Full text of Marriner S. Eccles Papers : Affidavit of Thomas B. McCabe, Box 22, Folder 2, Item 5

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

AFFIDAVIT OF THOMAS B# MCGABE

District of Columbia —ss:

THOMAS B* MCCABE, beinqg first duly sworn, deposes and says:
I am the Chairman of the Board of Governors of the Federal
Reserve System and have occupied said position since April 1$, 19U8*
There has been called to my attention an order entered on
July 1, 1950, by the Uhited States Circuit Court of Appeals for the
Ninth Circuit in proceedings entitled Board of Governors of the Federal Reserve System vs* Transamerica Corporation and Bank of America
National Trust and Savings Association No* 12587* In particular,
there has been called to my attention that portion of the Court's
order which reads as follows:
11 It is further ordered that petitioner obtain
and present to this court the affidavits of said
McCabe and of said Carpenter stating and reciting
such knowledge as said witnesses may have with respect to all matters of fact listed and referred to
in said affidavit of Samuel B* Stewart, Jr», and
the statement appended thereto#w

There has also been called to ray attention the affidavit of
Samuel B. Stewart dated June 30, 1950, referred to in the Court1s
order and the statement attached thereto•




-2-

I have read the affidavit and statement of Mr. Stewart and
do hereby inform the Court as follows -with respect to each of the matters therein referred to#

In setting forth my comments as to such

matters I shall first l i s t , by the same number as appears in the
statement accompanying Mr* Stewart's affidavit, the point which i t
is therein stated would be established i f the proposed deposition proceeding had been authorised by the Court:




,!1.

It is the accepted administrative practice and
policy of all of the Federal bank supervisory agencies
including the Comptroller of the Currency and the Federal Reserve Board:
11 (a)

That the Comptroller of the Currency shall
have jurisdiction to determine all questions
of public policy, public convenience and
advantage, and public interest involved in
the acquisition of existing bank assets by a
national bank or in the opening of a new
branch or change of location or operation of
a national bank#

11 (b)

That the Comptroller's authorization of the
opening of a new branch in the location of
an existing bank is not ever conditioned or
contingent upon acquisition of the assets and
business of the existing bank*

11 (c)

That i t is the established practice of the
Comptroller to consider all questions bearing
upon public convenience and advantage, including any policy of the anti-trust laws which may
be involved in an acquisition of assets of an
existing bank -which may be brought to the
Comptroller's attention in connection with an
application for a national bank for a branch

permit> and the Comptrollers approval of
a branch permit connotes his official
determination that the public convenience
and advantage will be served and that no
public policy will be violated by the proposed asset acquisition*
"(d)

That the Comptroller1s office and other
Federal bank supervisory agencies exchange
complete information with respect to matters
committed to their respective jurisdictions*11

I do not believe that the matters referred to in subparagraph
(a) above are matters vshich are the subject of any such administrative
practice or policy of all of the Federal bank supervisory agencies* I
am informed by counsel for the Board and, therefore, believe that under
the law the Comptroller of the Currency does have jurisdiction to determine
whether a national bapk may open a new branch in the United States or move
the location of such a branch*

In that case i t may be assumed that in

discharging his duties, he has implied authority to determine certain related questions of public interest, convenience and advantage* Section 11
of the Clayt8n Act, however, vests jurisdiction in the Board of Governors
to enforce compliance with certain provisions of that act in the banking
field*

Consequently, questions of public interest with respect to the

Clayton Act in its application to banks are vested in the Board and there
is no administrative practice or policy between all or any of the Federal
supervisory agencies which either does or could have the legal force of
transferring this responsibility to the Comptroller of the Currency or to
any other bank supervisory agency*
With respect to subparagraph (b) above, while I do not know of
my own knowledge that the authorization of a new branch by the Comptroller




of the Currency is never conditioned or contingent upon acquisition of
the assets and business of an existing bank, X am nevertheless informed
and believe that such is the fact.

Counsel for the Board has advised

me that there is no provision in any of the Federal banking statutes
which requires a national bank before acquiring the assets arid asstiming
the liabilities of another insured bank to obtain prior approval from
any bank supervisory authority.
With respect to paragraph (c) above, I do not have knowledge
as to any established practice of the Comptroller concerning his procedure when he is advised of a proposed acquisition of assets and
assumption of liabilities by one bank of another* However, I am informed by counsel for the Board that In view of the lade of statutory
authority to approve the acquisition of assets and the assumption of
liabilities of one bank by another, the Comptroller could have no
authority to bind the Board by any determination which he might make
in that regard.

I f , therefore, the Comptroller does faLlow the practice

set forth in subparagraph (c) above, under the circumstances mentioned,
such determination would have no binding force upon the Board in a Clayton
Act proceeding instituted by the Board pursuant to section 11 of that act.
With respect to subparagraph (d) $bove, I knoir of no policy of
the three Federal bank supervisory agencies by which each of such agencies
"exchange complete information with respect to matters committed to their
respective jurisdictions.w

I t is unquestionably true that the three

Federal agencies have cooperated and do cooperate from day to day in
assisting erch of the other agencies in the performance of their




-5responsibilities under the lav.

