The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1904-01-04
KILBURN CALLS IT AN
ENDLESS CHAIN SCHEME
Trust Company of the Republic Gave
Mr.. Dresser Ten Times More
Funds Than Could Care
fully Be Loaned.

pany of the Republic in connection with
the affairs of the United States Shipbuild-
fffg company, is a feature of the annual
report of Superintendent Frederick d. Kill
burn of the state bank department, made
public tonight.
Upon the first intimation that the
trust company had made unusual COM
mitments in the case" said Mr.. Kilburn,
"a special inquiry was instituted by me
to ascertain the facts, and 1 was amazed
to find that undertakings had been en-
tered into and liabilities incurred which
not only jeopardized the solvency of the
trust company, but hagranty trans
gressed the law
"The company had made numerous
large loans without collateral other than
shipbuildng stocks and securities. l re-
quired under the alternative that the COM
pany be referred at once to the attorney
general for proceedings in solvency to
be instituted against it, that there be some
very thorough Strengthening out of the
trust company's affairs. The direct loan
to Mr.. Dresser and to Mr.. Nixon was ex-
cessive under the law regardless of Mr..
Dresser's official relation to the company,
and to him it was more than ten times
the amount that could lawfully be loaned.
Under my insstence a half million of 1t
was soon repaid, the loans for two mil
lion guaranteed to other institutions were
taken up, and later the balance of the
Dresser and Nixon note to the trust COM
pany was paid in full. This seemed to me
a far better proceeding than to refer the
company to the attorney general sum-
marily, for it recovered nearly four mil
lion dollars that in the other alternative
might have proved loss
Cut Its Capital In Two.
ut was impossible however, to avert
all of the consequences of the ill-judged
and reckless commitments in which the
company had become involved and it pre-
served its so1vency only by cutting its
capital in two. Its losses on account of
investments in the shipbuilding folly, and
from loans upon shipbuilding collateral,
aggregated nearly 100000, and with other
minor losses and depreciation to invest
ments, wiped out the companys entire
surplus and necessitated the sacrifice by
stockholders of one-half of their holdings.
Over million dollars was charged to
profit and loss.
Il note that Mr.. Dresser attempted in
the shipbuilding inquiry to justify or ex-
cuse his borrowings from the trust COM
pany of the Republic by charging that
such transactions are common, or at least
not uncommon in other institutions The
information at my command regarding
such alleged practices warrants absolute
contradiction of Mr.. Dresser on this point.
Twice in each year every trust company
io IN n al orf
of its condition to this department. and
one item in such reports covers the
amount of loans, directly or Indirectly.
to directors. 1t is extremely unusual for
these reports to disclose any unlawful
loan of the character under consideration.
Another unusually emphatic portion of
the bank superintendents report relates
to the proceedings against the New York
Building, Loan and Banking company,
which he calls THE sensational episode of
the year"
Company Was HopeessIy lnsolvent.
1.-THE report of it's regular examination"
the superintendent says, showed to the
entire satisfaction of the superintendent
that the company which was the largest
building and loan association in the state
of New York, If not in the United States,
was hopeessly insolvent and was
Quoting the affairs with so great extrava-
gance. and upon a plan 50 utterly false
and vicious In principle, that 1t could not
hope to improve its condition, but mist
inevitably go from bad to worse. Its
equities in the properties by which its
advances to borrowing members were Sc
cured almost exclusively through sec
ond. third and fourth mortgages. Wee
too slight for expectancy that they cou.d
be a source of strength in an emergency.
'The report of the examination of the
company in 1902 demonstrated to my mind
that the affairs of the company had
reached such a state that 1t would be
culpable in me to longer hesitate to take
action against it. Withdrawals had so
accumulated as to foreshadow the end,
for it was only by the procuring of new
business-a sort of endless chain opera
t;on-tbat the institution could possibly
live. and it was losing more members than
1t gained.
Was Compromising Withdrawals.
"some of these withdrawals it was pay
ing or compromising out of the order of
their filing, which is violation OF law,
and 1t had been crediting dividends that
n not only had not been earned, but was
apportioning them inequitably between
different classes of stockholders. The
premiums that it was charging to bor-
rowing members for loans, including
them in the mortgages it took. were so
exorbitant that no other conclusion was
arfpossible than that the borrowers must
regard their transactions as virtual
sale of property to the company whose
real estate holdings were increasing rap
idly. and were being carried at heavy
annual loss. Numerous other irregular
tiles were established, an intolerable ex-
travagance in management was set forth,
and. in short, the company had reached
a condition where it must be manifest to
any impartial mind, that it had become
hopelessly insolvent
Upon the communication by me of
these conditions to the attorney general,
that official promptly Instituted proceed
ings for the dissolution of the company
because of its insolvency
Pretended injured Innocence.
$50 arrogantly and strenuously and
with so fine a front of assumed conf