by Paul R. Spitzzeri
An interesting recent read in California history was George D. Lyman’s 1937 book, Ralston’s Ring: California Plunders the Comstock Lode, which, despite the subtitle, is a biography of William Chapman Ralston (1826-1875), the very powerful managing cashier of the Bank of California, which largely dominated San Francisco’s financial section, significantly through control of much of the immense wealth generated from the Comstock Lode of silver mines in and around Virginia City, Nevada, northeast of that state’s capital, Carson City.
Lyman (1882-1949), was a doctor, specializing in pediatrics, but was a native of Virginia City where his father was a mine supervisor. A graduate of Stanford University and the Columbia College of Physicians and Surgeons, he ran the pediatrics department at a San Francisco hospital and frequently published on topics in his field, but also had a 6,000 volume library of Californiana, the largest private holding in the Golden State at the time, and was president of the California Historical Society.
In Ralston’s Ring, the writer too often used passive voice (too often had used?) and could give way to torrents of purple prose and fanciful wordplay designed to hold a general reader’s interest. One sample may suffice to illustrate: “with every swing of [miners’] picks, waves of muscle could be seen swelling over arms, flanks and backs. Beneath white skins, their hot, red blood glowed like a light behind a marble globe. They dripped with water, reeked with vapor. Ridges of sweat slid down their slippery flesh into the cloth rims about their waist . . . Never had Praxiteles [an ancient Greek sculptor of renown] found such models. Over the perfection of such physiques, Michael Angelo could sung a paean of praise in marble [and this image evoked statues in the Louvre and Vatican].”
Lyman, however, does tell a compelling story and there are 45 pages of notes that demonstrate a significant level of research, though his construction of Ralston’s power may be a bit overdone, as well as overwrought. Essential points, though, hold. The Bank of California was a financial services behemoth that used its control of Virginia City silver production to amass considerable wealth under his subject’s leadership for a little more than a decade, from 1864 to 1875. The author’s delineation of the years-long conflict between Ralston and Adolph Sutro, whose impressive nearly four-mile tunnel drained Comstock mines, is also a key storyline.
The story came to a dramatic conclusion when, badly overextended, Ralston was unable to work his way out of another jam, while he was also losing his control over much of his empire, and the Bank of California collapsed in a panic that burst forth on 26 August 1875, this about two years after a panic brought about the national Long Depression lasting through the remainder of the decade. A fitness buff who took frequent swims in the frigid and oft-turbulent San Francisco Bay, Ralston went on one of these after he was forced to resign from the bank and drowned. While suicide was widely assumed to be the case, it was posited that he had a stroke.
Ralston’s name has long resonated because of a statement made by the Los Angeles Star in its edition of 7 December as the Temple and Workman bank reopened, following more than three months in suspension resulting from the panic, thanks to funds loaned by Elias J. “Lucky” Baldwin. The San Francisco capitalist earned his nickname from the fortunate sale of Virginia City silver mine stock that yielded him a fortune of millions of dollars more than intended when he instructed a broker to sell at a given price, but kept his strongbox key when traveling, though, on his return, the price climbed much higher and he reaped the reward.
In discussing the Temple and Workman resumption, the paper, calling it, with no small amount of hyperbole, “one of the most interesting, as well as of the most auspicious, events that has ever occurred in California,” offered a sole caveat, that of the reopening of the Bank of California, of which Baldwin happened to be the largest creditor, so his role was, naturally, vital.
After attending a banquet at the Pico House hotel, feting Baldwin and F.P.F. Temple, president of Temple and Workman who arranged the loan amid tough negotiations (he informed his partner and father-in-law, founder of the Homestead, William Workman, that the loan was “on rather hard terms,” but all would work out in the end), a Star representative, almost certainly its proprietor, Benjamin C. Truman, who gave a speech at the dinner, returned to the Spring Street office of the paper and informed readers:
It is very late when we write this article; and, we can only say in brief, that, owing to the closing of the Bank of California, and the failure of Mr. Ralston as a banker, his Southern California counterpart, Mr. F.P.F. Temple, the Ralston of Los Angeles, was placed in an unbanker-like situation. Mr. Temple’s Bank closed during those stormy financial days, and has remained closed until the present time. Mr. Temple had been so noble, so humane, so open-handed and open-hearted, so true to the wants of his people, that he was left, so to speak, without coin to meet a run. At the same time his famous honesty of purpose, his admitted great wealth and the securities in his possession, gave depositors the confidence they have harmoniously maintained through the past three months; and which is unprecedented in the annals of the trust one man has in another.
The Star (Truman) exulted in the fact that, not only did Baldwin’s gold pieces, amounting to some $210,000 (it reported a quarter million), welcome customers when the doors were opened that morning, but $70,000 more were deposited during the day than were withdrawn, which “was an ovation” and, presumably, a happy foreboding of a better financial future in the Angel City.
