REPORT.

.

The committee on banks, to whom was referred a resolution of the senate instructing them to inquire into and report to the senate the condition of the several state banks of the commonwealth at the close of the war, in 1865, and what disposition has been made of the assets of the same, beg leave to report, that they have given the subject careful consideration, and transmit herewith the testimony of several witnesses whom they have examined rigidly and at great length, together with a list of a large amount of documentary evidence obtained from various sources.

At the close of the war, the state was interested in the following banks as a stockholder: Bank of the Valley, Bank of Virginia, Exchange bank of Virginia, and Farmers bank of Virginia.

In all the other banks (known as independent or stock banks), the state was interested only as a guarantor of their circulation, for which state stock was deposited by the bank with the treasurer of the commonwealth, to an amount equal to the circulation or notes guaranteed.

It was evident at the close of the war that none of the state banks, and but few of the independent banks, could pay all their liabilities dollar for dollar, and different plans for closing up their affairs were in succession projected and put into operation.

First-In June, 1865, F. H. Peirpont, acting governor of Virginia, in pursuance of section 45 of chapter 58 of the Code, appointed a commission, consisting of Messrs. Chas. Palmer, Horace L. Kent, and Lewis McKenzie, to receive reports from the officers or others in charge of the several banks of the state; and by proclamation required these reports to be made to said commissioners, setting forth fully and particularly all the assets of said banks. These commissioners were to fix an early day, as soon as the reports came in, for exchanging the notes on hand by the banks with a view of reducing the circulation of the state, &c., &c. These commissioners reported August 30, 1865, that they had received returns from nearly all the banks of the state, but were unable to say whether the state banks would be able to redeem their circulation dollar for dollar, and recommended that steps be taken to close up these at the earliest possible period. It does not appear that these commissioners took any steps towards exchanging the notes as instructed to do by the said proclamation, or that they in any manner interfered with the assets of any of the banks.

Second-The next plan or project was by legislative enactment, entitled an act requiring the banks of the commonwealth to go into liquidation, passed February 12, 1866.

By this act the president and directors of banks are authorized, when they deem it expedient, to execute deeds of trust, conveying the assets of their respective banks to trustees, to be collected and distributed according to law, and requiring such a deed to be made if in any case any creditor attempts to get precedence of the others by suit or otherwise. In pursuance of this law, all the four state banks and some of the independent banks made deeds and turned over their assets to trustees. The Bank of the Valley made a deed April 10, 1866, to H. M. Brent, trustee; the Bank of Virginia, February 8, 1867, to David J. Saunders and Samuel C. Tardy, trustees; the Farmers bank, January 19, 1868, to James M. Goddin and Samuel C. Robinson, trustees; the Exchange bank, about same time, to George W. Camp, trustee. Before much had been done, however, by these trustees, and this legislative plan of settlement fairly tested, the third and last plan or project was inaugurated, which instantly superseded and destroyed the former.

Third-This plan was through the federal courts by means of receivers: upon bills filed by non-residents of the state, claiming to be creditors of the banks, to seize upon their assets, of whatever character and wherever found, and to distribute them amongst those creditors who presented their claims within a given time. The non-residence of the plaintiffs gave the court jurisdiction, and the reasons alleged for interfering with the trustees and taking the case from the state tribunals were, that the deeds of trust under which they were acting gave preferences to certain classes of creditors not entitled by law, and that the processes of the state courts were not sufficient to collect the assets on account of stay laws and other causes. These bills were all filed in the circuit courts of the United States for the district of Virginia, and in every case a receiver was appointed as prayed for, and clothed with full powers to collect the assets; and these, after paying commissioners and costs (which were enormous), were distributed to such creditors as were reported entitled thereto, by a commissioner appointed for the purpose. In this manner, nearly all the valuable assets of those banks which have been described as state banks, have been distributed. There now remains, however, on hand a large amount of notes, bonds, and other choses in action, of doubtful solvency, which are being distributed to creditors who prove their claims-the first who comes having the pick.

The committee have to report that, after hearing a great amount of testimony from witnesses of every interest, they have found no good reason whatever for the settling up the affairs of these banks in the federal courts in preference to the state courts, while, on the other hand, the expenses of the settlement have been thereby increased ten-fold, and, in the language of several of the witnesses, the creditors of the banks have been "outrageously swindled." The evidence shows that there was such irregularity, secrecy, and extravagance in the closing up of these matters, as to create a great depreciation of the assets of the banks amongst the uninitiated, and to cause a loss of hundreds of thousands of dollars to the real bona fide creditors. Upon this subject the evidence was very full, and much more could have been obtained; but as all the witnesses concurred in stating that by no possible management or economy could the state have realized a dividend, being a stockholder, they deemed it unnecessary to prosecute the examination further.

There are still in the hands of the treasurer, stocks deposited by some of the independent banks, and not yet redeemed or withdrawn by them, as they are authorized to do by producing their countersigned notes in amounts of one hundred dollars, or any multiple thereof, and withdrawing an equal amount of stock. At the present session of the legislature, authority has been given to certain banks, which are able and ready to redeem their notes at par upon presentation, to withdraw their stocks without the production of the notes, after duly advertising for them to be brought in. By this means, in the next twelve months it is believed that the most of these stocks will be withdrawn,

and the state government nearly, if not entirely, freed from all connection with the banks and banking system of the state-a connection established more than a half century ago.

Respectfully submitted.

