Harriman Embarrassment

Last week a deaf old lady checked out of a small hotel in Lewisburg, Pa. after seven months of seclusion there, returned quietly to Manhattan. Remaining in seclusion unrelieved was her 69-year-old husband, Joseph Wright Harriman. onetime socialite banker, whose exploits in dementia during his criminal trial three years ago scarcely equaled those by which he put his Harriman National Bank & Trust Co. into the red and finally into receivership in 1933. As prison librarian at Lewisburg Federal Penitentiary, Convict Harriman had ample opportunity last week to read in the Press of the embarrassments his bank caused in Wall Street before its collapse. He had, he discovered, caused a legal battle which would make U. S. banking history whatever the outcome.

Against nine banks, all members of the New York Clearing House Association, the U. S. Comptroller of the Currency had brought suit to compel them to pay about $2,700,000 to depositors of the closed Harriman bank. Eleven members of the Clearing House had already settled out of court for $3,600,000. The nine defendants resisted payment on the ground that they had not, as the Government contended, guaranteed the assets of their ailing fellow members in 1932 only to back out later. Apparently the main actor and most eligible goat in the controversy was smart, clean-cut Banker Charles Simonton McCain, onetime chairman of Chase National. As head of the Clearing House committee in 1932, he tried to save the Harriman bank for better times.

When Banker McCain learned from, the national bank examiner in June 1932 that the Harriman bank was from $4,000,000 to $6,000,000 "under" and that $1,300,000 had been lifted from depositors' accounts to peg Harriman bank stock on the market, he concluded that criminal prosecution of Bankster Harriman just then would endanger other Clearing House banks. To postpone such prosecution until the bank's affairs were in order, Mr. Harriman was eased into the board chairmanship, and Mr. McCain induced Henry Elliott Cooper, onetime Chase National vice president, to take the presidency of Harriman National Bank & Trust. On the witness stand last week Mr. Cooper recalled that Mr. McCain had said: "We won't let your bank fail, Henry. The Clearing House will stand behind you regardless." Mr. McCain later gave the same assurances to the Comptroller of the Currency.

However, when Mr. Cooper went around to the Clearing House Association the following March to ask for $200,000 to enable the sapped Harriman bank to reopen after the 1933 bank holiday, he found the atmosphere distinctly chilly. Mortimer Norton Buckner, then president of the Clearing House Association and chairman of New York Trust, one of the eleven banks to settle, testified last week that most of the members were willing to contribute their share of the $6,300,000 actually needed to make up the Harriman losses, but that two banks, Guaranty Trust and Bankers' Trust, broke up the "rescue party." He remembered that Guaranty Trust's William C. Potter hung up on him when he tried to remonstrate by telephone. Mr. Cooper was called to a meeting.

"Mr. Buckner arose," Banker Cooper testified last week, "and told me the Clearing House committee was not prepared to go through with it. I said: 'You mean this loan?' He said: 'No, this whole arrangement.' I said: 'You don't mean your pledges to stand behind the bank?' and he said: 'I'm afraid so.' I told him that they had given undeniable pledges and that I would not stand for it."

Able defense lawyers worked hard last week to show that the pledges mentioned by Mr. Cooper were not binding on the member banks. From Banker McCain they drew admissions that at the time he gave his assurances to Mr. Cooper and the Federal Comptroller he had consulted only a few of the banks. There was no explicit agreement with them to supply money for Harriman deficits. Moreover, Banker McCain knew he had no authority to guarantee the bank deposits on their behalf.

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