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Mr. MILLS. Yes, Mr. Pecora.
Mr. PECORA. Go ahead.

Mr. MILLS. If it had received aid from the R.F.C. and if the chief national bank examiner of the district had not stated on the first day of the Michigan holiday to some of the depositors of the bank that the First National Bank had so many undesirable assets-he listed for the first time, that is, to our knowledge, approximately $200,000,000 of assets as being undesirable, even going so far as to so list every mortgage owned by the institution (it had over 50.000 mortgages, the average mortgage being only about $2,800 and practically all upon homes in Detroit), and he did not even allow the bank any banking premises, and some $8,000,000 or $10,000,000 of Catholic Church loans guaranteed by the Detroit diocese, amounting to at least $30,000,000 or $40,000,000, was likewise classified as undesirable, as were $7,000,000 of notes of the city of Detroit.

This, of course, planted seeds of suspicion of insolvency of the bank in the minds of certain of the large depositors and made any general reopening doubly difficult. At the time the Michigan holiday proclamation was about to be signed, the same examiner stated in the presence of many witnesses that the holiday would be of but short duration—to give the banks time to secure aid.

Nearly three quarters of a million different accounts were in the First National Bank and these people are, I believe, entitled to know why the then chief national bank examiner of the district, to the bank's directors, should both verbally and in writing on two occasions signal the green light " full speed ahead ", and then have the train run into a closed switch.

On December 30, 1932, 6 weeks before the Michigan bank holiday, the then chief examiner of the district stated orally to the following directors of the bank: W. T. Barbour, J. P. Bowen, E. W. Clark, J. B. Ford, Jr., James S. Holden, J. T. McMillan, T. H. Newberry, Leo Butzel, and myself, and James M. Dodge, a vice president, that the bank might continue to pay dividends upon its stock, and in his written report, dated in January 1933, in effect the same statement was made. It is also true that this report listed some $83,000,000 of doubtful assets, and large amounts of slow loans, but the bank never claimed to have a high degree of liquidity. I have heard no charge of any material changes of assets and liabilities after the examination, except liquidation of assets to meet deposit withdrawals.

Now the permission for the payment of dividends is the very negation of insolvency. Nothing could speak more strongly. Note how much further the examiner went in his oral and written reports than merely stating the bank was solvent—he went so much further as to say, in effect, “not only is the bank solvent but it is so solvent that no harm can come from the payment by the bank of dividends." The examiner must have believed in the full solvency of the bank or he would not have permitted the bank in the future to pay dividends. He did state that the Detroit Bankers Co. was not to pay any dividend in 1933 without first securing the permission of the comptroller.

During my 6 months as principal officer of the First National Bank no dividend was paid by it, or by the Detroit Bankers Co.,

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which did not have the full and prior approval of the chief national bank examiner of the district. The last dividend was only 6 weeks before the Michigan holiday. The permission to pay dividends far transcends the question of solvency.

Again, on March 10, 1933, 3 days before a conservator was appointed and while the national banking holiday was in full swing, the same examiner stated to Messrs. Ralph Gilchrest, F. M. Alger, E. W. Clark, J. B. Ford, Jr., Leo Butzel, İ. M. Dodge, D. N. Sweeny, Thomas Long, and myself, all—except myself—being prominent citizens of Michigan, that the bank was solvent and further stated that the above gentlemen should “not use or even think of the word “insolvency.

During the holiday when we could receive no definite commitments from the R.F.C., the reasons for which have been set forth in this proceeding in the testimony of Mr. J. K. McKee, we then concentrated our efforts upon securing State legislation which would have permitted the First National Bank to open on a partial basis, freezing a percentage of its deposits, but conserving its tremendous earnings for the benefit of depositors.

The earnings of the First National Bank, I am informed, were larger per dollar of deposits than that of probably any bank in the United States. Criticism may always be pointed to any method of determining in dollars and cents the earnings of any institution, but I think there can be no question but that the earnings of the First National Bank for the year 1933 would certainly have amounted to over $7,500,000. This means in 4 years the tremendous amount of $30,000,000, every penny of which would have been available to depositors of the bank. Instead, the bank was closed, and the best of earnings assets were sold to another institution, giving the benefit of these earnings to the stockholders of the other institution instead of to the depositors of the old institution, to whom such earnings rightfully belonged.

