Standard history of Pittsburg, Pennsylvania, Part 53

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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In 1864 it was enacted by the Legislature that any bank of this State, duly incorporated, which should adopt and carry on the banking business under the laws of the United States, should be deemed to have surrendered its charter, but was given three years in which to wind up its business under State laws. Full provisions were made for these important changes. Banks so changing could either reduce their capital stock to the par value of their shares, or sell

(d) Commercial, April 22, 1864.

(e) Commercial, April 23, 1864.

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467

HISTORY OF PITTSBURG.

the same at par without a reduction of capital stock. Reissues of former notes were prohibited, and State bank tax ended with the beginnings of the new National associations (f). The law was limited to such as should adopt its pro- visions by January 1, 1865. By a supplement the time was extended to January I, 1866, and eventually extended indefinitely.

Late in the year 1864 it was determined by many of the banks and bankers here to discontinue the practice of receiving and paying out as currency the notes of banks which should not be kept at par in Philadelphia or in this city. "They will continue to pay and sell such money, but no longer give it value as currency; and in their transactions in depreciated money will be governed by the cost, time, trouble and risk of converting it into bankable funds" (g). Free banks were authorized to borrow money to an amount not exceeding their capital stock and surrendered their bonds deposited with the Auditor- General as fast as their notes in circulation were redeemed. This law was passed to enable free banks to become National banks (h). On the Ist of April, 1867, a few of the banks had outstanding a considerable quantity of their old paper issues under State laws, as follows: Exchange, $78,322; Merchants' and Manufacturers', $50,012; Mechanics', $37,646; Citizens', $35,000; Iron City, $32,846; Allegheny, $30,587. In fact, all the old banks of issue, except the Bank of Pittsburg, had notes outstanding. By decision of the United States Supreme Court early in 1870, holders of the notes of old State banks, issued prior to the passage of the Legal-tender Act, could demand their redemption in gold. Such notes were thus worth more than greenbacks or National bank notes, as gold stood at this time at about 120.

(f) Act of August 22, 1864.

(h) Act of March 24, 1865.

(g) Commercial, December 31, 1864.

CHAPTER XIX.

THE NATIONAL BANKS-WONDERFUL NEW ISSUES-THEIR MARVELOUS SUCCESS- EFFORTS TO SECURE THE FIRST CHARTER-HISTORICAL LETTER FROM COMPTROLLER ECKELS-OTHER CHARTERS SECURED -START OF THE EARLIEST NATIONAL BANKS-SURPRISING BUSINESS DONE-VALUE OF STOCK-STATE AND NATIONAL BANKS OF 1864 COMPARED-RIVALRY TO OBTAIN PATRONAGE-RESUMPTION OF SPECIE PAYMENTS VIEWED WITH ALARM-STOCK QUOTATIONS IN 1865-EMBAR- RASSMENT OF KRAMER & RAHM-BANKING CAPITAL IN APRIL, 1867-ORGAN- IZATION, IMPORTANCE AND CAREER OF THE CLEARING-HOUSE-BANKS OF THE EARLY SEVENTIES-THE PANIC OF 1873-4-EXTENT OF THE DIS- TRESS-SUMMARY OF DISASTERS FROM 1873 TO 1884-ONE HUNDRED BANKING INSTITUTIONS IN 1874-MEMBERS OF THE CLEARING- HOUSE-OTHERS RECEIVING CLEARING PRIVILEGES-PANIC OF 1884- SUBSEQUENT EXTENT OF BANKING OPERATIONS-THE PANIC OF 1893-CLEARING-HOUSE CERTIFICATES ISSUED-THEIR RETIRE- MENT-COMPARATIVE STANDING OF MEMBERS OF THE CLEARING- HOUSE-TOTAL EXCHANGES FROM 1866 TO 1897 INCLUSIVE.

Pittsburg and Allegheny, in 1863, entered upon the most wonderful financial era in their history. The traditions of a century were brushed aside and a new order of affairs was inaugurated. The new condition had been foreshadowed in 1862, and, to some extent, realized in 1863; but it remained for 1864 almost wholly to discard the State bank system and to extend, with sweeping effect, the power of greenbacks and National bank notes. The tonic of a large and flexible currency injected into the business circulation of the "twin cities" stimu- lated all enterprises into wonderful activity, and laid the foundation of many of the great establishments and fortunes of to-day. Strong efforts were made here in April and May, 1864, to drive bank issues of all kinds out of circulation and to substitute therefor greenbacks, which all classes had learned to love. This movement may be said to have been the origin of the Greenback party in Alle- gheny County. Just as strong efforts were made, however, in favor of the retirement of greenbacks and the supremacy of National bank notes. A small fol- lowing, among which was the Bank of Pittsburg, though withdrawing its circulation in obedience to law, refused to discard wholly the old system of State banking methods. An overwhelming sentiment favored the new money and derided the old. Chicago seemed to lead the movement against State bank paper.

