Commercial Paper Market
A. G. BECKER & CO., INCORPORATED: JULY 2, 1894 TO 1900
As described in an archival document, A. G. Becker & Co.,
Incorporated, came into existence on July 2, 1894, with a capitalization
of 750 shares at a par value of $100 per share, or a total capital
of $75,000. The initial shareholders of the new corporation were:
Rachel M. Schaffner, 450 shares ($45,000); Kittie F. Becker, 230
shares ($23,000); Monroe J. Friedman, 30 shares ($3,000), and
Ocscar J. Friedman, 40 shares ($4,000). Rachel Schaffner was of
course A. G. Becker's sister (and widow of Herman Schaffner);
Kittie Becker was A. G.'s wife; and Monroe and Oscar Friedman
were brothers of Kittie Becker and therefore brothers-in-law of
It is noteworthy that, although the ownership of the new corporation
was kept "in the family," and perhaps A. G. loaned funds
to his wife for her purchase, he in fact had no direct stock ownership
in the new corporation. This arrangement might well have been
suitable in mid-1894, since even at that time A. G. may have been
under some cloud of possible financial liability for the Schaffner
bank failure, or violation of Illinois banking law.
It is also noteworthy that the Friedman brothers were issued
shares of a total value of $7,000, possibly in connection with
their having been a source of funding in such amount during the
first year of the Becker proprietorship.
Immediately upon incorporation, the organizing document shows
that A. G. Becker & Co., Incorporated, purchased "the
business of Rachel M. Schaffner" for $45,000. This is very
interesting! A. G. Becker must have considered that, from mid-1893
until mid-1894, he was carrying on the business owned by Herman
Schaffner's widow. However, this concept and language might well
have been adopted for some legal reasons, in light of the unsettled
liabilities of A. G. Becker and the Herman Schaffner Estate. It
is also noteworthy that the "Rachel Schaffner business"
was purchased for $45,000 from Rachel Schaffner, who in turn personally
provided $45,000 in capital to the new corporation. Her sole "ownership"
of the A. G. Becker proprietorship was essentially exchanged for
a 60 percent interest in the succeeding A. G. Becker corporation.
The archival document then goes on to list the assets of the
business being purchased at $75,996, consisting of $49,904 of
bills receivable (presumably "commercial paper"), $12,355
in stocks and bonds, and the balance in miscellaneous assets,
and that liabilities being assumed were $39,543, including $35,000
borrowed from the Atlas National Bank, and the balance in miscellaneous
payables. Thus, the new corporation paid Rachel Schaffner exactly
$45,000, which is somewhat more than the net asset value of the
business being acquired, but equal to the par value of the stock
issued to her. It is of course conjecture, but perhaps, in fact,
Rachel Schaffner provided A. G. Becker, from some source, say,
$50,000 with which to carry forward the commercial paper business
of Herman Schaffner & Co., and that prior to incorporation,
Mr. Becker was able to repay $5,000 of such advance, turning the
balance into a 60 percent interest in the new corporation. We
are unlikely ever to know the answer to this enigma.
As mentioned earlier, A. G. Becker was resolved to focus all
his energies on the commercial paper business, the area of the
Schaffner bank business on which it is believed he spent most
if not all of his time. It was noted in the newspapers at the
time of Herman Schaffner's disappearance that the bank had recently
enjoyed (presumably in 1892) an annual turnover of about $35 million
in paper placed. It is interesting to speculate that if A. G.
Becker were able in 1894 and forward years to regain, say, 50
percent of that turnover and realize a discount commission of,
say, 1/2 percent per annum (which rate was apparently prevalent
at that time), the ongoing firm could have realized gross income
of, say, $800,000-900,000 per annum. Even after expenses and handsome
compensation to A. G. Becker as manager, this could have been
quite profitable for shareholders.
In my summary review of the Becker archives in 1981, I found
a "statement of the business" dated December 31, 1897,
and signed by A. G. Becker. This may have been a statement which
A. G. shared with banks, as well as the family shareholders, to
communicate how the business had progressed since incorporation,
and where the business stood at the end of 1897.
Statement of the Business,
December 31, 1897
As can be seen, the company's retained earnings ("cumulative
profit and loss") since inception amounted to $78.452, to
which should be added $44,250 in dividends paid out over the applicable
period, resulting in a total profit for the period of $122,692.
This would mean that profits for the 3 ½ year period were
somewhat over 1.6 times original capital, or equal to a compounded
return on equity per annum of just above 30 per cent. Even though
the economic environment during the late 1890s was favorable for
the new business, this was still an exceptional achievement.
Finally, as to some hint of the nature of the business being
carried on by A. G. Becker from incorporation through the end
of 1899, the archives contain a list of 18 companies which appear
to have been issuers of commercial paper handled by A. G. Becker
& Co. in 1893, and then an additional list of 10 names apparently
added in 1894-1900. Another sheet from the archives lists Becker
commercial paper issuers in the 1900-02 time frame.
Commercial paper issuers
Commercial paper issuers
And a final table (not shown due to illegibility) lists over
150 "bank customers in the early days who are still in business
and customers of ours at the present time." Presumably, the
total number of banks who were commercial paper customers of A.
G. Becker & Co., Incorporated by the early 1900s well exceeded
this early base number. It is not clear when these various lists
were prepared, but it seems to be in the early 1900s, looking
back to the "early days" of the firm
Posted: July 12, 2007