The Birmingham age-herald., 1914-01-05
S|EGEL FAILURE
, ATTRIBUTED. TO
LACK OF CAPITAL
Not Due to Political Agita-
ton, Federal Legislation
or Tariff Law
FAILURE WAS NOT
ENTIRE SURPRISE
Rumors of Business Troubles to Big
Mercantile Institutions Had Been
Heard-Growth of the Mercan-
tile Private Banks
BY HOLLAND


BY HOLLAND
New York, January Especial .)-Vague
& rumors of business troubles have been in
circulation for several weeks which were
of somewhat startling import. They af-
tected some unidentified and vet very
large department store business. Some OF
these who heard these rumors We're per-
suaoeo that they originated in the minds
of those who have peen speaking dis
raragirgly of business conditions When.
therefore, the announcement was made
that the federal court had placed the So
called Siegel stores in bankruptcy and
had named receivers for the four insti-
tutions in this city which represent the
so-called Siegel capital and enterprise,
supplemented by the report from Boston
that the great department store in that
city. which was established by Henry
Siesel nine years ago, Wits also in such
condition as to justify the appointment
of receiver, it was realized that good
foundation did exist for the vague reports.
Mr. Siegel himself has long been
man in the higher meaning of that term
but also as an astute business financier
Aet careful admission is now made by
some OF the leading business men of this
city that they have suspected for some
time that the Siegel enterprises did not
pessess sufficient capital John Claflin,
low esteemed the greatest wholesale and
retail merchant in New York. is quoted
as having said that he suspected that
the trouble with the Siegel concerns has
been lack of sufficient capital to en-
able these businesses to be carried on
safely and conveniently.
The best business opinion in this city is
that these institutions were compelled to
seek the assistance of the court in the
Interest of the creditors for reasons which
would have been good even though the
lines had been propitious. Business re-
cession and the difficulty of obtaining
banking accommodations may have
brought the trouble to a Climax in these
closing days of the year But they were
not due to political agitations, to ankle
ties respecting federal legislation, and in
no way did the enactment of a new tariff
law add to the difficulties which the man.
ayers of these institutions were facing.
AHsfsfs A Great Failure
Although reorganization and rearrange-
nent skillfuly managed by the receivers
may put these business houses upon a
sound basis again yet. superficially at
least, the failure is d very heavy one.
Liabilities stand at nearly $4,000, 900, and
1t is not possible at present to get any
tairiy accurate estimate as to the value
Of the assets. There is one feature OF
the business which has been disclosed
by this failure which is of especial in
terest at this time. Among the liabili-
ties are $2500.000 which the private bank
ng institutions carried on under the name
Of Henry Siegel & Co., there being only
Two partners, carried TO the credit of the
depostors. This private bank allowed AZ
per cent interest upon deposits. For some
years the steady growth of private bank
Irg institutions carried on by those who
arc engaged in the large retail mercan-
tile operations has caused a great deal
of comment, especially among bankers
who direct state or national institutions.
That these private banks have carried
large deposits has been beyond question.
Bur nobody has ventured 20 make guess
of the aggregate deposits, carried by any
one of these private banks Sometimes ii
has been said that two or three of them
must have upon their books 81, 000,000 or
$s,0O0,0O0, and one is thought to have as
much as $4000,00O of deposits. Not sntil
the statement was made Immediately fol-
lowing the bankruptcy proceedings that
Henry Slegel & Co., private bankers, We're
carrying approximately $2500,000 deposit
was anything like an accurate idea of the
magnitude of these institutions obtained.
The Mercantile Private Banks
MI
whether corporations or partnerships, as
depo sitores of the small savings of many
people is direct result of conditions
which prevailed in the west years ago.
Many of the western states had not es-
tablished entirely satisfactory savings m
stitutions. The disasters which swept
So many of the state banks into bank
rurtcy throughout the west in the years
Immediately preceding the enactment of
the national banking law made many per-
sons suspicious. They had, however, con-
fidence in the great business institutions
of the larger cities of the west. There
fcre farmers and wage-earnerS who had
accumulated small savings, and others,
get into the way of asking the heads of
these large business institutions to accept
their savings; many times these deposits
were made practically in the form of
hans. No pass books were issued. No
notes were given. The money was simply
entered ON the books of the business
houses as credit toNvarious depositors.
In 1890 one of the greatest mercantile
houses in thesUnited States suddenly real
ized upor examination that it was carry
ing over $6,000,OOO Of these deposits which
were subject to immediate call. The times
were then unpropitious. The failure of
the Barring Bros of London had shriveled
credit. Business depression was grievous
So that If there had been the slightest
whisper affecting the solvency of this
great commercial house these depositors
would have come in crowds and have
demanded their moned, which. of course.
could not on the instant have been paid
out to them.
The grave danger which lurked in Git
uation of that kind made It expedient for
the managers of the house to visit Bos-
ton. New York and Philadelphia with in
tent to obtain such aid promised or
actual. as would be certain to protect
abundantly this Institution in case rumors
affecting it became public The whole
affair was managed with great discretion
and skill, and there never was an intima-
ticn of danger that these depositors would
approach the mercantile house In body.
Eut a lesson was then learned, and
gradually but surely this house curtailed
and ultimately gave up business of this
kind.
There was no occasion for private banks