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to do so, in the statement which it made in response to the Comptroller's call and in the statement which it published as of that date, created a deficiency in its legal reserve at the Federal Reserve bank amounting to over $11,000,000 ?

Mr. Mills. Not in its legal reserve; no, sir. Not in its legal reserves. One thing I always cautioned Mr. Russ was never to drop below his legal reserves. I know Mr. Russ well enough to be confident that he never did.

Mr. Pecora. What do you suppose, then, this memorandum or record refers to?

Mr. Mills. I did not make it. I do not know. That shows on the daily basis.

Mr. PECORA. Yes.

Mr. Mills. The law and the Federal Reserve regulations, I have been informed, do not require it on the daily basis. They are figured semiweekly.

Senator Couzens. Then, on July—
Mr. Mills. May I finish?
Senator COUZENS. Certainly.

Mr. Mills. We were using our power and our ability and the funds we had to pay bills payable. We had the power to do it and we used it, and our totals were down by some $20,000,000. If we had not done it we might have been accused of padding, showing some $20,000,000 more assets and 20 million more liabilities.

Mr. PECORA. Are you familiar with the provisions of the Federal Reserve Act?

Mr. MILLS. On reserves?

Mr. PECORA. With regard to member banks maintaining reserves there?

Mr. Mills. No; I am not.

Senator COCZENS. You are one of the largest members of the Federal Reserve System, and you are not familiar with that?

Mr. Mills. I know the general terms, Senator; yes.

Mr. PECORA. Did you ever read the regulation or provision of law itself relating to the maintenance of these reserves?

Mr. Mills. Oh, yes. I have read the Federal Reserve Act time Mr. PECORA, How about the regulations?

Mr. Mills. I do not believe I ever read the regulations. I have read the law time and again.

Mr. PECORA. Your bank declared and paid a dividend on June 30. 1932, did it not?

Mr. Mills. The First National Bank declared a dividend.
Mr. PECORA. Of $500,000?
Mr. MILLs. Prior to that date.
Mr. PECORA. And paid it as of June 30, 1932?
Mr. Mills. I believe that was the date.

Mr. PECORA. The amount of that dividend was $500,000, was it not?

Mr. Mills. I think it was $2 a share.
Mr. Pecora. That made $500,000 ?
Mr. MILLS, Correct.

and again.

Mr. PECORA. Are you familiar with this provision of the National Banking Act, known as “section 410, title XII”, which reads as follows (reading]:

The required balance carried by a member bank with the Federal Reserve bank may, under the regulations and subject to such penalties as may be prescribed by the Federal Reserve Board, be checked against and withdrawn by such member bank for the purpose of meeting existing liabilities, provided, however, that no bank shall at any time make new loans or shall pay any dividends, unless and until the total balance required by law is fully restored.

Mr. Mills. I recall having read some such provision. Any dividend was declared long before that date. It would have been declared in June-early in June, probably.

Mr. PECORA. The reference in the statement here is not to the decla. ration of dividends but to the payment of dividends. This dividend of $500,000 was paid on June 30, 1932, in pursuance of a declaration made earlier that month, was it not?

Mr. MILLS. I presume the date was June 30. I would have to take your word for it.

Mr. PECORA. I do not want you to take my word for it. You were the chief executive officer of the bank at that time. I should think you would know the date of the payment of dividends of the bank.

Mr. MILLS. Dividends were paid quarterly. They were paid either the last day of the year or the 1st day of January.

Mr. PECORA. Don't you know which day it was?
Mr. Mills. No; I do not.

Mr. PECORA. If it were declared quarterly, that would make it payable on either the 30th of June or the 1st of July.

Mr. Mills. Yes.
Mr. PECORA. Which of the dates was used ?

Mr. Mills. I do not know. I am inclined-yes; I do know-payable on the 1st day of January. I will tell you how I know that, because my income tax—they have checked my income tax-they threw that into the—now, I am not so sure. I do not know. I do not know which date it was, whether it was the last day or the first of the month.

Mr. PECORA. I will tell you what I would like to have you do, Mr. Mills.

Mr. Mills. Yes, sir.

