Mr. LEYBURN. Not for a violation of law. You have to go through the Federal court. The CHAIRMAN. He has to do it through the Comptroller, but the Comptroller has the power. Mr. LEYBURN. What do you mean? To take away the charter of the bank? Mr. PECORA. He can take charge of the bank. Mr. LEYBURN. I cannot see under what law he could take charge of the bank if the bank is not insolvent. Some State laws probably are that way, but I do not know of any such case with a national bank. But you will find that a bad bank has all the violations of law, as you say. There is no question about that. In section 30 of the Banking Act of 1933 the power is conferred to take out any officer or director for violation of law or mismanagement. Mr. PECORA. That is the law of 1933? Mr. LEYBURN. Yes; the banking law of 1933. Mr. PECORA. He can only do that through a proceeding instituted through the Federal Reserve Board for the particular district in which the bank is located. Mr. LEYBURN. In other words, the accused man has a hearing before the Federal Reserve Board. Mr. PECORA. The Comptroller of the Currency makes charges against an officer or officers of such bank, and those charges are read before the Federal Reserve Board of the district and, after hearing, determined by the Federal Reserve Board. Mr. LEYBURN. Yes. Mr. PECORA. That, in substance, is the provision embodied in the 1933 Banking Act. Mr. LEYBURN. That is about the size of it. That has teeth in it, if you want to use it. There is no question about that. Mr. PECORA. Would you care to advance any opinion to this committee with regard to the sufficiency of that provision of the law? Mr. LEYBURN. I believe that is all right, but there are other sections of that act that are very ambiguous, especially that one with regard to affiliates. Under this provision, an affiliate, it seems to me, is anything in the bank, except the president's wife's first husband. But that ought to be clarified. The CHAIRMAN. You mean there ought to be a definition of what an affiliate is? Mr. LEYBURN. I think it ought to be clarified as to just what is an affiliate. Senator COUZENS. Because of your position, Mr. Leyburn, you do not have to answer this question if you do not desire to. But what would you think of prohibiting bank examiners from joining banks after they leave the Government service, for a period of 2 years? Mr. LEYBURN. I am glad you asked me that question. I shall be glad to answer it. A man coming into the service as an examiner, on account of the salary, and everything else, has nothing to look forward to unless he can go into a bank. Frequently an attorney will win a case against the Standard Oil Co. or the American Telephone & Telegraph Co., and that corporation will hire him. I would hate to see that done, because I think it would ruin the morale of the force, and we have some wonderful men in the examining division. If you have in mind passing such a law, I think it would be better to prohibit him from going to the bank which he examined; and, with the approval of the Comptroller of the Currency, he could go with a bank. Senator COUZENS. In other words, you would prohibit a bank examiner, for a period of 2 years after leaving the service, from going to any bank which he had examined without the consent of the Comptroller of the Currency? Mr. LEYBURN. No; I did not say that. If you mean to pass such a law, that would be the best way to do it. Senator COUZENS. Would you be in favor of such a law? Senator COUZENS. You believe it ought to stand as it is? Mr. LEYBURN. I think so, except to provide that it may be done with the approval of the Comptroller of the Currency. Senator COUZENS. In other words, he can go to any bank that wants to employ him so long as he gets the approval of the Comptroller of the Currency? Mr. LEYBURN. That would be my idea. Mr. PECORA. What objection do you see to a proviso that no such employment shall be legal within a period of 2 years? Mr. LEYBURN. If a bank wants somebody to go with them, they do not want to wait for 2 years. In numerous cases examiners have gone into bad situations in banks and worked them out, to the credit of the depositors. If somebody wanted to hire you, they would not want to wait for 2 years. They want