Kremlin Montana Banking, A First-Hand Account

Kremlin Montana banking is explained in detail by John Swanson, Sr., who was Assistant Cashier of the First State Bank of Kremlin, which opened for business in 1913.    He wrote the following letter to
Judi Holsapple Gomke of Kremlin in February of 1976, for Kremlin's
U.S. BiCentennial Project.    Judi shares it here:

"Dear Judi,

"Sixty years ago Kremlin was made up of the following business enterprises: Three grain elevators, International, Farmers' and H. Earl Clack, who also operated the bulk oil plant."

"There were also three general stores, Matt Bjornsgaard, Frank Horish and Odin Sjordal, and a variety store owned by Mrs. A.T. Hilmen."

"There were two hotels, one operated by Bill Brookshire and the other by Ted Oltesvig. The Brookshire hotel was destroyed by fire in 1916."

"Kremlin had two restaurants at that time, one operated by Bertha Granell and the other by Mrs. McKenzie."

"Two lumberyards supplied the building needs of the homesteaders, the Rogers-Templeton and another locally owned and operated by John B. Shiltz."

"The Kremlin Chancellor enjoyed a wide circulation thru the area in those days and was edited by Matt Casey."

"There was also the Carlson hardware. A second hardware store was opened in 1917 by Earl Winter."

"Jules M. Jensen had the implement business, and the Lucke-Jensen garage and Ford dealership was operated by John Lucke and Wells Dye."

"E.V. Patrick had the pool hall."

"Augie Shoy had the barber shop, and this was taken over by Herman Bielen in the fall of 1916."

"Kremlin had three saloons at that time. Paul Glynn had the saloon next door to the bank, but I do not recall who operated the other two."

"In 1917 the Farmers' State Bank was opened up for business, and last but not least, was the First State Bank of Kremlin. That made up the town of Kremlin during its hey-day."



Banks in the Kremlin area

"The First State Bank of Kremlin, where I was employed as Assistant Cashier, was opened up for business in 1913 by two enterprising young men from Ambrose, North Dakota, namely Freeman S. Johnson (later to become known as 'First Mortgage Johnson') and Fred D. Athearn."

"The years 1913 and 1914 were deficient in rainfall and crops were light. The rains came in 1915 and 1916 and the area produced a fabulous crop each of those two years and this really brought prosperity to the Hi-Line."

"This spawned a lot of new banks thru that part of Montana and in 1917 the State issued charters for new banks at Hingham, Gildford, Kremlin and Laredo."

"Lee Dierdorff at Inverness secured a charter for and opened the First National Bank of Fresno in the spring of 1917. (Note: On a recent visit through the area, I could see no evidence of there ever having been a town at Fresno. The same was almost true of Laredo.)"

"Hingham had three banks, one a private bank, I believe the name was Minkiwitz or something similar, while Gildford and Kremlin both had two banks."

"Box Elder had the Security State Bank, and also had the Cowan and Sons Mercantile. Their accounts receivable were more than the total loans of the bank. This firm was started in the eighties at Fort Assiniboine by the senior Cowan and moved to Box Elder. They had check forms printed with their name at the top which they distributed to their customers to use and these checks usually came thru the bank and were paid by Cowan & Son and charged to the issuer's account at the store."



Banks' Diverse Business Activities

"The First State Bank of Kremlin carried on so many diverse business activities that in today's business terminology it would have to be called a conglomerate."

Horse Business

"In 1916 the bank sold 39 carloads of horses and 60 sets of harness to the homesteaders. I recall one particularly big day in the horse business occurred on April 12th, 1917 when the bank held a public horse auction on main street in front of the bank at which I helped officiate as clerk. The total sale proceeds that day were just ten dollars short of twelve thousand dollars. That would probably be the equivalent of $50,000 in today's dollars." [Mr. Swanson wrote this in 1976, remember; how much would it be now?]

"A good span of young work horses sold in those days for $400.00 to $550.00. The horse barn was only a few steps from the back door of the bank and on a busy day in the horse business there was plenty of traffic between the barn and the back door of the bank leading to the bank lobby. One of my duties as Assistant Cashier included doing the janitor work, and mopping the bank floor after a busy day in the horse business was not one of the more pleasant duties, as I recall it."

Homestead Final Proofs

"Another facet of the business that brought a lot of people to the bank was the handling of homestead final proofs. Fred Athearn had been appointed U.S. Commissioner for the area and his duties were to complete final proofs for the homesteaders when they had lived on the homestead the required three years (seven months or more in each year) and had cultivated the number of acres required by the Homestead Act."

"Five of these final proofs were scheduled for each day for five successive days. Each final proof involved four pages of testimony by the entry man and two pages each of his two corroborating witnesses. When these papers were completed they were taken to the U.S. Land office at Havre, of which M.W. Hutchinson was registrar at the time, and if everything was found to be in order Mr. Hutchinson would issue a register's certificate which constituted sufficient title for the homesteader to secure a first mortgage farm loan. The U.S. Land Patent usually followed in six months to a year."

