Mr. FORD. It was 22 million dollars.

Mr. PECORA. Was that on or about July 1, 1932?

Mr. FORD (continuing to look through some papers in his portfolio). The agreement was dated December 16, 1931.

Mr. PECORA. Who were the parties to that agreement?

Mr. FORD (continuing to look through his papers).

Mr. PECORA. While you are looking that up let me ask you: Was that agreement the one under which a credit not to exceed 15 million dollars was arranged for?

Mr. FORD. I do not believe I remember that.

Mr. PECORA. Do you recall anything at all about the terms of the agreement?

Mr. FORD. I would have to look it up to see.

Mr. PECORA. All right.

Mr. FORD (continuing to look through some papers). I haven't the agreement—yes, I find I have a copy of the agreement here. Mr. PECORA. Will you produce it, please?

Mr. FORD. Do you want it?

Mr. PECORA. Yes.

Mr. FORD. Here it is.

Mr. PECORA. Thank you. Now, Mr. Ford, I have before me what purports to be a photostatic reproduction of the copy of the agreement which you have just shown me. Will you look at the photostatic reproduction thereof, which I now hand to you, and tell me if you recognize it as a true and correct copy of the agreement in question?

Mr. FORD (after making a comparison, Mr. Colombo, his attorney, holding the photostat, and the witness holding his own paper).

The CHAIRMAN. You can answer now if you are ready, Mr. Ford. Mr. FORD. Yes, sir; that is a copy.

Mr. PECORA. Mr. Chairman, I offer in evidence the photostatic reproduction of the agreement.

The CHAIRMAN. Let it be admitted and entered in the record. (An agreement in letter form, dated Dec. 16, 1931, addressed to the Continental Illinois Bank & Trust Co. of Chicago, and the Bankers Trust Co. of New York City, signed by Guardian Detroit Union Group, Inc., was marked "Committee Exhibit No. 76, Jan. 12, 1934 ", and will be found where read by Mr. Pecora.)

Mr. PECORA. Now, Mr. Ford, do you know the circumstances under which this agreement, which has been marked "Committee Exhibit No. 76", in evidence, was entered into?

Mr. FORD. I do not quite get your question, Mr. Pecora.

Mr. PECORA. Do you know the circumstances under which this agreement was entered into?

Mr. FORD. Well, this is the agreement. Do you mean by your question, the terms of the agreement?

Mr. PECORA. No; not the terms, but――

Mr. FORD (continuing). The reasons for it?

Mr. PECORA (continuing). The reasons or circumstances under which it was found necessary or advisable to make the agreement that has just been produced and placed in evidence.

Mr. FORD. Well, the Guardian Group wished to borrow some money, and that was the method by which they went about doing it.

Mr. PECORA. What was the condition of the Guardian Group at that time which made it necessary for it to borrow money?

Mr. FORD. Well, the assets of members or units were being criticized, and

Mr. PECORA (interposing). Criticized by whom?

Mr. FORD. By the examiner, I suppose.

Mr. PECORA. By assets of the members-do you mean assets of the banks that were units of the group?

Mr. FORD. Units of the group; yes, sir. And as I remember it those funds were used to take out those criticized assets.

Mr. PECORA. Well, now, I will read the agreement that has been offered in evidence and received as "Committee Exhibit No. 76" of this date. It is in letter form, and as follows:

GUARDIAN DETROIT UNION GROUP, INC.,
Detroit, Mich., December 16, 1931.

GENTLEMEN: It is proposed that the Guarian Detroit Union Group, Inc., a Michigan corporation, borrow in its own name or in the name of certain of its directors, for or on its behalf, not to exceed an aggregate of $15,000,000 as set forth in this letter and as authorized by the board of directors at a regular meeting held on December 14, 1931.

1. The loan which the Bankers Trust Co. now holds from the Guardian Detroit Co. of $4,500,000 will be assumed by the Guardian Detroit Union Group, Inc. This loan is now secured by approximately $5,000,000 par value of municipal bonds, the property of Mr. Edsel B. Ford and loaned by him to the Guardian Detroit Co. with full power in that company to pledge the same. The Bankers Trust Co. will continue to carry said loan as the obligation of the Guardian Detroit Union Group, Inc., under the same terms and conditions as it is now carrying the obligation of the Guardian Detroit Co. The Bankers Trust Co. will also loan to the Guardian Detroit Union Group, Inc., up to $3,000,000, which said loan is to be secured by certain bonds and stocks of a character acceptable to Bankers Trust Co. (by D.P.C.) and now the property of the Guardian Detroit Co. (to be acquired by the Guardian Detroit Union Group, Inc.), said loan to be collateralized with a margin of at least 25 percent in market value as against the face amount of the loan. Both of the aforesaid loans, that is to say, the loan for $4,500,000 and loan for $3,000,000, may be liquidated from time to time by the sale of the collateral, and the Guardian Detroit Union Group, Inc., shall have the right to pledge such additional collateral as it may have available when and as needed (other than its holdings of bank shares).

