slow or undesirable assets, in some cases in an amount almost equal to the capital structure of the unit institution. The amounts were as follows, as reported to me:

Union Guardian Trust Co---

City National Bank & Trust Co., Battle Creek.
National Bank of Iona.

City National Bank & Trust Co., Niles.

Guardian Bank of Dearborn__

Guardian Bank of Grosse Pointe

Grand Rapids National Bank__

Guardian Bank of Trenton_

$7,500,000.00 198,068, 93

149, 468.90

148, 491.00

130, 616. 79

99,590. 18

92, 353. 04

78, 030. 90

Thus, in the case of the Union Trust Co., the Group Co. replaced the entire capital and surplus of that institution.

Senator COUZENS. May I interrupt you at that point: Where did you get the money to purchase those securities, from the dividends that you got from the paying institutions?

Mr. LORD. Senator, I think it is very difficult to earmark money. I would say it was from the borrowings of the Group Co., not from the dividends.

Senator COUZENS. I do not ask you to earmark the money, but did you relieve these units of these slow and doubtful assets by dividends received from the units?

Mr. LORD. Received from the units? No, sir; by borrowing money by the Group Co.

Senator COUZENS. Was that the only source that you had?

Mr. LORD. That was the source that was used. The situation in Michigan during the years 1931 and 1932 was probably more acute as regards bank failures than in any other State in the Union. In cities where our own units were located many failures occurred in spite of every aid to these competing banks that we could and did render. I have here a map of the State, prepared early in 1933, showing the bank failures throughout the State, and I would like to show it to this committee.

It is rather an interesting picture. [Exhibiting map.] There are 195 banks pictured there. The towns that are starred were left with no banking facilities whatever. In cases where they are marked with a number 2 or 3 it means 2 or 3 banks in the community have failed. That is in the period from January 1, 1931, to February 25, I think it was, 1933.

Mr. PECORA. Have you any reproductions of those?

Mr. LORD. I have some small ones, Mr. Pecora. They are not very clear.

Mr. PECORA. Would you let the committee have as many copies as you can gather?

Mr. LORD. They may have them all [handing copies]:

Mr. PECORA. I think we might offer this chart produced by the witness in evidence.

Senator COUZENS. Following up my earlier inquiry, Mr. Lord, where did you borrow this money from that you used to relieve these banks of their slow assets?

Mr. LORD. Senator, most of that money was borrowed from New York and Chicago banks, practically all of it, and I cover it a little later. May I read it, and if I have not answered the question I will be glad to?

Senator COUZENS. All right.

The CHAIRMAN. Let the chart be admitted and entered on the record.

(Chart presented by Mr. Lord showing bank failures in the State of Michigan from Jan. 1, 1931, to Feb. 25, 1933, was thereupon designated "Committee Exhibit No. 2, Dec. 19, 1933 ", and is reproduced herewith.)

Mr. LORD. The effect upon the deposits of open banks where a closing occurs in the same or a nearby community is always serious and was particularly so during those years when lack of confidence and fear were so prevalent in the public mind.

Another interesting situation that I might comment upon that took place in Michigan during that period was the fact that many banks who called themselves open-and there were literally county after county where this occurred-presented a situation where a man who tried to cash a check for a hundred dollars must be given $5 or $10. In other words, those banks held their doors open by brute strength, and there was no one in the community who wanted to see them close it, and they did the best they could, but it made a very difficult banking situation.

It may also be of interest to this committee to know what the situation is of the largest unit of the group, the Guardian National Bank of Commerce. That bank was a consolidation of the Guardian Detroit Bank, Bank of Detroit, and National Bank of Commerce, which latter bank had some previously absorbed the Griswold National Bank. I might say that, as shown on this chart, the Griswold National Bank had previously absorbed the First State Bank.

When these three banks were separate institutions they reported on December 31, 1929, total deposits of $190,609,633.78. When the final consolidation was completed December 31, 1931, the deposits were $169,058,328.36. On December 31, 1932, deposits were $138,385,923.37. After the bank had been refused a license to reopen after the holiday and was in the hands of a receiver 40 percent was paid to the depositors by the middle of the summer of 1933. Since then an additional 20 percent has been paid and plans are being completed for an additional 5 percent. Taking into consideration the current withdrawals made in normal course of business since December 31, 1931, that is, the date of the consolidation, and figuring as nearly accurately as I can without access to the bank's records, the deposit liability of approximately $33,000,000 remaining after this last 5percent payment-I say deposit liability as contrasted with contingent liabilities that come to a bank at its closing, such as rentals. Senator COUZENS. Have you any estimate of that, Mr. Lord?

