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Mr. BALLANTYNE. Yes.

Mr. PECORA. Who was at that time chairman of the board of the First National Bank in Detroit?

Mr. BALLANTYNE. He was an executive. He had been negotiating with Julius Haass for a long time about it, and he wanted me to pass judgment on it, and my answer to him was at that time, “ Mr. Clark, this is not my bank. The Livingstone interest is very large, and we will have to let Palmer Livingstone negotiate this ”; which he did.

Mr. PECORA. Mr. Livingstone

Mr. BALLANTYNE. What part he paid in the determining of these ratios I do not know. I never was present at any meeting, Mr. Pecora.

Mr. PECORA. I am not talking about or discussing the ratios of exchange of capital stock of the Detroit Bankers Co. for the capital stock of these five banks.

Mr. BALLANTYNE. You are talking about the dividend.

Mr. Pecora. I am talking about the fact that fully 3 months before the Detroit Bankers Co. actually came into legal existence, this circular, marked “ Committee's Exhibit No. 3”, was issued, addressed to the stockholders of the five banks in question, and they were advised in this circular that the Detroit Bankers Co. would pay an annual dividend at the rate of 17 percent, payable quarterly.

Mr. BALLANTYNE. Yes.
Mr. PECORA. And your name is signed to this circular.
Mr. BALLANTYNE. Yes.

Mr. PECORA. Which was addressed to the stockholders of the bank which you served as chairman of the board at that time.

Mr. BALLANTYNE. Yes; I know all of that.

Mr. PECORA. I want you to tell the committee, if you please, by what process of reasoning, calculation, or otherwise, the 12 founders of the Detroit Bankers Co., fully 3 months before that company came into official being or legal existence, fixed the dividend rate which the company would pay to its stockholders at 17 percent per annum.

Mr. BALLANTYNE. I would like to answer you, Mr. Pecora, but I cannot.

Senator COUZENS. Do you know what contribution the Bank of Michigan was to make to this 17-percent dividend?

Mr. BALLANTYNE. You are asking me about the earnings?

Senator COUZENS. I am asking you what contribution the Bank of Michigan was to make to this 17-percent dividend rate.

Mr. BALLANTYNE. Undoubtedly the thing was determined on the earnings.

Mr. PECORA. Do you know whether any survey was made of the earnings of these five banks!

Mr. BALLANTYNE. Oh, yes; I am sure sure of that.
Mr. PECORA. There was?
Mr. BALLANTYNE. Oh, yes.
Mr. PECORA. By these 12 founders or trustees !

Mr. BALLANTYNE. I do not know how many of them were in that part of it. I was not at that time. Mr. Livingstone acted for the Bank of Michigan.

Mr. PECORA. Was a report made prior to October 5, 1929, by whoever made that survey, or caused it to be made, to all the 12 trustees, as to the results thereof?

Mr. BALLANTYNE. Yes; and there were differences of opinion.

Mr. PECORA. What was the range of opinion expressed in connection with those differences of opinion?

Mr. BALLANTYNE. I could not tell you in exact figures.
Mr. PECORA. Tell us approximately.

Mr. BALLANTYNE. I would not dare to. That is 4 or 5 years ago, you know, and I could not recall. I am not withholding anything from you, Mr. Pecora. I just do not remember.

Mr. PECORA. What were the factors that induced you, as one of the 12 founders or trustees of the Detroit Bankers Co., to agree in advance to the fixation of the dividend rate to be paid by the Detroit Bankers Co. at 17 percent?

Mr. BALLANTYNE. At that time, of course, we were in a very desperate depression. You know that. You have cited that. Who knew how long that was going to last? Certainly we got no counsel from headquarters.

Mr. PECORA. What do you mean by headquarters?

Mr. BALLANTYNE. From Washington. Prosperity was just around the corner. We did not know how long it was going to last. Who possibly knew?

Senator Couzens. Prosperity was not just around the corner on October 5, 1929, because the bank collapse had not taken place.

Mr. PECORA. Nor the stock-market collapse.
Mr. BALLANTYNE. What is that?

Mr. PECORA. The stock-market collapse had not taken place by October 5, 1929.

Mr. BALLANTYNE. No.
Mr. PECORA. Which is the date of this circular.

Senator COUZENS. So that there was no advice from Washington about recovery being just around the corner on October 5, 1929.

