From the end of the nineteenth century until the onset of the Great Depression, Wall Street embarked on a stunning, unprecedented, and often bloody period of international expansion in the Caribbean. A host of financial entities sought to control banking, trade, and finance in the region. In the process, they not only trampled local sovereignty, grappled with domestic banking regulation, and backed US imperialismbut they also set the model for bad behavior by banks, visible still today. In Bankers and Empire, Peter James Hudson tells the provocative story of this period, taking a close look at both the institutions and individuals who defined this era of American capitalism in the West Indies. Whether in Wall Street minstrel shows or in dubious practices across the Caribbean, the behavior of the banks was deeply conditioned by bankers’ racial views and prejudices. Drawing deeply on a broad range of sources, Hudson reveals that the banks’ experimental practices and projects in the Caribbean often led to embarrassing failure, and, eventually, literal erasure from the archives.
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About the Author
Peter James Hudson is assistant professor of history and African American studies at the University of California, Los Angeles.
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Samuel Miller Jarvis landed at Santiago de Cuba on July 28, 1898, and discovered a squalid, broken city, a somnambulant frontier town seemingly stuck in a fast-retreating Spanish colonial past. What others found picturesque — the narrow lanes and low houses, the rouge-tiled roofs rising sharply from the sheltered bay, their ceramic patchwork broken only by the twinned cupola of the town's cathedral, the narcotic murmur and lull of daily life — Jarvis found disappointing, unattractive, and backward. Santiago, for Jarvis, was architecturally unimpressive, its streets were squalid and unhygienic, and its citizens, Cuban and Spaniard alike, appeared to be of a lowly character. "The town is very old, the style of architecture primitive, there is not a modern residence or business building in the town," Jarvis complained. "There has been no consideration given to sanitary engineering or conditions. The streets are narrow, badly paved where paved at all and at present in a bad state of repair, as well as being very dirty, and the sidewalks are very bad. It is very difficult to get around the town during this hot weather as it seems to be a succession of hills, and what carriages there are are rather heavy, without brakes and the horses are small and poor Cuban ponies."
Jarvis was a New York City businessman and banker, a board member of half a dozen corporate concerns, and a founder and vice president of the North American Trust Company (NATC) (fig. 1.1). He had traveled to Santiago de Cuba to open a branch of the NATC but, upon his arrival, found that after decades of insurrection and war, Santiago's underdevelopment mirrored Cuba's banking and financial organization. He discovered that in Cuba, banking, as US capitalists understood the term, was an "incidental" business, a secondary activity of commission houses and merchants whose specialty was the distribution and sale of cigars and cigarettes and other items. There were but two proper banks on the island: the Banco Español de la Isla de Cuba, fiscal agent of the Spanish colonial government, and the Banco Comercio, a private commercial bank in the process of liquidation; neither institution did much to stimulate economic growth. The merchant banks acted as resolutely private, even personal, concerns. Money was hoarded in fireproof safes, few people had bank accounts, there was little capital in circulation, and commercial transactions were settled not through drafts, but by the cumbersome movement of Spanish and French gold from creditor to debtor and back using a horse-drawn carriage accompanied by armed guards.
Yet Jarvis saw promise and possibility in Santiago de Cuba. Two hours after presenting his credentials to Major General William R. Shafter, the US commanding officer in Cuba, at Santiago's Municipal Palace, Jarvis was searching for an office for the NATC. Two days later, the NATC was opened for business at 10 Marina Street. "It was the first and is at present the only American banking institution in Santiago," Jarvis later stated, "and I was the first civilian to raise the American flag on the island after the commencement of the war."
Samuel Jarvis is among the most important if enigmatic figures in the early history of US imperial banking. Over nearly fifty energetic but peripatetic years, he created a series of financial institutions that, though oftentimes ill starred, contributed to the construction of the platform required for the international expansion of US finance and the development of the fiscal infrastructure of the US colonial state. The institutions Jarvis organized were at the nexus of the geographic imperatives and regulatory issues that plagued the foreign expansion of US banking and finance, and the clerks, accountants, managers, and auditors whom he employed were critical to the foreign management and internationalization of later, more established, and well-known US international banking institutions. Shrewd and entrepreneurial, Jarvis was quick to recognize the profit potential of the frontiers of US capitalism. He saw the promise of regions on the cusp of development and territories not yet strafed and exhausted by investment, and he saw the possibilities of industries and projects still nascent. Jarvis had a lawyer's mind and an assessor's eye, but he also had a politician's wiles and was able to mobilize both the law and the state for his own accumulative ends.
Jarvis's vision led him to Cuba. There, his North American Trust Company quickly took advantage of the financial possibilities of the US occupation (1898–1902) while his Banco Nacional de Cuba, organized in 1902, emerged as among the most important banking institutions in the early years of the república neocolonial, in which the Cuban economy and political system was increasingly dominated by the United States. In a similar fashion, a decade later, Jarvis turned to the Dominican Republic, organizing the Banco Nacional de Santo Domingo in an attempt to profit from US fiscal control of the country by taking advantage of the State Department's policies of dollar diplomacy in the Caribbean and Central America.
