History of Cincinnati, Ohio, with illustrations and biographical sketches, Part 97

Author: Ford, Henry A., comp; Ford, Kate B., joint comp
Publication date: 1881
Publisher: Cleveland, O., L.A. Williams & co.
Number of Pages: 666

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CHAPTER XXXVI. BANKING-FINANCE-INSURANCE.

THE opportunity to write another book, and a pretty large one, is presented to any one who will treat in detail the history of these things, so important and weighty in the affairs of Cincinnati for nearly eighty years. We can in this chapter but put together some memoranda and extracts gathered in the course of our general investiga- tions.

THE MIAMI EXPORTING COMPANY.

The first banking institution in Cincinnati bore this unique title. It was chartered for the term of forty years at the very first meeting of the general assembly of Ohio, only five months after the admission of this division of the Northwest Territory into the Union as a sovereign State. The plan of the company was first mooted by that well known old settler, some years afterwards the donor of the ground upon which the court house and county jail stand-Mr. Jesse Hunt, who was himself an export- ing merchant. The agriculture and commerce of the infant west were then at their lowest point of depression, in which Cincinnati fully sympathized; and the direct ob- ject of the new institution was to reduce the difficulty and expense of transportation to New Orleans. Banking was at first a secondary matter, though its charter permitted the issue of a circulating medium, and its financial ope- rations subsequently became much more prominent than its commercial transactions. In 1807, indeed, on the first of March, it gave over all commercial schemes, and launched out into a financial career pure and simple. Its capital stock was one hundred and fifty thousand dollars -an immense sum for that day in Cincinnati-which was taken in one hundred dollar shares by one hundred and ninety holders. The official organization was quite similar to that of the banks of to-day. Eleven directors were chosen by the shareholders, who in their turn elected the president and the cashier. In 1815 the Rev. Oliver M. Spencer, the boy hero of the Indian captivity of 1792, was president, and Samuel C. Vance was cashier. Dr. Drake, in his book of that year, said: "The reputation and notoriety of this institution are equal to that of any bank in the western country, and its dividends corres- pond, having for several years fluctuated between ten and fifteen per cent." Some of the later troubles of this institution are chronicled in our chapters on the annals of Cincinnati, and need not be recapitulated here.

IN THE FATEFUL YEAR

of 1812 the finances and all kinds of business were again depressed, and the clouds of war hung darkly over the country. In the midst of general gloom the second bank in Cincinnati was started-the Farmers' and Mechanics'. It was founded in 1812, and chartered the next year, but only for five years, or until the time when the charters of all banks in the State were to expire, except that of the Miami Exporting company. Its capital was the then handsome sum of two hundred thousand dollars, held in fifty dollar shares. The president, by the charter, must be one of the directors, and of these one-third were to be practical farmers, and another third practical mechanics. The taking name of the bank was thus better answered and justified than sometimes happens in the history of such institutions. William Irwin was President in 1815, and Samuel W. Davies, afterwards the proprietor of the water works, cashier. By this time its paper was exten- sively in circulation, and dividends had been declared of from eight to fourteen per cent. a year. In 1819 this bank was made the depository of the public moneys re- ceived at Cincinnati.

Two years afterwards, and before the war had ended- in June, 1814-the Bank of Cincinnati was opened and began its issues. Money was now easily obtained, and was much more freely and abundantly in circulation. The proportion of capital to population is said, but prob- ably with exaggeration, to have been ten times greater than now. The capital stock of this bank was taken in fifty dollar shares, of which eight thousand eight hundred had been subscribed by the middle of 1815, and by three hundred and forty-five subscribers, who had actually paid in one hundred and forty thousand dollars. At first it had no charter, and was governed by twelve directors, with the usual executive officers. Mr. Ethan Stone was first president, and Lot Pugh cashier. Its notes were issued without stint, and went far and wide.

AFTER THE WAR.