Mr. PECORA. Not only as the chief executive officer of the bank, but as an attorney, will you refer me—if you cannot do it now, do it at any subsequent time—to any statutory provision or to any provision found in any regulation or rule of the Federal Reserve bank which did not require the maintenance of reserves against daily balances ?

Mr. Mills. I will ask the people who told me about this, and bring you what they tell me; bring you the reference.

Mr. PECORA. While you are on the stand, and at this time, I will ask you to look at the National Banking Act, a copy of which I have before me, and to read section 408 thereof, entitled “ Balance Which Member Banks Must Keep in Reserve Banks”, and see if that enlightens you.

Mr. Milis. Do you wish me to read that aloud !
Mr. PECORA. No; just read it to yourself.

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Mr. Mills (examining document). This reads, as to our particular situation, being in a reserve city, that the bank shall hold and maintain with the Federal Reserve bank of its district an actual net balance equal to not less than 10 percent of the aggregate amount of its demand deposits and 3 percent of its time deposits. That is the portion as it refers to us.

Mr. PECORA. That does not say on a semiweekly average, does it!

Mr. Mills. I was informed by Mr. Sweeny and Mr. Russ that that was found in the regulations of the Federal Reserve Board as to reserves, or in some such similar document.

Mr. Pecora. I would like to have you call our attention to any such provision.

Mr. Mills. I will attempt to secure it for you.

Mr. PECORA. You know, from your experiences as a bank officer, as well, probably, as an attorney, that banks are subjected to penalties by way of fines by the Federal Reserve bank for creating deficiencies in their reserve funds at the Federal Reserve bank.

Mr. Mills. Yes.
Mr. PECORA. Was your bank ever fined for any such deficiency?
Mr. Mills. Not to my knowledge.

Mr. PECORA. Would you know if it were the fact that it had been fined?

Mr. Mills. If the fine amounted to anything of real consequence, I would have known of it while I was the head of the bank. If it was a small fine, I would not have.

Mr. PECORA. You might check that up, too, between now and your next appearance on the stand.

Mr. Mills. I do not know how I could find that, because I have no access to the records from the receiver.

Mr. PECORA. Perhaps some of your former associates in the bank who would know of that would be able to tell you. Perhaps Mr. Sweeny can tell you.

Mr. Mills. It is pretty hard to see him.

Senator Couzens. Perhaps the Federal Reserve in Detroit can tell you.

Mr. Mills. Could not the receiver tell me?

Mr. PECORA. If he is willing to, I have no objection to his doing it I do not care where you get your information from, if it is authentic.

Mr. Mills. It would be easier to find out from him. He has the record.

Mr. PECORA. And at the same time you might assure yourself of the date of payment of this dividend for the second quarter of 1932.

Mr. Mills. All right.

Mr. PECORA. Mr. Mills, while I am having certain records looked up, I want to ask you about this statement, taken from your prepared statement read into the record this morning. You will find it at page 6 thereof. [Reading:]

The First National Bank would have opened on Tuesday after Lincoln's birthday (that refers to the year 1933) 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 it: own and its controlled deposits, amounting to approximately 20 million dollars, 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 institu. tions were in no way related. Why Mr. Ford should state he would withdraw an enormous deposit from the First National Bank unless another and entirely separate and competing institution were saved, is to me unknown.

Now, did it ever occur to you to ask anyone connected with the Ford Motor Co. what reason they had for announcing that they would withdraw their deposit of approximately 20 million from your bank if the Guardian bank closed !

Mr. MILLS. Yes; it did.
Mr. PECORA. Did you ask them? Whom did you ask about it?
Mr. MILLS. I talked to Mr. Henry Ford.
Mr. PECORA. Did he give you his reason for that attitude ?
Mr. Mills. Mr Ford made substantially this statement to me.
Mr. PECORA. What statement ?

Mr. Mills. Ford stated to me--this was on the Michigan holiday, I on Monday evening of the Michigan holiday. That would be on the

Senator COUZENS. The 13th.

Mr. Mills. The 13th day of February—that unless the Guardian were permitted to open the following day he would come down and take his money, every cent of his funds, from us and from any other Detroit bank that was open.

The CHAIRMAN. And what?
Mr. MILLS. And any other Detroit bank that was open.
Mr. PECORA. Did he give you his reason for so doing?

