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THE Detroit Expects Pecora Probe to Unearth Causes Behind Closing of Banks
Impartial Is City's Hope
Michigan Situation Is Still the Spot'
Continued from Page One the Federal Bank ChiFederal Reserve under the jurisdiction of the ChiThis presents picture of banks in state, all members the Reserve heavy losses, and cases close, they the direction of the Seventh Federal Reserve which has head quarters in But get beginning of this disaster which finally spread embrace nation. Momentous Meeting Feb. 12 On the night of Lincoln's birthgroup American business dustry be office the Union Trust Detroit and of opening instituFeb. This trust company an late of the Guardian National Bank Commerce, and failed to open by the the Country that effecting only National, but 30 banks trust companies scattered State these institutions, including National were affiliated with the Guardian Detroit Union Group. company. which controlled the National Included group which gathered crisis Edsel Ford. largest the Guardian Sloan Colt and William Potter leaders the New York financial world; Alvan of Pack ard of Alfred Sloan, General Motors Corp. Alex Dow Detroit Edison William the Detroit City Gas Co. Practically every industry the City State represented this ering which will go down in the of These had hastily called together came from Washington that the RFC would not lend assets of the units of the Guardian Group This necessary open the Union Trust although the that firm 50 cent of the amount the The Federal Government was that meeting thur then undersecretary the Treasury: by fred Leyburn. chief bank examithe Seventh and representative the then acting Comptroller the Eugene the of Chiand McKee, who was RFC. The assistance the Federal Government had been denied, and practically large depositor the banks and the First that crisis had to be faced Turning to U. Mistake Naturally these and the for That this the first mistake the Detroit has since been related from the witness stand in judicial inquiry Detroit Not the Federal Govern this meet suggested closing McKee insisted could all straightened but that was required: Leyburn agreed that few days were about 11 the GoverWilliam Comsent for the day the Guardian Group continue negotiations with the Federal for loan from the RFC The Governor finally was induced to extend the banking eight days and about the of Feb. 14, the State's chief ecutive carried his lamation the office The DeFree Press, where presses had been held in for whataction be Indusand all of them large depositors, that meeting assured by McKee Leyburn that the holiday but expedient that the tire situation be out before the period ex pired. The day assurances were given the would assistance the Guardian and that normal banking facilities would available after Washington's Birthday. Statements given by McKee that would worked had for worry
Statements Unquestioned Nobody questioned the truthfulof these statements, took streets the about the situation the City banking facilities kind. Checks couldn't but firms accepted them. The only hardship by those on payrolls. Business and indusconcerns many instances gave employees as they could get funds from the dreamed that the banks would fail Hadn't the Federal that the holiday but an give the RFC an opportunity to further the the Guardian Group had pledged? those on the inside, and that the developed two the Governor's McKee, representing the RFC to make remarks about being organized comment that would become president of that "boy from might to the ficulties in which they found themselves. Bankers from New York Chicago They vised bank the holiday period: two Conferences day and night the period the holiday, came and no loan from the RFC. ask for of holiday which promptly granted Throughout the eight days bank endeavored the then Comptroller the rency to policy: tell them had done in They to any of policy. collapsed almost completely papers went press without enough advertising pay for the ink; not met and some faced the necessity closing from and from Paris and City banks any kind. was at stand
In Steps the Fords
Into this Sunday Feb. 26, stepped Henry Ford and his They agreed capital for two The Peoples tional Bank replace the First National Bank and the Manto replace the Guardian National Bank This plan had been accepted by the Board special in the after the the Fords the financial banks, never been definitely Newspapers the following Mon day morning fact that Ford had gone rescue of where he of greatest world then things began happen Within three the Fords plan blown The struction Finance have made two new Ford banks enable make payment depositors The from part of the deal within three An excuse offered New York bank had not vance $20,000,000 tional Bank, obligation which had been pledged the Ford The asked to its by that amount. This the Federal from Ford that banks for He took the posithat he done his that the had, for reason this date failed its From then the fourth day March negotations tinued reopening, the of these
