I have attached to this written statement detailed suggestions on the various provisions of the Act. In view of the time of this committee which I have already consumed, I will not attempt to read into the records of this committee all of these details which are, however, available if desired. Then follows a so-callled "exhibit A ", entitled "Specific Recommendations for Amedment to the Securities Act of 1933." Senator COUZENS. Mr. Pecora, do you want to read them? Mr. PECORA. I will not take the time to read them. They will be made available to the committee. Senator COUZENS. Very well. Mr. PECORA. Now, Mr. Lord, is there anything that you particularly want to call attention to? Mr. LORD. No. I tried to cover it briefly. Mr. PECORA. There are a number of views expressed by Mr. Lord in this prepared statement of his that, if time permitted, I should like to question him about. But perhaps that might be reserved for some future time. However, I do want to call his attention to this statement contained in his prepared statement: This Nation of ours-the most progressive in the world in the development of industry and commerce-was without doubt materially aided along these lines by the courage, foresight, and vision of its bankers. Mr. Lord, don't you think that a very substantial responsibility rests at the door of bankers, so-called, for the debacle of 1929 and what has followed since? Mr. LORD. I think it might be equally divided between the public and the bankers, Mr. Pecora. I do not think that any single class, industry or business or individuals, can be handed that responsibility or that blame. I think we were all at fault, bankers as well as others. Mr. PECORA. Wasn't the policy of banks and bankers such as to advertise that they would advise their depositors and customers with regard to the making of investments? Mr. LORD. Yes; I think it was generally so. And some gave good advice and some gave bad advice. Senator TOWNSEND. And some advice that they thought was good turned out bad, and Mr. LORD (interposing). Yes, sir. Senator TOWNSEND (continuing). And some that they thought was bad might have turned out good? Mr. LORD. Well, I don't know about that. Mr. PECORA. At any rate, securities affiliates of banks, organized selling campaigns to sell securities which they issued and underwrote. and which they underwrote under circumstances that charged them with knowledge as a result of reports made to them by their own observers and experts, and that put a very full responsibility upon them. For instance, in the case of Peruvian bonds, issued by J. & W. Seligman & Co. and the National City Co., evidence of that was presented to this committee last February, as you will recall, when 90 million dollars of bonds of the Peruvian Government were sold to the American public by the National City Co. and J. & W. Seligman & Co. Senator ToWNSEND. Oh, that was indefensible. Senator OVNSIN Well that was maciensinit. M PECOLLI think that all. M. Lord. Senator GODZENS. I wam 1 st M. Lord one thing with respect W grow banking. It appears that when the Group OL. was OTganized in Michigan. there was specifically drew to the attention of the Group So that they were 101 20 dired the banks but that LE DENKE WOLL et un cirection: # that rigm? Mr. Low That my recolection or feast in the time of the opinion by the attorney genera of Michigan and I don't remember the date of n. Senator COZZENS. What The acvantage of group banking r They are not Tt merier wrd the crrection of the unn banke? Mr. Lom. Wel. 1 time there are educational advantage that Ert very considerabit. Now. I should talk about our own situation in the ligm of subsequem events n might sound to you fools, and I know there were defens, but there was the advantage of euncetion WOTE. UN we helped i waging beneficial methods. and there were banks that were more carefully run as members of the group than before. They were run by therr pwr boards, and n Wat our Jaen 16 94 that i atmosphere presem for the benein. of the log 10L. Senator GoTZENS. Of course, the maintenance of a group organization was rather I extensive undertaking. was it not? Mr. LORD. It was: but I think it would have been worth the expense of operation under normal conditions. In our own situation. # I BG in my opening statement, the biggest mistake we mat Wae to have a group at the top of the 1 instead of at the botton of the . For instance. Senator. WILL Beale