Mr. WILLE. Is he going to be asking the questions publicly, because The CHAIRMAN. No. He will deliver them to you. Mr. STEIGER. Thank you, Mr. Chairman. I appreciate your courtesy and yours too, Mr. Wille. These are a considerable number of questions, most of which are related to the Wheeling, W. Va., bank that I discussed with you on the phone, and I would ask that you answer them in writing to the chairman. I will only tell you, Mr. Wille, that in my view of this, and never having seen your responses to these various questions, but the documentation is provided by the principal involved in this. A Mr. Molever, it appears to me has been done great personal harm by the FDIC. I might add much prior to your administration, and that even though the original investigation was repudiated by the investigator and another party has confessed to that which Mr. Molever was blamed for, at this point he has never been permitted the opportunity to present you with the documentation that he has, and the man who confessed to the impropriety that he was charged with is currently an officer in an FDIC bank. I offer that by way of summary, and in the event you are able to answer these questions, I'm sure the problem will be solved. The CHAIRMAN. I wish you would answer them right away to me and I will put them in the record. Mr. WILLE. Mr. Chairman, I really have to protest that request, I think. The Congressman has made both on the floor of the House and in his comments just now an accusation, which I think is completely unwarranted by the record, to the effect that the FDIC was overly harsh in dealing with this particular bank officer. I have a statement that I am prepared to release publicly on this case, and in view of the aspersions that have been cast on the Corporation, I may be obliged to release it in any event. The CHAIRMAN. Well, you may extend your remarks in connection with answering his question. Mr. WILLE. I will submit the statement for the record. Mr. Chairman, and I will, if I am asked, also release it publicly. The CHAIRMAN. Mr. Wille, may we have your statement now if you intend to release it? Mr. WILLE. I have it right in front of me. The CHAIRMAN. If you intend to release it today we would like to see it. Mr. WILLE. I do intend to release it today. The CHAIRMAN. When you do release it we would like to have it. Mr. WILLE. Yes, sir. I will send it to you when I release it. (The statement referred to by Mr. Wille follows:) BANK OF WHEELING MARCH 9, 1971. In view of the reference to the Bank of Wheeling made this morning in the House Banking and Currency Committee, Chairman Frank Wille of the Federal Deposit Insurance Corporation issued the following statement: "The Bank of Wheeling is a $6 million bank located in Wheeling, West Virginia. At the time of FDIC's 1970 examination, the Bank of Wheeling was in a completely sound financial condition. 62-214-71- 4 "This morning's references were to certain events that occurred in 1966, one year after the Bank of Wheeling was opened. FDIC records show that in April 1966 the bank was in an unsatisfactory financial condition which led to supervisory orders for corrective action, including a recapitalization of the bank. "These 1966 events have resulted in a number of pending law suits brought by the then president of the bank against the bank and certain of its directors. One is a stockholder's derivative action in the Circuit Court of Ohio County, West Virginia. The bank has filed a counterclaim against the former president based on his performance as the bank's chief executive officer. Another suit, dismissed for want of jurisdiction in the U.S. District Court for the Northern District of West Virginia, has been appealed to the 4th Circuit Court of Appeals in Richmond. A third law suit, alleging securities act violations, has been ordered transferred from the U.S. District Court in Arizona to the U.S. District Court in the Northern District of West Virginia. "In the light of these lawsuits, the FDIC will withhold further public comment at this time." The CHAIRMAN. Mr. Stanton. Mr. STANTON. Thank you, Mr. Chairman. Mr. WILLE, I would simply like to tell you that I have personally been very impressed with you this morning and your conscientious outright attempt to answer the questions put to you by the committee. How long have you been Chairman now? Mr. WILLE. I became Chairman of the FDIC on April 1, 1970. I might state in connection with the Bank of Wheeling matter that every one of the members of the board of directors has changed since those events occurred in 1966. But I made an effort to look at the record and to pull together some facts in that case. Mr. STANTON. I don't wish to discuss the Wheeling Bank. The first I ever heard of it was this morning. We were not privileged to have the chairman's statement that started this hearing, and I was concerned that he used the word "concerned" four or five times in speaking about your operation of the FDIC. I was wondering if you would tell me for the record the number of letters prior to the letters involved with this particular hearing this morning that you have had from the chairman in regard to your operation over the last year? Mr. WILLE. The chairman and I have corresponded with some frequency and regularity since April of 1970. The CHAIRMAN. Yes, sir: I think you still owe us some correspond ence. Mr. WILLE. We acknowledge the fact that we do, sir. Mr. STANTON. Mr. Wille, of course your normal responsibility involves the insured institutions of which you have stated there have been 19 bank closings. Have there been any others closed during this period? Mr. WILLE. Yes, sir. In fact, there was one very small uninsured bank in the State of Georgia that failed during the period. Mr. STANTON. Only one. Also, following upon Mr. Moorhead's general line of inquiry, don't you think it is extremely important, as we examine the reasons for bank failures, to take a serious look at the time in which these banks were instituted and became banks? Is there any relationship or corollary between the establishment of these banks and the eventual failure of these banks? Mr. WILLE. Well, I can't give you right now the statistics on the 19. But I will say that I have been somewhat surprised by how large a number of "problem" and failed banks have been recently organized. This is not true, naturally, of