Boston City (part 6 of 67)

The period of non-intercourse with Great Britain, which was more or less complete from the beginning of 1808 to the Treaty of Ghent at the end of 1814, was fruitful of good to this country in one important respect. The people were forced to engage in manufactures, for the simple reason that foreign goods were not to be had. Home industry was protected by the most potent of weapons. Previous to this time the cotton manufacture had been begun, in a small and desultory way, at factories fitted with British machinery, in Massachusetts, Rhode Island, and other States; but they were all small and poorly equipped establishments. The war sent up the price of cotton goods enormously. Cloth that retailed previously for seven¬ teen to twenty cents a yard, having been imported from England, now sold for seventy-five cents a yard by the package. The whole demand being thrown upon the domestic supply, factory building was greatly stimulated. Trustworthy statistics are not to be had, but it appears that more than seventy factories were built in Rhode Island alone, between the years 1810 and 1815. The growth of this interest in Massachusetts was quite as great in proportion, and larger in actual numbers. At this time was laid the foundation of the manufacturing supremacy of Massachusetts which, although figures seem to tell a different tale, she has never lost. The tariff of 1816, which followed soon after the close of the war, also helped to some extent in fostering the infant industry, although its purpose was to help the South rather than New England, which had so grievously offended the war party. Other manufactures, notably that of woollen goods, had been much stimulated by the non-intercourse policy, but it derived little or no benefit from the subsequent protective legislation.

The period succeeding the war, from 1815 to 1819, was one of severe pressure all over the country, but owing to the strength and soundness of the Massachusetts banks, and the comparatively excellent condition of the cur¬ rency, the evil was not so great here as it was in most other States. Some new banks were chartered at this time, but they had difficulty in raising their capital, and numerous acts were passed by the Legislature extending the time for its payment. It was during this period that the Provident In¬ stitution for Savings, the first savings-bank in the country, was established, in the year 1816. It was highly successful from the start, and its experi¬ ence led to the gradual extension of the system. The savings-banks of the State have been in general managed with much prudence, and have proved themselves to be of inestimable value in financial affairs. They have en¬ couraged a spirit of thrift on the part of the poorer classes of the people, giving them a safe place of deposit for their surplus earnings, and a small but certain income from them. The watchful care of the Legislature has been in nothing more wisely shown than in the restrictions laid upon the in¬ vestment of the funds entrusted to the banks. At one time two or three of the earlier banks claimed exemption from rules imposed subsequent to the granting of their charters ; but the opinion of the Supreme Court was asked, and, in consequence of the judgment rendered, it became an established principle that all these institutions were liable to be held under control. The chief part they have played during their whole existence has been in enabling large and small real estate improvements to be carried out, by mortgages upon the property to be improved. It is only necessary to say here, that, with a few scattered exceptions, each year has witnessed an in¬ crease in the number of banks of this class, and a still more important and rapid growth in the number of depositors and of deposits. The increase has frequently gone on in spite of general depression in business; and when at last the banks have begun to feel the effects of hard times, their re¬ covery has not lagged behind that of the trade of the country.1

The period from 1819 to 1825 was one of expansion. Foreign trade was active and internal commerce was good.2 This was the golden age of the insurance business in Boston.3 How profitable it was may be gathered from the fact that when, in May, 1825, the American Insurance Company de¬ clared a dividend of six per cent on the business of the preceding six months, it was stated that in the ten years of its existence it had divided one hundred and eighty-seven per cent of its capital. Many banks of de¬ posit and discount were also incorporated during this period; but some of them never went into operation. Nevertheless, the seven Boston banks of 1819 had become nineteen in 1825, and the capital was increased during the same time from $7,350,000 to $10,300,000.

It was towards the close of this period that the Suffolk Bank system, which has made New England banking famous for all time, was first intro¬ duced. The Suffolk Bank was chartered in 1818, as the seventh bank in Boston. Among the subscribers to its capital stock were Gardiner Greene, Patrick T. Jackson, John W. Boott, Nathan and William Appleton, William, Amos, Abbott, and Luther Lawrence, Ebenezer Francis, Augus¬ tine Heard, and other well known capitalists of Boston. The new bank, having organized by the choice of Mr. Francis as president and Matthew S. Parker as cashier, turned its attention at once to the " foreign money " busi¬ ness ; that is, the redemption of bank-notes issued by institutions outside of Boston, then monopolized by the New England Bank. The principle on which this business was done may be seen from the votes of the directors in February, 1819: "That if any bank will deposit with the Suffolk Bank soundness of many of the banks at once, has 3 [See the chapter on "The Rise and Progever occurred, and that will be referred to in its ress of Insurance in Boston," by Mr. Osborne appropriate place. Howe, Jr. - Ed.]

five thousand dollars as a permanent deposit, with such further sums as shall be sufficient from time to time to redeem its bills taken by this bank, such bank shall have the privilege of receiving its own bills at the same discount at which they are purchased ; " also that certain banks in Massa¬ chusetts and Rhode Island, which were named, " shall have the privilege of receiving such of their bills as may be received at the same discount as taken, without the permanent deposit of five thousand dollars, provided such banks will make all their deposits at the Suffolk Bank, and at all times have money sufficient to redeem the bills taken ; " further, " that should any bank refuse to make the deposit required, the bills of such banks shall be sent home for payment at such times and in such manner as the directors may hereafter order and direct."

A lively competition with the New England Bank was the result of this action of the bank, and the discount on foreign money was quickly reduced. After a short time the profits became so small that the Suffolk Bank was forced to reduce its expenses. A great deal of ill feeling was caused by the persistency with which the bills of country banks were returned for redemp¬ tion ; but the Suffolk Bank insisted upon its right, and the banks affected were forced to submit. In 1824 the city was flooded with the issues of these banks. Boston, having more than one half of the banking capital of New England, supplied only one twenty-fifth part of the currency. Accordingly, early in that year, a committee of two of the directors of the Suffolk Bank - Messrs. John A. Lowell and William Lawrence - were directed to consider, in connection with committees of other Boston banks, what meas¬ ures might be adopted to check the evil of the enormous expansion of country, and especially eastern, currency. Correspondence and conferences ensued, and the result was that the Suffolk Bank became the agent of all the banks of the city except the New England, to send home the bills of outside banks for redemption. A fund of $300,000 was subscribed by these banks in proportion to their respective capitals, for the purchase, indiscriminately, of foreign money. Intense opposition arose at once to this combined effort of the Boston banks to relieve themselves and the city of the great over-issues of bank bills. The association was called in deri¬ sion the " Holy Alliance," and the " Six-tailed Bashaw." But the opposition was unavailing. The Boston banks knew they were only acting within their rights when they treated a bank bill as a promise to pay money on demand. Yet long after the great benefits of the new arrangement had made them¬ selves evident, giving as it were a certificate of soundness to all the banks whose notes were received by the Suffolk Bank, and warning all banks of the danger of taking any bills of banks thrown out at the counter of the Suffolk, the unreasoning hostility was continued.1 Nevertheless the busi¬ ness increased very rapidly. ' With some minor modifications the Suffolk

1 As an example of this hostility may be the too cautious acceptance of country bankcited the angry remonstrance by the Hartford bills by the Boston banks, which were charged Times, in an article printed in July, 1827, against with being "up to their old tricks."

Bank system was continued until 1858, when the Bank of Mutual Redemp¬ tion was established for the special purpose of serving as agent of all the New England banks in the redemption of their bills.1 The amount of foreign money which passed through the Suffolk Bank in 1857, the last year of its service as the agent of the associated banks of Boston, reached the vast sum of four hundred millions, which is a much larger sum than the redemption agency at Washington, under the National Bank system, has ever been required to handle in the same length of time. The expense of doing all this work was but $40,000.

The years from 1825 to 1830 were marked by a very large increase in the number of banks in Massachusetts, though there were but three addi¬ tions to the Boston list. It was at this time that a spirit of recklessness seemed to come upon the projectors of banks. Felt says, in his History of Massachusetts Currency , that " before 1825 these institutions were promoted and sustained chiefly by capitalists; but since, they have been much oftener made up for the purpose of borrowing and not of lending, for rash enter¬ prises to gain fortunes at the risk of the community." The charters of three country banks, granted in 1825 and 1828, were repealed in 1830. They had been put in operation by means of perjury. They had violated nearly every provision of their charters, and were in an unsafe condition. Stringent laws were enacted to prevent a repetition of the scandal ; but they were easily evaded, and the succeeding period was one of the most disgrace¬ ful and disastrous in the history of Massachusetts banking.

