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Now, do you know anything about that?
Mr. Mills. All I can tell you about the Ford transaction is that they were, as my statement probably shows, the largest depositor of the bank. Whatever the Ford Motor Co. wished to do we did so long as it was within the law.
Mr. Pecora. Do you recall that the Ford Motor Co. by arrangement with the bank stepped up, to use the expression here, its balances as of December 31, 1931, by $2,500,000 through the issuance of certificates of deposit ?
Mr. Mills. Didn't it also say that the savings were reduced by a corresponding amount?
Mr. PECORA. Yes.
Mr. Mills. I don't recall it; no. It may have been so. I don't recall it.
Mr. PECORA. Are you familiar with that portion of the evidence taken before this committee last week in which certificates of deposit were put in evidence ?
Mr. Mills. I am not. I was not here. I did not even see a news paper account of it. I was on the train coming here. That is why I missed a newspaper.
I do know that the Ford Motor Co. accounts at the end of the year, and at all other times, were handled as Mr. Craig, treasurer or comptroller of that company, desired them handled. We had to handle them in accordance with his good wishes. They were good customers, and, after all, it was their money.
Mr. PECORA. What interest would the Ford Motor Co. have which the bank would not have had in stepping up, to use Mr. Russ's expression, its deposits in the First National at the end of the year 1931 by $2,500,000 ?
Mr. Mills. They evidently took it out of their savings and put it in their commercial.
Mr. PECORA. Well, the evidence here shows it was taken out of the Detroit Trust Co. account and put in here and then transferred back on January 3 into the Ford Motor Co.
Mr. Mills. I do not know why the Ford Motor Co. desired to do it. I have never known why the Ford Motor made these year-end transactions.
Mr. Pecora. What was the reason for Mr. Russ calling your attention, as the second ranking officer in the bank, to the various itens set forth in this memorandum?
Mr. Mills. To give me information about them, because Mr. Russ had been with the old First National Bank. I was with the Peoples. I had not known him intimately. Many of these notes, not all of them, many of them, were in the old First National Bank. Obvi. ously, he was giving me information about them.
Mr. PECORA. Let us see about the item referred to in this memorandum under the caption, “General Motors Corporation”, which
3 reads as follows:
With the knowledge that this corporation has of the fluctuating balances in banks at the end of the year, they very kindly volunteered to increase their account $3,000,000, and it is presumed that this $3,000,000 will be taken out gradually over the next week or two.
What does that indicate to you, Mr. Mills?
Mr. MILLs. Just what it says. General Motors Corporation volunteered to do that and increased their balances.
Mr. PECORA. In order to enable the bank to make a better showing as of the end of the year!
Mr. Mills. I do not know whether that was General Motors' idea or not.
Mr. PECORA. Was that the bank's idea in having the General Motors Co. increase its balances as of the end of the year?
Mr. Mills. I want to state right now, as I stated the other day, when I became head of this institution I told everybody that I was not in favor of getting deposits over the year end.
Mr. PECORA. Doesn't this look like getting a deposit over the yearend, a substantial deposit of $3,000,000?
Mr. Mills. It does not look at all like it from the wording of that document, which says that General Motors offered it.
Mr. PECORA. Doesn't it look like an increasing of deposits in order to enable the bank to make a better showing as of the end of the year, in view of the fact that Mr. Russ specifically says in this memorandum to you that it is presumed that this $3,000,000 will be taken out gradually over the next week or two?
Mr. Mills. General Motors—I object to any imputation that the First National Bank solicited that increase in deposit in the First National Bank. It appears on its face that the General Motors Co. came in and made that offer. That is all I know about it. Mr. PECORA. Was that true also of the Chrysler Corporation ? Mr. Mills. All I know is what you have read. Will you read it? Mr. Pecora. With regard to the Chrysler Corporation this is what Mr. Russ reported to you, according to this memorandum :
This corporation very generously increased their balance by a half million dollars due to the unusual conditions which they know exist at this particular time.
Does that indicate a generally generous attitude on the part of the Chrysler Corporation?
Mr. Mills. It would to me, knowing them as I do; yes. There are many decreases, as I recall it, in that memorandum.
