(The following was received subsequent to the hearings and was ordered inserted in the record:) NATIONAL ASSOCIATION OF SUPERVISORS OF STATE BANKS, Hon. A. WILLIS ROBERTSON, Chairman, U.S. Senate Banking and Currency Committee, DEAR SENATOR ROBERTSON : At the time I appeared as a witness before the Senate Banking and Currency Committee on behalf of the National Association of Supervisors of State Banks and suggested certain amendments in S. 1062, advocated by the association, I did not present the suggested amendments in draft form. I am, therefore, taking the liberty to forward to you herewith two drafts of amendments conforming to our recommendations. One draft would designate the Board of Governors of the Federal Reserve System as the Federal Agency to exercise the power of approval or disapproval of bank mergers as provided in the bill. The second draft designates the Federal Deposit Insurance Corporation as the Federal Agency for this purpose. You will recall that in my testimony I stated that the judgment of the executive committee and the legislative committee of the association as to the Federal Agency to be given this power was not settled. On my own behalf, as a State supervisor, I urge the designation of the Federal Reserve Board for this purpose. I would appreciate it very much if these drafts would be received and considered by your committee in connection with my testimony. Very truly yours, ROBERT L. MYERS, Jr., Secretary of Banking of Pennsylvania. S. 1062 AMENDED IN ACCORDANCE WITH THE SUGGESTIONS ADVANCED BY THE NATIONAL ASSOCIATION OF SUPERVISORS OF STATE BANKS Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (c) of section 18 of the Federal Deposit Insurance Act is amended by striking out the third sentence thereof and substituting in lieu thereof the following: "No insured bank shall merge or consolidate with any other insured bank, or either directly or indirectly, acquire the assets of, or assume liability to pay any deposits made in, any other insured bank without the prior written consent (i) of the Comptroller of the Currency and of the Board of Governors of the Federal Reserve Board if the acquiring, assuming, or resulting bank is to be a national bank or a district bank, or (ii) of the Board if the acquiring, assuming, or resulting bank is to be a State member bank or nonmember insured bank (except a district bank). In granting or withholding consent under this subsection, the Comptroller and/or Board, as the case may be, shall consider the factors enumerated in section 6 of this Act. In the case of a merger, consolidation, acquisition of assets or assumption of liabilities, the appropriate agency or agencies shall also take into consderation whether the effect may be to lessen competition unduly or to tend unduly to create a monopoly, and may also request the opinion of the Attorney General with respect to such question. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (c) of section 18 of the Federal Deposit Insurance Act is amended by striking out the third sentence thereof and substituting in lieu thereof the following: "No insured bank shall merge or consolidate with any other insured bank, or either directly or indirectly, acquire the assets of, or assume liability to pay any deposits made in, any other insured bank without the prior written consent (i) of the Comptroller of the Currency and of the Corporation if the acquiring, assuming, or resulting bank is to be a national bank or a district bank, or (ii) of the Corporation if the acquiring, assuming, or resulting bank is to be a State member bank or nonmember insured bank (except a district bank). In granting or withholding consent under this subsection, the Comptroller and/or Corporation, as the case may be, shall consider the factors enumerated in section 6 of this Act. In the case of a merger, consolidation, acquisition of assets, or assumption of liabilities, the appropriate agency or agencies shall also take into consideration whether the effect may be to lessen competition unduly or to tend unduly to create a monopoly, and may also request the opinion of the Attorney General with respect to such question. The CHAIRMAN. We are pleased to have our House colleague here, Judge Celler. Judge, if you will come up, the committee will be glad to hear you. I will just say before you start testifying that the last witness mentioned the fact that as far as State banks are concerned, they would just as soon have no legislation at all. They felt that there was a considerable demand for some legislation, and I told them that you might say something on that score. Mr. CELLER. We will come to it. STATEMENT OF EMANUEL CELLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. CELLER. Mr. Chairman, members of this distinguished committee, I always feel very comforted to come over here. I see so many faces of men with whom I have served, men who have served with distinction in the House and now with even greater distinction in the Senate. I number you among them, and I am very happy to be with you to say something about these pending bills. I appreciate the opportunity to present to this distinguished committee my views concerning S. 1062 which would provide safeguards against mergers and consolidations of banks which might lessen competition unduly or tend unduly to create a monopoly in the field of banking. I would point out that the views I express are based in considerable part on extensive studies, hearings, and reports of the House Judiciary antitrust subcommittee, dealing with the competitive aspects of bank mergers. To summarize my position, I recommend favorable consideration of S. 1062 provided it is amended in the following respects; First, by prohibiting the appropriate Federal bank supervisory agency from approving any bank merger or consolidation where, in any section of the country, the effect may be substantially to lessen competition or tend to create a monopoly ; Second, by requiring the appropriate Federal bank supervisory agency to give notice to the Attorney General of a proposed merger and to enable him to intervene or offer his views respecting the competitive phases of the transaction; Third, by requiring notice with opportunity to be heard to the appropriate supervisory authority of the interested State in the event the transaction involves State banks; Fourth, by adoption of a