Standard history of Pittsburg, Pennsylvania, Part 50

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

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the temporary use of other people's money. We have no doubt that the motive prompting them is a good and honest one, and we cast no per- sonal censures on any. But the whole thing is wrong at the root" (p).

The result of this monetary panic here was thus the failure of six broker- age and banking houses and an incalculable amount of suffering among small depositors. Out of the ruin of the old house of A. Wilkins & Co. arose the new one of Wilkins & Co., with the solemn promise to the public, through the newspapers, to stick closely to their legitimate business thereafter and not deal in any more outside ventures. Kramer & Rahm also managed to resume busi- ness again in April, 1855. Thus the Larimer collapse was the most disastrous. These failures and suspensions seemed, like a storm, to clear the financial atmos-

(p) Gazette, January 24, 1855.

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HISTORY OF PITTSBURG.

phere; because, late in February, 1855, confidence was almost wholly restored and monetary operations had resumed their customary health and volume. Dur- ing the panic the old banks suffered no inconvenience and were in no danger. In fact, they seemed to thrive on other people's misfortunes.

In 1855 an institution, to be called the "Mechanics' Bank of Pittsburg," with a capital of $500,000, divided into 10,000 shares of $50 each, and to be organized, managed and governed as provided in the act of April 16, 1850, was established. On April 26, 1855, books for subscription to the stock of the Mechanics' Bank were opened at the Merchants' Exchange, and by May 2d, according to the Dispatch, 8,217 shares had been subscribed for. "The stock has fallen into the hands of a very substantial, as well as of a very numerous, class of people. Only two individuals took as high as 200 shares. From the character of the stockholders we infer that the bank will be organized on a substantial basis and in a manner to command the public confidence in a high degree." On Wednesday, June 27th, the bank elected its first directors from eight tickets placed in the field, comprising thirty-five candidates. The following gentlemen were elected: Reuben Miller, Jr., John Herron, James A. Hutchison, Robert Dalzell, George W. Cass, William H. Smith, Alexander Speer, William B. Holmes, Isaac Jones, John W. Butler, James P. Hanna, William J. Morrison and Alexander Gordon. Reuben Miller, Jr., was chosen president and G. R. McGrew cashier. On July 18th there were sold at auction at the Exchange, 1,597 shares of this bank at from $50.50 to $50.75 per share. The institution formally opened for business July 9th, and commanded the confidence of the community from the start.

In 1855 the "Pittsburg Dollar Savings Institution" was incorporated. It was enacted that the bank's business should be managed by a board of trustees; that the business should generally consist in receiving on deposit money in sums of not less than one dollar from mariners, tradesmen, clerks, mechanics, labor- ers, minors, servants and others, and investing the same in certain stocks and bonds, mortgages on real estate, etc .; that deposits should be paid for as agreed upon, interest thereon being estimated by months, etc. (q). In 1858 the name was changed to the "Dollar Savings Bank;" and in 1862 it was authorized to loan money at such rates of interest, not exceeding ten per cent. per annum, as would enable it, after paying the expenses of the institution and a dividend on its deposits of six per cent. per annum, to accumulate a contingent fund of ten per cent. on the deposits on hand. On June 7, 1855, the institution was organized as a mutual banking company, with thirty-nine trustees. John H. Shoenberger was elected president, but declined, whereupon George Albree was chosen for that office, and Charles A. Colton was elected treasurer. Under the charter no capital was required, as the design of the institution was the invest- ment and management of deposits. On July 19th the business was formally begun. The success of this institution has been wonderful. From an insig- nificant start and a slow beginning, the institution steadily advanced until on December 1, 1897, its total assets amounted to $17,817,673.97, and its total number of depositors to 44,709.

During the Legislative session of 1856-7 twenty-six applications for banks were filed, of which thirteen were granted. Thirty-nine applications were filed at the next session. The Farmers' Deposit Company, Pittsburg Trust Com- pany and Citizens' Deposit Bank were not banks of issue, but depended upon their capital and the notes of other banks with which to discount local paper, buy stocks, etc. The newspapers of Pittsburg were outspoken in their denun- ciation of such a course, should the privilege of receiving the notes of other banks

(q) Act of April 27, 1855.

