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arket on the securities was, which might be abnormal on that parcular day, and say the loan had a loss in it. There is no real consistency in those two positions, where the man

still a good moral risk and could probably borrow the money ithout putting the collateral, and I believe that was what that was leant for. Mr. SAPERSTEIN. Was the policy stated in that telegram of October

and as further defined in this letter of July 1, 1932, kept in effect til the so-called “national banking holiday”? Mr. AWALT. That is true. And in that connection I would like to øver my particular part of that policy; that is, during the period hat I was Acting Comptroller. When Mr. Pole resigned in September I was told by Mr. Mills, ho was then Secretary of the Treasury, that there would be no new omptroller appointed, and therefore under operation of law I ould remain Comptroller until March 4, Acting Comptroller. He pld me that the policies followed by the Comptroller's office under fr. Pole would be followed by me.

Gentlemen, the banking situation was in a very critical condition t that time, and as you know, it got very much worse. I felt that I hould have the benefit of advice in regard to policies, and I went efore a joint meeting of the Federal Reserve governors, 12 Federal Reserve governors, and the 12 Federal Reserve agents, at my first pportunity, which was in November. I think the 16th of November 932, in their meeting in Washington.

Of course, they knew their conditions in their own districts. They ad through their meetings learned conditions generally in other istricts. I talked to them about the general situation. I told them hat I had been told by Mr. Mills that I would be Acting Comptroller ntil March 4. I asked them if they thought the policy which had peen followed by the previous Comptroller with regard to the bankng situation was sound under the conditions and that I should folow it. It was not their responsibility, but they were in the banking tructure with their member banks and otherwise, and we were dealng with a national situation.

Governor Calkins, Governor of the Federal Reserve Bank of San Francisco, was chairman of that meeting. It was discussed somevhat by the Governors and the agents, and Mr. Calkins said to hem—İ cannot give his exact words—the substance was this:

You gentlemen have all heard the discussion and the questions of the Acting Comptroller. If any of you gentlemen have any objections to the following of his policy, I would like you to now express it, or otherwise it will stand as approved.

No objection was raised. I merely mention that to show that the question of the policy that was followed was not one that depended upon one lone person. It was the result of careful study and careful consideration and consulting with the Federal Reserve officials and others.

Senator COUZENS. Has the Secretary of the Treasury any statutory control over the Comptroller of the Currency?

Mr. Awant. The act provides, Senator, that the Comptroller of the Currency shall perform his functions “under the general direction of the Secretary of the Treasury.”

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Senator COUZENS. That is all the statute refers to with respect to the Comptroller of the Currency?

Mr. AwALT. As to general supervision. There are one or tw things in the statute that must have the approval of the Secretary of the Treasury, the appointment of bank examiners, for instada. the advancement of funds to protect the property of insolvent banks where you might have a second mortgage and you thought that you had enough equity to protect it by paying off the first mortgage if it was going to be foreclosed, or something of that sort.

Senator Couzens. That has to have the approval of the Secretary of the Treasury?

Mr. Awalt. Yes, sir; as well as of the Comptroller. A few things of that sort, but in the main I would say that the Comptroller's office is an independent office, except under the general direction of the Secretary, because the law places in him certain responsibility, and the courts have said that he occupies a semjudicial position, which in many of his actions cannot be reviewed by the courts.

Senator COCZENS. You spoke a while ago of the 12 Federal Re serve agents and 12 Federal Reserve governors. I understood Mr. Stevens to say he was both, didn't he, from the seventh district!

Mr. AwALT. No; I think' not. He said he was chairman of the board of the Federal Reserve Bank of Chicago.

Senator Couzens. So there are two at each place; there is a Feleral Reserve agent and a Federal Reserve governor, is that it?

Mr. Awalt. Yes. The Federal Reserve agent is the Government's representative on the board, and he is chairman by the statutory provision.

Mr. SAPERSTEIN. Now, Mr. Awalt, let me ask you at this point : In the light of subsequent developments, and with the aid of hindsight, do you think that the policy that was adopted by the Comptroller of the Currency in 1931 and subsequently pursued down to the national banking holiday was a sound and wise one!

