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Bank On It
Thomas Freeman McKinney stormed through the door, surprising David Hill. The seated man rose as McKinney, a tall and stout man, stepped in front of Adam’s desk.
“Hill! What in blazes is this?” McKinney shouted, waving a piece of paper in front of Hill.
Hill, a thin, tweedy man with spectacles hung low over his aquiline nose, stared at the paper McKinney shook.
“What do you think it is?” he replied smugly.
McKinney’s face blushed with anger. “It’s a waste of my time, and a waste of Sam’s time. How dare you!”
Hill crossed his arms, stepping back from McKinney, distancing himself from the taller man’s rage. “It’s your own fault, McKinney. It merely is the price for conducting your business in the fashion you do. Apparently the Honorable Justice Adams believes that my complaint has merit.”
McKinney stepped forward, clenching his hand into a fist. “You Jacksonian jackass... I should-”
“Thomas!”
Another man entered the room. This man was older, with heavily greying hair. He was dressed in a full suit, finer than the other men in the room.
“Oh good,” Hill sighed. “Mr. Williams, would you mind taking your partner away? He’s doing your cause more harm than good.
Samuel May Williams sighed. “I thought as much. I was told Thomas would be here.” He looked from McKinney to Hill.
“Sam,” McKinney shoved the summons in front of Williams, “did you hear about this?”
“Yes,” Williams replied. “Now let me look at the summons.”
McKinney gave Williams the summons, and fumed silently as Williams read over the paper. After a moment of reading, Williams looked up, murmuring, “I see.” He looked over at Hill. “David, would it be possible for me to see the currency in dispute?”
“You’ll get your chance to see it in court. I have it kept in a safe place til then,” Hill replied.
“Doesn’t the accused have the right to examine the evidence brought against him?”
“Perhaps in the United States, but the last I heard, these parts were still called the Republic of Texas. We do things just a bit differently. There’s a right way and a wrong way to do things.”
“You’re going about things in the wrong fashion,” McKinney growled.
Hill shrank behind his desk, stepping even further back.
“Thomas! That’s enough!” shouted Williams.
McKinney stepped away from Hill’s desk, turning his back to Hill. He gritted his teeth, telling Williams, “Well, he’s doing this out of spite!”
“We can’t risk jeopardizing things here,” Williams said in a low voice. “Hill still owns valuable land. We may need to buy more land from him later down the line.”
“But the weasel is just trying to get us to pay twice for the property! That money’s good. I personally inspect each Republic of Texas note that goes through our store. He’s probably just hamstringing us with technicalities, such as the dates on the warrants we transfer as payment. I wouldn’t risk our reputation by passing bad money in these parts!”
“I know that,” Williams nodded. “However, errors in judgment can happen. We’ll just let our lawyers deal with it. Go on back to the store.”
McKinney sighed and shook his head, frustrated. He looked in Williams’s eyes, then nodded and walked out of the office.
Williams turned back to look at Hill. “I know Thomas has a temperamental nature,” Williams smiled. “I hope this won’t reflect too badly on us once this matter is in court?”
Hill stepped forward. “Oh, trust me, I’ll mention it!” He walked around the desk and stopped in front of Williams. “What goes around, comes around.”
“Now, what is that supposed to mean?” Williams asked, narrowing his gaze at Hill.
“Don’t think we’ve forgotten Monclova.”
Williams sagged tiredly at the mention of Monclova. He looked down at the wooden slats in the floor, then back up at Hill. “That was four years ago. 1835. When will you people stop penalizing me for an imagined crime?”
“Your friendship with Stephen Austin and Old Houston may have helped you get out of that, but not today, not here!” Hill set his mouth in a firm line.
“I’ve already apologized for any alleged improprieties that may have resulted from my business dealings in Monclova. Must I apologize yet again?”
“That won’t be necessary,” Hill waved his hand casually. “I’d just as sooner would rather see you leave Galveston. I hear tell you plan to move here, permanent. I don’t want that. I hear tell you want to open a bank here. I don’t want that.”
