February 27, 2025 • 26 mins
A century ago, in March 1925, Charles G. Dawes was sworn in as vice president of the United States. Being elected vice president of the United States — as Dawes was, alongside Calvin Coolidge, in a landslide — is usually a career pinnacle for an American politician, but Dawes’ vice presidency turned out to be more of a footnote in his eventful life. In the first part of this two-part podcast series — presented by R&T Deposit Solutions — Dawes biographer Annette Dunlap walks listeners through Dawes’ early life, his big ideas in banking and his service as comptroller of the currency, and how he built up Chicago as a regional banking center. At this centennial moment, and in this 150th anniversary year for ABA, it’s worth reflecting on the fascinating and complex life of Charley Dawes.
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Annette Dunlap (00:03):
he was ahead of his time, but if you take those three things, we get
the gold standard with McKinley in 1900.
We get the establishment of theFederal Reserve Bank in 1913, but
the work on that began in 1907.
You get the FDIC in 1933.
So, basically, everything that Charleylays out eventually happens and is now
(00:24):
a part of today's current banking world.
Evan Sparks (00:26):
From the American Bankers Association.
This is the ABA Banking Journal podcast.
Welcome back.
I'm Evan Sparks.
Today's episode is presentedby R& T Deposit Solutions.
I'm delighted to be here as we arecelebrating our 150th anniversary in 2025.
We are taking the opportunity to lookback at several interesting episodes
(00:48):
throughout the history of the bankingindustry and interesting figures in
the history of the banking industry.
And we're going to take a trip back tothe early 20, late 19th and early 20th
century today to take a look at someonewho I think is probably one of the most
influential bankers in American history.
(01:08):
But who is yet one of the lead today,one of the least known political figures
in the, in, in 20th century us history.
And that is Charles Dawes,or Charley, as he was known.
If you can believe it, he was, thisis someone who was The comptroller of
the currency, the first head of whatthe agency that became the Office of
Management and Budget and and a key figurein the allied war effort during World
(01:34):
War One as a serving as a colonel andthen and then being promoted to brigadier
general under Pershing, someone who was,who to the United Kingdom, someone who
is an international diplomat who won theNobel Peace Prize and someone who became
the Vice President of the United States.
And amazingly, Vice President of theUnited States is probably not even
in his top five accomplishments.
(01:55):
I mean, it was so, so when you lookat the, at what this person did
and all the while Being a businessleader and banking industry leader.
So why do we not knowmore about Charley Dawes?
To answer that question withme, I have Annette Dunlap.
Annette is the, is one of Dawesmore, more recent biographers.
She's the author of Charles GatesDawes: A Life, which came out in 2016.
(02:16):
Highly recommended, very readable,not a, she keeps the, Annette keeps
the the story zipping right along.
And so Annette, thank you forbeing with me today to talk about
talk more about Charley Dawes.
Annette Dunlap (02:27):
My pleasure.
Thank you for the kindwords about the book.
I appreciate that so much.
Evan Sparks (02:32):
I think very few of our listeners will be
familiar with Charley Dawes.
Can you give, give us a quick, you know,biographical sketch of where he came from?
Where he came from and how hegot his start in the world.
Annette Dunlap (02:44):
Sure.
So, Charley was born at the tail end ofthe Civil War in 1865 in Marietta, Ohio.
And his family tree was fairly prominent.
His great grand, well, his grandparentsand his great grandparents on both sides
of his family were founders of Marietta.
He had one great grandfather who wasinvolved with the Northwest Ordinance
(03:09):
drafting of the Northwest Ordinance,which included a clause that slavery would
not be brought into the Ohio Territory.
It was a family that put a lot ofemphasis on education, they were
politically active, and he had agrandfather who had founded a bank.
So you have all these different piecesthat go into this Young man's development.
(03:30):
He was, by all accounts,extremely intelligent.
He attended Marietta College, which wasactually a fairly respectable school
that brought in young men of from moneyedfamilies from around the Midwest area.
So it gave him a lot of connectionsoutside of just the Ohio area.
(03:50):
He then went to Cincinnati, tothe Cincinnati School of Law, and
he finished before he turned 21.
So he had to wait between graduationand his birthday before he was old
enough to take the bar exam, whichhe passed when he did take it.
In the meantime, he was looking at whathe was going to do in the future, and
(04:13):
the economy in Marietta was not doingvery well, and he had some relatives
that had moved out to Nebraska.
He had some classmates, both fromMarietta College and from the
School of Law, who were findingsome success moving to Nebraska.
A close friend of his was a nativeNebraskan, and so Charley went out and
(04:33):
settled in Lincoln, Nebraska, lookingto be a young man to make his fortune.
So he actually was successful in hisstart in law practice in Nebraska, but
he pretty quickly realized that themoney wasn't going to be made in doing
wills, trusts, and business transactions.
And so he got interested ininvestments in real estate.
(04:57):
And from there, when he began tounderstand the inner workings of
finance, which of course, as Isaid, he had a background in that.
from his grandfather and an uncle who hadtaken over management of the of the bank.
His grandfather had started andthis was an uncle by marriage.
So he got into investing andthen he realized Nebraska really
(05:18):
wasn't big enough for his dreams.
And he had gotten a lot of his funding.
If it wasn't from his family,it was from banks in Chicago.
So he made a move from there.
To Chicago and that's pretty muchwhere he planted his flag and his
life really started everything abouthis life just kind of took off from
there from the contacts that he madefrom the people that he got to know
(05:41):
from the opportunities that he had.
