Mr. BALLANTYNE. Yes.

Mr. PECORA. Which is addressed to the stockholders of each of the five banks?

Mr. BALLANTYNE. Yes.

Mr. PECORA. That it was intended to take into this holding company?

Mr. BALLANTYNE. Yes.

Mr. PECORA. And in this circular reference is made to the dividends to be paid by the holding company on its capital stock in the following language.

Mr. BALLANTYNE. Yes.

Mr. PECORA (reading):

It is proposed that dividends be paid upon the common stock of the new company in the aggregate amount of 17 percent per annum payable quarterly.

Now, isn't it reasonable to assume then that in view of those facts you took part in the discussions or deliberations which led to the adoption of that dividend rate even before the company saw official life?

Mr. BALLANTYNE. Can I interpolate anything in this discussion, Mr. Pecora? I want you to get the picture perfectly clear. Mr. PECORA. All right, sir.

Mr. BALLANTYNE. For a great many years I was president, or chairman of the board for a little while, of the Merchants National Bank of Detroit. I presumed that bank had been sought as much as any bank in Detroit to merge. I was constitutionally opposed to mergers. At the time that we merged with the Bank of Michigan, I give you my word, and everybody knows in Detroit that I was on my way up, and I was getting my bank into such shape that I merged with the Bank of Michigan for that purpose. Then Julius came to me and asked if I would help out, and I said "To the extent of my ability." I was getting along. I was willing to help an old friend do a thing that he thought constructive, and that is the part I played at that time. Now, you have a perfect understanding of the part I played.

Mr. PECORA. Mr. Ballantyne, you were not willing to help promulgate and further Mr. Haass' plan without giving some thought on your own part as to the soundness of the plan, where that plan was going to affect the stockholders of your own bank, were you? Mr. BALLANTYNE. Why, the plan seemed very sound to me. Mr. PECORA. Then you must have discussed the plan in its entirety?

Mr. BALLANTYNE. Oh, yes.

Mr. PECORA. And approved of it?

Mr. BALLANTYNE. Yes.

Mr. PECORA. You did not merely give your consent to this plan and become a party to it because of a desire on your part to help out an old friend?

Mr. BALLANTYNE. Well, practically it was.

Mr. PECORA. What?

Mr. BALLANTYNE. Very largely induced by that.
Mr. PECORA. What, to help out an old friend?
Mr. BALLANTYNE. Yes.

Mr. PECORA. And the old friend was Julius Haass?
Mr. BALLANTYNE. Yes.

Mr. PECORA. The executive head of a rival bank? Mr. BALLANTYNE. Oh, well, he never was a rival bank of mine. Mr. PECORA. One of the things you said it was sought to accomplish was to eliminate competition. I presume that meant also competition among the five banks that this holding company was to acquire?

Mr. BALLANTYNE. One Senator here will agree that Julius Haass was never responsible for unwise banking.

Mr. PECORA. That is not the point, Mr. Ballantyne.

Mr. BALLANTYNE. I think it is. But I am not sure. He was not a highly competitive banker. He is a very sound banker.

Mr. PECORA. Well, a sound banker may compete with other banks? Mr. BALLANTYNE. Not wisely.

Mr. PECORA. And still be a sound banker?

Mr. BALLANTYNE. Not wisely, and be a sound banker, Mr. Pecora. Mr. PECORA. How is that?

Mr. BALANTYNE. I think not wisely.

Mr. PECORA. Competition can be wise as well as unwise?

Mr. BALLANTYNE. I am speaking about unwise competition. It makes quite a difference.

Mr. PECORA. Mr. Ballantyne, you said that one of the things sought to effectuate through the creation of this holding company which was to acquire all of the capital stock of these 5 banks was to eliminate competition.

Mr. BALLANTYNE. Unwise competition.

Mr. PECORA. Unwise competition?

Mr. BALLANTYNE. Yes.

Mr. PECORA. All right. Your bank, namely, the Bank of Michigan, was one of the banks included in this plan; so was the bank of which Mr. Haass was the executive head?

Mr. BALLANTYNE. The Bank of Michigan was never my bank in the sense

Mr. PECORA (interposing). You were chairman of the board, though.

Mr. BALLANTYNE. I know-with no power.

