There were thirteen failures of national banks during Mr. Cannon's administration, not including the Metropolitan National Bank of New York, which suspended during the panic of 1884, but resumed business the following day.
The largest and most important of these failures was that of the Marine National Bank of New York, referred to in the preceding pages. This bank had been a source of suspicion for some time previous to its suspension, because of the extensive operations of its president, James D. Fish, in real estate, and his connection with the brokerage firm of Grant & Ward, of which he was a member. This firm was indebted to the national association, directly and indirectly, to the amount of over two and a half millions of dollars. This indebtedness was almost wholly unsecured, and the firm had overdrawn its account with the bank to the extent of over $750,000. The firm carried three accounts with the bank, a private account of one member of the firm, a general account, and a special account. Many of the notes for which the firm was liable were in the names of clerks employed by the firm, of no financial standing, and relatives of one of its members. The record shows that within less than a month before the failure of the bank a committee appointed by the directors made an examination of its affairs and reported everything in a satisfactory condition, and within an hour before the bank closed its doors the directors were in session and were apparently wholly ignorant of its true condition.
The disclosures following the failure showed the institution to be hopelessly insolvent and that for some time previous thereto it had been in the grip of the firm of Grant & Ward, which had been extended credit beyond all prudence and reason, amounting in the aggregate to six times the capital of the association. The failure of this firm necessitated the immediate closing of the bank.
The capital of this bank was $400,000 and the book value of its assets and liabilities was over $6,700,000. A receiver was appointed May 13, 1884, and an assessment was levied by the Comptroller upon its stockholders for $400,000, or one hundred per cent., to pay the debts of the association. Of this amount $272,896 was collected. The creditors were paid $3,774,704, or 83.465 per cent. of their claims. The receivership was finally closed September 30, 1899, fifteen years after the date of failure of the bank.
The prolongation of this receivership so far beyond the average time required to liquidate an insolvent national bank was due to the unusual difficulties encountered by the receiver in liquidating the bank's own assets and the enormous litigation in connection with the closing of the estates of the firm of Grant & Ward and James D. Fish, the president of the Marine National Bank, with which the affairs of the bank were inextricably involved. In consequence of this litigation the bank was not cleared of its entanglements with these estates until 1891, when, under a decree of the court, the Marine National Bank received every dollar of all the assets of Grant & Ward, amounting to about $500,000, and $100,000 from the estate of James D. Fish.
Further delay was occasioned by the litigation over the question of the right of savings banks in New York to preference over all other creditors. A suit involving this question was then pending in the State courts of New York, in the case of Davis v. The Elmira Savings Bank. The Metropolitan Savings Bank of New York City was a creditor of the Marine National Bank for $120,000, and served notice on the receiver that under the banking laws of the State of New York preference was claimed over all other creditors for the payment of this claim in full. This notice had the effect of tieing up the remaining assets of the Marine National Bank in the hands of the receiver until this question could be judicially determined. The State courts rendered a decision in favor of the Elmira Savings Bank, and the receiver of the Elmira National Bank appealed from that decision to the Supreme Court of the United States, where the matter rested until March, 1896, when the latter court overruled the decision of the State court and held that the provision of the New York State banking law, making debts due a savings bank by an insolvent bank a preferred lien, was repugnant to the Revised Statutes of the United States, requiring the assets of an insolvent national bank to be distributed ratably among the creditors of such bank, and was therefore inapplicable in the case of a national bank.