The Little Bank That Could - A Depression Era Tale for Today

One of the things about moving to the suburbs from the city is that you find yourself doing lots of family-oriented things.

In the summer of 2007, I attended a family reunion in Lawrence, Kansas. The Fitzgerald side of my family still lives in that area. I remember fondly the trips to Jamestown, Kansas, to visit my relatives every summer.

The tales that were told at the family reunion were familiar to me, but one stood out more than the others. It had to do with the Bank of Jamestown and how they outlasted the big boys at the megabanks in Kansas City during the Great Depression. This is a true story, and one worth retelling, as it has much relevance today.

This little bank served the Jamestown community - about five hundred townspeople and the surrounding farms.

One day in late 1929, an employee at the bank decided that the best way to make sure he wasn't going to lose any of his money after the Wall Street crash was to abscond with most of the bank's funds himself, leaving the bank and its customers high and dry. That way, he reasoned, if the customers made a run on their deposits, at least he would be sure to have his stash, and theirs, too. Even worse, he was the bank's president.

His timing couldn't have been worse. Everyone in the community was already hurting because of the Depression. And the FDIC didn't exist yet, meaning that none of the bank's deposits were insured. So, the bank faced possible insolvency in spite of its history of prudent management and its avoidance of Wall Street foolishness.

The bank's board of directors met immediately to decide what to do. They were facing a crisis. They knew they couldn't let the good people of the community who had placed their trust in them to go broke. My great-grandfather Ed Fitzgerald, who was head of the directors, volunteered to go to Kansas City to meet with the big banks there. He would try to persuade them to loan his bank $5,000 to replace the stolen funds, thereby covering the customers' losses and staving off insolvency.

Since he was only used to driving country roads, he had one of his sons, Bill, drive him to Kansas City. They arrived that afternoon, pulling up to park in front of a skyscraper twenty stories high.

Uncle Bill waited in the car while my great-grandfather took the elevator to one of the top floors, where the big city bankers waited in the boardroom. The doors swung open, my great-grandfather entered and shook hands all around, then sat down to present his case for a bank loan. He explained the situation thoroughly, leaving out nothing, then sat back and waited. His request was reasonable. The big bank was large and could easily afford the loan. Surely they would give it some consideration.

Then the bankers on the other side of the table spoke. The Bank of Jamestown's situation was certainly serious, they said, but they simply didn't make loans to small town banks. You small town bankers should leave banking to those who really understand it, they said - in short, the big boys. We're sorry, they said, but we can't help you. Good luck and good afternoon, Mr. Fitzgerald.

It was over. My great-grandfather rose from his chair, put on his hat, and left the boardroom. He got in the elevator and when he reached the street, he slid into his car beside my Uncle Bill and told him to drive back to Jamestown.

When they arrived, he relayed the bad news to the rest of the board of directors. They knew they had to come up with a solution, and quickly, or the community would face more hardship. My great-grandfather had a lot of grain from the local farmers, which he had taken in lieu of cash for the farm implements they bought from his hardware store. He and the rest of the directors realized they would have to dig into their own pockets to cover the stolen money. He sold the grain for what it would fetch and the other directors took similar actions.

The bank was saved and the customers' deposits were restored. The directors hired Mr. Herbin, a banker from a larger town, as the new president. He was an honest and capable man, and he put the bank back on an even keel. They never did catch the former bank president who embezzled all that money.

However, the big city bank that refused them the modest $5,000 loan went belly up within the year, and took a number of other banks, big and small, with it. The Bank of Jamestown is still in operation today, and not too long ago, celebrated one hundred years of business supporting the community that placed its trust in them.

It just goes to show that, despite what the big bankers and the Treasury say today, the big boys don't always know what's best, or even what they're doing. It is remarkable that, in a day and age when there were no bank bailouts, a small town bank saved itself and the community. It not only put the big banks to shame, but it proved itself as "the little bank that could."