Mr. PECORA. Did it cause that new Union Building Co. to be incorporated? Mr. BLAIR. Yes. Mr. PECORA. Do you remember when it was incorporated? Mr. BLAIR. I do not. Mr. PECORA. I understand that it was on or about June 1, 1927. Mr. BLAIR. That is probably so. Mr. PECORA. And it was incorporated under the laws of the State of Michigan? Mr. BLAIR. I think so. Mr. PECORA. Now, Mr. Blair, what were the purposes for which the New Union Building Co. was formed at the instance or by the Union Trust Co in 1927? Mr. BLAIR. The building occupied by the trust company prior to that time had become entirely inadequate for its needs, and it was renting another building to take care of some of its departments, making it very hard to do business. Some time, I should say, after that corporation-or I should say in 1925, or perhaps 2 years before Mr. PECORA (interposing). In 1927 that was. Mr. BLAIR. I meant in 1927, and perhaps 2 years before that I asked the board of directors of the trust company to appoint a building committee, or a committee which should look into the matter of housing the trust company. That committee, of which Mr. Warren was chairman, made quite an extensive investigation, and finally recommended that the trust company acquire a part of the block of land immediately south of the old trust company building. That property was acquired with the thought in mind of constructing on it a new building. Mr. PECORA. And such new building was eventually erected on that block? Mr. BLAIR. Yes, sir. Mr. PECORA. Was that building known as the Aztec Tower? Mr. PECORA. Well, is it commonly known as the Aztec Tower? Mr. BLAIR. I think it is commonly known as the Union Guardian Building. But I think there is a restaurant in the tower which called itself the Aztec Tower Restaurant. However, I do not think anybody around Detroit called the building the Aztec Tower Building. Mr. PECORA. This New Union Building Co., in other words, was virtually organized for the purpose of enabling the Union Trust Co. to acquire real estate and to construct upon it a building for its home? Mr. BLAIR. Yes. Mr. PECORA. Now, what did that investment cost, I mean the investment in land and building? Mr. BLAIR. Eventually, do you mean? Mr. PECORA. Yes. Mr. BLAIR. Including the equipment my remembrance is somewhere between 11 and 12 million dollars. Mr. PECORA. How did it raise the money with which to acquire that plot of ground and erect the building thereon? Mr. BLAIR. A first mortgage to the Metropolitan Trust Co. of $5,000,000, second-mortgage bonds, which were offered to the stockholders of the trust company, of $2,000,000, and Mr. PECORA (interposing). Were they taken by the stockholders? Mr. BLAIR. Practically all of them were. Mr. PECORA. All right. Mr. BLAIR. And the capital, which was originally $2,000,000 but afterwards increased to $5,000,000, owned by the trust company itself. Mr. PECORA. That increase of capital was necessary in order to meet the increased cost of the building, wasn't it? Mr. BLAIR. Yes, and some changes were made after the building was started. Senator COUZENS. For that $5,000,000 of stock, was the money taken out of the trust company? Mr. BLAIR. It was furnished by the stockholders of the trust company; yes. Mr. PECORA. It was not taken out of the funds of the trust company, was it? Mr. BLAIR. Oh, no. But the trust company stockholders increased their holdings-well, it was a part of this $7,500,000-no, let me see, three times-yes, it was a part of the $7,500,000 subscribed by stockholders in 1929. Senator COUZENS. I understood you to say the building was owned by the trust company. It was really owned by the stockholders, then, wasn't it? Mr. BLAIR. No; it was owned by the trust company as a corporation. That is, the trust company owned all of the stock of the building company. Mr. PECORA. Of the New Union Building Co.! Mr. BLAIR. Yes, sir. Senator COUZENS. But the stock was subscribed for separately by each stockholder in order to augment the stock of the trust company? Mr. BLAIR. Not just the way that sounds. Mr. PECORA. It was through the issuance and sale of second