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J. R. Walsh of Chicago: A Case Study in Banking and Politics, 1881–1905

Published online by Cambridge University Press:  11 June 2012

Joel A. Tarr
Joel A. Tarr
Affiliation:
Visiting Assistant Professor of History, University of California, Santa Barbara
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Abstract

The rise and fall of a “political” banker is traced here against the interaction of businessmen and machine politicians in turn-of-the-century Chicago, Illinois.

Type
Articles
Information
Business History Review , Volume 40 , Issue 4 , Winter 1966 , pp. 451 - 466
Copyright
Copyright © The President and Fellows of Harvard College 1966

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References

1 Chicago Tribune and Chicago Record-Herald, Dec. 18, 1905. The Tribune was the first Chicago paper to have the story. See, Linn, James Weber, James Keeley: Newspaperman (New York, 1937), 76–78.Google Scholar

2 There were seven important failures in the 1890's, all during the years of financial stress 1893–1897. In 1893 the Chemical National Bank failed and subsequent examination revealed that most of its funds had been loaned to its directors and stockholders, often on poor security or signature alone. The failures of the Atlas National Bank (1896), the Globe Savings Bank (1897), and E. S. Dreyer and Co. (1896), all involved speculation and politics. Herman Schaffer and Co. (1893) and the National Bank of Illinois (1896), both suspended because of involvement in traction speculation. See Cyril James, F., The Growth of Chicago Banks (2 vols. New York, 1938), I, 508–81, 587, II, 675–79Google Scholar; Thomas, R. G., “Bank Failures in Chicago before 1925,” Journal of the Illinois State Historical Society (Oct., 1935) XXVIII, 188–203.Google Scholar

3 James, Growth of Chicago Banks, II, 673–714. The Committee was the examining and policy-making group within the Chicago Clearing House Association.

4 For Walsh biographical information see the Chicago Tribune, Dec. 19, 1905, Oct. 1, 1909, and Jan. 19, 1910, and Andreas, A. T., History of Chicago (Chicago, 1885) III, 500–501.Google Scholar

5 James, Growth of Chicago Banks, I, 417–528, 534–35, II, 715, 1200. Appendix VIII of this work contains a summary of data on all Cook County banks founded between 1863 and 1938. See also, Pierce, Bessie L., History of Chicago, Vol. III: The Rise of a Modern City, 1871–1893 (New York, 1957), 201.Google Scholar For further information on the founding of the Chicago National see H. H. Nash [Cashier, Chicago National Bank] to John J. Knox [Comptroller of the Currency], Mar. 24, Nov. 11, and Dec. 2, 1881, Records of the Office of the Comptroller of the Currency (Record Group 101, National Archives), hereafter referred to as “Comptroller's Records.” The National Bank Examiner's Report for Feb. 13, 1888, noted that the Chicago National held as collateral an “unusual proportion” of local securities, especially those of publishers, printing firms, and newspapers. (Bank Examiner's Reports for the Chicago National will hereafter be referred to as “Examiner's Reports.” All are located in the Comptroller's Records.) The Examiner's Reports formed an indispensible source for this article. They include lists of bank officers, stockholders, bank holdings, and outstanding loans. Unfortunately, while the writer was engaged in his research, the Comptroller increased the restriction on the use of his records from fifty to seventy-five years.

6 Chicago Tribune, Dec. 19, 1905; James, Growth of Chicago Banks, II, 1229, 1273.

7 Ibid., I, 530–31; Heinberg, John J., The Office of the Comptroller of the Currency (Baltimore, 1926)Google Scholar; Welldon, Samuel A. [comp.], Digest of State Banking Statutes, Report of the National Monetary Commission (Washington, 1910) III, 146–52.Google Scholar

8 Examiner's Reports, Dec. 28, 1885, May 16, 1887, and Aug. 14, 1888; “A Man and Three Banks,” Chicago Economist (Dec. 23, 1905), 942.

9 H. H. Nash to John J. Knox, Mar. 5, 1884, John R. Walsh to William L. Trenholm [Comptroller of the Currency], June 17, 1887, Mar. 10, and Sept. 29, 1888, Comptroller's Records; Examiner's Report, Dec. 28, 1885.

