{"id":1396,"date":"2025-07-09T20:21:36","date_gmt":"2025-07-10T03:21:36","guid":{"rendered":"https:\/\/bruceramsey.net\/?page_id=1396"},"modified":"2025-07-09T20:22:06","modified_gmt":"2025-07-10T03:22:06","slug":"the-hoquiam-banker-2023","status":"publish","type":"page","link":"https:\/\/bruceramsey.net\/index.php\/the-hoquiam-banker-2023\/","title":{"rendered":"The Hoquiam Banker (2023)"},"content":{"rendered":"\t\t
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The history of banking in Washington is littered with colorful disasters. Having covered the collapse in 1982 of the Seattle-First National Bank as a newspaperman, and, to a lesser extent, the failure in 2008 of the Washington Mutual Savings Bank, I know why banks are regulated: because bankers can lose other people\u2019s money. Mostly bankers do an upstanding job, but when the economy goes off a cliff in a really big way, sometimes head-shaking stories come to light. One of them happened 92 years ago in Hoquiam.<\/span><\/p>

In the late 1920s, Gaylord Adams was the big wheel of banking in Grays Harbor country. He was the president and principal stockholder of two nationally chartered institutions, the First National Bank of Aberdeen and the First National Bank of Hoquiam. The Hoquiam bank was the oldest in Grays Harbor, founded in 1890. Adams inherited his position there from his father.<\/span><\/p>

Adams was also a stockholder in the Grays Harbor Chair Company, which he and two other investors set up in October, 1929. That was a notably bad time to invest in a business, for the Crash on Wall Street came at the end of that month.<\/span><\/p>

Charles W. Hinton, Washington\u2019s Republican state treasurer, also had an investment in October, 1929. On the 21<\/span>st<\/span><\/sup>, three days before the Crash began, Hinton went to a Seattle broker and bought stock in the Forrest E. Gilmore Company, which had an oil refinery in Texas. To pay for the shares, Hinton, whose state salary was $4,000 a year, borrowed $5,125 ($92,000 in today\u2019s money) from the First National Bank of Hoquiam.<\/span><\/p>

Why there? Hinton had deposited $500,000 in state funds ($8.9 million in today\u2019s money) there. This was a big favor for the Hoquiam bank and for Gaylord Adams. At one point, the state funds amounted to more than one-quarter of the bank\u2019s total deposits. Compared with the state funds, the loan to Hinton was a small thing. You could call it a kickback. As collateral for the loan, Hinton pledged the oil-refining stock he\u2019d just bought \u2014 which, unfortunately, lost more than half its value within the week.<\/span><\/p>

Our state treasurer was not a good investor.<\/span><\/p>

Sometime later, a federal bank examiner flagged the loan to Hinton. Was the state treasurer of Washington going to pay the money back? Adams didn\u2019t want to worry about that. By that time, the stock in the Forrest E. Gilmore Company was probably worthless; in any case, it was never found. The loan was written off. When asked in court why he\u2019d done that, Adams said, \u201cI did not want to press Mr. Hinton for payment because he was the state treasurer and had deposited state money in the banks. This money was costing us only 2 percent and we could loan it for at least 5 percent. It was worth on the average of $1,250 a month [$22,350 in today\u2019s money] for us.\u201d<\/span><\/p>

Meanwhile, in November 1929, the Grays Harbor Chair Company had floated an issue of 7-percent bonds. For a one-month-old company to be selling bonds at such a time, \u00a0and at the same interest as established borrowers, was a cheeky thing, but the company had a non-arms-length customer: Gaylord Adams. At his instruction, the First National Bank of Hoquiam bought $50,000 of the bonds \u2014 nearly $900,000 in today\u2019s money. The amount was greater than the bank\u2019s legal loan limit, but Adams gave himself permission to ignore that. He didn\u2019t ask his board of directors or his federal regulator.<\/span><\/p>

The Hoquiam bank also bought foreign bonds. These may have been 7-percent Latin American bonds, which were peddled to country banks then. The accounts don\u2019t say.<\/span><\/p>

The Depression hit hard in 1931, and the chair company\u2019s bonds were junk. Foreign bonds plunged in value in a world bond-market crash in September 1931\u2014 and it was the foreign bonds that did the trick. On November 4, 1931, the First National Bank of Hoquiam closed its doors.<\/span><\/p>

