Take It To The Bank With a Farmers’ and Merchants’ Bank of Los Angeles Check, 20 October 1876

by Paul R. Spitzzeri

Isaias W. Hellman (1842-1920), a migrant to Los Angeles when in his mid-teens, was a figure of unparalleled power in the Angel City’s realm of finance for much of the last forty years of the 19th century and well into the 20th. One of the early Jewish settlers in the small town when he arrived, he lived long enough to see the city become a major western America metropolis, the fortunes of which rose as his personal ones did, as well.

From humble beginnings as a merchant, Hellman’s incredible business acumen and reputation for a clear-eyed, pragmatic approach to banking and finance propelled him to the acme of those worlds in Los Angeles and in San Francisco. A descendant, Frances Dinkelspiel, wrote an excellent biography, Towers of Gold, that cannot be recommended enough for a full understanding of Hellman’s life.

As a post here based on that book noted, Hellman joined forces with William Workman and F.P.F. Temple to launch the second bank formed in Los Angeles, Hellman, Temple and Company, which opened its doors in September 1868, months after Hayward and Company, with ex-governor John G. Downey as a partner, became the town’s first bank. The Angel City was in the early stages of its first significant and sustained development book and these institutions were part of the development of the town and its surrounding area.

Los Angeles News, 14 April 1871.

By early 1871, however, fissures arose with Hellman, Temple and Company, and Hellman decided to end the partnership with Workman and Temple, mainly with the latter, with whom fundamental disagreements arose about basic banking policies, including the question of loans. Temple was more “liberal” on this score, whereas Hellman, the managing cashier, had a more “conservative” philosophy. A future post will go into more detail about this, but the result was that Hellman bought out the others and quickly joined forces with Downey, who likewise terminated his relationship with James Hayward.

In April, The Farmers’ and Merchants’ Bank of Los Angeles (F&M) was opened in the same quarters which Hellman, Temple and Company occupied, this being the ground-floor space in a two-story brick building built by former governor Pío Pico on the east side of Main Street just below where U.S. 101 runs through downtown now. Undeterred by the schism with Hellman, Temple convinced Workman to carry on with their own institution, which was launched in a three-story addition to the Temple Block at the intersection of Main, Spring and Temple streets, just south of F&M.

Los Angeles Herald, 1 January 1876.

As the boom extended over a few more years, both banks seemed to be as prosperous as could be, with substantial deposits and a steady stream of loans made, and any rivalry between the two was generally characterized as friendly. Notably, while F&M issued stock, though not publicly, and had a directorate of prominent Los Angeles figures, Temple and Workman remained private, controlled by its two owners (though Workman was the typical “silent partner” investing his cash but having no involvement whatever in operations.)

Then came the sudden news, relayed frantically by telegraph from San Francisco in late August 1875, of the spectacular crash of stock speculation with silver mines at Virginia City, Nevada, leading to the abrupt failure of the state’s largest bank, California Bank of San Francisco. The news spread like wildfire in an Angel City increasingly on edge about what was in play and rattled depositors descended on the two banks to withdrawn funds.

Hellman was in Europe on a well-deserved vacation, so Downey, who served as F&M’s president, agreed to a request by Temple, his counterpart, to suspend business for all of September to calm the waters. This decision, made on the first of that month, came on he day of the county elections and Temple, the sole Republican to do so, edged out Thomas Rowan, associated with F&M, as county treasurer.

Herald, 8 January 1876.

Furious at Downey’s action, Hellman raced home, stopping in New York City to borrow substantial cash to bring back with him and assure depositors and others of the absolute safety of his bank. He made a special show of piling coin (paper money was not yet common) on the counters of F&M to demonstrate the solidity of the institution on the day that the bank reopened.

As for Temple, he sought a loan in San Francisco but found no one interested in providing funds for his stricken bank, save one notable example. Elias J. Baldwin, who earned the sobriquet of “Lucky” through his sale of Virginia City silver stock that netted him millions and also helped precipitate the panic, was interested in greater Los Angeles land. Having acquired the Rancho Santa Anita from another prominent Jewish merchant, Harris Newmark, during spring 1875, Baldwin saw a golden opportunity to add substantially to his portfolio.

A loan to Temple and Workman was arranged in late November on what, Temple benignly informed his father-in-law, were “rather hard terms.” In fact, the complex interest payment terms were indicative of a real problem, but no one focused on that when the bank reopened on 6 December, just more than three month after suspension. Instead, a celebratory banquet was held at the Pico House hotel and the press acted as if the bank was saved and Los Angeles to return to its boomtown ways.

In its New Year’s Day 1876 edition, the Los Angeles Herald devoted some substantial attention to the city’s banks and painted a rosy picture in which future adequate supplies would feed the demand for investment, including from outside sources (principally from San Francisco), and Los Angeles would continue its upward mobility as a hub of the American Southwest. The paper insisted that Temple and Workman “has the confidence of the community” and the wealth of its owners was protection for depositors.

