Executor

Trustee

Manhattan

Consolidation of Bank of
Company and Merchants National of
New York

The formalities which attended the actual consolidation on March 29th of the Bank of Manhattan Company of New York established in 1799, and the Merchants National Bank, established in 1803, brought to a close one of the most interesting chapters in the history of two of Wall street's oldest banks. It is a long chapter which goes back to the early days in the life of this republic and is intimately bound up in the feud between Alexander Hamilton and Aaron Burr which resulted in the duel in which Hamilton was mortally wounded and Burr became an exile from his country. Many years have rolled by since Aaron Burr founded the Bank of Manhattan Company and Alexander Hamilton endicted the articles of incorporation under which the Merchants Bank was organized; the political enmities which tinged the earlier operations of these two famous banks have long since been obliterated. Nevertheless, the recent merger of these banks not only refreshed the memories of the earlier period in this nation's history, but served to emphasize how they have existed and grown side by side through periods of

national crisis, through years of depression and of affluence.

The consolidation, incidentally, brings about one of the biggest banking units in New York City. The first report of the Bank of Manhattan Company, the surviving corporate title of the merged banks, showed aggregate resources of $253,459,900, with capital of $5,000,000; surplus and undivided profits of $16,146,000. Stephen Baker, who has been president of the Bank of Manhattan Company since 1893, continued to conduct that office under the new regime. Raymond E. Jones is one of the most successful of the younger generation of bank presidents and who had the distinction of being the youngest bank president in New York City when he was elected president of the Merchants National Bank, has been elected first vice-president of the consolidated institution. The other vice-presidents and members of the official family are: Vice-presidents, James McNeil, B. D. Forster, Harry T. Hall, Edwin S. Laffey, P. A. Rowley, F. L. Hilton, D. H. Pierson, V. W. Smith; cashier, O. E. Paynter; assistant cashiers, W. F. Moore, John S. Baker, I. S. Gregory, H. M. Bucklin, W. A. Rush, Geo. S. Downing, E. S. MacDonald, O. G. Alexander.

Apart from the great expansion in the size of the English banks through amalgamations the great feature of late years has been their attention to foreign business. In doing this they have found that it was impossible to continue their old plan of working and steadily step by step a great revolution has taken place in their system of working. Previous to 1907 the English banks were purely home concerns, dealing with the home trade and largely influenced by local conditions. It then began to dawn upon some of their leading spirits that the foreign banks, who had by then been established a number of years in London, were attracting to themselves a class of business that ought to be done by the home banks. They found these foreign banks working their way by agencies and alliances through the industrial districts of England and doing an enormous business based largely on the foreign exchanges as a foundation.

The realization of this position brought to British bankers the necessity of dealing in foreign exchange, as otherwise they could not do the class of business that was being developed by their foreign competitors who were established in London. Accordingly in 1907 the late Sir Edward Holden, the then chairman of the London City and Midland Bank, inaugurated a foreign exchange department and this section of his bank which started with four officials has now developed into many sub-departments, in which the employees number 400 or more. So large a field is covered by its operations that when the London City and Midland Bank acquired the old offices of the London branch of the Dresdner Bank it adapted the whole of those premises to the requirements of its foreign department or Overseas

branch, as the number of its officials had grown so largely that there was not accommodation for them in the main head office. Establishing Foreign Banking Connections

The success of the department was soon recognized by the other leading London banks, and, more or less quickly, they formed foreign exchange departments of their own until the existence of a foreign department is looked upon as a necessary adjunct of a live bank. By the time the war broke out these departments had all come into importance in the leading British banks, but the events of that time showed that the British banks must go further if they wished to be sure of their control of the international business of the country.

Investigations necessitated by the events of the war brought into prominence the fact that a foreign exchange department in handing over documents and bills of its clients to foreign banks abroad often gave away valuable information. It gave the name of the customer and the class of business transacted and it was found that such information had been largely used by German interests to compete unfairly in the markets of the world against British manufacturers, the information, in the first place, having been supplied by a British bank working for a particular British manufacturer. So many of the Continental banks were under the control of German interests that to indiscriminately approach them was falling into the danger of giving information away to those who would make hostile use of it.

The results of these discoveries was that the British banks found it necessary to carry their foreign policy further by allying themselves in some cases with foreign banks

working abroad, and in other cases by opening branches of their own bank, or auxiliary banks, abroad. Where alliances were made with existing foreign banks due investigations were made, and such an arrangement was put up that these banks were bound specially to the British bank so that the latter could hand over to them business with the assurance that it would be used in the best interests of Great Britain. This process has been steadily. pursued during the war period and the result is that many of the leading British banks are now well equipped in this matter and can carry on business over a large part of the world with their particular friends in the banking sphere.

