Financial Institutions
Banks as Foundation Stones
Financial institutions were building blocks for the Firm in its early years.
The largest office, occupied in later years by Colonel Hartfield, looked out between the enormous
columns onto Wall Street.

Hazel Hankin, photographer

A view of wall street from broadway with bankers trust building on the left, 1936

When they started the Firm, DuPratt White and George Case did not have to search far for clients. Within days, the new firm had been retained by American Exchange National Bank, headed by George Case’s father-in-law, Dumont Clarke. The Firm also took on assignments that first year for The Liberty National Bank of New York, of which Harry Davison was president, and First National Bank.
When they started the Firm, DuPratt White and George Case did not have to search far for clients. Within days, the new firm had been retained by American Exchange National Bank, headed by George Case’s father-in-law, Dumont Clarke. The Firm also took on assignments that first year for The Liberty National Bank of New York, of which Harry Davison was president, and First National Bank.
Each of these initial clients stayed with White & Case for many years: Liberty until its 1921 merger into New York Trust Company, whereupon New York Trust became a White & Case client; American Exchange National Bank until its 1926 merger into Irving Bank and Trust Company; and First National Bank for well over half a century. However, the early client that put White & Case on the map—and drove the Firm’s early growth—was Bankers Trust Company. According to the Firm’s register, Case first spoke by phone with Harry Davison about forming a trust company on November 13, 1902. Case subsequently wrote to what was then called the New York State Department of Banking requesting forms to incorporate a trust company. He received those forms on December 13, 1902 and two days later wrote back to the Department of Banking asking for a list of all existing trust companies in the state and other information that would be helpful in creating the new institution. Over the next several weeks, Case threw himself into the job of preparing Bankers Trust’s incorporation papers. This work proceeded rapidly, and the new company opened for business on March 30, 1903. Trust companies were hardly new. The first such institution, Farmers Loan & Trust Co., had been chartered in New York State in 1822. By the beginning of the 20th century, there were nearly a thousand trust companies across the United States, and they were increasing in both number and importance. Bankers Trust was successful in this crowded field and grew rapidly because of an ingenious concept dreamed up by Davison.

letter from sloan colt, president of bankers trust company, 1953 (left)

first White & Case register entry for bankers trust company, 1902 (right)

Davison conceived the idea while serving as a vice-president of First National Bank. With the support of his boss, George Baker, he took the concept to J.P. Morgan & Co., which underwrote Bankers Trust’s initial offering of stock and acquired a controlling interest in the new company. Davison recognized that Bankers Trust would succeed by allying itself as closely as possible with the nation’s commercial banks so that they would refer business to it. He not only pledged that Bankers Trust would refrain from competing with the banks, but also encouraged the banks to invest in Bankers Trust stock, which many did. Whereas $1 million of stock was offered for sale in the initial offering, subscriptions came to a staggering $20 million, causing the share price to double from $150 to $300 on the first day of trading. To cement its relationship with the banks, Bankers Trust filled its board seats with commercial and investment bankers. At its founding, the company’s board of directors included representatives of 11 commercial banks in New York and one each in Chicago, Jersey City, Kansas City and Pittsburgh, as well as representatives of three investment banking firms—J.P. Morgan & Co., Blair & Company, and Kidder, Peabody & Co. A Bankers Trust official remarked, with only a bit of hyperbole, that every commercial banker in the United States personally knew at least one member of the Bankers Trust board. Bankers Trust enjoyed remarkable success. By 1912, its surplus and capital reached $20 million and its deposits were $134 million, making it—in just nine years of existence—the second-largest trust company in the United States. Five years later, in 1917, federally chartered commercial banks were granted trust powers, allowing them to compete directly with Bankers Trust and other trust institutions. That, in effect, released Bankers Trust from its non-compete pledge to the banks, and over the next decade it transformed itself into a full-service commercial bank. In 1917, it acquired Astor Trust Company, which became its first retail branch. In 1919, its bond department began distributing bonds nationwide. In the 1920s, its trust department began offering pension and other employee benefit plans to its corporate customers. In 1928, it formed a subsidiary, Bankers Company, to begin underwriting and distributing both debt and equity securities. This transformation into a full-service bank turned out to be successful, and by 1928 Bankers Trust was the sixth-largest commercial bank in the nation.

bankers trust company
corner of wall street at broad and nassau.