Mr. LORD. Very rough estimate. I should say they have set up four or five millions. That is the figure that I have heard, Senator, but I do not think it will take any such figure.

Senator COUZENS. That is for the leases and other claims?

Mr. LORD. For leases and other claims besides the depositors. The deposit liability of approximately $33,000,000 remaining after this last 5 percent payment means that during the period of less than 2 years, nearly 1 year of which the bank was closed, the bank has paid out to its depositors about $136,000,000, or nearly 80 percent of its deposits of December 1931. It is true that this was made possible

which amounted in the aggregate to $3,595,000. He was later reimbursed in part by the other stockholders of the Flint Bank.

Second. When the Group Co., in December 1931, found it neces sary to borrow, Mr. C. Mott loaned his credit on a note of the Group Co. with the Bankers Trust Co. of New York to the extent of $2,500,000.

Third: Late in 1930 Mr. Edsel B. Ford loaned to the Guardian Detroit Co. $1,000,000 in cash and also loaned to that same corporation-that was the securities company-approximately $5,000,000 of his personal securities.

Fourth: In December 1931 Mr. Edsel B. Ford loaned his credit to the Group Co. on a loan of $2,500,000 with the Continental Bank in Chicago.

Fifth: The Ford Motor Co. in December 1932 loaned the Group Co. $3,500,000 with which funds the Group Co. lifted out of the Union Guardian Trust Co. $3,500,000 of criticized assets.

Sixth. In December 1929 certain of the directors of the Guardian Detroit Group loaned their credit to the extent of $1,600,000 maximum, of which about $1,100,000 is now used, on a loan with the Bankers Trust Co. of New York, made for the purpose of carrying distress loans of certain officers and employees of the units of the Guardian Detroit Group.

Seventh: In November 1929, in order to relieve the Guardian Detroit Co. of part of its heavy inventory, a certain small group of stockholders purchased from that company, at $180 per share, 18,800 Group shares at a total cost of $3,384,000.

Eighth: In the early winter of 1930-31 certain individual stockholders agreed to subscribe for a total of approximately 93,000 shares of Group stock, to be bought from time to time in the open market at not to exceed $60 per share, the purpose of these purchases to stop or retard the decline in the quoted price of Group shares which was adversely affecting the institution's standing with an already hysterical public. That cost over $1,000,000.

Ninth: In the fall of 1930 certain individual stockholders put up $400,000 in cash through a company known as the Natum Corporation to purchase certain of the inventory of the Guardian Detroit Co., to provide funds for reduction in the loans of that company. These various items added together show that the larger stockholders contributed, in order to strengthen and stabilize the entire situation in the protection of the depositors, an aggregate of nearly $27,000,000.

Senator Couzens, that is where your money came from that lifted out the eight million four. Does that answer your question, sir? Senator COUZENS. Yes; except that you said that you got it from New York and Chicago banks, I understood.

Mr. LORD. Yes, sir.

Senator COUZENS. And these loans from New York and Chicago banks were guaranteed by these stockholders?

Mr. LORD. Yes, sir.

Senator COUZENS. That answers it.

Mr. LORD. Mr. Chairman, I do not know exactly what this committee wants, but I am here to cooperate in any way that I can. The CHAIRMAN. Did any of these banks subsequently reopen as shown on this chart?

y the aid of the Reconstruction Finance Corporation, but there ere no loans remaining from the Reconstruction Finance Corporaion until the first 20 percent payment was made.

I might state there that in paying and completing the 40 percent he Reconstruction Finance Corporation loaned the receiver of the uardian National Bank of Commerce four million three hundred inety-one thousand and odd dollars; I think that is the correct figre. The National Bank of Detroit had when it opened brought bout 13 million dollarsr of the loans which enable the 40 percent ayment, and by the end of the summer the Reconstruction Finance oan had been back in full and most of the loans taken by the National Bank of Detroit had been liquidated.