To that end exchange of information

is frequently made as a matter of course and at other timed upon
specific request. However, as will mora fully hereinafter appear* there
have been phases of the matter directly involved in the present proceedings before the Court as to which the Board has not been kept fully informed and where the lack of specific information deterred the Board
from fUlly considering and from determining upon a course of action in
the premises.
"2. The bank asset acquisitions involved in this proceeding were not handled hastily or precipitately,
but were handled with unusual deliberation and care
and under the supervision of the Comptroller of the
Currency, with the complete and current knowledge of
the Board of Governors of the Federal Reserve System
at every step of the procedure.n
With respect to paragraph k, I have no information which would
shed light on the question of how the bank asset acquisitions involved
in these proceeding were handled between the purchasing and selling
banks.

I have no knowledge whether they were handled under the super*

vision of the Comptroller of the Currency, but I repeat what hes been
heretofore said that, having no authority to approve or disapprove
acquisition of eligible assets and assumption of liabilities by one bank
of .another, supervision by the Comptroller of these acquisitions even i f
such supervision was exercised could not under the law deprive the Board
of its jurisdiction under section 11 of the Clayton Act.

As wiU appear

more fully hereinafter, neither the Board nor I had complete and current
knowledge of any such alleged supervision of these transactions ky the




-6Comptroller of the Currency.
"3- The Board of Governors and its counsel had complete knowledge of the fixed intention of the
Comptroller of the Currency to approve the transactions in question as early as April 11, 1950 and
was immediately informed of the Comptroller1 s
definite commitment binding himself to approve the
transactions of April H , 1950. (Exhibit K)w
Exhibit K appears to be a letter which the Comptroller of the
Currency addressed to Bank of America on April H , 1950, with respect to
the branch permits in question.

Neither I nor the Boerd had seen this let-*

ter prior to its submission as Exhibit K.
With respect to paragraph 3, xny answer is as contained in the letter to the Cpmptroller of the Currency hereto annexed marked Exhibit 1 and
which I ask be considered as part of this affidavit,

lhat letter is in

reply to a letter dated June 26, 1950, which together vith a copy of the
telegram referred to therein is annexed hereto marked Exhibit 2.

The letter

to the Comptroller, as will appear from its contents, among other things,
states the true situation with respect to matters passing between the Board
and the Comptroller of the Currency on the general subject of the bank expansion program of the Transamerica group.

In particular i t indicates the

extent of the Board1 s knowledge so far as i t relates to the subject of the
proposed branching of the 22 banks involved in this proceeding.




,f4.

In spite of such knowledge the Board of Governors and its counsel made no effort to invoke the
jurisdiction of this court or give any notice to the
respondents of any intention ever to invoke the
jurisdiction of the court for more than two months
during which, to the knowledge of the Board of Governors, and its counsel, steps were being taken
daily and procedures were being carried out in sn
orderly, manner, which would result in the change of
ownership of the assets and business of the selling
banks in question to Ban* of America N. T. & S. A.
on or about June 24, 1950, and either knew or should
have known that i f such invocation of this court's
jurisdiction were withheld until the time when
action was taken by the Board i t would be impossible

-7for the respondents to stop the transaction and would
create great confusion, disturbance, embarrassment,
public sensation and consequent serious injury not
only to the selling and purchasing banks but to the
public interests11
The statements contained in the letter marked Exhibit 1 and
annexed hereto fully demonstrate why the Board did not proceed earlier
to consider the question of whether to institute an injunction proceeding against respondent* Furthermore, I am advised by counsel for the
Board that in view of a l l the circumstances* the Board was justified in
delaying any attempt to obtain an injunction to prevent the acquisition
of assets and the assumption of liabilities of the 22 banks in this
proceeding until after the permits to establish the branches had been
issued by the Comptroller of the Currency*

This point is of particular

emphasis in the light of the fact that the applications to establish
the branches had been on f i l e with the Comptroller of the Currency for
over two years*

I know that the Board authorized the filing of these

proceedings only after the receipt of the letters of June 14 and 20,
1950, and only after careful and deliberate consideration of all aspects
of the public interest and concluded to do so only after a determination
that a failure to take such steps fully to protect its jurisdiction and
that of this Court upon appropriate findings to enter an order in aid of
the purposes of the Clayton Act, would constitute an improper rejection
of its responsibilities under the statute*




M5#

1

The complete chronological history of the branch
applications involved in the present proceeding, showing the dates of the first and a l l subsequent applications with respect to each location was the subject of

-8-

thorough and detailed investigation and considers^
tion by the Comptroller, Including field investigations covering substantial periods of time and
thorough consideration of the effect on the public
interest of each aspect of the transaction} such investigations being conducted entirely under the
supervision of the Comptroller of the Currency and
not under the supervision of the Board of Governors
of the Federal Reserve System*11
With respect to paragraph 5* I have no knowledge as to nhat
investigations were conducted by the Comptroller of the Currency or of
the time consumed in the making of such investigations#
"6* In the course of investigation by the Comptroller,
the anti-trust questions raised by the Board's pending proceeding under section 7 of the Clayton Act were
studied by counsel to the Comptroller, based upon
advice obtained by the Comptroller from the Attorney
General, and the Board's allegation of control of Bank
of America by Transamerica Corporation was also carefully investigated*
u7m

