During the three years and one month of Mr. Lacey's term as Comptroller, there were one hundred and thirty-eight failures of national banks. Ninety-one of these went into voluntary liquidation after closing their doors; forty-seven were placed in the hands of receivers, and one of the latter was permitted to resume business, having been restored to solvency.
As far as the records of the Comptroller's office show, only one bank prior to 1891 was permitted to reopen and resume business after being placed in the hands of a receiver.
There were more national bank failures in 1891 than during any previous year in the history of the national banking system. The most important of these failures, and those that attracted the greatest attention, were the Keystone and Spring Garden National Banks of Philadelphia, and the Maverick National Bank of Boston, Mass., which were closed March 20, May 8 and October 31, 1891, respectively, and were placed in the hands of receivers, May 9, May 21 and November 2, 1891, respectively.
Between the dates of closing of these institutions and the appointment of receivers these banks were in charge of national bank examiners. It was the practice of the Comptroller's office at that time, and previously, and for some time subsequent thereto, when a bank was closed to place an examiner in charge of its affairs to ascertain and report its true condition, collect maturing notes, list and classify its assets and determine its liabilities. A receiver was not appointed until it was definitely known that there was no possibility of the bank being able to resume business. Under this practice, closed banks were allowed to remain in charge of bank examiners for weeks, and in some cases months, before a receiver was appointed. This practice continued until it was held by the courts that Section 5210 of the Revised Statutes of the United States, prohibiting any attachment, injunction or execution against a national bank before final judgment, applied only to insolvent national associations, and that insolvency was not determined until a receiver was appointed. It was held that while property of the failed bank in the hands of a receiver was not attachable, in the hands of a bank examiner it was attachable.
This position was subsequently overruled by the Supreme Court of the United States, but the decision of the lower court led to a discontinuance of the administrative policy of placing a bank examiner in charge of a failed association for an indefinite period, and the adoption of the practice of appointing the examiner receiver temporarily immediately upon the closing of the bank, in order to avoid any question in regard to the examiner's legal status or the status of the failed bank in his hands.
A bank examiner in charge of a suspended or failed national bank is charged with certain important responsibilities, but his powers are circumscribed and he has no legal status, as the law makes no provision for such a contingency. He can transact no business, nor pay out any money. His duty is to collect and protect maturing paper, keeping the proceeds of collections separate from the cash in the bank at the date of suspension or failure. He can make no entries on the bank's books, but must keep the assets intact as they existed at the date of suspension. He must advise all correspondent banks immediately of the suspension of the association and to withhold the payment of outstanding drafts. His principal duty is to list and classify the assets coming into his hands when he took charge, under the headings of good, doubtful and worthless, and thus determine as accurately as possible the resources of the association. In brief, he must, by a speedy, intelligent and thorough examination of the bank bring order out of the chaotic conditions generally found to exist after failure occurs and turn over to the receiver, when appointed, a complete and detailed list of the assets, and, as fully as possible, the liabilities of the association.