Williams pursed his lips and stared at Hill. “I won’t be bullied by the likes of you. I regret that you feel the need to dredge up old animosities, but none of these matter in this particular situation.”
“It’s not much of a leap for a scoundrel and speculator to start forging money,” Hill sniffed. “And if you do open your little bank, you’ll have the stain of a counterfeiting charge on your reputation. Imagine how trustworthy your bank notes will be then.”
“If you have a legitimate case, we will do what we have to do to make up for our error in judgment. However, if you simply wish to foul up our business here in Galveston, then by God, I will ensure that you do not do this ever again- to myself, or my partner McKinney, or anyone else, ever.”
Williams stepped in close to Hill, his face inches away from Hill’s face. He jabbed his finger into Hill’s shoulder. “Mark my words, I will ruin you. You can bank on that.”1
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The summons in question from the above fictional account currently resides in the massive Special Collections Archive at the University of Texas at Arlington. Filled out by ink and pen on June 15, 1839, by the hand of the Justice of the Peace of Galveston County, C.B. Adams, the summon demands that McKinney and Williams appear in court in a dispute over a $100 debt to David Hill. On the back is a handwritten note by Adams, outlining the circumstances. Hill alleged that the two businessmen paid him with an counterfeit Republic of Texas $100 note.2
The fact that makes this counterfeiting case newsworthy is that McKinney and Williams were essentially the fathers of banking in Texas. However, the road to establishing a bank was not an easy one for Williams to travel.
The journey began circa March 1834 in Monclova, within the Mexican state of Coahuila and Texas. Civil unrest from Santa Anna’s expansion of his power in Mexico City and political dealings between empresarios in Texas set the atmosphere of this business trip. Williams’s original intent on this trip was to reconfirm an empresario grant made by his friend and partner, Stephen F. Austin and himself in 1831, and to request a charter for a bank from the state government of Coahuila and Texas.
However, Austin was in jail in Mexico City by Santa Anna’s orders. McKinney, who was serving as a Texan politician for the Brazos district, was unable to attend a legislative session in Coahuila at the time, and asked Williams to serve in his stead. Circumstances exploded in Coahuila. The governor of Coahuila put up hundreds of leagues of land in Texas for sale, hoping to raise money for a state army to defend Coahuila from Santa Anna’s federal troops.3
Never one to pass up a good business opportunity, Williams and several others bought up 400 leagues of land at rock bottom prices.4 As in all massive business deals, where a limited few benefited over dozens of others, resentment were bred. Accusations and charges were leveled, such as bribery. The scandal grew to huge proportions, forcing Williams to defend himself. “I speak for myself and do solemnly assure you, that the report [of bribery] is unfounded even in the lightest shade,” Williams wrote in the Texas Republican.5 His intentions were to use the land to raise money for Texas, attracting settlers and purchasing arms, for Texas was already headed for the revolution of 1836.
What of the bank charter Williams sought out? It was approved in April 30, 1835 by the legislature of Coahuila. Then the charter was approved by the new Texas Congress in 1836.6 However, Williams was sidetracked from his goal of establishing a bank by a little thing called Texas Independence. After the revolution, Jacksonian anti-banking factions passed laws forbidding banks of issue. Historians Ivy and Bradford wrote, “Many of these banks failed, and many were operated primarily to defraud the public; so some states even began to ban the issuance of paper currency.”7
It was not until February 3, 1841, when the Texas government authorized McKinney and Williams’s company to issue their own paper money, that the steps towards a true bank started.8 This required an act of Congress to overcome the anti-bank laws in the Texas constitution. McKinney & Williams Co. was not yet a true banking institution at this time, though. They put out $30,000 worth of money, in denominations from 25 cents to 3 dollars.9 This money came to be known as “Williams paper,” and was heavily used.