When it was announced that the Finance Committee of Congress, late in February, 1863, had indorsed the financial measures recommended by Secretary Chase, an act tantamount to the passage of the National bank bill, "great excite- ment" ensued among local bankers and brokers, who viewed with alarm the great power given to the Secretary, and realized that the course of Congress was unprecedented in the annals of the Government (a). Nearly all of the leading bankers of this vicinity were well known to the financiers of New York, Phila- delphia, Baltimore and Washington, and to Secretary Chase and Hugh McCul- loch, Comptroller of the Currency. Before the passage of the National Bank Act on February 25, 1863, and while it was pending in Congress, more than one

(a) Chronicle, February, 1863.

468

469

HISTORY OF PITTSBURG.

attempt was inaugurated here to win local prestige by obtaining the first charter under the new law. All the old financial institutions, except the Bank of Pitts- burg, even before the passage of the National bank bill, seriously considered the act and took steps in the direction of changing from State to National banks. In fact, so general was this movement that many withdrew from the attempt after they had learned that a few had secured the lead and would be given the appoint- ments. It was true, and can readily be accounted for, that the friends of the National Banking Law not only desired to place the new system in the hands of its friends, but also desired to win to its support all the strongest banks of the country. The consequence was that many of the oldest and stanchest banks were solicited to accept charters under the National Banking Act. The Bank of Pittsburg was tendered this honor, but declined, although it was specified that the old name might be retained (b).

"It is understood that preparations are being actively made by' a large num- ber of individuals and associations to establish banks under the provisions of the new bank law" (c). "It is stated that the Citizens' Bank is about going into operation under Secretary Chase's new banking law. While the Citizens' deems this the wisest course to pursue, the Exchange Bank is applying for an extension of its charter, and a bill for this purpose has been reported formally by Mr. Gross, chairman of the bank committee" (d). 'We are informed that the necessary steps are being taken for the formation of a new bank, under the provisions of the recent act of Congress, known as the National Banking Law. It is to be located in this city, with a capital of $500,000, and will probably be the first organization of the kind west of the mountains. It will doubtless, in a short time, rank among the first-class banks of the country" (e). . "Notice is hereby given that books to receive subscription to the capital stock of the Duquesne Bank will be open at my office, IIO Fourth Street, on Thursday morn- ing, April 16th, at 10 o'clock. This bank is to be organized and managed under the provisions of the Government banking law; capital $500,000, shares $100 each; subscription to be paid-thirty per cent. when the board of directors are elected and the remainder in ten per cent. installments every sixty days thereafter. The bank will go into operation as soon as the stock is all subscribed. W. O. Leslie" (f).

While the act of February 25, 1863, was pending in Congress, the Pitts- burg Trust Company, whose officers were personally known to the Comptroller of the Currency, signified to him their wish to organize under the new law should the same pass (g); but their action was anticipated by many other banking institutions elsewhere in the country, as will be seen from the following letter received in answer to an inquiry sent to the Treasury Department:

"Erasmus Wilson.

Washington, D. C., Jan. 22, 1897.

"Sir :- In answer to your inquiry of January 2Ist, you are respectfully advised that the first bank organized in Pittsburg was 'The First National Bank of Pittsburg,' charter No. 48; capital stock $400,000; date of preliminary organization certificate, June 1, 1863; date of Comptroller's certificate authorizing the association to begin business, August 5, 1863. The incorporators were James Laughlin, William K. Nimick, Robert S. Hays, Francis G. Bailey and Thomas Bell. The next National bank organized in Pittsburg was the Second National, No. 252, and was chartered on February 13, 1864. The first certificate of authority to begin business was issued by the Comptroller to 'The First National Bank of Philadelphia,' charter No. I, on June 20, 1863. The preliminary

(b) Statement of William Roseburg, 1897.

(d) Evening Chronicle, March 25, 1863.

(f) Evening Chronicle, April 15, 1863.

(e) Evening Chronicle, April 14, 1863.

(g) Statement of Charles F. Speer.

470

HISTORY OF PITTSBURG.

organization certificate was dated May 28, 1863. To ascertain the date of the first informal application to organize a National bank would necessitate an exhaustive research through the office files, which it is not practicable to have made. It is known to be a fact that upon the day of the passage of the National Bank Act, correspondence was entered into by a number of individuals who contemplated organizing National banking associations under that act.

