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2. With reference to the third paragraph on page 2 of the letter, it should be made clear that any proxy given at any time prior to the meeting to or under the control of Long Beach management as well as the shareholders' committee will be voted for the plan and trust under article XV unless the member attends and votes or revokes the proxy in writing, in accordance with section 2(c) of article XV. Sincerely,





Washington, D.C., February 15, 1963. Copy of a letter addressed to an officer of a national bank.

This is in reply to your letter of February 4, 1963, concerning the rights of national banks to enter into financing agreements whereunder they purchase equipment leases, either with or without recourse, without any note or other evidence of debt being executed by the lessor in favor of the bank.

It is the position of this office that equipment leases constitute satisfactory evidence of debt for purchase by a national bank within the meaning of paragraph seven of 12 U.S.C. 24, if under a given lease agreement and assignment, (1) the obligations of the lessor have been fully performed, (2) the lessee is unqualifiedly obligated to pay rentals thereunder, and (3) lessor and lessee agree to save free the bank from any claims arising thereunder.

JAMES J. SAXON, Comptroller of the Currency.



Washington, D.C., March 18, 1963. To the Presidents of All National Banks:

We have been asked whether it is permissible under existing law and regulations for a national bank to enter into lease financing arrangements whereby the national bank would acquire title to personal property and would lease such property directly to its customer.

Our letters of February 1, 1963, and March 1, 1963, copies of which were circulated to all national banks, ruled that leases covered thereby are valid evidences of debt for national banks, and may be considered as installment consumer paper to which exception 13 of 12 U.S.C. 84 is applicable.

The leasing by the bank of personal property acquired upon the specific request of and for the use of its customer, and the incurring of such additional obligations as may be incident to becoming an owner of personal property and the lessor thereof, is a lawful exercise of the powers of a national bank and necessary to the business of banking. Such direct leasing is, with respect to its banking aspects, substantially the same as the present practice of financing personal property acquisition through a separate lessor.

It is our conclusion therefore that direct lease transactions, as above described, constitute legal and proper banking activities for national banks.

JAMES J. SAXON, Comptroller of the Currency.



Washington, D.C., April 30, 1963. Copy of a letter addressed to an officer of a national bank.

Your letter of March 26, 1963, has reference to our earlier letter of March 18, authorizing the purchase of personal property hy national banks incidental to a lease thereof.

You advise that you bank has been requested to purchase equipment at a price of $150,000, for which the lessee would immediately pay to the bank $50,000 and enter into a 36-month-lease agreement. This would result in a net expenditure by the bank of $100,000, which is $70,000 more than the bank's lending limit. You request our advice on whether the lending limit is applicable to the situaition presented.


The purchase by the bank of personal property incidental to a lease thereof does not constitute a loan to the lessee, even if it is contemplated that title to the property will be transferred to the lessee upon termination of the lease.

Likewise, the fact that the sum of the lease rentals might exceed the bank's loan limit is without bearing, since such remittances are not repayments on a loan but payments for the use of property owned by the bank.

The amount of any one investment in personal property to be leased is a matter of judgment for the bank, acting upon the relevant circumstances of each case. An undue concentration in such investments is, of course, to be avoided. Sincerely,

JAMES J. Saxon, Comptroller of the Currency.


(Print. 1025, 2149—Intro. 1025)


January 14, 1963 Introduced by Mr. HATFIELD (at the request of the Joint Legislative Committee

to Revise the Banking Law) —read twice and ordered printed, and when printed to be committed to the Committee on Banks—committee discharged,

bill amended, ordered reprinted as amended and recommitted to said committee AN ACT To amend the banking law, with respect to terminology of savings and loan


The People of the State of New York, represented in Senate and Assembly, do enact as follows:

Section 1. Subdivision three of section three hundred seventy-eight of the banking law, such subdivision having been added by chapter three hundred fortyone of the laws of nineteen hundred thirty-nine, is hereby repealed.

8 2. Subdivisions four through ten, inclusive, of section three hundred seventyeight of such law are hereby renumbered, respectively, as subdivisions three through nine, inclusive.

§ 3. Section three hundred seventy-eight of such law is hereby amended by adding thereto a new subdivision, to be subdivision ten, to read as follows: [Explanation : Matter in italics is new; matter in brackets [ ] is old law to be omitted)

10. Notwithstanding any provision of this chapter, a savings and loan association, in its organization certificate, by-laws, advertising matter or any other instrument, document or other writing used in or in connection with its business, may designate its shares as deposit accounts" or "savings accountsits members as depositors", its dues or share payments as deposits, and its share capital as deposit liability". The use of any term permitted by this subdivision shall not affect any right, duty, privilege or liability which either the savings and loan association or any member would otherwise have.

$ 4. This act shall take effect immediately.


St. Paul, Minn., May 3, 1963. Mr. ABRAHAM J. MULTER, Chairman, Subcommittee on Bank Supervision and Insurance, New House Office Building, Washington, D.C.