Mr. BALLANTYNE. I am not saying specifically as to dates, but nobody dreamed we were going into this kind of a depression. I think I guessed as far as anybody about it, but I did not guess what we actually got into, Mr. Pecora. An angel from heaven could not have guessed it. We knew of definite economies that could be made. There was a definite earning power. I did not go into the details with these men, but I suspect that is how they arrived at the dividend rate.

Mr. PECORA. On October 5, 1929, it was the depression that was just around the corner, but nobody knew it. Isn't that right?

Mr. BALLANTYNE. I guess that is true.

Mr. PECORA. And the sun of prosperity was shining brightly on October 5, 1929, when this dividend rate of 17 percent was fixed. Is that right?

Mr. BALLANTYNE. I do not know that it was.
Mr. PECORA. There was no depression on then.
Mr. BALLANTYNE. There were elements of it.

Mr. PECORA. If it was, it was around the corner where nobody could see it plainly at that time, isn't that so?

Mr. BALLANTYNE. I think maybe so.

Mr. PECORA. The clouds began to obscure that sun in the latter part of October 1929, did they not?

Mr. BALLANTYNE. Yes.

Mr. Pecora. Nevertheless, when the company was organized on January 8, 1930, and for the year 1930, with the clouds of the depression in the skies and clearly visible to everybody, this dividend policy or rate of 17 percent, fixed in good times, was adhered to, was it not, by this group?

Mr. BALLANTYNE. Yes.
Mr. PECORA. Was that wise, in your opinion!

Mr. BALLANTYNE. I would not hold any brief for that. I have never been in favor of paying dividends that were not wise, and I cut the dividend of that operation.

Mr. PECORA. Not in 1930. Mr. BALLANTYNE. I did it in 1930. Mr. PECORA. Did you? Well, now, let us see. Mr. BALLANTYNE. 1931. (After_conferring with an associate.) 1932, rather. I beg your pardon. I was thinking of the gap. The first year

I was in I did it. Julius was in for a year. One can only speak for himself.

In answer to the Senator here, in respect to these 12 men, each of those men, I think the record will show, was a very large stockholder in the banking group.

Mr. PECORA. Did they remain stockholders up to the time that the company went into receivership, do you know?

Mr. BALLANTYNE. I did not.
Mr. PECORA. How about some of these others!
Mr. BALLANTYNE. I do not think anyone else left but me.

Mr. PECORA. Do you know whether any of the other 12 trustees or founders held on to their substantial stockholdings of this company up to the time when the company went into receivership in March 1933 ?

Mr. BALLANTYNE. From all I know, I would say yes; but that would be a mere guess.

Senator COUZENS. I still raise the same issue, because these gentlemen you refer to were stockholders of the units and not stockholders of the Detroit Bankers Co.

Mr. BALLANTYNE. I see what your point is.

Senator COUZENS. So, for the mere putting up of $1,200—which the facts show they did not put up, as a matter of fact—they got control of nearly 1 billion dollars, and that is what is generally referred to as the handling of other people's money. By the mere acquisition of $1,200 worth of trustee shares these men got control of nearly 1 billion dollars to do as they pleased with for a period of 5 years. I would just like to know if you, as an old-time banker in Detroit, endorse that as a principle.

Mr. BALLANTYNE. Not just the way you put it, Senator.
Senator COUZENS. I am putting it as a fact.

Mr. BALLANTYNE. Maybe it means that in substance. I do not know. I am not very well versed in legal phraseology.

Senator COUZENS. I am not either, but it does not require a lawyer—even some of the crooked ones can understand that.

Mr. PECORA. Are you talking about bankers now, Senator?

Senator COUzens. No; lawyers.

Mr. PECORA. Now, Mr. Ballantyne, let me real to you the following excerpt from the circular marked "Committee's Exhibit No. 3" in evidence (reading]: In order that each customer of these allied institutions

That is, referring to the five original banking units [continuing reading]: may continue to enjoy all existing connections and facilities, it is planned to carry on each institution as at present organized.

Was that principle carried out!
Mr. BALLASTYNE. No.
Mr. PECORA. It was not?
Mr. BALLAXTYNE. No::
Mr. PECORA. To what extent was it departed from?

