Mr. GIDNEY. I will be glad to do that. Hon. BRENT SPENCE, TREASURY DEPARTMENT, COMPTROLLER OF THE CURRENCY, Washington 25, July 22, 1957. Chairman, House Banking and Currency Committee, House of Representatives, Washington 25, D. C. MY DEAR MR. CHAIRMAN: At the hearings this morning on H. R. 7026 and S. 1451 we were requested by Representative McVey to furnish to the committee a list of the sections of the bills to which we are opposed. We are opposed to section 23 of title I, Disclosure of Stock Ownership, which would require the record owner of national bank stock to notify the Comptroller in writing of the name of any person or persons having a beneficial or equitable interest in such stock in excess of 5 percent of the outstanding shares of the bank. We do not believe that the merits of such legislation would justify the substantial amount of additional work which would be required of bank stockholders by these provisions. Furthermore, adoption of this section might serve to discourage investment in bank stock by many desirable investors including those holding stock in a fiduciary capacity, and may in many cases cause trustees to consider avoiding investing in bank stock. In addition, as written, this section would raise serious questions as to whether or not nominee registration could be used in the case of bank stock. We are opposed to section 32 (b) of title I which provides that a national bank may, with the approval of the Comptroller, purchase and hold for not more than 90 days stock of another bank as a step in a proposed absorption of such other bank through merger, consolidation, acquisition of assets and assumption of liabilities, or otherwise. We do not believe that it is proper for the officers or directors of a national bank even with the prior approval of the Comptroller, to use the bank's money to acquire stock in another bank as a first step to merging or consolidating with that bank. We are also opposed to the proviso contained in section 23 (d) of title II, the Federal Reserve Act, which contains a similar provision for State member banks. We are opposed to specific provisions of several other sections of the bill, and in our statement made recommendations for changes in those sections which would meet our objection. These sections include section 22, Shareholders' List, which provides that the list of shareholders shall be subject to the inspection of all the shareholders of the bank. We recommend that the right of shareholders to inspect the shareholders' list should be qualified by a requirement of a showing of a proper purpose not inimical to the interests of the bank. Section 29. Removal of Officers and Directors, provides that court review of the proceedings shall be as provided in the Administrative Procedure Act and the review by the court shall be upon the weight of the evidence. We recommend that the substantial evidence rule contained in the Administrative Procedure Act should be applicable. Section 31 (a) (9) which would authorize stock options provides that compliance of the option price with the 85 percent limitation contained in the section be determined as of the date the option is exercised. It should be determined as of the date the option is granted. Section 39 (a) in its present form will raise serious questions as to the status of all national bank branches established subsequent to February 25, 1927. This section should provide that a national bank may retain and operate such branch or branches as it may have in lawful operation at the date of the approval of the act. Section 33 of title II would permit holding company affiliates of member banks to use the required reserve fund for the purpose of making additions to capital as well as for replacement of capital. We are opposed to this change in present law. Section 6 of title III does not cover the situation of the Acting Comptroller of the Currency serving as a member of the Board of Directors of the Federal Deposit Insurance Corporation in the case of inability of the Comptroller of the Currency to act through illness or otherwise. Sincerely yours, RAY M. GIDNEY, Comptroller of the Currency. The CHAIRMAN. Mrs. Griffiths. Mrs. GRIFFITHS. Mr. Gidney, I, too, would like to commend you on your statement. I think it is excellent. Now, on page 5, where you refer to section 20, you point out that section 20 would permit national banks to issue preferred stock with the approval of the Comptroller. Mr. GIDNEY. Yes. Mrs. GRIFFITHS. After determination by him that the most practical method of obtaining desirable and needed capital is through the issuance of preferred stock. Mr. GIDNEY. Yes. Mrs. GRIFFITHS. But then you say, Mr. Gidney, that you believe that this should be used only in urgent or unusual situations, or under emergency conditions. It seems to me that the bill is attempting to broaden the power, and you are already stating you are planning to use it differently, is that right? Mr. GIDNEY. I am afraid that is correct. We really don't want it this way, but we will take it if it is given to us. Mrs. GRIFFITH. But you are not going to use it if you can avoid it? Mr. GIDNEY. No; we will try to do a fair job on that. There was a suggestion, when this was in process of drafting, that the preferred stock method should be used if it was the only way to get the needed capital. But that was changed to the present language where it is the most practical method. We can't ignore the intent of the legislation. We will have to be broad gage in our interpretation. We wish it weren't in at all. We would prefer to keep preferred stock as an emergency factor. But other folks would like to