The Texas Bank Mergers T ISSUE is one overriding question: Is it good, or is it dangerous, for big banks to get bigger and small banks to die out, as they have been doing, and should the Justice Department be allowed to use the anti-trust laws to stop it? Specifically at issue is another question : Should Congress pass special laws to forgive banks that already have been found guilty of breaking the law? The first question is an old one. Theoretically, at least, Congress is against too many mergers. Theoretically it is worried about the pace of mergers in this country. There were 25 banks in the New York Clearing House in 1940. Mergers have since dropped that number to ten. Although assets held by all banks have risen from $22 billion in 1920 to $300 billion today, there are only half as many banks. The pockets of concentrated financial power are becoming larger and deeper. Ten banks control nearly a fourth of the demand deposits in the country, and the hundred largest banks control almost half the commercial banks’ total assets and deposits. New York, of course, is the deepest pocket of all. To illustrate the thrall in which the New York lending houses hold much of the hinterlands, Patman likes to tell about how it was when he and other Texans went about getting Lone Star Steel set up in business. “We went to Dallas because Dallas had a lot of banks, but they told us that for a loan of that size we would have to go to New York City. We wanted about $75,000,000. Well, we went to New York and sat down to negotiate. Across the table from us, acting as directors of the New York banks, were men from U.S. Steel, Republic Steel, Jones and Laughlin, and other giant steel companies. They didn’t want us competing with them. We didn’t get the loan. “So we went back and started planning again. We figured there is a lot of money In addition to forgiving from three to six bank \\mergers already being challenged by the Justice Department as violations of the anti-trust law, the pending bank legislation would, New Republic reported Sept. 11, “release from the threat of antitrust action all 2,200-odd bank mergers consummated since 1950, even if they should someday become dangerous ‘monopolies.” Robert Sherrill reports from Washington that these are the Texas banks that have merged since 1950: Seagoville State Bank, Seagoville, with Citizens National Bank, Crandall. First Strawn National, Strawn, with First National, Strawn. Texas National, Houston, with Union National, Houston. First National, Deport, with Deport State, Deport. First National, Dallas, with Dallas National, Dallas. Marfa National, Marfa, with Marfa State, Marfa. 4 The Texas Observer in insurance companies, so we would try to borrow it there. We went to Dallas again, but the insurance men there said that for a loan of that size, we would have to go to New York. We went up there and sat down to negotiate, and across the table from us, acting as directors of the largest insurance companies, were men from U.S. Steel, Republic Steel, Jones and Laughlin, and other giants. We didn’t get the money.” He did finally get the money by going to President Roosevelt and Jesse Jones, who pushed the loan through the Reconstruction Finance Corporation. It has all been paid back now, plus $150 million in federal taxes, so the national economy didn’t suffer from the extra competition in the steel business. \(The RFC was one of the first New Deal innovations killed off under EisenWhether through these interlocking directorates or through mergers, or both, the concentration of financial influence is becoming awesome. On the whole, Congress seems helpless in the face of it. from time to time making vain attempts to stop the merging wave. This was supposed to be the objective of the Celler-Kefauver Act of 1950. It failed. Since then there have been 2,200 mergers. Congress tried again in 1960 with the Bank Merger Act. It was also a notable failure. Seven hundred mergers have taken place since it was passed. The 1960 act only confused the situation by leading some bankers to suppose they were no longer subject to anti-trust action as long as the federal comptroller of the currency approved their merger. Comptroller James Saxon, who is literally an employee of the national banks, did nothing to discourage this belief. More than half the 700 mergers were approved by Saxon despite Justice Department warnings that they would reduce banking competition, sometimes seriously tending toward monopoly. Attorney General Nicholas Katzenbach has seemed reluctant to argue the Republic National, Dallas, with Nation City, Dallas. Industrial National, Dallas, with Oak Lawn National, Dallas. First National, Dalhart, with First National, Nara Vista, N.M. First City National, Houston, with First National, Houston. Corpus Christi State National, Corpus Christi, with State National, Corpus. Farmers State, Clarendon, with First National, Clarendon. First National, Quanah, with First State, Go odlett. Wellington State, Wellington, with First National, Wellington. First Hutchings-Sealy National, Galveston, with Hutchings-Sealy National, Galveston. First National Bank in Richland, Richland, with First National Bank OF Richland, Richland. First Pasadena State, Pasadena, with First National, Pasadena. Security National, Beaumont, with Security State Bank and Trust Co., Beaumont. Texas Bank and Trust, Wichita Falls, with Texas Bank, Wichita Falls. Texas National Bank of Commerce, Houston, with Texas National Bank, Houston. Houston National, Houston, with Tennessee Bank and Trust Co., Houston. Congressman Wright Patman point. In only eight cases were banks actually taken to court, and five of these were pressed by his predecessor, Robert Kennedy: The A.B.A. wants mergers left up to the comptroller, the Federal Reserve Deposit Insurance Corporation, and the Federal Reserve Boardall of them, Patman contends, mere creatures of the banks. Then, two years ago, the spark was struck. The U.S. Supreme Court decided there was an anti-trust violation in one of the eight casesinvolving two Philadelphia banks that, by merging, wound up with 36% of the area’s total assets and deposits. Taking heart, the Justice Department soon had a ruling against two merged Lexington, Ky., banks which had a corner on all the corporate trust in Lexington. Now, ever since the Philadelphia ruling the American Bankers Association had been bitching like mad about the Justice Department’s “aggressiveness.” It complained even more bitterly after Lexington. i And then n March of this year, when a federal district court ruled against the merger of Manufacturers Trust and Hanover in New Yorkthus offending one of the half-dozen largest banks in the country the A.B.A. decided it was time for action. When the A.B.A. decides on action, it gets action. Within a month a bill was introduced by have completely removed the Justice Department from any jurisdiction in bank mergers, past or present, and would have granted forgiveness to six mergers which had been taken to court since the Philadelphia decision and in two cases held to be slightly modified form, this is the way the bill reached the House and came under Patman’s direction. The information that follows is almost solely the result of his wheedling, prying, and wringing it out of both reluctant and friendly witnesses.