Mr. PECORA. After you dispatched that letter to the President did you receive an acknowledgment from him in the form of the photostatic reproduction which I now show you? Mr. MILLS Yes; I received this letter from the President. This refreshes my recollection slightly, that I had up to this time thought that a special session was advisable for the purpose of one of those three things. Mr. PECORA, I offer it in evidence. The CHAIRMAN. Let it be admitted. (Photostatic copy of letter dated Oct. 21, 1931, from the President of the United States to Wilson W. Mills was received in evidence and marked "Committee Exhibit No. 147, Feb. 6, 1934.") Mr. PECORA. The photostatic copy of letter received in evidence as Committee Exhibit No. 147 reads as follows (reading): COMMITTEE EXHIBIT No. 147 THE WHITE HOUSE, Washington, October 21, 1931. Mr. WILSON W. MILLS, MY DEAR MR. MILLS: I have your kind letter of October 14th and would be glad if you could come to see me at your convenience to discuss the questions you have in mind. My own feeling is that confidence is returning throughout the country, of which there are many evidences, and that we should give opportunity for its growth without injecting all the uncertainties that might arise from the action you suggest. Nevertheless, I should like an opportunity for discussion with you personally and when you come east again would value your advice. Yours faithfully, (Signed) HERBERT HOOVER. Does this letter, Mr. Mills, refresh your recollection more clearly as to the action that you suggested the President might take in your letter to him of October 14, 1931? Mr. MILLS. As I stated, Mr. Pecora, I think I was urging a special session of the Congress to enact legislation along one of the three lines that I have mentioned. Mr. PECORA. Did you urge all three plans upon the President and suggest the adoption of any one of them, or did you confine your letter to one of the three plans? Mr. MILLS. I do not recall. Senator COUZENS. You know, of course, that in 1932, following that correspondence, Congress did enact the R.F.C. Act and also the Home Loan Act? Mr. MILLS. Yes, sir. Mr. PECORA. After the receipt of that letter from President Hoover, a copy of which was just offered in evidence, did you write a reply to it, of which this document is a photostatic reproduction [handing a paper to the witness]? Mr. MILLS. Yes, sir; that is a copy of the letter. Mr. PECORA. I offer it in evidence. The CHAIRMAN. Let it be admitted. (Photostatic copy of letter dated Oct. 27, 1931, to the President of the United States from Wilson W. Mills, was received in evidence and marked "Committee Exhibit No. 148, Feb. 6, 1934.") Mr. PECORA. The letter just received as Committee Exhibit No. 148 reads as follows [reading]: COMMITTEE EXHIBIT No. 148 OCTOBER 27, 1931. Honorable HERBERT HOOVER, President of the United States, Washington, D.C. MY DEAR MR. PRESIDENT: Your very generous and kind letter of October 21st has been received. In this matter, or any other I am of course, entirely at your disposal for any conference and should be most happy to go to Wash ington at any time which you may indicate will suit your convenience. I should greatly value a short discussion of the matter with you. I feel sure you will be interested in knowing that Michigan Association of the National Credit Corporation got away to a good start yesterday. Al banks in the State were invited to Detroit to organize and I believe there were between three and four hundred representatives present. There was a great deal of enthusiasm and helpfulness expressed for your plan. May I state, Mr. President, with what sympathy I have followed your endeavors in these anxious times. No president since Lincoln has had so many burdens nor in my opinion met them with such conscientiousness, courage and ability. Yours very respectfully, Now, Mr. Mills, when you were on the stand last Friday your attention was called to a letter or a copy of a letter received in evidence as Committee Exhibit 135, which you stated you had ad dressed to one Henry M. Robertson, then at the Metropolitan Hotel, Washington, D.C. That was a letter in which you gave some expression to a convulsion or shudder sometimes. Mr. MILLS. I recall it. Mr. PECORA. Will you tell us more definitely what prompted the writing of that letter particularly to Mr. Robinson? Mr. MILLS. Mr. Robinson had telephoned me a day or so previously-he knew I was interested; I had had some correspondence with him-he knew that I was interested and had hopes of the home loan bank bill. I was urging that it be in the form of a mortgage bank to rediscount mortgage paper, and he telephoned me, and that is what prompted the letter. Senator COUZENS. Did your bank, after the enactment of the R.F.C. Act or the Home Loan Act, take advantage of those acts? Mr. MILLS. We tried to at the end, just before the Michigan bank holiday was declared. That was the first time we ever applied. We never applied for a loan from the National Credit Corporation, and on February 12 and 13, 1933, was the first time we ever applied to the R.F.C. for a loan. Senator COUZENS. But in 1931 you were very much alarmed, and your directors were, and you were urging upon the President to call a special session of Congress for the