Samuel Thomas Hauser
Samuel Thomas Hauser was an American industrialist and banker who was active in the development of Montana Territory. He made his first fortune in silver mines and railroads, but he lost everything in the Panic of 1893. He restored his fortune by building hydroelectric dams, only to lose it all again after his Hauser Dam burst. In addition to his many business interests, he was appointed the 7th Governor of the Montana Territory, serving from 1885 to 1887.
A complicated figure, Hauser engaged in fraud and through his First National Bank of Helena he stole over $2 million. On the other hand, Hauser was praised by his contemporaries for his undeniable contributions to the development of Montana Territory. His mines, smelters, railroads, and dams all stimulated the region's economy. One newspaper called him "Montana's greatest captain of industry, former chief executive, pioneer trailblazer, eminent financier, distinguished citizen and one of the choice and master spirits of the age."
Early life
Hauser was born to Samuel Thomas and Mary Ann Hauser in Falmouth, Kentucky on January 10, 1833. His early education occurred locally at the Chittenden School while both his father, a judge and lawyer, and a cousin who had graduated from Yale University, oversaw his later education.At the age of 19, Hauser went to work for the Kentucky Central Railroad. He then moved to Missouri in 1854, where he worked as a civil engineer for the railroads. He began as an assistant engineer for the Missouri Pacific and Northern Pacific railways and worked his way up to become chief engineer on the Lexington to Sedalia branch.
Hauser married Ellen Farrar of St. Louis in 1871. The marriage produced two children: Ellen and Samuel Thomas Jr.
Montana
In early 1862, Hauser left his position with the railroads and boarded a steamboat for the journey up the Missouri River. He arrived at Fort Benton, Montana, in June and traveled overland toward the Salmon River to prospect for gold. Partway through the difficult journey, after hearing disappointing reports about the claims in the Salmon River area, he joined the gold rush at Bannack, Montana, where he arrived in August. The next year, his prospecting efforts took him down the Yellowstone River. During this expedition, Hauser's party was attacked by Indians, and Hauser himself was wounded. The bullet went through a thick notebook in his shirt pocket and lodged in a rib. He survived, and while he failed to find gold on the Yellowstone, other members of his party struck it rich at Alder Gulch. After the boom town of Virginia City sprang up in Alder Gulch, Hauser joined with Nathaniel P. Langford to establish one of the town's first banks, S. T. Hauser and Co, in 1865.Territorial developer
Hauser himself never had success with prospecting. Instead, he made his first fortune through investments in mines, smelters, and railroads. He visited St. Louis in 1865 to raise money from investors. His efforts proved successful, and in 1866 he formed the St. Louis & Montana Mining Company and built Montana Territory's first smelter at Argenta. Hauser invested heavily in the silver mining industry. Within a few years, he owned six silver mines, coal mines, and several silver smelters. Hauser also acquired a large real estate portfolio in support of his mining and ranching interests.However, the cost of transporting heavy equipment and ore cut into the profits of Hauser's mines. To solve the problem of shipping, Hauser invested heavily in railroad branch lines to link his mines to markets. He partnered with the Northern Pacific Railway to build the Helena, Boulder Valley, & Butte Railroad in 1887, as well as the Helena & Jefferson County, the Drummond & Philipsburg, the Helena & Red Mountain, the Helena Northern, and the Missoula & Bitter Root Valley spur lines. Hauser's partnership with the Northern Pacific was based on gentleman's agreements, without formal contracts. For each line that Hauser built, the Northern Pacific underwrote part of the construction costs. Hauser managed the construction of the lines and leased them to the Northern Pacific. The relationship between the two parties was a difficult one. Hauser was perpetually late with his loan payments, angering officials of the cash-strapped Northern Pacific. Nevertheless, both parties benefited from the arrangement. Hauser got his railroads, and in return, he often did favors for the Northern Pacific—for example, he once convinced copper kings William Andrews Clark and Marcus Daly to accept a rate increase for ore shipments.
Hauser's railroads invigorated Montana's mining industry. Not only could ores be shipped economically to smelters and to markets, but the shipment of heavy equipment allowed bigger, more efficient mills and smelters to be built locally. But while Hauser relentlessly promoted Montana's interests, he watched out for his own interests first and foremost. In 1883, Hauser bought the Alta mine through his Helena Mining and Reduction Company. The mine was failing due to the high cost of transportation of ore, equipment, and even food. Hauser organized the Alta-Montana Company with himself as director and built a branch line to connect the district to Helena. The mine turned out to be one of the richest silver mines in the territory.
