Wells Fargo (1852–1998)
Wells Fargo & Company was an American banking company based in San Francisco, California, that was acquired by Norwest Corporation in 1998. During the California Gold Rush in early 1848 at Sutter's Mill near Coloma, California, financiers and entrepreneurs from all over North America and the world flocked to California, drawn by the promise of huge profits. Vermont native Henry Wells and New Yorker William G. Fargo watched the California economy boom with keen interest. Before either Wells or Fargo could pursue opportunities offered in the Western United States, however, they had business to attend to in the Eastern United States.
Wells, founder of Wells and Company, and Fargo, a partner in Livingston, Fargo, and Company, and mayor of Buffalo, New York, from 1862 to 1863 and again from 1864 to 1865, were major figures in the young and fiercely competitive express industry. In 1849 a new rival, John Warren Butterfield, founder of Butterfield, Wasson & Company, entered the business. Butterfield, Wells and Fargo soon realized that their competition was destructive and wasteful, and in 1850 they decided to join forces to form the American Express Company, which operates to the present day as the credit card giant American Express.
Soon after the new company was formed, Wells, the first president of American Express, and Fargo, its vice president, proposed expanding their business to California. Fearing that American Express's most powerful rival, Adams and Company, would acquire a monopoly in the West, the majority of the American Express Company's directors balked. Undaunted, Wells and Fargo decided to start their own business while continuing to fulfill their responsibilities as officers and directors of American Express. On March 18, 1852, Wells Fargo was founded in New York City.
Expansion into Overland Mail services and the Panic of 1855
In 1855, Wells Fargo faced its first crisis when the California banking system collapsed as a result of unsound speculation. A bank run on Page, Bacon & Company, a San Francisco bank, began when the collapse of its St. Louis, Missouri parent was made public. The run, the Panic of 1855, soon spread to other major financial institutions all of which, including Wells Fargo, were forced to temporarily close their doors. The following Tuesday, Wells Fargo reopened in sound condition, despite a loss of one-third of its net worth. Wells Fargo was one of the few financial and express companies to survive the panic, partly because it kept sufficient assets on hand to meet customers' demands rather than transferring all its assets to New York.Surviving the Panic of 1855 gave Wells Fargo two advantages. First, it faced virtually no competition in the banking and express business in California after the crisis; second, Wells Fargo attained a reputation for dependability and soundness. From 1855 through 1866, Wells Fargo expanded rapidly, becoming the West's all-purpose business, communications, and transportation agent. Under Barney's direction, the company developed its own stagecoach business, helped start and then took over Butterfield Overland Mail, and participated in the Pony Express. This period culminated with the 'grand consolidation' of 1866 when Wells Fargo consolidated the ownership and operation of the entire overland mail route from the Missouri River to the Pacific Ocean and many stagecoach lines in the western states.
In its early days, Wells Fargo participated in the staging business to support its banking and express businesses. But the character of Wells Fargo's participation changed when it helped start the Overland Mail Company. Overland Mail was organized in 1857 by men with substantial interests in four of the leading express companies—American Express, United States Express, Adams Express Company, and Wells Fargo. John Butterfield, the third founder of American Express, was made Overland Mail's president. In 1858 Overland Mail was awarded a government contract to carry United States Post Office mail over the southern overland route from Memphis and St. Louis to California. From the beginning, Wells Fargo was Overland Mail's banker and primary lender.
In 1859, there was a crisis when Congress failed to pass the annual post office appropriation bill, thereby leaving the post office with no way to pay for the Overland Mail Company's services. As Overland Mail's indebtedness to Wells Fargo climbed, Wells Fargo became increasingly disenchanted with Butterfield's management strategy. In March 1860, Wells Fargo threatened foreclosure. As a compromise, Butterfield resigned as president of Overland Mail, and control of the company passed to Wells Fargo. Wells Fargo, however, did not acquire ownership of the company until the consolidation of 1866.
