are being made to extend the bank's correspondent service into Kentucky and Mississippi. These facts indicate the scope and competitive trend of this group of institutions, that having democratized credit for the "forgotten man,' now are broadening their activities to the whole field of credit and banking. The divestment of "Morris Plan" from titles has not only been visible in the consumer loan field. The Morris Plan Insurance Society, group life underwriting company which wrote policies on borrowers so that loans were automatically paid off at death, became the Bankers Society Life Insurance Society. The following list shows by States and cities the Morris Plan institutions which have changed their names and those which as yet have not done so reading]: Alabama Bank for Savings and Trusts, Birmingham. California Morris Plan Co. of California, San Francisco. Colorado First Industrial Bank, Denver. Connecticut The Bridgeport City Trust Co., Bridgeport, purchased the former Morris Plan bank in 1944. Morris Plan Bank, New Haven. Morris Plan Bank, Stamford. Morris Plan Bank of Waterbury. Delaware The Equitable Trust Co., Wilmington, merged the Morris Plan Bank in 1944 Washington, D. C. Maryland Fidelity Trust Co., in 1945 merged Public Bank of Baltimore, former Morris Plan bank. Massachusetts Holyoke National Bank, Holyoke, merged Morris Plan bank, June 1946. Security Banking Co., Springfield. Industrial City Bank & Banking Co., Worcester. Brockton Morris Plan Co., Brockton. Chelsea Morris Plan Co., Chelsea. Haverhill Morris Plan Banking Co., Haverhill. New Bedford Morris Plan Co. New Bedford. Salem Morris Plan Co., Salem. Minnesota Duluth Morris Plan Banking Co. . Missouri Industrial Bank, St. Louis. Morris Plan Bank of St. Joseph. New Hampshire Manchester Morris Plan Bank, Manchester. New York Morris Plan Industrial Bank of Albany, to be Industrial Bank of Commerce, January 1, 1947. Industrial Bank of Binghamton. Buffalo Industrial Bank, Buffalo. Industrial Bank of Commerce, New York, name changed January 1, 1946. Industrial Bank of Central New York, Syracuse. Industrial Bank of Utica. North Carolina The Bank of Asheville, changed title from Morris Plan Bank, Asheville, January 7, 1939. Bank of Charlotte, changed title from Morris Plan Bank of Charlotte, October 31, 1945. Security Bank & Trust Co., Salisbury changed title from Morris Plan Bank of Charlotte, October 31, 1945. Security Bank & Trust Co., Salisbury, changed title from Morris Plan Bank, March 12, 1945. City National Bank of Winston-Salem, converted from Morris Plan bank, March 12, 1945. Morris Plan Industrial Bank, Burlington. Morris Plan Industrial Bank, Durham. Newbern Morris Plan Co., New Bern.. Morris Plan Bank of Wilmington, Wilmington, to change soon. Ohio Bank of Akron. Guardian Bank & Savings Co., Cincinnati Morris Plan Bank, November 3, 1937. Bank of Ohio, Cleveland. State Industrial Bank, Columbus. Peoples Bank at Dayton, Dayton. Guardian Bank, Springfield. Lucas County Bank, Toledo, changed title from Morris Plan Bank of Toledo, March 15, 1944. Peoples Bank, Youngstown. Oklahoma Central State Bank, Oklahoma City. Citizens State Bank, Tulsa. Pennsylvania Morris Plan Bank of Philadelphia. Morris Plan Consumer Discount Co., York. Rhode Island Morris Plan Bank, Providence. South Carolina Homestead Bank, Columbia. Tennessee Pioneer Bank, Chattanooga. Now Morris Plan Bank of Knoxville, to be Tennessee Valley Bank, Knoxville as of January 1, 1947. Texas City Bank of Dallas, Dallas. Trinity State Bank, Fort Worth. Mission City Bank, San Antonio. Virginia Bank of Virginia, Richmond. West Virginia Morris Plan Savings and Loan Co., Wheeling. That suggests a question. When the Morris Plan organization buys a bank, that is a member of the Federal Reserve System, is it the custom to withdraw from the Federal Reserve System? Mr. HUNTINGTON. It has been; yes, sir. The CHAIRMAN. Why? Mr. HUNTINGTON. For the simple reason that we have not been able to find any reason for Federal Reserve membership for the tiny little banks, such as ours. I would like to give you some idea of the size of these banks. I have talked with bankers all over the country about the question of Federal Reserve membership, and I have talked with members of the staff of the Federal Reserve Board, too. I did so just about a year and a half ago. No one of these individuals has been able to give me any reason why little banks like ours which have no correspondent accounts to speak of should become Federal Reserve members, be subjected to the additional regulation and the additional expense. In fact, every commercial banker with whom I have talked, most of them, to be true, have been presidents of large institutions, have said, "If we were in your position we would not have Federal Reserve membership, but you certainly must have Federal Deposit Insurance Corporation membership." And this we do have. Our banks are very limited in size, as I could show you, if you would look. The CHAIRMAN. Are they smaller in proportion than many of the banks that belong to the Federal Reserve System? Mr. HUNTINGTON. No, there are a great many that belong to the Federal Reserve System. For what reason I cannot understand. They thought it would bring deposits, help their prestige in the community. That is a complete mistake. I have also talked on that question with a great many bankers and all of them are unanimous in agreeing that the only protection that the depositor looks for is FDIC insurance. I think that is so, and we found it so in our experience. Therefore, except for the large banks which need rediscount facilities, and have enormous correspondent accounts, I see no reason for Federal Reserve membership. That is a matter of personal preference and personal opinion. You can see how small our banks are. Their deposits at the end of 1946, of our 17 controlled banks, were $156,000,000, and deposits of Federal Reserve member banks in the States in