The severe pressure for money which had been felt at various times between 1825 and 1830 now began to pass away. With an abundance of money to be had at a low rate of interest, the spirit of speculation revived in its most active form. The bank fever was at its height. In seven years, ending with 1837, ^ie number of banks in Boston was doubled, increasing from seventeen to thirty-four. Outside of Boston they rose from the num-

1 It is hardly worth while at this time either to give the particulars of the history of Suffolk Bank redemption, or to dwell upon the incidents of the controversy which finally resulted in the overthrow of the system as it was originally. A very full and interesting account of the bank and its operations for sixty years may be found in Mr. D. R. Whitney's monograph, The Suffolk Bank, privately printed in 1878. But it may be worth while to give one example of the ingenious methods of opposition which were sometimes re¬ sorted to for the purpose of punishing the Suf¬ folk Bank for its zeal in requiring debtors to pay what they owed.

The Veazie Bank of Bangor, Maine, was one of the most active opponents of the sys¬ tem. The officers of that bank procured the passage of a law by the Legislature of Maine, allowing to the banks of that State a certain delay after the presentation of their bills in which to redeem them. Mr. Whitney tells how this privilege was used. " Having received in the regular course of its business a quantity of Veazie Bank notes, the Suffolk Bank would send a messenger to Bangor and demand specie for the same. The bank would acknowledge the demand and claim the lawful delay. In the mean time it would collect Boston funds and send them to a well known Boston broker, who, himself no friend of the Suffolk Bank, would take great pleasure in exchanging them in one way and another for checks on that bank. He would then present himself at the bank, demand specie for his checks, and, with the coin thus obtained, pay it for the bills for which it had demanded specie some days before ; in short, not only requiring the Suffolk Bank to hold the bills of the Veazie Bank for a certain specified time, but at the end of that time to furnish the specie for their redemption." The Veazie Bank, it may be remarked, flooded Maine with "shinplasters " at the beginning of the Civil War.

ber of forty-six to ninety-five. The new banks were used principally for the issue of circulating-notes, as may be seen from the following compari¬ son of the situation of all the banks in the two years named : -

The excessive amount of capital to the business done, the increased amount of circulation, and the small proportion of specie in reserve, tell their own story of expansion and unsoundness. In 1836 the banks of Bos¬ ton had barely ten per cent of the combined amount of their circulation and deposits in reserve, and the situation of the country banks was in¬ finitely worse. The ratio of their circulation and deposits to the specie on hand was twenty-eight and one half to one.

While this strong tendency to the creation of unnecessary banks was one of the most prominent features of the financial history of this period, it was not the only one. Speculation in real estate ran riot. There has perhaps never been another time, either before or since, when this partic¬ ular form of speculation assumed such proportions in the United States, or when it infected such numbers in the community. No better illustra¬ tion could be given of it than may be drawn from the " Eastern Land Speculation," which brought ruin upon hundreds of persons in Boston and thousands in New England. The history of this craze has never been written ; and the most that can be done now, until all that bears upon it is patiently collected from the records of the time, is to construct a brief narrative from the memories of the men, now all aged, who took part in the speculation.

There was a basis for the speculation, as there always must be for any general craze. Manufacturing by means of water-power was foreseen to be a great source of wealth for New England, and there were in Maine hun¬ dreds of unoccupied falls where the water was abundant and unfailing. The forests of Massachusetts were exhausted, and northern Maine was covered with a virgin growth of magnificent pines and other varieties of trees. The State had increased in population during the first ten years of its separate existence, not only more in proportion but more in actual numbers than the parent State. Emigration tended thither, and a strong belief existed in the future greatness of Maine. Add to all this that land was almost incredibly cheap in the State1 in 1830, and it will be seen that all the elements were present for a great speculation, particularly when money was plentiful and real estate was the favorite field for bold venture.

Nobody seems to be able to tell just how the madness began; but we find it in full control of New England in 1833 and 1834. In those and the two following years men apparently grew rich in a day. Mill sites, each suitable for a small grist-mill, rose to fabulous prices. Wild lands, which could hardly have been given away a few years before, and which were scarcely worth owning at any price, changed hands at an enormous valua¬ tion. It used to be a joke in Bangor that the hotels and boarding-houses were so full of Boston land-speculators that late comers were forced to pay high prices for the privilege of leaning, overnight, against a fence-post. The State sold lands by the township. A speculator would buy a township wholly on credit, like a pig in a poke, without the slightest knowledge of the character of the soil or the nature of the forest growth, if any, upon it. Then he would send an " explorer," of whom there were many professional ones, to investigate and report. In too many cases the explorer would find the attractions of Bangor too great to be resisted ; and accordingly, after an ostentatious setting out on his mission, he would return secretly, and draw up from his imagination a report, favorable of course. It is related of one of these explorers that he was seen making a series of sketches of townships, upon each of which a liberal growth of pine-trees was exhibited, and through the centre of each of which was represented a fine stream of water. The gentleman who saw this expressed surprise that all the town¬ ships should be so favored. " Oh," replied the explorer, " Maine is well watered." It was, indeed ! Fortified with a favorable report, the purchaser of the township would seek and quickly find a person eager to buy at an advance. As he had bought, so he would sell, - on credit. The second owner would repeat the process, taking a note for the purchase money; and so on.

This general method of operation was by no means confined to State lands. There were men who made it a business to go about taking bonds of all the real estate that the owners would sell. One who remembers well the incidents of the time says that almost the whole of the county of Kennebec was bonded to speculators. A bond for anything was salable. Women and boys engaged in this trade. Sorry as was the result of the craze, there are few men who were concerned in the speculation who do not recall the time with a twinkle of amusement in their eyes as soon as they begin to talk over old times, wondering at themselves as much as at others for their early folly. When the crash came, however, it was any¬ thing but amusing. Real fortunes, as well as paper ones, melted away in a night. The failure of any one of a series of holders of a piece of land top¬ pled over the whole structure of credit. In a few short months the whole speculation collapsed. So extreme was the depression which followed, that the land-agent of Maine, in his report at the beginning of 1838, urged the adoption of a system of cash payments for future sales of land, because " there are notes to a considerable amount in this office, taken in 1835, that can never be paid, all the parties to them having become bankrupt. . . . There is scarcely a man indebted to the land-office who would not find it exceedingly difficult to make immediate payment." A few men who took the precaution to sell out their lands and bonds at the high prices and get the money, or who were strong enough to hold on until prices became bet¬ ter, or who had kept out of the speculation until the collapse came and then bought properties for a song, became wealthy ; but the largest part of the men concerned in the affair, among whom Boston merchants and capitalists were very prominent, lost heavily.

The period under consideration is to be mentioned for another under¬ taking, or class of undertakings, which have done more than anything else to increase the power and importance, in a financial sense, of this city. It was at this time that the railroad system was introduced. The connection of Boston with enterprises in this field, - both those which were designed to and did minister directly to the consequence of Boston among the cities of the country, and those which served only as outlets for the surplus cap¬ ital of New England, and as remunerative investments in other parts of the country, - is told in another chapter.1 It will be sufficient in this place to note very briefly the influence of railroads upon the wealth and business of Boston.

The purely local roads have consolidated the country within many miles of Boston into what is practically one city, and have concentrated, - more than is true of any other centre of population in the country, - the ener¬ gies and the public spirit of all into one community. The roads which have a connection with the West or the South, or with both, have been most in¬ valuable as agents for the distribution of New England products, and for the bringing of food either for consumption or export; and, although they have been merely independent termini of great systems, they have done their work as well, and with quite as great returns to the owners, as the railroads of any other State or district of the country. Finally, the investments beyond the State have been in the main so judicious that handsome profits have accrued to the capital placed in them, and have given Boston a financial standing which is directly comparable with that of New York, and is inferior to that of no other city on the continent.

The great interruption to business prosperity came at the end of a season of unexampled speculation and inflation, in 1837. The storm had been giving warning of its approach for many months. In Massachusetts the growing distrust had manifested itself late in the previous year by such incidents as the run on the Nahant Bank, which suspended with only $215 in specie on hand, but with liabilities outstanding, on circulation alone, of

$242,965. At the beginning of 1837 suspicion was entertained of the sound¬ ness of four banks, three of them in Boston, and an investigation was had. In spite of a whitewashing report, all four banks failed before 1840. In March occurred the New Orleans failures, which pulled down many New York houses, and these in turn prostrated mercantile firms in Boston. In a short time business had almost completely ceased. On May 10 the banks of New York suspended specie payments, and the next day a large meet¬ ing was held in Faneuil Hall, at which it was resolved that self-protection required the banks of Boston to do the same. On the 12th all the banks did so.

