*%.* HHU jT ; J0WK9 ar Jrwfiffi 'isfjiw gtiftta g*atl p.otdtMss Digitized by the Internet Archive in 2012 with funding from University of California, Los Angeles http://www.archive.org/details/banksbanking117100hotc ALEXANDER HAMILTON BANKS AND BANKING 1 171— 1888 An Historical Sketch BASED UPON OFFICIAL RECORDS TOGETHER WITH A FEW "EPISODES CONNECTED WITH THE SUBJECT WHICH HAVE COME UNDER THE OBSERVATION OF THE WRITER DURING AN EXPERIENCE OF TWENTY-FIVE YEARS AS A BANKER AND MERCHANT IN THE CITY OF NEW YORK BY PHILO PRATT HOTCHKISS NEW YORK & LONDON XLhc Ifmlcfcerbocfcer ipress 1888 •> O 9 COPYRIGHT BY PHTLO PRATT HOTCHKISS 1888 Press of G. P. Putnam's Sons New York lit « • TO WILLIAM A. CAMP, Esq. MANAGER OF THE CLEARING HOUSE OF THE CITY OF NEW YORK THIS WORK IS DEDICATED, WITH THE AUTHOR'S GREAT RESPECT FOR HIS MARKED ABILITY AS A BANK OFFICER 339011 PREFACE This work requires but few words in the way of introduction. Though the author's purpose in writing the several articles on Banks and Banking for the Bay Shore Journal, was not to write for publication outside of the precincts of his summer home, yet at the special instance of banking friends here and in New England, who desired a copy of the writer's lecture, delivered before the Bay Shore Literary Society, in Suffolk Hall, March 14, 1888, which embraced the articles heretofore published in the newspaper, seemed to impose it upon him as a duty to his friends, to pub- lish the sketch on " Banks and Banking." It is by no means claimed that this is wholly an original paper. Reference, by permission, has been had to the valu- able work of that accomplished scholar and authority on banking, Hon. Willis S. Paine, Superintendent of the Banking Department of the State of New York. 5 6 PRE FA CE. Also to Lawson's " History of Banking," and Domett's "Bank of New York." I acknowledge very important information obtained by a most careful research of all of the books on bank- ing contained in the L. I. Historical Society, through the courtesy of the Society's faithful and learned librarian, Mr. Geo. Hannah; and last, but not least, of kindly suggestions from my comrade, Col. Geo. P. Bissell, member of the Veteran Association Hartford City Guard, and banker of Hartford, Conn. CONTENTS. PAGE Correspondence ........ 9 Introduction ......... 10 The First Chartered Bank, Bank of Genoa, 1171 13 First Bank in the United States, 1781 ... 14 Bank of New York, 1791 ...... 14 Chemical Bank, 1834 ....... 15 First United States Bank Incorporated, 1791 . 15 Second United States Bank Incorporated, 1816 . 16 The Manhattan Company . . . . . . 17 Conspiracy Trials, 1826 and 1827 .... 20 Renewal of Bank Charters ..... 22 Increase of Banking Capital 23 National Currency ....... 23 New York Clearing House 25 American Exchange National Bank .... 26 Episodes .......... 26 A True Story ........ 28 The Bank of England ....... 31 The London Clearing House 34 Call Loans 37 Usury 37 Expulsion of the Jews from England 39 Restoration of the Jews ...... 40 7 CONTENTS. Barter ..... Cash Reserves of Banks Retrospective . Alexander Hamilton Letter of Alexander Hamilton Conclusion . PACK 42 44 45 46 48 49 CORRESPONDENCE. Bay Shore Literary Society, Bay Shore, L. I., March 2, 1888. Mr. Philo P. Hotchkiss : Dear Sir — At the next meeting of the Literary Association, March 14th, I should be much pleased if you would favor us with your lecture on Banks and Banking, a subject of interest to us just now. Our exercises commence at 8 p.m., and are held in Suffolk Hall. Hoping to have the pleasure of meeting you on that evening, I am, very truly, W. T. CUSHING, President. New York, March 5, 1888. W. T. Cushing, Esq., President Bay Shore Literary Society : Dear Sir — I am favored by your valued invita- tion to give my lecture on " Banks and Banking," before the Bay Shore Literary Society, Wednesday, 9 IO CORRESPONDENCE. March 14th, at Suffolk Hall, at 8 p.m., as per your letter 2d inst. I will be on hand promptly at the appointed time. The aforesaid lecture has been prepared with con- siderable care, and not without extended research and examination of all the published authorities on Banking, from the chapters of Holy Writ down to a late edition of " Paine on Banking." The lecture occupies just fifty-five minutes of time, — not so long as to weary any of my neighbors, I hope. I inherit a natural fondness for music, and if not too much trouble, it would be a source of gratifica- tion to have one or two good pieces, either vocal or instrumental, precede the lecture. You have abun- dant native talent for this purpose to select from. Very respectfully your obedient servant, PHILO P. HOTCHKISS. Mr. President, Members of the Bay Shore Literary Society, Friends and Neighbors : One of Great Britain's most eminent judges, when asked what was his ideal of supreme happiness, replied : " To sit all day on the bench, and play whist till twelve o'clock at night, every day and night of my life." My personal ideal of a tolerably happy life, if the CORRESPONDENCE. 