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be denied them by law and they not be made banks of issue. Accordingly, the Citizens' Deposit Bank, anticipating hostile action, appeared before the Legis- lature with an application to be constituted a bank of issue and for an increase of capital. The charter of the Farmers' Deposit Bank was surrendered Saturday, June 13th, to take effect July Ist, and trustees were appointed under the act of 1822. The Pittsburg Trust Company, in June, 1857, by John D. Scully, cashier, called a meeting of its stockholders to consider the restrictions imposed upon them by the act of November 6, 1856, and the expediency of dissolving their corporation and of electing trustees, as provided in the act of April 1, 1822. On July 22, 1857, this company was organized under the new law, and James Laughlin, W. K. Nimick, Isaac M. Pennock, Samuel Rea, Francis G. Bailey, Thomas Bell, Alexander Bradley, Thomas Wrightman and James Anderson were elected directors under the new management. The act of the Assembly pro- hibited this and similar institutions from loaning the notes of other banks which might be in their possession (r).

The old Allegheny Savings Fund Company, having been incorporated, was reorganized in June, 1857, under the name Allegheny Bank. The new asso- ciation took out a license and proceeded to do a general banking and brokerage business. "Three bills for new banks here have passed the Legislature this winter, and it is certain that the Governor will sign two of them, if not all. This will increase our banking capital considerably, but will still be much less than .we need" (s). Books for the subscription of stock were opened for the Alle- gheny bank in Pittsburg on the 11th, 12th and 13th of June, and in Allegheny on the 8th, 9th and Ioth of June. William Bagaley was president of the com- missioners appointed by the Legislature, and R. T. Leech, Jr., secretary. The commissioners were authorized to establish the Allegheny Bank, with a capital of $500,000, in shares of $50 each, the same to be governed by the provisions of the act of April 16, 1850, and its subsequent amendments. It was provided that within one year from the passage of this act the bank should pay into the State Treasury a bonus of one per cent. on its capital stock. By special act of April 2, 1858, the Allegheny Bank was authorized to remove its office and place of business to Pittsburg. "Allegheny Bank .- The commissioners of this bank opened books at the Merchants' Exchange yesterday, and something over 1,600 shares were subscribed. This makes about 2,500 shares already taken" (t). "Allegheny Bank .- Nearly the whole of the stock of this bank was taken yesterday, subscribers being allowed to take within the range of 200

shares each. The promptness with which the entire stock of two new banks, amounting to $900,000, has been taken in one week, indicates the general soundness of our community and the large amount of floating capital ready for such investment" (u).

"Allegheny and Iron City Banks .- The books were open again on Saturday (13th), and the few shares which remained from the day before were snatched up eagerly within less than two hours. Thus these two banks-the Iron City and the Allegheny Bank stock, in a community where there is so much talk just now about poverty and the decline in property and the scarcity in money-have withdrawn from its place of deposit or from other and temporary investments $900,000, and in the course of five days absorbed that amount into themselves." The incorporators of this bank were authorized to establish a bank of issue, to be called the Iron City Bank, with a capital of $400,- 000, divided into 8,000 shares of $50 each, and to be subject to the act of April 16, 1850. On June 8, 1857, books for subscription to the stock of the Iron City Bank were opened at the Merchants' Exchange in Pittsburg. James S. Craft

(r) Post, June, 1857.

(t) Gazette, June 12, 1857.

(s) Gazette, May 4, 1857.

(u) Gazette, June 13, 1857.

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HISTORY OF PITTSBURG.

was president and L. S. Johns secretary of the commissioners. Speaking of the Iron City Bank, the Gazette a little later said: "The bank has issued, as yet, but $4,875, in fives and tens. We deem it unnecessary to state that we take Iron City Bank paper at par."

"About 1,800 shares (Iron City Bank) were subscribed yesterday (9th) in lots of four shares each, and about 600 the day before. To-day subscriptions of six shares will be received. There is no doubt now that the entire stock will be taken during the week" (v). "The Iron City Bank .- The number of shares subscribed yesterday (10th) in lots of six and under amounted to 3,840. This makes 6,218 shares subscribed, and as there are but 8,000 shares

The

in all there will be but 1,782 shares left for subscribers to-day.

