charges and limit services. Bankers can do much to improve this situation by making active efforts to fit their services to the needs of the public rather than relying upon restrictive agreements for profits.

"Partial monopolies over large areas may develop both by means of branch banking and through the holding-company device. The Corporation recommends that such branch banking as is permitted by the laws of the respective States be strictly regulated so that no bank will control a disproportionate percentage of the total banking resources or offices of an area. Holding companies not only tend to become monopolistic, but increase the problem of supervision. the ease with which assets may be transferred from one affiliated corporate unit to another and the possibility of the manipulation of the accounts of these enterprises make adequate examination of affiliated banks and the appraisal of their condition and capital position extremely difficult. The Corporation recommends that Congress enact legislation which will prohibit the future creation of holding companies and which will require the liquidation of existing holding companies after allowing a reasonable time for orderly distribution to their own stockholders of the bank stock which they now hold. The Corporation believes that such legislation is distinctly preferable to the enactment of further regulatory laws in the bank-holding-company field."

We believe that the citizens of Glenn County, of the Sacramento Valley, of the State of California, and of the United States of America, are vitally interested in preventing and prohibiting the growth of cartels and monopolies in the field of banking and credit. Mr. Orval W. Adams, executive vice president of the Utah State National Bank of Salt Lake City, and a former president of the American Bankers Association, is one of the best informed men in the United States on the subject of banking and is keenly alive to the danger to our economic system resulting from the present method of operation of certain types of corporate bank holding companies. On January 23, 1947, at Los Angeles, Calif., Mr. Adams made an address to the Independent Bankers Association of Southern California and chose as his subject "Where From Here?" We believe that our banking customers will be interested in portions of this address made by Orval W. Adams, from which we quote as follows:

*

"The American banking system as it has heretofore existed and now exists, is the mature product of long and steady growth, reflecting changes in economic and industrial conditions occurring with the development of our country; a system, consequently, peculiarly adapted to meet the needs of our people; a system based upon those fundamental principles which underlie the great concept of State rights-namely, that we should build from the bottom up, and not from the top down, that control should lie with those possessing the necessary information on which to act, that problems local to a group, a city or a State, should be decided by those affected thereby, and not by others; that system upon which American Government, American industry, American finance have been builtthe exact opposite of the system embodied in the Governments of England, recently, and of Russia, and recently, too, of Germany and Italy * * "I am sure you all feel, as I do; deep gratification for the Boston resolution adopted at a meeting of the American Bankers Association. I shall refer to this again. The Association, by the adoption of that resolution, placed itself squarely on record against any attempts to impair our traditional American banking. *** "In conclusion, I refer again to the Boston resolution on branch banking. All that is written into that mandate has a very direct relationship to all I have said about the American way of life, and the obligations of the banker-citizen to do his part in its preservation. The first take over, according to Karl Marx, in order to exchange free government for slave government, is the money and credit system. Let us not be blind and arrive at the illogical conclusion that the take over is impossible in America.

"The American Banking Association, when in session in Boston, and in subsequent meetings when that resolution was reemphasized, had no doubt of its meaning, implications, and importance; and that meaning was to prevent a money and credit monopoly in this land of the free. Here it is, word for word:

"BRANCH BANKING

"We emphatically reaffirm the action of the convention held at Boston in 1937, wherein the position of the association was stated with regard to the dual system of banking, branch banking and the autonomy of the laws of the separate States with respect to banking and definitely opposing any proposal or device looking to the establishment of branch banking privileges across State lines, directly or in

directly. We reaffirm the statement presented in the preamble to the Boston resolution that this declaration is binding on all divisions, committees, and commissions of the American Bankers Association.'

