In every one of those instances, while the weaker bank continued to operate as a part of the bigger bank, the bigger bank made a very substantial profit on the deal. Whatever losses there were, were absorbed by FDIC.

The CHAIRMAN. In other words, it took all the cream and none of the milk?

Mr. MULTER. That is quite right. In fact, whatever milk seemed to be turning sour was dumped into FDIC, which then continued to liquidate the assets for whatever it could get, and absorb the loss.

Now, please do not misunderstand me. I do not mean to imply for 1 minute that FDIC is weak, or that our banking system is getting weak, but this kind of business can weaken or destroy any good organization or institution, even if it be Government controlled.

The resultant Chase-Manhattan Bank became the second largest bank in the United States. A big merger begets a bigger merger. Not to be outdone by the Chase-Manhattan combination, the National City Bank, which had been No. 2 in the country, announced it would take over or merge with the First National Bank. Seeking to regain its former leadership, in size, other acquisitions by National City will doubtless follow.

Since mergers beget the passion to be No. 1, with the power that goes with it, and, of course, the prestige, there necessarily and logically follows the urge to ultimately set up a single monopoly enterprise which in due time is bound to be taken over by the State. Independent banks are swallowed up; the public interest is lost sight of and sacrificed in the merry chase for top leadership in banking and in industry generally.

Nor must we think that these New York City bank mergers are a unique and special case arising from extraordinary local market situations.

Let me here give you a brief quotation from the testimony as presented to us by a banker, a very distinguished citizen from the State of Georgia, who attended and testified before the Banking and Currency Committee. Listen to what he had to say. I am quoting, now, from page 174, of the hearings before the Committee on Banking and Currency of the House, on H. R. 2674, which is the bank holding company bill, which will shortly be before the Congress. I now quote from Mr. Peters:

Fifty years ago, they had in Georgia six clearinghouse banks-all in Atlanta. During that period of time, two additional banks have been organized. Had they all remained in business, we would today have 8 clearinghouse banks in the city whose population has grown at least 4 times and whose industry has grown many times. But we don't have eight banks. We have just four banks, now. Four banks in the meantime have disappeared through consolidation, mergers, or sales. And I think those who are familiar with banking in general know that this is true throughout the Nation.

And he goes on along the same line, to point out the dangers attendant upon these bank mergers.

In Philadelphia, the same sort of merger took place when the famous Girard Trust Co., among the 100 largest banks in the country, merged with the Corn Exchange National Bank & Trust Co., which was also a very substantial institution.

In Pittsburgh, a few years ago, the famous Mellon National Bank, which had grown large and strong through many previous absorp

tions, merged with the Farmers National Deposit Bank, also no mere pygmy.

The CHAIRMAN. Again you have the situation in Pittsburgh where the Farmers National Deposit Bank was a very substantial, strong, competing bank, and it was swallowed up by the Mellon National. That certainly looks like a substantial lessening of competition. Mr. MULTER. There is no doubt about it.

I suggest most respectfully, Mr. Chairman, that you might ask the Comptroller of the Currency to submit to you a list of all of the branches that were in operation at the time of each of these mergers by the two banks that were merged in each instance, and give you a current statement of how many branches the merged bank is operating today, and note how the competition has very substantially been lessened in each of these instances. Anyone who just took the time to look at the situation before the merger took place would have been compelled to conclude that that would be the inevitable result of these mergers; a lessening of competition.

I know they will come in, if they have not already done so, and tell you, "These big banks must merge and become bigger so that they can compete with the big loans made by the insurance companies."

I do not think that this Congress is concerned with whether or not a big bank can get big enough to compete with an insurance company. They have been able to do it successfully in the past by making joint loans, participating loans, where several of the banks would get together and each take a piece. It is much sounder in my opinion, as lending policy, for 1 bank not to take a $500 million loan, but rather to have 5 banks join in participating, each taking $100 million of the $500 million.

This competition they talk about as the reason why they approve the merger of these banks is not to continue the competition within the banking circles for the benefit of the businessman, or the average businessman, it was the desire of the banking authorities to go along with the interest of the big banks to merge so they can compete with the insurance companies.

