Wilson recalls runs on banks in depression

File A passer-by looks at an expensive-looking car parked on the street in New York City. The sign attached to the car tells the sad story of its owner following the stock market crash of Oct. 29, 1929. The Great Depression that followed the crash and subsequent runs on banks by investors desperate for cash reached its depths in the Quad-Cities in the early 1930s.

Times were hard on the local and national banking scene, but Mr. Wilson quickly climbed the ranks at the bank (now National City), from assistant in 1933 to president of the bank by 1937.

Now 99, Mr. Wilson still vividly recalls the dark days of the 1930s. ``They were very difficult days for most people,'' he said. ``It wasn't much fun being in the banking business.''

The roaring '20s came to a brutal halt on Oct. 29, 1929, when the stock market crashed. Mr. Wilson called it the greatest disaster in the history of the stock market. The initial crash was followed by several more days of unbelievable losses.

The consequence of those events was an erosion of income and capital, he said, ending in runs on banks by investors desperate to salvage what cash they could.

In the first six months of 1929, 345 of the nation's weaker banks failed, further panicking already shaken bank customers. Mr. Wilson said the biggest problem facing banks was not a lack of assets, but the inability to quickly convert them to cash to meet demand.

The ripple effect reached the Quad-Cities in the early '30s.

``The turmoil of mind, the hours of work, the tireless effort to liquidate assets on a constantly falling or frozen market had been the lot of local bankers,'' Mr. Wilson wrote of the Depression years in his history of the bank. ``The urge to press for collection of loans was accompanied by the anguish in enforcing collection and possibly forcing the debtor to the wall when he, himself a victim of the period, was already in dire trouble.''

By March 4, 1933, all 48 states had authorized restrictions on bank withdrawals. On March 9, the U.S. Congress passed the Emergency Banking Act, which called for not licensing banks not considered financially sound.

``The reaction to the Depression in the Quad-Cities area paralleled that of the national scene,'' Mr. Wilson wrote. ``As newspapers carried the news of the national scope of the crash and subsequent problems, the public followed. The increasing tempo of withdrawals increased the general anxiety, and resulted in full-fledged runs on the banks. The only recourse of the banks was to call in loans, sell bonds, and liquidate whatever assets were available in order to provide cash.''

Under the leadership of his boss, I.S. White, and eventually Mr. Wilson, State Bank survived.

``This was possibly true because at the time it was carrying higher liquidity ratios, and lower ratios of loans to deposits,'' Mr. Wilson said. ``Pressure for withdrawals was minor at all times, and only slightly increased at times of greatest problems to the entire national banking structure.''

Several other local banks did not fare as well. A handful were suspended in 1931, including the Commercial Savings Bank in Moline and Manufacturers State Bank in East Moline. Later in 1931, the American Savings Bank and Trust Company in Davenport, the largest bank in the region, closed, producing shock throughout the Quad-Cities. This prompted other local banks to restrict withdrawals to a 60-day notice.

In the wake of American's failure, three Illinois-side banks consolidated into the new Rock Island Band and Trust Company, reducing the number of banks in Rock Island to two, down from six in 1926.

Mr. Wilson said the scenario repeated itself in late 1932, with the liquidation of the Union Bank of Davenport, the Northwest Davenport Savings Bank, the Home Savings Bank of Davenport and the lone remaining Moline bank, Moline State Trust and Savings. This again led to 60-day restrictions.

``Every night you picked up a paper and read about banks failing,'' he said. ``There was no deposit insurance. If your bank did close, you lost your money.''

Some relief was on the way from the government. National, state and local politicians declared bank holidays, closing financial institutions for weeks at a time to prevent panic withdrawals. The mayors of Moline, East Moline and Rock Island declared two-week bank holidays in January 1933.

``On the homefront, it was a constant question as to how long the pressure would continue, how can we create confidence, when will the run cease, how long can we continue to demand of our borrowers, how long will the liquidity in our assets last, and when will only the frozen assets remain?'' Mr. Wilson wrote.

Although the Depression dragged on through the '30s, the banking situation began to stabilize by the end of 1933. The institution of Federal Deposit Insurance in January 1934 was a factor in the confidence level of the general population. In addition, bank deposits steadily increased throughout the decade at State Bank, rising from $2.7 million in March 1933 to $7.4 million in 1939.

The arrival of World War II and the following manufacturing boom erased the gloom of the Depression. Through the 1940s, State Bank saw phenomenal growth, Mr. Wilson said, adding that surviving the Depression was the greatest challenge in his 50-year banking career.