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'~~~ ~~~~~ r~ rdZiNR^or SJE ryjp- //~Cz: -/ti: CIUnp -Cmu- rYn.7lm Yr~ li7 i i r k — -~~ ---~ ~ —w — w C)r ii,I History of the BANK OF NEW YORK AND TRUST COMPANY 1784 to I934 By Allan Nevins PRIVATELY PRINTED: NEW YORK MARCH 1934 COPYRIGHT 1934 BY BANK OF NEW YORK AND TRUST COMPANY TABLE OF CONTENTS PAGE I The First Bank.... II Who's Who-1784...... 5 III Young Mr. Hamilton.... 7 IV Two Governments in Wall Street... 10 V Rules for Banking..... 15 VI The Fight for a Charter..... 19 VII Hamilton and the Bank..... 22 VIII Three Presidents..... 26 IX New Times, New Banks..... 3 X The Young Metropolis.. 33 XI Loans and Charters...... 37 XII New York at War.....40 XIII Steamboats and Canals..... 43 XIV New Charters....... 48 XV Fire and Panic....... 52 XVI The Clearing House. 58 XVII Bricks and Men......63 XVIII Financing the Civil War..... 69 XIX After the Battle...... 75 XX The Panic of 1873.... 78 XXI In the Wake of the Panic... 83 XXII Back to the Gold Standard...86 PAGE XXIII Storm Clouds of 1884.... 89 XXIV One Hundred Years of Banking.... 93 XXV Two Blizzards....... 97 XXVI Panic and Personalities..... 101 XXVII The Fight for the Gold Standard.... 107 XXVIII The Turn of the Century..... 111 XXIX The Bank in the Panic of 1907... 117 XXX In the Federal Reserve System.... 122 XXXI The World at War...... 126 XXXII A New Banking Era..... 133 XXXIII A Merger and a New Name.... 137 XXXIV Years of Expansion: the New Building... 145 XXXV The Bank and the Great Depression... 150 XXXVI The Bank's Declaration of Principles... 155 LIST OF ILLUSTRATIONS PAGE The First Building at 48 Wall Street... Frontis. Alexander McDougall...... 6 Alexander Hamilton....... 8 Act of Incorporation....... 20 Warrant No......... 22 Jeremiah Wadsworth....... 26 Isaac Roosevelt....... 28 Gulian Verplanck........ 30 One of the First Bank Notes Issued..32 Early Check. 32 Iron Key to the Bank....... 32 Herman Le Roy..... 42 Matthew Clarkson....... 44 Charles Wilkes..... 46 John Oothout..... 48 Announcement of Opening for Business.... 50 Charles P. Leverich... 86 Charles M. Fry........ 88 David G. Thompson....... 138 Henry Parish.....140 Edwin G. Merrill.. 142 Historic Clock of 1797..... 144 Present Building at 48 Wall Street..... 148 Fireplace in the Trustees' Room..... 150 John C. Traphagen........ 152 A View of the Main Banking Floor..... 154 THE FIRST BANK ~1 I T IS a brisk day late in February, 1784, in a little town that sprawls across the tip of Manhattan Island. One of its 23,ooo-odd citizens sits at breakfast in his house on Queen Street before the open fire that gives the only available heat. He sips his tea, and unfolds the small crinkling sheets of the New York Packet, one of the four newspapers then appearing in the city. This is General Alexander McDougall, brisk, decisive, a Scot by birth but an American now-merchant, former state senator, President of the Society of the Cincinnati, which bound the former officers of the patriot armies in friendly association. He glances through his paper and his eyes fall on a notice: BAN K. T appearing to be the difpofition of the Gentlemen in this City, to etabliha BANK on liberal principles, the flock to confift of fpecie only; they are therefore hereby invited to meet To-Morrow Evening at Six o'Clock, at the Merchant's Coffee. Houfc; where a plan will be fubmitted to their confideration. This brief advertisement of February 23, in the year following the formal peace by which the American colonies became independent States, represented the working of new and urgent forces. New York had passed through a ruinous seven years. It had been the centre of British activity for the entire period of the war. As the Colonial troops had evacuated it in September, 1 cA Hi-dory of I50 Years 1776, a fire had burst out which had devastated an eighth of its area. The British had done nothing to restore this ruined district; a rude village of tents and shacks had covered a portion of it-housing American prisoners. The civil government of the town had been abolished. Many of its merchants had fled, committed to rebellion; and commerce had been abruptly cut off. Late in 1783 New York had lain scarred with fire, some of its weed-choked streets the pastures of roaming cows, its fences and orchards long since destroyed for fuel, its wharves decaying and its treasury exhausted. But the notice in the Packet was symbolic of vigorous and constructive change. The city was now a port in an independent nation. Its patriot business men, triumphant at last, had returned. Its harbor and geographic position had already marked it as the most important shipping centre of the country, though Philadelphia then surpassed it in population. The British armies had gone, and with them had forever vanished the trade regulations that England had imposed. New York buzzed with new hopes and responsibilities. Immediately her merchants felt the need of a financial organization for their new activities. They looked south to the one hopeful example by which they could profit-the Bank of North America in Philadelphia, chartered by Congress and the State of Pennsylvania. For amazing as it seems in retrospect, until 1781 there had been no bank in America. And even in 1784, after two years of a successful bank in their largest city, banking was still a strange and little understood activity to most Americans. Colonial finance had indeed been primitive. Money had not come auto 2 The First Bank matically from England with the process of settlement. Barter had been a necessity for many years: corn and livestock and tobacco had been cumbersome units of currency in different places. Wampum, the Indians' money, had been widely used: it was still manufactured on Staten Island as late as 1830. Foreign coins had drifted in. Spanish coins from the West Indies were especially common-among them the milled dollar which was to give its name to the chief unit of American currency. And the Colonial governments had coined and printed money of their own, chiefly paper. Most of it, supported by ill-kept promises to pay, had sunk far below par. The Revolution, finally, had deluged the land with notes printed by Congress and the States, which by 1784 were all but worthless. There had been as little in the way of financial organization as there had been in the way of unified currency. Individual merchants had afforded what facilities were available. The Bank of North America had been a daring step toward a new efficiency. But it had also been an experiment, and was still experimental. And now the business men of New York who were about to meet at the Merchants' Coffee House and establish the first bank in New York City were to undertake another experiment. The announcement carried by the Packet indicates that interest in the organization of a bank had already developed. As a matter of fact, this announcement had not been the first move toward establishing one. Chancellor Robert Livingston had sponsored a project referred to as the "land" bank. For its proposed capital of $750,000 one-third was to be contributed in cash and two-thirds in landed security. The merchants in general disapproved of it. Land had been the basis for most of the sickly 3 tA Hiflory of 150 Years Colonial note issues, and it was argued that it could give a bank no real power or elasticity. The brilliant young Alexander Hamilton, already known as a keen theorist on finance, had thrown all his energy against the "land" organization, and had persuaded a number of its supporters of its danger. The merchants were striking at the land feature when they declared that the stock in their projected bank should be paid up in "specie only." It is interesting to note that the first of New York banks was organizing on a metallic basis shortly after the Bank of Commercial Discount, in Paris, with a low cash reserve, had been authorized by the French government to pay off its notes with fiat money. The meeting of February 24 was held as advertised. Another followed on February 26. General McDougall was made chairman, and plans for a bank were offered and approved. A capital stock of $500,000 was to be subscribed-a thousand shares, payable in gold or silver. When half the amount had been promised the subscribers were to meet and elect thirteen directors, including a president, and a cashier. The five hundred shares were quickly subscribed, and on March 15 the bank was organized. General McDougall was chosen President and William Seton Cashier. The other directors were: Samuel Franklin, Robert Bowne, Comfort Sands, Alexander Hamilton, Joshua Waddington, Thomas Randall, William Maxwell, Nicholas Low, Daniel McCormick, Isaac Roosevelt, John Vanderbilt and Thomas B. Stoughton. New York's first bank, though it was not to begin its operations for two and one-half months more, had been founded. For fifteen years the Bank of New York was to stand alone-the centre around which the financial life of the town revolved. 