SENATE 
 
 No. 25. 
 
 REPORT 
 
 RESPECTING THE 
 
 FRANKLIN BANK.- 
 

 ©ommontocaUlj of 
 
 House of Representatives, Jan. 10, 1838. 
 
 Ordered^ that a Joint Special Committee be appointed 
 to examine into the doings of the Franklin Bank, in the 
 city of Boston, and hear the bank thereon, agreeably to 
 the provisions of the thirty-sixth chapter of the Revised 
 Statutes, and to report the result of their investigations 
 to the present Legislature : and 
 
 Messrs. Robbins, of Milton^ 
 
 Sturgis, of Boston^ 
 
 Lincoln, of Worcester, 
 
 were appointed. 
 
 Sent up for concurrence. 
 
 L. S. CUSHING, Clerk. 
 
 In Senate, Jan. 11, 1838. 
 
 Concurred : and Messrs. Child and Goodrich are joined. 
 
 CHARLES CALHOUN, Clerk. 
 
(SommautoeaUlj of 
 
 In Senate, Jan. 31, 1838. 
 
 The Joint Special Committee appointed to examine into 
 the doings of the Franklin Bank, in the city of Boston, 
 and hear the bank thereon, agreeably to the provisions 
 of the thirty-sixth chapter of the Revised Statu'tes, and 
 report the result of their investigation to the present 
 Legislature, submit the following 
 
 REPORT: 
 
 The Committee met the president and directors of the 
 bank, at their banking-house, for the first time, on Friday 
 the twelfth day of the present month, and continued their 
 investigations during six successive meetings, at each of 
 which the president and a majority of the directors were 
 present. Previous to the last meeting of the committee 
 which was on Saturday the 20th instant, they caused the 
 corporation to be duly notified to appear before them, to 
 show cause why their charter should not be declared for¬ 
 feited. 
 
 The present condition of the bank will appear by the 
 following statement furnished to the committee at their 
 first meeting. 
 
State of the Franklin Bank, January 12 , 1838. 
 
 FRANKLIN BANK. 
 
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1838. 
 
 SENATE—No. 25. 
 
 5 
 
 From this statement, it appears that there is a very 
 great deficiency in the assets of the bank to meet its lia¬ 
 bilities, and this deficiency will the more strikingly appear 
 by a particular examination. The real estate which stands 
 upon the books of the bank at ^'23,123 86, is now under at¬ 
 tachment to the amount of ^7500, and on the tenth day of 
 July last was assigned, subject to the attachment, to the 
 United States to secure the sum of ^ 12,511 25. The next 
 item of j5fl834 04 in a debt against the Westbrook bank in 
 the state of Maine, is claimed to have been settled. And the 
 committee are induced to believe that such is the fact. 
 The Franklin bank stock to the aniountof ^82,080, which 
 is held bv this bank on its own account, cannot in the 
 least add to its resources ; for it appeared to the committee 
 most satisfactorily, that for many months the stock has been 
 worthless. 
 
 A similar remark rnav be made in reference to the 
 
 •/ 
 
 5,600 of stock in the Lafayette bank. Although the 
 committee are not informed of the exact condition of this 
 bank, yet such has been its intimate connexion with the 
 Franklin bank, that our examination has made us suf¬ 
 ficiently acquainted with its situation to assure us of the 
 entire worthlessness of its stock. The debt of 10,600 
 against the Lafayette bank, is balanced by two bank 
 books, sold by the Franklin bank to the Lafayette bank, 
 which were negotiated by the latter, and were not paid 
 by the Franklin bank when they became due, and which 
 will hereafter be returned. The item of ^169,246 08, 
 of notes discounted, was found, upon particular examina¬ 
 tion, not to add very materially to the resources of the 
 bank. ITe whole of these notes have for some time 
 been overdue. More than one half of the whole amount, 
 or about ;^90,000, are payable in the liabilities of the 
 2 
 
6 
 
 FRANKLIN BANK. 
 
 Jan 
 
 Franklin bank, the original notes having been given up 
 lor notes payable in that manner; and, although a por¬ 
 tion of notes, payable in Franklin hank securities, are not 
 now due, the debts for which they were given had been 
 a long time over due, before they were exchanged. Of 
 the remainder of the notes which have not been ex¬ 
 changed, but a small amount can ever be collected. The 
 checks of different individuals, to the amount of ;§f58,- 
 460 94, are, as near as the committee could ascertain, 
 of more doul)trul value than the notes. 
 
 The remaining item among the assets of the bank 
 which we shall notice, is the sum of 120,815 79, claimed 
 as a balance against Benjamin F. Hathorne, the former 
 cashier of the bank. Hathorne denies that this sum is 
 due. The particular circumstances of this claim will be 
 explained hereafter. It is sufficient here to observe, that, 
 wh{‘ther the claim be due or not, its payment cannot be 
 expected, as Hathorne is represented as destitute of prop¬ 
 er tv. 
 
