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Branch, Chain, and Group Banking
HEARINGS
B E FO R E T H E
COMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
SEVENTY-FIRST CONGRESS
SECOND SESSION
UNDER
H. Res. 141
AUTHORIZING THE BANKING AND CURRENCY COMMITTEE
TO STUDY AND INVESTIGATE GROUP, CHAIN
AND BRANCH BANKING
APRIL 23, 24, AND 25, 1930
VOLUME 2
Part 8
UNITED STATES
GOVERNMENT PRINTING OFFICE
JC0136
W A S H IN G T O N : 1930
COMMITTEE ON BANKING AND CURRENCY
LOUIS T . M c F A D D E N , Pennsylvania, Chairman
JAMES G. STRO NG, Kansas.
R O B E R T LU CE, Massachusetts.
E. H A R T F E N N , Connecticut.
G U Y E. C A M P B E L L, Pennsylvania.
C A R R O LL L. B E E D Y , Maine.
JOSEPH L. HOOPER, Michigan.
G O D F R E Y G. G O O D W IN , Minnesota.
F. D IC K IN SO N LE T T S, Iowa.
F R A N K L IN W . FO RT, New Jersey.
B E N J A M IN M . GO LD E R , Pennsylvania.
FR A N C IS SE IB E R LIN G , Ohio.
M RS. R U T H P R A TT , New York.
JAM ES W. D U N B A R , Indiana.
P hilip G. T
n
OTIS W IN G O , Arkansas.
H E N R Y B. S T E A G A L L , Alabama.
C H A R LE S H. B R A N D , Georgia
W . F. S T E V E N SO N , South Carolina.
T . A L A N GOLDSBORO UGH, MaryUn i
A N N IN G S. P RALL, New York.
JEFF B U SB Y, Mississippi.
h om pson .
Cifrk
CONTENTS
Exhibits of—
Pa««
Hon. John W. Pole, Comptroller of Currency_________________________ 1013
Lord, Robert O., president Guardian Detroit Union Group, Detroit,
Mich__________________________________________________________ 1037,1131
Rand, George F., president Marine Midland Corporation, Buffalo,
N. Y__________________________________________________________ 1174, 1201
m
A P P E N D IX
E x h ib it
A
THE DEMAND FOR PROFESSIONAL BANK MANAGEMENT
Address by J. W. Pole, Comptroller of the Currency, before The Ohio Bankers
Association at Columbus, Ohio, February 12, 1929
The last two decades have witnessed a remarkable development in the volume
and in the variety of the banking business. Demands for financial services
unheard of by the last generation are now required to be met by banking
institutions. The old simple form of banking in which the banker relied almost
entirely upon his personal knowledge of his customers is no longer adequate to
meet the present day situation.
We need only refer to the history of banking in the State of Ohio for an
illustration. In the year ending June 30, 1908, there were 990 banks of all
classes in operation in this State. These had total aggregate resources of
about $952,000,000. Twenty years later, for the year ending June 30, 1928,
there were 1,051 banks of all classes but with aggregate resources of $3,377,000,000. Thus while the number of banks in the State of Ohio has remained
almost stationary the banking resources are nearly four times as great. This
means that the officers of these banks have had nearly four times as much
business thrust upon them as they had 20 years ago. Nor do these figures for
resources tell the whole story because they do not take into account the tre
mendous growth of the trust business now in the hands of these banks nor of
the investment securities which they buy for sale over their counters
The
State of Ohio may be taken as an index of the development of banking through
out the United States, for here are represented every type of banking from
those banks situated in the outlying agricultural districts to those in the most
congested* commercial and indusrial centers.
Twenty years is an extremely short time in the history of a State or a nation.
The remarkable increase in growth of the banking business within that time
can be taken as an indication of the trend toward a future growth in even
greater volume. Another 20 years should see the banking resources of this
State exceed $12,000,000,000. It takes no gift of prophecy to make this pre
diction. We are still a very young country and the full force of our economic
vitality has yet to be, developed. Our population will greatly increase, our
cities' become larger and larger and our rural population denser than it is
to-day. There will be further expansions and intensifications of industrial
activity. Our world commerce, already at imposing figures to-day, must be
regarded as almost in its infancy. The very economic necessity of the situ
ation will bring agriculture up to a higher point of efficiency. And any state
ment as to the future of transportation and communication must seem ex
travagant beginning as we are with transportation by air at great speed over
vast distances and communication through the air by radio.
All of these developments will be reflected in the expansion of banking re
sources for our banks are the handmaids of progress, supporting, sustaining,
and serving in an essential capacity every forward economic movement.
There was a time in this country when almost any person of average intelli
gence could aspire to become a banker without any special previous training.
It may be said that it was the. original theory of the law that any group of
citizens had a right to form a banking corporation. The old-fashioned banker
was primarily a custodian and a lender of money. If he possessed a natural
shrewdness of mind and a strong character he was likely to succeed. In the
local community he was the dominant financial figure. He had opportunities
1013
1014
BRANCH, CH AIN, AND GROUP BANKING
to make money outside of his banking business. He became financially inter
ested in the local street car company, in the light and power company, in the
gas works, in the ice plant and in other such enterprises in which local capital
participated. These opportunities are also fast disappearing not only because
modern banking requires all of the energy and attention of the banker but
also because these local forms of public utilities are fast giving way before
the economy and efficiency of great central organizations operating through
local branches and there is no local financing. Some banks of this did type
still remain in existence but they must be regarded now as survivals of a
financial era which has passed.
Modern banking is a highly complicated and technical business, and it is
exemplified primarily by the city banks which have been compelled to meet
the varied financial demands of commerce and industry. It is in these com
mercial centers that the competition in all lines of business is so keen as to
compel the utmost economy in operation and the most efficient management
control. Out of the experience of these city banks there has developed in the
United States a fairly definite opinion in financial circles as to what constitutes
sound banking. This standard of bank management has not been theoretically
arrived at by any manner of means. It has grown up through hard-knocks
until finally the best method has been found to meet a given situation.
Let us pass briefly in review some of the principal features of modern bank
ing. First let us take the loans and discounts. The old-fashioned character
loans have almost disappeared. This does not mean that character is not a
valuable asset in the transaction. It simply means we are no longer in the
pioneer stage of our civilization. We have reached a stable development where
the instrumentalities of credit are ample. Great emphasis now is laid upon
adequate credit information and analysis. Nothing is left to chance, guess
work or favoritism. This credit information is often obtained as a result of
the most skillful scientific investigation, involving the study of plants, machin
ery, cost accounting, estimates of future operations, financial history, personal
reports on management, personnel and the like. The bank must be in a posi
tion not only to acquire but to comprehend and digest the most technical in
formation and data concerning its customers. In this country where every
variety of business operation is carried on by corporations, the bank must be
generally familiar with corporate organization and management in the field of
production, manufacture, transportation, and distribution, for the simple reason
that it is to the banks that these corporations must turn for advice and
assistance in financing their operations. Commercial banking therefore re
quires a fundamental knowledge of every process of commerce itself.
Now let us look at the business of buying and selling investment#securities
by banks. This is largely a postwar development. It is welL known that the
Liberty loan campaigns during the war served to educate the public at large
in making small investments In sound securities. The tremendous commercial
expansion in this country following the war has been financed in increasing
volume through the issuance of investment securities in which the general
public is invited to invest. It is natural that the banks should participate in
this development because their customers turn to them for advice.
The amendment in the McFadden Bank Act of 1927 has added impetus to
the movement to make the banks distributors of the best type of investment
securities. This means that the modern bank must be equipped with the proper
instrumentalities to deal with this new financial development. It imposes a
grave responsibility upon the banks which in turn requires them to create the
facilities for a comprehensive and accurate knowledge of the various issues
of securities which from time to time come upon the market. Not only must
they have adequate financial and statistical information with respect to each
issues but they must be in a position to interpret this information and to apply
it to the particular transaction in hand.
Turning now to the fiduciary operations of the modern bank we find a similar
growth and development. Within our own time we have seen the banks grad
ually displace the old type of individual and personal trustee, executor, admin
istrator, guardian, and custodian. It has become a function of banking to
administer the estates of deceased persons, many of which are of great magni
tude. In addition, largely as a postwar development, there has been a most
remarkable growth in the creation of corporate trusts. For every issue of
securities for corporate financing, whether in the form of stocks, bonds, deben
tures or notes, a bank is required to perform some ministerial or fiduciary func
tion. The bank has thus become an essential factor in the procedure of cor
BRANCH, CH AIN , AND GROUP BANKING
1015
porate finance and must act as trustee of bond and debenture issues and of
long-term notes, as fiscal agent, as registrar, as transfer agent, as a participant
in underwriting syndicates, as depositary under plans of reorganization, as
assignee and receiver, as custodian or trustee for investment trusts— in fact in
every fiduciary capacity which may be required by the machinery of corporation
finance.
The future of the trust business of banks in the United States would seem
to make it one of the most important phases of banking business. On the
other hand its proper administration makes it absolutely necessary that the
bank equip itself with the most advanced facilities for discharging these
fiduciary responsibilities and obligations.
The impressive growth of trust service in the banking field is illustrated by
considering the expansion in recent years of the fiduciary activities of banks
in the national banking system. The passage of the Federal reserve act made
possible the further extension of corporate trust facilities to practically every
section of the Nation. Since February 25, 1915, when the first permit under
this law was issued to a national bank, hundreds of banks throughout the
United States have availed themselves of this opportunity to render additional
service to their communities, until to-day 2,400 national banks have trust
powers, representing 31 per cent of the number and 73 per cent of the capital
of all banks in the national banking system. During 1928 these banks were
administering 63,776 trusts, with individual trust assets aggregating more
than $3,000,000,000 and were acting as trustees for bond and note issues totaling
close to $8,000,000,000.
Compared with the year 1926, these figures represent an increase of 47
per cent in the number of national banks administering trusts; an increase
of 145 per cent in the number of trusts being administered; an increase of
257 per cent in the volume of assets of individual trusts, while the bond and
note issues outstanding for which these banks are acting as trustees aggregate
in amount four times that in 1926.
About one out of every three national banks has authority to administer
trusts, while in the State of Ohio 21 per cent of the number of national banks,
representing 65 per cent of all of the capital of the national banks in the
State are authorized to act in fiduciary capacities. Since 1926 the number of
trusts being administered by these banks in Ohio has increased 52 per cent,
while the volume of note and bond issues for which they have been named to
act as trustees has doubled.
There is another phase of banking which has made remarkable strides within
the last few years and that is the savings department. The great increase in
individual wealth affecting every class of our population has put before the
banks of the country a potential opportunity to build up a large savings
business. Here again the bank must know how to cultivate habits of thrift
in its community and to carry on extensively an intelligent campaign for sav
ings deposits. That this is being done is evidenced by the remarkable increase
in the aggregate total in the savings deposits in the country year , by year.
Taking the national banks alone, here in the State of Ohio these deposits
have grown from $20,700,000 in 1908 to $269,000,000 in 1928, being an increase
of over tenfold. There was an even greater increase in the State banks, al
though I have not the exact figures. For the country at large the ratio of
increase is about the same as for the State of Ohio.
This brings me back to the subject of this address and that is that banking
In the future will be in the hands of professional management. (I am using
this term as opposed to amateur management.) This applies to banks of all
classes, whether city or small town because banking in its essence is the
same whether the population served be large or small. The very nature of
our economic life which expresses itself through corporate organizations and
in mass production will naturally demand of the smaller banks the same
standards and type of banking services which have been demonstrated as
sound and efficient by the larger city banks.
While the need for a higher training is increasingly demanded for making
commercial loans upon the proper credit basis it is in the newer fields of
banking— the trust business and the securities business—where technical
training and specialized experience are emphatically the essential require
ments for success. It is in these tw^o fields that there is likely to be the
greatest future expansion in banking and those banks will maintain the
largest growth which equip themselves technically to meet this opportunity.
1016
BRANCH, CH AIN, AND GROUP BANKING
It would be worse than useless for a bank to embark upon them with an
amateur management.
In general it must be said that old-fashioned business practices in banking
must give way to scientific methods in the acquisition and the formulation
of information, and in the application of the banking policies based thereon,
by men who have acquired what might be called a professional knowledge
of banking— a technical equipment to deal with method and policy.
I have in this address attempted to point out a practical condition which
is facing the banking business to which remedial measures must be applied.
I have also suggested the type of management personnel that will be necessary
whatever form the remedy may take but I have not attempted to go further
than that.
I may, however, say in closing that the large number of bank failures
outside of the metropolitan centers during the past few years is an indica
tion there are more banks than bankers. The scarcity of trained executives—
that is to say, executives with that degree of managerial ability required by
modern conditions— may be one of the underlying reasons for the rapid spread
of branch banking and group or chain banking ideas among bankers and
business men in this country. As the business of banking is growing at a more
rapid pace than executives are being developed to operate each unit bank
as a separate institution, it would seem to be an almost natural and logical
outcome that this scarcity of talent will lead to a more centralized* form of
banking control.
E x h ib it
B
BANKING AND THE N E W FINANCIAL ERA
(Address by John W. Pole, Comptroller of the Currency, before the Maryland
Bankers’ Association at Atlantic City, N. J., May 23, 1929)
I. The Need For a National Banking System.
There are two fundamental reasons why a system of national banks is essen
tial to the public welfare. First, commerce between the States is vested with
a national interest and in order that it may be financed in an orderly manner
it is necessary that there be a uniform system of commercial banking with a
common standard under the direction and supervision of the Federal Govern
ment. Second, and more important than the first, it is necessary for the Gov
ernment of the United States to possess a governmental instrumentality of
finance in the form of a system of national banks in order that it may through
them in times of stress be able to enforce a national financial policy. Our own
financial history has conclusively demonstrated that the Federal Government
can not rely upon the voluntary cooperation of the State banks and trust com
panies for the execution of a national policy. It may be instructive to pass
some of this history briefly in review.
At the very beginning of our national life the woeful failure of the Conti
nental Congress to finance the War of the Revolution was due in no small part
to the lack of an instrumentality in the form of a national bank. The first
bank of the United States was an outgrowth of this experience.
The First Bank of the United States was opened at Philadelphia, December
12, 1791, and its charter limited to 20 years. It later established branches at
Boston, New York, Baltimore, Washington, Norfolk, Charleston, Savannah, and
New Orleans and served as an instrumentality of the Federal Government.
Through it loans were made to the Government in anticipation of taxes; it acted
as custodian of Government funds; in the collection of the revenues; in the
transmission of public moneys; and otherwise strengthened and improved the
public credit.
As early as 1808 it was recommended to Congress that the charter be re
newed. Later, as it became increasingly evident that war was imminent with
Great Britain, Gallatin, then. Secretary of the Treasury, urged upon Congress
the necessity of the renewal of the charter in order to safeguard the interests
of the Government. Strong opposition developed to the renewal of the charter,
and in 1811 the bill for renewal was finally lost. The Government thus entered
the war the following year without any banking instrumentality under its
control.
There were in 1811, 88 local State chartered banks, with a combined capital
of nearly $43,000,000. The failure to charter the Bank of the United States,
or set up some similar Federal instrumentality in its place, caused enormous
losses to the Government during the war period of 1812 to 1816 in the flotation
of its loans. The Government was not able to secure the cooperation of any
of the State banks. The Treasury received only $34,000,000 in specie for
$80,000,000 of Government obligations put out. In other words we paid about
135 per cent for the money to finance the war, and the State banks profited at
the expense of the public.
In 1816, as a result of this bitter lesson, Congress chartered the Second Bank
of the United States. With the veto of the recharter bill for the Second Bank
of the United States on July 10, 1832, by President Jackson, the Government
was again deprived of a fiscal instrumentality. In 1841 a bill passed both
Houses of Congress for the incorporation of a new Bank of the United States,
but was vetoed by President Tyler. During the 30^-year period preceding the
Civil War the Federal Government operated without any fiscal instrumentality
other than the Independent Treasury system.
1017
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BRANCH, CHAIN*, AND GROUP BANKING
At the outbreak of the Civil War in 1861 Secretary Chase foresaw the need
for a national banking system to support the public credit. At this time there
were more than 1,600 State banks in the country. No action was had in that
year by Congress and in 1862 Chase again presented his plan in detail for a
system of national banks and urged its adoption. After the outbreak of
the war the circulating currency of the State banks rapidly increased with the
result of great depreciation in value, and loss of public confidence. In the
following year (1863) the national bank act was passed but- only a handful
of new banks were incorporated that ,year.
In 1864 the national bank act was reenacted whereby many of its provisions
were improved and the State banks were by a special amendment invited to
become national banks.
'
The act still remained ineffective. Secretary Fessenden thereupon made a
recommendation to Congress that the opposition of the State banks to the new
national system be removed by the enactment of discriminatory legislation and
Congress by the act of March 3, 1865, used the taxing power to compel the
State banks to nationalize. The Civil War was over before the national
banking system got under way.
Under the Federal reserve act of 1913 as originally enacted national banks
were forced to become members of the Federal reserve system, and State banks
were permitted to become members, if they so desired. From the period of 1914
to June 21, 1917, only 53 State banks and trust companies joined the Federal
reserve system. W e had entered the World War in April of that year and it
was considered absolutely necessary that the Federal reserve system have the
support of all of the banks, State and national. In order to induce the State
banks and trust companies to come in, special amendments were made to the
Federal reserve, act and approved by the President, June 21, 1917. These
amendments offered to the State banks more favorable conditions of member
ship than that held by the national banks. An extensive campaign was in
augurated for State bank membership. Under the stress of war with its
liberty loan drives and the great fervor Of patriotism, State and Federal offi
cials as well as committees of the American Bankers’ Association, publicly
and repeatedly urged State banks1and trust companies to enter the Federal
reserve system as a patriotic duty. On October 13, 1917, the President of the
United States issued a proclamation calling upon all eligible State banks to
join the Federal reserve system as & solemn obligation.” Notwithstanding
these circumstances, out of 8,500 State banks and trust companies eligible for
membership, only 212 joined the system in 1917 after the amendments were
adopted, and only 686 in 1918. The total membership of State banks and trust
companies at the close of the war was only 936.
The Federal reserve system could not have been created by Congress out of
the State banks and trust conipames. Had the national banking system not
been in existence the. year before the outbreak -of the World War, we would
in all probability have witnessed another disastrous attempt in war finance.
II. The Plight of the National BankingSystem .
It is no criticism of the State batiks and trust companies to say that the
National Government can not rely upon them to serve as its instrumentalities
in the enforcement of a Federal fiscal policy. Banking, like other business
enterprises, is entered into by stockholders for the purpose of realizing a
return upon the investment. It is futile to attempt to impute to such stock
holders altruistic or patriotic motives. As between two systems of banks,
capital will flow more freely into the one which yields the largest returns in
dividends. If the advantage in this respect be fundamental and permanent,
the system of banks thus favored will be the one which will survive.
If Congress therefore would protect itself from the loss of its present banking
instrumentality, it must make it to the advantage of capital to seek the national
rather than a trust company charter. Banking capital is wihout prejudice
or sentiment. It will flow back into the national banks normally and easily
with the turn of the tide of advantage. The alternative would seem to be
the elimination of the national banks in favor of 48 distinct systems of banks
under the supervision of 48 separate banking departments.
Within recent months the trend toward trust company charters by national
banks has been alarmingly accentuated* Great consolidations of national
banks and trust companies are taking place in which the national charters
are being given up. Within the past 6 months, 79 national banks with aggre
gate resources of two and three-quarter billions have passed over under State
BRANCH, CH AIN, AND GROUP BANKING
1019
jurisdictions. I shall not attempt here to analyze the cause of these defections,
but it is quite evident that it is being found more advantageous to carry on the
business of banking under trust company charters.
However, it is within the power of Congress to turn the advantage in favor
o f the national banks and thereby make it to the interest of all banks to operate
under the national charter. W hat form this action should take requires the
most careful consideration. I shall, in the course of my remarks, suggest a
method of approach to an adequate remedy.
H I. Banking Faces New Economic Conditions.
The inauguration of the Federal reserve system in 1914 and the outbreak
o f the World War in that same year definitely marked the close of a financial
era in the United States. The line of cleavage between the pre-war and
the postwar periods is so clear that the student o f finance has no diffi
culty in setting off the one against the other. Our economic develop
ment within the past 15 years has been so rapid and so varied that it seems
as though we had lived in that short period through several generations. The
mere mention of some o f the outstanding factors in this development will be
sufficient to bring to your minds the new conditions under which we now live.
Not the least of these is the modern automobile upon the automobile road.
Those have abolished distances between local communities and have revolu
tionized the social life of the country districts. Transportation by air is now
a practical fact and it would tax the imagination to conceive lisiw it will
accelerate the ease of transportation begun by the automobile. The extension
o f communication by telephone and now by radio to every rural community
has brought into a common knowledge and contact every phase of our national
life. The need for mass production of goods and commodities has caused
greater centralization to corporate management in industrial enterprises with
the result of greater efficiency and economy in operation and with cheaper
and better output for the consumer. We have achieved an outstanding position
in world finance and are rapidly developing the instrumentalities to discharge
that serious responsibility. We are nowTin a period o f great national prosperity
and growth in which the public at large is participating to a degree hitherto
unknown.
IV. The Unit System of Banking.
The system of banking which developed in the United States under the State
banking laws and later under the national bank act of 1863 has come to be
known as unit banking. The term unit banking is of recent origin and is used
in contrast to the development of branch banking and group banking within the
last few years.
A unit bank may be defined as a banking corporation having its origin in a
definite local community and confining its banking activities primarily to that
community. Its original organization was a local enterprise of considerable
significance and local public interest. Its board of directors, officers and em
ployees are residents of the local city, town or village. On the average the
capital stock is relatively small. Of the 7,575 national banks in operation on
March 27, 1929, 7,193 or 95 per cent had an average capital of $107,000, which
includes all banks outside of central reserve and reserve c ities; while the
remaining 5 per cent or 382 banks in the central reserve and reserve cities had
about 57 per cent of the total resources.
The business of a unit bank is derived from the community in which the
bank is situated. This includes such business as may be afforded by the com
mercial activities of the city, town or village and by the outlying farming com
munities. The president of the unit bank is ordinarily a prominent local citizen
and under the old economic regime he had an opportunity to become interested
in local industrial enterprises and local public utilities.
Under the system of horse transportation for the rural communities— a sys
tem which ended with the close of the pioneer life of America— the unit bank
was in a much stronger position than it is to-day. Apart from the question of
their great contribution to the up-building of local communities, they were
profitable as operating corporate units for the reason that they were normally
integrated with the local economic situation. The president of such a bank
was a personage in the community and the bank fostered and financed local
business enterprises. The banker was a factor in the local street car company,
the local telephone company, the local gas plant, the local power plant and the
like. I f I were asked to pick out a single type o f institution which has con
1020
BRANCH, CHAIN, AND GROUP BANKING
tributed the most to local community independence and thereby to the founda
tion o f our national development, I should choose the unit bank. It is the most
representative o f the genius of the American people.
Looking, however, at the unit bank from the viewpoint of present day eco
nomic and social conditions, the question is being raised whether the unit bank
can survive. The unit bank like many other types of local enterprise, was made
possible by the great distance between the local settled communities. Distance
has now been abolished and as a consequence of this one factor, the unit bank
finds itself face to face with difficulties that seem to be .almost insuperable. The
old opportunities for the local banker to have a hand in local enterprises has
passed away because the local enterprises have become to a large extent
merged into larger national operations. Every phase of the public utility busi
ness has passed from local control into the hands o f great centralized corpora
tions which are able to give better and more efficient service. The financing
is not done in the rural communities but in the large cities by the metropolitan
banks.
The unit bank being therefore thrown back upon its own resources lias to
face the rising cost of management with a relative decrease in income. Many of
them are now unable to offer to young men entering the banking business either
salaries, or the prospects o f a career of sufficient attractiveness to obtain the
highest type o f management personnel.
W e can not escape being moved with great concern to observe that at a time
o f the most unparalleled strengthening of our financial position in domestic
affairs and in foreign commerce and in investments, namely, during the last
eight years, there have been more than 5,000 failures of unit banks in the
United States, with an aggregate total o f deposits o f $1,500,000,000. These
banks were scattered in various sections o f the country districts o f the United
States, in the South, the Mid-West, the Northwest, and the Southwest, with a
scattering few on the Pacific coast and the Northeastern States. It is impos
sible for me to describe the acute local suffering occasioned by the losses of
hard-earned savings and by the disruption o f local business enterprises. In
many o f the communities public confidence in the unit banks has been so severely
shaken that funds which should find their way into banking channels are being
withheld. During this 8-year period there was not a single failure o f a large
metropolitan bank.
The unit States banks in rural districts as a rule have not found it profitable
to become members of the Federal reserve system. Out of about 15,000 State
banks and trust companies in the United States, only 1,208 have become mem
bers. I f it were not compulsory for national banks to become members of the
Federal reserve system, considerably more than one-half of them w7ould prob
ably never have become members. The State unit banks outside of the large
cities seem to find no place in the Federal reserve system.
V. The Growth of Group Banking.
W e have witnessed within the last two years an amazing development in the
concentration o f control over groups of unit banks. This has come to be called
group banking. It is not confined to any one section of the country, but seems
to be springing up everywhere. There are literally hundreds of these groups
o f banks varying in size from half a dozen banks to a hundred or more. The
usual form o f the group system is for a holding company to acquire the m ajority
o f the stock o f a number o f unit banks and then set up a central management
personnel for the purpose of operating the group as nearly as possible as a
single system. Organizers of these groups maintain that a combination o f unit
banks under a single ownership affords greater safety to the public and an im
provement in the quality o f the banking services.
There appear to be, however, certain inherent weaknesses in a system of
group banking. From an operating standpoint it is necessarily unwieldy.
Each member of the group is a separate and distinct corporation responsible
to its own board o f directors. It must operate as a separate corporation under
its own capital and resources and under the distinct limitations placed upon its
activities by law. The central management can enforce its policies only by
indirection, that is to say, by inducing the local boards to accept voluntarily
its policies and in case of refusal, to set up at the next annual election a new
board through its control over a m ajority of the stock. It is necessary to carry
5i full complement o f overhead of personnel for each bank.
In other words, as compared with branch banking, group banking from an
operating standpoint seems to lack the flexibility and the economy and efficiency
B B A N C H , C H A IN , AND GROUP B A N K IN G
1021
which carries the services of the central bank directly to the public served by
each branch. Morally and psychologically the central management of the
group system may go to each member of the group with its support, but the
funds of the various members of the group can not be shifted about from one
bank to another. The corporate set-up, therefore, o f a group system is neces
sarily complicated, whereas under a system of branches, each branch is the
bank itself and the full power and resources of the bank is in each place where
it does business, whether at the head office or at the branches. Disregarding
for the moment the question of public policy, the branch system is, in operation,
incomparably simpler than the group system.
VI. Reexamination of Branch Banking Necessary.
Contrary to the opinion of many the McFadden Act of February 25, 1927.
was not intended to be a permanent settlement o f the branch banking ques
tion. It was a compromise measure.
Prior to the passage of this legislation, branch banking had made consider
able headway in many sections of the United States. In certain large metro
politan centers like New York City, Detroit, Cleveland, Los Angeles, Boston,
and others, branch banking as an extension o f services by downtown banks
to other parts o f the city had demonstrated that the movement was sound
and practicable. This latter situation was recognized by Congress in the
McFadden Act when national banks were permitted to establish city branches.
In some sections of the United States branch banking had been extended by
State banks beyond the city limits to the surrounding suburban communities;
to the boundary limits of the county or adjoining county; and in several in
stances to the boundary lines o f the State itself. Regarding these outside
branches as being in the nature of an experimental operation, Congress de
sired to create a situation under which this movement could be studied for a
few years without permitting it to expand. As a consequence the McFadden
Act held all of these branches in statu quo as to number and location, but
permitted them to be nationalized. A fter the approval of the act practically
every large branch banking system, with branches on the outside of the city
in which the bank was situated, took advantage o f this opportunity and be
came national banks and are now operating under the national banking laws.
In view of the existing situation with reference to unit banking, the growth
of group banking, the curtailment o f branch banking by Federal statute, and
the increasing number of bank mergers under trust company charters, the
time appears opportune to reexamine the basic structure of our entire banking
system and to formulate a new banking policy to meet present-day conditions.
The national bank act specifically makes it the duty of the Comptroller o f
the Currency to recommend to Congress “ any amendment to the laws relative
to banking by which the system may be improved and the security o f creditors
may be increased.” In the present state of the national banking system I
feel it to be a serious undertaking to discharge that responsibility. Before
proceeding, therefore, to lay before Congress a definite formulation of pro
posed amendments to the banking laws, I shall, at an early date, call into
consultation a group of outstanding bankers and students of finance and shall
ask their assistance in the formulation of recommendations to Congress which
will offer to State banks and trust companies an opportunity to gain a wider
field of banking operations under the national charter.
E x h ib it C
THE NEED OF A N EW BANKING POLICY
(Address by J. W. Pole, Comptroller of the Currency, before the convention of
the American Bankers Association at San Francisco, Calif., October 2, 1929)
I am happy to avail myself of this opportunity to lay before your association
and the public, certain considerations which are of great importance to our
system of banking. It is fortunate that this can be done at a time o f busi
ness prosperity when the financial condition of the country is unquestionably
sound.
Before I attempt to set forth any conclusions or suggest any remedies I wish
to present a few salient facts and statistics which in the main tell their own
story. In the course o f the development of this country there have been evolved
two types of banks; namely, the metropolitan bank which serves a city popu
lation and the larger business enterprises, and the country bank which serves
the rural communities and the independent business houses in the smaller cities.
The metropolitan banks, by virtue o f their large capital, their access to a great
diversity of banking business and their a b lity to secure the most highly trained
personnel, are in a prosperous condition and reflect (as all banks should) the
general strength o f industry and commerce.
However, about three-fourths of the banks in the United States are outside
of the metropolitan centers and it is these banks which serve the m ajority o f
our population. They necessarily have a small investment of capital funds, be
cause there is not enough banking business in their localities to justify a larger
capital. More than three-fourths of all national banks are capitalized at less
than $200,000. The ratio is even less for the State banks. A study o f bank
earnings covering the last two or three years, which have been years o f gen
eral bus ness prosperity, shows that a large percentage of banks outside of the
principal cities are operating with insufficient earnings. Taking 1927 as a
ty p ic a l year, 906 national banks operated at a loss, and an additional 2,000
earned less than 5 per cent. In other words about 38 per cent of all national
banks earned for the year 1927 less than the yield of a high-grade security. It
is well known that the earning capacity of the general run of country national
banks is certainly not below that of the State banks similarly situated.
Current statistics for State banks are incomplete for the whole country,
but figures are available for the calendar year 1926 which show that about
2,000 State banks operated at a loss. The average earnings of all banks,
National and State, in one of our great agricultural States fo r the years 1924
to 1928, inclusive, were less than 1 y2 per cent on invested capital. In four
other great middle western States comprising both agricultural and industrial
activities 2,053 banks, National and State, earned in 1927 less than 6 per cent
on invested capital.
B A N K FAILURES
The inability of many country banks to earn a fair profit upon invested
capital is naturally reflected in the large number of failures which have oc
curred during the past eight years. From 1921 to 1928, inclusive, about 5,000
banks closed their doors and tied up deposits of more than $1,500,000,000. Of
this number. 700 were National banks and 4,300 were State banks. In 4
States from 40 to 53 per cent of all banks in existence in 1920 fa iled ; from
20 to 40 per cent in 6 States; and from 10 to 20 per cent in 30 other States. Only
two small Eastern States have had no bank failures within this period.
Eighty per cent o f these failures occurred in cities with a population of less
than three thousand and about 70 per cent o f the failed banks were capital
ized at $50,000 or less.
I have, upon a previous occasion, discussed the social and economic changes
through which the rural communities have passed since the W orld W ar, and
1022
B R A N C H , C H A IN , AND GROUP B AN K IN G
1023
I shall not go further into that question at this time than to say that the
country bank faces vastly different conditions from those which confronted
it in 1913.
I do not wish to be misunderstood as putting all country banks into the
same category. There are many country banks that are sound and prosperous
because they are in a position to obtain diversification of their business or
are managed with unusual skill and conservatism. But surely the failure of
between five and six thousand country banks to which the savings of small
depositors had been intrusted is a serious indictment against the system of
banking in the rural communities of the United States. The burden of these
failures has fallen upon those least able to bear it, and they have suffered
both as depositors and as stockholders.
The principal remedy which has been tried in the past for bank failures
is the Government guaranty o f bank deposits. It may be definitely said that
this remedy has failed wherever it lias been adopted. There are those who
have advocated stronger capitalization and more capable management for the
country banks. This doctrine has been preached for years without avail, for
the simple reason that the local business is not of sufficient volume to justify
the larger capital or the employment o f a more highly trained management.
Many causes have been assigned for bank failures in the country districts,
but one primary and fundamental cause covers all of the others; namely, that
diversification o f business is not generally possible. Without diversification
there can be no assurance of success in the long run.
The condition which I have pointed out above is a present condition, for
the figures which are available for the year 1929 show that 52 National banks
and 403 State banks have failed within the last eight months. I f these facts
as to earnings and as to bank failures had been presented at the close of
eight years o f business stagnation and financial depression there might be no
cause for concern. But the contrary is the case. The last eight years have
witnessed the greatest business activity, commercial expansion, and financial
strength the country has ever seen. Does not, therefore, the failure of so
many country banks to share proportionately in this increased prosperity
clearly indicate that there is a fundnmental weakness in our banking system?
Is it fair or just, or reasonable, to subject so many of our people to the
hazards of continued bank failures? Where is the responsibility for this con
dition? It is not primarily upon the bankers. The responsibility of the
banker is to operate his bank safely and profitably within the limits prescribed
by law, but the responsibility for the system of banking under which he oper
ates is upon the Government of the United States in the case of National
banks and upon the State governments in the case of State banks. I shall
return to this consideration before I close.
iil!A NCH
H A .XK I’M ;
In all of the current discussions o f the country bank situation, branch bank
ing is involved in one way or another. Branch banking has existed in the
United States in some form since the earliest times both under the authority
o f acts o f Congress and o f State laws. Under the Federal reserve act and
under the McFadden Bank Act of 1927, national banks may establish branches
in all foreign countries; in the insular possesisons of the United States; and
within the corporate limits of all large cities in which the head office of the
bank is situated where the State law permits State banks to have branches.
In the case of the establishment of foreign branches, a national bank must
have the approval of the Federal Reserve Board and in the case of a domestic
branch, the approval o f the Comptroller of the Currency. A number of States
permit State banks to establish state-wide branches but the establishment of
any such branches debars them from membership in the Federal reserve
system. This restriction, however, has not been sufficient to restrain all
State banks from establishing state-wide branches under the authority of
State laws.
When the McFadden Act was under consideration, the extreme opponents
of branch banking predicted that if national banks were permitted to establish
branches even within the cities in which they were situated there would be
a great scramble for branches with a consequent confusion in the banking
business accompanied by the danger o f overexpansion. Such has not been
the case.
1024
BKANCH, CH AIN, AND GEOUP BANKING
At the time the McFadden Act went into effect; namely, February 25, 1927,
145 national banks were operating a total o f 390 branches. On June 80, 1929,
about 2 y2 years later, 164 national banks were operating 992 branches, an
increase o f only 19 banks and 603 branches. When it is considered that be
tween 7,500 and 8,000 national banks were in operation during this period, the
establishment o f 603 branches throughout the whole o f the United States must
be considered as only nominal. In fact the rate of increase was about the
same as that prior to the McFadden Act when a national bank could only
acquire branches by purchasing a State bank with branches. At the time of
the approval o f the McFadden Act the total number o f branches of all banks
in the United States was 2,900 and on June 30, 1929, this number had been
increased to 3,440.
As the national law stands to-day the metropolitan banks can not extend their
services to the rural communities by establishing branches.
GROUP B A N K IN G
Notwithstanding the technical restrictions in the law against the establish
ment o f branches in the country districts by banks in the cities, there has
developed since the McFadden Act a new form o f branch banking which appears
to be without legal objection. For many years single individuals or groups of
individuals have owned the m ajority o f the stock o f more than one bank.
These banks were usually small and operated within a limited geographical
area. This phenomenon was regarded as being without particular economic
significance. The term group banking has come to be used to embrace a new
type o f bank ownership. A central financial corporation acquires the con
trolling interest in the stock o f a number o f banks, one o f which is a metro
politan bank around which the others are grouped. Although technically each
bank in the group is a separate corporation operating with a local board o f
directors, practically each member o f the group depends upon a central manage
ment which controls the banking policy of the group. The financial responsi
bility o f the central ownership and management is the main support o f the
group.
This movement is so new and is developing with such apparent rapidity that
it is not possible to present complete statistical information about it. Strong
financial groups for this purpose have been formed in practically every great
commercial center o f the country
Some o f these have already progressed
to the point where they own from 25 to 50 banks. It is reported that there
are 230 groups in existence in the United States including groups owned by
individuals, and that they own about 2,000 banks. These figures are believed
to be approximately correct.
Considering group banking as a phase or form o f branch banking and count
ing each branch as a banking office, there are about 29,000 banking offices in
the country as a whole, 6,000 of which are not strictly speaking unit banks.
In other words, something over 20 per cent of all banking offices in the United
States may be classed as branch banks.
Banking groups in the large cities which are thus obtaining control over
country banks appear to be driven by economic necessity to using this method
o f extending the services of the metropolitan banks to the rural communities.
They no doubt realize that the method used is more cumbersome and more
expensive than branch banking in its proper sense. W ith the best of inten
tions, the most capable management and the highest financial responsibility
on the part of a centrol group— and many of these groups meet these high
qualifications— the group can never be operated with the economy, the flexibility
and the singleness of policy which is possible under a branch system. I f the
laws permitted the establishment of branches in the country districts by these
banks, group banking would disappear and the country districts would be able
to do business directly with strong city banks.
W hile it is undoubtedly true that a strong metropolitan bank may, through
the group system, greatly improve the rural-banking situation by putting behind
a group of country banks its financial strength and skill of management, it is
debatable whether or not this form o f banking is the best remedy for the situa
tion which confronts us. The central management o f a group must operate
through a number o f separate corporations, each of which must maintain its
own operating status under the banking laws with a full complement of bank
ing overhead. Diversification o f banking business in the group and the use of
liquid funds can only be obtained by transferring assets from a bank in one
B R A N C H , C H A IN , AND GEO UP B AN K IN G
1025
locality to that in another, at the same time maintaining the separate financial
condition o f each bank at the required standard. In the case of a group com
posed of both national and State banks this procedure complicates the work
o f the supervising authorities. While the cond tions of each bank may be deter
mined, the condition of the group as a whole does not come under the visitorial
powers of the government concerned.
In the absence o f Government permission for branch banking in its true sense
present developments indicate that group banking, under the force of economic
law, may eventually displace the present system of country unit banks.
T H E E X TE N SION OF BRAN CH B A N K IN G
I have given long and careful study to this question and have conferred
with representative bankers of all classes. I have caused to be gathered
comprehensive statistics on bank operations throughout the country. After
reviewing all o f the discussions concerning branch banking before and since
the McFadden Act and having in mind that this should not be regarded as a
controversy solely between bankers but that the interest o f the general
public also be given full consideration, I have reached the conclusion that
an extension of branch banking privileges should be granted to national banks.
That it should not be nation-wide will be generally admitted. It has been
suggested that branch banking be Tmited to the confines of each Federal
reserve district. This may not be feasible to the same extent in all Federal
reserve d'stricts.
Restricting it to State boundaries, which are political,
rather than economic, presents difficulties, as does the suggestion that a
radius of 50 or 100 miles from the parent bank be fixed, but there is an
economic area to which the extension of branch banking can be applied, varying
in size to meet the diversified conditions that ex'st in this vast country.
It is for Congress ultimately to fix the .boundaries of these districts; but
Congress, of course, would not and could not attempt to do so prior to
careful consideration and study of all the factors, which could only be carried
on by a committee of qualified experts. Would we not be making real
progress if, at the coming session, the Congress were to instruct, let us say,
the Secretary of the Treasury, the Governor of the Federal Reserve Board,
and the Comptroller of the Currency to study the banking situation and to
report the boundaries which they would recommend that the Congress set
up, establishing such definite areas?
In order that this development, within whatever economic areas may be
determined upon by Congress, may be sound and orderly, it should be pro
tected by three safeguards: First, that government supervision be further
extended and intensified; second that each parent bank be capitalized adequately
to meet the responsibility of operating bran dies; and third, that discretion
over the establishment and over the removal o f every branch be vested
in the Comptroller of the Currency.
Under a branch system of this chara*-tor ii v*‘>nU! i.»* po^s'blo for the parent
bank to have a diversified banking Im-ii.e^s lo protect if. acrainst economic
depression in any one locality or in an, on,* iinlr. trial activity or business
enterprise. It would then be able in <*m h d to U«< ••mni-y districts the same
quality o f banking services and 11k* mi me r ife ly to it* tVposi'ors which the
customers o f metropolitan banks in flu* 1 rgf cliie
<njov. There would,
of course, still remain the quo-ron oi ?ii.'oui|."ti‘iii m an;;-“ iuent and in a
branch system the question uf n:a’ :u . t.-n.
o<* \h *
mimportance on
account of the magnitude of ih< enterprise. It i»- \o \l is «nd that it seems
wise that governmental supervision bo
p.sj j,» the tmhu where the super
vising authorities can protect the public a*- f\r j.n i- hum«tn!, possible in this
respect.
No weakly cap'^ ili/cd Inn1* ^hou'd !>- , <*nniit *d t.i e” ^a'-’' it. b anch banking
and in the ordinary course <>/ bus me*" h K no; iik *!/ :hat ^aeh a thing would
be proposed. Nevertheless J am in fa v o ” o f’ a x t . i i <hy i of^.frement for a
minimum cap;tali>,;,tion which will b - laii'e enough •>» ia -in1 t!.<- protection
of the depositor^ and lo di-cliaru* proporl' ill.* i'e^pwiMui] it
inc'dent to the
operation o f a branch system.
One o f the principal
n b y Me - c ‘'anr-!'' fur la m .‘lies under the
McFadden Act, prophesied lr, man; of she opi’ou -m the measure, failed to
materialize, was undoul:\dl. tb in*
on in Jba: ;
of the wise provi
sion that no branch coul i
'•iaVN’ ed viilion* the s i o f
the Comptrol
ler of the Currency. It w.i n e io re d that a’ * anplica'i ,i b* filed by the bank
1 0 0 1 3 0 — 3 0 — v e i, 2 . p t 9 --------- 2
1026
BRANCH, CHAIN, AND GBOUP BANKING
setting forth the reasons why the branch was desired, such application to be
supported by a formal resolution from its board o f directors in authorization
thereof. Further procedure involved the detailing o f a bank examiner to
make a thorough investigation, having in mind the effect of the establishment
o f the branch upon the local community, upon the banking situation as a whole
and upon the parent bank, and the filing with the Comptroller of the Currency
of a full, written report o f this investigation, along with recommendations
from the chief national bank examiner. Upon the basis o f this information
and such other information as the comptroller might acquire from the Federal
reserve bank or from other sources rests the approval or denial of each
application for the establishment of a branch. This procedure has been suffi
cient to discourage any precipitate rush, and this discretionary power lodged
with the Comptroller of the Currency will enable him at all times to require
a branch system to develop in an orderly manner.
W hat o f the sound country bank which has been operating for years with
profit and is serving its local community? Under the procedure outlined
above such a bank could not be driven out o f business through the establishment
o f a de novo branch, fo r the simple reason that no Comptroller of the Currency
would permit it. Bank stock is a commodity with a market value and if a
stockholder wishes to sell to a branch system that is his right under the ordi
nary law of contract. But it is inconceivable that any Comptroller of the Cur
rency, the proceedings of whose office are important public records, would ever
lend his high responsibility to aid o f a branch bank unfairly to drive a local
bank out o f business. The successful country bank, therefore, should have
nothing to fear from the recommendation which I propose.
In my recent address at Atlantic City, I indicated that the proposal for the
new legislation which I intended to formulate would offer to State banks and
trust companies an opportunity to gain a wider field o f banking operations
under the national charter.
With liberal branch banking privileges con
ferred upon the national banks, the attractions o f a national charter would be
considerably enhanced and wThile there would o f course be no compulsion upon
the State banks and trust companies to become national banks, in the usual
course o f business, it is believed that the stockholders of the large State insti
tutions would find it to their advantage to operate under the national charter.
From the standpoint o f the public, since commerce is national and interstate,
the creation o f a uniform banking system through the assimilation of the bulk
of the banking resources o f the country would be not only an advantage but a
logical development. From the standpoint o f the Government of the United
States, the increase in the resources and strength o f the national system as a
result o f the extension of branches and the conversion o f large State banks into
national, would bring into the Federal reserve system a great volume o f bank
ing resources now operating independently and at the same time develop an
instrumentality over which the Government would have complete control and
through which it could enforce an adequate banking policy.
E
x h ib it
D
Number of banks in the United States in towns
their average capital Juu
banks
■>
Mu
________
)a°ka........................
\ n 7 >m ..................
\lk
....................
hfomhi .................
Vi< i .'l<f . _ ..........._
•nno' a cu t________
' i* la^ 'u
...............
- Ion If
................
T."rfijn ...................
"Lrwah
................
): M fjllO ........................
Illinois_______ ______
Indiana____________
K e n tu c k y ... _____
Louisiana__________
M a in e................... .
M a ry la n d .................
Massachusetts____
M ichigan_____ _____
M innesota_________
Mississippi........ ........
M isKOuri.....................
302 |.1il3,875,400
14 1
915,000
1 2,706,000
394 ! 14, 901,175
300 ! 21,159,320
242 ! 8,118,000
62 1 4, 640, 000
40 ! 3, 622, 350
170 ! 10, 497, 200
375 ; 16,439,845
3
350, 000
13.1
4, 792, 500
1. 348 i 62. 834, 000
751 1 29,487,850
I. 248 ; 44,149, 800
i 24, 921, 000
514 21,767, 050
199 ; 9,981,050
74 ! 5,700,800
172 . 8, 526, 700
76 ! 7, 322, 500
042 ! 25,877,342
959 | 25,640,500
281 I 11,718,830
1,129 i 31,629,800
179 1 7, 525, 000
10,000 population or less and
•M. 1929
f
! Num
ber of
banks
|^ 5 8 ?
i $45, 945
65, 357
77, 314
37, 820
70, 531
33, 545
i 74,839
1 90,559
| 61,748
43, 840
116, 667
30, 584
46, 613
39, 265
35, 376
25, 932
42, 348
50,156
77, 038
| 49,574
; 96,349
40,307
1 26,737
! 41,704
. 28,016
; 42,039
Ntbi i&kt
N evad a..........
Now 111 <*; -,v>
1
N* \\ J‘ '■SPY,
New M
New Y ork___
North Carolina____
North D akota..
O hio.....................
O Idaho mu....................
Oregon_________
P e n nsylvan ia..
Rhode Is la n d ..
South Carolina...
South D akota___
Tennevv*1
T exas.................
1
[
Utah . . . .
V eu no’ / ...........
5
Virgin n ............
Wash.rtfi*-' p .
W est V in, m
.....
WhWl^i,
- --
Tufcm___
Capital
$24.196, 700
1,816, 600
| 4,154, 000
i 28,800,700
2, 340,000
47, 594, 950
16, 674, 662
9,132, 500
37,807, 500
16,647,150
9, 676, 500
S3, 652, 248
650, 000
9, 670, 025
! 9. 849,400
! 18,501,853
! 53,976,730
i 3. 244. 750
1 5, 751. 000
1 22,493,410
! 9,296,500
1 13,633,850
28,801,000
3, 260,000
$29,223
60, 553
79, 885
97, 629
42, 545
76, 519
44, 466
22,166
49, 422
27, 931
48, 383
84, 926
130, 000
51,164
26, 057
40,485
44, 243
41,073
85.836
55,131
35, 619
56,808
35,689
40, 247
20,008 880, 721,040
44,018
828
30
52
295
55
622
375
112
765
596
200
985
5
189
378
*157
1,220
79
67
408
261
240
807
81
Average per State, 400.
capital
1027
E
x h ib it
E
BANK. SUSPENSIONS
DURING tlCMT YE.AR. PERIOD * 1921-1928 INCLUSIVt
BY SIZE. CF CAPITAL STCXX
CAPITAL
STOCK OP
*25 OOO ft LB33
e& 000-160 000
60 000*100 000
10 0 0 0 0 -9 0 0 00 0
200 000-600 000 ■ |
MORE THAU OoO GOOf 5
ROT AVAILABLE
1028
HUHBER OF SUSPENSIONS
E
x h ib it
F
BANK, SUSPENSIONS •
DURING t m x YEAR. PERIOD m
MCLUSIVt
BY SIZLOFTOVN OR. CITY
1029
BRANCH. CH AIN, AND GEOUP BANKING
i s I » I 2 § s | i Ss
! s ” »‘ 2 W = -3 -a rsf
g S iillg s s s S l
ISiilllSlISs
is a s s a s f p ;- '”
i ils lS ills ll
i i~ -2 S 8 $ i3 S K “
JI
I illg | g llll5
t9H0
IS S B S lIS p g l
H cqg'M isV as
B oard , Ja nu ar y
n iilS l- lI g
r-T ffM
\ iV = V n o i;«
S I3 i!S iS g M 3 8
§
Reserve
iiisiiiiili!
I
Federal
m m
2 2 " r- ” 3S2S->-?ifs
O p e r a t io n s ,
m m
^ c n =v v -o «
ob’ Bank
*-r
Division
1030
Total, Southern
S ta t e s ..............................................................................................................,
1,44 1 !
J,132
Number of incorporated hanks 7,7 the. United States June SO, 1929, segregated according to capital stock, in each State
1031
Number of incorporated'banks in the United States June SO, 1929, segregated according to capital stock in each State— Continued
1032
BRA N CH , C H A IN , AND GROUP B A N K IN G
20, 1930]
Banker, February
The American
[From
Roll call of leading hank groups in the United States as of December SI, 1929, m order of deposits
BB A N C H , C H A IN , AND GBOUP B AN K IN G
1033
£
% ~-
£
i
I
31
I *
=5 £
i? '!
S ig^gsi.f||?§li|gg IgSSlIliSI li lilll
ii mmmmmmm mnmm
m mm
§ | s b ,~ # s b !? sr* w a n *
a * s i ? § s i i g i i i i Its m
i m
§ i ^ ' g i i s i i i i s i \m m m m m
$ mmmmmm
i§ mmmmm \m mmmm
mmm
g
sssi5|“§ ^ ^ ‘ a s g t fs f isfs
\%$m ,
is n i l .
;*s sw
ii;i usi
mm
1- *• ***
.
SI. 1929. in order of deposits— Continued
1034
BKANCH, CHAIN, AND GROUP BANKING
B R A N C H , C H A IN , AND GROUP B A N K IN G
T
h i r t y -e i g h t
L e a d i n g B a n k G r o u p s R e v e a l S p re ad o f S y s t e m — N e w
M u l t i u n i t B a n k M a n a g e m e n t A p p e a r s i n 1929
1035
F orce
in
The 38 leading groups of unit banks in the United States on December 31,
1929, which controlled resources of over $8,500,000,000 in 547 unit banks,
according to the roll call of group systems just presented by the American
Banker, represent the dominant institutions in the field of group banking as
distinguished from branch banking and unit banking and demonstrate the
extent to which this system of multi-unit banking spread during 1929.
This survey represents the most complete tabulation of group banking
resources which has been published, and will serve to clarify the degree to
which this method of achieving successful banking operation while maintaining
the individual banking units as separate chartered units has progressed.
In addition to the groups listed in the tabulation, there are many lesser
chain systems and also many group organizations, large and small, which are
built around a more or less “ invisible ” central ownership of stock. No
effort has been made to include these “ invisible group s” in the tabulation.
Several such chains when approached for statistics replied that they were
not a " group system ” and would not accept sueii a classification.
Nor has an effort been made to tabulate the branch bank systems which exist
in the States which permit city-wide or state-wide branch operation, except as
these systems are part o f “ group s’’ of independently chartered banks. Hence
certain North Carolina and South Carolina branch bank systems which were
formerly groups escape the “ roll call.”
I f branch systems were taken into consideration, they would include such
organizations as the National City Bank o f New York, with 37 branches, and
$2,200,000,000 in resources; Corn Exchange Bank, and numerous other New
York and other city institutions; quite a number o f California and other
branch bank State institutions, including the Bank of California of San Fran
cisco, which enjoys the peculiar privilege o f conducting branch operations out
side of its home State; the North Carolina Bank & Trust Co., with 10 branches
and resources o f $46,600,000; the Peoples State Bank o f South Carolina, with
branches in 27 cities and resources of $14,864,000, etc.
M U L T IU N IT B A N K IN G RESOURCES
M A Y TOTAL $ 1 8 ,0 0 0 ,0 0 0 ,0 0 0
Full knowledge of the figures for city or state-wide branch institutions would
possibly double the amount o f our Nation’s banking resources which are repre
sented in institutions committed to one form or another o f multiunit banking
operation making their totals $18,000,000,000 or so.
Barely two-thirds o f the groups listed are more than a year old and organiza
tion o f groups still continues.
In some instances these new organizations are simply the coming forward
into open group operation o f systems which have hitherto been invisibly linked
together. Once organized they both attract other unit banka and create a
situation in which competing key correspondent banks find it advisable to or
ganize their own groups. Such a situation impelled the organization of some
o f the largest mid-western groups last year.
Developments in group banking during 1930t are expected to reveal the or
ganization of still now groups, and the aggressive promotion of those already
■existing.
CONTROVERSY IN LEG ISLATIVE FOTLDS
State legislatures and Congress are likely to be scenes of sharp controversies
as to the advantages and disadvantages inherent in the group banking system
as compared with either unit or branch bank methods of operation.
One of the tilings which loom as a possibility as a result o f the legislative
attitude and which has been seriously though not 'publicly discussed is the
organization of a group bankers’ association, which will consider the problems
o f legislation, operation, and management principles which are peculiar to
multibank systems as, for instance, the trust company division o f the American
.'Bankers5 Association considers pertinent trust questions.
BRANCH, CHAIN, AND GROUP BANKING
W EDNESDAY, APR IL 23, 1930
H ouse of K efkissentatives ,
C om m ittee on B a n k in g and C u rre n c y ,
Washington, I). C.
The committee met at 10.30 a. m. in the committee room, Capitol,
Hon. Louis T. McFadden (chairman) presiding.
The C h a irm a n . The committee w ill come to order,.
We have before the committee this morning Mr. .Robert O. Lord,
of the Guardian Detroit Union Group of banks, Mr. Lord has
prepared a statement, and it has been requested, inasmuch as Mr.
Lord has furnished the members of the committee with copies of
the statement, that lie be permitted to proceed without interruption
until he completes the statement.
We will be very glad to have you proceed now, Mr Lord,,
STATEMENT OF ROBERT 0. LORD, PRESIDENT GUARDIAN DETROIT
UNION GROUP (INC.)
Mr. Lord. I have read carefully all published reports o f hearings
before your committee, and from them I understand that, follow
ing your usual procedure, you wish me to make an uninterrupted
statement on the subject of group banking, at the conclusion of
which I shall be glad to endeavor to answer, to the best of my abil
ity, any questions which may occur to members of the committee in
connection therewith.
A few weeks ago your chairman very courteously furnished me
with an outline of the points upon which the committee desired in
formation. I f it is agreeable to the committee, I shall, in my verbal
statement this morning, take up each of these subheadings in turn,
touching upon what I consider the high lights o f the material which
I have prepared, and submitting detailed data as appendices for in
clusion in the printed record, if, in the judgment o f the committee,
this information is deemed to be of sufficient value to warrant its
conclusion.
I should like to state right at the start that i feel that the com
mittee, through these hearings, is laying the statistical foundation
upon which wTe must build the banking structure of the future,
Information developed through the instrumentality of these hear
ings is bound to be of inestimable value to bankers generally. I
have already derived great benefit from the information so far
published, and I am more than glad to make what small contribu
tion I can to the common fund of information, bearing upon the
economics of the present situation in regard to banking, with the
1037
1038
B RA N CH , C H A IN , AND GROUP B A N K IN G
thought that we bankers will all have more accurate and more
comprehensive charts by which to steer the courses of our respective
financial institutions in the future.
Every banker is to-day faced with the necessity of adapting
banking practices and methods to economic conditions which have
changed materially over those which obtained but a few years ago.
The past few years, here in America, have witnessed the sudden
acceleration of economic forces which had been silently at work
for more than a decade. Our use of electrical energy is increasing
four times as fast as our population and even now equals that o f
the rest of the world combined. As a consequence, we have been
able to obtain a steadily increasing productivity per worker, and
simultaneously effect a gradual but substantial reduction in the
hours of labor.
Commodity prices have, in general, declined— in the face of rising
wage scales. The resultant improvement in our standard of living:
has excited the interest of the world and thrust upon America a
new leadership— and with it new responsibilities, of which a con
siderable portion have devolved upon the bankers of to-day.
Many years ago economic pressure welded our crazy quilt o f
hundreds of short local railroads into a relatively small number
of trunk lines, which, by superlatively prompt and effective servicer
ha ve been heavy contributions to the national prosperity with which
we have been blessed over a period of years, and wThich we shall
undoubtedly continue to enjoy in spite of occasional recessions.
Yet the pressure still persists, under mandate of Congress, for
fewer and presumably more efficient railroad systems. The present
line of the New York Central Railroad, between New York and
Buffalo, originally consisted of literally dozens of independently
owned short lines, each with its own management, frequently at
odds with that of other short lines.
Similarly, the line of the Pennsylvania Railroad between New
York and Pittsburgh originally consisted of a large number of short
lines. Who, to-day, would venture the claim that a return to former
conditions would be an improvement over the satisfactory service y
for passengers and for freight, which we take for granted to-day.
Our highly integrated industrial enterprises have time and again
proved bulwarks of strength in piece and in war, in prosperity and
in depression. Our great superpower systems have created huge
reservoirs of energy, with a flexibility of distribution which has
enormously increased our potential productivity, and, incidentally,
substantially lowered the average cost of electrical energy to the
consumer.
Throughout our whole business structure the pressure is in the
direction of larger and larger units, and more and more effective inter
connection of units over wider and wider areas. The compelling
reason is greater efficiency, bringing in its train lower prices for the
consumer, greater stability of operations for the producer, and there
fore a more abundant prosperity for the community served.
Banking, too, has felt the pressure toward larger units and closer
interconnection of units, the better to serve growing industries and
communities. The quickened tempo of to-day’s business has em
phasized the interindependence of communities within the same
B R A N C H , C H A IN , AND GROUP B AN K IN G
1039
natural industrial area, and has indicated the need for a more com
prehensive and more closely knit banking service than has been
available heretofore through the isolated unit banks, which met the
less exacting requirements of a few years ago.
The impact of science is a major factor in keeping the business
world in a state of flux. Research is creating new industries and
destroying entrenched monopolies. We telephone London or Paris
as easily as the nearest city; radio flings whispered words around the
world; television will be an accomplished fact before we finish saying
“ It can’t be done.” The airplane shrinks America to one-fourth
railroad size. Improved means of communication and transportation
are constants accelerating the pulse of business. Banking must
keep pace.
It seems to me axiomatic that the happiness and prosperity of the
residents of a given community depend, with few exceptions, upon
the progress of its wealth-producing industries and other activities.
These, in turn, can not flourish unless adequate banking facilities
are promptly and continuously available. I think we should all re
mind ourselves, at this juncture, that banking is not business of
itself— banking is merely a facilitating function of business. Bank
ing of itself creates no new weatlh, but a sound and adequate system
of banking does aid in the creation of new wealth and can be of
great assistance to the actual producers in facilitating the prompt
and efficient interchange of goods and services, without which there
can be no general diffusion of the state of well-being which we all
desire.
Banking must adapt itself to changing conditions if industry and
trade are not to be hamstrung in the struggle for world markets,
which is beginning to emerge as the outstanding characteristic of
the period through which we are passing.
I think it has been amply demonstrated, from the testimony al
ready presented to the committee, that the larger cities to-day enjoy
a safer and more effective banking service, in all phases, than is
available to the smaller communities.
One of the movements to extend metropolitan service to subcenters, within a given trade area, has come to be known as group
banking. Guardian Detroit Union Group (Inc.) was organized to
acquire the stocks of banks, trust companies, and other corporations
for the purpose of providing unified ownership, coordinated opera
tion, massed resources, and world-wide contacts with industry and
trade— an improved, completely rounded-out banking service for the
great industrial area of lower Michigan. Quite frankly, it is as
yet too early to appraise the results attained to date. Time alone
will tell whether or not we are on the right track. In the mean
time we are keeping our minds open and will welcome suggestions
from governmental authorities or guidance through legislation.
Taking up, in order, the topics suggested by your chairman, I shall
endeavor to conserve the time of the members of the committee by
endeavoring to point out what I consider to be the significant fea
tures of the information requested, submitting, at the conclusion of
each phase of my statement, complete detailed data as an appendix.
1040
B R A N C H , C H A IN , AND GROUP B A N K IN G
1 . C H A R TE R A N D B Y -L A W S
In order to present a proper picture of the organization of Guard
ian Detroit Union Group (Inc.), it is perhaps necessary to start the
story a few years previous to the formal incorporation of the group
company.
As we all know, the effect of the growth of the automotive indus
try was a tremendous and rapid increase in the population of Detroit*
Thirty years ago, it was a city of about 300,000. Now it has in
excess of 1,500,000 people.
During this period, manufacturing so absorbed the attention and
energy of Detroiters that banking facilities did not keep pace with
the needs of the growing city. Detroit found itself dependent finan
cially on outside cities. Even up to a few years ago, Detroit, fourth
in population and value of manufactured products, ranked eighth or
ninth in banking resources.
To help remedy this situation, on June 15, 1927, there was or
ganized, under the banking laws of the State of Michigan, Guardian
Detroit Bank. Under the plan and subscription agreement, there
was sold unified stock. Each subscriber to stock in Guardian De
troit Bank at the same time subscribed for the same number of
shares of Guardian Detroit Co., an investment affiliate, and for onefifth of the number of shares in Guardian Trust Co., a purely fidu
ciary organization, which had been organized under the banking
laws of the State of Michigan about two years previously. There
were thus created three independent corporations owned by the
same stockholders, in no way subsidiary to each other.
It was provided that none of the stock of the bank, the trust com
pany, or the securities company should be acquired or transferred
except in connection with the acquisition or transfer of a propor
tionate amount of the stock of each of the other two companies, so
that each stockholder would, at all times, own the same percentage
of the stock of any one of said companies as he owned of the stock
of each of the other two companies.
The Detroiters— drawn from the ranks of manufacturing, mer
chandizing, construction, transportation, publishing, real estate,
finance, and the professions— who sponsored the formation of De
troit’s first group of related institutions equipped to transact, under
one roof, every kind of banking, trust, and investment business for
individuals and corporations, included, among others—
Henry E. Bodman, counsel Packard Motor Car Co.
Ralph H. Booth (now minister to Denmark), president Booth Publish
ing Co.
Roy D. Chapin, chairman of the board, Hudson Motor Car Co,
Howard E. Coffin, president National Aviation Corporation.
George R. Fink, president Michigan Steel Corporation.
Fred J. Fisher, vice president General Motors Corporation.
Edsel B. Ford, president Ford Motor Company.
Albert Kahn, architect.
Ernest Kanzler, now president Universal Credit Corporation.
Carlton M. Higbie and Jereme E. J. Keane, partners in the security busi
ness of Keane, Higbie & Co.
Alvan Macauley, president Packard Motor Car Co.
W. Ledyard Mitchell, vice president Chrysler Corporation.
Charles S. Mott, vice president General Motors Corporation.
B EA N OH, C H A IN , AND GROUP BANKING
1041
Fred T. Murphy, trustee Murphy fam ily trusts, also a trustee of Yale
University.
Alger Shelden, president Shelden Land Co.
William Robert Wilson, chairman Great Lakes A ircraft Corporation.
Under unified ownership, and with coordinated management, these
three institutions, which came to be known popularly as “ the
guardian group,55 grew and prospered so that within two years their
aggregate resources amounted to approximately $78,000,000, without
including the figures of the Guardian Detroit Co., the securities
company.
Branch banking, within the corporate limits of the municipalities
in which organized, had been permitted in Michigan for several
years, one of the larger State banks having no less than 100 branches
in the city of Detroit.
Due to its great growth in recent years, several adjoining muni
cipalities had been annexed to Detroit, but several others had main
tained their corporate identity although plainly included in the same
economic area. In fact, two municipalities, Highland Park and
Hamtramck, are entirely surrounded by Detroit.
In one of these municipalities was Highland Park State Bank
(with seven branches) and Highland Park Trust Co. The officers
and directors of the Highland Park institutions felt that it would
be distinctly advantageous to effect a closer working arrangement
with a large down-town bank, and the officers and directors of
Guardian Detroit Bank were equally desirous of obtaining suitable
additional banking locations in the metropolitan area of Detroit,
without going through the slow and expensive process of acquiring
sites and building up deposits in the various shopping and industrial
communities.
In order to acquire the Highland Park institutions, which were
outside the corporate limits of the city of Detroit and could not,
therefore, be operated as branches of Guardian Detroit Bank, al
though from a purely economic standpoint they occupied exactly
the same status as branch offices in the contiguous corporate area of
Detroit, it was decided to organize under the provisions of the
general corporation laws (Act 84, Public Acts of 1921, as amended)
a Michigan corporation under the corporate title Guardian Detroit
Group (Inc.), for the following purposes:
to acquire, own, hold, dispose of, and deal in stocks, bonds, and other evidences
of indebtedness and securities, including those issued by any corporation,
domestic or foreign, and to possess and exercise in respect thereto, all rights,
powers, and privileges of individual owners thereof, including the right to Vote
the same and to execute proxies thereof.
The banking laws of Michigan (including Act L X Y I , Public
Acts of 1929) impose no limitation on the ownership of bank stocks
which would make such ownership different from that of other cor
porate shares. Furthermore, express power to acquire and own
shares of other corporations is given in Article I I I of the articles
of association quoted above. The ownership of such shares by the
company is specifically “ in furtherance of the objects of its exist
ence.55 The power so to do is conferred upon the company by its
charter and the statute of the State of Michigan. Furthermore, no
statute could be found wherein a restraint of any sort is imposed
100136— 30— vor. 2,
pt
9------ 3
1042
B R A N C H , C H A IN , AND GROUP B A N K IN G
upon the transfer or ownership of shares of stock in national banks
operating in Michigan, in Michigan State banks or Michigan trust
companies.
Guardian Detroit Group (Inc.) was organized purely as a hold
ing company, and, as such, its powers are limited solely to ownership
and other securities and the exercise of the incident privilege of
such ownership. This is the entire scope of its powers under its
charter.
In order to determine whether the owning and voting of such
shares (which is the full extent of business in which it is engaged)
by the company might be held to engage the company in the busi
ness of banking, this question was submitted to the attorney general
of the State of Michigan. It was our contention that the answer
must be found in the nature of the business as authorized and car
ried on by the company. With this view, the attorney general
agreed in an opinion filed on October 9, 1929, in which he reached the
following conclusions:
B a n k i n g L a w — C o k p o r a t io n L a w — S t o c k
(Opinion of Attorney General o f the State o f Michigan, Filed October 9, 1929)
syllabus
First. A holding company may organize under the general corporation laws
o f Michigan and may, if its charter is broad enough, purchase, own, and
hold shares of stock in State banks.
Second. The ownership and exercise o f incidents of ownership of stock in
a holding company owning all but qualifying shares in several banks is not
legally doing a banking business in the State, in violation o f law.
Third. It is only when the practices of a holding company become such
as to usurp the functions o f the bank in fact and in reality, so that a banking
business is being done by the holding company that intervention can be sus
tained.
Fourth. A holding company, can, by expression in its charter, meet the
double indemnity of statutory liability under the banking act.
Fifth. It is the banking department’s duty to continue to treat individual
banks concerned in stock purchased by a holding company in all respects
as individual units for examination and all other purposes; and also to scruti
nize the operation of such banks in their factual relationship with the holding
company.
It will be noted from paragraph 4 of the above syllabus that the
Attorney General held that a holding company could, by expression
in its charter, meet the double indemnity of statutory liability under
the banking act. Provision to this effect had been made some five
months previously in the original articles of association of guardian
Detroit Group (Inc.), filed on May 10, 1929, as follows:
A r t . IX. The holders of the stock of this corporation shall be individually
and severally liable (in proportion to the number of shares o f its stock held
by them respectively) for any statutory liability imposed upon this corporation
by reason of its ownership of shares o f the capital stock of any bank or trust
company.
Subsequently, the above paragraph of Article I X of the articles
of association was amended at a meeting of the stockholders held on
October 18, 1929, so as to provide a method of enforcing the double
liability of stockholders with respect to bank and trust company
shares owned by said corporation, as follows:
A r t . IX . The holders of stock of this corporation shall be individually and
severally liable (in proportion to the number o f shares of its stock held by
B R A N C H , C H A IN , AND GROUP B AN K IN G
1043
them respectively) for any statutory liability imposed upon this corporation by
reason o f its ownership of shares of the capital stock of any bank or trust com
pany, and the stockholders of this corporation by the acceptance of their cer
tificates of stock of this corporation severally agree that such liability may be
enforced in the same manner as statutory liability may now or hereafter be
enforceable against stockholders of banks or trust companies under the laws
of the United States or the State of Michigan. A list, of the stockholders of
this corporation shall be tiled with the banking commissioner of Michigan and
the Comptroller of the Currency whenever requested by either of those officers.
Another provision to which we shall have occasion to refer later
is that embodied in the second paragraph of Article I X , as amended,
which reads as follows:
A rt. IX . This corporation reserves and shall have the right from time to
time, upon the affirmative vote of three-fourths of its directors, to issue and
dispose of all or any of its unissued or increased stock for the purpose of acquir
ing stock of banks, trust companies and other corporations without offering to
the stockholders of this corporation for subscription any of the stock so to be
disposed of.
The only particularly significant paragraph in the by-laws is the
following:
A rt . VI. Whenever at any meeting of the stockholders of a bank or trust
company of which this corporation shall at the time own 75 per cent or more
of the outstanding stock, an election of a board of directors is held, the shares
of such bank or trust company owned by this company shall be voted in favor
of the election of a board of directors o f w h xh at least 75 per cent shall consist
of directors residing in the municipality where said bank or trust company is
located or within a radius o f 50 miles thereof.
Perhaps I should mention in passing that the board of directors
of all of our member units outside of the Detroit metropolitan area,
are made up entirely of local men, except in three instances wherein
the local boards were insistent upon having in one case three and in
the other two cases one representative from Detroit to serve on their
directorates. A ll of these representatives are practical operating
officers of Detroit units.
In brief, the articles of association (charter) have been accepted
and approved by the secretary of state of Michigan. The pro
visions as to statutory liability give the same protection to deposi
tors in unit member banks and trust companies as when the shares
in these institutions were owned by various individuals.
In order to complete the record, photostatic copies of the follow
ing documents (marked “Appendix I ” ) are submitted for the infor
mation of the committee:
Certificate of the secretary of state of Michigan authorizing the
corporation to commence business, dated May 10, 1929.
Articles of association with all amendments to date.
Copy of by-laws with amendments to date.
(The documents in question are printed at the conclusion of Mr.
Lord’s testimony.)
D IR E C T O R A T E O F H O L D I N G C O M P A N Y
The original board of directors was a small one, comprising only
nine members, but, with the acquisition of additional banks, one or
more directors chosen from the board of the unit acquired was added
to the directorate of the holding company, except in the case of a
few of the smaller institutions. Usually, the chairman or president
or senior operating officer of the unit in question was elected a di
rector, and, in addition, the unit bank was invited to designate a
1044
B RA N CH , C H A IN , AND GROUP B A N K IN G
senior active operating officer to serve on the operating committee,
the functions of which will be described later.
The board at present comprises:
Frank W. Blair, chairman of the board, Union Guardian Trust Co., Detroit,
Mich.
Arthur C. Bloomfield, chairman, Union & Peoples National Bank, Jackson,
Mich.
Henry E. Bodman, counsel, Guardian Detroit Union Group (In c.), Detroit,
Mich.
Clarence H. Booth, chairman of the board. Motor Bankers Corporation,
Detroit, Mich.
Ralph II. Booth, president, Booth Newspapers (In c.), Detroit, Mich.
Joseph H. Brewer, president, Grand Rapids Trust Co., Grand Rapids, Mich.
W alter O. Brings, chairman and president, Briggs Manufacturing Co., Detroit,
Mich.
Daniel D. Brown, president, First National Bank & Trust Co., Port Huron,
Mich.
Harry C. Bulkley, attorney, Campbell, Bulkley & Ledyard, Detroit, Mich.
Charles S. Campbell, president, First National Bank & Trust Co., Kalama
zoo, Mich.
R oy D. Chapin, chairman of board, Hudson Motor Car Co., Detroit, Mich.
George R. Fink, president, Michigan Steel Corporation, Detroit, Mich.
William A. Fisher, president, Fisher Body Corporation, Detroit, Mich.
Edsel B. Ford, president, Ford Motor Co., Detroit, Mich.
Frank E. Gorman, vice president. Capital National Bank, Lansing, Mich.
Stephen A. Graham, president. Federal Commercial & Savings Bank, Port
Huron, Mich.
John C. Grier, jr., president, Guardian Detroit Co., Detroit, Mich.
C. II. Haberkorn, jr., chairman of board, Bank of Detroit, Detroit, Mich.
Carlton M. Higbie, chairman of board, Keane, Higbie & Co., Detroit, Mich.
Sherwin A. Hill, attorney, Warren, Hill & Hamblem, Detroit, Mich.
Charles H. Hodges, vice president, American Radiator & Standard Sanitary
Corporation, Detroit, Mich.
James Inglis, president, American Blower Corporation, Detroit, Mich.
Richard P. Joy, director, National Bank o f Commerce, Detroit, Mich.
George B. Jndson, president, Bank of Detroit, Detroit, Mich.
Ernest Kanzler, president, Universal Credit Corporation, Detroit, Mich.
Jerome E. J. Keane, director, Guardian Detroit Bank, Detroit, Mich.
Dwight B. Lee, president and treasurer, Motor Products Corporation, Detroit,
Mich.
Robert O. Lord, president, Guardian Detroit Bank, Detroit, Mich.
Alvan Macauley, president and general manager, Packard Motor Car Co.,
Detroit, Mich.
Francis C. McMath, director, Canadian Bridge Co. (L td .), Detroit, Mich.
George B. Morley, chairman of board, Second National Bank & Trust Co.,
Saginaw, Mich.
Charles S. Mott, vice president, General Motors Corporation, Detroit, Mich.
Fred T. Murphy, trustee, Murphy Family Trusts, Detroit, Mich.
Edwin H. Nelson, president, Nelson, Baker & Co., Detroit, Mich.
Phelps Newberry, vice president, Guardian Detroit Bank, Detroit, Mich.
Ransom E. Olds, chairman of board, Reo Motor Car Co., Lansing, Mich.
Jerome H. Remick, president, Detroit Creamery Co., Detroit, Mich.
Herbert S. Reynolds, president, Union & Peoples National Bank, Jackson,
Mich.
John R. Russel, director, Union Guardian Trust Co., Detroit, Mich.
Murray W. Sales, president, Murray W. Sales & Co., Detroit, Mich.
Henry H. Sanger, president, National Bank o f Commerce, Detroit, Mich.
R. Perry Shorts, president, Second National Bank & Trust Co., Saginaw,
Mich.
Hal H. Smith, attorney, Beaumont, Smith & Harris, Detroit, Mich.
Oscar W. Smith, president, Parke, Davis & Co., Detroit, Mich.
John N. Stalker, president, Union Guardian Trust Co., Detroit, Mich.
James L. Walsh, vice president, Guardian Detroit Bank, Detroit, Mich.
Charles Beecher Warren, attorney, Warren, Hill & Hamblen, Detroit, Mich.
Dudley E. Waters, chairman, Grand Rapids National Bank, Grand Rapids,
Mich.
1045
B R A N C H ? C H A IN , AND GROUP B A N K IN G
3.
NUMBER,
NAM E,
SOURCES OF E A C H
L O C A T IO N ,
BANK
C A P IT A L ,
A C Q U IR E D B Y
SURPLUS
D E P O S IT S ,
AND
G U A R D I A N D E T R O IT U N I O N
RE
GROUP
( I N C .)
The following information is submitted as of the close of business
March 27, 1930, which is taken as a convenient date by reason of
the fact that it is the date of the last call of the Comptroller of the
Currency for Statement of Condition of National Banks. It also
is the date upon which the State Banking Commissioner of Michi
gan called for a Statement of Condition of all State Banks and
Trust Companies in Michigan.
As of March 27, 1930, Guardian Detroit Union Group (Inc.)
owned all or practically all of the capital stock (except directors7
qualifying shares) of 10 national banks, 2 located in Jackson and
1 in each of the cities of Battle Creek, Detroit, Grand Rapids,
Kalamazoo, Lansing, Niles, Port Huron, and Saginaw, 6 State
banks, members of Federal reserve system, 2 located in Detroit and
1 in each of the cities of Dearborn, Flint, Highland Park, and Port
Huron; 6 State banks nonmenibers of Federal reserve system, 2
located in Dearborn and one in each of the cities of Detroit, Grosse
Pointe Park, Hamtrainck, and Trenton, and 5 trust companies, lim
ited to purely fiduciary activities under the Michigan law, 2 located,
in Detroit and one in each of the cities of Flint, Grand Rapids, and
Highland Park, with capital, surplus, deposits, and resources as
follows:
Units in which the Guardian Detroit Union Group (In c.), holds a controlling
interest, i ccapitulation
i
Capital
: Undivided
profits and
reserves
Surplus
10 national banks__________ 310, 200, 000. 00 $10, 500, 000.
6 State banks (members
Federal reserve system) _ _ 12, 600,000. 00
7, 510, 000.
6 State banks (nonmembers
Federal reserve sy ste m ). _
492,150.
1, 250, 000. 00
5 trust companies___________
4, 574, 000.
7, 550, 000. 00
31, 600, 000. 00
Deposits
Resources
00 !$4, 189, 210. 70 $176, 707, 176. 87 $205, 977, 951. 18
00
3,121,497.18
155, 884, 329. 58
181, 519, 387. 12
00
00
159,174. 88
1, 653, 977. 77
10,130, 710. 62
58, 117,955. 12
12, 697, 578. 86
76, K4, 525. 05
22, 626,150. 00
9,123, 860. 53
400, 840,172. 19
476, 389, 442. 21
On March 27, 1930, the Guardian Detroit Union Group (Inc.),
also owned an approximate 40 per cent interest in seven small
State banks nonmembers of the Federal Reserve System.
In order to complete the record, detailed figures are submitted for
the information of the committee, marked Appendix II.
(The document referred to is printed in full at the conclusion of
Mr. Lord’s testimony.)
4.
NAM E
C O M M E R C IA L
STOCK
AND
BANKS
OF W H I C H
C A P IT A L
AND
IS O W N E D
STRU CTU R E
TRUST
BY
OF
C O R P O R A T IO N S
C O M P A N IE S ,
G U A R D IA N
THE
OTHER
M A J O R IT Y
D E T R O IT U N I O N
GROUP
(>'>'
THAN
THE
(I N C .) .
On March 27, 1930, Guardian Detroit Union Group (Inc.), owned
either directly or indirectly all or substantially all of the capital
stock of two joint stock land banks; nine securities companies; one
1046
BRA N CH , C H A IN , AND GROUP B A N K IN G
title guaranty company; two building companies; and one safe
deposit company, all located in Michigan, excepting one Joint
Stock Land Bank Co., whose principal place of business was Cleve
land, Ohio, and one securities company in California, with a nom
inal capital of $10,000.
In order to complete the record, detailed figures as to capital
stock, surplus, undivided profits, reserves and total resources of
these corporations (marked “Appendix I I I ” ) are submitted
for the information of the committee.
(The document referred to is printed in full at the conclusion of
Mr. Lord’s testimony.)
5.
METHOD
OF
A C Q U IR IN G
BANKS
AND
C O R P O R A T IO N S
As previously indicated under the original articles of association
(charter) of Guardian Detroit Group (Inc.), the company may,
upon the affirmative vote of three-fourths of its board of directors,
issue and dispose of unissued or increased stock of said company for
the purpose of acquiring stocks of banks or trust companies without
offering to the stockholders of the company for subscription the
stock to be so disposed of. By special provision of said charter, it
is provided that the stockholders of said company shall be individ
ually and severally liable (in proportion to the number of shares
of stock held by them respectively) for any statutory liability im
posed on such company by reason of its ownership of such shares
of the capital stock of any bank or trust company.
In accordance with these provisions of the charter, Guardian De
troit Group (Inc.), acquired all or substantial^ all of the capital
stock of the following institutions (except directors qualifying
shares) :
Guardian Detroit Bank, Detroit, Mich.
Guardian Trust Co., Detroit, Mich.
Guardian Detroit Co., Detroit, Mich.
Highland Park State Bank, Highland Park, Mich.
Highland Park Trust Co., Highland Park, Mich.
Bank o f Dearborn, Dearborn, Mich.
National Union Bank & Trust Co., Jackson, Mich.
Federal Commercial & Sayings Bank, Port Huron, Mich.
First National Bank & Trust Co., Port Huron, Mich.
Bank o f Detroit, Detroit, Mich.
While Guardian Detroit Group (Inc.), was negotiating wTith and
acquiring the above-listed institutions another company, called the
Union Commerce Corporation, of Detroit, Mich., had acquired all or
substantially all of the capital stock (except directors’ qualifying
shares) of the following institutions:
National Bank o f Commerce, Detroit, Mich.
Union Trust Co., Detroit, Mich.
Union Co., Detroit, Mich.
Michigan Industrial Bank, Detroit, Mich.
Union State Bank, Dearborn, Mich.
Bank o f Commerce, Dearborn, Mich.
Jefferson Savings Bank, Grosse Pointe, Mich.
Union Joint Stock Land Bank, Detroit, Mich.
Ohio-Penn. Joint Stock Land Bank, Cleveland, Ohio.
City National Bank & Trust Co., Battle Creek, Mich.
Keane, Higbie & Co., Detroit, Mich.
Union Industrial Bank and Union Industrial Trust Co., Flint, Mich.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1047
Union Commerce Corporation had also acquired through exchange
of its stock an approximate 40 per cent interest in seven small banks
located entirely in agricultural communities. In two other cases
58 per cent and a 78 per cent interest wras acquired. In acquiring
the Ohio-Penn. Joint Stock Land Bank of Cleveland, Ohio, the
Union Commerce Corporation exchanged its own stock for a portion
of the Land Bank stock and in addition, purchased a large number
of shares for cash. In the case of one other bank, the Union Com
merce Corporation after exchanging its stock entered into an agree
ment with the stockholders wherein the Union Commerce Corpora
tion purchased a considerable number of shares for cash.
Early in September of 1929, representatives of Guardian Detroit
Group (Inc.) and Union Commerce Corporation discussed the pos
sible advantages which might arise from a merger of the two com
panies. The discussion pointed out manifest benefits, and accord
ingly a proposed plan and agreement wTas drawn up providing for
the acquisition of the stock of Union Commerce Corporation by
Guardian Detroit Group (Inc.) through exchange of shares on a
share for share basis after declaration of a 20 per cent stock divi
dend by Guardian Detroit Group (Inc.)
On December IT, 1929, the plan was declared operative— the title
of Guardian Detroit Group (Inc.) thereupon being changed to
Guardian Detroit Union Group (Inc.), which is its title to-daj^.
Through this merger the latter company acquired ownership of
stock in the financial institutions and other corporations referred
to in the preceding paragraphs.
Subsequently, Guardian Detroit Union Group (Inc.) acquired by
exchange of stock all or substantially all of the stock, except direc
tors’ qualifying shares, of the following institutions:
Peoples National Bank o f Jackson, Mich.
City National Bank & Trust Co., Niles, Mich.
Capital National Bank o f Lansing, Mich.
Grand Rapids National Bank, Grand Rapids, Mich.
First National Bank & Trust Co., Kalamazoo, Mich.
Grand Rapids Trust Co., Grand Rapids, Mich.
Second National Bank & Trust Co., Saginaw, Mich.
Subsequent to March 27, 1929, which date has been selected for
the data included in this statement, Guardian Detroit Union Group
(Inc.) acquired (on April 8, 1930) practically all of the capital
stock, except directors’ qualifying shares, of the National Bank of
Ionia, Mich.
In figuring the basis of exchange of stock of the group company
for that of the banks or trust companies acquired, it may be stated
that, in general, the method was to reduce to a parity of actual value
both the stock of the holding company and the stock of the bank
to be acquired; and earnings of both institutions were also reduced
to a parity— both factors being given due consideration in arriving
at a basis satisfactory to both parties at interest. In this manner
any tendency toward dilution of either actual value of the shares
of earning power was minimized.
Actual values were determined by an examination of the assets of
the bank with which negotiations were under way; and the bank,
through its representatives, in turn, was afforded an opportunity to
satisfy itself as to the value of the shares of the group company.
1048
B RA N CH , C H A IN , AND GROUP B AN K IN G
On March 27, 1930, Guardian Detroit Union Group (Inc.) owned
all or substantially all of the stock of 27 banks and/or trust com
panies and a minority interest in seven additional banks. This is
exclusive of the two joint-stock land banks owned. Many of the
units acquired already had existing branches within the city limits
of the municipality in which located. The total number of locations
at which banking business is now7 transacted aggregates 102, exclu
sive of the seven banks in which a minority interest is owned.
6.
C A P IT A L
STRUCTUR E
OF G U A R D IA N
D E T R O IT U N I O N
GROUP
( I N C .)
Guardian Detroit Union Group (Inc.) has but one class of capital
stock of $20 par value. To date 2,500,000 shares have been author
ized, of which there are at present issued and outstanding 1,544,844
shares, representing a total of $30,896,880 par value out of a total
authorized capital of $50,000,000.
These shares have been validated by the Michigan Securities Com
mission and were listed on the Detroit Stock Exchange on February
8, 1930.
It may be of interest to state at this juncture that Guardian
Detroit Union Group (Inc.)— a Michigan corporation— is distinctly
a Michigan institution inasmuch as 7,192 stockholders out of a total
of 8,090 are residents of Michigan: 88.9 per cent of the stockholders
reside in Michigan, and these Michigan stockholders own 92.64
per cent of the total stock now outstanding; New York City with
150 stockholders owns only 2.13 per cent of the total shares out
standing.
Details as to the geographical location of the stockholdings of the
group company are as follows as of April 1, 1930:
D IS T R IB U T IO N
OF
STOCK
The distribution of shares of Guardian Detroit Union Group
(Inc.), according to the records as of April 1, 1930, was as follows:
Num ber
of stock
holders
Area
M ic h ig a n ..__________________________ _________
N ew Y ork C it y _______ _____ ________________
Eastern part of United States (exclusive of
N ew Y ork C ity
______ ______
________
Central part of U nited States...........................