Mr. Awalt. I think it saved hundreds of banks, many communities, and thousands of depositors from ruin, and I say that because values have come back, hysteria has disappeared. And you must remember this, that when a bank closes the assets of that institution naturally depreciate. You take a community with one bank in it: it will set that community back at least 20 years, and when you tie all of its credit structure up there is no demand to buy, values drop

. and when you go to liquidate, unless there is some remarkable rise in prices or something, you cannot do it.

There was one thing, if I may depart for a minute from your line of questioning, I neglected to say. Before the Comptroller took the action that he did in connection with the last move on the bonds

, he wired to all of the State superintendents of banks or commissioners in the various States to find out what they were doing, and he found that they were either following the formula similar to that which he sent out, or were not taking any notice at all of the bond depreciation.

I might also say that the State department in New York Citythat is, in New York State, Mr. Broderick–very kindly gave me per

: mission over the phone to read part of his instructions, you might

y, to his examiners, and also which were sent out to the bank, and I may have your permission, Mr. Chairman, I would like to read st a section of that. The CHAIRMAN. Very well. Mr. Awalt (reading): That a period of emergency exists; that there is no fixed measure of value failable, in that full and free markets formerly used for testing values of rtain assets no longer exists; that current market prices of securities, real tate, and other forms of property held as investments or considered as the sis for loans and credits do not represent the fair value of such assets or rnish a proper basis for determining the soundness of assets predicated ereon or the probable collection value thereof.

Also That in making examinations any loan which has become undercollateraled as a result of security depreciation shall not be classified as a los or as ubtful until careful consideration has been given to the foregoing principle f establishing fair value or to the potential capacity of the borrower to pay ay such loan.

And— That the best interest of depositors and stockholders generally may best e protected by maintaining all banking institutions as going concerns; that he greatest care should be exercised in communication with officers and direcbrs in order not to excite apprehension, and that disciplinary measures of he Department should be limited to such matters as are clearly necessary to e brought to the attention of those in charge of an institution.

Just as an example of what the State departments were doing. Ve did not go quite that far. Now, if I may come back, sir, to your question of whether or not believe that it was a good policy, I thing it might be just wise to point out that wheat is now around 90 cents, cotton is 11, other prices tre up, and those things, I believe, have fully justified the office in he position it took at that time.

Senator COUZENS. Mr. Leyburn testified that he believed that if his reorganization of banks that took place in March 1933 had aken place in 1930 or 1931, because of the constant dropping that you have just explained, the recovery would have been more rapid. Do you concur in that opinion?

Mr. Awalt. I think so, Senator, but I do not believe that a general bank holiday could have been placed in operation and accepted by the people of the United States at that time.

Senator "COUZENS. At any time prior to March of 1933 could it have been, in your opinion?

Mr. AWALT. Probably, but I do not think any other man could have done it than the new President, Mr. Roosevelt.

Senator Couzens. In spite of all that leniency that you have described, which brought about these numerous orders and instructions to examiners, and the action of the superintendent of banking of the State of New York, you reached the conclusion that these two Detroit banks under survey, were insolvent, is that true?

Mr. Awalt. Yes, sir; I reached that conclusion legally when I appointed receivers for the two banks in May of 1933.

Mr. SAPERSTEIN. Had you reached that conclusion at any time prior to that date?

Mr. Awalt. Not legally.

Mr. SAPERSTEIN. I notice you qualify the conclusion by putting in the word " legally." What do you mean by that?

Mr. Awalt. I could not have legally done it, and I say that be (ause the appointment of a receiver is a determination of insolvency.

Mr. SAPERSTEIN. At what time had you come to that conclusion!

Mr. Awalt. As a conclusion, when I had been advised by Jr. Leyburn over the telephone, after the banks were closed by order of the Governor of Michigan, or his proclamation was given, and that in his opinion the banks were insolvent, I mean Mr. Leyburn's opinion. However, his formal examination did not come into the office until much later, and the formal determination of insolvency and the appointment of receivers was based upon his examination.

Senator COUZENS. Well, you have drawn a very nice line of distinction there. When did you firts reach the conclusion in your own mind, before taking legal action, that the banks were insolvent!