The Comptroller satisfied himself as a result of
these investigations that no violations of the antitrust laws would be involved in the proposed acquisitions of assets involved in this court's orders, and
that even i f control of Bank of America by Transamerica had existed at one time in the past* it clearly
no longer existed at the time of the Comptroller * s
decision to take action*"

With reference to paragraphs 6 and 7> while the Comptroller of
the Currency and the Secretary of the Treasury have indicated to me that
consideration was being given to the relationship of the branch
permits to the Clayton Act proceeding, I have no knowledge concerning the scope or extent of such consideration*




However> I would lite

-9to repeat again that any decisions by the Comptroller on these points
could not deprive the Board of Governors of its authority to carry out
its responsibilities under the Clayton Act.
ft8.

That the uniform practices of the bank supervisory authorities under the law make necessary the
simultaneous acquisition of assets of selling banks
at the time fixed for assumption of deposit l i a b i l i ties of the selling bank, and in accordance with
this practice the fixing of the close of business
June
1950, as the time for assumption of deposit
liabilities of the selling banks in question
definitely and irrevocably fixed that time as the
time of acquisition of the assets by operation of
law and regardless of any act performed or which
could have been performed by either the purchasing
bank or the selling banks after the time of service
of this court1 s original temporary restraining order,"
With respect to paragraph 8, I know of no practices of the
bank supervisory authorities vhich can or do have the effect of changing
or altering the legal effect of any contract, law, order of the court,
or other legal instrument•

I t is true that i f , after a take over, a

bank supervisory authority, in the discharge of its examination function,
finds that the acquiring bank has acquired assets that are illegal for
the bank or unsound, the authority may undertake to require the bank to
dispose of them or charge them off,




n9.

The opinions of the responsible bank supervisor
authorities to the effect that any attempt by the
respondents to reverse the transactions in question
after the service of the court1s temporary restraining order at U o*clock Friday afternoon in time to
reopen the selling banks legally for business on the
following Monday morning would have necessarily failed
and resulted in serious jeopardy to the banks in
question and to the public interest.w
With respect to paragraph 9> i t is my opinion and that of the

-10Board that it was not impossible between 4 o'clock on Friday afternoon
and 9 o'clock on Monday morning for steps to be taken which could have
resulted in the selling banks opening for business on Monday morning*
I am advised and believe that the selling banks and the acquiring bank
could have deferred the effective date of the take over by agreement
between themselves and I believe that i f any approval for deferring such
effective date was needed from any bank supervisory agency, such approval
had i t been requested could have been obtained within that period of time*
fl10*

That the selling banks in question, by reason
of the acts which had taken place prior to the
original service of the court's temporary restraining order had effectively disabled themselves from
opening for business on the following Monday morning,
by reason of the disqualification of directors as a
result of sale of their qualifying shares, the
impossibility at that time of having them reelected
as directors so that the bank could operate legally
in the absence of a voting permit which would permit
such reelection, which voting permit could not have
been obtained in the time available*"
With respect to paragraph 10, i t is my opinion that assuming that
the election of directors of each of the 22 banks was a necessary legal prerequisite to the opening of those banks on Monday morning, the election of
directors could have been accomplished between A o'clock Friday afternoon
and Monday morning* Six of the banks involved are nonmember banks and far
them no voting permit would have been necessary*

The Board of Governors,

upon telegraphic application, could, through the instrumentality of the Federal Reserve Bank of San Francisco, have issued a voting permit to Transamerica to vote the stock for the election of each director of the member
banks, and, considering the nature of the relief sought by the Board in the
present proceedings before the Court, the Board would have granted such




-11application forthwith.

However, no such application was made.

w ll.
I t was not possible at the time of service
of the courts original temporary restraining
order to stop the passage of title to the assets
of the selling banks because of notices already
given to depositors in the case of both national
banks and State banks, and additionally because of
action already taken by the State Superintendent
of Banks as to the State banks.w

With respect to paragraph 11, I have no knowledge as to notices
to depositors which may have been given by any of the selling banks •
However, I am informed by counsel for the Board that there is no requirement under Federal law and he knows of none under California law that a
selling bank issue notices to its depositors prior to the date of the
take over or that, i f issued, any legal consequences necessarily ensue
which make i t impossible for such a bank to continue to conduct a banking
business after the date fixed in such notices•

Section 12B(i)(4) of the

Federal Reserve Act, which relates to deposit insurance coverage, provides
for the issuance of notices to depositors after the take over has been
accomplished.

Notices to depositors after the take over are also provided

for in the regulations of the Federal Deposit Insurance Corporation issued
pursuant to that section of the law.

