Adolph Oscar Eliason.

The beginning of banking in Minnesota online

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Before the days of white settlement in the Northwest, the ter-
ritory now embraced within the boundaries of Minnesota was in-
habited by Indians. Agriculture, trade and commerce, even in
their most rudimentary forms, could scarcely be said to exist.
Hunting, trapping and fishing were the chief occupations of the
men; and the women prepared the food, made the moccasins and
clothing, cared for the children, and in general performed the work
and drudgery about the camp or village.

The first white men to enter the territory were exploring trad-
ers, closely followed by missionaries and by regular traders seek-
ing the furs which the Indians procured with such little effort.

There was no metallic money in circulation in the early fur
trade. Trade was carried on by barter. Furs were exchanged by
the Indians for blankets, knives, powder, firearms, rum, and other
articles brought in by the traders. Henry E. Schoolcraft, the noted
traveler and writer, says, in his "Narrative of an Expedition
through the Upper Mississippi to Itasca Lake in 1832," that the
standard of value and computation in the fur trade was a prime
beaver, called "plus" by the French. Other writers bear out this
statement, and it is established beyond a doubt that, from the be-
ginnings of trade in this territory, the unit of trade was the beaver
skin, allowed at one and one-half pounds per skin. About 1820
a prime beaver skin was estimated as worth $2 a pound, a large
prime beaver being worth $4. t Schoolcraft, in the narrative refer-
red to, states that a prime beaver or plus was worth one bear, one
otter, or three martens, while a keg of rum was equivalent to
thirty plus. A little later the muskrat skin was the unit of trade
in this territory.

*Read at the monthly meeting of the Executive Council, May 11, 1908.
tWisconsin Historical Society Collections, Vol. VII, p. 205.


The .fur trade was the forerunner of civilization throughout
this region, as it has been in nearly all parts of the North Ameri-
can continent. Its attractive profits tempted exploration, estab-
lished settlements and posts for trading purposes, opened regular
avenues of trade, and prepared the way for the influx of agricul-
tural settlers, merchants, and those bent on other lines of trade
and industry. The history of the early fur trade in Minnesota
becomes, then, of first importance in the study of early business
conditions; and some little attention to these conditions is abso-
lutely necessary in order to determine just when and how the need-
ed banking facilities were supplied before conditions demanded the
establishment of exclusively banking institutions.

The fur trade in our territory was for many years in the hands
of the French, but after the middle of the eighteenth century the
English gradually began to secure the trade of the Northwest.
After the treaty of Paris in 1763, the English came into posses-
sion of all the posts, and for a brief period the fur trade was car-
ried on exclusively by the Hudson Bay Company. About 1766
private traders began to encroach, and in 1783 the strongest of
these traders united their stocks and formed the Northwest Com-
pany, with headquarters at Montreal, a strong rivalry immediately
springing up between the two companies. In 1798 the Northwest
Company alone had over forty clerks, fifty interpreters, and six
hundred canoemen in Minnesota. In 1809 the American Fur Com-
pany was organized by John Jacob Astor, but it did not begin bus-
iness until the close of the war of 1812. A few years later the
Indian trade of the territory passed into the hands of the Ameri-
can Company, for the Northwest Company was obliged to dispose
of its posts south of the Canadian line, on account of an act
passed by Congress in 1816 excluding foreigners from the Indian

With the advent of the American Company and the protection
of the frontier by the establishment in 1819 of the military post
at Fort Snelling, the Indian trade in our territory received a great
impetus, and although it was several years before settlers actually
began to arrive, the territory was being exploited by explorers and
traders and the eyes of future settlers turned in this direction. Ee-
ferring to the year 1832,, Neill wrote in his History of Minne-


sota (page 415) : "There were no white families in the country.
The entire population, besides the soldiers of the fort, were In-
dian traders." He undoubtedly left out of account the few Swiss
refugees who were at this time squatting upon the Fort Snelling
Reservation. By 1833, traders were established in posts at Men-
dota, Olive Grove at the t mouth of the St. Croix, Traverse des
Sioux, Little Eapids of the Minnesota river, Lac qui Parle, and
Lake Traverse; and as traders went out from these posts in every
direction, it may be seen that trade with the Indians was car-
ried on over a large part of our territory.

