The Region

Which of the Twin Cities?

Competition was intense between Minneapolis and St. Paul for the Ninth District Federal Reserve Bank

David Page - Intern

Published December 1, 1997  |  December 1997 issue

RIVAL'S KNOCKS SEEM TO INSURE ST. PAUL A BANK

Mill City Witnesses, in Belittling Neighbor, Incur Disfavor at Chicago Hearing

McADOO AND HOUSTON APPRECIATE FAIRNESS

MINNEAPOLIS SURE ... TO GET RESERVE BANK

Business Men's Delegation Completes Argument Before Federal Bank Organization Committee

LIVESTOCK MARKET PLEA IS MADE FOR ST. PAUL

St. Paul Pioneer Press
January 21, 1914

Minneapolis Journal
January 20, 1914


Despite occasional brief periods of cooperation, relations between the cities of St. Paul and Minneapolis have historically been as chilly as a Minnesota winter. When competition heats up, the resulting thaw generally leads to a flood of vitriol rather than an overflow of the milk of kindness. After the passage of the Federal Reserve Act in 1913, for example, the two cities engaged in one of their keenest fights over which—if either—should have the honor of hosting one of the proposed regional Federal Reserve banks.

"The Minneapolis St. Paul contest transcends in importance anything in the history of the competition of the two cities in the last twenty-five years," the Minneapolis Journal claimed, "and is so recognized."

With prestige and jobs at stake, the state capital and its sister city rushed to assemble delegations to present their relative cases at hearings to be held in Chicago in mid-January 1914. At those meetings and others held throughout the United States, Secretary of the Treasury William G. McAdoo and Secretary of Agriculture David F. Houston would listen to proposals about the location of regional banks, the number of such banks and the size of the territories they would serve.

From the outset, Minneapolis had better prospects than St. Paul. New Year's 1914 found the Mill City with 71.2 percent of bank clearings in the Twin Cities, leaving 28.8 percent for St. Paul. Newspapers were quick to point out the significance of the numbers: "Important beyond all past comparison are the figures at this time," the Journal trumpeted on Jan. 10, 1914, "for the federal committee of organization of the new reserve association that is to operate under the new currency law will be in Chicago early this month and business men and bankers will attend and present statements as to the financial prominence of Minneapolis and its relation to the northwest as a whole."

Additionally, in a poll of 645 cities in the proposed district, 365 votes were cast for Minneapolis, 118 for Chicago, 93 for St. Paul, 42 for either of the Twin Cities and the remainder of the votes spread over other communities in the area.

Nevertheless, the outcome was not a foregone conclusion. Some representatives from Chicago, which was practically guaranteed a bank, were pushing for the City of Big Shoulders to carry the entire Northwest all the way to the Pacific. Others were less greedy. George Reynolds, president of Continental and Commercial National Bank of Chicago, told the committee he favored banks in "Boston, New York, Chicago, San Francisco, Minneapolis, St. Louis...." He stopped suddenly and said, "Minneapolis or St. Paul," then continued his list.

When Reynolds had finished, Secretary McAdoo asked, "Which of the Twin Cities?"

"I will leave that for them to settle," Reynolds tactfully suggested.

Business leaders and bankers in Minneapolis had made plans to ensure that the matter was decided in their city's favor. The Minneapolis Civic and Commerce Association put together a lengthy printed volume of the city's resources—commercial, financial and industrial—to present to the committee. An economist at the University of Wisconsin was hired to gather and compile the information after the president of the University of Minnesota forbid any faculty member there to get into the fight between the two cities. Minneapolis also sent the largest delegation of any city in the country to the Chicago hearings.

St. Paul's delegates took a look at their 14-page brief and their smaller number of boosters and decided they needed reinforcements. Joseph Beck, secretary of the St. Paul Association of Commerce, got on the phone and called Jesse Gregg of Nicols, Dean and Gregg and asked that he and some friends get on the next train to Chicago so they could bolster St. Paul's position. In addition, John Flanagan of the Stockyards National Bank and William Magivny, president of the South St. Paul Union Stock Yards, planned to make a strong push for St. Paul because of its livestock industry. But reporters from the local dailies were more interested in those men from St. Paul who did not lend their weight to the capital's bid.

