Standard history of Pittsburg, Pennsylvania, Part 49

Author: Wilson, Erasmus, 1842-1922; Goodspeed, Weston Arthur, 1852-1926. cn
Publication date: 1898
Publisher: Chicago : H.R. Cornell & Co.
Number of Pages: 1192

USA > Pennsylvania > Allegheny County > Pittsburgh > Standard history of Pittsburg, Pennsylvania > Part 49

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At this time the Exchange Bank was the Government depository. It had the largest circulation compared with its capital of any bank here; but the Bank of Pittsburg, during part of 1844, had a larger sum of deposits than the other three combined-Exchange, Merchants' and Manufacturers' and Farmers' Deposit. The great fire of April 10, 1845, burned the building occupied by the Bank of Pittsburg, and burned out Sibbett & Jones, Allen Kramer and William A. Hill, exchange brokers. The bank moved into the building for- merly occupied by the Branch. The news that the bank had burned spread over the country and caused its notes, in some timid quarters, to sell at a discount of twenty-five per cent.

"It is a singular fact, and one which is demonstrative in the highest degree

(a) Gazette, March, 1845.

431

432

HISTORY OF PITTSBURG.

of the resources of the city, that the deposits in the banks are larger now than previous to the great fire. In the Bank of Pittsburg there were, before that catastrophe, rising $500,000, and now there are rising $700,000 on deposit. Subsequent to the fire the stock of our banks declined in the East, affected, 110 doubt by that occurrence; but, whether well or ill founded, this has but little effect at home. The stock of the Bank of Pittsburg, for example, is at par, and over 100 shares have been sold lately at $50, and more wanted. Our banks have acted very liberally and discounted a great deal of new paper since the fire. The relief fund is deposited among them and drawn upon as needed. The claimants whose losses did not exceed $2,000 were paid off this day" (b). "We desire to call attention to the fact that a corporation has been recently created by our Legislature called the Pittsburg Trust and Savings Company. The plan of the institution is a novel, but we think an excellent one, and pre- sents great advantages to stockholders. The gentleman who originated the plan and procured the passage of the bill is confident that the stock to the amount of half a million dollars will be promptly taken in the Eastern cities" (c). On the 17th of June, 1845, the following was the quotation in Philadelphia of . Pittsburg bank stocks, though they passed at par here:

Bank of Pittsburg.

Par. $50

Bid. Asked. $47

$50

Merchants' and Manufacturers'

50 42 45

Exchange Bank. 50

42 45

"There is a new movement going on among our banks. The Farmers' Deposit Bank has given the notice required by law of the intention of the directors to apply to the next Legislature for such an amendment of their charter as will permit the issue of notes payable on demand. The Allegheny Saving Fund Company, an institution recently organized in Allegheny City, has also given notice of an intention to apply for a charter with a capital of $100,000" (d). . . . "The city of Allegheny is about to issue a batch of $5,000 of corporation notes to pay the expenses of certain improvements. These 'prom- ises to pay' are extremely useful as a medium of local circulation" (d).

"The city has authorized an issue of $40,000 (in notes) and we understand the county will also issue $20,000. . ... The want now experienced will speedily absorb it. Some of the new issue of $5,000 by the city of Allegheny are in circulation. . ... Our city banks have declared their semi-annual dividends- the Exchange Bank, three per cent. on $1,000,000, $30,000; Merchants' and Manufacturers', three and a half per cent. on $600,000, $21,000; Bank of Pitts- burg, four per cent. on $1,200,000, $48,000" (d). The Post of April, 1846, reported quite a corner in the money market, owing to "the comparatively small banking capital of this city." "The issues of our own banks do not iloat upon the surface of the market as currency. They are driven out of cir- culation by the host of foreign uncurrent notes and by scrip made by the city and county" (e) "Our market (money) is unusually tight. The banks have not been doing anything of moment and furnish no relief. The county com- missioners are doing some business in the way of issuing illegal scrip; but its circulation only tends to render bankable funds scarcer. We regard this money manufacturing business as injurious in the extreme. It furnishes a depreciated currency and operates upon the market in other respects badly. An injunction would put a stop to it. If the county and city will make money, it should at least be at par at home" (f). Among the leading private

(b) Gazette, 1845.

