« ForrigeFortsett »
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.
(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.
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.
(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. 8. 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. gs 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 Fear 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 all 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 ?
Mr. GROESBECK. We will get that from the exchange turnover;
Mr. PECORA. Also, in connection with this letter from the American & Foreign Power Co., it strikes me that the aggregate amount for the entire year of the call loans made by that company and stated here to be $57,610,000 might be erroneous in view of the fact that the daily average of the call loans made by the company during the year was $6,477,000. Will you also check up that total for the year?
Mr. GROESBECK. We will.
Mr. PECORA. From what source did these two companies, Electric Bond & Share Co., and American & Foreign Power Co., obtain the moneys which they used in the making of these call loans ?
Mr. GROESBECK. From the sale of securities, and in the Electric Bond & Share figure, as stated here, we were loaning the money for a considerable number of affiliated companies. We were handling their funds for them.
Mr. PECORA. Were their funds also derived principally from the sale of securities?
Mr. GROESBECK. The sale of securities and earnings. They have peaks and valleys. During a period of months they will be accumulating earnings for interest or dividends. During that period their money is idle. Then they get a demand, on the 1st of January, or
. the 1st of July, or any other date, for dividend money, for construction money, or for interest money, and their surplus funds during this period were employed to some extent in this manner.
Mr. PECORA. Mr. Groesbeck, is there any other evidence or information you feel like giving to this committee on this general subject without being specifically questioned ?
Mr. GROESBECK. I think not, Mr. Pecora.
Senator Kean. I would like to ask some questions. Mr. Groesbeck, an electric company, in which you are interested or in which the company is interested, sells some securities with the idea of building a new powerhouse, and then it receives the money for those securities. That is correct, is it not?
Mr. GROESBECK. Yes.
Senator KEAN. It then makes a contract with somebody to build that powerhouse, and it pays that money out as a proportion of that work is completed ?
Mr. GROESBECK. Yes.
Senator KEAN. Therefore, they have the money on hand until that project is completed.
Mr. GROESBECK. Right.
Senator KEAN. And in order to earn some interest on that money they either deposit it in a bank or loan it on call on the stock exchange.
Mr. GROESBECK. Correct, sir.
Mr. GROESBECK. And, if I may say a word on that, Senator, this money is really bought in the money market, and you have to buy it when you can. You sell your securities when you can. Funds pile up, as you have pointed out, against commitments. If these are mortgage obligations interest must be paid on those obligations from the time the money is acquired. The purpose of this loaning is to
secure some earnings to offset the interest charges against the time the money becomes really productive in the business.
The CHAIRMAN. Has the Electric Bond & Share Co. kept up its dividends
Mr. GROESBECK. On preferred stock; yes, sir. We have discontinued dividends on our common stock.
The CHAIRMAN. How about these different corporations?
Mr. GROESBECK. Many of them have been obliged to cut or entirely eliminate their preferred-stock dividends.
Mr. PECORA. Would you say that a very substantial portion of the moneys the Electric Bond & Share Co. loaned on call in 1929 represented proceeds from the sale of its securities?
Mr. GROESBECK. I would not be able to give you an answer on that, Mr. Pecora, without making an examination, and again may I say that I had such short notice that I did not have a chance to get in the office to get anything at all yesterday.
Mr. PECORA. That information can be furnished to us subsequently?
Mr. GROESBECK. Very gladly. Shall we make a note of it?
The CHAIRMAN. Did you have any losses on any of these call loans, Mr. Groesbeck!
Mr. GROESBECK. None.
Mr. PECORA. Is there an officer here from the Standard Oil Co. of New Jersey
TESTIMONY OF R. P. RESOR, BRONXVILLE, N.Y., ASSISTANT
TREASURER, STANDARD OIL CO., INC., NEW JERSEY
The CHAIRMAN. You solemnly swear that you will tell the truth. the whole truth, and nothing but the truth regarding the matters now under investigation by the committee, so help you God?
Mr. RESOR. I do.
Mr. PECORA. Are you connected with the Standard Oil Co. of New Jersey
Mr. RESOR. I am assistant treasurer of the Standard Oil Co., Inc., in New Jersey, the parent company.
Mr. PECORA. That is a corporate name—the Standard Oil Co., Inc., of New Jersey?
Mr. Resor. The corporate name is Standard Oil Co. We identify it by calling it "Incorporated in New Jersey", to show where.
Mr. PECORA. For purposes of convenience in description, I will refer to it in my examination of you as the Standard Oil Co. of New Jersey.
Mr. Resor. There is a Standard Oil Co. of New Jersey, Mr. Pecora, that is an operating company.
Mr. PECORA. Then I will refer to it as the Standard Oil Co. Mr. Resor, who are the executive officers of the company of which you are the assistant treasurer?
Mr. RESOR. At present?
Mr. PECORA. Yes, sir.
Mr. Resor. W. S. Farish is chairman; W. C. Teagle, president; Mr. Christy Payne, vice president and treasurer; E. J. Sadler, vice president; Mr. C. O. Swain, general counsel.
Mr. PECORA. How long have you been assistant treasurer of the company?
Mr. RESOR. Since the latter part of 1911.
Mr. PECORA. During the year 1929 did that company make call loans to brokers in the city of New York?
Mr. Resor. Yes, sir; by an arrangement through a broker.
Mr. PECORA. Is that broker a member of the New York Stock Exchange?
Mr. RESOR. Yes, sir.
Mr. PECORA. What was the total number of such call loans made by your company to to brokers in New York City during the year 1929?
Mr. Resor. I cannot tell you the exact number.
Mr. PECORA. You cannot give the number of those loans made during the year 1929. Can you give the number of the borrowers!
Mr. Resor. I could if I added these all together, but you gentlemen have the figures.
Mr. PECORA. I can perhaps simplify your examination, then, by showing you this document addressed to me as counsel to this committee under date of November 3, 1933, signed by W. C. Teagle in behalf of the company. Mr. Teagle, you said, was the president. Will you look at it and tell me if you recognize it to be a communication caused to be sent to me in behalf of your company by the president [exhibiting paper to the witness] ?
Mr. RESOR. Yes.
(Copy of communication, Nov. 3, 1933, Teagle to Pecora, was received in evidence, marked " Committee's Exhibit No. 89," Feb. 23, 1934, and the same will be found at the conclusion of today's proceedings.)
Mr. PECORA. The document has been marked “ Committee's Exhibit No. 89” in evidence. According to this letter and the data which accompany it, the Standard Oil Co., in behalf of itself and subsidiary and affiliated companies, during the year 1929 made call loans to brokers of New York City in the following amounts. The amounts I will state represent the daily averages, by months, for the year 1929. The recapitulation shows that in January 1929, the total number of borrowers was 83, and the daily average of loans made on call was $75,692,000.
Mr. Resor. Right.
Mr. PECORA. In the month of February the number of borrowers was 84, and the daily average of the cail loans made to them was $72.310,000.