To most of the banks of Boston this was almost entirely a measure of' precaution. There was then, as before and since, a class of banks which are distinguished for taking large risks in the hope of large profits. In 1837 the number of such institutions appears to have been unusually large. They were exclusively new banks, all the older banks being conservative and strong. This is shown by a letter written by the president of the Suffolk Bank to a brother president in Augusta, Maine, less than a fort¬ night after suspension. " In regard to resuming specie payments," he wrote, " I can only say that we are ready to commence again to-day, and intend to remain in this condition till others are also ready." Other banks in Boston were in quite as safe and ready a condition as the Suffolk.

The old Jacksonian controversy over the United States Bank is not worth reviving now; but there can be no gainsaying the fact that the infla¬ tion of the years from 1832 to 1837 was largely caused by the rush to get into a business which the repeal of the charter, or rather its non-renewal, was to leave more open to competition ; that the distress was precipitated by the hard and unreasonable demands of the Government upon the banks for funds in large sums for the distribution of surplus revenue; and that after the suspension the Government aggravated rather than ameliorated the situation. The specie-circular of 1836, which required all payments for lands to be made in coin, was now followed by an order of the post¬ master-general directing that specie alone should be received for postage. An immense indignation meeting was held in Faneuil Hall on May 17 to protest against this order, and some vigorous resolutions were passed, which of course had no effect. Business continued to be in a wretchedly prostrate condition all through the year 1837. Early in the following year it seemed to observers that the existing evil might be to a great extent removed, if the banks were to give evidence of their faith in the future by resuming. The Legislature passed a law which made it for the interest of the banks to begin paying their notes; and on May 10, just a year after the suspension, they resumed at the same time with the New York banks.

Although immediately after the suspension of 1837 the banks of the city, with one exception, banded themselves together for purposes of mu¬ tual protection and supervision, the period is strewn with wrecks of these institutions. The Associated Banks appointed a committee, " with full power to examine into the condition of any bank in the association ; to reprove and, if necessary, restrain banks which were disposed to transcend the limits of prudence; and to require them to give security for their cir¬ culating-notes held by any bank in the association." 1 By this action the Boston banks gave proof of the good faith of their long-continued policy of rigor towards the banks in other parts of New England, since they now applied to themselves a more rigid rule than they had ever attempted to impose upon others. While the supervision which was exercised over the banks operated to some extent as a restraint upon the more reckless mem¬ bers, it could not save those which were already insolvent. In July, 1837, -the Franklin and Lafayette banks of Boston failed, with heavy liabilities and almost worthless assets. Some of the other banks expanded their cir¬ culation at the same time, but only to pay the penalty of their folly a lit¬ tle later. Confidence was gradually being restored as the excitement died away, when the public was startled, in January, 1838, by the failure of the Commonwealth Bank. This was the largest failure that had occurred among Boston banks up to that time; and it was particularly significant, owing to the circumstance that it was one of the institutions chosen by the General Government for the deposit of funds which were deemed unsafe in the Bank of the United States. Very soon afterward six other banks were forced to close their doors, four of them being Boston banks. The Legis¬ lature of 1838 promptly repealed the charters of ten banks, seven in Boston. These included, besides those already mentioned as having failed, the Com¬ mercial, Fulton, Kilby, and Hancock banks. Several other failures took place in following years, but only one, the Middling Interest, belonged to Boston. It is a fact worthy of notice that not one of the old Boston banks - those chartered before 1825 - was injured by the crisis. The mortality was heaviest among the latest comers into the field ; not because they had not had time to strengthen themselves, so much as because they were created for purposes of speculation, and were conducted on a speculative basis. In addition to its vigorous action in annulling charters of failed banks, the Legislature of 1838 passed laws for the protection of the public in their dealings with banks, and created the Board of Bank Commission¬ ers, who received large powers in the direction of examination and control of banks, - measures which fully justified themselves by their subsequent success in preventing reckless management, and in giving timely warning of disaster.

The period from 1840 to 1850 was one of large prosperity for Boston. It was then that the ocean carrying trade was most active at this port. Boston ships went everywhere. Here was the controlling market for many articles of foreign production of great importance; and even when the control of the sale was not here, a large part of the carrying was done in vessels owned in and sailing from Boston. During this decade the estab- lishment of the Cunard Line, as a swift carrier of mails, passengers, and high-cost freight, gave increased importance to the city. Those who wish to learn how large a part of the life of Boston the arrivals and departures of the Cunard steamers made, may make the discovery by studying the record of events in the city at this period, as given in the Boston Alma¬ nac. Not once is the interesting fact of a movement of one of these vessels omitted. The pride of the people in the line is indicated by the enterprise with which a channel was cut for the "Britannia" to go to sea, that it might not be said that she was detained in the harbor because Boston was frozen up.

At the beginning of the last decade before the war, the memory of the terrible consequences of undue expansion which culminated in 1837 had mostly died out, and a new season of inflation set in. As before, the specu¬ lative rage manifested itself in a marked degree by the creation of new banks. But the legislatures of this period were more cautious than their predecessors in the period from 1830 to 1837 had been. The result of their wise caution was seen in the better resistance offered by all the banks when the disasters soon to come overtook the community. While the banks remained comparatively conservative, speculation of various kinds was rife; merchandise advanced rapidly in price, and all the elements con¬ spired to prepare the way for a great financial revulsion.

Two events occurring in Boston at this time deserve more than a passing mention. The first was the establishment of the Boston Board of Trade, in 1854. This association was the result of an effort to concentrate the busi¬ ness energies of the city, then greatly divided, in order that a consistent and enterprising policy might be substituted for the hesitating and inharmonious methods that prevailed in reference to the interests of the port. The Board of Trade never succeeded in restoring Boston to its former maritime rank. New York, stimulated by the rivalry of sister cities, and aided both by natural advantages and by the systems of communication with the interior by means of canals and railroads, had gained a start which she easily maintained ; and since the period under consideration she has greatly in¬ creased her lead. Nevertheless, the Board of Trade found its mission, and has served a useful purpose in the financial economy of the city. The early habit of Boston merchants to meet " on 'Change," which was in vogue until about 1850, had been abandoned, and it has never been resumed; but the Board of Trade has served to keep up a fraternal spirit among Boston mer¬ chants, drawing them together now and then for the purpose of discussing matters involving the interests of the commerce, both domestic and foreign, of the port, and acting as an organ and spokesman of the entire body of business men. Of late years, we may remark, as there will be no occasion to mention its work again, it has maintained one of the finest commercial news-rooms in the country.

The other event was the establishment of the Clearing-house. The New York Clearing-house went into operation in October, 1853 ; that of Boston, VOL. iv. - 22.

in May, 1856. Twenty-nine banks formed the association at the start, but three others were admitted the same year. The exchanges in 1856 amounted to a little more than $1,000,000,000, - about one seventh of those at New York in the same year. The modern rule of estimating the amount of business done in a city at various periods, by a comparison of the clearings, can be proved correct, so far as Boston is concerned, by the statistics of this institution during the quarter-century of its existence. The effect of the crisis of 1857 is very distinctly observable; and so are the depres¬ sion at the beginning of the war, the expansion which followed, the sea¬ son of inflation from 1867 to 1873, the decrease of trade which ensued, and finally the revival of business in 1879 and 1880. In the last year the gross exchanges amounted to $3,326,343, 166. This sum was rather more than one twelfth part of the clearings in New York in 1880; showing, so far as this is a test, that the business of the metropolitan city has grown at a more rapid rate by far than that of Boston, and in the actual amount of business done is now many times as much. It is a fact well worthy of mention, that no bank belonging to the Boston Clearing-house has ever failed. At pres¬ ent the association includes fifty-one banks, all under national charter. Ten banks, most of them located in Roxbury or other annexed districts, and the several trust-companies which do a banking business, "clear" through some member of the association.

The banks of Boston were much better prepared to withstand the evil of 1857 than they had been to meet disaster in 1837. In the first place, they were managed by more prudent men, - or rather, to be more accurate, there were not among them so many reckless spirits. Moreover, a law passed in 1854 had required the Boston banks to publish weekly returns of their condition, so that the business was conducted more in the sight of the public. Nevertheless, the city banks in February, 1857, had but $3,500,000 specie, as reserve against liabilities in the shape of circulation and deposits of more than $22,000,000. Warned of impending danger, the banks not only of Boston, but of New York and other parts of the country, began to curtail their loans and to reduce their liabilities to the public. This action, coming upon a business community accustomed to a free use of credit, produced such a strain that in the autumn there was a general suspen¬ sion of specie payments, the Boston banks joining in the movement. The suspension lasted but fifty-nine days, and all the banks resumed payment on December 12, not one bank having failed in consequence of the crisis. Indeed, the suspension was merely nominal while it lasted. Specie flowed in rapidly, and there was no great difficulty in obtaining what was needed by the best borrowers.

