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All told, during the last 35 years the number of banks has been reduced by more than half. In 1921 there were over 30,000 banks serving the Nation's commercial borrowers and creditors ; at the end of 1954 some 14,409 banks remained in operation--a new low. This despite the postwar boom, the 286-percent growth in bank assets, the new high levels of loans and deposits, the greatly increased use made of banking services, and the enormous growth in the number of depositors. Chairman William McC. Martin, Jr. of the Board of Governors of the Federal System, testified that “since 1933 the merger movement has been the major factor in the gradual decline in the total number of banks. This is in contrast with the 10-year period just prior to 1933 when bank suspensions were more numerous than mergers and were the major factor in reducing the number of commercial banks by about one-half." 2

Table 5 sets forth data on recent national bank consolidations. It indicates that since 1950, 494 commercial banks have been absorbed in transactions involving national banks and that these involved resources of over $13,478 million.”

TABLE 5.Data on consolidations, mergers, and purchases involving national

banks Jan. 1, 1950, to May 1, 1955

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The banks that have been eliminated in the current wave of mergers have for the most part not been the financially weak, unsound banks that needed rescue in the depression pattern. Nor have they been in the main the specialized, the poorly organized, or the inefficiently managed ones. The banks that have disappeared have rather been the growing, efficient, profitable, vigorously competitive banks taken over at peak earning capacity. The merger pattern is not predominantly one of two or more small, inadequately financed or managed banks suffering or falling behind in the competitive race, seeking by merging to form a big integrated institution able to compete on equal terms. On the contrary more than half of the national-bank mergers or 274 out of 494, involved 1 or more giants, some having assets of $100 million or more. And the absorbed banks were likewise no minnows; nearly half of them, 121 to be exact, had assets in excess of $10 million; and 33 indeed had assets of over $50 million.

The fact is that recent merger activity, as the Federal Reserve Board indicated, is a matter of deep concern. This is particularly so since competition is one of the strongest factors which safeguard a sound banking system.

Since the first of the year alone, New York City, the financial capital of the Nation, has experienced in terms of total deposits the three largest bank mergers in the history of the country. First in March 1955, the Chase National Bank with total assets of $5,669 million merged with the Bank of Manhattan Co. with assets of $1,629 million and the Bronx County Trust Co. with assets of $76 million. This merger provided the new entity, the Chase Manhattan Bank, with total assets of $7,374 million or 21.7 percent of the total assets of all banks in New York City. The merger also jumped Chase Manhattan to first place in New York City and second place in the Nation.

2 Hearings, p. 2177. From a high of 30,000 in 1921, the number of banks declined to 24,000 in 1929. Between 1929 and 1933 about 9,000 banks were forced to close their doors due to the depression.

3 Appendix 2 lists the name, location, and total assets of all national banks that have participated in mergers or consolidations since January 1, 1953.

• Hearings, p. 2159.

Also in March 1955 the National City Bank of New York, previously the second largest bank in the United States with assets of $5,767 million took over the First National Bank of New York which had total assets of $713 million. The new combination, the First National City Bank, now ranks second in the area with assets of $6,480 million or 19.1 percent of the total.

Less than a month later the Bankers Trust Co. with assets of $2,207 million acquired the Public National Bank & Trust Co. of New York which controlled assets comprising some $562 million. This was only the last of a series of acquisitions by Bankers Trust Co. which has been taking over other banks at a rapid rate for the last several years. Indeed, since 1950 Bankers Trust has ahsorbed such substantial banking institutions as the Title Guarantee & Trust Co., Lawyers Trust Co., Flushing National Bank, the Commercial National Bank & Trust Co., and the Bayside National Bank.

In December 1954 the Chemical Bank & Trust Co., with assets of $2,081 million, combined with the Corn Exchange Bank & Trust Co., which had assets of $821 million, to form the Chemical Corn Exchange Bank which now has total assets of $2,902 million.

In part because of this merger activity New York City today has only 56 commercial banks whereas at the opening of the century it had 127. Today the city's 4 largest banks control 61 percent of all deposits, whereas in 1900 the 4 largest had only 21 percent of the total deposits.