The Iron rush yesterday was greater than any day before" (v). City Bank .- The remaining stock of this bank was taken yesterday morning in a few minutes after the books were opened. The rush for stock was tremen- dous, large numbers being unable to make the subscriptions they desired. This is the first instance in Pittsburg, and we presume it is the first in the State, in which the entire stock of a bank has been taken within the fourth day after the opening of the books" (v). "During last week the books of the Iron City and Allegheny banks were opened. The stock of the first, amount- ing to $400,000, was greedily taken before the fourth day was out. The stock of the other, amounting to $500,000, was all taken by Saturday. In addition, the new stock of the Citizens' Bank, amounting to $300,000, has nearly all been taken by the old stockholders. Our community has thus subscribed $1,200,000 of new bank stock within a week and with an alacrity never before witnessed. The fact speaks for itself. The Citizens' Bank will shortly get into full operation under the new charter and issue notes. The other two will probably get into operation about the Ist of August. The two deposit banks- the Farmers' and the Trust Company-will probably appoint trustees and take out broker's licenses and carry on a regular banking and discounting business, as hitherto" (v).

E. D. Jones, cashier, gave notice that books for the subscription of the $300,000 increased capital stock of the Citizens' Bank would be opened May 25th. Notices were published in June, 1857, that charters for the Commercial Bank of Pittsburg with a capital of $150,000, the Duquesne Bank of Pittsburg with a capital of $300,000, and the Diamond Savings Bank of Pittsburg with a capital of $50,000, would be applied for at the next sitting of the Legislature (w). The Diamond Savings Institution was established in the summer of 1857 with a capital of 300 shares. August 18th the name was changed to Union Banking Company, and the number of shares was increased to 500. "To those who can save even a dollar a week the Dollar Savings Institution, which went into opera- tion in July, 1855, affords an excellent place of deposit; while those who can spare larger amounts from their weekly earnings cannot find a more secure investment, where their money will be paying them a good interest, than in this institution at 65 Fourth Street. We know it is carefully managed and numbers among its trustees some of our best business men" (x). Twelve weeks of almost unbroken winter in 1855-6 totally suspended river operations, and money was temporarily invested in bank stock, which appreciated very much in value. In March, 1856, local bank stock, though variable, was worth about as follows:

Pittsburg Trust Company $65.50

Merchants' and Manufacturers' Bank. 64.75

(v) Gazette, June, 1857.

(x) Post, 1857.

(w). Harrisburg paper.

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HISTORY OF PITTSBURG.

Bank of Pittsburg $62.75

Exchange Bank. 60.25

Mechanics' Bank. 56.00

Citizens' Deposit Bank. 55.00

Farmers' Deposit Bank. 55.00

A bill to incorporate the Allegheny City Bank was introduced in the Legis- lature in 1855-6, but failed to become a law. Late in the year 1856 rumors of broken banks in different parts of the country were in circulation. Two or three failed at Erie, and others elsewhere in Pennsylvania and in Ohio, New York, Indiana, Illinois, Kentucky and other States. Money here commanded from ten to twelve per cent. per annum for first-class paper. In January, 1857, many banks in all parts of the country, particularly in Indiana and Illinois, closed their doors. In this month, while the air was rife with rumors of wrecked and ruined institutions, bills were introduced in the Legislature to charter the Bank of Allegheny, the Iron City Bank, the Monongahela Valley Bank of Mckeesport, and to increase the capital of the Citizens' Deposit Bank from $200,000 to $500,000.

"The call for money for the past few weeks has been intense, and we have never known a more active demand. The pressure upon the banks for discounts has been heavy, and although they have discounted quite liberally, large amounts of good paper have been thrown out" (b). "Money is in pressing demand, as much so as at any period during the year. . It is impossible for the banks to meet all the demands upon them for accommodation" (b).

On November 6, 1856, the Legislature restricted the operations of all in- corporated banking, saving fund, trust, or insurance companies to the notes of specie-paying banks of this State, or to notes issued under the act of May 4, 1841, or to coin; and on May 21, 1857, the law was extended to embrace brokers and private bankers. The passage of the law of November 6th was a direct blow at institutions like the Citizens' Deposit Bank, which relied wholly upon its own capital and the currency of other banks and States to enable it to do business, as it could issue no notes of its own. The law was announced to take effect July I, 1857. The Gazette said: "As far as this community is concerned, we think we are safe in stating that the banks of deposit are held among the safest in the city. They have inspired confidence by the manner in which they have transacted their business generally, carrying themselves and their depositors safely through a series of financial embarrassments which weighed upon this community in the latter part of the year 1854 and the beginning of 1855, when many who had placed their trust elsewhere were sufferers" (b).