mortgage bonds in part? Mr. BLAIR. No. The CHAIRMAN. It was stock in the trust company, and the proceeds of that stock went into this building. Mr. BLAIR. The increased capital of the trust company was used partly to carry this stock of the building company. Senator COUZENS. What portion of that which it did not carry was carried by others? In other words, did the trust company carry the stock in the amount of the excess of what you were able to raise? Mr. BLAIR. We raised all of it. Senator COUZENS. By additional sales of stock to your stockholders? Mr. BLAIR. Yes. Senator CoUZENS. All of it? Mr. BLAIR. Yes. Mr. PECORA. But the stockholders of the trust company purchased the $2,000,000 of second-mortgage bonds? Mr. BLAIR. Yes. Mr. PECORA. That were issued by the new Union Building Co.? Mr. BLAIR. Yes. Mr. PECORA. I see. Now, Mr. Blair, you have already referred to the fact, in passing, that on or about December 16, 1929, there was a merger or consolidation, whichever you are pleased to call it, of the Union Commerce Investment Co. and the Guardian Detroit Co. Inc.? Mr. BLAIR. The Guardian Detroit group. The Guardian Detroit Co. was a separate corporation. Mr. PECORA. The Guardian Detroit Group, Inc., was a holding company generally similar in scope and purposes and formation to the Union Commerce Investment Co., was it not? Mr. BLAIR. Yes, except that it was a Michigan corporation, the Michigan law having been changed, as I understand, early in 1929. Mr. PECORA. To make it feasible and practicable and legal under the laws of Michigan for the incorporation of a company such as the Union Commercial Investment Co.? Mr. BLAIR. Yes. Mr. PECORA. Now, the record here already shows that the Guardian Detroit Group, Inc., was incorporated in May of 1929 under the laws of the State of Michigan, and that the Union Commerce Investment Co. was incorporated in 1928 under the laws of Delaware. Now, who initiated the proceedings or negotiations that resulted in the consolidation in December of 1929 of these two holding companies under the name and title of the Guardian Detroit Union Group, Inc.? Mr. BLAIR. Do you mean, who did the talking? Mr. PECORA. Well, who initiated the proposition which resulted in the consolidation of the two companies? Mr. BLAIR. As I remember it, the first suggestion which came to me was from Mr. Lord. Mr. PECORA, Mr. Lord was then the president of the Guardian Detroit Group, Inc., was he not? Mr. BLAIR. Yes. Mr. PECORA. How long prior to the effecting of the consolidation on December 16, 1929, was the proposition for such consolidation first submitted, proposed, or advanced? Mr. BLAIR. Well, my memory may be a little bit faulty on that, but as I remember we had some talks about it in the early summer, but those talks came to nothing. Then along about midsummer the subject came up again, and we didn't get anywhere; but finally, along some time in the middle or latter part of September, we came to an agreement. I remember quite well that the agreement was reached at a meeting held at my house out in the country. Senator COUZENS. Were you the chief negotiator for your group, and was Mr. Lord the chief negotiator for his group? Mr. BLAIR. Yes. Mr. PECORA. Well, the proposition must have originated, then, very, very, shortly after the birth of the Guardian Detroit Group, Inc., which took place in May of 1929. Mr. BLAIR. As we look back it would seem that it did, but the way things were going then I suppose we thought it was a long time afterward. Mr. PECORA. On what terms was the consolidation effected? Mr. BLAIR. On a share-for-share basis after the Guardian Detroit Group stockholders received a 20 percent dividend. Mr. PECORA. Now, before this consolidation was effected had there been any competition between those two groups or holding companies, known respectively as the Guardian Detroit Group, Inc., and the Union Commerce Investment Co., in the matter of acquiring, through purchase of capital stock, bank units in the State of Michigan? Mr. BLAIR. Only in one case. Mr. PECORA. In which case was that? Mr. BLAIR. At Flint. Mr. PECORA. In the case of the