H

CHAPTER VII

Henry W. Cannon

ENRY W. CANNON, the fifth Comptroller of the Currency, was born at Delhi, N. Y., in 1850.

He was

educated in the private schools at Delhi and at the Delaware Literary Institute. After serving as a clerk in his early youth, he became teller of the First National Bank of Delhi, and later went to Minnesota to accept a position in the Second National Bank of St. Paul. In 1871, he removed to Stillwater, Minn., and assisted in the organization of the Lumberman's National Bank of that place, of which he was cashier. He remained connected with this institution for fifteen years. During the same period he was Secretary of the Chamber of Commerce, Treasurer of the Water and Gas Companies of Stillwater, and was active in the municipal affairs of Stillwater and other public movements. On May 12, 1884, he was appointed Comptroller of the Currency, to succeed John Jay Knox, and served until February 2, 1886, when he resigned to accept the vice-presidency of the National Bank of the Republic of New York City, of which institution Mr. Knox was president. This bank was organized in 1850 as a State institution and became a national association by conversion in 1865. He remained with this bank until October 30, 1886, when he was elected president of the Chase National Bank of New York, to succeed John Thompson. He continued as president of this institution until February, 1904, when he was succeeded by A. Barton Hepburn.

Mr. Cannon's term as Comptroller covered a period of only twenty-one months, and while his retirement was entirely voluntary, his administration was prematurely brought to a close by the election of Grover Cleveland to the Presidency of the United States and the party changes incident to a new administration of the Federal Government.

Panic of 1884

Immediately following Mr. Cannon's appointment as Comptroller he was confronted with the financial panic of 1884. This disturbance did not really amount to a panic, as it was confined almost wholly to New York City, and was the result of too close an intimacy of some of the New York City banks with Stock Exchange transactions.

During the greater part of 1883 there had been a gradual but general decline in values. Liquidation had been quietly but steadily going on for several months, with a marked shrinkage in the prices of commodities in general and a curtailment in production. In consequence a number of mercantile concerns were forced to suspend during the latter part of 1883, followed early in 1884 by the appointment of receivers for the New York & New England Railroad Company and the North River Construction Company. The Oregon and Trans-Continental Company, of which Henry Villard was president, became seriously involved. This company was formed for the purpose of acquiring a controlling interest in the stocks of the Northern Pacific and Oregon Railway & Navigation Companies.

During the months of February, March and April, 1884, numerous commercial failures occurred in New York City, followed by a further decline in stocks and bonds of all kinds. On May 6, 1884, the Marine National Bank of New York closed its doors, and as a result the brokerage firm of Grant & Ward, with which General Ulysses S. Grant was connected, suspended on May 8. The liabilities of this firm were over $16,000,000 and its assets less than $7,000,000. The president of the Marine National Bank was also a partner of Grant & Ward. The immediate cause of the failure of the bank was the over-certification of a check of the firm of Grant & Ward for the sum of $750,000.

The excitement and uneasiness caused by these failures was intensified by the discovery on May 13 that John C. Eno, the president of the Second National Bank of New York, was a defaulter to the extent of $3,185,000. This disclosure, coming at the time it did, when the financial situation was under a severe tension, had a further depressing effect upon the stock market

and caused a still further decline in stocks. This large shortage, however, was immediately made good, thereby averting the failure of the institution.

Criminal proceedings were instituted against Eno and immediately upon the discovery of the defalcation he fled to Canada, where he took refuge in Quebec and remained there until 1903, when he returned to New York City and surrendered to the Federal authorities. He was admitted to bail and remained at liberty until the indictments against him were quashed. In the meantime his father, Amos R. Eno, who was known as "the merchant prince" and reputed to be a man of great wealth and the owner of the Fifth Avenue Hotel and other valuable property in the vicinity of Madison Square, made good the shortage of his son to the bank. In 1903, nineteen years after the discovery of the defalcation, the indictments against Eno were quashed on the ground that it had not been shown that he had personally profited by the use of the funds of the bank. At the same time his one million interest in the estate of his father, who died in 1908, was assigned to W. N. Cromwell, his lawyer, in trust, to pay his debts. Nothing more was heard of Eno in the public prints until December, 1909, when he brought suit against Cromwell for an accounting. By stipulation of counsel a referee was appointed to take the accounting, who made a report to the court in December, 1911, showing that Cromwell had fully accounted to Eno for all moneys due him and that instead of Cromwell owing him anything, Eno owed Cromwell over fifty thousand dollars. Eno died at his home in New York City, February 28, 1914, of pneumonia, after a brief illness.