But the New York situation is by no means a local phenomenon. Other leading financial centers have likewise experienced a rash of bank-merger activity. In Philadelphia, Pa., for example, the Pennsylvania Company for Trusts & Banking, which is now the second largest bank in the area with total assets of $805 million, proposes to merge with the First National Bank which is fifth in size with total assets of $218 million. The consolidated bank would have total assets of about $1,023 million which would make it the largest banking institution in the area with control of 25.3 percent of total banking assets. Prior to that in 1933 the Tradesman's National Bank & Trust Co., with total assets of $139 million, merged with the Land Title Bank & Trust Co., which had assets of $96 million. Also in 1953 the Girard Trust Corn Exchange Bank, with assets of $579 million, acquired the National Bank of Germantown, with assets of $39 million. The Girard Trust Corn Exchange Bank itself resulted from a merger in 1951 between the Girard Trust Co., one of the hundred largest banks in the United States, and the Corn Exchange National Bank & Trust Co., another leading bank.

In Pittsburgh, Pa., the Mellon National Bank & Trust Co. has risen after a long series of mergers to a point where it now has assets of $1.861 million representing 61 percent of the total assets in that area. Between January 19.50 and the end of 1954, Mellon National had absorbed at least 13 other banks, many of them small, independent banks which had previously served depositori and borrowers in the suburban communities in the Pittsburgh area. In 1949, 8 banks had been merged or consolidated by Mellon National and in 1947 it had absorbed 2 large banks in Pittsburgh and 7 banks in the adjacent suburbs.

In Providence, R. I., the Industrial Trust Co., with assets of $312 million, merged in 1954 with the Providence Union National Bank, with assets of $168 million, which gave the resultant Providence Industrial National Bank control of some 57.7 percent of all banking assets in that city.

In California the First Western Bank & Trust Co., of San Francisco, a subsidiary of Transamerica Corp., absorbed 14 other California banks in 1931 and increased its assets in the process from $333 million to $798 million.

Many other cities have also experienced bank-merger activity in the last several years, for example, Boston; Cleveland: Dallas; Kansas City, Mo.: Cincinnati; Baltimore; Washington, D. C.; Houston; Indianapolis ; Hartford : Portland, Oreg.; and Wilmington, Del.

CONCENTRATION OF BANKING FACILITIES

At the present time the 100 largest banks control approximately 46 percent of the total assets of all the commercial banks in the country and more than 45 percent of the Nation's bank deposits.

Further reflecting the degree of concentration in our present-day banking system, in 10 of the Nation's 16 leading financial centers, 4 banks own more than 80 percent of all commercial-bank assets. In 9 of these financial centers, 2 banks own more than 60 percent of all commercial-bank assets. In each of the 16 leading financial centers the first 2 banks own more than 40 percent of all commercial-bank assets; the first 4 banks more than 60 percent. This data is reflected in table 6 that follows.

TABLE 6.—Percentage of total assets owned by largest banks in principal financial

centers

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Mr. KEATING. Is that our hearings of last year? The CHAIRMAN. Our report. You might proceed, Mr. Attorney General, with your statement. Mr. BROWNELL. A number of points that I have in my prepared statement are covered by the questions and answers that we have just completed and I would like therefore to turn to page 10 of my prepared statement and point out that the plan which we recommend, if the matter is not to be handled exclusively under the Clayton Act, section 7, would be to adopt this course.

First, amend section 7 as we have recommended to include bankasset acquisitions.

Then, amend section 23 of the omnibus bank bill at the same time to require first that in passing on bank mergers, the appropriate banking agency should consider, among other factors, the new standards or the standards of section 7 of the Clayton Act.

Second, we believe that the Attorney General should be notified of each request for approval and be assured some opportunity to intervene, or at least to present his views on the competitive problems to the appropriate bank agency.

Finally, just as in the case of the present provisions relating to bank holding company acquisitions, an antitrust savings clause should be included.

This savings clause, along with the amendment of section 7 of the Clayton Act, would still enable the Attorney General to proceed should any bank merger unreasonably restrain competition.

The CHAIRMAN. I think that is an excellent recommendation.

Mr. BROWNELL. This suggested pattern of enforcement responsibility finds support, not only in the bank holding company provisions which Congress enacted last session, and which are again endorsed this year in the omnibus banking bill by the Senate Banking Committee, but also in a parallel proposal advanced by the Federal Reserve Board 2 years ago, I think before this very committee.

At that time Chairman Martin said that each banking agency be required to consider competitive factors in passing on any mergers, and be authorized to seek the Attorney General's advice. He proposed that if the Attorney General concluded the merger would transgress section 7, the banking agency would be barred from approval.

