I am glad to hear you say that the danger signals are out and that you are going to be extremely alert to any future applications for

merger.

Mr. SCOTT. I have only one question, Mr. Mooney, and you may have covered it. That is, I would like you to comment on the difference between the relative gross total deposits of member banks in New York City and other large cities.

I notice in New York City the gross looks like around 13 or 14 percent and in other large cities, apparently about 37 percent. That follows page 19, in your long statement, table 6.

Mr. MOONEY. I thing that is a reflection of the diffusion of population, business activity and hence deposits, throughout the country. We have seen this decentralization of industry, principally since the war, I believe, with the result that banks follow their customers to the extent that they can.

Mr. SCOTT. The New York City situation would not reflect the situation outside of New York City proper?

Mr. SPEAGLE. The figures would not be materially changed if we took in the whole of New York State, sir.

Mr. MOONEY. I have a figure here, if I may just give it, that since before the war, banking deposits throughout the country rose $100 billion and the bulk of this growth, I guess, has been into banks around the country, rather than primarily in New York City.

The CHAIRMAN. Mr. Mooney, do you have any figures or would you care to supply us with figures to indicate the number of applications for mergers of banks under the State superintendent of banks' juris. diction in New York State in the last 5 years?

Mr. MOONEY. You see, Mr. Chairman, it is a difficult question to answer, and it is one that I sought to answer myself. I find that most of these applications, so-called, begin on a highly informal basis. That is, they are conversations with the superintendent or a deputy in the department. We never know how real the prospect is; that the questioner is actually contemplating a merger. The question comes up, perhaps with deliberate casualness, because he does not really want to indicate that it has reality, or maybe he is just "fishing." In any event, there are informal conversations which never show on the record, especially in those instances where representatives of the department frown on the proposal.

I find in checking back that there have been about half a dozen rejections there have been at least half a dozen rejections of merger applications during recent years, and these had to do principally with smaller banks in New York State. Most of these institutions, I am told, were not equipped by strength of capital or caliber of management to take on the new responsibilities.

I was questioned myself since my appointment-again, on an entirely informal basis-when I was having dinner with a man in the banking business who said, "What would be your reaction if so-and-so undertook to merge with so-and-so?" And knowing that it would. involve a very important concentration, I said, "I think that that would be impossible." And then I added that, if it were done under a national bank charter, it would not be my concern, but my informal reaction was that it would not be acceptable.

The CHAIRMAN. It would be your concern because it would affect the overall picture.

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Mr. MOONEY. Excuse me. I withdraw the reference to concern. I mean it would not be my direct problem.

The CHAIRMAN. How many of those mergers were granted during that same period? You say six were rejected, or rather informally rejected. How many were granted?

Mr. SPEAGLE. We have a table in here on the number of mergers that were in the postwar period. It is something like less than 100 in the whole postwar period.

If you want additional figures for each year, we will be glad to supply them later on.

The CHAIRMAN. In the postwar period up to date, there have been about 100 applications for mergers granted

Mr. SPEAGLE. Formal applications granted.

The CHAIRMAN. And about six formally or informally rejected? Mr. SPEAGLE. No, sir. As the superintendent has indicated, most of the merger applications come to us on an informal basis. As a result, we do not have any records.

In other words, a luncheon conversation at which a suggestion for a merger is rejected would not be recorded.

The CHAIRMAN. I see.

But you say there have been roughly 100 applications for mergers formally granted in New York State during the postwar period? Mr. SPEAGLE. During the entire postwar period, beginning in 1946; that is right.

These six rejections-there are more, as a matter of fact-they are just within the memory of some of the people involved.

So it

Now, you will notice we have had a change of superintendents and some of the people who rejected previous mergers have left us. is only what they can recollect and what they can tell us. The CHAIRMAN. Thank you, very much, Mr. Mooney.

We appreciate your coming down here and helping us untie some of these knots. We are very grateful to you. We also thank your staff, Mr. Speagle and Mr. Power.

Mr. Power, you will supply that additional information?

Mr. POWER. Yes, sir.

(The additional information was placed in the record of the hearings on June 13, 1955.)

