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The CHAIRMAN. It may be admitted in evidence.

(A photostatic copy of the minutes of the governing committee of the board of directors of the First National Bank, Detroit, held on Dec. 30, 1932, was marked "Committee Exhibit No. 180, Feb. 8, 1934 ", and will be found immediately following, where read by Mr. Saperstein.)

Mr. SAPERSTEIN. The minutes which have been received as Committee Exhibit No. 180, are as follows:

A special meeting of the governing committee of the board of directors of the First National Bank, Detroit, was held on Friday, December 30, 1932, at 2 o'clock a.m.

Mr. LEYBURN. That should be p.m.

Mr. SAPERSTEIN. But it says a.m.

Mr. LEYBURN. Very well, but I know that it was actually p.m.
Mr. SAPERSTEIN. You know that it was p.m., do you?

Mr. LEYBURN. Yes. I was there.

Mr. SAPERSTEIN. All right. I continue reading:

The following members were present:

Messrs. William T. Barbour, Julian P. Bowen, Emory W. Clark, John B. Ford, Jr., James S. Holden, James McMillan, Wilson W. Mills, Truman H. Newberry, Leo M. Butzel.

Also Mr. Alfred P. Leyburn, chief national bank examiner in charge of the seventh Federal reserve district and Mr. R. S. Beatty, national bank examiner in charge of the current examination of the First National Bank, Detroit.

Mr. Wilson W. Mills presided and Mr. J. M. Dodge acted as secretary of the meeting.

BANK EXAMINATION

The comments and recommendations of the examiners, covering the second regular examination of the bank for the year 1932, were read to the committee and thoroughly discussed.

It was recommended by Mr. Leyburn, and approved by the committee, that an immediate charge-off be made of bad and doubtful assets, totaling $6,000,000. Of this amount, $818,206.43, was to be applied against defaulted bonds and the remainder against loans, the selection of which was to be made by the bank officers and reported to the examiner.

Mr. Leyburn recommended, and the recommendation was approved by the committee, that no further public dividends be declared without the prior approval of the Comptroller of the Currency.

Mr. Beatty, examiner in charge, commented on the fact that his examination showed a much improved condition in the bank operations; that considerable effort was being put forth and its results were apparent; and that the bank management had established a much better control over the entire operation than heretofore.

There being no further business, the meeting, on motion, adjourned.
J. M. DODGE, Secretary.

Are these the minutes you referred to?

Mr. LEYBURN. Those are the right names, but those minutes and the minutes of the meeting of June 10, 1932, are absolutely false. They do not show that we discussed the precarious condition of that bank with the directors. And I am going to discuss that further on in my statement.

Mr. SAPERSTEIN. Will you be a little more specific as to the respects in which the minutes are false?

Mr. LEYBURN. Does it say anywhere in those minutes that we ever mentioned $49,000,000 of losses to them?

Mr. SAPERSTEIN. Is this statement correct:

Mr. Beatty, examiner in charge, commented on the fact that his examination showed a much improved condition in the bank operations; that considerable effort was being put forth and its resuits were apparent; and that the bank management had established a much better control over the entire operation than heretofore.

Mr. LEYBURN. That statement is correct. He did make that statement.

Mr. SAPERSTEIN. But you say the minutes do not show something that transpired in addition to that, do you?

Mr. LEYBURN. They do not. The minutes of neither one of these meetings show those things.

Mr. SAPERSTEIN. The other meeting which you refer to is the meeting of June 10, 1932?

Mr. LEYBURN. That is right.

Mr. SAPERSTEIN. The meeting following your first examination of the merged bank?

Mr. LEYBURN. That is right.

Mr. SAPERSTEIN. I have before me what purports to be a photostatic copy of the minutes of a meeting of the governing committe of the board of directors of the First Wayne National Bank of Detroit, held June 10, 1932. Mr. Chairman, I offer them in evidence. The CHAIRMAN. Let them be admitted.

(A photostatic copy of the minutes of a meeting of the governing committee of the board of directors of the First Wayne National Bank of Detroit, held on Friday, June 10, 1932, at 2 p.m., was marked "Committee Exhibit No. 181, February 8, 1934", and will be found immediately following where read by Mr. Saperstein.) Mr. SAPERSTEIN. The minutes, which have been received in evi dence as Committee Exhibit No. 181, as of this date, are as follows:

A meeting of the governing committee of the board of directors of the First Wayne National Bank of Detroit was held on Friday, June 10, 1932, at o'clock p.m., in the directors' room of the Detroit Bankers Co.

