Citibank history

Since the early 20th century, one of the three largest U.S. banks. It was established in 1812 as the City Bank of New York, a state-chartered bank. In its first quarter-century, it functioned primarily as a credit union for its merchant customers, with bad debts sometimes restricting its ability to provide services and increasing the bank’s reliance upon often volatile banknotes and interbank balances. After the Panic of 1837, a dynamic new director, Moses Taylor, a wealthy merchant closely linked to millionaire fur trader John Jacob ASTOR, gradually acquired a controlling interest in the bank, holding its presidency from 1856 until he died in 1882, to be succeeded by his son-in-law, Percy Pyne. Eschewing banknotes and interbank balances, Taylor and Pyne pursued policies of strong liquidity and high cash reserves, enabling the institution—rechartered in 1865 as the National City Bank of New York—to finance their family’s extensive railroad, utility, and commercial ventures.

In 1891, Pyne appointed James W. Stillman, an able New York businessman and securities underwriter with close family ties to the Rockefeller petroleum interests, president of the National City, then 12th in size among New York City banks. Stillman aggressively expanded the bank’s operations; in the decade after 1895 its assets grew 22 percent annually, making it the nation’s largest bank, a status he guarded jealously, and the first to acquire $1 billion in assets. Its capitalization rose from $3.4 million in 1891 to $49.3 million (with profits of $5.2 million) in 1907, with Stillman, William, and Percy Rockefeller as controlling stockholders. Stillman rapidly expanded the bank’s operations into INVESTMENT BANKING, underwriting numerous securities issues for such clients as the UNION PACIFIC RAILROAD interests of E. H. HARRIMAN, which in turn provided lucrative investment opportunities for National City’s growing number of corporate industrial clients, prominent among whom were large RAILROADS and the Rockefeller Standard Oil interests. On securities issues National City often worked closely with major New York investment houses, notably J. P. Morgan & Company and KUHN LOEB & COMPANY. The National City also benefited from extensive correspondent relationships with rural American banks, for whom it undertook profitable New York exchange transactions. Under Stillman, it embarked on an aggressive merger and acquisitions program, controlling or acquiring stock in the Third National Bank, the Fidelity Bank, the Hanover National Bank, the Riggs National Bank, and several others. The National City aggressively sought federal government business and by 1897 was the largest national government depository; early in the 20th century, Treasury secretaries employed such government deposits to relieve fluctuations in the money market. In the Panics of 1893 and 1907, the National City’s continuing strong liquidity policies won it numerous deposits from depositors and borrowers seeking security.

In 1899, Stillman hired as vice president Frank A. Vanderlip, an innovative former financial journalist and assistant secretary of the Treasury, who became president in 1909, leaving Stillman supreme as chairman until his death. Vanderlip dramatically expanded the National City’s securities business, and call loans rose from one-third of total loans in the 1890s to twothirds in the 1900s. Vanderlip also became prominent in the movement to expand American foreign commerce and investment, building on the foreign trade department Stillman had established in 1897 and instituting a new training program designed to equip young bank personnel for overseas service. By 1907, the National City financed one-third of American cotton exports and had established an impressive foreign correspondent network. Vanderlip was among the most outspoken campaigners for a U.S. central bank system, in part because this would facilitate American banks’ capacity to finance foreign commercial transactions, invest abroad, and establish overseas branches. After the Federal Reserve Act was passed in 1913 and the First World War began in 1914, Vanderlip rapidly acquired the International Banking Corporation, opened 132 branches in Asia, Latin America, and Russia, participated in extensive wartime loans to foreign governments and the financing of substantial overseas trade, and established the American International Corporation to purchase non-American businesses. These ventures’ ambitious scope, along with substantial National City losses after the November 1917 Bolshevik seizure of power in Russia, alarmed both Stillman, who died in 1918, and other prominent National City directors, who in 1919 dismissed Vanderlip, who had nonetheless laid the foundations of National City’s subsequent international preeminence among American banks.

Charles E. Mitchell, appointed president in 1921, built on his predecessors’ accomplishments, expanding COMMERCIAL BANKING services to large corporations and wealthy individuals, but also opening branches throughout New York to attract numerous small individual depositors and offering them opportunities to purchase domestic and overseas securities. By 1929, its associated National City Company handled almost one-quarter of all such bond issues floated in the United States, though Mitchell’s enthusiastic underwriting of shaky German and Latin American securities, while highly profitable throughout the later 1920s, ultimately brought National City large losses and his own dismissal and public disgrace. The 1933 Banking Act forced National City to renounce investment banking. Gradually recouping its position in the 1930s, during World War II National City handled extensive U.S. government accounts.

After 1945, the National City—renamed First National City Bank in 1956, after acquiring the First National Bank of New York, a one-branch blue-chip institution with substantial assets and several major corporate accounts—came under the dynamic leadership of the internationally minded Walter B. Wriston, who became president in 1968, remaining chief executive officer until 1984. Later renamed Citibank (in 1976), it recouped its international position, opening or reopening branches in every major overseas country. From then onward no other American financial institution could match its international interests. Wriston also aggressively sought both large and small domestic depositors, attracting smaller customers with loan, mortgage, and credit card facilities, and pioneering the introduction of automatic teller machines in all branches. The financial deregulation of the 1980s enabled Citibank further to extend its activities, and under the Citicorp holding company umbrella it once more marketed securities and offered domestic and overseas clients a wide range of investment facilities. In the later 1990s, it launched an impressive campaign to expand its overseas operations in Asia, where many local clients believed American-based financial institutions offered greater security than their local counterparts.

In 1998, Citibank was merged with the Travelers, an insurance company run by Sanford WEILL. The merger was the largest in history at the time and marked a significant change in the ownership and operation of banking institutions. As part of the deal, the two institutions needed to comply with the relevant provisions of the BANK HOLDING COMPANY ACT and the Glass-Steagall Act. Within a year, however, the Glass-Steagall Act was replaced by the FINANCIAL SERVICES MODERNIZATION ACT, and the merger became permanent.

Further reading

Huertas, Thomas F., and Harold van B. Cleveland. Citibank, 1812–1970. Cambridge, Mass.: Harvard University Press, 1985.
Logan, Sheridan. George F. Baker and His Bank, 1840–1955. New York: privately published, 1981.
Winkler, John K. The First Billion: The Stillmans and the National City Bank. Babson Park, Mass.: Mass Spear & Staff, 1951.
Zweig, Phillip L. Wriston: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy. New York: Crown Publishers, 1996.

Priscilla Roberts