In February, 1857, the newspapers of this vicinity, as a reason for their demand for greater banking capital in Western Pennsylvania, stated that the total banking capital of Pittsburg and Allegheny was $3,253,200; of Philadel- phia, $11,493,600; and in all of Pennsylvania, outside of Philadelphia, $10,864,256.

Late in August, 1857, there was an immense drain of specie from New York to Europe. Monetary affairs wore the most serious aspect. The Ohio Life and Trust Company of Cincinnati "went to the wall," and was immediately fol- lowed by many banks and business houses there and in other parts of the country (c). The local newspapers appeared with prominent headlines, "The Monetary Crisis." Intense excitement ensued on Wall Street, New York, which was seriously affected by the Cincinnati failure. As the newspapers here feared, this was but the beginning. The general panic, which had been gathering strength and fury for many years under reckless banking and business methods, was about ready at last to burst upon the bewildered monetary and com-

(b) Gazette, spring of 1857.

Edward MM. 2. Bigebay

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mercial world. Nothing yet of a serious nature had occurred here to interrupt the usual business transactions of banks and other financiers. Great conserva- tism was shown, however. Early in September more than thirty business houses in New York suspended as a consequence of bank failures and overtrad- ing. Still no failures nor suspensions had yet occurred here.

"Failure succeeds failure too rapidly to justify speaking of returning confi- dence, and the failures are of an important and prominent kind. They demon- strate that it was not a 'panic' confined to the surface and sweeping off those only who had not weight enough to keep them down, but a real deep-seated 'revulsion,' extending in its effects throughout the entire length and breadth of the land. Fortunately for this town of ours, the spirit for speculation and the rage for fortune-hunting had not taken root here, and we escape almost altogether. Our business and our business men never stood on a firmer footing than now" (d).

But the Exchange, as it said of others, was "whistling to keep up its cour- age;" the real storm had not yet burst. Long lists of weekly failures in the United States were reported in the local newspapers. O11 September 25th caine news of the suspension of the banks in Philadelphia, which occasioned the first serious tremor of excitement in Pittsburg. The Gazette said: "Our banks, well known to be among the soundest in the Union, while pursuing a prudent and cautious course, have had the ability to meet the main demands upon them in the way of accommodations and to keep our monetary condition sound and healthy .. Our banks are all strong, with but a limited circulation out, and they possess in an extraordinary degree, and deservedly so, the confidence of the community. Whatever may be the result of affairs elsewhere, our financial condition is such that we may safely enjoy an immunity from fear" (e). Sus- pension of banks continued to occur with startling frequency in all parts of the Union. On September 28, 1857, the following action was taken:

"Resolved, By the executive officers of the several banks represented in this convention, in view of the serious financial embarrassments resulting from the suspension of specie payments by the banks of Philadelphia, Baltimore and other cities, and the derangement of the currency and exchanges of the country at large, that we will recommend to the board of directors of our respective banks to suspend the payment of coin for the present. Resolved, That the exist- ing state of things presents to the banks of the city of Pittsburg but two lines of conduct-one of which is an almost total cessation in discounts, whether of exchange or local paper, thereby crushing inevitably large numbers of deserv- ing business men, although it would probably enable the banks to pay specie, or the alternative of a temporary suspension of payments in coin, which we embrace as the lesser evil. Resolved, That the cashiers of our respective banks be peremp- torily instructed by the boards of directors to resume payments as soon as a similar course shall be adopted by the Philadelphia banks." Signed: "Thomas Scott, president Merchants' and Manufacturers' Bank; T. M. Howe, president Exchange Bank; R. Miller, Jr., president Mechanics' Bank; O. Blackburn, president Citizens' Bank."

"The Bank of Pittsburg .- September 26, 1857, the cashier stated that he had called the board together to inform them that the banks of the city of Phila- delphia, and Eastern Pennsylvania generally, together with some of the banks of this city, have suspended specie payments; and he recommended to the board the continuance of the payment of specie upon all the liabilities of the bank. Whereupon, on motion of Mr. Holmes, it was resolved, unanimously, that this bank will continue to meet its liabilities in coin, as heretofore" (f).

(d) Weekly Review of the Exchange Market. (e) Issue of September 26, 1857.

(f) Minutes of the Board of Directors, Bank of Pittsburg.

