event, after your staff has decided what, if any, action it plans to take m the course of hearing as a result of this memorandum, we would appreciate your advising us. Then we can reach some informed judgment as to what, if any, further steps our enforcement obligations require.

From this brief narration of dealings between this Department and the Federal Reserve Board in the course of a consolidation under the Bank Holding Company Act, it can be seen how two different Government agencies can effectively work together on a common problem involving two different sets of responsibilities. However, this bit of history suggests, even more broadly, appropriate roles for this Department and each banking agency in consideration of, not only bank holding mergers, but all bank mergers. Section 23 should be amended, therefore, specifically to require notice to the Attorney General and to enable him to intervene, or at least offer his views, to the banking agency considering any bank merger.

(3) Finally, beyond competitive standards and the question of intervention, section 23 should be further amended, again paralleling the Bank Holding Company Act, to specify some antitrust saving provision. The Bank Holding Company Act (70 Stat. 133, May 9, 1956) and the pending proposals specify in title II, chapter 9, section 61, that-

Nothing herein contained shall be interpreted or construed as approving any act, action, or conduct which is or has been or many be in violation of existing law, nor shall anything herein contained constitute a defense to any action, suit, or proceeding pending or hereafter instituted on account of any prohibited antitrust or monopolistic act, action, or conduct.

This saving clause should be made applicable to all bank mergers as it now is to the formation of, or acquisition by, bank holding companies. Such application would carry out the recommendations advanced by the Federal Reserve Board Chairman that (statement by Federal Reserve Board Chairman Martin, explaining the Board's proposal for handling bank mergers, p. 691 of hearings of Senate Antitrust and Monopoly Subcommittee, "to study the antitrust laws of the United States, and their administration, interpretation and effect pursuant to Senate Resolution 61" (84th Cong., 1st sess.):

The Attorney General *** would continue to have full authority to institute proceedings under the Clayton Act, if he should deem it desirable, with respect to any situation resulting from the particular merger or consolidation.

Accordingly, I suggest that this committee write into the provisions of section 23 the same antitrust saving clause contained in Bank Holding Company provisions (reiterated in title II, ch. 9, sec. 61 of the proposed legislation). As a corollary, of course, since the saving clause refers to "existing law," this committee should also make clear its support of amendment to section 7 to cover bank assets as well as stock acquisitions. Only thus would the antitrust saving clause have real meaning.

Summing up, acceptance of my suggested revisions would maintain banking agencies' primary initial responsibility to pass on bank mergers, and go a long way toward insuring effective application of uniform competitive standards. They would put banks on a par with bank holding companies by making all mergers in this field subject to competitive provisions Congress has specified for bank holding companies. These suggested revisions, taken together, would mitigate, if not minimize, the force of the Department's objections to present section 23.

The CHAIRMAN. Judge Hansen, mergers are usually effected by the acquisition of assets and not by acquiring stock; isn't that true?

Mr. HANSEN. I think that is because they hope to avoid the provisions of section 7 as far as banks are concerned.

The CHAIRMAN. Do you know of any mergers that have been made other than by the acquisition of assets?

Mr. HANSEN. In the banking field?

The CHAIRMAN. Yes, sir.

Mr. HANSEN. I can't name them specifically. There have been one or two. But again I reiterate, I assume the reason is that they hope to avoid the provisions of the Clayton Act, which exempts acquisitions

of such nature.

The CHAIRMAN. Do you think the reason that they have pursued that course is to avoid the effects of section 7 of the Clayton Act? Mr. HANSEN. Very definitely. I don't think there is any question about it.

The CHAIRMAN. What is your opinion of the effect of the word "unduly"?

Mr. HANSEN. "Unduly" is a term that we have no legal definition of, and it is a different standard from that which is set forth in the Clayton Act's section 7.

The CHAIRMAN. And "unduly" can be construed in many different

ways.

Mr. HANSEN. It certainly can.

The CHAIRMAN. According to the views of the construer.

Mr. HANSEN. That is correct.

The CHAIRMAN. Now there is a provision in this bill which provides that a member bank may acquire the stock of other banks, and hold it, I believe, for a period of not more than 90 days in contemplation of merger.

What is your opinion of that? I asked Governor Robertson about that, and he said "Strike it out if you don't like it." Why was that put in the bill?

Mr. HANSEN. I can't understand why it would be put in there because Clayton Act, Section 7, covers the mergers where there is acquisition by stock. I don't see that it adds anything.

