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Mr. LORD. The fact that the editor wanted it as an interview. I suppose it was a gossipy article. I don't know what was in it. I cannot answer your question without knowing what was in it.

Mr. PECORA. The statement is contained in Mr. Brandon's letter to Colonel Walsh, which I have just read to you

However, the fact that we had a slight decrease in commercial deposits between the September 24 and December 31 call necessitated some change so that the article was finally prepared.

And so forth.
Do you know what kind of a change was made?
Mr. LORD. I do not know a thing about the article. I never

saw it.

Mr. Pecora. Was the change, in your opinion, designed to cloud or obscure the fact of the decrease in deposits between the two dates mentioned?

Mr. LORD. I would not think so, from that.

Mr. PECORA. I will ask Colonel Walsh about that when I call him to the stand.

Now, in the published reports the unit banks of course showed whatever Government bonds they had in their portfolios at the time they were making the reports?

Nr. LORD. Always; yes.

Mr. PECORA. Did the reports also show whether or not any of those Government bonds were pledged?

Mr. Lord. I think the so-called" legal” published reports that every bank that I know of publishes in addition to their condensed statement, always show the bonds pledged as security for postal savings. It was not, however, customary for banks to show any segregation of their Government or municipal bonds as security for either Government or municipal deposits.

Mr. PECORA. As a rule such bonds were pledged by banks as security for Government or municipal or State deposits?

Mr. LORD. Not as a rule. Mr. PECORA. Such deposits were required to be protected by a pledge of security!

Mr. LORD. In the case of Postal Savings it was required by law, as I recall it, that they must be secured by the deposit of Government or selected municipal bonds.

Mr. PECORA. In the case of deposits of public funds, were not such deposits usually covered by pledges of Government securities!

Mr. LORD. No, sir; they were not.

Senator COUZENS. Did you secure any other deposits besides those of the Government's ?

Mr. LORD. I think in some cases, in the units, in the local municipality, they pledged municipal or other securities.

Senator Couzens. I meant, governmental agencies or their subdivisions. Do you secure in any manner a private deposit!

Mr. Lord. Not to my knowledge, sir.

Mr. PECORA. Was it customary from time to time for any of the Group banks to request a depositor or customer to make a temporary deposit in order to enable the bank to show an increase in deposits for a certain date or on a certain date?

Mr. Lord. I could not say definitely on that, because I do not know. I think, answering your question in another way, it may

have happened frequently that in the solicitation of deposits certain deposits were secured which it was known at the time would only be in for a limited period.

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

(Whereupon, at 1 p.m., a recess was taken until 2 p.m., Thursday, Dec. 21, 1933.)

AFTER RECESS

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

The CHAIRMAN. The subcommittee will come to order. You may proceed, Mr. Pecora.

TESTIMONY OF ROBERT 0. LORD, DETROIT, MICH.—Resumed

Mr. PECORA. Will the committee reporter read the last question and answer of the morning session!

The committee reporter (Mr. Hart). The last question and answer of the morning session were as follows:

Mr, PECORA. Mr. Lord, was it customary from time to time for any of the Group banks to request a depositor or customer to make a temporary deposit in order to enable the bank to show an increase in deposits for a certain date or on a certain date?

Mr. LORD. I could not say definitely on that, Mr. Pecora, because I don't know. I think, answering your question in another way, it may have happened frequently that in the solicitation of deposits certain deposits were secured which it was known at the time would only be in for a limited period.

Mr. PECORA. What was specifically the purpose of obtaining such deposits, if it was known in advance that they would be available for only a short period !

Nr. LORD. For the benefit of the earnings of the institution, to increase the deposits generally.

Mr. PECORA. You mean for the purpose of enabling the institutions to put out a public statement

Mr. LORD. Not necessarily, because it was done all through the year. We took temporary deposits in the middle of the year, or any other time. In other words, there was enough rotation of temporary money to keep your deposit situation in shape.

Mr. PECORA. It was considered desirable at various periods of the year-say, for instance, the periods when calls would be expected from the Comptroller of the Currency for condition reports—to build up the deposits of the banks. Mr. LORD. Yes.