This, however, is merely for the

purpose of continuing deposit insurance coverage for an additional period
beyond the time of such actual take over.

I am advised by counsel for the

Board that no loss of deposit insurance coverage, in his opinion, would have
resulted from the selling banks having opened for business on Monday
morning.
I have no information as to what action was taken by the State
Superintendent of Banks referred to in this paragraph•




-12f'12#
The suggestion in the court's opinion that the
Comptroller was under duress to issue the branch
permits in question to obtain increased capitalization -which he thought necessary in the public interest
is without foundation in fact* Bank of America's
capital has been increased at a more rapid rate from
earnings than that of any other major bank, and while
the Comptroller thought additional capital desirable
as in the case of all substantial banks in recent
years, he recognized that the only reasonable basis
for asking stockholders to invest additional equity
capital was his decision to approve the branch permits
which would permit the assumption of deposit l i a b i l i ties of the selling banks*M

While I have been advised that the Comptroller of the Currency
has been urging Bank of America to increase its capitalization, I am not
in a position to state what other considerations led the Comptroller
of the Currency to his decision to approve the branch permits in question*
"13* The Comptroller did not, as suggested by the
court's opinion deplore the present state of the law
and has never requested any legislation to change it*11
I have no knowledge of the Controller's position with respect
to the question of law mentioned*
"14* The respondents' actions, which are the subject
of these proceedings, have been in accord with the
only course possible, consistent with the public
interest and convenience, and any present effort to
bring about reversal of those actions would be extremely difficult, i f not impossible, and, i f
possible, would be highly detrimental to the public
interest*11
With respect to paragraph 14 I do not believe that respondent's
actions since the entry of the Court's orders 6f June 23 and June 24, 1950,
have been consistent with the public interest nor do I believe that an




-13effort could not have been successfully made by the parties to these
transactions. Bank of America and Transamerica Corporation, to prevent
the consummation of the program of take overs herein discussed* Nor do
I believe i t is legally or practically impossible to bring about a reversal of those actions now*
M15#

The initiation of the Board *s proceedings in
this matter was not authorized by the United States
Attorney General or by any United States attorney,
and that these officials did not take the responsibility for the proceedings as required by law*11
With respect to paragraph 15> the Board did not obtain the
approval of the Attorney General of the United States before initiating
these proceedings for the reason that the Board did not regard such
action as necessary* However, the Attorney General was fully advised
before the institution of the proceedings and has been kept currently
informed as to their progress*

(Signed)
Subscribed and sworn to before me
this 3rd day of July, 1950.
(Signed) Josephine E, Lally
Notary Public, D# C#
(SEAL)




Notary Public, D* C.,
Ify commission expires
September 30, 1951

Thomas B« McCabe




EXHIBIT 1

BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.

ADDRESS OFFICIAL OOHRCBPONOCNCC
TO THE BOARD

July 3, 1950.
Honorable Preston Delano,
Comptroller of the Currency,
Washington, D. C.
Dear Preston:
The Board has asked me to acknowledge receipt of your letter
of June 26th with vhich you enclosed a copy of a telegram of the same
date to Mr.Giannini, President, Bank of America National Trust &
Savings Association. The wire states that Counsel for Bank of America
had requested advice regarding the allegations that (1) although your
office granted certain branch permits to Bank of America i t did not
consider the public interest involved in the related acquisition of
assets and the assumption of liabilities of banks being replaced by
the branches, and (2) the Board of Governors of the Federal Reserve
System first learned of the proposed branching on June 13th.
The statements contained in your wire with respect to these
two matters leave certain inferences which are not in accordance with
our understanding. With respect to the first allegation, Mr. O'Kane,
Assistant General Counsel of the Federal Reserve Bank of San Francisco,
who attended the hearing before the United States Court of Appeals on
June 2^th, was requested by the Board to relate his recollection of
what occurred at the hearing on this point. His report is as follows:
ff I can say unequivocally to the Board that at no time during
the course of Mr. Townsend's argument, and in no paper which
he has filed in that court, did Mr.Townsend say or write
any statement to the effect attributed to him. In fact, in
his argument Mr. Townsend appeared quite conscientiously
to be attempting to protect the record against the notion,
urged upon the court by the counsel for respondents, that
there was any 'civil war1 between the two agencies. On the
subject of the Comptroller' g authority, Mr.Townsend did
point out that the Comptroller had no authority under the
statute to approve or disapprove the acquisition of assets
of one bank by another. At that point he read to the court
a wire which he had received from Howland Chase [Assistant
Solicitor for the Board of Governors], purporting to state




