1850-1899: A History of America's Banks and The ABA

1852: There’s Gold in Them Hills
Henry Wells and William Fargo—among the co-founders of the American Express Company—see a need for both express delivery and financial services in gold-rush California. They organize Wells, Fargo & Co., which offers banking services, shipment of specie and bullion and overland mail services. Wells Fargo represents the banking industry’s commitment to making sure customers’ funds go where they want them, when they want them.
1861: The Civil War Begins
Upheaval as the Civil War begins results in the suspension of on-demand specie redemption, which will not be resumed until 1879.
1861: Financing American Industry
Jay Cooke founds an eponymous bank in New York that is considered America’s first investment bank. Cooke’s bank originates securities transactions by telegraph and provides financing for the Union during the Civil War and for the Northern Pacific Railroad.
1862: Printing the Greenback
To help fund the Civil War, Congress passes the Legal Tender Act, authorizing the printing of $150 million in new U.S. notes. The distinctive coloring leads to the nickname “greenbacks.”
1863: A National Banking System
With two related laws in 1863 and 1864 intended to produce a single national currency, Congress creates a national banking system for the first time. National banks—to be regulated by the newly created Office of the Comptroller of the Currency—are authorized to issue banknotes backed by U.S. government securities held in their portfolios. Banks in the largest cities will serve as reserve banks, holding higher capital levels and maintaining correspondent banking relationships with those in smaller towns. Any national bank’s notes are to be honored by all other national banks. The national bank system creates the unique dual state and federal chartering system that continues to characterize U.S. banking today.
1865: Helping Freed Men and Women
The government charters the Freedman’s Savings Bank to help support newly freed African-American slaves and veterans. Frederick Douglass would serve as the last president of the bank before its closure in 1874.
1875: Bankers Band Together
While walking down the street in St. Louis, Mo., bankers James Howenstein and Edward Breck notice a women’s suffrage meeting and decide that bankers, too, should band together. Howenstein corresponds with bankers across the country. In July of that year, 349 bankers from 31 states and the District of Columbia meet in Saratoga Springs, N.Y., to form the American Bankers Association.
1876: Advocating before Congress
ABA testifies before Congress for the first time when the association’s first president, Charles Hall, discusses reducing the tax burden on banks before the House Ways and Means Committee. He urged the repeal of taxes on capital and a two-cent stamp tax on checks, which ABA achieved in 1883.
1879: Specie Payment Resumes
In ABA’s first policy victory, the gold standard returns. Specie payment—the ability to exchange U.S. legal tender notes for gold bullion on demand—is resumed after being suspended during the Civil War.
1879: The First Woman Bank President
Miriam Carson Williams becomes the first recorded female bank president, leading the State National Bank of Raleigh, N.C.
1880: Foreign Banks Arrive in America
The first foreign bank branch—an office of the Hong Kong and Shanghai Banking Corporation, today HSBC—is licensed by New York state.
1880: Thrifts Pioneer Customer-Friendly Mortgages
The “Dayton plan” is developed in the mid-1880s by the Mutual Home and Savings Association, Dayton, Ohio. Under the plan, loan payments were tied to an interest rate rather than a dividend rate, making loan terms more predictable. The predecessor of a fixed-term amortizing mortgage, the customer-friendly Dayton plan was exclusively available from thrifts and spurred industry growth.
1891: ABA Protects Its Members
ABA appoints an anonymous committee to support the detection and prosecution of those who would defraud or rob ABA member banks—including offering rewards of up to $1,000. ABA’s promise to pursue those who robbed member banks reduces robberies dramatically—in 1896 and 1897, the only successful robbery of a member is of a Yonkers, N.Y., bank that had placed its ABA membership sign in an inconspicuous spot where the robbers could not see it.
1891: The U.S. League Is Founded
The U.S. League of Local Building and Loan Associations—the oldest predecessor to America’s Community Bankers—is founded in Chicago.
1894: Pinkertons on the Case
ABA hires the nationally renowned Pinkerton National Detective Agency to keep track of professional criminals and forewarn members of their movements. Pinkerton distributes a “rogue’s gallery” album of portraits and descriptions to members. Between 1894 and 1898, ABA membership almost doubles to 3,350 as banks join to be under the protection of ABA. The Pinkerton Agency continues under contract to ABA until 1909.
1894: Reforming Currency
To ward off financial panics and promote liquidity, the ABA Annual Convention adopts the “Baltimore plan” for an asset-backed currency.
1894: Planning Ahead for Deposit Insurance
Future Comptroller of the Currency—and future Vice President—Charles Dawes floats an idea for taxing national banks to pay for insurance that would cover depositors’ losses when banks fail.
1896: Serving Trust Companies
ABA establishes a special section for trust companies, beginning a long tradition of representing the trust industry’s interests and furthering professional development.
1897: Gage Leads the Treasury
Former ABA President Lyman Gage is appointed secretary of the Treasury by President William McKinley, serving until 1902.
1898: Growing Branches
Branch banking barriers begin to erode. An 1898 law permits branching in five New York counties; California follows in 1908. Chain banking—the development of banks owned by one chain or common owner—begins to develop, particularly in the Midwest, West, and South. Branching reduces bank failure rates as serving multiple regions or towns makes banks more resilient to isolated downturns.
1899: Checking with Certainty
The Boston Clearinghouse begins a uniform clearing procedure for clearing checks of all New England banks. The Boston breakthrough is repeated in St. Louis, Kansas City, Detroit and New York—becoming a model for the future Federal Reserve System.
1899: Credit Analysis
Credit analysis begins to grow in use, rising from less than 10 banks in 1899 to being used in most major banks by 1911.

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1850-1899: A History of America's Banks and The ABA

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