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."

The Smithsonian Needs Your Help Transcribing Sally Ride’s Notebooks

Sally Ride in 1984.
Sally Ride in 1984.
Coffeeandcrumbs, NASA, Wikimedia Commons // Public Domain

On June 18, 1983, Sally K. Ride made history when she became the first American woman to travel into space. Now, the Smithsonian Institution is making the history of her incredible decades-long career more accessible to everyone—and they need your help to do it.

The National Air and Space Museum Archives is home to the Sally K. Ride Papers, a collection of 38,640 physical pages (over 23 cubic feet) of material spanning Ride’s professional life as an astronaut, physicist, and educator from the 1970s to 2010s. Those resources have been scanned and used to create an online finding aid—not unlike a table of contents—so researchers can easily navigate through the wealth of information.

To simplify the searching process within that online finding aid, the Smithsonian Institution is asking for volunteers to transcribe documents in the Smithsonian’s Transcription Center, a digital hub launched in 2013, where anybody can sign up to type and review historical sources. Three projects from the Sally K. Ride Papers are currently available to transcribe, which include her notes for shuttle training between 1979 and 1981, notes about the Remote Manipulator System Arm (there's one on the International Space Station today), and notes from NASA commissions on which she served. One, for example, was the Rogers Commission, which investigated the causes of the fatal Space Shuttle Challenger disaster in 1986.

You can find out more about the documents in the projects here, and if you’re interested in joining the forces of “volunpeers,” as the Smithsonian likes to call its transcribers, you can create a new user account here. (All you’ll need is a username and email address.)

Check out more citizen science projects you can participate in at home here.

12 Things You Might Not Know About Passover

iStock
iStock

For practicing Jews, Passover is a time to remember their deliverance from captivity in ancient Egypt. It's one of the most important holidays on the Jewish calendar, and in the days before the first night's seder, families make preparations such as cleaning the home of chametz and planning for a week of meaningful dietary restrictions. Here are 12 facts about Passover that you wouldn't have learned from a yearly viewing of The Ten Commandments.

1. Firstborn sons need to fast for Passover.

matzo
iStock

The festival of Passover (or Pesach) commemorates the story of the Jews' escape from Egypt. The passover in question is when the houses of the observant Israelites in captivity were "passed over" as Egypt's first-born children were killed (although confusingly, in the Torah, the date the 14th of Nisan is referred to as Passover while the week-long celebration is the Festival of Matzot. They've since been combined into one celebration called Passover).

In celebration of the firstborns being saved, it is traditional for them to fast on 14 Nisan. If there are no children, the oldest member of the household fasts. If the firstborn is a daughter? That depends on the tradition of the community.

2. Passover lasts either seven or eight days.

reading the Haggadah at Passover
iStock

The Torah says to celebrate Passover for seven days (the time between the Exodus and the parting of the Red Sea), but many Jews outside of Israel celebrate for eight. Traditionally each month of the Jewish calendar was determined by an astronomical observation and could be either 29 or 30 days long. After a new month was determined, messengers spread the word. For Jews who lived too far away for messengers to bring timely news of a new month, it was safest to celebrate for an extra day, so no matter how long the previous month was, the holiday was celebrated.

Eventually the calendar was standardized and the eight-day custom was no longer needed. Today, some Jewish denominations outside of Israel (like Reform Judaism) celebrate the mandated seven days, while many others prefer eight days. Inside Israel it's generally seven.

3. Leavened grains are a no-go at Passover.

Person sweeping the floor
iStock

One of the most important parts of Passover preparations is cleaning the house of chametz, or leavened food. Even the tiniest bit has to go. Because the Jews left Egypt in such a hurry, it's said they didn't have time to leaven their bread. To commemorate that, five grains (traditionally wheat, barley, rye, spelt, and oats) are banished from the house. Jews can spend weeks ensuring that the house is perfectly clean—and there are even professional chametz cleaning services that say they'll boil toys, break down and reassemble kitchen chairs … and possibly still leave the house dirty. There's a saying in Jewish households: "Dust is not chametz." The goal is to get rid of chametz above all else.

4. Matzo, which is made from wheat, is one of the most important parts of a Passover meal.

baking matzo
iStock

While there are restrictions against leavened products, one of the most important parts of a Passover meal is matzo, which is made from wheat. The difference between matzo and regular bread is that the wheat in matzo cannot come into contact with any water until it's ready to be cooked. And once water and wheat are mixed it has to be baked within 18 minutes (sources differ as to whether the timer stops when it enters or leaves the oven). After 18 minutes, fermentation begins and it is chametz.

But why 18 minutes? Supposedly it's because that's how long it takes to walk between the cities of Migdal Nunaiya and Tiberias in Israel. Over the years, scholars have argued about how long it would actually take to walk between the cities, with some proposing that copying errors reduced the distance from circa 4 miles to 1 and thus reduced the time from 72 minutes to 18. Nowadays, it's felt that even if there was a transcribing error, there's enough tradition to use 18 minutes.

5. Grains get complicated during Passover.

matzo ball soup
iStock

As Jews spread around the world, they often found themselves faced with foods that weren't explicitly mentioned for Passover. Sephardic Jews (generally) feel that only the five expressly mentioned grains are forbidden, while Ashkenazi Jews worry that the dishes made from certain other plants that look similar and are grown in similar conditions as the forbidden grains will risk contamination between the two. So if these ingredients (called kitniyot, or "legumes") were avoided, actual chametz could more easily be avoided (although kitniyot is nowhere near as regulated as chametz).

But recently, some authorities have argued that improved technology and storing methods have rendered the old methods obsolete. It's a current debate in some communities.

