Dutch Influences

The Inland Empire

By 1896 the price of wheat was rising again, aided by another rumored scheme to corner the market. It hit one dollar a bushel on the Chicago board on August 21, 1897, the highest in six years. Wheat shortages in Argentina, Russia, India, and Australia held Liverpool prices high. In eastern Washington, “evidences of renewed hopefulness are seen on every hand…. The improvements do not show the expenditure of much money, but more careful attention” to buildings, fences, and machines, remarked an editor. Wheat rose twenty-one cents a bushel in one month at Yakima. The panic was over.
As a consequence of panic, many farm and city properties had changed hands through foreclosure and sale. Banks and merchants had gone out of business. Prominent men had toppled, their social ranks evaporating with their fortunes. New faces appeared in counting houses, stores, and on farms, but towns did not rally to an evident spirit of community renewal. Farmers did not diversify crops rather than rely on wheat. Rural political unity proved a myth when good times returned. Panic had not instilled a fear of debt. The Dutch Hypotheekbank of Spokane lent millions to farmers. Some farmers, having outlived the panic, paid up and moved away. Their neighbors eagerly went into debt to buy their land. (In this manner, Kelso brothers bought six thousand acres in the Horse Heaven district and then farmed it with a steam thresher.) Tales of privation, distress, and luck circulated for years, but few people changed the way they lived or the way they farmed.
Pg. 51: One of Seattle’s large early companies, Centennial Mills, had been started in Spokane in 1889 by Moritz Thomsen, a former Danish sea captain financed in milling by Dutch investors. Thomsen diligently expanded his business and in 1894 moved to Seattle. He remained at the head of Centennial for forty-three years, making his company powerful in western bakery and Asian grain trades.
Pg. 111: From this pep-rally conclave emerged the Pacific Northwest Fruit Distributors, attracting such men as H. F. Davidson of Hood River, W. T. Clark, the Wenatchee canal builder and nurseryman, Robert E. Strahorn, the reedy, secretive Harriman railroad promoter who chaired the meeting, and most important, W. H. Paulhamus, recently out of the governor’s race (“Pennsylvania Dutch. an organizer and orator by nature,” Sunset called him), the Puyallup grower who had organized the raspberry business. A one-time state senator, and president and manager of the Puyallup Fruit Growers Association, Paulhamus was accomplished at one of the arts of fruit selling—suing the railroads. As a grower remarked, “before the war, claims against railroads were a big part of the apple business.”
Pg. 122: The man in charge of money, more than anyone, was Daniel Webster Twohy, a slender, bald banker with a proper, almost pious, manner, who was installed in 1902 as president of Spokane’s Old National Bank by his brothers—Denis, James, and John, railroad contractors. With associates, the Twohys bought the bank from its founder, Stephen S. Glidden, once operator of the Tiger-Poorman mine in the Coeur d’Alenes, who named his bank “old” because he didn’t care to be second, and there had already been a First National and a Spokane National in the city. Until the depression of the thirties, banking in Spokane could almost be divided into two eras—before Twohy and after Twohy. Even the Dutch lenders, who virtually owned downtown Spokane by foreclosure in 1896 and continued to invest millions in rural eastern Washington until World War I, did not mark Spokane finance as indelibly as Twohy.
Pg. 128: One lender, the Northwestern and Pacific Hypotheekbank, owned principally by Dutch investors in Amsterdam and Rotterdam, lent millions on the security of real estate in Washington’s most productive wheat and fruit districts. In 1910, for instance, its loans of $4,498,349 concentrated in Adams, Douglas, Lincoln, and Spokane counties. A second company formed by the same investors, DeTweede Northwestern and Pacific Hypotheekbank, in 1911 loaned $1,114,660, one-third of it in Washington’s leading wheat counties, although its largest single investment was in irrigated tracts near Twin Falls, Idaho. Private trust and mortgage companies in 1914 reported more than $7,150,000 lent with farm real estate as security in the vicinity of Spokane.
