Financial Speculation and Banking

As part of the post-war recovery to encourage investment in industry and westward expansion, in 1816 Congress and President Madison created the second Bank of the United States that opened in Philadelphia in January 1817 and eventually had a few dozen branches across the US, including Baltimore.  This was a private bank but with public responsibilities to the US Treasury that owned 20% of the capital stock which was about $35 million.  Soon, speculation on banking and industry stocks and their inherent risks led to the nationwide financial Panic of 1819 (need to cite) that caused the SBUS to tighten its policy and call in many outstanding debts. This lead to the biggest and most consequential financial scandal in the US up to that time that revealed alleged corruption at the Baltimore Branch of the Bank of the United States, and the Williams brothers were at the center of it.

When the 2nd BUS opened, George Williams was elected a Director of the main branch of the central bank in Philadelphia while his brothers Amos was a Director in the Baltimore Branch and his cousin, Nathaniel Felton Williams, was a Director of the Office of Discount and Deposit of the Bank of the United States at Baltimore.  Cumberland Williams, and brothers Amos and George, were a customer and a drawer (borrower) and endorser (guarantee) of loans.  The collaboration of George along with the bank president and cashier in an unusual amount of borrowing, self-endorsing, or non-endorsing amongst the three of them eventually brought a conspiracy charge to commit fraud of $1.5 million dollars, over 4% of the total capitalization of the Second Bank of the United States and about 0.2% of the entire GDP of the country.

The indictment charged George Williams, James A. Buchanan (President of the Baltimore branch), and James W. McCulloch (Cashier of the Baltimore branch) with conspiring to "falsely, fraudulently, and unlawfully, by wrongful and indirect means, to cheat, defraud and impoverish the President, Directors and the Company of the Bank of the United States". The core of the charge was that they "conspired together to obtain and embezzle a large amount of money and promissory notes... the entire sum having a value of Fifteen Hundred Thousand Dollars".  They achieved this by taking money from the bank "without giving security or bothering to inform the Bank's directors," abusing their positions of trust.  For example, George Williams alone endorsed notes for S. Smith & Buchanan and J.W. McCulloch totaling nearly $600,000 that were part of the bank’s ultimate losses.

As part of the financial records and debts to be written off as unrecoverable bank losses, the following amounts attributable to the Williams brothers were as follows:

• George Williams: Written-off debts where he was drawer totaled $136,117.27. Written-off debts where he was an endorser totaled $821,105.32.

• Amos A. Williams: Written-off debts where he was drawer totaled $89,000.00. Written-off debts where he was an endorser totaled $38,304.75.

• Cumberland D. Williams: Written-off debts where he was drawer totaled $29,991.22. Written-off debts where he was an endorser totaled $628.42.

But Amos and George were also involved in lending each other the banks funds.  Amos drew banks notes worth $79,000 that were endorsed by George, and George drew a $169,833.34 note endorsed by Amos and another for $89,000. Even Cumberland drew a note endorsed by Amos for $31,250. 

The amounts that they owed and paid is difficult to precisely determine, but their restitution resulted in each of them declaring as an insolvent debtor forced to sell their assets at public auction between 1819 and 1820.   This would not have put them in position to purchase, or even invest, in a new enterprise such as the Savage Manufacturing Company.  So their colleague, Michael McBlair, became the primary force to start the new company.