The disaster of 1857, so far as it affected the banks, was thus of a brief and harmless character. It was quite otherwise with general business. Yet it is safe to say that hardly a person in the community had, at the time of suspension, even an approximate appreciation of the gravity of the situa¬ tion. The one thing apparent to everybody was that the banks had con- tracted at a terribly rapid rate,1 and in an unfeeling manner. The principle of post hoc propter hoc was applied by everybody who sought for an explana¬ tion of what was occurring, and the banks were denounced, right and left, for their heartless action. The newspaper and periodical literature of the day teems with long expositions of the situation. So careful an observer and so wise a man as Nathan Appleton, in a letter addressed to the Boston Daily Advertiser, on October 12, the day before suspension, maintained that business generally was in a sound and prosperous condition, or would be so but for the course of the New York banks. " In my whole experi¬ ence," he wrote, " I have never known a crisis so severe as the present, and, I must say, so wholly uncalled for." The editor of the Advertiser, in print¬ ing this letter, said that Mr. Appleton " fixes the seat of the mischief in the true spot, namely, the banks of the city of New York; " and Hunt's Mer¬ chant's Magazine, in copying the letter, expressed its entire concurrence in this view. Mr. Amasa Walker led off in the magazine just mentioned (issue for November, 1857) with an article, which he began by saying that "the whole monetary system of the United States has fallen with a mighty crash, and now lies before us a magnificent and melancholy ruin."

It was not long, however, before a change was observable in the explana¬ tions given. Careful men learned to their surprise, but to their complete satisfaction, that the real cause of the panic and the financial and commercial ruin lay much deeper than the action of the banks; and they were honest enough to confess the mistake they had made. Even if they had not done so, the lesson of the appalling list of failures which ensued, becoming more frequent and more disastrous after the banks had resumed and were again discounting freely, was too plain to be mistaken. In Boston alone there were two hundred and fifty-three failures, with liabilities amounting to $41,000,- 000, - an amount which was larger than that of any year before or since. In 1858 the fact was generally recognized that overtrading had caused the evil. Immense investments had been made in manufacturing and railroad enterprises, far beyond any present necessities, and the money for these purposes had been for the most part borrowed abroad. The currency was bad; but the commerce of the country was carried on in such an artificial way that merchants and speculators, and not the representatives of con¬ centrated wealth, were the real offenders.

The Suffolk Bank system came to an end in 1858. This was the result of a long-growing impatience on the part of many banks in New England at the restraints which that system imposed upon them, as well as of a desire to share in the supposed large profits of the Suffolk Bank on the redemption of foreign money. The Bank of Mutual Redemption was chartered in 1855, and began business in 1858. The division of the business of redemption

1 The loans and discounts of the New York a little more than ninety-seven millions, - a banks for the week ending August 8 averaged diminution of fully twenty per cent. The remore than one hundred and twenty-two millions, duction in Boston was only about ten per cent; In ten weeks, to October 17, the week of sus- but even then it amounted to several millions, pension, the amount of loans was reduced to and caused great financial distress.

between two agents, and the withdrawal of deposits by many of the country banks, determined the directors to discontinue the assorting of country money altogether. The system was continued in a modified form by the Bank of Mutual Redemption, until the establishment of the National Bank system rendered it no longer useful or practicable. The great value of the Suffolk Bank system is seen, and will always be acknowledged, by those who study the reasons why, when the currency of the country was in a state of utter disorder, that of New England was sound and healthy; and who observe that while the notes of other banks had but a local circulation, or, if they wandered away from the place of issue, were only taken at a large discount, those of New England banks were current at par in far distant States.

The beginning of the Civil War found general business again in a pros¬ perous state, and the banks in a condition of strength. While the strong arms of the sons of Massachusetts were offered to the country for its mili¬ tary service, its strong-box was opened to supply the means for prosecuting the war. The banks cheerfully took the assigned amounts of the national loans which were raised through the medium of the banks of New York, Philadelphia, and Boston, in 1861. They gave efficient help to business in the stirring times which followed. Boston had its full share of the trade which arose out of the necessities of large armies in the field. The last vestiges of its great fleet of ocean vessels were swept away, a part of them having been sold to British owners, and others having been captured by Confederate cruisers; but, in compensation, the factories of New England were pressed to their utmost capacity to supply woollen cloth for uniforms. The cotton-mills, if they had scanty supplies of raw material, were enabled to make handsome profits on the goods they could make. The boot and shoe makers and dealers enjoyed the benefits of an enormous demand for goods of a class in which they had almost a monoply. Other branches of business were also greatly favored by those kinds of trade which are made active by the dire necessities of war.

The first national banking law was passed in 1863, and re-enacted with some modifications in 1864. The Safety Fund Bank was the first Boston institution to take advantage of the new system, which it did by becoming the First National Bank of Boston, under the act of 1863. All the banks of Boston transformed themselves into National banks in 1864 and 1865, being encouraged to do so by a law of the Commonwealth passed in 1864, which facilitated the change. The provision of the National Bank Act which authorized the formation of gold-banks was availed of for the organization of the Kidder National Gold-Bank, the only one of the kind ever established except on the Pacific coast. This bank, however, discontinued business several years ago, and surrendered its charter.

than $15,000,000. The Merchants' National Bank has the largest capital among the Boston banks, amounting to $3,000,000; the State and Tremont banks have each a capital of $2,000,000; and there are nine others with a capital of $1 ,500,000 each. The largest amount of bank loan ever reported by the Clearing House Association - comprising, as has been said, nearly all the national banks and all the large ones - was $166,1 10,700, which was the average for the week ended Aug. 20, 1881. The individual deposits at the same time amounted to $68,304,100, which was not the largest sum ever reported, the amount having been at one time over $70,000,000; and the amount due to other banks, being the deposits mostly of New England country banks, was $42,145,900. These figures show an enormous busi¬ ness, and are greatly in excess of those for any other city in the United States, excepting New York. But they do not show the full amount of the banking business of Boston. There are several trust companies doing a general banking business, receiving money on deposit subject to check, and discounting business paper, but issuing no circulation. Moreover, there are many private banking firms, some of them with large capital, whose operations are on an extensive scale, and whose credit is recog¬ nized all over the world.

The financial crisis of 1873 offers no matter for particular mention of Boston's share in its disasters and distresses. The causes of the panic were no doubt as much promoted by the course of business and speculation in Boston as by what happened in other parts of the country, and not more. Trade was carried on and financial affairs were managed with as much, perhaps not with more, prudence here than elsewhere. If there was any difference it was in our favor, since it can be said with truth that the majority of the failures among individuals, firms, and corporations were later in point of time than in most of the large cities ; but in the end Bos¬ ton suffered not less than her sister cities. She has also shared to the full extent in the revival of business which preceded, by a little, the resumption of specie payments by the Banks and the Government, after a suspension of more than fifteen years. Indeed, it is believed by many persons that Boston was the first to enjoy the season of returning prosperity. It is cer¬ tain that the sudden and surprising recovery of confidence and business by some of the great railroads of the West in which Boston men chiefly were the stockholders and owners of the mortgage securities, - such as the Burlington & Missouri River, in Nebraska (now consolidated with the Chicago, Burlington, & Quincy), and the Atchison, Topeka, & Santa Fe roads, - anticipated by months the appreciation of the stocks of roads in which other cities were chiefly interested.

Mention should, however, be made of one class of disasters which affected Massachusetts peculiarly at this time. The savings-bank system of New England was more highly developed than that of any other part of the country. In Massachusetts it had been under a most pervasive and efficient control. These banks, receiving as they did the scanty earnings of the poor, who were least fitted either by education or by opportunities to investigate the safety of the institutions to which they committed their hard-earned savings, were justly deemed by the State authorities to be the most proper objects of vigilant watchfulness. The confidence inspired by this system was increased by the promptness with which they had met all their con¬ stantly increasing liabilities. The very excellence of the rules and restric¬ tions under which they were managed, however, was in a certain sense the cause of disaster. They were required to invest a large part of the deposits committed to them in mortgages of real estate in Massachusetts. Unfortu¬ nately they were not all careful to what proportion of the actual value of such property they lent money upon this security; and when, in the prog¬ ress of the long-continued depression, real estate took its turn at deprecia¬ tion, the margin of value above the mortgages was in many cases wiped out, and the banks suffered loss. The first institution to succumb to the pres¬ sure was that at Lancaster; the West Boston Bank came next, - both fail¬ ures having occurred within a fortnight of each other, at the end of 1875. The West Boston Bank, however, soon resumed, as it was believed that ar¬ rangements had been made by which further difficulties could be overcome; but later it was forced again to close its doors and to wind up its affairs. In 1877 the Mechanics' Bank of Boston, chartered after the panic of 1873, found its business unprofitable and retired. In the same year the North Bridgewater Bank of Brockton failed on account of the dishonesty of an officer, in April. In July the City Bank of Haverhill was obliged to sus¬ pend, after a run upon it. But the really serious troubles of the savingsbanks began when, in August, there was a run upon the Sandwich Bank. Shortly afterward the Barnstable Bank was attacked and overcome, and the Hyannis Bank followed.

