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STOCK-EXCHANGE PRACTICES

WEDNESDAY, JANUARY 17, 1934

UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE ON

BANKING AND CURRENCY,

Washington, D.C. The subcommittee met at 10 a.m. pursuant to adjournment on yesterday, in Room No. 301, of the Senate Office Building, Senator Duncan Ü. Fletcher presiding:

Present: Senators Fletcher (chairman), Adams, and Couzens, Present also: Ferdinand Pecora, counsel to the committee, Julius Silver and David Saperstein, associate counsel to the committee; and Frank J. Meehan, chief statistician to the committee.

The CHAIRMAN. The subcommittee will come to order.

TESTIMONY OF CLIFFORD B. LONGLEY, GROSSE POINTE FARMS,

MICH.— Resumed

Mr. PECORA. Mr. Longley, just before adjournment yesterday afternoon you were asked by Senator Couzens the question as to why the sum of $500,000 of capital A trust funds which were on deposit to the credit and account of the Union Guardian Trust Co. in the First National Bank of Detroit, were withdrawn and transferred to another bank. You answered as follows (reading]:

I do not know, Senator. You would have to ask Mr. Maurice. He undertook to select those depositories, and I was out of it. I had too much else to do.

Mr. LONGLEY. In that connection, let me state this further: That question of Senator Couzens is as to why he passed it from one bank to another.

Mr. PECORA. Yes. Mr. LONGLEY. I cannot tell you that. But I can tell you this: The deposits on February 11, of A funds in that particular bank were greater than they had been, on an average, for the 6 months preceding.

Mr. PECORA. On February 11, 1933 ?

Mr. LONGLEY. That is right. The deposits, if you would like to have them, in the First National Bank of Detroit, for June, July, August, September, October, November, and December were as follows-and I can give them to you as they appear on the 10th, 20th, and the last day of the month,

Mr. PECORA. All right.

Mr. LONGLEY. Only July 10 they were $853,000; July 20 they were $860,000; July 31, $881,000. Mr. PECORA. As of what year?

Mr. LONGLEY. This is 1932. The preceding 6 months—no; it does not include January. I have not got those figures, but that was when the movement was taking place. On August 10 there was $617,000; August 20 there was $417,000; August 31, $421,000; September 10, $561,000; September 20, $306,000; September 30, $307,000; October 10, $611,000; October 20, $406,000; October 31, $580,000; November 10, $626,000; November 20, $495,000; November 30, $287,000. On December 10 there was $513,000; December 20, $651,000; December 31, $692,000. On February 11, in that same depository, there was $702,213.48. The average for those deposits that I have given you is something less than $600,000.

I would like to say this also in connection with this thing. On February 11

Mr. PECORA. 1933 ?

Mr. LONGLEY, 1933—there was total cash shown on the statement of $7,313,000.

Senator COUZENS. What statement !

Mr. LONGLEY. Shown on the statement of condition of the Union Guardian Trust Co. as of February 11, 1933, $7,313,000. Of that, $2,346,000 was in Detroit banks.

Mr. PECORA. Two million
Mr. LONGLEY. I am talking about A and B funds.
Mr. PECORA. Two million-
Mr. LONGLEY. $2,346,000.
Senator COUZENS. Can you separate them!

Mr. LongLey. Yes, sir. Would you like to have them in all the banks, or just in the Detroit banks?

Mr. PECORA. Separate them as to class A and class B funds.
Mr. LONGLEY. Yes. I can do that.

Senator COUZENS. You said there were $7,000,000 in your own trust company?

Mr. LONGLEY. Oh, no. They are deposits of the trust company in Detroit banks.

Senator COUZENS. In Detroit banks?

Mr. LONGLEY. No; deposits of the trust company in all banks on that date were $7,313,000.

Senator COUZENS. Divide that figure as between A and B.

Mr. LONGLEY. All right. Of the total cash, $7,313,000 on February 11, there was $5,493,061.92 in A money, A cash. In B cash there was $1,820,978.25. Of that total of $7,313,000 there was $2,346,000 still in Detroit, and that is made up in this way. In the First National Bank

Mr. PECORA. Pardon me. Can you separate that $2,346,000 into class A and class B funds?

