The Spirit Bank

Andreas, A[lfred] T[heodore].  History of Cook County, Illinois: From the Earliest Period to the Present Time. Chicago:  A. Andreas, 1884:315-320.

By September 1 [1852], an irrepressible conflict had been worked up between the legal and illegal bank interests. At about this date a new element of financial disturbance was added. All banking in Chicago had, whether legal or illegal, been heretofore conducted on worldly principles and for the object, more or less sordid, of worldly gain. A new departure in the business was inaugurated by Seth Paine & Co.

The senior partner, Seth Paine, was a native of New England, and, when a young man, came West. He left Montpelier, Vt., in April, 1834, in company with Chester Smith, who was at that time an Illinois merchant, being a partner of a Mr. Goss at Walker’s Grove, now Plainfield. He traveled with him on his western journey by stage, canal and schooner as far as Detroit, where they separated, Smith going through to Chicago by stage, and Paine taking the longer but less expensive route in the schooner “Commerce,” by way of the lake. It took his last dollar to pay his deck passage to Chicago, where he arrived after a rough voyage of twelve days, with no capital except health, strength, and a most earnest endeavor to do his work in life according to his eccentric views of right. He was tall and straight. He bad a frank, open countenance, and a pleasing and prepossessing address. His conversational powers were excellent, and as a public speaker he was far above mediocrity. He was good humored, and made friends rapidly. He hired out with the firm of Taylor, Breese & Co., and was for a time a partner. Subsequently be entered into a copartnership with Theron Norton, under the firm name of Paine & Norton. They did a fairly successful business for several years. Paine sold out to Norton July 1, 1842, and retired from mercantile business in Chicago. He was married in Chicago on Thursday evening, August 25, 1837, to Mrs. Francis Jones, eldest daughter of Major Whitlock. Paine was always a rabid and uncompromising Abolitionist, and, subsequent to the dissolution of the firm of Paine & Norton, became a convert to the socialistic theories of Fourier, went into Lake County, where he bought a large farm, christened the place “Lake Zurich,” and in company with other kindred reformers attempted to carry into practice the socialistic theories he had accepted. How well or poorly he succeeded is not known. It is certain, however, that the enterprise did not prove ruinous nor so discouraging to him as to break his faith in the Fourierite doctrines. He was also for a time a heavy owner and one of the managers of the Illinois River Bank, an unchartered bank at LaSalle, Ill. On the first appearance of what are now termed “spiritual manifestations,” in the form of rappings or knockings at Rochester, N. Y., through the mediumship of the Fox girls, he became deeply interested in the phenomena, and soon after became an ardent convert and earnest advocate and believer in modern spiritualism—so ardent and earnest as to render him a credulous victim of the many designing mountebanks who attached themselves to that much abused and little understood philosophy. The character of Paine was naturally radical, and molded and fashioned by the many outside isms he had embraced, could but impel him to the adoption of modes and methods of action quite at variance with those prevailing, in whatever he might undertake. To his vision the affairs of this world were badly out of joint. They were sadly in need of reorganization, and it required Seth Paine to adjust things properly. So he left “Lake Zurich” and his farm, and returned to Chicago to teach his old friends and the world at large how banking could be carried on in accordance with what he deemed a higher law than the banking law of Illinois—the law of humanity.

THE BANK OF THE CITY OF CHICAGO.—The firm of Seth Paine & Co. was formed early in August, 1852. The following announcement appeared in the Democrat of August 10: “Seth Paine & Co. are about to open a banking and exchange office in Eddy’s new building, adjoining the old post-office, on Clark Street.” The firm was composed of Seth Paine, who put in about $1,100, and Ira B. Eddy, who lent in something over $4,000. The capital stock of the concern never exceeded $6,000, although it was believed that it was backed by capitalists of some strength and character, and at the start it had such financial standing as to obtain quite a number of depositors.

By the middle of October, the bank was opened for business, as appears by the following notice in the weekly Democrat of October 18: “The Bank of Chicago has determined upon issuing certificates of deposit, and issues are now out, which for artistic skill and beauty of finish arc not exceeded by any bills we have seen. On the right of the ones is a beautifully executed portrait of Senator Douglas, engraved by the well-known Tappan, Carpenter, Cassilear & Co. On the right of the twos is Washington crossing the Delaware, and on the threes a full portrait of Henry Clay. Mr. Paine, who is at the head of the banking house of Seth Paine & Co., is president and W. T. Maier is cashier.”

So soon as the bank commenced business it was apparent that Paine’s theory of banking was as unique as were his other theories, and, if carried out, would be equally subversive of the interests of both legal and illegal banking: indeed, it was his idea to work as radical a change in banking, as he believed would come to society as a whole by the adoption of the theories of Fourier.