Mr. PECORA. Even though they were built up only for those temporary periods.

Mr. LORD. Yes. Mr. PECORA. And that was done to enable the banks in their reports made in response to the call, to show a better condition on the surface than they actually enjoyed.

Mr. LORD. I would not say that, Mr. Pecora, a better condition than they enjoyed, because they did enjoy that condition. It is a better condition than a low point in the deposits.

Mr. PECORA. That is what I mean.

Mr. Lors. But the condition was a true condition whether the deposits be temporary or permanent.

Mr. PECORA. It was a true condition insofar as it existed on the date for which it was reported. But it was known to the officers, when special deposits were procued for these temporary periods, that that condition was not going to be the condition within a few days after the reports were made for the given date.

Mr. LORD. It might have been known as regards that particular deposit, but there may have been other deposits coming in to take its place.

Mr. PECORA. I think you testified in substance that in those instances where resort was had to a so-called “ C.D.”, or certificate of deposit in order to enable a unit bank to offset a bill payable, that the deposit was actually made.

Mr. LORD. So far as I know, it was.

Mr. PECORA. You were the president of the Gurdian Detroit Bank on December 31, 1931, were you not?

Mr. LORD. I was.

Mr. PECORA. I show you what purports to be a certificate of deposit dated December 31, or rather a photostatic copy of a certificate of deposit, dated December 31, 1931. Will you kindly look at it and tell me if you recognize it to be a true and correct copy of such certificate of deposit as was used?

Mr. LORD. I assume it was. I never saw this before.
Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted.

(The document referred to, copy of certificate of deposit, Dec. 31, 1931, was received in evidence, marked " Committee Exhibit No. 48 ", Dec. 21, 1933, and the same was later read into the record by Mr. Pecora.)

Mr. PECORA. The exhibit received in evidence and marked " Committee's Exhibit No. 48”, of this date reads as follows (reading]: MAIN OFFICE, UNION INDUSTRIAL BANK,

Flint, Mih. December 31, 1931. Serial no. 53. Guardian Detroit Bank, Detroit, Mich., has deposited in this bank (Union Industrial) $600,000 payable to the order of themselves upon the return of this certificate properly endorsed.

(Signed) EDWARD HOLMES,

Assistant Cashier. On the back thereof appears this endorsement in handwriting [reading]: This C.D. withdrawn January 2, 1932, and we credit Guardian Detroit Bank. What does this indicate, Mr. Lord ?

Mr. LORD. It indicates that the certificate was withdrawn, the funds withdrawn, on January 2.

Mr. PECORA. Why were they so withdrawn?

Mr. LORD. I do not know. Probably the Guardian Detroit Bank needed the money, or had use for it.

Mr. PECORA. Is this one of those occasions where a certificate of deposit was issued to offset bills payable on the books of the Union Industrial Bank?

Mr. LORD. It would seem so.

Mr. PECORA. The Union Industrial Bank carried an account with the Guardian Detroit Bank, did it not, at that time?

Mr. LORD. So far as I know; yes.

Mr. PECORA. I show you what purport to be photostatic reproductions of certain ledger sheets of the Guardian Detroit Bank with relation to the account with the Union Industrial Trust & Savings Bank of Flint, Mich., including the date of this certificate of deposit which has been received in evidence as Committee's exhibit no. 48. Will you look at it and see if you can identify those photostatic reproductions as true and correct copies of the ledger accounts of the bank?

Mr. LORD. I could not identify it, except that it has the Guardian Detroit Bank insignia on the top of it. I assume it is correct. I have no reason to question it.

Mr. PECORA. I offer those sheets in evidence.
The CHAIRMAN. Let them be admitted.

