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must comply is not necessary, and that it all can be done with slight amendments to existing law.

Senator ROBERTSON. Governor Eccles told us that they suppose they could not operate, and could not effectuate the intention of Congress, and from the securities and the insurance and things of that kind, that many banks are engaged in before passing that act. There were loopholes there and this bill closes them. He was for the bill for that reason.

Mr. HUNTINGTON. I disagree with Mr. Eccles. I think it would be a very simple matter to dissociate, for example, the holding bank stocks and the operation of other businesses through a holding company by the simple expedient of putting the holding companies under the supervision of the SEC, and under the provision of the Investment Company Act of 1940, which are much more stringent than the provisions of this bill.

The CHAIRMAN. Are you talking ad libitum here? I wonder if it would not be timely, in view of the fact that you per se represent and understand the Morris Plan bank structure and function better than anyone else, if you would not pause and tell us what Morris Plan Bank is, and what its scope is, and so forth. Mr. HUNTINGTON. I will be very glad to, Senator, .

A Morris plan Bank is defined in the dictionary as an industrial bank making loans to working people. That is not exactly an accurate definition, but I suppose in general terms that it is good enough.

Senator FLANDERS. You use the word "industrial" in the same sense that the word is used in industrial insurance?

Mr. HUNTINGTON. Yes, sir.
Senator FLANDERS. What does it mean?

Mr. HUNTINGTON. The term "industrial” means an industrial bank is one which theoretically, at least, is in the business of doing banking for the workingman.

The CHAIRMAN. Do not all banks function for the working man?

Mr. HUNTINGTON. And concentrating on personal loans, character loans.

Senator FLANDERS. It is an unusual use of the term. You think that industrial ordinarily refers to industries, but it has that connotation that it has that you described in connection with industrial insurance. How that ever arose, I do not know.

Mr. HUNTINGTON. It has, and in the banking field it is really a term which is applied to character and personal loans.

The CHAIRMAN. Is it a fact that the national banks as a class have in recent years set up personal loan departments to a very large extent which is in a way a new departure, and that they are making a specialty of that now?

Mr. HUNTINGTON. Yes, sir.
The CHAIRMAN. It is becoming more and more an issue?

Mr. HUNTINGTON. I think there are 10,000 banks in the country with so-called consumer-credit departments.

The CHAIRMAN. And so as of today, they are more in competition with the Morris Plan than ever before.

Mr. HUNTINGTON. Oh, completely; yes, sir.

The CHAIRMAN. And the Morris Plan Bank, to make it clear in my mind, you said it is a bank to make industrial loans; it is a part of a system of Morris Plan banks with some name over that?

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Mr. HUNTINGTON. Well, sir, the only standard among the Morris Plan banks, so-called, is the standard use of the Morris Plan diamond, as a trade name, and operating procedures, because in every Morris plan bank, operating procedures are more or less identical. The forms used are more or less identical. But there is no financial relationship.

The CHAIRMAN. You accept deposits from individuals the same as any banks?

Mr. HUNTINGTON. In most jurisdictions.
The CHAIRMAN. And have checking accounts?

Mr. HUNTINGTON. Yes, sir; that is true of our so-called 17 control banks. But that is not true of all of the other Morris Plan institutions, in some of which we have a minority stock interest.

The CHAIRMAN. When a bank becomes a Morris Plan bank in Manchester, N. H., or in Chicago, Ill., or wherever it is, all of the Manchester Morris Plan banks are controlled by or connected with a superorganization above that individual bank?

Mr. HUNTINGTON. Not all of them; no, sir. There is a holding company known as Morris Plan Corp. of America, of which I am president. Mr. Morris is chairman of the board, and he was the founder of this organization.

That bank, that Morris Plan Corp. of America, owns a majority interest in 17 Morris Plan institutions. Those are all banks. They all have banking charters, carrying on all of the departments of an ordinary commercial bank, but which stress their personal-loan and consumer-credit business.

The CHAIRMAN. Then there are individual Morris Plan banks?

Mr. HUNTINGTON. Then there are some-89 altogether individual companies, some of them banks also, in about 21 of which the Morris Plan Corp. has minority interests ranging from 5 or 6 or even 1 percent to in some cases 25 or 36 percent.

With respect to none of those minority banks and companies do we get reports, do we ever see the management, except occasionally at association meetings, do we ever sit down with them and discuss policies, do we have the slightest control over their operations.

