USA > Ohio > Montgomery County > Memoirs of the Miami valley > Part 21
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This habit had been common prior to 1850 and does not seem to have been confined to any one class of banks. About the time the State bank of Ohio was established it was generally known that Ohio banks had agencies in Illinois to distribute their paper for circulation, with the object of keeping it at a distance and preventing its return for redemption. The Commercial bank of Cincinnati had a St. Louis "agency" which became a federal de- pository. In 1854, the report of the special bank examiner, Charles Reemelin, shows that the practice of exchanging notes and keep- ing their circulation as far from the bank as possible was still common to all the banks of the state. He estimated the illegitimate cost to the state from extra exchange, note shaving, and broken banks at $750,000 a year. And H. F. Baker, in his history of Ohio banks two years later, declared this amount too low, in view of the
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fact that the exports and imports of Cincinnati alone for that year were nearly $90,000,000.
During the three years, 1852-4, fourteen of the authorized banks in Ohio failed, or closed up for other reasons. Of these, ten disappeared from the State Auditor's reports in the year 1854, three of them being old banks, three free banks, two independent banks, and two branches of the State bank. Of the four classes of banks in the state then, there remained at the close of 1854 but one old bank, nine independent banks, ten free banks, and thirty-seven branches of the State bank. The old bank was the Ohio Life In- surance and Trust company of Cincinnati. The capital of this in- stitution was $2,000,000, only about $600,000 of which, however, was employed in its banking business, the remainder being used in the insurance and trust department. This company was. conser- vative and its business said to be conducted in the most careful manner, while the Commercial bank of Cincinnati was classed among those considered guilty of some one or other improper practice, and the City bank of Cincinnati and the Savings bank of Cincinnati were considered more or less liable to censure and loss.
Without doubt the legislation on the subject of taxing the banks had been varied and somewhat vacillating. Prior to the general banking law of 1845 the general principle followed had been that of a tax on dividends. And the law of Feb. 24, 1845, authorizing the State bank of Ohio and other banking companies required the banks to pay, in lieu of the tax on dividends, 6 per cent on the profits after deducting expenses and ascertained losses. This law was amended March 2, 1846, the same day the Ohio legislature passed the Alfred Kelley general property tax law, and all the banks except the Ohio Life Insurance company and those organized under the State bank law, were required to set off for the state 6 per cent of their gross profits in lieu of the tax on dividends. Finally an act was passed, March 23, 1850, providing that each bank, whose charter did not provide another mode of tax, should report the amount of its capital and surplus and be taxed on that sum at the same rate as was assessed on money at interest at the place where the bank was located. By January, 1851, five banks had accepted the terms of this act, and thus there was quite a diversity of bank taxation in the state. The Ohio Life Insurance and Trust com- pany, for example, under its charter was taxed but 5 per cent on its dividends, the new banks organized under the State Bank law of 1845 paid 6 per cent upon their profits, except those that accepted the terms of the act of March 23, 1850, and these paid the regular property tax rate on their capital stock and surplus fund.
Meanwhile the new constitution was adopted, in June, 1851, con- taining clauses providing that all property, personal or real, should be taxed by a uniform rule; and that laws should be made taxing notes and bills discounted or purchased, moneys loaned, and all other property of all banks then existing or afterwards created in the state, so that all property employed in banking should always bear a burden of taxation equal to that imposed on the property of individuals. In accordance with these clauses, a law was passed, April 13, 1852, requiring that all banks of issue should make returns
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under oath of the average amount of their notes and bills discounted or purchased, on which any profit was earned; also of the average amount of all their other moneys, effects or dues, which were loaned or otherwise used with a view to profit. On these amounts they were then to be taxed at the same rate which individual property paid.
These provisions the banks considered very oppressive and un- just, claiming that they were thus taxed on three times the amount of their capital, or what individuals would pay on the same capital. Many banks refused to pay the tax and carried the matter into the courts, claiming that if they were not sustained they would have to go out of existence. In April, 1852, the Dayton bank, an inde- pendent concern, decided to wind up, saying that their taxes would have been $6,000 as compared with $1,100 the year before. About the same time the Franklin Branch bank of Cincinnati closed as a bank, and the firm of Groesbeck & Co. took its place, the view being expressed that the tax was much less on brokers than on banks.
