Cleveland Closings

Thanks to the Senate Banking & Currency Committee, public knowledge of private affairs has been broadened more in the past two years than in any similar period of U. S. history. Last week the Committee's catch-all investigation threw new light not only on the profits of brokers (see p. 66) but also on closed Cleveland banks. For the failure of $250,000,000 Union Trust Co. and $148,000,000 Guardian Trust Co. Ferdinand Pecora's staff blamed: 1) mismanagement; 2) a lax-Ohio Banking Department; 3) evasions of the spirit of the law. The investigators declared that Guardian Trust was "hopelessly insolvent" a year before it was closed by the banking moratorium, never to reopen, that it "has never published a statement of condition which has shown the true facts." Last month Joseph R. Nutt, onetime National Republican treasurer and Union Trust's onetime chairman, was indicted along with the bank's president and Oris Paxton Van Sweringen for an allegedly fraudulent deal to tone up the bank's statement (TIME, April 23).* The Senate report said that "one of the chief causes of the ultimate failure of Union Trust Co. was the excessive concentration of loans to the Van Sweringens. . . . There is very little doubt that the affairs of the Union Trust Co. were dictated by Mr. Nutt and, too, there is very little doubt but that the policies and acts of Mr. Nutt were, in a great measure, influenced and dictated by the Van Sweringens."

*TIME erred last month in stating that the $10,000,000 of government bonds which Van Sweringen Corp. sold to Cleveland's Union Trust Co., allegedly for window-dressing purposes, "were bound by indenture" to stay in the vaults of J. P. Morgan & Co." The bonds were not specifically pledged but were part of a fund which the corporation had undertaken to retain in its treasury in the form of cash or marketable securities until its outstanding notes were reduced to a certain figure. The bonds were merely deposited in the Morgan vaults for safekeeping. Van Sweringen Corp. was within its legal rights in selling them.

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