Tales From the Vault
The Dalles welcomed its first state-chartered bank more than 150 years ago
By Rodger Nichols
The story starts with the Oregon Constitutional Convention. On August 17, 1857, 60 men gathered at the Salem courthouse. Thirty-four of the delegates were farmers. Eighteen were lawyers, including the three justices of the Oregon Territorial Supreme Court. Two of the delegates were newspaper editors, five were miners and another was a civil engineer.
One attitude shared by the diverse group was that they hated banks—with some justification. Prior to 1863, the U.S. government didn’t print paper money, except for the early “continentals” during and after the Revolution.
Private state-chartered banks in other states issued money, as did railroads, churches, and private merchants. Not surprisingly, a lot of it wasn’t good because—whether on purpose or carelessness—they printed more money than assets to back it.
Publishers issued books of bad bills that merchants kept by the cash register. When a customer handed over a bill, merchants would check it against the book. Maybe it would be good, maybe it would be worth nothing or maybe it would trade at a discount.
In the new constitution, the framers were careful to include an article they thought would prevent banks and any financial institution from issuing money. In the signed copy of the document was a semicolon separating the two ideas. The semicolon hadn’t been in the draft adopted by delegates.
Accordingly, the Oregon Supreme Court ruled the semicolon should be a comma, and the only thing the clause prohibited were state-chartered banks that printed money.
The first state-chartered bank in The Dalles was French & Co. Bank, established in 1867 by Daniel and Joseph French. Originally from Vermont, the men went to California in the gold rush and built a mercantile business selling to the miners.
When gold was discovered in the John Day area, the men moved the business to The Dalles. They soon began using the large safe in their business to store gold for the miners and would ship it to San Francisco to be minted. Eventually, they sold the mercantile and established the bank.
After mining declined, stock and wheat ranches spread across the rangelands south of the Columbia River, including vast herds of sheep. Wool, wheat, and the product of salmon canneries were brought to The Dalles to be shipped to world markets.
French & Co. was prosperous enough that during the Panic of 1892-93, they did not foreclose on farmers, which gained them a loyal following.
But in 1922, the bank met its demise due to rising competition and several bad loans. The most noticeable of those was $50,000 to the Dufur Orchard Co.—organized in 1911 to establish what was once the largest apple orchard in the world, but doomed to fail on 4,000 marginally irrigated acres better suited to growing wheat.
The French family pledged its personal worth to reduce the debt to depositors, but a run on the bank dropped assets below the legal limit, and the institution never reopened. However, for the next eight years, the family and other investors liquidated holdings ranging from the bank building and assorted commercial properties in The Dalles to local subdivisions and timber tracts. The receivership was able to honor 97% of the claims.
French’s biggest competitor was the First National Bank of The Dalles, established in 1895. In 1911, the bank built a five-story building at Third and Washington, occupying the ground floor and renting the floors above for professional offices.
The federal government started chartering banks nationally in 1863 as a Civil War money-raiser. Federally chartered banks deposited bonds in the U.S. Treasury. The banks then could print banknotes worth up to 90% of the value of the bonds. The federal government would back the value of the notes, so merchants were happy to take them.
First National Bank of The Dalles printed $1,391,330 worth of national currency between 1895 and 1933. Thirty-three specimens are known to exist today. Anyone who happens to have one should take good care of it. Examples have been known to sell for $1,000 or more.
All that came to a halt in 1933. President Franklin Delano Roosevelt took office March 4, the last president to do so before the inauguration was moved to January. He immediately ordered all banks to close on March 6 for a full week.
In that time, Congress passed the Glass-Steagall Act legislation, which increased banking regulation and created the Federal Deposit Insurance Corp., which offered 100% insurance on deposits. With that guarantee, people lined up to deposit their hoarded cash.
It was too late for banks in The Dalles, however. The few that existed had all closed their doors months earlier.
At the same time, another provision of Glass- Steagall came through. Previously, nationally chartered banks were prohibited from opening branches. The act changed that policy.
On June 5, 1933, the U.S. National Bank of Portland opened the first nationally chartered branch in the United States, taking over the former First National Bank of The Dalles. The tall building was razed in 1963, and the sleek one-story building that now houses U.S. Bank was dedicated.
Today, The Dalles has seven banks—five state and two federally chartered—and a pair of credit unions. None of them issues its own currency.