Large depositors played dominant part negotiations. went to Washington seeking statement from the Comptroller what sired the depositors These large depositors never statement from the Comptroller's office. Reopening Pleas Unanswered Franklin Delano Roosevelt as on March 24 hours later all banks the Nation closed by his proclamation. Michigan, which had gone Democratic the first Presidential election looked something March Congress the Emergency Banking Act apreopen restricted basis forwarded Wash ington immediately. The replies received. But night of March when Mr. Sloan, Chrysler Edsel Ford and 150 other trial and financial leaders assem another the came. Acting Comptroller Awalt wired from Washington that had appointed conservators for the closed banks. That sounded death knell to attended last session and midnight Paul Keyes charge the First National Bank and became of the tional Bank of scurried to the Hotel to the and their amazement learned that Keyes Schram had been the for almost month: that had ordered there within hours after the temporary holiday been proclaimed had merely been awaiting the order from Washington. reporters learned that two lawyers. Robert Frank Wood, Cincinnati, been assist Schram and Keyes in taking over the banks. The City was stunned to learn of procedure the next morning. March But nothing happened. later admitted amazement thrown." developed that marines had been brought to Ile, 11 miles from that scores Department of Justice men were City to handle situation anticipated when the took over the Their never quired. Fourth City of the Nation kept its sanity. Liquidation Is Begun The ceivers and the liquidation the assets the closed banks commenced. small State banks reopened. co-operation of the State Departbanking business But facilities for the commerce of city 700,000 people inadequate. As liquidation the and mercantile establishments frozen in large closed banks, the business life of the City remained stiffled. This continued until when the the RFC in preIn the of abuse the directors of the old banks launched. But the the old institutions numbered among their members representing practically ery industrial mercantile and public businessmen could not be easily destroyed. By June was apparent, how complete confiwould never be established until atmosphere had the entire and had the States for banks asked send the partment Justice Detroit Hundreds went report has been Justice on its findings in De-
State Asks Grand Jury Probe At this the probe developed. judges of the Circuit Wayne designated Harry Keidan conduct the For Judge Keidan depositors these pleaded with office the Comptroller Currency records banks. His pleas appealed President for these records, his referred the General's office that polite letter under rule written made He asked that examination kept out Michigan and out the tion of the Circuit Court of Wayne County But the testimony In the grand being the Country causing the Treasury Department which on gardless of changing
Every effort was made that Judge Keidan his hearings for weeks having been assured that proved No Judge sumed his The hearing concluded his findings Judge Keiden that the banks which and remain vent in vent could decide vency in August, four receivers commenced liquidaFindings Carry Great Weight The findings any other judge in Detroit might created much of furore, Keiden an jurist whose decisions rarely, reversed the Court Michigan. Never politician, has led the ticket his tests bench. More have been polled by Judge Keidan any other ever upon the bench in Detroit. James zens him don the Court judge the FedCourt. Keiden declined. His findings much to vince people of Michigan
State got severe treatment from the Federal Government when its banks were closed in the last day Hoover regime. There much in the record The reports Reserve for the months preceding the banks Detroit. disclosed that City had suffered more than other Country. Withdrawals had been and had compelled to legal the mucipality enable to continue ganized Taxes could not be collected maintain police and fire departkeep sewer pumps working. maintain public school system. Banks advance money and provide and shelter had Neither National banks had received assistance from the when the banks the state closed. that loans $14,000,000 had been made companies Michwere as when the loans made Chicago deposit closed of Detroit was far liability involved the poured its millions the failing banks of Chicago. Only Trust Firm in Trouble previously, the loan the crash was That sum was the Deby McKee before Judge Union Guardian Trust Co. was the only institrouble. Its to $20,500,and the RFC originally sought, only that sum The testimony revealed that burn consulted upon his suggestion decided the larger loan for the pose increasing liquidity of other There been no suggestion that other danThe Guardian National of Commerce the largest unit of the and liquidity was 41 per original taking Guardian Trust out of the banking this the from the RFC was That institution not up under the steady Its assets, largely real estate loans, could liquidated enough to meet the demands Its business was considered to the the country per cent liquid the the banks were closed the fiduciary business Union Guardian Trust has increased the institution has substantial profits. the assets of this institution, and the units Detroit considered February loan The RFC was ready, Keidto advance national banking be dispute but That the figure which the the Guardian the RFC the Federal hands and allowed all banks of the State
