Mr. BALLANTYNE. Mr. Pecora, may I ask the favor that we get the return of this paper I have handed you and which you have just made an exhibit?

Mr. PECORA. Yes, it will be returned to you after the committee reporter has copied it and made it a part of our record.

Mr. BALLANTYNE. All right. I thank you.

Mr. PECORA. By the way, the document you have given me is merely an unsigned copy, I see.

Mr. BALLANTYNE. Yes, sir; it is that, but it is the only one we have and it is important that we get it back.

Mr. PECORA. Haven't you other copies?

Mr. BALLANTYNE. No; I haven't.

Mr. PECORA. Mr. Ballantyne, it was the primary purpose of the gentlemen who were the signers of this trust agreement marked in evidence as "Exhibit No. 2" of this date to create a holding company which would acquire, hold, and own

Mr. BALLANTYNE (interposing). According to the records of the

company.

Mr. PECORA (Continuing). The shares of the capital stock of the following five institutions.

Mr. BALLANTYNE. Yes, sir.

Mr. PECORA. Peoples Wayne County Bank, First National Bank in Detroit, the Detroit & Security Trust Co., Bank of Michigan, and the Peninsular State Bank.

Mr. BALLANTYNE. Yes.

Mr. PECORA. You were at the time of the execution of the trust agreement and also at the time of the incorporation of the Detroit Bankers Co. the chairman of the board of the Bank of Michigan? Mr. BALLANTYNE. Yes, sir.

Mr. PECORA. Were all of these five banks whose names I have given you located in the city of Detroit?

Mr. BALLANTYNE. Yes; almost within a stone's throw of one another.

Mr. PECORA. And you said something at the outset of your testimony about a large number of branches.

Mr. BALLANTYNE. Yes.

Mr. PECORA. Were you then alluding to the branches of these five banks?

Mr. BALLANTYNE. Yes.

Mr. PECORA. They were all in operation?

Mr. BALLANTYNE. Yes. Well, I was not alluding to them entirely. I was alluding to all of them.

Mr. PECORA. Not only the branches but to the banks themselves? Mr. BALLANTYNE. I don't know just how many branches these particular banks had, but they were very numerous. I think about 250.

Mr. PECORA. When this company was incorporated on January 8, 1930, did you know that there was then in existence doing business and in operation another bank holding company called the Guardian Detroit Union Group, Inc.?

Mr. BALLANTYNE. No, indeed; we didn't.

Mr. PECORA. As I recall the evidence before this committee, that company was incorporated-first, one of the constituents of the company was incorporated in 1927.

Mr. BALLANTYNE. I couldn't tell you that. I don't know which one you refer to.

Mr. PECORA. I think it was the one known as the Union Commerce Investment Co.

Mr. BALLANTYNE. The Union Commerce National Bank-the National Bank of Commerce, I think it was.

Mr. PECORA. Yes.

Mr. BALLANTYNE. And it was changed to the Guardian National Bank of Commerce.

Mr. PECORA. In December 1929 there was a merger or consolidation of the Guardian Detroit Co. with the Union Commerce Investment Co. under the name of the Guardian Detroit Union Group, Inc.; do you recall that?

Mr. BALLANTYNE. Well, I don't know the Union Commerce Investment Co. at all. I am not familiar with their ramifications, of

course.

Mr. PECORA. You do know the organization that was called the Guardian Detroit Union Group.

Mr. BALLANTYNE. Oh, very well; yes.

Mr. PECORA. Was this Detroit Bankers Co. designed to compete as a bank holding company with that Guardian Detroit Union Group, Inc., which was also a holding company?

Mr. BALLANTYNE. I would not like to say that. Of course, the Guardian Bank tried to get some of these banks, I think, but I do not believe the idea of competition was in it, nor was it supposed to be an endorsement of group banking at all. It was so specified by Julius Haass at the time. He was the

Mr. PECORA (interposing). He was the guiding spirit of this corporation, was he?

Mr. BALLANTYNE. Oh, yes.

Mr. PECORA. At least at its inception?

Mr. BALLANTYNE. Oh, yes.

Mr. PECORA. According to the trust agreement received in evidence here as committee's exhibit no. 2, the participants therein, or the parties thereto, were Julius H. Haass, John R. Bodde, Emory W. Clark, D. Dwight Douglas, Ralph Stone, McPherson Browning, John Ballantyne, which is yourself, T. W. P. Livingstone, H. L. Chittenden, Fred J. Fisher, William T. Barbour, and Wesson Seyburn, and I observe that those names are the same as the names of the incorporators of the Detroit Bankers Co.

