USA > New York > Nassau County > Long Island; a history of two great counties, Nassau and Suffolk, Volume II > Part 35
USA > New York > Suffolk County > Long Island; a history of two great counties, Nassau and Suffolk, Volume II > Part 35
Note: The text from this book was generated using artificial intelligence so there may be some errors. The full pages can be found on Archive.org (link on the Part 1 page).
Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 | Part 10 | Part 11 | Part 12 | Part 13 | Part 14 | Part 15 | Part 16 | Part 17 | Part 18 | Part 19 | Part 20 | Part 21 | Part 22 | Part 23 | Part 24 | Part 25 | Part 26 | Part 27 | Part 28 | Part 29 | Part 30 | Part 31 | Part 32 | Part 33 | Part 34 | Part 35 | Part 36 | Part 37 | Part 38 | Part 39 | Part 40 | Part 41 | Part 42 | Part 43 | Part 44 | Part 45 | Part 46 | Part 47 | Part 48
At that time banks were failing all over the United States. From a top of about 30,000 the number has now dwindled to approximately 14,000, the bulk of the shrinkage being in the late twenties and early thirties. Bank troubles were sweeping the county like a pestilence and had reached Long Island. The Long Beach Trust Company had closed; the Bank of North Hempstead at Port Washington had closed; and the fire was getting perilously near the heart of Nassau. The people everywhere had lost confidence in banks and were withdrawing their funds in volume. Gossip was rampant and disastrous. Friends were telegraphing friends in near and in far distant points to get their money out of their banks. The bankers themselves were almost in a state of panic, not knowing where and when the lightning would strike next.
I was sitting in iny office in the Bank of Rockville Centre Trust Company at about seven o'clock of a December night in 1931 when Edwin G. Wright* called me on the telephone and said he wanted to meet Dr. DeLano (then president of the bank) and myself in his office at eight o'clock on an important matter. I had not the slightest idea as to what he meant. At the appointed time we went to his office in the same building and found present the directors of the First National Bank of Rockville Centre and also the representatives of the State Banking Department and the Federal Reserve Bank of New York.
* Mr. Wright (attorney) was brought into the matter through one of the directors of the First National Bank who was alarmed at the condition of the bank as he saw it.
345
BANKING
It was then disclosed that the First National Bank of Rockville Centre (Capital $200,000, Surplus and Profits $164,199.26) was in trouble and had to have help. The question was, how that help could be obtained. The National Credit Association was then in operation. The bank had gradually sold its assets of the better type to meet a steady stream of withdrawals that had been going on for some little time, creating a continuous seepage of deposits which, if not stopped, would end in disaster.
NEW YEAR'S DAY GIVEN OVER TO BUSINESS
On New Year's Day, January 1, 1932, the directors of the Bank of Rockville Centre Trust Company and the Nassau County National Bank met some of the officials of the Brooklyn Trust Company in the latters' office and talked over the bank situation. A picture of the First National Bank had been obtained by a hurried but somewhat exhaustive examination made by men of the Bank of Rockville Centre Trust Company with the assistance of one or two men from the Brooklyn Trust Company, one of whom was an experienced bank examiner. We had worked around the clock before the Brooklyn meeting. Mr. George V. Mclaughlin, president of the Brooklyn Trust Company, suggested that the bank be taken over by either the Nassau County National Bank or ourselves. Dr. D. N. Bulson, then president of the Nassau County National Bank, said that he did not feel they were capable of doing so; but the men of the Bank of Rockville Centre Trust Company declared they would undertake the job if they could be assured of the support of the Brooklyn Trust Company and the National Credit Association.
It was then to determine on what basis and how the First National Bank could be merged with the Bank of Rockville Centre Trust Company. The seepage of deposits had continued rather seriously since the Wright meeting. The tension on the part of the public was so high and so delicate at the time that great care had to be exercised that the secret should not leak out and no false move should be made. In order not to provoke suspicion, a meeting of the directors of the two banks was held at the home of George A. Powers in Garden City as of Monday, January 4, 1932, followed by a meeting at the home of Jacob Post in Freeport, Tuesday, January 5, 1932, where nothing of moment developed. It was, however, intimated at the Powers meeting that another bank was interested in such a merger, but nothing of consequence followed the Powers meeting, so that the idea of a merger went back to the Bank of Rockville Centre Trust Company as a problem to work out. The Post meeting (but not the Powers) was also attended by representatives of the Federal and State Departments, and a lengthy discussion of the joint groups was held running far past midnight.