"It demands that the American Bankers Association relentlessly carry out that injunction. It stresses the fact that failure to carry into effect this charge will bring disunity, which will ultimately lead to disintegration of the association. It admonishes the official family of the American Bankers Association to ponder the words in the Boston resolution, particularly the words 'by indirection,' which words are synonymous with 'holding companies.' No one can maintain that at this time there is not branch banking across State lines through the vehicle of holding company camouflage. It calls to the attention of the 15 thousand members of the American Bankers Association how easy it was to take the first backward step in dear old England, to initiate totalitarian socialism-easy for the reason that there were only five branch bank systems involved in the tragic deal. It made each succeeding step easier because the Socialists had obtained control of money and credit after nationalizing the banks. Would it have been easy in this country? No! Because there was 15,000 organized American 'bobcat banks' with sharp claws, constituting the first line of defense against concentration of banking resources. Such a concentration would create a money and credit monopoly more dangerous to, and destructive of, the American system of State rights than any other form of capital concentration. That must not come to us. The world is watching and waiting to see to what lengths we, the most blessed of all other lands, are willing to go to maintain and perpetuate what we still possess, but what they have lost, perhaps forever.

"Let us not be blind and fail to understand that centralized control of money and credit was the first step in the destruction of British free economy, and repose in the false notion 'It can't happen here.'"

The

We have no criticism of many fine banking institutions who maintain branches in several cities and municipalities comprising a certain trade area within the limits of any particular State in which branch banking is not prohibited by law. majority of such banks have not heretofore shown any apparent attempt to eliminate competitive banks by the purchase of their corporate stock or assets, or to purchase and control under one management many banking offices located in other and different States, or to acquire control, either directly or indirectly, of banking, insurance, real estate, petroleum, manufacturing, and other industrial businesses or properties. The danger to our economy is only created by the presently insufficiently regulated holding companies referred to by the Board of Governors of the Federal Reserve System in the report herein-above set forth— whereby "controls are defeated and the holding company, by indirection, can do what the bank cannot do directly," and whereof "the same management which is restricted in its operation under a bank charter can, through the holding company device, acquire unit banks, operate them in the same manner branches would be operated, and thus defeat the expressed will of Congress regarding the establishment of branches." Merely because the management of certain types of bank holding companies do not appear to have the foresight to see that continued expansion and operations of this character will almost surely result in the socialization of all banking (as the American public will never permit even partial monopolies of banking and credit if and when same are finally recognized as such) is no reason why this bank, or any other bank, should sit calmly by and await the time when Congress will have to nationalize all banks (including the First National Bank of Willows) to correct a monopolistic situation that has expanded and developed to the extent that total socialization of banking then remains as the only remedy.

We call your attention to the fact that the continued operation of the First National Bank of Willows as a home-owned independent unit bank during the past 37 years has insured the benefits of competitive banking to farmers, businessmen, and citizens of Willows and vicinity. We have no desire to be the only bank doing business in the city of Willows. Many very fine local citizens do not care to do business with this bank. This is their American right and privilege. We believe that the farmers, merchants, businessmen, and general public of Willows and Glenn County are benefited by free and bona fide banking competition. We would certainly dislike any situation whereby our business community was limited to one grocery store, one hardware store, one barber shop, one clothing store, or one insurance agency. Some people like mince pie and some people like apple pie. People do not wish to be forced to eat any certain kind of pie any more than they like to be forced to travel from 20 to 50 miles for the privilege of doing business with one or more rival business concerns or banks. Our neighbor

ing cities of Orland and Corning formerly had competitive banks operating within their respective municipalities, but this situation no longer exists. We believe that the rich agricultural territory tributary to the cities of both Orland and Corning would permit the operation of at least two competitive operated banks therein on a sound and profitable basis. We have customers who travel many miles at periodic intervals during the course of every month, from Corning and Orland to Willows and return, in order to exercise their valued American right to do their banking business where and with whom they choose. We have hundreds of customers residing in nearby cities or in farming areas who do practically all of their banking with us by mail. The situation existing is only a "near home" example of a condition that now exists in many similar cities and communities throughout the Western States. There are many other small cities and communities within the State of California and elsewhere that have also been reduced to the status of one bank where two or more competitive banks formerly existed.