The CHAIRMAN. Is the argument that they need a greater amount of assets and therefore merge in order to compete with insurance companies sound? An insurance company does not make short-term banking loans. They do not accept banking paper, which is usually 18 months. Long term loans are usually made by the insurance companies. They are usually made in the form of debentures or similar evidences of debt. In many instances those loans are 20 years, 15 years, and 10 years. The bank cannot make such a loan unless it is willing to constantly renew the paper.

Mr. MULTER. That, sir, has been the traditional method of carrying on lending operations by our banks. But our banks are no longer satisfied to carry on in that traditional manner.

As a matter of fact, I believe it was only last week they pushed through in the other body of the Congress a bill permitting banks to lend on 20-year mortgages. Now, I noticed nothing about any hearings being held on that bill there. I do hope the bill will come before my committee in this House and we will have very extended hearings to show and develop that that idea and that proposed bill is just another move by the big bankers of the country to concentrate the banking monopoly in the hands of the few. There is no reason why a

bank which has, as its main asset, demand deposits should be permitted to invest demand deposits in 20-year mortgages. It is something entirely revolutionary in my mind, so far as banking policy is concerned, and I think it is very dangerous and very bad.

You see the trouble is that these big-money people of our country have now been rehabilitated to the point that they have forgotten that they ever had a depression in this country, they have forgotten that their paper profits vanished in thin air in the depression. They are trying to build up to that situation again and they will if we do not stop them. I think, regardless of what they may do with their own money and the risks they may take with their own money, we must see to it that they do not take any unwarranted risks with the public money. That is what they will do if not curbed.

We are accustomed to think of mergers and consolidations occurring during periods of depression. Here we are witnessing mergers taking place during a period of great business activity and booming prosperity.

Can it be due to anything but a passion for power that accompanies bigness? If it is the desire to possess and use power, then we must in the public interest look into the effects of that power on the rest of the economy.

It is often said, by way of justification of consolidations, that in these days of big enterprise we need bigger banks. As a matter of fact, successful large business corporations were always able to establish lines of bank credit to meet their short-time requirements.

A few years ago the press reported how General Motors borrowed hundreds of millions of dollars from a group of banks. Thousands of firms have developed multiple banking connections just the way they float their bond and stock issues through underwriting syndicates and investment houses.

Moreover, large successful firms, in recent years, have built up very large cash reserves from undistributed high profits, accelerated depreciation allowances, and other financial defense and national security devices.

If capital is needed for long-term investments in expansion of plant and equipment, these giant corporations rely on a stock issue, as seen of late in the case of a number of companies, including General Motors and Ford. Then there are the insurance companies with huge surpluses to invest, who stand ready to buy large blocks of stock, or make direct loans to business corporations.

I appreciate the fact that there are occasions when the shift of population in a banking area may make it necessary for a bank to make a shift in its pattern of operations. For example, branches may be needed to serve the suburban population. A large city bank may acquire a bank, equally large, that has in operation many branches in the desired area. It is understandable that two such banks might very well merge.

This has actually happened in the New York metropolitan area. Banks without branches find it wiser to merge than to make large investments in the erection of branch bank buildings; and desirable locations are not always available, except at exorbitant prices.

The CHAIRMAN. An example of some of the things you indicated is in the National City Bank absorbing the very large First National

Bank of New York. Can you conceive any real reason, except enrichment to the stockholders, for the merger of that bank?

Mr. MULTER. It was certainly not a rescue operation, it was not an operation to gain additional branches. It was solely the desire to be bigger, to have more capital, to have more assets and be able to make even larger loans. The First National Bank was reputed to have a policy of not taking any single depositor unless he maintained a daily balance of $200,000. Now, that is not small banking. The CHAIRMAN. So that was an elimination of a very powerful and strong competitor of the National City Bank?

Mr. MULTER. Yes, of course.

The CHAIRMAN. Did not the Comptroller of the Currency imply that merger created more competition instead of lessening competition?

Mr. MULTER. I suggest you invite him back and ask him what competition and ask him to indicate how they are handling their applicants for loans and the depositors of the First National Bank. Ask him to supply to you, in confidence, if you will; obtain it by

numbers

The CHAIRMAN. We did ask all those questions.

