I say accordingly, I mean in accordance with his own judgment as to whether a proceeding or action should or should not be instituted. Now, I do not know of a single instance where the Federal Reserve Board has ever referred anything to the Attorney General for his opinion as to whether it violated the antitrust laws or any of the statutes.

The CHAIRMAN. Well, do you not think that a committee composed of 61 members expert in antitrust matters should have devoted some time to the question of bank mergers in this country?

Mr. MULTER. Of course, they should have.

The CHAIRMAN. Were you ever informed as to any of the activities of that committee, you as a responsible and an important member of the Banking and Currency Committee?

Mr. MULTER. I would be inclined to say that I was not invited to attend. I had no notice of any of such hearings, or I might have asked permission to attend. I wasn't invited to attend or give them my views.

The CHAIRMAN. There were no hearings but I want to read a portion of a statement of Mr. Stanley Barnes, Assistant Attorney General of the United States, and S. Chesterfield Oppenheim, professor of law, University of Michigan, in a release dated August 27, 1953. They speak on page 9 of consultation with various Government agencies, and then we have this significant phrase:

"This liaison, as well as the liaison with both Houses of Congress and the Federal judiciary, insures the receipt by the cochairman and reference for study and analysis prior to the drafting of reports of the working group."

There are other indirect references to so-called liaison between Members of the House and the Senate.

Now, do you not think a committee as important as this committee was should have consulted the Members of the Senate and House Judiciary Committees and the Senate and House Banking and Currency Committees?

Mr. MULTER. There is no doubt in my mind that they should have, at least as a matter of courtesy, asked for our views on these important

matters.

But along that same line, let me indicate this to you.

The CHAIRMAN. There was no consultation whatsoever. I can say that as chairman of the Judiciary Committee.

Mr. MULTER. I know of none with any member of my committee. I know I was not consulted, and I know of no member of the House Committee on Banking and Currency who was consulted, nor any member of the Small Business Committee who was consulted.

The CHAIRMAN. And, as a matter of fact, in addition to that written promise, or indication of intention, there were oral statements made to me and to others that there would be consultations. There was a complete default with reference to that type of liaison.

Mr. MULTER. Along that same line, let me indicate by specific example what I mean by lack of sympathy in high places, with the congressional intent, insofar as antitrust laws are concerned.

We have a provision in our National Banking Act which provides in so many words that only natural persons may be the organizers of a national bank. Yet the Comptroller of the Currency personally

advised our Banking and Currency Committee that there was no objection to a corporation using dummies to organize a national

bank.

In other words, if a corporation wants to go into your area, or Mr. Scott's city, and open a bank, they take five persons whom they control, who subscribe to the application for the national bank charter and file it and say in the charter application that "these people are representing this corporation and all of the capital will be supplied by the corporation, and that the directors who must each own $1,000-a minimum of $1,000 of stock in the bank in order to qualify as a director, will have that stock supplied to them, with money furnished by the corporation.

So this eorporation owns and controls the bank even before it starts. And the Comptroller of the Currency tells us that he approves that kind of a situation. Now, that is on the record before our committee. The CHAIRMAN. I want to state to our colleague from New York that we have several other witnesses.

Will you go on with your statement?

Mr. MULTER. I am sorry to have taken so much time.

The CHAIRMAN. It has been very interesting and very illuminating. Mr. Scorr. I am glad to have the report of what your committee is doing with regard to this possible menace of overmerger in banks. It is especially interesting.

Mr. MULTER. I say, not because it comes from my committee, but I say one of the most important pieces of legislation that any committee has brought before this Congress is the bank holding company bill, which is a step in the direction of preventing these gigantic financial institutions from taking over and throttling the independent banks of our country. They cross State lines, they control industries other than banks, and it is a bad situation, which this bill will go a long way toward correcting.

The CHAIRMAN. And do not forget my bank merger bill before your committee.

Mr. MULTER. No, I will not, sir.

I will hurry along and finish this statement.

This merger-concentration movement has been going on for a long time. The more recent bank mergers in New York City have merely called attention to the ominous trend. Between 1945 and 1951, a period of great business activity, there were 581 consolidations and absorptions among the Nation's commercial banks. Between 1940 and 1950, these consolidations of commercial banks averaged more than 80 per year.