Western part of United States (west of
Mississippi)____________
________________
Outside of U nited States____
Outside of M ichigan, total___ _______
Michigan, total------------------------- --------
7.
R E L A T IO N S
BETW EEN
Total
shares held
Percentage
Percentage
of stock
of stock
holders to
to total
total
Average
share
holding
7,192
150
1, 424,390
32, 751
88.90
1.85
92.64
2.13
198.05
218.34
244
296
31, 303
30,190
3. 02
3. 66
2.04
1.96
128. 29
101.99
170
38
17, 762
1,119
2.10
.47
1.16
.07
104.48.
29.45
898
7, 192
113,125
1, 424, 390
11.10
88.90
7. 36
92. 64
125. 97
198.05
8,090 !
1, 537, 515
100.00
100. 00
190. 05
G U A R D IA N
D E T R O IT
U N IO N
GROUP
( I N C .)
AND
B A N K S A C Q U IR E D
I believe that the information which the committee has requested
on this subject can best be given by reading excerpts from con
fidential bulletin No. 1 of Guardian Detroit Union Group (Inc.)*
B RA N CH , C H A IN , AND GROUP B A N K IN G
1049
dated January 2, 1930, copies of which were furnished to all officers
and directors of unit members of the group. (Complete text in
cluded in Appendix IV .)
(The documents referred to are printed in full at the conclusion
of Mr. Lord’s testimony.)
From its inception Guardian Detroit Union Group (Inc.) has
stood committed to the fundamental policy of developing the stand
ing and prestige of local management and has placed the responsi
bility of such management upon the local boards of directors and
local officers.
Article V I of the by-laws of the group provides:
Whenever at any meeting of the stockholders of a bank or trust company of
which this corporation shall at the time own 75 per cent or more of the out
standing stock, an election o f a board, o f directors is held, the shares of such
bank or trust company owned by this company shall be voted in favor of the
election of a board of directors of which at least 75 per cent shall consist of
directors residing in the municipality where said bank or trust company is
located or within a radius of 50 miles thereof.
To further carry out these policies, the board of directors of
Guardian Detroit Union Group (Inc.) adopted the following reso
lutions :
Resolved, That credit based upon the deposits in a local bank, which is a
unit member o f Guardian Detroit Union Group (In c.), shall be controlled wholly
by the board of directors and the officers o f the local unit bank; and
Resolved, That Guardian Detroit Union Group (Inc.) in its relationships
with local banks which are unit members of the group, accepts as its sole
function, responsibility, and duty— to provide stronger support to the banks
and a more secure basis for these institutions— and the officers and staff of
the group be, and they hereby are, directed to devote their energies and restrict
their activities accordingly.
In order to put into effect these broad policies and such other more
specific courses of action as may be adopted in conformity thereto,
it is necessary to develop a form of organization for the group which
will not only allow the greatest possible latitude in the transaction
of local business, but will also, by a process of mutual education,
make constantly available to each unit all the accumulated knowledge
and expert opinion possessed by all the other units.
In considering this subject of the organization and functions of
the group company, it should be borne in mind that (the banking
laws) Act No. 66, public acts of 1929, State of Michigan, effective
April 19, 1929, provides—
Sec. 14. The affairs o f each bank shall be managed by a board of not less
than five directors * * *.
Sec. 15. The board of directors, or a quorum thereof, * * * shall meet at
least once each month and shall at such meetings examine the loans and in
vestments made by the officers thereof since the last meeting of such board
and shall review the other transactions of such bank. It shall cause to be
spread upon the records of such bank, in the record book thereof which shall
be kept for that purpose, the minutes of such meeting and all its actions
thereat, including the approval o f all loans required to be approved by the
board of directors * * *.
S e c . 17. The board o f directors! o f each bank shall appoint from its members
or stockholders an examining committee, or committees, not including any
officer who has active management o f the bank, whose duties it shall be to
examine the condition o f the bank at least once every six months. The exam
ining committee shall report to the board, giving in detail all items included
in the assets o f the bank which they have reason to believe are not of the
value at which they appear on the books and records o f the bank, and giving
1050
BRANCH, CH AIN, AND GROUP BANKING
the value o f each of such items as in their judgment they may have deter
mined.
From the above paragraphs it is evident that in each local bank
incorporated or existing under the act referred to, and similarly in
each bank chartered under the national banking act, the directors
have certain statutory duties, for the satisfactory performance of
which they are held personally responsible, and which can not be
by them delegated to any other person or persons.
Aside from the bald illegality of any attempt to ursurp the func
tions or hamper the activities of the board of directors of a local unit
bank, such a course would run directly counter to prudence, good
judgment and commen sense. Experience indicates that the bulk of
profitable business enjoyed by a given bank is the result of the per
sonal efforts of directors and officers. Hence, any policy which im
pairs, even in the slightest degree, the prestige and enthusiasm of a
local board of directors is a body-blow at the growth of the local
unit bank, and therefore at the growth and prosperity of the group
as a whole.
The deliberate adoption of policies so obviously suicidal is un
thinkable; nevertheless, extreme care must be exercised to insure
that group management does not perhaps unconsciously encroach
upon the statutory and customary authority and responsibility of the
unit-bank management.. Accordingly, it was deemed advisable to
particularly emphasize “ the group policy of noninterference with
local management,” by formal action of the group board of directors.
It was, therefore,
Resolved, That the board o f directors o f each local unit institution in
Guardian Detroit Union Group (In c.), is responsible for the management o f
the affairs of the institution in question; and that the officers of each unit
institution in the group are responsible directly to the board o f directors for
their own institution and to no other authority, except the law.
In brief, the local banks, trust companies, and other unit members
of the group are, and should be, considered as enjoying all the rights
and accepting all the responsibilities of full partnership in the group,
among the advantages of which are:
First. Each separate institution has the backing of resources many
times greater than its own, giving the depositor even greater as
surance as to the safety of his funds.
Second. The larger local corporations need no longer go to New
York or Chicago for such accommodations as they may need in
the matter of loans. The group should be able to provide all the
funds to which any of the local corporations are entitled.
Third. The depositors will have available to them the credit in
formation and the financial and investment advice of a large or
ganization, including specialists in many lines. A single institu
tion of moderate size could not afford to employ such experts.
Fourth. The depositors are assured of the continuance of capable
management of the local institution. The group company must, of
necessity, be in a position to furnish capable personnel to any unit
member of the group when called upon to do so.
Fifth. The group provides contact with innumerable types of
businesses and cooperation in developing new business for clients.
Sixth. The original stockholders of the unit bank, after exchang
ing their stock for stock of the group company, will have a diver
B R A N C H , C H A IN , AND GROUP B AN K IN G
1051
sity of risk, dependent not alone on the prosperity of their local
community but supplemented by larger resources with the invest
ment spread over banking institutions located in many cities— in
banks serving a wide range of industry and territory.
Seventh. Their new group stock is part of an issue of much
greater number of shares, owned by thousands rather than hundreds
of investors, giving them a broader and more active market in case
they care to buy or sell— a stock recognized as desirable collaterial
in every large city in the country.
Of course the advantages referred to above can be obtained only
as a result of establishing sound policies uniformly throughout the
group, developing unit organizations with the ability to put these
policies into effect, and providing a means of measuring the degree
in which these policies are effectively applied. The problem is to
devise a form of organization which will accomplish these purposes
without in any way infringing upon local autonomy.
GENERAL
F U N C T IO N S
OF
GROUP
COM PANY
It would appear that the board of directors of the group company
(upon which practically all units are represented by one or more
directors) could, with perfect properity, announce its belief in the
soundness of a given policy, and request the president to bring it,
as a “ recommended policy ” to the attention of the boards of direc
tors of all unit member institutions liable to be benefited thereby.
The board of directors of the local unit institution would be at
liberty to agree or disagree with the recommendation, but when, as
and if approved by the local board, it would become the “ approved
policy ” of the local unit institution.
Both the board of directors of the local unit institution and that
of the group would have, then, a joint interest in seeing that these
approved policies are put into effect. They also have a natural de
sire to know the degree of conformity to established policies attained
by the local unit in question and how it compares in relative operat
ing efficiency with other units of the group.
Apparently, then, the group company can perform the following
useful functions for the local unit institutions without in any way
violating the basic policy of encouraging local management to run
their own banks, namely:
(a)
Acting as a clearing house for information bearing upon
policies, practices, and results obtained by the various member unit
institutions.
(&) Systematically making available to all units the practice of
the best with a view to enabling all to reach the highest standards
of operation and resultant profit.
(c) Providing expert advice at minimum cost in regard to tax
and insurance matters and extraordinary legal questions.
(d) Providing capable supervision in connection with building
construction and management.
(e) Coordinating business development activities.
( /) Purchasing standard equipment and supplies in quantity.
(g) The group company should also provide an independent ex
amining force, in no way responsible for the condition which its
1052
B R A N C H , C H A IN , AND GROUP B AN K IN G
examination discloses, to supplement the work of the board of direc
tors of a local unit in connection with the examining responsibilities
imposed by statute.
In brief, it should be the principal function of the group company
to act in an advisory capacity— recommending to the boards of the
local units, policies, practices, economies, and so forth.
The local boards and the local officers of the units must operate
their own banks or trust companies. They are better able to know
and judge local conditions.
Guardian Detroit Union Group (Inc.) is not engaged in the bank
ing business and has no intention of engaging in the banking busi
ness. However, the need for coordinating activities of the various
member institutions requires some sort of organizations, in order to
achieve the increased efficiency which may reasonably be expected
from separate organizations imbued with a desire and a will to help
each other in providing the best possible service for the community
served. Accordingly, the following committees were elected by the
board of directors: Advisory committee, executive committee, oper
ating committee.
The advisory committee is largely a policy-making committee, its
membership is comparatively small, and includes no active operating
officers of any unit. This committee has entire freedom in criticiz
ing either the policies or the management of any unit or any depart
ment of the associated institutions. Its meetings are not held on
stated days, but upon the call of the chairman. Operating heads of
units or departments have the advice and assistance of this com
mittee as to any questions under consideration. The advisory com
mittee, as at present constituted, includes the following:
Fred T. Murpliy, chairman, trustee Murphy Family Trusts.
James Inglis, president American Blower Corporation.
Henry E. Bodman. counsel Guardian Detroit Union Group (In c.), Detroit,
Mich.
R oy D. Chapin, chairman of board Hudson Motor Car Co., Detroit, Mich.
Edsel B. Ford, president Ford Motor Co.. Dearborn, Mich.
Charles II. Hodges, vice president American Radiator & Standard Sanitary
Corporation, Detroit, Mich.
Ernest Kanzler, president Universal Credit Corporation, Detroit, Mich.
Alvan Macauley, president and general manager Packard Motor Car Co.,
Detroit, Mich.
George V. Morley, chairman of board Second National Bank and Trust Co.,
Saginaw, Mich.
Charles S. Mott, vice president General Motors Corporation, Detroit, Mich.
Jerome H. Remick, president Detroit Creamery Co., Detroit, Mich.
John R. Russel, director Union Guardian Trust Co.
Murray W. Sales, president Murray W. Sales & Co., Detroit, Mich.
Charles B. Warren, attorney, Warren, Hill & Hamblen, Detroit, Mich.
The executive committee includes several members of the advisory
committee, together with other members of the board of directors
who are operating men in the organizations in the group. Its duties
are much the same as any executive committee, empowered to act
on behalf of the board of directors.
The operating committee is made up of the operating heads of the
various large units in the group. Its function is to discuss operating
details, new business, and other matters pertaining to direct opera
tions of the various institutions, which would make for better and
more economical operation and for the further growth and develop
ment of the units in the group.
B R A N C H , C H A IN , AND GROUP B AN K IN G
1053
The following are members of the operating committee:
James L. Walsh, chairman, vice president Guardian Detroit Bank.
Frank W. Blair, chairman of board Union Guardian Trust Co., Detroit, Mich.
Frank M. Brandon, president City National Bank & Trust Co., Niles, Mich.
Joseph H. Brewer, president Grand Rapids National Bank, Grand Rapids,
Mich.
Harry S. Covington, executive vice president National Bank of Commerce,
Detroit, Mich.
Frank E. Gorman, vice president and cashier Capital National Bank, Lansing,
Mich.
Stephen A. Graham, president Federal Commercial & Savings Bank, Port
Huron, Mich.
John C. Grier, jr., president Guardian Detroit Co., Detroit, Mich.
Carlton M. Higbie, chairman of board Keane, Higbie & Co., Detroit, Mich.
George B. Judson, president Bank of Detroit, Detroit, Mich.
Charles A. Kanter, executive vice president National Bank of Commerce,
Detroit, Mich.
Samuel R. Kingston, executive vice president and cashier National Bank of
Commerce, Detroit, Mich.
Robert O. Lord, president Guardian Detroit Bank, Detroit, Mich.
Duncan J. McNabb, president Keane, Higb.e & Co. (In c.), Detroit, Mich.
Frank J. Maurice, executive vice president Highland Park State Bank,
Highland Park, Mich.
E. R. Morton, vice president and cashier City National Bank & Trust Co.,
Battle Creek, Mich.
Phelps Newberry, vice president Union Guardian Trust Co., Detroit, Mich.
Bert K. Patterson, vice president and treasurer Guardian Detroit Union
Group (In c.), Detroit, Mich.
Herbert S. Reynolds, president Union and Peoples National Bank, Jackson,
Mich.
Alex. Robertson, vice president National Bank of Ionia, Ionia, Mich.
Henry H. Sanger, president National Bank o f Commerce, Detroit, Mich.
Earl H. Shepherd, vice president First National Bank & Trust Co., Kalama
zoo, Mich.
R. Perry Shorts, president Second National Bank & Trust Co., Saginaw,
Mich.
John N. Stalker, president Union Guardian Trust Co., Detroit, Mich.
Arthur H. Vogt, vice president and comptroller Guardian Detroit Union
Group (In c.), Detroit, Mich.
Herbert R. Wilkin, executive vice president Union Industrial Bank, Flint,
Mich.
Instead of setting up a number of departments or divisions in the
group company, certain staff officers have been appointed to assist
the president of the group company in coordinating and stimulating
the activities of local institutions in accordance with “ approved
policies.”
A complete list of the entire personnel of the group company is
included in the annual report which is attached as Appendix V.
(The document referred to is printed in full at the conclusion of
Mr. Lord’s testimon}^.)
With the exception of the vice president and treasurer, and the
secretary of the group company, the official personnel of Guardian
Detroit Union Group (Inc.) is made up entirely of talent loaned
ov the members of the group. The salaries, except in the instances
given above, are paid by the local units of which the individual is
an officer. This is in order to keep at a minimum the expense of
the group organization and at the same time supply to the units of
the group the best available advice on special subjects.
In the official organization of the group company, we have a
group of active officers and advisory officers who, through their
knowledge and experience, should prove to be of great service to
1054
B RA N CH , C H A IN , AND GROUP B A N K IN G
all of the units in the group. A ll operating heads are encouraged
to write to the group company on any questions wherein it is felt
that the staff of the group company can be helpful. Communica
tions are ordinarily addressed to the president and by him referred,
if necessary to the proper officer in the group organization for
necessary action.
The advisory committee concerns itself only with the considera
tion of broad questions which affect the policy of the group as a
whole; and the executive committee is limited in its activities to
functioning in lieu of the board during the interval between regular
quarterly meetings. However, the operating committee is intended
to be the instrumentality to which the operating heads of the various
unit members bring their day-to-day operating problems. In this
connection, I think it would be of interest, inasmuch as we are
dealing with a new kind of organization— to read a few extracts
from the minutes of the first meeting of this operating committee:
The chairman outlined the purposes o f the meeting, quoting from the annual
report of the president of Guardian Detroit Union Group (In c.), as follow s:
“ The operating committee is made up of the operating heads of the various
large units in the group. Their function is to discuss operating details, new
business, and other matters pertaining to direct operations o f the various
institutions, which would make for better and more economical operation and
for the further growth and development o f the units in the group.”
It was pointed out that the operating committee consists, as present,
of 27 members, and that it is apparently expected to take cognizance
of all matters which have a bearing upon efficient and economical
operation, or wThich may be expected to have an effect upon the growth
of any banking, fiduciary, or investment unit, or of the group as a
whole. It was the concensus that with such a large membership and
such a broad range of activities, the operating committee can function
most effectively through the organization of subcommittees, ap
pointed to consider specific questions and to make appropriate re
ports and recommendations to the operating committee.
It was agreed that the operating committee should be represented
by one of its own members on each subcommittee, but that the entire
field of group official personnel should be drawn upon freely in mak
ing up the membership of the various subcommittees.
The chairman emphasized the importance of actually carrying out
the policy laid down at the first meeting of the board of directors of
the group company, namely, that the unit instructions wTere to con
tinue to function independently and subject only to the control of
their respective boards of directors and officers. He explained that
the operating committee was essentially a voluntary gathering of
operating heads of unit banks, trust companies, and other financial
organizations who plan to foregather, from time to time, wTith a view
to interchanging ideas; to determine, as the result of general dis
cussion, the best banking policies and practices to the end that each
“ recommended policy ” should be adopted by such units as saw fit to
recognize the sheer logic of the suggestion, after taking into full
account the exigencies of its local situation.
The chairman requested all members to consider the meetings of
the committee as a forum for the discussion of, and a clearing house
for, information bearing upon local-banking policies, operating
methods, difficulties encountered, and results obtained by the various
B R A N C H , C H A IN , AND GROUP B AN K IN G
1055
member unit institutions, with a view of systematically making avail
able to all units the practices of best so as to enable all to reach the
highest standards of operations and resultant profit.
The chairman suggested that it was entirely possible that certain
recommended policies might be applicable to certain member unit
institutions and obviously inapplicable to others, and, accordingly,
that votes be taken by units on each separate question considered by
the operating committee so that proper flexibility of application
would be insured without sacrificing the greatest possible degree of
harmonious operation.
8 . G E O G R A P H IC A L A R E A
In determining the geographical area into which Guardian Detroit
Union Group (Inc.) has so far extended its operations, we were
fortunate in having a natural, relatively compact trade area lying
almost wholly within the State of Michigan. We have to date con
fined our operations entirely to the lower Peninsula of Michigan, the
upper peninsula forming no part of the natural trade area.
A ll corporations now a part of the Guardian Detroit Union Group
(Inc.) are located within the confines of the State of Michigan with
the exception of the Ohio-Pennsylvania Joint Stock Land Bank,
Cleveland, Ohio, and the Guardian Detroit Co., of California, a
securities sales organization operating with a nominal capital of
$10,000 and with offices in Los Angeles and San Francisco, Calif.
We have no present intention of crossing State lines, although
economically Toledo and other Ohio cities are within the trade area
of Detroit.
W e feel at this time that group or branch banking should so far
as our own activities are concerned be confined to an area which by
the very nature of its business and industries is more or less depend
ent upon Detroit.
9 . A U D IT
AND
E X A M IN A T IO N
Guardian Detroit Union Group (Inc.), is fortunate in having
as vice president and treasurer, Mr. Bert K. Patterson, formerly
chief national bank examiner of the seventh Federal reserve district,
assisted by other former national bank examiners and assistants.
These examiners made, during the formative stages of the group,
detailed examinations of banks with which negotiations were under
Avay, and their findings were used in determination of values and
earnings necessary to arrive at an equitable basis for exchange of
stocks.
These gentlemen have now completed a thorough examination
of each unit member institution and, generally speaking, followed
the same procedure as do national bank examiners, except that they
are allowed much more time than is ordinarily permissible for regu
lar examinations of national banks by the comptroller’s representa
tives. Their examination is perhaps more comprehensive as to the
condition of the banks.
We contemplate having examinations made by these gentlemen
of all unit banks at least twice each year, examinations of course
to be in addition to those of national or State examiners.
1056
B R A N C H , C H A IN , AND GROUP B A N K IN G
The unit banks forward to the group office each week a balance
sheet statement of their condition which is used principally to keep
the officers of the group company advised of any important fluctua
tions in the main accounts of the bank— for example, marked in
creases or decreases in deposits, etc. The unit banks also forward
to ^the group office a balance sheet at the end of each month. These
figures are assembled and consolidated. Likewise, the unit banks
forward at the end of each month a statement of their earnings.
These are also combined to note progress made from month to month.
A ll unit members of Guardian Detroit Union Group (Inc.) are
gradually establishing the accrual system, in accordance with the
most modern practice. Besides establishing a uniform method of
bookkeeping and minimizing the possibilities of errors and inaccu
racies, it is felt that the accrual system is an additional safeguard
against possible loss in that it tends to show up any unusual trans
action or series of transactions and thus invite immediate investiga
tion as to the reasons therefor.
c o n c l u s io n s
I think this completes the information which your chairman
requested me to furnish. Before concluding my statement, I should
like to say that if there is any other information desired by the
committee, I shall be glad to have it prepared promptly and for
warded to the committee for inclusion in the record.
In that part of the latest Report of the Comptroller to Congress*
under the heading, “ Legislation Recommended,” I note that the
comptroller recommends the enactment of legislation wThich will
bring the operations of bank holding companies under some degree
of Federal supervision. The Guardian Detroit Union Group (Inc.)
would welcome the expansion of the visatorial power of the comp
troller to include all of the corporations in which we are interested.
The comptroller also recommended a further amendment to safe
guard the additional shareholders’ liability which each such bank
holding company incurs through the ownership of the shares of
national bank stock. As you will have noted from my statement*
Guardian Detroit Union Group (Inc.), through the provisions of
its charter filed May 10, 1929, Article I X , provided for this double
liability, feeling that the depositor should be given every possible
protection and safeguard.
As I see the situation to-day, we are confronted with the following
facts:
(a) During the nine years ended December 31, 1929, 5,640 banks
failed, with aggregate deposits exceeding $1,700,000,000, affecting
the savings of over 7,000,000 depositors, and causing 114,000 share
holders very serious losses.
(b) During the last calendar year, there were 640 bank failures
which caused the tying up of $234,000,000 of deposits— the greatest
of any year in the decade except 1926.
(c) It is perfectly obvious that there is something radically
wrong with a system of banking which permits such unusual hard
ships to be imposed over a wide geographical area, particularly in
the smaller communities.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1057
(d) During the same period, there have been no important failures
among the banks in the larger cities.
(e) A ll attempts to improve matters by legislation requiring the
guaranty of deposits or the like, have been proven to be economically
unsound, and have been practically abandoned.
(/) Federal reserve banks are not charged with the responsibility
of preventing bank failures and it is clearly beyond the power of
any governmental agency to stand between banks and insolvency.
{g) Intensification of the present correspondent system has been
suggested as a remedy, with the thought that the technical banking
experience and approved metropolitan banking methods should be
made available to a greater degree to smaller banks. Probably every
failed bank was a correspondent of some metropolitan bank, but that
fact has not prevented failures at the rate of more than 500 per
year. In any event, there would be no obligation, under the cor
respondent system, for the metropolitan banks to protect the local
depositors of their country correspondents.
In the final analysis, successful banking depends upon able man
agement and upon outside economic conditions. Through branch
or group banking, management for the smaller communities can un
doubtedly be improved in the vast majority of cases— and through a
larger institution properly capitalized with large financial resources
and diversification of assets and carefully supervised both by the
organization itself and by the government authorities, much greater
protection can be given to the depositors and shareholders.
To my mind, there is no probability of undue concentration of
capital, nor of the building up of a monopoly— for so long as the
banking business can be made to earn with safety a satisfactory
return, competition will exist, and new banks will continue to be
organized in the future as in the past.
I am in full agreement with Gov. Roy A. Young, of the Federal
Reserve Board, in his statement before this committee, that group,
chain and branch banking have developed because of business neces
sity, even though there has been little encouragement for it in the
way of legislation. Manifestly, more than one-half of the total
banking resources of the country, measured in terms of loans and
investments, would not now be held by branch, chain, and group
systems unless there had been some good reason for this great growth.
With him, I regard it as a natural development.
While undoubtedly economies of operation would result from
the conversion of some of the present group systems into branch
systems, I question whether this should be forced by legislation.
There is a very definite advantage arising from the retention, by
a local bank, of its own name and identity which, in most cases,
has a long and honored significance in the eyes of the local public.
Even though branch banking were permitted statewide in Michigan,
at the present time it is likely that some of our unit banks would
be kept as units, retaining their own corporate identity. In any
event, I should like to emphasize that the financial mechanism of
the country is a delicately balanced machine, and I respectfully
urge upon you gentlemen that whatever course you decide to pursue
should be tempered with the knowledge that its effects are likely
to be far reaching. It seems to me that we must seek improvement
100136—30— VOL 2,
PT
9
4
1058
B RA N CH , C H A IN , AND GROUP B A N K IN G
through evolution, rather than revolutionary measures, and allow
time for the entire banking structure to adapt itself to the new
order.
I want to thank the members of the committee for their courtesy
in permitting me to cover this subject in my own way, without
interruption, I shall be glad to answer, to the best of my ability, any
questions which may occur to the members of this committee.
(The documents referred to are as follows:)
I
A p p e n d ix
U n it e d
States
T he
of
State
A m e r ic a ,
of
M ic h ig a n ,
D epartm ent
of
State.
To all to whom these presents shall come:
I,
John S. Haggerty, secretary o f state o f the State of Michigan and
custodian of the great seal thereof, do hereby certify that articles of associa
tion o f Guardian Detroit Group (Inc.) were duly filed in this office 011 the
10th day of May, A. D., 1929, and the said company is authorized to commence
its business in conformity with Act 84, Public Acts o f 1921, as amended.
In testimony whereof I have hereunto set my hand and affixed the great
seal of the State at the capitol, in the city of Lansing, this 10th day of
May A. D., 1929.
[ s e a l .]
John
S.
H aggerty,
Secretary of State.
A r t ic l e s
of
A s s o c ia t io n
of
G u a r d ia n
D e t r o it
G roup
( I n c .)
We, the undersigned, desiring to become incorporated under the provisions
of Act No. 84 of the Public Acts of 1921, entitled “ An act to provide for the
organization, regulation and classification of domestic corporations; to pre
scribe their rights, powers, privileges and im munities; to prescribe the condi
tions upon which corporations may exercise their franchises,” etc., do hereby
make, execute, and adopt the following articles of association, to w it :
a r t ic l e
i
The name assumed by this association, and by which it shall be known in
law is Guardian Detroit Group (In c.).
a r t ic l e
ii
This corporation intends to proceed under section 1, chapter 1, part 1, of the
above act.
a r t ic l e
III
The purpose or purposes o f this corporation are as fo llo w s: To acquire, own,
hold, dispose of, and deal in stocks, bonds, and other evidences of indebtedness
and securities, including those issued by any corporation, domestic or foreign,
and to possess and exercise in respect thereto all the rights, powers, and privi
leges o f individual owners thereof, including the right to vote the same, and
to execute proxies therefor.
ARTICLE IV
Principal place where company will operate is Detroit, in the county of
Wayne, State o f Michigan.
Address o f main office in Michigan is Penobscot Building, Detroit.
ARTICLE
v
The total capital stock authorized is $7,500,000.
The amount subscribed is $1,000.
The amount paid in is $1,000.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1059
Tlie number o f shares of common stock is 150,000 of the par value of $50
each.
Amount of common stock, paid for in cash is $1,000.
The amount o f actual capital, in cash or property or both, which this cor
poration owned and possessed at the time of executing these articles is $1 ,000 .
ARTICLE VI
The term of this corporation is fixed at 30 years.
ARTICLE V II
Names of stockholders, their residences and shares subscribed by each are:
N u m b er o f
sh ares
Henry E. Bodman, 20 McKinley Place, Grosse Pointe Farms, Mich________
Edsel B. Ford, 100 Lake Shore Road, Grosse Pointe Shores, Mich__________
John C. Grier, jr., 8100 East Jefferson Avenue, Detroit, Mich____________
Sherwin A. Hill, Northville, Mich___________________________________________
Ernest Kanzler, 2501 Iroquois Avenue, Detroit, Mich_______________________
Robert O. Lord, 17 McKinley Place, Grosse Pointe Farms, Mich__________
Fred T. Murphy, 17620 East Jefferson Avenue, Grosse Pointe, Mich________
Phelps Newberry, 36 Cloverly Road, Grosse Pointe Farms, Mich__________
James L. Walsh, 8161 East Jefferson Avenue, Detroit, Mich_________________
1
1
1
1
1
12
1
1
1
AKTICLE V III
The officers and directors for the first year o f the corporation’s existence,
are as fo llo w s:
D irectors:
Henry E. Bodman, Penobscot Building, Detroit, Mich.
Edsel B. Ford, F o r d Motor Co., Dearborn, Mich.
John C. Grier, jr., Penobscot Building, Detroit, Mich.
Sherwin A. Hill, Union Trust Building, Detroit, Mich.
Ernest Kanzler, Penobscot Building, Detroit, Mich.
Robert O. Lord, Penobscot Building, Detroit, Mich.
Fred T. Murphy, Penobscot Building, Detroit, Mich.
Phelps Newberry, Penobscot Building, Detroit, Mich.
James L. Walsh, Penobscot Building, Detroit, Mich.
Officers:
Henry E. Bodman, chairman o f the board, Detroit, Mich.
Robert O. Lord, president, Detroit, Mich.
John C. Grier, jr., vice president, Detroit, Mich.
James L. Walsh, vice president, Detroit, Mich.
Phelps Newberry, vice president and treasurer, Detroit, Mich.
Lewis K. Walker, secretary, Detroit, Mich.
Arthur T. Vogt, assistant treasurer, Detroit, Mich.
Robert G. Lehman, assistant secretary, Detroit, Mich.
ARTICLE I X
The holders of the stock of this corporation shall be individually and sever
ally liable (in proportion to the number o f shares of its stock held by them
respectively) for any statutory liability imposed upon this corporation by
reason of its ownership o f shares o f the capital stock of any bank or trust
company.
This corporation reserves and shall have the right from time to time upon
the affirmative vote of three-fourths of its directors to issue and dispose of all
or any o f its unissued or increased stock for the purpose of acquiring stock
of banks or trust companies, without offering to the stockholders of this
corporation for subscription any of the stock so to be disposed of.
In witness whereof, we, the parties designated as provided by law by the
parties associating, as shown under Article V II o f these articles, for the
1060
B RA N CH , C H A IN , AND GROUP B A N K IN G
purpose o f giving legal effect to these articles, hereunto sign our names this
9th day o f May, A. D. 1929.
H e n r y E. B o d m a n .
J o h n C. G r i e r , J r .
R o bert O . L ord.
S ta te of M ic h ig a n ,
County of W ayne, ss:
On this 9th day o f May, A. D. 1929, before me, a notary public in and for
said county, personally appeared Henry E. Bodman, John C. Grier, jr., and
Robert O. Lord, known to me to be the persons named in, and who executed the
foregoing instrument, and severally acknowledged that they executed the same
freely and for the intents and purposes therein mentioned.
J o s e p h I. W e b b .
'Notary Public, W ayne County, Mich.
My commission expires November 19, 1929.
This is to certify that at the organization meeting o f the incorporators of
Guardian Detroit Group (In c.), a corporation to be formed under Act 84,
Public Acts o f 1921, o f the State of Michigan, as amended, held this 9th day
o f May, 1929, the following resolution was unanimously adopted and that the
undersigned wTas elected to act and did act as secretary of said meeting:
Resolved, That Henry E. Bodman, John C. Grier, jr., and Robert O. Lord,
be, and they are hereby designated to sign and acknowledge the Articles o f
Association o f Guardian Detroit Group (In c.), for themselves and for the
remainder of the incorporators of said corporation.
J o h n C. G r i e r ,
Secretary of the Organization Meeting of Guardian Detroit Group (In c.).
M ic h ig a n
D epartm ent
or
State,
C o r p o r a tio n
D iv is io n ,
C-6240.
May 31, 1929.
Received of Guardian Detroit Group (In c.), five and no/100 dollars. (F or
filing amendment, $5.)
J o h n S . H a g g e r t y , S ecretary of State.
M ic h ig a n
D epartm ent
State,
of
C o r p o r a tio n
D iv is io n ,
C-5655
M ay 10, 1929.
Received o f Guardian Detroit Group (In c.), three thousand seven hundred
and fifty-five and no/100 dollars. (For franchise fee, articles, $3,750, filing
articles, $5.)
J o h n S . H a g g e r t y , Secretary of State.
C e r t if ic a t e of A m e n d m e n t
to
th e
A r t ic l e s o f A s s o c ia t io n
D e t r o it G r o u p
of
the
: G u a r d ia n
( I n c .)
We, the undersigned, being the president and secretary of the Gurdian De
troit Group ( Inc.), a corporation existing under the provisions of Act. No. 84 of
the Public Acts of 1921, as amended, do hereby certify, as required by section 9,
chapter 1, Part II o f said a c t :
That at a meeting of the stockholders of said corporation expressly called for
the purpose of amending its articles of association and held at the office of said
company on the 23d day of May, A. D. 1929, it was resolved by the unanimous
vote of the capital stock o f said corporation, that Article V of the articles of
association be, and the same is, amended so as to read as follows, v iz :
“ a r t ic l e
“
“
“
“
The
The
The
The
total capital stock authorized is $7,500,000.
amount subscribed is one thousand dollars ($ 1 ,000 ).
amount paid in is one thousand dollars ($ 1 ,0 00 ).
number of shares of common stock is 375,000 o f the par value of $20.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1061
“ The amount of common stock paid for in cash is one thousand dollars
($1,000).
“ The amount of actual capital in cash or property or both which this corpo
ration owned and possessed at the time o f executing these articles is one
thousand dollars ($ 1 ,0 00 ) .”
In witness whereof we hereunto sign our names this 23 day of May, A. D.
1929.
R o b e r t O . L o r d , President.
L. K. W a l k e r , Secretary.
{ Indorsem ent:)
S t a te of M ic h ig a n ,
O f f ic e o f t h e S e c r e t a r y o f S t a t e .
I,
John S. Haggerty, secretary of state of the State of Michigan, do hereby
certify this amendment o f articles of association of Guardian Detroit Group
(Inc.) to be a true and correct copy of the original on file in this office, as of
May 31, A. D., 1929.
In testimony whereof I have hereunto set my hand and official seal at Lans
ing, this 31st day of May, in the year of our Lord 1929.
J o h n S . H a g g e r t y , Secretary of State.
June 3, 1929: Received for filing amendment to articles of association of
Guardian Detroit Group (In c.). Charles C. Thompson, deputy clerk.
C e r t if ic a t e
of
A m endm ent
of
A r t ic l e s
G roup
of
A s s o c ia t io n
G u a r d ia n
D e t r o it
( I n c .)
We, the undersigned, being the president and the secretary of Guardian De
troit Group (In c.), a corporation existing under the provisions of Act No. 84,
o f the Public Acts o f 1921, do hereby certify, as required by section 10, chapter
2, Part II of said a c t :
That at a meeting o f the stockholders o f said corporation expressly called for
the purpose o f amending its articles o f association and held at the office of
said company on the 17th day of August, 1929, it was resolved by a vote of more
than two-thirds o f the capital stock of said corporation that the shares of
stock of said company be increased from three hundred seventy-five thousand
(375,000) shares to five hundred thousand (500,000) shares, and that Article
V o f the articles of association be, and the same is amended so as to read as
follows, nam ely:
“ a r tic le
v
“ The total capital stock authorized is ten million dollars ($ 10 ,000 ,0 0 0 ).
“ The amount subscribed is seven million two hundred eighty-five thousand
dollars ($7,285,000).
“ The amount paid in is seven million two hundred eighty-five thousand dol
lars ($7,285,000).
“ The number o f shares of stock is five hundred thousand (500,000) of the par
value of $2 0 each.
“ The amount o f common stock paid for in cash is two million nine hundred
forty-seven thousand five hundred dollars ($2,947,500), and four million three
hundred thirty-seven thousand five hundred dollars ($4,337,500) has been paid
in property, the description and valuation at which each item is taken is as
fo llo w s:
N u m b er o f
sh are s
Consideration, issued in exchange for 50,000 “ Guardian Units ” (i. e.,
unified stock o f Guardian-Detroit Bank, Guardian Trust Co., of De
troit, and Guardian Detroit Co., $5,000,000___________________________ 250,000
Consideration, issued in exchange for 10.000 shares of Highland Park
State Bank, $1,000,000______________________________________________
50,000
Consideration, issued in exchange for 5,000 shares of Highland Park
Trust Co., $500,000___________________________________________________ 12,500
Consideration, issued for 6,000 shares (entire issue) of R. O. L. Co.,
$747,000______________________________________________________________ 15, 000
Consideration, issued in exchange for 2,000 shares of Bank o f Dear
born, $200,000___________________________________________ _____________
4,000
Total shares--------------------------- ------------------------------------------------------ 331, 500
1062
B R A N C H , C H A IN , AND GROUP B AN K IN G
“ Actual value of property taken in exchange in excess of, $7,447,000.
“ The amount of actual capital in cash, or property or both, which this
company owned and possessed at the time of executing the original articles
is $1 ,000 .”
In witness whereof we hereunto sign our names this 20th day o f August,
A. D. 1929.
R o b e r t O . L o r d , President.
L . K. W a l k e r . Secretary.
S ta t e of M ic h ig a n ,
County o f Wayne, ss:
Robert O. Lord, Henry I. Armstrong, and Lewis K. W alker being duly sworn
depose and say that they are three of the stockholders of the Guardian Detroit
Group (In c.), a Michigan corporation, amendments to whose articles o f asso
ciation are hereto attached; that they know the property described in such
amendments and taken in payment for capital stock, and that the same has
been actually transferred to such corporation, and further say that said prop
erty is of the actual value of $7,447,000 and upwards.
And further say not.
R o bert O . L ord.
H en ry
I.
A r m str o n g ,
Jr.
L e w is K . W a l k e r .
Subscribed and sworn to before me this 20th day of August, A. D. 1929.
H e le n
L. M cK ay,
N otary Public, Wayne County, Mich.
My commission expires January 30, 1933.
G u a r d ia n
D e t r o it
G roup
( I n c .),
C e r t if ic a t e
of
A m endm ent
of
A r t ic l e s
of
A s s o c ia t io n .
No. B 1005.
M ic h ig a n
D e p a rtm e n t
of
S ta te,
Lansing, Mich., D ecem ber 5, 1929.
Received from Guardian Detroit Group (In c.) the sum o f $5, balance due on
filing fee.
[ s e a l .]
J
ohn
S.
H aggerty,
No. 20073.
GUARDIAN DETROIT GROUP
( I N C .) ---- ARTICLES OF ASSO CIA TION
o f M i c h i g a n , Comity of Wayne, ss:
I,
Thomas F. Farrell, clerk o f the county o f Wayne, and of the circuit court
fo r said county, do hereby certify that the foregoing articles o f association
were received for record in my office, on the 7th day o f December, 1929,
and are recorded in record o f articles o f association, liber, on page— .
In testimony whereof I have hereunto set my hand and affixed the seal of said
Court and County, at Detroit, this 7th day o f December, 1929.
[ s e a l.]
T h o m a s F . F a r r e l l , Clerk.
Fee $3.
B y O . B i n g h a m , Deputy Clerk.
No. 20073. Fee paid, $2 .
D e c e m b e r , 7, 1929.
Received for filing articles of association, Guardian Detroit Group.
O . B i n g h a m , Deputy Clerk.
S ta te
C e r t if ic a t e
G u a r d ia n
of
A m endm ent
D e t r o it
of
G roup
A r t ic l e s of A s s o c ia t io n
( I n c .) ,
D e t r o it , M i c h .
We, the undersigned, being the president and the secretary of Guardian
D etroit Group (In c.), a corporation existing under the provisions of act No.
84 of the Public Acts of 1921, do hereby certify, as required by section 10,
chapter 2. Part II o f said act, and by section 9, chapter 1 , Part II of said a c t :
B R A N C H , C H A IN , AND GROUP B A N K IN G
1063
That at a meeting of the stockholders of said corporation expressly called
for the purpose o f amending its Articles of Association and held at the office
of said company on the 18th day of October, 1929, it was resolved by a vote
of more than two-thirds of the capital stock of said corporation that Articles
I, V, and I X o f the Articles of Association be, and the same hereby, are, amended
so as to read as follows, and that the shares of stock of said Company be
increased from 500,000 shares to 2,500,000 shares:
ARTICLE I
The name assumed by this association and by which it shall be known in
law is Guardian Detroit Union Group (Inc.)
a r t ic l e
v
The total capital stock authorized is $50,000,000.
The total amount subscribed is 394,500 shares, the par value of which is
$7,890,000.
The amount paid in is $11,594,500.
The number of shares o f stock is 2,500,000 o f the par value of $20 each.
The amount of common stock paid for in cash is $2,947,500 and $8,647,000 has
been paid in property the description and valuation at which each item is taken
is as fo llo w s:
C o n sid e ratio n
250.000 shares, issued in exchange for 50,000 guardian Units (i. e.,
unified stock of Guardian-Detroit Bank, Guardian Trust Co. of
Detroit and Guardian Detroit C o .)______________________________ $5,000,000
50.000 shares, issued in exchange for 10,000 shares of Highland
Park State Bank______________________ 1_________________________ 1,000,000
12,500 shares, issued in exchange for 5,000 shares of Highland Park
Trust Co_________________________________________________________
500, 000
15.000 shares, issued in exchange for 6,000 shares (entire issue) of
R. O. L. Co______________________________________________________
747,000
4.000_shares, issued in exchange for 2,000 shares o f Bank of Dear
born ______________________________________________________________
20 0 ,0 0 0
16,250 shares, issued in exchange for 5,000 shares of National Union
500, 000
Bank & Trust Co., Jackson, Mich________________________________
8.000 shares, issued in exchange for 4,000 shares of Federal Com
mercial & Savings Bank, Port Huron, Mich______________________
400, 000
6.000 shares, issued in exchange for 3,000 shares o f First National
Bank & Trust Co., Port Huron, Mich____________________________
300, 000
Total shares issued for property, 361,750; actual value of prop
erty taken in exchange is in excess o f______________________ 8 , 647, 000
The amount of actual capital in cash, or property, or both, which this company
owned and possessed at the time of executing the original articles is $1 ,000 .
ARTICLE I X
^ The holders o f stock of this corporation shall be individually and severally
liable (in proportion to the number of shares of its stock held by them re
spectively) for any statutory liability imposed upon this corporation by reason
o f its ownership o f shares of the capital stock of any bank or trust company,
and the stockholders o f this corporation by the acceptance of their certificates of
stock of this corporation severally agree that such liability may be enforced
in the same manner as statutory liability may now or hereafter be enforceable
against stockholders of banks or trust companies under the laws of the United
States or the State o f Michigan. A list of the stockholders of this corporation
shall be filed with the banking commissioner o f Michigan and the Comptroller
o f the Currency whenever requested by either of those officers.
This corporation reserves and shall have the right from time to time upon
the affirmative vote o f three-fourths o f its directors to issue and dispose o f all
or any o f its unissued or increased stock for the purpose o f acquiring stock of
banks, trust companies, and other corporations without offering to the stock
1064
B R A N C H , C H A IN , AND GKOUP B A N K IN G
holders o f this corporation for subscription any o f the stock so to be disposed
of.
In witness whereof, we hereunto sign our names this 12th day of November,
1929.
[ s e a l.]
R o b e r t O . L o r d , President.
L . K. W a l k e r , Secretary.
County o f Wayne, ss:
Robert O. Lord, John C. Grier, jr., and L. K. Walker, being duly sworn,
depose and say that they are three o f the stockholders of Guardian Detroit
Group (In c.), a Michigan corporation, amendments to whose articles of asso
ciation are hereto attached; that they know the property described in such
amendments and taken in payment for capital stock, and that the same has
been actually transferred to such corporation, and further say that said prop
erty is o f the actual value of $8,647,000 and upward.
S t a t e of M ic h ig a n ,
R obert
John
L.
O.
C.
L ord.
G r ie r ,
jr .
K . W alker.
Subscribed and sworn to before me this 12th day of November, 1929.
G ertrude
H in t z ,
Notary Public, W ayne County, Mich.
My commission expires June 30, 1930.
G u a r d i a n D e t r o it U n i o n
G roup
( I n c .)
B y -L a w s
ARTICLE 1. M EETINGS OF STOCKHOLDERS
Annual meetings:—1. The annual meeting of the stockholders of this company
shall be held at the principal office of the company the fourth Tuesday of
January of each year at 11 o’clock a. in., eastern standard time, for the election
o f directors and such other business as may properly come before said meeting.
2.
Notice o f such meeting shall be sent by the secretary to each stockholder,
by mail, addressed to such stockholder at his address as shown on the records
o f the company at least 10 days prior to the date of such meeting.
Special meetings.— 3. Special meetings of the stockholders shall be called
at any time on the order of the president or upon a resolution of a m ajority
o f the directors, or upon a written request of the holders of the m ajority of
the stock o f the company. Such meetings shall be held at the principal offices
o f the company.
4.
Notice of each special meeting of stockholders shall be given in the same
manner as in the case o f the annual stockholders’ meeting, but in addition
thereto such notice shall state the object of such meeting, and no business shall
be transacted thereat which shall not have been specified in said notice.
Quorum.— 5. The owners of a m ajority o f the capital stock of the company,
represented in person or by proxy, shall constitute a quorum for the transaction
o f business at any meeting of the stockholders, but less than a quorum shall
have power to take a recess or adjourn any such meeting.
Record of stockholders.— 6 . The board of directors of this corporation shall
have the right to fix in advance a date, not exceeding 40 days preceding the
date of any meeting o f stockholders or the date for the payment o f any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, as a record
date for the determination of the stockholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such divi
dend, or to any such allotment of rights, or to exercise the rights in respect
of any such change, conversion, or exchange of capital stock.
ART. I I . DIRECTORS
Number and election.— The affairs of the company shall be managed by
a board of nine directors to be elected by the stockholders at each annual
meeting to hold office for one year or until their successors are elected.
Amended August 8 , 1929: The affairs of the company shall be managed
by a board of 15 directors to be elected by the stockholders at each annual
meeting to hold office for one year or until their successors are elected.
B R A N C H , C H A IN , AND GROUP B AN K IN G
1065
Amended September 10, 1929: The affairs of the company shall be managed
by a board of 25 directors to be elected by the stockholders at each annual
meeting to hold office for one year or until their successors are elected.
Vacancies or newly created directorships may be filled at any time during
the year.
Amended December 16, 1929: The affairs o f the company shall be managed
by a board of 41 directors to be elected by the stockholders at each annual
meeting to hold office for one year and until their successors are elected.
Vacancies or newly created directorships may be filled by the board of directors
at any time during the year.
Amended January 28, 1930: The affairs of the company shall be managed by
a board of 50 directors to be elected by the stockholders at each annual meet
ing, to hold office for one year or until their successors are elected. Vacancies
or newly created directorships may be filled by the board of directors at any
time during the year.
Quorum.— 2. A m ajority o f the directors shall constitute a quorum for the
transaction o f business.
Vacancies.— 3. Vacancies in the board of directors shall be filled by the re
maining members o f the board.
Regular meetings.— 4, The board of directors shall meet at the office of the
company on the second Wednesday of December, March, June, and September,
at 2 o’clock p. m. eastern standard time, unless such day be a legal holiday
when such meeting shall be held on the next succeeding secular day at the
same hour and place.
Special meetings.— 5. Special meetings of the board of directors shall be
called at any time on the order of the president or whenever a request of such
meeting is made by a m ajority of the directors.
Directors’ meeting— Notice.— 6 . No notice need be given of the time or place
of the regular quarterly meetings of the board of directors, but notice shall
be given of all special meetings, which notice may be in writing, or by telegram,
addressed to each director at his address as shown on the books of the com
pany, or verbally, or by telephone, at least 24 hours before the time of such
meeting. Notice of special meetings of the directors need not specify the object
o f such meetings.
P ow ers.— 7. The board of directors shall at each annual meeting or ad
journed annual meeting elect the following officers : A chairman of the board,
a president, one or more vice presidents, a treasurer, a secretary, one or more
assistant treasurers, and o i k 1 o r more assistant secretaries. Each of the fore
going officers shall, unless meantime removed by the board of directors, hold
office for the period of one year, or until his successor is elected.
The board o f directors may also elect or appoint such additional officers as
they may from time to time deem wise.
E xecutive committee.— 8 . The board of directors shall appoint from time to
time an executive committee consisting of not less than 1 1 or more than 2 1
directors which committee shall have full power to act in the intervals between
meetings of the directors, with all the power of the directors. The directors
shall elect a chairman of said committee whose duty it shall be to preside at
meetings thereof. The secretary of the company shall act as secretary of said
committee and shall keep a record o f its proceedings. Regular and special
meetings of the executive committee shall be held at such times and places
and upon the giving o f such notice as the committee shall from time to time
determine. A m ajority o f such committee shall constitute a quorum for the
transaction of business.
A dvisory committee.— 9. The board o f directors shall appoint from time to
time an advisory committee, none o f whom shall be active, salaried operating
officers o f any of this corporation’s affiliated companies, who shall have such
duties as shall be delegated to it by said board of directors. The board of di
rectors shall appoint a chairman o f such committee. A m ajority of such com
mittee shall constitute a quorum for the transaction of business.
ART. I I I . OFFICERS
Chairman of the board.— 1. The chairman of the board of directors shall pre
side. at all meetings o f the board and o f the stockholders of the company and
in the absence or case o f disability of any officers of the company may exercise
the powers o f any such officer.
1066
B R A N C H , C H A IN , AND GROUP B AN K IN G
President.— 2. The president, subject to the board of directors, shall have
general charge of the business, property, and affairs of the company. He shall
be ex officio a member of all committees. He shall have power to execute, on
behalf o f the company, checks, drafts, orders, acknowledgments, receipts, cer
tificates, and all other documents not by the by-laws o f the company or by
any resolution o f the board required to be signed by another or two or more
officers. He shall have power to sign in conjunction with the secretary or an
assistant secretary certificates of stock o f the company. He shall preside at
meetings o f the stockholders and of the board o f directors in the absence of the
chairman. He shall also have power to employ such executives and engage
such employees o f the company as are not required to be elected or appointed
by the board.
Vice president.— 3. Each o f the vice presidents shall have and exercise
such powers as the president may delegate and as are not required by these by
laws to be performed by some other officer; and in the absence or disability of
the president, the vice president first in order o f election shall have and exer
cise all the powers of the president, and in case of the absence or disability of
the vice president first in order of election the other vice presidents shall in the
order of their respective elections have and exercise the powers o f the
president.
ART.
IV .
SEAL
The seal o f the corporation shall be in the form impressed hereon.
AET. V. STOCK CERTIFICATES
1. Stock in the company shall be represented by certificates in the follow
ing fo r m :
2 . Certificates representing stock o f the company shall be executed by two
officers of the company as fo llo w s: A president or a vice president and the
secretary or an assistant secretary.
3. Transfers o f shares o f stock of this company shall be made upon the
books o f the company by the registered holder in person or by attorney duly
authorized upon surrender of the certificate or certificates representing such
shares, but only wThen duly indorsed upon the form appearing on the reverse
side of the certificate.
ART. VI
These by-laws may be amended, altered, or repealed by the board of directors
at any regular or special meeting.
1. That whenever at any meeting o f the stockholders of a bank or trust
company, of which this corporation shall at the time own 75 per cent or more
o f the outstanding stock, an election o f a board of directors is held, the shares
o f such bank or trust company owned by this company shall be voted in favor
o f the election of a board o f directors o f which at least 75 per cent shall con
sist o f directors residing in the municipality where said bank or trust company
is located or within a radius o f 50 miles thereof.
ART. V II. REGULAR DIRECTORS’ M EETING
A regular meeting of the newly elected board of directors shall be held im
mediately upon the adjournment o f the annual meeting of stockholders at the
same place at which said annual meeting o f stockholders is held, provided
however, that the m ajority of directors attending said meeting may authorize
and adjournment thereof. At said meeting the directors shall elect officers for
the ensuing year.
ART. V III. AUTH O RIZED SIGN ATU R ES
Whenever certificates representing stock of this company have been or shall
be executed by or with the signature of officers authorized to execute the same,
and any such officer or officers shall cease to be such officer prior to the
issuance o f such certificates, or any of them, said certificates may, nevertheless,
be issued by this company and shall constitute valid certificates representing
ownership o f the stock o f this company.
B RA N CH , C H A IN , AND GROUP B A N K IN G
A p p e n d ix
1067
II
Units in which the Guardian Detroit Union Group (Inc.) holds a controlling
interest
Capital
Surplus
$600,000.00
$700, 000.00
5,000,000.00
6 000 000.00
1, 000, 000.00
500,000.00
Undivided
profits and
reserves
Deposits
NATIONAL BANKS
Battle Creek, M ich., C ity N a
tional B ank & Trust Co.
(operating one branch)________
D etroit, M ich., National Bank
of Commerce (operating 20
branches)_______________________
Grand Rapids, M ich., Grand
Rapids National Bank (operat
ing 8 branches)__________________
Jackson, M ich :
National Union Bank &
Trust Co.(operating 1 branch).
Peoples National B a n k ______
Kalam azoo, M ich., First N a
tional Bank & Trust Co. (no
branches)_______________________
Lansing, M ich ., Capital N a
tional
Bank
(operating
1
branch).____ ____________________
> iles, M ich., City National
Bank
&
Trust
Co.
(no
branches)_______________________
Port Huron, M ich., First N a
tional Bank & Trust Co. (no
branches)_______________________
Saginaw, M ich., Second N a
tional Bank & Trust Co.
(operating 1 branch)___________
T o ta l________________________
.
$102,289.66 $6, 336, 270. 86 $8,340, 710.47
, ,
1, 458,316.40 95, 295, 284. 87 108, 729,391. 05
251,437. 60
18, 994, 321. 97 22,056, 233. 97
500.000.00
200 000.00
300, 000. 00
200, 000. 00
215, 503. 94
155, 095. 71
8, 461, 405.18
7, 307, 853. 75
9, 854, 502. 24
8,053, 592.08
600,000.00
200 , 000 . 00
451, 312. 92
8,066, 337. 40
9, 388,839. 32
600,000.00
600, 000. 00
523, 844. 24 10, 606, 003.17 12,963,647. 79
150.000.00
1 0 0 , 0 0 0 . 00
300.000.00
200, 000.
00
53, 519. 20 1,811,117.19
2,193, 386. 39
6, 503, 868. 72
7, 322,043. 71
170, 760. 29
1, 250,000.00
807,130. 74 13, 324,713. 76 17,075, 604.16
10, 200, 000. 00 10,050,000.00
), 210. 70 176, 707,176. 87 205, 977,951.18
1, 250,000.00
STATE B A N KS, M EM BERS OF
FEDERAL R ESERVE
Dearborn, M ich ., Bank of Dear
born (no branches)_____________
200 , 000 . 00
D etroit, M ich., Bank of Detroit
(operating 20 branches)________ 4, 000,000.00
Guardian Detroit Bank (no
branches)________________________ 5, 000, 000. 00
F lin t, M ich ., Union Industrial
Bank (operating 9 bra n ches)... 2, 000, 000. 00
Highland Park, M ich., Highland
Park State Bank (operating 7
branches)________________________ 1, 000, 000.00
Port Huron, M ich ., Federal
Commercial & Savings Bank
(operating 4 branches)_________
T o ta l________________________ 12, 600, 000.00
50, 000. 00
10, 263.51
S36, 235.11
2, 205,452.03
1, 250, 000. 00
550, 567.83 44,729,872. 61
50,463,800.36
3, 000, 000. 00
1, 355, 230.12 54, 348, 410. 51
63, 844, 785. 79
1, 00 0, 000. 00
513, 809. 60
), 851,107. 61
26, 251,571.87
2 , 000 , 000 . 00
494,178. 04 27, 032, 722. 22
30,561,081. 53
7, 085, 981. 52
8,192, 695. 54
210 , 000. 00
7, 510,000.00
197, 448. 08
3,121, 497.18 155,884,329.58 181, 519, 387.12
STATE BANKS, NON MEMBERS OF
FEDERAL RESERVE
Dearborn, M ich., Bank of C om
merce (no branches)____________
Union State Bank (operating 2
branches)________________________
Detroit, M ich., Michigan Indus
trial Bank (no branches)______
Grosse Pointe Park, M ich ., Jef
ferson Savings Bank (operating
1 branch)________________________
H am tram ck, M ic h ., Bank of
Ham tram ck (no branches)____
Trenton, M ich ., Trenton State
B ank (no branches)____________
Total_____________________
37,247.65
1,698, 667. 85
1, 983, 254.91
200, 000. 00
203,150. 00
35, 916.31
3, 623, 032. 01
4, 068,104.72
500, 000. 00
125, 000. 00
57, 390.27
1,836, 544. 59
3,187,022.51
200, 000.00
56, 000. 00
100 , 000 . 00
30, 000. 00
8,858.69
1,029,866. 81
1,168,725. 50
200, 000.00
43, 000. 00
9,123.96
831,652. 97
1,083,776.93
50, 000. 00
35, 000.00
10, 638.00
1,110,946. 39
1, 206,694.29
159,174.88 10,130, 710.62
12,697, 578.86
492,150.00
1068
B RA N CH , C H A IN , AND GROUP B A N K IN G
Units in which the Guardian Detroit Union Group (In c.) holds a controllinginterest— Continued
Capital
Surplus
U ndivided
proSts and
reserves
Deposits
TRUST COMPANIES
Detroit, M ich .:
Guardian T rust Co. (no
branches)___________________ $1, 000, 000.00
$1, 000, 000.00 $1, 140, 684. 60 $20, 620, 550. 40 $23, 704, 366.20
Union
Trust
Co.
(no
branches)_____________ _____ | 5, 000, 000. 00 2, 500, 000.00
357, 587.47 34, 065, 779. 92 42, 496, 421. 79
Flint, M ich ., Union Industrial
T rust Co. (no branches)_______ !
300, 000. 00
24, 000.00
7, 060. 78
288, 026. 56
692, 372. 31
Grand Rapids, M ich ., Grand
R a p id s
T rust
C o.
(no
68, 420. 54 1, 715, 539. 50 3, 365, 383. 84
branches). ~ , ___________________
750, 000. 00
800, 000. 00
Highland Parle, M ich ., H igh
land Park Trust Co. (no
80, 224. 29
branches).......... ................................
500, 000. 00
250, 000. 00
1, 428, 058. 74 5 , 935, 980. 91
T o ta l..
7, 550, 000. 00
4, 574, 000. 00]
1, 653, 977. 77 58, 117, 955. 12 76, 194, 525. 05
Units in which the Guardian Detroit Union Group (Inc.) are interested but
holds only Jt0 per cent stock interest
Capital
Surplus
Undivided
profits and
reserves
■
Deposits
Resources
STATE BANKS, NONM EMIiEP.S
Blanchard, M ich ., Blanchard
State Bank_
_______
Clinton, M ich ., State Savings
B an k_________ . . . _____________
Hudson, M ich., Thom pson Sav
_________
ings B a n k_____
Rem us, M ich ., State Savings
______ . . . . . ____
Bank...
Six Lakes, M ich., State Bank of
...
Six Lakes... . .
______
Stanton, M ich ., State Savings
Bank _
.
___ . . . . .
Vestaburg, M ich ., State Bank
of V e s ta b u r g ........ ..........................
T otal__________ ______ ______
$5, 500. 00
$4, 567.12
$310,134. 73
$345, 201. 85
20, 000. 00
23, 212. 24
928, 562.10
1, 027, 672. 46
100, 000. 00
50, 000. 00
56, 981. 33
1, 343, 347. 05
1, 550, 328. 38
26, 000. 00
11, 500. 00
1, 230. 60;
320, 718. 58
359, 449. 18
20, 000. 00
4, 000. 00
2, 458. 02
129, 934. 61!
156, 392. 63
40, 000. 00
11, 300. 00
5, 002. 88
422, 381. 98
503, 384. 86
655. 65
129, 230. 27
154, 384. 92
94,107. 841 3, 584, 309. 32
4, 096, 815. 28
$25. 000. 00;
50, 000. 001
20, 000. 00
4, 500. 00
281, 000. 00
106, 800. 00
Recapitulation
Capital
Surplus
Undivided
profits and
reserves
Deposits
10 national banks........... ................. $10, 200, 000. 00 $10, 050, 000. 00 $4, 189, 210. 70 $176,707,176.87
6 State banks (members Fed
!
eral reserve system )........ ........ ! 12,600,000.00
7,510,000.00
3,121,497.18 155,884, 329. 58
6 State banks (nonmembers
492,150.00
159,174.88 10,130, 710.62
Federal reserve system )____ ' 1,250,000.00
5 trust companies________ ______
7, 550, 000. ooi 4, 574, 000. 00' 1, 653, 97 7. 77 58, 117, 955.12
27
! 31, 600, 000. 00 22, 626,150 00:
Resources
$205,977,951.18
181,519, 387.12
12, 697, 578. 86
76, 194, 525. 05
9, 123, 860. 53 400, 840, 172.19 476, 389, 442. 21
1069
B R A N C H , C H A IN , AND GROUP B AN K IN G
Corporations the m ajority o f the stock of which is owned ~by Guardian Detroit
Union Group (Inc.)
Capital stock
Cleveland, Ohio, Ohio-Pennsylvania Joint
Stock Land B an k ____________________________
Detroit, M ich.:
Bancdetroit Corporation............................. .
Guardian Detroit C o___ _______________
Guardian Holding C o_____________________
Guardian Safe Deposit C o ________________
Keane, Higbie & C o _____________________
N ew Union Building C o __________________
Union Co of Detroit______________________
Union Joint Stock Land C o _____________
Union Title & Guaranty C o ______________
Grand Rapids, M ich., Grand Rapids N a
tional C o______________________________________
Jackson, M ich.:
Union & Peoples C o _______________________
National Union Building C o _____________
Kalamazoo, M ich., F. N . B . Securities C o .- .
Los Angeles, Calif., Guardian Detroit C o ____
$770, 000.00
1 , 000. 00
5, 000, 000 . 00
10,
000. 00
1 0 0 , 000 . 00
1 , 0 0 0 , 000. 00
5, 000, 00 0 . 00
500, 000. 00
600, 000. 00
1, 00, 000.00
40, 000. 00
70, 000. 00
1 , 0 0 0 . 00
150, 000. 00
10, 000 . 00
T o ta l________ ________ ___________________
Surplus
U ndivided
profits and
reserves
$177, 500. 00
____________
1, 000, 000. 00
990, 000. 00
.........................
____________
____________
____________
100, 000. 00
____________
Total re
sources
$114, 432. 68 $14, 614, 402. 24
22, 067. 13
1, 280, 573. 13
23, 937. 62
4 ,7 8 5.2 4
3, 086, 595. 72
1 7 4 1 ,216.05
i 130, 122. 40
214, 270. 50
225,752.68
____________
650.27
90, 275.13
21, 893, 830. 84
5, 595, 342. 95
112, 825. 74
7, 673, 022. 21
11,398, 741. 72
2, 638, 305. 94
9, 919, 642. 84
1, 636, 236. 4.2
133, 531.15
3 9 ,7 29 .5 0
115,353.15
854 ,52 7 .9 8 _____________
36,2 67 .9 7
____________ :
7,8 2 7.5 6
260, 082.
855. 527.
186,267.
252,173.
65
98
97
90
3,161, 757. 48 , 4, 261, 175. 20
77, 260, 209. 68
1 Deficiency.
A p p e n d ix
G u a rd ia n
D e tr o it
IV
U n io n
G roup
( I n c .)
b a s ic p o lic ie s
President Hoover, in his recent message to Congress, referred to the group
banking movement as “ a groping for stronger support to the banks and a
more secure basis for these institutions.” However, he also raised the question
as to whether the development of group banking might not “ concentrate con
trol of credit ” and enunciated as one of the fundamentals of the American
credi tsystem that “ Credit which is based upon banking deposits should be
controlled by persons within those areas which furnish these deposits and
thus be subject to the restraints of local interest and public opinion in these
areas.”
The President has stated, briefly, but completely, the advantages to be
sought and the disadvantages to be avoided, in any program of group banking.
In this connection, it may be pertinent to quote Article VI of the by-laws of
Guardian Detroit Union Group (In c.) :
“ Whenever at any meeting of the stockholders of a bank or trust company
of which this corporation shall at the time own 75 per cent or more of the
outstanding stock, an election of a board of directors is held, the shares of
such bank or trust company o'wned by this company shall be voted in favor
of the election of a board o f directors of which at least 75 per cent shall
consist of directors residing in the municipality where said bank or trust
company is located or within a radius of 50 miles thereof.”
From its very inception, Guardian Detroit Union Group has, by common
consent, stood committed to fundamental policies in full accord with the ideals
expressed by the President of the United States. In order that there might
be no possibility o f misunderstanding in this regard, the board felt that the
present was an opportune time to go formally on record in reference to the
“ control of credit ” and also the fundamental basis o f the relationship betw een
the Group Co. and a local bank, which is a unit member of the group. It
was, therefore,
Resolved, That credit based upon the deposits in a local bank, which is a
unit member of Guardian Detroit Union Group (In c.), shall be controlled
wholly by the board o f directors and the officers o f the local unit b a n k ; and
Resolved, That Guardian Detroit Union Group (In c.), in its relationships
w ith local banks which are unit members o f the group, accepts as its sole
1070
B R A N C H , C H A IN , AND GROUP B A N K IN G
function, responsibility and duty— to provide “ stronger support to the bank&
and a more secure basis for these institutions,”— and the officers and staff of
the group be and they hereby are directed to devote their energies and restrict
their activities accordingly.
In order to put into effect these broad policies and such other more specific
courses of action as may be adopted in conformity thereto, it is necessary to
develop a form o f organization for the group which will not only allow the
greatest possible latitude in the transaction of local business, but will also, by
a process o f mutual education, make constantly available to each unit all the
accumulated knowledge and expert opinion possessed by all the other units.
In considering this subject of the organization and functions of the GroupCo., it should be borne in mind that Act No. 66 , Public Acts of 1929, State o f
Michigan, effective April 19, 1929, provid es:
“ Sec. 14. The affairs of each bank shall be managed by a board of not les&
than live directors * * *.
“ S e c . 15. The board of directors, or a quorum thereof * * * shall meet
at least once each month and shall at such meetings examine the loans and
investments made by the officers thereof since the last meeting of such board
and shall review the other transactions o f such bank. It shall cause to be
spread upon the records of such bank, in the record book thereof which shall
be kept for that purpose, the minutes of such meeting and all its actions
thereat, including the approval of all loans required to be approved by the
board o f directors * * *.
“ S e c . 17. The board o f directors of each bank shall appoint from its members
or stockholders an examining committee, or committees, not including any
officer who has active management of the bank, whose duties it shall be to
examine the condition of the bank at least once every six months. The ex
amining committee shall report to the board, giving in detail all items included
in the assets o f the bank which they have reason to believe are not of the
value at which they appear on the books and records of the bank, and giving
the value of each o f such items as in their judgment they may have deter
mined.”
From the above paragraphs, it is evident that, in each local bank incorporated
or existing under the act referred to, and similarly in each bank chartered
under the national banking act, the directors have certain statutory duties,,
for the satisfactory performance of which they are held personally responsible,
and which can not be by them delegated to any other person or persons.
Aside from the bald illegality of any attempt to usurp the functions or
hamper the activities of the board o f directors of a local unit bank, such a
course wTould run directly counter to prudence, good judgment and common
sense. Experience indicates that the bulk o f profitable business enjoyed by a
given bank is the result o f the personal efforts of directors and officers.
Hence, any policy which impairs, even in the slightest degree, the prestige
and enthusiasm of a local board of directors is a body blow at the growth
o f the local unit bank, and therefore at the growth and prosperity of the
group as a whole.
The deliberate adoption of policies so obviously suicidal is unthinkable
nevertheless, extreme care must be exercised to insure that group management
does not perhaps unconsciously, encroach upon the statutory and customary
authority and responsibility of the unit bank management. Accordingly, it was
deemed advisable to particularly emphasize “ the group policy o f noninterference
with local management,” by formal action of the group board of directors. It
was, therefore,
Resolved, That the board of directors of each local unit institution in Guardian
Detroit Union Group (In c.), is responsible for the management o f the affairs
of the institution in question; and that the officers o f each unit institution in the
group are responsible directly to the board of directors of their own institution
and to no other authority, except the law.
In brief, the local banks, trust companies and other unit members of the
group are, and should be, considered as enjoying all the rights and accepting all
the responsibilities of full partnership in the group, among the advantages of
which are:
First. Each separate institution has the backing o f resources many times
greater than its own, giving the depositor even greater assurance as to the
safety o f his funds.
BRANCH, CHAIN, AND GROUP BANKING
1071
Second. The larger local corporations need no longer go to New York or
Chicago for such accommodations as they may need in the matter of loans.
The group should be able to provide all the funds to which any of the local
corporations are entitled.
Third. The depositors will have available to them the credit information and
the financial and investment advice of a large organization, including specialists
in many lines. A single institution o f moderate size could not afford to employ
such experts.
Fourth. The depositors are assured of the continuance of capable management
of the local institution. The group company must, of necessity, be in a position
to furnish capable personnel to any unit member of the group when called
upon to do so.
Fifth. The group provides contact with innumerable types of businesses and
cooperation in developing new business for clients.
Sixth. The original stockholders of the unit bank, after exchanging their stock
for stock of the group company, will have a diversity of risk, dependent not
alone on the prosperity of their local community, but supplemented by larger
resources with the investment spread over banking institutions located in many
cities— in banks serving a wide range o f industry and territory.
Seventh. Their new group stock is part of an issue of much greater number
of shares, owned by thousands rather than hundreds of investors, giving them
a broader and more active market in case they care to buy or sell— a stock
recognized as desirable collateral in every large city in the country.
Of course, the advantages referred to above can be obtained only as a result
o f establishing sound policies uniformly throughout the grou p ; developing
unit organizations with the ability to put these policies into effect; and pro
viding a means for measuring the degree in which these policies are effectively
applied. The problem is to devise a form of organization which will accom
plish these purposes without in any way infringing upon local autonomy.
GENERA
FU N CTIO N S
OF
GROUP
CO.
It would appear that the board o f directors of the Group Co. (upon which
practically all units are represented by one or more directors) could, with per
fect propriety, announce its belief in the soundness of a given policy, and
request the president to bring it, as a “ recommended policy ” to the attention
of the board o f directors o f all unit member institutions liable to be benefited
thereby.
The board of directors of the local unit institution would be at liberty to
agree or disagree with the recommendation, but when, as, and if approved by
the local board, it would become the “ approved policy ” of the local unit
institution.
Both the board of directors of the local unit institution and that of the
group would have, then, a joint interest in seeing that these “ approved poli
cies ” are put into effect. They also have a natural desire to know the degree
o f conformity to established policies attained by the local unit in question and
how it compares in relative operating efficiency with other units of the group.
Apparently, then, the Group Co. can perform the following useful functions
for the local unit institutions without in any way violating the basic policy
o f encouraging local management to run their own banks, nam ely:
(a ) Acting as a clearing house for information bearing upon policies, prac
tices, and results obtained by the various member unit institutions.
(b ) Systematically making available to all units the practice of the best
with a view to enabling all to reach the highest standards of operation and
resultant profit.
( c ) Providing expert advice at minimum cost in regard to tax and insurance
matters, and extraordinary legal questions.
(d ) Providing capable supervision in connection with building construction
and management.
(e) Coordinating business development activities.
(f ) Purchasing standard equipment and supplies in quantity.
(g ) The Group Co. should also provide an independent examining force, in
no way responsible for the condition which its examination discloses, to
supplement the work o f the board o f directors o f a local unit in connection
with the examining responsibilities imposed by statute.
1072
BRANCH, CHAIN, AND GROUP BANKING
In brief, it should be the principal function of the Group Co. to act in an
advisory capacity— recommending to the boards of the local units, policies,
practices, economies, etc. The local boards and the local officers of the units
must operate their own banks or trust companies. They are better able to know
and judge local conditions.
ORGANIZATION OF GROUP COM PANY
In connection with the organization o f the group company a tentative or
ganization chart has been drawn up and a copy attached hereto.
The advisory committee is largely a poiicy-mak.ng committee, its membership
is comparatively small and includes no active operating officers of any unit.
This committee has, and should have, entire freedom in eriticiz.ng either the
policies or handLng of any unit or any department of the associated institu
tions. Its meetings are not held on stated days, but at irregular intervals
upon the call of the chairman. Operating heads of units or departments will,
from time to time, be called to confer with this committee as to any questions
under consideration.
The following have been elected members of the advisory com m ittee:
Fred T. Murphy, chairm an; Henry E. Bodman, Edsel B. Ford, James Inglis,
Alvan Macauley, Jerome H. Iiemick, Murray YV. Sales, Roy D. Chapin, Charles
H. Hodges, Ernest Kanzier, Charles S. Mott, John R. Russel, Charles B.
Warren.
The executive committee includes largely the advisory committee together
with other members of the board o f directors who are operating men in the
organizations in the group. Its duties are much the same as any executive
committee, empowered to act on behalf of the board of directors.
The following have been elected members of the executive com m ittee:
H. E. Bodman, chairm an; Frank W. Blair, John C. Grier, jr., Carlton M.
Higbie, Richard P. Joy, Robert O. Lord, Fred T. Murphy, Phelps Newberry,
Henry H. Sanger, James L. Walsh, Harry C. Bulkley, C. H. Haberkorn, jr.,
Sherwin A. Hill, Ernest Kanzier, Charles S. Mott, Edwin H. Nelson, Murray
W. Sales, John N. Stalker.
The operating committee is made up of the operating heads of the various
large units in the group. Their funtion is to discuss operating details, new
business, and other matters pertaining to direct operations of the various in
stitutions, which would make for better and more economical operation and for
the further growth and development o f the units in the group. When deemed
advisable more than one member from each unit can be included in the mem
bership of this committee.
The following have been elected members of the operating committee :
James L. Walsh, chairman; Frank W. Blair, John C. Grier, jr., Carlton M.
Higbie, Charles A. Kanter, Samuel R. Kingston, Robert O. Lord, Duncan McNabb, Phelps Newberry, Bert K. Patterson, Henry H. Sanger, John N. Stalker,
Arthur H. V o g t; Frank E. Quisenberry, representing Highland P a r k ; Frank J.
Maurice, representing Highland P a r k ; George B. Judson, representing Bank of
D etroit; H. S. Reynolds, representing Jackson; George R. Paul, representing
Jackson; S. A. Graham, representing Port H u ron ; H. R. Wilkin, representing
F lin t; E. R. Morton, representing Battle Creek.
To this committee will be added, from time to time, representatives of other
important departments in the above institutions and also representatives of
other units which may come into the group.
IM M E D IA T E OBJECTIVES
The future success of the Guardian Detroit Union Group is a question of
management. The board of directors and such committees of the group as may
be appointed can contribute in a large measure. I f we are to operate success
fully and increase the earnings o f the separate units, and of the group company,
we must concentrate our efforts upon the follow in g:
I. Increase the deposits of the banks and trust companies.
2. Increase the trust business of the Union Guardian Trust Co. and of the
other trust units.
3. Develop the investment business o f the Guardian Detroit Co. and of our
general distribution through the out-of-Detroit units.
4. Curtail expenses to the greatest possible extent consistent with operating
•efficiency.
BRANCH, CHAIN, AND GROUP BANKING
1073
FU N CTIO N S OF GROUP OFFICERS
It is believed that the above objectives can be attained without creating a
large operating organization in the group company. Such a course would not
only be unnecessarily expensive, but would tend in time to wreaken the author
ity, and therefore the sense of responsibility, of the management of local
unit institutions.
Instead of setting up a number of departments or divisions in the group
company, it is recommended that certain staff officers be appointed to assist
the president of the group company in coordinating and stimulating the activi
ties of local unit institutions in accordance with “ approved policies.”
Referring to the-accompanying organization chart, it will be noted that but
a single “ line of authority ” leads from the group board of directors, through
the group president, the local board of directors, the president of the local
unit institution, to the operating departments o f the local bank or trust com
pany. This has been done advisedly.
Nothing is more destructive o f morale nor more conducive to confused and
ineffective operation than to have every Tom, Dick, and Harry possessing an
official title take it upon himself to write letters asking for information—•
which has perhaps already been furnished; making requests— with the force
o f demands— for action which may conflict with existing p olicies; dispensing
information or advice—-possibly not the most accurate or dependable to be ob
tained within the group, etc.
A cross-fire of conflicting communications can yield chaos in short order.
Hence, the president will sign all the mail, even if the staff officers prepare
most of the letters for his signature.
To further insure continuity and consistency o f policy, a vice president and
general manager has been provided to serve as an “ alter ego ” for the president,
and to coordinate the work o f the staff officers,, who have been designated and
assigned duties as follows*
GENERAL
SALES
M ANAGER
(a ) Coordinates and stimulates business development activities of all local
units.
(&) Handles public relations for group.
(c ) Initiates group advertising.
(<f) Harmonizes advertising o f local units.
( e ) Operates central file showing relationships of all customers of all units
in the group.
( f ) Supervises technical instruction o f business development personnel.
COMPTROLLER GENERAL
(a )
(b )
(c )
(d )
(e )
(f)
Keeps general books o f the group.
Prepares group balance sheet and operating statements.
Develops standard operating methods, accounts, and reports.
Develops standard accrual systems and audit procedures.
Analyzes reports o f auditing departments of local units.
Supervises technical instruction of accounting and auditing personnel.
(а )
units.
( б)
(c )
(d)
Purchases standardized equipment and supplies on requisition of local
GENERAL PURCH ASIN G AGENT
Establishes standard stock records and normal inventories.
Salvages surplus property.
Supervises technical instruction o f purchasing personnel.
IN V E S T M E N T COUNSEL
(a)
Advises local unit management in regard to purchase of securities for
investment portfolio.
(&) Supervises technical instruction o f investment personnel.
100136— 30— v o l 2, p t 9--------- 5
1074
BRANCH, CHAIN, AND GROUP BANKING
GENERAL TRUST OFFICER
(а ) Establishes standard trust account records.
( б ) Reviews investments made fo r trust accounts.
(e ) Supervises technical instruction of trust personnel.
GENERAL CREDIT M ANAGER
(а ) Reviews financial programs of all local units.
( б ) Analyzes characteristics o f local deposits and loans.
(c ) Assists in the development o f standard program for conversion of funds*
(d ) Specifies items- for secondary reserve.
(e ) Tests “ turnover” and diversification o f loans in unit institutions.
I f) Checks “ follow -up ” o f slow and doubtful lines.
(ff) Establishes standard set-up for credit files.
(h ) Analyses reports- of examination by State or national examiner, or
clearing house.
(i) Assists, when required, in examination by examining committee of board
o f directors o f local unit.
( ; ) Supervises technical instruction o f credit personnel.
s u p e r v is o r
of
b u il d in g s
(а ) Assists in the construction and operation o f buildings owned by local
units.
( б ) Leases or sells vacant quarters not required by the activities of the
group.
(c ) Supervises technical instruction of building management personnel.
general
counsel
(a ) Handles all legal matters affecting the group as a whole.
(Z>) Advises local units in the handling o f income and personal property taxes.
(c ) Supervises placing of fidelity, fire and other forms o f insurance in con
nection with the property and business o f the local units.
E XTR A
C O M P ENSATION
PLA N
Financial incentive has proved most effective in producing results, according
to the experience o f the larger New York and Chicago banks.
In order to insure that the local management o f each local unit shall main
tain the keenest possible interest, in the economical operation of the institution
entrusted to its direction, as well as contribute to the general welfare and
progress o f the group as a whole, an extra compensation committee has been
established by the board o f directors with instructions to recommend, early
in 1930, a definite profit-sharing or extra compensation plan for all local
units.
The following have been elected members of the extra compensation com
mittee :
Clarence H. Booth, chairm an; R oy D. Chapin, Murray W. Sales, Edwin H.
Nelson, Hal H. Smith.
TRUST C O M P A N Y ACTIV ITIE S
In order to provide the highest possible type o f investment counsel for the
Union Guardian Trust Co., a trust investment committee, composed o f directors
having an outstanding reputation in the mind o f the public fo r experience
and conservatism, none o f whom are active operating officers, has been estab
lished and will in clu d e:
Henry E. Bodman, W alter O. Briggs, Roy D. Chapin, Luman W. Goodenough, Charles, H. Hodges, Richard P. Joy, Alvan Macauley, Fred T. Murphy,
Ralph H. Booth, Harry C. Bulkley, Edsel B. Ford, Sherwin A. H ill, Hobart
Hoyt, WTm. Kales, Charles S. Mott, Hal H. Smith.
0 5
<
CD
o
INVESTMENT
DEPARTMENT
Ll. <
ADMINISTRATION
DEPARTMENT
cc 2
q S
ct
OPERATING
DEPARTMENT
UNION
GROUP
F
TRU ST
DEPARTMENT
(/)
q:
O
Io
DEVELOPMENT
DEPARTMENT
DETROIT
STOCKHOLDERS
GUARDIAN
L OAN
DEPARTMENT
|
A U D IT IN G
D EP A R TM E N T
BRANCH, CH AIN , AND GROUP BANKING
10'
LlI
o
q:
1076
B RA N CH , C H A IN , AND GROUP B A N K IN G
B U SIN E SS
DEVELOPMENT
ACTIVITIES
A central file, based upon the Findex system, has been established in room
777, Penobscot Building, Detroit, Mich. All commercial accounts o f all units
in the group have been cross-indexed under several different classifications; as
to size, borrowing or nonbarrowing, branch or main office, possible related
business, etc.
Information in answer to specific inquiries is available to the proper officers
o f all local units; but, in view o f the semiconfidential nature of the data, no
complete lists o f customers, or other blanket information can be furnished.
The central file is particularly effective in preventing improper solicitation
by one unit o f a person, firm, or corporation already a customer of some other
unit o f Guardian Detroit Union Group, Inc. It ought to prove increasingly
valuable in helping out-of-Detroit units secure local accounts of corporations
controlled in Detroit which are already customers of a Detroit unit.
A business development committee has been organized as a subcommittee o f
the operating committee with membership as fo llo w s:
Alvan Macauley, jr., chairm an; John A. Reynolds, L. H. D. Baker, Harry
S. Covington, C. M. Beers, W illiam A. Mayberry, Emanuel C. Lindman, R. O.
Bisbee, Russell T. Jackson, A. B. Pflelderer, Herbert H. Gardner, Andrew D.
Hotchkiss, Andrew C. Lassen, Charles French.
CREDIT DEPARTMENT ACTIV ITIE S
A credit committee has been organized as a subcommittee of the operating
committee with membership as fo llo w s:
Orville L. Platt, chairman ; Frank P. Evans, jr., B. F. Saylor, Charles M.
Spinning, Gerald F. Collins, Griswold Adams, Norman H. Moysey. Harry C.
Blackman, Russell T. Jackson.
Standardized form s for personal statement, e tc .; notes; credit file ; analysis
sheets; have been determined upon and will be available, upon requisition, in
the near future.
BUDGETARY
CONTROL
As future meetings of the board serve to crystallize in the minds of the
directors certain definite aspirations and ideals for the group, it is believed
possible to gradually inaugurate in certain o f the local units as system o f
budgetary control with a view to—
(a ) Securing increased gross income through the establishment o f definite
goals or quotas.
(&) Locating opportunities for curtailment of expenditures through fixing
personal responsibilities therefor.
(c )
Securing increased net income as a result o f economical operation, a
more accurately informed management, and a more intelligent and aggressive
personnel.
E XPENSES
Our problem to increase earnings is tw o fo ld :
1. Increase our volume of business.
2. Cut expenses.
The group as it is now constituted has annual gross revenue o f upwards
o f $30,000,000— it is our job to save for net income just as large a percentage
of that gross revenue as possible.
Extravagance and wastefulness on the part o f more than 4,000
employees will mean many thousands o f dollars o f loss in earnings. Every
effort "should be made to impress upon all officers and employees in the entire
organization, the necessity for curtailment o f unnecessary expenses.
Probable lower rates for money during 1930 makes the expense question
a vital one.
F rank
W. B l a i r , Chairman.
R o b e r t O . L o r d , President.
D e c e m b e r 31, 1929.
1077
B R A N C H , C H A IN , AND GROUP B A N K IN G
P resent
Status
of
P rogram
Upon the exchange o f stock o f the Guardian Detroit Union Group (In c.)
fo r stock of Union Commerce Corporation, the group corporation will own
the following financial institutions (either directly or indirectly) :
Capital out
standing
Corporation
Guardian Detroit B a n k ______________ _____ ____________
Guardian Trust C o__________________________ _____ _____
Guardian Detroit C o . . ----------- --------------------------------------Guardian Safe Deposit C o_____________________ _______
Guardian Detroit Co. of California___________________
B ank of D e tro it________________________________________
Bank oi D earborn....................................................................
Highland Park State B a n k ____________________________
Highland Park Trust C o ______________________________
National Union Bank & Trust Co. of Jackson_______
Federal Commercial & Savings Bank of Port Huron.
First National Bank & T rust Co. of Port H u ron ____
U nion Trust C o ________________________________________
National Bank of Com m erce......... ....................................
U nion Title & Guaranty C o___________________________
Union Co. of D etroit___________________________________
Union Joint Stock Land & B a n k .......................................
Union Savings Bank of Brightmoor_______ ______ ____
N e w U nion Building C o ______________________ ________
M ichigan Industrial Bank________________ _____ _______
Keane, Higbie & C o ____________________ _______________
U nion Industrial Bank, F lin t_________________________
U nion Industrial Trust, F lin t....... .....................................
Ohio-Penn Joint Stock Land B a n k ---------------- -------B ank of Commerce, Dearborn_________________________
Union State Bank, Dearborn__________________________
Jefferson Savings Bank, Grosse Pointe...... .....................
B an k of H am tram ck__________________ _____ ___________
Blanchard State Bank, Blanchard____________________
State Savings Bank, C lin ton __________________________
C ity National Bank & Trust Co. of Battle Creek___
Thom pson Savings Bank, H u d son ...................................
State Savings Bank, R e m u s ___ _____ _________________
State Bank of Six Lakes, Six Lakes___________________
State Savings Bank, Stanton..............................................
Trenton State Bank, T ren ton ______ __________________
State Savings Bank, Vestaburg________________________
1 N o par value.
2 B y Union Trust.
3 Unified stock.
4 58.2 per cent.
$5,000,000
1,000,000
5,000,000
100,000
10,000
4,000,000
Capital
owned
!
|
!
i
1
!
200,000 ;
1,000,000 !
500, 000
600, 000
400, 000
300, 000
' 5, 000, 000
5,000, 000
1,000,000
500, 000
600, 000
50, 000
3, 000, 000
500, 000
1,000, 000
1, 800, 000
}
300, 000
770, 000
200, 000
200, 000
100, 000
200, 000
25, 000
50, 000
600, 000
100,000
26,000
20,000
40,000
50. 000
20,000
5 40.2 per cent.
6 42 per cent.
7 40 per cent.
s 40.3 per cent.
