By Bruce R. Tucker, Alfred Historical Society
At the close of the 18th century, Alfred began to feel growing pains. It had evolved from a hamlet with a few sawmills to an agricultural community with cleared fields. Resident’s needs were few on these self sufficient farms and what items were required could be easily gained by exchanging labor or surplus with neighbors. Most farmers kept account books (or day books) to keep track of their debts and debtors and accounts were eventually balanced with little hard cash being exchanged. It was a flexible closed system and sufficed on the cash starved frontier among neighbors who knew one another well.
In the early 1800’s, the naming of Alfred as the shiretown for York County caused an influx of folks coming to attend court, transact land sales, settle probates and file law suits. Residents operated stages, hotels, taverns and smithies to serve these out of towners. Many lawyers, judges and county officials took up residence in town to be near the courts and the commerce that gravitated to a county seat. These were educated men with the vision to recognize profitable opportunities on the frontier and the political connections to turn dreams to reality. Other men of commerce came to Alfred seeking legal help or funding and brought their entrepreneurial schemes with them. Their success in reflected in the beautiful houses they built in the village. Talk of a railroad passing through town began in the 1830’s and was really rampant by mid century. With all the businesses and men of commerce in town, Alfred’s economic future seemed secure. It was also apparent that the system of barter that was sufficient for a rural economy would not support this level of commerce.
Increasingly, Alfred’s taverns, stagelines and stores moved away from a barter system as payment for goods or services and demanded hard cash. Unlike the complicated accounts between neighbors that could drag on for years, cash settled the debt immediately. This was especially important when the bargain was between strangers and there was no way to access the buyers honesty or ability to pay. Local merchants and people from out of town doing business in Alfred appreciated the fixed value of money because there was no question of its value and less need to haggle. Alfred merchants needed cash to by goods from distant wholesalers who supplied their sale items. Cash was more portable, had a long shelf life, and was acceptable everywhere. As cash became more common in the backcountry, it became the accepted medium of exchange, especially for business. They couldn’t leave home without it.
As the country crept up on the industrial revolution, Alfred’s men of commerce considered more ambitious projects than buying another woodlot or purchasing a share in the local mill. Everywhere men were pooling their resources and seeking capitol to finance larger undertakings such as railroads, foundries or textile mills. The ideas, machinery, technologies and labor all required cash as payment and all demanded huge outlays of capital, far beyond the meager abilities of local businessmen to raise. Even Alfred’s farmers needed cash to buy the labor saving farm machinery, fertilizer and improved breeding stock becoming available. If Alfred was to keep up economically, it needed an easier way to accumulate and access large sums of money- it needed a bank.
The idea was not a new one, of course. Older coastal towns such as S. Berwick, Biddeford and Saco had established banks earlier in the century. These were state chartered banks that operated thusly: A group of investors (stockholders) raised money to capitalize the bank and deposited it in a bank in Boston. The local bank issued its own promissory notes to be redeemed from the money in the Boston account. These bank notes were used as currency, passed from hand to hand, working its way through the monetary system until eventually arriving in Boston. The Boston bank withdrew, from the local banks account, the notes value amount and returned the canceled note to the local bank be destroyed (usually burned). This balanced the account and removed the bank note from the monetary system. For their investment the shareholders were guaranteed a fixed interest rate for their money supplied. The local bank received no interest on their money deposited in Boston. The system seemed simple enough but as events panned out, it was anything but simple.