The CHAIRMAN. There certainly must have been some reason for putting it in.

Mr. HANSEN. I didn't draft the bill, and I don't know what the reason was behind it. I don't see any sound reason for it.

The CHAIRMAN. If you would proceed to

Mr. HANSEN. On second thought, there might be some advantage; if the notice was given of the intended merger, it might well be that we could move in under section 7 of the Clayton Act for an injunction, rather than have to try to unscramble it after the merger had taken place.

The CHAIRMAN. Wasn't the purpose to make mergers easy?
Mr. HANSEN. Clayton Act, section 7.

The CHAIRMAN. I mean the purpose of the amendment in the bill, under which the bank could acquire the stock of other banks in contemplation of merger. Wasn't the evident purpose of that to make mergers easier?

Mr. HANSEN. Well, I wouldn't think it would, unless the bill also would attempt to exempt, or amend, in effect, the Clayton Act, section 7, which holds banks under stock acquisition.

The CHAIRMAN. Is the Clayton Act now, as it is written, sufficient to prevent mergers that are contrary to its provisions?

Mr. HANSEN. Yes, sir; I think it is, very definitely, sir.

The CHAIRMAN. So the only additional power you would like to have is the power to prevent mergers by the acquisition of assets. Mr. HANSEN. Yes, sir, and, in the ultimate result, I see no difference. I can't see, for the life of me, why acquisition of stock should be placed in a different category than acquisition of assets. They both result in a merger.

The CHAIRMAN. Was there any other reason why the mergers would be effected by reason of the acquisition of assets rather than the acquisition of stock, except to evade the law?

Mr. HANSEN. I am convinced that the purpose of the elimination of the bank mergers by stock acquisition was to make the Clayton Act ineffective as far as banks are concerned.

The CHAIRMAN. Well, it certainly is very much easier to effect these mergers by the asquisition of assets than by stock.

Mr. HANSEN. Yes, sir.

The CHAIRMAN. After we passed the Bank Holding Company Act, Transamerica Corp. acquired, I think, at least 10 banks across State lines by the purchase of assets. Now, that could not have been effected quite that rapidly by the purchase of stock, could it?

Mr. HANSEN. I would think not.

The CHAIRMAN. How far can you go under the provisions of the Clayton Act? The merger must substantially lessen competition or tend to create a monopoly.

Mr. HANSEN. Yes, sir.

The CHAIRMAN. Take for example, the bank mergers that have taken place in New York. They didn't tend to create a monopoly, did they?

Mr. HANSEN. Which one?

The CHAIRMAN. The Chase Manhattan bank, for instance. Notwithstanding their size, did that merger tend to create a monopoly? Mr. HANSEN. I wouldn't want to commit myself on that until I know all the facts.

The CHAIRMAN. Well, this is just a curbstone opinion. There are so many large banks with immense assets, that even the merger of banks of that character didn't create a monopoly because there is competition.

Mr. HANSEN. If they don't come under the provisions of the Clayton Act, there is no objection to the merger.

The CHAIRMAN. Would you say that the concentration of economic power is a bad thing?

Mr. HANSEN. Well, it depends on how much concentration there is. The CHAIRMAN. Would you say that a merger such as that would lessen competition?

Mr. HANSEN. I would have to have the specific facts before I could voice an opinion as to whether or not I thought it tended to create a monopoly or whether it substantially lessened competition.

I think you have got to take the facts in each case. We have literally hundreds of mergers that are brought to our attention, and there are only relatively few that we ever take action on.

For example, we now have pending only eight merger cases, and we have reviewed literally thousands of mergers. So, we have come to the conclusion that, certainly, those mergers did not substantially reduce competition or tend to create a monopoly.

The CHAIRMAN. Did not the word "unduly" render the whole section cloudy and indefinable?

Mr. HANSEN. Yes, sir.

The CHAIRMAN. Mr. Talle.

Mr. TALLE. Thank you, Mr. Chairman.

Judge Hansen, may I pursue what the chairman discussed in a different direction. Instead of New York, a large city, let us look at a small community where there may be 2 banks, or 3, or possibly 4. Now in the event that you apply this standard of "substantially lessening of competition," would you not be obliged to find in practically every instance that there would be a substantial lessening of competition?

Mr. HANSEN. We haven't so done.

