Bank of United States
| Company type | Private |
|---|---|
| Industry | Banking, financial services |
| Founded | June 23, 1913, New York City, United States |
| Founder | Joseph S. Marcus |
| Defunct | 1931 |
| Fate | Insolvency and closure following bank run |
| Headquarters | New York City , United States |
Area served | New York City and surrounding areas |
Key people | Joseph S. Marcus (founder), Bernard K. Marcus (vice president, later president) |
The Bank of United States was a privately owned financial institution based in New York City that operated from 1913 until its insolvency in 1931. Established by Joseph S. Marcus, the bank experienced rapid expansion between 1925 and 1929, increasing its branch network more than twelve times to surpass 60 locations through a series of mergers and acquisitions.
A notable bank run at its Bronx branch in December 1930 is widely regarded as a significant catalyst for the widespread banking collapses during the Great Depression.
Founding
The Bank of United States was chartered on June 23, 1913, with an initial capital of $100,000 and a surplus of $50,000, situated at 77 Delancey Street, New York City. Joseph S. Marcus, who had previously served as president of Public Bank on Delancey Street, founded this new institution following internal disputes at Public Bank. Although some directors at Public Bank opposed the chosen name—fearing it might mislead immigrant customers into believing the bank had government backing—the name was ultimately accepted. While the use of such names was prohibited starting in 1926, banks already using them were grandfathered in.
Marcus, a Jewish immigrant born in Telz, Brandenburg (Germany) in 1862, arrived in the United States at age seventeen. He progressed from working as a tailor to becoming a banker, founding Public Bank in 1906 and later establishing the Bank of United States in 1913. Marcus passed away on July 3, 1927. Renowned for his charitable work, he supported institutions such as Beth Israel Hospital and the Hebrew Association for the Blind. His son, Bernard K. Marcus—educated at Worcester Academy and Columbia University—joined the bank as cashier in 1913 and advanced to vice president by 1918.
Growth
Initially, the bank expanded modestly, maintaining only five branches by 1925. Following Joseph Marcus’s death, his son Bernard—who had overseen operations since 1919—accelerated growth through mergers and acquisitions, resulting in a network of 62 branches by 1930. In April 1928, the bank merged with Central Mercantile Bank and Trust Company with Bernard Marcus assuming the presidency. Later that year, it absorbed Cosmopolitan Bank.
In April 1929, acquisitions included Colonial Bank and Bank of the Rockaways. By May of that year, after merging with Municipal Bank and Trust Company, it ranked as the third largest bank in New York City and twenty-eighth nationwide. Despite the stock market crash later that year, Bernard Marcus reassured investors by announcing a book value of $60 per share along with a $2 dividend for 1929.
In mid-1930, plans were announced for a major consolidation involving four leading New York banks—Manufacturers Trust Company, Public National Bank and Trust Company, International Bank and Trust Company, and Bank of United States—aiming to create a large-scale institution under J. Herbert Case from the Federal Reserve Bank of New York. However, on December 8, 1930, this merger was called off due to challenges related to securing deposits connected to legal complications and real estate loans held by affiliated subsidiaries. Shortly thereafter, on December 10, a run occurred at one of its Bronx branches.
Failure
On December 10, 1930, a significant crowd assembled at the Bronx's Southern Boulevard branch to withdraw their money, sparking a bank run frequently identified as a key trigger of the Great Depression. This event followed earlier withdrawal surges in the southeastern United States beginning in November 1930. The New York Times linked the panic to an unfounded rumor spread by a local merchant and shareholder alleging that the bank had refused to sell his stock.[1]
By midday, between 20,000 and 25,000 individuals had gathered, necessitating police involvement. That day alone, approximately 2,500 to 3,000 depositors withdrew around $2 million, although the majority of the 7,000 depositors present did not remove their funds. Smaller-scale runs also took place at other Bronx branches and in East New York, Brooklyn.[1]
Anticipating additional runs the next day, the bank’s board decided to close operations and requested New York Superintendent of Banks Joseph Broderick to assume control over its assets.[2] The bank’s shares plummeted from an annual peak of $91.50 (and a record $231.25 in 1928) to lows near $2.00 amid a wider downturn in the banking sector.Cite error: The opening <ref> tag is malformed or has a bad name Broderick pursued a merger with three other banks; however, prominent Wall Street firms declined involvement, possibly influenced by anti-semitic sentiments. Without securing a crucial $30 million bridge loan, efforts to rescue the bank were unsuccessful.Cite error: The opening <ref> tag is malformed or has a bad name
Initially, both bank officials and other New York financial institutions expected the bank to reopen within weeks. The New York Clearing House Association extended loans to depositors amounting to 50% of their deposits. Concurrently, investigations were launched into accusations that the bank had sold stock with unfulfilled one-year loss guarantees. The District Attorney's office examined potential criminal conduct. As panic intensified, police prevented depositors from entering the premises. Meanwhile, Mayor Jimmy Walker initiated legal proceedings to reclaim $1.5 million in city funds held by the institution. Deposits sharply declined from $212 million on October 17 to $160 million by December 11.[2]
The collapse sent shockwaves through the banking community; it was the first major failure of a New York bank since the 1929 stock market crash and represented the largest failure since the Knickerbocker Trust Company’s demise in 1907.Cite error: The opening <ref> tag is malformed or has a bad name Authorities swiftly implemented programs enabling depositors to borrow against their deposits in an effort to restore confidence.Cite error: The opening <ref> tag is malformed or has a bad name Loan disbursements commenced on December 23, drawing overwhelming demand that resulted in long queues and many depositors left unserved that day.Cite error: The opening <ref> tag is malformed or has a bad name
Aftermath
Shortly after the Bank of United States ceased operations, the Chelsea Bank was placed under the Superintendent of Banks’ control amid allegations that the Communist Party of America was orchestrating a run, with claims that Soviet Union-backed short sellers were involved. At the same time, a $50 million lawsuit was filed against the bank’s directors by stockholders accusing them of negligence and mismanagement. One depositor holding $20,000 committed suicide, while the Equity Casualty and Surety Company—which had invested over $1 million in the bank’s shares—filed for bankruptcy.
Out of 608 bank closures occurring in late 1930, the Bank of United States accounted for one-third of the $550 million in lost deposits, marking a pivotal moment in banking failures. This collapse triggered widespread withdrawals from other banks nationwide, forcing many institutions to recall loans and liquidate assets to maintain liquidity. Over 300 banks failed across the country during that month alone.
Following its downfall, the bank’s building on Delancey Street was purchased in 1932 by the Hebrew Publishing Company.
References
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