gan, were not aware of the trend of economic conditions currently during the year 1931?

Mr. LORD. That was the period when business was expected to improve. You know that.

Mr. PECORA. I also know that the expectations were not realized. Didn't you know that?

Mr. LORD. They were not realized, but I did not know that they would not be realized.

Mr. PECORA. You knew that currently they were not being realized, didn't you?

Mr. LORD. True.

Mr. PECORA. To return to this transaction involving the acquisition of the 1,600 shares of the Grand Rapids National Bank stock, you have already identified a copy of a letter which you addressed to Mr. Brewer under date of August 24, 1929. Will you now be good enough to look at this document which I show you, and which purports to be a photostatic reproduction of a letter addressed by you to Mr. Brewer under date of September 18, 1929, and after looking at it, tell me if you recognize it to be a true and correct copy of a letter sent by you to Mr. Brewer on that date.

Mr. LORD. Yes.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted and entered in the record. (The document referred to, letter, Sept. 18, 1929, Lord to Brewer, was received in evidence, marked "Committee's Exhibit No. 18", Dec. 20, 1933, and the same was subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The letter received in evidence as Committee's Exhibit No. 18 of this date, is apparently written on the letterhead of the Guardian Detroit Bank, dated September 18, 1929, and reads as follows [reading]:

Mr. JOSEPH H. BREWER,

Grand Rapids Trust Building,

(Personal)

Grand Rapids, Michigan.

SEPTEMBER 16, 1929.

DEAR MR. BREWER: Supplementing my letter to you of August 24, this will confirm our verbal understanding under which you have bought for us a total of One Thousand Six Hundred and One shares of stock of Grand Rapids National Bank at an aggregate cost of $862,895.75. You may consider that our agreement as to holding this stock, with your right to take it back from us, continues the same as covered in my letter to you of August 24, you to pay us the actual cost plus interest at the rate of 7 per cent per annum on our investment in the stock. Very truly yours,

President.

Mr. PECORA. Following the sending of this letter by you to Mr. Brewer, did you, under date of November 18, 1929, send to Mr. Brewer another letter relating to that same subject, a photostatic copy of which I now show you?

Mr. LORD. Yes, sir.

Mr. PECORA. I offer that letter in evidence.

The CHAIRMAN. Let it be admitted.

(The document referred to, letter, November 18, 1929, Lord to Brewer, was received in evidence, marked "Committee's Exhibit No.

19". December 20, 1933, and the same was subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The letter which has been received in evidence and marked "Committee's Exhibit No. 19" of this date reads as follows [reading]:

MR. JOSEPH H. BREWER,

President, Grand Rapids National Bank,

Grand Rapids, Michigan.

NOVEMBER 18, 1929.

MY DEAR JOE: I did not telephone you today regarding the dinner which you and Mr. Waters suggested be held some time next week because we have all of us been up to our necks in trying to push through at an early date the Union Commerce and Guardian consolidation.

I will interrupt my reading to ask you, Mr. Lord, this question. That refers to the consolidation of the two bank holding companies which became effective on December 16, 1929?

Mr. LORD. Yes, sir.

Mr. PECORA. Under the name of the Guardian Detroit Union Group, Inc.

Mr. LORD. Yes, sir.

Mr. PECORA. Resuming the reading of the letter [continuing reading]:

As a matter of fact, I gave up my trip East and have been on the job over the week-end, having in mind that everything possible should be done to speed up the consolidation details, and there is going into the mail tonight a notice to the Guardian and Union Commerce stockholders, a copy of which notice is enclosed herewith for your information. I see no reason why we can not get together a crowd of Guardian and Union Commerce officials or directors to attend a dinner in Grand Rapids some time next week. Mr. Blair is still away, and as he has been feeling pretty rotten, we have hesitated to ask him to come back. However, he is expected back the latter part of this week, and just as soon as he returns I will get in touch with him and telephone you so that a definite date can be set.

In connection with the merger, we are trying to straighten out a lot of ancompleted details. You will recall that under an arrangement with you we bought 1601 shares of Grand Rapids National Bank stock at an aggregate cost of $862,895.75. This stock will be exchangeable, upon consumation of our examination of the Grand Rapids National and upon your being satisfied with the Guardian-Union situation, for three and a half shares of our stock for each share of yours, or a total of 5,603.5 shares. If agreeable to you, I would appreciate it if you would put this matter in the form of a note to the Guardian Detro't Bank or to the Guardian Detroit Company, the note to be signed by either you personally or you and Mr. Waters according to your respective interest in this stock; and I would also appreciate it if you would collateralize the note with, say, $200,000 of additional security in the form of bonds or other marketable stocks. I realize that this suggestion is not strictly in accord with the original arrangement made with you, but I am making this request in view of our expectation of being full partners with you and your institutions at an early date. The matter of our carrying charges on this investment was to be figured originally at 7 per cent. I am quite willing to reduce this to the current rate of 6 per cent if you will handle the matter on the basis suggested, and if you will sign and return one of the enclosed notes for the face amount of the principal, namely, $862,895.75, I can have a memorandum sent to you at a later date after the interest has been figured.

