Reading Between the Lines in a Letter from George H. Woodruff to Walter P. Temple, 2 September 1931

by Paul R. Spitzzeri

As has been mentioned on this blog several times before, the financial parallels between F.P.F. Temple and his son Walter, roughly a half-century apart, are striking. Both plunged headlong, as many Angelenos did, into speculative enterprises in oil and real estate during development booms in greater Los Angeles, the father in the late 1860s and early 1870s and the son during the 1920s.

Some of their work had lasting consequences, mainly on the real estate side, as F.P.F.’s building of the Temple Block was part of the solidifying of the small, but gradually evolving financial district of the Angel City in an area that is still important as the location of today’s City Hall (completed in spring 1928.) Temple Street, established by his brother Jonathan in the 1850s, is a visible reminder of the siblings’ deep involvement in development in Los Angeles. With his early endeavors in oil in the San Fernando region at modern Santa Clarita, there was a foreshadowing of what became an enormously important industry in the 1890s and afterward.

His Los Angeles and Independence Railroad, the main branch of which was supposed to go more than 200 miles to the Owens Valley and Inyo County seat of Independence, to tap silver shipments from local mines, did build a local line to the new seaside town of Santa Monica and part of that route is now used by the Metro E line. Real estate subdivisions at Centinela and Lake Vineyard eventually morphed into such cities as Inglewood and Alhambra.

Los Angeles Times, 7 July 1929.

As for Walter, he, on his own or with partners, constructed buildings in Los Angeles, San Gabriel, Alhambra, El Monte and Temple City, which still stand and are used by businesses and bring employment and revenue to those cities a century or so later. His development of what he called the Town of Temple, renamed Temple City in 1928, and which is celebrating its centennial this year, also has a legacy for the approximately 36,000 people who live in the desirable San Gabriel Valley community.

Speculation inherently equals risk. It is obvious that, during boom periods, those with capital to invest will want to both use their money to enhance their portfolios while also, in many cases, create projects that will reflect well on them and, they often hope, have a durability and a legacy. Often, the excitement and enthusiasm can get ahead of capitalists, who can also experience any combination of abrupt shifts in financial markets, pitches for projects that might be a little too good to be true, unforeseen changes in natural conditions (an oil field or water source that goes dry too soon, for example), lack of proper management of personal or company finances, and more.

In summer and fall 1875, F.P.F. Temple, whose father-in-law, Homestead owner William Workman, was a silent partner (and who gave power of attorney to Temple at the start of the boom seven years prior), was overwhelmed when the state economy took a nosedive with the collapse of a Nevada silver mine stock bubble and the failure, in San Francisco, of the state’s largest bank, the California Bank. Lacking adequate cash reserves and, as a subsequent inventory revealed, decent management, the Temple and Workman bank, despite a substantial loan of some $340,000, from Elias J. “Lucky” Baldwin, closed early in 1876, becoming the first large-scale business failure in Angel City history (there wouldn’t be another major bank failure until the next boom, when the Bank of Pomona failed in 1889.)

San Pedro Pilot, 21 September 1929.

The crisis was not just professional, it was, of course, personal. The Workman and Temple family were among the wealthiest and best-known in Los Angeles County and their status changed almost completely in shockingly short order. This had the expected long-term consequences for members of the family, which is why the stunning discovery in 1914 of oil by 9-year old Thomas W. Temple II on land near Montebello owned by his father was so notable. When the first oil well on the Temple lease was brought into production by Standard Oil Company (California) in summer 1917 it was just about a half-century since that first regional boom began.

In greater Los Angeles, a succession of these growth periods included major ones in the late 1880s, the first years of the 1900s, the early 1910s, and much of the Roaring Twenties. As further producing wells and a few gushers were found on the Temple lease and the royalties got as high as $40,000 or more per month at the peak, Walter found himself with ample resources to get into the oil and real estate industries as these accelerated during the latest boom. For most of the Twenties, he chased the next big oil strike throughout the region, while also actively pursuing real estate projects in the cities and towns mentioned above.

Times, 31 December 1929.

What was different in his situation from his father’s was, among other factors, that taking out bonds was one way to manage financing and debt, by raising significant capital while paying off the costs over a long period of time, say, 30 years. Another was that Walter relied very heavily on production from the Temple lease, but the field was relatively shallow and returns diminished fairly rapidly during the early 1920s, precisely as his spending on other oil projects, as well as real estate development, increased. Added to this was the construction of the family mansion, La Casa Nueva, at the Homestead, and other personal expenses.