Mr. AWALT. When Mr. Leyburn told me of his conclusion that they were insolvent and when I received the same sort of idea from other information.

Senator COCZENS. What was the date of that?

Mr. AwALT. I cannot tell you, Senator Couzens. I don't remember.

Senator COUZENS. Have you any idea about when it was!
Mr. AwALT. Mr. Leyburn might remember.
Mr. LEYBURN. I think it was in March.

Mr. AWALT. Mr. Leyburn refreshes my memory, and he says he thinks it was in March.

Senator Couzens. Mr. Awalt, do you recall meeting me in Secretary Woodin's office, I think in the middle of March, about the 10th or 15th of March, when I was urging the Secretary of the Treasury to permit the opening of the banks, and you and Mr. Ballantine joined in the conference?

Mr. Awalr. I remember meeting you there; yes.

Senator COUZENS. Do you remember the declaration that you made at that time with respect to these banks?

Mr. AWALT. I don't remember my exact words, but I remember generally saying that based upon information I had received, that the banks were insolvent; and that was, of course, based upon my telephone conversations with Mr. Leyburn and information given by the R.F.C. people.

Senator Couzens. Have you available anything from the R.F.C. to show that the banks were insolvent?

Mr. Awalt. I have no figures or papers; no, sir.

Senator CouzeNS. Was that information conveyed to you orally or in writing?

Mr. AwALT. Orally.

Senator COUZENS. I wonder if I could refresh your mind by reminding you that you told Secretary Woodin that under no circumstances would you certify to the opening of these banks, when I was urging their reopening?

Mr. AWALT. Under no circumstances ?

Senator Couzens. That is, as to the “under no circumstances." you meant under the condition of the assets of the banks, of course, I take it?

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Mr. Awalt. Well, I think that is perfectly true. I could not have one it unless the examiners had found the banks solvent and in quid enough shape to be reopened.

Mr. SAPERSTEIN. Mr. Awalt, during your encumbency of the office f Acting Comptroller of the Currency were reports of examiners n these Detroit banks called to your attention?

Mr. Awalt. Well, the only examination that was made of the irst National Bank, as I remember it, after I was Acting Comproller, was started in November of 1932, and that report did not ome into the office until January 24, 1933. But my attention was alled to the matter by Mr. Leyburn on his trip to Washington n regard to a plan to be worked out with the R.F.C., particularly vith the Guardian Group. I did not have a conference with the eople who came down here, but Mr. Leyburn came in and talked o me about the situation.

Mr. SAPERSTEIN. That was toward the end of January, 1933, was t not? Mr. AWALT. As I remember it; yes. Mr. SAPERSTEIN. What did Mr. Leyburn tell you at that time in egard to the Detroit situation?

Mr. Awalt. He told me that the situation was very shaky, that le felt so far as the Guardian Group was concerned that the Ford nterests would take care of the situation, with reasonable help from he R.F.C., and that he was in hopes of working the matter out and preventing a crash in the State of Michigan.

The CHAIRMAN. Let me ask you right there: Why does it take so ong, from November to January, for the examiner's report to reach you?

Mr. Awalt. Well, Senator Fletcher, of course, that wasn't the bnly examination report that those men were making. And after hey made their report up, which possibly took 3 weeks for the xamination, I imagine—didn't it, Mr. Leyburn?

Mr. LEYBURN. The examination was started in November and was not completed until well into December, and it was one of the largest reports we ever made.

Mr. AwALT. Might I let Mr. Leyburn answer that question, because he remembers the dates better than I could ?

Mr. SAPERSTEIN. Mr. Leyburn, will you please come over here to the committee table, where we can all hear you?

Mr. LEYBURN. When we speak of the date of an examination we need to explain the time consumed in it. This examination was started November 11, and in the case of a bank like that it would take 3 weeks or a month to examine it, and then by the time the examiner's report is written up, and it is checked by the Chicago office, and means the typewriting of over a thousand pages, and the report has to be dealt with there, the report would only reach Washington about the 25th of January.

The CHAIRMAN. I had the impression that the report was completed in November.

Mr. LEYBURN. No, sir. The examination was started in November, and therefore you can well see that it could not have been completed in November.

The CHAIRMAN. All right.

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