Standard history of Pittsburg, Pennsylvania, Part 56

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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(o) Commercial Gazette, January 25, 1883.

(p) Leader, February, 1875.

492

HISTORY OF PITTSBURG.

Allegheny, 7; Nation's Bank for Savings, 15; Odd Fellows' Savings, 8; People's Savings, 3; People's Savings, of Allegheny, II; People's Savings, of McKees- port, 8; Penn, 7; Park Savings, of Allegheny, 15; Pittsburg Savings, 8; R. Patrick & Co., 13; Robinson Brothers, 3; Real Estate L. and T. Company, of Allegheny, 10; Shoe and Leather, 16; Smithfield Savings, 12; Semple & Jones, 3; St. Clair Banking Company, 4; Second National, of Allegheny, II; South Side Savings, 7; United Savings, 2; United States, 7; Union Savings and Deposit, of Birmingham, 7; Western Savings, 4; Weekly Savings, 7; West End Savings, 18; Woods Run S. and L. Association, II; Workingmen's Savings, of Allegheny, 12.

While it cannot be said that many failures resulted to the banking interests of this locality during the depression of 1883-85, and while it is questionable if the term "panic" can properly be applied to the intense distress which prevailed, it is nevertheless true that those years, continuing, in fact, until September, 1885, are generally classed among the periods of great financial depression which have so disturbed the business of the country. "The general condition of finan- cial affairs in Pittsburg and vicinity during the year of 1883 has been one of depression. The Clearing-house statement, the most reliable indicator of finan- cial progress or depression, shows an increase of exchanges over last year of only 2.9 per cent., instead of something over twenty per cent., which is the average for the past five years. This diminution in the Clearing-house exchanges is greater than the actual diminution in the advancement of the financial interests, because the Oil Exchange had no clearing-house until November 22, 1882, and the exchanges instead of the balances in that market swelled the volume of business in the Clearing-house of associated banks during the year 1882. It was from this cause principally, in the month of November, 1882, when speculation was rampant on the Oil Exchange, that the bank Clearing-house showed the largest transactions in its history for one month. Setting various transactions against each other, the business of the Clearing-house shows a healthy advancement" (q). "The demand for money has fallen off greatly and there is a steady accumulation in banks of idle funds. The week just closed has been the dullest for a long time past in all departments of finance.

Two months ago men were compelled to go from bank to bank seeking accommodation. Now the case is reversed and money is beginning to seek borrowers and banks to solicit paper. The stringency in money at the East is beginning to make itself felt here, but not yet to any marked degree. While the local money market cannot yet be pronounced stringent, it is cer- tainly working much closer than for months past, and all evidences point to a still closer condition in the near future. For three years past Pittsburg has escaped the stringency in money which had always previously occurred at the first of April, but present indications are that it will be with us this year" (r).

"The month of May (1884) will be remembered locally from the collapse of the Penn Bank and the exposure of a state of affairs in that institution as foul and disgraceful as that which attended the New York failures in the same month. The Clearing-house Association did not come to the rescue of the Penn Bank, nor, so far as known, to any of the others which were put in jeopardy by its failure. That certain other banks received timely relief is an open secret now, but there are no indications that the Clearing-house Asso- ciation granted it. The relief which was accorded the Penn Bank enabled it to reopen its doors and to resume business for a day or two, was given by banks and bankers on the individual responsibility of the directors of the Penn Bank,

(q) Commercial Gazette, January 2, 1884.

(r) Leader (adapted), February and March, 1884.

493

HISTORY OF PITTSBURG.

