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Mr. LOXGLEY. For several months; 4 or 5 months. I don't remember just when I became a director.
Mr. PECORA. Had you been connected with its predecessor company, the Union Trust Co.?
Mr. LONGLEY. NO.
Mr. Pecora. Until what date did you continue as president of the Union Trust Co.?
Mr. LONGLEY. Until after the holiday. Mr. PECORA. That is the banking holiday that was declared on February 13?
Mr. LONGLEY. Well, of course, until after that. The trust company did not go into the hands of the conservator until, oh, possibly a month to 6 weeks afterwards; I have forgotten the date. We had to wait until certain legislation was passed in Michigan before the conservator could be appointed. Until that time the officers and directors continued to function. The holiday continued, of course. You understand that.
The CHAIRMAN. The banks were not open?
Mr. LONGLEY. Oh, no; the holiday continued from the 14th of February onward.
Mr. PECORA. The bank has not been reopened since, has it?
Mr. LONGLEY. It is under conservatorship; yes. It is operating its fiduciary department fully.
Mr. PECORA. Yes; but it has departed from its general banking activities?
Mr. LONGLEY. Oh, no; that is under the conservatorship. That is on a restricted basis. The deposits are tied up.
Mr. Pecora. During the year 1932 an application was made to the R.F.C. in behalf of the Union Guardian Trust Co. for a loan, was it not?
Mr. LONGLEY. There are two applications.
Mr. LOXGLEY. Just a minute. Let me get my memorandum here. (After referring to data.) I don't believe I have anything that shows the date of the first loan, but, as I remember it, it was early in the spring, and the first funds were received from the R.F.C., perhaps in April, but it was early in the spring.
Mr. PECORA. Do you remember the amount of the loan for which application was first made? Mr. LONGLEY. Yes; I have that. Mr. PECORA. What was that? Mr. LONCLEY. That was $4,650,000, and for which was pledged $1,116,650 of bonds and $8,086,351 in mortgages.
Mr. Pecora. You are giving the face value of those assets, are Mr. LOXGLEY. I am giving the face value of the security. The $4,650,000 was the amount we received from the R.F.C. in cash.
Mr. Pecora. What was the condition of the Trust Co. at that time which necessitated the obtaining of this loan from the R.F.C.?
Mr. LONGLey. Lack of liquidity. It lacked liquidity very much.
Mr. PECORA. That lack of liquidity was due in large part to the fact that a large proportion, about 72 percent, as I recall it, of its resources were tied up in real-estate mortgages and other obligations secured by real estate?
Mr. LONGLEY. That was my understanding. A computation was made at my request some time about that time, and that is the figure that sticks in my mind. It is approximately 72 percent, and that is the figure that I testified to in Detroit before the grand jury.
Mr. PECORA. Thereafter was another application made in behalf of the Union Guardian Trust Co. to the R.F.C. for an additional loan?
Mr. LONGLEY. There was.
Mr. LONGLEY. As I remember, it was in July. I haven't that date either, I am sorry to say.
Mr. PECORA. 1932?
Mr. LONGLEY. It might have been. It might has been. I haven't a thing here to indicate what those dates were. I think we got the money in July, so possibly it was in June.
Mr. PECORA. Prior to your obtaining money from the Reconstruction Finance Corporation in July, did you and other officers and directors of the Trust Co. have conferences with Mr. Congdon representing the R.F.C. with respect to those loans?
Mr. LONGLEY. Yes, sir; I did. Mr. PECORA. What other officers joined you in those conferences with Mr. Congdon, do you recall ?
Mr. LONGLEY. Well, I do not think there were a great many with Mr. Congdon and myself. I think they were the officers who were familiar with the assets, and in charge of the books perhaps, the treasurer and the heads of departments in charge of assets that came from the particular departments.
Mr. PECORA. Were you joined in those conferences by officers and directors of the Guardian Detroit Union Group, Inc.?
Mr. LONGLEY. I do not think so. Mr. Patterson might have been on the fringe of things, or Mr. Hillsman, who were connected with the Group, but I don't think they had anything to do with either the examination or the discussions in connection with the assets. At least I do not remember it. Possibly they did.
