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resources of about $725,000,000.00. This represents approximately 60 percent of the total banking resources of Detroit, and the new institution will be the largest of its character in Michigan and the largest between New York and Chicago. The institutions so affiliated will have 192 branches, and will serve approximately 900,000 depositors and clients.

The Detroit Bankers Company will have an authorized capital of $50,000,000.00 with 2,500,000 Common shares of the par value of $20 per share. Of this amount $35,000,000.00 will be exchanged for stocks of the four banks and the trust company, the balance of $15,000,000.00 remaining in the treasury of the company. The Charter will provide that the Directors shall have power to issue this stock in exchange for capital stock or assets of other financial institutions. In case the stock is sold for cash, each stockholder will have the right to subscribe for his proportion. There will also be the trustee stock mentioned below.

Julius H. Haass will be president of the company. The Board of Directors will be twelve in number, as follows: Julius H. Haass, President, and John R. Bodde, Vice-President, of the Peoples Wayne County Bank; Emory W. Clark, Chairman of the Board and D. Dwight Douglas, President, of the First National Bank in Detroit; Ralph Stone, Chairman of the Board, and McPherson Browning, President, of the Detroit and Security Trust Company; John Ballantyne, Chairman of the Board, and T. W. P. Livingstone, President, of the Bank of Michigan; Herbert L. Chittenden, President of the Peninsular State Bank; Fred J. Fisher, William T. Barbour; and Wesson Seyburn. In order to insure the maintenance of existing policies, it is proposed that the first Board of Directors shall continue for a period of five years and to accomplish this purpose, the Charter will provide for the creation of 120 shares of Trustee stock so-called (in addition to the par value stock mentioned above) without par value, and for the sole voting power for directors to be vested in the Trustee stock until December 31, 1934. This stock will be issued in the names of the directors as Trustees for the benefit of all holders of Common shares of the company, and will not be entitled to any dividends or assets whatsoever and will be cancelled on December 31, 1934, upon payment of $10.000 per share, at which time all the voting power will vest in the par value shares.

The plan will become effective when 66-2/3 per cent in amount of the stock of each of the above banks and trust company is deposited for exchange.

The exchange of the stock will be made upon the following basés :

Peoples Wayne County Bank-one and one-half shares of the new company stock of $20 par for each share of present stock of the bank of $20 par;

First National Bank in Detroit-4.466 shares of the new company stock of $20 par for each share of present stock of the bank of $100 par;

Detroit and Security Trust Company-10 shares of the new company stock of $20 par for each share of present stock of the company of $100 par;

Bank of Michigan-3 shares of the new company stock of $20 par for each 4 shares of present stock of the bank of $20 par;

Peninsular State Bank—4.1 shares of the new company stock of $20 par for each 5 shares of present stock of the bank of $20 par;

Certificates for fractional shares of stock in the new company will not be issued but scrip certificates will be issued to each person entitled to a fraction of a share, which scrip certificates when combined to equal to exceed one share will be exchangeable for a certificate for such share of stock and a new scrip certificate will be issued for any excess fraction of a share remaining. The scrip will be not entitled to dividends nor have any voting power.

It is proposed that dividends be paid upon the Common stock of the new company, in the aggregate amount of 17 per cent, annum, payable quarterly.

In order that each customer of these allied institutions may continue to enjoy all existing connections and facilities, it is planned to carry on each institution as at present organized.

This forward looking step is in harmony with the trend of modern banking. In order that the advantages of the plan may accrue to the stockholders at as early a date as possible, it is very important that you deposit your stock at once.

There is enclosed herewith a form of agreement and power, which should be executed by you, duly witnessed, and returned with your certificates of stock of the above banks and trust company, endorsed by you in blank and duly witnessed. The signatures on the stock and agreement and power must correspond. They should be forwarded to Detroit and Security Trust Company,

Depositary, which institution will issue in exchange therefor a transferable
certificate of deposit, which in turn will be exchangeable for Common stock
of the new company, upon the consummation of the plan. The corporation
will attach the necessary revenue stamps.
No Federal income tax will accrue on the exchange of your stock.
Yours respectfully,

PEOPLES WAYNE COUNTY BANK,
JULIUS 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 COMPANY,
RALPI 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. Now, Mr. Ballantyne, at the time that the Detroit Bankers Co. came into formal existence, namely, on January 8, 1930, conditions in the securities market were pretty well unsettled, were they not?