The prospectus of the bank, written by Paine himself, gives the high moral grounds on which the bank was to be conducted. It read as follows:


“Rates of discount according to time and circumstances—six per cent being the highest.

“We loan to no one to pay debts.

“We loan to no one to aid in murder of anything which has life.

“We loan to no man to aid in speculating in that which is necessary to life.

“We loan nothing on real estate—believing that real estate cannot be bought and sold; and that possession with use, is the only title.

“We loan nothing to aid in making or selling intoxicating liquors, or tobacco in any of its forms.

“We loan nothing to gamblers or usurers who borrow to loan again.

“We loan nothing except for aiding the natural exchange between the producer and consumer, whether of body, soul or spirit—and for the time necessary to produce the exchange.

“Our basis for making loans is the established character of the borrower. He must be a temperate, honest and religious man or woman, with a mind sufficiently developed to understand his business. We are prepared to loan any amount needed for such business by such men. Our money corresponds in commerce, to the blood in the human system. It is the circulating medium. When money is used for the purposes of slaughter and shedding of blood, it makes the blood run cold; and it stagnates, and ceases to be healthy, and does not circulate freely, and finally ends in death.

“When used by any of the other classes excluded, it also ends in death. We want no business done which is death to the human body, or hell to the soul: and we would as soon furnish a rope to out brother for hanging himself, as the money to buy it with. We would as soon kill ourselves, as lend our money to aid in killing. We would as soon drink ourselves, as lend our money to drunkards. We would as soon take high rates of interest, as loan the usurer facilities to do the same thing. We would as soon take the life of our brother, as lend our aid to speculators in the bread of life, who may starve him into a living death, while they permit not the prayer for desolation. All has its foundation in Hate; and “He that hateth his brother is a murderer:—We will no longer murder.”

“His established rate of interest was not to exceed six per cent per annum. He proposed to loan his certificates on satisfactory security, for three-fourths of the amount, and an even exchange of the other one-fourth in current bank notes such as the certificates were payable in with the agreement on the part of the borrower that as often as one-tenth of the amount borrowed was returned for redemption, he should take them again, giving in exchange current bank notes. The plan, in other terms, was to make each borrower a sort of fiscal agent of the bank, pledged to keep in circulation or redeem so much of the money as he had borrowed and put in circulation. Had the people given Seth Paine their confidence and supported in as full measure as did the people of the Loyal States the Government during the war, and had Seth Paine’s fiat money been backed by a power co-equal to that of the General Government; and had Paine possessed the power, as did the Government to put out of circulation all other issues save his own, his money would have proved as good as greenbacks. Unhappily for Paine, none of these conditions indispensable to success as a fiat-money manufacturer were vouchsafed to him.


For a few weeks after it was opened for business, the bank did a quiet and unostentatious business with a class of very respectable citizens, who believed in the applications of moral principles to banking, as inculcated in Paine’s manifesto, and who were not sufficiently practical to foresee the obstacles to be encountered in establishing the institution in a not over moral community, made up largely of men who drank spirituous liquors, smoked and chewed tobacco, butchered cattle and hogs, and ate the meat, speculated in bread stuffs and other articles of food, bought, sold, mortgaged and owned land, loaned money at over six per cent, and otherwise brought contempt upon the code of morals on which the bank had been set up.

Perhaps Paine’s overweening confidence and often ill-timed advocacy of the many vagaries which he cherished, and which in a most illogical manner he managed to attach to, or mingle with his banking business, had something to do with precipitating the calamities that befell the institution.

Over the bank was “Harmony Hall,” the headquarters of as ardent a set of Spiritualists as could be found in the country. Both Paine and Eddy, his moneyed partner, were bright and shining lights of this Spiritual Church, and prominent and loud exhorters at the frequent meetings held over the bank. It was not tong before the bank became so identified with the spiritualistic views of the proprietors as to be inseparable in the minds of the outside community.

January 1, 1853, Mr. Paine issued the first number of a paper styled the Christian Banker. The articles were somewhat incoherent, abounded in wit and sarcasm, and so intermingled spiritualism, banking, and anti-monopoly, that it is no wonder many believed Paine had gone stark mad. In addition to his polemical articles, he was bitterly personal, and in his efforts to pull down the strongholds of sin, spared none who stood in the way. The articles became more vituperative with each succeeding issue, as increasing outside annoyance gave fresh cause, from his view, for righteous indignation. As showing the mental condition of Paine at this period in his banking career, and as relics of the time, quite copious extracts from the Christian Banker, Vol. 1. No. 4, date January 29, 1853, are here given.

