Senator WILLIAMS. Thank you very much, Mr. Gilbert, for your time.

Mr. GILBERT. Thank you.

(The prepared statement of Mrs. Wilma Soss follows:)

STATEMENT OF WILMA SOSS, PRESIDENT, FEDERATION OF WOMEN SHAREHOLDERS IN AMERICAN BUSINESS, INC.

Chairman and members of the Committee on Securities, it may be of interest on this occasion that the Honorable Ferdinand Pecora, father of the SEC, signed the articles of incorporation granted the Federation of Women Shareholders in American Business, Inc., in 1947 by the State of New York. Later Judge Pecora addressed our group which has become nationally and internationally known as the voice of the woman shareholder. That voice is dedicated to protecting the stockholder and the preservation of the capitalistic system through corporate democracy.

As founder and president, I would be derelict in my duty if I did not raise that voice at this time.

According to the census of the New York Stock Exchange, 52 percent of stockholders are women. Many trade in the over-the-counter market which in growth has outpaced listed stocks. Blue chips of this market are the insurance companies and banks. These have served unwittingly as an umbrella over stocks that are blue only in the mood they have created among countless disillusioned investors. When women hesitate to risk their savings and inheritance in overthe-counter stocks, their resistance is broken down by being told that banks and insurance companies are traded over the counter.

The trust departments of the banks and insurance companies have grown rich through the desire of men to protect their womenfolk and of men and women to protect their children. Yet, men and women who risk their capital to purchase shares in these institutions have had to rely for financial reports and information relative to salaries, pension plans and insider transactions largely upon such morsels as minority stockholders, attending annual meetings, can shame out of the chairmen until the Comptroller of the Currency in December of 1962 upon the eve of the publication of the SEC study promulgated a ruling for national banks. This is modeled on the SEC requirements but less far reaching and does not apply to State banks and their stockholder population. Whether bank stockholders will also have the same rights as stockholders in utilities and industrial corporations under the SEC to bring resolutions on bank proxy statements such as are now being brought from the floor of the annual meetings by such State banks as Chase Manhattan and Morgan Guaranty remain to be ascertained. These resolutions now are printed by the banks and distributed only to those attending the meeting to be voted upon before being defeated by the blanket proxies in management control from uninformed stockholders. But at least these proposals are the basis of discussions, debate, and reform.

Stockholders are employers of management and labor. But they have been stripped of the right to disclosure in banks and insurance companies and forced to rely solely upon government regulation and control. Why are bankers so fearful of giving the disclosure required by the SEC in industries on whose boards bankers sit? (For example, officers of Morgan Guaranty sit on the boards of directors of more than 50 corporations.)

The banks are the very core of the capitalistic system. Why-women shareholders want to know-why, why, why, are the banks so reluctant for the public shareowner to know what goes on? What kind of royal family of financiers flaunt corporate democracy? What is being cloaked? Wherefore the mystery of the banks? Why, for years, have great powers moved to defeat the Frear and Fulbright bills, and SEC chairmen, instead of to protect the stockholders? Is it the interlocking directorates? Can one wonder at a growing distrust of our capitalistic system-so lonely in the world-when here is the weakest link? In this country even the hard-pressed railroads are less in danger of eventual nationalization than the banks, with their determination to give a minimum of disclosures minus independent auditors.

It is time to end this abuse of power which endangers all of us, not just the bank stockholder.

We look to Congress, our elected representatives, to take remedial steps at long last to make it mandatory that banks and insurance companies, and other over-the-counter corporations, give full disclosure to their owners-the public stockholders-equal, at least, to that required of the utilities and industrial corporations by the SEC.

Until the present threat, the banks have too long refused to take the steps indicated by changing times. It raises the point as to whether, left to their own kind to regulate, once the threat of legislation has passed, they will not return to their inward ways, and slumbers, so that they continue to constitute a gigantic club instead of a public trust?

As for smaller companies, the public should not have to buy a pig in a poke if those companies want to be publicly financed, and remain so.

The enactment of S. 1642 will go a long way to restore confidence in the stock market, and in capitalism, damaged by practices of the over-the-counter companies. We urge its enactment, without dilution; we strongly urge the passage of this bill to end the double standard which multiplies the risks of risk capital.

Senator WILLIAMS. We will recess now until 10:30 a.m., tomorrow morning.

(Whereupon, at 12:05 p.m., the subcommittee recessed, to reconvene at 10:30 a.m., Tuesday, June 25, 1963.)