4 WHO'S WHO7 I 84 ~ II HE founders of the Bank of New York had sought to draw the greater number of merchants and men of wealth in the city into their effort to establish a financial centre. Doubtless the selection of General McDougall was made with a full sense of his influence and importance. A Scotchman born, and at first a follower of the sea-he had commanded a privateer with the savage name of The Tiger-he had come to New York in the late 1 75o's and settled there as a merchant. He had been successful. By the time the first excitement over British taxation had stirred the Colonies in 1765, he was ready to throw his heart and energies into the cause of the new land. He appeared as a Son of Liberty in that year; in 1775 he took command of the four regiments which New York raised to resist royal authority, and as a Brigadier-General, directed the retreat of the Americans from Long Island in 1776. Later he succeeded Benedict Arnold as commander at West Point; and emerged from the War a Major-General. Yet in selecting William Seton as Cashier, the organizers extended a quiet hand to a number of loyalists who still remained in the city. For the greater part of these, especially the more active ones and many of the richest, had fled with the British in 5 cA Hiflory of 150 Years 1783. Seton, also a Scot by birth, had taken no definite part in supporting the Crown, yet he had been sympathetic with it. At the same time, his courtesy and amiability had made him generally liked by both Patriots and Tories, and he was a prominent and responsible merchant. Many of the directors were as well known and esteemed as the two officers. Comfort Sands already had a reputation both as a prosperous business man and an ardent patriot. Isaac Roosevelt, an ancestor of Franklin Delano Roosevelt, had prospered in the sugar refining business; he too had fled before the British; in 1777 he had helped frame the new State Constitution at Kingston. Samuel Franklin, Robert Bowne, Joshua Waddington, William Maxwell and Nicholas Low were all prominent in business. Hamilton's brilliance as an officer and lawyer and member of Congress had already made him a national figure. The shareholders who gathered in support of this group were in some ways even more significant. The list of 1791 gives an astonishing array of New York families, and men later distinguished both in politics and in finance: Herman Le Roy, Gulian Verplanck, Nicholas Gouverneur (all of whom served later as Presidents of the Bank); John McVickar, David Lydig, William Aspinwall,WilliamBayard,James dePeyster, andJohn Roosevelt. On the roll also appear the names of Aaron Burr (who held three shares); Richard Harrison, later City Treasurer and with Burr a founder of the Manhattan Company; Richard Varick, later Mayor of the City and a founder of the Merchants' Bank; and Rufus King, soon to be elected United States Senator from New York. 6 Painting by E. Brown Smith Original in Possession of the Bank ALEXANDER McDOUGALL President 1784-1785 i I YOUNG MR. HAMILTON ~ III 0F ALL the founders of the Bank of New York, Alexander Hamilton was for a time to play the most active role. He was at this time but twenty-seven years of age. He had served on Washington's staff, and commanded troops at Yorktown, emerging from the War as a Colonel. His brilliant mind, insatiable activity, and firm character had already marked him as a leader. He had served in Congress, and many Americans knew his proposals for building a strong national government, in which appeared his outline of a national bank. Hamilton, while a member of Congress, had often consulted and advised with Robert Morris, the President of the Bank of NorthAmerica. He felt now that this organization, in having taken a Pennsylvania charter, had ceased to be national in character, and that New York must create her own bank to meet the future she could undoubtedly expect. Hamilton threw himself actively into the creating of the bank. Even in Europe chartered banks were relatively few. Hamilton had studied them. But here in New York, for the first time in his career, he helped build and operate one. This was a training that was the more valuable because in New York there had never been financial institutions of any kind, and no legislation existed for the control of banks. The Bank of New York was forced, 7 ,A Hiilory of 150 Years therefore, to face every major problem of structure and practice. One fact emphasizes Hamilton's activity; it was he who wrote the constitution under which the Bank was to operate. This constitution doubtless represented the suggestion of other minds as well as his own, but it was he who gave it final form. This is an important fact in Hamilton's life as well as in the Bank's. Only five years later he began to shape the financial policy of the United States as the first Secretary of the Treasury; and two of these years were devoted in no small measure to his work as director of the Bank of New York. The Bank thus became a school for his future monetary activities. To a much lesser extent it was also to influence men among its subscribers like Burr, Harrison, and Varick, and indeed to blaze a path along which later institutions were to follow. The organization which Hamilton and his associates devised for New York City's first bank was simple. The subscribers were to elect thirteen directors, who would choose a president from among themselves; such elections were to take place yearly. Every shareholder had a vote, and for his first four shares, one vote each. Holders of five shares had but four votes; those of six shares, five; those of eight shares, six; of ten shares, seven; and subscribers holding more than ten an additional vote for each five shares. The Board of Directors had full control of the policies of the Bank-forms of business, appointment of officers, investment of funds. Individual directors were removable by the board for "neglect of duty, or any malpractice." Severe penalties were to be imposed for fraud or embezzlement. The cashier and clerks were required to post bonds. Finally, the President and Directors 8 Courtesy oj ALEXANDER HAMILTON Director 1784-1788 a p * Young J/dr. Hamilton were to petition the legislature for a charter under the name, "The President, Directors, and Company of the Bank of New York," and also to ask for laws against fraud or embezzlement, and legislation "to punish the counterfeiters of bank notes and checks in the like exemplary manner, with such other clauses in the Act as they shall judge necessary and proper for the security of the stockholders." It was provided also in the Constitution that the liability of each shareholder should be limited to the amount of his subscription. This petition was presented to the legislature later in the year. Meanwhile the need for banking facilities and the promise of financial return to shareholders (the Bank of North America had been paying dividends totalling fourteen per cent. annually) seemed so great that plans were made for proceeding without a charter. Notice was given on May i, 1784, that the first payments on subscriptions would be due the coming June i. Meanwhile the President and Directors, on May 22, "qualified before his Worship, the Mayor, as required by the Constitution." This policy did not please all the subscribers. One in particular protested publicly against the directors proceeding in this fashion without a subscribers' meeting to decide whether or not the Bank should begin activities without a charter. Nevertheless, subscriptions were paid in, and some deposits made, and on June 7 notice was given that the Bank would open its doors two days later. 9 TWO GOVERNMENTS IN WALL STREET ~ 1V rIHE first home of the Bank was a building known as the Walton House, at No. 67 St. George's Square. It was also known as 156 Queen (later Pearl) Street. It was a simple, well-proportioned structure of yellow Holland brick, trimmed with brownstone, and three stories high. William Walton, popularly known as "Boss" Walton, had built it in 1752 as a private residence. The Square lay in what was then the central section of a diminutive New York. The town at that time occupied only the southern tip of the Island. The city area extended north from the battery only as far as Reade Street on the North River and Catherine Street on the East River. Its low buildings of brick and wood, with only an occasional church spire thrusting itself above numerous trees and gardens, stood in an almost rural quiet, strangely in contrast with the towering skyscrapers and endless traffic of modern Manhattan. To the north lay streams, ponds, meadows, and villages, with a few rocky hills-for southern Manhattan was in the main very low, and much of it originally swampy-which were to be leveled down by enthusiastic promoters in the early i 8oo's. Greenwich was one of the villages-a settlement quite removed from the 10 Two Qovernments in Wall Street town, yet destined later to play a role in the story of the Bank of New York, and other financial institutions. Queen (Pearl) and Water Streets were the busiest streets of the town. Here many of the most prosperous merchants had their shops or offices. Isaac Roosevelt's sugar refinery stood just across from the Bank at 159 Queen. Comfort Sands had offices with his brother Joshua at No. 73 Queen, where they did a shipping and supply business which was to become extraordinary for that period. On this street also were others then or later associated with the Bank: Samuel Corp, Thomas Randall, James Buchanan, and Joshua Waddington. Besides Queen and Water Street, William Street was important in the trade of the town. Here were the principal dry goods shops. But Wall Street had already begun to assume a preeminent position. It was fifty feet wide and straight in comparison with other streets. Not yet important in business, it was attaining a three-fold distinction for smart shops, public buildings, and exclusive residences. The residences clustered at the upper or western end, near Broadway. Here lived the McEvers, the Van Homes, the Buchanans, the Verplancks, the Ludlows, and others. A little farther east, at Wall and Broad, stood the City Hall. Almost opposite the City Hall was the residence of Alexander Hamilton. In 1792-4 the Tontine Coffee House was built at Wall and Water Streets, a kind of merchants' club built at a cost of $43,000. Practically all the men associated with the Bank of New York assisted in its establishment. Broadway, where important residences had also begun to appear, took on an increasing importance. It had the then 11 eA HiLlory of I50 Years extraordinary width of 75 feet, and ran the full length of the city. It