From this time on the failures were numerous; but it was evident that in many cases the disaster to banks was the result merely of panic. Their investments were properly of a character which did not allow of their re¬ sponding promptly to all demands. No matter how safe and strong they were, they could not collect debts not yet due. Under these circumstances the Legislature interposed with a law which permitted the Savings-Bank Commissioners to give orders restricting the amount of money which banks might pay on deposits; and in the course of two years many1 of the banks availed themselves of the law. The result was that of all the banks which took advantage of the law, all but one had resumed pay¬ ments in full and were doing business as usual before the end of 1880. But the evil had overtaken many banks before the benefits of this restric¬ tion were permitted to them ; about twenty of them, in various parts of the State, having been previously enjoined perpetually from doing any business, were wound up. The losses to depositors, however, were not as great as might have been at first feared. The deposits in the banks which failed were a little short of ten millions ($9,976,229). Up to the begin- ning of 1880 there had been distributed in dividends the sum of $6,568,- 799, and there remained in the hands of receivers assets estimated to be worth $2,417,440; so that the entire loss was but about $1,100,000, or eleven per cent. Under the new legislation, the necessity for which was fully proved by the events of the last few years, a repetition of these dis¬ asters is almost impossible, and the banks are now in a fair way to gain more than the confidence which they enjoyed up to the period when the troubles began.1

A consideration of the present financial position of Boston will give an opportunity for a brief reference to some features of the trade of the city which have been necessarily omitted thus far. In certain branches of busi¬ ness Boston has now, and has always held, a position of pre-eminence among the cities of the country. By far the most important of these is the boot and shoe trade. Much more than one half of all the boots and shoes made in the United States are the product of Massachusetts. The factories are owned in Boston for the most part, and the manufactured articles are sold here. Boston is also the largest wool market of the country, and it is the headquarters of the fish business. For many years it has been losing the leadership it once enjoyed in the domestic dry-goods trade, although the amount of business done in this department is still very large. It is second only to New York in the ownership of Western and Southern rail¬ road stocks and other securities. The Boston Stock Exchange has the lead of all Exchanges in the country, except that of New York, in the extent and variety of the list of securities dealt in, and in the amount of business done.2

Its commerce, although conducted for the most part in foreign steam¬ ships, is large and growing. Its imports from abroad are in value far in excess of those at any other port save that of New York; and of its ex¬ ports of general merchandise the same remark is true, - New Orleans sur¬ passing it only by her very heavy exports of cotton. With many regular lines of steamships to Europe, the sailings of which very nearly average one a day, a great growth in their number, and in the value of the trade of which they are the medium, is only prevented by the necessary slowness of creating dock accommodations for them. The coastwise trade gives profitable employment to a large number of sailing and steam vessels.

1 The growth of the Savings-Banks of Mas- That was high-water mark. In 1S78 there was a sachusetts is a very interesting and gratifying reduction in deposits of no less than $34,735,- exhibit. In 1834, when the returns first began 983. A further reduction took place in 1879, to be made systematically according to law, followed by a recovery in 1880. The last rethere were twenty-two banks, having deposits turns, those for the end of 1880, show that there amounting to $3,407,773. The system grew, with- were then one hundred and sixty-four banks out the interruption of a single year, until i860, doing business, having deposits amounting to when there were eightv-nine banks with deposits the sum of $218,047,922.

aggregating $45,054,236. In 1861, and again in 2 [There is a record of its development in 1865, there was a decrease; but with these ex- Mr. J. G. Martin's Seventy-three Years' History ceptions there was an annual growth until 1877, of the Boston Stock Market, from Jan. 1, 1798, to when there were one hundred and seventy-nine Jan. 1,1871 ; with notes, and also with an annual banks, having gross deposits of $244,596,614. appendix from 1870 to the present time. - Ed.]

The enterprise with which Boston capitalists seek new investments of a promising character is proverbial. Sometimes these investments have been extremely fortunate and profitable, as in the case of many Western rail¬ roads, to which reference has already been made. Other investments have been notably unfortunate, as for example those in the copper mines of Lake Superior. A few of these latter have nevertheless returned large profits to investors; and in one instance, that of the Calumet & Hecla company, the exception is a brilliant one, exhibiting, as it has done, the rare combination of a valuable mine, handled with scientific skill and busi- ness sagacity, and with wonderfully successful results. The most impor¬ tant feature of outside Boston investments of a new character, or rather in a new field, at present, is the construction of railroads in the Republic of Mexico. Capital in heavy amounts has gone from Boston for this pur¬ pose, the investors displaying great boldness, and the companies which have their headquarters in the city managing their affairs with masterly skill and ability.

1 [This cut follows a large photograph by sors in business, Messrs. Kidder, Peabody, & Whipple, hanging in the offices of his succes- Co. - Ed.]

wealth - a race in which she has succeeded to a far greater extent than her population or her geographical situation would have justified - has been gained by the character of the men who have represented her in the finan¬ cial and commercial world. Volumes might be filled with the commenda¬ tions which the merchants of Boston have received, from orators and writers in all parts of the land, for their integrity and faithfulness to high principle. And it has not been meaningless and undeserved praise. There has always been a strong public sentiment in Massachusetts which first created and afterward sustained the tradition that a Boston merchant or financier was expected to be honest. "Sharp," he might be in driving a bargain; but when the bargain was made, he must observe all the obligations which it laid upon- him, both in letter and in spirit. It is to a tradition of a similar kind that we may trace the origin and the steadiness of the high credit both of the city of Boston and of the Commonwealth. It is held as a principle, about which no argument can be tolerated, that lawful debts are to be paid. When the National Government issued its legal-tender notes, and made them available for the payment of all debts incurred before as well as after the issue, neither the city nor the State took advantage of the privilege, but religiously paid both interest and principal in coin, at no matter what cost for premium on gold. The idea of repudiation, or of creating money out of nothing by the fiat of the Government, has never been able to obtain even a hearing in Boston ; and the heretical notions about money which were encouraged by the long-continued use of irre¬ deemable paper currency, have been less prevalent in Massachusetts than in almost any other State of the Union.

To all these generally true remarks there have been notable exceptions. There have been swindling banks and dishonest managers, defaulting cashiers and treasurers, merchants who sold worthless goods and gave short measure, fraudulent bankrupts, and cheats and rogues who succeeded for a long time in concealing their true characters. They have, however, been exceptions to the rule. When their real characters have been tardily exposed, they have suffered not only the severe penalties which the law imposes, but the indignant reprobation of an outraged community. The courts have never been guilty - or, if at all, in very rare instances - of al¬ lowing the previous reputation of a detected rogue to mitigate the pun¬ ishment which should be meted out to all alike. Men who had occupied high station in mercantile affairs or in State concerns have been pitilessly pursued by the process of Massachusetts courts to their hiding places, tried with rigid severity, and condemned to take their appropriate places with the ordinary thieves and other miscreants to whose level they had abased themselves.

All the elements of strength which have conduced to the prosperity of Boston are still present to insure the continued progress of the city in wealth and importance. Her manufactures rule the markets for some of the articles in most constant and universal demand ; her financial institutions vol. iv. - 23.

are among the safest and most famous in the land ; her commerce, both internal and external, is extending as rapidly as it has ever done at any period in its history. It is entirely safe to predict, that while the enter¬ prise of Boston capitalists shows no diminution, and while high principle continues to govern public sentiment, the era of growth and prosperity will also continue.

