16221. Merchants Trust Company (New York, NY)

Bank Information

Episode Type
Suspension → Closure
Bank Type
trust company
Start Date
January 1, 1903*
Location
New York, New York (40.714, -74.006)

Metadata

Model
gpt-5-mini
Short Digest
437cde80

Response Measures

None

Description

Articles describe the Merchants Trust Company's problematic 'slow assets' discovered in January 1903, followed by the Superintendent reporting it to the Attorney General and a receiver being appointed; the affairs were liquidated and depositors paid in full. No explicit run is described in these excerpts, so this is a suspension leading to permanent closure/receivership. Dates are approximate where article gives only month/year.

Events (2)
1. January 1, 1903* Receivership
Newspaper Excerpt
Otto T. Bannard, president of the New-York Trust Company and co-receiver with Douglas Robinson of the failed Merchants' Trust Company ...; A receiver was appointed. The affairs of the company have been liquidated and every depositor has been paid in full, with sufficient funds remain undistributed to pay interest on all deposits from the date of closing the institution ... and to pay something to stockholders.
Source
newspapers
2. January 1, 1903* Suspension
Cause
Bank Specific Adverse Info
Cause Details
Large loans ($~4,048,000) on illiquid 'slow assets' (Hudson Valley Railway, Rutland and other street railway/lighting securities) made the company unsafe to continue; Superintendent reported it to Attorney General leading to receivership/closing.
Newspaper Excerpt
In January, 1903, a report was made to me by examiners of the Banking Department, from which it appeared that the Merchants' Trust Company ... had loaned $4,048,000 upon securities of a class which might be termed 'slow assets.'
Source
newspapers

Newspaper Articles (2)
1. May 30, 1905 New-York Tribune New York, NY
Article from New-York Tribune, May 30, 1905

