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. PECORA. We call it in New York a franchise tax. Mr. MILLS. I presume it is the same tax in both cases. The CHAIRMAN. Is it based at all on earnings of the company! 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 becom ing 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? Mr. MILLS. No; he asked me if I had had correspondence. 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? Mr. MILLS. I don't remember your reply at the moment, Senator. 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 recall, 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. The CHAIRMAN. Let it be admitted. (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]: Honorable ARTHUR H. VANDENBERG, Grand Rapids, Michigan. OCTOBER 14, 1931. DEAR SENATOR: The enclosed is self-explanatory. If there is anything further that you want me to do or that I can do, do not hesitate to let me know. You are busy-there is no need of acknowledging receipt. Yours very sincerely, I presume you signed it over the word "Chairman"? Mr. PECORA (Continuing reading): 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? Mr. MILLS. Yes. Mr. PECORA. And that was October 1931? 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. 175541-34-PT 12- -8 Mr. PECORA. I offer it in evidence. The CHAIRMAN. Let it be admitted. (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. 14 in evidence is as follows (reading): MR. WILSON W. MILLS, GRAND RAPIDS, MICHIGAN, October 15th, 1931. 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 yes 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 continues 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 ofer 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 will 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 similar contingent liability in connection with the guarantee of the Million Dollar mort gage purchase by the Blodgett group from the Old Home State Bank. I have 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 Corporation is reinstituted. I cannot sympathize for a single moment with any delay 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 sug gesting 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 adventure. With warm personal regards and best wishes, Cordially and faithfully, (Signed) A. H. VANDENHENG Upon receipt of that letter did you dictate a letter to Senator Vandenberg, of which this photostatic reproduction is a copy? Mr. MILLS (after perusing the document). Yes; I believe that is a copy of my reply. It looks like it. Mr. PECORA. I offer it in evidence. The CHAIRMAN. Let it be admitted. (Letter dated Oct. 16, 1931, from Wilson W. Mills to Hon. Arthur H. Vandenberg, was thereupon designated "Committee Exhibit No. 145, Feb. 6, 1934", and appears in the record immediately following where read by Mr. Pecora.) Mr. PECORA. The letter received in evidence as committee exhibit no. 145 reads as follows, dated October 16, 1931 [reading]: Hon. ARTHUR H. VANDENBERG, Grand Rapids, Mich. DEAR SENATOR: Thanks for your letter of the 15th. You know my views regarding the imperative necessity of immediate legislation, and I hope you know that anything I can do in any way to assist you I shall be most happy to do. You have stated the situation perfectly-it is desperate. And those three words are underscored. There must be some way to make the President understand the real situation. I think he probably is taking practically all his financial advice from New York, and they naturally are most concerned about their foreign credits. There is another thing, however, all the bankers in the country are complaining of the public hoarding. I am not certain that the bankers themselves did not start it and I do believe that at the present at least they are equally guilty with the public in hoarding, i.e., by the insistence of the maintenance of a tremendous cash and Government position. I know one large institution in New York has almost 75 percent of its deposits in cash and Governments; and while I haven't tried it, I am willing to wager that I couldn't make a sizable loan in the institution upon any collateral that was not subject to rediscount at the Federal Reserve-why? It impairs the bank's liquidity. Of course, this thing is the old vicious circle again-the banks are afraid of the public and the public are afraid of the banks, so they are in effect each compelled to hoard. I dictated the foregoing letter this morning before the receipt of your wire. While I think the papers of the National Credit Corporation could have been more definitely drawn, I do not think that the clause you quoted from page 3 will create any liability other than is stated in the succeeding sentence which limits the liability of other members of the association to a several proportionate amount. I talked to Mr. Buckner's office in New York about it after receipt of your telegram and they stated that the actual articles of agreement which will be mailed tomorrow and which will be the agreement itself as distinguished from the plan which has been received will not contain this ambiguity. Mr. Reichart agrees that it is all right to go ahead on that basis. While, of course, every bank that possibly can must and should follow up with the President's plan, I am sure there is going to be quite a reaction when the public understands that it is not going to assist failed banks or failing banks. It is for that reason also that I most heartily concur in your views as to the desirability of a special session. I am sorry to make this such a long letter, but at noon the president of the Detroit Real Estate Board telephoned me and asked if I wouldn't urge you to accept their invitation to be their guest and speak at their annual meeting in December. Of course, I hope you can; but I know how busy you will be in December and if you find it impossible to come I know they will understand why. Of course, I personally hope you will be able to be here. I am delighted to know that you will be in Detroit on Friday or Saturday of next week and am holding you to your promise to see me. Will you not save one of the days to have luncheon or dinner with me and if you have no other plans, I would be happy indeed to have you as my house guest. With kindest personal regards, Yours very sincerely, CHAIRMAN. Did you send a letter to Mr. Eugene Meyer, the Governor of the Federal Reserve Board, in Washington, of which this document which purports to be a photostatic reproduction is a copy? Mr. MILLS (after perusing document). I don't recall it, but I have no doubt that it is a copy. Mr. PECORA. I offer it in evidence. The CHAIRMAN. Let it be admitted. (Letter dated Oct. 17, 1931 from Wilson W. Mills to Eugene Meyer, Governor Federal Reserve Board, was thereupon designated "Committee Exhibit No. 146, Feb. 6, 1934," and appears in the record immediately following, where read by Mr. Pecora.) Senator COUZENS. Did you ever let Mr. Meyer know that you were alarmed about this in 1931? Mr. MILLS. Yes; and about the national situation. And so were all of them. Everyone was. The testimony has been that the Guar dian Detroit were fighting a war in Detroit. Everybody almost felt the same way I did. I talked to many of them from New York and all parts of the country. Mr. PECORA. The letter just received in evidence and marked “Exhibit No. 146" reads as follows [reading]: Mr. EUGENE MEYER, OCTOBER 17, 1931. Governor Federal Reserve Board, Washington, D.C. DEAR MR. MEYER: I am enclosing copy of a letter that I wrote to the Presi dent under date of October 14. In this part of the country, at least, I believe the situation is very serious indeed, and I fear for any long delay. The banks all complain of people hoarding-I am wondering as to whether the reverse is not also true that the banks are hoarding. When an institution has 75 percent and upwards of its deposits in cash and Governments and is a very unwilling lender, I would say that it is hoarding just about as much as the public-somewhat the case of the pot calling the kettle black. Conditions make hoardingif it may be called so-justifiable, but the cause that may necessitate it should be removed. I am not referring to any individual case, but as illustrative of the general situation. The confidence in our banking institutions is so rapidly waning that I fear the time element as much as anything else and believe delay will very materially lengthen the task of reestablishing that confidence. I trust you will pardon my writing you but I could not resist the temptation Yours very sincerely, CHAIRMAN, Now, Mr. Mills, in your letter to Mr. Meyer, as well as to Senator Vandenberg, you referred to the fact that you had sent a letter to President Hoover under date of October 14, 1931, and it has been reported to me that no copy of the letter was found among the files of the bank in custody of the receiver? Have you a copy of that letter? Mr. MILLS. No; I have not. I haven't any copy. Mr. PECORA. Do you recall the general substance of the letter? Mr. MILLS. While this was being read I have been wondering just what it was. It was either, in my judgment, one of three things either the Home Loan Bank bill or some provision to establish some type of agency under which mortgage paper might be rediscounted, like a general-mortgage bank, a central-mortgage bank, or else it may have been to broaden the rediscount base of the Fed eral Reserve bank with the privilege of rediscount, or it may have been something along the line of what later turned out to be the R.F.C. I do not recall exactly which it was, but I believe it was one of the three. |