2. The Bankers Trust Co. will loan for a period, with renewals, not exceeding 3 years, to Mrs. C. S. Mott, $2,500,000, said loan to be collaterialized by the note of a like amount of Guardian Detroit Union Group, Inc., payable to the order of said Mott, and by him endorsed and assigned in connection with his loan.

3. The Continental Illinois Bank & Trust Co. will loan the Guardian Detroit Union Group, Inc., for a period with renewals not exceeding 3 years, $2,500,000 upon the direct unsecured obligation of said corporation.

4. The Continental Illinois Bank & Trust Co. will loan to Mr. Edsel B. Ford for a period with renewals not exceeding 3 years, $2,500,000, said loan to be collateralized by the note of a like amount of the Guardian Detroit Union Group, Inc., payable to said Ford and by him endorsed and assigned in connection with his loan.

5. In connection with the three last-named loans of $2,500,000 each, aggregating $7,500,000, it is understood and agreed as follows:

(a) The rate of interest for the first year shall be 51⁄2 percent per annum payable quarterly on the 5th of January, April, July, and October.

(b) The rate of interest after the first year shall be as agreed upon from time to time, but at a rate not less than 5 percent nor more than 6 percent per

annum.

(c) The Guardian Detroit Union Group, Inc., undertakes to pay not less than $1,500,000 on or before January 1, 1933, a further sum of not less than $2,250,000 on or before January 1, 1934, and the balance on or before January 1, 1935.

(d) All payments made upon the principal of said loans shall be applied pro rata thereon.

(e) The maturity of the notes evidencing said indebtedness from time to time shall be as may be agreeable to the Bankers Trust Co. and the Continental Illinois Bank & Trust Co., with the understanding that renewals will be made from time to time to the end that the entire obligation of $7,500,000 will be liquidated on or before January 1, 1935.

6. Except from or by liquidation of the collateral itself, the loans made by the Bankers Trust Co., aggregating approximately $7,500,000 and specifically referred to in paragraph 1 of this letter, will not be liquidated from other sources than the collateral securing the same without the consent of the Continental Illinois Bank & Trust Co., Mr. Edsel B. Ford, and Mr. C. S. Mott.

7. Mr. Edsel B. Ford will agree that the present obligation of $1,000,000, owing to him by the Guardian Detroit Co., will remain the obligation of that company until the total borrowings of the Guardian Detroit Union Group, Inc., have been reduced to such an extent that the transfer of said obligation from the Guardian Detroit Co. to the Guardian Detroit Union Group, Inc., will not exceed the $15,000,000 hereinafter referred to, authorized by the board of directors and, furthermore, that said obligation and the obligation to return to him said $5,000,000 par value of bonds will be carried by said Edsel B. Ford until the final liquidation and payment of the $7,500,000 of loans referred to in paragraphs 2, 3, and 4 of this letter, and that until such liquidation said obligations will be subordinated to the payment thereof.

8. The Guardian Detroit Union Group, Inc., undertakes that other than the borrowings previously referred to in this letter, it will make no further or additional borrowings without the prior consent of the Bankers Trust Co., the Continental Illinois Bank & Trust Co., Mr. Edsel B. Ford, and Mr. C. S. Mott.

9. The Guardian Detroit Union Group, Inc., agrees that no sale of its major bank stock holdings will be made without the consent of the parties named in the foregoing paragraph as long as all or any part of the $7,500,000 loans referred to in paragraphs 2, 3, and 4 of this letter shall remain outstanding, unless the proceeds of such sale or sales shall be applied in liquidation of said loans and shall be sufficient in amount to accomplish such liquidation.

10. No major changes shall be made in the management of the Guardian Detroit Union Group, Inc., or in any of its large Detroit units after March 1, 1932, which in the opinion of the Bankers Trust Co. and the Continental Illinois Bank & Trust Co., shall be detrimental to the entire situation or which may adversely affect the security of their obligations.

Yours very truly,

ROBERT O. LORD,
President.
A. A. F. MAXWELL,

Secretary.

We have read the foregoing and the terms thereof are satisfactory to us and we agree to the terms thereof:

Now, reference is made, as you have probably noticed in this letter of agreement, to action taken by the board of directors of the Guardian Detroit Union Group, Inc., at its regular meeting held on December 14, 1931, authorizing the making of the loans referred to in this letter of agreement. Are you familiar with the action that was taken by the board of directors at that time?

Mr. FORD. I do not recall it.

Mr. PECORA. See if your recollection is refreshed by my reading to you the following extract from the minutes of the meeting of the board of directors of the group on December 14, 1931. At the meeting in question, according to the minute book, you did not attend. Does that accord with your recollection?

Mr. FORD. I don't remember, sir.