The question, of course, remains: Why was the First National Bank closed? Certainly, in my judgment, it was not insolvent. If the examiner had a doubt of solvency he might have permitted the bank to remain open, but it passes the bounds of one's imagination to conceive of his permitting the bank to pay dividends right up to the holiday which was expressly approved by him. Personally, I have no doubt whatsoever as to the solvency of the First National Bank at the time of the holiday, and this is best attested to by the fact that my own personal deposits, those of members of my family, and of corporations of which I was a director, were probably at their very peak, as were those, incidentally, of practically every other director in the bank and of their affiliated corporations. I believe that the First National Bank situation had become so inextricably tied up in the public and financial mind, and the official mind, with the Guardian Group situation that its own situations, its inherent ultimate soundness, and its ability to carry on in the service of the community and in the interest of its depositors, was entirely lost sight of. I believe, too, that if the Government agencies which were dealing with the banking situation in Detroit had it to do over again the First National Bank would today be one of the large banks of the country still serving its community. I thank you.

The CHAIRMAN. Mr. Mills, what was your salary as an officer of the bank, I mean the first officer of the bank?

Mr. Mills. In 1931 it was $50,000 a year. In 1932 it was $40,000 a year until March 1, 1933, and it was restored to $50,000 a year. I had a contract when I came to the bank. And on March 1, 1933, I reduced it to $25,000 a year.

Mr. PECORA. Mr. Chairman, the hour for recess has arrived, and I suggest that we take a recess until 2 o'clock. In the meantime I can look over this statement.

The CHAIRMAN. All right.

Mr. Pecora. Mr. Mills, will you give me a copy of that prepared statement that you have just read into the record, so that it may be marked in evidence ?

Mr. Mills. I have handed a copy to the committee reporter.

Mr. PECORA. Well, that may be marked as an exhibit. Of course it has already gone into the record, as you read it.

(Thereupon the statement prepared and read by the witness was marked “Committee Exhibit No. 132, February 2, 1934 ", and is shown immediately above where read by the witness, and, in addition, the matter the witness interpolated while reading the prepared statement.)

Thé CHAIRMAN. The subcommittee will now stand in recess until

2 p.m.

(Thereupon, at 12:55 p.m., Feb. 2, 1934, the committee recessed, to meet again at 2 p.m. the same day at the same place.)


The hearing was resumed at the expiration of the recess.
The CHAIRMAN. The committee will come to order.


Mr. PECORA. Mr. Mills, in the prepared statement which was read into the record this morning by you, a copy of which was marked in evidence, you state that you had been a bank officer 2 years from March 1, 1931, at which time you became chairman of the Peoples Wayne County Bank of Detroit. Prior to March 1, 1931, had you been a member of the board of directors of any banking institution in Detroit or elsewhere?

Mr. Mills. I became a director, was elected a director of the Dime Savings Bank, I think it was in 1926. That is the best of my recollection. That bank later became the Bank of Michigan by a merger, and I continued as a director of that bank; and in 1930, I believe it was, that bank was merged with the Peoples Wayne County Bank, and' I continued as a director for 6 or 7 months with the Peoples Wayne County Bank.

Mr. PECORA. Your first banking experience, then, as a director of any banking institution commenced in 1926 ?

Mr. MILLs. I think it was 1926; yes, sir; approximately.

Mr. PECORA. Did you become a stockholder of the Detroit Baakers Co. at the time of the organization of that company?

Mr. Mills. I exchanged my stock in the Bank of Michigan for Detroit Bankers Co, stock.

Mr. PECORA. And at the time you became chairman of the Peoples Wayne County Bank of Detroit on March 1, 1931, did you receive a salary as such chairman?

Mr. MILLS. I did, sir.

Mr. PECORA. That was the bank that was consolidated with the First National Bank in Detroit at the end of 1931 ?

Mr. Mills. Yes. As a matter of fact, so there will be no misunderstanding, I was elected chairman in January 1931 with the understanding that I would not assume duties or take any compensation until March.

Mr. PECORA. And you became chairman of the board of the consolidated bank immediately upon that consolidation becoming effective?

