USA > New Jersey > Essex County > Newark > A History of the city of Newark, New Jersey : embracing practically two and a half centuries, 1666-1913, Volume II > Part 32
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Untold wealth is here awaiting the touch of genius, of statesmanship, and executive administration; and may it be in the providence of God who has conserved these undeveloped lands for a wise use that such a city may grow thereon, and that Newark may be the instrument to fashion and shape its destiny.
JAMES M. REILLY.
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NEWARK BANKS AND BANKING. W. M. VAN DEUSEN, Cashier of National Newark Banking Company.
The great growth and prosperity of the manufacturing and mercantile Interests of Newark has been largely aided by the fact that the city has been favored by having from the earliest days strong, conservative and well-managed banks.
The history of banking in Newark is one of which the people of the city can be proud. There have been unsuccessful banks and there has been dishonesty, but in the one hundred and nine years covered by the banking history of the city the record is one with few dark spots. It has been equaled by few cities in the country,
In the earliest days of the city there was no need of banking facilities, as the business was done almost entirely by barter. In those days there was very little currency in circulation, and that which was used was of uncer- tain value. The consequence was that most of the business was done by bartering between the people directly interested in the transaction. Later on, the merchants of Newark who needed banking facilities depended on New York, the first bank there having been organized in 1784. New Jersey was fortunate in being free from the land bank craze which swept over the country during the middle of the eighteenth century. A land bank was organized in Massachusetts in 1740, but was never successful, and after a disastrous career was suppressed by royal authority. The Legislature of this State has always been very conservative in its banking legislation, and to this fact the people of the whole State owe much of their freedom from the banking troubles which hurt many of the other States. A short con- sideration of the history of each of the banks of the city will probably be the clearest way of presenting the banking history of the city.
NATIONAL NEWARK BANKING COMPANY.
When, in 1804, Newark had grown to be a town of about five thousand inhabitants, the industries of the town were of such consequence that they could no longer depend on the four banks of New York City, especially as communication between the two places was limited to one round trip daily of a two-horse stage over rough roads. There was also a demand for a local company to take up the insurance of dwelling houses and other buildings. as it had been found expensive and inconvenient to effect insurance through foreign insurance companies. To provide for these two demands a bill was introduced in the Legislature of the State, and on February 18, 1804, a charter was granted to "The Newark Banking and Insurance Company." The preamble to this bill is of interest, as it sets forth the reasons for the granting of the charter:
"Whereas, it is represented to the Legislature that the establishment of a company for the insurance of dwelling houses and other bulldings from loss or damage by fire, would greatly alleviate the distresses of, and would afford immedlate relief to, sufferers thereby; and whereas, it is further repre- sented that the premiums of Insurance may not yield an interest propor- tioned to the capital necessary to be raised to afford security to the insured. which consideration may operate to prevent the establishment of so beneficial an institution; and whereas, it is further represented that the agricultural,
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manufacturing and commercial interests of New Jersey may be advanced by the establishment of a well-regulated bank, and that a privilege to employ the capital raised for insurance in banking would afford additional induce- ments in favor of the undertaking, and, at the same time, be productive of great advantages; therefore, be it enacted," etc.
At the time the Bank of the United States was chartered by Congress in 1791 much attention was given to the provisions of its charter, and it came to be the model under which most of the early banks of the country were organized. There was, of course, no general banking law in those days, so banks were chartered by special acts of the Legislature, which acts contained the regulations under which the bank was to do business. The charter to The Newark Banking and Insurance Company served as the model for most of the other early banks of the State, and therefore deserves to be considered at some length. It was entitled "An Act to erect and estab- lish a Banking and Insurance Company in the Town of Newark," and among other things provided as follows:
"Stipulated, that any director, officer or other person holding any share, stock or capital of the said company, who shall commit any fraud or embez- zlement, touching the money or property of the said company, shall be liable to be prosecuted in the name of the State, by indictment for the same, in any court of law of this State, and upon conviction thereof, shall, besides the remedy that may be had by action in the name of said corporation, for the fraud aforesaid, forfeit to the said company all his share or stock in the same.
