Commercial Paper Market
REPAYMENT OF DEPOSITORS OF THE HERMAN SCHAFFNER BANK
As we will learn further along in this chronicle, A. G. Becker
was an extremely able businessman who in his lifetime built a
significant investment organization, pursued a range of civic
and humanitarian causes, and helped to raise a fine family. But
perhaps his most noble and praiseworthy achievement, and that
act which most established his wide and favorable reputation,
was to seek out and repay a significant number of depositors of
the former Herman Schaffner bank on the basis of a voluntary,
deeply felt moral as opposed to legal obligation.
It is clear in a range of documents, including letters (some
extracts are reported later) and public statements, that A. G.
Becker had no clear legal liability arising from the insolvency
of the Schaffner Bank. On the other hand, it has been disappointing
and quite frustrating not to be able to find a legal document
or other description or news report that confirms A. G. Becker's
conclusive exoneration from legal liability for the debts of Herman
Schaffner & Co. In this regard, perhaps corporate and bankruptcy
law at the time did not encompass today's conception of joint
and several liability of general partners for the debts of the
partnership. Perhaps it was determined that A. G. Becker had some
form of limited or no liability in the defunct bank. Perhaps he
was relieved of liability by a judge or judges on the basis of
his testimony in court, the details of which thus far have not
been discovered, and nor are they likely to be. It may be so simple
that, in the 1890s, each claimant had to establish, suit by suit,
the legal obligation of an alleged debtor in order to legally
collect a debt, and thus many depositors and other creditors of
the Herman Schaffner bank were not willing or able to pursue this
It has been frustrating not to find the final resolution of the
legal suit and grand jury indictment alleging A. G. Becker violated
Illinois banking law when receiving certain deposits. Perhaps
these legal challenges were defective and dismissed. Perhaps the
law was deemed invalid or inapplicable. Perhaps the suits were
in due course dismissed. An extensive search for information of
these legal proceedings has not yet turned up any answers.
We must also go back to A. G. Becker's statement the day after
Herman Schaffner disappeared, in which Mr. Becker was convinced
that the Schaffner bank was whole and that depositors were amply
covered. It would appear he had no clue to the bank's real condition.
Further, the newspapers did report some of his testimony before
the assignee to the effect that Herman Schaffner handled the money
and banking aspects and details, and Mr. Becker was not privy
to those matters. Perhaps as junior partner, he was kept in the
dark, or the status of matters was purposefully kept from him.
Perhaps he too much worshipped and trusted his brother-in-law.
It is also interesting to note that in all the various deposit
acknowledgements, deposit certificates, and other documents dealing
with the banking side of Herman Schaffner & Co., the only
signatory appears to be Herman Schaffner.
A. G. Becker was clearly very sick at heart with his brother-in-law's
tragic death and with the emerging reality of the terribly mismanaged
banking operation unfolding by July 1893. Whatever his own role,
Mr. Becker, even at that time, was saying to close friends and
others that he intended to repay depositors in the bank, and that
it was his goal to undertake whatever sacrifice and hard work
would be needed to meet this moral commitment.
As noted earlier, the Schaffner bank assignee made a report to
Judge Scales in County Court on March 1, 1894, that summarized
the work of the assignee since the June 18 filing.
Report of March 1, 1894
As reported, there were 838 claims from depositors and other
creditors which were approved by the assignee at that time, with
a range of petitions still being reviewed. As noted in that report,
a good amount of the bank's assets in miscellaneous paper in fact
turned out to be worthless (essentially as predicted in June 1893).
In addition, the collateral of secured creditors, upon liquidation,
came up $400,000 short of the secured liabilities. A dividend
of probably 10 per cent of approved claims was thus to be recommended
to the court.
It was not until August 10, 1894, that the assignee filed its
next report and proposed that a 10 per cent dividend be paid out
on an approved liability of about $1,355,000. Of this amount,
about $690,000 was due unsecured creditors (principally depositors),
and $665,000 was due secured creditors (given the significant
reduction in the value of their collateral upon disposition).
This liability was about $1 million less than that initially evaluated
in June 1893. A distribution of $137,555 went to creditors, and
to cover some court costs, according to this report.
of Ten Percent Paid
The final payment to the creditors of the Herman Schaffner &
Co. was not made until November 27, 1898, with a distribution
of $27,825. The basis for this distribution was 2 1/2 per cent
of the then standing total liability. As such, this liability
had apparently been further reduced by about $100,000 by court
action over the period since August 1894. Even so, it would appear
that some $650,000 of depositor claims were still outstanding
as the court wound up the affairs of the failed Herman Schaffner
bank in late 1898.
In the firm's archives are three tabulations which reflect the
details of the status of depositors and other creditors of the
failed bank. One tabulation appears to be an alphabetical printed
listing of depositor account names, as if regularly printed in
the normal course of internal weekly operations, with an amount
of each deposit penciled in after the depositor's name. The printed
list is augmented with the names of other depositors, inserted
generally alphabetically, with the balance in their accounts,
as if an audit review of the overall situation was being compiled.