Extracts from the Christian Banker:

Our Pulpit.—We preach daily (Sunday excepted, when we talk, as the spirit moves, in Harmony Hall, at half-past ten in the morning and seven in the evening) in the Bank of Chicago. Our hearers give increasing evidence of hope within their souls, and go forth as radiators of new light. If a cigar-smoker or a rum-sucker, or hog-eater comes in (for there are such men in Chicago yet), who not only have so little respect for themselves, but actually intrude such offensive influence before us as would make a dog puke, we refuse to do business with them, but send them right over to Swift, who smokes to drown conscience, which has been violated so long by huge shaves of his fellow-men, that the hair has all come off over that organ.—See Eddy on phrenological bumps. There all smokers can find sympathy.

“Our pulpit brings faith and works together. Ignorance supposes we would loan our bills for the sake of money. But intelligence radiates from our pulpit, and permeates their addled brains as far as wholesome truth can reach a tobacco bloat or a sucker of rum, and tells them that our faith is true, and they can’t borrow for love or money. Some come in to exchange our bills for something which our addle-headed bankers take on deposit, (they take nothing which goes out at less than ten per cent—that being their standard of both faith and dumplings. Well, Illinois River bills are bankable, and why should they not be? Taylor is interested in him, especially in this crisis, for they regard him as a great manager.

[. . .]

In an article on taxation the editor says:

“In our first number, I said we would pay no more taxes—and on that lovely spot at Lake Zurich, the Lord of Hosts and the devotees of Mammon shall measure swords, and test the right of a set of vampires to prey upon my substance.

“We well considered what we said, and we have been greatly strengthened in our convictions since that time. We say that man has an inalienable right to as much soil as he can occupy and cultivate; that he cannot acquire any title to more, nor be restricted in his title to less. Any attempt to acquire more is as great a crime as to submit your right to less.

[. . .]

“I claim the right to my land by the right of nature. God gave it to me, and I say to those who claim it, ‘show me the title superior to God.’ If I have a right to the soil I have to my sinews, and the turnips which those sinews and God’s rains and sunshine produce.

They are either God’s or mine. If God’s, levy your taxes on Him, take the turnips if you dare, for taxes or anything else. If they are mine, take them if you can.”
The opening paragraph of a lengthy article on “Spiritualism,” shows that Paine believed that the directors of his bank were not all taxpayers or property owners in Chicago. It read:

“The subject Spiritualism may hardly seem appropriate in even the ‘Christian Banker.’ but when men come to an understanding of the truth as it is in Jesus, they will see clearly that it is appropriate and necessary. When men come to know of the connection and exchanges between mind and matter, surely they will not wonder that we have sustained our position against the entire moneyed hosts, and in the face of falsehood, detraction, Grand Juries, corrupted Judges and bribed lawyers. No, if the dark minds of Clark-street bankers were open to the knowledge of our minds, and the hosts of God who are managing this whole matter, and could only be made aware how little and how dark their point of vision, they would no more think of contending against us than of an attempt to dethrone Almighty God.

“We have not only direct communication with God, but we are surrounded by the mightiest intellects who have swayed this world and this country. Thus armed, it is not us, but God, against whom you fight. We have no feeling or war against any banker in this city. We regard every one a brother, and would rather do him good than anything else, but our course is rendered necessary by the false attitude they assume and the false position in which they have placed themselves. The scourges which we have and shall inflict, are all for their present and eternal good, and the moment they assume a true and teachable position, we shall show them this by impressions which will be made by the spirits upon their own minds. But they must let reason and charity, not passion and avarice, be their guiding star.”

The prospects of “Union Stores” was discussed thus:

“Be patient, brothers. The good time is close at hand. Lying, cheating and stealing, as competition needs and cannot live without, shall give place to truth, love, and honesty. We will soon have the matter in hand. You selfish fellows may as well wind up before we administer on your estates.”

[. . .]

“There has been but little Christianity in market, and much that is offered is of the scurvy order. This kind, however, bears a much better price than the more perfect, as the tastes of consumers have been destroyed by rum and smoke, until their heads and hams are in a perfect pickle.

“Christianity being the purest and scarcest metal, like gold among bankers, we take it for our standard; and everything and everybody which does not come up to that standard, we quote below par, until they reach the point where neither zero nor Nero can measure them.

[. . .]

