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Mr. FORD. Yes, sir.

Mr. PECORA. Did you, as a director of the Group, sanction the declaration and payment of those dividends during those years both by the Group and by the various unit banks in the Group?

Mr. FORD. I don't recall actually sanctioning them, but I know that they were being paid. I didn't criticize them.

Mr. PECORA. You did not criticize them?
Mr. FORD. No, sir.

Mr. PECORA. You did not offer any objection or protest to such action?

Mr. FORD. No. sir.

Mr. PECORA. Were you present at the meetings of the board of the Group at which those dividends were declared ?

Mr. FORD. I don't remember.
Mr. PECORA. During the years 1930 and 1931 ?
Mr. FORD. I don't remember.
Mr. PECORA. Have you a good memory, Mr. Ford?
Mr. FORD. I think so.
Senator Adams. It does not always operate.

Mr. PECORA. Up to the present time you have not recalled many, or most in fact, of the important things that I have asked you about concerning the business and the operation of the Group and unit banks.

Mr. Ford. Well, I am very sorry, sir, but there are a great many things going on from day to day that I have to go through with, and it is not always possible to retain all kinds of facts and figures. Some people are more able to do that than others.

Mr. PECORA. Outside of your position as president of the Ford Motor Co., and I presume a member of its board of directors, did you act as a director or officer of any other corporation during the years 1930 and 1931 and 1932, with the exception of this Group and one or two of its unit banks?

Mr. Ford. Well, I would have to refer to my records. We have a lot of subsidiary corporations,

Mr. PECORA. By we you mean the Ford Motor Co.?
Mr. FORD. Yes.

Mr. PECORA. Outside of the immediate corporate interests of the Ford Motor Co. and its subsidiaries, did you sit and serve as a member of the board of directors of any other corporation or corporations than this Group and any of its unit banks during the years 1930 and 1931 and 1932?

Mr. FORD. I don't think so.

Mr. Pecora. Do you know what the status is today of any of the loans that were made under this agreement of December 16, 1931 ?

Mr. FORD. I know that some of them were paid. Mr. PECORA. Do you know which ones? Mr. Ford. The 412 million dollar loan that was at the Bankers Trust Co. and the 21/2 million dollar endorsement which I made was paid. Those are the only ones I know of. Mr. PECORA. The others remain unpaid ? Mr. FORD. I don't know, sir. Mr. PECORA. Now, you spoke of the payment of the loan of 412 million dollars. Was that paid by the group or by any of its units?

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Mr. FORD. No.

Mr. PECORA. As a matter of fact, it was paid by the Ford Motor Co., wasn't it?

Mr. FORD. That is right.

Mr. Pecora. When I asked you before about the status of these loans and you said that some of them were paid I wanted you to tell which of these loans or portions thereof had been paid by the Group or any of its units.

Mr. Ford. I don't think any of them were paid by the group or its units.

Mr. PECORA. And that was because the group and those units were not in a position to repay those loans, wasn't it?

Mr. FORD. I don't know about that. They may have had assets or cash to pay them, but they did not pay them.

Mr. PECORA. The loan of 442 million dollars which has already been spoken of and which you say was paid by the Ford Motor Co.has that been repaid to the Ford Motor Co.?

Mr. FORD. No, sir.

Senator ADAMS. And the Ford Motor Co. holds the original papers against the bank?

Mr. FORD. The Ford Motor Co. paid it temporarily and then I reimbursed the Ford Motor Co., so it is an obligation

Senator Adams (interposing). But you hold the obligation against the

Mr. FORD. Against the group.

Senator Adams. Against the group. And that is true as to the 21/2-million-dollar obligation also, is it?

Mr. FORD. Yes, sir.

Mr. PECORA. Now, the 212 million dollars and the 442-milliondollar obligation that you referred to were both paid on February 18, 1933, by the Ford Motor Co., were they not?

Mr. FORD. Yes, sir.

Mr. PECORA. And the Ford Motor Co. has been reimbursed by you individually?

Mr. FORD. Yes, sir.
Mr. PECORA. And you now hold those obligations?
Mr. FORD. Yes, sir.
Mr. PECORA. Which remain unpaid?
Mr. FORD. Yes, sir.