with collaterals; and however meritorious the intention may have been, there is reason to think that the depositors of the bank were left in a far worse position by the reopening and the second collapse of the institution than if such alleged relief had never been given. The confidence the people had in this speculative bubble was noteworthy. The next day after its first suspension 107 was openly bid for its stock, the best evidence of confidence in its solvency; whereas, it was not only worthless, but was so utterly insolvent that its depositors have never received anything. Its second closing was a severe blow to the business interests of the city. Confidence was lost. Country banks began drawing their funds from the city banks. Rumors of probable runs were rife. Small runs were made, but met so fully and satisfactorily that no other financial institution was carried down, and thanks to the good sense of the people and the conservative system of banking generally pursued, the excitement was soon allayed. It was several months, however, before the funds were fully returned from the country. They are now stronger than ever. The sterling conduct of our bankers at this critical juncture of affairs was not only worthy of commendation, but justly entitled them to the additional confidence which has since been reposed in them. The bank exchanges at the Clearing-house began to fall off immediately on the failure of the Penn Bank. During the first six months the exchanges exceeded those of 1883 by more than forty millions, but during the last six months fell off more than twenty-eight millions, compared with 1883. The Diamond National Bank was admitted to membership in the association this year. Among the ventures of the year was the Keystone Bank, under State laws, upon the new system in this city of loaning on collateral security. The result has proved entirely satis- factory to the founders" (s).

"The latter (1890) was the banner year in the history of the city, the bank exchanges aggregating $786,694,231. For the year just closed (1891) they were $679,062,255. The falling off of $107,631,976 was due to the depression which prevailed during the first six months in Pittsburg's two most important indus- tries-iron and steel and coke. At the close of the year (1891) the surplus and profits of Pittsburg's twenty-seven National banks amount to $7,600,000, against $7,287,000 at the close of 1890, and $6,569,000 at the close of 1889. The figures show that while the percentage of profits was largely reduced, the banks never- theless had a prosperous year's business" (t).

"In 1861 Pittsburg had thirteen incorporated banks, with a capital of $5,245,200. At the beginning of the present year (1893) it had fifty-one banks, with a total capitalization of $16,241,540. The growth has been steady and unin- terrupted. In Allegheny County the increase has been from thirteen banks in 1861 to seventy-three in 1893, with an aggregate capitalization of $18,715,540. And this growth continues to-day, for since the first of the year there have been organized in the county four new National banks, one savings bank and one trust company, and one of the established institutions has given notice of an increase in capital from $250,000 to $500,000. The new banks which do not appear in the last mentioned totals are: The National Bank of Western Penn- sylvania, $300,000 capital; Columbia National, $250,000; Bank of Secured Sav- ings, $100,000; Citizens' National, of Mckeesport, $100,000; First National, of Verona, $50,000; the Pittsburg Trust Company, $600,000. These will add $1,600,000 to the present capital, increasing the total for the county to $20,315,- 540. The total banking capital of Allegheny County, including under this head the capital, surplus, undivided profits and deposits of the seventy-three banks, is $120,563,553. This sum is larger than the combined banking capital (the

(s) Commercial Gazette, January, 1885.

(t) R. J. Stoney, Jr., January, 1892. (By permission.)

494

HISTORY OF PITTSBURG.

same items included) of all the incorporated and private banks of eight Southern States, namely, the two Carolinas, Georgia, Florida, Alabama, Mississippi, Arkansas and West Virginia. The paid-up capital of the incorporated banks of Allegheny County exceeds the total capital of all the banks in the State of Pennsylvania in the year 1852, and the deposits are more than four times as great. In the year 1834 the total number of banks in the United States was 506, with total deposits of $75,600,000. In the year 1893 the seventy-three banks of Allegheny County have nearly $89,000,000 deposits. Heretofore Pittsburg's reputation has rested almost exclusively upon its manufacturing industries. It will now be seen that it may also lay claim to prominence as a financial cen- ter" (11).

The year 1893 opened with nearly $69,000,000 worth of business for Janu- ary in the Clearing-house, but fell off in February to about $55,000,000. Then there was a gradual fall until September. The exchanges for the month of July were over $56,000,000; in August they dropped to a little more than $40,- 000,000, and in September to less than $40,000,000. The last three months of the year they stood at about $50,000,000. This extraordinary depression was felt in every avenue of business. The banks, however, made a better showing than expected.

