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to the opinions they entertained and expressed at that time. I am glad to refer to the matter and regret that space does not permit more detailed consideration here (supplemental report, p. 11).

It may be added that Mr. Baetjer has not demanded or received compensation for his arduous and time-consuming labors. And, as indicated in the report, Mr. Howard Bruce, who has no part in creating the problem, was called in at a critical time, has devoted several years of untiring effort to the attempted rescue of the bank from an inevitable failure, and has personally and through his companies sustained heavy loses. These circumstances should not be obscured or overlooked.

I have not the slightest desire to impugn their motives, or to minimize the 'difficulties or magnify the mistakes of their valuation. My only purpose is to record what seem to me significant details of an important event in the history of the Baltimore Trust Co.


The exact relation of the bank examiners and the officers and directors of the bank, respectively, to the responsibility of maintaining the bank in a sound condition seems to be a subject on which there is considerable disagreement (p. 175). The State banking department seems not to have objected to any of the major policies of the Baltimore Trust Co., such as the erection of the building, the relations of the bank with the Baltimore Co. and the Baltimore Gillet Co., the investments in coal properties in which more than $3 million was lost, the investment of three-quarters of a million dollars in the Baltimore Mail Steamship Co. or $1 million in the common stock of the International Mercantile Marine Co. or the long-time capital loan of approximately $1 million to the Glenn L. Martin Co. (p. 176).

The directors made no independent investigation into the affairs of the bank, relying on the public authorities (p. 175). These authorities, on the other hand, received the published reports of the bank, examined them for statistical purposes, but failed to compare them with the findings of their own examiners. In many instances the examiners' reports were not laid before the directors and the directors seem not to have noticed the omission (p. 177). The examiners reported to their superiors that the reports had not been laid before the board, but these officials took no action (supplemental report, p. 27). Important criticisms of the examiner, even when concurred in by his superior, the bank commissioner, in many instances failed to result in action because the commissioner accepted general assurances of the bank's officers of the soundness of the institution (supplemental report, p. 25).

On at least one occasion, an examiner, noting the large loans to the Baltimore company, requested an opportunity to examine its books, and this was refused (p. 182). The bank commissioner did not press the matter.


After the bank had received the examiner's report, dated March 28, 1932, recommending chargeoffs of $8,574,224.48, which would have wiped out the reserve account, the bank officials published their statement of June 30, 1932, without this chargeoff and showed a condition substantially the same as the preceding December (pp. 187-188; supplementary rept. p. 20). The examiner's recommendation was moderate even in the light of existing conditions. It is fair to say that a conference had been held on June 15, 1932, by the officers and certain members of the executive committee of the bank with the State bank commissioner, the Federal Reserve agents, and members of their staffs. At this conference the bank officials demurred to the chargeoff and the supervisory officials acquiesced. It appears, however, that their acquiescence was influenced in part at lease by representations made by one of the officials of the bank that there was no substantial loss in the Baltimore Co. and the Baltimore-Gillet Co. repurchase agreements (supplementary rept. p. 25).

Had the bank commissioner known of the extent of the loss in these repurchase agreements it is not unlikely that he would have required the bank to raise additional capital in order to continue operations.


If proper reserves had at all times been maintained, at least some of the dividends paid could not properly have been declared (p. 191). In Mr. Norton's regime almost no thought was given to reserves. Mr. Symington prides himself on having put into the reserve all earnings in excess of dividends. It seems not to have occurred to him or to the board that duty required them first to establish adequate reserves and thereafter, if there should be an excess, to declare a dividendf. If there had been periodical detailed and conservative valuation of assets with sufficient reserves for losses, there would have been no profits and no dividends during the large portions of the period under consideration (p. 198).

OFFICERS' AND DIRECTORS' HOLDINGS OF THE BALTIMORE TRUST CO. STOCK More directors actually increased their holdings of Baltimore Trust stock than decreased them. The transactions of each are treated in detail in the report (pp. 199-206).


