Vigo County, Indiana - Chapter 16: Banking and Finance, 1908

The following literal copv of a handbill, circulated in Terre Haute in 1834, not onlv gives us the date of the first movement to establish the first bank in Terre Haute and the method of advertising it, but also presents the names of the leading, enterprising men of the old town, seventy-four years ago :

At a meeting of the stockholders of the Branch Bank, located at Terre Haute, held at the Court House, the 25th day of October, ult., pursuant to a public notice in the Wabash Courier.

Demas Deming was called to the chair, and Chauncey Warren appointed secretary. Then followed the proceedings for the nomination and selection of candidates for directors, which resulted in the choice of the following: Chauncey Rose, Demas Deming, Curtis Gilbert, James Farrington, John D, Early, David Linton and S, Crawford, of Vigo county, and John Sunderland, of Parke county. The report was signed bv D. Deming and C, Warren, and dated "November 4th,, 1834."

States. Its notes went cnrrent from lakes to gulf, and its capital and credit were used to develop business and agricultural resources of the state. Its regular annual dividends for twenty years averaged ten to twelve per cent., and at the expiration of its charter there was a surplus of one hundred per cent, to divide among the stockholders.

The State liank was chartered in the winter of 1833-34. It was not a central bank with numerous branches, but the institution consisted of the ('ifferent branches under control of a central governing body. Thirteen branches in all were organized, including that at Terre Haute, each branch having its own president and other officers. The semi-annual examinations by the state president were very searching, and kept the liranches in a safe and health\- condition, with the result that only one case of fraud was ever found in all the thirteen banks. The capital of each branch was $160,000, one-half of which was furnished by the state. As there were no capitalists in the state at that time, the charter provided that every stockholder who paid $18.75 on each $50 share should receive as a loan from the state the remaining $31.25 so as to fully pay up the stock. The loan was secured b\- bond and mortgage on real estate, at six per cent, interest. The full amount of the annual dividends was then credited on the loan,, and in one of the branches at least the loan was thus paid ofif seven years before the expiration of the charter, and the borrowing stockholder received for that period the full amount of the dividends on his shares. To pay for its half of the stock and its advances to stockholders, the state had issued and sold in London its coupon bonds at five per cent., these being secured by the state stock in the banks and liens upon borrowers' stock. The state could have retired all these bonds before maturitv, but although the state credit was very low in and after 1837, these bonds commanded a handsome premium and could not be reached. The state's share in the banks, bonds and mortgages and sinking fund was so well managed that not a dollar was lost, and the state made a net profit of nearly $3,000,000 by its connection with the bank - revenues which became the basis for the large school fund.

The capital of the thirteen branches was a little over two millions, but the aggregate of the loans sometimes amounted to ten or fifteen millions in a year. There was one president, cashier and Tjoard of directors for the whole state, this central body having absolute control over the branches, with power to put any branch in liquidation, which was e.xercised but once, with only a temporary suspension. The general board was composed of splendid men and able financiers, and through their management the bank had a career such as few banks of the country surpassed. The State Bank of Illinois, chartered in the same year, disastrous! V failed in 1837. The Indiana Bank suspended specie payment in 1837, as did everv other bank in the country except the Chemical of New York, but it always furnislied its customers wi.th New York exchange at one per cent, premium for its own or other bankable notes, and also never failed to supply the home demand for coin, which was* then silver.

The State Bank of Indiana, being- a monopoly, there was a great demand as its charter was expiring for a free bank act, which was authorized by the new constitution, and the old bank decided to retire from the field without effort to secure a new charter.

The old State Bank, having come to an end by the lapse of its charter, which would not be renewed by the state legislature, the Wabash Courier published, in December, 1858, the following well-deserved epitaph :

"An honest bank ; one that lived and died honestly : think of that ! By the report of the commissioners of the Sinking Fund, the old State Bank is credited with a profit to the state of $2,780,604.36, arising from the stock taken by the state in the old bank ; the bonds issued for the stock are provided for; the sum above named is clear profit. It is all safe, too; and by law, its proceeds are hereafter to be devoted to the school fund. One can hardlv help regretting that a liank so remarkable as this is wound up; for it is honestly closed up, without cheating the stockholders, or other people ; the noteholders are all safe. But, perhaps, it was best that it should live no longer; as, if it had lived, it might have fallen into the sinful ways of other moneyed institutions. Let a monument be raised over the tomb of this institution: 'Here lies the shade of a Bank that has paid all its dues, made a profit for the state, and went to an honorable grave ; leaving a successor with a very bad beginning, but with a good example to follow." "'

