The Acting Comptroller replied to this communication in writing under date of December 12, 1913, relating in detail the history and condition of the trust company from the date of its organization to the date of its failure and many interesting features in the career of some of the managing officers of the company who were responsible for wrecking the institution.

In concluding this communication the Acting Comptroller said:

When a bank in the hands of a management known or believed to be honest and competent becomes temporarily embarrassed, the best interests of all concerned require that every proper assistance should be extended to the management in their efforts to extricate the institution from its unsatisfactory or dangerous condition, and restore it to a state of solvency and safety. This always has been the policy of the Comptroller's office. But when a bank is in the control of a management believed or known to be hazardously speculative, whose honesty of purpose, sincerity or ability is questioned, whose free use of the funds and credits of the bank in furtherance of their individual reckless ventures has brought the institution to a condition bordering on insolvency, such a management is entitled to no consideration or forbearance and the sooner the doors of their institution are closed the better for its depositors, stockholders and the community in general. To temporize with a management of this kind is simply to invite disaster and jeopardize the interests of depositors and minority stockholders in a way that cannot be justified. Such was the reputation of the controlling management of the United States Trust Company as shown by the reports of the bank examiners on file in the Comptroller's office.

There was nothing new or novel in the manner in which the affairs of this company were handled by the Acting Comptroller when the true condition of the concern became known. There are a number of similar situations in the records of the Comptroller's office, the most notable and recent being that of the First-Second National Bank of Pittsburgh. Before the completion of the examination of that bank the examiners came to Washington for a conference as to its condition. The president of another national bank in Pittsburgh was sent for at the suggestion of Assistant Secretary Williams and was permitted by him to go over the assets in detail with the examiners. The examiners then returned to Pittsburgh with instructions to confer with the clearing house committee. Several conferences followed, at some of which you and the Acting Comptroller were present, but the condition of the bank was not taken up with the board of directors until Sunday morning, the day before its doors were closed.

The two cases were exactly similar. Each had a serious impairment of capital, which the directors were unable to restore, and any attempt to collect an assessment from the stockholders would have resulted in the closing of the bank. No complications arose in the Pittsburgh case, as the bank was promptly closed. No complications would have arisen in the case of the United States Trust Company if similar action had been taken.

Whenever a bank of any size fails the examiner and the Comptroller's office are invariably severely criticised for not doing what the critics think should have been done, or for doing what they did do. The case of the United States Trust Company is no exception to the rule. Such criticisms as were made of the Comptroller and the Examiner in this matter came from or were instigated by, as is usually the case, the men responsible for wrecking the institution.

If any criticism of the Department in connection with this matter is justified, it is for permitting this company to continue doing business so long after its real condition became known.

It was the intention of the Acting Comptroller to close and take possession of the United States Trust Company on the morning following the day on which the run on the institution began. It was evident that the run would continue the next day with increasing severity. The assets of the company were not sufficiently liquid to enable the management to raise the funds necessary to meet the urgent demands of the depositors, and the financial strength and credit of the directors were not such as to afford any assurance of their ability to meet the situation otherwise. They would not entertain a suggestion to close the bank pending its reorganization or absorption by another institution, so the only alternative was for the Comptroller to take possession.

As in the case of the Pittsburgh bank, the bugaboo of a threatened panic was again called into service. It was claimed that the closing of the institution by the Comptroller would precipitate a crisis that would involve every bank in Washington.

The Acting Comptroller did not share in this apprehension. He contended that the only banks that would probably be affected by the failure would be one national bank and a savings bank which were known to be somewhat involved with the trust company. All the other banks and trust companies in Washington had made preparations to promptly meet any demands of their depositors. This was one of the good effects of the conference with the bankers before the failure, as it enabled the banks to prepare for the emergency.

The unwarranted and extraordinary proceeding of lending to a trust company a million dollars from the Treasury of the United States for the purpose of paying the deposit liabilities of another trust company did not occur to the Acting Comptroller as a possible means of saving the latter institution, as such a proceeding had no precedent in the annals of the Comptroller's office or the Treasury Department.

If the Acting Comptroller had placed the United States Trust Company in the hands of a receiver on the morning of November 22, 1913, as he would have done had it not been for the interference of his official superiors, the depositors would have been temporarily inconvenienced, but the Treasury Department would not have been subjected to the severe arraignment that was heaped upon it because of Assistant Secretary Williams' course, the interest of the minority stockholders would have been better subserved, and those who were responsible for wrecking the institution would have been brought to justice.

Many of the stockholders in this bank bought their stock at a valuation based on an unimpaired capital of $1,250,000 and undivided profits of over $98,000. At the date of failure and for some months previous thereto the profit account was entirely wiped out and the capital was impaired at least seventy-five per cent., according to the examiner's report. The disappearance of this large sum of money never has been satisfactorily accounted for to the stockholders.

When the Munsey Trust Company paid the depositors in full and satisfied its own claims against the United States Trust Company the books of the company and the remaining assets were turned over to Mr. Tucker K. Sands, the receiver of the company appointed by the court. Mr. Sands was vice-president of the Commercial National Bank of Washington, D. C, at the time of his appointment. Eight of the ten directors of the Commercial National Bank were directors of the United States Trust Company at the date of its failure. The propriety of this appointment was, therefore, very properly questioned as it placed the final liquidation of the company in the hands or under the influence of its former management.

The books of the trust company showed many transactions and manipulations which it is not believed would have stood the test of a judicial investigation. An illustrative case was submitted by the Comptroller of the Currency to the Department of Justice for investigation before the books of the company were surrendered by the Munsey Trust Company, but the matter was disposed of by that department referring it to the United States Attorney for the District of Columbia with a notification to the Comptroller that the question was one coming under the supervision of the United States Attornev, and there the matter ended.