Honorable Preston Delano

7- 7

what Mr. J. L. Robertson, the Deputy Comptroller of the
Currency, had said to Howland Chase on that very subject.
Consequently, he argued that nothing in the Comptroller's
decision to grant the branches in nuestion could be construed as a determination of the questions pending before
the Board in the Clayton Act proceeding against Transamerica.
Incidentally, this position was the decision of the court in
its opinion issued today.11
The wording of the wire from Mr.Chase, referred to above,
was cleared with Deputy Comptroller Robertson over the telephone after
i t was sent, and he agreed with i t . The wire, dated June 24 > 1950,
read as follows:
"Deputy Comptroller of the Currency J. L. Robertson
advised me this morning that he understood the take over
of the banks which Bank of America proposes to convert into
branches on June 26 pursuant to Comptroller's permits, is
to be accomplished by a sale of assets and assumption of
liabilities. He said there was no federal control over such
a sale and assumption, and that therefore his office had not
approved i t and had no power to approve i t or disapprove i t .
He said the proposed take over did not involve a consolidation
or merger, and that the liquidation of the banks would follow
the sale of their assets."
With respect to the second allegation, in the interest of
clarification I am reviewing below the situation as the Board understands
it:
Over a period of years prior to 1942 there were numerous conferences and discussions among the various Federal bank supervisory
agencies regarding the policy to be followed with respect to the further
expansion of the Transamerica group. The discussions culminated in a
letter, dated February 14, 1942, which the Board sent to Transamerica
Corporation and which was initialed by you as Comptroller of the Currency
and Mr. Crowley as Chairman of the Federal Deposit Insurance Corporation.
After stating that should the Corporation have any plans for the further
expansion of its interests in banks i t was requested to advise the Board
through the Federal Reserve Bank of San Francisco before any such plans
were consummated, the letter continued as follows:
"The Board's position in this matter is in accord with
the policy, upon which there is unanimous agreement by the
Board, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, that the Federal bank supervisory agencies should, under existing circumstances, decline
permission for the acquisition directly or indirectly of any
additional banking offices or any substantial interest there- in by Transamerica Corporation, Bank of America N. T. & S. A.,
or any other unit of the Transamerica group."



Honorable Preston Delano

7-

7

In August 1945 you wrote a confidential memorandum to
Secretary of the Treasury Vinson, which he turned over to the then Chairman of the Board and which, after reviewing the expansionary policies
and the dominant position of the Transamerica group, stated the
principles "which render i t inappropriate, except to meet compelling
local need, for the Comptroller to authorize Bank of Americc to
establish additional branch offices". The principles were stated in
the memorandum as follows:
"First of these principles is the American government policy
against monopoly, unfair competition, and absentee ownership,
and in favor of small businesses, free competition, and local
ownership and control. The comptroller is not charged with
the enforcement of the anti-trust laws, but he should end does
exercise his discretionary power in the light of the purposes
which the statutes in this field were designed to achieve.
"The opportunity to monopolize the field ond prevent the
development of new competition is greater in banking than in
most industrial and commercial fields. Furthermore, monopoly
in banking is singularly dangerous because of the influence
banks exercise over the entire economy through control of
credit and liquid funds.
"Even apart from the foregoing, the potential disastrous
effects of a failure of a branch-bank system of such magnitude render inadvisable the authorization of further expansion
of its branch network. Bank of A erica is in relatively sound
condition today and its failure within the foreseeable future
is improbable. However, supervisory authorities must always
bear in mind the possibility of bank failures due to rapid
changes in economic conditions or to unsound and speculative
management, and policies should be adopted which will minimize
the harm resulting from the collapse of any one institution.
The primary obligation of the Comptroller, in exercising his
discretion regarding the chartering of new banks, the granting
of branch permits, etc., is the maintenance of a safe and sound
banking system. Any further growth of Bank of America - and
consequent increased dominance in California banking - is undesirable from this point of view.
"The enormous importance of banks to modern industrial
l i f e gives rise to another danger implicit in the existence
of a banking institution of the unparalleled power and extent
of Bank of America. Banking has long been recognized as a




Honorable Preston Delano

7- 7

matter requiring governmental supervision and control, and
the federal statutes provide general sanctions designed to
enable the supervisory authorities to maintain safe and
sound banking practices and to prevent violations of the
banking laws. Unfortunately, these sanctions - for example,
the forfeiture of a bank*s charter - are extremely drastic.
VJhere a single bank is badly managed, or resistant to proper
supervisory requirements, these sanctions can be brought to
bear, and this possibility alone is sufficient to make the
vast raajority of banks receptive to criticisms, corrections,
and recommendations. But any responsible official hesitates
to invoke such sanctions where the offending bank furnishes
a major part of the banking facilities of a great State; the
hazards involved in mere unfavorable rumors regarding a bank
make bank supervisors reluctant even to threaten the use of
a serious sanction. Being fully aware of this situation, the
management of a mammoth, many-branched institution can sometimes defy governmental regulation, and violate almost with
impunity the laws enacted by Congress for its control and the
protection of the public. The history of Bank of America
reveals just such a situation and attitude.

"In regard to the twenty-six (26) applications for
branches with which we are presently confronted, ho departure is contemplated from the basic policy of restraining a l l possible any further expansion of the Giannini
banking interests. Some twenty (20) of these applications
can and should be rejected. However, in approximately
a half dozen cases the communities involved are entitled
to more adequate banking accommodation, and careful investigation fails to reveal any practical method of securing such additional accommodation save through granting to the Bank of America permission to establish branches
at these points.