Mr. BALLANTYNE. To this extent: It is like everything else. You start off with one idea, and circumstances force others on you. That very matter of branches came up for discussion frequently, and it was found that the old loyalties persisted, and everyone wanted the other fellow's branch closed rather than his own. I suppose that was human nature. That was what determined them on those later mergers, later consolidations of the Bank of Michigan with the Peoples Wayne Bank, so that they could make a clean sweep of it. As far as my knowledge goes, that is why it was done.

Mr. PECORA. Were those unit banks that came into this Detroit holding company through the acquisition of their capital stock permitted to continue in operation under the policies formulated by the officers of those unit banks, the officers and directors of those unit banks, or were those unit banks directed, as to their policies, and so forth, by the officers and directors of the Detroit Bankers Co.?

Mr. BALLANTYNE. I think not. There was no coercion that I know anything about; no.

Mr. PECORA. Will you be good enough to look at this chart [indicating a large chart mounted at the head of the committee table]?

Mr. BALLANTYNE. Yes.

Mr. PECORA. It purports to be an outline of the various units that were acquired from time to time by the Detroit Bankers Co.

Mr. BALLANTYNE. Yes.
Mr. PECORA. That includes banking units and nonbanking units?
Mr. BALLANTYNE. Yes.

Mr. PECORA. Will you look at it and tell us if you can say that it is a correct representation of the various units, both banking and nonbanking, which ultimately were acquired, in whole or in part, through the acquisition of capital stock by the Detroit Bankers Co.! Look at it closely. You may also seek the advice on that of any of your

associates. This is as of the time when it went into receivership; in other words, at the end.

Mr. BALLANTYNE (standing before map on easel). It does not seem to be correct to me. For instance, there was a Detroit Trust Co. and a former Detroit Securities Co. I don't think this one (pointing on map], for instance, was put into it.

Mr. PECORA. Well, those colored green on the map were eliminated by the merger, you understand.

175541—34-PT 1143

Mr. BALLANTYNE. All right.

Mr. PECORA. They had formerly been entities, but they were inated by the merger into the Detroit Trust Co.

Mr. BALLANTYNE. I see.

Senator COUZENS. You understand that those in green were e nated by the merger.

Mr. BALLANTYNE. Let me look over the map, and I will see I can make out of it.

Mr. PECORA. All right. Please do so.

Mr. BALLANTYNE (after looking at the map and consulting other witnesses present). That is substantially right, I think.

Mr. PECORA, Now, the chart as you have examined it and o ferred about its correctness with quite a number of your associa is correct, is it?

Mr. BALLANTYNE. It appears to be correct; yes.

Mr. PECORA. Mr. Chairman, I ask that that map be marked evidence.

Senator COUZENS (presiding). That may be done.

(A large chart entitled_“ Organization of Detroit Bankers Co. was marked “ Committee Exhibit No. 6, Jan. 24, 1934”; and a coj of it, reduced in size, is made a part of the record.)

Mr. PECORA. Mr. "Ballantyne, I show you a little booklet bearin the inscription on the cover page, “ Detroit Bankers Co.”, and pu porting to be the consolidated balance sheet of wholly owned bank of the Detroit Bankers Co. as of December 31, 1929; and als purporting to show the officers and directors of the Detroit Banker Co., and the officers and directors of the wholly owned bank referred to. Will you look at it and tell me if you recognize it to be a true and correct copy of such pamphlet gotten out by the Detroit Bankers Co.?

Mr. BALLANTYNE (after looking at the booklet). I would say that is a true and correct copy.

Mr. PECORA. Mr. Chairman, I offer that in evidence.
Senator COUZENS (presiding). It may be entered in the record.

(A printed pamphlet entitled “ Detroit Bankers Co., Consolidated Balance Sheet of Wholly Owned Banks, as of Dec. 31, 1929, etc.", was marked “ Committee Exhibit No. 7, Jan. 24, 1934.")

Mr. PECORA. I notice on page 3 of this pamphlet, which has been received in evidence as committee's exhibit no. 7, the following footnote:

These figures do not include the resources of the Detroit Co., nor of the First National Co, of Detroit.

Do you know why in the consolidated balance sheet of these wholly owned banks there was not included the balance sheet of these Detroit Co. nor of the First National Co. of Detroit ?

Mr. BALLANTYNE. The First National Co. of Detroit was included in our statements, so I am told.

Mr. VERHELLE. This is earlier.
Mr. PECORA. What was that?

Mr. VERHELLE. The reason was that the Detroit Co. was owned by the Detroit Trust Co., and

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