1 1 cares of the world would allow any such comfortable state of existence, is to be permitted to live and die in this pleasant village, and see it develop into a beautiful city by the sea, and to be called upon by your Society to talk to you once or twice a year on my favorite theme. BANKS AND BANKING. " The two greatest inventions of the human mind are writing and money. The common language and self-interest." — Marquis De Mirabeau. The first chartered bank on this planet was estab- lished at Venice in the year a.d. j i 7 1^ Six years thereafter the Bank of Genoa came into existence at Genoa, Italy, about the year a.d. 11 77 under the title of " The Chamber of St. George," sometimes designated as " St. George " and " Bank of St. George." Unquestionably there had been capital invested in money-lending by the ancient Jews for more than one thousand years before this bank began busi- ness. Money was invested upon collateral security. Usury was charged, and almost any obtainable rate was deemed lawful and right in the earlier days of the Christian era. Indeed the Scripture recites the reproval of the man of " one talent " for not putting 13 14 BANKS AND BANKING. his Lord's money out at usury to the money-chan- gers, while in respect to the men of five and ten talents, no objection was made to the high rate of usury obtained in the matter of their investment. The incorporation in the year 1781 of the Bank of North America, at Philadelphia, the first duly or- ganized bank in the United States, was chiefly due to the efforts of Robert Morris, a representative of Pennsylvania in the Continental Congress, and after- wards Treasurer of the United States. The second bank in the United States, chartered by a State government was the Massachusetts Bank at Boston in the year 1784. The Bank of New York, with a capital of $500,- 000, was chartered by act of the Legislature of the State of New York, March 21, 1791, though this in- stitution had carried on a banking business since February 26, 1774. This institution has never passed a dividend, ex- cept in 1837, when it was obliged to do so by law. Previous to its incorporation, there is reason to be- lieve it paid dividends 48 per cent. Since its incor- poration, it has paid 862^- per cent., making a total payment to its stockholders, during 100 years of ex- istence, of 910J- per cent. These banks are still in existence, never having failed, with respective capitals and surplus on January 1, 1888, as follows : BANKS AND BANKING. I 5 Bank of North America ..... $2,500,000 Massachusetts National Bank . . . 1,000,000 Bank of N. Y., Nat. Banking Association . 3,500,000 The market value of the shares, par $100, being respectively : Bank of North America ...... $250 Massachusetts National Bank . . . . . 120 Bank of N. Y., Nat. Banking Association . . 210 The most remarkable record of success in banking is probably illustrated by that of the Chemical Na- tional Bank of the City of New York, which organ- ized April 1 st, in the year 1824, with a capital of $300,000. They show at the present time a surplus of $5,289,- 785. To-day, $3,500 is bid for one share par $100 of their stock. Dividends bi-monthly. UNITED STATES BANK. The first bank of the United States was incorpo- rated February 25, 1 79 1 ; the capital stock was fixed at $10,000,000, $2,000,000 of which was subscribed by the government, to be refunded in ten annual in- stalments ; twenty-five United States citizens consti- tuted the Board of Directors, who served without pay. The notes of the bank were receivable for all debts due to the United States. They immediately went into operation. The government disposed of its 1 6 BANKS AND BANKING. $2,000,000 of stock within the specified time, realiz- ing a profit of 57 per cent, on the original investment. The second bank of the United States was incor- porated April 10, 1 8 1 6, and began business January 7, 1817. The capital was not to exceed $25,000,000, and the charter required the directors to be resident citizens and to serve without pay. The bank was a public depository, and allowed to establish branches and issue circulating notes, receivable in payment of debts due the United States ; and, in consideration of the sum of $1,500,000, to be paid to the United States, it was agreed that no other bank, outside of the District of Columbia, should be established during the ensuing twenty years, the period of its charter. During the first three years of its existence, it en- countered numerous obstacles, which almost resulted in failure, but, after 1820, it gradually recovered, and surmounted all opposition until July 16, 1832, when President Jackson vetoed the bill granting a re-charter. During the year 1833, the government deposits were removed from the Bank of the United States to various State banks, by order of the Secretary of the Treasury. The bank continued its existence by ob- taining a charter from the State of Pennsylvania, February 18, 1836. The disastrous history of the bank under this char- ter, from 1837 until its last failure in 1843, is shown BANKS AND BANKING. \J by the enormous decline in the value of its stock, from 137, in 1837 to i-J in 1843. On finally closing the affairs of the first bank of the United States, the stockholders received a premium on the par value of their stock of 8-^- per cent. The second bank of the United States paid nothing to its stockholders, the entire capital of $28,000,000 having been sunk, although its charter contained substantially the same prohibitions and restrictions. The other creditors, however, were paid in full. While nothing of a political character at first entered into the establishment of banks, that feeling soon manifested itself, and, under the circumstances, very naturally so. In 1799 John Adams was President, and another presidential election was imminent. The Bank of New York was in Federal hands, and the