Just what does this language mean? Does it mean that the bank supervisory agencies are to approve bank mergers that tend to monopoly, so long as the mergers do not tend unduly to monopoly? And what constitutes unduly?

Contrast this, if you will, with the language of the Clayton Act, which applies to other businesses and prohibits any merger where the effect of the acquisition, and I quote, "may be substantially to lessen competition, or to tend to create a monopoly." Here is language that is meaningful, for it has been interpreted by the courts on numerous occasions. To discard this standard for the vague and novel "unduly" in S. 1062 is not only to invite trouble but more bank mergers as well. The language in this section of the bill presumably gives more discretionary power to the supervisory agencies. The Federal Reserve Board, one would think, would like to keep discretionary authority to a minimum. The discretionary authority in the Bank Holding Company Act of 1956 has increased the Board's workload and involved it in a number of very close decisions.

It appears that when an agency has discretionary power, the little people are at a disadvantage. It has been this association's contention that good legislation spells out in detail what can and cannot be done.

It is apparently assumed that antimerger legislation will be passed. Therefore, those not opposed to mergers desire a bill that is not too restrictive. The very moderate bill before us, I am afraid, will have considerable support from some of the banking agencies and from some banking associations. You have heard of them.

This bill provides that whenever the monopoly question arises, the appropriate agency, and I quote:

shall not take action as to any such transaction without first seeking the views of the other two banking agencies referred to herein *

The bill further provides that, and I quote:

in such a case the appropriate agency may also request the opinion of the Attorney General with respect to such question.

I emphasize the "shall" and "may" to call attention to the fact that consultation between the bank supervisory agencies on a question of monopoly is mandatory, but consultation with the Attorney General is permissive. Why shouldn't consultation be mandatory in both instances?

As bank mergers might be violations of the antitrust laws, it seems logical that the Justice Department shall be consulted by the banking agencies. Antimerger legislation naturally comes in the field of the Attorney General's office.

The antitrust Division of the Justice Department has been doing an excellent job in enforcing antitrust laws. That agency knows the strangling effect of monopoly upon business; the destruction of competition. It would seem that this proposed legislation is incomplete unless the Department of Justice is included with the agencies in making decisions on bank mergers. Further, why should the supervisors of State banks be excluded from having a voice in mergers that affect banks under their jurisdiction?

There is an antitrust "saving" clause governing bank holding companies. Why shouldn't this same clause apply to banks? The clause

I refer to is section 11 of the Bank Holding Company Act of 1956 and reads as follows:

Nothing herein contained shall be interpreted or construed as approving any act, action, or conduct which is or has been or may be in violation of existing law, nor shall anything herein contained constitute a defense to any action, suit, or proceeding pending or hereafter instituted on account of any prohibited antitrust or monopolistic act, action, or conduct.

A couple of other antimerger bills were introduced in the Senate and referred to the Committee on the Judiciary. Senator Sparkman introduced, what to us was a strong antimerger bill. As I recall it, his bill had about 10 cosponsors. Senator Wiley's bill used the understandable language, we favor, and I quote:

may be substantially to lessen competition or to tend to create a monopoly. We understand that the Judiciary has turned antimerger legislation affecting banks over to the Banking and Currency Committee, so the only bill before us is S. 1062.

It is with regret that we find it necessary to be in disagreement with this proposed legislation, especially in view of the fact that this bill bears the distinguished name of the chairman of this committee, but my responsibility is to express the views of the Independent Bankers Association.

Our old system of independent banking is in jeopardy. The giant financial institutions with their insatiable appetite are slowly eating up the little fellows. The community banks that constitute a diffused system of banking, a system that is close to the people of the respective communities, a system that gives personal banking which is far superior to the service rendered by a subsidiary of some distant central office, need your help.

If independent banking is to survive, there must be legislation that will protect it from those who are forcing upon the country a foreign system of banking.

We do not believe that there is any Member of the Congress who would advocate the destruction of our independent system of banking, our home-owned institutions. Even those bankers with monopolistic intent would not openly call for the elimination of independent banking. However, by indirection these people and their institutions are slowly cutting the ground from under our old system of banking.

In Missouri last fall some of the giant banks of that State advocated branch bank legislation. It was submitted to the people of Missouri. The people in every county in that State voted down that proposition. This is evidence of what the people think of branch banking. I believe that people feel essentially the same about all forms of multiunit banking.

The future of independent banking is more than a banking issue. It is a people's issue and the Members of the Congress are, of course, interested in the public welfare.

It is the hope of the Independent Bankers Association and, I believe, the hope of the people, that Congress will continue to pass legislation that restricts the big from becoming too big. Such legislation applied to the field of banking should have as its objectives the prevention of monopoly and the welfare of the Nation's small banks.

We believe a bank antimerger bill must do more than make a gesture toward partial closing of the door labeled "mergers." We believe any

bank antimerger bill should be understandable and effective. S. 1062 could be both if it were amended by striking the word "unduly" and substituting "substantially," and by making consultation with the Department of Justice mandatory on all questions of monopoly.

Mr. Chairman and members of the committee, I appreciate this opportunity of appearing before you.

The CHAIRMAN. Thank you, sir.

We hope to get these hearings printed by the last of this week, or certainly by the early part of the following week. After they have become available in printed form, the Chair will call a meeting of the committee to act in executive session on the amendments that have been suggested and on reporting a bill to the Senate.

We have a statement from the Chamber of Commerce of the United States which will go into the record.

