Memoirs of General William T. Sherman — Complete
endeavored to make myself familiar with the business, but of course
Nisbet kept the books, and gave his personal attention to the
loans, discounts, and drafts, which yielded the profits. I soon
saw, however, that the three per cent. charged as premium on bills
of exchange was not all profit, but out of this had to come one and
a fourth to one and a half for freight, one and a third for
insurance, with some indefinite promise of a return premium; then,
the cost of blanks, boxing of the bullion, etc., etc. Indeed, I
saw no margin for profit at all. Nisbet, however, who had long
been familiar with the business, insisted there was a profit, in
the fact that the gold-dust or bullion shipped was more valuable
than its cost to us. We, of course, had to remit bullion to meet
our bills on New York, and bought crude gold-dust, or bars refined
by Kellogg & Humbert or E. Justh & Co., for at that time the United
States Mint was not in operation. But, as the reports of our
shipments came back from New York, I discovered that I was right,
and Nisbet was wrong; and, although we could not help selling our
checks on New York and St. Louis at the same price as other
bankers, I discovered that, at all events, the exchange business in
San Francisco was rather a losing business than profitable. The
same as to loans. We could loan, at three per cent. a month, all
our own money, say two hundred and fifty thousand dollars, and a
part of our deposit account. This latter account in California was
decidedly uncertain. The balance due depositors would run down to
a mere nominal sum on steamer-days, which were the 1st and 15th of
each month, and then would increase till the next steamer-day, so
that we could not make use of any reasonable part of this balance
for loans beyond the next steamer-day; or, in other words, we had
an expensive bank, with expensive clerks, and all the machinery for
taking care of other people's money for their benefit, without
corresponding profit. I also saw that loans were attended with
risk commensurate with the rate; nevertheless, I could not attempt
to reform the rules and customs established by others before me,
and had to drift along with the rest toward that Niagara that none
foresaw at the time.
Shortly after arriving out in 1853, we looked around for a site for
the new bank, and the only place then available on Montgomery
Street, the Wall Street of San Francisco, was a lot at the corner
of Jackson Street, facing Montgomery, with an alley on the north,
belonging to James Lick. The ground was sixty by sixty-two feet,
and I had to pay for it thirty-two thousand dollars. I then made a
contract with the builders, Keyser, & Brown, to erect a three-story
brick building, with finished basement, for about fifty thousand
dollars. This made eighty-two thousand instead of fifty thousand
dollars, but I thought Mr. Lucas could stand it and would approve,
which he did, though it resulted in loss to him. After the civil
war, he told me he had sold the building for forty thousand
dollars, about half its cost, but luckily gold was then at 250, so
that he could use the forty thousand dollars gold as the equivalent
of one hundred thousand dollars currency. The building was
erected; I gave it my personal supervision, and it was strongly and
thoroughly built, for I saw it two years ago, when several
earthquakes had made no impression on it; still, the choice of site
was unfortunate, for the city drifted in the opposite direction,
viz., toward Market Street. I then thought that all the heavy
business would remain toward the foot of Broadway and Jackson
Street, because there were the deepest water and best wharves, but
in this I made a mistake. Nevertheless, in the spring of 1854, the
new bank was finished, and we removed to it, paying rents
thereafter to our Mr. Lucas instead of to Adams & Co. A man named
Wright, during the same season, built a still finer building just
across the street from us; Pioche, Bayerque & Co. were already
established on another corner of Jackson Street, and the new
Metropolitan Theatre was in progress diagonally opposite us.
During the whole of 1854 our business steadily grew, our average
deposits going up to half a million, and our sales of exchange and
consequent shipment of bullion averaging two hundred thousand
dollars per steamer. I signed all bills of exchange, and insisted
on Nisbet consulting me on loans and discounts. Spite of every
caution, however, we lost occasionally by bad loans, and worse by
the steady depreciation of real estate. The city of San Francisco
was then extending her streets, sewering them, and planking them,
with three-inch lumber. In payment for the lumber and the work of
contractors, the city authorities paid scrip in even sums of one
hundred, five hundred, one thousand, and five thousand dollars.
These formed a favorite collateral for loans at from fifty to sixty
cents on the dollar, and no one doubted their ultimate value,
either by redemption or by being converted into city bonds.