The Alfred bank received her charter March 5, 1855 and was incorporated soon thereafter. The directors met at the new County fireproof near the courthouse, trying to drum up enough interest to capitalize their bank at $50,000. They were selling 500 shares at $100 per share They found there were local people champing at the bit to invest in this enterprise. Lawyers were well represented among the shareholders. Nathan D. Appleton, Ira T. Drew, Daniel Goodenow, and Nathan Dane were all Alfred barristers who ponied up some cash. Luther S. Moore of Limerick, Edward S. Morris of Newfield, and Robert T. Blazo of Parsonsfield were investors, prominent lawyers in their respective towns. Samuel C. Adams, currently register of deeds, bought shares in the bank. Storekeepers and traders were well represented by Moses Ayer, James M Burbank of Newfield; Abner Burbank of Limerick; Silas Derby, the Conants, the Littlefields of Alfred; Benjamin Dalton, Pendexter & Pray of Parsonsfield; George A. Frost of Sanford; Samuel Lord, Stephen Merrill of Springvale and others were investors. Millowners George W. Wilson of Newfield; Daniel Clark of Sanford; Dimon Roberts of Lyman bought shares. All the above professions handled cash, knew its power, and hoped to make more for themselves. Wealthy farmers with extra cash saw these banks as a safe place to invest their money. Men such as George W. Came saw the bank as a way to carry on his private, personal lending business and reduce his own involvement. While Came engaged in farming he lent out large sums of money in private loans to individuals or even towns. A bank would handle the messy bookkeeping and collection details for Came and still keep his money working. The bank would also be taking the risk in loaning to persons who would not repay. The bank dividend was a lot more certain and simpler than extending loans to individuals. The bank stock was also a more liquid investment than personal notes. Investor Nathaniel Chadbourne of Sanford had seen his brother Reuben become a successful banker in the Midwest and perhaps hoped to follow his footsteps. ( He eventually did follow those footsteps and died working for his brother in Michigan.) Family connections also likely led relatives to invest when the opportunity to buy shares became known. Alfred lawyer Ira T. Drew’s father (Winborn A. Drew), sister (Jane M. Drew), father in law (Moses Ayer), and brother in law (John N. Stinson) were all investors. The family connection of the banks largest shareholder with 100 shares (20% of the banks capitalization) , Joseph Drew of Boston, is still to be determined. The names of the bank shareholders were published each year so the public could judge if the bank were controlled by a few men, out of towners or men of integrity. It was the public gauge on how responsive the bank would be to their concerns and how safe their money was. Confidence in the bank was closely linked to the good name of those stood behind it and the public trusted them to act responsibly. Here again the public relied on personal knowledge of the directors, trusted them to operate in the towns best interest and did not rely on the government to regulate or oversee their actions.
These stockholders were among the most prominent and financially successful men in their communities. They were successful because they were quick to take advantage of new ideas and opportunities and saw the shift from an agricultural economy to a mercantile or industrial one. They also saw the need for capitol formation necessary to take advantage of this shift. Larger, more established towns already had banks or access to capitol. Smaller towns in interior York county realized they needed capitol formation but needed to pool their resources to do it, hence the interest by citizens of Newfield, Lyman, Limerick et al. At the Alfred Bank, many of these stockholders would become the banks largest creditors as they attempted to finance their leap into the nascent industrial revolution where cash was king.
Preparations for the bank were made in the store owned by John H. Sayward and Nathan L. Webber that sat near the corner opposite the John Holmes house [present location of Hussey Gardens]. On Aug. 27, 1855, G. Came wrote,” They hoisted the save into the Bank room over John Saywards store with a derrick. The save was hauled up with 4 oxen from Kennebunk depot by Bradford Allen on Saturday, did not get up with it until dark. It weighs 3 tons I believe. Mr. Nathan Dane is President of the bank and John N. Stinson is the cashier. Father has gone over to the Village to pay in the money he has subscribed for which is $800.” (Came p.22) Although earliest records of the bank are missing, activity was apparently heavy when the bank opened for business. As expected many loans of several hundred dollars were made to local merchants and individuals. Some people were borrowing larger amounts.
The Alfred bank’s system of reconciling their notes had several drawbacks. Not all notes made their way through the monetary system. Some notes were treated as cash and accepted as such for payments between individuals, staying in circulation a long time. Some notes were considered so secure and redeemable that they were saved like cash, stuck in mattresses or tin cans by frugal Yankees who assumed the drafts could be redeemed at any time in the future. These notes were taken completely out of the monetary system and never redeemed. Although banks considered this the supreme testimony to the public confidence in their institution, it created a cash flow problem for the banks. Once the bank had leant out all its capitalized value, it had to wait until some notes were redeemed before lending out more. But sitting in a store till or under a mattress, the notes stayed in circulation, not redeemed and never reconciled. Rather than shut down operations, the big temptation was to continue issuing notes on the Boston bank deposit, trusting a certain number of notes would stay in circulation and not come due for a while. This was a very common practice and all state banks seemed to have participated in it. A bank commission report states, “ The practice of overdrawing is a pernicious one. Every cashier dislikes it, and while he may consent, he never approves, and if the Directors set the example they must expect others to follow.”
