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tutions connected with the companies growing out of that original organization.

Mr. PECORA. February 11 of what year?

Mr. KANZLER. 1933. I presume I continued beyond that, but it was not active.

Senator COUZENS. When you left in 1928, Mr. Kanzler, when did you return to the organization?

Mr. KANZLER. I returned-I never was on the pay roll of the organization. Whenever I have served, I have served in just what time I could devote from my credit company business. I served as chairman of the board of the Group Co. after my election to that office, I think, from January 26, 1932.

The CHAIRMAN. What has been your business?
Mr. KANZLER. What is my business?
The CHAIRMAN. Yes.

Mr. KANZLER. The Universal Credit Corporation, which is an automobile financing corporation with branches in 35 cities, financing time sales of automobiles. This is a rather extensive business, and it has occupied a considerable amount of my time. We have done about $900,000,000 worth of financing since 1928.

Mr. PECORA. Do you recall attending and presiding over the annual meeting of the stockholders of the Guardian Detroit Union Group, Inc., which was held on January 24, 1933?

Mr. KANZLER. Yes, sir.

Mr. PECORA. And which, as I understand, was the last annual meeting of the stockholders of that company.

Mr. KANZLER. Yes, sir. I conducted that meeting.

Mr. PECORA. About how many stockholders attended that meeting?

Mr. KANZLER. I should judge there were about 130 or 140 people there. There must have been about 20 rows, and about 8 or 10 in a row.

Mr. PECORA. At that meeting do you recall whether or not an annual report was submitted or presented in any form whatsoerer to the stockholders for the year 1932?

Mr. KANZLER. At that meeting I made some remarks to the stockholders from notes that I had which I read, because it was the first meeting I had ever conducted, and I was not quite sure of myself as to how to conduct a meeting of that kind, so I had prepared some notes which I read to the stockholders, and I also had prepared some charts which indicated the growth of the various institutions that were members of the group, and after I had read up to the point where those charts were material, I left off the writing that I had prepared and continued an informal discussion about each of the various units, and commented on the conditions in those cities as illustrated by the charts.

Mr. PECORA. Do you know whether or' not there is in existence either the original or any copy of the notes from which you read your report, or part of it, to the stockholders at that annual meeting?

Mr. KANZLER. I have the actual notes which I prepared for my own reading and which I read.

Mr. PECORA. Do you have them with you?
Mr. KANZLER. Yes, sir; I have.
Mr. PECORA. Will you please produce them?

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Mr. KANZLER. Yes, sir (producing a document].

Mr. PECORA (after examining document). Mr. Kanzler, did you read to the stockholders at the last annual meeting all of the matter which is typewritten and handwritten on the document which you have handed me?

Mr. KANZLER. I have not changed the document any, and I presume I read it all just as it is.

Mr. PECORA. Is it fair to assume that those portions of this document which are deleted by lead pencil lines were not read?

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

(Kanzler notes, annual meeting of stockholders, Guardian Detroit Union Group, Inc., Jan. 24, 1933, were received in evidence, marked “Committee's Exhibit No. 63, Jan. 4, 1934," and the same were subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The document, which has been marked "Committee's Exhibit No. 63”, reads as follows (reading]:

Annual reports of 1932 are hardly complete without reference to economic conditions, to the need for drastic curtailment of governmental expenditure, the pecessity of finding solutions for the European situation and unemployment, and the desirability of enacting banking legislation.

These problems are controversial. They have been debated by experts; writers of authority have discussed them in the public prints.

We have very definite opinions on these problems and our organization has contributed liberally in time and effort to help solve them.

But, since the full discussion of even one of these problems affecting the economic situation would, were it adequately treated here, consume infinitely more time than is at our disposal, we want you to know that we are constantly on the alert to changing conditions. We have at our disposal the best obtainable counsel and in our operations during the past year we have been guided by this counsel and have charted our course accordingly.

The safety of funds which our deositors have entrusted to us is paramount to every other consideration. From this viewpoint, 1932 was a year of notable improvement.

Despite the generally adverse business conditions which prevailed, no less than $100,000,000 of assets of our banks and trust companies are held as cash or invested in United States Government securities against aggregate deposit liabilities of $290,000,000. This degree of liquidity is not excelled by any bank or group of banks in the entire State of Michigan.

Mr. KANZLER. Mr. Pecora, may I interrupt? I think you will find "any bank" is crossed off.

Mr. PECORA (reading): This degree of liquidity is not excelled by any group of banks in the entire State of Michigan.

Is that the way you think that was read?

Mr. KANZLER. I am sure it was, because I remember it at the time. I thought it was an overstatement, and that there might be some bank that was 100 percent liquid, or 90 percent liquid, and so that was crossed off.

Mr. Pecora (continuing reading):

While bettering their liquid position, our banks have at all times continued to render constructive, helpful service to customers and have played an important part in encouraging industry to maintein employment and in rendering distinct assistance and cooperation to their respective communities.