Along with these mergers, naturally, there was a steady decline in the number of independent banking units. It is not true that branch banks fill the gap caused by the loss of independent banking units. The total number of branca banks jumped from some 1,200 in 1920 to about 5,000 in 1950.

I am not opposed to branch banking. I cite the data to show how consolidations wipe out the independently managed banks.

Let me say, in passing, that our banking policy for generations has been wisely based on fostering strong, independent, unit banks, locally financed and locally managed to render maximum service to the persons and businesses in that local community. This does not preclude

branch banking, when necessary to form a strong bank. But the bank merger movement is drastically altering our banking structure by wiping out many strong, ably managed, local, independent banks.

The potential danger in the most recent bank mergers lies in the fact that the consolidations are between banks with huge assets, profitably operated and well managed. It is not a case of one strong institution rescuing a weak and shaky bank, as happened frequently during the 1930's.

The chairman of this committee has called attention to a factor which not infrequently induces a bank merger. He referred to the fact that bank stocks very often are quoted in the market far below their book value. As you are doubtless aware, bank stocks are not listed on the stock exchange. They are sold over the counter, which means in a limited market, through brokers.

The banking fraternity, of course, is aware of the fact that stocks of some sound banks are undervalued. Such banks are ripe for a merger. A good example of this type of merger is found in the history of the Brooklyn Trust Co.

This story is told in great detail in the staff report of the House Judiciary Committee in 1951. Title of report: Bank Mergers and Concentration; 82d Congress, 2d session, page 21.

The CHAIRMAN. There was great manipulation in the stock of the Brooklyn Trust Co. and vast sums were made by speculators in the market, as well as by stockholders who bought up large volumes of the stock. The same situation occurred with reference to the merger of the Bronx County Trust Co. with the Bank of Manhattan Co. We always hear of the Chase National Bank merging with the Bank of Manhattan, but there was an additional merger also, the Bronx County Trust Co.

It would be interesting to see the tremendous advance in stock marketwise of the Bronx County Trust Co., and I would like to know how much money was made by the insiders.

Mr. MULTER. I think that is a proper subject of inquiry by your committee, and I think it should be spread on the public record. To anyone who comes in and says to you "That is confidential," I think you can very properly say that it is a necessary part of your investigation, that matters like that which certainly were made known or should have been made known to the stockholders of both groups, should be spread on the public record.

The Brooklyn Trust Co. stock had a market price of from a low of 97 to a high of 155 per share during 1949. Late that year its book value was 194.96 per share-December 1949. This bank merged with the Manufacturers Trust Co., which paid the stockholders of the Brooklyn Trust Co. $183 for each share of stock, plus 1 share of Manufacturers Trust Co., whose shares were approximately $55. course, this merger enabled the Manufacturers Trust Co. to expand its banking facilities, increase its deposits, and in general add to its financial strength.

Of

According to the staff report, "The case of the Brooklyn Trust Co. is far from unique." The Brooklyn Trust Co. had 20 branches; this was one of the valuable assets wanted by the Manufacturers Trust Co. Incidentally, many small depositors in the Brooklyn Trust Co. after the merger were invited to take their accounts elsewhere because this new big bank could not afford to handle those small deposits

The situation in the District of Columbia is far worse than anywhere

else in the country.

I will come back at a later date, if the chairman will allow me, and develop that situation in the District of Columbia.

The CHAIRMAN. We will certainly welcome your second appearance before this committee.

Mr. MULTER. Thank you, Mr. Chairman.

It appears from the testimony during the current hearings, and from the statements issued by your chairman, that the ShermanClayton Acts have not been invoked to halt this merger movement, or even to investigate thoroughly into the effects of the mergers on competition. At any rate, bank mergers have gone on merrily. It might be well for you to inquire into how much time is actually spent by the Comptroller of the Currency in reviewing proposed bank mergers. I think you will find it is a matter of weeks. And then ask him, too, "How much time do you give to reviewing the applications for a new bank charter?" You will find that it is a matter of months. In the one instance, dealing with small sums in a small community, or part of a community, it takes an indefinitely long time, and in the other, dealing with billions of dollars it goes through like a flash. The CHAIRMAN. We have asked for that information.

