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perhaps some disagreement over means, is endorsed in principle by the President, the Department of Justice, the Federal Trade Commission, and the appropriate banking agencies.

To meet this agreed-upon need for effective, but reasonable, restraints on bank mergers, I would urge this committee to proceed with enactment of this, reporting favorably on this particular legislation, without, as some people have suggested should be done, without waiting any final action on the so-called omnibus banking bill which was reported out last Monday by the Senate Banking and Currency Committee.

There is some interrelation here between these two proposals that I would like to discuss before the subcommittee this morning.

The CHAIRMAN. You are referring, I think, in connection with the Omnibus Banking Bill to section 23, chapter 6, title III.

Mr. BROWNELL. That is right.

The CHAIRMAN. We might put that right in the record at this point.

Mr. BROWNELL. I think it would be helpful because I want to refer to it a number of times.

(The document referred to is as follows:) § 23. Mergers and consolidations.

Without prior written consent by the Corporation, no insured bank shall (1) merge or consolidate with any noninsured bank or institution or convert into a noninsured bank or institution or (2) assume liability to pay any deposits made in, or similar liabilities of, any noninsured bank or institution or (3) transfer assets to any noninsured bank or institution in consideration of the assumption of liabilities for any portion of the deposits made in such insured bank. No insured bank shall convert into an insured State bank if its capital stock or its surplus will be less than the capital stock or surplus, respectively, of the converting bank at the time of the shareholders' meeting approving such conversion, without prior written consent by the Comptroller of the Currency if the resulting bank is to be a District bank, or by the Board of Governors of the Federal Reserve System if the resulting bank is to be a State member bank (except a District bank), or by the Corporation if the resulting bank is to be a State nonmember insured bank (except a District bank). No insured bank shall merge or consolidate with any other insured bank or, either directly or indirectly, acquire the assets of, or assume liability to pay any deposits made in, any other insured bank without the prior written consent (i) of the Comptroller of the Currency if the acquiring, assuming, or resulting bank is national bank or a district bank, or (ii) of the Board of Governors of the Federal Reserve System if the acquiring, assuming, or resulting bank is to be a State member bank (except a District bank), or (iii) of the Corporation if the acquiring, assuming, or resulting bank is to be a nonmember insured bank (except a District bank). In granting or withholding consent under this section, the Comptroller, the Board of Governors of the Federal Reserve System, or the Corporation, as the case may be, shall consider the factors enumerated in section 15 of this Act. In the case of a merger, consolidation, acquisition of assets, or assumption of liabilities, the appropriate agency shall also take into consideration whether the effect thereof may be to lessen competition unduly or to tend unduly to create a monopoly, and, in the interests of uniform standards, it shall not take action as to any such transaction without first seeking the views of each of the other two banking agencies referred to herein with respect to such question; and in such a case the appropriate agency may also request the opinion of the Attorney General with respect to such question. Vo insured State nonmember bank (except a District bank) shall, without the prior consent of the Corporation, reduce the amount or retire any part of its common or preferred capital stock, or retire any part of its capital notes or debentures.

The CHAIRMAN. I do not think we need read it.
We will just put it in the record at this point.

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Mr. KEATING. You mean existing law?
The CHAIRMAN. Proposed.

Mr. BROW NELL. First, I would suggest that considerations of effective enforcement and equity in themselves require that bank acquisitions, like most other business mergers, should be treated not by way of special legislation such as incorporation in the Banking Act, but under the Clayton Act, section 7.

Second, I would say that even if Congress does agree with the Senate Banking Committee's report that bank mergers should be treated, initially at least, by appropriate banking agencies, that such banking legislation should include, just the way it does in respect to bank holding companies, some antitrust savings clause so that there will not be any seeming conflict between the two.

And to make that savings clause effective, in any event, section 7 should be amended to cover the bank-asset acquisitions, as it now does the bank-stock acquisitions.

Why do I urge that section 23 of this Senate-reported omnibus banking bill falls short of the needs for reasonable curbs on bank mergers?

First, it sets up competitive tests for bank mergers which are different from those which apply to other segments and sectors of American business, as I will point out in some detail in a moment.

Second, by setting up this special standard, we believe it would dissipate enforcement efforts by decentralizing responsibility for decisions affecting the Clayton Act, section 7, so that some of the decisions would be made by the banking agencies and some by the Department of Justice.

It was my view that both of these objections to section 23 are rooted in firm principles of equitable enforcement and uniform administration of justice.

Let me take them up more in detail now.

First, we believe that the proposed banking legislation prescribed for bank mergers would weaken the standards of section 7 of the Clayton Act because under that bank bill the factor of competition wond be only one of numerous considerations to be taken into account by the banking agency that is examining a proposed merger, and also the standard that is set up there in that section 23 of the omnibus banking bill is whether the acquisition may "lessen competition unduly or tend unduly to create a monopoly.”.

The members of this subcommittee will recognize immediately that this is a novel and a less stringent standard than the one that is specified in section 7 of the Clayton Act.

The CHAIRMAN. It would weaken decidedly present section 7 standards.

Mr. BROWNELL. Very much so.

The CILJIRAN. How can you speak of a monopoly that is an undue monopoly? If it is a monopoly it is a monopoly, isn't it?