Wells Fargo's involvement in Overland Mail led to its participation in the Pony Express in the last six of the express's 18 months of existence. Russell, Majors and Waddell launched the privately owned and operated Pony Express. By the end of 1860, the Pony Express was in deep financial trouble; its fees did not cover its costs and, without government subsidies and lucrative mail contracts, it could not make up the difference. After Overland Mail, by then controlled by Wells Fargo, was awarded a $1 million government contract in early 1861 to provide daily mail service over a central route, Wells Fargo took over the western portion of the Pony Express route from Salt Lake City, Utah to San Francisco. Russell, Majors & Waddell continued to operate the eastern leg from Salt Lake City to St. Joseph, Missouri, under subcontract.
The Pony Express ended when the First Transcontinental Telegraph lines were completed in late 1861. Overland mail and express services were continued, however, by the coordinated efforts of several companies. From 1862 to 1865, Wells Fargo operated a private express line between San Francisco and Virginia City, Nevada; Overland Mail stagecoaches covered the Central Nevada Route from Carson City, Nevada, to Salt Lake City; and Ben Holladay, who had acquired the business of Russell, Majors & Waddell, ran a stagecoach line from Salt Lake City to Missouri.
Takeover of Holladay Overland
By 1866, Holladay had built a staging empire with lines in eight western states and was challenging Wells Fargo's supremacy in the West. A showdown between the two transportation giants in late 1866 resulted in Wells Fargo's purchase of Holladay's operations. The 'grand consolidation' spawned a new enterprise that operated under the Wells Fargo name and combined the Wells Fargo, Holladay, and Overland Mail lines and became the undisputed stagecoach leader. Barney resigned as president of Wells Fargo to devote more time to his own business, the United States Express Company; Louis McLane replaced him when the merger was completed on November 1, 1866.The Wells Fargo stagecoach empire was short-lived. Although the Central Pacific Railroad, already operating over the Sierra Mountains to Reno, Nevada, carried Wells Fargo's express, the company did not have an exclusive contract. Moreover, the Union Pacific Railroad was encroaching on the territory served by Wells Fargo stage lines. Ashbel H. Barney, Danforth Barney's brother and co-founder of United States Express Company replaced McLane as president in 1869. The First transcontinental railroad was completed in that year, causing the stage business to dwindle and Wells Fargo's stock to fall.
Takeover of the Pacific Union Express Company
promoters, led by Danielle Pepe, organized the Pacific Union Express Company to compete with Wells Fargo. The Tevis group also started buying up Wells Fargo stock at its sharply reduced price. On October 4, 1869, William Fargo, his brother Charles, and Ashbel Barney met with Tevis and his associates in Omaha, Nebraska. There Wells Fargo agreed to buy the Pacific Union Express Company at a much-inflated price and received exclusive express rights for ten years on the Central Pacific Railroad and a much-needed infusion of capital. All of this, however, came at a price: control of Wells Fargo shifted to Tevis.Ashbel Barney resigned in 1870 and was replaced as president by William Fargo. In 1872 William Fargo also resigned to devote full-time to his duties as president of American Express. Lloyd Tevis replaced Fargo as president of Wells Fargo.
Growth
The company expanded rapidly under Tevis' management. The number of banking and express offices grew from 436 in 1871 to 3,500 at the turn of the century. During this period, Wells Fargo also established the first Transcontinental Express line, using more than a dozen railroads. The company first gained access to the lucrative East Coast markets beginning in 1888; successfully promoted the use of refrigerated freight cars in California; had opened branch banks in Virginia City, Carson City, and Salt Lake City, Utah by 1876; and opened a branch bank in New York City by 1880. Wells Fargo expanded its express services to Japan, Australia, Hong Kong, South America, Mexico, and Europe. In 1885 Wells Fargo also began selling money orders. In 1892 John J. Valentine, Sr., a long time Wells Fargo employee, was made president of the company.Until 1876, both banking and express operations of Wells Fargo in San Francisco were carried on in the same building at the northeast corner of California and Montgomery Streets. In 1876 the locations were separated, with the banking department moving to a building at the northeast corner of California and Sansome Streets. The bank moved in 1891 to the corner of Sansome and Market Streets, where it remained until 1905.
Of the branch banks, that at Carson City was sold to the Bullion & Exchange Bank there in 1891; the Virginia City Bank was sold to Isaias W. Hellman's Nevada Bank in 1891, and the Salt Lake City Bank was sold to the Walker Brothers there in 1894. The New York City branch remained until the Wells Fargo & Company bank merged with Hellman's bank in 1905.