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-c-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.

Saul Singer at 15 was proprietor of a hardware store in Sebastopol. At 17 he was earning $4 a week in a Manhattan sweatshop. He became in due course president of the $15,000,000 Garment Centre Capital buildings, president of the Cloak, Suit and Skirt Manufacturers' Protective Association. At 47 he has a rambling colonial house of 25 rooms and a large forested estate on Long Island where he employs two chauffeurs and three gardeners, owns saddle horses, a station wagon and two limousines.

Isidor Jacob Kresel is a diminutive man and an able lawyer. Austrian by birth. American by 40 years of residence, his record in the Bar includes investigation of the famous insurance scandals of a quarter of a century ago. He was a prosecuting attorney in the impeachment of Governor William Sulzer of New York. For the U. S. Government he investigated the meat packers in Chicago and was just delving into the building trades when Attorney General Harry Micajah Daugherty discharged him from the Government employ. Three years ago he unearthed a series of "ambulance chasing" scandals in Manhattan. Recently he has been at work investigating New York City Magistrates with the result that three have resigned (TIME, Aug. 25 et seq.). Altogether little Mr. Kresel has a great reputation for ferreting out evil. His present position, at the other end of an indictment, is a novelty.

The Legal Duel Great was the array of legal talent which the Bank of U. S. affair brought last week into the New York courts. For Messrs. Marcus and Singer appeared Charles Henry Tuttle, last year's Republican candidate for Governor of New York. C. Stanley Mitchell, chairman of the bank's directorate, was represented by famed Martin Wiley Littleton. Mr. Kresel himself appeared in court with his counsel, John William Davis, erstwhile Democratic candidate for President. They were but a few of the bank officials' lawyers. On the other side appeared District Attorney Thomas C. T. Grain and above all Max D. Steuer in the double capacity of Special Deputy Assistant Attorney General and Special Assistant District Attorney appointed for the case. For his services in this case the soft-tongued Mr. Steuer, who has pocketed enormous fees, who has a reputation in the law of having outsmarted more men than Odysseus, is to be paid $1. It was he who presented the case to the grand jury and secured the indictments. So unwelcome was his participation that Messrs. Marcus and Singer made a futile effort to have him removed as illegally appointed.

Towering in interest above the other legal experts of the case, was the fact that here were Messrs. Kresel and Steuer standing face to face in battle--Mr. Kresel somewhat wobbly to begin with, because he had risen from his sickbed against doctor's orders so as to appear in court. Here, reasoned prize fight fans, was the setup of master battle, a battle of two cruisers each hungering for blood.

Partly this is because suave Mr. Steuer is a strong Tammany man and Mr. Kresel is Tammany's vigorous opponent. In the midst of his attack upon Tammany's Magistrates, this indictment was brought against him. Promptly Mr. Kresel resigned his post as investigator of the courts--score one for Mr. Steuer and a breathing spell for Tammany which had Deen severely discomfited through the attack upon its Magistrates. Enemies of Tammany saw partially in the fact that the City Government had acted so emphatically against the Bank of United States in comparison to its attitude in the failure of City Trust Co. two years ago (for which a Tammany Magistrate, Judge Francis X. Mancuso, has not yet stood trial).

But it was not mere political enmity that made the air vibrant between Mr. Steuer and Mr. Kresel. Sixteen years ago, in 1915, the late Abraham Lincoln Erlanger (theatre magnate) accused Mr. Steuer of blackmailing him in the trial for breach of contract brought by an actress. After the accusation Mr. Kresel brought disbarment proceedings against Mr. Steuer. Mr. Steuer was not disbarred but he may not have forgotten the incident. Today Mr. Kresel is counsel for the Erlanger estate, defending it from the claims of Charlotte Fixel (who asserts she was Erlangers common law wife) and Mr. Steuer is Mrs. Pixel's lawyer--another reason why the Erlanger incident has not been entirely forgotten. One more point of contact between the two gentlemen is that when Mr. Kresel became counsel to Bernard K. Marcus he succeeded Mr. Steuer in the post. If Mr. Kresel ever takes the witness stand and Mr. Steuer turns to him and purrs: "Now, Mr. Kresel, will you tell us. ..." no pins will be heard dropping on the courtroom floor.

Salvage.Last week a proposal was made to the head of the New York banking department for a reorganization of the bank under another name. The plan is understood to propose giving depositors 70 in cash and 30% in stock of the new bank so that payment would in effect be made 100% on all deposits.

The plan was offered by Samuel P. Rosoff, wealthy subway contractor. It was drawn up by the legal firm of Satterlee & Canfield. Herbert Livingston Satterlee is a brother-in-law of J. P. Morgan. The member of the firm who drew the plan was David M. Milton, son-in-law of John Davison Rockefeller Jr. Neither the young Jewish banker who brought the Bank of U. S. to glory and destruction, nor his methods were ever given much countenance by the higher financial community. If the proposed reorganization is carried out, the bank will pass apparently into another circle of financial society.

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