A. R. COURTNEY,

EDGAR SNOWDEN, JR.,
R. S. BEAZLEY,

A. M. DAVIS,

G. H. KENDRICK,

MERIWETHER LEWIS,

WM. T. MARTIN,

Committee.

Senators Robert L. Owen and William P. Moseley not present when the report was made.

TESTIMONY.

SENATE CHAMBER,

RICHMOND, February 24, 1870.

A meeting of the committee on banks of the senate was held this day in the senate chamber at five o'clock, P. M.

Present: Alfred R. Courtney, Robert L. Owen, Edgar Snowden, Jr., R. L. Beazley, and Meriwether Lewis.

The following resolution offered by Mr. Courtney in senate, and referred to the committee on the 22d instant, was read:

"Resolved, That the committee on banks be instructed to inquire into and report to the senate, the condition of the several state banks of this commonwealth at the close of the war, in 1865, and what disposition has been made of assets of the same, and the committee shall have power to send for persons and papers."

HORACE L. KENT EXAMINED.

Horace L. Kent, Esq., of the city of Richmond, having been summoned, appeared before the committee, and in reply to questions propounded to him, give the following an

swers:

I was one of three commissioners appointed by Governor Peirpont in 1865 to examine into the condition of the banks of this state. The appointment was made in May or early in June of that year. Reports were received by the commissioners from nearly all the banks. A report was made by the commissioners, but I do not know where that report is now. I am satisfied that the report was submitted to Governor Peirpont, or to some officer authorized by him to receive it. I have but few papers showing the condition of the banks, except an abstract referring to assets of value of some of the banks which I made for my own use. It is my opinion that noteholders, in many cases, have been swindled, and that if the banks had been suffered to remain in the hands of the old officers, the dividends to the noteholders would have been much larger. It is my opinion, also, that the assets of none of the old state banks would have been sufficient to discharge their liabilities so as to give a dividend to the stockholders.

The bank of the Old Dominion at Alexandria, the Farmers bank of Fincastle, the Southwestern bank at Wytheville, and the Merchants bank of Lynchburg, redeemed their notes, having been principally managed by their old officers. I think there is still some stock in the hands of the state treasurer belonging to some of the banks. I believe that the brokers of the city of Richmond can give information as to the purchase of their notes by the banks. Notes of the Farmers bank of Virginia sold high here some time ago, but are now very low. I paid as high as sixty-eight and a half cents; now, I am told, they can be had for thirty cents. I cannot tell, without reference to my books, when it was I paid sixty-eight and a half cents, but think it was some twelve months ago. It is my

opinion, and I believe it is the opinion of the noteholders generally of the Bank of the Valley of Virginia, that they have been awfully swindled. Mr. Fant and other gentlemen were intrusted in the purchase of the notes, and my belief is, that the depressure in the notes of the Bank of the Valley was mainly owing to the bad management of the receiver, Mr. Fant. I know nothing about the management of the Exchange bank. Mr. Camp told me, at the time I was commissioner, that he had loaned a considerable portion of the gold held by the Exchange bank of Norfolk, taking the bonds of the stockholders with the stock of the bank as collateral security.

Mr. Kent, at the close of his examination, surrendered to the committee the following papers, which he said were all that he has in his possession:

1. A letter from John M. Godwin, teller Farmers bank of Virginia, at Charlottesville, stating that he could not make a report until the return of the specie from the south.

2. A paper styled "state of the Bank of the Valley," in Virginia, July 1, 1865.
3. List of notes on banks of other states, held by the Danville bank July 1, 1865.

4. A letter from James H. Chamblin, clerk, office of discount and deposit, Leesburg, Virginia, July 20, 1865, stated that he encloses statement of the bank; also a letter from William A. Powell, cashier of the same bank, referring to the same subject.

5. A letter from L. J. Woodyard, receiver, Kanawha Courthouse, West Virginia, June 21, 1865, with reference to the assets of the branch of the Bank of Virginia, at Charleston, Kanawha county, Virginia.

6. A letter from H. M. Brinkley, Bank of the Valley of Virginia, Winchester, Virginia, in regard to the assets and books of the bank, and the assets and books and papers of the branches of Romney and Moorefield.

7. A letter from the cashier of the Farmers bank of Virginia, at Winchester, Virginia, June 22, 1865, in regard to the books, papers, and effects of that office.

8. A letter from M. McDaniel, cashier of the Bank of Virginia, at Union, July 4, 1865, in regard to books and a portion of the assets of the bank.

9. A letter from the president of Branch bank of Virginia, in Danville, July 12, 1865, in regard to the effects of the institution, its liabilities, &c.

10. A letter from D. Buckhart, president Bank of Berkeley, in Virginia, Martinsburg, June 27, 1865, stating that he encloses statement of the condition of the bank.

11. A letter from H. M. Brinkley, Bank of the Valley, in Virginia, Winchester, June 22, 1865, in regard to assets, books, and papers of the bank, and of branches at Romney and Moorefield.

12. A letter from A. L. Archer, branch of the Exchange bank, Petersburg, Virginia, July 5, 1865, giving a statement in regard to the funds of the bank.

13. A letter from A. H. Johnston, Blacksburg, July 15, 1865, stating that he encloses statement of the branch of the Virginia bank, at Union, &c.

14. A letter from Governor Peirpoint to Horace L. Kent, instructing him to give to Richard Comden information concerning the branch of the Exchange bank, at Weston.

15. A letter from the same to the same, concerning the condition of the banks generally.