Mr. MILLS. Not at the time of the examiner's report in December. It became hypothecated in January, but it was not hypothecated then.

Senator COUZENS. You mean it became hypothecated in January 1933?

Mr. MILLS. Yes, sir.

Senator CouZENS. Was that the first time the First Detroit Co. stock was hypothecated?

Mr. MILLS. To the best of my knowledge and belief; yes, sir. Senator COUZENS. When Mr. Pecora started to question you you got switched off from the First National Co. to the First Detroit Co. Mr. MILLS. Yes, sir.

Senator COUZENS. Through an error. Was the condition of the First National Co. such that it could have been liquidated in the interest of revenue for the Detroit Bankers Co.?

Mr. MILLS. I don't believe so. I was a director of the First National Co. for just about 1 year. I resigned as a director of the First National Co. in October of 1932, having been a director for about 1 year, and I am quite certain that the First National Co. could not pay all its debts.

Senator COUZENS. A while ago you said that the assets of the First Detroit Co. were such that they could have been liquidated. Could they have been liquidated without a substantial loss?

Mr. MILLS. Well, I question, Senator what you mean by loss, whether you mean over cost or over book value.

Senator COUZENS. Over the the book, of course, because you say they had set up reserves.

Mr. MILLS. They had these reserves they had set up. I have every reason to believe the First Detroit Co. assets could have been liquidated for over a million dollars.

Senator COUZENS. And what was the book?

Mr. MILLS. Well, it showed a capital of $800,000, surplus of $200,000, undivided profits of $116,000, and reserves to meet the shrinkage in inventory of $466,000.

Senator COUZENS. What I was trying to get at was, what was the inventory?

Mr. MILLS. In dollars, total?

Senator CoUZENS. Yes.

Mr. MILLS. I don't know. I can secure it.

Senator COUZENS. Of course, that is about all that could be liquidated, because undoubtedly the stock could not have been liquidated, because the stock in itself did not have any particular value.

Mr. MILLS. I know, but they could have liquidated its inventory. Senator COUZENS. Yes; that is what I was trying to get at. What was the extent of the inventory and in what fashion could it have been liquidated under that market?

Mr. MILLS. It could have been liquidated quite promptly, in my judgment, and would have netted over a million dollars.

Senator COUZENS. That in itself, of course, would create a sub

stantial loss, wouldn't it?

Mr. MILLS. To the First National Co.?

Senator COUZENS. Well, the Detroit Bankers Co., which was the parent of the First Detroit Co.

Mr. MILLS. No; I think not, because the capital of the First Detroit Co. and the surplus, which I was informed-I did not know anything about it originally--I have been informed when it was paid in it was only a million dollars. So I do not believe there would have been any loss. I do not know what it cost the Detroit bankers originally. I was not part of that party.

Mr. PECORA. Mr. Mills, do you recall that eventually the Detroit Bankers Co. entirely wrote off or reduced to the nominal sum of $1 the note which it held of the First National Co. for $7,000,000?

Mr. MILLS. I don't recall that it was written off entirely, Mr. Pecora. In fact, my memory is that it was written down to the amount of I beg your pardon; are you speaking of the Bankers Co. or the bank?

Mr. PECORA. The Detroit Bankers Co.

Mr. MILLS. I believe it was written down to a dollar. thinking of the bank; I beg your pardon. I believe it was. not certain. I believe it was.

Mr. PECORA. That is our recollection.

Mr. MILLS. You will forgive me for talking about the bank.

I was
I am

Mr. PECORA. All right. Mr. Mills, I show you what purport to be photostatic reproductions of some handwriting on five sheets of paper. Will you look at them and tell me if the handwriting there shown is your handwriting?

Mr. MILLS (after examining document). Yes, this is my handwriting.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted.

(Photostat of five sheets of handwriting were thereupon designated as one exhibit "Committee Exhibit No. 138, Feb. 6, 1934 ", and appear in the record immediately following where read from by Mr. Pecora.)

Mr. PECORA. Do you recall as of what time you wrote what purport to be memoranda on these five sheets which have been received in evidence as committee's exhibit no. 138? See if there is anything there that suggests the date to you, because I fail to find any date on it.

Mr. MILLS. This, I believe from the looks of it, is notes made by me at the time that the examiner was discussing with the governing board his May examination.

Mr. PECORA. May 1932 examination?

Mr. MILLS. Yes. That is my belief.

Mr. PECORA. And those were notes that you jotted down with reference to the subject matter of the discussion?

Mr. MILLS. The subject matter of the discussion or items that had occurred to me to write down to look into or to have something done. Mr. PECORA. To follow up?

Mr. MILLS. To follow up. There may have been some of my thoughts as well as the examiner's, some of his.

Mr. PECORA. At the top appear in one section of this exhibit no. 138 the name "J. L. White ", under that the initials "D.M.S.", and under that the name 66 Wise Chrome." Do you recall to what that

related?

Mr. MILLS. Why——

Mr. PECORA. First let me ask

Mr. MILLS. Yes.

Mr. PECORA. To whom do the initials "D.M.S." refer?

Mr. MILLS.D.N.S.". I believe.

Mr. PECORA. Well,

D.N.S."

Mr. MILLS. I don't blame you for not reading my handwriting. "D.N.S." referred to Mr. Sweeny.

Mr. PECORA. Donald N. Sweeny?

Mr. MILLS. Yes, sir.

Mr. PECORA. Do you know the occasion for jotting down this memorandum?

