By Joel Thurtell
In the wee hours of Tuesday, February 14, 1933, Michigan’s new Democratic Governor William Comstock emerged from the posh Detroit Club after a long meeting of Detroit financiers and Lansing and Washington treasury bigshots. He turned right on Cass Street, right again on West Lafayette and right yet again as he walked through the ornate entry of the Albert Kahn-designed Detroit Free Press building.
In the Free Press newsroom, the governor dictated a proclamation ordering all Michigan banks to take a breather for eight days. The state’s banks were to close while state bank examiners determined which financial institutions were solvent and which ones should never re-open. The governor’s move forestalled further runs on banks that threatened financial chaos in the nation’s automotive manufacturing center.
A few blocks away at 500 Griswold Street stands another ornate monument to the era of the 1920s opulence that led into the Great Depression. It is now known as the Guardian Building, and is the subject of a beautiful book recently published by Wayne State University Press. Researched and written by Detroit Institute of Arts art historian James Tottis, it is titled The Guardian Building: Cathedral of Finance.
Most people I talk to have no idea that this gaudy showpiece of 1920s opulence, known then as the Union Trust Company, symbolizes the profligacy that brought many of the nation’s banks to ruin. The bank whose building was intended to signal stability and strength was actually insolvent by 1933.
By then known as the Guardian Detroit Union Group, the bank had as two of its largest investors Henry and Edsel Ford. When Henry Ford, steamed at his former business partner and then U.S. Senator James Couzens and distrusting banks in general, refused to sink more money into the Guardian Union bank and when the Fords also refused to step aside as preferred creditors, it looked like the impending failure of this big bank would topple Detroit’s other banks, all of which, like the Guardian Union bank, had invested heavily in now hugely devalued real estate and industrial bonds.
The standoff between the Fords and the feds forced Gov. Comstock to order the eight-day “banking holiday” that froze a billion and a half dollars worth of Michigan bank deposits along with 550 banks with 900,000 depositors, according to 28 Days A History of the Banking Crisis, by C.C. Colt and N.S. Keith.
In the twenty five and a half months preceding the Michigan banking holiday, 163 banks had failed in Michigan. One of the prime causes of those failures was incompetence of bank officials, according to a study by then University of Michigan business Professor Robert Rodkey. I’m writing about this and other Depression-era bank boondoggles in my book, How To Stop A Bank Run.
Earlier, banking holidays had been declared in Nevada and Louisiana, but those states lacked the heavy capitalization and the overwhelming debt of the country’s car capital. The Michigan banking holiday precipitated runs on banks in other states near and far.
By the time the new Democratic president, Franklin Delano Roosevelt, was inaugurated on Saturday, March 4, 1933, the nation’s banking system was in chaos. In Michigan, people were applying to their out-of-state banks for funds to meet payrolls and daily household expenses, thus stressing those banks and forcing other governors to order holidays. Some people were were traipsing over to Windsor in hopes of finding loose cash. There were no bank failures in Canada during the Great Depression.
On Monday, March 6, President Roosevelt ordered all of the nation’s banks to close while auditors could figure out which ones were solvent and which were zombies. In Michigan, dozens more banks closed during the state and federal holidays never re-opened.
And it started right there at 500 Griswold Street in the “Cathedral of Finance.”
James Tottis’ beautiful book will be on sale Thursday, March 26 at 5:30 p.m. in the Guardian Building, where Wayne State University Press, Detroit Area Art Deco Society, Michigan Architectural Foundation, Wayne County and Preservation Wayne will celebrate the Guardian Building’s 80th anniversary.
Oh yes, I almost forgot: Wayne State University Press has published a book authored by me and Patricia Beck, Up the Rouge! Paddling Detroit’s Hidden River. Our book can be ordered at uptherouge.com for $34.95 plus $7 shipping.
I’m now writing a book about banks in the Great Depression called How To Stop A Bank Run.
Drop me a line at joelthurtell@gmail.com
