Senator COUZENS. Do you know who were there?

Mr. LONGLEY. No, sir; not without checking up on the minutes. That is what I was wondering about.

Mr. PECORA. Do you recall that 2 days after this meeting of the executive committee of the board there was a meeting of the board of directors of the Trust Co. at which, among other things, the following action was taken-and I am reading, now, from what purports to be a copy of page 118 of the minute book in use at that time [reading]:

The minutes of the regular meeting of the executive committee held Thursday, February 23, 1933, were read and after discussion the following resolution was duly made, supported and unanimously carried:

Resolved, That the action of the executive committee at its meeting held February 23, 1933, be ratified and approved, except that the clause contained in Resolution 7, reading as follows: with a very considerable degree of freedom of action' be stricken out, and that the officers be, and they are hereby, directed to continue the trust business of the company until further instruction from the board, provided that no debtor or creditor relation of the bank be affected.

Further resolved, That the officers be and they are hereby directed to call the board together from day to day if any new changes in the situation take place."

It was the consensus that the banking commissioner be further informed of the company's present operations through presentation to him of a copy of the minutes of the meeting of the executive committee held February 23, 1933, together with a copy of the minutes of this meeting.

You note that the resolution styled "Resolution No. 7", adopted by the executive committee on February 23, 1933, was amended at the board meeting held 2 days later by striking out the words " with a very considerable degree of freedom of action?"

Mr. LONGLEY. Yes.

Mr. PECORA. Do you recall the discussion that was had at the meeting of the board on February 25, 1933, at which that action was taken?

Mr. LONGLEY. No; I do not. I do not know just why that was. I would assume it was because the directors were being supercautious about the operations of the company during the holiday.

Senator COUZENS. I would like to have your interpretation, Mr. Longley, of the meaning of this resolution which has been designated as no. 7", where it says that you may have freedom of action," provided, that in so doing the company's debtor and creditor relationships and its own status as regards assets and liabilities are not effected." What does that mean?

Mr. LONGLEY. I do not know exactly what that latter part means, but the thought, as I remember it, was that during that period of lack of knowledge of what our situation was going to be, the termination of the holiday or when the new legislation was worked out, the directors were trying to be as careful as they could on all questions concerning debtor and creditor relationships. I think that was a very sensible thing to do.

Senator COUZENS. How could you conduct the fiduciary business of the company with a very considerable degree of freedom-Mr. LONGLEY. That was the part that was stricken.

Senator COUZENS. Yes; but it was in operation 2 days before. It was in there when the resolution was adopted. I am just wonder

ing how you could conduct any business without "the company's debtor and creditor relationships and its own status in regard to liabilities and assets being affected." That is such a ridiculous resolution, to me, that I do not understand it.

Mr. LONGLEY. I am not sure that I fully appreciate the meaning of it, myself; but we were trying to be as exceedingly cautious as we could, as far as the creditors were concerned, and the depositors, and the R.F.C.; but at the same time we thought it absolutely necessary to preserve our fiduciary business and to protect those trust papers of the company, and we did that as best we could. I think that is about as far as it went during that period.

Senator COUZENS. Any withdrawal of any of those funds by one of your clients or customers would affect the debtor and creditor relationships. It seems to me that it is contradictory. In one place you say you can go ahead and in another place you say you must stop. Mr. LONGLEY. I would not like to try to say what that meant. I know what we did.

Senator COUZENS. What you did was to pay out some of those trust funds?

Mr. LONGLEY. Yes; we did; exactly.

Senator COUZENS. Right up to the time that the conservator was appointed?

Mr. LONGLEY. That is right. I do not know what the amounts were. I only know we did it.

Senator COUZENS. That is the information that you are going to get for the committee?

Mr. LONGLEY. Yes, sir.

Mr. PECORA. For the purpose of refreshing your recollection, let me read further from the minute book this extract of the minutes of a meeting held on February 25, last, at page 119 of the minute book [reading]:

Upon inquiry the board was informed that the last examination of the bank indicated liabilities in excess of $7,000,000 over the assets of the company, that of this amount 31⁄2 million dollars had been written off through arrangement with the depositors and would be approved by the banking commissioner.

