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Mr. SAPERSTEIN. That is, to the governing committee?
Mr. LEYBURN. Yes,
Mr. SAPERSTEIN. It was not imparted to the directors?
Mr. LEYBURN. Oh, no; to the governing committee.
Mr. SAPERSTEIN. Why wasn't it given to the directors of the bank?
Mr. LEYBURN. Well-

The CHAIRMAN (interposing). Do you mean the First National Bank?

Mr. LEYBURN. This was the merged bank. You could not take a board of directors, which at that time was composed of about 78 men, and discuss a condition like this of a bank and not expect to “ bust the bank, and all smart money go out of it. As a matter of fact, there was some evidence introduced here that some of the directors were talking about what happened in board meetings. Do you remember the letter on yesterday?

Now, when they spoke up, two or three of them, they said: “We figure on about $15,000,000. And that nearly knocked us out of our chairs.

Mr. SAPERSTEIN. About $45,000,000 what?
Mr. LEYBURN. Of losses.

Mr. SAPERSTEIN. Did they tell you what they figured as doubtful or slow?

Mr. LEYBURN. No; I think they just said losses. I will give them the benefit of the doubt on that.

Mr. SAPERSTEIN. Your estimate was $49,000,000 losses, while theirs was $45,000,000 ?

Mr. LEYBURN. Yes, sir. And there was no way to take care of that without busting the bank. And you know what the condition was at that time.

I submitted to the board of directors a statement which showed slow $76.819,369, doubtful $91,138,760, and loss $8,545,777. It was concluded to take out this loss of approximately $8,500,000.

Now, based on that examination, which of course goes to Washington with the yellow sheet on it, the Comptroller of the Currency addressed a letter to the board of directors of that bank, and he said:

Will you kindly review the report at your next board meeting, and thereafter advise this office of the action taken and the progress made in remedying each of the matters mentioned.

And he made particular reference to the $1,000,000 loan to officers, employees, and the management of the bank. Then he went on to say:

The extremely large aggregate of slow and doubtful assets, especially the latter, which are shown at $91,000,000, and other unsatisfactory conditions in the bank, reflect a state of affairs calling for constructive and vigorous action and changed policies with a view to bringing about a marked improvement in the bank's condition as rapidly as this can be accomplished.

Then he went on to say:

Since the contents of the examiner's report and the criticized matters are so self-explanatory, it is believed unnecessary to dwell further herein on the situation in your bank.

Now, President Sweeny replied to that letter of the Comptroller's, about a 3-page letter, and he stated that the report had been reviewed with the governing committee.

Now, granting that it is true, what did he tell the governing committee? If there was any questioning of the report it would go baik to him.

The next examination of the bank, just before the bank holiday, was made November 18, 1932, and was concluded in December. A meeting was held with the governing board around Christmas time. The classifications as shown by the report that went to the directors was: Slow, $78,305,000; doubtful, $83,874,000; loss $6,013,000.

The question of dividends was considered, and they were advised that no dividends should be paid at that time at all, because it would not be legal to do it. To that Truman Newberry took violent exception. And, as you may recall, Truman H. Newberry was elected to the United States Senate once, and he came down here to Washing. ton to take his seat, but found it was crowded. [Laughter.]

Mr. SAPERSTEIN. Can you give us the names of the members of the governing committee who were present at the time?

Mr. LEYBURN. F. M. Alger--well, will you give me a copy of the minutes of that date, because Mr. Stair was not present at this meeting I am sure, and I do not want to do anybody an injustice. I believe you have a photostatic copy of those minutes.

The CHAIRMAN. While Mr. Saperstein is looking for the minutes let me ask you: I think Mr. Mills testified that they never declared any dividend without your approval.

Mr. LEYBURN. I know he did; and I will get to that a little later on. He testified to a good many other things, too.

The CHAIRMAN. That he wanted to centralize authority, I believe, in this combination, and I presume he got that. Then his idea was to reduce the overhead and expenses.

Mr. LEYBURN. Well, he reduced the overhead all right when he raised his own salary the first of the year from $40,000 to $50.00 I think he wanted the distinction of being the only bank in the United States or industrial leader that did it. So he claimed he had a contract, and I don't know whether he did or not, but at least he didn't have to take the money. He could not distinguish between “mine” and “thine” very well, I should think.

Mr. SAPERSTEIN. You are referring to a photostatic copy of the minutes of the governing committee of the board of directors of the First National Bank of Detroit dated Friday, December 30, 1954, are you?

Mr. LEYBURN. That is right. Whoever was present was the gorerning committee.

Mr. SAPERSTEIN. According to the photostatic copy which is enclosed with a copy of your report, the following members were present

Senator COUZENS (interposing). Let us have the report put into the record. As long as that is a photostatic copy of the actual minutes, let us put them in.

Mr. LEYBURN. You see, what they wanted to do was

Senator COUZENS (interposing). Just a minute. Let us get this into the record first.

Mr. LEYBURN. Certainly.

Mr. SAPERSTEIN. I will offer this photostatic copy of the minutes of the meeting of Friday, December 30, 1932.

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 $19,000,000 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 operatia 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 committer 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 eridence 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, 1832, 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 bard; Herbert L. Chittenden, chairman of the executive committee; T. W. P. Livingstone, vice chairman of the executive committee; Donald N. Sweeny, president; J. F. Verhelle, comptroller of Detroit Bankers Co. Mr. Wilson W. Mills presided.

NATIONAL EXAMINERS

Messrs. Leyburn and Utt, chief national bank examiner and examiner in charge, were present and reported the result of their examination. They remended that the bank do not declare a quarterly dividend in excess of $2.10 per share upon its stock. The general matter of organization of the bank and 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. 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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