Mr. MILLS. I said, "Why is that, Mr. Ford?” He said, "I think it is up to the Government to save these institutions by making them loans. They saved the Dawes bank."

Mr. PECORA. Is that the reason he gave?

Mr. MILLs. That is substantially the reason. That was substantially the whole conversation.

Mr. PECORA. Then you did know the reason, when you prepared this statement which you read into the record, and said:

Why Mr. Ford should state he would withdraw an enormous deposit from the First National Bank unless another and entirely separate and competing insti. tution were saved is to me unknown.

Mr. Mills. Mr. Ford may have had other reasons in addition which he did not express to me.

Mr. PECORA. You are assuming, now, that he had other reasons. Mr. MILLS. Assuming he may have had them.

Mr. PECORA. But you did specifically go to him to find out what his reason for such withdrawal was, and he gave you the reason you have repeated just now.

Mr. MiLLs. I asked him if he would play ball, told him what the situation was, told him we were applying for a loan from the R.F.C. for the first time and we hoped to secure one. Mr. Ford made the remark that I have testified to.

Mr. PECORA. Mr. Mills, I show you what purports to be a phototatic reproduction of a letter addressed by you under date of Norember 14, 1931, to Mr. Henry M. Robinson, care of Carlton Hotel, Vashington, D.C. Will you look at it and tell me if you recognize t to be a true and correct copy of such a letter addressed by you to Mr. Robinson on or about that date? [Handing a paper to Mr. Mills.]

Senator COUZENS. Who is Mr. Robinson?

Mr. Mills. Mr. Robinson is a banker of California. [After examining paper.] Yes; I wrote - I believe I wrote the original of that letter, without any question.

Mr. PECORA. I offer it in evidence.

(Copy of letter, Nov. 14, 1931, Mills to Henry M. Robinson, was received in evidence, marked " Committee Exhibit No. 135, Feb. 2. 1934 ", and the same was subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The letter received in evidence as Committee's Exhibit No. 135 of this date reads as follows (reading]:


Care of Carlton Hotel, Washington, D.O. DEAR MR. ROBINSON: I cannot begin to tell you how cheered I felt upon our telephone talk yesterday afternoon. I have spoken to the head of every bank and trust company of significance in Detroit and they have agreed to give the heartiest public approval to the President's plan. Many other of our local prominent citizens are likewise doing so.

The attitude of all of our newspapers has been perfectly splendid. The Detroit Free Press carried the announcement with a headline completely across the first page, and I happen to know that they will follow it up with favorabe editorial comment. The other papers have given it prominent publicity on the front pages, and at least one of them has indicated to me that they will folloa it up editorially.

At first I was somewhat disappointed that dispatches from Washington were not received until so late last evening, but I think it is better now than tad they come in earlier, because I am told that our papers expect to carry speciai articles tomorrow (Sunday) upon the plan. So there will be, in effect, a double dose of news publicity.

The other organizations here are also planning to get behind the plan and ¢ what they can with their Representatives and Senators toward an early enact ment of the plan into law. Frankly I shudder when I consider our senior Senator. I have not the remotest idea-possibly he has not-what his reacti ma will be. I wish he was a more normal and not such an erratic individual.

I telephoned your message to Emory Clark. He was delighted to bear t and asked me, if I happened to see or write you, to give you his very best remembrances.

I cannot close this letter without telling you how very much I enjoyed our meeting, and that I feel the country, in addition to having the President to thank for this present constructive move, should also have you to thank If you are ever in this neighborhood, I will not forgive you if you do not let me know, and when, as and if, as a lawyer would say, I happen to be in Washington, I am going to at least inflict myself upon you for a few moments. With heartiest congratulations and the very best of good wishes, I remain.

Yours Faithfully,

Senator COUZENS. What was the plan you were talking about in that letter? I am curious to know the plan that was to be announced.

Mr. MILLS. As I recall it, Senator, Mr. Hoover had already announced, or was about to announce, a plan for the Federal Home Loan Bank, which he advocated.

Senator COUZENs. This was after the R.F.C. had been organized, was it?

Mr. Mills. No.
Mr. PECORA. This was dated in November 1931.

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