"Provided, that if any person or persons shall, within this State, forge or counterfeit any of the notes or checks of the said corporation, or pay or tender in payment, or in any manner pass or offer to pass, such forged or counterfeit note or check, knowing them to be forged or counterfeited, and shall be thereof convicted in any court of law within this State, shall be adjudged guilty of a misdemeanor, and suffer such punishment as persons guilty of counterfeiting bank bills or notes are liable to, under the existing laws of the State.'
The capital stock and funds of the corporation were declared to be personal estate.
"Provided, that the said corporation may make insurance on any dwell- ing house, houses or other buildings and property therein contained, what- soever, in this State or elsewhere, and shall be liable to make good and pay to the several persons who shall be insured by the said company, for all losses which they may sustain by fire in their houses or buildings, or prop- erty contained therein, as aforesaid, according to the terms of the policy of insurance, and as far only as the amount of the capital stock of the said company and the value insured in the said policy shall extend, excepting average losses by fire, not exceeding 5 per cent. in value, in $100 in value, of said house, houses, buildings or property therein contained, as aforesaid, for which the company shall not be answerable."
"Provided for opening of subscription for $225,000, in shares of $50 each; subscriptions to be paid as follows: Five dollars at time of sub- scribing; $5 previous to or at time of election of first directors; remainder in four equal monthly installments; failure to pay worked forfeiture of previous payments."
The subscription books were opened at the "house of Nathaniel Sea- bury, Innkeeper," on Monday, April 2, 1804, and continued open for five successivo days, and on May 4 a meeting of the stockholders was held at the house of Archer Gifford, "innkeeper," at which the following stockholders were elected as the board of directors: Elisha Boudinot, Archibald Mercer, John N. Cumming, William S. Pennington, David D. Crane, Silas Condit, John Crawford, Aaron Coe, George Nelson, Moses Hedden, Stephen Hays.
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The above board of directors met the same day and elected Elisha Boudinot, president, and William Whitehead, cashier, and on the 30th of July, 1804, the new bank opened its doors for business in the dwelling of Smith Burnet, on Broad street, near Market street, "opposite Caleb Pier- son's Inn." The banking quarters were rented from June 9, 1804, to May 1, 1805, for the sum of £50. At the time of closing the subscription books, $100,000 had been subscribed, and the bank started with that capital and with $40,000 of it paid in. The Newark Sentinel of Freedom said of the bank: "We are happy to find that it will commence under the most flatter- ing prospects of immediate success. The rapid rise of the stock, the increased demand for more and the strong probability that the whole of the capital will be brought into operation, will powerfully tend to give it a permanent establishment."
At the beginning of business it was found necessary to have a New York bank which should act as its agent in that city, especially for the redemption of its notes. The account was at first opened with the Man- hattan Company, now the Bank of the Manhattan Company, and later with the Merchants' Bank, now the Merchants' National Bank, and it is inter- esting to note that the National Newark Banking Company is still doing business with both of these banks.
In January, 1805, the balance of the authorized capital was issued, the State having sold for a premium of $1,530 its right to subscribe for $25,000 of the stock, and by the middle of 1805 the paid-in capital was $225,000.
Soon after its organization the bank purchased the lot at the corner of Broad street and "Maiden Lane," now Bank street, at a cost of £100. A building, including banking rooms and the cashier's residence, was at once erected, and occupied by the bank in May, 1805. It was used till 1856, and was then replaced by a handsome brownstone structure which stood there till removed to make room for the present Public Service building.
In November following the charter of the Newark Banking and Insur- ance Company, "The Associates of the Jersey Company" applied for a charter for a bank at Paules Hook (now Jersey City). The Newark Bank opposed the granting of this charter on the ground that their charter gave them all of East Jersey as its territory, and the Legislature, recognizing the validity of the objection, passed an act providing that the Newark Bank could establish a branch at Paules Hook. This was done, the bank there being known as the Jersey Bank, and having the same power to do an insur- ance business as the present bank. This power was at once availed of, and the bank did a large insurance business. It had only a short career, as its charter was given up in 1810 and the bank moved to New York City, being reincorporated as the Union Bank.