The pursuance of this sound policy of looking first to the stability and liquidity of our banks and trust companies necessarily affected our earning power-for liquidity can be maintained only at the expense of profits. For the year 1932,

reserves.

operating earnings of the banks and trust companies in the Group, after all expenses of operation, taxes, depreciation on banking houses and equipment and losses on securities sold, but before reserves, were $2,619,443. On the same basis and for the same period, the consolidated net operating earnings of the Group Co., banks, trust companies and all other affiliated companies, amounted to $1,316,952.

Dividends paid during the year amounted to $375,134. Conservative policies made advisable the discontinuance of dividends during the second quarter of 1932. The remaining earnings of $941,818, together with recoveries of $1,131,005, from items charged off in previous years, plus sums taken from capital funds in an amount of $8,966,932, totaling $10,939,756, were transferred to

Computed on the basis of the aggregate capital, surplus, and undivided profits of the unit banks and trust companies, as reflected by their published statements of December 31, 1932, plus the net worth of the other affiliated companies at market prices of securities on December 31, 1932, the book value of the group stock amounts to $17.04 per share. This figure does not include total reserves remaining in the banks and trust companies exceeding $6,700,000, nor does it include a reserve of $5,000,000 on the books of the Group Co. for contingencies not determinable at this time, but which your management has deemed it prudent to create, in view of the present business situation.

The policy of liquidating securities affiliates which was initiated in 1931 has been continued during 1932 in an orderly manner. During 1932, a difficult period for liquidation, securities carried on the books at $1,712,821 were sold with a resultant net loss of only $42,201, accomplishing this liquidation by the sale of the least desirable holdings and retaining only the highest grade securities. On December 31, 1932 the aggregate market value of securities owned by these companies was $5,688,797.

Outside of the banks and trust companies whose statements are regularly published, and in addition to the securities companies which are in liquidation, as stated above, there are included also in the Group the following three operating companies—the Union Title & Guaranty Co., the New Union Building Co., and the Guardian Safe Deposit Co.

The Union Title & Guaranty Co. depends upon real estate activity for its profitable volume of business. During 1932 there was continued stagnation of real estate activity in the metropolitan Detroit district. In spite of the greatly curtailed field for title-company operations, this company was able to show a small profit ($1,600) in 1932 as against a $47,000 loss in 1931. Though its operating income declined 20 percent, its expenses were cut about 30 percent to produce this result.

The year 1932 has been one of continued difficulties for office-building operation Under the existing leases with the New Union Building Co., the Union Guardian Trust Co. handles all details of building management, and all results of such operations are reflected in the trust company statement as published. Under this arrangement, the New Union Building Co. made a profit of $219,000 before depreciation. Depreciation of building and equipment amounted to $290,000.

The funds which are being accumulated in the reserve for depreciation are used to make principal payments on the mortgage obligation of the building company. Since completion of the building in 1929, the building has been written down by $1,227,916.66, and during the same period its mortgage indebtedness has been reduced by $575,000 to $6,425,000. This indebtedness is now being reduced at the rate of $250,000 per year. Except for current operating accounts, the building company has no obligations other than the mortgage debt.

There was a greater than normal demand for safety-deposit boxes this year, and a as result the Guardian Safe Deposit Co., which operates all the safe-deposit business in metropolitan Detroit and a few other units, had a slight increase in its earnings, the total for the year being $4,800.

Drastic economies of operation were continued during the year with satisfactory results. In spite of the fact that total operating income of banks and trust companies decreased 18.32 percent, the controllable operating expenses-i. e., other than interest on deposits-were reduced 25.41 percent.

To effect further operating economies, the Grosse Pointe unit, the Guardian Bank of Grosse Pointe, was merged with the Guardian National Bank of Commerce on December 31, 1932.

FINANCIAL STABILIZATION In the latter part of December 1931 the American State Bank of Lansing, one of the three largest banks in Lansing, had been forced to close its doors. Public confidence in Lansing was badly shaken. The public hysteria was directed almost entirely against the City National Bank, whose deposits were rapidly being withdrawn.

To protect the citizens of Lansing from a catastrophe from which the city would have taken many years to recover, and to establish financial stability for the city of Lansing, the Capital National Bank of Lansing, our unit, on December 28, 1931, took over the City National Bank of Lansing, which then was an institution with total footings of approximately $9,000,000.

To protect our unit against possible loss in taking over the assets of the City National Bank, certain of the directors of that institution, together with some public-spirited corporations and other individuals, put up in trust as a guaranty fund, securities having a market value of $1,500,000.

Announcement that one of the Guardian units had guaranteed deposits of the City National Bank immediately quieted the fears of the Lansing public and financial tranquility was reestablished within short order.

The wisdom of this action has been fully demonstrated and public confidence in Guardian institutions and Guardian policies has increased in no small degree.

On January 14 of this year, the only other bank in Port Huron outside of our unit was compelled to close its doors. At the same time, two small banks, one in Algonac and one in Marine City, nearby communities, also closed their doors.