Republi- cans naturally wanted a bank of their own to control ; but the Legislature was in the hands of the Federals, who were jealous of moneyed institutions, and the prospect of a Republican bank seemed dubious at least. THE MANHATTAN CO. It was then Aaron Burr's fertile brain came to the rescue. New York had been visited by the yellow fever, and it was believed that this malady was in- duced by the lack of wholesome water in that city. 1 8 BANKS AND BANKING. Here was the opportunity. It was proposed to incorporate the " Manhattan Company," for the be- nevolent purpose of supplying New York with pure water ; $2,000,000 would do this, and as these water- works might not absorb the entire amount, the petitioners asked for a provision authorizing this institution to employ its surplus capital " in the yS purchase of public or other stock, or in any other moneyed transactions or operations, not inconsistent with the constitution and laws of this State, or of the United States." And as the object was to supply a want that would always exist, it was not unreasonable that the grant should be given without limit as to time forever. This corporation, with its unassuming title, was too late seen to be a banking institution with a char- ter of the most liberal character. After the charter had passed, the Federals discovered their political mistake. The bill was introduced at the very close of the session, hastily pushed through the Assembly and Senate. In the latter body it was reported com- plete by a select committee, and never referred to the committee of the whole. The Council of Revi- sion then existed, " to revise all bills about to be passed into laws by the Legislature." The attention of this body was called by the Chief-Justice, to whom the bill was referred, to the clause under which the BANKS AND BANKING. 1 9 banking powers existed. He objected to this clause, because he was apprehensive that the capital would be employed in trade, etc. The minutes of the Council indicate that there was not the slightest thought that the bill created banking powers. The Manhattan Company has acted in the capacity of general transfer agent of the State of New York for all the stock issued for canal purposes from the year 1818 to the present time. From that year to the year 1839, tne certificates of State stock were signed by the cashier of the Manhattan Company alone ; since 1839 these certificates have been signed by the Comptroller of the State, and countersigned by the cashier of the bank during a period of sixty- six years with perfect faithfulness and to the complete satisfaction of the State government. The Manhat- tan Company has issued, transferred, and paid the public stocks, and the State has held, from the year 1 8 10, one thousand shares, the nominal or par value of $50 a share, of the stock of this bank for the account of the common-school fund. Many persons are living in the metropolis who can remember the large water-wheel which was located on Reade, between Centre and Elm streets. This corporation, as a water company, was a most benefi- cent institution. It has been a very conservatively managed bank. 20 BANKS AND BANKING. CONSPIRACY TRIALS OF I 826 AND I 82 7. During the summer and fall of 1826, and early in 1827, several citizens of high character in the city of New York were indicted and tried for an alleged conspiracy to defraud the Morris Canal and Bank Company, the Fulton Bank, the Tradesmen's Bank, the Mercantile Insurance Company, the Merchants' Fire Insurance Company, and other moneyed insti- tutions. Several of the officers and directors or managing agents of the " Life and Fire Insurance Company," the " Sun Fire Insurance Company," the " United States Lombard Association," and the " Madison Fire Insurance Company " were implicated in these crimi- nal prosecutions, which were widely and generally known and designated at the time as the " Conspiracy Trials." Briefly, the Life and Fire Insurance Company were charged with using the express powers given it for insurance purposes to carry on a banking business. It caused its bonds to be engraved like bank notes, and so issued were placed like so much paper currency in circulation. The conspiracy trials were still in pro- gress, the excitement produced by them still continued, when the Legislature met in January, 1827, and Gov- ernor Clinton, in his annual message, stated that the then existing commercial revulsions would inculcate BANKS AND BANKING. 21 the necessity of avoiding a recurrence of such calami- ties, by avoiding the causes which produced them ; that the calamitous derangements in England had been ascribed to a transition state from war to peace, and to excess of production, but the better opinion then was, that they were chiefly imputable to excessive issues of paper money, in the shape of bank notes ; and as similar disasters were experienced almost con- temporaneously in this country, that they might be traced to similar causes ; that a bank might issue notes to three times the amount of its capital paid in ; that this was intended as a wholesome restric- tion, but was in fact a most pernicious authorization, and could never be justified by any condition of affairs ; that the authority to create money would invariably be abused ; that the power of making money was a dangerous faculty, and its liability to perversion was in proportion to its extension ; that banking privileges deposited in unskilful hands