Billion-Dollar Bank

Ever since the first stockmarket crash there have been stories of a "trouble-spot'' in Manhattan banking. When remedies from within fail, a sure ointment for financial and industrial troubles is a merger. Long has it been hoped that this treatment would be used to assuage the Manhattan sorespot. Recently just such a merger was rumored. Remarkable feature was that it involved the unique plan of consolidating four banks (TIME, Nov. 10 ). They were: Manufacturers Trust, with resources of $463,000,000, greatly expanded during recent years; Public National Bank, with resources of $246,000,000, a bank which has grown steadily and conservatively; Bank of the United States, with resources of $254,000,000, which, like Manufacturers, has recently expanded; International Trust, with resources of $29,000,000, and closely affiliated with Manufacturers.

Merging four banks at once would be difficult at any time. Unusual obstacles arose which threatened to block this long-awaited deal. A peculiar situation was known to exist in Bank of the United States. In 1913 this bank was formed in Manhattan's lower East Side. By 1928 it had grown one thousand-fold without a merger. Then, after Goldman Sachs Trading Corp. acquired a large block of its stock, it began to whirl through a period of expansion. Since May 1929 it has lost one-fourth of its deposits; its shares have tumbled from $91 to $13. Recently it has been understood that officials in Washington have been closely watching its affairs, perhaps anxious that no harm should befall a Manhattan bank whose name sounds so significant. While Bank of the United States deposits were dropping 25%, Manufacturers Trust's deposits slumped 15%. In Manufacturers Trust, Goldman Sachs Trading was likewise a dominant stockholder. Obviously complicated were the problems of determining the value of all four of these banks in terms of the other three.

For these reasons many a banker feared last fortnight that the negotiations had been dropped. But over the weekend a group of prominent bankers met with a banker of great skill and fame, James Herbert Case, chairman of the Federal Reserve Bank of New York. When the new week started, it was announced that the merger would go through, that Banker Case would be chairman of the consolidated banks, that an able new board of directors would guide its affairs.

Well versed in the ways of the Federal Reserve and of commercial banking is Mr. Case, who became head of the Federal Reserve of New York when portly Gates W. McGarrah resigned the position last spring to become president of Bank for International Settlements (TIME, May 5). In 1888, at the age of 16, Banker Case became a clerk in City National Bank of Plainfield, N. J. Four years later he went to work for a Manhattan bank, became discount clerk. During this time he supplemented his public school education with a course at American Institute of Banking's night school. In 1902 he returned to Plainfield, organized Plainfield Trust Co. of which he was secretary and executive vice president for eight years. Later he again left Plainfield for Manhattan, was soon building up the credit department of Farmers Loan & Trust Co. In 1917 he was made Deputy Governor of Federal Reserve Bank of New York, figured importantly in War financing. His two smart sons are Everett Case, assistant to Owen D. Young; James Herbert Case Jr., with Stock Clearing Corp.

While Banker Case personifies conservatism and skill, the directorate over which he will preside contains such "good names" in banking as: Mortimer Norton Buckner, board chairman of New York Trust Co.; Walter Edwin Frew, chairman of Cora Exchange Bank Trust Co.; George Willets Davison, president of Central Hanover Bank & Trust Co.; Park A. Rowley, vice chairman of Bank of Manhattan Trust Co. President of the new bank will be Emanuel Chester Gersten, able young president of Public National Bank.

No name has been chosen for the new bank (although Manufacturers Trust may be retained). So soon as the merger is completed, the new bank will join the Clearing House, become subject to its rigid rules. Probably its largest stockholder will be Goldman Sachs Trading Corp.

Most prominent man in the old management of any of the four banks was Nathan S. Jonas, chairman of Manufacturers Trust. Last week it was announced he will occupy "an important position" in the new bank, but there was no indication of what this position might be. And observers recalled that a fortnight ago Manufacturers Trust celebrated its 25th anniversary with a memorial banquet at which self-made Banker Jonas received a watch as a testimonial.

Although stockholders of the four banks had still to be told the exact terms, bankers last week conceded there was no chance of the deal falling through. Many a banker shuddered at the thought of what might have happened, in a week noisy with news of bank failures in other cities, if this four-ply merger had not been arranged, if Banker Case & friends had not been willing to take charge. Well justified seemed the heading of an editorial on the deal in The American Banker: "A BILLION DOLLAR STEP FORWARD." But no banker had to puzzle over the meaning of this paragraph in the same editorial: "For the human hopes dashed down and the promising ventures erased, the observer can have only sympathy and a sincere wish for future successes in a more tempered future. That the drama carries elements of tragedy for some of the protagonists who, willy-nilly, were cast into their ambitious roles, is unfortunate though inevitable."

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