New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1891-06-15
THE KEYSTONE BANK AFFAIR
STATEMENT BY CONTROLLER LACEY.

vxpr,AINING TO THE SECRETARY OF THE
TREASURY WHY THE INSTITUTION WAS
NOT CLOSED BEFORE 1T WAS
CRITICISMS DISPOSED Of
washington June 14.-In a statement made To-
asr 10 the secretary of the Treasury regard to the
affairs OF the wrecked Keystone National Bank, Of
philadelphia Mr.. Lacey, the Controller of the Cur
rencv. says that the first information re-
oeived BY him In reference to the Lucas dehication
vas contained In communication addressed TO him by
william P. Drew. Bank Examiner for Philadelphia
dated January "a, 1891, and reoeited by him on
January 26. The letter says
on entering on the examination Of the Keystone
National Bank Of this CITY, on the 9th inst, was
closed a hitherto eifectually concealed debt 10 the
bank OF It's late president John Z, Lucas, ANNOUNCING
it appears that Mr. Lucas during his presidency Of
the bank had, with the connivsnee of the cashier, Mr.
Marsh the president of the bank carried out. by
sdrot manipulation Of the accounts OF te bank for
series OF years, a scheme Tor systemsuc a0slracuon
nom the bank of large to assist his speculanons
In real estate OF spring Lake and sea Girt, n j. as
well in the construction Of the large building on
secure for for the bank without publicity whichever
kpS alter few days succeeded in obtaining the
property used by the bank as banking house, for
and 's ssp SSe'ssS st Mr. spsa s was
ignoranty led into the irregular transactions BY tS
sTSSss S Ss N .' Sars 10 :" continue the
under representations that the money sosrscea " wo
soon be returned to the DaoK ironi the res'' " NM
There does NOT appear to be any evidence that Mr.
Hsee tke sOd dscosare he has fSiy aud earnestly
oooperated in all efforts TO assist tne osnn bst mo-
publicity be given to the affair until the bank snail
ist fSt'''''d' or all efforts 'n'' Gnu ''A"' ~
The Controller then says'
Upon receipt of this report the Controller was con
the fSnt cSn ES could not at this time lawfully
closed the bank nor could he have levied an assess,
ment to make good impairment Of capital, as none
existed according to this report The danger then was
for time past and the Controller dPcded 10 avail .T
following the receipt Of the communication when fun
consideration of the situation in PhiaHelpna wac
sentsd I y the a contaoeT by r Drew at this interview
that in his judgment and ii tie opinion Of the Ce9rlns
By the Lucas estate was equal in value to the indebted
ness which had been concealed and that in any event
the creditors of the bank were entirely SAFE ",
also S H. tho to B Bs6R RosG
ste eXctes suspicion and that IT would be imposing
30 convince the public that some grave losses aa no
been sustained by the bank that MI Marsh wa, was
earnest desire TO do all in his power to assist the bank
in recovering any sums Which had been mPop eo
sIderaon deemed best for the bank for Its creators
for the other banking associations, ana ior tne cry
OF Philadelphia, whose treasurer had an active ac-
count in the bank, that Mr. Drew should continue his
examination of the bank and promptly Place MS assist tne
understanding that the active direG t OF 6e
the Controller did not insist upon te imm me.
date resignation of President Marsh, although 1t wss
distinctly understood That he was TO remain there Only
Controller did not close the bank at tbs time 1or
the reason that he hsd no lawful authority to 90 SO
upon the facts submitted.
The Controller visited Philadelphia February ~
and met several leading directors of the bank There
seemed to be- he says an earnest purpose to pay in
sny sum necessary to make good any deficit which
might be developed
on February II the Controller received letter from
Mr. Drew which said that within day or two he had
been forced to entertain suspicious Of Marsh.
This communication accompanied by memo
randum which had submitted TO the directors OF
te bank and which disclosed estimated impairment
of $l65 O00 after reducing all assets to their estimated
cash value. While this showed an impairment OF cap
i IL did not indicate Insolvency for the reason that
the hank would still have assets amounting 10 1875 900.
What seems TO have been the final and formal re-
port ss developed by the examination, was dated Feb
ruary IS, and reached the Controller on March :"
Having fully considered all the items stated in this
report 1t apparent that an impairment OF cap
il existed to the extent Of at least $250O0O, where
upon under date of March 7, the Controller levied an
assessment OF So50O00 upon the association, and so
informed Marsh
on March IA the bank examiner wrote that he was
greatly disappointed in finding little active support
given bv the directors in the effort TO rehabitate the
bank. Three days later the Controller telegraphed
Examiner Drew 10 close the bank.
Continuing, the Controller says:
The Controller has been criticised for three things:
srst For allowing Mr.. Mtrsh to remain in office after
his confession and not causing his arrest,
Second For delay in closing the bank.
Third. delay in appointing receiver.
As 10 the first matter complained OF have this to
that avn nowhere charged with any responsibility in con-
with criminal prosecutions, and bank examiner
IS held 70 have done duty he LAYS before
the United Attorney any facts involving crime
which may his knowledge in the discharge OF
his duties. Every bank examiner is instructed
and expected to this and could not avoid the eoncu
sion that Mr. had discharged this duty after reading
his letter January "a in which he says that he was as
sisted securing settlement with the Lucas estate by
the Hon. r. Read United States District Attorney.
whom had employed to aid him in the Transaction"
was led believe that not only the DistrcAorney but
also the Clearing House Committee conversant with
all the facts and these gentlemen together with the
directors ho were really the responsible par
tes) and the examiner all OF the opinion that Mr..
Marsh had made a voluntary confession to the funds
distracted by that he had not proted by the de-
alcaton in any that he was genuinely repentant;
that he was only living who could subsantate
claim for funds and that his almost
indispensable to a complete solution OF the difficulties
which surrounded the bank
Second, for delay in closing the bank In regard to
this matter that the Controller only act
In accordance with law. and this
cerned governed by the provisions OF Section OF
the act Of go 1876. The Controller is not COM
n,andcd 20 appoint a receiver but he do under
certain conditions AS the Keystone National Bank had
never had franchise declared forfeited had had
judgment rendered against IT, committed other
oct Of insolvency the Controller could proceed under
this section unless satisfied insolvency
certainly would have been justnab!e for the Con-
troer certify It's insolvency and close IL up when
no act Of Insolvency had been committed The entire
county was in a nervous condition financially. The
placing Of this bank safe situation would have gone
far toward insurng safety OF Others An assessment
paid agreed upon would prevent disastrous ana
scendalous failure while the haTshef alternative could bring
nothing but serious and much Of suffering 10 many
Thrd-Ths criticism has been pretty fully discussee
already
In closing this branch Of the subject, in justice 10 one
whose name has been the discussion Of this
failure desire 10 :he Hon John Wanamaker has
never directly indirectly suggested solicited one days
delay in closing OF the bank In the appointment Of
felpQrnm hefcinnftcr