Evening star., 1933-02-23
4SHORT SELLING
BY BANK CHARGED
National City Affiliate
"Short" in 1929, Officials
Admit at Probe.
CONTINUED From First Page.)

Baker said he did not think records
with the data were available and that
they were in New York.
Real Purpose Asked.
Chairman Norbeck interrupted, a
trifle impatiently.
'If the records aren't here" he said,
"we'l send for them
Leaning over the table, Pecora asked
sharply:
What was the real purpose of bor-
rowing those shares, to facilitate de-
livery?"
without waiting for Baker to reply,
he continued:
I'm other words, the National City
Co. sold shares of bank stock it didn't
have?"
NO" Baker said.
Baker said the company on February
Is took over rights to 81 $50 shares to
hold for distant shareholders.
Kept in Separate Account.
"In doing so it was able to acquire
thousands of rights belonging to other
shareholders who had permitted them
to lapSe?" the counsel asked.
THAT is not quite correct" the wit
ness responded THE balance of shares
shares. These were purchased"
Replying to questions by Senator
Brookhart, Baker said the rights per-
mitted purchase of stock at less than
the market price.
Pecora asked if while the company
held the stock it was not also using
it to fill orders.
II don't know that we segregated
1t from any other stock" Baker said.
Later, he said it was kept in sep
arate account.
Pecora asked for the details of the
account, but Baker said he could not
give them and Law was called to the
stand.
Set Up Subscription Account.
In answer to questions, Law said the
National City Co. was entitled to other
shares OF stock on bank capital stock
It held.
The company, Baker related. set up
q. subscription account and held all but
437 shares of the 81 500 shares until
May 3, 1929, when it was closed. He
said the bank or company made no
profit on the transaction.
Baker said the subscription price OF
the old atock on February Is was $100,
but that the market price ranged from
1919 to t348.
Questioned by Pecora, Law said the
bank had no right to hold the rights
after February Is, and 1t was neceS-
sary to turn them over to some one
else.
so the medium chosen was its Sc
curity affiliate?"
Right"
Were the rights held intact by the
company, from February is, to May?"
THE physical shares may have been
merged and used to fill orders be-
cause it had purchases coming in from
all over the world" Law said.
Presses for Details.
go" the counsel said, his voice ris-
ing, "the company used the shares
order to make deliveries to the gen.
sral public"
THE company was under no con-
tract to deliver the rights to any one
when they were taken over" the wit
ness said.
Pecora continued to press for details
Of the involved transaction.
Law said that on April 10, 1929, the
National City Co. held only ACT shares
in the subscription account set aside
for shareholders rights and that the
remainder had gone largely to fill sub
scription rights.
Now why Was this $4,000 shares of
stock borrowed from Mitchell?"
Law said he was familiar with the
transaction from mechanical stand
point only"
well who does (know)?" Pecora shot
at him. why don't you answer?"
81 should say Mr. Mitchell ought to
know. He loaned the stock"
Finally, Law said:
''I imagine the stock was borrowed
to make delivery"
Broker Recalled to Stand.
Law insisted the procedure was mot
m unusual practice"
'The stock was borrowed to fill de-
Hyeries?" Pecora asked again.
Yes" the witness agreed.
so the company made sales Of stock
1t didn't have for delivery?"
ut didn't momentarily, that Is true"
Law agreed.
Baker then was recalled to the stand
and Pecora placed in the record let
ter showing Mitchell lent the stock on
collateral of $3.50 share on which he
was to get 6 per cent interest. He
was given credit on the company's
books for $5,700,000
Another $4,000 shares was borrowed
May 49, Baker said, on the same terms,
except the collateral was $400. a share,
and Mitchell was credited with So
000, 900.
$12S,000 Interest Paid.
The stock was returned July 10, Pc
cora showed, and Mitchell was given
$l28,000 for interest and $4,000 for
dividends on July /.
Isn't 1t fact the 10000 shares were
borrowed to enable the company to
make deliveries to customers which the
company did not have for delivery?"
Pecora asked.
TITS true, to the extent that We didn't
have 1t in New York" Baker replied.
Did you have it anywhere else?"
Il don't know; it may have been en-
route"
wouldn't you say you borrowed 30
900 shares because the company was
selling the bank stock short at the
time?'
THE answer is no if you take into
consideration that We were accumulat-
ing farmers loans and trust company
stock to be converted and had deliveries
coming in" Baker replied. IF you
flgure only on the immediate holdings,
the answer would be yes"
Wheeler AssaiIs Mitchell.
At yesterdays session the committee
learned that while the National City
Bank was selling out its customers in
the frenzied days following the market
crash Of 1929, it set aside 81 ,400, 600
for 1nterest-free loans to protect its
own hard pressed officers.