Mr. PECORA. Pardon me, Mr. Lord; that National Bank of Detroit o which you have just referred was a new bank that was organized n the spring of the current year?

Mr. LORD. It was a new bank that was organized this year. I hink it opened on March 24. In my opinion, with proper handling of the remaining assets and any reasonable recovery of business, the lepositors will receive 100 cents on the dollar. Personally, I do not now of any closed institution with conditions in any way comparble where the showing is as good.

In 1929 Guardian had a definite plan to acquire bank shares in nstitutions in certain of the principal cities of Michigan, cities where ndustry was closely allied with the industries of Detroit. In no ommunty did we desire or attempt to have a banking monopoly. There were many cases where bank shares were offered to and delined by our group, not only in cities where we already had a unit out in other communities. Our original program adopted in 1929 was completed early in the year 1930 and except for the Guardian Bank of Royal Oak which we organized in that city of upwards of 20,000 people at the request of its citizens because the three banks formerly serving that city had long since been closed, there were, I believe, no further additions of banking units to the group.

I have already stated that there were undoubtedly many errors in judgment. Broadly speaking, the greatest mistake of the Group was that it was organized at the peak of the Nation's prosperitythat we along with others were unable to foresee the conditions which were to follow that long period of prosperity and expansion of business. During almost the entire history of the group it was engaged in a battle against a depression probably never before equalled in its severity in the history of the world and the consequences of which were felt more acutely in Michigan and in Detroit than in any other section of this country. In this battle against the depression, most of the larger stockholders contributed enormously to support and stabilize the situation. Here are some of the instances:

First. In the late fall of 1929, when negotiations were in progress for the merger of the Guardian Detroit Group and the Union Commerce Corporation, a series of defalcations were discovered in the Union Industrial Bank of Flint, the stock of which bank has been or was being acquired by the Union Commerce Corporation. Mr. C. S. Mott, from his own resources, made good these defalcations,

Mr. LORD. On that State chart?

The CHAIRMAN. Yes.

Mr. PECORA. That is the chart which has been presented by Mr. Lord and marked "Committee Exhibit No. 2".

Mr. LORD. I cannot tell you, Senator. It has been a changing situation. There has been a very substantial number of State banks reopened on a reorganization or on a partial withdrawal basis.

Senator COUZENS. There is one statement I would like to have you clarify, and that is you say that this sum of $27,000,000 was advanced for the purpose of protecting the depositors. Is that quite an accurate statement?

Mr. LORD. For either protecting the depositors directly or stabilizing the situation which was so disturbing to the depositors, Senator. Senator COUZENS. Have you any figures to segregate that money that was put up for the protection of the stock in the group or the banks, as distinguished from that money that was put up for the protection of the depositors?

Mr. LORD. Yes. May I take a minute to give you the approximate figure?

Senator COUZENS. Yes.

Mr. LORD. I would say that Mr. Mott's contribution in Flint was for the protection of the depositors; wouldn't you? He made good a defalcation in a bank of which he was president.

Senator COUZENS. I should say so; yes.

Mr. LORD. That is $3,595,000. Do you want me to eliminate the loan of Mr. Edsel Ford to the securities company? Would you not consider that for the protection of the whole situation?

Senator COUZENS. I understood that was used for the purpose of taking up doubtful securities in these institutions.

Mr. LORD. No; I mean where he loaned some of his personal collateral to the security company.

Senator COUZENS. I do not know whether you can trace back to the purpose of that, the purpose for which it was used, or not, but I do not think it is in accord with your statement a while ago as to what it was used for.

Mr. LORD. It was loaned by the Guardian Detroit Co. to the securities company to enable them to carry their inventory.

Senator COUZENS. That would hardly be for the protection of depositors.

Mr. LORD. Not directly for depositors, but for the protection of the whole situation.

Senator, I would say that for the direct protection of the stockholders over 12 million went in, and the balance to stabilize the general situation.

Senator COUZENS. So that out of about 27 million about 12 million went for the protection of depositors and the balance for the protection of the stockholders?

Mr. LORD. First for the depositors, Senator. You know when the stock of the banks dropped how disturbed the depositor was? Senator COUZENS. Oh, yes. You can only get the best estimate of how the money reacted, but I was trying to arrive at the purpose that first suggested the putting up of the money.