In the case of Williams v. Cobb, 1916, the U.S Supreme Court was tasked with determining whether a receiver for an insolvent national bank could recover payments made by the bank to a creditor shortly before it failed. The defendant, Mr. Cobb had received payment from First National Bank of Mineral Point in Wisconsin as part of his debt settlement just days before it went bankrupt and receivership was declared. The plaintiff, Mr. Williams who served as the receiver for this insolvent bank argued that these payments were preferential and should be returned to distribute among all creditors equally. The court ruled in favor of Williams stating that under Section 5242 Revised Statutes (U.S.C., Title 12), such transactions are deemed void if they occur within four months prior to insolvency proceedings being initiated against a national banking association; provided there is reasonable cause to believe that fraud or intent to prefer one creditor over others existed at time when such transaction took place. This ruling established precedent regarding fraudulent preference in bankruptcy law - particularly concerning timing and knowledge on part of both debtor and preferred creditor.

In the dissenting opinion for Williams v. Cobb, it was argued that the majority's decision to allow a receiver of an insolvent bank to recover money paid out by the bank prior to its insolvency was incorrect. The dissenting justices believed this ruling contradicted previous court decisions and common law principles which state that receivers can only recover payments made in bad faith or without fair consideration. They contended that there was no evidence suggesting these payments were not made in good faith or without fair value received by the bank, thus they should not be recovered. Furthermore, they asserted that allowing such recovery would disrupt commercial transactions as parties could never be certain their dealings with a solvent corporation would remain secure if it later became insolvent.