448

HISTORY OF PITTSBURG.

On October 4, 1857, pursuant to call, a large meeting of business men was held at the Merchants' Exchange to take into consideration the crisis in mone- tary affairs. W. H. Williams was chosen chairman and J. G. Coffin secretary. Mr. Cosgrave offered a set of resolutions, which were adopted unanimously. Five were as follows:

"Resolved, That we regard the banks of this county as entirely safe and solvent, and that they have been managed with undoubted prudence, skill and forethought. Resolved, That the course pursued by those banks of Pittsburg which have suspended specie payments was dictated by a sense of their duty to the business interests of our city. Resolved, That we believe the bank suspensions which have taken place here have been caused solely by the trouble and unex- pected financial disasters which have occurred in other parts of the country, and that there is no inherent cause for the suspension in the condition or con- duct of the banks themselves. Resolved, That, taking this view of the conduct of the suspended banks, we believe they are entitled to the protection of the Legis- lature and an entire remission of the penalties imposed by the law of 1850. Resolved, That the period should be fixed by the Legislature for the resumption of specie payments, and that all the banks of our Commonwealth should be compelled to resume specie payments at the earliest day possible."

By act of October 13, 1857, all previous acts declaring the forfeiture of bank charters in case of a suspension of specie payments, or the infliction of any penalties for the issuance of notes of incorporated non-specie paying banks, after September 1, 1857, were declared suspended until the second Monday in April, 1858. In fact, a general relief law for all incorporated banks was passed; but banks in Pittsburg and Allegheny were required to make weekly statements and returns of their condition. All banks were required to receive the paper of solvent State banks at par. It having been stated in the National Intelligencer that the banks of Allegheny County had suspended specie payments, the Gazette editorially remarked: "It is not true that all the banks of this county have suspended. The old Bank of Pittsburg goes on as usual, never having refused to pay specie on any of its obligations, either during the present unfortunate crisis or at any previous time of financial trouble. The Allegheny Bank is a new bank and has just got under way; it pays specie also" (g).

Governor James Pollock, by proclamation, convened the Legislature, and, in his message of October 6th, recommended the passage of a law temporarily releasing banks from penalties due to their suspension of specie payments. About the middle of October money was very scarce here. To borrow on new paper was out of the question. Currency was also scarce, the most of it having gone home for redemption. Ten banks only in Pennsylvania had continued paying specie (h). So far no serious business failures had resulted in this city, but the large manufacturers began to close down their operations, because they could get no accommodation at the banks. Fearful misgivings were enter- tained.

At this time it was ascertained that a firm in this city had been permitted to overdraw their account in the Merchants' and Manufacturers' Bank to the amount of about $185,000 without the knowledge or consent of the directors, but through the connivance of a bookkeeper. At this time Thomas Scott, presi- dent of the bank, resigned and Henry L. Bollman succeeded him. The bank announced that it would redeem its circulation and pay its depositors in checks upon Western banks, and began suit against J. and H. O'Connor and C. Ihmsen. Its notes and stock depreciated considerably in value. The defendants, under pressure, transferred to the bank $126,000 in securities and took the benefit of

(g) Gazette, October 7, 1857.

(h) Philadelphia Inquirer, October 10, 1857.

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HISTORY OF PITTSBURG.

the insolvent laws. The charge against them was conspiracy to obtain money by fraud. Numerous stories concerning this affair werc in circulation. The bookkeeper, Wilson Bleakney, made affidavit that he alone was to blame; that he employed falsc entries and footings, which were shown to the bank's officers; that he had permitted the Messrs. O'Connor to overdraw, and then had begged them to replace the amount, which they had faithfully promised to do, but had failed to comply with their promises to him; and that the president and directors had been thus deceived. His affidavit was confirmed by Thomas Jackson, teller. The committee appointed to investigate the affair reported the following state of things: The settlement with O'Connor Brothers & Co. was upon the basis of $185,000 indebtedness, to be secured by paper, etc., amounting on its face to $210,000. Of this security there had been received by the bank previous to November 10th an amount of over $210,000. It was believed that the bank would have no serious difficulty in paying its billholders, depositors and other creditors, and in preserving unimpaired its capital. "We are sorry that our examinations have not enabled us to acquit all those who have had charge of the bank from a want of proper care in its interests" (i).

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Standard history of Pittsburg, Pennsylvania, Part 50

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