PARAGRAPH SEVEN. Commencing on or about May 18, 1943, and at various times thereafter respondent has attempted, either directly or through one or more of its controlled companies or agents, to acquire a controlling stock interest in the Citizens National Trust & Savings Bank, Los Angeles, California. In furtherance of such attempts respondent has acquired and now owns, either directly or through one or more of its controlled companies or nominees, approximately 58,937 shares of the said Citizens National Trust & Savings Bank, which number of shares represents approximately 23 per cent of the total number of shares of said bank now outstanding. Citizens National Trust & Savings Bank is a national bank operating through a head office and 33 branches, all located in Los Angeles County, California, having deposits of individuals, partnerships and corporations of approximately $315,000,000. Citizens National Trust & Savings Bank is engaged in interstate commerce within the purview of Section 7 of the Act of Congress approved October 15, 1914 (Clayton Act). Should respondent acquire a controlling stock interest in such bank, the number of banking offices which respondent controls in Los Angeles County, California, would be increased from approximately 157 to 191, or from approximately 42 per cent of all banking offices in Los Angeles County to approximately 51 per cent in such county; and the amount of deposits of individuals, partnerships and corporations which respondent controls in such county would be increased from approximately $1,656,000,000 to $1,971,000,000, or from 37 per cent to 45 per cent of all such deposits in such county.

PARAGRAPH EIGHT. Upon information and belief, that respondent, unless restrained, intends to and will further expand its banking interests by acquiring the controlling stock interest in the Citizens National Trust & Savings Bank of Los Angeles, California, as well as controlling stock interests in other independent banks now operating or which in the future will be operating in the States of California, Oregon, Nevada, Arizona, and Washington in competition with one or more of the banks now controlled by respondent.

PARAGRAPH NINE. The acquisition by respondent of the capital stocks of the banks listed in Paragraphs Four, Five, and Six herein, as well as the acquisition by it of the stock of Citizens National Trust & Savings Bank, Los Angeles, California, was contrary to law in violation of Section 7 of the said Clayton Act, and the effect of such acquisition of such stocks may be, has been and is:

(a) To substantially lessen competition in the commercial banking business between some or all of such banks; or

(b) To restrain commerce in the commercial banking business in the sections or communities in which such banks were severally engaged at the time of such acquisition or in some of such acquistion or in some of such sections or communities; or

(c) To tend to create a monopoly of commerce in respondent in the commercial banking business, particularly in banking offices, bank deposits, and bank credit in the five-state area of California, Oregon, Nevada, Arizona, and Washington or in various sections or communities in the said five states.

WHEREFORE, THE PREMISES CONSIDERED the Board of Governors of the Federal Reserve System on this 24th day of June, A. D. 1948, issues its complaint against said respondent.

NOTICE

Notice is hereby given you, Transamerica Corporation, respondent herein, that the 12th day of October, A. D. 1948, at 10:30 o'clock in the forenoon, is hereby fixed as the time and the offices of the Board of Governors of the Federal Reserve System, in the City of Washington, D. C., as the place, when and where a hearing will be had on the charges set forth in this complaint, at which time and place you shall have the right, under said Act, to appear and show cause why an order should not be entered by said Board requiring you to cease and desist from the violation of the law charged in this complaint and to divest yourself of the stock of the Citizens National Trust & Savings Bank, Los Angeles, California, and the stocks of any or all of those banks listed in Paragraph Four herein.

IN WITNESS WHEROF, the Board of Governors of the Federal Reserve System has caused this, its complaint, to be signed by its Secretary, and its official seal to be hereto affixed, at Washington, D. C., this 24th day of June, A. D. 1948.

By the Board.

[SEAL]

(Signed) S. R. CARPENTER,

Secretary.

Colonel WOZENCRAFT. The complaint states, and I quote:

Since its organization in 1928 respondent has continued

to expand its banking interests by the acquistion, either directly or through one or more of its controlled companies or agents, of controlling stock interests in or the banking business of various independent banks which banks were at the time of such acquisitions in competition with one or more of the banks already controlled by respondent. As a result of such expansion respondent now controls approximately 46 banks, operating approximately 598 branches located in the States of California, Oregon, Nevada, Arizona, and Washington, having aggregate. deposits of approximately $6,640,000,000. Of the banking offices so controlled by respondent approximately 555 are located in California, 57 in Oregon, 15 in Nevada, 7 in Arizona, and 10 in Washington. Of the banking deposits so controlled by respondent approximately $5,716,000,000 are located in California, $614,000,000 in Oregon, $129,000,000 in Nevada, $85,000,000 in Arizona, and $96,000,000 in Washington. The banking offices and deposits controlled by respondent constitute the following percentages of the total banking offices and deposits in each of the five States above named: In California approximately 50 percent of all banking offices and 43 percent of all deposits; in Oregon approximately 36 percent of all banking offices and 44 percent of all deposits; in Nevada approximately 60 percent of all banking offices and 77 percent of all deposits; in Arizona aopproximately 13 percent of all banking offices and 20 percent of all deposits; in Washington approximately 4 percent of all banking offices and 4 percent of all deposits.

