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Thursday, July 10, 2014

Banking On That

 July 8, 2014   Journal-Opinion

     “Coos Bank was indicative of the enterprise not only of the men of Grafton County…but also the growing wealth and importance of the Connecticut Valley….also the importance of Haverhill as a business center.”  This is Haverhill historian William Whitcher’s description of the first bank in the region. The Coos Bank was established in 1803 in Haverhill Corner. 

     This column describes the history of banking in the area following the chartering of the Coos Bank. Information was gathered from local histories, interviews, Internet sources and Arthur Stone’s The Vermont of Today. 

     During the 40 years after settlement in the 1760s there were no banks in the area. Local residents joined the rest of the nation in having a strong aversion to banks as they identified them with moneyed interests, speculation and debt. Supposing that banks were not in the interest of the general population, it was generally believed that banks “put into circulation notes, which gradually become worthless, and which father all manner of evils.”  

     With little currency available, locals relied on coins, either foreign or domestic, and bartering. During the period after independence, the Continental Congress issued paper money that immediately lost so much value that the slogan “Not worth a Continental” became synonymous with worthless.  Locally it was said that it took a barrel full of this currency to buy a barrel full of flour. 

     In 1791, at the encouragement of Secretary of the Treasury Alexander Hamilton, the First Bank of the United States was created. The first bank in Vermont was established and owned by the State in 1806.  The law creating this bank outlawed the circulation of private bank notes. Within five years this bank closed and in 1811 the First Bank’s charter was also not renewed.

     Trade and industry were severely hampered by the lack of banks and the losses from bad paper money. The Coos Bank was the only local bank within 100 miles of Haverhill during this period.  But by 1820 it had issued bank notes in amounts beyond the limits of its charter and it suffered financial failure.  

     Two years later the Grafton Bank opened in Haverhill.  Its operation was the subject of considerable partisan wrangling, with local Democrats charging that “it was in the control of a junta of aristocratic old time Federalists and Whigs.” This bank survived until 1849.  While these banks struggled to endure, anks some merchants offered their own script notes, honored locally. 

     Counterfeiting of local bank notes added to the currency mistrust. Counterfeiters not only printed fake notes but also altered real bills to manipulate face values. It was difficult for the average person to distinguish between the real and the bogus.   

     While some counterfeiters escaped punishment, others did not. In 1795, Vermonter Seba Beebe had his right ear cut off and his forehead branded with a “C” after being convicted of counterfeiting.   

     Two other notorious counterfeiters operated locally. The first, Stephen Burroughs, was described as a “most shrewd and accomplished villain.” In 1806, Orange County’s Sheriff Micah Barron of Bradford, underwritten by the Coos Bank among others, travelled to Lower Canada and apprehended Burroughs.  In 1849, renowned counterfeiter William Warburton, nicknamed “Bristol Bill,” operated with his gang out of a home in Groton. Recognition of a gang member by a local bank employee led to the arrest of the entire band and confiscation of their printing press and copper plates. 

     The first bank in this part of Vermont was the Bank of Newbury, chartered in 1831.  It was established by major businessmen from five area towns. Its location was the subject of controversy when Wells River rather than the village of Newbury was chosen. This slight was the cause of “consternation” within the town for years. 

     Nationally, this was a period of “free banking,” especially after the demise of the Second Bank of the United States in 1836. Locally, several other banks were chartered, but either never opened or operated for only a brief time. These included the Amonoosuc Bank of Bath, the Grafton Bank of Haverhill and the Grafton County Bank, also in Haverhill. 

     In 1854, The Bradford Bank opened for business. It was an example of savings banks being opened across the nation “to encourage economy and frugality” among the people. The Bradford Bank as part of its operation, issued paper money that was “excellently engraved, well printed and attractively designed.”  But local currencies of this type were not popular nationally, especially with the outbreak of the Civil War. 

      In 1863 the federal government passed legislation that created nationally chartered banks with currency backed by U.S. Government securities. Officials of The Bradford Bank objected to this national interference and, in 1864, closed the bank. In contrast, the Bank of Newbury became the National Bank of Newbury.

     It was not uncommon for the nation to enter a period of economic depression. These “panics” where often characterized by bank failures. Depositors would demand their savings, a demand that banks could not always meet. One example of this was the Bradford Savings Bank and Trust Company established in 1870.  In 1892 this bank occupied a new brick building on Main Street.

     But this bank became too leveraged in the failing Ely copper mines and during the panic of 1897 the bank went into receivership and never recovered. The West Fairlee Savings Bank and Trust Co., established in 1871, suffered the same fate, closing around 1890. That depression was the worse the nation had experienced with 500 banks and 15,000 companies failing. 

     Woodsville had several banks established at this time. The Woodsville Guaranty Saving Bank was chartered in 1889 and soon after opening it moved to the new Opera Block on Central Street. In 1891 the Woodsville Loan and Banking Association opened and in 1897 became the Woodsville National Bank.

     The national bank and the saving bank operated out of the same location in Woodsville. This was because national banks were at that time limited to checking accounts and commercial loans. Savings banks could offer savings accounts and residential mortgages. 

