Few events in American history had such a direct and immediate impact on Sonoma County as the Bank Panic of 1907. Although Ground Zero was the New York City financial district, the tsunami that rippled west from Wall Street hit the Pacific coast two weeks later. Everyone who read the papers knew the general history of recent events, and anticipated the worst was coming; it was like California was the last child in a long line of children waiting for to receive a doctor’s shot with a big, scary needle. People in Sonoma County began literally burying their gold and silver coins in their backyards rather than trust local banks.

The local papers were sketchy on the details of what was happening out east, but it was clearly bad. Stocks were crashing; a bank run on one of the country’s largest trust companies forced it to close, with thousands of depositors losing their savings. “FINANCIAL SITUATION IS PANICKY ALL OVER COUNTRY,” was the Press Democrat headline on Oct. 24. These were not problems that touched most Santa Rosans, who kept their money in local banks; few in this farm town would have played the stock market. But then came news that must have terrified them: The local banks would soon be paying withdrawls in something called, “clearing house certificates” instead of money.

Only those who lived in the eastern U.S. during the summer of 1893 had probably seen such a thing before. Certificates were intended to provide some traction for the financial system when it was skidding towards a cliff. During such a severe crisis, the clearing houses – which were normally obscure waystations in the banking world where checks were exchanged between big banks – would be allowed to print these certificates and use them as if they were U.S. currency. At the end of the crisis, everyone could exchange this quasi-legal tender for cold, hard, cash. It’s understandable that many were uncomfortable about this funny money; these certificates weren’t backed by a precious metal, or even in the name of the United States Treasury, but were issued by unofficial, unregulated consortiums of regional banks – which might also close if there were a total banking meltdown. Skeptics probably buried their remaining coin more often that we’d expect.

There was another unique problem with certificates in California and Nevada: People in 1907 were still accustomed to using gold and silver coins (minted in San Francisco) for regular business, not paper greenbacks (printed in Washington, D.C.) – in fact, a contemporary source pointed out that the public held different meanings for the words, “currency” and “money.” It’s understandable that some balked at being forced to accept nondescript slips of paper cranked out quickly at some local printing place. The enormous Goldfield mining camp shut down in November because workers refused to accept the clearing house scrip; troops were called to protect the scab miners who were sent in.

Criminals exploited the public’s unfamiliarity with paper money; a farmer in Northern California was arrested after he tried to pay an immigrant worker with cigar coupons, telling him they were certificates. A certificate counterfeiting ring in Sacramento was busted, with one member confessing, “Why, it is the easiest graft I know. With $3.50 I can make $10,000 worth of those certificates and they will pass. All one has to do is get the paper, a little colored ink, make a stamp of the signatures and run off a batch as long as the paper and ink last.” And in Arcadia, a crook robbed a victim of $3 in certificates, and when taken to court, used the defense that since the paper had no technical value, it couldn’t be a felony to steal them.

Sonoma County bankers formed their own Clearing House Association with twenty member banks, printing their own certificates in $1, $10, $20, $500, and $1000 denominations (alas, I can find no images of any of these, and a collector’s price guide suggests that they are quite rare). By mid-November, the county was using these certificates to pay its debts. But at the same time, the county was refusing to accept certificates in payment of taxes. If you didn’t have the gold coin, you had to pay the taxman with a certified check from a bank. That’s a vote of confidence in the clearing house, yessir.

In the end, the clearing house certificates probably saved the Sonoma County economy that year. The crisis hit just before the main local crops, hops and wine grapes, were to reach the market. If the banking system was still paralyzed, growers probably would have been forced to sell their crops at ruinous prices.

That wraps up the Sonoma County angle to the Bank Panic of 1907, but as I was researching the topic, I was dismayed that I couldn’t find anything on the Internet with a clear explanation of why the crisis happened, although there are many disconcerting parallels to our recent financial firestorm. I also discovered there was an unsolved mystery concerning an apparent attempt to incapacitate (and potentially, murder) a senator in the United States Senate chamber. Lots more interesting stuff in part two.


– Press Democrat headline, October 23, 1907


– Press Democrat headline, October 24, 1907
Governor Declares a Holiday for the Banks

– Press Democrat headline, October 31, 1907

When money is “tight” on Wall street the United States government often relieves the tension by depositing government funds in the Wall street banks, so that these banks may in turn lend the money to their customers.

Congressman Burleson of Texas thinks that other parts of the country and other interests are as much entitled to this sort of assistance as Wall street and its money kings. He has begun a campaign to secure government deposits of ten million dollars of public funds in the banks of the west and south to be secured–not by stocks and bonds of finance, as is the case in New York–but by cotton, tobacco, and wheat to the value of forty millions–the goods to be stored in government warehouses as security before the money is loaned.

