The Ladies' Deposit: The 19th-Century Ponzi Scheme by Women, for Women

Hulton Archive/Getty Images
Hulton Archive/Getty Images

Sarah Howe never disclosed the methods by which she did business. After establishing the Ladies' Deposit Company in an unassuming brick building in Boston's South End around 1879, the former fortuneteller refused to solicit clients for her brand-new bank. There was no advertising, and no public announcement. Instead, members could only be referred by other members in good standing. They had to be single women, not rich, who didn't own their own homes. Deposits could only be made in amounts of more than $200 but less than $1000, and returns were set at 8 percent interest per month—an incredible amount then as well as today [PDF].

Despite the lack of advertising, word of the Ladies' Deposit Company traveled quickly among Boston's working-class women. Howe's selectiveness endeared her to potential clients, as did the fact that she presented herself as a maternal figure at a time when gender stereotypes and predatory practices often left women and their money at the mercy of men. She even invited her select few depositors to sit with her, offering small talk and compliments. The experience seemed, as one woman put it, "sympathetic."

For the single women of Massachusetts, Howe appeared to be offering a remarkable opportunity to grow their nest eggs in a female-friendly environment. But the Ladies' Deposit was far from what it appeared to be.

A CHARITABLE INSTITUTION

The Ladies' Deposit Company had not been operating for long when its exclusive nature—and its amazing returns—captured the curiosity of local newspapers. One Boston Herald investigator who tried to ask some questions at the bank was rebuffed, so in January 1880, he disguised himself as a woman and successfully got inside. His article reprinted a notice pasted inside each Ladies' Deposit-issued bankbook, which described the establishment as a "charitable institution for single ladies, old and young." When the reporter asked how their interest rates were possible, a clerk had replied, "We never disclose the methods by which we do business."

The answers to further questions were similarly unilluminating. A follow-up article in the Herald included an interview with Howe herself, who described the bank as a "Quaker Aid Society" that had first been formed in Alexandria, Virginia. She coyly claimed that she couldn't provide any further details without angering her superiors.

The more reporters mocked and prodded the Ladies' Deposit, the more business poured in. At the height of the operation's popularity, Howe was serving an estimated 1200 women from Boston and beyond—Buffalo, Chicago, Pittsburgh, Baltimore, and Washington. She bought a luxurious home worth $40,000 on Franklin Square, which she paid for in rubber-banded bundles of cash and furnished with thousands of dollars' worth of exotic plants and other decorations.

But although business was booming, it was the beginning of the end for Howe.

On September 25, 1880, the Boston Daily Advertiser ran the first in a series of articles that reignited the controversy around the Ladies' Deposit. Under the title "A Mysterious Bank," the piece detailed the "fabulous rates of interest" offered to "unprotected females," explaining that "the mystery which surrounds and attaches to [the bank] has never been fully dispelled." While the writer wasn't able to solve the mystery of the amazing interest rates themselves, they noted that no one had yet complained about losing even a dollar, which made it difficult to probe much further: "Whatever there may be that is suspicious, nothing unlawful is disclosed, and no depositor comes forward to say that she has been unjustly dealt with."

But the Advertiser's articles were enough to set tongues wagging. Soon, experts wrote in predicting a crash and theorizing that Howe could only afford to pay out her customers with the deposits of other women, a well that would soon run dry. No one used the phrase "Ponzi scheme"—this was 40 years before Charles Ponzi would garner attention for his frauds—but the Advertiser's series, printed over several weeks, proved to be key in turning opinion against the Ladies' Deposit.

As more investors who read the articles became suspicious, they demanded to withdraw their funds. At the end of that September, there was a week-long run on the bank. For a while, Howe was able to sustain the withdrawals, but she soon tried to suspend payments. In response, the Advertiser published an article interviewing seven prominent lawyers, who all said she was liable to pay her depositors' principal without delay. Not long after, as The Atlantic put it, "a storm of legal process burst upon her."

Howe was arrested upon order of the district attorney on October 16, 1880, with her bail set at $20,000. In court, she was tried on five counts of "cheating by false pretenses" by five former depositors. The nail in the coffin was Howe's claim that a Quaker fund backed the Ladies' Deposit. It became apparent during the Advertiser's investigation and her subsequent court hearing that there was no such fund, and that Howe had no connections with any Quaker organization. "She had no more hold upon the Quakers than she had upon the Pope," The Atlantic wrote.

On April 25, 1881, Howe was sentenced to three years in jail on four counts of cheating by false pretenses. Later that November, she would also be involuntarily declared insolvent after trying to pay back depositors.

A RESILIENT CHEAT

Howe didn't learn any lessons from her experience with the Ladies' Deposit. Upon her release from jail in 1884, she set up a new enterprise, the Woman's Bank, in elegant apartments on Concord Street. The operation again targeted women, but offered a more humble 7 percent interest, as opposed to the Deposit’s 8 percent returns.

The Woman's Bank operated successfully for two years, until in April 1887, one woman from Maine called to retrieve her investment and found she couldn't. Howe soon absconded with an estimated $50,000 in deposits.

Next, she tried a similar scheme in Chicago. Her "Ladies Provident Aid" operated in a familiar manner, promising 7 percent interest a month, with three month's interest offered in advance. Local reporters quickly exposed Howe yet again—proving just how notorious she had become.