The problem was magnified by the huge sums dispersed through these banks for soldiers’ bounty payments and paying off regiments during the Civil War. This put large sums of cash into the hands of common folk who never handled much money before. Their newfound wealth was not burning a hole in their pocket and they held onto their money. These notes took a very long time to reconcile. As the bank commission so eloquently stated,” like the little rills that feed the mountain springs, it has found its way into every hamlet and village of the land, lining the pockets of the people as never before; and such is the spirit of economy now prevalent among all classes, that the dollar assumes its goodliest proportions, increasing from the size of a knot hole to that of a Cheshire cheese, and is not parted with without “ a valuable consideration.” ( Gee, they just don’t write government document like this any more. Too bad. - ye olde ed.) In plain English, people who never had or needed cash before probably didn’t need to spend it now. They wouldn’t part with their cash without striking a hard Yankee bargain ( good value for their money) and then only reluctantly. This really created a cash flow problem for the banks as few of the notes were being redeemed by the Boston bank.
The town report for Alfred 1864/65 shows the magnitude of the town borrowing to provide bounty money to fill the towns enlistment quota. Between March 1864 and Jan. 1865, Alfred authorized $12,300 to be spent procuring soldiers for the draft. This was an age when the town school budget was $1000 and $500 supported all the town’s paupers. The town also forked out almost $1000 in aid to the families of volunteers (which amount was to be refunded by the state). Alfred had borrowed $4000 in notes from the Alfred Bank, the balance from citizens and moneys due from the state. Interestingly, John N. Stimson , clerk at the bank, was due $4850 for procuring soldiers and had already been paid $850 to date for the same purposes. I think we can assume the recipient of the bank loan may have facilitated the approval process.
The dealings of the bank exposed Alfred to the dark side of wider commerce. A couple of enterprising Alfred lads were implicated in throwing a safe from a train in Conn. and rifling its contents. An accomplices turned states evidence and ratted them out. By the time they were apprehended, the train robbers were engaged in counterfeiting in New York. The bank president, McIntyre, and Stimson, the clerk, were summoned to Conn. to testify at the trial as apparently much of the stolen money and bogus bills had been exchanged at the Alfred Bank. (You may note that this train robbery predates the efforts of the James Gang who claimed to have pioneered this larcenous art form. Apparently they were only following in the footsteps of forward thinking Alfredians. ye olde ed.)
On July 19, 1863, George Came reported, “ Some body broke open the outside door of the bank last week but did not make a “haul”.” In June of 1864, a more serious attempt was made on the bank. Came stated, “ The bank was again entered by burglars. They bored through the outside casing of iron and through several inches of mortar and cement about the size of a man’s fist or a little larger. When they struck steel bars that could not be punctured by their little machinery, or daylight brought them up. They left line and little pegging awls. There was 5 or $6000 in the safe.” The rest of the tools were found the next day under a bridge in Sanford near Powers Tavern. Between these attempts, however, there occurred a financial calamity that rang the death knell for the Alfred Bank.
On Sept. 19, 1863 Came notes, “ There is trouble with Alfred Bank. Luther Moore has failed and it is said owes about $10,000 to Alfred Bank. Stimson and McIntrye have resigned it is said, I don’t know why. Stimson expects to absent. Samuel C. Adams, President and Wm.Henry Conant, cashier until a meeting is held.” A letter from the state’s bank auditors dated Sept. 23 infers that an audit in July 1863 revealed some questionable bookkeeping involving missing bank notes. Most of the blame apparently fell on the bank clerk who, the auditors felt, “ did not very carefully look after the business of the bank.”
Luther Moore, whose financial problems high lighted the banks problems, was a prominent Limerick citizen. A Newfield native, he was educated at Limerick Academy, became a member of the York Co. Bar in 1844 and served in the Maine Senate and Legislature. A progressive farmer, he owned many acres and was a trustee of the State College of Agriculture. Moore was also one of the banks shareholders but how he came to borrow one fifth of the banks capitalization is not clear.
Stimson too had taken out large loans to the tune of over $8000 that showed on the ledger soon after his dismissal. He had purchased a woolen mill in Limerick in 1861 and likely expended large sums to make a go of it. During the war, Stimson frequently traveled out of town, recruiting soldiers for Alfred’s quota and buying horses to sell the army. The bank sued Moore and Stimson to recover their lost assets. In 1871, the bank recovered near $7000 from the auction of Moore’s property. Years later, much of Stimson’s debt remained outstanding.
