Mr. PECORA. What facts did they present at the meetings which prompted you to vote in favor of the declaration of that dividend, if you recall?

Mr. KANZLER. I am very sorry, but I do not recall the specific facts of a particular directors' meeting in 1930.

Mr. PECORA. Do you recall any meeting of the board of directors of the Union Guardian Trust Co. held during the year 1930, when the officers informed the directors that the group had suggested that the directors of the Trust Co. declare a dividend for the quarter at a rate which was not justified by the earnings? Do you recall any such event?

Mr. KANZLER. That does not stand out in my memory at all. Mr. PECORA. If such a thing had happened, would it stand out in your memory, or would it have been forgotten by you by this time?

Mr. KANZLER. It depends upon the explanation which might have been made, along with such an event.

Mr. PECORA. Don't you recall any such event at all?

Mr. KANZLER. No, sir; I do not.

Mr. PECORA. As a director of the trust company, did you endeavor to keep yourself cognizant of the position of the bank with respect to its earnings, so that you might be guided, in the operation of your judgment on the question of declaration of dividends by the trust company?

Mr. KANZLER. Yes, sir.

Mr. PECORA. You did?
Mr. KANZLER. Yes, sir.

Mr. PECORA. Were you cognizant of the fact, in June 1930, not as an officer and director of the group, but as a director of the Union Guardian Trust Co., that the group had suggested to the trust company the declaration of a dividend for the second quarter at the rate of 20 percent per annum, which was in excess of the earnings of the trust company for the quarter?

Mr. KANZLER. I do not recall that I was.

Mr. PECORA. As a director of the trust company, when you voted to declare dividends, what facts did you base your judgment upon with regard to the declaration of the dividend?

Mr. KANZLER. I am speaking from my present judgment as to how I would have acted under the circumstances, because I have no memory of any such meeting, but I would have based my judgment upon what the officers had told us, what they were recommending, and what they would point out as to their future, and the occasions which might have been the cause for not having earned the dividend, if they had not earned it.

Mr. PECORA. Have you any recollection at all of what the officers of the trust company told the board with regard to the declaration of the dividend for the second quarter of 1930?

Mr. KANZLER. No, sir; I have no recollection.

Mr. PECORA. Is not your recollection refreshed by the portion of the letter addressed by Stalker to Lord, which I read to you a few minutes ago?

Mr. KANZLER. No, sir; only to the extent, as I say, that I have heard it before here in this testimony.

Mr. PECORA. Do you recall any time when the officers of the Trust Co. came before the board and asked the board to declare a dividend at a rate not justified by the earnings?

Mr. KANZLER. I do not recall whether it was a Trust Co. meeting or some other meeting, but I do recall that I have attended some meetings at which it was stated that earnings had not come up to the amount that it was considered desirable to declare out of undivided profits as a dividend, but just when those meetings were, or where, I do not at this moment recall.

Mr. PECORA. Were the dividends declared in those instances?

Mr. KANZLER. I am certain I attended meetings and voted for some dividends to be declared out of undivided profits that were not made out of current earnings.

Mr. PECORA. That was during the war against the depression?
Mr. KANZLER. Yes, sir.

Mr. PECORA. Did you think that was a sound banking policy? Mr. KANZLER. In the light of the circumstances as we saw them then, I think it was the thing to have done.

Mr. PECORA. That term "in the light of the circumstances as we saw them then," is not a new one to this committee in these hearings. What do you mean by it? What were the circumstances you referred to?

Mr. KANZLER. Are you referring now to the Trust Co., or to a unit, or to the bank, or to the group?

Mr. PECORA. Let us take the Trust Co. situation, the Union Guardian Trust Co.

Mr. KANZLER. There were times when it was felt that the Group Co. should pay a dividend and, of course, it was known that the Group Co. had no earnings except as it received dividends from the units, and in order to assist the Group Co. in its position, in behalf of the Trust Co., the directors at times thought it wise to declare a dividend to the Group Co. so that the Group Co. could maintain a dividend, so that the market of stock, which in the public's mind was inherently and unfortunately associated with the caliber of the institutions represented by that stock, would

Mr. PECORA. You say inherently and unfortunately associated in the public mind with the caliber of the instutitions represented by the stock. Was not that inevitable, rather than unfortunate? We know it was unfortunate, but was it not inevitable that the public mind would so regard that association?

