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Senator COUZENS. I am glad you asked that question, Senator Adams, because I think the results are so different.

Mr. LORD. Well, I haven't the figures, Senator Couzens, but I question that it would show any substantial amount.

Senator COUZENS. Would you consider 18 millions a substantial amount?

Mr. LORD. No; not with deposits of 400 million, Senator. Senator COUZENS. It might be a substantial amount to a small unit with a few millions of deposits, might it not?

Mr. LORD. Yes; but there were 23 banks and trust companies. I do not know the figures, but I doubt whether it averaged 18 million. There may have been periods, due to the fluctuation of business, where it went up and down.

Senator Adams. In the conduct of your system did the Guardian Bank act as a general depositary in Detroit of the other 22 members of the system?

Mr. LORD. Yes, sir.

Senator Adams. What would be the situation where you were taking out a bill payable? Say the Niles bank had its reserves carried with the Guardian Bank and the Guardian Bank

Mr. LORD (interposing). Senator Adams, the Niles bank, being a national bank, had to carry its reserves in the Federal Reserve bank.

Senator Adams. It did not carry all of them.
Mr. LORD. It might have had some excess, yes.

Senator ADAMS. Was there such a condition that the Niles bank had on deposit in the Guardian Bank a certain amount, and then the Guardian Bank, in order to help them meet the bills payable, would make a separate deposit; that is, each would pass on the independent deposits rather than offsetting?

Mr. LORD. Well, of course, in case of trouble the deposits would offset, in case of trouble. But they are entirely separate transactions.

Senator ADAMS. They might have been carried as separate deposits so that they were actually susceptible of offsetting, but the offsetting was not done!

Mr. LORD. Yes, that is correct.

Mr. PECORA. Mr. Lord, will you look at this document which I now show you and which purports to be a photostatic copy of a letter addressed by Mr. Walsh to Mr. Frank M. Brandon, president of the City National Bank & Trust Co. of Niles, dated January 6, 1931, and tell me if you recognize it as a true and correct copy of such a letter?

Mr. LORD (after examining document). I recognize Colonel Walsh's initials on that.

Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted and entered in the record.

(Letter dated Jan. 6, 1931, from James L. Walsh to Frank M. Brandon was designated Committee Exhibit No. 44, Dec. 21, 1933", and appears immediately following where read by Mr. Pecora.)

Mr. PECORA. The letter marked "Committee's Exhibit No. 44" in evidence, reads as follows; it is on the letterhead of the Guardian Detroit Bank, addressed to Mr. Frank M. Brandon, president of the City National Bank & Trust Co., Niles (reading]:

DEAR FRANK: This is just a brief note to congratulate you on being able to show the item Bills payable--none" in your statement of condition as of

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December 31, 1930. I was also pleased to note the change you made in the set-up of your statement by eliminating the item in “ Trust Assets.” I, too, feel that this is a step toward bringing the statements of all of the group banks into harmony.

Your personal remarks are greatly appreciated, and I, too, am looking forward to a very pleasant association with you in the year 1931. Cordially yours,

Signed J. L W. Those were Mr. Walsh's initials, were they not? Mr. LORD. Yes, sir.

Mr. Pecora. Now, what do you understand by the reference in this letter to an elimination in the statement of condition of Mr. Brandon's bank of the item in “ Trust assets"?

Mr. LORD. Mr. Pecora, that is a technical matter. Some banks, as a matter of form, will carry off-setting items on each side of their statement, of bonds in safe keeping or trust assets, on the asset side, off setting the liability side. It meant absolutely nothing. It merely distorted the bank's statement of its own resources and liabilities. Now it is a technical matter that probably Colonel Walsh can explain. It is a detail that I would not follow myself, but that is my understanding. There are a great many State banks that used to carry bonds in safe keeping that might run up to several hundred thousand dollars, and that might swell their statement, giving it the appearance of a bigger institution than it actually was.

Senator Adams. It had no effect on the net worth of the bank? Mr. LORD. Absolutely no effect.

Senator Adams. Merely on the aggregate or totals on the two sides?

Mr. LORD. Yes, sir.

Senator COUZENS. Yes; but wasn't it quite an ordinary discussion to talk about your totals?

Mr. LORD. Not distorted that way, Senator.

Mr. PECORA. Didn't it show a larger amount of total resources for that year?

Mr. LORD. Than we wanted to show, and that is why it was taken out; because it gave to my mind a somewhat false impression of the totals of the bank.

