Mr. PECORA. Have you any recollection that you would rely upon now, as to what was discussed with the examiner at the meeting that you have in mind?

Mr. MURFIN. I was present one time-I do not remember whenwhen he told us that we had one of the best banks in the Seventh Federal Reserve District, but I cannot recall what date he told us that, or when that was.

Mr. PECORA. Who was the examiner who told you that?

Mr. MURFIN. There were two of them there. I do not remember their names.

Mr. PECORA. Was Mr. Leyburn one of them?

Mr. MURFIN. I would not know Mr. Leyburn if I should see him. I have talked with him on the long-distance phone.

Mr. PECORA. There is Mr. Leyburn, the gentleman sitting over there [indicating].

Mr. MURFIN. I have talked to him on the telephone [after turning and looking at Mr. Leyburn]. I have seen him. He was one of

them.

Mr. PECORA. Do you recall distinctly that he was?

Mr. MURFIN. I think now that he was; yes. I have been looking at him here and wondering where I had seen him. I think he was. Mr. LEYBURN. I think you are in error.

Mr. MURFIN. Maybe so.

Mr. PECORA. Was there more than one examiner at that meeting or conference you attended?

Mr. MURFIN. My memory is that there was another man with him. Mr. PECORA. Do you recall the name of that other man?

Mr. MURFIN. No; I do not. I think there was another man with him, but I am not certain.

Mr. PECORA. Judge, is there anything else you want to call to the attention of this committee by way of any knowledge of facts that you have with regard to the Detroit Bankers Co. or any of its unit banks?

Mr. MURFIN. Why, no, Mr. Pecora. I would only suggest that you get people on the stand who know more than an ordinary director. I might say the more questions you ask me the more ordinary I feel, as a director.

The CHAIRMAN. What people would you suggest might give more information?

Mr. MURFIN. I beg your pardon?

The CHAIRMAN. What people would you suggest might give more information?

Mr. MURFIN. Mr. Mills, who is here, can give you a great deal of information. Mr. Wilson, who is here, can give you a great deal of information. A man who could give you as much as any other one man is Mr. Sweeny. He cannot be here. He is sick. There are other executive officers of the bank who could give you a great deal of information. Mr. McGonegal could give you a great deal of information. Senator Fletcher, my only thought is that the ordinary bank director does not know one tenth about the workings of the bank as the executive officers who are operating it. We all know that. I am just a common garden variety director.

Mr. PECORA, The only reason I have questioned you to this extent about these things, Judge, is because of the testimony you gave at

that the one-man grand jury proceeding which, upon a cursory reading of it, rather impressed me with the thought that you felt you had considerable knowledge of the bank.

des Mr. MURFIN. I did so feel, Mr. Pecora. I did think I had considerable knowledge. I think so yet. But on details I am lost, when you get into details. I do not know details and I do not like details.

Th

Mr. PECORA. I have not asked you solely for details.

Mr. MURFIN. I am not complaining at all, sir. You have been very nice.

Mr. PECORA. Do you know that an examination of the bank was made as of the close of business on February 11, 1933?

Mr. MURFIN. I was told that on St. Valentine's Day they came in and started the new examination. That is the day the bank closed. That is only hearsay. I was told they came right in and started in their examination.

Mr. PECORA. For your information, then, Judge, let me read from the original report of that examination made to the Comptroller of the Currency, the following general remarks or comments

Mr. MURFIN. Of course, that examination never came to our board. Mr. PECORA. That is why I am saying, let me read it now for your information. Let me read these general remarks of the examiner in his report to the Comptroller [reading]:

A complete examination of this bank was impossible, due to the limited amount of time, and only a skeleton crew with which to work. Consequently there are numerous schedules which are not complete or omitted entirely. A comparatively recent report was made as of the close of business November 17, 1932.

In accordance with instructions from Chief Examiner Leyburn, no attempt was made to list slow loans, for probably over 90 percent of all loans not classified as doubtful or loss would be classified as slow under prevailing conditions.

I made no examination of the real-estate loans or contracts, but judging from the previous report of examination the bank will continue to acquire a substantial amount of real estate, and consequently a substantial amount of losses will be sustained.

In reviewing this bank's loans, appraisals of the paper were made on the assumption that some sort of a reorganization would be affected and that assets would be liquidated in an orderly manner under some sort of a composition of deposits and freezing of a substantial portion of the released portion of the balance of the deposits.

After the bank's loans had been completely reviewed it was learned that an immediate reorganization was impracticable, and a conservator had been appointed. In other words, under a conservator it is presumed that liquidation will be forced, and under forced liquidation it is highly probable that substantially more losses will be sustained than then estimated in this report. In conclusion I have no hesitancy in making the statement that I believe this bank to be hopelessly insolvent.

