History of the city of Toledo and Lucas County, Ohio, Part 96

Author: Waggoner, Clark, 1820-1903
Publication date: 1888
Publisher: New York and Toledo : Munsell & Company
Number of Pages: 1408

USA > Ohio > Lucas County > Toledo > History of the city of Toledo and Lucas County, Ohio > Part 96

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4.59

BANKS AND BANKING.

great West eould receive but little benefit from their issues. Co-operating with such influences, was the rapid influx of active and energetic settlers, who lost no time in seeking out the shortest roads to riches, through operations in tarm lands, Town lots and other speculations, all which called for currency " to meet the de- mands of trade." Impatient of dependence on outside Banks, and not a little resentful of the practice of favoritism by the Administration toward such " pets," the Western States re- sorted to different plans for meeting this press ing call. The natural result of such state of things was not delayed. It came, first, in the form of wild speculation and recklessness, al- ways induced by excessive currency and con- sequent facility for the means of traffic.

As early as 1835, the Government found itself charged with a burden evidently not expected, and which was mainly felt in connection with its land sales. Speculation was chiefly devel- oped in traffic in publie lands, which were pur- chased in vast quantities by speculators, as well as by an unprecedented tide of settlers from the East. All purchasers sought to pay in the cur- rency most readily to be obtained. This was soon found to be impracticable by the Govern- ment, since a large portion of such currency was of the issue of obscure Banks, without gen- eral credit or means for the redemption of their notes. Hence, it was necessary to select the Banks whose issues were deemed safe, and pub- lish lists of such for the information of land- buyers.

The result of this was most annoying and the cause of heavy loss to the purchasers. As will be seen, before visiting a Land Office, one was compelled to consult the latest published list of acceptable Banks, and provide himself accordingly. Of course, such choice placed the bills of the Banks named at a premium, and thus, at the outset, involved loss by the pro- posed purchaser. And not only this-do the best he could, he was liable to find, on arrival at the distant Land Office, that, subsequent to supplying himself with prescribed currency, more or less of the same, in consequence of the failure or diseredit of Banks, had been rendered useless to him, except as he might be able to exchange it at whatever "shave " might be de- manded by the " Money Changers," located " next door" to the Land Office. The result often was gross wrong through the extortion thus enforced by conscienceless operators.

A case in point, is that of Cyrus Darling, of Perrysburg, Wood County, whose statement made October 3, 1836, indicates something both of the condition of the curreney and of the modes of public business of those days. Mr. Darling said that in July previous to the date named he was at the Land Office at Lima, Ohio, for the purpose of purchasing land; and finding the currency he had with him was not "Land Office money," he was referred to a 32

small " Exchange Office " close by, where ao- ceptable money was to be had, for which he paid 5 per cent. premium. After getting this, he found that the land selected by him had been entered by another person ; and while looking for another piece the Office was closed. Ile then went to the Land Office at Fort Wayne, where he was required to pay to another Land Office " Exchange " 7 per cent. to get the same money changed ; making a total premium of 12 per cent. One man, who had paid 8 per eent., or 832 premium for the exchange of $400, found his land taken, and begged the re- turn of his money, which was refused. Ile seemed to be a hard-working young man.

As further showing something of the condi. tion of the currency at the West at that time, a copy of a "Shinplaster" is given here. It bears the names of two men subsequently emi- nent in publie life-both baving become mem- bers of Congress from Ohio, and one (the " President ") the Democratie candidate for Governor in the close contest of 1848, when Seabury Ford, his Whig opponent, was chosen. The "promise to pay " was as follows :

No. 48. (VIGNETTE, -Horse and Leader.)

5 ELOCUTORY BANK 5

ELOCUTORY BANK.

Will pay Thomas Blair, or bearer, on demand, FIVE CENTS, At the Office of the Cashier, Hamilton, Ohio. L. D. CAMPBELL, JOHN B. WELLER,

Cashier. President

MAY 27, 1837.

This is but a sample of a large portion of the " curreney " then in use throughout the West, and to large extent in other sections ; except, that most of it was the issue of firms and indi- viduals, and made payable in "current Bank notes," when presented in sums of one or more dollars.

The natural climax of the financial policy of the Government was reached in the issue of the " Specie ('ireular " of the Fall of 1836, for. bidding the receipt of anything but gold and silver for public dues, which operated greatly to aggravate the state of things, especially at the West.