A bill to enforce the collection of the bank taxes was promptly brought before the legislature of 1853. It was opposed by the Whigs and by some of the Democrats, especially the bankers in the party, a Mr. Beckel, a prominent Democratic bank president of Dayton, being one of those active in opposition to the law. But nevertheless, on March 14, 1853, it became a law, and was known as the famous "Crow Bar Law."
In 1854, the tax law of April 13, 1852, was declared unconsti- tutional so far as it related to the banks organized by the law of 1845, the United States Supreme court holding that the fact that the Ohio constitution permitted such a tax did not release the state from its contract. The Cincinnati Enquirer called the decision a blow at state sovereignty, the view having been held by the dominant party in the state that the power of taxation was an act of sovereignty which one legislature could not part with in perpetuity.
In Ohio, as in other parts of the country, the years 1850-52 had been years of comparatively low prices. Then followed a gradual rise until they reached a high level in 1855. Thus in Cin- cinnati, from 1851 to 1855 the price of wheat rose from 58 cents a bushel to $1.62, corn from 30c a bushel to 43c, flour from $2.95 a barrel to $8.10, whiskey from 16c a gallon to 341/2c, hogs from $4.55 a hundred to $6.30, pork from $12 a barrel to $16, lard from 7c a pound to 1034c, and tallow candles from 10c a pound to 15c. In 1856, all these prices show a decided falling off, while in 1857 they were about as low as in 1852. A fall of stocks in the summer of 1857 caused great embarrassment to many eastern bankers and others who held call loans for which they had taken stock col- lateral. And on August 24th, the crisis was occasioned by the failure of the Ohio Life Insurance and Trust company, with liabili- ties running into millions.
This institution had enjoyed excellent credit; its home busi- ness had been well and carefully managed; and its directors as well as the public thought it sound and prosperous. Its failure was due to big speculative operations by the cashier of its New York office.
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The deposit balances in New York had been employed in common by the Cincinnati and New York offices, discounted upon to some extent in the west and the remainder loaned by the New York cashier under the advice of a sub-board of eastern trustees.
The failure of the Life and Trust company precipitated a panic in New York. Many of the Ohio banks had kept their New York accounts with this institution and its failure seriously crippled them. Almost all the branches of the State bank had made the Trust company their New York agent; and throughout this try- ing period they continued to redeem their notes. Among other recommendations in the plan adopted by the board of control of the State bank, in September, 1857, to enable the branches to con- tinue specie payment was one urging the branches, which had not already done so, to co-operate in the note redemption agency which had been arranged in Cincinnati by some of the branches, in May, 1857.
In 1850, some of the branches in conjunction with other banks in the state established an agency in Cincinnati, where on account of the course of trade the circulation of Ohio banks concentrated, with the object of checking the continual drain of specie from their vaults, and of keeping their notes equal to coin by furnishing eastern exchange for them, at all times, at about the cost of trans- porting coin. In May, 1854, the scheme was renewed by the branches of the State bank. A fund was raised and placed in the Mechanics' and Traders' branch at Cincinnati for the purpose of returning to the proper bank and converting into eastern exchange all notes that were depreciated below those of the State bank. The Merchants' and Traders' branch failed in November of that year, however, and again the agency was closed. On May 20, 1857, a similar arrangement was made with Kenney, Espy & Co., a Cin- cinnati banking house, for the special purpose of returning the notes of Kentucky, Indiana, and Virginia banks.
Speculation had so controlled the rate of exchange between the east and the west that the feeling had become pretty widespread that the establishment in Cincinnati of some sort of clearing house for the banks of Ohio, Indiana, and Kentucky would result in sub- stantial benefits to the sound banks and give additional protection to the business community. Governor Chase recommended it in his message in January, 1858; the Cincinnati Chamber of Commerce indorsed it in April; and in June a convention of Ohio, Indiana, and Kentucky bankers met in Cincinnati and proposed a plan which the branches of the State bank of Ohio undertook to put into opera- tion. This movement was stopped, however, by the discovery of legal difficulty in the way of locating the agency of a foreign bank in Ohio.