(The unabridged statement of Mr. Mooney follows :)

STATEMENT OF GEORGE A. MOONEY, SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK, ON RECENT NEW YORK CITY BANK MERGERS

INTRODUCTION

The question of competition and monopoly, which is the special area of study and concern of the Antimonopoly Subcommittee, is a highly important one for the health of the American economy. The virtues of competition are a fundamental tenet of this country. The belief is deeply woven into the fabric of American traditions that monopoly is odious and goes counter to the public welfare.

That there is no substitute for competition is a fact that must be fully recognized in the field of banking and is so recognized by the Department of Banking of New York State. The stewardship of the superintendent of banks includes, as part of his superviison of State-chartered banking institutions, the maintenance of sound and strong competition among them, consonant with high standards of soundness and safety.

The banking law of the State of New York provides as follows:

"SEC. 10. DECLARATION OF POLICY.-It is hereby declared to be the policy of the State of New York that the business of all banking organizations shall be supervised and regulated through the banking department in such manner as to

insure the safe and sound conduct of such business, to conserve their assets, to prevent hoarding of money, to eliminate unsound and destructive competition among such banking organizations and thus to maintain public confidence in such business and protect the public interest and the interests of depositors. creditors, shareholders, and stockholders."

Although, technically, the superintendent's jurisdiction does not extend to the enforcement of the Federal antitrust statutes, a broad conception of his duties, as well as sound policy, requires him to see that both Federal and State laws are strictly observed by all the various types of banking organizations. In this connection, it may interest this committee to know that in the two large New York City mergers which the new superintendent approved since assuming office at the beginning of the year, he took the unusual step of personally requesting the banks concerned to seek "advance clearance" from both the attorney general of the State of New York and from the Department of Justice in Washington. The purpose was to let the foremost law-enforcement officers of the country and the State review aspects of the nationally important mergers that lay within their jurisdiction and competence.

The advance-clearance procedure has been thus described by the Assistant Attorney General in charge of the Antitrust Division in an address delivered on January 28, 1954, before the New York State Bar Association (1954 CCH Trade Regulation Reporter, sec. 4208.03) as follows:

"In another phase of antitrust work-that is, the merger program-the Division has also formulated certain advance clearance procedures. With respect to any proposed merger, the Division permits the parties involved to confer with Division representatives concerning the details of the proposed merger with a view toward obtaining a statement from the Division that the proposed merger would not be the subject of legal proceedings. Following such conferences, the Division, if it finds that the proposed merger does not raise serious questions under the antitrust law, may indicate in writing to the parties that it does not intend to take legal action against the merger, but that it reserves its right to take action if subsequent developments and operations so warrant." After conferences by the counsel for the banks with the Honorable Stanley M. Barnes, Assistant Attorney General, and the submission to him of comprehensive statements as to the effect of the proposed mergers, clearance letters were received by counsel for the banks in accordance with the advance clearance procedures.

The superintendent, being advised of the legal implications of this procedure, was fully aware that the granting of clearance did not operate to relieve him of his responsibilities to follow the spirit and the substance of the statutes enacted to safeguard banking competition as he and his staff saw them.

The statement to follow will give proof at various points along the discussion how the banking department of New York State has gone into action to maintain competitive conditions.

The body of this document consists of three parts. The first part aims to set out the most significant aspects of banking competition in New York City. Second, the statement will outline the yardsticks developed by the department in approving or disapproving mergers between banking institutions. Third, to fit in with these broad considerations of policy, the statement will cite the specific facts that governed the department's approval of the merger of the Chase National Bank into the Bank of the Manhattan Co., and of the Public National Bank & Trust Co. into the Bankers Trust Co.

PART I

Concentration of banking in New York City

A focal point in all deliberations on monopoly and competition in banking is the degree of concentration that exists in any given geographical area. The situation with regard to banking in New York City is illustrated in the chart and in table 1, showing the concentration of bank assets both before and after the four large mergers that have recently taken place. The basis of comparison are figures for December 31, 1954, so as to insure uniformity in point of time, despite the varying dates on which the mergers became effective.

