FRONT PAGE OF THE CHICAGO EVENING POST
SATURDAY JUNE 3 1893 5PM EDITION
SCHAFFNER & CO. FAIL
Senior Member of the Banking Firm Mysteriously Missing
MAY HAVE KILLED HIMSELF
His Disappearance Causes the Assignment—Excitement on the Stock Exchange
The bank of Herman Schaffner & Co., at 100 Washington Street, closed its doors today, and at the same time it was announced that Herman Schaffner, the senior member of the firm, had mysteriously disappeared. At 10 o'clock the American Trust and Saving's Bank, to which an assignment had been made, took possession of the suspended bank and its affairs.
The suspension was caused by the disappearance of Mr. Schaffner, who, it is feared by his friends, has wandered away in a fit of mental aberration. Mr. Schaffner was last seen at the bank yesterday at noon. He had been at his desk, as was his usual custom, most of the morning. At the noon hour, without making any statement to any one as to where he was going, Mr. Schaffner walked out of the bank, leaving his overcoat on the back of the chair on which he had been sitting. He did not return, but his absence was not thought strange or unusual until the time came to close the bank in the evening.
No Trace of the Banker Found
At 6 o’clock the vault was locked and the bank closed, but at that hour the junior member of the firm, Abraham G. Becker, had become alarmed at the absence of his partner. Mr. Becker made inquiry at Mr. Schaffer’s home, at 3217 Wabash avenue, and was still further alarmed when be learned from Mrs. Schaffner that her husband had not been there since he left home for business in the morning. Mrs. Schaffner then became alarmed and at 7 o'clock sent for her husband's attorney, Jacob Newman. Mr. Newman had messengers sent out to find Mr. Schaffner and the hotels and clubs where he might possibly have been or visited.
No trace of the missing man could be found, and at 9 o'clock the police were notified of the disappearance. All the hospitals were called up by telephone and inquiry was made of each if any man of Mr. Schaffer’s description had been brought in. Police officers searched the city up to midnight, but no clue could be found. No trace of the banker's movements after he walked out of his office at 100 Washington was uncovered.
Assignment Decided On
When it became evident that Mr. Schaffner had disappeared there was a consultation between Mr. Becker, James Rosenthal, his brother-in-law, and Attorney Newman as to the effect his absence, when it became known, would have on the bank. Representatives
of three of the largest banks in Chicago were called upon for advice and they and the gentlemen just mentioned went at 1 o'clock this morning to the residence of Levy Mayer. There it was decided that the best thing to do under the circumstances was to make an assignment as soon as the County Court opened this morning, and the American Trust and Savings Bank was selected as the assignee.
The assignment was filed a little before 10 o’clock and a few minutes later G. T. Shaw, representing the assignee, took charge of the bank.
Mr. Becker was so overcome by the disappearance of his partner that he was taken ill and this morning was confined to his home at 3232 Groveland avenue.
Attorney Newman, who had known the missing banker for years, said to-day that he was utterly unable to account for the disappearance. “Mr. Schaffner,” said he, “was apparently in good health, and so far as I know, as his attorney, there was nothing in his private affairs or in the affairs of the bank to cause him to commit suicide. Mrs. Schaffner tells me that he left his home yesterday morning apparently in good health and in good spirits and there was nothing in his manner yesterday to indicate to Mr. Becker that there was anything wrong. The condition of the money market during the last three weeks has been such that Mr. Schaffner was under a heavy strain. The only explanation I can give of his disappearance is that his mind gave way temporarily under the strain and he wandered away.
Fears that He Killed Himself
"Whether he committed suicide or not nobody knows, but his friends fear the worst. Mrs. Schaffner is terribly distressed, and when I left her house at 8 o'clock this morning she was sitting at one of the front windows vainly watching for her husband's return."
"Did Mr. Schaffner have any money with him?" Mr. Newman was asked.
“Nobody knows, but I don't suppose that he had any more than a man of his habits usually carries about his person."
"Was Mr. Schaffner in financial difficulties?"
"Not that I know of. Of course the condition of the market gave him a great deal of anxiety, but if there is anything wrong in his business I am not aware of it."