During the struggle of 1812-15 there was compara- tively little foreign merchandise imported into this coun- try, and American money staid at home. But upon the restoration of peace the sails of commerce again speedily whitened the high seas, and the unwonted abundance of money naturally led to unwonted extravagance, especi- ally in the purchase of foreign wares and luxuries. Thus the country was speedily denuded of coin, commerce and domestic trade were contracted, credits were destroyed, debts had to be collected by force, and presently set in the financial disasters and the monetary crisis which lasted from 1817 to 1823. Cincinnati had her full share of its ills. The Miami Exporting company, the woollen factory, the sugar refinery, the iron foundry in which Generals Harrison and Findlay and Judge Burnet had invested large blocks of their means-all the chief props · of industry and trade in the embryo city-went down be- fore the terrible rush of this panic. It was during this tristful period that Judge Burnet, heavily indebted to the branch bank of the United States, sacrificed to that all- grasping institution, in payment of his obligations, the

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splendid property comprising the entire square upon which the Burnet house and the post office stand, now worth millions of dollars, for twenty-five thousand dollars. He had offered it to the corporation at a great bargain; but the over-cautious authorities in charge of the affairs of a new-fledged city refused to buy; so the grand op- portunity was lost.

The successful founders and operators of John H. Piatt & Company's Bank, however, had means, responsi- bility, and the confidence of the community sufficient to start their institution not far from the fall of the general calamities upon the world of finance, in the year 1817.

THE BRANCH BANK OF THE UNITED STATES.

The second bank established by the Federal Govern- ment received its charter from Congress in April, 1816. The next year, on the twenty-eighth of January, a branch was opened in Cincinnati, and some months afterwards another was established in Chillicothe. This was in pur- suance of the visit of deputations from the principal towns of Ohio to secure the establishment of branches at their several places. The Cincinnati branch was at first the only bank in the place. It was opened as an office of discount and deposit in April, 1817, withdrew from the field in October, 1820, and was re-established in May, 1825. In the years 1826-7 J. Reynolds was president, and P. Ben- son cashier. Gorham A. Worth, from New York city, but long a resident here, was the original cashier, and had a good board of directors at his back.

The State of Ohio asserted the right to tax these branch- es. A law was passed by the legislature fixing a levy of fifty thousand dollars upon each, if they should still be in business after September 15, 1819. The auditor of State was authorized and directed to issue his warrants for the collection of the said amounts. When the time arrived, the branches still being in operation, the authorities pre- pared for the collection of the tax, but were temporarily prevented by an injunction procured by a bill of chancery in the United States circuit court, in the absence of the State auditor, Hon. Ralph Osborn, who, under advice of counsel, declined to appear as cited, upon the fourth of September, the day fixed for the hearing. He was en- joined from proceeding with the acts of collection, al- though the bank was at the same time required to give bonds to the amount of one hundred thousand dollars. A copy of the petition for an injunction was served by an agent of the Cincinnati branch upon the auditor, with a subpoena to appear before the court on the first Mon- day of the next January. He had, however, no copy of the writ of injunction allowed; and the auditor enclosed the other papers to the secretary of State, with his warrant for the tax levy, desiring that if, upon legal opinions, they did not amount to an injunction, he should have the warrant carried into effect-otherwise to take no further steps in the matter. The counsel of the State giving ad- vice that no injunction had been served-as was doubt- less the case, technically-the writ for collection was passed to Mr. John L. Harper, with instructions to de- mand payment at the bank, and, if refused, to take the requisite amount from its vaults, if he could do so with-

out using force. If violently opposed, he was simply to depose to the facts before a magistrate. Mr. Harper, in company with Messrs. J. McCollister and T. Orr, entered the banking-house on the seventeenth of September, and made the demand, after making sure their means of ac- cess to the vault. He was refused, of course, but not met with force and arms, and quietly carried off ninety-eight thousand dollars in gold, silver, and bank notes, which were turned over to the State treasury three days later.

The gentlemen making this seizure had now to con- front the majesty of Federal law, in answering to a charge of contempt of court, by violating the terms of the in- junction. They were arrested and imprisoned, and the money procured and returned to Cincinnati. After long delay, the case, upon an appeal to the United States su- preme court, received its final hearing in February, 1824, when a decision was rendered affirming the decree of the court below by which payment of the tax was refused. The State made no further effort at collection, though the bank was deprived for some years of the advantage of the State laws in the transaction of its business, particu- larly in making its collections ; and the legislature made a fruitless attempt to secure a change in the Constitution of the United States, removing such matters from the jurisdiction of the Federal courts.