And he also wasn't afraidto put himself out there.
So he got involved in, in theMcKinley campaign and that
got him his political start.
And I, I could go on and on, but Ithink that's probably a really good
place to just stop and let you startasking some specific questions.
Evan Sparks (05:59):
Absolutely.
So I'm, I, so looking at his start, he'sgetting, he gets into the political, in
the, into the McKinley, it gets involvedin Republican politics in Illinois.
And you have a lot of material on that.
He's very, he, Kind of gets in withthe McKinley campaign with Mark
Hanna, who is McKinley's consigliereand the guy who was kind of running
(06:20):
the campaign, the McKinley campaign.
And so he's and he's promised thejob of comptroller of the currency
at the age of what, 30, he'sin his early thirties, I think.
Right.
So he, he's, he's going to be going toWashington as soon as the, the current
comptroller, Finishes his term Dawes hasthis job as a, as comptroller lined up.
(06:41):
And I think that one of the interestingthings that you talk about in the book,
one reason that he was, that he was,you know, a competitive figure for
that job was this booklet he publishesin 1894 on the banking system of the
United States and its relation to themoney and business of the country.
And He's coming out of, he'slooking back on the Panic of 1893.
(07:04):
And what is it that in this, in thisbooklet that he proposes that causes
so much attention and causes kindof gets him so much attention from
the banking and political community?
Annette Dunlap (07:14):
Sure.
So this book is really almost in someways prophetic because he outlines
some recommendations to avoid anotherpanic like the Panic of 1893 that
people were sort of going through.
Yeah.
taken aback by again because it was avery forward thinking it was probably
way ahead of the time from wherepolitically people were, but as we'll
(07:38):
see I through our conversation thismorning, we'll see how nearly every
one of his recommendations eventuallygets adopted in one form or another.
So I think, you know, when we'retalking about his youth, 1894.
And as I said, he was born in 1865.
So he's 29 years old.
When he writes this book, and one of thefirst things that he calls for in the book
(08:00):
is the establishment of a gold standard.
Now, the part of the reason for thePanic of 1893 was because we didn't have
a gold standard, and there was the pushfor bimetallism, and that silver could
be exchanged at a rate for gold and thatwhen the price of silver started to go
down as they had more silver, silver minediscoveries and therefore had more silver
(08:24):
flooding the market and people wanted togo ahead and exchange that for gold, there
was actually a run of gold on the banks.
In the work that I did on anotherbiography, one of the things that I
learned in the process of working onthe Cleveland administration is that.
Grover Cleveland, in order to put anend to this panic, actually asked J. P.
(08:48):
Morgan to loan the United States roughly10 million of gold to replenish the United
States Treasury and to help put a stopto The gold run on the banks and also
to stabilize the United States economyin the United States banking system.
So Charley is writing inresponse to what has happened.
(09:10):
So his first thing is, you know,get us on a gold standard, which he
had, there were a lot of detractors.
William Jennings Bryan was sortof leading the charge on that.
Charley's own uncle who was running thebank back in Marietta disagreed with him.
The second thing was what we now knowas depositor's insurance, but the way
that Charley posed it in the book wasthat it would be a tax on the bank
(09:35):
based on the value of its deposits.
So it was essentially a prorated share.
of or prorated percentage ofwhat was deposited in the bank
would then be paid as a tax.
That tax would become a form of insurance.
The next thing that Charley waslooking at was instead of having these
(09:55):
regional clearinghouses that handledthe interbank transactions, there
should be a national entity that wasoverseeing all interbanking transactions,
interstate banking transactions.
transactions as well as intrastate bankingtransactions, and on top of that have
(10:15):
some say so in federal monetary policy.
So again, he was ahead of his time, butif you take those three things, we get
the gold standard with McKinley in 1900.
We get the establishment of theFederal Reserve Bank in 1913, but
the work on that began in 1907.
It was finally pushed through afterWoodrow Wilson became president in 13.
(10:36):
And then when Franklin Rooseveltcame into office, and he declared the
banking holiday and then had the bankinglegislation to be able to reopen the
banks with some sense of confidence.
You get the FDIC, Federal DepositInsurance Corporation, in 1933.
So, basically, everything that Charleylays out eventually happens and is now
(10:58):
a part of today's current banking world.
Evan Sparks (11:01):
Yeah, no, it's, I mean, it's, I was reading the, this, you
know, description in the book herewhere he says, You know, "there's one
law that has, which has already beenconsidered somewhat in Congress, the
passage of which, in a proper form,seems to us of vital importance.
That law is one which should levy a taxupon national banks for the purposes
of creating a fund to be held by theTreasury for the reimbursement of
depositors and failed national banks."I mean, that is basically using the
(11:23):
language instead of tax of assessmentsand of using the language of assessments
and it's not, you know, and it's,And it's not for national banks only.
It's for all banks.
That is the structure of depositinsurance that was created with the FDIC.
So it's pretty remarkable that, youknow, he's kind of coming out with this.
What was the reaction in the bankingindustry among other people, among
(11:45):
other leaders in banking, andPolitical leaders to these proposals
at the time that Charley had putput this put this booklet out there.
Annette Dunlap (11:54):
Sure.
So his uncle, W. W. Mills.
So he's an uncle by marriagecritique to the book.
And as I mentioned earlier, Did not agreewith the gold standard had some questions
about the quote tax or as we would nowof course today call it an assessment
on the depositor's insurance thoughtthat some of Charley's ideas were good.