May Have Jumped into the Lake
Mr. Schaffner’s friends took a little item which appeared in the papers this morning as a possible clue to his disappearance. Yesterday afternoon a well-dressed, heavy-set man hired a boat at Andrews' boat house, at the foot of Diversey avenue, and rowed out into the lake. He did not return, but the boatkeeper a few hours later found the boat two miles off the shore, empty. In the bottom of the boat was the black derby hat which the man had worn. It was about 2 o'clock when the boat was hired and the general resemblance of the man to Mr. Schaffner caused his friends to suspect that it was he. This morning Mr. Rosenthal went to the boat house, accompanied by a Central Station detective, to investigate the story.
While nobody about the bank who saw Mr. Schaffner yesterday would say that there was anything unusual in his manner or appearance, it is said that acute mental aberration is not unknown in his family, and that a near relative once developed traces of insanity. Mr. Schaffner was about fifty years old and had been in the banking business for about thirty years. He has five children, the eldest a boy of eighteen years, who is a student at Yale College, and the youngest five years old.
Attorney Mayer’s Statement
Levy Mayor, as attorney for the assignee, gave out a statement as to the conditions of the bank, and coupled with it an account of Mr. Schaffer’s disappearance and the fears of his friends that harm bad befallen him.
"It is expected," said Mr. Mayer, "that the assignment will be but temporary and in the meantime a complete inventory of the firm's assets will be made by the American Trust and Savings Bank. The assignment was decided upon after the advice of some of the leading bankers of the city had been taken. As far as we know there is nothing in the condition of the bank which would furnish a reason for Mr. Schaffner’s disappearance. Mr. Becker and his representatives entertain no doubt that the firm will be able, even by forced liquidation, to pay off all its liabilities. A meeting of the interested parties will be held early next week so as to enable the bank to resume if it is deemed advisable. It is not a failure in the ordinary sense, but it was foreseen that when Mr. Schaffner’s disappearance became known a run on the bank would ensue. To avoid that, suspension was decided upon. There has already been sufficient investigation made to show that no bank in the city or elsewhere will lose cent by the suspension."
Too Much Commercial Paper
E. Chapman, of the American Trust & Savings Bank, said: "I cannot tell what the assets and liabilities are until I get a statement from the banks. That statement will probably be issued to-day. The cause of the failure? Too much commercial paper. They were the biggest dealers in commercial paper in the country. They handled $35,000,000 of it last year. There was no sale, to speak of, of commercial paper this year, and that is the cause of the failure. I can say nothing further until a statement has been prepared of the bank's condition, and men are at work on that now as fast as they can.”
The firm. of which Mr. Schaffner and A. G. Becker are the only members was organized in 1878, and its chief business has been that of handling commercial paper. It has also done a deposit business in a small way. Mr. Newman said that last year the firm handled $36,000,000 worth of commercial paper, depending for its profits upon a small brokerage. It handled the paper of Armour, Morris and nearly all the packers, great and small.
Depositors Will Lose Nothing
The amount of deposits is said to be small and Mr. Mayer said that none of the depositors will lose anything. When the bank was closed this notice was posted in the window. “This bank is in the possession of the American Trust and Savings Bank.”
The notice attracted a crowd in a moment and the crowd remained during the whole afternoon. In a little while it was joined by some of the depositors, who could be picked out of the idle throng by their pale faces and serious looks. Many expressions of excitement could be heard, and more than one man tried to get into the institution, but the front doors were tightly closed while the wide entrance was guarded by a big policeman, who refused to allow any one to pass. The excitement on the street was increased by the rumor that Mr. Schaffner had committed suicide. This rumor, more than anything else, drew the crowd and caused the people to stand peering by the hour through the big front windows.
Theories of Other Bankers
More than one theory was advanced by bankers to-day as to the cause of the suspension. The president of a bank located not far from Schaffner's said: "Of course thing's are panicky. Anybody can see that. But Schaffner's failure is not a great surprise. The weak concerns must go down now. That's all there's to it. See the losses Schaffner has had. He got caught in the Deimal Bros. failure for over $100,000, in the D. Dalzel newspaper failure for $25,000, and in the M. E. Page failure for a large amount. These were too much for the institution in these stringent times. Schaffner used to be in with Greenebaum and went into business for himself after the failure of the German bank in 1876. See, here is a confidential letter from New York. In the last two months the deposits there have fallen off over $100,000,000. It is due to the numberless schemes on account of the world's fair.. There are too many schemes drawing money out of the banks."
