim appointment."
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