Mr. MILLS. I did. I was the second officer of the bank.

Mr. PECORA. By the second officer of the bank, do you mean that you were the senior executive next to the president?

Mr. Mills. No; the chairman of the governing committee was the senior executive of the First Wayne National Bank, under the bylaws. Mr. PECORA. Who was that officer? Mr. MILLS. Mr. Ballantyne.

Mr. PECORA. When did you become chairman of the governing board ?

Mr. Mills. I was elected to that position in July or August-I think it was July of 1932.

Mr. PECORA. And continued to serve in that capacity until a receiver for the bank was appointed ?

Mr. Mills. Not quite. The office was later abolished in an effort to cut down bylaws, and so forth. The office was abolished and I was given the office of chairman of the board, and that became the highest ranking office.

Mr. PECORA. The highest executive officer?

Mr. Mills. With the same powers as the chairman of the governing committee had had before.

Mr. PECORA. Are you familiar with the testimony which Mr. Ballantyne gave here during the past week in which, in substance, he stated that as chairman of the board of the First National Bank he felt that he did not have the power under the bylaws, and had been so advised, that he thought should attach to the position which he held ?

Mr. Mills. I read that statement, substantially as you have made it, in the press; yes, sir.

Mr. PECORA. Was that the condition of affairs?
Mr. MILLS. Might I introduce the bylaws in evidence?

Mr. PECORA. It is unnecessary. You are an attorney, and perhaps you can simplify it.

Mr. Mills. I think they would be the better evidence. I would state that in my judgment under the bylaws there was ample power given to the chief executive officer of the bank. Like all matters, certain things are subject to veto power by the board, or, in this case, by the governing committee.

Mr. PECORA. When were the bylaws you have in your hand now adopted in the form in which they appear in that copy?

Mr. Mills. This is the final amended form. There was a change in an effort

Mr. PECORA. What year?

Mr. Mills. 1932. It is substantially the same as to the power of the governing board.

Mr. PECORA. You say “substantially the same”, from which I am inferring that there was some change made in that provision.

Mr. Mills. The only change that I recall that was made in that provision was to give to the chairman of the board the power that had previously been enjoyed by the chairman of the governing committee.

Mr. PECORA. Can you produce here a copy of the bylaws of the bank that were in effect just prior to the resignation of Mr. Ballantyne.

Mr. Mills. I have not them. It may be that Mr. Long, who is present, has them in his files.

(Addressing Mr. Long:) Have you the original bylaws?
Mr. Long. I have my copy:
Mr. Mills. Will you give it to me, please?

Mr. Long has handed me what he states is a copy of the bylaws as they existed at the time of the organization of the bank and which were in force during Mr. Ballantyne's administration.

Mr. PECORA. Do I understand that those were the bylaws, to which you now refer, which were in force just prior to Mr. Ballantyne's resignation in 1932?

Mr. Mills. So I am informed by Mr. Long, and they would seem so to me.

Mr. PECORA. I ask that they be marked for identification; not in evidence, but just marked for identification.

Mr. Long. That is my private file, Mr. Pecora. Will I have to leave it here?

The CHAIRMAN. You will not have to leave it.

(Bylaws produced by Mr. Long, entitled “Bylaws of First Wayne National Bank, of Detroit, as recommended Dec. 18, 1931, and adopted Dec. 31, 1931 ”, were marked for identification Committee Exhibit No. 133, Feb. 2, 1934.")

Mr. PECORA. The bylaws that have been marked for identification as the Committee's Exhibit No. 133 for identification are entitled “ Bylaws of First Wayne National Bank, of Detroit, as recommended December 18, 1931; and adopted December 31, 1931.” Let me ask you this, Mr. Mills: Do you know that the form in which the bylaws here in this copy thereof which has been marked for identification was retained up to the time of Mr. Ballantyne's resignation, or had there been any changes or amendments prior to that time!

Mr. Mills. I am almost certain that there were no changes or amendments until after Mr. Ballantyne's resignation. I am almost certain of that.

Mr. PECORA. Have you a copy of the bylaws as then changed or amended ?

Mr. Mills. I have a copy of the bylaws as they were on February 11.

Mr. PECORA. Of 'what year!
Mr. MILLS. 1933.

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