which our 17 banks were operating were $63,500,000,000. It is an infinitesimal part of the banking business. For example, I have also a comparison of our 17 banks with the 3 largest banks in the United States. We know what the first largest bank is. Let us take the second largest bank, which is the National City, or the third, which is the Chase. Their correspondent accounts in the Chase are $1,000,000,000. The same accounts in our little affiliated banks are about $1,000,000. That is against a billion. That is all of our 17 banks. So that really there is no problem. The CHAIRMAN. I refer to your statement a few minutes ago in which you concurred in my thought that the Morris Plan banks which is primarily organized to make industrial loans, loans to working people, people of small means, an accommodation, certainly functioned very splendidly in that respect. Now, the banks of the country having perforce by conditions put in small personal loan accounts, and so forth, the same type of loans as character loans, and rather successfully also, what is the line of cleavage between the Morris Plan bank as originally conceived, and the present method of national banking whereby the banks make these loans themselves through special departments set up in the last few years. Mr. HUNTINGTON. We think as a matter of fact that we know a little bit more about that business than some of the competitive business, but they are doing the same business. The CHAIRMAN. How about so far as the business goes, the type of business? Mr. HUNTINGTON. The type of business is the same. The CHAIRMAN. They all do the same? Mr. HUNTINGTON. Yes. The CHAIRMAN. A few minutes ago you questioned this bill because it contained no standards. If that is true, will not the courts hold it to be unconstitutional? Mr. HUNTINGTON. No, sir, not necessarily. I think that the constitutionality of the bill might be sustained even though there were not standards, but I think there are some constitutional questions in this bill. The CHAIRMAN. And as a matter of fact, do you not realize that the bill has some standards which are obnoxious and prejudicial to your plans in the Morris Plan banks? Mr. HUNTINGTON. I think it is prejudicial to our operation, very unfairly so. We have been in business for 40 years. The CHAIRMAN. Some of the principles enunciated in the bill are in opposition to your thought. Mr. HUNTINGTON. I mean no standards of performance are set up. They hold, for example, under section 3, a holding company The CHAIRMAN. Thou shalt not do certain things; that is a standard, is it not? Mr. HUNTINGTON. It says quite to the contrary, that you are a holding company if you own 10 percent of the stock in more than one bank. Then it goes on to say that notwithstanding the fact that you are prima facie a holding company, if you own 10 percent of the bank, you can still be a holding company if you only own one share in each of two banks. It goes on also to say that in the absolute discretion of the Federal Reserve Board, any entity could be declared not to be a holding company, no matter how much it held, in how many other banks. I do not think that any standard is prescribed under those terms which a businessman can understand. Senator FLANDERS. That is the heart of your objection to the bill. Mr. HUNTINGTON. That is one of my objections. That is the least of my objections. Senator CAIN. That objection should be easily eliminated. Mr. HUNTINGTON. I think that objection can be met by prescribing standards. For instance, what is bigness? How many millions of dollars is bigness. Bigness ought to be definable. I do not want undue financial influence or undue business influence in this country any more than any other American wants it. I was brought up in a little rural town and I have seen the local baker or grocer and butcher disappear, and seen his place taken by chain store operations I think that while we are a country of mass production, and mass distribution, that nevertheless some of that has been unfortunate. And I am not a believer in bigness. Senator CAIN. Our problem is to improve upon a piece of legislation rather than to discard it because in a particular instance it is adverse to a particular group. Mr. HUNTINGTON. I think you can improve on this piece of legislation by using legislation already in existence, and by making a very few slight amendments to some fine legislation such as the Investment Company Act of 1940, which is a very rigid piece of legislation and is objectively and intelligently administered by the SEC. The CHAIRMAN. Does the Morris Plan Associates, the company which it comes under, the Equity, and the others, are these two investment corporations, the American General and Equity, owned by the Morris Plan Associates, the majority stock? Mr. HUNTINGTON. No, sir. The CHAIRMAN. Any financial interest? Mr. HUNTINGTON. Morris Plan Corp. has no interest in them whatsoever. The CHAIRMAN. Just as any other investment company. Mr. HUNTINGTON. American General Corp. made this investment in the Morris Plan Corp. stock by way of investing in bank stocks and replacing the investment. The CHAIRMAN. The same as in any other. Mr. HUNTINGTON. They might invest in the National City Bank stock in order to have diversification of its portfolio. I might say that for example, Senator Cain, under the Investment Company Act of 1940, the investment section 7 of this bill would not be in the bill. Upstream loans are absolutely forbidden under the Investment Company Act, and I think they ought to be forbidden in this. Investment by a bank in holding company stock, I do not think the Federal Reserve Board can call our attention to one single instance since 1933, certainly, where any bank in the holding company system has invested in the stock of a holding company. I have not heard him cite any such case. The CHAIRMAN. Do you feel bank holding companies are a wise part of our economic and financial life? |