 From these statements it is apparent, that not only has 
 the whole capital of the bank been lost, but that a great 
 proportion of its bills and liabilities now in the hands of 
 the public, amounting in the aggregate to more than 
 ^650,000, will never be paid. The committee were on 
 this account induced to institute a most rigid examination 
 into the causes and course of management which had 
 overwhelmed the institution in such complete ruin. The 
 result of that examination we now proceed to spread 
 before the Legislature. 
 
 The Franklin bank was incorporated in 1828. Its 
 capital was originally 100,000, and, at the January ses¬ 
 sion of the Legislature 1832, was increased to^l50,000. 
 The w'hole amount of its capital was paid in, and it con- 
 
1838. 
 
 SENATE—No. 25. 
 
 7 
 
 tinued in a highly prosperous condition till the change in 
 its direction, which took place in October, 1834. Mr. 
 Jeremy Drake, who was its cashier from October, 1831, 
 till the autumn of 1834, testified to the committee, that 
 its concerns were in a flourishing condition at the time 
 he left the bank. 
 
 During the summer of 1834, a project was set on foot 
 by Thomas Richardson, Josiah Dunham and Benjamin 
 F. Hathorne, with the knowledge and advice of Ebenezer 
 Stevens and Ebenezer Hayward, and perhaps others to 
 change the direction of the bank, and place its manage¬ 
 ment in other hands. To accomplish this, it became nec¬ 
 essary to purchase a sufficient amount of stock to secure 
 a majority of votes at the election of directors. Richard¬ 
 son and Hathorne were the active parties in the purchase 
 of the stock, and the result of their efforts was, that they 
 became the owners of the stock of the bank to the 
 amount of about ^75,000, at a cost to themselves, of 
 eight per cent, above par. 
 
 By means of this stock thus purchased, a new board of 
 diref'tors was chosen in October, 1834, among whom were 
 Richard son, Dunham, Stevens and Hayward. Richard¬ 
 son was made president and Hathorne cashier. Of the 
 stock wiiich had been purchased under the foregoing ar¬ 
 rangement, ^25,000 were taken by Richardson, and the 
 remainder was left upon the hands of Hathorne, in whose 
 name it liad been originally purchased. Although it had 
 been understood that Dunham, Stevens and Hayward 
 were to be interested wdth Richardson and Hathorne in 
 the stock to be purchased, this arrangement seems never 
 to have been carried into effect. Hathorne, a young man, 
 destitute of property, and the cashier of the bank, w as thus 
 left with ^50,000 of its stock on hand and to provide for 
 
8 
 
 FRANKLIN BANK. 
 
 Jan. 
 
 the payment of this large debt which had been incurred 
 by the purchaser. That this stock was held by Ha- 
 thorne, with the knowledge and consent of the directors, is 
 proved by the fact that he was aided by the funds and 
 credit of the directors as w ell as the funds of the bank in 
 his numerous operations on account of it, in which he was 
 engaged for a period of about three years. During these 
 operations, Hathorne sustained himself by a resort to 
 loans on short periods of time and at exorbitant rates of in¬ 
 terest. And w'hen loans could not be obtained in season 
 to meet his numerous payments, the cash drawer of.the 
 bank supplied the deficiency; and when by these appropria¬ 
 tions the resources of the bank were so far diminished as 
 to render it unable to meet the numerous applications of 
 its customers for discounts, most of w’hom w^ere the direc¬ 
 tors, new loans were negotiated to supply the deficiency 
 which had thus been produced in the funds of the bank. 
 Although this stock stood upon the books in the name, of 
 Hathorne,—Dunham, Stevens and Hayward seem to 
 have considered themselves under obligation to sustain 
 him in the numerous payments w hich w^ere from time to 
 time made on account of it. This is shown not only by 
 the fact that Dunham and Stevens were the endorsers of 
 his notes, and that they consented to his using in their 
 operations the funds of the bank, but also by the fact that 
 an agreement was entered into between Dunham, Ste¬ 
 vens and Hayw^ard, to share among themselves in certain 
 proportions, the extra interest which had been paid by 
 Hathorne upon his stock notes. These transactions seem 
 to have been so far connected with the operations of the 
 bank, that no account of them w^as kept by Hathorne, 
 separate from the concerns of the bank, l)ut that his stock 
 transactions W'ere so intimately blended with all the bus- 
 
1838. 
 
 vSENATE—No. 25. 
 
 9 
 
 iness of the bank, that loans were as frequently negotia¬ 
 ted by Hathorne, to supply the wants of the bank, as for 
 the payments of his own notes. 
 
 This state of things continued until Hathorne ceased to 
 be cashier of the bank, in 1837, and at a loss to the 
 bank, as it eventually turned out, of not far from ^20,000, 
 as claimed by Hathorne, in extra interest, paid in the va¬ 
 rious negociations, on account of this stock. In the 
 month of August, 1836, Mr. Richardson, who is not 
 proved to have been as conversant with Hathorne’s trans¬ 
 actions, in Franklin bank stock, as other directors, left 
 the bank, having first sold to Dunham, who succeeded 
 him in the office of president, his stock to the amount of 
 ;§27,000, at an advance of three per cent, above par. 
 Richardson’s stock was paid for out of the funds of the 
 bank. Mr. Richardson testified, that, for more than a 
 year before he left the office of president, his confidence 
 in the integrity of Hathorne was impaired, and that he 
 called for an investigation into his accounts and doings. 
 Several investigations were had, and resulted in discov¬ 
 ering no deficiency in the funds of the bank. 
 
