competition the Justice Department does not view that in the light of the public interest.

At the hearings on S. 3911, 84th Congress (1956), page 82, Assistant Attorney General Barnes testified as follows:

Senator FREAR. Does the lessening of competition in the eyes of the Justice Department necessarily mean it is not in the public interest?

Mr. BARNES. Yes. That is the tendency. That is one of the two standards established by section 7 of the Clayton Act. That is Congress' decision and not the Justice Department. It may tend to create a monopoly or substantially lessen competition. Those are our working tools.

Senator FREAR. Yes, but if any two banks in an area merge the Justice Department can say it lessens competition because there is just one bank after the merger and it definitely lessens competition because there is no competitor there. Does the Justice Department say that is not in the public interest because it does lessen competition?

Mr. BARNES. By enacting Clayton Act, section 7, Congress has already proclaimed the public interest in promoting competition. The Justice Department simply applies the standards that Congress has given us.

Senator FREAR. I am glad you said that. So then when you are talking about lessening competition, you do not view that in the light of the public interest. Mr. BARNES. That is correct. And the reason why we do not is because Congress has not said, "Look. See if it lessens competition and then whether it does or not you consider whether it is in the public interest." We do not have that authority. We do what Congress tells us to. Does it substantially lessen competition? That is the question for us.

That is why I say, the suggestion I made is we can give that one circumscribed opinion on the lessening of competition, and if the banking agencies want to say that despite that the public interest demands this merger go through, that is their responsibility. They may have good reasons for it on which we are mot competent. We would not object to it as long as we have the right to contest it in court if we think they are so wrong it must go court. Senator FREAR. But you follow pretty much the dictates of Congress, Mr. BARNES. As far as I possibly can, I do so.

Amendment of section 7 of the Clayton Act would be anomalous in view of the fact that Congress has long recognized that completely free and unbridled competition between banks is undesirable.

For example, it has placed limits upon entrance into the banking business, and upon the establishment of branches by national and member banks. All national banks must be chartered by the Comptroller of the Currency and all branches established by insured banks, including national banks, must be approved by one of the three Federal banking agencies. Expansion of bank holding companies through the acquisition of banks must be approved by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956.

In a statement made by Chairman Robertson at the time of the introduction of this bill, it was pointed out that unrestricted competition has not been the rule of the banking industry for many years, that it is impossible to require unrestricted competition in the field of banking, and impossible to subject banks to competitive rules applicable to ordinary industrial and commercial concerns not subject to regulation and not vested with the public interest.

Under existing law bank mergers and consolidations where the resulting bank is an insured State bank, and bank mergers accomplished by purchase of assets and assumption of liabilities whether the resulting bank is a national or insured State bank, need be approved by a Federal bank supervisory agency only if the capital stock or surplus of the resulting bank will be less than the aggregate capital

stock or surplus of all the merging banks. Thus, many bank mergers: are not now subject to Federal regulation or control.

For the information of the committee there is included an appendix to this statement giving a list of bank mergers or assumptions since 1955 in which approval of a Federal agency was not required. This 1955 date was selected because that was when the first consideration of the matter was initiated which led to the passage of S. 3911 in early 1956.

Enactment of S. 1062 would extend Federal regulation to similar cases arising in the future by requiring prior approval by a Federal agency of all bank mergers and absorptions involving insured banks after a consideration, as has been said, of banking factors, competitive factors, and the public interest.

An amendment to section 7 of the Clayton Act, on the other hand, in addition to other serious objections to that proposal, would not accomplish the desired end of extending Federal regulation of bank mergers. It would not require prior approval for many bank mergers, nor would it require or even permit consideration of banking factors and the public interest in such cases. It would have effect only in cases in which it might be said with reason that there would' be a substantial lessening of competition or a tendency toward monopoly and then by means of the cumbersome approach of litigation to require a separation of the merged bank back into its constituent elements, an almost impossible task in the case of banks.

It should be obvious that S. 1062, requiring prior approval, and a consideration of banking as well as competitive factors, is the best method of dealing with bank mergers.

