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SESSIONS BANK TOLD DEALS IN HUSH DIRECTORS OF TANGLED
Superintendent Exposes Secret Meetings Of Valley Bank Board With Him
In order that the people of central fully advised of the alleged Valley bank moindle, The will pubHsh the complete report of the state of banks to Friend W. Richardson. This report will be published in daily until completed. -Editor's note.
That extremely serious situaand one that demanded the faced the Valley bank January, 1924, vealed in the John Franklin state superintendent of banks, to Governor Richardson, which been made and being published in full by installments. Johnson's report to the governor would fill approximately 55 newspaper columns. It sets forth chronological order the history the Valley bank, from its formation to its condition when merged wtih the Pacific Southwest Trust Savings bank and the Bank of Italy. SWEARS SECRECY On January 1924, Johnson met with the board of directors of the Valley bank and explained the members the gravity of the situaation, and them to the true of matters from the public He thus that might have hundreds people throughout central California to lose everything they owned. At meeting, the report shows, the management of the bank presented plan of which included promise strict compliance with the law, reduction salaries, and the immediate liquidation or removal of bad paper soon losses were determined and means provided for the removal. The report continues as follows:
INSTALLMENT II "On January 1924, the president and entire of of the Valley bank, Field met with the superintendent of banks, his attorney, his chief his chief deputy. and Examiner Barth the office of the superintendent of banks. superintendent explained the board the gravity of the situation confronting them and their bank, and the board sworn not discuss the matters discussed this meeting with anyone outside the membership the board. This was for the purpose of preventing the of the bank being spread by of the board, the being that the of the bank was such to justify the utmost and refraining from any outside discussion of the bank's affairs with anyone whatsoever. Chief Examiner Wingate then proceeded to read the examination letter which had been prepared. As he proceeded with the reading of the letter, both myself and my attorney inquired the directors if they understood they had known of the various criticized in the letter, and elicited the that most of them not with had been on in the Valley bank Every effort was made to give the complete statement the point of view the department and they were emphatically informed regarding their duty in the premises management which would conduct the bank economically and efficiently, within the limitations the law and sound banking and that was their duty review all loans then in the bank inform themselves as their worth and endeavor determine upon practical program for dealing with impairment might by sequent by and half of the directors. The board directors promised to attempt correct the of the bank and to for cutting the bank and report adjustments regularly. Mr. Mitchell asked that 30 days time given him which correct the of the bank. told him that knew no improvement the condition be had in 30 days and said could that was willing to give longer time if the board directors would take proper steps correct and would correct the within the bank. At this meeting the directors stated assessment could levied. THE LETTER On Monday, January 1924, the first page of the originally was incorporate the record of the fact of the holding the ing in the office the superintendof banks, but the letter was not otherwise materially altered. above in statement by Chief Examiner Wingate on file in the state banking department, copy of which hereto attached, made part hereof and marked exhibit On January 1924, as superintendent banks,I wrote letter the Federal Reserve bank regarding the affairs of the Valley bank. this letter stated that the condition revealed by the examination such that necessary have complete the and board of rectors; that January of directors had met my office and the disclosed by the reviewed with board for their information: and that the ment had gram of adjustment three spects, first, strict with the law future reduction salaries, third, the immediate removal from the bank of illegal per and of bad paper fast as losses were determined and means provided for its removal. further stated that the management given further time, no specific limit being set, promise to proceed actively and effectively on the above program, being my understanding with the of directors. further stated that matter policy seemed inadvisable that time to fix an impairment and levy an because of the conditions prevailing the San Joaquin valley, but that the affairs of the institution would followed and definite program of improvement insisted upon. This more fully appears from letter itself, copy which hereto attached, made part hereof and marked exhibit January started to Washington with my attorney who joined me Sacramento January 1924, the Valley bank situation being left in the hands the chief deputy and chief examdid not return from my trip Washington until February 1924. "On January 1924, the examina- tion letter was signed by the chief deputy mailed the Valley bank. This letter the extent that went, and upon the information then in the hands of our examiners, contained true the condition and affairs of the bank. stated the actual condition of the Valley bank was much worse than that time than out in said the bank being fact insolvent, and many officers and directors being guilty of illegal and and practices, will hereinafter shown, and which made their and impossible. copy of the letter more