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Article Text

MR. KILBURN EXONERATED Governor Dismisses Charges in Merchants' Trust Affair. Albany, May 29.-Governor Higgins to-day dismissed the charges made by George Von Utassy, of New-York City, against Superintendent Kilburn of the State Banking Department for the failure of the latter to close the Merchants' Trust Company, of New-York City, two years ago. The Governor took this action after the receipt from Superintendent Kilburn of a statement answering the charges. The Governor made this statement: Reading Superintendent Kilburn's statement in connection with the charges, and after consultation with the Attorney General and the counsel to the Governor on the legal questions involved, I have decided that the Superintendent of Banks acted in the matter in accordance with law, and exercised proper judgment and pru dence in so doing. The enarges against nim are hereby dismissed. Superintendent Kilburn filed with the Governor the following reply to the charges: In January, 1903, a report was made to me by examiners of the Banking Department, from which it appeared that the Merchants' Trust Company of the city of New-York, had loaned $4,048,000 upon securities of a class which might be termed "slow assets." He here gives the list heretofore published. I at once entered upon the task to have the company relieved of these loans and securities, which, in my opinion, was a much wiser course than an attempt at that time to put the company in the hands of a receiver. I gave, and have continued to give, the matter my earnest personal attention, with the result that I have succeeded in having the trust company relieved of $2,120,173 of the Virginia company's loans and securities, and $98,834 of the $520,000 of various other loans, making an aggregate of $2,219,000 of loans retired. I have also had the trust company relieved of its guarantee of $750,000. above mentioned, making a total of nearly $3,000,000. At the time the report of examination was made to me there was not. in my opinion, sufficient ground to conclude that the company was insolvent, nor that its capital was impaired, for, while these securities which I have referred to were not readily marketable, it was yet claimed that they were of a value sufficient to maintain beyond question the solvency of the trust company. Had any step then been taken to throw the company into a receivership, it would undoubtedly have resulted in a sacrifice of these securities and in great loss to the depositors. Such a course was not, in my opinion, justifiable, although, so far as I was concerned, it would at once have relieved me of further responsibility and anxiety. I believed it to be my duty to save the company, if possible, and, if not, to at least save everything possible out of it, and to that end I have given its affairs my unremitting and anxious attention. At the time of the examination the obligaa tions of the trust company to depositors were trifle less than $5,250,000. while at the present time it owes depositors about $2,000,000. The "slow assets" consist at the present time in the main of bonds of the Hudson Valley Railway Company, and of certain power, street railway and lighting companies in Rutland, Vt. These securities have substantial value, and it is expected that the receivers will ultimately obtain for them sufficient to pay depositors in full. The detailed figures relating to these securities, as well as to other transactions, are matters of record on file in my office. The statute clothes me with discretion in determining when "it is unsafe and inexpedient for such corporations to continue business," and the facts and results show that I have exercised my judgment and discretion wisely, and in the interests of the trust company and its depositors. Neither at the time of the examination nor at any time since bave I had sufficient grounds, in my opinion, to report to the Attorney General that the company was insolvent. Ever since the Richmond securities were taken out it has been my constant endeavor to have the company relieved of the Hudson Valley Railway and Rutland securities. Negotiations have been pending looking to the sale of these securities, and especially those of the Hudson Valley Railway Company, and strong assurances have been repeatedly given that efforts in this direction would be successful. What amounted substantially to offers to purchase these securities were made, but did not reach figures which the trust company felt justified in accepting, and when it appeared that an expeditious sale could not be made at a proper sum, it seemed to me to be in the interests of a the depositors of the trust company that receiver should be appointed, and therefore, exercising to the best of my judgment the discretion conferred upon me by law, I reported to the Attorney General that it was unsafe and inexpedient for the trust company to longer continue business I most emphatically deny each and every charge contained in the communication addressed to you, and I respectfully submit that I have acted prudently and wisely in the matter throughout and entirely within the law. Otto T. Bannard, president of the New-York Trust Company and co-receiver with Douglas Robinson of the failed Merchants' Trust Company, was disinclined yesterday to comment upon his recent inspection of the street railway and other properties at Rutland, Vt., upon which the Merchants' Trust Company had made heavy loans, beyond remarking that some of the plants were in excellent condition. W. B. Ellison, counsel for the trust company, and several of the other men interested in the efforts to rehabilitate it were out of town yesterday, and in their absence no information could be obtained regarding the rumor that a syndicate had been formed to take over the Merchants' Trust Company's interests in the Rutland and Hudson Valley railway properties, at about 50. and reorganize the company It is estimated by some Merchants' Trust Company interests that about 50 cents on the dollar. representing in all about $1,000,000. can probably be realized on the Rutland and Hudson Valley loans If this expectation shall prove well founded, the stockholders will probably be called upon for little or no contribution under their "100 per cent liability.