enactment of the R.F.C. or the War Finance Corporation Act, or something along that line, and you were also urging the enactment of the Home Loan Bank Act, and then shortly after that, within a few months, those acts were passed and they were organized and went on for nearly a year, and you did not avail yourselves of either of those laws after urging their enactment. I am curious to know why. Mr. MILLS. In the first place, the home loan bill, as it passed, did not offer us the help and the avenue that we thought, or at least that I thought, it should. It was not in a form we had hoped it would be. tor. Senator COUZENS. I protested the form in which it went through. Mr. MILLS. I think you protested the entire act, as I recall, Sen Senator COUZENS. I proposed to set up a home-loan division in the R.F.C. for a billion dollars of those mortgages, but the Congress, although the Senate at one time had voted for the setting up of a bureau in the R.F.C. to relieve half a billion, reversed themselves and set up a bank which I understand did not do anybody any particular good out there. Mr. MILLS. But as to your question about the R.F.C., there were several reasons that we did not apply to the R.F.C. board. In the first place, we were running along, with our liquidity going off a trifle, but very little. I think the R.F.C. rate at that time was 5 percent. We did not wish to burden our depositors or our institution with that interest charge until we needed to. We had thought that if we ever needed help from the R.F.C. we could get a reasonable amount from them, and I was more interested in having them as reservoirs if we needed help-just like a fire hydrant in front of the house. Senator COUZENS. Of course, any time along in 1932 or January 1933, you could have borrowed up to 90 or 100 million dollars of those very mortgages that you had some $153,000,000 of, as I recall? Mr. MILLS. We could have asked for a loan. I do not know whether we could have had it or not. When we asked for it we did not get it. Senator COUZENS. You asked for it after the crisis began. Senator COUZENS. Yes; I understand that. But with respect to the so-called "Dawes Bank ", you remember that it was in June 1932 that Dawes got his loan, secured by what everyone at that time thought and many now think was adequate security. You could have gotten the same amount in 1932 or up until January 1933 with adequate security. There was no limitation beyond a hundred millions. Mr. MILLS. But the Dawes trouble had arisen. He had a fire in his house right then and there. We did not. Our fire did not come until the 11th day of February, so far as I knew anything about the fire; and, besides, this burden of interest on a substantial loan would have been terrific to have placed on our depositors for the institution to absorb; and there was also this matter of publicity, which did not help, in my judgment, any institution. Senator COUZENS. Of course, there was no publicity when Dawes got his loan. Mr. MILLS. Yes; but the Dawes house was on fire at the time. Senator COUZENS. But there was no publicity when the Union Guardian Trust Co. got their first loan, was there? Mr. MILLS. It was in the report filed by the R.F.C.; the monthly report filed by the R.F.C. Senator COUZENS. It was not until after June 1932, when Congress, by special enactment, made those loans public? Mr. MILLS. That is correct. Mr. PECORA. As bearing on the banking situation that existed toward the latter part of 1931 and to which reference is made in the various letters that have just been offered in evidence, I show you what purports to be a photostatic reproduction of a letter addressed to you by Senator Vandenberg. Will you look at it and tell me if you recognize it to be a true and correct copy of a letter received by you on or about the date that it bears? Mr. MILLS. Yes; that is a letter apparently that I received from Senator Vandenberg. Mr. PECORA. I offer it in evidence. The CHAIRMAN. Let it be admitted. (Photostatic copy of letter dated Dec. 7, 1931, addressed to Mr. Wilson W. Mills from Senator Vandenberg, was received in evidence and marked "Committee Exhibit No. 149, Feb. 6, 1934.") Mr. PECORA. Did you, following the receipt of that letter, address a letter Mr. MILLS. May that letter be read? Mr. PECORA. I am going to read them both. Mr. MILLS. I beg your pardon. Mr. PECORA. Did you address a letter to Senator Vandenberg by way of reply, and of which I show you what purports to be a photostatic reproduction? Mr. MILLS. I believe that is without question a letter I addressed to Senator Vandenberg. Mr. PECORA. I offer it in evidence. The CHAIRMAN. Let it be admitted. (Photostatic copy of letter dated Dec. 10, 1931, addressed to Hon. Arthur H. Vandenberg from Wilson W. Mills, was received in evidence and marked "Committee Exhibit No. 150, Feb. 6, 1934.") Mr. PECORA. I will read both letters, which have been marked, respectively, as Committee Exhibit No. 149 and Committee Exhibit No. 150. Exhibit No. 149 reads as follows [reading]: COMMITTEE EXHIBIT NO. 149. UNITED STATES SENATE, COMMITTEE ON FOREIGN RELATIONS, DECEMBER 7TH, 1931 Mr. WILSON W. MILLS, Detroit, Mich. MY DEAR MR. MILLS: I am anxious to know just what has happened in connection with the Bay City banks. When