Early in 1893 the financial distress began to announce its appearance in Pittsburg by an unaccountable scarcity of currency. Banks accommodated busi- ness men even beyond the limits of safety. The increase in the number of failures of financial institutions throughout the country revealed the terrible stress under which all business was transacted. Banks particularly were soon crashing in every direction. Distrust seized all classes, and depositors and country bankers drained the stanch moneyed institutions of Pittsburg and environs as they had never drained them before. In June, 1893, the banks of New York, as they had done in previous panics, resorted to Clearing-house certificates to save them- selves from despair. By the 30th of June they had taken out certificates to the amount of $17,000,000. At this time currency there was so scarce that it was bought and sold like any other commodity. Call loans commanded seventy- five per cent. As the country bankers and the depositors drained the Pittsburg banks, the latter were forced to call in their reserves from New York and other large cities, but to a large degree the calls were evaded or refused. Early in July wholesale importers here were told by New York merchants that nothing but gold would be accepted to settle the bills of the foreign houses. On July 13th the Pittsburg Chamber of Commerce, in a stirring session, demanded the repeal of the purchasing clause of the Sherman silver bill, and recommended an amendment to the National banking law, permitting banks to issue currency to the par value of their bonds deposited with the Government. About the middle of July several banks of Kansas City and Denver went down, and were followed by many others in all parts of the Union. Early in August currency was so scarce in New York that it rose from one and a half to two and a half per cent. premium, with gold at one per cent. premium over Clearing-house certificates, the latter forming the basis for estimates of valuation.

"The Pittsburg banks have not resorted to Clearing-house certificates, but they have manifestly done all in their power to meet the requirements of the business public" (v). "An attempt to force or induce the local Clear- ing-house Association to issue certificates, as many of the financial centers have done, was a failure, so far as taking immediate action was concerned. A meeting of the Association was held yesterday, when it was the unanimous opinion that

(u) R. J. Stoney, Jr., January, 1894. (By permission.)

(v) Dispatch, July 17, 1893.

ClarmeBurleigh

497

HISTORY OF PITTSBURG.

the time for such a step had not arrived and might not come. In order to be prepared to protect local manufacturing and mercantile interests, it was decided to get ready for such an issue should one be required" (w). "The local Clearing-house loan certificates will be issued. This was decided upon at a mceting of the association this afternoon. As the assent of all the nineteen mem- bers of the Association was necessary, delay was occasioncd by two of the members, who thought that the issue of such certificates was not imperative at this time. It was decided to-day that the Clearing-house should issue the certificates as fast as they are called for by the members. The issue of the Clear- ing-house loan certificates is a simple matter, but it would never have been resorted to by the local banks if they had not been forced to do it by the action of Eastern banks in refusing to ship currency on drafts, yct demanding cur- rency from Pittsburg banks. The modus operandi is as follows: When a bank finds, on making its morning settlement with the Clearing-house, that it is a debtor to that concern, it may hereafter, instead of taking from its vaults the currency it may need in the transaction of business over its counter, apply for one of these certificates, to be turned over probably to the banks to whom the Clearing-house statement shows it is indebted for the day. But thesc certificates, which are really a sort of I O U, require some security by the Clearing-house Association, and this is obtained by the banks turning over to the loan committee of the Clearing-house such of its securities and collaterals as its directors may sclect. These the Clearing-housc accepts at seventy-five per cent. of their face value, and holds until the bank sees its way clear to redeem them by turning over the cash to the Clearing-house or settling with the creditor bank in some other way. It is an expcdicnt that would not have been adopted but for the present stringency, and, as stated, the fact that so many other cities have been forced to take the same step. Pittsburg is one of the last to fall in line, and it is not likely that this course will be pursued one moment longer than is absolutely necessary" (x).

The issue of Clearing-house certificates was an immense relief to the bankers of this vicinity. They had been draincd for months of their currency, until some of them could not safely afford any further assistance to their patrons and were in a dangerous condition should a run upon them be precipitated. The certifi- cates set free a large amount of currency, but this did not afford all the relief needed by business men, a number of whom issued their own certificates of indebtedness. "Checks, drafts, notes, acceptances and other items, not payable in this city, are received and forwarded for collection at depositor's risk only until we have received a final actual payment" (y). The Clearing-house certifi- cates were eagerly taken up by the majority of members of the Association; by August 2Ist $825,000 had been issued, and by August 22d the amount had reached $922,000.