might be abused without design, but when granted to fraudu- lent men who preferred wealth to character, there would be no bounds to the evils that would follow. The Governor further declared that experience had proved that applications for banking privileges were made for personal benefit, and not for public accom- modation. In conclusion, he recommended great caution in 22 BANKS AND BANK IXC. making such grants in future, and stated that "some general restrictions were indispensably necessary for limiting the issue of bank paper ; for regaining the possession of a certain quantity of metallic money, and adequate security for the redemption of bank notes ; for compelling the attendance, and increasing the responsibility, of directors ; for detecting the con- dition of banking institutions, and for prohibiting the circulation of bank notes below a certain sum." RENEWAL OF BANK CHARTERS. In the State of New York, on the ist day of Jan- uary, 1829, there were forty banks, the majority of whose charters were about to expire, having a com- bined capital of $15,000,000 actually paid in, and loans and discounts aggregating more than $30,000,- 000, with liabilities of about the same amount. The question of renewing charters greatly agitated the State, and involved problems of the greatest im- portance. Fortunately, during the crisis, the elec- tion of Martin Van Buren as governor proved oppor- tune. He reviewed the situation impartially, and in his message to the Legislature in 1829 said: "To dispense with the banks altogether is an idea which seems to have no advocate, and to make ourselves wholly dependent upon those established by Federal authority deserves none." BANKS AND BANKING. 2$ In considering the renewal of the charters of sol- vent institutions, he concluded with the following words : " The pecuniary convulsion that must result from a compulsory closing of these extensive con- cerns would neither be slight in its degree nor tran- sient in its duration." INCREASE OF BANKING CAPITAL. The rapidity with which banks multiplied from 1848 to 1853, is shown by the remarkable increase of banking capital, as compared with previous years. From 1843 to 1848, the increase was $375,512, while from 1848 to 1853, the increase exceeded $32,000,000. The stability of our banks during those years, is also apparent from the fact, that during the financial embarrassment of 1854, the banks in this State, with only a single exception, satisfied the demands of their bill holders without resort to securities with the Bank- ing Department. NATIONAL CURRENCY. Passing over the great panic of 1857, and its effects upon the country, we may note that the banking laws received no material amendment, the State of New York presenting the best banking system and the best currency of any State. In 1 86 1 came the war of the rebellion, and with it 24 BANKS AND BANKING. the demand of the government for millions, when thousands heretofore had answered. Bank suspension and panic became inevitable, and with the application by Congress of the New York system, to its own currency, and with its taxa- tion of ten per cent, on the circulation of the State banks, the latter at once disappeared, and United States, "legal tenders," so-called, and National Bank currency took its place. In 1882 a compilation and revision of the banking statutes became a law. Whatever is excellent in the present National Bank system belongs not to one Secretary of the Treasury or another, but to the fact that the general government borrowed the prin- ciples of sound finance from the great State of New York. This system, too, has been applied to the Bank of England, so that New York may claim to be the Empire State of sound banking, whose men and whose principles have given currency, whose actual value is the same as its nominal value, to two worlds. Few people not conversant with banks or banking comprehend the beneficent effect of having sound banks to deposit money in, or of the incalculable value of the banks of New York to the merchant and trader, and to the general government itself. What other power could have carried out the BANKS AND BANKING. 2$ admirable financial policy of Salmon P. Chase, and supplied funds promptly and in any required amount, but the associated banks of the city of New York, under our wonderful Clearing House system ? It is impossible to break any associated New York bank that can make a solvent showing to that able and accomplished manager, William A. Camp, Esq., inas- much as Clearing House certificates, countable as reserve, can be issued almost any moment by the Association, to any solvent bank. These certificates are a binding obligation upon all of the banks mem- bers of the association, jointly and severally, and the highest class of security. NEW YORK CLEARING HOUSE. The New York Clearing House was established October, 1853, and has become a most important institution, settling transactions hardly, if at all, in- ferior in amount to those of the London Clearing House. The work is carried on in a fine large banking room, where there is proper accommodation for the manager and his clerks, instead of the small glass box in which the inspectors sit in the Lombard Street room at London. Each New York bank has one settling clerk in the exchange room, besides a messenger who brings and 26 BANKS AND BANKING. delivers the parcels of checks and bills. The settling clerks sit in a series of desks, arranged in an oval