After the revolution

Once Carranza had defeated his opponents, banknote issues, bank reserves and similar currency matters were major subjects of dispute. Although banknotes had been driven out of circulation by the more worthless government issues, substantial amounts were still outstanding, largely in the possession of the well-to-do. The first step Carranza took consisted in forcing the banks to place themselves within the stipulations of the Ley General de Instituciones de Crédito, in particular to show that they had sufficient reserves. On 29 September 1915 Carranza (decree núm. 80) set a period of 45 days for the banks to comply with the law or their concessions would be cancelled. The report of his Comisión Reguladora de Bancos on 8 March 1916 showed that, as at 13 November 1915 the Banco de Sonora had 2,286,320 pesos in notes in circulation but as its reserves were 1,228,636.50 pesos it was operating within the law.

On 15 September 1916 Carranza decreed that the concessions previously granted to the banks of issue were unconstitutional, and accordingly were abrogated. Despite this ruling, the banks were given sixty days within which to bring their reserves up to the legal requirements, and in the meantime were limited in their operations by the auditors from the Treasury Department. On 14 December another decree declared in liquidation any bank, including the Banco de Sonora, which had not succeeded in bringing its cash reserves within the legal requirements and the authorities took possession of the bank.

On 6 November 1918 the Secretaría de Hacienda announced that the Banco de Sonora should be inspected to establish its financial state^{El Informador, Guadalajara, 7 November 1918}. On 8 September 1919 the Ministro de Hacienda, Luis Cabrera, said that the bank had transferred its funds and accounts to the United States and did not want to return to Mexico until it had been compensated for the damages it had suffered. He added that the bank ought to be subject to the laws and did not have government approval^{El Informador, 9 September 1919}.

The Banco de Sonora based itself in Nogales, Sonora^{It held its Annual General Meeting in Nogales in 1918 (Boletín Oficial, 18 May 1918). In 1920 the bank was located in calle Elías; the manager was Alfonso Balarezo, contador Alejandro Durazo, and cajero Maytorena. In 1923 it built offices on the corner of calle Camou (today Internacional) and calle Cristóbal Colón (today Ruiz Cortines)} until 1921, when it re-opened its head offices in Hermosillo, held its Annual General Meeting there on 16 February, confirmed Brauer in the post of Director-Gerente, and petitioned the Secretaría de Hacienda for the return of its legal status and all its goods^{AGHES, NPS. Pablo Peralta, Hermosillo, 20 February 1921}.

In 1921 under Obregón’s Ley de Desincautación, the old banks of issue recovered their legal status and were returned to their own Boards of governors. The law divided banks into three categories, depending on the state of their reserves. On 11 March 1921 Secretario de Hacienda Adolfo de la Huerta wrote to Brauer that the Banco de Sonora's board was legally constituted and as its assets exceeded its liabilities by more than 10%, the bank regained its judicial form, under the control of its manager and board, and was classified as in Category A (for banks whose assets were greater than their liabilities)^{Boletín de la Secretaría de Hacienda,} . It could resume all operations except the issue of bank notes.

In March 1921 it was reported that the Banco de Sonora branch in Chihuahua was about to reopen. Leon Escobar was to be the manager^{El Paso Herald, 17 March 1921. He was still there on 19 February 1923 (ST papers, Part I, box 6)}.

In December 1923 $87,000 in reserves were returned to the bank’s owners.

Under the new Ley sobre Bancos Refaccionarios of September 1924 and the Ley General de Instituciones de Crédito y Establecimientos Bancarios of 1925, the banks established under the Ley General de Instituciones de Crédito of 1897 had to restructure themselves as bancos refaccionarios or hipotecarios. The Banco de Sonora reorganised itself as a banco refaccionario. Its shareholders (represented by Felipe A. Seldner, Ramón Corral and Taide López del Castillo) modified the bank’s statutes on 8 March 1927 in accordance with a concession from the Secretaría de Hacienda y Crédito Público dated 19 January and the Ley General de Instituciones de Crédito y Establecimientos Bancarios of 1925. This Banco de Sonora, S. A. Refaccionario continued to have a capital of $1,500,000 but with plans to increase this to $3,000,000 (30,000 shares of $100) and its concession was to last for 30 years, from 29 September 1924. The directors remained Felipe Seldner, Luis A. Martínez, Víctor Aguilar, Max Müller and Ramón Corral^{AGHES, FN, tomo 6, exp. 500, carpeta 50, Horacio Sobarzo. Acta de reorganización del Banco de Sonora, 8 March 1927}.

