Mr. PECORA. Did the group engage anybody to look after its interests insofar as they might be affected by pending legislation? Mr. LONGLEY. Not that I know of. I think that our own officers kept in close contact with the Lansing situation, that went very slowly, and it dragged and dragged, and we were very anxious to have some remedial legislation that would permit us to operate under a conservatorship in some limited way. I think that that was what Mr. Stalker had in mind when he wrote those communications. He was anxious to see if things could not be pushed along and some action secured.

However, I think that most of it was worked out through Judge Lacy, whom I have already mentioned, and Mr. Maurice spent a good deal of time in Lansing in connection with general things, and some of the other officers.

Mr. PECORA. Who is Mr. A. Quay Beyer?

Mr. LONGLEY. Who is he now?

Mr. PECORA. Who was he?

Mr. LONGLEY. He is living at Detroit. At one time he was a junior officer of the Guardian National Bank of Commerce. I believe.

Mr. PECORA. You knew him, didn't you?

Mr. LONGLEY. Oh, yes; very well.

Mr. PECORA. You say he was a junior officer of the Guardian National Bank of Commerce?

Mr. LONGLEY. I think so. I don't know just exactly what his official position was; but he had to do with mortgages, I know that. Mr. PECORA. Mr. Frank Maurice was an officer of the Union Guardian Trust Co.?

Mr. LONGLEY. Yes.

Mr. PECORA. I show you what purports to be a photostatic reproduction of an intra-group and interoffice memorandum on the letterhead of the Guardian Detroit Union Group, Inc., addressed to Mr. Frank Maurice from Quay Beyer. Will you look at it and tell me if you recognize it as a true and correct copy of such a communication sent by Mr. Beyer to Mr. Maurice?

Mr. LONGLEY (after perusing document). Yes. I don't know that I ever saw that before, but I think that is Mr. Beyer's writing, and if you found it in the files it is probably his.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted.

(Photostat of hand-written memorandum from A. Quay Beyer to Frank Maurice, filed Apr. 18, 1933, was thereupon designated "Committee Exhibit No. 93, Jan. 17, 1934", and same appears immediately following where read by Mr. Pecora.)

Mr. PECORA. The document received in evidence as committee's exhibit no. 93 of this date reads as follows [reading]:

To Mr. Frank Maurice

From Quay Beyer

Supplementing my memo. of March 18 I would like to set forth briefly a few of the other things I have in mind which might work in with the plan outlined. When the deadlock on the mortgages is broken then there will be the property to be disposed of. If I may go back for a moment to the beginning of the decline and imagine that someone designated by the trust company were well

acquainted with, say, 10 of the larger corporation's employment managers and that this man had been introduced under very favorable circumstances by the president of the corporation who sits on our board. If the man designated had had a list of our mortgages and land contract purchasers and could have interceded for them, would it not have made a material difference in the amount of collections and income

It seems to me the people against whom we have mortgages should be the first ones to be permitted the opportunity of repurchasing perhaps on land contract. If we can secure jobs for them we can start to thaw out a lot of the so-called frozen assets. We cannot get them all, of course, but I am wondering if it is not worth a trial. We are not getting any now and I certainly would not be afraid to tackle the job, which could be worked in with new business calls, and in that way would not be any additional expense--or to get started some overtime work could be done.

For example, let's assume Chrysler Co. employ 30,000 men at the peak and 5,000 at low ebb because they are compelled to keep a number for maintenance, etc. Let's say we secured an infinitely small percentage of these. Would it not be an advantage gained?

I don't think it would be a very elaborate program from an expense standpoint. After the contact had been properly made with the employment managers, then periodic check-ups could be made even when conditions are improved. Understand, if you please, it is not my idea to create an employment agency or a welfare department (however, I do think it would automatically do worlds of good for a lot of deserving people and perhaps save a lifetime of savings for some), and for that reason the individual for whom we would intercede should not even know of it.

Some of these details will of course work themselves out. I would like very much to get your reaction on the above?

I really think our shop is in a better position to do this than any othe organization in town, because we have so many industrialists on our board and I am sure they would be willing to cooperate.

We have in many instances contacted the purchasing agents to secure orders for firms that we hoped would give us accounts. Now why not the employment managers to keep men who theoretically will give us an account by paying on their accounts?