"The banks have so strengthened themselves that no additional Clearing- house certificates are being taken out, and it was again said to-day that some of the $922,000 already issued would soon be withdrawn. The interest they bear, and the fact that they are taxable by the Government, are enough to call them in as soon as they can possibly be spared. There is no disguising the fact that they were a mighty useful article for several down-town banks that were being drained pretty close by their country correspondents when currency was com- manding a premium, and, indeed, almost a necessity at that time." (z). . "Two weeks have now passed since the last Clearing-house loan certificate was

(w) Times, August 8, 1893 (adapted).

(x) Commercial Gazette, August 10, 1893 (adapted).

(y) Action taken by some of the banks.

(z) Commercial Gazette, September 12, 1893.

498

HISTORY OF PITTSBURG.

issued by the loan committee for the association of Pittsburg banks. It is not to-day expected that any of the $922,000 issued will be withdrawn quite as soon as had been predicted. One prominent banker said: 'I see it stated that several of the banks that were opposed to the issue of certificates had been glad to take out some of them. I know that is a mistake. They have pulled through without resorting to such an expedient, and, on the other hand, many of the banks that favored the issue of certificates have taken out none at all' " (a).

"A meeting of the loan committee of the Clearing-house Association was called for to-day for the benefit of a bank that wished to take out $25,000 in loan certificates, but before the committee got together it was notified that there was no pressing use for the certificates, as currency was coming in sufficiently for the transaction of business" (b). .. . "The loan committee on the Clearing- house to-day issued $25,000 certificates, making the total outstanding $947,- 000" (c). "The Clearing-house loan committee to-day issued $40,000 in loan certificates, which makes the total to date $987,000, and pretty nearly destroys the hopes of those who predicted that the total issue would not exceed $1,000,000 before some of them were retired" (d). "Not only were there no Clearing-house loan certificates issued by the Pittsburg Association yesterday, but notice was given that $50,000 of those now out would be retired and canceled to-morrow (26th September)" (e). "The first day of a new week, and that the first of the last quarter of the year, was celebrated by the banks of this city giving notice of the retirement of $150,000 worth of Clear- ing-house certificates, leaving the amount now outstanding $878,000, and the prospects are that these will be canceled very shortly. At least eighty per cent. of the debit balances in the Clearing-house are now settled in cash. The banks are increasing their deposits, are not giving up any more money than they can help, as they are anxious to make as good a showing as possible when the comptroller calls on them" (f). "The local banks are fast canceling their outstanding Clearing-house loan certificates. By to-morrow afternoon the balance against all the banks in the city will be but $672,000, as $50,000 were retired to-day and $75,000 called for to-morrow" (g).

The total amount of Clearing-house certificates issued to the Philadelphia banks aggregated about $13,000,000, of which less than $4,000,000 were can- celed by the middle of October, 1893. The banks of New York had yet out- standing over $12,000,000, but Boston had retired all except about $100,000. New York had issued a total of $41,490,000 of these certificates. It was thought by financiers generally in this locality in the summer and autumn of 1893 that the repeal of the Sherman silver act would restore confidence to money and busi- ness and inaugurate good times; hence great anxiety was felt on the subject, and great pressure brought to bear to effect the repeal of that law. Its repeal finally was not followed by the good times expected. In fact, no sooner had the act been repealed than the shipments of gold to Europe began to frighten financiers almost into spasms. The encroachment on the gold reserve, it was seen, was certain to oblige the Government to issue bonds to replenish the large amount shipped abroad.

"Of the multitude of causes assigned for the recent disturbance we think the most vital was distrust of our currency. It was a veritable money panic and the fiercest that ever swept over the nation. At its incipiency the fever was for gold, but before it spent its force all discrimination had ceased and there was

(a) Commercial Gazette, September 13, 1893.

(b) Leader, September 14, 1893.

(d) Press, September 16, 1893.

(e) Commercial Gazette, September 26, 1893.

(f) Commercial Gazette, October 3, 1893. (g) Times, October II, 1893.