6. Some of the best matzo flour is made in Arizona.

field of wheat
iStock

One of the most difficult parts of making matzo is keeping the flour dry before it's ready to be converted into matzo; any water risks converting flour into chametz. So, according to The New York Times, one sect of Hasidic Jews has found the perfect farming conditions to produce their wheat—the arid fields of southwestern Arizona. The group of ultra-Orthodox Jews from Brooklyn, New York, work with a farm in Yuma, Arizona, to ensure that no unwanted moisture affects the crop, and the resulting kosher wheat is shipped back east to make up to 100,000 pounds of matzo.

7. Pets also get special food during Passover.

cute dog with head tilted
iStock

For Passover, houses must be free of chametz and there can be no benefit derived from it. This includes pet food. In keeping with this, there are Passover-friendly pet foods out there, and some Rabbinical authorities propose switching out your pet's diet for a few days—such as giving dogs straight meat or herbivores a variety of approved vegetables. If a pet must have a specific type of food—or you can't get Passover-friendly pet food—some observant Jews follow the rabbinical authorities who give the option to sell the pet to a gentile for a few days and then get it back after Passover has ended.

8. There are six symbolic Passover foods.

seder plate for Passover
iStock

The focal point of the start of Passover is the Seder plate, and on it are six ceremonial items:

Beitzah—A cooked egg, representing sacrifice (it's also been suggested that while most foods soften when you cook them, eggs get harder, representing the resolve of the Jewish people)

Haroset—a sweet mix of fruits, nuts, and honey/wine that symbolizes the mortar used by Jews during their slavery

Karpas—a green vegetable signifying new life

Maror and hazeret—bitter herbs (often horseradish for maror and something like romaine for hazeret) to represent the bitterness of slavery

Zeroa—a shank bone (or a chicken neck) to remember the Paschal sacrifice.

9. Sometimes an orange is added to the Seder plate.

slice of orange
iStock

In the 1980s, Dartmouth professor Susannah Heschel spoke on a panel at Oberlin College. While there, she met some students who told a story of a rabbi who said "There's as much room for a lesbian in Judaism as there is for a crust of bread on the seder plate." In response, they started placing a crust on their plates.

Heschel was inspired, but felt that using bread sent the wrong message, writing "it renders everything chametz … [suggesting] that being a lesbian is being transgressive, violating Judaism." So she proposed putting an orange (originally a tangerine) on the Seder plate to symbolize Jewish gays and lesbians. At some point a story emerged that it was actually to symbolize women in general, but Heschel explained: "A woman's words are attributed to a man, and the affirmation of lesbians and gay men is erased. Isn't that precisely what's happened over the centuries to women's ideas?"

Other more modern additions include pine cones (symbolizing mass incarceration), an artichoke (to recognize interfaith families), or tomatoes or Fair Trade chocolate (to remember that there's still slavery around the world).

10. Some major companies produce special kosher-for-Passover food and beverages.

ad for kosher Coca-Cola
Mike Mozart, Flickr // CC-BY-2.0

Many companies produce special kosher-for-Passover products, from chocolate syrup to cake mixes. But one of the most important is Coca-Cola. In the early 20th century Rabbi Tobias Geffen was serving as an Orthodox Rabbi in Atlanta. Due to his location (Coca-Cola was invented and is headquartered in Atlanta), he was frequently asked if Coca-Cola was kosher. After analyzing the product, he found two problem ingredients—alcohol and glycerin.

The alcohol was a problem because it was grain-derived and thus unacceptable for Passover, a problem that was solved by switching to fermented molasses. The other problem, however, was glycerin. The glycerin was derived from animals, and there was simply no economic way to ensure the animals were kosher. As Roger Horowitz explains in Kosher USA, there's an exemption in the rules for a tiny amount of an unacceptable ingredient—designed to cover mistakes—and Coca-Cola's glycerin content was dramatically below that level. Rabbi Geffen, however, believed that since the glycerin was deliberately added, it didn't qualify for this rule. Soon though, a new source of glycerin from cottonseed oil emerged, and Coca-Cola was approved for Passover.

When Coca-Cola switched to high fructose corn syrup, however, that created a problem for Ashkenazi Jews. As such, today there's a special yellow-capped Coca-Cola that doesn't use HFCS and is certified kosher.

11. Maxwell House coffee holds a special place at Passover.

Maxwell House Haggadahs
Tom Lappin, Flickr // CC BY-NC 2.0

But the most influential company is likely Maxwell House. In the 1920s they decided to expand their presence to Jewish families—but there was a problem. Colloquially known as coffee "beans," there was a view that they were legumes, and as such forbidden to Ashkenazi Jews. Soon Maxwell House convinced reluctant coffee drinkers that their product was acceptable and in 1932 the company began publishing the Maxwell House Haggadah (the Haggadah is the telling of the Exodus and how to perform a seder meal). In the years since, Maxwell House estimates that it has published 50 million Haggadahs, which were even the preferred text for the Obama White House Seder.

12. The world's largest Seder happens in a surprising location.

Hundreds of worshippers gather in a hall for Passover in Kathmandu in 2014.
Hundreds of worshippers gather in a hall for Passover in Kathmandu in 2014.
PRAKASH MATHEMA, AFP/Getty Images

Going on for almost 30 years and hosting over 1000 people, the Kathmandu Seder was started in 1989 by the Israeli ambassador to Nepal, who quickly realized that the demand was much higher than he was ready for. The ambassador contacted a rabbi friend who dispatched two rabbinical students to aid the preparations. The seder was a massive success—expecting 90 guests and hoping for 150, they ultimately had 500 guests.

Nowadays, preparations for the seder start months in advance, with 1000 bottles of wine and over 1000 pounds of matzo getting shipped in from the United States and Israel.

SECTIONS

arrow
LIVE SMARTER