Mr. PECORA. What was the nature of the transaction which was not consummated?

Mr. WILKIN. It was the crediting of our account with the $600,000 as advised, and the charging-or at least the crediting of our account with that $600,000 in our bills payable.

Mr. PECORA. If the certificate of deposit was not used for any reason at all, then why were the bills payable of the Union Industrial Bank of Flint reduced by the amount of this certificate of deposit?

Mr. WILKIN. We anticipated that that would be the way this would be handled, which was the usual way to handle such a transaction.

Mr. PECORA. Do you know why the certificate of deposit was issued in the first instance? It was signed by the assistant cashier, Mr. Holmes, of the Union Industrial Bank of Flint.

Mr. WILKIN. Yes, sir; it was. Now, do I know why it was issued? Mr. PECORA. Yes.

Mr. WILKIN. Well, because we had our advices of the crediting to our account of this amount of money.

Mr. PECORA. Who sent you that advice?

Mr. WILKIN. As I understand it, it was Mr. Patterson.

Mr. PECORA. Who was then executive vice president of the group. Mr. WILKIN. Yes, sir.

Mr. PECORA. And how were those advices communicated to you, by mail or by telephone or how?

Mr. WILKIN. By telephone.

Mr. PECORA. What did Mr. Patterson say, specifically?

Mr. WILKIN. I don't remember. Whether he talked to me or not I could not say.

Mr. PECORA. Well, the officer, if it was someone other than yourself, of the Flint Bank, reported it to you, didn't he?

Mr. WILKIN. I don't remember about that.

Mr. PECORA. Well, what were the advices which prompted the issuance of this certificate of deposit by the Flint Bank in favor of the Guardian Detroit Bank?

Mr. WILKIN. Well, the advices were given on the telephone, which was the usual way that we received such advices.

Mr. PECORA. It appears from the evidence that the issuance of this certificate of deposit was entered upon the books of the Flint bank.

Mr. WILKIN. Yes, sir.

Mr. PECORA. As of December 31, 1931.

Mr. WILKIN. Yes, sir.

Mr. PECORA. Now, the day following December 31, 1931, was a legal holiday?

Mr. WILKIN. Yes, sir.

Mr. PECORA. And banks were not open?

Mr. WILKIN. Yes, sir; that is right.

Mr. PECORA. The following day, January 2, was the first business day after the date of the issuance of this certificate of deposit. Mr. WILKIN. That is right.

Mr. PECORA. I notice, just as you have heretofore been advised, because I called it to your attention when you were on the stand

last week, that this certificate of deposit has the following endorsement or inscription on the back of it:

This C.D. withdrawn January 2, '32, and we credit Guardian Detroit Bank. What is the significance of that endorsement or statement? Mr. WILKIN. Well, I would say that the entry was just the reverse. Mr. PECORA. What is the significance of the withdrawal of it? Mr. WILKIN. It was just in keeping with all the testimony I think that I have given about it.

Mr. PECORA. Why was it withdrawn?

Mr. WILKIN. Because the entry had never-or the transaction had never cleared.

Mr. PECORA. Why hadn't it cleared?

Mr. WILKIN. Well, for the reason that the Detroit bank had not given us the credit as agreed on the telephone.

Mr. PECORA. Do you mean they did not put you in possession of the funds?

Mr. WILKIN. That is right.

Mr. PECORA. Corresponding to the amount of this certificate of deposit?

Mr. WILKIN. Yes, sir.

Mr. PECORA. Namely, $600,000?

Mr. WILKIN. Yes, sir.

Mr. PECORA. If that is so, then why in the statement that was issued showing the condition of the bank as of December 31, were bills payable reduced from $2,100,000 to $1,500,000, or reduced by a sum corresponding to the amount of this certificate of deposit? Mr. WILKIN. What statement have you now reference to?

Mr. PECORA. The one that was put in evidence here last week, which was signed by you.

Mr. WILKIN. I cannot answer that question.

Mr. PECORA. Why not?

Mr. WILKIN. Because, Mr. Pecora, the signing of bank statements is a purely routine matter. I do not think any executive officer of a bank ever goes through and checks the actual items on a bank

statement.

Senator COUZENS. Was there any statement published in the Flint papers as to the condition of the bank as of December 31, 1931? Mr. WILKIN. I would say there was.

