Excerpt of Corporate History for Dain Rauscher, Written by Steve George
Starting Local
Twin Cities Roots: Kalman and Dain
Louis Hill hunted in style. At the Saint Paul train yard of the Great Northern Railway—
the railroad he ran after his father, “Empire Builder” James J. Hill, died in 1916—a yard worker
lowered the back wall of a specially-designed boxcar. Hill’s chauffeur drove Hill’s car up the
ramp and onto the train as Louis Hill and his friend of 40 years, Charles Oscar Kalman, climbed
aboard the railroad chief’s private rail car for a hunting trip to the Dakotas.
The Kalman and Hill families lived less than a block apart on Summit Avenue in Saint
Paul. Kalman—Oscar to those who knew him—and Louis Hill had gone to prep school in New
Hampshire together, then to college at Yale. The same age, both men loved to hunt and fish, and
they both loved railroads: Oscar Kalman worked for the Chicago Great Western Railroad for 15
years before opening an investment firm in 1909.
For the next 20 years, Kalman and an assortment of partners bought and sold stocks and
bonds for their Twin Cities clients. In addition to being Louis Hill’s financial advisor, Kalman
helped form First Bank, organized the St. Paul Symphony Orchestra, arranged financing for
public and private projects in the Upper Midwest, and served on the boards of more than a dozen
companies including Berghoff Brewing, Anchor Casualty, and Gould-National Batteries.
In 1929 Louis Hill resigned as chairman of the Great Northern Railway. Oscar Kalman,
on the other hand, was hard at work trying to keep up with a chaotic stock market. Reacting to
rumors, clients bought stock by putting up just 10 percent of its value. As was the practice of the
day, Kalman & Company covered the rest. Amid rampant speculation in an unregulated market,
Kalman welcomed the relief promised by his friend’s fall hunting expedition.
On October 24, 1929, Hill and Kalman stood on the railroad tracks of a spur line next to a
Dakota brush patch, rifles at their shoulders. The engineer blew the steam whistle, rousting
startled pheasants into the hunters’ sights.
A world away, the stock market crash rousted startled investors into an uncertain future.
It would be days before Kalman and Hill returned home to hear the news.
While Kalman survived the ensuing Depression better than many brokers, he remained
depressed about his business. Another of his friends, author F. Scott Fitzgerald, invited Kalman
and his wife to come to Paris, where Zelda was being treated for schizophrenia and Scott was
writing his last novel, Tender Is the Night. Kalman declined, explaining in a February 19, 1931,
letter to Fitzgerald that “my business, like many others, has been in such shape that I do not feel
like leaving it.”
He kept at it for another half-dozen years. In 1937, at the age of 65, Kalman sold his
business to six of his employees, including Paul Doelz and Don McFarland. Thirty years later,
Doelz would work out a merger with Wheelock Whitney that launched the regional firm of Dain,
Kalman & Quail. Dick McFarland, Don’s son and a Kalman broker before the merger occurred,
would play a major role in the company’s recent transition from regional to national prominence.
In the 90 years since Oscar Kalman started his business in Saint Paul’s Pioneer Press
building, the company that is now Dain Rauscher has grown from local to regional to national
prominence, survived the uncertainty of market cycles and the fallout of strategic mistakes,
overcome tragedy, capitalized on diverse talents and uncommon tenacity, and served its
communities by financing the infrastructure in cities and states, by helping companies fund their
growth, and by helping individuals achieve financial security.
The story of Dain Rauscher is a story about people committed to doing what’s best for
their customers. That story begins with Kalman and Louis Hill in 1909 and pivots in 1929, not
because of the stock market crash but because a new investment company opened across the
river.
James Dain had been working for Sun Oil Company in Minneapolis for a few months
when he decided to join the Army. The year was 1914. He served in the Chemical Division in
World War I, fighting in the fierce battle for France’s Argonne Forest. Although he returned to
work for Sun Oil after the war, he soon quit to join the investment firm of Marshall Field and
Glore.
On May 16, 1929, he started his own investment business, J.M. Dain & Company. The
“company” part was a stretch, since his secretary was his only employee. Dain decided to focus
on municipal bonds from his office in the Rand Tower in Minneapolis.
One of the first people Dain hired was Merrill Cohen. Four years later, Dain made Cohen
president of the company. Although he had dropped out of high school, Cohen was a financial
genius who later became governor and vice chairman of the Midwest Stock Exchange, chairman
of the board of the National Association of Securities Dealers (NASD), and chairman of the
NASD’s Ethics Committee. “He was the most ethical person I ever knew in my life,” recalls
Wheelock Whitney, who succeeded Cohen as president of J.M. Dain & Company in 1963.
No company comes by its culture accidentally. Dain Rauscher values a strong customer
focus and high ethical standards because they were first valued by James Dain and Oscar
Kalman and the people who worked with and succeeded them. Yet these Twin Cities pioneers
represent only part of the legacy upon which Dain Rauscher is built.
