Other banking competitors of FNBC are secondarily interlocked. New England Merchants Co., whose wholly owned subsidiary is the New England Merchants National Bank, is a large and close competitor to the FNBC and its bank. NEMC has four directors on the board of Arkwright-Boston, which has one direct FNBC interlock. It has two directors on New England Mutual whose board has two directors from FNBC. It it represented twice on John Hancock's board, twice on Arthur D. Little's board and twice on Cabot Corp.'s board-all of which are directly interlocked with FNBC.

Another competitor of FNBC is State Street Bank & Trust. Three of its directors sit together with three directors of FNBC on the board of John Hancock. It also has secondary interlocks with FNBC on the boards of New England Mutual, Boston Edison, New England Tel & Tel, New England Electric System, and Cabot Corp.

Other secondary interlocks which may or may not involve banking services competitive with FNBC are the Provident Institution for Savings (10 times); the Boston Five Cent Savings Bank (6 times); Boston Safe Deposit (3 times); and Suffolk-Franklin Savings Bank (5 times).

This extraordinary array of secondary interlocks raises the issueand that is all it is at this point-that direct bank competitors have the potential to use other company's board rooms in which to discuss and possibly agree to policies which would be inimical to banking competition in Boston and New England. The lines of communication are there—that is what the chart shows.

Finally, FNBC may have an extensive forum for policy discussions and understandings on certain boards other than its own. For instance, four FNBC directors sit down at Raytheon's board table where John Hancock is represented four times, Liberty Mutual is represented three times, Boston Edison is represented twice, not to mention Shawmut, Boston Gas, and New England Mutual. Each of these companies traditionally have had a substantial impact on the economic and employment growth of New England.

Similar opportunities for wider communication exist on Liberty Mutual's board where New England Tel & Tel is represented three times, Raytheon (three), Boston Edison (five), and the Shawmut (four). Also on that board are directors of Eastern Airlines and Pan American Airways.

The Gillette board brings FNBC into direct contact with Shawmut, Provident, and New England Merchants, as regional competitors, and with Morgan Guaranty and J. P. Morgan, as national banking competition. Three insurance companies are there (New England Mutual, Liberty Mutual, and Aetna), as are Pan Am, United States Steel, and Burlington Northern. John Hancock's board, in addition to regional representation, also brings FNBC into direct contact with Morgan Guaranty, Commercial Union Insurance (a wholly owned subsidiary of Commercial Union Assurance Co., Ltd.-a large multiple line company), Ford, du Pont, and Middle South Utilities, all of national and international scope.

Thus, the chart provides many possibilities and potentials for evaluating the real role of FNBC in the city of Boston, in the New England region, and on a national basis.

The chart referred to follows:]

(Robert Krause). Along with these energy companies is New England Telephone & Telegraph-the primary telephone supplier to the region-with two directors on the FNBC board.

These utilities are major customers of banks and other financial institutions in the region and perhaps nationally. The utilities not only obtain extensive loans both short term and long term, but they make substantial bank deposits. They use bank and other institutional services for the collection of revenues, the payments to suppliers, employees and shareholders, the management of pension funds, the maintenance of health programs, the purchase of insurance, the issuing of securities, and other financial and corporate needs. Such services should be obtained on a competitive basis in order to keep down costs and, in turn, utility rates to the consumer.

The fact that representatives of these major utilities sit at the board table of the region's largest bank corporation together with a heavy representation of directors from major insurance companies may provide an opportunity whereby these financial institutions can learn the particular financial needs of such utilities and obtain a favored position in meeting those needs to the detriment of other competitive financial institutions. We do not claim that such practice is in effect, merely that the potential for preferential access to credit and other anticompetitive activities is apparent from the representation on FNBC's board. Our inquiry discloses that all of the financial institutions represented on FNBC's board are in the corporate loan market. The extent to which they are involved in loans and other financial services to these major utilities would be a matter for further investigation.

Other companies represented on FNBC's board may be actual or potential suppliers and customers of the utilities.

Their close relationship could also provide special anticompetitive conditions with respect to similar companies not on the FNBC board. Raytheon, for instance, is a major supplier of electronic equipment. It owns a subsidiary which designs, engineers, and constructs both conventional and nuclear power facilities. Raytheon is also a substantial customer of the utilities. So are United Shoe, Gillette, Cabot Corp. and other companies directly interlocked on the FNBC board. Cabot Corp. is, among other things, an energy company. It is involved in the exploration, development, and production of natural gas, condensate, and crude oil, and in the selling of liquified natural gas in the Northeast. Cabot has two of its directors on the FNCB board.

Third, the chart indicates certain secondary or indirect interlocks with the FNBC which may also fall within the area of concern expressed by the Chairman of the Federal Trade Commission.

As previously mentioned, eight members of FNBC's board sit on the board of Liberty Mutual on which also sit four board members of the Shawmut Association (or its bank)-FNBC's leading bank competitor. Over on the John Hancock board three directors of FNBC sit down with three directors of Shawmut. On Boston Edison's board three FNBC directors sit with three Shawmut directors. In fact Shawmut appears to be secondarily interlocked with FNBC some 15 times with respect to the selected primary interlocking companies on the chart. Further study of the primary interlocks may disclose additional secondary interlocks.