Mr. PECORA. How much of a loan from the R.F.C. did your Trust
Mr. LONGLEY. I do not recall how much was sought to be obtained.
Mr. LONGLEY. I do not know. I do not think so. We finally got $15,000,000 altogether.
Mr. PECORA. How much do you think it was?
Mr. LONGLEY. I don't remember. Have you a copy of that application?
Mr. PECORA. Well, I have before me excerpts from the minutes of the meeting of the executive committee of the R.F.C. held on June 29, 1932, which is headed : Re a conference concerning the proposed application for a loan of $28,000,000.
Mr. LONGLEY. Well, that might easily be so. I do not remember the details of that application.
Mr. PECORA. Let me read excerpts from the minutes of the executive committee of the board of the R.F.C. held on June 29, 1932, and that may possibly refresh your recollection.
Mr. LONGLEY. All right. Mr. PECORA. It says: Mr. Congdon reported that the following officers of the Union Guardian Trust Co. of Detroit, and of the Guardian Detroit Union Group, Inc., had conferred with him concerning a proposed application on the part of the Union Guardian Trust Co. for a loan of approximately $28,000,000 for the purpose of liquidating in full its liability for deposits, except certain trust deposits and its bills pay. able, permitting the company to continue business along fiduciary lines only:
C. B. Longley, president of the Union Guardian Trust Co.
Robert 0. Lord, president of the Guardian Detroit Union Group, Inc., and the Guardian National Bank of Commerce.
James L. Walsh, executive vice president of the Union Guardian Group, Inc., and vice president of the Guardian National Bank of Commerce.
B. K. Patterson, executive vice president of the Guardian Detroit Union Group, Inc.
Mr. Congdon said that these gentlemen had represented that the trust company, because of uncertainty as to its ability to meet anticipated withdrawals of deposits, was in imminent danger of suspension, and that its closing would undoubtedly be followed by the suspension of the entire Guardian Union Group, and probably that of other banks in Detroit and eastern Michigan,
The first proposal of the trust company, he said, was that in order to avoid showing large bills payable, the loan be made to a trustee, to which the trust company would transfer assets which would be offered as security. The general counsel advised that the corporation could not under the law make a loan to a trustee as proposed.
Mr. LONGLEY. Yes; I think that is right.
Mr. PECORA. Do you think that is a fair representation of the facts that had developed up to that time?
Mr. LONGLEY. Probably so. I do not remember them myself, but as I look back at it that is probably quite correct.
Mr. PECORA. Then it is correct to say that prior to June 29, 1932, you, Mr. Harris, a vice president of your Trust Co., and Mr. Lord, Mr. Walsh, and Mr. Patterson, executive officers of the Guardian Detroit Union Group, had entered into conferences with the R.F.C.'s representative, Mr. Congdon?
Mr. LONGLEY. That is right.
Mr. PECORA. Looking toward the obtaining of a loan of approximately $28,000,000 from the R.F.C. for the Union Guardian Trust Co.?
Mr. LONGLEY. I do not recall the amount, but if that is a copy of the application, undoubtedly it is true.
Mr. PECORA. No. I am reading from the minutes of the R.F.C., and not from the application.
Mr. LONGLEY. Oh, I see. Well, unless you can get some document that comes from the Trust Co., I don't know. I suppose that is right, although the other day when you were reading from the minutes of the R.F.C. I disagreed strongly with what you read. But this may be true. I would say that it probably was or near the amount as I recollect it.
Mr. PECORA. Well, do you recall that during the spring of 1932 the Trust Co. reached a situation where it desired or thought it best to liquidate in full its liability for deposits and its bills payable, and to have the Trust Co. continue in business only along fiduciary lines?
Mr. LONGLEY. Yes, sir; I do.
Mr. PECORA. What were the circumstances that brought you, as president of the Trust Co., to that frame of mind in the spring of 1932?
Mr. LONGLEY. Principally the condition of the trust company. Mr. Pecora. Will you tell us what that was?