"Very resp'y, JAMES H. ECKELS, Comptroller."

An examination of the information contained in this letter discloses the fact that from May 28, 1863, to June 1, 1863 (probably inclusive), many preliminary certificates were issued, of which that granted to the First National Bank of Pittsburg was properly well down on the list, unless favoritism was shown, which may not be supposed. Charter No. I was issued to the First National of Philadelphia, June 20, 1863; and charter No. 48 to the First National of Pitts- burg, on August 5, 1863. It may be reasonably concluded that applications were filed and numbered in the order in which they were received, under which supposition the First National of Pittsburg was preceded by forty-seven other banks. The law was approved February 25, 1863, and yet the first preliminary certificates was not issued until May 28, 1863, more than three months after- ward, and the first authorization not until June 20th, nearly four months after- ward.

"A preliminary application for incorporation under the uniform National Currency Act has been made by persons in Pittsburg representing capital to the amount of $400,000" (h). . "By advertisement elsewhere it will be seen that the Pittsburg Trust Company, one of the best managed and most successful of our banking institutions, has organized under the new banking law, with the title of First National Bank of Pittsburg, with a capital of $400,000 and leave to increase the same to $1,000,000. The new institution will be managed by the same officers who had charge of the old, and we have no doubt whatever that it will prove equally as successful, and give as much satisfaction to the business public" (i).

The First National Bank began business August 8, 1863, with the following officers and directors: President, James Laughlin; cashier, John D. Scully; directors, James Laughlin, Robert S. Hays, Thomas Bell, Thomas Wightman, William E. Nimick, Alexander Speer, Francis G. Bailey, Alexander Bradley and Samuel Rea. In November, 1863, its first dividend as a National bank was declared, and consisted of two dollars per share. About the time business was begun the capital was increased to $500,000.

"We hail the advent of the new National bank currency with unfeigned pleasure and are firmly convinced that it will inaugurate an epoch in the circu- lating medium of our country that will bury every irresponsible wildcat institu- tion and gradually change the old banking systems, which have had their day and subserved their end as well as they were capable of doing" (j). . "On December 2, 1863, books for subscription to the stock of a new National · bank in Allegheny were opened, and during the forenoon of that day over $100,000 of the stock was taken. By the 5th the subscription had reached $150,000" (k). . "The stockholders of the First National Bank of Allegheny held a meeting Tuesday for the election of directors, with the fol- lowing result: T. H. Nevin, C. C. Boyle, R. H. Davis, Arthur Hobson, D. N. White, John Thompson, W. Harbaugh, Henry Gerwig and John Dean. The institution being now fairly organized will proceed to business in a few days.

(h) Washington Dispatch, June 3, 1863.

(j) Commercial, September II, 1863.

(i) Evening Chronicle, August 10, 1863.

(k) Dispatch, December 5, 1863.

471

HISTORY OF PITTSBURG.

The Iron City Trust Company has also decided to go into business under the new banking law" (1).

The Second National Bank of Pittsburg, formerly the Iron City Trust Company, was authorized on February 13, 1864, by the Comptroller of the Currency, to commence business with a capital of $300,000. The first officers were G. E. Warner president, John E. Patterson cashier, and Jacob Painter, Jake Hill, C. F. Klopfer, William Cooper, Robert Robinson, R. Boughman and W. M. Gormly, directors. The officers announced the bank ready for business on February 23, 1864 (m). "The Iron City Bank is one of our oldest institu- tions, and has always enjoyed a sound reputation as a financial institution. It has been duly organized as a National bank" (n).

On the 7th of March, 1864, the Third National Bank opened its doors for business, having previously received authority so to do from the Comptroller of the Currency, and having organized February 24. Its first office- was in the banking room of the Dime Savings Institution, but a little later in its new build- ing, corner of Wood Street and Virgin Alley. The stockholders gave a banquet to the workmen when the new building was opened. This was the most pre- tentious banking structure in the city at this time. The first president was Adam Reineman, first cashier Robert C. Schmertz, and first board of directors Adam Reineman, William E. Schmertz, Algernon S. Bell, Samuel Hartman, Lewis Morganstern, Augustus Hartje, Alexander Holstein, Henry Gerwig and Bateman Goe (o). The capital was $300,000. "In January, 1865, there was an exciting contest in the election of directors of the Third National Bank. The legal question was raised whether a director was an officer within the meaning of the law. The point was referred to the Comptroller of the Currency, who decided in the negative" (p). By February 20, 1864, two hundred and sixty-nine National banks had been authorized to commence business in the United States, with an aggregate capital of over $32,000,000.

