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Mr. Pecora. So that, at this conference of 6 persons named, only 1 was an officer or director of the Saginaw bank, and the other 5 were officers and/or directors of the Group; is that correct?

Mr. LORD. Yes, sir. Isn't it possible the suggestion could have come from that one out of the six?

Mr. PECORA. For the benefit of the other 5 ?
Mr. LORD. For the benefit of Mr. Brewer.

Mr. PECORA. For the benefit of the Group represented by the other five, wasn't it?

Mr. LORD. I would say for the benefit of Mr. Brewer.

Mr. PECORA. Well, the 5 of the 6 persons who took part in this understanding or reached this understanding were officers and directors of the Group and the other one was an officer and director of the bank, the Saginaw bank. That is the situation.

Mr. LORD. Well, they were not all officers, but they were all directors.

The CHAIRMAN. You referred to some institution in Grand Rapids that Mr. Brewer was interested in. The First National Bank was one, and what was the other?

Mr. LORD. The Grand Rapids National Bank and the Grand Rapids Trust Co., Senator Fletcher.

The CHAIRMAN. And what became of them?

Mr. LORD. Well, the Grand Rapids National has been reorganized, and I think the trust company is in process or has been. Mr. Brewer is head of the new Grand Rapids reorganized bank.

The CHAIRMAN. When was that reorganized ?
Mr. LORD. Some time this summer, as I remember.

Mr. PECORA. Now, I want to go back to Mr. Brewer's letter to you of November 21, 1929, which was received in evidence as exhibit no. 20 this morning, and let me read this portion of the letter to you [reading]:

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.

Mr. Lord. What he was referring to was carrying Group stock. Mr. PECORA. I was just going to ask you. What is that?

Mr. LORD. What he was referring to was Guardian Detroit Union Group stock.

Senator Couzens. Who put up the money to buy these 1,601 shares of Grand Rapids National ?

Mr. LORD. The securities company from their capital.

Mr. PECORA. You mean the Guardian Detroit Co., which was the securities affiliate of the Guardian Detroit Bank !

Mr. LORD. Yes, sir.
Mr. PECORA. Of which you were the president?
Mr. LORD. Yes, sir.
Mr. PECORA. Were you also the president of the securities affiliate?
Mr. LORD. I was not, sir.
Senator COUZENS. Where did they get the money to

Mr. LORD (interposing). They had 5 million capital and they had Group bank credit in New York and Chicago.

Senator COUZENS. Were they borrowing from New York and Chicago at the time they put up this money?

Mr. LORD. I don't recall, Senator. They were substantial borrowers in both New York and Chicago.

The CHAIRMAN. The committee will now take a recess until 2 o'clock.

(Accordingly, at 1 p.m., a recess was taken until 2 p.m. of the same day.)

AFTER RECESS

(The subcommittee resumed at 2 p.m., on the expiration of the noon recess.)

The CHAIRMAN. The subcommittee will resume. You may proceed, Mr. PECORA.

TESTIMONY OF ROBERT 0. LORD, PENOBSCOT BUILDING,

DETROIT, MICH.—Resumed

Mr. PECORA. Mr. Lord, I am not quite certain whether in your testimony this forenoon you told the committee who eventually took up the 1,601 shares of the stock of the Grand Rapids National Bank that was referred to in connection with your correspondence with Mr. Brewer on that subject.

Mr. LORD. Mr. Pecora, I told you in my testimony, I believe, that I did not know who eventually took up that stock, but I was rather under the impression that the Guardian Detroit Co. had to keep it. May I say something, Mr. Pecora ? Mr. PECORA. Go ahead.

Mr. LORD. With regard to our discussion this morning-and this is rather interesting-as to the prognostications for business in 1931, at the time of some of these dividends, here is a clipping from the New York Times of March 8, 1931, which gives the prognostications of 13 services, and if I may, I will just read it. It is very brief,

The Harvard Economic Society's prognostication was this: The business depression is apparently close to if not actually at bottom. The National City Bank of New York in their monthly paper says: Business men no longer feel they are looking down a black hole, but that they have taken the measure of the depression.

