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was made, namely, that we could not go to the national corporations which had deposits in the Union Guardian Trust Co., which also had deposits in our various units of the bank, and say, "Will you please subordinate some of
these deposits, because if we get enough maybe we can get an R.F.C. loan.” I think that would have been a very dangerous situation, and we did not dare to do it.
Senator COUZENS. Who were present at the meeting when you were alleged to have made the statement?
Mr. KANZLER. I think the whole board, Senator Couzens--Mr. Ieyburn, Mr. McKee, Mr. Longley
Mr. PECORA. Who was Mr. McKee? Mr. KANZLER. In the absence of Governor Tally, who was ill, Mr. McKee was in charge of bank loans for the R.F.C.; and Governor Tally thought that this was so important that he immediately sent Mr. McKee, who returned with us the day after we were in Washington, and he came to Detroit on a Saturday and we worked incessantly about 18 hours a day preparing these schedules; that is, the scheduling was under the supervision of some of the active officers of the institution.
Senator COUZENS. Who else was at the meeting?
Mr. KANZLER. I think, Senator Pomerene, Ogden Mills, Judge McCarthy, Mr. Miller, president of the Reconstruction Finance Corporation; and there was a rather long table, and on both sides of it there was a group of individuals whose names I do not recall.
Senator COUZENS. Who took down the record of your statements? Do you know?
Mr. KANZLER. I have no idea.
The CHAIRMAN. As a matter of fact, there was a gap in the amount of the loans and securities, was there not?
Mr. KANZLER. The gap was the $6,000,000, Senator Fletcher, that we were asked to provide.
Mr. PECORA. What was the loan that you asked for-$65,000,000, was it not?
Mr. KANZLER. I think we asked for an additional $48,000,000 or $49,000,000, and that involved all the banks and trust companies in the State, and that was done
Mr. PECORA. You asked for a total of $65,000,000, did you not?
Mr. KANZLER. No; $14,000,000 had already been granted, so we asked for the difference between the two.
The CHAIRMAN. What was the total amount you asked for?
Mr. Pecora. In other words, what was the total that you had received and what did you ask for additionally?
Mr. KANZLER. We asked for approximately $50,000,000 additional.
Mr. KANZLER. Yes. I do not want to quibble about that. Incidentally in that connection we were told by Governor Tally, “If you are going to make a loan of this size or anywhere near this size"this was when we were down in the first instance-he said
Be sure that you ask for a sufficient amount of money, because we would be very unhappy if we thought there should be relief given to those 24 banks and trust companies and should find that you did not do this thing adequately and should find that we failed in our purpose.
And he suggested that we be sure that we asked for enough.
Mr. KANZLER. $14,000,000 for the trust company had been previously committed for.
The CHAIRMAN. It had not been received?
Senator COUZENS, How much of it did you receive-about $11,000,000, was it not?
Mr. KANZLER. Finally, I think about $11,000,000, Senator; I don't remember. We did not sleep days or nights, and some of those figures I do not recall.
Mr. Pecora. Did you state to the Reconstruction Finance Corporation Board on February 6, last, that Mr. Henry Ford had helped the group out in the preceding three years to the extent of about $16,000,000?
Mr. KANZLER. No, sir. Mr. PECORA. Did you say anything like that? Mr. KANZLER. Oh, yes; something very much like it. I said Mr. Edsel Ford had loaned collateral and loaned some cash and had signed his name to some notes.
Mr. PECORA. Did you say in substance to the Reconstruction Finance Corporation Board last February 6, “In connection with the deposits of this company”.
That is, the Ford Motor Co. Totaling about $30,000,000 in the various member banks of the Guardian Group, Mr. Kanzler stated that not only had Mr. Henry Ford in the past 3 years aided the Group to the extent of about $16,000,000 and felt that he had done enough, but they would be obliged to go to Mr. Ford again to assist in raising $5,000,000 of new capital for the proposed mortgage company. Mr. Kanzler stated it would be impossible, in his opinion, to obtain this $5,000,000 advance from Mr. Ford if the deposits of the Ford Motor Co. in the Guardian Group of banks were frozen.