MIDNIGHT MEETINGS
At around two o'clock in the morning of January 5, 1932, William P. Carl (now deceased), and who was spokesman for the First National Bank group, came down from an upstairs meeting of the First National Bank directors at the Post home, and said to me: "Mr. Kniffin, what would you do?" I immediately replied : "Bill, I think there is nothing
.346
LONG ISLAND-NASSAU AND SUFFOLK
you can do at the moment except to put on the thirty-day clause to- morrow morning." That was the morning of January 6. The cash in the First National Bank was running alarmingly low; there was no immediate help in sight; the borrowing power of the bank had been exhausted; and it was only a question of hours as to how long the doors could be kept open. The withdrawal notice would give them time, and would afford a breathing spell. (The notice was made effective as of the morning of January 6.)
I then told the two groups that I would call together the banks on the south shore of Nassau County and see if a pool could not be
NASSAU COUNTY TRUST COMPANY
---
Home of Nassau County Trust Company, Mineola
arranged to take over some of the assets of the First National Bank. At about eight o'clock I called together the south shore banks from Valley Stream to Bellmore and asked them to meet me at ten o'clock at the Garden City Hotel, which they did. In a few words I explained the situation to them when William F. Ploch, then president of the National City Bank of Long Beach, arose and said: "This job is too big for this small group; why not get all the banks of the county in on it?" The meeting adjourned to meet at four o'clock. I went to the telephone booth in the hotel and called up some forty banks in succession. I tried to keep the matter secret (which I did not succeed in doing), but I got practically every man in every bank whom I asked for. I told them to meet at four o'clock at the hotel with enough of their men to say "yes" or "no" to a very important matter.
A HOUSE DIVIDED
The banks responded, but the many telephone calls had resulted in the rumor that something was wrong with the banking situation in
347
BANKING
Nassau, and it was apparent that the county was seething with rumors of one kind or another.
When the bankers assembled (Walter Sherman, then president of the Nassau County Bankers Association presiding), the story was again presented to them with the idea of forming a pool to take over the assets and keep the bank going until something better could be worked out. Meanwhile, the depositors of the First National Bank had filed some $50,000 of withdrawal notices which, if the deposits had been paid in cash (and this would have been the case), would have stripped the bank of all its available money. The matter was discussed at length at the afternoon session, and on taking a vote it was apparent that the county was sharply divided - one group against the other, and on the sharp division of opinion nothing could be done.
All sorts of proposals were made, such as for instance, if a certain percentage of the banks agreed, they would agree, etc. The banks would gather in little groups and discuss the question, come back and report to the chairman. Time was running on, and time was decisively of the essence, and we were getting nowhere. After taking several votes it was apparent that there was a deadlock and nothing could be put over effectively.
I had talked with Mr. Leslie R. Rounds, then as now vice president of the Federal Reserve Bank of New York, and told him of the meeting and the seriousness of the situation. I had told him that he was the only man I knew who could handle such a gathering and begged him to come. He said he could not possibly get away. I called him several times during the evening and advised him of the situation, and again told him that the meeting was out of hand and nothing workable was in sight. He finally agreed to come to Garden City, and he did.
Sometime prior to midnight, Judge Howell came into the room. I met him as he came in and said to him in these exact words: "Judge, you've got to make the speech of your life tonight." He replied, as I remember it: "Leave it to me." We took a short recess while waiting for Mr. Rounds, during which time Judge Howell talked with the bankers, as only he could, and said, among other things: "What you men need is a Clearing House."
A SEED IS PLANTED
A committee was immediately appointed to draft a plan for a Clearing House. The committee retired and came back later with a rough outline of a plan for a Nassau County Clearing House. Thus it was born. Mr. Ploch was on that committee, and I believe chairman.
