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upon as scarcely respectable. No generation had yet grown up accustomed to wealth from its birth; there was no class of men of leisure. The railroad changed all this. It brought to Boston the full current of modern city life,turning the large New-England town into a metropolis, if a provincial one. Of the rapid increase both in wealth and population which then ensued, the figures of the census tell the story. It would be foreign to the purpose to dwell upon it here. There is, however, another story which the census does not tell. In a quarter of a century after the three initial railroads were opened, both the ancient city limits and the modes of life traditionally pursued within them had disappeared. Boston had become the counting-house, as it were, the daily business exchange, of a vast concourse of active. men having their homes in every neighboring town within a limit of thirty miles. The ancient municipalities immediately adjoining the city had been absorbed into it: Salem, Lynn, Lowell, Lawrence, and Worcester became its suburbs. Meanwhile business vocations not only diversified themselves, but they increased in volume, so as to lose all proportion with what they had been. New branches of industry came into existence, and their rapid growth soon caused them to overshadow the traditional callings which were inseparably associated in the New-England mind with the idea of accumulation. Down to the time when the three carliest Boston railroad lines were opened together in 1835, all the large fortunes, as they were then thought, had their origin in the fisheries, in the carrying trade, and in foreign commerce. Thenceforth these were to become of minor importance.

Men of a former generation thus found themselves puzzled. They saw change going on, and they mistook it for decay. Under the altered conditions, new points of distribution and new channels for reaching out from them came into being; and the old channels, and the branches of trade which had immemorially flowed in them, dwindled by degrees and then disappeared. Foreign commerce languished; sailing ships from Canton, from Calcutta, from Russia, from the Levant, and the west coasts of Africa and America no longer unloaded at the wharves. Grass seemed likely to grow in front of those warehouses, from the counting-room windows of which the old-fashioned merchants had been wont to look down on the decks of their vessels. Hence it came about that the period of Boston's most rapid growth was also the period in which the loudest and most dismal forebodings of the city's commercial decline were incessantly heard.

The whole of no community ever readily adapts itself to a far-reaching change of business conditions. In this case the interior of a continent was springing into civilized life. Those who could not realize the fact, or who from habit or slowness of perception were not in harmony with the new order of things, were ruined. Left stranded by the course of events, they disappeared. A wholly new America was meanwhile shaping itself, — an America with which the relations of Boston and New England were yet to be established. New York remained the financial centre of the whole; but Chicago, in 1835 a mere out-post town on the shores of Lake Michigan,

was transformed into the chief distributing point of an interior, in comparison with which that region which the foreign trade of Boston once supplied, was lost in insignificance.1 Boston meanwhile developed into the local centre of a busy manufacturing population dwelling and working in all eastern New England. This was its home function. As respects the new interior of the continent and foreign countries, the tendency of railroad development is to reduce all seaboard cities into being mere points of transshipment,conduits, as it were, of modern trade. They are, indeed, of hardly more account in the process of distribution on this scale than those interior towns through which the freight trains laden with corn and meat pass rapidly on their way to the East, shortly to return carrying the bonded wares of Europe in their unbroken packages to the custom-houses of the West.

Between 1835 and 1880, then, the introduction of the railroad and the development of the railroad system, as it changed every other considerable city, changed Boston also. They changed it both within itself, and in its relations with other countries and other portions of the common country. The former capital of provincial New England had not become one of the great railroad centres of the continent. Geographical position alone probably put this out of the question. It had not, however, developed into nearly so considerable a railroad centre as it might at one time have been made. In this respect opportunities had been lost. Nevertheless, as a railroad centre of the second class the position of Boston was well defined and considerable. Within its own territory the city was supreme; and that territory was populous, busy, and wealthy. Beyond its territory the railroad enterprise and railroad investments of those dwelling in Boston had sent back to it a tide of wealth, which reduced to insignificance the old-time profits. Meanwhile, so far as foreign commerce and a share in the handling of the great volume of commodities and exchanges passing between the interior and the ports of other nations are concerned, the city had much more than held its own, and its outlook for the future in 1880 was brighter than ever before in its history.