The editor's forebodings of the successor were not realized, for it had an honorable career, until the national bank law compelled it to withdraw from business. The eulogy of the old State Bank was just, and the dignified but time-worn old banking house, on Ohio street, west of Third street, still stands as the monument to remind Terre Haute people of the noble ancestor of their banking business. The men trained in the old Branch of the State Bank are still leaders in the city's banking business. W. R. McKeen, once a cashier of the Branch Bank, is the president of the AJcKeen National Bank; Preston Hussey, who succeeded Mr. McKeen as cashier, is president of the Terre Haute National Bank, and Demas Deming. son of the first ])resident of the Branch Bank, is the president of the First National P>ank, all continuing the integrity and wisdom which characterized what may be called the parent bank of Terre Haute. The record of two of the gentlemen named is unique in that

The agitation for a new bank law resulted in a bill prcividing for the establishment of the "Bank of the State of Indiana," as the title was then made to read. The bill was vetoed and passed over the governor's veto, and became a law in 1855. The state could not be a stockholder in the new institution. There were to be twent\- Ijranches,, each with $100,000 capital. It was a good franchise, but the organizers did not intend to operate the bank, and it passed under the control of the former managers of the old State Bank and other citizens, with Hugh AIcCullocli as president, and began business in 1S57. It started out under the most favorable auspices, but the panic of 1S57 tested its resources to the utmost. Only one bank in the east, and in the west the Bank of Kentuckv and the Bank of Indiana alone escaped the necessity of suspending specie pavment. The Indiana, bank's notes commanded a premium, but the result of that was a drain on the bank's specie from the notes coming from other states. To have declined to redeem notes in specie on demand would have caused the forfeiture of the charter, which was too valuable to sacrifice. The branches made a gallant struggle, and had nearly exhausted their cash resources when on the fifth week of the panic there was a change for the better in the financial outlook, gold declined in the east, and the Indiana notes ceased to come home for redemption. The charter was safe. The effects of tlie panic were overcome in from two to three months, and the business of the branches was prosperous until the war broke out. Then ensued a great depression and a renewed demand for gold. Under the direction of Mr. McCulloch, the branches proposed to weather the storm, drew in their circulation as much as possible, arranged with depositors that deposits in gold should be paid in .gold and in bank notes with notes. The issue of legal tender notes in 1862 made them a substitute for coin, and the question arose could the bank save its charter by redeeming with legal tender notes instead of gold. A test case was hurried through the circuit court and supreme court of the state, and the matter decided in favor of the legal tender notes as lawful money.

The Bank of the State of Indiana successfully passed through all financial storms, and when Mr. McCulloch resigned in 1863 to become comptroller it had upwards of three million dollars in gold coin in its vaults. With the passage of the national banking act, all notes of state and private banks were taxed ten per cent., which was practically prohibitive and caused nearly all these banks to surrender their charters and either go out of existence or take out national charters.

Linton was fund commissioner, to negotiate loans, etc., and in that capacity left on March ist for eastern cities. His account shows an advertising bill of $8,075 for advertising for loans in the New York American Advertiser, Mercantile Advertiser, New York Evening Post, and United States Gazette; $55 for lithographing bonds; $21.20 to United State Bank for order on United States mint to buy change (specie) ; De Silver, Jr.,, & Thomas (bank equipment), $99; gold scales, $135; boxing specie at mint, $19.80; for services as commissioner, $275.

Judge John Watson (1797-1861), long a county judge, who came from Rhode Island to Vigo county in 1819. was a man of ability, dignified and austere. He was slightly paralyzed on one side of his body. He was a private banker, took few deposits, but loaned money in note and mortgage, and issued circulating notes of scrip in one and two-dollar bills. He kept no records of his business, and possibly could not have told the amount of the notes he had in circulation. But his notes had a remarkable stability and as circulating mediums among so many forms of unstable bank currency, during the years when bank issues were subject to constantly changing rates of discount. "Watson money" circulated in eastern Illinois and western Indiana from before 1840, and it is said that the farmers would bring notes of the best banks and even gold to Watson to exchange for his notes. Pork buyers when drawing on Early or others for money to buy hogs would say, "Give it to me m Watson money," and the clerk would go to the Branch of the State Bank, draw the check and take the notes to Watson to be exchanged for his money. He always redeemed his own notes on presentation in the bills of other banks, or even in gold if required. He was a rich man for his time, owning lands in many counties. At one time in the fifties he took for a debt a ferry near Lexington, Missouri, then far beyond the reach of railroads, and went out there, taking W. E. Hendrich with him, with the intention of placing Mr. Hendrich in charge of the ferry, but he found a purchaser for the ferry and brought the money and Mr. Hendrich back to Terre Haute - for the good of the town.

