By John Steele Gordon
In the late 1890s, my then-16-year-old grandfather was just beginning his Wall Street career, working as a runner (the Wall Street term for messenger boy, the first rung up the ladder). One day he had to deliver something to the Chemical Bank headquarters on Broadway south of Wall Street. Climbing the steps ahead of him was an elderly woman in a faded and patched black dress. He wondered what business such an obviously poor woman could have with a bank, for in those days, banks were for businesses and the rich.
But when she walked in, everyone on the banking floor stood up and wished her good morning. The “impoverished” woman was, in fact, the fabulously wealthy Hetty Green, perhaps the most famous miser in American history, often remembered as the “witch of Wall Street.” But if my grandfather had, understandably enough, grossly underestimated her net worth, he had been right about commercial banks like Chemical being for the rich.
There was, however, by that time another sort of bank that was designed for people of ordinary means: the savings bank.
Commercial banks, which had developed during the Italian Renaissance, took deposits and, while maintaining reserves, loaned the deposited money out at interest. Savings banks also took deposits, but they invested the money in safe securities such as government bonds and paid interest on the deposits.
Commercial banks had always existed solely to make money for their stockholders or partners. But savings banks had had an eleemosynary origin during the Enlightenment. For savings banks were designed to give ordinary people a safer place than under the mattress to keep any surplus cash they might have accumulated. What’s more, at a savings bank they could benefit from the magic of compound interest.
Savings banks had developed in Europe in the middle of the 18th century. In this country, the first two were founded in Boston and Philadelphia in 1816. In Boston, James Savage, who had made a fortune in the ice trade with his cousin Frederick Tudor and would later be a founder of MIT, gathered a group of other Boston Brahmins at the Exchange Coffee House to form the Provident Institution for Savings.
They agreed that the “object of the institution” was “to provide a safe and profitable mode of enabling industrious persons of all descriptions to invest such parts of their earnings or property … in a manner which will afford them both profit and security.”
The idea, as good ideas always do, quickly spread to other cities. In 1818, the Bank for Savings in the City of New-York was founded by Thomas Eddy and many others of New York City’s upper class.
It was an immediate success. One of its early sponsors, John Pintard, had hoped that it might achieve $50,000 in deposits in the first year. In fact, it gathered $155,000 in deposits in just the first six months. By 1860, its deposit base exceeded $10 million.
Thomas Eddy, who had founded the first mutual insurance company in New York City and was also one of the main drivers behind the building of the Erie Canal (see the November/ December 2025 Banking Journal), spent much of his adult life in philanthropic endeavors. He was involved from the beginning in such institutions as the New York Manumission Society, the Bible Society and the New York Hospital. He is most famous for his work in prison reform and his 1801 book An Account of the State Prison or Penitentiary House in the City of New York was a landmark in the history of prison reform.
He regarded the Bank for Savings as not the least of his innumerable good works.