Starting in Denver: Bosworth and Sullivan
In 1916, at the age of 30, Arthur Bosworth convinced W. Octave Chanute and Paul
Loughridge to open an investment firm in Denver. A Yale graduate, Bosworth had been
fascinated by money since childhood, when he preferred reading the financial pages instead of
the comics. Loughridge and Chanute brought affluent connections to the new firm: While
Loughridge polished his reputation by rising to the rank of major during World War I, Chanute
inherited name recognition from his grandfather, Octave Chanute, who wrote a book in 1894
called Progress in Flying Machines. The Wright brothers referred to the book, borrowed design
elements from Chanute’s glider, and brought Chanute to Kill Devil Hill to witness their glides.
W. Octave Chanute shared a love of flying with his grandfather and with his own good friend,
Charles Lindbergh.
Eleven years after Bosworth, Chanute, Loughridge & Company started, John Sullivan
launched his own Denver investment firm. Sullivan & Company focused on municipal bonds and
church bonds; John Sullivan helped finance bonds for Catholic churches across the country. One
of the founders of Catholic Charities in Denver in 1928, Sullivan actively supported both his
community and industry: He backed the Denver Civic Theater, Art Museum, and Council of
Social Agencies, and served on the boards of the Association of Stock Exchange Firms, National
Association of Securities Dealers, and Investment Bankers Association. Such broad community
and industry involvement foreshadows another of Dain Rauscher’s values.
In 1946, Arthur Bosworth approached John Sullivan about merging their two companies.
Bosworth had the larger firm at the time, but had run out of senior management and had been
advised to quit the business because of poor health. Sullivan declined. Bosworth persisted,
warning Sullivan that if he didn’t combine the two companies and become president, Bosworth
would liquidate his company. Appalled at the prospect, Sullivan acquiesced, and Bosworth
Sullivan was formed.
Three years later, Arthur Bosworth traveled East for a check-up with Paul Dudley White,
considered the world’s greatest authority on heart diseases. White pronounced Bosworth fit.
Bosworth walked down the steps onto the Boston street and dropped dead of a heart attack at the
age of 63.
Serving Arizona: Refsnes
When Dain Rauscher wants an early example of another of its values, its entrepreneurial
spirit, it can point to Joseph Elmer Refsnes. Born and raised in Anaconda, Montana, Joe knew
how to make money. As a boy, he bought boxes of candy for 65 cents each, then sold chances at
a box for a dollar apiece. He dived from the rafters of the Gregson Hot Springs to catch coins
thrown by clients before the coins reached bottom. He collected burlap sacks in the town’s alleys
and sold them to a local grain dealer at two bags for a nickel.
His primary business, however, was selling newspapers. In addition to the Anaconda and
Butte daily papers, young Joe sold the Saturday Evening Post and Los Angeles Examiner, buying
twice what he needed and selling the extras to other boys at a half-cent profit. When he was only
12, he realized he could broaden his market by selling papers on streetcars. He went to the street
trolley company office with his proposal, which they accepted.
By the time Joe Refsnes graduated from Eighth Grade in 1913, he was making $70 a
month (about $1,200 in 1999 dollars). Rather than attend high school, he got a job at the
Anaconda Copper Mining Company, where he sharpened his bookkeeping skills until a bout
with inflammatory rheumatism forced him to move to Arizona. In 1917, the Gila Valley Bank
and Trust Company hired him as a bookkeeper. The head of the bank died in 1924 and Joe took
over at the age of 26.
A number of the bank’s customers who were connected with mining companies
expressed interest in investing in stocks and bonds. Since they wanted to know what Joe thought,
he decided he’d better read up on the subject. In 1926, the bank asked him to form a securities
department, through which he would manage the bank’s portfolio of bonds and provide stock
and bond services to customers.
Five years later the bank got a new president who frowned upon banks having securities
departments. The stock market crash and ensuing Depression had revealed the dangers of such
an arrangement. Sims Ely, a cashier at the bank, encouraged Joe to take the security business out
of the bank. Joe offered to buy the business for $10,000 but was told since he’d built the
business, the bank would be happy to turn it over to him free of charge.
On May 18, 1931, he formed the J.E. Refsnes Company. Paul Beck was the assistant
manager. They got two offices in the Phoenix Title and Trust Building. When Sims Ely joined
the company in October 1931, they changed the name to Refsnes, Ely, Beck & Company.
Serving Dallas: Rauscher and Pierce
To many Americans, it looked like the stock market crash caused the Great Depression.
Banks had a large role in the stock market, and a record number of banks had failed. When
Franklin Roosevelt ran for president in 1932, his platform addressed voters’ concerns by calling
for stock and bond market reform. In 1933, Congress supported FDR’s mandate by passing the
Glass-Steagall Act separating commercial and investment banking.