 In the month of November or December, as testified 
 by the present directors, their confidence began to be im¬ 
 paired in the integrity of Hathorne, from the fact, that 
 they ascertained, that he had applied $23,000 of the 
 money of the bank, to a speculation in beef and pork, in 
 which Hathorne w as to be jointly interested with another 
 individual. But it does not seem that this produced anv 
 great alarm in the minds of the directors, for they admit 
 that, after this discovery was made, they suffered Ha¬ 
 thorne to remain as cashier for at least the period of two 
 months. It w'as also admitted by Stevens, that, previous 
 to Hathorne’s engaging in this speculation, the project was 
 submitted to him by Hathorne, and Stevens does not ap- 
 
10 
 
 FRANKLIN BANK. 
 
 Jan 
 
 pear to have discountenanced it. In the month of Feb¬ 
 ruary, 1837, Dunham, as president of the bank, agreed 
 to take of Hathorne his stock, at its cost, including the 
 ^20,000 which had been paid in extra interest. This 
 stock, with that purchased of Richardson and a few addi¬ 
 tional shares which had been purchased by Hathorne 
 subsequent to the first operation, which stood in his 
 name, make up the $82,080 of Franklin Bank stock 
 which now appears among the assets of the bank. 
 
 The stock, taken of Hathorne, was credited to him at 
 its par value upon the books of the bank, and even that 
 amount did not reduce his balance below $120,000. It 
 is claimed by Hathorne, that the $20,000 wdiich was paid 
 by him in extra interest should also be credited to him. 
 
 The Franklin bank stock was not the only stock in 
 W’hich Hathorne was concerned, w hile he was cashier of 
 the bank. Stocks in the South Boston India Rubber 
 Company, the Boxbury India Rubber Company, the 
 Chemical Com.pany, the Lafayette bank and the West¬ 
 brook bank, all received a due share of his attention. 
 The committee are unwilling to extend this report by a de¬ 
 tailed account of the various transactions in these stocks. 
 We will how'ever remark, that, in most of these trans¬ 
 actions, he w’as connected wdth some one or more of the 
 directors of the bank. In the Roxburv India Rubber 
 stock, Richardson being then president of the bank was 
 jointly concerned w ith him. And the result of that trans¬ 
 action, so far as regards the bank, is, that Hathorne^s 
 note is now among the assets of this bank for $10,000, 
 w ith Chemical stock pledged as collateral. In his deal¬ 
 ings in South Boston India Rubber stock he was con- 
 nected with Thomas Richardson, Josiah Dunham, Eben- 
 ezer Stevens and Hugh Montgomery, all directors of this 
 bank, and owmers of stock in the South Boston India 
 
]838. 
 
 SENATE—No. 25. 
 
 11 
 
 Robber Company. As a subscriber to the stock of the 
 Lafayette Bank, his name appears with , those of Josiah 
 Dunham and Ebenezer Stevens and Thomas Richardson, 
 to the following amounts : 
 
 Josiah Dunham, 
 Ebenezer Stevens, 
 Thomas Richardson, 
 Benj amin F. Hathorne, 
 
 ,^ 30,000 
 
 12,000 
 
 15,000 
 
 5,000 
 
 and these subscriptions to the stock of the Lafayette 
 bank were made at the very period wlien Hathorne was 
 holding stock in the Franklin bank, witli the consent and 
 aid of Dunham and Stevens, to the amount of more than 
 ,^50,000, without being able to pay for it, except from 
 the funds of the Franklin bank. 
 
 In his transaction in the stock of the Westbrook bank, 
 Hathorne, as testified by himself and not contradicted by 
 Dunham, was Jointly concerned with Dunham, who w^as 
 then president of the Franklin bank. In explanation of 
 Hathorne’s transactions in the stock of the Westbrook 
 bank, and of the item shown among the assets of the 
 bank as a debt due from the Westbrook bank, a transac¬ 
 tion was disclosed by Hathorne, and admitted to be cor¬ 
 rect by some of the directors, which tlie committee, un¬ 
 der their instructions to examine into the doings of the 
 bank and report their results, feel bound to spread before 
 the Legislature. 
 
 After the Franklin bank had been made one of the 
 depositories of the j)ublic money of the United States, 
 application was made to the directors by Mr. F. O. J. 
 Smith, of the vState of Maine, who was then engaged in 
 starting the Westbrook bank, for a portion of the specie 
 of the Franklin bank, with the assurance that, as soon as 
 an exatninaiion of the specie in the Westbrook bank should 
 
12 
 
 FRANKLIN BANK. 
 