“It is notable,” Joe B. Frantz wrote, “that when in 1844 Texas exchequer paper was being discounted nearly 50 per cent, McKinney & Williams’ bills were bringing 90 to 95 per cent of their face value in specie.”10 The Republic of Texas printed six different issues of national currency, on top of warrants (promissory notes, typically used to pay government employees and the military.) Overprinting and runaway inflation eroded the value of the Republic’s money, but Williams was conservative in his currency policies. His company had the collateral to back up his money, in form of a sawmill, mortgages held on real estate, and slaves.11
Finally, after securing backing from the firm of Joseph S. Lake and Company of New York and others, Williams started the Commercial and Agricultural (C&A) Bank in Galveston, the first incorporated bank in Texas, at the end of the year 1847.12 McKinney had lost interest in the bank and left it to Williams to pursue, while he focused on his work in state politics. It had been a twelve year road, but Williams achieved his goal.
However, anti-banking factions still held sway over politics. In the establishment of the state of Texas in 1845, the newly written constitution specifically prohibited creating new banks of issue, and restricted existing ones. Williams continued business without trouble, partly due to the fact that he was instrumental to securing the financial backing Texas needed to fund the Revolution of 1836. “When finally Texas tabulated its debts for the period of revolution and just after, it found itself $153,408 in arrears to McKinney & Williams... [they] had actually paid one-tenth the cost of a war,” Frantz wrote.13 Another reason was because of Williams’s solid business reputation. As previously noted, Texans held confidence in Williams’s money.
Still, obstacles in the road continued to appear as the Second Legislature of Texas Congress convened in 1848. Politics, both of public opinion and personal agendas, brought a new law into being. This act made the issuance of paper money without proper authorization illegal, punishable with a fine up to five thousand dollars per offense each month. Clearly, “Williams paper” fell under fire from this new act.
Williams felt that his 1841 charter, and even his original charter of 1835 from Coahuila, validated the C&A Bank, in spite of any later laws. Essentially, he felt his charters should be “grandfathered.”
Williams was taken to court by the State of Texas at the end of 1848, and in January 1849, District Judge Meggison rendered his verdict. The prosecution tried to prove that Williams’s charter was invalid, but his lawyers successfully defended the charter. Meggison said that the 1841 law passed by the Texas Congress was not altered by any later acts of legislature.14
Ironically, the special assistant chosen to prosecute the case against Williams was named Andrew Jackson Hamilton. The politics of both Andrew Jackson and Alexander Hamilton figured heavily into the financial landscape of the United States and the Republic of Texas during this time.
Williams was not the only one that came under fire by the anti-bank factions of the Texas government. Another businessman, Robert Mills moved into the Galveston area, and distributed paper money out of his store. Mills operated slightly differently than Williams did. Mills had bought the stock of paper money from a Mississippi bank and endorsed them with his initials before putting them in circulation. This came to be known as “Mills money,” and was widely used. By this particular method of putting out paper currency, and the virtue of specifically not calling themselves a bank, Mills was able to avoid most of the legal ramifications of his banking actions.15
The end of the road came for Williams with the election of 1852. Many anti-banking Democrats were elected to the state government. With their ascension, they wrote more laws restricting banking, and targeted Williams’s C&A Bank.
In March 1852, the Texas Supreme Court heard the State’s appeal of the 1849 case. Again, the prosecution tried to prove the invalidity of Williams’s charters. They failed to convince the justices with their argument. The Court’s opinion upheld the validity of the Coahuila charter of 1835 and the ruling on the relief law of 1841.
The arrival of August 1852 came with more fines being levied against the board of directors of the C&A Bank for illegally passing self-published paper money. Williams, as part of the suit against C&A Bank’s board of directors, was fined for his participation. Williams’s attorneys, Allen and Hale, filed a general demurrer, and the state failed to take further action, resulting in the dismissal of the lawsuit.
In March 1853, a similar lawsuit was brought against Williams again, and was dismissed by the judge based on the nonspecificness of the charges.16 Robert Mills also came under fire by the Attorney General, but his charges were dismissed due to the same reasons. The judge summed up the weakness of the case against Mills with this question: “Why should he [Mills] be fined for passing Mississippi money accepted in New Orleans?”17 This applied to Williams’s case to an extent, because “Williams paper” was widely accepted from Galveston to New Orleans to New York. This didn’t stop the Attorney General’s office from reopening the case against Williams in 1855, only to have the case dismissed again due to the vagueness of the charges.
