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Mr. PECORA. $10,375,000 approximately, wasn't it?

Mr. JOHNSTON. Yes, sir. So to take a percentage of 5 percent of that

Mr. PECORA (interposing). Now you are taking the lowest rate, aren't you?

Mr. JOHNSTON. I was going to say, if you took 5 percent that would be $500,000.

Mr. PECORA. At 5 percent?
Mr. JOHNSTON. Five percent.

Mr. PECORA. But the range of the interest rates ran from 5 to 15 percent?

Mr. Johnston. It was higher than 5; yes, sir. Those higher rates were few and far between.

Mr. Pecora. Would it be possible for you to get, for the benefit of this committee, after today from your office records the figure that I have asked for?

Mr. JOHNSTON. Yes, sir.

Mr. PECORA. Can you tell us this, Mr. Johnston: What was the average period of time for which those call loans were made in 1928 and 1929 ?

Mr. JOHNSTON. I should judge the average loan would stay out 4 or 5 days.

Senator TOWNSEND. Mr. Johnston, how was this surplus of money which Cities Service was loaning in the Street obtained? Was it a profit on their business or how was it obtained?

Mr. JOHNSTON. Partly from the earnings of the operating companies, and partly from the sale of securities.

Senátor TOWNSEND. Sale of securities—what do you mean by that?
Mr. JOHNSTON. Cities Service Co. and its subsidiaries.
The CHAIRMAN. Issuing stock and selling stock!

Mr. JOHNSTON. Different kinds of securities were issued. There was stock issued; yes, sir.

Senator TOWNSEND. What portion of this money was received by the sale of Cities Service stock itself ?

Mr. JOHNSTON. Well, it is hard to tell just where any portion of certain sums of money comes from. Sources of income are varied, and the disbursements are also varied.

Senator TowNSEND. Do you recall the amount of Cities Service stock sold, we will say, in the year 1929, and the prices obtained for it?

Mr. JOHNSTON. I do not recall at the moment those figures; no, sir.

Mr. PECORA. Could you give the figure with some degree of approximation ?

Mr. JOHNSTON. It is too far back.

Mr. PECORA. What would be your best estimate at this time of that figure? Mr. JOHNSTON. The number of shares of stock?

Mr. PECORA, No; the amount realized from the sale of stock. in that year.

(There was a pause without response.)

Senator TOWNSEND. It would suffice if you would get that for the record, the amount of stock sold in 1929 and the prices obtained and the amount of money received.

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Mr. JOHNSTON. It is quite a large amount, and it would be just a guess in any one year.

Mr. PECORA. Will you get that figure also, Mr. Johnston, and send it to me at the New York office and I will submit it to the committee?

Mr. JOHNSTON. Yes, sir.

Mr. PECORA. You might give us that figure for both the years 1928 and 1929 separately

stated for each of those years. Mr. JOHNSTON. Yes, sir.

Mr. PECORA. Now I show you, Mr. Johnston, a letter addressed to me as counsel to this committee by some gentleman connected with the Cities Service Co. whose signature I cannot read, dated November 1, 1933, which refers to accompanying date. Will you look at it and tell me if you recognize it to be a letter caused to be sent to me as counsel for this committee by the Cities Service Co. on or about November 1, 1933, with the accompanying data which I also show you?

Mr. JOHNSTON (after examining document). Yes, sir; the first letter is signed by Mr. W. Alton Jones, and the second by Mr. W. B. S. Winans.

Mr. PECORA. Yes. I offer the letters and accompanying data in evidence. The CHAIRMAN. Let them be admitted.

(Letter dated Nov. 1, 1933, from W. A. Jones to Ferdinand Pecora, together with accompanying data, was designated “ Committee Exhibit No. 86, February 23, 1934". The letter appears in the record in full, immediately following, where read by Mr. Pecora, and the exhibit appears in full at the close of the day's proceedings.)