you now. Senator COUZENS. I could express an opinion, but I am not on the witness stand. Mr. LEYBURN. I would like to have your opinion just the same. Mr. PECORA. I think that is all of this witness. Is there anything else you wanted to tell the committee? Mr. LEYBURN. No. I think I have spoken my piece. I will add this, that the Comptroller's Office has not muzzled me in any way, shape, or form, and has given me, and also this committee, the best of cooperation. The CHAIRMAN. Very well, Mr. Leyburn. I believe that is all. Mr. LEYBURN. Is that all for me on this case? Mr. PECORA. Yes. Mr. LEYBURN. Thank you. The CHAIRMAN. The committee will take a recess until 2 o'clock. (Whereupon, at 12:45 p.m., Friday, January 12, 1934, a recess was taken until 2 p.m.) AFTER RECESS The subcommittee reconvened at the expiration of the recess, at 2 p.m. Friday, January 12, 1934. The CHAIRMAN. The committee will come to order. Proceed, Mr. Pecora. Mr. PECORA. Mr. Bryan. TESTIMONY OF CHARLES A. BRYAN, 1209 FEDERAL RESERVE BUILDING, CHICAGO, ILL. The CHAIRMAN. You solemnly swear that you will tell the truth, the whole truth, and nothing but the truth, regarding the matters now under investigation by the committee. So help you God. Mr. BRYAN. I do, sir. Mr. PECORA. What is your full name and address? Mr. BRYAN. Charles A. Bryan, 1209 Federal Reserve Building, Chicago, Ill. Mr. PECORA. What is your present business or occupation? Mr. PECORA. When did you become a national-bank examiner for the first time? Mr. BRYAN. In August of 1924. Mr. PECORA. How long did you continue serving as a national-bank examiner from that time on? Mr. BRYAN. Until 1929.... Mr. PECORA. What did you do in 1929? Mr. BRYAN. I went with the Guardian Detroit Union Group on December 1. Mr. PECORA. 1929? Mr. BRYAN. Yes, sir. Mr. PECORA. In what capacity? Mr. BRYAN. As the Group examiner. Mr. PECORA. How long did you continue in the service of the Guardian Detroit Union Group, Inc.? Mr. BRYAN. Until December 26, 1931. Mr. PECORA. Then what did you do? Mr. BRYAN. I then became vice president of the Capitol National Bank of Lansing, one of the units of the Group. Mr. PECORA. Did you continue to serve in that capacity for some period of time? Mr. BRYAN. Until the Michigan holiday. Mr. PECORA. That is, until the Michigan banking holiday? Mr. BRYAN. Yes, sir. Mr. PECORA. That was declared on February 14, 1933. Mr. BRYAN. Yes, sir. Senator COUZENS. Before you became a bank examiner, what was your experience to qualify you to become a bank examiner? Mr. BRYAN. I had had 16 years' practical experience in a bank. Senator COUZENS. Where? Mr. BRYAN. In Idaho. Mr. PECORA. Who was your immediate superior when you first entered the employ of the Group on December 1, 1929? Mr. BRYAN. Mr. B. K. Patterson. Mr. PECORA. Had you previously known him? Mr. BRYAN. Yes; Mr. Patterson and I were friends in Pocatello, Idaho, as young men. He was in one of the banks and I was in the other one. Mr. PECORA. Had you served in the same area, or district, or jurisdiction as national bank examiners? Mr. BRYAN. Yes, sir. I first was assigned to the ninth district at Minneapolis, under Chief Examiner Harris, and Mr. Patterson later became chief national bank examiner of that district, and when he was transferred to Chicago as chief examiner I was transferred to Chicago as one of the examiners, with my headquarters at Detroit, Mich. Mr. PECORA. Who first offered you employment with the group! Mr. PECORA. Shortly prior to your resignation as a national bank examiner? Mr. BRYAN. Yes, sir. Mr. PECORA. What duties were assigned to you from the outset after you entered the employ of the group? Mr. BRYAN. To examine the unit banks of the group. Mr. PECORA. All the unit banks, both State and national? Mr. PECORA. How many unit banks were there in the group, both Mr. BRYAN. They were changing, Mr. Pecora, by consolidations. From 18 to 22, I should say. Mr. PECORA. Were there 18 when you entered the employ of the group in December 1929 ? Mr. BRYAN. Approximately that number, Mr. Pecora. They were being acquired, and then they were being consolidated. Mr. PECORA. How many examinations of each banking unit of the group were you to make?" Mr. BRYAN. It was the policy of the group to make 2 