Paper Money of Chihuahua

.. by Simon Prendergast

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Home The History El Banco Minero After the revolution

The Banco Minero after the Revolution

Purchasing the bank's own notes

As the price of Banco Minero notes fell, Enrique Creel considered the suggestion of buying up the bank’s own notes. It could have used its dollar reserves, but Creel had two observations. Firstly, each dollar guaranteed $18 in notes, and to reduce the bank’s metallic holdings would put it further outside the legal minimum. Secondly, he had given his personal assurance for the bank’s holdings in Chihuahua, which might require the American reserves. However, Creel believed that it would be advantageous to use the holdings that the Comisión de Cambios y Moneda had in Mexican and American coins to buy up large numbers of notes CONDUMEX, Fondo Creel, 140, 36080, letter of Enrique Creel to Juan Creel, 3 April 1915. By August 1914 the Banco Minero had $2,476,000 ($2,351,000 in oro nacional, pesos fuertes y tostones and $125,000 in oro americano) deposited with the Comisión de Cambio y Moneda in México City, represented by certificados de depósito.

Because of the revolution the bank contracted with the New York firm of Ladenburg, Thalmann and CompanyCONDUMEX, Fondo Creel, 129, 33076, memorandum, July 1915, to receive these funds (in fact, the certificados de depósito) and use them to repurchase the bank’s own notes. In September 1915 the Banco Nacional de México wrote to General Pablo González that it had been informed by Ladenburg, Thalmann that the Banco Minero had endorsed the certificados de depósito and asked the Banco Nacional’s help in withdrawing the Banco Minero notes and payings its creditors. The Banco Nacional approved of the idea but wanted official approval. González passed on the request to CarranzaAPGG, leg. 2, exp. 136. telegram 17 September 1915. However, the contract between the Banco Minero and Ladenbury, Thalmann had not yet been signed by September 1915CONDUMEX, Fondo Creel, 142, 36607 and was rescinded.

In fact the Secretaría de Hacienda refused the bank permission to use these funds to buy up its own banknotes and the money was passed to the Tesorería General and used for public servicesCONDUMEX, Fondo Creel, 80, 20680, Enrique C. Creel, Los Angeles to Jorge Vera Estañol, 15 August 1917. The Secretaria applied most of it to clearing the bank’s debts with the Comisión de Cambios y Moneda, forcing the bank to pay in oro nacional despite the fact that a special clause made them payable in notes of the Banco NacionalCONDUMEX, Fondo Creel, 238, 60957, letter Enrique C. Creel, Los Angeles to Juan A. Creel, El Paso 5 July 1920.

On 20 April 1915 Creel sent a message (via the US State Department) to José Simón, Director of the Banco Nacional, instructing him to go ahead with the purchase of banknotes. "This transaction strictly moral and legal and should be done to protect  public interest without consultation"CONDUMEX, Fondo Creel, 129, 33076.

However, other concerns, including the Secretaría de Hacienda itself, were also buying up Banco Minero notes. Under Mexican law, debts to a bank of issue could be paid with the bank notes issued by the corresponding bank, and many of the Banco Minero’s clients used this method to pay off their accounts. These transactions were to the advantage of the bank because the liability concerning bank notes in circulation was reduced and some of the accounts that were paid in this way might otherwise not have been collected. However, they did not produce any money for the benefit of other creditorsCONDUMEX, Fondo Creel, 63, 16344, letter Enrique Creel to Harry Goschen, London, 18 April 1919.

Carranza's decree of 29 September 1915

The first step Carranza took to reform the banks was to force them to place themselves within the stipulations of the Ley General de Instituciones de Crédito and to apply the penalties laid down in the same legislation. In most cases the banks were obliged to show that the metallic value on hand was equivalent to at least 50% of the total of deposits on sight and paper money in circulation. On 29 September 1915 Carranza set a period of forty-five days for the banks to comply or their concessions would be cancelled and to this end the government created the Comisión Reguladora e Inspectora de Instituciones de Crédito. The Banco Minero could not comply with this 50% requirement so was threatened with liquidation. To avoid such a declaration it needed to use the funds held by the Comisión to retire its notesCONDUMEX, Fondo Creel, 149, 38352, report on Banco Minero by Francisco C. Terrazas.

Needless to say, Creel wrote to José Simon registering the bank’s opposition to the decree, as it would take several years of ordered progress to be able to comply with the revised requirementCONDUMEX, Fondo Creel, 120, 30917. After Carranza issued his decree on 15 September 1916 the local banks on 28 October sent a memorandum to the Secretaría de Hacienda, proposing a different procedure for their liquidation, after warning that shareholders considered that their concessions were legal and not to be renounced without adequate compensation. They argued that it would be inconvenient to use their metallic reserves to redeem their notes, since the majority of them were held abroad so the coinage would be exported. Instead, they suggested a period of a year in which to redeem their notes with infalsificable currency, bought from the Secretaría de Hacienda at an agreed rate (CONDUMEX, Fondo XXI , leg. 11436). At this time most of the bank's notes were supposedly backed by 33% in reserves in accordance with Huerta's modification of the Ley, though this was 'more honour'd in the breach than the observance'.