Cleveland Trust Co. (Colonel Ayres) says: Present indications are that we are at or near the bottom of this depression Babson's Statistical Organization says: Many think the rapid recovery in stock prices is sure sign clouds of 1930 have lifted. We do not agree.

Federal Reserve Bank at New York said: A few important indicators of business activity showed signs of greater activity.

Guaranty Trust Co., of New York, said:
Indications are that immediate future will witness continued readjustment.
The Irving Trust Co., New York, said:
Now certain that a number of basic industries have made headway recently.
Brookmire Economic Service, Inc., said:
The major decline has approximately reached bottom.

Alexander Hamilton Institute said:
General business situation featured by moderately encouraging developments.
Van Strum Financial Service said:
Business recovery should continue after completion of seasonal upswing.
Investors Research Bureau, Inc., said:
('urrent reports reveal little more than usual seasonal fluctuations.
Wetsel Market Bureau, Inc., said:
Business shows signs of having turned the corner but recovery will be slow,
Silberling Business Service said:

It can hardly be said that there is any certain indication of a final return not subject to relapse.

Just a little indication of what anybody's prognostication amounted to.

The CHAIRMAN. What is the date of that? Mr. LORD. March 8, 1931. This is clipped from the New York Times.

Mr. PECORA. Taking all those prognostications as a whole they did not tend to build up much optimism, did they?

Mr. LORD. No. It would indicate from the trend of them that they thought that the depression had reached the bottom and that the recovery, whatever it might be, would be slow. But that is rather interesting.

Mr. PECORA. Which was no ground for optimism as expressed in dividend declarations, was it?

Mr. LORD. Well, it depends on the dividend declarations.

Mr. PECORA. You remember that yesterday I asked you some questions as to whether or not the Comptroller of the Currency in the year of either 1931 or 1932 had requested banks to be extremely cautious and conservative about dividend declarations?

Mr. LORD. You asked that question this morning, Mr. Pecora.

Mr. PECORA. Yes; this morning. Now will you please look at the document which I now show you, and which purports to be a photostatic reproduction of a letter addressed to Mr. Maxwell, the secretary of your Group, under date of September 17, 1931, by Mr. F. M. Brandon, then the president of the City National Bank & Trust Co. of Niles, Mich. Do you recognize it as a true and correct copy of a letter among the files of your Group that was received by Mr. Marwell [handing same to Mr. Lord] ?

Mr. LORD (after examining same). I recognize Mr. Brandon's signature. I have no doubt of it. Mr. PECORA. I offer that in evidence.

The CHAIRMAN. It may be received in evidence and placed in the record.

(Photostatic copy of memorandum to A. A. F. Maxwell from F. M. Brandon, dated Sept. 17, 1931, was received in evidence and marked “ Committee Exhibit No. 23 of Dec. 20, 1933.")

Mr. PECORA. The letter received in evidence as committee's exhibit no. 23 reads as follows. It is on the letterhead of the Guardian Detroit Union Group, Inc., entitled:

INTRA-GROUP MEMORANDUM

To Mr. A. A. F. MAXWELL, Secretary Guardian Detroit Union Group, Inc.
From Mr. F. M. BRANDON, President City National Bank & Trust Company,

Niles, Mich.
Subject

Mr. LORD. Excuse me, Mr. Pecora, what was the date of that? Mr. PECORA. September 17, 1931. [Continuing reading :)

DATE SEPTEMBER 17, 1931. DEAB MR. MAXWELL: Your memorandum of July 16 concerning the dividend requirements of units of the Guardian Detroit Union Group, Inc. is received.

The September meeting of our Board of Directors was held yesterday and the matter of dividends was discussed and no action taken. This is in barmony with the request of the Comptroller of the Currency, that current profits be used instead to take care of depreciation in the securities account.

If for any reason the management of the Group feel that different action should be taken and will promtply advise us, we shall call a special meeting of the Board of Directors for further consideration of the subject and will, there. fore, appreciate hearing from you promptly. Yours very truly,

(Signed) F. M. BRANDON

President. Mr. PECORA. Do you recall what response, if any, was made to this letter from Mr. Brandon?

Mr. LORD. I do not.

