A profile Amendments made to the federal Bank Holding Company Act of 1956 were designed to limit the range of nonbanking activities bankholding companies could pursue. The 1970 amendments generally prohibit banking conglomerates from owning stock in nonbanking enterprises, but specific exceptions give holding companies enough room to accumulate large and diverse portfolios. Multibankers may hold unlimited non-bank stock as trustees, accept other corporate shares for debt settlement \(as long as their banks sell the number of non-banking concerns the Federal Reserve Board considers to be intimately related to bank service. Compared to the rest of the nation’s bankholding organizations, Texas conglomerates had few non-banking interests seven years ago. But Houston’s Texas Commerce Bancshares, for one, has taken advantage of the opportunity to enter non-banking fields, particularly those related to the provision of services to its subsidiaries. Through structurally separate corporations such as the Texas Commerce Leasing Co., Texas Commerce Realty Co., Gulf Building Corp., and the Main and Rusk Realty Co., the holding company leases heavy industrial equipment, building space, office equipment, and even oil tankers to anyone who can pay for them. TCBancshares also provides its subsidiaries with professional servicesmost importantly, trust investment counseling, loan portfolio advice, budget consultation, marketing, and advertising. Texas Commerce Bank, the conglomerate’s lead bank, is the center of the TCBancshares organization. From its offices in the Gulf Building \(owned by dinates the holding company and its international apparatus, but also other properties, such as the Matagorda Oil Co. However, the lines between separate companies and in-house systems blur under TCBancshares control. For example, in a 1975 merger application, the holding company listed Matagorda Oil as a subsidiary of Texas Commerce Shareholders Co., an “independent” corporation under the TCBancshares umbrella. But in 1976, Matagorda Oil was transferred to Texas Commerce Bank control. There is nothing subtle about TCBancshares’ control of advertising and marketing: the holding company runs all members’ advertising, marketing research, public relations, and press contacts. More than one subsidiary president refused to talk to the Observer until Marshall Tyndall, chief of the central marketing division, okayed an interview. Centralized promotion has great advantages: the holding company augments each member bank’s modest advertising budget \(annually, one-tenth of one perunit cost of new, experimental ad campaigns by spreading expenses over the entire system. The holding company’s advertisements for itself also benefit the member banks: full-page spreads in local newspapers welcoming new acquisitions and TCBancshares layouts in Texas Parade, The New York Times, the East Coast and Southwestern editions of The Wall Street Journal, and Texas Monthly can’t hurt. How works an acquisition When TCBancshares decides to add another car to its gravy train, the holding company begins the integration process even before the merger application has been approved by the board of governors of the Federal Reserve, starting with meetings between the chief executive officers of both the holding company and the proposed subsidiary. Immediately after approval, the new member is obliged to adopt TCBancshares’ accounting and reporting systems and the forecasting and budgeting schemes administered by Texas Commerce Bank’s planning division. The TCBancshares logo replaces whatever symbol the subsidiary had worn before. The merger itself involves a hefty stock swap. This spring, when TCBancshares took over Austin’s Capital National Bank, the only bank in the BanCapital Corp. holding company, about 1,350 people held the one million outstanding shares of BanCapital stock. TCBancshares, which offered the merger deal in mid-1976 \(after BanCapital had tried and failed to become a multibank Governor Dolph Briscoe From a letter submitted with the Texas CommercelBanCapital of Austin merger application to the Federal Reserve Board of Governors. Texas banks, however, relative to the size of the markets they serve, are smaller than the banking institutions in other industrial states. It is because of this, as governor of Texas, [that] I support such proposed mergers as that of the Capital National Bank of Austin and Texas Commerce Bancshares. In order to continue the economic development of our state and to attract more corporate headquarters to Texas, in my opinion, we need banking institutions of sufficient size to serve the large companies doing business in Texas. I would want to point out that in private business before becoming governor, I served as an officer in two rural banks and that we also have stock holdings in some of the bankholding companies, including Texas Commerce Bancshares. My recommendations of this proposed merger, and others like it, are made on the basis of my belief as to what is in the best interest for the future economic development of this state, and not in any way based upon the stock ownership that my family and I have. Fred T. Brooks President, Merchants State Bank, Dallas. It must be recognized that banks do not create wealth. Branch banking would not magically manufacture new deposits. It would merely redistribute existing deposits into fewer and larger banks, headquartered in the larger cities. This could cause a flow of capital out of the smaller communities of the state into the financial centers. When deposits become concentrated in a handful of giant banks, money becomes less available for people-type loansfor houses, small businesses, recreation vehicles. The independent, community bank is able to offer better service because the manager of the bank frequently has his life’s savings tied up in the organization. The manager of a bank branch or a subsidiary of a holding company usually has no investment in a bank. His job represents another rung on the cor rate ladder. Even supporters of branch banking have admitted such a system means higher costs. Branch offices with absentee ownership take more money to run than independent local units. Banking concentration is more than economic power. It goes hand in hand with political powerthat is the nature of things. Do the people of Texas want to hand over that kind of power, with all its potential for abuse, to a handful of bankers? Would that be in the public interest? William Sinkin A spokesman for the Independent Bankers Assn. of Texas. De novo banking is a lethal weapon to defeat the prohibition of branch bankinga de novo charter is in essence a branch. That’s why the IBAT is so carefully scrutinizing de novo charters. I haven’t seen any memos and that’s probably something you won’t see, something from the head office that says, ‘Now you will do such-and-such. But I do know this: in terms of their investments, policy is all determined by the head office. It is a centralized operationit has to be.
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