USA > Massachusetts > Suffolk County > Boston > Metropolitan Boston; a modern history; Volume II > Part 8
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Perhaps the situation can best be summarized by quoting from a special report which he made to the Legislature on March 28, 1922. In this report he said :
"The past two years have placed upon the Commissioner of Banks grave responsibilities, which have been lightened only by the knowledge that his duties were clear. A small group of Boston trust companies, controlled by men who lacked the ability, the training, and, in some cases, the moral character requisite to the proper administration of a bank, were so glaringly mismanaged, and in such an unsound condition, that the most drastic of actions became necessary in order to quickly avert a situation which was inviting a financial crisis in the city of Boston.
"This deplorable situation in four of these trust companies became apparent during the first six months of the present Commissioner's ad- ministration, and in the fifth, within the next five months, and it was manifest to him that to have permitted such institutions to continue business would have constituted a breach of trust to the stockholders and depositors of the banks and to the people of the Commonwealth.
"The law specifically authorizes the Commissioner to take possession of a bank which 'has violated its charter or any law of the Common- wealth, or is conducting its business in an unsafe or unauthorized man- ner, or that its capital is impaired . . . or is in an unsound or unsafe condition to transact the business for which it is organized . . . "
"It was obvious that the authority conferred by this statute should be exercised only for grave and compelling reasons, and then only with consideration for the rights of all interested persons ; but it was equally obvious that the exigency contemplated by the statute then existed, and that its authority must be invoked.
"The Commonwealth has been justly proud of its banking reputation. The closing of the five trust companies was a blow to that reputation
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A HISTORY OF BANKING IN BOSTON
from which it will take long to recover. It shook the faith of many foreign-born citizens in American financial institutions. The revelation of the insolvency of these trust companies caused suffering to countless poor people who could ill afford their losses. It brought hardship, and perhaps financial ruin, to many business enterprises. To have allowed these trust companies to continue operations, however, would have only increased the eventual loss and suffering.
"Regrettable as were the conditions which existed in these trust com- panies, and grave as was the effect which the closing of them has had upon our community, it must not be forgotten that the financial and banking situation in Massachusetts is fundamentally sound, and that the officers of our banks are now, and with few exceptions have been, men who regard their duty as a public trust and execute that trust with full recognition of their responsibilities."
Commissioner Allen then presented a brief sketch of the conditions found in each of the closed banks and gave an accounting of the man- ner in which they had been operated. Volumes could be written on these five closed trust companies, the events leading to their failures and to their subsequent liquidation. In the first place, there is grave doubt as to whether the men behind these institutions should have been allowed bank charters, as they quite obviously were more at home in politics than in the banking world, and political considerations ought not to be given any place where millions of dollars of deposits of the public are concerned.
In each instance the laws of the Commonwealth were disregarded by these five trust companies at will. In each case the mismanagement was of a nature calling for criminal prosecution. It was found, however, that the banking laws of the State were woefully weak in that they failed to provide adequate penalties for violations, and in some instances provided no penalties. As a result of such a situation not one of the parties guilty of wrecking these institutions ever spent a day in jail as punishment The Legislature took cognizance of this fact, and on recommendation of a special commission, created for the purpose, the general banking laws and trust company statutes have been greatly tightened and penalties for violations provided.
The Hanover Trust Company was closed on August II, 1920, "after an examination which disclosed that the bank had violated the banking laws, that its capital was impaired, and that its condition and the conduct of its business were such as to make it unsafe and inexpedient for the bank to continue business." Mr. Fitz-Henry Smith, Jr., was appointed as liquidating agent by the commissioner. While the depositors in the sav- ings department were paid in full, up to the beginning of the year 1927
396
METROPOLITAN BOSTON
the depositors in the commercial department had received only 60 per cent, with small prospect of receiving more-which means a loss of at least $1,000,000 to these depositors, to say nothing of the losses incurred by the directors and stockholders.
The Prudential Trust Company was closed on September 10, 1920, when, because of "loans of bad and doubtful character, inability to main- tain a required legal reserve, persistent withdrawals of deposits and other factors" it could no longer continue business. John E. Hannigan was named as liquidating agent. The savings depositors were paid in full, the final dividend being sent out on July 10, 1923. The commercial de- positors had received 602/3 per cent up to 1927, and apparently stood to lose about $400,000, with about an equal amount to be lost by the direc- tors and stockholders.
