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Statement by Kanzler
Jan. text of Ernest C. Kanzler's statement outlining the developments leading up to the application for loan from the RFC for the Union Guardian Trust Co., follows:
It might appear that certain remarks made to the stockholders at the annual meeting and the preliminary draft of the annual report in preparation for sending to stock. holders seem to be with statements contained in the Reconstruction Finance Corp. application. They are not fairly understand matters requires analysis of their purpose of the situation governing the time they were made. In order that this Committee may be fully and fairly informed as to the facts, have prepared short statement which ask the privilege of reading The period the latter part of January 1933. annual meeting under the bylaws was set for the last As of the of Directors the Guardian Detroit Union was called upon to preside at that meeting and to report to the stockholders the operations of the group during the preceding year order make this report, furnished the data and operating figures to submit to the stockholders. At the time, also tried to do that could to assist the units the Group to obtain loan from the Finance Corp., with Mr. Leyburn, the chief National bank aminer, actively participated in those negotiations.
Duty to Depositors
Our first duty was to the depositors. It imperative that these banks and trust companies kept open the interests of the depositors were to be protected. We were also apprise the the annual meeting of the of the preceding The fact that der most trying conditions, splendid work had been done during the year in liquidating loans and in fecting economies. Many the units of our Group were able function in the communities in which they located better than competing banks those aggregate the units of the Group had earnings to report before These items are usually commented upon such meetings. The stockholders were advised that additional substantial reserves of several millions had then been set aside out earnings, recoveries and capital funds of the various units meet contingencies. The stockholders were advised additional of $5,000,000 for contingencies not determinable time, but which the management deemed it prudent create. The remarks to the stockholders annual meeting. considered the light our duty as that time, and see now, were the proper remarks to make. At that time, It was realized that the Union Trust serious the trust company had an called part commitment approximately $6,000,000 from the Reconstruction Finance Corp. Its published Dec. 1932. showed bills payable of
Held Many Mortgages
It was also generally published press the trust company from Reconstruction Corp. Over the preceding two had liquidated its deposit liabilities to the extent nearly approximately cent. Many its assets were real estate assets The Union Guardian Trust Co. was the trust Michigan. Its past of earn ings We believed, and had believe, the time of the stockholders' meeting, that the new application then making Reconstruction Finance Corp. would be granted. These additional funds were not only for trust company, to liquidat its banking business tirely, but also to all the institutions group on such liquid and sound basis that their continuance would assured. At that time and for two weeks thereto, had been in conference with Mr. Leyburn, chief aminer for the Seventh District, with view obtaining from the Finance Corp. of the slower assets of some units of the group for the purpose of making certain that under even the most stressing that might develop these units could continue their operaand and protect the deposits their thousands of depositors throughout the state. The trust company be takout of the banking and be gradually liquidated and its future business be and solely that of trust and fiduciary company and nothing more.
Advised by Leyburn
In preparing this application to the Reconstruction Finance Corp. Mr. co-operated with us In fact, the plan presented Mr. was He personally participated in all conferences had with the Reconstruction Finance Corp., and in advocated the presence He advised us that in presenting his own views to the Reconstruction Finance Corp. Board in private session without Feb. he strongly recommended In setting up this application and selecting the type of security be offered, we also counseled Gov. Talley, head of the bank division Finance Corp. in Washington. available more liquid had assets as collateral the loan, but at time first the Reconstruction Finance Corp. advised select and offer the slower, type collateral after had been that there remain in the units substantial further develop liquidity necesthe regular means sary. through the Federal Reserve and correspondent banks. the time of the stockholders' also the we had by the Reconassistance rendered struction Finance Corp. other and lieved banks that the RFC. organized for the very purpose of rendering asked. the that was being willing to come would ready and advance when forward with such an application was formally acted upon. Up to that time our banks, and in fact, all of the banks in the State of Michigan, had sought comparatively help from the Reconconsidering the the deposits the banks in Michigan as compared to the deposits in other section the country the country whole. The banks the State Michigan had, received only small percentage of aid from the Reconstruction Finance Corp. compared that given banks throughout the United States then. and we believe now, that the loan should have been granted. The application to the Reconstruction Finance Corp. speaks for itself. We were preparing for every future contingency. The potential seriousness the condition of the Union Guardian Trust Co. could not be to the Finance If events should the trust exhaust its liquid funds. were fearful without the proper help at that time there runs the other banks, and unless assistance were immediately forthcoming. the banking system of the State of Michigan, and the entire country, would be paralyzed. Prior to this time. directors had given most generously their own funds strengthen the liquid position of Moreover, the the Reconstruction Corp. necessary, the subordination of seven and million dollars of deposits the trust company and additional assets, 80 that all remaining deposits "in the trust could paid full from the proceeds of this loan
A $6,000,000 Difference
The Board of the Reconstruction Finance Corp. willing lend thirty-seven and million dollars, but and million dollars was necessary. Six million dollars would have kept these institutions from closing. result of closing them. the added welfare contributions required from the Finance Corp. and the of from the State of to say nothing of the direct loss to the Government due the closing, will amount to many, many times more than that six million dollars. Nine of our former units have been reopened and are doing business 100 per cent. would venture to say that National bank the United States being liquidated by receiver at this time has made showing comparable that the National Bank the largest These together with the sults liquidation other units, even the cumstances receiverships, offer positive proof of the soundness our view the situation at the time of our application. THAT THIS LOAN WAS NOT WAY OF THINKING, IS A GREAT TRAGEDY. In conclusion. therefore, let us say that you review the remarks the and the made the ReFinance which prepared about the same time and revised shortly thereafter. the light the they then existed. believe that you find the statements in both of them fully justified by the facts My confidence the situation indicated the that 24, 1933, the date the Feb. 1933, the last day the Guardian Bank Commerce open for business, posits of companies which am president increased $2,095,000.
Minutes of RFC Concerning Requests for Guardian Loan
WASHINGTON Jan. 4-Minutes of the RFC dealing with the requests for loans to save the Union Trust Co. were read the records the Senate Banking Committee today Ferdinand Committee counsel. The minutes follow Mr. Kanzler stated that would be required the deposits the Trust Co. of but the assets which they could security for such loan would value only about $6,000,000. said that, in these the necessary aid could not be tained from he and his associates felt that there would be no course open except to close the Trust Co. This he would result the collapse the Guardian Group, well other banking the State Michigan, thus the State's entire financial and seriously affecting that other states. Mr. Kanzler stated that there deposits all the 16 which of the Guardian Group operated and that since the Guardian members more liquid condition than the other banks in these communities, he did not see any of the other banks could the the Group. any bank State of Michigan operate. He stated, that his opinion, would not be feasible induce depositors subordinate their claims during the life of loan the Corporation, made, with the exception, possibly of few the larger customers Guardian Group, including the Ford Motor Co In connection with the deposits this totaling about $30,000,000 in various member banks of the Guardian Group, however, Mr Kanzler stated that not only had Henry Ford, within the past three years, aided the group about and felt that he had enough, but that they would be obliged Mr. Ford again to assist raising the $5,000,000 new capital for the proposed mortgage company. Mr. Kanzler said that would be impossible, his opinion, to obtain $5,000,000 advance from Mr Ford, the deposits of the Ford Motor the Guardian Group of banks, frozen. Mr. admitted that there considerable the value the collateral which could be pledged and the amount of the loan stated that the Guardian Group involved imminent danger of disaster ing the State of Michigan and the large that he and his associates, feeling that, sible, something should be done avert had decided Board of Directors of this Corporation.