Mr. PECORA. Exaggerated impression?
Mr. LORD. Yes; I think it did.

Senator Adams. Banks have used that term “ resources” and used that total sometimes as if it meant something?

Mr. LORD. Yes; and it really meant nothing, because they were offsetting items on both the asset and liability side.

Mr. PECORA. I show you what purports to be a photostatic reproduction of a telegram sent to Mr. Herbert R. Wilkin, executive vice president Union Industrial Trust & Savings Bank, Flint, Mich., by James L. Walsh under date of December 30, 1930. Will you look at it and tell me if you are familiar with the transaction to which that relates ?

Mr. LORD. I know nothing about it at all. Never saw the telegram.

Mr. PECORA. I show you now another photostatic reproduction of what purports to be an intra-Group memorandum letter addressed to Mr. Wilkin by Mr. Walsh under date of December 31, 1930. Will you look at it and tell me if you recognize it as being a true and correct copy of such a Group memorandum or letter?

Mr. LORD (after examining document). I recognize Colonel Walsh's signature.

Mr. PECORA. I offer it in evidence.
Mr. LORD. Do you want both of them?
Mr. PECORA. Both the telegram and the letter.

Mr. Lord. I don't know anything about the telegram. There is no way of identifying it. I assume it is all right.

The CHAIRMAN. Let them be admitted and entered on the record,

(Photostat of telegram dated Dec. 30, 1930, from James L. Walsh to Herbert R. Wilkin was designated "Committee Exhibit No. 45, Dec. 21, 1933," and appears immediately following where read by Mr. Pecora.)

(Intra-group memorandum dated Dec. 31, 1930, from James L. Walsh to H. R. Wilkin was designated “ Committee Exhibit No. 46. Dec. 21, 1933," and appears immediately following where read by Mr. Pecora.)

Mr. PECORA. The telegram marked “Exhibit No. 45” reads as follows (reading]:

DECEMBER 30, 1930. HERBERT R. WILKIN, Executive Vice President, Union Industrial Trust & Savings Bank,

Flint, Mich. Wire me early Wednesday morning your total bills payable, if any, and will endeavor to secure deposit for you to offset.

JAMES L. WALSH. The letter marked in evidence as “ Committee Exhibit No. 46" is on the letterhead of the Guardian Detroit Union Group, Inc., entitled “Intragroup Memorandum”, dated December 31, 1930, addressed to Mr. H. R. Wilkin, executive vice president and cashier, Union Industrial Trust & Savings Bank, Flint, from Mr. James L. Walsh, vice president, Guardian Detroit Bank. It reads as follows [reading]:

DEAR HERB : Agreeable with our telephone conversations today, we have credited your account $1,800,000, representing your certificate of deposit for $1,200,000 received by messenger and a transfer of $600,000 received through the Federal Reserve bank.

In accordance with your instructions we have charged your account with your notes to the Guardian Detroit Bank aggregating $1,800,000, plus accrued interest to date amounting to $155.55. We are enclosing duplicate deposit ticket in acknowledgment of above credit, debit advice, and your canceled notes.

You will be gratified to know that none of the units of the Guardian Detroit Union Group will show one dollar of bills payable in their annual statements to be published shortly. With best wishes for a happy and prosperous new year, I am, Cordially yours,

JAMES L. WALSH. Mr. PECORA. What does this letter indicate to you as the transaction alluded to therein?

Mr. LORD. Aside from the letter, I know nothing about the transaction. The letter would indicate that the deposit was $1,200,000 made by the Guardian Bank with the Flint Bank; that the proceeds of that deposit were transferred, or $600,000 of the Flint Bank's funds, making a total of $1,800,000 which was used in liquidation of the note of that bank to the Guardian Detroit Bank.

Mr. PECORA. Was the note actually paid?

Mr. LORD. I assume it was.
Mr. PECORA. Or was it a mere bookkeeping transaction?
Mr. LORD. I assume it was paid and canceled.
Mr. PECORA. And the obligation represented by the note was passed
on to the obligation represented by the depositor!
Mr. LORD. Well, in part.
Mr. PECORA. Was the note referred to in this letter, exhibit 46,
reinstated after the 1st of January 1931 ?

Mr. LORD. Mr. Pecora, I know nothing about it. I have no details of the note at all.

Mr. PECORA. Was there a committee known as the “ Public Relations Committee", either of the Guardian Detroit Bank or of the

group?