(12:15):
His law professor, Jacob Cox, whowas one of his earliest investors
in helping Charley get off theground in his financial life.
And then, thought that the book waswell done, but also wrote a very
detailed critique of it, which Icouldn't get my hands on, but Charley
was so impressed with the critique,that when he had the book reissued, he
(12:36):
included the critique in its entiretyin a second edition of the book.
But by and large, it was just oneof those books that was just, you
know, read by a very small audience.
It didn't seem to set anybody on fire.
Fire obviously, since we've justdiscussed how long it took for these
ideas to ultimately find its place inour way of banking operations today.
(13:02):
And then in the laws governingbanking, banking operations, Charley.
You know, it just.
My opinion would be, hewas ahead of his time.
He was a, he was a farsightedindividual who was very good at
analyzing and figuring things out.
But again, I think his youth workedagainst him, the fact that he really
(13:22):
didn't have enough of a toehold inthe banking community at that point
to really quote unquote sell the idea.
It, it just didn't get the traction.
That it would eventually get but aswe've already said you get it in pieces
Evan Sparks (13:36):
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(13:59):
So let's talk about that toehold and howhe grew it because so here so he's he's
the comptroller of the currency undermckinley After mckinley leaves he returns
to chicago Starts this starts a bank.
Can you talk about how he builthis bank in chicago and his role
in growing the, growing the bankingsector in the Chicago area.
Annette Dunlap (14:19):
Charley establishes the premise that banks are a public
institution that are responsibleto their communities, that they
operate as a middleman betweenthe depositor and the borrower.
And so Charley is taking this viewof what a bank should be into the
(14:40):
ethos of the bank that he is creating.
So what he is doing is establishing abank that, to use 21st century language,
is going to be dedicated to goodcustomer service and at the same time
be conservative in the types of loansthat it's going to be willing to make.
So he's going in with whattoday we would consider to be
(15:02):
very solid banking principles.
The second thing is thatCharley wasn't just working on
getting this bank established.
The other thing that he wasdoing at the same time was he was
looking for businesses that had avery low propensity for failure.
And the business that he got involvedin was at the time the manufactured
(15:24):
gas business, which was being usedto light homes and provide heating.
And.
He, he, he could have actually taken abath on those investments because he was
jumping into that industry at roughlythe same time that Thomas Edison was
(15:44):
beginning to roll out lighting in domesticlighting in cities and small communities.
And so the manufactured gas, whichwas being used to provide lighting
was no longer going to be as safe.
Or as economical as well aselectric lighting would be.
But Charley was nimble as a businessmanand he turned that into what today we
(16:10):
would call the natural gas business.
So he was able to make a conversionand then you Use natural gas and
promote natural gas as a heating fuel.
So he survives that.
So he's got investors who are investingwith him in these companies and therefore
are having confidence in him in termsof starting to invest in his bank.
(16:30):
He's already made political friendshipsbecause he has gone against the
Chicago and the Illinois machine in hisactivities in the Illinois caucuses and
in the Illinois Republican conventions,but he's built friendships that way.
So he's got, people have confidencein him as a human being and willing
(16:51):
to trust him with their deposits.
And he's building friendships andbecoming active in the community
in a way that starts to attractdepositors and by the same token,
encourage people to, who want to buildtheir businesses to borrow from him.
So he's really.
Just he has that personality and has beenlaying the groundwork to be successful
(17:14):
in the world of banking, which isreally banking is all about people.
And I don't need to tell your audiencethat, but, you know, in spite of all
of the regulations that are involvedwith banking at the end of the
day, it's the relationship that thecustomer has with the person sitting
across on the other side of the desk.
(17:35):
That is going to determine how confidentthat individual is in working with this
particular banker and by the same token,the banker has done hopefully his or
her due diligence to feel comfortableworking with either the borrower,
the depositor, but it's a, it's a,it's a transactional relationship and
Charley understood that and was verysuccessful at being able to turn that
(17:58):
into a highly profitable enterprise.
Evan Sparks (18:01):
Yeah, and you talk in the book about how his, he's involved in
business, his involvement in business.
He's, you know, he, he and hisbrothers are all in business together.
They have a lot of interlocking businessesthere and they are, they have a lot of
interest in oil that, you know, obviouslyis like the, like in the generation of
the oil to produce the natural gas too.
So they have all thesedifferent business interests.
(18:22):
We're in a time before the the morerigorous contemporary understanding of
the separation of banking and commerce.
I am curious, did his wealth.
Come primarily from his outside,from his non banking activities.
Was there, did he kind of have a mindsetyou talked about his mindset of banking
as a public trust, you know, did hedid his, did his wealth primarily come
(18:44):
from his other business interests orfor, did it come more from the banking
side of, of what he was active in?
Annette Dunlap (18:50):
From everything that I was able to determine from looking
at was what was available to me ofthe financial documentation, most
of his wealth came from the companythat he and his brothers owned,
which was called Dawes Brothers Inc.
Dawes Brothers Inc. was the holdingcompany for the oil interests you just
mentioned for the gas interests andreally I should stop calling him gas
(19:12):
interest because they become utilities.
He, they, they, Dawes BrothersInc. becomes the owner of
utilities in small cities.
That's the market niche that he identifiesand is able to be successful because
it's essentially, it's a monopoly.
And it's a legal monopoly,so he, he owns them.
He can operate them.
His I think his brother Rufus isthe one who's kind of managing that.
