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charter. So, in effect, you have the right of life or death over the new State bank as a director of FDIC. That is technically correct; is that correct?

Mr. Saxon. Technically; yes, sir.

Mr. LLOYD. Now, then, it is possible, then, that as a director of FDIC, having a State application, and as the Comptroller, also having an application for a National bank charter, that you could determine the policy within the State. And what would your policy be under those circumstances ?

Mr. Saxon. I am not aware of a single instance in which we have exercised any such authority, the Board of the FDIC, either sitting myself as Comptroller or through a deputy. In fact, FDĪC operates today effectively as a single administrator.

So I don't see any basis. Technically your statement is correct—we could. But I don't think we have done so.

And, in fact, the other two members would vote the other way. And I don't know an instance in which they wouldn't. We take a view of detachment on that ground; namely, that this is a State system, this is an effective regulator of the State system, and ordinarily we do not enter into it.

Mr. LLOYD. If you had a National bank policy, for example, you would not exercise it under those circumstances?

Mr. Saxon. That is correct.
Mr. LLOYD. That is all at this time, Mr. Chairman.
Mr. MULTER. Mr. Minish?
Mr. MINISH. I have no questions.
Mr. MULTER. Mr. Weltner?
Mr. WELTNER. No questions.
Mr. MULTER. Mr. Grabowski?
Mr. GRABOWSKI. No questions.
Mr. MULTER. Mr. Hanna?

Mr. Saxon. If I may just a second, I am advised—counsel advisedwe abstain when there are conflicting applications. That is our policy.

Mr. LLOYD. Your policy is to abstain?
Mr. Saxon. To abstain.

Mr. LLOYD. That is a decision which you can change tomorrow, I suppose.

Mr. Saxon. That is correct.
Mr.LLOYD. Thank you.

Mr. MULTER. That was not the rule when your predecessor was in control.

Mr. Saxon. I cannot speak as to that, Mr. Chairman.

Mr. HANNA. Mr. Chairman, if I might, could I ask-if we set by congressional action the kind of minimum standards that I spoke about when I asked the chairman for leave to inject myself-wouldn't this settle the matter? In other words, you would be bound—if you said that you had to accept the State standards, if they were at least up to what the congressional minimum was, then they would be bound, would they not, just as they are in the Federal determination?

Mr. Saxon. That is correct. And we would certify to the FDIC in every charter application—it has been found in accordance with the standards prescribed in the statute, in every case.

Mr. MULTER. Do you think those standards, as set forth in the statute, are fciently explicit ?

Mr. Saxon. Yes, sir, I do, in the Federal statute. Our capital requirements on the whole are much higher than the States, much higher.

For example—not only administratively—and again even far higher than they were in the statute.

Our statutory capital standards, for example, today are far too low, in my opinion.

We have just, for example, set a new policy in Oklahoma that we would not consider a bank in ordinary circumstances with capital of less than $200,000 in any case-unless some rare or unusual circumstance would develop—which has caused some contention.

Some of these communities felt this is an excessive amount. But generally speaking these standards—our standards are much higher than the State standards, capitalwise and otherwise.

There has been a tendency, because of the excessive regulation by the Federal authorities of the States--more than a tendency-a reliance on the Federal authorities to carry out State regulations.

Mr. HANNA. Mr. Chairman-in regard to this overregulating type of thing, it has been my experience that there is another approach that can be made to a situation like this, in which you put the agency in a position, under certain prescribed circumstances, where the burden of proof is on them on certain allegations.

I am thinking in terms of, for instance, we were trying to change our corporation law in the State of California. I had the uniform securities law, in which we were trying to change the direction of the regulations there, from being one where the client had to prove that this was a fair, just, and equitable deal, insofar as the stock was concerned, to a position where the agency had to prove that it tended to create a fraud.