DEAR MR. MULTER : It was a pleasure for me to be with the group representing the Independent Bankers Association and to discuss with you changes in present banking laws. I know of your past interest and I am anxious to be of help to you in this endeavor.

In line with our conversation, the Independent Bankers Association has been interested in strengthening national banking laws in several areas and I am submitting herewith on an informal basis some ideas on possible amendments with the thought that you and the lawyers on the staff might like to look at them and to consider their advisability. The IBA has not taken formal action on these proposals, although it is believed that they would be supported. We will endeavor to determine as soon as possible the position of the IBA on these and other proposals before your subcommittee and will advise you further. In the meantime, our thought in transmitting this to you is to save time in considering these proposals.


In section 36 (c) is the essence of the dual banking system, but much of the difficulty arises from the narrowness of the requirements that national banks must follow State standards only “as to location.” If these words were stricken from the first sentence of this section it would place national banks upon an equal plane with State banks as to branching. For example, in some States like North Dakota and Missouri, the State laws permit only “facilities” for paying and receiving purposes, instead of a branch office with full banking powers. The Comptroller ignores this restriction because it is not strictly a restriction as to "location."


* * "

The 1960 Bank Merger Act (title XII, sec. 1828 (c) U.S.C.) provides near the end of the section, that "in the interests of uniform standards, before acting on a merger ** * the agency (for example, the Comptroller) shall request a report on the competitive factors involved from the Attorney General and the other two banking agencies referred to in this subsection * Our suggestion is that this requirement could be strengthened by the addition of a sentence to follow which would read as follows:

“No merger shall be approved if the Attorney General and one of said other agencies or the other two agencies without the Attorney General are adverse to approval of the merger."

The Comptroller has ignored the adverse reports of the Attorney General and the other two agencies in a great number of mergers and has granted them in spite of the adverse reports on the competitive factors. This results in defeating the will of Congress and past practice has illustrated that it is necessary to have an enforcement provision along the line suggested.


Enclosed are alternate proposals for amendments of this act which are explained. The first proposal would be the most desirable, the second next most desirable, and the third would be the minimum strengthening required, in my opinion. The third proposal grows out of bitter experiences we have had in attempting to oppose acquisitions by holding companies. In connection with the third proposal there is also attached a specific proposal regarding procedures for notice and hearing on applications for acquisitions before the Federal Reserve Board.


Much of the difficulty concerning the conduct of the Comptroller's office arises from the secrecy of the proceedings on application for new bank charters or de novo branches. For some unexplained reason the Comptroller is not under the Administrative Procedures Act and there are insufficient standards, no requirements for procedures, and no possibility for court review. The granting of charters should be as important in the public interest as licenses and permits from the FCC, the ICC, and the FPC. A bank charter is a grant of a permanenttype privilege at least as important as new television stations, trucklines, and public utilities. If there were adequate standards, due notice to all parties interested, a public hearing in which proponents and opponents have full status as parties in the proceeding with equal opportunity to present evidence and cross-examine the other's witnesses and a court review upon the record the result would be a more responsible processing of charters for new banks and branches and all concerned would feel that with such fully democratic procedures the applications will be decided upon the merits and not upon the whim of an administrator who may change his standards from day to day.

Under present procedures the granting of charters for new banks and branches is not subject to court review and the Comptroller need not reveal on what basis he made his decision. (See annotations to secs. 26 and 27, title XII, U.S.C.) This is an intolerable situation in a democratic society and should be corrected.

This is a complicated matter for amendment of the statutes and at the moment we have no specific language to offer but will develop some ideas and send them on to you shortly. It may be that this matter of charters may be better taken away from the Comptroller and given to a bank commission such as you propose. Again, on this subject we will determine the position of the IBA and advise you.

Once more let me say it was a real pleasure for me to make your acquaintance and I hope to have the opportunity to work with you further on these matters. Sincerely yours,





To amend the 1956 act so as to make it a freeze law

The effect of the amendment would be to make it unlawful (1) for any action to be taken which results in a company (as defined) or a bank (as defined) becoming a bank holding company (as defined); (2) for any holding company or subsidiary thereof to acquire direct or indirect ownership or control of more than 5 percent of the voting shares of a bank; (3) for any holding company or subsidiary thereof to acquire all or substantially all of the assets of a bank; or (4) for any holding company or subsidiary thereof to merge or consolidate with any other holding company or subsidiary thereof.

These prohibitions would not apply to additional shares acquired by a holding company which already owns or controls a majority of the voting shares.

Penalties for violation would remain the same as in the present act; namely, $1,000 fine for each day the violation continues as against the corporation, up to $10,000 fine or imprisonment for not more than 1 year as against any individual, and the same penalties for false entries in books and records as are applicable to officers, directors, agents, and employees of member banks under section 1005 of title 18, United States Code.