Mr. LONGLEY. That is what I am doing now.
Senator COUZENS. That last $5,000,000 is class B, is it not?

Mr. LONGLEY. No, indeed. I am going to give you the figures right now. In the Á funds which were deposited in the First National Bank of Detroit, there was $702,213.48. Those are the A funds. There was $1,644,450.97 of B funds, and those were in the Guardian National Bank of Commerce.

There was also an account of $2,500 in the Highland Park State Bank, a special account of some sort which, by the way, I did not add in there. If you want to add that in, it is all right.

So, we have, as a consequence, after this transfer, more A funds in the First National Bank of Detroit than had previously been deposited there, and we have further, out of the whole of the funds of the trust company, $2,300,000 out of $7,300,000 still in Detroit banks on February 11.

Mr. PECORA. Can you explain, then, any reason why $500,000 on (leposit on January 13, 1933, in the First National Bank of Detroit was withdrawn and deposited in the Central Hanover Bank & Trust Co. of New York?

Mr. LONGLEY. I can tell you this, that it was the custom to withdraw funds from out-of-town banks and put them through the local depositories before transferring them to other depositories. We did not care to have some of these out-of-State banks know just where the funds were going, and so we transferred them through Detroit depositories. My answer to Senator Couzens last night was that I did not know just why, and that is the nearest I can come to explaining. Mr. Maurice could probably tell you about that, if it is important

Mr. PECORA. When you refer to out-of-State banks do you mean banks outside the State of Michigan?

Mr. LONGLEY. Yes. If you would care to have it, I would be glad to introduce this statement as of February 11, showing the funds in these various banks.

Mr. PECORA. Yes.
Mr. LONGLEY. This is a copy of it [producing paper].
Mr. PECORA. Do you know that it is correct?
Mr. LONGLEY. I only know that I asked for it and got it.
Mr. PECORA. Who prepared it?

Mr. LONGLEY. The treasurer of the trust company. At least, I got it from him. I would also be glad to introduce the statement as of December 31, 1932, if that is of any interest.

Mr. PECORA. All right.
Mr. LONGLEY. I would like to use them.

Mr. PECORA. I will offer the first statement in evidence, entitled "General journal and statement of condition" of the Union Guardian Trust Co., as of February 11, 1933.

The CHAIRMAN. Let it be admitted.

(Statement entitled, “ General journal and statement of condition” Union Guardian Trust Co., Feb. 11, 1933, was received in evidence, marked “Committee Exhibit No. 84, Jan. 17, 1934 ", and the same will be found at the conclusion of today's proceedings.)

Mr. PECORA. I also offer in evidence the other statement produced by the witness, entitled “General journal and statement of condition of the Union Guardian Trust Co, as of December 31, 1932.

Mr. LONGLEY. You will find on the back the list of these depositories, with amounts.

Mr. PECORA. Yes.
Mr. LONGLEY. That is where I take my figures.
The CHAIRMAN. Let it be admitted.

(Statement entitled “General journal and statement of condition” Union Guardian Trust Co., Dec. 31, 1932, was received in evidence, marked " Committee Exhibit No. 85, Jan. 17, 1934 ", and the same will be found at the conclusion of today's proceedings.)

Mr. PECORA. Are you familiar with the transaction whereby, on January 17, 1933, the sum of $125,501 was withdrawn by the Union Guardian Trust Co. from the National City Bank of Cleveland, and certificates of deposit purchased ?

Mr. LONGLEY. Yes.' That was in the course of the same series of transfers of these "A" funds, which resulted, as I have already stated, in the deposits being as they were on February 11.

Mr. PECORA. And on the same date, namely, January 17, 1933, $227.681.82 was withdrawn by the Union Guardian Trust Co. from the Farmers Deposit National Bank of Pittsburgh?

Mr. LONGLEY. That is right.
Mr. PECORA. And certificates of deposit purchased.
Mr. LONGLEY. That is right.
Mr. PECORA. That was part of the same plan?

Mr. LONGLEY. Part of the same plan. It was a readjustment of all those accounts with the old depositories and the new depositories.

Mr. PECORA. On January 18, 1933, the sum of $400,000 was deposited in the Union Trust Co. of Pittsburgh?

Mr. LONGLEY. That is true.
Mr. PECORA. Those were “A” funds?