Not only is S. 1062 supported by the Treasury Department, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation, but it is supported also by the American Bankers Association, the Association of Reserve City Bankers, the Federal Advisory Council, the U.S. Chamber of Commerce and the American Bar Association. At the meeting of the house of delegates of the American Bar Association on February 19, 1957, the following resolution was adopted:

Resolved, That the American Bar Association recommends to the Congress that, instead of legislation amending section 7 of the Clayton Act by extending the asset provisions to banks, banking associations, and trust companies, legislation be enacted amending the Federal Deposit Insurance Act by prohibiting the merger or consolidation of any insured bank with any other insured bank, or the acquisition of the assets of or assumption of the deposit liabilities of any other insured bank without the prior written consent of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation, depending upon the status of the resulting, acquiring or assuming bank as a National bank, a State member bank,. or a nonmember insured bank; and providing that the appropriate agency shall take into consideration whether the effect of the merger, consolidation, acquisition, or assumption may be to lessen competition unduly or to tend unduly to create a monopoly.

In the light of our experience with mergers and our study of the problem, it is our recommendation that S. 1062 be enacted. That is my formal statement.

I would just like to refer again to the material which we have added to this statement, which is too voluminous to go into except to summarize.

We have given in schedule A a list of consolidations, mergers, assumptions, not requiring approval of appropriate Federal bank supervisory agency, 1955 through 1958.

We have given a summary in appendix B of the number of mergers, consolidations, and purchase and sale transactions by years, 1950–58, showing the number of banks taken over and the resources of the banks taken over. Those are in two columns, those approved by the Comptroller of the Currency and those approved by State banking departments.

We have given, supplementing those summary figures, a complete list of consolidations so far as we are able to prepare it, and we believe we have the complete list of consolidations, mergers, and purchase and sale transactions approved by the Comptroller of the Currency from 1950 to 1958, inclusive, and the consolidations, mergers, and purchase and sale transactions approved by State banking departments over the same period.

We have given in appendix C a very brief appendix showing the number of banks-and this I should say is for commercial banksin the country at January 1, 1950, which was 14,199, the number absorbed or discontinued during each year, the number of new banks chartered, the number of banks at the end of the year. That has run from 14,164 down to 13,540 at January 1, 1959. I think there is a little difference between that figure and the one that I had, in the text of my remarks, but it is very slight and we shall have to reconcile it. These figures show a decrease of about 412 percent in number of banks.

We believe that those banks have become better equipped to compete and they have become more and more active in competition and that I would say, with whatever firmness I can, that I think we have a very good banking system at this time and that this bill will be helpful in keeping it so.

(The appendixes referred to will be found in the appendix to the record, p. 126.)

Mr. GIDNEY. Mr. Chairman, I appreciate the opportunity to testify and the patience of the committee in listening to this presentation. The CHAIRMAN. Are there any questions?

Senator BENNETT. Mr. Chairman, I have just one question.
The CHAIRMAN. Senator Bennett.

Senator BENNETT. In 1941 the Federal Reserve System published a series of banking studies by members of its staff. On page 35 of the latest edition of that series is this statement and I would appreciate your comment on it:

Today the operations of individual banks are closely interknit, and to a greater extent than is true of other forms of business banks suffer rather than gain from one another's weaknesses. In the light of these conditions it has become more and more apparent that banking cannot be understood so long as it is viewed from the point of view of the single institution. It must be viewed as an organic system of institutions in which the whole is far more than merely the sum of its individual parts.

Is that a fairly accurate statement?

Mr. GIDNEY. I think that is a very good statement, sir. I think that is a very good statement. One could apply that. I think that was written with the experiences of the early thirties in mind where the weaknesses of one bank perhaps caused it to get into trouble, and the

resemblance of the resulting effect to the falling of a row of dominoes was quite marked.

Senator BENNETT. In the light of this kind of statement, is it fair to assume that mergers should be looked at from the point of view of their potential effect on the organic structure and not simply as a program by which the competition between individual institutions with no relation to any larger responsibility is either increased or decreased?

Mr. GIDNEY. I think that is very desirable. I think we should hope, and I think we have a good deal of evidence to show, that mergers have strengthened the banking system rather than otherwise. They have strengthened the institutions.

We have tried in some of our reports to give to the Congress a number of reasons which bring about mergers, and I think in our 1954 report we went into that.