Mr. TALLE. It could be that for economic reasons, the mergers might be desirable. I have in mind that a bank is limited as to what it may lend to one borrower. I believe my State has more small banks, perhaps, than any other. That is a result of our State banking laws which permit savings banks to do commercial banking. Most of them are small. And, therefore, to any one borrower, such a bank cannot lend a substantial amount. For economic reasons, therefore, mergers, in some cases, might be desirable.

Mr. HANSEN. I can conceive of desirable mergers. There are many mergers we have never opposed.

Mr. TALLE. Don't you think, if this standard is applied it would be practically impossible for them to combine?

Mr. HANSEN. Oh, no. Certainly not.

Mr. TALLE. Well, I respect your opinion, although I am not fully convinced. Now, may I turn to another matter? I gather from your statement that you believe that the Comptroller of the Currency and the Federal Reserve Board go along with the thinking of the Department of Justice on this question. I would like, therefore, to read from the Senate hearings on the bill.

Mr. HANSEN. I didn't mean to give the impression that the Comptroller of the Currency would go along with all of our positions here at all. I am satisfied he probably would not.

I simply quoted certain language on the general existence of the problem and general thinking with reference to it.

Mr. TALLE. I see. Perhaps it would be appropriate then, inasmuch as I have raised the question, that I read what appears in the Senate Hearings, on page 1011:

Senator ROBERTSON. Will the witness yield at this point? Governor Robertson testified before this committee this year also.

Mr. BROWNELL. Did he?

Senator ROBERTSON. Yes; he said that he not only favored the objective, but he favored the plan.

Mr. BROWNELL. As outlined in section 23?

Senator ROBERTSON. AS written in the tentative bill, the Federal Reserve Board gave its emphatic endorsement, and so did the Comptroller also.

95375-57-pt. 1-10

So the administration seems to be just a little bit at cross-purposes on this proposal. The provision in the bill was endorsed by a fine group, which I call my advisory group, of 27 men: bankers and credit men. It was endorsed by the American Bankers Association. It was endorsed last year by this committee, and is passed the Senate.

So we have all the testimony so far except yours, in favor of the bill, and we have all of the Federal agencies, except yours, in favor of the bill. We have the record here; we have all of the big banking associations and credit associations in favor of the bill. We have it as a matter of record that the Senate voted last year and passed it, but I still say you have the right to renew your objections to it.

In the light of what you have stated, Judge Hansen, perhaps my reading from this isn't quite so pertinent as I though it might be. Would you like to make any comment?

Mr. HANSEN. No, I think that is a fair statement. We are certainly not at cross-purposes. I think we certainly think alike, that there has been a substantial increase in mergers. There is an increase in concentration in the area, and I think we all agree that there should be control of it. We have differences of opinion possibly as to method, and as to language.

Mr. TALLE. That is all. Thank you, Judge Hansen.
The CHAIRMEN. Mr. Brown.

Mr. BROWN. Mr. Hansen, as to your objections to section 23, State banks come under supervisory authorities. It is the State authority that makes these decisions.

Mr. HANSEN. Well, if they are engaged in interstate commerce they would be subject to Federal laws.

Mr. BROWN. Do you care to make any other comment on it?

Mr. HANSEN. Well, maybe I misunderstood your question, sir. Mr. BROWN. In other words, State-chartered banks now, as far as jurisdiction is concerned, for consolidation or merger, are under State law, under the State supervisors of banks.

This bill changes that and puts the authority in the Federal supervisors.

Mr. HANSEN. No, it simply makes them subject to the general antitrust laws of the United States, to which all other commerce and industry engaged in interstate commerce are subject.

There are many State regulations and regulatory bodies.

Mr. BROWN. That is true. But they are taking it all away from the State bodies now.

Mr. HANSEN. Certainly our amendment to Clayton Act section 7 would not interfere with the supervision and control of State banks by State supervisors, except in instances where the State bank is engaged in interstate commerce, and in our opinion violates the antitrust laws, and then we would have a right to step in.

Mr. BROWN. Of course all State banks do business out of the State. Mr. HANSEN. I think that is true. Therefore I think it would follow that they would be subject to the antitrust laws, just as any other local industry that is under regulations by States.

Mr. BROWN. I don't have any other questions.

The CHAIRMAN. Mr. Kilburn.

Mr. KILBURN. Judge Hansen, it would appear to be your contention that section 7 of the Clayton Act covers stock acquisition of all corporations engaged in commerce.

Mr. HANSEN. Yes, sir.