form in the middle of the spacious room, and the exchanges are effected by an equal number of mes- sengers simultaneously walking around the desks, delivering the parcels of credit and debit exchanges. The Association numbers sixty-three banks, whose united capital and surplus at present is one hundred and seven millions. Specie eighty-three millions, legal tenders thirty-four millions, and deposits of three hundred and eighty-six millions. The aggre- gate deposits to-day of five New York banks are over one hundred millions. Probably one of the safest and most conservatively managed banks in America, is the American Exchange National Bank of the City of New York, with a capi- tal and surplus of $6,700,000, deposits $17,352,838, market value of stock 140%. EPISODES. Some banking episodes have naturally come under our observation in an experience of twenty-five years as a banker and merchant in the city of New York. Eternal vigilance is the price of liberty in this as in any other profession. The sharper is always on the alert to beat the bank in many ways. One favorite way is to operate on the institution BANKS AND BANKING. 2 J after making the acquaintance of the paying teller, and getting possession of a well-known local check for several thousand, and demanding and receiving small bills therefor, and then return the somewhat cumbersome package to the polite teller, who receives the same without counting the bills, and he, the sharper, demands large bills therefor ; Mr. Sharper holding back a thousand dollars from the larger pile of bills, leaving the bank short $1,000, discoverable only at balance time, 3 p.m. " Truth crushed to earth shall rise again ; The eternal years of God are hers." Bryant. In this business a lie travels somewhat faster than the truth. A president of a New York bank once told me that in his opinion the American people loved to be hum- bugged. Look at the case of the Dexter Savings Bank of Maine, where, on Washington's Birthday, a.d. 1878, the faithful old treasurer, Mr. John Wilson Barron, was brutally murdered, and his body placed inside the bank vault ; and the theory of death by his own hand and short accounts, at once adopted by the wise- looking bank officials ; and but for the liberality of a New York newspaper proprietor, two murderers would have escaped justice, and the martyred treasurers 28 BANKS AND BANKING. memory would still have born the unjust stigma of default and suicide. "A TRUE STORY." Not many years ago, as I was attending to the business of negotiating a line of paper with a Con- necticut bank president, a lady called, whom we will designate as " Lady Victoria " ; and upon the retire- ment of my customer, asked for a moment's conversa- tion. I told her to proceed. She said she had just settled her husband's estate, and had a sum of money which she wished to leave with me for investment. I told her that I only dealt in notes and safe investment securities, and never speculated, either for myself or customers. She deposited then and there $40,000, saying she would call in a day or two and decide how she would invest the money. In a couple of days she came in and said that she had decided to speculate in stocks ; that she had a friend who had given her " sure points," and ordered me to buy a thousand shares of the Royal Bengal Mining Co. I was astonished at her recklessness, and told her she was all wrong ; that the stock was down to 25, and was almost certain to go lower ; but she said she knew what she was doing, and she had a good " sure point." I bought the stock, arid down it BANKS AND BANKING. 29 went, and when it had fallen seven points she be came alarmed, and ordered me to sell at a loss of $7,000. After a few days she called again and ordered me to buy a thousand of Oshkosh & Kalamazoo R. R. Again I protested at her want of judgment, when she became angry, and said that I was her broker, and bound to do as ordered. So I bought the stock, and this time the stock declined ten points, making her loss $10,000. She then ordered me to sell short a large block of a stock she was sure was going down. I 'was astonished at her audacity. This time I de- clined to do the business, and told her that I would not be the medium of her losing any more money, and that she must find some other banker, if she de- sired to do business in that wild manner. She thereupon requested me to transfer her account to another house, which she named. Again I pro- tested, and told her that the firm was a very weak one, and not responsible — in short, dangerous, — but she was a wilful widow (some of them are), and ordered me to move the account as she said, which I did. In about two months Lady Victoria called again, with a sad face, and told me the firm had failed, and she had lost all but $1,000. I could not laugh, although inclined to, as I asked her what she was going to do. 37 ' " If thy brother be waxen poor, then thou shalt relieve him, yea, though he be a stranger, or a sojourner, that he may live with thee. Take thou no usury of him." But in Deuteronomy xxiii., 20, the law of God seems to tolerate usury towards strangers : " Unto a stranger thou mayest lend upon usury." The law of usury, therefore, seems to have been peculiar to the ancient Jewish state, but in equity it obligeth us to show mercy to those we have advan- tage of, and to be content to share with those we BANKS AND BANKING. 