In July, 1838, notes of the Banks of the several States, were quoted at New York at the discount here given, to wit :

Connecticut Bank, 23 per cent .; Rhode Island, 1} ; Maine, New Hampshire, Massachusetts and Vermont, 1; New Jersey, par to 4; Pennsylvania, 2 to 8 ; Dis- triet of Columbia, 33; Georgia, 5 to S; Ohio, 5 to 6 ; Indiana and Illinois, 6; Mobile, Ala., 14 to I6; New Orleans, 10; Natchez, 20 to 25; Canada, 5 to G. For collections-On Boston, &; Philadelphia, 2; New Orleans, 73 to 10; Mobite, 14 to 15.

In 1845, the first sound and effective Banking system was adopted in Ohio. It consisted ot the State Bank of Ohio, with Branches, to- gether with provision for Independent Banks.

FIVE CENTS.

490

IIISTORY OF TOLEDO AND LUCAS COUNTY.

Under the law, a certain amount of capital was fixed for the entire State, and which was apportioned to the different sections of the State, according to the assumed needs of the same, respectively. This apportionment was not always satisfactory, nor always just. The rule of " first come, first served," necessarily adopted, operated to secure to the earliest applicants

privileges assigned to a certain district. Hence, it was, for instance, that steps were taken at Findlay for a Branch of the State Bank; and when preliminaries were completed, it was found that Toledo had got the start by a day or two, and secured for itself all the Banking privileges apportioned to this section under the State Bank system.

While that system was not perfect, it was, by all odds, the best the State had then known, and soon commanded the general confidence of the people. It remained in operation until the creation by Congress of the system of National Banks, in 1863, which was made to take the place of all local Banks of issue by means of taxation of the latter amounting to prohibition. The result was, that most of the State Banks accepted and organized under the National system, which from the first commanded the confidence of the country to an extent far beyond anything previously existing. Two distinctive and highly important benefits have heen conferred by it: Ist. A currency so sound and reliable that the note's of every Bank, however obscure its location or small its capital stock, are current equally with those of the largest institutions at the centers of trade ; while all have credit at the principal money marts of the world. The second advantage arising from this system, consists in the un- precedented facilities for exchange thereby sup. plied. Until its adoption 24 years ago, all values in trade were more or less controlled by the rates for exchange existing at the several markets, and which depended on the value of the local currency at the point where the ex- change was to be used. The consequence often was, that a large per cent. of a dealer's receipts was required to get the balance into shape to be available for paying his indebtedness or for new purchases.

Some idea may be had of the embarrassment experienced in this connection in carly times, from a statement of the main reliance for ex- change then possessed. This consisted in cut- ting Bank bills into two equal parts from top to bottom, and then mailing to the payee one part of each bill so cut, accompanied by a description of the same, together with notice, that upon acknowledgment of receipt of the same, the other parts of the bills would be for- warded in like manner. As a result of the imperfect mail facilities of those days, it was not infrequent that the first remittance would be lost. In such case, public notice was given through the press of the fact, when the re-

tained parts of the bills would be sent to the proper Banks, by which they would be ex- changed for new bills, All this-or nearly all-was dispensed with in the establishment of a currency uniform in value at all points; whereby at the farthest there can be no cost for exchange beyond the actual expense for the transportation of currency to the point of use; while for much of each year, especially at commercial centers, currency is worth more than exchange, and at a premium-a condition of things in marked contrast with that which devolved upon Western and Southern dealers a loss of from 1 to 25, and even a higher per cent. of loss on their business for exchange.

Whether or not Michigan in her " Wild Cat " Banks, furnished the worst samples of the broods born of the " Pet Bank " system, may be in doubt ; but the necessarily intimate rela tions of Lucas County, and of Ohio generally, with that particular species, constitute a por- tion of the local history here proper to be furnished.

In its effects upon the business of this sec- tion, the wretched so-called " currency" of Michigan, was no less unfortunate than was the boundary question, which then had just been settled. In fact, the contest with the " Wild Cat " brood, while perhaps not more bloody than was the " Toledo War," nevertheless was far more calamitous to the material interests of both sides of the disputed boundary.

By the 1st of January, 1838, " Michigan money" had come to be a matter of serious concern, and of no little discussion in this region. The Banks had substantially all sus- pended payment, without the possession by the public of any proper information as to when or whether they would resume. For a time, this question seriously disturbed business eir- cles. The dealers of Toledo had divided as to the course to be pursued in this matter. De- cember 16, 1837, a meeting of citizens of Tre- mainesville and vicinity was held for the " con- sideration of the depreciation of Michigan money," with Horace Thacher in the Chair, and Cyrus Fisher as Secretary. After pro- viding for an adjourned meeting, with dele- gates from Sylvania, Bedford and Erie, ad- journment to December 22, at the house of P. 1. Phillips, Tremainesville, took place. At the adjourned meeting after discussion, it was resolved to stand by the Michigan Banks and receive such of their notes as circulated at home. The " Toledo merchants and dealers " who were discounting such bills at 123 per cent. were strongly censured for so doing, since such policy was likely to "injure the farmers and mechanics," turn " trade into other channels," and " drive the only currency they had out of the country." They would " ask no discount on such money," nor would " they deal, if within their power to avoid it, with any man who de- manded it"-an instance of " Boycotting,"