During the pendency of the case, in December, 1820, and the ensuing month, the following remarkable resolu- tions were also debated and passed by the Ohio Legisla- ture :

That, in respect to the powers of the governments of the several States that compose the American Union and the powers of the Federal Gov- ernment, the general assembly do recognize and approve the doctrines asserted by the legislatures of Kentucky and Virginia, in their resolu- tions of November and December, 1798, and January, 1800, and do consider that their principles have been recognized and adopted by a majority of the American people.

That this general assembly do assert, and will maintain, by all legal and constitutional means, the right of the State to tax the business and property of any private corporation of trade, incorporated by the Con- gress of the United States, and located to transact its corporate busi- ness within any State.

That the Bank of the United States is a private corporation of trade, the capital and business of which may be legally taxed in any State where they may be found.

That this general assembly do protest against the doctrine that the political rights of the separate States that compose the American Union, and their powers as sovereign States, may be settled and deter- mined in the supreme court of the United States, so as to conclude and bind them in cases contrived between individuals, and where they are, no one of them, parties direct.

Thus is outlined one of the most interesting chapters in the history of banking and finance in Ohio.

Within a few years after the foundation of this bank, and during the financial crisis above mentioned, its offi- cers received orders to put at once in suit every debt that was due and over-due. The execution of this order added immeasurably to the distress which the business men of Cincinnati were already suffering. Many of the best of them were ruined; the troubles were complicated and in many cases irreparable; and the community did not recover from the shock for many years. It was at this time that Judge Burnet was compelled to make the sacrifice of his home property mentioned in a former paragraph.

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HISTORY OF CINCINNATI, OHIO.

Some interesting reminiscences of this period were con- tributed to Cincinnati Past and Present by the late Timo- thy A. Kirby :

Cincinnati was one of the points selected in 1816 for a branch of the bank. The advent of that institution, just after the close of the war, was at a critical time in financial affairs. Imports had been suspended for several years by the war, and home manufactures stimulated into a premature existence; but were then in process of being crushed out by an overwhelming avalanche of British goods poured into the country. The war debt was large, and that portion of it held at home supplied remittance bonds to pay balances abroad in lieu of specie; thus saving the bank from immediate pressure, while the country was being demor- alized by improvident trade of a one-sided character. Gorham A. Worth took charge of the Cincinnati branch, supported by a local board of directors, one of the leading spirits of which was the late Hugh Glenn. The leading men of Cincinnati were largely indebted to the local banks; their resources were mostly in lands, estimated at high values. The notes and bills discounted by the branch bank became to a large extent mere transfers of previous debts from the local banks. Such a business was unsound, and of course resulted in disaster in about four years. By the year 1820 matters came to a crisis. The credit of many leading men was shaken, but still they were mostly sound in real estate assets, in case their lands maintained their values. At that day the merchants and business men of Philadelphia held Cin- cinnati in leading strings. It was of the utmost importance to the peo- ple of the small city to keep good faith and preserve the good opinion of the large city with which they traded. Unfortunately a little sharp practice on the part of a very small number of the people of Cincinnati had the effect to create an unjust prejudice at Philadelphia. In the course of business all the local banks became heavily indebted to the branch bank, and among these one under the management of wealthy Cincinnati and Newport men shut down, indebted one-third of a mil- lion or so to the branch. That was a large sum at that day; and to save it the head cashier was sent out, and was drawn into the accept- ance of lands at an enormous valuation from the local banks. The home directors and stockholders of the United States bank were in the belief that they had been imposed upon, and that Cincinnati and her lands were a bubble, maintained by the State valuation law and by the united action of a people indebted to insolvency. It may be safely said that this one settlement, made notorious by exaggeration, in its sub- sequent effects cost the people of Cincinnati millions of dollars in the unjust disparagement or depreciation of its lands, and consequent losses in after settlements and also to pay the heavy indebtedness to the merchants and banks of Philadelphia and elsewhere.

The Cincinnati branch was promptly withdrawn, and the business closed up by an agency. Some of the heaviest claims were lost, being discounts of a wild character, while the good claims were collected for the most part in real estate. The titles of the property held by the bank were perfected as far as practicable, and after about two years the property was put on the market and sold in small parcels in install- ments favorable to the growth of the city, and in a careful manner, to protect the interests of the bank.