DuPratt White and George Case did more than help incorporate Bankers Trust Company. They advised their new client through its start-up process, and Case helped Davison recruit its first executive team and served on the three-person voting trust that controlled it. The Firm worked side by side with Bankers Trust over the next two-plus decades to help transform it from a single-purpose organization into a full-service commercial bank. The close relationship that developed between the Firm and Bankers Trust from Day One became well known in financial circles, and the Firm’s continuing work for Bankers Trust and other banks established the Firm’s reputation as a leading banking law firm, one that not only provided top-quality legal services but also understood the banking business.
At that time, federally chartered commercial banks were not allowed to engage in the trust business. However, trust companies, which were state-chartered, were allowed to conduct most commercial banking activities, including offering checking and savings accounts and providing loans. When a commercial bank referred a client to a trust institution for fiduciary services, it did so with the uneasy feeling that the trust institution might try to snatch the entire account, fiduciary and commercial alike. To make matters worse for the commercial banks, they were at a competitive disadvantage to the trust companies. Because the trust companies loaned only against secure collateral, their risks were lower, allowing them to pay higher interest rates on deposits. Under the concept devised by Davison, Bankers Trust Company was exactly what its name implied—a trust company for bankers. It welcomed trust accounts referred to it by commercial banks and, in doing so, publicly pledged not to compete with the banks or engage in any aspect of commercial banking. A
Banking Law Journal
article at that time noted: “The fact that Bankers Trust Company will in no way enter into competition with banks for active accounts nor with savings institutions, and its general policy of limiting its operations to a distinctively trust company business, will, it is believed, appeal to all bankers and insure their support and cooperation.”
The client that drove the Firm’s early growth was Bankers Trust.

stock market crash, october 29, 1929
Wall Street, Manhattan

Fallout from the 1929 crash
On Black Tuesday, October 29, 1929, the stock market crashed in New York. The Great Depression ensued and continued throughout the next decade. Both the Firm and its banking clients had to take the economic realities of the Great Depression into account in deciding how to run their businesses. Bankers Trust adopted a general retrenchment program to address the initial downturn in economic activity, but it kept pressing ahead with the mortgage, real estate and investment activities of its fiduciary division and, in the mid-1930s, began making loans to help companies rebuild as they began to recover. The Firm focused on helping Bankers Trust and its other banking clients deal with the challenges they faced, including advising on the new laws adopted by the U.S. Congress to address what it believed to be the causes of the financial crisis. One of these laws that had a significant effect on the banking business for years to come was the Glass-Steagall Act of 1933. This act erected a wall between commercial banking and investment banking and required commercial banks to exit from and cease in the future from engaging in the securities underwriting business. Bankers Trust closed Bankers Company as required by Glass-Steagall. Other banks took similar action. Further laws adopted by Congress to address the causes of the financial crisis affected corporations as well as banks and led to additional work for the Firm during the 1930s
(see Chapter Three)
. Congress approved other initiatives as part of President Roosevelt’s New Deal program to combat the Great Depression. One of the laws adopted established the Reconstruction Finance Corporation (RFC), the mandate of which was to save the banks that were failing across the nation. The RFC carried out its mandate with vigor, and the existence of the RFC had at least one other positive result for the Firm. Claude Hamilton joined the RFC shortly after its formation and rose through the ranks to become its general counsel. In 1942, when banking partner Tracy Vought died, Hamilton left the RFC for White & Case
(see profile)

The great depression
Breadline for the needy in New York City, 1930.