*

Honorable Preston Delano

7- 7

On November 7, 1947, the Board advised you thrt i t had directed
an investigation to determine whether a proceeding should be instituted
against Transamerica by the Board under the Clayton Act. Under date of
November 10, 1947, you replied to the Board, stating that a number of
applications by Bank of America for branches were on file in your office
and that institution by the Board of a proceeding against Transamerica
under the Clayton Act would, of course, 11 be a factor requiring serious
consideration." You added, however, that "These applications have a l ready received considerable study and we hope to give a reasonably prompt
answer to the applicants."
On November 24, 1947, the Board replied that i t was proceeding
in the matter with the utmost dispatch and that "in the meantime we trust
that you will find i t possible to defer a decision on the pending applications for branches."
On November 28, 1947, you wrote to the Chairman of the Board
enclosing a copy of your letter to Bank of America advising the Bank that
in view of the consideration which the Board was giving to instituting a
Clayton Act proceeding " i t will be necessary for this office.to defer its
decision on the *** applications."
In a letter dated Msgr 27, 1948, the Board advised you of its
decision to institute the Clayton Act proceeding and stated that i f there
were any phase of the matter which you or others in your office might
wish to discuss with the Board i t would, of course, te pleased to do so.
The letter also added that the Board hoped to receive the assistance of
your office in assembling and presenting certain parts of the evidence
to be introduced at the hearing.
I t having appeared that you had authorized Bank of America to
establish additional de novo branches, the Board on August 24, 1948,
wrote you as follows:
"In your recent conversations with Governor Ssymczak,
regarding the establishment of branches by banks in the Transamerica group there appeared to be a difference of view as to
the present status of the policy agreed upon in February 1942
by the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board regarding expansion of that
group.
"In "the conversations, i t appeared that your office had
assumed- thot the understanding had been terminated and that the
Board was of the same view. While the Board has been aware of
the fact that the establishment of branches by banks in the
Transamerica group has been approved in some instances, the
Board has considered itself bound by the understanding and will
continue to act in accordance with its terms until such time
as i t may be terminated or modified after consultrtion among
th6 three agencies.



Honorable Preston Delano 7- 7
"We are writing this letter to obviate any possible misunderstanding as to the Board's position in this matter."
You replied under date of August 27, 1948, as follows;
"Permit me to acknowledge your letter of August
1948
with its comment upon the policy of this office in granting
branches to the Bank of America N&tional Trust and Savings
Association and to banks of the Transamerica group.
"It has been my understanding that our policy with respect
to that situation was outlined by Secretary Vinson particularly
after the conversations in December 1945 between the Secretary
and the Chairman of your Board, and was thoroughly understood
by the Board. Subsequent conversations between my office, the
Attorney General and members of the Board of Governors would
seem to confirm this understanding. We have consistently followed the policy there outlined."
On August 24th, the Board wrote to you regarding e recent
conversation between Governor Szymczak and yourself in which i t was
stated:
"Governor Szymczak has told the Board of his recent conversation with you on the subject of branches of Bank of
America N. T. & S. A. and of other national banks in the Transamerica group. In the conversation Governor Szymczak promised
that the Board would write you regarding its position and its
interest in this matter.
"The Board believes that the approval of the establishment
of domestic branches by any of the banks of the Transamerica
group, regardless of whether such branches are new offices or
result from the conversion of existing banks into branches, may
be considered incompatible with the proceeding which the Board
has instituted against Transamerica Corporation under section 11
of the Clayton Act. Broadly stated, the issue involved in that
proceeding is the legality of the expansion of the Transamerica
banking group in the West Coast area. Until that issue is
decided, the Board feels that i t is inconsistent for any Federal
agency to approve further expansion of the group in that area by
any method.
"Accordingly the Board, while fully mindful of your discretionary authority, urges that pending the conclusion of the
Clayton Act proceeding you withhr. 1 approval of the establishment of any de novo branches by ll&tional banks in the Transamerica
group, as we understand you have been doing with respect to applications for the establishment of branches resulting from the
conversion of existing banks."




Honorable Preston Delano 7- 7
In subsequent paragraphs the letter commented as follows:
!lThe

