What a Long, Strange Trip
The nation's largest banks today are the products of hundreds of mergers. In honor of American Banker's 175th anniversary, we've mapped the genealogy of the top four.November 11
In the midst of a financial crisis, the secretary of the Treasury writes to an official at a large New York bank, assuring him the federal government and the local branch of the central bank will help.
Board members of the bank in need and the central bank are suspicious of one another, but the Treasury secretary, who once worked at the New York institution, intervenes to smooth relations.
No, it's not 2008, or 1998-it's 1792. The Treasury secretary is Alexander Hamilton, who eight years earlier founded the Bank of New-York (then hyphenated). His letter to William Seton, the bank's cashier, is among the artifacts on display in a new exhibition at the Museum of the City of New York.
"Capital of Capital: New York's Banks and the Creation of a Global Economy" chronicles Gotham's ascendance as the financial center of the nation and, eventually, the world. It also shows how much-and how little-banking itself has changed over the last two centuries.
Think the media demonizes finance today? Check out the political cartoon from 1833 that depicts Nelson Biddle, the Ben Bernanke of his day, with horns and a tail. Bankers also had their admirers in that period, even in small-town America, as evidenced by the poem "Here's to J.P. Morgan," written by a resident of Bangor, Maine, in 1907, the year the legendary capitalist rescued the banking system.
Wall Street looms large in the exhibition. Aside from the predictable memorabilia (vintage stock certificates, ticker tape from the 1929 market crash), there's a chair from the New York Stock Exchange circa the 1870s. Why a chair? Back then, a "seat on the exchange" meant just that.
Much attention also is paid to the role that New York's banks had in funding massive infrastructure projects, like Citibank's involvement in the building of the Panama Canal. (Citigroup is a sponsor of the show, which runs through Oct. 21, and donated many of the pieces.)
The role of personal banking in the lives of New York's working class also is illuminated. There once was a time when "commercial bank" and "savings bank" were not just regulatory designations, but literal descriptions. The former had no appetite for small deposits, while the latter emerged, beginning in 1816, as a philanthropic enterprise to encourage thrift, particularly among immigrants. (Emigrant Bank, which today has just under $8 billion of assets, grew out of the Irish Emigrant Society.)
Museumgoers also can learn how American Express started out as, well, an express, moving goods around the country by horse, ship and train. The company began issuing money orders in 1882, and scored big with immigrants who spoke little or no English. Instead of filling out the Post Office's money order, customers could just point at one of the preprinted numbers on American Express' form, and an agent would cut the piece of paper down to the desired amount.
Other curiosities on display include privately issued paper money from the 19th century, with odd denominations like the 12 and a half cent note at left, and an "automatic deposit machine" from 1922 (below), where customers could leave their cash (including coins, via pinball game-size slots) after business hours. In case people didn't get the idea, this one-way ATM was shaped like a Greek Revival-style bank branch.
You'll chuckle at the industry's early attempts at mass-market advertising, like the sheet music for "I Bank at Chase" ("what a friend-ly place") and a television commercial straight out of Mad Men ("New York woman: When her needs are financial, her reaction is Chemical.") More sobering is the 1960s section on discriminatory practices like redlining.
Certain themes emerge as timeless-not just the obvious, like financial panics, but also the politicization of banking and the gaming of regulations. Hamilton, for example, opened Bank of New-York as a rogue organization, operating without a charter the first seven years because the state legislature refused to grant one. His arch-nemesis Aaron Burr's Manhattan Co. got around the same problem by incorporating as a water utility and tucking in a clause allowing it to use "excess funds" (which turned out to be most of them) to create a bank.
This article originally appeared in the July issue of American Banker Magazine.