(2) Eliminate State banking authority and bring about the complete federalization of all aspects of the banking business. Neither of these points is in need of elaboration. The Federal Reserve Board, through the noticeable omissions of the bill, has expressed its contempt of the Comptroller's office, the Federal Deposit Insurance Corporation, and our various State banking departments and has overlooked completely the fact that Congress has already assigned to the Securities and Exchange Commission the regulation of investment companies.5

The bill either does not recognize the vast powers of any of these agencies (except in sec. 6 where reference was compulsory) or, in the alternative, assumes they will be incompetently exercised. Whether or not this is so is obviously a question between these agencies and the Federal Reserve Board.

The elimination of our dual banking system raises more serious questions than do interdepartmental quarrels. The Federal Reserve Board has wanted, for many years, to bring this about (Federal Reserve Bulletin, March 1933), but Congress has heretofore resisted all efforts in this direction. The problem need not be labored here. It is all too obvious that this would be one of the consequences of the bill. For, if State nonmember banks are to be supervised by the Federal Reserve Board, why remain State banks? Why bear the expense of extra examinations and undergo the annoyance of duplicate regulations?


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The bill is not only wholly unnecessary but is obviously unfair and will prove destructive and costly.

If the bill in its present form is passed, all Morris Plan affiliations would have to be abandoned. The 2-year death sentence would become operative; and investments, built up with painstaking care over the years, would of necessity be scrapped. The only alternative under the bill is submission to a further duplication of regulation. Federal Reserve Board supervision would be added to that of the FDIC and various State banking departments and affiliated registered investment companies would be saddled with Federal Reserve examinations and reports in addition to those required by the Securities and Exchange Commission.

In connection with current regulation, incidentally, it might be of interest to this committee of the United States Senate to know that through the 12 months ending April of this year the Morris Plan Corp. and its affiliates (in compliance with the provisions of the Investment Company Act, the Securities Act, and the Securities and Exchange Act) filed with the Securities and Exchange Commission documents (exhibited to the committee) having a bulk of 15 by 10 by 12 inches and weighing, altogether, about 30 lbs. (physical exhibit of SEC material); and that the aggregate expense involved in this compliance was about $290,000, or nearly $1,000 for each day of the year.

Does the Federal Reserve Board think that its supervisory efforts will be any less expensive to taxpaying businesses? And is not such calloused disregard of cost typical of bureaucratic expansionism (see exhibit 8-A)?

Evidently the Federal Reserve Board holds to the delightful but. somewhat naive belief that, since its working funds are not appropriated by Congress, its operations add no burden to the cost of bureaucracy. No taxpayer certainly, will be likely to agree with this reasoning.

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The Federal Reserve Board, in this bill, is straining at the gnat of undue influence in order to swallow the camel of State banking and take unto itself additional arbitrary power far beyond that ever heretofore contemplated by Congress as necessary in the implementation of its concept of our Federal Reserve System.

No other interpretation is possible in the face of the demonstrated extent of existing supervisory authority and in the complete absence of any proof of evil as a result of bank stock ownership or owner affiliations.6

Mr. Eccles also expressed his contempt in no uncertain terms on May 26, 1947. He blamed, by inference at least, the Comptroller's office for Bank of America expansion. Mr. Eccles apparently forgot that Bank of America has always been a Federal Reserve member and that Federal Reserve power could have been used to prevent unwarranted expansion-particularly under the voting permit authority of the Board. (R. S. 5144; sec. 9, Federal Reserve Act, reg. P). It must be remembered, too, that Mr. Eccles has testified that the only case of undue influence known to him is that of Transamerica — Bank of America and that all of this could have been controlled.

If, on the other hand, Congress really believes that bank stock ownershipwhether or not coupled with outside activities-gives rise to tendencies which are not now controllable and must be checked, the necessary results can be accomplished by simple amendments to existing law. There is certainly no need for writing a Magna Carta of Abolutism for the Federal Reserve Board.

In the first place, it should not be forgotten that practically every bank in the country, if it is to stay in business, must maintain its insured status with Federal Deposit Insurance Corporation. Congress can, therefore, easily use the weapon of insurance "conditions” to bring about a segregation of activities and to control expansion. Beyond this, is the possibility of amending the Investment Company Act of 1940. Either or both methods will readily accomplish all that ought to be done in the way of adding regulation on regulation.