The Cosmopolitan Trust Company was closed on September 25, 1920, after withdrawals of deposits at the rate of $1,000,000 a month for the three preceding months, together with the condition of its loans, made it unable to continue to meet the heavy withdrawals. It was not until after a long investigation that it was brought out that "the losses from bad loans and investments, negligently, recklessly and carelessly made, and with little or no regard for the banking laws of the Commonwealth, were in excess of $5,000,000." Mr. Henry O. Cushman was named by the commissioner as liquidating agent. Up to the beginning of 1927 the savings depositors had received 90 per cent in dividends, or a total of $5,170,269.82. The commercial department creditors at the same time had received only 32 per cent, or a total of $2,044,775.38. The losses to the depositors will reach several million dollars before final liquida- tion is completed. The president of this institution, Max Mitchell, was adjudicated a bankrupt by the Bankruptcy Court, although claims against him for money had and received, for statutory liability as a stockholder and for liability as a director, had been proved for $2,768,802.95.
The Fidelity Trust Company was closed on September 28, 1920, when it could no longer stand the demands being made for withdrawals of deposits. Mr. W. Rodman Peabody was appointed liquidating agent. Negotiations were made whereby the bank was taken over by the Liberty Trust Company on April 18, 1921, but the entire capital and surplus had been wiped out, and the directors and stockholders suffered a loss of more than $4,000,000. Speculative enterprises in which the bank's officers were interested, and unwarranted use of the bank's money for such purposes, were largely responsible for the plight of the institution.
The Tremont Trust Company was closed on February 17, 1921, when it appeared that the capital had become impaired and that the trust com- pany was being conducted in an unsafe and unauthorized manner. Mr.
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A HISTORY OF BANKING IN BOSTON
W. Rodman Peabody, who had completed his duties as liquidating agent of the Fidelity Trust Company was appointed to serve in a similar ca- pacity in winding up the affairs of the Tremont Trust Company. On the date of closing the deposits in the savings department amounted to $8,991,406.50, and in the commercial department to $4,325,066.56, making the total deposits $13,316,473.06. Up to 1927 a total of 962/3 per cent has been paid in dividends in the savings department, and 412/3 per cent in the commercial department. Further small dividends are expected in each of these departments.
The liquidating of these five institutions has been a long and arduous task, involving a tremendous amount of litigation. In most cases it was necessary to carry the legal cases to the Supreme Judicial Court, as questions involved had never before been passed upon. In enforcing the stockholders' and directors' liability, all sorts of complicated issues were involved.
In a great many cases debtors of the banks claimed that they were unable to pay in full the amount of their indebtedness. This necessi- tated extensive financial investigation as to the responsibility of the debtors. Had suit been pressed in a great many cases the debtors would have been forced into bankruptcy and little or no recovery for the de- positors would have been made. Such a situation also prolonged the work of liquidation. It was deemed advisable, however, to follow what- ever course would lead to the largest possible recovery for the institutions.
It may seem that too much attention has been paid to trust company failures, but these failures have been an extremely important part of the history of these institutions. Because of them the trust companies of Boston and of Massachusetts today afford greater protection to their de- positors than do the trust companies of any other State in the country. Because of them Massachusetts today has the best supervision over its financial institutions of any State in the country. Because of them the trust companies generally are in the best condition in their history, and are under the most efficient management.
Under the heading of some of the oldest and largest trust companies brief individual histories are presented. They show the extent of the growth of these institutions and indicate the confidence reposed in them by the public. Of the fourteen Boston Trust Companies only twelve have savings departments and only nine have trust departments.
Twenty years ago there were nineteen trust companies in Boston with a total capital of $12,500,000, as compared with a total of $24,050,000 for the fourteen such institutions in 1926. During the same period the total surplus and undivided profits has grown from $20,826,005 to $33,- 327,179; the combined deposits have grown from $147,579,973 to $387,-
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METROPOLITAN BOSTON
625,653 ; the trust departments have increased from $22,405,157 to $369,- 176,468, and the total resources, including trust departments, which amounted to $203,398,651 twenty years ago, now reach the figure of $846,048,429.98.
This comparison of figures tells the story of Boston's trust companies better than it could be told in words. The detailed figures as of June 30, 1926, are as follows :
BOSTON TRUST COMPANIES-June 30, 1926. COMMERCIAL DEPARTMENTS.
Bank.
Capital Stock.
Total Assets.
American Trust Company.
$1,500,000
$33,539,932.15
Bank of Commerce and Trust Company
600,000
5,155,815.95
Beacon Trust Company
1,500,000
25,124,666.12
Boston Safe Deposit & Trust Company.
1,000,000
23,541,464.59
Charlestown Trust Company
200,000
1,508,815.02
Columbia Trust Company
100,000
1,328,762.58
Exchange Trust Company
1,000,000
9,455,785.33
Jamaica Plain Trust Company.
