The CHAIRMAN. This is off the record.

(Discussion off the record.)

The CHAIRMAN. On the record. I think Mr. Coyle wants to ask some questions.

Mr. COYLE. These questions do not apply to you so much as they do as to asking your opinion about some of the concentration of insurance companies in the New York area.

Looking back to the depression when the farmers were threatening to shoot insurance men who wanted to foreclose, do you think that if a depression came that a big New York company would be in as good a position as a local company to determine whether your investments in Texas, for example, should be foreclosed?

Mr. FULTON. I hesitate very much to speak on looking into the future and speak in relation to what another company would be in a position to do. It seems to be a rather dangerous process for me. I have no intimate knowledge of the organizations of other companies. We do not make farm loans. We make many home loans. We make those home loans through what we call mortgage correspondents. In Dallas, in Fort Worth, in Syracuse, in Buffalo, in Washington, we do that, and we would think that those mortgage-loan correspondents that are tied up to us, with many ties tangible and intangible, would be quite as capable of advising us accurately as to the wisdom of foreclosure or nonforeclosure of properties, as would the officials of a local life-insurance company.

Mr. COYLE. Do you think it is good for Texas, for example, that decisions, after getting the advice, should be made on such matters in New York?

Mr. FULTON. What matters, Mr. Coyle?

Mr. COYLE. On questions of loans and their foreclosures.

Mr. FULTON. I see no objection to it if it is made in the light of proper local advice and counsel and good management dictates that. You should have the advice of local people.

Mr. KEATING. You do not know anything about the atmosphere of New York State that causes poor judgment to be exercised as opposed to the great State of Texas?

Mr. FULTON. I would say this. I am not a New Yorker. I am a country life-insurance agent that clambered up here.

The CHAIRMAN. From Brooklyn?

Mr. FULTON. No, sir; from down in the State of Delaware; country, I mean, down country, small town. I do not find New York people much different. They may talk with a little different accent in the Bronx or over in Brooklyn, but basically they are just about the same kind of folk who do things just about the same kind of way down in lower Delaware where I came from or out in Texas or any place else. I do not find any different motives.

Mr. COYLE. There are those who think that the New York businessmen of the type that we find on your board of directors and on boards. of directors of these big insurance companies do have a little different atmosphere from businessmen out in the rest of the country. Do you think that it is sound for the country that businessmen in the outlying parts of the United States should depend on the judgment of the New York business community as to whether funds ought to be loaned to them in the outer parts of the country?

Mr. FULTON. I can only say on the record that the system seems to have worked admirably. There has been no impeding of the flow of funds to the outlying sections, and in the main the distribution of those funds; they are lending and negotiating with the small-business concerns and mortgages of home owners and businessmen, floating loans through mortgage loans coming through local correspondents, local people or branch offices with other companies thoroughly familiar with local conditions.

It is one of the most decentralized factors of our activity in life insurance.

Mr. COYLE. You do not think that where the actual business interests of the local business community might conflict with the business interests of the New York community, a decision by the New York community as to financing of the local business people would be likely to be colored by that difference of interest?

Mr. FULTON. I can only speak with authority as to one company, but I would have no reason to believe it was different in other companies that have been of the same caliber as we do.

Never in 20 years have I seen one director of our company show the slightest indication either positively or negatively of allowing any interest of his to interfere with the decision affecting the loaning of money or any other activity of our company.

Mr. COYLE. That is what I wanted to know.

The CHAIRMAN. Mr. Foley wants to ask some questions.

Mr. FOLEY. Mr. Fulton, I believe you said that there is no monopolistic practice or no unfair trade practices in the insurance business. Mr. FULTON. That is correct, sir.

Mr. FOLEY. Would you care to comment on the recommendation of the superintendent of insurance of the State of New York and the joint legislative committee on insurance rates and regulations, in which they recommend that the Donnelly Act, which is a little Sherman Act of the State of New York, be amended to include insurance companies?

Mr. FULTON. Maybe I misunderstood your question. Was your question life insurance or insurance companies?

Mr. FOLEY. I refer to the insurance business. I am not sure of your quote. That is why I asked you to correct me.

Mr. FULTON. I have total unfamiliarity with the fire and casualty insurance business. I do not know what the conditions are there or what the recommendations that are made are.

Mr. KEATING. Does the comment have to do with fire and casualty? Mr. FULTON. That would be my impression. I think if you want to get an authoritative answer on that, you would have to get Mr. Dineen, the superintendent of New York, to come down. I have had many discussions with him officially and unofficially, and I have never had the slightest intimation that there was any monopolistic practice or tendency, in his judgment, in the life-insurance business that required any State action.

Mr. FOLEY. Mr. Fulton, both bills that were recommended by this joint legislative committee, both the amendment of the Donnelly Act and the amendment of the insurance law preventing unfair trade practices, do not contain any exemptions for life insurance.

96347-50-pt. 2B- -23

Mr. FULTON. We certainly would not want any exemptions. I do not think there is any assumption because an act is passed and we are not exempted from it, that we are guilty of any practices that that act may be aimed at.

Mr. FOLEY. Are you familiar with the mortgage conference antitrust suit in New York?

Mr. FULTON. I am quite familiar with it; yes, sir.

Mr. FOLEY. That is still pending, is it not?

Mr. FULTON. No, sir.

Mr. FOLEY. It has been dismissed? I mean if it is a pending suit, I do not wish to discuss it.

Mr. FULTON. No; it was terminated; our company was named originally as a defendant, so long as you have brought it up, in that action. The action was terminated by the signing of a given group of companies of a so-called consent decree. The Home Life Isurance Co. did not sign any consent decree, and I think I am correct in this. On motion of the Government the action was dismissed as to our company.

