Mr. WILSON. I mean of bank examinations. You have a State bank examination and you have Federal Deposit Insurance examiners, and you have national bank examiners, and you have Federal bank examiners, and you have R.F.C. examinations. Certainly the Government agencies ought to be able to adopt one form of exami nation to be used by all departments and thus eliminate the exce cost and the time of these examinations.

The CHAIRMAN. Don't they cooperate in any way?

Mr. WILSON. Oh, they cooperate, probably, Senator Fletcher, but they still have their examiners.

Mr. SAPERSTEIN. Go ahead with your recommendations.

Mr. WILSON. Another recommendation I have here is that no bank should be permitted to pay a dividend until it has received the ap proval of its supervising authority-I mean in the matter of the declaration of every dividend. That is could only be paid after it had been approved. As to member banks, probably the Federal Reserve Board; and as to national banks, probably the Comptroller of the Currency; and as to nonmember State banks, I believe now they should go to the Federal Deposit Insurance Corporation, unless you can put them under one camp, which I do not believe you can do today.

Senator COUZENS. Mr. Wilson, have you observed any of the Fed eral Reserve banks showing favoritism toward one community over another?

Mr. WILSON. My observations have been confined entirely to the seventh Federal Reserve district, Chicago. Never in the experience I have had since last April in the reorganization of banks in Michi gan have I had anything but the full and hearty approval of the Federal Reserve Bank of Chicago. And in the matter of the opening of the bank at Flint last week it was necessary to put through certain credits. I called the Detroit branch of the Federal Reserve Bank of Chicago and they kept their books open until 11 o'clock at night in order to be able to complete that transaction that day. I had full 100 percent cooperation at all times.

Senator COUZENS. Then your answer to my question as to whether you have found any favoritism is no?

Mr. WILSON. I have not.

Senator COUZENS. I merely want to say that during the period from March 10 on

Mr. WILSON (interposing). And that is the period I am talking about.

Senator COUZENS (continuing). Evidence has come to me, and it is true that it was not written but oral, that some of the 12 Federal Reserve banks did play favorites as between one community and another, and as between one bank and another.

Mr. WILSON. Well, Senator Couzens, I have failed to find anything like that, and I have been through quite a number of reorganizations in Michigan since April.

Senator COUZENS. That is your observation in the seventh Federal Reserve District, is it?

Mr. WILSON. Yes, sir.

Mr. SAPERSTEIN. Proceed with your recommendations.

Mr. WILSON. The next recommendation is: To prohibit the listing of any bank stocks, or the stocks of holding companies that are

owners of bank stocks, on any exchange, or to even have quotations in the newspapers.

Senator COUZENS. Do you agree with Mr. Mills that a corporation should not hold bank stocks?

Mr. WILSON (after thinking for about a minute). Well, I wonder if you could write a law of that type, one that they could not get around.

Senator COUZENS. Well, I am just asking whether you believe it would be desirable if we could draft such a law. I know that we could not draft a law that Mr. Long could not get around. [Laughter.] But we might draft a law that some others may not be able to get around.

Mr. WILSON. You might draft such a law, but still I believe if a corporation wanted to own stocks they could still own stocks of banks and carry them in the names of trustees or nominees. I do not believe it could be stopped.

Senator COUZENS. If it could be written into a law, do you believe it would be a desirable thing to do?

Mr. WILSON. I would not want to give an offhand opinion on that. I would want to think about it.

The CHAIRMAN. What do you think about holding companies? Do you think they are a subterfuge and device that might well be done away with?

Mr. WILSON. Well, I do not believe a holding company has, over a long stretch, any position in the banking picture in the country. Senator COUZENS. What is your next recommendation?

Mr. WILSON. My next recommendation is to county-wide branch banking. I think under the law it should be limited to countywide, and not State-wide or overlapping State lines. That is due to the difficulty of obtaining the man power required. If the law is not so amended, I think you will see a great influx of State-wide branch banking in the next 5 or 6 years. And I do not think we are ready for it.

Mr. SAPERSTEIN. Go ahead with your next recommendation.

Mr. WILSON. The next one is as to the confusion in your banking systems. I believe it has been spoken of as the "57 varieties." And I do not know how you are going to correct it. It is one of the underlying causes of the weakness of the banking system, with 57 banking systems competing with one another.

