There have been many long, hot summers in the Glass City, but none that would shake the very foundation of the city’s future as did the summer of 1931. This one had nothing to do with the weather, but rather the nation’s stormy economic climate that would trigger a financial panic we should hope, we never see again.
As the city’s economy faltered in 1931, amidst a serious national economic downturn, a banking crisis began to take shape in Toledo with the collapse of Security Home Trust Company in June of 1931. A state audit earlier that spring showed the bank was having serious financial difficulty and was insolvent. Within weeks word had spread and corporate depositors began withdrawing their funds. On the sunny and warm Wednesday morning of June 16th, a line of anxious depositors and investors started gathering outside the doors of the bank at Huron and Madison. They were hoping to get whatever they could of the deposits the bank held inside. They waited for naught. The bank didn’t open its doors. Its ten branches also remained closed. Security Home Trust Company was history. The move left other bankers in Toledo with white knuckled paranoia as they feared their banks could be next if a sudden wave of withdrawal fever should begin. In a quick move to head off that possibility, the state banking superintendent and three other big banks in Toledo put a 60 day waiting period on cash withdrawals in hopes of blocking any panic induced runs that would surely put a catastrophic strain on their solvency. In the meantime, they assured the public in advertisements and news articles that the banks were solvent, and their money was safe, but because of the current “hysteria”, they were going to implement these controls.
But two months later, when the banks were to lift those limits, fear was still palpable and on August 17th, 1931 the three banks decided not open at all. As Time Magazine wrote the next week. ”
“The closings brought to Toledo as grave a financial crisis as could possibly overtake a large U. S. industrial community. For last week only one of the city’s great banking institutions could pay depositors; 70% of the city’s banking deposits were frozen; eleven building-&-loan associations halted payments on their $50,000,000 deposits.”
The other banks that failed to open included:
Ohio Savings Bank & Trust Co. (deposits $45,526,000″)
Commerce Guardian Savings Bank & Trust Co. (deposits $21,328,000)
Commercial Savings Bank & Trust Co. (deposits $13,069,000)
American Bank (deposits $1,509,000).
In all 5 banks were closed along with 34 of their branches. More than 100 million dollars in deposits were tied up. The mood was grim at best and the city was in turmoil. Four banks did manage to stay open, and one of them was Toledo Trust, which actually used the crisis to brag about their solvency, even bringing in four truckloads of 11 million dollars worth of fresh currency from the Federal Reserve in Cleveland. The trucks parked outside the bank , to visibly demonstrate their slogan as “The Strongest Bank in Northwest Ohio”.
As the word spread of the bank closures, the city was on edge and civil unrest was feared. Toledo police called back officers on vacation and a unit of the National Guard was put on alert. The situation sent ripples of anxiety across the region. Hundreds of area bankers got together to discuss strategy and scores of bank examiners were summoned to Toledo to help sort through and fix the Toledo problem that threatened to set off a tidal wave of more panic and closures.
The great Toledo bank crisis was one of the worst in the nation, during the great depression. Bank depositors in Toledo lost more capita than in any other city in the nation.
It would be convenient to write that these institutions were simply victims of a bad economy, and the so called “perfect storm” of circumstances. But that would wrong. While the failing economy certainly set the stage for this drama, there is ample evidence that the main actors were ruled by their own greed and personal panic. Bankers who grabbed what they could, while they could with a “depositor-be-damned” attitude. If you think the great bank panic of 2008, rife with insider manipulation and amoral avarice was a new phenomenon, think again. I suggest you read “ Banksters, Bosses, and Smart Money: A Social History of the Great Toledo Bank Crash of 1931” Written by Toledo historian Timothy Messer-Kruse, it examines and details just how the owners and insiders at these failed Toledo banks managed to line their own pockets first with millions of dollars as the panic set in, thus hastening the demise of these institutions that were entrusted to hold and keep secure the savings and assets of the general public. During the 60 day withdrawal moratorium, many of the directors and owners used this chance to sell off assets, cashed out their own deposits and were even giving themselves unsecured loans. They, in effect, stole the life rafts for themselves as the ship was sinking.
The brazen actions did not go without notice. After numerous public hearings to deconstruct what had happened, some of the bank officers and directors from various banks were later charged by prosecutor Frazier Reams in 1934. But while he was trying to get criminal indictments and convictions, the most severe consequences ultimately passed down, were censure and civil actions against the bankers and some of their directors.
Eventually, thousands of depositors affected were paid most of their money, but in increments that were strung out over years.