In the year 1825, the United States bank sent out to Cincinnati Peter Benson, to open another branch of their bank at Cincinnati, supported by a good local board of directors. They enforced specie payment, compelled the local banks to keep their circulation within safe limits, and supplied exchange at fair rates. Their discount for notes and bills was for the most part done on a safe footing. There is no doubt that the general management of the Cincinnati bank, from 1824 to 1836, was highly advantageous to the business in the west. Mr. Biddle and his board of directors at Philadelphia succeeded admirably during the con- gress charter in sustaining the interests of the stockholders and in pro- moting the business of the country, Under the Pennsylvania charter they broke down and sunk the capital of the bank in their futile efforts to maintain specie payments in the face of an excessive foreign trade, stimulated to a disastrous extent by the government policy of the time. The bank should have suspended payment two years sooner, while their assets were sound and not have gone into the folly of remitting State bonds and other trash, to Europe, to meet the huge trade balances of that day.

Colonel James Taylor, of Newport, a young man at the time, has vivid recollections of the career of this Branch bank, some of which he has courteously com- municated to the writer of these pages. He says:

This bank was a large-sized shark, as it ate up all the small banks in

the city-to-wit: The Maine Exporting company, the Farmers' and Mechanics' bank, and the Bank of Cincinnati, together with other banks in Ohio. Many citizens of Cincinnati were injured by the bank -among them General William Lytle (it broke him up), Judge Burnet, Mr. Carr, St. Clair, Morris, William Barr, and others. Lytle had to give up his homestead, now owned by Dr. Foster and others, and some tracts of land in Hamilton and Clermont counties. Burnet gave up his homestead, where the Burnet house stands.

I know the bank made large sums of money out of its debtors. I, as well as my father, bought considerable property of the agent, taken for debts. The money was mostly made from vacant ground, taken and subdivided, and the rise of property.

The bank wound up and established an agency, which existed over fifty years. George Jones was the first agent, in 1823; Herman Cope, the second; and Timothy Kirby, deceased, the third. Property was low in 1823-4, and their debtors were forced to give up property to a large amount. The bank, by rise and subdivision of property, made millions of dollars, and only wound up by Kirby a few years ago.

This United States bank, instead of being a benefit to Cincinnati, was an injury, as it forced into bankruptcy the other banks in the city, and involved many of its most influential citizens.

FINANCIAL NOTES.

The local bank rule in 1819 was that "all notes for discount must be dated and deposited in the banks the day previous, before one o'clock P. M., except those for the Branch bank, which must be dated on Tuesday." The banking hours then were only from 10 A. M. to I P. M.

Mrs. Charlotte Chambers Riske, formerly Mrs. Israel Ludlow, makes this entry in her journal for August 2, 1820:

The depressed state of money matters creates much uneasiness among business men. The gentlemen have formed an association for the reduction of family expenses, superfluities of dress, amusements, etc. Mr. S. insisted upon the entire disuse of tea and coffee. Dr. D. [Drake, probably] argued against the tea measure.

By 1829 the United States Branch bank, having now a capital of one million two hundred thousand dollars, was the only banking institution left in the city. A char- ter for another had been obtained at the previous session of the legislature, but the stock had not yet been sub- scribed. The Commercial bank was shortly started, at No. 45 Main street; Robert Buchanan, president. At the legislative session of 1830-1 the Savings bank was in- corporated, and it was organized the following March, with George W. Jones president and H. H. Goodman secretary. Its habitation was at Goodman's Exchange office, on West Third street, near Main.

The well-known Franklin bank of Cincinnati, for many years occupying the classic structure on Third street, near Main, bearing its name on the front, was in- corporated February 19, 1833, with a capital of one mil- lion of dollars.

The Exchange bank was founded October 1, 1834, at No. 154 Main street. The celebrated Ohio Life and Trust company was incorporated in February of the same year. This institution had very extensive powers- to make insurance on lives, grant and purchase annui- ties, make other contracts involving the interest or use of money and the duration of lives, to receive moneys in trust and accumulate the same, accept and execute trusts of every description, receive and hold lands for the transaction of business or such as may be taken in pay- ment of debts, buy and sell bills of exchange and drafts, and issue bills or notes to an amount not exceeding thrice the amount of the funds deposited with the company for

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not less than a year, other than the capital stock. Twenty trustees managed the affairs of the company, each of whom, was a stockholder to the amount of at least five thousand dollars. The charter was not to be repealed or amended before the year 1870. By 1835 it had two mil- lions of capital and had become a powerful institution.