The Rise And Progress Of Insurance In Boston

xV several centuries in England and on the continent of Europe, its adoption in this country is of comparatively recent date. Indeed, when one considers how essential this method of mutual protection is to the well-being of society, and to the security of mercantile communities, it is hard to understand how those who lived in Boston less than one hundred years ago could have been so blind, or so indifferent to its advantages, as the records of that and of earlier times prove them to have been. Not less strange is the tentative and groping manner in which the first essays at in¬ surance were made. It was, it is true, a new undertaking to insure life and property against death and destruction by shipwreck and fire ; but at the present day we adapt with such ease the business customs of other coun¬ tries to our own uses, when they are found to be desirable, that the slowness and inflexibility of our forefathers seems, by comparison, hardly

Mr. Joseph Marion appears to have been the first underwriter ever known in Boston ; and, what is more, the first person in America to enter definitely into this business. From the fact that he had received a commis¬ sion as notary public from the Archbishop of Canterbury, the presumption is that he must have acquired some insight into the business while on a visit to England. In 1724 he established what was termed an insurance office, though beyond the fact that such an office was opened there fs little evi¬ dence obtainable. It may be safe to assume that this enterprise took form in consequence of the demands of local trade. While the commercial relations of the colony were confined closely to trade between it and the mother country, it was probably thought best to obtain the needed insur¬ ance upon the vessels making these transatlantic voyages in the insurance associations of England ; but as time passed on, and the colony began to build up an ocean commerce of its own, to send its vessels upon fishing trips and coasting voyages, the inadequacy of the then prevailing method made itself manifest. The insurance had to be effected in London, and contracts made at such a distance were always expensive to the insured; while it must often have happened that those who desired the protection which a policy of insurance would have given them, were obliged to assume the risk themselves. Under these circumstances it is not strange that an insurance office should have been started; for now, under similar conditions, such a demand would be answered in a less number of days than it then required years to bring about. The office was, beyond question, a marine one, and carried on what is known as a personal underwriting business; that is, it copied the method then and now in vogue at the Lloyd's Ex¬ change in London. A policy of insurance was made out describing the ship, the voyage, the rate of premium, the amount to be taken, and the conditions to which both parties to the contract were to be bound. To this those who chose to take a share in the risk subscribed their names, with the amounts they were willing to assume, the list remaining open until the entire sum had been made up.

It is highly probable that Mr. Marion found his business a thriving one, for four years after he had started in it - in 1728 - -he made an attempt to develop it on an exceedingly comprehensive scale. He then proposed to erect, as it was termed, an assurance office to insure houses and house¬ hold goods in any part of the province from loss and damage by fire ; the organization to be called the " Sun Fire Office in Boston." The effort was an ambitious one, but Mr. Marion seems to have failed to find the support needed to carry it to a successful conclusion ; at least, there is nothing to show that the enterprise ever went beyond its initiatory stages. That the projector of this fire office keenly regretted his failure may well be believed, for, thirty-two years later, his name is found among those who were suffer¬ ers by the great fire of 1760.

In all probability marine-insurance contracts, made in the manner men¬ tioned above, were the only policies of insurance written in Boston for seventy years after Mr. Marion first opened his office. As these operations were carried on without license or authorization of any kind, it is impossible to determine the extent of the business ; but as the commerce of Boston and the neighboring seaports increased greatly in volume during the years of the last century which preceded and followed the Revolution, and as the desirability, not to say necessity, of procuring guarantees of this kind against loss became more and more apparent, the business must, be¬ fore the advent of the present century, have expanded vastly beyond what was done prior to 1750. The Revolution broke off the business connec¬ tions with London existing previous to 1775 ; and, so far as the marine insurance of Boston is concerned, they do not appear ever to have been re-established.

These early underwriters must have borrowed the forms of policy and their methods of carrying on business wholly from the Lloyd's Association.

Rise And Progress Of Insurance In Boston

It is curious to notice their close adhesion to what may be termed the ec¬ centricities of the English underwriters. These latter had copied their system of marine insurance from the Lombards, who, in connection with their banking business, began insuring vessels and cargoes in England as early as 1425. Even the word "policy" is a direct derivative from the term polizza , a promise, used by the Lombards. So, too, in their policies to this day the Lloyd's Association say: "And it is agreed by us the in¬ surers, that this writing or policy of assurance, shall be of as much force and effect as the surest writing or policy of assurance made in Lombard Street," - a guarantee which at the present time is equivocal, to say the least, when it is taken into account that policies are no longer written in that thorough¬ fare. But this meaningless form seems to have been thought an essential part of the contract, and in some of the earlier American policies was cop¬ ied verbatim. Later on, particularly after the Revolution, it was thought necessary to adopt some other enforcing clause ; and hence some of the marine policies of the latter part of the last century read that the document was to have " as much force and effect as the surest writing or policy of insurance heretofore made," or " the surest writing, etc., heretofore made in any of the LTnited States or elsewhere." This form does not seem, in Bos¬ ton, to have survived the eighteenth century, the insured probably coming to the conclusion that the policy was only worth the value given to it by the credit of its guarantors, and that the comparative protestation, however forcible, did not strengthen it. Another feature, which does not seem to have been wholly borrowed from transatlantic authorities, was the abiding faith held by these old underwriters in the immediate supervision in mun¬ dane affairs of a Supreme Ruler. The policies grant insurance of such an amount on " the good ship . . . whereof ... is master, under God, for the present voyage." And then go on to say: "And the assured, in case of loss (which God forbid ! ) to abate two per cent, and such loss to be paid in sixty days after proof thereof."

The marine-insurance business of that period was in the character of the risks assumed, - a very different occupation from that carried on by marine underwriters at the present time. These old policies give a striking illus¬ tration of the various hazards incident to a sea voyage no longer than one hundred years ago. The ship-merchant then had to encounter other risks than the ordinary ones of the sea; and to guard against these the policies read : " Touching the Adventures and Perils which we the Insurers are contented to bear, and do take upon us in this Voyage, they are of the Seas, Men-of-War, Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Let¬ ters of Mark and Counter-Mark, Surprisals, Takings at Sea, Arrests, Re¬ straints and Detainments of all Kings, Princes, and People, of what Nation, Condition, or Quality soever, Barratry of the Master (unless the Assured be owner of said vessel) and Mariners, and of all other Perils, Losses, and Misfortunes that have or shall come to the Hurt, Detriment, or Damage of the said Ship." As this, like most of the other parts of the policy, was a copy from the form then used by the Lloyd's Association, it might be assumed that it was held to more by force of custom than of necessity ; but in opposition to this view it may be urged that the underwriters of that time were in all probability no more willing than their successors of to-day to take upon themselves an unnecessary liability; and if the insured had not desired this measure of protection it is not at all likely that it would have been granted. At that time these various interferences were positive perils to be guarded against ; gradually their mention dropped from the policies made in our Boston offices, so that in those dating shortly after the War of 1812 no trace of them is found, the insurance companies and associations, then as now, insuring only against what may be called the ordinary perils of a sea voyage. And yet, in spite of these many dangers, the rates of premium asked for insuring vessels making long voyages were by no means high, being, as a rule, about the same as those charged at the present day for in¬ suring similar ventures. This certainly speaks well for the seamanship of the officers and crews of the Boston merchant-marine of this early period. But in insuring vessels engaged in coasting voyages the scale of rates, as contrasted with our modern experience, seems to have been very high. Voyages to Norfolk were evidently looked upon as almost as hazardous as those up the Baltic; while the rate asked to insure a small craft on a trip around Cape Cod to New York was six or eight times larger than would be asked by the marine offices on State Street to-day. One does not have to look far for the cause of this difference. The vessels, though small, were stanchly built, the mariners were skilful navigators ; but the various aids to commerce now existing in the shape of carefully drawn charts, beacons, buoys, and lighthouses, which reduce to a minimum the dangers of sailing along our northern coast, were wholly wanting ; while in the event of a wreck, not only was the vessel hopelessly lost, but the wreckers along the shore from Maine to South Carolina were sufficiently active to prevent the underwriters from obtaining much salvage either upon hull or cargo. But the growth of our local commerce, added to the dangers to which those who were en¬ gaged in it were exposed, must have given to our marine underwriters during the latter part of the last century a large amount of business; for when, in 1795, the Massachusetts Fire and Marine Company was incorpo¬ rated, and in 1799 the Boston Marine Company, they both found a wide field for operation.

Our Boston underwriters, with the possible exception of Mr. Marion, were unquestionably backward in discovering the advantages of carrying on their business by means of incorporated companies. In a somewhat crude way, under a deed of settlement, a fire-insurance company had been started in Philadelphia in 1752, and marine companies began operations in that town and in Baltimore a year or two before our first Boston company came into existence. The two Boston companies referred to must have confined themselves pretty closely to marine business, for though the Massachusetts company had the chartered right to insure against losses by fire, it is not at all probable that at the outset it had much opportunity to exercise this privilege. The marine business was what these early companies mainly depended upon for their profits ; and that they were well employed may be judged by the fact that in eight years after the first company was started - that is, in 1803 - the insurance capital of the stock-insurance companies in Boston was nearly $2,000,000, not to speak of the money indirectly invested in the business in the one mutual company, and by individual underwriters.