When Mr. Rounds arrived he surveyed the situation and then offered the proposition that the banks take over the First National Bank building at $375,000, and the Bank of Rockville Centre Trust Company would assume the liabilities of the First National Bank. The building had cost the bank $327,567.89 and its furnishing $35,906.86 - a total of $363,474.75. Mr. Rounds proposed that an assessment be levied on the banks of the county aggregating the purchase price, and based on their deposits. He asked the bankers to discuss the idea among their men and when they came to a decision, to report to Mr.
348
LONG ISLAND-NASSAU AND SUFFOLK
Sherman who kept the tabulation of the "ayes" and "nays." The responses were encouraging but not enough so to spell success. Pro- posals and counter-proposals and compromises were again offered from various parts of the room, and the proceedings came to the point where the Bank of Rockville Centre Trust Company held the key to the situation. It had held out in respect to the assessment on the theory that in agreeing to take over the First National Bank it had enough at stake without putting up any more money.
As the affirmative votes accumulated, but not enough to make the plan effective, Mr. Rounds finally took out his watch and said to Dr. DeLano standing by his side: "I will give you (so many minutes) to make up your mind. The closing notice is ready to be tacked on the door and all I've got to do is to make a telephone call and on it will go." That would have been the end of the First National Bank. The Doctor soon made up his mind and nodded "Yes" and the result was announced. A cheer went up from that smoke engulfed and highly electrified crowd. Mr. Rounds then said: "Now come over here and sign up and then go home and do it." The meeting broke up around three o'clock and I started back for Rockville Centre with Oscar Gast, and I remember distinctly saying to him: "Oscar, now we've got two runs on our hands."
The two Boards of Directors worked practically all night with the lawyers, shaping up the agreement to take over. It was signed by six o'clock in the morning. At eight o'clock on the morning of January 7, 1932, I took an office in the First National Bank and Mr. Gast took charge of affairs at the Bank of Rockville Centre Trust Company. We had already secured $100,000 in cash from our New York correspondent. About nine o'clock the morning of January 7 an armored truck drew up before the Bank of Rockville Centre Trust Company with $300,000 in cash (small bills), and two guards stood watch over the money until it was released later in the day by call from the Federal Reserve Bank. (The banks had wired in their sub- scriptions to the Federal during the early morning hours, but the Federal had anticipated this and sent the cash in advance.) The con- tributions of the banks were all cash contributions and not guarantees or warranties of any kind. I watched the $100,000, which had been taken to the First National Bank, all day. The news of bank trouble had spread and the people were flocking to the First National Bank to get their money. At first it was only "small fry" and the dollar amount withdrawn was not imposing. At about noontime of that day (Thursday) we conceived the idea of giving the depositors a ticket which would be good for the amount in opening a new account in the Bank of Rockville Centre Trust Company. The depositors were with- drawing largely from savings accounts. I personally handled the larger ones and left the smaller depositors to the tellers. The transfer idea conserved the cash, and while we had a steady stream of with- drawals all day, at three o'clock I was persuaded the run would not get out of hand. The cash had held out. During the first day we paid out $182,000 representing 375 closed accounts. The next day, however, the larger depositors came streaming in, but the transfer idea was
349
BANKING
beginning to be effective, and the cash was equal to the demands. At the close of business on Friday, the 8th, it was a fair assumption that the crisis was over. Between Saturday noon and Sunday at midnight, working with an augmented force, every asset and liability account on the First National Bank books was transferred to our own forms; new passbooks were made ready; and at midnight of Sunday, the 10th, all the remaining assets and the new records were placed on a truck and taken to the Bank of Rockville Centre Trust Company, the doors were locked, and the First National Bank as a functioning institution closed its doors forever. A highly profitable and at one time successful bank was no more.
THE CRUCIAL MOMENT
There is, on every important occasion, a "crucial moment" which determines the result in its finality. Looking back upon the whole story of the First National Bank affair, my judgment is that the turn- ing point was the determination of the directors to enforce the thirty- day clause; because that kept the bank open until help could come. It now seems a mathematical certainty that the doors would have been closed before noon on that fateful Wednesday because the cash (some- where around $15,000) would have been exhausted by twelve o'clock. It is a fair conclusion also that the credit for the successful outcome of the Garden City meeting was due to Mr. Ploch for suggesting a county wide participation; to Mr. Rounds for conceiving the idea of buying the building and eventually persuading the banks to go along; and to Judge Howell for his leadership in the ethical and moral sense. I simply called the meeting. (Mr. Rounds warned the bankers of the serious consequences of a bank of that prominence and in that location closing its doors.)
