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Mr. Mills. I was chairman of the board of directors of the First National Bank, in Detroit.

The CHAIRMAN. For how long?

Mr. Mills. I had been in that office for 1 year, or a little over, sperhaps. During the first 5 or 6 months I was the second officer of the bank, under Mr. John Ballantyne. At the time of his resigination I became the first officer of the bank.

The CHAIRMAN. What were your duties?

Mr. Mills. I was with the First National Bank at the time of its organization on January 1, 1932, as chairman of the board. That was second officer of the bank. That position I continued in until some time in July, when I was elected chairman of the governing committee, succeeding Mr. Ballantyne. As chairman of the governing committee I retained the other title, chairman of the board, and later the office of chairman of the governing committee was abolished, and I continued as chairman of the board until the Michigan bank holiday, until conservators were appointed.

The CHAIRMAN. All right. Mr. Pecora may proceed. Mr. Mills. In addition to this statement, I have also—and possibly I have gone out of my way, but I do not wish to be presumptuous— prepared to make three or four possible suggestions for legislation, due to my experience in banking matters in Michigan. I presume you would prefer to have this other read later.

The CHAIRMAX. Yes; that might be given later.
Mr. Mills I have here the prepared statement which I spoke of.

Mr. PECORA. What statement is that? I was out of the room for 2 moment,

Mr. Mills. I said that I had a fairly short statement as to the reasons for the closing of the First National Bank. I was prompted to prepare that in the hope of being of some assistance to this committee in developing the facts I thought the committee were desirous of developing. Of course, I am anxious to answer any questions of counsel, the committee, or any member of the committee. But I thought this statement might be helpful in giving a clear idea of the whole matter.

Mr. PECORA. Have you a copy of that prepared statement for my use? Mr. Mills. Oh, yes. Mr. PECORA. May I have it, please? Mr. Mills. Yes, I will give you the original.

Mr. PECORA. As I understand, you want to read this into the ecord ?

Mr. Mills. I should like to have it read, or to read it myself. Mr. PECORA. I will ask you a few preliminary questions about it, nd then you may read it into the record. When was this statement repared

Mr. Mills. It was prepared by me during the course of the last or 4 weeks, or 2 or 3 weeks. Mr. PECORA. Was it just prepared by you without the assistance Mr. Mills. That is correct. I read it to 3 or 4 people afterward, ad occasionally adopted a suggestion.

F any one else?

Mr. PECORA. Mr. Chairman, I suggest that the witness read his prepared statement into the record; or, if you wish me to do it, I will read it. Mr. Mills. Whichever you prefer. Mr. PECORA. You just go ahead and read it.

Mr. Mills. Amongst other purposes this committee is sitting to consider possible legislation under which such a situation as aris in Michigan, and later spread throughout the Nation, will not agait occur. Everyone must be in favor of such objectives.

I have been a bank officer 2 years from March 1, 1931, becoming then chairman of the Peoples Wayne County Bank, of Detroit After its consolidation with the First National Bank, January 1 1932, I became second officer of that institution for about 6 months and was first officer of it for about the same period prior to the State banking holiday in Michigan. During this 2-year period I was : director of the Detroit Bankers Co.-never was I an officer of that corporation. I entered the banking business very reluctantly, at a substantial pecuniary sacrifice, and only upon the importunities of the late Julius Haass, then president of the Detroit Bankers Co. which had been formed over a year before, and of various large stockholders.

After I undertook this service I found in the situation mant problems, all of which were the outgrowth of transactions made prior to my becoming an officer. For instance:

A. The bank had made many loans predicated upon a tremendous number of shares of stock of the Detroit Bankers Co. (these coming into the bank by virtue of the exchange of unit banks for stock of the Detroit Bankers Co.).

B. The Detroit Bankers Co. had obligated itself to pay some 7 million dollars of debts of a subsidiary and had directly borrowed funds in the neighborhood of an additional million dollars to acquire complete ownership of seven small banks in Wayne County.

C. A subsidiary of the Detroit Bankers Co. had acquired partia ownership of some 10 banks throughout the State of Michigan.

