Chicago eagle. [volume] (Chicago, Ill.) 1889-19??, 1896-12-26
THE STORY OF THE BANK FAILURE.

Chicago Tribune: The causes which
led to the failure Of the National Bank
Of Illinois are no clear on the SURFACE
that he who runs may read. The story
Il short ana simple, but ut the same
time significant. The denOucmeiit has
come swiftly and involves u situation
revealing rank carclessness II not posi-.
tive crininality. The moral Of the story
IL obvious. particularly to directors who
do not direct.
The Calumet Electric Railway II one
Of the iridcscent schemes born or
Worlds Fair enthusiasm ana launched
full twenty years ahead Of Its time. 1t
traverscs sparscly settled region anu
has few patrons except In pleasant
summer days. when excursionists from
the city feel like exploring cOmpara.
lively unknown section as days out
Ing. 1t was organized and doomed by
W. v. jacobs, but early In the proceed.
lngs he became financially involved.
His name was on obligations amount
ing to half a million, backed by Calu-
met Electric securities. In his search
for some one upon whom to unload the
obligations and securities he found the
National Bank OF Illinois. He was the
fox In the well and the bank was the
goat whom he cOaxed into 1t and upon
whose shoulders he clambered out. The
directors We're assured there would bc
speedy sales Of two millions OF the
bonds In the Eastern market. but the
Eastern market was shy and the sales
were not made. The bank found itself
loaded up with half million Of these
obligations. To have ridden itself Of
them would have been the part Of pru.
dence. but, unwilling to incur a small
loss, 1t went on putting In more money
and preparing the way for bigger
losses. The bank was ut last saddled
with $2,475,OOO Of Calumet Electric
bonds. more than the banks capital
stock, a considerable portion of which
was concealed In other accounts.
The next chapter In the story pertains
| to the rivalries and jealOusies Of other
roads. They notified the bank exam
liner that these securities We're much
less valuable than he had been led Ia
suppose. The bank examiner notified
the Controller and the Controller or.
dered an investigation. The clearing
house committee started the investiga'
ton which resulted In the suspension
of the bank from the privileges OF the
| clearing house and the closing Of it,
doors. Other bad debts amounting to
81, O6s 600 helped to bring about this
amazing failure. 1t probably added to
the downfall that Mr.. Schneider, who
In his prime was an able and cOnserva
tive banker. Is now old and In feeble
J health. With an infirm man mt the
head, with reckless officials under HIM
and with directors who knew nothing
! Of what was going on, II IL not remark
able that the smash should have come
II Is remarkable 1t did not come sooner
The policy OF the bank invited wreck
and there was no way to prevent 1t eX
cept upon the impossible presumption
that the bank was strong enough to
carry bonds no one wanted for fifteen
or twenty years, until they became OF
value. Instead OF taking the bull by
the horns when the obligations were
comparatively small, and writing them
of to profit and loss, 1t carried them
along as live assets, paid II per cent
dividends. put In more good money
from time to time to get back lost
money, and finally wound up where the
State Savings and Il. +. Aliens Banks
wound up. 1t was bad banking carried
on by weak and reckless men, and II
has ended where that kind of banking