Financial institution closings and CEOs leaving with "golden parachutes." Questionable loan practices. Panic on Wall Street and worries on Main Street. Finally, a financial bailout.
Sounds like recent headlines out of newspapers and in the general media, right?
While true, these problems didn't always happen on Wall Street. We go back this time to 1912 and will find a slightly similar situation in New Berlin.
Frank T. Arnold was considered the leading businessman of New Berlin, as cashier of the First National Bank of New Berlin. Highly respected in the community, Arnold lived in the elaborate Manor House, which we know today as Preferred Manor. He had servants and a life of luxury.
An $1,800 annual salary with the bank wasn't enough to cover such a lavish lifestyle, so something strange was going on for more than a generation, as early as 1863.
Local businesspeople, farmers and retirees put their large deposits and securities in the hands of Frank T. Arnold with full faith. Arnold persuaded his clients to not purchase safe deposit boxes, as he considered these a waste of their money.
Portions of those funds that were put in Arnold's hands, however, began taking a path to his own pockets. The life of the cashier got increasingly more well-to-do as the years went on. If and when he was asked how he could do it all on a cashier's salary, Arnold explained the money came from a hefty estate of his deceased wife's family. The bank's board of directors never questioned Arnold's good reputation and judgment, as they probably had no idea what was going on.
Arnold entertained many guests at his lovely home, but some guests didn't turn out to be friends. Some apparently caught on to how Arnold was living the high life and thought they could take advantage of him.
One day in 1912, Charles H. Holland, a former guest from New York, paid Arnold a visit at the New Berlin bank. Holland was connected to a criminal gang from New York City who tried to force Arnold to buy a certain stock. Holland flashed some letters he had in front of Arnold, which Holland claimed were of importance and of such scandalous nature that could bring disgrace and dishonor to the trusted cashier "" if the contents became public property. Arnold was given a set time to get the money for what was essentially worthless stock.
Arnold never read those letters, which turned out to not be scandalous at all. No matter which way he turned, Arnold was in deep trouble. He didn't buy the stock, but in desperation consulted with the bank's attorney. Holland came back to get his money and was promptly arrested.
News of that arrest cast a dark cloud over the bank, and depositors began to ask what did Holland know of their trusted cashier who held their savings and securities. Many depositors withdrew their holdings in late March and early April in what was described as "not a panic situation." Nevertheless the bank closed on April 11.
Bank examiners were brought in and found what Arnold had been taking over the years. The initial deficit was about $250,000, but according to The Otsego Farmer during April and May, those numbers went higher by the week, ending at around $400,000.
Arnold didn't get a "golden parachute" for his years of service. At first he was placed under guard at his home. The Otsego Farmer reported of quite a scene when Arnold was first taken to jail in Norwich.
"The crowd shouted Bring Him Out! Burn Him Out! String Him Up!' It was a long time before United States Marshal Foster Black dared to bring the cashier out, place him in an automobile and whisk him away to jail. The mob was composed of 400 citizens of New Berlin, all of them worked up to a dangerous pitch."
Arnold was eventually sentenced to 10 years in Atlanta Federal Prison, but died before serving his sentence.
Many lost a lot of money from this bank fiasco. Some of it was recovered after an auction was held at Arnold's home and returned to depositors. A new bank, the National Bank of New Berlin, opened in early June 1912.
On Monday: We'll put a freeze frame on local life in October 1968.
City Historian Mark Simonson's column appears twice weekly. On Saturdays, his column focuses on the area during the Depression and before. His Monday columns address local history after the Depression. If you have feedback or ideas about the column, write to him at The Daily Star, e-mail simmark@stny.rr.com. His website is www.oneontahistorian.com
Print this story
E-mail this story