followed a kind of ridge, the backbone of the island, and from the windows of its houses a clear view could be had over the rest of the town, and of the rivers on both sides. Cortlandt Street ran westward from it, and terminated in the Bear Market (after i814 the Washington Market), and the ferry for Paulus Hook (Jersey City). There was another ferry on the eastern side of the town, at the foot of Maiden Lane, where boats ran to Brooklyn, a little village of 4,000 people. Here too was the noted Valley or "Fly" Market. Aside from Wall and Broadway, the streets of New York were narrow and irregular. Most of them were unpaved, and sidewalks edged only parts of the better thoroughfares. There was of course no gas for lighting. Drinking water was a problem. It was supplied by wells, none of them very good, or brought in hogsheads. On the streets horses, sedan chairs, carriages and wagons provided transportation. For travellers outward bound there were only sailing vessels and mud-spattered stage coaches. A Boston stage line in 1787 jolted its patrons over uneven roads for six days to their destination. Philadelphia was more accessible-a stage left daily at 4 P.M., and arrived the following day. An Albany coach line began operations in 1786, using a covered wagon with four horses and charging four pence a mile. The stages started from Cortlandt Street and reached Albany in two days. In overseas travel, there was no regular service to England, but merchant ships sailed frequently and took passengers. Six weeks was normal time for a crossing. For France, however, a line of packets, established in 1783, sailed monthly, and the supervision of this 12 Two Governments in Wall Street service in America was the business of William Seton, Cashier of the Bank of New York. Yet if New York in the 1780's and early 1790's was only a large and struggling village as measured by twentieth century standards, it was important enough in its own America. Not only was it the shipping center of the new land; it was also the capital of the State. And in December, 1784, the Continental Congress chose it as the national capital. So from 1784 to 1791 it was lively with its own expanding trade and with the activities of two governments. The burnedover district began to re-build. The City Hall was remodelled in 1788 for the use of the Federal Government at a cost of $32,000. Fashionable gentlemen in white embroidered satin vests, ruffled shirts, velvet coats of all colors, and glittering buckles crowded Wall Street. Ladies in silks were occasionally driven by in coaches. Liveried servants, mansions lighted for dinners, balls and assemblies lent the town both glitter and excitement. Just after the War the distinguished figure of Washington was familiar as Commander-in-Chief of the American armies; later he was to return as the first President under the Federal Constitution. In this New York appeared Franklin, Jefferson, Robert Morris, John Jay and Madison. John Quincy Adams, already a promising person of eighteen years, arrived from England in the summer of 1785, and was entertained by Richard Henry Lee, President of Congress under the Articles of the Confederation. There was also young Aaron Burr, Attorney General of the State and soon after elected United States Senator in opposition to General Schuyler, Hamilton's father-in-law, thus opening a political hostility with Hamilton which quickly deep 13 A Hiflory of I50 Years ened and ended so tragically with the death of the latter. A vivid picture of the little town is drawn by Henry Wansey, an English merchant, who visited it in 1794. He thought it "much more like a city" than Boston. The streets were wider and the houses in better style. "Boston is the Bristol, New York the Liverpool, and Philadelphia the London of America." This was the town in which the Bank of New York began its life half a year after the formal acknowledgment of American independence. The Bank was to find a busy and broadening field for its work, full of obstacles and problems as well as rewards...- ~.- _...:'~ —' -~ v ~-',. ~2:-. ---" C -- - --;- _ V — Reproduction of an early i9th Century steel engraving THE WALTON HOUSE in which the Bank of New York commenced business, June 9, 1784 14 RULES FOR BANKING ~ V -O N JUNE 9, 1784, the Bank of New York opened its doors for business. Meanwhile, the officers and directors had agreed upon a code of practice. To a considerable extent they had profited by the experience of the Bank of North America at Philadelphia. Seton had made a trip to that city late in March, armed with a letter of introduction from Hamilton to Thomas Fitzsimmons, one of its directors. The proposed practices of the Bank were outlined in a set of rules published by General McDougall for the public on June 7, the day when the opening of the Bank was definitely announced. The Bank was to be open from ten to one in the forenoon, and from three to five in the afternoon, on all days except "Sundays, Christmas Day, New Year's Day, Good Friday, the Fourth of July, and general holidays appointed by legal authority." It would discount notes and bills "at six per cent. per annum; but no discount will be made for longer than thirty days, nor will any note or bill be discounted to pay a former one. Payment must be made in bank notes or specie." There were rules which now would be taken for granted: "Money lodged at the bank may be re-drawn at pleasure, free of expense; but no drafts will be paid beyond the balance of the account" (the English custom of permitting overdrafts was then the commonest form of loan), and 15 .A Hitfory of 150 Years again, "Payments made at the Bank must be examined at the time, as no deficiency suggested afterward will be admitted." Such practices doubtless represented what Seton had learned by a visit to the Bank of North America at Philadelphia, what was general practice among the merchants, and what Hamilton and the other directors had determined upon by consultation. An interesting picture of the currency situation is given by a table which the rules included, listing the value that would be put upon gold coins in terms of dollars. It is as follows: A Johannes weighing 18 dwt. $16.00 A half " ' 9" 8.oo A Spanish doubloon " 17 " 15.00 A double Spanish pistole " 8 " 12 gr. 7.48 A Spanish Pistole " 4 6 " 3.72 A British Guinea " 5 " 6" 4.64 A British half Guinea " 2 " 15 2.32 A French Guinea 5 4 4.52 A Moidore " 6 " 8 " 6.oo A Caroline " 6 " 8 " 4.72 A Chequin " 2 4 1.78 The Johannes and Moidore were Portuguese coins, the Caroline was German. There were at this time no American coins whatever. The dollar was a theoretical unit of value. Congress, then operating under the Articles of Confederation, had approved it as a standard, but Thomas Jefferson's suggestions for its use on a decimal basis were not to be adopted in modified form until July, 1785. However, the Bank apparently used the decimal basis for its computations. There was much American paper money-that of individual colonies and states, notes of the Bank of North America, and Congressional issues. Thus the first bank in New York opened its doors to transactions mostly carried on in foreign metal. This was fairly typical 16 Rjiles for Banking of the dependent and undeveloped state of American finance. Indeed, for many years, although the ~ sign always appears on the Bank's journals, the $ sign was never used, the designation always being "dollars." It was not until the i 820's that the native sign customarily displaced this written word. The impulses to foreign trade which came with independence and peace, the presence of the State and National governments in the city, and the brisk development of the American interior, already seeking outlets through New York, gave the Bank of New York a rich field for activity. This was reflected at once in its profits. The Bank began paying dividends as early as November, 1 784 (for the six months preceding). After this it paid three per cent. semi-annually until November, 1788, when the dividend rose to three and a half per cent. In 1791 this was increased to seven per cent. After three years of business on St. George's Square (a part of Pearl or Queen Street), the Bank needed larger and better quarters, and purchased the building and land at No. i i Hanover Square for ~5,000. Here, as was often the custom, the Cashier, William Seton, made his residence in the upper story of the building for the safety of the bank. Despite its prosperity, the Bank had numerous problems. It faced the technical difficulties of an institution dealing with matters for which no precedents existed, and in an era of confusion. There was also an unfriendly prejudice born partly of jealousy, partly of the unfamiliarity of the public with banking. The elementary problem of dealing with money was a difficult one. Not only were the various foreign coins to be reduced to value in terms of a theoretical dollar, but all of them had also to 17 cA Hislory of 150 Years be carefully watched on account of the clipping and sweating to which they were often subjected. Weighing was the accepted method of handling them. In addition, the paper currency was a problem. The New York Chamber of Commerce had often discussed it, and had been particularly concerned by the large numbers of Pennsylvania and New Jersey notes which circulated in New York. As late as 1787 it had found no solution, and decided that "the Chamber should not for the present interfere in the matter." Meanwhile the Bank had to do the best it could. Its difficulties had been further increased by the decision of the State legislature in 1786 to emit a paper issue. The merchants of New York unanimously opposed the idea, and remonstrated formally through the Chamber of Commerce. But times were hardShays' rebellion was brewing just across the Massachusetts