Viewed from all angles, it seems fair to conclude that, on the whole, directors did not avail themselves of their presumed inside knowledge of the bank's affairs to secure for themselves and their companies preferences over other depositors by heavy withdrawals. The individual cases that require explanation are fully discussed in the report (pp. 207–213).


Mr. Norton, practically single handed, promoted the Atlantic Trust Co. in 1921. Through his energies, 2 consolidations with older and better established banks had been effected by 1925, and the new institution soon had over $50 million in deposits. In the merger of the Atlantic Exchange Lank & Trust Co. with the Baltimore Trust Co. the latter institution gave its name to the consolidated company, but its spirit was supplied by the former (pp. 22-25).

Mr. Norton lost the confidence of his board because of his lack of conservatism (his most serious blunder was in the coal investments which he brought into the bank), and he was supplanted by Mr. Symington in January 1927 (p. 25).

Mr. Norton had an interest in several enterprises for which he negotiated loans from the Baltimore Trust Co., and he now owes it over $100,000 (pp. 214220). He has written me the following:

"I might mention that if at any time up to the fall of 1930 the loan department had made a demand on me to take up these loans, or my own personal loan, I was in a position to do so.

"It is my opinion that the collateral loans of the trust company should have been looked after in a more hardboiled manner than they were, and that many of them should have been called and the collateral sold before they went under water (p. 220).”

For the president of a bank to defend nonpayment of loans which he made himself, in some instances apparently without observing the usual formalities, on the ground that the officers who served under him, and his successors, did not press him vigorously, is so extraordinary as to require no comment (p. 221).


When he became president of the Baltimore Trust Co. in January 1927, Donald Symington was a man of wealth and substantial income. Although without banking experience, his reputation as a businessman was very high. The directors of the Baltimore Trust Co. believed Mr. Symington would bring to the presidency the conservatism which Mr. Norton lacked; yet it was during his administration that blunder after blunder was perpetrated which, added to those of the former administration, led to the decline and ultimate collapse of the Baltimore Trust Co.

Mr. Symington was responsible for the great increase in the coal investments. The disastrous speculations in Baltimore Trust stock through syndicates and the Baltimore Co. were conducted by him. The building was constructed during his

administration and the repurchase agreements were arranged under his direc


He made a number of other large investments unsuitable for the bank without prior authority of the board, but with a single negligbile exception, all these commitments were ratified by the directors without question.

Mr. Symington had many transactions with the bank through his holding company, the Patapsco Corp., and its subsidiaries. Loans to these companies at one time exceeded $2 million. The Patapsco Corp. now owes the bank $674,668.65most of which is lost.

Business reverses which followed the undertaking of these obligations have wiped out his large fortune. The United States Government has a lien for an income-tax claim against all his properties.


One of the greatest disasters suffered by the Baltimore Trust Co. is the loss of nearly $32 million arising from its various transactions in the financing and operation of coal companies. All these transactions have been carefully traced. The story is confusing because of the mass of detail, changes in names and corporate form of these companies, consolidations, refinancing and similar operations. The loans and investments were bad in their inception and should never have been made. The losses were for a long time concealed by faulty appraisals and by fictitious entries, apparently reflecting a mere switch in securities. These accounts had their inception in Mr. Norton's presidency and were greatly increased in Mr. Symington's regime (pp. 249–292).


It is not possible within the compass of this summary to do more that allude to a few of the loans and investments upon which losses have been sustained. A loan of $525,000 with a resultant loss of $404,000 was made to the J. Ray Arnold Cypress Co., a lumber concern, located in Groveland, Fla., more than 1,000 miles from Baltimore. When the loan was made most of the debtor's assets were subject to two issues of bonds secured by mortgage (pp. 306–315).

Loans to L. S. C. Corp., investment bankers, in excessive sums, coming from. the Century Trust Co., resulted in losses of $121,000. The trust company promoted certain bonds and loaned on this security more than it was paying for similar bonds at about the same time. This case illustrates the unwisdom of permitting a financial institution to function both as investment banker and bank of deposit (pp. 400–404).