Mr. MULTER. Good. Then we are thinking along the same lines. You will find, without disclosing any confidences, that the big depositors in the First National Bank were getting loans there and were getting loans in National City. If they were not getting them in National City, they were getting them in Chase National Bank.

The only result that could come from that, other than the bigness of the giant now created, is to destroy competition. I say, not lessen but destroy competition.

Mr. FINE. I remember, Mr. Multer, the Comptroller of the Currency did state there was no lessening of competition by reason of that merger of the First National Bank.

Mr. MULTER. I read that, Mr. Fine. If I had been sitting in your seat at the time, I would have asked him to explain that.

The CHAIRMAN. We covered that very thoroughly, but as I said before, the answers were very unsatisfactory and even naive.

Mr. MULTER. I clipped this from the New York Times of Thursday, June 2d, and it is typical of what I say is the thinking of those in high Government places, charged with the duty of enforcing these laws.

This is what Edward F. Howrey, Chairman of the Federal Trade Commission said:

Some mergers are good because they strengthen competition.

He cited the recent merger of Willys-Overland and Kaiser-Fraser as providing more competition for the three big auto makers.

And then he goes on to say the major compelling reason for mergers is the desire of companies to increase their capacities without creating new competition.

Now, how can he be right in both instances? You do not lessen competition when the desire behind the merger is to increase capacity without creating new competition.

Mr. FINE. They mean competition between the big banks.

Mr. MULTER. I think what they mean without saying it is the desire behind these mergers is to destroy competition. I go further than

the language of the statute. The desire for these big mergers is not to lessen competition, it is to destroy competition.

The CHAIRMAN. It is the coming into being of a new cult. It is called megalolatry, the cult that claims the bigger is the better.

Mr. MULTER. In some cases the bigger the better but in too many cases, "the bigger the more dangerous.'

You see, you and I, Mr. Chairman, have very often been in before the Congress urging amendments to the law and have been accused of advocating foreign doctrine in our country which would tend to socialize it. The very people who raise those arguments now run away from the danger we point out to them, and refuse to see the danger. This trend is more likely to bring about socialization and nationalization than anything that has ever happened anywhere. If you will just look at these so-called foreign ideologies that they do not want to come into this country, you will see the experiences of those countries have indicated that the very danger we are talking about is likely to come upon us here at home, if we do not keep our eyes open and be alert to stop this very dangerous trend.

The CHAIRMAN. In other words, if we had another depression like we had in the thirties, or if there ever to be a scandal somewhere, you would have the hue and cry all over the country for the banks to become nationalized.

Mr. MULTER. You will not need a depression to bring it about, sir. Because once they get so big, as business is throttled, as it cannot get the credit it needs; as people see their jobs being lost because of these tremendous consolidations, you will not have to wait for a depression. Somebody is going to come along and very forcefully argue, "The only way to stop this is let the Government, not only regulate, as we seek to do, but to own and control," and that is not free enterprise. These free enterprisers who are always talking about free enterprise and crying, "We do not want any interference by the Government," cannot see the necessity for the Government to protect them against this danger by these regulations we are advocating.

Mr. SCOTT. Mr. Multer, you make an interesting comment in your statement, "It is not a case of one strong institution rescuing a weak and a shaky bank as happened frequently during the thirties." The reverse of that situation happened all over the United States in the thirties and happened in Philadelphia to my personal knowledge. There the big, stronger banks not only attempted to rescue the smaller banks, but in some instances, the big banks actually forced the closure of remaining smaller banks because they did not want the competition in the area.

I know of a bank that was 116-percent solvent, which was kept closed by the bigger banks, against the advice of the resident national bank examiner because the big banks did not want to bother with the competition of the little one.

Now, there is a further evil that may not have come across your own experience, but it certainly came across mine.

Mr. MULTER. Mr. Scott, I am well aware of that. It happened throughout the country. It happened in Philadelphia, it happened in New York, it happened in Pittsburgh, it happened in Chicago. It happened in Georgia.

I quoted some of the testimony before the Banking and Currency Committee of Mr. James Peters of Georgia. The same thing hap