Senator COUZENS. Which of the two statements was published, the one showing $2,100,000 bills payable or the one showing $1,500,000 bills payable?

Mr. WILKIN. I could not tell you.

Mr. PECORA. That statement of the condition of the bank as of December 31, 1931, was dated, as appears from the evidence introduced here last week, January 8, 1932. Do you recall that?

Mr. WILKIN. That is right.

Mr. PECORA. In other words, it was 6 days after it was known. that this certificate of deposit had not cleared?

Mr. WILKIN. Yes, sir.

Mr. PECORA. If it was known then that it had not cleared, why was the statement of condition of the bank made out so as to report bills payable at $1,500,000 instead of $2,100,000?

Mr. WILKIN. I cannot answer that question, Mr. Pecora. I did not make out the statement.

Mr. PECORA. You signed it as executive vice president and cashier of the bank?

Mr. WILKIN. Yes; without checking it. As I say, that is a purely routine matter in a bank.

Mr. PECORA. Now, Mr. Wilkin, let me call your attention to the fact that in the printed annual report issued by the Group Co. to its stockholders for the year 1931 there appears at page 21 thereof a statement of condition of the Union Industrial Trust & Savings Bank of Flint, Mich., which shows under the caption "Liabilities " an item of bills payable as $1,500,000. So that that figure was even carried out in the annual report issued by the Group Co. to its stockholders for the year 1931. You notice that on the report which I hand over to you for inspection, do you?

Mr. WILKIN. Yes, sir.

Mr. PECORA. How do you account for that?

Mr. WILKIN. Well, that is practically the same statement that you have introduced in evidence here.

Mr. PECORA. It is a copy of it?

Mr. WILKIN. No.

Mr. PECORA. It is not textually a copy of it, but

Mr. WILKIN (interposing). No.

Mr. PECORA. Not textually a copy of it, I know, but the same thing.

Mr. WILKIN. It is taken from the same figures that you have produced here.

Senator COUZENS. Mr. Wilkin, this report that Mr. Pecora has just referred to is dated January 26, 1932.

Mr. WILKIN. I imagine that the units of the group, or the banks, would have to have that in for the purposes of the group during the very early part of January.

Senator COUZENS. That $600,000 would show in the Guardian Detroit Bank as money in other banks, wouldn't it?

Mr. WILKIN. Yes, sir. I beg pardon; this entry did not go through, so they did not show it in that.

Mr. PECORA. If that certificate of deposit had properly cleared, the statement of condition of the Flint bank would have shown deposits of $600,000 more as a result of this certificate of deposit?

Mr. WILKIN. I will have to explain that, Mr. Pecora.

Mr. PECORA. All right. Please do so.

Mr. WILKIN. Because if this money came direct from the Guardian Bank and was deposited by them, that would be true. But you mean that the $600,000 would be reflected in their deposits and also in the deposits of the bank at Flint?

Mr. PECORA. Yes.

Mr. WILKIN. Yes, sir.

Mr. PECORA. And the deposits of the bank at Flint would be increased by the sum of $600,000 as a result of this certificate of deposit?

Mr. WILKIN. Provided it was their own funds.

Mr. PECORA. Don't you know that the amount of such deposits were increased in that statement of condition by $600,000 because of this certificate deposit even though it had not cleared as you say?

Mr. WILKIN. Well, that is obvious; yes, sir.

Mr. PECORA. Why was that done? In other words, why was the bank at Flint crediting itself with a deposit of $600,000, represented by a certificate of deposit that had not cleared?

Mr. WILKIN. I do not understand that question. I do not want to appear evasive about it, but we did not know, Mr. Pecora, that it had not cleared. There was no way for us to know until January 2, when we received our statement from the Detroit bank.

Mr. PECORA. Then, on January 2 did you know that this certificate of deposit had been canceled?

Mr. WILKIN. I did; yes.

Mr. PECORA. Because of the failure on the part of the Guardian Detroit Bank to fulfill its part of the transaction?

Mr. WILKIN. Yes, sir.

Mr. PECORA. Well, if you knew that then, why was the statement of condition, which was made on January 8, 1932, as of December 31, 1931, so made as to show a reduction of bills payable, on account of this certificate of deposit, from $2,100,000 to $1,500,000?