Such measures as this have often been proposed, but never before with such prospect of success as now. The turning of the light upon Wall street’s dark places has had the effect of opening the eyes of the people to the fact that Wall street does not own the riches of the world or control the destinies of the nation. But Wall street has pulled the strings for a long, long while; and will not let go without making a fierce “roar.”

There is a local application of all this, although it may not at first glance be apparent. Farmers here can find no present market for their hops and wool, because money is “tight.” There is no particular reason why government money should be loaned to banks on paper security in order that the banks may loan it again on better security. The government can take that security as well as the banks can, and it will not be surprising if some such result as that now proposed by Congressman Burleson should in time work itself out.

– Press Democrat editorial, October 27, 1907

Important Meeting Held Here Last Night to Consider Financial Situation

“All principal clearing house associations in the United States, including San Francisco, have gone on clearing house basis and will not ship money to correspondents. We suggest you organize locally for protection. Stamp your drafts on as payable only through San Francisco clearing house.”

The above telegram ws received by all of the local banks yesterday from their respective San Francisco correspondents.

Last night a meeting of the banks of Santa Rosa, Sebastopol, and Guerneville was held to consider this telegram and what action was to be taken.

It was the sense of the meeting that local conditions are sound and satisfactory.

We are in the midst of marketing one of the most valuable crops in the history of the county, on which large advances have been made by the different banks, and on which returns cannot be immediately received owing to conditions existing as outlined in the above telegram.

Statements of the different banks show ample funds on hand to handle all necessary requirements, provided the money is not withdrawn from circulation or diverted to other localities.

All of the banks agreed to stand together for the protection of their depositors, and to care for local business.

Checks will be handled in the usual manner but cash will be paid only when actually necessary.

It is hoped that these conditions will not long be continued. Meanwhile, people should aim to handle their funds in a manner as nearly normal as possible, as this will hasten the resumption of the usual order of things.

– Press Democrat, October 31, 1907

W. H. Grissim, of “The Swell” received a $10 Clearing House certificate, probably the first seen in Santa Rosa, over the bar Thursday evening in payment for a couple of drinks, It was tendered by a well known traveling man, who said he was given ten of the certificates when he left San Francisco for expenses as there was no cash available for the firm.

The certificates are printed in a neat manner on special paper carrying a certain water mark and are signed by the Secretary of the Clearing House Association in person while the President’s signature is a facsimile printed on. The paper is worth face value through the clearing house and will be accepted by banks on deposits the same as a draft or check, but cannot be cashed in. They will be taken for collection.

People arriving from Sacramento on Thursday tell of the appearance there of a large quantity of paper money. The latter has never been acceptable in California, but it is said it has come to be so common in Sacramento as to pass without comment during the past week or ten days. It will probably become quite common all over the state as a result of the gold stringency.

– Press Democrat, November 8, 1907

Organization Effected at Meeting of Bankers Held in Santa Rosa Monday Night–Plans of Organization

Representatives from all of the twenty or more banks of Sonoma county were present here Monday evening at a meeting called for the purpose of completing organization which has been under formation for a week past.

As a result of the gathering the Sonoma County Clearing House Association was organized with President John P. Overton of the Savings Bank of Santa Rosa as president, and Cashier E. C. Merritt of the Union Trust-Savings Bank as secretary. All the cashiers of the various banks in the county were elected assistant secretaries, while the selection of a vice president was deferred until the next meeting.

Financial matters was discussed at some length and while everything was reported to be moving smoothly. It was decided that Clearing House certificates should be issued as occasion arises so as not to allow all the gold to work its way to San Francisco and other financial centers. This action is in accord with that of San Francisco, Oakland, Sacramento and other cities of the state as well as of the cities of other states.

San Francisco Clearing House receipts are being accepted by all the county banks for credit and exchange is being issued on San Francisco and New York as usual. Business is reported good and the deposits are larger than the withdrawals.

– Press Democrat, November 11, 1907

The banks of Sonoma county have organized what is to be know as the Sonoma County Clearing House Association, the purpose of which is to allow the banks to afford proper assistance to their respective business communities by issuing clearing house certificates and to facilitate inter-bank settlements.

Every city in the country is now temporarily on a clearing house basis. There is no better money than a clearing house certificate. The certificates not only have behind them the strength of all the banks, but every dollar they represent is secured by the pledge of high-class securities far above their face value. They are as well secured as national bank notes, of which not one dollar ever did or ever will fail of redemption.