Conditions, however, were very concerning to Angelenos in late August when the telegraph ticked the tale of the San Francisco panic and failure of the Bank of California. The Los Angeles Express of the 27th editorialized about this closure that “we presume that there is an inner circle which has known all along of the embarrassments of the Bank,” while the public was said to have “a pretty well defined suspicion of them.”
Moreover, it was asserted that “it required financiering of a very bungling or unprincipled character to bring such a result about,” with San Francisco papers well aware of the often precarious situation with Ralston’s institution and “partaking of the character of outrages.” The paper continued that,
Nevada will be the region principally affected by this disaster to the bank, although its evil effects will ramify through the State [of California] at large, and even to some extent reach Los Angeles and San Diego, in a loss of general confidence.
The Express reminded readers that “it has been a common expression that the Bank of California ‘owned’ Nevada,” and, while the vast sums that poured into the institution’s vaults would be assumed to be more than sufficient for its security, “the bank has always been adventurous and speculative.” Therefore, it was posited, “the failure of some of its numerous ventures has made it impossible [any] longer to conceal from the public its hollowness.”
It was added that Ralston’s bank was not the dominant force it once was as Baldwin was said to have invested millions in a competing institution, while James G. Fair, James Flood, William O’Brien and John W. Mackay, Virginia City “Bonanza King” rivals of the Bank of California cashier, opened their Bank of Nevada. These latter, it was assumed, would rise to become the dominant financiers of San Francisco (and, thereby, of California).
A separate editorial noted that Flood and Mackay precipitated the suspension of the Bank of California by “locking up” coin after its battle with Ralston’s associate, United Senator from Nevada William Sharon (the other senator was John P. Jones, another Virginia City mining magnate, who was president, succeeding Temple, who moved to treasurer, of the Los Angeles and Independence Railroad.)
The writer of the piece recorded that, on a train trip to Carson City from San Francisco, Sharon was heard to say that he was “small potatoes” compared to the Bonanza Kings, but the essay ended with the expression of hope that the Bank of Nevada titans would not countenance “universal financial distress.” It also offered that “the greatest privilege of a monarch, moneyed or other, is to contribute to the general happiness.”
Separately, the paper told its readers that,
We are delighted at being able to report that the banks of Los Angeles are in a specially satisfactory condition. Owing to the fact that our county has afforded such a remunerative field for investment, we are more than even with the capitalists of San Francisco.
It then suggested that an interview with local representatives of the Angel City’s financial institutions be perused, with that article titled “WHAT OUR BANKERS SAY” and the subheadings being “Our Local Banks All Right” and, interestingly, “The Egotistical View of the Matter.” At noon, a reporter “sallied forth” to Los Angeles institutions “to know the views taken by our local bankers on the financial crisis in San Francisco.”
The second subtitle was courtesy of Frank Lecouvreur, cashier at The Farmers’ and Merchants’ Bank of Los Angeles, whose president was ex-Governor John G. Downey and whose manager, then absent on a well-deserved vacation in his native Europe, was Isaias W. Hellman. Lecouvreur (1829-1901), a native of East Prussia was a long-time surveyor in Los Angeles, migrating south in 1855 after some four years in the gold fields of northern California, and, when asked for his impressions, offered:
From an egotistical standpoint the general suspension will have a good effect here. The Los Angeles banks are heavy borrowers from the San Francisco banks, and if, instead of suspending, they had undertaken to call in all their country loans, we should have had to pay up. [Stating that the northern institutions would soon reopen and public confidence restored, he continued] Instead of the suspension injuring the Los Angeles banks the boot is on the other leg.
Lecouvreur added that the local institutions would pull back on operations and “quit dealing in exchange and greenbacks,” though, if the poor state of matters continued, “it will make money tight.” He went on to note that “our Bank was never in a better condition,” and, while there were a few withdrawals, reserves were double what was needed. Asked about how the Bank of California would use assets to pay liabilities, the cashier demurred from speculating, but noted that, when an institution of that age floundered, “there is something serious[ly] the matter.”
Jonathan S. Slauson of the Los Angeles County Bank, which was a savings, not a commercial, institution, opined that, when it came to the panic in the north, “I don’t think it will effect [sic] our banks to any great effect” and his institution was operating as usual. It’s San Francisco partner, the Anglo-Californian Bank, did not close and “this fact should be known to its credit.” He commented that the Bank of California’s ability to handle its liabilities depended on who the major stockholders were and how much they could absorb as to paying debts.
First, however, the journalist spoke to Temple and Workman’s managing cashier, Henry S. Ledyard forecast that the crisis “will have a bad effect for a time in disturbing general confidence, and stagnating business,” though, asked about the effect on local banks, simply replied, “not at all.” He continued that, “the Los Angeles banks are all indebted to the San Francisco banks, and of course they can’t lose a dollar,” as money was borrowed at 10% annually, but loaned locally at one to one-and-a-half per cent.”