However, the roots of the Jarvis project were not in the West Indies, but in the US Midwest. Before Jarvis grafted his organizations onto the project of US colonialism in the Caribbean archipelago, he profited from the history of white settler colonialism in the Missouri Valley. Two decades before Jarvis reached Santiago de Cuba, he began as a mortgage broker in frontier Kansas. There, he organized a slate of corporations and banks, the most important being the Jarvis-Conklin Mortgage Trust Company, an institution launched with his erstwhile business partner Roland Ray Conklin. Jarvis-Conklin emerged as the preeminent institution serving as the intermediary for the capital "irrigating," to use the parlance of the time, the US West. It lent Atlantic capital, the savings of the middle classes of England and the eastern United States, to the white farmers, drovers, and ranchers settling the states and territories west of the Missouri River. Jarvis-Conklin offered mortgages on farms and ranches and financed the street railroads, residential plats, and waterworks for the growing urban populations of Kansas City and Baltimore.
In Cuba and the Dominican Republic, Jarvis's ventures were guaranteed by force: protocols and agreements between the United States and the two countries enshrined financial stability through the threat of military intervention; in the US West Jarvis's companies were underwritten by the historical violence of white settler colonialism: territorial dispossession enabled both the financialization of the West and the expansion of racial capitalism. But both territories were governed by an expansionist state eager to encourage investment but whose actual regulatory footprint was weak. Drawing on a reservoir of colonial capital to finance his projects, Jarvis profited from the inefficiencies, oversights, and ambiguities of a state bureaucracy still in formation and encumbered by problems of distance and geography. He worked in regions where jurisdictional boundaries were unclear and fuzzy and where local sovereignty and authority were difficult and transitional.
Jarvis proved an adept navigator of these regulatory spaces, walking the thin lines between legality and illegality, sound and unsound banking practice, and ethical and dubious business pursuits. Such an approach to business did not come without criticism. The Investors' Review derisively evoked "the methods of Messrs. Jarvis and Conklin" as a prime example of the suspect business and financial practices prevalent in the US West. These methods prompted lawsuits, investigations, and legal proceedings and generated an aura of impropriety, chicanery, crookedness, and corruption that enveloped all of Jarvis's enterprises and followed him from Kansas to the Caribbean. In the Missouri basin Jarvis and Conklin were accused of patronage, graft, and fraud. In Cuba, a former employee described the Jarvis crowd as a "gang of crooks" who had come to the island "to plunder, exploit, not for any good purpose." In the Dominican Republic, the associates of Jarvis threatened rivals with violence, fell afoul of the US State Department, and became pariahs in the local business community. Despite the criticisms, Jarvis's methods, honed in Kansas and perfected in the Caribbean, were essential to the history and growth of US imperial banking and the training of its bankers. Long after Jarvis's institutions had collapsed, the bankers he employed continued to shape the terms and history of the internationalization of Wall Street.
Samuel Miller Jarvis was born in McDonough County, Illinois, in 1853. He spent his early years on his father's farm, attended local schools, and upon his graduation in 1871, married and moved to Winfield, Kansas, a small township in the southern part of the state. Taking advantage of the federal government's preemption statues allowing white settlers to take over surveyed, "un-occupied" land, he appropriated and worked an acreage. Jarvis also taught school, traded in land, and made mortgage loans for friends back in Illinois. He began editing and publishing the Cedar Vale Blade in nearby Chautauqua County in August 1877 but finding it unprofitable sold it by December. He read law in his spare time, and in 1878, he was admitted to the bar. He formed Gilbert, Jarvis & Co., with Stanley L. Gilbert, a local notary. The company loaned money on improved farmland in Cowley and surrounding counties. Jarvis combined his knowledge of real estate law with his skills in appraising farmland. The company proved a success.
When Gilbert retired in 1881, Jarvis reconstituted the business as Jarvis, Conklin Co. His new partner, Roland Ray Conklin, was born in Urbana, Illinois, in 1858. Conklin left school at fourteen and worked for two years as a clerk and a bookkeeper before applying for admission to the University of Illinois. To pay his tuition, Conklin worked as a clerk for a local merchant and spent his summers traveling up and down the Missouri and Mississippi rivers and taking temporary employment. He took jobs as a ship hand, a baker, and a traveling salesman in Sioux City, Kansas, and St. Paul. At one time in St. Louis, he hawked primitive telephones, foreshadowing some of his later enterprises. He was forced to drop out of school because of his inability to pay tuition, and in 1878, he moved to Winfield, Kansas, where his brother was already established as a newspaper publisher. Conklin was hired as the bookkeeper for Gilbert, Jarvis and when Gilbert retired, formed a partnership with Jarvis. It would last nearly forty years.