The legal fortunes of Texas’s banks shifted in January 1857, when both Williams and Mills came under legal attack again. Williams was fined for passing 50 one dollar bank notes, which added up to thousands and thousands of dollars in fines. Robert Mills’s defense lost in court, which only made it harder for Williams’s lawyers to win out this time. So Allen and Hale advised Williams to plea bargain, accepting the penalty for passing one bank note, a $2,000 fine. This would set grounds for a further appeal by the lawyers.18
Circumstances outside the courtroom added to the mix. Newspapers all over Texas pushed either pro or anti-banking stances, affecting public opinion. Election times were approaching for the judges that would preside over these banking cases. This was a factor in Mills’s 1857 court loss. Houston newspapers, traditionally anti-banking because of the fear of losing influence to the already prosperous city of Galveston, fought against Williams’s Galveston-based bank.19 However, as time passed, newspapers changed their stances, and reversed them yet again. The same could be said of the people of Texas as well.
In 1857, the New York City based Ohio Life Insurance & Trust Company closed, causing a financial panic which spread to New Orleans, a vital lifeline for the burgeoning Galveston banking industry. New Orleans banks suspended specie payments, causing a run on the banks in the South. However, Williams forestalled any trouble to his bank by having the C&A Bank accept all New Orleans paper money and paid out in specie upon demand.20 He was able to do this by keeping a larger amount of specie than the amount of paper money he had.21 This financial cushion saved his bank.
Williams’s appeal of the 1857 decision was delayed because Justice Wheeler, of the Texas Supreme Court, died in March 1858. The new replacement, whoever he would be, would change the political make-up of the bench, affecting Williams’s case.
However, Williams would not see what the results would be, because he had reached the end of the road for himself. September 13, 1858, Samuel May Williams died after a brief illness.
Soon thereafter, the Commercial & Agricultural Bank reached the end of the road, dying at the hands of the Texas Supreme Court. In 1859, Associate Justice Oran M. Roberts, speaking for the court, nullified the original 1835 charter, stating that Williams’s bank didn’t actually start doing business until 1848, which was three years after the state constitution prohibited such activity. Thus the fines levied against the bank for passing illegal money stood, leaving the C&A Bank no choice but to close their doors. Its assets were liquidated, and the C&A Bank was no more.22
Williams’s “little bank,” as McKinney liked to refer to it, changed the financial landscape of Texas.23 His banking served to make stronger ties with the United States through the financial institutions of New Orleans and New York City. Williams’s banking helped keep the economy afloat even when the state issued money of the Republic of Texas depreciated in value repeatedly. Williams’s banking, both through McKinney & Williams Co. and the C&A Bank, affected the future of Texas as an independent Republic and a State of the United States.
And what of the lawsuit David Hill brought against McKinney and Williams in 1839? Unfortunately, whatever evidence relating to the case is either gone with the ravages of time and hurricanes, or deeply buried within an archive. However, two intriguing things have come to light. First, listed within the Rosenberg Library’s calendar of Samuel May Williams’s papers, is a receipt for a one-year subscription to a magazine called Counterfeit Detector and Bank Note List, made out to McKinney and Williams, dated April 1839.24 This was several months before Hill lodged his complaint.The second is a photograph of a 5,000 dollar Republic of Texas bank note made out to McKinney and Williams, dated March 1, 1839. Actually, the date has been altered in ink, since the original printing can be seen to say “September 1, 1837.”25
From these two pieces of evidence, one could theorize different things. Perhaps the money given to Hill was knowingly passed as a forgery, since they subscribed to the Counterfeit Detector magazine. Perhaps one or both men in fact used the magazine to produce a forgery. Another possibility could be that the $100 bill was altered by McKinney and Williams, a practice sometimes done, but Hill did not accept it? In any case, the evidence presented is circumstantial, and the theories more imaginative than factual. The reality probably was much more prosaic. The phrase “only time will tell” won’t apply here.
[In class, I presented my topic to class with handouts illustrating my topic and paper.
Handout 1 - Handout 2 - Handout 3 - Timeline]
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