Loans to the Rucker Bonded Warehouse Co., resulted in a loss of $130,973.25, aggravated through speculation by the borrower in cotton "futures" with the sanction of the Baltimore Trust Co. (pp. 411-415).

The uncollateraled loan to J. A. W. Iglehart to purchase a seat on the New York Stock Exchange resulted in a loss to the bank of $368,000. This is one of the most bizarre of all the loans made by the Baltimore Trust Co. and is, as far as I know, without precedent in banking practice anywhere (pp. 428-432).

The Baltimore Trust Co. lost $333,000 on a loan to Hambleton & Co. arising out of a joint venture in underwriting Norton Coal Co. bonds. The Baltimore Trust Co. lent the Hambleton & Co. the full amount of its participation, on a 3year commitment, without additional collateral. No part of this sum was ever paid (pp. 318-324).

The strictly banking business transacted by the Baltimore Trust Co. for the National Bond and Mortgage Co. was purely incidental to its brokerage business: with that company. Banking judgment was obscured by the mirage of promotion profit with a resulting loss of $155,383.23 (pp. 332–339).

The present balance of the National Sugar Manufacturing Co., in receivership,. is $146,445.29 (pp. 339–352).

Loss on loans to the Poole Engineering & Machine Company of Maryland amounts to $97,771.13 (pp. 367-374).

Roy C. Toombs, of St. Louis, procured a loan of over $200,000 on forged collateral. This resulted in a total loss, (pp. 374-379).

One hundred thousand dollars was lost in loans to the McShane Bell Foundry Co. (pp. 324–332).

Loans to the Victory Sparkler & Speciality Co. involved a loss of $122,609.00 (pp. 379-400).

Transactions with the Lorraine Petroleum Co. resulted in a frozen asset costing over $450,000; on which a substantial loss is anticipated. In this instance the

bulk of the loan was made on the security of Interocean Oil Co. bonds at par, substantially in excess of the price at which the Century Trust Co. bought similar bonds at about the same time (pp. 404–411).

The law suit of the bondholders of the First National Co. was settled at a loss to the Baltimore Trust Co. in excess of $600,000. This loss was artifically concealed on the books of the Baltimore Trust Co. from August 1931 until a few days before the bank closed (Sup. Rep. p. 30).

The Island Export Co. transactions cost the Baltimore Trust Co. nearly $300,000 (pp. 432-436).


A number of important inquiries begun, but not completed are being reserved for treatment in the final report. Among these are the transaction between the bank and one of its directors, Mr. C. Wilbur Miller and his companies, the Davidson Chemical Co. and the Silica Gel Corp.; the First National Co.; the operations of the bank in the period from September 1931 until February 1933; the plan of reorganization and the formation of the Baltimore National Bank; the administration of the liquidation by the advisory committee and the Baltimore Trust Corp., with particular attention to the terms of the settlements made and setoffs allowed.

The final report will consider the law applicable to the facts disclosed by the completed investigation, together with such recommendations as may seem appropriate.

Mr. SOBELOFF (reading):

In view of Mr. Shankroff's acknowledged familiarity with my report, his misstatement cannot be inadvertent; yet his argument is largely based on this incorrect premise. Such deliberate distortion and misrepresentation shows his accusations to be completely irresponsible.

The Shankroff Attack on James Bruce re Hendley Transaction.

I might say for those who have not read Mr. Shankroff's letter, that he goes into a long and detailed discussion and he attacks Mr. Bruce, whose letter was read into the record, and involves him with a transaction with which he had no connection, and this is my answer:

Mr. Shankroff says that James Bruce, a director, whose letter the committee chairman read into the record, "obviously lies." He refers to a transaction for which suit was filed by me and cocounsel against Howard Bruce. The odd twist that Mr. Shankroff gives the Hendley transaction may be based on a deliberate confusion of James Bruce with Howard Bruce in order to weave into his story the sensational allegation of Hendley' suicide, which, even if true, would be of doubtful relevance. It was Howard, not James, who returned to Hendley certain collateral. This happened long after James Bruce had left the bank, and I am criticized for not suing James Bruce. Howard Bruce, who surrendered the collateral, was sued for this. However, in fairness I should add that Judge Stanton, after a full trial, found Mr. Howard Bruce not liable and absolved him. Certainly I was not favoring either James or Howard Bruce, for both were sued. (James Bruce was named a defendant for other transactions and contributed substantially to the directors' settlement fund.)

