First Year – July, 1893 to 1894
First Year – July, 1893 to 1894
As noted earlier, A.G. Becker's family life, as well as his business situation, was completely uprooted by the death of his brother-in-law, cousin, and business partner. Marne Friedlich remembers her father telling her that he "adored" his brother-in-law. His unexpected and macabre death, and all the revelations which subsequently came tumbling out, must have been devastating for "Abe," as his intimate friends called A.G. Becker. A lesser man would have crumbled under this load.
In addition to the family turmoil involving his sister and her children, now absorbed into his home, and the sorrow and anxiety felt in the whole extended Becker-Schaffner-Friedman family, A.G. faced immediate and intensive legal issues. Judge Scales of the County Court presided over the Schaffner bank assignment. Levy Mayer, a leading Chicago attorney, was counsel for the assignee, American Trust and Savings Bank. He appeared in court almost daily, as reported in the Chicago papers. Apparently, A.G. Becker was under intensive examination almost the whole of June 1893. Disbelief and distrust were running high; tempers flared; depositors and other creditors were hostile. A.G. Becker was clearly a central target, but must have held up well under questioning, from what can be learned from incomplete newspaper reports. For three months, claims were permitted to be filed; hundreds of petitions and supporting documents soon began to be recorded.
On July 6, apparently exiting from a visit to the court, A.G. Becker was arrested under a warrant charging that he personally had accepted a deposit of $364 from August Klaas on June 2, on which date it was alleged that he knew that the Schaffner bank was insolvent. Such action was a violation of Illinois banking law. Mr. Becker was taken before Judge Everett where he posted bond. This case was still under consideration in late September when the Chicago Tribune reported that a grand jury had indicted A.G. Becker for the same Illinois law violation, though, in this case, for taking a deposit of $20,000 from Cooper, Siegel & Co., a major retail merchant in Chicago. The article noted that Henry Siegel and A.G. Becker were good friends (or had been at least!). Some persons, in newspaper articles in July and August, were assailing the character of A.G. Becker for having placed funds of a building society, of which he was Treasurer, in the Schaffner bank at a time when he had knowledge of the bank's poor financial condition.
According to Marne Friedlich, her father told her that he started up A.G. Becker & Co. in the following way. Shortly after the failure of the Schaffner bank, a certain Mr. Burton from LaCrosse was visiting Chicago and came by to see Mr. Becker. He said he wished to buy some commercial paper. Mr. Becker responded, "Don't you know that the Herman Schaffner business has failed?" To which Mr. Burton responded, "That wasn't what I asked you -- I asked if you had any paper to sell?" After a moment, Mr. Becker said, "Yes, I have some," pulled it out, and sold it to Mr. Burton. "And that is how the business of A.G. Becker & Co. started."
For many years, well into the 1900s, the business of A.G. Becker was solely that of dealing in commercial paper. As he said to a reporter in the early 1900s, "After the failure (of Herman Schaffner & Co.), I separated the brokerage part of the former business and continued it in the Home Building." Also, as will be reviewed later, in a speech A.G. Becker prepared in 1923, he reminisced about the early days of his firm, and how he was a "pioneer" especially because he began, probably very soon after starting his own company, to be a "dealer" rather than a "broker" in commercial paper. As he reported:
"Chicago (had) no electric lights or electric railways, or automobiles, or typewriters, and with five or six thousand telephones. That is the Chicago in which I first began to deal in paper and the first paper I dealt in consisted of the bills receivable of our merchants, jobbers and manufacturers. I bought it here but sold it largely in the East, and when I say "bought," I use the word advisedly, for that is one thing in which I was really a pioneer. For many years after I entered the business, paper was generally handled on consignment - it was a brokerage business - but I had and held to a theory that I would not ask a bank to buy paper in which I had not shown my confidence by having bought it outright."
Marne Friedlich remembers her mother saying how "we really had to pull in our horns," and that for a number of years, "there were no milk shakes." Marne also remembers her mother - a very shy woman - telling her about purchasing a hat just before the Herman Schaffner failure, but, anticipating the need to husband funds, promptly and embarrassedly returning the hat for refund.
In the business and family archives, there is a typed list of the employees of the Schaffner bank, presumably at the time of assignment on June 3, 1893. At that time, Herman Schaffner & Co. had two principals and 18 employees. The first names were completed in pencil after the first name initial, and positions were penciled to the right, after the employee's address. Perhaps this penciling is that of A.G. Becker himself. It may be assumed that some of these employees stayed on with A.G. Becker to pursue the commercial paper business of the new firm. For instance, I.D. Berg and Miss Elias are known to have become long-term employees of Becker. In addition, N. (with "athan" added in pencil) Becker was shown in the list, immediately after Moses Mergentheim, with the word "coal" appearing in front of his name, and residing at 3217 Wabash Avenue. No position title was written in after his address, as in the case of all others. What did this mean? Perhaps "Pa" Becker helped out in the office, or was on the Schaffner bank payroll for some reason?
Employees of Herman Schaffner & Co., June 3, 1893
It is not clear just how A.G. Becker funded the ongoing commercial paper business during his first year of the new business. As Howell Murray tells the story, Mr. Becker’s sister, Rachel Schaffner, received $50,000 in life insurance proceeds upon the death of her husband, which funds were loaned to her brother to start his new business. This explanation may well be accurate, but there is little evidence to support it in the newspaper articles at the time. These reports said that Herman Schaffner had only a modest amount of life insurance at his death; that there would be nothing from the estate for creditors; and that the widow would realize little. In 1894, the Chicago Tribune reported on a suit by widow Schaffner claiming $15,000 in life insurance being held back by an insurer under a suicide clause in three policies. (Later, in 1895, a jury determined, very controversially, that Herman Schaffner did drown, but it was not suicide, but there was no ruling for Mrs. Schaffner. This decision was to be appealed, and the suit retried, but no information can be discovered as to the outcome. Meanwhile, A.G. Becker's business was well along in development). It may be that the widow did receive insurance proceeds of $50,000 in mid- to late 1893, but it is hard to imagine that such information was not discovered and reported by the newspapers.
Thus, there is ample reason to believe that the early business of A.G. Becker was funded by himself, perhaps augmented by some loans from his Friedman in-laws, or perhaps funded by Mrs. Schaffner, in some other way than insurance proceeds, as we will learn more later. The staff would presumably have been considerably reduced - with no deposit taking, lending, and investing activity - and with expenses cut to the bone, and the need for working capital would have been relatively modest. In all likelihood, A.G. Becker had some personal resources not involved in the Schaffner bank business, remembering that in 1886 his net worth was estimated in a very loose way at $100,000. Quite immediately, too, he was probably able to broker paper left with him on consignment by sources who believed in his character and honesty, and his marketing contacts and ability, such as Mr. Burton of LaCrosse. Maybe too, he was able to borrow some modest funds from a bank or banks, which as we will see, the business was clearly able to do by mid-1894.
Meanwhile, in March 1894, the assignee announced that a dividend of 10 per cent of approved liabilities would be paid - which action was not carried out until August (see later) - and that the likelihood of an additional dividend was very modest. The overall liability situation of the failed bank was also summarized, and it must have continued to bring great pain to A.G. Becker.