(d) Gazette and Advertiser, various issues, 1845.

(e) Gazette and Advertiser, May 20, 1846.

(f) Gazette and Advertiser, June 3, 1846.

433

HISTORY OF PITTSBURG.

bankers in October, 1847, were Hussey, Hanna & Co., N. Holmes & Son, Hill (Joseph) & Curry (William C.), William A. Hill & Co., Kramer & Rahm, and others. All banks, savings institutions, loan companies and insurance companies were required by act of March 6, 1847, to publish in local news- papers, in December of each year, dividends or profits declared on their cap- ital stock which had remained unclaimed for the period of three years; and three years after such publication it was declared that such dividends and profits should escheat to the Commonwealth. In 1848 counterfeit bills of the denomination of two dollars, on the city's scrip, were in circulation here. Cornelius Darragh and other distinguished lawyers, upon request, expressed the opinion that the alteration of notes under five dollars was not an infringe- ment of the statute, because the city issues under that denomination were themselves illegal. The Allegheny Savings Fund Company began business sev- eral years before it succeeded in getting a charter, by the association of sev- eral individuals who, from time to time, advanced installments on their stock. They were incorporated in 1849, the corporators named being Henry Irwin, Jacob Geyer, John Morrison, William Miller, Henry Harman, David Dehaven and John Fleming, "together with the other persons who do now constitute the stockholders of the Allegheny Savings Fund Company, or such persons as shall hereafter become stockholders of the same."

The decade of the '40s closed without noteworthy events to the bankers of Pittsburg and Allegheny. Doing business here had been or were the fol- lowing financial institutions and brokers: Bank of Pittsburg; Merchants' and Manufacturers' Bank; Exchange Bank; Farmers' Deposit Bank; Allegheny Savings Fund Company; Pittsburg Trust and Savings Company; Fifth Ward Savings Bank; Commercial Bank; N. Holmes & Son; William H. Williams & Co. (I. B. McVay and later J. G. Coffin); Palmer (Waterman), Hanna (Joshua) & Co. (William K. Hart), successors to Husscy, Hanna & Co .; George E. Arnold & Co .; Kramer (Allen) & Rahm (Edward); Baird (S.) & Irvin (William A.); A. Wilkins & Co .; G. W. Taylor; H. D. King; William Larimer, Jr .; Warwick, Martin & Co .; Cook (Jacob W.) & Harris (Isaac); Hoon & Sargent, and no doubt others. All told, the capital actually employed in 1849 did not exceed $3,000,000, a sum much too small for the immense business of that day.

By act of April 16, 1850, a general banking law was passed by the Legisla- ture, which granted the right to associations, under elaborate restrictions and requirements, to organize and become incorporated for the purpose of doing solely a legitimate banking business. An important amendment was passed in 1854, correcting some omissions and deficiencies in the former bill. In 1853 a special law, which had been applied to certain counties in Eastern Pennsyl- vania, concerning the formation and management of saving fund companies, was extended so as to embrace Allegheny County in its operations, and became the basis of associations of that character established thereafter in this por- tion of the State. The law was specially designed for the benefit of orphans' estates, and has since had a development not dreamed of by its projectors. In June, 1851, stock and notes were quoted as follows:

Stock. Notes. Par.

Bank of Pittsburg

$ 53.50

Merchants' and Manufacturers'

53.50

Par.

Exchange Bank. ...

50.75 Par.

Allegheny Savings Bank 155.00

No issues.

The following is a statement of the issue and redemption of county scrip made by William Flinn, John Emerick and F. I. Gardner, auditors of Alle-

434

HISTORY OF PITTSBURG.

gheny County, in 1853. This showed that $22,242 had been redeemed more than had been issued (g):

Year.

Issued. Redeemed.