Mr. MILLS. Yes: I think I know that.

Mr. PECORA. What was it?

Mr. MILLS. The examiner stated that he had heard that there were some-how shall I state it?-unethical or wrongful practices—I will put it that way—in the bank, particularly affecting Wise Chrome Steel. Senator Newberry and I were both present at the meeting, and the Senator stated to the examiner that we were fully aware of that, that a special committee had been appointed, that the matter had been thoroughly gone into and a complete exoneration given. We explained to him that the Wise Chrome note had been initialed by Mr. Sweeny, had previously apparently been authorized by the board of directors upon a credit statement, and that Mr. Sweeny had not been a director when certain of those notes were originally made. Senator CouZENS. Was not a director of what?

Mr. MILLS. Of the bank at the time of the original inception of those notes. That is covered in his affidavit also. The examiner said, "Well, all right. I am glad to have taken care of that matter." I believe that is to what it refers.

Mr. PECORA, Who is the J. L. White referred to in that portion of the memorandum?

Mr. MILLS. I am not sure whether we had a man working for the bank by that name or not. I am not sure. We may have had an employee working for the bank by that name. I am not certain, Mr. Pecora. It brings nothing to my mind at any rate.

Mr. PECORA. Now, the next note appearing on this exhibit, no. 138, in your handwriting, as I read it, is "New officers." What does that refer to?

Mr. MILLS. At that time the bank in my judgment-and for once I fully agreed with the examiner-needed to be organized. As I say, before that time there had been different offices in connection with the main office. They had not been coordinated, and the examiner suggested that it would be well to have some new blood in the institution and possibly the elimination of certain gossip there. That is to what that refers.

Mr. PECORA. Then follows a memorandum which, as I read it, says "40-50 million dollars losses."

Mr. MILLS. May I see it?

Mr. PECORA. Is that a correct rendition of that note?

Mr. MILLS. It says " 40-50 million losses." My recollection of that is that he said, "You have on your books here items which I classify as doubtful. They may develop into losses. They may not. We do not know what will develop with those items."

Mr. PECORA, Who made that statement?

Mr. MILLS. The examiner.

Mr. PECORA. Who was it? Was it Mr. Leyburn or was it the field examiner?

Mr. MILLS. I think Mr. Leyburn did-Mr. Leyburn did most of the talking, not all of it, but he did most of it.

Mr. PECORA. The next notation reads, as far as I can decipher it, first," Brokers and banks "is that?-"212,000."

Mr. MILLS. Might I stand here and look at it?

Mr. PECORA. Yes.

(Mr. Mills looked at the exhibit with Mr. Pecora.)

Mr. PECORA. "Brokers and banks, 212,000."

Mr. MILLS. "Brokers and " either "banks" or "bankers loans. 212,000; officers and employees loans, $1,971,000; commercial, $8.750.000."

Mr. PECORA. 570.

Mr. MILLS. 570. The next item means 66 Wayne Home." That was one of the offices, a branch office, "$925,000." "Fisher "—I presume that would mean the Fisher office-“ 637.”

Mr. PECORA. Thousand?

Mr. MILLS. Thousand. "Peoples Wayne County claims, 329,000. First National, 2,838,000. Peoples Wayne County brokers and banks or bankers, 155,000. Claims, 4,474."

Mr. PECORA. What did this memorandum mean?

Mr. MILLS. I presume-it is difficult to remember; some of that I can remember-he said, "You have loans in this bank and under those classifications, and there are loans "-either he said "doubtful", or "that require some special looking after." Something of that sort.

Mr. PECORA. They were notes made by you during the discussion, based upon the examination of May 6, 1932, with the examiner, were they not?

Mr. MILLS. Yes.

Mr. PECORA. These notes were based upon what the examiner said? Mr. MILLS. And remarks or thoughts that I had at the time, and would interpolate anything that came along.

Mr. PECORA. This last notation, reading "Claims, $4,474,000 ”, does not of itself explain itself. Will you explain it and tell us what kind of claims were referred to there?

Mr. MILLS. We had a department of the bank known as "special loans or claims." It was called either way. It may be that at that time we had two; for a long time we had two of those departments. may refer to one or it may refer to both of them. There were more than those items.

It

Mr. PECORA. Loans in ordinary routine that were unpaid were sent to the claims department for action, were they not?

Mr. MILLS. Some went there before.

Mr. PECORA. As a rule, did not that action precede the writing off of the loans?

Mr. MILLS. Frequently, very frequently; but, on the other hand, I know of many cases that I can tell you of where items have come back, after they have gone to claims. I mean, the note has been made good or liquidation has been had.

hose who the 25 that eziene for the marg. mil YANMAR Jey. He mated that be destrei tarred of, 85 fore, and it shows $2.600.000, which, as I A he wished charged off, and he wished it charged off He was a-ked which items he wished charged off, You pick out from your loans and discounts those that you computer the worst and advise me before Tuesday ”, either_that The charge off had been made or as to what the items were. I am tbord to think it was that the charge-off had been made. Jouw the items because it took some time to pick out the items. M Pecoms That charge off was made, was it?

He

Mb Murs Oh, yes. It was made within the time he stated that It should be made.

Af Pecoms The next item appearing on these memoranda reads as followe

My colleron is that at the time of the consolidation of the En & Noral Bank and the Peoples Wayne County Bank into the coral Rank wain spe reserves were st Nelieve at this time that this THUG