On May 14, 1884, the Metropolitan National Bank of New York City suspended and the Northwestern Car Company, controlled by United States Senator Sabin of Minnesota, went into the hands of a receiver. The Atlantic State Bank of Brooklyn, of New York, and the Newark Savings Institution of Newark, N. J., also closed their doors. The failure of the latter institution was due to its connection with the brokerage firm of Fisk & Hatch, which suspended, together with several other similar concerns. Through the assistance rendered by the Clearing House Association, under the supervision of the National Bank Exam

iner, the Metropolitan National Bank was permitted to resume business on the day following its suspension. The temporary suspension of this bank was the result of a run upon it by the depositors, who in the panicky condition of the public mind became distrustful of the management of the bank, whose president, while reputed to be a man of considerable means, was known to be identified with numerous enterprises, some of which were more or less of a speculative nature.

Public confidence was so badly shaken by these successive failures that a great pressure was made to sell stocks and securities of every kind, and withdrawals of bank deposits were quite active and persistent. Call loans were difficult to collect, as borrowers could not obtain money, except by sacrificing their securities, and money commanded as high as four per cent. for a loan for twenty-four hours.

Although the situation was exceedingly grave for a time, the prompt action of the New York Clearing House Association in issuing loan certificates relieved the strain and contributed greatly toward speedily clarifying the financial atmosphere, restoring confidence, and checking a panic, which, but for such action, would, no doubt, have spread to the interior banks and become general throughout the country, as credits in St. Louis and Chicago were already beginning to be affected by the disturbance. The panic, however, was confined almost wholly to New York City and vicinity, and the only failure of any importance outside of New York City, besides the Newark Savings Institution, during the flurry, was in Pittsburgh, and this was the result of speculation in oil.

Between May 15 and October 3, 1884, Clearing House Loan Certificates to the amount of $24,915,000 were issued by the New York Clearing House Association, the greater part of which were taken by banks having large country bank balances. By July 1 following all of these certificates had been redeemed and cancelled, except those that were issued to the Metropolitan National Bank, which bank was unable to collect its loans or to realize on its securities as promptly as the other banks, because of the heavy withdrawal of deposits, which continued during this disturbance and after it had practically subsided, necessitating the placing

of this institution in voluntary liquidation on November 18, 1884, after which date the certificates were gradually retired.

These certicates were issued to Clearing House banks upon their bills receivable and securities, at the rate of seventy-five cents on the dollar, and bore interest at the rate of six per cent.

Cause of the Financial Troubles of 1884

In endeavoring to assign a cause for the financial troubles of 1884, Mr. Cannon, in his annual report to Congress for that year, stated that:

The many profound students of political economy have for many years endeavored to explain the causes which have led to financial troubles similar to those of 1857, 1873 and 1884. * * * It is apparent that a repetition of the same circumstances which brought about the monetary crisis of 1873 was largely influential in causing the crisis of 1884. Property of all kinds had been capitalized, bonds and stocks had been issued for the purpose of building railroads, carrying on manufacturing and other business, municipal and other public improvements, and commercial credit was extended until a point was reached where capitalists of this and other countries questioned the intrinsic value of these securities and the earning power of the property on which they were based. A decrease in the earnings of railroads, manufacturing and other enterprises followed and the entire business of the country was consequently restricted and deadened.

The local disturbance among the banks, national, state and private, in New York City was, as usual, their intimate relation in many instances with the New York Stock Exchange, and the fact that a large portion of the loans made by the banks and bankers of New York were based upon the security of stocks and bonds, often speculative in their character, which were dealt in and regularly called at the stock board.

Mr. Cannon then proceeded to express some views on the lessons taught by this panic, the relation between banking and the