Mr. BEASLEY. No; a branch has no separate corporate entity. Senator ROBERTSON. You refer to a whole page ad which was published in California papers by the First National Bank. Mr. BEASLEY. Yes, sir. Senator ROBERTSON. Is this the ad that you referred to? Senator ROBERTSON. Mr. Chairman, I think it would be illuminating for us to read the third line in that ad: "As a firm believer in the triaditional American system of free enterprise, and free unrestricted competition" and so forth. I think that gives the philosophy of those who object to the Government being an umpire in this game of competion, and whoever got money enough to crush the other fellow should be free to do it. The Governments must keep their bandits from taking the money out of the bank by force, but if they can take it out by economic force, it is all right. The CHAIRMAN. Do you have anything more to add? Senator CAIN. Two questions, if I may, on a continuation of what you said in your statement, Mr. Beasley. In your opinion, how much real danger is there of a monopolistic control of banking and credit in the western section of America? Mr. BEASLEY. I think it is very real, sir. Senator CAIN. You think that if regulatory laws are not imposed upon a prevailing situation that we are actually headed toward a monopolistic control all up and down that coast? Mr. BEASLEY. I think that is the case. I have not the figure here, but I have some figures here that might be interesting. In the statement I mentioned that at the present time in the five Western States, one holding company holds 38 percent of all deposits. If simply four deals in that area were completed-and, understand, I am not implying that there is any pending thing in any of these deals; I am simply showing, though, what could happen-our four deals, if they were completed, one in Arizona, one in California, one in Oregon, and one in Washington, that total for that five-State area would reach 56 percent. Senator CAIN. As opposed to 38 presently? Mr. BEASLEY. Those are only four deals. I think that is a very critical and dangerous situation. Senator CAIN. You would not mention the word "deal" unless you had reason to assume that efforts were being made to secure control of these additional four. Mr. BEASLEY. No; I have nothing to indicate that there is any effort to acquire any of the banks that I have selected. The CHAIRMAN. You are talking of what might be possible. Mr. BEASLEY. That is correct, sir. Senator CAIN. I have one other question. I should like to direct it to you as a banker and ask you to elaborate just a little on that part of your statement which spoke of the necessity for keeping banking free from entanglement with affiliated and extraneous businesses. think you have used both of those qualifying words. Mr. BEASLEY. I did, sir. That has to do with the possibility of private and confidential information concerning a bank customer reaching his competitor, owned by the bank holding company. A If banker has a great deal of information concerning his customer. you gentlemen think back on the little notations you write on the corners of your checks or on the backs of your checks, there is a lot of private information on those memorandums. If your banker wishes to keep track of those things, sooner or later he could get something rather helpful to a competitor, I am sure. The checks of the individual depositor indicates what securities he owns, the sources of his income such things as that. Those data are available even though the customer is not a borrower of the bank and has not filed a financial statement. That is a very small illustration of what I have in mind in that regard, sir. Senator CAIN. You think you speak pretty well with authority for a majority of the bankers not only in California, but in the sevenStates region which you represent Mr. BEASLEY. I am very confident of that, sir. Senator CAIN. When you say that they have a keen disapproval of the association of banking with outside but related activities? Mr. BEASLEY. That is right, sir. Senator SPARKMAN. This question is somewhat along the line Senator Cain asked you, about these affiliated and extraneous businesses that Transamerica is tied up in. I was very much impressed in looking over one of the recent annual reports of Transamerica, to see the great number of different business enterprises that they had under their control. I wonder if through that means there cannot be a pretty complete economic strangling I do not mean that there will be necessarily, but certainly it is possible. Mr. BEASLEY. The possibility is very definitely there. Senator SPARKMAN. Not only so far as it pertains to those particular businesses, but certainly they can use that as use that as a means of strangling businesses otherwise. Mr. BEASLEY. That is correct, sir. Senator SPARKMAN. Banking and other types of businesses competitive with theirs. Mr. BEASLEY. I think that is a real danger. Senator SPARKMAN. As I understand it, one of the essential parts of this bill is to require these holding companies to dissociate themselves from such collateral