The notes also of H. Meiggs, Neeley Thompson & Co., etc.,
lumber-dealers, were favorite notes, for they paid their interest
promptly, and lodged large margins of these street-improvement
warrants as collateral. At that time, Meiggs was a prominent man,
lived in style in a large house on Broadway, was a member of the
City Council, and owned large saw-mills up the coast about
Mendocino. In him Nisbet had unbounded faith, but, for some
reason, I feared or mistrusted him, and remember that I cautioned
Nisbet not to extend his credit, but to gradually contract his
loans. On looking over our bills receivable, then about six
hundred thousand dollars, I found Meiggs, as principal or indorser,
owed us about eighty thousand dollars--all, however, secured by
city warrants; still, he kept bank accounts elsewhere, and was
generally a borrower. I instructed Nisbet to insist on his
reducing his line as the notes matured, and, as he found it
indelicate to speak to Meiggs, I instructed him to refer him to me;
accordingly, when, on the next steamer-day, Meiggs appealed at the
counter for a draft on Philadelphia, of about twenty thousand
dollars, for which he offered his note and collateral, he was
referred to me, and I explained to him that our draft was the same
as money; that he could have it for cash, but that we were already
in advance to him some seventy-five or eighty thousand dollars, and
that instead of increasing the amount I must insist on its
reduction. He inquired if I mistrusted his ability, etc. I
explained, certainly not, but that our duty was to assist those who
did all their business with us, and, as our means were necessarily
limited, I must restrict him to some reasonable sum, say,
twenty-five thousand dollars. Meiggs invited me to go with him to a
rich mercantile house on Clay Street, whose partners belonged in
Hamburg, and there, in the presence of the principals of the house,
he demonstrated, as clearly as a proposition in mathematics, that
his business at Mendocino was based on calculations that could not
fail. The bill of exchange which he wanted, he said would make the
last payment on a propeller already built in Philadelphia, which
would be sent to San Francisco, to tow into and out of port the
schooners and brigs that were bringing his lumber down the coast. I
admitted all he said, but renewed my determination to limit his
credit to twenty-five thousand dollars. The Hamburg firm then
agreed to accept for him the payment of all his debt to us, except
the twenty-five thousand dollars, payable in equal parts for the
next three steamer-days. Accordingly, Meiggs went back with me to
our bank, wrote his note for twenty-five thousand dollars, and
secured it by mortgage on real estate and city warrants, and
substituted the three acceptances of the Hamburg firm for the
overplus. I surrendered to him all his former notes, except one for
which he was indorser. The three acceptances duly matured and were
paid; one morning Meiggs and family were missing, and it was
discovered they had embarked in a sailing-vessel for South America.
This was the beginning of a series of failures in San Francisco,
that extended through the next two years. As soon as it was known
that Meiggs had fled, the town was full of rumors, and everybody was
running to and fro to secure his money. His debts amounted to
nearly a million dollars. The Hamburg house which, had been
humbugged, were heavy losers and failed, I think. I took possession
of Meiggs's dwelling-house and other property for which I held his
mortgage, and in the city warrants thought I had an overplus; but it
transpired that Meiggs, being in the City Council, had issued
various quantities of street scrip, which was adjudged a forgery,
though, beyond doubt, most of it, if not all, was properly signed,
but fraudulently issued. On this city scrip our bank must have lost
about ten thousand dollars. Meiggs subsequently turned up in Chili,
where again he rose to wealth and has paid much of his San Francisco
debts, but none to us. He is now in Peru, living like a prince.
With Meiggs fell all the lumber-dealers, and many persons dealing in
city scrip. Compared with others, our loss was a trifle. In a
short time things in San Francisco resumed their wonted course, and
we generally laughed at the escapade of Meiggs, and the cursing of
his deluded creditors.
Shortly after our arrival in San Francisco, I rented of a Mr.
Marryat, son of the English Captain Marryat, the author, a small
frame-house on Stockton Street, near Green, buying of him his
furniture, and we removed to it about December 1,1853. Close by,
around on Green Street, a man named Dickey was building two small
brick-houses, on ground which he had leased of Nicholson. I bought
one of these houses, subject to the ground-rent, and moved into it
as soon as finished. Lieutenant T. H. Stevens, of the United
States Navy, with his family, rented the other; we lived in this
house throughout the year 1854, and up to April 17, 1855.
CHAPTER V.
CALIFORNIA
1855-1857
During the winter of 1854-'55, I received frequent intimations in
my letters from the St. Louis house, that the bank of Page, Bacon &
Co. was in trouble, growing out of their relations to the Ohio &
Mississippi Railroad, to the contractors for building which they
had made large advances, to secure which they had been compelled to
take, as it were, an assignment of the contract itself, and finally
to assume all the liabilities of the contractors. Then they had to
borrow money in New York, and raise other money from time to time,
in the purchase of iron and materials for the road, and to pay the
hands. The firm in St. Louis and that in San Francisco were
different, having different partners, and the St. Louis house
naturally pressed the San Francisco firm to ship largely of
"gold-dust," which gave them a great name; also to keep as large a
balance as possible in New York to sustain their credit. Mr. Page
was a very wealthy man, but his wealth consisted mostly of land and
property in St. Louis. He was an old man, and a good one; had been
a baker, and knew little of banking as a business. This part of
his general business was managed exclusively by his son-in-law,
Henry D. Bacon, who was young, handsome, and generally popular.
How he was drawn into that affair of the Ohio & Mississippi road I
have no means of knowing, except by hearsay. Their business in New
York was done through the American Exchange Bank, and through
Duncan, Sherman & Co. As we were rival houses, the St. Louis
partners removed our account from the American Exchange Bank to the
Metropolitan Bank; and, as Wadsworth & Sheldon had failed, I was