branches and 25 military banking facilities throughout the State of California and had overseas offices in London, Manila, Tokyo, Yokohama, Kobe, Bangkok, and Guam. In 1948, there were more than 140 communities in the State of California in which branches of the Bank of America provided the only banking facilities. How the Bank of America grew in size over the years is disclosed by the figures in the following table: TABLE XI.-Growth of the Bank of America National Trust and Savings Association 767, 817, 646 50,000,000 49, 591, 605 941, 001, 838 1,357, 224 345 187 1933 1934. 978, 332, 802 1 Totals include United States war loan deposits, which in recent years were as follows on the dates. indicated: Dec. 31, 1946, $63,708,788; Dec. 31, 1947, $18,526,670; Dec. 31, 1948, $45,119,675; June 30, 1949, $35,966,398. 2 Not available. 3 Includes preferred stock but does not include reserve for increase of common capital, which amounted to $1,200,000 in 1941, $2,784,080 in 1942, $3,897,080 in 1943, and $3,914,440 in 1944. This reserve was not needed and was transferred to undivided profits on June 15, 1945, concurrently with the payment of a 6633 percent stock dividend. During 1946, 400,327 shares of preferred stock ($8,006,540 par value) were converted into 531,710 shares of common stock ($6,646,375 par value), and the difference in par value, $1,360,165, was credited to surplus account. The remaining shares of preferred stock 3,951, were retired by call July 31, 1946. 4 In addition, the bank was operating 31 "Facilities" at Dec. 31, 1943, 42 at Dec. 30, 1944, 39 at Dec. 31, 1945, 15 at Dec. 31, 1946, 12 at Dec. 31, 1947, and 1948, and 16 at June 30, 1949. June 30. ⚫June 23. Source: Hearings on S. 2318, 81st Cong., 2d sess. (1950), p. 345. 1, 142, 323, 319 1, 547, 604 1,677, 558 1, 911, 035 It is important to recognize that the great increase in the size of banks has not necessarily entailed greater rates of profitability for large banking units, and cannot therefore be solely attributed to the desire to effect savings through increased efficiency and better business practices. The Federal Deposit Insurance Corporation has compiled figures indicating that at the present time smaller banks tend to be more profitable than their banking competitors of greater financial strength. According to the Annual Report of the Federal Deposit Insurance Corporation for 1951, the rate of net current operating earnings to total assets was greatest for banks in the smallest size group having deposits of $500,000 or less. Average rate of earnings for these smaller banks totaled 1.26 percent and declined progressively for banks with greater deposits, averaging only 0.93 percent for the largest banks with deposits exceeding $100 million.36 Net profit on total capital accounts averaged highest for small banks with deposits between $1,000,000 and $2,000,000, while the lowest rate, 7.1 percent, was netted by banks in the highest category of deposits. According to the conclusion reached by the Federal Deposit Insurance Corporation, "in general, the average rate of net profit was smaller the larger the size group. 9937 While banks in general have grown larger during recent decades, figures relating to the very largest banks of the country are even more indicative of the concentration of financial power within the economy. Deposits in the 100 largest banks in the United States increased more than two times from $18,750,524,485 in 1931 to $39,547,776,770 a decade later, and again almost doubled by exceeding $76,500,000,000 at the end of 1951. As of December of the latter year, these 100 banks held 46.4 percent of all commercial bank deposits in the United States. While this is a smaller percentage of total deposits than the 100 largest banks have at times held in the past, it nevertheless reflects a singular measure of financial power. TABLE XII.-Comparison of deposits held by largest banks, selected years At the end of 1951, of 13,386 insured commercial banks in the country, 201 banks (1.5 percent), each having deposits of $100,000,000 or more, held 59 percent of total loans and discounts and 55 percent of insured commercial-bank deposits. Computing figures for national 36 Annual Report of the Federal Deposit Insurance Corporation (1951), p. 47. 37 Id., p. 50. banks alone, 20 large national banks, each with deposits exceeding $500,000,001, held 42 percent of all national-bank loans and discounts and 36 percent of all national-bank deposits. It is evident from these figures that the Nation's financial structure is highly centralized and that a comparatively few large banks presently control a predominate share of the Nation's banking resources. TABLE XIII.