10 James, Growth of Chicago Banks, I, 508–609.

11 Redlich, Fritz, The Molding of American Banking: Men and Ideas, Part II 1840–1910 (New York, 1951), 175.Google Scholar The Comptroller was William L. Trenholm.

12 The list of bonds is in the Examiner's Reports for Feb. 20 and Aug. 28, 1889. For Yerkes' activities see Roberts, Sidney I., “Portrait of a Robber Baron: Charles T. Yerkes,” Business History Review (Autumn, 1961) XXXV, 349–54.Google Scholar

13 There is a list of Walsh's directorships in James, Growth of Chicago Banks, II, 715.

14 Examiner's Report, Nov. 9, 1905.

15 Examiner's Report, Dec. 9, 1905.

16 The complicated story of the Ogden Gas Co. can be traced in Harrison, Carter H., Stormy Years (Chicago, 1935), 192–99Google Scholar, Sidney C. Eastman, “Corruption in Illinois” (typewritten manuscript, n.d.), Sidney C. Eastman Papers (Chicago Historical Society), and Chicago Tribune, Feb. 26, 1895, Feb. 26–28, Mar. 1, 3–6 and May 7, 1897. For short summaries see Forrest McDonald, Insult (Chicago, 1962), 83, and Steffens, Lincoln, The Struggle For Self-Government (New York, 1906), 51–52.Google Scholar

17 The best decription of this alliance, and of Chicago politics in general, is Merriam, Charles E., Chicago: A More Intimate View of Urban Politics (New York, 1929).Google Scholar See also, Harrison, Stormy Years, passim, and Ickes, Harold L., The Autobiography of a Curmudgeon (New York, 1943), 83–114.Google Scholar

18 Examiner's Report, June 11, 1913. This report includes a list of Chicago National stockholders in December, 1905. For biographical information on Hopkins see Marquis, A. N. [comp.], Who's Who in Chicago for 1917 (Chicago, 1917), 340Google Scholar; for Sullivan see Zink, Harold, City Bosses in the United States (Durham, 1930), 291–301.Google Scholar For information on the Sullivan-Hopkins faction see Harrison, Stormy Years, passim. Harrison led the opposing faction in the Democratic party.

19 For information on the Lorimer faction see Tarr, Joel A., “William Lorimer of Illinois: A Study in Boss Politics” (Ph.D. dissertation, Northwestern University, 1963)Google Scholar and Wooddy, Carroll H., The Case of Frank L. Smith (Chicago, 1931), 147–55.Google Scholar Lorimer was elected to the United States Senate in 1909 by a bipartisan coalition in the Illinois General Assembly; he was ejected from the Senate in 1912 because of the use of bribery in his election. Biographical information on Smyth is from the Chicago Tribune, Nov. 5, 1909; for Blount see Marquis, Who's Who in Chicago for 1926, 99. William Kent of the Chicago Municipal Voters' League said that Walsh, Smyth, and Blount were “to be found at the bottom of most of the devilment in local government.” See, “The Republican Party in Illinois,” (typewritten manuscript dated Nov. 22, 1901), William Kent Papers (Yale University Library).

20 Chicago Tribune, Dec. 28, 1896, Jan. 6 and Feb. 6, 1897; Tarr, “William Lorimer,” 108–109.

21 Journal of the House of the Fortieth Illinois General Assembly (Springfield, 1897), 951–52; Chicago Tribune, May 20, 22, 25, 1897; Roberts, “Yerkes,” 354–60.

22 Chicago Tribune, Dec. 19, 1905; Steffens, Struggle for Self-Government, 65.

23 Journal of the Senate of the Fortieth Illinois General Assembly, 932; Chicago Tribune, May 7, 1897.

24 Ibid., Jan. 6, Feb. 6 and May 8, 12, 1897; Eastman, “Corruption;” Harrison, Carter, Growing Up With Chicago: Sequel to “Stormy Years” (Chicago, 1944), 277.Google Scholar

25 Chicago Tribune, June 6, 8–10, 1897. The Yerkes' measures and the gas consolidation bills were later blocked in the Chicago City Council, mainly through the efforts of Mayor Carter H. Harrison. See, Roberts, “Yerkes,” 363–70 and Harrison, Stormy Years, 153–82. Gas consolidation was accomplished in 1906 after Harrison had left office.