fully showing these facts is hereto attached, made part hereof and marked exhibit Receipt the examinaletter and the fact that they had familiarized themselves with its contents acknowledged by the directors writing, that cepting only This appears from the receipt and copy of which is hereto attached. made part and marked exhibit "On January 12, 1924, Directors Hopper, Graves Pierce called the banking and saw Chief Examiner Wingate and directors advised that Mitchell had recently been president of the Valley bank the annual meeting of the stockholders with the understanding that was proceed as rapidly possible up various matters, loans which was and was then to hold office at the pleasure the board of directors. was the and individual opinion of each of these directors Mitchell had demonstrated his unfitness for the presidency the bank. These were advised ascertain the facts, and were advised that was their duty times to keep all the of the bank. They so doing the future, although that the had been careless in this regard and had permitted to be put off by the officers when information. The directors were told that after the matter bad paper had been definitely determined by the board with the banking department, definite program adjustment must be adopted. They were assured that the departwould be disposed prevent any the reputa of the bank by levying an sessment such course were legally possible. No were given regard. The fully appears from Chief Wingate, which is hereto exhibit and made January Cashier Crowell Valley bank and Hall the state banking department various the Valley bank Crowell informed that department expected ment of the bank its total bad and doubtful which paper had provide which the would be willing the practicable program for dealing the situaMr. informed that first the was the the illegal paper for which Mitchell was Mr. expressed the opinion that the interests the bank would be best served the Mitchell from the presidency, but the immediate future considered desirable to retain his ices pending the up matters for which he was sponsible and which he was financially The above more fully appears from memorandum by Chief Examiner Wingate, copy of which is hereto tached and made part hereof, marked exhibit "In the early and middle part of January, 1924, the Pacific-Southwest Trust Savings bank of Los Angeles several times proached by one of the directors the Valley bank, Mr. Pierce, to ask that bank would not be interested in taking over the Valley bank, saying that everything in the bank was not running that there factions in the bank the management and control and that they viewing the coming season with some matter was taken up the Trust Savings bank also by Mr. George president of the California bank, who stated that the bank could had, that they and that he would be glad to turn the thing Trust Savings bank if was interested. Various banks in the San Joaquin valley over situa. tion. asked the Savings bank they would not the bank over, the being discussed among president the First National of formerly president the California The bank San Francisco asked the question, through Mr. and of that bank. The answer the Trust Sav ings bank all these inquiries that they not interested in the purchase of the Valley bank that did not want the Valley bank because they had representa tion the various places the San Joaquin valley and in taking over the Valley with its branches would either duplicate an already representation take points where they did not care to that their mergers basis, and that was no one in the the Valley attractive that they knew enough the in the Valley that had real problems which they did not desire carry. This position maintained until situation in the Valley critical, though they supported the Valley bank the extent of giving cured credit of in conjunction equal credits from the Bank of Italy and the Crocker National San Francisco. The request take over the bank came from sources and one time desire get rid of the Valley such that certain Crim, approached the ings bank, stating that they had the Valley for This offer was made the middle February the Valley bank the Southwest and of Italy and March 1924, these brokers through their claimed they were entitled the payment the price. copy of this letter demand attached hereto, made part hereof and marked exhibit 12. 'At about the same time the Valley bank to the Trust Savings bank, the Valley bank for the Bank of Italy, offer made by President between Mr. Mr. Saunders, and of the of Italy, San was January 1924. Mr. Mitchell told these the Bank Italy that banks was that the Valley bank write off certain assets, that the board directors, that rumors of that dissension getting on the side, and that conditions the Valley bank were rather critical, that had made up his mind to out, but wanted get out result of the sale and consequently offered the bank the Bank of Italy/ On behalf of the Bank of Italy, Mr. Giannini told Mr. Mitchell that the Bank of Italy already had two offices Fresno and was not interested in any more and that he not in the purchase of the Upon Mr. Mitchell's request that he defer judgment, Mr. Giannini said that in any he would not any sition he had first seen what there was and the condition of the institution Mr. Mitchell said that something had to be done and, if the result of the examination did not satisfy the Bank of Italy, asked whether they would agree lend the bank million dollars, to which Mr. Giannini that that also would depend upon the condition the bank. arranged that Mr. chief examiner of the Bank Italy, should company Mitchell and Mr. Saunders make the examination. Mr. Snyder made three day conjuneMr. Hays, vice president the Bank of Italy at Fresno. Upon Mr. Snyder's return to