Although the possibility of carrying on the marine-insurance business even without the intervention of corporations had been clearly demonstrated by the usage of nearly three quarters of a century, there is no reason to believe that the practicability or utility of insuring property on land against loss by fire was generally conceded before the Massachusetts company was in¬ corporated. As mentioned above, a Philadelphia organization, - which is still in existence, - known as the Philadelphia Contributionship, Was started in 1752, having Benjamin Franklin as one of its original members; and a few years after that date its arbitrary course of action led to the formation of a rival company. These two associations were for years the only ones in America issuing fire policies. Before the year 1795 it is not at all likely that there was a single building in Boston insured against fire. Shortly before the War of 1812 some of the English fire-insurance companies estab¬ lished agencies in Boston and in New York, but this was after a desire for this species of protection had been built up by the exertions of local organizations. It is easy to believe that the individual suffering due to the relatively frequent fires in Boston, a hundred years or more ago, must have been in many cases intense ; and it is well known that efforts were fre¬ quently made to equalize these losses. It was a common practice, for a citizen whose house or store had been burned, to send out a subscription paper calling public attention to the misfortune he had met with, and ask¬ ing his fellow-townsmen to assist him, on the ground that the loss which had come to him might at any time visit them, if God should so will it, and that they then would need the help which he now implored of them. It may be assumed that these petitions for aid were generally responded to with great liberality, as they seem to have been made after almost every fire, and not unfrequently by those who were not in absolutely destitute circum¬ stances. It was, in a word, a rude system of insurance, - a recognition of the principle that a loss spread out over a large number of individuals is more easily borne than when its incident falls sharply upon a single person ; only, by this method the payment of premium was voluntary and always uncertain, and it must have been a rare instance where the sufferer by the fire received a sufficient amount in charity to make good his losses.

The first successful effort to protect the property of the citizens of the town of Boston against loss by fire was made by those who were instru¬ mental in procuring the charter of the Massachusetts Mutual Company, in 1798. These men were Paul Revere, Henry Jackson, William Eustace, Edward Tuckerman, George R. Minot, Elisha Ticknor, and several other prominent Bostonians. The company, by the limitations imposed by the State, was not allowed to do business until its incorporators had obtained in Boston and its immediate vicinity two million dollars' worth of property to be insured ; and as the company was restricted to insuring only four-fifths of the value of the risk assumed, the incorporators had to find owners of property to the extent of $2,500,000. When one takes into account the low value of the entire building property of Boston at that time, and that quite a number of the local companies now doing business in this city have less than the amount named at risk in Boston and its suburbs, the demands of the Legislature seem unreasonable, and can only be explained on the assumption that the Great and General Court looked upon the enterprise as one of questionable utility, and was not willing to sanction it, without it could be shown, in an unmistakable manner, that there was a popular call for it. The charter, thus encumbered, was however accepted, and the gentlemen named, with some associate members, went upon a canvass among their personal and business friends to obtain the desired amount of insurance. The record books of the old company show that this canvassing was a trying task, particularly as the direct individual interest in it of any one person must have been very slight; for the opportunity to insure his property was the most that any member of the company could hope to obtain. A number of the canvassers relinquished the undertaking, and their places were supplied by others ; but at the end of a year the total amount was obtained, and the company opened its office on State Street for business.

For a number of years this office seems to have done a greater part of the fire-insurance business of Boston. Its trustees must have borrowed the information needed for their operations from the experience of the com¬ panies in England and in Philadelphia. The policies they issued were for a term of seven years, and none were written for a shorter period. One of their first efforts was to teach their policy-holders the necessity of protect¬ ing themselves. They offered rewards of money, not exceeding ten dollars, for good service performed by citizens at fires. If any of the holders of pol¬ icies allowed their pumps to get out of order, and permitted them to remain so after a notification from the office, they tvere fined two dollars, and two dollars additional for every week that they continued out of repair; while those who allowed their chimneys to get on fire were fined one dollar.

The question of rates of premium was one which they found it very hard to settle. The scale adopted at the outset did not give satisfaction, and after a number of changes a committee consisting of John Lowell, Tristram Barnard, Ebenezer Gay, Elisha Ticknor, and William Gay, which had been appointed to consider the subject, after due deliberation submitted the fol¬ lowing report : -

" Your Committee are of opinion that brick or stone buildings, covered with slate, tiles, or metal, standing alone, similar to the store in Marlborough Street, occupied by William Leverett, or the house by Joseph Coolidge, Esq., of New Boston, may be safely taken by the trustees at 35 cents per $100. That brick or stone buildings in blocks, with slate, tile, or metal, separated by brick partition walls and battlements, agreeable to law, similar to those on Mt. Vernon, at 45 cents per $100. That wooden buildings, standing alone, similar to Henry Hill's and Samuel Elliot's, Esq., at 55 cents per $100 That buildings, part of brick or stone and part of wood, and wooden buildings in blocks, similar to those of Samuel Smith and Stephen Higginson in Fed¬ eral Street, at 70 cents per $100."

The scale thus given shows that in spite of the great height of our mod¬ ern buildings, and the dangerous character in many ways of their appliances for heating and lighting, the liability to loss by fire is now very much less than it was when the committee prepared the above report. Another diffi¬ culty which the trustees of the company encountered was in determining questions of law. They had to work completely in the dark, in the entire absence of precedents to guide their action. Theophilus Parsons and other legal authorities of the day were frequently consulted ; and though the advice given was no doubt judicious, it did not always save the company from litigation. In less than three years after it began business a fire oc¬ curred (Dec. 16, 1801) on Ann Street, which destroyed, besides other prop¬ erty, the dwelling-house, cooper-shop, and fish-store of Amasa Stetson. These latter were insured in the Massachusetts Mutual, but the trustees refused payment on the ground that the property had been changed after the policy of insurance was taken out, in such a manner as to increase the risk ; and also on account of alienation of title. This disagreement led to the first fire-insurance lawsuit tried in the courts of this country; the Massachusetts Supreme Court, in 1807, rendering a decision in favor of Stetson.

It should, in justice to the fire underwriters, be said that this first dis¬ pute over a loss finding its way into the courts was not followed for a long time by other lawsuits. In the edition of 1825 of Bigelow's Digest the case of Stetson v. Massachusetts Mutual Insurance Company appears as the only one on record. In Willard Phillips's Treatise on The Law of Inszirance (ed. of 1823) the author's intention seems to have been to cover the entire field of insurance, but the work, which is a fairly bulky one, is made up almost exclusively of precedents bearing upon marine underwriting. Fire underwriting is referred to, but in the simplest possible terms, as a form of contract but little understood for want of experience, and the laws laid down as governing it do not occupy more than two or three pages out of the entire work, - a comment which also holds good of life insurance, a branch of business in which the author, later on, greatly distinguished himself.

This absence of litigation, by means of which legal precedents could be established, was no doubt largely due to the contracted character of the business. The New England, Suffolk, and Union offices were opened in the early years of the present century ; but they seem to have confined them¬ selves very closely to marine insurance. As late as 1823 the Merchants' Insurance Company published a tract on fire insurance, of which only one VOL: iv. - 24.

copy now seems to be extant, in which it is asserted that the fire policies issued by the Boston companies are for the most part taken out by those who are members or stockholders of the several companies. The directors of the Merchants' Company felt called upon to explain the nature of the business; and in their preface they say: " Presuming the subject of Fire In¬ surance has fallen under the consideration of but comparatively few persons, they trust no apology will be thought necessary for this publication." That they had but a dim perception of the dimensions the business was in after years to attain may be judged by the remark made, that " the only danger insurance companies have of losing their capital is that the directors may err in judgment and insure for too small a premium,"- - -thus indicating that they did not think it conceivable that property-owners throughout the city would insure their buildings and merchandise, and thus make the companies liable to an overwhelming loss should a conflagration occur. They go on to say : -

" He who loses his all at sea by not insuring, instead of sympathy meets with re¬ proach for his temerity. He who suffers by fire, although equally chargeable with rashness and imprudence, not only claims exemption from reproach, but appeals with confidence, and often with success, to public sympathy. The distress and misery resulting from this misfortune have been so often witnessed or felt, as to render it un¬ necessary here to enlarge on the subject. It is sufficient to refer to the frequent appeals to public charity. When the low rate of premiums is considered, it is matter of surprise that so great a proportion of the property in this country is uninsured, and the fact can only be accounted for on the supposition that it is not known at how small an expense insurance can be effected. Probably in no country in Europe is there so great a proportion of the property uninsured as in this country. There, more particularly in Great Britain, it is a very general custom to insure Furniture and Houses, as well as Merchandise and Stores."

