MONOPOLISTIC AND UNFAIR TRADE PRACTICES WEDNESDAY, NOVEMBER 24, 1948 HOUSE OF REPRESENTATIVES, Washington, D. C. The subcommittee met in room 129, Old House Office Building, at 2 p. m., Hon. William H. Stevenson presiding. Present: Representative Stevenson. Also present: Willis J. Ballinger, economic counsel, and Paul O. Peters, staff investigator. Mr. STEVENSON. The Subcommittee on Monopoly of the Small Business Committee of the House will now come to order at this adjourned session, at 2 p. m., of this 24th day of November 1948. Mr. BALLINGER. Are we ready to call the one and only witness, Mr. Chairman? Mr. STEVENSON. Yes. Will you do that? Mr. BALLINGER. Colonel Wozencraft, will you give your full name for the record, and whom you represent? STATEMENT OF COL. FRANK W. WOZENCRAFT, WASHINGTON COUNSEL FOR THE INDEPENDENT BANKERS ASSOCIATION OF THE TWELFTH FEDERAL RESERVE DISTRICT COLONEL WOZENCRAFT. Mr. Chairman and members of the committee, my name is Frank W. Wozencraft. I am Washington counsel for the Independent Bankers Association of the Twelfth Federal Reserve District. In response to the invitation of Mr. W. J. Ballinger, economic counsel of the committee, I am here today representing the association and its 350 member banks located in the seven Western States Arizona, California, Idaho, Nevada, Oregon, Utah, and Washington. The association was organized in 1937 to protect free enterprise in banking and to oppose the elimination of competitive banks and to fight against monopoly in banking. Monopoly in banking will in turn foster monopolies and cartels in other business. There can be no free enterprise in other fields unless there is free enterprise and competition in banking and credit. The elimination of competition in the field of banking constitutes one of the most potent threats to small-business men and to the entire freeenterprise system to be found in America today. Lest this statement may be considered overly pessimistic, let me refer you to the Annual Report for 1944 of the Federal Deposit Insurance Corporation which states in part, and I quote: 1315 Monopoly in banking is a threat to American traditions, both because it limits the opportunities to engage in the business of banking and because it provides an opportunity for favoritism in the extension of credit which may foster monopolies in other industries. The growing tendencies toward monopoly in the banking business are serious, and prompt action should be taken to curb them * The inevitable result of the continued "growing tendencies toward monopoly" in banking and the attendant restriction of credit would be the socialization of banking and the end of free enterprise in our economy. The American public will never permit a private monopoly of credit. The ultimate outcome can only be the socialization of banking. It has begun in England. It has already been legislated in Australia and only restraint by the courts during pending litigation to test the constitutionality of the act has prevented the complete socialization of all banks. It can happen here. That is why the Independent Bankers' Association of the Twelfth Federal Reserve District, from its inception, has stanchly advocated the necessity for new Federal legislation for the maintenance of free enterprise in the banking field. We believe the most serious threat to free enterprise in banking today is the unregulated operation and expansion of the bank holding company-that queer animal that is neither fish nor fowl and has grown up entirely without effective regulation by any Federal or State agency. Relying on the general corporation laws of the respective States, the holding company has moved into banking operations denied both National and State banks. It has made possible the accomplishment by indirection of that which could not be done by direction. According to the September 8, 1948, issue of the American Banker, 11 bank holding companies now own or control 330 banks, with more than 800 banking offices, extending into 20 States. The aggregate resources of these 11 corporations and their affiliated institutions exceeds $13,500,000,000. Accepted rules of law confine the business of banks to banking and prohibit them from engaging in extraneous enterprises-that is from the Annual Report for 1943 Board of Governors of the Federal Reserve System. It is recognized that banking must be kept free from entanglement with other business enterprises in order that the banker may maintain the disinterested judgment necessary to the sound extension of credit and the protection of the depositor's money. When a bank also controls another business, I think that it is obvious that that business enjoys an unfair competitive advantage in the obtainment of credit. That is just one of the reasons why banks may not own companies engaged in nonbanking activities. A bank holding company, however, is not bound by the legal restrictions which apply to banks. I have here a copy of the American Banker of February 27, 1948, showing a chart of one holding-company organization, "a Panama corporation with offices at Nassau, Bahamas, B. W. I." This chart was prepared by the Virginia Bankers' Association. I would like to offer it for the record. Mr. BALLINGER. May it be received, Mr. Chairman? Mr. STEVENSON. It is so ordered. It will be entered as part of the record. CHART OF HOLDING COMPANY organization owning interests in Morris Plan banks and companies, and former Morris Plan banks now under different names, insurance companies, finance companies and industrial concerns, published by the Virginia Bankers Association. The holding company structure heads up in Ellery C. Huntington and David M. Milton, of New York, who several years ago acquired major stockholdings in the nation-wide system J. Morris. of Morris Plan financing and franchise owning companies developed by Arthur Colonel WOZENCRAFT. This chart states that— 33,000 shares of Oceanic Trading Co., Inc. (10 cents par), common stock out of 138,436.1 shares outstanding, and with December 31, 1944, book value