Mr. LONGLEY. I do not know that he was on that committee. He made a report on real estate.

Mr. PECORA. I show you what purports to be a photostatic copy of the report of this examining committee of the Union Guardian Trust Co. as of December 13, 1932, which report is signed on March 10, 1932. Will you look at it and tell me if you recognize it to be a true and correct copy of such report?

Mr. LONGLEY. This would appear to be, from what I remember of it. If you took it from the records, I will assume so.

Mr. PECORA. It was so taken from the records. I offer it in evidence; but in view of its voluminous character I do not think it necessary at this time, at least, to spread it in full on the minutes. I wish to make references to portions of the text thereof from time to time.

Senator COUZENS. The same may be admitted, but not printed in the record. Just mark it as an exhibit.

(Photostatic copy of report of examining committee of Union Guardian Trust Co. as of Dec. 13, 1932, was received in evidence, marked "Committee Exhibit No. 92, Jan. 17, 1934.”)

Mr. LONGLEY. Mr. Pecora, I do not find Mr. Wormer's name on the committee. I wonder if he was not just a member of the subcommittee that this committee appointed to examine real estate?

Mr. PECORA. I understand the original was signed by him as chairman of the committee.

Mr. LONGLEY. On page 2 of this report which is marked "Exhibit 92" I find this [reading]:

Partly as a matter of expediency and partly as a method of obtaining the most accurate information, the committee

that is, the examining committee

authorized its chairman to appoint a subcommittee of directors to examine real-estate mortgages and land contracts owned by the Trust Co. The following subcommittee was accordingly appointed:

And it names Mr. Wormer, Mr. Trowbridge, Mr. Deming, Dr. George R. Andrews, Mr. Alger Sheldon; and none of those gentlemen seem to be on the committee itself. So apparently they were directors taken from elsewhere and not on that committee.

Mr. PECORA. Let me read the following from the report just received in evidence and marked " Committee Exhibit No. 92." I am reading from pages 4 and 5 thereof

Senator COUZENS. Have you a record of who signed that report. before you start to read that?

Mr. PECORA. Yes, sir; Mr. Wormer.

Mr. LONGLEY. I think you are mistaken, Mr. Pecora, on that. He signed that subcommittee report that is attached, I believe. I think all of the members of the committee signed this examination.

Mr. PECORA. The only name that appears on this copy is Mr. Wormer, Jr.

Mr. LONGLEY. No.

Mr. PECORA. Unless I have overlooked something. The report is signed by William K. Muir. H. B. Hoyt, Robert Oakland, George B. Russell, George H. Klein, C. H. Murphy, Fred C. Austin, and H. H. Walker.

Mr. LONGLEY. That is right. That is the committee. The subcommittee report is attached as an exhibit.

Mr. PECORA. The subcommittee report is the one signed by Mr. Wormer?

Mr. LONGLEY. That is right; and that is the report on the real estate.

Mr. PECORA. Now, reading from pages ing]:

and 5 of the report [read

The assets referred to in the foregoing have been classified in four columns, "Good", "Slow", "Doubtful", and "Loss" (Except bonds and securities, land contracts and real estate, which only appear in "Good" and "Loss"). Detailed schedules accompany the report, with the exception of items classified 100 percent good. These are not listed. Items marked "Slow" are considered by the committee to be eventually good. "Doubtful" does not indicate a probable 100 percent loss of the total in the column. No doubt many of such items will eventually pay out, at least in part, and in some cases perhaps substantially. A 50 percent reserve is later recommended. The committee feels that there is a definite loss which should be charged off of items in the loss column.

Since the date as of which this examination is made you have listened to the president's report covering the result of the Trust Co.'s business in the year 1932 in which it was stated that late in December the Group made provision for "lifting out" about 31⁄2 million dollars of questionable assets. Explaining more in detail, this figure represented what we consider to be fair charge-off items as determined by the officers of this company and of the Group company, and these were sold at face value to the Congress Corporation, a holding company wholly owned by the Group company, the consideration being the cancelation of the Trust Co.'s liability on a like amount of certificates of deposit owned by the Ford interests"

And so forth.

Mr. Longley, you referred in your testimony this forenoon, among other things, to the withdrawal by the Trust Co. from deposit accounts which it maintained in various other banks of sums aggregating a little more than 32 million dollars, which withdrawals you said were in cash, and the cash was placed in the vaults of the company?