Besides his mining interests, Hauser invested in cattle and partnered with Granville Stuart and A. J. Davis in the DHS Ranch. In 1870, Hauser participated as a member of the Washburn–Langford–Doane Expedition. He was also active in efforts to preserve the Yellowstone area and his lobbying efforts helped see the creation of the Yellowstone National Park. Politically he was aligned with the Democratic Party and served as a delegate to the 1884 Democratic National Convention. Despite being a Democrat, Hauser's business influence was large within the territory that he even influenced the selection of Republican appointees.
Governorship
Hauser became the first territorial resident to be appointed Governor of Montana Territory after President Grover Cleveland appointed him to the position on July 3, 1885. He took office on July 14 of the same year. During his term of office, his many business interests consumed much of his time and many of his duties as governor were delegated to his personal secretary. In fact, Hauser's critics alleged he only took public office in order to further his business interests.A Democrat, Hauser allied himself with key Republicans to further the economic development of the territory. Hauser maintained ties to other western Democrats interested in economic development, particularly Missouri Senator George Graham Vest. It was Vest, along with Montana's territorial delegate James K. Toole, who negotiated Hauser's appointment as governor.
As governor, Hauser was an advocate of free silver and supported relocating the territory's indigenous population to the Indian Territory in order to free land for settlers. To appease cattle interests within the territory he appointed a territorial veterinary surgeon while, in an effort to constrain territorial spending, vetoed the establishment of a territorial insane asylum.
In order to free himself to concentrate on his business activities, Hauser submitted his resignation in December 1886. His last day in office came on February 7, 1887.
Banking
In 1866, Hauser founded the First National Bank of Helena. The bank received its charter April 5, 1866, with capital from St. Louis investors and with Hauser as president. Troubles began almost immediately.Risky loans
Under the National Bank Act, the Office of the Comptroller of the Currency chartered and regulated national banks. National banks, including Hauser's First National Bank of Helena, could issue national bank notes backed by the purchase of federal government bonds. These national bank notes constituted the national currency. Among other things, the law required national banks to maintain a reserve of fifteen percent of all bank notes and deposits. In addition, loans to a single borrower were limited to ten percent of capital and surplus. National banks had to report to the comptroller, and the comptroller hired bank examiners to ensure that banks followed the law, loaned wisely, and otherwise stayed healthy.Under Hauser's leadership, the First National Bank of Helena ignored many of these regulations from the start. Hauser blamed the problems on the isolation of the area. Because no railroad connected Helena to the outside world, transportation was slow or nonexistent. Telegraph lines could be down, and even Indian hostilities could hamper communication. Under these conditions, banks tolerated overdrafts, essentially considering them short-term, interest-free loans. Ranchers and miners working outside of Helena often wrote drafts against their accounts, even if they had no balance or a negative balance. Later, after selling their herds or ore, they would come to town and settle their accounts. Hauser's bank also made advances against the silver profits of mines, without requiring collateral or an endorser, based only on an assay report. When a mine proved profitable, such loans resulted in profit for the bank. But often, the veins of silver would "pinch out," leaving the bank with nothing but valueless paper. The bank also practiced the nineteenth-century custom of accepting single-name paper. A single-name paper was a promissory note with only one signature rather than the usual co-signer. Essentially, it was an unsecured loan based only on a borrower's good reputation.
The first bank examiner to look into the affairs of the First National Bank of Helena, H. H. Wernse, reported in 1870 that Hauser was away from the bank on travels half the time and that, although he was respected locally, he was "more popular than competent." In 1872, the job of bank examiner was taken over by Hauser's personal friend Nathaniel Langford. Langford's reports painted Hauser in a good light, calling him a "rustling active businessman." But by 1879, even Langford noted that the bank had dangerous levels of risky single-name paper loans. He begged Hauser to reform the bank's practices. In 1886, Langford moved on from his job as bank examiner. The two examiners who succeeded him both reported long lists of problems: lax management, poor record-keeping, excessive loans, loans to officers and directors, unsecured paper, overdrafts, and disregard for banking law all threatened the bank's health.
Yet in his reports to the comptroller, which were published in the local newspaper, Hauser painted an optimistic picture. In 1888, he reported that the bank provided 3.1 million dollars in loans; listed "Other Stocks and Bonds" at $218,800; and listed "Undivided Profits" at $373,795. Bank examiner H. H. Taylor reported a more pessimistic view: $819,144—a full 25 percent—of the bank's loans were overdue paper. He figured that much of the debt would never be repaid. He also noted that over 2 million dollars of the loans were single-name paper, including $791,000 in loans to the bank's officers and directors, including Hauser. He finished his report by pointing out that these bad debts would swallow up the bank's profits. By 1890, another examiner noted that "one serious run on this bank would end it," and by 1891, the comptroller threatened to revoke the bank's charter. But Hauser continued to brush off the bad reports, saying that the loans were mere technical violations of banking statute.