The written entries may be in the hand of A. G. Becker. It is
believed that this was possibly A. G. Becker's own first tabulation
of the bank depositor situation, right after Herman Schaffner's
A second tabulation, a ledger labeled "Estate Accounts,"
consists of four alphabetical groupings and appears to be the
assignee's record of depositor names, balances, and claims. This
ledger contains the names of 838 numbered entries, which was the
number of claims announced by the assignee in March 1894. This
tabulation/ledger thus appears to have been initiated sometime
before, or in connection with, the March 1894 announcement. The
ledger in some cases shows a reduction in the "filed"
claims vs. the "allowed" claims. Also, the ledger shows
the dividends paid, including the final 2 1/2 per cent dividend.
Thus, this ledger appears to be the assignee's record of all allowed
claims as of March, 1894, and their payment of dividends through
late 1898. In addition, someone has penciled in the addresses
of all the depositor and creditor entries, and has added some
names and balances at the end of some of the alphabet groupings.
Starting apparently in late 1893 even, A. G. Becker, through
A. G. Becker & Co., or directly, or in some cases through
his sister, Rachel Schaffner, or his nephew, Robert Schaffner,
began to "repay" some depositors, receiving receipts
for full or often partial payments. A bit later, the repayment
began to take the form of an assignment of the depositor's claim
against the Schaffner estate, presumably with the settlement of
the deposit balance, or, perhaps in some cases, a lesser amount.
In some cases A. G. Becker apparently paid some cash and gave
a note for the balance. This pattern of steady although occasional
repayment of depositor claims went forward particularly in 1894
and perhaps 1895. Then it appeared generally to fall off. Examples
of these repayments are shown in the following links.
by Rachel Schaffner (nominally perhaps)
Robert Schaffner (nominally perhaps)
by A. G. Becker, cash and note
Repayments by A. G. Becker,
The final third tabulation is a ledger which essentially copies
the 838 entries made in the second tabulation above, but lists
addresses in ink, in a separate column, and incorporates more
detail in other columns. It is believed that this ledger was developed
by A. G. Becker in mid-1899 as a way to enter all settlements
of claims he had made to date and for which he had retained separate
documents, but apparently no master listing, and then as a guide
to a more organized and systematic depositor repayment program
in the future. This ledger is printed and organized for such a
purpose and on one of the facing pages, near the spine, is printed
"Jul 15 1899." Thus it is believed that this ledger
was organized and printed by Mr. Becker in mid-1899 for the purpose
of summarizing, updating, planning, and the future recording of
his overall depositor repayment program.
It is fascinating to closely examine this repayment ledger. All
the depositor names and other data are entered by hand in ink,
the entries being made by a very good script writer, perhaps not
A. G. Becker, but more likely his secretary. The column headings,
across the top of the left and right hand page, are Name, Address,
Account, Certificate, Claim, Offset, Dividend No. 1, Dividend
No. 2, Settlement, and Remarks. As noted, the pages and column
headings of the ledger appear to have been custom designed and
printed to record and support the repayment program. There are
generally 20 depositor/creditor claims listed usually -- but not
always - alphabetically, numbering from 1 to 838. On a few pages
there are claims entered in ink that have no number, and unnumbered
claims are inked or penciled in at the end of each alphabetical
section. The total number of depositors and claims thus exceeds
900. This suggests that A. G. Becker acknowledged and added a
number of claims on his own, and apparently did list some claims
which had been settled "out of court." The dollar entries
in various columns are not footed, or totaled. This suggests that
Mr. Becker was approaching the repayment plan on a claim-by-claim,
person-by-person basis, utilizing some selection process, known
only to him to allocate the funds in his voluntary repayment plan.
Generally, many relatively larger claims -- by what appear to
be businesses -- were not repaid, whereas many small deposits
of individuals were paid, as if that selection were more "just."
(Mr. Becker said in 1901: "From the moment of the failure
I set to work to pay every just account."). Since most claims
had received 12 1/2 per cent of their approved amounts, the amount
in the "settlement" column reflected the remaining unpaid
87 1/2 per cent. In some cases, however, the amount in the settlement
column was less than 87 1/2 per cent an approved claim, the amount
presumably being lower, suggesting a discussion and agreement
with a depositor. In some cases, a claim is noted to be offset
by a liability to the estate or to Mr. Becker. In a number of
cases, the unpaid claim or settlement was shown paid on an installment
basis, but in most cases, it was "Paid in full in cash,"
with a date shown.
The paper and entries in this ledger are in excellent condition,
and the ledger itself protectively rebound in handsome red leather,
probably in the early 1980s, after Paribas became the principal
shareholder of the former A. G. Becker & Co.