The directors of the Banco Minero, who met in the United States, declared though the medium of the Banco Nacional that its capital and liabilities were both 5,000,000 pesos, whilst notes in circulation had reached 14,000,000 pesos. Thus it did not comply. The bank failed to produce its accounting books for the necessary inspection and on 15 December 1915 following a report by the Comisión Reguladora, the Secretaría de Hacienda cancelled its charter. Carranza was, however, still willing to help in withdrawing their notes and on 28 February 1916 the Dirección General del Timbre sent out a circular to all its offices instructing them to admit the notes of the failed banks (including the Banco Minero) in payment. An exception was made for those notes that had depreciated in the marketplace in relation to the Constitutionalist paper moneyPeriódico Oficial, 4 March 1916 but Boletín Oficial, Sonora, 4 March 1916 has the exact opposite.

By August 1917 the firm of A. Iselin and Co. of New York were buying Banco Minero notes (both American Bank Note Company and Bouligny issues) on behalf of the bank.

In November 1919 a reader wrote from Batopilas to La Voz del Pueblo newspaper in Ciudad Juárez, asking who was redeeming Banco Minero de Chihuahua notes, and where, as he and his friends had sizeable holdings of these notesLa Voz del Pueblo, 2 November 1919. Juan A. Creel replied in the newspaper that the bank’s offices were at segunda calle de Capuchinas No. 41, Mexico City, under the management of  Francisco C. Terrazas, but the notes were not being redeemed at the present time because of the government’s moratoriumLa Voz del Pueblo.

Attempts to sell the 1913 6% Federal bonds

The bank also tried to sell the Federal bonds that it had been forced to take from the Huerta government, in order to raise funds and withdraw fron circulation the $3,456,472.50 in notes that it had put into circulation as part of the deal.

Though the Secretaría de Hacienda had prohibited any other type of transaction by the bank, it approved this plan, as long as the proceeds of the sale were used to reduce the bank’s outstanding liabilities. On 22 December 1916 the bank was offered 12% for the bonds, but refused, as Juan Creel thought they should receive at least 15%. On 25 January some financiers in Chicago offered $250,000 US dollars. As the Bouligny issues were being traded at seven cents oro americano, this offer would have allowed the bank to buy back the $3,456,472.50, and would also have solved the problem of holding the bonds, which had no market and were very risky, as their value could have been wiped out by future political decisions in Mexico. So the bank agreed to sell, but the Chicago syndicate then pulled out of the deal.

Creel then offered the bonds to various institutions in New York without success before agreeing to transfer them to the Bankers Trust Company of New York. The contract stipulated that the bonds had to be sold for the sum that the Banco Minero had paid for them, i.e. $3,456,472.50 in their own notes, or the equivalence in oro americanoCONDUMEX, Fondo Creel, 62, 16116, memorandum of Enrique Creel, 17 April 1917.

Claims for damages

The bank's survival also relied on certain claims it had against the government, especially for monies that had been forcibly extracted from the bank's branches. The bank’s claims includedCONDUMEX, Fondo Creel, 12, 134201, memorandum, 26 May 1927. Slightly different figure for 24 June 1927, when the bank was claiming $1,800,809.34 in reclamaciones and $1, 487,400.77 in interest, $38,000 already acknowledged, and $2,000,000 in daños y perjuicios (AGN, Antiguos Bancos de Emisión, caja 302):

The money taken from the iron column in Chihuahua (see Luis Terrazas hijo and the bank's reserves) $590,000.00
Various forced loans Gómez Palacio 31 March 1911 12,500.00
Gómez Palacio 5 Oct 1813 30,000.00
Parral 22 May 1911 10,000.00
Parral 25 March and 1 April 1912 56,600.00
Hermosillo 3 March 1913 3,000.00
Interest to  15 June 1914 237.12
Ciudad Juárez 4 March 1912 20,000.00
Ciudad Juárez 20 March 1913 27,900.80
Ciudad Juárez 20 May 1913 2,073.60
Ciudad Juárez 17 Nov 1913 83,880.00
Ciudad Juárez 17 Nov 1913 1,623.90
Ciudad Camargo 1911, 26 May and 2 June 1912 5,250.53
Pascual Orozco's bonds
12 and 29 April 1912 255,000.00
Consignment of gold coins taken by rebels
Las Tablas, San Luis Potosi 10 Feb 1913 30,000.00
Damage to Parral branch
4 April 1912 37,072.36
Damage to Gómez Palacio branch 22 July 1913 5,053.16
4,143.49
10,000.00
50,000.00
Damages for cotton crop confiscated by Villa in Torreón 1913 460,000.00
1,694,293.96
less sum paid by Sonora government
(3,237.12)
Three giros from the Jefe Político of Lerdo 5, 14 and 21 Sep 1912 15,000.00
Reclamación 2210 21 May 1924 94,752.50
Certificado of Banco Nacional de México 38,000.00
Revenue(interest?) for 9 1/2 years at 6% 21,850.00
General damages for losses which were in fact more than $15,000,000
2,000,000.00
Damages detailed in attached sheet 1,465,154.77
TOTAL 5,325,814.11

 

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