Spokane’s trespass into rural banking, sitting city directors on rural boards and sending bright young city bankers to learn their trade (and impress the home office) by managing country accounts, the expanding investment in agriculture by impersonal loan companies with directors in Holland or North Dakota or New York, the legislative closure of private banks, the emergence of trust companies as bankers and insurance companies as lenders, and the constraints of national and international commerce—all of these, joined with the farmer’s growing investment in his business, closed out the personal era of country banking and stiffened the requirements to conform, to keep books and offer collateral. And where personal banking lingered, rather than treasuring it, bankers acted embarrassed by their seeming laxity.
Pg. 184: The Palouse pioneer George H. McCroskey remembered five- and six-day trips to the hills for timber before railroads came—those railroads that radiated from Spokane to ensure the city’s place in the lumber business of the Inland Empire. Beside the Spokane River lay two of the larger mills before 1900: Frederick Post’s, lipping the canyon at Post Falls, and the Sawmill Phoenix at Spokane on a dammed river channel, acquired through foreclosure by Dutch lenders, and dedicated with champagne, whistles, and cheers. Managed by Spokane’s perennial parade marshal, dapper Eli F. Cartier van Dissel, refugee from a defunct California orchard colony of wealthy Hollanders, the Phoenix brought logs over the Spokane Falls and Northern Railroad from 10,000 acres near Springdale.
Pg. 210-211: Nearly all the businesses burned on August 4, 1889, but within a few days Spokane’s merchants resolved to build a new city. They overbuilt in high-spending competition, ornate, fire-resistant structures of brick and granite along Riverside Avenue. Oddly enough, although steel framing had been used elsewhere since 1871, not one of Spokane’s new buildings used it. Nearly all the builders went heavily into debt. Earlier Spokane had lacked outside capital, but now the Northwestern and Pacific Hypotheekbank, a Dutch-owned mortgage company, lent generously. An imposing city rose. After miles of unpainted, dusty hamlets, railroad travelers came upon Spokane, new six- and seven-story buildings lofting majestically above the rushing river. They were awed as if they had happened upon an oasis of formal gardens in a desert. A Dutch lender wrote home, “I have never seen a small town which offers such an overwhelming impression of monumental buildings. Its people were too extravagant during its early development and many over-reached themselves to force its development.” Overbuilt perhaps, but the grandeur of rebuilt Spokane, with its railroad connections, quieted speculation about which city was to be the great one of eastern Washington.
Pg. 211-212: Even as Spokane rebuilt from its fire, the nation’s economy stuttered. In 1893 a crushing depression fell across the United States, and in the Palouse unseasonal steady rains destroyed crops. Faced with impending bankruptcy in The Netherlands, the Hypotheekbank aggressively foreclosed its mortgages on Spokane’s fine buildings. Cannon, Glover, and dozens of other men were ruined. By 1896, when Spokane’s assessed valuation stood at $15 million, the Dutch owned $4.7 million in property, generally the best commercial ground. As soon as the panic started to break, the Dutch began selling—only four important buildings had escaped foreclosure—and new owners bought the structures. They were a new generation of influential men for Spokane, men like D. C. Corbin, rich from building feeder railroads; F. Lewis Clark and Charles Sweeny, who made a killing in mining stocks; Patrick Welch, railroad contractor; Aaron Kuhn, Palouse merchant and moneylender turned banker; David T. Ham (with King George V beard and bow tie), real estate investor and political machinist; James L. Comstock and Robert B. Paterson, merchants, whose principal object was to acquire a central site for their store; William H. Cowles, newspaper publisher, who confided to an associate that real estate was the only investment he could make without arousing suspicion that his papers promoted businesses he owned; and others.

Spokane and the Inland Empire

Pg. 189: The original Dutch involvement in Spokane was not related directly to other colonization or investments elsewhere in the region; their principal company, the Northwestern and Pacific Hypotheekbank, was formed specifically to operate in Spokane and its contiguous areas. Loans outside of this locality before 1900 were minor. This singular interest in Spokane seems to have resulted from an analysis of the city’s capital resources by a traveling Hollander, Herman A. Van Valkenburg, who was appraising railroad investments. In 1883, Van Valkenburg visited Spokane Falls and was impressed with its location, plans for feeder railroads, rich farming areas to the south, and potential waterpower. He perceived that Spokane Falls (as the city was then known) lacked capital to back its optimistic spirit. Perhaps a dozen loan agents were in business, but none with outside financing, and only small investments trickled in from Portland and Helena. Consequently, Van Valkenburg, having assessed Spokane Falls as a promising market for lending and the purchase of state warrants, formed the Northwestern and Pacific Mortgage Company in 1885. He hired as its agents two attorneys, John W. Binldey and Jacob R. Taylor, stout Canadian cousins recently arrived from Ontario. Among the incorporators was Anthony M. Cannon, co-owner of the Spokane Falls townsite, who was the town’s first banker and also a real estate developer, mill owner, and city councilman. Cannon regarded himself as a molder of the city. The mortgage company sold debentures, largely to Dutch buyers in the United States, to raise the initial capital.
