Mr. GROESBECK. For several years; yes, sir.

Mr. PECORA. When was the Electric Bond & Share Co. organized? Mr. GROESBECK. In 1905.

Mr. PECORA. Is it a holding company?

Mr. GROESBECK. Well, it is a holding company in the sense that it owns the securities of a number of companies.

Mr. PECORA. What is the kind of business conducted by the various companies whose securities it owns?

Mr. GROESBECK. Public-utility business.

Mr. PECORA. During the year 1929, to your knowledge did the Electric Bond & Share Co. make call-money loans to brokers in the city of New York?

Mr. GROESBECK. It did.

Mr. PECORA. Were those loans made by your company directly or were they made through the medium of any banks or bankers?

Mr. GROESBECK. All through bankers; through banks and trust companies. All through banks and trust companies.

Mr. PECORA. Will you name the banks and trust companies through whom such loans were made by your company?

Mr. GROESBECK. May I have the privilege of referring to the record?

Mr. PECORA. Surely.

Mr. GROESBECK (referring to date). The Irving Trust Co., the Guaranty Trust Co., the Bankers Trust Co., the Central Hanover, the Chemical Bank & Trust Co., the Chase National Bank, and the National City Bank, all of New York.

Mr. PECORA. In those call-money loans that were made during that year by your company, were there included loans made by a corporation called the "American & Foreign Power Co., Inc."?

Mr. GROESBECK. Yes, sir.

Mr. PECORA. Is that one of the subsidiaries of the Electric Bond & Share Co., or is it one of the

Mr. GROESBECK. Well, it is one of the associated companies. We control a very large amount of their stock.

Senator KEAN. You do not absolutely control that stock, do you?
Mr. GROESBECK. We have the majority of the stock, sir.
Mr. KEAN. You have it?

Mr. GROESBECK. Yes, sir; American & Foreign Power Co.
Mr. PECORA. You own 75 percent or more of its stock?

Mr. GROESBECK. No. No; to be quite technical about it, we own just a little under the 50 percent of the common stock, but we own enough other stock so that we could make it over 50 in case it became desirable to do so. It is so close that it is rather a technical point to make.

Mr. PECORA. There is no question that the stock owned by the Electric Bond & Share of the American & Foreign Power Co., Inc., is enough to give it management control easily?

Mr. GROESBECK. Yes, sir.

Mr. PECORA. What was the total number of call loans made to brokers in New York City by the Electric Bond & Share Co., either in behalf of itself or itself and subsidiaries or associated companies during the year 1929 ?

Mr. GROESBECK. One thousand six hundred and sixty-three.

Mr. PECORA. And what was the aggregate amount of those loans in the year 1929?

Mr. GROESBECK. Вy that you mean, Mr. Pecora, the accumulated total?

Mr. PECORA. Aggregate amount of all of these 1,663 loans; yes. Mr. GROESBECK. Regardless of whether they were turned over daily?

Mr. PECORA. Yes.

Mr. GROESBECK. $867,295,000.

Senator KEAN. That means that loans were paid from day to day and that you reloaned the money to somebody else?

Mr. GROESBECK. Right.

Senator KEAN. So that it might be that $100,000 would make 365? Mr. GROESBECK. Yes; that is it precisely.

Mr. PECORA. Yes; that is understood. This figure of $867,295,000 which you have given us, Mr. Groesbeck, represents the aggregate amount of all of the 1,663 call loans which your company made during the year 1929?

Mr. GROESBECK. That is right.

Mr. PECORA. What was the highest amount of such loans outstanding on any single day during the year 1929?

Mr. GROESBECK. $187,900,000.

Mr. PECORA. And on what date was that amount outstanding?
Mr. GROESBECK. August 27, 1929.

Mr. PECORA. What was the daily average of these loans for the year 1929 which your corporation made?

Mr. GROESBECK. $100,727,010.

Mr. PECORA. Which officer or board of officers of your corporation supervises the making of these call loans?

Mr. GROESBECK. Directly the mechanics were carried by the treasurer of the company.

Mr. PECORA. Are you familiar with those mechanics, Mr. Groesbeck?

Mr. GROESBECK. No; I am not, Mr. Pecora, but I can get you any information you want.