-191

BANKS AND BANKING.

practiced many years before Mr. Boycott, the Irish landlord, was subjected to the same means for coercion. The Committee reporting the resolutions consisted of Dr. Cyrus Fisher, John W. Collins, J. Porter Whitney, Thomas Wing, Coleman I. Keeler, M. W. West and M. 1. Whitney. To what extent local jealousy may have operated to array the Tremaines- ville business men so actively against the policy adopted at their young and rising com- petitor, cannot now be definitely stated.

The people of Manmee City, also, shared in this currency trouble. A meeting of merchants and other citizens was heldl in August, 1837, to take measures to prevent injury from the cir- culation of uncurrent Bank notes. Hiram Steele was the Chairman, and B. D. Coffin the Secretary. F. E. Kirtland, Dr. Oscar White, Timothy Griffith, Owen Williams and James Ilowe, as a committee, reported resolutions deprecating the embarrassment under which trade was conducted, and specifying the Bank notes which they would receive and the rates to be allowed for the same. They proposed, that " for the purpose of restoring the currency to something like a par standard, they would charge and exact the following rates of dis- count on Michigan Bank notes: The Banks in Detroit and the River Raisin Bank, not bank- able in Ohio, five per cent .; Erie and Kalamazoo Railroad Bank notes, eight per cent .; Washte- naw and Monroe, no sale; Clinton and Macomb County Banks, 25 per cent .; and other Michi- gan notes, 10 per cent." It was provided, that White & Kirtland, Morehouse & Brownlee, and S. A. & J. H. Sargent be a committee to report weekly through the Manmee City Express, " the standard value of Michigan Bank notes." It is safe to say, that these firms constituted the first recognized authority on the Maumee River for fixing the value of Bank currency.

An address delivered in February, 1878, by the late Alphous Felch, formerly a Bank Commis- sioner of Michigan, member of the Legislature and Governor of that State, and United States Senator from the same, furnishes much informa- tion as to the pioneer Banking system of that State. The first charter granted by the Legis- lative Council, was for the Bank of Monroe in 1832, with permission to establish a Branch at Pontiac. In 1835, several Banks were created and Banking privileges given the Erie and Kala- mazoo and the Detroit and Pontiac Railroad Companies. Although Michigan did not be- come a State until Jannary, 1837, a so-called State Legislature, early in 1836, undertook to grant Bank charters, of which that of the Bank of Manhattan was first in the list, it having been approved by the Governor March 25, 1836; following which were charters for the Banks of Calhoun County, St. Clair, Clinton, Ypsilanti, Macomb County, Oakland County, Tecumseh and Constantine. An attempt was

made to adopt a "Safety Fund System," after the plan which did not succeed in New York, the distinctive feature of which was that cach Bank was to deposit with the State Treasurer, at the beginning of each year, a sum equal to one-half of one per cent. on the capital stock paid in; and the fund so created was to be held and to be used for the benefit of the creditors whenever any Bank in the arrangement should become insolvent. This applied only to Banks thereafter to be created and such others as av- cepted the law. The process of Bank-creation then went on, and was greatly stimulated in 1837 by the suspension of nearly every solvent Bank in the country.

In order the more fully to keep afloat the circulation of the home institutions, the Mich- igan Legislature in June, 1837, passed an "art suspending for a limited time certain provisions of law," whereby the Banks were permitted to suspend specie payments until May 18, 1838. Not only this, but all banks which should be started before the 16th of May, 1838, should have the benefit of this provision. Thus was the door opened for the indefinite issue of paper, of the solvency of which there could be no possible means of ascertaining. Asa matter of course, scheming adventurers at all points availed themselves ofsuch extraordinary license. Under the General Banking law, 10 per cent. of subscriptions of stock was to be paid at the time of subscription, and 10 per cent. every six months; 30 per cent. in specie being required before the Bank was started. But this was not done. One recourse for evasion of the law, was the use of so-called " Specie Certificates," as a substitute for coin. These consisted of' re- ceipts given by officers of the Bank and by others acknowledging that they had received specie from the Bank. In other cases, specie was borrowed for the sole purpose of being counted by the Bank Commissioners. In one case, as officially reported, $5,000 in coin thus borrowed was counted three times and made to answer for $15,000 in three different Bank vaults. The Farmers' Bank of Genesee was started on $35,500 of certificates; the Exchange Bank of Shiawassee on $27,000; the Bank of Lapeer on $15,000; and the Wayne County Bank on $30,000 of the same sort of capital. The loaning of specie and of specie certificates to new Banks, came to be a regular business. and a source of profit.