Mr. PECORA. I will read this extract from the minutes, under the caption of the "Report of the President":

President Lord made the following recommendations, which, on motion duly made and seconded, were unanimously approved:

Then follow recommendations numbered here 1, 2, 3, 4, 5, 6, 7, 8, and 9. The fourth recommendation reads as follows:

Second. We recommend that all bad or doubtful assets be lifted out from all banks and trust companies, so as to place these units in the best possible condition to compete for banking and trust business, to which we recommend that we confine our activities in the future.

Then recommendation no. 5 made by Mr. Lord reads as follows, according to the minutes:

Third: In order to effect liquidation of the portfolio of the securities companies to best advantage, we recommend that this liquidation be centered in the Group Co. and that all loans of the various securities companies be consolidated in a loan by the Group Co., part of the proceeds of which will be used to pay off existing loans of the various security companies.

Recommendation no. 8 reads as follows:

In order to assume and pay off present loans to the securities companies and provide for working out recoveries from slow or doubtful assets of banks and trust companies, and thereby give them increased liquidity, it is recommended that authority be granted to the officers of the Group Co. to borrow from time to time, as may be necessary to put the above program into effect, a total of not to exceed 15 million dollars, upon such terms as may be agreed upon.

The CHAIRMAN. How many of those security companies were there, Mr. Ford; do you remember?

Mr. FORD. I think there were four, but I am not sure.

The CHAIRMAN. Their business chiefly was to furnish security for deposits on public funds in these institutions?

Mr. FORD. Oh, no, sir; they were to deal in securities.

Mr. PECORA. They were security affiliates of the different bank units in the Group. And the most important one and the largest one was the company known as the Guardian Detroit Co. ?

Mr. FORD. That is right.

Mr. PECORA. That was the security affiliate of the Guardian Detroit Bank, which afterward became the Guardian National Bank of Commerce?

Mr. FORD. Yes, sir.

Senator COUZENS. Can you enumerate those four affiliates?

Mr. FORD. Keane, Higbie & Co. was one at one time. I cannot quite remember the termination. The Guardian Detroit Co. was another one. And I think there were two up in the State, but I cannot recall them.

Senator COUZENS. Do not recall the names?

Mr. FORD. No, sir; I do not. I may be mistaken about that number, but I think there were four.

Mr. PECORA. Do you recall that the condition not only of the Group but of its various bank and security affiliate units in December 1931 was rather serious?

Mr. FORD. Yes. These assets were being appraised and depreciated all the time, and that is what made the different units require assistance of this kind to satisfy the depreciation and the criticism of the securities against the loans in these banks.

Mr. PECORA. Do you know how much of the moneys representing proceeds of any loans made to the Group under the terms of this agreement of December 16, 1931, which has been marked in evidence "Committee's Exhibit No. 76" was actually used for the purposes that you have referred to?

as

Mr. FORD. No, sir. I do not.

Mr. PECORA. Do you know how much was actually borrowed by the Group under the terms of this agreement of December 16, 1931? Mr. FORD (after referring to documents). I would not dare say. I don't know the exact figure.

Senator CouZENS. Was the whole fifteen million borrowed?

Mr. FORD. I don't know that. I don't think so, but I don't remember.

Senator CoUZENS. May I ask, Mr. Pecora, at this time whether those minutes of December 14, 1931, included the list of directors who were present?

Mr. PECORA. Yes, sir; I will read them into the record from the minute book. This purports to have been an adjourned regular quarterly meeting of the board of directors of the Guardian Detroit Union Group, Inc., held on Monday, December 14, 1931, at 2 p.m.

"There were present "--and I will read the names from the minutes-Frank W. Blair, Arthur C. Bloomfield, Henry E. Bodman, Clarence H. Booth, Joseph H. Brewer, Daniel D. Brown, Charles S. Campbell, George R. Cook, Harry S. Covington, John H. French, Frank E. Gorman, Stephen A. Graham, C. H. Haberkorn, Jr., Sherwin A. Hill, Ernest Kanzler, Robert O. Lord, Frank J. Maurice, Edwin R. Morton, Charles S. Mott, Fred T. Murphy, Edwin H. Nelson, Phelps Newberry, Bert K. Patterson, Herbert S. Reynolds, John R. Russell, Murray W. Sales, Henry W. Sanger, R. Perry Shorts, Hal H. Smith, John N. Stalker, James L. Walsh, Charles B. Warren.

"Mr. Frank W. Blair, chairman of the board, presided, and Mr. A. A. F. Maxwell acted as secretary."

Now, apparently the difficulties of the Group and various of its units became so marked by December of 1930 that loans of 51⁄2 million dollars had to be obtained, which were obtained by a loan of 1 million dollars, which you individually made, and a loan of 41⁄2 million dollars, obtained from the Bankers Trust Co. upon 5 million dollars principal amount of securities loaned by you to the Guardian Detroit Co.

Mr. FORD. Yes, sir.

Mr. PECORA. Now, despite that fact, Mr. Ford, it appears that during the year 1930 and during the year 1931, particularly, the Group paid substantial cash dividends to its stockholders, the greater portion of which it obtained in the form of dividends declared by the various banking units of the Group. You recall that to be the fact, don't you?