The CHAIRMAN. So that a bank in Cheyenne, Wyo., might have the name Morris Plan bank, but have no physical or otherwise in connections other than sentimental; no organization connection, no control or no suggestions coming from any superorganization; just as independent as the first national bank.

Mr. HUNTINGTON. They are, even in some cases where we have as much as 36 percent stock interest, which is one of the outstanding things about this bill in the light of our own personal experience with these banks where we have less than a 50-percent interest in these banks. We never hear from them except at association meetings.

They consult us in nothing. They are well operating, not that that is a matter of any great concern because they are well operated, but with respect to our majority banks, our relationship is very much closer. They do consult with us on policy questions. We leave the operation of our underlying banks entirely in the hands of the management. We have just as a matter of fact circulated and are entering into with managements of the majority banks an agreement which I think novel in the annals of American enterprise. It is an agreement under which we give up our right to our majority stock ownership, our right to dispose of that stock ownership, because we give a call on that stock to the local managements in order to give them the protection and the security which we feel they ought to have.

The CHAIRMAN. What is the American General Corp.?

Mr. HUNTINGTON. That is an investment company, a registered investment company registered under the Investment Act of 1940. The Morris Plan Corp. of America is an affiliate of that by reason of the fact that American General Corp. owns more than 50 percent of the common stock of the Morris Plan Corp. of America.

Senator FLANDERS. That is an unusual percentage, is it not, of a banking institution to be owned by an investment company. I think it says 60% percent.

Mr. HUNTINGTON. Sixty percent. Senator Flanders, the American General Corp. investment was made in the stock of the Morris Plan Corp. of America, in the summer of 1945, as a matter of investment policy. At that time American General Corp. owned the stocks of various and sundry commercial banks in approximately the equivalent amount, which was invested in the Morris Plan Corp. of America.

We felt as a matter of investment policy at that time that we had reached the peak of commercial bank stock values which subsequently of course has proven to be the fact. We therefore sold those commercial bank stocks and reinvested the proceeds in the stock of the Morris Plan Corp. of America, on the theory that the backlog of businesses of banks owned by the Morris Plan Corp. of America was at a very low ebb due to the war, due to regulation W, and due to the plethora of funds in the hands of the consuming public. That has also proven to be the fact. Senator FLANDERS. Any questions I may ask are not in any sense

Ι hostile to the Morris Plan bank idea.

Mr. HUNTINGTON. I understand. I am glad to answer your questions.

The CHAIRMAN. What is the Equity Corp.?

Mr. HUNTINGTON. That is another registered investment company which controls American General Corp.

The CHAIRMAN. So that you have at the top the Equity?
Mr. HUNTINGTON. And then the American General.
The CHAIRMAN. What is the relation between the two?

Mr. HUNTINGTON. Parent and subsidiary, the Equity Corp. being the parent.

The CHAIRMAN. So coming down the scale, there is Equity on top, then American General, and then you come down to the Morris Plan Corp. of America.

Mr. HUNTINGTON. Yes.

The CHAIRMAN. Below that the individual banks of the Morris Plan?

Mr. HUNTINGTON. Yes.

The CHAIRMAN. You have an empire here, you have here an equation, a unit.

Mr. HUNTINGTON. Not much of an empire, really.

The CHAIRMAN. You have the Equity Corp. on top; then you come down the scale, American General Corp., then the Morris Plan Corp. of America, and then the individual banks; that is the structure, is it not?

Mr. HUNTINGTON. Yes, sir. One reason for that is that the Equity Corp. and the American General Corp. were two separate developments. Plans are on foot for abolishing these two entities, to be put together and one will disappear.

The CHAIRMAN. As to the investments policy and modus operandi, is there any relation between these investment companies, and the investment of funds by the individual Morris Plan banks?

Mr. HUNTINGTON. Not the slightest, sir; and under section 17 of the Investment Company Act of 1940, there could be no dealing of any kind between any of the investment companies, or any affiliates of investment companies, except with the consent

The CHAIRMAN. How do they function? What funds do they invest? What is the functioning? Begin with the American General. How does it function with reference to the Morris Plan banks? How does it work out?

Mr. HUNTINGTON. It has no relationship whatsoever with the Morris Plan banks.

The CHAIRMAN. Entirely separate financial organizations?
Mr. HUNTINGTON. Yes, indeed, entirely separate.
The CHAIRMAN. And the Equity?
Mr. HUNTINGTON. We collect no management fees.
The CHAIRMAN. And the Equity?

