Montana labor news., 1933-03-02
USED FUNDS TO PEG STOCK OF
OFFICERS, PAID HUGE BONUSES
TNSIDERS" MIXED NATIONAL CITY BANKS
WILL PATRONS WERE BEING SOLD OUT"
PUBLIC is TAKEN FOR RIDE"
BAD INVESTMENT in SUGAR WAS CAPITALIZED
AND PASSED ON TO INNOCENT INVESTORS

the American people got inside the
breastworks of Wall Street last week.
Charles E. Mitchell, chairman of the
National City Bank and its affiliate,
the National City Company, and Cor
don S. Rensselaer,, president of the
National City Bank, were on the stand,
and they told a story of the low
morals of high finance which has
shocked even cynical Washington. The
National City is a Rockefeller insti-
tuition, and one of the largest banks
in the world.
Officers of the bank and the COM
pany helped themselves to bonuses of
more than SO, 900, 900 in three years,
keeping the matter so close a secret
that these bonuses were paid with
checks on other banks.
Officers Of the bank borrowed ST.
100000 from the bank, on personal,
unsecured notes, to help them weather
the stock market crash in the fall of
1929 and not 5 per cent of these bor-
rowings have been repaid.
sold Out" Customers.
They borrowed this money at a time
when the bank was selling out" other
borrowers, whose stock had lost mar
ket value in the crash. A month
later, in December, 1929, they sold co.
900 shares of stock in the bank to en-
ployes at from 5000 to 1920 a share.
1t is now worth around $38 a share.
Those employees have been paying for
this stock out of their weekly checks
for more than three years, and still
the balance unpaid is more than the
present market value of the stock.
Under pressure from Ferdinand Pc
cora, counsel for the Senate COM
mittee, Mr.. Mitchell admitted putting
some S31, 900, 900 into Cuban sugar
concerns which now stand on the COM
panyS BOOKS valued at Sl.
He admitted shutting securities like
the pea in a shell game to cover up
this loss.
Skinned Uncle Sam.
He admitted receiving $3,481, 1872 in
three years as a bonus for Services
whose real value is probably pretty
well measured by the wisdom shown
in the Cuban investment.
He admitted selling stock to a rela-
tive-afterwards buying it back at the
same price-to Establish a loss" and
thus avoid the payment of any in
come tax in 1929.
Mr.. Mitchell has appeared before
Senate investigating committees many
times before, and always has behaved
in a truculent, o~verbearing manner. 1t
was not so this time.
Pec0ra Had 'the Goods"
Justice Brandeis met said that the
secret Of successful cross-examination
is to know at least as much about the
subject as the witness does. 1t was
clear at every step of the inquiry last
week that Mr.. Pecora chad the goods
on Mr.. Mitchell, and the magnate,
who formerly stormed and beloved,
now roared as gently as any sucking
dove.
The Cuban venture will be easier
to understand if told without the
names of the various sugar compan-
les. Shortly after the World War,
National City plunged on Cuban
sugar, and by 1922 had $31, SOC, 900
loaned and invested in that industry.
By 1927, even a Wall Street financier
could see that this money was gone
for good.
The straightforward course would
have been to admit the bungle and
charge it off the books. But that
would have p%unctured some inflated
regulations. The bull market was
on; the bank was making money hand
owe fist; its stock was in demand.
SO, $4,000 new shares of stock in the
National City Bank were issued, and
roll to holders of the existing stock at