The issuing of its bank note circulation was given a great deal of attention in the early days, the paper being made in the presence of a committee of the directors, and the worn notes being destroyed with much care. A large part of the early minutes is given up to reports about the bank notes. The early notes were perfectly plain black, on white paper, but in 1811 they were ornamented by vignettes, one of the earliest being a picture of Israel Crane's quarry, and later views of the shoeshop of Luther Goble. Post notes were issued in the early days, being filled in with the amount needed at the time of issue, and payable to the order of the party by whom it was to be used, and payable at a future date. These post notes passed by indorsement like a note of hand.
The directors in the early days of the bank gave very close attention to the details of the business, and were fined for non-attendance or tardi-
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ness at the meetings. The minutes show such entries as that "Mr. Mercer and Mr. Hedden were fined fifty cents each, which they paid," and "Mr. Crawford was fined 1212 cents for tardiness." The officers' salaries were paid every three months, and only after the directors passed a resolution to that effect. Clerks were elected by ballot and after much careful considera- tion by the board, and by a resolution of April 17, 1806, it was ordered that "Clerks shall not leave the bank during business hours without express permission of the cashier." The clerks were also prohibited from engaging in any business or occupation interfering with his duties to the bank, or keeping an account with the bank.
Many details were acted upon by the shareholders, and it was necessary to call them in frequent meetings. An important meeting of the share- holders was, however, held on November 27, 1810, to take action regarding the law passed by the Legislature on November 10, 1810, imposing a tax on the capital of the banks of the State. It was even resolved that the directors consider the possibility of obtaining a charter in New York, if the law was not repealed. The law, however, withstood all attacks, and all the banks of the State accepted it with the exception of the Jersey Bank at Paules Hook, which removed to New York.
January 29, 1808, a committee of the board was appointed to classify the names of dealers, according to the amount of credit to each, as drawer and indorser. The committee recommended limiting the liability of any one man or firm to $15,000, and the greatest total liability to $30,000. The liabilities of directors were arranged in three classes (as payers), viz., best estates, $12,000; second class, $8,000; third, $5,000, and it was resolved, "That it is submitted to the good judgment of each director under which class to arrange his names." It was also resolved "That this committee do earnestly recommend to every director of this bank to abstain from drawing, accepting or indorsing for the accommodation of any person or persons whatsoever, except for particular friends, who are perfectly safe, and for such amounts only as their circumstances and resources would enable them to pay in case of their friends' failure."
The Newark Banking and Insurance Company declared its first dividend on June 29, 1805, it being fixed at eight per cent.
In 1812 the State banks of Newark, Camden, Elizabeth, New Bruns- wick and Morris were chartered, until which time the Newark Banking and Insurance Company had been the only bank in Newark. Amicable arrange- ments were made with the State Bank at Newark providing for daily exchanges and settlements.
On May 9, 1814, Mr. Whitehead, who had been cashier since the bank organized, resigned, and Aaron Beach was appointed to succeed him. Mr. Beach held this office till 1841, and became a very prominent citizen of Newark.
The business depression of the country led, after Congress passed the Embargo Act in 1813, to a suspension of specie payments. This suspension did not take place in Newark till after the banks of New York and Phila- delphia had suspended. The reasons for this suspension in Newark are clearly shown by the following resolution adopted September 1, 1814, by' the directors of the Newark Banking and Insurance Company: "Consider- ing the dependence of the country banks on those of the city, the board are of the opinion that, if they should continue to issue specie, inevitable ruin to the institution must be the consequence, and, although it is with reluctance they adopt the measure, yet duty compels them to resolve, That
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they will not issue specie as long as the New York banks continue the measure, except change under one dollar."
A little later the board ordered the issue of bills under one dollar "for change." Specie payments were finally resumed on February 20, 1817. The suspension of specie payments does not seem to have affected the pay- ments of dividends, as 412 per cent. was paid semi-annually from 1812 to 1817, and an extra dividend in June, 1814. In June, 1817, began a decrease In dividends which lasted till 1850, during which period the bank paid 31/2 and 3 per cent. semi-annually. The year 1817 was one of great depression, and as a matter of economy the cashier was ordered to take on the duties of teller.
