The Birmingham age-herald., 1913-12-02
The Manner of Liquidation

Inc MANNER Oh Liquidation
Another feature of this transaction
which has caused favorable comment in
this city among the bankers is this-a
strong trust institution, although in cap
ital resources and deposit not represented
by figures as great those reported by
an institution which found itself in en-
barrassment, takes over and practically
liquidates the greater institution.
Exactly what the details of the trans
action perfected by Mr.. Munsey and his
associates with the executive officers of
the institution which he liquidated is not
known in this city, or If there be knowl-
edge of it the information is kept in con-
fdence. The presumption is that the
Munsey institution, in addition to guaran-
teeing the deposits or such of them as
may be placed in the Munsey institution,
gained from those who had expert knowl-
edge fairly reasonable estimates of the
value of some of the securities, possibly
real property, which were in the possess
sion of the institution which was to be
liquidated. 1t may be that a price was
fixed upon these securities at which they
were to be taken over by the Munsey
institution. Some of them apparently
were not of liquid character, for If they
had been the imperiled trust institution
would have been able to protect itself.
Ultimately in one way or another these
assets will be converted into cash and will
serve with the good or liquid assets, first
to pay off all the obligations of the in
stituton and second, to redeem the cap
ital stock.
There have been various ways of lqui-
dating an embarrassed institution whose
embarrassment was due to the overload
ing of it with securities which could not
find a ready market.
In New England. some years ago, a
small bank having deposit line of about
$500 600, found itself in embarra ssment be-
cause its assets consisted in part of Sc
curities which could not be easily mar
keted. Another bank made this PROPOSE
ton to the embarrassed bank. 1t would
take over the deposits and protect them
with the credit and resources of it's own
institution. 1t would then say to the
embarrassed bank. You take the assets
make the most of them and liquidate
yourself" The proposition was accepted
and the transaction was entirely satsfac-
tory.
The Old Third National
In 1893, the Third National bank of this
city found it's business not very profitable
and there was some indication that it was
suffering from dry rot A new presi-
dent was chosen-A Patton Hepburn. He
had just finished his term as comptroller
of the currency at Washington. He has in
recent years gained place among those
bankers who stand in the very highest
ranks as constructive American bankers
President Hepburn became convinced
that it was best for the stockholders of
that institution that 1t be liquidated
Just at that time James Stillman was
working out the first of his plans for the
development of the National City bank
into one of the greatest of the banking m
stitutions of the world. He proposed that
his bank should take charge of the liqui-
dation of the Third National. 1t would
undertake to handle the assets of the
Third National, nurse them, market them
If prices for securities were good. and
with the proceeds pay off obligations and
then redeem the stock. The transaction
was so we'll carried on that the stockhold-
ers expressed their qualification. Mean
while the great body of the depositors of
the Third National were glad to transfer
their deposits to the city bank, so that
the aggregate deposits of this institution
was increa sed at one stroke by nearly 100
per cent. 1t was the first step along the
path which the city bank has followed
until 1t is now the acknowledged greatest
of American banks.
Mr.. Stillman's plans for the enlargement
of the city bank did not include the pur-
chase of other institutions and the merg-
ing of them into the city.
Other institutions in this city have be-
come great through purchase of and
mergers with other banks That is also
true of Boston. Chicago and other large
financial centers.
York undertook the liquidation in 1884 OF