Mr. PECORA. I beg pardon?
Mr. Mills. There are many decreases, I believe, in that memorandum too.
Mr. PECORA. There were. I have put the entire memorandum in evidence. What were, do you suppose, the unusual conditions known to the Chrysler Corporation and to the General Motors Corporation referred to in this memorandum?
Mr. Mills. I can only think of two things. One was that possible tax matters; second, deposits in the First National Bank that my written statement here has shown had gone off $143,000,000 in 18 months.
Mr. PECORA. Where reference is made in this memorandum to money having been transferred by different depositors named here for tax purposes, what does that refer to? I mean what tax purpose could be derived by such a transfer?
Mr. Mills. I have read in the newspapers account of this portion of the testimony and Mr. Edsel Ford's testimony, and after reading that I am mystified as to the purposes.
Mr. PECORA. Well, here your vice president in a memorandum to you says these transfers were made for tax purposes. Were you mystified on January 6, 1932, when you got such a memorandum from Russ?
Mr. Mills. I thought at the time that these transactions, or many of them, were for—not an evasion, but for an avoidance of certain taxes.
Mr. PECORA. How could that operate to produce such an effect ! Mr. Mills. Many of those corporations paid a privilege tax.
Mr. Pecora. You mean a tax imposed by the taxing laws, general taxing statutes of the State of Michigan, upon foreign corporations doing business within the State, having authority within the State!
Mr. Mills. Yes.
Mr. PECORA. That is what is known under your laws as a privilege tax!
Mr. Mills. A privilege or an annual corporation tax. That tax is also imposed upon domestic corporations, but with different legal consequences, as you understand.
Mr. PECORA. But in the case of foreign corporations doing business in the State of Michigan it is called “ a privilege tax" ?
Mr. MILLS. It is called that in that State.
Mr. Mills. No; it is based on assets, Mr. Chairman. It is based on assets; and in the case of foreign assets, on the proportion, as I recall it, of assets within and without the State.
Mr. PECORA. Mr. Mills, let me ask you, when did you reach the realization that banking conditions generally in Detroit were becoming quite serious ?
Mr. Mills. Shortly after I went into the banking business.
Mr. Mills. March 1931. Within a week this American State Bank-or within 2 weeks this American State Bank-incident came up, and I realized it then.
Mr. Pecora. Did you have any correspondence with anyone in Washington in 1931 with regard to the banking situation ?
Mr. Mills. Oh, I think I had a lot of correspondence in 1931 with various people in Washington.
Mr. PECORA. With whom?
Mr. Mills. The senior Senator, the junior Senator from Michigan, and I probably wrote the Comptroller.
Mr. PECORA. Who?
Mr. Mills. The Comptroller. I think I wrote the Comptroller. I undoubtedly wrote various of our Representatives.
Senator COUZENS. That was in 1931 ?
Mr. Mills. Oh, yes; I am sure I wrote to you in 1931. The letter was produced the other day.
Senator COUZENS. That was not my letter!
Senator COUZENS. But I understood you stated that you had correspondence with the senior Senator from Michigan in 1931.
Mr. Mills. I meant by that I had written to the senior Senatorfrom Michigan in 1931.
Senator COUZENS. And did my reply give you a shudder?
Senator COUZENS. I am inclined to visualize what I said in 1931 would make you shudder. I don't recall any correspondence in 1931.
Mr. Mills. Why, you probably may recali, Senator, we had a good deal of correspondence about the home loan bank bill in 1931, and it may possibly have carried over into 1932. We did not agree about the home loan bank bill.
Mr. Pecora. I show you what purports to be a photostatic reproduction of a letter dated October 14, 1931. Will you look at it and tell me if you recall having dictated, signed, and sent the original of that letter?
Mr. Mills [after perusing document]. I presume I wrote it. Senator Vandenberg would have the original. I presume I wrote it. I have no present recollection of it. I had a large correspondence. I presume I wrote it.
Mr. PECORA. I offer it in evidence.
(Photostat of letter dated Oct. 14, 1931, from Wilson W. Mills to Hon. Arthur H. Vandenberg was thereupon designated “Committee Exhibit No. 143, February 6, 1934 ", and appears in the record in full immediately following, where read by Mr. Pecora.)
