while on horseback. Bedlam and despair seemed to rule the day, with many customers refusing to assemble peacefully, all the while lamenting over the loss of their life savings. As opined by a popular journalist at the time,“[ the collapse ] had an alarming effect on the public mind.” Even though the ramifications of its closing would have a muted effect on New York’ s money markets, depositors began calling into question the solvency of the banking system.
The mission behind the founding of Bank of United States differed considerably from the financial shenanigans which caused its demise. Founded with a capital contribution of $ 100,000 by Joseph S. Marcus, a Russian-Jewish clothing manufacturer, the institution commenced operations in 1913. Operating out of New York City’ s Lower East Side, the home to recently arrived Jewish immigrants, the bank primarily serviced garment workers who functioned as its depositor base. It held savings accounts with balances of less than $ 100 and would often adopt banking hours scheduled around the needs of its customers, sometimes opening on Sunday. By 1919, it joined the Federal Reserve system and eight years later held assets of $ 107 million and deposits of $ 95 million. This asset-liability combination required it to keep demand-deposit reserves at the Fed amounting to 13 %. Furthermore, its stock fluctuated between $ 195- $ 350 per share during the mid-1920s, which made it an attractive investment for those accountholders who often purchased shares of the bank.
Upon Marcus’ s death in July 1927, his son, Bernard, in partnership with bank official Saul Singer, embarked upon a series of aggressive expansion projects: real estate development and the creation of stock syndicates for the sale and repurchase of the bank’ s securities, as well as mergers and acquisitions. Its M & A activities proved so lucrative that during the 1928 – 1929 calendar year it acquired five banks with deposits totaling $ 170 million with an aggregate book value of $ 26 million. What’ s more, Marcus and Singer wished to expand branches throughout New York, beyond the areas which originally served their customer base.
Consequently, the affiliation with syndicates would call into question the bank’ s bookkeeping. Such irregularities in its recordkeeping led one bank examiner to comment several years after the bank’ s closing that the principals sought“ to build up a city-wide branch banking system,” whereby the owners would accrue“ a large profit to themselves.” However, not long after their inception, these syndicate affiliations would lead to significant problems for the bank. Nevertheless, Marcus and Singer embarked upon this course of action either unaware— or indifferent— to its circumstances.
Looking to create vehicles whereby depositors could purchase shares in Bank of United States and other banks, the bank merged with City Financial Corporation in 1927, followed by Consolidated Indemnity and Insurance Co. in 1928. Another acquisition in 1929, Colonial and Municipal Bank and Trust Co.( considered the largest bank in Brooklyn at the time), and following the path of City and Consolidated, seemed to bypass the interest of state regulators. One historian determined that the complacency of regulators and bank directors, coupled with Saul Singer’ s then“ unblemished reputation,” tended to allow such combinations with little interest shown in their feasibility.
These syndicate arrangements, followed by numerous other affiliates created during the late-1920s, existed mainly for purchase, holding and speculation in bank stocks, including that of Bank of United States. Marcus and Saul Singer even formed a private syndicate geared toward speculation staffed by both directors and managers of the bank. The financing for this scheme came from loans originated by Bank of United States and those affiliates already created for the purposes of stock speculation.
By May 1929, the bank owned three safe deposit companies and an insurance company, and it held significant real estate investments. One subsidiary, Bankus Corp., manipulated the price of Bank of United States stock and used the equity as loan collateral. From this maneuver, the bank could claim $ 315 million in assets on deposits of $ 220 million. This lack of transparency not only violated agency responsibilities owed to the bank’ s shareholders and depositors, but such practices appeared more like Ponzi-style arrangements that ultimately contributed to insolvency.
The first“ shot across the bow” came with a steep decline in the value of units representing equity in the affiliates. From a peak of $ 242 per unit in April 1929, units declined to $ 207 by July and $ 170 by early October 1929. This sell-off, occurring prior to the stock market crash that same month, coincided with a rise in the share price of several New York City banks. One economist explained that corrections in the affiliates’ prices reflected the sentiments of“ influential” bank stockholders who had begun realizing how the fiscal affairs of Bank of United States“[ were ] being conducted.” Moreover, a national banking crisis had begun to grip the country; Marcus and Singer’ s reckless stock speculation only exacerbated the situation.
Now fully aware of the bank’ s expansive acquisitions, by early 1930 bank examiners began looking into its operations. A report issued at the time cited one of its affiliates could potentially result in the“… failure of the bank, to which the corporation [ affiliate ] was closely bound.” Subsequent examinations taking place in June observed that serious difficulties were present and that the bank might only be saved through a merger. One hundred fifteen state and 15 Federal Reserve Bank examiners audited the books until September. The audit cited how“ real estate speculation, concentrations to affiliated corporations, loan losses,” further impeded the bank’ s capacity as a going concern. Real estate holdings were of particular concern given NYC banks held only 12 % in their portfolios in contrast to 45 % held by the bank.
In mid-November 1930, the closing of a regional investment banking firm, Caldwell and Company based in Tennessee, resulted in the collapse of more than 15 banks in western North Carolina, and bank failures followed throughout parts of the upper South. Most of these banks were forced into closing due to poor loan originations and underperforming investments. Nevertheless, the Caldwell failure contributed to a Domino-like effect on regional foreclosures, as the firm was a major source of funds for both IPOs and public finance.
Perhaps recognizing the broad impact of Caldwell’ s collapse and now thoroughly aware of the deleterious effect of the dummy corporations owned by Bank of United States on its solvency, state and federal regulators again stepped in. New York’ s Superintendent of Banks Joseph A. Broderick sponsored merger proposals, and the Federal Reserve issued a list
www. MoAF. org | Spring / Summer 2026 | FINANCIAL HISTORY 43