Francisco, after examining the Valley bank he reported that he had found $3,000,000 in bad and doubtful paper, and that in his estimation there would be loss $1,000,000 thereabouts. Some of the facts shown telegrams Mr. H. (Bill) Snyder and Giannini and January 23, copies of which hereto part and marked 13, 13b. Mr. Giannini had tion from Chief Deputy Janas that the to $275, 000. This was the sum which had referred to in the based information at hand the the examination. The telegrams Mr. Snyder upon investigation found the losses be several times amount, and upon the basis of Snyder's the Bank of Italy refused either make the requested loan to purchase the Valley bank. Some time about the middle 1924, Mr. H. Carr the First National Bank of Porterville, at that time president of the California Bankers' association, examined the assets of the Valley bank particular reference to their ability to give acceptable to the Crocker National bank for money borrowed from Crocker National bank by the Valley bank. As result of this was convinced that the Valley bank very losses least dollars in the Valley bank, and that, unless very and support, would its doors. Mr. Carr discussed the subject of his examination the Valley bank with Mr. Stern of the PacificSouthwest Trust Savings bank, and urged that the latter bank should money take over the Valley bank. Carr stated that time that he was interested the matter as local banker in the San Joaquin valley, because in the event that the Valley bank with eight nine branches the Valley closed doors, nothing could save the Valley from mendous disaster, that other banks would of necessity be caught same Mr. Carr further stated that his interest also president the California Bankers' association, and as such he was interested in averting financial catastrophe anywhere in the state. "On 23, 1924. during my absence the East, Mr. Graves, later president the Valley bank, accompanied by Mr. secretary, attorney and director the
Valley bank, called on the chief deputy the offices of the State Banking department and stated that some of the directors were not cooperating in efforts to conditions the bank. They by the chief deputy that the department would forced take drastic steps in the any breaking faith as the perintendent seriousness situation and had, against his better on the by the directors themselves, given certain definite time than they asked which correct the within their bank. Mr. Graves stated that Bank of Italy did not want bank. It was learned time that Mitchell had tried borrow million dollars from the Bank Italy, the loan had not been made. January 24, 1924, at WorcesMassachusetts, received from deputy telegram taining report, which erroneous, that the Trust and Savings bank gotiating the purchase Valley the telegram stating that this adjustment was not sirable view of the conditions. The telegram reported that Mitchell reported be attempting deliver control Henderson that the Italy willing to take over the Valley bank necessary. telegram further stated that Mitchell had stated flatly that he was his loans and also that talking freely on the outside. informed by the chief deputy that he would instruct the directors remove Mitchell's obligations from the bank and would oppose sale excepting in extreme then only an institution to carry the This appears from the telegram itself, copy which hereto attached made part hereof. marked Exhibit In reply this telegram and January 24, 1924, wired the chief deputy that the Henderson control the bank was impossible and further stated that the Valley bank itself in the best position to handle was its affairs. ordered the chief not crowd Mitchell's deputy the point that would bring paper crisis that he the chief examiner should use their best judgment and that the result would be satisfactory; that I would return immediately if he considered This appears from the telegram itself, copy which hereto attached and part marked Exhibit 15. "On or about January 24, 1924, the of the Valley bank the that they decided try and procure to replace Mitchell, the president. Mr. H. Carr of Porterville, president of the California Bankers' association, and Mr. Carr called department and discussed the matter with the chief deputy. January 24, 1924, the chief deputy called Sargent, the assistant Federal Reserve agent, the phone, asked him what steps Federal Reserve bank was prepared to take in order the Valley bank. The reply was that they did not know what would do, anything; that examination had not given them any idea what steps could be taken to assist the Valley bank open. this change for the better had been made regard the within the Valley but the bank had in the fast losing ground. On January 1924, an run on the Valley was checked. During all this time, however, silent house had been going on, Valley bank having $700,000 in aggregate indeposits. "On January 1924, some of the directors of the Valley bank called at the state banking department and stated that they must have new man at the head their institution place of Mr. Mitchell, because none the banks, all of them havbeen approached in San Francisco and Angeles, would loan any money to the institution as long Mitchell remained at the head the bank. The Crocker National bank. the Bank Italy and the Federal Reserve bank all same attitude. The Crocker National bank had already loaned the Valley bank considerable sum money. About January 1924, Mr. Fagan of the Crocker National bank Mr. E. Fickett on the street in San Francisco. Mr. Fickett had just returned from Utah. Mr. Fagan inquired whether Mr. Fickett would be interested assuming the of the Valley bank, were offered to him, and finally prevailed upon Mr. Fickett to consider the matter. Mr.
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