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Mr. PECORA. But, my dear man, only the day before your bank withdrew funds from one bank and deposited portions thereof, aggregating $331,731.70, in this First National Bank of Detroit. Mr. LONGLEY. That is true.
Mr. PECORA. And the following day withdrew $200.000 from the First National Bank of Detroit and deposited it in a Chicago bank.
Mr. LOXGLEY. That is true. That is perfectly all right. He was adjusting those accounts and bringing them to the level that he wanted them to be, I suppose. You would have to ask him in order to get exactly what he had in his mind, because I cannot guess that, but from my general knowledge of it, I think that is what he had in mind. I think the best picture you will have will be on that sheet of February 11, which shows where they finally wound up.
Mr. PECORA. On January 20, 1933, the sum of $100,000 was withdrawn from the regular account, so called, which your Trust Co. had with the Continental Illinois Bank & Trust Co. of Chicago, and deposited in the Continental Illinois Bank & Trust Co. of Chicago in an account called "Account No. 2."
Mr. LoxGLEY. Yes.
Mr. LONGLEY. No; I do not, except that it was in the course of this general readjustment of "A" fund accounts.
Mr. PECORA. What was the reason for maintaining a regular account and an account no. 2 in the Continental Illinois Bank & Trust Co.?
Mr. LONGLEY. I do not know. I do not know what that particular designation means.
Senator COUZENS. Is Mr. Maurice here?
Mr. PECORA. On January 26, 1933, $350,000 was withdrawn from the Union Trust Co. of Pittsburgh and certificates of deposit purchased.
Mr. LONGLEY. Yes.
Mr. PECORA. On January 27, 1933, the sum of $241,000 was withdrawn from the Chemical Bank & Trust Co. of New York, and a deposit of the same amount made that same day in the Guaranty Trust Co. of New York.
Mr. LONGLEY. That is true, apparently.
Mr. PECORA. On January 28, 1933, the sum of $400,000 was withdrawn from the regular account, so-called, which your trust company had with the Bankers Trust Co., and deposited in account no. 2, in the same bank.
Mr. LONGLEY. Yes; that is apparently true. That is what memorandum shows.
Senator COUZENS. Do you know what account no. 2 was?
Mr. LONGLEY. I have not the slightest idea. It was the same designation, apparently, that was in the Continental Illinois Bank.
Senator COUZENS. You do not know what account no. 2 meant? Mr. LONGLEY. No; I do not.
Mr. PECORA, On February 7, 1933, $400,000 was withdrawn from the First National Bank of Detroit, and the following deposits were made on the same day: One of $200,000 in the Bankers Trust Co. of New York, and one of $200,000 in the Union Trust Co. of Pittsburgh, presumably the same funds.
Mr. LONGLEY. Presumably.
Mr. PECORA. On February 11, 1933, $116,000 was withdrawn from the Continental Illinois Bank & Trust'Co. of Chicago, and a corresponding sum deposited in the First National Bank of Detroit. Is that correct?
Mr. LONGLEY. Yes; apparently.
Mr. PECORA. On February 15, 1933, $55,000 was withdrawn from the Chemical Bank & Trust Co. of New York. Do you know what disposition was made of those funds!
Mr. LONGLEY. No; I do not. You say February 15?
Mr. LONGLEY. Mr. Pecora, that amount was withdrawn by the bank from its account in the Chemical Bank & Trust Co. of New York.
Mr. LONGLEY. I do not know about it. I would suppose that the institution was closed up tight on that day.
Mr. PECORA. And on February 23, 1933, the following withdrawals were made from the banks which I will name, in the respective sums which I will also name: From the Central Hanover Bank & Trust Co. of New York, $500,000; from the Bankers Trust Co. of New York, $825,069.11; from the Union Trust Co. of Pittsburgh, $250,000.
Mr. LONGLEY. Were those all “A” funds ?
Mr. PECORA. From the Guaranty Trust Co. of New York, $250,000; from the Continental Illinois National Bank & Trust Co. of Chicago, $600,000; from the Farmers Deposit National Bank & Trust Co. of Pittsburgh, $120,000; from the Northern Trust Co. of Chicago, $200,000.