border-and in country districts a firm belief persisted that "more money" would bring prosperity; so that in that year the legislature authorized an issue of $200,000 in notes, bearing five per cent. interest, "for the purpose of increasing the currency." Fortunately, the Federal Constitution was framed the following year, forbidding State money. But the Bank of New York found the State notes coming in rapidly, and finally was forced to establish a "paper bank" to take care of them separately. Eventually more than half of this paper found its way into the vaults of the Bank and stayed there. In February, 1801, there was still $104,058 of it on hand, and the Bank begged the legislature to accept this in partial payment of State obligations, described in our succeeding pages. This request was granted, and a troublesome adventure in paper money finally came to an end. 18 THE FIGHT FOR A CHARTER ~VI THE time the Bank commenced business, the securing of a charter had not seemed a formidable undertaking. The "land" bank still had supporters up to the time of the Bank's opening, but they had quieted down. As he had been directed, General McDougall had applied on November 13, 1784, on behalf of the directors and stockholders of the Bank, for incorporation. A bill was introduced granting a charter, but after making good progress, it was finally defeated in April, 1785. Meanwhile, opposition to the Bank had been developing steadily. The unfamiliarity of the public with banking tended to arouse suspicion on the most absurd provocation. For example, the business of the City and State had greatly increased, and there had been a large gain in imports of foreign goods-a natural reaction to the isolation and poverty of the war period. At the same time British markets remained restricted against the American exporters as a consequence of the successful rebellion. This inevitably drew gold from the State. As specie became scarce, the Bank was charged with responsibility for the situation. It was said that the Bank was preying upon trade. The directors were even pictured as the tools of European capitalists, and were accused of refusing to discount notes before the sailing 19 cA Hif/ory of 150 Years dates of ships, in order to profit by the distress which followed. Nevertheless the Bank renewed its application for a charter on July 5, 1789, setting forth its reasons for desiring incorporation. In particular it emphasized the inability of the Bank in its existing condition to aid either the State or the Federal government as it would wish. Finally, after another rejection, a bill was at last framed which, with amendments, was passed by both houses and signed by Governor George Clinton on March 2 1, 179 1. By this act the Bank of New York became the first incorporated institution of its kind in the State. During these early years the public of New York commonly referred to it simply as "The Bank." Up to this time, as we have pointed out, the State had enacted no legislation on banking. The charter was the first step toward the public control of banks in New York. In the main it was a negative document, but it was a definite beginning. It specified a number of things that the Bank could not do, and limited certain of the things it could do. Thus, debts were not to exceed three times the amount of capital subscribed, property was not to be held except for purposes necessary to banking, and the bank was not to buy and sell stocks. These were new provisions, and except for them and a few others, the charter followed the constitution of the Bank as written by Hamilton. The charter of the Bank of New York was to serve as a model for subsequent charters. Therefore in a very real sense Hamilton and his associates may be thought of as laying a foundation for the banking law of New York, and to some extent of the nation. The charter gave the bank a capital of $900,000. The full 20 An A C T to Incorporate th~ Stockholders of the Bank of N ew-York, Pq/rd the aifi of March, 17 91. W1 ERE AS 1(aae Roofevelt and others *(lciatwd as a Company, under the Heii of the Prefident, Direators, and Compssa df he Bank of New-York, by their'petition prefented to the Legiflature, have prayed for, the privilege of beging norraethe better to enable theui to carry on the purpofes of their' inftitution: Terefore, &e it eisaflw Sy the PW./ the $:to* of?fewad-flr A%*A*aedh(,tni d djfremblyd, ad it is: her14ebyxaled b~y the autberity et the fiaa, That all (itch P1drfons as now are, or hereafter (hall be ftockholders of the faid bank, (hall be and hereby are ordained, conflituted and declared to be from time to time, and until the fecond Tueflsy ef May, which will be in the year one thoufand eight hundred and eleven, a body cc~porate and politic, in fadt and in Dame, by the name of the Prefident, Direftors and Conmpany of the Bank of 14,ew.York; and that by that name, they and their fuccelTors until the faid (econd Tuefday of May, one thoufauid eight hundred and eleven (hall and may have continual (ucceffion; and (hall be perfons in law capable of (suing and being fued, pleading and being impleaded, anfweuing and being ktifiveed unto, derencding and being dWlended if all courts and places whatfoever, in all maner of affIons, Thits, eomplalnts, matters and cauifes whatfoever ~. And that they and their (ueddos nmaf lhive a common feal, and may change and alter the fame at their pinafure; and alfo that they and their faccefiors by the fame name of the P'refident, Direftors and Company of the Bank 6f New-Yark, &dal be in law, capable of purchafing, holding and conveyiztg any eftate real or p*(beal, for tke ufe of tbe (aid corporitloni dad 7ie-kf friher inaidd Dy atthiaabrTy afW0td,'That i lhate In tAi flick of the (aid Bank (halfbe five hundred Spanlfh milled dollars, or the equlivalent theteof ih (pecle; and the number of (hares WhIl not exceed end thaufand eight hundred, excishlifie of any (hares that niay be fubfrcribed cm the part df this State# and fubfcriptions (bail be ki~k open under the direation of the Prefident and Direaiors of the (aid Bank, until the (aid number of (hares (hall -be filled, and the whole amount of the ftock eflate, and property which the faid corporation (hail bel authorifed to hold, including the capital, ftock or (hares nbove mentioned, (hall never exceed hif value one millioil of dollars. dafd be itfurtAher enuiled by the authority afereftoid, That the flock, propefty, aflairs and concerns of the faid corporation (hail be managed and condufle by thirteen Direators, one of -*hom to be the Prefident, who (hiall hold their offices. for one year, which DireCtors (hall be ftockholders, and (hWl be citizens of this fiate, and be eleed on the fedend Tudfday of May in every year, at fuch time of the day, and at fuch place in the city of New 'o*asaaort of h dire~tr, o te timew being~hall appoint; and public n~ot (hl be given by the (aid Direftors, in two of the teW~porpers printed in the faid city, of rb&la doiu and place# not biure than twenty, nor lefs than ten days previous to thec thu.e of holding the fhid eleflon and the (aid eleffion (hall be. held and made, by (uch of the (aid ftockholdeft of the OM lank as (hall attend for that purpofe, i thei own proper perfons, or by ptoxy and all eke~los for Diredotos (hail be by ballot, and the thirteen perfon's who (hall have the greateft numbet otf votes at any eleffion, (hall be the Dircdors, exceptassis herein after diredted. Anid-Ifit (heuld happ at any ele~ion that twoor more perfons lbave an equal tiumber of votes, int (ucb inanner that a gfeeter number of pefions than thirtee (h-all by plurality of ivotes appear to bit thoft astare~tow, alien the (aW id boksldr erein before ~ssthorifed to hold (uch ele~ton, 21ha1 Vioed to ballot a fecauad time, and by pluetly of vote dee "un which of the (aid per&oVbhItanwn "aubrf toes(hiltheDibeo Direftors, First Page of ACT OF INCORPORATION OF 179 1 Passed after seven years of effort i The Fight for a Charter amount had been deposited by August 1. Meanwhile, the Bank commenced operations under the charter on May i, 1791, and on May 2 formally adopted the charter, assumed the obligations of the unincorporated institution, and re-elected its officers. Its statement at that time is an interesting contrast to the balance sheet of the Bank today. SPECIE Bills discounted....... $845,940.20 Due from Corporation. 12,222.44 Cash....$516,081.87 Less notes on hand...53,266.oo 462,815.87 $1,320,978.5 PAPER House 8c lot, Queen St. ~5,248 4 9 Cash, ~115,373 17 11 Notes on hand ~25,6o5... 89,768 17 11 ~95,017 2 8 BANK Capital stock......... $318,250.00 Notes outstanding..... 181,254.00 Due depositors....... 773,709.67 Profit and Loss........ 47,764.84 $1,320,978.51 BANK Notes out........... ~71,822 o o Due depositors....... 16,920 0 4 Profit and Loss....... 6,275 2 4 ~95,017 2 8 Under the charter the Bank at once began a career of greater prosperity. Its seven per cent. semi-annual dividend of November, 1791, was double any that had previously been declared, and in the preceding six months it discounted bills and notes to the extent of $10,558,669, and received $42,681,664 in cash. It was now definitely in a better position to serve the state and national governments. 