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Mr. Mills. No; I think not, because the capital of the First Detroit Co. and the surplus, which I was informed—I did not know anything about it originally—I have been informed when it was paid in it was only a million dollars. So I do not believe there would have been any loss. I do not know what it cost the Detroit bankers originally. I was not part of that party.

Mr. PECORA. Mr. Mills, do you recall that eventually the Detroit Bankers Co. entirely wrote off or reduced to the nominal sum of $1 the note which it held of the First National Co. for $7,000,000?

Mr. Mills. I don't recall that it was written off entirely, Mr. Pecora. In fact, my memory is that it was written down to the amount of—I beg your pardon; are you speaking of the Bankers Co. or the bank?

Mr. PECORA. The Detroit Bankers Co.

Mr. Mills. I believe it was written down to a dollar. I was thinking of the bank; I beg your pardon. I believe it was. not certain. I believe it was.

Mr. PECORA. That is our recollection.
Mr. Mills. You will forgive me for talking about the bank.

Mr. PECORA. All right. Mr. Mills, I show you what purport to be photostatic reproductions of some handwriting on five sheets of paper. Will you look at them and tell me if the handwriting there shown is your handwriting?

Mr. Mills (after examining document). Yes, this is my handwriting

Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted.

(Photostat of five sheets of handwriting were thereupon designated as one exhibit“ Committee Exhibit No. 138, Feb. 6, 1934 ", and appear in the record immediately following where read from by Mr. Pecora.)

Mr. Pecora. Do you recall as of what time you wrote what purport to be memoranda on these five sheets which have been received in evidence as committee's exhibit no. 138? See if there is anything there that suggests the date to you, because I fail to find any date on it.

Mr. Mills. This, I believe from the looks of it, is notes made by me at the time that the examiner was discussing with the governing board his May examination.

Mr. PECORA. May 1932 examination?
Mr. Mills. Yes. That is my belief.

Mr. PECORA. And those were notes that you jotted down with reference to the subject matter of the discussion?

Mr. Mills. The subject matter of the discussion or items that had occurred to me to write down to look into or to have something done.

Mr. PECORA. To follow up?

Mr. Mills. To follow up. There may have been some of my thoughts as well as the examiner's, some of his.

Mr. Pecora. At the top appear in one section of this exhibit no. 138 the name "J. L. White", under that the initials “D.M.S.”, and under that the name Wise Chrome." Do you recall to what that related ?

Mr. Mills. Why

Mr. PECORA. First let me ask
Mr. Mills. Yes.
Mr. PECORA. To whom do the initials “ D.M.S." refer?
Mr. Mills. “D.N.S.", I believe.
Mr. PECORA. Well, “D.N.S."
Mr. Mills. I don't blame you for not reading my handwriting.
“D.N.S.” referred to Mr. Sweeny.

Mr. PECORA. Donald N. Sweeny?
Mr. Mills. Yes, sir.

Mr. PECORA. Dó you know the occasion for jotting down this memorandum?

Mr. Mills. Yes; I think I know that.
Mr. PECORA. What was it?

Mr. Mills. The examiner stated that he had heard that there were some—how shall I state it?—unethical or wrongful practices—I will put it that way—in the bank, particularly affecting Wise Chrome Steel. Senator Newberry and I were both present at the meeting. and the Senator stated to the examiner that we were fully aware of that, that a special committee had been appointed, that the matter had been thoroughly gone into and a complete exoneration given. We explained to him that the Wise Chrome note had been initialed by Mr. Sweeny, had previously apparently been authorized by the board of directors upon a credit statement, and that Mr. Sweeny had not been a director when certain of those notes were originally made.

Senator COUZENS. Was not a director of what?

Mr. Mills. Of the bank at the time of the original inception of those notes. That is covered in his affidavit also. The examiner said, “Well, all right. I am glad to have taken care of that matter." I believe that is to what it refers.

Mr. PECORA. Who is the J. L. White referred to in that portion of the memorandum?

