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Mr. Mills. Yes.

Mr. SAPERSTEIN. Now, during your incumbency of the office of chairman of the board of the Peoples Wayne County Bank, did that bank acquire control of the stock of the Citizens Šavings Bank of Mount Clemens, Mich.?

Mr. MILLS. Control of the stock was deposited with it. But I have a statement on that subject which completely tells the story, if you would like the story.

Mr. SAPERSTEIN. Is that a statement prepared by yourself?

Mr. Mills. No; but I know that the facts are true. It was prepared by an officer of the bank.

Mr. SAPERSTEIN. What officer of the bank?
Mr. Mills. Mr. Robert B. Locke.
Mr. SAPERSTEIN. What was his office in the bank?
Mr. Mills. He was vice president of the bank.

Mr. SAPERSTEIN. Are you prepared to say that the statements contained in that prepared statement are true?

Mr. Mills. So far as I will read them; yes. I will only read matter of which I had knowledge.

Mr. SAPERSTEIN. Can you state first those matters which are within your knowledge!

Mr. Mills. That is what I only intended to tell.
Mr. SAPERSTEIN. Will you please do that.

Mr. Mills. The American State Bank, as I have testified before, was taken over by the Peoples Wayne County Bank under the basis of guaranteeing deposits. The Peoples Wayne County Bank was chosen by the clearing-house banks to undertake the liquidation of the American State Bank. The Peoples Wayne County Bank's interest in the matter was proportionate, as were the proportionate liability of all the other Detroit banks and trust companies.

Mr. SAPERSTEIN. What was the interest of the Peoples Wayne County Bank?

Mr. Mills. Well, that was the largest interest. I do not recall the percentage, but it was the largest individual interest, as it was the largest bank.

Mr. SAPERSTEIN. How many other banks were involved ?

Mr. Mills. Oh, outside of the Peoples Wayne County Bank there was the First National Bank, the Guardian Bank of Detroit, the Na. tional Bank of Commerce as it was then, the Union Guardian Trust Co., the Detroit Trust Co., the Fidelity Trust Co., and I think the Equitable and the Central Trust Cos. That is my recollection of the group. There may have been one or more banks in addition. Oh, yes; the Commonwealth Commercial Bank and the Detroit Sav. ings Bank. All of the Detroit banks and trust companies undertook this guarantee of deposits. It was done through the clearing house, and the liquidation was entrusted to the Peoples Wayne County Bank.

Mr. SAPERSTEIN. When was that?
Mr. MILLS. That was in March of 1931.
Mr. SAPERSTEIN. Now, Mr. Mills, will you go on with your story!

Mr. MILLS. Well, among the assets that we found in the American State Bank was a note of the American Detroit Co. for $981,000. I am giving you only the round figures and that note was secured by

various collateral, including 8,220 shares of the stock of the Citizens Savings Bank of Mount Clemens. This stock was in the name of the American State Bankers Co. Among the assets of the American State Bank was also a note of three gentlement named McGill, Dalby, and Rogers, as trustees, for $141,000, which, in turn, was secured by 2,184 shares of stock of the same Citizens Savings Bank of Mount Clemens. This stock stood in their name as trustees. Eliminating the other collateral of the American Detroit Co. loan, the American State Bank had an investment in the Citizens Savings Bank stock of approximately $800,000. It was thought, because there was no other work back of the American Detroit Bankers Co., and the guaranteeing banks and trust companies soon recognized that we had nothing to look to except the collateral; and we were naturally, and it was our duty, to be desirous of saving the work of the collateral, the value of the collateral, for the depositors of our bank and for the stockholders of the American State Bank; for it might conceivably have reduced their stockholders' assessment if we could have realized anything upon that stock which we held. So we

Mr. SAPERSTEIN (interposing). Did the collateral consist principally of the stock in the Citizens Savings Bank that you refer to?

Mr. MiLLs. Yes.
Mr. SAPERSTEIN. The 8,220 shares of stock?

Mr. Mills. The 8,220 shares were the stock held as security for the American Bankers Co. loan, and 2,184 shares on this trustee note of the three gentlemen, who we were satisfied had no other financial responsibility; and those were loans that had been made by the American State Bank entirely outside of our province. So we determined it was our duty to save that investment that the American State Bank had, in effect, in this Citizens Savings Bank of Mount Clemens. The Citizens Savings Bank of Mount Clemens was, like every other bank in Michigan, experiencing substantial withdrawals of deposits; and in May of 1931 a committee of their directors came down to Detroit and said they would have to have financial assistance. We held a meeting of the guaranteeing banks and trust companies.

