Before gold was discovered in the American River in 1848, California was sparsely settled. The gold rush brought thousands of settlers to the state, but many came intending to stay for only a short time before retuning home. Once the gold petered out, those who decided to make California their permanent home focused on other businesses. They had almost a blank canvas as California had few roads, railroad lines, water delivery systems, trolleys, banks, farms, or factories.
Men tried all sorts of businesses to make money. For a time, silkworms were the craze. The California legislature thought silk could be a major industry and politicians subsidized the planting of mulberry trees and the purchase of silkworms. The plan fizzled.
In Los Angeles, two businessmen thought they could make money by running a homing pigeon delivery service between Los Angeles and the popular resort island of Catalina. One farmer planted pineapples.
One detriment to business expansion was a lack of capital. Banks were technically illegal in California until 1871, so many settlers had to borrow funds from private moneylenders at high rates. At times, the interest rates were 5 percent a month, making money very expensive. In Los Angeles, there were stories of men who had borrowed $5,000 and watched in horror as compounded interest increased their debt to more than $100,000 (about $2.7 million today).
Hellman opened his first bank, Hellman, Temple & Co., in 1868, in a brick building next to the Bella Union Hotel on Main Street in Los Angeles. It lasted about three years before Hellman bought out his partners. His next bank, the Farmers and Merchants Bank, opened in Los Angeles in 1871 and survived for 85 years. The bank ushered in an era of tremendous growth for Los Angeles. For the first time there was ample money at reasonable rates for business expansion. The banks lent out thousands for mortgages for farms and small businesses.
Hellman and men like him took advantage of the myriad of business opportunities in the new state. Hellman invested money in new water and gas companies, bought up thousands of acres of land to subdivide into farms and homesteads, planted grapes, wheat, and barley, made wine and port, and started trolley lines.