so-called antitrust savings clause for a merger between banks similar to that governing a merger between a holding company and a bank under section 11 of the Bank Holding Company Act of 1956, thus making it clear that applicable provisions of the antitrust laws pertaining to banks are not to be superseded; Fifth, by adoption of provisions for a hearing on the record. As background for these legislative recommendations, I propose to discuss first the trend of bank merger activity and the resulting concentration in banking facilities; second, the present provisions of Federal law dealing with bank mergers; and finally, the reasons why the recommended changes in the bill are necessary. Concentration of banking facilities: At the outset I would emphasize that enactment of S. 1062 with the recommended amendments is the minimum necessary to maintain a sound, vigorously competitive unit banking system in this country and to arrest a trend which is concentrating control of the Nation's banking business into the hands of fewer and larger financial institutions. At the present time, while there are approximately 13,500 commercial banks in this country, the 100 largest control approximately 46 percent of the Nation's total bank assets, and more than 48 percent of the bank deposits. In 10 of the Nation's 16 leading financial centers, 4 banks own more than 80 percent of all commercial assets. Furthermore, in 9 of these financial centers, 2 banks own more than 60 percent of all commercial bank assets. Again in each of the 16 leading financial centers, as indicated by the following table, the first 2 banks own more than 40 percent of all the commercial assets, the first 4 banks 60 percent. Percentage of total assets owned by largest banks in principal financial centers 1 See interim report of the Antitrust Subcommittee, House Committee on the Judiciary on Corporate and Bank Mergers, p. 30 (84th Cong., 1st sess.). See also House Judiciary Report No. 1417 on H.R. 5948 (Bank Mergers), p. 8 (84th Cong., 1st sess.). Source: Superintendent of banks, New York State. Further indicating the degree of concentration is the following table (Congressional Record, Mar. 14, 1957, p. 3317) showing as of June 30, 1956, the proportion of assets for each of 54 cities which are classified as central reserve and reserve cities by first, the largest commercial and second, the five largest commercial banks. Assets of (1) the largest commercial bank, and (2) the 5 largest commercial banks as percentages of the total assets of all commercial banks in central Reserve and Reserve cities, 1956 And this is important, Mr. Chairman and members of the committee, the increase in banking concentration has been coupled with a comparative contraction in the credit extended to borrowers by the banking system. As banks have grown larger, they have tended to have fewer dealings with smaller businesses. A study conducted by the Federal Reserve Board several years ago shows that the very large banks with deposits of $500 million or more had the least number of loans with small business of all classes of banks, the next to lowest dollar volume of loans with small business, and the smallest percentage of dollar volume of all loans with small business.1 Considering the decrease in the proportion of small banks in the financial community, the overall drop in credit extended, and the frequent resort to Government agencies for funds, as a result, it seems likely that the increasing trend toward concentration has at times entailed credit shortages especially for smaller enterprises.2 Moreover, the present degree of concentration is contrary, I think, to the fundamental premise that the banking system of the United States should rely for its vitality on vigorous competition by a multitude of independent banks, locally organized, locally financed, and locally managed. Unlike other countries, such as Great Britain, Germany, and France, where a few mammoth institutions control nearly all the banking facilities, the American system is based on unit banking-that is, strong, growing community banks which provide a wide 1 See "Bank Mergers and Concentration of Banking Facilities," a staff report to Subcommittee No. 5 of the House Committee on the Judiciary, p. 48 (1952). a Ibid. It is the unit range of financial services to the people in the area. banking system which has played a key role in the economic development of this country. And it is this kind of system, premised on independent banks effectively competing with each other that must be perpetuated and preserved. For independent banks not only act as a necessary balance wheel to offset the power of big business, they tend to provide a much healthier basis for effective community organization than does the absentee ownership of giant banking institutions. In fact, the independent bank-not the mammoth financial houseprovides in many cases the new ideas from which widespread innovations originate. I am constrained to conclude that unless additional legislative precautions are taken of the kind here recommended to preserve the competition that still exists, there is the very real possibility that banking credit will be dominated to an ever-increasing extent by a small, tightly knit group. Bank merger activity: Largely responsible, in my judgment, for the concentration that now characterizes the banking system, has been a rapidly accelerating trend toward bank mergers which has been a major development in banking over the past 8 years. As shown by the following table, in the period 1950 through 1958, some 1,330 of the Nation's commercial banks have disappeared by way of mergers and consolidations: Decreases in number of commercial banks because of consolidations and Of these 1,300 mergers and consolidations, 731 or over one-half involved national bank transactions approved by the Comptroller of the Currency. Total resources of the banks absorbed in these national bank mergers amounted to $11,303,146,733. Another matter that I know is of interest to this committee is the gradual decline in the total number of banks in the Nation. During the last 35 years the banking population of the Nation has been reduced by more than half; in 1921 there were more than 30,000 banks serving the Nation's creditors and depositors as compared to approximately 13,500 at the present time. True, a large share of the Nation's |