The History of Chemical Bank

Courtesy of JPMorgan Chase Archives

History of Chemical Bank
A bank... and a chemical company
Old Bullion during the Civil War years
New banking businesses
Expansion under a new president
The 1929 reorganization and WWII
Post-war mergers
Expansion, innovation, and internal reorganization
Forming a holding company
Chemical in the 1980s
Merging with Manufacturers Hanover and Chase Manhattan

History of Chemical Bank
Chemical Bank was one of the largest banks in a nation of more than 10,000 banks. But when it was established by six merchants in 1824, it was one of only a handful of banks in the country.

John C. Morrison, James Jenkins, Charles G. Haynes, Balthazar P. Melick, Mark Spencer and Gerardus Post formed what was to become Chemical Bank as the New York Chemical Manufacturing Company on February 24, 1823. William A. Seely served as notary public and William Stebbins was company agent.

While the Greenwich Village company was formed to produce a variety of chemical solutions, dyes, drugs and paints, there is reason to believe that at least three of the organizers were more intent from the start on forming a bank.

As a result of the financial ambitions and lobbying efforts of Messrs. Melick, Spencer and Post, a year later the Chemical Manufacturing Company had its original 21-year charter amended to allow for banking privileges in addition to its manufacturing arm. (Banks, as quasi-public institutions, had to be chartered by the State Legislature.) Because the legislature in the 1820s was anti-banking, many individuals found it easier to begin a business and later lobby to amend its charter.

Mr. Morrison, a druggist who was primarily interested in running the chemical end of the new company, began those operations with his own workmen and equipment. He initially supervised the manufacturing operation. Meanwhile, Mr. Melick, a wholesale grocer and a director on the boards of several New York City insurance companies, was named as the first president of the Bank. He served in that capacity from April 1824 to April 1831.

A bank … and a chemical company
Both the Bank and the manufacturing company initially flourished. In 1825 the chemical plant moved to what had been a glass factory at an old farmhouse on a lot that ran from 32nd to 34th Streets in Manhattan, from the Hudson River to 10th Avenue. The Bank offices, meanwhile, were situated in a three-story residential building at 216 Broadway, opposite St. Paul's Chapel. Rent for the offices was slightly more than $1,000 a year.

Only 12 other banks were doing business in New York City when Chemical received its bank charter from the State. Some, like Chemical, existed as part of a more general business. Banks at this time functioned as arms of import-export merchant businesses, offering such banking services as the exchanging of bonds, stocks and banknotes.

At the time of its formation, Chemical's assets were gold, silver and New York State bonds. The Bank invested these assets in such projects as the Erie Canal and new roads. By 1829, Chemical had more than $216,000 on deposit, more than $20,000 in specie (gold and silver) and a surplus profit fund of $4,000.

In April 1831 John Mason became Chemical's second president. One of the wealthiest landowners in the city at that time, Mr. Mason served as president until his death in October 1839. He was succeeded by Isaac Jones.

Reorganization: Selling off the chemical company
In 1838 the Free Banking Act was passed by the New York State Legislature. The act allowed individuals to set up banks provided they had the capital, filed articles of association and complied with specific rules designed to ensure the solvency of the institution. In effect, the act said that banking was like any other business.

The act also turned banks into government bond-backed institutions, as opposed to the asset-backed institutions they had been. It required nine-tenths of a bank's capital to be backed by government bonds; the remainder of the assets could be invested as the directors saw fit.

Chemical took advantage of the act in 1844, six years after its passage, when the Bank's original charter expired. The directors formed a new institution called Chemical Bank. From 1844 to 1851, the directors paid the final dividends and sold off the chemical company's inventories and real estate holdings. For the first time, Chemical existed solely as a banking institution.

John Quentin Jones was named president of the new Chemical Bank at a salary of $2,500 a year. Mr. Jones, a former Chemical cashier who became a well-respected and wealthy merchant, served as the executive officer of the Bank, while the actual day-to-day operations were administered by the cashier.