Outstanding. Old Issues.

1842

$28,000

$ 820

$27,180

1843

22,500

1,569

48,III

1844

14,500

3,993

59,518

1845

51,643

5,965

105,196

1846

32,02I

6,009

182,108

1847

41,559

6,793

166,874

1848

67,654

99,220

1849

. ... .

90,012

9,208

1850

...

29,650

. .

$190,223 $212,465

$697,410

At the close of 1851 the Auditor-General's report exhibited the following facts concerning the banks here: Bank of Pittsburg, capital $1,142,700, indi- vidual deposits $590,257.87, coin on hand $157,182.22, notes in circulation $276,167; Exchange Bank, capital $813,345, due depositors $268,984.49, coin on hand $119,570.75, notes in circulation $503,290; Merchants' and Manufactur- ers' Bank, capital $600,000, due depositors $156,935.26, coin on hand $107,682.30, notes in circulation $523,947.50; Farmers' Deposit Bank, capital $62,500, deposits at interest $151,251.49, transient deposits $34,070.84, cash on hand $21,582.06. The Bank of Pittsburg held discounted paper to the amount of $1,701,973.36. This was more than was held by the other three banks combined. Two peti- tions of the merchants and manufacturers of Pittsburg were laid before the Legislature late in February, 1852, for the chartering of the. Commercial Bank of Pittsburg. In the Senate, April 23, 1852, the bill to incorporate the Commer- cial Bank of Pittsburg passed by fifteen yeas to thirteen nays; in the House it had passed nine days before by fifty yeas to forty-one nays. Governor Bigler vetoed this bill (which embraced other banks), and the General Assembly failed to pass the same over his veto-failing by about two to one, a partisan vote. In April, 1852, John Stewart, secretary, called a meeting of the shareholders of the Fifth Ward Savings Bank, to be held at the office of the institution, 424 Liberty Street, on June 29th, to consider the question of having the stock con- solidated into an incorporated company. This institution had been established by James Laughlin and others a short time before. Subscriptions for the shares of the Pittsburg Trust and Savings Fund Company were received at the office of Hays & Painter, on Liberty Street. On June 28, 1852, it was said: "The stock of this popular institution went off swimmingly yesterday. Nearly or quite 2,000 shares are already subscribed, being double the amount required for the issuing of the letters patent" (h). On July 12, 1852, this com- pany elected its first trustees, as follows: James Laughlin, B. F. Jones, I. M. Pennock, William Bingham, Thomas Hays, John Lindsay, Samuel Rea, William K. Nimick and James A. Hutchison. On September 3, 1852, John D. Scully, actuary of the company, called for the second installment of four dollars on the stock of the institution, the same to be paid on the 15th of each month there- after until all installments should be paid.

Thompson, Bell & Co., exchange brokers, offered stock of the Citizens' Deposit Bank for sale in August, 1852: A. Wilkins & Co. did the same. The former company succeeded the latter in July, 1852. What are called sight drafts now were often called "time bills" then. Late in July money became abundant,

(g) Post, May, 1853. (h) Gazette, June 30, 1852.

437

HISTORY OF PITTSBURG.

causing bank and all other kinds of stock to advance sharply. Strong demands were made for this stock by the brokers.

"The recent pressure of the money market, which commenced in New York, extended to all the cities of the West. In Pittsburg . . the cause arose from no lack of money, but in an unfounded disturbance of confidence. What there was to lead to a loss of confidence, other than what results from a morbid distrust of commercial men, we have not been able to learn and cannot conceive" (i). "The improvement in money matters in Pittsburg does not keep pace with the improvement in the castern cities. When a tightening in money affairs takes place in the East, our market follows very promptly; but is very slack in following when casier times commence. This is because our money market is controlled by outsiders instead of by the banks, as it ought to be. . We have here but three banks, of not very extended capital. The youngest of these banks was chartered about twenty years ago; and, although within that time our population and commerce and manufactures have doubled, our banking capital remains the same. Twenty years ago these three banks were competent to meet the business wants of the community; but now they are not. Their joint capital and joint means of doing business are not equal to the demands of a commerce which has doubled within a short period of time and is constantly expanding; and to this is to be added the fact that the largest of these banks pursues a policy cautious in the extreme, holding the others measurably in check. As long as this state of things continues the con- trol of monetary affairs will be in the hands of outsiders, and our merchants will remain, in some degree, at their mercy. Pittsburg needs another bank with capital sufficient to meet her expanded wants" (j).