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There was no deposit insurance in those years, but Gaylord Adams promised depositors they would eventually be paid 100 cents on the dollar. They got 58 cents, eight years later. On December 11, 1931, the First National of Aberdeen, also failed. Eight years later, it paid depositors 68\u00bd cents on the dollar.<\/span><\/p>

At 41, Gaylord Adams had lost most of his fortune. What finished the job, according to his court testimony, was his bank stock. In those days, all bank stock had a double-liability provision. When a bank failed, owners of the stock were\u00a0billed<\/em>\u00a0for an amount up to the par value of their shares. The idea was to pay the depositors. Sometimes it worked, but often not well (which is why we don\u2019t use that system any more).<\/span><\/p>

Double liability was a problem for all bank stockholders. One such was E.J. Spicer, a lumber-mill man and former sea captain who owned shares in the First National Bank of Hoquiam. Spicer, 63, was sore about the bank going bust, and his stock becoming a liability rather than an asset. He had been grumbling around town, saying that somebody should put a bullet in that no-good bank wrecker. And on February 27, 1932, Spicer walked into the Hoquiam Elks Club, and there was the bank wrecker himself. At one of the darkest times of the Great Depression, Gaylord Adams was seated at a table, playing cards with his pals.<\/span><\/p>

\u201cGet out of here!\u201d Hinton yelled at him. \u201cI\u2019ve got a good notion to plug you!\u201d<\/span><\/p>

For all his old-time roughness, Spicer was a gentleman. He allowed Adams to go to the cloakroom and get his revolver. It was a bad decision. Moments later Spicer drew his .38-caliber Smith & Wesson and Adams drew his .32-caliber Colt automatic. They fired. Spicer fell to the floor and died that night at the hospital. Adams was untouched. The next day the Seattle papers carried front-page stories about Hoquiam bank president who had shot and killed his stockholder.<\/span><\/p>

So here\u2019s the question: What was Adams guilty of? Homicide? No, it was self-defense. After a night in jail, Adams was let go.<\/span><\/p>

In October 1933, the U.S. Attorney took Adams to federal court in Tacoma on 12 counts of violating national banking laws. During the trial, half the charges were dropped, because the government didn\u2019t have strong enough evidence to nail him. This included the charges relating to the chair-company bonds. The prosecutor argued that on the remaining six counts, Adams had misapplied bank funds to further his private interests.<\/span><\/p>

Adams testified on his own behalf. He said he and his mother had bolstered the bank\u2019s capital early in 1931 with $150,000 \u2014 $3 million today \u2014 they had borrowed from the Grays Harbor Lumber Company. They lost that money when the bank failed. Adams said he\u2019d lost his fortune trying to keep his two banks alive in the storm of the Great Depression.<\/span><\/p>

There was little argument in court about the facts. The issue was what they meant. The trial ended in a hung jury.<\/span><\/p>

In June 1934, Adams was tried a second time. To testify against Adams, prosecutors tracked down Charles Hinton, who had been swept out of his state treasurer office in Franklin Roosevelt\u2019s Democratic sweep of 1932. The trial, however, had the same outcome: another hung jury, this time after 53 hours of deliberation. Several months later, the government dropped the remaining charges. Gaylord Adams was home free.<\/span><\/p>

None of the news stories I read suggested that the former state treasurer, Charles Hinton, would be charged with anything.<\/span><\/p>

\u00a9 2023 Bruce Ramsey<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

The history of banking in Washington is littered with colorful disasters. Having covered the collapse in 1982 of the Seattle-First National Bank as a newspaperman, and, to a lesser extent, the failure in 2008 of the Washington Mutual Savings Bank, I know why banks are regulated: because bankers can lose other people\u2019s money. Mostly bankers […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"class_list":["post-1396","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/bruceramsey.net\/index.php\/wp-json\/wp\/v2\/pages\/1396","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bruceramsey.net\/index.php\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/bruceramsey.net\/index.php\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/bruceramsey.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bruceramsey.net\/index.php\/wp-json\/wp\/v2\/comments?post=1396"}],"version-history":[{"count":11,"href":"https:\/\/bruceramsey.net\/index.php\/wp-json\/wp\/v2\/pages\/1396\/revisions"}],"predecessor-version":[{"id":1410,"href":"https:\/\/bruceramsey.net\/index.php\/wp-json\/wp\/v2\/pages\/1396\/revisions\/1410"}],"wp:attachment":[{"href":"https:\/\/bruceramsey.net\/index.php\/wp-json\/wp\/v2\/media?parent=1396"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}