Shut Michigan

Banks opening, business recovering: such was the scene last week in most parts of the U. S. Not so in Detroit. Detroit's two largest banks, representing 90% of its banking resources, instead of opening were firmly closed and sealed by Federal conservators. Two savings banks, one of them taking some commercial accounts, one Morris Plan bank, a commercial bank and one small state "Thrift Bank" were open under restrictions. A few other small institutions permitted withdrawals up to 5% to depositors who could prove they were in need. For practical purposes Detroit banking business was SHUT-- shut for the fifth week in succession.

Cleveland, Baltimore, New Orleans-- none was happy, but business in none had been subject for five weeks to a condition where transactions had to be carried on with a negligible means of exchange. Detroit's one business, motor cars, depressed enough in 1933, further depressed by a national bank holiday that stopped one week's sales everywhere, was reduced to a point where General Motors and Chrysler temporarily suspended national advertising. Ford was employing 27,000 men against 42,000 before the holiday. Many of Detroit's foremost citizens, already half or more broke, found themselves faced by the prospect of having to pay huge assessments on their bank stock holdings. And there was no promise of early bank re-openings.

At the end of the national bank holiday, the U. S. sent word from Washington that one new bank should be formed in Detroit, the big depositors of the old banks to put up $5,000,000 of capital, the R. F. C. to buy $20,000,000 of preferred stock, the new bank to take over 50% of the deposits and the liquid assets of the old banks. It struck Detroit's businessmen as ruinous to liquidate their two old banks, but they regarded the word from Washington as an ultimatum. They despatched a flight of telegrams in protest* and convened to obey. Meetings began. Alfred P. Sloan

Jr. and Walter P. Chrysler arrived from New York. Henry and Edsel Ford conferred with the officers of the Union Guardian Trust. Jovial Scotsman Alex Dow of Detroit Edison. Alvan Macauley of Packard. Burch Foraker of Michigan Bell Telephone, William Gordon Woolfolk of Detroit City Gas. Frederic and William A. Fisher (bodies), Dubois Young of Hupmobile, Charles T. Van Dusen of S. S. Kresge--the leading citizens of Detroit-- Newberrys, McMillans. Algers--all were drawn into the conferences.

The conclusive meeting was held in the 32nd story of the Aztec Tower of the Union Guardian Building. John K. McKee, representing the R. F. C., laid down the terms. The long wrangle ended. It was agreed to furnish $5,000,000 of new capital and promptly a telegram from the Comptroller of the Currency: "Due to the many complaints registered against the plan for a new bank . . . have deemed it advisable ... to appoint conservators . . . until the confusion of thought can be eliminated. . . ."

Next morning the two conservators took charge, Paul Crawford Keyes who had previously liquidated the National Bank of Kentucky for the Comptroller of the Currency, and Bjorn C.* Schram of the National Bank Redemption agency of the Treasury Department. They announced at once that all officers of both banks above the rank of assistant cashier were fired. They put seals on the doors, began to study the books. Announcement was made that their appointment would not prevent the possibility of both banks being reorganized, but Detroit remained in moneyless confusion.

Into the confusion came a proposal from Washington, after a conference between Mr. Sloan and R. F. C. directors, to leave Mr. Ford out of the formation of a new Detroit bank to be organized from the assets of the old banks, with a $12,500,000 loan from the R. F. C., a like amount from other Detroit automobile groups.

*Typical was the telegram from the president of the Board of Commerce: "We fear several thousands of bankruptcies and enormously in- creased unemployment. . . . Entire city in confusion and need for immediate reassurance is vital." *"C" not for Charles nor Cadwallader but so he can have the initials "B. C." U. S. Grant adopted his "S" from the family name Simpson.

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