Now, I think there is an approach that can be made where you can put the burden of proof on the agency in a circumstance where it is an overregulation if the other party has the burden of proof,

I would like to see you examine the possibilities of injecting into the picture those situations in which we believe that it is more appropriate that the agency should have the burden of proof if they are making certain allegations, which if we don't put in there tends to put agency decisions ahead of private business decisions in areas where I don't think there is a demonstration that they have that much more competency to make those decisions.

Now, would there be anything wrong in an approach of this type, in your estimate?

Mr. Saxon. I think that is correct. The great effort is to assure that a public agency is operating as such, and its sole justification for existence is the disposition of the public's business.

Now, we were somewhat surprised at the extent of the criticism of the information policy of this office. There has been nothing like it anywhere in the country in any agency, State or National.

Èverything has been on the board, open, except the examination report. There are some 36 States which provide us with none or minimum information.

We don't criticize them for it—that is their policy. On the other hand, it is a little surprising to hear them criticize this office which through its bulletins, press releases, and every way has exposed this

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information to all, on the grounds that this is the public's business, and it ought to be available to all the public.

I think the most fundamental change that could be made would be a similar policy adopted by all of the States.

Now, many of the States do this.

For example, in your own State of California now a bulletin is put out by the State of California, as in the State of Michigan.

And we provide full information to them, on applications not dispositions merely, but all applications.

And this is distributed by the California State authorities to all banks, State or National.

Similarly, in Michigan—we hope there will be further development of this practice.

But we don't think wewe think the importance of full public disclosure is so great that we should not continue, as we did up until April 19–continue to provide Federal information, and thereby eliminate the lever we would have to persuade the States which are not putting this information out publicly to do so.

We would be only too happy in any State, as we are doing in many of these States, to see this done, even through their own channels, as is happening in a number of States.

And we have found now, and are beginning to find a better coordination from some of the States.

With some 18 of these, we don't have any problem at all—there is full disclosure.

Now, obviously, you are going to have conflicts any time, where you have two local groups, any charter, branch, seeking a franchise--the capital commitment-these are conflicts to be resolved.

Some of these no amount of legislation or administrative policy will eliminate, unless you are to say, “Well, you should yield always to them, or the State should yield always to the National.”

There are just certain cases where it is essential to cut between the conflicts that is all.

And sometimes the lines are very thin indeed. But it has to be done.

These are bound to occur no matter how beautifully tailored the statutory and administrative arrangements may be.

Fortunately, these are at a minimum.

As I pointed out the most difficult cases we have are those which involve conflicting applications by National banks, not State cases.

Mr. MULTER. Why shouldn't we permit any bank to become a party to any application that is pending before your Department, and have you become a party to any proceeding pending before a State supervisory banking authority, and permit any State supervisory authority to be a party to an application in your office, and let then all come in and be heard as parties; and then give any party the right of review?

Mr. Saxon. You mean it is an adversary proceeding?
Mr. MULTER. Yes.

Mr. Saxon. I think this would convert what is an administrative process to an adversary judicial process. It would be highly cumbersome and ponderous, and would greatly hamper the expeditious disposition of these matters.

Further, we have found, we constantly, in almost every case, hear the views, in writing or orally or both, from all parties at interest, being mainly affected institutions.

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And most of them don't wish to engage

Mr. MULTER. If they don't wish to—there is nothing compulsory about it. But why shouldn't they have the right to do it?

Today you hear everybody that wants to be heard, but it is done ex parte. Why shouldn't they be heard in a hearing, where each of them have a right to know what the other is saying and meet all objections that may be raised?

Mr. Saxon. The problem here is the disposition on the part of some, as we found, competing parties, mostly unknown to us as individuals, of course disposition on the part of some to use such a procedure, a compulsory procedure, as a dilatory, self-serving process.

Mr. MULTER. You could be in complete control of that.

Mr. Saxon. I disagree with you completely, Mr. Chairman. It is just impossible to do so.

And we see this constantly. This is an abuse of process.