have it more liberal. Mrs. GRIFFITHS. And if we pass this law, you will abide by it? Mr. GIDNEY. Certainly, we will have to. But in writing it this way, that is that it be found to be the most practical method; we would hope to have the right to talk with the banks proposing preferred stock and hope that they would conclude that it wasn't the most practical method. But if all things point to its being the most practical method, we would have to say yes. We are a little bit apprehensive that this law pushes us into a place where we would wish not to be. Mrs. GRIFFITHS. Now, I would like to ask you why you want the authority, or do you want the authority to determine whether or not a national bank can move its location in a city? Mr. GIDNEY. Well, that is not a terribly important thing. We have had very few cases where there has been trouble on that score. Mrs. GRIFFITHS. What is the trouble? Mr. GIDNEY. Well, I remember one case in New York where there was a bank that moved from one section to another, bought itself a very expensive banking house-expensive for them Mrs. GRIFFITHS. Did the directors make any money on it? Mr. GIDNEY. Oh, no; I don't believe they did. The bank went broke, eventually. It didn't come out well. But at the time of the move they could thumb their nose at the Comptroller, and did, and that is the only case that I think of now. 95375-57-pt. 1-13 Mr. MULTER. There was one in Washington. Mr. GIDNEY. Not actual; just hypothetical, wasn't it? Mr. GIDNEY. I don't know about the one in Washington. Perhaps Mr. Jennings can tell you. But this provision isn't a thing we are militant about. We think if we have all these other things-oh, I think I remember the case Mr. Multer has in mind-the Bank of Commerce moved. They didn't have to have our permission. I don't know that they would under this law. But we didn't object, and we probably wouldn't object if there had been such a law. It was a sensible move. In most cases the banks would talk with us, and we probably would be satisfied, anyway. But it would be just as well to have it clear. Mrs. GRIFFITHS. I would like to say that I am surprised at your statement that you feel that banking has unique safeguards against monopoly, and that you are not too interested in the Clayton Act. I have talked with some of the most prominent bankers in the city of Detroit, and they have assured me that they think one of the most alarming things in the country today is these bank mergers. At the present time, isn't there only one national bank in New York City? Mr. GIDNEY. No; there are a very considerable number, but not in Manhattan. There are only the Grace National and the National City and Sterling National in Manhattan, I think. Mrs. GRIFFITHS. Is your only objection that you don't want another department of Government to enter into that? Mr. GIDNEY. Well, that is an important objection. We think the handling of this is much better in the supervisory agencies supervising banks, just as we think it is much better to have banking matters come to this Committee on Banking and Currency than to go to the Judiciary Committee. Mrs. GRIFFITHS. Well, I think, Mr. Gidney, that what the rest of the country is quarreling with is the theory that banking presents safeguards against monopoly. I just don't think it does, and, personally, I hope either you stop bank mergers or I, for one, am going to vote for anything that gives the power to stop it to somebody else. The CHAIRMAN. Your time has expired, Mrs. Griffiths. Mr. Henderson. Mr. HENDERSON. Mr. Gidney, I am very much interested in your report, and I compliment you for it. Time has almost expired here, but do you have a suggested amendment for this pension plan that you suggest? Mr. GIDNEY. We can furnish one. We had one at the time we went before the other committee. It was discarded, but we have one. Mr. HENDERSON. Could this committee have the benefit of that? Mr. GIDNEY. We would be delighted. (The information requested above is as follows:) Hon. BRENT SPENCE, TREASURY DEPARTMENT, COMPTROLLER OF THE CURRENCY, Washington 25, July 22, 1957. Chairman, House Banking and Currency Committee, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: In response to the request made by Representative Henderson at the hearings this morning on H. R. 7026 and S. 1451, there is enclosed herewith a draft of the proposed legislation designed to implement our recommendation with respect to administration of pension and profit-sharing accounts of national banks. Sincerely yours, No. 45A RAY M. GIDNEY, Comptroller of the Currency. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That any national banking association may, by its board of directors, establish retirement or pension accounts and profitsharing accounts for the benefit of the officers and employees of the association, or, by its board of directors, join or become a participant with others in such an account. Such an account shall be managed by not less than three designated individual trustees with provision made for succession in the instrument creating the trusteeship, except that in lieu of or in addition to one or more individual trustees, a corporate trustee or corporate cotrustee may be designated. The trustees of such accounts shall keep adequate records of all transactions. All such accounts, including those established without shareholder approval prior to the enactment of this Act, shall be approved by the owners of a majority of the shares of the capital stock of the association. No such account shall borrow or become indebted in any manner in an amount in excess of 5 per centum of the market value of the corpus of such