Was there anything done about that?

A. QUAY BEYER,

Mr. LONGLEY. Yes; I think Mr. Beyer went ahead and tried to get some of these poor chaps who could not pay on their mortgages jobs. I don't know how far he got with it, but I know he worked hard on it trying to get them employment. I thought it was a pretty good scheme. Jobs were pretty scarce at that time, however, and nothing very important happened.

Mr. PECORA. Referring again to the examination of the trust company made by the State examiner as of September 14, 1931, it appears in his report that Mr. Hudson, the examiner, prepared that there is a liquidating statement of condition which is entitled "Examiner's Estimate of Bank's Condition ", and in this estimate or purported estimate he set up surplus, undivided profits, and reserve accounts. from which he deducted estimated losses which he believed the bank might have to sustain, and reached a net deficiency of

Mr. LONGLEY (interposing). What was the date of that examination?

Mr. PECORA. The examination of September 14, 1931. He reached a net deficiency of $478,241.54. That was taking into account capital stock of the bank $5,000,000, undivided profits $591,345, and other items carrying the total up to $5,963,919.85, from which he deducted estimated losses aggregating $6,442,169.39, leaving a net deficiency of $478,249.54. Are you familiar with that report?

Mr. LONGLEY. I am not; no.

Mr. PECORA. What is that?

Mr. LONGLEY. I am not.

Mr. PECORA. Have you a copy of the report of September 14, 1931? Mr. LONGLEY. No, I have not. In fact, my memorandum of it shows that no report was ever received from the banking department. I wondered whether you were talking about the 1932 report. Mr. PECORA. No; the report as of September 14, 1931, by Mr. Hudson, the same State examiner.

Mr. LONGLEY. This is what my memorandum says, that the trust

company gave me :

Probably check of directors' examination. No report being received from the banking department.

I never saw it.

Mr. PECORA. In Mr. Hudson's report of his examination of the trust company as of August 8, 1932, he reported a net deficiency arrived at in the same way of $2,915,889.34, as I read to you before. Mr. LONGLEY. Yes; that is right.

Mr. PECORA. Which compared with the net deficiency as of September of the preceding year of $478,000 odd.

Mr. LONGLEY. Of course, after the report of September 14, 1931, I do not believe I have ever seen the report of the banking department, but on our own investigations we made charge-offs at the end of the year of $2,162,746.64 and added certain reserves in the amount of $50,600. That was not in furtherance of the State banking department examination, but in furtherance of our own investigations.

Mr. PECORA. I think that is all, Mr. Longley.

Senator COUZENS. I would like to ask a question before Mr. Longley leaves the stand.

When the banks closed Saturday noon on February 11, that was the usual closing time, was it not?

Mr. LONGLEY. Yes, sir.

Senator COUZENS. When they closed they had been operating normally up to then, had they not?

Mr. LONGLEY. Exactly.

Senator COUZENS. What happened between February 11 at 12 o'clock noon and midnight of the 13th when the Governor issued his closing order, to make you believe it was necessary to close? Mr. LONGLEY. It did not all happen between those dates.

Senator COUZENS. Then you were not operating normally at noon on the 11th, were you?

Mr. LONGLEY. Yes; we were operating normally, but during the previous week, while we were in Washington, we would get continually calls, repeated calls from people in New York and Chicago, which gave us a great deal of concern.

Senator COUZENS. What were they?

Mr. LONGLEY. Oh, inquiries that indicated that there was this very large application; the news was out that the trust company was making this very large application.

Senator COUZENS. That was not quite the fact, because it was the group that was making the application.

Mr. LONGLEY. That is true. But we had been showing large bills payable, and I think that the depositors generally recognized the

fact of the lack of liquidity of the trust company at that time, and we felt that we did not dare to go further with it.

Senator COUZENS. So up until noon on February 11 you were not particularly afraid of large withdrawals?

Mr. LONGLEY. I do not think there were any that amounted to anything.

Senator COUZENS. I say, you were not afraid of them at that time, because you were operating and paying the depositors?

Mr. LONGLEY. That is right.

Senator COUZENS. Then between noon of the 11th and the night of the 13th of February you got more rumors and reports that if you opened up there might be withdrawals?

