Evening star. [volume] (Washington, D.C.) 1854-1972, 1899-07-15
OF A BANK
A Chicago Institution Which Has
Had a Curious History.
IN TEE HANDS OF A RECEIVER
Pays Dividends on Stock Worth
More Than Face Value.
SPLENDID FINANCIERING

| SPLENDID FINANClERING
Written for The Evening Star by Ray stannard aker
| More than twenty years ago the Third
National Bank of Chicago formally closed
its doors and a receiver was appointed to
l'satisfy the clamoring depositors. Some of
the stockholders feared an immediate as
,fsessment for the Payment of liabilities and
offered to give their stock to any one who
would assume it's obligations. Today this
stock is held at nearly double its par
value; and it is regarded as 'giit-edged"
| security. Within five years, although the
| bank has received no deposits, made no
/ loans, issued no currency sold no drafts,
! 1t has paid two substantial dividends to its
stockholders and promises many more. The
| very name Of the bank has been forgotten
except by few gray-headed men who are
personally interested in its affairs, but it is
| even yet an important financial institution
with its regular stockholders meetings, its
| taxes, its law suits. its reports and its
bookkeeping. Moreover, Ii is unique in be-
| ing a corporation having large assets and
no liabilittes-beyond the obligation to its
| stockholders. All of the entries except
drlblets OF expense, appear on the credit
| size of the ledger.
The circumstances which led up to these
/ peculiar, even unprecedented conditions.
make a story probably without parallel in
| the annals of national banking
| Prior to the panic of 1873 the Third Ma
| tonal Bank ranked as one of the Stanchest
| financial institutions in the west. 1t had
| a capital of 200 and it's directory includ-
| ed some of the most prominent names in
| Chicago-such men as George Al. Pullman,
| j. Irving Pearce, Joseph Medill C. II. Cur
| tbs, c. M. Henderson, C. r. Steele. John H.
| Thompson, William r. Alien and S. S. Ben
jamin. Only one bank in its home city ex-
| ceeded 1t in the extent and Importance of
4 its business.
Fall From Grace.
| When the financial crisis of 1873 was at
| its height the Third National Bank sus-
pended payment for a single week as a pre-
caution against threatened run. Then 1t
| opened again and prepared to resume its
old place in the business world. But a
| bank is like man. 1t is trusted implicitly
| until it reveals some inherent weakness
| After that its business friends watch it
| keenly and approve its methods with an
| if and its business enemies await the
strain which again shall test its strength.
! The Third National Bank had the finest
offices in Chicago, the largest force of
| clerks, the longest list of country CORE
spondents, but it also had the single slip
from the path of financial rectitude to live
| away. Some of its officers, knowing the
| need of unusual efforts to maintain its
| business supremacy, signed the bonds of
! the treasurer of Cook county, thereby re-
ceiving large deposits of the public money
| to swell the quarterly reports. The bank
also appeared as the main depository of
| board OF park commissioners of which its
president had become the treasurer. Other
| bankers, looking on, saw the signs and
| understood them
4 In 1873 the deposits exceeded 81 600 900
| but in spite of all the bank could do they
| kept creeping down and down until late
| in 1877 they Were only 81 $4,000 During
| most OF this time the bank officers were
| firmly optimistic; they believed in the solid
| ity and business worth of their bank.
| Felt the Shock.
| In September, 1877, an extensive hotel
property owned by President Pearce and
| one of the other directors was destroyed
| by fire. 1t had no connection with the bank
and yet the bank felt the shock. A few
weeks later President Pearce called on the
| New York correspondent of his bank and
| asked for a temporary loan to be used in
| case the heavy deposits of public money
| should be withdrawn suddenly. The New
| York bank hesitated and hedged. If it
| We're not for the large demands now being
| made as an incident to the hard times and
| the uncertainty of the money market-and
! other circumstances that assist a bank
president who does not wish to loan money
they might possibly spare few hundred
thousands.
On President Pearce's return TO Chicago
| he found that some of the directors of the
bank had been touched with the growing
distrust. They were losing confidence in
| the ability of their own bank to meet the
demands which might be made upon it,
They had kept the feeling to themselves
and yet, after the manner of such things,
| it was all down the street in a single day.
travelling by such secret ways as only an
evil rumor knows.
In spite of the loss of confidence there
was no regular run on the bank. Its busi-
ness was conducted by the usual number
| OF clerks and its mail had not diminished.
1t was buoyed up and supported by the
reputation of substantial prosperity and
dignity which ii had known In the past
and yet it was suffering from q wasting
disease known to fnanciers as west
pocket rum. Depositors came smilingly
and drew out their money. and it was not
replaced. A st. Louis paper printed a brief
telegram limiting at the condition of the
bank, and the country correspondents al
ways ready with their suspicious began TO
fear of their balances, and every mail
brought drafts that helped to drain the
banks reserve
A Quiet Run.
A bank can fortify itself against the
excitement of a regular run and fall, strug-
Cling, with some of the honors of war
but it has no protection against the creep
ing misery of these quiet, friendly with
drawals, continuing day after day for
weeks, and each of them an insidious thrust
at the banks stability
one day the county treasurer gave notice
that he would want half million dollars
He was very agreeable about it and he had
his eNcuses-but he must have the money.
He, too, had heard the rumors, and he
must protect himself
half million dollars Is q very large sum
Of money TO ask instantly from any banks
reserve cash. The officers of the Third Ma
dcnal Bank ran here and there for help,
thereby spreading the odium of their dis
tress The First National Bank, fearing a
general financial disaster agreed to lend a
helping hand If the Union National Bank |
would do the same. The Union National |
Bank. after questioning and delaying and |
questioning again, agreed by its president, |
w. +. Cooibaugh, to advance $500, 900 in |
case of emergency. Confidence came back |
again. With this money and other prom |
ised assistance, President Pearce was sure |
that he could make his bank stand any /
strain. And this rumor. too, given vigor- |
Gus start ran its way up and down the |
street, and some of those who had conten1- /
plated withdrawing their deposits, put their |
creek books away and waited. Even the |