Mr. PECORA. Do you know at what rates of interest these loans were made during the year 1929? That is, what was the range? Mr. GROESBECK. Well, generally speaking, I should say from recollection that they ran from around 5 to 15 percent.

Mr. PECORA. That is, they were made at the current rates?

Mr. GROESBECK. At the current rates; yes, sir; whatever the prevailing rate was.

Mr. PECORA. And that ranged generally from 5 to 15 percent throughout the year?

Mr. GROESBECK. I heard a statement made that the rate was higher than that before, but I cannot speak of that of my own knowledge. Mr. PECORA. Do you know the amount received by the Electric Bond & Share Co. by way of interest on these loans for the year 1929 ? Mr. GROESBECK. I am sorry, Mr. Pecora; I haven't that.

Mr. PECORA. That can be furnished to us by your company? Mr. GROESBECK. It can; yes, sir. And may I say that I received this subpena only yesterday at 1 o'clock, which was a holiday, and our treasurer was in the country many miles from the office, and I

did not get a hold of him until 3 o'clock yesterday afternoon. So perhaps I have not quite as much information as I should have.

Mr. PECORA. That is quite all right, sir; if you will get us the information at your early convenience and send it to me so that I will present it to the committee.

Mr. GROESBECK. I will be very glad to, sir.

Mr. PECORA. Had it been the business or practice of the Electric Bond & Share Co. and its associated companies to make call-money loans to brokers prior to the year 1929?

Mr. GROESBECK. Yes; we had several years before, but not to brokers, Mr. Pecora. Through the same channel, through the banks. Mr. PECORA. Through the banks?

Mr. GROESBECK. Yes, sir.

Mr. PECORA. The loans were made to brokers through the medium of your banks?

Mr. GROESBECK. Yes, sir.

Mr. PECORA. For how many years prior to 1929 had your company made such loans as part of its business operations?

Mr. GROESBECK. Probably 3 years, Mr. Pecora, but we will be glad to get that information exactly from our records, if you desire. Would you like it?

Mr. PECORA. Yes. Would you say, Mr. Groesbeck, that the greatest number of these loans and for the greatest aggregate amount were made in the year 1929?

Mr. GROESBECK. By far.

Mr. PECORA. And what was that due to?

Mr. GROESBECK. The attractive interest rates.

Mr. PECORA. And those attractive interest rates were due to the very, very active speculation in securities?

Mr. GROESBECK. Well, I don't know that I am qualified to pass on that.

Mr. PECORA. I don't think you need be so modest.

Mr. GROESBECK. I am not an economist and I am not a banker, and I really do not know that my opinion would be worth anything on that, Mr. Pecora.

Mr. PECORA, Recognizing you are neither a banker nor an economist, your opinion might be of some value.

Mr. GROESBECK. Will you repeat the question, please?

The SHORTHAND REPORTER." And those attractive interest rates

were due to the very, very active speculation in securities?"

Mr. PECORA. During the year 1929.

Mr. GROESBECK. I would like to answer you, but really all I can do would be to give you a guess.

Mr. PECORA. Well, even your guess might be illuminating.

Mr. GROESBECK. My guess would be that the activity in the securities market contributed to the high interest rates. I am not trying to evade the question, Mr. Pecora, but

Mr. PECORA. To your knowledge that activity in the securities market was unprecedented in the year 1929, wasn't it?

Mr. GROESBECK. Greatest I have even seen or heard of; yes, sir. Mr. PECORA. And would you say, as executive of a corporation that held securities of many utilities companies, that that speculation, in its volume and the manner in which it was conducted, was a good, wholesome thing for the national economy?

Mr. GROESBECK. We had lots of advice in that period, both from foreigners and Americans that we were in a new era and that things were going on at that rate forever, but in the light of events we know that that did not happen.

Mr. PECORA. You know that the reverse happened, in the light of events?

66

Mr. GROESBECK. Something has happened; I know that.

Mr. PECORA. Something happened that had the opposite trend? Mr. GROESBECK. Right; yes, sir.

Mr. PECORA. To an advance or a continuation of that so-called prosperity"?

Mr. GROESBECK. Yes, sir.

Mr. PECORA. You recall, don't you, that there was a very severe break in securities prices on the stock exchanges late in October 1929? Mr. GROESBECK. I do.

Mr. PECORA. Following that break or shortly thereafter did your company cease making these call loans?