Flint bank? Mr. BLAIR. Yes; and I don't know that that was serious competition at all. Mr. PECORA. What were the advantages that were claimed for the consolidation of those two holding companies? Mr. BLAIR. Well, I think we felt that there could be quite a saving through the merging of the two trust companies in Detroit and the two commercial banks, and also of the two investment houses. Mr. PECORA. What were those two investment houses? Mr. BLAIR. The Guardian Detroit Co. and Keane, Higbie & Co. Mr. PECORA. Keane, Higbie & Co. had been acquired by your original holding company? Mr. BLAIR. Yes, sir. Mr. PECORA. Namely, the Union Commerce Investment Co.? Mr. PECORA. When was that done? Mr. BLAIR. About the 1st of September. Mr. PECORA. Of 1929? Mr. BLAIR. Of 1929; yes. Mr. PECORA. Now, what was the business of Keane, Higbie & Co. at that time? Mr. BLAIR. Keane, Higbie & Co. have been referred to in these hearings two or three times as a brokerage house. That is not a proper designation of that firm. It had some brokerage business, but by far the larger part of its business was investment banking. Senator COUZENS. The buying and selling of securities? Mr. BLAIR. The buying and selling of securities, yes. Senator COUZENS. They held considerable securities in their portfolio, didn't they? Mr. BLAIR. Yes. But most investment houses did, of course. Mr. PECORA. Now, Mr. Blair, you took an active part, didn't you, in the negotiations that led to the acquisition of Keane, Higbie & Co., Inc., by the Union Commerce Corporation? Mr. BLAIR. I did. Mr. PECORA. What advantages did you see in your corporation acquiring Keane, Higbie & Co. at that time? Mr. BLAIR. May I read a statement I have prepared? I rather expected I would be asked that very question; and then I will be very glad to answer any questions. Mr. PECORA. Well, have you a copy of that statement? Mr. BLAIR. I will give this to you. Mr. PECORA. I mean, if you could let me have a copy so that I might follow you through. Mr. BLAIR. I am not sure that I have a copy. I will look. [After looking through his papers]. I do not seem to have another copy, Mr. Pecora. Mr. PECORA. I will be with you in just a moment. Senator COUZENS. When was the Guardian Trust Co. organized, Mr. Blair? Mr. BLAIR. I think in the year 1925. Senator COUZENS. That belonged to your group at the time of the consolidation now under discussion, the Guardian Trust Co.? Mr. BLAIR. No; it belonged to the Guardian Detroit Group, not to our group. Senator COUZENS. Oh, the Union belonged to your group? Senator COUZENS. Who organized the Guardian Trust Co.? That was organized after I left, and I do not recall it. Mr. BLAIR. Well, I would not dare to say who did that. I remember that Fred Murphy and Harry Bodman were among the men associated with it in early days, but I would not attempt to say who were responsible for its formation. The CHAIRMAN. Did this combination have the effect of reducing overhead and saving expense? Mr. BLAIR. Yes. Senator COUZENS. Why did you resign as the head of the Union Trust Co.? Mr. BLAIR. Well, in the fall of 1931 I found my own financial position, because of endorsements I had made, to be such as to give me a good deal of worry, and I did not think that it was proper for me to continue. Senator COUZENS. And your resignation from the Mr. BLAIR. I did not resign, Senator; I was retired. Senator COUZENS. Voluntarily? Mr. BLAIR. Yes; I asked to be retired. Senator CoUZENS. That was the time that Mr. Bodman succeeded you? Mr. BLAIR. Yes. Mr. PECORA. Will you let me look at the statement that you had prepared in order to enable you to answer questions concerning the acquisition of Keane, Higbie & Co., by the Union Commerce Co.? Mr. BLAIR. Certainly [handing a paper to Mr. Pecora]. Mr. PECORA. You say you have not a copy of this statement? Mr. BLAIR. I did. Mr. PECORA. Without any assistance from anyone else? Senator COUZENS. When did you prepare it? Mr. BLAIR. Oh, I suppose Senator COUZENS. At the beginning of these hearings? Mr. BLAIR. It was after two gentlemen representing Mr. Pecora called on me at my office in Detroit. |