As banks around the US began to fail in 1929, Charles D. Waggoner, president of the Bank of Telluride, saw the writing on the wall. Waggoner knew that customer confidence was, essentially, all that remained of the Bank’s assets.
The week’s Sunday Sign commemorates Waggoner’s “Great Swindle” to save the Bank of Telluride.
On August 30, 1929, Charles D. Waggoner set out for Denver with a Robin Hood type of plan to save the Bank of Telluride. The swindle worked long enough for Waggoner to obtain a half-million dollars from the New York City banks and use these funds to pay creditors of the Bank of Telluride, which left funds for the Bank’s depositors. The swindle saved the townspeople but Waggoner’s swindle was uncovered and the Bank of Telluride was closed.
Time magazine provided a contemporaneous account of Waggoner’s swindle, published in the magazine’s September 16, 1929 issue.
In 1939, Waggoner told a newspaper, The Daily Sentinel, that he knew what he was doing. “I would rather see the New York banks lose money than the people of Telluride, most of whom had worked all their lives for the savings which were deposited in my bank.”
I’m not condoning Charles D. Waggoner’s swindle. What he did was illegal. But the difference is that Waggoner was charged and served time for his fraud.
This past Thursday, the Jefferson County Commission approved the overall “talking points” of a negotiated settlement with Wall Street investment banks, led by J.P. Morgan. Without a settlement, County bankruptcy was inevitable. If the settlement is finalized and approved by all the controlling parties, perhaps County bankruptcy will be avoided. The details and history of the Jefferson County sewer bond debacle has been well documented by others.
The big investment firms that planned and executed the Jefferson County Sewer Debt refinancing deal made out like bandits in the deal. The refinancing scheme wasn’t technically illegal but it was sold to officials (in Jefferson County, and elsewhere) as a positive, with no downside risk. Many of the elected officials involved (and some of their local cronies) have been convicted of taking or paying bribes and/or illegal kickbacks, in relation to this and other government actions. To my knowledge, the investment banks haven’t faced any criminal charges and only two lower-level investment bank employees are dealing with civil investigations by the SEC. Sure, they’ll write off a bit from the settlement, but the individuals who planned it have already received their big bonuses. And the loss will be written off and further reduce the already-minimal federal taxes the investment firms pay.
Wall Street and the “big” financial industry continues to ride high in the aftermath of the 2008 crash. The rest of America (and most of the rest of the world) continues to pay the price for the swindles—some legal, some illegal. These financial scams are destroying the wealth of the middle and working classes in the United States. The laws, regulations and policies that favor the financial industry are at least partly to blame for the budget debts and overall deficit of the U.S. Hedge fund managers pay little tax on the fees they receive for managing the funds, while workers pay very high rates of tax on earned income. Politicians still bow at the altar of investment banks.
In 2011, small banks continue to fail, big investment banks and big commercial banks are bigger than ever (and still to big to fail). History repeats itself, only more so.
Telluride, Colorado is one of my favorite places. The old mining town is best known today for its skiing but it’s really a cool place with lots of interesting history. Telluride has a unique mountain vibe that comes from the meshing of ski-bum hippie attitudes with a small-town community relationships (and all the values that fall in between the two).
The Sunday Sign is a weekly feature of The Ben Franklin Follies. Links to more Sunday Sign posts are here (or simply click on the Sunday Sign tag at the bottom of this post).
Forbes magazine (Feb. 14, 2011): New laws stroke hedge fund managers
Looting Main Street by Matt Taibbi for Rolling Stone (March 30, 2010)
Loophole for hedge fund managers costs billions: 2007 Report by Randall Dodd for Economic Policy Institute
FDIC Failed Bank List: Bank Failures since 2000
Bachus is Wall Street’s Man in Jefferson County: Business Week, May 26, 2011