Mr. LONGLEY. Yes; after the holiday.

Mr. PECORA. That is between February 15 and February 23, 1932! Mr. LONGLEY. In there somewhere.

Mr. PECORA. Can you tell this committee what disposition was made of any of the cash so withdrawn and stored in the vaults of the Trust Co.?

Mr. LONGLEY. Well, what was not paid to the trust depositors is still there, I suppose.

Mr. PECORA. What trust depositors received any payment therefrom?

Mr. LONGLEY. I have no idea, without seeing the records. The A fund depositors that are on the records of the company, and who applied, undoubtedly were paid something; but I do not know who they were, now, without referring again to the books.

Mr. PECORA. Do you know how much of the 32 million dollars approximately was so paid out?

Mr. LONGLEY. I have not the slightest idea. I think, probably no more than normal.

Mr. PECORA. What would be normal?

Mr. LONGLEY. Well, that account maintained itself around between 4 and 6 millions. I think probably that account maintained

itself even after the holiday; I don't know; I am just guessing, but I would suppose so.

Senator COUZENS. From the time of the closing of the Trust Co. to the time of the appointment of the conservator, you have had no access to the records?

Mr. LONGLEY. No, sir; I have not. I think I can get information by calling Mr. Harris. He probably would give it to me. Whenever I have asked him for information I have received it.

Senator COUZENS. That is, the conservator has no objection to giving you access to the records he has in his possession?

Mr. LONGLEY. He has not turned me loose in the records, but whenever I have asked questions he has given me information.

Senator COUZENS. I think the committee would like to have a record of the withdrawals of those A funds from the time the three million and odd dollars was withdrawn from banks and placed in the vaults, up to the time of the appointment of the conservator, if you can get that information.

Mr. LONGLEY. Would you like me to get it by mail?

Senator COUZENS. Well, I think if you can get by telephone we would like it better-or by wire.

Mr. LONGLEY. I will try to, Senator.

Mr. PECORA. Mr. Longley, do you recall a meeting of the executive committee of the board of directors of the Union Guardian Trust Co. which was held on February 23, 1933?

Mr. LONGLEY. Not just by that description; no.

Mr. PECORA. Do you recall a meeting at which took place the adoption of the following resolution, according to the minute book [reading]:

Resolved, That the officers be and they hereby are directed to withdraw all funds held by depositaries in Chicago for the account of and on behalf of this company;

2. Resolved, That anticipated requrements for disbursement of trust accounts for 30 days be withdrawn from the depositaries of the bank in cash and held in the vaults of the bank;

Further resolved, That 90 percent of the balance then on deposit be withdrawn and invested in short-term United States Government obligations, preferably Treasury bills or retained in cash or both.

Further resolved, That the balance on deposit after such withdrawals be carried on deposit in the New York and Pittsburgh depositaries of the company or withdrawn at any time, held in cash or invested in short-term obligations of the United States Government, preferably Treasury bills.

The officers and directors are to do all things necessary to carry the foregoing into effect.

Resolved, That the officers be and they are hereby authorized to conduct the fiduciary business of the company (with a very considerable degree of freedom of action), provided that in so doing the company's debtor and creditor relationships and its own status as regards assets and liabilities are not affected.

Mr. LONGLEY. Yes; I remember that meeting.

Mr. PECORA. You attended the meeting as a member of the executive committee of the board?

Mr. LONGLEY. I am not certain. Does it show that I attended it. Mr. PECORA. We have not the minute book here. I have only

certain extracts.

Mr. LONGLEY. I am not sure I attended it, but I am familiar with the adoption of that resolution.

Senator COUZENS. Do you know who were there?

Mr. LONGLEY. No, sir; not without checking up on the minutes. That is what I was wondering about.

Mr. PECORA. Do you recall that 2 days after this meeting of the executive committee of the board there was a meeting of the board of directors of the Trust Co. at which, among other things, the following action was taken-and I am reading, now, from what purports to be a copy of page 118 of the minute book in use at that time [reading]:

The minutes of the regular meeting of the executive committee held Thursday, February 23, 1933, were read and after discussion the following resolu tion was duly made, supported and unanimously carried:

"Resolved, That the action of the executive committee at its meeting held February 23, 1933, be ratified and approved, except that the clause contained in Resolution 7, reading as follows: with a very considerable degree of freedom of action' be stricken out, and that the officers be, and they are hereby, directed to continue the trust business of the company until further instruction from the board, provided that no debtor or creditor relation of the bank be affected.

