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Senator METCALF. Five major banks hold almost 40 percent of the voting stock of Western Union International. Chase, Citibank, Bank of New York, U.S. Trust and Bankers Trust hold more than onethird, almost one-half of the stock out of the 2,982,000 shares outstanding.
We keep reading about Billy Rose being the former largest stockholder in A.T. & T. But A.T. & T. does not report that the largest stockholder in A.T. & T. is Bankers Trust, with 2 percent of the stock. That appears nowhere.
The next largest stockholders are Chase Manhattan and Merrill Lynch, both with more than 1 percent of the stock. Their names appear nowhere on the ownership report.
How are we going to get a true picture of the ownership of these communications companies, I.T. & T., RCA, Western Union, vital communication arteries for the United States, when the big owners. appear nowhere?
Mr. Wiley. Of course, relative to the 1-percent and 3- and 5-percent ownership, those, of course, pertain to our broadcast area. I think the important point you are making is the one we previously alluded to, that this is something that should be revealed in the reports that we receive and to the extent that we are getting merely nominees rather than really finding out who does have the voting power, except that we are not aggregating these interests in order to come up with the kind of information the subcommittee has, it seems to me that we need to correct that deficiency in our own reporting require
Senator METCALF. Let's look at I.T. & T. now.
[The tables referred to follow:]
"30 STOCKHOLDERS HAVING GREATEST VOTING POWER"-ITT, AS OF FEB. 22, 1974
Name and address
Cede & Co (Nominee), Depository Treasury Co., Box No. 20, Bowling
Societe Interprofessionelle (Broker), Pour La Compensation Des Valeurs
Brown Brothers Harriman (Broker) & Co., 59 Wall St., New York, N.Y.
Societe De Banque Suisse (Nominee), Basle, Switzerland.
Merrill Lynch, Pierce, Fenner, & Smith Inc. (Broker), 70 Pine St., New
**30 STOCKHOLDERS HAVING GREATEST VOTING POWER"-ITT, AS OF FEB. 22, 1974-Continued
(STAFF SUMMARY OF ITT OWNERSHIP REPORT SUBMITTED TO FCC)
Senator METCALF. According to your report stockholder No. 1 in I.T. & T. is Cede & Co. with almost 6 million shares. Of course, we all know Cede & Co. is simply a nominee for Depository Trust, a subsidiary of the New York Stock Exchange. We have made arrangements to have Cede & Co. printouts made available. They show the banks and brokers for whom Cede holds stock.
So Cede & Co. doesn't belong in the report at all. That is a name that should just be wiped out.
Mr. WILEY. Now that we can get those printouts from Depository Trust
Mr. TURNER. As I understand it the respondent, the company under your jurisdiction, is to get those printouts from Cede and then report to you.
Mr. WILEY. They are obtainable. Right?
Mr. TURNER. On this aggregation, in order to straighten that out, the aggregation should be the responsibility of the respondent company to aggregate when it makes a report to you and not have you have to go through the job of aggregating it for that company. Is that correct? Mr. WILEY. I don't have any disagreement with that, Mr. Turner. Senator METCALF. That was the agreement that we entered into with Cede & Co.
We showed you the report we received from the Southern Railway?
Senator METCALF. It showed how much these various investors owned through Cede & Co.
Then back to I.T. & T.-you go to stockholders Nos. 2, 6, 9, 10, 21 and 22, they are all foreign. They are mostly Swiss banks.
Stockholder No. 3, Kane & Co., is a nominee for Chase Manhattan. So is stockholder No. 5. So is stockholder No. 17, Egger & Co.
In addition, according to what Depository Trust has provided you regarding Cede & Co., Chase also has one-third of a million shares in Cede & Co.'s vaults. So Chase Manhattan has over 4 million shares of I.T. & T.
Mr. WILEY. Yes. You make an aggregation of Kane, Cudd, and Egger & Co. holdings in order to find out what Chase Manhattan's actual holdings are and go behind those nominees.
Senator METCALF. I.T. & T. doesn't show that Morgan Guaranty is in the top 10 stockholders. I.T. & T. list Morgan Guaranty holders in three different street name accounts.
When you add them up it is more than 2 million shares making Morgan Guaranty stockholder No. 4.
We don't get any of that information by going over to your agency and trying to find out what the influence of Chase or Morgan Guaranty or the Swiss banks is on the operation of I.T. & T.