Mr. HUNTINGTON. I am thoroughly opposed to that section of this bill.

The CHAIRMAN. And the Equity Corp. on top has no connection?

Mr. HUNTINGTON. None whatever; none, even the Morris Plan Corp. of America has nothing to do with the operations of the banks. We never interfere with the operation of the banks.

The CHAIRMAN. What function?

Mr. HUNTINGTON. They are entirely separate units. We are simply a company, a medium, an investment company, a medium for the investment of funds which have been entrusted to those investment companies by stockholders who are the public, and who believe that these companies know what they are doing in the way of investing those funds with profit.

The CHAIRMAN. And the funds they invest and advise about are funds that might be those of any gentleman in this room, or his firm, or his corporation, and have nothing to do with the Morris Plan bank.

Mr. Huntington. Nothing whatsoever, and the investment of the Morris Plan stocks was simply an investment to take the place of the investment in other bank stocks because in a portfolio of the kind that American General has, it is necessary to have diversification in that, and bank stocks are a logical part of our total investments. As a matter of fact, they are one-sixth of our total.

Senator FLANDERS. You spoke of the fact that some of the Morris Plan banks were banks of deposit, and in the ordinary sense of the ordinary banks, and others are engaged in purely and simply industrial loans.

Mr. HUNTINGTON. That is correct. Senator FLANDERS. Under what supervision do these two kinds of Morris Plan banks operate?

Mr. HUNTINGTON. Under the supervision of the State banking departments of every State in which they are located.

Senator FLANDERS. The State banking department takes care of both of those types?

Mr. HUNTINGTON. Yes, indeed.

Senator FLANDERS. Are any of them members of the FDIC?

Mr. HUNTINGTON. All of our banks are members of FDIC or have applied for insured stocks. None of our banks are Federal Reserve members.

Senator FLANDERS. None of the loan companies, purely loaning companies, would have to be members of the FDIC?

Mr. HUNTINGTON. They cannot qualify:
Senator FLANDERS. There are no deposits.

Mr. HUNTINGTON. That is correct. We have no interest except the small minority to which I have alluded.

Senator Cain. You see no similarity between your situation and the situations described by other witnesses this morning?

Mr. HUNTINGTON. Well, Senator, I am sorry to say that I did not listen very attentively to the testimony this morning, except Mr. Beasley's testimony, and the only situation which he described was that described by Mr. Eccles the other day.

In other words, the only case of banking monopoly in this country to which anyone has been able to draw attention is the Bank of America-Transamerica situation. That can be easily dealth with.

Senator FLANDERS. It has not been possible to deal with it yet. Mr. HUNTINGTON. I think I could suggest a remedy.

Senator FLANDERS. I hope that you will put your remedy in writing and send it in to us.

Mr. HUNTINGTON. It can be easily done under exising authorities.

Senator Cain. You take exception to the bill as it applies to you, not necessarily as the bill is intended to apply to other situations included among them being that situation.

Mr. HUNTINGTON. I think there are some things about this bill that ought never to be in any bill. I have alluded to one of them, the question of standards. I think it is possible, if you have to have legislation of this kind, to provide standards, so that businessmen will have something to shoot at.

One of the witnesses this morning talked about rules of the game, but these are fine rules when you do not know what the rules are going to be until the referee blows his whistle. You could not play a game of football under rules like that, and we are being asked to play the game of business under rules where you will not know what the rule is until the whistle blows.

The CHAIRMAN. I have here a statement with which you are doubtless familiar from the American Banker of November 18, 1946.

(The statement is as follows:)

FORTY-FOUR OF EIGHTY-ONE MORRIS PLAN INSTITUTIONS HAVE CHANGED

NAMES AS BANKING MOVE • In line with their new policy to change from a purely consumer credit banking business to the broader field of commercial banking, 44 Morris Plan banks out of a total of 81 in the United States, have changed their names to place names or city names—leaving out all reference to "Morris Plan, or have been absorbed into other local banks within the past few years. Of the remaining 37, many are contemplating change of names within a short time.

These 44 banks, now engaged generally in the commercial banking field, are in 22 States. With the Morris Plan institutions whose names are not yet changed they form a banking network spread over 29 States.

As an example of how these banks are moving into the commercial field, the Industrial Bank, in St. Louis, Mo., as reported by the American Banker of October 29, has acquired 145 correspondent banks with balances of $7,500,000 within the past few years. These correspondents are in Missouri and Illinois. Efforts

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