OFFICERS OF GUARDIAN DETROIT U NION GROUP
$100
100
$5,000,000
1,000,000
5, 000. 000
100,000
10,000
3,993, 600
200,000
1, 000,000
500, 000
600,000
400, 000
300. 000
5, 000, 000
5, 000, 000
* 1,000, 000
* 500, 000
600, 000
2 50, 000
* 3, 000, 000
471, 000
1,000, 000
s 1f 793, 600
768, 200
187, 500
188, 700
91,000
« 116, 500
* 10, 600
6 21.000
562, 640
’ 40, 000
s 10,500
* 8, 500
i® 15,000
ii 39,000
7 8,000
e 42.5 per cent .
10 37.5 per cent.
ii 78 per cent.
(IN C .)
Temporary offices: Room 777 Penobscot Building, Detroit, Mich.
Frank W. Blair, chairman o f the board.
Robert O. Lord, president.
Ernest Kanzler, vice president.
Phelps Newberry, vice president.
John N. Stalker, vice president and secretary.
Lewis K. Walker, vice president.
Arthur H. Vogt, assistant treasurer.
A. A. F. Maxwell, assistant secretary.
Henry E. Bodman, chairman, executive committee.
John C. Grier, jr., vice president.
James L. Walsh, vice president.
Henry H. Sanger, vice president.
Bert K. Patterson, vice president and treasurer.
Harry S. Covington, vice president.
Robert C. Lehman, assistant secretary.
George D. Clark, assistant secretary.
Charles B. Marks, assistant secretary.
Par value
of shares
0
/
\
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
10
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1078
B RA N CH , C H A IN , M D
GROUP B A N K IN G
BOAED OF DIRECTORS
Frank W. Blair, president Union Trust Co., Detroit.
Arthur C. Bloomfield, president National Union Bank & Trust Co., Jackson.
Henry E. Bodman, chairman Guardian Trust Co., Detroit.
Clarence H. Booth, chairman Motor Bankers Corporation, Detroit.
Ralph H. Booth, president Booth Newspapers (In c.), Detroit.
W alter O. Briggs, chairman and president Briggs Manufacturing Co., Detroit.
Daniel D. Brown, president First National Bank & Trust Co., Port Huron.
Harry C. Bulkley, Campbell, Bulkley & Ledyard, Detroit.
Roy D. Chapin, chairman Hudson Motor Car Co., Detroit.
Harry S. Covington, executive vice president National bank o f Commerce,
Detroit.
George R. Fink, president Michigan Steel Corporation, Detroit.
W illiam A. Fisher, president Fisher Body Corporation, Detroit.
Edsel B. Ford, president Ford Motor Co., Detroit.
Stephen A. Graham, president Commercial & Savings Bank, Port Huron.
John C. Grier, Jr., president Guardian Detroit Co., Detroit.
C. H. Haberkorn, jr., chairman Bank of Detroit, Detroit.
Carlton M. Higbie, chairman Keane, Higbie & Co., Detroit.
Sherwin A. H ill; Warren, Hill & Hamblen, Detroit.
Charles H. Hodges, vice president American Radiator & Standard Sanitary
Corporation, Detroit.
James Inglis. president American Blower Corporation, Detroit.
Richard P. Joy, chairman National Bank o f Commerce, Detroit.
George B. Judson, president Bank of Detroit, Detroit.
Ernest Kanzier, president Universal Credit Corporation, Detroit.
Jerome E. J. Keane, director Keane, Higbie & Co., Detroit.
Dwight B. Lee, president and treasurer Motor Products Corporation, Detroit.
Robert O. Lord, president Guardian Detroit Bank, Detroit.
Alvan Macauley, president and general manager, Packard Motor Car Co.,
Detroit.
Francis C. McMath, director Canadian Bridge Co. (L td .), Detroit.
Charles S. Mott, vice president General Motors Corporation, Detroit.
Fred T. Murphy, chairman Guardian Detroit Bank, Detroit.
Edwin H. Nelson, president Nelson, Baker & Co., Detroit.
Phelps Newberry, vice president, Guardian Detroit Bank, Detroit.
Jerome H. Remick, president Detroit Creamery Co., Detroit.
Herbert S. Reynolds, president Peoples National Bank, Jackson.
Murray W. Sales, president Murray W. Sales & Co., Detroit.
Henry H. Sanger, president National Bank o f Commerce, Detroit.
Hal H. Sm ith; Beaumont, Smith & Harris, Detroit.
Oscar W. Smith, president Parke-Davis & Co., Detroit.
John N. Stalker, executive vice president, Union Trust Co., Detroit.
James L. Walsh, vice president Guardian Detroit Bank, Detroit.
Charles Beecher W arren ; Warren, Hill & Hamblen, Detroit.
A p p e n d ix V
A n n u a l R eport o f th e
G u a rd ia n
D e tr o it
U n io n
G roup
( I n c .) ,
1929
d ir e c to r s
Frank W. Blair, chairman Union Trust Co., Detroit.
Arthur C. Bloomfield, president National Union Bank & Trust Co., Jackson.
Henry E. Bodman, chairman Guardian Trust Co., Detroit.
Clarence H. Booth, chairman Motor Bankers Corporation, Detroit.
Ralph H. Booth, president Booth Newspapers (In c.), Detroit.
Joseph H. Brewer, president Grand Rapids Trust Co., Grand Rapids.
W alter O. Briggs, chairman and president Briggs Manufacturing Co., De
troit.
Daniel D. Brown, president First National Bank & Trust Co., Port Huron.
Harry C. B ulkley; Campbell, Bulkley & Ledyard, Detroit.
Charles S. Campbell, president First National Bank & Trust Co., Kalamazoo.
R oy D. Chapin, chairman Hudson Motor Car Co., Detroit.
George R. Fink, president Michigan Steel Corporation, Detroit.
B R A N C H , C H A IN , AND GROUP B AN K IN G
1079
William A. Fisher, president Fisher Body Corporation, Detroit.
Edsel B. Ford, president Ford Motor Co., Detroit.
Frank E. Gorman, vice president Capital National Bank, Lansing.
Stephen A. Graham, president Federal Commercial & Savings Bank, Port
Huron.
John C. Grier, jr., president Guardian Detroit Co., Detroit.
C. H. Haberkorn, jr., chairman Bank of Detroit, Detroit.
Carlton M. Higbie, chairman Keane, Higbie & Co., Detroit.
Shenvin A. H ill; Warren, Hill & Hamblen, Detroit.
Charles H. Hodges, vice president American Radiator & Standard Sanitary
Corporation, Detroit.
James Inglis, president American Blower Corporation, Detroit.
Richard P. Joy, director National Bank o f Commerce, Detroit.
George B. Judson, president Bank of Detroit, Detroit.
Ernest Kanzler, president Universal Credit Corporation, Detroit.
Jerome E. J. Keane, director Guardian Detroit Bank, Detroit.
Dwight B. Lee, president and treasurer Motor Products Corporation, Detroit.
Robert O. Lord, president Guardian Detroit Bank, Detroit.
Alvan Macauley, president and general manager Packard Motor Car Co.,
Detroit.
Francis C. McMath, director Canadian Bridge Co. (L td.), Detroit.
George B. Morley, chairman Second National Bank & Trust Co., Saginaw.
Charles S. Mott, vice president General Motors Corporation, Detroit
Fred T. Murphy, chairman Guardian Detroit Bank, Detroit.
Edwin H. Nelson, president Nelson, Baker & Co., Detroit.
Phelps Newberry, vice president Guardian Detroit Bank, Detroit.
Ransom E. Olds, chairman Reo Motor Car Co., Lansing.
Jerome H. Remick, president Detroit Creamery Co., Detroit
Herbert S. Reynolds, president Peoples National Bank, Jackson.
John R. Russel, director Russel Steel Construction Co.
Murray W. Sales, president Murray W. Sales & Co., Detroit.
Henry H. Sanger, president National Bank o f Commerce, Detroit.
R Perry Shorts, president Second National Bank & Trust Co., Saginaw.
Hal H. Smith, Beaumont, Smith & Harris, Detroit.
Oscar W. Smith, president Parke Davis & Co., Detroit.
John N. Stalker, president Union Trust Co., Detroit.
James L. Walsh, vice president Guardian Detroit Bank, Detroit.
Charles Beecher Warren, Warren, Hill & Hamblen, Detroit.
Dudley E Waters, chairman Grand Rapids National Bank, Grand Rapids.
OFFICERS
Frank W. Blair, chairman of the board.
Henry E. Bodman, chairman executive committee.
Robert O. Lord, president.
John C. Grier, jr., vice president.
James L. Walsh, vice president.
Henry H Sanger, vice president.
Bert K. Patterson, vice president and treasurer.
C. H. Haberkorn, jr., vice president.
Lewis K. Walker, vice president.
Joel H. Prescott, vice president.
Andrew L. Malott, vice president
A . A. F. Maxwell, secretary.
H. A. Conner, assistant secretary.
Ernest Kanzler, vice president.
Phelps Newberry, vice president.
John N. Stalker, vice president
Arthur H. Vogt, vice president and comptroller.
Samuel R. Kingston, vice president.
Charles A. Kanter, vice president.
Harry S. Covington, vice president.
R. Perry Shorts, vice president.
W. J. Penningroth, assistant treasurer.
O. A. Waldow, assistant comptroller.
1080
B R A N C H , C H A IN , AND GROUP B A N K IN G
Advisory comm ittee: Fred T. Murphy, chairm an; James Inglis, vice chairm an;
Henry E. Bodman, Roy D. Chapin, Edsel B. Ford, Charles H. Hodges, Ernest
Kanzler, Alvan Macauley, George B. Morley, Charles S. Mott, Jerome H. Remick,
John R. Russel, Murray W. Sales, Charles B. Warren.
Executive com m ittee: Henry E. Bodman, chairm an; Frank W. Blair, Harry C.
Bulkley, John C. Grier, jr., C. H. Haberkorn, jr., Carlton M. Higbie, Sherwin A.
Hill, Richard P. Joy, Ernest Kanzler, Robert O. Lord, Charles S. Mott, Fred T.
Murphy, Edwin H. Nelson, Phelps Newberry, Murray W. Sales, Henry H.
Sanger, John N. Stalker, James L. Walsh.
Operating committee: James L. Walsh, chairm an; Frank W. Blair, Frank M.
Brandon, Joseph H. Brewer, Harry S. Covington, Frank E. Gorman, Stephen A.
Graham, John C. Grier, jr., Carlton M. Higbie, George B. Judson, Charles A.
Kanter, Samuel R. Kingston, Robert O. Lord, Duncan J. McNabb, Frank J.
Maurice, E. R. Morton, Phelps Newberry, Bert K. Patterson, George R. Paul,
Frank E. Quisenberry, Herbert S. Reynolds, Henry H. Sanger, Earl H. Shepherd,
R. Perry Shorts, John N. Stalker, Arthur H. Vogt, Herbert R. Wilkin.
J a n u a r y 28, 1930.
To the stockholders of Chiardian Detroit Union Group {I n c .):
The Guardian Detroit Union Group (In c.), was organized May 10, 1929. It
now has outstanding 1,538,801 shares ($20 par value) of an authorized issue
o f 2,500,000 shares. The banks, trust companies, and other related institutions
now units o f the group are as fo llo w s:
B A N K S AND TRUST COM PAN IES
Detroit and the metropolitan d istrict: National Bank of Commerce, Guardian
Detroit Bank, Bank o f Detroit, Highland Park State Bank, Michigan Industrial
Bank, Jefferson Savings Bank, Bank of Hamtramck, Bank of Dearborn, Union
State Bank, Dearborn; Bank o f Commerce, Dearborn; Trenton State Bank,
T ren ton ; Union Savings Bank, B rightm oor; Union Trust Co., Guardian Trust
Co., Highland Park Trust Co.
Battle C reek: City National Bank & Trust Co.
F lin t: Union Industrial Bank, Union Industrial Trust Co.
Grand R apids: Grand Rapids National Bank, Grand Rapids Trust Co.
Jackson: National Union Bank & Trust Co., Peoples National Bank.
K alam azoo: First National Bank & Trust Co.
Lansing: Capital National Bank.
N iles: City National Bank & Trust Co.
Port H u ron : Federal Commercial & Savings Bank, First National Bank &
Trust Co.
Saginaw : Second National Bank & Trust Co.
The group company owns all or practically all o f the capital stock (except
directors’ qualifying shares) of the above named banks and trust companies.
The company also owns approximately 40 per cent of the stock o f the following
bank s:
Blanchard State Bank, Blanchard.
State Savings Bank, Clinton.
Thompson Savings Bank, Hudson.
State Savings Bank, Remus.
State Bank o f Six Lakes, Six Lakes.
State Savings Bank, Stanton.
State Savings Bank, Yestaburg.
The group company owns either directly or indirectly all or substantially all
o f the capital stock o f the following corporations:
SECURITIES COM PANIES
Guardian Detroit Co.
Keane, Higbie & Co.
National Union Co., Jackson.
F. N. B. Securities Co., Kalamazoo.
Grand Rapids National Co., Grand Rapids.
Guardian Detroit Co. o f California.
Peoples National Co., Jackson.
B R A N C H , C H A IN , AND GROUP B AN K IN G
1081
JO INT-STO CK L AN D B A N K S
Union Joint Stock Land Bank, Detroit.
Ohio-Pennsylvania Joint Stock Land Bank, Cleveland.
OTHER AFFILIATED IN ST IT U T IO N S
Union Title & Guaranty Co., Detroit.
New Union Building Co., Detroit.
Guardian Safe Deposit Co.
Guardian Holding Co.
National Union Building Co., Jackson.
PURPOSES
In the past decade, banking like industry has felt the economic pressure
toward larger units and closer connection of units. The progress o f business
has emphasized the interdependence o f communities within the same industrial
area, and has shown the need for a more comprehensive banking service.
The purpose o f the group has been to gather together under unified owner
ship outstanding banks, trust companies, and financial institutions in ihe
leading industrial and commercial centers o f Michigan to the end that—
1. Industry, commerce, and the individual shall be better served, by a strong
and progressive group o f banking and financial institutions, whose directors
and officers have a clear and sympathetic understanding o f the needs and
problems o f business in the vast industrial region of lower Michigan— one of
the most important manufacturing districts in the world.
2. There shall be retained fo r Michigan and for its cities the banking re
sources and deposits which might otherwise o f necessity go in substantial
amounts to financial centers outside o f the State.
3. Further growth and development in Michigan shall be aided and fostered
by Michigan institutions and by Michigan capital.
The practical advantages which the group offers are many. Each unit in
stitution is associated with the group company having aggregate resources
many times greater than its own, giving the depositor even greater assurance
of the safety o f his funds. The larger local corporations need no longer go
elsewhere for such loan accommodations as they may need. I f individual
units o f the group do not have sufficient legal loaning capacity to provide for
the requirements o f the large corporations, the other units of the group should
be able to take care of these requirements.
Depositors will have available the credit information and the financial and
investment service o f a larger organization fully equipped to render such
service. The group through its units and through its outside relationships
provides contact with innumerable types o f business and cooperates in develop
ing new business for customers.
POLICY
OF
M ANAGEM ENT
From its inception Guardian Detroit Union Group (In c.) has stood com
mitted to the fundamental policy o f developing the standing and prestige
of local management and has placed the responsibility o f such management
upon the local boards o f directors and local officers.
Article VI of the by-laws of the group provides:
“ Whenever at any meeting o f the stockholders o f a bank or trust company
o f which this corporation shall at the time own 75 per cent or more of the
outstanding stock, an election of a board o f directors is held, the shares of
such bank or trust company owned by this company shall be voted in favor
of the election of a board of directors of which at least 75 per cent shall
consist o f directors residing in the municipality where said bank or trust
company is located or within a radius of 50 miles thereof.”
To further carry out these policies, the board of directors of Guardian
Detroit Union Group ( Inc.) adopted the following resolutions:
“ Resolved, That credit based upon the deposits in a local bank, which is
a unit member o f Guardian Detroit Union Group (In c.), shall be controlled
wholly by the board o f directors and the officers o f the local unit bank; and
“ jResolved, That Guardian Detroit Union Group (In c.), in its relationships
with local banks which are unit members of the group, accepts as its sole
1082
B R A N C H , C H A IN , AND GROUP B A N K IN G
function, responsibility and duty— to provide ‘ stronger support to the banks
and a more secure basis for these institutions ’— and the officers and staff
o f the group be and they hereby are directed to devote their energies and
restrict their activities accordingly; and
“ Resolved, That the board of directors o f each local unit institution in
Guardian Detroit Union Group (In c.), is responsible for the management
o f the affairs o f the institution in question; and that the officers of each unit
institution in the group are responsible directly to the board o f directors of
their own institution and to no other authority, except the law.”
Subject to the broad policies outlined above, the group company can perform
the following useful functions for local unit institutions:
( a ) Acting as clearing-house for information bearing upon policies, practices,
and results obtained by the various member unit institutions;
(Z>) Systematically making available to all units the practice of the best
with a view to enabling all to reach the highest standards of operation and
resultant profit;
(c ) Providing expert advice at minimum cost in regard to tax and insurance
matters, and extraordinary legal questions;
( d ) Providing capable supervision in connection with building construction
and management;
(e ) Coordinating business development activities;
If) Purchasing standard equipment and supplies in quantity;
(g )
The group company should also provide an independent examining force,
in no way responsible for the condition which its examination discloses, to
supplement the work o f the board o f directors o f a local unit in connection
with the examining responsibilities imposed by Statute.
In order to perform the above functions effectively, the following committees
have been elected, by the board of directors: Advisory committee, executive
committee, operating committee.
The advisory committee is largely a policy-making comm ittee; its member
ship is comparatively small, and includes no active operating officers of any
unit. This committee has, and should have entire freedom in criticizing either
the policies or the management o f any unit or any department of the associated
institutions. Its meetings are not held on stated days, but upon the call of
the chairman. Operating heads of units or departments w ill have the advice
and assistance o f this committee as to any questions under consideration.
The executive committee includes several members of the advisory com
mittee together with other members o f the board of directors who are operating
men in the organizations in the group. Its duties are much the same as any
executive committee, empowered to act on behalf of the board of directors.
The operating committee is made up o f the operating heads of the various
large units in the group. Their function is to discuss operating details, new
business and other matters pertaining to direct operations of the various
institutions, which would make for better and more economical operation and
for the further growth and development o f the units in the group.
To assist in coordinating and stimulating group activities, the follow ing staff
officers have been provided fo r : Manager business development, comptroller,
purchasing agent, chairman bank investment committee, general trust officer,
manager department o f examinations, supervisor o f buildings, general counsel.
RESULTS OF OPERATIONS DURING 1 9 2 9
The results of operations of the above unit institutions of Guardian Detroit
Union Group (In c.) for the year ending December 31, 1929, were satisfactory
in spite of the difficult condition which confronted every banking institution
during the last 10 weeks o f the calendar year.
Aggregate gross earnings o f the units o f the group amounted to_ $41, 847,489.21
From which all expenses (including taxes of all kinds, and
depreciation of buildings and equipment) were paid to the
amount o f____________________________________________________
32, 435, 031. 08
Leaving net earnings from operations (after writing off all
known losses) in the amount o f_____________________________
9, 412, 458. IB
Or at the rate o f 30.58 per cent on outstanding capital stock
o f 1,538,801 shares of $20 par value.
1083
B R A N C H , C H A IN , AND GROUP B A N K IN G
Of this amount, there was set aside reserves for unforseen
contingencies in the amount o f_______________________________
Leaving available for dividends_______________________________
Or at the rate o f 25.04 per cent on outstanding capital
stock o f 1,538,801 shares of $20 par value.
Of this amount there was paid out in dividends during the
year by the group or by the member banks prior to affiliation
with the group_______________________________________________
Leaving for additions to surplus or undivided profits__________
$1, 704, 732. 73
7, 707, 725. 40
4, 246, 359. 04
3, 461, 366.36
The banks and trust companies, units o f the Guardian Detroit Union Group
(In c.) now serve more than 500,000 customers.
Aggregate resources and liabilities of banks and trust companies affiliated with
Guardian D etroit XJnion Group (Inc.) as of December 31, 1929
RESOURCES
L IABILITIES
Loans and discounts. $227, 245, 022. 82
Bonds and securities83, 216, 782. 92
R e a l estate mort
gages --------------------75,'
Cash and due from
banks______________
78,195, 449. 90
Advances to trusts—
6 , 355, 536. 99
Customers’
liability
letters o f credit and
851, 318. 15
acceptances_______
Customers’ s e c u r i
ties— Safekeeping _
1 2 , 594, 330. 16
First mortgage
bonds— trust fund3, 699, 193. 96
Banking
houses,
equipment, etc_____
2 1 , 256, 041. 50
Other resources_____
540, 1 2 1 . 85
Capital stock_________ $31,700,000.00
Surplus_______________ 27, 527, 400.00
Undivided profits_____
7, 600, 673. 01
Reserves______________
1, 432,124. 97
509, 949, 812. 23
509, 949, 812. 23
Total
invested
capital_______
68,260,197. 98
21, 842,176. 83
Bills payable_________
Letters o f credit and
857, 466. 92
acceptances________
Customers’ securities—
safekeeping-----------12, 594,330.16
Mortgage bon d s______
3, 770, 200.00
Repurchase a g r e e
ments_______________
2 , 000 , 000 . 00
3,226,035.00
Circulation___________
Other liabilities______
4,313, 076.50
D eposits______________ 393, 086,329. 34
Invested capital o f banks and trust companies as indicated
above ( including contingent reserves) -----------------------------------Invested capital of all other corporations, units of the group, in
cluding the proportionate ownership where less than 50 per
cent of the capital is owned by Guardian Detroit Union Group
(I n c .)________________________________________________________
Total invested capital___________________________________
68 , 260,197. 98
12,777,190.58
81, 037, 388. 56
The Guardian Detro.it Union Group (Inc.) has more than 8,000 stockholders.
These stockholders can be of inestimable help in further developing the business
o f the various units of the group, not only through the use of all facilities
offered by the units but also in urging their friends to do likewise. Much o f
this assistance has already been given by our stockholders for which the
management wishes to express appreciation. In asking a further measure o f
support we are mindful that whatever benefits the units of the group is of
direct benefit to the stockholders.
Acknowledgment is made o f the loyal support and untiring efforts of all o f
our directors, officers, and employees during the past year.
By order of the executive committee.
R o b e r t O . L o r d , President.
1084
B R A N C H , C H A IN , AND GROUP B A N K IN G
Statement of condition of National Bank o f Commerce, Detroit, Mich., at the
close o f business Decem ber 31, 1929
RESOURCES
Loans and discounts___________________________________________ $87, 806, 901. 65
275,000.00
United States bonds___________________________________________
Other bonds and securities_____________________________________
3, 407, 560. 00
18, 926, 748. 85
Cash and due from banks--------------------------------------------------------United States bonds borrowed_________________________________
3, 900, 000.00
Banking house and equipment__________________________________
2, 294, 332.10
Other real estate_______________________________________________
2,245. 27
Customers’ liability letters of credit and acceptances__________
440, 751. 20
Total________________ ____________________________________
117, 053, 539. 07
LIAB ILITIES
Capital s to ck ___________________________________________________
Surplus_________________________________i________________________
Undivided profits---------------------------------------------------------------------Reserve for interest, taxes, etc_________________________________
Discount collected not earned_________________________________
Dividends unpaid_______________________________________________
Liability under letters of credit and acceptances_______________
Bills payable------------------------------------------------------------------------------Rediscounts------------------------------------------------------------------------------United States bonds borrowed--------------------------------------------------Real estate mortgage and commitments_________________________
Deposits--------------------------------------------------------------------------------------
5,000,000.00
6 , 000 , 000 . 00
1,487,157.56
285,100.75
119, 022.19
1 , 822. 50
446, 899.97
7, 900, 000.00
895, 000. 00
3, 900,000. 00
34, 634. 87
90. 983. 901. 23
T o ta l------------------------------------------------------------------------------- 117. 053, 539. 07
OFFICERS
Henry H. Sanger, chairman of the
board and president.
Samuel R. Kingston, executive vice
president and cashier.
Charles A. Kanter, executive vice pres
ident.
Harry S. Covington, executive vice
president.
L. H. D. Baker, vice president.
Scott Carpenter, vice president.
Harry S Finkenstaedt, vice president.
Orville L. Hatt, vice president.
Charles A. Kinney, vice president.
Charles N. Maycoek, vice president.
Robert C. Wandel, vice president.
G. R. Harris, assistant vice president.
W. P. Jacobs, assistant vice president.
Albert P. Voss, assistant vice president.
W. E. Blakeley, assistant cashier.
Walter D. Brown, assistant cashier.
S. A. Clark, assistant cashier.
Leo J. Coleman, assistant cashier.
R. V. Free, assistant cashier.
A. D Freydl, assistant cashier.
George L. Greenup, assistant cashier.
Nels Johnson, assistant cashier.
John W. Johnston, assistant cashier.
S. W. Laird, assistant cashier.
Douglas
G. McCracken,
assistant
cashier.
Charles F. Sawyer, assistant cashier.
Harry Schaefer, assistant cashier.
F W. Shelton, assistant cashier.
E. Schulz, auditor.
William Fredericks, assistant auditor.
Leo E. Kangas, assistant auditor.
Statement o f condition of Bank of Detroit, Detroit, Mich., at the close of
business Decem ber 31, 1929
RESOURCES
Loans and discounts------------------------------------------------------------------- $21,194,274.41
Bonds, mortgages, and securities________________________________
17. 737, 381. 49
2, 000, 000.00
Securities sold subject to repurchase agreement-----------------------Federal reserve bank stock--------------------------------------------------------150, 000. 00
Cash resources:
Due from Federal reserve bank------------------- $2, 002, 514. 57
Cash in vault and due from banks__________
6 , 567, 603. 03
----------------------8 , 570,117. 60
Customers’ liability letters of credit-----------------------------------------35, 817.02
Customers’ bonds for safekeeping_______________________________
2, 097, 400.00
B R A N C H , C H A IN , AND GROUP B AN K IN G
Bank buildings and equipment_________________________________
Other real estate_______________________________________________
Land contracts receivable_______________________________________
Income accrued receivable (n e t)_______________________________
Interest and expenses prepaid (n e t)____________________________
1085
$2, 338, 623. 01
284, 833. 24
101, 599. 09
222,608.30
60,471.47
Total_____________________________________________________ $54, 793,125. 63
LIABILITIES
Capital stock____________________________________________________
Surplus_________________________________________________________
Undivided profits_______________________________________________
Dividend checks outstanding___________________________________
Customers’ bonds for safekeeping_______________________________
Securities sold subject to repurchase agreement________________
Letters of credit_______________________________________________
D eposits________________________________________________________
$4, 000, 000. 00
1, 250, 000. 00
501, 572. 38
883. 85
2, 097, 400. 00
2, 000, 000.00
35, 817.02
44, 907, 452. 38
Total_____________________________________________________
54, 793,125. 63
C. H. Haberkorn, jr., chairman of the
board.
Geo. B. Judson, president.
G. Ogden Ellis, vice president.
W. A. Fisher, vice president.
R. B. Gripman, vice president.
F. J. Beyer, vice president.
E. S. Burns, vice president.
C. M. Beers, vice president.
L. C. Van Auken, vice president.
W. R. Laing. cashier.
G. T. Murray, assistant cashier.
C. S. Goddin, assistant cashier.
E. T. McConnell, assistant cashier.
B. F. Saylor, assistant cashier.
A. J. Stocker, assistant cashier.
G. C. Auten, assistant cashier.
M. W. Heyrock, assistant cashier.
N. J. MacDonald, assistant cashier.
T. L. Higgins, auditor.
Statement of Condition of Guardian Detroit Bank, Detroit, Mich,, at the Closi.
of Business December 31. W29
RESOURCES
Loans and discounts____________________________________________ $32, 942, 649. 45
United States bonds and certificates____________________________
9, 513, 335. 77
Other bonds_____________________________________________________
2, 451, 334. 92
240,000.00
Federal reserve bank stock_____________ _______________________
Cash resources:
Due from Federal reserve bank____________ $5, 697, 350. 20
Cash in vault and due from banks__________ 12,150, 777. 00
------ ----------------- • 17, 848,127. 20
Customers’ liability letters of credit and acceptances__________
248, 719.93
Banking quarters and equipment_______________________________
1,121, 661. 49
T otal_____________________________________________________
64, 365, 828. 76
LIA B ILITIE S
Capital stock___________________________________________________
Surplus___________ ______________________________________________
Undivided profits________________________________________________
Reserve for interest, taxes, etc_________________________________
Letters of credit and acceptances_______________________________
Bills payable___________________________________________________
Deposits------------------------------------------------------------------------------------Total.
5 , 000, 000. 00
3, 000, 000. 00
882, 092. 60
516, 736. 06
248, 719. 93
None.
54, 718* 280.17
64, 365, 828. 76
1086
B R A N C H , C H A IN , AND GROUP B A N K IN G
OFFICERS
Fred T. Murphy, chairman o f the
board.
Robert O. Lord, president.
Ernest Kanzler, vice president.
James L. Walsh, vice president.
John O. Grier, jr., vice president.
Phelps Newberry, vice president.
C. A. Shepardson, vice president.
Arthur H. Vogt, vice president.
Alvan Macauley, jr., vice president.
Frank P. Evans, jr., vice president.
John B. Dew, cashier.
John S. Wells, assistant vice president
John N. Daley, assistant vice president
Norman Rudolph, assistant cashier.
James J. O’Shea, assistant cashier.
Dan P. Caulkins, assistant cashier.
John R. Walsh, assistant cashier.
Maurice D. Watts, assistant cashier.
Guardian Trust Co. of Detroit, statement of condition of at the clrJse of business
December 31, 1929
RESOURCES
Cash and due from banks_______________________________________ $1. 530, 408. 71
Collateral loans__________________________________________________ 12, 246,150. 35
Real-estate mortgages___________________________________________
6 , 567, 694. 47
Real-estate mortgages with State treasurer-------------------------------213,125. 50
Bonds________________ ____________________________________________ 2, 358,138. 30
Advances to trusts_______________________________________________
412, 439. 03
Total______________________________________________________ 23, 327, 956. 36
LIAB ILITIES
Capital stock____________________________________________________ 1, 000, 000. 00
Surplus__________________________________________________________ 1. 000, 000. 00
Undivided profits-----------------------------------------------------------------------899, 904. 57
Reserve for interest, taxes, etc---------------------------------------------------356, 875. 66
Trust deposits___________________________________________________ 20, 071,176.13
T o ta l_____________________________________________________ 23,327,956.36
OFFICERS
Henry E. Bodman, chairman of the
board.
Robert O. Lord, president.
Lewis K. Walker, vice president and
secretary.
John C. Grier, jr., vice president.
Phelps Newberry, vice president.
Andrew L. Malott, vice president.
Rudolph E. Hofelich, vice president.
Arthur H. Yogt, vice president and
comptroller.
A. A. F. Maxwell, assistant vice
president.
Ernest C. Harris, assistant vice presi
dent.
A. B. Pfleiderer, assistant vice presi
dent.
John L. Cotter, assistant vice presi
dent.
Harold W. Buckheit, assistant vice
president.
Charles A. Meyer, trust officer.
Louis J. Ronder, assistant secretary.
Charles B. Marks, assistant secre
tary.
George D. Clark, assistant secretary.
Wilbur F. Campbell, assistant secre
tary.
Statement of condition of Union Trust Co., Detroit, Mich., at the close of 'busi
ness December 31, 1929
RESOURCES
Collateral loans-------------------------------------------------------------------------United States Government securities----------------------------------------Bonds, mortgages, etc---------------------------------------------------------------Cash on hand and in banks-------------------------------------------------------Stock o f New Union Building Co----------------------------------------------Stock of Union Title & Guaranty Co-----------------------------------------Advances to trusts---------------------------------------------------------------------
$9» 135,009.04
165,095. 52
23, 525, 897. 2 2
6 , 529,987. 88
3, 000, 000.00
000, 000* 00
5, 219, 062. 88
B R A N C H , C H A IN , AND GROUP B AN K IN G
1087
Real estate_________________________________________ _____________
Furniture and fixtures______________________ ___________________
Accrued receivables, net________________________________________
1 , 097, 279. 45
$729, 769. 48
263, 878. 80
Total----------------------------------------------------------------------------------
50, 665, 980. 27
LIABILITIES
Capital stock___________________________________________________
Surplus_________________________________________________________
Undivided profits_______________________________________________
Bills payable___________________________________________________
United States Government securities borrowed_________________
Other liabilities_________________________________________________
Reserve for interest, taxes, etc_________________________________
Accrued payable, net___________________________________________
Trust deposits__________________________________________________
5,000,000. 00
7, 500, 000. 00
402,133. 81
5, 232, 500. 00
60, 000. 00
15, 250. 00
73, 683. 77
461, 694. 74
31, 920, 717. 95
Total______________________________________________________
50, 665, 980. 27
OFFICERS
Frank W. Blair, chairman of the
board.
John N. Stalker, president.
Charles R. Dunn, executive vice presi
dent.
Joel H. Prescott, executive vice presi
dent.
Andrew L. Malott, executive vice
president.
Charles N. Crosman, vice president.
Charles H. Adams, vice president.
Merrill C. Adams, vice president.
Charles E. Clark, vice president.
John A. Reynolds, vice president.
Clinton F. Berry, vice president.
A. Douglas Jamieson, vice president.
Ralph E. Badger, vice president.
E. L. Deacon, vice president.
J. Monroe Roney, vice president.
Lawrence J. Toomey, vice president.
Morse D. Campbell, vice president.
Alvin W. Bond, vice president.
Eugene A. Miller, vice president.
Merrill C. Adams, secretary.
Charles E. Clark, treasurer.
Joseph J. Cavanaugh, trust officer.
Thomas J. Teare, trust officer.
James A. Pierce, trust officer.
George F. Aldrich, trust officer.
C. Stewart Baxter, trust officer.
George E. Parker, jr., trust officer.
Harry Slater, assistant to the presi
dent.
Louis H. Charbonneau, assistant vice
president.
Herold G. Woodruff, assistant vice
president.
John C. Evans, assistant vice presi
dent.
Wayne W. Putnam, assistant vice
president.
William B. McNally, assistant vice
president.
William J. Dickson, assistant vice
president.
Wesley J. Carlyle, assistant vice presi
dent.
Arthur S. Gilmore, assistant secretary.
Ned W. Andrus, assistant secretary.
William H. Erskine, assistant secre
tary.
Wayne W. Putnam, assistant secre
tary.
Millard E. Bowlus, assistant secre
tary.
Robert T. Flattery, assistant secre
tary.
Thomas L. Patton, assistant secretary.
Herbert H. Schoenberg, assistant sec
retary.
Lucius A. Thomas, assistant secre
tary.
Edward L. Alward, assistant secre
tary.
E. Arthur Edwards, assistant secre
tary.
Walter C. Hartwig, assistant treas
urer.
Charles H. Adams, manager bond de
partment.
Roy R. Carpenter, manager corporate
division, bond department.
Frank P. Keane, manager municipal
division, bond department.
Paul D. Corbett, manager of sales,
bond department.
E. John Lantz, auditor.
Irving C. Tuttle, assistant auditor.
John A. Reynolds, manager business
extension department.
Robert T. Flattery, assistant manager
business extension department.
W ilfred C. Dickie, assistant manager
business extension department.
H. Raymond Bacon, assistant man
ager business extension department.
1088
B R A N C H , C H A IN , AND GBOUP B AN K IN G
Statement of condition of Highland Park State Bank, Highland Park, Mich.,
at the close of business D ecem ber 31, 1929
RESOURCES
Loans and discounts____________________________________________ $5,197,257. 58
Real-estate loans_________________________________________________ 10, 882, 703. 87
United States bonds and certificates____________________________ 1, 858,334.19
Other bonds_____________________________________________________ 6 , 314,197. 97
Federal reserve bank stock______________________________________
90, 000.00
Cash resources:
Due from Federal reserve bank_______________ $837, 685. 59
Cash in vault and due from banks____________ 1, 437, 805. 61
--------------------- 2, 275, 491. 20
Banking houses and equipment_________________________________
1, 111, 263. 97
Customers’ liability letters o f credit-------------------------------------------10, 000. 00
T o ta l_____________________________________________________ 27, 739,248. 78
L I AB IITIES
Capital stock ------------------------------------------------------------------------------- 1, 000, 000. 00
Surplus__________________________________________________________ 2, 000, 000. 00
Undivided profits-----------------------------------------------------------------------258,895. 22
Reserve for interest, taxes, etc_________________________._________
208,163. 92
Letters o f credit and acceptances------------------------------------------------10, 000. 00
Bills payable------------------------------------------------------------------------------None
D ep osits_____________________ :__________________________________ 24, 262,189. 64
27, 739, 248. 78
Total -
James T. Whitehead, chairman o f the
board.
Robert O. Lord, president.
George R. Andrews, chairman of exec
utive committee.
Frank E. Quisenberry, executive vice
president.
Frank J. Maurice, executive vice presi
dent.
Herbert G. Wood, vice president.
Herbert H. Gardner, vice president.
Charles I. Norman, vice president and
bond officer.
William A. Mayberry, assistant vice
president.
Lloyd P. Thompson, cashier.
Leo C. Janisse, assistant vice presi
dent.
Griswold Adams, assistant cashier.
James H. Helliwell, assistant cashier.
L. F. Merz, manager foreign bank
ing department.
B. Pesciarelli, assistant manager for
eign banking department.
Statement of condition o f Highland Park Trust Co., Highland Park, Mich,
at the close of business, Decem ber 31, 1929
RESOURCES
Cash and due from banks------------------------------------------------------------$168, 707.12
Collateral loans----------------------------------------------------------------------------611, 973. 81
Real-estate mortgages____________________________________________
395, 504. 00
Bonds with State treasurer----------------------------------------------------------205, 562. 53
Bonds_________________ i___________________________________________
593, 385. 70
Advances to trusts________________________________________________
89, 903. 80
First mortgage bond trust fund--------------------------------------------------- 3, 699,193. 96
Furniture, fixtures, etc-----------------------------------------------------------------19, 949. 01
T otal-
5, 784,179. 93
LIA B ILITIE S
Capital stock_____________________________________________________
500, 000. 00
Surplus------------------------------------------------------------------------------------------250, 000. 00
Undivided profits---------------------------------------------------------------------------75, 562. 36
Reserve for interest, taxes, etc____________________________________
95, 588. 37
First-mortgage bonds outstanding________________________________ 3, 686 , 500. 00
Trust deposits____________________________________________________ 1,176, 529. 20
Total.
5, 784,179. 93
B R A N C H , C H A IN , AND GROUP B A N K IN G
1089
OFFICERS
Robert O. Lord, chairman of the board.
Frank E. Quisenberry, president.
George R. Andrews, chairman of ex
ecutive committee.
Frank J. Maurice, vice president.
Herbert H. Gardner, executive vice
president and trust officer.
Charles I. Norman, vice president and
bond officer.
Alfred Zahrn, secretary.
Herbert G. Wood, treasurer.
Leonard F. Betts, assistant trust
officer.
W illiam A. Mayberry, assistant sec
retary.
Lloyd J. Thompson, assistant secre
tary and assistant treasurer.
Leo C. Janisse, assistant treasurer.
Statement of condition of Michigan Industrial Bank, Detroit, Mich., at the
close of business Decem ber SI, 1929
RESOURCES
Loans and discounts____________________________________________ $3, 202, 454.18
Cash on hand and in banks___________________ __________________
31, 701. 61
Furniture and fixtures__________________________________________
13, 306. 66
Other assets_____________________________________________________
77. 30
Total______________________________________________________
3, 247, 539. 75
L IAB ILITIES
Capital stock_____________________________________________________
500, 000. 00
Surplus___________________________________________________________
125, 000 00
Undivided profits__________________________________________ _______
59, 843. 42
Interest received unearned_______________________________________
80, 260. 47
Reserve for interest, taxes, etc---------------------------------------------------21, 296. 70
Repayments on loans_____________________________________________ 1,110, 200. 03
Savings deposits__________________________________________________
575, 730.12
Bills payable_____________________________________________________
775, 000. 00
Other liabilities___________________________________________________
209. 01
Total_______________________________________________________ 3, 247, 539. 75
OFFICERS
Allan A. Templeton, president.
George B. Yerkes, vice president
Harold L. Wadsworth, vice president.
C. S. Fitzpatrick, executive vice president.
A. E. Betteley, vice president.
Carl M. Heck, vice president and treasurer.
S. P. King, secretary.
Statement of Condition of Trenton State Bank, Trenton, Mich., at the close
of business December 31, 1929
RESOURCES
Loans and discounts________________________________ _____________ $380,311.17
Real estate mortgages___________________________________________
328, 408. 61
Bonds_____________________________________________________________
237, 872. 38
United States bonds carried as reserve----------------------------------------66,150. 00
Cash and due from banks-------------------------------------------------------------64, 986. 88
Premium account-------------------------------------------------------------------------609.27
Banking house and equipment-----------------------------------------------------44, 697. 68
Other real estate_________________________________________________
3, 365.00
Customers’ bonds in safekeeping----------------------------------------------1, 250. 00
Accrued interest paid--------------------------------------------------------------------198.19
T o ta l______________________________________________________ 1,127,789.18
100136— 30— v o l 2, p t 9—— 6
1090
BRANCH, CHAIN, AND GHOUP BANKING
LIA B ILITIE S
Capital stock_____________________________________________________
$50, 000. 00
Surplus and undivided profits__________________________________
42,196.88
Bills payable_____________________________________________________
25, 000. 00
Customers’ bonds in safekeeping________________________________
1, 250. 00
D e p osits__________________________________________________________ 1,009, 342. 31
Total_______________________________________________________ 1,127,789.18
OFFICERS
Austin Church, chairman of the board.
Nicholas A. Mans, president.
F. A. Lautenschlager, vice president
and cashier.
Margaret Stone, assistant cashier.
Karl Fust, assistant cashier.
Statement of condition of Bank of Commerce, Dearborn, Mich., at the close of
business December 81, 1929
RESOURCES
Loans and discounts_____________________________________________
Bonds and mortgages-------------------------------------------------------------------Cash and due from banks________________________________________
Banking house and equipment----------------------------------------------------Interest accrued receivable______________________________________
$507, 958. 75
923, 566. 37
251, 094.40
123, 000.00
18,511.12
Total______________________________________________________ 1, 824,130. 64
L IAB IL IT IES
Capital sto ck --------------------------------------------------------------------------------200, 000.00
Surplus----------------------------------------------------------------------------------------50, 000.00
Undivided profits_________________________________________________
40, 081.10
Dividends unpaid-------------------------------------------------------------------------330. 00
Deposits___________________________________________________________ 1,533,719.54
T o ta l______________________________________________________
1,824,130.64
OFFICERS
Oren O. Otis, vice president and i Henry H. Sanger, president.
cashier.
S. R. Kingston, vice president.
William O. Gierk, assistant cashier.
I
Statement o f condition of Bank o f Dearborn, Dearborn, Mich., at the close of
business, December 31, 1929
RESOURCES
Loans and discounts----------------------------------------------------------------------Real estate loans_________________________________________________
Other bonds---------------------------------------------------------------------------------Federal reserve bank stock------------------------------------------------------------Cash and due from banks_________________________________________
Banking house and equipment____________________________________
Other resources-----------------------------------------------------------------------------
$675, 020.13
245, 546.22
673, 963. 50
7, 500. 00
176,667.47
163, 804. 72
10, 759. 69
Total------------------------------------------------------------------------------------ 1 , 953, 261. 73
LIAB IL IT IES
Capital stock---------------------------------------------------------------------------------200, 000.00
Surplus------------------------------------------------------------------------------------------50, 000. 00
Undivided profits---------------------------------------------------------------------------9 , 9 3 1 . 70
Jtieserve for interest, taxes, etc____________________________________
17,663.89
Deposits----------------------------------------------------------------------------------------- 1,675,666.14
Total------------------------------------------------------------------------------------ 1,953,261.73
BRANCH, CHAIN, AND GROUP BANKING
1091
OFFICERS
Clarence H. Booth, president.
Frank E. Quisenberry, vice president.
Frank J. Maurice, vice president.
Emanuel C. Lindman, cashier.
Walter H. Bell, jr., assistant cashier.
Statement of condition of Union State Bank, Dearborn, Mich., at the close of
business Decem ber 31„ 1929
RESOURCES
Loans and discounts_____________________________________________ $2 , 087, 661. 65
Bonds and mortgages____________________________________________
799, 944. 04
Banking house and branches______________________________________
197, 692. 28
Furniture and fixtures___________________________________________
20, 446. 56
Cash and due from banks and bankers___________________________
838, 811. 33
Total______________________________________________________
3,944,555.86
LIABILITIES
Capiial stock_________________________ ______ _ ____ _______
Surplus____________________________________________ _ ___________
Undivided profits________________________________________ ___ ___
Dividends unpaid_________________________ _________
____ ___
Deposits_________________________________________________________
Total________________________ ______________________ ______
Joseph Henn, chairman.
W. J. Rachow, president and cashier.
Frank W. Blair, vice president.
Howard O. Wells, vice president.
Percy J. Wines, assistant cashier.
Joseph A. George, assistant cashier.
200,000.00
203,150.00
25,999.69
6 , 486. 40
3. 508, 919. 77
3, 944. 555. 86
F. G. Krusell, assistant cashier.
Hal H. Smith, attorney.
Victor Tinerean, manager foreign de
partment.
C. H. Gates, manager new business
department.
Statement o f condition of Jefferson Savings Bank, Grosse Pointe Park, Mich.,
at the close of business Decem ber 31, 1929
RESOURCES
Loans and discounts______________________________________________
Real estate loans__________________________________________________
B on d s_____________________________________________________________
Cash and due from banks-------------------------------------------------------------Banking houses and equipment__________________________________
$173, 816. 46
335, 994. 85
365, 401. 77
207, 719. 51
56, 079. 00
T o ta l_______________________________________________________ 1,139, 011. 59
L IABILITIES
Capital stock---------------------------------------------------------------------------------100, 000. 00
30, 000. 00
Surplus_____________________________________________ _______________
Undivided profits_________ :________________________________________
7, 533. 94
Reserve for interest, taxes, etc_____________________________________
1, 000.00
D eposits__________________________________________________________ 1, 000, 477. 65
T o ta l_______________________________________________________ 1,139, 011. 59
OFFICERS
Jul. W. Berns, president.
I S. W illard Hosking, assistant cashier.
W. Lloyd Webster, vice president and
Henry C. De Yonker, assistant cashier,
cashier.
I
1092
B R A N C H , C H A IN , AND GROUP B A N K IN G
Statement o f condition of Bank of Hamtramck, Hamtramck, Mich., at the close
of business December 31, 1929
RESOURCES
Loans and discounts--------------------------------------------------------------------Bonds and mortgages____________________________________________
United States bonds_______________________________________________
Cash on hand and in banks----------------------------------------------------------Banking house and equipment____________________________________
Bonds left for safe keeping_______________________________________
Total______________________________________________________
$861, 850. 24
402, 521. 20 •
42, 500.00
103, 672. 98 *
152, 843. 85 •
9, 450. 00
1,072,898.2?
LIABILITIES
Capital stock_____________________________________________________
Surplus_________________________________________________ __________
Undivided profits_________________________________________________
Dividends unpaid________________________________________________
Bonds left for safe keeping_______________________________________
Deposits----------------------------------------------------------------------------------------Total______________________________________________________
20 0 , 000. 00
43.000. 00
5, 775. 57
6 ,000.00
9, 450. 00
808, 672. 70 •
1,072,898.27
OKIICERS
John F. Koenig, president.
Edwin R. Monnig, vice president.
I W. E. Dingman, cashier.
| J. J. Putera, assistant cashier.
Statement of condition o f City National Bank & Trust Co., B attle Creek, Mich.t
at the close of business Decem ber 31, 1929
RESOURCES
Loans and discounts------------------------------------------------------------------- $4, 713, 4 4 3 . '
Bonds____________________________________________________________ 1, 219, 809. 35*
United States bonds to secure circulation___*____________________
600, 000. 00
Banking house and equipment__________________________________
1,198, 650. 49
Cash on hand and in banks______________________________________
683, 583. 60
Stock in Federal reserve bank__________________________________
39, 000. 00
30, 000. 00
Redemption fu n d _______________________________________________
T o ta l_____________________________________________________
8 , 484, 486. 78
LIAB ILITIE S
Capital___________________________________________________________
Surplus__________________________________________________________
Undivided profits________________________________________________
National bank circulation________________________________________
Bills payable and rediscounts____________________________________
Deposits__________________________________________________________
Total__________________________________________ l ___________
600, 000. 00
700, 000. 00
57, 542. 27
600, 000. 00
385, 472. 28
6,141, 472. 23
8; 484, 486. 7S
OFFICERS
Charles C. Green, president.
Edwin R. Morton, vice president and
cashier.
Frederick A. Allwardt, vice president.
Nelson E. Hubbard, vice president.
Glenn Van Denbergh, assistant cashier.
Joseph P. Burgie, assistant cashier.
Earle J. Lae,, manager West End
Branch).
1093
B RA N CH , C H AIN , AND GROUP B A N K IN G
Statement o f condition o f Union Industrial Bank, Flint, Mich., at the close
of 'business Decem ber 31, 1929
RESOURCES
Loans and discounts___________________________________________ $10,136, 565. 64
Real estate mortgages_________________________________________
8,119, 313, 90
United States bonds and certificates of indebtedness__________
1, 323, 013. 38
■Other bonds____________________________________________________
5, 409, 441. 97
Federal Reserve Bank Stock__________________________________
90, 000. 00
Due from Federal Reserve Bank______________________________
706, 983. 41
Cash and due from other banks_______________________________
1, 464, 319. 46
Banking quarters and equipment______________________________
1,125, 876. 70
278, 282. 02
Other resources___________________________ _____________ ______
Total____________________________________
_____ __
____
28, 653, 796. 48
LIABILITIES
Capital__________________________________________________________
S urplus_________________________________________________________
Undivided profits________________________________________________
Reserve for taxes and contingencies____ ______________________
Bills payable____________________________________________________
’D ep osits________________ _____________________ _ ________________
Total_________________________________________
2 . 000 , 000 . 00
1 , 000, 000.00
152, 256. 98
267, 641. 73
3, 350, 000. 00
21,883,888.77
______ __ 28,653,796.48
OFFICERS
C. S. Mott, president.
H. R. Wilkin, executive vice presi
dent and cashier.
John E. Storer, vice president.
N. H. Moysey, vice president.
C. F. Barth, vice president.
Robert T. Longway, vice president.
A. M. Davison, vice president.
W. E. Fellows, vice president.
Herbert J. Strasler, auditor.
Earl F. Johnson, assistant cashier.
D. W. Chambers, assistant cashier.
Edward Holmes, assistant cashier.
E. C. Reid, assistant cashier.
Charles J. French, assistant cashier.
Statement of condition of Union Industrial Trust Co., Flint, Mich., at the close
of business December 31, 1929
RESOURCES
Loans and discounts_______________________________________________$112,708.42
Real estate mortgages______________________________________________ 216, 675. 80
172, 850. 00
Municipal and other bonds________________________________________
Cash on hand and in banks________________________________________
228, 782. 98
Banking house and equipment_____________________________________
20, 027. 29
Advance to trusts__________________________________________________
667. 84
Accrued interest receivable________________________________________
111. 41
Investment account for sinking fund and interest reserve________
54,411.99
Total_________________________________________________________
806, 235. 78
LIA B ILITIE S
Capital stock______________________________________________________
Surplus____________________________________________________________
Undivided profits__________________________________________________
Reserve for interest________________________________________________
Sinking fund— first mortgage certificates__________________________
First mortgage certificates payable________________________________
Deposits____________________________________________________________
Other liabilities____________________________________________________
300, 000.00
24, 000. 00
6 , 662. 87
1, 538.19
57, 912.42
83, 700. 00
330, 516.41
1, 905. 84
Total_________________________________________________________
806, 235. 73
1094
B RA N CH , C H A IN , AND GROUP B A N K IN G
OFFICERS
Charles S. Mott, chairman
board.
John N. Stalker, president.
S. S. Stewart, vice president.
A. M. Davison, vice president.
W. E. Fellows, vice president.
of
the
Lloyd G. Kirby, executive vice presi
dent, secretary, treasurer, and trust
officer.
Allen T. Smith, assistant vice presi
dent and assistant trust officer.
Statement of condition of Grand Rapids National Bank, Grand Rapids, Mich., at
the close o f business December 31, 1929
RESOURCES
Loans and discounts, bonds and mortgages-------------------------------- $15, 918, 028. 52
Banking house and equipment, main office-----------$1, 906, 450. 60
Less deferred payment on bank-building site____
200, 000. 00
1, 706, 450. 60
254, 867. 37
Banking house and equipment branch offices__________________
45, 000. 00
Five per cent redemption fund----------------------------------------------Cash and due from banks_______________________________________
5, 457,210.05
Other assets------------------------------------------------------------------------------187, 780.24
Customers’ liability, letters of credit and travelers’ checks--------108, 755. 00
Total_____________________________________________________
LIAB ILITIES
________________
23, 678, 091. 78
,
,
.
Capital________________________
Surplus and undivided profits.
___________________
___________________
Circulation___________________
Rediscounts-----------------------------___________________
----------------------------Bills payable--------------------------Unearned d iscou nt____________
___________________
Travelers’ checks and letters of credit___________________
Deposits___________________________________________________ _____
1 000 000 00
855, 558. 20
869, 220. 00
473, 000. 00
None.
10, 420.19
108, 755. 00
20, 361,138. 39
Total_____________________________________________________
23, 678, 091. 78
Dudley E. Waters, chairman of the
board.
Joseph H. Brewer, president.
Charles H. Bender, vice president.
Alvah D. Crimmins, vice president and
cashier.
J. D. Farr, assistant vice president.
Benjamin de Graaf, assistant vice
president.
B. Yander Meulen, assistant cashier.
John Larson, assistant cashier.
Mahlon A. Smith, assistant cashier.
A. T. Edison, assistant cashier.
Harry Lundberg, assistant cashier.
A. K. Gibson, assistant cashier.
F. I. Card, auditor.
John R. Schermer, manager bond de
partment.
Statement of condition of Grand Rapids Trust Co., Grand Rapids, Mich., at the
close of business December 31, 1929
RESOURCES
Mortgage loans in office---------------------------------------------------------------$156,525. 56
Mortgage loans with State treasurer_____________________________
214, 425. 00
Other loans----------------------------------------------------------------------------------131, 571. 54
Bonds in office----------------------------------------------------------------------------990, 287. 09
Cash due from banks and in transit______________________________
383, 876.72
Advances to trusts________________________________________________
339,983. 39
Banking house, vaults, furniture, and fixtures____________________ 1, 052, 685. 90
Other assets--------------------------------------------------------------------------------18, 734. 67
Total________________________________________________________ 3,288,089.87
B R A N C H , C H A IN , AND GROUP B A N K IN G
1095
LIA B ILITIE S
Capital stock____________________________________________________
$750, 000. 00
Surplus_______________________________ ____________________________
800, 000. 00
Undivided profits and reserves___________________________________
74,106. 30
Dividends unpaid-------------------------------------------------------------------------29, 388. 00
Bills payable_____________________________________________________
295, 000. 00
Interim certificates_______________________________________________
24, 600. 39
Deposits__________________________________________________________ 1, 314, 995.18
Total_______________________________________________________ 3,288,089.87
OFFICERS
Joseph H. Brewer, president.
Lee M. Hutchins, vice president.
Alex W. Hompe, vice president.
Paul Frederick Steketee, vice presi
dent.
James R. Hooper, vice president and
trust officer.
Frank Gr. Deane, vice president.
Elmer F. Birdsall, vice president.
Peter D. Kline, vice president.
Henry C. W orfel, treasurer.
Arthur E. Wells, secretary.
Joseph B. Ware, assistant secretary.
Frank V. Burrows, assistant trust
officer.
Frank W. Schmidt, assistant treasurer.
C. Leo Van Frank, auditor.
Fred A. Worden, manager real estate
department.
Lee W. Finch, manager bond depart
ment.
Statement of condition of Peoples National Bank, Jackson, Mich., at the close
of business December 31, 1929
RESOURCES
Loans and discounts_____________________________________________ $4, 368, 239. 49
1, 646, 899.11
United States bonds and other securities________________________
Real estate and fixtures-------------------------------------------------------------171, 393. 93
Cash and due from banks------------------------------------------------------------ 2, 331, 626. 24
Total______________________________________________________
8 , 518,158. 77
LIAB ILITIES
Capital stock_____________________________________________________
Surplus and undivided profits-----------------------------------------------------Circulating notes________________________________________________
Deposits__________________________________________________________
200, 000. 00
367,231.71
200, 000. 00
7, 750, 927. 06
Total______________________________________________________
8 , 518,158. 77
OFFICERS
Bradley M. De Lamater, chairman of
the board.
Herbert S. Reynolds, president.
Hiram C. Blackman, vice president.
Jay F. Clark, cashier.
Clyde H. Edgar, assistant cashier.
Arthur J. Whitney, assistant cashier
S. Clark Beise, trust officer.
Statement of condition of National Union Bank & Trust Co. ( and East Side
Affiliated Bank), Jackson, Mich., at the close of business December 31, 1929
RESOURCES
Loans and discounts_____________________________________________ $6 , 672, 472. 82
United States bonds and certificates_____________________________
405, 872.00
Other bonds_____________________________________________________
951,864.82
Federal reserve bank stock--------------------------------------------------------27,150.00
Cash resources:
Due from Federal reserve bank_______________ $600,408. 89
Cash in vault and due from banks------------------- 1, 464, 379.91
--------------------- 2, 064, 788. 80*
Banking house and equipment__________________________________
653, 781. 54
Total.
10, 775, 929. 98
1096
BRA N CH , C H A IN , AND GROUP B A N K IN G
LIA B ILITIE S
Capital stock____________________________________________________
S urplus_________________________________________________________
Undivided P rofits_______________________________________________
Reserve for interest, taxes, etc__________________________________
Circulation_______________________________________________________
Deposits_________________________________________________________
$600,000.00
307, 250. 00
222,123.78
18,207.46
382, 960. 00
9, 245, 388. 74
Total__________________ ____________________________________
10, 775, 929. 98
OFFICERS
Main office:
Arthur C. Bloomfield, president.
Clarence B. Hayes, vice president.
Rollin O. Bisbee, vice president.
G. E. Paul, vice president.
Charles M. Spinning, vice president.
Frank H. Newkirk, vice president.
Henry A. Reece, cashier.
Clarence F. Logan, assistant cashier.
Albert R. Johnson, assistant cashier.
Edmund J. Tobin, jr., assistant cashier.
John W. Knight, assistant cashier.
Daniel C. Haefner, assistant cashier.
Trust and bond departm ent:
George E. Paul, vice president and
trust officer.
Albert C. Brown, assistant trust o f
ficer.
East side bran ch:
Rudolph L. Kantlehner, advisory of
ficer.
Carl W. Spiegel, manager.
Statement o f condition o f F irst 'National Bank & Trust Co., Kalamazoo, Mich.,
at the close of business Decem ber 31, 1929
RESOURCES
Loans and discounts____________________________________________ $6 , 233, 535. 22
Bonds and securities______________________ ______________________
1 , 038, 537. 76
United States bonds and certificates o f indebtedness____________
845, 500. 00
Stock, Federal reserve bank______________________________________
24, 000.00
Cash and due from banks________________________________________
1, 267, 820. 72
Banking house and equipment___________________________________
368, 859. 50
2, 200. 00
Real estate______________________________________________________
2, 500. 00
W ith United States Treasurer__________________________________
T o ta l_____________________________________________________
9, 782, 953. 20
L IA B IL IT IES
Capital___________________________________________________________
Surplus and profits_______________________________________________
Reserved for interest____________________________________________
Reserved for bond account__________ :____________________________
Circulation______________________________________________________
Bills payable and rediscounts____________________________________
Deposits_________________________________________________________
600,000. 00
570, 304. 83
46, 310. 36
47, 972. 32
48, 860.00
244, 700. 30
8 , 224, 805. 39
T o ta l_____________________________________________________
9, 782,953. 20
OFFICERS
O.
<X
E.
H.
S. Campbell, president.
H. Stearns, vice president.
H. Shepherd, vice president.
B. Allen, vice president.
S.
R.
J.
C.
A.
G.
H.
C.
Pratt, assistant vice president.
Rye, cashier.
Tolhuizen, assistant cashier.
Boers, assistant cashier.
Statement of condition of Capital National Bank, Lansing, Mich., at the close
of business Decem ber 31, 1929
RESOURCES
Loans and discounts____________________________________________ $7, 034, 250. 91
Bonds, securities, e t c ------------------------------------------------------------------ 4, 374, 046. 49
Cash and due from banks----------------------------------------------------------2, 281, 971. 50
Redemption fund with United States Treasurer_________________
30, 000.00
Interest earned but not collected-----------------------------------------------7, 672. 47
Building and equipm ent________________________________________
540, 227. 35
Total_____________________________________________________ 14, 268,168. 72
1097
B R A N C H , C H A IN , AND GROUP B AN K IN G
LIA B IL IT IE S
C apital_________________________________________________________
Surplus--------------------------------------------------------------------------------------Undivided profits__________________ •_____________________________
Unearned interest______________________________________________
Circulation---------- ----------------------------------------------------------------------Rediscounts and bills payable___________________________________
Deposits---------------------------------------------------------------------------------------
$600, 000. 00
600,060. 00
505, 232.12
54, 253.34
600, 000. 00
931, 503. 75
10, 977,179. 51
Total______________________________________________________ 14,268,168.72
OFFICERS
Ransom E. Olds, president.
Arthur C. Stebbins, vice president.
Frank E. Gorman, vice president and
cashier.
Bruce Anderson, vice president.
Albert A. Elsesser, vice president.
Marshall Westfall, assistant cashier.
Miles D. Grant, assistant cashier.
J. Harold Sessions, assistant cashier.
Ralph H. Parker, assistant cashier.
Statement o f condition of City National Bank d Trust Co., Niles, Mich., at
the close of business December 31, 1929
RESOURCES
Loans and discounts-------------------------------------------------------------------Bonds and securities____________________________________________
United States bonds________________________________ .______________
Mortgages______________________ __________________________________
Cash and due from banks____________________ ____________________
Stock in Federal reserve bank___________________________________
Due from United States Treasury_______________________________
Bank building and fixtures_______________________________________
$937, 453.21
578, 778. 00
35, 000. 00
269, 268. 00
234, 245. 73
7, 500. 00
1 , 250. 00
72, 000. 00
Total_______________________________________________________ 2,135, 494. 94
LIAB ILITIES
Capital stock_____________________________________________________
Surplus____________________________________________________________
Undivided profits and reserves__________________________________
C irculation_______________________________ ■_______________________
Bills payable-------------------------------------------------------------------------------Deposits______________________________________________________ ____ 1,
150, 000. 00
100, 000. 00
61, 497. 35
25, 000. 00
100, 000. 00
698, 997. 59
Total_______________________________________________________ 2,335,494.94
Assets of trust department_______________________________________
384, 662. 37
Combined resources______________________________________________
2 , 520,157. 31
OFFICERS
Frank M. Brandon, president.
Matthew Stoll, vice president.
Charles E. White, vice president.
Thomas C. Hance, cashier and trust
officer.
Fred E. Powell, auditor.
Alfred E. Zordel, assistant
and assistant trust officer.
cashier
Statement of condition of Federal Commercial and Savings Bank, Port Huron,
Mich., at the close of business December 31, 1929
RESOURCES
Loans and discounts_____________________________________________ $5, 679,919. 68
United States bonds and certificates_____________________________
679, 550.00
Other bonds_____________________________________________________
741, 013. 59
Federal reserve bank stock_______________________________________
18, 300. 00
1098
B RA N CH , C H A IN , AND GKOUP B A N K IN G
Cash resources—■
Due from Federal reserve bank--------------------------$178, 571. 21
Cash in vault and due from banks--------------------- 585, 396. 85
-------------------Banking quarters and equipment------------------------------------------------Customers’ bonds left for safekeeping-----------------------------------------Total______________________________________________________
$763, 968. 06
475, 966. 30
157, 984.29
8 , 516, 701. 92
LIAB ILITIES
'Capital stock_____________________________________________________
Surplus___________________________________________________________
Undivided profits_________________________________________________
Reserve for interest, taxes, etc_______________________ ____________
Bills payable_____________________________________________________
Customers’ bonds left for safekeeping____________________________
D ep osits__________________________________________________________
Total______________________________ ________________________
400, 000. 00
210,000. 00
175, 985. 70
42, 589.49
125, 000.00
157, 984.29
7,405,142. 44
8,516,701.92
o f f ic e r s
Albert D. Bennett, chairman o f the
board.
Stephen A. Graham, president.
Louis A. Weil, vice president.
Samuel L. Boyce, vice president.
W illiam D. Smith, vice president.
Russell T. Jackson, cashier.
Frank C. Wellman, assistant cashier.
Harry W. Maitland, assistant cashier.
Edward N. Branagan, assistant cashier.
Loy R. Morton, assistant cashier.
Howard M. Thomas, assistant cashier.
Statement o f condition o f First 'National Bank & Trust Co., P ort Huron, Mich.,
at the close of "business Decem ber 31, 1929
RESOURCES
Loans and discounts_____________________________________________ $2, 486, 801. 24
B onds____________________________________________________________
450, 700. 00
United States, municipal, and other bonds______________________
2, 572, 393. 01
Federal reserve bank stock______________________________________
14, 250. 00
Cash and due from banks_______________________________________
701, 659.15
Banking house and equipment____________________________________
192,150. 00
Total______________________________________________________
6 , 417, 953. 40
l ia b il it ie s
Capital stock____________________________________________________
Surplus and undivided profits____________________________________
Bills payable____________________________________________________
Circulation_______________________________________________________
Deposits__________________________________________________________
300,000. 00
313,183. 54
360, 000. 00
149, 995. 00
5, 294, 774. 86
T otal______________________________________________________
Trust department resources---------------------------------------------------------
6 , 417, 953. 40
2, 523, 529. 31
■Combined resources______________________________________________
8 , 941, 482. 71
OFFICERS
Daniel D. Brown, president.
Frank E. Beard, vice president.
David MacTaggart, vice president.
Andrew C. Lassen, cashier.
Alex D. Adams, assistant cashier.
Gerald F. Collins, assistant cashier.
Ira Bricker, Trust Officer.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1099
Second National Bank & Trust Co., Saginaw, Mich., statement of condition o f
at the close of business December 31, 1929
RESOURCES
Loans and discounts_____________________________________________ $9, 098,123. 85
United States securities_________________________________________
2,405,761.31
Other bonds_____________________________________________________
2, 738, 483. 02
Cash and due from banks_______________________________________
1, 585, 416. 38
Bonds deposited with State treasurer for account trust depart
ment__________________________________________________________
20 0 , 000 . 00
Stock in Federal reserve bank__________________________________
75, 000. 00
Banking houses and office building______________________________
1, 435, 000. 00
Other real estate________________________________________________
35, 943. 83
Due from United States Treasurer______________________________
17, 500. 00
Total_________________ ___________________________________
17, 591, 228. 39
LIA B ILITIE S
Capital stock____________________________________________________
Surplus fund____________________________________________________
Undivided profits and reserves----------------------------------------------------
1 , 250, 000 . 00
1, 250, 000. 00
762, 928. 30
3, 262, 928. 30
National bank notes outstanding------------------------------------------------350, 000. 00
Bills payable____________________________________________________
750, 000. 00
Deposits_________________________________________________________ 13, 228, 300. 09
T o ta l_____________________ _______________________________
■George B. Morley, chairman of the
board.
R. Perry Shorts, president.
W. H. Wallace, vice president.
Albert H. Morley, vice president.
R ay T. Maynard, vice president and
cashier.
G u a r d ia n
17, 591,,228. 39
Emil A. Tessin, vice president and
trust officer.
Alfred H. Perrin, vice president.
Mervyn E. Curran, assistant cashier.
Thomas M. Morley, assistant cashier.
John J. Spencer, assistant cashier.
John A. Stewart, assistant cashier.
D e t r o it
Co.
o f f ic e r s
Carlton M. Higbie, chairman o f the
board.
John C. Grier, jr., president.
Robert O. Lord, vice president.
Ernest Kanzier, vice president.
Robert C. Lehman, vice president.
Howard M. Smith, vice president.
Andrew D. Hotchkiss, vice president .
Pelham C. Wilmerding, vice president,
E. P. Kimbrough, vice president.
Percival J. Steindler, vice president.
Philip K. Watson, vice president.
Frederick W. Pritchard, comptroller.
Gerald E. Miller, secretary.
G. T. Marshall, jr., assistant vice pres
ident.
G u a r d ia n
D e t r o it
Leslie A. Morgan, assistant vice pres
ident.
W esley L. Murray, assistant vice pres
ident.
Kenneth K. Martin, assistant vice
president.
Archibald B. Morrison, assistant vice
president.
Joseph D. Frost, assistant vice pres
ident.
Edgar R. Thom, assistant vice pres
ident.
Harold J. Lauver, assistant secretary.
Prosser M. Watts, assistant secretary.
L. J. Ronder, assistant treasurer.
S. McKim Rusk, assistant treasurer.
Co.
of
C a l if o r n ia
o f f ic e r s
John C. Grier, jr., president.
Robert O. Lord, vice president.
Ernest Kanzier, vice president.
E. Price Kimbrough, vice president.
Harvey Roney, vice president.
Milton F. Steindler, vice president.
W. F. Wickman, assistant vice president
Robert C. Lehman, secretary.
Frederick W. Pritchard, treasurer.
Gerald E. Miller, assistant secretary.
1100
B RA N CH , C H A IN , AND GROUP BAN KIN G
K eane,
H ig b ie
Carlton M. Higbie, chairman of the
board.
Duncan J. McNabb, president and
treasurer.
N. Bradley Higbie, jr., vice president.
& Co.
Henry S. Morgan, vice president.
Muir B. Snow, vice president.
Millard H. Pryor, vice president.
Frederick W. Pritchard, comptroller.
Robert C. Lehman, secretary.
CORPORATE CONNECTIONS OF T H E DIRECTORS IN T H E GUARDIAN DETROIT U N IO N GROUP
Charles H. Adams, D etroit; vice president Union Trust Co., vice president
and director Union Joint Stock Land Bank, director Bank of Hamtramck.
Merrill C. Adams, D etroit; vice president and secretary Union Trust C o .;
secretary-treasurer New Union Building Co., secretary and director Union
Joint Stock Bank, secretary Union Title & Guaranty Co., director Wm P.
Ternes Co.
George A. Alderton, Saginaw ; director Second National Bank & Trust Co.,
president G. A. Alderton & Co., president Melze, Alderton Shoe Co.
H.
B. Allen, K alam azoo; vice president and director First National Bank
& Trust Co.
F.
A. Allwardt, Battle Creek; vice president and director City National
Bank & Trust Co.
D.
M. Amberg, Grand Rapids; director Grand Rapids National Bank, vice
president and director Imperial Furniture Co., vice president and director
Grand Rapids Chair Co.
Dr. Edward Ames, K alam azoo; director First National Bank & Trust Co.,
physician.
Bruce Anderson, Lansing; vice president and director Capital National Bank,
director Industrial Bank, director Loan & Deposit State Bank, Grand Ledge,
director Hill-Diesel Engine Co., president and director Lansing Oldsmobile
Co., vice president and director R. E. Olds Co., treasurer and director Lansing
Community Hotel Corporation, treasurer and director Hotel Olds Operating Co.
John A. Anderson, Port H u ron ; director Federal Commercial & Savings
Bank, president and treasurer Harrington Hotel.
Wendell W. Anderson, D etroit; director Guardian Detroit Bank, director
Highland Park State Bank, director Highland Park Trust Co., secretarytreasurer Anderson & Gardner (In c.), treasurer and director Bundy Tubing
Co.. treasurer and director Saunders Michigan Stores (In c.), director Clarence
Saunders Stores (In c.), director Detroit & Canada Tunnel Co., director Cadillac
Aircraft Corporation.
Frank W. Andreae, Port H u ron ; director First National Bank & Trust
Co., president Yale Woolen Mills, director Excello A ircraft & Tool Corporation,
director Duro W ood Products (In c.).
George R. Andrews, D etroit; chairman executive committee and director
Highland Park State Bank, chairman executive committee and director Highland
Park Trust Co., director Bank of Detroit, director Bank o f Dearborn.
Roger M. Andrews, D etroit; director Bank of Detroit, president Times
Publishing Co., publisher the Detroit Times, publisher and owner the Menom
inee Herald-Leader, Menominee.
Thomas Jackson Anketell. D etroit; director Union Joint Stock Land Bank,,
president Gratiot Lumber & Coal Co., president Anketell Lumber & Coal Co.
F.
N. Arbaugh, Lansing; director Capital National Bank, director Industrial
Bank, president and manager the F. N. Arbaugh Co., president Capital Electric
Supply Co., vice president Barker Fowler Electric Co., vice president Standard
Real Estate Co., treasurer Dail Steel Products Co., director Arctic Dairy
Products Co., director Lansing Oldsmobile Co.
Frederic G. Austin, D e tro it; director Union Trust Co., vice president, general
manager and director W hitney Realty Co. (L td.), director General Brass Co.
Paul F. Bagley. D etroit; director Union Trust Co., president and director
W oodmere Cemetery Association, director Bagley Land Co. (L td .).
George L. Bahl, D e tro it; director Highland Park State Bank, director H igh
land Park Trust Co., general agent Penn Mutual Life Insurance Co., vice presi
dent Hutto Engineering Co., director Central West Casualty Co.
Hollis S. Baker, Grand R a p id s; director Grand Rapids National Bank, pres
ident and general manager Baker Furniture Co.
B R A N C H , C H A IN , AND GROTJ * B A N K IN G
1101
L. H. D. Baker, D etroit; vice president National Bank of Commerce, director
Michigan Industrial Bank, director Jefferson Savings Bank, Gross Pointe
Park, director Husted Safety Wheel Co.
Ralph W. Ballantine, Lansing; director Capital National Bank, director
First National Bank of Dearborn, president and director Michigan MortgageInvestment Corporation, secretary, treasurer and director Community Land
Co., director Lansing Community Hotel Corporation.
J. M. Barringer, F lin t; director Union Industrial Bank, president General
Foundry & Machine Co.
Charles F. Barth, F lin t; vice president and director Union Industrial Bank,
director Union Industrial Trust Co., vice president and general production
manager Chevrolet Motor Co.
Frank E. Beard, Port H u ron ; vice president and director First National
Bank & Trust Co., president Beard, Campbell Co., chairman St. Clair County
Road Commissioners.
Charles H. Bender, Grand R a p id s; vice pres‘dent, chairman executive com
mittee and director Grand Rapids National Bank, director Union Joint Stock
Land Bank, Detroit, secretary, treasurer and director Hackley Phelps Bonnell
Co., director Central West Casualty Co., director Ruggles & Rademaker Co.
Albert D. Bennett, Port H u ron ; chairman and director Federal Commercial
& Savings Bank.
Frank T. Bennett, Jackson; director National Union Bank & Trust Co.,
president Bennett-McQuillan (In c.), trustee F. I). Bennett estate.
Jul. W. Berns, D etroit; president and director Jefferson Savings Bank,
Grosse Pointe P a r k ; vice president Lochmoor State Bank, vice president
Windisch-Commercial Bindery (In c.), vice president Stanley Furnace Corpora
tion.
Frank K. Berry, Battle Creek; director City National Bank & Trust Co.,
president A-B Stove Co., president Marshall Furnace Co.
Charles A. Bigelow, Saginaw; director Second National Bank & Trust Co.,
director Peoples Commercial & Savings Bank, Bay C ity; president KneelandBigelow Co.
Charles Binder, Battle C reek; director City National Bank & Trust Co., R.
Binder Co., director Margalexom Oil Co.
Iiollin O. Bisbee, Jackson; vice president and director National Union Bank
& Trust Co., director Peoples State Savings Bank o f East Jordan, president
Bankers Investment Co., president Fidelity Corporation of Michigan.
Arthur G. Bishop, F lin t; director Union Trust Co., D etroit; director Union
Joint Stock Land Bank, Detroit; president and director Genesee County Savings
Bank, F lin t; director First Trust & Savings Bank, Flushing; vice president and
director General Motors Corporation, New Y o rk ; director Durant Hotel Co.
M. R. Bissell, jr., Grand R ap ids; director Grand Rapids Trust Co., vice
president and director Bissell Carpet Sweeper Co.
Judge Edward D. Black, F lin t; director Union Industrial Bank, director Union
Industrial Trust Co., president Industrial Realty Co.
Hiram C. Blackman, Jackson; vice president and director Peoples National
Bnnk, vice president Peoples National Co., director Jackson Citizens Finance Co.
Frank W. Blair, D etroit; chairman and director Guardian Detroit Union
Group (In c.), chairman and director Union Trust Co., president and director
Union Joint Stock Land Bank, president Ohio-Pennsylvania Joint Stock Land
Bank, president and director New Union Building Co., director Guardian Detroit
Co., vice president and director Standard Savings & Loan Association, director
National Bank o f Commerce, director Union Title and Guaranty Co., director
Keane, Higbie & Co., director Union State Bank o f Dearborn, director Michigan
Bell Telephone Co., director Central West Casualty Co., director Russel Steel
Construction Co., director Detroit Bevel Gear Co., director Clawson State Savings
Bank, director Wabash Portland Cement Co., director Michigan Steel Corpo
ration, director National Grocer Co., director American L ife Insurance Co.,
director Clayton and Lambert Mfg. Co., director National Steel Corporation,
director Republic Gear Co.
Arthur L. Blakeslee, K alam azoo; director First National Bank & Trust Co.,
president Kalamazoo Stove Co., director Industrial Finance Co.
Arthur C. Bloomfield, Jackson; director Guardian Detroit Union Group (In c.),
president and director National Union Bank & Trust Co., vice president National
Union Co., vice president Longyear Mesaba Land & Iron Co.
1102
B R A N C H , C H A IN , AND GBOUP B AN K IN G
Anthony Bodde, D etroit; director Michigan Industrial Bank, director Con
solidated Brass Co., president and director Beaver Realty Co., secretary and
director Detroit Metal Spinning Co., treasurer and director Detroit Steel Cor
poration, director Norton Hotel Co.
Henry E. Bodman, D e tro it; chairman executive committee and director
Guardian Detroit Union Group (In c.), chairman and director Guardian Trust
Co., director Guardian Detroit Bank, director Guardian Detroit Co., vice presi
dent and counsel Packard Motor Car Co., director Detroit City Gas Co., director
Pennsylvania, Ohio & Detroit Railroad, director National Investors Corporation*
Carl W. Bonbright, F lin t; director Union Industrial Bank, director Union
Industrial Trust Co., vice president and director General Foundry & Machine
Co., member advisory board American Industries Corporation.
Howard Bonbright, Detroit; director Guardian Detroit Bank, director Guard
ian Trust Co., president General Securities Corporation, special partner NicolFord & Co.
Clarence H. Booth, D etroit; director Guardian Detroit Union Group (In c.),
director Guardian Detroit Bank, director Highland Park State Bank, director
Highland Park Trust Co., president and director Bank of Dearborn, chairman
Motor Bankers Corporation, president and director Gladwin Park Realty Co..
vice president and director Detroit Ecorse Land Co., director Booth Newspapers
(In c.)
Ralph H. Booth, D etroit; director Guardian Detroit Union Group (In c.),
director Guardian Detroit Bank, director Guardian Trust Co., director Union
Joint Stock Land Bank, president Booth Newspapers (In c.), president Ralph
H. Booth Corporation, president Detroit Ecorse Land Co., vice president Gladwin
Park Realty Co., director Selected Securities Corporation.
Samuel L. Boyce, Port H u ron ; vice president and director Federal Commer
cial & Savings Bank.
George H. Boyd, SaginawT; director Second National Bank & Trust Co.,
chairman Saginaw- Lumber Co., president Wyandotte Lumber Co., Wyandotte,
president Boyd & Horine Lumber Co., Detroit, director Allington & Curtis
Manufacturing Co.
Judson Bradway, D etroit; director Guardian Trust Co., president Judson
Bradway Co., pr?sident Detroit & Canada Tunnel Co., president Bloomfiold
Village Corporation, president Maple-Cranbrook Corporation, president Eclipse
Interchangeable Counterbore Co.
Frank M. Brandon, N iles; president and director City National Bank &
Trust Co.
Joseph H. Brewer, Grand Rapids; director Guardian Detroit Union Group
(In c.), president and director Grand Rapids National Bank, president and
director Grand Rapids Trust Co., president and director Pantlind Hotel Co.,
president and director Grand Rapids Hotel Co., director Grand Rapids Railway
Co., director Grand Rapids Creamery Co., director Detroit Creamery Co.
W ill A. Brewrer, Saginaw; director Second National Bank & Trust Co..
president Brewer Nienstedt Lumber Co., vice president and director Bancroft
Hotel Co., treasurer and director Grant Grocer Co.
W alter O. Briggs, D etroit; director Guardian Detroit Union Group (In c.),
director Guardian Detroit Bank, director Guardian Trust Co., chairman and
president Briggs Manufacturing Co., president Briggs Commercial & Develop
ment Co., president Briggs Bond & Investment Co.
Ralph Briscoe, T ren ton; director Trenton State Bank.
Daniel D. Brown, Port H uron; director Guardian Detroit Union Group (In c.).
president and director First National Bank & Trust Co., director Port Huron
Loan & Building Association.
George D. Brown, D etroit; director Highland Park State Bank, director
Highland Park Trust Co.
David H. Brown, Grand Rapids; director Grand Rapids National Bank,
treasurer Century Furniture Co.
Lewis J. Brown, Battle Creek; director City National Bank & Trust Co.,.
president and director Nichols & Shepard Co., general manager Kellogg Co.,.
director Kellogg Inn Co., Director Calhoun Savings & Loan Association.
Roy E. Brownell, F lint; director and attorney Union Industrial Bank,
director and attorney Union Industrial Trust Co.
John A. Bryant, D e tro it; director Union Trust Co., treasurer Bryant &
Detwiler Co., vice president Feno Stamping & Manufacturing Co., director De
troit Motor Bus Co., director W olverine Stone Co.
B R A N C H , C H A IN , AND GROUP B A N K IN G
110&
Fred Buck, Saginaw; director Second National Bank & Trust Co.; president,
general manager, and director the Lufkin Rule Co., second vice president and
director the Michigan Mutual Liability Co., Detroit.
Harry C. Bulkley, D etroit; director Guardian Detroit Union Group (In c.),
director Union Trust Co., director National Bank of Commerce, director Union
Joint Stock Land Bank, director Detroit Legal News Co.
John K. Burch, Grand R ap ids; director Grand Rapids National Bank, presi
dent, treasurer, and director A. F. Burch Co., president and director Division
Avenue Realty Co.
George L. Burrows, Saginaw ; director Second National Bank & Trust Co.
Charles J. Butler, Detroit ; director Highland Park State Bank, director
Highland Park Trust Co., president Morgan & Wright,
W. F. Butler, Trenton, director Trenton State Bank, Wayne County road
commissioner, secretary Wayne County Park Board.
Charles S. Campbell, Kalam azoo; director Guardian Detroit Union Group
(In c.), president and director First National Bank & Trust Co., president
F. N. B. Securities Co., president Fidelity Building & Loan Association, vice
president Gilmore Bros., secretary George W. Taylor Clothing Co., treasurer
Merchants Publishing Co., treasurer Kalamazoo Vegetable Parchment Co.
Douglas Campbell, D etroit; director Union Joint Stock Land Bank, secretary
Baker, Simonds & Co., director Universal Products Co., director River Rouge
Improvement Co., director Home Properties Corporation, director Russel Woods
Co., director Woodlawn Cemetery Association.
Frederick Carlisle, Saginaw; director, Second National Bank & Trust C o.;
president and treasurer F. W. & F. Carlisle Co.
Dan P. Caulkins, D etroit; director, Bank of D earborn; assistant cashier,
Guardian Detroit Bank.
Roy D. Chapin, D etroit; director, Guardian Detroit Union Group (I n c .);
director, Guardian Detroit B an k ; director, Guardian Trust C o .; chairman
Hudson Motor Car C o .; member advisory board, Investment Co. of A m erica;
director, Detroit Garages (I n c .); director. Detroit Aircraft Corporation;
director, North American Aviation (Inc.) ; director, Curtiss Airports Corpora
tion; director, National Garages (In c.).
Jay F. Clark, Jackson; cashier and director, Peoples National B ank; vice
president, People National C o .; director, Commander Lighting Co.
Edgar B. Clarkson, Jackson; director. Peoples National Bank.
Austin Church, Trenton; chairman and director, Trenton State Bank; presi
dent Church Land Co.
Charles E. Clark, D etroit; vice president, Union Trust C o.; director, Jefferson
Savings Bank, Grosse Pointe P a rk ; director, Trenton State Bank, T renton;
vice president and director, Society for Savings; director, Clawson State Sav
ings Bank, Clawson ; vice president and director, Union State Bank, Dearborn ;
director, Crowley Milner & Co.
Leon T. Closterhouse, Grand R ap id s; director, Grand Rapids Trust C o.;
treasurer Grand Rapids Mutual Building & Loan Association; director, Globe
Knitting Works.
Bernard C. Cobb, New Y ork; director, Peoples National Bank, Jackson; chair
man Commonwealth & Southern Corporation ; president Central Illinois Light
C o .; president Commonwealth Power C orporation; president Consumers POwer
C o .; president Grand Rapids Railroad C o .; president Illinois Power C o .; presi
dent Northern Ohio Power & Light C o .; president Ohio Edison C o .; president
Penn-Ohio Edison C o .; president Southern Indiana Gas & Electric C o .; presi
dent Southern Michigan Light & Power C o .; president Tennessee ElectricPower Co.
Howard E. Coffin, D e tro it; director, Guardian Detroit B a n k ; director,
Guardian Detroit C o .; vice president and director, Hudson Motor Car C o .;
chairman and director, National Air Transport (Inc.) ; president Realty In
vestments (Inc.) ; chairman Sea Island Co.; director, Montauk Beach Develop
ment C o .; director, Transcontinental Air T ransport; director, National Aviation
Corporation (Inc.) ; director, North American Aviation (Inc.) ; director, Curtiss
Airports (Inc.) ; director. Curtiss Flying Service (In c.).
William A. Comstock, D etroit; director, Union Joint Stock Land Bank.
Frank C. Cook, D etroit; director, Michigan Industrial B a n k ; assistant
treasurer and director, Detroit National Fire Insurance C o.; secretary, treas
urer, and director, Oakland Theater C o .; secretary and director, Detroit Rend
ering C o .; director, Schroeder Paint & Glass C o .; director, Gratiot Yiew Land
Corporation.
%
1104
BRA N CH , C H A IN , AND GROUP B A N K IN G
George W. Cook, F lin t; director, Union Industrial B a n k ; director, Union
Industrial Trust C o .: Cook, Sheppard & Stipes.
George R. Cooke, D etroit; director Guardian Detroit Bank, director Guardian
Trust Co., president George R. Cooke Co., president Cooke Asphalt Paving Co.,
vice president Detroit & Canada Tunnel Co., vice president A. J. Dupuis Co.
