override State law and raises a serious constitutional issue by asserting authority over Bank Holding Companies which do not operate beyond the confines of a single State.

This same omission was made in the Bank Holding Company Bills which the "Independent Bankers" supported in 1947 and 1950 and on those occasions The Morris Plan Corporation protested the failure to include this customary exemption just as we are here protesting.33

(C) It impinges on State authority in its inclusion of Bank Holding Companies owning only State banks; and gives rise to a serious constitutional question in that it attempts to place, under the jurisdiction of a Federal Agency, Bank Holding Companies and their underlying State banks whose offices and operations are all within the confines of a single State.3

34

The Morris Plan Corporation believes that there is at least one Bank Holding Company group which operates exclusively within one State. Whether or not this is the fact, however, is immaterial for it is certainly true that the language of the Bill is broad enough to include such a group. Certainly, if there is an adequate exclusion no advocate of the Bill has referred to it in his testimony.

It follows, therefore, that S.1118, by the very generality of its "Definition Section" (Section 3), and through its interference with local laws and vested rights under Sections 5 and 6, stands exposed to attack on constitutional grounds and to the charge that it is another device designed to end our dual banking system.

33 Hearings 1947, page 178; 1950, page 246; and Schedule One, Part I. 34 As does the Federal Reserve Board Bill: Hearings 1953, pages 20-23.

PART IV

ANALYSIS OF PROPONENTS' ALLEGATIONS OF BANK HOLDING COMPANY EVILS

"UNCONTROLLABLE" EXPANSION AND

BANKING "MONOPOLY”

MIXED INVESTMENTS AND UNFAIR DEALING

The "Independents" have been careering about the country talking to each other in convention, buttonholing officers of banking associations, political officials, news reporters and anyone else who would pause to listen to their campaign of villification against Bank Holding Companies. They have asserted all manner of things about us and their allegations have been so varied and so reckless that it is not easy to determine which they, themselves, consider important. On volume, however, the principal Bank Holding Company "evils" which they have been proclaiming seem to be those of "monopoly and unregulated expansions" and the ownership of "mixed investments." First: "Uncontrollable" expansion and banking "monopoly.” The witnesses who appeared in behalf of the 1953 version of Bank Holding Company legislation made a series of sweeping pronouncements to the effect that the "illegal" operations of Bank Holding Companies were leading to the stifling of competition and the destruction of the "independent" Banks of the country.' As has been true in past years not a scintilla of evidence was presented in support of these assertions nor a single instance cited in which any Bank Holding Company had succeeded in becoming a "banking monopoly" in any section of the United States.3

The only effort made by the proponents of this legislation to deal, factually, with their allegations of "illegal and excessive expansion" was the submission, by the Federal Reserve Board, of an exhibit directed at the rela tive size of Bank Holding Companies as at December 31, 1952.* Whether this exhibit was intended as an attack on Bank Holding Company "size" is not clear.

"Size" has always been one of the pet obsessions of the "Independents." Much was made of it in the arguments advanced by the sponsors of the 1947 Measure and it was stressed, again, in 1950. In these years Transamerica Corporation was the target-and on both occasions The Bank of America was included as one of Transamerica's "controlled" banks even though, by 1950, the amount of voting stock of Bank of America owned by Transamerica was only 11.1% of the total and, even though, also, at the January 10, 1950 Annual Meeting of Stockholders of Bank of

The exhibit includes Bankers Discount Corporation, which, if it ever was a Bank Holding Company, did not acquire this status until 1953.

This flagrant misuse of statistical data was compounded by the inclusion of Bank of America among Transamerica's holdings (see note (4) (7), following).

5 Hearings 1947, pages 22-25

6 Hearings 1950, pages 37-38 and 225-226

8

America, where 7,108,579 shares out of 10,238,052 were voted, Transamerica owned and voted only 1,136,771 or about 16% of the actual votes cast.' If the exhibit submitted in connection wtih the current (1953) Hearings is designed to indicate that Bank Holding Companies, collectively, are now occupying a menacing dominant position in the banking world, it fails, dismally, in its purpose. Even on the basis of the unwarranted inclusion, in the 1952 figures, of Bank of America as one of Transamerica's "controlled" banks, the ratios of "offices of group banks to all commercial banks in the same state" or "in the United States" are ridiculously small. If Bank of America is excluded-as it properly must bethe percentages are infinitesimal. The ratio of offices of group Banks to the offices of all commercial Banks in the United States was only 4.83% as at the end of 1952.

