Authors: H.W. Brands
Returning to St. Louis for consultation, Sherman had no difficulty securing the requisite funds. James Lucas and Henry Turner pledged $200,000 in cash and arranged a credit line of $50,000 with a New York bank in which Lucas was a principal. Sherman resigned his army commission, fetched his family—which now included a daughter, Lizzie—and traveled west once more. They reached San Francisco on October 15, 1853, and set up housekeeping, first at a hotel on Stockton Street near Broadway, then in a rented house on Stockton, and finally in a new brick house on Green Street that Sherman purchased from the builder.
T
HE BANKING BUSINESS
proved more of a challenge than Sherman had anticipated. Costs were greater than he guessed, starting with the cost of constructing an office. He had budgeted $50,000 for acquiring a lot and erecting a building; by the time the new office of Lucas & Turner, located on the corner of Montgomery and Jackson, greeted its first customers, Sherman had spent half again that much.
Yet the hardest part of his new job was distinguishing good risks from bad. Everyone in San Francisco had grand schemes for making money: by subdividing property, developing mines, building streets and hotels and
warehouses and homes. Those projects that succeeded paid handsomely, to the entrepreneurs and their lenders alike. But many projects failed, leaving the entrepreneurs illiquid and the noteholders empty-handed.
One of San Francisco’s leading entrepreneurs—and one of Sherman’s most important customers—was Henry Meiggs, a member of the city council and a businessman with large and varied interests, including a chain of sawmills up the coast near Mendocino. From his mansion on Broadway, Meiggs strode forth each day to tend to his business affairs and the wellbeing of the city. Like many San Franciscans, he had sizable debts, but these supported his profit-generating activities and appeared hardly out of line.
Yet Sherman developed an uneasy feeling about Meiggs. Some of Sherman’s discomfort followed from Meiggs’s overrepresentation in the loan portfolio of Lucas & Turner: $80,000 of a loan total of $600,000. Some owed to the circumstance that Meiggs kept his positive balances in other banks, leaving Sherman unclear about the exact state of his liquidity. Finally, certain things about Meiggs just didn’t seem right—his promises and explanations were always plausible but never entirely convincing. Consequently, Sherman decided to diminish the bank’s exposure in Meiggs’s direction. When Meiggs applied for a draft for an additional $20,000, Sherman politely declined. Meiggs indignantly asked whether Sherman distrusted him. No, Sherman said, it was just that the bank had limited resources and as a matter of policy was concentrating them among the customers that did all their business with Lucas & Turner. Thereupon Meiggs invited Sherman to join him on a visit to the local office of a German bank, where Meiggs demonstrated, “as clearly as a proposition in mathematics,” in Sherman’s ironic characterization, that his business at Mendocino couldn’t fail. The new $20,000 would pay for a powerful tugboat to bring his lumber ships into port at San Francisco. The Germans were persuaded; they offered to relieve Sherman of Meiggs’s entire debt if he—Sherman—would supply a draft to pay Meiggs’s shipbuilder in Philadelphia. Sherman was happy to oblige, as this transaction lightened his load with Meiggs considerably. Moreover, the new note was secured by mortgages on San Francisco real estate and by warrants issued by the city government.
Not much later, Meiggs disappeared. Investigation revealed that he
and his family had left on a steamer bound for Chile, well beyond the reach of American law. Additional investigation showed that his debts were far greater than either Sherman or the German bankers knew, totaling more than a million dollars. Sherman took possession of Meiggs’s mortgaged properties, redeemed the city warrants, and congratulated himself on following his intuition. The Germans had to admit they’d been humbugged, and were forced to close their doors.
H
UMBUGS WERE UBIQUITOUS
in California during the Gold Rush era, and the doubts they sowed in the popular mind sprang up to harm everyone. Even in settled circumstances, nearly all banks are failures- in-waiting; the essence of the banking business is to lend out the money depositors bring in, and to receive repayment, including more interest than the depositors get, before the depositors demand their money back. In confident times the arrangement works well, as depositors prefer the interest on their deposits to the security of holding cash. But when confidence is shaken, as by the default of a major bank customer, depositors’ preferences shift from interest to security, and they may demand their deposits at once.