The following members were present: Messrs. F. M. Alger, Julian P. Bowen, Emory W. Clark, John B. Ford, Jr., Ralph Gilchrist, James S. Holden, James T. McMillan, Wilson W. Mills, Truman H. Newberry, Wesson Seyburn, E., D. Stair, Oscar Webber, and Messrs. John R. Bodde, vice chairman of the board; Herbert L. Chittenden, chairman of the executive committee; T. W. P. Living stone, vice chairman of the executive committee; Donald N. Sweeny, president: J. F. Verhelle, comptroller of Detroit Bankers Co. Mr. Wilson W. Mis presided.

NATIONAL EXAMINERS

Messrs. Leyburn and Utt, chief national bank examiner and examiner charge, were present and reported the result of their examination. They reco mended that the bank do not declare a quarterly dividend in excess of $230 per share upon its stock. The general matter of organization of the bank ar the like were discussed.

At this point in the proceedings, Messrs. Bodde, Chittenden, Livingstone. Sweeny, and Verhelle left the meeting.

QUARTERLY DIVIDEND

Upon motion, duly made and seconded, it was determined to recommend to the board of directors of the bank that a quarterly dividend be declared in the sum of $2 per share.

AMERICAN STATE BANK MORTGAGES

The chairman brought up the matter of taking over certain American State Bank mortgages into the account of the bank. As a matter of policy this was approved, and subject to similar action on behalf of the executive committee and the mortgage loan committee, the bank was authorized to take over these mortgages, the specific mortgages now to be taken over to consist of 88 mortgages bearing interest at the rate of 7 percent, having a present balance of $73,668.74, having been paid down from an original amount of $228,861, and having a present valuation of the properties of $418,000, and upon which interest and principal payments have been promptly made.

BRANCH BANK CLOSINGS

The chairman requested authorization for the closing of the following nine branches: no. 67, Forest-Cadillac; no. 113, Sherman-Chene; no. 153, WarrenWalton; no. 168, Grand River-Trumbull; no. 207, Gratiot-Jos. Campau; no. 210, Cass-Grand River; no. 217, Adams-Woodward; no. 218, Chene-Harper; no. 49, West Jefferson-Dearborn, which upon motion duly made, seconded, and unanimously adopted, he was authorized to proceed to close.

There being no further business, the meeting, on motion, adjourned.

Now, do these minutes correctly set forth what transpired at that conference or meeting so far as the national bank examiners were concerned?

Mr. LEYBURN. They do not.

Mr. SAPERSTEIN. In what respect do they fail to set forth what transpired at the meeting?

Mr. LEYBURN. There is nothing there about either the $49,000,000 or the $45,000,000. There is nothing in there that we told them about the condition of the bank. There is nothing in there that we told them that if any dividend was declared it would be on their own responsibility, and it would be questioned as to legality.

Mr. SAPERSTEIN. Now you may go ahead with your statement. Mr. LEYBURN. When it was ascertained that the Reconstruction Finance Corporation would not grant a loan to the Union Trust Co., on the Saturday before the banking holiday, I called Mr. Mills over to the Detroit Club and told him the situation in the Guardian Group. He was rather peeved because I had not told him sooner. But you must remember that there might have been a chance to get the loan, and they were competitors, and one could not put himself in the position of giving the condition of a rival bank.

After the banking holiday Mr. Davidson, of New York, came to Detroit, but I do not know at whose request. A meeting was held at the Detroit Club the morning he arrived, and I and Examiner Sedlacek were present. There were present also: Mills, of the First National Bank; Sloan, of General Motors; Walter Chrysler, of Chrysler Motors; Leobolt, the secretary of the Ford Motor Co.; and probably 10 or 12 others whom I do not remember at this time.

The question came of some plan of reorganizing the Guardian National Bank and the First National Bank. I stated that any reorganization should be on a sound basis and that the town needed some banking facilities. Mills got up and commenced to tell what a swell bank he had. I think he said it was 80 percent liquid, or words to that effect. I stood for that just about as long as I could, and I got up and said that his statement was misleading, and told them what kind of a monkey house he did have over there. That is

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the time, or the next day, that some one stated that remarks I made made a chill run up the spine of some of his departments. The chill should have run up his spine, as a matter of fact. The bank was never 80 percent liquid. It was really 25 percent. They even had to borrow to make the 5 percent disbursement during the banking holiday. In his bond account alone $52,948,500 was pledged, which included $44,606,000 Liberty bonds.

Mr. SAPERSTEIN. Did you take issue with him then and there? Mr. LEYBURN. And how! I would take issue with him now if he were here. I stated that the large amount of real-estate mortgages which the bank had-approximately 60,000 separate mortgages, totaling about $156,000,000-was not desirable for a commercial bank. The next time I made the statement I said they were no good.