Up to 1837, none of the land in Minnesota was open to set-
tlement. All the land belonged to the Indians, with the excep-
tion of the military reservation. Beginning with 1837, treaties
were made with the Indians by which their rights of occupancy
between the Mississippi and St. Croix as far north as the Crow
Wing were ceded to the United States, thus making settlement
possible. Gradually settlers began to arrive, but up to 1849 com-
paratively little headway had been made in this direction, consid-
ering the vastness of the territory. Mr. A. L. Larpenteur, who
was afterward one of the first merchants in St. Paul, arrived in
the territory in September, 1843. "At that time/' he says in his

Recollections, "the white population in the vast

territory that now includes the great state of Minnesota, the two'
Dakotas, parts of Wisconsin and Iowa, and all the country across
the Missouri river to the Pacific coast, did not exceed three hun-
dred." At the time of the first official census, taken in 1849, when
the territorial organization was effected, there were less than 5,000
inhabitants within the area now included in Minnesota.

John Jacob Astor was an enterprising and astute trader. He
sent to the territory a number of wide awake young men from the
East. Among them were Ramsay Crooks, who was his first agent
and afterward was president of the company, and Charles H.
Oakes and Charles W. W. Borup, who have the distinction of start-
ing the first banking-house within our boundaries.

In 1834, H. H. Sibley, who later was to play such an import-
ant part in our history, came to Minnesota, having formed, with
Colonel Dousman and Joseph Rolette, Sr., a copartnership with
the American Fur Company. Sibley was placed in control of the



trade throughout this vast region and had his headquarters at St.
Peter's, now the village of Mendota. He inspected the posts,
supervised the operations of the traders, clerks, and voyageurs, and
dictated the policy of the company with regard to the traffic with
the Indians. Sibley's day books, his letter books showing copies
of all his letters, and several files of letters received by him while
in the fur trade, are to be found in the Library of this Society.
They furnish a vast fund of information as to the history of the
fur trade and the conditions of the Territory in general, during a
period upon which it is extremely difficult to find any definite and
reliable information.

In order that we may more clearly comprehend the earliest
stages of banking development in Minnesota, let us give a mo-
ment's attention to the beginnings of banking in New England. A
glance at the early conditions in the east will show a. remarkable
similarity with the conditions in this territory.

In studying the rise of banking institutions in the United
States, we find that the business and industries of the colonies
were carried on for nearly two centuries without the assistance of
a single local commercial bank. The peculiar conditions of colo-
nial trade and industry made the rise of local banking institutions
unnecessary.* There were no manufactures requiring extensive
capital and banking facilities; the financial aid necessary to carry
on operations under the agricultural and domestic systems was sup-
plied by individuals in the colonies; the retail trade and the coast-
ing and shipping industries were conducted on English capital;
the banking for the merchants in the colonies was done in Eng-
land; and these merchants, with the aid of their own capital and
their banking connections in England, together with their remark-
able credit arrangements with the English merchants, were able
to give to individuals and small traders in the colonies the credit
accommodations and limited banking services which they required.

So long as these conditions continued in the colonies, local
banking institutions were not needed and consequently did not
arise; but with the gradual disruption of the domestic system, and
with the development of manufactures and other industries requir-

*See "The Rise of Commercial Banking Institutions in the United States,"
by A. O. Eliason.


ing larger capital and more extensive accommodations and ser-
vices such as are usually supplied by banks, together with the
severance of the relations with the mother country, local bank-
ing institutions became necessary, and in compliance with this "de-
mand the first commercial bank was established in Philadelphia in

Conditions were, in many respects, similar in the early days
of this territory. Before the advent of the white man, the neces-
sity of banking institutions was obviously lacking. With the
growth of the fur trade, the establishment of trading posts, and
the subsequent influx of white settlers, the needs for banking fa-
cilities gradually arose.

Up to the beginnings of the nineteenth century, the develop-
ment of the territory along these lines had not proceeded far
enough to demand any banking facilities, but with the rise of the
American Fur Company an active movement of exploration and
exploitation began and within a short time a great many trading
posts were established. Missionaries began to work among the
Indians, and white settlers began to come.

