It is said that history does not repeat itself, but it can rhyme.
Let’s reflect on a nation that is coming out of a protracted war, experiencing a surge in productivity, has a commodity surplus and being subjected to a variety of disruptive technologies. Does this sound like 2015? Or is it 1865, or both?
The U.S. appears to be winding down, ever so slowly, from military involvement in southwest Asia at present, while in mid-1865 the Civil War was drawing to a close. Our ancestors were beginning to experience a surge in industrial productivity as the industrial revolution kicked into high gear with industrial innovation, similar to our present revolution in electronic and communication technology. The current developments in tech are disruptive of former business models, not entirely dissimilar to the expansion of railroads and telegraphs in the 19th century and the means of communicating, obtaining information and transporting goods and products. In 2015 we appear to have a glut of hydrocarbons, while in 1865, with the end of military demand for grain, the nation experienced a glut in agricultural products.
Into this mix, a group of Clinton business owners started Clinton National Bank. It may be impossible to discover their motives for doing so, but there are factors that might point to several reasons.
One was the completion of a railroad bridge across the Mississippi River in January 1865. Since 1860, the railroad had stopped at Little Rock Island and goods were ferried to Iowa. The completion of the bridge would enable a more efficient and possibly cheaper means of shipping lumber products to the booming economy. This development could allow the expansion of the lumber as well as other local industries. With demand increasing and shipping secured, a more efficient means of payment and finance was needed.
The U.S. government may have met this demand with the passage of the National Banking Acts of 1863 and 1864. Under this legislation, bank charters were issued by the federal government and national banks were subject to regulation by the Office of the Comptroller of the Currency, still the case to this day. Capital and reserve requirements were placed on national banks and other national banks were required to accept the notes of other national banks at par. This created uniformity to the U.S. currency.
At the time, state banks (the only banks that existed prior to these laws) would issue notes whose value would vary depending upon the institution and the state in which the bank was located. This was not efficient, simple or conducive to an expanding national economy. Finally, the value of notes a national bank was permitted to issue was dependent upon a percentage of U.S. Treasury securities owned by the bank. If a bank wanted to increase the number of loans, it would need to purchase additional treasury securities, providing a market to finance the Civil War and the large federal debt incurred to conduct the war.
It is possible that the founders of Clinton National Bank contemplated the advantages of obtaining a national bank charter as an efficient means of receiving payment from their lumber customers with notes issued by other national banks. They could conduct business throughout the country without concern for discounting state bank issued notes received in payment for goods provided and efficiently pay for raw materials, equipment and machinery to conduct and expand their expanding businesses.
Of course, this was no guarantee of success or that the bank would last. The Comptroller of the Currency issued numbered charters to over 1,500 national banks by 1865. Clinton National Bank was issued charter number 994. Based on information from 2014, there are 24 national banks in the U.S. with a smaller charter number than 994. This would make Clinton National Bank the 25th oldest national bank in the country. State banks continued to operate and many came under FDIC protection in a later generation. Based on 2014 information from FDIC on bank establishment dates, Clinton National Bank is the 150th oldest bank in the country with FDIC coverage.
Times have changed and faces with them. Many of the general concerns faced in 1865 are repeated in our present time. Though not identical, there may be enough similarities to compose a short rhyme.
David Helscher is a senior vice president with Clinton National Bank.