26 Walsh owned a total of three newspapers: the Chicago Herald, bought in 1883, the Evening Post, founded in 1890, and the Chronicle, established in 1895. Walsh sold the Herald and the Evening Post in 1895. The Chronicle consistently defended the machines and abused the reformers. See, for instance, the issues of Aug. 27, 1895, Mar. 22, 1900, Oct. 25, 1902, and May 8, 10, 1904. For Fisher's comment, see Fisher to Theodore Roosevelt, Feb. 19, 1904, Theodore Roosevelt Papers (Library of Congress). In 1901 Walsh tried to manipulate banking legislation to his advantage. Gus Nohe, Lorimer's chief lieutenant in the Illionois House, introduced a bill that would have exempted Walsh's Home Savings Bank from any reserve requirement, while requiring one for other savings banks. The bill did not pass. See, James C. Hutchins [Hutchins was a lawyer for John J. Mitchell of the Illinois Trust and Savings Bank] to Lawrence Y. Sherman [Speaker of the Illinois House], Jan. 25, 1901, Lawrence Y. Sherman Papers (Illinois State Historical Library); Journal of the House of the Forty-Second Illinois General Assembly (Springfield, 1901), 93.

27 Merriam, Chicago, 24–33; Pierce, Chicago, III, 335–38; Chicago Tribune, Dec. 19, 1905; Chicago Record-Herald, Mar. 3, 1906.

28 Ibid.; Merriam, Charles E., Report on the Municipal Revenues of Chicago (Chicago, 1906), 106.Google Scholar

29 Chicago Tribune, June 5, 1904 and Dec. 19, 1905; Chicago South Park Board, Annual Reports (Chicago, 1888–1905); Chicago West Park Board, Annual Reports (Chicago, 1888–1905); Board of Trustees of the Sanitary District of Chicago, Proceedings (Chicago, 1896–1906).

30 Examiner's Reports, June 22 and Dec. 9, 1905; Merriam, Report on the Municipal Revenues of Chicago, 108. Walsh used two of his correspondent banks, the Central Trust Company of Chicago and the First National Bank of New York, as depositories for South Park funds.

31 Examiner's Reports, June 22 and Dec. 9, 1905; Chicago Tribune, Dec. 19, 1905; Chicago Record-Herald, Mar. 3, 1906. The banks holding county deposits were the Federal Trust, the Fort Dearborn, the American Trust, the National Bank of the Republic, and the Metropolitan National Bank. Those with city funds were the Federal Trust, the Fort Dearborn, the American Trust, the First National, the National Bank of the Republic, the Metropolitan Trust, the Commercial National, the Calumet National, and the Corn Exchange Bank. Merriam, Report on the Municipal Revenues of Chicago, 108, contains a list of banks holding public deposits from the various Cook County and Chicago governments. Although the sums held are not listed, the interest paid is.

32 Ibid., 103–105.

33 Examiner's Reports, Dec. 9, 1905 and July 3, 1906. Other borrowers included Fred M. Busse, a Republican who was State Treasurer from 1902–1904, Chicago Postmaster from 1905–1907, and mayor from 1907–1911, $46,500; Judge Elbridge Hanecy, Lorimer's candidate for governor in 1900 and mayor in 1901, $46,000 (Equitable Trust); Charles U. Gordon, Chicago Postmaster from 1897–1901, $20,000; Joseph C. Braden, Republican Sanitary District Trustee, $19,000; Republican Congressman Henry S. Boutell, $8,000; Daniel D. Healy, president of the Cook County Board of Commissioners, $7,445; Robert E. Burke, Democratic politician, $3,650; and James P. Gallagher, Lorimer's business partner, $20,000.