These travelers and the traders, missionaries, and other set-
tlers did, of necessity, occasionally require some services usually
performed by banks. Some needed funds sent them from the
east, others wished to send home their surplus earnings. Some
needed financial assistance from time to time ; others had, at times,
a small surplus needing some safe place of deposit. These and
many other services were required by the earliest white settlers. As
there were no local banks, the interesting question arises, How
were these needed banking facilities supplied? The answer is to
be found only through a close study of the daily business opera-
tions of the inhabitants.

The Fur Company was the moneyed establishment of the early
days, and, if. any fiscal or other exceptional service was required,
the Fur Company was looked to for its accomplishment. The com-
pany was the fiscal agent for the early explorers and missionaries,
for the Indians, and for the people of the region in general. It
not only kept accounts for goods sold them and for furs received
in return, but it performed many purely banking services, such
as making loans, cashing drafts on New York, Quebec, St. Louis,


and other places,, and selling exchange on the Company offices at
St. Louis, New York, and other points. Sometimes these advan-
ces, drafts, and other credits, were carried on the books of the
company in a running account, and orders on the same were hon-
ored when presented.

Many interesting examples in substantiation of these state-
ments are to be found in Sibley's day book, and in letters written
to him and by him while in charge of the Company's office at St.
Peter's. On July 9th, 1838, for example, the J. N. Nicollet ex-
pedition was charged on Sibley's day book to "paid order, Moyese
Arcand, $25.00." On September 17th, 1838, the Western Outfit
was charged to draft of J. N. Nicollet on P. Chouteau & Co., of
St. Louis, account of expedition under his charge, drawn in favor
of H. H. Sibley, agent of the American Fur Company, for $1,899.-
33. Nicollet evidently made a draft on P. Chouteau & Co., which
Sibley cashed or credited; and Nicollet undoubtedly had a run-
ning account with the Fur Company, drawing on the same for his
expenditures and other purposes, and replenishing it when low.

Other running accounts are clearly indicated by other entries.
On July 28th, 1838, N. W. Kittson was credited with a draft for
$130 drawn by H. H. Mooers on H. L. Dousnran. On August 23d,
1838, Huggins & Williamson were credited with $20.00 cash re-
ceived from Mr. Nicollet ; and on the same date the Pokegama Mis-
sion was credited by F. Avers, a missionary in the . Snake river
country, with a draft for $400 drawn on New York, ten days, in
favor of G. M. Tracey.

Turning to Sibley's letter copy books and letter files, we find
evidences of similar transactions. On October 24th, 1838, Joseph
Renville, Sr., at Lac qui Parle, wrote to Sibley, requesting him to
let Dr. Williamson have $100 and charge to his account. In a let-
ter to Sibley, on November 25th, 1838, from Lac qui Parle, Dr.
Williamson says, "I send you above a draft on Mr. Tracey of New
York for $112.14. This, with the $25.00 which you told me you
intended contributing to the Board, .... if I remember
correctly, covers all the orders I have drawn on you."

Another letter written by H. L. Dousman from Prairie du
Chien on October 13th, 1840, to William H. Forbes, an employee
of the Fur Company in Sibley's office, says, "I send herewith my


order in your favor on the postmasters at Fort Snelling and Lake
St. Croix for the quarter ending September 30th last," and gives
orders to collect and credit. These letters all show that the com-
pany carried on its books running accounts,, not only with people
in this region, but also with others living in other parts of the
country who had business to transact in this locality; and thus,
by providing the necessary machinery for the transfer of funds
and credits in this manner, it performed a necessary banking func-

