Evening star., 1933-02-23


in banks" Wheeler said, would be to
take these crooked presidents out of
the banks and treat them the same as
We treated Al Capone when he failed
to pay his income tax"
Gordon S. Rentschler. president Of the
bank, told the committee of. the loan
fund for the institutions officers. The
money was advanced, he said, without
interest and some times without Sc
curlty as a means of sustaining the
morale of the organization.
A plan under which employees of the
bank were permitted in 1929 to buy its
stock at 5000 and $500, and acknoWl-
edged that although installment pay
ments have been taken from their
salaries since, they still owe more than
the shrunken market value of the
securities.
Several times during the bank presi-
dents testimony Pecora questioned
whether banking laws had been vio-
lated, but Rentschler denied they had
Pecora raised the point particularly
when he developed that during the
three years ending in 1880. the National
City Co., borrowing from the bank,
sold 1,950,000 shares of the bank stock
to the public for 50000,000.
Rentschler denied this was viola
ton of the law forbidding a national
bank to sell its own stock, but said he
would not like to see it done again.
Presented with evidence by Pecora,
Rentschler said employees of the bank
assisted in sale of the stock, but teSti-
fed that premiums from the sales went
to the bank and not the employees.
The witness agreed that statesmen for
the security affiliate had gone out to
the highways and byways" looking for
customers for the stock when it was
selling as high as $3.50, though its book
value was between $50 and $40 and
dividends were 81.
Questioned by Pecora, Rentschler said
the fund for loans to the banks officers
was created by action of the board of
directors November 13, 1929, shortly
after the stock market crash.
About 100 officers of the bank and
its security affiliate borrowed from the
fund, he said, without interest and
some without security.
Accounts Closed in 1880.
The accounts were closed out De-
cember Is. 1890, he said, some being
written off and others transferred to
the company. When Pecora suggested
this was "bailing out" the bank, the
witness said he would use whatever
word you wish"
The resolution provided the fund
was to protect officers in this emer-
gency and to sustain morale"
do you mean it was to protect obli-
cations they had incurred operating In
the market?" Pecora asked.
Not all of it." the banker replied.
Nov at the very time the bank was
setting aside this fund to protect these
officials was it not selling out other
outside cusomers of the bank who did
not have sufficient collateral to cover
their obligations?" Pecora inquired,
sharply.
THAT may we'll be-" Rentschler re-
piled after pause. 'One of the abso-
lutte rules of the bank is to protect and
preserve its assets"
Did you have any legal opinion for
setting aside this fund.-" Pecora asked.
Rentschler said the banks counsel
had been consulted.
do you know of any provision OF
the national banking act which justi-
fies loans to officers that are unse-
cured?" Pecora asked.
Rentschler pointed out the leans were
made through trustees, who were also
officers of the bank, and finally agreed
the effect was the same as though the
loans were made directly.
Questioning the banker about the
plan for selling stock to employees, the
committee learned that 10000 shares
were sold at 5000 and 1920, on the in
stallment plan. after the crash in 1929
The bank hasn't done anything to
sustain the morale of these employees,
has it?" Pecora asked.
The banker said they were satisfied
to be in on the plan and had fine
morale.
Returning to the loan fund for Off
GERS, Pecora found by questioning the
banker that the largest loan to an
officer now with the company was
$29e 900 to E. M Barrett, a vice presi-
dent, Of which only $l1 900 has been
repaid.
Pecora said the loan had been taken
over by the City company and written
down to S65,000.
An even larger loan, of $345 900, was
made to Lee Olwell, who was then, but
is no longer, an officer of the bank,
Pecora said, of which none has been
repaid.
Referring back to Mitchell's testi-
mony that officers of the bank shared
in the profits of the bank from a man
agement fund for their benefit, Pecora
asked what Rentschler's share was.
The bank president said he received
Sl54 600 in 1927 and SlZ5, 900 in 1928.
in addition to his annual salary of