The changing nature of the banking business during the 1950s through the 1970s is reflected in the transformation of Bankers Trust’s business during this period. After becoming a full-service commercial bank, Bankers Trust focused primarily on its wholesale business with a customer base composed of large corporations and wealthy individuals, but it also developed its retail operations. In 1955, it acquired Public National Bank, which had the fourth-largest branch network in New York City. Its retail business peaked in the late 1960s and early 1970s as part of an expansion and diversification plan that included moving into international, real estate, construction and middle-market lending, including factoring and equipment leasing. By the mid-1970s, Bankers Trust had concluded that its retail operations were not able to compete effectively with banks with much larger branch networks. It decided to exit the retail banking business and convert itself into a European-style merchant bank that would offer a full range of commercial and investment banking products. By the end of the 1970s, it had divested most of its branches and was concentrating on both commercial and investment banking products. The Glass-Steagall Act, however, was still on the books, and it stood in the way of the development by Bankers Trust of a number of investment banking products, one of which was the marketing of commercial paper. Undeterred, Bankers Trust became the first bank in the United States to market commercial paper, a move that was “loudly opposed by the securities industry,” in the words of
magazine. The Securities Industry Association (SIA) petitioned the Federal Reserve Board (FRB) to declare Bankers Trust’s commercial paper activities illegal. The FRB rejected the petition, ruling that commercial paper was not a “security” for Glass-Steagall purposes. The SIA then sued in federal court, leading to a 1984 U.S. Supreme Court decision that commercial paper was, in fact, a security. However, this proved to be a Pyrrhic victory for the securities industry. Instead of prohibiting Bankers Trust from marketing commercial paper, the court sent the matter back to the FRB for further review. In light of the Supreme Court ruling, the FRB told Bankers Trust that its method of marketing commercial paper amounted to the underwriting of corporate securities by a bank in violation of Glass-Steagall. But the FRB temporarily suspended the enforcement of its ruling to give Bankers Trust a chance to demonstrate that this interpretation was wrong. With White & Case’s assistance, Bankers Trust then convinced the FRB that its commercial paper activity did not violate Glass-Steagall because it entailed distribution, not underwriting. When Bankers Trust received a green light from the FRB to continue with its commercial paper activity, the SIA went back to court but lost at the appellate level. In 1988, the Supreme Court declined to review the appellate court decision. With the help of the White & Case team led by John Barnum, Paul Friedman, Laura Hoguet and Duane Wall, and assisted by then junior associate Chris Curran, Bankers Trust established its right to market commercial paper, which was a first, small crack in the Glass-Steagall Act. Soon, other banks joined in the fray, and their relentless pressure led to the evisceration of Glass-Steagall and the emergence of multiservice financial providers. Congress repealed most of the Glass-Steagall Act in 1999 with the adoption of the Gramm-Leach-Bliley Act. In the wake of the 2008–2009 financial crisis in which Lehman Brothers went bankrupt and governments in the United States and Europe were compelled to bail out banks and other financial institutions, some have called for the reinstatement of Glass-Steagall, though as of now no well developed proposals have been introduced.
Changing nature of the banking business
The close relationship between White & Case and Bankers Trust was one of the reasons the Firm opened an office in Paris in 1926. Bankers Trust established operations in Paris in 1920 and in London in 1922 and by the late 1920s was one of the leading U.S. banks in Europe. The opportunity to spend time in the Firm’s Paris office gave a number of the Firm’s lawyers valuable international experience. Bankers Trust also played a key role in the development of the Firm’s non-U.S. bank clientele. As World War II approached, Swiss Bank Corporation (now UBS) undertook a review of its operations and, on the recommendation of Bankers Trust, retained White & Case to advise it on opportunities in the United States. This led to the opening by Swiss Bank of an agency in New York City in 1938, and the addition of Swiss Bank as a client helped the Firm establish its reputation as a leading law firm for non-U.S. banks as well as U.S. banks. The Firm’s non-U.S. bank clients continued to grow in number over the years. In the mid-1970s, Deutsche Bank retained White & Case to help it with a litigation matter, was pleased with the result achieved by the Firm and then asked the Firm to help it open an agency in New York City in 1978. Deutsche Bank remained a client of the Firm until and after its acquisition of Bankers Trust in 1999. During the early years after World War II, the Firm began to represent The Prudential Insurance Company of America in its private placement activity. Glover Johnson
(see profile)
was responsible for bringing Prudential to the Firm through his contacts with the vice-president in charge of Prudential’s private placement business. Jack Tennant did most of this work after he became a partner in 1948. When Tennant left the Firm in 1953 to become general counsel of U.S. Steel, Bill Williams took over responsibility for the work and handled it successfully until he retired in 1980. The Firm’s private placement work for Prudential was substantial, and handling these financial transactions became an important part of the career development of many banking and corporate associates. The Firm also did private placement work for other insurance companies, including Aetna Life Insurance Company, American General Life Insurance Company, John Hancock Life Insurance Company and New York Life Insurance Company. The close relationship between the Firm and Prudential led, in turn, to the Firm’s representation of Prudential and other lenders in the $1.7 billion financing in 1975–1976 of the construction of the Trans-Alaska Pipeline from Prudhoe Bay to the port of Valdez. At the time, this was one of the largest private placements ever undertaken for a construction project.