Mr. MULTER. I am sure it will shed considerable light on the investigations you are conducting here.

I am happy to know that Congressman Celler has recently introduced a bill, H. R. 2115, which you have already referred to, Mr. Chairman, which gives the administrators of our Federal financial agencies the authority and the responsibility to examine carefully into contemplated bank mergers and to make it illegal to merge until written permission is granted to the banks to do so.

In the case of national banks, that power and responsibility presently resides with the Comptroller of the Currency. In the case of a State-chartered bank, which is a member of the Federal Reserve System, that power and responsibility to grant permission to consolidate is in the Federal Reserve Board. In the case of a State, nonmember but insured bank, written permission to consolidate comes from the Federal Deposit Insurance Corporation. The important provision of this bill is the obligation imposed on all the Federal agencies granting permission to merge "to take into consideration whether the effect" (of the merger)

may be to lessen competition unduly or tend unduly to create a monopoly contrary to the policy of Congress declared in favor of local ownership and control of banks and competition of banking.

BANK HOLDING COMPANIES

Along with the problem of increased mergers and consolidations is the very disturbing influence of the operations of the bank holding companies. For a number of years both Houses of the Congress have attempted to amend the 1940 act under which such holding companies now operate. The Federal Reserve Board has recommended several amendments. The Comptroller of the Currency has also approved certain amendments to the existing statute.

A few days ago the House Banking and Currency Committee approved the Spence bill, H. R. 6227, after very extensive hearings. The declared policy of this bill is "to control the creation and expansion of

bank holding companies"; to separate their business of managing and controlling banks from nonbanking enterprises; and generally—

to maintain competition among banks and to minimize the danger inherent in concentration of economic power through centralized control of banks; and to subject the business and affairs of bank holding companies to the same type of examination and regulation as the banks which they control.

Everybody in Government agrees with that declaration of policy. I hope we will soon enact that bill into law, because it carries out part of the intent and purpose of this investigation that your committee is so ably conducting.

The CHAIRMAN. Thank you, Mr. Multer.

Your views as usual have been very instructive, and you have ably and materially helped the committee.

We are very grateful.

Mr. MULTER. Thank you for the privilege of being here, sir.

The CHAIRMAN. Our next witness is Prof. S. Chesterfield Oppenheim, Cochairman of the Attorney General's National Committee To Study the Antitrust Laws.

We have an additional witness this morning who has come from New Haven, Prof. Eugene Rostow.

We are going to try if we can, to fit both of you into the hearings for the rest of the day. We have this difficulty: There will be considered on the floor today, under suspension of the rules, the postal pay raise bill. That will take 40 minutes, plus rollcalls. Then, we have the consent calendar, and the Judiciary Committee, of which I am the chairman, has a number of bills on that calendar which will require our attention. Therefore, we will go on just as long as we possibly can. We may have to interrupt your testimony or Professor Rostow's testimony to take care of those chores that I have mentioned, and thereafter we will continue in the afternoon.

Now, if perchance we cannot finish with either, or both of you, I hope that we will be enabled to continue your testimony, or Professor Rostow's testimony, on Friday.

STATEMENT OF S. CHESTERFIELD OPPENHEIM, COCHAIRMAN,
ATTORNEY GENERAL'S NATIONAL COMMITTEE TO STUDY THE
ANTITRUST LAWS

Mr. OPPENHEIM. Mr. Chairman and members of the committee, I value this privilege of appearing in response to your invitation. I hope I can be helpful in answering any questions you may have in mind, regarding the work and report of the Attorney General's National Committee To Study the Antitrust Laws, of which I was cochairman with Judge Barnes.

I may say that I have here a statement of my biographical background, which reads as follows:

My educational preparation was at Columbia University from which I received bachelor of arts and master of arts degrees. While teaching economics at the University of Michigan, I received the doctor of jurisprudence and doctor of juridical science degrees at the University of Michigan Law School.

I taught at the George Washington University Law School in Washington from 1927 to 1952, and was then appointed professor of law at the University of Michigan, where I am now teaching.