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Cooperstown's First Bank

Waldo Ellsworth
(First National Bank of Cooperstown)

Presented at the Annual Meeting of the New York State Historical Association in Cooperstown, on August 29, 1940
Published in New York History Vol. XXII, No. 4 (October 1941), pp. 401-410

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Mr. Ellsworth, who is a teller of the First National Bank of Cooperstown, has based this paper on the records in the possession of this bank, which is a successor of Cooperstown's first bank; the accounts in the Cooperstown Freeman's Journal; and the standard local histories.

THE PETITION to the legislature of the state of New York in 1825 for the incorporation of the Otsego County Bank at Cooperstown made several significant statements. As a manufacturing county, according to the petition, Otsego was second to but one in the state. There were in successful operation within its limits nine cotton and six woolen manufactories, two extensive paper mills, numerous linseed oil mills, and other industrial establishments abundantly sufficient not only for the wants of the county's citizens but for a considerable amount of export. More than a million dollars in capital was invested in manufacturing in the county, and its population exceeded 4S,000 Between 50,000 and 70,000 dollars of capital was employed annually in the purchase and transportation of lumber on the Susquehanna and Delaware rivers.

In the village of Cooperstown, the county seat, was a large card factory which afforded employment for 300 persons, a large book printing establishment and stereotype foundry, and all the ordinary branches of business incidental to a commercial, agricultural, and manufacturing community.

The active capital paid into the Central Bank at Cherry Valley, went on the petition, was about $60,000; thus discounts were, of course, small and limited. This bank (founded in 1818) was situated in Otsego's northeast town, and its customers were principally from the counties of Schoharie and Montgomery. It had therefore been {402} found necessary for the inhabitants in and about Cooperstown to engage an agent to go to Utica once a week for the purpose of transacting bank business. He had been almost totally employed in these transactions for ten years past and had made himself rich from the profits.

This legislative petition was the beginning of the third attempt to obtain a bank charter for Cooperstown. The first effort had been made in 1814, but the bill failed to pass the state assembly; the second proposal, in 1824, did not get through the senate. But at last, on April 7, 1830, a bank charter was approved. After fifteen years of effort on the part of various committees of townspeople, zealously aided by the county's legislative representatives, Cooperstown was finally awarded a bank. Levi Beardsley, of Cherry Valley, called up the question in the state senate for the final vote. Not until several years later did banks start to multiply rapidly, and the state census of 1830 shows only forty-five in New York State.

The period of agitation to secure a bank was contemporaneous with the great growth of Otsego County. The Union Cotton Manufactory was founded in Cooperstown in 1809, or at practically the beginning of the American industrial revolution. The Erie Canal was opened in 1825, and a big westward migration was soon under way. One of the main stage routes west passed through Cooperstown. The many factories lining our streams found an outlet for their excess products in this movement. The migration also caused a rapid turnover of population and, after 1830, a slowing down of the rate of growth of this county.

Cooperstown, the county seat and a thriving community, attracted many able men. Samuel Nelson moved here in 1826, John A. Dix in 1828, and many others. Promotional activities reflected the optimistic spirit of the time. On December 19, 1831, a railroad meeting was called with Robert Campbell as chairman, which resolved that "it is expedient to give notice to the Legislature of our intention to incorporate a railroad company, to construct {403} a railroad through the Valley of the Susquehanna, to the mouth of Schenevus Creek." On January 16, 1832, at a meeting of the board of directors of the Great Western Turnpike Road at Albany, it was resolved to ask the legislature for the right to build a railroad from the city of Albany to Cooperstown and from there to Ithaca, with a capital of $1,000,000. Numerous other plans for railways were proposed later, and in 1839 a survey was made for one to connect Cooperstown with Canajoharie.

In 1828 the Susquehanna River was surveyed by De Witt Clinton, Jr. After much agitation and an appropriation by the legislature, another survey was started by H. Sargent on August 11, 1830 These surveys were designed to further the project of constructing a waterway the length of the Susquehanna River, through Otsego Lake and on to Fort Plain, thereby connecting with the Erie Canal. (Even George Washington in 1783 had thought of such a plan.) The growing of hops was introduced into Otsego County around 1830, and about 1840 the cultivation of the silkworm was attempted.

Of all these dreams, only two flourished: a railroad was constructed from Cooperstown to Colliers in 1869, and the cultivation of hops gradually came to occupy an important economic place in the county. The beautiful hills surrounding our village proved too much of a transportation barrier to make Cooperstown a large manufacturing or commercial center. The large number of factories that dotted our streams are gone. James Fenimore Cooper, writing in 1838 in his Chronicles of Cooperstown, correctly foresaw that Cooperstown was evidently destined to occupy, as he said, some such place among the towns of New York State as was filled by the villages on -the shores of the lakes in Westmoreland in England and several places in Switzerland. The great novelist thought Cooperstown excellently fitted by nature for a summer resort and stated that the village "for the last twenty years has been rather remarkable for its female population. Per{404}haps no place of its size can boast of a finer collection of young women..., the salubrity of the climate appearing to favor the development of their forms and constitutions."