Attacks on others

In his persistence to make these charges stick, despite the repudiation at the hearing

that is, Shankroff—

he now finds it necessary to denounce Mr. Hospelhorn as part of a "conspiracy to cheat and defraud the depositors and creditors—"

that is the man he asked summoned to prove his charges

to impugn the integrity of Senator Radcliffe

who appeared here—

to accuse the witness Mr. Stockbridge of "doubletalk"; and to doubt the candor of Circuit Judge Soper by referring to him as sitting "ominiously silent" in the face of these charges.



Groundless, too, is the charge that I represented inconsistent interests in the settlement of the stockholders' statutory double liability. The court records show that in the latter part of 1935, while I was engaged day and night in the preparation of my report and was not doing any other work for the receiver, or indeed for any other client, a committee of lawyers negotiated with the judge to settle the $10 per share liability for $5. I did not participate in these negotiations.

I might add that there was a good deal of publicity about this thing in the newspapers and the lawyers who represented the stockholders in these negotiations were Chester F. Morrow, Charles C. Page, and W. Conwell Smith, later chief judge of the supreme bench of Baltimore, now deceased.

Mr. Shankroff accuses me of the responsibility for inadequate assessments. I had nothing to do with the amount of the assessment nor do I agree that it was in fact inadequate. No one at the time so thought. Any aggrieved party, whether the depositor or receiver or his counsel, or depositors' protective committee, could have objected and appealed. Mr. Shankroff's is the first challenge.

Mr. Shankroff chooses to ignore the fact that what I did in my limited sphere and what the receiver and all others connected with the Baltimore Trust case did, was at every turn under the watchful eye of Judge O'Dunne, a man of the highest integrity and alertness. Mr. Shankroff is perhaps too new in Baltimore to know the firm position of Judge O'Dunne in the regard of the people of that city. It is sheer presumption for him to suggest after two decades that he has found irregularities that had been overlooked by a community and its press that were watching these proceedings with keenest interest.

Senator O'MAHONEY. Are there any questions?

(No response.)

Senator O'MAHONEY. Mr. Sobeloff, do you wish to make any further statement?

Mr. SOBELOFF. Yes. There is already in the record, I believe, a letter I wrote you, Senator, on February 17, 1956, which recites the circumstances under which I was selected to make this report and the general nature of my duties, and it shows that I was not general counsel for the receiver in liquidation of the assets.

Senator O'MAHONEY. That is clear not only by your letter but by the testimony.

Mr. SOBELOFF. Now, there is one letter that I would like to have in the record. It was written by Judge Parker to Senator Kilgore on July 25, 1955. It speaks of me personally. I will not read that. It can be inserted into this record.

Senator O'MAHONEY. Don't be too bashful, under these circumstances.

Mr. SOBELOFF. Well, all right:

I note that the President has nominated Solicitor General Sobeloff to fill the vacancy caused by the retirement of Judge Soper of our circuit; and I feel that as chief judge of the circuit, I should say that I regard this as an excellent appointment and am anxious that the nomination be confirmed as soon as possible so that Judge Sobeloff may be available for work within the circuit. The fourth circuit has only three circuit judges and has a heavier caseload per judge than any other circuit in the United States. With Judge Soper in retirement, we have only two circuit judges left, although Judge Soper assures me that we may count on him for such service as he feels able to render. Because of an illness among the district judges we shall not be able to call upon them for much assistance in the court of appeals.

I think I should say also that I have known Judge Sobeloff well for more than a quarter of a century and have the highest regard for his character and ability. He was an outstanding district attorney during the Hoover adminis

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