Fondly, Pennsylvania

Bankers Trust Company: too small to save?

Tuesday, 2/1/11

One of the main tasks Dana and I have been working on thus far for the Greenfield digital editing project- part of a larger effort funded by the Albert M. Greenfield Foundation- is to try to piece together the history of Bankers Trust Company, the banking institution on which our project is focused. This can at times be rather difficult due to gaps in the historical record. We have looked through several hundred documents from the Albert M. Greenfield Papers (collection 1959), as well as materials from a couple related collections located here at HSP, such as the Philadelphia Clearinghouse Association (collection 1908)- an association that among other things, helped member banks during banking panics- but pieces of the puzzle are still missing.

One part of the story that I am grappling with is why the effort to reorganize the bank, rather than liquidate it, ultimately failed. For many affiliated with the bank, its closure on December 22, 1930 did not spell certain doom. Rather, it was most likely viewed as only a temporary suspension enacted to allow the bank to recover from the run it had been experiencing over the last couple months. The plan was to reorganize Bankers Trust and have it reopen as soon as possible.

Almost immediately after the bank’s closure, efforts for its reorganization were underway, and the possibility of its reopening looked promising. The bank was able to quickly pay off many of its loans. Also, by the end of 1930, Bankers Trust had formed a Depositors’ Committee that drafted a plan for the bank’s reopening by the spring of 1931. Moreover, in March 1931, William D. Gordon replaced Peter Cameron as Secretary of Banking. Gordon seemed to have been on the same page as Greenfield with regards to the rehabilitation plans for Bankers Trust.


Depositors' Committee's plan, April 18, 1931, page 1.


Depositors' Committee's plan, April 18, 1931, page 2.

Greenfield and Bankers Trust President, Samuel H. Barker, were involved in reorganization planning as well. As the bank’s principal depositor, Greenfield had plenty of motivation to see Bankers Trust reopen. He himself sent Secretary Gordon an in-depth proposal for reorganization.


Greenfield's letter to Secretary of Banking William D. Gordon outlining his ideas for the bank's reorganization, July 2, 1931, page 1.


Greenfield's letter to Gordon, page 2.

Understandably, the reorganization plans and goals of the bank’s rehabilitation envisioned by its directors, stockholders, and depositors differed. A split amongst the bank’s depositors emerged. Some depositors felt that the Depositors’ Committee was too closely aligned with Bankers Trust stockholders and directors, which they argued was reflected in the reorganization plan. They wanted to preclude any persons from the “old regime,” most notably Greenfield, from having any involvement with the bank’s reorganization. In May 1931 these depositors, under the leadership of Frank S. Dreeben, formed the Minority Depositors’ Committee, or Depositors’ Protective Committee and drafted an alternate reorganization plan.


Minority Depositors' Committee's plan (May 16, 1931), page 1


Minority Depositors' Committee's plan, page 2


Minority Depositors' Committee's plan, page 3

By June 1931, the Depositors’ Committee had obtained the signatures of 60% of depositors who supported the reorganization plan it had drafted; however, the state required 80% of depositors to endorse the plan in order for it to go through. After months of going back and forth, on September 24, Secretary Gordon announced his rejection of a reorganization plan for Bankers Trust and his decision to instead proceed with the bank’s liquidation. Gordon denied depositors’ petition to bar stockholders, officers, and directors who may have been depositors from receiving payment from liquidation proceeds. He also denied depositors representation on the liquidation board. The first payment to depositors was issued in early November, almost one year since the bank’s closing.


Greenfield tried to meet with Gordon days before the latter announced his decision to liquidate Bankers Trust

On average, liquidations during the Great Depression lasted about six years. Bankers Trust Company’s liquidation process lasted sixteen. The sixth and final payment was not made to depositors until May 1946.

Comments

An interesting account of a

An interesting account of a little known aspect of American financial history. More accounts of banks' demise need to be recorded and studied to prevent the financial turmoil that the Western World has just been through.

Here in Charleston I have been trying to find more information on the demise of the People's Bank of Charleston that closed on December 31, 1931 and never re-opened. At the time it was by far the largest bank in Coastal SC by number of branches and total deposits. The president of the bank, Goodwyn Rhett, was a scion of the city's first families, a former mayor of the city, and well connected in legal, business, and political circles. It dealt a heavy blow to the community when it closed. Teetering right on the edge behind it was the 2nd largest bank in the city at the time, the South Carolina National Bank. It had been the first state wide bank in the country 10 years earlier and survived only because of an injection of capital and Roosevelt's banking holiday in 1933.

Unfortunately all of the key players have long since departed and their successors have only scant memories of the factors that brought these banks down. There are few written accounts that offer little more than what I have revealed above. What really needs to be known is what brought them down and the factors behind it, the loans, persons involved, connections to the banks, etc.

Hopefully your account can serve as a guide to others.

PC COker

Thank you for your comments

Thank you for your comments and for reading the blog! The research you're doing on failing banks in South Carolina seems very interesting as well, though I'm sorry that you're having such a difficult time finding written documentation. We do hope that the work we're doing for the Greenfield digital editing project will, among other things, provide information that is helpful to researchers interested in the topic of bank failures during the Great Depression.

Re: Search for info on

Re: Search for info on People's Bank of Charleston SC demise -- I too was interested in learning more about this, mainly because I am fascinated with the history of the "People's Building" (as it is now known). You have probably run across this, but the only thing I have seen is a well-written article published in the Moultrie News in 2008: "People's Bank Deemed Not Too Big To Fail in 1932" written by Tom Horton, a history teacher at Porter-Gaud. Here is the link (sorry, you'll have to cut & paste, I can't figure out how to make it work in a reply box):

http://www.moultrienews.com/historian/1216history

Your best bet for further details would be to physically go to the Charleston Post & Courier and ask to view their archives for further info. Wouldn't it be great if they would digitize and offer online! I personally would be willing to pay a fee. You can't even go to the library and look up on microfilm, although I'm told they have a somewhat spotty card-catalog index-only going back to 1930 that you can research before going to the paper to look up articles. It doesn't include Evening Post index though. Good luck and let us know if you find out more!

I am a direct descendant of

I am a direct descendant of Robert Goodwyn Rhett, he is my great great grandfather. My Grandfather's mother Helen Whaley Rhett Simons was his daughter, I wrote a term paper in high school about the demise of the Peoples' bank. My father at the time was Vice President of First Federal of Charleston. We are researching more about him as I speak and I have found one of his first edition books online. I will go through my old notes as my mother gave me a box of my old high school papers a few years back and some of the research survived. My brother also holds a file cabinet of papers pertaining to family history. Here are a few tidbits that mention Rhett on a national level. http://www.time.com/time/magazine/article/0,9171,883203,00.html

Hi Reid Simons Fulton, Is

Hi Reid Simons Fulton,

Is there any way that I could obtain a copy of your term paper on the People's Bank? If so please contact me at: cokerre@yahoo.com.

Also what is your connection to Dick Simons the grandson of the architect Albert Simons?

PC Coker

Charleston

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