Mr. BALLANTYNE. Yes.

Mr. PECORA. Now, these 12 persons were the persons who acquired the 120 so-called "trustee shares? "

Mr. BALLANTYNE. Yes.

Mr. PECORA. Of the capital stock of the Detroit Bankers Co.?
Mr. BALLANTYNE. Yes.

Mr. PECORA. At the very outset?

Mr. BALLANTYNE. Yes.

Mr. PECORA. Each one acquiring 10 of the 120 shares?

Mr. BALLANTYNE. Yes.

Mr. PECORA. And paying for them $120, or $10 apiece?

Mr. BALLANTYNE. Yes.

Mr. PECORA. That was the sole capital with which the Detroit Bankers Co. commenced business, wasn't it?

Mr. BALLANTYNE. Yes, sir; I believe so.

Mr. PECORA. $1,200 that was paid by the 12 trustees, each one for 10 shares of the trustee stock?

Mr. BALLANTYNE. Yes.

Mr. PECORA. Now, can you tell the committee the purpose for vesting in the 12 holders of the trustee shares of the capital stock of this holding company the sole voting power for the election of officers and directors of the company for the first 5 years?

Mr. BALLANTYNE. Mr. Pecora, I am afraid I cannot. That was an idea that was promulgated by Julius Haass. I never quite understood it. The board was enlarged after he

Mr. PECORA (interposing). I know the board was enlarged eventually from 12 to 21 persons.

Mr. BALLANTYNE. Yes; I think something like that.

Mr. PECORA. On promulgating this idea what benefits did Mr. Haass claim for it?

Mr. BALLANTYNE. I don't know that I could answer that very clearly.

Mr. PECORA. Why not?

Mr. BALLANTYNE. I don't think my memory is clear on that.

Mr. PECORA. What benefits do you now see to have been inherent in that plan?

Mr. BALLANTYNE. Oh, I don't know that I see any particularly. Mr. PECORA. What is that?

Mr. BALLANTYNE. Unless just a small group could hold together better. I am sure I don't know. But you could get that information from other sources, I am sure, better than from me.

Mr. PECORA. Well now, Mr. Ballantyne, you were one of that small group from the start?

Mr. BALLANTYNE. That is true.

Mr. PECORA. And you eventually became the president of this holding company?

Mr. BALLANTYNE. No; but I never contemplated, my dear sirMr. PECORA (interposing). Whether you contemplated it or not, you became its president?

Mr. BALLANTYNE. That was fate that did that, not me.

Mr. PECORA. Well, fate put you in the presidency of this holding company?

Mr. BALLANTYNE. Yes.

Mr. PECORA. And you continued to serve as president for more than 1 year?

Mr. BALLANTYNE. No; 1 year.

Mr. PECORA. For 1 year?

Mr. BALLANTYNE. Yes.

Mr. PECORA. All right. And you were a director from the start? Mr. BALLANTYNE. Yes.

175541-34-PT 11-2

Mr. PECORA. And you were one of the 12 trustees, were you not? Mr. BALLANTYNE. Yes.

Mr. PECORA. Now, can't you tell this committee, not upon any recollection of what Mr. Haass might have said about it, but can't you tell this committee your own idea of the benefits that accrued or were attached to this feature of the plan of the Detroit Bankers Co., the feature I refer to being to vest absolute voting power for the election of officers and directors in these 12 trustees for the first 5 years?

Mr. BALLANTYNE. Mr. Haass had the desire to prevent-I know this; he expressed himself to this extent-to prevent the possibility of an attack on Detroit by any large interests elsewhere. I know that was in his mind.

Mr. PECORA. An attack on Detroit?

Mr. BALLANTYNE. Well, not an attack-he didn't want to have outside interests coming in and getting control of these older banks of Detroit or anywhere. I know that was partly in his mind. The truth to tell, I didn't pay much attention to that at all, Mr. Pecora. Mr. PECORA. Can't you tell this committee any benefits that seemed to you attached to this feature of the plan?

Mr. BALLANTYNE. I never saw any benefits particularly. When I succeeded him I enlarged or had the board enlarged. I didn't see any reason, unless it was to perpetuate themselves in office.