Mr. WILKIN. I cannot tell. I did not make up the statement. Mr. PECORA. Mr. Wilkin, you eventually became executive vice president of the Group Co., didn't you?

Mr. WILKIN. Yes, sir.

Mr. PECORA. Do you care to express any opinion of yours to this committee with regard to the soundness or the wisdom of the dividend-paying policy that, according to the evidence introduced before this committee, was adopted by the Group Co. and its banking units?

Mr. WILKIN. Well, of course, Mr. Pecora, as we look back upon it now, it was not, perhaps, the thing to do. However, it was done in conjunction with the advice and counsel of the banking departments, both State and national.

Mr. PECORA. Was it done in conjunction with any advice received from National bank examiners?

Mr. WILKIN. I think without exception, Mr. Pecora.

Mr. PECORA. Don't you know, according to the evidence introduced before this committee and consisting in part of documentary evidence in the form of reports made by national-bank examiners to the Comptroller of the Currency, that the payment of many dividends by the unit banks was criticized?

Mr. WILKIN. No; I do not know that. Perhaps I should have read the testimony, but I did not read it. But I will tell you of one instance that I have very clear in my mind. It was the Capital National Bank of Lansing, and it had been arranged with the national department, with Mr. Leyburn, to pay a dividend at that bank, and a few of us decided that it absolutely was not the thing to do, to pay it in 1932.

Mr. PECORA. Do you know of any instances where the officers of the Group Co. conferred with national banks and State bank examiners for the purpose of getting their judgment or views with regard to the declaration of dividends by unit banks and by the Group Co.? Mr. WILKIN. Yes, sir; I do.

Mr. PECORA. How many such instances do you personally know of? Mr. WILKIN. Well, I have that one very clearly in mind.

Mr. PECORA. Is that the only one that you have clearly in your mind?

Mr. WILKIN. No. I conferred with the State Department while I was in Flint. I paid a dividend, I would say, in March or June of 1931 out of undivided profits, when I did not earn it, but I did it with the consent of the State banking department.

Mr. PECORA. Who was the State bank examiner who consented to that?

Mr. WILKIN. Mr. Taylor. Not the deputy commissioner, but Mr. Taylor, and I think his name was Herman Taylor.

Senator COUZENS. Did he give you that consent in writing?

Mr. WILKIN. I don't know. But I am sure, or I know that he gave it to our executive committee when it was going into the matter, when he was going over the recapitulation or examination.

Mr. PECORA. Can you call to this committee's attention where national bank examiners advised the payment of dividends by any of the group banks?

Mr. WILKIN. Yes, sir. Take this case in Lansing. That was the one I mentioned where his permission was given after he had been consulted. And if I am not mistaken, Mr. Pecora, that evidence was put in here by someone before this.

Mr. PECORA. Who was that examiner?

Mr. WILKIN. Well, this was the chief examiner who, as I say, I was advised, or at least he was perfectly willing that it should be done. And the Group Co., or some of the officers of the group, decided it was not the thing to do, and did not do it.

Mr. PECORA. Then it was not done?

Mr. WILKIN. No; it was not.

Mr. PECORA. Tell me of any instance that you know of where a dividend was declared by any of the banking units of this Group Co., out of undivided profits or surplus account, upon the approval, or with the approval of a national bank examiner.

Mr. WILKIN. Of my own knowledge I cannot say. But I do say this: That it was my understanding there never was a dividend paid by this group that had not their permission before it was paid out of undivided profits.

Mr. PECORA. And do you mean that it had the permission of the national bank examiner?

Mr. WILKIN. Yes, sir.

Mr. PECORA. Are you familiar with the evidence that has been adduced before this committee, consisting in part of reports of national bank examiners to the Comptroller of the Currency, in which they criticized the payment of those dividends?

Mr. WILKIN. Well, I am not; no, sir.

Senator COUZENS. Anyhow, the committee has that evidence.

Mr. PECORA. Mr. Wilkin, have you any opinions you would care to express to this committee concerning the wisdom or soundness of group banking, based upon your experience as an officer of banks and as executive vice president of this Group Co.?

Mr. WILKIN. Well, of course, I think, and it is only my opinion, that group banking has its weaknesses.

Senator Tow NSEND. What are they?