all of the recently organized banks. They are not all problem banks. The banks that have only been in existence 5 to 10 years or so do seem to show up, however, with some frequency on the problem list, and those banks we supervise more closely than others. To what you can attribute this, I am not sure-possibly inexperience more than anything else. Mr. STANTON. I think it would be a great help to this committee if you could, in your testimony, expand upon this particular line of thought. I think we can learn something; hopefully, from studying the circumstances under which these applications for charters were originally approved. Mr. WILLE. I hope so, sir, too. I actually welcome this hearing because I think it can be of assistance to the regulatory agencies. The CHAIRMAN. We are not restricting it to the 19. We will take any that shows a system in connection with these 19. Mr. STANTON. Thank you, Mr. Chairman. (In response to the information requested by Mr. Stanton the following letter with attached table was received from Mr. Wille :) Hon. J. WILLIAM STANTON, FEDERAL DEPOSIT INSURANCE CORPORATION, DEAR MR. STANTON: During the course of my testimony concerning recent bank closings on March 9, 1971 before the House Committee on Banking and Currency, you asked whether there was any correlation between bank closings and the year of their organization. Of the nineteen banks that have failed since January 1, 1969, only one (City Bank of Philadelphia) was organized within five years of the date of closing, while four more (The Rocky Mountain Bank, Eatontown National Bank, Sharpstown State Bank and Birmingham Bloomfield Bank) were organized between five years and fifteen years prior to the date of closing. Of the thirty-four banks that failed between January 1, 1960 and year-end 1968, five were organized within five years of this closing and three more were organized between five years and fifteen years prior to their closing. The attached table gives this information in greater specificity. I would point out, however, that the table does not list banks in financial difficulty that were merged out of existence rather than closed. I hope that this information will be helpful to you and to the other members of the Committee. Name of bank Winona State Bank, Winona, Tex. Five Points National Bank, Miami, Fla. Saguache County National Bank, Saguache, Colo. Bank of Gray Summit, Gray Summit, Mo. Public Bank, Detroit, Mich. First State Bank of Tuscola, Tuscola, Tex. Bank of Pine Apple, Pine Apple, Ala. Southern Bank of St. Petersburg, St. Petersburg, Fla. Mr. STANTON. Mr. Chairman, I have just one further question. The CHAIRMAN. Excuse me. Mr. STANTON. In your statement you stated it is mandatory that corporations serve as a receiver of all national banks and to serve as receivers of State banks when appointment is tendered. Are there cases of failures of State banks when you have not been asked to be a receiver? Mr. WILLE. Yes; this is actually a matter of State law, sir. The National Bank Act requires us to be the receiver for national banks that fail. Most States have a similar requirement in State law that, when a State bank fails, the appointment as receiver must be tendered to the FDIC. Our statute says that if we are tendered the appointment we must accept it. However, there are a limited number of States in which a receiver appointed by a court need not be the FDIC. In some of those cases we nevertheless are involved, because the court-appointed receiver asks the Corporation to assist it in the liquidation process. But that isn't always required. Mr. STANTON. In the cases where you are not appointed receiver you still have the responsibility to your depositors? Mr. WILLE. I am sorry sir, I did not understand your question. Mr. STANTON. For example, a court appoints a receivership other than the FDIC in a bank that would close. You still have a responsibility? Mr. WILLE. Yes, sir. We have a responsibility to make sure that the insured deposits are paid up to the $20,000 limitation. The CHAIRMAN. Mr. St Germain. Mr. ST GERMAIN. Thank you, Mr. Chairman. Mr. Wille, when did it first come to the attention of the FDIC that the Sharpstown Bank was in trouble. Mr. WILLE. The FDIC's regular examination process indicated some loan problems in the Sharpstown State Bank as early as 1967, but these were not at that time serious problems. I would say that, in our view, the condition of the Sharpstown State Bank had become seriously adverse by June of 1969, which is when we made our regular 1969 examination. Mr. ST GERMAIN. It first came to your attention in 1967. Did you examine with more frequency subsequent to 1967, between 1967 and 1969 ? Mr. WILLE. Yes, sir. Mr. ST GERMAIN. As the result of this? Mr. WILLE. We attempted to alternate our examinations with those of the State authority, but there was cooperation between the two agencies that resulted in much more frequent examinations. Mr. ST GERMAIN. For the record, would you provide the actual date of examinations? Mr. WILLE. Yes, sir. Mr. ST GERMAIN. And also a comparison of how these compared with the situation as it would have been had there not been a flag waved back in 1967 to the effect there might be problems? Do you follow me? Mr. WILLE. Certainly. We will give you the average or the normal dates on which the bank would have been examined. (The information requested follows:) Full examinations of Sharpstown State Bank, from the beginning of 1967 to the date of closing, were commenced on the following dates: February 25, 1967 November 4, 1967 September 28, 1968 June 21, 1969 November 3, 1970 If the bank had not been subject to closer than normal supervision, examinations would probably have been commenced as follows: First quarter 1967 Second quarter 1970 Mr. ST GERMAIN. The next question: Was the FDIC aware of the large number of self-dealing loans being made by the Sharpstown Bank? Mr. WILLE. Yes, sir. Mr. ST GERMAIN. Were you aware of the Jesuit loan of $3 million in 1967 wherein the money was borrowed, deposited, then lent to Sharpstown Realty and used by a Mr. Frank Sharp to purchase stock? Mr. WILLE. I was just checking my notes on the date of that loan. Mr. ST GERMAIN. That was 1967. Mr. WILLE. Yes. Let me, however, give you a little bit more complete answer than that. Mr. ST GERMAIN. Just leave me about 30 seconds. |