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Senator COUZENS. You do not answer that definitely. Are you trusting to your memory?

Mr. LORD. Data like that are prepared in some other departments frequently. I do not keep the books. You must rely, or I had to rely, upon information given to me by employees in the organization at all times. No man could cover the whole thing.

Senator COUZENS. Do you now believe that that statement was true, in fact?

Mr. LORD. I think it was, or it would not have been stated.

Senator Couzens. But subsequent information has not indicated to vou that that statement is true or untrue? I ask that question.

Mr. LORD. No, sir.
Senator COUZENS. You have no subsequent information?

Mr. LORD. Not that would indicate that that statement made in there is other than true.

Senator COUZENS. All right.

Mr. PECORA. I show you what purports to be a printed copy of the Annual Report issued by the Guardian Detroit Union Group, Inc., as of December 31, 1930. Will you look at it and tell me if you identify it as a true and correct copy of the annual report that was so issued by you as president of the Group!

Mr. LORD. These statements, as shown in this report, would indicate that there were no bills payable, unless you want to consider that the Highland Park Trust Co. first-mortgage bonds outstanding are bills payable.

Mr. PECORA. No. I merely asked you to look at that printed document and tell us, if you can identify it as a true and correct copy of the annual report that was issued by you, as of December 31, 1930.

Mr. LORD. It is, sir.

Mr. PECORA. I offer it in evidence, but in view of its voluminous character I do not think it need be spread on the minutes. The CHAIRMAN. Let it be admitted in evidence and filed.

(The document referred to, Annual Report Guardian Detroit Union Group, Inc., Dec. 31, 1930, was received in evidence, marked “ Committee's Exhibit No. 36 ", Dec. 20, 1933, and the same was ordered filed.)

Mr. PECORA. I shall make reference to certain extracts from this report from time to time. This report has been received in evidence as Committee's Exhibit No. 36 of this date, and on page 10 thereof, under the caption " Aggregate Resources and Liabilities of Banks and Trust Companies Affiliated with Guardian Detroit Union Group, Inc. as of December 31, 1930 " appears this item, under the caption of “Liabilities: Bills payable, none." You notice that, do you not, Mr. Lord, the next to the last item on that page?

Mr. LORD. Yes, sir.

Mr. PECORA. Now, Mr. Lord will you tell this committee whether or not there was a settled policy on the part of the group to have its unit banks show no bills payable at any time in their statements or reports ?

Mr. Lord. I would say it was a settled policy of the banks to show no bills payable, or to keep them at a minimum, at all times.

Mr. PECORs. Was that settled policy of a kind which enabled the unit banks to make in their reports the statement of no bills payable at any time, because bills payable which were in existence were temporarily taken care of by some process or device? Mr. LORD. May I ask you to repeat the question? (The reporter read the pending question.) Mr. LORD. Read it again, please. (The reporter again read the pending question.) Mr. LORD. Read it again. It is not clear to me, at the end. Mr. PECORA. I want it to be fully clear to you. (The reporter again read the pending question.)

Mr. LORD. I would say it was the policy of the group that the units should make a satisfactory showing on the date of the statements.

Mr. PECORA. Well, was that satisfactory showing designed to be satisfactory despite the facts ?

Mr. LORD. I would not think so.

Mr. PECORA. Can you tell this committee whether, at or about the time when unit banks were about to be examined, either by the State banking department or by the Comptroller of the Currency, or at or about the time when they were expected to publish reports, they owed hills, but by the adoption of some method or device or process, those bills payable were temporarily taken care of so that they would not be shown upon an examination of the bank or in any published report of condition.

Mr. LORD. Mr. Pecora, no bank knows when an examination is to be made, so that it would not be possible. For instance

Mr. PECORA. How about when banks were about to make statements?

Mr. Lord. I think the effort was made at all times to make a good statement.

