expressed there. I think that was probably a sound statement at the time.

Mr. PECORA. Do you know that the readjustment was of a nature that led to the declaration of the dividend by the Trust Co. in pursuance of the original suggestion of the group, despite the fact that the officers of the Trust Co. pointed out that such dividend was not justified by the earnings?

Mr. KANZLER. I would not have known it, Mr. Pecora, except that I have been here and heard the testimony, and have heard that it had been done.

Mr. PECORA. Then, you were not aware of this correspondence that passed between the officers of the Trust Co. and the president of the group in June 1930?

Mr. KANZLER. I do not recall whether I was or was not, but I have heard it now.

Mr. PECORA. Is this the first time you have heard it, that is, since these hearings commenced?

Mr. KANZLER. I do not recall that I heard it before, but I think there was some oral discussion in the meeting. I do not think there were any letters produced or anything of that nature.

Mr. PECORA. Searching your own mind on the matter, Mr. Kanzler, do you think that if you had been informed in June 1930 of the facts pointed out by Mr. Stalker in his letter to Mr. Lord, a portion of which I have read to you, that you, as a director and officer of the group, would have taken the position that the trust company should, nevertheless, declare the dividend at the rate suggested by the group? Mr. KANZLER. I cannot answer that question, because I do not know what Mr. Stalker had in mind as to what he might do in the way of future revenue-producing steps. That was a large operation. The trust company had always been a very successful one. Nobody knew what the next few months were going to bring. He may have thought he was perfectly justified, for the moment, in doing this, and in adjusting himself to it.

Mr. PECORA. I thought you were conscious, in June 1930 of the fact that you were fighting a war against the depression.

Mr. KANZLER. I had not said that. I said before that we realized things were not as good in 1930 as they had been in 1929.

Mr. PECORA. That is why I asked you at the outset this morning, Mr. Kanzler, when you first began to realize that the group was fighting a war against the depression.

Mr. KANZLER. I tried to indicate that

Mr. PECORA. So far as I understand your answers in the earlier part of your examination this morning, you became aware of the existence of the war against the depression sometime early in 1930. Mr. KANZLER. You asked me yesterday where I got this expression "war against the depression.' I do not think it was ever used in 1930. I think that came as the crescendo developed. I do not remember when we first felt that it was as serious as it finally turned out to be.

Mr. PECORA. You were the head of a credit organization of great magnitude for many years, were you not?

Mr. KANZLER. It was organized in 1928, yes, sir.

Mr. PECORA. And as the head of that credit company, which was .called the Universal Credit Corporation

Mr. KANZLER. That is correct.

Mr. PECORA. Were you not kept cognizant of business conditions? Mr. KANZLER. Yes, sir; and we kept abreast of them.

Mr. PECORA. You did not have to know that a depression was on from knowledge that came to you as a director of the group, did you? Mr. KANZLER. We had a very fine year in 1930.

Mr. PECORA. Do you consider that an answer to my question? Mr. KANZLER. Yes I do.

Mr. PECORA. Did I ask you what kind of a year the Credit Corporation had in 1930?

Mr. KANZLER. No; you did not, but you say I was kept cognizant of conditions.

Mr. PECORA. When did you first realize that the depression was on? Let us put it that way.

Mr. KANZLER. I do not know of any one date.

Mr. PECORA. I do not mean to hold you to a specific day of the year. What period? What time? What season?

Mr. KANZLER. I would say that it became increasingly impressed upon my mind that things were getting constantly worse, and I would not say at one particular time that I started calling it a depression. I knew in October 1929 that we were going through something, and that impression magnified itself from month to month. Mr. PECORA. When did it first assume the proportions of a depression, as you understand the term?

Mr. KANZLER. I would say I cannot give you an answer. I do not know what I would term a "depression", in that sense.

Mr. PECORA. What did you term a "depression" when you said yesterday you were fighting a war against the depression? What were you referring to then?

Mr. KANZLER. I was referring particularly to the latter half of 1932.

Mr. PECORA. Is that when the war commenced, that you were fighting the latter half of 1932?

Mr. KANZLER. That is when it seemed to me to develop into a battle.