"The business of Herman Schaffner & Co.," said a well-known financial authority, "has been such that failure seemed impossible. It required no capital, for the bank took no risks and loaned almost no money, certainly no large sums. It was purely a brokerage business. Merchants who needed more money than they could obtain from their own banks used to put their paper into Shaffner's hands for sale. He would then make a tour of the banks and place it for a commission. Never in a single instance did he endorse anybody's paper, so far as I know. The bank also did a little in the way of loaning trifling sums, and it accepted deposits in a small way. But the cause of the failure is not to be found here.”
"Mr. Shaffner has not been able to sell any paper for five or fix weeks, but it is not likely that the bank is withholding sums received in that way. The whole thing is a mystery to me, and not only to me, but to every banker in Chicago. It will remain a mystery until the bank’s accounts are made public.”
Mrs. Schaffner is Prostrated
There was an air of sadness and mystery about the Schaffner homestead at 8217 Wabash avenue to-day. The house is a rather pretty brown stone front, built close in with others of the same character. A reporter for the evening post was received by a young man who said that the family had been instructed to say nothing by the friends of the banker. Mrs. Schaffner was reported as being too prostrated, either to be seen or, if seen, to talk. She was shocked at the strange disappearance of her husband and had remained awake all night awaiting his return. It was only after he had remained away an inordinate and unaccountable length of time that A. G. Becker, Schaffner’s partner, decided to notify the police of the occurrence. Mr. Schaffner's son at Harvard College has been notified by telegraph of his father's absence.
When an effort was made to see Mr. Becker that, too, was futile. The young man on guard at Mr. Schaffner's house said that Mr. Becker was sick in bed and was not to be seen. A call was made at the house of the banker's partner, 3332 Groveland avenue, and the servant there said that Mr. Becker was not at home, that she did not know where he was and that she did not know when he would return.
Fruitless Search for the Banker
Mr. Rosenthal, whose law firm, that of Rosenthal & Herschel, had charge of much of Shaffner’s legal business, was seen at noon after he had returned from a fruitless search for the missing man. "No clue has been discovered," said he, "although the search has been kept up all night and all morning. I think that he is wandering aimlessly about and that he will eventually [sentence not complete in the news report].
As a result of the suspension L. Zachman, a creditor to the amount of $600, appeared before Judge Donnelly in the County Court and secured a citation against Schaffner and Becker, summoning them into court for examination this afternoon. Zachman's attorney, Moses, Pam & Kennedy, are said to represent other creditors to the amount of $100,000, who will insist upon an examination the firm's affairs in court.
EXCITEMENT ON THE STOCK EXCHANGE
Brokers Greatly Wrought Up Over the Failure – Big Drop In Railway Stocks
Schaffner & Co.'s failure caused one of the most exciting scenes ever witnessed on the floor of the Chicago Stock Exchange. From the opening to the close the bidding was spirited and an immense number of deals was put through. Stocks declined with surprising rapidity and for a time the oldest brokers were at a loss to estimate how long the slumping would continue. As a result of the day's trading many the small holders of West Chicago Railway and North Chicago Street Railway stocks have serious trouble in meeting their margins.
The excitement began at the opening and continued throughout the remainder of the forenoon. When Secretary Wilkins mounted his chair the floor was crowded with brokers eager to begin the battle. Charley Yoe, of Brewster & Co., and Jacob Breese of Breese & Cummings, began at once to buy heavily, while Lobdell, Farwell & Co. started out to unload. Immediately a crowd of speculators gathered in front of the secretary's desk, and from that time on prices began to decline rapidly. So spirited was the trading it was almost impossible to note the sales on the bulletin boards. James Townsend, M. M. Jamieson and Solomon Sturges were among those in the center of the group that kept the market fluctuating. A. 0. Slaughter, Edwin Foreman, Henry Lowe, John B. Kitchen and Henry Wise were also among the heavy traders and A. W. Wheeler, E. W. Spencer, C. A. Whylan and C. G. Hammond bought and sold heavily.