The nine members of the board of directors of the First National Bank of Willows own and control over 73 percent of the stock in this bank, and our directors, both as stockholders and directors, have aggressively dedicated themselves to the proposition of insuring the continuance and maintenance of free and bona fide banking competition for the city of Willows and Glenn County. Throughout our entire 37 years of corporate existence, we have vigorously rejected all offers of individuals, groups, or corporations, to purchase the control of this bank, and we have the most sincere and honest intention to continue to refuse any future offers that may be made. There is not enough money within the States of New York and California combined to buy the control of this bank, for the simple reason that the First National Bank of Willows is not for sale at any price.

Preston Delano, the present Comptroller of the Currency, issued a public statement describing the small banks as "guardian outposts of our financial system. We have tried to live up to this definition. We have no stocks or bonds to sell. Our only business is banking. We believe that the people of the Sacramento Valley believe in the system of free enterprise and independent unit banking. This is amply demonstrated by the fact that during the past 10 years our total assets have increased from $1,649,000.00 to over $6,000,000.00.

We are directing this message to all banking customers living in the Sacramento Valley because we believe that you are interested in the continuance of the present free enterprise system under which this country has grown and prospered far in excess of any other nation on earth, and under which system the American people have attained the highest standard of living prevailing in any nation in the world. We bring this message to you in all modesty, as we have no desire for further expansion or great power and monoply. The sole ambition of our board of directors is to continue to operate and maintain an independent unit bank in Willows and Glenn County and do our part toward the advancement of the economic and financial interests of our own local farmers, businessmen, and citizens.

It appears, however, that Congress is at last becoming aware of the danger threatening our whole economic system. Senator Tobey, chairman of the United States Senate Banking Committee has recently introduced a bill designated as Senate bill 829. This bill was entered at the request of Marriner S. Eccles, Chairman of the Board of Governors of the Federal Reserve System. The object of this bill is stated in its preamble as follows:

"DECLARATION OF POLICY

"It is hereby declared to be the policy of Congress, in accordance with which policy all of the provisions of this act shall be interpreted, to control the creation and expansion of bank holding companies; to separate their business of managing and controlling banks from unrelated businesses; and generally to maintain competition among banks and to minimize the danger inherent in concentration of economic power through centralized control of banks; to subject the business and affairs of bank holding companies to the same type of examination and regulation as the banks which they control; and otherwise to provide for more effective regulation and supervision of bank holding companies to the end that their influence and control shall be directed toward the continued pursuit of sound policies and the continued maintenance of sound financial conditions by their subsidiary banks."

As soon as sufficient copies of this bill are procured, we will be glad to mail same to any of our customers upon request. The proponents of regulative bank holding company legislation are determined to leave no stone unturned in an aggressive effort to see to it that the respective banking committees of the United

States Senate and House of Representatives hold hearings upon bank holding company legislation during the present session of Congress and that Congress thereafter enact the necessary legislation prohibiting further unregulated expansion of bank holding companies, and thereby help preserve the free enterprise system in the United States. We are well aware of the fact that bank holding company legislation will not be enacted without the most aggressive effort on the part of the proponents of the free enterprise system, as we recognize the tremendous political influence that can be exercised upon many Congressmen by well financed opposition to such legislation.

The immediate purpose of this advertisement is to urge you to write or telegraph your own Congressman and also both Senators William F. Knowland and Sheridan Downey and request their support in obtaining immediate public hear ings on pending bank holding legislation. We believe that when Congress is informed of all the facts, that Congress itself will take the matter in hand and possibly write and enact even stricter legislation than the pending bill introduced by Senator Tobey by reason of the vigorous recommendation heretofore made to Congress by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation. Write or wire your Congressman and Senators at once.

THE FIRST NATIONAL BANK OF WILLOWS

THAT FRIENDLY RELIABLE BANK

Directors: H. C. Bell, F. E. Brenneman, H. G. Rawlins, Carleton W. Boyd, R. A. Renaud, J. Leo Feeney, O. E. Schnurbusch, Arthur O. Pieper, Carroll F. Byrd, chairman.