$6,000,000 Disaster's Margin The evidence taken makes that for an addi$6,000,000 crash which state the and which brought financial distress have been Since the and while these large banks under Federal assist the The chairman the Mr stating knows the will obtain funds adequately the loans made by the naturally arises whether more profitable Federal Government the Detroit the entire that from under which of the the ordinary Department the Divi miswas made in the handling the bureauthe Detroit admit likely clear newsThat made very papermen who the immeceivers and their banks diately after the Detroit closed. banks not lowed reopen? thousands That question Detroit. each that has been definitely condition banks far less liquid allowed than those in Detroit Statistics compiled reopen. which show that at least 700 by no means those Detroit others with restricted from the to New Bank Best Assets Sold of the One of sell the ceivers at closed best inthe stitution assets sale be Federal Court, the have this day depositors judges who Even the proved assets before the sale was of the remaining Practically were then the for the loans pledged The made the right bank was any assets period stitute advansix the tage this joined whereby General Bank Deganize the the General Motors troit. this service doing caught in the Detroit which swept the "liquidity country after the Administration office. The Woodin policy only banks high liquility open under Comptroller enforced Detroit the policy changed when found that drastic and banks liquidity the large mercial banks of the East were licensed. the meantime the first In the country had Detroit, Department was determined that this venture should prove now fairly established that the ganization of this bank nitely terminated and possibility the the First National Bank and the Guardian tional Bank the Motor For these banks remained the hands receivers, thereby them competing with the Detroit Hopes for Full Facts
Detroit is hopeful that the Sen the facts the Detroit situation being public. complete the disaster which brought losses more than 000 people Michigan could not be told Grand Jury at Detroit Judge Keidan was denied the of the Fed officials, but no such obstacle stands the path the ate's books the banks of Detroit can be produced for the Detroit, and possibly the be interested in the complete because in Detroit that the started. Those control of the Treasury Department the time realized that rapidity with which that fire was The the which Washington months ascertain upon which base legislation to remedy the financial which To provide support for this legislation Pierpont Morand others high fiancial world, have before Now Detroit with the leaddustry should be importance the disasof last winter But the committee is to present for the isting should also go into the employed in Comptroller's office particular brought grand in that bank examiners superiors the of far back these erous appraisals' and 'to be lenient,' depositors national banks the United States keeping banks, after the
Comptroller's knew that they were Examiners Joined Bank Staff
If the Senate examines carefully the Detroit find bank leave the Federal service the ploy the banks which they investigating. natural assume that lookfor in bank, incapable an impartial examination of the bank he hopes to are in Washington that the banking precipitated in order embarrass Henry Ford. Testimony hinting at this was given the grand investigation. reported that Herbert Hoover night the RFC's the Detroit the holds out, Ford will go to the Ford was the largest depositor His deposits the National banks have been estimated $40,000,000; his and his Edsel all banks Fords, father and son, had loaned the Union $11,000,000 permit keep functioning the time the held shares stock in the Group, subdouble Yet Henry Ford asked put more money the was organized supthe structure of the and interest itself the Detroit Henry replied when high official of the Federal called him on the telephone hours before the holiday proclamation issued and asked that he up the funds The Detroit situation developed known Treasury Department. bank could upon the appraisal of and fixed examiner from another and possessed no knowledge real estate
Church Loans Held Valueless in the jury probe aminers church loans, which approximated valueless, assets. these mortgages were buildings the Roman inenjoys for over Other showed that aminers held the paper the Detroit that fact the City had many millions delinquent Detroit banks were unlike those most similar the Country. They than their legal limitation ings. But there letters file which that the Currency approved the mergers these mortgage holdings into the instias every banker rapidly and yet in the long run usually be investments. But cannot maintain high degree of liquidity and the same invest loans. What Comptroller another and failure the sist the Detroit banks brought about the Why the failed to assist which Mr. Pecora Detroiters will also much Inthe mittee answer question what actual control Comptroller's office exercises over National banks. Certainly that control beneficial the banks of troit.
