UPON the resignation of Mr. Trenholm, President Cleveland, a few weeks before the close of his first term, nominated the Deputy Comptroller of the Currency, Jesse D. Abrahams, to be Comptroller, but the Senate took no action on the nomination, and the office remained vacant until May 1, 1889, when Edward S. Lacey, of Michigan, was appointed Comptroller by President Benjamin Harrison.
Mr. Lacey, the seventh Comptroller of the Currency, was born at Chili, N. Y., November 26, 1835. He removed to Michigan in 1842, and was educated at the public schools and at Olivet College. He was elected Register of Deeds of Charlotte, Mich., in 1860, and was re-elected in 1862. He was trustee of the Michigan State Insane Asylum from 1874 to 1880, and was a delegate to the Republican National Convention in 1876. He was elected a. Representative from the Third District of Michigan to the Forty-seventh and Forty-eighth Congresses. Previous to his appointment as Comptroller he had had a practical banking experience of twenty-five years, and at the time of his appointment was president of the First National Bank of Charlotte, Mich., which he assisted in organizing in 1870, and was its first cashier. He resigned the office of Comptroller on June 30, 1892, to become president of the Bankers National Bank of Chicago, which he organized, and continued to be its president until August 31, 1909, when this bank was merged with the Commercial National Bank of Chicago. George E. Roberts, president of the latter institution, was made president of the consolidated bank, and Mr. Lacey was made chairman of the board of directors. On July 30, 1910, the Commercial National Bank was merged with the Continental National, under the title of the Continental and Commercial National Bank, and Mr. Lacey continued his connection with this institution as a director and chairman of the advisory committee of the board until the date of his death, October 2, 1916, at Evanston, 111.
Mr. Lacey came to the office of Comptroller of the Currency thoroughly equipped for the discharge of its responsible and onerous duties, not only as a practical banker, but as an experienced legislator. He was a man of reserved disposition, extremely cautious and ultra-conservative; scrupulously conscientious in the discharge of his duties and in every business detail, slow in bestowing his confidences, but unlimited in his trust when once his confidence was obtained.
Monetary Stringency of 1890
The second year of Mr. Lacey's incumbency of the office of Comptroller was marked by the monetary stringency of 1890, the approach of which was plainly manifest in the early spring of that year.
In commenting upon the conditions which existed throughout the country immediately preceding the culmination of this stringency, Mr. Lacey, in his annual report to Congress for 1890, stated that the agricultural interests were in an unsatisfactory condition and that overtrading and unhealthful expansion were apparent everywhere. The activity in railroad development forced upon the markets large lines of securities. Attractive investments in real estate, farm mortgages, manufacturing operations, stocks and bonds of electric, water and light power plants, and many other lines of industry, drew large amounts of capital theretofore loanable in the East from the Atlantic Coast States to the Middle West and Pacific Coast, and likewise from abroad. This, Mr. Lacey stated, not only largely depleted the Atlantic States of the capital necessary to carry on manufacturing and other legitimate enterprises of that section, but had the effect of unduly stimulating speculative operations in the West and of laying the foundation for the collapse in prices and values which followed when the inflow of capital was arrested or ceased to be available. As a result, the banks in these sections became more or less involved through their customers, and so badly extended as to compel them to rediscount heavily with their reserve city correspondents in order to carry the burden.
Similar conditions, Mr. Lacey stated, of undue expansion existed abroad, and in anticipation of a monetary stringency in England, large amounts of American securities held by European investors were forced upon the New York market. The failure of the Panama Canal Company and the French Copper Company had already forced the continental countries of Europe through a period of liquidation and loss.
During the months of June, July and August of 1890, the net exportations of gold and bullion from the United States exceeded fourteen millions of dollars, and from January, 1890, to August, 1891, the gold exportations amounted to over seventy-five millions.
Between February and May, 1890, the gross deposits of the forty-six banks in New York City fell off nearly forty-five millions of dollars, due to the demands of the interior banks.
This stringency culminated about the middle of November in New York, by the failure of J. C. Wallcott & Company, a leading brokerage firm, and the North River Bank, a State institution. The Bank of North America became involved, and at the same time announcement was made of the embarrassment of Baring Brothers & Company, of London, whose obligations were guaranteed to the extent of seventy-five millions of dollars by a syndicate headed by the Bank of England. Other failures followed, both in New York and Philadelphia.
The unfavorable conditions in the United States were heightened by the greatly reduced yield of wheat, oats and corn and the prevailing low prices for these commodities. The new tariff law which went into effect in October, 1890, also operated as a disturbing factor by stimulating importations in anticipation of the higher duties imposed by the Act.
The available surplus in the Treasury of the United States was almost completely exhausted in an endeavor on the part of the Secretary to relieve the monetary stringency, and over ninety million dollars of Government funds were disbursed between July and November, 1890, by the purchase of United States bonds and the payment of interest thereon. As is usual in periods of monetary stringency, the banks of the metropolitan cities were subject to pressing demands for relief and the Clearing House Associations of New York, Philadelphia and Boston were compelled to have recourse to the expedient so successfully resorted to during the panics of 1873 and 1884, of issuing Clearing House loan certificates. This action, together with the large disbursements of the United States Treasury, contributed greatly toward relieving the situation and the restoration of confidence, which, after all, is more essential and effective in bringing about a return to normal conditions than any increase in the circulating medium.
The amount of Clearing House certificates issued by the New York Clearing House Association aggregated $16,645,000; by the Boston Clearing House Association, $5,065,000, and by the Philadelphia Clearing House Association, $8,870,000.
While the severity of this monetary disturbance passed away to a considerable extent with the close of the year 1890, especially in the larger cities, its effect upon the country at large continued throughout the following year, and, as Mr. Lacey said, in closing his comments upon the causes which led to the disturbance, the process of liquidation continued and was reflected in the arrest of a multitude of contemplated operations, the abandonment of projects, the annulment or suspension of innumerable contracts, the curtailment of business in general and widespread depression and stagnation, which had an intimate bearing upon the bank and business failures which followed in 1891.
Although Mr. Lacey accurately described the conditions which led to this monetary disturbance, what he believed to be the passing away of the financial storm was simply a temporary lull in its fury, the full force of which did not sweep over the country until 1893, a little more than a year after he had retired from the office of Comptroller.