Mr. PECORA. It was practically a catastrophe then, was it not? Mr. KANZLER. It was pretty bad.

Mr. PECORA. It did not come overnight, in the latter part of 1932? Mr. KANZLER. No; it did not. I say it was a crescendo that developed.

Mr. PECORA. When did the development commence, in your judgment?

Mr. KANZLER. I think, as an event, it started in the fall of 1929. Mr. PECORA. You were a director of the Union Guardian Trust Co. in the year 1930, were you not?

Mr. KANZLER. Yes, sir.

Mr. PECORA. As a director of the Union Guardian Trust Co., you were familiar with the circumstances under which the bank declared a dividend at the rate of 20 percent per annum for the second quarter of that year, were you not?

Mr. KANZLER. We had the recommendation of the officers at that time, and the facts which they presented at the meetings.

Mr. PECORA. What facts did they present at the meetings which prompted you to vote in favor of the declaration of that dividend, if you recall?

Mr. KANZLER. I am very sorry, but I do not recall the specific facts of a particular directors' meeting in 1930.

Mr. PECORA. Do you recall any meeting of the board of directors of the Union Guardian Trust Co. held during the year 1930, when the officers informed the directors that the group had suggested that the directors of the Trust Co. declare a dividend for the quarter at a rate which was not justified by the earnings? Do you recall any such event?

Mr. KANZLER. That does not stand out in my memory at all. Mr. PECORA. If such a thing had happened, would it stand out in your memory, or would it have been forgotten by you by this time?

Mr. KANZLER. It depends upon the explanation which might have been made, along with such an event.

Mr. PECORA. Don't you recall any such event at all?
Mr. KANZLER. No, sir; I do not.

Mr. PECORA. As a director of the trust company, did you endeavor to keep yourself cognizant of the position of the bank with respect to its earnings, so that you might be guided, in the operation of your judgment on the question of declaration of dividends by the trust company?

Mr. KANZLER. Yes, sir.

Mr. PECORA. You did?
Mr. KANZLER. Yes, sir.

Mr. PECORA. Were you cognizant of the fact, in June 1930, not as an officer and director of the group, but as a director of the Union Guardian Trust Co., that the group had suggested to the trust company the declaration of a dividend for the second quarter at the rate of 20 percent per annum, which was in excess of the earnings of the trust company for the quarter?

Mr. KANZLER. I do not recall that I was.

Mr. PECORA. As a director of the trust company, when you voted to declare dividends, what facts did you base your judgment upon with regard to the declaration of the dividend?

Mr. KANZLER. I am speaking from my present judgment as to how I would have acted under the circumstances, because I have no memory of any such meeting, but I would have based my judgment upon what the officers had told us, what they were recommending, and what they would point out as to their future, and the occasions which might have been the cause for not having earned the dividend, if they had not earned it.

Mr. PECORA. Have you any recollection at all of what the officers of the trust company told the board with regard to the declaration of the dividend for the second quarter of 1930?

Mr. KANZLER. No, sir; I have no recollection.

Mr. PECORA. Is not your recollection refreshed by the portion of the letter addressed by Stalker to Lord, which I read to you a few minutes ago?

Mr. KANZLER. No, sir; only to the extent, as I say, that I have heard it before here in this testimony.

Mr. PECORA. Do you recall any time when the officers of the Trust Co. came before the board and asked the board to declare a dividend at a rate not justified by the earnings?

Mr. KANZLER. I do not recall whether it was a Trust Co. meeting or some other meeting, but I do recall that I have attended some meetings at which it was stated that earnings had not come up to the amount that it was considered desirable to declare out of undivided profits as a dividend, but just when those meetings were, or where, I do not at this moment recall.

Mr. PECORA. Were the dividends declared in those instances?

Mr. KANZLER. I am certain I attended meetings and voted for some dividends to be declared out of undivided profits that were not made out of current earnings.

Mr. PECORA. That was during the war against the depression?
Mr. KANZLER. Yes, sir.

Mr. PECORA. Did you think that was a sound banking policy? Mr. KANZLER. In the light of the circumstances as we saw them then, I think it was the thing to have done.