There are other changes in the law which, perhaps, should be investigated in any event. At least one of these would benefit bank stock owners rather than add to their troubles. For the reserve fund section of the present law (Revised Statutes 5144) is both unnecessary and unfair. It should be repealed at the earliest possible moment.

If remedial legislation is needed, therefore, it should take the form of amendments to existing authority vested in agencies other than the Feneral Reserve Board. This would be the easy, safe, and intelligent method. It would differ, in all these respects, from the unwholesome and undemocratic procedure suggested by the Federal Reserve Board in the measure which has been the subject matter of this discussion. Respectfully submitted,

ELLERY C. HUNTINGTON, Jr. May 24, 1947.


COMPANY BILL (S. 829), JUNE 2, 1947
Exhibit 1 omitted in printing; on file with the committee.

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THE ORIGINAL PROPONENTS OF THE MORRIS PLAN (A partial list of men who gave financial support and personal service) Alfred E. Smith

Newcomb Carlton Henry Towne

Elgin R. L. Gould Julius Rosenwald

E. H. Outerbridge T. Coleman du Pont

Stephen C. Mallett Clark Williams, former superintendent Arthur Hagen of banks, New York.

George M. Reynolds Willard D. Straight

Henry P. Davidson Bernard E. Baruch

George Case William Hamlin Childs

Nicholas Murray Butler W. Gates McGarrah

Louis Liggett Charles H. Sabins

Joseph P. Kennedy Samuel L. Fuller

George Wharton Pepper W. R. Craig

Chief Justice Harlan F. Stone Fergus Reid

Lewis Gantry Herbert L. Satterlee

Thomas Cochrane Vincent Astor

George F. Canfield

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Affiliated banks (aggre- $300, 416, 753

gate). Federal Reserve member 69, 203, 509,000

banks in States where

MPCA banks located.
New York City MPCA 74, 196, 470

New York City Federal 27,380, 420,000

Reserve members.
Fifth largest bank in New 1,639, 765, 324

York (Central Hanover).
Chicago MPCA bank.

39, 905, 740 Chicago Federal Reserve 6, 349, 195, 000

Buffalo MPCA bank

8, 109, 366 Buffalo Federal Reserve 756, 410,000


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Morris Plan comparative data

(All figures as of year end 1946]


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Two largest Morris Plan affiliated

banks Corn Exchange Bank (ninth largest

in New York City, fourteenth largest in United States).

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842, 678, 581

800, 637,837


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Figures for all reporting Morris Plan banks and companies:

(A) Estimate of total loans...
(B) Approx. number of total loans made..
(C) Average loan throughout entire period..

(D) Average loan for 1946... Bankers Security Life Insurance Society:

(A) Insurance written (1917-46) -
(B) Premiums paid (1917–46)

$5, 000, 000, 000 18, 000, 000, 000

227 762


4, 016, 535

Exhibit 4-A

Washington 6, D. C., May 22, 1947.
President, Morris Plan Corp. of America,

New York 17, N. Y. DEAR ELLERY: I find your letter of the 20th, which was received only this morning a very easy one to answer.

As you know, I first became associated with the Morris Plan group in February 1928, as secretary to Tom Boushall, president of the then Morris Plan Bank of Richmond, subsequently the Morris Plan Bank of Virginia, and now The Bank of Virginia. The Morris Plan Corp. has always held a majority stock interest in that bank. As the president's secretary, and later his assistant, I had ample opportunity to know what was going on not only in that bank but in other banks in the group in which the corporation owned stock, both majority and minority interests.

In the period of 16 years prior to my entering the Naval service in 1944, I do not know.of any instance where the corporation imposed any program or action on any bank in either group against the will or judgment of the local boards of directors or management. Whenever a difference of opinion arose, the local direction and management always came out on top.