Judge Elisha Boudinot tendered his resignation as president and director of the bank on April 6, 1815, and was succeeded by General John .N. Cumming, a director. Elisha Boudinot was one of the most prominent men of the State in his day. He was a member of the Committee of Safety, deputy to the Colonial Congress, a Judge of the Common Pleas of Essex County, and a Judge of the Supreme Court of New Jersey. He died at his residence on Park place, October 12, 1819, in his seventy-seventh year.
On May 30, 1820, General Cumming resigned as president, and was succeeded by Silas Condit, who kept this office till 1842.
In 1821 a serious effort was made to take advantage of that part of the bank's charter permitting it to do an insurance business. The first loss was paid on February 21, 1822, but the business did not prosper, and on February 23, 1829, the business was given up, and in 1855, when the charter was renewed, the power was removed and the word dropped from the title. The first renewal of the charter of the bank was passed by the Legislature on November 14, 1821, to expire February 17, 1839. The second renewal of the charter was passed by the Legislature February 24, 1836, to expire February 17, 1859.
The year which preceded 1834 was a year of prosperity for the whole country, and New Jersey shared in this prosperity. The first cloud came in the latter part of 1833, when the opposition which the President of the United States, Andrew Jackson, felt towards the Bank of the United States, took definite shape. He announced that beginning in October, 1833, the government deposits in the Bank of the United States would be withdrawn to be deposited in certain State banks. The Bank of the United States was forced to curtail its loan in order to prepare its cash reserves for the expected withdrawal, and this resulted in serious embarrassment to trade and manufactures. New Jersey felt this action keenly, and especially was it a severe blow to a manufacturing city like Newark. Many meetings were held in this city, and petitions sent to Congress. But on April 2, 1834, the most important meeting was held at Trenton, with representatives from all parts of the State. Newark was represented by some of its most prom- inent citizens, among the number being Silas Condit, president of the New- ark Banking & Insurance Company; Amzi Dodd, Samuel Pennington, Isaac Baldwin and W. B. Kinney. President Jackson, however, could not be moved from his position, and withdrew the deposits from the Bank of the United States.
The hope of obtaining these deposits led to the formation of a large number of State banks throughout the country, though there were few organized in New Jersey. This resulted in a great expansion of credit and directly brought about the crisis of 1837. In March of that year several cotton firms in New Orleans failed, which resulted in the failure of a
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number of New York firms, involving several of the New York banks and causing distrust of the rest. The Dry Dock Bank there closed its doors on May 8, and the president of the Mechanics' Bank killed himself. On May 10 the banks of New York suspended specie payments, and in view of this action the directors of the Newark Banking and Insurance Company adopted the following resolution: "Whereas, information has this day been received in this city that the banks of the city of New York have suspended specie payments, it is therefore resolved that in view of the great com- mercial embarrassments of our country, payments in specie by this company be hereafter refused."
The latter part of the same year the Legislature suspended all pro- visions of law then in force regulating banks, including all penalties in case of refusal to pay specie, and in March of the following year this was con- tinued until fifteen days after the majority of the banks of New York and Philadelphia should resume payments. Meetings were held in New York to try to obtain an agreement by the banks of the country in regard to the resumption of specie payments. Eighteen States were represented at these meetings, the Newark banks having their representatives present. An agree- ment was reached to resume January 1, 1839. Resumption, however, was slow, and on August 15 the Governor of New Jersey issued a proclamation commanding the banks of the State to resume within fifteen days.