Edgar L. Cooley, Lansing; director Capital National Bank, director Industrial
Bank, secretary, treasurer, and director Michigan Supply Co.
Lawrence Cornelius, Grand R ap ids; director Grand Rapids National Bank,
vice president and general manager Wolverine Brass Works.
L^-uis A. Cornelius, Grand R ap ids; director Grand Rapids Trust Co., president
ai ’ director Wolverine Brass Works, president and director W olverine Co.
(In c.), New York City.
E.
J. Cornwell, Saginaw ; director Second National Bank & Trust Co., presi
dent and treasurer E. J. Cornwell Lumber Co., secretary-treasurer Cornwell
Lumber Co., director the Schust Co., director Johannesberg Manufacturing Co.,
director Molalla Lumber Co.
Lambert B. Cowley, Jackson; director Peoples National Bank, Cowley’s Shoe
Store.
Frank Couzens, D etroit; director Bank of Detroit, director Guardian Trust
Co., president Frank Couzens, Inc.
Harry S. Covington, D etroit; executive vice president and director National
Bank o f Commerce, director Union Industrial Bank, F lin t; director National
Tool Salvage Co., director Industrial Morris Plan Bank.
Lyman J. Craig, D etroit; director Bank of Detroit, director Bank of Dear
born, trustee James Craig Estate.
W illiam W. Crapo, S aginaw ; director Second National Bank & Trust Co.,
director Consolidated Coal Co.
William R. Craven, Cleveland, O h io; director Ohio-Pennsylvania Joint Stock
Land Bank, chairman Dayton Savings & Trust Co., vice president W. H.
K iefaber Co.
Alvah D. Crimmins, Grand Rapids ; vice president, cashier, and director Grand
Rapids National Bank.
Charles A. Cumings, F lin t; director Union Industrial Bank, director Union
Industrial Trust Co., secretary, treasurer, and director Cumings Bros.
Edward M. Cumings, F lin t; director Union Industrial Bank, director Union
Industrial Trust Co., president and director Cumings Bros., secretary and direc
tor Bendlecrest Corporation.
Thomas F. Daigle, D etroit; director Michigan Industrial Bank, president and
treasurer Daigle Iron Works, president and treasurer Daigle Investment C or
poration, president and treasurer Airmount Sign Service, second vice president
Inyo Chemical Co., director Union Agency Corporation.
Ernest I. Dail, Lansing; director Capital National Bank, director Industrial
Bank, president and general manager Dail Steel Products Co., director Capitol
Savings & Loan Co.
Murray Dalziel, Jackson; director National Union Bank & Trust Co., president
Collins, Hahn & Dalziel.
Arthur M. Davison, F lin t; vice president and director Union Industrial Bank,
vice president and director Union Industrial Trust Co., president Mount Morris
State Bank, first vice president Capitol Theater Building Co., president
Windiate-Pierce-Davison Co., partner A. M. Davison Co., director Cumings
Bros., director City Ice & Fuel Co.
Mathew Davison, F lin t; director Union Industrial Bank, director Union
Industrial Trust Co., director R. B. Ailing Co., director Cumings Bros., director
Mount Morris State Bank.
Clarence M. Day, Jackson; director National Union Bank & Trust Co., general
manager Jaxon Steel Products Co. Division General Motors Corporation.
Frank G. Deane, Grand R ap ids; vice president and director Grand Rapids
Trust Co.
Louis A. DeHayes, D e tro it; director Jefferson Savings Bank, Grosse Pointe
Park, president and treasurer Sterling Coal Co., treasurer Detroit Coal E x
change.
Bradley M. DeLamater, Jackson; chairman and director Peoples National
Bank.
Paul H. Deming, D etroit; director Union Trust Co., director and president
Mackinac Island State Bank, director Copeland Products (In c.), chairman and
director The George Washington Co., Cleveland.
b r a n c h :, c h a i n , a n d
g ro u p b a n k in g
1105
Aaron DeRoy, D e tro it; director Union Trust Co., director Michigan Industrial
Bank, president and director Aaron DeRoy Management Corporation, president
and director Aaron DeRoy Motor Car Co. of Detroit, president and director
Aaron DeRoy Motor Car Co. of Pittsburgh, president and director Automobile
Discount Co., president and director Si-Roy Properties Corporation.
W ard A. Detwiler, D etroit; director Bank of Detroit, president Bryant &
Detwiler Co.
Victor F. Dewey, D e tro it; director Highland Park State Bank, director High
land Park Trust Co., president and general manager Detroit Steel Products
Co., vice president and director Fenestra Construction Co., director Ames Shovel
& Tool Co.
C. W. Dickerson, D etroit; director Michigan Industrial Bank, vice president
and secretary Timken Detroit Axle Co., vice president and director Michigan
Mutual Liability Co.
Bartlett C. Dickinson, K alam azoo; director First National Bank & Trust Co.,
treasurer Sutherland Paper Co., commissioner city of Kalamazoo.
Hon. Gerrit J. Diekema, Grand R ap ids; United States Minister of the Nether
lands, director Grand Rapids Trust Co., director Grand Haven State Bank,
president Lokker Rutgers Co., president De Pree Co., director Michigan Bell
Telephone Co., director Buss Machine Co.
William E. Dingman, D e tro it; cashier and director Bank of Hamtramck.
Fred J. Dixon, Port Huron, director First National Bank & Trust Co., real
estate.
Clayton N. Doty, F lin t; director Union Industrial Bank.
J. Walter Drake, Detroit.; director Union Trust Co., director Hupp Motor
Car Corporation, director Detroit Gear & Machine Co., director Norge Corpora
tion.
Martin J. Dregge, Grand R ap ids; director Grand Rapids National Bank,
president and director Luce Furniture Shops, president and director Luce
Furniture Co., president and director Michigan Chair Co., president and director
Furniture Shops o f Grand Rapids, president and director Grand Rapids Duplex
Divan Lumber Co., secretary, treasurer, and director Nichols & Cox Lumber Co.
Landon A. Dudley, Battle C reek; director City National Bank & Trust Co.,
district manager Northwestern Mutual Life Insurance Co
Charles R. Dunn, D e tro it; executive vice president and director Union Trust
Oo., secretary, treasurer, and director Marion County Land Co., vice president
and director Florida-Michigan Realty Co., vice president and director Newberry
Lumber & Chemical Co., director Hubbard Realty Co.
Cady B. Durham, F lin t; director Union Industrial Bank, director Union
Industrial Trust Co.
R udolf Eckert, F lin t; director Union Industrial Bank, vice president and
director Home Dairy Co., director International Foxes & Furs (In c.), director
Moffatt Grocer Co.
D. S. Eddins, L ansing; director Capital National Bank, vice president and
general sales manager Olds Motor Works, member Board of Light and Water
Commissioners.
G.
Ogden Ellis, D e tro it; vice president and director Bank of Detroit, publisher
The American Boy.
Albert A. Elsesser, L ansing; vice president and director Capital National
Bank, director Industrial Bank, vice president and director Mills Supplies
Corporation.
Anthony M. Esper, D e tro it; director Union State Bank o f Dearborn, council
man City o f Dearborn.
Henry T. Ewald, D e tro it; director Bank o f Detroit, president CampbellEwald Co.
Frank D. Ewen, Saginaw, director second National Bank & Trust Co.
Alonzo P Ewing, D etroit; director Bank of Detroit.
John A. Fead, Port H u ron ; director Federal Commercial & Savings Bank,
secretary J. L. Fead & Sons.
Lawrence G. Fell, Battle C reek; director City National Bank & Trust Co.,
vice president and treasurer Michigan Carton Co.
William E. Fellow’ s, F lint; vice president and director Union Industrial
Bank, vice president and director Union Industrial Trust Co., director Flint
Mortgage Co., director Guaranty Title & Mortgage Co., director Superior Felt
Products, ( Inc.).
100136— 30—
vol
2, p t 9------- 7
1106
BR A N C H , C H A IN , AND GROUP B AN K IN G
Hugh J. Ferry, D etroit; director Jefferson Savings Bank, Grosse Pointe Park,
treasurer Packard Motor Car Co.
Leonard H. Field, jr., Jackson, director National Union Bank & Trust Co.,
architect.
George R. Fink, D etroit; director Guardian Detroit Union Group (In c.), direc
tor National Bank o f Commerce, director Union Trust Co., director Guardian
Detroit Co., director Keane, Higbie & Co., president Michigan Steel Corporation,
president National Steel Corporation, director W ilcox-Rich Corporation, director
Square D Co.
Harry S. Finkenstaedt, D etroit; vice president and director National Bank of
Commerce, director Peoples National Bank, Jackson, director Troyoak Land Co.
John W. Finkenstaedt, D etroit; director Union Trust Co., Partner Harris
Small & Co.
Adolph Finsterwald, Detro,it; director Union Trust Co., president The Fintex
Corporation, president Finsterwald Investment Co., vice president Banker
Securities Co., director Ray Jewelry Co., director Michigan Lafayette Building
Co.
William A. Fisher, D etroit; director Guardian Detroit Union Group (In c),
vice president and director Bank of Detroit, director Guardian Trust Co., presi
dent Fisher Body Corporation.
Burch Foraker, D e tro it; director Union Trust Co., director National Bank of
Commerce, president and director Michigan Bell Telephone Co.
Edsel B. Ford, D etroit; president Ford Motor Co., director Guardian Detroit
Union Group (In c.), director Guardian Detroit Bank, director Guardian Trust
Co., director National Bank o f Commerce.
Joseph W. Fordney, Saginaw; director Second National Bank & Trust Co.
J. Richard Francis, F lint; director Union Industrial Bank, director Union
Industrial Trust Co., senior vice president, member of finance committee and of
executive committee, and director Borg-Warner Corporation, Chicago, president,
general manager, and director Marvel Carburetor Co., vice president and direc
tor Wheeler-Schebler Carburetor Co., Indianapolis, vice president and director
Groble Gas Regulator Co., Anderson, Ind., vice president and director National
Bronze & Aluminum Foundry Co., Cleveland, Ohio, director Johnson Co.,
Detroit, director Mechanics Universal Joint Co., Rockford, 111., director W arner
Gear Co., Muncie, Ind.
D.
H. Frazer, jr., Battle Creek; director City National Bank & Trust Co.,
secretary and director National Gas & Electric Corporation, secretary and
director National Gas & Power Corporation, secretary and director Swingle Oil
& Gas Co., secretary and director Hopewell Fuel & Gas Co., secretary and
director Industrial Gas Co., secretary and director Gas Producing Co. of Ohio,
secretary and director Consumers Utilities Co., secretary National Utilities Co.
o f Michigan, secretary and director Greeley Gas & Fuel Co., assistant secretary
National Utilities Co. of Georgia, secretary, assistant treasurer, and director
National Utilities Co. of South Carolina, secretary, assistant treasurer, and
director National Utilities Co. of North Carolina, secretary and assistant treas
urer National Utilities Co. of Missouri, secretary National Utilities of Alabama,
secretary and director City Gas Co., secretary and director Reedy River Power
Co., secretary and director Sullivan Power Co., assistant secretary-treasurer and
director Battle Creek Gas Co., assistant secretary-treasurer American Gas &
Power Co.
D.
H. Frazer, Battle C reek; director, City National Bank & Trust C o.;
president and director, Battle Creek Gas C o .; vice president and director,
National Gas & Electric C orporation; vice president, National Gas & Power
C orporation; director, American Gas & Power Co.
Frederick W. Freeman, Cleveland, O h io ; director, Ohio-Pennsylvania Joint
Stock Land B a n k ; director, Ohio Finance Co., Columbus, O h io; director,
Hughes-Peters Electric Corporation, Columbus, Ohio.
Leonard Freeman, F lint; director, Union Industrial B ank; director, Union
Industrial Trust C o .; president and director, Freeman Dairy C o .; vice presi
dent and director, Durant Hotel Co.
John H. French, director, Union Trust C o .; director, National Bank o f
Com m erce; director, Michigan Industrial B a n k ; director, Union Title &
Guaranty C o .; president and director, French Mortgage & Bond C o .; president
and director, Mortgage & Bond Fidelity Corporation; president and director,
Clinton View Greenhouses; director, Production Forging C o .; director, Briggs
Manufacturing C o .; director, Dominion Forge & Stamping Co.
B R A N C H , 'C H A IN , AND GROUP B AN K IN G
1107
Edward Frensdorf, D etroit; vice president and director. Union Joint Stock
Land Bank; president Peoples State Bank, B ritton; president Tecumseh State
Savings Bank, Tecumseh ; president Bankers Bond & Mortgage Co., H udson;
president the Cutler-Dickerson Co., A d rian ; president the State Land Realty
C o .; president the Island Land C o .; vice president, First State Savings Bank,
H illsdale; director, Grange Life Insurance C o .; Lansing; director, the Hardie
Manufacturing Co., H u dson; director, the Western Shoe Co., Toledo, O h io;
director, State Land Corporation, P on tiac; director, Hudson Milling Co.
Herbert H. Gardner, Detroit ; executive vice president, director, and trust
officer .Highland Park Trust C o .; vice president, Highland Park State Bank.
George J. Genebach, Battle C reek; director, City National Bank & Trust C o .;
director, Calhoun Savings & Loan Association; director, Battle Creek Citizens
Loan & Investment C o .; president United Steel & W ire C o.; vice president,
H. C. King & S on s; president, Margalexom Oil C o .; president Trenton Crude
Oil & Gas C o .; director, Michigan Metal Products Co.
Donald S. Gilmore, Kalam azoo; director, First National Bank & Trust C o.;
secretary Gilmore Bros.
Daniel Goldberger, Flint, director, Union Industrial Bank.
Grover C. Good, Grand R ap id s; director, Grand Rapids National B an k ;
secretary, treasurer, and director, Globe Knitting W orks; director, Malloch
Knitting M ills; director, C. & D. C o .; director, W orld’s Star Knitting Co., Bay
City.
Luman W. Goodenough, D etroit: director, Guardian Detroit B a n k ; director,
Guardian Trust C o .; director, Union Title & Guaranty C o .; Goodenough,
Voorhies, Long & Ryan ; president Gray Estate C o .; president, the Mortgage
& Contract Co.
Theoron H. Goodspeed, Grand R ap ids: director. Grand Rapids Trust Co. ;
president and director, Citizens Industrial B a n k ; president and director, Amer
ican Box Board C o .; president and director, American Ply-Wood-Case C o ;
president and director, Kent Storage C o .; president and director, Goodspeed
Real Estate C o .; president and director, Industrial Service Co.
Frank E. Gorman, Lansing; director guardian Detroit Union Group (In c.),
vice president, cashier, and director Capital National Bank, director Central
Trust Co.
O. P. Gossard, D etroit; vice president and director Union Joint Stock Land
Bank, vice president and director Ohio-Pennsylvania Joint Stock Land Bank,
Cleveland, Ohio, director Central Discount Co.
Stephen A. Graham, Port H u ron; director guardian Detroit Union Group
(In c.), president and director Federal Commercial & Savings Bank.
Charles C. Green, Battle Creek; president and director City National Bank
& Trust Co.. vice president and director Lubricating Devices (In c.), vice presi
dent and director Michigan Metal Products Co., director Marshall Furnace Co.
L. H. Green. D etroit: director Bank of D etroit; president and director Auto
motive Materials Corporation, president and director Textileather Corporation
of Ohio, president and director Standard Cotton Products Corporation of Flint,
director Michigan Life Insurance Co., director Newcombe Separator Co. of
America, director Union Steam Pump Co.
John M. Greissell, F lint; director Union Industrial Bank, director Union In
dustrial Trust Co.
L. R. Greusel, Battle Creek: director City National Bank & Trust Co., secre
tary and manager Central Electric Co., director American Finance Corporation.
John C. Grier, jr., D etroit: vice president and director Guardian Detroit
Union Group (In c.), president and director Guardian Detroit Co., vice presi
dent and director Guardian Detroit Bank, vice president and director Guardian
Trust Co. of Detroit, director Keane. Higbie & Co., director National Investors
Corporation, director United States & Overseas Corporation.
John A. Grosfield, D etroit; director Bank of Hamtramck, president Grosfield
Investment Co.
Fred H. Haas, Trenton; director Trenton State Bank, vice president and
director Michigan Foundation Co.
Tr C '
Haberkorn, J’ r -> D etroit: vice president and director Guardian D etront
Lmon Group (In c.), chairman and director Bank of Detroit, director Guardian
Trust Co., president C. H. Haberkorn & Co.
Robert W. Hamilton, D etroit; director Highland Park State Bank, director
Highland Park Trust Co., treasurer Gregory, Mayer & Thom, treasurer- Na
tional Lithograph Co.
1108
BRANCH, CHAIN, AND GROUP BANKING
Thomas C. Hance, N iles; cashier, trust officer, and director City National
Bank & Trust Co.
Esbern Hanson, Saginaw; director Second National Bank & Trust Co., treas-'
urer and director Salling-Hanson Co., president and director Grayling B ox Co.,
director Johannesburg Manufacturing Co.
A. B. C. Hardy, Lansing; director Capital National Bank, director Central
Trust Co., director Union Trust Co., Detroit, director Union Joint Stock Land
Bank, Detroit, director Title & Trust Co., D etroit; president Lansing Indus
trial Finance Corporation, director Detroit Motorbus Co., Detroit.
Jessel Hardy, F lint; director Union Industrial Bank, vice president Mount
Morris State Bank, director Hardy Baking Co.
W alter A. Hardy, F lint; director Union Industrial Bank, director Flint
Citizens Loan & Investment Co., president Hardy Baking Co., director Liberty
Baking Corporation, New York.
J. Frederick Hartz, D etroit; director Highland Park State Bank, director
Highland Park Trust Co., chairman J. F. Hartz Co., chairman C. M. Hall Lamp
Co., director Charles W. Warren & Co.
Albert S. Harvey, Saginaw ; director Second National Bank & Trust Co.,
president United States Graphite Co.
Orville L. Hatt, D e tro it; vice president National Bank o f Commerce,
Director Bank of Commerce, Dearborn, treasurer and director National Tool
Salvage Co., president and director Tool Salvage (L td.) of Canada, Walkerville.
Clarence B. Hayes, Jackson; vice president and director National Union
Bank & Trust Co., director Kelsey-IIayes Wheel Co., director Lefree Forge &
Machine Co.
Edward A. Haynes, Port H u ron ; director First National Bank & Trust Co.,
vice president Port Huron Sulphite & Paper Co., vice president North Shore
Transit Co.
Frederick J. Haynes, D etroit; director Michigan Industrial Bank, president
and director Durant Motors (In c.), vice president and director Detroit
National Fire Insurance Co., director Chateau Yoyageurs.
Max P. Heavenrich, Saginaw ; director Second National Bank & Trust Co.,
•director Heavenrich Brothers & Co.
George K. Hebb, D etroit; director National Bank o f Commerce, treasurer
and director Evans-Winter-Hebb (In c.), secretary, treasurer, and director
Anchor Building Co., director, Anchor Press (Inc., director United Typothetate
o f America.
Richard C. Hedke, T renton; director Trenton State Bank, vice president,
general manager, and director Eaton-Clark Co., Detroit.
Joseph Henn, D e tro it; chairman and director Union State Bank.
A. B. Herpolsheimer, Grand R apids; director Grand Rapids National Bank,
president Herpolsheimer Co., president Herpolsheimer Realty Co., vice presi
dent Wheeler-Van Label Co.
Parmely W. Herrick, Cleveland, O h io ; director Ohio-Pennsylvania Joint
Stock Land Bank, director Society for Savings, Cleveland, president the
W inch Co., president the Cuyahoga Co., vice president the Crawford Realty Co.,
director Union Trust Co., Cleveland, director Harriman National Bank, New
York, director National Surety Co., New York, director Guarantee Title & Trust.
Co., Cleveland, director North American Aviation Corporation, New York.
John G. Hibbard, Cleveland, Ohio; secretary, treasurer, and director OhioPennsylvania Joint Stock Land Bank.
E.
K. Hibsman, Cleveland, O h io ; director Ohio-Pennsylvania Joint Stock
Land Bank, director New York Joint Stock Land Bank, Rochester, N. Y.
Carlton M. Higbie, D etroit; director Guardian Detroit Union Group (In c.),
chairman and director Keane, 'Higbie & Co., chairman and director Guardian
Detroit Co., director National Bank o f Commerce, director Guardian Trust Co.,
vice president and director Kalamazoo Stove Co., vice president and director
Brown Fence & W ire Co., director Reo Motor Car Co., director W ilcox-R ich
Corporation, director Murray Corporation of America, director Square D Co.,
director Kingston Products Co., director General Brass Co., director Federated
Publication (In c.), director F. Burkhart Manufacturing Co., director Standard
Steel Spring Co., director Penberthy Injector Co., director Mesta Machine Co.,
director National Steel Co.
Harley G. Higbie, D etroit; director Guardian Trust Co., treasurer and
director" Hugo Scherer Estate (In c.), secretary and director Scherer & Co.,
secretary and director St. Clair Rubber Co.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1109
N. Bradley Higbie, jr., Detroit; vice president and director Keane, Higbie
& Co., director Pittsburgh Forging Co.
Phil Higer, Port H u ron ; director Federal Commercial & Savings Bank,
proprietor L. Higer & Son.
Sherwin A. Hill, D e tro it; director guardian Detroit Union Group, ( Inc.),
director Guardian Detroit Bank, director Guardian Trust Co., director Guard
ian Detroit Co., director Bank of Commerce, Dearborn, Warren, Hill & Ham
blen, director Graham-Paige Motors Corporation, director Michigan Sugar Co.,
director Nicholson Universal Steamship Co., director Nicholson Terminal &
Dock Co., director W ilcox-Iiich Corporation, director Detroit & Canada Tunnel
Co.
Fred M. Hodge, Kalam azoo; director First National Bank & Trust Co.,
president Kalamazoo Paper Co.
Charles H. Hodges, D etroit; director Guardian Detroit Union Group (In c.),
director Union Trust Co., director National Bank of Commerce, first vice
president and director American Radiator & Standard Sanitary Corporation,
first vice president, member of executive committee, and director American
Radiator Co., chairman and director Detroit Lubricator Co., director American
Blower Co., director Grand River Avenue Development Co., director American
Industries Corporation.
C. H. Hodges, jr., D etroit; director Bank of Commerce, Dearborn, vice
president Detroit Lubricator Co.
T. H. Hogsett, Cleveland, O h io ; vice president and director the ObioPennsylvania Joint Stock Land Bank, director United Banking & Trust Co.,,
director The Northern Ohio Power & Light Co., director The Lage Shore Elec
tric Railway Co., director The Ohio Varnish Co.
Addison E. Holton, D e tro it; director Michigan Industrial Bank, president
and director Holton & Co., secretary and director Lewiston Oil & Refining Co.,
treasurer and director Sommerville & Co., secretary and director Century
Oil Co., secretary and director Blackstone Oil Co., secretary and director
Northern States Oil Co., director Anaconda Wire & Cable Co., director Regal
Oil Co. (L td.).
A.
W. Hompe, Grand Rapids; vice president and director Grand Rapids
Trust Co., vice president Grand Rapids Furniture Co., director Macey Co.,
director John W iddicomb Co.
James R. Hooper, Grand R ap id s; vice president, trust officer, and director
Grand Rapids Trust Co.
J. A. House, Cleveland, O h io; director Ohio-Pennsylvania Joint Stock Land
Bank, president and director Guardian Trust Co. o f Cleveland, president New
England Co., director Goodyear Tire & Rubber Co., director New York, Chicago'
& St. Louis Railroad, director Wheeling & Lake Erie Railroad Co., director
Standard Textile Co., director Morris Plan Bank of Cleveland, director Cleve
land Builders Supply Co., director Monarch Fire Insurance Co., director In
land Investors (In c.), director Industrial Rayon Corporation, director Kilby
Manufacturing Co., director The Mills Co., director Jordan Motor Car Co.
Hobart B. Hoyt, D etroit; director Union Trust Co., director Union Title &
Guaranty Co., vice president and director Michigan Steel Casting Co.
N. E. Hubbard, Battle Creek; vice president and director City National
Bank & Trust Co., president Hubbard Electric Co., vice president Morton In
vestment Co.
Caspar B. Hughes, D etroit; director Union State Bank of Dearborn, secretary-treasurer Wayne Acres Land Co.
N. P. Hull, Lansing; director Capital National Bank, director Central Trust
Co., director Union Joint Stock Land Bank of Detroit, president and director
Grange L ife Insurance Co., president and director Michigan Milk Producers’
Association, president and director National Dairy Union, president and di
rector Lansing W elfare Loan Association, vice president and director Amer
ican Annuity Savings Association, vice president and director Michigan State
Good Roads Association, chairman executive committee and director Michigan
State Grange, director Lansing Community Hotel Corporation, director United
States Mortgage Bond Co. o f Detroit, director Michigan Producers Dairy Co.,
Adrian, director National Cooperative Milk Producers Federation, Washington.
George L. Humphrey, Saginaw; director Second National Bank & Trust Co.,
president, treasurer, and director C. K. Eddy & Sons, president, treasurer, and
director Saginaw Milling Co., director Consolidated Coal Co., Director United
States Graphite Co.
1110
B R A N C H , C H A IN , AND GROUP B A N K IN G
Lee M. Hutchins, Grand R apids; director Grand Rapids National Bank, vice
president and director Grand Rapids Trust Co., president and manager Hazeltine & Perkins Drug Co., director Grand Rapids Foundation.
James Inglis, Detroit; director Guardian Detroit Union G roup (In c.), di
rector National Bank of Commerce, director Union Trust Co., president Amer
ican Blower Corporation, president Canadian Sirocco Co. (L td .), Windsor,
director American Radiator Co., New York, director Michigan Mutual Li
ability Corporation, advisory committee American Industries Corporation.
Fred F. Ingram, Jackson; director National Union Bank & Trust Co., presi
dent L. H. Field Co., president Field-Ingram Co.
Earl S. Irwin, Grand R a p id s; director Grand Rapids National Bank, presi
dent Macey Co., president Steel Furniture Co., treasurer Robert W. Irwin Co.,
vice president C. J. Farley Co.
Glenn R. Jackson, Flint; director Union Industrial Bank, director Union In
dustrial Trust Co., president Continental Department Stores (In c.). director
Merchants & Mechanics Bank.
Edward Jenkins, Saginaw; director Second National Bank & Trust Co.
W. Lee Jenks, Port Huron ; director F rst National Bank & Trust Co. attor
ney, president Moak Machine & Tool Co., vice president Moak Realty Co., presi
dent Port Huron Terminal Co.
Almon O. Jones, Battle Creek: director City National Bank & Trust Co.,
president United States Register Co.. president Lubricator Devices (In c.), di
rector Simmons-Leedle Furnace Co., Marshall.
James B. Jones, D etroit; director National Bank of Commerce, vice president
and general manager Crowley Milner & Co., director Better Business Bureau
o f Detroit (In c.), director Detroit Shopping News, director Business Property
Association of Detroit.
Richard P. Joy, Detroit; director Guard'an Detroit Union Group (In c.),
director National Bank of Commerce, director Union Trust Co., president and
director La Salle County Carbon Coal Co., director Packard Motor Car Co.,
director Grace Harbor Lumber Co.
George B. Judson, D etroit; director Guardian Detroit Union Group (In c.),
president and director Bank of Detroit, director Bank of Dearborn.
Albert Kahn, D e tro it; director Guardian Detroit Bank, president Albert
Kahn (In c.), director Truscon Steel Co., director Electro-Master Co., director
Congress Investment Co.
William R. Kales, D etroit; director Union Trust Co., director Michigan In
dustrial Bank, vice president Whitehead & Kales Co., president Kales Stamp
ing Co., secretary-treasurer Kales Realty Co., vice president Jefferson Terminal
Warehouse Co., director Central West Casualty Co.
Charles A. Kanter, D etroit; executive vice president and director National
Bank o f Commerce, director Union Industrial Bank, ITlint.
Rudolph L. Kantlehner, Jackson ; director National Union Bank & Trust Co.,
president R. L. Kantlehner (In c.), advisory officer East Side National Union
Branch, director Jackson Community Finance.
Ernest Ivanzler, D e tro it; vice president and director Guardian Detroit Union
Group (In c.), vice president and director Guardian Detroit Bank, vice presi
dent and director Guardian Detroit Co., director Guardian Trust Co., president
Universal Credit Corporation.
Joseph M. Karmann, D etroit; director Union State Bank of Dearborn.
Jerome E. J. Keane, D etroit; director Guardian Detroit Union Group (In c.),
director Guardian Detroit Bank, director Guardian Trust Co., director Suther
land Paper Co.
Ernst C. Kern, D etroit; director Bank o f Detroit, The Ernest Kern Co.
W illiam Kersjes, Kalam azoo; director First National Bank & Trust Co.,
president Wheeler Blaney Co.
A.
Earl Kettle, K alam azoo; director First National Bank & Trust Co., presi
dent Edwards & Chamberlin Hardware Co.
Samuel R. Kingston, D etroit; executive vice president, cashier, and director
National Bank of Commerce, vice president and director Bank of Commerce
o f Dearborn, director First State Savings Bank of Birmingham, director Lochmoor State Bank, director Baker Land Co., director National Tool & Sal
vage Co.
Charles A. Kinney, D e tro it; vice president and director National Bank of
Commerce, director City National Bank & Trust Co., Battle Creek.
Lloyd G. Kirby, F lin t; executive vice president, secretary and director Union
Industrial Trust Co., director Union Industrial Bank.
B R A N C H , C H A IN , AND GROUP BAN K IN G
1111
George H. Klein, D e tro it; director Union Trust Co., director National Bank
o f Commerce, director Union Title & Guaranty Co., secretary and director
Detroit City Service Co., secretary and director Executives Trading Corpora
tion, director Long Manufacturing Co.
Reinhard Kleinpell, F lint; director Union Industrial Bank, director Union
Industrial Trust Co., treasurer, manager, and director Flint Lumber Co., vice
president and director Veit & Davison Lumber Co., vice president and director
Herman Hughes Lumber Co., president and director Flushing Lumber Co.,
chairman and director Flint Structural Steel Co., president and director
W oodcroft Estates, president and director Burgess Realty Co., president and
director Flint Savings Association, treasurer and director Flint Die & Tool
Co., director Superior Felt Products Co., director Durant Hotel Co.
Albert Koegel, F lin t; director Union Industrial Bank, director Union In
dustrial Trust Co., president A. Koegel & Co., director Sunset Hills Association.
John F. Koenig, D e tro it; president and director Bank of Hamtramck, presi
dent and director Koenig Coal & Supply Co., president and director Koenig
Transportation Co., treasurer and director Trombly Brick Co.
Rudolph F. Kompass, N iles; director City National Bank & Trust Co.
Leopold Koscinski, D e tro it; director Bank of Hamtramck.
Arthur J. Lacy, D etroit; director Bank of Detroit, Anderson, W ilcox, Lacy
& Lawson.
Charles F. Lambert, D e tro it; director National Bank o f Commerce, president,
general manager, and director Clayton & Lambert Manufacturing Co., director
Rhodes Metallic Packing Co.
Frederick Larkin, F lin t; director Union Industrial Bank, president Realty
Construction Co.
F.
A. Lautenschlager, T renton; vice president, cashier, and director Trenton
State Bank.
Dwight B. Lee, D e tro it; director Guardian Detroit Union Group, Inc., director
Union Trust Co., director National Bank of Commerce, president, treasurer, and
director Motor Products Corporation, director Kelvinator Corporation, director
Dome Mines, Ltd., of Canada, director Black River Ranch.
T. Fred Lee, D etroit; director Michigan Industrial Bank, director Detroit
National Fire Insurance Co.
Ernest G. Liebold, D e tro it; director Bank of Dearborn, general secretary
to Henry Ford.
Arnold Lenz, Saginaw ; director Second National Bank & Trust Co., man
ager Chevrolet Motor Co., Grey Iron Foundry.
Murray D. Lincoln, Cleveland, O h io; director Ohio-Pennsylvania Joint Stock
Land Bank, general manager Ohio Farm Bureau Corporation, secretary-treasurer Ohio Farm Bureau Service Co., secretary-treasurer Farm Bureau Mutual
Automobile Insurance Co., secretary Ohio Farm Bureau Federation, director
Auxiliary Board First Citizens Trust Co., Columbus.
Edwin H. Lindow, D e tro it; president and director Union Title & Guaranty
Co.
Robert T. Longway, F lin t; vice president and director Union Industrial
Bank, director Union Industrial Trust Co., vice president Buick Motor Co.
Robert O. Lord, Detroit ; president and cirector Guardian Detroit Union
Group (In c.), president and director Guardian Detroit Bank, president and
director Guardian Trust Co., vice president and director Guardian Detroit Co.,
director Bank o f Detroit, president and director Highland Park State Bank,
chairman and director Highland Park Trust Co., director Universal Credit
Corporation, director National Investors Corporation, director Keane, Higbie
& Co.
W. H. Loutit, Grand R a p id s; director Grand Rapids Trust Co., president
and director Wm. H. Keller, Inc., chairman Michigan Conservation Commission.
Richard H. Loveland, Jackson; director Peoples National B ank; director
Jackson Citizens Finance Co.
William B. Lowe, D e tro it; director Highland Park State Bank, director
Highland Park Trust Co., managing director Detroit Free Press, treasurer and
director Free Press Photogravure Co., director Free Press Realty Co.
Albert B. Lowrie, D etroit; director Bank o f Dearborn, director Michigan
Industrial Bank, secretary-treasurer Lowrie-Robinson Lumber Co.
Alvan Macauley, D e tro it; director Guardian Detroit Union Group, Inc.,
director Guardian Detroit Bank, director Guardian Trust Co., director Guardian
Detroit Co., director National Bank o f Commerce, president, general manager
1112
BRANCH, CHAIN, AND GROUP BANKING
and director Packard Motor Car Co., president and director National Auto
mobile Chamber o f Commerce.
Alvan Macauley, jr., D etroit; vice president Guardian Detroit B a n k ; director
Bank o f Dearborn.
James C. MacGregor, M. D., F lin t; director Union Industrial Bank, director
Union Industrial Co.
David MacTaggart, Port H u ron ; vice president and director First National
Bank & Trust Co., president David MacTaggart Co., President MacTaggartHoffman Co.
James M. MacTaggart, Port H uron; director First National Bank & Trust
Co., secretary-treasurer Port Huron-Sarnie Ferry Co.
Andrew L. Malott, D e tro it; vice president and director Guardian Trust Co.,
executive vice president Union Trust Co., director Union Title & Guaranty Co.
Nicholas A. Mans, T ren ton; president and director Trenton State Bank, di
rector W yandotte Industrial Bank, president N. A. Mans & Sons, vice president
O’Connor Properties Corporation, director A. R. Reno Drug Co., director Warren
Park Land Co.
George K. March, D etroit; director Michigan Industrial Bank.
Howard R. Marsh, Jackson; director National Union Bank & Trust Co.
Henry Marx, Port H u ron; director Federal Commercial & Savings Bank.
A. G. Masters, D etroit; director Union Joint Stock Land Bank of Detroit.
Frank J. Maurice, D etroit; executive vice president and director Highland
Park State Bank, vice president and director Highland Park Trust Co., vice
president and director Bank o f Dearborn.
R ay T. Maynard, Saginawr; vice president, cashier, and director Second Na
tional Bank & Trust Co., director Saginaw Financing Corporation.
W. B. Mayo, D etroit; director Bank o f Commerce of Dearborn, chairman and
vice president Detroit Motorbus Co., vice president Stout Air Services (In c.),
vice president Stout Metal Airplane Co., vice president Hooven, Owens & Rentschler Co., vice president Aircraft Development Corporation (division Detroit
Aircraft Corporation), president Hamilton Moulding Sand Co., director Pratt &
W hitney Aircraft Corporation, director Dexter-Carpenter Coal Co., director
General Machinery Corporation, director Maddux Airlines (In c.), director New
York, Rio & Buenos Aires Lines (In c.), director Transcontinental A ir Trans
port (In c.), director Coast Range Steel Corporation, director United Aircraft
and Transport Corporation, director United Aviation Corporation, director Sky
View Lines (In c.), director Northwest Airways (In c.), director Towle A ir
craft Corporation, director Detroit A ircraft Corporation, director Aviation
Credit Corporation.
Norman McClave, Grand R apids; director Grand Rapids National Bank,
president Sligh Furniture Co.
Samuel L. McCune, Cleveland, Ohio; vice president and director Ohio-Pennsylvania Joint-Stock Land Bank.
Fred J. McDonald, D etroit; director Michigan Industrial Bank, president
McDonald Coal & Brick Co.
J. C. McHannan, Cleveland, O h io ; director Ohio-Pennsylvania Joint-Stock
Land Bank, vice president and director Central National Bank, treasurer Prospect-37th Co., treasurer and director Cleveland Rubber (In c.), vice president
and director Birkett L. W illiams Co., treasurer Cleveland Industrial Exposi
tion Co.
W illiam S. McKay, Cleveland, Ohio; director Ohio-Pennsylvania Joint-Stock
Land Bank, president and director First National Bank, Greenville, Pa., secre
tary and trustee Grove City College, Grove City, Pa., secretary, treasurer, and
director Turner McKay Co., Grove C-ity, Pa., secretary, treasurer, and director
Hillcrest Realty Co., Grove City, Pa., chairman Agricultural Committee Penn
sylvania Bankers Association.
John M. McKerchey, D etroit; director Michigan Industrial Bank, president
Acacia Park Cemetery, president W oodward Avenue Improvement Association.
Francis C. McMath, D etroit; director Guardian Detroit Union Group (In c.),
director Union Trust Co., director National Bank o f Commerce, president Es
sex Real Estate Co., director New Union Building Co., director Essex Terminal
Railroad, Walkerville, Ontario, director Canadian Bridge Co. (L td .), W alkerville, Ontario.
Duncan J. McNabb, D etroit; president and treasurer Keane, Higbie & Co.,
director Guardian Detroit Co., director Union Joint Stock Land Bank, director
Ohio-Pennsylvania Joint Stock Land Bank, director Kalamazoo Stove Co., Kala
mazoo, director W ilcox-Rich Corporation, Saginaw.
BRANCH, CHAIN, AND GROUP BANKING
1113
George W. Mechem, Battle Creek; director City National Bank & Trust
Co., director Battle Creek Gas Co.
Louis Mendelssohn, D etroit; director Guardian Trust Co.
Frank W. Merrick, D etroit; director Union Joint Stock Land Bank, director
Ohio-Pennsylvania Joint Stock Land Bank, Cleveland, president and director
State Savings Bank, Gladwin, vice president and director Pigeon State Bank,
Pigeon, vice president and director Oscoda State Savings Bank, Oscoda, vice
president and director Owendale Bank, Owendale, vice president Twining Bank,
Twining, vice president Mikado Bank, Mikado, vice president Lincoln Bank,
Linco.n, president and director Michigan Bean Co., Saginaw, director Lake
City State Bank, Lake City, director Muncie Malleable Foundry Co., Muncie,
director R. W. Babcock (In c.), Detroit.
Mark Merriman, Jackson; director Peoples National Bank.
Edward Miller, D etroit; director Union State Bank, Dearborn.
R. Verne Mitchell, Cleveland, Ohio; director Union Trust Co., director OhioPennsylvania Joint Stock Land Bank, vice president and general manager R.
V. Mitchell & Co., president and director Harris-Seybold-Potter Co., director
Continental Shares (In c.), director General Printing Ink Corporation, New York,
director, The Bonnot Co., Canton, Ohio, director the Buyers Machine Co., direc
tor City National Mortgage Co., Canton, Ohio, director Dill Manufacturing Co.,
director Haughton Elevator Co., Toledo, Ohio, director James Leffel & Co.,
Springfield, Ohio, director the Kaynes Co., director Investment Trust of New
York (In c.), New York, director Piqua Hosiery Co., Piqua, Ohio, director Reli
ance Manufacturing Co., Massillon, Ohio, director Thompson Products Co., direc
tor Union Metal Manufacturing Co., Canton, Ohio.
W. Ledyard Mitchell, D etroit; director Guardian Detroit Bank, director
Guardian Trust Co., vice president and director Chrysler Corporation, vice
president the Robert Mitchell Manufacturing Co., chairman Chrysler Export
Corporation.
Edwin R. Monnig, D etroit; vice president and director Bank of Hamtramck.
Charles M. Montague, Niles; director City National Bank & Trust Co.
Charles E. Moon, N iles; director City National Bank & Trust Co.
Fred T. Moran, D etroit; director Union Trust Co., director Union Title &
Guaranty Co., president Peninsular Stove Co.
Albert H. Morley, Saginaw; vice president and director Second National
Bank & Trust Co.
George B. Morley, Saginaw; director Guardian Detroit Union Group (In c.),
chairman and director Second National Bank & Trust Co.
Ralph C. Morley, Saginaw; director Second National Bank & Trust Co.,
president and director Morley Bros., chairman and director Morley Murphy
Co., president and director American Logging Tool Co., vice president and
director Saginaw Timber Co.
S. A. Morman, Grand R ap id s; director Grand Rapids National Bank, partner
ship S. A. Morman & Co., vice president and director American Box Board Co.
Benjamin F. Mortenson, D etroit; director Michigan Industrial Bank, presi
dent Mortenson Michelson Co., owner Benj. F. Mortenson Co.
Edwin R. Morton, Battle Creek; vice president, cashier, and director City
National Bank & Trust Co.; director Union Joint Stock Land Bank, Detroit;
president and director American Finance Corporation, president and director
B. & M. Real Estate C o .; president and director Morton Investment Co.
W. E. Moss, D etroit; director Union Joint Stock Land Bank, director W. E.
Moss & Co., director Greenfield Investment Corporation.
Charles S. Mott., D etroit; director Guardian Detroit Union Group (In c.),
president and director Union Industrial Bank, Flint, chairman and director
Union Industrial Trust Co., Flint, director National Bank of Commerce, director
Union Trust Co., director Guardian Detroit Co., vice president General Motors
Corporation, director Detroit Aircraft Corporation, director Michigan Copper &
Brass Co.
Oscar B. Mueller, Port H u ron ; director Federal Commercial & Savings Bank,
president Mueller Brass Co., treasurer Mueller Investment Association.
William K. Muir, D etroit; director Guardian Trust Co., superintendent
Detroit & Cleveland Navigation Co., secretary Stout-Detroit & Cleveland Air
Lines (In c.).
C. Hayward Murphy, D etroit; diector Bank of Detroit; director Guardian
Trust Co., secretary Simon J. Murphy Co.
Fred T. Murphy, D etroit; director Detroit Guardian Union Group (In c.),
chairman and director Guardian Detroit Bank, director Guardian Trust Co.,
1114
BRANCH, CHAIN, AND GROUP BANKING
director Guardian Detroit Co., trustee Murphy Family Trusts, vice president
Pacific Lumber Co.
Joseph Murphy, C adillac; director Grand Rapids Trust Co., vice president
Cadillac-Soo Lumber Co., vice president Grand Rapids Lumber Co., director
Cadillac State Bank.
James R. Murray, D etroit; director Guardian Trust Co., president The Forg
ing & Casting Corporation, president Standard Tube & Manufacturing Co.,
president Murray-Ross Corporation, president Pontiacres (In c.), vice president
Conductors’ Protective Assurance Co., director Murray-Ohio Manufacturing
Co., director Field-Jerome Laboratories (In c.).
Joseph Neckel, D etroit; director Union State Bank of Dearborn.
Henry H. Neesley, Jackson; director National Union Bank & Trust Co.
Edwin H. Nelson, Detroit, director Guardian Detroit Union Group (In c.),
director Union Trust Co., director National Bank of Commerce, director Bank
o f Commerce o f Dearborn, president and director Nelson, Baker & Co.
Phelps Newberry, D e tro it; vice president and director Guardian Detroit
Union Group (In c.), vice president and director Guardian Detroit Bank, vice
president and director Quardian Trust Co., director Guardian Detroit Co.,
director Highland Park State Bank, director Highland Park Trust Co., vice
president Newberry Estate (In c.), treasurer Tanglefoot Co., director Detroit
Steel Casting Co., director Buhl Aircraft Co.
Elliott S. Nichols, Trenton; director Trenton State Bank, vice president and
director Plymouth Road Development Corporation, director Maple Cranbrook
Co.
Aaron E. Noble, D etroit; director Michigan Industrial Bank.
Robert Oakman, D etroit; director Union Trust Co., president and director
Robert Oakman Land Co.
R. E. Olds, Lansing; director Guardian Detroit Union Group (In c.), presi
dent and director Capital National Bank, director Union Trust Co., Detroit,
president and director R. E. Olds Co., chairman and director Chateau Yoyageurs,
Detroit, chairman and director Ideal Power Lawn Mower Co., chairman and
director Lansing Community Hotel Corporation, chairman and director Reo
Motor Car Co., chairman and director Hill Diesel Engine Co., director Atlas
Drop Forge Co., director Detroit Aircraft Corporation, Detroit, director National
Automobile Chamber of Commerce, director Central Trust Co.
O.
O. Otis, D etroit; vice president, cashier and director Bank o f Commerce
o f Dearborn.
Edwin Owen, Grand R ap id s; director Grand Rapids Trust Co., chairman and
director Owen Ames Kimball Co., secretary, treasurer, and director Highland
Park Association, director Michigan Hardware Co., director Stow Davis Fur
niture Co.
Felix Pagenstecher, Kalamazoo, director First National Bank & Trust Co.,
president and manager Bryant Paper Co., vice president Kalamazoo Citizens
Loan & Investment Co.
Albert B. Parfet, Port H u ron ; director Federal Commercial & Savings Bank,
president and treasurer Albert S. Parfet Co.
Frank E. Parker, D etroit; director Michigan Industrial Bank, vice president
and general manager Merchants Credit Bureau (In c.), director Michigan Credit
Bureau (Inc.)
Harry B. Parker, Albion, director Peoples National Bank, Jackson, director
Commercial & Savings Bank, vice president and general manager Albion Mal
leable Iron Co.
James Parkhill, F lin t; director Union Industrial Bank, manager Armstrong
Spring Co. division o f General Motors Corporation.
William S. Paterson, F lint; director Union Industrial Bank, director Union
Industrial Trust Co.
George E. Paul, Jackson, vice president, trust officer, and director National
Union Bank & Trust Co., president National Union Co., vice president Bankers
Investment Corporation.
Charles F. Pears, Niles; director City National Bank & Trust Co.
Andrew J. reoples, D e tro it; director Bank of Detroit, director Bank o f Dear
born, director Michigan Industrial Bank, manager the American Brass Co.,
Detroit branch, director Michigan Mutual Liability Co.
James B. Peter, Saginaw ; director Second National Bank & Trust Co., direc
tor Consolidated Coal Co.
J. Alfred Pip, D e tro it; director Michigan Industrial Bank, president and
treasurer Anderson & Pip Co., vice president Beaver Realty Co., treasurer
B R A N C H , C H A IN , AND GROUP B AN K IN G
1115
Eagle Faint Works, treasurer Eagle Properties Corporation, director Detroit
Steel Corporation, director Detroit Concrete Receptacle Co.
Francis J. Flym, N iles; director Guardian Detroit Bank, president Kawneer
Co., Niles, President Kawneer Manufacturing Co. of California, president
Star Manufacturing Co., vice president and director Niles Hotel Co., director
American Industries, Detroit, director First National Bank, South Bend.
Ferdinand Porath, jr., D etroit; director Union State Bank of Dearborn.
Drury L. Porter, Lansing; director Capital National Bank, vice president,
treasurer, and director Motor Wheel Corporation.
Ray Potter, Lansing, director Capital National Bank, vice president, treas
urer, and director Michigan Screw Co., director Federal Screw Works, Detroit,
director Superior Screw & Bolt Manufactuing Co., Cleveland, director Motor
Wheel Corporation, director Dail Steel Products Co., director Lansing Co.
Joel H. Prescott, D etroit: executive vice president and director Union Trust
Co., president and director Palms Realty Co.
Frank E. Quisenberry, D e tro it; executive vice president and director High
land Park State Bank, president and director Highland Park Trust Co., vice
president and director Bank o f Dearborn.
W. J. Rachow, D e tro it; president, cashier, and director Union State Bank,
Dearborn.
H. Ii. Rackham, D e tro it; director Bank o f Detroit.
John H. Rademaker, Grand Rapids; director Grand Rapids Trust Co., vice
president and director Manistee County Savings Bank, president Anderson
Lumber Co.
Ellis W. Iianney, Grand R ap id s; director Grand Rapids Trust Co., president
Ranney Refrigerator Co., Greenville, vice president Moore Plow & Implement
Co., Greenville, vice president Commercial State Savings Bank, Greenville,
director Michigan Surety Co., Lansing.
Austin B. Read, K alam azoo; director First National Bank & Trust Co.
Jerome H. Remick, Detroit; director Guardian Detroit Union Group (In c.),
Union Trust Co., Grand Rapids Creamery Co., president and director Detroit
Creamery Co., president and director Detroit Creamery Realty Co., vice presi
dent and director Parke, Davis & Co., Detroit Symphony Society.
Charles N. Remington, Grand Rapids ; director Grand Rapids National Bank.
Grand Rapids Trust Co., president Grand Rapids Mutual Building & Loan
Association, director Grand Rapids Gas Light Co.
I. J. Reuter, Lansing; director Capital National Bank, president Olds Motor
Works, vice president General Motors Corporation, managing director Opel
Motor Co., Germany.
Herbert S. Reynolds, Jackson; director Guardian Detroit Union Group (In c.),
president and director Peoples National Bank, president Peoples National Co.,
director Sparks Withington Co.
W iley R. Reynolds, Jackson; director Peoples National Bank, American Trust
Co., New York, Calhoun State Bank. Homer, General Leather Co., Newark. N. J.,
DeForest Radio Co., Jersey City, N. J., chairman and director Reynolds Spring
Co., president and director W. R. Reynolds & Co.
George W. Ritchie, Kalamazoo; director First National Bank & Trust Co.;
retired capitalist.
Theodore J. Richter, D e tro it; director Bank o f Hamtramck.
C. J. Rouser, Lansing; director Capital National Bank, president C. J. Rouser
Drug Co.
George Bagg Russel, D etroit; director Union Trust Co., vice president National
Surety Co.
John R. Russel, D etroit; director Guardian Detroit Union Group (In c.),
National Bank of Commerce, Union Trust Co., Union Joint Stock Land Bank,
vice president and director Clayton & Lambert Manufacturing Co., director
Russel Steel Construction Co., Commercial Reproducing Co.
Murray W. Sales, D etroit; director Guardian Detroit Union Group (In c.),
Union Trust Co., National Bank of Commerce, president Murray W. Sales &
Co., Sales Realty Co.
Henry H. Sanger. D etroit; vice president and director Guardian Detroit
Union Group (In c.). chairman, president, and director National Bank of Com
merce, director Guardian Detroit Bank, Union Trust Co., president Bank of
Commerce, Dearborn, vice president Union Joint Stock Land Bank, director
Ohio-Pennsylvania Joint Stock Land Bank, Cleveland, director Keane, Higbie
& Co., Whitman & Barnes (In c.), Michigan Sugar Co., Saginaw.
1116
BRANCH, CHAIN, AND GROUP BANKING
Arnold Augustus Schantz, D etroit; director Union Trust Co., director Michi
gan Industrial Bank, director Detroit Convention & Tourist Bureau, president
Detroit & Cleveland Navigation Co., president Ashley & Dustin Steamer Line,
president Stout D. & C. Air Lines (In c.), vice president Saunders of Ohio (In c.),
vice president Detroit Creamery Co., vice president Detroit Marine Aero Engine
Co., vice president National Rivers and Harbors Congress, chairman Inland
W ater Lines Association, vice president Detroit Fire Commission, director
W hite Star Navigation Co., director Detroit Creamery Realty Co., director
Greater Detroit Committee, director Aviation Consolidated (In c.), New York,
director National Vending Corporation.
Stuart M. Schram, Jackson; director Peoples National Bank, president Cen
tral Automobile Co.
Dickson S. Scoffern, N iles; chairman and director City National Bank &
Trust Co.
Edmund Secrest, Cleveland, O h io; director Ohio-Pennsylvania Joint-Stock
Land Bank, State forester, State of Ohio, associate director Ohio Agricultural
Experiment Station.
Arthur H. Seibig, Cleveland, O h io; director Ohio-Pennsylvania Joint-Stock
Land Bank, director New York Joint-Stock Land Bank, president United
Banking & Trust Co., vice president Cleveland Securities Corporation, treasurer
Cleveland Automobile Club, director Guarantee Title & Trust Co., director
Cleveland Builders Supply & Brick Co., director Cleveland W elding Co.
Edgar M. Sergeant, K alam azoo; director First National Bank & Trust Co.,
president Sergeant Coal Co., commissioner city of Kalamazoo.
Alger Shelden, D etroit; director Guardian Trust Co., president- Shelden
Land Co.
Allan Shelden, D etroit; director National Bank of Commerce, director
Guardian Trust Co., H. D. Shelden’s Sons.
Earl H. Shepherd, K alam azoo; vice president and director First National
Bank & Trust Co., vice president F. N. B. Securities Co., vice president Martin
Exchange Bank, Martin,1 director Kalamazoo Poper B ox Co., director American
Sign Co.
R. Perry Shorts, Saginaw ; vice president and director Guardian Detroit Union
Group (In c.), president and director Second National Bank & Trust Co., vice
president and director C. K. Eddy & Sons, secretary-treasurer Mitts & Merrill.
Albert E. Sleeper, D etroit; director Union Joint-Stock Land Bank, president
State Savings Bank, Bad Axe, president Commercial State Bank, Murlette,
president First National Bank, Yale, director State Bank, Croswell, director
State Bank, Sandusky, director Nunica Malleable Foundry Co., director Michi
gan Surety Co.
Cramer Smith, Pontiac; president and director Pontiac Commercial & Savings
Bank, Pontiac, president and director Pontiac Trust Co., Pontiac, director Union
Trust Co., director National Grocer Co.
Hal H. Smith, Detroit; director Guardian Union Group (In c.), director
Union Trust Co., director National Bank o f Commerce, director Union State
Bank, Dearborn, president Central West Casualty Co., vice president Federal
Motor Co.
Oscar W. Smith, D etroit; director guardian Detroit Union Group (In c.),
director National Bank o f Commerce, director Union Trust Co., president and
director Parke, Davis & Co , director American Drug Manufacturers Associa
tion.
Roger W. Smith, Jackson; director National Union Bank & Trust Co., presi
dent Smith-Winchester Co., vice president Alloy Steel Spring Co.
W illiam D. Smith, port H u ron ; director Federal Commercial & Savings Bank,
Smith Bros.
Muir B. Snow, D etroit; vice president and director Keane, Higbie & Co.,
director Whitman & Barnes (In c.), director Canadian Detroit Twist D rill Co.
(L td .).
Clifford M. Sparks, Jackson; director Peoples National Bank, vice president
Sparks-Withington Co., vice president Cardon-Phonocraft Corporation.
Harry G. Sparks, Jackson; director National Union Bank & Trust Co., vice
president and general manager Cardon-Phonocraft Corporation, vice president
Sparks-Withington Co.
W illiam Sparks, Jackson; director Peoples National Bank, president CardonPhonocraft Corporation, president Sparks-Withington Co.
W illiam R. Spencer, Jackson; director National Union Bank & Trust Co.,
proprietor W. R. Spencer Grocery Co , president Hayes Hotel Co., president
Jackson Storage & Trucking Co., president Luna-Manganese Co.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1117
J. Ben Sperry, Port H uron; director Federal Commercial & Savings Bank,
president J. P. Sperry Co.
Charles M. Spinning, Jackson; vice president and director National Union
Bank & Trust Co., president National Union Building Co.
John N. Stalker, D etroit; vice president and director Guardian Detroit Union
Group (In c.), president and director Union Trust Co., president and director
Union Industrial Trust C o , Flint, chairman and director Union Title and
Guaranty Co., treasurer and director Union Joint Stock Land Bank, vice pres
ident and director New Union Building Co., director National Bank of Com
merce, director Industrial Morris Plan Bank, director Ohio-Pennsylvania Joint
Stock Land Bank, director Detroit City Service Co., director Long Manufactur
ing Co.
Clare H. Stearns, K alam azoo; vice president and director First National
Bank & Trust Co., attorney, director Merchants Publishing Co., director Kala
mazoo Vegetable Parchment Co.
A. C. Stebbins, Lansing; vice president and director Capital National Bank,
vice president and director Capital Savings & Loan Co., vice president and
director Young Bros, Realty Co.
Dan C. Steketee, Grand R a p id s; director Grand Rapids National Bank,
Paul Steketee & Sons.
Paul Frederick Steketee, Grand R apids; vice president and director Grand
Rapids Trust C o , partner Paul Steketee & Sons.
B. F. Stephenson, D etroit; director Union Trust Co., president, treasurer, and
director Troyak Land C o .; secretary, treasurer, and director Robert E. Barber
Land Co.; president, treasurer, and director McCordie Construction Co.; secre
tary, treasurer, and director Seven Oak Land Co. and Eight Oak Land C o.;
president, treasurer, and director Stephenson Land C o .; president, treasurer,
and director Stephenson Leland Co.
H. LeRoy Stevens, Port H uron; director First National Bank & Trust Co.,
attorney and director Dunn Sulphite Paper Co.
S. Sidney Stewart, F lin t; director Union Industrial Bank, vice president Union
Industrial Trust Co., president and treasurer the W. F. Stewart Co., director
Superior Felt Products Co., director Flint Citizens Loan & Investment Co.
Matthew Stoll, N iles; vice president and director City National Bank & Trust
Co.
John E. Storer, F lint; vice president and director Union Industrial Bank.
Edward T. Strong, F lin t; director Union Industrial Bank, director Union
Industrial Trust Co., president, general manager, and director Buick Motor C o .;
vice president General Motors Corporation, president and director Modern
Housing Corporation and General Motors Institute o f Technology.
Louis W. Sutherland, Kalam azoo; director First National Bank & Trust Co.,
president Sutherland Paper Co., American Sign Co., and Kerston Radio Co.
John W. Symons, jr., Saginaw; director Second National Bank & Trust Co.,
president and director Symons Bros. & Co.
Louis J. Taber, Cleveland, O h io ; director Ohio-Pennsylvania Joint Stock Land
Bank, president Eastern Ohio Publishing Co., vice president Farmers & Traders
L ife Insurance Co., director National Grange Liability Co., New York Joint
Stock Land Bank, and National Grain Corporation.
B. E. Taylor, D e tro it; director Union Trust Co., real estate.
Seneca V. Taylor, D e tro it; director Michigan Industrial Bank, president and
director Concrete Steel Fireproofing Co., vice president and director All-Steel
Products Co. and Seminole Properties Corporation.
James M. Teahen, D etroit; director Michigan Industrial Bank, treasurer and
director Detroit National Fire Insurance Co.
William W. Tefft, Jackson; director National Union Bank & Trust Co., vice
president Fargo Engineering Co., president board of trustees Albion College.
Allan A. Templeton, D etroit; president and director Michigan Industrial Bank,
vice president and director Detroit National Fire Insurance Co., and Acacia Park
Cemetery Association; director Society for Savings, Michigan Mutual Liability
Co., and Title & Trust Co.
Emil A. Tessin, Saginaw; vice president, trust officer, and director Second
National Bank & Trust Co.
John R. Thompson, D etroit; director Union Joint Stock Land B a n k ; presi
dent and director Cold water National Bank, Cold w a ter; director W olverine
Portland Cement Co., Coldwater; and director and trustee Investment C or
poration, Coklwater.
1118
BRANCH, CHAIN, AND GROUP BANKING
John H. Tigchon, D e tro it; director Jefferson Savings Bank of Grosse Pointe
Park.
John M. Toolin, D etroit; director Union Trust Co., president The Great
Atlantic & Pacific Tea Co., central western division, director The Great
Atlantic & Pacific Tea Co. of America (and subsidiaries).
Charles Trankla, Grand R ap ids; director Grand Rapids National Bank, man
aging partner Charles Trankla & Co.
C.
W. Treadwell, D etroit; director Jefferson Savings Bank of Grosse Pointe
Park, owner C. W. Treadwell Co., owner and director Lincoln Park Devel
opment Co.
George W. Trendle, D etroit; director Union Trust Co. and Motion Pictures
Theater Owners o f M ichigan; vice president, general manager, and director
Kunsky Theaters Corporation; vice president, secretary, and director Madison
Realty Co.; vice president, secretary, and director Strand Theater (In c.),
Columbia Theater (In c.), Adams Theater Co., and Cooperative Booking offices
(In c.).
Luther S. Trowbridge, D etroit; director Guardian Trust Co. and Union Title
& Guaranty Co., and Trowbridge, Lewis & Watkins.
Charles B. Tuttle, D etroit; director Union Trust Co. and National Bank of
Commerce; treasurer and director S. S. Kresge Co., S. S. Kresge Co. (L td .),
and Kresge Realty C o.; president and director Great Miami Realty C o .;
director Mount Clemens Pottery Co., Mortenson Mickelson Co., Detroit City
Service Co., and Universal Cooler Co. (L td.).
Paul J. Ullrich, Mount Clemens; director Union Joint Stock Land Bank,
Detroit, and Ullrich Savings Bank, president Macomb County Savings Bank,
treasurer Mount Clemens Bath Co., director Detroit Fidelity & Surety Co.
C.
J. Van Etten, Grand Rapids ; director Grand Rapids Trust Co., secretarytreasurer Blodgett Co. (L td.).
Sam L. Vreeland, Trenton ; director Trenton State Bank and Fanners Mutual
Fire Insurance Co.
Harold L. Wadsworth, D etroit; vice president and director Michigan Indus
trial Bank, treasurer and director Lewistown Oil & Refining Co,, president and
director Wadsworth-Campbell Box Co. and Thermal Engineering C orporation;
vice president and director Holton & Co., American Box Supply Co., and Somer
ville & C o .; treasurer and director C. W. Toles & Co., Century Oil Co., and
Northern States Oil C o .; director Regal Oil Co.
Harrington E. Walker, D etroit; director Union Trust Co. and National Trust
Co. (L td.) Toronto, president Huron Manufacturing Co., Garden Court Realty
Co., W alkerville & Detroit Ferry Co., Walkerville Land & Building Co. (L td .),
W alkerville; Walkerville Securities (L td.), W alkerville; Walkerville Lumber
Co. (L td .), W alkerville: Yorkshire Securities (L td.), W alkerville: and Border
Construction Co. (L td .), W alkerville; vice president Walkerside Dairy (L td.),
W alkerville; Walkerville Water Co. (L td.). W alkerville; W alkerville Construc
tion Co. (L td.), W alkerville; and New Era Dredge Co. (L td.), W alkerville;
director, General Engineering Co., and Northward Mines (L td .), Toronto.
Hiram H. Walker, Detroit; director, Guardian Trust Co. and Guardian
Detroit C o .; president Hoskins Manufacturing Co., Walkerville Water Company
(L td .), and Walkerside Dairy (Ltd.) ; vice president W alkerville Land & Build
ing Co., Prince Edward Hotel Co., Walkerville-Detroit Ferry Co.. and W alker
ville Lumber Co., and director, Garden Court Realty Co.
Lewis K. Walker, D e tro it; vice president Guardian Detroit Union Group
( I n c .) ; vice president, secretary, and director, Guardian Trust Co.; and
director, Union Title & Guaranty Co.
W illiam H. Wallace, Saginaw; vice president and director, Second National
Bank & Trust C o .; president and director, Michigan Sugar C o .; president W al
lace & Morley, Bad Axe Grain Co., W allace Stone Co., and Bay Port Fish Co.
James L. Walsh, D etroit; vice president and director, Guardian Detroit Union
Group (Inc.) and Guardian Detroit B ank; director, Bank of Detroit, Highland
Park State Bank, Union Industrial Bank. F lin t; Bank of Dearborn, McGrawH ill Publishing Co. (In c.), Railway & Utilities Investing Corporation, and
Cowan & Dengler (In c.).
Charles Beecher Warren, D etroit; director, Guardian Detroit Union Group
(In c.). National Bank of Commerce, Union Trust Co., and W arren, Hill &
Hamblen.
Arthur T. W aterfall, D etroit; director, Union Trust C o .; capitalist; president
R edford Development Corporation and O’Donnell Land C o .; vice president and
B R A N C H , C H A IN , AND GROUP B A N K IN G
1119
director, Farfall Industries ( Inc.) and Parker Auto Sales C orporation; and
director, Stout Air Services.
Dudley E. Waters, Grand Rapids; director, Guardian Detroit Union Group
(I n c .); chairman and director, Grand Rapids National B ank; vice president
and director, Union Joint Stock Land Bank, D etroit; director, Detroit Creamery
C o .; president and director, Klingman Furniture Co., Hackley-Phelps-Bonnell
Co., and Furniture Exhibition Building C o .; vice president and director, Michi
gan Bell Telephone Co., Hayes Body Corporation, and Grand Rapids Creamery
C o .; and director, Grand Rapids Railway Co.
Dudley H. Waters, Grand R ap ids; director Grand Rapids National Bank.
W. Lloyd Webster, D etroit; vice president, cashier, and director Jefferson
Savings Bank, Grosse Pointe Park, director Lochmoor State Bank, treasurer
and director Stanley Furnace Corporation.
Louis A. Weil, Port H u ron ; vice president and director Federal Commercial
& Savings Bank, vice president and treasurer Times-Herald Co.
Fred J. Weiss, F lint; director Union Industrial Bank, Union Industrial
Trust Co.
Arthur E. Wells, Grand R ap ids; secretary and director Grand Rapids
Trust Co.
Charles E. Wetherald, F lin t; director Union Industrial Bank, Union Indus
trial Trust Co., assistant manufacturing manager Chevrolet Motor Co., director
Flint Citizens Loan Co.
W. A. Wheeler, D etroit; director Michigan Industrial Bank, secretary Paige
Sales Co.
Charles E. White, N iles; vice president and director City National Bank &
Trust Co.
Stuart B. White, Niles: director City National Bank & Trust Co.
James T. Whitehead, D e tro it; chairman and director Highland Park State
Bank, director Guardian Detroit Bank, Highland Park Trust Co., Bank of
Dearborn, president Whitehead & Kales, Kales Realty Co., director Wider
W oodward Land Co.
Justin R. Whiting, Jackson: director National Union Bank & Trust Co.,
counsel and director Mi chigan Electric Shares Corporation and affiliated com
panies, Frost Gear & Forge Co., Riverside Forge & Machine Co.
Holland J. Whiting, F lin t; director Union Industrial Bank, plant manager
Fisher Body Corporation.
Matthew B. Whittlesey, Detroit; director Union Trust Co., president Detroit
& Marquette Land Co., director National Grocer Co., Michigan Fire and Marine
Insurance Co., governor Detroit Stock Exchange.
Rollin A. Wilbur, Cleveland, O h io; director Ohio-Pennsyl vania Joint Stock
Land Bank, director Central National Bank, vice president and director The
Herrick Co., president and director Sun Investing Co., New York C ity ; director
The Crawford Realty Co.
Clarence E. W ilcox, D e tro it; director Highland Park State B an k ; Highland
Park Trust Co., Bank of Dearborn, corporation counsel for the City of Detroit*
Anderson, Wilcox, Lacy & Lawson, trustee Children’s Fund of Michigan, vice
president Kales Stamping Co.
Herbert R. Wilkin, Flint, executive vice president, cashier, and director
Union Industrial Bank.
Herbert J. Williams, D etroit; director Jefferson Savings Bank, Grosse Pointe
Park, president Dautrick Co., president and treasurer Herbert J. Williams
(Inc.)
William J. Willson, Port Huron; director First National Bank & Trust Co..
real estate.
H. C. Wilmarth, Grand Rapids ; director Grand Rapids National Bank, seeretary-treasurer and director Grand Rapids Store Equipment Corporation, secre
tary and director, Tri-Art Printing Co., vice president and director, the Measuregraph Co., St. Louis, Mo.
Lewis T. Willmarth, Grand R ap ids; director, Grand Rapids Trust Co.
C.
E. Wilson, D etroit; director, Union Trust Co., vice president, General
Motors Corporation, director, Bendix Aviation Corporation, director Fokker
Aircraft Corporation of America.
LeRoy S. Wilson, Port H u ron ; director, First National Bank & Trust Co.,
vice president, Wilson Ice Cream Co., subsidiary o f the Detroit Creamery Co.
William Robert Wilson, D etroit; director, Bank of Detroit, director, Guard
ian Trust Co., chairman, Copeland Products Co., chairman, Great Lakes Air
1120
BRANCH, CHAIN, AND GROUP BANKING
craft Corporation, president, Allied Motor Industries (In c.), chairman, Ameri
can Cirrus Engines (In c.).
John G. Windiate, Flint; director, Union Industrial Bank, Union Industrial
Trust Co., Mount Morris State Bank, treasurer, Windiate-Pierce-Davison Co.,
vice president and director, Flint Mortgage Co., Guaranty Title & Mortgage Co.,
president, Mount Morris Building Co.
Dallas E. Winslow, F lint; director, Union Industrial Bank, Union Industrial
Trust Co., secretary-treasurer General Parts Corporation, president, Dallas E.
Winslow (In c.).
Benjamin W olf, Grand R apids; director, Grand Rapids Trust Co., secretary
Northland Lumber Co.
James P. Wood, Cleveland, O h io; director, Ohio-Pennsylvania Joint Stock
Land Bank.
Harvey T. Woodfield, Jackson; director, National Union Bank & Trust Co.,
secretary-treasurer and general manager, Hartwick-Woodfleld Co., secretary
W ildwood Apartment Co.
•Clarkson C. Wormer, jr., D etroit; director Guardian Detroit Bank, director
Guardian Trust Co., president Wormer & Moore.
James T. Wylie, Saginaw ; director Second National Bank & Trust Co., presi
dent Bliss & Van Auken Lumber Co., director Batchelor Timber Co.
W. H. Yeasting, Cleveland, O h io; director Ohio-Pennsylvania Joint Stock Land
Bank, president the Commercial Savings Bank & Trust Co., Toledo, Ohio, direc
tor State Savings Bank, W oodville, Ohio, director Morris Plan Bank, Toledo,
Ohio, director National Bank of Port Clinton, Port Clinton, Ohio, president the
Commercial Building Co., Toledo, Ohio, president State Savings Bank, Maumee,
Ohio, treasurer Toledo Travelers L ife Insurance Co., Toledo, Ohio, trustee
Flower Hospital, Toledo, Ohio.
George B. Yerkes, D etroit; vice president and director Michigan Industrial
Bank, Universal Products Co., president Burton Building Co., vice president
Palmer-Woods Co., director Eureka Vacuum Cleaner Co., director HousemanSpitzley Corporation, director Chester Heights Realty Co., director Burton
Abstract & Title Co., director C. E. Jamieson & Co.
Mark V. Yost, T renton; director Trenton State Bank.
L. A. Young, D e tro it; director Union Trust Co., director National Bank of
Commerce, president and director L. A. Young Spring & W ire Corporation,
L. A. Young Co., Lay Improvement Corporation, Tiffany Stahl Products (In c.),
L. A. Young Investment Co., Southwick Young Corporation, Star Service
Hanger Co.
Smith G. Young, Lansing; director Capital National Bank, president Young
Bros. Realty Co., Young Bros. & Daley, the Ballantine Co., Lansing Warehouse
Co., Community Land Co., director Lansing Community Hotel Corporation.
The C h a ir m a n . I want to compliment you, Mr. Lord, on your
presentation of the case to the committee. I think it covers the situa
tion quite thoroughly.
Mr. Luce, do you desire to ask any questions ?
Mr. L u c e . Just a few.
A paragraph on page 17 attracts my attention. It is about twothirds of the way down the page:
The chairman suggested that it was entirely possible that certain recom
mended policies might be applicable to certain member-unit institutions and
obviously applicable to others.
Would you go into that a little further to give us some illustrations
of certain policies?
Mr. L o r d . Mr. Luce, the average city bank loans an individual on
an unsecured basis very rarely. The country bank must do it. There
is an example of a policy which would apply in Detroit which would
not apply in a smaller community.
Mr. L u c e . Would that extend to the charging of different rates of
discount ?
Mr. L o r d . Our unit banks determine their rates and other policies
for themselves. We have never attempted to direct them as to rates.
They fix them themselves as though they were unit banks.
BRANCH, CHAIN, AND GROUP BANKING
1121
Mr. L uce . Would not the system of branch banking present a dif
ferent situation?
Mr. L ord. I think it would. I think branch banking would mate
rially reduce the rates of interest charges in the smaller communities.
In our own group we have no very small communities.
Mr. L u c e . Then we will set that down on the credit side for branch
banking ?
Mr. L ord. Yes, sir.
Mr. L uce . Is the same statement applicable to the rate of interest
paid to depositors on balances ?
Mr. L ord. In our group we have some banks that pay 4 per cent
on savings and some that pay only 3. We have never disturbed their
old-established rates. There are some cities known as 4 per cent
cities and some as 3 per cent cities, throughout Michigan.
Mr. L uce . Is there any justification for that difference?
M r. L ord. I th in k w here th ey are 4 per cent cities the custom ers, in
b orrow in g, p a y the difference.
Mr. L uce . I notice in the pamphlet, the annual report for 1929,
that there are listed, as a part of this organization, seven securities
companies. What is their function? That will be found on page 6
of the annual report.
Mr. L ord. Their function, Mr. Luce, is the purchase and sale of
investment securities. The reason there are so many is that some of
the existing units had their own securities company.
The Bank of Detroit had its securities company.
The Grand Rapids National Bank had its securities company.
The National Union Bank of Jackson had its securities company.
The First National Bank of Kalamazoo had its securities company.
W e have left those securities companies as small local institutions
tied into the parent institution.
Mr. L uce . Am I to understand that the securities institution has
no other function than to buy and sell bonds and securities?
Mr. L ord. Yes, sir.
Mr. L uce . And that covers corporation notes?
Mr. L ord. Y es, sir.
Mr. L uce . Is it not an economic waste to have seven different
organizations doing that?
Mr. L ord. I should say it is.
Mr. L uce . It has been alleged that securities companies affiliated
with banking institutions result at times in the purchase of— well, I
do not want to say “ questionably,” but less valuable securities than
would otherwise be bought, by reason of the fact that if offerings
are not taken up no more offerings are made. How about that ?
Mr. L ord. Applying it to our own group, Mr. Luce, we do not
force any of our securities offerings on any unit in the group. They
can either take them or reject them. There is no question of pressure
whatsoever brought upon them.
Mr. L uce . Supposing your group comes to the conclusion that
some industry or some locality is particularly promising in the way
of investment. Does this set-up warp their judgment at all in that
matter ?
100136—30— v o l 2,p t 9--- 8
1122
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. L ord. I do not think so, Mr. Luce. W e do not lend money to
our securities companies except on the same basis as outsiders; and,
in fact, I think we are a little bit harder boiled with them.
Mr. L uce . There is that possibility, however, that the judgment
may be biased in this or that direction?
Mr. L ord. There is that possibility.
Mr. L uce . There is the further criticism— and I am not advancing
these criticisms as indicating the amount of weight that I am attach
ing to them, but simply to fortify myself in answering questions—
the general criticism is (the one that arouses the most apprehension
among most of the Members of Congress and in certain parts of the
country) that both of these systems, group and branch banking, tend
to drain the money out of the smaller communities and take it
into the larger centers where more profit is to be made of its use.
How do you answer that?
Mr. L ord. I would answer that in this way, that we have several
cases where industries in such cities as Kalamazoo and Port Huron
must, at certain times of the year, borrow more money than all the
banks in those cities can give them. Instead of the Guardian Detroit
Union Group draining the funds from those cities, they are loaning
those industries money, rather than have them go to New York
or Chicago and centralize their business there.
Mr. L uce . W on’t you explain a bit about the mechanism of doing
that under a group system where you have maintained the individual
units? Supposing more money is needed in Kalamazoo, for in
stance : How is it secured— by recourse to a single bank in Detroit ?
Mr. L ord. By recourse, in this case, to the Guardian Detroit Bank.
W e have a loaning capacity, under the State banking laws, in the
Guardian Detroit Bank, of $1,600,000, which is more than any indus
try in Kalamazoo needs at one time.
Mr. L u ce . Frankly, to a layman, this looks like a cumbersome form
of Organization which would not stand the test of time. Do you
think you can hold out against branch banking?
Mr. L ord. W e have both branch and group banking, Mr. Luce.
W e have 72 branches within our group right now. I think we can
hold out, if we keep them as units, against branch banking.
Mr. L uce . It looks to an outsider as though branch banking is a
simpler way to meet the situation.
Mr. L ord. It is.
Mr. L uce . And, of course, the simpler and cheaper form, in the
long run, wins out. Is it possible that you may look upon group
banking as a step toward branch banking ?
Mr. L ord. I think it is.
Mr. L uce . That is all.
Mr. W ingo . I have been somewhat interested in the practical bene
fits of your set-up. As I gather, you have three different provisions
in your holding company, through which the benefits of your holding
company are extended to individual units; that is, your advisory and
your executive committee and operating committee. That is true,
is it?
Mr. L ord. Yes, sir.
Mr. W ingo . What do you understand are the benefits w hich your
set-up affords which can not be furnished by the individual unit
B R A N C H , C H A IN , AND GROUP B A N K IN G
1123
banker or which your set-up can afford to a greater degree, both in
volume and in safety?
Mr. L ord. A s against the unit bank?
Mr. W in go . Yes.
Mr. L o r d . I think the greatest example that we have had in our
experience of the benefit of a group organization came when 20 or 22
employees of the Union Industrial Bank at Flint stole a total of
$3,600,000 from that bank. We were fortunate in having as the
head of that bank Mr. Charles S. Mott, vice president of the General
Motors Corporation. Mr. Mott immediately put up the funds to take
care of that defalcation. Had he not done it, the group company
would have done it, The day after the defalcation was discovered,
we had 35 bank officers, tellers, and clerks in there running that bank,
and without such support that bank would probably have closed.
Mr. W i n g o . That was but a repetition of what has been done more
than once b y the Federal reserve b a n k at Kansas City in that ter
rito ry .
M r. L ord. The U n ion In dustrial o f F lin t is a State bank.
Mr. W ingo . Mr. Mott did take care o f it.
Mr. L ord. Yes.
Mr. W ingo . And he was the president o f a unit bank, and he took
care o f it.
M r. L ord. He was the chairm an o f the board.
Mr. W ingo . But he was the head (
Mr. L ord. Yes, sir.
Mr. W ingo . The responsible head of the institution. But what I
■was thinking about was a general benefit. Of course, the benefits of
a banking system are twofold: One is the service that is afforded to
the depositors and borrowers in the community in which it operates,
and the other is the means of profit to the stockholders. Now,
measured by that, do you think that your set-up affords a larger
measure and a greater degree of safety, both to the depositors and
to the borrower in the communities in which your units operate ?
Mr. L ord. Yes, sir.
Mr. W ingo . Aside from furnishing a larger reservoir of capital.
I am wondering if the benefits you have in mind include the ad
visory and operating group benefits.
Mr. L ord. I think they do.
Mr. W ingo . A s I understand, your advisory group in your holding
corporation, that is the group that gives direct study to the general
policies ?
Mr. L ord. Broad policies.
Mr. W ingo . Broad policies, not only of your own holding cor
poration, but the broad policies that shall aid and insure the security
and the prosperity of each unit in the group ?
Mr. L ord. Yes, sir.
Mr. W in go . And necessarily they have to consider the peculiar
problems that concern each unit bank?
M r. L ord. Yes, sir.
Mr. W ingo . And they, as well as the operating committee, have
to consider the operations of each unit; do they not ?
Mr. L ord. The advisory committee do not go into the detailed
operations of the separate units. That is done by the operating
committee.
1124
BRANCH, CHAIN, AND GROUP BANKING;
Mr. W in g o . You stated that your advisory committee concerned
itself only with the consideration of the broad questions which affect
the policy of the group as a whole. I interpreted that statement
to refer not to your holding corporation but to the individual units
that compose your group, and you used the word “ group.” It
concerns itself, then, with the broad questions which affect the policy
of each unit of your group ?
Mr. L ord. Yes, sir.
Mr. W ingo . You further stated that the executive committee is
limited in its activities to functioning in lieu of the board during
the intervals between regular quarterly meetings for the purpose of
what I was discussing with you, but there is no use to pursue that
further. In other words, it functions in the absence of your full
board.
Mr. L ord. W e have a board of 48 members, and it sometimes isdifficult to get 48 men together.
Mr. W ingo . In other words, in the absence of the board', it simply
performs the ordinary functions of an executive committee?
Mr. L ord. That is right.
Mr. W ingo . And it takes authority to act within the broad con
fines of the general, well-known policy ?
Mr. L ord. Yes, sir.
Mr. W ingo . And then you went on and said that the operating"
committee is intended to be the instrumentality to which the oper
ating heads of the various unit members bring their day-to-daj
operating problems. I presume, then, that your operating com
mittee is your real committee?
Mr. L ord. Yes, sir.
Mr. W in go . And your real agency whereby your local units and
your local communities are benefited by your organization, other
than through that reservoir of capital ?
Mr. L ord. Yes, sir.
Mr. W ingo . W e will just eliminate that broad benefit which you
claim through a larger reservoir of capital, and we will now speak
of the other benefits. I take it that the operating committee is the
one that really has the practical working out of the extension of
these benefits, and I am interested in how that can be demonstrated
as being true other than in theory, so I want to ask you this: You
say that they bring to that committee their day-to-day operating
problems; do you mean that they confine their advice, assistance^
direction and discussion with the local directors to the policies of
that local unit, or do they go into a discussion with them in order
to aid them and advise them in reference to the actual detailed
operations of the bank?
Mr. L ord. More the detailed operations, and, in explanation of'
that statement, one of the first things that the operating committee
undertook was to educate the unit banks as to a proper credit file
and investigation of credit. I f you have ever been in a country bank
and tried to find a credit file, you have probably found out that it
is usually on the cuff of the president of the bank, and when the
personnel changes, it is almost impossible for a new officer to have
a complete and satisfactory understanding of the demands of the
credit situation, and so they had a committee made up of various
members from the units, who studied the question of credit files,.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1125
form of unsecured notes, and form of collateral notes, and that
committee turned its recommendations in to the operating committee
and the units were given the privilege of accepting this information
and studying it, and I think most of them did.
Mr. W ingo . That is what you might call the mechanics of your
credit agency?
Mr. L ord. Yes, sir.
Mr. W in g o . In other words, advising them how they could main
tain accurate information, readily available, with reference to any
depositor or borrower ?
Mr. L ord. Yes, sir.
Mr. W ingo . Is that all? Do you not give any greater benefit?
Let us assume that here is a board of local directors that is dealing
with a local manufacturing concern, and a board of local directors
are not satisfied as to their judgment with reference to the line of
credit to give to that particular established manufacturing concern;
would your operating committee or your advisory committee confer
with your local board or with your local officers that are managing
the bank in fixing the amount of credit to be given to this manu
facturer^
Mr. L ord. I should say that the operating committee would secure
the information and data on that industry and on the particular
company, and it would be sent back to the local bank and the local
board of directors would then decide whether or not their bank
should lend this company money; and if so, how much.
Mr. W ingo . That is your hypothetical opinion. In actual experi
ence, has your operating committee ever rendered any such service
or assistance to a local unit ?
Mr. L ord. The operating committee as such has not, but our own
credit department has frequently done so for the unit.
Mr. W ingo . Here is the thought I had in mind: Here is your
active vice president, or your cashier, or maybe the whole board, in
some local bank that is considering whether or not they shall extend
a certain line of credit to, say, the A B C Stepladder Co., located in
their town. Do you know whether or not, in a case like that, the
local bank, either through its cashier or managing vice president or
other officer or its board, consults with your holding corporation, or
the advisory committee or the operating committee?
Mr. L ord. For the sake of speed I would say they would come
•direct to the Guardian Detroit Bank and its credit department.
Mr. W ingo . I am talking about your opinion about what might
happen; I am asking you whether or not you have any knowledge in
actual operation of such benefits as you contend in theory might
flow from your set-up to the local unit, whether or not such benefits
have been extended or such service has been rendered to them.
Mr. L ord. It has, many times.
Mr. W in go . Well, do you recall whether or not where a new busi
ness was being started the question came up whether or not this local
unit should undertake to meet their credit needs, or whether or not
they would undertake to send the request to a larger bank in the
parent bank city or somewhere else, or whether or not they would
undertake to act as their agents in procuring the larger line of credit
for them? Has such a situation as that, to your knowledge, prac
tically arisen and been passed upon by your group or organization
1126
B RA N CH , C H A IN , AND GROUP B A N K IN G
and, if so, has it been the advisory board or the operating committee
that passed on it and extended help ?
Mr. L ord. To my knowledge it has not happened in the case of a
new industry, but it has happened frequently in the case of estab
lished industries.
Mr. W ingo . What benefit is your operating committee to the local
cashier or the local loan committee, say, of your board in determin
ing whether or not the line of credit that they already had extended
or the line of credit that they contemplate extending to a given
customer is wise?
Mr. L ord. The operating committee is not necessarily made up of
credit experts. I f the question came up of the credit of a corpora
tion, it would immediately be referred to the credit department either
in the Guardian Detroit Bank or the National Bank of Commerce
or the Bank of Detroit, or all of them, to find out and assemble all
available information on that corporation. It would be referred
immediately to credit experts rather than to operating men.
Mr. W ingo . I do not know whether I have made myself clear.
I am not trying to get into any argument with you, but you have
given the theory and I want the answer, if you have any as a result
of your practical experience. Here is a little unit bank in one of
your communities, and here is a proposed and particular loan of a
particular borrower; do you know whether or not that bank has ever
had the practical benefit of the assistance of the holding company
on any such particular loan?
Mr. L ord. They have had the practical benefit and assistance of
other members of the group on those loans.
Mr. W in go . I am not talking about a particular industry, such as
the automobile industry, or the plow industry, as to whether it is
prosperous or not, but what I am talking about is this: When Bill
Jones comes into the local bank, has the question of Bill Jones’s loan
and whether it is wTise or unwise ever been considered at all by any
part of your holding company ?
Mr. L ord. There is a paper company in Kalamazoo that has need
at different times in the year for as much as half a million dollars
or more in money, and it comes to one of our units, the First Na
tional Bank & Trust Co. That bank has a loaning limit of less than
$125,000, and we have loaned this paper company $250,000 for the
benefit of our unit in Kalamazoo.
Mr. W ingo . You say “ we 55?
Mr. L ord. The Guardian Detroit Bank.
Mr. W in go . But it is not your holding corporation?
Mr. L ord. No; the holding company is not in the banking business.
Mr. W ingo . Here is what I am trying to find out: In actual
operation— not in theory— what practical benefit is there here to
strengthen the local unit bank, by advice, say, in particular cases—
and not in connection with general credit policies or the maintenance
of a credit file but in actual everyday operation— that either makes
or breaks a bank or determines the extent to which it will serve the
community in which it is operating? In other words, wherein does
your concern in actual practice help the local unit; and is that help
in actual practice, according to your experience and not your theory,
extended through the advisory committee or through the operating
committee?
