Wild West Banking

This is be a shorter blog than usual because my mother is in the hospital. She’s 99, and until now has been doing relatively well, but a cellulitis infection has ravaged her and she has little will to fight back. At the moment she’s holding her own, and I’m the frazzled one. So please forgive any errors.

I’d already decided to blog on old west banks today.   It seemed kind of fitting,  considering the state of their modern counterparts today. 

Banks arrived in new western towns almost as rapidly as the newspapers I’ve blogged about earlier, and the wild west also meant wild banking. It’s often one of the frequent plot lines of western movies and novels. How many have you read or watched in which a bank failure or foreclosure was the inciting incident?

There were no regulations for these “community” banks,, and fraud and mismanagement was not uncommon. Usually several people got together, pooled their money and opened the bank. Usually a company was organized on the basis of a small cash subscription, with paper money supplying the deficit of metallic currency. And most of the banks’ loans were “frozen assets,” long term loans for the land or seed.

The farmer needed money for at least a year at a time, and often much longer, so the rural bank had little option but to tie up its money in fairly permanent form, Even worse the security for the loan was often inadequate. Often the banker took the farmer’s own optimistic concept of the value of his property, but even with a good evaluation, trouble lurked. Land tended to become practically worthless with economic depression and falling prices. When the farmer could not pay interest on his loan, the bank could foreclose, but then it was left paying taxes on land that was not worth the amount of the mortgage, while the borrower and his friends became extremely and bitterly hostile. A bank robbery could also ruin one of those early institutions, along with the savings of its depositors.

There was also fraud – think of Ponzi schemes today. The “saddlebag bank” was notorious. A man would ride his horse into a small town with his saddlebags crammed with beautiful crisp new banknotes. Then he would set up an office and lend his paper money to all the neighboring farmers on easy terms and with but little security. After collecting all possible promissory notes, he disposed of them to the store owner or the innkeeper at a discount for cash and decamped with the proceeds. The local noteholder was thus left with the job of placating the irate farmers when they discovered that their attractive new bank notes were practically worthless.

Some things never seem to change, regulations or not.

Little wonder that banks were viewed with some skepticism and more than a little hostility.

According to “The Settler’s West,” bank currency issued in the west was, in the words of one printer, “the substance of things hoped for, the evidence of things not seen.” When a Missouri river steamboat captain tried to bargain for a few cords at a wood yard, the proprietor asked, “What kind of money do ye tote?”

 “The best on earth – the new Platte Valley Bank,” replied the captain.

“If that be so, I’ll trade cord for cord,” replied the proprietor.

But banks were particularly vital in the cattle towns. The sums exchanged in Kansas cattle towns during the eight years after the Civil War could be staggering. Drovers bought cattle in Texas on extended terms, likely as not to be paid for only upon their return with money in hands. They would then have to take out loans for supplies and to pay their hands while waiting for a buyer. As much as $50,000 to $100,000 occasionally changed hands in a single transaction between the owner/drover of a cattle herd and the cattle buyer, and few wanted to carry that kind of cash over long distances. Interest rates were high, and volume heavy, but a “panic” in 1873 led many banks to close, including Wichita’s First National Bank. Its president went to jail for having lapsed into fraudulent practices while trying to “repair” the damage.

Can you remember any plots based on bank failures or failure to get a loan?

One that immediately comes to my mind is “3:10 to Yuma” when the hero agreed to take a wanted man to Yuma after failing to get a loan. Any others?





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20 thoughts on “Wild West Banking”

  1. Pat I will be praying for your Mom I am about ready myself to head to hospital to have a surgery. So I will say prayers for your mom for her recovery. I am sure it is hard on her at her age. I will pray for you also.

  2. I’ll keep your mom in my prayers, Pat. So sorry she’s sick.

    This banking is so interesting. They really printed their own money? And people took it? I had no idea. Or was it just ‘notes’ not really considered cash?

    And I did a cattle drive story and the cattle brought $25 a head. For one thousand cattle. A fortune. I went over those numbers many times because seriously, back then $25,000 was a stunning amount.

    I suppose the weak part is the 1000 cattle. Getting that many would be the real trick.

  3. Pat, my thoughts and prayers are with you and your family. Not many get to the age of 99, so your mother has lived a good long life.

    I don’t beleive I have read anything about banks in the old west lately. It’s a good topic though.

  4. Pat, I’m sorry about your mother. I hope she has a short stay in the hospital.

    Interesting subject today. My second single title The Cowboy Who Came Calling centered around the foreclosure of the heroine’s family farm. I really enjoyed writing that story. Bank forclosure and bank fraud are common themes in westerns because there were so many unscrupulous bankers. Makes for interesting stories.

  5. hi all. . . Apparently there was quite a bit of counterfeiting going on. It would have been easy to duplicate folding money then, and probably difficult to detect by untrained eyes.

  6. Hi Pat,
    Sending prayers for you and your mom. I hope things turn around for the better.

    Great blog on banking. I guess nothing much has changed with the system though, yet they are disguised a little better.

    I can’t think of westerns at the moment, but It’s a Wonderful Life sure did center around banking failure.

  7. Sympathies on this difficult time with your mother, Pat. Wishing strength and peace for both of you.

    Enjoyed the banking blog. Some of those stories sound straight from the evening news. Some things don’t seem to change, do they?

    Welcome to the fence, new fillies Tracy, Vickie, Winnie and Tanya. Always nice to have new faces in town.

  8. Sorry to hear about your mom. I hope she recovers soon. Take good care of yourself. It is hard to remember when you are worried about someone else.
    Very interesting blog on banking. Always enjoy the research I read on this site. Take care.

  9. Pat, You and your mom will be in my prayers. Here’s hoping for peace and calm to settle over the whole situation.

    Life is sure full of challenges, and these days banking is on the list. I thoroughly enjoyed your blog! I had to do some bank research for “The Maverick Preacher.” The heroine owes money on her boardinghouse. I had no idea things were as wild as they were.

  10. Vicki. . . I had an unusually difficult time finding anything about western banks, even on the internet. I found short snips of this and that in a variety of research books, but very little in depth. That surprised me since I can usually find whatever I need on the web.

  11. God’s blessings to your dear mother, you, and your family!

    Interesting topic!

    Pat Cochran

  12. Pat- I am adding my prayers for you and your mother. Wow 99! My Dad is 85 and we’ve are thankful each year he is still with us especially since we lost my mom when she was only 48.
    Interesting topic on the banks. I can think of stories with foreclosures but no bank failures come to mind.

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