Mr. KANZLER. I think it was inevitable.

Mr. PECORA. Was not that foreseen by you as one of the founders of this group?

Mr. KANZLER. You say "as one of the founders of this group." I happened to be a member of the group, but in 1928 I was establishing a credit corporation with 33 branches throughout the country, and I was not thinking of the set-up of the group.

Mr. PECORA. Were you one of the founders of the group?

Mr. KANZLER. No; I would not say I was an active founder. I became a director in the Guardian Detroit Group when it was formed, but I would not say I was a founder of the group.

Mr. PECORA. Whom do you regard as the founders of the group? Mr. KANZLER. I think the founders of the group were the active

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Mr. PECORA. Give us the names. We can identify them better

by name.

Mr. KANZLER. I would say the active officers of the Guardian Group at the time it became Guardian Detroit Group.

Mr. PECORA. Who were they? Give us their names.

Mr. KANZLER. I do not know whether I know the exact names of all of them.

Mr. PECORA. Give us the names of as many as you can give us, of those whom you regard as the founders of the group.

Mr. KANZLER. Of course, I must say this, that the head of the bank at that time was Mr. Lord. I happened to be in Europe in 1929, when the corporate structure of the Guardian Detroit Bank was changed to Guardian Detroit Group. Why that was done, and how it was done, I have no real knowledge. That is where I think one of the group movements started, and just who were the movers in that I do not know.

Mr. PECORA. Could you not name for this committee the persons whom you regarded as the founders of this group?

Mr. KANZLER. I think it was a very broad group, and some had more to do with it than others. If you would take the directorates you would probably find the founders of the group-the directors of the bank.

Mr. PECORA. I was not around Detroit when this group was given birth. You were, probably. Can you not give us those names?

Mr. KANZLER. As I say, I was in Europe when the Guardian Detroit Bank changed to the Guardian Detroit Group, and the specific reasons, or the legal reasons why that was changed in that form, I do not know, except that

Mr. PECORA. Changing the name of the group is just a mere detail? Mr. KANZLER. I think not, Mr. Pecora.

Mr. PECORA. Do you think it is an important event?

Mr. KANZLER. Yes, because with it came a different charter, and the power to create more shares, and by that exchange of shares to take in institutions.

Mr. PECORA. You were not in Europe when the group was origiinally founded, were you?

Mr. KANZLER. Yes; when that was done I was in Europe.

Mr. PECORA. Were you named a director of the group at the very outset, while you were in Europe?

Mr. KANZLER. Yes.

Mr. PECORA. Did they name you as a director without your knowledge and consent, while you were in Europe?

Mr. KANZLER. They knew I would be very glad to go along with such a movement.

Mr. PECORA. You must have known something about the organization of the group before you went to Europe.

Mr. KANZLER. I do not think it was planned before I went to Europe.

Mr. PECORA. Did you learn about the founding, or the conception of this group for the first time while you were in Europe?

Mr. KANZLER. The conception of the group, to go back to the history of this thing as a matter of fact, this discussion is recalling most of it to my mind now. It was the Guardian Detroit Bank, owing the Trust Company, and the Guardian Detroit Co. by means

of unified shares. Then, I think there came an idea of merging or acquiring the Highland Park State Bank, which was a bank doing business in Highland Park, a municipality entirely surrounded by and within the city of Detroit, and that idea crystallized, as I say, while I was out of the country, and in order to do that it became necessary to change the corporate structure of what formerly were unified shares, and that was done, and in that I would say was the kernel of the group idea.

Mr. PECORA. Who were the founders of this group, Mr. Kanzler, in your opinion?

Mr. KANZLER. I think everyone who was a director in the bank, and who voted for the merger with the Highland Park State Bank. Mr. PECORA. Who were they? What were their names?

Mr. KANZLER. Have you a list of the directorate there? I do not

recall all of them.

Mr. PECORA. Of what?

Mr. KANZLER. Of the Guardian Detroit Bank.

Mr. PECORA. For what year?

Mr. KANZLER. 1929. It may seem to you, Mr. Pecora, that I am quibbling on this point, but I really do not know how this came about, but I do know that this whole group of people were in the Guardian Detroit Bank, and ended up in the Guardian Detroit Group, which group had these powers.

