The meeting of the board of directors of the company called for nine o'clock on the following morning was never held, but promptly at nine o'clock Assistant Secretary Williams requested the Acting Comptroller to come to his office where he found several of the officers and directors of the trust company in conference with Mr. Williams, headed by a Richmond (Va.) banker, who was then connected with another bank in Washington, closely affiliated with the trust company in many of its transactions. They had complained to Secretary Williams of the action of the Acting Comptroller and the examiner in calling a meeting of the the bankers of Washington the night before and exposing to them the condition of the trust company. The examiner was called in and they disputed his valuations of certain properties owned by the company and his estimates of losses on certain notes, claiming that the properties were worth fully the amount at which they were carried on the bank's books and that the notes were collectible at their face value. They ridiculed any suggestion of losses sufficient to impair the capital and maintained that the bank was solvent and able to pay its creditors in full on demand.
The examiner had not yet prepared his report and his data were not assembled in a way to enable him to discuss the condition of the bank in an intelligent and orderly manner.
It was plainly evident from Mr. Williams' manner at the beginning of the conference that his mind had been prejudiced by the statements made to him by the representatives of the bank and their friends, and that he was inclined to prejudge the case and discredit the examiner before he was informed of the real condition of affairs.
As an illustration of this fact a single instance may be stated:
When the examiner produced an itemized list of the notes which he regarded as slow, doubtful or worthless, Mr. Williams found among them the name of a Richmond man whom he knew personally, and he expressed surprise that the examiner should have questioned the worth of his paper. He declared the note to be absolutely good and collectible, and then proceeded to discredit the examiner before all who were assembled in the room by stating that if his judgment in regard to the other assets of the bank were as faulty as his judgment of the value of this particular note, his report was wholly unreliable.
This statement was made before the examiner was given an opportunity to say what he knew about the note or to explain how he arrived at his valuation of this particular piece of paper.
Later in the conference Lancaster Williams of Baltimore, a brother of Secretary Williams, was present, and was asked by Mr. Williams what he thought of the note in question. He promptly replied that paper of the same party had gone to protest in Baltimore and that it was not considered good.
Under such circumstances, confronted with a half dozen or more officers and directors of the trust company and their friends, all antagonistic to the examiner and more or less personally involved or interested in the bank, and Mr. Williams apparently biased in their favor, is it surprising that the examiner was discouraged and lost heart in defending his position in regard to the condition of the bank? No orderly or intelligent consideration of the bank's condition could be maintained under such circumstances.
This conference lasted the best part of the whole day. In the meantime, the representatives of the bank instead of complying with the Acting Comptroller's request for a conference with the board of directors in his office, at which it was intended to discuss the condition of affairs in detail and determine what was best to be done, fearing, it was presumed, that the Acting Comptroller contemplated closing and taking possession of the trust company, hurried off to the capitol and other places to bring influence to bear to forestall such action. In this way it became rumored around the streets of Washington that the United States Trust Company was in trouble. These rumors spread. Christmas was approaching. The company held a large amount of Christmas savings funds. The rumors reached the ears of this class of depositors and a run quickly followed.
The company operated five branches. The run started on the Pennsylvania Avenue branch and soon extended to all the others and the principal office. It was equivalent, therefore, to a run upon six banks in different sections of the city.
The legal right of this or any other trust company organized under authority of the Act of Congress approved October 1, 1890, to operate branches was always questioned by the Comptroller's office. This act did not specifically, nor by implication, confer such authority, and the rule laid down by the courts in such cases is that powers not specifically granted or necessarily incidental to those that are conferred are prohibited.
The attention of the Department of Justice was called to this matter at one time and an opinion requested, but the Attorney General declined to express an opinion, stating that the question was one for the Attorney for the District of Columbia to determine as coming within his jurisdiction.
Notwithstanding the apparently antagonistic attitude of Mr. Williams toward the examiner at the beginning of the irregular conference in regard to the condition of the trust company, a careful analysis of the slow, doubtful and worthless assets listed by the examiner, demonstrated beyond question that the capital of the company was badly impaired and that it was otherwise in a very precarious condition. As the directors were unable to make good the deficiency or to make any immediate arrangement to meet the pressing demands of the depositors that were then being made it became necessary for the Comptroller either to close and take possession of the company or for another financial institution to take over its assets and assume its deposit liabilities. Accordingly with the latter object in view negotiations were commenced with the Munsey Trust Company, of which Lancaster Williams was a director, and the Continental Trust Company, of which ex-Senator Scott was president.