It did not take the examiner more than a half hour after entering the bank to discover that it was not only hopelessly insolvent, but that its operations were fraudulent in the extreme and criminal, and the examiner was instructed to immediately close its doors and take possession of its assets, if any could be found, pending his appointment as receiver.
By the Act of Congress approved June 25, 1906, amendatory of the Code of the District of Columbia, all banks and trust companies organized under the laws of any of the States of the Union, having an office or banking house located within the District of Columbia, for the receipt of deposits or savings, were made subject to the provisions of the national banking laws in respect to making and publishing reports of condition, the same as national banks are required to make and publish, and the Comptroller was authorized to examine and take possession of any such bank, company or corporation, for the same reasons and in the same manner that he was authorized to examine and take possession of a national bank.
As the Aetna Banking and Trust Company was not a national bank, and did not operate under the national banking laws, it was necessary to prepare a special form of commission in appointing a receiver for the Washington branch, and the Comptroller's counsel was instructed to prepare a form that would meet the requirements of law.
After looking into the law on the subject, counsel advised the Deputy Comptroller, who at that time was acting Comptroller, that he had no authority under the law to appoint a receiver for the branch bank, unless he was satisfied that the parent bank at Butte, Mont., was insolvent, as the parent bank was liable for the debts of the branch, and if the former was solvent, the branch was not insolvent.
The Deputy Comptroller advised his counsel that he did not know what the condition of the parent bank at Butte was, but he did know that the Washington branch was nothing but a fraud, and a swindle upon the people of Washington, who were depositing their money in it, and that it was his purpose to place it in the hands of a receiver.
Counsel replied that there was no doubt of the fraudulent character of the branch, and that it ought to be placed in charge of a receiver, but as counsel for the Comptroller, he said he must advise him that he had no authority to appoint a receiver, except under the conditions stated.
The Deputy Comptroller said that he would assume responsibility for appointing a receiver, and leave it to the parent bank to question or dispute the legality of his action, and instructed his counsel to go ahead and prepare the commission.
A receiver was appointed, and, within an hour afterward, advice was received by wire that the parent bank at Butte had been closed.
The Deputy Comptroller immediately wired the national bank examiner who covered that territory to go to Butte and take possession of the parent bank in the name of the Comptroller of the Currency, and that he would appoint him receiver upon receipt of advice that he had taken charge of the bank.
The Comptroller's counsel advised him that he had no authority to take possession of a State bank. The Deputy Comptroller replied that he would let the State authorities raise that question.
Upon receipt of a wire from the national bank examiner that he had arrived at Butte and had taken possession of the bank, the Deputy Comptroller wired him to immediately forward to the Treasurer of the United States, for credit of the Comptroller of the Currency, for account of the creditors of the Aetna Banking and Trust Company, all the cash in the bank, the purpose being to remove these funds from the jurisdiction of the State authorities, in order that in the liquidation of the affairs of the bank, the Washington creditors might be assured that they would receive their share of any dividend that might be paid.
Up to this stage of the proceedings neither the bank officials nor any of the State authorities had questioned the right of the Comptroller to take possession of, and appoint a receiver for the Aetna Banking and Trust Company, but several months later, in a suit brought by the receiver against the Bank of Discount of the City of New York, to recover a sum of money due his trust, the question was raised by the defendant as to the authority of a receiver appointed by the Comptroller of the Currency, for a State banking corporation, having an office or branch in the District of Columbia, to sue in the Circuit Court of the United States, for moneys due or property belonging to such banking corporation, when such debt is due from or the property is in the possession of persons outside of the District of Columbia.
It was contended by the counsel for the receiver, that if such a doctrine should be allowed to prevail, all that was necessary for a banking corporation doing business in the District of Columbia to do, to render the Act of Congress ineffective, was to remove its assets over the line into Maryland or Virginia, and the receiver would then be powerless to recover. In such an event the creditors of the bank residing in the District would be compelled to institute suit in the State in which the bank was incorporated, and follow the assets as best they could.
The court very properly held that if a banking corporation organized under the laws of a State, saw fit to go into the District of Columbia, and there to do business, it must conform to the laws of the District, and in case it did not, and became insolvent, the Comptroller could so declare and appoint a receiver of all its assets, no matter where located, and apply such assets according to the provisions of the laws of the United States to the satisfaction of the claims of all the corporation's creditors. The court declared that Congress intended that the Comptroller should have the right to appoint a receiver for the corporation, and not only for the branch doing business in the District of Columbia, and that under such authority, the receiver had the right to take possession of the assets of the corporation wherever situated.