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Bankers Feuded Well Into Afterlife
By Robert F. Lemke, Bank Note Reporter
August 27, 2012

This article was originally printed in Bank Note Reporter.
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More often than not, unless they picture a president of the United States, or an early American figure of national renown like Henry Clay or Daniel Webster, the portraits appearing on obsolete bank notes are a mystery to today’s collector.

The men, women and children who adorn so many obsoletes, when they represent actual persons, rather than just the fancy of a bank note company’s engraver, were there not only to confound contemporary counterfeiters, but also to fulfill other another purpose.

In general, the appearance of a local dignitary’s portrait—perhaps a local representative to Congress or the state’s governor, or even the banker or a member of his family—was intended to provide a measure of familiarity, and by extension, a level of comfort and a sense of security, that the bank’s notes were as good as gold.

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The use of real-life local portraits may have been intended as a tribute to, or to curry favor from, a local politician, or merely to boost the ego of the banker pictured on his own circulating currency. Such motivations can usually only be guessed at today, even when the identity of the person thus immortalized is known.

Occasionally, however, the collector is privileged to have access to the story behind the portrait. Such is the case with the portraits found on the later series of notes issued by the South Royalton Bank in Vermont. And it is a story of uncommon interest.

Through its relatively short life, the South Royalton Bank was one of the most controversial in the state.

Unlike the majority of banks, which were individually chartered by legislation of the Vermont General Assembly, the South Royalton Bank was the first of only two in the state organized under the state’s General Banking Law of Nov. 17, 1851, better known as the “free banking” law.

Modeled after 1838 New York legislation, Vermont’s free banking law was seen as a remedy to the state-charter process that was viewed as susceptible to partisan politics and corruption.

Under free banking, a bank could be organized by any group and its bank note circulation secured, not by specie held in its vaults, but by deposit with the state treasurer of approved state bonds and real estate mortgages. The depositing bank continued to receive the interest on the bonds and mortgages that, theoretically, assured the soundness of the bank’s circulating currency.

It was a system not unlike that of the United States national bank system instituted in the 1860s.

Unfettered by some of the more restrictive covenants forced upon the state’s chartered institutions, the South Royalton Bank also earned the envy, if not enmity, of the other Vermont banks by its refusal to join the Suffolk system. By depositing a not insignificant amount of cash, usually several thousand dollars, based on the bank’s capitalization, with the Suffolk Bank of Boston, and by paying an annual fee of 2 to 3 percent of its capital, a country bank anywhere in New England could insure that its notes would freely circulate at full face value throughout the region.

The South Royalton Bank was organized Dec. 8, 1851, with Daniel Tarbell, Jr. as president and Samuel H. Stowell, cashier. Tarbell was the prime mover in establishing the bank, as he was of almost every other enterprise in South Royalton from 1848 through the 1850s.

Tarbell is one of the most fascinating figures in Vermont banking in the mid 19th century. Besides being one of the state’s most enterprising businessmen and a financial genius, he was a self-proclaimed “infidel” who practiced spiritualism, studied phrenology and mesmerism and was probably the most litigious man in Vermont, being involved in dozens of law suits at any given time, including with his own father.

Born in 1811 in Tunbridge, Tarbell leased the family farm at age 22, and by 1848, when he moved to what he would create as the village of South Royalton, he owned land in five nearby townships and was a successful poultry and produce dealer in the Nashua and Boston markets.

Establishing South Royalton two miles down the White River from Royalton, near the geographic center of the state, Tarbell built a road and bridge to persuade the Vermont Central Railroad to establish a station there. By 1883 he claimed he had “built or caused to be built more than three-fourths of the entire village as it stands to-day,” including homes, stores, the church and school, and the tavern and hotel, South Royalton House, which he operated and which is pictured as a vignette at bottom center of the bank’s later series $1, $2, $10 and $50 notes.

Operating a bank under the free banking law gave Tarbell access to virtually unlimited funds for growth and development of his empire. Following the eventual failure of the bank, the Bankers’ Magazine in 1857 alleged, “The bank appears not to have been organized to do legitimate business, but to facilitate the operations of its promoters in other undertakings.”

In 1883, Tarbell published a 92-page autobiography, Incidents of Real Life, “Dedicated to the Instruction of Youth, and Elevation of Morality, True Religion, and Politics.” The naturally self-serving book is available in its entirety on-line. Though he promised the book would be continued “in pamphlet form,” revealing even more of the inner workings of business, religion and politics of Vermont in the late 1800s, Tarbell died in 1892, apparently taking those secrets to the grave.

To start up the South Royalton Bank, Tarbell had heavily mortgaged his own property along with that of a handful of other area farmers to a total of $11,400, and, along with $50,000 in bonds of the State of Virginia, deposited them with the state treasurer to secure its issue of $61,400 in rather uninspired $1, $2 and $3 notes by Jocelyn, Draper, Welsh & Co., each note bearing the state seal and countersigned by the state treasurer. Prominently displayed on each bill was the note that it was “SECURED BY THE PLEDGE OF / PUBLIC STOCKS & REAL ESTATE.”