enterprises. Mr. BEASLEY. That is right: the complete divorcement from nonbanking activities. Senator SPARKMAN. Even though this huge banking concern that you have described remained intact out there, you believe that the economic life of your section would be protected by divorcing the two activities the two lines of activities. Mr. BEASLEY. It would be a very great improvement. Senator SPARKMAN. And of course this bill would also stop, if I understand it correctly, the extension even of the banking business. by such holding company. Mr. BEASLEY. It would place under the regulation of the Federal Reserve System, sir. Senator SPARKMAN. And prevent further expansion; would it? Mr. BEASLEY. It does not prohibit further expansion. It limits to a permissive function of the Federal Reserve System.. Senator SPARKMAN. That is all. The CHAIRMAN. Why a bank holding company? The CHAIRMAN. Why have one? What is the thesis: Greater efficiency, greater concentrated expert advice on investments? I am asking you. Is there need in our economic financial system for such agencies as bank-holding companies? Mr. BEASLEY. I do not think so, personally. The CHAIRMAN. What was the genesis of them? Mr. BEASLEY. I think it was a matter of expediency in rounding up the purchase of banks to channel them into a branch-bank system. Well, perhaps I could reword that answer, sir. It is a means whereby control could be obtained of a bankpurchase of a bank could be completed-wherein a bank itself could not purchase a bank. The CHAIRMAN. So they formed the agency. Mr. BEASLEY. Yes. The CHAIRMAN. And going a step further, an argument has been used and has an appeal, of course, and it is that we take a dozen small banks and put them together in a holding company. That little bank is not able to employ investment counsel, and those men, perforce provincially minded, live in a small community; therefore, by forming the holding company, they can employ them and give the bank, and through them the depositors, the benefit of skillful investment advice. That is one of the motivations of a bank-holding company. You have heard that used. Mr. BEASLEY. Yes, sir. The CHAIRMAN. And another thing along that line, but going beyond that and I accept that as a very honest argument; but going beyond that-then comes the question there is in the hearts and breasts and minds and spleen of man, and has been from time immemorial- a desire for success. Success is understood to be two things: Not only to make money in itself, but in addition to making money, there is always present in our American development on the part of certain men of a certain type in a certain era an urge for power; the desire to control, to sway large things in large ways, to have fingers on a lot of things. They have made money enough, but, ergo, they want power. They like it. They thrive on it. It has an appeal to an emotion in all of us. Do you think that has been present in some of these things? That is all I have. Thank you. The CHAIRMAN. Thank you. The next witness is Ben Du Bois, secretary of the Independent Bankers Association, Sauk Centre, Minn. STATEMENT OF BEN DU BOIS, SECRETARY, INDEPENDENT BANKERS ASSOCIATION, SAUK CENTRE, MINN. Mr. Du Bois. Mr. Chairman and members of the committee, Mr. Gregory was expected to testify here today, but unfortunately he could not be here, so I am taking his place. My name is Ben Du Bois. I am president of the First State Bank of Sauk Centre, Minn. I am secretary of the Independent Bankers Association. I am here today representing the association, which was organized in Minnesota in 1930. The association has a membership of 1,894 independent banks located in all Federal Reserve districts with the exception of the Twelfth Federal Reserve District. The association was organized to protect independent banking from the trends toward centralization. We believe in democratic economy. At its convention in St. Louis, Mo., on May 24, 1947, the Independent Bankers Association unanimously passed the following resolution: Whereas it is and always has been the declared policy of this association that the future creation of bank holding companies should, by appropriation legislation, be prevented; that all existing bank holding companies should be required by effective legislation to separate their business of managing and controlling banks from unrelated businesses; that the business and affairs of bank holding companies be made subject to the same type of examination and regulation as the banks which they control; that said bank holding companies be made subject to more effective regulation and supervision, all this to the end that their continued operation will result in minimizing the danger inherent in concentration of economic power through centralized control of banks; and Whereas S. 829 now introduced in the Senate of the United States is a forward step in that direction: Now, therefore, be it Resolved, That the Independent Bankers Association do unqualifiedly and unreservedly recommend the passage of S. 829 as now written, together with any clarifying or minor amendments thereto as may be