Mr. GROESBECK. We reduced.

Mr. PECORA. Very considerably?

Mr. GROESBECK. Very considerably; yes, sir.

Mr. PECORA. Because stock market activity reduced?

Mr. GROESBECK. Because we could not get the return, the interest rate.

Mr. PECORA. Well, the severe drop in securities prices at that time was a contributing factor to that, wasn't it?

Mr. GROESBECK. Again you are getting a little way out of my field, Mr. Pecora.

The CHAIRMAN. The demand for these loans fell off after October? Mr. GROESBECK. Very materially, I assume. Otherwise the inter

est rates would not have gone down so rapidly.

The CHAIRMAN. How did your loans run, say, in November and December 1929?

Mr. GROESBECK. I am sorry, Mr. Chairman, I haven't the figures, but I can say that they were reduced substantially, and I can get the figures-be very glad to if you desire them.

Mr. PECORA. During the year 1930 did your company continue making these call loans?

Mr. GROESBECK. We did.

Mr. PECORA. But in a very much decreased amount?

Mr. GROESBECK. Yes, sir.

Mr. PECORA. How about the year 1931?

Mr. GROESBECK. I should have to look that up, Mr. Pecora.

Mr. PECORA. Will you look it up also for the year 1932 and the year 1933?

Mr. GROESBECK. Yes.

Senator KEAN. Mr. Groesbeck, you had a large amount of money loaned in 1929. Then the rates were very high?

Mr. GROESBECK. Yes, sir.

Senator KEAN. After 1930 the rate on the stock exchange went down to something like 2 percent, didn't it?

Mr. GROESBECK. I believe it did; yes, sir.

Senator KEAN. Therefore you could deposit this money in a trust company and receive more money than you could on the stock exchange for it?

Mr. GROESBECK. I am not sure, Senator, that those are the facts. I am not attempting to contradict you, but my own knowledge of the thing is pretty hazy.

Senator KEAN. If the trust company was paying for deposits 32 percent and the stock exchange loans were down to 2 percent, there was a difference there that you ought to have taken cognizance of; is that right?

Mr. GROESBECK. Yes, sir. And if those were the conditions, I think undoubtedly we did take advantage of the conditions.

Mr. PECORA. Have you any thought, Mr. Groesbeck, that during the year 1929 and during the year 1928 the unusual activity in the stock market could have been possible, could have been sustained, without the making available to brokers these tremendous sums of money by way of call loans?

Mr. GROESBECK. I have no real opinion on that, Mr. Pecora. Again, that is

Mr. PECORA (interposing). Again I think you are modest.
Mr. GROESBECK. Again that is a little out of my field.

Mr. PECORA. Do you know the average period of time for which these call loans were made by your company in the year 1929?

Mr. GROESBECK. I haven't that, Mr. Pecora. I will have to get it for you if you desire it. Shall we make a note of it?

Mr. PECORA. If you don't mind.

Senator KEAN. Mr. Groesbeck, these loans were call loans, so that all you had to do was to notify the people that you had loaned the money through that you wanted the money back and they would have had to pay it by 2:15?

Mr. GROESBECK. That is correct, sir.

Mr. PECORA. Mr. Groesbeck, you have stated that the aggregate amount of the 1,663 call loans which your company made in 1929 is $867,295,000; that the peak amount in any 1 day in that year was $187,900,000, and that the daily average of those loans for the year was $100,727,110.

Now, in view of the fact that the daily average of your call loans for the year was over a hundred million dollars, isn't there an error in the aggregate amount of those loans for the year as being only $867,000,000?

Mr. GROESBECK (after consulting associate). Well, I think the figures are right, Mr. Pecora. I will be very glad to have them checked.

Mr. PECORA. You see, the daily average being more than a hundred million dollars, the total number of loans 1,663, I would think that the aggregate amount of all those loans would greatly exceed $867,000,000, if these were the usual kind of call-money loans made for a few days at a time, usually 1 day.

Mr. GROESBECK (after consulting associate). Well, some of these loans may have run for a week or 30 days or longer, which would reduce the turn-over.

Mr. PECORA. Yes; but you had 1,600 loans. The daily average for the year was a hundred million dollars. There were call loans usually made for very short periods of time, as a rule a day or two. I think perhaps there is a mistake somewhere in the figures that you have given us as the aggregate.

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