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has such a deep interest, I would say that the standard there should be exactly the same as the standard under section 7 of the Clayton Act applying to industry generally, and that if you set up a weaker, paler standard there, you are not only going to have this period of uncertainty to which I referred, but you are also going to have a tendency to have industry generally try and have that new, weaker standard applied in the industrial area generally.
I think that it would lead perhaps to a breakdown of a standard which I think it is very important to maintain.
Mr. McCULLOCH. Mr. Chairman, in this connection, I would like to say that I completely agree with the statement in the report of this committee under date of July 26, 1955, the year before last, Report No. 1417, and I quote this sentence that I would like to have in the record at this point:
The committee recognizes that in some circumstances a transaction may not be contrary to the policy of the antitrust laws even though it may lessen competition.
Mr. HOLTZMAN. Will you yield at that point ?
Wouldn't the word “unduly” seem to better apply to that situation than "substantial" ?
The CHAIRMAN. It might be well to read the balance of that.
The CHAIRMAN. This is a report on the bill which passed the House, which apparently bore my name in the last Congress.
Mr. MALETZ. Continuing the reading of Report No. 1417 on H. R. 5948:
In the International Shoe Company case (280 U. S. 291) the Supreme Court held that where the concern acquired is “a corporation with resources so depleted and the prospect of rehabilitation so remote that it faced the grave probability of business failure * * * the purchase of its capital stock by a competitor (there being no other prospective purchaser), not with a purpose to lessen competition, but to facilitate the accumulated business of the purchaser and with the effect of mitigating seriously injurious consequences otherwise probable * * * does not substantially lessen competition or restrain commerce within the intent of the Clayton Act.”
On the same principle, the acquisition by a bank of the assets of another bank should not be precluded where otherwise there would be a reasonable probability of the ultimate failure of the acquired bank or where, because of inadequate
The CHAIRMAN. You are reading the report, not the decision?
Mr. MALETZ. I am reading the report, Mr. Chairman [continuing]because of inadequate management, the acquired bank's prospects for survival seem dim.
In addition to the acquisition of a bank which otherwise would be faced with the possibility of failure, there are other circumstances in which, from a banking standpoint, the acquisition of a bank by another bank may be desirable, as, for example, where the acquisition is the most practicable means of dealing with a problem bank having inadequate capital or unsound assets or where the acquired bank has no adequate provision for management succession. Also, where several banks in a small town are compelled by an overbanked situation to resort to unsound competitive practices which may eventually have an adverse effect upon the condition of the banks, the merger of two or more of the banks may well be in the public interest. The same principle applies where there are not adequate banking facilities. These various situations are illustrative of the circumstances where the consummation of the transaction would not be contrary to the public interest.
In view of the fact that the Clayton Act has always used the words "substantially to lessen competition,” the committee thinks it preferable not to change this language by substituting the word “unduly.” At the same time, the committee believes that the present bill should not be interpreted as prohibiting bank mergers in situations such as those described.
The CHAIRMAN. I think that covers it pretty well.
Mr. BROWNELL. Yes, I agree with that statement which the committee made last year, and I would like to just add this: I would say the chief objective of the Antitrust Division of the Department of Justice over the past few years has been to bring certainty and clarity to the antitrust laws. We believe that the overwhelming segment of business wants to comply with the antitrust laws, realize their sig. nificance to the success of the competitive enterprise system, and therefore we are bending every effort to see to it that the law and the administration of the law is made just as clear as possible.
The report of the so-called Attorney General's Committee To Study the Antitrust Laws I think was a tremendous step forward in that area, and I believe this committee has at various times expressed its agreement with that point of view.
The one area where there is considerable uncertainty is this area of merger statute.
The CHAIRMAN. As to the controversy that developed between your department on the one hand, and the Comptroller of the Currency and the FDIC, on the other, I would like to ask you 1 or 2 questions.
You agree that the bills before us embody the President's recommendations?
Mr. BROWNELL. Yes.
The CHAIRMAN. And the recommendations appeared on two distinct occasions, in January 1956 and in January 1957, is that correct?
Mr. BROWNELL. That is correct.
The CHAIRMAN. Are you aware that the Comptroller of the Currency, who is under the jurisdiction of the Secretary of the Treasury, and the Federal Deposit Insurance Corporation, each one of these agencies is opposed to this legislation.
Mr. BROWNELL. This means of achieving the objective, that is correct.