group banking there a question II my mine that that whom Dorwest count has beer protected and saved through those groups there. With al the bank faltes that took place berg in 1920 and 1921 Iowa. Nebraska, the Dakotas, and Montana, even the banks that art a part of those 2 groups up there, or those 3 or 4 groups-i do noi believe they could have survived this last. Senator COTZENA. How was it they survived and you could no SCITITE! Mr. Low. I think they have gone through their worst times. I June 1982 was the jow point of nearly time in this county IL the value of securities, and certainly Detroit was the low point n this country, when this country was at its low point. Senator GoTZENS. Was it not true, in the case of the Northwest group, that the stockholders and directors got together and refanditated the corporation! Mr. Low. Not that I know of: although I do not know. I de not know anything about their internal workings. I know the institution and know the men in it. I do not know what they dit financially. Senator CoTZENS. As I remember, former Secretary of State Kellogg told me that they had called upon all of their directOS ANČ stockholders to put up a lot more money to rehabilitate the group. Mr. LORD. I do not know the circumstances at all. Senator COUZENS. How many other groups are there operating besides the Northwest Co.? Mr. LORD. There is the Marine Midland, which is a group in New York State with a big bank in Buffalo, and the Marine Trust Co. in New York, and a string of banks all through the State. There are smaller groups. There is a group around Seattle. There is a group around Ogden, Utah, and there are other smaller groups. This man Bremer, whose son was just kidnaped, has a small group of banks. Senator COUZENS. There is some difference between chain banking and group banking, is there not? Mr. LORD. Yes; I think there is, Senator. As I recall the definition of chain banking, there is the question of a single ownership of an individual, where, perhaps, one bank owns an interest in another bank instead of all centering in one holding company without any bank relationship. Senator COUZENS. Which do you think the safer practice, chain banking or group banking? Mr. LORD. I do not like chain banking at all, because I think there is an overlapping. There was quite a chain down in Arkansas, as I remember it, that failed several years ago. Senator TOWNSEND. There was a chain down in Florida, too. Mr. LORD. Yes. I will admit that there are weaknesses in group banking. There is no question about it. The only answer in this country to the banking situation is branch banking. It has got to come, because the small community cannot support a unit bank with the safety the community ought to have. Senator COUZENS. Do you have anything else to say, Mr. Lord? Mr. LORD. No, sir. Mr. PECORA. You come very close to favoring the nationalization of banks. Mr. LORD. I do; under one single system-not State systems but a national system. Senator TOWNSEND. That is very nearly accomplished, is it not, under the guaranty plan? Mr. LORD. To a great extent I think it is. Mr. PECORA. That is all I have. Senator COUZENS. The committee will adjourn until tomorrow morning at 10 o'clock. (Thereupon, at 5 p.m., Tuesday, Jan. 23, 1934, the subcommittee adjourned to meet Wednesday, Jan. 24, 1934, at 10 a.m.) 1 Purchased direct by Congress Corporation. COMMITTEE EXHIBIT NO. 91, JANUARY 17, 1934 Wilcox-Rich Corp. 100,000.00 Feb. 10, 1933 Truman Newberry. Detroit Trust Co. Agent for Trustees of Childrens Fund of Michigan. 50,000.00 100,000.00 1,500.00 Feb. 11, 1933 U.G.T. Co. Rec'r for Grand Trunk Rwy. Terminal & Cold Stor. Co. 5,400.00 60, 238,90 3,000.00 HEARINGS BEFORE THE COMMITTEE ON BANKING AND CURRENCY UNITED STATES SENATE SEVENTY-THIRD CONGRESS SECOND SESSION ON S. Res. 84 (72d CONGRESS) A RESOLUTION TO INVESTIGATE PRACTICES OF STOCK AND S.Res. 56 and S.Res. 97 (73d CONGRESS) RESOLUTIONS TO INVESTIGATE THE MATTER OF BANKING OPERATIONS AND PRACTICES, TRANSACTIONS RELATING TO ANY SALE, EXCHANGE, PURCHASE, ACQUISITION, BORROWING, LENDING, FINANCING, ISSUING, DISTRIBUTING, OR OTHER DISPOSITION OF, OR DEALING IN, SECURITIES OR CREDIT BY ANY PERSON OR FIRM, PARTNERSHIP, COMPANY, ASSOCIATION, CORPORATION, OR OTHER ENTITY, WITH A VIEW TO RECOMMENDING NECESSARY LEGISLATION, UNDER THE TAXING POWER OR OTHER FEDERAL POWERS Printed for the use of the Committee on Banking and Currency |