As was to be expected, the public in Port Huron became apprehensive as to the safety of their deposits. For a day or two even our own bank at Port Huron suffered withdrawals. These withdrawals have ceased, and funds which had been placed in safety-deposit boxes by frightened customers have already begun to return to our bank.

It is an inherent feature of the present banking situation, involving as it does such a delicate and fragile thing as credit reputation, that the many instances of assistance rendered by the group to communities and institutions of Michigan can never be detailed. Actual results, however, have developed an understanding in many quarters of the effectiveness of group banking as conducted in your corporation, and have made for our units many new friends and an enhanced reputation.

The banking units of the Guardian Detroit Union Group are located in 16 communities

It is interesting to note that, as measured by deposits, in 11 of these communities the Guardian units are first in size; in 4 cities they are second in size; and 1, in Hamtramck, is in third place.

Putting it in another way, in 3 cities our units have 100 percent of the deposits in the city; in another 3 cities our units have more than 75 percent of all deposits; in 2 cities our units have more than 50 percent; in 5 cities our units have more than 25 percent; and in 3 cities we have less than 25 percent.

That our units are gaining in good will and strength in the eyes of the various communities of the State is best demonstrated by the fact that two of our largest gut-State units, which at the beginning of the year had been in second place, went to first place in their respective cities. Two other units advanced their position from third place to second. Only one unit in the Group, namely, Dearborn, lost its relative position during the year, the same having been passed by the Deaborn State Bank.

Fourteen of the twenty banks and trust companies in the Group are 20 years old or more. Seven of these are 60 years old or more—the average age being 35 years.

Mr. KANZLER. Mr. Pecora, if I may interrupt here, it was at this point that I brought out the charts, and in connection with this information I discussed the situation of each unit and the community.

Mr. PECORA. You have not any copy of those charts?

Mr. KANZLER. They were all extemperaneous. I think the charts probably are still in Detroit.

Mr. Pecora. I will resume my reading of Committee's Exhibit No. 63 [continuing reading]:

The stock ownership of your corporation is the best evidence of the confidence the directors and officers have in the future of the group. Its institutions are manned by men who are outstanding citizens in their respective communities, who have for years been identified with their institutions, and who are familiar with industrial and economic conditions of each city. They are men who are themselves large holders of stock in your corporation and whose every effort is devoted to an interested development of service to the public and the community in which they are located.

Shares owned by officers and directors of units of the group as of January 12, 1933, amounted to over 400,000 shares, or more than 26 percent of the total of 1,544,844 shares outstanding; 1,435,978 shares, or 93 percent, are owned by residents of the State of Michigan. There was a substantial increase in the number of shareholders during the last year. There are now 9,837 shareholders, compared with 8,945 on December 31, 1931. Ownership of large holdings of stock remained practically unchanged during the year.

IN MEMORIAM

It is with deep regret that we report the great loss the Group has suffered by deaths during the year

On March 26: Edwin H. Nelson, president Nelson, Baker & Co.

On April 1: John R. Russel, vice president Clayton Lambert Manufacturing Co.

On June 23: Daniel D. Brown, chairman First National Trust & Savings Bank, Port Huron.

These men were all directors of the Guardian Detroit Union Group, and their memory is warmly cherished by those with whom they were associated.

Notwithstanding the exceptionally trying times and their effect upon our banking institutions during the year, our unit banks are entering the new year prepared to furnish better and more efficient banking service to the communities which they serve.

Perhaps never in the history of banking has more been demanded of directors, officers, and staff than in the past year. It has been an inspiration to note the unselfishness with which our organization has faced its daily problems.

We wish to take this occasion to express to them our appreciation for their zeal, loyalty, and cooperation which has been shown.

We also take this opportunity to thank our shareholders for their splendid support during the year 1932, which has resulted in an increased amount of business being directed to units of the Group. Continuance of this confidence during 1933 will stimulate the operating staff to even greater endeavors in the interest of the stockholders.

The preeminence of the Guardian Detroit Union Group, Inc., as a vital factor in the economic and financial life of Michigan becomes impressive when one considers the outstanding men representing its affiliated institutions as directors. With these contacts, any economic improvement or further development of Michigan's industries will directly reflect such prosperity within our own institution.

Mr. KANZLER. This next was not read, Mr. Pecora. That was just a computation.

The CHAIRMAN. And right after that meeting you proceeded to Washington to get a loan from the Reconstruction Finance Corporation.

Mr. KANZLER. Yes, sir.

Mr. Pecora. Does this comprise substantially what you gave to the stockholders orally at the meeting of January 24 last, as the annual report of the Group or holding company for the year 1932?

Mr. KANZLER. It does, plus the remarks I made in commenting on the situations in the local communities that were represented by those charts.

Mr. Pecora. Could you give this committee now, from your recollection or from any notes that you may have, the substance of those remarks you made?

Mr. KANZLER. I had no notes. I commented on the conditions of the banks throughout Michigan, as I recall it, and the fact that there had been many banking failures. I commented on the-well, I cannot generalize, Mr. Pecora. I would have to sort of think back over each city. I remember I commented on the fact that the automobile

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