It is well to quote his words:

However, it should be clearly provided that, if the Attorney General has not been previously consulted by the appropriate bank supervisory agency and has not indicated an absence of objection on his part, he would continue to have full authority to institute proceedings under the Clayton Act, if he should deem it desirable, with respect to any situation resulting from the particular merger or consolidation.

In substance to sum up these suggested revisions which are offered as an alternative to the treatment of bank mergers under section 7 alone, would maintain the responsibility, initial responsibility of the banking agency, to pass on bank mergers, but we believe they would go a long way toward insuring effective application of a uniform competitive standard.

Taken together, these suggested revisions would mitigate, if not minimize, the force of my objections to section 23 of the omnibus banking bill in the form that it was reported out by the Senate committee.

Unless there are some questions, I would propose now, Mr. Chairman and gentlemen, to proceed to the other provisions in the bills before you, and that is the one which sets forth certain requirements for notification before any mergers, if that is agreeable.

The need for some notification before the merger takes place stems from problems which are inherent in the present means available for discovering mergers before they occur.

You, Mr. Chairman, referred to that need in your opening statement. Let me, if I may, give you a bill of particulars as to why that is so.

The Antitrust Division now has 21 lawyers that are responsible for merger activity. In addition, a merger unit has been created in our Economic Section to assist the lawyers in these merger problems.

But before we can pass on a merger, we have got to find it. And a good part, the way things stand now, of the time and efforts of the junior staff members in this merger section is required to ferret out the mergers which have potential anticompetitive effect before they Occur.

The way they do it, they look over the trade journals and financial newspapers and the manuals of investment, and to show you the volume of the work that they have to do in finding these mergers, from January 1953 to the present time the staff has reviewed about 2,250 records of mergers and acquisitions.

When we find that on the face of it it would appear section 7 has been violated, a further inquiry is required, and we have set up special merger files for this further inquiry in 165 instances since January 1953.

Some of these mergers have already resulted in the institution of proceedings in court. Others are still under inquiry, and others were never consummated.

I think these figures will make it clear to you that this investigative burden, to find out if the mergers are occurring, would be substantially relieved if we had this legislation which would require notification to be given to us before the merger takes place.

We would no longer have to scan the publications and the financial periodicals, and many mergers which are not presently published in advance of consummation would be brought to the Department's attention.

It is interesting to note further that in those 165 cases where we have set up the special merger file because of apparently a prima facie case of violation had occurred, in almost 30 percent, that is in 47 of these cases, we did not know about the merger prior to its consummation.

This means that in almost 30 percent of these special inquiries, we had no chance to even consider moving for a preliminary injunction. We had no choice of appraising the wisdom of suit but to face the quite understandable reluctance which I am sure the courts would have to divest after the merger has already taken place.

So notification in advance would insure us of a chance to move for preliminary injunction as well as to avoid practical difficulties which are involved in trying to unscramble the omelet.

The CHAIRMAN. Mr. Attorney General, I take it then that you do not agree with the testimony of a former head of the Antitrust Division who represented the American Bar Association, Mr. Herbert Bergson, when he testified before the Antitrust Committee last year as follows:

I do not know of any merger that is consummated without the knowledge of the Department of Justice. Mr. BROWNELL. The figures would prove him to be wrong on that.

The CHAIRMAN. And I take it you don't agree with the following objection which Mr. Bergson stated :

Existing stores of premerger information seem adequate and the Government neither has been nor is likely to be significantly hampered without a mandatory notification.

Almost every proposed or rumored merger and acquisition of consequence is currently reported in the trade or financial press.

I don't think you would agree with that. .

Mr. BROWNELL. No. Time seems to have erased certain matters from his memory.

The CHAIRMAN. Have there been to your knowledge any instances where significant-and I emphasize significant-mergers were consummated concerning which the Department of Justice did not have information prior to the fact ?

Mr. BROWNELL. I think it stands to reason that there were some, yes.

The CHAIRMAN. Objection has been made to the premerger notification on the basis thatthe bill would no doubt be interpreted by the enforcement agencies as the equivalent of a congressional finding of fact that any merger or acquisition meeting the dollard standard was prima facie unlawful.

Mr. KEATING. Whose statement was that?
The CHAIRMAN. I will check on that.
Mr. KEATING. That was in the Senate hearings?
The CHAIRMAN. Senate hearings on page 209.

Mr. MALETZ. Mr. Chairman, that was a statement by Mr. Harvey M. Crow, associate general counsel, National Association of Manufacturers.

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