-Concentration of financial resources in large banks 1 1 Source: Annual reports, Federal Deposit Insurance Corporation and Comptroller of the Currency. 2 Breakdown of figures by size of bank available for all insured commercial banks for year 1940. While figures pertaining to deposits reflect lending potential and therefore are significant in indicating the inherent power existing among a relatively few large banking entities, it is equally as important to consider the extent to which outstanding bank loans are held by large banking enterprises. Here, again, figures disclose a high degree of concentration among the biggest banks in the country. Insured commercial banks with deposits of more than $100,000,000, constituting but 1.3 percent of all insured commercial banks in the country, held, as of December 31, 1949, about 40 percent of outstanding bank mortgage loan balances secured by residential properties.38 According to one author on the subject, some large banks have used concentration of control as an entering wedge to secure mortgage lending business." 39 66* * * As of December 31, 1951, the 25 largest commercial banks in the United States each had total loans and discounts outstanding of well over $100,000,000. Included among these banks were some of the oldest and most renowned names in American financial annals such as National City Bank, Chase National Bank, Manufacturers Trust Co., and Mellon National Bank & Trust Co. Together these 25 banking institutions held loans and discounts exceeding $19,909,900,000 or 34.48 percent of total loans and discounts held by all commercial banks in the United States. These figures are representative of the degree of control over the Nation's banking credit which a small number of banks have exercised for an extended period of time. 38 Behrens, Commercial Bank Activities in Urban Mortgage Financing (1952), p. 28. "Chapman, Concentration of Banking (1934), p. 78. TABLE XIV.-Loans outstanding of the 25 largest banks holding largest amount of deposits 623, 963,025 926, 473, 067 624, 610, 680 292, 451, 914 Source: Moody's Banks and Insurance Companies, Moody's Investors Service, New York. Banking and Monetary Statistics, Federal Reserve Board. No one can controvert the fact that the figures cited above, bearing upon the proportion of total commercial-bank loans and deposits held by a small number of large financial institutions, reflect a high degree of control over the financial resources of the Nation. The total impact of this financial concentration upon the economy of the country, however, is difficult to ascertain and undoubtedly requires intensive and prolonged study of economic materials not now readily available. While it cannot presently be shown to be directly attributable either to the growth of large banks, the decrease in the number of banks, or the concentration of financial resources, it is nevertheless relevant to consider the declining role which commercial bank credit has played in the economy in conjunction with our discussion of these other factors. CHART 5 GROSS NATIONAL PRODUCT, THE MONEY SUPPLY, AND ALL BANK LOANS In 1929, the optimum year of financial activity preceding the depression, total loans of almost 25,000 banks doing business in the United States exceeded $41,000,000,000. By the end of 1951, with only 14,618 banks open for business, loans and discounts of all banks had risen to $68,000,000,000, an increase of two-thirds over those outstanding in the year 1929. Meanwhile, however, bank depositsor lending potential-had increased threefold and the gross national product, or dollar volume of economic activity, had also trebled. Thus it can be seen that over the last two decades bank loans have increased much less rapidly than has the general level of economic activity. Even during those periods of time when business activity was at peak levels-1946-48 and 1950-51-the volume of bank loans in comparison to the increased size of the economy remained much lower than in 1929.40 In the year 1951, when post-Korean economic 40 See statement of Roy L, Reierson, vice president, Bankers Trust Co., hearings before the Subcommittee on General Credit Control and Debt Management of the Joint Committee on the Economic Report, 82d Cong., 2d sess. (1952), pp. 653-654. |