The Exchange Bank Scandal

Soon after A.L. and B.O. Williams arrived in the early 1830's, they built a double log house near the Shiawassee River on the east Shiawassee Township line. This building was used as a trading-post and in 1835 a dwelling was attached measuring 20' X 55'. A.L. and his wife occupied this as a residence.

In 1837 it was rented to and later purchased by Andrew Parsons (who later was elected Gov. of Michigan) and Lemuel Brown for a hotel.

Messrs. Morehouse, Bell, Toll and a few others arrived from Ohio and established a banking enterprize under the title "Exchange Bank of Shiawassee."

By an act of the Michigan state legislature passed December 30, 1837, three bank commissioners were appointed, who were to begin their duties in January 1838.

Meanwhile, the Exchange Bank of Shiawassee had based their business transactions upon specie certificates then in use by them to the amount of $27,000. In a descriptive account of the Exchange building written by Lucius E. Gould, is found the following reference to these certificates.

"Before us as we write is one of the $5.00 bills that was issued from the Shiawassee Exchange Bank on the 4th of February, 1838. It is printed in the form of a promissory note payable on demand to S.M. Green or bearer, and is signed by A.M. Clark, cashier and A. Morehouse as president. S.M. Green was the Sanford M. Green who was not only Owosso's first public school teacher, but one of Michigan's greatest jurists."

This bill of old 'wild-cat' money was never carried from the vicinity of where the Exchange building once stood until it was presented to us in October last, by Mr. James Lyman of Antrim Township.

"In the days when this bill was issued the banks under the law were obliged to keep a reserve fund of $5,000 in specie on hand. When the bank commissioner came around to Shiawassee he was invariably entertained by the citizens, with a supper and a ball, which were given in the Shiawassee Exchange building, but not until the money was counted and certified to as the correct amount required by the law.

Then the commissioner was escorted to supper and ballroom where, if possible, he was detained until it was quite morning, and while the dance was on and pleasure at its greatest height, the gold and silver money which had been officially counted, was placed in a stout saddlebag and given to a trusty lad who mounted a swift horse and rode away to Flint, Michigan, where the next bank, the commissioner was to visit, was located.

Of course, when the commissioner arrived at Flint and counted the required specie there, he found it exactly correct. But it was the very same money he had been counting for the last three days, first at Ypsilanti, then at Howell, then at Shiawassee Exchange and so on."

by Andrew Huggins....1878

At the regular session of the legislature in March 1837, a bill was passed to organize and regulate banking associations authorizing any twelve freeholders of any county who desired to form an association for transacting banking business to make application to the treasurer and clerk of the county for that purpose, and books were to be opened for subscription to the capital stock of the associationin no case to be less than $50,000.

Ten percent on each share was required to be paid in specie at the time of subscribing, and 30 per cent of the entire capital stock in like funds before the association should commence operations. This was the celebrated wild cat banking of Michigan commenced-to be only a forerunner of the Greenback assumption of today.

Almost every body had a bank of his own. A man would put his own note in his safe for any amount, payable in specie, and commence business. Shiawassee county had the Bank of Shiawassee located at Owosso, and the Exchange Bank of Shiawassee, located in the old building still known as the Exchange some two or three miles south of Newburg, when the county had a population of less than 1,200.

To demand a redemption of these bills in coin, was for the holder to make a tour through the forest, to some unknown spot, if the location of the bank could even then be found; and in June of the same year, at an extra session of the legislature, called for that purpose, the banks were allowed to suspend specie payments-a payment they had never made; for according to the Bank Commissioners report, subsequently made, it was found that some of the banks were as destitute of specie as their officers were of even the semblance of honesty. The Bank of Sandstone (Jackson County), for instance, never had any specie, and although its liabilities exceeded $38,000., it had no assets of any kind at the time when it was examined. The Exchange Bank of Shiawassee threw open its safe to disclose only seven coppers and a very small amount of paper, while it had bills in circulation to the amount of $22,261.

Within the space of about a year 49 banks were organized and about 40 went into actual operation, the nominal capital of which was $3,915,000. Of the entire number that went into operation, but seven existed eighteen months thereafter.

The Exchange Bank of Shiawassee was a fair specimen of the entire breed of wild-cats. Its officers were: President A. Morehouse; Cashier, G.W. Clark; directors, John Pierson, Lemuel Brown, Hosea Baker, G.W. Clark; A. Morehouse, Aaron Swain, Isaac Castle and H. Rowe. Hosea Baker and Lemuel Brown subsequently made affidavit before the State Bank Commissioner that no cash was ever paid in and that the principal getters up of the bank, Root, Pierson, Clark, Morehouse, and others were not at that time and never had been residents of the State or county.

Andrew Parsons, afterward Governor of the State, was appointed receiver of the concern in its collapsed state, and here is his report:

But there came a day when the commissioner appeared at the bank unannounced and unexpected, after the manner of present day bank inspectors. In the consequent examination of the bank's reserve a small amount of paper and seven coppers were discovered, against which were bills in circulation to the amount of $22,261.00, 30% of the capitol stock having been required by law. Upon the discovery of this fact the Exchange Bank shared the fate of similar wildcat enterprizes of the day, and ceased to exist.

Sir: In ccmpliance with your request, of Nov. 27, 1839, I herewith transmit such information as I am able to give upon the points names.

1. The amount of notes obtained from the engraver is unknown, but were ordered by G.W. Clark, cashier.

2. As no books of the bank have ever been kept, I have no means of knowing the largest amount ever in circulation at any one time, only by a statement drawn up by the president and cashier, which is now in the bank, and it is even impossible by that to ascertain the amount positively. By that statement the whole amount of notes ever numbered and signed was $34,320, and the amount then in bank of its bills, $14,174, but when I took possession of the bank, there were but $7,303 signed by the president only, which sum, I suppose, was reckoned in said statement.

3. By this statement, it appears that the amount of liabilities is $22,261 and of this amount there has been deposited in my hands as receiver $5, 288.

4. I know of no way that I can calculate the amount of assets belonging to the bank, only to give such information as I am able with reference to that of which the assets consist. There was mortgaged about 1,760 acres of land to secure the payment of the debts of the bank-the title to about only 1,500 of which appears to be good. There are notes and receipts in the bank to the amount of about $7,200-$2,940 of which are given to individuals and not to the bank. All the business of the bank was done in not only an imperfect but a ridiculous manner. In examining over all the notes and receipts I find but one note (on which is due $l.623] that is given to the bank, that can in any probability be collected, and only one receipt [of $48.00] that can be collected. I therefore think that about $1,676 of the notes and receipts, may be collected-and that the remainder, $5,540 cannot be collected, or at least by me as receiver of the bank. There is an iron sate belonging to the bank, worth probably 15 or 20 dollars.

5. As to what amount of capital stock was paid in, I have no means of knowing antthing about it.

I have collected of the notes and receipts which were in the bank $3,273. I am fully persuaded that there are not many more of the notes of the bank that will ever be deposited with me as receiver. I have been informed that many of the notes have been burned or destroyed, in consequence of their being considered worth nothing, and it is undoubtedly the fact. There were some of the directors of the bank who absconded with several thousand dollars, bills of the bank, without giving their notes or receipts, or even anything else to the bank for the amount. It is of much importance to some of our farmers here, that mortgages upon their lands are soon released.

signed Andrew Parsons

This building continued to be called the 'Shiawassee Exchange' even after the bank folded. It's wayside inn and ball room on the second floor was the scene of many parties and public meetings for several years.