Island History for Friday, June 3, 2011

In 1929, the Territory of Hawai‘i was short of cash, so, in keeping with past practice, it wrote warrants on Hawai‘i’s two major banks, anticipating the banks would then cash them as usual to allow the Territory to remain solvent.

However, the banks’ vice presidents informed Governor Judd that their banks would not accept the warrants unless he took action to lower real property taxes.

Their demand was unacceptable to Judd, but without their funding, the Territory risked insolvency.

Judd sought the advice of his attorney general, who informed him that Kaua‘i’s Charles Rice (1876-1964), then chairman of the territorial Senate Ways and Means Committee, was in Honolulu and his advice should be sought.

At that time, Rice dominated territorial politics with his good judgment, quick-wittedness and influence. Charlie Fern (1892-1995), The Garden Island newspaper’s longtime editor, once remarked, “If you had Charlie Rice behind you, you were elected. That was it.”

Rice came in, listened to Judd and laid out his plan.

The following day, the governor, the attorney general and the territorial treasurer went to the banks with a detail of national guardsmen and withdrew all of the Territory’s cash, which included bond money, current funds, and non-operational funds.

They then loaded it onto a truck, drove to the treasurer’s office, locked it in a vault and posted an armed guard.

The bankers soon learned they were low on cash, with no chance of quickly replacing it locally, or from the Mainland.

What’s more, these bankers realized that if their customers were to discover that the territorial government had withdrawn its cash, panic could ensue, causing a rush for their banks’ funds and financial disaster.

Thanks to Charles Rice’s counsel, the warrants were finally accepted, thus ending the Territory’s financial crisis.