Mr. BALLANTYNE. Yes.
Mr. PECORA. Do you recall that?
Mr. BALLANTYNE. Yes; very well.

Mr. PECORA. Do you recall that in the latter part of October 1929, over 2 months prior to the incorporation of this company, there had been a startling collapse on the stock exchange?

Mr. BALLANTYNE. Yes; I happen to know all about it.

Mr. PECORA. And in the midst of the turmoil created by those conditions this company was born, wasn't it?

Mr. BALLANTYNE. Yes.

Mr. PECORA. At that time there was considerable doubt and uncertainty in the minds of business men, financiers, with regard to the immediate future?

Mr. BALLANTYNE. Yes.
Mr. PECORA. Very much so?
Mr. BALLANTYNE. Yes.

Mr. PECORA. In view of those circumstances, Mr. Ballantyne, why aid the trustees or the organizers or creators of this company undertake in advance to fix the dividend rate of this holding company at 17 percent?

Mr. BALLANTYNE. I believe that was determined to a large extent by the earnings of the banks prior to that time and the—I do not believe I had any participation in that.

Mr. PECORA. What is that?

Mr. BALLANTYNE. I don't recall having had participation in that deliberation.

Mr. PECORA. Well, your name is signed as the chairman of the board of the Bank of Michigan to this circular letter dated October 5. 1929 ?

Mr. BALLANTYNE. Yes.

Mr. PECORA. Which is addressed to the stockholders of each of the five banks?

Mr. BALLANTYNE. Yes.

Mr. PECORA. That it was intended to take into this holding company?

Mr. BALLANTYNE. Yes.

Mr. PECORA. And in this circular reference is made to the dividends to be paid by the holding company on its capital stock in the following language. Mr. BALLANTYNE. Yes. Mr. PECORA (reading): It is proposed that dividends be paid upon the common stock of the new company in the aggregate amount of 17 percent per annum payable quarterly.

Now, isn't it reasonable to assume then that in view of those facts you took part in the discussions or deliberations which led to the adoption of that dividend rate even before the company saw official life?

Mr. BALLANTYNE. Can I interpolate anything in this discussion, Mr. Pecora? I want you to get the picture perfectly clear.

Mr. PECORA. All right, sir.

Mr. BALLANTYNE. For a great many years I was president, or chairman of the board for a little while, of the Merchants National Bank of Detroit. I presumed that bank had been sought as much as any bank in Detroit to merge. I was constitutionally opposed to mergers. At the time that we merged with the Bank of Michigan, I give you my word, and everybody knows in Detroit that I was on my way up, and I was getting my bank into such shape that I merged with the Bank of Michigan for that purpose. Then Julius came to me and asked if I would help out, and I said “To the extent of my ability.” I was getting along. I was willing to help an old friend do a thing that he thought constructive, and that is the part I played at that time. Now, you have a perfect understanding of the part I played.

Mr. PECORA. Mr. Ballantyne, you were not willing to help promulgate and further Mr. Haass plan without giving some thought on your own part as to the soundness of the plan, where that plan was going to affect the stockholders of your own bank, were you?

Mr. BALLANTYNE. Why, the plan seemed very sound to me.

Mr. PECORA. Then you must have discussed the plan in its entirety?

Mr. BALLANTYNE. Oh, yes.
Mr. PECORA. And approved of it?
Mr. BALLANTYNE. Řes.

Mr. PECORA. You did not merely give your consent to this plan and become a party to it because of a desire on your part to help out an old friend ?

Mr. BALLANTYNE. Well, practically it was.
Mr. PECORA. What?
Mr. BALLANTYNE. Very largely induced by that.
Mr. PECORA. What, to help out an old friend?
Mr. BALLANTYNE. Yes.

Mr. PECORI. And the old friend was Julius Haass!
Mr. BALLANTTXE. Yes.
Mr. PECORA. The executive head of a rival bank!
Mr. BALLANTYNE. Oh, well, he never was a rival bank of mine.

Mr. PECORA. One of the things you said it was sought to accomplish was to eliminate competition. I presume that meant also competition among the five banks that this holding company was to acquire!

Nr. BALLANTYNE. One Senator here will agree that Julius Haass was never responsible for unwise banking.

Mr. Pecors. That is not the point, Mr. Ballantyne.

Mr. BALLANTYNE. I think it is. But I am not sure. He was not a highly competitive banker. He is a very sound banker.