34 Roger C. Sullivan and John P. Hopkins were Gold Democrats opposed to Altgeld's faction. James, Growth of Chicago Banks, I, 644; Barnard, Harry, Eagle Forgotten: The Life of John Peter Altgeld (New York, 1938), 148–49, 354–56.Google Scholar

35 Chicago Tribune, Dec. 19, 1905.

36 “Failure of the Walsh Banks,” Chicago Economist (Dec. 23, 1905), 945; Chicago Tribune. Oct. 1, 1909.

37 Examiner's Reports, Nov. 9 and Dec. 9, 1905; Forgan, James B., Recollections of a Busy Life (New York, 1924), 278–80.Google Scholar

38 Ridgely to Theodore Roosevelt, June 26, 1906, Roosevelt Papers.

39 Forgan, Recollections, 282–84; Redlich, Molding of American Banking, II, 204–205; Moxey, Edward P., “Causes, Methods & Prevention of Bank Defalcation,” Journal of Accountancy (Jan., 1906), I, 223–32.Google Scholar

40 Bosworth had been president of Walsh's Southern Indiana Railroad, but was forced to resign by Walsh over a policy difference. He thus had previous information concerning Walsh's methods of financing. See Huston, Francis M., Financing an Empire: History of Banking in Illinois (4 vols., Chicago, 1926), I, 328–29Google Scholar; Chicago Record-Herald, Dec. 18, 1905.

41 See comments by Bosworth, and letter from C. C. Jones [Illinois Bank Examiner] to Bosworth, June 9, 1905, in Examiner's Report, June 22, 1905; Huston, Financing an Empire I, 328.

42 Chicago Tribune, May 10, June 4–5, 1904; Tarr, “William Lorimer,” 316–61.

43 Chicago Tribune, June 5, 1904.

44 Chicago Record-Herald, Mar. 3, 1906; Chicago Board, West Park, Annual Report (Chicago, 1906)Google Scholar; Chicago South Park Board, Annual Report (Chicago, 1906); Chicago Sanitary District, Proceedings (Chicago, 1906); Merriam, Report on the Municipal Revenues of Chicago,. 107.

45 Examiner's Report, July 2, 1906. This report includes detailed schedules of the Equitable Trust and Home Savings Bank liquidations. See also, Huston, Financing an Empire, I, 330.

46 Ibid., I, 329–34; James, Growth of Chicago Banks, II, 714–19. For a description of the meeting by a participant see Dawes, Charles G., A Journal of the McKinley Years (Chicago, 1950 [ed. by Bascom N. Timmons]), 408–410.Google Scholar

47 Forgan, Recollections, 278.

48 Quoted in James, Growth of Chicago Banks, II, 716. There is evidence that another powerful banker, John J. Mitchell, disapproved of Walsh's methods. It was Mitchell's lawyer who protested about the 1901 banking legislation sponsored by Walsh mentioned in note 26.

49 Dawes and Walsh had been financial and personal friends during the time Dawes was Comptroller. See, Dawes, Journal of the McKinley Years, viii, 50–51, 55, 59, 90, 285–86, 292. In addition, in 1905 Eckels owed the Chicago National $96,305.07. See, Examiner's Report, Dec. 9, 1905. Ridgely, Comptroller at the time of the failure, was the son-in-law of Republican Senator Shelby M. Cullom of Illinois.

50 Chicago Tribune, Dec. 19, 1905; “A Man and Three Banks,” Chicago Economist (Dec. 23, 1905), 942; Edwin L. Lobell, “Random Recollections” (typewritten manuscript, ed. by Adeline Pynchon, Chicago Historical Society, n.d.); James, Growth of Chicago Banks, II, 717. In 1896 Walsh had refused to agree to a guarantee of the deposits of the National Bank of Illinois. See, ibid., II, 674.

51 Forgan, Recollections, 281–82; Houston, Financing an Empire, I, 329–34; James, Growth of Chicago Banks, II, 714–19; Kane, Thomas P., The Romance and Tragedy of Banking (New York, 1923), 252–57.Google Scholar The details concerning the Clearing House Association's actions can be traced in the minutes of the “Meetings of the Directors of the Chicago National Bank,” for Dec. 18–19, 1905 and Jan. 10, 1906, in the Comptroller's Records.

