Out in Greene County, Iowa

Here’s why a bank with a significant anniversary damn well should have a full-blown celebration

By CHUCK OFFENBURGER
October 5, 2009
JEFFERSON, IOWA

Home State Bank, the financial institution that we Offenburgers use here in Greene County, celebrated its 75th anniversary last week. Thursday evening there was a public reception the likes of which I’d never seen in a bank.

Mary Foss, the principal harpist from the Des Moines Symphony Orchestra, performed at one end of the lobby. Four of the Yoder kids, children of one the bank execs Ben Yoder, formed a string quartet and they played, too. There was wine, beer and lemonade served all along the tellers’ counter. There was a lavish outlay of food and desserts down the center of the lobby. The bank’s owners, directors, officers and employees were all there, welcoming the crowd. And people came in such a steady stream that the reception’s hours had to be extended well beyond the 5 to 7 p.m. time that had been announced. My guess is 1,000 people went through the lines.

It really was a wonderful celebration of a business that was started in 1934 with $50,000. In its first year, the new bank took in deposits of $234,842. Last year, 2008, its deposits were more than $105 million. So it has not only survived three-quarters of a century, but has grown tremendously. And at this significant anniversary, it looks and acts like you’d want a bank to – solid, basically conservative although certainly progressive on technology and services, community-minded.

But not until a few hours later, and over the next couple of days, did I come to a full appreciation of the bank’s history, as well as the history of the other two banks in Jefferson – Peoples Trust & Savings Bank and Wells Fargo.

That started when I was wondering aloud about what kind of daring it must have taken to start a new bank in 1934, in the depths of the Great Depression, and started inquiring about which bank in Jefferson is the oldest. “Well, I don’t think any banks in Jefferson made it through the Depression,” a friend said. “In fact, I think the only bank in Greene County did was one of them in Rippey.”

OH, WHAT A TOLL! He wasn’t completely correct. But as I dug into county history, here’s some of what I learned:

-- From 1920 to early 1926, all five banks that had operated in Jefferson failed and closed. That was well before the Great Depression, which is generally considered to have started with the Wall Street collapse in 1929. Rather, these bank failures occurred during an agricultural depression that lasted the entire decade of the 1920s, and then led into the Great Depression.

-- In that same six-year time period, the banks in Churdan and Cooper folded, too.

-- The rural economy was so grim in early 1926 that Jefferson, which had a population then of about 3,400, had no bank for two months!

-- In about March of 1926, there must have been more hope, because two new banks started up. One was the Jefferson State Bank, which was founded by the banking Brenton family of Dallas Center, and which has evolved into today’s Well Fargo operation in Jefferson. The other was the Iowa State Bank, which had Des Moines banker Simon Cassady as the chairman of its board. What became of the Iowa State Bank, I have been unable so far to determine.

-- In 1931, two more banks in Greene County failed, one in Scranton and another in Paton.

Thus, in the 14 years before Home State Bank was founded, there were eight or nine banks that had failed in the county. It must have taken some real moxie to think you could start a new one and that it would not only succeed, but also grow and prosper for 75 years.

THE VISION AND GRIT OF THE GARSTS. The early leadership was from founder Warren Garst, whose roots were in Coon Rapids. He was a first cousin of farmer and entrepreneur Roswell Garst. And like his cousin, Warren Garst was an advocate of the newest farming practices, including the then-new hybrid seed corn and liberal use of fertilizer. He apparently saw in all that a means of building not only the agricultural economy in Greene County, where soil conditions were about as good as any place on Earth, but also a means of building his bank in Jefferson.

Seventy-five years later, the bank’s principal owner is Warren’s daughter Mary Garst, who lives outside Coon Rapids, along with her daughters Liz, Sarah, Kate, Rachel and Jennifer.