Mr. LONGLEY. Oh, yes. It was well known around Detroit what the situation was, because we took so many people into our confidence. We necessarily had to, to try to get those funds; and our directors of course could not keep it entirely to themselves, and it was talked around. There just wasn't a chance after our meeting over that week end.

Senator COUZENS. So that most of the fear, then, and the rumors developed from noon of the 11th until midnight of the 13th; is that correct?

Mr. LONGLEY. A large part of it; yes. I cannot say quite most of it, because

Senator COUZENS. I said "most of it," because, as a matter of fact, there were no large withdrawals demanded before that.

Mr. LONGLEY. That is true.

Senator COUZENS. There is just one question that is not particularly important for the record, but Mr. Leyburn testified to some statements that I was alleged to have made to you and Mr. Walsh, I think it was, when you came to the Senate to see me on February 6 or 7

Mr. LONGLEY. It was Thursday, February 9.

Senator COUZENS. Can you tell the committee just what I said at that time, if you recall it?

Mr. LONGLEY. Well, I recall some of the things you said; yes. Senator COUZENS. Will you tell the committee all of it, if you can tell all of it?

Mr. LONGLEY. I do not know that I can remember them all. Colonel Walsh and I called upon you outside the Senate chamber, and we tried to describe the situation and we tried to explain what our application was to the R.F.C., and the seriousness of the situa tion in Detroit. You stated to us that you had heard that we had asked the R.F.C. people not to let you know about the application. I remember I tried to explain to you that that was the first I had heard of it, if it were true, and I tried to tell you that we were very carefully not asking you or Mr. Chapin or any of our Congressmen or other official people here in Washington to participate in this thing, due to the fact that I had in my bag at the time this article by Mr. Flynn in Harper's Magazine, criticizing Mr. Chapin for having secured a loan for the Union Guardian Trust Co., and I guess Mr. Chapin had probably never heard of it. We felt that with Mr. Leyburn's participation in that application-he really gave as much to the conception of that plan as anyone else—we had strong sup

port. We also felt that the seriousness of the situation and the necessity for the loan going through made it just something that could not be turned down. I tried to explain that to you, as I remember, and you were not very interested. We asked if you would speak to Šenator Vandenburg, and we proceeded to tell him the whole story.

Senator COUZENS. I want to say that, so far as I was concerned, I thought you were entirely right in not coming to any political representatives in Washington, and I thought that I ought not to have been approached, and so I did not find any fault with you for that reason; but what I wanted particularly was to have you say as to whether or not I ever said to you that I would condemn the loan from the housetops.

Mr. LONGLEY. Oh, no; you did not say that to me.

Senator COUZENS. That is what Mr. Leyburn testified to the other

day.

Mr. LONGLEY. Oh: I did not understand that.

Senator COUZENS. That is what I wanted to straighten up, because I thought he was mistaken; he was depending upon rumor. Mr. LONGLEY. I understood that you said that later.

Senator COUZENS. I said that in the White House, but not to you. Mr. LONGLEY. Not to me, no; you did not indicate what you would do. You said you were in a quandary as to whether you should go one way in support of these institutions or let things slide the other way and let them go. I have forgotten what your language was. Senator COUZENS. I guess it was printable, was it not? Mr. LONGLEY. Oh, yes; quite printable.

(Witness excused.)

TESTIMONY OF CHARLES S. MOTT, FLINT, MICH.

The CHAIRMAN. You do solemnly swear that the testimony you will give at this hearing will be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. MOTT. I do.

Mr. PECORA. Please state your full name.

Mr. MOTT. Charles S. Mott.

Mr. PECORA. Your address, Mr. Mott?

Mr. MOTT. Flint, Mich.

Mr. PECORA. And your business or occupation?

Mr. MOTT. What I have been doing practically for the past year? Mr. PECORA. What you regard as your business or occupation. Mr. MOTT. I don't know.

The CHAIRMAN. What has it been?

Mr. MOTT. Most of my time during the past year has been defending myself in lawsuits.

Senator COUZENS. So that your occupation is that of a defendant? (No response.)

Mr. PECORA. What is your most active business affiliation? I will put it that way.

Mr. MOTT. Well, I am a director of General Motors and a member of the executive committee, but I am not active in that corporation. Mr. PECORA. You were an officer or director of the Guardian Detroit Union Group, were you not?