Upon inquiry the board was informed that substantially all of the class A trust fund deposits had been withdrawn from the depositaries of the company outside of the State of Michigan; that currency approximating $3,463,000 is held in the vaults in the bank and that the balance remaining in depositaries outside the State of Michigan is approximately $189,000.

Do you recall that those proceedings took place at the board meeting?

Mr. LONGLEY. I think that is probably true.

Senator COUZENS. We will recess at this time until 2 o'clock. (Whereupon, at 1:05 p.m., the subcommittee took a recess until 2 p.m., Jan. 17, 1934.)

AFTER RECESS

The subcommittee resumed at 2 p.m. on the expiration of the

recess.

The CHAIRMAN. The subcommittee will come to order and resume its hearing.

TESTIMONY OF CLIFFORD B. LONGLEY-Resumed

Mr. PECORA. Mr. Longley, referring to the exhibit known as "Committee Exhibit No. 92", of this date, which was received in evidence this morning, and which consists of a copy of the report of the examining committee of the Union Guardian Detroit Co., as of December 13, 1932

Mr. LONGLEY (interposing). You mean of the Union Guardian Trust Co.?

Mr. PECORA, Yes; of the Union Guardian Trust Co. I want to call your attention to schedule no. 6 attached to this report and forming a part thereof, showing the liability of officers and directors of the bank as of December 13, 1932. And is shows that as of that date the liability of the different officers and directors of the bank, on their respective individual accounts, aggregated $2,477,040.45; and that the aggregate of their liabilities as endorsers or guarantors was $136,010. Do you know whether anything has been done toward liquidating these liabilities of officers and directors?

Mr. LONGLEY. Since that report?

Mr. PECORA. Yes.

Mr. LONGLEY. I do not know how much; no. I think every effort has been made, on the part of the conservator principally, to collect those loans.

Mr. PECORA. Well, now, many of these loans were of long standing, weren't they?

Mr. LONGLEY. Oh, yes. They were old accounts rather than loans of long standing. They would change from time to time, for instance, take the Oakman loan

Mr. PECORA (interposing). The Robert Oakman loan is a direct liability of the payer, in the aggregate as of December 13, 1932, according to this report, of $1,653,412.65; and in addition to whichMr. LONGLEY (interposing). Yes.

Mr. PECORA (Continuing). He was liable as endorser or guarantor to the extent of $105,000.

Mr. LONGLEY. Yes, sir.

Mr. PECORA. Both these items are exclusive of mortgage loans. And what were you going to say a moment ago about the Oakman loan account?

Mr. LONGLEY. Well, that was paid down and increased again. It was a more or less open account, or an open loan on account of those advances, I mean that part that pertains to the advances.

Mr. PECORA. Yes. Anything else?

Mr. LONGLEY. I think that is it.

Senator COUZENS. And for that reason you do not call it an old loan?

Mr. LONGLEY. Well, it is an old loan. His business goes back, I believe, to the year 1916. But he has gotten loans from the trust company and then they have been paid off, and then new loans have been made, as he developed his real-estate business, over the question of the years he had been a customer of the trust company, I think since approximately 1916. Of course, real estate isn't liquid, or is not liquidating very fast now, nor was it in 1932.

Mr. PECORA. Was that the principal kind of collateral that he gave for those loans, real estate?

Mr. LONGLEY. Yes, sir. He was in the real-estate business, a large real-estate operator in the city of Detroit.

Mr. PECORA. In addition to this personal liability, what mortgage loans were made to him, I mean loans that are not included in this aggregate of $1,653,412.65?

Mr. LONGLEY. I do not know. At the end of the year my memorandum shows we had $144,426 in mortgage loans.

Mr. PECORA. Exclusive of this liability on his part of $1,653,412.65. Mr. LONGLEY. Yes; outside of that. Now, wait a minute! What did you say?

Mr. PECORA. According to the report of the examining committee as of December 13, 1932, the liability as payer of Robert Oakman, a director, was $1,653,412.65, except mortgage loans.

Mr. LONGLEY. Well, if that report says that, that is probably so. Mr. PECORA. Weren't you familiar with the loan account of Mr. Oakman?

Mr. LONGLEY. Somewhat; yes.

Mr. PECORA. To what extent? What can you tell the committee about it? How was it secured, among other things?

