Further testimony came in the form of a letter from the cashier of one of the New Haven banks, expressing the highest confidence in the financial strength of the company. Barnum afterwards learned that his correspondent represented a bank which was one of the largest creditors of the concern.
Barnum finally agreed to lend the clock company his notes for a sum not to exceed $50,000, and to accept drafts to an amount not to exceed $60,000. He also received the written guarantee of the President, Chauncey Jerome, that in no event should he lose by the loan, as he would be personally responsible for the repayment. Mr. Barnum was willing that his notes should be taken up and renewed an indefinite number of times just so the maximum of $110,000 was not exceeded. Upon the representation that it was impossible to say exactly when it would be necessary to use the notes, Barnum was induced to put his name to several notes for $3,000, $5,000 and $10,000, leaving the date of payment blank, it being stipulated that the blanks should be filled to make the notes payable in five, ten, or even sixty days from date. On the other hand, it was agreed that the Jerome Company should exchange its stock with the Terry and Barnum stockholders, thus absorbing that concern, and unite the whole business in East Bridgeport.
Three months later Barnum's memoranda showed that the entire $110,000 had been used. He was then solicited by the New York agent of the company for five additional notes for $5,000 each. The request was refused unless they would return an equal amount of his own cancelled notes, since the agent assured him that they were cancelling these notes "every week." The cancelled notes were brought him next day and he renewed them. This he did afterwards very frequently, until at last his confidence in their integrity became so firmly established that he ceased to ask to see the notes that had been taken up, but furnished new paper as often as it was desired.
But gradually the rumor that the banks were hesitating about discounting his paper came to Barnum's ears. Wondering at this, he made a few inquiries, which resulted in the startling discovery that his notes had never been taken up, as represented by the Jerome Company, and that some of the blank-date notes had been made payable in twelve, eighteen and twenty-four months. Further investigation revealed the fact that he had indorsed for the company to the amount of over half a million dollars, and that most of the notes had been exchanged for old Jerome Company notes due to the banks and other creditors.
Barnum simply went to work, paid every debt he owed in the world, and—failed!
The Jerome Company also failed, and in addition to absorbing
Barnum's fortune, was able to pay only about fifteen per cent. of
its own obligations. Of course it never removed to East
Bridgeport at all.
The failure was a nine-days' wonder all over the country. Never had Barnum achieved such notoriety. As he expressed it, he was taken to pieces, analyzed, put together again, kicked, "pitched into," tumbled about, preached to, preached about, and made to serve every purpose to which a sensation loving world could put him.
Barnum declared that he could stand the abuse, the cooling of false friends and even the loss of fortune, but it made him furious to read and hear the moralizings over the "instability of ill-gotten gains." His fortune, if made quickly, had been honestly worked for and honorably acquired, though envious people pretended not to believe it.