It also averred that, once the Baldwin loan was secured and the institution reopened, “there was no clamor on the part of the depositors” and, not only was there “no rush” to remove borrowed money, but “several large capitalists testified their faith by making large deposits.” The paper concluded that Temple and Workman “is now in a prosperous condition increasing its business from day to day.”

Los Angeles Express, 13 January 1876.

As to Farmers’ and Merchants’, the Herald briefly noted that it “occupies a leading position” and business in 1875 was “considerably augmented” and “the standing of the bank [was] raised even higher by its able management during the panic.” Monthly $5 dividends per share of stock were declared and it was noted that “the stockholders of the institution include many of our wealthiest citizens.”

Just under two weeks later, however, a placard appeared on the door of Temple and Workman announcing its permanent closure. If there was no clamor or rush to withdraw funds, there was certainly a steady stream of depositors removing Baldwin’s borrowed coin, with the originally $210,000 augmented by another $100,000 and then a final $30,000 before he flatly denied any further monies.

The Los Angeles Express of the 13th featured interviews with other bankers in town, including Hellman, who was asked his opinion on the effect of the closure of Temple and Workman. He replied, “Well, it will create some temporary inconvenience,” but he added “Mr. Temple’s depositors have been mainly rich people,” so no great problem was forecasted. Notably, Hellman added, “the poorer classes of depositors anticipated the suspension, I think, and were prepared for it.”

Herald, 14 January 1876.

Queried as to whether he believed that the assets of Temple and Workman were enough to cover liabilities, Hellman responded, “if prudently managed I think they certainly are.” When asked again about any potential “disturbance” in Los Angeles because of the other bank’s closure, he sanguinely and confidently told the paper “I refer you to the formidable array of coin as an evidence that we have been preparing and are prepared for any contingency.”

The following day’s Herald commented

The rapid accumulation of gold in the Farmers’ and Merchants’ bank within the past few weeks affords substantial evidence of the most perfect confidence the people of Southern California feel in this incorporation.

With rising deposits and a more-than-adequate cash reserve, not to mention that directors were “all wealthy men” with “the private fortunes of several of them fully equalling [sic] the entire liabilities of their bank,” there was no “possibility of inconvenience or delay” in the operations of F&M. Moreover, as the assignees of Temple and Workman prepared to release an inventory, it was recorded that F&M freely and fully opened its books for inspection, while the failed institution demurred.

Los Angeles Star, 29 January 1876.

The reason for the reticence was realized soon enough: the management of Temple and Workman was breathtakingly lackadaisical and disorganized under managing cashier Henry S. Ledyard and, apparently, Temple, the president, entirely too trusting and/or distracted by his many business and political interests. It was telling that, when city treasurer James J. Mellus was criticized for placing large amounts of municipal funds with Temple and Workman with the promise of extraordinarily high rates of interest, F&M assistant cashier John Milner was appointed Mellus’ deputy and retained that position after the latter’s resignation and replacement by Joseph Huber, Jr.

At the end of February, the Herald quoted the smaller Los Angeles Republican and its approving commentary on F&M, noting that “from the day on which the bank opened its doors down to the present time it has sustained no considerable loss” and added that “the history of this bank presents only gratifying pages to both stockholders and depositors.” It ended by proclaiming “the people of this city, and in fact of all Southern California, have long regarded the Farmers’ and Merchants’ as the bank of Los Angeles.”

The 8 March edition of the Herald included a feature about a visit to F&M, noting that there were rumors that “the bank was doing business on the county funds” deposited there under Rowan’s several-year tenure as county treasurer. Having just took office, albeit with a deputy given his status as a failed banker though it is remarkable that he was not induced to resign (he served his two-year term through March 1878), Temple directed the $108,000 in county money to be transferred from F&M to the recently opened Commercial Bank of Los Angeles, whose cashier, Edward F. Spence, was one of the assignees, with Daniel Freeman, of Temple and Workman.

Los Angeles Herald, 26 February 1876.

The paper observed that these claims were “made by “so industriously circulated by a few individuals who never had a dollar in any bank nor a dollar of their own except as they sponged it out of poor Mr. TEMPLE” and added that they were utterly false. Instead, the reporter found that “business was going on as usual, and a glance over the counter revealed a mountain of gold coin,” with trays of gold $20 pieces and boxes of silver coin on the floor. It was estimated that at least a half million dollars was in this area and plenty more in the vault, this being “a mere bagatelle” of the bank’s resources.

Reminding readers that F&M “is one of the safest and most reliable banks in the State” with directors of wealth and distinction, the Herald further noted that it was “conducted on the most careful business principles.” Under such conditions, the paper concluded

It follows as certainly as the day follows the night that a bank conducted on such principles and managed by men of long experience and acknowledged financial ability is a safe and solid institution in which the public with perfect safety place the utmost confidence.

