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With the -Democrats now in control of the U. S. Senate, Sen. William Proxmire is taking over the chairmanship of the Senate Banking, Housing and Urban Affairs Committee. Not a liberal on spending issues, the Wisconsin maverick is a frugal middle-westerner, who came to national prominence when he opposed spending money on the supersonic transport in 1970. He may be best known for his rigorous discipline at 71, he runs four miles to work every day and his “Golden Fleece” awards to dubious projects he considers wasteful of the taxpayers’ money. Proxmire -was interviewed by Paul Sweeney, a longtime Observer contributor and New York freelancer, who writes on business and public affairs. The first question I wanted to ask you was about Japanese capital coming into the U.S. economy. This last summer Sumitomo bought a massive amount of stock in Goldman Sachs. Are you concerned about the role of foreign capital in the U.S. economy and the possible ownership of banks by the Japanese? Well, I’m concerned about the consolidation of banks, regardless of who owns them. We have a mobility of capital, an international mobility, and there’s not much you can do about it. Whether you’re for or against it, it’s part of technology, it’s part of the kind of world we have, with a Japan that’s growing very, very rapidly. It’s a formidable force. And if we cut outselves off, we might cut ourselves off from trade. But that would be a mistake . . . because we would cut ourselves off from the flow of capital. And we’ve benefited by and large over the years. We’ve been a group investor abroad until recently. We’ve been a net positive investor throughout the world. That’s changed. The Japanese, as you know, have come on like gangbusters. What concerns me is the Japanese holdings in this country. . . . Not only do they have a big investment [in California], but they are big banks. Of the 11 biggest banks in Paul Sweeney is a freelance writer living in Brooklyn, New York. California, five are Japanese. I think we’ve moved too rapidly in the direction of concentrating national resources over the last five years in very, very large banks. Just last week you had two mergers in Texas. One on Monday, oneon Tuesday. Here you had the sixth biggest bank, Chemical, merging with the’ second biggest bank in Texas, Texas Commerce, resulting in a bank that will be either the fourth or fifth biggest bank in the country. The Sen. William Proxmire Texas bank was healthy; it wasn’t unhealthy. It was a healthy bank. Well, I understand it did have some bad . . . some real estate and energy problems. It did have some problems, sure, especially in Texas. But the report that was in The New York Times said that it was a fairly healthy situation. Then you had an even more puzzling situation where you had a merger of two Dallas banks [Interfirst Corp. and RepublicBank] in the same market. Very big banks something like 29th and 25th biggest banks in the country. Whatever it was, they ended up with the 12th biggest bank in the country; that’s got to be a very big bank for Texas. And while the people who put it together Morgan Stanley claimed that, in their judgment, we do not have any antitrust implications, the former head of the Federal Reserve Board in that area said he couldn’t understand. He said, “Of course it has antitrust implications. There’s no question about it.” That was his view. Now I haven’t had a chance to explore that. I want to get in touch with this fellow and talk with him and get a response from him and ‘find out how he explains that. Do we need legislation? Another Clayton Act? I think we need anti-takeover legislation in all kinds of areas. And certainly the banking committee is going to be concerned about concentration of banks. One . of the kinds of legislation that, we’re thinking about is a limit on concentration. That would only help at the very top. Say you have something like three or four or five whatever it is percent of the banking assets in the country in one bank. That’s plenty big to do anything. . . . In fact, they say that a $100 million bank is about where the economies of scale stop. And these banks are far, far bigger than that. This new bank in Texas will be $35 billion it will be 350 times bigger than the bank big enough to take advantage of all the economies of scale. And that wouldn’t be as big as the Chemical merger. So we’re talking about very, very big bank concentrations. We’re moving away from what has been a traditional and unique American system of many independent banks. I . mean, most of our banking business is unlike the United Kingdom, Japan, France, Canada and so forth that have four or five big banks that do all the business, with a lot of branches. And I think the individual, locally owned bank is tremendously advantageous for small towns and small business. Can there actually be some breaking up of the concentration? No, no, I doubt that. We’re going to be doing awfully well if we can slow it down some. I think that, instead of our 11,000 independent banks we have today, we could be down to 3000, maybe 2,500 in ten years. Some people say that would be a good thing. I think it would be a terrible thing. Terrible. The effect is that you don’t have people who live in the community owning the bank themselves with their knowledge of the local people, their character and personality, as well as their operating statement and the numbers. That’s not a theory. That’s something I’ve gone through myself. I had a business before I came to Washington. I was president of a Taking It to the Banks New Banking Chairman is Worried About Mergers By Paul Sweeney THE TEXAS OBSERVER 13