Bonds were taken out in 1926 for the Temple Townsite Company, which specifically managed the development of Temple City, and the Temple Estate Company, which oversaw all of Temple’s other properties, including the current construction of the Edison Building in Alhambra. This proved to be his last real estate project when it was finished in April 1927. As other posts here have shown, there were warnings and expressions of concern about the financial health of the Temple Estate Company by fellow investor and Walter’s personal attorney, George H. Woodruff.

Los Angeles Express, 17 May 1930.

Woodruff, who came to California to attend Stanford University and then moved to Whittier in the early years of the 20th century to work at the state boys’ home as well as city attorney before taking up the law in Los Angeles, was a key figure in arranging the bonds, but also sounded alarms about spending and what the future would hold if cash flow and expenditures were not put into better balance. Naturally, what he, nor others, could not anticipate, despite a drop in the real estate market in the last half of the 1920s, but, especially, concerning stock sale practices, such as on Wall Street in New York City, was the seismic shaking that rocked the United States and the world with the onset of the Great Depression.

The earliest signs were the crash of October 1929, though there were hopes and forecasts of a recovery into the last year of the Roaring Twenties. An article by Gary Richardson of the Federal Reserve of Richmond, Virginia, noted that “the U.S. appeared to be poised for economic recovery following” the crash. This was based on recent history as the triennial financial “contractions” of 1920, 1923 and 1926 lasted about fifteen months each, so the thinking among many experts was that conditions would improve by the end of 1930.

As Richardson recorded, however, November of that year brought a renewed banking crisis, with one of the ominous signs being that, while 8,000 banks were part of the Federal Reserve, established in 1913 after the severe depression of a half-dozen years prior to stabilize markets and forestall such disasters when possible, more than double that number chose not to be part of the system. He observed that the practice of considering checks actually in the collection process as part of reserves gave a false sense of security, while another issue was that much of the reserve cash in banks were on deposit with other financial institutions, so mobilizing reserves amid consumer panic was a very significant problem.

The failure of a bank in Nashville, Tennessee, led to a cascade of subsequent failures, including the fourth-largest in the nation, the Bank of United States, in New York City and, in late 1930 and early 1931, hundreds of financial institutions went under. While the situation was calmed for several months, another wave of collapses occurred in June 1931, starting in Chicago and one of the many consequences concerned the resulting softness of the real estate market. Richardson added that declining credit and the hoarding of cash in bank reserves were also important issues, as was deflation which, of course, meant a downward trend in prices as cash supply dwindled.

Kristie M. Engemann of the Federal Reserve of St. Louis pointed out that, while the late 1930/early 1931 bank crises were regional, this changed in fall 1931 when a panic burst forth that was nationwide. Much of this was engendered by Great Britain’s decision to abandon the gold standard, which involves providing a defined amount of gold as an exchange for bank notes, and led investors to seek gold as a haven, draining the American supply of the precious metal. Depositors, meanwhile, drained their bank accounts, so that a lesser amount of money brought deflation which worsened the depression.

While the drain of gold ended after about a month and the Fed raised its discount rate to encourage savings with higher yields, there was a continuance in the failure of banks across the country towards the latter part of 1931. These very informative short articles by Richardson and Engemann provide useful context for the financial environment of the featured artifact from the Museum’s collection for this post, a 2 September 1931 letter by Woodruff to Temple concerning the increasing economic difficulties of the Temple Estate Company and the personal measures undertaken by the lawyer to stave off the worsening set of problems facing the firm.

Writing on the letterhead of his firm, Woodruff, Musick and Hartke, based in the Security Title Insurance Building, which still stands at the southeast corner of Grand Avenue and 6th Street near the Central Public Library and Pershing Square, the attorney addressed his missive to Temple’s home for the past year-and-a-half, 317 Ryerson Street in the Baja California city of Ensenada. With his worsening financial situation, Temple leased the Homestead to the Golden State Military Academy in April 1930 and moved to Ensenada to save funds. For a time, he received his mail from a little cantina a few blocks to the south called Hussong’s, but Woodruff, apparently, was able to have his letter delivered direct.

The correspondence began with the report that “the note at the Farmers & Merchants National Bank,” established in 1871 when Walter’s father and grandfather were bought out by partner Isaias W. Hellman and their Hellman, Temple and Company bank closed (so there is no small amount of historical irony here), “about which I talked with you when you were here, has given me a great deal of concern and trouble.” This was because a small amount of the principal was due “in order to prevent the bank from selling the stock” in the company put down as collateral “and suing on the note.”