Other banking competitors of FNBC are secondarily interlocked. New England Merchants Co., whose wholly owned subsidiary is the New England Merchants National Bank, is a large and close competitor to the FNBC and its bank. NEMC has four directors on the board of Arkwright-Boston, which has one direct FNBC interlock. It has two directors on New England Mutual whose board has two directors from FNBC. It it represented twice on John Hancock's board, twice on Arthur D. Little's board and twice on Cabot Corp.'s board-all of which are directly interlocked with FNBC.

Another competitor of FNBC is State Street Bank & Trust. Three of its directors sit together with three directors of FNBC on the board of John Hancock. It also has secondary interlocks with FNBC on the boards of New England Mutual, Boston Edison, New England Tel & Tel, New England Electric System, and Cabot Corp.

Other secondary interlocks which may or may not involve banking services competitive with FNBC are the Provident Institution for Savings (10 times); the Boston Five Cent Savings Bank (6 times); Boston Safe Deposit (3 times); and Suffolk-Franklin Savings Bank (5 times).

This extraordinary array of secondary interlocks raises the issueand that is all it is at this point-that direct bank competitors have the potential to use other company's board rooms in which to discuss and possibly agree to policies which would be inimical to banking competition in Boston and New England. The lines of communication are there-that is what the chart shows.

Finally, FNBC may have an extensive forum for policy discussions and understandings on certain boards other than its own. For instance, four FNBC directors sit down at Raytheon's board table where John Hancock is represented four times, Liberty Mutual is represented three times, Boston Edison is represented twice, not to mention Shawmut, Boston Gas, and New England Mutual. Each of these companies traditionally have had a substantial impact on the economic and employment growth of New England.

Similar opportunities for wider communication exist on Liberty Mutual's board where New England Tel & Tel is represented three times, Raytheon (three), Boston Edison (five), and the Shawmut (four). Also on that board are directors of Eastern Airlines and Pan American Airways.

The Gillette board brings FNBC into direct contact with Shawmut, Provident, and New England Merchants, as regional competitors, and with Morgan Guaranty and J. P. Morgan, as national banking competition. Three insurance companies are there (New England Mutual, Liberty Mutual, and Aetna), as are Pan Am, United States Steel, and Burlington Northern. John Hancock's board, in addition to regional representation, also brings FNBC into direct contact with Morgan Guaranty, Commercial Union Insurance (a wholly owned subsidiary of Commercial Union Assurance Co., Ltd.-a large multiple line company), Ford, du Pont, and Middle South Utilities, all of national and international scope.

Thus, the chart provides many possibilities and potentials for evaluating the real role of FNBC in the city of Boston, in the New England region, and on a national basis.

The chart referred to follows:]

ABBREVIATIONS USED ON FIRST NATIONAL BOSTON INTERLOCK CHART

ADL, Arthur D. Little Inc.

Am. Tel & Tel. or A.T. & T., American Telephone & Telegraph Inc. Arkwright Boston, Arkwright Boston Manufacturers Mutual Insurance Co. Boston 5 Cent, Boston Five Cents Savings Bank.

Boston Safe, Boston Safe Deposit & Trust Co.

Breeder Reactor, Breeder Reactor Corp.

Burlington North., Burlington Northern.

Cabot, Cabot Corp.

Comm. Union, Commercial Union Insurance Co.

Dennison, Dennison Manufacturing Co.

The Equitable, The Equitable Life Mortgage & Realty Investors.
Fed. Res. (Boston), The Federal Reserve Bank of Boston.

F.N.B., First National Bank of Boston.

Franklin National, Franklin National Bank.

Georgia Pacific, Georgia Pacific Corp.

Hanna Min., Hanna Mining Corp.

Maine Yankee, Maine Yankee Atomic Power Co.

Marine Midland, Marine Midland National Bank.

Mass. Mut., Massachusetts Mutual Life Insurance Co.

Mass. LNG, Massachusetts Liquified Natural Gas Co.

N. E. Merchants, New England Merchants Bank of Boston and/or New England Merchants Co.

N. E. Mut. New England Mutual Life Insurance Co.

N. E. Tel & Tel, New England Telephone & Telegraph Co.

Pen Cen, Penn. Central Co.

Provident, Provident Institution for Savings

Shawmut, Shawmut Association, (a bank holding company) and/or National Shawmut Bank of Boston.

State St., State Street Bank & Trust Co.

Suffolk Fr., Suffolk Franklin Savings Bank.

U.S.M., United Shoe Machinery Co.

Ver. Yankee, Vermont Yankee Nuclear Power Corp.

Yankee Atomic, Yankee Atomic Electric Co.

Senator METCALF. The committee will be in recess for a few minutes while I also go over to try to make a quorum in the Interior Committee on the other side of the building. I will be back in about 10 minutes. So we will recess for 10 minutes.

[Brief recess.]

Senator METCALF. The subcommittee will be in order. Ten minutes go into more than a half hour which is standard operating procedure in this institution.

We now have the privilege to have Norman Fischer, chairman of the board of Medalist Industries of Milwaukee, Wis., who will be our next witness.

Mr. Fischer has a prepared statement, and if you will go ahead, Mr. Fischer, we will try to handle your testimony as expeditiously as possible. We are delighted to have you here. We are honored to have you before the committee.

STATEMENT OF NORMAN J. FISCHER, CHAIRMAN OF THE BOARD OF MEDALIST INDUSTRIES, INC.

Mr. FISCHER. Thank you, the pleasure is mine.

I want to thank my home Senator, William Proxmire, for interceding on my behalf with these joint Senate subcommittees to hear our story; and I also thank the chairman, Senator Lee Metcalf, and Senator Edmund Muskie for permitting me to appear.