Now, they were not all at the meeting, because the American State bank's liquidation was handled by a committee that had been appointed by all of them, and the committee consisted of someone from the Detroit Savings Bank, and from the Fidelity Trust Co., and from the First National Bank, and from the Guardian National Bank, and from the Peoples Wayne County Bank. They were called the liquidating committee, and they were given full power on any questions of policy in the matter of the American State Bank liquidation.

Well, we had a meeting with them, and it was determined at that meeting that the management of the Mount Clemens Bank had not been very strong and that we might consider, at a later time, to change that management. We did not know whether we would or not, and by “we” I am speaking of the representatives of the guarantors. And we

Senator COUZENS (interposing). At that time did you have control of the stock of the bank?

Mr. Mills. No, sir.

Senator COUZENS. What was the amount of the shares outstanding of the Mount Clemens Bank at that time?

175541--34-PT 12-4-10

Mr. Mills. I will come to that in a moment, Senator Couzens.
Senator COUZENS. All right; go ahead.

Mr. SAPERSTEIN. Could you give us the date of this meeting you are now talking about?

Mr. Mills. It was sometime in May is all that I can now say.
Mr. SAPERSTEIN. In May of 1931 ?
Mr. Mills. Yes, sir.
Mr. SAPERSTEIN. All right. You may proceed with your statement .

Mr. Mills. So a group of those directors came down and met with this committee of guarantors, and they said they must have financial assistance or they would have to close up shop. We told them that we would be willing, and by “we” I mean all the guaranteeing banks and trust companies, would be willing to advance to them up to $750,000 upon what collateral-and, in the meantime, I might say that we had made a hasty check of what collateral they had out there, and we were satisfied it would go at least to the extent of $750,000— that we would advance to them up to $750,000, on their collateral, provided they would put up sufficient additional shares of stock, under an agreement, so to speak, of the Detroit banks and trust companies controlling the bank if they ever desired to exercise it.

The agreement, however, provided that that stock, which they then put up, would be surrendered to the bank at any time upon payment of the advances which the clearing-house banks were talking about making to the American State Bank, and upon the payment of this American Detroit Bankers Co. loan, at any time that those loans were paid, with the rate of interest carried on the face of the notes that not only would the stock which we originally held as collateral be surrendered, but also this additional stock which they were talking about putting up, and which was put up.

Furthermore, the agreement provided—and I haven't the agreement here—but the receiver must have it, that agreement provided that at any time after 5 years we would resell all this stock that we then had by way of collateral or otherwise, at varying prices, for a total of which would pay the loan of the American Detroit Bankers Co. In other words, they had 5 years to pay off those loans.

Then the agreement went on to provide further that if they did not pay it within 5 years, and later we wished to sell it, they would have the first option to purchase that stock at any price that we later determined to sell it for.

The CHAIRMAN. There was no general market for that stock at all, was there?

Mr. Mills. Oh, Senator Fletcher, there was no market for it at all. The stock was

The CHAIRMAN (interposing). You would have had to go out and hunt purchasers for it, I take it?

Mr. Mills. We would have had to go out and hunt purchasers for it, and we almost let the thing go at the time, but we had this large investment in it through the American State Bank, and we recognized that probably times might change and it might be well worth the effort to try to save the investment that the American State Bank had in it.

Mr. SAPERSTEIN. That agreement which you have just referred to was made between the Citizens Savings Bank and the Peoples Wayne County Bank, was it not?

Mr. Mills. That is my recollection.

Mr. SAPERSTEIN. These other banks which you have referred to as being guaranteeing banks, were not parties to that agreement, were they?

Mr. Mills. They were not legal parties, but they authorized our going into the agreement.

Mr. SAPERSTEIN. Did they give you that authorization in writing?

Mr. MILLS. Whether they kept minutes, I don't know, but I think they authorized it in writing.

Nr. SAPERSTEIN. Mr. Mills, I show you a paper, dated May 25, 1931, which purports to be an agreement between the Citizens Savings Bank of Mount Clemens, Mich., as party of the first part, and the Peoples Wayne County Bank, of Detroit, Mich., as party of the second part, and ask you whether that is a photostatic copy of the agreement to which you refer. Mr. MILL: (after looking at the paper). I have no doubt that it is.

Mr. SAPERSTEIN. Mr. Chairman, I ask that that may be made a part of the record.

The CHAIRMAN. Let it be admitted.

(An agreement dated May 25, 1931, between the Citizens Savings Bank of Mount Clemens, Mich., and the Peoples Wayne County Bank was marked " Committee Exhibit No. 153, Feb. 7, 1934 ", and will be found immediately following where read by Mr. Saperstein.)

