New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1904-01-04
CONDEMNSTHEIR METHODS
KiIburn on Trust Co. Of Republic
and Building Loan Banking.

of the methods and operations OF the Trust COM
pany Of the Republic in connection with the OI'eu
States Shpbuildng Company. and also OF the new
York Building Loan Banking Company CHARACTER
ICES the three salient features of the annual report
Of Bank Superintendent Frederick d. klburh' nlaue
public to-day The undertakings or tho
Company OF the Republic in connection Win fIe
United States Shipbuildng Company are cehsuiea
as fagrantly transgressing the law-as III Juuseu
and reckless commitments"-whIle the explanations
OF D. lie Roy Dresser OF his borrowings from ,te
trust company hatly controverted oy oupe
tendent Kiburr. who refers TO the Ohiteu go
Shlpbuildng Company directly as the shpouLu
ing folly" Various recommendations lot chdlls1S
in the present banking laws based upon the eNil7
illustrated by the difficulties OF the Trust Colpo"g
of the Republic and the New-York BulloIhs Ao"i
Banking Company. are also contained IN me report;
Concerning the conditions which he olsco'eieu
when he began his investigation of the Affairs OF
the Trust Company OF the Republic superintendent
Kilburn writes:
was amazed md that kings had n% 6 6nR
ieo1ardized the solvency Of the trust company,
but iagrantly tralsgressed the law me eI aheyy
than shpbuding stock and securities one Of them 1nG
TO TO NJ Hxo5 Tor ' nearly million and three quar-
OF dollars It had besides guaranteed io ans
Mi Nixon amounting TO two million dollars. re e.
qured, under the alternative that me for nro
ceednes in insolvency to be Instituted against it;
out of the trust companys affairs. The direct Loan
to Mr. Dresser and to MI N M pressers ofSiai
relation 10 the company, and 10 him II was 9'1 I
than ten times the amount that cou4u ia"iu''
Under my nslstence half million Of it was soon
repaid. the loans for millions guaranteed 70
other Institutions were taken up ana iateT T, me
COMPANY OF the Repu6lic was paid in full. This
seemed to far better procedure than 10 irIef
for it recovered nearly four million dollars that
Mo T one plan for reoTsanizng the shiPbuild
ing trust would have involved loss of S6lVoGO 10
ever was. objected to- and finally a6an1oned =, tbs
II impossible. however TO avert , $l ot oIn
mitments in which the company had become IN
ting its capital in two It's losses on account OF In
vestmens in the shiphmiidnE 1oy ana from e 9%i
500 zoo and with other minor losses and deprecia-
t ti1 surplus and necesitated the sacrifice stock
holders OF one-half OF their holdings over S4VV"
charged TO prolt ana loss
To avoid repetition Of the disaster of, the Trust
Company Of the Republic Superintendent Khburn
recommends that trust companies should be pro-
hbited by law from engaging In underwriting
schemes and from investing any more than 10 per
cent OF their combined capital and surplus In the
stock Of any corporation. except in the case OF
trust companies whose charters expressly authorize
them TO invest in the stocks OF private companies
in the discretion OF their management. Concerning
the former recommendation superintendent Kill
burn writes:
The experiences in New-York within a year or
two where bonds put out have had very great s de
nboTt have occasioned many regrets and sore mem
cries hold therefore, that IT Is n9t enough tH1e
purchases Of stocks Of private corporations. oui
that It should be shut also against TOO close aita
the fortunes of a trust company with experimental
and hazardous schemes for the financing and de-
veopment Of properties which even II eyentua!ty
successful may have before them Gng ys5S 81
deserve 10 be guarded against such reckless en-
@ eas and p tss ~hsh
along such lines cannot be lawfully carried.
OF the crash attending the investigating OF the
affairs of the New-York Building Loan Banking
Company and the subsequent appointing OF n re-
cever, Superintendent Klburn writes with con-
siderable severity. He asserts that tho report OF
his departments investigation In 1902 showed
that the company which was the largest building
and loan association In the State Of New-York. II
IN the United States, hupelessly insolvent.
and was conducting its affairs with great
travagance. and upon plan utterly false and
vicious principle. that it could not hope to i'm
prove its condition. but must inevitably go from
bad to worse"
OF the methods OF the New-York Building Loan
Banking Company Superintendent Kilburn has this
to say:
Withdrawals had SO accumulated to fore
new busness-a sort OF -dless chain operation
| losing more members than ii gained Some of these
withdrawals IL was paying or compromising out OF
law and it had been crediting dividends that not
only had not 0efn a og was or
holders. The premiums that IT was charging to
the mortgages it toOk-were so exorbitant that
other conclusion was possible than that the Dor
rowers must regard their transactions virtual
sale OF property 10 the company, whose real estate
holdings were increasing rapidly and were being
carried at heavy annual loss. 1t was treating
the premiums which il charged for loans and
which it included in its MORTGAGES. as though they
were cash receipts ana using them Tor the credit
mCnt OF expenses, Notwithstanding such premiums
would not be actually paid for years, and perhaps
never Numerous other Irregularities estab-
ished also. an intolerabe extravagance in manage
nlent was set fort h. and In short the company had
reached a condition where it must be manifest to
any impartial mind that it had become hopelessly
insOlvent
As a result Of the lessons taught by the downfall
Of the New-York Building Loan Banking Company
Superintendent KilbUrn makes the following rec
concentrations to the legislature; First that the
qualified prohibition contained in the Banking Law
prohibiting building and loan associations from
loaning their funds On second mortgages be made
absolute: second. that there should be a positive
prohibition against any association operating upon
| the gross premium plan. at making such
| premium asset fully earned and. therefore,
made available for the payment OF dividends and
expenses and. finally that the law OF 1894 relating
to savings banks and loan associations be extended
| 10 all other associations.
The total resources OF the several classes of IN
situations which report to TO-, the State Banking De-
| indicated, are as follows:
Banks Of deposit and discount. August 25
4q 4gst Soopanes July l. 1908 I9aa a 5 S
Foreign mortgage companies. January l.
1903 $500. 1887 4S5
1903 ....-........... 6ss523s7
Domestic mortgage and security company. 1911 $50
Security ana mortgage companies 45ooi4S
Total sO7a es 500
gain previous year is..... s1a5 8se ss5
And since January. 1896. S73