The Fourth National Bank had its origin among the leading coal merchants of the city early in April, 1864. A meeting was called and a committee, consist- ing of S. M. Bailey, J. F. Herron, J. F. Dravo and James O'Connor, was appointed to open books for the subscription of stock, which was done at the office of Mr. O'Connor, at 55 Market Street, on April 9th. The necessary stock was rapidly taken, and on May 6th the bank was duly organized. This bank, in its early career, had the most phenomenal development of any of the local National banks. With Mr. O'Connor as president and S. D. Herron as cashier it began operations late in 1864. In April, 1865, the Fourth National Bank's statement exhibited an exceptional showing. The deposits amounted to $1,666,- 385. 19; loans and discounts to $903,888.35; Treasury notes and Government bonds held to $663,671.30. At the same time the deposits of the First National Bank amounted to $1,995,050.93. "From the time of its organization until the present it has surprised our financial men by the magnitude of its business and the liberal dividends which have been steadily announced" (q). On January I, 1865, its deposits amounted to $859,158.80. "The success of the Fourth National Bank, we believe, is almost beyond parallel in the history of banking in this country. It has only been in operation for a few months, and yet its stock, the par value of which is $100, has sold as high as $160. The directors have decided to increase its capital stock $100,000" (r). On May 19, 1865, when James

(1) Post, Tuesday, December 8, 1863.

(m) Post, February 23, 1864.

(n) Gazette, January 4, 1865.

(o) Post, February, 1864. (John B. Livingston soon succeeded Mr. Schmertz as (p) Gazette, January 16, 1865.

cashier.)

(q) Commercial, January 4, 1865, referring to the Fourth National Bank.

(r) Gazette March 1, 1865.

472

HISTORY OF PITTSBURG.

O'Connor resigned the presidency of the Fourth National Bank, the directors declared a dividend for the preceding six months of $13 per share. In resigning, the president referred with pride to the phenomenal prosperity of the bank, and stated that in twenty-two working days alone it had disposed of over $1,250,- 000 in Government bonds; that not a dollar had been lost by bad, doubtful or suspended debt; that nearly every security held was worth its face, and that the deposits exceeded $1,000,000 and the cash $700,000. In April, 1864, National bank stock here was quoted as follows:

Par.

Asked.

First National Bank.

$100

$IIO

Second National Bank.

IIO

Third National Bank.

100

IIO

First National Bank (Allegheny).

100

IIO

It was proposed in the spring of 1864 by several prominent brokers to establish a stock board, but no action was taken until autumn. In May gold rose in New York to about 190; in June to 258, and in July to 289. The extraordinary changes under these wild movements were felt with full force in Pittsburg and Allegheny. Thc immense dealings in oil brought to these cities large sums of money, which found investment eventually in bank stocks, Government bonds and other securities. The loans of the Government in this vicinity during the war were placed almost wholly by the banks and brokers. All became heavy holders for two reasons: (I) Because they considered it their duty to thus assist the Government; and (2) because they regarded the investment safe and profit- able. Early in September, 1864, the Bankers' and Brokers' Board began opera- tions with a strong membership, which, by October Ist, consisted of about twenty-five banking and brokerage houses.

"Our city banks were never in a sounder condition since the suspension. The readiness with which their stock is purchased at high prices is evidence of their soundness. Although some of them have expanded their circulation very materially, yet it was done by way of accommodation to well-tried customers, and they have taken the precaution to fortify themselves by investing heavily in Government securities. They may be considered National institutions with- out the regular form of organization" (t). "Banks that can show in their assets what can be made immediately available in redeeming their circu- lation and satisfying the depositors are in no danger from panics. It is this show of strength which has always given the banks of this city a good repu- tation for soundness and strength. Whenever they have been called upon to increase their circulation by the heavy demands from the manufacturing interests of this community, it was prudently secured by an increase of con- vertibles. This feature in the management is observable in all their official statements. Latterly they have greatly increased their investments in Govern- ment securities which, while it strengthens themselves, is directly aiding the general Government" (u).

By the autumn of 1864 the First National Bank had outstripped the old banks in the amount of deposits-$2,031,424.20. Its circulation amounted to $284,000; its loans and discounts to $942,455.65, and it held $674,000 in Govern- ment six per cent. bonds. On October Ist five National banks were in operation here-the First, Second, Third and Fourth of Pittsburg and the First of Alle- gheny. The following table shows their condition compared with the seven old banks:

(t) Commercial, May 31, 1864.

(u) Commercial, July 4, 1864.