Mr. PECORA. That was it exactly, wasn't it, to perpetuate themselves in office?

Mr. BALLANTYNE. That was not my idea.

Mr. PECORA. Whether it was your idea or not, wasn't that the motive that prompted it?

Mr. BALLANTYNE. I would not say that.

Mr. PECORA. Wasn't that the thought that prompted the inclusion of that feature of this corporation in its articles of association?

Mr. BALLANTYNE. If I were to say yes, if I were to answer in the affirmative, Mr. Pecora, I would not be telling the truth. I don't know. Frankly, I don't know.

Mr. PECORA. Now, you said that this corporation was the outcome of conferences that covered a period of perhaps a year prior to the date when the corporation was created.

Mr. BALLANTYNE. Well, that was a conjecture. I am not sure of the last of the year.

Mr. PECORA. It was several months prior, that you know?

Mr. BALLANTYNE. Yes; it was quite a time prior to that. I was not informed about those at the time.

Mr. PECORA. Apparently at the very outset the central purpose of the gentleman who became the 12 trustees or 12 owners of all of the trustee stock of this corporation was to bring together in this holding company the five banks that I have named?

Mr. BALLANTYNE. Yes; and to eliminate branches and bring in economies that would naturally follow from such an arrangement, and to create a bank that was in proportion to the needs of Detroit. Mr. PECORA. And the general method by which these five banks were to be brought under the ownership, let us call it

Mr. BALLANTYNE. Yes.

Mr. PECORA. Of this holding company that was called the Detroit Bankers Co., was through the process of exchange of stock, to have this holding company acquire all of the outstanding capital stock of these five banks?

Mr. BALLANTYNE. I presume so.

Mr. PECORA. Well, don't you know so?

Mr. BALLANTYNE. Yes. I would say so.

Mr. PECORA. Now, as a matter of fact, the plan for the creation of this corporation was pretty well completed about 3 months before the corporation was actually organized, wasn't it, namely, in October 1929?

Mr. BALLANTYNE. Yes.

Mr. PECORA. And about that time, the early part of October 1929, do you know whether a circular letter was caused to be printed and sent out to the stockholders of each of the five banks that I have named, in which reference was made to the plan to create a holding company which would exchange its capital stock for the capital stock of the five banks?

Mr. BALLANTYNE. I believe that is true.

Mr. PECORA. I show you what purports to be a printed circular or letter of that sort. Will you look at it and tell me if you recognize it to be a copy of such printed letter or circular so sent out and addressed to the stockholders of those five banks?

Mr. BALLANTYNE (after perusing document). Yes; that is all right, Mr. Pecora.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be adınitted and entered on the record.

(Printed circular dated Oct. 5, 1929, addressed to the stockholders of Peoples Wayne County Bank, First National Bank in Detroit, Detroit and Security Trust Co., Bank of Michigan, and Peninsular State Bank, and signed by Peoples Wayne County Bank, Julius H. Haass, president, John R. Bodde, vice president; First National Bank in Detroit, Emory W. Clark, chairman of the board, D. Dwight Douglas, president; Detroit and Security Trust Co., Ralph Stone, chairman of the board, Albert E. Green, vice chairman of the board, McPherson Browning, president; Bank of Michigan, John Ballantyne, chairman of the board, T. W. P. Livingstone, president; Peninsular State Bank, E. J. Hickey, chairman of the board, H. L. Chittenden, president, was thereupon designated "Committee Exhibit No. 3, Jan. 24, 1923 ", and appears in full immediately following where read by Mr. Pecora.)

Mr. PECORA. The exhibit received as exhibit no. 3 of this date is printed and reads as follows [reading]:

DETROIT, MICH., October 5, 1933. To the stockholders of PEOPLES WAYNE COUNTY BANK, FIRST NATIONAL BANK IN DETROIT, DETROIT AND SECURITY TRUST COMPANY, BANK OF MICHIGAN, PENINSULAR STATE BANK:

The Boards of Directors of the above banks and trust company, at meetings held on September 27, 1929, unanimously adopted resolutions recommending to their stockholders the exchange of their stock for stock of a holding corporation to be organized, to be known as Detroit Bankers Company.

The banks and trust company to be affiliated in this way will have combined capital, surplus, and undivided profits of approximately $90,000,000.00, and