Cincinnati was then the monetary center of the west. There was an annual demand there for exchange, chiefly on eastern cities, amounting to sixty or seventy million dollars. Accordingly, with good prospects of success a bank somewhat on the plan of the Suffolk bank of Boston was organized in Cincinnati under the free banking law of 1851, and a contract was made with the State bank of Ohio by which its branches were to deposit with the new
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bank an amount equal to 4 per cent of their authorized circulation, free of exchange interest, and the latter was to sell eastern ex- change at a rate not to exceed 1/2 per cent premium.
This new redemption agency soon increased its capital stock to $500,000, of which $300,000 was to be offered in Cincinnati and $150,000 in New York and other eastern cities. This institution continued to act as redeeming agency for the State bank of Ohio until Nov. 20, 1861, at which time foreign notes, except those of the bank of the State of Indiana, were no longer current in Ohio.
Most of the financial trouble in Ohio, in 1857, had originated not in authorized banks of issue, but in the failures of private bankers and of the Ohio Life Insurance and Trust company, whose power to issue notes had terminated Jan. 1, 1843. The failure of this institution in 1857 removed the last representative of the old banks organized under special charters, with no security for their circulation except their general assets. The branches of the State bank and the independent banks were organized under the law of 1845, which gave them existence only for twenty years. Conse- quently, when the Civil war broke out and the National Bank Act was passed many of them took advantage of the opportunity and became National banks. Of the first ten National banks or- ganized in 1863, six were in Ohio, and two of these were located in the Miami valley, at Dayton. At the beginning of 1864 there were approximately 200 banks in Ohio with over $12,000,000 capi- tal, and twenty-seven of these were private banks and located in Hamilton county.
After the passage of the National Banking law, the notes of the State banks had to compete with the new National Bank notes and the greenbacks, or notes of the Federal government. They held their own, however, until the Federal tax of 10 per cent upon the issues of State banks, early in 1865, forced the retiring of the circulation of all State banks; and this, together with the expiration of the charter of the State bank closed a period of Ohio's banking history, that of State banks organized under general laws and issu- ing notes secured by a safety fund or deposit of government bonds. Henceforth note issue ceased to be a function of banks organized under state laws.
TRANSPORTATION
I "T is a far cry from the winding trails of the Indian along the high ridges of the Miami country to the swift-winged aeroplane of the twentieth century, yet it remained for this rich valley whose early commercial development was so greatly retarded by inade- quate transportation facilities to give to the world that almost un- believable invention which became the eyes of the armies in the great world war, and which is being rapidly developed into com- mercial possibilities. It was just about the beginning of the nine- teenth century when a sufficient number of early settlers had occu- pied land in the Miami country to make the question of disposition of their surplus agricultural products and modest requirements one involving the problem of transportation.
The founding of Columbia and Losantiville, afterward Cincin- nati, formed the nucleus of the fifth community district of the Ohio valley, and with the first budding of commercial opportunity came the pioneer merchants with the then luxuries of groceries, dry goods, tobacco and whiskey. As these were exchanged for agricultural products and furs and skins, the more adventurous farmers and trappers who had broken farther into the forest, made their way by blazed trails and Indian and buffalo paths to the river settlement in order to barter their products for those imported from the east.
The stocks of these pioneer merchants were chiefly bought in Baltimore and Philadelphia, and transported in the specially built wagons of those days to Pittsburg, at a cost of from $5 to $8 per hundred weight. The goods were then loaded into keel-boats and floated and poled down the Ohio to Cincinnati. These keel-boats were long and narrow, constructed with a view of navigating the swift waters of the river, and of being poled in shallow places, or towed by hand from paths along the bank. A more pretentious type, known as a barge, was from 75 to 100 feet long, and from 15 to 20 feet wide, carrying from fifty to one hundred tons. Some of them were equipped with masts and sails, and carried as high as sixty men to ply the oars, and were capable of making as high as fifteen miles a day against the current. About two trips a year were made by each boat between Pittsburg and New Orleans.
