Guardian Detroit Union Group, Inc.

Product Details

Historical Context

In 1933, Ford founder Henry Ford and President Edsel Ford were heralded as saviors of Detroit's banking industry when they founded Manufacturers National Bank of Detroit during the depths of the Great Depression.

That's ironic, some historians say, because they report that the Ford family had a role in landing Detroit's banks on the brink of failure in the first place.

Edsel Ford, who was president of Ford Motors in 1933, was a director and the primary shareholder of the five-year-old Guardian Detroit Union Group Inc. And it was the Guardian group that precipitated the need for a month-long emergency bank holiday that left the city in need of new national banks, according to the books Ford: The Men and the Machine by Robert Lacey and Detroit and its Banks by Arthur Woodford.

Guardian, which Lacey reported held at least 25 banks by its second year, 1929, had borrowed heavily to accommodate its rapid expansion. So it had problems when the stock market crashed late in 1929. Its customers stopped borrowing, and borrowers stopped making payments. And Guardian furthered its problems when things got tight by borrowing from itself, Lacey said. By 1933, federal prosecutors had begun indicting Guardian officials for improper financial procedures, Lacey wrote.

It was worry over Guardian's banks going bust and causing a run on the city's other banks that prompted Gov. William Comstock to order a weeklong emergency bank holiday to begin February 14, 1933.

Comstock, business owners, community leaders and national banking figures hoped to find a fix in that time.

Guardian asked the Reconstruction Finance Corp. for a $50 million loan. But federal auditors denied them, saying the bank had inadequate collateral.

The RFC did offer to lend Guardian $37 million if the bank's largest depositors - the automakers would put up the other $20 million it needed. Woodford reported that General Motors and Chrysler agreed, but Henry Ford wouldn't go along.

Henry Ford offered to bail Guardian out himself, Woodford wrote, but that time another source of funds fell through.

Michigan's banks remained closed for a month while federal regulators, bankers and industrialists looked for a way to bail out Guardian. And when the holiday was over on March 14, only five of the city's banks reopened. Federal regulators ruled Guardian and the city's other nationally chartered bank to be insolvent and ordered them closed and liquidated.

That month, General Motors, with help from the Reconstruction Finance Authority, organized the National Bank of Detroit to replace the collapsed First National Bank-Detroit.

Four months later, Woodford reported, Edsel and Henry Ford put up $3 million so that Edsel Ford could found Manufacturers Bank of Detroit.

Lacey wrote that the money must have come from Henry Ford and Ford Motors, though, because Edsel Ford was on the brink of personal bankruptcy by the end of his Guardian debacle.

Detroiters enthusiastically supported the Ford-backed bank, Comerica reported in the book Promises Kept: The Story of Comerica.

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