That financial instrument, Woodruff reminded Temple, “is secured by all of the stock of the Temple Estate Company belonging to you and it is also guaranteed by Staats and Marble and myself, and I in turn agreed to protect Staats and Marble regarding any liability arising under the note.” The William R. Staats Company and the John M.C. Marble Company of Los Angeles were major bond dealing houses and were approached by Woodruff when the economic situation was becoming a strain to provide funds for the estate company and the lawyer added that “this was all done in connection with the refinancing of your Alhambra properties.”

Returning to the note, it was added that

It developed at the last moment that there was no money enough to pay all of the old bonds and we had to call upon the Farmers and Merchants Bank to make up the deficiency, and it agreed to do so at the request of Staats, Marble and myself if we would guarantee the note of the Temple Estate Company and yourself. This we did on the assumption that we would dispose of some of the real estate of the Temple Estate Company in time to met the note, but it has been absolutely impossible to sell anything and the bank notified us that it was unwilling to carry the note any longer without some reduction of principal.

Further complicating the matter for Woodruff was the “Staats and Marble would not pay, so I had to pay to avoid being sued on the note.” He then remitted $1220.10 to being the note down to $7500.00, but added that “in order to protect myself I paid this money under the terms and conditions set out in the letter addressed by me to the Farmers and Merchants Bank.” A copy, which survives and is in the Museum’s holdings along with this letter, was enclosed and Staats and William C. Marble “signed the consent attached to the letter” as did Temple’s business manager, Milton Kauffman, on behalf of the estate company.

Times, 4 December 1931.

Woodruff continued by informing Temple that Farmers and Merchants “requires you personally to sign on behalf of the Temple Estate Company and also to sign as an individual, as you are one of the makers of the note.” The agreement arranged by Woodruff with the bank was that the company could “postpone any further payment on the principal of the note for a period of six months,” during which time “we earnestly hope that we will be able to dispose of some of the real estate of the company.” It was previously thought that Temple sold all of his Alhambra holdings by summer 1929, but this clearly as not the case. Meanwhile, the attorney added, “I will have to pay the interest on the note monthly as the Temple Estate Company has no funds for that purpose.”

After asking Temple to return the signed letter, Woodruff mentioned the local weather and then passed along that

However, it is confidently hoped by many people that [economic] conditions will improve later this fall or in any event the beginning of next year and there may be some demand for real estate so that we can commence to liquidate the indebtedness of the Temple Estate Company.

With regard to Kauffman, the attorney assured Temple that “Milton is doing excellent work and I feel that everything is being done that it is humanly possible to do to save as much out of the asserts of the estate as we can.” The company was unable to pay “very burdensome” taxes and interest on “its bond issue covering the Edison Building and the lots in San Pedro and other scattering properties,” but bondholders were working with the firm “and it is expected they will defer their foreclosure until we can dispose of these properties.”

Finally, Woodruff informed his client and friend that “the home place,” meaning the Homestead, “is doing very well and Milton reports that the walnut crop is much better than last year,” so that “there will be money enough . . . to pay the taxes and other carrying charges against that property for this year.” As to 1932, that was another matter as, in July, the Homestead was lost to foreclosure. Engemann wrote that Congress created the Reconstruction Finance Corporation for lending to banks and other institutions, while the Fed purchased some $1 billion in government securities during the spring and summer.

Times, 21 August 1932. The building still stands on the northwest corner of Main and 3rd streets in Alhambra.

While the latest banking crisis eased, another one arose late in the year, during which time Franklin D. Roosevelt became the first Democrat to win the presidency since 1916 and there was great uncertainty about the scale of his economic policies, and continued into early 1933, even as interest rates were again raised. Two days after he took office, Roosevelt declared a bank holiday and suspended shipments of gold from the country and, while the New Deal program had a raft of finance industry policies and Congressional legislation, including those aiming to prevent future crises, the Depression lingered through the decade and did not end until the United States entered World War II after the bombing of Pearl Harbor and the resulting massive military mobilization movement.

Documents like this letter continue to better help us understand the history of the Workman and Temple family, specifically, in this instance, the financial deterioration experienced by Walter P. Temple and his family. Look for more “Reading Between the Lines” posts as we share family-related letters from the Museum’s collection. Check out the Richardson and Engemann articles for their discussion on American financial conditions in the early 1930s.

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