Mr. PECORA. The exhibit has been marked no. 86 in evidence, and the forwarding letter reads as follows (reading]:

CITIES SERVICE COMPANY,

November 1, 1933. Mr. FERDINAND PECORA, Counsel

Et cetera,
MY DEAR MR. PECORA :

With further reference to your inquiry of October 26, you will find enclosed herewith complete questionnaire, which we trust you will find in order. Sincerely yours,

W. A. JONES. Is thatMr. JOHNSON. Yes, sir.

Mr. PECORA. W. Alton Jones. The enclosures consist of the socalled “ questionnaire ", entitled “ Questions and answers regarding call loans of year 1929”, and gives the figures that have already been testified to by the witness, namely, total number of loans in the call money market in New York City that were made during the year 1929 was 912; that the total amount of those loans in that year was $285,325,092.21; that the maximum amount of call money on any one day was $41,900,000; that the average daily amount of call loans outstanding during the year made by the company was $10,375,778.23, and that the average amount of each call loan made was $312,856.46, and that such loans were not made through any commercial bank, private bank, or any other agency, but made directly to the borrower.

The other letter, addressed to me on behalf of the Cities Service Co., and signed by W. B. S. Winans, reads as follows [reading]:

NOVEMBER 11, 1933. Committee on Banking and Currency, and so forth.

DEAR SIRS: In response to your telephone request we enclose herewith a statement accounting for the call loans outstanding on the day in the year 1929 when call loans were in the largest amount. The list attached indicates to whom loans were made and the amounts involved, the total of which was $41,900,000.

In respect to your inquiry regarding the total number of shares transferred in 1929, we wish to advise that from January 1st, 1929 to May 1st, 1929, 3,936,159 shares of $20 per value stock were transferred, and from May 2, 1929 to December 31, 1929, 49,500,528 shares of no par value stock were transferred. Yours very truly,

W. B. S. WINANB. The stock referred to in this letter which I have just read into the record, Mr. Johnston, was the stock of the Cities Service Co.?

Mr. JOHNSTON. Yes, sir.

Mr. PECORA. What was the total number of shares of common stock $20 per value that that company had outstanding in the year 1929 ?

Mr. JOHNSTON. Probably between seven and eight million shares.

Mr. PECORA. According to the information or data embodied in this letter of Mr. Winans of November 11, 1933, the transfers made on the books of the company of its common stock $20 par value during the year 1929 were about seven times the amount of stock outstanding, were they not, between six and seven times ?

Mr. JOHNSTON. I did not get that.

Mr. PECORA. You said the total number of shares outstanding in that year was between seven and eight million?

Mr. JOHNSTON. Yes.

Mr. PECORA. The total number of shares transferred from January 1 to December 31, 1929, according to the advices embodied in Mr. Winans' letter, was 53,486,787 shares.

Mr. JOHNSTON. That figure includes stock with no par value, which in about May of 1929 was issued four shares for one of the $20 par, and therefore the number of shares of no par value would be in the neighborhood of 30 to 35 million.

Mr. PECORA. That was after May 1929?
Mr. JOHNSTON. Yes; about May 1.

Mr. PECORA. These figures merely relate to the transfers made on the books of the company, don't they?

Mr. JOHNSTON. Yes, sir.

Mr. PECORA. And you would say, would you not, that those figures would not include the total amount traded in in the shares of the stock of your company during the year 1929 ?

Mr. JOHNSTON. The number of shares traded in and the number of shares transferred would be two different figures.

Mr. PECORA. Yes. The number of shares traded in would be far in excess of the number of shares transferred on the books?

Mr. JOHNSTON. I would not say that, Mr. Pecora, because there may be transfers for other purposes than just trading on the exchange.

Mr. PECORA. Well, don't you find as a matter of experience and observation that the number of shares of a given stock bought and sold throughout the year on the floor of the exchange, assuming it is a listed security, far exceeds the number of transfers made on the books of the issuing company?

Mr. JOHNSTON. I think they would exceed them; yes. Mr. PECORA. Several times over? Mr. JOHNSTON. Probably not. In individual cases there may be transfers of large blocks of stock that did not involve any trading. The CHAIRMAN. Were there transfer taxes paid on these! Mr. JOHNSTON. Oh, yes; the transfer tax was paid by the seller. The CHAIRMAN. What would that amount to? Mr. JOHNSTON. I have no figures for that at the moment. Mr. PECORA. Could you also send to our office in New York within the next few days from your records the total amount of shares traded in during the year 1929 ? Mr. JOHNSTON. Yes, sir. Mr. PECORA. Bought and sold on the floor of the exchange? Mr. JOHNSTON. Yes, sir.

