The Generous Lender

Banker William Rose of Ellenville, N.Y., third-generation president of Ellenville's Home National Bank (capital: $807,000), seemed the very model of a progressive small-town banker. A frugal, prosperous bachelor of 50 who daily carried his lunch --a cold fried-egg sandwich and a Thermos of iced tea--to the bank in a wicker bas ket, he was a tireless dabbler in civil affairs. He led the movement for the summertime Empire State Music Festival that attracted thousands of culture seekers and dollars to Ellenville, was a district president in 1953 of the State Bankers Association, head usher of the Methodist Church. In the quiet little summer-resort village (pop. 5,000) two hours from Manhattan, literally everyone was in his debt; he did two-thirds of the town's banking business, furnished 70% of its credit. "I've got to go up and see Uncle Bill and get a loan" was a community phrase. And rarely did Uncle Bill refuse.

Here and there some discrepancies crept into the account. A few years ago the Methodist stewards had to remove Rose as church treasurer for the unbankerlike reason that his accounts were too careless ly handled. He was careless in other ways, too. Many was the time he would put through a businessman's check even when the account was overdrawn, then phone and say: "Pay me when you get it." Faced with such freehanded competition, one Ellenville finance company folded up and left town.

Wobbly Borrowers. But all seemed well in Ellenville until last month. Then eight national bank examiners started to go over the bank's books, wondering why the checks drawn on other banks had been taking three to four weeks to clear the Home National, instead of the usual two to three days. Rose hastily called a friend on the bank board and confessed: he had been manipulating the bank funds, holding up payments on incoming checks to tide over a couple of wobbly depositors. Rose resigned, saying he had done it all for Ellenville. One of the doubtful ac counts was a nearby hotel named Zeiger's, the other, the Anjopa Paper Co., in neighboring Napanoch, headed by Joseph Di Candia. Rose had poured thousands of dollars into the old broken-down paper mill, handled all its finances personally, rebuilt it into an apparently profitable concern. Once when Di Candia was picked up in Ellenville on a charge of passing bad checks in York, Pa., Rose even helped make the checks good in the settlement that got Di Candia out of jail. Rose made no visible profit from his unusual generosity, while Di Candia, who arrived in Ellenville virtually penniless in 1949, owned two Cadillacs, a $40,000 home, a powerboat. Di Candia said that Rose did not even charge interest on the money he lent him; he thought it was Rose's own.

Staunch Friends. All told, the examiners found a shortage of $564,000 in Uncle Bill's accounts. Was that all? a director asked Rose. Dramatically, the banker raised his right hand, swore that it was. That night Rose was charged with the federal offense of altering bank records (maximum sentence: $5,000 fine and five years in jail), released on bail.

The next day, instead of the anticipated run on the bank, the town rallied around the bank and Uncle Bill. Depositors brought in more money than on almost any Saturday since the resort season ended; the busy, year-round Nevele Hotel & Country Club alone deposited $102,-ooo. A wooden booth went up in the town square with the placard: "We're behind you, Bill," and 3.000 residents lined up to sign a petition: "Ellenville is a finer place to live because of his unselfish leadership." Business leaders sent Rose a letter reaffirming the "unique regard we hold for you."

The cold awakening came two days later when an examiner turned up more shortages--a total of $1,200,000. Set against bank capital of $807,000, the shortage brought only one answer from the Federal Deposit Insurance Corp.: close the bank, freeze all accounts, pay off all deposits up to the $10,000 maximum. Last week Ellenville counted the cost of its generous banker in empty stores, canceled orders and overdue bills. Business was down about 50%, and Christmas prospects looked grim, as FDIC prepared to liquidate the bank.

Happy Citizens. At week's end, as FDIC prepared to start paying off on insured deposits, a businessmen's committee raced to Washington with a plea: Would the Government permit them to raise fresh capital locally so the bank could reopen? Finally, Washington agreed to charter a new bank to replace Rose's old bank, if the townsfolk would raise $1,050,000. The new Ellenville National Bank would inherit Home National's good accounts, while FDIC would assume the dubious ones, continue liquidation of the old bank. Back home, the businessmen scoured the town, selling 20,000 shares of new bank stock at $52.50 apiece. This week they announced that the necessary money had been pledged.

Happy smiles decorated every face in Ellenville except that of generous Banker Rose. Reason: as soon as his bank was closed, his $25,000 check for bail, drawn on his personal account, had bounced, and he was jailed.

This file is automatically generated by a robot program, so reader's discretion is required.