In further reference to that certain loan in the Grand National about which I spoke to you. I feel very strongly that if I were in your position I would arrange to have the loan paid at this time. I have information on the outside which leads me to believe that the company's business is in far from good shape and that their prospects for the coming year are not very encouraging. With personal regards, I am

Very sincerely,

President.

Mr. PECORA. Did Mr. Brewer agree to the suggestion you made to him in this letter about sending in his note, or a note signed by him and Mr. Waters jointly, for the purchase price of those 1,601 shares of Grand Rapids Bank stock, and collateralizing it in part not only with the stock itself, but with $200,000 worth of marketable securities?

Mr. LORD. Mr. Pecora, I do not recall the final outcome, how much stock Mr. Brewer took up, or how much stock Mr. Waters took up. I have no record.

Mr. PECORA. You have no recollection beyond that which you have just given us?

Mr. LORD. No, I have not.

Mr. PECORA. Will you be good enough to look at this letter, which purports to be a photostatic reproduction of a letter sent to you by Mr. Brewer under date of November 21, 1929, apparently in reply to your letter to him of November 18, 1929, and tell me if you recognize it to be a true and correct copy of a letter received by you from Mr. Brewer on that date?

Mr. LORD. Yes, sir.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted and entered in the record.

(The document referred to, letter, November 21, 1929, Brewer to Lord, was received in evidence, marked "Committee's Exhibit No. 20", December 20, 1933, and the same was subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The letter which has been received in evidence as Committee Exhibit No. 29 of this date is written on the letterhead of the Grand Rapids Trust Co., Grand Rapids, Mich., dated November 21, 1929, and reads as follows:

ROBERT O. LORD,

GRAND RAPIDS TRUST Co., GRAND RAPIDS, MICH., November 21, 1929.

President Guardian Detroit Bank,

Detroit, Mich.

DEAR MR. LORD: Referring to the request contained in your letter of the 18th instant, that I forward you note for $862,895.00 for 1,601 shares of Grand Rapids National Bank stock:

As I said to you over the telephone this morning, while I want to be of any assistance I can in the working out of your plans and do not want to embarrass you in any way at the same time I prefer that our original arrangement as set forth in your correspondence, should stand. You will recollect that when I suggested you purchase this stock I told you that in view of the large holding which I then had in the Grand Rapids National Bank I did not feel that I should take on any additional shares. You very kindly offered at that time to loan me the money on my note and I was obliged to decline the offer. I am not in any different situation now than I was then and do not feel that I can assume the obligation which you ask me to take on.

I understand, as you indicated in our conversation this morning, that it is desirable that your institution should not be carrying a large amount of its own stock and for that reason you would like to have me take this off your hands. If there is any other way in which I can assist in relieving the situa tion without changing my status I will be glad to cooperate with you.

As I said this morning, possibly by talking the matter over we might evolve some plan. Enclosed herewith you will find my check for $4,002.50, being a quarterly dividend on the 1601 shares which, through inadvertence in my office, has not been forwarded to you before.

Yours very truly,

JOSEPH H. BREWER.

Mr. PECORA. Does this letter serve to refresh your recollection concerning the action that was taken with regard to this transaction with Mr. Brewer?

Mr. LORD. Mr. Pecora, my recollection on the final outcome of that very vague. I think that the Guardian Detroit Co. finally had to take over all that stock.

Mr. PECORA. By the way, Mr. Lord, does the reading of this letter refresh your recollection concerning the inception or initiation of this transaction to this extent? Does it indicate to you now that the reason for the acquisition of these 1,601 shares of the Grand Rapids National Bank stock was to prevent its falling into the hands of socalled "outsiders" at the time when you, in behalf of the group, were negotiating to have the group acquire control of the Grand Rapids National Bank?

Mr. LORD. Mr. Pecora, without seeing all the correspondence and without having a chance to go through it, my recollection is so vague on that that I just do not feel that I can testify.

