New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1915-02-07
Controller Makes Demand
for Losses Incurred in
Deals He Questions.
COM MERGE REPORTS
S750,000 RESTORED
Improbable Transactions
in Underwriting Date
Back TO 1906.

Of SIX New York banks have been
called on by John SHELTON Williams.
Controller Of the Currency, personally
to make good losses on investments
which the Controller contends were
made without authority in law.
The amount which the directors OF
these banks have been called on 20
repay into their institutions approx
mates 100000. Of which amount the
directors Of the National Bank Of
Commerce have to make up S.50,000.
The balance OF S1.25O.O00 is divided
among the other FIVE banks. Persons
who ought to know declined to make
known the names Of these banks to-
night, bat il was said that none Of
them was IN the slightest danger, the
total amount involved being only few
million dollars.
The transactions upon which Con
troller Williams bases his demand
date back. it is said. to 1906. and,
while they did not constitute viola
tions Of the banking law, there was
nothing in the banking act which au-
thcrizcd the making of the loans. The
Controller, however. contends that
these loans were made without proper
authority. They are said TO have been
in the form OF underwriting opera
tions.
Mr.. Williams declined to-day to
comment on the report that he had
asked the bank directors to make good
these losses That is, he declared that
he had nothing to say for the present,
and that when he made up mis- mind
to discuss the subject he would do
so in a formal statement.
The action of the Controller Of the
Currency in going back to the records
of his predecessors in Office brought
forth a large amount of comment here
to-day among bankers and men inter-
ested in financial affairs. His action
was looked upon as more drastic than
that taken by any of his predecessors,
who, il is understood, merely demanded
that the losses be made up by the
bank directors.
Williams Ready to Sue.
II is' understood here that Controller
Williams has backed up his demand
that the directors of these six banks
make good the losses with the sugges
ton that a stockholders suit 10 recover
would be instituted against them if
they did not comply.
Action was taken by the department
at this time, it was understood, be-
cause the statute of limitations might
operate to prevent stockholders of the
banks in question from recovering
through legal proceedings the amounts
lost.
Some doubt was expressed here as to
the authority of Controller Williams in
taking this action, but it is believed
that the directors OF the six banks af-
fected have decided TO yield rather
than to have the subject dragged into
the limelight. 1t is probable that when
these losses are repaid statement will
be issueo by the Controller giving the
names OF the banks affected, together
with the amounts and his reasons for
compelling the repayment OF the losses.
Until this has been accomplished no
formal word will come from Mr.. Will
Jams.
James s. Alexander, president of the
National Bank Of Commerce, said yes
terday that the losses which John Skel-
ton Williams, Controller of the Cur
rency, had called on the directors OF
that bank 10 make good were sus-
tanned through the purchase of stock
of the Chicago City Railways in 1905,
when control of the company was TAX
eli over by a syndicate headed by J. P.
Morgan & Co.
The banks subscription to the Chi
cago City Railways syndicate amount
cd to S1,900,000 stock which later de-
preciated in value so that a loss Of
S75O.000 resulted. This has been made
up, according to Mr.. Alexander, and
the trapsaction so far as the Bank Of
Commerce is concerned is now closed.
Mr.. Alexander declined to divulge the
names Of the directors who had sub
scribed 10 the deficiency.
The question raised by Controller
Williams in connection with this Incl
dent that he has the power to enforce
such demands on bank directors, il was
pointed out, il not specifically granted
i'm the national banking act. The act
does not give banks the authority TO
deal in stocks. nor does il say that such
transactions are in actual violation of
the law.
Because of the possible consequences
which might result from stock dealings,
two Of the largest national banks in
this city formed separate companies TO
carry on such operations without fear
Of criticism. These were the National
CITY Bank and the First National Bank.
While control in reality rests in the
two banks, it is nominally in the hands
Of the individual stockholders.
The directors of the Commerce Bank
at the time Of the Chicago City Rail
WAYS transaction were Valentine p.
SNYDER. who also was president then;
lanes w. Alexander, George +. Baker,
Charles T. Barney, f. J. Berwind. c.
Ledyard Blair, John Clafin, Frederick
Cromwell. Henry c. Deming. Chauncey
NJ. Depew, John +. Dryden. James b.
Duke. Marshall Field. George j. Gould.
Daniel Guggenheim. George q. Haven.
Adrian lselin. jr., Brayton Ives, James
y. Iarvie. A. d. Juillisrd, Otto II. Kahn,
I .uther Kountze. Alvin w. krech. Wood
hurry Langdon, Charles Lanler, Richard
\. McCurdy, William II. Mcintyre, A.
". Mellon, d. Ogden Mills. David II.
NofTat. J. r. Morgan. Levi P. Morton,
Walter G. oakmen, Frederick p. Olcott,
Alexander +. Orr, Charles A. Peabody,
Flihu Root, Charles II. Russell, Thomas
+. Ryan, Jacob II. SchiiF, Frederick
Sturges, II. Mex. Twombly Il. II. Vree-
land, Harry Payne Whitney and George
W. Young