Mr. LONGLEY. It was secured by real estate owned by Mr. Oakman, running south from Grand River Avenue, we will say. And I believe he reduced his loan towards

Mr. PECORA (interposing). Was it improved real estate?

Mr. LONGLEY. Oh, yes. He put a great deal of money into that real estate. It ran into the millions of dollars, I think, over those years.

Mr. PECORA. Had he financed those real-estate operations largely by means of loans made to him by the trust company?

Mr. LONGLEY. I think so. There was also a piece of real estate that ran south of this parcel adjoining Grand River Avenue, nearly as far down as the River Rouge plant. Then there was another piece that he had and that is covered by those loans, that ran north from Grand River Avenue, and around close to Third Avenue, nearly to the Ford plant at Highland Park. I do not know how many miles that is, but it was adjoining what is called the Oakman Boulevard, running approximately from one plant to the other. In all probability-and this is a figure that has been given to me as an estimate he had an investment of perhaps 10 millions of dollars in those properties. Some of it, of course, had been paid back. But his total investment, perhaps, would aggregate that sum. Mr. PECORA. To what extent, if you can tell this committee, had this Oakman loan account been liquidated during the year 1932? That is, during the period of the year prior to December 13, 1932, which would take in the greater part of the year?

Mr. LONGLEY. There were a good many payments on the account, but I think as a whole the loan increased rather than decreased. Mr. PECORA. During the year 1932?

Mr. LONGLEY. I think so. He had to take care of taxes and certain other things that had to be met.

Mr. PECORA. Now, according to the report of the State bank examiner made as of September 14, 1931, on that date Mr. Oakman owed the bank on account of loans upon which he was directly liable. an aggregate of $1,283,000, the entire amount of which was classi

fied as "slow" in the analysis made of the loan accounts of the trust company at that time. That was about a year and a quarter prior to December 13, 1932, so it would seem that his loan account had increased by something like $400.000 during the year 1932.

Mr. LONGLEY. I do not think so. I think there has been something left out there. I may be wrong about that. but

Mr. PECORA (interposing). Well, if it was left out, it was left out by your examining committee.

Mr. LONGLEY. Well, that might be, but I don't know. As I remember that loan, when I first became acquainted with it it was about what it is now, or what it was in February of 1933. There wasn't much change in it.

Senator COUZENS. This State bank examination was as of September 1931 and you were not there with the trust company then? Mr. LONGLEY. No.

Senator COUZENS. Mr. Pecora, the witness was not there in 1931. Mr. PECORA. I was not there then, but when I first became familiar with that account it was around $1,500,000 or $1,600.000, or that is my recollection.

Mr. PECORA. Toward the end of 1932 it was $1,653.000.

Mr. LONGLEY. I am talking about the end of 1931. My first recollection of that loan was that it was approximately what it was in February of 1933.

Senator COUZENS. Do you mean by that to say that it was not increased after you became president of the trust company? Mr. PECORA. Oh, no. He said it was increased.

Mr. LONGLEY. Yes; it was as I remember it. We advanced some funds for his income taxes, and for other taxes, and things such as that, that he had to meet in order to protect the properties.

Senator COUZENS. That was after you became president of the trust company?

Mr. LONGLEY. Yes, sir. Without looking at the account, Mr. Pecora, I could not tell you just what it was.

Mr. PECORA. What was that?

Mr. LONGLEY. Without looking at the account I could not tell you what it was increased to as compared to the period of 1931.

Mr. PECORA. The next largest loan account of a director or officer as shown by the report of the examining committee of the trust company as of December 13, 1932, appears to be that of J. Walter Drake, a director. It amounted to $159,712.50. Do you know whether anything has been done toward the liquidation of that loan? Mr. LONGLEY. I don't believe that there was very much done. The CHAIRMAN. Was it secured?

Mr. LONGLEY. In a way; yes.

Mr. PECORA. In what way?

Mr. LONGLEY. There are $100,000 of Union Trust Building bonds, and 14,700 shares of Hupp Motor Co. stock.

Mr. PECORA. What kind of stock?

Mr. LONGLEY. Hupp Motor Co. stock.

Mr. PECORA. Oh. I understand now. Hupp Motor Co. stock. Mr. LONGLEY. Yes. Mr. Drake was connected with that company. It was thought that there would be some recovery in that security. I do not know whether they have sold any of it since then or not.