B R A N C H , C H A IN , AND GROUP B AN K IN G
1127
Mr. L ord. What is your question ?
Mr. W in go . Here is what I am trying to set a t: I want you to
forget the theory; I want your experience. Has your holding cor
poration ever been of any practical benefit to your local unit bank in
exercising its judgment and passing upon any particular loan?
Mr. L ord. It has been of very considerable benefit in handling for
the local banks, through other members in the group, loans for an
amount larger than that which the local bank could handle.
Mr. W ingo . I see. Do you do that through your operating com
mittee or advisory committee ?
Mr. L ord. That goes through another unit in the group. You
asked about the benefits; if the Kalamazoo bank were not a member
of the Guardian Detroit Union Group, the Guardian Detroit Bank
would feel no obligation whatever to take the excess amount of this
paper in.
Mr. W ingo . But it would if it were a correspondent, would it not?
Mr. L ord. Not necessarily. It might take it if it were a corre
spondent, but it would be under no obligation to do so.
Mr. W ingo . My little touch with a few banks has shown me that
sometimes there are correspondents that are competing for business
of that kind which comes from the local banks.
Mr. L ord. But the first duty of the metropolitan bank is to its own
customers.
Mr. W in go . Then that operation does not go through your hold
ing company ?
Mr. L ord. N o , sir. The holding company is not in the b a n k in g
business.
Mr. W ingo . Your thought is that by reason of the fact that both
of them are controlled by your holding corporation, naturally one of
them goes to the other when it wants a larger loan handled than
the smaller bank can handle ?
Mr. L ord. A request for the handling of a loan might come to me
as president of the holding corporation. I happen also to be presi
dent of the Guardian Detroit Bank. It goes to the holding corpor
ation in that way, but it ends up in one of the unit banks, because
the holding corporation does not lend money. It is not in the bank
ing business; it is merely a vehicle by which these banks in the group
are gathered in association together.
Mr. W ingo . S o that is the service that your corporation has
rendered where the local unit bank had an application for a larger
line of credit than it was permitted to handle. But let us take
a situation where the local bank is permitted to handle the loan.
Let us say that I am located in one of these small communities
where you have the unit banks, and that I am a customer of that
unit bank and I walk up and ask for a loan of $10,000, which is
within the limit of that bank. The only question to be determined
is whether or not it is safe, whether or not they should give me that
accommodation. In your experience, has your holding corporation
ever given that local unit any benefit or assistance in determining
the course of the local bank in that situation ?
Mr. L ord. The local bank would make its own loan; make its own
decision on the loan.
Mr. W ingo . W e have been told and we have found by observation
and some of us by experience that local banks are wrecked through
1128
BRANCH, CHAIN, AND GROUP BANKING
improvident loans and not through corrupt practices or fraud. Now,
your set-up offers no protection whatever to the local community
against the wrecking of a unit bank by improvident loans, does it?
Mr. L ord. Yes; it does. W e have two examinations a year.
Mr. W ingo . The presumption is that the examining authorities
are efficient; that is a presumption of law, as you know, but, of
course, they are not, and the same presumption of efficiency goes to
your examiners, but in practice you will find that your examinations
will sometimes fail and not be 100 per cent efficient. However, aside
from that examining supervision, there is nothing in your set-up
that will give any assistance to the local community against the
danger of it being injured by the failure of a bank by reason of im
provident loans, is there?
Mr. L ord. The holding company does not guarantee the deposits
of the local banks.
Mr. W ingo . That is not my question.
Mr. L ord. H ow can we give other assistance except management
assistance and advice as to the amount that they should loan on real
estate or on other class of security?
Mr. W ingo . You just said that you did not give them any assist
ance other than on the broad general policies, that on the individual
loans you give them absolutely no assistance. You just said that
you did not.
Mr. L ord. The examinations point out the poor loans, just as the
national bank examination points them out, and the group company,
through its examining department, follow the criticized loans of
their own report to see that they are taken care of.
M
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s u p e r v is e s
t h a t ,
th e
o p e r a tin g
c o m
m
itte e
o r
th e
c o m m itte e ?
Mr. L ord. An officer of the group company, Mr. Patterson.
Mr. W in g o . Neither of the committees exercises control over him?
Mr. L ord. He is accountable only to the board of directors.
Mr. W ingo . Y ou have a more cumbersome set-up than I thought
you had.
Now, you say that you are absolutely not engaged in the banking
business ?
M
r .
L o r d .
N o , s ir .
Mr. W ingo . Y ou have nothing to do with the operation of a localunit bank except as to the broad policies, broad advice, and the in
quisitorial and supervisory powers over your examiners?
Mr. L ord. Yes, sir.
The C h a ir m a n . Y ou are speaking now of the holding company?
Mr. W in g o . O f the holding company, yes.
That brings me down to this question: You were saying that you
were not doing a banking business, that you are simply a stock
holding company?
Mr. L ord. Yes, sir.
Mr. W in g o . Then what is the justification for all of the expense
o f this extensive set-up, if you do nothing more than to give broad
general advice and have these examinations?
Mr. L ord. There is no additional expense except the expense of
examination and the license tax of our corporation.
Mr. W in g o . Do you not have any employees of your operating
committee ?
B R A N C H , C H A IN , AND GROUP B AN K IN G
1129
Mr. L ord. Outside of Mr. Patterson and his examining corps and
the secretary of the company there are no salaries paid by the group
company.
Mr. W in g o . Y ou have no clerical force for the operating company?
Mr. L ord. N o, sir. The talent that makes up the operating com
mittee is contributed by the various units, and they are paid by
their own institutions. They are not drawing a salary from the
holding company.
Mr. W ingo . Then your operating committee does not have any
unit of operation, with a stenographer, say, and a file, or anything
else; it is just made up of these different gentlemen who are the
heads of your larger banks, and they get together at intervals and
discuss the situation ? Is that what your operating committee is ?
Mr. L ord. Putting it broadly, it is more or less of an educational
committee to bring to the units the best practice, the best methods,
both as to operations and as to the acquisition of business, and ques
tions of investment of trust funds, questions as to income taxes, per
sonal and property taxes, and the operation of the buildings owned
by the banks. It is more of an advisory committee.
# Mr. W ingo . I am wondering how they do it. I f at any of these
little gatherings a question of income-tax liability comes up, you
refer that to an attorney, do you not ?
Mr. L ord. I was speaking of the make-up of the return.
Mr. W ingo . All right. Do you furnish employees to help the
local unit banks in making up their returns ?
Mr. L ord. Yes; Mr. Patterson’s department, or the comptroller of
one of the banks.
Mr. W ingo . But Mr. Patterson’s department is a department of
the holding company, is it not ?
Mr. L ord. That is correct.
Mr. W ingo . And it must have some stenographers and files?
Mr. L ord. Yes.
Mr. W ingo . S o that you do have some expense there, do you not?
Mr. L ord. Yes.
Mr. W ingo . Y ou are very careful to keep yourself in a position of
not doing a banking business— I refer to your holding company?
Mr. L ord. We do not have the right under our charter to do it.
Mr. W in g o . I am wondering if there is anything else besides that.
Have you any other reasons why in the statement which you read
you were so careful to avoid any suggestion that you are engaged
in the banking business? Is it because you do not want to violate
the corporation laws of Michigan? Is that the sole reason?
Mr. L ord. Under the laws of Michigan, state-wide branch banking
is not permitted, and our corporation was organized solely for the
purpose of owning the capital stock of banks and trust companies
and other corporations, and we propose and expect to live within the
powers of our charter.
Mr. W ingo . I notice you have the opinion of the Attorney General
that you are not performing any of the functions of a bank. Have
you any other legal opinion as to the legal status of a holding corpo
ration such as yours?
Mr. L ord. We, of course, had our own counsel’s opinion before we
went into it.
Mr. W in go . Y ou are not an attorney yourself, are you?
1130
B R A N C H , C H A IN , AND GROUP B AN K IN G
Mr. L ord. N o, sir.
Mr. W in g o . And I assume yon do not know whether he has any
further opinions, but the real test, you can understand, as a layman,
is not what you say you are but whether in reality you discharge any
of the functions of banking.
Mr. L ord. Yes, sir.
Mr. W ingo . Your idea of the functions of banking is the everyday
routine such as the discount of notes, the paying of checks, and such
as that. The General Motors Corporation is not in the motor-car
business, according to your theory, is it ?
Mr. L ord. I do not recall the exact corporate set-up. They have
several units.
Mr. W in go . The General Motors Co., according to my under
standing— and if I am wrong in this there are gentlemen here who
will correct me— is a holding corporation that controls different cor
porations, like the Buick Co., and that Buick Co. with its own set-up
engages in manufacturing. So, according to your theory, the Gen
eral Motors Co. itself is not engaged in the manufacturing of auto
mobiles.
Mr. L ord. I think that is correct.
Mr. W in g o . It is purely a holding corporation?
Mr. L ord. I think that is correct.
Mr. W in g o . It is no more engaged in the motor-car business than
your corporation is engaged in the banking business. Do you not
think that that would be news to Mr. Raskob and these other gentle
men, that they are not in the motor-car business ?
Mr. L ord. I do not believe that the United States Steel Corpora
tion is in the steel business.
Mr. W ingo . In other words, according to your theory, taking
the banking business, the motor-car business, the steel business, and
the dairy business— and, taking the Southern Dairy, I think they
have a holding corporation— none of them is engaged in business
excepting as holding and controlling and directing? Is not the
greater part of the function of a bank the directing of that bank
by the directors and the directing officers? They are the ones that
engage in banking in my town; it is not the bookkeeper; it is not
the paying teller; it is not the note teller. We, the officers and the
directors, in my part of the country, are under the delusion or
illusion that we are engaged in the banking business, not these em
ployees of ours; and for all practical purposes your unit banks are
nothing but employees of your holding corporation in carrying out
a general policy in actual banking in their particular communities.
Mr. L ord. The unit banks are no more employees of the holding
corporation in our group than any unit bank is an employee of its
stockholders.
Mr. W in go . S o they are absolutely free to do as they please?
Mr. L ord. Absolutely. I f you lived in Kalamazoo and had done
your business with the First National Bank & Trust Co. of Kalama
zoo, so far as the conduct of your business before and after the
acquisition of the stock of that bank there was concerned, you would
not know that the group existed.
Mr. W in go . W h a t is your definition of a trade area?
B RA N CH , C H A IN , AND GROUP B A N K IN G
1131
Mr. L ord. I have covered it in this way:
W e feel at this time that group or branch banking should, so far as our own
activities are concerned, be confined to an area which, by the very nature of its
business and industries, is more or Jess dependent upon Detroit.
Mr. W ingo . Take the case of a wholesale dry-goods company at
Kansas City; what is its trade area? Would you regard Texas as
its trade area? I think Texas is its biggest area of distribution.
Mr. L ord. I should say that the trade* area of such a concern should
be where the major part of its business is transacted. I do not know
whether a wholesale dry-goods business in Kansas City would go into
Texas, but I should say, offhand, that Dallas would take a piece out
of that trade area.
Mr. W ingo . You have other people right in Detroit to take some
thing out of your trade area inside the city; that would not be the
test as to whether you had an absolute monopoly?
Mr. L ord. N o ; but, following your statement, the trade area of
Detroit is the world, because their motor cars are shipped all over
the world.
Mr. W ingo . That is the point I wanted to get at. A trade area
is rather a difficult thing to define, is it not ?
Mr. L ord. I think it is very difficult,
Mr. W ingo . Y ou could not define it in a statute, could you? It
would necessarily have to be left to a supervisory board or an
official?
Mr. L ord. I would think so, unless you, instead of designating
trade areas, want to take the Federal reserve districts. I think it
must be made flexible and left to a supervisory board.
Mr. W ingo . What would you do with a district like mine? Parts
of my district is or was in a Federal reserve district different from
that in which most of the rest of my State is located, as well as my
capital city.
Mr. L ord. I think there might have to be permission to overlap.
Mr. W ingo . My district runs right along the State line, with the
State line as an arbitrary dividing line. You see where you get.
You have never heard or any business— banking or dry goods or
groceries or anything else— that followed arbitrary political lines ?
Mr. L ord. No.
(Thereupon the committee went into executive session, to resume
its hearing at 2.30 o’clock p. m.)
AFTER
RECESS
The hearing was resumed at 2.80 o’clock, p. m., at the conclusion of
the recess.
The A cting C h a ir m a n (Mr. Strong in the chair). The committee
will come to order.
STATEMENT OF ROBERT 0. LORD— Resumed
Mr. S trong . You stated that the laws of your State do not permit
State-wide branch banking?
Mr. L ord. Yes, sir.
1132
BRANCH, CHAIN, AND GROUP BANKING
Mr. S trong . Is that the reason you organized the holding com
pany ?
Mr. L ord. Yes, sir.
Mr. S trong . Then you purposely intended to do indirectly what
the law prohibited your doing directly, to quote a gentleman here
present ?
Mr. L ord. I do not think so.
Mr. S trong . Well, your laws prohibited it and you say you created
the group to evade the law. Now, is not that a correct statement ?
Mr. L ord. W e created this holding company and gathered together
this aggregation of banks which serve or feed into Detroit.
Mr. S trong . But you said you did it because you can not indulge
in State-wide branch banking?
Mr. L ord. I also stated that if we could do state-wide branch
banking, I doubt if all the units would be taken in as branch banks.
Mr. S trong . But you got up this organization because you can not
indulge in state-wide branch banking?
Mr. L ord. W e got it up in order to own the Highland Park State
Bank, and we had to do that to have a holding company.
Mr. S trong . In order to evade the law of your State. How many
banks were in the original group?
Mr. L ord. Our original group before there was a holding com
pany constituted the Guardian Detroit Bank, the Guardian Trust
Co., and a securities company, the Guardian Detroit Co.
Mr. S trong . Three?
Mr. L ord. Yes, sir.
Mr. S trong . And you exchanged your stock for the stock of the
holding company ?
Mr. L ord. Yes, sir.
Mr. S trong . Who passed upon that exchange of stock ?
Mr. L ord. Our counsel, Mr. Henry E. Bodman.
Mr. S trong . I mean the value of one stock for the other— who
passed upon the number of shares of stock of the holding company
you would give for the stock transferred to it?
Mr. L ord. Are you speaking of the original group ?
Mr. S trong . I am speaking of the original group; yes, sir.
Mr. L ord. The board of directors of the banks.
Mr. S trong . When you take in another bank, who passes upon
that ?
Mr. L ord. The board of directors of their bank and the board of
directors of the group company.
Mr. S trong . They do not have an opportunity to pass upon the
number of shares they shall receive for the number of shares they
are to contribute to the holding company from the banks without
the consent of your group, then ?
Mr. L ord. N o, sir; it is by mutual agreement. However, no stock
holder, by any action of the board of directors in the unit bank, can
be forced to exchange his stock. It is a purely voluntary act on
the part of the stockholders.
Mr. S trong . They can not be forced ?
Mr. L ord. No, sir; he can retain the stock.
Mr. S trong . And not take stock in the holding company?
Mr. L ord. Absolutely.
BRANCH, CHAIN, AND GROUP BANKING
1133
Mr. S trong . H ow does he become a member of the group ?
Mr. L ord. By consent of the stockholder, voluntarily. In the
case of the Bank of Detroit, there have been 12 shares never ex
changed.
In the case of the Grand Rapids National Bank, there were 25
shares.
In the case of the First National Bank & Trust Co., of Kalamazoo,
there are 109 shares outstanding.
Mr. S trong . But the majority of the shares were taken in?
Mr. L ord. Yes, sir.
Mr. S trong . And if you control the majority of the shares, you
control the bank?
Mr. L ord. But the stockholder has the same rights as before, if he
does not want to exchange the stock.
Mr. S trong . Even if he does not want to exchange the stock,
enough have exchanged the stock to make a majority and that is
control?
Mr. L ord. Y es, sir.
Mr. S trong . Y ou do not need the odd shares?
Mr. L ord. That is correct.
Mr. S trong . What did you do to induce the other banks— how
many are in the group now?
Mr. L ord. Twenty-seven.
Mr. S trong . Have they any branches ?
Mr. L ord. Included in those 27 banks are 102 places of business.
That would leave 75 branches.
Mr. S trong . There are 102 banks or places for business in your
group ?
Mr. L ord. Yes, sirMr. S trong . What inducement was held out, if any, to get them
to join?
Mr. L ord. The offer of shares of the group company stock.
Mr. S trong . Are any banks ever coerced?
Mr. L ord. N o , sir.
Mr. S trong . The reason I am asking you these questions is
because I received a letter in the morning’s mail from the Minneap
olis Council of Agriculture. The writer says, in referring to a like
statement made by Mr. Wakefield and Mr. Decker:
It is the opinion of tlie writer that if an investigation was made and an
examination held into the methods used by the First National Bank and the
Northwestern National Bank in acquiring control of various banks now consti
tuting their group, that red-blooded American citizens, having pride in the
honesty of the banking institutions o f the country, would bow their heads in
shame.
Mr. W ingo . What is the gentlemon reading from?
Mr. S trong . I am reading from a statement, something sent to
the committee by the Minneapolis Council of Agriculture.
This indicates that the group banks of Minneapolis and St. Paul
forced some of the smaller banks in their territory to join their
system. Was anything of that kind done in your group?
Mr. L ord. N o, sir.
Mr. S trong . Mr. Wingo was asking you a line of questions, and
your answers indicated you did not think the holding company was
in the banking business?
1134
M
r .
B RA N CH , C H A IN , AND GROUP B AN K IN G
L o r d .
N o , s i r ;
I
d o
n o t.
Mr. S trong . I f any investments were made by any units in your
group that caused the examiner to report that they were irregular
and not in line with proper banking, would the officers of your group
be called upon to explain them ?
Mr. L ord. I would say not. The officers of the particular institu
tion would be called upon to explain. No officer of our group has
ever been called on to explain or discuss, by a State or National
bank examiner, any report.
Mr. S trong . Have some of the examiners called upon your banks
to make explanations of loans and investments?
Mr. L ord. Of our unit banks ?
Mr. S trong . Yes.
Mr. L ord. Yes, sir; certainly.
Mr. S trong But your holding company took no part?
M
r .
L o r d .
W
e
w e r e
n o t
c a lle d
u p o n
b y
th e
e x a m
in e r .
Mr. S trong . And they took no part ?
M
r .
L o r d .
N
o
,
s ir .
Mr. S trong . But you could imagine there might be cases?
Mr. L ord. I f a serious situation arose, I imagine the group com
pany might be called upon to help.
Mr. S trong . Why, if they were not in the banking business, could
they be called upon ?
Mr. L ord. Iii time of trouble. I think every agency should be
called in to help.
Mr. S trong . An agency not connected with the banking business
would not be called upon?
Mr. L ord. Frequently other banks are called upon to help when a
bank is failing.
Mr. S trong . They might be called upon to take some paper and
put up some money, but they are not called upon for an explanation
of the loans and investments ?
Mr. L ord. That is correct.
Mr. S trong . But you think your group might be so called upon ?
Mr. L ord. To explain investments ?
Mr. S trong . Yes.
Mr. L ord. N o , sir; I think the local directorates are responsible.
Mr. S trong . But you wTill admit that the Comptroller of the Cur
rency might ask your group for an explanation?
Mr. L ord. I do not know what he might do, but we would be glnd
to help out if we could.
The C h a ir m a n . Is there any difference between your group, as a
stockholder, and the individual as a stockholder?
Mr. L ord. Not the slightest that I can see.
The C h a ir m a n . The same relationship exists between your group
as exists between the stockholder and any bank ?
Mr. L ord. Yes, sir; absolutely.
Mr. S trong . But there is this difference, that the group holds
control of the shares of the banks ?
Mr. L ord. Yes, sir; that is true.
Mr. S trong . And can dominate them?
Mr. L ord. Yes, sir; can dominate them.
Mr. S trong . You still think they are not in the banking business?
Mr. L ord. No, sir.
BRANCH ,
c h a in
,
and
group
b a n k in g
1135
Mr. W ingo . I forgot to ask you one question. Mr. Strong, will
you ask him this question at this point— what business do you con
tend you are in; what classification would you give ity if you had to
answer some of these census or other comparable queries?
Mr. L ord. We are operating under the general corporation law7s
of the State of Michigan as a holding company.
Mr. F e n n . There are some of us, Mr. Chairman, who are waiting
to ask questions.
Mr. W ingo . I will withdraw the other question I had in mind.
Mr. S trong . D o you also accept in your group only, such banks as
are making money ?
Mr. L ord. Up to date, we have accepted only such banks as are
making money. W e have had innumerable banks come to us and
ask to be taken into the group.
Mr. S trong . Then, your group banking does not provide a way to
do away with the w7eak banks of the country. The statement has
been made here that branch banking will eliminate the weak banks
of the country. Your group banking does not propose to do that?
Mr. L ord. I f all of the banks of the State of Michigan were in
strong groups or strong banks, I would say that the weak banks
would be eliminated.
Mr. S trong . But you will not let the weak banks into your organi
zation. That being so, how are you going to take care of the weak
ones? You say you are only taking in those that make money?
Mr. L ord. That is correct.
Mr. S trong . And the weak bank has no chance to get into the
system ?
Mr. L ord. Unless we want to take them in.
Mr. S trong . That argument, then, does not apply to group bank
ing— that it will help the weak bank ?
Mr. L ord. It applies to the community in which we are operating
and to the institutions we own. W e can not own all of the banks.
Mr. S trong . Y ou say you did not admit any except those that
make money. The weak banks have no haven of refuge in your
group ?
Mr. L ord. Do you think they should have?
Mr. S trong . D o you n ot th in k som e system should be devised
w here the peop le in the cou n try should be served w ith b a n k in g fa c ili
ties and should h ave such facilities?
Mr. L ord. I do not think there should be any law requiring a
strong bank to take in a failing institution, whether a bank or other
wise.
Mr. S trong . Do you think we should allow banking to fall only
into the hands of the strong institutions and the weak banks be left
out in the cold so that there would be people with no banking
service ?
Mr. L ord. After all, in any kind of business, it is the survival of
the fittest and the weak ones will fail, whether they are in the auto
mobile business, in the dry goods business, or in the banking business.
Mr. S trong . Then you think there is no difference between the
Government’s charge of banking and the automobile business ?
Mr. L ord. So far as the weak and strong are- concerned.
Mr. S trong . Y ou think the Government ought to sit idly b y and
let you form strong groups and fail to take in the small comnmni-
1136
BRANCH, CHAIN, AND GROUP BANKING
ties of the country that need banking, and build up your groups,
and let the others fail ?
Mr. L ord. I think the Government should allow the strong groups
to go into communities where there are weak banks, so that the com
munities can do business with the strong banks.
Mr. S trong . Is there any one interfering with your taking over
the weak banks? You do not let them in your system.
Mr. L ord. W e do not want them.
Mr. S trong . Y ou control the clearing house in your city, do
you not?
Mr. L ord. Our group ?
Mr. S trong . Yes.
Mr. L ord. No, sir; the Detroit Bankers Co. have greater resources
than we.
Mr. S trong . Are they also a banking group ?
Mr. L ord. Yes, sir.
Mr. S trong . What are the little banks in the small communities
going to do if your groups control the banks in the city? They are
pretty nearly forced out of business, or have to join your group, are
they not ?
Mr. L ord. There are small independent banks in Detroit making
money.
Mr. S trong . But in the small communities, are they not em
barrassed because you control the banking in Detroit ?
Mr. L ord. N o , sir; the little bank would not get any business in
Detroit any way if they are out from Detroit, whether we have a
group or whether the Detroit Bankers Co. have a group.
Mr. S trong . You do not think the little bank out from Detroit
would be embarrassed in any way from the fact that, in Detroit and
in the other cities of your State, your different groups control the
banking business?
Mr. L ord. Not the slightest,
Mr. S trong . H ow many banks in this group of yours are branch
banks ?
Mr. L ord. D o you want me to read them or count them? The City
National Bank & Trust Co. of Battle Creek has 1 branch.
The National Bank of Commerce of Detroit has 20.
The Grand Rapids National Bank has 8.
The National Union Bank & Trust Co. of Jackson has 1.
The Capital National Bank of Lansing has 1. ^
The Second National Bank & Trust Co. of Saginaw has 1.
The Bank of Detroit, of Detroit, has 20.
The Union Industrial Bank of Flint has 9.
The Highland Park State Bank has 7.
The Federal Commercial & Savings Bank of Port Huron has 4.
The Union State Bank of Dearborn has 2.^
The Jefferson Savings Bank of Grosse Pointe has 1.
Mr. S tevenson . That totals 75
Mr. L ord. Yes, sir.
Mr. S trong . Are there any chain banks in your group?
Mr. L ord. H ow do you define a chain bank ?
Mr. S trong . Where one or two men own a bank. They may join
your group ?
B R A N C H , C H A IN , AND GROUP B A N K IN G
1137
Mr. L ord. N o, sir.
Mr. S trong . I think that is all.
The C h a ir m a n . Mr. Brand, it is your turn.
Mr. B r an d . I yield to Mr. Fenn.
Mr. F e n n . I have only one or two questions to ask. You said, Mr.
Lord, that Michigan did not allow branch banking?
Mr. L ord. Not state-wide but within the municipality.
Mr. F e n n . Yes. Now, you said to Mr. Strong, in reply to the
interrogatories he directed to you— it seemed to me your rather agreed
to his statement, as I listened to your answer— that you had formed
this group in order to evade the laws of the State of Michigan ?
Mr. L ord. I did not agree to that statement. He took it for
granted. We have never intended to evade that law.
Mr. F e n n . I took your answer the same as you have explained it.
Let me ask you a little about the stockholders of this organization
of yours. Is the stock in these banks which make up your associa
tion owned by the stockholders of the respective banks or owned by
the association?
Mr. L ord. Owned by the Guardian Detroit Union Group (Inc.),
except the directors’ qualifying shares.
Mr. F e n n . Just the directors’ qualifying shares?
Mr. L ord. Yes, sir.
Mr. F e n n . When you make an issue of stock— I understand you
are capitalized at $50,000,000, but you have issued $32,000,000------Mr. L ord. Between thirty and thirty-one million.
Mr. F e n n . In what way, if you see fit to issue that treasury stock
balance that is in your treasury— the unissued stock— how do you get
that out? Is that issued for the purpose of taking in other banks
as you see fit, or issued to the general public ?
Mr. L ord. It may be issued for the purpose of taking in other
banks, in which case, upon a three-fourths affirmative vote of the
board of directors of the group company, it can be so issued without
offering it to our stockholders.
I f it be issued for cash and the cash should be used for any other
purpose, or buying other banks for cash, then it is necessary for us
to offer the stock first to our own stockholders.
Mr. F e n n . By your own stockholders, do you mean individuals or
banks ?
Mr. L ord. Individuals.
Mr. F e n n . Then it does go to individuals?
Mr. L ord. Absolutely. I thought you were speaking of the unit
bands. The stock of the group company is owned largely by indi
viduals.
The C h a ir m a n . Y ou spoke this morning of the stockholders of
the holding group agreeing to the double liability.
Mr. L ord. Yes, sir; it is in the certificate.
The C h a ir m a n . S o when your group owns the stock of a national
bank, for instance, your holding group assumes the double liability
that is provided for?
Mr. L ord. It is n ot on ly in the certificate, b u t in the charter.
Mr. L etts . Not the holding group?
Mr. L ord. The holding company.
100136—30— v o l 2,p t 9--- 9
1138
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. L etts . I understand from this, your stockholder has a pro
rata liability, according to the liability for the entire holdings of the
holding company?
Mr. L ord. That is correct.
Mr. F e n n . May I pursue my interrogation, Judge Letts.
In your list of stockholders given, there is a schedule of percentages
and number of stockholders, we will say, of New York. I presume
that applies to New York City.
Mr. L ord. Yes, sir.
Mr. F e n n . And then there is the eastern part of the country, and
other sections. You have given it all very clearly in your history
there. So I take it that these are individual stockholders of the
group company?
Mr. L ord. Yes, sir.
Mr. F e n n . Then, can that stock be bought and sold on the ex
changes, or disposed of by the individual owner as he sees fit and
when he sees fit ?
Mr. L ord. A t any time.
Mr. F e n n . This is a little different from the northwestern and
the other banking group in Minneapolis. There the banks making up
that group, as I understood it, transferred their stock to the group
center, and the group center owned the thing, and there were no
private stockholders or personal stockholders or individual stock
holders. But in your case the individual stockholders own their stock
and can transfer or sell it or dispose of it as they see fit.
Mr. L ord. O f the group company, and the group company, in turn,
owns all or practically all of the stock of the unit banks.
Mr. F e n n . And gets it in that way ?
Mr. L ord. Yes, sir.
Mr. F e n n . What would be your course in case one of your banks
became unfortunate, either through bad investments or lack of proper
management, or for any other reason, and, in the phrase of the
street, fell down? What would you do in that case if you had a
bank of that kind that was going to smash or had gone to smash ?
Mr. L ord. The group company would put up cash to make it
good.
Mr. F e n n . Would put up the cash to make it good?
Mr. L ord. Yes, sir.
M
r .
F enn.
I s
t h a t
p r o v id e d
f o r
i n
y o u r
a r ti c le s
o f
in c o r p o r a tio n ?
Mr. L ord. It is not provided for, but that is the law of selfpreservation.
Mr. F e n n . I see that you have a couple of joint-stock land banks
in your group ownership.
Mr. L ord. Yes, sir.
Mr. F e n n . Are they subject to the same surveillance and supervi
sion that your other units are ?
Mr. L ord. They certainty are.
Mr. F e n n . H ow did you happen to go into the joint-stock land
banks ?
Mr. L ord. The Union Joint Stock Land Bank------Mr. F e n n . There is another bank of that name in Cleveland?
Mr. L ord. Yes, sir.
B R A N C H , C H A IN , AND GROUP B AN K IN G
1139
It was organized by the Union Trust Co. of the Detroit group.
That bank has been in existence for a great many years, and has been
operated and controlled by the same crowd.
Mr. F e n n . In this double liability of yours, does that apply to
State banks the same as national banks ?
Mr. L ord. Yes, sir.
Mr. F e n n . I s that the law of Michigan ?
Mr. L ord. Yes, sir.
Mr. F e n n . I ask that question because some States do not have
double liability for their State organizations.
Mr. L ord. Michigan has.
Mr. F e n n . I think that is all.
Mr. S tevenson . I only want to ask one or two questions along the
line Mr. Fenn was speaking about. When a bank of your group,
that he was asking about, goes bad, you say it is up to the group corpo
ration to make it good ? There is no legal obligation to make it good f
Mr. L ord. None except the double liability of a stockholder.
Mr. S tevenson . Any stockholder owes double liability %
Mr. L ord. Yes, sir.
Mr. S tevenson . In your argreement I understand that liability is
assumed by the stockholder in the holding company ?
Mr. L ord. Yes, sir.
Mr. S tevenson . Y ou take it out of the stockholder in the group
company and put it over in the till of the weak bank ?
Mr. L ord. Mr. Stevenson, before an assessment would be levied on
the stockholder of the group company, the resources of the group
company would be used.
Mr. S tevenson . O f course.
Mr. L ord. T o protect any failing bank.
Mr. S tevenson . At least you would go far enough to see if it was
necessary to levy an assessment ?
Mr. L ord. Yes, sir.
Mr. S tevenson . The assessment would be levied by the State au
thorities on the stockholders of the group company?
Mr. L ord. Yes, sir; or by the national authorities in the case of a
national bank.
Mr. S tevenson . Have you any authority for levying the assess
ment, or is it merely a matter of contract between the stockholder
and the group company ?
Mr. L ord. I should say it is a matter of contract with the stock
holder of the group company, inasmuch as that provision is a part
of the stockholder’s certificate.
Mr. S tevenson . It is part of the contract; yes, but it is purely a
contractual and not a statutory liability.
Mr. L ord. That is the way I understand it.
Mr. S tevenson . The liability on the holding company, however, is
a statutory liability in Michigan, as I understand it.
Mr. L ord. The holding company takes the place of the individual
stockholder and there is the further protection that the stockholder of
the holding company assumes that liability.
Mr. S tevenson . That is all.
Mr. W ingo . While I think of it, is there anything in the record
to show what State your corporation is incorporated under?
1140
B RA N CH , C H A IN , AND GROUP B A N K IN G
Mr. L ord. Under the laws of Michigan.
The C h a ir m a n . Mr. Beedy, you are next.
Mr. B eedy . Of course, I can not ask any questions, because I did
not hear the original statement.
The C h a ir m a n . Mr. Letts, you are next.
Mr. L etts . Mr. Lord, can you tell us how many banks you have in
the State of Michigan?
Mr. L ord. We have 27 banks and/or trust companies.
Mr. L etts . I do not mean your group.
Mr. L ord. H ow many there are altogether ?
Mr. L etts . Yes.
Mr. L ord. I can not answer that question.
Mr. L etts . Do you happen to know how many national banks
there are?
Mr. L ord. N o ; I do not know. I can give you the total resources,
but not the number of banks themselves.
Mr. L etts . Then tell me how many banks there are, State and
national, in the city of Detroit, including branches. How many
banking places or banking offices are there in the city of Detroit ?
Mr. L ord. I can not tell you that; they have been closing branches
so rapidly.
Mr. L etts . Y ou can approximate it, of course.
Mr. L ord. I should say that there are, including our own group,
between 250 and 275 places doing a banking business; probably
nearer 300.
Mr. L etts . H ow m any banks do y o u h ave in y ou r g ro u p in the
city o f D e tro it ?
Mr. L ord. We have the Guardian Detroit Bank, National Bank
of Commerce, Bank of Detroit, Michigan Industrial Bank, Union
Trust Co., and the Guardian Trust Co.; and the Guardian Trust Co.
and Lhiion Trust Co. have been consolidated into the Union Guard
ian Trust Co., a single institution.
Mr. L etts . Are there other banks there as large and as strong as
these ?
Mr. L ord. Yes, sir. In the metropolitan district of Detroit, the
Guardian Detroit Union group represents deposits of about $290,000,000; the Detroit bankers group represents deposits of approxi
mately $560,000,000; and miscellaneous banks represent deposits of
approximately $165,000,000.
Mr. L etts . I notice in your statement that on March 27 just past,
your group controlled 2 joint-stock land banks, 9 security com
panies, and 1 title guaranty company, as well as 2 building com
panies and 1 safety deposit company. Tell us what these security
companies are.
Mr. L ord. The security companies are the Bancdetroit Corpora
tion, which was a subsidiary of the Bank of Detroit, having a capi
tal stock of $1,000; the Guardian Detroit Co., which is a securities
company, having a capital stock of $5,000,000; the Guardian Holding
Co., which has a present capital of $1,000,000; Keene-Higbie & Co.,
having a capital of $1,000,000; Grand Rapids National Co., having a
capital of $40,000; Union & Peoples Co. of Jackson, with a capital
of $70,000; the F. N. B. Securities Co., Kalamazoo, with a capital of
$150,000; and the Guardian Detroit Co. of California, with a capital
of $10,000.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1141
Mr. L etts . Were all o f these security companies in existence at the
time your group was started?
Mr, L ord. Yes, sir.
Mr. L etts . Were they affiliated with some of these companies that
are now in your group?
Mr. L ord, They were all affiliated when our group wTas put
together.
Mr. L etts . With some one or other ?
Mr. L ord. With one or another.
Mr. L etts . What is the nature of the business done by these com
panies ?
Mr. L ord. The purchase and sale of bonds and investment stocks.
Mr. L etts . Now, coming to the title guaranty company, is that the
only title guaranty company in Detroit?
Mr. L ord. N o, sir.
Mr. L etts . H ow m any are there?
Mr. L ord. There are two.
Mr. L etts . I s this a strong company, or an old company ?
Mr. L ord. Yes, sir; it has been in business for quite a number
of years.
Mr. L etts . Y ou mentioned two building companies. What busi
ness do they engage in ?
Mr. L ord. Those corporations are merely corporations for the pur
pose of owning the bank buildings, which are office buildings.
Mr. L etts . They do not deal in real estate ?
M r. L ord. N o, sir.
Mr. L etts . I suppose that this safety-deposit company does the
kind of business that its name indicates?
Mr. L ord. Yes, sir.
Mr. L etts . D o you see a possibility of controlling many lines of
business that are not banking in nature?
Mr. L ord. I do not see any possibility of controlling them; no.
These securities companies are in business to buy and sell invest
ments.
Mr. L etts , I see on page 13 of your statement that you mention
as one of the advantages to be gained by the group system the fact
that the group provides contact with innumerable types of business
and cooperation in developing new business for clients.
Just what do you mean by that?
Mr. L ord. We have on the books of the Guardian Detroit Bank
a great many accounts of steel corporations all over the country.
They want contact with the manufacturer and the users of steel,
and we can give them that contact. W e can not sell their goods, but
we can open doors for them.
Mr. L etts . Can you close doors for them? That is the thing I
am interested in. Do you see any real danger that groups may close
the doors of industry?
Mr. L ord. N o , sir.
Mr. L etts . In other words, one of the fears that I have is that
the groups may become so strong that it may be practically impos
sible for men going single handed and alone to finance their affairs
unless they submit to the will of those that control the banking
policies of the community.
1142
B RA N CH , C H A IN , AND GROUP B A N K IN G
Mr. L ord. Mr. Letts, I do not know of any bank, in the years I
have been in them, that has not been willing to loan to an individual
or a corporation where that individual or corporation is entitled to
credit. A bank must prosper on service to its customers.
Mr. L etts . Is there such a thing as favoritism at times?
Mr. L ord. Not in our institutions.
Mr. L etts . Very often there is quite distinct rivalry between en
terprises in the same line of business, and it is quite conceivable
that one might prosper because of the favoritism that is extended
to him by those in control of banking, to the detriment of the other.
That is true; is it not ?
Mr. L ord. It is possible, but not probable. We can not in the
banking business take sides, favoring one customer as against
another, so long as our relationship with both customers has been
a satisfactory one.
Mr. L etts . In reading a prospectus of, I think, the Transamerica
Corporation, or perhaps it was a statement by the Los Angeles
Board of Trade in a report that they had made covering the state of
the operations of that corporation and its possibilities, it was said
that they would have the opportunity to divert large quantities
of business to their companies, and illustrated that by saying that
they could divert tremendous amounts of insurance to their insur
ance company, which is one of the industries that they further.
Do you see any danger in that policy ?
Mr. L ord. There might be, although I am not close enough to that
to know.
M r . L e t t s . Y o u h a v e
b e e n
in
e x is te n c e
a b o u t 10 m o n t h s ?
M
r .
L o r d .
A
s
a
g r o u p ; y e s .
L etts . A s a h o l d i n g c o m p a n y ?
Mr. L ord. Yes, sir.
Mr. L etts . Directing the policies of the banks under your control ?
Mr. L ord. Advising with the banks.
M
r .
M
r .
c e p te d
L e t t s .
Y e s ,
o f
c o u r s e ;
b u t
y o u
e x p e c t
t h a t
a d v ic e
to
b e
a c
?
Mr. L ord. It is not always accepted.
Mr. L etts . But it is natural that it would be ?
Mr. L ord. It is listened to.
Mr. L etts . Yes, of course; it ou ght to be.
Well, 10 months is not a very long time; and, yet, no doubt, be
cause of the success with which you have met, you are looking ahead.
Are you thinking of other possibilities than banking? Have you
ever considered the possibility of an insurance company— fire, life,
or accident?
Mr. L ord. W e have, and discarded it.
Mr. L etts . Why did you discard it?
Mr. L ord. Because it is quite apart from the banking business.
Mr. L etts . It was said in this report of the Los Angeles Board
of Trade that the Transamerica Corporation expected to handle realestate transactions in the State of California. I do not pretend to
quote from it, but I think that is the substance of it; and they do
have a company that depends upon commissions from the sale of
real estate and on making trades.
Have you thought of a possibility of that kind ?
B R A N C H , C H A IN , AND GROUP B A N K IN G
1143
Mr. L ord. W e have, and we felt that the outside broker can do
it better than we can when it conies to the sale of real estate, and
the only real estate we own (except our buildings) is what we may
have to take under foreclosure.
Mr. L etts . Is it your policy, then, to limit your operations to the
holding of bank stocks and the developing of banking policies ?
Mr. L ord. Yes, sir; so far as the group company is concerned.
Mr. L etts . I am speaking of the group company.
Mr. L ord. Yes, sir.
Mr. L etts . Y ou say that yours is a mixed condition, group and
branch ?
Mr. L ord. It is a group of branch banking institutions.
Mr. L etts . But not entirely ?
Mr. L ord. Not entirely; no. There are some without branches.
Mr. L etts . Now, I suppose that Detroit is the banking center of
your State?
Mr. L ord. Yes, sir.
Mr. L etts . And naturally you have an interest in the smaller
communities of the State; you would like to see the smaller com
munities provided with suitable banking facilities %
Mr. L ord. Yes, sir.
Mr. L etts . I understand that it is your judgment that those facil
ities can be furnished best by going to the branch system ?
Mr. L ord. Yes, sir.
Mr. L etts . In other words, you think that the strong banks which
form your group could render a better service to the varied com
munities of your State if they were permitted to establish in those
communities branches which would approximate the needs of the
communities ?
Mr. L ord. Yes, sir.
Mr. L etts . D o you feel that this p o lic y is one w hich w ill destroy
in d ivid u a l in itia tive?
Mr. L o r d . N o , sir. Are you speaking of the person or the cor
poration ?
Mr. L etts . I am speaking of persons now.
Mr. L ord. Far from it.
Mr. L etts . Can it do other than to encourage initiative within
your group ? It would destroy competition without the group, would
it not ?
Mr. L ord. I think it would encourage initiative within the group.
Banking talent, banking brains, are scarce, and the opportunities are
greater in an organization such as this than they ever can be in small
unit banks.
So far as discouraging competition is concerned, as long as the
banking business can be done safely and at a profit there is going to
be competition. Neither you nor I nor anyone else can keep it out.
Mr. L e t t s . Did you have bad times in Michigan, comparable m
any way with those we experienced in Iowa ?
Mr. L ord. N o, sir.
Mr. L etts . Did you lose any of your banks up there ?
Mr. L ord. I believe the record shows that 66 banks failed during
the period covered by Mr. Pole’s testimony, in nine years.
Mr. L etts . Do you now have more banks than are needed through
out the State, would you say?
1144
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. L ord. In some communities, yes; and there is a very consider
able duplication of branches throughout the city of Detroit. There
may be three and four different branches within two blocks.
Mr. L etts . H ow many groups have you in the State of Michigan ?
Mr. L ord. I can not recall. Mr. Pole’s testimony shows it, I think.
Mr. L etts . H ow many do you have in Detroit ?
Mr. L ord. There are three so-called groups in Detroit.
Mr. L etts . There are some not located in Detroit up there, are
there ?
Mr. L ord. I believe so.
Mr. L etts . I s there harmony among the three Detroit groups, or
is there competition in a live sense ?
Mr. L ord. There is very keen competition.
Mr. L etts . The feeling, I suppose, is good, however?
Mr. L ord. Entirely friendly; but take the other fellow’s business
if you can get it.
Mr. L etts . There is just one other thing that I had in mind. You
have acquired the stocks that you possess largely by transferring the
stock of the holding company in exchange ?
Mr. L ord. Yes, sir.
Mr. L etts . At what value did you exchange the stock of the hold
ing company for the stock of the unit banks ?
Mr. L ord. It depended on the bank itself, but in general we
matched actual value of group shares for actual value of unit bank
shares, and our earnings against their earnings. In other words,
our examiners would go into a unit bank prior to our proposal of
exchanging stock and make a careful examination of the bank and
set up reserves that the examiners considered were necessary to show
the actual value of the shares of that bank.
Mr. L etts . You tried to maintain a parity, I suppose, as to the
value that you sought to get ?
Mr. L ord. Yes, sir.
Mr. L etts . What was that? Was it approximately $20 par, or
more ?
Mr. L ord. N o. The actual value of the group company shares was
somewhere between $55 and $56 per share of $20 par value.
Mr. L etts . N o w , in your own bank------Mr. L ord. The Guardian Detroit Bank.
Mr. L etts (continuing). How did you arrive at the ratio of ex
change in that instance? That, I suppose, was the first one or one
of the first?
Mr. L ord. That was the first. The Guardian Detroit Bank stock
carried with it, for each share of bank stock, as a part of the certifi
cate itself, one-fifth of a share of stock of. the trust company and one
share of stock of the securities company. The book value of that
Guardian Detroit Bank share, carrying with it the other two inter
ests, when it was $100 par value, was approximately $280. That was
exchanged for five shares of group stock, $20 par value.
Mr. L etts . A n d that was a rrived at b y ju st figu rin g values?
Mr. L ord. It made no difference to the stockholder; he held exactly
what he held before, so far as proportionate interest is concerned.
Mr. L etts, I want to ask you as to your judgment as to whether
or not it is a wholesome thing for the country that banks are connect-
B R A N C H , C H A IN , AND GROUP B A N K IN G
1145
Ing with their institutions security companies, trust companies, and
that sort of thing ?
Mr. L ord. Yes, sir.
Mr. L etts . They are largely doing the trust business of the coun
try. Do you think that that is a wholesome thing ?
Mr. L ord. I do, sir. I think they are better qualified to do it than
the average individual.
Mr. L etts . D o you see any danger in ciden t to the policies that p r e
va il th rou gh ou t the cou n try in m a n a gin g securities com panies?
Mr. L ord. N o, sir.
Mr. L etts . Have you solicited the banks that you connected with
your group, or have they come to you ?
M r. L ord. W e have solicited some, and some h ave com e to us.
Mr. L etts . H ow m an y have a p p lied to you fo r affiliation w ith
y o u r g ro u p ?
Mr. L ord. It is pretty hard to answer that. Many have applied
to us that we have not taken in. In fact, we have had an entire
group apply to us.
Mr. L etts . D o you find that often it is desired that someone from
Detroit, somebody connected with the holding company, should go
on the board of directors or take a position as an official in the unit
banks ?
Mr. L ord. Some of them have insisted upon it; they wanted the
help of an operating officer and asked to have that officer on the
board.
Mr. L etts . I believe that in your set-up, 75 per cent o f the mem
bers o f the board must be local ?
Mr. L ord. Must be local, or must reside within 50 miles, the same
as under the national bank law.
Mr. L etts . W hy is that necessary?
Mr. L ord. It would be necessary in our national bank units under
the law. In our State bank units it would not be necessary, but we
wanted to keep the local units local so far as possible.
Mr. L etts . Well, leaving out of consideration the requirements of
the law, is it desirable?
Mr. L ord. I think it is.
Mr. L etts . Why would you think it is desirable ?
Mr. L ord. Because we want the interest o f the local people kept
in the banks.
Mr. L etts . And you think you get that better by having it known
as their bank?
Mr. L ord. I do, sir.
Mr. L etts . Rather than a Detroit bank ?
Mr. L ord. I do. I think I would like to state in passing that the
boards of directors of the local units banks, far from being dummy
directors, are taking greater interest in the operation of their banks
than they did before the banks were members of the group.
Mr. L etts . Mr. Lord, have you been approached to become a part
of some larger plan than yours?
M r. L ord. N o , sir.
Mr. L etts . Or a plan that might cover the country ?
Mr. L ord. N o , sir.
Mr. L etts . And extend through other States than Michigan?
1146
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. L ord. No, sir.
Mr. L etts . Y ou have n ot h ad any such con tact?
Mr. L ord. That is, not by a group or corporation that would take
us over; no. We have been approached by other banks and other
smaller groups that wanted to come into our system.
Mr. L etts . Yes; I understand that, but I meant by an interest
larger than yours that would like to associate you with other groups
comparable in size and strength with yours?
Mr. L ord. N o , sir.
Mr. L etts . That is all.
The C h a ir m a n . Mrs. Pratt.
Mrs. P ratt . Mr. Chairman, Mr. Lord’s statement is so compre
hensive that I find that many of the questions that have arisen in my
mind have been answered as he read his statement, but I: would like
to get this clearly in mind: Mr. Lord, your holding company, I think
you mave made very clear, is not a bank, does not do any banking
business, and is not in a parent position, is it, to the banks in that
group? You do not attempt to control?
Mr. L ord. Only own them; not control them or operate them.
Mrs. P ratt . Have you formed sort of a liaison between the differ
ent unit banks?
Mr. L ord. Yes.
Mrs. P ra tt . Would you attempt, for instance, to advise the trans
fer of funds from one bank to the other, or, rather, transfer the
credits if you knew that one bank in your group could not meet the
borrowing that it was called upon to meet of some depositor or other
person? You would be in position to advise them that some other
bank in your group could help them, would you not?
Mr. L ord. We w ould.
Mrs. P r a tt . And you would do that ?
Mr. L ord. We have done it many times.
Mrs. P ratt . Have you attempted in any way to control the type
of security ?
Mr. L ord. No; they buy their own securities.
Mrs. P ratt . I meant the security that the borrower must give.
Mr. L ord. Not through the group company. Each bank prescribes
its own collateral.
Mrs. P ra tt . In your position as more or less of an adviser, would
you feel that you are in position to criticize certain types of col
lateral ?
Mr. L ord. We would feel entirely free to criticize any type of
security and advise the unit bank as to our opinion of such security.
Mrs. P ratt . And you would feel that your advice should prevail
if they did not agree with you as to what was considered suitable ?
Mr. L ord. I f they thought they knew more about it than we, that
would be their party.
Mrs. P ra tt . D o you feel that your system of group banking is
meeting the necessity for sounder banking facilities in the smaller
communities ?
Mr. L ord. We do not go in very small communities. Ionia and
Niles, Mich., are the smallest communities in which we are located,
of about 10,000 people.
Mrs. P ra tt . Then you do not really cover the Federal reserve
district ?
1147
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. L o r d . N o . We are in the seventh district, and that includes
Chicago, Milwaukee, and quite a substantial number of large cities.
W e do not go outside of the State of Michigan, so far as our banks
and trust companies are concerned.
Mrs. P r a tt . Do you anticipate any further merging of groups in
your communities------Mr. L ord. I hope not.
Mrs. P ratt (continuing). Where you would ultimately be in con
trol of the banking business?
Mr. L ord. N o. W e have had numerous opportunities in some of
the communities in which we own units to buy all of the stocks of
banks in the community, but we did not want it; we want competi
tion
Mrs. P ra tt . I think you said that in Detroit there were two other
large groups.
Mr. L ord. We are the second in size; not the first.
Mrs. P r a tt . And there is a third?
Mr. L ord. There is a third and smaller group.
M rs. P ra tt . Y ou have no th ou gh t in m in d o f those la rge grou ps
m e rg in g in to one great m on op oly ?
Mr. L ord. I think not. I f that were done, there would immedi
ately start up in Detroit new banks that would compete.
Mrs. P ratt . I think that is all.
The C h a ir m a n . Mr. Busby.
Mr. B u s b y . In order to follow up the questions that Mr. Letts
asked, I want to make this statement which I gathered from Gov
ernor Young’s testimony, that there are 109 banks in Michigan that
belong to groups or chains which do not operate branches, 26 banks
belonging to groups or chains which operate 853 branches, as well
as 36 banks that do not belong to groups or chains but which operate
86 branches. There are also 572 additional independent banks, mak
ing a total of 1,182 banks in your State.
Now as to your statement of a moment ago that you had not gone
into cities of less than 10,000 inhabitants—
Mr. L ord. Except the seven small banks that are mentioned in the
report, in agricultural communities.
M
to
r .
g o
B usby.
in to
D o
th o s e
y o u
p la c e s
f in d
t h a t
t h a t
a r e
i t
is
s m
n o t
d e s ir a b le
a lle r
t h a n
u n d e r
1 0 ,0 0 0
i n
y o u r
s y s te m
p o p u la tio n ?
M r. L ord. I do n ot believe that a bank can survive in a sm all tow n
over a p e rio d o f years.
M r . B usby. D o
y o u
b e lie v e
t h a t
a
b a n k
w ill
s u r v iv e
r e a s o n a b ly
w e ll
in
a
to w n
s m
a lle r
t h a n
1 0 ,0 0 0
p e o p le
?
Mr. L ord. It will have in my opinion to have exceptionally able
management.
Mr. B u s b y . What would be your suggestion in the way of afford
ing banking facilities to places having a population smaller than
10, 000 ?
Mr. L ord. Branch b ankin g.
M r. B u sb y . D o you th in k b ranch ba n kin g w ou ld be the desirable
m ethod o f fu rn ish in g b a n k in g service to p ra ctica lly all places w ith
a p o p u la tio n o f less than 10,000 inhabitants ?
Mr. L ord. Yes.
Mr. B u sb y . Y ou spoke aw hile ago o f the m eth od that y ou r h o ld
ing com pan y fo llo w e d in tran sactin g its business, and the manner in
1148
B RA N CH , C H A IN , AND GROUP B A N K IN G
which it dealt with the several banks in your system, and your state
ment made this morning uses the term “ recommended policy ” that
is arrived at by one certain group of your managers under the own
ing company.
What do you mean specifically by “ recommended policy ” ?
Mr. L ord. This might be a recommended policy that a bank should
not have over 50 per cent of its assets or loanable funds in securities
based upon real estate, and we might have one, two, or three units
that went above that percentage.
Mr. B u s b y . I s your “ recommended policy ” so worked out that it
applies to the several banks individually, or is it a class action ?
Mr. L ord. I think each unit would have to be taken into consid
eration, and the nature of the business in that community would
have to be considered.
Mr. B u sby . Then your board that defines the recommended policy
would take up each individual unit in your system and adopt a rec
ommended policy for that banking institution, if I understand you?
Mr. L ord. Yes, sir.
Mr. B u s b y . N o w , are you r exam iners acquainted w ith the recom
m ended p olicies fo r these several banks?
Mr. L ord. Probably the recommended policies are based upon the
examination of the examiners.
Mr. B u sby . I know, but when your examiners go out from the
holding corporation to a unit bank are they made acquainted with
the recommended policy for the handling of the business in that bank
so that they can, in the light of that policy, better make a true and
proper examination of the bank ?
Mr. L ord. Yes, sir.
Mr. B usby . What happens if the directors of that bank refuse to
follow the recommended policy for the bank as declared by the
board that promulgated that policy, after an inspection has been
made and it is disclosed that the directors of this local institution
have refused to adopt the recommended policy?
Mr. L ord, They never have refused.
Mr. B u s b y . They never have refused? That is what I was g et
ting at.
Mr. L ord. Because the recommended policies are based upon
sound banking.
Mr. B u s b y . I understand that, of course.
Now, the trouble about the whole situation is that you have an
ironclad method of doing business with each one of these several
banking institutions through a recommended policy and your system
of examination, do you not ?
Mr. L ord. Mr. Busby, we do not have an ironclad fist or anything
of that nature. For instance, one of the banks in the group has
shown that it can operate its own bank as it pleases; it uses one of
our competitors in Detroit as its principal Detroit correspondent,
rather than us.
Mr. B u s b y . What do you assign as a reason for that?
Mr. L ord. Because they happen to have done business with that
bank for a great many years and there is a certain sentiment at
tached to it, and if they want to continue it, it is all right with us.
Mr. B u s b y . Y ou have no recom m en ded p o licy fo r that bank a lon g
th at line, have you ?
1149
B R A N C H , C H A IN , AND GROUP B AN K IN G
Mr. L ord. We have not recommended a policy for that bank.
M r. B u sb y . B u t i f you recom m ended a p o licy to the con tra ry
th ey w ou ld not dare to do that, w ou ld they?
M r. L ord. We would not recommend it for a reason like that,
because that is sound banking whether they take us or our competitor
in Detroit as the correspondent.
Mr. B u s b y . This morning you stated that }^ou were more “ hard
boiled” with your trust subsidiaries-----Mr. L ord. Securities companies.
Mr. B u sby . Yes, securities companies— then you were with some
disconnected security company that came to your bank for credit?
Mr. L ord. Yes.
Mr. B u sb y . Who does that act of being “ hard boiled ” ?
Mr. L ord. I do.
M r. B u s b y . Y ou d o?
Mr. L ord. Yes, now.
Mr. B u sby . A s the president of the holding company ?
Mr. L ord. A s the president of the Guardian Detroit Bank and
of the holding company.
Mr. B u sb y . Suppose that they did not come to your bank but
went to one of your other independent units; you would likely hear
about it, would you not ?
Mr. L ord. I know where the securities companies are borrowing
their money. That is my business to know.
Mr. B usby . And you would certainly hear about that ?
Mr. L ord. Yes
Mr. B u sby . And yet you are the president of the holding com
pany and not the manager of the banks; is that right ?
Mr. L ord. Yes, sir.
Mr. B u sby . But the fact is that you are indirectly the manager of
all of these banks when it comes to making big transactions and put
ting out loans that are of unusual size, are you not ?
Mr. L ord. No; I think I am merely the adviser.
Mr. B u sby . Adviser?
Mr. L ord. Yes, sir.
Mr. B u sby . With more than the usual emphasis upon that word,
though, are you not?
Mr. L ord. I do not think so.
Mr. B u sby . I find that while there are 610 banks in your State, a
few of which are not in the area in which you operate, that are
connected with the chain, group, and branch banking activities with
yourself and others, there are 572 banks that are running and oper
ating independently of any group, branch, or chain system. You
say it is not your purpose to take over any more of those small
banks ?
Mr. L ord. N o ; I did not say that.
Mr. B u sby . The fact is, that you have not taken any banks in
small places, is it not ?
Mr. L ord. N o, sir; we have not.
M
a n d
r .
B u sby .
t h a t
m o n e y .
Y o u
s a id
y o u
h a d
n o t
Y o u
s a id
t h a t ,
t h a t
ta k e n
d id
i t
y o u
Mr. L ord. That was the idea.
w a s
o v e r
a n y
n o t?
n o t
y o u r
e x c e p t
p u r p o s e
th o s e
t h a t
to
ta k e
a r e
o v e r
m a k in g ;
1150
B RA N CH , C H A IN , AND GROUP B A N K IN G
Mr. B u sb y . Well, they did not particularly need your protection,
did they? They were making money and on a sound basis.
Mr. L o r d . W e did not take them over for their protection.
Mr. B u sb y . What did you take them over for ?
Mr. L o r d . T o help build them up.
Mr. B u sb y . Did you not take them over to help you build up a
strong banking institution in that section of the country, with which
to make dividends ?
Mr. L o r d . Maybe; that may have been one of the reasons, yes.
Mr. B u sby . Your institution is not so altruistic that it is going
out for any other purpose than to make dividends, to make money,
is it?
Mr. L o r d . We can not prosper unless we do operate on a more or
less altruistic basis so far as service to the customer at proper rates
is concerned.
M
to
r .
th e
B u sby .
t r a d e ,
Y o u
h a v e
th e
tr a d e
o r
to
s h o w
w ill
n o t
a
c e r ta i n
p a tr o n i z e
a m
o u n t
y o u .
I
o f
c o n s id e r a tio n
g r a n t
t h a t .
Mr. L o r d . Certainly.
Mr. B u sb y . But the ultimate purpose is the one I asked about ?
Mr. L o r d . Yes, sir.
Mr. B u sby . Y ou say that these banks, unless there is an unusual
condition, can not make money in cities or towns of less than 10,000
population, and yet you do not think it is feasible for you— and, of
course, you would not think it was feasible for others in the same
line of operation that you are engaged in— to take them over. So
what do you see left for them to do but to liquidate ?
Mr. L o r d . There are many communities in which the Guardian
Detroit Union Group would be glad to establish branches.
Mr. B u s b y . Then you would not have all of those 572 banks go
broke, or any appreciable number of them, because they were left out
in the cold by the group organizations ?
M
r .
L
o r d
.
N
o
.
Mr. B u s b y . What solution do you have for those particular cities,
and how would you take care of them ?
Mr. L o r d . Branch banking would solve it.
Mr. B u s b y . Are you asking that a system be established that will
compel branch banking in the field in competition with you ?
Mr. L o r d . N o ; that it be permitted, not compelled.
Mr. B u s b y . What if they did not take to it any more than you have
taken to it?
Mr. L o r d . Y o u mean, to the communities?
Mr. B u sb y . To the smaller banks, the 572 that are operating inde
pendently of any branches.
Mr. L o r d . Mr. Busby, a bank of limited size could be profitably
operated as a branch, whereas it might not be possible to make even
expenses operating it as a separate unit.
Mr. B u s b y . But you certainly would not think that a system which
would continue 572, or even half that number of independent banks,
especially those in towns of 5,000 or 6,000 people, as banking institu
tions on an independent basis, was feasible, would you?
Mr. L o r d . I f branch banking were permitted-----Mr. B u sb y . I am not asking you that.
In other words, your knowledge of banking operations would not
lead you to, say, that independent banks in towns of 4,000, 5,000, 6,000,
1151
B R A N C H , C H A IN , AND GROUP B A N K IN G
or 7,000 people should be encouraged to continue as they have done in
the past ? That is what I gathered from your statement.
M
r .
w o u ld
L o r d .
I
in d ic a t e
t h i n k
t h a t
t h a t
th e y
th e
c a n
r e c o r d
n o t
o f
f a il u r e s
c o n tin u e
o n
a n d
in
to w n s
c o n tin u e
o f
t h a t
s iz e
p r o f i ta b ly .
Mr. B u sby . Your State has not such a bad record for failures,
has it ?
Mr. L ord. My State has an unusually good record.
Mr. B u sby . In 1921 it had eight failures.
Mr. L ord. Yes.
Mr. B u sby . And in 1922 it had 4; in 1923 it had 3; in 1924 it had
7; in 1925 it had 5; in 1926 it had 3; in 1927 it had 7; in 1928 it had
none; and in 1929 it had 9— 66 in all.
Mr. L ord. Why should it have had nine failures in 1929? With
branches or group banking or a combination of the two, there should
have been no failures in Michigan.
Mr. B u sby . One reason is that which you spoke of awhile ago—
somebody stealing $1,200,000— and, of course, the bank would have
gone broke had it not been for the intervention which followed.
Then, they will go broke for the same reason as that reported in
to-day’s paper in connection with a Texas bank, involving a steal by
officers of the bank of over $1,000,000.
Dishonesty and bad management are reasons for the failure of
banks.
Mr. L ord. A strong group, properly supervised, could protect the
community against failure, even against a defalcation of that size.
Mr. B u sby . But you will admit that 66 failures is a very small
percentage, considering the fact that Michigan had 1,182 banks?
Mr. L ord. It has had a very wonderful record.
Mr. B u sby . Why, then, do you make your statement that they can
not safely operate as independent banks ?
Mr. L ord. I did not say safely; I said profitably.
Mr. B u sby . Y ou say profitably?
Mr. L ord. Yes, sir.
Mr. B u sb y . D o you think the depositors are reasonably safe in
those banks ?
Mr. L ord. I f the bank is reasonably well managed, yes.
Mr. B u sby . N o w , your investment companies, as you call them-----Mr. L ord. Yes.
Mr. B u sby (continuing). Are engaged in buying and selling bonds,
and in the general financial investment business?
Mr. L ord. Yes, sir.
Mr. B u sby . Is that a more hazardous financial business for the in
stitution than straight banking?
Mr. L ord. N o ; I do not think so. Their earnings may fluctuate
up and down more than the ordinary banking or trust business.
Mr. B u s b y . I f I recall, Mr. Wakefield seemed to express himself
that it was much more hazardous, and Mr. Decker stated positively
that it was much more hazardous than the ordinary banking business.
What is your view on the subject?
Mr. L ord. I do not see why it should be.
Mr. B u sby . It is only in recent years that that class of business has
been coupled with banking, is it not ?
Mr. L ord. Banks have had investment departments for many,
many years. I worked for a bank in Chicago when I went to work
1152
B R A N C H , C H A IN , AND GROUP B A N K IN G
in 1906, where the biggest part of its business was the investment,
business.
Mr. B usby . It has all grown up in the last 25 or 30 years, practi
cally. Does it not appear to you that that type of banking activity,,
where the work is done under high pressure, is tending largely to
place many investment bonds and securities in the field to-day ?
Mr. L ord. Banks have certainly a very large distribution of in
vestment securities; yes.
Mr. B u sb y . Does your holding company have any syndicates for
the underwriting of security issues ?
Mr. L ord. The securities companies have; not the holding com
pany.
Mr. B u sby . Well, they are owned by the holding company, are
they not?
Mr. L ord. Yes, sir; just as the banks and trust companies are
owned by the holding company.
Mr. B u sby . Do you not think that that all tends to greatly inflate
the credit of the country beyond the actual commercial needs of the
country ?
Mr. L ord. W hy should it? I f the banks------M
r .
B u sby .
T o
a n s w e r
y o u ,
i t
h a s .
N o w ,
w h y
d id
it?
Mr. L ord. I f the banks do not supervise and handle securities and
advise their customers independent so-called investment houses are
going to sell to those customers. Would you not rather have the
public get advice from the banker than perhaps some other advice ?
M
th e
i n
r .
B usby.
o ffic e rs
th e
la s t
D o
y o u
o f
t r u s t
tw o
o r
a n d
th r e e
t h i n k
t h a t
in v e s tm
y e a r s
e n t
th e
a d v ic e
c o m
p a n ie s
o f
th e
h a s
b a n k e r s
h e lp e d
th e
a n d
o f
p u b lic
?
Mr. L ord. Yes, sir; I do.
Mr. B u sby . D o ^ ou not think that the banks and underwriting
syndicates, with their agents going up and down these corridors and
into every nook and corner where they thought they could interest
somebody in buying a security or a stock, and by selling to many
people who knew nothing about the stocks or the securities but who
hoped that the stock market would go up and that they could sell
at a better price than that at which bought, have done a great in
jury to the finances of this country in the last two or three years?
Mr. L ord. I do not think that the banks, generally speaking, ad
vised the public to go in and buy stocks, either for cash or on mar
gin, during the past two years or at any time.
Mr. B u sby . Do you not know that the underwriting syndicates
employ high-powered stock salesmen to go among the people every
where they think they can sell stocks, and that these solicitors do not
carry with them the knowledge that the bank possesses concerning
the validity or the desirability of those securities?
Mr. L ord. Are you speaking of securities companies affiliated with
their banks ?
Mr. B u sb y . Yes.
Mr. L ord. Or independent brokers and security dealers?
Mr. B u sby . I refer to the securities companies affiliated with their
banks.
Mr. L ord. I think, generally speaking, that securities companies
affiliated with banks or trust companies are very conscientious about
what they are recommending for investment by the public.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1153
Mr. B u s b y . D o they not employ agents to go out and solicit
individuals ?
Mr. L o r d . Yes.
Mr. B u s b y . H ow do you expect these solicitors to carry all of this
expert information to the individual?
Mr. L ord. Before the securities company connected with the bank
buys securities for sale, the salesmen do not examine the securities
and purchase them, but the heads of the organization pass on them
as to their value and safety, and the salesman is the one who goes
out to sell them.
Mr. B usby . And he is not very particular about giving the pur
chaser inside information, is he, or anything except a glowing ac
count of the possibility of the stock ?
Mr. L ord. I do not know that banks use the high-pressure method
that you are speaking about, or bank securities companies. We do
not.
Mr. B u sby . B u t you em p loy agents to g o out am on g the people,
d o you n ot?
Mr. L ord. Salesmen; yes.
Mr. B u sby . I believe that is all.
The C h a ir m a n . Mr. Dunbar.
Mr. D u n ba r . Mr. Lord, on page 3 of your statement you say that
your stockholders of the Guardian Detroit Bank have the same
number of shares of stock in that bank as in the Guardian Detroit
Co., and that they have one-fifth of the number of shares in the
Guardian Trust Co. Is the Guardian Trust Co. larger than the
other two companies %
Mr. L ord. Mr. Dunbar, that was the original corporate set-up of
the Guardian Detroit Co., Guardian Trust Co., and Guardian De
troit Bank. It does not apply to the present organization, or what
we term the group company.
Mr. D u n b a r . I know, but do you have a larger number of stock
holders or a larger capital stock in the Guardian Trust Co. than
you have in the other two ?
Mr. L ord. N o , sir. The Guardian Trust Co. had $1,000,000 capi
tal and $1,000,000 surplus. The Guardian Detroit Bank had $5,000,000 capital and $3,000,000 surplus; and the Guardian Detroit Co.
had 50,000 shares originally of no par value stock, $35 per share,
paid in.
Mr. D u n b a r . But the shares of stock in all three of them so allo
cate themselves that a man can have an equal number of shares in the
Guardian Detroit Bank, the Guardian Detroit Co., and one-fifth
of the stock in the Guardian Trust Co. ?
Mr. L ord. They could have before those three institutions became
affiliated with the present group company. You could not separate
one from the other.
Mr. D u n ba r . N ow , in answer to a question by Mr. Letts, you said
that there was a keen competition between these companies. I do not
see how you could have keen competition.
Mr. L ord. He asked about the other companies in Detroit, Mr.
Dunbar, the other banks.
Mr. D u n b a r . But there is no keen competition.
100136— 30— v o l 2, p t 9----------10
1154
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. L ord. Between our own companies?
Mr. D u n b a r . Yes.
Mr. L ord. No, sir.
Mr. D u n b a r . That is what I thought. I did not see why there
should be.
On page 6 of your statement I note that 75 per cent of the directors
of one of your unit banks must come from the municipality in which
that bank or trust company is located.
Mr. L ord. Yes, sir; or within 50 miles o f it.
Mr. D u n b a r . They are all stockholders in the parent company,
are they?
Mr. L ord. They are also stockholders in the old, original unit.
Mr. D u n ba r . In the selection of these people you dictate to them,
do you not ?
Mr. L ord. We never have changed the boards from the way they
came to us.
Mr. D u n ba r . But you decide their reelection ?
M
r .
M
r .
th e
L ord. A s
D u n ba r .
b a n k
?
I
a
m
T o
a jo r ity
w
h a t
u n d e r s to o d
o w n e r
e x te n t
y o u
to
o f
d o
th e
y o u
s a y
s to c k .
d ic ta te
y o u
d id
to
n o t
th e m
d ic ta te
i n
m
to
a n a g in g
th e m
.
Mr. L ord. We do not.
Mr. D u n b a r . Suppose that you got hold of a wild set of directors ?
M
r .
L
o r d
.
W
e
w o u ld
g e t
a
n e w
s e t.
Mr. D u n b a r . H ow would you get them? They are elected for a
year, are they not ?
Mr. L ord. A t a special stockholders’ meeting.
Mr. D u n b a r . Y ou cou ld depose them , cou ld y o u ?
Mr. L ord. Yes, sir.
M
t h e
r .
D
unbar
c o n s e n t
s y s te m
o f
.
T h is
y o u r
is
n o t
d ir e c to r s ,
in
a r e
th e
y o u
n a tu r e
n o t
o f
r e a lly
a
c r itic is m
th e
c z a r
,
o f
b u t,
th e
w
ith
w h o le
?
Mr. L ord. I do n ot th in k so.
Mr. D u n ba r . D o you think that any of these directors in any of
these other banks would dare to disobey your wish ?
M
r .
L ord.
T h e y
h a v e ,
in
s o m e
in s ta n c e s .
Mr. D u n ba r . D id it tu rn out th at they were rig h t ?
Mr. L ord. Sometimes.
Mr. D u n ba r . Then you are a wise person, one who, when anyone
disagrees with you and they turn out to be right, does not “ hop ”
them for i t ; do you ?
Mr. L ord. Sometimes.
Mr. D u n bar . Now, suppose that you got all wrong; then the whole
system is going to be all wTrong; is it not ?
Mr. L ord. I f I go all wTrong, the board of directors of the group
company would have me out before I could go very far wrong.
Mr. D u n ba r . But suppose that you are elected for a year; they
could not put you out before a year ?
Mr. L ord. Yes; they could. W e have a directors’ meeting every
three months, and a special meeting could be called and I could
be thrown out in two days.
Mr. D u n ba r . Well, the point I was trying to bring out is this,
that it is a bad thing for this country when you find its people
being driven for a living, when they have to bow and to get upon
their knees. I do not know what is going to become of us; in-
B R A N C H , C H A IN , AND GROUP B A N K IN G
1155
divi duality is going away. That is my principal objection to your
system, that individuality and personality are being developed less
and less, and after awhile people will not have minds of their own
because they will be depending on the dictators above them.
Mr. L ord. I do not think so, in this country.
Mr. D u n ba r . A ll right, I hope you are right.
Now, suppose that you owned a bank in Wyandotte that went
broke; all of the depositors would be secured under your system,
would they not?
Mr. L ord. T o the extent of the resources of the group company,
and, in turn, the assessment that might be levied upon the stock
holders of the company.
Mr. D u n ba r . Not any more?
Mr. L ord. Unless they kept on levying 100 per cent assessments.
M r. D u n ba r . Y ou w ou ld not, as a grou p head, assist them in any
w ay?
Mr. L ord. We certainly would.
Mr. D u n ba r . In what way would you assess them?
Mr. L ord. Putting up the money.
Mr. D u n ba r . Then, getting back to my question, would the de
positors in that bank be secure ?
Mr. L ord. Mr. Dunbar, it would depend upon the size of the bank,
but a bank in Wyandotte would be so small that it would be very
easy to take care of the depositors.
Mr. D u n ba r . But your depositors in a group bank would not have
very much more assurance of receiving their money than if they
were in a unit bank?
Mr. L ord. They would have $81,000,000 back of it as against the
$500,000 or whatever the capital might be of the Wyandotte bank.
Mr. D u n ba r . Y ou say that the capital of the Wyandotte bank is
$85,000,000?
Mr. L ord. W a it a m inute. I do n ot kn ow w hat the ca p ita l is.
Mr. D u n b a r . Let us suppose that you have a bank in Chicago that
has a capital of $85,000,000, and it fails. To what extent would you
in Detroit help them ?
Mr. L ord. T o the extent of our a bility.
Mr. D u n ba r . What is the size of your largest bank ?
Mr. L ord. The largest bank we have has a capital of $5,000,000, a
surplus of $6,000,000, and undivided profits of about $1,500,000.
Mr. D u n ba r . What bank is that?
Mr. L ord. The National Bank of Commerce.
Mr. D u n ba r . Y ou mentioned $85,000,000, Suppose that you had
a branch bank at Lansing, with $500,000 capital ?
Mr. L ord. Yes, sir.
Mr. D u n ba r . And that it had $2,000,000 on deposit, and it failed.
Your double liability would not amount to nearly $2,000,000. After
selling your assets, there might be a deficiency of $1,000,000. Would
there be any hope of those people getting money from your system?
Mr. L ord. W e could not afford, from the standpoint of the stand
ing of the group, to allow any bank to fail.
Mr. D u n bar . Y ou would pay the $1,000,000, would you?
Mr. L ord. Probably would.
Mr. D u n ba r . Then you practically, although you do not specifi
cally say so, guarantee the deposits of any bank that might fail?
1156
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. L ord. T o the extent of our financial ability to do so..
Mr. D u n b a r . But suppose that you did not have that financial
ability ?
Mr. L ord. We would still have the 100 per cent assessment avail
able.
Mr. D u n b a r . Which is the same as all other banks of the country?
Mr. L ord. Yes.
Mr. D u n b a r . Y ou do not go in to cities o f less than 10,000 p o p u la
tion , do you ?
Mr. L ord. Approximately that.
Mr. D u n bar . Now, then, if all of our failures, or at least 95 per
cent of them, occur in banks having less than $25,000 capital and in
towns of 1,000 population and loss, you do not run any risk by not
going into that kind of a community, do you ?
Mr. L ord. Not without being allowed to do branch banking.
Mr. D u n ba r . But you do do branch banking ?
Mr. L ord. In the big communities.
Mr. D u n ba r . Y ou are growing into a branch banking system, are
you?
Mr. L ord. Modestly.
Mr. D u n ba r . The impression you gave us is that branch banking
must take care of the business in these small towns, and you want to
take the cream, as it were ?
Mr. L ord. It is the best way to take care of it, in my opinion.
Mr. D u n ba r . I am asking for information more than anything
else. Now, in these smaller towns you believe that we should have
branch banking?
Mr. L ord. Yes, sir.
M
r .
D
unbar
.
D o
y o u
t h in k
y o u
w ill
e n g a g e
in
i t ?
Mr. L ord. T o a reasonable extent; yes, sir.
Mr. D u n b a r . Then, the branch banks in those cases would be
subsidiaries of the holding company ?
Mr. L ord. N o , sir. I f branch banking were permitted, and we
went into branch banking, there wTould be no holding company; there
would merely be a single bank with branches constituting our pres
ent group.
Mr. D u n b a r . I notice that some of your banks are not members of
the Federal reserve system.
Mr. L ord. Yes, sir.
Mr. D u n b a r . What do you think about the Federal reserve
system ?
Mr. L ord. I am for it.
Mr. D u n b a r . Why do you not make these other banks members,
then ?
Mr. L ord. They are so small that they could get no advantage
from being members. They were not members before they came into
our group.
Mr. D u n ba r . W e have a bank in our town that has a capital of
$100,000 and a surplus of $125,000 and undivided profits of $50,000,
which is not a member of the Federal reserve system because they
say that they can have dealings with some bank that is a member
and get all the benefits which might accrue to them. That is not:
right, is it?
Mr. L ord. That is true that they can.
BR A N C H , C H A IN , AND GROUP B A N K IN G
1157
Mr. D u n b a r . But that is not right, is it?
Mr. L ord . For a s m a ll b a n k , th e y can.
Mr. D u n b a r . D o you think that that bank is justified in not being
a member of the Federal reserve system?
Mr. L ord . It make so much difference in their earnings, Mr. Dun
bar, that they can not afford to join the Federal reserve system.
The reserves that they would be required to carry in the Federal
rserve system against their deposits, and upon which they would
receive no interest, would be a great handicap to them.
Mr. D u n b a r . H o w m u c h is th a t reserve?
Mr. L ord . It depends-----Mr. D u n b a r . There are other advantages that they get that enable
the country bank to carry on its banking business, so that I think
they ought to be members of the Federal reserve system and I think
you ought to require your banks to be members, and the question is
how many banks are going to permit members of their system not to
be members of the Federal reserve system.
Mr. L ord . That question has not come up.
Mr. D u n b a r . These questions I have asked are largely for infor
mation.
Mr. L ord . We have no thought of the present members of the Fed
eral reserve system resigning.
Mr. F o r t . I hope I will not cover other matters that have been
covered. I had another committee meeting this morning. I f I do
cover matters that have already been covered, will you please advise
me, Mr. Chairman?
Mr. Lord, in looking over your statement I notice that you have a
by-law that directors— 75 per cent of the directors of every bank—
must be residents of the community or within 50 miles of the bank.
Mr. L ord . Yes, sir.
Mr. F or t . O f course, that 50-mile limit, on the bulk, if not all of
the banks of the group, permits the directors to come from Detroit ?
Mr. L ord. N o , sir.
Mr. F o r t . N o t th e m a jo r p a r t?
Mr. L ord . It would eliminate Jackson, Kalamazoo, Battle Creek,
Niles, Saginaw, Flint, and Grand Rapids. It would eliminate most
of them because they are more than 50 miles from Detroit.
Mr. F o r t . Y ou feel, from your own information, that, in the
proper management of a group system, the directorate should be
local?
Mr. L ord . Mr. Fort, I feel it so strongly that in case we were doing
a branch-banking business in Michigan we would retain the board as
an advisory committee for that district.
Mr. F o r t . I f w e, here, c o n sid e rin g th is t h in g as a n a tio n a l prob
le m , sh o u ld be in c lin e d d ir e c tly or in d ir e c tly to a u th o rize b ra n ch
b a n k in g , w e w o u ld be w ise to in sist u p o n th e m a in ten a n c e of th e
lo c a l directo rs ?
Mr. L ord . I th in k so.
Mr. F o r t . Have you ever considered the propriety, in group bank
ing, of permitting minority stockholding interests to be represented
on the directorate ?
Mr. L ord . Mr. Fort, in effect, the minority has a directorate in
our group.
1158
BR A N C H , C H A IN , AND GROUP B A N K IN G
Mr. F o r t . Except, I take it, all the directors are stockholders in the
Guardian Stockholding Corporation?
Mr. L ord . Yes, sir.
Mr. F o rt . What I am getting at is there are some States that, in
corporations, call for cumulative voting, in order to insure minority
representation on the board of directors.
Mr. L ord . Yes, sir.
Mr. F o r t . Can you see any objection to a thing of that sort, if w e
are going to authorize group banking ?
Mr. L ord . N o t th e slig h te st.
Mr. F or t . N o w , as a part of your organization, do your group
banks loan on the stock of the holding company as collateral?
Mr. L ord . Yes, sir.
Mr. F o rt . D o you approve of that?
Mr. L ord . In reasonable amounts; yes, sir.
Mr. F o r t . What is a reasonable amount?
Mr. L ord . W e would not allow any bank— that is, the Guardian
Detroit Bank, of which I am president, would not lend an unreason
able amount on General Motors stock, Packard Car stock, or United
States Steel stock. In theory, I think they should not loan on that
stock.
Practically, I think it is quite safe. In a period of two years, we
will have every such loan out of the group banks, as a matter of
policy.
Mr. F o r t . But those things which seem to you, perhaps, as good
policy, had we not better regard as a matter of law for protection
against unscrupulous banks ?
Mr. L ord . I think you should.
Mr. F o r t . D o you see any reason why trust companies and others
exercising fiduciary powers should have any different rules applied
to their fiduciary relations than those which apply to individual
trustees under like instruments ?
Mr. L ord . Mr. Fort, what------ Mr. F o r t . For example, an individual trustee may make directly
or indirectly no profit whatever out of his handling of the trust,
other than the legal commissions.
Mr. L ord . Yes, sir.
Mr. F o r t . Should the bank, acting as a fiduciary, have any greater
power ?
Mr. L ord . Our company makes no profit except the fee.
Mr. F o r t . Does it b a n k fu n d s ?
Mr. L ord. It banks them separately and the trust receives the
interest.
Mr. F o r t . Y ou think that is sound?
Mr. L ord . Yes, sir.
Mr. F o r t . However, in that group organization, Mr. Lord, it
might, of course, accomplish the same purpose by banking with other
members of the group.
Mr. L ord . I think it is perfectly proper they should bank with
other members of the group, providing the interest received is in
keeping with interest they would receive from other outside banks.
Mr. F o rt . Y ou think there is no psychological danger in withhold
ing the investment of funds in time of high interest rates on money ?
B R A N C H , C H A IN , AND GROUP B A N K IN G
1159
Mr. L ord . N o , sir.
Mr. F o rt . Y ou think such an organization, doing a trust business,
should be allowed to buy securities from itself or affiliated organi
zations ?
Mr. L ord. Without profit; yes, sir.
Mr. F o r t . Would you include a securities organization owned by
the group holding company ?
Mr. L ord . Yes, sir.
Mr. F ort . Have you been asked any questions about the segregation
of sayings deposits?
Mr. L ord . N o , sir.
Mr. F o r t . Have you any views on the propriety or impropriety
of requiring savings deposits in ordinary commercial banks to be
segregated as to investments and preferred as creditors ?
Mr. L ord . The laws of Michigan require that we segregate our
bank deposits and segregate certain assets against them.
Mr. F o r t . And you approve of that?
Mr. L ord . I do not think it is necessary, provided the bank has
proper supervision— I mean Government or State.
Mr. F o r t . However, you have had remarkably few failures in
Michigan.
Mr. L ord . Yes, sir.
Mr. F or t . Do y o u o b je c t to th e la w ?
Mr. L ord . I do not object to it; no.
Mr. F o r t . One of our committee members one day made reference
in a very fine way, I thought, to Gresham’s law, relating to the
driving out by the baser metals of the better.
Mr. L ord . Yes, sir.
Mr. F o r t . His reference was in reference to the tendency of banks
to shift from the more rigorous code of law to the lesser.
Mr. L ord . Referring to the national system as against the State
system ?
Mr. F o r t . Yes.
Mr. L ord . Yes, sir.
Mr. F or t . D o you feel that it is desirable, from a national view
point, that where possible wTe should bring the national code to the
highest possible point of wise banking legislation, and then use our
best efforts to make the States measure up to it ?
Mr. L ord . I do. I f we, to-day, could operate as a branch-banking
system under the national system, we would prefer it to the State
system. We welcome any supervision that makes banking better.
Mr. F o r t . D o you approve of banking regulations that permit of
the investment by banks in stocks?
Mr. L ord . We do not invest in any stocks, and therefore I do not
approve of it, except stocks of building companies, or something that
goes with it.
Mr. F o rt . Necessary affiliations?
Mr. L ord . Yes, sir.
Mr. F o r t . In regard to branch banking, I take it from your
statement and from the few questions I have had the privilege of
hearing you answer, you believe that branch banking is a necessity
for the small communities?
Mr. L ord . Yes, sir; I do.
1160
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. F o r t . I f we are going to authorize branch banking, do you feel
we should authorize the establishment of branches in communities
where they would come in competition with local unit banks ?
Mr. L ord . Mr. Fort, I think that the establishment of new banks,
whether they be unit banks or branch banks, should, in some way,
be controlled so there does not exist or come to pass a situation where
neither of several banks are able to make any money in a community.
Whether that control comes from the Federal reserve bank or system
or through the comptroller’s department makes no difference, but I
think it should be accomplished, because three banks in a community
that might be making no money, certainly can not be as good for a
community as one bank that is prosperous or two banks that might
be prosperous.
Mr. F o r t . But, of course, if branch banking wrere permitted concurently with unit banking, assuming, as would normally be the case
in all but the larger cities, the branch was a branch of a far stronger
bank than the local bank, would not the tendency be for the larger
bank, with the branch, provided it maintained its contracts, to drive
the unit bank out ?
Mr. L ord . I do not think so. Banking is largely a question o f
acquaintance and contracts, so far as securing business is concerned.
Mr. F o r t . And credit facilities.
Mr. L ord . And if the unit bank has the proper capital and surplus
or proper loaning capacity, it should certainly retain a proper share
of the business of the community.
Mr. F o r t . Some of us who have been thinking on this branch bank
ing question, are wondering whether, if we should decide to permit
it at all, we should not handle the matter in some way so as to prevent
the larger metropolitan city banks from going out into the branch
banking business into the country, and hold that down so that the
branches would be those of nonmetropolitan cities. Have you any
views on that?
Mr. L ord . In other words, do you mean you would not want a
bank in New York City to be able to acquire banks or groups in
other centers?
Mr. F o r t . Yes— branches I am speaking o f and not groups.
Mr. L ord . Through separate institutions?
Mr. F o r t . Through branches— not groups.
Mr. L ord . I think the extension of branches should be limited to
trade areas as Mr. Pole suggests.
Mr. F o r t . For example, he used an illustration here of St. Louis—•
and Detroit as well, perhaps. Some of us have had the thought that
the St. Louis trade area, being quite extensive, it might be preferable
to say that St. Louis might not go out through its entire trade area,
which would spread to Little Rock on one side and Des Moines on
the other, but that Des Moines should be permitted to have branches
out through its area in order to prevent the aggregation of banking
control and resources in the major cities.
Mr. L ord . I should think that the better way would be for St.