21 HAMILTON AND THE BANK ~VII W HEN the Federal Constitution went into effect in 1789, Alexander Hamilton became the first Secretary of the Treasury. He had served as a director of the Bank for two years. In the period that followed, his energy had gone into public affairs, but he had never lost interest in the project he had helped to shape, and had remained on the most cordial terms with the Bank's officers and directors. He had been particularly the friend and advisor of the Cashier, William Seton. On taking up his work as Secretary of the Treasury, he had established official relations with the Bank of New York. During the latter part of 1789, the Bank made a loan of $200,000 to the Government-the first loan it obtained; against which the Secretary of the Treasury drew a series of "warrants" on the Bank. The first of these "warrants" is still in its possession. In 1790 Hamilton made the Bank the agent of the United States for the sale of 200,000 guilders. Meanwhile, Hamilton had proposed to Congress his plan for a Bank of the United States. It was accepted, and the Federal bank began its career on February 19, 1791. But Hamilton's relations with the Bank of New York did not cease on this account. Indeed, they became more active. Evidently he had hoped to 22 -,/, "A-,/( /a e 6',e9, /,,q/,W, $,, Vo. y. '?^^1 y at ~4 N (1/fT/6/?a^',,. dt r,~, zW 4 t<, /y,,, a.ff ~ < f s t i/, 7. /. v Facsimile of Drawn on the Bank of New York by Alexander Hamilton, Secretary of the Treasury <' /.c // /t;aa ^ ^ey?,7?u C U. S.^cr^ TREASURY WARRANT No.~ ra^s^ c / ^^^ ^ ^s ^ ^ ^ ^ -I f ^ ^ ^/ ^ ^t^^y a/fcew ^^ ^^ ^ / ^ ^ ^ ^ ^ ^^a^^^ ^i^^ tt ^^-^ ^ ~ ^w^^5^^^^^ ^y^/^yZ ^4/ I Hamilton & the Bank make the Bank of New York the agent of the Government in New York. This hope did not materialize, for the directors of the Bank of the United States decided to establish a branch in New York City. During this period Hamilton showed the greatest consideration for his friends and former business associates. The financial situation at the beginning of 1791 was difficult. Hamilton wrote in January to Seton: "I have explicitly directed the Treasurer to forbear drawing on the Bank of New York, without special direction from me. And my intention is to leave you in possession of all the money you have or may receive as a depository of the Government till I am assured that the present storm is effectually weathered.... Be confidential with me; if you are pressed, whatever support may be in my power shall be afforded." In November of the same year, after the plan for a New York branch of the Bank of the United States had been matured, he explained to Seton that the idea had been developed without his knowledge. "Ultimately," he concluded, "it will be incumbent on me to place the public funds in the keeping of the Branch; but it may be depended upon that I shall precipitate nothing, but shall so conduct the transfer as not to embarrass your institution." Happily, the presence of the Branch did not work against the Bank of New York. The city and nation were growing and there was more than enough business for both institutions. The Bank of New York had already established pleasant relations with the Head Office of the Bank of the United States in Philadelphia. In March, 1792, committees from the Branch and the Bank of New York came together and agreed upon a policy of cooperation. This was to be successfully developed. cA Hisiory of 150 Years The personal relationship between Hamilton and the Bank continued. The year 1791 brought no small distress to American merchants. There was acute speculation, with notable business failures, and the new bonds of the United States rapidly fell in value. In September Hamilton employed the Bank of New York to buy Government bonds in small lots, and this step was helpful. The Bank in turn was able to serve Hamilton. He was greatly interested in promoting American industry in conjunction with tariffs, and had encouraged the formation of the Society for Establishing Useful Manufactures. Hamilton urged the merits of the undertaking on the Bank, for the Society wanted a loan. The $50,000 advanced to the Society as a result made the Bank of New York the first financial agency to support American industry under the protective system. On October 6, 1794, the Bank was again able to assist Hamilton with a loan of $200,000 for four months, and it eventually continued this for two years. A further loan of $1oo,ooo was made at Hamilton's request in December of that year, and another of $ 120,000 on August 1 6, 1796. The personal relationship between Hamilton and the directors remained cordial. The Bank had also established an active relationship with the State of New York during this period. In February, 1792, it decided to accept deposits from the State, at not more than six per cent. interest, these to be returned within three months. The Treasurer of the State deposited with the Bank on May 24, 1792, a large sum in United States debt certificates-$1,954,264-on which the Bank was to collect interest. Five years later, on April 13, 1797, these certificates were purchased by the Bank under an agreement by which the Bank would pay for them over a term of 24 Hamilton & the Bank years, agreeing to lend the State in the meantime any reasonable amount of money. Loans to the State amounting to $128,000 were outstanding in November, 1798, when a further loan of $200,000 was made at the request of Governor John Jay. The financial relationship with the State gave the bank additional resources, which were increasingly of value to it; for capitalization was limited by the charter, and although the Bank constantly asked for an increase, and although other banks were established with larger capitalization, a hostile legislature steadily refused to raise the limit of $900,000, and later $1,000,000, which the charter imposed. Deposits by the State thus acted as a temporary substitute. LIVING ROOM IN THE WALTON HOUSE Here the Bank of New York began business. The same architectural motif is followed in the present building at 48 Wall Street 25 THREE PRESIDENTS ~ VIII D E URING the period a number of changes had taken place among those directing the affairs of the Bank. Hamilton, of course, had withdrawn from active service at the end of two years. However, General McDougall had retired even sooner. In May, 1785, he had found his health failing, and had declined re-election; he died in June, 1786. Jeremiah Wadsworth was elected to succeed him. Wadsworth had been one of the friends whom Hamilton drew from the project for another bank into association with the Bank of New York. Born at Hartford, Connecticut, in 1743, he had followed the sea for a time, owning and sailing a vessel which engaged in the West Indian trade. He had hardly left this work to settle in Hartford when the Revolution brought him actively into service as Commissary-General for Connecticut, and, later, as Commissary-General of Purchases for the Continental Congress, and special Commissary for the French troops. Keenly interested in banking, he had been the largest subscriber to the Bank of North America in 1781, taking 104 shares at $400 each. However, his association with the Bank of New York terminated at the end of his year of office, in 1786. He died only three months before Hamilton, on April 30, 1 804. Isaac Roosevelt was chosen President, in May, 1786. Like his 26 Courtesy of 1 JEREMIAH WADSWORTH President 1785-1786 Three {Presidents three predecessors, he had been a noted patriot, and after the close of the war had been elected to the State Senate. He was to be a delegate to the New York State Convention which ratified the Constitution in 1788. His family was of the old Dutch stock, and has since achieved a national prominence which it did not then enjoy. But the Roosevelts were prominent and honored in New York. The sugar refinery which Isaac Roosevelt had reestablished after the War was located at 159 Queen Street, just opposite the Bank's first quarters. It is said that he would go each morning to his place of business, and help his son and partner prepare for the work of the day, and then at ten o'clock would walk across the street to the Bank to perform his duties as President. Isaac Roosevelt, although he resigned in 1791, lived busily for another six years. His successor, Gulian Verplanck, was descended on his father's side from one of the old Dutch families; on his mother's side he was of French Huguenot descent. Born February 1 1, 1751, he had been graduated from King's College (now Columbia), and had completed his training by serving for some years in the banking house of Daniel Crommelin & Sons, of Amsterdam. Daniel Crommelin was his uncle. After returning to America Verplanck was elected to the New YorkAssembly. He was a fluent debater, and became Speaker. He was one of the regents of the University of the State of New York. During his presidency, which lasted until his sudden death in 1799, the Bank removed from its second location on Hanover Square. The growth of business and financial activities was now toward Wall Street, and it was on the corner of Wall and William Streets that the directors in November, 1796, bought a house and 27 cA Hiflory of 150 Years lot of William Constable for Li 1,ooo in "New York currency," this pound having an exchange value of $2.50. Possession was to be secured May i, 1797, and late in April the Board decided to tear down the building already there and erect in its place "a house, with necessary vaults, for transacting the business of the Bank." The house and land on Pearl Street were sold at auction in January, 1798, and brought o10,600. The cornerstone of the new building was laid on June 22, 1797, by Gulian Verplanck, the President, and George Doolet, the architect. In the spring of 1798 the completed structure was ready, and the Bank removed to its new home on April 23. A house at 3 1 Wall Street was leased as a residence for the Cashier. The new location was the final site of the Bank, though several other buildings have since succeeded the one erected in 1797. The new building was a simple, two-storied structure of dignity; its tall rows of windows and entrance faced with light stone showing the best "Colonial" taste of the period, modified by the "Classical" French influence. Yet for brief periods the Bank was to have a temporary home outside the city. Yellow fever had been raging in New York during the summer of 1798. There were 2086 deaths. Provisions were difficult to secure, and many people left the town. A bookkeeper at the Bank had been one of the victims of the fever. It seemed wise to face the possible need for moving outside the city, and the directors decided to provide for temporary quarters at Greenwich. Two lots were purchased here and a building was erected at a total cost of $16,000. The property fronted on Factory (Waverly Place) and Hammond Streets, and what is now known as Bank Street. 