While the statement that there were but three banks here was not literally true, the meaning of the editor was correct, that banking capital, aside from the three old banks (Bank of Pittsburg, Merchants' and Manufacturers' Bank and Exchange Bank), was so small as to afford very little assistance to the immense industries of this vicinity. By act of March 30, 1853, the name of the "Pittsburg Trust and Savings Company" was changed to the "Pittsburg Trust Company;" and by act of April 18, 1854, the charter of the latter was extended fifteen years from the expiration of its (then) present charter. In 1853 bills were introduced in the House to incorporate the Citizens' Deposit Bank and the Commercial Bank of Pittsburg. The latter failed, but the former became a law. The Legislature, in 1853, incorporated William Dawson, James D. Kelly, Andrew McMasters, Samucl Morrow, Jacob Hays, Robert Bruce, Jr., and Francis Sellers, "together with the other persons who do now constitute the stockholders of the Citizens' Deposit Bank of Pittsburg, or such persons as shall hereafter become stockholders of the same." In a supplementary act in May, 1857, the name of the Citizens' Deposit Bank of Pittsburg was changed to the Citizens' Bank of Pittsburg, which was authorized to increase its capital stock to $500,000, and was required within one year from the passage of the act to pay into the State Treasury two per cent. of such incrcase of $300,000. It was authorized to issue banknotes, payable on demand at its counter in specie; but such issue was prohibited until $300,000 had been actually paid in on stock. On May 19, 1853, P. M. Davis, auctionecr, sold twenty-eight shares of stock of the Merchants' and Manufacturers' Bank at from $56.25 to $56.50 per share; eight shares of Bank of Pittsburg stock at from $55 to $55.125 per share, and eighty-six shares of Exchange Bank stock at from $55.375 to $56 per share. A short time before this was the first date when stock of the other two banks rated higher and sold for more than that of the Bank of Pittsburg.

"Cannot the brokers of the city do something to relieve the community of

(i) Gazette, April 15, 1853.

(j) Gazette, May 2, 1853.

438

HISTORY OF PITTSBURG.

the ragged small notes that infest the avenues of trade? At no period in our history have we noticed so much rotten trash about as that which disgusts us at the present time. It seems as if the Ohio and Indiana banks have selected Pittsburg as the receptacle for their defaced currency. It is too bad. These banks are growing fat on the simplicity of Pennsylvania. We are literally swamped with trash. A clerk must rush to the brokers with every dollar he receives, or the poor fellow is lost in doubt and has no rest. . It would require a gigantic intellect to keep posted on all the 'Owl Creek's' and 'Hit him hard' banks that are springing up, like Jonah's gourd, all around" (k). ·

"The one grand, overpowering drawback upon our advancement as a city is the want of adequate banking capital. . The deposits in our banking

institutions at the date of the last report were only $1, 355,892.60. .

Our banking capital is no larger now than it was in 1835, although our population has more than doubled since that time" (1).

This was not the cry of the Gazette only, but reflected the judgment of Pitts- burg and Allegheny business. men generally. The banks had discounted as much as it was prudent for them to loan, and there is no doubt that twice as much capital at this date would have been used. Even the stock of the banks depreciated, owing to the demand for money. The speculative spirit was becom- ing distracted. December 30, 1853, bank stock was quoted as follows:

Asked. Offered. $ 56

Merchants' and Manufacturers'

$ 57

Exchange Bank.

55.50

Bank of Pittsburg 56

Pittsburg Trust Company

55.25

Citizens' Trust Company

Allegheny Savings Bank.