Louis to be allowed to be the center of a trade area and Little Rock
the center of a trade area and Des Moines also. There might be an
overlapping of the trade areas with centers at Des Moines, St. Louis,
and Little Rock, but there certainly would be competition, and cer
B R A N C H , C H A IN , AND GROUP B A N K IN G
1161
tainly St. Louis would not gobble up all the business if that were
allowed.
Mr. F o r t . Y ou at least agree with those of us who are not neces
sarily committeed to it but think along that line, that in any way
we do it we should be sure to preserve competition ?
Mr. L ord . Competition will be there whether we try to preserve
it or not, in my opinion.
Mr. F ort . Not if adequate facilities are there without competition.
Mr. L ord . In the small communities probably not, because one
bank only could live; but in the sizable communities there will be
competition whether there is unit or branch banking in that city.
Mr. F ort . Y ou see no hazard in permitting an aggregation of
financial resources under a single management as long as there is
service ?
Mr. L ord . I do not see any danger.
Mr. F o r t . I think that is all, Mr. Chairman.
The C h a i r m a n . This morning, Mr. Lord, some one questioned
you about the scope of your plan. I understood you to say that your
scope was confined to your trade area?
Mr. L ord . Yes, sir.
The C h a i r m a n . Y ou consider your trade area Detroit and the
State of Michigan?
Mr. L ord. I should think, Mr. Chairman, that our trade area would
also include Toledo, which does feed into Detroit. Toledo is 60
miles from Detroit. We have not gone into Ohio at any time, nor
do we contemplate doing it.
The C h a i r m a n . When was your plan declared operative?
Mr. L ord . December, 1929.
The C h a i r m a n . What brought about that consolidation? Was
it the fact that you had joint owners in the group ?
Mr. L ord . No, sir.
The C h a i r m a n . There was no affiliation between you?
Mr. L ord . N o , sir; it was brought about purely by negotiation.
The C h a i r m a n . Was it purely a banking negotiation, or did it
arise from business conditions?
Mr. L ord . Banking conditions.
The C h a i r m a n . The whole development sprang from a banking
situation ?
Mr. L ord . Yes, sir.
The C h a i r m a n . There has been no demand for it from the public ?
Mr. L ord. I would not think so. It is pretty hard to allocate the
reasons, Mr. Chairman.
The C h a i r m a n . Y ou fe lt it was the logical thing to do to serve
your trade area and improve your banking institutions ?
Mr. L ord . In Detroit, if you know the city, the industries are
pretty well scattered around the city, and, in order for us to serve
the industries that wanted to bank with the Guardian Detroit Bank,
we had either to build our own branches and develop them or take in
some institutions that had branches.
The C h a i r m a n . Y ou have stated that you do not think under
present conditions, unit banks in small towns can continue to make
sufficient profits to exist?
Mr. L ord . I think the majority of the banks are unable to make
a profit.
1162
B RA N CH , C H A IN , AND GROUP B AN K IN G
The C h a i r m a n . For a number of years, we have had a system of
unit banks in the country and they have apparently succeeded up
until the last few years.
Mr. L ord . Yes, sir.
The C h a i r m a n . Have we reached a condition in this country
where unit banks can no longer exist ?
Mr. L ord . In the small communities; yes, sir.
The C h a i r m a n . What is responsible for that change?
Mr. L ord . There are a great many factors, as I see i t ; in the first
place, the banks used to make quite a profit through real estate or
farm mortgages. They used to make a profit from the collection of
checks. A t the present time, Mr. Chairman, the expenses of operat
ing a bank have increased, just as the expenses in your own house
hold or living costs, and yet the rates of interest do not increase,
and the margin between the gross income and expenses is getting
narrower and narrower.
The C h a i r m a n . In other words, these unit banks have been de
prived of previous sources of income and there has been an increase
in expenses ?
Mr. L ord . Yes, sir.
The C h a i r m a n . Y ou would not attribute that to improper man
agement ?
Mr. L ord . I think many failures are traceable to that.
The C h a i r m a n . You are speaking of the country as a whole?
Mr. L ord . Yes, sir.
The C h a i r m a n . There are certain States where unit banks con
tinued uninterrupted by failures, like Vermont and Connecticut.
There was not a failure in Vermont.
Mr. L ord . You have a situation there that does not exist in other
States. You have a diversity of risk which is unusual. X think that
is one of the reasons, Mr. Chairman, Michigan has such a good
record; but going back to the question of management, take, for
instance, Florida, in Miami: The First National Bank there shrank
in its resources from $72,000,000 to twenty million dollars and odd
almost over night, yet it survived. I call that good management.
Plenty of other banks went down.
The C h a i r m a n . I do not want to detain you too long, but in con
nection with your statement this morning showing a list of your
stockholders and where the stock is held, is control of your holding
companies lodged in the hands of any group ?
Mr. L ord . It is lodged in the hands of residents of Detroit. The
largest single holding, I think, is 3 per cent of the total stock.
C h a ir m a n . I s t h e r e a n y
L ord . N o , sir; absolutely
T h e
C h a ir m a n . N o u n d e r s t a
Mr. L ord . No, sir.
The C h a i r m a n . The control
T h e
Mr.
p o o lin g
o f
th e
c o n tr o l
o f
th e
s to c k ?
free.
n d in g
a b o u t
c o n tr o l?
is in the hands of the management
only so far as successful management prevails?
Mr. L ord . Yes, sir.
The C h a i r m a n . I s there a large amount of stock of your holding
company in the officers of the banks and directors?
Mr. L ord . Yes, sir.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1163
The C h a i r m a n . What per cent of the holding company’s stock
would be in the control of officers and directors ?
Mr. L ord . Mr. Chairman, I could not tell you. I can get you that
information. I should say that all directors and presidents of unit
banks are substantial stockholders.
The C h a i r m a n . Your stock of the holding companies is all one
class of stock?
Mr. L ord . Yes, sir; $20 par.
The C h a i r m a n . Any inducement to management offered to any
institution in the way of distribution of profit sharing, and so
forth ?
Mr. L ord . We are working on a profit-sharing plan which has not
been put into effect, because it has not been completed. W e do, in
some communities, have group insurance, pensions, and so forth,
which are inducements, but as far as regular profits are concerned
there is no plan in force.
The C h a i r m a n . In Mr. Luce’s questions this morning he was re
ferring to interest charges paid by your bank. You stated, I believe,
that was optional with the banks themselves.
Mr. L ord . Yes, sir.
The C h a i r m a n . Does the change in the Federal reserve rates or
rates on commercial paper or bills change the rates of interest paid
or charged by any of your banks?
Mr. L ord . It changes the rate of interest charged more than that
paid.
The C h a i r m a n . You do vary that charge in accordance with the
fixed money rates?
Mr. L ord . Yes, sir.
Mr. Chairman, we have in Detroit to meet to a great extent the
New York and Chicago rates.
The C h a i r m a n . Y ou spoke during the day here of closing many
branches in Detroit. That was brought about through the consolida
tion of groups?
Mr. L ord . O f the other group, particularly. When the other
group got together it had approximately 200 branches. I believe
they expected to close quite a substantial number where they com
peted in adjacent locations.
The C h a i r m a n . Y ou m ea n th e com m e rce g r o u p th a t jo in e d w ith
you?
Mr. L ord . N o , sir; the Detroit Bankers Co. The Peoples Wayne
County Bank had about 100 branches.
The Peninsula State Bank had 30 or 40 branches.
The First National Bank had about the same number and the
Bank of Michigan also. When they were all put into the Detroit
Bankers Co. the combined picture showed about 200 branches, and
in many locations there were two and three and four competing with
each other within an area of two blocks.
The C h a i r m a n . The consolidation of these two groups in Detroit
wTilI result in closing a number of branches ?
Mr. L ord . Over a period of two years, by the time it takes to
adjust it, they would close, I would say, from 30 to 40 branches.
1164
B R A N C H , C H A IN , AND GROUP B A N K IN G
The C h a i r m a n . Does your holding company or your banks ownt
as investments, stocks in other banks than those which form your
group ?
Mr. L ord . The Securities Co. may have some moderate holdings
in other banks that do not amount to anything. They may be trad
ing for customers.
The C h a i r m a n . They own no stock except of the group of banks
and companies affiliated, of which you put a list in the hearing?
Mr. L ord . Yes, sir.
The C h a i r m a n . Some groups that have been developing have seen
fit to take over banks in New York; for instance, the Marine Mid
land group who have taken over the Commercial Fidelity of New
York. Have you an institution of that kind there?
Mr. L ord . N o , sir; and I think we do business with almost every big
bank in New York. W e have no interest in banks in New York.
The C h a i r m a n . Your investment companies do maintain an office
in New York?
Mr. L ord . Yes, s i r ; the Guardian Detroit Co.
The C h a i r m a n . Your group company owns no other stocks except
the stock of institutions referred to by you as part of your group ?
Mr. L ord . That is correct.
The C h a i r m a n . It is purely a stockholding company?
Mr. L ord . Some of the subsidiaries may own other stocks, but the
group company does not. It owns only the banks and institutions
mentioned.
The C h a i r m a n . Y o u referred to the fact that you d id not take
over any banks that did not pay. Could you not take over many
small banks that are now operated at a loss because of poor manage
ment and high operating costs that you could operate at a profit ?
Mr. L ord . A s u n its?
T h e
y o u
C h a ir m a n .
w o u ld
s a y
“
A s
y e s
”
u n i t s ;
y e s .
i f
c o u ld
y o u
F r o m
y o u r
o p e r a te
s ta te m
th e m
a s
e n t
I
p r e s u m
e
b r a n c h e s .
Mr. L ord . I f we could operate them as branches; there are many,
but not as units.
The C h a i r m a n . Under your plan of operating units, you could not
do that?
Mr. L ord . I would not want to do that as a business proposition.
In the first place, we want to retain the local management and the
same management as far as possible, so as not to disturb the local
situation and, with that in mind, we have endeavored to select banks
operating satisfactorily.
The C h a i r m a n . A s I understood you to say, it would be very
difficult for the small banks, in small communities, to exist in the
future ?
Mr. L ord . Yes, sir.
The C h a i r m a n . What would you recommend to this committee
to furnish banking facilities to those communities? Would you
recommend branch banking nation-wide, state-wide, or trade area ?
Mr. L ord . Trade area.
The C h a i r m a n . You think the trade area would cover every com
munity in the United States that is now being served ?
Mr. L ord . Yes, sir.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1165
The C h a i r m a n . In other words every part of the United States,
you believe, would be included in some particular trade area ?
Mr. L ord . Yes, sir.
The C h a i r m a n . D o any of your banks or your holding company
buy and sell stocks in your banks or companies; in other words, do
you maintain a market on any of your stock ?
Mr. L ord . We maintain a market for the holding company stock
only for the accommodation of our stockholders.
The C h a i r m a n . That is to say one of your companies buys and
sells your holding company stock and maintains a market on it?
Mr. L ord . We do not support the market unduly. We maintain
a market so that proper distribution will be given to the shares of
that company; for instance, we would rather have a shareholder come
to the Guardian Detroit Co. when he wants to buy or sell shares of
the group company than go to some broker with the stock.
The C h a i r m a n . Your holding company maintains a market for
individual people in the country who want to buy stocks?
Mr. L ord . No sir; we do not have enough to sell, often.
The C h a i r m a n . In the fiasco last fall, it was shown some affiliated
companies wTere selling stocks of banks and recommending them to
investors. You do not pursue that policy with your organization?
Mr. L ord . We want to create local interest in the group company
and we try to select, in Kalamazoo or Jackson or Grand Rapids, or
in communities where we have a unit, people that we think can do
our institution good from the standpoint of business contact and we
do try to place stock with such people, but the stock is quoted on the
exchanges and sold at the current market price.
The C h a i r m a n . In reply to Mr. Fort’s questions in regard to
profits on trust business, you said they were never carried on at a
profit. What would you consider a profit in a trust transaction ?
Mr. L ord . We do not sell to our own trusts either mortgages or
bonds except at our cost to the securities company and as I said
to Mr. Fort, where there are funds in those trusts, they are deposited
with other institutions and the trust receives exactly the same rate of
interest we receive.
The C h a i r m a n . Where these various trusts have been invested in
other stocks that are local and they have gone up in value and in
the management of those securities you sell them, do you give the
trust whatever profit may have accrued on those investments ?
Mr. L ord . Yes, sir.
The C h a i r m a n . Y ou were speaking a few moments ago in regard
to the consolidation of one, two, three, or more banks in small com
munities, and I think you said it was better to have one well-managed
and conservatively operated money-making bank in the community
than to have three. Is it a voluntary proposition as to whether those
banks get together ?
Mr. L ord . Yes, sir.
The C h a i r m a n . Do you not think it advisable to authorize the
Comptroller of the Currency, the Federal Reserve Board, or the
supervisor of banks to determine whether there are too many banks
in those towns and whether those banks should consolidate ?
1166
B R A N C H , C H A IN , AND G B 0U P B A N K IN G
Mr. L ord . I do not believe it would be wise to force them to con
solidate, but I believe that the comptroller or the State banking,
commissioner could advise with them with the result that there
would be consolidations that would benefit the community. I do
not see how you could force them to consolidate if they did not
choose to.
The C h a i r m a n . Under the premise that the bank was not making
money and that there were too many banks in that area, could not
the supervising function of one of those officers be applied so that
it would become apparent that it was necessary to consolidate in.
order to facilitate the banking business in that community?
Mr. L ord . I do not know how you could do it by law, but I know
that the banks always listen with open ears to the comptroller or the
State banking commissioner.
The C h a i r m a n . I am jumping from one thing to another here,
Mr. Lord, but in the last few years we have had a change in the
method of financing industries; in other words, many industries are
now financing themselves through the sale of stock issues and
building up their treasuries that way. How has that affected bank
ing business generally?
Mr. L ord . Take our own situation, Mr. Chairman; it has neces
sitated our carrying in the Guardian Detroit Bank— and I am using
that because I know that bank more intimately than any other—•
between 20 and 25 per cent of our deposits in Government bonds
because we have insufficient eligible paper.
The C h a i r m a n . That plan of financing tends to decrease the
amount of eligible paper in banks.
Mr. L ord . Yes.
The C h a i r m a n . And, because of that, you, just the same as many
of the other large banks there, utilize Government securities as the
most convenient means of going to the Federal reserve bank, if you
have to ?
Mr. L ord . A s practically the only other way we can go to the
Federal reserve bank.
T h e
q u ir e s
in g
C h a ir m a n .
v e r y
c a r e f u l
D o
y o u
s tu d y
in
n o t
t h i n k
t h a t
c o n n e c tio n
w
t h a t
ith
is
a n y
a
s it u a ti o n
c h a n g e
in
t h a t
o u r
r e
b a n k
s y s te m ?
Mr. L ord . I d o , sir.
The C h a i r m a n . Particularly when, in these days, we are hearing
a lot of talk about the amount of brokers5 loans and all that, do you
not think that the changed conditions are a factor to be considered ?
Mr. L ord . I think that should be recognized.
The C h a i r m a n . And before we deal with it we should know to
what use that money is put before we attempt to regulate it ?
Mr. L ord . Yes.
The C h a i r m a n . I am not going to keep you any longer.
M
r .
L
ord . G o
r i g h t
o n .
Mr. F o r t . May I ask one question I omitted, or, rather, two small
ones?
Mr. Lord, we have a 10 per cent limit on individual borrower’s
loans under the law. Do you think we should have any limit on the
amount that might be loaned on the identical collateral by a banky
B R A N C H , C H A IN , AND GROUP B A N K IN G
1167
now that loans are made on collateral rather than on name in so many
cases ?
Mr. L ord . N o ; I do not think so. I do not think it is necessary.
Mr. F o r t . In many towns, is not the major type of frozen loans
that the banks get on local securities ?
Mr. L ord . Yes; but I think that situation is always called to th e
attention of the bank of the examiner.
Mr. F o r t . But he has no power to force them to d o anything.
Mr. L ord . He has no power, except that his comments on the
condition of the bank, in my experience, are always recognized by
the board and by the officers. So far as our bank is concerned, we
keep a running record of how much is in General Motors stock and
how much in Packard stock, and so forth, in connection with all our
loans.
Mr. F o r t . Last week Mr. Wakefield, of the First Bank Stock
Corporation, offered to furnish the committee his views as to the
type of regulatory legislation which might be proper for the com
mittee to recommend in regard to group and branch banking.
Would you be willing to do the same thing?
Mr. L ord . I w o u ld be w illin g to do a n y th in g y o u w a n t m e to
th a t m ig h t be h e lp f u l.
Mr. F o r t . I think
we would be very glad to have them. We
would get more help from you gentlemen who have had this ex
perience in running these institutions as to the hazards we ought
to guard against in connection with inefficient and incompetent man
agement than we can devise out of our own heads, and perhaps we
would annoy you less if we got intelligent aid first.
Mr. L ord . I do not know that I can add anything to it, but I
would be glad to do anything I can.
Mr. F o r t . I think the committee would be very glad to get a state
ment from all of you gentlemen as to what regulations you may re
gard as wise or necessary if the expansion of group banking is to be
permitted.
Mr. L ord . Have you in mind merely group banking, or the whole
subject of group, branch, and chain banking?
Mr. F o r t . Anyone of them. I think we would be glad to have the
views of any of these witnesses— don’t you, Mr. Chairman ?
The C h a i r m a n . I certainly do.
Mr. F o rt . On essential regulation.
The C h a i r m a n . After all, Mr. Lord, this committee is trying to
deal constructively with this situation. Some of us are more or less
familiar with banking conditions throughout the country, but there
are men like you and the others who are in the midst of these under
takings who can give us very good information, and we would ap
preciate it as a committee if you men who are appearing before this
committee would take it upon yourselves to make any suggestion to
us which might be helpful to us in solving this whole problem.
After all, this is a study of the whole situation; we are looking for
light.
I want, on behalf of the committee, to express to you our sincere
appreciation of the statement which you have given us. I am sure it
has been very helpful, but I am also of the opinion that, upon your
1168
B RA N CH , C H A I I , AND GROUP B A N K IN G
return to Detroit, other things may occur to you that will be helpful
to us, and we would like to hear further from you and receive any
suggestions which you may care to make.
Mr. W i n g o . I think, in making suggestions in response to the re
quest of Mr. Fort, he should not confine himself alone to suggestions
with respect to restrictive legislation, but if he thinks that there is
any restriction that now exists that could be liberalized or removed,
we would like to have that also. In other words, feel free to offer
such suggestions as to legislation which, if you were sitting in our
place on the committee, would occur to you as being wise and im
portant.
Mr. L ord . I will be very glad to give you whatever may occur to
me in that connection.
(Thereupon, at 4.50 o’clock p. m., the committee went into execu
tive session, following which it adjourned until Thursday morning,
April 24, 1930, at 10.30 o’clock.)
BRANCH, CHAIN, AND GROUP BANKING
THURSDAY, A PR IL 24, 1930
H o u s e o f R e p r e s e n t a t iv e s ,
C o m m it t e e on B a n k i n g a n d C u r r e n c y ,
W as!ling ton, IJ. C.
The committee met in the committee room, Capitol, at 10.30 o’clock
a. m., Hon. Louis T. McFadden (chairman) presiding.
The C h a i r m a n . The committee w ill come to order.
Before we hear from Mr. Rand, I would like to insert in the record
here a communication which has come to the committee from the
Minneapolis Council of Agriculture, under date of April 18,1930, and
another letter from Stanchfield & Co., St. Paul, Minn., under date
of April 22, 1930.
Unless there is objection, these letters will be placed in the record
at this point.
(There was no objection, and the letters are reproduced below.)
M in n e a p o l is
C o u n c il
of
A g r ic u l t u r e ,
Minneapolis, Minn., April IS, 1930.
C o m m it t e e o n
B a n k in g
and
Currency,
House of Representatives, Washington, D. C.
: C. T. Jaffray, president Soo Line, former president and now
director First National Bank, M inneapolis; Joseph Chapman, affiliated with
Northwestern National Bank, and manager L. S. Donaldson C o .; F. M Prince,
First National B an k ; W. H. Brammer, receiver Minneapolis & St. Louis R ail
road ; C. D. Mills, Midland National Bank & Trust C o .; L. E. Wakefield, First
National B an k; F. B. Wells, Peavy Grain C o .; E. W. Decker, Northwestern
National Bank, joined in a telegram sent to the then President Coolidge,
signed by 20 in opposition to bill for the relief of agriculture, from which the
following is quoted:
G e n t le m e n
“ F ebruary
15. 1927.
“ As a result of our five years’ diversified-farming program, the in d e b t e d n e s s ,
i f member banks to the Ninth Federal Reserve Bank has been reduced from
$115,000,000 to $3,500,000. Paper from closed banks acquired by the Ninth
Federal Reserve Bank have been reduced from $14,000,000 to $1,800,000. Loans
borrowed by banks from the W ar Finance Corporation have been reduced from
$(>0,000,000 to $2,000,000. Total bank deposits in the Northwest now are the
same as in 1920.
“ We believe, with the proper methods of farming and application of sound
business principles to our agriculture, almost every northwest acre can produce
a gross profit of more than $25 annually.
“ During the past five years hundreds of thousands of dollars have been
spent annually by northwest business leaders, representing railroads, banks,
manufacturers, newspapers, and many others, on educational work with the
northwest farmers for the promotion of diversified farming.”
Again, in Minneapolis Tribune, January 26. 1927, Roy A. Young reports
deposits of district reached total held in 1920.
“ The sound financial position of the inland Northwest and its banking insti
tutions is indicated by the fact that the-loans of the Federal Reserve Bank of
100136— 30—
vol
2.
p t 9 ----------11
1169
1170
BRANCH, CHAIN, AND GROUP BANKING
Minneapolis to its members now are around $3,500,000, as compared witli
$115,000,000 seven years ago,” Roy A. Young, governor of the bank, told members
of the Northwest Shippers Advisory Board, and so forth, in his report as chair
man o f the board’s committee on finance and credit.
“ That the operating member banks in Montana on December 22, 1926, owed
the Helena branch of the Federal reserve bank but $23,033; on August 31, 1921,
the banks’ advances in Montana totaled $13,601,000.
“ As further indication of the Northwest’s improved financial situation, the
banks of the ninth district to-day hold about the same total o f deposits as in
1920, when inflation was at its peak, although the number o f banks has been
reduced considerably.
“ Borrowing on a sound basis is legitimate and benefits the community of the
bank which does it.”
According to press dispatches under date of April 6, 1930, L. E. Wakefield,
president First National Bank, Minneapolis, is quoted as having told the
House Banking and Currency Comm ittee: “ Since 1920, the Northwest has been
the scene of a constant struggle, political and economic, to reestablish the
foundation o f its basic financial structures which were rudely jarred by the
consequences of the war.”
Developments which resulted in a group banking movement, he said, included:
“ The increase in production costs, due to sharp uptrend in output during the
war years and the general price level decline in 1920.
“ PRIOR TO 1 9 2 0
“ The banks cooperated fully with the agricultural population by the exten
sion of new credits which were reflected in tremendously increased deposits.
A large equity in these newly developed farm s was represented in second
mortgages held by banks as collateral for note loans.
“ With the advent of 1920, the general price level took a sharp decline and
the reaction followed throughout the entire credit structure.
" Much money from outside territory which was on deposit, attracted by the
high rate of interest, was withdrawn.
The pressure of the Federal reserve and trade associations against the
charging of exchange, deprived rural banks o f another of their sources of
income.
“ In reaching our decision to embark upon the group-banking program we
were prompted solely by the necessity of some form o f practical reorganization
o f the rural banking structure if the territory as a whole was to recover from
the effects o f the deflation.
“ To correct the situation we felt that we would create an advisory organi
zation, properly manned, and with sufficient banking experience to offer to
individual units making up the chain, expert advice and assistance in the
management of their local banks, that there would be no question as to the
benefits which would accrue.
“ We can expect that within a few years the farm mortgage will be restored
as a liquid instrument.”
Mr. E. W. Decker, of the Northwest Bancorporation, Northwestern National
Bank, Minnesota Loan & Trust Co., on the same date is qu oted: “ The average
small bank has been unable to earn a profit or even to pay the overhead in
some cases. It can readily be seen that a bank operating on such a small
margin would not be in a position to take care of such losses when they came,
necessitating the closing of its doors.
“ They retain local officers and directors consisting of men intimately iden
tified with local systems under the systems o f group banking. Each State has
the advantage o f personal property taxes. In 1927 such taxes for Minnesota,
the Dakotas, and Montana amounted to over $3,000,000.
“ The bank that can not make money should not be in business.”
The attitude of Mr. Decker and Mr. Wakefield in 1927 seems to have been
that there was nothing wrong with the Northwest— that there wTas no economic
problem, and it would seem to be substantiated by their message to President
Coolidge.
From the statement of Mr. Young, it is found that during the 5-year period
prior to 1927, the indebtedness of member banks in the ninth Federal reserve
district has been reduced by a total of $111,500,000, and paper from closed
banks acquired by the Federal reserve bank, had been reduced $12,200,000.
Add to this, loans borrowed by banks from W ar Finance Corporation, which
B R A N C H , C H A IN , AND GROUP B A N K IN G
1171
were reduced $58,000,000, thus, according to Mr. Young's statement, during this
period of deflation, the residents of the ninth Federal reserve district had paid,
a total of $181,700,000 of obligations.
Bear in mind that this payment was forced—that is. the Federal reserve
bank refused agricultural paper for rediscount— and during this period, agri
culture had no credit in the ninth Federal reserve district, this amount had to be
paid out of its savings and current earnings, and during all of this period they
had to-pay the ever increasing tax burden, and all other obligations, other than
strictly Federal reserve and War Finance Corporation indebtedness.
Then again, Mr. Wakefield and Mr. Decker in that telegram state in effect
that with proper methods of farming and application of sound business princi
ples to our agriculture almost every Northwest acre can produce a gross profit
of more than $25 annually. It would seem from this that the method of farm
ing and the unsound business principles used in the operation of the farming
industry in the ninth Federal reserve district for the 5-year period prior :o
1927 resulting as it did in the payment of $181,700,000 indebtedness to these two
creditors, was brought about by improper methods of farming and the applica
tion of unsound principles in the business of our agriculture.
These gentlemen now tell the committee that owing to the political and economic
struggle to reestablish the foundation of its (Northwest) basic financial struc
tures a movement developed which resulted in group banking, and yet the facts
are. according to the statement of these gentlemen, that the group banking
movement is about a year old. so all o f this has developed, if you believe their
statements in the telegram to Mr. Coolidge, since 1927.
In view of the now admitted unsound financial structure according to their
statements, what is the meaning of Governor Young’s statement as of January
26, 1927, that the sound financial position of the inland Northwest and its bank
ing institutions is indicated by the fact that the loans of the Federal Reserve
Board to its members have been reduced, and so forth? It does appear to the
writer that these gentlemen in 1927 were in accord with Mr. Young, and at
that time agreed that the financial position of the Northwest and its banking
institutions was sound. Their statement to Mr. Coolidge in the telegram that
during the past five years hundreds of thousands of dollars have been spent
annually by Northwest business leaders representing railroads, banks, manu
facturers, newspapers, and many others, on educational work with the Northwest:
farmers for the promotion of diversified farming is another indication that
these gentlemen believed in the soundness of the financial structures up to1927, and the only flaw they found in the agricultural situation in the North
west was improper farm ing methods and lack of diversification. Bear in mind:
that at this time in 1927, according to the statement of Governor Young, “ total
bank deposits in the Northwest now are tlie same as in 1920,’’ and the peak.
of deposits for that inflated war period was in 1920.
Now, in view of the contradictory statements given to the President in 1927,
with those statements given to the Committee on Banking and Currency in
1930, have these gentlemen qualified as being competent to advise the agri
cultural Northwest as to sound agricultural business and methods.
In all
history I do not recall as ever having heard such an ill-advised and impossible
statement as that they make when they say that every Northwest acre can
produce a gross profit o f more than $25 annually.
Mr. Wakefield says in a statement to your committee, “ With the advent o f
1920 the general price level took a sharp decline.” Again he says, “ The pres
sure of the Federal reserve and trade associations against the charging o f
exchange deprived rural banks and others o f another source of income.”
It is true that there was pressure from the Federal reserve. In May, 1920,.
the Federal Reserve Board, in session at Washington, singled out the agri
cultural industry for deflation, and the instructions went to the various Fed
eral reserve district banks to refuse agricultural paper for rediscount pur
poses, so that as fa r as the agricultural section is concerned in the district o f
which Mr. Wakefield and Mr. Decker speak, the Federal reserve bank failed
to function for the purposes for which it was created, and when you bear in
mind that in addition to this $181,700,000 o f obligations paid through the Fed
eral reserve bank and the W ar Finance Corporation, and vastly larger sums
of obligations that must of necessity have been discharged in the other avenue
of finance, it is a wonder that the condition in the Northwest is as favorable
as it is. None but a people o f the hardy pioneer type, with a territory rich in
natural resources, as this territory is, could have survived.
1172
B R A N C H , C H A IN , AND GROUP BAN K IN G
You will bear in mind in this connection that Mr. Wakefield and Mr. Decker
probably seconded and helped shape the policy of the Federal reserve bank
with reference to agricultural paper at this time. Mr. Young came to the
Ninth District Federal Reserve Bank as assistant to the then Governor W old
and upon Mr. Young’s selection as governor o f the Ninth Federal Reserve District
Bank, Mr. W old became affiliated with the Northwestern National Bank, o f
which Mr. Decker is the controlling factor.
Mr. Wakefield further states to your committee, “ In reaching our decision to
embark upon the group-banking program we were prompted solely by the neces
sity o f some form of practical reorganization of the rural banking structure if
the territory as a whole was to recover from the effects o f farm deflation.”
Is this an admission on the part o f Mr. Wakefield that the Federal reserve bank,
as it functions, is a failure, and can not aid a territory in recovering from the
effects o f deflation brought about by causes beyond their control, and the
responsibility for this deflation rests, as Mr. Wakefield places it— upon the,
consequences of the war, he might well add that the evil consequences following
this were augmented and enlarged by the action o f the Federal reserve system
in denying this depressed territory the aid of credit through the Federal reserve
system. Not only denial of aid and credit but the ruthless demand for the
immediate payment o f all agricultural paper.
“ Prompted solely by the necessity o f some form o f practical reorganization
o f rural banking structure”— the first evidences of sprea.ding out, or a group
control, was when the First National Bank and the Northwestern National
Bank of Minneapolis acquired control o f various other banks in the city of
Minneapolis and in direct violation of what I believe was the law attempted to
operate them as branches, and this was long before they felt the prompting of
the reorganization of the rural banking structure. They state that they felt
they “ could create an advisory organization properly manned and with sufficient
banking experience to offer to individual units making up the chain expert
advice and assistance in the management of their local banks.”
W ho are these supermen who have advised agriculture through these periods
o f depression and who have now, that they are displacing the community banker,
the community center, and forming a channel through which they can control
the entire flow and line of credit and money to every community in the North
west— is there anything in history o f either o f these men or the institutions
that they are connected with which, if carefully examined, would ju stify the
least efficient farmer or business man in placing his future and his prosperity
in their hands? It is the opinion of the writer that if an examination was
made and an investigation held upon the methods used in the distribution of
funds through the Northwest Agricultural Credit Corporation and, if you please,
in the methods used by the First National Bank and the Northwestern National
Bank in acquiring control of various banks now constituting their group, that
red-blooded Americans, proud of the liberties and honesty o f its countrymen,
would bow their heads in shame.
Your committee can not expect to secure from these gentlemen any admis
sion that they used anything but the very kindliest persuasion to get banks
into their group, neither can you expect a small community banker, with his
very healthy bank, who is still independent, to come before your committee
and tell you of the means and methods employed to indicate to him the
necessity o f his joining one group or other or finding himself possibly without
means o f establishing a clearing, or a correspondent in either Minneapolis or
St. Paul. It is likely that a few independent bankers will appear before your
committee and give testimony along this line but for the most part they will
not care to incur the displeasure of a clearing house in Minneapolis and St.
Paul, which is necessary for them in order to serve their customers. Minne
apolis banks no longer are in competition to secure correspondent accounts from
the country banker and the independent banker is finding it harder and harder
to comply with the regulations required for carrying an account in these banks
through which to clear. In fact, it will be found to be true, I believe, that
the group banker is now analyzing personal accounts and a small account that
is active is being analyzed to determine whether there is a profit sufficient in
the handling of the account to warrant their extending that convenience to
some of their customers and perhaps shortly the edict will go out that accounts
that do not carry a daily balance o f $500 or perhaps $1,000 are not desired.
Your committee is undoubtedly familiar with the earnings of the Federal
reserve bank in the ninth Federal reserve district covering the territory dis
cussed by Mr. Decker and Mr. Wakefield. I merely want to call your atten
1173
B liA N C H ? C H A IN , AND GROUP B AN K IN G
tion to the earnings for the year 1921, in which occurred this sudden and drastic
deflation, and I believe it will be found that the Federal Reserve Bank of
Minneapolis earned 126 per cent on its capital. There is something wrong
when a banking institution, at a time of distress felt in every home throughout
the district, can earn such an exorbitant income upon its capital invested and
a continuation o f .such a process is sure to absorb the entire production o f
wyealth and savings of any community wherein an institution of this character
is permitted to exist.
The inadvertent use of the word “ chain ” by Mr. Wakefield must not go
unnoticed. Evidently he is having the same difficulty in differentiating be
tween group bank, branch bank, and chain bank that Mr. Pole, Comptroller
o f the Currency, experienced in his efforts and explanation to your committee.
In Mr. Pole’s examination by your committee, the statement was made that
Canadian failures were rare, yet those failures are more far-reaching and but
for the Dominion Government coming to the rescue of the Canadian Bank of
Commerce, one more failure might have been added, and we all know of the
collapse of the Home Bank, and I venture to make the statement that if there
were no bank examinations and regulations in the State of Minnesota, 90 per
cent of the State banks closed would be still operating.
When Mr. Decker states " The bank that can not make money should not
be in business,” he gives you an insight into the workings of his mind, mayhap,
indicating that the controlling factor with him is— will I make money. It
may be that the Northwestern National Bank’s business has been very profit
able during this time when desolation, abandonment of homes, misery, and want
stalked throughout the district, that his institution should serve. Speaking
o f taxes, it may be that the statement, the States of Minnesota, the Dakotas,
and Montana taxes amounting to over $3,000,000 is true, but he does not say
that this amount was paid, nor does lie say that the national banks went into the
courts in Minnesota in an endeavor to pay a lesser amount, and they are now
paying taxes in Minnesota under a “ Gentlemen’s agreement.”
The unit bank and the banking system in operation for so long in the United
States, has adjusted itself to the rapid growth and development of the greatest
nation on earth, and until the Federal reserve system was adopted, no valid
indictment of our banking system would stand, so that it would appear that
the functioning of the Federal reserve bank, or its failure to function, as
anticipated, has hindered, or obstructed America’s banking system from ad
justing itself to meet the conditions that have arisen since the adoption o f the
Federal reserve system, or perhaps more rightly, since it began to force
deflation beginning in 1920.
And it seems to the writer that the outstanding conclusion that can be drawn
from our banking experience is that to no small group of men. however patriotic
they may be, can be given the control of money and credits when such control,
exercised for other than the common good of. the whole people, might result
in profit or advantage to some group or section and to the disadvantage, neces
sarily, of some other group industry, or section, and perhaps to the personal
gain of the group controlling the flow of moneys and credits.
Respectfully submitted.
Jo h n
M e y e r , S ecrcta ri/.
S ta n c h fie ld
't.
C o m m it t e e
ox
Paul.
M inn..
April
& Co.,
22,
1930.
B a n k in g .
wish to protest against a n y legislation in favor of group or
branch banking. Rather, I urge action which will absolutely prevent action, as
I firmly believe it will nullify all good features of the reserve system.
Mr. Wakefield's testimony on April 10 Mas remarkable for what he did not
tell you.
He did not tell you that his 150 banks are controlled absolutely by the credit
department of the parent institution and the old officers are merely puppets.
The local paper is examined by and absolutely controlled by a traveling credit
man, who can have and has no interest in local affairs.
He did not tell you that through his trust companies and subsidiaries he
probably holds an amount of bad farm paper proportionate to any rural bank.
He did not tell you that increased money power will enable him to make
large speculative loans in which his sole interest is large underwriting profits.
The gieatest hindrance to the development o f Canada has been its banking
system. In a rural town the only logical man to increase its prosperity is
Gentlem en :
I
1174
BRANCH, CHAIN, AND GROUP BANKING
the banker, for he is in a sense the partner o f every borrower and mutual
success is vital.
The group bank is merely a safe-deposit vault, and it is the consensus of
opinion o f business men of this territory that group banking spells the ultimate
ruin of the rural town. Too much centralization of money power is probably
the cause of our nation-wide depression; in part, at least.
Any favorable legislation toward group or branch methods will simply be
another nail in the coffin o f the Grand Old Party, a coffin which, since the war.
has been almost totally completed.
The opinion of an individual citizen will probably reach only the waste’ basket, but all the people can not be fooled all the time, as the W hig Party
discovered.
Respectfully,
Geo. F.
S t a x c h f ie l d .
The C h a i r m a n . W e have b e fo re the committee this morning Mr.
George F. Rand, president of the Marine Midland Corporation
of Buffalo, K Y.
Mr. Rand asks that he be permitted to make his statement without
interruption until he has completed it. So, if you will, Mr. Rand,
proceed in your own way.
STATEMENT OF GEORGE F. RAND, PRESIDENT MARINE MIDLAND
CORPORATION, BUFFALO, N. Y.
Mr. R a n d . Mr. McFadden and gentlemen of the committee, I
think that my statement will cover our corporation pretty well, and
after I have completed it I will be glad to answer any questions
you ask if I am able to.
I n t r o d u c t io n
W hile the term “ group banking ” is of comparatively recent origin, the
need fo r such a relationship between the larger city banks and the smaller
town banks has become increasing evident to us for years past.
The traditional American banking system functioned for many years, before
the era of the automobile, good roads, radio, consolidations in industry, etc.,
quite successfully. Changing business methods have, however, made it in
creasingly difficult to transact business in the smaller towns profitably as
heretofore. W here formerly there were possibly 15 or 20 small or moderate
sized manufacturing concerns or jobbers in a city o f 25,000, there are now
perhaps 4 or 5 big companies. If these operate as branches of a parent cor
poration, the bank balance which they carry in that community is probably
reduced to petty cash or pay-roll accounts. If, on the other hand, they are
the head offices of large corporations, their credit requirements are probably
in excess o f the available bank credit in that community, and if they have
large bank balances, these are probably carried in the larger metropolitan
banks either for the purpose of assuring adequate lines of credit or possibly
as a matter o f safety. These conditions apply even in cities the size of Niagara
Falls, Troy, and Rochester, the population o f which ranges from 80,000 to
250,000.
W e have had small banks come to us to sell or rediscount either secured or
unsecured paper which they are unable to handle on account of certain definite
limitations, perhaps because o f insufficient resources. They have come to us
pledging bonds other than Government securities, usually when bond prices
are low and money is in demand in their local communities. They have even
been forced to sell securities at times when they have had to take losses of a
substantial character.
On the other hand, occasionally, lacking a sound local market for their
funds, in order to keep their money in use, we have seen such banks take
unsound credit risks locally or purchase investments in an inexperienced way,
being unduly influenced by the prospective yield. From our experience we
might cite instances where credit has not been granted to local enterpises
because the* amounts involved were not within the ability o f the local bank
t o loan. The same local enterprises have found it difficult to obtain credit
B R A N C H , C H A IN , AND GROUP B AN K IN G
1175
under the correspondent hanking system because the granting of sucli credit
involved an intimate knowledge of the company’s management. Under the
system of group banking such credit is extended, because through the local
unit in the group there exists the necessary intimate knowledge of the com
pany’s affairs and the resources of the entire group are thereby made avail
able to it.
The management of the Marine Trust Co. of Buffalo has for years had an
interest in a small city bank (the First Trust Co., of Tonawanda). Through
its affiliation this local bank has been able to keep its funds safely and profit
ably invested and to supply the credit requirements of its community so
adequately that although it is in a city of 15,000 population, 110 other bank
has been started there, every other bank having failed years ago. Because of
its relationship with the Marine Trust Co.. this bank has experienced few of
the difficulties which beset the management of the average small bank operating
alone.
Our experience with these conditions and knowledge of these facts prompted
us to form the Marine Midland group.
B A CKGR OU N D
The Marine Trust Co. of Buffalo is the direct successor of the Marine Bank,
a New York State corporation, organized in 1850. In 1902 it became the
Marine National Bank of Buffalo and absorbed the Buffalo Commercial Bank,
which had been organized in 1836, so that it cun now trace its corporate
existence over a period of 94 years.
Branch banking in Buffalo started in 1916 when B a n k e r s Trust Co. of Buffalo
(merged into the Marine Trust Co. in 1919) «irgan:-<ed by George F. Rand, sr.,
opened its Cold Spring branch. After it had aswubed the Central National
Bank, it continued to operate the office of that LiMitution as a branch, thus
opening the first two branch banks established in the city of Buffalo.
George F. Rand, sr., who was at that time president of the Marine Trust
Co. of Buffalo, was the first advocate in that city of branch banking. He
inaugurated the definite policy of developing branch bai/l's in all of the more
important community centers within the city for the purpose of bringing bank
ing facilities within easy reach of all the retail business and residential centers,
thereby encouraging greater use o f such facilities, educating the public in the
various branches of banking service which were available for their use. and
inducing the removal o f hoarded savings from chimneys, socks, and mattresses
to the vaults of a financially responsible bank.
In carrying out this policy the Marine Trust Co. of Buffalo has continued to
open branches, with the approval of the State superintendent of banks, at
various central locations, until it now has some 34 of such branches within the
city o f Buffalo, operating to the mutual advantage of the public and the trust
company.
Concurrently with the development o f branch banking within the limits of the
city o f Buffalo, Mr. Rand, sr., began laying the foundation o f the present
Marine Midland group of banks, through extending the influence o f the Marine
Trust Co. outside the city of Buffalo. He had started his banking career in
Tonawanda and was a substantial stockholder in the First Trust Co. of Tona
wanda at the time he became president o f the Marine Trust Co. This Tona
wanda bank, therefore, as stated above, was closely affiliated with the Marine
Trust Co., and the officers of the latter institution, as directors or advisers,
played a very important role in guiding the policies and extending the develop
ment of the smaller bank.
It was largely as a result of this experience, referred to above, and o f the
realization o f the mutual advantages to be derived from such relationships that
the officers of the Marine Trust Co. began systematically to build up a group
o f banks affiliated with their larger institution through closer cooperation, some
common stockholders, and a growing acquaintance and friendship among the
officers and directors.
The group so built up comprised, prior to the organization of Marine Mid
land Corporation in September, 1929, the following banks:
The Marine Trust Co. o f Buffalo.
Union Trust Co. o f Rochester.
Niagara Falls Trust Co.
First Trust Co. o f Tonawanda.
1176
B R A N C H , C H A IN , AND GROUP BAN K IN G
State Trust Co. of North Tonawanda.
Lackawanna National Bank.
Niagara County National Bank & Trust Co. (Lockport).
Peoples Trust Co., Binghamton.
W orkers Trust Co. o f Johnson City.
Union Trust Co. of Jamestown.
Bank of East Aurora.
Bank of Snyder.
\1 AKIN K M ID LAN D
CORPORATION
On September 23, 1929, Marine Midland Corporation was incorporated under
the laws of the State of Delaware, with an authorized capital consisting o f
10.000.000 shares of the par value o f $10 a share, for the express purpose,
among other things, o f acquiring a controlling interest in the stock o f various
banks and trust companies in the State of New York. Certified copies of its
certificate of incorporation and by-laws are attached hereto, marked “ Schedule
1 and 2,” respectively.
Offers were made to the stockholders of all of the banks listed above, and
also to the stockholders of the manufacturers National Bank of Troy, Cortland
Trust Co., Orleans County National Bank and Bank of LaSalle (Niagara
F alls) to exchange their stock for stock of the, new corporation. The ratio o f
exchange was in each instance worked out between officers of the new cor
poration and officers and stockholders of the respective banks, giving due
consideration to the earning power, liquidating value and market value of these
bank stocks, and taking the stock o f Marine Midland Corporation at $60 a share.
Concurrently with this offer, underwriting agreements were entered into for
the sale for cash of 1,000,000 shares at $60 a share, less commissions to the
underwriters.
The formal offer of exchange was made to the stockholders of all these banks
on September 24, 1929. They were given until October 7, 192*9, to deposit their
stock. On October 17, 1929, the necessary number of shares having been
deposited, the underwritten stock was taken up by the bankers for cash, and
1',025,055 shares o f stock were issued in exchange for stock of all of the banks
other than the Marine Trust Co. of Buffalo. On October 21, 1929, 2.816,430
shares were issued in exchange for stock o f the Marine Trust Co. of Buffalo.
On October 25, 1929, an agreement similar to those made with the first 16
banks and trust companies; was made with the stockholders of the Power City
Bank of Niagara Falls, and on November 30, 1929, 140,328 shares were issued
in exchange for stock of that bank.
On February 28, 1930, an agreement was entered into with the stockholders
of Fidelity Trust Co., of New York, similar to the agreement previously entered
into with the stockholders of the other banks and trust companies for the
acquisition of stock of that bank. In this case, however, stockholders of
Fidelity Trust Co. were offered the option o f exchanging their stock either for
l 3i shares of Marine Midland stock, or for 1 share of Marine Midland stock
and $40 in cash in exchange for each share of their stock carrying one share
of stock of Fitrust Corporation, an affiliated securities company.
This was the only instance in which cash was paid by Marine Midland for
stock of its affiliated banks, except a small amount paid for adjustment of
fractional shares.
Under this agreement, on March 29, 1930, 274,893 shares of Marine Midland
stock and $8,498,360 in cash were delivered in exchange for 248,169 shares of
the capital stock of the Fidelity Trust Co. o f New York, and the same number
of shares of stock of Fitrust Corporation.
PRESENT' B A N K
HOLDINGS OF M A R IN E M ID LAN D
CORPORATION
Additional stock of all the banks was deposited and accepted for exchange
after the deposit date until as of April 9, 1930, Marine Midland Corporation
held stock of the various banks which, with directors* qualifying shares retained
by the directors, constituted over 97 per cent of the aggregate number of shares
of the 18 banks and trust companies.
Attached hereto, marked “ Schedule 5,” is a statement showing in detail the
number of shares of stock of each bank and trust company authorized and out
standing, the number held by the directors as qualifying shares, the number
o f shares exchanged and held by Marine Midland Corporation, the combined
percentage, and the number of shares remaining available for exchange held
by nondepositing stockholders.
1177
B R A N C II? C H A IN , AND GROUP BAN K IN G
DIRECTORS OF M A R IN E M ID LAN D CORPORATION
Attached hereto, marked “ Schedule 3,” is a list of the directors of Marine
Midland Corporation as of this date, showing the principal business occupation
of each.
DESCRIPTION OF B A N K IN G IN ST IT U T IO N S CONTROLLED
Attached hereto, marked “ Schedule 4,” is a statement as of March 31, 1930.
of each o f the banking institutions controlled by Marine Midland Corporation,
showing its name, location, capital, surplus, deposits, and total resources:
whether it is national or State; and which of the State institutions are not
members o f the Federal reserve system.
CORPORATIONS OTHER T H A N
RANKS
CONTROLLED BY
M A R IN E M IDLAND CORPORATION
It is the policy of Marine Midland Corporation to own the stock of banking
corporations only. However, in the case of two of the banks acquired there
were affiliated securities corporations controlled by the stockholders, the stock
of the securities corporation being transferred with the stock of the bank.
Therefore in acquiring majority interests in the stock of these banks Marine
Midland also acquired a controlling stock interest in these two securities cor
porations, viz, Security Properties Co. (In c.), affiliated with Manufacturers
National Bank, of Troy, and Fitrust Corporation, affiliated with Fidelity Trust
Co.. of New York.
METHOD
OK
A CQUIRING
HANKS
Generally speaking, the policy of Marine Midland Corporation is to acquire
its holdings of bank stocks through the issuance o f its own stock in exchange
therefor, but this policy w i!! not prevent it from using cash for part or all
o f the purchase price if that means will be helpful in any given case.
C AP ITAL
STRUCTURE
AND
STOCK
DISTRIBUTION
As already stated, the capital structure of Marine Midland Corporation is extremely simple, there being only one class of stock authorized, consisting of
10,000.000 shares of the par value of $10 each.
The extent and method of stock distribution may be considered under two
heads. The stock issued in exchange for bank stocks was. of course, distributed
among the stockholders of the various banks who deposited their stock under
the several plans and agreements and received Marine Midland stock in
exchange therefor when the requisite amount o f stock had been so deposited,
and the transactions were closed. In addition to this stock. 1,000,000 shares
were underwritten and offered to the public at $G0 a share. This public offer
ing was made by Stone & Webster and Blodget (In c.), White, W eld & Co..
Ciias. D. Barney & Co., Schoellkopf, Ilmum & Pomeroy (In c.), and Marine
Union Investors (In c.), and 75,000 shares underwritten without commission by
certain individuals were sold to the management at the same price paid by the
public. The total number of stock holder of the corporation is now somewhat
over 20,000. The complete statement a- to the distribution of stock in all
Marine Midland cities is as fo llo w s:
P la c e
! N u m b e r of
1 sto c k h o ld e rs
N e w Y o rk :
B u f fa lo ___________ . _ _____
___
___ __
N e w Y o rk C it v . _ ___________________________ ____ . . . .
R o c h e ste r_________________________ _ _ ____ _
_____ _
______ . . . . . . . ______ __ _____
T r o y _______ ______ ___ ___
N ia g a r a F a l l s _____________________________________________
B in g h a m to n
T o n a w a n d a . . . . . ____
...
....
N o rth T o n a w a n d a ____________________________________________
f>, 505
2, 6&7
1, 555
534
907
184
194
Lockport. _________________
________
_______ _________
Johnson C itv _____________________________________________ . . . .
L ackaw an n a
Jam estow n __ _____ . _
______ _____ ______ __ __
East Aurora. _ . . . .
_
_
__
C ortland.____________ _______ ________________________ _______
Albion
Snyder___
.. .
. . . . . . .
Total Marine M idland cities_________ _____ ______ ____ _
411 other communities in N ew York State__________________
T otal, N ew York State, 427__________________________ _____
1
'
169
372
80
57
120
83
126
47
116
T o ta l sh are s
2, 891, 844
877,911
249,067
102, 650
231, 297
31, 788
115, 455
84, 210
62, 315
11.457
1,535
16, 653
8, 664
8, 296
1,864
3, 458
13,776
2,191
4, 698, 464
287, 778
15,967
4, 986, 242
N o t e .— There are m anv communities tributary to Marine M idland cities whose figures are not included
in Marine M idland cities totals.
1178
B R A N C H , C H A IN , AND GBOUP B A N K IN G
Marine Midland stockholders are distributed through 45 States, Canada, Eng
land, Hawaii, and the West Indies.
In many cases where, under the unit system, one individual or a group of
two or three controlled the bank and the number of stockholders in the com
munity was comparatively small, now there is a much wider distribution of
Marine Midland stock throughout the same community and the percentage of
customers who are stockholders has been and is being substantially increased.
M A R IN E
M IDLAND GROUP
(IN C .)
Marine Midland Corporation is purely a holding corporation, organized
under the laws o f Delaware and transacting 110 business 111 the State of New
York. For the purpose of affording the various banks in the group the benefits
o f centralized supervision, coopera live buying and selling of securities, stabili
zation of methods of operation, cooperative purchasing and advertising and the
other advantages which naturally accrue from group organization, the above
corporation was organized under the laws of New York as a management
company.
This company has only a nominal capitalization and all of its stock is o w n e d
by the trust companies or officials of the banks comprising the group. It has its
head office in Buffalo and a board of directors comprising representatives from
all o f the banks in the group. Under management contracts with each bank,
its expenses are prorated quarterly among the various banks in proportion to
their deposits at the beginning of the quarter. This company has adopted a
very carefully worked out program covering the service which it renders and
will render to the members of the group, which may be analyzed as fo llo w s :
1.
Supervision and examinations.— An expert examiner, who was form erly a
chief bank examiner o f the New York State banking department, has been
secured to head this department. He, with his associates, and with the assist
ance o f auditors drawn from other banks than the one being examined, will
conduct frequent examinations of the various member banks, thus insuring
that they wTill be maintained in excellent condition, that their methods will
be up to date and standardized according to the best accounting practice, and
that any weaknesses will be promptly discovered. The best methods developed
in any one bank will be made available for all in the group. This wre conceive
to be the most important service rendered available by the group system, and
one which will inevitably tend to weed out incompetent officials and doubtful
loans, build up the standards o f each separate bank, and give to the smallest
institution the same high character of supervision otherwise available only
to the larger institutions.
2
Advertising and new business.— Through the management company a na
tional publicity campaign is being carried on which has certain unique features.
Each advertisement has reference specifically to one of the communities in
which the Marine Midland Group operates and features that city and the
particular bank located there, Batten, Barton, Durstine & Osborn have been
retained as publicity counsel, and a comprehensive program is being wTorked
out by which all the banks will benefit from the publicity of each and the
development of the local community in which each is operating will be
consistently advocated.
Representatives of this department will also be constantly on the alert to
obtain new business for the various member banks. This department will
furnish a clearing house where all information regarding business developments
which offer opportunity for banking service will be noted and followed up.
Through having the combined resources o f all the member banks at their
disposal, representatives of this department will be able to offer lines o f
credit and other banking service commensurate with the needs of the largest
corporate enterprises in the country.
3.
Bonds and Investm ents■— One of the important divisions of this manage
ment corporation is that which will analyze the investments of the various
banks and assist them in making changes in their portfolios. The highest class
of investment service will thus be available fo r each bank and information
possessed by any one will be open to all. Experts have been at work for months
analyzing the portfolios o f the various banks and recommending changes in
the investments tending to strengthen the list and increase the rate of return.
Their advice will always be obtained before any changes are made, and they
w ill likewise call the attention of the several banks to opportunities for
profitable and safe investments as they arise.
B R A N C H , C H A IN , AND GROUP B AN K IN G
1179
4. Central credit file.— A central credit file is being inaugurated which will
contain credit information regarding customers or prospects whose principal
offices are located outside the immediate territory served by the group. This
will be of great value to any member considering increasing lines to such cus
tomers or extending lines to new prospects. In addition, the credit files of
each bank will, of course, be at the disposal of all the members.
5. Central purchasing bureau.—As standardized forms and equipment are
introduced throughout the group, economies will be effected through the employ
ment of the services of this department in making purchases in larger quan
tities and on better terms than otherwise possible.
6. Trust departments.— One of the most important services will be that per
taining to- the trust departments of the various institutions. Here, especially,
the smaller banks are lacking in the experience and facilities which would,
enable them to develop trust business in their communities. Efficient trust
officers will be at the disposal of all the members of the group, so that the
internal organizations of their trust departments will be standardized, enlarged,,
and improved, and their external relations with the communitj7 correspondingly
developed.
7. Miscel aneous.— In addition to the services outlined above, this company
will be in position to help the member banks in many other ways, as for instance
in developing their travel departments, their foreign departments, their realestate and mortgage departments, and in all the other branches of banking.
One which should perhaps receive special mention is that of industrial survey
and financial advice. The company will supply experts to study the business
methods and conditions of customers who are not making good, and to give
advice regarding changes in business methods or capital structure, by means of
which results advantageous to the banks and customers alike may be obtained..
GEOGRAPHICAL AEEA
The Marine Midland Group is the normal development of affiliated banks
throughout a territory closely bound together by common ties of industry, com
merce, and finance. This development started in the so-called Niagara frontier,
including the cities o f Buffalo, Niagara Falls, the Tonawandas, Lockport, and
Lackawanna, as well as the smaller communities o f East Aurora, Albion, and.
Snyder, and the territory immediately adjacent to the Niagara frontier extend
ing as far south as Jamestown and as far east as Rochester. All of these
communities are united by close trade relations, and the territory which they
cover may properly be described as a “ trade area ” in the restricted use o f
that term. By a normal extension three banks in the adjacent territory, known
as the southern teir. were added to the group in Binghamton, Johnson City,
and Cortland. Also in recognition o f the fact that the commerce of western
and central New York normally flows largely along the route of the Erie
Canal and the New York Central Railroad a representative bank in the manu
facturing city of Troy was added to the group. Finally, to round out the
territory served and pursuant to the plan originally adopted, which recognized
the necessity o f a New York City connection because of the very large volume
o f trade, commerce, and finance between all of these communities and that
city, the Fidelity Trust Co. of New York was acquired by the group. For
generations all the so-called “ up-State
banks and industries in New York
have had close business and financial relations with New York City.
The entire territory served by the Marine Midland Group may, therefore,
properly be regarded as a “ trade area /’ The rural communities in the
southern tier send their dairy and farm products to New York City. Grain,
pig iron, flour, and many other commodities originating in western New York
are shipped to New York City by rail or water transportation.
•The State of New York is an economic unit bound together by a community
of trade, transportation systems, uniform business customs, and the same laws..
It is also a financial unit comprising substantially the entire New York Federal
reserve district.
At the present time we do not contemplate the acquisition of any addi
tional banks outside this territory, as we feel that we should first coordinate
the banks which we have acquired and such additional ones within these limits
as we may acquire in the near future before considering the possibility of
extending our investment beyond these lines. As a matter of principle, how
ever, it would appear reasonable that a group of banks controlled by one
corporation need not of necessity be confined to the limits of any one State-
1180
B RA N CH , C H A IN , AND GKOUP B A N K IN G
or Federal reserve district. Certainly, where a recognized trade area overlaps
such lines the group of banks might well be likewise extended.
I f the group is to be confined to one trade area, the definition of trade area
should not be too limited or narrow, but should be broad enough to include
sufficient diversification so that if one locality is going through a business
depression the others will be far enough removed not to be affected by such a
purely local condition.
Such a condition o f trade area has been repeatedly recognized as applicable to
New York State and contiguous territory. The United States Government
census figures and all official reports divide the country into standard sections,
one of which is the Middle Atlantic division, comprising the States o f New
York, Pennsylvania, and New Jersey.
The Federal reserve district No. 2 comprises all of New York State. Fairfield
County in Connecticut, and the northern section of New Jersey as far as
Mercer and Ocean Counties.
In the Market Data Handbook of the United States, published by Batten.
Barton, Durstine & Osborn in 1929 as the result of an exhaustive field study
and statistical analysis covering several years of work, a trading-area map of
the United States is presented which includes as a “ major a r e a 5' New York
State, 5 counties in Connecticut, 14 counties in northern New Jersey, and a por
tion or all of 9 northern counties o f Pennsylvania. This so-called “ m ajor trade
area ” has been adopted as the basis for sales promotion programs by a number
o f large corporations, including, among others, Armstrong Cork Co., Atwater
Kent, Johnson & Johnson, Zellerbach, Clicquot, and General Electric Co. This
last-named company in its bulletin. Sales Office Territories, published Jan
uary" 1, 1930, prints a map showing its New York sales territory to be exactly
that of the “ major New York a r e a ” described above. International Magazine
Co. has issued a study of trading areas called Trading Area System of Sales
Control, copyrighted 1929. In this a marketing map of New7 York State is
published including, in addition to New York State, a portion of Connecticut,
northern New Jersey, and five counties in northern Pennsylvania. The same
territory is shown on a map published by the Chicago Tribune Book of Facts
issued in 1927, except that the last named includes all of the State o f New
Jersey instead of only the northern part.
From all these references it is clear that both logically and by recognized
governmental and business authorities the territory served by the Marine
Midland Banks is well within a recognized major trade area.
Whether or not any geographical limitation upon the group is wise depends
largely upon each particular case, and until experience has given us more
information upon which to base a judgment in this regard we prefer to remain
open minded.
GENERAL CO M M EN TS-----RELATION
TO GOVEEN M EN TAL OFFICIALS
Marine Midland voluntarily offered to permit the New York State superin
tendent of banks to examine its business, affairs, and records at any time as
.fully as though it were subject by law to such an examination. Later, the
New York Legislature amended the banking law so as to extend the jurisdic
tion of the banking department to corporations affiliated with State banks
or trust companies, and the governor has approved this bill. In my opinion
this is a proper arrangement. We are equally willing to submit to examination
by the Comptroller of the Currency, since some of our banks are national
banks and others are members of the Federal reserve system.
STOCKHOLDERS' L IA B IL IT Y EOI! A SSE SSM E N T S
Under both Federal and State laws, the stockholders of banks and trust com
panies are liable to an assessment for the benefit of creditors in an .amount
equal to the par value of the stock owned by them. Bank holding corpora
tions have sometimes been criticized on the ground that they constitute an
evasion of this liability. I feel that the contrary is the case, and that such
a corporation, properly organized and conducted, makes the stockholders’
liability much more readily enforceable.
Experience has demonstrated that under the ordinary unit banking condi
tions less than 50 per cent of such liability is in practice actually collected.
Contrast this with our own situation.
It is almost inconceivable that a
condition could arise among our banks where the stockholders’ liability could not
B R A N C H , C H A IN , AND GROUP BAN K IN G
1181
be enforced 100 per cent. The total authorized capital stock of all our banks
is $28,025,000, which is, therefore, the extent o f stockholders’ liability, if all
the banks should fail so badly as to make the maximum assessments necessary.
Against this, Marine Midland Corporation has over $45,000,000 in cash, outside
its investment in bank stocks, and it is our policy to keep at all times an
amount in cash or its equivalent equal to our aggregate stockholders’ liability
on the bank stocks owned by us. It is, however, beyond the bounds of proba
bility that any such situation as the failure of all the banks should arise.
I f it did, it could only be as the result of such a cataclysmic financial debacle as
would render the ordinary individual stockholders’ liability actually unen
forceable to any extent.
Experience has demonstrated that in nearly all cases it is the smaller banks
which get into difficulties requiring resort to assessments against the stock
holders. When we remember that the total surplus and undivided profits
o f our banks combined is $42,134,389.72, as of March 31, 1930, or half again
as much as their total authorized capital, and that the Marine Midland
Corporation owns substantially all of this surplus and undivided profits in
other banks (in addition to its other resources) it is readily seen that payment
of an assessment by any one bank in full is assured. Certainly, therefore,
the depositors have vastly stronger protection than in cases where the stock
of a bank is widely scattered among individual holders of every variety o f
type, business, and financial responsibility.
I f a holding company were organized to own only the stock of a single bank,
and no other assets, then it might properly be said to constitute an evasion of
the stockholders’ liability. But where, as in our case, the holding company
owns the stock of a large group of banks, located in many different com
munities, and serving widely varying industries, and has also a substantial
worth outside of such bank stocks, there can be no possible conclusion but that
the stockholders liability becomes a much more readily enforceable and valu
able asset of each separate bank. Moreover, the actual obligation of the hold
ing company to protect every bank in jts group is far greater than the legal
requirements represented by its stockholders’ liability. It would be fatal fo r
it to permit any single bank controlled by it to fail for any cause whatever.
Its moral responsibility goes far beyond its legal obligations as a stockholder.
G IJO U P B A N K I N G
TH E
N A T V IiA I . K K S I I.Y OF ilO D K R N
E C O N O M IC T E N D E N C I E S
During the past 10 years the methods of conducting business in this country
have been revolutionized. As stated by Comptroller Pole in his testimony
before this committee: “ The economic movement away from a large number o f
independent local utility and industrial operating units towards a stronger anti
more centralized form of operation in the large cities has curtailed the op
portunities of the country bank for diversity and extension of business whilebroadening those opportunities for the large city bank. * * * The expenses
o f operating banks have been materially— very materially— increased. The op
portunities o f the country banks have diminished in that the small town has
become less of a factor by reason of the improvement in roads and the quick:
transportation which takes people to the cities to do their business and their
banking frequently instead of doing it in the small town. Heretofore in years;
gone by a community has been more or less independent, with its locally op
erated utilities, its light plants, ice plants, and wagon factories, etc., all o f
which have been removed and those things have gone to the cities and now
are controlled by large corporations and those opportunities have been removed.
“ There has been a change in corporate financing within the last 10 years,.
Heretofore large corporations, and small corporations similarly, would borrow
seasonably, whereas now they have financed themselves through reorganization
of their capital structures. That has removed the opportunities from the banks*
and such things as that have made it very difficult for a bank to stay on an
even keel. * * * Banks in small communities have to be satisfied with
small local loans and real-estate loans, which, frequently, are slow and un
satisfactory, resulting in a greater percentage o f loss than in years gone by.”
The banking system has not kept pace with all these changes. On the con
trary, it tried to continue unchanged the traditional American ideal of the small,
independent banker operating in thousands o f small communities. The changed
business conditions, as well as the agricultural depression, cut off the form er
sources of profit for such bankers, so that thousands failed, and other thousands
have been on the verge o f failure.
1182
B R A N C H , C H A IN , AND GROUP R A N K IN G
In the 10 years from 1920 to 1929, inclusive, about 750 national banks and
4,900 State banks, mostly small in size, failed. It is a ghastly record. About 10
per cent of the national banks and 20 per cent o f State banks closed their doors.
In the current year 1930, the Comptroller of the Currency lias testified before
this committee that from January 1 to February 21, 1930, 155 more banks
failed, or at the rate of 1,140 a year. These failures have not only caused
tremendous losses to the depositors and the stockholders, but they have virtually
paralyzed business in whole sections of the country. The remaining banks
have been afraid to make loans even well within their capacity, feeling that
they must retain sufficient liquid assets to meet a run which might be caused
at any time by the suspension of a neighboring institution.
Moreover, the vastly increased banking and financial needs resulting from so
many consolidations and mergers rendered the resources of banks which had
been large enough 10 years ago inadequate to meet these new demands.
As a result of these two tendencies in industrial development, two distinct
movements have become manifest in our banking structure, first the stupendous
increase in the size and decrease in the number o f the metropolitan banks
through huge mergers and consolidations, and, second, the rapid development o f
group banking throughout the country.
Unlike manufacturers or retailer^ bankers could not establish branches ex
cept to a very limited extent. Branch banking, except within city limits, is,
generally speaking, prohibited by the national bank act and by the laws o f most
States. The ownership o f stock control of one bank by another is likewise fo r
bidden. Therefore, to accomplish the same results that industry had reached
toy means o f consolidations and branches, group banking developed almost over
night, as an entirely new form of banking development.
GROUP B A N K IN G
r . C H A IN B A N K IN G
As generally understood, “ group banking ” implies the ownership by a hold
ing company managed by bankers of a controlling stock interest in a group of
banks or trust companies. It is a banking system whereby a number of cor
porately independent financial institutions, retaining their own identity, capital,
personnel, and management, are coordinated through m ajority stock control,
by a supervising holding company, operated by the banking interests of the
territory which it serves. The stock of this holding company is widely dis
tributed among a large number o f stockholders.
“ Cha'n banking ” as the expression is commonly used, refers to the ownership
o f stock control o f a number of banks, directly or indirectly, by one or more
individuals who may be bankers, but are more often business men wTho have
.acquired or operate the banks as adjuncts o f their business interests. Ultimate
.stock control is usually lodged in one, or at most, in a very few' individuals.
GROUP B A N K IN G V. BR A N CH B A N K IN G
We were compelled to carry out our plans by the method of group banking ”
because as already intimated, the laws of New' York State and the national
bank act both prohibit branch banking beyond city limits. It is, therefore,
somewhat academic for me to try to compare one system with the other, when
■only one was open to us. However, in view of the suggestion that the national
hank act may be amended in such a way as to permit at least state-w7!de branch
banking, I have given considerable thought to the question as to wThich form of
operation would be preferable in our case.
Obviously certain advantages of branch banking can not be realized fully by
group banking. For instance, more economies may be effected, both in operating
costs and 'n overhead. Administration, also, would be more direct and simple.
'The corporate set-up is less complicated, the resources o f the system more
•closely integrated, and authority more concentrated.
On the other hand, there appear to be certain advantages which group bank
ing possesses over the branch system.
Ernest T. Clough in Barrons for April 14, 1930, in an article on “ Group
Hanking Sweeps the Country,” summarizes these advantages as follows *
“ Banking facilities broadened: In many ways, the group-banking movement
-offers advantages to American business, to individuals in the community, and
to the depositors and stockholders of the numerous unit banks. Banking opera
tions are thereby broadened, the ability to handle the credit requirements of
large corporate enterprises in the various territories is improved, sounder
B R A N C H , C H A IN , AND GROUP BAN K IN G
1183
investment advice is being given, individuals are offered opportunities of trust
department and safekeeping facilities never before available, and advantages
in the financing of foreign trade and in the obtaining of letters of credit for
travel abroad are given the community served such as they are not able to
secure in any other way under the present system of banking. At the same
time, the local banking personnel is handling the problems of each community,
which means that local requirements are fully understood and given sympa
thetic consideration. Depositors continue to have a feeling of pride in the
institution as one which reflects the financial strength of the community, and
the ability to maintain this close kinship between the depositor and his bank
is unquestionably one of the strongest factors of strength in group banking.”
Group banking is a compromise between the British, continental, and Cana
dian systems of branch banking, and the traditional unit-bank system of the
United States. Possibly it is only a transitional stage. But for the present,
at least, the retention of local interest and contacts, through independent
boards of directors and real local autonomy, seem very real advantages. Local
pride and rivalry are stimulated. Cooperation rather than centralization is
stressed. In the numerous meetings we have had of the officers and directors
o f the different banks, a splendid esprit de corps was developed, with much
friendly emulation as to the relative merits, efficiency, and progress of their
respective institutions. It is hard to conceive of such a spirit— at least under
present conditions— in a convention of branch managers. However, we are
open-minded on the subject, and I am frank to confess that our experience
has been too short to justify forming any final judgment as to the respective
ultimate advantages of group versus branch banking. Nevertheless, I can and
do heartily indorse the statement made by Mr. Wakefield of the First Bank
Stock Corporation in his testimony before this committee, in which he sa id :
“ The group system of banking is sound because it rests on these foundations:
First, cooperation of resources; second, diversification of resources; third, own
ership spread throughout the territory; fourth, creation and management by
bankers.”
ADVANTAGES COM M ON TO GEO V P AND BRA NCH B A N K IN G
Through its affiliations with the other Marine Midland banks, The Marine
Trust Co. in February wTas able to become the successful bidder for an entire
issue o f $50,000,000 o f the United States Government certificates. This fact
attracted widespread notice and much favorable newspaper comment. It was
stated to be the first time that such a large Government issue had been taken
up by a bank outside o f New York City. This is one illustration o f the many
ways in which bigger things can be done under the group or branch system.
The Orleans County Trust Co. is one of our smallest banks, being located at
Albion, N. Y., in the midst of a farming community. Most of the farms are
already mortgaged, and the farmers are having a hard time to make them pay.
Through its affiliation with the Marine Midland group, this little trust company
has been able to secure the services o f an expert on farm loans, who is now
studying the situation there and advising the farmers how they may so improve
their methods or refinance their operations as to turn failure into prosperity
and gradually liquidate their loans. This is an illustration o f a very different
way in which advantages may result from a coordinated banking system.
Another real gain from an organization viewpoint is the greatly enlarged
opportunity afforded to every officer and employee in the whole group. Here
wTe can learn much from the experience of Canadian bankers, where they are
able to try a man out in a small branch and promote him or shift him around
until he has broadened his experience and developed his abilities and become a
seasoned, well-trained banker. The chance for advancement is multiplied many
times. Good men are bound to ^ discovered and given promotion in their own
or some other bank. A messenger in one o f the country banks may some day
become president o f The Marine Trust Co. or o f the Marine Midland Cor
poration.
EELATION TO OTHER INDEPENDENT B A N K S
The Marine Midland banks number among their correspondents hundreds of
independent unit banks. It is the policy o f Marine Midland to work with these
banks and serve their requirements as conscientiously and ably as it does its
own member banks as far as it lies within its power so to do.
1184
B R A N C H , C H A IN , AND GROUP B A N K IN G
Whatever power and influence the joining of this group of banks into the
Marine Midland group has given will never be used to force or coerce a smaller
independent bank either into joining the Marine Midland group or into taking
action detrimental to its own best interests.
Rather Marine Midland will use its power and influence to first protect its
depositors’ moneys, build up and assist local enterprise, better in so far as it
can local banking conditions, develop the communities which it serves to the end
that by serving others efficiently and well it also best serves itself. Local inde
pendent banks will find Marine Midland helpful, aggressive for business but
only on a fair and profitable basis. Several times at the request of the New
York State banking department the Marine Trust Co. has aided in saving
smaller banks from failure each time at no gain to itself. A bank that is not
a profitable bank is a poor bank. The Marine Midland Corporation desires its
member banks to be profitable ones. We desire our employees and officers to
receive a living wage. Too often the wages and salaries paid bank employees
are a temptation to dishonesty.
CONCLUSION
Industrial and economic progress in the past 20 years has improved the
standards of living and contributed to the happiness and welfare of the greater
bulk of the people. Most of this progress has resulted from developments in
transportation and communication which have broken down barriers and
prejudices and changed methods o f transacting business both in manufuacturing
and distribution.
In this progress, up to the present time, banking organization has lagged
behind. To-day, however, group banking is the logical means by which the two
basic functions of a bank, the protection of its depositors’ money, and the sound
constructive extension o f credit can be most effectively exercised.
Marine Midland Corporation, as an exponent o f modern banking structure,
definitely benefits the public, 350.000 depositors, and over 20,000 stockholders.
These advantages may be summarized as fo llo w s:
ADVANTAGES TO TH E DEPOSITORS
1. Greater protection for their deposits in a member bank through the avail
ability of greater resources in money and experienced management as applied
both to operations and the handling of the bank’s investments.
2. Greater mobility of credit. (E xam ple: The manufacturer in a small com
munity who needs more credit than has been available to him through an
isolated unit bank may now, through a group bank in his own home town, make
arrangements for his requirements with greater facility.)
Group banking will benefit many communities by furnishing the assurance
that credit is extended on the basis of sound business judgment rather than
prejudice. (Example : Many times the president of a small bank, because of
prejudice, will refuse to meet the legitimate needs of his customers or will often
use the bank for his own personal ends.)
Certain small town banks with little paper to rediscount have been unable
to take care of the legitimate matters of their individual borrowers. To such
banks, members of Marine Midland, we are sending funds.
3. More complete financial service: The isolated country bank, while pro
fessing to have trust and investment departments, has been unable to afford
competent officers along such lines. Now through any Marine Midland member
bank there is available to the public such service through the part time of
men who are experienced in their respective fields.
4. More efficient service. (E xam ple: Through the extensive contacts of the
Marine Midland group member banks are able to secure better and quicker
credit information for their customers.)
In some instances readjustment of operating practice will improve the service
at tellers windows and necessitate less waiting in line on the part of the public.
5. Financial advice: Manufacturers, jobbers, and merchants have a right to
expect advice from their bank on many problems of a semibanking or business
nature. If the officers in any particular Marine Midland bank can not from
their own experience contribute constructive advice, such counsel is more
directly available to the inquiring business man by virtue of the fact that the
bank is a member o f the group.
B L A N C H , C H A IN , AND GROUP B AN K IN G
1185
0. Development of communities and areas served by ilie g rou p : The Marine
Midland Corporation is not a bank and can profit only as the communities
in the area which it serves ihoni-^lw-: <n*ow and prosper. With this in mind
a national advertising campaign pointing out. the advantages of Marine Mid
land cities and New York Kiau- :‘rom a manufacturing and s a le s distribution
standpoint is being run in national ; ublications.
W e are also preparing a mark'-tinM’ survey of New York State designed
to point out the opportunities in New York State.
None of these things which in the last analysis should tend to build up
These communities could be attempted or carried out by the average small
or moderate size unit bank.
ADVANTAGES TO T H E STOCKHOLDERS
1. Safety of investm ent: The value of stock in an isolated unit bank is
subject to depreciation, which, might e< me from a business depression affecting
that particular community or e> oi: ; com a single credit loss. An investment
in stock, such as that o f Ma-im- Midland Corporation, owning as it does
17 banks, has the advantage oi safety Through diversification of risk.
A change in management mv< »ita ie d , perhaps, through the death of the
chief executive of a small country bank might be detrimental to the value of
stock in such a single institution. < the other hand, under group banking
continuity o f good management in any sim .ie hank is more readily assured.
2. Opportunity for normal im-p'-a^' in value: Economies in operation and
greater effici; n< y in manage;):'-’ t go Land in hand with group bankinsr. Further
more group banking f u r n i s h e s opportunities for increased calming* T h r o u g h the
ability to exit nd trus‘ and i n \ i i v 'i n facilities to a greater nui-.b'T o f people.
8.
Greater market a hi’h y : Surk in ill-' Marine Midland Corporation is listed
and affords the investor mi opportunity to liquidate at any t im i if he needs to
do so. Oftentimes the holder of mo *k in a small bank finds it almost impossible
to dispose of- his hold intr.- wlrhonr -\arifiee.
The soie basis of profit. so. far as M:r*ii.* Midland. Corporation is concerned,
is the growth and development of the bank* in Marine Midland cities. In each
of these there is aggressive normal compel b i< m Our banks* opportunity there
fore lies chiefly in better serving the public.
In advocating group banking I do not deprecate the accomplishments and
ability of the banker in a small city or town. Changes in business methods,
however, .are liraking it more difficult P t him to operate a safe and profitable
bank playing a lone hand. As outlined above, group banking retains all that
is good in the unit and contributes much in ’r esources and management which
is of benefit to the pindic and through, them of benefit to the bank in the small
town.
We look forward to the future with «. mifideme. We welcome cooperation with
both. State and governmental authorities and will furnish them every oppor
tunity to examine our affairs. Our d ricto rs and officers have the confidence
of the communities in which we do misme^. and we are equally proud of the
character of our customers. At the "-aim time we are not unmindful of the
great responsibility resting upon us. especially in being one of the pioneers in
this new field of American banking, and we are determined to do our utmost
to serve faithfully and efficiently our 20,000 stockholders, our 850.000 customers,
and every community, both the s m a l l e s t and the largest, in which a Marine
Midland bank is operating.
C e r t if ic a t e
of
I n c o r p o r a t io n
of
M a r ix e
M id l a n d
C o r p o r a t io n
First: The name of this corporation is Marine Midland Corporation.
Second. Its principal office in the State of Delaware is located at No. 7 West
Tenth Street, in the city of Wilmington, county of New Castle. The name and
address of its resident agent is the Corporation Trust Co. of America. No. 7 West
Tenth Street, Wilmington, Del.
Third. The nature of the business and the objects and purposes proposed to
be transacted, promoted, and carried on are to do any or all of the things
herein mentioned as fully and to the same extent as natural persons might or
could do in any part o f the world, as set forth below. (W herever used in this
article 3, the expression “ evidence o f indebtedness” or “ evidences of indebt100336—30— v o l 2,
pt
9------ 12
1186
BRANCH, CHAIN, AND GROUP BANKING
edness ” shall mean and include, without limiting its generality, any and all
bonds, debentures-, notes, coupons, mortgages, commercial paper, an d/or any
other instruments evidencing indebtedness, however created, issued, or granted,
and whether fully paid or subject to further payments; and the expression
“ certificate of interest ” or “ certificates of interest ” shall mean and include,
without limiting its generality, any and all certificates or shares o f stock, scrip,
interim receipts, participation certificates, voting trust certificates, subscrip
tion warrants, option warrants, and/or any other instruments evidencing inter
est in share capital or other property, however created, issued, or granted, and
whether fully paid or subject to further payments.)
(1) To acquire by purchase, subscription, contract, or otherwise, hold for
investment or otherwise, own, sell, exchange, mortgage, pledge, or otherwise dis
pose of, and generally deal in and with evidences of indebtedness, an d/or
certificates of interest issued or created in any and all parts of the world by
banks, trust companies, financial institutions o f every kind and description, cor
porations, associations, partnerships, firms, trustees, syndicates, individuals,
governments, States, municipalities, or other political governmental divisions
or subdivisions, or by any combinations, organizations, or entities whatsoever,
irrespective of their form or the name by which they may be described, and to
issue in exchange therefor or in payment thereof, in any manner permitted by
law, its own evidences of indebtedness, and/or certificates of interest, or to
make payment therefor by any other lawful means of payment w hatsoever;
and to exercise any and all of said powers, either on its own account, or with
or as agent for other persons, firms, corporations, or organizations.
(2 ) To receive, collect and dispose of interest, dividends, and income upon,
o f and from any evidence o f indebtedness or certificate of interest and any
other property held or owned by it, and to exercise any and all rights, powers
and privileges of individual ownership or interest in respect o f any and all
such evidences of indebtedness or certificates of interest, including the right
to vote thereon for any and all purposes.
(3) To indorse or guarantee the payment of principal and/or interest or
dividends upon, and to guarantee the performance of sinking fund or other
obligations of, any evidences of indebtedness or certificates of interest, and to
guarantee the performance of any of the contracts or other undertakings in
which the corporation may otherwis ebe or become interested, or any corporation,
association, partnership, firm, trustee, syndicate, individual, Government, State,
municipality, or other political or governmental division or subdivision, domes
tic or foreign, in so far as may be permitted by law to a corporation of this
character.
(4) To enter into, make, perform, and carry out or cancel and rescind con
tracts relating to or underwritings of evidences of indebtedness or certificates
of interest, o f any corporation, association, partnership, firm, trustee, syndi
cate, individual, Government, State, municipality, or other political or govern
mental division or subdivision, domestic or foreign, or of any combination,
organization, or entity, domestic or foreign, and to act as manager of' any
underwriting or purchasing or selling syndicate.
(5) To lend money, whether or not secured by mortgages or other liens on
real estate or personal property, and to negotiate and make, either as principal
or broker or agent, contracts or other agreements in connection therewith.
(6) To borrow money with or without security, to make, accept, indorse,
guarantee, execute, and issue evidences of indebtedness and to secure the same
by a mortgage, pledge, deed o f trust, other lien, or otherwise, upon all or
any part of the property o f the corporation, wherever situated.
(7) To act as agent or representative of individuals, firms, and corporations,
and as such to develop and extend the business interests o f individuals, firms,
and corporations.
(8) To purchase, hold, sell, and transfer the shares o f its own capital stock,
provided it shall not use its funds or property for the purchase of its own
shares o f capital stock when such use would cause any impairment of its capi
tal, and provided that shares of its own capital stock belonging to it shall not
be voted upon, directly or indirectly, but nothing in this subdivision shall be
construed as limiting the exercise o f the rights given by section 27 of the
general corporation law of the State o f Delaware.
(9) To take, lease, purchase, or otherwise acquire and to own, use, hold,
sell, convey, lease, exchange, mortgage, improve, develop, cultivate, and other
wise handle, deal in, and dispose o f real estate, real property, and, any interest
or right therein.
B R A N C H , C H A IN , AND GROUP B AN KIN G
1187
<10) To purchase, manufacture, acquire, hold, own, mortgage, pledge, lease,
sell, assign, and transfer, and to invest, trade, deal in and with goods, wares,
merchandise, patents, trade-marks, rights, privileges, franchises, grants, and
property o f every kind and description ; to carry on any of the above businesses
or any other business connected therewith, wherever the same may be per
mitted by law, and to the same extent as the laws of this State will permit
and as fully and with all the powers that the laws of this State confer upon
corporations and organizations under the general corporation law of the State
o f Delaware.
(11) To acquire and take over as a going concern and/or carry on the busi
ness of any person, firm, association, or corporation engaged in any business
which this corporation is authorized to carry on.
(12) To render service, assistance, counsel, and advice to any person, firm,
association, or corporation in the conduct of his or its business.
(13) To do all and everything necessary, suitable, and proper for the accom
plishment of any of the purposes or the attainment of any of the objects or the
furtherance of any o f the powers hereinbefore set forth, either as principal or
agent, either alone or associated with other corporations or with firms or indi
viduals, and either directly or indirectly through one or more subsidiary com
pany or companies organized or utilized for the purpose, and to do any other
act or acts, thing or things, incidental or pertaining to, or growing out of, or
connected with the aforesaid business or powers, or any parts thereof, provided
the same be not inconsistent with the law under which this corporation is
organized.
(14) The business or purpose o f the corporation is from time to time to do
any one or more acts and things herein set fo r t h ; and it may conduct such
business in all its branches or any part thereof either within or outside the State
of Delaware, and in other States and Territories and dependencies of the United
States and in foreign countries.
The foregoing enumeration of specific powers shall not be deemed to limit or
restrict in any manner the general powers o f the corporation and the enjoyment
and exercise thereof as conferred by the laws of the State of Delaware upon
corporations formed under the general corporation law of said State and the
doing o f any or all the things hereinbefore set forth to the same extent as
natural persons might or could d o ; but this corporation shall not by any implica
tion or construction be deemed to possess the power of issuing bills, notes, or
other evidences of debt for circulation as money, or the power of carrying on
the business of receiving deposits of money, or the business of buying gold and
silver bullion or foreign coins.
Fourth. The total number of shares of stock which the corporation shall
have authority to issue is 10,000,000, and the par value of each of such shares
is amounting in the aggregate to $100,000,000.
Fifth. The minimum amount of capital with which the corporation will com
mence business is $1,000.
Sixth. The names and places o f residence o f each of the incorporators are
as fo llo w s: C. S. Peabbles, Wilmington, D e l.; L, E. Gray, Wilmington. D el.;
H. E. Grantland, Wilmington, Del.
Seventh. This corporation is to have pepetual existence.
Eighth. The private property of the stockholders shall not be subject to
payment o f corporate debts to any extent whatsoever.
Ninth. The holders of the stock o f this corporation shall have a preemptive
or preferential right to be exercised upon such terms and conditions (including
a determination o f what disposition shall be made of fractional shares result
ing from a pro rata offering to stockholders) as the board of directors in its
discretion may from time to time fix and determine, to subscribe to any shares
of stock or obligations convertible into stock of this corporation, issued for
cash : Provided, That such right o f subscription shall not apply to any shares
of stock issued upon the organization of this corporation or within 90 days
thereafter : Provided also, That such right of subscription shall not apply to
any shares issued to any director, officer, or employee of the corporation, not
exceeding 25,000 shares in the aggregate, at such price or prices, not less than
$60 per share, as the board of directors may from time to time determine,
but no shares issued upon the organization o f this corporation or within 90
days thereafter shall be deemed to be issued out o f said 25,000 shares; but no
holder of stock of this corporation shall have any preemptive or preferential
right o f subscription to any shares of stock o f this corporation or to any obliga
tions convertible into stock o f this corporation issued for any consideration
1188
B K A X C H , CHAIN*, AXD GItOUP B A N K IN G
other thnn casli. As used in this paragraph, the term “ obligations convertible
into stock '' shall in elude any notes, bonds, or other evidences of indebtedness
which by tlieir terms are convertible into shares o f stock of this corporation
or with which are issued warrants (either in attached or detached form ) or
other rights to purchase for cash shares of stock o f this corporation.
Tenth. Subject to the provisions of law and in furtherance and not in limita
tion o f the powers conferred by law. tlie board of directors of tlie corporation
is hereby empowered by resolution or resolutions:
1. Subject to tlie provisions of article 9 hereof, to provide for the issuance
from time to time of its shares of stock of any class, whether now or hereafter
authorized, and securities convertible into shares of its stock of any class,
an d/or securities whether now or hereafter authorized carrying a privilege to
subscribe for or receive shares of its stock of any class, for such considerations
and upon such terms and conditions as tlie board of directors may fix from
time to time.