examinations of each bank a year, but there were 2 examiners, Mr. Penningrath and myself, and then there was a corps of assistants of about 8 men. Mr. PECORA. You and Mr. Penningrath were in charge of that corps of assistants? Mr. BRYAN. Yes, sir. Mr. PECORA. Had Mr. Penningrath been a national-bank examiner ! prior to his employment by the Group? Mr. BRYAN. Yes, sir. Mr. PECORA. Had you served with him in the same district as a national-bank examiner? Mr. BRYAN. Mr. Penningrath started out as an assistant in Minneapolis, and he served under me from time to time as my assistant, and he later became an examiner in that district. Mr. PECORA. Did you and Mr. Penningrath and your corps of eight assistants actually make, from the time that you entered the employ of the Group, two examinations per year of each of the unit banks of the Group? have Mr. BRYAN. I cannot say as to that. That was the intention, and I think it was pretty largely carried out. For instance, I may examined Jackson the first part of the year, and he may have ex amined it the second part of the year. I would not keep any record of that. Mr. PECORA. Did you make such examinations in the same fashion in which you had been accustomed to make examinations of national banks for the Comptroller of the Currency? Mr. BRYAN. As an examiner, Mr. Pecora, I have always felt it my duty to obtain the facts as I saw them in the examination of the bank, and as a national-bank examiner I submitted that to the Comptroller for him to do as he saw fit. When I went with the Group I assumped that my position was to determine the condition of the banks for Mr. Lord, who was in charge of the Group. I considered that he would want to know the facts. Mr. PECORA. The actual facts? Mr. BRYAN. The actual facts of the banks as they existed, and I examined them on that basis. I have always been considered, I believe, a severe examiner, and I examined the banks of the Group on the same basis that I would examine a national bank. Mr. PECORA. That is, as a national-bank examiner? Mr. BRYAN. Yes, sir. Mr. PECORA. In what form did you make to Mr. Lord, or to any other executive officer or officers of the group, a report of your various examinations of the unit banks from time to time? Mr. BRYAN. We made a complete report, which followed along the lines of the national-bank examinations, criticizing each loan. I think we went down to loans of $500 and over and all loans under that that were past due. I think you would find in my reports that ach loan that was subject to criticism would be listed in those reports. Bonds and all the assets were listed and classified as to slow, doubtful, or loss. That report was typed in the group office, and 3 copies were made, 1 for the bank, 1 for the general files, which were under Mr. Patterson, and a copy for Mr. Lord. In the copies that went to Mr. Patterson and Mr. Lord was a confidential section regarding the management of the bank, the conditions as we found them, and any items that we believed were subject to criticism and should not be imparted to the bank-that is, the unit bank. Mr. PECORA. Have you ever had access to any of those written reports of your examinations? Mr. BRYAN. I had access to them all the time that I was with the group. They were in the files. Of course they were kept under lock and key, so that everyone could not have access to them, but I had access to them. Mr. PECORA. Did you know in whose immediate custody they were kept? Mr. BRYAN. I cannot recall the girl's name. There was a young lady employed that had the keys to the file. I should say they were under the custody, though, of Mr. Patterson, and he had his girl in charge of them. Mr. PECORA. Take the year 1930, which was the first full calendar year in which you worked as an examiner for the group. Mr. BRYAN. Yes, sir. Mr. PECORA. Do you recall whether or not you examined, at least once in that year, every one of the unit banks of the group? Mr. BRYAN. No, sir; not every one of them. Mr. PECORA. How many of them did you examine in that year? Mr. BRYAN. Oh, I should say possibly 15 or 20 examinations. I would do special work. I might be in the office for 2 weeks or a month. I remember at one time I installed a complete record in the 175541-34-PT 109 |