Mr. PECORA. In 1929 you were one of the directors of the Guardian Detroit Bank?

Mr. KANZLER. Yes, sir.

Mr. PECORA. Were the founders scattered among that board?

Mr. KANZLER. I would say so.

Mr. PECORA. You were not only a director, but you were vice president of the Guardian Detroit Bank in the year 1929, were you

not?

Mr. KANZLER. Inactive; yes, sir.

Mr. PECORA. Inactive?

Mr. KANZLER. Yes, sir. I had no salary and no specific duties. Mr. PECORA. Mr. Lord was president of the Guardian Detroit Bank in 1929?

Mr. KANZLER. Yes, sir.

Mr. PECORA. Do you regard him as one of the founders of the group?

Mr. KANZLER. Yes, sir.

Mr. PECORA. Just go along the line and see if you cannot give us any other names, without prompting from me, just out of your own knowledge of the situation.

Mr. KANZLER. I would say Dr. Murphy; Mr. Bodman; I count myself an absent founder of the group. I was in it at the beginning, and ended up with it, so I am a founder of the group. Mr. PECORA. Thank you for that information. trying to get it for ten minutes. Who else?

Mr. KANZLER. May I have a list of those directors?

I have been

Mr. PECORA. Unfortunately the annual report of the group for the year 1929 does not give the names of the board of the Guardian Detroit Bank but does give quite a formidable list of officers.

Mr. KANZLER. I can tell from that list, I think. [Mr. Pecora handed a paper to the witness.]

Mr. KANZLER. James Walsh; John Grier

Mr. PECORA. That is John C. Grier, Jr., is it not?

Mr. KANZLER. Yes, sir; John C. Grier, Jr.; Phelps Newberry

Mr. PECORA. Would you say Mr. Edsel B. Ford was one of the founders?

Mr. KANZLER. Mr. Ford; Mr. Chapin

Mr. PECORA. Roy Chapin?

Mr. KANZLER. Mr. Roy Chapin; Mr. Jerome Keane; Mr. Higbee; Mr. Howard Bonbright; Mr. Ralph Booth; Mr. Judson Bradway; Mr. Walter Briggs; Mr. Howard Coffin; Mr. Frank Couzens; Mr. George Fink; Mr. Sherwin Hill; Mr. James Inglis; Mr. Albert Kahn; Mr. Alvan Macauley; Mr. Ledyard Mitchell; Mr. Allan Shelden; Mr. Hiram Walker; Mr. Clarkson C. Wormer, Jr; Mr. William Robert Wilson.

I have taken that list from the combined list, and I may have skipped some that were in that original group, but that approximately is, I think, the group of people.

Mr. PECORA. Now, Mr. Kanzler, what were the acts of participation, in your opinion, that constituted all of these men founders of the group?

Mr. KANZLER. In voting for the charter and approving this program and setting up the organization that then grew from that original idea.

Mr. PECORA. Whose was the original idea?

Mr. KANZLER. I don't know.

Mr. PECORA. Who first propounded it to you?

Mr. KANZLER. Well, as I say, when I came back to town I was informed of the idea of a merger between the Highland Park State Bank and the Guardian Group as it had then been, and I think I was advised of that by Mr. Lord.

The CHAIRMAN. How long were you away?

Mr. KANZLER. About seven weeks.

Mr. PECORA. You remarked before that in the public mind the group became identified inherently and unfortunately with the various banks that were units of the group. You recall that, don't you?

Mr. KANZLER. No; I said that the stock, the price of the stock inherently and unfortunately

Mr. PECORA (interposing). Price of the stock of the group?

Mr. KANZLER. Yes.

Mr. PECORA. Inherently and unfortunately was associated in the public mind with the banks that were units of the group?

Mr. KANZLER. With the condition of the banks.

Mr. PECORA. With the condition of the banks that were units of the group?

Mr. KANZLER. Yes, sir.

Mr. PECORA. Was that a factor in determining or shaping the dividend paying policy of the group?

Mr. KANZLER. I think it had a decided effect on the judgment of the individuals. I can speak for myself. It did in my case.

Mr. PECORA. Now, how did your mind operate in that respect? Mr. KANZLER. On the Detroit Stock Exchange the bank stocks were listed. If the price of the stock might be 80 or 90 or 20 or whatever it might have been at the time, and from 1 day to the next