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Mr. Mills. Several months before the R.F.C. He stated that ir his message to Congress, when Congress convened in DecemberMr. Hoover made the public statement that when Congress convened in December he would recommend to the Congress the enact. ment of a Federal Home Loan bank bill. Mr. Robinson had informed me of that.

The CHAIRMAN. That was put in operation about a year and a half afterwards. It started about a year and a half afterwards.

Mr. Pecora. No; this letter was dated November 14, 1931.
Senator COUZENS. The Federal Home Loan bank.

The CHAIRMAN. The Federal Home Loan bank was started about a year and a half afterwards. The committee will now adjourn until 10 o'clock Tuesday morning.

(Whereupon, at 4 p.m., Friday, Feb. 2, 1934, an adjournment was taken until Tuesday, Feb. 6, 1934, at 10 a.m.)

175541-34-PT 12—-5

STOCK EXCHANGE PRACTICES

TUESDAY, FEBRUARY 6, 1934

UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE
ON BANKING AND CURRENCY,

Washington, D.C. The subcommittee met at 10:30 a.m., pursuant to adjournment on Friday, February 2, 1934, in room no. 301 of the Senate Office Building, Senator Duncan U. Fletcher presiding.

Present: Senators Fletcher (chairman), Adams, and Couzens.

Present also: Ferdinand Pecora, counsel to the committee; Julius Silver and David Saperstein, associate counsel to the committee; and Frank J. Meehan, chief statistician to the committee.

The CHAIRMAN. The subcommittee will coine to order. You may proceed, Mr. Pecora.

Mr. PECORA. Mr. Mills.

TESTIMONY OF WILSON W. MILLS, GROSSE POINTE FARMS,

DETROIT, MICH.-Resumed

Mr. MILLS. Mr. Chairman, at the last session of the committee I was asked how frequently the First Wayne National Bank, subsequently the First National Bank in Detroit, had had a shortage of reserves during the year 1932; or, to put it mildly, I think the intimation was made that there was a shortage of reserves with the Federal Reserve bank in June of 1932. Immediately upon my return to Detroit I took the matter up with the Federal Reserve Bank of Chicago, Detroit branch, and with your permission I should like to read a letter from the managing director: DETROIT BRANCH, FEDERAL RESERVE BANK OF CHICAGO,

Detroit, Mich., February 3, 1934 Mr. Wilson W. Mills,

Grosse Pointe, Mich. DEAB MR. MILLS: In accordance with your today's telephone request the following information is submitted from our records in connection with the reserves of the First Wayne National Bank, Detroit, and the First National Bank, Detroit, for the year 1932.

On January 31, 1932, a charge was made to the First Wayne National Bank, Detroit, of $67.76 for a reserve deficiency of $149,912. Our records further ndicate there was a deficiency of $504 for the period ending February 19, 1932, on which no penalty was assessed because of the small amount. For all other periods during the year 1932 the First Wayne National Bank, which in October 1932 was named the First National Bank, carried excess reserves.

You will find attached to this letter a copy of the Federal Reserve Board's egulation D, which has to do with reserves of member banks and which gives authority for computing reserves on the average daily net deposit balances covering semiweekly periods. Yours very truly,

WM. R. CATION, Managing Direotor.

Also another letter from Mr. Cation, bearing the same date, as follows:

With further reference to my today's letter in connection wtih the reserves of the First Wayne National Bank, Detroit, and the First National Bach, Detroit, for the year 1932, you have inquired with respect to the reserves the First National Bank for the year 1933.

Our records indicate that during the year 1933 the First National Bank Detroit, carried excess reserves for all periods up to the date the bank was taken over by the receiver, Very truly yours,

W’m. R. CATION, Managing Directe The CHAIRMAX. They may go into the record, and you have already read them.

