Business & Finance: Footing the Bill

If 400,000 depositors of a given bank have each a family of five, there will be 2,000,000 grief-stricken people when that bank goes on the rocks. So calculating, New York newspapers for two months have labored with huge headlines and millions of words to supply tidbits of consolation to those bereaved when the Bank of United States with 59 branches in their city foundered last December (TIME, Dec. 22). In spite of all this effort only last week was important progress made in picking up the fragments. The fragments proved to be bills which many people must foot.

Bill No, 1 to be footed chiefly by depositors consists of the difference between assets and liabilities. Assets so far realized amount to $60,000,000. Others as yet unrealized may eventually bring the total up to $140,000,000 or $150,000,000. The liabilities, less indefinite, amount to $165,000,000. Depositors hope to get back 80¢on the dollar but the total loss would be enough to put back on their feet most of the small banks which have failed elsewhere in the country.

Bill No, 2 to be footed by stockholders consists of investments of some $48,000,000 in the bank's stock. This appears to be wiped out. If the bank had still $10,000,000 sunk in bad investments and $45,000,000 in uncollectible loans ($25,000,000 of the amount to its own subsidiaries) the stockholders might get something as well as the depositors. Since, however, many depositors were induced by the bank to invest in its stock, there is a large group who will be called upon to foot both bills.

Bill No, 3 is one at which most depositors inwardly rejoice. It consists of the prosecution of the bank's officers and directors for their part in the failure. Not until failure impends are directors apt to realize their liability for proper conduct of a bank. Last week eight directors and officers of the Bank of U. S. were indicted together, were arraigned and marched off to supply bail and have their fingerprints taken. The indictments accuse the eight of having fenagled with $8,000,000, of having lent that sum to three of their subsidiaries who passed it along enabling two other subsidiaries to "pay back" to the bank loans which the bank examiner had ordered to be collected. Charges of improper loans made to bank officials or to companies in which they are interested are expected to lead to other indictments. Already civil suit for $50,000,000 has been instituted against officials of one of the bank's subsidiaries (Bankus Corp.) for wrongful acts and negligent omissions.

Noteworthy among the men indicted are Bernard K. Marcus, president of the bank, Saul Singer, executive vice president, and Isidor Jacob Kresel, bank director and legal counselor. Marcus, 40, is son of Joseph S. Marcus who founded the bank on the lower East side in 1913. The bank grew moderately until the older Marcus' death in 1927, when the younger took command and began his program of expansion. In three years he boosted the bank to its present eminence, to the point where it became the largest State bank in New York. This able young man is a Bachelor of Arts (Columbia), a member of four country clubs. In 1928, after he had raised $5,000,000 for Beth Israel Hospital, Mayor Walker, Felix M. Warburg and 2,000 local notables attended a banquet in his honor.