39 lend to, in loss as well as profit, if Providence cross them. And in view of this fact an eminent theological writer says : " It seems as lawful for me to receive interest for money which another takes pains with, improves, but runs the hazard of in trade, as it is to receive rent for my land, which another takes pains with, improves, but runs the hazard of in husbandry." (Alex. Cruden, M. A. : " Concordance of the Holy Scriptures," 533.) We therefore see that the practice of requiring in repayment of money lent, any thing more than the money lent, was formerly thought to be a great moral wrong. But for many years that opinion has ceased to exist, and has lost much of its practical legal force. It is no longer deemed more wrong to take pay for the use of money, than for the use of a horse, or a house, or any other property, and that money should be bought and sold upon whatever terms the parties themselves should agree to. EXPULSION OF THE JEWS FROM ENGLAND. The ancient Jews were expelled from England in the year 1290 for usurious and extortionate practices. October 10th was the day fixed by royal edict, but the king benignantly allowed them till "All Saints Day," after which all who delayed were to be hanged 40 BANKS AND BANNING. without mercy. Even the zeal of the Bishop of London (Robert de Gravesend) outran that of the archbishop and the king in his persecution of these thrifty people. He ordered all of their synagogues to be destroyed. The archbishop, prevailed on by the urgent applications of the Jews, graciously in- formed the bishop that he might conscientiously al- low one synagogue, "if that synagogue did not wound the eyes of the pious Christians by its magnificence," to remain. RESTORATION OF THE JEWS. After having been banished from England 370 years for practising usury, they were kindly permitted to return by Cromwell, in the year 1650, when a cele- brated physician, Manasseh ben Israel, presented a petition to the Protector for the readmission of his countrymen into the realm. The address was drawn with eloquence and skill. It commenced by recognizing the hand of God in the appointment of Cromwell to the Protectorate. It dexterously insinuated the instability of all govern- ments unfavorable to the Jews, and it asserted the general joy with which the ambassadors of the repub- lic had been received in the synagogues in Holland and elsewhere. Manasseh ben Israel issued a second address to the BANKS AND BANKING. 4 1 commonwealth of England. He complimented the general humanity of the nation, stated his sole object to be the establishment of a synagogue in the king- dom. He adroitly endeavored to interest the reli- gious enthusiasm of England on his side by declaring his conviction that the restoration of Israel, and of course the last day, was at hand. He did not neglect the temporal advantages of the worldly, the profits to be derived from their traffic, and concluded by expressing his sincere attachment to a commonwealth abounding in so many men of piety and learning. Whether moved by one or all of these reasons, Cromwell summoned an assembly of two lawyers, seven citizens of London, and fourteen divines, to debate the question : first, whether it was lawful to admit the Jews? second, if lawful, on what terms it was expedient to admit them ? The lawyers decided at once in the affirmative. The citizens were divided, but the contest among the divines was so long and so inconclusive that Oliver, having so spoken that one present asserted, ''I have never heard a man speak so well," at length grew weary, and the question was adjourned to a more convenient season. It is a curious fact of the times, that so far were some of the republican writers from hostility to the 42 BANKS AND BANKING. Jews, that Harrington in his " Oceana" gravely pro- poses disburdening the kingdom of the weight of Irish affairs, by selling the Emerald Isle to the Jews. The necessities of Charles II. and his courtiers quietly accomplished that change on which Cromwell had not dared openly to venture. The convenient Jews came quietly into the king- dom, where they have ever since maintained their footing, and no doubt contributed their fair propor- tion to the national wealth as industrious, law-abiding, peaceable citizens. BARTER. Some years since, Mademoiselle Zelie, a singer of the Theatre Lyrique at Paris, made a professional tour around the world and gave a concert in the Society Islands. In exchange for an air from Norma and a few other songs, she was to receive a third part of the receipts. When counted, her share was found to consist of three pigs, twenty-three turkeys, forty-four chickens, five hundred cocoa-nuts, besides considerable quanti- ties of bananas, lemons, and oranges. There is something absurdly incongruous in the fact that a joint-stock company called " The African Barter Company, Limited," existed in London until recently, which carried on its transactions upon the BANKS AND BANKING. 