Pg. 190: His Netherlands investors were enthused at this showing, but to avoid U.S. taxes on bonds of an American company, they encouraged Van Valkenburg to reorganize his mortgage company in The Netherlands. Thus, the Northwestern and Pacific Hypotheekbank was chartered by royal decree on June 4, 1889, and also registered in Washington on the same date. “Hypotheek” means mortgage. Its charter allowed the company to lend money on the security of real estate in the United States and in The Netherlands, to buy and sell mortgages, and to issue debentures in amounts equal to its outstanding mortgages. Capitalized for 6,000,000 guilders (approximately $2.4 million), the company named as its principals: Van Valkenburg; Mari Franois de Monchy, secretary of the Amsterdam Canal Company; and Jean Pierre Gu6pin, a banker’s son who was a captain in the Dutch navy.
Pg. 191: The reorganized Northwestern and Pacific Hypotheekbank absorbed the business of Van Valkenburg’s original company, which amounted to 533 loans totaling $1,107,963 on real estate in Spokane Falls and farmland in Spokane, Lincoln, Whitman, Garfield, Columbia, and Walla Walla counties in Washington, and in Idaho’s Kootenai, Latah, and Nez Perce counties. (There were four loans in Helena, but the company made no attempt to increase its business there). Van Valkenburg served as the Hypotheekbank’s president and director in the United States; Binldey and Taylor continued as its agents and attorneys. The new Hypotheekbank had scarcely begun business when the town burned down. On August 4, 1889, fire destroyed thirty-two city blocks, including most of the business district. Some structures were protected from the flames by gullies, dynamiting, and the Spokane River, but leaky hoses prevented volunteer firemen from effectively watering down the main commercial center. Fortunately for the Hypotheekbank, insurance with British companies covered its losses and the Dutch bank received payment within two weeks. It was then back in business to help reconstruct the charred city.
Pg. 194: By the end of 1892, the Dutch investments in rural lands rose beyond $1 million and its city loans passed $4.8 million. Every week, the Hypotheekbank sent $4,000 to $25,000 to Amsterdam through Brown Brothers, the New York investment brokers, or via London banks. Much of the rural land accepted as security for loans was never given on-site inspections, since the company’s agents at Pullman and Moscow simply assumed it was good grain fields and orchards. By the next summer, however, deteriorating business conditions became alarming, as the United States toppled into a devastating depression started by the Panic of 1893. Spokane stores closed, and in surrounding areas, numerous farms lay neglected and crops unharvested. On June 5, Cannon’s pioneer Bank of Spokane Falls collapsed, and all of the city’s banks were besieged. Two more failed to open on the morning of June 6, and at 2 P.M. another closed. In all, seven of ten banks fell. Wheat prices in the Palouse fluttered to 30 cents a bushel, then rain ruined the new crop. Many farmers could not pay their bills, and neither could they afford to move away.
Pg. 200: Oyens, when he formed the new Northwestern and Pacific Hypotheekbank, sent Isaac Jones to Spokane to make a detailed evaluation of the old company’s urban and farm properties. Jones, son of an Amsterdam stockbroker and a director of Oyens’s Netherlands-American Land Company, was then living in St. Paul. Arriving in 1896, Jones found Spokane and the surrounding area recovering from the 1893 panic. He calculated that, as a result of foreclosures, the Northwestern and Pacific owned 25 percent of the central part of the city, which was now appreciating in value. (A story, perhaps apocryphal, claims that visiting Dutch stockholders, challenged for jaywalking during a nighttime revel, ordered the policeman to stand aside, shouting, “Don’t you know who we are? We own this whole damned town!”)