D. The Detroit banks of the Detroit Bankers Co. having just merged, and still consisting for many practical purposes of the five or six constituent units presented tremendous problems of organization and personnel-it was very much the same type of problem which would be encountered upon suddenly consolidatin the United States Steel Corporation and the Bethlehem Steel Corporation.

E. At the time of the organization of the Detroit Bankers Co there were somewhat over 200 branches, all in the city of Detroit which presented serious problems.

F. The banks were not as liquid as conditions developing at the time required, and they had in excess of 150 million dollars of mort, gages and had otherwise attempted to take care of the demands of the community. Detroit had experienced probably the most rapid phenomenal, and mushroom growth of industry of any community in the United States. Due to the automotive industry centralizing in Detroit, literally trainloads of people had been arriving daily to make their residence there. Schools had to be erected, churche established, and homes built for this influx of people, and the old

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banks were the only ones to do it. They became a part of the warp I and woof of the fabric of the community.

G. The bank had outstanding large amounts of loans predicated upon the slowest type of security, but to individuals who were considered good financial risks. Also some of the constituent banks had encouraged employee-ownership of stock, and upon a declining

market many officers and employees, as well as others, became u involved.

H. Within 2 weeks after I became an officer of the Peoples Wayne : County Bank, the Detroit Clearing House and Trust Cos. voted [ to take over the expiring American State Bank, with assets of about

$50,000,000, and its liquidation was entrusted by the Detroit Clearing House and Trust Cos. to the Peoples Wayne County Bank.

It is easy to criticize these conditions from the vantage of the viewpoint of 1934, but such hindsight gives us an altogether distorted conception of what occurred 4 or 5 years ago, and the condition in Detroit due to the growth of the automobile industry probably made many of these actions seem advisable. Things must be viewed in the light of what was then happening in order to see them in their proper perspective.

To meet this legacy of grief which I inherited upon coming into the bank, policies were instituted to cut down all the loans predicated upon Detroit Bankers Co. stock-if I might interpolate a word here: Why, the record will show more Detroit Bankers Co. stock at the end than at this time, was because practically all of that came in by way of relief or additional collateral to loans already in existence to liquidate the net indebtedness above mentioned of the Detroit Bankers Co., and to reduce its operation and expenses (which latter could not be accomplished until Mr. E. D. Stair consented to serve as president upon the understanding this would be done), to solve the problems arising by virtue of partial ownership in the 10 banks throughout the State, to increase the liquidity of the bank, and to increase its strength and to liquidate its loans, and finally to organize its personnel and to coordinate its staff.

How well this task was in progress may probably best be pointed out by the statement that in the last 112 calendar years of the existence of the bank—and you will understand by the word “ bank” I mean the two constituent banks, the Peoples Wayne County Bank and the First National Bank-i.e., June 30, 1931, to December 31, 1932, it lost about $143,000,000 of deposits. In the last calendar year alone, it lost $60,000,000 of deposits, paid over $27,000,000 of bills payable that existed on the 1st day of January 1932, charged off $15,000,000 of bad or doubtful loans, or a total liquidation in the last calendar year of over $102,000,000 and maintained not far from the same percentage of liquidity at the end of the year which it had at the beginning. We desired a higher degree of liquidity but were unable to attain it owing to the heavy withdrawals of the last 18 months. In the last 18 months over $30,000,000 was charged off on account of loans, and so forth previously made. I firmly believe no bank of comparable size in the United States—with assets such as these banks had could have done as much. You have the case of a bank successfully handling a shrinkage of deposits of

$143,000,000 in 18 months, without borrowing a cent from the R.F.C. It had done a good job.

During this period, the depression was on in full force throughout the country, although I believe that Detroit was feeling the depression worse than any other part of the United States due to its highly specialized type of industry, and people were now leaving Detroit by carloads and the housing and church problems which had been se acute up to 1930, were found almost overnight to have become greatly extended.' In 1932 Detroit was in the very depths of the depression. Of course, all this was felt by everyone in the cenmunity, including the bank by falling values and deposit withdrawals.