The first series of South Royalton Bank notes was quickly replaced by a more elegantly prepared issue by Toppan, Carpenter, Casilear & Co.

Tarbell had his own portrait included on the $1, $5 and $50 notes. The portrait of his frequent financier and one of the bank’s directors, Solomon Downer, appears on the $2, $10 and $100 notes of the new series. Tarbell’s name appears in conjunction with his portrait on the $1 notes, but not on the $5 or $50. Downer is identified on the $2 and $10, but not on the $100.

Tarbell’s placement of Downer’s portrait on the South Royalton Bank’s notes was no doubt intended as a tribute to the latter’s role in financing the development of the village. Ironically, before long, Tarbell had labeled Downer a “traitor,” blaming him for the bank’s failure and engaging him in more than 60 law suits over the next decade.

The South Royalton Bank proved to be an immediate success. As of July 19, 1852, the bank had nearly $60,000 of its bills in circulation, $1,936.36 in specie in its vault, and a surplus of $285.90. A few weeks earlier, six months’ interest on the Virginia bonds which backed the notes, amounting to $1,500, had been collected, and a dividend of $2,000 paid to shareholders.

In 1853, the state banking commissioner’s report showed the bank’s profits were $1,648.09, with dividends paid to the shareholders in January of $3,000, and in July of $3,864. Bills in circulation amounted to $96,221.

Earlier that year, Tarbell’s bank had fought off an attempt by the Suffolk Bank of Boston to break it by showing up at its door with $45,000 of the South Royalton Bank’s notes, demanding immediate conversion to specie.

Details of Tarbell’s defense are presented in his autobiography, though certain key elements are not made clear. It appears he was able to forestall the redemption by forcing the Suffolk Bank’s agent to segregate the South Royalton notes by denomination, counting and recounting the bills and the specie while he exchanged the South Royalton bills for those of a couple of banks in nearby communities, and redeemed those for coins to pay the Boston banker. After a couple of days of such tactics, the Suffolk gave up on its plan and returned to Boston, apparently with much of the South Royalton circulation in hand.

Having withstood the attack of the Boston bank, the South Royalton Bank soon succumbed to what Tarbell believed to be treachery at the hands of Solomon Downer, the director whose portrait circulated alongside Tarbell’s own on the bank’s currency.

Downer was born in 1784 in Sharon, Vt. He made his fortune as a money lender; an early 20th-century historian said, “He was probably the richest man in this vicinity for many years, and possibly no one has since equalled him in the influence he wielded in the financial world bounded by his horizon.” By the time he met Daniel Tarbell in 1848, his worth was estimated at $300,000.

Tarbell availed himself of Downer’s mortgage services many times as the pair partnered again and again in the development of South Royalton. “I received money from Downer,” Tarbell wrote, “bought lots and erected buildings, and either rented or sold them. Downer would either take a mortgage, or if I sold on time would cash the notes.”

Eventually, however, the banker, who held the financier in such high esteem that he placed his portrait on the bank’s currency, came to loathe the man.

In his book Tarbell wrote of Downer, “He was a man of strong nerves, soft and coaxing in his address, but heartless and cruel in his methods of business. I could not believe a man could be really so heartless as to betray his friend and companion in business, when everything had been so friendly and fraternal; advising together, working together, and enjoying together the growth and future prospects of our village. But after all, this hardened and heartless old knave betrayed my trust.”

The South Royalton Bank had brought suit against the Suffolk Bank for its “admitted purpose of draining the vaults and injuring the plaintiff bank.” The litigation wended through the courts until the Vermont Supreme Court ruled in 1855 in favor of the Suffolk Bank, asserting that it had acted within its legal rights and that its motive was unimportant.

The close call with the Suffolk Bank spooked some of the South Royalton Bank’s directors. Tarbell wrote that the Boston bank’s “influence over our stockholders was so great that it was difficult to hold them together in harmony. We had meeting after meeting for the purpose of discussing the principles of banking, and the practical effect of redeeming at Suffolk bank. Upon this subject we did not agree. Finally I got tired of the discord in our own bank, and resigned my position as President.” Thus, sometime in 1854, Tarbell’s signature on the South Royalton currency was replaced by that of his brother-in-law, David W. Cowdery.

In late 1854, possibly with the Suffolk Bank working behind the scenes, perhaps even in collusion with one or more of the South Royalton Bank’s directors, the Vermont legislature passed a law that Tarbell said “was without our notice or knowledge,” and that led to the bank’s demise.

The legislation provided that any shareholder could withdraw the securities he had on deposit with the state treasurer, thus reducing the backing of the bank’s currency. The bank would then have 10 days to find a replacement stockholder or face liquidation. Tarbell correctly assumed that “if the old bondsmen were dissatisfied for just cause for alarm or not, that would be the presumption if they gave their notice, and no one outside would care to step into his place. This of course would operate as fatal to the bank.”

Tarbell’s book picks up the action, “Solomon Downer, who was naturally a traitor, gave his notice, and consequently the State put in a Receiver…(who) took the assets of the bank, sent them to New York, and there sold them, so far as related to public stocks, and brought bills to foreclose the bonds and mortgages so far as the real estate was concerned.”