Board regrets that there has been any misunderstanding
of its position with respect to the establishment of branches by
banks in the Transamerica group, and hopes, in the interest of
greater effectiveness of Federal authority in the banking field,
that agreement can be had in these matters.
"Since the Transamerica group includes insured nonmember
banks, the Board is conveying its views in this matter to the
Chairman of the Federal Deposit Insurance Corporation."
This letter was answered by you under date of August 30, 1943,
as follows:
"Acknowledgment is made of your letter of August
1943
with its reference to conversations between Governor Szymcsak
and myself concerning the Clayton Act proceeding of the Board
against Transamerica Corporation and the influence that branches
granted the Bank of America may have upon such proceeding.
"This office has eveiy desire to cooperate with the Board
in a l l matters. However, I find i t difficult to follow the
reasoning that the granting of de novo branches to the Bank
of America embarrasses the Board in its present action against
Transamerica Corporation. I t is our opinion that branch applications of the Bank of America f a l l into two classes: (1)
those applications which contemplate the branching of Transamerica-controlled banks into the Bank of America system, with
the resulting extinction of the stock of such banks, and (2)
applications for new branches where no present facilities exist
and where there is no interference in the status quo of Transamerica- controlled institutions.
"Since receipt of your advice of the intention of the
Board to institute Clayton Act proceedings against Transamerica
Corporation we have consistently refused to grant applications
which f a l l into the first class, i . e . , applications for branching Transamerica-owned banks into the Bank of America system.
We have followed this policy in order that no question might be
raised as to possible interference with the Board1s action.
"Where local need and convenience and a l l .other factors
clearly justify the approval of applications for branches whicJh
f a l l into the second class, i t is our opinion that .such applications could only be denied on the ground that the Bank of
America is already a monopoly or tending toward a monopoly in
its field. You are aware, of course, that the Attorney General
of the United States has stated both to the Treasury and representatives of the Federal Reserve Board that at the present
time there is insufficient evidence to support this view*



Honorable Preston Delano 7- 7
From the above correspondence i t was the Board's distinct understanding that, in the absence of further advice from you, you vould not
issue permits authorizing the establishment of branches for the purpose
of taking over the banking business of existing banks controlled by
Transamerica Corporation.
Following the correspondence referred to above you initiated
a number of informal conversations with me and I received the distinct
impression during the earlier of these conversations that i t *<as your
intention, as a matter of desirable cooperation between our agencies, to
adhere to the policy outlined in the above correspondence. I urged you
to do so. I also have the recollection that in our later conversations
you seemed to be increasingly concerned about the pressure on your office
to grant the 20-odd applications of Bank of America for branches and
talked with me about the possible effects on our Clayton Act proceeding
i f they were granted. I persistently pointed out that a decision to
do so would be very detrimental to our enforcement of the Clayton Act.
On March 10, 1950, I addressed the following letter to the
Secretary of the Treasury:
"Following our conversation on yesterday, I am enclosing
a clipping from a San Francisco newspaper and a brief memorandum
which I reauested from our Legal Division of the possible effects
on the Boardfs case against Transamerica i f these applications
were granted. I cannot emphasize too strongly the unfortunate
repercussions that might result from such an action. I am confident that the independent bankers on the West Coast, many of
the members of Congress from out there, the press, and some of
our local people hare in Washington would have a heyday in
dramatizing this issue.
"I am appreciative of your expressed willingness to discuss
this question with me again before any decision is made by the
Comptrollers Office. This note is written to you only because of
my deep concern about the matter.11
His reply of March 15> 1950, was as follows:
"Permit me to acknowledge receipt of your letter of March 10,
1950 in regard to applications by the Bank of America National
Trust and Savings Association to branch into its system certain
Transamerica-controlled banks.
"As I explained to you in our conversation of March 9, almost
all of these applications which ore now pending in the Comptrollers
office are very old; over two years in fact. They have been held
in abeyance in deference to your view that action on them might in
some way prejudice the prosecution of your Clayton Act case against




Honorable Preston Delano 7- 7
Transamerica Corporation, However, the conclusion of that proceeding appears remote, and the Comptroller's office has definite supervisory responsibilities in this matter vhich are daily becoming
more acute.
"The Treasury has every desire to cooperate with the Federal
Reserve but i t cannot ignore the obligations laid on the Comptroller of the Currency and on i t by the Congress and must reserve
to itself the right of independent judgment when i t is confronted
with a problem as difficult and complex as this one. For this
reason, I do: not feel that I can reouest the Comptroller to delay
a decision indefinitely."
This situation continued until on or about April 11, 1950, when
I had an informal conversation with the Secretary of the Treasury in which
the latter stated that permits would be issued for branches which would take
over banks involved in this proceeding. I protested to the Secretary very
vigorously against any such action because of its possible effect on the
Clayton Act proceeding, stating that action should be deferred pending
further discussion.
At about the same time, in a casual conversation with Deputy
Comptroller Robertson while we were returning from a visit to the Capitol
he stated to me that a letter to Bank of America with respect to the
branches had been prepared and probably would go forward shortly. In
view of this statement, and when statements appeared in the press that
the bank was going to increrse its capital and would establish additional
branches, the Board's General Counsel called Mr. Robertson on the telephone
and asked i f the Board might have a copy of the letter sent bv you to
Bank of America with respect to permission to establish branches, Mr.
Robertson sent to the Board's General Counsel a copy of a letter to Bank
of America dated April 14, 1950, with reference to an increase in the bank's
capital which, however, did not mention branches. Mr. Robertson told the
Board's General Counsel that after reviewing the matter he was not at
liberty to give to the Board a copy of the letter to Bank of America with
reference to the establishment of branches because i t was confidential.
In the light of the circumstances the Board considered what steps
might be taken, short of a petition to enjoin the acouisition of the assets
of the banks in question, to prevent such acquisition and the matter was
thoroughly discussed on several occasions with representatives of the Department of Justice.
In view of a l l the circumstances of which the Board was aware,
including ray discussions with you and with the Secretary of the Treasury
and the circumstances surrounding the discussions in which the Attorney
General and I participated, the Board felt justified in believing that
the matter had not been so definitely settled in your office that the
permits would actually be issued or that you could not be dissuaded from
issuing them. This was particularly so since the Board received no