(19:36):
It's really interesting when you lookat the structure of Dawes Brothers
Inc, because, you know, Charley issort of, and I mean, this sort of in
a positive way, not negatively, butCharley is sort of this puppeteer.
who's kind of directing what each ofthem, each of his brothers is going to do.
So, you know, you have Beeman who'skind of involved, the youngest one who's
(19:56):
involved with the oil interest, Rufus,who's the next one under him in age,
who's handling all the utility interests.
And Henry, who is very much in personalityand temperament, like Charley, kind
of is, you know, making sure that thebooks of Dawes Brothers Inc. are written
in black ink instead of red ink, andkeeping Charley on top of what's going
(20:17):
on with the financial transactions,while Charley is this public face
of Central Trust Bank in Chicago.
So, so, to answer your questiondirectly, the wealth is coming
from Dawes Brothers Inc., and thebank is a public facing for him.
Evan Sparks (20:35):
And obviously he's, you know, I've given his, his professional, you
know, his academic, his interest in thebanking, the theory of the banking system
and services control of the currency.
It makes sense that he is, has alot of interest in spending time
on, on this bank as he's You know,and active in the Chicago community.
One thing I'm curious about, and thiscomes out a little bit in the, in
(20:58):
the book, is the relationship, youknow, we, there is so much written
about, you know, the house of Morganabout the East coast banking system.
And obviously there's all this, you know,dynamic between this is this dynamic
around the The panic of 1907, Morgan onceagain comes in and rescues, bails out the
(21:20):
the financial system to stop the panicand everyone says, okay, at this point.
We can't, JP Morgan's notgoing to be around forever.
We got to figure out something else.
Right.
Senator Aldrich gets, you know,starts working on what eventually
becomes the federal reserve system.
And that's, and, and, butthat is a lot of people.
(21:40):
There's a lot of division in the bankingindustry because people see that as
kind of the New York banks versus other,the other, you know, regional centers
of influence in the banking sector.
Can you talk a little bit about the.
the tension between the Chicago and NewYork banking worlds, you know, and, and
how does, what kind of relationshipshe had and how he navigated the tension
(22:03):
that existed between these differentcenters of power in the banking system?
Annette Dunlap (22:07):
Sure.
So as you've said, you know, the New Yorkbanks, as far as the, the non New York
world was concerned ran the United States.
You know, whether it was just J. P.Morgan by name or the New York banks
as just a a broad brush term for it.
And then you've got Chicago, which isreally trying to become a strong financial
(22:33):
and manufacturing center in the Midwest.
So you've got a couple of things goingon here just from an historical basis.
Now, New York's wealth is has started fromthe settlement of that, of what had been
the colony of, you know, well, what wasit, New Netherlands at the first point?
(22:54):
Some historian may becorrecting me on that.
So you've got money that'sbeing established right there.
Then you have New York as a, as a shippingcenter because it has excellent ports
and it has just all of the differentgeographic factors that are going to lend
itself to becoming a shipping center.
A a center of commerce and a and aPO and a strong population center.
(23:15):
So from one standpoint, you've gotan historical establishment of a
city that has built its wealth over.
By the time Charley's getting there,you're we're now almost two, two plus
centuries in, and then you have Chicago,which really doesn't start developing
until about the mid 18 hundreds.
(23:36):
You know, 1850 ish is sortof when we start to see.
growth of communities inwhat, what becomes Chicago.
And so we're talking thedifference between a half a
century and two centuries plus.
And Chicago of course, is trying toestablish itself as a very strong
banking center in the Midwest.
(23:58):
But, but part of the problem that youhave, and this kind of goes back to what
Charley was talking about in his bookabout needing more of a national fed, what
we would call a federal clearing house.
for all monetary transactions is thatbecause there just isn't the accumulation
(24:18):
of assets in the Chicago area at thelevel at which there is the accumulation
of monetary assets and, and stock assetsin New York, you still have a certain
amount of reliance on the part of theChicago banks on what the New York banks
can do because there are just timeswhen the Chicago banks have got to go
(24:39):
to the New York banks for loans in orderto handle their day to day operations.
So you, as you've said,there is this tension there.
And Charley does the best that hecan to cultivate relationships with
the New York banks for the verysimple reason is that, like it or
not, you He has to depend on them.
We see some of this dependence.
(25:02):
You know, when we get further into thestory, we'll see this dependence on the
New York banks when Charley is workingto raise bond funds for World War for
World War one to because that Initially,the United States was lending money to
England and France to help finance theirwar effort, and they were doing that by
selling bonds here in the United States.
(25:22):
That had to be an interrelationshipbetween and Char, and Charley was
heading up a lot of that underwritingin the Chicago side, but he had to work
with the New York banks to do that.
And then you see sort of this riftbetween the Chicago banks and the New
York banks, or specifically Charleyand the and the New York banks when his
bank in Chicago starts to go under asthe result of the failure of one of his
(25:47):
major depositors and one of his majorloan holders and that's Samuel Insull
who was running Consolidated Edison inChicago and the New York banks are not
at that point willing to work with him.
So the ten the tension is justthere and some of that In, in the
way that I understand things isalmost inevitable just by virtue
(26:07):
of the fact of the longevity of theNew York banking system versus the
longevity of the Chicago system.
Evan Sparks (26:15):
And that's the conclusion of part one of our conversation with
Annette Dunlap about, Charlie Dawes.
Thanks so much for listening.