Mr. PECORA. That term "in the light of the circumstances as we saw them then," is not a new one to this committee in these hearings. What do you mean by it? What were the circumstances you referred to?

Mr. KANZLER. Are you referring now to the Trust Co., or to a unit, or to the bank, or to the group?

Mr. PECORA. Let us take the Trust Co. situation, the Union Guardian Trust Co.

Mr. KANZLER. There were times when it was felt that the Group Co. should pay a dividend and, of course, it was known that the Group Co. had no earnings except as it received dividends from the units, and in order to assist the Group Co. in its position, in behalf of the Trust Co., the directors at times thought it wise to declare a dividend to the Group Co. so that the Group Co. could maintain a dividend, so that the market of stock, which in the public's mind was inherently and unfortunately associated with the caliber of the institutions represented by that stock, would-—

Mr. PECORA. You say inherently and unfortunately associated in the public mind with the caliber of the instutitions represented by the stock. Was not that inevitable, rather than unfortunate? We know it was unfortunate, but was it not inevitable that the public mind would so regard that association?

Mr. KANZLER. I think it was inevitable.

Mr. PECORA. Was not that foreseen by you as one of the founders of this group?

Mr. KANZLER. You say

as one of the founders of this group."

I happened to be a member of the group, but in 1928 I was establishing a credit corporation with 33 branches throughout the country, and I was not thinking of the set-up of the group.

I

Mr. PECORA. Were you one of the founders of the group? Mr. KANZLER. No; I would not say I was an active founder. became a director in the Guardian Detroit Group when it was formed, but I would not say I was a founder of the group.

Mr. PECORA. Whom do you regard as the founders of the group? Mr. KANZLER. I think the founders of the group were the active

175541-34—PT 10- -2

Mr. PECORA. Give us the names. We can identify them better

by name.

Mr. KANZLER. I would say the active officers of the Guardian Group at the time it became Guardian Detroit Group.

Mr. PECORA. Who were they? Give us their names.

Mr. KANZLER. I do not know whether I know the exact names of all of them.

Mr. PECORA. Give us the names of as many as you can give us, of those whom you regard as the founders of the group.

Mr. KANZLER. Of course, I must say this, that the head of the bank at that time was Mr. Lord. I happened to be in Europe in 1929, when the corporate structure of the Guardian Detroit Bank was changed to Guardian Detroit Group. Why that was done, and how it was done, I have no real knowledge. That is where I think one of the group movements started, and just who were the movers in that I do not know.

Mr. PECORA. Could you not name for this committee the persons whom you regarded as the founders of this group?

Mr. KANZLER. I think it was a very broad group, and some had more to do with it than others. If you would take the directorates you would probably find the founders of the group-the directors of the bank.

Mr. PECORA. I was not around Detroit when this group was given birth. You were, probably. Can you not give us those names?

Mr. KANZLER. As I say, I was in Europe when the Guardian Detroit Bank changed to the Guardian Detroit Group, and the specific reasons, or the legal reasons why that was changed in that form, I do not know, except that

Mr. PECORA. Changing the name of the group is just a mere detail? Mr. KANZLER. I think not, Mr. Pecora.

Mr. PECORA. Do you think it is an important event?

Mr. KANZLER. Yes, because with it came a different charter, and the power to create more shares, and by that exchange of shares to take in institutions.

Mr. PECORA. You were not in Europe when the group was origiinally founded, were you?

Mr. KANZLER. Yes; when that was done I was in Europe.

Mr. PECORA. Were you named a director of the group at the very outset, while you were in Europe?

Mr. KANZLER. Yes.

Mr. PECORA. Did they name you as a director without your knowledge and consent, while you were in Europe?

Mr. KANZLER. They knew I would be very glad to go along with such a movement.

Mr. PECORA. You must have known something about the organization of the group before you went to Europe.

Mr. KANZLER. I do not think it was planned before I went to Europe.

Mr. PECORA. Did you learn about the founding, or the conception of this group for the first time while you were in Europe?

Mr. KANZLER. The conception of the group, to go back to the history of this thing as a matter of fact, this discussion is recalling most of it to my mind now. It was the Guardian Detroit Bank, owing the Trust Company, and the Guardian Detroit Co. by means