Since assuming the executive direction of the Association late in 1945, after being relieved of active duty by the Navy, I have had numerous opportunities to visit with and talk to the 66 members of the Association all over the United States. In this capacity I have particularly been able to enlarge my contacts with the banks in which the corporation owns a minority stock interest, as well as Morris Plan institutions in which the corporation owns no stock. Nothing that I have heard since I have been with the Association would modify the impression expressed above. As a matter of fact-although I know it would have been contrary to the corporation's long-standing policy, which undoubtedly has been a wise one over a period of years—I am of the personal opinion that the local institutions would have profited much had the corporation sought more aggressively to forward programs and plans which it conveyed to and discussed with the local management.

I am not recommending that the corporation change its policy; but thought that the personal opinion expressed immediately above would best illustrate my understanding of that policy. With best regards, I remain, Sincerely yours,


Executive director.

May 20, 1947. Mr. Gary UNDERHILL, Executive Director Consumer Bankers Association, 1025 Connecticut Ave., NW.,

Washington 6, D. C. DEAR GARY: One of the points we may wish to stress, in connection with our opposition to the pending bank holding company bill (ś. Bill 829), is that the Morris Plan Corporation, as an investor in bank stocks and as the owner and


nolder of a minority interest in a number of Morris Plan institutions, does not pursue a policy of interference with managements.

Our relationships with our majority-owned banks are fairly well delineated in the protective agreement on which we have been working for more than a year and which has recently been circulated in final form. Our relationships with managements in which we have minority interests, however, can be demonstrated most effectively from the record.

You, of course, represent all of the institutions which are members of the Consumer Bankers Association. You talk with all managements periodically and are in a position to know their real feelings with respect to their relations with

They may say a good many unkind things about us which we never hear, and they may feel that we attempt to influence their operations, although I have been unable to find in the files any instance in which a complaint has been made by any so-called minority institution.

I am writing you now because I would like to know whether you have had any indications, at any time during the long years you have been associated with the Morris Plan institution, that there is any feeling on the part of minority managements that the Morris Plan Corporation or its officials have ever sought to impose their will upon such managements or in any wise interfered with local operations. With kindest regards. Faithfully yours,



EXHIBIT 4-D Whereas the Morris Plan Corp. of America, a Virginia corporation having its general offices at 420 Lexington Avenue, in the city, county and State of New York (hereinafter sometimes referred to as the “corporation"), is the owner of more than 39 percent of the outstanding capital stock of (hereinafter sometimes referred to as “bank”); and

Whereas the corporation has determined upon a policy pursuant to which a portion of its stock holdings may be distributed to management, directors, and other local interests; and

Whereas the corporation has determined, also, to give to the directors and management of the bank such assurances as is reasonably possible looking toward a continuity of stock ownership; and Whereas residing at

(hereinafter sometimes referred to as “purchaser”) desires to purchase shares of the capital stock as now constituted of the bank from the corporation:

Now, therefore, in consideration of the premises and of the sale of said stock and of the reciprocal undertakings herein contained, the parties hereto hereby covenant and agree for and on behalf of themselves, their heirs, executors, administrators, successors, and assigns, as follows:

1. The corporation hereby sells and the purchaser hereby purchases shares of the capital stock aforesaid at the price of $. -- per share, making an aggregate purchase price of $_.

for said number of shares, the receipt of which shares of stock by purchaser and receipt of which purchase price by corporation are hereby acknowledged.

2. Purchaser agrees that he will not sell or otherwise dispose of said shares of stock nor any part thereof without first offering to sell same to corporation at the then book value thereof, it being understood and agreed that in the event the corporation does not take up and pay for the said shares within 30 days from the date such offer is received by it from purchaser, or within 30 days after the date of approval of any governmental agency or body having authority over the proposed transaction (hereinafter referred to as the “governmental agency") in case such approval is required, then and only in that event purchaser shall be free to sell or otherwise dispose of said shares to third parties.

3. It is agreed by and between the purchaser and the corporation that in the event of the death of the purchaser said shares of stock shall be offered for sale to the corporation as soon as practicable and at the then book value thereof, it being understood and agreed that in the event the corporation does not take up and pay for the said shares within 30 days from the date such offer is received by it from the estate of purchaser, or within 30 days after the date of approval of the govern-. mental agency, in case such approval is required, then and only in that.event shall the estate of purchaser be free to sell or otherwise dispose of said shares to third parties.

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