BETWEEN the first establishment of a banking institution in this country and the national banking system lies an experience in finance that is as wonderful as anything else in our history. In hunting it out, the chief miracle seems to be that the land was able to achieve even the least prosperity. At the beginning of this century there was an almost unanimous opposition to banks ; now it seems to be a prevailing opinion that the more we have the merrier.
It was Philadelphia that set New York the example of creating a bank of discount and deposit. The Bank of North America, originated by Robert Morris, Superintendent of Finance for the United States, was incorporated by Congress in 1781 and by the State of Pennsylvania a few months later in the same year. But nothing. could be done in New York while the British held possession of the city, and it was not until November 25, 1783, that the English soldiers finally disembarked, taking with them thousands of Tory refugees. Philadelphia had a population of forty thousand at that time, and was regarded as the future capital of the colonies, since Congress always held its sessions there. New York was but the shadow of the flourishing city of 1776. Its patriotic citizens re-turned to find its homes dismantled or destroyed by fire, its churches turned into riding-schools or hospitals, and its commerce gone. But the spirit of its people was indomitable. Though the population of the city numbered but twenty thousand, and the business men had been largely impoverished by the war, a movement was started at once looking to the creation of a bank. Money was scarce, and it was at first proposed that subscriptions should be made with one-third money and two-thirds mortgages or deeds of trust on land in New York and New Jersey. Happily wiser counsels prevailed, and at a meeting held in the Merchants’ Coffee House on February 26, 1784, the Bank of New York was organized, with a capital stock of $500,000 in gold and silver. Major-general Alexander McDougall, a gallant soldier of the Revolution, and President of the Society of the Cincinnati, was elected President, and William Seton, a shipping merchant whose sympathies were with the royal side, and who had remained in New York throughout the war, was made cashier. In the first list of directors are the names of Alexander Hamilton, Comfort Sands, Thomas Randall, Nicholas Law, Isaac Roosevelt, and others almost equally well known in the early financial and commercial history of the city. Alexander Hamilton drew up the constitution and gave Mr. Seton, who was not familiar with the forms of banking business, a letter to the cashier of the bank in Philadelphia where he had gone to procure ” materials and information.”
The bank began business at the old Walton House on St. George’s Square, now known as Franklin Square, but in 1798 it was removed to the corner of Wall and William streets, the same site which it now occupies. Wall Street was then largely a street of private residences. Alexander Hamilton had his modest house upon part of the present site of the Mechanics’ Bank, and near by lived the Verplancks, Ludlows, Marstons, and other families of social prominence. The dry-goods and millinery stores were in William Street, where the ladies did their shopping. There was considerable opposition in the Legislature to the incorporation of banking institutions, and the petition which the Bank of New York presented in 1789 was unheeded, and while the Assembly of 1790 (in which my grandfather’s grandfather was member from the great county of Ontario, which then embraced the western half of the State) passed an act of incorporation for the bank, it was defeated in the Senate by the casting vote of the Chairman. A year later the bank was successful, and under these new auspices it took a fresh lease of life, with a capital of $900,000 and with Washington’s Secretary of the Treasury as its friend and adviser. But even great men are short-sighted, and on January 18, 1791, I find Alexander Hamilton writing to Cashier Seton that he has “learned with infinite pain the circumstance of a new bank having started up in your city. Its effects cannot but be in every way pernicious. These extravagant sallies of speculation do injury to the Government and to the whole system of public credit, by disgusting all sober citizens and giving a wild air to everything.” But the proposed Million Bank, which Hamilton else-where designates as a newly engendered monster,” failed to obtain a charter, and was never organized for business.
The whole city appears to have subscribed for the five-hundred-dollar shares of the Bank of New York when they were placed on the market. Among the stockholders in 1784 I find the names of Herman Le Roy, Thomas Ludlow, Robert Lenox, Peter Keteltas, John Delafield, Gulian Verplanck, Anthony S. Bleecker, Peter Schermerhorn, Richard Varick, Gouverneur Kemble, John Alsop, Josiah Ogden Hoffman, Gilbert Aspinwall, John Suydam, and Anthony A. Rutgers-a brave showing of old colonial blood. The extremes of subscriptions were those of Temperance Green, who took twenty-five shares, and the Black Friars’ Society, which was enrolled for a one-half share. The second name on the list was that of Alexander Hamilton, a subscriber for one share and a half, and the third is that of Aaron Burr, who took three shares. It was a natural sequence of names in that day; in these later times it looks familiar and significant. On the same roll I find the name of Abraham Bradley, a near relative of my ancestral member from Ontario, who was appointed Assistant Postmaster-general by President Washington, and held the office for forty years. And there is one name there of a white-haired soldier of the Revolution who used to take me on his knee, and tell me of the wild charge upon the Hessians at Trenton, and the glorious surrender at Yorktown-Major Jonathan Lawrence. So, when I have told my little boy-the Benjamin of our quiet household-of the carnage I witnessed at Malvern Hill and Spottsylvania, I can also give him, as I heard it from living lips, the story of the long, dark years that stretched between the fight at Lexington and the evacuation of New York.