Mr. PECORA. Won't you please answer my previous question, Mr. Lord, more specifically than you have? Mr. LORD. The one that I asked to be repeated ? Mr. PECORA. No; the one after that. Mr. Lord. May I ask you to read that? (The reporter read as requested.) Mr. LORD. I have answered the first part of it.

Mr. PECORA. Yes; you have answered the first part. Now answer the second part relating to the publication of reports of condition. by the bank.

Mr. Lord. The question involves so many things. Read it and leave out the first part. Mr. PECORA. Let me phrase it again.

Mr. LORD. All right. Phrase it again. You have put two things in there.

Mr. Pecora. I will make it as simple as I possibly can. From time to time, Mr. Lord, your unit banks were required to publish reports of condition, were they not?

Mr. LORD. Yes, sir. Mr. PECORA. At any of those times did any of those unit banks have bills payable which were taken care of temporarily in some fash

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ion so as to make it unnecessary to show those bills payable in published reports of condition?

Mr. LORD. Yes, sir. Mr. PECORA. How was that done, Mr. Lord? Mr. LORD. It was done usually by either the Guardian Detroit Bank buying some of their assets and supplying them with cash or depositing funds in the form of C.D's.

Mr. PECORA. Just enlighten us further about the allusion to “ C.D's.” Do you mean certificates of deposit?

Mr. LORD. Certificates of deposit.
Mr. PECORA. What was the reason for doing that?
Mr. LORD. That the bank should make an excellent showing.

Mr. PECORA. In other words, was not this one of the reasons, to enable the unit banks to make reports which would show no bills payable, despite the fact that there were actually bills pavable?

Mr. LORD. Yes. May I interject something at this point?
Mr. PECORA. Surely.

Mr. LORD. For a great many years the bankers in this country had very foolishly adopted the idea that it was something to be ashameil of for a bank to show borrowed money. In spite of

Mr. PECORA. Mr. Lord, are you not undertaking entirely too much to speak for all the bankers of this country?

Mr. LORD. Just a minute, please, Mr. Pecora. Let me finish, please.

Mr. PECORA. I do not want the record encumbered with your observations as to what all the bankers of this country thought or did, because I do not think you or any other individual is competent to assert that.

Mr. LORD. All right. Then, might I say that, generally speaking

Senator COUZENS. That is too wide a field.

Mr. Lord. The public had been educated to a point where to have a bank show bills payable was some criticism of the bank.

Mr. PECORA. Who was the educator in that respect?
Mr. LORD. The bankers themselves, and I blame them for it.
Mr. PECORA. Were you one of those bankers?
Mr. LORD. Probably, long before I came to Detroit.
Mr. PECORA. How universal was that practice?

Mr. LORD. I would say fairly universal. That is, during the past 3 years, with the public fear and distrust, that complex that the bankers had was accentuated. On top of that, we had the publicity clause in the R.F.C. law, requiring or permitting the R.F.C. to publish the statement of its loans.

Senator COUZENS. Please make that statement over again.

Mr. Lord. The R.F.C. required the publication of R.F.C. loans. Isn't that correct, under the law?

Senator COUZENS. When?
Mr. LORD. Last summer.

Senator COUZENS. But that has nothing to do with these other statements.

Mr. LORD. I am just showing the whole picture.

Senator COUZENS. Just leave out irrelevant and immaterial matters in discussing these other matters, because the R.F.C. publicity

of bank loans did not occur until after these events we are talking about.

Mr. LORD. All right. Eliminate that. The complex still remained in the minds of the public that it was a criticism of the bank to show bank loans. With the public fear and distrust, and the complex of panic, it was necessary that every bank, or at least most banks considered it necessary, to make the best showing they possibly could at the time of publication of statements, for their own and their depositors' protection.

The CHAIRMAN. They would do that, you mean to say, by borrowing money from somebody?

Mr. Lord. Or securing deposits that would eliminate their borrowed money.

The CHAIRMAN. And then, after that was all over, they would set back to the

Mr. Lord. They might.