The consolidated statement of the First National Bank and the Bank of Rockville Centre Trust Company as of January 7, 1932 showed assets of $6,351,373.52 - deposits of $4,821,019.72 - capital funds $418,145.42 - reserves $433,140.48 - bills payable $664,125. The de- posits of the First National Bank were $1,479,323.28, which amount was assumed by the Bank of Rockville Centre Trust Company.
A COSTLY BANK BUILDING
No sooner had the bankers of Nassau County taken over the bank building than they realized they had a "white elephant" on their hands. What to do with this costly investment was the question. Here it was - five stories of space (mostly vacant) and an empty banking room - in its departed glory. This sick orphan badly needed a foster parent who would love it enough to nurse it back to health.
The chief problem of the Nassau County Bankers Association and its successor, the Nassau County Clearing House, was the bank build- ing already referred to, and located at Sunrise Highway and Park Avenue in Rockville Centre. The building was built at the peak of prices in the "twenties" by an institution at the time of about two and a half millions of resources. As an investment for a bank of that size
350
LONG ISLAND-NASSAU AND SUFFOLK
it was never justified. It was, and still is of fine quality, fireproof, with two elevators - a public and a private "lift." The banking room was in good taste and imposing. The counters were Italian marble, the side walls travertine, floors terrazzo, the ceiling high and highly ornamented. The basement contained heavy money vaults, coupon booths, storage vaults and a cold storage equipment. The office furnishings were of the very best and costly. Talking to an officer of The Chase National Bank about that time I said to him: "You have a fine banking room here, but no better in quality than the defunct First National." The build- ing was far ahead of its time, and the bank was altogether too small to take on such overhead. The plot alone (40 x 100) cost the bank over $80,000, the highest price land ever sold for in Rockville Centre.
A SALE OR A MORTGAGE ?
Some sixty banks either bought the building for $375,000 on that memorable morning of January 7, 1932 for "cash on the barrel head," or they made a loan secured by the building. Whether it was one or the other was a moot question for several years. I am not prepared to say which was in the minds of bankers at the time, but my personal opinion was, and still is, they thought they bought the building in fee simple. The wording of the agreement, however, left the answer in doubt. From time to time the question was raised and a committee was appointed to determine the exact legal status of the building. If it was a loan secured by mortgage, foreclosure would have to follow to effect good and marketable title. If the title was in fee simple a deed could be delivered.
On April 18, 1939 Martin V. W. Hall, attorney (now deceased), advised that the State Tax Commission and the Nassau County Clerk had concurred in an opinion that "we regard the deed as a conveyance in trust for purposes of liquidation and payment of the indebtedness, and not as a pledge or security in the nature of a mortage." It was therefore entitled to be recorded free from the payment of a mortgage tax. This settled the long drawn out legal controversy as to whether the building transaction was a sale of realty or a loan secured by a bank building. The trustees of the building were the Nassau County National Bank of Rockville Centre and the First National Bank and Trust Company of Freeport. The Nassau County National Bank did most of the work. The village was not yet ready for so pretentious an office building. It was never fully rented until the boom times of the late war. Soon after taking over, the ground floor was rented as a bar and grill, for which it was never adapted. The upper floors were not in demand and the rents were nominal. Subsequently, the furnish- ings were sold at bargain prices and the marble counters were sold to another bank. The costly and impressive vaults were likewise sold at bargain prices. It was in truth a "white elephant."
In the minutes of the Clearing House of November 3, 1938 I find a report on the income for a year to be approximately $7,200, with 15 out of 36 rooms and the ground floor vacant. It never carried itself by far. A committee was at one time appointed to endeavor to sell it. At the time it was reported by appraisers to be worth $100,000. The
351
BANKING
minutes of these days make frequent mention of this building problem. After some ten years a buyer was found who was bold enough to undertake the operation of the building. The sale price was $45,000 with $10,000 down and the balance on mortgage, about half the price the bank paid for the land alone. The new owner endeavored to make the building carry itself, but it did not. He was at one time badly in arrears as to interest and taxes, although he could well afford to have paid them out of other funds. His procrastination in respect to the fixed charges brought the matter to a head and foreclosure was at one time actually begun. With better management, however, and better times coming on, the rentals were steadily improving. In due course the mortgage was paid in full and the banks took their loss as a finality.