The subscription book of the Otsego County Bank was opened on June 1, 1830, at Metcalf's Hotel in Cooperstown by the commissioners: Eben B. Morehouse, John A. Dix, John H. Prentiss, Robert Campbell, and George A. Starkweather. In two days 126 people subscribed for $297,000 worth of stock, or about three times the $100,000 capitalization contemplated. The distribution of the stock, a subject of much dispute and bitterness in some communities, seems to have been conducted with impartiality and fairness.

On June 23 thirteen directors were elected-- Robert Campbell, Henry Phinney, William H. Averell, Samuel Starkweather, Thomas Fuller, Calvin Graves, Henry Scott, Lawrence McNamee, John Russell, Joseph Moss, Joseph White, Levi Beardsley, and Alvin Stewart. On July 5, Robert Campbell, who was a lawyer and a member of the Campbell family of Cherry Valley, was elected president and held that o~ice until his death in September, 1847 On September 14, 1830, Henry Scott, a local merchant, was elected cashier and served until 1871, a span of forty years.

One of the first acts of the board of directors was to purchase a lot from William H. Averell for the purpose of erecting a banking house. The builders were Thornton and Lacey, and the structure was completed and occupied in 1831. According to the Freeman's Journal, of November 15, 1830, "Its design does much credit to the Architect and its location and structure will prove an ornament to our Village." This building is located directly across the street from the NEW YORK STATE HISTORICAL ASSOCIATION'S museum and is now occupied by the offices of the Leatherstocking Corporation. The total cost of the structure as carried on the books of the bank was {405} $3,310.93. Apparently alterations were made in 1851, as its valuation was raised to $4,000, and in 1860, to $6,000.

The bank went into operation on November 9, 1830. The first bank statement, which bears that date, shows discounted bills of $210.50 and deposits of $102. The first two customers of the bank were George Clarke and John C. Morris. Business picked up rapidly, and by November, 1831, discounted bills were $232,000, and deposits $28,000. Between 1830 and 1855, total deposits varied between ten and fifty thousand dollars; after 1855, they averaged about one hundred thousand dollars. Discounted bills ran between two hundred and three hundred fifty thousand dollars during this period. With a capital of S100,000 and deposits of $30,000, how did the bank lend $300,000? The answer is -- by circulation, or, in other words, by issuing currency. These bank notes or bills, issued payable to some particular person, were in denominations of one, two, three, five, and ten dollars. The circulation of the bank varied from $200,000 to a high of $440,000 in 1843; after that date the average was $150,000.

Circulation was essentially a method of creating capital in a growing country, which needed capital and did not have it. The privilege of circulation was oftentimes abused and caused great confusion because of the variety and doubtful value of some of the bank notes. The bank notes of the Otsego County Bank, however, were all redeemed, with loss to no one.

The New York State Banking Law of 1829 set up the Safety Fund plan, mutual insurance by New York State banks of their circulating notes. An assessment of j percent of the capital of the bank was paid into this fund, and if a bank failed, the fund was used to redeem its currency. This plan bears a certain resemblance to the present Federal Deposit Insurance Corporation. The State Banking Law Of 1838 provided that collateral must be deposited to protect circulating notes. A list of the collateral deposited {406} by the Otsego County Bank for that purpose shows that it held mortgages on real estate on a number of places outside Otsego County. In 1846 the double indemnity law on ownership of bank stock was passed. All of these laws provided a sound basis for banking in New York State and served as a model for other states, as well as for the National Banking System.

In May, 1837, all upstate banks suspended specie payment because of the panic of that year, which originated in New York City. During this panic year the Otsego County Bank continued to pay dividends and showed no particular strain. The only comment in the minutes of the board of directors occurs on May 2, 1838, "Resolved: That the bank resume specie payments."

The first dividend was paid on November 2, 1831, and throughout its corporate existence, the bank paid an average yearly return to its stockholders of 9½ percent.

Among the most active checking accounts in the bank was that of James Fenimore Cooper. The first deposit in this account was made on September 9, 1834, soon after Cooper had returned to Cooperstown from his European residence, and the last entry was a check dated September 1, 1851, just thirteen days before Cooper's death. During these seventeen years, he drew 1,740 checks against his account. Inasmuch as it was the custom during this period not to surrender checks, many of these are in the possession today of the First National Bank of Cooperstown. Endorsements were not required locally, and a number of these checks were made payable in a manner that would confound a present day bank teller. For example, checks were drawn payable to flour, potatoes, carpet bag, for splitting rails, cow, watch, E. Hull for manure, hay, plaster, beer, sow of pigs, Harry Clark in full for wagon, Boden for chairs, linen, drums and trumpets, maple sugar, turkeys, and sixteen cards of wool. All the local merchants were mentioned as well as Cooper's servants and other hired help. The members of his family named were Mrs. {407} S.A.F. Cooper, Susan, Paul, Charlotte, Fanny, and Caroline. He was a regular subscriber to the New York Evening Post, and the Journal of Commerce is mentioned several times. Other things specified were Pew Rent, Fourth of July, Otsego Mills, taxes, insurance, Dr. Thrall, Dr. Peake, Dr. Johnson, Merry Christmas, lawyers, Joe Tom on account of Paul for use of boat, Don Lamb in full for making shingles, C.V. DeLancey, J.H. Prentiss postage, Christ Church, apple hill, Democratic principles, and mass meeting to help thrash Henry Clay.