The CHAIRMAN. And they are opposed notwithstanding the President's recommendation?
Mr. BROWNELL. That is the way I interpret the President's recommendation, to be in accord with the view that was taken by this committee last year, and which is set forth in these two bills that we are considering this morning.
The CHAIRMAN. Despite the President's recommendation these two agencies still persist in their opposition to this legislation ? Mr. BROWNELL. I think that is a fair statement.
The CHAIRMAN. Is it not their position that all bank mergers should be subject to advance approval by the Federal bank supervisory agency, which is granting or withholding approval would have to take into consideration a number of factors including among other things whether the effect may be unduly to lessen competition or tend unduly to create monopoly? That is true; isn't it?
Mr. BROWNELL. Yes.
Mr. BROWNELL. Yes, although I think in fairness to them I should state that they believe they are in accord with the objectives which the President set forth in his message, and they believe that the machinery that they favor, the means of accomplishing this objective would be just as effective.
I think it is a disagreement there, and I would not want to imply that they feel that they are departing from the President's recommendations
Mr. KEATING. They should ask the President.
The President said in his state of the Union message or in the Economic Report of 1956 as follows:
Toward this end, the following revisions of antitrust legislation are recomvended: First. all tirus of significant size that are engaging in icterstate emmerce and plan to merce should be required to give advance notice of the propuseul merger to the autitrust agracies and to supply the informatika Deeded to assess its probable impaet on competition.
Secondand this is importantFueral regulation should be extenderi to all mergers of backing institutions.
Mr. KEATING. Ther are extending it. The President does not tell us whether he likes undulva better than “substantial.“
The CHARMAN. No, but he made reference to mergers ir business engaged in interstate commerce which should be required to give notice to the antitrust agencies in case of a proposed merger. His reummendations were to revise and charge the antitrust Laws so as to broaden their coverage.
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And he prefaces all this by saying:
To perform their purpose fully, the antitrust laws require not only vigorous enforcement but adaptation to changing economic conditions.
So I think the implication is clear, and the Attorney General I am sure has caught the implication properly, that the President wants the present law as it now exists, to cover banking mergers where assets are acquired.
I think you agree with that, do you not, Mr. Attorney General?
Mr. BROWNELL. Yes, I do, but I do not want to imply by that there is any lack of good faith on the people who take the other interpretation as to the best means of doing this. I think they feel that their method will carry out the President's objective, and do it just as effectively as the one which we favor.
Mr. McCULLOCH. Mr. Attorney General-excuse me, sir.
The CHAIRMAN. And they take that position notwithstanding the President's recommendation?
Mr. BROWNELL. Within the full light of it.
The CHAIRMAN. I ask the Attorney General, they take that position despite your interpretation of the President's recommendation?
Mr. BROW NELL. Yes. It is a bona fide dispute as to what is the most effective means to accomplish an objective as to which we are all in agreement.
The CHAIRMAN. Correct. As you testified I think before, that the proposal these two agencies favor, would provide that in passing on a bank merger the Federal banking agency may request the opinion of the Attorney General. That is correct, isn't it?
Mr. BROWNELL. Yes.
The CHAIRMAN. In recommending against extension of antitrust legislation to cover bank mergers accomplished by asset acquisitions, aren't the Comptroller of the Currency and the FDIC really running counter to the President's recommendations?
Mr. BROWNELL. They do not think so.
The CHAIRMAN. As a matter of fact, isn't it correct that the proposal now appearing in section 23 of chapter 6, title III of the Senate Banking and Currency Committee print of the Financial Institutions Act of 1957, the so-called omnibus banking bill, was drafted by and transmitted to the Congress by the Secretary of the Treasury !
Mr. BROWNELL. That I would not know.
Mr. BROW NELL. I do not dispute it at all, Mr. Chairman. I just did not happen to know that history of it.
The CHAIRMAN. We might get that in the record at this point.
Mr. MALETZ. Mr. Chairman, at page 29 of the hearings before the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary, 84th Congress, 2d session, pursuant to Senate Resolution 170 on S. 3341 and other bills, the following statement is made, in referring to a provision which is now section 23 of the omnibus bill:
Proposed legislation to the same effect was transmitted to the Senate and House on May 17, 1956, by a letter from the Acting Secretary of the Treasury,
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:) 8 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 to be a 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 1.) 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 induly 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. No 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.