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F 4. The corporation agrees that it will not hereafter sell any shares of stock of the bank owned by it, the effect of which would be to reduce its stockholding in the bank below 51 percent of the total stock outstanding, or when, at the time of such sale, its stockholding in the bank is already below 51 percent of the total stock outstanding, without first

(a) offering to purchaser and to other purchasers executing contracts with the corporation substantially identical herewith, the opportunity to purchase all (but not less than all) of the shares of stock of the bank which the corporation desires to sell and in such proportions thereof among themselves as such purchasers may agree upon, at a price equal to the then book value thereof, it being understood and agreed that in the event all of said shares are not taken up and paid for by such purchasers within 30 days from the date such offer is made by the corporation or within 30 days after the date of approval of the governmental agency, in case such approval is required, then and in that event the corporation shall be under no duty or obligation to sell any part of said shares to any of the said purchasers but shall be free to sell all or any part of said shares to third parties;

(b) obtaining for purchaser the opportunity to sell his stock upon substantially the same terms and conditions as those upon which the corporation may wish to sell its own stock: Provided, That purchaser shall not have exercised his right to purchase pursuant to the provisions of subparagraph numbered 4 (a) hereof: And provided further, That the purchaser shall, within the period of his option under subparagraph 4 (a) hereof, have notified the corporation in writing of his desire to have his shares included with those of

the corporation in such proposed sale. 5. The corporation agrees that whenever a proposed transaction hereunder shall require the approval of the governmental agency, it will, if permitted, make or cause to be made application for such approval for and on behalf of itself and/or purchaser and without cost to purchaser.

6. It is agreed by and between the parties hereto that all certificates for shares of the capital stock of the bank subject to the terms of this agreement shall have placed thereon an appropriate endorsement reading substantially as follows:

“The sale, transfer, and delivery of this certificate and of the capital stock represented hereby is limited and restricted in accordance with the terms of a certain agreement entered into by and between the registered owner and the Morris Plan Corp. of America, dated the

day of

19.

3 a copy of which agreement is on file at the general offices of said corporation.'

7. The term "book value” as used herein with respect to any date shall mean, with respect to the common capital stock, the sum of the then capital surplus, undivided profits, and surplus reserves of the bank (after provision for reasonable reserves and exclusive of intangible assets), allocable to the common capital stock, divided by the number of shares of such common capital stock then outstanding, and shall mean, with respect to any other securities, such portion of the net tangible assets of the bank as may then be allocable to each unit of such securities, all as such items shall then be shown on the books of the bank. In the event of any difference of opinion between the parties respecting book value as defined in this paragraph 7, the book value shall be determined by an auditor of the corporation and by the president or in his absence the cashier (or other corresponding officer) of the bank and, in the event they cannot agree, then by any one of the following firms of certified public accountants to be selected by the corporation, namely, Peat, Marwick, Mitchell & Co., Arthur Andersen & Co., or Price, Waterhouse & Co. and the decision of such firm, so selected, shall be final and binding.

8. It is further understood and agreed by and between the parties hereto that this agreement shall cover not only the shares of the capital stock of the bank hereinabove referred to but also any securities, as related thereto, into or for which they may be exchanged or be exchangeable (and all rights with respect thereto) as well as any securities which may be issued or be issuable therefor upon any reclassification of the capital stock of the bank, by stock dividend or otherwise.

In witness whereof the parties hereto have executed this agreement in duplicate as of the day of

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19..

[Seal] (Witness as to Purchaser)

(Purchaser) THE MORRIS PLAN CORP. OF AMERICA

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(Vice President)

(Secretary)

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EXHIBIT 4-F

May 28, 1947 The Morris Plan Corp. of America representation on boards of directors Majority-owned banks: Number of directors.

168 Number of MPCA representatives.

2 Minority banks:

Number of banks and companies where MPCA has minority interests. 26 Number of minority banks and companies in which MPCA is represented (in each case one director only)--

3

The CHAIRMAN. I dislike to put restrictions on a witness. I understood you had a statement to make. Is that correct?

STATEMENT OF ARTHUR J. MORRIS, CHAIRMAN OF THE BOARD,

MORRIS PLAN CORP. OF AMERICA, NEW YORK, N. Y.

Mr. MORRIS. I cannot make my statement and do justice to my opposition to this bill, or do justice to the philosophies in this bill, in which I concur, but which I am satisfied can be better done by amendments to existing legislation than what this bill offers. I cannot do anything that is in justice to this bill in 10 minutes that would be enlightening.