"The bank in extending credit to the homesteader would take as security a mortgage on his horses and machinery and would also take what was then known as a preliminary mortgage on the homestead. If final proof was completed the preliminary mortgage would become good, but if the homesteader did not acquire title, and gave up the homestead, the mortgage would have no value."

Bank Examiners I Remember

"I recall one occasion while I was helping the bank examiner review the notes and collateral paper held by the bank, after mentioning to him on several occasions that the bank also held a preliminary mortgage on the land, the examiner said to me: "I don't want to appear stupid, but just what is a preliminary mortgage?"

"I also recall a note secured by a chattel mortgage covering one bull and a long list of farm machinery. The examiner made this comment to me: "Wouldn't you think that bull would get awfully lonesome out there with all that machinery?" Usually the examiners were quite stern in their evaluation of the collateral and were not easily impressed with the merits of some of the paper they found in the bank's note pouch, but they also maintained their sense of humor."


"Another incident that I recall was when an elderly gentleman told me about coming to the bank some time earlier during the hard years to borrow one hundred dollars. He related to me how he sat down at the table the night before and wrote his name on a piece of paper one hundred times so he would be sure to do a good job of signing his name on the note. He learned to his disappointment the next day that all this work was for naught as the bank refused to make him the loan."

Farm Mortgage Business

"Getting back to the diverse business activities of the bank, the farm mortgage business was thriving at the time the homesteaders were making final proof on the land. After completion of the final proof papers the bank would then have the homesteader secure a first mortgage loan on the land."

"This consisted of a note secured by a first mortgage and a release of the preliminary mortgage held by the bank. This farm loan mortgage was then brokered in Minneapolis, St. Paul or Chicago to the people who had money they wanted to invest in first mortgage farm loans bearing 6% interest. The Bank also took a commission mortgage representing the other 4% interest, bringing the total interest up to 10%."

"This commission mortgage was owned jointly by the bank and the broker who sold the mortgage to the investor. In 1916 when the Federal Land Bank system came into being it brought an end to the farm mortgage business as the Federal Land Bank loans were made for a 5½ % interest rate. The Federal Land Bank amortized mortgage required a payment of 6 ½ % of the original principal amount of the mortgage each year and at the end of 34 ½ years the principal and interest were extinguished in full."

Insurance Business

"The Bank also wrote insurance, mostly crop-hail on crops and fire and tornado on farm buildings. I recall writing a farm couple about renewing their fire and tornado policy on the house. The housewife wrote back asking that I discontinue the tornado part as she and her husband had talked it over and decided that if the house blew away they would very likely be in it and would not survive to collect on the policy."

"Auto insurance was unheard of as there were no finance companies requiring it. Neither do I recall writing any farm liability policies in those days. People didn't seem to be liability conscious. That was to come later. Most of the cars were Model T Fords and on the dirt and chuck ridden roads of those days they didn't travel fast enough to incur any bodily injury or property damage liability."

"Even the jackrabbits could outdistance a Ford at that time, as I recall it. They were frowned on when they first came out as too impractical, and were sometimes referred to as 'fireless cookers' before they became better ventilated and air conditioned as they are today."

All-Risk Crop Insurance

"In the spring of 1917 a company was formed in Helena with a capitalization of $250,000.00 for the purpose of writing all-risk crop insurance. It was short lived. The Bank at Kremlin did not take on the agency as the field was new and the boys were skeptical about it, which, as it turned out, was excellent judgment on their part."

"The bank at Gildford took the agency and hired a man from Kremlin to write it. Total indemnity under the policy was $7.00 per acre and the premium was 70 cents per acre. Selling it was not difficult as the season was dry and most of the crops were either sowed on spring plowing or stubbled in and did not hold forth much promise in the event of a prolonged drought."

"As it turned out most of these policies became claims and the company was unable to pay. No doubt most of the capital had been expended in organization, supervision and underwriting costs, so all the company could offer in the way of settlement was a return of the premium."

"This naturally did not go over, and a group of the more militant farmers in the Gildford area found the company adjuster and proceeded to get a little rough. While they held him down in the mud on the street they had him sign a telegram to the company reading something like this: 'Struck a tough bunch. Must settle in full.' Needless to say the telegram did not produce any magic results."

"One of the major insurance companies also undertook to write drought insurance on crops that year. They had adjusters in the field for the next two years before all of the claims were finally settled."

Automobile Business

"The First State Bank of Kremlin also engaged in the automobile business, thru an agency in Malta, and sold Buick and Maxwell cars. In the spring of 1917 the Buick Motor Company came out with a four-cylinder touring car, not much bigger than the Model T Ford."

"The bank sold one of these cars to the genial saloonkeeper next door to the bank, Paul Glynn. Paul was a bachelor and his constant companion in this car on trips to Havre, etc. was usually Ted Oltesvig. Paul and Ted were both men of considerable girth and could not both ride comfortably in the front seat so Ted occupied the back seat on these trips."