After reiterating that “the Los Angeles banks are all sound,” Ledyard found the closure of the northern institutions to be “a wise measure” and that doing so for a few days would, as Lecouvreur noted, be good for the confidence of the public. He went on,
No banks on earth could stand a rush from a frenzied community. Banks of course make their money by lending it out at interest, and neither the banks of San Francisco nor of any other city could stand a frenzied rush of the whole community. [Asked if local banks were in a sound state, he answered] Undoubtedly; it could not be better.
Ralston’s death engendered much comment in the Angel City press, with the Express of the 28th intoning “there is something very mournful” in the news. It acknowledged his popularity in San Francisco and lauded his spirit of enterprise, though it also noted “we can all now see how hollow was the edifice he had erected for himself.” The piece recognized Ralston’s role as “the father of nearly every manufacturing interest in San Francisco,” but it asserted he was “unprincipled” and lacked “moral restraints” with his relationship to women.
Moreover, it was stated that he conspired “to debauch the public conscience” and pursue making money to an extreme, yet “his hand was as open as the day” while “many an act of delicate generosity and genuine human kindness . . . redeemed and honored his private life.” The unnamed author of the editorial sat in Ralston’s office for 45 minutes and saw the banker conduct business with 50 men when most could only handle 5. Though it accounted his reported suicide as a moral failing, the paper, at the end of the article, noted that the coroner’s inquest was likely to find apoplexy (stroke) as the cause of death.
The Los Angeles Herald, also of the 28th, reported that Ralston’s passing created a dark pall over San Francisco, but heard “the banks will survive the run and that the excitement is abating.” There was some concern that news of the death would lead to a new run and institutions forced to shut their doors, but the paper added,
The panic in San Francisco does not and will not affect the banks of Los Angeles. They are all on sound basis and have an abundance of funds to meet any demand made upon them.
Separately, the Herald sought to assuage fears among its readership by declaring that the debtor was most sanguine in times like these because “a crisis every now and then is the great leveler which makes a poor devil satisfied with his lot and makes him look with contempt on riches—when they are locked up in a defunct banking institution like the Bank of California.”
In an editorial, “The Financial Situation,” the paper acknowledged that the situation in the north was “of a very alarming character,” noting that “a money panic is the most absurd of all popular follies, but at the same time the most irresistible.” The reputation of the Bank of California and Ralston and “the exaggerated public opinion as to the mammoth operations and wonderful resources of the institution,” as laid bare before the public, “only served to intensify the distrust.”
Key to the analysis was the remark that, when it came to the safety of loans and investments, “the law has placed very few restrictions” on the possibility of the concern “that the speculators have carried them beyond the bounds of prudence and safety.” The Herald recommended the state legislature “to take up the financial question and impose some wholesome restrictions upon the custodians of our wealth.” While too late for the current crisis, such legislative action “will provide against loss and depression in the future.
Yet, the paper concluded with this local review:
Regarding our own banks in Los Angeles, there need be no alarm. They are almost wholly disconnected with the banks of San Francisco; their funds are used only in local and legitimate enterprises, and they have an abundance of coin on hand—more than sufficient to meet all their demand deposits. They are in a better position than at any time for several years past, and will soon be filled to overflowing as the crops are marketed.
With such rosy prognostications in mind, the Express commented that, discussions with the local banks found that, if San Francisco banks opened on Monday the 30th, “ours will follow suit.” It continued that “in times of threatened panic like these, in dealing with sound institutions like our Los Angeles banks, instead of drawing out their deposits our citizens should pour into them their surplus coin.”
Separately, it advised that “when our banks open, all sensible people should crowd into them to deposit their coin, instead of, like fools and enemies to the public good, seek to embarrass them by drawing out their deposits.” The paper insisted that the local institutions were as reliable as the Bank of England with assets, that could tapped within a few weeks, thrice as great as their liabilities.
Exhorting that “the young and prosperous city of Los Angeles should never for a moment tolerate the word ‘panic,'” the Express thought it necessary to offer a third piece of advice to its readers:
Every inhabitant of Los Angeles should now be willing to drop all other subjects, and join in a long pull, a strong pull and a pull altogether to guarantee public confidence. Los Angeles never stood so well as she does now, and everyone should do his part by showing his faith in our future.
Clearly, underlying the sunny optimism of the bankers and press statements immediately following the panic, there were mounting concerns about the viability of the situation, so we’ll return tomorrow with a second part to carry the story through the end of August.
Learning from this post that George Lyman’s private library of 6,000 books on Californiana was considered the largest of its kind in California in his time reminded me of two other prominent collectors: Guadalupe Vallejo and H. H. Bancroft.
I remembered that Vallejo had an enormous collection of California-related documents and records and his private library was considered to have the largest collections of its kind in his time – probably not in terms of the number of books, and his time was more than half a century earlier than Lyman’s.
I assume H. H. Bancroft’s collection of books, manuscripts, documents, and other California-related materials must have been much larger than either Lyman’s or Vallejo’s. However, I’m not sure whether Bancroft’s collection would be considered in his time as a private library or an institutional library.