Mr. SAPERSTEIN. The agreement, which has been marked in evidence as “ Committee Exhibit No. 153 ”, reads as follows:

MEMORANDUM OF AGREEMENT made and entered into this 25th day of May, A.D. 1931, between CITIZENS SAVINGS BANK OF MOUNT CLEMENS, MICHIGAN, a banking corporation organized and existing under the laws of the State of Michigan, of the first part, and PEOPLES WAYNE COUNTY BANK, of Detroit, Michigan, a banking corporation organized and existing under the laws of the State of Michigan, of the second part, WITNESSETH:

WHEREAS, second party now controls through loans upon certain shares of the capital stock of the first party a total of 10,384 of such shares; and

WHEREAS, second party desires to control in addition to the said stock so controlled by it an additional 2216 shares of such capital stock so it will control 12,600 shares of such capital stock, and first party has undertaken to deliver to second party or its nominee such 2216 shares,

NOW THEREFORE, in consideration of the premises, first party hereby agrees to deliver to second party or to its nominee with all convenient speed and within a period of ten (10) days from and after the date hereof, such additional shares of capital stock consisting of 2216 shares endorsed in blank and second party in consideration thereof agrees that it will at any time within five years from and after the date hereof cause to be sold and assigned to first party said 10,384 shares of such capital stock at the following prices : $80 per share for 8,200 shares and $63 per share for 2,184 shares, (in each case with interest thereon at the rate of 5 per cent per annum from the date of this agreement, crediting upon such interest any dividends which may have been since the date of this agreement declared and paid upon said 12,600 shares), and in case first party exercises such option and purchases such stock as herein provided, second party will also without further consideration cause to be assigned to first party said 2216 shares of capital stock so to be delivered by first party to second party or its nominee.

IT IS FURTHER AGREED that in case first party does not exercise the option to purchase such stock within five years from and after the date hereof, and second party concludes to sell said stock at a lesser price than provided in said option, then, and in that case, second party agrees before selling said stock to other parties to give to first party the privilege of purchasing said stock at such price as it may be offered by third parties.

AND IN CASE SAID OPTION is not exercised within the time, and pursuat to the terms herein provided, second party or its nominee may retain said 2216 shares absolutely and first party will be foreclosed of all right, title or interest therein. Time is hereby made of the essence of this agreement.

IT IS FURTHER AGREED that, pending exercise of said option by the party of the first part, the party of the second part will extend to the party of the first part a line of credit up to $750,000 by making loans to first party from time to time provided said first party deposits collateral security for such loans of a value satisfactory to the second party, consisting of notes, mortgages, or other property owned by the first party.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written,

CITIZENS SAVINGS BANK OF Mount CLEMENS,
By (Signel) H. J. McGill, President, and
(Signed) CHARLES S. NIEMETTA, Chairman.

PEOPLES WAYNE COUNTY BANK,
By (Signed) DONALD N. SWEENY, Executive President, and

(Signed) A. T. WILSON, Cashier. Mr. SAPERSTEIN. Do you know the name of the cashier at that time? I have trouble deciphering the name here.

Mr. Mills. Probably it was A. T. Wilson.
Mr. SAPERSTEIN. Yes; it seems to be A. T. Wilson, cashier.
Mr. MILLS. All right.

Mr. SAPERSTEIN. This agreement is dated May 25, 1931. Now, were the additional shares of stock referred to in this agreement, namely, 2,216 shares, delivered to the Peoples Wayne County Bank

Mr. Mills. Yes. I was informed that they were delivered, that the agreement was carried out.

Mr. SAPERSTEIN. These shares, together with the ten-thousand-odd shares you had previously held, were sufficient to give you control of that bank, were they not?

Mr. Mills. They gave control; yes.

Mr. SAPERSTEIN. In other words, they gave you 51 percent of the stock.

Mr. Mills. Yes; or over 50 percent, anyway.

Mr. SAPERSTEIN. Now, did the Peoples Wayne County Bank make loans to the Citizens Savings Bank?

Mr. Mills. They did.

Mr. SAPERSTEIN (continuing). Pursuant to the terms of this agreement which I have read!

Mr. Mills. They did. The first loan they made was on June 1, of $300,000. That loan was increased at various times until it got up to $750,000. But I want to call attention to the fact that collateral for that loan consisted of notes, and some bonds, and it also consisted of mortgages, which at that time it was almost impossible to obtain loans upon. We did make loans to them upon various of their mortgages. Finally we went over the $750,000 by way of loans, in an attempt to save that bank, and gave them the maximum loan in November of 1931, when they owed slightly over $1,000,000, which was collateraled.

Mr. SAPERSTEIN. What were the conditions which induced the Peoples Wayne County Bank to increase the amount of the loan beyond the commitment set forth in this agreement?

Mr. Mills. We wanted to save the investment that the Detroit banks had in this Citizens Savings Bank through the American State Bank.

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