1933: Hudson Banks Defy Roosevelt, Stay Open

For most of the century, Hudson was serviced by two locally owned banks: Thompson Savings Bank, which dated from 1867, and Hudson State Savings Bank. which adopted the name in 1917 after a change of ownership and merger with a third Hudson Bank; it had earlier been Boies State Bank, which was incorporated in 1891 and dated back to 1855.

Both were sound, conservatively managed banks that supported the community. The soundness -- and independence -- of their managements gave them a special mark of notoriety in the depths of the Depression of the 1930s.

Most of the assets in banks consists of money they've loaned out; only a relatively small amount of cash is kept on hand. In the days before the Federal Deposit Insurance Corporation, very often if the public had reason to suspect that a bank was in trouble, the customers would want to draw their money out. "Runs" on banks could wipe a bank out of their cash reserve, and in 1933, the feeling that banks weren't sound was widespread. The depression, falling real estate prices and other factors led to the crisis, along with a number of other factors..

When President Franklin Delano  Roosevelt, in his inaugural speech, said "The only thing we have to fear is fear itself," it was the banking crisis he was talking about.

Between the Stock Market Crash of 1929 and early 1933, over 5500 banks around the country had failed. The situation finally got so bad in February  of 1933, when Detroit's largest bank appeared about to close,  that  Michigan Governor William A. Comstock ordered the banks in the state to close for eight days, first to give them a breather from a panic of withdrawals, and secondly to give a chance to see if the banks were, in fact, sound.

But, the banks in Hudson defied the governor. "My father was an independent character," recalls William G. Thompson; his father, William R. Thompson, was the owner and president of the bank. "He knew the bank was sound, and wasn't going to close it."

Byron Foster, President of Hudson State Savings Bank, new his bank was solid, too, and agreed to back Thompson up. "If you don't close, we won't" he's reported as telling Thompson.

Soon Thompson got a call from a Michigan bank examiner,  ordering him to close. "You just gave us a clean bill of health three weeks ago," he's reported as telling the examiner. "A bank can't go bad in three weeks. We're staying open."

"If you want to buy a bank," William G. Thompson remembers his father telling a federal bank examiner, "Then you can close it. I'm not closing it while I own it." Michigan's banks stayed closed for longer than the original eight days, and other states closed their banks, as well. Roosevelt, having just taken office as President of the United States, realized that the temporary closing of banks around the country might be a way to stem the rush, and within hours after taking office had picked up on the Michigan idea.

But, the lights stayed on at Thompson Savings Bank, and Hudson State Savings Bank, making loans, deposits and withdrawals like normal..

With the exception of Hudson's banks, and a handful of other recalcitrant , the banks around the country stayed closed for several days, while examiners went over them. The  administration printed extra money for sound banks to use, and the panic began to stem. Many banks didn't reopen after the "Bank Holiday".

Out of the "Bank Holiday" came the Federal Deposit Insurance Corporation, and the Federal Reserve System. Today most people don't even know what a "run" on a bank was.

But old-time bank people from either of the Hudson banks still take some pride at having stood up to Roosevelt and saying that they intended to honor their commitment to their customers to stay open, rather than follow the dictates of the government.

   Hudson State Savings Bank was purchased by the Bank of Lenawee in 1987; Thompson Savings Bank  managed to stay independent until 1995, when it was purchased by United Bank of Tecumseh, now United Bank & Trust. 

   
THOMPSON SAVINGS BANK in the 1930s. Shown are (left to right) Ellsworth J. Scovill, Marshall Goodrich, E.C. Rickenbaugh, Russell D. Coman, and Marinus Hinckley, all bank employees.