Mr. MULTER. Well, you can stop abuse of process. But I don't think it is an abuse of process—I think it is an abuse of process the other way, if you don't let a person come in and be heard as a party, and confront another party with what he is saying.

Mr. Saxon. They are heard today—and where cases are affecting a branch, cases where there is a question in the minds of the parties, they are in litigation, which is the proper place in our opinion to resolve the issue.

Mr. MULTER. Yes; but this is not fair, to require people to resort to the courts when they haven't had an opportunity to be present and confront the other parties to the proceeding.

Mr. Saxon. Well, most you would find would be disinclined to do so in any case.

Mr. MULTER. Then you would have no problem.

Mr. Saxon. You would find, Mr. Chairman, abuse of the use of this process by one group just to prevent another group. .

Mr. MULTER. Well, let's take a typical example. I think you will agree with me.

Mr. SAXON. Let's take the case of the District of Columbia National Bank in the District of Columbia.

If there had been such a procedure—in view of the strong antagonism in this—this is not untypical—I would very much doubt the bank would be in existence today.

Mr. MULTER. Take that very case or any other case. The fact of the matter is when you solicit the opinions of the competing banks, or the banks which are today the competitors of this new bank, you will get letters from them, you will get oral representations to your examiners or people investigating—"we don't need another bank here, we object.

Yet, if they were required to come in on the record, they would not come in with the objection.

Isn't that so?

Mr. Saxon. Many-most of them wouldn't come in with the opposing party present. Mr. MULTER. That is right. Mr. SAXON. Or even groups.

Mr. MULTER. And if they won't come in and say this with the applicant there, because for some reason either they cannot substan

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tiate the objection or they dare not make the objection, I think it is wrong, and you ought not to consider it.

Mr. Saxon. Or, as some cases—you know, no one really welcomes competition.

Mr. MULTER. Then let them frankly come forward and say, “We don't want any more competition,” but don't let them write a letter and say, "Mr. Comptroller, we object to another bank here," yet they won't dare confront the applicant to justify their position.

Mr. Belton. Mr. Chairman, by such a process are you not immediately playing into the hands of the larger existing organization if you require an ex parte proceeding, followed by judicial review, with the standards of judgment which there must necessarily be it is established in the act.

Let's take just the standard of competitive situation. This could draw out into a legal process which if you take it all the way through the court of appeals and perhaps to the Supreme Court, it can be a time-consuming process which a large organization can engage in purely to keep out of existence any new bank.

Take the situation that existed in San Francisco. The gentleman testified that he started with a million dollars capital against the Bank of America out there.

If there had been the opposition of the Bank of America, they could have gone through 5 years of litigation and used up most of the basic

5 capital in the litigation before the bank even got its charter.

And by the time it got its charter it would not be able to open, because its capital has been dissipated.

Mr. MULTER. This is a real possibility.
Mr. Saxon. That is exactly correct.

Mr. MULTER. But I am more concerned about taking ex parte objections, not confronting the applicant with the objection, giving him no opportunity to answer it.

I am more concerned with that than the right of review. Mr. Saxon. Well, now, Mr. Chairman, I point out—it is a matter of regular policy. We review these and point out “the objection is made as follows, so they can answer it.

There is a group opposing a charter in Texas. "What do you have to say to this?” And it stated that.

Mř. MULTER. Mr. Saxon, I think you may be doing a different job in your handling of applications than was done heretofore in that office.

Heretofore an applicant would go in, file his application. All sorts of ex parte objections would be made and filed. The only thing the applicant would know is that his application was denied in the language of the statute, that the application is denied, and you have all the excuses given in the statute—taking the standards and just converting them the other way and saying you don't have sufficient capital, there is no need in the community for this institution, you are not going to serve its convenience, there is no adequate proof of profitable operation-taking all of the sections and the standards in the statute, you recite them all as a blanket objection.

And the applicant never knows why he was turned down. And he had no opportunity to meet them, because the examiners do not go back to the applicant and say, “The bank down the street has objected


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