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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?

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 interest 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 342 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 tisually 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.

175541—34-PT 14-11

Mr. GROESBECK. May we verify them and send you the answer? Mr. PECORA. Yes. Mr. GROESBECK. Thank you. Mr. PECORA. Now, I show you, Mr. Groesbeck, a communication addressed to me as counsel to this committee by your company over the signature of its treasurer under date of November 9, 1933. Will you look at it and tell me if you recognize it to be a letter so addressed to me in behalf of your company? That was sent to us, if you notice, in response to a questionnaire that we submitted to your company.

Mr. GROESBECK (after examining document). I identify this as a letter addressed to you by the treasurer of our company.

Mr. PECORA. Yes. I offer it in evidence.
The CHAIRMAN. Let it be admitted.

(Letter dated Nov. 9, 1933, from A. C. Ray, treasurer Electric Bond & Share Co., to Ferdinand Pecora, counsel, Committee on Banking and Currency, was designated “ Committee Exhibit No. 87, February 23, 1934 ", and appears in full in the record at the end of today's proceedings.)

Mr. PECORA. The letter has been marked in evidence as “ Exhibit No. 87”, on the letterhead of the Electric Bond & Share Co., and reads as follow [reading]:

NOVEMBER 9, 1933. DEAR MR. PECORA : In accordance with the request contained in your letter of October 28, I desire to report as follows in answer to your questionnaire :

A.-1. The total number of shares of the Common Stock of Electric Bond and Share Company appearing on our records as of June 18, 1929* in the name of such stock brokerage firms as we were able to identify as stock brokerage firms was 2,112,222.

It then states that the total number of such brokers and brokerage firms on the records of the Electric Bond & Share as of June 18, 1929, as the owners of the common stock of that company was 510. It gives other information which will be spread in the record from the reading of the letter.

It states also total number of shares of the common stock of Electric Bond & Share Co. transferred from the books from one ownership to another during the year 1929 was 10,796,073 shares. It states further that the total number of transfers of common stock of Electric Bond & Share Co. from one ownership to another during the year 1929 was 141,569. And then gives the other information with regard to call money loans which the witness has already given in the course of his examination.

The CHAIRMAN. What was the total capital of the Electric Bond & Share Co.?

Mr. PECORA. That is, of its common stock, how many shares were outstanding during the year 1929 ?

Mr. GROESBECK. Early in the spring of 1929 the capitalization of the company was changed, and thereafter the outstanding common stock was around 5 million shares.

Mr. PECORA. Do you know what the total volume of trading in that stock was through the medium of any securities exchange during that year! Mr. GROESBECK. I do not.

"RA. The stock was listed, was it not, on the New York

Mr D

Mr. GROESBECK. On the curb; yes, sir.
The CHAIRMAN. Curb, or on the exchange?
Mr. GROESBECK. On the curb.
The CHAIRMAN. Not on the New York Stock Exchange?
Mr. GROESBECK. Not on the New York Stock Exchange.
The CHAIRMAN. What was the par value?
Mr. GROESBECK. $5 a share.
Mr. PECORA. Now, I show you another communication in the form
of a letter addressed to me under date of November 9, 1933, by the
American & Foreign Power Co., Inc., through its treasurer, A. C.
Ray. Will you look at it and tell me if you recognize it as being a
letter caused to be sent on behalf of that company to me under date
of November 9, 1933 ?

Mr. GROESBECK (after examing document). I identify this as a letter from the treasurer of the American & Foreign Power Co., addressed to you.

Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be 'admitted.

(Letter dated Nov. 9, 1933, from A. C. Ray, treasurer, American & Foreign Power Co., to Ferdinand Pecora, counsel, Committee on Banking and Currency, was designated “ Committee Exhibit No. 88, February 23, 1934", and appears in full in this record at the end of today's proceedings.)

Mr. PECORA. The letter has been received in evidence as exhibit no. 88 of this date, and I ask that it be spread in full on the minutes, and I merely want to call the attention of the committee at this time to the following information embodied in the letter: That the total number of shares in the common stock in the American & Foreign Power Co., Inc., transferred on the books from one ownership to another during the year 1929 was 1,930,679, and that the total number of transfers on the books from one ownership to another of such common stock for the year 1929 was 32,159.

It also states that the total amount of street loans made during that year by the American & Foreign Power Co. was $57,610,000; that the peak amount of such call loans at any 1 day during that year was $30,321,000, and that the daily average amount of such loans for the year 1929 was $6,477,729, and that alĩ those call loans were made through commercial banks.

This letter further states that the figures with regard to call loans made by the American & Foreign Power Co. during the year 1929 are included in the figures already put into the record through the testimony of Mr. Groesbeck as the call loans made by Electric Bond & Share Co.

Mr. GROESBECK. Correct.

Mr. PECORA. Were the shares of the common stock of the Ameri, can & Foreign Power Co. listed on any securities exchange?

Mr. GROESBECK. The New York Stock Exchange.

Mr. PECORA. Do you know the total amount of common stock that company had issued and outstanding during the year 1929 ?

Mr. GROESBECK. I am sorry I do not know offhand what it was at that time, but I will be glad to send it to you.

Mr. PECORA. Also the total amount of trading in the common stock of that company during the year 1929?

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