Three days later, the bank issued a financial statement to the press with the balance sheet showing assets north of $880,000, including nearly 20% of that in cash on hand, $675,000 in loans, with not quite half of that secured by mortgages and some $26,000 entailed in the bank’s real estate, structure (which it acquired from Pico), vaults and fixtures.

Herald, 8 March 1876.

As to liabilities, these totaled $468,000, with about $340,000 available to depositors on call, another $125,000 due to term depositors whose funds were “locked up” for a period. With the remaining $414,000 and allowing for $400,000 in “capital paid up in gold coin,” this left a reserve fund of just north of $14,000. Not included in the total was interest due on uncollected funds totaling some $20,000.

The Express of the 13th stated that the statement ” a very creditable exhibit of the affairs” of F&M and that this “will swell the general confidence which exists in the integrity and business capacity of the managers.” With the institution deemed “sound and healthy,” it was concluded that the bank would remain “in public estimation among the substantial financial institutions of our State.”

The Herald, which also reprinted the statement, chimed in the next day that “no banking establishment is more carefully conducted” or operated by officers with more experience or thoroughness. Noting that F&M “has long possessed the confidence of our business community,” the paper ended with the observation that the statement would only “add to the confidence already felt in its strength and stability.”

Express,13 March 1876.

Separately it noted that cash on hand constituted a large amount compared to the amount of call deposits—but this was also a function of conservative operations during a financial depression (a national one having burst forth in 1873). It was added that, typically, F&M would be expected to have about a third, or under $70,000, of cash on hand.

Inspired by the statement, Benjamin L. Peel, who had oil interests north of Los Angeles in what is now Santa Clarita where Temple was also a prospector, took the opportunity to lambast the naysayers about Los Angeles’ financial footing. His suggestions for how residents could demonstrate confidence in the city’s banks included:

They must stop their croaking about hard times, quit standing on the corners of the streets with their hands in their pockets and go to business. Second, kick every low devil off the sidewalk, that attempts to whisper to you with a knowing wink to look out for other failures soon. These are the fellows who are doing more to destroy confidence than everything else put together.

Lastly, Peel implored those squirreling their money in “dark places” to deposit those funds in the banks or loan to those who could provide adequate security. He called out those “timid people” hoarding cash for “better times” and concluded with the advice “let all the good people discountenance these knowing prophets and croakers and show an accommodating spirit towards each other.” He predicted that conditions could improve dramatically within a month if attitudes changed.

Herald, 15 March 1876.

The Herald of 9 April appraised the financial situation of Los Angeles and claimed that “there never has been a time in the history of our city when our finances were in so healthy and safe a condition,” even if money wasn’t circulating quite as freely and there was more stringent qualifications on security for loans. It asserted that “the recent panic, like a storm which demolishes one or two old oaks [were Workman and Temple compared to aging trees?], but served to clear up the atmosphere and leave the elements in a healthy state.”

The paper commented that F&M was “as solid as [the rock of] Gibraltar” and prepared to loan when deemed safe and “ever ready to extend favors on a legitimate basis,” but, under Hellman’s steady and firm guiding hand, there was no “disposition to venture into reckless or doubtful speculations.” Consequently, concluded the Herald, “this is the true sphere of a bank, and ever man dealing with such an institution feels a security that is satisfying.”

Herald, 9 April 1876.

Further adding to its stature in the Angel City, F&M took out an ad in the papers on 13 May offering $100,000 in loans in amounts from $1,000 to $5,000 on real estate and securities, which led the Herald to claim that “one of the unmistakable signs of easy financial circumstances in this community” was embodied in this offer. It noted that “the vaults . . . are overflowing with coin” and ready to yield its bounty to those who patronized “this old, staunch and always popular banking establishment.” Incidentally, four days later, Workman, despairing that he would be evicted from his home, committed suicide.

Reportedly because of Downey’s acquiescence in suspending operations in the prior September, the officers’ election for F&M in July included his ouster and Hellman’s installation as president. Assistant cashier Frank Lecouvreur moved into the head position and, aside from this trio, directors included Ozro W. Childs, John S. Griffin, Charles Ducommun, Leander C. Goodwin, Cameron E. Thom and José Mascarel.

Express, 25 September 1876.

In September, because of a new state law requiring public disclosure of bank directors, the number of shares they possessed and the value of those, it was revealed that Hellman owned 57% of the stock, with his portion valued at not far below $200,000, with Childs holding the next largest block at 11% and consisting of just north of $38,000. It was not surprising, perhaps, that Hellman embarked that fall on the construction of one of the finest residences in the Angel City, at the southwest corner of Main and 4th streets—after he moved to San Francisco, where he ran the Bank of Nevada and Wells Fargo, the site became the headquarters for F&M and the 1905 structure stands today.

The highlighted object from the Homestead’s holdings for this post is rather unremarkable, being a check from F&M made out on 20 October 1876 by W.W. Goodale for himself for $30 in silver and including a 2-cent federal revenue stamp, but it is representative of a particularly interesting period in Los Angeles banking history and that of the institution specifically.

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