First Governor Haskell's Historic Leadership in Infant Oklahoma's Banking Crisis
Ohio-born railroad, building, and law magnate Charles N. Haskell (1860-1933), first governor of Oklahoma, proved to be a big enough man to lead a big and brawling new Western state through its baptism of fire. He was a man of action in a memorable era and land. Controversy and accolades alike festooned him, and he made close friends and bitter enemies of those who would be President and those who were. He led the infant state with a cocksure confidence he backed up with deeds—and he might even have saved it a time or two. In a distant generation, he rises up as a preeminent founding father of Oklahoma and one of the great men in its history.
Governor Haskell’s cool, stalwart leadership during the state’s tense banking crisis that occurred mere weeks following statehood helped carve his legend into Oklahoma history. For the financial turbulence of Indian Territory and Oklahoma Territory did not pass away with statehood in late 1907. Fortunately, Haskell’s ringing inaugural address championed passage of the bitterly contested Bank Deposit Guaranty Law. This landmark bill established Oklahoma as the first state in America to require its state-chartered banks to insure their depositors’ money against any loss with a Depositors’ Guaranty Fund. He proposed that they contribute 1 percent of their respective assets to the fund.
Haskell had tried to include such a law in the state constitution. He aimed to ensure that the working people of Oklahoma would not lose a dollar, particularly when the periodic national economic panics tended to roll downward onto them from the folly and greed of the wealthy and powerful—“the avariciousness of man,” as Haskell declared it. Oklahoma wanted “protection of its banks from the excesses of New York,” according to historian Loren Gatch.
Some of the state’s large banks opposed the law from its inception. They knew their assets would provide the bulk of the Guaranty’s funds and that without those funds some small banks would fail. Then, the larger banks could replace them with branches.
The law received a dramatic early baptism of economic fire. Almost immediately following its February 15, 1908, passage, the Noble State Bank challenged its legality in court. The Coalgate State Bank—closed, then covered by the Guaranty Law—accused Haskell of orchestrating the shutdown to score political points during a presidential campaign with the success of “his pet scheme.” The Coalgate imbroglio lumbered along with ugliness. A grand jury eventually censured the state banking commissioner, closed the bank, and recommended his removal.
The 1908 episodes paled in comparison with the challenge Haskell, the Deposit Guaranty Fund, and Oklahoma faced when the state’s largest bank, Columbia Bank and Trust in Oklahoma City, failed in September of 1909. Columbia’s dramatic crash resembled another spectacular demise three quarters of a century later in the same city—Penn Square Bank. The crashes of both banks had surprising similarities, including recklessly daring executives, foolhardy oil-related loans, and collateral damage to other banks.
The Columbia Bank and Trust in Oklahoma City, the state’s largest financial institution
at the time of its 1909 failure.
Columbia presented Oklahoma with a frightening specter. Due to its size and influence, the individuals, other banks and organizations, and even towns and cities whose continued welfare hinged on a wise remedy to the bank’s situation were legion. For starters, the Deposit Guaranty Fund had nowhere near enough cash on hand to cover the millions of exposed depositor dollars.
Oklahoma Conquers Crisis
Haskell exhibited the formidable stature that prompted Edward Everett Dale, the dean of Oklahoma historians, to write, “Oklahoma was fortunate in having as its first governor a man of rare ability and wide experience, both in government and business.” With colossal stakes in the balance as he faced some big banks’ continued opposition and negative media coverage inspired in part by his political enemies, Haskell rallied the state’s political and banking establishments and even his friends among banking heavyweights in much larger cities like Kansas City and St. Louis. He scored enormous cash advances from both those cities to cover possible quick withdrawals by Columbia depositors.
Haskell’s efforts, coupled with the Bank Guaranty Deposit Law and the people of Oklahoma, conquered the crisis. The doors to Columbia never closed until its liquidation. The expected “run” at the bank as in New York City during the Panic of 1907 did not occur, and all depositors were paid in full, even though some experienced a delay.
Newspaper headlines blared the story of Oklahoma’s most frightening early financial crisis, the fall of Columbia Bank and Trust, the state’s largest financial institution. (Courtesy Oklahoma Historical Society)
Aware of the persistent opposition from some of the state’s big-city banks and their business allies, Haskell triumphantly drew a bead on them. “The Oklahoma banking law is a complete success, even against the persistent opposition of a strong element of other classes of bankers,” he declared. “We adjust the affairs of an embarrassed state bank with perfect ease in a very few days, and with no public clamor whatever. Everybody is in good humor and conditions are normal. Depositors’ money was not tied up a single hour. Other state banks are quiet and gaining in deposits.”
Accomplishing its mission, the legislature terminated the Bank Deposit Guaranty Law in 1923. The legacy it left included the first such protection of citizens’ money by any state, numerous successful securings of that money in failed banks, and passage a quarter-century before its parallel on the national level, the Federal Deposit Insurance Corporation. Haskell perhaps pronounced the consummate valedictory in 1910:
“Theorizing may do when we consider untried things, but two years of actual experience has qualified our people to judge of the efficiency of the Oklahoma banking law. It has been subjected to the severest test possible to have occurred within our state. It has arisen from this test, supreme in its power, and blessed by the people for its beneficial effects.”