Mr. Mills. I am not sure whether we had a man working for the bank by that name or not. I am not sure. We may have had an employee working for the bank by that name. I am not certain, Mr. Pecora. It brings nothing to my mind at any rate.

Mr. PECORA. Now, the next note appearing on this exhibit, no. 138, in your hand

handwriting, as I read it, is “ New officers." What does that refer to?

Mr. Mills. At that time the bank in my judgment and for once I fully agreed with the examiner-needed to be organized. As I say, before that time there had been different offices in connection with the main office. They had not been coordinated, and the examiner suggested that it would be well to have some new blood in the institution and possibly the elimination of certain gossip there. That is to what that refers.

Mr. PECORA. Then follows a memorandum which, as I read it, says " 40-50 million dollars losses."

Mr. Mills. May I see it?
Mr. PECORA. Is that a correct rendition of that note?

Mr. Mills. It says " 40-50 million losses.” My recollection of that is that he said, “You have on your books here items which I classify as doubtful. They may develop into losses. They may not. We do not know what will develop with those items."

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Mr. PECORA. Who made that statement?
Mr. MILLS. The examiner.

Mr. PECORA. Who was it? Was it Mr. Leyburn or was it the field examiner?

Mr. Mills. I think Mr. Leyburn did–Mr. Leyburn did most of the talking, not all of it, but he did most of it.

Mr. Pecora. The next notation reads, as far as I can decipher it, first, “ Brokers and banks”-is that!_5212,000."

Mr. Mills. Might I stand here and look at it?
Mr. PECORA. Yes.
(Mr. Mills looked at the exhibit with Mr. Pecora.)
Mr. PECORA. “Brokers and banks, 212,000."

Mr. MILLS. “Brokers and" either “banks” or “bankers loans 212.000; officers and employees loans, $1,971,000; commercial, $8.750.000.”

Mr. PECORA. 570.

Mr. Mills. 570. The next item means “Wayne Home.” That was one of the offices, a branch office, “ $925,000.” “ Fisher ”—I presume that would mean the Fisher office—“ 637.”

Mr. PECORA. Thousand ? Mr. Mills. Thousand. “Peoples Wayne County claims, 329,000. First National, 2,838,000. Peoples Wayne County brokers and banks or bankers, 155,000. Claims, 4,474.”

Mr. PECORA. What did this memorandum mean?

Mr. Mills. I presume--it is difficult to remember; some of that I can remember—he said, “You have loans in this bank and under those classifications, and there are loans ”-either he said “doubtful", or " that require some special looking after.” Something of that sort.

Mr. PECORA. They were notes made by you during the discussion, based upon the examination of May 6, 1932, with the examiner, were they not? Mr. Mills. Yes. Mr. PECORA. These notes were based upon what the examiner said?

Mr. Mills. And remarks or thoughts that I had at the time, and would interpolate anything that came along.

Mr. PECORA. This last notation, reading “ Claims, $4,474,000", does not of itself explain itself. Will you explain it and tell us what kind of claims were referred to there?

Mr. Mills. We had a department of the bank known as “special loans or claims.” It was called either way. It may be that at that time we had two; for a long time we had two of those departments. It

may refer to one or it may refer to both of them. There were more than those items.

Mr. Pecora. Loans in ordinary routine that were unpaid were sent to the claims department for action, were they not?

Mr. MILLS. Some went there before. Mr. PECORA. As a rule, did not that action precede the writing off of the loans?

Mr. Mills. Frequently, very frequently; but, on the other hand, I know of many cases that I can tell you of where items have come back, after they have gone to claims. I mean, the note has been made good or liquidation has been had.

Mr. Pecora. But the much larger proportion that went into claims were eventually written off, were they not?

Mr. Mills. No; I would not say that, because a large amount of items would go to claims that were undercollateralized and where we were fearful, or else the maker had stopped paying interest. I remember one time making some rough figures listing the readily marketable collateral covering half the stuff that was in claims But those loans were in some type of difficulty. Either we had to make some reduction in interest—the maker could not pay the interest—or else we were fearful that one of those things would happen.