Honorable Preston Delano 7- 7
formal advice of the proposed issuance of the permits prior to your letter
of June 1U> 1950. In that letter you stated that while your office had
undertaken to approve "certain applications submitted by the Bank of America
National Trust and Savings Association to branch some smaller banks presently
owned by the Transamerica Corporation", this approval was contingent upon
the bank raising $70 million of new capital, that that operation was then
in process, and that you would be glad to advise the Board i f and when
the operation was concluded and the applications granted.
The Board was not advised until i t received your letter of
June 20, 1950, that the permits for the establishment of the branches
had been granted, and that letter shows on its face that the permits were
not actually granted until that date. I t was in this letter of June 20,
1950, that the Board for the first time was advised by your office of
the names of the banks which were to be converted into the branches
covered by your permits. At that point, having this definite information in hand, the Board took immediate steps to petition for injunctive
relief.
In view of the fact that your wire stated that the information
contained therein was being sent to Bank of A merica for presentation by
its counsel to the Court, and since the Court has ordered that I furnish
an affidavit on this matter, a copy of this letter, together with your
letter to me of June 26, 1950, is being attached to the affidavit as an
exhibit.




With warmest regards,
Sincerely,
(Signed) Tom
Thomas B. McCabe,
Chairman.




EXHIBIT 2

THE COMPTROLLER OF THE CURRENCY
Washington 2$

June 26, 1950

Dear Tom:
Attached hereto is a copy of a telegram
today sent to Jr. L. M. Giannini, President, Bank
of America National Trust and Savings Association,
San Francisco, California, the contents of which
are self-explanatory.
With personal regards, I am
Sincerely,
(Signed)

Preston Delano

Comptroller of the Currency
Enclosure
Honorable Thomas B. JcCabe, Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C.




COPY
COMPTROLLER OF 1HE CURRENCY
COMPTROLLER OF THE CURRENCY
RATIONAL BANK EXAMINERS
June 26, 1950
L.M. GIANNINI PRESIDENT
BANK OF AMERICA NAHONAL TRUST AND SAVINGS ASSOCIATION
SAN FRANCI SCO CALIFORNIA
I N CONNECTION ;JTH THE INJUNCTION ISSUED AGAINST YOUR BANK ON JUNE 21*, YOUR
COUNSEL HAS REQUESTED ADVICE FOR PRESENTATION TO COURT REGARDING THE ALLEGATION
THAT ALTHOUGH THIS OFFICE GRANTED CERTAIN BRANCH PERMITS TO YOUR BANK I T DID NOT
CONSIDER THE PUBLIC INTEREST INVOLVED I N THE RELATED ACQUISITION OF ASSETS AND
ASSUMPTION OF LIABILITIES OF BANKS BEING REPLACED BY THE BRANCHES STOP YOU ARE
ADVISED THAT 1MEVER A NATIONAL BANK APPLIES FOR AUTHORITY TO ESTABLISH A BRANCH
THE APPROVAL OR DISAPPROVAL OF THE COMPTROLLER I S BASiLD ON A STUDY AND
INVESTIGATION OF ALL RELEVANT FACTORS, ONE OF THE MOST IMPORTANT OF uHICH I S THE
EFFECT ON THE PUBLIC INTEREST OF EACH ASPECT OF THE TRANSACTION STOP THIS CASE
I S NO EXCEPTION STOP THE BRANCH APPLICATIONS HERE INVOLVED V/ERE PREDICATED UPON
THE PROPOSED TAKE-OVER BY BANK OF AMERICA OF THE BUSINESS OF OTHER SPECIFIED
BANKS AND THAT FACTOR M S FULLY CONSIDERED I N DETERMINING THAT APPROVAL OF THE
APPLICATIONS AND THE GRANTING OF THE PERiHTS Y.ERE I N THE PUBLIC INTEREST STOP
YOUR COUNSEL FURTHER INQUIRED AS TO ASSERTION THAT THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM FIRST LEARNED OF THE PROPOSED BRANCHING ON JUNE 13 STOP
YOU ARE ADVISED THAT THE CHAIRMAN OF THAT BOARD WAS KEPT GENERALLY INFORMED OF
THE STATUS OF THE BRANCH APPLICATIONS AND WAS NOTIFIED AT LEAST AS EARLY AS
APRIL 11, 1950 OF THE INTENTION TO GRANT THE BRANCH PERMITS I N CONNECTION V8ITH A
CONTCIPLATED INCREASE OF YOUR BANK'S CAPITAL STOP A COPY OF THIS WERE I S BEING
SENT TO THE CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM STOP




(Signed) Delano
DELANO
COMPTROLLER OF THE CURRENCY