We'll be back next week with part two ofthe conversation where we will cover his
experience in World War I and then hisprominent national political leadership
as the head of the Bureau of the budget,as an international diplomat and as vice
president of the United States, and thenthe end of his banking career in the
(26:38):
1930s during the banking crisis of 1932.
So it'll be a lot more to cover.
Thanks again to R&T Deposit Solutionsfor sponsoring this episode.
And join us next week.
he was ahead of his time, but if you take those three things, we get
the gold standard with McKinley in 1900.
We get the establishment of theFederal Reserve Bank in 1913, but
the work on that began in 1907.
You get the FDIC in 1933.
So, basically, everything that Charleylays out eventually happens and is now
(00:24):
a part of today's current banking world.
Evan Sparks (00:26):
From the American Bankers Association.
This is the ABA Banking Journal podcast.
Welcome back.
I'm Evan Sparks.
Today's episode is presentedby R& T Deposit Solutions.
I'm delighted to be here as we arecelebrating our 150th anniversary in 2025.
We are taking the opportunity to lookback at several interesting episodes
(00:48):
throughout the history of the bankingindustry and interesting figures in
the history of the banking industry.
And we're going to take a trip back tothe early 20, late 19th and early 20th
century today to take a look at someonewho I think is probably one of the most
influential bankers in American history.
(01:08):
But who is yet one of the lead today,one of the least known political figures
in the, in, in 20th century us history.
And that is Charles Dawes,or Charley, as he was known.
If you can believe it, he was, thisis someone who was The comptroller of
the currency, the first head of whatthe agency that became the Office of
Management and Budget and and a key figurein the allied war effort during World
(01:34):
War One as a serving as a colonel andthen and then being promoted to brigadier
general under Pershing, someone who was,who to the United Kingdom, someone who
is an international diplomat who won theNobel Peace Prize and someone who became
the Vice President of the United States.
And amazingly, Vice President of theUnited States is probably not even
in his top five accomplishments.
(01:55):
I mean, it was so, so when you lookat the, at what this person did
and all the while Being a businessleader and banking industry leader.
So why do we not knowmore about Charley Dawes?
To answer that question withme, I have Annette Dunlap.
Annette is the, is one of Dawesmore, more recent biographers.
She's the author of Charles GatesDawes: A Life, which came out in 2016.
(02:16):
Highly recommended, very readable,not a, she keeps the, Annette keeps
the the story zipping right along.
And so Annette, thank you forbeing with me today to talk about
talk more about Charley Dawes.
Annette Dunlap (02:27):
My pleasure.
Thank you for the kindwords about the book.
I appreciate that so much.
Evan Sparks (02:32):
I think very few of our listeners will be
familiar with Charley Dawes.
Can you give, give us a quick, you know,biographical sketch of where he came from?
Where he came from and how hegot his start in the world.
Annette Dunlap (02:44):
Sure.
So, Charley was born at the tail end ofthe Civil War in 1865 in Marietta, Ohio.
And his family tree was fairly prominent.
His great grand, well, his grandparentsand his great grandparents on both sides
of his family were founders of Marietta.
He had one great grandfather who wasinvolved with the Northwest Ordinance
(03:09):
drafting of the Northwest Ordinance,which included a clause that slavery would
not be brought into the Ohio Territory.
It was a family that put a lot ofemphasis on education, they were
politically active, and he had agrandfather who had founded a bank.
So you have all these different piecesthat go into this Young man's development.
(03:30):
He was, by all accounts,extremely intelligent.
He attended Marietta College, which wasactually a fairly respectable school
that brought in young men of from moneyedfamilies from around the Midwest area.
So it gave him a lot of connectionsoutside of just the Ohio area.
(03:50):
He then went to Cincinnati, tothe Cincinnati School of Law, and
he finished before he turned 21.
So he had to wait between graduationand his birthday before he was old
enough to take the bar exam, whichhe passed when he did take it.
In the meantime, he was looking at whathe was going to do in the future, and
(04:13):
the economy in Marietta was not doingvery well, and he had some relatives
that had moved out to Nebraska.
He had some classmates, both fromMarietta College and from the
School of Law, who were findingsome success moving to Nebraska.
A close friend of his was a nativeNebraskan, and so Charley went out and
(04:33):
settled in Lincoln, Nebraska, lookingto be a young man to make his fortune.
So he actually was successful in hisstart in law practice in Nebraska, but
he pretty quickly realized that themoney wasn't going to be made in doing
wills, trusts, and business transactions.
And so he got interested ininvestments in real estate.
(04:57):
And from there, when he began tounderstand the inner workings of
finance, which of course, as Isaid, he had a background in that.
from his grandfather and an uncle who hadtaken over management of the of the bank.
His grandfather had started andthis was an uncle by marriage.
So he got into investing andthen he realized Nebraska really
(05:18):
wasn't big enough for his dreams.
And he had gotten a lot of his funding.
If it wasn't from his family,it was from banks in Chicago.
So he made a move from there.
To Chicago and that's pretty muchwhere he planted his flag and his
life really started everything abouthis life just kind of took off from
there from the contacts that he madefrom the people that he got to know
(05:41):
from the opportunities that he had.
And he also wasn't afraidto put himself out there.
So he got involved in, in theMcKinley campaign and that
got him his political start.
And I, I could go on and on, but Ithink that's probably a really good
place to just stop and let you startasking some specific questions.
Evan Sparks (05:59):
Absolutely.