Mr. PECORA. With no power?

Mr. BALLANTYNE. No; that I know of.

Senator COUZENS. That is a new one, because I understood that somebody testified here the other day that the man who was chairman was being promoted after being the president.

Mr. BALLANTYNE. Well, I never saw any power, if the Senator will permit.

Senator COUZENS. You mean us to understand then that there is no power in the chairman or vice chairman?

Mr. BALLANTYNE. A chairman or vice chairman can have as much or as little power as the bylaws give him. I think Mr. Pecora will agree with me.

Mr. PECORA. I am not a banker and never have been, Mr. Ballantyne.

Mr. BALLANTYNE. I think there are all sorts of chairmen of boards. Sometimes people are demoted to the chairmanship of the board,

and the legal control vested in the president, and vice versa. It always depends on the man, to a large extent, and the circumstances.

Mr. PECORA. Mr. Ballantyne, are you so modest that you want this committee to believe that as chairman of the board of the Bank of Michigan you occupied merely a nominal position, with no real power?

Mr. BALLANTYNE. My dear sir, I am trying to tell you that I was getting my ship into port, with the hope and belief that I would get out of business entirely, just as soon as possible. That is well known to all my associates. I stayed with that bank to steady the situation for a little while, not meaning to go along very far with it.

Senator COUZENS. I am interested in that, because you say you wanted to get your ship into port. You must have been in danger. Mr. BALLANTYNE. Do you have to be in danger to get your ship into port?

Senator COUZENS. I think, when you stayed at the helm, as you did, to get your ship into port, there must have been some reason for it.

Mr. BALLANTYNE. There was a reason for it.

Senator COUZENS. What was it?

Mr. BALLANTYNE. There was a schism in our own board.
Senator CouZENS. What was it?

Mr. BALLANTYNE. We had been going through perilous times.
Then was the peril, when the orgy of speculation was on.
Mr. PECORA. What were the perilous times you refer to?
Mr. BALLANTYNE. When the orgy was on in New York.

Mr. PECORA. You mean the stock speculation or gambling orgy Mr. BALLANTYNE. Yes.

Mr. PECORA. You mean it centered in New York. It was on all over the country, was it not?

Mr. BALLANTYNE. I will say it was.

Mr. PECORA. Detroit was engulfed in it too, was it not?
Mr. BALLANTYNE. Engulfed in it, but my bank was not.

Senator COUZENS. Then, why did you have to stay at the helm to get it into port, if your bank was not involved in it? I do not understand that.

Mr. BALLANTYNE. I think Mr. Pecora does. Do you, Mr. Pecora!
Mr. PECORA. The Senator is asking you the question.
Mr. BALLANTYNE. Are you asking me a question?

Senator COUZENS. Yes. I am asking, if your bank was not involved, as you stated, in this speculation, why you had to stay at the helm to get into port.

Mr. BALLANTYNE. My bank, or the bank which I call mine, which I organized, is on record here with the Comptroller's office, and if you can see any involvement in that picture, I will be much surprised, Senator.

Senator COUZENS. I am not charging that.

Mr. BALLANTYNE. It was a case of a schism in the board of the bank, and maybe a little fatigue on my part. I did not want to liquidate the bank, so I thought this was a judicious merger with a bank with a great many branches already formed. We had had no branches.

Senator COUZENS. In that connection, I invite your attention to the language in the circular, which says (reading):

In order that each customer of these allied institutions may continue to enjoy all existing connections and facilities, it is planned to carry on each institution as at present organized.

How did you contemplate bringing around these economies, in the elimination of competition, if you contemplated carrying on these institutions as organized?

Mr. BALLANTYNE. Senator, it is a well-known fact that it was not an uncommon thing in the city of Detroit for four competing banks in that very group to have four branches, on four corners of an intersection. That was one thing. There was no more use for four banks in that block, four competing banks in that block, than there was for the man in the moon.

Senator COUZENS. I will agree with that. You could not have carried on "as at present organized" if you were to eliminate branches, could you?

Mr. BALLANTYNE. I think in a general way; yes. Each was going to retain its character and individuality. I understood that.