Within one year, 49 different Banks were organized in Michigan under the general law. Of these, 40 went into operation, being one Bank for each 4,000 inhabitants of the State, with an aggregate capital stock of $3,915,000, or about 822 per capita. Hlad the law been complied with, there would have been an avail- able coin reserve of $1, 745,000, for the security of creditors; but there was probably not tive per cent. of such amount. Many Banks were

492

HISTORY OF TOLEDO AND LUCAS COUNTY.

located at points distant and inaccessible, scem - ingly for the purpose of preventing ready pre- sentation of their notes.

The year 1839 was one of marked fatality with these institutions; and in Deeember it was officially reported that there remained of the original brood but three having charters and one branch, and four of the 40 under the general law. There were then 42 under in- junction, prohibiting business by them. At least $1,000,000 of the notes of these Banks proved worthless, being chiefly in the hands of the people of Michigan, since they had little credit outside that State. To make more com- plete the final collapse, the State Courts, in 1845, declared the general law to be unconsti- tutional. This, of course, discharged all indi- vidual liability of stockholders, on which bill- holders' hope for relief almost wholly rested. Another decision (in 1848) held that a Bank Director could not be adjudged liable under the provision of the law declaring such liability.

The ease of the Farmers' Genesee County Bank may be taken as a sample of its class. Upon official examination it was found that there was in the Bank neither specie nor bills of other Banks; no officer in charge of the Bank; no set of books-nothing, save a file of " stoek notes," a file of receipts to stockholders, and unendorsed notes to the amount of $168,- 653.50. These notes were given by different persons-$60,000 by R. H. Jerome, President of the Bank, and payable five years from date ; and $52,000 by Rufus Brown, Jr., also payable in five years. There was no evidence of any security in real estate having been given, or that any coin was ever in the Bank. In the Exchange Bank of Shiawassee, no books were found giving any clne to the transactions of the concern. Five coppers, a counterfeit note of a New York Bank for $5, and a check for $3,000. were found in the vaults. The cirenlation of the Bank was $25,000. The books of the Jaek- son County Bank at Jackson, were found in- terpolated, erased and kept in pencil; while the "assets" consisted of boxes filled with nails, glass and iron. The Bank of White Pigeon had found itself so pressed for money, that it commenced the printing of its notes on common paper in the "shinplaster" style. These all were among the "Safety Fund Banks" of Michigan.

The experience of the young State of Michi- gan in connection with her outset in internal improvements-chiefly the Southern and Cen- tral Railroads-well illustrates both her em- barrassments and the general condition at the West, following the financial paralysis dating from 1837. For the purpose of carrying on its improvements, the State borrowed money at liberal interest, and deposited it in the State Bank of Michigan, as the safest known place for keeping. When called for, however, the money was not forthcoming. The Bank, in

explanation of its inability to respond to the State's demand in 1839, made report that the money had been loaned to and was then due from, the following named persons :

Stevens T. Mason, Governor. $ 4,414 30

John T. Mason, Governor's father 2.311 72

Calvin C. Jackson, Governor's Private Secretary 2,320 82

Charles W. Whipple, Judge. 8.402 64

28,003 71

Lewis S. Humphrey, Commissioner

11,705 00

Horace C. Comstock, Senator

44,090 00

Conrad Ten Eyck, U. S. Marshal

5.792 93

Lucius Lyon, Ex-United States Senator

900 00

Daniel Goodwin, U. S. District Attorney

2.000 00

David C. Mckinstry, Commissioner.

8,823 71

John Norton, Jr., Cashier.

6.4.6 37

Foster and Gibson, Commissioners

1,643 00

Kinsing Prichette, Bank Commissioner.

1,643 00

Justice Burdick, Ex-Commissioner

6,432 98

Thomas B. Clark, Director.

$9.440 00 3,710 00 437 95

Frederick H. Stevens.

29,850 00

John 1). Pierce, Superintendent Public Instruction ..

9,737 00

James Beaubien ..

1,000 00 10,000 00

Bank of Niles.