Sherman got caught in one such crisis of confidence. The Page, Bacon & Co. bank of San Francisco was part of a larger Page operation that had offices in the East and was engaged in all manner of lending for the nation’s booming economy. Most important, both for the bank and for the nation, was the railroad industry; one of the Page’s principal customers was the Ohio & Mississippi Railroad. During the winter of 1854–55 the Ohio & Mississippi ran into financial trouble, which spilled over into the affairs of the Page. On February 17, 1855, the Pacific Mail steamer arrived at San Francisco with the news that the Page branch in New York had suspended operations. Despite the best efforts of the Page officers in San Francisco to explain that the difficulty in New York had absolutely no bearing on the finances of the San Francisco house, it did
have
a bearing—for the simple reason that the Page’s San Francisco depositors believed it did. Seized by panic, they converged on the Page offices and demanded their deposits. For three days the bank’s reserves decreased alarmingly.
The Page bank’s director, Henry Haight, approached Sherman for an emergency loan. Despite the jolt the run on the Page caused the San Francisco financial community, Sherman felt confident. Against deposits of some $600,000, his Lucas & Turner bank had cash reserves of nearly $500,000, an usually large fraction. Loans receivable summed to an additional $500,000. In other words, Lucas & Turner was well positioned to withstand a test of its strength.
Sherman was reluctant to weaken that position, and would do so only if given personal assurances that the Page bank would make every endeavor in its own behalf. After the close of business one afternoon he visited the Page bank. To his dismay he discovered that Haight had been drinking, and was now lamenting that “all the banks would break.” This was hardly the reassurance Sherman was seeking. On the way out he encountered a group of the city’s bankers and leading businessmen, who were preparing a joint statement expressing their faith in the solvency of the Page. They asked Sherman to add his signature to theirs. He inquired whether they had examined the accounts of the Page bank, and pointed out that the proposed statement made them morally, if perhaps not legally, responsible for the Page’s fate. This struck them as a novel idea, not entirely germane to the crisis at hand; but they were compelled to reply that they hadn’t. Sherman declined to sign, and bade them all good evening.
The run on the Page resumed the next day, and the day after that the bank closed. The financial panic spread across the city, and Sherman, expecting a torrent of frantic depositors at his own doors, prepared for the worst. He opened the Lucas & Turner office at the usual hour, to an anxious crowd. The depositors streamed in, pushing to get to the tellers’ windows. “The most noisy and clamorous were men and women who held small certificates,” Sherman observed. This was a blessing, as paying them depleted the bank’s holdings only slowly. Through the course of the day Sherman managed to satisfy all those who showed up. His reputation for sober diligence kept their number down. “Several gentlemen of my personal acquaintance merely asked my word of honor that their money was safe, and went away.” The mood of the crowd was captured in a remark by one of Sherman’s depositors, a Frenchman still struggling with English:
“If you got the money, I no want him; but if you no got him, I want it like the devil!”
That evening Sherman began dunning the people who owed him money. Although most of his notes were not callable, he judged that his debtors, who included some of the chief businessmen of the city, ought to share the risk of the city’s banks—if only because the ruin of the banks would paralyze the economy of the entire region. Some of the men Sherman approached were themselves paralyzed and unable to act. Of one man who owed $25,000, Sherman wrote, “I found him in great pain and distress, mental and physical. He was sitting in a chair, and bathing his head with a sponge.” Nor was he alone. “So great was the shock to public confidence that men slept on their money, and would not loan it for ten per cent a week on any security whatever.” Others, fortunately, took a broader view. When Sherman asked the holder of two acceptances, in the amounts of $20,000 and $16,000, to pay one, the man offered to pay both, with a personal check, asking only that Sherman not cash the check unless it proved necessary.
In fact it didn’t prove necessary. As word got out that Sherman had the backing of some of San Francisco’s most solvent citizens, the pressure on Lucas & Turner eased. Depositors stopped withdrawing money, and began returning funds they had withdrawn the day before.
T
HE BANK PANIC
of 1855 was the most serious calamity to hit San Francisco since the great fire of 1851. Hundreds of businesses went under, erasing millions of dollars of equity. Prices collapsed; workers were idled. A sense of sullen foreboding, of promises broken and golden dreams dashed, pervaded the city.