Mr. LONGLEY. Those were “A” funds; yes, sir. Those were all part of this same series of transfers.

Mr. PECORA. On the same date $81,731.70 was deposited in the First National Bank—there were two deposits.

Mr. LONGLEY. That is right.

Mr. PECORA. One of $81,731.70, and another of $250,000 were made in the First National Bank of Detroit.

Mr. LONGLEY. That is right; a total of $331,731.70, brought back to Detroit.

Mr. PECORA. On the same day $250,000 was withdrawn from the Continental Illinois Bank & Trust Co. of Chicago.

Mr. LONGLEY. That is right.

Mr. PECORA. Is that the $250,000 that was deposited in the First National Bank of Detroit that day?

Mr. LONGLEY. I could not tell where that went. You cannot tell that from these figures. You would have to follow the course of each one of these checks through the various channels. This really does not mean anything, so far as the course that money followed is concerned.

Mr. PECORA. Let us see. On that same date, January 18, 1933, $481,731.70 was withdrawn from the Guardian National Bank of Commerce of Detroit; isn't that so!

Mr. LONGLEY. That is right. That probably checks up there very nicely.

Mr. PECORA. That is the aggregate of the two items of deposits, respectively, of $400,000 deposited in the Union Trust Co. of Pittsburgh, and' $81,731.70 deposited in the First National Bank of Detroit.

Mr. LONGLEY. That is right.

Mr. PECORA. Would not that indicate the withdrawal of $481,731.70 from the Guardian National Bank of Commerce in Detroit on that day?

Mr. LONGLEY. Probably; yes. I would say so.

Mr. PECORA. That amount was deposited, in the proportions I have stated, in the Union Trust Co. of Pittsburgh and the First National Bank of Detroit.

Mr. LONGLEY. Yes. I think that is right.

Mr. PECORA. Is it not also correct to infer that the $250,000 with. drawn on January 18, 1933, from the Continental Illinois Bank & Trust Co. of Chicago was the $250,000 deposited that same day in the First National Bank of Detroit !

Mr. LONGLEY. Yes; I think that is true.

Mr. PECORA. What occasioned that particular shifting of funds on that date?

Mr. LONGLEY. January 18?
Mr. PECORA. Yes.

Mr. LONGLEY. Oh, I do not know. It was in the course of this same process of readjusting those deposits. There were some new depositories, three of them, I think, and funds were adjusted from the old depositories to the new, and the A funds from the Guardian were adjusted throughout these depositories.

Senator COUZENS. Was it not done on the recommendation of Mr. Bodman, and in view of the letter he sent you?

Mr. LONGLEY. Yes. It was all done in furtherance of that, and his verbal request to do so.

Mr. PECORA. On January 19, 1933, $200,000 was withdrawn from the First National Bank of Detroit, and a similar sum deposited in the Northern Trust Co., of Chicago.

Mr. LONGLEY. Yes.

Mr. PECORA. That was not done in pursuance of Mr. Bodman's suggestion made many months prior, was it?

Mr. LONGLEY. It was not. Mr. PECORA. What was the reason for that transfer ? Mr. LONGLEY. Except that it was in the course of this same process. Why wasn't it? I don't understand.

Mr. PECORA. Because Mr. Bodman's suggestion was that moneys be withdrawn from banks affiliated with the Group with which the Union Guardian Trust Co. was affiliated. In this particular case, on January 19, 1933, $200,000 was withdrawn from one bank not affiliated with the Group, and deposited in another bank not affiliated with the Group.

Mr. LONGLEY. Is there any other reason-
Mr. PECORA. Which other bank was outside the State of Michigan.

Mr. LONGLEY. That is quite true; but is there any other reason why the officer in charge of adjusting these deposits cannot keep his deposit in the First National Bank, where he wants it, and why he cannot, if it is high there, put some over in Chicago, Pittsburgh, or New York ?

Mr. PECORA. I am trying to find out from you what the reason was for this so-called “readjustment”?

Mr. LONGLEY. I am only supposing that, because I did not handle the transfers, but I assume that the officer who was handling this did not want that deposit in the First National Bank to be a great deal greater than it had been. He had his own reasons for that. I suppose, but it was higher on February 11 than it had been.

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