2. To determine that o n l y a part of the consideration which shall be received
by the corporation in excess of the par value of its shares of capital stock or
any thereof, which it shall issue from time to time shall be capital.
3. Without the consent of the stockholders of any class, to authorize the
issuance and sale from time to time of evidences of indebtedness (as defined in
article 3 hereof) of the corporation for such consideration as it may deem ad
visable, to provide that such evidences of indebtedness be issued in such series,
in such denomination or denominations, and with such interest rate or rates,
redemption price or prices, and maturing at such time or times and otherwise
varying as it may determ ine: and likewise without such consent to mortgage,
pledge, and/or hypothecate all or any part of the corporation’s property, real,
personal, or mixed (except its corporate franchises), and its rents, revenues,
and income, whether now owned or hereafter acquired, and to authorize the
execution, delivery, filing, and recording of all mortgages, deeds of trust, or other
indentures, in such form as shall lie determined bv it. to secure the pavuient
of all or any of such evidences of indebtedness, the principal and interest
thereof, the premium, if any. thereon, and any and all other amounts or sums
payable in respect thereof or in connection therewith.
4. To make, alter, amend, change, add to, or repeal the by-laws of this cor
poration without any action on the part of the stockholders.
5. By resolution passed by a m ajority of the whole board, to designate two
or more of its number to constitute an executive committee, which committee,
so far as is provided in said resolution or in the by-laws of this corporation,
shall have and may exercise the powers of the board of directors in the man
agement of the business and affairs of this corporation and have power to
authorize tlie seal of this corporation to be affixed to all papers which may
require it.
6. When and as authorized by the affirmative vote of the holders of a ma
jority of the stock issued and outstanding having voting power given at a
stockholders* meeting duly called for that purpose, or when authorized by the
written consent of the holders of a m ajority of the voting stock issued and out
standing to sell, lease, or exchange all of the property and assets of the cor
poration, including its good will and its corporate franchises, upon such terms
and conditions and for such consideration, which may be in whole or in part
evidences of indebtedness and/or certificates of interest (as defined in article
3 hereof) as its board of directors shall deem expedient and for the best
interests of the corporation.
7. From time to time, to determine whether and to what extent and at what
times and places and under what conditions and regulations the accounts and
1tooks of this corporation (other than the stock ledger) or any of them shall be
open to the inspection of stockholders; and no stockholder shall have any right
of inspecting any account, book, or document of this corporation, except as con
ferred by statute, unless authorized by resolution of stockholders or directors.
8. To set apart out of any of the funds or assets of this corporation, available
for dividends, a reserve or reserves for any proper purpose, and to abolish
any such reserve or reserves. Against any such reserve or reserves an d/or
surplus so established, there may be charged losses at any time incurred by this
corporation, also dividends or other distribution upon stock. Such reserve or
reserves and/or surplus m a y be reduced from time to time by the board of
directors by transfer from such reserve or reserves an d/or surplus to capital
account.
9. Subject to tlie provisions of article ninth hereof, at any time or from
time to time to create and issue (without any action by the stockholders of
B R A N C H , C H A IN , AND GROCP BAN K IN G
1189
the corporation), whether or not in connection with the issue and sale of
any shares of stock or other .securities of the corporation, rights or options
entitling the holders thereof to purchase from the corporation shares of its
capital stock, such rights or options to be evidenced by or in such instrument or
instruments as shall be approved by the board of directors. The terms upon
which, the time or times, which may be limited or unlimited in duration, at or
within which, and the price or prices at which any such shares may be pur
chased from the corporation upon the exercise of any such right or option
shall be such as shall be fixed and stated in a resolution or resolutions adopted
by the board of directors providing for the creation and issue of such rights
or options, and set forth or incorporated by reference in the instrument or in
struments evidencing such rights or options.
Eleventh. The number of directors which ^ii i 1 <on titut( the whole board
shall be such from time to time as shall be fixed n the o\ la^->. but in no case
shall the board be less than three (8 ). In case <m am vn lease in the number
of directors, such additional directors shall be ' hos* u b* iho <H e c t o r s or stock
holders at the time entitled to vote, as may be p iesu ibed m tl e by-laws of this
corporation. Directors need not be stockhohk rs
J’ li.-. coipMj it ion may in its
by-laws confer powers upon its directors in ; ddiuon u> too e <o>iferred in this
certificate of incorporation and in addition to the powers and authorities ex
pressly conferred upon them by statute.
Twelfth. The corporation shall be entitled to t reat the person in whose name
any share is registered as the owner thereof for all purpo>+\-., and shall not be
bound to recognize any equitable or other claim to or interest in such share
on the part of any other person, whetiier or not the corporation shall have
notice thereof, save as expressly provided by the lav* oi tin* State of Delaware.
Thirteenth. Both stockholders and director1 -hall h <\e power, if the by-laws
so provide, to hold their meetings and to have one <,r m >i «* o fi--'- within or with
out the State of Delaware and to keep the books of this corporation (subject to
the provisions of the general corporation law of -aid Stare' outside the State of
Delaware, at such places a~ may be from time to ihao de-aunated by the board of
directors.
Fourteenth. All the powers of this corporation in so far as the same may be
lawfully vested by this certificate of incorporation in the board of directors, are
hereby conferred upon the board of directors of tli<< cojp< rn’ ion. provided,
however, that by resolution of the board of directors adopted either by a quorum
disinterested in the subject matter of the resolution or
- i .m] therein, as the
case may he, any matter concerning the management of the corporation or its
affairs may be referred to the stockholders o f the corporation i’oj- decision and
in such cases such matters may be authorized by v o t e adopt/-] by tit*' majority
of a quorum of the siockliolders entitled to vote at a
et ii.i> *
duly held.
Fifteenth. A director of the corporation shall not i>. .lie ab-ei <-e <>f fraud be
disqualified by his oiiice from dealing or contractin'.* w :ih tie' <orponuion either
as a vendor, purchaser, or otherwise, nor in the ao^-ec ■ .■«' Gaed shall any
transaction or c,infract of the corporation bo void or <,ii,a!>l< -r affected by
reason of the fact that any director, or any firm o| v-hh ’ •anv •i'»vet-,r is a member, or any corporation or association of which am o’ i,,en >r i^ an oiiieer, direc
tor. or stockholder, is in any way interested in -u'*h transacrhoi or contract:
provided that at the meeting of the board of direr;or- or .*f a ••ommiitee thereof
having authority in the premises, authorizing or coidirmn-u,- .-aid contract or
transaction, the existence of an interest o f such di-vc,or. firm, r orooration, or
association is disclosed or made known for shall hav- !> ■<>., aii-<■1 ■d and spread
upon the records at a previous meeting at which a quorum wa- Mi^ent) and
there shall be present a quorum of the board of direct •^ or
t he directors
constituting such committee, and such contract or i ran^'e-Go,, 11;i11 be approved
by a majority of such quorum, which majority shall consist of ui rectors not so
interested or connected. Nor shall any director be liabG to mc-*ou>r to the corpo
ration for any profit realized by him from or throuuh any >ucb transaction or
contract of the corporation ratified or approved as aforesaid,, by reason of the
fact that he or any firm of which he is a member, or any corporation or associ
ation of which he is an officer, director, or stockholder, was interested in such
transaction or contract. Anything herein contained to the contrary notwith
standing, all or any of the directors of the corporation, in connection with the
organization of this corporation and the issuance of its stock for cash and/or
properties, may vote to approve and authorize plans and agreements for the
acquisition by this corporation, through the issuance of its own stock in exchange
therefor, of stock in banks a n d/or trust companies o f which said directors, or
1190
B R A N C H , CHAIN", AND GROUP B A N K IN G
any of them, may be stockholders, directors, or officers, and to approve and au
thorize an underwriting agreement or agreements for the sale of stock of this
corporation, in which they or any of them may be interested, with the same
force and effect as though not so interested. Directors so interested may be
counted when present at meetings of the board of directors or of such committee
for the j)urpose of determining the existence of a quorum. Any contract, trans
action, or act o f the corporation or of the board o f directors or of any committee
thereof (whether or not approved or ratified as hereinabove provided) which
shall be ratified by a m ajority in interest of a quorum of the stockholders en
titled to vote at any annual meeting or any special meeting called for such pur
pose or approved in writing by a m ajority in interest of the stockholders entitled
to vote without a meeting, shall be as valid and as binding as though ratified
by every stockholder of the corporation.
Sixteenth. This corporation reserves the right to amend, alter, change, or
repeal any provision contained in this certificate o f incorporation in the manner
now or hereafter prescribed by statute, and all rights conferred on officers,
directors, and stockholders herein are granted subject to this reservation.
We. the undersigned, being each of the incorporators hereinbefore named
for the purpose of forming a corporation to do business both within and with
out the State o f Delaware, and in pursuance o f the general corporation law of
the State o f Delaware, being chapter 65 of the Revised Code of Delaware, and
the acts amendatory thereof and supplemental thereto, do make and file this
certificate, hereby declaring and certifying that the facts herein stated are
true, and accordingly have hereunto set our hands and seals this 23d day of
September, 1929.
C. S. P eobles
L. E. G r a y
H. E. G r a n t la n d
[ l . s. j
[ l . s.]
[ l . s.]
In the presence o f:
Albert L. Miller.
S t at e of D e l a w a r e ,
County o f New Castle, ss:
Be it remembered that on this 23d day of September, 1929, personally came
before me, Albert L. Miller, a notary public fo r the State of Delaware, C. S.
Peobles, L. E. Gray, and H. E. Grantland, all parties to the foregoing certifi'
cate o f incorporation, known to me personally to be such, and severally
acknowledged the said certificate to be the act and deed of the signers re
spectively, and that the facts therein stated are truly set forth.
Given under my hand and seal o f office the day and year aforesaid.
[ s e a l .]
A l b e r t L. M i l l e r , Notary PuMic.
S t a t e of D e l a w a r e .
O f f ic e o f S e c r e t a r y o f S t a t e .
I,
Charles H. GrantSand. secretary of state o f the State of Delaware, do
hereby certify that the above and foregoing is a true and correct copy of certifi
cate o f incorporation of the Marine Midland Corporation, as received and filed
in this office the 23d day of September, A. D. 1929. at 11 o’clock a. m.
In testimony whereof I have hereunto set my hand and official seal, at Dover,
this 23d day of S ep tem b er in the year of our Lord 1929.
[ s e a l .]
C harles H . G rantland,
Secretary of State.
B y -L a w s o f M a rin e
M ji* la n d C o r p o r a t io n
(a s
A m ended
to
O ctob er
1. 1929)
o f f ic e s
1. The principal offi - ^hali be i'i the city of Wilmington, county of New
Castle, State of Delaware, and the name of the resident agent in charge thereof
is the Corporation Trust Co. of America.
2. The corporation may also have offices at such other places, within or with
out the State of Delaware, as the board o f directors may from time to time
appoint or the business of the corporation may require.
B RA N CH , C H A IN , AND GROUP BAN K IN G
1191
SEA L
3. The corporate seal shall have inscribed thereon rlie name of The c o r p o r a t i o n ,
and the word “ Delaware." Said seal may b e used
thereof t o be impressed o r affixed o r reproduced or
t h e year of its organization,
b y causing i t or a facsimile
o t h e r w i s e represented.
STO C K H O LD E R ,s' M E E T IN G S
4. Meetings of the stockholders shall be held at the principal office of the
corporation in Wilmington, Del.
5. An annual meeting of stockholders, after the year 1929, shall be held on
the first Wednesday after the first Tuesday in February in each year if not a
legal holiday, and if a legal holiday, then on the next day following that is not
a legal holiday, at 12 o ’clock m., when they shall elect by a plurality vote, by
ballot, a board of directors and transact such other business as may properly be
brought before the meeting.
6. The holders o f a m ajority of the stock issued and outstanding, and entitled
to vote thereat, present in person, or represented by proxy, shall be requisite
and shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by law. by the certificate
o f incorporation or by these by-laws. If, however, such m ajority shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person, or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announce
ment at the meeting, until the requisite amount of voting stock shall be present.
At such adjourned meeting at which the requisite amount of voting stock
shall be represented any business may be transacted which might have been
transacted at the meeting as originally notified.
7. At any meeting of the stockholders every stockholder having the right to
vote shall be entitled to vote in person, or by proxy appointed by an instrument
in writing subscribed by such stockholder and bearing a date not more than
three years prior to said meeting, unless said instrument provides for a longer
period. Each stockholder shall have one vote for each share of stock having
voting power, registered in his name on the books o f the corporation, and
except where the transfer books o f the corporation shall have been closed or
a date shall have been fixed as a record date fo r the determination of its stock
holders entitled to vote, no share o f stock shall be voted on at any election for
directors which shall have been transferred on the books of the corporation
within twenty days next preceding such election of directors.
8. Written notice o f the annual meeting shall be mailed to each stockholder
entitled to vote thereat at such address as appears on the stock book of the
corporation, at least 10 days prior to the meeting.
9. A complete list of the stockholders entitled to vote at the ensuing election,
arranged in alphabetical order, with the residence of each, and the number of
voting shares held by each, shall be prepared by the secretary and filed in the
office where the election is to be held, at least 10 days before every election, and
shall at all times, during the usual hours for business, and during the whole
time of said election, be open to the examination of any stockholder.
10. Special meetings of the stockholders, for any purpose, or purposes, unless
otherwise prescribed by statute, may be called by the president or by resolution
of the board of directors, and shall be called by the president or secretary at the
request in writing of a m ajority of the board of directors, or at the request in
waiting of three or more stockholders owning at least 10 per cent in amount of
the entire capital stock of the corporation issued and outstanding and entitled
to vote. Such request shall state the purpose or purposes of the proposed
meeting.
11. Business transacted at all special meetings shall be confined to the objects
stated in the call.
12. Written^ notice of a special meeting of stockholders, stating the time and
place and object thereof, shall be mailed, postage prepaid, at least 10 days
before such meeting, to each stockholder entitled to vote thereat at such address
as appears on the books of the corporation.
1192
BH ANCH , C H A IN , ANI> GIIOVP B AN K IN G
DIRECTORS
13. The property and business of this corporation shall, except as otherwise
provided in the certificate of incorporation, be managed by its board of direc
tors, 20 in number. Directors need not be stockholders. They shall be elected
at the annual meeting of the stockholders, and each director shall be elected to
serve until his successor shall be elected and shall qualify. In case of any
increase in the number of directors, such additional directors shall be chosen
by the directors.
14. The directors may hold their meetings and have one or more offices, and
keeep the books o f the corporation .except the original or duplicate stock ledger,
outside Delaware, at such office of the corporation' as they may from time to
time determine.
15. I f the office of any director or directors becomes vacant by reason of
death, resignation, retirement, disqualification, removal from office, or otherwise,
a m ajority of the remaining directors, though less than a quorum, shall choose
a successor or successors, who shall hold office until the next annual election and
until a successor or successors have been duly elected, unless sooner displaced.
16. In addition to the powers and authorities "■>> fnese by-laws expressly con
ferred upon it. the board of directors may «‘X >rci *e all such powers of the
corporation and do all such lawful acts and iM n-s a-> are not by statute or by
the certificate of incorporation or by these h\ -i;uv- directed or required to be
exercised or done by the stockholders.
E X E C U T IV E
COM M ITTE E
17. There shall be an executive committee of the board of directors consist
ing of five directors in addition to the president, ex officio which shall be desig
nated by resolution or resolutions, passed by a m ajority of the whole board.
The members of such committee shall serve for a period of one year and until
their successors are elected and have qualified. The board of directors may also
in the same manner designate an alternate for each such member. In the event
that any member of the committee is unable to attend any meeting or meetings,
his alternate may act thereat in his stead. Vacancies in alternate membership
shall be filled in the same manner as vacancies in the membership of the com
mittee.
18. In the event of a vacancy occurring in the executive committee, the board
of directors shall, by resolution passed by a m ajority of the whole board desig
nate a successor to fill the vacancy for the unexpired term.
19. Subject to such limitations and regulations as may be prescribed by law
or these by-laws or by the board of directors, the executive committee shall
have and exercise all the powers of the board of directors in the intervals
between the meetings of the board, and shall have power to authorize the
seal o f the corporation to be affixed to all papers which may require it.
20. Regular meetings of the executive committee shall be held on such days,
at such hours and at such place or places as the committee may by resolution
appoint.
21 No notice shall be required to be given of any regular meeting of the
executive committee.
22. Special meetings of the executive committee may be called at any time
by any two members of the committee and may be held at any place and at
any time designated in the notice thereof.
23. Notice of each special meeting of the executive committee, stating the
time, place, and purpose or purposes thereof, shall be given by the president
or by the secretary or by any member of the committee to each member of
the committee not less than three days by mail or one day by telegraph or
telephone prior to the meeting. Special meetings of the executive committee
may also be held at any place and time, without notice, provided all the
members are present at such meeting or the members absent shall waive
notice.
24. At any meeting of the executive committee a m ajority of the entire com
mittee shall constitute a quorum and. except where otherwise provided by law
or by these by-laws, a m ajority o f such quorum shall decide any question that
may come before the meeting. A m ajority of the members present at any
regular or special meeting, although less than a quorum, may adjourn the
same from time to time, without notice other than announcement at the meet
ing, until a quorum is present. At such adjourned meeting at which a quorum
B R A N C H , C H A IN , AND GROUP B AN K IN G
1193
shall be present any business may be transacted which might lmve been
transacted at the meeting as originally called.
25. The chairman o f the executive committee shall be designated by the
board o f directors and shall preside at all meetings o f the committee. The
secretary o f the corporation shall act as secretary o f the executive committee.
In the absence of the chairman or of the secretary, the committee shall appoint
a chairman or secretary o f the meeting as the case may be. The committee
shall keep a record o f its acts and proceedings and report thereon to the
board o f directors at its next regular meeting.
ADDITIONAL
COMM ITTEES OF DIRECTORS
26. The board of directors may. by resolution or resolutions passed by a
m ajority o f the whole board, designate one or more committees in addition
to the executive committee, each committee to consist of two or more o f the
directors o f the corporation, which, ro the extent provided in said resolution
or resolutions, shall have and may exercise the powers o f the board o f directors
in the management o f the business and affairs o f the corporation, and may
have power to authorize the seal o f the corporation to be affixed to all papers
which may require it. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the
board of directors.
27. Said committees shall keep regular minutes o f their proceedings and
report the same to the board when required.
c o m p e n s a t io n
of
d ir e c t o r s
28. Directors, as such, shall not receive any stated salary for their services,
but by resolution o f the board, a fixed sum and expenses o f attendance, if any,
may be allowed for attendance at each regular or special meeting of the b oa rd :
Provided. That nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
29. Members o f special or standing committees may be allowed like compen
sation for attending committee meetings.
M EETINGS
OF T H E BOARD
HO. Any member of a newly elected board of directors may call a meeting
o f such board, to be held at such place either within or without the State
o f Delaware, and at such time as shall be stated in the notice to be given m
the same manner as for special meetings.
81. Regular meetings o f the board may be held without notice at such time
and place either within or without the State o f Delaware as shall from time
to time be determined by the board.
32. Special meetings o f the board o f directors may be called at any time by
Die president or any three members o f the board and may be held at any time
smd place designated in a notice thereof given by the president or by the secre
tary or by the members calling such meeting to each member o f the board not
less than three days by mail or one day by telegraph or telephone prior to the
meeting.
33. At all meetings of the board one-third o f the total number o f the board
but not in any case less than two directors shall be necessary and sufficient to
constitute a quorum for the transaction o f business, and the act of a majority
o f the directors present at any meeting at which there is a quorum, shall be
the act o f the board o f directors, except as may be otherwise specifically pro
vided by statute or by the certificate of incorporation or by these by-laws.
ADVISORY
BOARD
34. The board o f directors o f the corporation may, in its discretion, at any
time and from time to time make, constitute, and appoint an advisory board of
the corporation, consisting o f such persons as the board o f directors of the cor
poration shall from time to time designate, under such rules and regulations
as the board o f directors o f the corporation may adopt. Such advisory board
shall be for the purpose o f enabling the board o f directors o f the corporation to
obtain counsel and advice with respect to such matters as may be from time to
time referred by it to such advisory board for such purpose.
1194
BRANCH, CHAIN, AND GROUP BANKING
OFFICERS
35. The officers of the corporation shall be chosen by the directors, and shall
be a chairman o f the board, a president, vice president, secretary, and treasurer.
The board o f directors may also choose additional vice presidents, assistant
secretaries, and assistant treasurers. The secretary and treasurer may be the
same person, but a vice president may not hold at the same time the office of
secretary or treasurer.
36. The board of directors at its first meeting after each annual meeting of
stockholders shall choose a chairman of the board and a president from their
own number, and one or more vice presidents, a secretary, and a treasurer,
who need not be members of the board.
37. The board may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by
the board.
38. The salaries o f all officers and agents of the corporation shall be fixed
by the board o f directors.
39. The officers of the corporation shall hold office until their sucessors are
chosen and qualify in their stead. Any officer elected or appointed by the board
o f directors may be removed at any time by the affirmative vote of a m ajority
of the whole board of directors. I f the office of any officer or officers becomes
vacant for any reason, the vacancy shall be filled by the board of directors.
T H E C H A IR M A N OF T H E BOARD
40. The chairman o f the board shall preside at all meetings of the stockholders
and o f the board o f directors, and shall be entitled to vote upon all questions.
In thet absence of the president, the chairman of the board shall exercise the
power and perform the duties of the president. He shall also perform such
other duties as the board of directors or the executive committee may from time
to time prescribe.
T H E PRESIDENT
41. The president shall be the chief executive officer of the corporation and
shall, under the control of the board of directors and of the executive committee,
have the general management of its affairs and shall perform all duties and
exercise all powers incident to his office.
42. In the absence of the chairman of the board, the president shall preside
at all meetings o f the stockholders and o£ the board of directors. He shall
have power to employ and discharge all employees, and to fix their salaries
from time to time. He shall have power to fix and from time to time to change
the salaries of all officers whose salaries shall be at the rate of less than
$10,000 per annum. He shall execute bonds, mortgages, and other contracts
requiring a seal under the seal of the corporation. He shall also perform such
duties and be vested with such powers as shall be assigned to him from time to
time by the board of directors and by the executive committee, and shall be ex
officio a member o f all committees authorized by these by-laws or created by
the board o f directors. He may. from time to time, in his discretion, compen
sate any director who does not receive a salary from the corporation, for any
special service rendered by said director, at his request, not exceeding, however,
in amount for any day’s service, the amount paid to a director for attending a
regular meeting of the board.
VICE PRESIDENTS
43. The vice presidents shall, in the absence or disability of the president,
perform the duties and exercise the powers o f the president and shall perform
such other duties as the board of directors shall prescribe.
T H E SECRETARY AND A S S IS T A N T SECRETARIES
44. The secretary shall attend all sessions of the board and all meetings of
the stockholders and record all votes and the minutes o f all proceedings in a
book to be kept for that purpose; and shall perform like duties for the standing
committees when required. He shall, if requested, give, or cause to be given,
notice o f all meetings o f the stockholders and o f the board of directors, and
B R A N C H , C H A IN , AND GROUP B AN KIN G
1195
shall perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he shall be. He shall keep in safe custody
the seal o f the corporation, and when authorized by the board affix the same
to any instrument requiring it, and when so affixed it shall be attested by his
signature or by the signature of the treasurer or an assistant secretary. He
shall be sworn to the faithful discharge o f his duty.
45. The assistant secretaries may, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary, and shall perform
such other duties as the board o f directors shall prescribe.
TH E
TR E A S U R E R A N D A S S I S T A N T
T R E ASU RER S
46. The treasurer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in
books belonging to the corporation, and shall deposit all moneys and other
valuable effects in the name and to the credit of the corporation in such deposi
tories as may be designated by the board of directors.
47. He shall disburse the funds of the corporation for proper corporate pur
poses, taking proper vouchers for such disbursements, and shall render to the
president and directors, at the regular meetings of the board, or whenever they
may require it, an account of all his transactions as treasurer and of the finan
cial condition o f the corporation.
48. The treasurer and the assistant treasurers shal], respectively, give the
corporation a bond if required by the board o f directors in a sum and with one
or more sureties satisfactory to the board for the faithful performance of the
duties of his office in such form as the president or board of directors shall
approve.
49. The assistant treasurers may, in the
of the treas
urer, or at his request, perform the duties and *-;i r
powers of the
treasurer, and shall perform such other duties
’ *> >id of directors shall
prescribe.
DITTIES OF OFFICERS M A Y
BE DELEGATED
50. In ease of the absence of any officer of the corpo* ) «>' or for any other
reason that the board may deem sufficient, the hoard \ . v delegate, for the
time being, the powers or duties or any of them, <f s \ tfu*nr to any other
officer, or to any director.
C E R T IF IC A T E S OF STOCK
51. The certificates of stock of the corporation
i <i<
timbered and shall
be entered in the books of the corporation as tiew i.** l^ued. They shall
exhibit the holder’s name and number of shares ,ind shad be signed by the
president or a vice president and the treasurer o - 1 .i--, st.nn treasurer, or
the secretary or an assistant secretary. I f the co. pm a'i
b
a transfer agent
or an assistant transfer agent or a transfer clerk <^ nu <si its behalf and a
registrar the signature of any such officer may be fao<nn<*'\ In case any officer
or officers who shall have signed, or whose facsimile ^unnture or signatures
shall have been used on, any such certificate or <ei nli< atp> shall cease to be
such officer or officers of the corporation, whether Decause of death, resigna
tion or otherwise, before such certificate or certificates shall have been delivered
by the corporation, such certificate or certificates may nevertheless be adopted
by the corporation and be issued and delivered as though the person or persons
who signed such certificate or certificates or whose facsimile signatures shall
have been used thereon had not ceased to be such officer or officers of the
corporation.
T R A N S F E R S OF STOC K
52. Transfers of stock shall be made on the books of the corporation only
by the person named in the certificate or by attorney, lawfully constituted in
writing, and upon surrender of the certificate therefor,
C LO S IN G OF T R A N S F E R B OOKS
53. The board of directors shall have power to close the stock transfer books
of the corporation fo r a period not exceeding 40 days preceding the date of
any meeting of stockholders or the date for payment of any dividend or the
1196
BRANCH, CHAIN? AND GROUP BANKING
date for the allotment of rights or the date when any change or conversion
or exchange o f capital stock shall go into effect: Provided, however, That in
lien of closing the stock transfer books as aforesaid, the board of directors
may fix in advance a date, not exceeding 40 days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, as a record date for the deter
mination of the stockholders entitled to notice of, and to vote at, any such,
meeting, or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion, or exchange of capital stock, and in such case such stockholders,
and only such stockholders as shall be stockholders of record on the date so
fixed, shall be entitled to such notice of, and to vote at, such meeting, or to
received payment of such dividends, or to receive such allotment of rights, or
to exercise such rights, as the case may be, notwithstanding any transfer o f
any stock on the books of the corporation after any such record date fixed as
aforesaid.
REGISTERED STOCK HOLDERS
54. The corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall have express
or other notice thereof, save us expressly provided by the laws of Delaware.
l.O. >1 CERTIFICATE
55. Any person claiming a certificate of stock to be lost or destroyed shall
make an affidavit or affirmation of that fact and advertise the same in such
manner as the board of directors may require, and the board of directors may,
in its discretion, require the owner of the lost or destroyed certificate, or his
legal representative, to give the corporation a bond, in such sum as it may
direct, not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss
of any such certificate. A new certificate of the same tenor and for the same
number of shares as the one alleged to be lost or destroyed may be issued with
out requiring any bfrnd when, in the judgineut of the directors, it is proper so
to do.
CHECKS
5(5. A ll checks or demands for money and notes of the corporation shall be
signed by such officer or officers or M ich other person or persons as the board of
directors may from time to time designate.
FISCAL YEAR
57. The fiscal year shall begin the 1st day of January in each year.
DIVIDENDS
58. Dividends upon the capital stock of the corporation, subject to the provi
sions of the certificate of incorporation, if any, may be declared by the board
of directors at any regular or special meeting, pursuant to law. Dividends nniy
be paid in cash, in property, or in shares of the capital stock.
59. Before payment of any dividend there may be set aside out of any funds
of the corporation available for d vidends such sum or sums as the directors
from time to time, in their, absolute discretion, think proper as a reserve fund
to meet contingencies, or for equalizing dividends, or for repairing or maintain
ing any property of the corporation, or for such other purposes as the directors
shall think conductive to rhe interests of the corporation, and the directors may
abolish any such reserve n the manner in which it was created. Any tmch
reserve or reserves may be reduced from time to time by the board of directors
by transfer from such reserve or reserves to capital account. Transfers to
capital account may also be made from surplus.
1197
BRANCH, CHAIN, AND GROUP BANKING
NOTICKS
60. Whenever under the provisions of these by-laws notice is required to be
given to any director, officer, or stockholder, it shall not be construed to mean
personal notice, but such notice may, unless some other method is provided
therefor, be given in writing, by mail, by depositing the same in the post office
or letter box, in a post-paid sealed wrapper, addressed to such stockholder,
officer, or director at such address as appears on the books of the corporation,
or, in default of other address, to such director, officer, or stockholder <at the
general post office in the city of Wilmington, Del., and such notice shall be
deemed to be given at the time when the same shall be thus mailed.
61. Whenever any notice whatever is required to be given under the provi
sions of the general corporation law of Delaware or under the provisions of
the certificate of incorporation or by-laws of this corporation, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
AMENDMENTS
62. These by-laws may be altered or amended or repealed by the affirmative
vote of a majority of the stock issued and outstanding and entitled to vote
thereat at any regular or special meeting of the stockholders or by the affirma
tive vote of a majority of the board of directors at any regular or special
meeting of the board if notice of the proposed alteration or amendment or
repeal be contained in the notice of the meeting of stockholders or directors,
as the case may be: Provided, however, That no change of the time or place
for the election of directors shall be made within 60 days next before the day
on which such election is to be held, and that in case of any change of such
time or place notice thereof shall be given to each stockholder in person or
by letter mailed to his last-known post-office address at least 20 (lays before
the election is held.
I, Edward H. Letchworth, secretary of Marine Midland Corporation, hereby
certify that the foregoing is a true and complete copy of the by-laws of said
corporation as the same are in force and effect as of the date hereof.
In witness whereof I have hereunto subscribed my name and affixed the seal
of said corporation this------day o f ---------- , 19—.
[ s e a l .]
---------------------------,
Secretary.
S c h e d u l e N o. 3
BOARD OF DIRECTORS OF MARINE MIDLAND CORPORATION «DELAWARE.
George G. Allen, president Duke Power Co.
John L. Clawson, chairman of the board, Clawson & Wilson Co.
Walter P. Cooke, chairman of the board, the Marine Trust Co. of Buffalo.
Arthur V. Davis, chairman of the board. Aluminum Co. of Americ-:!.
William C. Feathers, president the Manufacturers National Bank of Troy.
Seymour H. Knox, president Marine Union Investors (Inc.).
Edward H. Letchworth, director and general counsel, the Marine Tru*t Co.
of Buffalo.
Raymond V, V. Miller, White, Weld & Co.
George O. Muhlfeld, vice president, Stone & Webster t Inc. f.
Bayard F. Pope, president Stone & Webster & Blodget (Inc.).
George F. Rand, president the Marine Trust Co. of Buffalo.
Faris R. Russell, White, Weld & Co.
J. F. Schoellkopf, jr., vice president, Schoellkopf, Hutton & Pomeroy (Inc.).
Paul A. Schoellkopf, president Niagara Hudson Power Corporation.
Eustace Seligman, Sullivan & Cromwell.
Ernest Stauffen, jr., chairman of the board.
Charles Winslow Smith, treasurer Sherwood Shoe Co.
Harral S. Tenney, vice president, Marine Midland Corporation.
Thomas A. Wilson, president Peoples Trust Co., Binghamton. N. Y.
Frederick W. Zoller, president Union Trust Co. of Rochester.
1198
BRANCH, CHAIN, AND GROUP BANKING
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1199
BRANCH, CHAIN, AND GBOTJF BANKING
S c h e d u le
No.
5
Status of stock of Marine Midland Banks at March 31, 1930
Outstanding
1
Par i Shares
Marine Trust Co..............................................
Union Trust Co., Rochester.........................
First Trust Co., Tonawanda........................
State Trust Co., North Tonawanda...........
Niagara Falls Trust Co..................................
Manufacturers National Bank, Troy,
and Security Propreties Co. (Inc.)_____
Niagara County National Bank, Lockport............................................ .................. ...
Peoples Trust Co., Binghampton...............
Workers Trust Co., Johnson City..............
Union Trust Co., Jamestown____________
Lackawanna National Bank...... ..................
Bank of East Aurora.......................................
Cortland Trust Co..........................................
Orleans County Trust, Albion.....................
Bank of Snyder................................................
Bank of LaSalle, Niagara Falls....................
Power City Bank, Niagara Falls................
Fidelity Trust Co., New York City..........
Total shares_______________________
Total percentage___________________
$50 “ 200,000
50
80,000
100
5,000
12,000
50
50
40,000
Directors
qualify Shares ex
changed
ing
shares
430
302
no
180
510
197,721
78,624
4,885
11,819
38,072
Available shares
Com
bined
per
Unex
Per
cent changed
cent
99.07
98.66
99.90
99.99
96.45
1,849
1,074
5
1
1,418
0.93
1.34
.10
.01
3.55
25
48,000
1,400
46,242
99.25
358
.75
25
100
25
100
100
100
100
50
50
100
25
20
24.000
5,000
8,000
6,000
2,000
1.750
2,000
2,000
2,000
500
40,000
300,000
690
175
92
140
lf,l
100
150
140
2(50
00
680
280
23,034
4,721
7,792
5,860
1.782
1,603
1,850
1,800
1,717
400
38, (iOfi
203?669
98.85
97.92
98.55
100.00
97.15
97.32
100.00
100.00
98.85
98.00
98.21
87.98
276
104
116
1.15
2.08
1.45
57
47
0
0
23
10
714
36,051
2.85
2.68
0
0
1.15
2.00
1.79
12.02
778,250
5,890
730.257
42,103
.76
93.83
5.41
N ote .—Entire available stock of Union Trust Co., Jamestown; Cortland Trust Co.; Orleans Couniy
Trust Co., Albion, have been exchanged.
(Thereupon, at 12 o’clock noon, after an informal discussion, in
which it was decided to question Mr. Rand on his statement to
morrow, an adjournment was taken until Friday morning, April 25,
1930, at 10.30 o’clock.)
BRANCH, CHAIN, AND GROUP BANKING
F R ID A Y , A P R I L 25, 1930
H ouse of R epresentatives ,
C o m m it t e e on B a n k i n g a n d C u r r e n c y ,
Washington, D. G.
The committee met at 10.80 o’clock a. m. in the committee room,
Capitol, Hon. Louis T. McFadden (chairman) presiding.
The C h a irm a n . The committee will come to order.
STATEMENT OF GEORGE E. RAND— Resumed
The C h a irm a n . Mr. Rand, in your very excellent statement which
you read yesterday morning you covered, sufficient for our purposes,
a number of aspects of the type of banking in which you are en
gaged ; but it seems to me that you touched rather lightly, if at all,
upon the question of the initiation and application of the groupbanking policy. From the standpoint of this committee that is
about the most important question we have to consider in this inves
tigation. I should like, therefore, to ask you to state fully to the
committee how and by whom—that is to say, by what committee—
the Marine Midland Corporation arrived at a banking policy for the
group as a whole or for any member of the group, and what means
are employed to make this policy effective in the banks.
I should like you to cover the following points:
First. Investment policy: After you have acquired control of a
bank what steps are taken to see that the securities which it pur
chases are sound and liquid ?
Second. Loan policy: What action does the Marine Midland, or
any other agency connected with it, take in the matter of reviewing
or fixing lines of credit or otherwise attempting to improve the loans
of one of its banks ?
Third. Examination. When your examiner goes out and makes an
examination of a member bank of your group I presume he brings in
a written report much the same as that of the National and State
bank examiners. Should one of these reports reveal incompetency of
management, unsatisfactory loans, or securities purchased not up to
the standard, what means does your group employ to remedy such a
situation? As the majority stockholder of such a bank you hold the
power of removal over directors, and through that power indirectly
control the appointment and tenure of office of the management per
sonnel. In such a case as I have described would the Marine Midland
Corporation call the officers of the bank on the carpet as a means of
enforcing the group policy?
100136— 30— v o l 2, p t 9--------13
1201
1202
BRANCH, CHAIN, AND GROUP BANKING
I wish you would address yourself to those questions and any other
points that may appear pertinent to you along those lines. The com
mittee would be glad to have you answer as fully as you can.
Mr. R a n d . I will state in answer to question No. 1—investment
policy—which question is, “After you have acquired control of a
bank, what steps are taken to see that the securities which it pur
chases are sound and liquid? ” the first thing we do after we have
acquired control of a new bank, and even before we have acquired
the bank, is to make a detailed examination of its loans and all its
securities.
After we have acquired control of a bank we have in the Marine
Midland Group (Inc.) an investment committee who are experts
in the handling and purchasing of securities. This committee is con
stantly working with the individual bank in going over its securi
ties, in weeding out the undesirable ones. The securities that the
individual bank holds have generally been handled by the president
or by a vice president—one officer generally has had charge of them—
and our committee works with that officer more or less in advising
the retention of good securities and the elimination of unsound
securities.
There is a statistical department and an analysis of securities
department. Every security that is owned by Marine Midland banks
is constantly being analyzed and reviewed. If we hold railroad
bonds, the reports of those railroads are followed very closely. If we
hold industrial bonds, each report of that industrial concern is
studied. The conditions of the industry are tabulated and watched,
something that the individual bank perhaps did not do before. So,
the securities are constantly reviewed and information about the
particular industry or the particular railroad is constantly before our
committee working with the officer in the bank who has particular
charge of the banlrs investments.
Then the matter is brought up to their board, with the recom
mendation that certain securities be disposed of or certain new secur
ities be added, with the reasons why we make the recommendations.
Many of these banks have not, in the past, given "sufficient con
sideration to their liquidity and we have endeavored to remedy that
by the putting of a certain portion of their security holdings in
Government bonds and a certain proportion in railroad bonds, with
the idea of having a liquid additional reserve for those banks, to have
a certain proportion in high-grade rails, a certain proportion in highgrade industrials, a certain proportion in high-grade public utilities,
of course, starting with Government and municipal bonds.
The C h a irm a n . N ow there is a second question.
Mr. R an d . The second question referred to loan policy—
What action does the Marine Midland, or any other agency connected with
it, take in the matter of reviewing or fixing lines of credit or otherwise attempt
ing to improve the loans of one of its banks?
After we have assumed control of the stock of a Marine Midland
bank, we very carefully go over the loans, review as far as possible
the financial statements of the makers of the loans. We have in
mind also the length of time the loans have run, what payments
have been made upon the loans, and the type of industry to which the
credit is extended. We work with the proper loaning officers—the
BRANCH, CHAIN, AND GROUP BANKING
1203
president, vice president, or cashier. Sometimes we work with the
borrower in pointing out ways and means by which he can improve
his business.
This loan committee of the Marine Midland Group (Inc.) is con
stantly working to eliminate unliquid loans or frozen loans, to get
the borrower, individual or corporation, in the habit of filing his
financial statements, or, if he is a farmer, working with him on his
farm problems.
The smaller banks have, in the past, not been as scientific as the
larger banks. They have loaned a small industry in the town be
cause a director sitting around the table will say, “ I know John
Smith, and know that anything he desires is all right,” and they
make the loan. Now, in the interest of the borrower as well as our
bank, we are encouraging them to get auditors in and make an
audited statement of that particular company, to check up on the
management and see what the trend is and look back over a period
of years to see what progress the company is making and check up
on its inventory.
We have done another think in connection with the loans, which I
think is very helpful. In the past, the local banker has been too apt
to just sit in his bank and talk with his customers. We have urged
our local bankers to get out and call on their customers and go into
their stores and see the condition of the merchandise, see whether the
store looks prosperous, see whether he is keeping his windows clean
and up to date, and the way he is operating his store, and offering
suggestions. We go through the local factories with the same object
in view.
We have retained a former agricultural expert to work with our
farmers in the farming communities, to go out and advise with them
on the diversification of crops, better ways of running his farm, and.
in many cases, we have arranged sales for parts of the farm to enable
the farmer to operate his farm in a better way than before.
We are doing a great deal in trying to improve the character of
loans in these banks, always, of course, cooperating with the local
ban]?; board and the local president. We avoid dictating to them as
long as the bank is running smoothly. W e have some banks that
have been very efficiently and very properly run, and there are very
few loans that are subject to criticism. Those banks we have not
interefered with, but where a bank has an undue proportion of poor
loans, not as liquid as they might be, we do all in our power to
assist that bank and show them some similarly situated institutions.
W e are constantly taking men from one bank and placing them in
others for certain periods so that they may learn from observation
better methods of operation. It has been quite an eye opener in
many cases, and they have gone back and put their own banks vol
untarily, of their own accord, in much better condition.
Are there any other questions on that ?
The C h a irm a n . I think that covers that quite well.
Mr. R an d . N ow the next question, examination:
When your examiner goes out and makes an examination of a member bank
of your group I presume he brings in a written report much the same as that
of the national and State bank examiners. Should one of these reports reveal
1204
BRANCH, CHAIN, AND GROUP BANKING
incompetency of management, unsatisfactory loans or securities purchased not
up to the standard, what means does your group employ to remedy such a
situation?
Now, our bank examiner, as I said in my statement yesterday, was
formerly chief bank examiner for western New York for the New
York banking department, a very able man. He has under him
seven or eight very capable men. They will go in and make an ex
amination of a member bank of our group and unless the examina
tion shows dishonesty, which it very rarely does, we endeavor to
educate the management of that particular bank by placing certain
officers or employees in other member banks very much as I have
said before. Many of these banks have had a poor business policy,
due to the fact they do not know how to run a bank. They have
been in a single small bank all of their lives and have had little op
portunity to see how other banks operate.
In brief, what we endeavor to do is to educate the management.
I f we find they have not operated the bank efficiently, we sometimes
loan a good man from another bank to work with them for a period.
Should their reports reveal gross incompetency, or should we find
that the men in the bank are, in our opinion, not capable of running
a bank, then we call a special meeting of the board of the small bank
and put the whole situation up to them. Fortunately we have only
had to do that once, and we told the person who was in that bank
that he was not a born banker and did not have a future in the
banking business and should get in some other line. But we always
work through the individual board, and the cooperation of the in
dividual boards, after we have had control of the bank, has been
very gratifying.
The C h a i r m a n . Your chief examiner, with a corps of assistants,
is engaged exclusively in examining that group of banks ?
Mr. R a n d . Yes, sir.
The C h a irm a n . And spends all of his time doing that work 1
Mr. R a n d . Yes, sir.
The C h a irm a n . Y o u get this information in regard to mismanage
ment or anything else affecting conditions in those institutions
through your examiners?
Mr. R an d . Yes, sir.
The C h a irm a n . That is the way it is brought to your group ?
Mr. R an d . Yes, sir.
Now, our examiners confine themselves very much to the condition
of the bank. They do not handle the securities. They receive a
list of securities, but the handling of those securities is done by a
separate division of our Marine Midland Group (Inc.). The aver
age examiner is not an expert on securities, and we have three or
four men who do nothing but handle securities. The bank ex
aminers study the loans. The analysis of securities is handled by
the securities division of the Marine Midland Group (Inc.). The
individual bank purchases its own securities, cooperating with our
securities division and their own board of directors.
The C h a irm a n . When the examinations by the banking depart
ment or the examinations of the national banks which may be in
your group, by the Comptroller of the Currency, take place, your
examining department or your chief examiner and his assistants
go through the examination with these independent examiners?
BRANCH, CHAIN, AND GROUP BANKING
1205
Mr. R a n d . No; we get the report of the banking department of
the State or the National department and then go over that report
with the officers of the bank, in addition to making our own com
plete examination.
The C h a irm a n . After the State examination has been completed,
however, or the national-bank examination is completed, those results
are reported to you ?
Mr. R an d . Yes, sir.
The C h a irm a n . H o w often does the State of New York examine
the banks ?
Mr. R an d . Twice a year.
The C h a irm a n . At stated periods?
Mr. R an d . N o sir; we do not know when they are coming.
The C h a irm a n . Y o u do not rely upon the examinations of the
State banking department or the comptroller’s examinations exclu
sively to keep in touch with your bank’s conditions, but keep your
own examining force and they go into these banks the same as the
State banks or national-bank examiners, without notice ?
Mr. R an d . Without notice; yes sir.
The C h a i r m a n . As a matter of fact, then, I suppose they may
drop into any one of your banks half a dozen times a year, for that
matter ?
Mr. R a n d . Yes. As a matter of fact, after we have made an
examination, this chief examiner of ours will make certain recom
mendations and then possibly within a month he will send out one of
his men to that bank and say, “ What have you done with these
recommendations ? How are you following out the recommendations
we have made?” He will probably meet with the board of directors.
The board and our examiner will agree on a certain policy and later
we will follow up and see how the policy is being carried out.
The C h a irm a n . Supposing the State banking department, as the
result of the examination made by their examiner and the comp
troller’s office, as a result of the examination by the national-bank
examiner, make definite recommendations to charge off assets which
are not in conformity with the department’s idea?
Mr. R an d . With our department’s idea?
The C h a irm a n . With the ideas of the comptroller’s office or of
the State banking department?
Mr. R an d . I do not believe I understand that question.
The C h a irm a n . In other words, if an examiner, either from the
comptroller’s office or from the State banking department, recom
mends certain assets to be charged off, are they charged out of the
assets of those banks or does one of your banks take over the
criticized assets?
Mr. R a n d . No, sir; they are charged off by that bank.
The C h a irm a n . There is no taking out of criticized assets and
putting them in another company?
Mr. R an d . N o , sir.
The C h a irm a n . Each bank stands on its own foundation?
Mr. R an d . Yes, sir. We handle it this way: In the case of a bank
that has a large number of charge offs, or the banking department,
either State or national, has to make certain charge offs and if those
charge offs are of sufficient number to be serious, we will charge them
1206
B R A N C H , C H A IN , AND GROUP B A N K IN G
off and then the holding company will pay in additional money into
that bank.
You see, we raised $57,000,000 in cash. We are keeping a revolving
fund anywhere from thirty to forty-five or fifty million dollars in
cash at all times, and in case any bank’s assets are impaired through
the charge offs we do either of two things—have the bank stop pay
ing dividends and let their earnings build up to take care of it, or
increase their capital and pay in additional money to the surplus and
their capital.
We do not feel that it is wise to take those assets out of the bank
for two reasons: First, it relieves the banker of his responsibility on
those assets to a certain extent; secondly, they are not apt to be
followed up as closely as if left in the bank and that bank left to
collect them.
The C h a irm a n . N ow , as to the latter part o f the question — as the
m a jo rity stockholder o f such a bank you hold the pow er o f rem oval
over directors, and through that power indirectly control the ap
pointm ent and tenure o f office o f the m anagem ent personnel— can
you elucidate on that, as to how you meet that situation ?
Mr. R an d . In our banks we have never used our power to elimi
nate any directors of one of our member banks unless the board of
that bank desired those directors eliminated themselves. In other
words, we will go to the president of one of our member banks when
the annual election comes up and say, “Are there any changes that
you people desire to make on your board? ” And if the president
says, “ Well, John Smith is no longer of any use to us; we should
like to elect another man in the town who is a capable and coming
man in place of him,” we will take their suggestions on him and
first we will check up on him to see if their recommendations seem
sound to us, and the board will go ahead and make those changes
by the election of the additional directors.
Now, in the case of officers of banks, if they are incompetent— and
as I said, we have only had that experience once— we would call a
special board meeting and put it up to the board, and the board
would have to do that themselves. They will have to get rid of
that president, vice president, or cashier or whoever it was that was
incompetent.
The C h a irm a n . But, as a general thing, you prefer to keep the
local boards or the majority of them in the locality where the bank is ?
Mr. R an d . Yes, sir; in many localities we have not even put a man
on the board and have kept them intact. They run the bank under
our supervision and with our help. If the local board wants to
make a loan, they can loan any money they want to the community
providing it is good. The only time we veto a loan— and then we
only do it through moral suasion— is after a long conference, and
if we feel it unwise to make that loan we tell the member bank,
“ We do not advise you to make that loan,” and they do not do it.
The C h a irm a n . Your management makes no limitation as to the
amount the officers can lend, either to individuals or to corporations ?
Mr. R a n d . The officers do not make loans unless approved by their
particular boards and we make no limitation on the loaning power
of those boards other than the limitations made by law.
The C h a i r m a n . Do you find it necessary at times to transfer
funds from one locality to another ?
BRANCH, CHAIN, AND GROUP BANKING
1207
Mr. B a n d . Yes, sir.
The C h a i r m a n . Y ou do that?
Mr. R a n d . Yes, sir.
The C h a i r m a n . That is done through your parent institution ?
Mr. R a n d . That is done through one of the larger banks in the
group; yes, sir; depositing money with the various banks. For in
stance, at the time of the stock-market crash last fall we had about
$50,000,000 in cash or call loans, extra money which was ready to be
used for any of these banks that needed additional funds. In three
or four cases, we deposited considerable amounts of money in those
banks to enable them to take care of their requirements at that
time.
The C h a i r m a n . Do you find that, in the smaller towns, you fre
quently have to send more money to serve the community, or do
they have sufficient money there to take care of their requirements?
Mr. R a n d . It seems to average up pretty well. One town will
need money and another will have a surplus.
I would say at the present time we are not having to shift funds.
The banks are running on about an even keel themselves, but even
in times of distress it seems to run fairly even— one bank will need
funds and another will have an excess.
The C h a i r m a n . N o w , you are operating an interesting group.
I should like to ask you what economies in management you have
instituted ?
Mr. R a n d . The economies in management—I mentioned them in
my statement yesterday. We formed our group last October. The
economies are just beginning to show now. In one bank, for in
stance, I think it is safe to predict a saving in overhead of from
$100,000 to $200,000 a year.
The C h a i r m a n . H o w did you bring about such economies— by
the discharge of unnecessary employes ?
Mr. R a n d . N o .
The C h a i r m a n . Reducing salaries?
Mr. R a n d . No; we have never made it a policy to discharge em
ployes. We have, on the contrary, recommended consistently the
increase of salaries to employes.
Perhaps if I give a case involving one of our larger banks, a bank
of some $70,000,000, where we are able to effect a great many econo
mies, it will serve to illustrate what I have in mind.
Those economies are to be made, first, in the rentals that bank has
been paying for space. That bank had several unnecessary offices.
It had 11 branches, I believe, and we are able to show them how they
can eliminate two or three of those branches.
In the second case— that same bank—in connection with the amount
of cash that that bank carried in its own vault, we have been able to
save that bank forty or fifty thousand dollars a year, by showing how
similar banks, in our group, operate with less cash in their vault. In
other words, it does not matter to a local bank whether it carries
cash in its vaults or on deposit with the Federal reserve bank. The
tellers were doing business with fifteen or eighteen thousand dollars
in their cages, and we were able to show those tellers that in another
bank of the same size, the teller could do the same amount of busi
ness with $4,000 in his cage if he would use his head a little. We
were able to cut down the cash requirements in that bank and give the
1208
BRANCH, CHAIN, AND GROUP BANKING
same service to the customer, I think almost to the extent of $1,000,000, in the aggregate. Now, if you figure 5 per cent on $1,000,000,
it is $50,000 a year.
We have done that in all our banks, and the saving has not been
so much in the smaller banks, but in the larger banks it is quite
a great deal. We have done the same thing in purchasing.
Most of the little banks, and larger ones, are the prey of every
salesman that goes into their town. They will buy adding machines;
they will buy typewriters; they will buy ledgers, and a little bank,
with three or four million dollars in resources, will spend some
times three or four thousand dollars a year unnecessarily in doo
dads that people come in and sell them. The savings we have made
in that connection are remarkable.
We are also showing these smaller banks, and larger ones, too,
that are in our group, that, through certain physical changes in
their set-up of their bank inside, in the way they handle their col
lections and handle their items, they can cut down the number of
their employees.
As I said a moment ago, we have never let out employees. Where
we have, in our group, two or three thousand employees, they are
always leaving and there is always a turnover, and we simply stop
from hiring for a while. I f we go into one bank and find an excess
of employees, we will take possibly two or three employees out of
that bank—say, for instance, the bank is in Niagara Falls— and
move them into our head office in the Marine Trust Co., in Buffalo,
where we may need additional employees in the bond or trust department.
We are trying to' increase the salaries of our employes and at the
same time increase their efficiency and cut down on the total salaries.
The C h a i r m a n . Would you say, in that connection, you have in
creased or decreased salaries on the whole ?
Mr. R a n d . Increased them on the whole.
The C h a i r m a n . Would you care to state the maximum and mini
mum salaries paid ?
Mr. R a n d . That is difficult to state, because the banks vary so.
The C h a i r m a n . Y ou have no set rule, then, for the different classes
of work?
Mr. R a n d . No; we have more or less standards. We feel that a
man who handles money, a teller, should receive a decent living wage.
The C h a i r m a n . For instance, take a teller: What is the salary paid
to a teller?
Mr. R a n d . Taking the teller in a bank in Buffalo, one of our
tellers receives $4,000 a year.
The C h a i r m a n . And in the smaller institutions ?
Mr. R a n d . In the smaller institutions the teller’s work is entirely
different. There a teller does not have to be on his toes as he does in
a big city, where he has a string of people waiting to cash checks and
do business. He has to be a much more capable man in a larger city.
In a smaller town we take into consideration the living conditions of
the town, whether he is married or not, and how long he has been
with the bank.
I should say that the teller in the small town would receive possibly
a minimum wage of $150 a month.
BRANCH, CHAIN, AND GROUP BANKING
1209
The C h a i r m a n . Take stenographers and bookkeepers: What rate
of salary do you pay them ?
Mr. R an d . With the stenographers and bookkeepers, it depends
upon the banks in which they are. In the small towns a stenog
rapher will do all kinds of work in a bank. She may work in the
bank part of the time or may do stenographic work. We pay our
stenographers, I would say, depending upon their age, their qualifi
cations, and length of time they have been in the bank from $75 a
month to $250 a month.
The C h a i r m a n . Mr. Lord the other day in his testimony before
this committee made the statement that their group never took over
an institution that was not on a paying basis, and he also stressed
the thought that these small banks in small towns could not operate
successfully and that the only way that situation in these rural com
munities could exist in the future would be to adopt a form of branch
banking; that those units could be operated as branches efficiently
and serve those communities. Do you agree with that statement?
Mr. R a n d . In general I do.
The C h a i r m a n . Y ou have taken over small banks in small com
munities ?
Mr. R a n d . Our group, Mr. McFadden, is very similar— our prob
lems in our group are very similar— to the problems in Mr. Lord’s
group. His group radiates out of Detroit and we radiate out of
Buffalo. We have 18 banks in our group and he has more than that.
We have, for the most part, taken over paying banks. Now we
have taken over two or three banks—I will say two— that are not
making earnings at the present time, but we think they have a great
future. We believe the town in which they are,located is growing.
I do not know of any way of taking care of the banking require
ments of many towns in New York State without a straight-out
branch banking system.
The C h a i r m a n . In the acquisition of these banks, do you wait
, for them to suggest to you that they be taken over or do you go out
and negotiate or buy up control of the banks ?
Mr. R a n d . We have never bought up the control of any bank, and
my policy is, never to buy up the control of a bank unbeknown to
the officers of the bank or, in any way, detrimental to the best inter
ests of the town. In fact, we have never bought up control of the
banks without full consent of the directors of the banks. In every
case in the acquisition of our banks we have never used any force or
suasion. The banks have all come to us, I think, in every single case
and asked that they be included in our Marine Midland group.
In the original formation of the group, however, we went to some
12 or 13 banks who had been working with us for years and we
knew them and knew their officers and directors, and told them what
we were planning to do and asked them if they cared to come in with
us. We simply told them our plan, and if they wanted to come in
it was all right, and if they did not want to come in it was all right.
The C h a i r m a n . You dwelt at some length yesterday on the trade
area of Buffalo. I notice, in looking over your group, that you have
gone across the State line into territory that might be tributary to
New York City. Have you arrived at what you consider to be your
definite trade area or do you consider the whole of New York State
as your trade area ?
1210
BRANCH, CHAIN, AND GROUP BANKING
Mr. R a n d . We feel that the whole of New York State is our
definite trade area. I should like to read something here that I have
prepared-----Mr. C h a i r m a n . I should like also to embody in that question, for
your thought and consideration in making your answer, the fact
that you have acquired a bank in New York City which is a some
what different plan than some of the other groups are working
under. Will you explain to us that plan ?
Mr. R a n d . A New York City bank is very essential to our group.
I should like to elaborate on that. I was hoping you would ask
that question because it is very essential to us.
The C h a i r m a n . In that connection, the thought occurs to me as
to whether or not, in the working out of your plan of group man
agement, you contemplate the use of that bank exclusively for your
group in New York—that is to say, whether your New York opera
tions are to be conducted through that institution or whether you
will utilize other banks for correspondents, and so forth.
Mr. R a n d . We do not contemplate using the New York bank
exclusively.
The C h a i r m a n . But the major portion of the business will be
done through that institution ?
Mr. R a n d . The major portion of the business will be done through
that institution; yes—probably 50 or 60 per cent through our New
York bank and the other 40 per cent through bank correspondents
in New York. Of course you must realize nearly all the banks are
members of the Federal reserve system and a large portion of the
New York business is done through the Federal reserve banks.
The same changing methods in business and the tendency toward
consolidation which deter banks in small towns from retaining their
business makes a bank in New York of great value even to such banks
as the Marine Trust Co., of Buffalo, the Union Trust Co., of Roches
ter and our banks in larger cities.
In an ever-increasing measure we have seen independent manu
facturing companies in Buffalo and western New York merge or sell
out to other concerns in a similar line of business. In case after
case the executive offices are now in New York.
Cash balances which formerly ran into hundreds of thousands of
dollars with our up-State banks are gradually reduced, becoming
small operating accounts.
In many instances a large stock interest in the merged company
remains— for, example, in Buffalo. Men whom we know well be
come prominent in the affairs of the company moving to New York.
Much as they would like to continue to do business with the old bank
which they know, gradually this business slips away, due to the con
venience of doing business with a New York City bank at their
headquarters. There is already an indication that with a bank in
New x ork City we will regain their business which has been lost
in recent years and retain within the group such business in the
future.
(After discussion off the record.)
Mr. R a n d . I will say this, that we have seen no evidence of the
New York banks trying to take this business away from us except in
a perfectly fair competitive way. Many of these mergers and con
BRANCH, CHAIN, AND
GROUP
BANKING
1211
solidations had nothing at all to do w ith the N ew Y o r k banks, but
ju st fo r economic and business reasons.
For instance the Hotel Statler Co. moved down to New York
because the president of it, Mr. Statler, wanted to live there, and
gradually he began doing business in New York, and there are many,
many cases of that land totally outside of the investment and under
writing business or the power of the New York banks that have
caused this business to go to New York.
I will also say that I do not see any way in which banks outside of
New York City could act as registrar and transfer agent of corpora
tions whose stock is listed on the New York Stock Exchange. Other
cities have a similar rule. We have in Buffalo, in our local stock
exchange, a rule that you have to have a registrar and transfer agent
in Buffalo, and Chicago, I believe, has the same.
Mr. W in g o . Explain why that is necessary.
Mr. R a n d . Because, when a man in Buffalo sells some stock on
the Buffalo Stock Exchange, he could not go to New York or Chicago
and have a New York or Chicago bank act as registrar, because it
has to be delivered under the rules of the stock exchange immediately,
and the expense and all that is prohibitive.
Mr. W in g o . Y ou do not mean immediately. Explain that, for the
benefit of the thousands who may read this record and who do not
understand this transfer situation. You do not have to deliver it
on the very day; it is the next day, is it not ?
Mr. R an d . I can not qualify to state the rules of the stock ex
change, but it interferes seriously with the delivery if it has to go
out of town to be registered or transferred.
Mr. W in g o . I do not know anything about the stock exchange,
but I have read somewhere that you have to make your transfer bv
3 o’clock the next day.
Mr. F isch er . That is delivery, but that does not necessarily mean
it has to be transferred.
Mr. W in g o . That is the point I wanted to get at; go on and ex
plain it, because you just made a statement in the record that will
be challenged by a great many gentlemen.
Mr. R an d . I will have to get somebody more familiar with the
rules of the stock exchange than I am.
The C h a i r m a n . I s not this the real answer: That these trans
actions take place in New York City and, because of the require
ments of the exchange as regards deliveries, it would be physically
impossible to send them to these other cities for these transfers; in
other words, it would impede these transactions to such an extent
that it would be a great handicap, and inasmuch as the New York
stock market is the big market, it is necessary that these transfers
and registrations take place in close proximity to the exchange?
Mr. W in go . Both of you gentlemen, I presume, are lawyers?
The C h a i r m a n . I am not a lawyer.
M r. R a n d . I am not.
Mr. W in g o . I said that sarcastically. When you say it is neces
sary physically to do this, unless they are different stocks from any
I have ever seen or any I have ever as an attorney prepared for a
little country corporation, I do not believe that you have given the
real reason yet. There is another reason, I anticipate, aside from the
1212
BRANCH, CHAIN, AND GROUP BANKING
natural selfish desire to control the business. I have seen stock
certificates with three or four transfers on them before they were
ever transferred on the books. I f a man wants to take a risk, and not
have it transferred on the books, he can do so, and in some instances
that happens.
(After further informal discussion off the record.)
Mr. S eiberlin g . The important thing that we have not in the
record is that these corporations consolidating and moving to New
York affect the banks to the extent of $100,000 a year in connection
with transfers.
Mr. B a n d . That is not accurate. I could not say with accuracy
just what that would amount to, but suppose one of our customers
in Buffalo were to sell a bond issue and have that bond issue listed
on the New York Stock Exchange. The trustee of the bond issue
would have to be a New York bank. I f we had a bank in New
York, we would receive the fee ourselves, assuming that our customer
picked out our bank as trustee.
The C h a i r m a n . Which they would be likely to do.
Mr. B a n d . Which they would be more apt to do. In many cases
this amounts to between $20,000 and $80,000, depending on the size
of the bond issue.
Mr. W in g o . That is a bond to be listed on the New York Stock
Exchange ?
Mr. B a n d . Yes.
The C h a i r m a n . I think a statement should go into the record that
Mr. Band discusssed with the committee, off the record, an angle of
this development in banking such as he has engaged in through the
organization of the Marine Midland Corporation, with particular
reference to their taking over the Fidelity Trust Co. in New York,
operated as the New York City institution of their group.
Mr. W in g o . Before you get away from that stock transaction and
that stock registrar, there are two reasons why they insist upon
that, and one is to keep the stock there, and frequently stock will be
held in brokers’ hands with numerous transfers of ownership but
without an actual transfer on the books, and the major reason why
they insist on it is that they want to keep those transactions as a
New York contract, governed by the laws of New York. For illus
tration, there are the call-loan rates. This is a real reason. There is
nothing physical that would require the registrar or the stock-transfer bank to be there ; and the registrar or the stock-transfer bank
could be in Buffalo just the same as in New York except for the
reason I mentioned. Their selfish idea is to keep it in New York
City, and they use that practice to make it a New York contract, so
that if any litigation arises the New York courts have jurisdiction
and the New York laws as to usury and everything else govern.
I think, if you ask them in New York, they will tell you that that
is the real reason why they require it.
The C h a i r m a n . In connection with this discussion of consolida
tions and mergers and control of banking incident thereto, during the
past few years a new method of financing industry independently
from bank loans has developed through the issuance oi common
stocks and their sale to the public. How has that affected, in your
judgment, the general commercial banking business ? In other words,
BRANCH, CHAIN, AND GROUP BANKING
1213
the Federal reserve act was created in 1913 to serve the business
interests of this country through making eligible for rediscount paper
representing commercial transactions, and practically ever since the
development and organization of that system, we have been having
a decreasing amount of that very class of paper, and the concerns
who were to be served from that source have gained their money
from the public through the issuance of common stock and other
classes of securities.
Now, in your judgment, how has that tended to affect the general
banking business of the country ?
Mr. R an d . Well, it has changed quite materially the general char
acter of our business by cutting down the eligible paper we have for
rediscount with the Federal reserve bank, in that the amount and
number of commercial loans that we are called upon to make is
declining, and on the other hand the amount of collateral loans we
are called upon to make is increasing.
The C h a i r m a n . Collateral loans are usually secured by stockexchange securities, are they not?
Mr. R a n d . Stock-exchange collateral.
The C h a i r m a n . H o w do you meet that, then, in carrying your
assets in such condition that will permit you to obtain money from
the Federal reserve in case you require it 5 What class of securities
do you carry?
Mr. R a n d . We meet that by increasing, of course, our supply of
Government bonds. We carry larger amounts of Government bonds.
We also carry larger lines of acceptances and bankers’ bills, which
are eligible for rediscount.
The C h a i r m a n . Y ou are forced to do that because o f these chang
in g conditions ?
Mr. R a n d . Changing
The C h a i r m a n . And
economic conditions.
your situation in that respect is no different
from that of any of the other large banks ?
Mr. R a n d . N o.
The C h a i r m a n . Particularly the banks in New York City.
Mr. R a n d . Oar situation is comparable to that of banks in New
York City, Cleveland, Detroit, and Pittsburgh.
The C h a i r m a n . Have you any suggestion to make as to whether
or not that is a development that synchronizes with the intent of the
Federal reserve plan ?
Mr. R a n d . I could not answer that.
The C h a i r m a n . In other words, does not that tend to freeze the
assets of the Federal reserve system?
Mr. R a n d . I suppose it does in a smaller way.
The C h a i r m a n . As a matter of fact, does not the large volume
of acceptances which the Federal reserve carries from time to time
practically resolve itself into frozen assets ?
Mr. R a n d . I would not be qualified to say that.
The C h a i r m a n . Mr. Luce.
Mr. L u c e . Before asking a question or two I want to take the
stand myself and from personal experience add something to the
considerations that have resulted in the centering of business in New
York.
Something more than 40 years ago I started a business in the city
of Boston. Five years later we opened a branch in New York. The
1214
BRANCH, CHAIN, AND GROUP BANKING
New York business grew rapidly and the Boston business grew
slowly, and three years ago we abandoned our business in Boston and
centered it in New York, and such funds as the corporation possessed
were transferred from a Boston bank to a New York bank.
That was not done through any love of New York. Personally,
if I were faced with the prospect of having to live in New York
in order to make a living I would go and try to exist without the
same sort of living somewhere else somehow. This business went
to New York simply because there was more money to be made in
New York, and I did not have to go with it.
I think you will find that is at the heart of this whole tendency
of business to go from the smaller to the larger place. It goes
because that is more profitable. There is no personal consideration,
and nothing in connection with any social tendency that could be
checked if we wanted to do it. I reiterate that business goes to the
larger place because it is more profitable to do business in the larger
place.
Now, as to the physical factors connected with the transfer of
stocks, in Massachusetts the head office of our public service corpora
tions were generally at first in the city concerned. That is changing,
but still there are some public-service corporations with their main
offices in the smaller cities. They maintain a transfer office in Boston
in large part because of the convenience to the stockholders. It is a
nuisance when you are closing up an estate or when you are making
an individual purchase or sale to have to send certificates of stock
off some 30, 40, 50, or 100 miles and take several days to get the thing
done, rather than to step around the corner into the office of the trans
fer agent and have it done in five minutes.
Now, one or two questions. Unfortunately I was kept away from
yesterday’s hearing by the necessities of the business on the floor of
the house, and I am not informed as to whether in your group there
are any securities companies.
Mr. R an d . When we took over the Fidelity Trust Co. they had
a small securities company called the Fitrust Corporation, and that
is still in existence, and also in the Manufacturers’ National Bank of
Troy they have a small securities company in connection with that
bank, called the Security Properties Co. (Inc.).
Mr. L u c e . It has been disclosed that in the West, from which we
have had most of the testimony prior to this, there has been a marked
growth of lending on securities. Is that true also of the business in
New York State?
M r . R a n d . Yes; lending on collateral. I just mentioned that.
The banks are lending in increasing amounts on collateral.
Mr. L u c e . Is it your expectation that you will concentrate the
business of all your banks in that regard in one securities company ?
Mr. R a n d . Well, the securities company has nothing to do with
the loans that the banks make. The collateral loans that the banks
make to customers are made at the banks, and not through any
securities company. I do not know of any securities company that
makes loans on collateral. That is a banking function.
Mr. L u c e . I think that we have different things in mind. I have
had in mind the allotments to others.
Mr. R a n d . Do you mean the underwriting of securities?
Mr. L u c e . Yes; the underwriting of securities.
BRANCH, CHAIN, AND GROUP BANKING
1215
Mr. R a n d . What was the question?
Mr. L u c e . I s it your intention to develop a central bank sep
arately for that purpose ?
Mr. R a n d . D o you mean, is it our intention to develop a securi
ties company for the underwriting of securities?
Mr. L uce " Yes.
Mr. R a n d . We are studying that proposition now, and we are not
prepared to say at this time whether we will develop that or not.
We are selling through our bond departments, through the bond
department of the Marine Trust Co., the Union Trust Co. of Roch
ester, and our other large banks—selling and distributing large
amounts of securities. We have to do it in self defense, and there
is a demand by our customers for that kind of business, and it ful
fills an economic function, of the banks selling high-grade securities.
Whether we will form a securities company to handle that end of it
or not, I am not prepared to say at this time. We have not de
cided. I would imagine that we probably will.
Mr. L u c e . I s it your judgment that the tendency toward the
greater participation by banks in that particular type of business is
wise or unwise?
Mr. R a n d . My judgment is that it is probably wise. It all de
pends on the way the securities company is operated. I f the securi
ties company is operated in a high-grade way, and distributes only
the highest-grade securities, I think it is a wise thing to do. In our
trust departments and in our fiduciary capacity, we have made it a
practice never to buy any securities that are sold by ourselves. In
any of our trust accounts, we never purchase securities from our
own banks or from any member of our own bank group. We have
never done that; we never will.
Mr. L u c e . It has been charged that your high standard is not ob
served in many parts of the country and that banks having trust
departments are willing to unload into trust funds the poorer grades
of securities for which they do not find a ready market. What is
the answer to that?
Mr. R a n d . My answer to that is that all of the banks that I know
of, the higher-grade banks, particularly in New York and the larger
cities, have adopted the same policy that we have, of never purchas
ing securities from themselves with trust funds. I do not know of a
large New York bank or a large bank of any standing anywhere
that purchases securities from itself. I may be mistaken on that,
but that is my impression.
Mr. L u c e . Y ou have pointed out that the tendency of business to
go from smaller cities to the larger cities has resulted in gain on the
part of the banks in the larger cities, at the expense of those in the
smaller cities, and that you are attempting by your form of organi
zation to recover some of that loss.
Turn the matter around. When the banks in New York discover
and realize that they are thus being attacked in a perfectly legitimate
way, will not the inevitable result be that they will turn around and
begin to form holding companies themselves ?
M r. R a n d . I should think it w ould be.
Mr. L u c e . Then tell me this: If you were to start over again with
a perfectly free hand to establish branch banks, would you establish
a branch banking system or a group banking system ?
1216
BRANCH, CHAIN, AND GROUP BANKING
Mr. R a n d . That is a difficult question to answer.
Mr. L u c e . It is an important part of what we are trying to find
out, whether, with free competition between the two systems, and
full opportunity, the branch banking system or the group banking
system will bring the community greater economic advantage and
more safety ?
Mr. R a n d . I discussed that at length in my statement yesterday,
of which I would be glad to give you a copy.
Mr. L u c e . It would be in the transcript, then, and I shall read it.
I feared I might be duplicating.
Mr. R a n d . My conclusion on that was that we had not really made
up our minds which system was preferable, that each has many
advantages over the other.
Mr. L u c e . That is all.
The C h a i r m a n . Judge Brand.
Mr. B r a n d . I want to ask you a few questions only.
First, what is the approximate size of the smallest bank in your
system ?
Mr. R an d . About $1,000,000 in deposits.
Mr. B r a n d . What is the population, say, of the city or cities in
which such a bank is located?
Mr. R a n d . I would say about 3,000 population; 2,000 or 3,000.
Mr. B r a n d . Your group banks loan to farmers, as I understand it?
Mr. R a n d . I beg your pardon?
Mr. B r a n d . Do your group banks loan to farmers ?
Mr. R a n d . Yes.
Mr. B r a n d . Upon what character of security?
Mr. R a n d . Sometimes we take a mortgage on their farm, and at
other times we loan them to buy a tractor, and we take a note from
them, and things of that kind.
Mr. B r a n d . What rate of interest do you charge the farmer?
Mr. R a n d . Six per cent.
Mr. B r a n d . How long do you carry it?
Mr. R a n d . When I said 6 per cent, that is our standard rate.
Some of the banks— and I may be mistaken—might charge 6% or 5y2
per cent.
What is your other question?
Mr. B r a n d . How long do you carry the loan ?
Mr. R a n d . A commercial bank should not carry a loan longer than
90 days. Of course, that is ridiculous when it comes to farmers.
Sometimes we have loans that we carry along for several years, but
we do not like to do it. We like to have the farmer amortize the
loan.
Mr. B r a n d . For instance, if he wanted to borrow $1,000 in March,
payable this fall, would you make him that loan?
Mr. R a n d . Yes.
Mr. B r a n d . Do you charge any commission outside of the rate of
interest ?
Mr. R a n d . N o , sir.
Mr. B r a n d . That is the total cost to him for the use of that
money ?
Mr. R a n d . Yes.
Mr. B r a n d . Do you loan at any time on the crops that he pro
duces on the farm ?
BBAN OH, CHAIN, AND GROUP BANKING
1217
Mr. R a n d . We have never had that in New York State to any
extent; we have never taken an assignment of the crop, and never
been asked to. We will loan a man in the spring $1,000, with the
understanding that when his crop comes in he will pay us off, but
we, unlike banks in other localities, have never been called upon
to make loans directly on the crop.
Mr. B r a n d . What is the average value of the land that the farm
ers own who apply to you for money ?
Mr. R an d . That would be hard to answer, because the sections are
different. We have some dairying, some in orchards, and some in
hay. I would say it runs anywhere from $100 an acre to $300 or
$400 an acre.
Mr. B r and . We know that there has been more or less criticism—
and I think that is impliedly admitted in your statement and in the
statement of others— of this group banking on the ground that
either impliedly or expressly they are trying to evade the double
liability of stockholders in case of the insolvency of the bank. What
is the amount of stock on an average that your holding company
owns in these smaller banks?
Mr. R an d . Taking all the banks, we own about 97 per cent
Mr. B r and . Suppose that you were to buy a bank and you could
not buy up over 51 per cent?
Mr. R a n d . Then we would not buy it.
Mr. B r a n d . Say two-thirds.
Mr. R a n d . We would probably take it if we could get two-thirds.
Mr. B r a n d . Suppose that that bank failed; your bank would be
liable for the double liability, would it not ?
Mr. R a n d . Yes, sir. Bank stockholders would be liable.
Mr. B r a n d . Would these other stockholders owning one-third of
the stock in that insolvent bank be assessed in order to help pay the
creditors of the failed institution?
Mr. R a n d . In the first place, in our particular group we would
never let a bank get in that shape. Our holding company has as a
part of its plan the keeping of a revolving fund of between $30,000,000 and $50,000,000 in cash at all times. At the present time we have
some $45,000,000 in cash. If a bank got in a bad condition, before it
got to the double liability we would pay any amount of money to take
care of it.
Mr. B r a nd . But suppose that it did fail and the holding company
owned 66% per cent of the stock, which you would have to make
good and would make good; the owners of the other third of that
stock would be liable for the double liability, would they ?
Mr. R a n d . Yes.
Mr. B r a n d . And have to pay ?
Mr. R a n d . Depending on whether we would allow them to pay
1 do not know. That contingency would probably never arise.
Mr. B rand . Would you not require them to pay ?
Mr. R a n d . I would not say as ’to that. We might pay for them;
I do not know.
Mr. B r and . But it would be paid in any event ?
Mr. R a n d . It would be paid.
Mr. B rand . There is no danger, then, of a holding company not
paying the assessment which may be levied by the Government or
by the State banking department in case of the insolvency of a bank ?
1001.36— 30— vol 2, pt 9------ 14
1218
BEAN OH, CHAIN, AND GROUP BANKING
Mr. B a n d . I can not say as to any other holding company; I only
say as to our own. As far as our own is concerned, I can not
conceive of any minority stockholder having to pay anything.
Mr. B r a n d . Does your holding company carry double liability in
case of insolvency?
Mr. R a n d . Our holding company does not carry double liability.
We would welcome it if it were necessary.
The combined capital of our banks at the present time is
$28,025,000, and therefore the double liability would be $28,025,000.
We aim to keep at all times in cash an amount sufficient to take
care of that double liability. In other words, our company will
carry in cash anywhere from $30,000,000 to $50,000,000, so that the
double liability is assured. We have it in cash, in other words.
Mr. B r an d . Suppose that one of your banks began to get in a
shaky condition or in an unsound condition, financially, and the
probabilities were that it would become insolvent. What would
you do ?
Mr. R a n d . I believe I explained that. We would keep it from
getting that way by our examination by working out the poor assets,
by paying in additional money from our holding company into the
capital structure of the bank.
Mr. B r a n d . Getting back to that surplus fund that you referred
to once or twice, where do these member banks of the holding com
pany deposit this surplus fund?
Mr. R a n d . For the most part, in the Federal reserve bank where
they are members; most of our banks are members of the Federal
reserve. There are four or five exceptions. The other banks deposit
in their bank correspondents. I would say that very few of them
carry more than a third or a quarter of their funds with other mem
bers of our own group.
The C h a i r m a n . May I ask a question there ?
Mr. B r a n d . Yes.
The C h a i r m a n . They do not deposit the surplus funds with your
holding company, do they?
Mr. R a n d . No; the surplus funds of the holding company are car
ried on deposit with our own banks and with other banks, and where
they are carried on deposit with our larger banks-----The C h a i r m a n . Do you mean the larger banks of your group ?
Mr. R a n d . The larger banks of your group—the money is placed
on call in Government bonds or invested so that it is always kept
liquid.
Mr. B r a n d . Y ou recognize that there have been criticisms of this
group banking?
Mr. R a n d . Y e s.
Mr. B r a n d . Relative to the question whether you want to evade
this double liability.
Mr. R a n d . The formation of our holding company was in no
sense due to the intention to evade the double liability.
Mr. B r a n d . But there has been that criticism made, that the hold
ing companies were formed to evade this double liability. Do you
deny that that is true?
Mr. R a n d . Yes.
Mr. B r a n d . For your holding company.
BRANCH, CHAIN, AND GBOUP BANKING
1219
Mr. R a n d . We are perfectly willing to have double liability on
our holding company stock, so far as that is concerned.
Mr. B r a n d . Are your smaller units, located in agricultural sec
tions, supplied with all the money they want and need to carry on
their business?
Mr. R a n d . I would not say that the small bank is supplied with
all the money they want; the small bank receives all that they
should have. Sometimes a banker will think that he should have a
lot more than he is entitled to. I would say that they are supplied
with all the money they need for their legitimate demands to take
care of their communities.
Mr. B r and . Are there other banks in these cities where you have
your smaller banks ?
Mr. R a n d . Yes, sir.
Mr. B r a n d . Were they there when you got possession of your
banks?
Mr. R a n d . Yes.
Mr. B r a n d . Are all of them there that were there when you
established your group banks in those smaller communities, or have
any of them failed ?
Mr. R a n d . None has failed, to my knowledge.
Mr. B r and . Then, so far as your group banking business is con
cerned, you have not interfered with the other banking institutions
in cities in which they are located ?
Mr. R a n d . Not in the slightest.
Mr. B r and . I want to ask you one other question, along the line
that the chairman was questioning you, which is more or less im
material. As I understand you, the average salary that you pay to
your tellers is $150 per month in your smaller banks.
Mr. R a n d . I may be somewhat guessing on that. I should think
that that would be the average salary. In some of our smaller banks,
in a bank of $1,000,000, where we sometimes have a cashier act as
teller, I would say as a general rule that $150 a month was about the
lowest we paid the teller.
Mr. B r a n d . What do you pay your cashier in a $1,000,000 bank?
Mr. R a n d . I would say that we pay him between $3,000 and $4,000
a year.
Mr. B r a n d . Do you have a vice president and a president in each
bank?
Mr. R a n d . Not in a small bank like that. A president and a
cashier.
Mr. B r and . What do you pay the president?
Mr. R a n d . Very often the position of president of a small bank
is an honorary position, but where he is active, we probably pay him
$3,000 or $4,000 a year, maybe $5,000. Where the president is active,
the cashier would "generally not be active.
Mr. B r a n d . In the Bank of Snyder, I notice that the resources
are about $650,000. In a bank like that, do you have a loan com
mittee independent of the board of directors to pass on loans ?
Mr. R a n d . That particular bank is practically in a suburb of
Buffalo; it is to all intents and purposes a suburb of Buffalo; and
that bank is officered by some of our officers of the Marine Trust Co.,
and they have a loan committee that acts for that bank.
1220
BRANCH, CHAIN, AND GROUP BANKING
Mr. B r a n d . Are you familiar with the merger of the Fourth
National Bank in Atlanta with the Atlanta Lowrey National Bank,
into the First National Bank?
Mr. R a n d . No, sir.
Mr. B r a n d . What suggestion would you make in regard to the
establishment of a bank in a section where the people themselves
are not able to form a bank and where all the banks have failed?
Would you suggest that they go in a branch banking system or a
chain banking system, or a group banking system ?
Mr. R a n d . Branch banking system.
Mr. B r a nd . A branch banking system can be more economically
operated than a group banking system, or chain banking system,
can it?
Mr. R a n d . Yes, sir.
Mr. B r a nd . Do you recommend branch banking because it is safer,
or cheaper?
Mr. R a n d . It is more economical—that is, for the contingency
that you mentioned.
Mr. B r a n d . Take a State like Georgia or South Carolina. Georgia,
at least, is purely an agricultural State. What sort of a banking
system would you suggest for Georgia?
Mr. R a n d . I could not offer a suggestion, because I do not know
the conditions.
Mr. B r a nd . There is nothing there but farmers growing cotton.
Mr. R a n d . I would think a branch banking system would be the
best; but, as I say, that is only a haphazard answer, not knowing
the conditions there.
Mr. B r a n d . Then, if Georgia does not have a branch banking law,
your opinion is that the State legislature ought to provide for it ?
Mr. R a n d . I could not answer that unless I knew the conditions
better. I think it is unwise to try to answer something where I do
not know anything about the conditions in Georgia.
Mr. B r a n d . Well, the agricultural classes are depending upon
wheat, or corn, or cotton to make a living, and in that State, as well
as in the South generally and the West, which is preferable, in your
opinion, going into a branch banking system or a group banking
system or a chain banking system?
Mr. R a n d . I would hesitate to answer that, because I do not know
the conditions.
The C h a i r m a n . What is the please of the committee now? It is
12.30.
Mr. W in g o . I would like to ask a few questions. I will have to
leave in a few minutes.
The C h a i r m a n . All right; proceed.
Mr. W in g o . You stated, in response to a question from Judge
Brand a moment ago, that branch banking is more economical than
group banking. Did you mean that in connection with the situation
he mentioned down in Georgia, or as a general proposition?
Mr. R a n d . I think it is true as a general proposition.
Mr. W in g o . Then why do you not engage m branch banking exclu
sively, instead of group banking ?
Mr. R a n d . I thought I covered that in my original statement; that
group banking is more economical than independent banking, unit
banking, but there are so may other conditions that come up in group
BRANCH, CHAIN, AND GROUP BANKING
1221
banking that are advantageous that, in my opinion, it offsets to some
extent the greater economies that might be effected out of straight
branch banking. In other words, in group banking you retain many
of the benefits of independent unit banking which you might not be
able to obtain in straight branch banking. As I said in my statement
yesterday, I am not prepared to say which system is preferable, but I
think either system is preferable to the independent unit bank.
Mr. W in g o . I f the law and the restrictions were identical, do you
think then that you would in some instances maintain group banking
and in other instances maintain branch banking?
Mr. B a n d . S o far as our particular operation is concerned, if I
might hazard a guess, I would say we would probably go to branch
banking.
Mr. W in g o . That is the point I wanted to get at. I f we liberalized
the law along the line you and the advocates of branch banking insist
would be proper, the probabilities are that you would gradually be
transformed into a branch-banking system?
Mr. R a n d . Yes, sir.
Mr. W in g o . Which would you prefer, the trade area or the State
line?
Mr. R a n d . I feel that the trade area would be preferable.
Mr. W in g o . What reasons now occur to you, as a practical banker,
based upon your own observation and experience, that would make
a trade area preferable to a limitation based solely upon the polical
lines of a State ?
Mr. R a n d . Well, I discussed that at length in my statement, and
I feel I can only speak for our own situation, because I am not
familiar with the other trade areas or trade locations. For our own
situation, I would say that New York State and possibly a part of
Pennsylvania and a part of New Jersey, as well as a part of Con
necticut, following in general the second Federal reserve district,
which includes those particular States.
Mr. W in go . In other words, you have some natural industrial
centers which are near State lines, and their trade and business are
not limited to the political subdivisions of the country, but covers
other States adjacent to those industrial centers and banking cen
ters—that is the gist of your thought on that, I presume ?
Mr. R a n d . Yes.
Mr. W in g o . Your corporation, as I understand, is a Delaware
corporation ?
Mr. R a n d . Yes, sir.
Mr. W in g o . Where do you hold your stockholders’ meetings?
Mr. R a n d . Wilmington, Del.
Mr. W in g o . D o you intend to hold your stockholders’ meeting
there each February, or are you permitted to hold it in Buffalo, if
you desire to do so?
Mr. R a n d . No; we are not permitted to hold them in Buffalo.
We hold them in Wilmington, Del.
Mr. W in g o . I think you would be permitted to hold it elsewhere,
but your policy is to hold it at Wilmington and you have been hold
ing it in Wilmington?
Mr. R a n d . Yes, sir.
Mr. W in go . All three of your original incorporators are citizens
of Wilmington?
Mr. R a n d . Yes.
1222
BRANCH, CHAIN, AND GROUP BANKING
Mr. W in g o . Under your charter, your holding corporation is per
mitted to engage in any business that an individual could engage in,
except a few functions of a banking nature; for illustration, you
are not permitted to receive deposits; you are not permitted to issue
a circulating medium; and you are not permitted to buy and sell
gold bullion and foreign coins; but is there any other business that
you are barred from under your charter?
Mr. R a n d . I do not know.
Mr. W in g o . Y ou can do anything that an individual can do except
those things which are specifically enumerated in your charter that
you are barred from doing, can you not?