Mr. PECORA. In addition to the loans provided for by this agreement of December 16, 1931, was any other loan made by you or the Ford Motor Co. to the Guardian Detroit Union Group, Inc., or to any of its units?

Mr. Ford. There was a 31/2-million-dollar loan made on [examining papers]

Mr. PECORA. December 1932, wasn't it?
Mr. Ford. Yes, sir; to the Trust Co.
Mr. PECORA. To the Union Guardian Trust Co.?
Mr. FORD. Yes, sir.
Mr. PECORA. Who made that loan to it?
Mr. FORD. The Ford Motor Co.
Mr. PECORA. Was it collateralized or secured in any way!
Mr. FORD. Ford Motor Co. holds a note dated December 29, 1932.

Mr. PECORA. No part of which has been paid?
Mr. FORD. No, sir.

Mr. Pecora. Now, I show you what purports to be a photostatic copy of an agreement made between the Ford Motor Co. and the Guardian Detroit Union Group, Inc., under date of December 29, 1932. Will you look at it and tell me if you recognize it to be a true and correct copy of memorandum of agreement under which this loan of 342 million dollars was made by your company to the Guardian Detroit Union Group?

Mr. FORD. I think that is correct.
Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted and entered in the record.

(Photostat of agreement between Ford Motor Co. and Guardian Detroit Union Group, Inc., dated Dec. 29, 1932, was designated “ Committee Exhibit No. 77, Jan. 12, 1934 ", and appears in full immediately following, where read by Mr. Pecora.)

The CHAIRMAN. Mr. Ford, may I ask how the stock of the Ford Motor Co. is held ?

Mr. FORD. Held by Mr. Henry Ford and Mrs. Ford and myself. The CHAIRMAN. Not held by the public? Mr. FORD. No, sir. The CHAIRMAN. Then you have another corporation, the Ford Motor Co. of Canada?

Mr. FORD. Yes, sir.

The CHAIRMAN. That stock is listed on the Exchange, I believe, and distributed to the public generally, but that is a separate corporation?

Mr. FORD. That is a separate corporation. We are stockholders in that, and many other people.

Mr. PECORA. The agreement offered in evidence and received as Committee's Exhibit No. 77 of this date reads as follows (reading):

MEMORANDUM OF AGREEMENT

This agreement made this 29th day of December 1932 A.D. by and between the Ford Motor Co., a Delaware corporation, of Detroit, Mich., of the first part, and the Guardian Detroit Union Group, Inc., a Michigan corporation, of Detroit, Mich. (hereinafter called the “Group Co.") of the second part.

Witnesseth : First, the Ford Motor Co. agrees to loan the Group Co. the sum of $3,500,000, as evidenced by a note of the Group Co. delivered herewith, dated December 29, 1932, A.D., and payable on or before 3 years from date and bearing interest at the rate of 312 percent per annum, payable semiannually.

Second. The Ford Motor Co. further agrees that the payment of such loan shall be subordinated to the present outstanding obligations of the Group Co., covered by such company's existing agreements with the Continental, Illinois National Bank & Trust Co., of Chicago, and the Bankers' Trust Co. of New York City, such indebtedness being referred to set forth in an agreement dated December 16, 1931, A.D., between such banks and the Group Co., a copy of which is attached hereto and made a part hereof.

Third. The Group Co. agrees that it will make no further or additional borrowings nor pledge the capital stock of any of its subsidiary companies without the prior consent of the Ford Motor Co., so long as the obligation hereby created remains unpaid.

Fourth: The Group Co. also agrees during the period this loan or any part thereof remains unpaid that no sale of its major bank holdings will be made without consent of the Ford Motor Co., unless the proceeds of such sale or sales shall be applied in liquidation of this loan and shall be sufficient in amount to accomplish such liquidation.

Fifth: The Group Co. agrees that the company will pay no dividends upon its capital stock without the consent of the Ford Motor Co. unless the indebtedness referred to in paragraph 1 shall have first been paid in full. In witness whereof the parties hereto have executed the foregoing.

FORD MOTOR CO.,
By EDSEL B. FORD, President.
By B. J. CRAIG, Secretary.