43 West Coast of Africa entirely by bartering European manufactures for palm oil, gold dust, ivory, coffee, gum, and other raw produce. In the Book of Job (ii., 4) we read: " Skin for skin, yea all that a man hath, will he give for his life " ; a statement clearly implying that skins were taken as the representative of value among the an- cient Oriental nations. Etymological research shows that the same may be said of the northern nations from the earliest times. In the Esthonian language the word "raha" gener- ally signifies money, but its equivalent in the kindred Lappish tongue has not yet altogether lost the original meaning of skin or fur. Leather money is said to have circulated in Russia as late as the reign of Peter the Great, and it is worthy of notice that classical writers have recorded traditions to the effect that the earliest currency of Rome, Laceda^mon (las-e-dee-mon), and Carthage was formed of leather. We need not go back, however, to such early times to study the use of rude currencies. In the traffic of the Hudson Bay Company with North American Indians, furs, in spite of their dif- ferences of quality and size, long formed the medium of exchange. It is very instructive, and corrobora- tive of the previous evidence, to find that even after the use of coin had become common among Indians, 44 BANKS AND BANKING. the skin was still commonly used as the money of account. Thus Whymper says : " A gun, nominally worth about forty shillings, brought twenty ' skins.' This term is the old one employed by the Company. One skin (beaver) is supposed to be worth two shillings, and it represents two marten, and so on." In the Old Testament, the notion of money is expressed three times by the Hebrew word "kesitah," which is translated in certain old versions into words meaning lamb (not a Wall St. lamb). This might seem to be an additional proof of the former use of cattle as a medium of exchange ; but I am informed that this translation probably arises from an accidental blunder, and that the original meaning of the word " kesitah ' was that of "a cer- tain weight," or "an exact quantity." The corre- sponding word in the Arabic " kist " is said to denote a pair of scales. CASH RESERVES OF BANKS. It is important, but very difficult to decide, what is the amount of real cash held by banks generally, in readiness to meet their liabilities. Many banks publish balance sheets professing to show the reserve of ready money, and when we in- quire into the nature of the bank's ready money it is BANKS AND BANKING. 45 found to consist in a great degree of money invested in government securities, deposited with other banks, or loaned on call — that is, lent to brokers, members of the Stock Exchange, who invest it in negotiable securities. From the published balance sheets we get no positive indications of the real metallic re- serve of the country available for the payment of foreign debts. Thus the whole fabric of our vast commerce is found to depend upon the improbability that the merchants and other customers of the banks will ever want, simultaneously and suddenly, all of the specie and legal tenders which they have a right to receive on demand at any moment during banking hours. RETROSPECTIVE. " Lives of great men all remind us, We can make our lives sublime " Longfellow. in this as well as any other profession. We are like unto the insects that in the unseen depths of the ocean lay the coral foundations of uprising islands. In the end comes the solid land, the olive and the vine, the habitations of man, the arts and industries of life, the havens of the sea and ships riding at anchor. But the busy toilers, who had laid the beams of a continent in a dreary waste, are entombed in their work, and sometimes forgotten in their tombs. 46 BANKS AND BANKING. They brought nothing into this world, and may carry nothing out, and there is nothing left of it all but a tolling bell, a handful of earth, and a passing tradition. A man may be libelled to-day as a fool, a fanatic, and a knave, and to-morrow his libellers sneak into his funeral procession, and the chief magistrate of forty millions of freemen begs the honor of two feet of space at his obsequies, and yet it is not always thus. Many in our profession have left behind a just and fragrant memory, not a few of them leaving in their places worthy representatives of their name and blood. George Washington's name will live forever in the hearts of the American people. Abraham Lincoln, by that wonderful pen, directed by the hand of Almighty God, decreed that henceforth and forever none but freemen should inhabit America. He was a benefactor, a martyr, a saint. ALEXANDER HAMILTON. But it was reserved for Alexander Hamilton to be the promoter and firm friend of banks, first, last, and all of the time. To his consummate ability, influence, and fostering care the earlier banks of the country owed their success and life. He became Secretary of the Treasury when the Constitution of the United States went into opera- BANKS AND BANKING. 47 tion in 1789, and while he was a director in the Bank of New York ; but he continued to show a lively in- terest in its welfare, and he was the firm friend and adviser of its cashier. In 1790 the bank was made agent of the United States. In 1792, the Society for Establishing Useful Man- ufactures, in which Alexander Hamilton was inter- ested, and which had recently been organized in Phil- adelphia, applied to the Bank of New York for a loan to enable it to carry out its plans for building facto- ries at Paterson, N. J. The busy city, which to-day has 50,000 inhabitants, was then a settlement with ten dwellings. At Hamilton's suggestion, the bank lent the soci- ety $10,000 on pledge of United States deferred stock, with interest at 5 per cent., and a few months later a further loan of $35,000 was made to the society on similar terms. Hamilton, in his letter to the bank, said : " In my opinion, banks ought to afford accommodation in such cases upon easy terms of