Mr. LORD. I have a vague recollection of such a committee.
Mr. PECORA. What were the functions of that committee?
Mr. Lurd. I suppose, just what the name implies.
Mr. PECORA. Well
Mr. LORD. Public relations.
Mr. PECORA. Well, elaborate on that a little, will you?

Mr. LORD. I would say it would handle advertising, publicity of all characters, contacts with the public—whatever comes within the scope of public relations.

Nr. Pecora. I have before me what purports to be a photostatic reproduction of the minutes of a meeting of this public relations committee held on June 25, 1931, in the directors' room of the Guardian Detroit Bank, and which reads as follows

Mr. LORD. What was the date? Excuse me. Mr. Pecora. June 25, 1931. [Reading :) Ernest Kanzler presided as chairman. Present: Messrs. Berry, Kanzler. Keane, and Snow. By invitation : Messrs. Scrymgeour, Winningham, and Paterson.

(1) The minutes of the meeting held May 22, 1931, were read and discussed as follows: The matter of appointing a publicity man in each unit who would be responsible for gathering current news items and either getting them in the local papers or sending them on to Mr. Ernest Kanzler was discussed. Mr. Scrymgeour stated that he had prepared a letter and submitted it to Mr. Walsh, which Mr. Walsh now has. The chairman will take this up with Mr. Walsh direct.

(2) In regard to the posters to be used on the Fort Street side of the Guardian Detroit Bank Savings department in the Penobscot Building, Mr. Berry reported that he had taken the matter up with Mr. Walsh, but due to Doctor Murphy being out of town, nothing definite had been arrived at as yet.

This is what I particularly want to call your attention to, Mr. Lord (reading] :

(a) A discussion followed of the Consolidated Group statement, which is to be printed in poster form 3 or 4 days after the unit statements are available. It was finally decided that this consolidated statement would be printed in the standard form rather than in the understandable form, as it had been originally set up. It was felt that the understandable form was devised at a time when conditions warranted such a statement, whereas the situation is now entirely different, and it will be much better to use the same type of statement for the newspapers, for printed statements, and for posters.

What was the difference between the so-called standard form of report and the understandable form?

Mr. Lord. Mr. Pecora, I do not know anything about it. I do not know what they were talking about. I was not at the meeting and do not know what the discussion was; and I do not know of any statement that was published that is not in understandable form. It is all Greek to me. I never saw the thing before.

Mr. PECORA. What was the standard form? Let us see how much Greek there was to it.

Mr. Lord. I do not know what they are referring to.

Mr. PECORA. They were referring to the issuance of the Consolidated Group statement, were they not?

Mr. LORD. Yes.
Mr. PECORA. Do you know what that was?
Mr. LORD. I assume it is what appeared in the annual report.

Mr. PECORA. The consolidated group statement was a statement showing the condition of all of the unit banks in the group, in consolidated form!

Mr. LORD. Yes, sir.

Mr. PECORA. And in that consolidated group statement it was necessary to show various items of assets and items of liability?

Mr. LORD. Yes, sir.

Mr. PECORA. There was a so-called standard form of such a statement, was there not?

Mr. LORD. I do not know what he was talking about when he says “ standard” or “understandable.” I have not the slightest idea.

Senator COUZENS. That was not the question that Mr. Pecora asked. He asked whether or not there was a standard form. I think he was not referring to this particular thing, but was there a standard form?

Mr. LORD. As I understand the words “standard form ”, it is the statement which appeared in the annual report. I do not know of any other form.

Mr. PECORA. Did you ever hear of another form called or desig. nated as an understandable form as distinguished from the standard form?

Mr. Lord. I do not know what he was referring to, unless he is referring to detailed statement such as that of thé Continental Bank of New York, or the Corn Exchange Bank. Under each item it would have in words of one syllable just what it owed to the depositors, and under capital stock it would show what the stockholders had in it. Unless he means that, I do not know what he was talking about.

Mr. PECORA. You were the executive officer of both the Group and of the largest bank in the Group, were you not, at this time, in June 1931 ?

Mr. LORD. Yes.

Mr. PECORA. And as the executive officer of the Group it was part of your duty to get up or to assist in the preparation of a statement showing the condition of the Group and its units, was it not?

Mr. Lord. It was part of my duty to look at the statement and see that it was satisfactory; yes. But to get it up, no.

Mr. PECORA. In order to see that it was satisfactory you had to know what the report contained ?

Mr. LORD. Yes.

Mr. PECORA. And that would lead to a consideration by you of the form of the report, would it not?

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