(The document referred to, photostatic copies of ledger sheets of the account of the Union Industrial Trust & Savings Bank, Flint, Mich., on the books of the Guardian Detroit Bank, were received in evidence and marked " Committee's Exhibit No. 49", Dec. 21, 1933, and portions thereof were subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The photostatic copies of these ledger sheets of the account of the Union Industrial Trust & Savings Bank of Flint, Mich., on the books of the Guardian Detroit Bank contain absolutely no entry respecting this certificate of deposit represented by committee Exhibit No. 48, do they?

Mr. LORD. A certificate of deposit issued by the Union Industrial Trust & Savings Bank would not show on this ledger sheet.

Mr. PECORA. Why not? Mr. LORD. Why should it? That is a separate piece of paper. That is not a credit on the books on the account so far as I know.

Mr. PECORA. Why shouldn't it be!

Mr. LORD. I do not know what happened to the proceeds of that certificate.

Mr. PECORA. What does this certificate of deposit indicate!

Mr. LORD. It indicates that the Guardian Detroit Bank had on deposit in the Union Industrial Trust & Savings Bank $600,000.

Mr. PECORA. Yes. Would not that appear in the ledger account carried on the books of the Guardian Detroit Bank?

Mr. LORD. Frankly, I do not know. I am not a bookkeeper. I do not know how a bank would carry its certificates, whether they are carried on a ledger sheet where the regular balances are carried, or carried in some other way. That is beyond my activities in the bank, and I do not know how it would be carried.

Senator COUZENS. Who, in your organization, would know, Mr. Lord!

Mr. LORD. I do not know who the bookkeepers were.

Senator. Couzens. Would the knowledge be confined to a bookkeeper, or would not some officer know whether the bookkeeper was doing his duty?

Mr. LORD. I suppose some technical officer would know it.

Senator Coczexs. Would you know what technical officer would know it?

Mr. Lord. I suppose Mr. Burns would know it. He had charge of the operations of the bank.

Senator COUZENS. What was his title?
Mr. LORD. His title was cashier.

Senator Adams. Senator, in a country bank an officer knows all those things.

Mr. Lord. Yes; because he does all the work.
Senator ADAMS. Even when he does not.

Mr. PECORA. I show you what purports to be a photostatic reproduction of a report of conditions of the Union Industrial Trust & Savings Bank of Flint, Mich., as of the close of business on December 31, 1931, which corresponds to the date of the certificate of deposit which has been marked in evidence as “ Committee's Exhibit No. 18.” Will you look at this photostatic copy of that report and tell us if you recognize it to be a true and correct copy of the report of condition made by the bank as of December 31, 1931 ?

Mr. LORD. Mr. Pecora I have no way of identifying it. I can identify Mr. Wilkins 'signature on here, but I never saw the report before.

Mr. PECORA. Have you any doubt that it is a true and correct copy of the report?

Mr. LORD. I would not question your word on it.

Mr. PECORA. Subject to any correction or confirmation you want to make on that, I offer that in evidence.

The CHAIRMAN. Let it be admitted.

(The document referred to, report of condition, Union Industrial Trust & Savings Bank, Flint, Mich., Dec. 31, 1931, was received in evidence, marked “ Committee Exhibit No. 50 ", Dec. 21, 1933, and is not reproduced here for the reasons given below.)

Mr. PECORA. On account of the voluminous character of the exhibit I do not think it is necessary to spread it in full on the minutes, but I do want to read into the record the following item appearing under schedule H, entitled “ Bills Payable and Rediscounts", item No. 2 in that schedule [reading] :

Certificates of deposit issued to other banks and trust companies for money borrowed : None.

Now, Mr. Lord, would not that seem to be an incorrect statement, in view of the issuance of this certificate of deposit that has been marked " Committee's Exhibit No. 48"?

Mr. LORD. It would, sir.

Mr. PECORA. This report appears to be signed by Mr. H. R. Wilkins, and was sworn to by him on January 8, 1932.

What was originally known as the Guardian Detroit Bank, of which you were president, eventually became, by merger or consolidation with the National Bank of Commerce, the Guardian National Bank of Commerce.

Mr. LORD. That is correct.

Mr. PECORA. And you continued as president of the bank under that designation or name.

Mr. LORD. I did.

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