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Mr. LORD. I have not the various rates, but can figure it out. They were at different rates throughout the period.

Senator COUZENS. The chairman wants to know what percent it was on the Group stock.

Mr. Lord. I have tried to explain that it was at different rates in different years, and even in different quarters. In 1930 I think the rate paid was $3.20 a share on the Group stock. In the two years following it was gradually cut down.

Mr. PECORA. And it was of a par value of $20 a share?

Mr. LORD. Yes, sir. Sixteen percent on the par value of the stock at the start, and was finally cut down to a very small percentage.

Mr. PECORA. Go ahead.

Mr. LORD. On yesterday in our testimony there was particular stress laid upon the dividends of the Union Guardian Trust Co. and on the National Bank of Commerce.

I would like to bring out the earnings of those institutions for the 3 years. For the 3-year period the earnings of the Union Guardian Trust Co. were $1,675,000 plus. The dividends declared in that period were $1,475,000.

In the case of the National Bank of Commerce, you will recall there was a consolidation of the National Bank of Commerce with the Guardian Detroit Bank as of December 31, 1931. Therefore it is necessary, in discussing these dividends and earnings, of course, to take the consolidated figures. For the 3-year period the consolidated figures of the institution which finally constituted the Guardian National Bank of Commerce, the operating earnings were $5,140,000 plus, whereas the dividends declared during that 3-year period were only $3,736,800.

Another fact that I would call to the attention of this committee is that during that 3-year period that we are discussing on the question of dividends, the Group Co. received in dividends from the bank and trust company units approximately $8,164,000, whereas during that same period the Group Co. purchased slow or criticized assets from the units of more than $8,400,000, or more than $200,000 in excess of the dividends paid out by these units to the Group Corporation.

In addition to that, I want to refer to my statement of yesterday and state that during that same period, or approximately the same period, if we include the fall and winter of 1929, the big stockholders who you might say were benefited by these dividends, contributed for the protection of the despositors, as I figure out the amount, more than $12,000,000 of their own resources for the protection of the depositors; and on top of that those same stockholders took out of their own pockets $15,0000,000 more for the protection of the whole situation in Detroit.

The CHAIRMAN. When was that?

Mr. Lord. In that 3-year period. There was a total of $27,000,000 out of the personal resources of those stockholders.

The CHAIRMAN. And that extended over the whole 3 years?
Mr. LORD. It extended over the whole 3 years.

The CHAIRMAN. When did the bank troubles begin? When did the run begin on your bank?

Mr. LORD. Senator Fletcher, I should say that the bank troubles in Detroit began at the time that the Detroit banks, in order to protect 150,000 depositors in the American State Bank, assumed the deposit liabilities of that bank.

The CHAIRMAX. When was that?

Mr. LORD. My recollection is that it was in the winter of 1931. It would be either 1930 or 1931. The clearing-house banks in Detroit at that time, perhaps foolishly if we had realized the trend of the depression, the terrific velocity of the depression-perhaps we would and should have let that bank go; but in the clearing-house meeting, after full discussion, it was decided by these banks that the thing to do for those 150,000 depositors, for the other banks in Detroit was to assume those deposit liabilities, which we did. As I recall it, the deposits in the American State Bank at that time were $30,000,000 odd. I have not the figure definitely in mind. But it was very largely a savings bank with branches throughout the city of Detroit, with workers' funds in it, and we felt that it was a very serious matter to let that bank go down.

The C'HAIRMAX. Had there been any run started on that bank?

Mr. LORD. There certainly had, and it finally reached the point that the banks in town bought whatever good assets they could find to protect the bank. But the velocity of the run was so serious that it was absolutely necessary for the banks to assume that liability unless the American State Bank was to be closed.

The CHAIRMAX. You do not remember whether that was in 1930 or 1931 ?

Mr. LORD. May I refer to a paper?
The CHAIRMAN. Yes.
Mr. LORD (after referring to a paper). It was March 1931.
The CHAIRMAX. That is when the real trouble began?

Mr. Lord. That is when the real trouble began. There had been seepage of deposits in the Michigan banks.

Mr. PECORA. It began to become acute about that time?
Mr. LORD. It began to become very acute.
The CHAIRMAN. Were the unit banks involved at the same time?
Mr. LORD. Throughout the State?
The CHAIRMAX. Yes.
Mr. LORD. No, sir: oh, no.
The CHAIRMAX. They had no trouble then?