Mr. PECORA. The second sheet of these five sheets of notes in your handwriting contains the notation at the top, as follows:

Bonds defaulted, $1,066,000.
Stocks, $257,000.
Loss, claims, first-

I assume that refers to the First National Bank$2.838.000. One half P. B.-

Peoples Bank$2,200,000.

Then, alongside of those figures, a bracket and then the statement or the inscription, “Pick out."

Will you explain that memorandum?

Mr. Mills. I could not explain that except for the margin, and I think that gives me a key. He stated that he desired charged off, as appears here--you see a line, and it shows $8,600,000, which, as I recall it, he said he wished charged off, and he wished it charged off before June 30. He was asked which items he wished charged off, and he said, “ You pick out from your loans and discounts those that you consider the worst and advise me before Tuesday ", either that the charge-off had been made or as to what the items were. I am inclined to think it was that the charge-off had been made. He knew the items, because it took some time to pick out the items.

Mr. PECORA. That charge-off was made, was it!

Mr. Mills. Oh, yes. It was made within the time he stated that it should be made.

Mr. PECORA. The next item appearing on these memoranda reads as follows:

Four million dollars reserves special. Take out and unfreeze-
I cannot make out the next word-
Make specific reserve, total $8,500,000.
Can you explain that?
Mr. Mills (reading):
And not make specific reserve.

My recollection is that at the time of the consolidation of the First National Bank and the Peoples Wayne County Bank into the First Wayne National Bank certain specific reserves were set up against specific items, and I believe at this time that this memorandum would indicate that it was suggested, I believe, by the examiner that apparently $1,000,000 of those specific reserves were to be taken out and carried into our general reserve account and a

total charge-off of 812 million dollars was to be made. In other words, he no longer desired a reserve kept against particular items, but desired them carried in a general reserve account.

Mr. Pecora. Then the third sheet of your memoranda seems to read as follows (reading]:

Real estate, $1,580,000.
American State-

It is abbreviated "Am. St." $7,805,000.

Redford P.S., $680,000.
Redford State, $527,000.
Other real estate-

I am giving effect now to abbreviations$2,605,000.

Peoples Wayne-
Commercial, $13,936,000.
Highland Park, $534,000. Bonds, $1,066,000. Stocks, $267,000.
I cannot decipher the rest of that.

Mr. Mills. I believe you made one error. I do not think that is "Highland Park.”

Mr. PECORA. Is there a “ Highland Place"?

Mr. Milis. Highland Park is a separate entity. We have no branch at Highland Park.

Mr. PECORA. What is it then? It is your handwriting.

Mr. Mills. It looks like Highland Park. There may be some branch up there. I may have written Highland Park.

Mr. PECORA. Will you explain that item? First, read whatever portion I have not been able to decipher.

Mr. Mills. Where it says “P. S.” after “Redford”, it means the old People's State Bank of Redford and “Redford State" means the Redford State Bank. I presume, although it is only my recollection, that these items are referring to the items that were passed as doubtful by the examiner in that examination as to locations in bank.

The CHAIRMAN. Real estate?

Mr. Mills. There is an item here that says, "Other real estate", meaning other real estate of apparently $2,605,000.

Mr. PECORA. The loss that in the examiner's opinion the bank might have to take?

Mr. Mills. No. I think he classed it as doubtful. The only loss at that time was approximately $1,500,000, and that was charged off. I am quite certain that this was pointed out to the examiner. He has here “American State" as a doubtful item of $7,805,000. I am almost certain that the examiner did not take into consideration the fact that we had under the contract in which we took over the American State Bank a contribution from the other bank and trust company. I believe this was gross. From the examiner's viewpoint that may have been our own liability, but we had, in turn, a claim against all the other Detroit banks and trust companies for their proportionate share of the American State bank take-over [reading]: Employees' loans. Take up, and take up some R.E.

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