Notwithstanding the financial success of the Bank of New York and its acknowledged convenience to the public, there was wide-spread popular prejudice against the establishment of more banks. The farmers were an important and growing element in the State, and they were possessed with the idea that the money placed in banks was just so much withdrawn from circulation in the community. A branch of the United States Bank had been established in New York City, and these two institutions were judged to be sufficient for business purposes for many years to come. But as it is the unexpected which always happens, so an unforeseen occurrence paved the way to the’ incorporation of other banks. The yellow-fever visited New York in 1798, and one of its earliest victims was a book-keeper in the Bank of New York. Fearing another visitation of the pestilence, the bank made arrangements with the branch Bank of the United States to purchase two plots of eight city lots each, in Greenwich Village, far away from the city proper, to which they could remove in case of being placed in danger of quarantine. Here two houses were erected in the spring of 1799, and here the banks were removed in September of that year, giving their name, Bank Street, to the little village lane that had been nameless before. The last removal was made in 1822, when the yellow-fever raged with unusual virulence, and the plot, which had been purchased for $500, was sold in 1843 for $30,000.
It would be scarcely possible to exaggerate the terror which pervaded the city during the prevalence of the yellow-fever. Colonel Tappan, whose home was then in Orchard Street, tells me that an iron chain was stretched across the streets at the Brick Church, which marked the boundaries of the quarantine, and he has a vivid recollection of the sudden and appalling inroads of the pestilence upon the ranks of his stalwart young contemporaries. An old New Yorker, who was born in Greenwich Village in the first year of the century, and who, as I write, in the same spot is passing peacefully down to the grave, remembers that during one fever summer a hotel of rough boards, capable of holding 500 guests, had gone up between Saturday and Monday in a field where the ripe wheat was waving on Saturday. The city was without sewerage. Great gutters, that ran through the centre of the streets, collected the refuse instead of carrying it off, and left it festering in the sun. Pigs roamed at large, and cattle were driven home to the stables from the pasture lots near Canal Street. Pestilence was the natural result of the city’s accumulated filth, and it was equally natural that a desire for sanitary reform should follow in its turn. In this sanitary revolution Aaron Burr saw his financial opportunity, and whispered it to some of the leading merchants of the city. The result was that a bill was presented to the Legislature in 1799 chartering a company with a capital of $2,000,000 for the purpose of introducing pure water into the City of New York. This was all well enough so far, but the true intent of the scheme lay in a clause providing that the surplus capital might be employed in moneyed transactions or operations not inconsistent with the laws and Constitution of the State of New York.” The scheme worked well, owing to Burr’s sagacious leadership, and the Legislature passed the bill, with real or pretended ignorance of the effect of the measure. That effect was speedily seen, for soon after its charter was se-cured notice was given that the Manhattan Company would begin banking operations in September of that year with a capital of $500,000.
This was the only way to flank a bitter and unreasoning popular prejudice. Legislatures were as flexible in that era as now, and the lobby was as potent if less numerous. Chemical works, ship-building yards, and other pretexts were used to charter additional banks. The great bank buildings which now make Wall Street magnificent are a glory to this city and a testimony of what may be accomplished by financial genius’ and integrity. One of these has been erected by the Gallatin Bank, which honored itself in exchanging its old name of National Bank to one which keeps green the memory of the greatest Secretary of the Treasury of this century. In the sixty years of its existence this bank has had but three presidents, Albert Gallatin, his son, James Gallatin, and the present occupant of the chair, Frederick D. Tappan. A portrait of the first president is worth a visit to see, so nobly does it typify the great men who built up the young republic into stalwart manhood.
These banks of an older day have had their defeats as well as their victories. There lies before me a little newspaper, yellowed by age, that was issued May 10, 1837, at the crisis of the great panic. The day be-fore, the Chemical Bank, the ” pet ” of the editor, had suspended specie payments, and twenty-two others had kept it company. The community had lost its head in some respects. The worthy Mayor had camped a regiment of infantry in the City Hall Park, and by way of a further precaution against outbreak he absurdly sent several men into Wall Street, bearing aloft plaster busts of the immortal Washington. The National Theatre advertised to take notes of all State banks at par, and to give season tickets in ex-change. ” By gar,” said a Frenchman who read the notice ; ” dat is good. I have forty dollar-ah, ah-I shall no lose my moneys now.” ” Keep cool,” is the editor’s advice. “The banks will resume payment ; Martin Van Buren will be turned out of office, and all will be well.” How splendidly our city banks weathered this financial hurricane is now a matter of history.
One of the first newspaper pictures that I remember to have seen represented the interior of a wildcat bank in Indiana. Leaning across the counter, the cashier was handing a $1 bill to a small boy with the impressive exhortation, ” Here, boy, run to the corner and get me a dollar’s worth of silver change. I expect the bank examiner to-day, and we must have some silver to show him.” Endless was the bother in my boyhood days about uncurrent money, counterfeit detectors, and bills of doubtful value. Each State was so jealous of its own currency that even the great State of Pennsylvania passed a law placing a fine of $5 on any person who attempted to put in circulation the bank-bills of another State. I remember that once when I was a lad at school in Burling-ton, N. J., I went to Philadelphia to have a tooth extracted. An exceedingly benevolent-looking gentleman in clerical black nearly murdered me in accomplishing the feat of extracting the molar, and I felt that he amply deserved his fee of fifty cents. In the confiding innocence of early youth, I handed him a $2 bill upon one of the oldest and safest banks in the City of New York. The good man looked at it sternly, glanced at me sadly, and then remarked : ” Did you know that there is a fine of $5 for attempting to pass New York currency in this State?” ” No,” replied I, with a blush and a shudder. And what said the good man? With a brand-new glow of benevolence on his serene countenance, he remarked, generously and gushingly: “Well, my boy, I will protect you. I will keep the bill myself. Good-bye !” Often since that time I have been led to apply to the two cities a remark which a friend was accustomed to apply to Hartford and Providence. “They’re a little more pious in Philadelphia, but they’re a little more honest in New York.”