The banker went on to accuse the receiver of speculating in South Royalton Bank notes by using the bank’s own securities proceeds to buy them at a discount and presenting them at the bank for full face value, pocketing the difference.

Tarbell summarized his banking days in his book, “In this bank enterprise I lost in all more than fifty thousand dollars. I lost more money than all the rest of the stockholders. When the bank closed I owned more than one-half the entire stock, and I had done a large amount of hard work in the fight with the Suffolk and the special charters, for which I got nothing. If it had not been for the treachery of our officers, we might as well have been a pattern bank of the State as not, instead of such as it was; but we are bound to accept our common lot, and with it be content.”

On Feb. 7, 1855, the Orange County Bank at Chelsea, Vt., which was a creditor of the South Royalton Bank, got a decree of foreclosure on the bank, but it appears to have continued in operation until at least mid-1857. Lawsuits and the settlement of claims continued for a decade or more.

The Bankers’ Magazine, in its October, 1857, issue, reported that South Royalton Bank bills were still being exchanged at the rate of 50 cents on the dollar. Whether the bank would have survived the Commercial Crises and Stock Market Panic of 1857-1858 will never be known.

Tarbell’s resignation as bank president followed closely upon his conversion to what he called the religion of spiritualism. Much of his life thereafter was conducted at the direction of the spirit world with whom he communicated via mediums.

Tarbell and Downer eventually filled various court calendars with more than 60 law suits. Having watched Downer ruin others, Tarbell had a foretaste of the man’s methods.

In a chapter of his book titled “My Experience and Suits with Solomon Downer,” Tarbell detailed one such incident.

“During the time of this connection with Downer I learned something as to his style of slaughtering. He had been a terror in his time, and was dreaded more than admired by people in his part of the country. I remembered back to the time when he slaughtered Jacob Fox, in an early day. This act, and his method of doing it, I got from himself, and out of that he got fifty thousand dollars. This Fox undertook to build up North Royalton, as it was then called. Downer let him have money, and took mortgages and such other securities as Fox could give. When Fox got far enough along ‘Honest Sol’ made sweeping attachments on mortgage notes, and all other ways known to the law, and by so doing embarrassed Fox so that he could control nothing, and of course could pay nothing, or get any one to give him relief, as they feared Downer as they would a wild tiger or lion thirsting for blood. I took particular interest in this story, and thought it might be possible that he would play the same trick on me.”

Tarbell continued, “I determined a full fight was unavoidable. I informed the old man that if I lived in poverty and ruin he should die by my side; I had ceased trying to make overtures for a settlement, and should no longer counsel with him, and did not want any more of his professed friendship.

“My tactics in the fight were different from those the old man had been accustomed to. He brought suits at law on the mortgage notes due, and bills to foreclose the mortgages, with suits in ejectment on the tenants and notice to pay me no more rents. This presented a good front for a fight, and a fight it was. My policy was to hold the old man in court as long as I could, and make it as expensive as possible for him. The cases went by from term to term; then his lawyers began to want pay, and brought suits against him, which contributed to help me on successfully. The property in the suits all this time was running down for want of care. Tenants paid no rent to him or any one else, and the old man’s money went from him in every direction like the flow of water from a mill tail. I was young, but at that time the old man was old and clumsy, and as a result of the fight I got the best of it.

“These cases finally died out by settlements at different times with Downer. He never gained anything in his suits and attachments, but lost all he had. I did not get it, but officers, lawyers and speculators did. I held him in position, and they picked him and preyed upon him like so many vultures on decayed flesh.

“He finally left his old home in Sharon and went to Randolph, where he left the mortal abode of this life, and stepped over to meet his legitimate punishments or rewards of this life in common with the rest of his victims of slaughter while here.”

Tarbell’s feud with Downer didn’t end with Downer’s death in 1860. The spiritualist Tarbell claimed to have had many contacts with Downer’s spirit, detailing some of them in his book.

“I have had several communications from the old man since he left the body, all of which show the nature and condition of the old man in this as well as that state. At one time French and Chester Downer (Ed. note: Solomon’s sons) sued me on some old claim they bought of the estate of Solomon Downer, and I published a letter, or statement, not very complimentary or flattering to them or the old man. In that communication I inserted the fact that Solomon Downer never had an honest dollar about him, but all he had or ever had was adulterated with money obtained by fraud from beginning to the end of his business career.”

Tarbell continued, “This was read in presence of a medium. The spirit of the old man being present, he was offended, took possession of the medium, snatched the paper, threw it into the fire, and told me it was a lie. Many other times I have had communications from him; generally he is pleasant, and jokes as he did when here.”

On Jan. 11, 1892, Daniel Tarbell joined Solomon Downer in the spirit world.

Tarbell was not the only writer to cast Downer in a negative light. In his 2007 novel, Fettered Yet Free, Richard B. Kimball created a presumably shady, but mysteriously so, Wall Street character named Solomon Downer.

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