235

225

During the spring of 1854 business in Pittsburg and Allegheny was unusu- ally active, the banks sharing in the general and enjoyable prosperity. The demand for money was strong at twelve per cent. per annum. April 15, 1854, twenty-four shares of stock of the Merchants' and Manufacturers' Bank brought at auction on 'Change $60 each, par funds (m). This was the first instance the stock of either of the old banks sold as high as that figure at public auction. Everybody was looking for a place to invest his money, and he was not always particular just where it was placed; hence the rise in bank stock. The mutterings of the coming storm were unheeded. There were introduced into the Legislature, in 1854-5, bills to incorporate the Mechanics' Bank of Pittsburg, the Commercial Bank of Pittsburg, the Allegheny Valley Bank of Pittsburg, and to increase the capital of the Citizens' Deposit Bank. Previous to March 30, 1855, the com- mittee of the House had reported favorably on evcry bank bill that had come before it. At this time there were pending in the Legislature about eighty applica- tions concerning banks-new banks, increase of capital, etc. Even the press of Pittsburg was considerably staggered by this fact. The clamors here and else- where in the State for greater banking capital were bearing fruit. The following statement of the conditions of the local banks is taken from the report of the Auditor-General of November, 1854:

Circulation.

Deposits.

Institution.

1853. 1854.

Bank of Pittsburg

.248.567

203,997

675,758

1,642,657

Merchants' and Manufacturers' Bank. 600,922

451,145

298,225 269,029

Exchange Bank

.903,350

632,925

227,867 171,732

(k) "Merchant" in Gazette, May 25, 1853.

(1) Gazette, July 2, 1853. (m) Gazette, April 17, 1854.

439

HISTORY OF PITTSBURG.

Circulation.

Deposits.

Institution.

1853. 1854.

Farmers' Deposit Bank.

240,300

263,589

Citizens' Deposit Bank.

30,672

63,671

Pittsburg Trust Company

320,408 437,718

Allegheny Savings Fund Company

.. ..

85,298

124,400

Discounts.

Specie.

Institution.

1853.

1854.

1853.

1854.

Bank of Pittsburg

. 1,629,164 1,642,637

249,219

II4,454

Merchants' and Manufacturers' Bank 1,312,956

1,152,545

94,983

93,064

Exchange Bank.

1,440,980

1,330,062

215,227 164,976

Farmers' Deposit Bank.

314,152

337,712

64,114

26,080

Citizens' Deposit Bank.

81,36I

203,167

4,050.

25,254

Pittsburg Trust Company.

453,433

533,936

43,562

106,76I

Allegheny Savings Fund Company ..

117,037 . 147,089

15,105

26,17I

The summer of 1854 was dull in money matters and gave no intimation of what the following winter was to bring forth. It was said that, "Money con- tinues in active demand at rates ranging from twelve to twenty-four per cent., according to the reputation of the paper offered, and this although business is dull. . . Money is said to be abundant, but holders are extremely cautious and scrutinize paper very closely" (n).

One reason for the strong demand for money was that large quantities of it were required to carry on the numerous railways and turnpike roads then in process of construction. During the summer the Allegheny Savings Bank and the Farmers' Deposit Bank gave notice that they would apply for an increase of capital at the next sitting of the Legislature. It was still the opinion of busi- ness men here that the banking capital of Pittsburg should be greatly increased. The newspapers urgently expressed this belief in issue after issue. The Gazette said: "Our business is crippled for want of means and must remain so until our banking capital is doubled, or the present system is abandoned" (o). The times were panicky. Business men overtraded and overborrowed and never once seemed to think of pay-day. Even bankers went beyond the limits of safety and took all first-class paper offered. It needed but a breath of suspicion to sweep away the gossamer of confidence and precipitate local financial affairs into a state of ruin and dismay. The demand for greater banking capital became unintermittent. Business ventures of all sorts were undertaken even by bankers themselves. It was the opinion that Western Pennsylvania, particularly in this vicinity, had been unjustly treated by the last and previous Legislatures in not having been granted an increase of banking capital. Desperate investments were undertaken with a surprising disregard for the outcome. Monetary values were unsettled and the times were ripe for ruin.