Mr. LONGLEY. It was in what I found, or at least believed to be, a frozen condition. That is, the assets, or a large part of the credits, were based upon real estate just as I have already said. And the real-estate market in Detroit, and in Michigan, was such—well, there just wasn't any such thing at the time. The properties were valuable, of course. There were many, many very valuable properties that they had in their list of items. I felt that if the trust company could be protected on its deposit liability there should be no trouble at all in its ultimately coming through and protecting that business for the stockholders.
Mr. PECORA. That is, you mean the trust business?
Mr. LONGLEY. Protecting that, and taking care of these assets that belonged to the trust company, and ultimately paying off their debts, which involved paying off those deposits.
Mr. PECORA. When had the real estate market begun to slump?
Mr. LONGLEY. Well, Mr. Pecora, I have never been in the realestate business, and I am just guessing when I say this, but I should say approximately 1927; perhaps in 1926, although it was not very noticeable, perhaps, until 1927 or 1928. I am not exactly sure about that in my own mind.
Mr. PECORA. Had you and the other gentlemen who participated with you in those conferences with Mr. Congdon, whose names I have read to you from the minutes of the R.F.C., represented to Mr. Condon, in substance, that your trust company, because of the uncertainty as to its ability to meet anticipated withdrwals of deposits, was then in imminent danger of suspension ?
Mr. LONGLEY. Well, I do not know the language that was used at all. But I do not believe that we used that language.
Mr. Pecora. Well, what do you recall was said by any of you to Mr. Congdon on that score?
Mr. LONGLEY. I do not remember what was said to Mr. Congdon, but somewhere you will find the application, and in that application we set up the condition as we saw it as to those assets, that they could not be liquidated quickly enough to take care of the deposit liability, and our fear that unless relief was had through loans the deposit liability on some future date could not be met. Now, that
application is available it seems to me, and that will show the language we used.
Mr. PECORA. The language you used in the application would be different from the language you used in the conference with Mr. Congdon, wouldn't it? It would be much more terse and much more concise.
Mr. LONGLEY. Probably. The thing I am trying to stress is that at no time did we have any question about the value of those assets. It was a question of unfreezing them and getting liquidity. And that was pointed out very carefully and in very careful language. That is why I go back to the application.
Mr. PECORA. Don't you recall the substance of the conferences with Mr. Congdon?
Mr. LONGLEY. Yes, sir.
Mr. PECORA. I am not confining you to any one particular conference, now, but to the general course of them.
Mr. LONGLEY. We talked all these things over, and I haven't the slightest recollection of just what was said. However, it is all covered in substance by our application.
The CHAIRMAN. How much was that application for?
Mr. LONGLEY. I suppose that it was for the amount mentioned by Mr. Pecora in those minutes. I do not remember myself, Senator Fletcher.
The CHAIRMAN. It was for 28 million dollars?
Mr. LONGLEY. I think it was an application to take care of the deposit liability of the trust company.
The CHAIRMAN. And do you know what that liability was?
Mr. LONGLEY. They finally made a loan with the R.F.C. officials that would take care of us, as they thought. At least Mr. Congdon and Mr. Sheehan thought so, or they hoped it would, anyway.
The CHAIRMAN. How much was it?
Mr. LONGLEY. Wait a minute and I can give you that. (Looking through some papers.)
Mr. PECORA. Do you recall that it was said to Mr.
Mr. LONGLEY (interposing). One minute, Mr. Pecora. I am trying to answer Senator Fletcher's question if I can.
Mr. PECORA. Pardon me.
Mr. LONGLEY. It seems to be 1112 million dollars, Senator Fletcher, on the second application.
The CHAIRMAN. That is in addition to the $4,750,000 ?
Mr. PECORA. Do you recall that it was stated, in substance, to Mr. Congdon in those conferences prior to June 29, 1932, that the closing of the Union Guardian Trust Co., if it should become closed, would be followed undoubtedly by the suspension of the entire Guardian Detroit Union Group banks!
Mr. LONGLEY. Yes, sir; that is right.
Mr. PECORA. Will you tell the committee on what you based your judgment that if the Union Guardian Trust Co. had to suspend