"Further resolved, That the officers be and they are hereby directed to call the board together from day to day if any new changes in the situation take place."

It was the consensus that the banking commissioner be further informed of the company's present operations through presentation to him of a copy of the minutes of the meeting of the executive committee held February 23, 1933, together with a copy of the minutes of this meeting.

You note that the resolution styled "Resolution No. 7", adopted by the executive committee on February 23, 1933, was amended at the board meeting held 2 days later by striking out the words "with a very considerable degree of freedom of action?"

Mr. LONGLEY. Yes.

Mr. PECORA. Do you recall the discussion that was had at the meeting of the board on February 25, 1933, at which that action was taken?

Mr. LONGLEY. No; I do not. I do not know just why that was. I would assume it was because the directors were being supercautious about the operations of the company during the holiday. Senator COUZENS. I would like to have your interpretation, Mr. Longley, of the meaning of this resolution which has been desig nated as 66 no. 7", where it says that you may have freedom of action," provided, that in so doing the company's debtor and creditor relationships and its own status as regards assets and liabilities are not effected." What does that mean?

Mr. LONGLEY. I do not know exactly what that latter part means, but the thought, as I remember it, was that during that period of lack of knowledge of what our situation was going to be, the ter mination of the holiday or when the new legislation was worked out, the directors were trying to be as careful as they could on all questions concerning debtor and creditor relationships. I think that was a very sensible thing to do.

Senator COUZENS. How could you conduct the fiduciary business of the company with a very considerable degree of freedom-Mr. LONGLEY. That was the part that was stricken.

Senator COUZENS. Yes; but it was in operation 2 days before. It was in there when the resolution was adopted. I am just wonder

ing how you could conduct any business without "the company's debtor and creditor relationships and its own status in regard to liabilities and assets being affected." That is such a ridiculous resolution, to me, that I do not understand it.

Mr. LONGLEY. I am not sure that I fully appreciate the meaning of it, myself; but we were trying to be as exceedingly cautious as we could, as far as the creditors were concerned, and the depositors, and the R.F.C.; but at the same time we thought it absolutely necessary to preserve our fiduciary business and to protect those trust papers of the company, and we did that as best we could. I think that is about as far as it went during that period.

Senator COUZENS. Any withdrawal of any of those funds by one of your clients or customers would affect the debtor and creditor relationships. It seems to me that it is contradictory. In one place you say you can go ahead and in another place you say you must stop. Mr. LONGLEY. I would not like to try to say what that meant. I know what we did.

Senator COUZENS. What you did was to pay out some of those trust funds?

Mr. LONGLEY. Yes; we did; exactly.

Senator COUZENS. Right up to the time that the conservator was appointed?

Mr. LONGLEY. That is right. I do not know what the amounts were. I only know we did it.

Senator COUZENS. That is the information that you are going to get for the committee?

Mr. LONGLEY. Yes, sir.

Mr. PECORA. For the purpose of refreshing your recollection, let me read further from the minute book this extract of the minutes of a meeting held on February 25, last, at page 119 of the minute book [reading]:

Upon inquiry the board was informed that the last examination of the bank indicated liabilities in excess of $7,000,000 over the assets of the company, that of this amount 321⁄2 million dollars had been written off through arrangement with the depositors and would be approved by the banking commissioner.

Upon inquiry the board was informed that substantially all of the class A trust fund deposits had been withdrawn from the depositaries of the company outside of the State of Michigan; that currency approximating $3,463,000 is held in the vaults in the bank and that the balance remaining in depositaries outside the State of Michigan is approximately $189,000.

Do you recall that those proceedings took place at the board meeting?

Mr. LONGLEY. I think that is probably true.

Senator COUZENS. We will recess at this time until 2 o'clock. (Whereupon, at 1:05 p.m., the subcommittee took a recess until 2 p.m., Jan. 17, 1934.)

AFTER RECESS

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

recess.

The CHAIRMAN. The subcommittee will come to order and resume its hearing.