About 1800 the sailing barge reached a state of development which permitted operation with greatly reduced crews to between from $5 and $6 a ton between Cincinnati and New Orleans, thereby greatly stimulating the exports from the valley.
It was by means of this type of boats that the merchandise from the east, dragged so laboriously over the mountains, completed its journey to Cincinnati, if, indeed, that journey were ever completed. It was not unfraught with danger, both to the crew and cargo, for frequently the merchant purchased his own boat, and, being unfa-
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miliar with the shoals and rapids, lost his property or even his life, on the journey. If successful, the trip required about twenty days. Safely arrived, the goods might be placed on sale in the frontier stores to await the incoming customers, but the more ambitious found it necessary to seek out the settlements, then forming, further up the valleys of the Miamis. As the trails were only wide enough for a man to advance single file, carrying limited supplies upon his back, crude roadways were soon broken through in order that the goods might be hauled to the new communities. At this point ad- vertisements would be sent out and traders invited to ride or walk in to inspect them. While the volume of barter was greater than that of sale, and the early flow of commerce set in for both import and export, the provisioning of the army engaged in Indian warfare furnished a profitable source of business, and the passage of the troops led to a considerable improvement of the roadways. Never- theless there was but little development along this line, and the ex- pansion of commerce in the Miami country was materially retarded by the inaccessibility of interior points, which could only be reached by loaded wagons under the most favorable weather conditions.
The economic demands of the new territory were such, how- ever, that these avenues of transportation gradually took the form of a system. Five thoroughfares radiating from Cincinnati were fairly well developed before 1809. One of these led to Lebanon; another through Hamilton and Franklin to Dayton; with laterals branching out through the Miami valleys. At Dayton connection was made for Springfield, Urbana and Piqua, and branches from Hamilton extended eastwardly through Lebanon to Chillicothe, join- ing the Zane Trace, which in turn extended through Lancaster and Zanesville to Wheeling. Another branch from Hamilton reached Eaton. Up the river through Columbia a roadway extended through Williamsburg, Newmarket and Bainbridge to Chillicothe, and an- other to the west followed the river to Cleves. A fifth passed through the blue grass region to Lexington.
During the process of the evolution of these highways, access was found to some of the more northern points of the Miami valley region by keel-boats passing up the Great Miami, and floating back with a return cargo. The treacherous and rocky character of this stream made the undertaking one of difficulty, but it appears that a considerable amount of produce was shipped in this way, sometimes continuing down the Ohio and Mississippi rivers to New Orleans.
Flour, bacon, whisky, pelts and venison were the principal commodities shipped over this route. In the meantime river trans- portation had improved and, with the influx of settlers, better types of boats were put into commission. A packet line was established between Pittsburg and Cincinnati, making the trip every two weeks. The boats were armored in a crude way, and equipped with small cannon, in addition to rifles and muskets as a protection against Indians.
The difficulty of up-river transportation soon began to popu- larize travel by land, and the road from Wheeling to Maysville laid out by Ebenezer Zane, as well as that through Chillicothe, became more and more frequented by parties from the east.
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The War of 1812 impressed upon the nation the necessity for military roads to take the place of the rough highways which were passable only at certain seasons, and the Miami country came in for its share of a pioneer good roads movement, which spread through- out the east and penetrated more slowly into the west. Many maps were made and many turnpikes proposed, but little was actually accomplished until more than a decade later.
That historic highway, the Old National road, was extended into Ohio in 1825 and did not reach Springfield until 1837, connect- ing the northern section of the Miami valley with the eastern states and ultimately through Indiana to the west. However, in the decade beginning 1830 macadamized turnpikes multiplied with great rapid- ity. The most important of these were the Cincinnati and Hamilton turnpike, twenty-five miles in length, the Harrison turnpike, twenty miles, the Lebanon and Springfield turnpike, forty miles, the Cin- cinnati and Wooster turnpike, twenty miles, and the Covington and Lexington turnpike, eighty miles in length. These were completed or well under way in 1840, and, together with the subsidiary or lateral roads made seventeen turnpikes interlacing the Miami valley and leading directly or indirectly into Cincinnati. From the earliest days the comparatively lower cost of water borne traffic was very apparent, and as early as 1815 Dr. Daniel Drake launched a cam- paign for the construction of a system of canals in Ohio. In 1819 Governor Brown took official notice of the movement, and in 1822 the legislature authorized a preliminary survey which led, three years later, to the authorization of the construction of the Ohio and Miami canals.