Mr. MURFIN. What is the date of that, sir?

Mr. PECORA. This is as of February 11, 1933.
Mr. MURFIN. What is the date of that letter?

Mr. PECORA. This report is dated-the examination was closed on
March 17, 1933.

Mr. MURFIN. I ask that question because the conservator came into the bank March 14, and before he had been there a month he sold one quarter of all we had.

The CHAIRMAN. Sold one quarter of what-securities?

175541-34-PT 12- 3

Mr. MURFIN. He sold one quarter of all our assets.
The CHAIRMAN. What did they consist of-securities?

Mr. MURFIN. The new bank that was organized in Detroit bought one quarter of the assets of the First National Bank through the conservator, and he bought just such assets as he wanted. I have assumed he bought the choicest lot, but he bought one quarter of them, and I was wondering if this report was made after the conservator's sale or before.

Mr. PECORA. This report was the report of examination as of the condition of the bank at the close of business on February 11, 1933. The examination itself, according to the report, was concluded on March 17, 1933.

Mr. MURFIN. That was 3 days after the conservator came in. Mr. PECORA. And this report appears to have been filed with the Comptroller on April 10, 1933. That answers your question, does it not?

Mr. MURFIN. Yes, sir. Thank you.

Mr. PECORA. I think that is all.

The CHAIRMAN. You may be excused, Judge.
Mr. MURFIN. Thank you.

of

Mr. PECORA. Judge, I will be glad to get that typewritten copy the plan that has been discussed in the course of your testimony. Mr. MURFIN. I will look it up and mail it to you, in care of this room in the Senate Office Building?

Mr. PECORA. Or at the Mayflower Hotel. It does not make any difference.

The CHAIRMAN. Who is the next witness?

Mr. PECORA. I think I will call Mr. Mills.

TESTIMONY OF WILSON W. MILLS, GROSSE POINTE FARMS, DETROIT, MICH.

The CHAIRMAN. Mr. Mills, you solemnly swear that you will tell the truth, the whole truth, and nothing but the truth, regarding the matters now under investigation by the committee. So help you God.

Mr. MILLS. I do.

Mr. PECORA. Mr. Mills, will you give your full name, address, and business or profession to the reporter for the record?

Mr. MILLS. Wilson W. Mills; 19 Cloverly Road, Grosse Pointe Farms, Detroit, Mich. I am an attorney.

The CHAIRMAN. What is your present occupation, Mr. Mills! Mr. MILLS. I am an attorney. I am not actively practicing. Mr. Chairman, I have prepared a short statement as to the reasons for the closing of the First National Bank, Detroit. I ask permission to read it, or have it read, whatever is the custom of this com mittee, because I think it would be helpful to this committee in developing such facts as they may be desirous of developing. I think also it might possibly save some time of the committee. I am, of course, happy to answer all questions of any member of the committee, or its counsel.

The CHAIRMAN. Mr. Mills, please state what your connection or relation was with the bank.

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, perhaps. During the first 5 or 6 months I was the second officer the be of the bank, under Mr. John Ballantyne. At the time of his resignation I became the first officer of the bank.

OFT WAS EN

The CHAIRMAN. What were your duties?

t of 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 presumptuousprepared 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 CHAIRMAN. 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 a 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 comSmittee 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 record?

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, and then you may read it into the record. When was this statement prepared?

Mr. MILLS. It was prepared by me during the course of the last 3 or 4 weeks, or 2 or 3 weeks.

Mr. PECORA. Was it just prepared by you without the assistance of any one else?

Mr. MILLS. That is correct. I read it to 3 or 4 people afterward, and occasionally adopted a suggestion.

Mr. PECORA. Mr. Chairman, I suggest that the witness read h prepared statement into the record; or, if you wish me to do it, 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 t consider possible legislation under which such a situation as are in Michigan, and later spread throughout the Nation, will not again 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 Star banking holiday in Michigan. During this 2-year period I was director of the Detroit Bankers Co.-never was I an officer of th corporation. I entered the banking business very reluctantly, a substantial pecuniary sacrifice, and only upon the importuniti of the late Julius Haass, then president of the Detroit Bankers Ce which had been formed over a year before, and of various larg stockholders.

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

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

B. The Detroit Bankers Co. had obligated itself to pay som 7 million dollars of debts of a subsidiary and had directly borrow 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 parti ownership of some 10 banks throughout the State of Michigan.

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

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

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

I