By examining further into the correspondence of the Ameri-
can Fur Company, we discover that this was not the only banking
service rendered the community, but that in addition to carrying
running accounts on its books, sustained by credits in a manner not
essentially differing from modern banking practice, the company
also made loans and advances the same as any commercial bank.
In a letter dated August llth, 1849, to H. L. Moss, Esq., at Still-
water, Sibley says, "I enclose you my own acceptance at three days
for one hundred dollars, being the amount you wish to borrow
from me and which I advance you with much pleasure. The draft
may be cashed by any of the banks or by E. H. Campbell, Esq.,
in Galena." Another letter, written by Sibley to R. H. Campbell,
of Galena, September 27th, 1849, says, "I have advanced Doctor
Norwood of the Geological Corps the sum of $390, which he ex-
pects to get from Mr. Carter at your place, in which case I have
requested him to turn the amount over to you, taking your receipt
therefor." On July 26th, 1849, Sibley wrote to Mr. James Ryan,
of Galena, that he would remit to him the sum of $200 at the re-
quest of the Rev. Mr. Belcourt; and in a letter to Mr. Borup on
September 28th, 1849, he says: "A certain person drew from
Galena for $1,800 or $1,900, saying in his letter of advice, 'I will
not draw again,' and making many brilliant promises of the large
remittances to be made from contracts with the government." All
these instances clearly show that the Fur Company was in the
habit of making loans, as well as of carrying running -accounts fed
from outside sources!

-Not only did the Fur Company obviate the necessity of local
banking institutions by transferring funds through exchange trans-
actions, by carrying running accounts on the books of the company


against which orders could be drawn, and by extending financial
accommodations through loans, but it also acted as a general fiscal
or financial agent, both for the local inhabitants and for those in
the East and other parts of the country who had business to trans-
act in this region.

On November 3rd, 1841, for example, General Dodge wrote to
Sibley sending him a draft for $10,000 for "purchases for the
Sioux Treaty," presumably for presents to the Indians to get the
treaty signed, and on January 14th, 1849, Rev. G. A. Belcourt,
missionary at Pembina, wrote to Sibley : "I want to draw money
from savings bank at Quebec, and I know of no surer way of get-
ting it than by asking you." Another letter written to Sibley on
October 28th, 1850, from St. Louis by Kenneth McKenzie, asks
him to attend to his claims when the treaty is made with the
Sioux in 1851, his claims amounting to $57,175.00. These letters
all show that persons in other sections of the country used the
American Fur Company as a financial agent in this region.

In performing numerous functions of a bank, the local Fur
Company worked in connection wdth and was assisted by the home
establishment in New York. Various letters to Sibley from New
York written by Ramsay Crooks, the president of the company,
show the connection with the home office.

A letter dated April 27th, 1836, gives notice of the payment of
a draft for $112.14, drawn by Dr. Williamson on G. M. Tracey,
which was evidently credited on the books at the New York office.
Another letter of March 29th, 1836, says, "Mr. Norman W. Kitt-
son has left in our hands $500, which is subject to his order, and
in case he wants funds in your country we hope it will be conven-
ient for you to accommodate him to the extent of his said deposit/'
In the same letter he says, "Our friends in Montreal are anxious
that we collect from your Mr. Forbes the amount of his note to
John White, say $80.00. which we hope you will see he pays with
interest;" and in a postscript he says, "General C/s acceptance of
Mr. Kittson's draft on him for $828.00, one of those you gave me
last winter, was protested today for want of funds." On May 26th,
1837, Crooks notified Sibley of the payment of a certain draft for
$1,000, and admonished him to be careful whose drafts he takes,
as "but few of them are good." On October 18th, 1836, Sibley


is sent a note for collection, with instructions to place to the credit
of St. Mary's Outfit when collected; and on December 20th, 1836,
he is notified of the collection of two certain drafts and the credit
of same to the "Western Outfit" and the "Fort Snelling Outfit,"
respectively, .and of the payment of $40.00 "to Samuel W. Bene-
dict, as requested/'

There was no marked influx of settlers into this region until
after the organization of Minnesota as a territory in 1849. Dur-
ing the pre-territorial period the few scattered white inhabitants
managed very well without the assistance of banking institutions,
for the simple reason, as has been pointed out, that they did not
need them, their few needs in this direction being cared for by
the Fur Company without great inconvenience.

