New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1911-11-04
TO SELL BANK STOCKS
National City Co. FOreStallS Pos
Sble Action by Government.
INCORPORATED LAST JULY
Planned to Make Investments Not
Within the Express Corporate
Powers of a National Bank.

banks and is negotiating for the sale Oh
It's large blocks OF stock In a number oil
New York city financial institutions. Inc
decision 10 part with its bank shares mas
been taken as a solution Of the SITUATION
created 10y the conflicting views OF the
federal Department 'of Justice ana the
Treasury Department as TO whether a cor
polation directly controlled by national
bank might hold stocks Of other national
banks which the controlling bank itself Is
not allowed under the law to hold.
The National City Company it will ne
remembered. was Incorporated at Albany
on July s. with a capital of SloWo'V'' us
EXPRESSED object being 10 deal in real es-
tate It's directors were James Sullman'
Frank 4 Vanderlip and Samuel McRoo-
erts respectively chairman OF the board
president and vice president of the Nauon,
al CITY Bank. and John W. Sterling anu
Stephen S Palmer. directors Of the BANK
4 special cash dividend of 20 per cent OF
$1,000 OnO was declared by the directors OF
the hank ITS payment being made Tor ''e
purpose OF facilitating stockholders of the
hank in acquiring a beneficial interest ih
tho security company-the National CltN
Company-the capital stock of Which
equalled the amount Of the special diNI-
dend
Senarata certificates, representing owner
shin in the security company, were not
given 10 the banks stockholders. but evil
donce Of their beneficial interest in the new
company was stamped upon their shares
Of National city Bank stock. Also, II was
provided that the capital stock of the Ma
tional city Company should he held by
three trustees. who should exercise the
powers Of ownership, elect the directors
and receive all dividends paid by the Ma
tional CITY Company. paying the money
over 10 he bank for distribution among the
banks shareholders who should have ac-
ouired beneficial interest in the security
company Messrs. Stillman, Nanderlip and
Palmer were named as the first trustees.
Thus it was apparent that the full control
Of the National City Company rested with
the National city Bank
The circular inviting the stockholders OF
the bank TO acquire beneficial interest IN
the new security company TO the extent OF
two-ffths Of their holdings of the banks
stock said the plan was to establish cor
poration so organized that IT may make
investments and transact other business
which. though often very profitable. may not
lie within the express corporate powers OF
a national bank
Dealing IN stocks is among the activities
which are prohibited TO national banks. the
prohibition being implied from the failure of
the statute to grant the power. Especially
is the ownership by national bank of
stock in another national bank prohibited.
md the late Justice Shiras. i'm handing
dowr the opinion " the United States SUI
uremc Court in the leading case on the sub
irrt. remarked that "tho smaller banks in
such 20 case would he in effect though not
i'm form. branches Of the larger one No
national bank may have branches. state
banks have.
Interests affiliated with the National city
Euk acquired ten or dozen years ago
holdings i'm several financial institutions Of
This city. and entered their boards of di
roctors the connection between these insti-
buttons and tho National City Bank being
thereafter commonly regarded as extreme
D. close and friendly. The banks so brought
into ahlation with the City Bank were the
citizens Central National Bank the Ma
t.oual Butchers and Drov,rs' Bank. the
Lincoln National Bank. the Bank of ,he
Metropolis. the Columbia Bank and the
Fidelity Bank. The connection Of the cav
Bank interests with the Hanover and tne
Second National banks and tho United
States and the Farmers Loan al TinS'
Compaics has been of oven longer duration.
Last March a syndicate composed Of rep
Tosentatiycs Of j. i. Morgan & Co., Kuhn,
Loeb 4 60. and thc First and National city
banks bought one-half Of the holdings Of
tho Equitable Life Assurance Society and
Tho Mutual Life Insurance Company in
the National Bank Of Commerce the pur-
chase amounting 10 about $4,000 shares out
of the total of 100000, and President Van
derlip and Vice President Simonson. Of the
National City Bank. were among the new
men who entered thu board of the Bank Of
Commerce AT tho time. The investment Of
tho National city Bank interests i'm this
stock was said TO have been 600 shares.
for which 5000 It share was paid. Men
closely connected with tho city Bank con-
troll are also directors and stockholders Of
banks in other parts Of thc country.
These various bank stock holdings were
turned over to the new National city Com
pany, and so came more closely under the
control Of the National City Bank than
they had been as holdings I'm the hands of
individuals identified with the banks man
agement. The National City Company. of
course. held many stocks Of other sorts
but the concentration of large amount
OF bank stocks I'm its possession aroused
speculation as to whether a holding com
pany in the relation 90 national bank
similar 10 that between the National city
Company and the National city Bank
might not be able. if if should SO elect. to
proceed 90 an indefinite length in acquiring
ttock in other banks and thus enable It's
controlling institution 20 obtain a power
not possible to 70 under the implied prohibi-
ton of the national bank law.
The Attorney General and the Secretary
Of the Treasury took up the question. the
latter finding that the National city Com
many was not operating iu coutravention Of
law. while Attorney General WickershanL
whose agents had conducted AN inquiry in
which every aid was given them by the
officers Of the National city Bank. came 10
"a decision adverse 10 the company The
reuorts Of the two Cabinet officers were
submitted 10 President TAFT who is expect
Cd 10 give his decision ON the matter some
time this month.
IL is believed in Wall street that the ac-
tiou ofJhe National city Company in vol
UNFAIRLY parting with an Of its bank sto X
holdings viii insure the continued OK
isrence ~ the COMPANY. the objection ais"d
bv the Attorney General having been re-
r,oyed The National CITY Company IS the
reyyes, Of several similar companies formed
In the interest Of national banks in various
,.7rts Of the country. and occupies the
,,,. ,,,eitloI In relation 10 the National