Chase Manhattan Bank history

In 1799, a water company named the Manhattan Company was founded in New York. Part of its original charter also provided for a banking company, which was begun as the Bank of Manhattan Company. Among its founding members were Alexander HAMILTON and Aaron Burr. The bank quickly became established in New York City and originally made loans to New York State to finance expansion of the ERIE CANAL.

After the Civil War, John Thompson founded the Chase National Bank, named after Salmon P. Chase, secretary of the Treasury during the war. The bank obtained its charter as a national association through the NATIONAL BANK ACT of 1864, designed to rationalize the banking system. In 1927, it became the largest bank in the country, with assets of $1 billion. Along with some other large banks, the bank delisted its stock from the NEW YORK STOCK EXCHANGE in 1928, ostensibly to prevent speculation. In 1930, Chase bought the Equitable Trust Company from the Rockefeller family, which received a substantial block of stock in return. From that time, Chase became known as the “Rockefeller bank.” David Rockefeller later became chief executive of Chase in 1961.

The bank’s reputation suffered in the early 1930s as it became one of the focal points of discontent after the Crash of 1929 and the early years of the Great Depression. During Senate hearings in 1933, Albert Wiggin, president of the bank during the 1920s, testified about his own activities during the stock market bubble. It was revealed that he had often traded the bank’s stock for his own account even when it appeared to run counter to the bank’s interests. It was he who had the stock delisted from the stock exchange, and the speculation occurred during the same period. As a result of his revelations and those of others, the BANKING ACT OF 1933 was passed. His successor, Winthrop Aldrich, helped heal the image of the bank, and he became one of the few bankers supporting financial reform during the NEW DEAL. After the new law was passed, Chase divested itself of its securities affiliates and chose the path of commercial rather than INVESTMENT BANKING like J. P. Morgan, which also chose COMMERCIAL BANKING.

Throughout the 20th century, much of the bank’s growth came through MERGERS. The Bank of Manhattan Company bought the Bank of the Metropolis in 1918; Chase purchased it in 1955 and changed its name to the Chase Manhattan Bank. By 1955, the bank had purchased more than 20 smaller banks. Like many other large banks in the 1950s and 1960s, Chase wanted to expand to the suburbs, outside its Manhattan base, but was initially constrained by local New York banking laws. The bank created a HOLDING COMPANY, the Chase Manhattan Corporation, in 1969 in order to diversify its holdings and expand; that same year a change in New York State banking laws allowed banks to cross county lines, something they had been prohibited from doing in the past. As a result, the bank opened branches in Long Island and other boroughs of the city. The bank also listed its stock on the stock exchange again after an absence of 40 years.

As part of its expansion in large retail banking, the bank developed the New York Cash Exchange (NYCE), the first successful major attempt at automated teller machines (ATMs), in 1985. The bank maintained a mix of retail and wholesale banking functions. In 1996, it merged again, this time with the Chemical Banking Corp. to again form the largest bank in the country. It lost the top spot shortly thereafter when CITIBANK merged with Travelers Group.

In 2000, it completed its best-known merger when it purchased J. P. Morgan & Co. in order to gain entrance into investment and wholesale banking. The $36-billion stock-only deal closed in December 2000, ending J. P. Morgan’s long history of independence. The new entity was named J. P. Morgan Chase, with the Morgan side conducting investment banking and wholesale banking business while the Chase side emphasized retail banking in its many forms. The new bank ranked as one of the top-five banking institutions in the country.

See also BANK OF AMERICA; BANK OF NEW YORK; MORGAN, JOHN PIERPONT.

Further reading

Rockefeller, David. Memoirs. New York: Random House, 2002.
Wilson, John Donald. The Chase: The Chase Manhattan Bank N.A., 1945–1985. Boston: Harvard Business School Press, 1986.