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. But as I come in 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

gress had recommended a bill which would impinge very severely on the work which this committee is doing, without your hardly realizing it.

Mr. KEATING. We run into that all the time, Mr. Attorney General. Mr. BROWNELL. I suppose so.

Mr. KEATING. We may have as much difficulty reconciling our views with the Banking Committee as you and the Comptroller have had difficulty.

Mr. BROWNELL. If you can meet that standard of cooperation, I think it will solve this one.

Mr. RODINO. You say, Mr. Attorney General, that there would be at least a period of uncertainty as to the interpretation of lessening of competition unduly; isn't that so!

Mr. BROWNELL. Yes.

Mr. RODINO. Could it be possible that the "substantially" phraseology might result in more effective control than the word "unduly" as eventually interpreted?

Mr. BROWNELL. Reading the hearings before the Senate Banking and Currency Committee on this, discussions that I have seen of it, I believe that it is the intention that putting that word "unduly" in there would mean that fewer proposed mergers would be affected by it. I think it is a weakening of the antitrust standard.

Mr. RODINO. That is your present thinking?

Mr. BROWNELL. Yes.

Mr. KEATING. But in section 7, don't we have the word "substantial"?

Mr. BROWNELL. Yes.

Mr. KEATING. And that is left out, so that there might be some contention certainly that any lessening of competition which was undue would not have to be substantial in order to fall under the ban of this section?

Mr. BROWNELL. It is going to be very troublesome, I think.

Mr. RODINO. Then to pursue that further, Mr. Attorney General, if that were the case-and of course we are dealing with hypotheses right now would you then object to the use of the "undue" terminology if it would result in more effective and stringent control?

Mr. BROWNELL. I think there is such a slight chance of that happening that it would be hardly worth our time to consider it. The whole tenor of the testimony that has been given in support of it indicates to me that a strong effort would be made to say that that is a weakening of the present standard.

I think that the main thing is uniformity. I think it would be a mistake to have two separate standards, whatever they are. For as I understand it, it is the purpose of this subcommittee and the purpose of the Congress that there shall be competition in the banking field that is just as stringent, no more, no less, than that in industry generally.

In other words, it is not comparable to the railroads or something of that sort, where in return for monopoly powers they are given exemption from the antitrust laws. But as I understand it, the expression of opinion of Congress, at least up to this time, is that the standards of competition in the banking industry shall be no different than they are in industry generally. If that is true, then I think it

would be very unfortunate to have new terminology used without any indication, in the legislative history or otherwise, that the Congress considers it exactly the same in effect and substance as the Clayton Act, section 7.

Mr. KEATING. There is a distinction in kind between banking and say the cloak and suit business.

Banking seems to be somewhat more tinged with the public interest. Mr. BROWNELL. That is right; and that is why it is subject to regulation in certain aspects. I do not say that those other considerations should not be taken into account by the banking agencies when it comes to pass upon a merger or upon an acquisition. But I say that insofar as the antitrust part of this is concerned, the maintenance of effective competition in the area, that that factor should be the same as the factor and standard applying to the rest of industry.

Mr. McCULLOCH. Mr. Chairman, I would like to ask the Attorney General this question: Then if you have come to a firm conclusion that the standards should be the same with respect to prospective mergers

Mr. BROWNELL. Yes.

Mr. McCULLOCH (continuing). Are you at all fearful that those rigid standards may prevent needed mergers at banks in cities, or areas, or communities too small to support a banking institution, which areas and which communities in my opinion now exist?

Mr. BROWNELL. I am not fearful of that, for several reasons. One, I am about to come to in my statement, and that is the question of failing banks. I do not think that there would be any need to worry about that.

Mr. McCULLOCH. I would agree with that.

Mr. BROWNELL. So far as the small communities are concerned, the final decision in any event in the banking area would be left to the appropriate banking agency. And they could take into consideration the special banking considerations which should be involved. For example, the consideration of the question of whether there is sufficient services there and sufficient assets.

All those things would still be taken into consideration before the final decision was made by the banking agency.

Mr. McCULLOCH. And even though there would be a substantial reduction in competition, that would not prevent the merger in your opinion, if the other factors

Mr. BROWNELL. If the other factors outweight it in the opinion of the appropriate banking agency.

Mr. KEATING. How do you reach that conclusion?

Is there something in section 7 which would give warrant to that, or is it found somewhere else?

Mr. BROWNELL. It would be in the omnibus banking bill.

Mr. KEATING. In other words, even though it did substantially lessen competition, if there were other factors which made the acquisition desirable in order to give the proper service to a small community

Mr. BROWNELL. As a net proposition, yes.

Mr. KEATING (Continuing). Would you be able under the omnibus banking bill to permit the merger?

Mr. BROWNELL. That is right, but on the one factor of competition or substantial lessening of competition in which this committee

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.
Mr. McCULLOCH. Will counsel read it?

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 significance 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.

The CHAIRMAN. That is their point of view?