Mr. KANZLER. I think that is a natural error for somebody reporting to make that "Henry Ford." That meant the Ford interests.
Mr. PECORA. In all other respects did you in substance say what I have read to you?
Mr. KANZLER. That we could not go back to him for more, or that he had given that specific sum?
Mr. PECORA. That he had given you $16,000,000.
Mr. KANZLER. I do not recall that figure, and I do not believe it compares with the figures I have. I have in mind it was a loan of $5,000,000 worth of bonds, a loan of $1,000,000, the signing of a note of 24 million. That would be about 82 million. And taking a note of 372 million. That would be about 12 million. It would be about 12 million dollars, as I recall it now.
Mr. Pecora. Had the Ford interests, whether represented by either Henry Ford or Edsel Ford, separately or jointly, come to the relief of the Group in the preceding 3 years to the extent of $12,000,000 or thereabouts?
Mr. KANZLER. Yes, sir. I did not want to be misunderstood. That was not a gift; that was in the way of providing liquidity.
Mr. PecorA. Was it in the way of a loan or what? It was given in what form?
Mr. KANZLER. Yes; a loan of securities, or the lending of a name for endorsement, or something of that nature.
Mr. PECORA. In the annual reports to the stockholders for the years 1929, 1930, and 1931 which have been received in evidence before this committee heretofore, and in the annual report for the year 1932 which you delivered to the stockholders and which was put in evidence this afternoon in connection with your testimony, was there any mention made anywhere of the condition of the group at any time existing during those years which required this kind of assistance from the Ford interests or from anybody else?
Mr. KANZLER. I recall that in previous annual reports I think the statement was made about borrowing 774 million dollars to take out undesirable assets, to lift out assets from banks; also 736 million dollars in working out an orderly liquidation of the securities companies.
Mr. PECORA. Have you a recollection of any such information being embodied in any of the annual reports issued to the stockholders of the group?
Mr. KANZLER. I think so.
Mr. KANZLER. I have not seen some of them for some time, and I would not want to
Mr. PECORA. By the way: Did you have anything to do with the preparation of those annual reports for the years 1929, 1930, and 1931 as well as for the year 1932?
Mr. KANZLER. I may have changed some of the verbiage here and there. I think I was consulted about it. I did not sit down and work the thing through, but I think I saw some of the text of it from time to time. The CHAIRMAN. When was this $12,000,000 of assistance extended?
Mr. KANZLER. I think the Guardian Detroit Co. got a loan for its securities. That was not extended to the Group. That was extended to the Guardian Detroit Co. I think that was at the end of 1930. And then Mr. Mott and Mr. Ford endorsed in 1931, and the last assistance was given in December, I think, of 1932. The CHAIRMAN. Were any of these paid back? Mr. KANZLER. No, sir.
The CHAIRMAN. In 1932, in your report, did you advise the stockholders of that?
Mr. KANZLER. Yes, sir. That would be in the consolidated balance sheet. Mr. PECORA. Which was never sent out? Mr. KANZLER. That was never sent out.
Mr. PECORA. Then you did not advise the stockholders of that fact?
Mr. KANZLER. The annual report that would have been sent out would have included it, and it was approved by the executive committee.
Mr. PECORA. But you did not actually give out that information? Mr. KANZLER. That was not an annual report. Those were remarks to stockholders.
Mr. Pecora. You say it was remarks to stockholders. Was it not regarded as the annual report? Was not a motion made and unanimously carried that the report which you now say was remarks to stockholders should be placed on file and printed and mailed to all of the stockholders of record?
Mr. KANZLER. Yes, but I could not put my extemporaneous remarks on file. I had not reported the balance sheet, and it certainly went with an annual report. We did have a tentative form of the annual report which went to the executive committee and which they approved. I have a copy here if you would like to see it:
Mr. PECORA. I would like to see it. In fact, I would like to offer it in evidence.
Senator COUZENS. Did I understand you to say that Mr. Edsel Ford put up $5,000,000 of his own securities?