Within a year the business of Jarvis, Conklin had outgrown Winfield, and they relocated to Kansas City, Missouri. Kansas City was emerging as a regional financial and commercial hub. Its population was swelling with white settlers. Telegraph and railway lines converged on the city, and its financial institutions acted as the clearing house for investment capital: money from the northeastern states and England passed through it on its way for public improvements, urban expansion, and the development of the West. In November 1886 Jarvis and Conklin dissolved their partnership, reconstituting it as the Jarvis-Conklin Mortgage Trust Company, releasing them from individual liability and positioning them to take advantage of the booming economy of Kansas City and its environs.
The Jarvis-Conklin Mortgage Trust Company became the most important financial institution in the region, amassing a large portfolio of five- and ten-year mortgages on city and farm real estate. The headquarters of the company was staffed by almost thirty clerks who issued its paper and a team of traveling inspectors who examined securities and assessed property values. They had a network of agents and inspectors in nearly all of the western states and territories. They opened agencies in New York, Providence, Philadelphia, Boston, Dallas, Portland, Denver, and Memphis, through which mortgages and securities were marketed. They also developed an extensive branch network. The headquarters were responsible for loans in Missouri, Kansas, and Nebraska, the branch in Memphis presided over Tennessee, Arkansas, Texas, and Alabama; the Portland office covered Washington, Idaho, and Montana; and Denver covered Colorado. In addition, in 1887 they established an office in London, England, the first branch of a US trust company to be set up overseas. The London office was soon their busiest, employing the largest number of staff and selling almost as many securities as the other branches combined. Jarvis-Conklin also contracted as the sole fiduciary agent in the United States for the Yorkshire Investment and American Mortgage Company, Ltd., founded by Bradford, England, investors.
By 1888, Jarvis-Conklin had negotiated almost 15,000 mortgages valued at more than $14 million and paid out close to $4 million in interest to its investors and shareholders. Its success led it into enterprises beyond western farm mortgages. Jarvis-Conklin acted as the developer for the Roland Park Company, a corporation formed by London's Land Trust Company in 1891 to oversee the development of a Baltimore suburb. The suburb displaced a longstanding African American community and included covenants against blacks and Jews in the purchase agreements. They platted and developed Kansas City's tony Hyde Park neighborhood, another racially segregated neighborhood, where both men owned large homes. They formed the Bear Lake and River Water Works and Irrigation Co. The prospectus of the company outlined far-reaching plans for a hydrological system that would irrigate much of the Utah Territory. They also founded local banks, including the Farmers and Drovers' Bank, at Kingman, Kansas, and the Bank of Columbus, in Kansas City, and railroad and utility companies, including the Kansas Elevated Railway, the Augusta Railway Company, the North-East Street Railway Company, the Augusta Electric Company, the Ogden Street Railway Company, and Waukesha Hygeia Mineral Springs.
The success of Jarvis-Conklin was based on the possibilities of both land and the law. First, the availability of free, unencumbered, and uninhabited land in the West was the precondition for accumulation; settlement was only possible by prior displacement, and the financial abstractions of land mortgages were underwritten by the historical violence of indigenous expulsion. Jarvis-Conklin issued a publicity tract titled The Great Loan Land that inadvertently illuminated this history. The title of the volume played on the trope of empty but financialized space, as its text evoked Kansas and Missouri as lands wherein every square inch was being energized by investment capital. But it was accumulation based on dispossession: they did not settle empty land but emptied land, land in which the aboriginal populations had been killed or removed.
The success of Jarvis-Conklin was also facilitated by the regulatory context of the period and the region. Restrictions governing other types of intermediaries that might have otherwise entered the market in western mortgages enabled its expansion. The New England savings banks that had invested their capital in Jarvis-Conklin were strictly local in their operations. They did not have a network of agents that could inspect properties, verify mortgages, or collect charges and payments, and so relied on brokers like Jarvis-Conklin to do this work. Similarly, although under the National Bank Act, New York City's financial institutions were becoming increasingly powerful, they were also restricted from operating beyond their state of incorporation. Only insurance companies offered any competition to the land mortgage companies.
Yet even in the context of this loose regulatory environment, Jarvis-Conklin's geographical expansion raised concerns over its authority to operate in certain jurisdictions. In 1890, the superintendent of the New York State Banking Department asked the attorney general for an opinion on whether or not Jarvis-Conklin had the legal right to accept deposits and borrow money in New York while issuing its debentures as security in Kansas. The attorney general affirmed the right of the company to do so, but stressed that it was restrained by law depending on the material form of the issue: it could issue debentures as security, but was expressly forbidden to issue debentures as circulating currency or banknotes. It was noted that Jarvis-Conklin bonds were of similar material form to banknotes and that such issues were forbidden according to its charter. The attorney general stated that the company was liable to a $1,000 penalty if it began issuing banknotes. Such legal questions and doubts would dog the company.(Continues…)
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Table of Contents
INTRODUCTION / Dark Finance,
ONE / Colonial Methods,
TWO / Rogue Bankers,
THREE / Financial Occupations,
FOUR / Foreign Regulation,
FIVE / American Expansion,
SIX / Imperial Government,
SEVEN / Odious Debt,
CONCLUSION / Racial Capitalism,