Vermont phÅ“nix. [volume] (Brattleboro, Vt.) 1834-1955, 1893-09-29
A BRILLIANT BUBBLE.
When 1t Burst the Liabilities
Were $6,OOO,OOO.

The complete story oil the collapse OF the
Northwestern Guaranty Loan company of Min
neapoiis as published by the New York Herald,
reveals a system of wildcat fnanciering that is
unparalleled in this country. From the date of
its organization this company never missed a div.
idend. on January last it declared seman-
nua dividend of four per cent mailing checks to
the stockholders that they reached them on
that date Four months aud 20 days later it
closed its doors, owing more than S6,OOOON. OF
lutely worthless The assets can best be suggest
ed by an interrogation point. For more than two
years certainly, and probably for longer time,
this company had been rotten to the core.
Last December when its annual report showed
the company to be in extraordinarily good condi-
ton, it issued a statement which closed with the
following; I'VE take great pride in saying that
we have never passed dividend never defauted
payment, and not in an instance has an invest
or made loss through us
Directors who Did Not Direct.
The company was incorporated May 1. 1854
with an. authorzed:capital of S9OOO,oOO, the paid
,lp capital being S2OOO 900. The names Of Thomas
Lowry, the principal owner q the street railway
systems of Minneapolis Senator Washburne, G.
A. Pilsbury, the great flour manufactures, and
other men of prominence appeared as officers of
the company. These men had little or no inter
est in the company. They given a few
shares of stock in order that they might be
qualified to become directors. At least two men,
Mr. Pillsbury and Mr.. Eustis, did not know that
they had been elected directors. Their names
were used for years without their knowledge.
Two ago Mr.. IllSOury compelled tine COM
pany to take his name from the list
In the light of recent developments 1t is proba-
BILE that Menage used the company as a clearing
house for his own enterprises from the start.
The rapid increase in the value of real estate
for in those days it no extraordinary thing
for property to double itself in value in three
months-covered what might have been disas-
trous failures had there been any depression.
Times were good. Everybody was flush with
money. While loans were made on property
owned by Menage and by others which were
probably up to the full value of the property at
that time; yet the increase in value covered this
creased with rapid strides. 1t paid dividends
from the very start. The confidence which had
been bestowed upon ii through the names of the
men connected with it increased by the sue
cess of the company. The credit for this success
went largely to Menage. He had gained a repu
tation for extraordinary shrewdness in real es-
tate speculatons He organized and was the
leading spirit in score of other corporations
which were more or less affiliated with the Guar
anty Loan
The Finest Building I'm the Northwest.
In 1888 the company erected the finest building
in the Northwest, at cost of 81 100000. This
building made great impression on the people
of that section, and added much to its confidence
and prestige. BY this time the company had be-
come widely known. Its business had shown a
great increase. 1t had never missed dividend.
it had never defauted on payment: in fact, il
had carefully avoided doing anything which
might be construed in the least degree to reflect
upon it. On the contrary, it had taken every
step and every means that the ingenuity of its
officers could devise to extend the confidence. II
advertised widely. 1t selected capitalists from
the East-New York. Boston and the interior of
New England-who made up party to visit the
companys home in Minneapolis and they
then taken through the oaning fields of the
Northwest. That scheme which carried out
in 1890, was master stroke of advertising. The
visitors thought they knew exactly upon what
properties money was loaned and the amount
loaned. They could see the property themselves,
and the officers of the company could tell them
how much the property was worth and how
company had placed upward of S12,OOOOOO in
curties
Advent of MIR. Streeter.
One of the important changes in the company
took place in 1889, when VIM. S. Streeter became
connected with it. Mr.. Streeter was born in Bar
ton, Vt. He entered bank there and subse-
quenty removed to st. Johnsbury, Vt, where he
was made teller and afterwards cashier of the
Merchants national bank of that town. He was
prominent in the church and Sunday school and
stood high in the estimation of the good people
of that placed. TWAS ill health which compelled
him 10 leave st. Johnsbury In the fall of 1855 he
went to Denver. Then, through the influence of
H, E. Fletcher, formerly of st. Johnsbury, he
became connected with the Northwestern Guar
anty Loan company 1t was understood at that
time that he was to have an outside position; that
his business was TO be principally in placing loans
IN the taI OF lsse Mr. Streeter appears as one of
the vice presidents of the company, and inside
year after that he was the most powerful man in
itneXt to Menage
Placed S75O,OOO i'm Vermont.
Prior to Mr.. Streeter's connection with the COM
pany the paid-up stock had been increased to
S50O,0O0 In 1889 the paid-up stock was increased
to 81 0OOO 900 and later to ST. 80 900 This increase
of $4,000 was all placed by Mr.. Streeter princi-
pally among his old friends in Vermont He had
difficulty in placing this stock at the rate of
$4,000 a day whenever it was founu necessary to
raise funds In addition, he established hundreds
of agencies for the disposal of notes and securi.
ties dealt in by the company
Everybody who had Investments in the compa-
ny had the greatest confidence in its stability On
the 18th of May the company could not make
good its guarantee of commercial paper, could
not sell other commercial paper, and the Mime
apolis Trust company was made its receiver
The Building Had Been Transferred.
The receivers were confident that the losses to
the creditors would be slight, but when they
came to look into the matter they were dumb
founded. The first thing which they looked upon
as asset was the building itself They knew
that it bonded to S6OO,O 600 but they were sure
that there at least $500, 600 in equity which
would become part of the assets The receiver
was informed that the Northwestern Guaranty
Loan company did not have particle of equity
in the building. II was the property of the
Northwestern Loan Building company, sepa.
rate corporation This was a staggerer The
transfer had been made more than year before
the failure; the conveyance was recorded only the
of the debenture bonds OF these they found
that about $4,000 had been issued. Some OF
are worthless. They found that property had
been mortgaged for two, three, five, and in somt
instances 10 times it value and the mortgages
sold.
Paper Representing s2,3OO,O 900 Signed
by BARRIERS, POrters, Etc.
But the most astounding discovery was mad,
in connection with the commercial paper which
the company had guaranteed and sold. Directly
after the announcement of the appointment o
the receiver attorneys in Minneapolis began t,
receive notes from all the country for collec
ton The lawyers hustled about to find the max
ers of these notes. They could not find them TO
the most part Out of 60 makers of notes who's
signatures were affixed to notes which came I,
one Minneapolis firm of lawyers alone they wer
able to find but four men, Not ore of these mel
has in a commercial sense business existence
OF the four whom they did find, man is
porter in a store in Minnea polls another is bar
Der, who used to dress the HAIR of some of the of
fcers of the company. OF the other two, one i
a man out of work and the other mechanic
making a very small amount of wages. Thes
notes continued to pour in, until at the presen
time it is known that the Northwestern Guarant
Loan company sold 81, 10000 worth of CONNER
cial paper signed by these irresponsible peopl
and which is absolutely worthless
The company does not owe in Minneapolis owe
$4,000 of its total Indebtedness of $1,000 900. II
paper is held in different parts of the country
but the sufferers who will feel their losses mos
keenly are Vermonters. In st. Johnsbury alon