Mr. KANZLER. Yes, sir.
Mr. KANZLER. I did not have anything to do with the transaction, so I cannot give you the details; but I am inclined to believe it was with the Guardian Detroit Co.
Senator COUZENS. What did they use them for?
Mr. KANLZER. I am not certain about that; I think it was the Bankers Trust Co.
Senator COUZENS. Of New York?
Mr. KANZLER. I cannot tell you, Senator Couzens. I had better not endeavor to answer that question, because I do not know.
Mr. PECORA. I offer in evidence the document produced by the witness as the contemplated annual report or the tentative report
Mr. KANZLER. It was a draft for discussion.
(Mimeographed copy of document addressed to the stockholders, Guardian Detroit Union Group, produced by the witness, was received in evidence, marked "Committee Exhibit No. 64, Jan. 4, 1934, and will be found printed in full at the end of today's record.)
Mr. PECORA. Do you recall having attended a meeting of the executive committee of the board of directors of the group on January 20, 1933, 4 days before the stockholders' meeting?
Mr. KANZLER. Yes, sir.
Mr. Pecora. I show you what purports to be a photostatic reproduction of the minute book of the executive committee of the board of directors of the Guardian Detroit Union Group, Inc., including minutes of the meeting of the executive committee held on January 20, 1933, beginning at page 185. Will you look particularly at the page of those minutes of that meeting entitled “Consolidated Statement of Earnings and Expenses", and tell us what the last row of figures on that page represents?
Mr. KANZLER. The last row down this way (indicating]?
Mr. PECORA. The bottom row. What do those figures represent?
Mr. KANZLER. It is beaded “Current Period Profits" for the month of December 1932, month of November 1932, month of December 1931, and for the period to date for the year 1932 and the period to date for the year 1931.
Mr. Pecora. For the period to date for the year 1932 what is the figure? Mr. KANZLER. The figure shows $1,798,069. Mr. PECORA. In the red or black? Mr. KANZLER. There is an “R” behind it-red, I presume. Mr. PECORA. What does that indicate?
Mr. KANZLER. I would say that indicates a method of compiling the profit for the year 1932 in the red.
Mr. PECORA. A profit in the red? Mr. KANZLER. A profit or loss figure, which shows in the red. Mr. PECORA. What was the amount of the figure for the year 1932 as there indicated? Mr. KANZLER. $1,798,469.
Mr. PECORA. You were present at that meeting of the executive committee of the board held on January 20 last, were you not?
Mr. KANZLER. Yes, sir.
Mr. PECORA. And you presided over the meeting of the stockholders held 4 days later?
Mr. KANZLER. Yes, sir.
Mr. PECORA. Did you make any mention at all in any statement made to the stockholders of that figure?
Mr. KANZLER. I would have to examine it to find how it was arrived at. I do not recall seeing this particular statement.
Mr. PECORA. It was presented to the meeting of the executive committee of the board on January 20, was it not? Mr. KANZLER. Well, the very next statement shows
Mr. PECORA. Please confine yourself to my question and not to something else.
Mr. KANZLER. I do not recall whether it was or not. I presume it was, but I don't remember seeing any such figure.
Mr. PECORA. You see it now, do you not? Mr. KANZLER. Yes, sir. Mr. Pecora. You do not doubt the authenticity of it, do you? Mr. KANZLER. I think it would have to be explained before you would understand it. Mr. PECORA. You do not want me to explain it, do you? Mr. KANZLER. Maybe if I have time I might be able to explain it. Mr. PECORA. Can you explain it now? Mr. KANZLER. May I take a look at this? Mr. PECORA. Surely. Mr. KANZLER. I think this shows a comparison of figures with other years on a different system of accrual.
Mr. PECORA. I am afraid I do not understand that. Will you enlighten me a little bit further?
Mr. KANZLER. I think this is the basis of conducting the banking books I am presuming now-on what would
be termed a cash basis instead of on an accrual basis, and this was gotten up for purposes of comparison.
Mr. PECORA. With what?