account, except to the extent necessary to make disbursements to beneficiaries or participants required by the terms of the trust instrument. No such account shall puchase, own, or hold in its assets any real estate, equipment, or other property for lease to, use by, or for the benefit of the association, or any director, officer, or employee thereof, or their interests, or any affiliate of the association. Retirement or pension accounts established by any one national banking association shall not purchase, own, or hold, in the aggregate, any shares of the capital stock of any one banking institution or trust company in excess of 5 per centum of its outstanding shares. No retirement or pension account shall purchase, own, or hold any shares of the capital stock of any one banking institution or trust company, the cost price or fair market value of which at the time acquired exceeds 10 per centum of the corpus of such account. Profit-sharing accounts established by any one national banking association shall not purchase, own, or hold, in the aggregate, any shares of the capital stock of any one banking institution or trust company in excess of 10 per centum of its outstanding shares, except that for the purposes of this sentence there shall be included any investment in such shares held in the association's retirement or pension accounts. No limitation or prohibition of this section shall prevent the acceptance or ownership of shares received as stock dividends, or as dividends in kind, or pursuant to the exercise of preemptive rights. Nothing herein contained shall prohibit the continued ownership or holding of assets lawfully acquired prior to the date of enactment of this Act. In connection with the examination of any national bank, the Comptroller of the Currency may cause to be made examinations of the affairs of its retirement or pension accounts and profit-sharing accounts which are not administered by a corporate trustee which is independent of the association. The provisions of this section shall not apply to any unfunded insurance plan, and no association is prohibited from participating in such a plan with the approval of the owners of a majority of the shares of the capital stock of the association. The Comptroller of the Currency is authorized and empowered to promulgate such regulations as he may deem necessary to enforce compliance with the provisions of this section. SEC. 2. Everything herein made applicable to retirement or pension accounts and profit-sharing accounts of national banks shall be equally applicable to such accounts established by banks operating under the Code of Laws of the District of Columbia. Mr. HENDERSON. This bill we have before us is far more than just a mere recodification of banking law, is it not? Mr. GIDNEY. Well, I think the substantive additions are not very extensive. But it is a very good recodification, and did drop out a carload of useless provisions, and it puts everything in order so you can find things, which has not always been true. Mr. HENDERSON. Mr. Gidney, I have a letter here from the Ohio Bankers Association, with reference to section 32 (b). Their recommendation is: If this proposal can be properly safeguarded so that it will not be an instrument used primarily for the promotion of mergers, it should be supported. Is your objection to this provision that it cannot be properly safeguarded, or do you have Mr. GIDNEY. Oh, yes, sir; that is purchase of stock. We oppose that, because the national banks cannot buy stock at the present time, and we think they can do their mergers perfectly well without that. Mr. HENDERSON. By acquisition of assets? Mr. GIDNEY. Yes, sir; by purchase of assets. This is not at all necessary. I think the Federal Reserve Board put it in, but we see no need for it. The Ohio folks say, "If this can be safeguarded”? Mr. HENDERSON. That is right. Mr. GIDNEY. In other words, we would rather favor the removal of this. Mr. HENDERSON. I see. That completes my questioning. Mr. Chairman, I have a letter from the Ohio Bankers Association that I ask unanimous consent to have inserted at an appropriate place in the record. The CHAIRMAN. Without objection, that may be done. (The letter referred to follows:) OHIO BANKERS ASSOCIATION, Mr. JOHN E. HENDERSON, House of Representatives, Washington, D. C. DEAR JOHN: May we submit the enclosed memorandum reflecting the policy of the Ohio Bankers Association in regard to H. R. 7026, Mr. Brown of Georgia, proposed Financial Institutions Act of 1957. If the House Committee on Banking and Currency desires testimony beyond the enclosed, we shall be glad to comply, although we believe all the points covered by the memorandum will be adequately explored. You will note that the memorandum endorses a number of points included in S. 1451, by Mr. Robertson, of Virginia, the companion measure, as passed by the Senate. However, 1 or 2 questions are raised in regard to S. 1451 and emphasis is given to some miscellaneous points. Respectfully, BELFORD P. ATKINSON, RECOMMENDATIONS OF THE LEGISLATIVE COMMITTEE OF THE OHIO BANKERS AssoCIATION IN REGARD TO PROPOSED FINANCIAL INSTITUTIONS ACT OF 1957 AND RELATED MATTERS Cumulative voting Section 26 (c): Permission for shareholders of national banks to use cumulative voting in the election of directors when the articles of association so provide, should be supported. Similar Ohio law for State banks works well. Temporary stock in another bank Section 32 (b): If this proposal can be properly safeguarded so that it will not be an instrument used primarily for the promotion of mergers, it should be supported-but 90 days may be too long. |