When the act was passed organizing Minnesota Territory, the
region was "little more than a wilderness." The whole country
west of the Mississippi river, from the Iowa line to Lake Itasca,
was still unceded by the Indians. St. Paul was the only settlement
in the territory that could lay claims to being even a small village,
so small in fact that its population did not exceed two hundred and
fifty or three hundred inhabitants, even after the sudden stimulus
of the rumor that it was to become the capital of the new terri-
tory. It was "just emerging from a collection of Indian whiskey
shops and birch-roofed cabins of half-breed voyageurs," with here
and there a frame tenement erected and some warehouses in the
process of construction.*

The organization of the territory was followed by an influx of
settlers, and the population steadily increased. At the first cen-
sus, taken in the early summer of 1849, St. Paul had a population
of 840, and Stillwater, the only other settlement of any size within
the present boundaries of Minnesota, numbered 609 inhabitants.
St. Paul, being the capital and at the head of navigation, continued
for some time to attract nearly all the immigration, and by the lat-
ter part of 1853 its population had increased to about 4,700.t

The first newspaper to be established in Minnesota was the
Pioneer, whose first issue appeared on the 28th of April, 1849, and
it has continued uninterruptedly to this day. About the same time

*Neill, History of Minnesota, p. 494.
tThe Pioneer, November 17th, 1853.


the Kegister appeared, closely followed by the Minnesota Chroni-
cle; and after a few weeks' existence these papers were discontin-
ued and gave way to the "Chronicle and Kegister." From the files
of these papers is to be gleaned much valuable information upon
our subject.

The scarcity of currency, which was keenly felt by the earliest
settlers, fanned the zeal of those who wished to establish banks
for the issue of paper money; but the experience of our public men
with "wildcat" and other irresponsible paper banking schemes in
other states, together with the able and vigorous opposition of the
local newspapers, prevented legislative sanction of any such move-
ment. The few unauthorized attempts to establish a paper bank
were met by such determined and concerted action, on the part of
the sound money men, that no bank for the issue of paper money
was ever successfully established in -the territory.

The earliest paper banking project in Minnesota, which I have
been able to discover, was the "Bank of Saint Croix." The first
reference to this project in the Pioneer appeared in an editorial
on November 15thj 1849, which stated that sometime in Septem-
ber a stranger calling himself Isaac Young came to St. Paul and
succeeded in getting a Mr. Sawyer to sign a large number of pieces
of paper on which were engraved the words, "Bank of Saint Croix,
Saint Paul, Minnesota," Mr. Sawyer being informed by Young
that the piece? of paper which he signed as cashier would be
promptly redeemed when issued. Young evidently left St. Paul
with the notes and attempted to get them into circulation, for the
Pioneer states that notes of the "Bank of Saint Croix" were quot-
ed in the eastern bank note lists at one per cent discount; and it
was the opinion of the editor that the quotations were furnished
by "some accomplice in the fraud, living in Wall street, New York

How extensively these notes got into circulation cannot be de-
termined, but the project created considerable comment and was
repeatedly mentioned in the St. Paul newspapers up to the middle
of February, 1850. On December 12th, 1849, the Pioneer notified
the public abroad that there was no such bank in Minnesota, and
added that "if they ever hear of the existence of any banking in-
stitution in this Territory, they may set it down as a fraudulent,


unlicensed concern;" and so much prominence was given in sub-
sequent issues to the exposure of this fraud that, in all probability,
but few of the notes got into circulation. The Pioneer on January
9th, 1850, claimed that a large quantity of the notes were issued
and taken to. Galena, St. Louis, and other places; and that, when
navigation was closed and winter should nearly cut off communi-
cation with St. Louis, "it was designed to flood the whole lower
country with this spurious stuff." St. Louis and Galena, however,
discovered the fraud early enough to prevent this. In the latter
part of December, the St. Louis Union cautioned all persons
against taking the notes., designating them as a "bare-faced fraud,"
and stated that a gentleman from St. Paul, Minnesota Territory,
had informed them that "there is no Bank of Saint Croix at that
place, and there is not a bank in the Territory, although paper
bearing that face is quoted in Presbury & Co.'s Counterfeit De-


Online LibraryAdolph Oscar EliasonThe beginning of banking in Minnesota → online text (page 1 of 2)