MISMANAGEMENT AND OTHER TROUBLES 79 
stockholders. In 1868 Cooke and Huntington of 
the First National Bank, both trustees of the 
Freedmen’s Bank, secured control of the com- 
pany, over-capitalized it, declared a stock divi- 
dend to the original incorporators, issued a lot 
of first and second mortgage bonds, which were 
placed on sale, and then speculation began.” 
As the Freedmen’s Bank offered an easy mark, 
from it a loan of $51,000 was secured in 1871, 
and $49,000 in second mortgage bonds and 
£20,000 in first mortgage bonds were given as 
collateral.®® The second mortgage bonds were 
generally known to be valueless, and, the fact 
of the loan becoming public, attacks were made 
by the newspapers upon the bank management.® 
Thereupon Eaton, the actuary, went to Kilbourn 
and Evans, real estate brokers and appraisers 
for the bank, and made an agreement with them 
and with the Seneca Sandstone Company to 
change the form of the loan and thus protect the 
finance committee from hostile criticism. The 
account of the Seneca Company was then closed, 
the loan being transferred on the books to Kil- 
bourn and Evans, who gave their joint note, 
% The property of the Seneca Sandstone Company cost $120,000; 
the company was incorporated with a capital stock of $500,000, later 
raised to $1,000,000, and a stock dividend of $300,000 was declared. 
Not more than enough money was collected from stockholders to pay 
the original cost of the property. It was charged that noted men re- 
ceived blocks of stock free in return for the use of their names, but the 
charge was not proved. See Douglas and Bruce Reports, passim. 
3 An earlier transaction in 1870 was the “loan” of $18,000 upon 
$20,000 first mortgage Seneca bonds, but it was testified that there was 
no intention on either side of redeeming the bonds—they were to be 
considered an investment. . 
Tt was charged that loans secured by collateral of this kind were in 
violation of the charter of the bank. It was at this time that Ketchum, 
of the board of trustees, after objecting in vain to such loans, resigned.