Mr. LORD. No; except the seepage due to the depression; but there were no active runs. Following that, a few months later—well, to take the Detroit situation alone, there were a number of private banks in Detroit, particularly Polish banks, in Hamtramck. I believe there were 11 of them. All of them closed their doors. Hamtramok is very largely a Polish district, and you know what that class of depositors will do to a bank when they want their money. They will just come and get it.

In the summer, as I recall it-I think it was 1931—there were 3 or 4 banks that failed in Toledo. My recollection is that the deposits involved in those three Toledo bank failures totaled approximately $75,000,000. We used to keep for our own information à record of the Postal Savings deposits in Detroit to watch the trend of the deposit situation. Normally the deposits in Postal Savings in Detroit used to run about $7,500 a day. Due to these Toledo bank failures, due to the local situation, and due to the surrounding situation in the outlying districts of Detroit and throughout the State, with all of these bank failures, there were days when those Postal Savings deposits reached nearly $300,000. So you can see the trend of the withdrawal of deposits from the bigger Detroit banks. The figures that I think I gave you yesterday showing the decrease in deposits from the peak of $420,000,000 pliis to whatever it was when the bank holiday came—my recollection is about $275,000,000 or $285,000,000—that decrease was the result of all these bank troubles and of the depression and of the public fear and unrest. That is the situation that we faced in Detroit.

Now, to continue about this question of dividends. Perhaps we should not have declared two thirds of the operating earnings out in dividends. Perhaps we should have paid half of that. Perhaps we should have paid no dividens; but at the time the action was taken it was taken after full consideration, after study of the situation; it was taken at a time when the Administration and when the business leaders of the country were urging corporations to continue dividends in order to keep up the buying power of the Nation, to create employment, and to help the worker. Perhaps we were mistaken. I think we were, if our foresight had been as good as our hindsight. If we had realized that the depression was to continue for the time it has, I think we would have said, right off the bat, * No more dividends until the depression is over." But when the action was taken, it was taken after careful consideration and it seemed the wise thing to do.

Mr. Pecora. In other words, you thought that prosperity was just around the corner ?

Mr. Lord. They said so in the paper about every 2 days.

Mr. Pecora. But you had no idea how far from your position that corner was?

Mr. LORD. No; and no one else did.

Mr. PECORA. You assumed it was quite near, from your dividend policy?

Mr. LORD. We assumed and hoped it was quite near. We were told it was quite near.

Mr. PECORA. You have been good enough to tell this committee that during the years 1930, 1931, and 1932 the Group purchased from various of its unit banks slow or doubtful assets of an aggregate value of over $8,000,000 ?

Mr. LORD. Yes, sir.

Mr. PECORA. From what banks were those assets purchased by the Group?

Mr. LORD. Mr. Pecora, a record given to me shows—do you want the trust companies also?

Mr. PECORA. Yes. Mr. Lord. Union Guardian Trust Co., $7,500,000. Mr. PECORA. When was that done? Mr. Lord. That was done in two pieces: At the end of 1931, $4,000.000, if my recollection is correct; and at the end of 1932, $3,500,000

The CHAIRMAN. What does that refer to now—the purchase of assets?

Mr. Lord. The purchase at the carrying value on the books of the institution of slow and doubtful assets by the Group.

The CHAIRMAN. Were they turned over to the Group?
Mr. LORD. Yes.
The CHAIRMAX. And that was done to help the trust companies?
Mr. Lord. To help the institution; yes, sir.

Mr. PECORA. During those 2 years of 1931 and 1932 what dividends, if any, were declared by the Union Guardian Trust Co.?

Mr. LORD. I am not sure I have those figures, Mr. Pecora.
Mr. PECORA. Well, perhaps I can give you those figures
Mr. LORD. Yes; I have them here. In 1931 and 1932, you say?
Mr. PECORA. Well, take 1930, also.

Mr. LORD. In 1930 the approximate dividend of the Union Guardian Trust Co. was $925.000. In 1931, $500,000; in 1932, $50,000.

The CHAIRMAN. I would like to understand that a little better. Suppose that I am a stockholder in that bank. You tell me the total dividends are so many hundreds thousands of dollars. What did the stockholders get? What was the rate percent?