 Jan 
 
 be had, the quantity furnished by the Franklin bank 
 should be returned. Specie to the amount of ;§f 14,000 
 was furnished to Mr. Smith, and after the Westbrook 
 bank was in operation, the specie was returned by Smith. 
 But the demands of the Westbrook bank upon the Frank¬ 
 lin, did not stop with the use of its specie. The West¬ 
 brook bank still needed the aid of the Franklin bank to 
 the same amount; and as the specie of the latter had 
 been counted for the benefit of the former. Smith still 
 desired, that the deficiency, occasioned by the return of 
 the specie, might be supplied by a blue book, to be issued 
 by the Franklin bank for the benefit of the Westbrook 
 bank. This book was issued in the name of vSmith bv 
 Dunham, in direct violation of the law of this Common¬ 
 wealth, for the amount of ^14,000, and under circum¬ 
 stances which it is not necessary here to relate. 
 
 In furnishing this book, Dunham and Hathorne took 
 good care to include in it the payment of their own stock, 
 to the amount of ^2000, in the Westbrook bank. The 
 Franklin bank also furnished funds for the redemption of 
 the bills of the Westbrook bank, w'hich swelled its in¬ 
 debtedness to a much larger amount than the ^12,000 
 which were charged to the Westbrook bank, on account 
 of the book; and in the final adjustment of its balance 
 the Franklin bank was obliged to receive, at its own risk, 
 of the Westbrook bank, the paper of different individuals, 
 ^1834 04 of which have not been paid. 
 
 These operations of the bank in its own stock, which 
 at last amounted to more than half its capital, and in the 
 numerous fancy stocks of the day, with extensive loans 
 made to its directors and principal stockholders, neces¬ 
 sarily involved its concerns in great embarrassment. 
 These embarrassments began to be more severely felt in 
 the autumn of 1836, after Richardson had left the bank. 
 
1838. 
 
 13 
 
 . SENATE—No. 25. 
 
 and after ^27,000 of the funds had been appropriated to 
 the purchase of Richardson’s stock. Although for more 
 than one year previous to this time the circulation of the 
 bank, as it appears on the books, in a statement of its 
 condition made up for Tuesdays and Fridays of each 
 week, did not vary, upon an average, for the whole of that 
 period, more than two or three thousand dollars from the 
 highest amount which the law permitted, yet this amount, 
 great as it was, did not furnish the adequate means to 
 enable the bank to meet its increasing liabilities. 
 
 A new process was to bo resorted to, and that was the 
 issue of post notes. Up to the period when Richardson 
 ceased to be president of the bank, the issue of post notes 
 had not exceeded the limits allowed by law, and in no 
 instance had they been issued hut in compliance with a 
 vote of the directors. But, as soon as Dunham became 
 president, it does not appear that a vote of the directors 
 was supposed to be necessary to authorize the issuing of 
 post notes. 
 
 On the first Saturday of September, 1836, the day on 
 which they were required by the governor to return to 
 the office of the secretary of the Commonwealth, the 
 post notes then out, amounted to a little over ^42,000, 
 although the return showed but ^37,500 the precise 
 amount allowed by law. On the 15th day of February 
 following, the day upon which Hathorne left the bank, 
 the post notes amounted to ^,222,400. During this same 
 period, the liabilities of the bank had been still further in¬ 
 creased by the issuing of blue books, certificates of de- 
 posites, and the borrowing of large sums of money upon a 
 pledge of its own bills, but to w’hat amount does not ap¬ 
 pear by any books or papers examined by the committee, 
 3 
 
FRANKLIN BANK. 
 
 Jan 
 
 u 
 
 as these transactions do not appear to have been entered 
 upon any of the books of the bank. 
 
 On the 15th day of February, 1837, Edmund F. 
 Bunnell was made cashier of the bank in the place of 
 Hathorne, in which situation he continued until the fail¬ 
 ure of the bank in July, 1837. During the administra¬ 
 tion of Bunnell, post notes were issued by him to the 
 amount of ^241,143, and blue books and certificates of 
 deposites to the amount of 16,548 more, to which is to 
 be added a further sum of $32,200 borrowed by the bank 
 on a pledge of its own bills, and at an interest of two per 
 cent, per month, thus making the transactions of the bank 
 in post notes, blue books, certificates of deposites, and the 
 borrowing of money upon its own bills, in a period of 
 about ten months, amount to $612,291, without inclu¬ 
 ding the books and certificates of deposite issued, and bills 
 loaned by Hathorne during the last four months, while 
 he was cashier of the bank. How great a portion of 
 these post notes, books, certificates of deposite, and bills 
 were sold by the bank on its own account, to enable it to 
 meet its immense liabilities, cannot now be ascertained, 
 as no cash account was kept by either Hathorne or Bun¬ 
 nell during the last eighteen months before the failure of 
 the bank. But, from the papers in the bank, showing the 
 settlement made with Bunnell before he left, it ap¬ 
 peared that the sum of $35,927 21 was allowed to him 
 on the settlement of his account for the shave to which 
 the bank had been subjected on the post notes, books, 
 certificates of deposites, and bills sold on its own account, 
 and that the amount issued by Bunnell and sold by the 
 bank on its own account, during a period of about five 
 months, was $332,200. It was claimed by Hathorne, 
 that the loss to the bank on the post notes, blue books, 
 certificates of deposite issued by himself, and the money 
 
1838. 
 