Mr. R a n d . I could not answer that. I am not a lawyer, and
therefore could not answer that. I know that our holding company,
the Marine Midland Corporation, is a holding company exclusively
engaged in no other business except the holding of bank stocks.
Mr. W in g o . You mean that in practice you are strictly a holding
company ?
Mr. R a n d . Yes.
Mr. W in g o . Is your attorney here?
Mr. R a n d . N o , sir.
Mr. W in g o . That is my interpretation of your charter, that you
can do what any person naturally can do except those things which
I have enumerated. I am under the impression, as a country lawyer,
that where you enumerate and include certain things in a document
that way, that that excludes the others, and the reverse would be
true, that where you undertake to give a broad authority except as
to certain things, then those few would eliminate from the excep
tions all others. But your directors do not have to be stockholders,
do they ?
Mr. R a n d . I do not know—no.
Mr. W in g o . Your directors may alter, amend, add to or repeal
any by-law without the consent, knowledge, or approval of the stock
holders—is not that true ?
Mr. R a n d . I could not answer that.
Mr. S e iber lin g . That is true.
Mr. R a n d . I believe that is true.
Mr. W in g o . You will find it on page 7 of your printed charter,
in article 4:
To make, alter, amend, change, add to, or repeal the by-laws of this corpora
tion without any action on the part of the stockholders.
That is under the tenth subdivision, giving the powers of your
board of directors, and under your charter all your powers are
vested in your board of directors, who do not have to be stockholders,
and that board of directors in turn may subdelegate all of their
power to two members.
Do any of your banks act in a fiduciary capacity ?
Mr. R a n d . Yes, sir.
Mr. W in g o . D o they loan on the stocks either of the parent cor
poration or of any of the unit banks in your group ?
Mr. R a n d . N o , sir.
Mr. W in g o . They are permitted to do it, are they not?
Mr. R a n d . Our banks are permitted to loan on tlie stocks of every
other bank in the group, but we do not do it. We do have a few
BRANCH, CHAIN, AND GROUP BANKING
1223
loans, but our policy is not to lend upon our own stock, upon the
stock of the holding company. We do have a few loans that are
gradually being liquidated that hung over from before the time we
formed the Marine Midland Corporation. For instance, we took
into the Marine Midland Corporation the Union Trust Co. of
Rochester, the largest bank in Rochester. Before we took that into
the Marine Midland Corporation there were some few loans on the
Marine Trust Co. and Union Trust, of Rochester stock, and vice
versa. Now, that stock was exchanged for stock in our holding com
pany, but gradually we are eliminating that, so that eventually we
will not loan upon our own stock.
Mr. W in g o . Your policy, then, is to avoid what, of course, is obvi
ously a dangerous practice, which would permit pyramiding?
Mr. R a n d . Our policy is to treat our holding company as much
like an actual bank as we possibly can, and not loan upon our own
stock.
The C h a i r m a n . Do you maintain a market for any of your stocks ?
Mr. R a n d . D o you mean the other stocks of the constituent banks ?
The C h a i r m a n . Yes.
Mr. R a n d . N o .
The C h a i r m a n . Do you maintain a market on the stock of the
holding company?
Mr. R a n d . We have nothing to do with that. When our company
was formed we had a million shares of our stock that were handled
by four different firms, and whatever marketing was done was main
tained by them, but we have never tried to manipulate the stock
or put it up.
The C h a i r m a n . Have you any arrangement for the maintenance
of or for making a market for your stock with any of those houses?
Mr. R a n d . We have not. The houses themselves are doing it, but
it is independently of us.
The C h a i r m a n . D o you have to sell those stocks ?
Mr. R a n d . No, sir; never.
Mr. W in g o . A s to those banks that act in a fiduciary capacity, do
they receive on deposit the trust funds o f the trust where they are
acting in a fiduciary capacity ?
Mr. R a n d . Yes.
Mr. W in g o . D o they pay the customary interest on that deposit?
Mr. R a n d . Yes.
Mr. W in g o . D o they not pay any additional ?
Mr .R a n d . N o , sir.
Mr. W in g o . D o you think that is wise ?
Mr. R a n d . I do not see how we could discriminate and pay trust
funds left on deposit with us more than we pay our regular cus
tomers. It would open up all kinds of embarrassing problems for us
if we did. Our policy is to treat them all alike, however, paying our
trust funds the highest rate of interest we can under the clearing
house arrangements in the cities in which we operate.
Mr. W in go . D o you think a bank should be permitted to be exempt
from the ordinary rules governing a trustee where the trustee is an
individual? Why should a bank be given preference over an indi
vidual in connection with the income to be derived from the handling
of trust funds ?
1224
BRANCH, CHAIN, AND GROUP BANKING
Mr. R a n d . I can not answer that.
Mr. W in g o . D o you not recognize that that is a sound rule, that
the trustee shall not derive any emoluments or profits from the
handling of trust funds other than the commissions allowed by law ?
Mr. R a n d . Yes; I agree with that.
Mr. W in g o . Why should a bank acting in a fiduciary capacity be
permitted to profit from handling the trust estate in addition to the
regular commissions allowed by law?
Mr. R a n d . Of course, we keep most of our trust funds invested at
all times; we have very little in the way of trust funds on deposit.
Most of them are invested, and most of the trust fees are fixed by law.
Mr. W in g o . But, as to the deposits that are made, you simply treat
them as the other deposits bearing interest ?
Mr. R a n d . I do not know as I understand exactly what you mean.
We pay our trust funds the same interest that we pay our other
accounts, but we have no bank that I know of that has a uniform
rate for all their accounts. Some are savings, some are thrift, some
are checking accounts, and the rates vary. We aim to pay our trust
funds the largest rate of interest that we consistently can, but we do
not favor a trust account over some widow that may have a deposit
with us. In other words, it seems to me that we should have a fair
rate of interest, pay a fair rate of interest to all of our customers,
and, simply because one is a trust account, we should not pay more
on that than we would some individual or some poor person or some
widow or orphan, and that is the way we try to operate.
Mr. W in g o . Where you are dealing with an individual who comes
and voluntarily deposits the funds with you, each one of you, as con
tracting parties, is capable of protecting the interest of himself; but,
on the other hand, where you are acting as trustee for an estate, you
are dealing with yourself, and is it not the natural tendency, without
any corrupt motive, for anyone who is borrowing money to pay the
lowest rate he can pay on it?
Mr. R a n d . I think that is true, but in handling our trust estate we
pay the largest rate of interest we consistently can, and we have
never penalized to the slightest extent because of that contractual
relation.
Mr. W in g o . But that results in the trust estate sometimes having to
take a lower return than could be safely procured elsewhere.
Mr. R a n d . I do not think so. It does not in our case. We invest
that money possibly down to $100 or $200. We do not let it lie in the
bank at interest.
Mr. W in g o . S o your policy is not to take advantage of your power
there and accumulate the trust funds and simply pay a current rate
of interest on the deposits?
Mr. R a n d . I think that would be very wrong.
Mr. W in g o . That would be very reprehensible ?
Mr. R a n d . That would be wrong. We have never done that.
Mr. W in g o . Your corporation is authorized to do an underwriting
business. Have you ever done any of that ?
Mr. R a n d . N o , sir.
Mr. W in g o . D o any of your constituent banks do an underwriting
business ?
Mr. R a n d . Yes.
BRANCH, CHAIN, AND GROUP BANKING
1225
Mr. W in g o . D o any of your banks buy securities underwritten by
your other banks ?
Mr. R a n d . Yes; our banks do. Where our Marine Trust Co., for
example, has a bond issue, we allow participation in that bond issue
to our group of banks, and that is one of the benefits of group
banking.
Mr. W in g o . Is there not a possible danger there?
Mr. R a n d . There may be a possible danger, but I do not see that
there is any more danger in buying from the bond department where
we underwrite the securities than in buying elsewhere. If they do
not buy from us, they will buy from some other bank, and maybe an
inferior security, or they will buy from some bond salesman or some
bond house, and it might be an inferior security.
The C h a i r m a n . I would like to ask, Mr. Rand, whether you invest
the trust funds of your customers in securities of your own
organization ?
Mr. R a n d . N o , sir; never have done that.
Mr. W in go . Notwithstanding the authority in your charter, you
have never engaged in anything except holding the stocks of your
unit banks ?
Mr. R a n d . Yes.
Mr. W in g o . Y ou have not done any mortgage business?
Mr. R a n d . N o , sir.
Mr. W in go . And your holding corporation has not done any un
derwriting; your banks do that?
Mr. R a n d . That is right.
Mr. W in g o . What size community, as a general proposition, do
you think would be able to maintain a unit bank profitably?
Mr. R a n d . I think a town of 10,000 or 15,000 people could main
tain a unit bank profitably.
Mr. W in g o . Where there is a unit bank in a town and there is a
manufacturer in that small community who needs more credit, as
suggested in paragraph 2 under the heading “Advantages to the de
positors ” on page 18 of your statement, it is customary now for the
independent unit bank to arrange for the handling of that larger
credit through one of its correspondents, is it not ?
Mr. R a n d . Yes, sir; if the correspondent will do it. Very often
the correspondent will not take the excess line of the unit bank.
Mr. W in g o . It would not do it unless it were profitable and sound.
Mr. R a n d . Unless it were profitable and sound, and unless they
happened to have the money.
Mr. W in g o . Would your group take it if it was not profitable
and sound ?
Mr. R a n d . We would not want our member bank to take the loan
originally unless it were profitable and sound. I f our member bank
took the loan, we would assume that it was profitable and sound or
they would not have taken it.
M r. W in g o . Y ou would assume it?
Mr. R a n d . We would approve it before it came to us.
Mr. W in g o . In other words, if a loan would appeal to you as
being safe and sound, why would it not appeal to the correspondent
of the independent unit bank?
Mr. R a n d . Their judgment might be different than our own, and
it might appeal to the independent unit bank. I do not know—it
1226
B R A N C H , C H A I N , AND GH0U1’ BA N KI N G
would have to depend on the individual loan, and you can not
inswer in advance what it would be.
Mr. W in go . So the logic of your answer on that point is that the
superior judgment of your group system is the determining factor
as against the unit bank taking care of that excess credit needed
by the manufacturer in a local community?
Mr. B a n d . Yes; I would say so.
Mr. W in g o . Under subdivision 3 of the same chapter, on page 19,
you say, u The isolated country bank, while professing to have trust
and investment departments, has been unable to afford competent
officers along such lines.” Then you say that through your banking
organization there is available to the public such service through the
part time of men who are experienced in their respective fields. Do
you mean that you send out your different experts to these different
unit banks in these small communities ?
Mr. R a n d . Yes.
Mr. W in g o . As a matter of fact, you exercise considerable super
visory control over the detailed operations of your unit bants, do
you not, in order to guarantee the safety and soundness of them ?
Mr. R a n d . Well, I think I covered that in my answer to Mr.
McFadden earlier in the hearing. Our examining committee works
with these banks; we get to know how they operate; we get to know
whether the loans that they are making are good and sound. We
do not require the individual bank to take up with us a loan before
hand unless it is an unusually large loan or unless they are in doubt
as to whether they should make the loan.
Mr. W in g o . In other words, it is comparable to this, that in an
ordinary, individual unit bank there are certain types and sizes of
loans and the operating officer, say the cashier or the active vice
president, or president, whoever is the operating head, makes the
great bulk of the loans without consulting the board of directors
or a loan committee-----Mr. R a n d . Yes.
Mr. W in go (continuing)—and it is the unusual loan that the
board of directors or the loan board or committee passes on?
Mr. R a n d . Yes, that is correct.
Mr. W in g o . N o w , your holding company and its supervisory
officers and advisory officers occupy about the same relation to your
banks as the directors in the independent unit bank would occupy
to the cashier on these current loans ?
Mr. R a n d . Marine Midland Group (Inc.) does.
Mr. W in g o . And it is only the unusual loan that the operating
officer would not act upon?
Mr. R a n d . Yes.
Mr. W in g o . In other words, if I walked into a unit bank in one of
your towns, and I was a citizen there, and I asked for an ordinary,
small loan, nothing unusual in size, and I had an established credit
and standing, they would not ask the holding company or its advisory
group or board for approval, but if I asked for an extraordinary loan
or was engaging in some new venture and wanted to establish some
new manufacturing enterprise and wanted a line of credit, the possi
bilities are that they would get the benefit of your judgment ?
BRANCH, CHAIN, AND GROUP BANKING
1227
Mr. R an d . Yes.
Mr. W in g o . Although the local board would ultimately determine
what that would be ?
Mr. R an d . Yes.
Mr. W in g o . Now, you have examiners that go around, I un
derstand ?
Mr. R an d . Yes.
Mr. W in g o . And they are in close touch with the credit organiza
tion of your holding company ?
Mr. R an d . With the credit organization of Marine Midland
Group (Inc.)
Mr. W in g o . And, for practical purposes, those examined are
really traveling credit representatives? They are the agency through
which your holding company protects your stockholders against im
provident loans or improvident management of your units banks?
Mr. R an d. Yes.
Mr. W in g o . And that control, in your experience, has been
effective ?
Mr. R an d . Yes.
Mr. W in g o . That is all.
The C h a irm a n . Before we adjourn, I would like to ask you one or
two questions.
You defined your particular trade area as New York State and a
certain portion of northern Pennsylvania. Would you acquire any
banks outside of that area?
Mr. R an d . Our policy at the present time is not to acquire any
banks outside of New York State. We may some time later wish to
change that, but we are not going outside of New York State at the
present time.
The C h a irm a n . There is nothing in your make-up to prevent you
from acquiring a bank in San Francisco if you want to, is there?
Mr. R an d . N o , sir.
The C h a irm a n . N o w , the presentation of Mr. Lord, of Detroit,
the other day embodied a statement as regards their stock holdings.
For instance, he told us what per cent of his stock was held in Detroit,
what per cent was held in New York, and what per cent was held in
other parts of the country. Have you your stock ownership classified
so that you could give us some idea as to where your stockholders are ?
Mr. R an d . Yes, sir.
The C h a irm a n . Would you put that in the record at this point?
Mr. R an d . It is covered in my statement. Our stock is held in 45
different States.
The C h a irm a n . I f that is already in the record, I do not want it
repeated, but if you have it by States, I would like to have it. Have
you separated the amount that is held in New York City?
Mr. R an d . Yes.
The C h a irm a n . If you would put that in also, we will appreciate
it. and, without objection, that will be placed in the record at this
point.
1228
BRANCH, CHAIN, AND GROUP BANKING
(There was no objection, and the statement referred to is repro
duced below.)
Distribution of Marine Midland Corporation stock on April 10, 1930
Number |
State and place
Of Stock* '
h old ers i
Total
cViarAQ
shares
New York:
Buffalo......... ..................................
New York City............................
Rochester........................................
Troy................................................
Niagara Falls.................................
Binghamton...................................
Tonawanda....................................
North Tonawanda.......................
Lockport.........................................
Johnson City.................................
Lackawanna..................................
Jamestown......................................
East Aurora...................................
Cortland...... .................................
Albion.............................................
Snyder............................................
6,505
2,667
1,555
534
967
184
194
169
372
80
57
120
83
126
47
116
, 2,891,844
877,911
249,067
! 102,650
; 231,297
!
31,788
. 115,455
84,210
;
62,315
11,457
i
1,535
16,653
8,664
8,296
1,864
3,458
Total Marine Midland cities.
411 other communities............. .
13,776
2,191
4,698,464
287,778
Total New York State (427)..
15,967
4,986,242
j Number Number
of com of stock
munities holders
New York.....................
Alabama................ ........
Arizona..........................
Arkansas...... .................
California-....................
Colorado........................
Connecticut...............
Delaware..................... .
District of Columbia.
Florida...........................
Georgia..........................
Illinois:
Chicago.
Other___
15,967
2
1
1
112
11
371
137
2
136
Maryland:
Baltimore..
Other......... .
Massachusetts:
Boston..........
Other........... .
986,242
35
10
50
29,161
2,025
12,351
4,348
5,979
10,264
18,008
44,371
10,614
54,985
Total..
Indiana.................................
Iow a.....................................
Kentucky, Louisville........
Louisiana, New Orleans..
Maine........ ..........................
Number
of shares
37,908
1,208
150
164
4,017
12,890
720
1,006
69,463
25,190
94,653
Michigan:
Detroit..
Other....
3,533
12,368
15,901
N o t e . —There are many communities tributary to Marine Midland cities whose figures are not included
in Marine Midland cities totals.
1229
BRANCH, CHAIN, AND GROUP BANKING
Distribution of Marine Midland Corporation stock on April 10, 19S0—Contd.
Number Number
of com of stock
munities holders
Minnesota....................................
Mississippi...................................
Missouri.......................................
Montana......................................
Nebraska........ ..............................
New Hampshire.........................
New Jersey..................................
North Carolina...........................
New Mexico................................
56
3
15
6
12
92
449
Number
of shares
3,850
200
2,355
280
450
3,066
78,785
11
5
Ohio:
Cleveland.............................
Other......................................
11,101
Total..................................
22,530
Oklahoma.......... ........................
Oregon..........................................
275
520
Pennsylvania:
Philadelphia........................
Other......................................
11,429
1
111
230
201
Total...................................
18,341
60,532
78,873
Rhode Island:
Providence...........................
Other......................................
Total...................................
5,607
South Carolina........ .................
South Dakota.............................
Tennessee.....................................
Texas........... ................................
Utah.......................................... .
Vermont.......................................
Virginia........................................
Washington.................................
West Virginia.............................
Wisconsin.....................................
Wyornin .....................................
56
5
926
1,445
5
4,579
3,196
3,394
206
3,379
10
20,857
Total United States (45)
5,509,3
Foreign:
Canada.................................. .
England_______ ____ _____
Hawaii....................................
West Indies...........................
13,673
1,090
100
Total, foreign................... .
14,873
Grand total........................
10
1,256
20,9:
The C h a i r m a n . Will it be convenient for you to come back at 2.30 %
Mr. R a n d . I will if you want me to. I had planned not to, but I
will if you desire.
The C h a i r m a n . I think there are other members of the committee
that would like to question you. Perhaps we could make it at 2
o’clock, if that would help you any.
Mr. R a n d . As I said, I place myself in your hands. I will stay
here as long as you want me to; I will be glad to.
The C h a i r m a n . Then I suggest that we recess until 2.30 o’clock
this afternoon.
(Thereupon, at 12.55 o’clock p. m., a recess was taken until 2.30
•o’clock p. m.)
1230
B RA N CH , C H A IN , AND GROUP B AN K IN G
AFTE R RECESS
The hearing was resumed at 2.30 o’clock p. m. at the conclusion of
the recess.
STATEMENT OF GEORGE F. RAND— Resumed
The C h a i r m a n . The committee w ill come to order.
Mr. S e iberling . I should like to ask the witness just a few ques
tions. By the way, are you going to put the articles of incorporation
and by-laws in the record, Mr. Chairman?
The C h a i r m a n . They were placed in the record yesterday.
Mr. S eiberlin g . I just wondered if you wanted it in; and how
about the exhibits that go with it? He has Schedules Nos. 4 and 5.
The C h a i r m a n . They also have been placed in the record.
Mr. S eiberlin g . Mr. Rand, I notice on page 3 of the articles of
incorporation, paragraph 8, that your corporation has the right to
deal in its own shares to the extent, however, that it can not impair
its capital. That is correct, is it ?
Mr. R a n d . Yes, sir.
Mr. S e ib er lin g . In your statement of December 31, 1929, you
show a surplus of $19,670,000. It would have been possible on that
date to have had invested in your holding company stock, holding
company funds of over $19,000,000?
Mr. R a n d . The surplus of the 17 banks of the Marine Midland
Corporation as of December 31, 1929, was $19,670,000 not the sur
plus of the holding company. The holding company as of that
date had cash on hand or in transit of $57,157,689.71. The only
stock we have purchased of our own is eight or ten thousand shares
for our employees, as employees’ stock. I think the amount, as of
January 1, was not over two or three hundred thousand dollars.
Mr. S eiberlin g . That is not the question I asked you. Under
your set-up it would have been possible to have invested over
$19,000,000 in youi* own stock if you had wanted to?
Mr. R a n d . We had the right to do it, but we did not do it. That
is common to Delaware corporations—investing in their own stock.
Mr. S eiber lin g . Y ou have an executive com m ittee provided fo r o f
five members ?
Mr. R a n d . Yes,
Mr. S e iberling .
sir.
And, of course, they control the activities of your
company between meetings of the board of directors?
Mr. R a n d . Yes.
Mr. S eiberling . And you have a provision that a majority shall
control so that, as a matter of fact, it makes it possible for three
men in your organization to control the whole organization be
tween meetings o? the board?
Mr. R a n d . It does in theory, but actually the company is simply
a holding company and does not take any action of any importance
without a full board meeting, although under the by-laws, we have
that power.
Mr. S eiberlin g . Of course, that is your present practice, but you
do not have to continue to run it 1-hat. way and neither does your
successor ?
B R A N C H , C H A IN , AND GROUP B A N K IN G
1231
Mr. R a n d . That is common with banks and with most corporations.
During the absence of the board, the men on the executive commit
tee—a majority of them—are in control.
Mr. S eiberlin g . Y ou do not have to make any reports, as a
banking company?
Mr. R a n d . We are not a banking company, but a holding company.
Mr. S eiberling . In accordance with your charter and by-laws, you
are not a banking company ?
Mr. R a n d . That is correct.
Mr. S eiberling . But, in reality, you are a tremendously big bankMr. R a n d . N o ; we do not do any banking.
Mr. S eiberling . Y ou run a great many banks.
Mr. R a n d . The Marine Midland Corporation of Delaware does
not run any banks. It is simply a holding company to hold bank
stocks.
Mr. S eiberlin g . When you hold stocks, your holding company,
in reality, runs the banks?
Mr. R a n d . Not the holding company; no. We have a separate
company, the Midland Group (Inc.) under which the banking busi
ness of this company operates; that is, we do not do any banking
business or perform any banking function, but the explanation and
all functions I mentioned this morning are handled by a sort of
clearing-house group of the various banks themselves—the presidents
of these various banks acting as the Marine Midland Group (Inc.).
Mr. S eiberling . That is true; but your holding company sits away
up on top and directs all of them, does it not?
Mr. R a n d . It does not direct them.
Mr. S eiberling . It has a right to direct them, though ?
Mr. R a n d . The holding company does not have the right to do
business in New York State and does not do business there.
Mr. S eiberling . It owns the capital stock of all the banks ?
Mr. R a n d . Yes, sir; but it does not actually do any business. It
transacts no business, but simply holds the stock of the banks and
receives the dividends and pays out dividends.
The C h a i r m a n . May I ask a question right there?
Mr. S eiberling . Yes.
The C h a i r m a n . It has no other income ?
Mr. R a n d . Except from the cash which it has on hand— forty or
fifty million dollars.
The C h a i r m a n . Except the income it receives from that?
Mr. R a n d . Yes, sir; it has no other income.
Mr. S eiberlin g . Just one more question along that line: Then,
while you own all of these banks—substantially all the capital stock—
you have here the sheet showing the proportionate part of the capital
stock you own, showing an average of 93.83 per cent-----Mr. R a n d . Yes, sir.
Mr. S eiberling . Y ou own 93.83 per cent o f all the banks o f the
group and yet you contend you are not in the banking business ?
Mr. R a n d . We are not in the banking business, as a holding com
pany; no.
Mr. S eiberling . Y ou make no reports as a holding company to the
State or to the Federal Government—you are not subject to call for
any reports?
1232
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. R a n d . N o ; but we have voluntarily offered to the banking de
partment of New York State to permit them to examine our company
at any time and recently a bill has been passed in the New York
State Legislature and the House, and I believe signed by the gover
nor in the last few days, which would put our holding company
under the banking department for examination; so, from now on I
believe the bank holding companies in New York State will be sub
ject to examination by the New York Banking Department.
Mr. S e iber lin g . Y ou are familiar with living trusts and trusts
under wills, I take it ?
Mr. R a n d . Yes, sir.
Mr. S eiberlin g . Under this set-up, it will be possible, at future
times—25 or 50 years from now—to have all of the stock of this
holding company deposited in trusts of one kind and another and the
holding company run by men without a dollar’s interest in the
company ?
M r . R a n d . N o, sir.
Mr. S eiberling . It would be possible?
Mr. R a n d . I do not see how.
Mr. S eiber lin g . Under the set-up, it would be perfectly legal?
M r . R a n d . I do n ot know .
I
answer that.
Mr. S eib er lin g . Y ou do know
am not a law yer, ancl can not
that a director does not have to
have any stock ?
Mr. R a n d . Yes, sir.
Mr. S eiber lin g . And a member of the executive committee does
not have to have any stock ?
M r . R a n d . N o , sir.
Mr. S e ib er lin g . I f
three men on the executive committee can
control the company, then it would be possible to have your stock
trusteed and three men run the holding company without any owner
ship of stock?
Mr. R a n d . In theory it would be possible, but not in practice
to-day. I do not see how much difference it would make under the
requirement that the three men should own 10 shares each—the dif
ference between owning 30 shares of stock out of 5,500,000 shares
and owning none—the difference is so small that it reduces it almost
to the point of absurdity. As a matter of fact, the directors that
are on the executive committee are very large stockholders—they
are the largest stockholders in the Marine Midland Corporation. I
suppose, in theory, you could take a bank like the National City
Bank and work out the proposition you have submitted, and have
the directors, owning ten shares of stock each out of five or six
million shares of the National City Bank, control the whole bank.
Mr. S e ib er lin g . Do you thing it is a good thing to have such a
large company as you have here controlling so many banks and so
many deposits of the people, and upon whom the people depend for
their money to do business, controlled by three men who have no
interest in the company and who do not even have to live in the
State of New York?
Mr. R a n d . Three men do not control the company.
Mr. S eiber lin g . I am not asking that. Would you think that
would be a good thing if such a thing should be done?
B R A N C H , C H A IN , AND GROUP B A N K IN G
1233
Mr. R a n d . If such a remote contingency arose, I think it would be
a very bad thing, but it is almost impossible.
Mr. S eiberlin g . A s long as you are managing this holding com
pany, with the views you have expressed here, I have no doubt it
would be all right, but looking into the future, do you think that
legislation should be passed permitting such a possible situation as I
have just described to you?
Mr. R a n d . I think the situation is so remote that no legislation of
that kind would be needed. The same contingency you mentioned,
you could work up for any large corporation or any great bank. The
same think could be true of the Chase Bank and the National City
Bank or any other great institution.
Mr. S eiberlin g . Y ou do not think a banking institution is com
parable with any large industrial company, do you?
Mr. R a n d . No; but the same banking institution is comparable, in
some respects, to our holding company, and the same contingency you
mentioned is perfectly possible in connection with any bank vou can
mention.
Mr. S eiberling . I just want to ask a few questions along another
line. You had the Lackawanna Steel in Buffalo recently?
Mr. R a n d . Yes, sir.
Mr. S eiberlin g . And that consolidated with the Bethlehem
Steel Co.?
Mr. R a n d . Yes, sir.
Mr. S e iber lin g . Did you do business with the Lackawanna at that
time ?
Mr. R a n d . Yes, sir; and we still do.
Mr. S eiberlin g . N o w , the consolidation— I do not want to dig into
the affairs of that company, but the consolidation of that company
with the Bethlehem—wThat effect did that have 011 the banking situa
tion in Buffalo, not only as to deposits, but as to the transfer of stock,
trusteeship of bonds, and those things that were necessary in the
actual financing of the company?
Mr. R a n d . In that particular company it did not have so large an
effect, except a Buffalo man who was president of it is no longer
president, and the directors’ meetings are no longer held in Buffalo.
That stock, before the merger with the Bethlehem, if I remember
correctly, was already listed on the New York Stock Exchange.
Mr. S eiberlin g . Y ou are familiar with the contest going on be
tween Cleveland and New York now in reference to the Youngstown
Sheet & Tube Co. ?
Mr. R a n d . Only from newspaper reports.
Mr. S eiberling . D o you know that just now, probably for the
first time in this country, as far as I know, a Cleveland house is
underwriting debentures for an Akron company amounting to $30,000,000 ? That is very unusual, is it not ?
Mr. R a n d . I would not say that it was unusual for a Cleveland or
Chicago house to underwrite a large bond issue.
Mr. S eiberling . I s it not desirable that we keep these sections, like
Buffalo, Cleveland, and Chicago, in a position so that they can under
write securities for companies in their own territory ?
Mr. R a n d . I think that is very desirable.
1 0 0 1 3 6 — 3 0 — VOL
2,
PT
9-------- 15
1234
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. S eib e r lin g . Why do you think it is desirable ? I just want to
get your reasons for it.
Mr. R an d . Well, I think it is desirable because it diversifies the
large financial transactions and spreads them out over the country
as a whole. It builds up in these large cities like Chicago, Detroit,
and Buffalo, and Cleveland big houses who can do a big underwriting
business. It retains money and business in those localities that other
wise might be concentrated in another locality.
Mr. S e ib e r u n g . Incidentally, it also gives the lawyers of those
centers something to do ?
Mr. R an d . Yes, sir.
Mr. S e ib e r lin g . And insurance agents something to do?
Mr. R a n d . Yes, sir.
Mr. S e ib e r lin g . And the trust departments of banks something
to do in the way of registering bonds and collecting coupons, and
there is not any real reason why New York should do all the business
of that character in the country, is there ?
Mr. R an d . N o . Generally, when a big issue is handled by a house
in Cleveland, Buffalo, or Chicago, or Detroit there are New York
partners taken into the picture.
Mr. S e ib e r lin g . I think that is all.
The C h a irm a n . Mr. Busby.
Mr. B u sb y . On page 7 of your statement, headed “ The Midland
Group (Inc.),” you say the Marine Midland Corporation is purely a
holding corporation organized under the laws of Delaware and
transacting no business in the State of New York?
Mr. R an d . Yes.
Mr. B u sby . In the same paragraph you state that for the purpose
of affording certain advantages you mention there the Marine Mid
land Group (Inc.) was organized under the laws of New York as a
management company.
I take it that you refer to the Marine Midland Group (Inc.) as
being a different organization from the Marine Midland Corporation,
the one originally mentioned ?
Mr. R an d . Yes; we formed the Marine Midland Group (Inc.),
organized under the laws of the State of New York, which is a small
company with a moderate capital, which does these things mentioned
in that paragraph.
The C h a irm a n . Under the corporation laws or under the banking
laws?
Mr. R an d . Under the corporation laws.
Mr. B u sb y . So the Marine Midland Corporation and the Marine
Midland Group (Inc.) are two distinct bodies?
Mr. R a n d . Yes.
Mr. B u sb y . One organized under the laws of Delaware and the
other under the laws of New York?
Mr. R a n d . Yes. That is done entirely for matters of taxation.
Mr. B u sb y . Well, what stocks or evidences of ownership in the
Marine Midland Group (Inc.) do you have outstanding? What is
it, in other words, anyway?
Mr. R an d . The Marine Midland Group (Inc.) is in reality a sort
of clearing-house arrangement or group arrangement of various
banks with a capital, I believe, of $3,000. It is a very nominal cap
B R A N C H , C H A IN , AND GROUP B A N K IN G
1235
ital. Each of the presidents of the individual banks is a director in
the Marine Midland Group (Inc.). The expenses of the Marine
Midland Group (Inc.) are nominal. The only expenses they have
are the paying of the examining committee, the paying of the invest
ment experts that we have, and the handling of whatever group ad
vertising is being done by the group. In effect, it is like a clearing
house arrangement of a city, where the banks chip in and pay the
clearing-house examiners and pay for whatever expenses may come up.
Mr. S e ib e r lin g . Who owns the $3,000 stock?
Mr. R an d . The $3,000 stock is owned by the trust companies that
can own the stock. In case the member bank can not own the stock,
it is owned by the president of that bank. That amounts to from
$30 to a few hundred dollars in each case.
Mr. B u sby . What relation does this body have to the other body—
the holding corporation ?
Mr. R an d . The holding company is simply a holding company to
receive dividends and pay out dividends. Some of the directors of
the Marine Midland Group (Inc.)—the key directors— are also
directors in the Midland Corporation, and from time to time the
executives and directors of the Marine Midland Corporation confer
with the directors of the Marine Midland Group (Inc.).
Mr. B u sby . This organization is the agency that handles the busi
ness. largely, of the main holding company, is it not?
Mr. R an d . Yes.
Mr. B u sby . It is merely the contact agent between the holding
company and the individual banking units in your system ?
Mr. R an d . Yes.
Mr. B u sby . Y o u say you have $57,000,000 cash that belongs to
the holding company?
Mr. R an d . That was at the first of the year—yes.
Mr. B u sb y . H o w do you keep that cash invested— or is it in
vested ?
Mr. R an d . I explained that this morning. Were you here?
Mr. B u sb y . Yes; I was here.
Mr. R an d . That is deposited among the various member banks
and other banks.
Mr. B u sby . And do those banks pay interest on that ?
Mr. R an d . They pay interest upon that deposit. The banks that
that money is deposited in keep that money in Government bonds
or call loans—keep it liquid.
Mr. B u sby. What do you think of an independent bank making
money in a town of six or seven or eight thousand people— an average
city of that size ?
Mr. R an d . That is just about the border line in m y own feeling.
I feel a bank in a city of ten or fifteen thousand population— an inde
pendent bank—would have a chance to get along fairly well.
Mr. B u sb y . Suppose you have several banks in a town of that
size—say three ?
Mr. R an d . That makes it that much more difficult.
Mr. B u sby . What about a town of four or five thousand people
having its own independent bank?
Mr. R an d . It would have very hard sledding in a town of that
size.
1236
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. B u s b y . Does your managing board, representing the holding
company, arrive at policies that should be put into effect by the
banks in your system?
Mr. R a n d . That is largely arrived at by the dicetors of the Marine
Midland Group (Inc.) rather than the directors of the holding
company.
Mr. B u s b y . I s that the institution we were talking about awhile
ago?
Mr. R a n d . Yes; the management company.
Mr. B u s b y . I believe it was Mr. Lord who, in his statement the
other day, told us about “ approved policies ” that had been decided
upon by the managers of his holding corporation. So the Marine
Midland Group (Inc.) decides on “ policies” for your institutions?
How is the decision passed down to the several banks ?
Mr. R a n d . For each bank, a member of the group—the president
of the bank is a director in the Marine Midland Group (Inc.). He
attends the meetings of the Marine Midland Group (Inc.); he en
ters into the discussions and knows what is going on and when he
goes back to his own bank, the policy decided on he carries back to
his own bank and puts it into effect in his own bank.
Mr. B u s b y . Suppose the directors of his bank do not agree with
him?
Mr. R a n d . That has not arisen so far.
M r . B u s b y . B u t suppose it does arise ?
Mr. R a n d . He discusses that with his
directors. That has not
arisen so far, however.
Mr. B u s b y . D o you think the time will ever arrive when the sepa
rate banks in your group will refuse to accept these policies de
cided on by the Marine Midland Group (Inc.) ?
Mr. R a n d . We would welcome that. If the directors of our bank
in Rochester, for example, which is the largest bank in Rochester, a
big bank, should feel that the Union Trust Co. of Rochester should
operate under a different policy than the Marine Midland Group
feel they should, we would go down there and have a meeting with
those directors and thresh the matter out and discuss it, and if they
convinced us, we would do what we thought was best; and again,
maybe we would convince them. It is all a matter of discussion and
conference. The larger banks in our group are well-run and the
matters of policy are pretty well defined. They have operated much
the same policies as we have, and they are working together in that
respect. There has been, so far, no conflict in that respect.
Mr. B u s b y . Whom do your examiners represent? Who selects
them, and to whom do they report ?
Mr. R a n d . The examiners are selected by the directors and officers
of the Marine Midland Group (Inc.). They report direct to the
officers of the Marine Midland Group (Inc.).
Mr. B u s b y . Is there only one individual from each group that is
a member of the organization that controls the Marine Midland
Group (Inc.) ?
Mr. R a n d . In some banks we have more than one.
Mr. B u s b y . How many members are in it?
Mr. R a n d . About 25. We have about 17 banks. We had 18
banks, but we are merging two. We have 17 banks and the larger
B R A N C H , C H A IN , AND GROUP B A N K IN G
1237
banks have more representatives than the smaller banks. We have
at least one from each bank.
Mr. B u s b y . Does this organization employ economists and statis
ticians to keep them advised as to the situation of finance through
out the country, as well as your business ?
Mr. R a n d . It does in respect to the purchase of securities in our
bonds and investments. We have experts along that line.
The Marine Trust Co. is a large bank of $300,000,000 resources.
We have our own statistician and economist in the Marine Trust Co.
That function has not been taken over by the group, as yet. Later
on, undoubtedly it will.
Mr. B u sb y . I s it your belief or not that the credit of the country
should be in proportion to the needs of commerce and business of
the country?
Mr. R a n d . Well, I certainly do.
Mr. B u s b y . Suppose, through our banking system and method of
handling financing the credit is extended greatly in excess of the
proper needs of the business of the c o u n t y : What, in your judg
ment, would be the result ?
Mr. R a n d . That is difficult to say. I think the law of supply and
demand will operate in banking the same as it does in any other
line.
Mr. B u s b y . Do you not think the recent collapse of the stock
market was' due largely to the fact that the agencies for creating
securities and bonds and putting them on the market, and especially
through the individual bond salesmen, who went to the individual
person and solicited, and sold bonds, created such a great supply of
bonds and stocks throughout the country that credit was extended
far beyond any business needs of the present time, and that that
is what caused the collapse in finances recently ?
Mr. R a n d . I do not feel qualified to state why the collapse oc
curred and what caused it. I have heard so many different angles
on it and so many different agencies blamed for the smash, that I
think anyone who would try to put his finger on the cause is a very
brave person. I do not feel qualified to express an opinion on that.
Mr. B u s b y . Of course, these investment houses underwriting syn
dicates are bound to depend on stocks and bonds being handled in
quantity in order to have a big business, are they not— in order to
make money?
Mr. R a n d . That is a little out of my line, and I do not feel quali
fied to state anything on that.
M r. B u s b y . Y ou have some o f those organizations in your insti
tution ?
Mr. R a n d . We handle bonds and handle the underwriting of
bonds, but I have not seen how the underwriting of good, high-grade
bonds, such as we do, has created an oversupply, or has had a con
tributory cause to the stock-market crash.
Mr. B u s b y . I will take but two or three minutes more. Suppose,
as we have witnessed in this city, perfectly desirable buildings con
structed by reason of the fact that an underwriting syndicate has
made it possible to supply the funds with which to place the bonds
of that building on the market: The building is not needed, but it
is a good building. The bonds are sold to the public, and then the
1238
B R A N C H , C H A IN , AND GROUP B A N K IN G
building is not used. It is a good building, and t-lie public loses
what it has invested in the bonds, by reason of the building being
sold out under a first trust to pay off a part of the first-mortgage
bonds. Could you not see, under circumstances like that, where easy
money, being made available by underwriting syndicates, would be
a detriment to the people and to business ?
Mr. R an d . I think you are getting back to the law of supply and
demand again.
Mr. B u sb y . I am not dealing with that now. I am looking at
the situation created by the underwriting syndicates and these
investment companies. I think they have gone far beyond the
requirements according to the law of supply and demand in furnish
ing credit.
Do you not think that kind of condition would be detrimental to
the people—business stability ?
Mr. R an d . If you had a condition that caused the creation of more
production than you need, that might be detrimental, but I think
that might be just one of the many other contributing causes. I do
not see how you can pin it onto any one agency.
Easy money may be conducive to speculation, but it is only one of
the great many other contributory causes, and it is hard to put them
in their proper relationship. You can read volumes on it and study
it until you are dizzy, but I can not, in my own mind, pin it down
to any one cause.
The C h a irm a n . Mr. Rand, I should like to ask two or three
questions before I defer to Mr. Fort, on the organization of your
group.
In the organization of your group, what was the motivating
cause that prompted it? Was it the business in your section, or
particular trade area, that demanded improved service, or was it
to strengthen the local banking situation, or was it that you and
your associates saw an opportunity to progress from a banking
standpoint ?
Mr. R a n d . I think that is the real reason—possibly a combination
of all three. As I said this morning, many of our customers are
growing larger and becoming stronger and requiring larger lines of
credit and carrying larger balances with us, and many spreading
out through our trade area and we desired to strengthen our position
in our territory. We desire to strengthen the position of a number
of the smaller banks who were having increasingly difficult sledding.
As I said in my statement yesterday morning, several times in the
last year or two, at the request of the State banking department, we
have aided State banks and kept them from failing in two or three
instances.
The C h a irm a n . If the laws of the State and Nation had permitted
you to organize as a branch banking institution, would you have
organized as a group, as you have ?
Mr. R an d . I think not. I think we probably would have organized
as branches, although I think the group system provides an admirable
transitional stage.
The C h a irm a n . In regard to the purchase of these various banks,
do you believe that the price at which the stock was bought by your
company, represents a fair capitalization of the earning power of
the units?
B R A N C H , C H A IN , AND GROUP B A N K IN G
1239
Mr. R an d . Yes.
The C h a irm a n . I s it not true that some of the prices paid have
been such that the returns must, necessarily be low for some period of
time ?
Mr. R an d . That is probably true. Of course, our corporation was
formed in October or September of last year, when all bank stocks
were selling on a very high basis. We ignored, as far as we possibly
could, the market value of the stocks, and took into consideration
mainly the earning power and asset value, liquidating value, and the
communities in which they were, in arriving at the basis on which we
exchanged stock for the various banks.
The C h a irm a n . In listening to the testimony of others, as well
as yourself, under the group plan, I am impressed with the thought
that where these companies are well managed they are successful
and probably advantageous to the community, as well as to the men
who are running the institution, but in view of the possibilities of
the future and possible changes in management, do you not think
that we, Representatives in Congress here, with legislation in mind,
should take into consideration the question of maximum and mini
mum as to the size of these groups and the territory they should
cover; in other words, this particular plan of group or chain bank
ing— and there is quite a similarity between the two—has had a
variety of experiences in this country. It has been clearly demon
strated that where it is in strong hands it has succeeded, but in
weak hands it has usually failed. Do you not think there should
be some limitations placed in order to protect the public ?
Mr. R an d . I think there should be limitations as to territory. I
do not see how or why you should limit the size of these groups any
more than you limit the size of large banks in New York or Chicago.
I do not see why they should be-----The C h a irm a n . In other words, you think you have as good a right
to have a big bank in Buffalo as they have to have a big bank in New
York City?
Mr. R an d . Yes, sir.
The C h a irm a n . And in serving your particular trade area, if the
business of the trade area requires it, you should have the oppor
tunity of taking care of the business of that particular territory,
without regard to the size of your institution ?
Mr. R an d . Yes, sir.
The C h a irm a n . Supposing that branch banking were authorized
now, would you probably convert into a branch-banking system or
continue under your present form?
Mr. R an d . Oi course, that is a difficult question to answer. My
feeling is— and speaking only for myself and not for my board of
directors— I would prefer to see us in a reasonable time convert into
a branch-banking system.
The C h a irm a n . N ow , in regard to your holding companies, the
Delaware corporation, which is the Marine Midland Corporation,
which is the holding company of these stocks of banks in your group,
who votes that stock at the annual meetings ?
Mr. R an d . The stocks of the various banks ?
The C h a irm a n . Yes.
Mr. R an d . That is voted by the officers of the Marine Midland
Corporation of Delaware.
1240
B E A N C H , C H A IN , AND GROUP B A N K IN G
T h e C h a i r m a n . Y ou designate certain officers?
Mr. R a n d . Yes. sir: designated at the board meeting,
as to the
voting power of the stock.
Mr. S e i b e r l i n g . Who votes the stocks held in your companies and
trusts, and various corporations, banks, and so forth, held under
wills—who votes that?
Mr. R a n d . As a rule, our policy under that is that unless we have
a large block of stock in any individual corporation we do not vote
them. If we have a couple hundred shares of United States Steel
Corporation stock in one trust, we do not vote that stock unless our
coexecutor desires us to. If we have a very large block of stock in
a certain corporation and the management of that corporation is
ood and the company is making progress, our trust department
rings it before the executive committee of the trust company and
we vote it in favor of the management. We try to put ourselves in
the position that the person naming us trustee was himself before
he died.
The C h a i r m a n . What would be your view on the question of
examination of affiliated companies, either by the Comptroller of the
Currency of national banks, or the superintendent of State banks
in connection with State banks?
Mr. R a n d . I think they should .be examined.
The C h a i r m a n . Y ou would be in favo r o f th a t?
Mr. R a n d . Yes, sir.
The C h a i r m a n . Y ou do not have any examination by the corpora
tion department of the State of New York over your New York
company, do you ?
Mr. R a n d . N o , sir.
The C h a i r m a n . That is, the group company?
Mr. R a n d . Yes, sir.
f
T h e C h a i r m a n . D o you have to make any reports to the depart
m ent covering you r operations o f th at group ?
M r. R a n d . T o w hat departm ent?
The C h a i r m a n . T o the corporation department of the State of
New York.
Mr. R a n d . I do not think we do.
The C h a i r m a n . Let me ask you one or two other questions pertain
ing to the expenses of the Marine Midland Corporation of Delaware.
Is there any expense attached to the operation of that company?
Mr. R a n d . A nominal expense.
The C h a i r m a n . Any salaries of officers?
Mr. R a n d . A few salaries of officers.
The C h a i r m a n . H o w about the Marine Midland Group (Inc.)—
the New York corporation?
Mr. R a n d . The Marine Midland Group (Inc.) pays only salaries
to its bank examiners and its bond experts, or where we have, in a
number of cases, taken a man from the Marine Trust Co. who spends
part time with the group and part time with the Marine Trust Co.,
his salary is prorated.
The C h a i r m a n . How is that money furnished to the group com
pany ?
Mr. R a n d . Each bank chips in, and we take our expenses for the
quarter, and each bank contributes in proportion to its deposits.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1241
The C h a i r m a n . The officers and directors of the Marine Midland
Co. of Delaware and the officers and directors of the Marine Mid
land Group (Inc.)—their salaries are paid by the banks, are they
not ?
Mr. R a n d . The directors get no salary. The officers of the Marine
Midland Group (Inc.)—the only salaries they get are those who
are employed full time in the examinations and in a supervising
capacity.
Now, there are one or two officers there in the Marine Midland
Group (Inc.) who receive part of their salary from the group and
part from the bank in which they serve. For instance, we have an
officer who serves as president of the Marine Midland Group (Inc.),
Mr. Becker. He was receiving a moderate salary at the Marine
Trust Co. When he went to the Marine Midland Group his salary
was adjusted and paid in proportion to the work that he did for
the group and the trust company. So there is no double salary.
There is no double salary and there is no desire on the part of those
forming the group to give large salaries.
The C h a i r m a n . The salaries of the officers of the two holding
companies that are affiliated-----Mr. R a n d . The officers’ salaries of the Delaware corporation are
very nominal.
The C h a i r m a n . And deducted from the dividends they receive?
Mr. R a n d . Yes, sir; deducted from the income of the corporation,
dividends and interest,
Mr. F ort. Unfortunately, I missed a great deal of Mr. Rand’s
testimony on account of having to attend to other duties. I do not
want to duplicate, and hope you will call my attention to the fact
if I should happen to.
We have asked other witnesses, Mr. Rand, who have been here
representing other groups, whether they believed that there were any
legal regulations of group banking that we should adopt if we are
to recognize it legally at all. What is your view on that ?
Mr. R a n d . I think that probably the territory should be defined.
It is hard to give an off-hand opinion on that. I had not thought
of it-----Mr. F ort. When you say the territory should be defined, you mean
similarly to the suggestion of the comptroller, for instance, as to
branch banking, through trade areas ?
Mr. R a n d . Yes, sir.
Mr. F ort. Some such basis of definition ?
Mr. R a n d . Yes, sir.
Mr. F ort. Y ou men who have been running the companies are so
much better posted than we are as to the hazards there may be in bad
management through your personal observation of it, we have asked
the other gentlemen if they would not tender a memorandum of
their views as to what, if any, form of regulation it may be wise for
Congress to consider, applicable to group, chain, and branch banking.
Mr. R a n d . I shall be glad to do that.
Mr. F ort. For advisory use.
Mr. R a n d . I shall be glad to do that.
Mr. F ort. In your handling, Mr. Rand, if your fiduciary business,
is that so handled that the trust companies which act as trustees, or
1242
B R A N C H , C H A IN , AND GROUP B A N K IN G
banks having trust departments, earn directly or indirectly any profit
whatever other than the statutory commissions ?
Mr. R a n d . None whatever.
Mr. F ort. D o the}’ buy secruities from the security affiliates of the
bank?
Mr. R a n d . N o, sir.
Mr. F ort. They always buy outside ?
Mr. R a n d . Yes, sir.
Mr. F ort. And bank outside ?
Mr. R a n d . N o , sir. We discussed that this morning at some length.
Mr. F ort. Then I will not go into that any further.
Mr. R a n d . We keep very little on deposit of our trust funds. Most
of it is immediately invested.
Mr. F ort. Have you expressed your views on branch banking as a
policy ?
Mr. R a n d . Yes; I expressed them at length in my original state
ment.
Mr. F ort. I saw that. Have you gone into the question as to
whether branch banking should be permitted—that is, the establish
ment of branches should be permitted—in competition with existing
unit banks?
Mr. R a n d . We have not discussed that.
Mr. F ort. What would your view on that be ? Let us take one of
the small towns that Mr. Busby spoke about: I f there is a unit bank
in a town of five or six thousand, should the Marine Trust or any
large institution, in a neighboring town, be allowed to go into that
town with a branch ?
Mr. R a n d . I should say no. I think the way to handle that would
be the way the national banking department and State banking de
partment handle it now. I f we had national branch banking and the
Marine Trust wanted to start a branch in a certain town, whether
they should be allowed to start the branch should be in the discretion
of the banking department, who would investigate the banking con
ditions there and see whether the town would be better served by a
branch bank, and it should not be permitted if there is proper
service there.
Mr. F ort. That is difficult to do as long as you have a dual system,
naturally.
Mr. R a n d . I f you have State and national banks?
Mr. F ort. Yes. I speak as one coming from New Jersey. We had
a situation there three or four years ago where it seemed almost for
a time that there was competition between the State department and
the national department to see who would authorize the most banks.
Mr. R a n d . I have understood that the State banking department
of New York State and the national department were cooperating
pretty well on matters of that kind.
Mr. F ort. That always depends upon the personality at the head
of the departments ?
Mr. R a n d . Yes, sir.
Mr. F ort. We had a situation where that did not work out so well,
and we had to get rid of our commissioner. Consequently, as long
as that dual control in that matter does not have access to a court of
appeals, you are faced with that bad situation ?
Mr. R a n d . Yes, sir.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1243
Mr. F ort . That leads to another question. Do you see any real
excuse in America for a dual code of banking; that is having both
national and State codes working side by side, or would we be better
off with a single code ?
Mr. R a n d . Well, that is a large understaking to answer.
Mr. F ort. I notice that the bulk of your banks are State char
tered ?
Mr. R a n d . Yes, sir.
Mr. F ort. All but two.
Mr. R a n d . We have two or three national banks.
Mr. F ort. I s that the result o f preference in setting up the organ
izations or does it happen that the banks you wanted were so incor
porated in the first place ?
Mr. R a n d . There is no intention to discriminate against national
banks: it is simply a condition that exists in New York State to-day.
We have not changed any banks from State to National or from
National to State.
Mr. Fort. Is that because 3Tou are indifferent in your choice be
tween the two sets of laws or because you did not want to disturb
the status quo?
Mr. R a n d . I feel I personally would prefer to operate, at the
present time, under a State charter, but not to the extent, if we had
a good national bank or had a number of them, we would have them
change over to State institutions. We would prefer to keep them
as national banks.
Mr. F ort. That interests us here because we are considering, as a
part of all this, some reference to the weakness or point of strength
of the national code in distinction to the State codes.
You say you think you would prefer the New York State code.
What are the reasons for that?
Mr. R a n d . In the first place, we can be a trust company which we
can not be under the national code. We can be a national bank
with trust powers, but as a trust company under the State law, we
have broader power in mortgage loans, etc. Our preference is not
strong-----Mr. F ort . Is it in any way influenced by the fact that State insti
tutions—trust companies—can buy and sell stocks which the national
banks can not do?
Mr. R a n d . Not to any extent.
Mr. F ort. D o you think that is a wise power for a bank to have?
Mr. R a n d . I do not think a bank should deal in stocks.
Mr. F ort . Either for itself, for its own account, or as an under
writer ?
Mr. R a n d . I do not say as to underwriting.
Mr. F ort. It may be for itself, for its own account?
Mr. R a n d . Our trust companies have never underwritten stock.
Occasionally we offer a high-grade preferred stock, but I do not know,
in the last three or four years, when we have offered stock.
M r. F ort. D o you have a securities affiliate ?
Mr. R a n d . N o . I explained that this morning at
Mr. F ort. Have you been asked about the question
of savings deposits?
Mr. R a n d . N o.
length.
of segregation
1244
B R A N C H , C H A IN , A N D .G R O U P B A N K IN G
Mr. F ort . We have been trying to find out the views o f bankers
on whether or not savings deposits ought not to be segregated as
to investment and made preferred creditors of a bank as against
commercial deposits. What is your view on that?
Mr. R a n d . I think it would be unwise.
Mr. F ort. Some States have gone so far as to forbid joint opera
tion even in the same building. You see no reason for elevating the
savings deposits accounts to a higher level of security than the
ordinary account?
M r . R a n d . N o.
Mr. F ort. In your
institution, do you permit your subsidiary banks
to make collateral loans on the stocks of the Marine Midland Cor
poration itself?
Mr. R a n d . I discussed that this morning. Our policy is not to
make loans on our own stocks. As I said this morning, when we
formed our group last October, the Marine Trust Co. was loaning
perhaps on the Union Trust Co. of Rochester stock and vice versa.
We are working that out and taking on no new loans.
Mr. F ort. It would be, perhaps, a wise regulation, if we regulate
this matter at all, to prohibit such loans except after a reasonable
period of time after the organization of the group ?
Mr. R a n d . I should be in favor of that.
Mr. F ort. In our banking laws now, we limit the amount that can
be loaned to an individual borrower to a certain percentage of the
bank’s surplus and resources. Modern loaning having become so
much a matter on collateral rather than on names, have you ever
considered the question as to whether a similar limitation on per
centage of loans on any one single collateral might or might not be
desirable ?
Mr. R a n d . That is a question I would have to think about a little.
I am inclined to say that I think it would be desirable but, on the
other hand, it depends on the security. For instance, if a banker
were limited to an amount of United States Steel common or pre
ferred stock it could take, it might work a hardship, whereas it
might take a great deal of that stock profitably rather than take a
lot of little dabs of second-rate companies. It is rather a difficult
matter to legislate on. Some regulation might be worked out that
might be beneficial.
Mr. F ort . It has always seemed to me, as a banker, and looking
into this question, that many of our most serious troubles in these
banks has come from loans on frozen securities. I think every bank
has had its troubles with that and possibly some regulation of it
might be in the general public interest and in the interest of the
banks themselves in the long run.
Mr. R a n d . It would have to be worked out carefully because, as I
say, some banks could take a great deal of a great big nationally
known company that enjoys a good market, and a regulation of that
kind might hurt a bank that way. I think some regulation along that
line, taking that into consideration, might be advisable.
Mr. F ort . The factor of ready marketability might enter?
Mr. R a n d . Yes, sir.
Mr. F ort. I guess you have heard, as we have, that the only place
to buy control of a company is to go to one or two banks and get it,
and they would be glad to let you have it.
B K A X C H , C H A IN , AND GROUP B A N K IN G
1245
Did you discuss this morning the question of how you set up your
directorates in your local banks?
Mr. R a n d . Yes.
Mr. F ort. Y ou keep them local?
Mr. R a n d . Yes.
M r. F ort. T h e stock which they hold to q u a lify them is your
stock ?
M r. R a n d . N o , s ir ; it is theirs.
M r. F ort. F o r the tim e being?
Mr. R a n d . In some cases it is owned outright by the individuals,
and, in a few other cases, we have an agreement to repurchase the
stock from them.
M r. F ort. A n enforceable agreement at your option ?
Mr. R a n d . Yes, sir; only a few cases.
Mr. F ort . So, you could disqualify a director overnight, by making
him give up his stock ?
Mr. R a n d . I think that that is not our case; that we have an option
to buy the stock of the director upon his death. We agree to buy it
from his estate, but he can own it until his death.
Mr. F ort. I would like to see a copy of the agreement, because
that is a very interesting situation.
Mr. R a n d . We have no arrangement whereby we can disqualify a
director overnight.
Mr. F ort . Have you any arrangement in a bank where there is
any substantial minority interest for representation of that minority
interest?
Mr. R a n d . In all our banks we own at least 93 per cent of the
stock and there is practically no minority interest.
Mr. F ort. I thought you showed in one of these documents 12 per
cent outstanding in the Fidelity Trust Co.?
M r. R a n d . T h a t was in the process o f taking over. N ow I believe
we have 96 per cent in that institution.
Mr. F ort. Well, on the general principle of group banking or
some group institution having in some cases only control or some
thing over control, would you feel it was desirable or undesirable for
us to consider the idea of providing for minority representation ?
Mr. R a n d . I should think the group bank itself would want the
minority interest on the board.
Mr. F ort. That would depend upon the sincerity o f the group
management to some extent and its purposes.
Mr. R a n d . I should think that might be incorporated in the regu
lations.
M r. F ort . W h a t is your arrangement as to your security affiliates,
such as you have in your institution— you lock the stock o f the se
curity affiliates so it can only be sold as part o f the stock o f the bank
itse lf?
Mr. R a n d . Both of our security affiliates were not of our own
forming. They had been formed when we took over the bank, and
we have arrived at no policy as to them.
Mr. F ort. Have you given any thought as to the wisdom, from
the general banking angle, of permitting the tying up of non
banking stock as a unit with a bank stock and marketed the same
way?
Mr. R a n d . I do not believe I understand that.
1246
BRANCH, CHAIN, AND GROUP BANKING
Mr. F ort . I s it not possible that, through bad fortune or specu
lative efforts, or something else, of a security affiliate, when the stock
is tied in with it, as a market factor, that a great lack of confidence
in the bank itself might come from a collapse of the stock value ?
Mr. R a n d . That might be possible.
Mr. F ort . And is it not putting an entirely fictitious view in the
public mind of the value of bank stocks, as bank stocks, to include
the market price of the stock of the corporate affiliate, as some are?
Mr. R a n d . I could not answer that question. We are making a
study of that now. Some of these securities companies are able and
well run, and their business fits in admirably with the banking
business.
Mr. F ort. That is the next question I wanted to ask. Just what
advantage do you think it is to a bank to have its own securities
affiliate ?
Mr. R a n d . It is a tremendous advantage in that it is a valuable
by-product of the bank’s own business. What we are up against,
not having a securities company of our own, is that some affiliated
security company of a New York bank or a Chicago bank or some
other bank, will go to one of our customers and underwrite a bond
issue for him, and the first thing we know that customer will be
going to that other bank. Furthermore, the bank, by its close con
tact with the customs and through accounts, is very often in a posi
tion to guide its capital requirements and developments better than
some outside agency that comes in.
Of course that opens up a field for a great deal of discussion and
a great deal of study and thought.
Mr. F ort. That is all on the theory that investment and com
mercial banking are now so close that it is difficult to find the line of
demarcation.
Mr. R a n d . That is true; there is a great deal in common.
Mr. F ort. But if no bank had security affiliates, the first hazard
you spoke of, namely, losing your accounts to the bank whose security
affiliate would be financing, would not obtain?
Mr. R a n d . Of course what might happen there—I am speaking
offhand— and as I said I have not given the possibility very much
thought, and it requires a great deal of thought; if a bank did not
have a security affiliate, some officers or directors of a bank might
organize one on the side and they might reap a very large profit out
of operating a security company and the profits of that company
would go to the individuals instead of to the banking institution
where it rightfully belongs. As I say, that is a subject lor profound
study and it is a big subject.
Mr. F ort. I have operated one myself and I know something
about it, but not for a bank.
You see no hazard in the affiliation between an investment house
and a bank of possibly getting your bank loaded with some frozen
things ?
Mr. R a n d . There again you get back to the management of the
bank and the investment company. There is that possibility, but you
can get loaded and frozen with other things than that.
Mr. F ort. Y ou think there is no greater tendency to get loaded
when they own the affiliate itself through circumstances arising from
BRANCH, CHAIN, AND GROUP BANKING
1247
bad management than there is getting loaded at the hands of other
customers?
Mr. R a n d . I do not think so-—perhaps not as much.
Mr. F ort. I think that is all.
The C h a i r m a n . I should like to ask you if you see any danger in
this quite recent development of mixing commercial and investment
funds?
Mr. R a n d . I do not see any; no.
The C h a i r m a n . O f course, in England they keep the two quite
separate.
Mr. R a n d . Separate the savings deposits from the-----The C h a i r m a n . No; I did not mean that. For instance, you have
in banks short-time money and long-time money. You have cash
and you have credit. Short-time funds are mixed in with long-time
investments, and long-time investments are mixed in with short-time
funds. The thing is becoming quite mixed; in other words, we are
mixing our commercial and our investment banking to an extent
that it makes available, when not controlled, funds, for instance, for
speculative purposes, like last fall or the past two years, in specu
lating operations. There were all the funds available that anyone
would want to play the market with by the mingling of those funds
and making them available for any particular movement and without
any segregation of the short-time funds and the long-time funds.
For instance, savings are long-time funds and invested in securities,
and the short-time funds are supposed to be liquid. Do you think
there is any danger in that, or do you think it is a proper and ethical
banking movement, or do you think we should stop, look, and listen
when we mix commercial funds with long-time investments?
Mr. R a n d . I do not see how you can very w ell differentiate those
funds. I do not see any real danger. I tnink the w ay the various
banking institutions came through this crash w as really remarkable.
I am afraid that any radical change in handling or segregating
those funds might be more dangerous than the evil you are attempt
ing to cure.
The C h a i r m a n . Let me ask you this, quite aside from that ques
tion: The movement toward consolidations in groups and branches
is pretty active just now. Returning to the question of Mr. Fort—
and the suggestion, I think, was brought about by the testimony of
other witnesses—to the question of regulation of these movements,
is it your practice, when you take over a bank, to consult with the
banking superintendent or the Comptroller of the Currency, or do
you acquire the institution without taking it up first with the bank
ing superintendent or the comptroller?
Mr. R a n d . As a rule, we have conferred with the banking super
intendent or the Comptroller of the Currency. We have conferred
more with the superintendent of banks, because most of the banks
have been State banks, and we have been in a little closer contact
with the State banking department than with the Comptroller of
the Currency, and in a number of cases, where we thought there was
any question that might arise in the mind of the Comptroller of the
Currency or in the mind of the State superintendent of banks, we
have conferred with them.
1248
B R A N C H , C H A IN , AND GROUP B A N K IN G
The C h a i r m a n . Under the present movements is it possible for a
weak group or mercenary group to take over control of many banks
without consulting the Comptroller of the Currency or the banking
superintendent ?
Mr. R a n d . It is possible.
The C h a i r m a n . It seems to me there should be some check Ota that
temporarily while this movement is running so rapidly. For instance,.
I was furnished with information the other day that indicated to me
a group which apparently did not have sufficient financial backing
was considering taking over some 200 banks in one of the States of
the Union, and they could proceed to do that without consulting the
banking superintendent or the comptroller. So while that move
ment is as active as it is now, it seems to me some temporary check
should be placed on it either through the State banking department
or through the comptroller’s officer. What would you think of a
regulation like that, before these groups can extend, that they must
get permission of the Comptroller of the Currency or of the State
superintendent of banks?
Mr. R a n d . I think these groups should be under the jurisdiction
of the State suj)erintendent or the Comptroller of the Currency, or
both; and that, in taking over banks, that should be one of the func
tions of the comptroller or the State banking department to pass
upon the stability and strength of the various holding companies.
That would overcome the objection you mentioned.
The C h a i r m a n . We could probably reach most of those by pro
viding a regulation in the national law in regard to membership in
the Federal reserve system to prohibit membership if their business
was not conducted in that manner by first getting the consent of the
Comptroller of the Currency or the banking superintendent.
Mr. R a n d . I think the Controller of the Currency or the superin
tendent of banks, or both, should have the power to prevent a hold
ing company that had not passed their requirements or is not the
type of holding company that they feel a bank should be owned
by—I think they should have the power of preventing that holding
company from taking over the bank.
The C h a i r m a n . Mr. Dunbar.
Mr. D u n b a r . In your testimony, Mr. Rand, you stated that one
of the means of economic reforms and activities in the substation
banks you acquired, was to cause them to have less actual cash in
their safe, and you instructed them to deposit some of that money
in the Federal reserve bank.
Now, the Federal reserve bank pays no interest. Did you mean
to make that statement ?
Mr. R a n d . Yes; our banks have to carry a certain amount on
deposit with the Federal reserve banks anyway. We have certain
requirements as to the money we have to carry wit hthe Federal
reserve banks. If we take money out of the tellers’ windows and
from out of our own vault and put it there, that releases other
money which we will have to invest in Government bonds or to
put in other banks where we do get interest on it.
Mr. D u n b a r . Is your Marine Midland Corporation a member of
the Federal reserve system?
Mr. R a n d . N o , s i r ; it could not be.
Mr. D u n b a r . H o w many of the substation banks are members of
the Federal reserve system?
B R A N C H , C H A IN , AND GROUP B A N K IN G
1249
Mr. B a n d . Ten of our banks are members of the Federal reserve
system. The other eight are not, but those eight, for the most part,
are very small banks.
Mr. D u n b a r . Would your corporation be permitted to be a mem
ber of the Federal reserve system ?
Mr. B a n d . N o.
Mr. D u n b a r . N o bank holding company would be permitted to be
a member of the Federal reserve system?
Mr. R a n d . Not under the present law.
Mr. D u n b a r . N o w , you stated that you deposited this money in'
the Federal reserve bank and it would release credit to you that
would enable you to make money.
Mr. R a n d . Yes, sir.
Mr. D u n b a r . In the Federal reserve bank you are required to carry
a certain amount on deposit for reserves, and you get no interest for
that ?
Mr. R a n d . Yes, sir.
Mr. D u n b a r . Have these banks that you advised to deposit their
surplus money in the Federal reserve bank been depositing their
money there ?
Mr. R a n d . Yes, sir; they have been.
Mr. D u n b a r . Then, why deposit any more there when you get no
interest on it, but could get interest-on it by depositing it in other
banks ?
Mr. R a n d . In other words, this is what we were doing: We were
taking money that they were holding in the bank in the tellers’ win
dows and in the vault, and on which we were drawing no interest,
and we deposited that money in the Federal reserve bank, and that
released money that was in the Federal reserve bank so that we
could use that in buying Government bonds or in placing it in banks
where we did get interest.
Mr. D u n b a r . But why not use the money that you saved from the
tellers’ windows and held in your vault for that purpose, instead of
swapping the money ?
Mr. R a n d . We took the money that we were getting no return on,
and placed it where we got return; in other words, we could have
taken the money we had in the tellers’ windows and put it in other
banks and gotten a return on it.
Mr. D u n b a r . But you get no return on any money in the Federal
reserve bank over and above your lawful reserve that you are
required to keep there ?
M r. R a n d . N o, sir.
Mr. D u n b a r . I wish you would explain how it was possible to get
money from money you put into the Federal reserve bank.
Mr. R a n d . We took money that was idle and put it in other banks.
We had money in the Federal reserve banks, and we replaced that
money by money that we saved by the methods I mentioned.
Mr. D u n b a r . Y ou put the money in the Federal reserve and you
released the money in the Federal reserve bank to other banks ?
Mr. R a n d . Yes, sir.
Mr. D u n b a r . I thought you loaned more money and took the
paper and rediscounted it and continued to pyramid it?
Mr. R a n d . N o, sir.
1 0 0 1 3 6 — 3 0 — VOL
2,
PT
9-------- 1 6
1250
BRANCH, CHAIN, AND GROUP BANKING
Mr. D u n b a r . The same effect could be effected b y depositing the
money directly into other banks instead of putting it into the Fed
eral reserve bank?
Mr. R a n d . Yes, sir.
Mr. D u n b a r . N o w , Mrs. Pratt thi£ morning, brought out the
point in reference to your establishing a bank in the city of New
xork so that you there might take care of your customers who
would naturally leave you and go to other banks there and she said
the thought was new to her and possibly the trust companies would
fall into that habit and the chairman said perhaps they would, and
I think Mr. Wingo said after they got there they would be swallowed
up by the banks m the city of New York. Is not that a possibility?
Mr. R a n d . That is a possibility, but-----Mr. D u n b a r . In other words, are we not going right toward
centralization and everything of that sort?
Mr. R a n d . N o , s i r ; I th in k it is g o in g the other w ay.
Mr. D u n b a r . Y ou think the business is decentralizing?
M r. Rand. N o, I think our plan of banking decentralizes banking
control away from, for instance, one center. I think it means
stronger banks in the Northwest and stronger banks in Detroit and
stronger banks in Buffalo and decentralizes the banking business.
Mr. D u n b a r . Then, by buying this bank in New York City who
made your bank in Buffalo stronger?
Mr. R a n d . Yes, sir.
Mr. D u n b a r . Has this bank in New York more capitalization than
your bank in Buffalo?
Mr. R a n d . No.
Mr. D u n b a r . The resources of your bank in Buffalo are available
fo r this bank in New York?
M r . R a n d . N o , sir.
Mr. D u n b a r . I f your
customers were transferred to a bank in
New York City not as strong as your bank in Buffalo, I should think
there would be a little hesitancy—I should think they would go to
the stronger bank.
Mr. R a n d . I thought I covered that this morning.
Mr. D u n b a r . Perhaps you did, and I will look it over.
Now, this morning, you said you sold securities in self defense,
and Mr. Luce thought it was not wise to do so. These securities
which you sold in self defense—what do you mean by that? Does
that mean people you are doing business with issue bonds, and you
buy them and sell them?
Mr. R a n d . Our Marine Trust Co. has 150,000 customers. They
are coming to their banker and asking him ior information about
securities. They are coming to us and asking us to find or secure
certain securities for them, so our bond department in our Marine
Trust Co. is selling securities to our own customers, the same as
other banks throughout the territory are doing.
Mr. D u n b a r . Y ou do that as much as an accommodation to your
customer as yourself, because they expect you to do that for them?
Mr. R a n d . Yes, sir
Mr. D u n b a r . D o you encourage your substation banks to become
members of the Federal reserve system?
Mr. R a n d . We have not changed the banks that have gone into
our group. I f they are members of the Federal reserve, we want
BRANCH, CHAIN, AND GROUP BANKING
1251
them to remain members of the Federal reserve. So far, we have
not adopted a policy. I should say, however, our policy is to have
our large banks, particularly, members of the Federal reserve system.
Mr. D u n b a r . W h y should not the sm aller banks be members ?
Mr. B a n d . Well, we allow our banking boards a very large degree
of local autonomy and where the board of directors of the local
bank wish to become a member of the Federal reserve system, we
encourage it and sometimes) they have not wished to become a mem
ber of the Federal reserve system and we have not interfered with
the local autonomy that they cherish.
Mr. D u n b a r . Y ou are a believer in the Federal reserve system?
Mr. B a n d . By all means. I am a director in the Buffalo branch
of the Federal reserve.
Mr. D u n b a r . T o what extent will these holding companies inter
fere with the Federal reserve banks ?
Mr. B a n d . I do not think they will interfere.
Mr. D u n b a r . You believe the holding company will encourage
*most of the substation banks to be members ?
Mr. R a n d . Yes. sir.
Mr. D u n b a r . All of your national banks are members of the
Federal reserve system, of course?
Mr. R a n d . Yes, sir.
Mr. D u n b a r . Y ou have to deal, in doing business with your in
dustrial companies, you have to deal in a great many of their bonds
and stocks, do you not ?
Mr. R a n d . Not in stocks. We occasionally buy some o f their
bonds.
Mr. D u n b a r . N o w , to what extent do you think that our industrial
system is being encouraged to promote their business beyond re
quirements, by reason of the easy credit which exists throughout
our country most of the time ?
In my district I have seen more failures of industrial plants due
to the fact that when they get on easy street and make $100,000 they
want to make $500,000 ; and they begin to expand and their credit
was good, and before they knew of it they got in deep water. Would
you call that a fault of the banking system out there as much as any
thing else ?
Mr. R a n d . I have not had experience out in your territory, so I
really can not answer that.
Mr. D u n b a r . Y ou watch all the people you lend m oney to very
carefu lly, o f course ?
Mr. R a n d . Yes.
Mr. D u n b a r . That
is one of the advantages you claim for group
banking?
Mr. S a n d . Yes, sir.
Mr. D u n b a r . Is| there any legislation, in your opinion, going to
solve this problem? I have been coming here every day and the
longer I come the more confused I get. Could we have any national
legislation that would affect group banking all over the United
States to apply to it?
Mr. R a n d . Yes; if Congress would put it into effect, it would.
Mr. D u n b a r . I f Congress put it into effect, the States could pass
laws in respect to group banks and they might antagonize, might
they not?
1252
BRANCH, CHAIN, AND GROUP BANKING
Mr. R a n d . I really could not answer that question.
Mr. D u n b a r . We have our State banks, which are antagonizing
our national banks, and it seems to me we would have different laws
in different States respecting group banking that would not be in
harmony with the national act. For instance, take the matter of tax
ation: In your State of New York you only pay one-tenth the tax
on your capital we have to pay out in Indiana. It is just a matter of
-State law. The laws of the State of New York are especially appli
cable to all bank stocks and all capital. Out in Indiana the bank
stock is assessed as capital, surplus, and undivided profits, and then
pays tax at 4 per cent.
The States are not in harmony in their dealing with banking insti
tutions and the States could enact laws which are not in harmony
with our Federal law so long as they remain within the State.
You believe, even under this situation that will exist, that the Fed
eral Government could enact a holding company group bank law
that would be made effective throughout the country ?
Mr. R a n d . A s far as it applied to Federal reserve banks or national
banks. I could not answer your question fully because it is a legal
•question, and I am not a lawyer.
Mr. D u n b a r . I infer from your testimony that you are broadminded and you believe branch banking has a place just as well as
group banking?
Mr. R a n d . Yes.
Mr. D u n b a r . Y ou spoke about group banking should be established
in cities above 10,000, because you said unit banks could flourish in
towns between 10,000 and 15,000—could prosper ?
Mr. R a n d . Well, I said in answer to the question as to how large
a city should be to start an independent bank, the city should be
approximately 10,000 or above. I think that is correct.
Mr. D u n b a r . Now, it would be your opinion, if we had a Federal
group law—and for that matter we could have a State law on the
subject—in all probability the unit banking system will disappear %
Mr. R a n d . N o , s ir ; I do not think so. I think we w ill alw ays
h av e u nit banking.
Mr. S trong . I wanted
to ask you a few questions about the organi
sation of your holding company. As I understand, the first authori
sation was for $10,000,000 capital.
Mr. R a n d . Ten million shares authorized.
Mr. S trong . At a value of $10 par?
Mr. R a n d . $10 par.
Mr. S trong . And that stock was used in exchange for stock of the
group banks ?
Mr. R a n d . Only a part of it. I f you read the original statement,
it gives the whole history of that.
M r . S trong . I wanted to ask some questions and wanted to la y the
foundation.
Mr. R a n d .
About 3,800,000 shares were issued in exchange for the
stock of various banks.
Mr. S trong . H o w m any banks were in the group when it was first
formed?
Mr. R a n d . When it was first formed there were 16 banks.
Mr. S trong . Was that the start of your group?
Mr. R a n d . Yes, sir.
BRANCH, CHAIN, AND GROtTP BANKING
1253
Mr. Strong. Now, what arrangements are made as to the exchange
of the stock of the banks for the holding company stock?
Mr. R a n d . I explained that while you were out. We worked out
a plan with all the various banks, taking into consideration their
earnings, asset value, liquidating value, and the market value of
the stock at the time, and the prospects of the bank and the locality
in which it was located.
Mr. S trong . When you take in new banks, what procedure do you
go through ?
Mr. R a n d . The same.
Mr. S trong . What I am asking is whether the banks that first
created the holding company did not have the advantage of making
their own deals as to the proportionate amount of holding company
stock they should have for the stock of their exchanging bank, and
when the other banks come in, you do not scrutinize them very
carefully, and perhaps make a less generous proposition with them.
Mr. R a n d . We carefully refrained from that. We were afraid
we would be open to that criticism, and besides it would not be fair
and it is not fair.
We go through exactly the same procedure when we take over a
bank as we did when we formed the group.
M r. S trong . I s the amount o f stock larger in amount— than the
combined am ount you hold in the banks ?
Mr. R a n d . It is, in number of shares, but the stock we exchange
for the stock of the bank coming in is probably about equal in value
for the bank stock that we are receiving.
Mr. S trong . Of course, the bank stock you are putting out at first
has really no value until you get control of the banks for which the
stock is issued; it is only paper. You issue that for the stock of
the bank?
Mr. R a n d . Yes. No stock has been issued except for cash or bank
stock.
Mr. S trong . Do you issue a proportionately larger amount of the
stock of the holding company than the stock of the bank you take in ?
Mr. R a n d . No; for instance, we have outstanding at the present
time approximately $55,000,000—five and one-half million shares at
$10 par. The combined capital of these various banks is $28,025,000.
Their surplus and undivided profits are over $40,000,000. The com
bined capital surplus and undivided profits of the banks is $70,159,000.
Mr. S trong . Capital and surplus?
Mr. R a n d . Yes, sir. The issue in exchange was five and one-half
million shares, approximately, of new stock, of $10 par, or
$55,000,000.
Mr. S trong . What is the stock of the holding company worth?
Mr. R a n d . It is selling for approximately $45 a share.
Mr. S trong . That is four and one-half times the original value
of the stock?
Mr. R a n d . Yes.
Mr. S trong . There are considerable paper profits in that ?
Mr. R a n d . When we took over the various banks, their own stock
was selling from three to eight times their book value. When we
took over the Marine Trust Co., the stock was selling for $1,200 a
share, and had a book value of about $150 a share.
1254
BRANCH, CHAIN, AND GROUP BANKING
My position on the market value of the stocks of these banks has
been that I am not interested in the market values. The market
values are created by conditions over which we have no control.
Mr. S trong . You have control over the profits; if you make a
good profit you increase the value of the stock.
Mr. B a n d . By increasing the earning power of these various
banks, and that is all we have been interested in doing.
Mr. S trong . Y ou have been organized about four or five months?
Mr. B a n d . We organized September, 1929.
Mr. S trong . Have you paid any dividends yet?
Mr. B a n d . Two— 30 cents a share each.
Mr. S trong . How do the earnings compare to those dividends?
Mr. B a n d . We are earning about $2 a snare.
Mr. S trong . Quarterly?
Mr. B a n d . No; per year. Our stock is selling on a higher yield
basis than the average New York bank stock; that is, it is not selling
as high as the average New York bank stock.
Mr. S trong . D o you intend to confine your operations to the State
of New York?
Mr. B a n d . That is our intention at the present time.
Mr. S trong . H a v e you some banks in C anada?
M r. B a n d . N o .
Mr. S trong . Y ou
say it is your intention to stick to the State of
New York?
Mr. B a n d . Yes.
'Mr. S trong . Does your charter provide you can go outside of the
State of New York?
Mr. B a n d . Yes.
Mr. S trong . You do not intend to do that?
Mr. B a n d . At the present time we do not intend to. We may
change our minds later.
M r . S trong . I presume you do not w ant to take into your group any
bank that does n ot m ake money.
Mr. B a n d . The only banks we have taken in that do not make
money are banks that we feel in the future will make money. A bank
that does not make money is a poor bank, and we do not want to take
them in.
Mr. S trong . What is your scheme or your proposition in these
holding companies? What do they provide in the way of taking
care o f the small towns or small businesses?
Mr. B a n d . I thought I covered that in my original statement.
Mr. S trong . Maybe you did, but I will not keep you very long.
Mr. B a n d . I have discussed that so much to-day I hardly know
where to commence. We, of course, try to build up the local com
munities.
Mr. S trong . Mr. Seiberling says that your argument was that
branch banking was necessary to take care of that situation.
M r . B a n d . I n the very sm all tow n I think that branch ba n k in g is
necessary.
Mr. S trong . Then you think branch banking is preferable to your
system of banking?
Mr. B a n d . I should say if branch banking were permissible in New
York State, or if Congress would amend the law and make branch
banking legal, the chances are that we would favor the branch system.
B R A N C H , C H A IN , AND GROUP B A N K IN G
1255
M r. S trong . Y ou would convert to a branch banking?
Mr. R a n d . Our inclination would be to do that.
Mr. S trong . Are you in favor of the suggested trade
area plan of
branch banking?
Mr. R a n d . Yes.
Mr. S trong . What trade area would your group of banks belong
to ?
Mr. R a n d . A s I said previously, I feel that the second Federal
^Reserve District would just about suit our trade area; that is, New
York State, parts of New Jersey and parts of Pennsylvania and part
of Connecticut.
Mr. S trong . D o you think your group would be able to dominate
the banking in that trade area ?
M r. R a n d . N o .
Mr. S trong . Are there other groups ?
Mr. R a n d . Yes; there are other groups.
Mr. S trong . Organized along your lines?
Mr. R a n d . Somewhat along our lines?
Mr. S trong . H o w many banks are in your group ?
Mr. R a n d . Seventeen.
Mr. S trong . That is including branches ?
Mr. R a n d . No. I think the 17 banks operate 68 branches,
Mr. S trong . They are State banks mainly that have these branches ?
Mr. R a n d . State and national. I think there are four national
banks and the balance State banks.
Mr. S trong . National banks have no branches outside of the State
in which the bank is located ?
Mr. R a n d . N o , sir; that is against the law in New York State and
national banking laws. Some national banks have branches inside of
the city but not outside.
Mr. S trong . The real purpose of organizing your group is to have
branches outside of the city in other parts of the State or States in
your Federal reserve district?
Mr. R a n d . That is one of the purposes.
Mr. S trong . I f your group continues for 5 or 10 years, do you
think you will be able to dominate the Federal reserve bank in your
territory ?
Mr. R a n d . N o ; it would be ridiculous to think we could dominate
the Federal reserve bank.
Mr. S trong . You have dominated the other banks in that territory,
have you not?
Mr. R a n d . N o ; there are some pretty strong banks in our territory.
Mr. S trong . Y ou started about five or six months ago and you
have 68 banks now.
Mr. R a n d . No; 17 banks.
Mr. S trong . But you have 50 or 60 branches?
Mr. R a n d . Thirty-four branches in Buffalo, but there are other
banks in Buffalo that have almost as many as we have.
Mr. S trong . That is pretty good progress in that short time ?
Mr. R a n d . We have added only one in the last two or three years in
Buffalo.
Mr. S trong . N o w , you have 17 banks in this original group con
trolling about 70 branches. Do you contemplate you will take in a
great many more banks and branches?
1256
B R A N C H , C H A IN , AND GROUP B A N K IN G
Mr. R a n d . Not indiscriminately. We might add three or four
banks a year, but we are not-----Mr. S trong . Are you contemplating that those banks will each
have a number of branches?
Mr. R a n d . We can not tell that.
Mr. S trong . How maiw other groups in that trade area that you
refer to—how many other groups have branches like you have ?
Mr. R a n d . I could not answer that offhand. There is one at
Syracuse, the Bank of Manhattan of New York City, and others in
New York State.
Mr. S trong . Do you not really believe as a practical proposition in
ime there will be a uniting of some of those groups, as a natural
>nsequence ?
Mr. R a n d . There m ay be. I do not know.
Mr. S trong . It is reasonable to suppose there will be?
Mr. R a n d . I could not say.
Mr. S trong . You would say it is reasonable to believe that?
Mr. R a n d . I would not say"that, even.
Mr. S trong . If there were, and those banks up there would unite
in these groups, don’t you think they would have a dominating
influence in the control of the Federal reserve bank ?
Mr. R a n d . No; I think there are too many banks in New York
State to have any one group have any appreciable influence on the
Federal reserve.
Mr. S trong . I was suggesting there would be a combination of
banks down to two or three groups and if that should happen, I think
there would be a domination of the Federal reserve bank. One of the
things I am worrying about in this new changing banking system of
ours into chain, group, and branch banking, is whether or not, during
the course of the years, there will not be such a combination of banks
that they will dominate and control the Federal reserve banks.
Everybody knows that if b a n k i n g -hould be centered in one or two
groups in each Federal reserve district, they would exert a tre
mendous influence on the Federal reserve banks.
Mr. R a n d . I can not see any danger of that in New York State.
I do not know the conditions outside of New York State. I can see
no danger in New York State at present or future of one or two
or three groups dominating the Federal reserve bank in New York
State.
Mr. S trong . Have you ever attempted to solicit any other banks
to join your group?
Mr. R a n d . N o , sir; they have come to us.
Mr. S trong . Unsolicited?
Mr. R a n d . Yes. We might solicit them in the future. We would
never use any force or coercive methods to get banks to join our
group.
Mr. S trong . Mr. Wakefield and Mr. Decker held out that state
ment to us, and yet before they got home we got a letter from a
considerable group insisting they had used persuasive measures that
might be described as practically force to bring certain banks into
the group. Do you realize that if that were done it would be a
serious proposition ?
Mr. R a n d . Yes.
BRANCH, CH AIN , AND GROUP BANK Ii
Mr. S trong . Just one more question: Do you not
that if combinations of banks are allowed to spring
as rapidly as your system is growing, and the one at
and St. Paul and St. Louis and San Francisco and thro
country, eventually we are going to have a control of n
credits in this country by a few groups ?
Mr. R a n d . No; I think the country is so large and the pro
the groups could have in proportion to the total resource
growth and strength of the country—I do not believe any <_
san dominate or attempt to dominate in the country.
Mr. S trong . W e have had group banking only a few months, a
they are controlling hundreds of banks in their groups and domina
ing and controlling the banking business in their territories.
I f those strides are maintained, in the course of a few years it
seems to me there is serious danger of a control of money and credits
in various territories of the United States and which will, in turn,
lead to amalgamation of such interests, and what I am afraid of is
that, through combinations of group banking, chain banking, and
branch banking, we will have a control of money and credits in the
country that will be a dangerous th ng for the Nation.
Mr. R a n d . I do not think you w ill have anything to fear on that.
Mr. S trong . Naturally, having formed a successful combination
of banks, I imagine you would not be fearful of it, and as long as
you are at the head of them, probably there should not be any such
fear, but our lives are short and when men get into power they
become selfish, and it has been the history of the world that the
greatest domination of a nation is money and credits. They domi
nate armies, and we said during the war “ that men win battles, but
money wins wars.”
That is all I care to ask.
The A c tin g C h a i r m a n (Mr. Seiberling). W e thank you very
much for your testimony, Mr. Rand. The committee will stand ad
journed until Tuesday, April 29, 1930.
(Whereupon, at 4.20 o’clock p. m., the committee adjourned, to
meet at 10.30 o’clock a. m.? on Tuesday, April 29, 1930.)
@FedFRASER