interest. Institutions of this kind ought to consider it as a principal object to pro- mote public purposes." The cashier indicated the feelings of the officers of the bank toward Hamilton in his letter of June 25th : " Our Directors are informed of your sentiments 48 BANKS AND BANKING. respecting the loan to the Manufacturing Society. Be assured, my dear sir, that they have so much con- fidence in any measure pointed out by you, and take so much pleasure in promoting your views, that by complying with your wishes they are glad to have an opportunity of acknowledging the obligations this institution is under to you." LETTER FROM ALEXANDER HAMILTON TO THE DIREC- TORS OF THE BANK OF NEW YORK. Treasury Department, January 25, 1795. Gentlemen : — You were so obliging as to cause it to be intimated that the payment of the loan of $200,000 had of your institution might be deferred if the service of the United States should require it. It will be a great convenience to this department to avail itself of the permission, so as to defer the reimbursement of the principal of that sum to a year from its commencement. The interest can be paid at such periods as are agreeable to you. I cannot let slip this opportunity of thanking, for the last time, the Directors of the Bank of New 7 York for that decided, prompt support of my administra- • tion which they have upon every occasion given. It has made a lasting impression on my heart. With great consideration and esteem, I have the honor to be, gentlemen, your obedient servant, Alexander Hamilton. To the Directors of the Bank of New York. BANKS AND BANKING. 49 CONCLUSION. General Washington wrote to his English friend in the year 1778, these lines : " If the people of the United States of America continue to be true to themselves, no power on earth can prevent their becoming a great, a powerful, and a commercial country." And said the Hon. Junius S. Morgan, the eminent London- American banker, in the year 1876, in the city of New York, at a dinner given in his honor by Governor Tilden and other citizens of New York and Connecticut : " That prophecy has been wonderfully fulfilled, and should American legislation henceforth be care- ful to promote the highest national honor and integ- rity, without spot or blemish, no earthly power can prevent the people of this country from continuing a free, a commercial, and a respected nation. " The future is with us. Providence has done every thing for us." History records that Christopher Columbus was not only a shareholder but a depositor in the Bank of Genoa, and a firm believer in banks and banking, as evidenced by his last earthly act. Upon his deathbed he directed, by his last will and testament, Don Diego, his eldest son, or who- 50 BANKS AND BANKING. ever should inherit his estate, to invest such sums as he may be able to save out of the revenue of his estate, in a stock in the Bank of St. George, which gives an interest of 6 per cent. ; and let him therefore collect and make a fund of all his wealth in " St. George of Genoa," and let it multiply there ; and, to show that our navigator had confidence in his ability to invest money safely, as well as a firm and abiding faith in some form of religion, he directs Don Diego, in the last clause of his will, that, every time and as often as he confesses, he first show this obligation, or a copy, to his Father Confessor, praying him to read it through, that he may be enabled to inquire respect- ing its fulfilment. (Irving's " Columbus," vol. III., pp. 450-452.) And thus, in honoring Christopher Columbus as a friend and promoter of the old Bank of Genoa, let us not forget his great services in discovering the grand- est continent in this or any other world. How we should have rejoiced to have been with our friend on the morning of the " third day," as the sun came up out of the water for the last time, and birds of new plumage came singing through the tat- tered sails of the ship glad songs of welcome to the land, and flowers of strange odor drifted by her keel, and heard that shout : " Land ho ! " and America, beloved America, was ours. Ours to inherit, ours BANKS AND BANKING. 5 I to foster, ours to transmit. The greatest and best of all lands. The land of the free, and the home of the brave. The land where the lowliest of Almighty God's creatures can, by industry and a virtuous life, attain to the very front rank of any profession, and be loved and respected like unto him whose last words were : " In manus tuas, Domine, commendo spiritum meum " (" Into thy hands, O Lord, I com- mend my spirit "), and who now sleeps in his quiet tomb at Havana, in the island of Cuba, upon which we to-night drop a fragrant wild-flower, gathered from some favored spot " on old Long Island's sea-girt shore," as we see the certain star of empire, shining not only over our beautiful (city) village, but over all the broad land which Columbus discovered, and hav- ing no farther west to go, will shine and stay with us forever. HOTCHKISS & CO. BANKERS Dealers in Commercial Paper 34 PINE STREET New York 52 UNIVERSITY OF CALIFORNIA AT LOS ANGELES THE UNIVERSITY LIBRARY This book is DUE on the last date stamped below ~ & <,aK *$$& ' ■ JAN 3 1956' APR i 2 1960 Wi e'Be' DlSCHI\W£-U Rt MAR * wmtfflip Q7S jni *:vm f&m wtC .otAi.o m DEC 04 7985,-f- RfCDLD-Um ;^964 lOBggTWK NOVO 9 1995 REC'D LDURf. ««i DEC 2 3 74 °£C231974- Form L-0 20m-l, '42(8518) #02 3 1988 OCT 1 2 2009 3 1158 00434 8826 mm 9