So, Home State Bank may be the youngest of Jefferson’s three banks, depending on how you trace the institutions’ history. Wells Fargo’s bank here dates to its start-up by the Brenton family in 1926, as I said earlier. Peoples Trust & Savings Bank did not open its branch in Jefferson until 1985, as a branch of Security National Bank of Scranton, a bank that had started in the Carroll County town of Ralston in 1905. Security National in Jefferson became Peoples Trust & Savings Bank in 1995, when it was purchased by the growing Peoples group.

In little Rippey, in southeastern corner of Greene County, a community history written in 1956 claimes that two banks in the town survived the 1920s and the Great Depression – the First National Bank and the Rippey Savings Bank. First National, which today is part of the Peoples Trust & Savings Bank chain, had continuous operation from its 1905 founding, according to the history. Rippey Savings Bank, which today is a branch of Rolling Hills Bank & Trust, went through a formal reorganization in 1926 with new stockholders, but retained the same officers, the Rippey history reported.

THE HISTORIAN’S TAKE ON IT ALL. Most of my understanding of the above has been shaped by re-reading portions of “Prairie Grass Roots: An Iowa Small Town in the Early Twentieth Century.” That is a history of early Greene County, researched and written by Jefferson native Tom Morain, and published in 1988 by Iowa State University Press. It is an extremely well-written and readable history that still today is solid background if you want to understand this area of west central Iowa.

Morain went on to become one of Iowa’s foremost historians, and is still sought out for his knowledge of state history. His current position is director of governmental relations at Graceland University in Lamoni in south central Iowa.

So just how rough were the 1920s and ’30s on Jefferson and Greene County?

“Terrible,” Morain said in a phone conversation. “Most people today know about the Great Depression, and how tough things were in the 1930s. But there is this widely-held idea that the 1920s were a good time. We’ve all heard of ‘the roaring ’20s.’ But that is strictly an urban perspective. Yes, manufacturing and organized labor were having very good times in the 1920s, so the cities did have it pretty good. But that certainly was not true in agriculture and rural America.

“The agricultural depression of the 1920s amounted to a post-war economic collapse out here,” Morain continued. “What happened is that during World War I, the U.S. government had guaranteed prices for farmers, in order to encourage full-out production. They had to feed the military, as well as all our people at home and a lot of Europe, too. Then after the war ended in 1918, the price guarantees were continued for another year and a half, because we still wanted all the ag production we could get. We weren’t having to feed as many people in the military, but we still had much of Europe to try to feed. So, the 1919 crop was planted with those continued price guarantees, and so was the 1920 crop. Then on May 1, 1920, the government announced it was no longer going to support ag prices, effective immediately and despite much of the crop already having been planted.”

The impact on the economy in rural America was devastating.

“We suddenly had a glut of surplus grain,” Morain said. “But it wasn’t just that grain prices started spiraling down. So did land prices. The government’s price guarantees during the war and just after had set off a real bubble of land speculation. It was being traded furiously, and land values went way up. Then when the price supports ended, the land speculation bubble burst, and the values started falling rapidly.”

Farmers could not repay the loans they’d been given by their local bankers. The local banks couldn’t satisfy their obligations to other financial institutions and to their stockholders, and the collapse began rolling across the countryside – including in Jefferson and Greene County.

SO MUCH FOR BANKS BEING STRONG AND SECURE. The idea that banks could be so fragile, that they indeed could fail and lose the hard-earned money of their customers, was as shocking in the 1920s as it would be today.

“Back then, like now, when people would invest money, if they were putting it in the stock market, they’d realize there is some risk to that,” Morain said. “But everybody would think that their local bank is always going to be safe. If you have that mindset, and then all of a sudden you begin seeing banks close and people are not getting their money back, that’s a spooky thought. It was pretty easy for people begin to panic.”

In that miserable first five years of the 1920s, Jefferson “already had an established business community,” Morain said. “The square was full of shops, with lots of Mom & Pop ownership. There were 12 or 13 small groceries in town, there were dairies, shoe repair shops, lots of local craftsmen. It was much more of a self-sufficient business community in terms of retail back then. You didn’t have to go outside Jefferson to buy much of anything. So, when the bank failures started, there was serious disruption for local businesses.”

