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upon those banks for essential services.” Interlocking directorates are the blueprints on which those concerned about the concentration of economic power in the United States build their arguments that too few men or institutions control too large a segment of the economy. An interlock occurs when an officer or director of one corporation sits on the board of directors of a second corporation. Opposition to interlocks are almost as old as the concept inself. In 1913, Louis D. Brandeis, later a U.S. Supreme Court justice, wrote in Harper’s Weekly: “Obviously, interlocking directorates, and all that term implies, must be effectually prohibited before the freedom of American business can be regained . . .” Of the primary or direct interlocks, First City has on its board the chairman and chief executive officer of Exxon Co. U.S.A., a subsidiary of Exxon Corp., the largest corporation in the country. It also has the presidents and directors of two independent oil producers and the directors of two others. First City also has a director from El Paso Natural Gas, the chairman of the board of EnTex, the president and chief executive officer of Panhandle Eastern Pipe Line Co, and a director of both Texas Eastern Transmission and Southwestern Pipe. There also exist secondary interlocks between FirSt City and the other two major bank holding companies in the city Texas Commerce Bancshares and Southwest Bancshares. The president and chief executive officer of Cameron Iron Works_ sits on the First City board while the chairman of Cameron’s board is on the board of Texas Commerce. Both bank holding company boards also have directors who are vice presidents and directors of the Exxon Corp. First City has on its board a director of El Paso Natural Gas, while the board chairman and chief executive officer of El Paso also sits on the board of Texas Commerce. The king Ranch also has interests in two bank boards with a director who owns 121/2 percent of the King Ranch on the First City board and the vice president of the King Ranch on the board of Texas Commerce. First City has similar secondary interlocks with Southwest Bancshares: vice presidents of Quintana Petroleum Corp. sit on both boards as do representatives from EnTex, the law firm of Vinson, Elkins Searls, Connally and Smith, Great Southern Life Insurance, and American National Insurance. THE SECONDARY interlocks between Southwest Bancshares and Texas Commerce include directors of Anderson, Clayton & Co. The insurance companies on the board of First City handle a variety of lines. Great Southern, American General, and American National provide ordinary, participating, and group life insurance and health annuity programs. These companies are potential if not direct competitors in the insurance business. They also are substantial customers of banks as depositors and investors. The insurance companies may be extensively involved in pension and health plans for many commercial companies and other organizations in Houston. First City is also involved in this highly competitive and profitable area of both service and investment. Both the insurance companies and First City are lenders, handling corporate bonds, mortgage loans personal and corporate and policy loans. This extraordinary array of interlocks raises the issue and that’s all it is at this point that direct competitors have the potential to use other company’s board rooms in which to discuss and possibly agree to policies which would be inimical to business and banking competition. The lines of communication are there. The multiple levers of corporate management available to institutional investors present fundamental questions regarding public policy. These matters cut across the concerns of a number of different agencies and congressional committees. Together they present questions about the nature of America’s industrial society and how it will be directed and controlled. The decisions of the bank holding companies and other institutional investors can alter the stability of the market and individual companies. To minimize the impact on medium and small companies, large institutional investors tend to concentrate theii investments in large companies. This has led to the two-tier market in which stocks of the largest companies trade at a considerably higher multiple of earnings than those of many medium and smaller companies, which encounter difficulty in raising equity capital. In U.S Senate testimony last year, C. V. Wood, Jr., chairman of the Committee of Publicly Owned Companies, told congressional leaders that the institutional investors have run up the price of the stock of big companies with which they have personal and business relationships. What happens, he said, is that trading in the stocks of smaller and medium-sized companies languishes, and their stock prices sink to new lows despite good earnings. Since the market undervalues the stock, the smaller companies cannot raise money in the market for replacement or expansion of facilities. So they have to borrow the capital they need, increasing their debt-equity ratio to dangerous highs. They borrow at escalated interest rates from the banks, which are driving them deeper into debt. The smaller and medium-sized companies also find themselves unable to communicate directly with the shareholders whose identities remain confidential with the institutional investors handling their accounts. As a result, Wood testified, the smaller and medium U.S. corporations have become prime targets of the foreign companies which have recently taken over U.S. companies from bases in Italy, France, Switzerland, Germany, the United Kingdom, and Saudi Arabia. So, here in the mid-Seventies, there is much ado being made over a banking system in some trouble. Yet the larger banks have grown enormously more efficient and have pushed into areas undreamed of a generation ago. In some instances, they have stretched themselves precariously thin. But when you look at the likes of First City Bancorporation, Texas Commerce, and Southwest Bancshares the superbanks and when you consider the power and wealth behind them, you realize that those “troubled” giants in America are still very much in control. July 4, 19.75 5 MARTIN ELFANT SUN LIFE OF CANADA LIFE HEALTH DENTAL 600 JEFFERSON SUITE 430 HOUSTON, TEXAS 224-0686 , . , 2116 BROWSE 10:00 GARNER TILL P.M. MONDAY thru FRIDAY Now In Our 13th Year of service to Austin AND SMIT H’i BePTOIRE I . _ Guadalupe Austin, Texas 717$ 477-9725