200,000
1,783,173.28
Liberty Trust Company
750,000
9,090,878.44
New England Trust Company.
1,000,000
29,499,973-45
Old Colony Trust Company.
12,000,000
210,484,233.88
Roxbury Trust Company
200,000
913,080.66
State Street Trust Company
3,000,000
69,041,328.82
*United States Trust Company
1,000,000
12,263,317.01
$24,050,000
$432,731,227.28
*The capital of the United States Trust Company was increased to $2,000,000 in 1927, by the declaration of a 100 per cent. stock dividend.
COMMERCIAL DEPARTMENTS-Continued.
Surplus and
Bank.
Undivided Earnings.
Deposits.
American Trust Company
$2,792,112.58
$25,920,184.54
Bank of Commerce and Trust Company
157,505.12
4,239,241.63
Beacon Trust Company
2,151,985.19
19,726,854.91
Boston Safe Deposit & Trust Company.
3,937,888.13
16,873,297.08
Charlestown Trust Company
26,327.55
1,276,107.56
Columbia Trust Company
126,350.95
1,102,386.63
Exchange Trust Company
I,III,289.67
6,429,551.45
Jamaica Plain Trust Company
62,345-71
1,439,926.09
Liberty Trust Company
757,928.32
7,217,027.II
New England Trust Company.
2,885,660.15
23,140,312.74
Old Colony Trust Company .
13,812,276.79
170,556,301.19
Roxbury Trust Company
5,950.36
707,130.30
State Street Trust Company
3,996,652.05
56,813,608.24
United States Trust Company
1,502,907.42
9,109,182.23
$33,327,179.99 $344,551,III.70
TRUST DEPARTMENTS.
Bank.
Total Assets.
American Trust Company
$2,444,391.47
Bank of Commerce and Trust Company.
117,466.03
Boston Safe Deposit & Trust Company.
110,802,548.84
Exchange Trust Company
423,909.31
Liberty Trust Company
294,853.18
New England Trust Company.
103,615,861.66
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A HISTORY OF BANKING IN BOSTON
TRUST DEPARTMENTS.
Bank.
Total Assets.
Old Colony Trust Company.
128,680,925.53
State Street Trust Company.
19,466,408.66
United States Trust Company
3,330,104.23
$369,176,468.91
SAVINGS DEPARTMENTS.
Bank.
Total Assets.
Deposits.
American Trust Company
$227,242.50
$226,309.50
Bank of Commerce and Trust Company .
1,226,237.42
1,208,377.04
Beacon Trust Company
4,525,498.25
4,447,936.67
Charlestown Trust Company
2,442,590.80
2,346,11 3.62
Columbia Trust Company
1,938,452.68
1,840,635.86
Exchange Trust Company
11,713,005.31
11,415,767.83
Jamaica Plain Trust Company.
3,220,049.98
3,135,692.40
Liberty Trust Company
4,980,806.45
4,888, 180.46
Old Colony Trust Company
3,216,636.51
3,196,728.28
Roxbury Trust Company
1,178,116.57
1,154,692.79
State Street Trust Company
2,409,437.29
2,377,957.56
United States Trust Company.
7,062,660.03
6,836,149.96
$44,140,733-79
$43,074,541.97
Following is a brief life story of some of the representative Boston trust companies :
Old Colony Trust Company-Although only thirty-seven years old, the Old Colony Trust Company of Boston has become the foremost trust company of New England and one of the truly great financial institu- tions of the country. It is the fourth oldest bank of its kind in Boston, having been incorporated May 8, 1890, and opened for business on June 14 of the same year.
It made its start in an obscure office at 50 State Street, with a staff of three men, T. Jefferson Coolidge, Jr., Charles S. Tuckerman, and George S. Stickney. The two customers who made up the first day's business, with deposits amounting to $219,000, were both members of this office force. So rapidly did the company grow, however, that in 1892 it moved to the Ames Building at the corner of Washington and Court streets. By 1909 it occupied four floors of this building. Continued expansion and increasing inconvenience of accommodations, led to the purchase of the site at 17 Court Street, and the erection there of a four-story bank building, which is a part of the present main office, and was occupied in December, 1909.
The size of both business and staff by 1923 had driven the company into various annexes in the buildings near by, a far from satisfactory condition. A new ten-story building was therefore contracted for, to face on Cornhill and to connect with the Court Street Building. A novel feature of this new building was the use of a "setback" at the ninth
/
400
METROPOLITAN BOSTON.
floor because of building restrictions. This allowed the addition of sev- eral stories and makes the building stand out in its section of the city. It was completed and occupied early in 1925.