2. December 31, 1906 New-York Tribune New York, NY
Article from New-York Tribune, December 31, 1906

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Article Text

ment shall be carried always upon the same basis investment or value The shrinking or amortization where a premium is to be eliminated or the gain in case of a a discount should be provided for by adopting new valuation at the end of each six months. BRANCH SAVINGS BANKS It is advised that the banking law be amended so as to permit banks to open and operate branches. In New York City in particular, and not improbably in other cities as well. though perhaps in lesser degree there is continual proceeding a development in Industry business and population in outlying districts which calls more or less urgently for savings bank facilities The scope of the plan should in my judgment extend no further initially than to authorize a savof Superinapproval ings the the subject to bank branches such of conduct tendent Banks in the same city where its principal office is. If the periment should be justifie experience, as would eventually be am that might confident be extended permit such branches to be conparent in the from more remote points at ducted stitution so serve in this respect the thirty counties in the state within which no savings bank now located and which. failing this method securing such accommodations and advantage, are likely to go long without them. BRANCH BANKS AND TRUST COMPANIES. The Attorney General construes the Banking law authorize trust company to transaot business or branches its pleasure, in the city char of or rporation, judgement the the of regard to Banks the same The in adviser law the of by the and holds also deposit of that bank entitled York subNew is of city privilege provided only that law Banking gives, explicitly the other In to unqualified right when in his would advantage not the corporators when trust Again of Banks, in office for a writing yet, and it may act, the and question and the and in absurdity an power responsibility in the one case other and the should, therefore be amended so as expressly provide that the same discretion shall be lodged in the Superintendent of Banks with reference to the opening of branch offices of banks and trust companies as the law now gives him with organizations original In order that a permanent record may be made of the material facts connected with the failure of the Merchants Trust Company of New York and of the German Bank of Buffalo a brief statement is incorporated in this report regarding the clostwo ing these of which about so much said and written which really had no foundation in MERC TANTS TRUST COMPANY In January 1903. a report was made to me by examiners of this department from which it appeared that this company had loaned a little over $4,000,000 upon sec class which had no ready mar ket value and the intrinsic worth of which It was hard loans not excessive, and the of the company in the abof fraud. had the right to make them upon have been an easy disposition of the case for me to have ed the whole matter to the Attorney General and thus have escaped all further responsibility and vet it might have been exceeding) difficult to prove to the satisfaction of the court that the company was insolvent, for was claimed that the securities were worth more than sufficient insu the solvency of the compon the at report once receiving called together the officers of the compa and such directors 88 were accessible. went over the whole matter with them thoroughly and, after consider ing the case in all of its bearings, came to the conclusion that it was my duty to make an tempt to convert the securities and to every thing save the depositors, which I Imset about doing with the result that ded in relieving the trust company of $2,219 of the loans made upon these securities, and leving it from liability upon a guarany of $750,000 This of course, took time, patience a of and great work deal At the time the report of examination was made to me there were not in my opinion, sufficient conclude that the company was innor that Its capital was impaired am satisfied ttempted that had the time discovered the conditions above stated the company into the hands of receiver, would have ted in sacrifice of these securities and in great loss to depositors Such a course in my pinion. was not justified. I believed it to be my duty to save the company if possible, and, not. at least to ave everything possible of it and to that end gave its affairs my unand anxious T that could make no further progress in the dation of the affairs of the company reported it to the Attorney General for the appointment of receiver A receiver was appointed The affairs of the company have been liquidated and every depositor has been paid in full, with sufficient funds remain undistrib ated to pay interest on all deposits from the date of closing the institution (A questic which 16 now before Court of Appeals) and to pay something to stockholders Any one familiar with the history of this affair. believe firmly will agree that any other course would have resulted in serious loss to depositors From the time of the discovery of the trouble until receiver was appointed I exacted daily reports condition of the company, and kept constantly Informed as to its affairs The whole matter caused anxiety much and yet it seemed to me that the performance of my duty no other course was missible Mv management of the matter certainly has been highly complimented and com mended by some of the best bankers in New York and I cannot Imagine how any other course than that which I pursued could have been justified GERMAN BANK OF BUFFALO. No reasonable person will claim that the success failure of a banking institution does not directly depend upo the chara and honesty of its management by Its officers and directors. It quite as Impossible for a supervising officer, either national or state to direct the immediate and detailed managem of banking Institution. or to that fficers and directors are able and efficient is for a physician to prevent all sickor all wickedness The German Bank of Buffalo was an old institution There never had been a time up to its close when any report of examination or any other report, showed 1 to be in an insolvent condition or condition which bordered on insolvency. There was no evidence of evasion or violation of law In the spring of 1904 the controlling interest in the Gern Bank had been purchased by outside parties one Mr. Appleyard and associates Immediately upon hearing this sent an examiner to examine institutio and to ascertain the six inficiacience of this change of control. The examiner made an exhaustive examination and report and came to the conclusion and so reported to me. that the change of control was for the better; that Mr. Appleyard was a man of large means, and there was nothing at that time to suggest that the change ontrol was not bona fide and for the best the interests bank of The principa complaint in connection with the German Bank 16 based upon the fact that it was allowed to open on Monday December 5. 1904. The statements that some depositors were favored during the time the bank was open on that morning are absolutely Irresponsible, and the cashier has made affidavit that they are utterly untrue was not in the bank tself during the time, but consultatio in the with board of and suppose that everybody who heard of the trouble and who had any deposit with the bank tried to get 11 out The deposits at the time the bank amounted closed to about $5,000,000 and about $350.00 was drawn out during the time the bank that was open morning I do not think it is generally understood that the so-called depositors' committee which made the complaint in this matter was not the regular and original depositors' committee composed of a very much larger number of depositor and, in my opinion. of great responsibility and headed by Lautz an eminent citizen of Buffalo, since deceased. This original committee never made complaint, so far know. and they were