The Board of Directors of the Bank in 1844 consisted of Cornelius Roosevelt, John D. Wolfe, Bradish Johnson, Isaac Platt and Mr. Jones. These men responded to shareholders and met weekly to make policy and business decisions. It was this body of men that voted to issue the first Chemical Bank stock dividends in December 1848. Around this time, Chemical also ordered plates and began to print its own $2, $3 and $5 bills. (It was the practice for banks to print and circulate their own monies, or "banknotes.")

By the late 1840s Chemical had outgrown its offices at 216 Broadway and $8,750 was allocated for the construction of a building nearer Chambers Street in Manhattan. This building, at 270 Broadway, became the new headquarters of Chemical in 1850. At this time downtown Manhattan already had the air of a financial district, with a majority of the buildings housing different financial and brokerage concerns.

In 1853 Chemical was one of 57 founding members of the New York Clearing House, established to handle the growing number of checks produced within the city. Two Chemical presidents were destined to serve as president of the Clearing House over the next 30 years.

In 1857 the United States entered the severest depression it had ever experienced. Many of the newly founded banks were affected, with 18 New York banks closing in a single day. For a few days Chemical was the only bank to redeem notes in gold instead of in loan certificates, giving the Bank its nickname -- "Old Bullion."

The financial crisis did not end in 1857. It was followed shortly by another in the early 1860s. Many banks floundered but Chemical continued to increase its deposits, which jumped by 50 percent in one year.

Old Bullion during the Civil War years
Two major banking acts passed during the Civil War were to significantly influence Chemical and other banks -- the National Currency Act of 1863-4 and the National Bank Act of 1864. The legislation came about in an effort to slow the proliferation of banknotes throughout the country, reform the flow of currency and fund the national treasury.

By the 1860s, more than 7,000 different banknotes were being circulated in America. In an already-unstable economy, it was difficult to determine the credit-worthiness of a particular bank's notes. The laws allowed nationally chartered banks to issue notes backed by government bonds.

Chemical, as a state bank that met the financial requirements set by the acts, converted to a national charter on August 1, 1865. There was much controversy among banks over the issue of national charters. A strong reason for opposition to the National Bank Acts was that banks choosing not to convert to a national charter had to pay a 10 percent tax to the Federal government when issuing their own banknotes. Since Chemical was a big issuer of currency, the Bank opted to adopt a national charter.

Many banks felt that chartering was primarily an undertaking by the Federal government to fund the Civil War. By requiring the nationally chartered banks to purchase government bonds as the asset base upon which their notes were guaranteed, the government obtained millions of dollars in funding, of which a large part went to ease the burden of military spending.

The banks did receive interest payments on their bond purchases. Another requirement of the acts was that each nationally chartered bank had to have a redemption office, as well as maintain reserved in a major city near its main office. The acts created a national currency of sorts and, by establishing reserve centers, ensured that money and credit would be available to bankers and customers throughout the country.

Despite the monetary and fiscal problems of the 1860s and 1870s -- which included financial crises in 1861, 1863 and 1871-75 -- Chemical continued to increase its deposits and declare dividends. In 1857, the Bank had deposits of $1,619,811, which grew to $3,510,000 in 1861 and to $5,081,515 by 1871. Those were considerable sums for the period.

New banking businesses
Most of Chemical's accounts were commercial accounts. The Bank did have personal checking accounts, but with only one office there were limitations to the amount of retail business a bank could attract.

In 1869 the Bank hired its first staff attorney, Joseph Daly. By December 1873, Chemical had 35 employees, including 11 tellers, eight clerks and four bookkeepers. The five directors were all members of prominent New York families who often handed their directorships down from generation to generation.

In 1878 President Jones died and George G. Williams took his place, serving as Chemical's president until his death in 1903.

The scope of the Bank's business was also increasing; Chemical was conducting correspondent banking business with the Central National Bank of Omaha, Nebraska; the German Bank of Memphis, Tennessee; the Fidelity Bank of Cincinnati, Ohio; Planters Bank of Sherman, Texas, and many others. Chemical was a major correspondent bank during this period, and many of the nation's smaller banks relied heavily on their New York City bank to conduct business.