The latter exercised a most important influence upon the de- velopment of the Miami valley, knitting into it a community of interests and solidarity that was destined to become enduring. Built at a time when the roadways of this section were in a deplorable condition, it offered an opportunity for expansion which the Miami territory so badly needed. The canal commenced near the mouth of the Mad river at Dayton, descending the Miami valley through the villages of Miamisburg, Franklin, Middletown and Hamilton. From this point it followed the course of Mill creek to Cincinnati. The length of the canal from Dayton to Cincinnati was 67 miles, and it was completed in 1828. Later, the canal was extended to Piqua, and in the latter part of the 40's continued to the junction of the Auglaize and Maumee rivers, whence it continued to Lake Erie under the name of the Wabash canal.
The canal earned $8,507 in tolls, and ten years later its income amounted to $81,431. All kinds of products were transported over it, and a thriving passenger business conducted between Cincinnati and Dayton, and to some extent to northern points. In 1840 the governor of the state pointed with pride to the fact that the Miami canal had netted in excess of 6 per cent on the total cost of con- struction. This cost was upward of a million dollars for the section between Cincinnati and Dayton. The success of the Miami canal soon led to a movement for the construction of the Whitewater canal to connect Cincinnati with the Whitewater canal of Indiana, which was originally planned to extend from Cambridge City, on the Na-
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tional road, to Lawrenceburg on the Ohio, and of which forty miles had already been completed. This connection was made at Harrison on the Ohio state line about twenty-five miles from Cin- cinnati. It was confidently predicted by Historian Cist that "this canal will likewise be navigable during a greater portion of the year than that of any other canal in the state ; it being situated at the base of a hill which has southern exposure, and it will not only receive the direct rays of the sun, but will also have the benefit of its re- flected rays from the sides of the hills, as well as from the water from the rivers running along parallel with the canal. This will make a difference of from two to three weeks in the time of opening this canal in the spring."
The construction of this canal proved to be an expensive under- taking, costing $800,000, of which the state of Ohio subscribed $150,000, the city of Cincinnati $400,000, private individuals $90,000, the balance being raised by certificates and bonds issued by the com- pany. It passed over two wooden aqueducts, a freestone arch and through a 1,900-foot tunnel. The first boat reached the city in 1843. Heavy damages by floods seriously interfered with the success of the undertaking, and in later years it was finally abandoned, and the terminal at Cincinnati converted into an entrance for steam rail- roads.
The Miami canal was more prosperous, and the collection of $315,103 in tolls in 1850 moved the same historian to say : "As will be seen, our railroad facilities have not, thus far, reduced, nor are they ever expected to reduce materially or even relatively the canal business of Cincinnati and vicinity." It is interesting to note that Cist, in the next edition of his sketches and statistics of Cincinnati, published eight years later, makes no reference to the canals or in fact to any other kind of transportation than steam railroads.
It is nevertheless a tribute to the energy and resources of the Miami valley that the Miami canal at all times showed more vitality than any other artificial waterway in the state. It was laid out care- fully to follow closely rivers and other sources of water supply. The first spadeful of dirt was excavated by Governor DeWitt Clinton of New York, the father of internal waterway improvements in this country, by whose efforts the Erie canal in New York state had just been completed. There were bands of music, companies of soldiers, and orators from all parts of the United States. The ceremonies took place at the Doty lock, then about a half a mile below the village of Middletown, and now within the corporate limits of that city. Although a tablet was imbedded in the stonework when the Doty lock was completed commemorating the ceremonies, it, like the canal system of the state, has been neglected and its inscription is totally illegible.
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