 SENATE—No. 25. 
 
 15 
 
 borrowed by the bank on a pledge of its own bills, was 
 greater than the sum allowed to Bunnell, and that a sim¬ 
 ilar allowance ought to be made to him, and be deduc¬ 
 ted from the large balance now standing against him 
 upon the statement of the present condition of the bank. 
 The whole amount claimed by Hathorne to be deducted 
 from that balance, is between seventy and eighty thou¬ 
 sand dollars, which sum is made up of the extra interest 
 paid upon his stock notes for a period of about three 
 years, and upon the post notes, blue books, and certifi¬ 
 cates of deposite, and bills negotiated by himself on ac¬ 
 count of the bank. The committee do not pretend to 
 decide upon the correctness of this claim, but if the rule 
 adopted by the directors in the settlement of Bunnell’s 
 account be taken as a criterion, the loss to the bank in 
 interest was at the rate of two per cent, per month. 
 
 The great and unparalleled amount of bills in circula¬ 
 tion kept up with most astonishing uniformity for a 
 whole year previous to July, 1836, at the great hazard of 
 the solvency of the bank; and the subsequent illegal issue 
 of post notes, blue books, certificates of deposite, and the 
 loaning of its own bills, were not the only means re¬ 
 sorted to bv the bank to sustain its totteriiif^ credit. 
 
 During the summer of 1836, application had been 
 made to the secretary of the treasury of the United 
 States, for a portion of the government deposites. The 
 apj)lication was not immediately acted upon by the secre¬ 
 tary. The Lafayette bank had been incorporated at the 
 previous session of the Legislature, and in the course of 
 the summer had been organized by the choice of its pres¬ 
 ident, directors, and cashier, and, on the 13th of July, 
 commimced its operations. At the commencement of the 
 operations of the Lafayette bank, ;Jf99,300 of its stock 
 stood in the names of Thomas Richardson, Josiah Dun- 
 
16 
 
 FRANKLIN BANK. 
 
 Jan 
 
 ham, Ebenezer Stevens, Benjamin F. Hathorne, Isaac C. 
 Barnes, Josiah Dunham, Jr., and Thomas H. Dunliam, 
 the four first of whom were directors and cashier of the 
 Franklin bank, and of the three last two were the presi¬ 
 dent and cashier of the Lafayette bank, and the other a 
 minor son of Josiah Dunham, senior. Before the Lafay¬ 
 ette bank commenced operations, but after the choice of 
 its officers, as testified by Hathorne, and admitted to be 
 true by some of the directors of the Franklin bank, it 
 w^as agreed, that, inasmuch as the application of the 
 Franklin bank for the government deposites remained un¬ 
 decided, the Lafayette bank should also apply fora share 
 of the deposites, and, if they could not be obtained by 
 both, that, as the Franklin bank had first applied, the 
 claims of the Lafayette bank should not be pressed to the 
 prejudice of the prior applicant, and that if the Franklin 
 bank alone should receive the government money, the 
 amount should lie shared between that and the Lafayette 
 bank, but in wdiat proportions does not fully appear by 
 the evidence. The Lafayette bank immediately went 
 into operation, and the specie in its vaults was counted 
 in conformity with the provisions of law. 
 
 The president of the Lafayette bank, and one of its 
 directors, soon after started for Washington to press the 
 application of both banks for a portion of the public money. 
 The application of the Franklin bank alone was success¬ 
 ful, and checks upon the Commonwealth bank to the 
 amount of 100,000 were forwarded to the Franklin bank 
 from the secretary of the treasury. But this addition 
 to the resources of the bank, did not furnish it wdth much 
 substantial relief from its embarrassments. For as testi¬ 
 fied l)y Hathorne, and not contradicted by any of the di¬ 
 rectors, ^26,000 of tiiis money w^as applied to the pay¬ 
 ment of a debt then due from the-Franklin to the Com- 
 
1838. 
 
 SENATE—No. 25. 
 
 17 
 
 monvvealth bank, about ^20,000 more was appropriated 
 to procure an additional quantity of specie required to be 
 kept in the bank under the regulations of the treasury 
 department at Washington, and ^20,000 was paid to the 
 Lafayette bank under the agreement above referred to, 
 and for the balance they were obliged to wait the conve¬ 
 nience of the Commonwealth bank, before it could be 
 paid. 
 
 In addition to the gross violations of law by the bank, 
 to w hich the committee have adverted, we also ascertain¬ 
 ed that the rates of interest, demanded and received upon 
 discounts made at the bank, were far greater than is al¬ 
 lowed by law. Upon this point, we will mention only 
 one instance, w'hich was a transaction in the month of 
 December 1836, to the amount of ^3,500, and upon 
 which the legal interest w^ould have been ^276 08, while 
 the sum actually taken was ^1033 54, making an excess 
 beyond the limits allowed by law, of ^757 46. The 
 violation of law by the bank, in refusing to make to the 
 office of the secretary of the Commonwealth a return of 
 its condition on the first Saturdav of October last, as re- 
 quired by the governor, induced the committee to exam¬ 
 ine into the character of its former returns. 
 