of approximately $168,500, holds voting control of subsidiaries with assets of over $359,000,000. The chart names Morris Plan Corp. of America, more than a score of banks in more than a dozen States, a number of fire and casualty insurance companies, finance companies, an oil company, and manufacturers of refrigerators, abrasives, electric heaters, office machines and equipment, et cetera, located in various States. Enlarged copies of this chart, which are more easily legible, can be obtained from the Virginia Bankers Association, Richmond, Va. Mr. BALLINGER. May I ask you a question, Colonel? Mr. BALLINGER. Who owns this top holding company on the chart? Colonel WOZENCRAFT. You will find all of the information, sir, on the chart, if you will refer to it. Mr. BALLINGER. But who are these people? Do you know? The chart does not explain that, as I see it. Colonel WOZENCRAFT. Ellery C. Huntington appeared before the Banking and Currency Committee of the Senate at the time when there were hearings on S. 829, during the last session of Congress. I think, sir, that more complete information than I can give you can be obtained from that testimony. Mr. BALLINGER. And the same as to Mr. David M. Milton? Colonel WOZENCRAFT. I do not remember whether Mr. Milton was present at those hearings, or whether information concerning him was put in the record. I have no information as to that. Mr. BALLINGER. The printing on the chart is so fine, here. Does this mean that Ellery C. Huntington and David M. Milton are the principal stockholders of the Oceanic Trading Co.? Colonel WOZENCRAFT. As I understand the language, sir, the chart states that these two gentlemen own 33,000 shares of Oceanic Trading Co. stock, which, according to the chart, and I am quoting from it, "holds voting control of subsidiaries with assets of over $359,000,000." I have no information about it except what appears from this chart published in the American Banker. Mr. BALLINGER. These are American citizens, of course, are they not? Colonel WOZENCRAFT. I am quite confident that they are. I think, sir, that the matter of this corporation was gone into quite fully by the Virginia Bankers Association in connection with some legislation which was before the Virginia State Legislature a year or two ago; and I think that you would prefer to get from the Virginia Bankers Association the information which they developed at that time. I really have no information except that which was put into the record at the hearing before the Senate committee, and this chart; and I am confining my statement about this holding company to what appears in the chart published in the American Banker. Mr. BALLINGER. It will probably have also the history of the company, how it originated, and maneuvered. Colonel WOZENCRAFT. I would assume, sir, that they would have rather full information about it, but I really do not know. Mr. BALLINGER. I think we ought to obtain that, Mr. Chairman, and try to get it in as part of the record, to see how this was put together. Colonel WOZENCRAFT. By comparison, of course, this is a relatively small bank holding company. I would like to direct your attention now to a very big one-Transamerica Corp. with aggregate resources reported at $7,385,000,000 at the beginning of 1948 (American Banker for September 8, 1948). I would like to submit for the record the annual report of Transamerica Corp. for 1947. Mr. BALLINGER. May we make it part of the record, Mr. Chairman? Mr. STEVENSON. It will be made part of the record. It is so ordered. (The annual report of Transamerica Corp. for 1947 is as follows:) ANNUAL REPORT OF THE TRANSAMERICA CORPORATION FOR 1947 TRANSAMERICA CORPORATION [Incorporated under the laws of Delaware] Montgomery Street at Columbus Avenue, San Francisco 11, California Board of directors.-A. P. Giannini, Chairman, Judge Russ Avery, P. A. Bricca, Jas. F. Cavagnaro, Geo. J. DeMartini, L. M. Giannini, Gordon Gray, William N. Lagomarsino, Sam H. Husbands, A. P. Jacobs, E. D. Woodruff. Officers.-A. P. Giannini, Chairman of the Board; Sam H. Husbands, Executive Vice President; Jas. F. Cavagnaro, Senior Vice President; W. L. Andrews, Vice President and Treasurer; A. Fenton, Vice President; G. M. McClerkin, Vice President; A. L. Elliott Ponsford, Secretary and Assistant Treasurer; J. A. Smith, Assistant Secretary and Assistant Treasurer; W. J. Wells, Assistant Secretary and Assistant Treasurer; J. Franceschi, Assistant Secretary; P. Gaulette, Assistant Secretary; Albert E. Heston, Assistant Secretary; Malcolm P. McLellan, Assistant Secretary. Executive committee-P. A. Bricca, Geo. J. DeMartini, L. M. Giannini, A. P. Jacobs, E. D. Woodruff. Transfer agents.-City Bank Farmers Trust Company, New York; Bank of America N. T. & S. A., San Francisco. Registrars.-The Chase National Bank of the City of New York; Crocker First National Bank of San Francisco. ANNUAL REPORT TO STOCKHOLDERS, 1947 SAN FRANCISCO, CALIFORNIA, March 9, 1948. TO THE SHAREHOLDERS: Transamerica Corporation's diversified activities followed the trend of changing conditions in 1947, a year characterized by prolonged postwar uncertainties, and operating results on the whole were good. Transamerica's banks loaned more money and increased their revenues from that expanded volume. Their investments in U. S. Government securities declined. With higher operating costs, more interest on rising savings deposits and lowered income from security investments, combined net earnings of our banks tapered off moderately. Our three insurance companies wrote considerably more business than in 1946. They absorbed the initial cost of writing this insurance and, as the policies become seasoned, future earnings will be benefited by income from further premiums and amounts now carried in premium reserves. Property sales by our real estate subsidiary were considerably less and, in consequence, profits were lower than in the preceding year. Oil development made favorable progress in domestic operations, while preliminary Philippine explorations remained incon |