On this day in economic and financial history…
American Express Company (NYSE:AXP) was founded in Buffalo, N.Y., on March 18, 1850. In a unique twist of fate, this company — originally created as an express mail service — was the result of the merger of two smaller express-mail companies owned by Henry Wells and William G. Fargo, as well as one owned by John W. Butterfield. Exactly two years later, this pair founded Wells Fargo & Co (NYSE:WFC) in New York City on March 18, 1852. These two financial titans would soon take on important — and occasionally competitive — roles in the spread of both communications and finance to the American frontier.
Shipping was every bit as important a link in the chain of American commerce in the 1800s as it is today, as the U.S. Postal Service did not deliver packages larger than an envelope until much later in its history. Simply sending stock certificates, contracts, and other official documents required specialized express delivery through a trusted provider, a service for which which both American Express Company (NYSE:AXP) and Wells Fargo quickly became known.
Wells Fargo & Co (NYSE:WFC) took on a banking role from its earliest days, but American Express Company (NYSE:AXP) did not expand into financial services until it began offering money orders in 1882 and then pioneered the widespread use of traveler’s cheques in 1891. Within several years, AmEx was selling more than $6 million in traveler’s cheques annually, which would be roughly equivalent to $160 million today. Meanwhile, Wells Fargo had long since established itself as an arbiter of gold values for the forty-niners during the California Gold Rush. This early business became a cornerstone of Wells Fargo, which was founded partly in response to American Express Company directors’ reluctance to expand to the booming West Coast. By the time AmEx moved into financial services, Wells Fargo had survived a California banking panic in 1855, started the West’s leading express business, and opened hundreds of banking and express offices throughout the country.
American Express Company (NYSE:AXP) would grow into an even larger express-services company than Wells Fargo & Co (NYSE:WFC). At the time of President Woodrow Wilson’s wartime nationalization of the railroads in 1917, American Express Company controlled more than 70,000 miles of railroad. At this point, American Express Company (NYSE:AXP) joined Wells Fargo & Co (NYSE:WFC) in separating its financial and delivery businesses — Wells Fargo & Co (NYSE:WFC) having already done so in 1905. The Panic of 1907 hit Wells Fargo hard, and it spent years rebuilding from that crash at a time when American Express Company (NYSE:AXP) thrived as a travel services company. However, conservative management allowed Wells Fargo to survive the more devastating crash of 1929, which destroyed thousands of its competitors.
At this point, the tables turned, and Wells Fargo & Co (NYSE:WFC) held a stronger position than American Express Company (NYSE:AXP), shares of which had been stealthily bought up by Chase National Bank (predecessor to JPMorgan Chase & Co. (NYSE:JPM)) through the difficult postwar years, until 97% of American Express Company (NYSE:AXP) shares were in Chase’s hands by 1929. Only the staunch resistance of the owners of the remaining 4,700 shares allowed American Express Company (NYSE:AXP) to survive as an independent entity until Glass-Steagall forced the separation of banking corporations from nonbanking activities, ending Chase’s attempt at a takeover.