7,387 97

Bank of Marshall

30,000 00

C. & J. Wells.

8,974 00

Peter Morey. Attorney General_

100 97

Jolin S. Bagg

470 00

Total $245,454 97

The "individual liability " principle in Bank- ing adopted in Indiana, asindicated by the case of the Bank of Newville, was different from that of Michigan, though not adapted to as general application. In that case, it is credibly (though not officially) reported that the President of the Bank (Ladd Thomas) carried its " specie basis " (a double eagle) securely sewed in the seat of his buckskin pants .* This statement being true, hardly equals that of the Bank in Indiana in 1822, which was said to have issued skins of animals as currency, instead of notes. Thus, a raecoon skin passed for $1.00; an opossum for 50 cents; minks for 25 cents each ; rabbits at 123 cents, and squirrels for 1 cent. At length this, like most other currency, be- vame vitiated by counterfeits. Thus, coon tails were attached to 'possum skins, and passed at $1 00, while the tailless coons, without their pedal witness, maintained their true value nutil the fraud was detected.

The following " Specie Basis Bank Note Ta- ble," as published in tho Blade of February 18, 1842, shows something of the condition of the currency of the West at that time :

O1110.

Alt hanks, except the following 12} discount

Bank of Cincinnati

Bank of Steubenville broke

Circleville (chartered 1818) broke

German Bank of Wooster

Gallipolis. broke

Lebanon M. Banking Company failed

Mechanics' and Traders' Bank 15 dis.

Bank of Manhattan closed

Miami Exporting Company broke

Bank of West Union broke

Washington Bank

broke

*Historical address by Hon. A. P. Edgerton, now United States Commissioner of Civil Service.

Epaphroditus Ransom.

1,5:7 84

J. Mott Williams, Attorney and Director

Anthony Ten Eyck

John W. Wilson, Ex-Sheriff.

James B. Hunt, Commissioner

493

BANKS AND BANKING.

Post. Notes of State of Ohio t24 to 15 dis.

Bank of Granville. failed

Urbana Banking Company 65 dis.

ILLINOIS.

State Bank and Branches 35 dis.

Bank of Illinois 35 dis.

Bank of Cairo

Illinois and Michigan Canal Checks 35 dis.

INDIANA.

State Bank and Branches 1-t dis.

Indiana State Serip, $5 22 dis.

Indiana State Scrip, $50 32 dis.

MICHIGAN.

Bank of River Raisin 124 dis.

Bank of St. Clair 124 dis.

Farmers' and Mechanics' Bank 20 dis.

Michigan Insurance Company 123 dis.

All other Banks in the State various rates

EXCHANGE (SELLING).

On New York, premium 2 per cent.

On Buffalo 13 per cent.

Gilbart's " History of Banking in Ireland," furnishes in the case of a Bank at Killarney, a sample of Banking, which shows that the sort in vogue at the West half a century since, was not the first of its kind. A bill-holder, with companions, called on the Killarney Banker, who also was a Saddler, when the following in- lerview took place:

"Good morning to you, sir," said the caller, " 1 presume you are the gentleman of the house." " At your service, ladies and gentlemen," returned the Saddler. " It is here, I understand, that the Bank is kept," continued the gentleman. "You are just right, sir." replied the mechanic, " this is the Killar- ney Bank, for want of a better." " We have a few of your notes, which will be of no manner of use to ns elsewhere, and I'll thank you for cash for them." " Cash, plase your honor, and what is that ? Is it any- thing in the leather line ? I have a beautiful saddle here as iver was put across a horse, good, and cheap, upon my say so. Ilow much of my notes have you, sir, if you plase ?" Upon making computation the gentle- man found he had 16 notes, running from 3d. to 3s. 9}d. each, amounting to 15s. 9d. "There, sir, are no less than 16 of your promises to pay, for the amazing sum of tifteen shillings and nine pence, Sterling money." " } should be sorry, most noble sir," said the Banker, "to waste any more of your Lordship's time, or of those swate, beautiful ladies and gintlemen, but I have an illegant bridle here, as isn't to be matched in Yoorup, Aishy, Afriky nor 'Meriky. Its lowest price is fifteen shillings sixpence ha'penny ; we'll say fifteen shillings sixpence to your Lordship. If ye'll be pleased to accept it, there'll be a tuppence ha'penny, or a thrippenny note coming to your Lord- ship, and that will close the business at once."

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History of the city of Toledo and Lucas County, Ohio, Part 96

Author: Waggoner, Clark, 1820-1903 Publication date: 1888 Publisher: New York and Toledo : Munsell & Company Number of Pages: 1408

Author: Waggoner, Clark, 1820-1903
Publication date: 1888
Publisher: New York and Toledo : Munsell & Company
Number of Pages: 1408