 The last return of the bank, which was made in 1836, 
 of its condition on the first Saturday of Se[)iember in that 
 year, was found to be false in several important particulars. 
 The disclosures upon this point are of so extraordinary 
 a character, that the committee feel bound not only to 
 present a full statement of these disclosures, but also of 
 the manner in which they w^ere elicited. At the first 
 meeting of the committee, no testimony was received ex¬ 
 cept Irorn the president, directors, and cashier of the bank. 
 The testimony of the president and some of the directors, 
 attributed most of the present embarrassments of the bank 
 
18 
 
 FRANKLIN BANK. 
 
 Jan 
 
 to the mismanagement of Hathorne, the former cashier. 
 He was charged with a direct embezzlement of the funds, 
 and that about two montlis before he ceased to be cashier, 
 he was detected in the transaction before referred to, in 
 which he had appropriated ^23,000 of the money of the 
 bank in a speculation in the purchase of beef and pork with 
 another individual, and in which Hathorne was to receive a 
 portion of the profits. It was further testified by the presi¬ 
 dent, and at least two of the directors, that, for three or four 
 months before Hathorne left the bank, they had laicome 
 satisfied, that no reliance could be placed in his integrity ; 
 that the books did not show the actual condition of things ; 
 that in many important particulars they must have been 
 false ; that there had been an over-issue of bills, while the 
 books showed an amount much less than the law allowed, 
 and one of the directors was stationed in the bank to keep' 
 guard of the bills as they should come in, and place them 
 under lock and key, to prevent them from being again 
 put in circulation by the cashier. It was also testified by , 
 the president, that he now believes that the return of 1 836 
 was false, although at the time it was made, and signed, 
 and sworn to by himself, and the other directors, he had 
 no suspicion that it was not correct. The character of 
 this testimony, bearing so severely upon Hathorne, induc¬ 
 ed the committee to summon him before them, and fur¬ 
 nish him an opportunity, if he desired it, to explain the 
 charges made against him. But before the summons was 
 served upon him, a request was presented in his behalf, 
 to one of the committee, for an opportunity to appear be¬ 
 fore us. At the next meeting of the committee, Hathorne 
 appeared. His testimony, voluntarily given,* embraced 
 the whole period of liis connection with the bank as cash¬ 
 ier, as well as his agency in the purchase of Franklin bank 
 
1838. 
 
 SENATE—No. 25. 
 
 19 
 
 stock, as detailed in a former part of this report. He tes¬ 
 tified that the books of the bank for more than a jear be¬ 
 fore he left, did not show its actual condition.—that they 
 were false in all important particulars,—and that the re¬ 
 turn of 1836 was false,—that while by the return it ap¬ 
 peared that the amount of loan was ;|^299,284, the actual 
 loan was nearly ;^370,000,—that while the return showed 
 jgf 134,207 as the amount of bills in circulation, the actual 
 amount was near ^234,000, and that while by the return 
 as well as the books of the bank, the amount of post 
 notes out, w\as given at ^37,500, the actual amount 
 was ^42,000. Hathorne further testified, that this 
 return was designedly false, that it might show a bet¬ 
 ter condition of the bank than was actually true—that 
 he swore to the truth of this return, knowing it to be 
 false, and that the directors who signed and swore to its 
 correctness must have known it to be false—that he told 
 them that there were more bills in circulation than was 
 indicated by the return—and that, for more than a year 
 previous to this time, the circulation had exceeded the 
 limits allowed by law, and that this fact must have been 
 known to the directors, as it was frequentlj the case that 
 there were no bills in the bank, except a few which were 
 so much worn as to be unfit for use. It should here be 
 observed, that each of the directors testified positively, that 
 they had no knowledge of the falsehood of the return of 
 1836, at the time it was made. It should also be ob¬ 
 served, that the committee do not consider any fact as 
 proved, unless it is corroborated by other testimony than 
 the oath of Hathorne, who now stands, by his own volun¬ 
 tary admission, as a witness who has been guilty of wilful 
 and deliberate perjury. That the return of 1836 was 
 false is not now conlraverted by the directors, and no at- 
 
20 
 
 FRANKLIN BANK. 
 