Mr. PECORA. Well, a sound banker may compete with other banks!
Mr. BALLANTYNE. Not wisely.
Mr. PECORA. And still be a sound banker?
Mr. BALLANTINE. Not wisely, and be a sound banker, Mr. Pecora.
Mr. PECORA. How is that?
Mr. BALAXTYNE. I think not wisely.
Mr. PECORA. Competition can be wise as well as unwise?

Mr. BALLANTYNE. I am speaking about unwise competition. It makes quite a difference.

Mr. PECORA. Mr. Ballantyne, you said that one of the things sought to effectuate through the creation of this holding company which was to acquire all of the capital stock of these 5 banks was to elimi. nate competition.

Mr. BALLANTYNE. Unwise competition.
Mr. PECORA. Unwise competition?
Mr. BALLANTYNE. Yes.

Mr. PECORA. All right. Your bank, namely, the Bank of Michigan, was one of the banks included in this plan; so was the bank of which Mr. Haass was the executive head?

Mr. BALLANTYNE. The Bank of Michigan was never my bank in the sense

Mr. PECORA (interposing). You were chairman of the board, though.

Mr. BALLANTYNE. I know-with no power.
Mr. PECORA. With no power?
Mr. BALLANTYNE. No; that I know of.

Senator COUZENS. That is a new one, because I understood that somebody testified here the other day that the man who was chairman was being promoted after being the president.

Mr. BALLANTYNE. Well, I never saw any power, if the Senator will permit.

Senator COUZENS. You mean us to understand then that there is no power in the chairman or vice chairman?

Mr. BALLANTYNE. A chairman or vice chairman can have as much or as little power as the bylaws give him. I think Mr. Pecora will agree with me.

Mr. PECORA. I am not a banker and never have been, Mr. Ballantyne.

Mr. BALLANTYNE. I think there are all sorts of chairmen of boards. Sometimes people are demoted to the chairmanship of the board, and the legal control vested in the president, and vice versa.

It always depends on the man, to a large extent, and the circumstances.

Mr. PECORA. Mr. Ballantyne, are you so modest that you want this committee to believe that as chairman of the board of the Bank of Michigan you occupied merely a nominal position, with no real power?

Mr. BALLANTYNE. My dear sir, I am trying to tell you that I was getting my ship into port, with the hope and belief that I would get out of business entirely, just as soon as possible. That is well known to all my associates. I stayed with that bank to steady the situation for a little while, not meaning to go along very far with it.

Senator COUZENS. I am interested in that, because you say you wanted to get your ship into port. You must have been in danger.

Mr. BALLANTYNE. Do you have to be in danger to get your ship into port?

Senator COUZENS. I think, when you stayed at the helm, as you did, to get your ship into port, there must have been some reason for it.

Mr. BALLANTYNE. There was a reason for it.
Senator COUZENS. What was it?
Mr. BALLANTYNE. There was a schism in our own board.
Senator COUZENS. What was it?
Mr. BALLANTYNE. We had been going through perilous times.
Then was the peril, when the orgy of speculation was on.

Mr. PECORA. What were the perilous times you refer to?
Mr. BALLANTYNE. When the orgy was on in New York.
Mr. PECORA. You mean the stock speculation or gambling orgy?
Mr. BALLANTYNE. Yes.

Mr. PECORA. You mean it centered in New York. It was on all over the country, was it not?

Mr. BALLANTYNE. I will say it was.
Mr. PECORA. Detroit was engulfed in it too, was it not?
Mr. BALLANTYNE. Engulfed in it, but my bank was not.

Senator COUZENS. Then, why did you have to stay at the helm to get it into port, if your bank was not involved in it? I do not understand that.

Mr. BALLANTYNE. I think Mr. Pecora does. Do you, Mr. Pecora !
Mr. PECORA. The Senator is asking you the question.
Mr. BALLANTYNE. Are you asking me a question ?

Senator COUZENS. Yes. I am asking, if your bank was not involved, as you stated, in this speculation, why you had to stay at the helm to get into port.

Mr. BALLANTYNE. My bank, or the bank which I call mine, which I organized, is on record here with the Comptroller's office, and if you can see any involvement in that picture, I will be much surprised, Senator.

Senator COUZENS. I am not charging that.

Mr. BALLANTYNE. It was a case of a schism in the board of the bank, and maybe a little fatigue on my part. I did not want to liquidate the bank, so I thought this was a judicious merger with a bank with a great many branches already formed. We had had no branches.

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