Member of Federal Reserve System and Federal Deposit Insurance Corporation

Mr. BEASLEY. The red dots represent branches of the Bank of America. The blue dots represent branches of the Citizens National Trust and Savings Bank. The 1946 annual report of Transamerica shows that it already holds a substantial minority interest in that bank, but it does not have control.

According to Time magazine for September 2, 1946 [reading]: Last month the ominous word went out over Los Angeles' Spring Street that "cleaning up this Citizens National situation" had become No. 1 on the list of things 76-year-old Mr. Giannini wanted to do before it was too late.

Senator CAIN. Is that Threadneedle Street?

Mr. BEASLEY. That is the financial street of Los Angeles, sir.
If S. 829 becomes law, it will be too late.

The CHAIRMAN. Tco late to clean up?

Mr. BEASLEY. Too late to complete his transaction.

This association is thoroughly in accord with the purposes of S. 829. The members of the Independent Bankers Association of the twelfth Federal Reserve district are grateful to Chairman Eccles and the Board of Governors of the Federal Reserve System for having prepared this bill which has been widely approved by bankers throughout the Nation.

We are also grateful to Chairman Tobey for having introduced this bill and for this hearing, and to the members of the committee for their interest in this legislation.

We

In conclusion, we urge the prompt enactment of this bill. know that the Senate already has before it many important measures. We hope that the facts presented at this hearing have demonstrated that the control of bank holding companies is also an emergency matter. It is vital to sound banking, to the maintenance of free credit, and to free enterprise.

Senator BUCK. What is meant by Indpendent Bankers Association? Is that the State banks, the bank association of the State?

Mr. BEASLEY. No, that is an association organized in seven Western States. It has nothing to do with any of the State associations, comprised of the bankers who are seeking to maintain competition in banking.

Senator FLANDERS. I take it there are none of the Transamerica banks in the association.

Mr. BEASLEY. That is right, sir.

Senator BUCK. When these branches are established is that done by a vote of the directors or by vote of the stockholders?

Mr. BEASLEY. I imagine it is done by the directors. That is a technical question.

Senator BUCK. The stockholders have no voice in it?

Mr. BEASLEY. I have never established a branch.

Senator BUCK. You know of these hundreds that have been established. You must know something about how it is done, by this Transamerica Bank. How do they establish their branches? By action of the board, or by the stockholders?

Mr. BEASLEY. I imagine it is by action of the board.

The CHAIRMAN. First they dominate the company by getting a majority of the stock.

Senator Buck. No; they do not.

Senator CAIN. They buy an independent bank, and then they place that bank in their system as a branch, is the way they do it. Mr. BEASLEY. I can tell you how it was done in the quite distant

past.

Giannini, and I believe it was his father-in-law, purchased the stock of the bank that they were acquiring, and then when the thing was all completed and wrapped up, it was then turned in to the bank at that time.

The CHAIRMAN. At the same price that the father-in-law acquired it?

Mr. BEASLEY. I believe so. On that I have no data myself.
The CHAIRMAN. So they did purchase the company.

Mr. BEASLEY. That is correct, sir.

The CHAIRMAN. Having purchased the company, then referring to Senator Buck's comment of a minute ago

Senator BUCK. It would not make any difference then.
The CHAIRMAN. Of course.

Senator BUCK. Governor Eccles testified that many of these branches were established when the holding companies were established, when they did not have more than 15 percent of the control of the bank.

Mr. BEASLEY. Well, the matter of control varies in each individual circumstance.

Senator BUCK. I mean control through the stock.

Mr. BEASLEY. That is right.

Senator BUCK. It may have had control of the directors, and probably did, of the board.

Mr. BEASLEY. It depends on each circumstance.

In some places 15 percent would be quite substantial control, and in other places more stock than that is definitely not control.

Senator CAIN. But every branch within the system called the Bank of America would have to be owned insofar as the majority control of the stock was concerned.