28 Painting by Gilbert Stuart Courtesy of Mrs. James Roosevelt ISAAC ROOSEVELT President 1786-1791 Three Presidents The fever, as had been feared, recurred in even more virulent form in the summer of 1799, and the Bank moved into its new country residence on September 93. It remained at Greenwich until cold weather ended the epidemic. In 1803 and 1805 and again in 1 822 it took up temporary quarters there; and its practice was prudently followed in the later years by other financial institutions. The dividend of November, 1791, had been followed by another of four per cent. in May, 1792, and thereafter semi-annual dividends of four and one-half per cent. were paid to May, 1794. Up to that time the Bank had made a total profit of $345,393 in its three years as an incorporated institution. William Seton, the Cashier, retired aften ten years of invaluable service, and Charles Wilkes succeeded him. Seton must have looked with satisfaction upon the growth of the institution which he had had so great a share in building. The Branch Bank had proved no impediment to the prosperity of the Bank of New York. The city had grown in trade and population, passing Philadelphia as the largest in the country; in 1 8oo its population was 6o,ooo as compared with Philadelphia's 41,000. Manufactures were springing up, and trade with Europe was increasing. In the late 1790's the Bank could regard itself as standing in a favorable relation with both the State and National governments. It had entered upon an important experiment and had been more than successful. NEW TIMES, NEW BANKS ~IX UT a new era was at hand. With the closing of the century, New York, with a population of 60,ooo, had grown to be easily the largest of American cities. The promise of further growth was clear, though time proved that expectation fell far short of actuality. The Bank of New York, still the only organization of its kind in the city incorporated under the State law, and with only the Branch Bank of the Bank of the United States as a competitor, enjoyed unusual opportunities. Others had been eager to share them. Two attempts had been made in 1792 to secure bank charters for New York City groups-one for the Million Bank, one for the State Bank. But these organizations remained mere paper hopes, to die in the legislature. However, in 1799, under the leadership of Aaron Burr and Brockholst Livingston, a banking charter for a rival company was secured. It was Burr who was the active leader of this successful attack, and he won his victory by a ruse. New York City, with its recent growth in population, was desperately in need of an adequate water supply. Its pitiful wells had never been satisfactory, and were tragically inadequate now, both in the event of fire and for the daily necessities of the city. Burr and his associates petitioned the legislature to grant a charter for a water company. A capitali 30 Painting by John Singleton Copley Courtesy of Mr. (ulian Verplanck Quilliard GULIAN VERPLANCK President 1791-1799 New Times, VNew Banks zation of $2,000,000 was requested. The proposed company was hailed almost universally as a delivering angel. The corporation of New York urged the legislature to pass the bill, and subscribed for 2,000 shares of stock. Scoville, in his Merchants of Old New York, asserts that even Hamilton spoke for the project. But the wily Burr had tucked a clause into the bill which specified that surplus capital could be used "in the purchase of public or other stocks, or in any other moneyed transactions or operations not inconsistent with the laws and constitution of the State of New York." The clause came up for discussion in committee, and it was proposed to strike it out, but Burr talked vaguely of trade with the Indies and of the necessity for protecting the investors. The legislature therefore finally passed the bill, and Governor Jay signed it, without suspecting that permission to establish a bank was being granted. Certainly such a grant would have been refused by an Assembly, Senate, and Governor, then Federalist in sympathies, to the promoter of the Tammany Society and his associates, who were making so great a stir in behalf of the as yet unsuccessful Republican party. The Manhattan Company forthwith gave notice that it would begin banking operations in September with a capital of $500,000. The new company was a formidable rival. Its organizers, besides Burr and Livingston, included Samuel Osgood, Daniel Ludlow, and Richard Harrison, the City Recorder. It could count on support from the growing group of Republicans. And it had distinct advantages over its well-established rival, for its legal capitalization was $2,000,000 as against $900,000, and its charter was a perpetual one, while that of the Bank of New York ran until 1811 only. And although the Manhattan Com 31 oA Hiitory of I50 Years pany did construct wooden mains through which it supplied some water to the city until 1842, it soon threw its chief energies and resources into exploiting its financial opportunities. The Manhattan Company, moreover, was soon to be joined by other banks. The Merchants' Bank was established in 1803, with a capitalization of $1,490,000, and in a few years five other banks opened their doors in New York City, all but one with larger capital resources than the Bank of New York. Thus by 1812 the Bank of New York was facing an entirely different situation from that of the 1790's, when it had held advantages, especially with regard to the merchants of the city and the State, amounting almost to a monopoly. However, the Bank possessed ample strength to meet the era of competition on which it was to enter. Its arrangement with the State, and its past relationship to that government, gave it a definite position with the State Comptroller and the legislature. In addition, it numbered among its directors some of the wealthiest and most successful men in the city. The Sands, Archibald Gracie (elected director in 1798), Samuel Corp (elected director in 1799), and Herman Le Roy (director from 1795 to 1820, and for many years the Bank's President) were among the great shippers and importers of the city. Some measure of the wealth and influence which the Bank represented is suggested by the fact that in 1806, of the fifteen New Yorkers reputed to keep carriages, four were or had recently been directors of the Bank of New York. They were Nehemiah Rogers, Archibald Gracie, Herman Le Roy, and William Bayard. 32 I 'A' IVIN I J&Mt)vI'~'r-Oat.- /t //.1 A 7 / A'- ) (New~orkN) BANK NOTES ISSUED ONE OF THE FIRST Cafhier of the Bank, Pay to I7,~111 New-York, the ~N. - -or Bearer, /.-'RyJ I,~OKper. 2 Da9~ ISQ~ 4 - EARLY CHECK It is addressed to "the Bank," there beingl no other at the time N IRON KEY TO THE BANK Used by the Cashier previous to 1797 v~ THE YOUNG METROPOLIS ~x EW YORK, even before 1800, with its two governments and its leaping trade, had achieved a liveliness and importance such as it had never before known. Yet with the turn of the century it passed into a period of much greater power. True, it was no longer a capital of any kind. The Federal government had removed to Philadelphia in 1791, and the State government to Albany in 1799. But the city had gathered to itself the commerce of northern New Jersey, Connecticut, Vermont, and part of Massachusetts, with the produce of its own up-State regions and that of the growing Northwest flowing into its markets and its harbor. Its ships were sailing to all parts of Europe, and to the West and East Indies. The effect on the appearance and atmosphere of New York had been almost electric. The raggedness of its central sections was rapidly disappearing. Many thoroughfares had been paved, and improved with fine brick sidewalks. Broadway was now lined with residences "lofty and tall," occupied by important merchants, and built mostly of red brick. There were now twenty-three churches, and in 1798 the Park Theatre opened its doors. The newspapers had become more numerous and of better quality. The Commercial Advertiser (later The Globe) had 33 cA Hiflory of I50 Years been founded in 1793 by Noah Webster, and The New York Evening Post was launched in 1 80 1 with Hamilton's encouragement. Charles Brockden Brown was living in New York and writing the first novels of consequence to be published in America. Young Washington Irving was soon to be active in helping to produce the Salmagundi Papers. At the same time many interesting organizations of a public or cultural character had been or were soon to be established. In many of these the directors or officers of the Bank of New York participated as founders or trustees. The New York Hospital had been completed in 1775, but its unused rooms had been converted by the British into a barracks; it was not to be opened until 1791. Isaac Roosevelt was one of the governors, and later so was Wynant Van Zandt, elected a director of the Bank of New York in 1 806. During the 1790's, the Tammany Society began to gather notable strength. Founded by William Mooney in 1789 as a fraternal and patriotic organization, it had been utilized by Burr as a centre of Republican activities. Despite their generally Federalist sympathies, some of the directors of the Bank were Democrats-Van Zandt, for example; and Tammany, then of a different character from that which it assumed later, must have touched their lives and activities. In 1803 the cornerstone of the new City Hall was laid in City Hall Park. Van Zandt was then an alderman, and stoutly resisted the proposal that the front of the Hall should be white, and the rear of red stone; for, he argued, the town would build far beyond the Hall, and the rear would be as important as the front. A compromise was made on brownstone. 