Except in California and Nevada, and to a less extent in Oregon and Washington, gold does not circulate at all in this country, and where people are accustomed to paper money the new form is accepted without question. The notes are not legal tender, it is true, but neither are national bank notes legal tender, and yet nobody refuses them. As between national bank notes and the clearing house certificates, one is precisely as good as the other. Some of our people, accustomed as we are to use gold and silver exclusively, are inclined to sniff a little at any paper money because it is new to them. But they need not worry. The certificates are as safe as gold, and except on this coast, are preferred as more convenient. It is merely a question of habit. If we should use the certificates a few months we might dislike to return to metallic currency.

But we are not likely to do so. We shall be back on a gold basis as soon as the great streams of gold now entering the country reach San Francisco and allow things to resume their normal state. Our banks are not out of gold. Far from it. And what is more, they do not intend to get out. In any large city there are a great many people who, whenever there is any talk about scarcity of money, will rush to the bank, draw out their gold, and hoard it. This is something that they will not be allowed to do this time, because such tactics are not fair either to the other depositors or to the business community as a whole.

As a result of he experience had during the past few weeks, when, for no good reason, there has been an unprecedented demand for money and in order to properly protect the country’s business interests all the banks of the country have been compelled to get together and devise ways and means for providing additional circulating media. It is very probable that some form of legislation will be evolved to meet such conditions in future. There certainly should be. New conditions demand new methods, and the business of the country has now grown to such enormous proportions that the methods for so long in vogue are no longer adequate. When Bryan said there was not enough money in the country to transact the business of the country he knew what he was talking about. There is plenty of wealth, but not enough exchange media. This fact has now been demonstrated to the satisfaction of everybody, and Congress at its next session will be very apt, as it should, to enact laws providing the country with a more elastic form of currency than we possess.

– Press Democrat editorial, November 11, 1907
County Treasurer Murdock Kept Busy Wednesday Paying Claims

County Treasurer Glen Murdock was a busy man Wednesday when he paid off many claims against the county in the new clearing house certificates, issued by the Clearing House Association of Sonoma County, representing twenty banks. In all but a few instances the paper money was accepted cheerfully. Once in a while, because the person receiving the same, did not understand the situation, there was some reluctance at taking the certificates. Treasurer Murdock did his best in such cases to explain the matter to the satisfaction of the doubting Thomas. But for the purpose of accommodating patrons County Treasurer Murdock need not have opened payment on Wednesday had he so desired, owing to the fact that the legal holidays still continue.

– Press Democrat, November 14, 1907

Somebody signing his letter “A Subscriber” but neglecting to give his name, asks why the city and county tax collectors will not accept certificates in payment for taxes. The county tax collector is receiving the certificates of the Association of Sonoma County Banks in payment of all taxes collected at his office. Under the advice of the city attorney, the city tax collector is not receiving these certificates. At the same time any taxpayer having certificates can take them to any bank in the county and receive a certified check for the amount of his taxes and the city tax collector will receive the same and deliver the receipt for taxes paid. An ordinary check drawn on any bank in the city, or for that matter, the county, will be accepted by the city tax collector if he is satisfied that the money to pay the check is on deposit. It seems that the failure to receive the certificates directly when they will be accepted indirectly is a technicality to considerable extent. Anybody having certificates of the clearing house of this county can pay any kind of taxes with them in the manner stated above.

– Santa Rosa Republican editorial, November 16, 1907

– Press Democrat headline, November 17, 1907

Arrival of the Southern Pacific Pay Car in Santa Rosa Yesterday Morning–First Time in Years

The Southern Pacific pay car arrived in this city yesterday morning and it brought in a large supply of checks. It is a long time since the pay car came to town, the plan of late having been to send checks to the agents and have them in turn distributed to the men at the different stations.

In view of the financial stringency the men here and along the line had hoped that the pay car would bring cash as was the rule in the days ago. There was consequently some disappointment when checks were handed out. Of course there was no difficulty in cashing the Southern Pacific checks, only that some of the men objected to taking clearing house certificates in part payment when they came to cash them.

They pay car was so badly wrecked at Sacramento Wednesday night by the switching crew in the yards that it had to be left there for repairs, and a tourist coach was used to complete the trip for paying off.

– Press Democrat, November 23, 1907


Now that “paper certificates” are becoming very plentiful, it is very good idea to learn to know the good ones from the bogus.

The “lines” or “threads” or “fibers,” as seen in the ordinary government issues of paper money are not seen in the clearing house certificates, nor are they seen in ordinary checks with stripes both visible and invisible are seen in the latest suits made by Hodgson-Henderson Co., 517 Fourth st.

– Press Democrat advertisement, December 18, 1907


While searching in the ground in the floor of the chicken house Sunday for the money, a son of the late John Wesley Sparks found about $140 that his father had buried there a few weeks ago. It was known that when the banks opened after the special holidays Mr. Sparks withdrew life savings and buried them. The money will be quite a help to the widow at this time.

– Santa Rosa Republican, February 11, 1908

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