. Mr. PECORA. All right, sir. Now, among the data which accompanied the letter marked in evidence here as exhibit no. 86, and which forms a part of that exhibit in this record, is a statement entitled “ Details of maximum call loans outstanding any 1 day, 1929– September 25, 1929 ", and gives the names of the brokers to whom call loans were made on that day to an amount aggregating $41,900.000.

I have no further questions to ask the witness, Mr. Chairman.
Have you any information or any statement you would like to make
to this committee without being asked specifically about it, Mr.
Johnston ?
Mr. JOHNSON. No, sir; not at this moment.

The CHAIRMAN. Is the H. L. Doherty Co. still the fiscal agent of the Cities Service?

Mr. JOHNSTON. Yes, sir; but they do not carry the funds of the corporations in their name in the banks at this time. The funds of the Cities Service Co. and its subsidiaries are carried in the banks in their own name.

The CHAIRMAN. Each subsidiary?
Mr. JOHNSTON. Yes, sir.

Mr. PECORA. Is there any commission arrangement between Henry L. Doherty & Co. and the Cities Service Co. determining the compensation paid to Henry L. Doherty & Co. for its services as fiscal agent for the corporation? Mr. JOHNSTON. No, sir.

Mr. PECORA. I assume that Henry L. Doherty & Co. do collect or receive fees, commissions, or compensation in some form!

Mr. JOHNSTOx. No, sir.
Mr. PECORA. They render that service gratis?

Mr. JOHNSTON. Yes, sir. The expenses, of course, are charged up to Cities Service Co. also.

The CHAIRMAN. Were fees paid to the brokers with whom you negotiated these loans?

Mr. Johnston. The borrower paid a small fee to the money broker. We did not.

The CHAIRMAN. Do you know what that fee would amount to? What was the small fee you mentioned ?

Mr. Johnston. I do not recall at this time.

Mr. PECORA. That is, the broker to whom the loan was made would pay not only the interest on the loan but would also pay a small fee to the money broker?

Mr. JOHNSTON. Yes, sir.

Mr. PECORA. Through whose instrumentality the loan from the Cities Service Co. was secured?

Mr. JOHNSTON. Yes, sir.
Senator KEAN. That is not over one sixty-fourth of 1 percent, is it?

Mr. JOHNSTON. Well, it never passed through our office, so I could not say exactly what the fee was.

Senator KEAN. I think it is about one sixty-fourth of 1 percent.

The CHAIRMAN. I believe that is all, Mr. Johnston. You will be excused, sir.

Mr. JOHNSTON. Thank you.
Mr. PECORA. Is Mr. Groesbeck in the room, please?

TESTIMONY OF C. E. GROESBECK, CHAIRMAN OF THE BOARD

OF ELECTRIC BOND & SHARE CO., NEW YORK CITY

The CHAIRMAN. Mr. Groesbeck, you do solemnly swear that the testimony you are about to give in the matters under investigation by this committee will be the truth, the whole truth, and nothing but the truth. So help you God.

Mr. GROESBECK. I do. May I bring my associate with my papers here?

Mr. PECORA. Yes. What is your full name, Mr. Groesbeck; and your address?

Mr. GROESBECK. C. E. Groesbeck. My office address is 2 Rector Street, New York. My home address is Locust Valley, L.I.

Mr. PECORA. Mr. Groesbeck, are you connected with a corporation called Electric Bond & Share Co.?

Mr. GROESBECK. I am, sir.
Mr. PECORA. In what capacity?
Mr. GROESBECK. I am chairman of the board.

Mr. PECORA. How long have you been connected in any capacity with the Electric Bond & Share Co.?

Mr. GROESBECK. Well, about 17 years.
Mr. PECORA. How long have you been the chairman of its board?
Mr. GROESBECK. About 11 months.

Mr. PECORA. And immediately prior to that were you connected with it in any other official capacity?

Mr. GROESBECK. I was, sir. I was president of the company prior to that time.

Mr. PECORA. And how long had you been president?

Mr. GROESBECK. Well, for several years. I don't know that I can-well, until sometime in 1929.

Mr. PECORA. And you have been a member of the board of directors of the Electric Bond & Share Co. for many years?

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