TUESDAY, JUNE 25, 1963

U.S. SENATE,

COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON SECURITIES,

Washington, D.C.

The subcommittee met, pursuant to recess, at 10:45 a.m., Senator Harrison A. Williams, Jr. (chairman of the subcommittee) presiding. Present: Senator Williams.

Senator WILLIAMS. We are honored to have Mr. William F. Kelly, vice president of the American Bankers Association. Mr. Kelly is also president of the First Pennsylvania Banking & Trust Co., in Philadelphia. Will you come forward, Mr. Kelly?

STATEMENT OF WILLIAM F. KELLY, PRESIDENT OF THE FIRST PENNSYLVANIA BANKING & TRUST CO., PHILADELPHIA, PA., AND VICE PRESIDENT OF THE AMERICAN BANKERS ASSOCIATION

Mr. KELLY. Thank you, sir. It is very kind of you indeed, Senator, to see me this morning. I spent most of last week traveling around, attending State conventions. This is the time of the year when the schedule becomes very heavy for those of us holding national office in the association.

Senator WILLIAMS. We are always proud when your association comes to Atlantic City for national conventions.

Mr. KELLY. You see, one of the criticisms we get in Pennsylvaniawe have our PBA convention in Atlantic City, and have had it there for 20-odd years so we get quite a few complaints from some of our local chambers of commerce about using Atlantic City, instead of Philadelphia or Pittsburgh.

You might be amused that, at the recent meeting of the association, this has been such a controversial subject, they had a vote as to where they would hold the convention for the next 3 years, and the vote was about 50 to 1, in favor of Atlantic City; so that seemed to dispose of the subject.

Senator WILLIAMS. That is interesting. Let me suggest that you not have your conference late in the summer of 1964, or you will be overrun by a lot of Democrats in Atlantic City, I think. Our convention plans are going to be announced shortly.

Mr. KELLY. Are they?

Senator WILLIAMS. That is my best information.

Mr. KELLY. I am rooting for you. Our friends, Elwood Kirkman and others, will be happy.

Senator WILLIAMS. I hope you will root for us in November just as you do now.

Mr. KELLY. I think the Senator has won that round. I appear here today, on behalf of the American Bankers Association, to discuss certain of the provisions of S. 1642, which would extend to banks-and to other firms whose stock is traded in the over-the-counter marketsprovisions, with respect to disclosure and other requirements, comparable to those presently applied by the Securities and Exchange Commission to corporations whose stock is listed on the national exchanges.

The American Bankers Association agrees with and supports the purposes and principles of the banking sections of S. 1642. However, we believe that these objectives and principles are, in great part, already served by existing law or regulation; and we have, in addition, serious reservations as to the manner in which it is proposed to apply disclosure principles to commercial banks.

Commercial bankers should not, and they certainly do not, seek special favors with respect to their basic responsibilities to stockholders. If banks are to obtain the additional capital which is essential to support the increased volume of loans needed by our expanding economy, they will have to resort more and more to the public sales of stock. To do this successfully will require the disclosure of essential information comparable to that now required of those corporations whose stock is listed on the national exchanges. An informed and intelligent investing public is essential to the proper allocation and mobility of capital in a free market economy.

Our reservations with respect to the bill before us are based primarily on three factors: (1) the degree of regulation presently applicable to commercial banks; (2) the proposed delegation of disclosure authority; and (3) the scope of the bill in terms of the number of banks affected.

That banking is already heavily regulated is well known, though some may occasionally forget the extensiveness of the regulation. Virtually all commercial banks are subject to Federal supervision by reason of their national charter or, if State chartered, because of membership in the Federal Reserve System or the Federal Deposit Insurance Corporation. In addition, State banks are subject to further supervision by State authorities.

There would not be time to describe all of the facets of existing supervision of banks by Federal and State authorities, and I should therefore like to cover only a few major points. Unlike most other businesses, entry into banking is strictly regulated, with careful attention given to such things as community needs, proposed management, capital adequacy, and earnings prospects. Once established, banks must furnish reports of condition to both State and Federal authorities and, with few exceptions, must publish them. Detailed reports of earnings and dividends must also be furnished and, though generally not required to be published, are subject to regular verification by examiners. Thorough examinations are made of every bankusually at least once a year-for the primary purpose of appraising the assets of the bank and determining its net sound capital. Any developing capital impairment must be arrested or rectified, or the bank is closed.