Frank B. Kellogg, the "trust buster" who had taken on Standard Oil and would eventually win a Nobel Peace Prize, was to open the battle for St. Paul. When Kellogg did not appear in Chicago, other arrangements had to be made. Empire Builder James J. Hill, the man whose railroad had tamed the Pacific Northwest and turned Seattle into a metropolis, would not be there to represent his newfound interest in banking, but when his son Louis also skipped the meeting, rumors flew. Pierce Butler—a member of the University of Minnesota Board of Regents, an eventual U.S. Supreme Court justice and one of Hill's lawyers—was present but not part of St. Paul's official delegation.

The absence of these highly esteemed members of the St. Paul community caused considerable speculation. The elder Hill's dramatic jump from the Democratic to the Republican party and the Republican leanings of Kellogg and Butler may have played some role in their decision to avoid attending the hearings in any official capacity, especially since Flanagan argued that the bank should be in St. Paul because it was "a good democratic city." The banker's statement backfired when McAdoo said the comment was "out of place." Houston added that politics was not "the thing to bring up at this meeting."

St. Paul did have one ace in the hole, however. St. Paul banker John R. Mitchell, part of the city's delegation, was "a warm personal friend" of John Skelton Williams, who had just been confirmed as Comptroller of the Currency by the Senate and thus would become an ex-officio member of the Federal Reserve board. Williams could not be in Chicago, but he would be part of the three-person panel that would make the final decision concerning the disposition of the reserve banks.

Minneapolis tried to counter any political advantage St. Paul might have by attacking the city's economic vitality. McAdoo and Houston quickly cautioned Minneapolis witnesses to confine any comments to their own city. Taking a calculated risk, the Mill City's representatives indicated that if Minneapolis could not have the regional bank, then it should be located in Chicago, not St. Paul. Sensing they could gain some kind of moral advantage, St. Paul's envoys quickly told the two board members present that they would be happy to see the bank in Minneapolis if it were not in St. Paul. Banks in the Dakotas asked the Minneapolis delegation to change its stance and accept St. Paul as an alternate. Otherwise, bankers from those two states would press for Fargo as their reserve center. Representatives from Montana also expressed their desire to see the Twin Cities cooperate in getting a bank outside Chicago.

The day after the hearings were completed, the St. Paul Pioneer Press boasted that "Rival's Knocks Seems to Insure St. Paul a Bank," forgetting perhaps that the city's commissioners had also been reprimanded by the two secretaries. The Minneapolis Journal also claimed victory: "Minneapolis Sure ... to Get Reserve Bank."

Months before the final decision was made, some cities were charging the selection process would be marred by undue political influence. Thus it came as no surprise that when the final determinations were announced in early April, many of the 37 cities hoping to be selected were not happy. "Omaha is hopping mad," the Journal reported, and "New Orleans is almost ready to secede from the union." The decision to place a bank in Richmond caused particular rancor, especially since Williams hailed from that city: "Baltimore is one of the biggest trading places in the United States," one wag commented, "But if Baltimore should happen to be short of cash it would have to take its discountable paper to Richmond, which would entail much loss of time besides involving the labor of seeking out the location of Richmond and a study of the stage routes to the place."

When the final boundaries were drawn, the Ninth Federal Reserve District did not include the Pacific Northwest as Minneapolis delegates had proposed, but it did take in the northern two-thirds of Wisconsin and Upper Michigan. Bankers from 34 Wisconsin counties were not happy about the decision and petitioned for their removal from the Ninth District. Eventually banks in 25 Wisconsin counties were transferred to Chicago in October 1916.

Perhaps not surprisingly, St. Paul financiers expressed delight that a Reserve bank was located in the Northwest. For their part, Minneapolis delegates thanked St. Paul for helping to secure a bank for this section of the country and promised it would be a Twin Cities rather than a Minneapolis institution. Possibly as some sort of attempt at reconciliation, the first meeting to discuss the shape of the bank's board of directors was held in St. Paul.

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