Functions of Intelligence Departments

As a result of these connections and alliances the British banks found that there was placed at their disposal a great deal of information in regard to matters in foreign countries, and the necessity of gathering and collating this information at once became apparent. At the same time the great growth in the British banks has rendered them such huge institutions with hundreds of millions of deposits, and thousands of offices, that a department was required which should gather information regarding these offices and also to supply information to them. From these two basic causes there has been gradually established an intelligence. department in each of the leading banks. These departments have not been long in existence and cannot by any means be considered to have developed to anything like their expected importance. The object of their formation may, however, be summarized as for the six following purposes:

(1) To gather and collate information of service to clients of the bank.

(2) To assist clients of the bank with information and other services.

(3) To gather and collate general information and statistics which in the ordinary course would not come to the notice of the managing staff.

(4) To produce monthly the review issued by the bank.

(5) To supply managing staff with a synopsis of general news, and to provide special information when asked for.

(6) to act as source of information for the general body of the staff when information is needed.

As we have said these intelligence departments have not reached their highest stage

of development, but already they have got into such a position that they are of considerable service to the banks. The foreign banks with which they are allied give them a great deal of information as to the condition of affairs abroad, both on general lines and as relates to special trades and special firms. This information is all duly docketed and kept for future use. The result is that these offices are already in a position to give clients of the bank information straight away regarding the standing of many firms abroad, conditions of trade in certain places, rules and regulations that have to be observed in regard to shipment of goods and many other matters. In cases where this information is not at their finger's end they make their inquiries through allied banks, and such information when once obtained for a particular customer is duly recorded for future use.

It is by no means unusual now for merchants to appeal to the bank for information as to whether certain classes of goods can be sent with assurance of profit to certain foreign ports. The bank will make inquiries as to whether such goods are in demand and often if necessary will provide names of agents or merchants to whom the goods could be consigned, although, of course, the banks take no responsibility in bringing people together in this way. At the same time, it is the object of the banks to introduce business of this kind only where the parties concerned are solid and of good standing.

The Eyes of the Bank

In regard to general information the intelligence departments have developed very markedly of late. They gather all kinds of statistical and general matter which are useful to a banker, but which in the ordinary way he would not come across. In other words the department may be considered the eyes of the bank. A great deal of the information so gathered is simply stored away for reference purposes when needed, but a good proportion is sifted cach day and a digest is made for the general managers, for them to look at with a view to keeping them in touch with general affairs. In practice this means that the intelligence department takes the leading papers and picks out all commercial and financial items of importance and puts them in a readily digested form before their management, so that the banker who usually only reads one paper can in a few pages see a collection of the important financial news of the day.

The monthly review has now become a standing production on the part of the leading banks. It deals with Government finance, matters affecting banking, information of importance to traders, and usually also supply some record of the course of money, the foreign exchanges, and the Stock Exchange during the month. The reviews go out to the branches and are distributed among customers, and in this way the banks. are able to give a good deal of information to their clients of a general character, which is often useful to them in their ordinary course of business. Some of the banks with connections abroad have letters from different foreign centers giving conditions of affairs there, and much information as to business conducted in those countries.

Indeed, certain of the British banks, whose business is almost wholly abroad, devote the whole of their review to such information and their reviews are valued very much by merchants trading with those countries.

Branch Office and Department Development

Added to this there is the need for the intelligence department to assist the branches. Branch banking in England is, of course, the basis of banking business and when a bank has over a thousand branches it can be understood that many of these branches are managed by men who have not seen a great deal of international business of first-class finance. When important matters are therefore raised before these managers they appeal to the head office before making a decision, and many of their queries are referred by the head office to the intelligence department. All sorts of inquiries are made in foreign countries and elsewhere to provide the information desired and the branch manager is often in a position of being able to give his customer

a reply which surprises him at the depth of knowledge displayed.

Of course in developing their intelligence departments the British banks have not pursued exactly the same policy. For instance, the foreign exchange departments previous to the war had become so developed in certain banks that they had already formed inner departments in those banks to deal with inquiries of customers regarding the conduct of trading operations abroad. Then banks in some cases have preferred to refer such matters to the old inquiry departments which have been in existence for a great many years, and which were established in the first place to supply information regarding conditions at home. It is, however, probable that these differences in working will gradually disappear, as otherwise the great expansion in this class of banking activities that must take place in the future, would lead to an overlapping of these departments.

Gradually these information departments outside the intelligence department must be gathered into the sphere of influence of that department, so that the material it gathers with such labor can be used to the best advantage. There naturally falls to it the task of carrying out all communications to the press, not only in connection with the reports and meetings of the banks, but also any special developments. Gradually, too, they are taking over the advertisement schemes of their institutions, a matter which a few years back was delegated to advertisement agents, but which, it is now found, is better treated from inside the banks.

James P. Gardiner and Frederick A. Thomas have been appointed assistant cashiers of the Hanover National Bank of New York.