I think the single thing that makes for mergers most often is difference in level of position-that is, position as to asset health and as to management. I think it is fair to say that it generally happens that the weak merges into the strong and there is an upgrading of the strength of the institution and of the management ability.

If that is the case, and I believe it is, then we have strengthened our banking system.

One cannot live through many years of banking without seeing cases where a bank is taken out and you feel very badly about it. It may have been a friendly bank. I remember in Buffalo we had a merger of a bank I was with. I was on the wrong side of the merger. It is not much fun sometimes.

A newspaperman said that "when your columnist finds a bank that seems to have some 'bowels of compassion,' the first thing he knows it gets up and merges with an institution that is just a bank." He had a $350 note with us and he perhaps felt he could not get the same with the coldblooded bank it was merged with.

Senator BENNETT. If we were to proceed to this problem in the spirit of section 7, would we not be proceeding on the theory that we were dealing with single institutions only? And would a section 7 approach be able to preserve the atmosphere described by this language that I have just read?

Mr. GIDNEY. I think that section 7 would not be helpful to the purposes and the standards which that statement implies. Senator BENNETT. Thank you. No other questions.

The CHAIRMAN. Any further questions?

Senator SPARKMAN. Mr. Chairman ?

The CHAIRMAN. Senator Sparkman.

Senator SPARKMAN. Mr. Gidney, I have enjoyed your statement. I think it is a very fine and clear statement.

You may know that I sponsored one of the early bills looking toward notice prior to bank mergers, and I proceeded along the line of amending section 7 of the Clayton Act. I think you have given some very strong arguments here as to why this would be a preferable procedure rather than amending section 7 of the Clayton Act.

I notice, however, you make reference to the fact I believe you do, or maybe the chairman did in his statement-that under this bill

the Attorney General may be consulted but it is not required that you consult him.

Mr. GIDNEY. Yes.

Senator SPARKMAN. You are required, as I understand it, to consult with the Federal Reserve and the Treasury. Are those the two? Mr. GIDNEY. We would be required to consult with the Federal Deposit Insurance Corporation and the Federal Reserve.

Senator SPARKMAN. The Federal Deposit Insurance Corporation and the Federal Reserve?

Mr. GIDNEY. We would be a part of the Treasury.

Senator SPARKMAN. Why would it not be a good thing to bring in the Attorney General, the Department of Justice, not from the standpoint that his opinion would be controlling but at least to assure that he would be a part of the case?

It is stated here that you "may" consult him. I am wondering why you are required to consult the other two agencies and you do not want to be required to consult the Department of Justice.

It seems to me that it would strengthen your position if you had the opinion of the Department of Justice.

Mr. GIDNEY. Well, I cannot answer that question without saying that I believe these other two agencies are the people that know the facts of life and are competent in this matter. That implies that we do not think the Department of Justice is really very well equipped in a banking matter.

Senator SPARKMAN. I would go along with you on that, and, therefore, I would not advocate that the opinion of the Attorney General be controlling. But it seems to me that in an advisory capacity involving the antitrust aspects it would be well to consult the Attorney General.

Mr. GIDNEY. We have in a good many cases consulted them, but, of course, it was partly to ascertain whether they felt they had the jurisdiction which they did not have at that time.

We had one case, now a little over 2 years ago, where it seemed to us that their opinion was very, very desirable, and we did ask their opinion and that of the Federal Reserve Board, because we thought the particular transaction might come under section 7.

That was in December of 1956. We have had a reply from the Federal Reserve Board. We have never heard from the Department of Justice. And it was appropriate perhaps that we should not, because the matter worked into litigation in the State courts and that has not been finally concluded, so perhaps that is the reason why.

But these mergers are quite numerous. The material which one may have to develop becomes extremely voluminous, almost beyond belief. We think this matter is better right in the hands of the supervisory agencies who have material already and people that are studying and are kept informed daily on banking matters.

I just think the opinion we will get from the other supervisory agencies is better.

And, of course, the purpose of having this consultation is to get into a common path so that we would not be going off in all directions. Senator SPARKMAN. Am I right in my understanding that there are two general methods of merging banks? One of them is by acquisition of assets?

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