On the following day, February 24, 1933, the following withdrawals of funds were made: From the Chemical Bank & Trust Co. of New York, $375,000; from the Union Trust Co. of Pittsburgh, $350,000.
The aggregate amount of all these withdrawals commencing on February 15, 1933, and ending on February 24, 1933, was $3,525,069.11. Do you know the reason for that?
Mr. LONGLEY. Yes.
Mr. LONGLEY. I think I know the reason. After the holiday things became very, very serious in Detroit, with all the banks
closed, and our trust depositors were having difficulty, and were in needs of funds, and the trust funds were withdrawn and put in cash.
Mr. PECORA. The “A” trust funds?
Mr. LONGLEY. The “A” trust funds were withdrawn, as far as they could be, and put in cash in the vault in the Trust Co. for the benefit of the trust depositors.
The CHAIRMAN. When were they paid out?
Mr. LONGLEY. Since then, as the people applied. I do not know just what the conservator has done. The first disbursement, as I remember, was 50 cents on the dollar of the total amount of their claim. That I think was raised, and I think now they have somewhere around 70 or 80 cents. . There is still, of course, a large and substantial sum in the closed bank in Detroit, but actually that reserve protected those trust depositors to the extent of about 90 cents on the dollar.
The CHAIRMAN. The 50 percent was paid by whom?
Mr. LONGLEY. By the conservator or the Trust Co. I have forgotten whether it happened before the conservator took hold or not.
The CHAIRMAN. These funds were turned over to the conservator?
Mr. LONGLEY. Oh, yes. The conservator has possession of everything.
Senator COUZENS. When was the conservator appointed?
Mr. LONGLEY. I do not remember that date. I would say it was late in March.
Senator COUZENS. Then, between the time of these withdrawals, February 15 up to February 24, 1933, and the time the conservator was appointed, these funds were in your charge?
Mr. LONGLEY. That is right. I think there was something paid out, but I have forgotten what it was.
Senator COUZENS. Was that paid out on a percentage basis?
Mr. LONGLEY. I do not think so. I think that they were allowed up to a certain percentage. Senator COUZENS. Do you know what the percentage was? Mr. LONGLEY. No; I have forgotten. Senator COUZENS. Was it not possible, between the dates of those withdrawals and the appointment of the conservator, for some of those trust funds to be withdrawn to the extent of 100 percent!
Mr. LONGLEY. No; there never would have been 100 percent for them, because of the sum still in the closed Detroit bank.
Senator COUZENS. I mean of that amount which was in your vaults, which you withdrew and put in your vaults.
Mr. LONGLEY. Yes.
Senator COUZENS. Were not some of those trust funds paid out to the extent of 100 percent?
Mr. LONGLEY. Not that I know of.
Mr. LONGLEY. My recollection is otherwise. I do not remember it. I do not think so.
Senator Couzens. I am trying to get at whether there would be any rule or mandatory provision by any governmental agency to distribute those trust funds on a percentage basis at that time.
Mr. LOXGI EY. No; there was no rule, but, as I remember, you will find a resolution of the board, or the executive committee, authorizing the officers to continue with the business, but using due care as to any possible preference that might arise—some such language as that.
Senator COCZENS. Can you give reference as to the date of that resolution?
Mr. LOXGLEY. No; I do not have it. In fact, I have a very hazy recollection as to the resolution.
Senator COCZENS. As a matter of fact, you cannot testify that there were no 100-percent withdrawals of that trust fund between the time of the withdrawals from these depositories and the time of the appointment of the conservator?
Mr. LOXGLEY. No; I cannot testify to it absolutely, but I think there were not.
The CHAIRMAN. You do know that there was some distribution made at that time?
Mr. LOXGLEY. I think so; yes.
Mr. PECORA. Mr. Longley, I show you what purports to be a photostatic reproduction of an intragroup and interoffice memorandum, so styled, dated January 16, 1933, addressed to Mr. Frank Maurice by Mr. E. C. Harris, on the subject of “ Recommendations re bank account set-up."