Each year that this expansion is permitted to continue additional independent banks are being gobbled up by one means or another. For example, the complaint shows that in 1947 four independent banks in California and Oregon, with total deposits of approximately $14,318,000 were added to the Transamerica empire. So far in 1948, two independent banks with deposits of approximately $5,390,000 have been acquired and I was told recently of a third acquisition of stock in another independent bank in Oregon, which has not yet been announced.

This expansion of Transamerica Corp. has by no means been limited to the field of banking. In addition to these owned or controlled banking institutions, the complaint states further that through various subsidiaries and other controlled companies, Transamerica is now engaged in the busines of home financing; in the business of acquiring, managing, and selling real estate; in the business of catching, buying, processing, and selling fish and seafood; in the business of underwriting and selling life, health, accident, fire, automobile, and marine insurance; in the business of manufacturing and selling hydraulic controls, line supports, and aircraft, agricultural implements, Diesel engines, nonferrous and aluminum castings and forgings, malleable iron and steel castings, oil-well equipment and machinery, and other products; and in other businesses. Obviously existing antitrust laws have not adequately protected the legitimate interests of small business. There is urgent need for new Federal legislation specifically designed to regulate and control the operations and further expansion of bank holding companies and to require the divorcement of nonbanking activities. For example, under existing laws, a bank must obtain permission to open a branch from the Comptroller of the Currency in the case of the national bank, or from the State banking department in the case of a State bank. However, under present laws, it has been and is possible for bank holding companies to acquire control of banks without permission from any Federal or State agency and in effect to operate them as branches-Annual Report for 1943, Board of Governors of the Federal Reserve System.

Our position in the matter of new legislation is in line with the opinions expressed by both Federal and State bank regulatory authorities and by many banking groups. The Secretary of the Treasuryhearing before the Banking and Currency Committee of the Senate, Eightieth Congress, second session, on confirmation of nomination of Thomas Bayrd McCabe, page 190-the Comptroller of the CurrencyAnnual Report for 1945, Comptroller of the Currency-the Board of Governors of the Federal Reserve Bank-Annual Report for 1943, Board of Governors of the Federal Reserve System-and the Federal Deposit Insurance Corporation-Annual Report for 1944, Federal Deposit Insurance Corporation are all on record as favoring proper regulatory legislation. The National Association of Supervisors of State Banks, at its annual convention in both 1947 and 1948, approved resolutions asking Congress for the enactment of a bank holding company regulatory bill.

Mr. BALLINGER. I want to ask you one question, Colonel. Do you know whether the bank holding company has also been one of the important causes of bank failures?

I remember when I was in the Securities and Exchange Commission we made a study of the disastrous banking failure in Detroit, Mich., that of the Detroit Guardian Trust, and the disastrous banking failure in Cleveland; and at the center of these failures was this precise kind of a holding company that you are talking about, which controlled banks, insurance companies, and private manufacturing ventures of all kinds, so that the banks' funds were put into businesses in which the directors of the top holding company were interested. And as I recall it, and I will correct myself by looking over that report of the SEC, I think that the investigators of the SEC put their fingers squarely on this kind of a device as one of the calamitous factors in the picture. Do you know anything about that?

Colonel WOŻENCRAFT. I have heard a great deal of talk about it, but I do not know enough about it of my own knowledge to feel justified in making any statement. I think it is thoroughly worth going into from your standpoint, however, sir, and I hope that you will go into it.

Mr. BALLINGER. I remember that Mr. Flynn in his little book called Graft in Business, makes a special point of this. He pointed out that it was one of the major factors in causing the bankruptcy of a great many banks. Because bands of adventurers went out in the twenties and, through this holding company device, would get control of a bank that had many times the deposits or the capital necessary to control it. Then they would begin to gamble with those deposits by putting them into ventures in which they were personally interested. It became a cockeyed system of banking.

I know that he urged at that time that something be done about the bank holding company. But we have not as yet done anything about it, have we?

Colonel WOZENCRAFT. No. At the last session of Congress, the Senate Banking and Currency Committee unanimously reported favorably S. 829, which was a bill for the regulation of bank holding companies; but no further action was taken. There were a few hearings in the House committee, but the adjournment, or the end, of that session of Congress-that was in the spring of 1947-caused a suspension of the hearings.

Mr. BALLINGER. I want to say, Mr. Chairman, that I have not had the pleasure of meeting Colonel Wozencraft before, but I know his organization well, and they were one of the first groups to actively express interest in the work of this committee. I happen to know that Mr. Hollister of that organization was a very vigorous battler for those principles.

Colonel WOZENCRAFT. The American Bankers Association, at its annual convention in September of this year-1948-unanimously approved a resolution in which it "urges that the Congress take prompt action designed to place under effective supervision bank holding companies and to require the separation from such companies of all nonbanking activities." Many State bankers' associations have taken similar action.

Monopoly in banking and credit endangers free enterprise in every field of business. It affects not only the small banker but every businessman, particularly those in the smaller communities of the Nation, since it may require him to obtain necessary credit from one single institution on whose terms he must deal. If this bank is controlled by a holding company, which in turn controls his competitor across the street, his plight may indeed be a sad one. Yet, today there are many communities where competitive banking facilities have been eliminated entirely through the spread of the bank holding company during the past 20 years.