Mr. PECORA. Mr. Ballantyne, prior to the acquisition of the capital stock of these five banks by the Detroit Bankers Co., the stockholders of each one of those banks, as such stockholders, had the power to elect the boards of directors of their respective banks, did they not?

Mr. BALLANTYNE. Yes; I believe so.

Mr. PECORA. And that is an important power and right attaching to a stockholder of any corporation, and particularly a banking corporation, is it not?

Mr. BALLANTYNE. Yes.

Mr. PECORA. By the scheme or plan upon which the Detroit Bankers Co. was created, these stockholders of the constituent banks that became the units of this holding company were deprived, at least for the first 5 years, of the right to elect directors of their own banks, were they not?

Mr. BALLANTYNE. I think not. They were electing them when I left the Bankers Co.

Mr. PECORA. Elected by whom?

Mr. BALLANTYNE. Of course, they were elected by the Detroit Bankers Co.

Mr. PECORA. And the Detroit Bankers Co. elected these directors through the control vested in the 12 trustees?

Mr. BALLANTYNE. Yes.

Mr. PECORA. Who had all the voting power of the first 5 years.
Mr. BALLANTYNE. I fancy that is true, Mr. Pecora.

Mr. PECORA. So that the stockholders of these banks that became units of the holding company were given no voice either in the election of the directors of the holding company or in the election of the directors of the unit banks, at least for the first 5 years. Mr. BALLANTYNE. I fancy that is true.

Mr. PECORA. That was a radical departure from the scheme of operation of those unit banks prior to the merger, was it not? Mr. BALLANTYNE. Well, in the law it would be.

Mr. PECORA. Wasn't it in fact as well as in law?

Mr. BALLANTYNE. I think not, Mr. Pecora. I think the directors that were operating those banks when I left the Bankers Co. were practically the same people.

Mr. PECORA. But whenever changes were made they were made upon the judgment and decision of the holders of the 120 shares of trustee stock, worth $1,200, issued by the holding company; isn't that so?

Mr. BALLANTYNE. To some extent I think maybe that is true. Mr. PECORA. Is there any doubt that it is true?

Mr. BALLANTYNE. I cannot recall right at this moment any changes.

Mr. PECORA. I will show you later that there were changes.
Mr. BALLANTYNE. There were changes?

Mr. PECORA. Yes.

Mr. BALLANTYNE. There probably were. I do not recall them. Mr. PECORA. I want to show you what purports to be a photostatic reproduction of a certificate issued by the Detroit Bankers Co. for its trustee shares. Will you look at it and tell me if you recognize it to be a true and correct copy of such certificate?

Mr. BALLANTYNE (after conferring with an associate). I believe that is all right, Mr. Pecora.

Mr. PECORA. I offer it in evidence.

Senator COUZENS. Let it be entered.

(Copy of certificate for trustee shares, Detroit Bankers Co., was received in evidence, marked "Committee Exhibit No. 4, Jan. 24, 1984", and the same will be found at the conclusion of today's proceedings.)

Mr. PECORA. It will be noted that on the back of the certificate just received in evidence as exhibit no. 4 of this date are printed the provisions of articles 5 and 9 of the articles of association of the Detroit Bankers Co., respecting the powers of the holders of the trustee shares.

I show you what purports to be a specimen copy of certificate of shares of the common stock issued by the Detroit Bankers Co. Will you look at it and tell me if you recognize it to be a true and correct copy of those certificates of common stock?

Mr. BALLANTYNE (after conferring with an associate). Yes, sir. Mr. PECORA. I offer that in evidence.

Senator COUZENS. The same will be entered.

(Copy of certificate of shares of common stock, Detroit Bankers Co., was received in evidence, marked "Committee Exhibit No. 5, Jan. 24, 1934," and the same will be found at the conclusion of today's proceedings.)

Mr. PECORA. I want to call attention on the record to the fact that on the back of this exhibit marked "Committee's Exhibit No. 5" of this date there are printed the provisions of article IX of the articles of association of the Detroit Bankers Co. relating to the statutory liability.

Senator COUZENS. Is there any reference to the trusteeship there! Mr. PECORA. And also article V relating to the trusteeship-articles V and IX, defining the rights, powers, and duties of the trustees. It has already been shown that the authorized capital structure of this Detroit Bankers Co. was $50,000,000, exclusive of the 120