(The statement referred to follows:)

STATEMENT OF THE CHAMBER OF COMMERCE OF THE UNITED STATES

The Chamber of Commerce of the United States supports S. 1062 which would amend the Federal Deposit Insurance Corporation Act to effect control over bank mergers and provide for advance approval of a merger or asset acquisition by the existing banking regulatory agencies.

The national chamber has consistently stressed its dedication to the principle of a dual banking system which provides checks and balances consistent with effective supervision in a private enterprise economy.

During hearings on the Financial Institutions Act of 1957, the National Chamber supported provisions in that legislation which would have given authority to the three supervisory agencies, the Comptroller, the Federal Reserve Board, and the FDIC, to decide the fate of proposed bank mergers and consolidations. Competition is, of course, the essence of free enterprise, and maintaining competition is vital to the preservation of free private financial institutions. But preserving existing competitors is not the same as preserving the competitive nature of the system. Moreover, in evaluating the degree of competition which exists in a particular case, the relevant market must be considered. Commercial banks must compete with other financial institutions both in securing private savings and in their lending operations. We believe that bank mergers and consolidations, per se, rarely result in a lessening of overall competition in financial markets, and in many cases actually improve competitive conditions and, thereby, service to business and the public at large.

In addition to the competitive implications of bank mergers, other public interest factors, peculiar to banking, are of great importance. Safety, solvency, and adequacy are of prime consideration. In a particular community protecting the public and assuring the public of adequate banking services are often more important than preserving an existing banking institution. For example, there may be four or five good banks, highly competitive; suddenly one finds itself in a weakened condition, but still solvent. A merger with one of the stronger banks might or might not tend to lessen competition, but this factor cannot be considered, in a vacuum. To deny a merger or consolidation, might result in the final liquidation of the bank to the detriment of depositors and the citizens of the community.

Because of the complex of factors which obtain in the banking field, Congress and the States have established sound and adequate chartering and supervisory agencies. Banking is a highly regulated industry. It seems only sensible that the agencies charged with the public responsibility of supervising must also remain in a position of determining the effects and ramifications of mergers and consolidations within the industry.

A real and vigorous competition permeates the banking industry. This competition has been fostered through the development of better communications and the accessibility to credit and other banking sources.

Often overlooked in this rigorous financial competition are the many other financial institutions which provide vigorous competition in the savings and lending field.

In the private sector alone, commercial banking competition is two-pronged; (a) from other banking institutions, and (b) from other types of financial institutions; such as, savings and loans associations, credit unions, savings banks, finance companies, and insurance companies.

In addition to private competition in the savings and lending field, the Federal Government provides competition for financial institutions through subsidies, grants-in-aid or insuring activities. With this Federal invasion into the credit field came direct lending in 1917 and the insuring and guaranteeing of private loans in 1934. In some instances this may have been helpful to the banking system, but not without the inherent dangers of Federal intrusion. Some of these Federal programs in the financial field are:

Governmental savings programs:

Postal Savings System

U.S. savings bonds program Governmental lending programs:

Small Business Investment Companies Act

Small Business Administration:

Disaster loans

Business loans

Department of Agriculture: Rural electrification loans
Farm Credit Administration:

Federal land bank loans (long-term)

Production credit association (short-term)

Federal intermediate credit bank (short term)

Banks for cooperatives

Housing and Home Finance Agency:

Urban Renewal Administration advances (5 year and long-term)
Community Facilities Administration:

College housing loans (long-term)
Public facility loans (long-term)

Public Housing Administration: Low rent housing

Within the overall framework of supervisory and chartering agencies on the State and National level, banking has undergone profound change. There has been a marked change from the more restricted clientele-type of banking to mass or retail banking. This new approach to serving the community has brought considerable change in the availability of credit. And this new approach has meant the development of financial services never before dreamed of in the American economy-personal, consumer, and installment loans; crop, seed, livestock, and machinery loans and the newer type of industry, business, and agriculture term loan.

American business and the consuming public have been served by the banking industry through all of these new and more efficient developments. The services of financial institutions have been broadened and modernized, leading to aggressive and greater competition.

With rapid communications, speedy transit, and efficient business operations, the services of banking institutions can be had anywhere in the Nation-from the smallest community to the larger metropolitan centers. As business tends to demand more credit and banking service, it is essential that banking institutions be able to meet these dynamic needs.

The nature of the banking business requires that consideration be given to all factors relative to a merger. S. 1062 would make explicit the authority over bank mergers and asset acquisitions of the Federal Deposit Insurance Corporation, Comptroller of the Currency, and Federal Reserve. We believe that S. 1062 is designed to provide effective regulation of bank mergers by the agencies that must regulate other banking operations. We therefore support S. 1062 and urge favorable consideration of the bill by the Senate Banking and Currency Committee.

The CHAIRMAN. We have a chart from the American Banker, which shows deposit comparisons for the years 1940, 1945, 1950, 1955, 1957, and 1958, by size groupings of commercial banks and mutual savings banks.

Percentages shown represent, cumulatively, the proportion of total deposits of all banks in the United States held by the size groupings of banks; mutual savings banks' figures are their percentages of total for all banks in U. S.

We have received from the Federal Reserve Board a compilation of State laws relating to delegation of authority in bank mergers and consolidations. Without objection, we will insert it in the appendix to the record. (See p. 182.)

In view of the frequent allusions to the Sherman Antitrust Act and the Clayton Act, appropriate sections from both will be inserted in the appendix to the hearings. (See p. 200.)

Frequent references have been made during the hearings to three merger cases, the International Shoe case, the Bethlehem-Youngstown Steel case, and the First America case. The opinions on the cases, or extracts, will be inserted in the appendix to the record. (See p. 202.)

The committee will stand in recess subject to the call of the chair

man.