Sufficient has been quoted to show that the editor of the Christian Banker was not disposed to “turn the other cheek” when he was smitten, and that he did not propose to give up his cloak nor even his coat without a vigorous fight. By his indiscriminate attacks on every body and everything, outside his own circle, he alienated the common sympathy which otherwise would have been bestowed upon him. He became the Ishmael among Chicago bankers, whose hand was against all others, and against whom every other banker’s hand was raised. During the month of January, 1853, Paine’s bank was constantly called upon to redeem every bill which came into the possession of rival banks. The circulation at its highest did not exceed four thousand dollars, yet this small amount kept Paine quite busy, as through the machinations of his rivals and enemies, it seemed to find its way back to his bank for redemption as fast as it could be paid out, and the circulation thus became a source of constant annoyance to him instead of proving, as he had hoped, a source of profit to himself and a blessing to the community. In his tribulation, he looked to the departed spirits of illustrious bankers for counsel. It was given through a Mrs. Herrick, a speaking and trance medium, who, at that time presided as “high priestess” over the Spiritual Church in Harmony Hall. She, or rather Alexander Hamilton, through her, advised Paine and Eddy what course to pursue, and, in order to give specific advise on the daily and hourly emergencies as they might arise, the High Priestess came down from the altar and was installed behind the counter of the bank, as a spiritual director. She told them for whom to redeem, and who were to be denied. No smokers, drinkers nor bankers were to be paid. Women, children, negroes and spiritual minded men were to be served first. So soon as it became known that the bank was being thus conducted, on petition of Ira B. Eddy’s friends, he was brought before Judge Skinner, and on hearing of testimony, a commission of lunacy was granted and he was declared incapable of managing his business affairs. An injunction was served in order to protect and preserve Mr. Eddy’s interest in the bank. By the commission of lunacy Devotion C. Eddy was appointed conservator of the estate of Ira B. Eddy, and John W. Holmes, book-keeper. As soon as this became known there was excitement without and within the bank. The holders of the bills began to flock in crowds to the bank, where Mr. Paine and the priestess were installed behind the counter grimly awaiting the assault of their enemies. Most of the bills were redeemed, but occasionally a man came up whom for spiritual reasons the priestess spurned. Such persons were collared by the husband of the priestess and one or two other stalwart Spiritualists who acted as door-keepers, and incontinently hustled out. Judge Hoard was thus tumbled, and Ezra L. Sherman, after a smart tussle with the spiritual police, came out in a dishevelled and flurried condition. The worthy Colonel (then Captain) James R. Hugunin made a wager at Swift’s bank (cigars for the crowd) that he could go over to the bank, being a friend of Seth, and get his bills redeemed. He took $35, and walked confidently across the street into the bank, and up to the counter, where he affably presented his bills for redemption. Paine looked favorably upon his case and would have redeemed on the spot, but the spirit of Alexander Hamilton looked sternly out of the eves of Mrs. Herrick, and out of her mouth his words came in startling cadence. “Never ! get out !!” “Then give me back my money,” said the mild-mannered Captain; “Never ! get out !!” again quote the priestess, and forthwith the Captain was hastily leaving the bank, wildly clawing the air as he proceeded toward the sidewalk, and the bank door was slammed, not exactly in his face. A moment after it was reopened, Seth appeared and gave to the shakenup Captain the bills, and he returned to his friends at Swift’s. “What luck. Captain?” cried the crowd. “Good !” “What kind of bills did Paine give you ?” “The very same I carried over, and I was deuced lucky to get them. I think I can afford to pay the cigars.”

Things culminated at the bank on the following day, February 11, when the conservator of Eddy’s estate undertook to get possession of the bank. Ira P. threatened to shoot, and the priestess refused to abdicate in favor of Holmes the book-keeper, whom the court had appointed. On complaint of Holmes, for attempt to intimidate by personal violence, the whole corps of the bank, including mediums and spiritual friends, were arrested and brought before Judge Rucker. The trial resulted in the discharge of two or three, and the binding over in $500, to keep the peace, of all others except the high priestess. During the trial she became unduly demonstrative, and was taken to jail, resisting the officers on her way quite stubbornly. She was held in durance vile until the storm was over. Ira B. Eddy was for a short time in the Hartford Insane Asylum, but was soon liberated on petition of many respectable citizens who had known him long and well, and who had doubted from the beginning the means by which his committal had been brought about, as well as the alleged fact of his insanity.

The Bank of Chicago was, by the removal of Eddy’s deposits, crippled to that extent that it never rallied sufficiently afterward to be even a disturbing factor in the finances of the city. So far as is known, every bill was redeemed and every indebtedness of the bank honorably paid, either by Paine, Eddy, or the conservators of Eddy’s estate. The bank, eccentric as it was, was not, as were many of its contemporaries, buried either in dishonor or insolvency.


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