The CHAIRMAN. You have heard the testimony by the head of your company, Mr. Huntington. Do you concur in all of the statements he made?

Mr. MORRIS. Principally, yes; but he and I do not agree in detail on some things.

The CHAIRMAN. Will you point out to the committee what you would add as an addenda to his statement. Can you do that without reading a formal statement?

Mr. MORRIS. Well, in the first place, I want to qualify myself as having always been a great believer in and a friend of the Federal Reserve System. I came here in the early days of Wilson's administration, and in spite of all of the influence that could possibly be brought against me, I came here and contradicted such authorities as Frank Vanderlip and others, in absolute support of the Federal Reserve System.

I also want to say that my support of the Federal Reserve System was predicated on the monetary and the necessary principles involved in protecting our monetary system, with no idea of it becoming either plutocratic or bureaucratic.

To further emphasize the fact that I spent days and weeks and months with this honorable committee during the lifetime of Carter Glass, and Senator Fletcher, and Senator Buckley and others, to get the Morris plan system recognized by the Federal Reserve System so that certain Morris plan banks, when, if, and as they should be members of the Federal Reserve System, would be eligible, because even at that early date, or that late date, there was bureaucratic tendency, such as this bill permits, that would directly and indirectly undertake to smother the very fundamental principles for which the Morris plan system was conceived by me, and fought for in over a lifetime against every organized and disorganized opposition conceivable by human agencies.

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In other words, there was no person, firm, or corporation in this country prior to 1910 that were interested for 5 minutes in democratizing credit, and giving the honest wage earner any access to credit, regardless of his human necessities or his business opportunities or any other reason.

When I started as a lawyer in Norfolk, Va., as counsel to a number of banks, I was besieged day after day, and week after week, by honest

I wage earners to help them over precarious conditions that confronted the human vicissitudes, and every time I tried to get a loan for them, or tried to help their credit necessities, the bankers of Norfolk not only frowned down upon any such idea, but criticized me as a corporation and a bank lawyer for wasting my time in trying to help individuals borrow money. Let them go to the loan shark. Let them go to charity societies. Let them go wherever they can. not interested in any loans to anybody except commercial depositors. And you, A. J., ought to know that no bank can live unless they can confine their credit operations to commercial borrowers with commercial deposits.

Well, I have to pause to tell you that I did not get the support from anybody, including my own father, who was a businessman and a manufacturer and banker. He was just as bad as any of them.

But I just made up my mind that these people deserved an access to monetary credit, and I started the first Morris Plan Bank in Norfolk, Va., in 1910, in which everybody in that community pretty near said I was something sick, lame, and disordered.

In the first year of that operation, even to the consternation of my own board of directors, and to the best of my recollection I had to put up half the capital and guarantee the other half to even get a board of directors, why, I started the financing of motorcars, and that was the beginning of real consumer credit in this country.

And the members of this august committee ought to know that the beginning of the financing of motorcars, the beginning of consumer credit in this country, now copied and imitated by over 10,000 commercial banks in the country, and the development of personal credit or what I comprehensively termed the democratization of credit, has constituted the buying supremacy of this country that has made possible mass production, and that has made possible that the automobile industry is the largest industry in the civilized world.

If you gentlemen charged with the fiduciary responsibility of legislating in behalf of not only the constituents you individually represent, but charged with the fiduciary responsibility of collectively representing the masses of the American wage earners in this country to the extent that communism must be defied and resisted by affirmative improvement over our own democracy and not stultifying or impairing American initiative and the free enterprise of this country, by any such legislation such as this contemplates, or is possible to apply, I say that you have to preserve the essential qualities that will assure mass production, which must be in order that mass consumption may be, which must be in order that mass production, in order that you gentlemen can insure the potentialities of continued mass employment in this country.

You might say, “That is all sound, Mr. Morris, but what has that to do with this bíll?” It has a lot to do with it.

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In the first place, if there had been any bill like this in existence when I started the Morris plan, you could not have started any Morris plan. There was not anybody interested, and they are not interested now, in starting a handful of banks.

Senator Tobey says, “Why a holding company?” There may not be any necessity for a holding company like the Gianninis'. That brings up another chapter, and now or later I would like to go into that and give you specific remedies for Mr. Giannini, although I hold no brief for him. I certainly do not directly or indirectly want to be a party, and I do not believe any august Senator within the sound of my voice wants to be a party to stifling his free initiative and stifling his capacity to do some of the things he has done, so long as he is regulated to the point where his progress can not be harmful to innocent persons, firms, and corporations.