The ugly mood grew uglier when one of those idled by the panic, a banker named James King of William, took up a new calling. King (“of William” had been added to distinguish this James King from others) turned to journalism and launched a crusade against political corruption in the city. It was an easy target, for in the four years since the Committee of Vigilance had suppressed the Hounds and Ducks, the criminal element had
gone into politics. Graft and extortion became a regular part of governance, enforced by thugs on the politicians’ payroll and enabled by the same laissez-faire attitude that had allowed the gangs to flourish.
James King, however, refused to let things be. “It’s no use trying to dodge the
Bulletin
,” he warned the objects of his paper’s wrath. Foremost of those objects was James Casey, an erstwhile inmate of New York’s Sing Sing Prison who graduated to the San Francisco Board of Supervisors without—in King’s plainly stated view—changing his character or much altering his modus operandi. As if to prove King correct, Casey shot him fatally on the street in broad daylight in May 1856.
King’s editorials scratched the conscience of those who had allowed the city government to fall into the hands of such as Casey, and his killing remobilized the membership of the dormant Committee of Vigilance. Even as King breathed his last, circulars summoned the city’s honest inhabitants to its defense. Casey, the shooter, surrendered himself to the sheriff from fear of the Vigilance crowd—and from hope that the sheriff, who was in league with the criminal element, would allow his escape after things calmed down.
Several hundred, then several thousand, citizens answered the appeal of the revived Vigilance Committee. A subscription almost instantly raised $75,000 for arms and other expenses. An executive committee was chosen, headed by William Coleman, a prominent merchant known for astute judgment and no-nonsense dispatch. Officers were elected to drill the rank and file, who marched about the streets, shouldering bayoneted rifles and pulling cannons commandeered from the armory.
As control of the city slipped to the Vigilance Committee, the mayor, James Van Ness, called on Governor William Johnson for aid. Johnson in turn called on William Sherman, who, in light of the tenuous condition of the banking business, had accepted a part-time commission as major- general of the state militia. Sherman answered Johnson’s summons to an emergency meeting. “I found him on the roof of the International [Hotel],” Sherman wrote, “from which we looked down on the whole city, and more especially on the face of Telegraph Hill, which was already covered with a crowd of people, while others were moving toward the jail on Broadway.
Parties of armed men, in good order, were marching by platoons in the same direction, and formed a line along Broadway, facing the jail-door.”
An opposition group calling itself the Law and Order Party had gathered in front of the jail to support the sheriff. But on assessing the size and determination of the Vigilance forces, the Law and Order men withdrew, leaving the sheriff to answer the Vigilance demands. The central demand was the surrender of Casey, but while they were there the Vigilance leaders insisted on custody of another prisoner, Charles Cora, who had shot and killed a federal marshal but thus far evaded conviction.
Shortly thereafter the Vigilance Committee conducted a trial of Casey, which yielded the predictable verdict. Cora received a separate trial but the same verdict. On May 22—the day of King’s funeral, as it happened—the two men were hanged.
N
O TEARS WERE
shed for James Casey, but at least a few fell for Charles Cora. Cora had been a professional gambler in New Orleans before coming west, and he continued to ply his craft in San Francisco, with evident success. Yet Cora’s luck at cards was nothing next to the luck of his partner, a woman named Belle, at a much older profession.
During the early years of the Gold Rush, California, with far more than its share of single men, had far more than its share of prostitutes. Many came from South America, like Pérez Rosales’s shipmate Rosario, who worked her way north before receiving a rousing welcome in San Francisco. Pérez, for the sake of conscience or health, had been one of the few aboard the
Stanguéli
to decline her favors, but as she debarked he felt a certain admiration. “Rosario,” he wrote, “like a privateer in her magnificent silk dress, cape and parasol and attended with the utmost eagerness by all who came on board, soon left the vessel and disappeared, surrounded by courtiers, through the heavy fog.” Other
filles de joie
were French, driven from Paris by the same combination of economic depression and political upheaval that launched Jean-Nicolas Perlot across two oceans. One Frenchman in California rather proudly described the superiority of his countrywomen: “Americans were irresistibly attracted by their graceful
walk, their supple and easy bearing, and charming freedom of manner, qualities, after all, to be found only in France; and they trooped after a French woman whenever she put her nose out of doors, as if they could never see enough of her.” Still other prostitutes were Australian and Chinese, the latter including the famously lovely Ah Toy, characterized by one admiring argonaut as “the finest-looking woman I have ever seen.”