"Returning from Havre one windy night in the fall of 1917 Ted's hat blew off somewhere around Fresno and Paul stopped the car so Ted could recover his hat. A few minutes later Paul thought he heard the back door slam so he started down the road for Kremlin."

"Paul was a man of few words and when he stopped the car in his garage he shouted out the command: 'Unload.' Not hearing any commotion from the back seat he finally managed to turn around far enough to discover Ted was not there. So he went to bed without any further worry about Ted and his hat problem."

"This incident created strained relations between the two but Ted being a happy-go-lucky sort of person was soon willing to 'forgive and forget' and it was not long until they were back on their jaunts in the little Buick again."



Crops and Banks

"The favorable crop years of 1915 and 1916 coupled with the high prices for wheat brought about partly by the war that had been going on in Europe since 1914, was in some ways very unfortunate."

"In the fall of 1916 when the farmers came in to take care of their obligations at the bank, Johnson and Athearn advised them to go out and pay all their other bills first and if they had any money left they could pay the bank. If not, the bank would be glad to carry them over."

"This they found out later was a mistake. It encouraged a lot of people to buy things they could probably have done without, instead of liquidating their obligations first."

Bankers unpopular in hard times

"The next year was a different story. Many of the banks had borrowed money to extend credit and needed to make collections in the fall to liquidate their bills payable. The banker became unpopular in pressing for collection when the crop was short and money was scarce."

"Some of the more militant farmers in a few cases threatened to 'beat up' on Johnson and Athearn and even did so in few instances when they were trying to make collections. I recall the bank suing on a note on which the creditor was trying to stall payment on some technicality."

"I recall a statement made by the defendant's attorney in his plea to the court that went something like this 'Look at this man, this hard-hearted Johnson. His primary concern is to get the money. Get it honestly if you can, but get the money.' A few of these experiences convinced Johnson and Athearn that they would like to sell out. This they did in February, 1918."

Drought and poor prices

"The set-backs suffered by the early settlers and the businessmen by reason of the drought cycle of 1917-18-19 were a sad chapter in the history of the Kremlin area and it really took about seven years to recover from it."

"In 1919 there was no grain harvested around Kremlin. Even the Russian thistles grew only to a height of four or five inches. There were a few showers along the Canadian border and these produced a little wheat in what was part of the Kremlin territory at that time."

"The farmers bringing in the few wagonloads of wheat to Kremlin didn't reach town as they were intercepted on the way by farmers along the route who had no crop and wanted to buy this wheat for seed for the following spring. Other than that all the seed wheat for the 1920 planting had to be shipped in from Canada at a cost of $2.50 per bushel."

"Then the price collapsed in the fall of 1920 and the farmers who had hoped to realize a $2.50 or better per bushel for their wheat that fall found the price dropping around 10 cents a bushel almost daily and many of them had to sell their wheat for less than half of the price they had paid for seed wheat in the spring."



Kremlin in the Saturday Evening Post

"A man by the name of Garet/Garrett wrote an article for the Saturday Evening Post during that period (April 12, 1924) entitled 'That Pain in Our Northwest'. Kremlin seemed to be the focal point in this article and I recall the pictures in the Post accompanying the article were very familiar. One of them was taken of the bank at Kremlin and another was taken at the Bob Lucke farmstead two miles east of Kremlin."

"This man Garrett and his article came in for much criticism from the people in the area who still had confidence in that part of Montana. He finally returned after conditions had become more stabilized and wrote a sequel to 'That Pain in Our Northwest', painting a completely different picture of the area as he found it then, and the second article was well received."

"In thinking about the homestead years one has to admire those early settlers who stayed on, enduring the hardships and privations brought about by the dry years, hail storms, grasshoppers and the collapse of grain prices in the early twenties and during the great depression of the early thirties."



Remembering Mr. Banks' Good Water

"One of the things that stands out in my memory about Kremlin was the water situation and the lack of good drinking water. All of the drilled wells seemed to produce soda water and it was not good for drinking or culinary purposes."

"A farmer a few miles southwest of Kremlin by the name of Spencer C. Banks had a well that produced good drinking water, and he undertook to supply the town with good water."

"I recall seeing him come down the street every morning with a team of horses pulling a low steel-wheeled truck wagon with a flatbed on it. On this he carried six or eight 65-gallon barrels of water and from these he made deliveries with a bucket to the homes and business places."

"Speaking of water problems, one of the old-timers who settled in the Shelby area around 1908 or thereabouts related to me how he was quite puzzled why so many people came down to meet the train when it stopped at Shelby. He finally discovered that they all came down to get a drink of good water from the train's water dispenser.
(Slight exaggeration, no doubt.)"

"Judi, I have rambled on reminiscing about the past and realize that a lot of it may be irrelevant or inappropriate for the project you have in mind, but you can use anything that you find suitable."


The end of John Swanson's letter.
We can be most grateful for his first-hand recollections!



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