Judge Watson was a bachelor, and lived alone for many years at his bank, which was in the second story over the McKeen bank at northeast Third and Wabash, and later on Ohio street. He took a great liking for a bright young Irishman who worked at one of the carpenter shops - Pat Shannon - and finally made him his partner. (Mr. Watson afterwards lived in the frame house at southwest Fourth and Ohio.) After his death, Mr. Shannon carried on the bank, and ultimately redeemed all the Watson money, the will having provided for such redemption. Mr. Watson was a farmer for several years, then a merchant, he and Chauncev Warren buving C. Rose's interest in the store at Third and Ohio. He was in various mercantile pursuits for eleven vears, and later held a number of county offices, being probate judge 1841-48. While he was judge he opened the first broker's office, continuing in "that line until about i860.

Demas Deming, Isanker. was born at W'ethersfield, Coimecticut, 1787. He was the si.Kth in line of descent from John Deming. who came from England and settled at Wethersfield in 1636. John Deming married, in 1637, Honour Treat, one of the family which emigrated to New England in 1630 and gave to Connecticut its first colonial governor, Robert Treat, a hero of the Pequot war and the leader in resistance to the demand by Governor Andros for the colony's charter, which was concealed in the famous "Charter Oak." The Demings were prominent for several generations in the colonial history of Connecticut. A daughter of the family was the mother of the governor and senator, William Sprague, of Rhode Island.

When the second' war with Great Britain broke out, Demas entered the army and with the rank of lieutenant was stationed during the war at New London. On the return of peace he resigned his commission. In pursuit of business, he made a trip to the West Indies,, but finally settled at Baltimore, which he left in 1818, attracted by opportunities offered in the newly opened west. During the last three years of his life in Baltimore he formed a close friendship with George Peabody, then a young banker, and afterward celebrated for his philanthropic gifts to the poor classes of London and to many causes in America. Mr. Peabody remembered this intimacy so well that years later, 1856, when traveling in this country, he made a long detour in his journey to visit Mr. Deming, and remained several days in Terre Haute.

Demas Deming in 1818 settled in Terre Haute, and engaged in such trade as was open and began to buy land in confidence of the development which was to come. He was appointed associate judge in the first court organized by the state, and held the position for several terms. When the Bank of Indiana was organized, with branches in several cities, Mr. Deming was elected president of the Terre Haute Branch, which position he held eighteen years.

He was married February 19, 1840, to Sarah Chambers, daughter of Arthur Patterson,, a member of a good family which emigrated from County Tyrone, Ireland, in 1781), and settled in \irginia. Arthur removed to Indiana, where he became a distinguished citizen and came within one vote in caucus of being the successful candidate for L^nited States senator. He married }ilargaret, daughter of Colonel Chambers, a Revolutionary officer of New Jersey, whose brother at the same time was serving as major in the British army, but after the war became an American citizen.

As a g^irl, Mrs. Patterson lived at Marietta, near Blennerhassett's island, and at the time that unfortunate Irish gentleman was entertaining Col. Aaron Burr, shf, in company with her sister, Mrs. Skinner, General Lewis Cass and others, attended a party given on the island. In the gaiety of the evening little or nothing was thought about the whispered treasonable designs of Burr, but Mrs. Skinner would not dance with the former vice president,, and kept away from the ball-room, saying frankly to her friends that Colonel Burr was plotting treason against the government. Mrs. Patterson, vounger and less thoughtful, took in all the gaiety, ball-room and all. lieneral Patterson, who was a very accomplished man, said by Edward Everett to be the best historian of any private gentleman he had ever known, came to Terre Haute in 1846, and was one of the city's early wholesale merchants. He died in 1848. The children of Arthur Patterson were Sarah, who married "Judge" Deming; Mary, who married David Linton, a pioneer merchant of Terre Haute, and Margaret, who became the wife of the eminent lawyer, John P. Lusher, who was secretary of the interior in President Lincoln's cabinet. The only son was Chambers Patterson, a lawyer of high ability, who studied law at Harvard, under Judge Story. He was a power in politics,, three times mayor of Terre Haute, and judge of the Vigo circuit court. Mrs. Sarah C. Deming survived her husband thirty -two years, dying at the age of eightyseven, in 1898.

Nelson J. Williams, a Yankee, native of \'ermont, learned banking in the bank of L. E. Chittenden, afterwards register of the L'nited States treasury, and came to Terre Haute in 1856, where he was connected with the Branch of the State Bank until 1863, when he went to the A'incennes Bank. He died in 1881. He was wealthy, popular, and most beloved man in X'incennes.

In i860, besides the Branch bank of the State of Indiana, Terre Haute had the Southern Bank of Indiana,, J. H. and F. S. Williams, proprietors, with capital of $150,000, and the Prairie City Bank, capital $78,700, of which S. S. Early and John S. Beach were owners. The Prairie City Bank was chartered as a state bank in 1852, but after the surrender of its charter was continued as a private bank, Mr. John S. Beach being the controlling factor. In the building of this bank, the Savings Bank was opened for business December i, i86g, with the following officials : Thomas Dowling, president ; Lucius Ryce and R. N. Hudson, vice presidents, and John S. Beach, secretary and treasurer.