So I'm, I, so looking at his start, he'sgetting, he gets into the political, in
the, into the McKinley, it gets involvedin Republican politics in Illinois.
And you have a lot of material on that.
He's very, he, Kind of gets in withthe McKinley campaign with Mark
Hanna, who is McKinley's consigliereand the guy who was kind of running
(06:20):
the campaign, the McKinley campaign.
And so he's and he's promised thejob of comptroller of the currency
at the age of what, 30, he'sin his early thirties, I think.
Right.
So he, he's, he's going to be going toWashington as soon as the, the current
comptroller, Finishes his term Dawes hasthis job as a, as comptroller lined up.
(06:41):
And I think that one of the interestingthings that you talk about in the book,
one reason that he was, that he was,you know, a competitive figure for
that job was this booklet he publishesin 1894 on the banking system of the
United States and its relation to themoney and business of the country.
And He's coming out of, he'slooking back on the Panic of 1893.
(07:04):
And what is it that in this, in thisbooklet that he proposes that causes
so much attention and causes kindof gets him so much attention from
the banking and political community?
Annette Dunlap (07:14):
Sure.
So this book is really almost in someways prophetic because he outlines
some recommendations to avoid anotherpanic like the Panic of 1893 that
people were sort of going through.
Yeah.
taken aback by again because it was avery forward thinking it was probably
way ahead of the time from wherepolitically people were, but as we'll
(07:38):
see I through our conversation thismorning, we'll see how nearly every
one of his recommendations eventuallygets adopted in one form or another.
So I think, you know, when we'retalking about his youth, 1894.
And as I said, he was born in 1865.
So he's 29 years old.
When he writes this book, and one of thefirst things that he calls for in the book
(08:00):
is the establishment of a gold standard.
Now, the part of the reason for thePanic of 1893 was because we didn't have
a gold standard, and there was the pushfor bimetallism, and that silver could
be exchanged at a rate for gold and thatwhen the price of silver started to go
down as they had more silver, silver minediscoveries and therefore had more silver
(08:24):
flooding the market and people wanted togo ahead and exchange that for gold, there
was actually a run of gold on the banks.
In the work that I did on anotherbiography, one of the things that I
learned in the process of working onthe Cleveland administration is that.
Grover Cleveland, in order to put anend to this panic, actually asked J. P.
(08:48):
Morgan to loan the United States roughly10 million of gold to replenish the United
States Treasury and to help put a stopto The gold run on the banks and also
to stabilize the United States economyin the United States banking system.
So Charley is writing inresponse to what has happened.
(09:10):
So his first thing is, you know,get us on a gold standard, which he
had, there were a lot of detractors.
William Jennings Bryan was sortof leading the charge on that.
Charley's own uncle who was running thebank back in Marietta disagreed with him.
The second thing was what we now knowas depositor's insurance, but the way
that Charley posed it in the book wasthat it would be a tax on the bank
(09:35):
based on the value of its deposits.
So it was essentially a prorated share.
of or prorated percentage ofwhat was deposited in the bank
would then be paid as a tax.
That tax would become a form of insurance.
The next thing that Charley waslooking at was instead of having these
(09:55):
regional clearinghouses that handledthe interbank transactions, there
should be a national entity that wasoverseeing all interbanking transactions,
interstate banking transactions.
transactions as well as intrastate bankingtransactions, and on top of that have
(10:15):
some say so in federal monetary policy.
So again, he was ahead of his time, butif you take those three things, we get
the gold standard with McKinley in 1900.
We get the establishment of theFederal Reserve Bank in 1913, but
the work on that began in 1907.
It was finally pushed through afterWoodrow Wilson became president in 13.
(10:36):
And then when Franklin Rooseveltcame into office, and he declared the
banking holiday and then had the bankinglegislation to be able to reopen the
banks with some sense of confidence.
You get the FDIC, Federal DepositInsurance Corporation, in 1933.
So, basically, everything that Charleylays out eventually happens and is now
(10:58):
a part of today's current banking world.
Evan Sparks (11:01):
Yeah, no, it's, I mean, it's, I was reading the, this, you
know, description in the book herewhere he says, You know, "there's one
law that has, which has already beenconsidered somewhat in Congress, the
passage of which, in a proper form,seems to us of vital importance.
That law is one which should levy a taxupon national banks for the purposes
of creating a fund to be held by theTreasury for the reimbursement of
depositors and failed national banks."I mean, that is basically using the
(11:23):
language instead of tax of assessmentsand of using the language of assessments
and it's not, you know, and it's,And it's not for national banks only.
It's for all banks.
That is the structure of depositinsurance that was created with the FDIC.
So it's pretty remarkable that, youknow, he's kind of coming out with this.
What was the reaction in the bankingindustry among other people, among
(11:45):
other leaders in banking, andPolitical leaders to these proposals
at the time that Charley had putput this put this booklet out there.
Annette Dunlap (11:54):
Sure.
So his uncle, W. W. Mills.
So he's an uncle by marriagecritique to the book.
And as I mentioned earlier, Did not agreewith the gold standard had some questions
about the quote tax or as we would nowof course today call it an assessment
on the depositor's insurance thoughtthat some of Charley's ideas were good.
(12:15):
His law professor, Jacob Cox, whowas one of his earliest investors
in helping Charley get off theground in his financial life.
And then, thought that the book waswell done, but also wrote a very
detailed critique of it, which Icouldn't get my hands on, but Charley
was so impressed with the critique,that when he had the book reissued, he
(12:36):
included the critique in its entiretyin a second edition of the book.