Mr. PECORA. Mr. Lord, you have had the benefit, up to the present moment, of all the correspondence with the exception of one more letter which I will come to presently.

Mr. LORD. It is quite possible that we desired to buy those 1,600 shares with Mr. Brewer in order to be sure that the plan of consolidation would go through.

Mr. PECORA. Let us see if this will refresh your recollection more sharply than that. He says in this letter, among other things, as follows [reading]:

You will recollect that when I suggested you purchase this stock, I told you that in view of the large holding which I then had in the Grand Rapids National Bank I did not feel that I should take on any additional shares.

Does not that expression in Mr. Brewer's letter to you of November 21, 1929, clearly indicate to you now that you inspired this transaction, because of your desire to prevent 1,601 shares of the Grand Rapids Bank stock from falling into the hands of outsiders who, you understood, in August 1929 were trying to purchase it?

Mr. LORD. I would say, Mr. Pecora, that Mr. Brewer probably came to me and said:

These brokers are buying the stock, If you want this transaction to go through and be completed, the stock must be purchased.

As I say, my recollection is so vague that I hesitate to testify. It took place 4 years ago. The bulk of the arrangements were made by personal conversation with Mr. Brewer. It was made at a time when, as that correspondence showed, we were in the throes

of

a merger of the two groups, and my own recollection on it is so vague that I hesitate to attempt to give you the details.

Mr. PECORA. Is not that recollection refreshed by this correspondence?

Mr. LORD. Somewhat; yes.

Mr. PECORA. Is it refreshed to the extent that you

Mr. LORD. Not in full; no; because I cannot remember all the conversations that were had with Mr. Brewer. Mr. Waters, as I recall it, was in Europe, or on his way back from Europe, and Mr. Brewer was working for Mr. Waters and for himself.

175541-34-PT 97

Mr. PECORA. But here is Mr. Brewer, in his letter of November 21, 1929, to you, reminding you that when he suggested you pur chase that stock he told you that in view of the large holding which he then had in his own bank stock he did not feel that he should take on any additional shares.

Mr. LORD. Mr. Pecora, if that were so, why should we carry the stock and give Mr. Brewer the opportunity of buying it?

Mr. PECORA. That is what I want you to answer.

Mr. LORD. I do not know. I think Mr. Brewer's recollection of that was probably different from mine.

Mr. PECORA. Did you send Mr. Brewer a reply to this letter? Mr. LORD. I do not know.

Mr. PECORA. In which you indicated a difference of opinion or recollection from his?

Mr. LORD. I do not recall. I may have discussed it with him. I may have written him. I do not recall.

Mr. PECORA. Now, let me show you another letter, a photostatic copy of which I show you, and which purports to be a copy of a letter addressed by you to Mr. Brewer on this subject under date of January 22, 1930. Will you look at it and tell me if it is a true and correct copy of such a letter sent by you to Mr. Brewer? Mr. LORD. Yes, sir.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted.

(The document referred to, letter, Jan. 22, 1930, Lord to Brewer. was received in evidence, marked "Committee's Exhibit No. 21". Dec. 20, 1933, and the same was subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The letter which has been received in evidence as Committee's Exhibit No. 21 of this date reads as follows [reading]:

Grand Rapids, Michigan.

JANUARY 22, 1930.

DEAR JOE: I have been thinking over the question of the 7,204 shares of Guardian Detroit Union Group stock which the Detroit Company is now carrying. This stock was purchased primarily for you or for you and Mr. Waters, and while at the present time with a market of $120 the cost is two or three points in excess of that market, I think the fair thing would be for you to take over the stock because, frankly, I believe that within a year the stock will be worth anywhere from 25 to 5) points more than its present selling price.

My suggestion would be that the amount due on the stock be covered in two notes, one for $500,000 to the Guardian Detroit Bank and one for the balance of $379,433.45 to be made to the Guardian Trust Company. Our loaning limit in the bank is $800,000 unless we go to the board and secure the consent of two-thirds of the board members. We probably could make a temporary loan. using this stock as the major part of the collateral. However, it is likely that a loan of this size might be criticised by the Banking Commissioner if it had too large a proportion of Guardian Detroit Union Group stock as collateral. It would be my suggestion, if you have a substantial amount of other collateral of a readily marketable character, that perhaps some of the bank stock he removed and the other collateral be used. This would make the loan look less heavy with Guardian Detroit Union Group stock as security.

I realize that it is likely you will want to liquidate at some later date a por tion of this bank stock, but I feel it would be very distinctly to your advantage to hold this stock for the next three to five years. I think with our situation throughout the State and with the economies we can make and the business