Mr. BROW NELL. The very least you could say is that there would he a period of great uncertainty while the courts were struggling with this new word and trying to figure out what the new standard was that was set up.

The CHAIRMAx. I mean in commonsense how could it be an unduie monopoly?

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Mr. KEATING. The banking community no doubt cites the Comptroller of the Currency, doesn't it?

Mr. BROWNELL. I suppose that a certain element of them do because there is I am sure some feeling there that they would rather deal just with one agency:

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my statement a little further along here to say, I think we could work out a joint arrangement there so that the two agencies could work in harmony, but our goal would be the interpretation of one effective standard of antitrust enforcement, and that is the standard that is in section 7 of the Clayton Act, which has been on the books now for some time.

People are beginning to understand it and work within it, and it seems most unfortunate to introduce a new uninterpreted standard which would apply only to the banking mergers and not to nonbanking mergers.

Mr. KEATING. You have undoubtedly endeavored to negotiate with the Comptroller of the Currency in an effort to find a meeting of the minds between you?

Mr. BROWNELL. Yes, we have, and we are certainly agreed on the objective that is to be accomplished here. It is only a question of means, and the means that we propose would be that there be just the one standard, and that either the Department of Justice alone, which is the major agency of the Government heretofore which has interpreted these antitrust standards should be the one to pass on it, or if it is deemed more desirable to have the banking agencies at least initially pass on them, let them consult with the Department of Justice and together apply the single standard of section 7 of the Clayton Act.

The CHAIRMAN. I might say to the gentleman from New York that the Independent Bankers Association is in favor of H. R. 2143, also the State supervisory agencies have indicated that they much prefer 2143 than provisions of the Senate so-called omnibus bank bill, because that latter bill would take away a good deal of their supervisory jurisdiction over State banks so that segment of the banking fraternity, I think, would be favorably disposed toward legislation embodied in the bill before us this morning.

Mr. KEATING. Is it the intention to call some of the members of the banking community to testify?

The CHAIRMAN. Yes.

Mr. BROWNELL. If I may interpolate, I think that there is some danger during the current session that they will try to compartmentalize these things too much, let the Banking Committee pass on the banking problems, let the Judiciary Committee pass on merger problems.

Now it is just commonsense that those two come together at some point, and I hope very much that there can be a community of interests and cooperation between the two committees so that this problem will be studied as a whole.

I am very glad that you are going to get some testimony from the banking community here so that you can see the overall picture and work out with the Banking Committee an overall solution to it. There is a danger that this committee, which has a primary responsibility for seeing that the antitrust laws are effective and clear, might do its job and yet find that unknowingly some other committee in the Con

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If it is a monopoly it is a monopoly. It can't be qualified, can it?

Mr. BROWNELL. I certainly would have a hard time with a decision as to what that means, but it must mean something, and therefore it must be a weaker standard from the standpoint of effective antitrust enforcement than the one which is in section 7 of the Clayton Act.

The CHAIRMAN. Do you know who originated that idea? Mr. BROWNELL. No; I do not. The first place it has appeared I think is in this omnibus banking bill. Mr. KEATING. Does the word “substantially" appear

there? Mr. BROWNELL No; it does not. It is “unduly. Mr. KEATING. Is that "unduly" a new word in the law?

Mr. BROWNELL. Yes, it is, and as I say, I think at the very least it would mean a period of great uncertainty here while the courts were trying to figure out what it meant and how it does differ from the Clayton Act standard, and it would be very troublesome to us who believe in the enforcement of section 7 in the nonbanking areas, because this weaker standard that is set up here would undoubtedly be cited by corporations as a standard that should be accepted under section 7.

The CHAIRMAN. It strikes me that when you say “tend unduly to create a monopoly” that would be very much like saying a man is not unduly dishonest. I cannot understand how they ever could dream of putting those words in juxtaposition.

Mr. BROWNELL. I think that the banking authorities themselves are disturbed about this. I put in my statement here a quotation from Chairman Martin, who says:

We recognize that you have a legal groundwork for substantially lessening competition already in the framework of the law and that it may not be feasible to use unduly lessening competitionSo that in support of this novel and what I would call a weaker standard, the Comptroller of the Currency has attempted to show the harshness of section 7 standards in certain bank failure situations.

I would like to come to that point too. In other words, the point has been made that you could not handle the situation of a failing bank if you adopted the standard of section 7 of the Clayton Act.

We believe that is not so.
Mr. KEATING. May I interpose a question just so I get this picture?

The Comptroller of the Currency favors handling this bank merger business under this omnibus banking bill?

Mr. BROWNELL. Yes, and establishing a new standard which he would interpret, and he could or he might not—he is not requiredto consult the Department of Justice to get our views as to what the proper interpretation would be, so that you are going to have the possibility at least of conflicting interpretations right within the Government as to what the merger standards should be, and that is one thing I think this committee would be very, very slow to accept.

I think we have all seen in our experience the importance of certainty and clarity in these antitrust standards, and if you have not only two conflicting standards but two conflicting agencies of Government interpreting those standards, you really are not fair to the business community because it would introduce an element of uncertainty which I think would be most unfortunate.

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