Evening star. [volume] (Washington, D.C.) 1854-1972, 1911-08-03
TO ACT ON DECISION
Government May Move in Ma.
tiona| City Company Case.
WAITING ON WICKERSHAM
Secretary MacVeagh Expects Soon
to Know Whether or Not Con-
Germ Is Legal.

secretary MacVeagh expects to shortly
receive from Attorney General Wicker
sham decision whether the National
City Company of New York Is legal
corporation under the national bankin 6
laws. This company was recently or
Sanized by directors of the National City
Bank of New York to hold bank stocks.
Tho case. when finally acted upon by
Secretary MacVeagh, Will determine the
attitude of the government toward So
called security companies
The question in the case Of the National
City Company is said to be substantially
paralleled in other cities and 1t Is said
the Department Of Justice has taken cog
nizance Of the First Trust Company. re-
ported to be the security company for
the First National Bank Of Chicago, and
the First Security Company, said to have
been created by tho First National Bank
OF New York. Records in the office Of
the controller Of the currency are said to
show the existence Of nearly 800 smaller
and similar corporations throughout the
country Of which the Department Of JUS
tice did not know when 1t began its in
quiry into the National City Company.
Officials of the Treasury are much di-
vided in opinion as to whether the ma
uona1 bank law applies to the cases In
question.
Action of Secretary MacVeagh.
Secretary MacVeagh's action upon the
Attorney Generals report will hinge upon
whether he believes the National City
Company to be bona fide corporation,
ASSOCIATED from the National City Bank;
or merely a device Of that institution to
hold stock in other national banks. Gov
eminent agents who inquired into the
National City Company reported that it
appeared to be closely linked with the
National City Bank. and that only stock
holders in the National City Bank could
be stockholders in the company. The
company issued no shares of stock, but
Endorsed ownership upon the certificates
of the bank
1t has been represented to the govern
ment that the First Security Company of
New York in the same way holds bank
stocks for the First National Bank, and
that the First Trust Company of Chicago
does the same service for the First Ma
tional Bank there. James B. Forgan,
president Of the First National OF Chicago,
is accredited with being the pioneer in the
security company idea.
Those officialys who hold that the ma
tional bank laws cover the case Of the
National City Company, provided that
corporation is held to be mere adjunct
of the bank, maintain that a decision of
the Supreme Court in 1899 interpreted the
national bank act to intend that there
should be no ownership. either direct or
indirect. or stocks by one national bank in
another.
The decision in question was in the So
called Indianapolis National Bank case,
and In part the Supreme Court held:
Decision of Supreme Court.
I'VE think that the reasons which dis
r1aHfv no nj TIC
money in the stock of another corporation
are quite as obvious when that other COR
poration is a national bank. as in the
case of other corporations. The invest
ment by national banks of their surplus
funds in other national banks, situated,
perhaps, in distant states, as in the pres
ent case, is plainly against the meaning
and policy of the statutes from which
they derive their powers, and evil con-
sequences would be certain to ensue If
such a course of conduct were counte-
nanced as lawful.
One of the evident purposes Is to con-
fine the management of each bank to
persons who live in the neighborhood
and who may for that reason be supposed
to know the trustworthiness of those who
are to be appointed officers Of the bank
and the character and financial ability of
those who may seek to borrow it's money
But if the funds of a bank in New Hamp-
shire, instead of being retained in the
NuStouy anu management vi ltS directors,
are invested in the stock of a bank in
Indiana. the policy of this wholesome pro-
vision Of the statute would be frustrated
The property of the local stockholders, so
far as thus invested, would not be man
aged by directors of their own selection,
but by distant and unknown persons.
Another evil that might result, il
large and wealthy banks were permitted
to buy and hold the capital stock of other
banks, would be that In that way the
banking capital of community might be
concentrated in one concern. and business
men be deprived Of the advantages that
attend competition between banks.