By 1927 it was decided that only those old banks of issue that had debts to the federal government would continue to enjoy the government-imposed moratorium on repaying creditors so on 1 October the Secretaría de Hacienda determined that, in accordance with the decree of 26 May 1924 from 1 October 1927 the Banco de Sonora was obliged to exchange its notes and other créditos in unlimited quantities for cash for a period of six months, after which they would be worthless^{El Universal, 1 October 1927}. However, a few weeks later it was reported that the moratorium in fact remained in place^{El Universal, 23 October 1927}.

In October 1927 the Banco de Sonora agreed to take over the Banco Hipotecario y Agrícola del Pacifico (whose board members were also members of the Banco de Sonora Refaccionario’s board). This happened on 1 January 1928, with Banco Hipotecario shareholders receiving shares in the other bank.

In March 1929 the bank had to close its doors during the Escobarista rebellion^{In March 1929 General José Gonzalo Escobar rebelled against interim President Emilio Portes Gil and Plutarco Elías Calles who, despite not being president, was actually running the country. He issued his Manifesto de Hermosillo on 3 March and established himself across Sonora and Sinaloa and other parts of northern Mexico but was soon defeated}. It reopened in Hermosillo and Nogales on 27 May^{El Universal, 8 June 1929}. According to the bank the rebels took $40,000 from its head offices and five branches whilst in the first two weeks of the revolt it paid out $2.5m to uneasy depositors^{El Universal, 11 July 1929. According to another newspaper an inspection in July revealed a shortage of more than one million pesos (El Grafico, 10 July 1929)} .

Bankrupcy

The bank was already suffering from the depression when in 1931 it was struck two deadly blows, the expulsion of the Chinese from Sonora and the sudden bankruptcy of its subsidiary, the Sonora Bank and Trust Company on 19 November^{Nogales Herald, 19 November 1931}.

The Sonora Bank and Trust Company was established on 11 March 1914 with the incorporators listed as Adolfo Bley (of San Francisco); Max Müller (of Los Angeles) and Luis Brauer (of Nogales, Arizona). It had a capital of $100,000 (1,000 shares of $100), its principal place of business was Nogales, but it could have branches in or outside Arizona and in any foreign country^{The Oasis, 11 March 1914}. By 1931 the Sonora Bank and Trust, principally owned by the Bank of Sonora, had agencies in Nogales, Cananea, Hermosillo, Guaymas, Cajamé, Navojoa and Culiacán. Its officers included Max Müller as vice-president (sic) and W. C. Winegar as vice-president and manager^{Other officers were R. H. Bibolet, secretary; C. Mignardot, cashier and W. P. Tiedemann, assistant secretary} and its directors were Müller, Winegar, W. J. Phillips, J. E. Wise, Ramon Corral, Ernesto Camou and Guillermo Mascareñas. The Trust closed its doors on 19 November 1931, after a quiet run on the bank over several months, occasioned by the exodus of Chinese from Sonora^{Nogales Herald, 19 November 1931}. Apparently Müller was trying to raise the necessary capital to reopen^{Nogales Herald, 20 November 1931} but on 23 November the parent Banco de Sonora also closed.

The withdrawal of their savings by many of its Chinese depositors (said to be $400,000 in less than a week^{El Universal, 25 November 1931}) had already depleted the Banco de Sonora’s reserves: when the bankruptcy of the American company became general knowledge, customers besieged the bank’s offices in Nogales, Guaymas, Navojoa and Hermosillo to demand their money and it had to close its doors on 23 November^{Nogales Herald, 23 November 1931}. The bank in turn was forced to foreclose on its mortgages and compel people to sell their properties but this was not enough to save it and it went into bankruptcy with debts of more that two and a half million pesos.

However, the traditional view that Chinese individuals living in Sonora were responsible for the Banco de Sonora’s bankruptcy is challenged in a new study by Ana Isabel Grijalva Díaz and Luis Anaya Merchant^{Ana Isabel Grijalva Díaz and Luis Anaya Merchant, “La quiebra del Banco de Sonora tras la coyuntura política del Plan de Hermosillo, 1929-1933” in región y sociedad, Año 32, 2020}. They show that the bank neglected its finances by granting large amounts of financing to a few clients without verifying their credit recovery capacity and so was financially weak when it resumed operations in 1922.