34 The Young VMetropolis The year 1804 witnessed the founding of the New York Historical Society, and in 1806 came the Free School Society, which was to prove the germ of the City's public school system. Five of its incorporators, John McVickar, Charles Wilkes, Archibald Gracie, Matthew Clarkson, and Robert Bowne, had been or were associated with the Bank of New York. In 1804 occurred the tragic duel between Hamilton and Burr. The two had long been opposed politically, and Hamilton had a deep distrust of Burr. In 1800 he had been influential in swinging the election for the Presidency to Jefferson in the House of Representatives, when some Federalists favored Burr. Again, in 1804, he had been prominent in bringing about Burr's defeat in the contest for the governorship. Burr deeply resented these and other acts of Hamilton, and when Hamilton was quoted in print as saying that Burr was "dangerous," Burr began a correspondence which ended in a challenge to a duel. Hamilton accepted it, though he abhorred duelling, for he felt that the general public would not understand or approve his refusing. The duel took place early on the morning of July 1 i, on Weehawken Heights. The two stood a distance of twelve paces apart. Burr fired instantly at the command, and Hamilton fell, his pistol going off accidentally, for he disclaimed before and after the duel any intention to fire. He was rowed back across the river still conscious but knowing himself mortally wounded, and was taken to the house of William Bayard, formerly a director of the Bank. Here he died. The Bank, like all New York, was draped in black for the great statesman thus tragically cut off in mid-career. Charles Wilkes, then Cashier of the Bank, and later its Presi 35 tA Hi-tory of 150 Years dent, was especially active during these years in public matters of a cultural nature. So, also, was Archibald Gracie, who at this time had a mansion on the East River opposite Hell Gate. The building and grounds were of notable beauty, for Gracie was one of the richest men in the city. But not all the stir and aspiration of New York in the early 18oo's related to progress in humane and artistic fields. Here steam navigation also had its birth. John Fitch's crude steamboat had been given a trial in 1796 on the waters of the Collect, a fresh water pond not far south of the present Canal Street. In 1807 Fulton's Clermont made its successful effort on the Hudson, and steam-driven vessels were soon operating on the river. Moreover, New York in the early 18oo's had begun that amazing march up Manhattan Island which was to fill its own citizens with astonishment for the next hundred years. In 1807 three commissioners were appointed by the City to plan for the growth of the future metropolis, and they laid out streets as far north as 155th Street. The Collect was filled. The two streams that obstructed settlement at Canal Street were disciplined, and soon a broad thoroughfare emerged, with a neatly channeled stream down the center, bordered with trees. Again it was alderman Wynant Van Zandt who insisted that the street should be ioo feet wide instead of 60, as proposed, and this time the far-sighted director of the Bank had his way with his fellowaldermen. 36 LOANS AND CHARTERS ~XI SOON after the Legislature had unknowingly granted a perpetual charter to the Manhattan Company, the Bank of New York attempted to improve its own charter. In February, 1801, its effort finally took the form of a petition from the directors to the State, asking a number of concessions. In the end it secured only two improvements: It was no longer forced to retire four directors each year, and it was permitted to pay a portion of its obligation to the State in the New York notes which it held to the value of more than $104,000. However, if it was dissatisfied with this result, its position and resources were apparently regarded highly even by those of different political feeling. The Mayor of the City, Richard Livingston, a prominent Republican, sought to make an arrangement with the Bank in 1803 by which the City would sponsor an effort for a $1,ooo,ooo increase in capitalization, and share in the dividends on the new stock. But the Bank declined his offer, and was soon renewing its attempts to extend the time limit of its charter. However, the best it could achieve was an offer from the State for an extension without any improvement of terms, and with a new restriction. An act was passed April 6, 1 808, extending the charter to 1820, but specifying that two directors appointed 37 oA Hiliory of I50 Years by the State were to sit on the Bank's board. The Bank accepted the arrangement. Again, in 1 8183, the State gave a further extension, this time until 1832, but stipulated that the Bank should donate thirty shares of stock, which it could add to its existing shares, to the State School Fund, forty shares to Union College, forty to Hamilton College, and the same number to Columbia College if that institution desired them. The Bank again accepted the terms offered, but eventually bought up the shares from Hamilton and Union. Other banks were called upon to make similar grants to education, but the Bank of Manhattan, having a perpetual charter, escaped. Because of its arrangement of April, 1797, to purchase from the State its $1,954,000 worth of Federal securities, and make loans meanwhile as needed, the Bank had maintained a close relationship with the Comptroller and Legislature at Albany. After the loan for $200,000 made at the request of Governor Jay in 1798, it had made a loan of $20,000 on April 24, 1804, and another of $200,000 on April 26, 1 808-$420,000 in all. In addition, large payments had been made on the principle of the debt -quite apart from the loans. A settlement of the entire debt was due in May, 1809, and on February 28 the Bank received an inquiry from the Comptroller as to what it wished to do about this. The directors pointed out in reply that the Bank had purchased the Federal bonds at par when they were 20 per cent. below par, and suggested that it should not be called upon to pay in advance of the maturing of the bonds themselves. It had paid all past maturities, and requested an extension of the arrangement with the State until May, 181 1. This was granted. Meanwhile, on April 13, 1809, 38 Loans & Charters the Bank agreed to lend the State $150,000ooo more. Early in 1810 o it asked a further extension of time in making the settlement for the Federal bonds, pointing out that it had paid back and loaned the State $60,ooo more than it had received from the Federal government, and a postponement was made until May, 1818. However, on January 24, 1815, the Bank offered to settle in full-this apparently involving a payment of about $435,000. The State, however, now preferred a postponement of a general settlement, and it later received further loans of $75,oo000 and $15 0o,ooo. In 1 818 settlement was again deferred until 1823, and the State began paying back the loans it had obtained from the Bank; finally, late in 1823, the Bank began paying off the amount due for the Federal securities, now almost $8oo00,000ooo, and with the aid of a ~200,000 loan from Baring Brothers, of London, ultimately did so in full. This terminated its special relationship with the State, which had now lasted for more than thirty years. While the Bank was destined to lend to the State and borrow from it in the future, it never again occupied the position which its long-standing earlier agreement had given it. 39 NEW YORK AT WAR ~ XII F ROM the beginning of the century New York merchants had suffered from the efforts of France and England to cripple each other at sea. Neutrality became more and more impracticable. In June, 1812, when war was declared against England as the result of injuries inflicted on American ships, the city was drawn directly into hostilities. The conflict came reluctantly as it was bound to be devastating to American trade. But once war was declared, New York became an aggressive center of naval activities. Twenty-six privateers, with a total of 2,239 men, put out from her harbor. They captured the lion's share of the 2,500 merchant vessels which England lost to such American ships. As the war progressed, the British finally established their mastery of the seas. For a year and ten months the city was under blockade by their fleets, which cut off its commerce and sought to prevent its light ships of prey from getting out of the harbor. Finally, late in August, 1814, came the news that a British fleet had sailed up the Potomac and burned the national capital. It was known that attacks on Baltimore, Philadelphia and New York were also contemplated. New York sprang as a man to the task of preparing itself for resistance. A force of 20,000 militia was assembled. Men worked by moonlight upon the numerous 40 New York at War fortifications which had yet to be completed. Commodore Decatur was put in charge of the harbor. The Bank of New York had been prompt to make a small patriotic donation toward fortification early in August, and had expressed its readiness to lend the city money. Now, in September, its directors voted a loan of $100,000, and again in December, 1814, volunteered to advance that amount again on the City's security. Fortunately, the City's hurried preparations did something to prevent the threatened attack. The triumphant