Forced to flee once more, Howe made her way back to Boston, where she was arrested in 1888 on an outstanding warrant. By this point, the women preyed upon by Howe received little sympathy at all. "It is plain that Mrs. Howe's methods of business would not have inveigled men," The New York Times wrote. "Men, even when they become victims of the sawdust swindlers, require to see how the tempter can find his account in the offer he makes them." The article neglected to mention that a number of men, seeing an opportunity for quick cash, had enlisted female relatives to invest in the Ladies' Deposit for them.

Howe maintained her penchant for duplicity until the end of her life. After being released from prison for the final time in 1889, she returned to her former profession of fortunetelling, charging 25 cents a reading. She died in 1892 at the age of 65, penniless and alone, but insisted until the day she died that she had not been responsible for the Ladies' Deposit. "It was not I," she said. "I did no swindling."

5 Fast Facts About Muhammad Ali

Kent Gavin/Getty Images
Kent Gavin/Getty Images

Muhammad Ali is one of the most important athletes and cultural figures in American history. Though he passed away in 2016, the heavyweight boxing champ was larger than life in and outside of the ring. The man who coined the phrase "float like a butterfly, sting like a bee” won 37 knockout victories. Here are five more fast facts about Muhammad Ali, a.k.a. The Greatest.

1. Cassius Clay was named for a white abolitionist.

Muhammad Ali was born Cassius Marcellus Clay, Jr. and named after his father, who had in turn been named for a white abolitionist. The original Cassius Clay was a wealthy 19th-century planter and politician who not only published an anti-slavery newspaper, but also emancipated every slave he inherited from his father. Cassius Clay also served as a minister to Russia under President Abraham Lincoln.

2. Muhammad Ali's draft evasion case went to the Supreme Court.

In the early 1960s, Clay converted to Islam, joined the Nation of Islam, and took the name Muhammad Ali. According to his religious beliefs, Ali refused to serve in the Vietnam War when he was drafted in April 1967. He was arrested and stripped of his boxing license and heavyweight title. On June 20, 1967, he was convicted of draft evasion and banned from fighting while he remained free on appeal. His case went all the way to the U.S. Supreme Court, which unanimously overturned his conviction in 1971.

3. He received a replacement gold medal.

At the 1960 Summer Olympics in Rome, Ali won the gold medal for boxing in the light heavyweight division. But, as he wrote in his 1975 autobiography, The Greatest: My Own Story (edited by Toni Morrison!), he supposedly threw his medal into the Ohio River in frustration over the racism he still experienced in his hometown of Louisville, Kentucky. Some historians dispute this story and suggest that Ali just lost the medal. Either way, he was given a replacement when he lit the Olympic cauldron at the opening ceremonies of the 1996 Olympic Games in Atlanta.

4. Muhammad Ali was an actual superhero.

In 1978, DC Comics published Superman vs. Muhammad Ali—an oversize comic in which Muhammad Ali defeats Superman and saves the world. In real life, Ali did save a man from suicide. In 1981, a man threatened to jump from the ninth story of a building in L.A.’s Miracle Mile neighborhood. Ali’s friend Howard Bingham witnessed the unfolding drama and called the boxer, who lived nearby. Ali rushed into the building and successfully talked the man down from the ledge.

5. Muhammad Ali starred in a Broadway show.

In Oscar Brown, Jr.'s 1969 musical adaptation of Joseph Dolan Tuotti's play Big Time Buck White, Ali played a militant black intellectual who speaks at a political meeting. The play ran for only five nights at the George Abbot Theatre in New York. His Playbill bio reported that Ali "is now appealing his five-year prison conviction and $10,000 fine for refusing to enter the armed services on religious grounds. The Big Time Buck White role that he has accepted is much like the life he lives off stage in reality.”

Why Do Brides Traditionally Wear White? You Can Thank Queen Victoria

The royal family has been setting fashion standards since long before Kate Middleton and Meghan Markle became household names. More than 175 years ago, the wedding dress Queen Victoria wore when she married Prince Albert in 1840 made a major statement. Victoria's off-the-shoulder satin gown was covered in delicate lace, but most impressively of all, it was the color of snow.

Wedding dress styles have changed a great deal since the Victorian era, but the light color palette has more or less remained a constant, according to Vanity Fair. White wasn’t always the obvious choice, though.

Prior to Queen Victoria’s royal wedding, red and other bright hues were the go-to colors for would-be brides. While Queen Victoria is largely credited with being the person who popularized the white wedding dress tradition as we know it today, she wasn’t the first woman to wear white on her wedding day—or even the first royal bride to don the the color (Mary, Queen of Scots opted for white when she married the Dauphin of France in 1558).

While some accounts have suggested that Queen Victoria wore white as a symbol of her sexual purity, historians have pointed out that wearing white was more of a status symbol. Wealthy brides wore the color to flaunt the fact that they could afford to have the dress cleaned—a task that was notoriously difficult in those days.

"Before bleaching techniques were mastered, white was a rare and expensive color, more a symbol of wealth than purity,” biographer Julia Baird wrote in Victoria: The Queen. “Victoria was not the first to wear it, but she made it popular by example. Lace makers across England were thrilled by the sudden surge in the popularity of their handiwork."

Eventually, white weddings became the standard—particularly once synthetic fibers became widely available (and cheaper than satin). With that, the “definitive democratization of the white wedding gown” was complete, Carol Wallace wrote in All Dressed in White: The Irresistible Rise of the American Wedding.

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