By John Steele GordonUnlike chartered banks, private banks were very lightly regulated in the 19th century. Of course, they were all structured as partnerships, so the fact that the entire net worth of each partner was at risk usually instilled discipline.
One of New York’s leading banks in the middle years of the 19th century was the bank of John J. Cisco and Son, where many prominent New Yorkers kept their funds. One of them was Hetty Green. Known to history, a bit unfairly, as the “witch of Wall Street,” Mrs. Green was a penny pincher on an imperial scale, willing to spend anything: time, convenience, comfort—anything except money. She had turned a considerable inherited fortune into a huge one by shrewd investments. In 1885, she had over $25 million in securities at the Cisco bank for safe keeping and $556,581.33 in cash deposits.
But John J. Cisco had died the previous year and the son and the son’s new partner were not the astute and serious bankers that the father had been. In the darkening economic climate of the mid-1880s, the Cisco bank began to lose deposits. Hetty Green, sensing trouble, ordered the bank to transfer her securities and cash to the Chemical Bank.
The Cisco bank, unable to survive so large a withdrawal, refused, saying that the bank’s loans to Mrs. Green’s husband were not sufficiently collateralized. They wanted her to cover the difference. Mrs. Green adamantly refused, saying her husband’s debts were no concern of hers, and again demanded the transfer, threatening legal action. Residing in Vermont, she hastily made her way to New York.
But by the time she got there, the situation had changed. With the receipt of the second letter, John J. Cisco and Son had declared bankruptcy. Its assets, including Mrs. Green’s cash, were now in the care of an assignee, Lewis May.
She confronted him in his office at the Cisco Bank’s 59 Wall Street offices. She demanded her money but was firmly told that she was just one of the more than 800 creditors of the bank. And May also refused to turn over her securities, which were not part of the bankruptcy, unless she made good on her husband’s debts to the bank.
Like most misers, she regarded money as her security against a cruel and dangerous world. To have it suddenly snatched away from her was her ultimate nightmare. For five hours that day she pleaded, she shouted and she threatened, while crowds out on Wall Street watched the drama through the bank’s big plate glass windows.
She was there the next day as well and it went on for two weeks. Hetty Green was obdurate, emotional and vituperative. (As a young girl in the whaling town of New Bedford, Mass., she had acquired a rich vocabulary of unladylike terms and had no hesitation about using them.) Mr. May was unfailingly polite and understanding. But he was no less obdurate. He would not release her securities until the difference in value between her husband’s loans and the collateral he had provided was made up.
Finally, she gave in and wrote a check for $422,143.22. It was by far the largest check she would ever write for which she did not get something of equal value in exchange.
With that, she bundled her bonds, stocks, leases, deeds, certificates of deposit and other proofs of her fortune into a cab and, with hardly room for herself, took them down to the Chemical Bank on Broadway. There, her fortune and thus herself were safe once again.