499

HISTORY OF PITTSBURG.

a grand scramble to obtain anything that passed current as money. The run on the banks reached the maximum in August, and as no official call was made in that month, we will never know exactly how great the withdrawal of funds was. Since August and down to date of the present call of the comptroller the banks have made immense gains. But while it is impossible to give statistics covering the extremes of the panic, some idea of the extraordinary movement of money out of bank may be had by comparing the items contained in the official calls for May 4 and July 12, 1893. Between these dates the deposits of the National banks of New York City decreased 11.73 per cent., while the loans and discounts increased .42 per cent. The decrease in deposits of all National banks in the country was 11.83 per cent., which is nearly double the loss in each of the three preceding panics. The shrinkage in loans was 6.36 per cent. St. Louis, which was the greatest loser in 1890, was the only city gaining in deposits this year-4.04 per cent. At the same time that city reduced its loans 18.96 per cent., the greatest reduction reported from any of the leading cities, and nearly thirteen per cent. greater than the average of all the banks in the country. Kansas City was one of the centers of greatest disturbance, losing over thirty- three per cent. of its deposits, and reducing its loans nearly fifteen per cent. In Pittsburg the decrease in deposits was 14.18 per cent., and in loans 4.21 per

cent" (h). "The Pittsburg banks to-day (10th), somewhat unex- pectedly, canceled the last of their $165,000 outstanding Clearing-house loan certificates, thus getting rid of them before interest again became due. The total amount issued here was $987,000, but a great many were never used in any manner" (i). "The fact that one small private bank (Patrick & Co.) in this city has suspended payment is to-day being pointed to as only another evidence of the substantial basis upon which the local institutions are estab- lished" (j). "On the 14th of August (1893) the local Clearing-house issued loan certificates to such of its members as desired assistance of that kind. The scarcity of currency made the step necessary, but Pittsburg was about the last city in the country to adopt such a course. Only $987,000 were taken out altogether, and the last one was canceled November 10th" (k).

From May 4 to October 3, 1893, there was a decrease in the National banks of individual deposits, 17.12 per cent .; of total deposits, 20.45 per cent .; of loans and discounts, 13.8 per cent .; and in the twenty-four State institutions of indi- vidual deposits, 11.68 per cent .; total deposits, II.01 per cent .; loans and dis- counts, II.34 per cent. When the purely savings institutions are separated from the State banks and trust companies, the loss in individual deposits is found to be about equal to that of the National banks. The decrease in four large sav- ings banks was only 7.29 per cent., while in the nineteen State banks it was 17.56 per cent., against 17.12 per cent. for the National banks (1).

"The year 1893 has passed into history, and so far as its financial and indus- trial record is concerned it stands without parallel, both as to the extent and char- acter of its disasters. Certainly there have been no such shrinkage in securities and no such business depression during the past fifty years as have been experi- enced since last spring. The fright seems to have been caused by apprehen- sions of serious impairment of the national credit by the reduction of the gold reserve below the required standard. Confidence was not restored by the repeal of the silver purchase law. Money grew abundant in the banks, while orders became scarce in the mills" (m).

The following table shows the relative standing of the nineteen banks of

(h) R. J. Stoney, Jr.

(j) Commercial Gazette, December, 1893.

(1) Times, January, 1894.

(i) Commercial Gazette, November, 1893.

(k) Commercial Gazette, December, 1893.

(m) Commercial Gazette (adapted), January, 1894.

500

HISTORY OF PITTSBURG.

the Clearing-house, as regards the volume of their exchanges, from 1893 to 1897, inclusive (c):

1893. 1894. 1895. 1896. 1897.

Farmers' Deposit ..

National Bank of Commerce.

People's

German.

First

Tradesmen's.

Merchants' and Manufacturers'

Second.

Allegheny

Union.

Mechanics'

Citizens'

Iron City

Third. .

Exchange.

Bank of Pittsburg

First (Allegheny)

N. Holmes & Sons.

Diamond.

The total exchanges of the Clearing-house from 1866 to 1897, inclusive, are as follows (o):

I866

$ 83,731,242.17

1882

$483,519,704.53

I867

97,157,556.03

1883

497,653,962.43

I868

115,296,621.33

I884 469,316,009.68

I869

156,880,910.90

1885

356,171,592.53

I870

178,409,905.51

I886

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Standard history of Pittsburg, Pennsylvania, Part 56

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