Mr. PECORA. The letter received in evidence as committee's exhibit no. 143, reads as follows [reading] :
OCTOBER 14, 1931. Honorable ARTHUR H. VANDENBERG,
Grand Rapids, Michigan.
Yours very sincerely,
P.S. You know the President. If you believe a five-minute interview with me might help to impress the gloomy picture on his mind, I am willing, but not anxious, to go to Washington for that purpose. If you believe this suggestion worth a darn, merely by way of suggestion, you might wire Washington that I have sent you a copy of my letter. I really believe the national situation is approaching that of being desperate.
That is the way you felt about it, didn't you, at the time?
Senator COUZENS. May I ask, Mr. Pecora, if you found any correspondence with me in Mr. Mills' file?
Mr. PECORA. We have not, sir. Did you receive a reply to this letter just read in evidence of which this purports to be a photostatic copy is a copy?
Mr. Mills (after perusing document). Yes; I received that letter from Senator Vandenberg. That is the original of that letter.
Mr. PECORA. I offer it in evidence.
(Letter dated Grand Rapids, Mich,, Oct. 15, 1931, from A. H. Vandenberg to Wilson W. Mills was thereupon designated “Committee Exhibit No. 144, Feb. 6, 1934 ", and appears in the record immediately following, where read by Mr. Pecora.)
Mr. PECORA. The letter received as Committee's Exhibit No. 144 in evidence is as follows (reading):
GRAND RAPIDS, MICHIGAN, October 15th, 1931. MR. WILSON W. MILLS, Chairman Peoples Wayne County Bank,
Detroit, Mich. MY DEAR MR. Mills: Thanks for your letter of October 14, with its splendid inclosure. Your letter to the President is a bulls-eye. I wrote him again Fes. terday myself following our conversation on the telephone. I also wrote another urgent letter to Governor Meyer.
Let me digress a moment. That refers to Eugene Meyer, then Governor of the Federal Reserve?
Mr. Mills. Unquestionably. Mr. PECORA. Resuming the reading of the letter: I do not believe they fully sense the extent of our banking jeopardy in the Middle West. Their liaison is almost exclusively with New York, and it costinues to be my observation that the New York problem frequently is substantially different from our own.
The voluntary credit pool is good scenery. The psychological effect ore? here has been excellent. As a matter of fact, yesterday was almost a normal day so far as withdrawals are concerned. But of course this picture can change in the twinkling of an eye. If it does, I am afraid the credit pool wil prove to be a horrible anti-climax unless its organization structure is rather swiftly changed. I have drawn the attention of Governor Meyer and the Pres ident to the fact that our State Banking Department seriously questions the legal right of our banks to accept an unlimited contingent liability for the prospective loans of all the banks in regional association. I have called their attention to the fact that the National Bank Examiner in this area declined in September to allow the Grand Rapids Clearing House banks to accept a simile: contingent liability in connection with the guarantee of the Million Dollar mortgage purchase by the Blodgett group from the Old Home State Bank. I hare also called their attention to the fact that when the use of the new pool is confined exclusively to those who create the pool, the situation scarcely encourages those which may be most in need of help because such a bank dare not intensify its own hazard by releasing the cash necessary if a contribution to the pool be made.
At best this is only a stop-gap. The real assistance comes only when the Federal Reserve credit base is broadened and when the War Finance Corpo ration is reinstituted. I cannot sympathize for a single moment with any delas in bringing this result to pass. I have earnestly supplicated the President precisely in line with the contents of your splendid letter of October 14th to him. But up to date he is adamant against the suggestion. I certainly wish you could talk with him personally. I am going to take the liberty of suzgesting to him that if he is consulting bankers any further in connection with this situation that he ask you to be among those summoned. I am also telling him today that I have seen a copy of your letter of October 14th to him and that I endorse every word in it.
I expect to be in Detroit next week Friday and Saturday and I shall try to see you. I cannot begin to tell you how much it has meant to me to be in direct and sympathetic contact with you in this desperate adrenture. With warm personal regards and best wishes, Cordially and faithfully,
(Signed) A. H. VANDENBERG.