The United States Trust Company was organized in 1907, under authority of an Act of Congress approved October 1, 1890, authorizing the formation of trust companies in the District of Columbia with a capital stock of not less than one million dollars. This company had a turbulent career from the beginning, owing to internal dissensions which resulted in frequent changes in the personnel of the board of directors and the managing officers of the institution.
In January, 1911, control of the company passed into the hands of Eldridge E. Jordan, who became its president. A little later, because of dissatisfaction with him and his methods, he was superseded by N. B. Scott, ex-United States Senator from West Virginia. In a very short time Mr. Scott was succeeded again by Mr. Jordan, under whose domination the company remained until its failure on November 21, 1913, although nominally succeeded by Lawrence O. Murray, former Comptroller of the Currency, in April, 1913.
Mr. Jordan made his first appearance in banking in the city of Washington in the Merchants and Mechanics Savings Bank, a small institution located on Seventh Street. Later he became connected with the Traders National Bank, which institution he merged with the Merchants and Mechanics Savings Bank in April, 1908. Subsequently, he merged the last-named bank and the International Banking Corporation with the United States Trust Company. He also became connected with the Commercial National Bank and because of his attempted domination of this bank several of its officers and directors withdrew from the concern and organized the Federal National Bank.
The records of the Comptroller's office show Mr. Jordan to have been the cause of disturbance and dissensions in every bank in the District of Columbia with which he had been connected, and a source of anxiety to the Comptroller and the banking interests of Washington generally, because of his unlawful, speculative and hazardous methods.
The records show that many of the transactions with which Jordan was connected were hazardous in the extreme and that he was regarded as a most daring and reckless speculator. For some time after his retirement from the presidency of the Merchants and Mechanics Savings Bank, the Comptroller objected to his becoming connected with the management of any banking institution in Washington, and Comptroller Murray made the remark that if he had the authority he would prohibit him from walking on the same side of the street on which a bank was located.
In January, 1911, however, after Mr. Jordan acquired control of the United States Trust Company, Mr. Murray, for some unknown reason, withdrew his objection to Mr. Jordan in the following signed letter, dated January 9, 1911:
The Comptroller has carefully read this report and I would be justified in making objection to Mr. Jordan again becoming connected with any banking institution under the supervision of the Comptroller of the Currency.
It is my wish, however, to take a kindlier view of the situation, and will interpose no objection to Mr. Jordan's entry into the banking business.
The last examination of this company, previous to its failure, was made on January 8, 1913, at which time losses were reported by the examiner aggregating $256,150, impairing the capital to the extent of over $177,000. This examination was interrupted and prolonged until the following April, when on April 26 a conference was held with some of the officers and directors of the bank in the office of the Deputy Comptroller. As Comptroller Murray's term was about to expire, he requested the Deputy Comptroller to take the matter up with the directors, inasmuch as, he stated, the Deputy would have it to handle after he left the office.
The condition of the company's affairs was gone over in detail with the directors by the examiner who made the examination and the Deputy Comptroller, and the directors were required to make up the deficiency in the capital stock without delay by the substitution of cash or its equivalent for some of the depreciated assets, and paper and securities on which losses were estimated.
The directors would not concede the capital to be impaired and would not agree to put in the cash. They wanted time to work out the unsatisfactory condition without interference by the Comptroller's office. The Deputy Comptroller, however, insisted upon the capital being made good in the way above suggested, otherwise he would serve formal notice on the bank declaring the capital to be impaired and requiring a meeting of the shareholders to be called for the purpose of voting an assessment of the stock.
Appeal was then made to Comptroller Murray, who took the matter out of the Deputy's hands and accepted a bond executed by some of the directors in the sum of sixty thousand dollars to indemnify the depositors in the company against any existing or future loss occasioned by depreciation of a certain asset which was being carried on the books at a valuation of $851,000, and on which the examiner had estimated a loss of $121,000.
Most of the directors who executed this bond were then heavily indebted to the company, and some of them were unable to pay their individual obligations at that time.
The Deputy Comptroller did not regard this bond as of any value and did not approve of that method of making good an impairment of the bank's capital.
A few days after this conference Comptroller Murray accepted the presidency of this institution, but did not remain with it long. He resigned in less than six months after his acceptance of the office, giving as a reason therefor, as stated by the examiner, that he could not tolerate Jordan's banking methods.
The Deputy Comptroller was of the opinion that the tender of the position to him in the first place was mainly for the purpose of forestalling any attempt on the deputy's part to compel the directors to make good the impaired capital of the bank by the substitution of cash or its equivalent for the bad assets or by an assessment of the stock.