At this time New York banks in general were funding mercantile businesses in the South and real estate development in New York City. There were more than 54 New York City banks, holding a total of more than $250 million on deposit. Banks also served as conduits for foreign investment in American railroads and other businesses.

In 1885 Chemical renewed its national charter, extending it to 1905. By 1890 the growing Bank had created an office of vice president-without-pay, and James A. Roosevelt was appointed to fill the new position. The Roosevelts, like the Goelet family, were important investors in Chemical, and had been since the first decades of the Bank's existence.

In 1879 and again in 1887, Chemical bought additional land adjacent to 270 Broadway for its offices. In 1907 a monumental new headquarters was constructed on the same site.

Expansion under a new president
When Chemical's president, Joseph B. Martindale, died in 1917 and was replaced by Herbert K. Twitchell, the Board of Directors was so concerned about the Bank's future that it launched an intensive search for new leadership. They found strength outside Chemical, luring a young Kentucky banker, Percy H. Johnston, to Chemical in 1917. Mr. Johnston came to Chemical as a first vice president, and the directors gave him much authority with regard to Chemical's business and its staff.

The young man -- who had been a national bank examiner with substantial correspondent banking contacts -- had an almost immediate effect on the Bank. Deposits in September 1917 were $35 million; they rose to $63 million by that December.

Mr. Johnston stressed the importance of developing a strong, professional staff. Under his guidance the number of directors was increased and the Bank moved into the securities business and opened a trust department, among many other undertakings.

In the early 1920s, Mr. Johnston brought in a new management team. Frank Houston, Harold Helm and N. Baxter Jackson, all Southerners, would guide the Bank for the next 40 years.

The Bank's executives concentrated on expanding Chemical's presence. The first branch had been opened in 1924; by 1929, Chemical had 12 branches in Manhattan and Brooklyn. London and Chicago representative offices were opened as well. In 1928, the Bank moved closer to the financial district, opening headquarters at 165 Broadway.

The 1929 reorganization and World War II
Chemical's national charter limited the amount of trust business the Bank was allowed to develop, and in May 1929 Chemical reorganized as a state-chartered bank. The Bank then merged with the United States Mortgage and Trust Company and changed its name to the Chemical Bank Trust Company. At the time of the merger, the trust company's president was John Platten, grandfather of future Chemical Chairman Donald C. Platten.

In 1929 Chemical set up two affiliates. One, Chemical National Company, Inc., was created to buy, sell and underwrite securities; the other was Chemical National Associates, Inc., a holding company. When the Depression hit hard, the affiliates were merged together and then merged back into the Bank.

Chemical weathered the Depression well: between 1929 and 1935 deposits actually increased by 40 percent. This was a major victory for the Bank and was a strong indication of the faith customers had in the institution. In 1941, at the start of World War II, Chemical's deposits reached the billion-dollar mark for the first time.

During the Johnston years, the Bank established departments that ultimately became the divisions existing today. A branch administration unit opened, as did the Personnel Department. Treasury functions were arranged into Municipal and Government Bond departments. By the late 1940s Chemical had trust departments responsible for investment, personal and corporate trust business.

The staff continued to grow in number, and the first pension plan was created by the Bank in 1934. Chemical now provided coverage through an insurance company. In 1941 the Quarter Century Club was organized for long-time employees, with 117 founding members.

During the 1930s and '40s, the Bank's Foreign Department grew. Its Latin American business expanded, but its European business was limited because of World War II. Chemical closed its London office, and many employees entered the armed forces. Chemical also bought government bonds for its own portfolio that amounted to $800 million by 1945.

During the war, as hundreds of Chemical's male employees enlisted, the Bank brought back its retirees and hired many women to carry on its operations. As during World War I, this was an opportunity for women to enter the field of banking.

At the war's end, Percy Johnston also prepared to retire, since he would reach the mandatory retirement age of 65 in 1946. During his tenure Chemical had grown to become the seventh-largest bank in the United States. Chemical's new chairman was Frank Houston, and N. Baxter Jackson became the new president.