The CHAIRMAN. Do you favor a unified banking system?
Mr. WILSON. Yes, sir; very definitely, sir.

Mr. SAPERSTEIN. Go ahead with your next recommendation. Mr. WILSON. The next one is: To prohibit holding-company units. so long as they are in existence, from holding holding-company stock as collateral or borrowing on it in any manner whatsoever. My last recommendation, which probably should have been the first one, is to extend the temporary insurance fund for at least 1 year pending further study. That is very important at this time.

Senator COUZENS. Mr. Wilson, as a general principle, do you believe in the guaranteering of bank deposits?

Mr. WILSON. I am very much in favor of the insurance fund today. The CHAIRMAN. Why not continue the present law for a year and see how it works?

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Mr. WILSON. That is what I am recommending. That you extend the temporary insurance fund for 1 year, until you have made further study of it and see how it works.

The CHAIRMAN. How about standing by the statute for another year?

Mr. WILSON. That is what I say.

Senator COUZENS. I do not think you get the point made by the chairman of the committee. He asked you: Why not let the law remain as it is for another year?

Mr. WILSON. Because you come into the permanent fund the 1st day of July, and banks are not ready to get themselves in position by that time. They will have to have more time.

Senator COUZENS. Mr. Wilson, you have not covered the matter of duplication of deposits. I mean of banks depositing funds in other banks.

Mr. WILSON. No; I have not covered that. I had it down on my memorandum but I haven't covered it.

Senator COUZENS. I think that is one of the most vicious points about bank statements.

Mr. WILSON. Well, my recommendation on that is that all banks carry reserves with the Federal Reserve System, and eliminate this duplication of deposit accounts. Under this plan sometimes you will end up with 10 times the same deposit.

Senator COUZENS. Absolutely. That was happening in all this window dressing, and it would not be possible if they were not per mitted to do that.

Mr. WILSON. Yes, sir. A lot of banks carry reserves with Federal Reserve banks, you know.

Senator COUZENS. Yes; but there are many accounts kept in the big cities, in some banks there, for the purpose of being used as checking accounts.

Mr. WILSON. It could be kept at the Federal Reserve Bank of New York, for instance.

Senator COUZENS. But you would not permit one bank to deposit in another, would you?

Mr. WILSON. No; absolutely not; because it is absolutely a dupli cation, and sometimes it is done as much as 10 times before you get through with one deposit.

Senator COUZENS. So when you have estimated a national deposit of, say, $50,000,000 it may only be what?

Mr. WILSON. It may only be twenty-five or thirty million dollars.
Senator COUZENS. Yes; it might be only $25,000,000.
Mr. WILSON. Yes, sir; that is correct.

The CHAIRMAN. I do not quite get that. How does that come about?

Senator COUZENS. Mr. Chairman, if I were to put $5,000,000 in a Detroit bank today, it can deposit that $5,000,000 in another bank. and then you have $10,000,000, and they can deposit the $5,000,000 in still another bank, and there you have $15,000,000.

Mr. WILSON. Oh, yes. But you can start back before you get to Detroit, and say you put $1,000 in a small county bank, and that might be deposited in a bank located at the county seat, and then that bank might deposit it in Detroit, and then it might be sent to

Chicago, and afterward to New York, and then to Boston, and back to St. Louis, and you run from 5 to 10 times on the same deposit. The CHAIRMAN. I understand that. Now, is that all that you have to say, Mr. Wilson?

Mr. WILSON. That is all, I think, Mr. Chairman.

Mr. SAPERSTEIN. Mr. Wilson, have you anything further to add to the record here, or any further recommendations?

Mr. WILSON. In regard to recommendations I have no more to say at this time. In regard to the operations of the units and loans and investments and mortgages, and whatnot, of the Detroit situation, I could sit here and testify for a week and then I would not be through.

The CHAIRMAN. Then you may be excused, Mr. Wilson.

Senator COUZENS. Just one minute before you leave the committee table. Mr. Wilson, you have examined the most of the nationalbank examiner's reports of the First National Bank unit of the Detroit Bankers Co. since the organization of the Detroit Bankers Co., haven't you?

Mr. WILSON. Up to the time I left as vice president of the Detroit Bankers Co.

