FEBRUARY 28, 1933.

"Mr. J. K. McKEE,

Reconstruction Finance Corporation, Detroit, Mich.

"DEAR Mr. McKEE: I tried to reach you by telephone this evening, without

success.

"At the conclusion of the board meeting today, I was instructed to telephone Mr. Edsel D. Ford and to state to him that the general opinion of the board is that it is inadvisable to go ahead under the proposed plan in which he and his father are interested. I might add, for your information, that this action of our board was unanimous.

"Will you be good enough to communicate this action to the board of directors of the Reconstruction Finance Corporation? I have informed Mr. Ford of the action of our board.

"I am sending a copy of this letter to your office at the Reconstruction Finance Corporation.

"Faithfully yours,

"WILSON W. MILLS, Chairman.”

Mr. MCKEE. Mr. Pecora, I would like to change that answer of mine. Those loans were not made. Similar amounts were in my head that were made later to the conservator, but were not at that time.

Mr. PECORA. Have you, Mr. McKee, at my suggestion caused to be prepared a statement showing the status of loans made by the Reconstruction Finance Corporation to various banks in the Guardian Detroit Union Group as of December 19, 1933?

Mr. McKEE. I think there was such a report prepared.

Mr. PECORA. I show you what purports to be such a report. Will you please look at it and tell me if you identify it as a correct statement of the status of those loans as of December 19, 1933? Mr. McKEE. Although I did not prepare it, this is a copy.

Mr. PECORA. I offer that in evidence.

The CHAIRMAN. It will be admitted and made a part of the record.

(A tabulated statement headed "Status of Loans Made by Reconstruction Finance Corporation to Banks in Guardian Detroit Union Group as of Dec. 19, 1933," was received in evidence, marked "Committee Exhibit No. 79, Jan. 15, 1934," and will be found printed in full at the end of Witness McKee's testimony of this date.)

Senator COUZENS. As I recall your reply to Mr. Pecora's question as to what happened after the banks closed, that is, what happened in relation to the R.F.C., you stated that the money was applied for, that certain moneys were applied for to loan to two new banks that Mr. Ford was to organize; is that correct?

Mr. McKEE. That is correct-excuse me, Senator; not to the banks but to the existing banks. The loan was applied for by the existing banks.

Senator COUZENS. For the organization, however, of two new banks by Mr. Ford, as I understood?

Mr. McKEE. Yes; but the new banks would not assume our

Senator COUZENS. Yes; I understand that. If my recollection is correct, from February 14 on until the time Mr. Ford had agreed to reorganize two new banks, there were negotiations for loans; is not that correct?

Mr. MCKEE. That is right.

Senator COUZENS. You made no reference to those in your reply to the question of Mr. Pecora, did you? You started, as I recall the

recital of the events, beginning with the time that Mr. Ford was to start the two new banks. Were there not some applications prior to that time?

Mr. McKEE. There were applications made on Monday, or tentative applications considered on Monday, February 13. In order to liquidate the First National Bank and the Guardian Bank of Commerce those were considered up until midnight the night of the 13th-that if and when the Union Group would decide to close the Union Trust Co. and the other banks would decide, in face of that fact, to open for business on February 14, they wanted us to make emergency loans to those two banks. Those applications were considered in a tentative way. However, I question whether our board ever acted on them; but we were in position to recommend to our board from Detroit a loan to the First National Bank, if and when requested, and a loan to the Guardian National Bank if and when requested, if those institutions were going to open on February 14.

Senator COUZENS. From February 14 until the time that Mr. Ford had agreed to establish two new banks, under certain conditions, were there any applications made by both the Guardian National Bank of Commerce and the First National Bank?

Mr. McKEE. Not that I recall, Senator, now.

Senator CouZENS. I think there were.

Mr. McKEE. You may be correct on that, Senator, but I just do not recall it now. I do not remember that the records of our corporation indicate that anything was presented to our board. Senator COUZENS. Will you look at the records on that? Mr. McKEE. I will be happy to, Senator.

Mr. PECORA. The report or statement of the status of loans made by the R.F.C. to the Guardian Detroit Union Group as of December 19, 1933, has been received in evidence, marked "Committee Exhibit No. 79" of this date. It shows loans made by the R.F.C. commencing on May 24, 1932; and the last loan appears to have been made on December 16, 1933. That is the last loan shown on this statement. The total amount of loans authorized was $80,382,000, of which amount there was canceled a total of $10,273,204.23. The total amount disbursed up to December 19, 1933, on account of these authorized loans, is stated to be $59,472,236.19, of which there has been repaid $14,377,393.05, leaving a balance due as of December 19, 1933, of $45,094,843.14. Collateral held has an aggregate value of $147,239,849.10.

Now I presume, Mr. McKee, that the value so given to this collateral is the face value?

Mr. McKEE. That is correct.

Mr. PECORA. That is the total interest paid on account of these loans up to December 19, 1933, was $251,822.91.

The CHAIRMAN. As payments are made, is the collateral surrendered?

Mr. McKEE. It is usually made from the sale or reduction of the collateral. In these instances there is no question that most of the repayments have come from the liquidation of collateral pledged, not from other sources.

(Witness excused.)

The CHAIRMAN. The committee will now take a recess until 10 o'clock tomorrow morning.

(Whereupon, at 4:15 p.m., the subcommittee took a recess until tomorrow, Tuesday, January 16, 1934, at 10 a.m.)

Cash guaranty to assure the payment and collection of the double liability on the stock of the Union Guardian Trust Co....

89, 727, 997. 25 5, 000, 000, 00

94, 727,997.25

(Pencil memorandum on reverse side of exhibit:)

"Original sheet of requirements as prepared by Mr. Kanzler."