Bankers ran scared, of course. They could not be sure how angry depositors would respond when doors were closed. Some bankers fled the community.

The bank failures were almost contagious, too. When a bank would fail, depositors at other banks might well start withdrawing their money. And if that escalated into a full-scale “run” on the bank by long lines of customers, that could cause another closure.

WHEN IT HIT BOTTOM HERE. Four vignettes from Morain’s book that illustrate just how tough it got:

-- The first bank that closed in Jefferson was the privately-owned City Bank, on July 21,1920. The bank president, M.G. McDufffie, subsequently stood trial for a form of fraud. But a jury found that while he’d used bad judgment, he had not done anything criminal. However, his own life changed dramatically in the years that followed. He “took a job on a road crew cutting weeds, and he and his wife took in boarders,” Morain wrote.

-- Things went even rougher on brothers Mahlon and Roscoe Head, who saw their three banks in Greene County collapse in December, 1925. Those were the First National Bank in Jefferson, the Farmers and Merchants Bank in Churdan and the Bank of Cooper. That led to a liquidation of assets. Here’s Morain: “In February 1927 the community witnessed a sheriff’s sale of the bank fixtures and several personal family items, including the law library of the men’s father, Capt. Albert Head. Potential buyers were refused the right to peruse the books prior to the sale, on the chance that there might be some money stored in some of the volumes. Also for sale was the family Bible and photograph album, chairs and railings from the bank. A $1,500 burglar alarm system that had never been used sold for $8.”

-- The Jefferson Savings Bank closed in January, 1926, after its customers began withdrawing their deposits through the fall. Late in December, there were lines of people daily, demanding return of their money. The bank tried desperately to find enough cash to make the payments. One rising community leader who tried to help was young James Hilton, then the Greene County Extension agent, later the president of Iowa State University in Ames. Morain: “Hilton saw the line (outside the Jefferson Savings Bank) stretching down the block and knew what was going on. In his pocket was a small check of Farm Bureau expense money, he recalled, perhaps 25 or 30 dollars. ‘I walked in and here was all the line of people lined up withdrawing their money.’ Hilton went to the cashier’s window and said he wished to make a deposit. ‘I said it just as loud as I could just so it would have some effect.’ It did not, and the future president of Iowa State University became the last depositor in the Jefferson Savings Bank.”

-- Morain said one of his favorite interviews in researching all this for “Prairie Grass Roots” in the middle 1980s was with Bess Osgood, “who was then 92 or 93 years old. She had a sharp memory and was a great storyteller.” She related how she and her husband Paul Osgood “lost money in each of the five banks that closed in Jefferson,” Morain said. “They kept moving money to another bank, and one after another, they closed.”

WHEN THERE WERE NO BANKS AT ALL. So, what of that time from January, 1926, until the two new banks were opened in March, or just later? Can you imagine a town of 3,400 people with no bank? What was that like?

“With the closing of the last bank in the community, Jefferson merchants found themselves hard pressed to pay wholesalers,” Morain wrote. “To keep money in circulation, the Milligan grain elevator announced that it would pay cash or acceptable exchange for all corn or other grains delivered to it. Milligan’s began to be a clearinghouse for checks while the town was without regular banks. Still, neither merchants nor their customers could get the necessary cash to carry on business as usual. On 28 January, in a united promotion, merchants began a giant sale to attract shoppers who would pay in cash. A special edition of the newspaper, detailing the bank failures and the reasons for the lack of cash in circulation, was distributed to every household within a 30-mile radius of the town. Now was not the time to try to hide dirty laundry. Now was the time to encourage shoppers to come to the community that would offer bargains for cash.”

So that is the story of the era which saw the founding, and undoubtedly the wobbly starts, of Jefferson’s banks today.

And that seems plenty good reason why, when any of them passes a significant anniversary, they damn well ought to have a full-blown celebration like Home State Bank just did.


You can write the columnist at chuck@Offenburger.com.