 Jan 
 
 tempt was made by them to show that it was correct. 
 The hook containing the statements of the condition of 
 the bank, purports to show its exact condition on Tues¬ 
 days and Fridays of each week, and the state of the bank 
 as indicated upon this book, as was testified by one or 
 more of the directors, was read at every meeting of the 
 directors for discounts. Neither of the returns of 1836 
 or 1835 compares with any statement upon this book at 
 or near the times at which the returns were called for. 
 It was, however, suggested to the committee, that, as the 
 condition of the bank was called for as it stood upon Sat¬ 
 urday, if the return was correct, it would necessarily vary 
 from the book containing the statements of the bank, 
 those statements being made up for Tuesdays and Fri¬ 
 days, and that the several items in the returns must 
 have been taken from the entries of similar items upon 
 the leger. But, upon turning to the leger, it was ascer¬ 
 tained by the committee, that there are no entries there 
 which indicate the amount of bills in circulation. The 
 bills in circulation were always ascertained at any partic¬ 
 ular time, by counting the bills on hand, and dediicting 
 them from the whole amount which had been filled up 
 and signed by the president and cashier. The circula¬ 
 tion, as entered upon the statement of the condition of 
 the bank, as made np for Tuesdays and Fridays of each 
 week, must have been ascertained in that manner. But 
 as the directors were required in 1835 and 1836 to make 
 return of the condition of the bank as it stood in one case, 
 six weeks, and in the other five months previous to the time 
 when the return was to be made out, we do not perceive 
 how it was possible to ascertain the amount of bills in cir¬ 
 culation, except by the book containing the statements of 
 the condition of the bank. But the returns vary in all 
 
1038. 
 
 SENATE—No. 25: 
 
 21 
 
 iniportant particulars from these statements, and particu¬ 
 larly in the item of hills in circulation. If it was true 
 that at anv time there were no hills in the l)ank fit for 
 use, and that fact was known to the directors, they 
 must have known not only that there was an over-is¬ 
 sue of bills, hut also that the condition of the bank 
 W'as essentially different from any thing wdiich apjieared 
 upon its hooks. The only item in the return of 1836, in 
 addition to real estate and capital stock, which compares 
 exactly with the corresponding item upon the hook con¬ 
 taining the semi-weekly statements of the condition of 
 the hank, is the entry of ^37,500 of jiost notes. That 
 item is the same upon the return and in the hooks, but it 
 was admitted to be false upon both. That the hooks did 
 not show the exact condition of the hank, from the time 
 of making the last return, in 1836, until the failure of the 
 bank in July, 1837, and that this fact became knowai to 
 the directors soon after that return was made, is admitted. 
 The regular hooks of the bank contain no entries of the 
 enormous amount of post notes, bank hooks, certificates 
 of deposites beyond the amount of ^37,500 of post notes, 
 the precise amount allowed by law, the remainder amount¬ 
 ing to several hundred thousand dollars being entered upon 
 a private memorandum book, which was kept in the 
 drawer of the cashier. It w'as admitted by Dunham and 
 Stevens, that the reason for not entering the whole amount 
 of f)ost notes, blue hooks and certificates upon the regular 
 books of the hank was to conceal the illegality of these 
 transactions. It has been stated before, that a great pro¬ 
 portion of the whole amount of post notes, hank books, 
 certificates of deposites, were sold by the hank on its own 
 account, and the avails applied to its own use While, 
 therefore, the avails of these transactions were received 
 
 4 
 
22 
 
 FRANKLIN BANK. 
 
 Jan 
 
 by the bank, and applied to its daily use, and at the 
 same time these immense liabilities against it were not 
 entered upon its regular books, it is manifest that the 
 books of the bank, for the last eight months previous to its 
 failure, contained no correct account of its most impor¬ 
 tant transactions. And it is not pretended by the direct¬ 
 ors, that this state of things was not fully known to them¬ 
 selves. 
 
 In addition to the transactions of the bank which we 
 have detailed, we feel bound to bring to the attention of the 
 Legislature another practice,'which, if it be not a direct vio¬ 
 lation of any particular law, is yet worthy, in the opinion of 
 the committee, of tlie attention of the Legislature ; we 
 allude to the practice of loaning its specie to other banks 
 to be counted as part of their capital, at the commence¬ 
 ment of their operations, and then to be immediately re¬ 
 turned. It was admitted by Dunham, that the specie of 
 the Franklin bank had been counted as part of the cap¬ 
 ital stock, at the commencement of their operations, not 
 only of the Westbrook bank, as is stated in a former part 
 of this report, but also of the Chelsea, Lafayette and Rox- 
 bury banks. 
 
 In the case of the Roxbury bank, he admitted, that the 
 specie of the Franklin bank was carried by himself to the 
 Roxbury bank, and counted by the commissioners, in his 
 presence, as part of the capital of that bank ; and on the 
 same evening was returned by himself to the place from 
 which it was taken. 
 
 The foregoing statements relate to the transactions of 
 the bank, before its failure in July, 1837. But the com¬ 
 mittee also feel bound to bring to the notice of the Legis¬ 
 lature some of its transactions since its failure. 
 
1838. 
 
 SENATE—No. 25. 
 
 23 
 
 Upon the 22d day of September, 1837, the following 
 vote of the board of directors was passed : — 
 
 “ Voted, That the cashier be authorized to receive from 
 the delinquent debtors post notes, bank deposites, or bills 
 of the Franklin bank, in the payment of their notes and 
 checks, and that all collaterals be given up to them, upon 
 the payment of their respective notes and checks in the 
 liabilities of this bank ; and that the South Boston India 
 Rubber Company have the privilege of paying their debts 
 to this bank in the same manner.” 
 
