Bank Holiday

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BANK HOLIDAY

BANK HOLIDAY

As the Golden Decade climbed up the financial graphs to the peak of prosperity, American Express, moving as always with the times, reached new levels of business volume. Its biggest year before the present era was 1929. However, the common sense of its high officials mentally in sound condition, they remained closed on Saturday at the joint request of the President of the United States and the President-elect. The financial heart of America had stopped beating.

This was the final stage of the great depression which had begun more than three years before on that wild October day in 1929 when the rainbow bubble of prosperity burst as panic swept the floor of the New York Stock Exchange. After the crash had come the slow agonizing months of diminishing business, the gradual creeping paralysis of the American economy. The banks had stood the strain amazingly well, but in the winter of 1932 those in the hardest-hit areas began to weaken. The governor of Michigan ordered the banks closed in his state on February 14, 1933. Other states followed suit in quick succession, and finally President Herbert Hoover and President-elect Franklin D. Roosevelt decided to close all the banks for a period of reorganization.

Even before the bank closings had begun, American Express officials had foreseen the possibility of such a situation and started to plan a course of action. They made the first move when the Michigan banks closed. Harry Stetser and John H. Fuchs were sent to Detroit to take charge of the situation there. They expected to pay out large sums of money, but the reverse was the case.

With the banks closed, Detroit businessmen lost the ordinary means of remitting funds to New York; American Express drafts seemed to be the solution to their problem. On the second day after Stetser and Fuchs arrived, owners of large and small businesses began to come in carrying packets of bills and bags of silver. Quite frequently the smaller shopkeepers would bring in more money than they said was in the bags. In their hurry to get back to their shops they would say, "You count it and let us know."

As the business increased, Stetser had to hire a bank vault to hold the growing hoard. Fuchs stayed in the vault for long hours counting the money, while Stetser attended to the business of forwarding the drafts to New York and shipping the actual cash to other cities, where it was used to meet payments on Travellers Cheques. In all, Stetser and Fuchs took in more than £3,000,000 in cash in Detroit. Despite the rush and improvisation, when at last they balanced their books they were only three cents out.

Naturally, they paid all American Express Travellers Cheques that were presented to them. But holders of Travellers cheques issued by companies who had no offices in Detroit came in to cash these also, since no banks were open. Stetser finally telephoned President Small and said, "This is hurling the Travellers cheque business. Can I take limited amounts of other people's Travellers cheques?"

Small agreed, and American Express paid off on its rivals' cheques as well s its own.

As other states followed the example of Michigan and closed their banks, the pattern set in Detroit was repeated, and the American Express Company became the only "banking" medium in many great cities.


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What next? Accounting and Auditing

Accounting and Auditing

The first was the development of the remarkably efficient accounting and auditing system which enables the company to transact its tremendous financial business. This was largely the work of Ralph T. Reed and Edward T. Krach. They went on to study all the varied activities of the company, introducing better techniques. As Reed puts it, "We grew by constantly striving to improve our methods.

The second innovation was the establishment of Inspectors Department, which grew into the extraordinarily efficient detective service of the American Express Company, first set up by Del Richer in 1922.

Richer was a plain and kindly man who understood and was tolerant of ordinary weaknesses. But he had an iron firmness in handling crooks. He liked to deal with them personally and he soon had a wide acquaintance in the underworld. His primary object was to protect American Express financial paper and the people who bought it. When a loss was reported to him,... see: Accounting and Auditing


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