. There was an inconvenient difference between currency and par funds. Issues of all the poorer banks formed the circulating medium of common transactions, and this currency was at a discount with par paper and coin. Not- withstanding this fact the latter two were in constant circulation, the premium being always taken into account in each business operation. Of course, all the notes of the local banks were at par with coin here. Nearly all Western notes of solvent banks were from one to two per cent. discount; while those of Eastern banks were at par or a slight premium. Late in August a general feeling of distrust toward Western banknotes caused them to decline from two to five per cent. Indiana, Michigan and Tennessee notes were regarded with

· (n) Daily Union, June, 1854.

(o) Issue of July 8, 1854.

440

HISTORY OF PITTSBURG.

suspicion and shaved even more than five per cent. This threw them out of circulation and into the hands of the brokers. In September eight or ten weak banks in different parts of the country failed. The banks here became very cautious. About the middle of October even the local brokers refused to buy notes of the State stock banks of Indiana and Illinois, which were thus almost wholly thrown out of circulation. Business failures became of frequent occur- rence in different parts of the country. Much embarrassment was experienced here. Early in the year 1854 everything had looked promising, but drouth, cholera and the monetary stringency rendered the summer and fall unprofitable and disastrous.

On November 8th the banking house of A. Wilkins & Co. closed its doors; a severe panic resulted and runs were made upon the other brokers, but all demands were at first promptly met. The next day a heavy run on Hugh D. King compelled him to close his doors. On the Ioth a severe drain was made upon General William Larimer, Jr., but he bravely met all demands. The suspension of Mr. King, who was related to General Larimer, caused the run on the latter. A great quantity of money was withdrawn from the brokers and private bankers and deposited in the old banks or hoarded. The rate of discount on currency advanced to two per cent., and on relief notes to one per cent. On January 2, IS55, General Larimer suspended as a result of the terrible run upon him on the toth of December. On January 3, 1855, W. A. Hill & Co., brokers and agents and treasurers of the Pittsburg and Steubenville Railroad, and Hoon & Sargent, brokers, succumbed to the persistent drain upon them and closed their doors. Financial affairs in Pittsurg and Allegheny at this time were dark in the extreme. Many small depositors suffered severely. It was hoped that General Larimer would recover himself and resume; but he was unable to do so, and soon made an assignment, the assignees being Thomas Mellon and Thomas Davidson. The final appraisement fixed the assets at $409,869 and the liabilities at about the same amount. At the time of his failure he was president of the Connellsville Railroad, treasurer of the Ohio and Pennsylvania Railroad, and owned a large interest in the Youghiogheny Slackwater Navigation Company, the last having cost him $63,000. In the appraisement this interest was estimated at $40,000. In December, 1855, it was sold at auction for $9,300. The remainder of the estate proved almost as valueless. On January 22, 1855, Kramer & Rahm were forced to suspend operations. They had been sorely pressed during the previous runs, but had managed to meet all demands, though they were so crippled that eventual suspension was necessary. No immediate run caused this action; the constant drain and poor collections rendered the closing of their doors impera- tive. It was said of them: "This house, like most of the others which preceded it, had outside risks-large sums invested in a rolling-mill and other ventures of a similar nature, from which it is next to impossible to realize at such a time as this. . . . These are not the investments for those to whom are intrusted

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Standard history of Pittsburg, Pennsylvania, Part 49

Author: Wilson, Erasmus, 1842-1922; Goodspeed, Weston Arthur, 1852-1926. cn Publication date: 1898 Publisher: Chicago : H.R. Cornell & Co. Number of Pages: 1192

Author: Wilson, Erasmus, 1842-1922; Goodspeed, Weston Arthur, 1852-1926. cn
Publication date: 1898
Publisher: Chicago : H.R. Cornell & Co.
Number of Pages: 1192