John A. Dix was a depositor, although not a very active one, from 1830 until 1852. He was one of the original subscribers to the capital stock but sold his interest on September 15, 1830, before the bank was opened.

Samuel Nelson began his account in 1831 and continued it actively throughout the existence of the bank. He became a stockholder in 1844 and in June of that year was elected a director of the bank and served until November 8, 1864 In 1845 he was appointed associate justice of the Supreme Court of the United States, so the bank should have had very able legal advice. Judge Nelson's absence or presence in Cooperstown can be easily followed by the activity of his checking account.

Among the other customers of the bank were many names associated with the development of Cooperstown and Otsego County. To list just a few, there were: John H. Prentiss, a county editor of considerable influence and twice Congressman; William H. Averell, one of the bank commissioners of New York State in 1841; Seth Doubleday, an uncle of General Abner Doubleday; and William H. Duff, a schoolmaster who taught Abner Doubleday in 1839, the year baseball was originated here.

Manufacturing companies with active accounts were the Hope Factory, the Phoenix Cotton Manufactory, the Union Cotton Manufactory, H. & E. Phinney, printers, the Oaksville Manufactory, the Arkwright Cotton Manufactory, and many others.

{408} On October 2, 1847, Henry Phinney, the publisher, was elected president of the bank, following the death of Robert Campbell. After Phinney's resignation in 1850, his brother Elihu held that office until 1854. Henry Scott then became president for a short time with David Willard cashier, but on Willard's death in 1855, William H. Averell was elected president and Henry Scott resumed the cashiership.

In 1853, the original charter having expired, the bank was reorganized with an increase of capital from $100,000 to $200,000. After the reorganization, the largest stockholders included William H. Averell, Horatio Averell, Elihu Phinney, Henry Scott, Joseph Moss, Elizabeth White, and Samuel Nelson.

In the weekly statement of condition of January 1, 1851, appeared a very unusual entry: "Stolen by burglars, $31,529.45." The burglary occurred on the night of December 28, 1850, and caused great excitement throughout the county. In September of that year, Abijah Leonard was tried and convicted of the crime. The records of the bank show that practically none of this money was ever recovered. The profit and loss account was reduced to less than $3,000, but because of good earnings no dividend was passed.

A side light on the manner of the times may be gained from the following offer of Editor John H. Prentiss printed in the Freeman's Journal of October 31, 1831:

The "thirty-six" of the "Tocsin" [that is, the supporters of the opposition Antimasonic newspaper] affect to be very confident of success in the election of their Ticket; so much so, that they have publicly claimed three hundred majority in the County. Now, to test the sincerity of these vain boasters, I pledge myself at fifteen minutes notice to deposit in the Otsego County Bank any sum, from $100 to $500, conditional that their Ticket will not be elected.

In 1863 during the Civil War, the National Banking Act was passed. On February 15, 1864, the First National Bank of Cooperstown was organized with Charter No. {409} 280. The major reasons for its organization were to acquire the circulation privilege of federal bank notes and to become a depository of federal funds. There were five directors, all of whom were associated with the Otsego County Bank, and they held all the new institution"s capital stock, which was then assigned proportionally to the existing ownership of the Otsego County Bank. George W. Ernst, who was commissioner of internal revenue for this congressional district, was president of the new organization for one month. He then resigned, and Calvin Graves became a director and president of the First National Bank.

In 1864 a New York State law placed a heavy tax on circulation. In the tax book of the town of Otsego for that year, a tax of $14,582.48 WaS levied against the Otsego County Bank. On that particular page of the tax hook appears the following notation: "The Otsego County Bank hereby declares that the tax herein levied is wrong and unjust and believed to be illegal as assessed to this institution and it is paid under protest." Attempts to recover proved futile. In 1865 because of the slowness of state banks in joining the National Banking System, the Federal Government placed a 10 percent tax on the circulation of state banks.

As a consequence of these taxes, on March 14, 1866, the following resolution was passed: "The directors are of the opinion that the interest of the stockholders require that the association should be dissolved." On May 14, 1866, notice was given to the superintendent of banks of New York State that the Otsego County Bank intended to close the business of banking on that date. On the same day at a meeting of the board of directors of the First National Bank, this minute was made: "Resolved; that in consideration and upon condition that the Otsego County Bank agrees to transfer and set over to this bank all its accounts, profits, etc., that the First National Bank hereby agrees to {410} assume and pay all losses that may arise to the Otsego County Bank."

Henry Scott continued as cashier of the Otsego County Bank to conclude its affairs, and on August 21, 1866, he was appointed cashier of the First National Bank.

Thus came to an end Cooperstown's first bank. James Fenimore Cooper in his Chronicles of Cooperstown of 1838 had truly said: "The incorporation has been well managed and it has been found very serviceable to the community."

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