The daily gazette., 1878-12-26
A FAVORED BANK.


First National Of Ne,o York and its
Frottdote Relations acith the Gore,n-
ment-Hoc ii has Enjoyed Ercep-
nondt and Extraordinary Methods of
Money Making.
NEW YORK, December 23.-Judge
kelley's resolution of the 4th instant,
calling upon the Sec etary of the Treas
ury to inform Congress what amount of
coin belonging to the government on the
Both of November was on deposit in the
national banks, has led to some impor-
tant developments, especially with re-
spect to the curious relations existing be-
tween the Treasury and the First Nat
ional Bank, of this city, an allusion te
which, made by Mr.. Hewitt in the House
OF Representatives on Saturday last, ex-
cited quite breeze amongthe members.
The First National Bank, of New York,
was originated by the venerable John
Thompson, now of the Chase National
Bank, and was, we believe, the first
bank organized in this ciy under the
national banking act. Its capital is
S500,0OO. Some two years ago a con-
trolling interest IN its stock passed into
the hands of new owners, the principal
of whom was Mr.. ii. c. Fahnestock,
formerly of Jay Cooke & Co., and for
many years the principal manager of the
New York branch of Jay Cooke & Co.'S
business. Mr.. Fahnes ock is man of
great ability and shrewdness entirely
familiar with political financing-if such
a phase may be used-and on terms of
great intimacy wi h Mr.. Secretary Sher-
man.
One of the with sses before the bank
ing and currency committee ofthe House
OF Representatives last spring-a very
well known banker of of New York
stated privately to members of the COM
mlttee that shortly after Mr.. Fahnestock
b came an officer of the First National
Bank separate office was esta blished,
the exclusive business of which was deal
ing in United States securities. Its oper-
ations were conducted on hcae of
great magnitude, and Mr.. Thompson dis
covering one day that this branch of the
bank was in possession of some thirty
of United States bonds and os-
their owner, was sufficiently
stai tied and alarmed to demand an expla-
nation. 1t then transpired that Mr..
Fahnestock had an agreement with
the Treasury Department which was
so framed that while it gave to the bank
whatever profits might he derived from
the sale of the bonds, at the same instant
guaranteed the bank against any losses
that might accrue. This sort of finan-
cling was not satisfactory to Mr.. Thomp-
son and he served his connection with
the institution.
That this bank has been in the enjoy
ment of exceptional and extraordinary
methods OF making profits is shown by
the fact that the market value of its
stock has advanced from 200 on the 10th
of NJ arch, 1877, to 400 at this time. This
great advance is clearly not due to ordi-
nary bank profits. Its loans on the Goth
of March, 1877, were s5,O38, 900, and on
the 10Th instant were S6,770,000, Its circu-
lation having been reduced in the mean
time from $4,000 TO 5000, while its
surplus fund has increased from S438 900
to 81 ,165,000.
This great increase iE circulation rep
resents good deal more than any possi-
Bile profits derivable from its regular and
legitimate business and is independent of
the profits derived among the share
holders. The public have been led to
believe that the Federal Treasury has
had on deposit with the national banks
a large sum in actual coin, but this So
called coin was in the form of United
States bonds, and of these deposits of
bonds or Treasury "coin" three-fourths
have constantly been in the First Ma
tional Bank of New York. Nominally
by the bank, they have, as a
fact, been used in refundng operations,
and great profits have been accrued.
Under the refunding act of 1870-wbich
was engineered by Mr.. Sherman through
Secretary of the Treasury
is allowed to pay one.half of one per
cent. for advertising and disposing of the
bonds authorized by the act for refund
ing purposes; add to this commission of
one-half of ono per cent. the interest ac.
cruing upon the bonds during the period
they lay in the hands of the bank, and
other incidental profits, and it Will not
be d fflcult to account for the enormous
gains made by the First National Bank
Of New York out of its connection with
the Treasury. All these refunding op-
srations might be easily performed by
Treasury officials without an additional
Expense of single dollar to the public;
md that they are not so performed re-
;llltS in serious loss.