the first of these banks closed in September, I was under the impression that the others were in fair condition. But now two more of these Bay City banks have closed within the week. I am wondering to what extent the Federal Reserve Bank functioned in this emergency. I am also wondering whether the National Credit Corporation was called upon for aid. The latter phase seems to be particularly important as a matter of psychology. We cannot expect Michigan depositors to maintain their new confidence-born of the creation of the National Credit Corporation-if there are major closings subsequent to its organization. Do not let this inquiry be any burden upon you. But if you have any information I shall appreciate hearing from you. I have a meeting this afternoon with the Comptroller on the general proposi tion that he has numerous examiners who are needlessly willing to have banks close; and that he has numerous receivers who are needlessly unwilling to have them reopen. It seems to me that there is a prime necessity in putting every possible impulse at work to reopen these banks that have closed. But I fail to find any constructive contribution which the Government is making to this end. On the contrary, it is my observation that some of these receivers are more interested in prolonging their jobs than they are in rescuing the banking function. Incidentally, I strenuously object to the policy of the Comptroller in bringing in professional receivers from outside the state. It strikes me as being a new species of "carpetbagging". With warm personal regards and best wishes, Cordially and faithfully, (Signed) A. H. VANDENBERG. The reply letter, marked "Committee Exhibit 150", reads as follows [reading]: COMMITTEE EXHIBIT No. 150. Honorable ARTHUR H. VANDENBERG, United States Senate, Washington, D.C. DECEMBER 10, 1931. MY DEAR SENATOR: I have your letter of the 7th. I happen to know a little about the Bay City situation. As you undoubtedly know, the two banks that were closed in Bay City, one the First National Bank and the other the Bay County Savings Bank, were both owned by Mr. William L. Clements and his associates. Those banks were both in the same building and as I understand it were identically owned. When the situation arose in Michigan of surety companies ceasing to write bonds covering deposit of public funds, some $600,000 of public funds deposited in the institutions were guaranteed by responsible directors of those institutions and when the final show-down came these individuals felt they could not put up any additional funds to tide the bank over on account of their previously having guaranteed these public funds. The Bay County Savings Bank had borrowed a fair amount from their Detroit correspondent which was properly collateralled. The First National Bank of Bay City likewise borrowed from its correspondent and had borrowed from the Federal Reserve Bank (the savings bank was not a member of the "Fed.") the sum of $185,000 on governments and $46,000 on commercial paper. I am told they had approximately $150,000 of other commercial paper upon which they could have borrowed from the "Fed". They had practically exhausted their borrowings on government securities as the remainder of the government securities owned were posted to secure circulation, Philippine deposits and the like. I believe what finally brought the roof down was that the national bank examiner told the First National Bank that they would have to write off some $350,000 of assets and while the First National Bank could have borrowed some additional funds from the Fed on their eligible paper this request of the National bank examiner amounted to the handwriting on the wall-particularly as the stockholders could do nothing of consequence after previously guaranteeing the public funds. A meeting was held in Detroit between Mr. Clements and his associates and Mr. Davidson of the remaining bank in Bay City at which Mr. Davidson offered to help provided help were forthcoming from the principal stockholders of Mr. Clements' banks, who for the reasons I have stated decided they could not go along any further. As a result the banks failed to open. The two closed Bay City banks had sometime ago joined with the other bank in Bay City in a public announcement to the effect that they had adopted a resolution to join the National Credit Corporation, but neither closed bank had actually joined or signed and subscription, nor did either of the closed banks make any application for assistance to the National Credit Corporation. I do not know what good it did by having the Federal examiner make this demand for a write-off except to stop some preferential payments but I would say that some preferential payments might better have been made than to have, as I was informed today, approximately 50 or 60 percent of Bay City people tied up in the closed banks. The situation in Bay City today as a result of the closing is pretty bad. Many people only have a very few dollars and I don't know what can be done. You will be interested to know that Mr. Davidson's bank, the Peoples Commercial, and only remaining bank in Bay City stood the shock in splendid fashion. They had a run but it has now subsided and yesterday showed a slight increase in deposits. |