The spectators' gallery was crowded during the entire session with persons eagerly watching the market. Many had invested small amounts in Yerkes' cable stock and were not pleased with the result. They went to the Exchange Building' to-day expecting to see West and .North Side stocks go up, but they were sadly disappointed. They were not long in the gallery before they realized that what they had invested was lost. There were others in the gallery who had been attracted there out of curiosity by the slump in prices. Among these were such widely known citizens as Mr. Willoughby, of Willoughby & Hill, and Moses Wentworth. The spectators watched the trading with intense interest.
What was most noticeable in the exciting session was the lack of support for North Chicago, which permitted a decline to 183, while West Chicago was very freely purchased for investors in small lots, causing the market to react several times from the lowest notch of the day. The brokers seemed to feel that nothing was worthy of attention outside the Yerkes cable stocks.
Among the spectators in the gallery were some heavy holders of the securities of these companies. A great many buying orders were openly given over the rail. The declines of the day were no more serious than those of Friday, but the public labors under much greater excitement. The record of sales for the week shows how extensive has been the speculation in the cables and how urgent was the need for liquidation.
The miscellaneous stocks have not been very greatly affected by the declines of the week. The heaviest losses have fallen upon the holders of the Yerkes cables. With all the shrinkage that has occurred in the near past it is astonishing that no failures have occurred on the exchange. Each business day has seen margins put off afresh by weary bidders, which means a great deal in these stringent times for money.
The crowd had scarcely thinned out in the galleries until the gavel struck the hour of noon. Those who happened to depart only gave place to fresh arrivals. The comments of speculators at the rail could be overheard among the members, and were mainly of surprise over the collapse in prices. They expressed satisfaction with the reaction in West Chicago to the opening figure, but did not fail to notice that North Chicago left off 10 points below the starting point. Everybody had a hand in operations in the cables. There were several large transfers of Brewing stock that looked like the liquidation of a long interest – the only thing discernable at that time.
At the close of trading it was the general opinion among brokers that stocks were selling at bottom prices. The decline had reached its lowest notch and better prices are looked for. The selling to-day was as a rule in small lots. The weak holders sold out shortly after the opening to-day. The strong holders have locked up all their securities and intend to hold them until the market gets in a better condition. Nearly all the brokers were, however, hit hard to-day.
GAGE SEES NO DANGER OF PANIC
Business World Needn’t Be Alarmed – His Opinion of Mr. Schaffner
President Lyman J. Gage, of the First National Bank, sees nothing in the failure of Herman Schaffner & Co. or in the numerous bank assignments of late to alarm the business world. "Of course these events invariably occasion surprise among the people, but I see nothing' in the present condition of affairs to cause alarm," said he to-day. “This man has disappeared and his bank goes under. That is no reason for supposing that any one else will meet the same fate. Throughout the entire country there is a great deal of liquidation going on and this expenditure causes a failure here and there. It is not surprising. There is no occasion for a panic, and I see no reason for believing that there is any danger of a panic. People are apt to become alarmed at the downfall of a concern; but, as I said before, there is nothing in the condition of affairs to justify fear of a general collapse.”
When asked his opinion of Mr. Schaffner’s failure, Mr. Gage said: "I do not know what has got him into trouble. It is a mere matter of conjecture. He may have been caught on local stocks, and his losses broke his heart and caused him to disappear. I do not see anything in the regular course of his business to have precipitated his failure. That is looking upon the affair from an outside standpoint, for he did not do any business with us and I am not acquainted with his inside affairs.
“Mr. Schaffner is an honorable man, considered safe and conservative by all who know him,” continued Mr. Gage. "He is a good judge of men and credits, and as a commercial note broker he handled the better class of credit .paper. He started in business here about fifteen or sixteen years ago, as cashier for Henry Greenebaum, or rather the German National Bank, which failed about that time. Being out of business he did not pretend to have any money. He went into business as a negotiator or broker and picked up quite a nice business. He opened an office and small dealers and acquaintances came to him with their accounts, so he built up a moderate deposit business. In addition to that he did a large business in buying and selling commercial paper. He never sold it with his own endorsement, but always on its merits. In the course of his business when he did not have any money of his of his own he borrowed from banks and lodged the commercial notes as collateral. He did not do this to a very large extent, however."