Senator COUZENS. What is your general opinion of those reports; are they fair and reasonable?

Mr. WILSON. They were always fair and reasonable, with one exception that I remember.

Senator COUZENS. And what was that exception?

Mr. WILSON. That was at the time of the examination of the First National Bank in May; either in April or May, of 1931. Senator COUZENS. And what was not fair about that?

Mr. WILSON. The field examiner, in making his report, had not gone strong enough.

Senator COUZENS. In other words, instead of being too harsh, you thought he had been too liberal; is that it?

Mr. WILSON. I stated in the executive committee meeting at that time, and Mr. Leyburn was present, and he is here now and can probably recall that I made such a statement-I don't know about that, but I hope he can-and I made the statement to the examiner, after he had told his story, that he was all right as far as he had gone, but that he had not gone far enough.

Senator COUZENS. From your long experience, have you heard of these so-called "yellow sheets" before?

Mr. WILSON. Yes; I have written many of them.

Senator COUZENS. So you were not unfamiliar with the fact that there were confidential reports sent to the Comptroller of the Currency by national bank examiners?

Mr. WILSON. I had known of those reports for years.

Senator COUZENS. And as long as they deal with personalities and the organization, do you not think they are justified?

Mr. WILSON. I think they are justified, and I think they should be continued.

Mr. SAPERSTEIN. That is all, Mr. Wilson, and we thank you.
The CHAIRMAN. You are excused now, Mr. Wilson.

(Thereupon Mr. Wilson left the committee table.)

The CHAIRMAN. Who will you have next, Mr. Saperstein?
Mr. SAPERSTEIN. Mr. Verhelle.

TESTIMONY OF JOSEPH F. VERHELLE, GROSSE POINTE, MICH. SENIOR OFFICER OF THE MANUFACTURERS' NATIONAL BANK OF DETROIT-Resumed

The CHAIRMAN. Mr. Verhelle, do you wish to make a further statement?

Mr. VERHELLE. Yes, sir.

The CHAIRMAN. I think you wanted to reply to some things that have been stated here with regard to your reports, and so forth, and if so, you may now do so, but be as brief as you can about it: condense it.

Mr. VERHELLE. Mr. Mark A. Wilson elaborated to some extent on the nature of the organization there and. as he expressed it, the question of expense was no consideration in the matter of my resigna tion from the Detroit Bankers Co. And it is on that point that I wish to elaborate, as well as on the matter of the First National Co. which was brought up here this morning when Mr. Wilson read a statement in a letter which I did not recall the other day, bat which referred to the fact that the First National group of directors was to hold the Detroit Bankers Co. harmless on our stocks purchased. That was probably the most serious consideration in connection with the Detroit Bankers Co.

Mr. SAPERSTEIN. Are you now referring to securities purchased after the merger had been agreed upon but before the Detroit Bankers Co. actually began to operate?

Mr. VERHELLE. Yes, sir.

Mr. SAPERSTEIN. Can you give us the amount of those purchases! Mr. VERHELLE. The amount purchased, roughly speaking, was about $8,000,000 or a little over. There were State bank stocks totaling $6,900,000, plus another figure of approximately $1,400,000, making a total of approximately $8,200.000.

Senator COUZENS. What did the $1,400,000 cover?

Mr. VERHELLE. Local bank stocks.

Senator COUZENS. Were those local bank stocks bought after the officials of the First National Co. knew of the contemplated organization of the Detroit Bankers Co.?

Mr. VERHELLE. Yes, sir.

Senator COUZENS. So, in effect, the First National Co., because of its prior knowledge of the organization of the Detroit Bankers Co., went out and bought up stock of individual units.

Mr. VERHELLE. Well, as to the cause of it, I suppose that would be a logical conclusion to draw.

Mr. SAPERSTEIN. Were those purchases made with the knowledge and approval of any of the directors, or of those men who were sched uled to become directors of the Detroit Bankers Co.!

of

Mr. VERHELLE. Because of the very heavy problem involved in connection with the burden that the Detroit Bankers Co. was forced to carry. I made a study of it, and found no approval on the part o the board of directors or meetings at which it was provided to carry that through.

Mr. SAPERSTEIN. Was Mr. Wilson's statement correct when he said that none of the members of the board of the Detroit Bankers Co. knew anything about those purchases?