Most of the entries under "Remarks" have a date or
dates along with "Repayment in full in cash," but a
number of claims show that notation but no date. By comparing
some of the detailed claim payment documents which exist in the
archives, it can be determined that these undated payments were
those which were completed before mid-July 1899. The first dated
entry shows a repayment on September 6, 1899, with a relatively
large number of payments made during the days which followed.
Then, there was apparently a broad repayment made in November
1899. Then there appear to be a number of payments made together
in November and December 1900. And then more payments were made
at certain times in 1901, and at the end of 1902. Mr. Becker's
final "tranche" of payments appears to have been in
Recipients of deposit settlements from mid-1899 forward, even
into the 1920s, were asked to sign a standard receipt, or form
of assignment, waiving any future liability of A. G. Becker with
respect to the Herman Schaffner affair.
Printed Standard Assignment
Form Used Mid-1899 Forward
A total of all the payments entered in the repayment ledger,
including those completed before mid-1899, and then from September
1899 through early 1903, would reach $325,000, and include about
325 depositors. A. G. Becker continued to use this ledger to record
occasional payments of claims after 1904 all the way forward to
1924, with the aggregate additional payments for this period being
approximately $15,000, assuming the ledger shows all such payments.
It is curious to speculate how A. G. Becker selected depositors
for repayment and with what priority? Perhaps he went through
his summary ledger, and earlier documents, identifying those persons
and businesses he knew, or knew something about, or that he felt
may have relied upon his presence in the failed bank? Maybe the
selection involved depositors he knew to be widows or to be destitute?
Perhaps he selected depositors he thought his brother-in-law must
have known personally, and who relied on his presence in the bank
carrying his name? Perhaps he selected some depositors with whom
he needed to relate in connection with his new business activity?
And, why did he cease his regular program of repayment after early
1903? At various times, he expressed the hope and intention to
repay all depositors. Did he develop a specific lesser goal which
he met, but which was short of the total? Did he feel after a
time that he had done his duty, on a "just" basis, and
anything further was unnecessary or inappropriate? Did he feel
that after a time, he would be responsive to repayment, but not
proactive about it? These are all questions the answers to which
were only known to Mr. Becker.
And why did A. G. Becker decide, in mid-1899, to systematize
and aggressively execute his moral commitment program? We might
conjecture some reasons. Firstly, the new A. G. Becker & Co.,
Incorporated, started in mid-1894, was becoming quite successful
and was apparently "rolling" by 1899. Excess funds were
perhaps accumulating personally and in the business. (It is not
clear whether the business' funds or those of A. G. Becker personally
were being used in the repayment plan. It would appear that both
sources might have been drawn on, personal funds presumably being
earned by Mr. Becker through compensation and not through dividends,
since he was not a shareholder).
Perhaps business conditions and the firm's growth gave reasonable
optimism for good sailing ahead, and Mr. Becker sensed that he
could now sustain a broad repayment program -- something he later
expressed as very important to him when he founded the business.
Also, with the Schaffner Estate fully settled in late 1898, it
was clear that there would be no more funds, or any promises of
future funds, from the assignee. The final,accurate amount of
unpaid depositor claims was now established. In addition, with
the passage of time, A. G. Becker had time to determine those
depositors he hoped particularly to make whole, and yet on the
other hand, which persons and businesses he would not choose to
repay, for various reasons, given, among other considerations,
the experience of the claims and legal processes of the prior
Finally, there is the conjecture that somewhere along this timeline,
A. G. Becker concluded that there was no further risk, or significantly
less risk, of any legal liability in the Schaffner matter, and
that he was free to repay depositors in an organized, voluntary
way, without establishing any legal and binding precedents. He
could now be the sole master of an "open" repayment
plan, using his own standards and selections. Perhaps now he could
be guided by his own moral compass, and work within his financial
Whatever the process Mr. Becker used, most recipients of his
organized voluntary payment starting in mid-1899 apparently were
very surprised to receive funds, and in almost all cases, terribly
grateful. When he initiated payments in September 1999, A. G.
Becker apparently wrote those depositors he had selected and included
a check for the amount of their remaining claim. Their responses
record their grateful surprise, and their acceptance of his moral
vs. legal obligation which apparently in some way he expressed
in his letter. The archives unfortunately do not have any examples
of the letter which A. G. Becker wrote to depositors, but the
archives do contain a large number of letters from grateful recipients
of his repayments.
Extracts From Letters to A. G. Becker
Starting with his payments in 1900 and forward, Mr. Becker apparently
would contact former depositors and suggest they call at his office
to discuss a matter, on which visit they would learn of his intentions
and receive payments in person. In some cases, he would hand a
former depositor an envelope with a check and return voucher in
it and ask that they open it later.
As noted earlier, in connection with his repayments, Mr. Becker
would request that depositors sign a printed form, which assigned
their claims to his company, and legally bound them to waive any
future claims arising from the Herman Schaffner failure.
Originally posted: July 12, 2007. Edited: September 15, 2007.