During an examination of the Fort Dearborn National Bank of Chicago by the clearing house examiners, commencing November 15, 1921, a condition was disclosed which, but for the prompt and co-operative action of the clearing house banks, undoubtedly would have developed into the most serious financial situation that had threatened the city of Chicago and the surrounding territory for a number of years, and would have resulted also in the failure of the Fort Dearborn National Bank and the Fort Dearborn Trust and Savings Bank, an affiliated institution, with all the disturbing and disastrous consequences that usually follow the failure of financial institutions of the size and importance of these two banks.

The collapse of the Fort Dearborn National Bank was the result of a series of events.

About fifty per cent, of the stock of this bank was owned by the Tilden interest and the management of the bank was practically, if not wholly, in the hands of the Tildens.

The Edward Tilden estate under the management of Averill Tilden, a director of the Fort Dearborn National Bank, had hypothecated about 21,000 shares of the stock of the bank as collateral for loans from various banks, totalling around $4,000,-000. In addition to the borrowings on the security of this stock the Tilden interest became interested in other enterprises, under-writings and financing of heavy mercantile, manufacturing and realty ventures, some of which were more or less speculative. The general business depression affected many of these loans.

The companies financed were those in which the Tildens and their associates were largely interested, and it appears that correspondent banks of the Fort Dearborn National Bank, and their connections, were very freely used in placing these loans, both on collateral and on open lines of credit.

For a year or more previous to the closing of the banks the various industries in which the Fort Dearborn bank, through the Tilden connections, was incidentally interested had been very extensively advertising, the publicity end of the business having been conducted by John Fletcher, who, it appears, was also interested in the enterprises advertised and was liberally compensated as their financial agent. He was connected with the various concerns officially and at the same time was an active vice-president of the Fort Dearborn banks, national and state. Through the financing of these many industries and interests the Tildens became heavily over-extended and embarrassed.

On December 28, 1921, Mr. William A. Tilden, president of the Fort Dearborn National Bank, approached the officers of the First National Bank of Chicago with a proposition for that bank to purchase the assets of the Fort Dearborn National and assume its liabilities, and an arrangement was made for an immediate examination of the assets of the latter bank. After the entire credit department and auditing force of the First National had devoted all day Saturday, December 31, and the following Sunday and Sunday night to an examination of the assets of the Fort Dearborn National, the First National Bank declined to favorably entertain the proposition on the ground that the amount of the liquid assets of the bank was insufficient to warrant the First National in assuming its liabilities.

The immediate and precipitating cause, therefore, of the collapse of the Fort Dearborn National Bank and its affiliated institution, the Fort Dearborn Trust and Savings Bank, may be attributed to the failure of the negotiations with the First National by the president of the Fort Dearborn National to take over the assets of the latter and assume its liabilities, which appeal was necessitated by the embarrassment of the Edward Tilden Company because of the inability of the company to finance any further the corporations with which it was connected, or to meet the maturing demands upon its own and affiliated companies. The affairs of the Edward Tilden Company, Merrill, Cox & Company, the Earl Motors Company, Inc., and various other enterprises in which the Tildens and their associates were interested or were assisting in financing, were placed in the hands of a committee of their creditors for adjustment, which fact increased the difficulty of accurately appraising the assets of the bank, as the financial worth of the individual and corporate borrowers from the bank depended largely upon the favorable outcome of their interwoven interests.

When the First National Bank declined to entertain favorably the proposition of Mr. Tilden, a meeting of the clearing house was called for Monday morning, January 2, 1922, for the purpose of considering the best means of liquidating the Fort Dearborn National Bank through one of the clearing house banks and thereby averting what threatened to become a most disastrous failure, not only of the national bank but also of the Fort Dearborn Trust and Savings Bank, its affiliated institution. At this conference it was finally agreed that the Continental and Commercial National Bank should take over the assets of the Fort Dearborn National, and that the Continental and Commercial Trust and Savings Bank should take over the assets of the Fort Dearborn Trust and Savings Bank, and that each should assume the liabilities of the bank taken over.

The agreement also provided that in order to induce the Continental and Commercial National Bank to enter into the agreement to take over the business of the Fort Dearborn National Bank, the clearing-house banks would, on January 3, 1922, make deposits in the Fort Dearborn National Bank aggregating $1,000,0000, and would accept from the Fort Dearborn National Bank for such deposits, deferred certificates of deposit, payable January 3, 1924, bearing interest at the rate of five per cent, per annum, from date. This one million dollars was to constitute and be a part of the assets taken over by the Continental and Commercial National Bank, and no part of the one million dollars thus contributed was to be repaid to the contributing banks until all liabilities of the Fort Dearborn National Bank assumed by the Continental National Bank, together with interest on said liabilities assumed, at the rate of five per cent, per annum, had been repaid to the Continental National Bank and liquidated in full.

It is understood that a similar agreement was entered into between the Fort Dearborn Trust and Savings Bank and the Continental and Commercial Trust and Savings Bank.

The real elements of danger in and the primary cause of the enforced merger of these institutions were their domination by the Tilden interests and the too free use of the funds of the bank by such interests for their self-serving purposes. The banks were managed largely, if not altogether, by directors who were either active officers, or were heavily and continuously indebted to the institutions and connected with the borrowing concerns, thereby making it necessary for the banks to borrow large sums of money to enable them to carry these lines of credit.

At the time of the examination of the Fort Dearborn National Bank in November, 1921, by the national bank examiner, the liabilities of the bank to the Federal Reserve Bank for rediscounts were reported to be over $12,876,000, paper classed as slow amounted to over $5,000,000, doubtful paper to over $6,800,000 and undesirable assets to over $8,700,000.

At the time of the examination by the clearing house examiner the early part of the same month, he required the bank to charge off as a loss over $800,000.

The total deposits of the two national banks and the two trust companies after the merger aggregated over $400,000,000 and their total resources over $525,000,000.

The merger of these two national banks, therefore, made the Continental and Commercial National Bank the second largest national bank in the United States.