Will you please look at it and tell me if you recognize it to be a true and correct copy of such memorandum that passed from Mr. Harris to Mr. Maurice?
Mr. LONGLEY (after reading paper to near the end). Yes; this seems to be what you designate it as.
Mr. PECORA. Mr. Chairman, I offer it in evidence.
Mr. PECORA, Mr. Longley, will you just give it to the committee reporter when you are through reading it?
Mr. LONGLEY: Yes. [And after a few moments longer, having completed the reading of the paper, the witness handed it to the com. mittee reporter.]
(The Intra-group and Inter-Office memorandum, dated Jan. 16, 1933, from E. Č. Harris to Frank Maurice, was marked “ Committee Exhibit No. 86, Jan. 17, 1934 ", and will be found immediately following where read by Mr. Pecora.)
Mr. PECORA. The memorandum just received in evidence, and marked " Committee Exhibit No. 86” as of this date, being on the letterhead of the Guardian Detroit Union Group, Inc., and being styled an Intra-group and Inter-Office memorandum, reads as follows (reading):
GUARDIAN DETROIT UNION GROUP
INTRA-GROUP AND INTER-OFFICE MEMORANDUM
Jan. 16, 1933. To Mr. Frank Maurice 30 From Mr. E. C. Harris 251 Subject RECOMMENDATIONS RE-BANK ACCOUNT SET-UP
BANK ACCOUNTS—TRUST FUNDS CLASS A
Central Hanover Bank & Trust Co.-On deposit $500,000. Rate of interest on open account 12%. Inasmuch as this will be an inactive account, it is recommended that we purchase a Certificate of Deposit in that Institution for $400,000 and leave $100,000 in open account. Recommendation for the purchase of a Certificate of Deposit on this inactive money is to increase interest yield.
Chemical Bank & Trust Co.-On deposit $706,124. Rate of interest 4%. Inasmuch as this is the account on which all our bond trading transactions are cleared, it seems advisable to make this our general active New York account. For this purpose, we should leave about $100,000 and distribute the balance as follows:
Chemical Bank & Trust Co. Certificate of Deposit, $400,000.
Transfer to the Guaranty Trust Co., N.Y., $200,000, which will become our active Class A account in New York.
Manufacturers' Trust Co.-Suggest that this balance be left as it is until disposition has been made of some of the large balances on open account in other institutions. This account is presently paying us 1%.
Bankers Trust Co.-On deposit $500,000. Interest rate 42%. It does not appear that we can leave as large a sum of money on deposit in open account at this small interest rate. Mr. Jackson informs us that they do not issue Certificates of Deposit. If this is the case, negotiations should be made for an arrangement which will allow us a better interest rate or transfer be effected to some other account. Chicago
Continental Illinois National Bank & Trust Co.-Amount on deposit $778,154. Inasmuch as it seems to be the intent to keep a large sum on deposit with the Continental Illinois Bank, it is suggested that $500,000 of this amount be converted into one of their Certificates of Deposit with a larger interest return than we are now getting. The remaining $278,000 will be sufficient monies to have on open account in Chicago.
First National Bank-This is a new depositary and it looks as though there would be available for an initial deposit about $200,000. This should be placed in the form of a Certificate of Deposit instead of an open account.
Northern Trust Co.—About $200,000 will be available for opening an initial account in this Bank. This should be in the form of a Certificate of Deposit rather than an open account. Pittsburgh
Farmers Deposit National Bank—We have purchased here $227,681 in Certificates of Deposit for trust accounts and have on open account $32,318, making a total of $260,000. Open account pays 1%2% and Certificates of Deposit 2%. Suggest leaving as is.
Union Trust Company–Balance here has been $50,498, on wbich we are getting 11,2%. Suggest that we leave as is in open account. Cleveland
National City Bank-We have purchased at this Institution $125,501 in Cer. tificates of Deposit leaving $74,499 in open account. On open account we are to receive 2% and on Certificates of Deposit 242%. Detroit
Guardian National Bank of Commerce-Uptown Office. Our account here will be entirely wiped out with the opening of the two additional bank accounts in Chicago. On deposit $411,722, rate of interest 1%.