Mr. FOLEY. As to your company?

Mr. FULTON. As to our company and a number of other companies. Mr. FOLEY. There were nine life-insurance companies indicted, were there not?

Mr. FULTON. There were no life-insurance companies indicted. Mr. FOLEY. Rather mentioned as defendants in the complaint. Mr. FULTON. In a civil action.

Mr. FOLEY. Yes; and that was a complaint which alleged that the insurance companies and certain banks banded together to suppress competition among lending institutions; was it not?

Mr. FULTON. You have the record before you, sir. I am sure you know.

Mr. FOLEY. That is all.

Mr. FULTON. I would just like to record this fact. In the so-called consent decree it was recorded that the insurance companies, the defendants, all of them, did not admit any such charges. They merely, and from my standpoint in order to avoid further harassment, signed the consent decree, which as they put it agreed not to do things which they had never done and never had any intention of doing.

The CHAIRMAN. There is a suit pending now, is there not, an antitrust suit against a certain number of investment bankers in which a number of life-insurance companies are mentioned; is that true? Mr. FULTON. That is correct.

The CHAIRMAN. Is the Home Life Insurance Co. mentioned as having participated in an agreement between those investment bankers? I said mentioned, not "defending," but mentioned.

Mr. FULTON. Yes, Mr. Chairman. I am glad you brought that up. I have read the testimony in this hearing here. You have referred to the companies as being "culpable" and as being "in cahoots." Those are quotations, I think, sir, and with all due respect I think those statements are completely unwarranted.

The CHAIRMAN. Have you read the complaint completely?

Mr. FULTON. I have.

The CHAIRMAN. Well, in my humble estimation, I do not know anything about the truth or falsity of the charges. My statements were

confined to the fact that the Department of Justice made serious charges against these insurance companies that the insurance companies were in league with these investment-banking houses, and that they are in league to do that which is in violation of the antitrust laws. I do not say that you have done it, but I would say that the word "cahoots" is perfectly proper, in my humble estimation. I do not say you are guilty. I never said that.

Mr. FULTON. Mr. Chairman, I base my statement on this fact. I was the chairman of the committee that carried forward that activity in behalf of the companies. In that capacity I was representing the insurance department, the superintendent of insurance of New York, Mr. Louis H. Pink. I testified, I think, at five successive sessions before a grand jury, and Mr. Pink testified and several others, and at the end of that testimony we were not made defendants to the suit, and I suggest that if we were "in cahoots" in any alleged illegal conspiracy or were "culpable," that we could have been made defendants in such an action, and I think my personal knowledge of the facts in the case would make it clear that they were perfectly proper in not making us defendants in any such action.

The CHAIRMAN. I was very careful to say that you were not made defendants but that you were mentioned, your company was mentioned with others in that complaint filed in the United States District Court for the Southern District.

Mr. FULTON. My point was that if we were "culpable," if I understand the meaning of that word, we should have been made defendants, and by the fact that we were not made defendants, I think it clearly indicates that it was the decision either of the attorneys for the Antitrust Division or of the grand jury that we were not "culpable" or "in cahoots."

Mr. KEATING. And the fact that you were not made defendants denies you any opportunity to defend yourself in that action, does it

not?

Mr. FULTON. That is right.

Mr. KEATING. And all you can do is sit back and let the Government make all the allegations they want to and you have no recourse, is that not so?

Mr. FULTON. And I would like to make this point clear, if I may. The CHAIRMAN. That is not so. I must take exception to the gentleman's statement.

Mr. KEATING. How can he appear in the action?

The CHAIRMAN. He can appear as amicus curiae and defend himself, ask to be defended. No judge would deny it.

Mr. KEATING. I never heard of such a thing, when he is not a defendant.

Mr. FULTON. Might I just make one further observation on that point since it has been raised, Mr. Chairman?

That activity that is discussed here was a series of hearings called by the official of the State of New York who is responsible for supervision of life-insurance companies, at that time Mr. Louis H. Pinkthen superintendent of insurance.

This was confined purely to an exchange of opinions and ideas between investment bankers and life-insurance companies, every one held in the office of and in the presence of the superintendent of in

surance of the State of New York, and it is difficult for me to understand how, any more than our accepting this invitation to appearwe could have done anything but appear and discuss the matter with them-how that in any way makes us culpable.

Mr. KEATING. And that is the allegation of wrongdoing on your part in this indictment against other people that you have nothing to do with, am I correct?

Mr. FULTON. Well, if there is an allegation of wrongdoing, I think if there was an allegation of wrongdoing, we would be made defendants

The CHAIRMAN. Mr. Fulton

Mr. KEATING. Let us have the witness' answer. into this. Let us have him answer.

We have gotten

The CHAIRMAN. Just a minute, please. You may proceed, Mr. Fulton.

Mr. FULTON. I have nothing further to say, sir.

The CHAIRMAN. Any other questions?

Mr. BRYSON. I move we adjourn.

The CHAIRMAN. Mr. Fulton, we are very glad to have your testimony, and I assure you that there is nothing personal in these questions at all. You have given us a contribution that is valuable.

This committee will adjourn to meet tomorrow morning at 10 o'clock when we will hear Mr. Charles E. Wilson of the General Electric Co., John S. Thompson of the Mutual Benefit Life Insurance Co. of Newark, and Mr. F. D. Russell of the Security Mutual of Binghamton, and Mr. Carrol M. Shanks of the Prudential Life Insurance Co. of Newark, N. J.

(Whereupon, at 12:50 p. m., the special subcommittee adjourned, to reconvene at 10 a. m., Wednesday, November 30, 1949.)