It was proposed during the holiday that Henry and Edsel Ford subscribe approximately $11,000,000 new capital to make possible the organization of two new banks to take the place of the First National and the Guardian National Bank of Commerce. It was also contingent upon an R.F.C. loan of $100,000,000 to the First National Bank and approximately $35,000,000 to the Guardian National Bank, which would have made an initial payment to the depositors of around 50 percent. Later on the R.F.C. reduced its offer so that they could not disburse 50 percent. The Ford interests would not go through with any plan that contemplated payment to depositors under 50 percent, and that plan fell through. It was the hope of Mr. Mills that he could be president of the new bank, but the Ford people would have nothing to do with him in that direction.

The next plan was to reorganize the First National Bank, provided they could obtain a loan of $20,000,000 from a bank or banks in New York City and rediscounts of around $4,500,000 from the Federal Reserve Bank of Chicago. Mr. Mills, of course, was anxious to be president of this reorganized bank. The New York banks claimed that it was questionable if the First National Bank could transfer any of its assets during the banking holiday for a loan, and so the loan was not granted and this deal fell through.

It has previously been testified-and there is no question that they knew what they were talking about-it was testified by Mr. Edsel Ford and others, that Mr. Henry Ford stated that if the Union Trust Co. was not taken care of he would withdraw his deposit out of the First National the minute the bank opened, which was ap proximately $20,000,000. The bank, furthermore, would have been faced with withdrawals of $20,000,000 from other banks outside of Detroit. If that bank had been permitted to open the day following the bank holiday, you can see they would be ruined right away. Forty million dollars would have gone up, and all that would have been left would have been just a shell. So we could not let that happen. That is probably about the most sensible thing I ever did. They have claimed consistently that no criticism has ever been made of their real-estate loans by a bank examiner. If you would look into the report of examination of May 1932, there is a long page that reads like this:

917 real-estate mortgages subject to redemption.

672 real-estate mortgage foreclosures..

66 land contracts being foreclosed_

Other real-estate loans, interest past due more than 6 months, num-
ber of items 929; past due as to interest or principal or both_-
Land contracts past due as to interest or principal or both.
Real-estate mortgages where interest is in default only, total of
interest due...-

I am not adding up these totals.

$6,065, 000

3, 580, 000 601, 705

5,051,233 1, 355, 195

450, 369

Other real estate at this examination amounted to, in addition to banking house equity and sites, $8,398,325. These items total $25,031,458.

In addition to that, they carried an equity in the banking house of $18,071,495. There is the answer to the statement that we never criticised the real-estate loans.

Early in 1932 the First National Bank advanced $150,000 to the Detroit Bankers Co. to meet current expenses. This was carried as a "suspense item " on the books of the First National Bank. At that time the banks of the group were still paying dividends.

Then they had another outfit there called the First National Co., that you have heard a lot about. They had total liabilities and assets of $9,513,613.

The statement which I have before me is of November 18, 1932. It shows cash, $3,711.90; investments, book value, bonds, $757,292.44; stocks, $1,670,620.23; Detroit Bankers Co., trustee account, $1,143,033.24; State bank stocks, $5,791,974.80; notes and accounts receivable, $146,980.47; total assets, $9,513,613.08.

You come to the liability side with a capital of $1,000,000 and a surplus of $522,556.02 (red). That outfit was borrowing $8,749,000. That is their total borrowings besides accounts payable of $287,151, You people have gone into that pretty thoroughly.

Senator COUZENS. What were the total liabilities?

Mr. LEYBURN. Including capital?

Senator COUZENS. No.

Mr. SAPERSTEIN. Without including capital.

Mr. LEYBURN. Over nine million dollars. That is borrowed money. The borrowed money was from the Detroit Bankers and the First National Bank. As a matter of fact, the notes payable to the First National Bank amounted to $400,000, and there was another note for $979,000. Then, from the Detroit Bankers Co. they borrowed $7,370,000.

Of this $7,000,000 loan I mentioned that they had with the Detroit Bankers Co., they charged off in 1932 at various times $3,100,000.

Senator COUZENS. Who charged it off?

Mr. LEYBURN. The Detroit Bankers Co., in 1932, $3,100,000. I am sure that is correct.

Senator COUZENS. How did you get those Detroit Bankers Co. figures?

Mr. LEYBURN. I got them from the statement that we got during the examination.

Senator COUZENS. You did not examine them, did you?

Mr. LEYBURN. No; I had no power to examine affiliates at that time. I wish we had the power.

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