During the time I was principal officer of the First National Bank, i.e., after July 1932, there was one bank examination of 1 institution. At that time every cent which the examiner requested be charged off was charged off and the examiner complimented thr bank upon the aggressive steps which it was taking to meet the discult situations above set forth. The examiner also had suggestions and criticisms, which we were glad to have and which we attempted to put into execution where practicable. At no time during my connection as principal officer of the bank was any dividend paid by to bank or by the Detroit Bankers Co., which had not received the full and prior approval of the chief national bank examiner for the district. We recognized we had problems, but we were well on our way to solve them. Expenses of the bank had been, during the year 1932, greatly reduced, that for 1932 being $2,753,000 less than in 1931. Operating expenses had been reduced about $1.200,000—in spite of the fact that many of these economies had only been in effect a few months of the year. We employed every method to increase our gross income and lessen expenses. The bank, in late 1958 had become a well organized, homogeneous institution, ready to fac any reasonable situation.

În 1931 the National Credit Corporation was formed for the erpress purpose of saving banks by making loans to banks upon slow collateral. The Peoples' Wayne County Bank joined the corporation and loaned its credit-approximately one third of the total credit of this association in Michigan-to all banks in Michigan seek ing aid, and it has been reliably estimated by members of the Michigan National Credit Board that over 50 banks were saved by this action. The Peoples' Wayne County Bank, or the First National Bank, never made application to borrow 1 cent from the National Credit Corporation. The bank was still following its established policy of trying to be helpful to the community, to the State and Nation by lending our credit.

The R.F.C. was formed early in 1932, but at no time did the First National Bank seek or request a loan from it until the Lincoln Birthday week-end, immediately prior to the Michigan bank holidar, when the First National Bank was for the first time informed of thie imminent and critical condition of the Union Guardian Trust Co it requested a loan from the R.F.C., but was able to obtain no commitment from it whatsoever, so that the holiday in Michigan might have been avoided. After the receivership loans were made to the receiver by the R.F.C. to the extent of, I should imagine, $70,001), (,

upon collateral which was available for such loan before the Michigan holiday. Such a loan then would have avoided the holidaybut it was not forthcoming.

It is probably unnecessary to again set forth here the events leading up to the Lincoln Birthday week-end holiday in Michigan. Although the chief national-bank examiner for the district was fully aware since at least the end of January of the pressing needs of the Union Guardian Trust Co., neither he nor any Government official, nor anyone connected with the Union Guardian Group, informed the First National Bank thereof (rather, however, several days before a high officer of the Union Guardian Group, stated they were experiencing no difficulty), although the examiner states in his testimony that he had long recognized the seriousness of the condition of the Union Guardian Trust Co., describing it as a cancer, and in the event of its failure the serious effect upon other institutions in the State. Two days before the declaration of the holiday was all the time given the First National Bank to meet such a devastating emergency (one of these days was a Sunday and the other a holiday). In spite of the shortness of time and the difficulties, the officers of the First National Bank did everything they could to put their institution in shape to meet such a tremendous earthquake. We were arranging loans from our New York correspondents; we were attempting to arrange loans from the Federal Reserve Bank of Chicago; and requested aid from the R.F.C., which for some inexplicable reason was not forthcoming. We had close to $60,000,000 of cash or its equivalent which was free.

Mr. PECORA. What did you say there?
Mr. Mills. I added the words “ which was free."

Mr. PECORA. And that does not appear on your prepared statement.

Mr. Mills. No.
Mr. PECORA. All right. Go ahead with your prepared statement.

Mr. Mills. The First National Bank would have opened on Tuesday after Lincoln's Birthday and conducted its business, had it not been for the attitude of the Ford Motor Co., which then stated that if the Guardian were not permitted to open the Ford Motor Co. would withdraw its own and its controlled deposits, amounting to approximately $20,000,000, from the First National Bank “the first thing Tuesday morning.'

For some reason, as has been testified by Mr. Edsel Ford, the Ford Motor interests reached the conclusion that, unless the Guardian were permitted to open, they would withdraw their deposits from the First National Bank. These institutions were in no way related. Why Mr. Ford should state he withdraw an enormous deposit from the First National Bank unless another and entirely separate and competing institution were saved, is to me unknown. În spite of these things the First National Bank would have reopened a few days after the holiday—and I wish to interpolate, possibly on a restricted basis.

Mr. PECORA. Where do you say you wish to interpolate that?
Mr. Mills. After the word "holiday."
Mr. PECORA. And you say, “ possibly on a restricted basis”?

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