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In 1820 the Board of Directors of Internal Improvements stated in the report already referred to (see ante.), that "the tract of country which at present can carry its surplus produce to

Boston more easily than to any other sea-port, and which can receive its foreign supplies from thence most conveniently, contains a population not exceeding 300,000 souls" (p. 44).

THE

CHAPTER VI.

FINANCE IN BOSTON.

BY HENRY P. KIDDER AND FRANCIS H. PEABODY.

HE history of the growth of Boston as a centre of financial enterprise and wealth necessarily includes the story of its connection with many undertakings of sufficient magnitude and importance to require separate treatment in other chapters of this work. Although shipping and the foreign trade in the early days, and in more recent times the manufacture of goods for the markets of the country, either in Boston or in other cities and towns of New England, and the construction and operation of railroads have given the greatest impetus to enterprise and the greatest additions to the wealth of the city, yet in this place a brief reference only can be made to the development of these enterprises. But if circumstances require that they shall seemingly occupy a subordinate place, it is necessary that their truc importance shall be recognized at the very outset.

Boston was from its foundation comparatively a rich and prosperous town. It was the political and trading centre of the colony, and, as the colonies grew into States, of New England. In these respects it was second. only to Philadelphia in all the colonies during the Revolutionary period. When the first census of the United States was taken in 1790, the whole population of the country was a little short of four millions, of whom nearly or quite one fourth were directly dependent upon Boston as their financial and commercial capital. From an account' written four years later, in 1794, we may obtain an excellent idea of the material condition of Boston just after the close of the Revolutionary War.2 The population at that time was about nineteen thousand. It had two banks, one of them already ten years old, chartered by the Commonwealth, besides a branch of the United States. Bank; some eighty wharves and quays, and a large domestic and foreign trade. Ship-building had been carried on very extensively in former years, but had, at the date of Mr. Pemberton's writing, been for the most part. transferred to other coast towns.3 There were at one time twenty-seven

1 "Description of Boston," by T. Pemberton; Mass. Hist. Coll., iii. 241.

2 [See Mr. Hill's chapter in this volume.-ED.]

3 [See the chapter on "Industries," and the references there, and further extracts from Pemberton in Mr. Hill's chapter. — ED.]

dock-yards, and upwards of sixty vessels had been on the stocks at once. One yard had launched as many as twelve ships in one year.

The foundation of the financial strength which Boston has enjoyed in a peculiar degree during the last century was, without doubt, laid when the banking system was established. The usefulness of the modern instruments for economizing the use of money, by means of combination and concentration of wealth, and for increasing its power by the same means, was recognized at a very early day. The wisdom, or the chance, which led the legislators of the last century to adopt measures which, while they encouraged such concentration of wealth and energy, served to give security both to the owners of the capital of banks and to depositors in them, supplemented as it has been by a generally consistent adherence to conservative and correct principles of banking, have done more than anything else to give to Boston the rank as a financial centre which it enjoys, a rank to which neither its position as a nucleus of population nor its situation with respect to the trade of the country would ever have conferred. The banks of Boston have been safe and strong at times when those of other cities have been weak. They have never led the way in a suspension of specie payments, nor have they ever been backward in resuming. Disasters among them have been rare, and seldom or never attended with serious consequences to sister institutions clsewhere, or to the commercial world. They have helped greatly in sustaining credit, both public and private; and reciprocal assistance has been rendered to them in the shape of a strong public sentiment, which was as free from unreasonable jealousy of their power as it was from toleration of dangerous tendencies in banking.