In January, 1835, according to the tabular statement by the auditor of State, the banks of Cincinnati were the Ohio Life and Trust company, the Commercial, Frank- lin, and Lafayette. The capital of the first was put as we have stated in the preceding paragraph; that of each of the others was one million, which was all paid in for the Commercial and Franklin, but only one-fourth for the Lafayette. Judge Hall, the distinguished writer, was at this time cashier of the Commercial bank, and became its president in 1853.

A VIEW OF 1831.

The compilers of the city directory of 1831, just half a century ago, were moved by the state of the money market to say:

Money for several years has been in great demand in Cincinnati. The banks discount notes at six per cent., and do a heavy business, but the market-price of money is much greater than that. As there are no usury laws in Ohio, money sells at its real value. Ten per cent. is now considered the market-price of money secured by mortgage, unless the sum loaned be very large. Upon personal security the rate of interest varies from one per cent. a month to three, the rate varying, of course, according to circumstances. The high rates at which money may be safely invested at interest, are gradually attracting the notice of eastern capitalists, to the great profit of our citizens and all concerned. It may startle eastern men to say that money can be borrowed to carry on any business at such high rates of interest, with profit; but there is no doubt of the fact.

THE GREAT BANK BUILDING OF 1840.

The time-honored edifice on Third street, to which we have just referred in connection with a brief notice of the Franklin bank, was thus paragraphed in 1840, when it was new, in a contemporaneous number of the Cincin- nati Chronicle:

The new cdifice for the accommodation of the Franklin and Lafayette hanks of Cincinnati, has been completed. It stands on the north side of Third, between Main and Walnut streets-a very suitable location for the business of the city, hut not the most eligible for the display of its magnificent portico, except when the ohserver is directly in front, on the opposite side of the street. The architect is Mr. Henry Walter, to whose skill and cultured taste many. public and private edifices of this city bear testimony.

Its portico was described as occupying the entire front of the building, with eight Greek-Doric columns, each four feet six inches in diameter. It was of the same style as the building for the Bank of the United States at Philadelphia, which was modeled from the Parthenon. It was built of freestone from the banks of the Ohio river, near the mouth of the Scioto. The roof was covered with copper. It is a notable building in the financial history of Cincinnati.

THE BANKS OF 1841

were the Life and Trust company, keeping good its capital of two millions, with Micajah T. Williams for president, and James H. Perkins, cashier, the Franklin, with one million, John H. Groesbeck, president ; William Hooper, cashier; the Lafayette, with one million, Josiah

Lawrence, president, W. G. W. Gano, cashier; the Com- mercial, one million, James Armstrong, president, James Hall, cashier; the Bank of Cincinnati, G. R. Gilmore, president, George Hatch, cashier; the Miami Exporting Company (redivivus), with sixty thousand dollars capital, N. W. Thomas, president, J. M. Douglass, cashier ; Mechanics' and Traders' Bank, E. D. John, president, Stanhope Skinner, cashier ; Exchange Bank, two hundred thousand dollars capital, owned chiefly by Mr. John Bates, A. Barnes, cashier; the Branch Bank of the United States, Timothy Kirby, agent ; Cincinnati Savings Institution, George W. Jones, president, P. Outcalt, cashier. The last-named received the smallest sums on deposit, and paid interest on all sums beyond five dollars. Cincinnati was now well provided with banks, at least in number and financial strength, and the respectability of the men connected with them. Their aggregate capital was over six million dollars. The Life and Trust Com- pany was at the corner of Main and Third; the Com- mercial on the east side of Main; the Merchants' and Traders' on the east side of Main, between Third and Fourth, and the Franklin and Lafayette, of course, were in their own building on Third street.

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History of Cincinnati, Ohio, with illustrations and biographical sketches, Part 97

Author: Ford, Henry A., comp; Ford, Kate B., joint comp Publication date: 1881 Publisher: Cleveland, O., L.A. Williams & co. Number of Pages: 666

Author: Ford, Henry A., comp; Ford, Kate B., joint comp
Publication date: 1881
Publisher: Cleveland, O., L.A. Williams & co.
Number of Pages: 666