52 After the guarantee was made, Forgan wrote: “It required a good deal of nerve to stand up to a situation where the uncertainties in connection with the assets were so great, while of course the liabilities of the three institutions were a known and fixed quantity. I trust it may not cost us all too dear. As this Bank has to stand something more than one-fifth of the whole amount, you can readily understand that I am not feeling any too hilarious about it, but… I do not think we will lose more than we are able to stand.” Forgan to Mr. Snyder, Jan. 2, 1906, James B. Forgan Papers (Library of the First National Bank, Chicago). The Clearing House banks assumed obligations totaling $4,464,000. After its depositors had been paid the Chicago National ended its public banking business. Its board of directors continued to meet until 1913, at which time the affairs of the bank were finally concluded. See Owen T. Reeves [National Bank Examiner] to T. P. Kane [Comptroller], June 11, 1913, with attached Examiner's Report, Comptroller's Records.

53 Walsh was defended by Hopkins on the floor of the Senate, after he had been attacked by Senator Benjamin Tillman. Tillman seems to have been informed of the case by William Kent, Chicago progressive. Hopkins and Walsh were no strangers. Walsh was on the board of directors of the Illinois Surety Company of which Hopkins was vice-president and Fred Blount president. See, William Kent to Senator Benjamin Tillman, June 16, 1906, Kent Papers, and the Congressional Record, 59th Cong., 1st Sess., Vol. 40, pt. 9, 5512, 5521–22, 5560–62, and pt. 13, 8491. For Shaw's comments see, Chicago Record-Herald, Mar. 3, 1906. There is a possibility that Shaw was tied up in business dealings with Walsh. On Jan. 22, 1915, Roosevelt wrote Charles J. Bonaparte (printed in E. E. Morison [ed.], The Letters of Theodore Roosevelt (8 vols., Cambridge, 1951–1954, VIII, p. 882)Google Scholar that he had forced Shaw to resign in 1907 because of his connections with Walsh and his Indiana quarries, which held federal government stone contracts. The writer has been unable to find any further evidence on this charge.

54 Roosevelt had been informed of Walsh's activities as early as February, 1904. See, Walter L. Fisher to Roosevelt, Feb. 19, 1904, Roosevelt Papers. He seems to have taken an interest in the case from the beginning, and had Comptroller Ridgely prepare a special report on the relationships between the Comptroller's office and the Chicago National be fore the failure. See, Ridgely to Roosevelt, June 26, 1906, Roosevelt Papers; Chicago Tribune, Mar. 3–4, 1906.

55 Ibid., Oct. 1, 6, 1909, Sept. 25, 27, 1910, and Oct. 15, 24, 1911. For Taft's role see, “In the Matter of the Application for the Pardon of John R. Walsh,” May 24, 1911, Taft to Daniel Gibbons, Oct. 11, 1910, and to James H. Lamperton, May 29, 1911, William Howard Taft Papers (Library of Congress).

56 “A Man and Three Banks,” and “Public Funds,” Chicago Economist (Dec. 23, 1905), 942–43. Forgan did not object to the acceptance of public deposits per se; his own bank, the First National, held both city and Lincoln Park Board deposits. What disturbed him was that the public deposits comprised such a large part of the liabilities of the Walsh banks.

57 See the perceptive essay by Hays, Samuel P., “The Politics of Reform in Municipal Government in the Progressive Era,” Pacific Northwest Quarterly, LV (Oct., 1964), 157–69Google Scholar, and “The Politics of Efficiency,” Chapter VI in Haber, Samuel, Efficiency and Uplift: Scientific Management in the Progressive Era 1890–1920 (Chicago, 1964), 99–116.Google Scholar

58 Merriam, Chicago, 70–89, 102–103, 111; Lewis, Lloyd and Smith, Henry Justin, Chicago: The History of its Reputation (New York, 1929), 323–24Google Scholar; James, Growth of Chicago Banks, II, 720–22; Forgan, Recollections, 285–94.

59 James, Growth of Chicago Banks, II, 679; Barnard, Eagle Forgotten, 413–14.