Mr. PECORA. They did in the case of your unit banks, did they not !

Mr. LORD. In some cases; yes.
Mr. PECORA. Have you finished your answer.
Mr. LORD. I think I have.

Senator Couzens. Before you go on, when you had these bills payable, were they secured ?

Mr. LORD. Always.

Senator COUZEN'S. So, in effect, that security still remained with bills payable, although your statement, in itself, showed no bills payable.

Mr. LORD. It did not.
Senator COUZENS. You withdrew the security?

Mr. LORD. We had no claim on the security when we had a deposit in the bank.

Senator COUZENS. But you had the security.

Mr. LORD. It might have been in our possession, but we had no claim on it, any more than if I were borrowing money and paid my note, and left the collateral with the bank.

Senator Couzens. I think we will show, in a few days, that it was very necessary to have the collateral, which would not have been available for depositors' claims.

Mr. Lord. I do not know what cases you are talking about, Senator Couzens. I cannot answer that question.

Mr. PECORA. Mr. Lord, if, as you have just told us, it was a rather aniversal practice among bank executives to temporarily take care of bills payable in order that they might show in their published reports that they had no bills payable, whereas in truth and in fact they did have, why did you, in the information that you caused to be sent out in January 1931, to different bankers with whom the Guardian institutions maintained banking relationships, include the pecific information—and I am now quoting from your memoranlum. Committee's Exhibit No. 35—that all the 23 banks and trust companies comprising Guardian Detroit Union Group, Inc., showed, on December 31, 1930,“ bills payable, none ”, and you had the “ none

written out in capital letters! If that was the universal custom. bankers receiving that information would take it as a matter of course, would they not?

Mr. Lord. I do not know how they would take it.

Mr. PECORA. Isn't it normal to expect that that is what they would have done?

Mr. Lord. I suppose so; yes, sir.

Mr. PECORA. But instead, apparently a lot of these bankers thought that you had performed a miracle in making statements in behalf of your 23 banks that showed that they had no bills payable at all, because one of these banking officers, one of the Guardian“ rooters you will remember, according to Exhibit No. 35, said: “If I may be permitted to use a superlative, the showing of all the 23 banks and trust companies is little short of miraculous.” Apparently that bank officer was unaware of the legerdemain by which this miracle was performed. Isn't that so?

Mr. LORD. Mr. Pecora, wasn't my statement to the effect that the banks throughout the county endeavored to make the best showing they could

Mr. PECORA. No; your statement, as I recall it, was far more specific than that. Your statement was that the banks had educated the public into a fear complex respecting banks that owed bills.

Mr. LORD. I don't think it was quite as strong as that.

Mr. PECORA. Well, if it was not quite as strong as that, that is the way I understood it. Didn't you intend it to be that strong?

Mr. LORD. I said the bankers had very foolishly educated the public on the question of the criticism of the banks when they showed borrowed money, as I recall it.

Senator COUZENS. And so as to overcome that you created a device to hide it?

Mr. LORD. I would not call it a device, Senator.

Senator COUZEXS. Well, I think that the record shows, Mr. Lord, clearly it was a device, because you yourself testified a while ago, without going into specific cases, that you made every effort to avoid showing bills payable.

Mr. LORD. We did, sir.

Senator Couzens. But you did not pay up your bills payable to avoid the showing, because you say yourself that there were occasions where there were bills payable that were bills payable shortly after reinstatement ?

Mr. LORD. I think there probably are, sir.
Senator COCZENS. Yes.

Mr. LORD. Let me say this in that connection, in connection with the Guardian Detroit Bank, as in the case of many large banks: It found itself with a surplus fund beginning with the 15th of December until after the first of the year. Is there any reason—there certainly is none that I know of-why those funds, instead of being sent to Wall Street or to Chicago, should not be placed in our own institution?

Senator Couzens. Are you asking me a question?
Mr. Lord. I am asking that as a question.

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