Post-war mergers
The Bank's assets rose from $1.35 billion in 1946 to more than $15 billion in 1972. During these years Chemical developed into a modern financial services corporation. The Bank began professional advertising, public relations, personnel and operations services. Auditing, control and legal departments were established. The scope and breadth of all the Bank's financial functions increased dramatically. Chief among these were Chemical's International, Metropolitan and Trust divisions.

Post-war banking in America was marked by two trends: consolidation through mergers and the growth of branch banking. Chemical acquired or merged with eight banks between 1951 and 1972. Those banks were themselves the result of more than 34 other bank mergers that occurred since the 1900s. Through these acquisitions, Chemical also increased the credit lines available to its customers, enlarged its trust and commercial banking business and entered geographical regions in which it had previously lacked representation.

When Frank K. Houston retired as chairman in 1947, N. Baxter Jackson was appointed chairman and Harold H. Helm became the president of the Bank. That same year, Chemical's total deposits reached $1,296,051,829, and they increased by more than $225 million in 1948, when the Bank acquired the Continental Bank & Trust Company of New York.

In 1951 Chemical acquired the National Safety Bank and Trust Company, a mid-sized bank with strong ties to the garment industry and deposits of $100 million.

The first major merger was with the Corn Exchange Bank and Trust Company, in 1954. Founded in 1854 as part of the Corn Exchange, it had once been an aggressive retail bank, acquiring smaller community banks as soon as New York legislation permitted branch operations in 1898. The 1954 merger, engineered by then-Chairman Helm, gave Chemical 98 branches in New York City, many in boroughs other than Manhattan.

In 1959, under the guidance of Chairman Helm, Chemical merged with the prestigious New York Trust Company, founded in 1889. The second major merger of the decade greatly enhanced the Bank's trust activities.

Continued expansion, innovation, and internal reorganization
The 1960s saw the growth of suburban developments, and Chemical responded to the new demographics by opening branches on Long Island and in Westchester County. The Bank's first Nassau County office opened in 1961 in Massapequa. The same year, Branch 250 opened in the Vernon Hills Shopping Center in Westchester. Acquisitions like the Bank of Rockville Centre Trust Company in 1963, and the Bensonhurst National Bank of Brooklyn and the First National Bank of Mount Vernon, both in 1964, all helped Chemical's representation in Westchester, Rockland, Suffolk and Nassau counties grow steadily.

Consumer spending habits changed as well in the years 1946-1972. Credit plans -- once the purview of businesses -- became a major part of retail banking. Technical advances made possible new products like bank credit cards and automated teller machines. Chemical installed its first ATM in its Rockville Centre branch in 1969.

In 1959, London became the site of Chemical's first foreign branch. Until then, Chemical had serviced United States corporations overseas by working with local banks in the particular country. In the late 1960s, the International Division expanded rapidly. By 1972 Chemical was represented in six European countries, the Middle East, three Asian nations and five Latin American countries.

In addition to opening branches and representative offices, Chemical took advantage of the Edge Act. Passed in 1919, the act permitted banking subsidiaries to conduct international financial enterprises that an American business could not. Chemical International Finance, Inc., Chemical's first Edge Act company, was established in 1958. Through its Edge Act offices, Chemical engaged in fiduciary services, commercial banking and joint ventures, holding interests in other international financial corporations.

The diversification of banking was made possible by internal restructuring, and the organization of bank activities into departments and divisions was a hallmark of this period. In 1946 the Bank's officers and staff were assigned to general commercial banking, or to one of a few departments; in 1972 the Bank's 11,876 employees were working in a financial management institution far more complex than could have been imagined in Percy Johnston's day.

The impact of new technology -- in the form of computers -- was felt throughout Chemical, and the Operations Division, formally established in 1956, grew to 3,913 employees in 1972. Chemical's Personnel Department went from a small unit to a division of 185 employees.

The management training program, begun in the late 1940s, also had advanced within the Bank. In addition, Chemical expanded its medical and pension benefits; the growth of Chemical's offices and activities meant that staffers were dispersed worldwide, requiring many kinds of benefits and services.

As competition in Banking increased, the Bank began to market its services. The advertisements of the post-war years were a departure from Chemical's practice of avoiding publicity. In 1952, for example, Chemical ran ads more than 600 times in a wide variety of trade and general publications.