This, and much more to the same effect, proves that in the first twentyfive years of its existence in Boston the business of fire underwriting made but very little progress. Merchants insured their stores or stocks of goods, on which they were obliged to obtain mortgages or credit ; but the citizens generally did not comprehend the value of the protection which a policy of insurance afforded, or thought that their chances of suffering by fire were altogether too slight to make it an object to pay anything to a corporation to assume the risk. Hence, when a fire occurred, it was still a common occurrence to have a subscription paper started for the aid of the citizen whose property had been destroyed.

Indeed, in most matters appertaining to loss by fire the citizens of Boston at that time do not appear to have been particularly enterprising. The plan of using hose in the fire department for the purpose of carrying water to that point in the burning building where it could be employed to the greatest advantage, and also for pumping water from a distance, had been adopted in Philadelphia in 1808; and although many attempts were made here to have it substituted in place of the bucket supply, which the citi- zens generally took part in serving, it was not until 1826 that the change was brought about. By that time quite a number of new companies had been organized. One was incorporated in 1816, one in 1818, one in 1822, three in 1823, one in 1824, and two in 1825. These new companies found ample ground for action in the growing commerce of the port, which was each year requiring a larger amount of insurance capital properly to protect it. The conditions under which the voyages of Boston ships were under¬ taken were not appreciably better than they had been in the last century; and therefore the marine policies of this period are noticeable on account of the exceedingly high rate charged for coasting ventures. A few of the larger English insurance companies seem to have established agencies in Boston subsequent to the War of 1812, for when the Exchange Coffee Blouse was destroyed by fire in November, 1818, the only company called upon to pay insurance upon the loss was the Phoenix of London. It is noteworthy as indicating the low opinion entertained of the security given by insurance companies, that though this building, with its contents, was thought to be worth not less than $500,000, its owners had covered it with only a single policy for $10,000.

The business of life insurance was the last in Boston of these three forms of protection to develop itself. In the Old World life insurance seems to have antedated fire insurance, for the oldest wrork on underwriting, Guidon de la Mer, published in France about 1600, says that it was a common prac¬ tice at the time of the Crusades for men about to go to sea to take out policies on their lives, the money to be used to ransom them when captured -by pirates, and to revert to their relatives if they were never heard from. In 1769 a mutual association was formed by the clergymen of the Episcopal Church in the Province of Pennsylvania for the purpose of paying small an¬ nuities to the families of the insured, after the death of the latter, and the system was afterward extended to Maryland, New Jersey, and New York; but life insurance, in the sense that it is now understood, did not come into existence in this country until 1812, when the Pennsylvania Company for Insurances upon Lives was incorporated. There is every reason for think¬ ing that insurances of this class were looked upon by the great mass of the people as immoral contracts. The duration of a man's life, it was held, rested upon the will of God, and if Lie chose in His divine wisdom to re¬ move him from this world, it was an act of impiety on the part of the latter to speculate on the probable workings of Almighty power. This feeling was doubtless stronger in Massachusetts than in any other of the United States; and it is questionable whether in the second decade of the present century our Legislature would have sanctioned the incorporation of a lifeinsurance company on simple business principles. But on Feb. 24, 1814, the trustees of the Massachusetts General Hospital obtained the right to grant annuities on lives. That this venture into the field of life insurance was condoned by public opinion on account of the charitable disposition which was to be made of the resulting profits seems more than probable, for six years later the trustees debated for some time over the question of whether they should also apply to the Legislature for permission to carry on a lottery, - an enterprise which might then have been sanctioned here, as it has since been in other parts of the country, for the direct aid its suc¬ cess would give to some deserving institution. Having obtained the right to negotiate for annuities, the trustees of the hospital did not care to exercise the privilege, thinking, no doubt, that it would necessitate a greater amount of labor in managing the financial details of the scheme than they could afford to give to it. Presumably for this reason, and because the plan could under a different management be better expanded, it was decided to organize what is now known as the Massachusetts Hospital Life Insurance Company. This company was incorporated in 1 8 1 8, with a capital stock of $500,000, and with the provision in its charter that it was to pay annually to the trustees of the Massachusetts General Hospital one third of the net profits which should arise from the insurance on lives made during the pre¬ ceding year. Under these conditions the company must have found some difficulty in starting, for in 1823 its directors entered into an agreement with the trustees of the hospital, by which it was arranged that the annual pay¬ ments were to be one third part of the net profits accruing to the company from insurance on lives, reversionary payments, and generally from all kinds of contracts in which the casualties and contingencies of life, and the interest of money, are principally involved, after deducting for the use of the stock¬ holders the legal interest on the amount of capital actually paid in by them. That is to say, the stockholders were to be sure of six per cent per annum on their investment when that amount was earned, and two thirds of what-^ ever profits the company made over that percentage. This agreement was on the following year ratified by an act of the Legislature. But in order still further to protect the stockholders, the special statute creating the Hospi¬ tal Life Company contained the provision that so long as the company paid to the General Hospital the share of profits agreed upon, it should not be lawful for any persons or corporations within the Commonwealth to make insurance on lives upon land without they were empowered to do so by future legislatures ; and if such grants were made, the obligation of this company to pay a part of its profits to the hospital should cease, unless the same obligation were imposed upon those to whom such rights were granted.

It is difficult at the present time to understand why such an agreement was made, except on the supposition that the State would not bestow the privilege to do a life business to a company that did not turn over a part of its profits to charitable uses. Mr. Bowditch, in his History of the Massa¬ chusetts Geizeral Hospital , says that his father, Dr. Nathaniel Bowditch, who was the actuary of the company, thought that the arrangement was an eminently fit one, as it prevented a great deal of the jealousy which would otherwise be displayed against the insurance company; though why there should be more jealousy evinced at the success of a life company than at the good fortune of a fire or marine company is not explained, and is comprehensible only on the grounds already stated. Certain it is that life insurance sometime in the not distant past was looked upon as an immoral proceeding, and was prohibited by statute in Rotterdam, Amsterdam, and other continental cities, and by a general ordinance of Louis XIV. in France ; the received opinion being that such a contract was opposed to the law of nature, and was therefore void.

The Hospital Life Company issued its first policy on Sept. 15, 1823, in¬ suring the life of John Minot for two years. From that time for a number of years it did a small life business, granting policies in almost every case for short terms, these in most instances having for their object the securing of money loaned by third parties to the insured. Among these early policies was one on the life of Daniel Webster, which was issued, presumably, to protect the lender of a sum of money. The conditions then imposed on the insured are decidedly curious, considering the liberty now accorded to those who take out life policies. He was supposed to remain at home, and to subject his life to no hazard not coming in the ordinary course of his daily existence ; hence, indorsements such as these are not infrequently found on the policies : " Permission is given to the assured to go to New York ; " "The assured is to have the liberty to go to Portland by boat," etc.

During the first part of the second quarter of this century the business of marine and fire insurance seems to have been constantly on the increase. Between 1825 and 1835 ten new companies came into existence. Before the former date the chief occupation of the underwriters had been found in faking marine risks ; but shortly after that period public opinion appears to have been educated up to a partial appreciation of the value of fire in¬ surance. In this work of popularizing fire insurance, President Balch, of the Merchants' Insurance Company, was exceedingly active, and hardly a year passed at that time in which he did not send out printed circulars and tracts descriptive of the system of protection which his company offered to the citizens of Boston. In 1831 the Firemen's Insurance Company was organ¬ ized for the purpose of doing a strictly fire business. For a stock company thus to limit itself was looked upon as a very venturesome undertaking, and the older underwriters did not hesitate to predict that it would be impossible for the company to sustain itself. In this they were so far correct, that the officers of the company must have had for a long time very hard work to make its operations profitable, and for a series of years it did not pay its stockholders as much as four per cent per annum on their investments. That our Boston companies limited their fire business very closely to this city may be assumed from the fact that the great fire in New York city in 1835, which destroyed fifteen million dollars' worth of property, and com¬ pelled twenty-three out of the twenty-six insurance companies of that city to suspend business, does not appear to have troubled them in the least. There was no appreciable falling off in their dividends, and their stocks are quoted as selling quite as favorably after the fire as before it.