473

HISTORY OF PITTSBURG.

Capital of old banks. $4,643,505

· Capital of National banks 1,579,310

Total

$6,222,815

Circulation of old banks.

$6,665,655

Circulation of National banks

902,500

Total

.$7,568,155

Deposits of old banks

$4,412,772

Deposits of National banks 4,675,88 I

Total

.$9,088,653

United States securities in old banks

$7,702,050

United States securities in National banks

2,078,700

Total.

$9,780,750

Discounts of old banks

$5,387,618

Discounts of National banks

2,498,732

Total $7,886,350

"The quantity of defaced and mutilated fractional currency in circulation is so large as to be a source of considerable public inconvenience and to call for prompt action on the part of the Treasury with a view to its exchange" (v). 'Our local money market continues very active. Speculation keeps up lively since the election and whatever funds are not invested in the minor stocks are rapidly absorbed in governments" (w). ..... In December, 1864, for the first time in the history of the city, the balance of trade with the East was in favor of Pittsburg, and exchange with the Atlantic cities sold at par

or a slight discount. . "This is one of the beneficial results of a uniform currency, and as the banks become converted into National institutions, the difference between our uncurrent funds and par will disappear, and notes, in fact, will be recognized as money which is at par. In fact, we do not see why the present time should not be selected to do away with the present dis- tinction between par and currency by our banking institutions. The difference is very slight and much future trouble might be avoided by refusing all notes for which a redemption at par was not provided either here or in Philadelphia" (x).

The Pittsburg National Bank of Commerce was organized December 6, 1864, at the banking house of Hill & Co., with a capital of $500,000. Alfred Patterson was elected president and Joseph H. Hill cashier. The following directors were also elected at this meeting: Alfred Patterson, Joseph H. Hill, Charles Lockhart, Joseph Pennock, Josiah King, Robert Patrick, William Reed, George W. Smith and Walter P. Marshall.

The Iron City National Bank was authorized on December 1, 1864, by the Comptroller of the .Currency, to begin business under the act of Congress, approved June 3, 1864. Previous to this, on December 22, 1864, the stock- holders had met pursuant to law and had decided to change from a State to a National institution (a). The officers under the old law were continued under the new: James McAuley, president, and John Magoffin, cashier. The former capital of $400,000 was continued by the new organization.

The Citizens' National Bank, first established as the Citizens' Deposit Bank

(v) Commercial, November 8, 1864.

(x) Commercial, December 22, 1864.

(w) Commercial, November 16, 1864.

(a) Post, December, 1864.

474

HISTORY OF PITTSBURG.

in 1853, and changed to the Citizens' Bank in 1857, was authorized December 10, 1864, to begin operations under the National law of June 3, 1864. On December 23, 1864, the stockholders voted to change from a State to a National bank by over two-thirds of the stock in the affirmative (b), and at the same meeting decided to open their doors under the new order on or before Janu- ary 1, 1865. The capital in 1853 had been $200,000, in 1857 $500,000, and under the National law was raised to $800,000. Francis Sellers was elected president and George T. Van Doren cashier (c). Francis Sellers, Frank Rahm, John S. Dilworth, George S. Head, B. L. Fahnestock, Alexander Reynolds, William McCleery, George B. Jones and William S. Bissell were the directors of the Citizens' National Bank elected March 18, 1865. In March, 1865, the bank bought its present lot for $18,000. The site had pre- viously been occupied by Hays' tobacco warehouse.

The Mechanics' Bank was merged into a National institution by more than a two-thirds vote of the stockholders, as provided by the State law of August 22, 1864, on December 23, 1864, and on January II, 1865, the certificate of incorporation was issued by the Comptroller of the Currency. The first president under the new law was William B. Holmes; first cashier, John G. Martin, and first directors W. B. Holmes, James I. Bennett, Christian Yeager, George Wilson, B. A. Wolfe, John Orr, Edward House, Charles L. Caldwell, Philip Reymer, Frederick McKee, Abner U. Howard, Campbell Herron and John Holmes. The capital was fixed at $500,000, with the privi- lege of increasing to $1,000,000. "To the Mechanics' National Bank belongs the credit, we believe, of declaring the largest dividend thus far this year, with the exception of the Fourth National, having declared ten per cent. within seven months. Without speaking disparagingly of others, the Mechanics' is conceded to be one of the soundest and most efficiently officered banks in this city. The president, William B. Holmes, and cashier, John G. Martin, are both gentlemen of energy, intelligence and experience, and are admirably adapted for the responsible positions they occupy" (d).

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Standard history of Pittsburg, Pennsylvania, Part 53

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