In January, 1902, the first branch of the Old Colony Trust Company was opened at Temple Place in a remodeled shoe store. The present structure occupied by this branch was erected in 1903.
In 1910 the company absorbed the City Trust Company, an institu- tion with deposits of approximately $28,000,000. This company had been in business since 1902, and had absorbed the Mercantile Trust Company (with which had merged the Massachusetts Loan and Trust Company), and the Bunker Hill National Bank (with which had merged the Monu- ment National Bank). The Old Colony Trust Company also took over the Copley Trust Company, an institution with nominal deposits only.
Four years later, in 1914, the Bay State Trust Company was acquired. This has since been operated at 222 Boylston Street as the Bay State Branch. The next acquisition was that of the Pilgrim Trust Company in August, 1925. This latter company had in turn succeeded to the busi- ness of the First State Bank, and had deposits of about $700,000. Its main office was at 167 Summer Street, and it had contracted for a branch in the new Hotel Eliot, which was being built at the corner of Massachu- setts and Commonwealth avenues. Both of these offices are now oper- ated as branches of the Old Colony Trust Company.
Throughout its history the Old Colony Trust Company has had a phenomenal growth. On October 31, 1890, less than four months after it had opened, the deposits were $3,512,060.35. On June 30, 1926, the de- posits in the commercial department were $170,556,301.19 and in the sav- ings department, $3,196,728.28, making a total of $173,753,029.47. Its trust department, on October 31, 1900, ten years after the bank was first opened, amounted to $93,707.43. On June 30, 1926, the trust department had assets of nearly $129,000,000, stamping it as the largest trust depart- ment of any bank in New England.
The company's staff in 1890 grew from three to thirteen, while in 1926 it had eighty-five officers and 885 employees. The main office alone has 835 officers and employees.
The banking department has over 29,000 individual and corporation banking accounts, which is considerably more than any other trust com- pany in New England. The transfer department is now transfer agent for 234 corporations and in 99 of these cases it is also appointed to pay dividends. This is the largest department of its kind in New England.
The Old Colony Corporation, a subsidiary, occupies a front-rank position among distributors of high grade securities throughout New England.
While the Old Colony Trust Company is distinctly a New England
BOSTON ARMY SUPPLY BASE, VIEW FROM AEROPLANE
401
A HISTORY OF BANKING IN BOSTON
bank, it is well and favorably known throughout the United States, and has customers in almost every part of the world. Its officers are as fol- lows :
President, Philip Stockton; secretary, C. B. Wetherbee; treasurer, Wilbur W. Higgins; Actuary, F. J. Bradlee ; board of directors, Gordon Abbott, C. F. Adams, Oliver Ames, William Amory, D. F. Appel, C. F. Ayer, M. G. Chace, T. J. Coolidge, C. E. Cotting, Alvah Crocker, T. K. Cummins, P. Y. DeNormandie, Philip Dexter, W. B. Donham, J. T. Dor- rence, F. C. Dumaine, F. J. Fahey, Reginald Foster, G. P. Gardner, F. R. Hart, R. F. Herrick, J. C. Howe, H. C. Keith, Arthur Lyman, James MacNaughton, G. von L. Meyer, Maxwell Norman, C. J. Paine, R. T. Paine, 2d, R. S. Russell, Abbott Stevens, G. S. Stevenson, Philip Stock- ton, P. F. Sullivan, E. S. Welch, C. W. Whittier, Robert Winsor, Jr., and C. A. Wood.
The State Street Trust Company-Second in size among the trust companies of Boston is the State Street Trust Company, which, although it was not incorporated until 1891, has a history dating back to 1792, through its merger in 1925 with the National Union Bank, the second financial institution to be organized in Boston.
The State Street Trust Company, in an elaborate brochure issued in 1926, describes its origin by stating: "In the spring of 1891, some of the officers of the Third National Bank and several of their friends, recog- nized that it would be a great convenience for the box-renters of the State Street Safe Deposit Company to have a bank in the same rooms so that they could have an accessible place in which to deposit or cash their cou- pons. Mr. Moses Williams, who was then president of the Third Na- tional Bank, with offices adjoining, owned a charter which he thought might be useful for this purpose."
The work of organizing the bank was promptly undertaken, and on July 1, 1891, the State Street Safe Deposit and Trust Company was opened, with a capital of $300,000, largely subscribed for by the stock- holders of the Third National Bank. The first day's deposits amounted to only $8,898, and the first loan to be made was on stock of the Boston & Maine Railroad, which at that time was selling at $165 a share.