British forces had sailed from Washington to Baltimore, and had been repulsed on land and sea by the energetic defenders of that city. They could hardly hope for more success at New York, where preparation had been even more thorough, and where the defending forces were larger and well commanded. They never attempted the capture of the metropolis. However, the war had put a severe strain upon the financial institutions of the country, and before the close of hostilities the banks had already reflected the difficulties of the government and of the business men. On August 21 the Manhattan Company and the Mechanics' and City Banks had invited all their associates in New York to attend a meeting "to take into consideration the state of the banks and of commercial credit and to take such measures for the relief of the merchants of this city as may be deemed advisable." It will be remembered that the loan of the Bank of New York to the City was made more than a month after this; the Bank of New York was apparently in good condition. However, others seem not to have been, and meanwhile word came from Philadelphia that the banks of that city would 41 A HifZory of I50 Years suspend specie payments. Accordingly, on September 2, 1814, the banks of New York, "with the utmost regret," decided to follow Philadelphia's example. There ensued a long period without specie. It was a difficult time for business men, but the situation was well managed by the banks, which worked in constant agreement with each other. They made a set of rules for their mutual guidance-a precedent which was to be followed in later "panics," and-which kept the situation in control. A general meeting was held once a week. Finally specie payments were resumed on February 6, 1817. The Bank of New York was ready for this step, and swung back with the other banks of the city into the "era of good feeling" and further commercial growth which came with James Monroe's two quiet Administrations. 42 HERMAN LE ROY President 1802-1 804 $0,. STEAMBOATS AND CANALS ~ XIII T IHE first seventeen years of the nineteenth century had been years of keen competition in banking, as we have pointed out. They had also been years of great commercial difficulty. The Bank of New York had proved its strength by steady growth and prosperity during this period. The death of Gulian Verplanck, Sr., in 1799 had been a severe blow to the organization; Nicholas Gouverneur had been elected to fill his place and had served ably for three years, until his own death in 1802. He was of a well-established and wealthy New York family, and his son later married the daughter of President Monroe. The directors elected Herman Le Roy to fill his place. Of an old Dutch family, with a business training in Holland, he had become a member of his father's firm, Jacob Le Roy and Sons. Later he founded the firm of Le Roy, Bayard & Co., still later changing it to Le Roy, Bayard and McEvers, for a time the most powerful of all American business organizations. One of his daughters married Daniel Webster. Le Roy served the Bank for only two years as President, but remained a director until 1 820 -a period all told of twenty-five years. His company made large profits in the War of 1812 where others were ruined, successfully 43 tA Hiflory of 150 Years sending out ships both to Europe and the East Indies. He had lived for a while above the offices of the firm at 3 Hanover Square, and later at 7 Greenwich Street. From i 804 on the Bank was under the direction of General Matthew Clarkson, one of its most distinguished early Presidents. Born in New York in 1758, he had joined the revolutionary forces in the War of Independence at the age of seventeen, had served on the staffs of Generals Arnold and Lincoln, and had managed to be present at almost all the chief engagements of the War-the retreat from Long Island, the fall of Charleston, the capture of Burgoyne and of Cornwallis. He had served as State senator and assemblyman. In business, he was well known first as a member of the firm of Vanderbilt and Clarkson, then under his own name, and finally as an associate of his brother in the firm of S. and L. Clarkson & Company. He was the friend of Hamilton and Jay, and later of De Witt Clinton. During these years the Bank had registered its prosperity in its semi-annual dividends. These had been regularly four and a half per cent. each six months, except for one of nine per cent. in 1 803. The close of the War found the Bank ready to take advantage of the new growth of the nation and city. This growth was to take many forms. The western country was almost yearly bringing new States into the Union, with new trade. Indiana, for example, was admitted in i 8i6, Mississippi in 1817, Illinois and Alabama in 1818. Cotton was taking its strong place in international trade, and was to swell the business of New York banks, the Bank of New York among them. Immigration had become a large factor in American life. And with increasing population and production had appeared two great 44 Courtesy of New York Hospital MATTHEW CLARKSON President 1804-1825, i Om, ) Steamboats & Canals factors in transportation calculated to open up new districts and speed the processes of trade: the steamboat and the canal. Both were in a sense the peculiar property of New York. Fulton had launched the Clermont on the Hudson; the greatest of American canals was to link New York City with the rich northwest. Ten years after Fulton's first trip, boats i 20 feet in length were plying to Albany. The opening of the Erie Canal in 1825 reduced freight rates from the interior by as much as 90 per cent., and gave New York a tremendous trade with the Middle West. During these years New York grew in importance as the nation's largest city. Here in 1 818 the new American flag was designed at 27 Cherry Street at the suggestion of Captain Samuel C. Reid-a design that kept the thirteen stripes for the original States and added a star for each new State, instead of increasing both stars and stripes, as had theretofore been attempted, with increasing difficulty. Monroe, himself married to a New Yorker, and with his daughter also in New York, spent his last years in the city. Andrew Jackson was an exciting visitor in 1 819, the great Lafayette in 1824. In 1825 New York saw its first opera, The Barber of Seville, and in that year, No. 7 Cherry Street, the home of the president of the New York Gas Light Company, became the first house to be lighted by gas. During this period ships began to employ steam for trans-Atlantic crossing. In finance there had been growth also. Throughout the nation new banks were springing up, more than supplying the needs of a booming country, East and West. Many, however, were rashly formed and operated, and a minor panic in 1819-20 testified to the dangers from their too lavishly issued bank-notes. A painful period of speculation in banking, especially in the West, was 45 L4 Hitfory of 150 Years upon the country and was not outgrown for dozens of years. However, banking practice in New York City was generally sound, and the Bank of New York continued its semi-annual dividends of four and a half per cent. Its new directors were drawn from the most responsible merchants of the city. Among them were John Mason, later to be President of the Chemical Bank, Isaac Heyer, Charles McEvers, of Le Roy, Bayard & McEvers, and John B. Coles, prominent as a flour merchant and an alderman. Other men who associated themselves with the Bank in the 1820's were Henry Beekman, elected director in 1826; Gurdon Buck, elected in 1827; and Peter P. Goelet, director from 81 2 to 1826; Edward R. Jones, i 827, a director of the Globe Insurance Company; and Gardner G. Howland (1825-52), a prominent shipper whose fortune was rated at half a million-a large sum in those days. The Bank's reputation for strength was well known in London, a fact shown by the favorable response which Baring Brothers made in 1822 to an inquiry whether it might be allowed a large European loan. The prospect was so good that Charles Wilkes, the Cashier, was sent to London to conclude arrangements for borrowing ~250,000. He sailed in November and successfully negotiated the transaction. It was finally approved by the Board of Directors on December 2, 1823, and at a favorable rate of interest provided capital which immensely strengthened the Bank's position. A considerable portion of the money was used to discharge the Bank's debt to the State. As was previously pointed out, this loan was utilized as the equivalent of the increase in capitalization which the Bank had not been able to secure from the state legislature. 46 Painting by Gilbert Stuart Courtesy of Metropolitan Museum of Art CHARLES WILKES President 1825-1832 Portrait of about 1794, when Wilkes was serving as Cashier Steamboats & Canals Wilkes, who had served as Cashier since June, 1794, had proved himself an able and dependable financier, and his work in this final transaction left no question as to his fitness for the office of President when Matthew Clarkson resigned, "in consequence of my advancing years," in 1825. Born in London in 1764, he had come to America at the suggestion of William Seton, the first Cashier of the Bank. With time he had thoroughly identified himself with New York City, both in business and in social and public life. General Clarkson did not survive his retirement a month, dying on April 25, 1825. He had long been an eminent figure in the life of the city, and men like Chancellor Kent and DeWitt Clinton praised his character and public spirit. Certtficate to$ oA o for a ~C/lawe in ie. Sw intend7 en a cectain 'wf7uiin9 of d4a date, teaZtive to ete daa e of Alexander Hamilton, decea'e; a3 Ai Ce',zi icae to adesnate an o Alexader Ha il on, iQa ofd tot &tate jay ga 7;wtwee ad a )iayment vof c~v0o