With the retirement of Mr. Helm in 1965, the Southern leadership tradition of Chemical came to an end. Mr. Helm was succeeded by William S. Renchard, who served as chairman until 1972 and under whose leadership Chemical's overseas branch expansion began in earnest.

Forming a holding company
In 1969 Chemical formed a holding company, Chemical New York Corporation, to own Chemical Bank and a growing number of non-bank subsidiaries.

In 1972 Mr. Renchard retired as chairman and Donald C. Platten, who had headed the International Division, became the new CEO. At the same time, Norborne Berkeley Jr. was appointed president, a position he held until he retired and was succeeded by Walter V. Shipley on January 1, 1982.

Under Mr. Platten, who served as chairman until he retired in 1983, Chemical became a stronger institution. Its assets and its shareholders' equity more than tripled, and its return on assets and return on equity improved substantially. Its worldwide reach was aided by the filling-in of the overseas branch network, and its domestic retail business was helped by the acquisition of a number of banks and the establishment of de novo offices throughout New York State -- the most important being the Security National Bank, acquired in 1975.

The holding companies non-banking subsidiaries were expanded with purchases of consumer finance, mortgage banking and investment management companies in a number of states. The holding company also took advantage of as Delaware law to establish Chemical Bank (Delaware) as a separate institution focusing on wholesale banking business in the Middle Atlantic area.

Chemical in the 1980s
Chemical in 1982 moved its world headquarters from 20 Pine Street in Lower Manhattan to 277 Park Avenue, between 47th and 48th Streets, in midtown Manhattan. The relocation followed similar moves by many other major money-center banks to midtown from downtown in the Wall Street area. At the entrance of the 50-story building, the Bank constructed ChemCourt, a four-story atrium of plants, flowers, trees and waterfalls open to the public.

When Mr. Shipley succeeded Mr. Platten as chairman in 1984, three men were named to serve jointly as president -- former senior executive vice presidents Robert J. Callander, Robert I. Lipp and Thomas S. Johnson. Vice Chairman Richard K. LeBlond II retired in November 1985 and was succeeded by Richard S. Simmons, former corporate counsel for Chemical and a partner in the law firm of Cravath, Swaine and Moore.

A significant part of Chemical's strategy in the 1980s was its move into electronic banking. In 1982 the Bank unveiled Pronto, the first electronic home banking and information service, enabling customers to use a personal computer to do most of their banking at home. Shortly thereafter Chemical introduced BankLink, a microprocessor-based corporate cash management system that was franchised to other banks and is now the largest such system in the world.

In 1985 the Bank helped found the first major automated cash machine network in the New York metropolitan area. Called the New York Cash Exchange -- or NYCE -- the network made available more than 1,000 ATMs to its customers in the greater New York region.

Merging with Manufacturers Hanover Corporation and
Chase Manhattan Corporation

The early 1990s saw what until then was the largest and most significant event in Chemical's history: the merger of Chemical Banking Corporation and Manufacturers Hanover Corporation. These two banking giants -- of similar size in assets, number of employees, number of offices -- had operated in the same New York City market place since the early 19th century. In fact, at the time of their merger on December 31, 1991, the two corporations' 50-story headquarters buildings were right across the street from one another, on Park Avenue.

The new Chemical Banking Corporation became the fifth-largest bank holding company in the United States, with assets of nearly $183 billion and major franchises in key regional, national and international markets. Chemical was the leading bank to small businesses and mid-sized companies in the tri-state region of New York, New Jersey and Connecticut, and had New York State's largest retail branch network.

Nationally, Chemical became a leader in primary relationships with major U.S. corporations, as well as an industry leader in key operating services such as cash management, corporate and institutional trust, trade services and funds transfer. Chemical operated one of the nation's largest bank credit card franchises and was a major originator and servicer of home mortgages.

Chemical was the world leader in loan syndications and a major global provider of foreign exchange, interest rate and currency swaps and corporate finance services through an extensive international office network in major financial centers around the world.

Then, on March 31, 1996 Chemical merged with the Chase Manhattan Corporation forming what was then the largest bank holding company in the United States.

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