It will be seen that prior to these 4 mergers the largest bank was the National City, having $5.8 billion of assets, and accounting for 17 percent of banking resources in the 5 boroughs. It was closely followed by the Chase National, with $5.7 billion, or 16.7 percent of bank assets. Third and fourth in rank, but at some distance behind these 2 institutions, were Manufacturers Trust and Guaranty Trust, with $3 billion, or 8.9 percent of citywide bank assets each. Other well-known commercial banks come next in descending order, until the

array reaches J. P. Morgan, whose $830 million of assets represented 2.4 percent of New York City's total. Forty-four smaller commercial banking institutions shared $3.4 billion, or 10 percent of assets between them.

Effect of mergers on concentration

What was the effect of these four large mergers in New York City on the distribution of total banking assets? The chart tells the story.

DISTRIBUTION OF THE 556 BANKING OFFICES

TABLE 1.-Bank mergers in New York City-effect on asset concentration (on Dec. 31, 1954, basis)

1 Since banks were merged before Dec. 31, 1954, figures were estimated from Oct. 7, 1954, call report.

Source: New York Clearinghouse.

63478-55-pt. 3- -11

Beginning with the Chase National Bank, its merger into the Bank of the Manhattan Co., after the latter had absorbed the Bronx County Trust Co., raised its share of bank assets from 17 percent to 22 percent for the combined institution. This made the Chase Manhattan the largest bank in the East and in New York City, although not in the country as a whole.

The merger of the First National Bank into the National City Bank brought the latter institution's share of banking resources to over 19 percent, thus giving the new institution the rank of the second largest commercial bank in the city.

The merger between the Chemical Bank and the Corn Exchange Bank, which was the first of the 4 large mergers, occurring in October of 1954, raised the combined institution's share to 8.5 percent of the city total.

Last, the merger between Bankers Trust and Public National resulted in an institution accounting for 8.2 percent of total bank assets in New York City. Several conclusions may be drawn from these facts. First of all, the increase in conclusions may be drawn from these facts. First of all, the increase in concentration that resulted from the four mergers was measurable but it was far from overwhelming. It was most definite in the case of the Chase Manhattan. Yet it gave the combined institution, in spite of its size, not more than roughly one-fifth of New York City's total bank assets. In the three other mergers, the increase in concentration was modest to the degree of almost passing notice. In brief, the impact of these mergers on concentration failed to provide the weight of evidence that would be needed to show that competition was being substantially lessened in New York City. Taken by themselves, the effects of the four mergers on concentration furnished no clear or convincing grounds on which disapproval of the applications of the banks involved would become mandatory. Meaning of concentration ratios

Any consideration of the concentration of assets in an important money market like New York City requires an appreciation of the functions of such a money market. The banks of any community serve its local commercial and consumer needs with business and personal loans, demand and savings accounts, and the other broad banking services. In this respect, New York does not differ from any other community. In addition, however, an important financial center like New York serves a function of providing wholesale banking in the form of large business credits for national and international enterprises. Such loans, which become bank assets, are attracted only by the adequacy of the institutions from a size standpoint to furnish the credit either by themselves or in association with other large financial institutions.

In searching more deeply into the meaning of concentration ratios, the Department analyzed closely, among other things, the various activities and types of business done by the large commercial banks in New York City. It investigated the nature of their customers, the location of their plants and offices, their banking habits and their financial practices. In the course of these studies it was brought out that the customers of the large banks in New York City were, for the predominant part, national corporations. Their factories and offices were located in every State of the Union. Their cash balances were distributed among banks all over the country, especially in other financial centers which competed vigorously with Manhattan for a greater share of deposits and credit lines. Since New York City was and remains the foremost money and capital market in the Nation, a far greater than proportionate amount of corporate funds was found to flow through the large-city banks. Money was channeled here for purposes of investment, for the payment of taxes, and for the servicing of loans and other indebtedness. Correspondent relations, linking unit banks throughout the Nation into one great system, had the effect of bringing a substantial volume of interbank funds and reserves into the larger banks in the city. New York, it was also found, was mainly chosen as the depositary of foreigners and foreign banks who tended to accumulate the predominant part of their dollar balances at banks in lower Manhattan.