At the close of the year 1837 a report of all the banks in New Jersey was called for by the Legislature. This report showed that the three banks in Newark were the largest in the State, the Newark Banking and Insurance Company showing loans of over $565,000, the Mechanics' Bank of over $522,000, and the State Bank of over $413,000. These same banks held specie and notes of other banks as follows: Newark Banking and Insurance Company, $43,000; Mechanics' Bank, $35,000; State Bank, $91,000. The total resources were: Newark Banking and Insurance Company, $711,000; Mechanics' Bank, $642,000; State Bank, $553,000. They had at this time paid-in capital stock as follows: Newark Banking and Insurance Company, $508,250; Mechanics' Bank, $500,000; State Bank, $400,000 and surplus; Newark Banking and Insurance Company, $43,000; Mechanics' Bank, $38,- 000; State Bank, $11,000. The circulation was: Newark Banking and Insurance Company, $66,000; Mechanics' Bank, $31,000; State Bank, $40,000. The deposits and due to other banks amounted to: Newark Banking and Insurance Company, $75,000; Mechanics' Bank, $93,000; State Bank, $81,000. At that time they were all paying 6 per cent. divi- dends. Only two banks in the State carried any public deposits at this time-the State Bank of Newark being one with $15,000 on deposit.
In November, 1841, after serving as cashier of the Newark Banking and Insurance Company for over twenty-seven years, Aaron Beach died. On November 22 the position was offered to Mr. William M. Vermilye, then cashier of the Manhattan Company of New York, and accepted by him. Mr. Vermilye afterwards became a partner in the well-known Wall Street banking house of Vermilye & Co.
After serving as president of the bank for over twenty-two years, the loss of his health forced Mr. Silas Condit, on February 3, 1842, to resign as president and director. He was followed in office by John Taylor, elected February 28, 1842.
It is interesting to note that on March 16, 1843, James D. Orton was appointed a clerk in this bank. He afterward became cashier of the State
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Bank in Newark, and later organized the Second National Bank, serving it as cashier and president.
The banks of Newark were always ready to assist the government. This readiness was shown about this time by the purchase by the Newark Banking and Insurance Company of a considerable amount of the United States Treasury notes.
Mr. William M. Vermilye, who had come from New York to be cashier of the bank in 1841, resigned on July 20, 1843, to go into business for himself, and he was succeeded in the position by his brother, Jacob D. Ver- milye, who was at the time cashier of the State Bank in Newark.
It is an evidence of the hard times the country had passed through to see in the records of the bank, especially those covering the year around 1842, the numerous entries of settlements with bankrupt debtors and the taking over of much property. So much of this real estate was taken over for bad debts that it was found necessary to appoint a "committee on real estate taken for debt."
On August 11, 1846, Mr. Archibald Parkhurst was appointed teller in the bank. Mr. Parkhurst afterward became cashier of the bank at Mata- wan, New Jersey, and still later cashier of the St. Nicholas Bank of New York City.
The notes of the bank had been redeemed in New York by the Mer- chants' Bank for many years, and it was the custom for one of the officers to go to New York at regular periods to obtain the redeemed notes. On May 3, 1848, President Taylor was returning with a package containing about $50,000 of these notes which had been cashed by the Merchants' Bank. On leaving the ferryboat he forgot the package, having left it on a seat in the boat. He realized his loss as soon as he got ashore, and returned to the boat, but the package was gone. It was afterwards found that it had been picked up by a colored woman, she being discovered by her trying to spend the notes, which were of large denominations for one in her condi- tion. There was a considerable amount which was not recovered, and the loss was made good by Mr. Taylor.
For many years it had not been thought necessary to protect the books of the bank from fire, only the money and more valuable papers being locked up. But in September, 1848, the directors decided it was necessary to protect the books and an iron safe was purchased for the purpose.
After serving for over twelve years, Mr. Taylor, on September 14, 1854, resigned the presidency because of ill health, and as his successor the board of directors elected Mr. James B. Pinneo, who held that office for almost thirty-three years. Mr. Taylor did not live long after his resignation, as he died on February 25, 1856.
The Legislature on March 24, 1855, passed a large number of bank charters, and among them was one extending the charter of the Newark Banking and Insurance Company, which old charter expired February 17, 1859. This extension of the charter to February 17, 1879, provided, among other things, for a change of the name of the bank to the "Newark Banking Company." This change in title was to take effect in 1859, but the bank was allowed to use the new title at once on the circulating notes, and this change was made in 1856.
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