The foregoing statistics, however, do not tell the whole story. The pertinent question is: "How has bank expansion actually taken place?" The question has been answered in Schedule Two, Part II, presented herewith.' Summarized, the data set forth in Schedule Two shows:

(1) Total Banks owned by Bank Holding Companies decreased from 395 as at December 31, 1933 to 309 as at December 31, 1948. There were, thus, 86 less of these banks in existence at the beginning of 1949 than there were 15 years earlier. This was a decrease of about 22%. In the same period, on the other hand, branches increased from 606 to 922—a total of 316 branches and an increase of more than 52%. Every bit of the bank holding company growth which took place in these years, therefore, was expansion to which supervisory authority consent was a prerequisite.10

(2) During the same period the changes in the number of banking offices for all Banks in the country were as follows:

Total Banks decreased from 14,555 to 14,221-a decrease of 234 or about 1.6%. Branch increases are not shown for this period but from the end of 1935 through 1948 they increased from 3,248 to 4,431. This was a total of 1,183 branches or an increase of 36%." It is evi

7 Hearings 1950, pages 182-184 and 325

It is, of course, a matter of common knowledge that Transamerica does not own a single share of stock of Bank of America and that there are no interlocking directors. These facts render the Federal Reserve Board exhibit decidedly incongruous if not actually misleading (see Transamerica Annual Report 1952, and Hearings 1950, pages 182-184 and 325).

8 Hearings 1953, pages 44-47

9 See, also: Part VII following

10 Schedule One, Part III; and Hearings 1950; and 1953, page 50.

11 See Annual Reports of Federal Deposit Insurance Corporation for years in question-Table 102

dent, therefore, that the overall trend-like the Bank Holding Company trend, after the "Bank Holiday," has been toward the elimination of Banks and an increase in branches. The expansion which took place, therefore, occurred only because federal and state authorities permitted it to occur as it was entirely within their power to prevent it."

12

(3) From 1948 through 1952 the total number of Banks owned by Bank Holding Companies (covered in the Federal Reserve statistics submitted at the 1950 Hearings on pages 54-46, excluding Transamerica in each case) decreased from 388 to 348 and in the same period branches increased from 177 to 431. Therefore, the trend indicated during the period 1933 through 1948 was continued through 1952. All the expansion of these bank holding companies took the form of the establishment of new branches. This entire expansion, then, could have been controlled by the authorities had they deemed it undesirable.13

(4) During the period (1948 through 1952) all commercial Banks increased total offices from 18,450 to 19,320 or a total of 870 offices. Since branches increased from 4,279 to 5,274 or a total of 995 there was a net decrease in banks. All of this expansion, therefore, like that of the bank holding companies, took the form of controllable branch establishment.14

In Summary: From 1933 through 1952 Banks owned by Bank Holding Companies decreased by 89 or 22% while branches increased by 470 or 77%. For all commercial Banks the decrease in number of Banks was 404 or 2.8% and branch increases were 2,678 or 96%. The record which was inserted by The Federal Reserve Board in 1953, to indicate bank holding company "size" and "growth," thus, on analysis, supports conclusions which are the exact reverse of those intended. Nor is this all. The 1953 record included entities which did not appear in the list of 1950. Among the additions to the 1953 list will be found "The Equity Corporation" which is the parent of The Morris Plan Corporation.

15

The Equity Corporation, beyond doubt, was used (rather than The Morris Plan Corporation) because, as a registered investment company

12 Schedule One, accompanying, Part III

13 Schedule Two, accompanying, Part II; and Hearings 1950, pages 50; and 1953; pages 44-47: and page 50.

14 Id.

15 Hearings 1953, pages 44-47