hereafter adopted. The CHAIRMAN. Are you or your associates familiar with the series of amendments which Mr. Eccles has suggested, after consultation with the Federal Advisory Board at a recent meeting. Mr. DuBois. And we are agreeable. Senator CAIN. You represent, Mr. Du Bois, an organization or association comparable in character to the one Mr. Beasley represented? Mr. Du Bois. Practically the same type of organization. We have worked in close harmony all through the years. This resolution reemphasizes the long-standing policy of this association favoring adequate control of the holding company device, and indicates our growing concern over the present trend toward greater destruction of our system of free enterprise through the use of holding companies. Holding companies are directly controlling the operations of hundreds of unit banks and branches in the United States at this time. The dangerously large holding companies continue to acquire other independent unit banks, but conditions have now developed that make inevitable a much greater concentration of banking under many new holding companies unless additional governmental controls become effective at once. One factor influencing the trend is the narrowing market for all bank stock, especially the stocks of small and medium-sized banks. The increase in the size of most unit banks during the last 16 or 18 years has aggravated the situation, since the total life savings of bank officers today cannot even approach the point of purchasing control in banks these officers are operating. Control in many unit banks is being offered for sale by aging owner-management or their heirs and since the stocks of such banks are no longer as attractive for investment to local businessmen as they are to loan company or similar holding companies, these unit banks are being readily absorbed into these holding companies. The appetite of loan company holding groups for such investments is being intensified by the increasing bank competition at the lower rates that banks are offering and the recent tendency of many States to regulate loan company set-ups, especially when maximum interest rates are prescribed. Many other types of holding companies are also bidding for banks, usually with motives that do not promise the public good bank operation. Big banks and big business naturally work hand in glove with one another. The concentration of economic power becomes, of course, political power. Our democracy receives a jolt. We cannot maintain a true democracy without a true democratic economy. If this country is to prosper, we must have numerous types of independent businesses. People must own and manage their own enterprises. The desire for business efficiency would often destroy the spiritual well-being of our people. The big corporation, mass production, has made robots of many of us. This dire fate should be avoided as much as possible. Small business finds a close relationship with a small bank, the independent institution whose management is part and parcel of the community. The people of this country have always been opposed to monopolies-the Congress has passed numerous antitrust laws-but if we should some day wake up to the fact that banking was too closely held in this country, we might find ourselves with a credit monopoly that would dwarf monopolies of the past. We believe this concentration of banking power has reached the point where the Congress. must decide a way of limiting it. It is more than a banking issue; it affects the well-being of all the people. If banking is concentrated in too few hands, it invites socialization or nationalization. Recently some 15 different countries have nationalized, in whole or in part, their banking systems. If we keep this country a predominantly independent banking country, we need have no fear of following the footsteps of these socialistic countries. The independent bankers are not now cohesive enough to stop holding company banking, and, of course, we cannot expect selfimposed restraints on the part of the holding companies. We can only look to the Congress of the United States for the protection that independent banking must have if it is to survive and we ask for this legislation, not only in our own interests, but in the interests of the people of this country. Our association supports the objectives of S. 829 and we urge its passage. It is the minimum that will control the situation and is absolutely needed at this time. The CHAIRMAN. Are there any questions? Senator ROBERTSON. Do you not think it has always been the purpose and the intention of the Congress to prevent monopolistic practices in the banking industry? Mr. Du Bois. I think it has been the intent, but I think the way the thing has changed that we need supporting legislation. Senator ROBERTSON. In other words, they have found loopholes in our laws. Mr. Du Bois. Yes, we need to tighten up a little bit. Senator ROBERTSON. And the purpose of this bill is to close those loopholes. Mr. Du Bois. It is to carry out the views of the Congress to put in such form that it can be done. 62394-47- -4 |