One of the purposes of this investigation is to determine if existing laws effectively protect the legitimate interests of small business, and if not, what can be done about it. The Independent Bankers Association of the Twelfth Federal Reserve District declares that they are not adequate. We urge that this committee recommend to the Congress the prompt enactment of a bank holding company regulatory bill. We urge this not only in the interests of independent bankers but also to preserve and protect free enterprise and the free competitive system in every line of business and industry.

In behalf of the association, I thank you for the opportunity of appearing before the committee.

Mr. BALLINGER. It has been a pleasure to have you here, Mr. Wozencraft.

Mr. STEVENSON. Do you have any other witnesses?

Mr. BALLINGER. Mr. Paul O. Peters has a statement to file, Mr. Chairman.

Mr. STEVENSON. I will call now upon Mr. Paul O. Peters, who wishes to file a statement in these hearings.

Mr. PETERS. Thank you, Mr. Chairman.

The statement which I will file will cover the operations of the Bank of America, and also some of the operations of the huge industries that are integrating their operations, both horizontally and vertically, to the detriment of free enterprise.

Mr. STEVENSON. Very well.

STATEMENT OF PAUL O. PETERS, STAFF INVESTIGATOR, SELECT COMMITTEE ON SMALL BUSINESS, HOUSE OF REPRESENTATIVES

Mr. CHAIRMAN. The thousands of complaints received by the select committee during the calendar year 1948 indicate that things are not good in our economy, notwithstanding that employment is at an all-time high and profits of corporations are reported better than in 1947.

When hundreds of small enterprisers appeal to the committees established by the Congress for relief or assistance in obtaining essential materials in the conduct of their business, something is wrong with our economy that needs immediate attention.

If our Nation is to preserve the free enterprise system and our capitalistic economy all elements of our economic life must be protected from monopolistic practices on the part of both business and Government.

Our economy functions smoothly and profitably only when the essential tools of production are available to those who are able and willing to use them. The tools of production include machines, manpower, and capital.

If the machinery for production is monopolized by the few giant corporations the masses eventually suffer.

If the manpower becomes immobilized by strikes, walk-outs, or other causes production falls off, goods become scarce, and prices tend to advance.

If capital becomes concentrated in the hands of giant financial institutions the possibility of long-term credit for small business becomes less and less.

Both concentrations of economic power and financial power are dangers which threaten the United States at this time.

The Federal Trade Commission reports that 113 giant corporations with individual assets of more than $100,000,000 each control more than $42,000,000,000 of the more than $97,000,000,000 in assets of the manufacturing industries of the United States. The 43-percent control by 113 giant corporations appears in better perspective when one knows that there are over 215,000 manufacturing enterprises in our economy.

Thus one-twentieth of 1 percent of the firms control 43 percent of the assets, while 99120 percent control the remaining 56 plus percent.

In the petroleum industry, the select committee received many complaints during the year from producers, refiners, and others that they were unable to get materials with which to carry on their business.

We had complaints and calls for assistance from Texas, Oklahoma, and other States by drillers who complained they could not get well casing or upset tubing with which to complete wells they desired to drill.

From Salt Lake City, a small independent refinery asked for aid in getting a small supply of pipe with which to complete their plant, which was very modest in size. By contrast to the situation in which this small independent was placed, one of the giant companies near the independent refiner was able to complete a giant plant costing over $5,000,000 without any difficulty whatsoever.

This caused the staff to inquire into the monopolistic practices in the petroleum industries and as an auxiliary to the investigation we discovered that the four largest corporations in the petroleum industries controlled assets of more than $6,671,000,000 or approximately 49 percent of all the assets of the industry said to total approximately $13,650,000,000 at the end of 1947.

The concentrations of economic power which are apparent in the manufacturing industries also extend to the financial institutions of the Nation.

The Federal Trade Commission has made numerous reports on concentrations of capital and liquid assets in the hands of the giants in the manufacturing industries, but it remained for the American Banker, a trade publication of the banking industry to publish the facts respecting the concentrations of financial power in the fields of money and credit.

The American Banker in a September 1948 issue reported that 11 bank holding companies own or control 330 institutions with more than 800 banking offices in 20 States.

Further investigation reveals that one giant of giants controls assets of more than $7,000,000,000 and reaches down through stock ownership to control the largest banking enterprise in America, the Bank of America.

The giant of giants, Transamerica Corp. is in many fields outside of banking. They have interests in or wholly own insurance companies, oil and mineral development companies, packing plants, machine shops, foundries, and other industrial enterprises. In fact they operate agencies on foreign countries and the Banca d'America e d'Italia, through ownership of 92 percent of the capital and an investment of over $9,000,000. The very fact that business is big should not be considered an indictment of size. However, when corporations become so large and so extensive that their operations assume the character of monopoly, whether in production, or capital and credit, then the free enterprise system is in danger.

Banking and finance should be promptly and effectively divorced from ownership in, and direction of, the manufacturing industries.