GUARDIAN DETROIT UNION GROUP, INC.
By ROBERT 0. LORD, President.

By C. H. HABERKORN, Jr., Secretary. The undersigned hereby consent and agree to the making of the loan to the Group Co. by the Ford Motor Co., above referred to. CHICAGO, ILL.,

19. CONTINENTAL ILLINOIS NATIONAL BANK & TRUST Co., By

Cashier. NEW YORK, N.Y., December 30, 1932.

BANKERS TRUST CO. OF NEW YORK, By S. SLOAN COLT, President.

EDSEL B. FORD.

C. S. MOTT.
Senator COUZENS. Was there any collateral for that loan?
Mr. FORD. No, sir.

Mr. PECORA. What is the status of this loan? Has any part of it ever been repaid ?

Mr. FORD. Not paid.
Mr. PECORA. Any interest due thereon ever been paid?
Mr. FORD. I don't know.

Mr. PECORA. In the agreement of December 16, 1931, which has been received in evidence this morning as Committee's Exhibit No. 76, I notice the following provision therein. It is in the concluding paragraph, no. 10:

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

Isn't that rather an unusual provision, whereby a bank holding company virtually surrenders its powers to two banks in two other States?

Mr. FORD. Well, it may be. I never considered it that way. They had loans, as well as ourselves, which they naturally were anxious to protect, and I suppose that provision was put in for that purpose. It never occurred to me that it showed any control or attempted control on the part of anybody else.

Mr. PECORA. It virtually gave these two creditor banks a veto power, didn't it?

Mr. Ford. On any major changes?
Mr. PECORA. Yes,

Mr. Ford. Not necessarily the banks alone. Doesn't that include myself and Mr. Mott?

Mr. PECORA. No; unfortunately. The provision is:

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.

means.

Mr, FORD. Yes. I am sorry. I misunderstood.

Mr. PECORA. It was probably thought that you as a director in the group were in a position to exercise some voice or judgment with regard to the management of the group. Does not the inclusion of that remarkable provision in this loan agreement indicate further the desperate situation of the group and its unit banks in December 1931 ?

Mr. Ford. That is subject to interpretation. I do not know that it was necessarily desperate; I did not think so.

Mr. PECORA. Did you think its condition was desperate?

Mr. Ford. I thought it was difficult, but I did not think it was desperate.

Mr. PECORA. Did you think it had become desperate by December 1932? Mr. FORD. That all depends on what “desperate

Each month was more difficult, of course.

Mr. PECORA. When February 1933 came around-you are familiar, are you not, with the fact that representatives of the group sought aid from the Reconstruction Finance Corporation!

Mr. FORD. Yes, sir.

Mr. PECORA. Did you take any part in any discussions or proceedings in relation to those efforts

Mr. FORD. Not with the authorities down here.

Mr. PECORA. I did not limit the question to efforts with the authorities; but did you take part in any discussions or proceedings with respect to the making of such efforts ?

Mr. FORD. Yes, sir.

Mr. PECORA. Will you tell the committee the extent of your participation and the substance of your participation in those discussions, and give also the substance of the discussions themselves?

Mr. Ford. The whole matter was gone over with me by Mr, Kanzler and it was his recommendation that a plan be devised whereby assistance might be had from the Reconstruction Finance Corporation, and I concurred in that; and steps were taken to proceed.

Mr. PECORA. When did Mr. Kanzler first discuss that subject with

you?

Mr. FORD. In January sometime.
Mr. PECORA. Of 1933 ?
Mr. FORD. Yes, sir.

Mr. Pecora. How many conversations did you have with him on that subject-more than one?

Mr. FORD. Oh, yes. I don't recall, but it was more than one.

Mr. PECORA. You discussed the subject about that same period of time with other officers of the group, did you not?

Mr. FORD. I think so.
Mr. PECORA. With whom?
Mr. FORD. Mr. Longley; I do not recall any others.

Mr. PECORA. Just what was the situation of the Group and its unit banks at that time as it was represented to you by Mr. Kanzler or Mr. Longley or anyone else?

Mr. FORD. Some of them were, in their opinion, in good shape, and some of them had considerable frozen assets.

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