Mr. LORD. There was $5,000,000 of capital stock of the Union Guardian Trust Co. All of that capital stock, except the directors' qualifying shares, was owned by the Group Co. Had you been the Group Co. owning that capital stock, your rate of dividend in 1930 would have been 18.5 percent. In 1931 it would have been 10 percent. In 1932 it would have been 1 percent. Does that answer your question ?

The CHAIRMAN. Yes; that is what I wanted.

Mr. PECORA. Now, from what other banks in the Group did the Group purchase slow and doubtful assets during those 3 years?

Mr. LORD. The City National Bank & Trust Co. of Battle Creek, $198,068.93. Does that answer your question?

Mr. PECORA. Yes.
Mr. LORD. Shall I continue with the purchase of the assets!
Mr. PECORA. Yes.
Mr. LORD. The National Bank of Ionia-

Mr. PECORA. As you give the names of the banks from which the group purchased slow and doubtful assets, will you also give the dividends paid during those years in which the purchases were made?

Mr. LORD. City National Bank & Trust Co.-may I find out just when those purchases were made? [After conferring.] We know that the purchases were made in 1931 and 1932.

Mr. Pecora. Is that the Battle Creek City National Bank & Trust Co.?

Mr. Lord. Yes, sir. This memorandum here [indicating] shows that the purchase from the City National Bank & Trust Co. of Battle Creek was January 8, 1932. In 1932 the City National Bank & Trust Co. of Battle Creek paid no dividends.

Mr. PECORA. What dividends had they paid for the year preceding, that is, the year 1931 ?

Mr. LORD. They paid $24,422.20.

Mr. PECORA. Representing what rate of dividend on the par capital stock?

Mr. Lord. I will have to get a report and find out what the capital stock was at that time. I think it was $500,000 capital. I will have to check it. [After referring to memoranda.] The capital stock of the City National Bank & Trust Co. of Battle Creek on December 31, 1931, was $600,000. Therefore the dividend amounted to approximately 4 percent.

The next purchase was National Bank of Ionia, made on January 11, 1932, $149,468.90. The National Bank of Ionia paid no dividends either in 1931 or 1932.

The next purchase was City National Bank & Trust Co. of Niles, $118,191.18, on January 8, 1932. In 1932 the City National Bank & Trust Co. of Niles paid no dividends.

Senator COCZENS. What did they pay in 1931 ?

Mr. LORD. Three thousand seven hundred and fifty dollars, or at the rate of-they had a capital of $150,000 on December 1, 1931— $3,750 would be about 212 percent, I believe.

The Guardian Bank of Dearborn. The purchase of those assets was made December 29, 1931, just before the close of the year. The Guardian Bank of Dearborn in 1932 paid $2,500 in dividends; in 1931, $25,997.50; and the capital stock on December 31, 1931, was $100,000. That meant about six and a fraction percent dividend in 1931 and a fraction of 1 percent in 1932.

Mr. PECORA. What was the amount of the take-out of doubtful assets?

Mr. LORD. The Guardian Bank of Dearborn, from this record given me, shows $130,646.79.

The Guardian Bank of Grosse Pointe—the take-out was made on December 31, 1931, amounting to $99,590.18. The Guardian Bank of Grosse Pointe paid no dividends either in 1932 or 1931.

The next item is Grand Rapids National Bank. The take-out was on December 30, 1931. The amount reported to me was $92,353.04. The Grand Rapids National Bank paid $25,000 in dividends in 1932 and $99.837.50 in 1931. It had a capital stock at the close of December 1931 of $1,000,000.

In other words, they paid 21/2 percent in 1932 and slightly under 10 percent in 1931.

Mr. PECORA. And also, in other words, in 1931 the Grand Rapids National Bank paid out in dividends $99,000, whereas at the end of that

year the Group found it necessary to take over slow and doubtful assets from that bank in the sum of $92,000 and odd? Mr. Lord. Yes.

Mr. PECORA. It is true, is it not, that the Group owned all of the capital stock of the Grand Rapids National Bank?

Mr. LORD. Except directors' qualifying shares; yes, sir. Mr. Pecora. As to which the Group had an agreement with the directors who held those qualifying shares to exchange them for shares of the Group?

JIr. Lord. When they ceased to be directors. Mr. Pecora, you say
necessary to take out." I cannot answer that question.
Mr. PECORA. I assumed it was necessary.
Mr. LORD). Advisable; certainly.
Mr. PECORA. Because it was done?
Mr. Lord. It was advisable or it would not have been done.

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