Mr. Mills. May I make one more short statement: When Juu Murfin was on the stand last week—and he has been excused as I understand it—it was stated, or at least I understood the statement to be made, that if Mr. Sweeny would authenticate any statement that he desired to make with reference to the charges that had led made against him, the committee would be glad to receive same here I have two authenticated statements by Mr. Sweeny, one rather long and in detail, composed of some 12 pages, and the other in very much briefer form, composed of some three pages, both of whict. at his request, I should now like to offer to this committee. Au. I am further authorized to state that Mr. Sweeny's health is somewhat better, and his doctor feels that a deposition might readily be taken, in bed, as he is still in bed, at any time so long as he is Le given more than an hour period daily.

Senator Couzens. Mr. Chairman, I move that the two authenticated statements be received.

The CHAIRMAN. Have those statements been sworn to bs Vr Sweeny before a notary public?

Mr. Mills. They are sworn to before a notary public, with sal: yes, Mr. Chairman.

Senator COUZENS. Mr. Chairman, I move that they be received f. the consideration of the committee.

The CHAIRMAN. They may be received and marked for identzira tion, and the committee will later determine about offering them :: evidence.

(The 12-page statement, dated Jan. 27, 1934, was marked - C mittee Exhibit No. 136 for identification, Feb. 6, 1934 ", and wil be held by the subcommittee for further determination.)

(The 3-page statement, dated Feb. 3, 1934, was marked - Comu. tee Exhibit No. 137 for identification, Feb. 6, 1934 ", and will b: tri. by the subcommittee for further determination.)

Mr. PECORA. Mr. Mills, do you want the committee to understag on the basis of the advices that you have read into the recori having been received by you from the Federal Reserve Bank of 3 cago, Detroit branch, that the First Wayne National Bank of Detru? did not have a deficiency in its reserves with the Federal RX bank on the 30th day of June 1932!

Mr. Mills. The statements are self-explanatory. In accontas with the regulations of the Federal Reserve Board there was deficiency.

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Senator Couzens. Mr. Mills, that does not answer the question, because the records of your own bank show that it was deficient in a sum of over $11,000,000 as of that date.

Mr. Mills. I have no knowledge who made such record. They have not been produced. I do not know who made the record because it has not been brought here. All that I know is that under the regulations of the Federal Reserve Board there was no deficiency.

Mr. PECORA. The managing director says there was no deficiency on 3-day periods.

Mr. Mills. And that is how they are computed under the law and the regulations.

Mr. PECORA. I have asked you if it is a fact that on June 30, 1932, the bank had created a deficiency in its reserve with the Federal Reserve bank on that date.

Mr. Mills. Not under the law and regulations.
Mr. PECORA. What do you mean by “not under the law”?
Mr. Mills. And the regulations.

Mr. PECORA. The regulations you have reference to are regulations for assessing penalties for the establishment of a deficiency during 3-day periods, aren't they?

Mr. Mills. They are also regulations for the maintenance of reserves.

Mr. PECORA, Aren't they regulations of a character that require daily reserves, or reserves on the daily balances?

Mr. Mills. The regulations provide for a semiweekly average of balances.

Mr. PECORA. Will you read that letter again that you read into the record ?

Mr. MILLS. Yes, sir.

Mr. PECORA. Or let me have it and I will get right to the point I have in mind.

Mr. MILLS. All right. Here they are [handing to Mr. Pecora the two letters he had already read into the record].

Senator Adams. Mr. Mills, while Mr. Pecora is looking over the letters let me ask you: The statutes require certain mathematical reserves on certain types of deposits, don't they? Mr. MILLS. Yes, sir.

Senator Adams. They must have a certain percentage of reserves for deposits of different kinds!

Mr. Mills. Yes.

Senator Adams. As I gather, your theory is that the Federal Reserve Board, or the Federal Reserve Bank of Chicago, has seen fit to interpret those reserve requirements in terms of averages and that it does not require that they shall maintain those reserves on each day.

Mr. Mills. That is correct. And the statute, I am informed, gives that authority to the Federal Reserve Board—to make those regulations.

Senator ADAMS. Your understanding of the statute is that it authorizes such action?

Mr. Mills. Yes, sir.
Senator Adams. Have you the statute here?

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