But by and large, it was just oneof those books that was just, you
know, read by a very small audience.
It didn't seem to set anybody on fire.
Fire obviously, since we've justdiscussed how long it took for these
ideas to ultimately find its place inour way of banking operations today.
(13:02):
And then in the laws governingbanking, banking operations, Charley.
You know, it just.
My opinion would be, hewas ahead of his time.
He was a, he was a farsightedindividual who was very good at
analyzing and figuring things out.
But again, I think his youth workedagainst him, the fact that he really
(13:22):
didn't have enough of a toehold inthe banking community at that point
to really quote unquote sell the idea.
It, it just didn't get the traction.
That it would eventually get but aswe've already said you get it in pieces
Evan Sparks (13:36):
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(13:59):
So let's talk about that toehold and howhe grew it because so here so he's he's
the comptroller of the currency undermckinley After mckinley leaves he returns
to chicago Starts this starts a bank.
Can you talk about how he builthis bank in chicago and his role
in growing the, growing the bankingsector in the Chicago area.
Annette Dunlap (14:19):
Charley establishes the premise that banks are a public
institution that are responsibleto their communities, that they
operate as a middleman betweenthe depositor and the borrower.
And so Charley is taking this viewof what a bank should be into the
(14:40):
ethos of the bank that he is creating.
So what he is doing is establishing abank that, to use 21st century language,
is going to be dedicated to goodcustomer service and at the same time
be conservative in the types of loansthat it's going to be willing to make.
So he's going in with whattoday we would consider to be
(15:02):
very solid banking principles.
The second thing is thatCharley wasn't just working on
getting this bank established.
The other thing that he wasdoing at the same time was he was
looking for businesses that had avery low propensity for failure.
And the business that he got involvedin was at the time the manufactured
(15:24):
gas business, which was being usedto light homes and provide heating.
And.
He, he, he could have actually taken abath on those investments because he was
jumping into that industry at roughlythe same time that Thomas Edison was
(15:44):
beginning to roll out lighting in domesticlighting in cities and small communities.
And so the manufactured gas, whichwas being used to provide lighting
was no longer going to be as safe.
Or as economical as well aselectric lighting would be.
But Charley was nimble as a businessmanand he turned that into what today we
(16:10):
would call the natural gas business.
So he was able to make a conversionand then you Use natural gas and
promote natural gas as a heating fuel.
So he survives that.
So he's got investors who are investingwith him in these companies and therefore
are having confidence in him in termsof starting to invest in his bank.
(16:30):
He's already made political friendshipsbecause he has gone against the
Chicago and the Illinois machine in hisactivities in the Illinois caucuses and
in the Illinois Republican conventions,but he's built friendships that way.
So he's got, people have confidencein him as a human being and willing
(16:51):
to trust him with their deposits.
And he's building friendships andbecoming active in the community
in a way that starts to attractdepositors and by the same token,
encourage people to, who want to buildtheir businesses to borrow from him.
So he's really.
Just he has that personality and has beenlaying the groundwork to be successful
(17:14):
in the world of banking, which isreally banking is all about people.
And I don't need to tell your audiencethat, but, you know, in spite of all
of the regulations that are involvedwith banking at the end of the
day, it's the relationship that thecustomer has with the person sitting
across on the other side of the desk.
(17:35):
That is going to determine how confidentthat individual is in working with this
particular banker and by the same token,the banker has done hopefully his or
her due diligence to feel comfortableworking with either the borrower,
the depositor, but it's a, it's a,it's a transactional relationship and
Charley understood that and was verysuccessful at being able to turn that
(17:58):
into a highly profitable enterprise.
Evan Sparks (18:01):
Yeah, and you talk in the book about how his, he's involved in
business, his involvement in business.
He's, you know, he, he and hisbrothers are all in business together.
They have a lot of interlocking businessesthere and they are, they have a lot of
interest in oil that, you know, obviouslyis like the, like in the generation of
the oil to produce the natural gas too.
So they have all thesedifferent business interests.
(18:22):
We're in a time before the the morerigorous contemporary understanding of
the separation of banking and commerce.
I am curious, did his wealth.
Come primarily from his outside,from his non banking activities.
Was there, did he kind of have a mindsetyou talked about his mindset of banking
as a public trust, you know, did hedid his, did his wealth primarily come
(18:44):
from his other business interests orfor, did it come more from the banking
side of, of what he was active in?
Annette Dunlap (18:50):
From everything that I was able to determine from looking
at was what was available to me ofthe financial documentation, most
of his wealth came from the companythat he and his brothers owned,
which was called Dawes Brothers Inc.
Dawes Brothers Inc. was the holdingcompany for the oil interests you just
mentioned for the gas interests andreally I should stop calling him gas
(19:12):
interest because they become utilities.
He, they, they, Dawes BrothersInc. becomes the owner of
utilities in small cities.
That's the market niche that he identifiesand is able to be successful because
it's essentially, it's a monopoly.
And it's a legal monopoly,so he, he owns them.
He can operate them.
His I think his brother Rufus isthe one who's kind of managing that.
(19:36):
It's really interesting when you lookat the structure of Dawes Brothers
Inc, because, you know, Charley issort of, and I mean, this sort of in
a positive way, not negatively, butCharley is sort of this puppeteer.
who's kind of directing what each ofthem, each of his brothers is going to do.
So, you know, you have Beeman who'skind of involved, the youngest one who's
(19:56):
involved with the oil interest, Rufus,who's the next one under him in age,
who's handling all the utility interests.