This freeze amendment would require deleting from the act the sections providing for hearings before the Board of Governors of the Federal Reserve System and the five tests it applies in making a determination, as well as the provision for review of the Board's decision by the circuit court. Compliance with the act would then be carried out by enforcing the penalties.

Comment.No one can advance any valid reason for any further expansion of bank holding company systems in this country that cannot be offset by stronger reasons why this country cannot stand any more concentration of control of credit resources. In 1960 the House Small Business Committee reported that over 66 percent of all bank assets in the country are in the hands of branch banks and holding companies. (“Banking Concentration and Small Business,"

p. 8.)

In 1962 the Senate Small Business Committee showed that the tendency to concentration of control of banking resources, particularly by branching, is continuing at a steady rate. It quotes the figures of the Board of Governors showing what has happened in the last 10 years. This report concludes: "Through mergers or absorptions, 1,311 independent banks were converted into branches and 4,824 new branch outlets were established. Of all mergers and consolidations, nearly half were acquired by banks with assets of more than $100 million. Putting it another way, 2.2 percent of all insured banks absorbed about half the banks that went out of business.” Branch banks, the study said, grew from 5 percent of all banking offices in 1921 to 44 percent in mid-1961.

From the standpoint of the effect of this concentration, it makes no difference whether it comes about by virtue of branch banking or expansion of holding company systems. Both have th same effect to put more control in fewer hands.

It has long been recognized that in States having antibranching laws, the intent and purpose of the legislation in many cases has been circumvented by the holding company device. As the House committee said in urging adoption of the 1956 act, “Your committee believes it is obvious that the declared will of Congress in favor of independent, competitive banking is being thwarted by indirect branch banking, through the mechanism of the holding company" (H. Rept. 609, 84th Cong. ).

It would appear that this kind of freeze bill could be enacted in the national interest, without constitutional problems, as in the case of the 1956 act and the 1960 Bank Merger Act.


To freeze bank holding companies in States having antibranching laws

This would mean that in such States this amendment would prohibit the formation of new holding companies and would prohibit any further acquisition of banks by existing holding companies. A modification would be necessary to the extent that if a State permitted limited branching, then holding company operations could not exceed the limits prescribed by the antibranching law.

Comment.-This would be the next best amendment to the one proposed in pro posal I. It would help the States having antibranching laws by implementing their laws, recognizing, as commented upon above, that holding companies are in effect circumventions of antibranching laws. Also, it would recognize the rights of States to declare their banking policy.

According to a recent compilation, States prohibiting branch banking are: Colorado, Florida, Illinois, Minnesota, Montana, New Hampshire, Texas, West Virginia, and Wyoming. States which permit limited branching are: Alabama, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Virginia, and Wisconsin. (Fischer, “Bank Holding Companies," June 1961.)

This limited type of freeze amendment would leave standing all of the other provisions of the 1956 act. NOTE.—This proposal II may be combined with the following proposal III.


To strengthen generally the existing 1956 act by amendments which experience

shows to be desirable or necessary The proposed amendments are as follows:

A. Clarifying the five factors.--Following is section 3(c) of the Bank Holding Company Act of 1956 with proposed deletions in black brackets and proposed additions italicized :

"(c) In determining whether or not to approve any acquisition or merger or consolidation under this section, the Board shall take into consideration the following factors: (1) the financial history and condition of the company or companies and the banks concerned; (2) their prospects; (3) the character of their management; (4) the convenience, needs, and welfare of the communities where the banks to be acquired are located [and], the area served by these banks and their competition, [concerned,] and the area of proposed operations of the company or companies; and (5) whether or not the effect of such acquisition or merger or consolidation may be substantially to lessen competition or tend to undue concentration of control of bank deposits or would be inconsistent (would be to expand the size or extent of the bank holding company system involved beyond limits consistent] with adequate and sound banking, the public interest, and the preservation of competition in the field of banking.

"In determining whether or not to approve any application which would result in a company becoming a bank holding company, the Board shall take into consideration the following factors: (6) the existing system of banking and whether or not it adequately serves, together with other financial institutions, the needs, convenience and welfare of the area concerned; (7) whether or not there is any substantial need which the proposed holding company could serve and which is not served by the existing banking system, and if so whether or not there are any adverse considerations offsetting the proposal; (8) whether or not the effect of approval may be, considering all existing financial institutions, substantially to lessen competition or tend to undue concentration of control of bank deposits or would be inconsistent with adequate and sound banking, the public interest, and the preservation of competition in the field of banking; (9) as to both the applicant company and the proposed subsidiary banks, factors (1), (2), (3) and (4) above; and (10) as to the applicant company, factors (6), (y) and (8) applied to the area of proposed and future operations, and the state as a whole."

Comments.-In its report to Congress on the experience under the act, the Federal Reserve Board commented upon the vagueness and generalities of some of the language in the five factors to be used in determining whether to approve or deny an application. They expressed uncertainty as to how to apply these factors. Further experience since the report of the Board to Congress shows added need for clarification.

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