You asked why a holding company. A holding company is essentially necessary to develop banks that cannot subsist by themselves. Just like a child that comes into the world within the inherent limitations of its infancy needs the mother and father to raise it and nurture it and educate it, if it had not been for the very first holding company that started in Norfolk, called the Fidelity Corp. of America, I wish I had time to tell you how it happened to be called, gentlemen, the Morris plan. I never designated it the Morris plan. I fought

I 2 weeks for calling it that because of the fear of personal jealousy about it. The

very first holding company, the Fidelity Corp. of America was necessary in order to get the first 12 or 14 banks started. These banks were small. Each and every one of them is small. Their volume of business represents a multiplicity of items. The cost is several times more per dollar loan to operate a Morris Plan bank than that of the commercial bank.

Senator FLANDERS. May I interrupt the witness for a minute? I feel that I have to go, Mr. Morris, and I am particularly interested in the statement you made a few months ago, that you felt that the harmful elements in the Bank of America situation could be taken care of by other means. I would like to suggest that he expand that idea, perhaps preferably in a letter to you, and that we study his suggestion along that line.

Mr. MORRIS. I could give you the crux of it in a minute. I will follow the details by letter, if you desire. .

There are two things that these commercial banks are afraid of with regard to Mr. Giannini's policy, and a great deal of their fear is both jealousy and phantom. As I say, I hold no brief for that development. We have banks in California, and we have no difficulty competing with Giannini, and anybody that gives you the impression that Giannini is operating any monopoly in California, or any of the other States in which he operates, is just taking you for a buggyride with misinformation.

We operate a bank in San Francisco, and we compete with him every day. We operate a bank in Stockton, Calif., and we compete with him. I will admit he has a marvelous organization, and he is not easy to compete with. But we compete with him.

You want to know the remedy, Senator Flanders.

As I understand this bill, the main thing it has is that first they want to open a branch, and they cannot, and the State banking

department declines to operate a branch. They find it necessary to buy up that bank and absorb it, and there is no existing law that will prevent the majority stockholders of that specific bank from selling out to the Transamerica Corp.

Do I state the case, Senator?
The CHAIRMAN. I think so.

Mr. MORRIS. That can be easily remedied by passing whatever amendment is necessary, both covering national banks or members of the Federal Reserve and State banks, that no bank insured by FDIC, and no bank member of the Federal Reserve System can sell out to any holding company or any other person, firm or corporation, either without the consent of the Federal Reserve Board, if it is a member bank, or without the consent of the FDIC, if it is a State bank, and not a member bank.

Senator ROBERTSON. Do you favor or oppose limiting the business to banking institutions?

Senator FLANDERS. That is the question in my mind.
The CHAIRMAN. Will you repeat the question?

Senator ROBERTSON. Do you favor or oppose limiting the banking business to banks?

Mr. Morris. I am certainly opposed to limiting it to banking business as defined and as adjudicated by this pending bill. I do not think that a bank or holding company that is engaged in holding banks like our Morris Plan Corp. of America should be engaged in laying railroads and telephones, but we run, for example, the Morris Plan Insurance Society. If it had not been for that 51 to 70 percent of our comakers and endorsers, the borrowers could not have obtained such comakers and endorsers, because that society. was the first society started in America that went into what is known as protected loan service, which made it possible for borrowers to get comakers.

If the Federal Reserve on this bill said, “We do not think that is part of your business," and we were to throw it out, we would have no remedy, and you would impair the very success and the facilities that you are offering in the process of democratizing credit to the American wage earner.

The CHAIRMAN. You believe in your cause. I have no question in my mind that you have strong faith within you and the justice of your position.

Mr. MORRIS. My faith, Senator, is predicated upon nearly 40 years now of extraordinary experience.

The CHAIRMAN. You are well qualified to speak. This committee is now 5 minutes past its hour. We have the rent-control bill coming on the floor for action in which this committee is specifically interested. I had hoped to conclude these hearings this morning, but I think it is not the part of widsom and justice to do it.

The chairman will make the following statement: We will have another hearing on this matter, giving time for Mr. Eccles and his group, to digest the comments that have been made here by Mr. Huntington and yourself, and we will be glad to receive from you the data in writing which you suggested you would send us, or anything else that comes to your mind.

We want you to have every opportunity to present your case as fully and frankly as you want to.

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