A bank was established in Boston as early as 1689; but neither that nor any one of several successors during the following century had a long life, or was fortunate while it still existed. In March, 1782, the Bank of North America, founded in Pennsylvania, was chartered also by Massachusetts, and opened a branch in Boston. Although no record of the operations of this bank has been preserved, it is known that its success was sufficient to lead to the charter of a purely local bank in Boston two years later. This latter institution, the Massachusetts Bank, is still in a state of prosperous existence under a national charter. It began business on July 5, 1784, with an authorized capital of $300,000, of which $253,500 was paid in. The

1 [Professor W. G. Sumner's chapter on "Monetary Development," in The First Century of the Republic, cites as the chief contemporary authorities on colonial matters of this kind two Boston books, — Hutchinson's Massachusetts Bay (very intelligent and correct on finance, he says), and Douglass's Summary (unequal but valuable, as he accounts it). He also esteems of great value a pamphlet published in Boston in 1740, Discourse concerning the Currencies of the British Plantations. The reader who is curious to trace the instructive history of our currency in the preRevolutionary periods may find- beside Felt's

Historical Account of Massachusetts Currency, 1839, and the references noted in Vol. I. p. 354, and Vol. II. p. 467 — something of more or less advantage in the following: Mass. Hist. Soc. Proc., February, 1863, and April, 1870 (by W. S. Appleton); Amer. Antiq. Soc. Coll., iii. 1.48; and Proceedings, March 16 and April 25, 1866; N. E. Hist. and Geneal. Reg., July, 1860, p. 261. The story will serve as an illustrative commentary on the financial history of our own day, and needs to be well written. - ED.]

2 [See further on its formation in the chapter by Mr. H. A. Hill, in the present volume. ED.]

rules adopted for the management of its business were of the most stringent character, but were exceedingly wholesome in their operation, and the Massachusetts Bank secured a good amount of profitable business. The dividends fluctuated somewhat during the carly years of its existence, but the average of the years 1791 and 1792 was sixteen per cent. Its assured success led, in the latter year, to the establishment of a rival, the Union Bank; and about the same time a branch of the United States Bank was opened in Boston. The Union Bank was the first of a series of banks. organized under charters having some peculiar provisions. Its capital was fixed at $1,200,000, of which one third was subscribed by the State in its corporate capacity. The bank was forbidden to issue any circulating notes for less than five dollars, or to owe more than twice its capital in addition to its deposits, the penalty for transgressing this last restriction being the personal liability of the directors for the excess. It was provided that one fifth of the bank funds should be appropriated to loans outside of Boston, for the benefit of agriculture, in sums not less than $100 or more than $1,000, secured by mortgages of real estate, and having not less than one year to run.2

Such was the origin of the system which not only rendered available the wealth of Boston merchants, but, becoming metropolitan, absorbed a large part of the banking reserves of New England, and thus made the surplus of the whole group of States helpful in carrying forward Boston enterprises.

At this time, and for many years afterward, Boston was chiefly a commercial port. The great fortunes that were made were acquired in the foreign trade, like those of Russell, Phillips, Perkins, and others, and that of Mr. William Gray, who made his fortune as a Salem merchant, and then came to Boston to enjoy it. In the years from 1786, perhaps a little earlier, down to the time of the second war with Great Britain, the trade of Boston with China and the East Indies, and to a smaller degree with other countries, was the distinguishing feature of the town's commercial enterprise. But there was another movement going on at the same time which exercised even then, and was destined in after years to exert to a greater extent, an influence upon the future of Boston. The very smallness of the area of the town, and its inaccessibility, served to open a field for financial activity and

The maximum loan to one person at one time was $3,000; no person was allowed to owe the bank more than $5,000 at the same time; and $7,500 was the largest sum for which any person could be liable to the bank as promisor and endorser. Renewal of notes was absolutely forbidden. The person who failed to meet his note was not only obliged to submit to the immediate sale of his security, but he was denied the privilege of having any further notes discounted for a period of eight months thereafter, unless the penalty were remitted by a unanimous vote of the directors. The rules, which were VOL. IV. 20.

44 not

to be deviated from in the smallest instance nor on any pretence whatever," also required that the names of delinquents should be posted in a conspicuous place in the bank.

2 Most of the subsequent charters of Boston banks, until the year 1816, contain provisions similar to these, with some variations in detail. The State subscription became an ordinary feature of the bank charter, so that in 1812 the Commonwealth owned about $1,000,000 in stock of its own corporations, being nearly one eighth of all the banking capital of the State. This stock was all disposed of a few years later.