The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-05-25
MERCHANTS TRUST FINANCING
STOCKHOLDERS TALKING OF A
PROTECTIVE COMMITTEE.
Peitner says Trust Co. Should Assert Its
Control OF Hudson Valley Railway-It
seems to Have Built the Road at
the Expense OF Its Own Solvency.

chants Trust Company which was closed
on Tuesday by the State Banking Depart
ment. had meeting at the Savoy Hotel
Inst night and resolved to organize a pro-
tectiye committee. The meeting was called
BY Thomas L. Feitner, vice-president Of
the company. There we're only fourteen
nersoIs present, most Of them friends OF
Ar. Feitrer,
~ is simply a case said Mr.. Feitner,
sof debtor aving q creditor by the throat.
The trust company. together with two
other interests. makes q syndicate Of five
members, whic' votes controlling part
Of the Hudson Valley Railroad stock. Not
outstanding this, it APPEARS ttat the trust
conpany has only three directors Of the
railway company out Of total Of eleven.
The other eight have apparently been
working against the trust company and
in the interests Of the Delaware and Hudson
and the United Traction Company Of Troy.
which want to get the Hudson Valley prop
erty. These directors refused to take
I'D the loans and this put the trust COM
pany in a hole. 1t is the duty Of the re-
oeivers to get control, Of this railway
urope t. at the election on July and see
that the interests Of the stockholders Of
the trust company shall not be sacrificed. y
Another meeting is to be held week
from tonight, when the committee will
be announced.
Tie receivers intend to make thorough
investigation Of tie loans made on certain
properties in which some Of the directors
of the trust comrany we're interested.
They will examine the property Of the
4 Ht~h " N
was loaned and OF the Hudson Valley
hallway, in which the company tied up
81. 200, coo of its money in loans and invest
ments. 1t was stated among other things
Yesterday tt at interests friendly to the
Hudson Valley. Railway will in all prob
rany, presumat ly at Glens Falls.
The State Banking law forl ids hank
ing CORPORATION to make loan to any
person or corporation to an amount ex--
ceeding one-flfth Of the lenders CAP tal and
surplus. An exception allows 40 FER cent.
collateral having a market value of 10 FER
cent. more. than the amount OF TIE loan.
According to lawyers who have studied
III is section, the courts have held In several
ca SOS that tie securities oheled as such
collateral must have recognized market
value.
COMPANY TO the Hudson Valley Railway
began on Aug. 81, 1901. when Mr.. Langdon
was president of the trust company and
director Of the railway company, The
railway company from that time until July,
1872, got loans OF $4,000 and 500, 600 several
times month, putting up its bonds and
stock as collateral. The total amount
loaned the company. which was then in
course Of construction, was ss46,s8l, of
which the company has PAID 100000, ieav-
inc an outstanding loan to-day of $74e,s6l
As collateral for this loan the trust CON-
nauv has bonds whose par value is only
tG25.375 In addition to these bonds it got
as collateral for the loans and as bonus
For the bonds it actually bought, 81 LOO, go
bank examiners wrote this stock of as
nothing as soon as they found it,
To have been proper collateral for such
a loan according to one lawyer yesterda =.
the bonds would have had to he marketa bic
securities worth far above par.
Is shown by the fact that OF the trust COM
panys own investment Of S5o4 ,825 in them
$4,000 represented its participation In
syndicate that was organized to float the
securities. The trust company wasn't able
to sell the bonds and had to take them up.
One financial authority said yesterday that
such loans and investments would have
ecrippied a company OF five times its re-
sources.
Both Frank j. Gould and Edwin Haw!ey
were in tie dire 'torate when the board
approved Of the loans, but the minutes of
the meeting show that neither Of them
y-Ys present to vote on II. The Goulds
were or; diled with br ring behind the Hudson
Valley Company when 1t vas built. Ad-
Olson P. Co,yin, Who was State treasurer
road, and Senator Green Of Bingham,on
Is a director Soon after Its first. lines
we're built the New York Central and
Delaware and Hudson built sev,sral parallel
lines and the company has had trouble
ever since. Charles A, Gardiner was
loans were nade. He has been ucceeded
since by William B, Ellison.
The loans made to the Chittenden I'M
rrovement Company, organized as hold
ing company for the various Rutland
also an Investment Of 500, 900 III Chttenden
honGs. The collateral was the securities
Of the company, but how much was put up
vas not learned yesterday. 1t Is conceded
by every one that these securities are not
worth as much as the Hudson Valley bonds
President Barnard of the New York
Trust Company, one Of the receivers, said
yesterday that he thought the depositors
would be paid in full in time, but that it
would probably he necessary to assess
the stock 10 do this. There are ITO stock
holders. According to ole Of the lawyers
Interested, one-half of them are dummies.
Sullv. the cotton king had few shares,
which are now held by his trustee in bank
rlp,cv. Edward lauterbach, counsel for
the receivers, thinks that In case of an
assessment the men behind the dummy
stockholders could be reached His opinion
LAWYERS who said that the courts have held
that only stockholders Of record eau be-
assessed
b;.nk Sups rint.ndent Kilburn gave it
as his opinion yesterday that the depositors
g
Two years ago the deposits in the
Merchants Trust Company aGsre gated
alb u 5000 Goo" he said, while now they
arc not mere than s20CO,C0o; Had put
the company in the hands of the receiver at
tn start the depositors would not have
IT ceived so q nts on the dollar. These in
vestrlents were made between examinations
If the bank by the Department, and after
thcywere discovered i. was then question
of What 70 do with the situation. fad the
trust company been put in the hands Of
ton dis losed the fact that the manage
rnent he'd mada these loans, it would, |