The following men were present at the first meeting of the board of directors: Moses Williams, Joseph B. Russell, Eliot C. Clarke, Frederic J. Stimson, Edward Atkinson, Thomas O. Richardson, Charles E. Samp- son, Arthur Wainwright and Francis B. Sears. Colonel William L. Chase and Royal E. Robbins wre added to the board at its second meet- ing.
In 1897 the name of the institution was shortened to the State Street Met. Bos .- 26
402
METROPOLITAN BOSTON
Trust Company. In 1901 the Third National Bank was consolidated with the National Shawmut Bank, and the trust company became entirely independent of control by outside institutions, a position which it has maintained ever since.
Late in 1900 the company moved from its original location in the Ex- change Building, to the Union Building, taking the offices on the corner of State and Exchange streets. At this time the deposits were about $2,000,000. In the eleven years during which it remained at this location, the deposits increased to $13,000,000. In 1905 a branch office was located in the Back Bay section of the city, having been voted by the directors three years earlier. A building was erected and occupied at the corner of Massachusetts Avenue and Boylston Street, equipped with safe- deposit vaults.
In December, 1911, the main office of the trust company was moved into the Worthington Building, on another corner of State Street, diagon- ally across from its previous location, where it remained for fourteen years, during which the deposits grew to $40,000,000. In 1916 the State Street Trust Company absorbed the Paul Revere Trust Company, the Copley Square branch of which was continued as a branch of the State Street institution.
The bank's quarters in the Worthington Building became inadequate as the institution continued to grow, and finally a picturesque building of the old Colonial type, was erected at the corner of State and Congress streets, on what is practically the identical location where the bank was first started. The building, which was opened in 1925, preserves the Colonial atmosphere throughout, including its furnishings and rare relics, and attracts thousands of visitors annually.
The trust company assumed the management, upon moving into its new quarters, of the State Street Deposit Vaults, with which it started its career. It then effected the merger with the National Union Bank, which brought its deposits to $57,000,000, the capital being increased at the same time to $3,000,000.
Considerable mention has been made in this record of the National Union Bank. The trust company has carefully preserved the original charter, granted in 1792, which was signed by John Hancock, the first Governor of Massachusetts. Moses Gill, lieutenant-governor, was the institution's first president. The records of the bank for the first twelve years were never saved, but the first meeting of the directors of which there is an existing record, shows the following men in attendance, Janu- ary 3, 1804 : Samuel Brown, Thomas L. Winthrop, Josiah Quincy, John Welles, John Prince, Jr., Joseph Head, Thomas Davis, Samuel Cobb, Stephen Codman and Benjamin Bussey.
403
A HISTORY OF BANKING IN BOSTON
The presidents of the bank, following Mr. Gill, were Oliver Wendell, Samuel Brown, Thomas L. Winthrop, Samuel Fales, Chester Adams, Thaddeus Nichols, George C. Richardson, Charles L. Young, George Whitney, James R. Hooper, and Henry S. Grew.
The bank located in 1792 in the residence of the Hon. Perez Morton, at the corner of State Street and Exchange Lane. In 1799 it purchased the property and in 1826 a new building was erected on the same site. The building was sold in 1850, but the bank continued as a tenant, occu- pying the same location for a period of about 130 years. All of the bank's old papers, many of which are extremely interesting from an historical standpoint, are carefully preserved by the trust company.
The State Street Trust Company, on June 30, 1926, had total assets of $69,041,328.82 in its commercial department, $19,466,408.66 in its trust department, and $2,409,437.29 in its savings department. Its surplus and undivided earnings amounted to $3,996,652.05.
Its officers were as follows: President, Allan Forbes; treasurer, Walter F. Pickett; secretary, Edward D. Harlow; board of directors, R. L. Aggasiz, Harcourt Amory, Edmund Billings, Ingersoll Bowditch, H. H. Bundy, Allston Burr, H. B. Cabot, A. L. Carr, H. F. Clark, A. E. Colby, H. C. Dodge, J. W. Farley, Allan Forbes, F. M. Forbes, R. H. Gardiner, G. P. Gardner, Jr., A. F. Goodwin, H. S. Grew, G. E. Hall, J. L. Hall, B. N. Hamlin, C. M. Holmes, F. M. Holmes, H. F. Hurlburt, James Jackson, Harris Livermore, H. F. Mason, W. B. McSkimmon, William Minot, J. F. Moors, W. E. Nickerson, B. W. Palmer, Francis Peabody, W. M. Prest, J. H. Soliday, Eliot Spalding, F. J. Stimson, M. B. Stone, J. H. Storer, J. A. Sweetser, M. C. Tuttle, B. W. Warren, S. D. Warren, E. S. Welch, F. S. White, H. H. Whitman, Moses Williams, S. H. Wolcott.
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