And Henry, who is very much in personalityand temperament, like Charley, kind
of is, you know, making sure that thebooks of Dawes Brothers Inc. are written
in black ink instead of red ink, andkeeping Charley on top of what's going
(20:17):
on with the financial transactions,while Charley is this public face
of Central Trust Bank in Chicago.
So, so, to answer your questiondirectly, the wealth is coming
from Dawes Brothers Inc., and thebank is a public facing for him.
Evan Sparks (20:35):
And obviously he's, you know, I've given his, his professional, you
know, his academic, his interest in thebanking, the theory of the banking system
and services control of the currency.
It makes sense that he is, has alot of interest in spending time
on, on this bank as he's You know,and active in the Chicago community.
One thing I'm curious about, and thiscomes out a little bit in the, in
(20:58):
the book, is the relationship, youknow, we, there is so much written
about, you know, the house of Morganabout the East coast banking system.
And obviously there's all this, you know,dynamic between this is this dynamic
around the The panic of 1907, Morgan onceagain comes in and rescues, bails out the
(21:20):
the financial system to stop the panicand everyone says, okay, at this point.
We can't, JP Morgan's notgoing to be around forever.
We got to figure out something else.
Right.
Senator Aldrich gets, you know,starts working on what eventually
becomes the federal reserve system.
And that's, and, and, butthat is a lot of people.
(21:40):
There's a lot of division in the bankingindustry because people see that as
kind of the New York banks versus other,the other, you know, regional centers
of influence in the banking sector.
Can you talk a little bit about the.
the tension between the Chicago and NewYork banking worlds, you know, and, and
how does, what kind of relationshipshe had and how he navigated the tension
(22:03):
that existed between these differentcenters of power in the banking system?
Annette Dunlap (22:07):
Sure.
So as you've said, you know, the New Yorkbanks, as far as the, the non New York
world was concerned ran the United States.
You know, whether it was just J. P.Morgan by name or the New York banks
as just a a broad brush term for it.
And then you've got Chicago, which isreally trying to become a strong financial
(22:33):
and manufacturing center in the Midwest.
So you've got a couple of things goingon here just from an historical basis.
Now, New York's wealth is has started fromthe settlement of that, of what had been
the colony of, you know, well, what wasit, New Netherlands at the first point?
(22:54):
Some historian may becorrecting me on that.
So you've got money that'sbeing established right there.
Then you have New York as a, as a shippingcenter because it has excellent ports
and it has just all of the differentgeographic factors that are going to lend
itself to becoming a shipping center.
A a center of commerce and a and aPO and a strong population center.
(23:15):
So from one standpoint, you've gotan historical establishment of a
city that has built its wealth over.
By the time Charley's getting there,you're we're now almost two, two plus
centuries in, and then you have Chicago,which really doesn't start developing
until about the mid 18 hundreds.
(23:36):
You know, 1850 ish is sortof when we start to see.
growth of communities inwhat, what becomes Chicago.
And so we're talking thedifference between a half a
century and two centuries plus.
And Chicago of course, is trying toestablish itself as a very strong
banking center in the Midwest.
(23:58):
But, but part of the problem that youhave, and this kind of goes back to what
Charley was talking about in his bookabout needing more of a national fed, what
we would call a federal clearing house.
for all monetary transactions is thatbecause there just isn't the accumulation
(24:18):
of assets in the Chicago area at thelevel at which there is the accumulation
of monetary assets and, and stock assetsin New York, you still have a certain
amount of reliance on the part of theChicago banks on what the New York banks
can do because there are just timeswhen the Chicago banks have got to go
(24:39):
to the New York banks for loans in orderto handle their day to day operations.
So you, as you've said,there is this tension there.
And Charley does the best that hecan to cultivate relationships with
the New York banks for the verysimple reason is that, like it or
not, you He has to depend on them.
We see some of this dependence.
(25:02):
You know, when we get further into thestory, we'll see this dependence on the
New York banks when Charley is workingto raise bond funds for World War for
World War one to because that Initially,the United States was lending money to
England and France to help finance theirwar effort, and they were doing that by
selling bonds here in the United States.
(25:22):
That had to be an interrelationshipbetween and Char, and Charley was
heading up a lot of that underwritingin the Chicago side, but he had to work
with the New York banks to do that.
And then you see sort of this riftbetween the Chicago banks and the New
York banks, or specifically Charleyand the and the New York banks when his
bank in Chicago starts to go under asthe result of the failure of one of his
(25:47):
major depositors and one of his majorloan holders and that's Samuel Insull
who was running Consolidated Edison inChicago and the New York banks are not
at that point willing to work with him.
So the ten the tension is justthere and some of that In, in the
way that I understand things isalmost inevitable just by virtue
(26:07):
of the fact of the longevity of theNew York banking system versus the
longevity of the Chicago system.
Evan Sparks (26:15):
And that's the conclusion of part one of our conversation with
Annette Dunlap about, Charlie Dawes.
Thanks so much for listening.
We'll be back next week with part two ofthe conversation where we will cover his
experience in World War I and then hisprominent national political leadership
as the head of the Bureau of the budget,as an international diplomat and as vice
president of the United States, and thenthe end of his banking career in the
(26:38):
1930s during the banking crisis of 1932.
So it'll be a lot more to cover.
Thanks again to R&T Deposit Solutionsfor sponsoring this episode.
And join us next week.
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