Founded in 1670 in Canada and still in existence, the strongest and probably most influential trading company in the Northwest was the Hudson's Bay Company (HBC). In 1670, King Charles II of England granted permission for the company to his cousin Prince Rupert and 17 other noblemen and gentlemen. The company had the authority to establish laws and impose penalties for breaking that law. The company built forts, maintained warships, established trade, and made peace with the Indians. Until 1783, the HBC held a monopoly on fur trading in the Great Lakes region.

In 1783, a second company was organized and competed with the HBC for fur profits. Eventually, in 1821, the two companies merged, and HBC again held a monopoly. Now its region stretched from the Arctic Ocean in the north to the Pacific Ocean in the west.

During the early 1820s, Fort George - present-day Astoria, Oregon - was the early headquarters for HBC in the Northwest. After John McLaughlin was appointed chief factor of the operation, his first job was to select a new site for the headquarters. Fort George was on the south side of the Columbia River, making it legally an American post. McLoughlin had to locate and claim an area on the north side of the Columbia. In 1824, the center of operation was moved to Fort Vancouver near the mouths of the Cowlitz, Lewis, and Willamette rivers.

McLoughlin was born in Quebec, Canada, in 1784. His older brother was the personal physician of the king of France. At age 18, McLoughlin himself was licensed to practice medicine. Another relative, Simon Fraser, gave McLoughlin his first job with the HBC. Known as the "father of Oregon," McLoughlin was a giant of a man, standing over 6 feet 4 inches. One of his greatest assets was his influence over the Indians, who called him "White Eagle" because of his prematurely white hair.

The region that McLoughlin governed was roughly 700,000 square miles. This region extended from Russian Alaska to Mexican California and from the Rocky Mountains to the Pacific Ocean.

In the 1820s and 1830s, McLoughlin ran the HBC post at Vancouver and was the unofficial govenor of the region. Whenever settlers from the United States arrived in the area, he provided them with advice and help. McLoughlin would supply the settlers' new homesteads and then send them south to the fertile Willamette Valley. His plan was to have all U.S. citizens in the region living south of the Columbia River, saving the land on the north side of the Columbia for settlers from British countries. He hoped that Great Britain would eventually control the region, and the Columbia River would become the southern boundary to the British land claim.

McLoughlin could readily supply the settlers because the company farms in the Cowlitz and Nisqually regions were so successful. Cattle were raised on the Nisqually farm, and grain was grown on the Cowlitz farm. These farms helped feed the residents of and visitors to the company forts.

In 1837, the company began colonizing the region north of the Columbia. Simon Plondon was the first settler in present day Washington State. McLoughlin had urged Plondon to settle at the Cowlitz farm. Soon more settlers followed because the company promised to give them houses, barns, and work animals. Many of these early settlers were retired Hudson's Bay employees.

McLoughlin was successful in keeping the territory north of the Columbia River for the British until 1845 when the Simmons party established the first American settlement north of the Columbia. Simmons was a determined man from Kentucky. His party arrived at Fort Vancouver in 1844. McLoughlin tried his best to direct Simmons to the fertile Willamette Valley, but Simmons was not easily swayed.

The Simmons party spent the summer of 1845 exploring the region between Fort Vancouver and Nisqually. After looking at many possible sites, the men finally decided on a site near Budd Inlet close to the falls of the Deschutes River near present day Tumwater. Four other families and two single men accompanied the Simmons settlers. McLoughlin was not happy with their decision, but always a businessman, offered his help in supplying their new settlement with cattle and grain.

By 1848 more settlers had moved to Tumwater, and the new city of Smithter (now known as Olympia) became one of the first port cities on Puget Sound.