That goes on and on. I.T. & T. is in the news, of course. So is A.T. & T. These communications systems are so vital to the life of America that the people of America should know who owns them and not just be satisfied with a name such as Egger & Co., and so forth. The president of A.T. & T. can't even find out with his own telephone directory because the nominees don't have telephones.
You don't even list the post office box for those so-called large owners because you have to go through them to the banks that have the control.
Mr. WILEY. This is precisely why we are considering the rulemaking that we have discussed.
Mr. TURNER. On that point, Mr. Chairman, I think when you emphasize the foreign accounts, these are holdings of Swiss banks, French investment companies, and so forth. There is no way of us knowing whether in Chase Manhattan's nominee account of Kane & Co. or Morgan Guaranty that they in fact are not holding also for these foreign nationals, corporate or individual.
Are you looking into the next step, Mr. Commissioner, and that is the beneficial ownership; the major beneficial owners?
Are you going to look into that and have that a part of your rulemaking?
Mr. WILEY. I am advised that we are. Is that the case, Mr. White? Mr. WHITE. Yes, sir.
Mr. TURNER. I think that is one of the most significant statements we have had from any regulatory Commission, Mr. Chairman, because they are moving into the next step, which is a very important one, and the one to which the chairman refers, and that is the beneficial owners who may or may not be foreign nationals.
Senator METCALF. In your statement you told about your rules and how you prohibited ownership in more than-I refer you to your statement about the various rules of 1 percent or 3 percent or 10 percent. Mutual funds can only have so much and banks can only have so much.
Yet, when you analyze these statements, every one of those rules has been violated insofar as the large radio networks are concerned, ABC, CBS, NBC, the banks have violated-in fact, they violated with such impunity that you changed the rules for them and they are still in violation.
Mr. WILEY. I would say on that, Mr. Chairman, that we feel on the change of the rules that the banks are passive owner, passive investor who manage the trusts for investment purposes for beneficiaries and not to control the management of policies of the broadcast company and, of course, to insure that passive role, the Commission would require disclaimer by banks if they are in the area of 5 percent.
I must say that is the basis on which I voted for it and not to let the banks out because they had violated the rule.
There have been violations. There is no question about that. One of the problems has been that the rapid trading of these stocks has made it difficult for the Commission to keep up with it. But I think the point is well made that this is important for us to do it and if we are
going to have these rules it is important for us to have some way in which we can check out whether or not there is enforcement of the rules and they are being maintained.
I think this is what we are moving toward, as I pointed out in my formal statement.
Senator METCALF. More than 2 years ago the FCC admitted that it didn't have the information to report on bank ownership.
When the report on disclosure came out at the beginning of the year the CAB immediately instituted an investigation into the airline ownership control and yet 2 years after your early warning you are still talking about rulemaking power and investigation and so forth. Mr. WILEY. I can only say on that, Mr. Chairman, that one of our problems has been, of course, that the manual handling of this data is just not effective.
We have to have additional computer capability and that is an overall problem we have in many of our areas. We now are obtaining that computer capability and we are going to be in a position to move on this. I can't make any statements about what has been done in the past, but I can tell you where we are going to go from here on out; that is, that we are serious about our responsibilities in this area and I think with this added computer capability we are going to be able to meet those responsibilities.
Senator METCALF. I am glad to hear that. I am sure that you are going to do everything possible, Mr. Chairman. I hope in this tremendously important field of communications which relates to every other aspect of American industry and American life, the Federal Communications Commission should not be strapped in discovering who has ownership and what corporations own and control.
If you would read the dialog between Senator Percy and a representative of the First National City Bank you would find out that the banks aren't always as passive as you suggest, that there are leading banks that step in and take control and this Chinese wall has been breached a good many times between the beneficial owner on the trust side and the active lending activities of the bank on the active banking side.
Mr. WILEY. That is, of course, why we require the disclaimer because the problem you allude to is a serious one if it would have some control of a broadcast licensee's operations.
Senator METCALF. I thought it was most revealing when Senator Percy said if we are the leading bank we step in and we do something about the administration of some of these corporations that look as if they are going to do some of the other things that would bring discredit on the bank itself.
So there is activity and there is interference in administration of these various corporations by the banks themselves.
Mr. WILEY. I think you certainly touch on a serious problem. We do require loan agreements and other such documents be filed with us in toto so we can be assured that there won't be this type of taking over control because that would be a serious thing in relationship to the public interest of American broadcasting.
Mr. TURNER. Why the magic figure of 5 percent? What justifies a bank to be able to hold and have voting power over 5 percent of the