     This same paired arrangement was found in neighboring Wells River. In 1892 the Wells River Savings Bank was chartered to complement the National Bank of Newbury. They operated with the same board of directors from the same location on the east side of Main Street.

     In 1904 the Bradford National Bank was chartered and occupied the vacated savings and trust bank building.  Reform was needed in the national banking system especially after the panic of 1907. Solutions were often the victim of partisan politics. However, in 1913 Congress established the Federal Reserve System, a decentralized central banking agency. Its purpose was to maintain a “safer, more flexible and more stable monetary and financial system.”    

     While bank failures were common, local banks survived. Thrifty locals who had money saved it and it was reinvested in local communities. “During the period from 1908-1928 only one Vermont bank has closed its doors, and that one has since paid it creditors the full principal amount.” When Arthur Stone made this observation in 1929, the nation was on the brink of the Great Depression. 

     At that time, depositors had little recourse if banks were unable to return their savings. As the nation went into an economic tailspin in late 1929, panic spread. In many areas across the nation, lines formed in front of banks as depositors demanded savings that were unavailable. That year, 659 banks failed followed by 5102 the following year.

     By March 1933, 10,000 banks had failed nationally, but not one locally. On March 6, 1933 newly-elected President Franklin D. Roosevelt ordered a bank holiday in an effort to reestablish confidence in the nation’s banking system. New legislation created a federally-backed depositors’ insurance and federal examiners reviewed bank records for solvency. On March 13, local banks joined others in reopening. Panic was stemmed and nationally many customers returned the savings they had hastily withdrawn.  Others who lost their deposits did not return and remained suspicious of banks for a long time.

     Banking during these years was very much a local activity.  Highly respected citizens, primarily men, cautious in their approach, held the executive and director positions. Tellers and loan officers were local residents. Generally, citizens banked locally where they knew the bank and the bank knew them. Some residents and businesses, either in an effort for privacy or because their activities were beyond the scope of local banks, used larger institutions elsewhere.   

     Raymond Green came to Bradford in 1963 with plans to purchase  Green Mountain Explosives and relocate it from Barre. His initial request for a loan at the Bradford National Bank was denied. After all, he appeared to the bank as an untried newcomer. Green told me that he dropped by the rear of the Gove and Morrill Hardware store where Bernard Crafts had his unofficial “office.”  Crafts was the bank’s president, a town selectman and the “Mayor” of Bradford. Green made his appeal. Crafts gave sage advice that Green followed. The loan was granted. 

      Over the past 18 months I have been writing articles on the area changes from 1960 to 1994. The following is some of the banking news mentioned in this newspaper and gathered from local interviews. The news was of expansion, mergers, modernization and failures.

     The Bradford National Bank relocated to a new building on the east side of Main Street in 1961. As was the case with many banks during this period this bank opened small branch banks, in Fairlee in 1964 and Thetford in 1974.  The bank prospered, enlarged their main building, and added new features such as computers, credit cards and drive-up windows. However, during the recession of the early 1990’s, the BNB became distressed and in January 1993 was taken over by federal officials.         

     The Merchants Bank took over the operation of the defunct bank. Organized in Burlington in 1849, Merchants was chartered as a national bank in 1865 and then converted to a state-chartered bank in 1974. It currently operates branches in Bradford and East Thetford.

     Another bank that closed during this period was the Hanover Bank and Trust Co. It opened a branch in Orford in 1979 in the Old Elm House and later relocated it to the corner of Bridge and Main Streets. It was taken over by BankEast in 1991, a bank that was one of the six major New Hampshire banks that failed in the recession of the early 1990s.   

      Dartmouth National Bank opened the first bank in Lyme in 1975 in the Nichols Hardware Building where it operated until 1986. That year it was acquired by Indian Head Bank for two years and then by Fleet Bank. Without a renewal of its lease the bank branch closed in 1994.  In 1994, Mascoma Savings Bank opened a Lyme branch office and the following year Ledyard National Bank did also.  Both still operated.       

     Changes in banking practices caused the formerly complementary National Bank of Newbury and Wells River Savings Bank to offer duplicate services and a degree of competition. Therefore, in 1981, they merged. In 1988 the bank built a new building on Bradford’s Main Street followed by branches in buildings old and new in Fairlee, Newbury and East Thetford.

     The Woodsville Guaranty Saving Bank also continued to prosper and in 1973 opened a branch office in Piermont, followed by branches in other Northern New Hampshire locations. By 1974 the Woodsville National Bank was operating from a new building on Central Street. Over the next two decades it was part of several mergers, first with Littleton’s Lafayette National Bank and then with Fleet Bank.  In 1999, it was acquired by the Laconia Savings Bank, a bank established in 1831. In 2013, it was renamed The Bank of New Hampshire.    

     In earlier times, bankers were among the most distrusted of occupations. Banks have a mixed history in the area, some lasting for many decades, others for short periods of time. Most officials were honest and competent, but a few were found lacking.

     Standing in the lobby of any area bank one can see that these institutions serve a cross-section of the community with politeness and skill and reinvest local funds in local projects. Attempt to raise funds for a community activity and one finds banks most generous. Hoping to see local communities prosper one will find bank officials in the vanguard of those efforts.  You can bank on it.