This brief sketch largely from memory faintly conveys the long drawn out anxiety this adventure in real estate cost the banks. Most, if not all, had charged off their participations long ago, and considered their loss as insurance against what might have been more serious consequences. Most certainly the avoidance of another bank closing was beneficial in the highest degree to the banking interests of Nassau County, and no doubt the investment was well made for that reason. The liquidation of the First National Bank was completed by the Bank of Rockville Centre Trust Company in 1939.
A NEW IDEA
The idea of a county clearing house was at that time somewhat new and the only guide in that respect was the New York Clearing House with its prestige and its powers and its traditions. It was . considered one of the most powerful bank organizations in this country. Some of the Nassau County bankers were fearful that in trying to imitate the New York Clearing House the Nassau County Clearing House would become an examining body with the privilege of looking intimately into the internal affairs of the banks, and by men who would in a sense be competitors. The chief problem of the Clearing House, at its inception, was therefore how to persuade the banks that none of the cherished secrets would be revealed, and such as came to the attention of the Clearing House managers would be held inviolate to the extremest degree, and that principle has been followed religiously ever since. It is readily apparent that with the privilege as well as the power of going into a bank and making an examination would go the revelation of many matters that are not for public consumption. It required no little of banking genius to persuade skeptical bankers that a Clearing House would not be a dictatorial body, laying down hard and fast rules for the internal conduct of the banks. Mr. Ploch has done a masterful piece of banking psychology in obtaining the full con- fidence of the bankers in respect to secrets so jealously guarded by banks everywhere.
The present setup of the Clearing House will be found elsewhere. The manner of organization has been a matter of development and evolution; but it can well be claimed that this has been a smooth working and highly successful bank organization from the beginning.
352
LONG ISLAND-NASSAU AND SUFFOLK
The organization meeting of the Clearing House was held in Judge Howell's office on Monday, January 11, 1932. It will be remembered that the Clearing House idea had been born only a few days before - that is, on January 6, 1932. Articles of Association were then agreed upon, to be submitted to the Nassau County Bankers Association on January 19, 1932. A special meeting of the Bankers Association was held January 28, 1932, at which time Articles of Association were adopted and the Clearing House began to function. William F. Ploch was naturally the first Chairman, and Charles Machleid was the first Secretary. Harry Hedger was the first Vice Chairman.
One of the most practical and easiest functions of the Clearing House was to put the figures of the banks together to see how large we were in totals. As a matter of fact, the total deposits of the banks were at the time $87,000,000. Today (1947) they are $403,719,356 - fifty commercial and one savings bank. Consequently, the monthly reports were asked of the banks as of the 21st of each month, the first being February 20, 1932. These were continued monthly until the Clearing House asked for reports quarterly beginning October 1, 1944.
THE BANK HOLIDAY
The Bank Holiday began March 4, 1933 about fourteen months after the organization of the Clearing House. On a bleak and icy Sunday night soon after the Holiday began, the banks of Nassau County were asked to come to Judge Howell's office in relays with their latest examination reports. Several groups of bankers had been se- lected to go over the reports and determine how much, if any, new capital would be required to make it fully solvent. Judge Howell and Mr. Ploch had been working in New York and Washington on behalf of the Nassau County banks. They had worked out an overall plan in respect to the reopening of the banks when the Holiday should come to an end. The banking authorities accepted their appraisal of the vari- ous institutions as made by the special committee aforementioned, and in most instances the additional capital was provided by the directors, and in time to qualify the banks to reopen.
CLOSED BANKS
As an aftermath of the Bank Holiday several banks in Nassau County closed. A chronological list of these banks is taken from "The Banks of the State of New York" just issued by the New York State Bankers Association.
SUSPENDED BANKS IN NASSAU COUNTY
Bank of North Hempstead, Port Washington .. December 1931 Long Beach Trust Company December 1931 First National Bank, Rockville Centre .. January 1932 (absorbed) Sunrise National Bank, Baldwin February 1933
Need help finding more records? Try our genealogical records directory which has more than 1 million sources to help you more easily locate the available records.