Expansion to non-U.S. banks
Monty Hatch
Vermont (“Monty”) Hatch came to the Firm in 1916 after graduating from Columbia Law School. He started his career as a litigation associate, working with Colonel Hartfield, and continued as a litigator upon becoming a partner in 1925.
After heading the Paris office in 1930 and 1931, Hatch returned to New York and switched from litigation to banking law. He was one of five members on a newly created management committee in 1935 when George Case began to withdraw from active management. He advised Swiss Bank, on the recommendation of Bankers Trust, when Swiss Bank applied to open for business in New York, and then became the relationship partner for Swiss Bank for the rest of his career. At the outbreak of World War II, Hatch was retained to advise on the U.S. government’s newly inaugurated Regulation V loan guarantee program for defense contractors. He prepared the first Regulation V loan agreement, which had to meet the requirements of the lending bank, guaranteeing agency, borrower and Federal Reserve Board. That initial document became the model for all subsequent Regulation V loans throughout the war. Otherwise, he became renowned for his drafting of loan agreements, both for lenders and borrowers. In 1952, he returned to his first area of practice, litigation, and was involved in a celebrated case in which the Bush Terminal Buildings Company successfully defeated objections by two shareholders to a plan of recapitalization. Hatch was a perfectionist and a workaholic, seldom leaving the office before 10 p.m. He would often take his associates out to dinner, where they would continue to work before returning to the office. Hatch served for a number of years as a trustee of Columbia University, for which he also acted as outside counsel. He died in 1959 at age 66.
Glover Johnson
Glover Johnson, sometimes referred to by his younger colleagues at the Firm as “God in a double-breasted suit,” was another key partner who joined the Firm in the period between the two world wars and became a partner in 1936. Johnson was an extremely capable corporate lawyer who got along well with people and brought significant business to the Firm, such as the legal work for Prudential on its private placements after World War II.
Following the deaths of Joe Bennett and Monty Hatch in the 1950s, he became active in the Firm’s relationship with Bankers Trust. He was widely sought as a corporate director, serving on the boards of International Minerals & Chemical Corporation, F. & M. Schaefer Corporation, Federal Paper Board, Arnold Bakers and Agfa-Gevaert. He was selected as chairman of the Firm’s management committee in 1969 and served in that capacity for two years. He died in 1973 at age 72.
Claude Hamilton
Gracious and charming, Claude Hamilton was the epitome of the Southern gentleman. He earned his undergraduate and law degrees from the University of Alabama and practiced law in that state before moving to Washington, D.C. in the 1930s to join the Reconstruction Finance Corporation (RFC) as a lawyer.
He became the RFC’s general counsel in 1937. The RFC bought shares in the nation’s failing banks by using the vast funds at the RFC’s disposal ($500 million in cash and $1.5 billion in government-guaranteed tax-free bonds) with the aim of their eventual rescue. Many of the banks were ultimately able to reacquire their stock, ending government ownership. Hamilton, as RFC’s general counsel, was deeply involved in these efforts to save the banks and then return them to private ownership. In the process, he became an authority on banking law. He was a close friend of U.S. Supreme Court Justice Hugo Black, and according to
The New York Times
, when Black gave his radio address in 1937 acknowledging that he had been a member of the Ku Klux Klan, he did it from Hamilton’s living room. In 1942, while Hamilton was still at the RFC, White & Case partner Tracy Vought died, and the Firm needed an experienced lawyer for its banking practice. Colonel Hartfield thought immediately of Hamilton, whom he knew through Jesse Jones, a Texas businessman, chairman of the RFC and by then U.S. secretary of commerce. Hamilton joined the Firm with the promise he would be made a partner as soon as he passed the New York Bar, which he did in 1943. He then worked with many of the banks the RFC had rescued. He became the Firm’s senior banking partner following the death of Monty Hatch in 1959. He became of counsel in 1975 and retired completely in 1979. He died in 1983 at age 84.
Bill Knox
Bill Knox was one of those most responsible for the continuing success of the Firm’s banking practice in the 1950s and the years that followed. Knox joined White & Case in 1941 upon graduating from Harvard Law School, but was almost immediately drafted into the Army, serving in a tank battalion in Europe. He returned to White & Case after the war and became a partner in 1955.
Knox was small and slender, and was very intense in his work. “He had a Tennessee accent, but he thought fast and talked fast,” recalled Jim Hurlock, who joined the Firm in 1959 and observed Knox at close quarters. Widely known as one of the leading banking lawyers of his time, he was highly intelligent and well respected both within the Firm and throughout the legal profession. Knox had close relationships with Bankers Trust, Deutsche Bank, Swiss Bank and many of the Firm’s other banking clients. He helped many non-U.S. banks open branches, agencies or representative offices in New York. He dealt regularly with regulators at the Federal Reserve Board, the Office of the Comptroller of the Currency and the New York State Banking Department. His knowledge of banking law was encyclopedic, and his interpretations were taken as gospel throughout the banking and legal communities. He was often called upon by clients, as well as lawyers inside and outside the Firm, to interpret federal and New York State banking statutes and regulations. “Bill was a very impressive figure, and the whole Firm thought the world of him,” observes Sean Geary, who joined the Firm in 1974 and would become one of the top leveraged finance lawyers in the country, “but I always found it very hard to understand him!” Trim and ever the picture of good health, Knox suffered a heart attack in 1981 while dancing with his wife at the Waldorf Astoria Hotel, dying hours later at age 64.