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,

Those were Mr. Walsh's initials, were they not?
Mr. LORD. Yes, sir.

Signed J. L. W.

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

that total sometimes as if it meant something?

66 resources and used

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]:

HERBERT R. WILKIN,

DECEMBER 30, 1930.

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. LORD. 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.

Mr. 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. Serymgeour 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 neces sary 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 a detailed statement such as that of the 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 form of the report, would it not?

of the

Mr. LORD. I would say so; yes.

Mr. PECORA. You were interested as the executive head of the Group in anything that was put out in behalf of the Group to enlighten the public with respect to the position of the Group and of the unit banks, were you not?

Mr. LORD. Yes, I was, naturally.

Mr. PECORA. And you knew that this public relations committee was functioning for the precise purpose or the specific purpose of keeping the public informed, among other things, concerning the activities, the condition, the progress of the Group and its unit banks? Mr. LORD. Yes.

Mr. PECORA. That was not an unimportant detail, was it?

Mr. LORD. NO.

Mr. PECORA. It is important to any bank to maintain friendly rela tions with the public, is it not?

Mr. LORD. Indeed it is.

Mr. PECORA. And to impress upon the public any facts that would tend to reflect the sound condition of the bank?

Mr. LORD. Correct, sir. Mr. Kanzler tells me that the so-called "understandable form " is the formal statement that you may not recall or that you may recall having seen gotten out by the Corn Exchange Bank.

Mr. PECORA. Published generally in theater programs and newspapers, and one that employs verbiage which is not technical?

Mr. LORD. Not technical. It was at that time certainly quite an unusual form used by banks.

Mr. PECORA. It was called an understandable form because it was considered that the lay public, unfamiliar with the technique of banking, would be able to understand a report in that form better than it could understand the standard form of report. Is not that so?

Mr. LORD. Yes. Part of the lay public-I mean, the man on the street. It said in words of one syllable what each item meant, so that you might say a child of 12 could understand it. It was quite the unusual form used by banks.

Mr. PECORA. It is a commendable form where it is sought to inform the public accurately and understandingly?

Mr. LORD. I think it is.

Mr. PECORA. Do you know the reason why in June 1931, it was considered inadvisable to issue a report or statement in behalf of the Group not in its understandable form, or the form that the public would more easily understand and appreciate the significance of, but in the standard form which was not quite so capable of being understood by the public?

Mr. LORD. Mr. Pecora, I cannot answer that question. My assumption would be that the reason they preferred to use the standard form was that no other bank in Detroit used the so-called understandable form, nor had we in any of our banks or in any of our Group statements ever used it, and it meant a change from the ordinary form. Mr. PECORA. Had not the Group at any time issued a report in the so-called understandable form?

Mr. LORD. Not to my knowledge.

Mr. PECORA. Had it published anything embodying a statement of the condition in the so-called understandable form?