 At a meeting of stockholders, held January 3, 1838, 
 the following vote was passed: — 
 
 ‘‘ Voted, That the directors are authorized and empow¬ 
 ered, immediately after the passage of this vote, to receive 
 in payment of all debts due to the bank from individuals, 
 either as promisers or endorsers, any liabilities of the 
 bank ; also to receive from said debtors, when tendered 
 within fourteen days from this date, their note or notes 
 payable in such liabilities. The amount or amounts of 
 indebtedness to be made up with interest to date, and the 
 old obligations relinquished on settlement as above. 
 
 The stockholders do not seem to have been unanimous 
 in the passage of this vote. It was finally carried, prin¬ 
 cipally by the votes of those who were interested in its 
 passage, in consequence of their large indebtedness to the 
 bank. Under the vote of the directors, it appears, that 
 between that time and January 12th, 1838, ^83,058 84 
 of the debts of the bank were paid in Franklin liabilities, 
 and a large portion of those debts from directors them¬ 
 selves. 
 
 Under the vote of the stockholders, it appears, that 
 notes to the amount of about ^90,000 have been taken, 
 payable in Franklin bank liabilities, in exchange for the 
 
24 
 
 FRANKLIN BANK. 
 
 Jan 
 
 original notes held by the bank. Upon most of the notes 
 thus exchanged, some one or more of the directors were 
 liable as promisers or endorsers, except a large debt of 
 ;^43,000 against the South Boston India Rubber Company. 
 And as several of the directors are members of that com¬ 
 pany, and as the individual members of tliat corporation 
 are liable in their individual capacities for its debts, the 
 interest of directors in having that debt paid in Franklin 
 bank liabilities w’as equally as great as if they had been 
 promisers or endorsers. 
 
 Belbre closing this report, the committee ought to ob¬ 
 serve, in regard to Mr. Josiah Dunham, that, although he 
 has been president of this bank since August, 1836, he 
 can neither read nor write, except that he can write his 
 name. This fact was introduced by Mr. Dunham, as a 
 circumstance tending to show that he could not have had 
 any very accurate knowledge at the time of many of the 
 illegal transactions of the bank, and particularly of the 
 incorrectness of the books. 
 
 The onlv comment which the committee deem it ne- 
 cessary to make upon the facts disclosed by their investi¬ 
 gation, is, that there is scarcely a provision of the charter 
 of this bank, which has not been deliberately and repeat¬ 
 edly violated ; and that, as the corporation were duly 
 notified to appear before the committee, to show cause 
 why their charter should not be declared forfeited, and as 
 the corporation was heard thereon, the committee report 
 that the charter of the Franklin bank be declared forfeited 
 and void; and also report the accompanying bill. 
 
 The com^mittee take much pleasure in acknowledging 
 their obligations to Mr. Charles Hickling, the present 
 cashier of the bank, for the promptness with which he 
 furnished to them all the information within his know- 
 
1838. 
 
 SENATE—No. 25. 
 
 25 
 
 ledge, and the aid which they derived from him in the 
 prosecution of their investigations. Mr. ilickling was 
 first employed by the bank during the past summer, and 
 after the failure of the bank, to ascertain, as far as could 
 be done from the books, the condition of the bank, and 
 subsequently was made its cashier. And we would also 
 observe, that there is nothing in any of the transactions 
 of Hickling, in connexion with the affidrs of the bank, in 
 the least inconsistent with the most perfect propriety of 
 conduct. 
 
 Submitted by order of the Committee. 
 
 L. CHILD, Chairman. 
 
<£:oiumonti3ealtlj of 
 
 In the Year One Thousand Eight Hundred and Thirty- 
 
 Eight. 
 
 AN ACT 
 
 To repeal the Charter of the Franklin Bank. 
 
 Be it enacted by the Senate and House of Represen¬ 
 tatives^ in General Court assembled, and by the authority 
 of the same, as follows: 
 
 1 Sec. 1. That an act, entitled “an act to incorpo- 
 
 2 rate the President, Directors and Company of the 
 
 3 Franklin Bank, in Boston,” passed March the eighth, 
 
 4 in the year of our Lord one thousand eight hundred 
 
 5 and twenty-eight: so much of an act, entitled “ an act 
 
 6 to continue the banking corporations therein named, 
 
 7 and for other purposes,” passed February the twenty- 
 
 8 eighth, in the year of our Lord one thousand eight 
 
 9 hundred and thirty-one, as continued the said corpo- 
 
 10 ration for the purposes of banking : and an act, enti- 
 
 11 tied “an act to increase the capital stock of the 
 
 12 Franklin Bank,” passed February the eighth, in the 
 
28 
 
 
 12 105379561 
 
 A 
 
 J 
 
 FRANKLIN BANK. Jan. 1838. 
 
 13 year of our Lord one thousand eight hundred and 
 
 14 thirty-two, are hereby repealed: provided, that\no¬ 
 lo thing in this act contained shall be so construed, as to 
 
 16 release or absolve the said corporation, or any director 
 
 17 or stockholder thereof, from any liability created by 
 
 18 any provisions of the acts hereby repealed. 
 
 1 Sec. 2. This act shall take effect from and after 
 
 2 its passage.