After the fall of 1863, more than the handwriting in the ledger books changed for the Alfred Bank. Fewer loans were given out and the major activity seems to be accepting payments on loans outstanding. In the fall of 1865, the bank had to decide whether to become a federally chartered banking association under the new banking laws or surrender their state charter and cease business all together. They voted to close up shop for good effective Oct. 28,1865 with two years to redeem all outstanding notes. Advertisements were printed in the Maine Democrat and the Boston Advertiser calling in all notes issued by the Alfred Bank. The bank directors started burning unissued and returned notes at a fearsome clip, $20,000 to $30,000 per blaze. By now Samuel Came was the cashier, handled the banks legal problems and was entrusted with shutting the bank down. They moved the bank’s office from over Sayward's store into Derby’s store which Came had purchased as an office for his legal practice. In Oct. 1868, they sold the bank vault to Nat Thompson for $333 and the other bank furniture for $6.95. The bank’s death throes continued until Oct. 1871 when the directors declared $4282.70 worth of notes were still outstanding (likely under mattresses), and the bank held $4204.22 in worthless bills and checks. All were deemed uncollectible and written off as a loss.
The story of Alfred’s little bank is not an isolated one. State chartered banks, like Alfred's, had sprung up all over the country like mushrooms after a spring rain. They all began issuing their own notes and many were less stable and less conservative than the Alfred Bank. Banks began to keep ledgers of the relative value of other banks issued notes, discounting their face value based on how much trouble the issuing bank was in. If the note was from a bank that was wildly overextended, the note was worthless. The person that accepted the note as payment in good faith was stuck until he could find someone else to take it off his hands. For example, Sanford’s Mousam River Bank of the same size was opened for business Aug. 16, 1854, and had injunctions filed to cease business by Sept. 22. By Nov. 1856, it had $ 40,000 out in bad loans. It changed its name and limped along until 1861 before closing for good. (Emery 308,9) The state and, indeed, the nation was awash in a sea of red banking ink in the mid 1860’s.
In the final analyses, what purpose did these small local banks serve? Their brief, tumultuous existence was really the growing pains of our industrial economy. To the community, Alfred’s Bank was a status symbol, a sign to village was coming of age, venturing boldly into the capitalist world. It was another civic garland akin to the courthouse and the coming railroad. It marked Alfred’s men of commerce as being astute enough to recognize a bank was an asset to the town and they had the where-with-all to create one.
Socially, America was shifting from an agricultural economy to an industrial one. The idea of work shifted from thinking of tasks like building a stone wall or plowing a field to laboring by the hour for a wage in a textile mill. The completion of a task no longer became the object of work, works value was how many hours some one paid you to labor. Time began to equal money. People began to earn their living performing one specialized task. That task would earn money that would purchase necessary goods that someone one else specialized in producing. Even farmers began to specialize in their production; dairy, produce, grains, potatoes, all seeking a “cash crop” to buy the items their diversified subsistence farms once produced. Agriculture became industrialized. Farmers labor was no longer sufficient to pay their road taxes or produce the farm machinery they came to depend upon. Farmers needed cash too. Banks were a repository where cash was safely stored and made available.
Institutions were created to serve this new way of life, society in general assuming tasks formerly handled by families and friends. Town farms began to care for the local poor and asylums in Augusta housed the insane. Trade schools and agricultural land grant colleges arose to provide specialized training for this new economy. A boy could no longer learn everything he needed to know to earn a living from his father. Banks were an institution that arose because they filled a need in society, providing money to finance this new way of life.
There was no blueprint on how to structure and govern these new institutions. Naturally, they were not perfect at their inception. Only time and experience could work the bugs out of the system as schemers angled to cheat the system and lawmakers sought to thwart them. When regulators at the state level failed to curb the banking abuses, federal banking policies stepped in. Federal law required that the confusing avalanche of local bank notes be abandoned and the national currency be used. Laws were passed to standardize banking and auditing practices. Book-keeping and accountant practices were raised to a higher level and both became professions requiring education and experience. Eventually, federal banks offered insurance to depositors, calming fears and lending confidence to those who left their money in the bank.
Lest we become too smug in reflecting on the mistakes of our forefathers, we only have to recall the savings and loan scandal of a few years ago. As long as a bank controls money, men will scheme to get their hands on it. In an earlier age, we would have been panicked by banks collapsing but now we trust the government to make things right. Government will continue to play catch-up with banking laws and bailout the public with their own tax money.