Mr. PECORA. I now show you another document purporting to be a photostatic copy of a letter addressed to Mr. B. K. Patterson, the vice president of the Guardian Detroit Union Group, Inc., by Mr. Henry F. Quinn, national bank examiner, under date of September 19, 1931, and ask you if you recognize it to be a true and correct copy of a letter received by Mr. Patterson and included in the files of the Group.

Mr. LORD. I do not think I ever saw the letter before, nor Mr. Quinn's signature. I do not recognize it, but I have no doubt of it.

Mr. PECORA. Well, Mr. Patterson is here. Mr. LORD. I haven't any doubt of it. Mr. PECORA. You do not have any doubt that it is a true and correct copy of such a letter received by Mr. Patterson? Mr. LORD. No, not the slightest. Mr. PECORA. I offer it in evidence.

The CHAIRMAN. It may be received in evidence and placed in the record.

(Photostatic copy of letter addressed to B. F. Patterson from Henry F. Quinn, dated Sept. 1, 1931, was received in evidence and marked " Committee Exhibit 24 of Dec. 20, 1933.")

Mr. PECORA. The letter has been received as Committee's Exhibit No. 24, written on the letterhead of the City National Bank & Trust Co., Niles, Mich. It reads as follows:

SEPTEMBER 19, 1931. Mr. B. K. PATTERSON, Vice President Guardian Detroit Union Group, Inc.,

Detroit, Mich. DEAR MR. PATTERSON : I have completed an examination of the City National Bank and Trust Company of Niles, Michigan today, and there exists a problem in the bank which I believe you would be most interested in, before the report is submitted to the Comptroller's office,

I shall be in Detroit, Saturday, this coming week, and I have suggested to Mr. Brandon that he, your own good self, and I, have a conference in your office on that date, preferably right after noon.

Will you please advise me, as well as Mr. Brandon, if this suggestion meets with your pleasure. Yours very truly,

(Signed) HENRY F. QUINN,

National Bank Eraminer. Mr. PECORA. I now show you another document purporting to be a photostatic copy of a letter or Intra-Group Memorandum addressed to Mr. Brandon by Mr. Maxwell, the Secretary of the Group, under date of September 24, 1931, which is apparently in reply to Mr. Brandon's letter to Mr. Maxwell, which is of September 17, 1931, which has already been offered in evidence as committee's exhibit no. 23. Will you look at this memorandum or letter to Mr. Brandon and see if you recognize it as a true and correct copy of such a letter or memorandum sent to Mr. Brandon? [Handing same to Mr. Lord.]

Mr. Lord (after examining same). I do not recall having seen the letter, but I assume it is a correct copy; yes.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. It may be received in evidence and placed in the record.

(Photostatic copy of Intra-Group memorandum, to F. M. Brandon, President City National Bank & Trust Company, Niles, from Mr. A. A. F. Maxwell, Secretary, Guardian Detroit Union Group, Inc., dated Sept. 24, 1931, was received in evidence and marked “ Committee Exhibit No. 25 of Dec. 20, 1933.")

Mr. PECORA. This letter has been received in evidence as Committee's Exhibit' No. 25 of this date, and reads as follows, written on the letterhead of the Guardian Detroit Union Group, Inc. [reading]:

Date 9/24/31. To Mr. F. M. BRANDON,

President City National Bank of Trust Co., Niles. From Mr. A. A. F. MAXWELL,

Secretary Guardian Detroit Union Group, Inc. DEAR Mr. BRANDON : Your letter of September 17th has been received and referred to Mr. Patterson.

Undoubtedly there will be adjustments to be made after the conference with the National Bank Examiner, but Mr. Patterson feels that these charges should be.taken care of through the surplus account. Will you, therefore, arrange to call a special meeting of your Board for the purpose of declaring the dividend as outlined in our previous memorandum of July 16th. With kind personal regards, Cordially yours,

Secretary. Mr. PECORA. I now show you what purports to be a photostatic reproduction of a memorandum or letter addressed to Mr. Maxwell in reply to the letter just read in evidence, by Mr. Brandon, under date of September 28, 1931. Will you look at it and tell me if you recognize it to be a true and correct copy of such a letter or memorandum among the files of the Group? (Handing same to Mr. Lord.)

Mr. LORD (after examining same). I do.

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