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Before the
BOARD OF GOVERNORS
of the
FEDERAL RESERVE SYSTEM
In the Matter of:
TRANSAMERICA CORPORATION
Place
of Hearing:
Washington, P. C.
Date
of Hearing:
February 8 , 19^9
Pages
577 to 672
Volume No.
8
COLUMBIA REPORTING COMPANY
Official Reporters
631 Pennsylvania Avenue, N. W.
W A S H I N G T O N 4, D. C.
REpublic 3601
EXecutive 1851
A
Cohn
I
INDEX
2
WITNESSES i
3
Marriner S. Eccles (Resumed)
DIRECT CROSS REDIRECT RECROSS
578
615
4
5
6
7
8
9
EXHIBITS
NUMBER:
Federal
Federal
II Federal
Federal
12 Federal
Federal
10
13
14
15
16
17
18
19
20
21
22
23
24
25
FOR IDENTIFICATION IN EVIDENCE
Reserve
Reserve
Reserve
Reserve
Reserve
Reserve
Board•s
Beard®s
Board*s
Board's
Board9s
Board8s
39
40
41
42
43
44
579
586
588
589
600
602
579
587
588
589
600
602
577
ascl
Arms Cohn
UNITED STATES OP AMERICA
1
2
BEFORE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
3
4
IN THE MATTER OF
5
TRANSAMERICA CORPORATION
6
7
a
Room 1202;
Federal Reserve Board Building,
Washington 25, D. C . ,
Tuesday, February 8, 1949.
9
10
11
The above-entitled matter came on f o r hearing pursuant
12
t o adjournment, at 10s30 o 9 clock a• m•
13
BEFORE s
14
15
16
17
18
19
20
21
22
23
24
25
RUDOLPH Mo EVANS, Member, Board of Governors, of
the Federal Reserve System,
Hearing O f f i c e r .
APPEARANCES s
J. LEONARD TOWNSEND, S o l i c i t o r , Board of
Oovernors of the Federal Reserve
System, Washington, D. C . , and
0 . ROWLAND CHASE, Assistant S o l i c i t o r , Board of
Governors of the Federal Reserve
System, Washington, D. C . ,
appearing on behalf of the Board.
SAMUEL B. STEWART, JRo, and
HUGO Ao STEINMEYER, 300 Montgomery S t r e e t , San
Francisco, C a l i f o r n i a , appearing
on behalf of Transamerica Corporation •
ac2
578
P R O C E EJD I N
1
THE HEARINO OFFICER:
2
3
OS
The hearing w i l l come to
order, please.
4
Mr. Townsend, you may proceed.
5
MARRINER S. ECCLES
6
the witness on the stand at the time of the adjournment, resumed
7
the witness stand and t e s t i f i e d f u r t h e r as follows:
DIRECT EXAMINATION (Resumed)
8
BY MR. TOWNSEND:
9
10
Q
Mr. Eccles,at the recess l a s t evening you had reached
11
t h a t point I n your testimony wherein you had r e l a t e d the f a c t
12
of a c e r t a i n conference held i n Washington, D. C . , on February
13
18, 1943, which was attended by Mr. A. P. Oianninl and members
14
of the Board of Governors.
15
you had r e l a t e d c e r t a i n things t h a t you r e c a l l e d as having
At the conclusion of your testimony
16 been discussed fit that conference and I w i l l now show you what
17
has been marked f,Copy of a d r a f t of report of informal con-
18
ference w i t h A. P•Oianninl" on t h a t date and ask you I f you
19
w i l l i d e n t i f y that f o r the record, please.
20
A
Yes, that i s the memorandum.
21
Q
That i s what memorandum, Mr. Eccles?
22
A
That I s the memorandum t h a t was prepared by Mr.
23
M o r r i l l a f t e r interviewing each of the Board members who had
24
attended t h i s conference with Mr. A. P. Oianninl as reporting
25
bhe discussions of the conference and as agreed to by the mem-
asclO
579
bers of the Board I n attendance a t the conference.
MR* T0WN3BND:
With t h a t I d e n t i f i c a t i o n , may i t
please the Hearing O f f i c e r , I o f f e r the document i n evidence,
MR. STEWART:
Without being understood t o concede
i t s 100 per cent accuracy, s i r , I do not object to i t s i n t r o duction as being what Mr. Eccles has said i t
THE HEARING OFFICER:
is.
On t h a t basis i t w i l l be
admitted.
MR. TOWNSEND:
W i l l the stenographer please mark
t h i s document as Board*s Exhibit No. 39?
(The document r e f e r r e d to was marked
I n d e r a l Itese^ve Benrd : 8 Exhibit No.
39 f o r i d e n t i f i c a t i o n and received
i n cvldtoftce*)
MR. TOWNSEND:
May i t please the Hearing O f f i c e r ,
I would l i k e fro read t h i s In the record also a t t h i s time.
I
quote from the memorandum:
" I n accordance with the request which had been made
i n a l e t t e r from Mr. A.P. Giannini to Chairman Eccles, there
was an informal conference of the members of the Board and Mr.
Giannini on February 18, 1943, beginning at 10:30 a . m* and
l a s t i n g u n t i l 3 p»
except f o r a recess f o r lunch. I n
addition to Mr. Giannini, those present were Messrs. Eccles,
Ransom, Szymczak, Evans, and McKee, except that Mr. Szymczak,
by reason of a previous engagement, was not a partidpant i n
the luncheon.
Aside from having indicated i n a general tray
580
asclO
1
t h a t he wanted Information about the Board•a policy I n r e l a ~
2
t l o n t o the expansion of Transamerica 8 s banking I n t e r e s t ,
3
Mr. Oianninl had not stated s p e c i f i c a l l y or I n d e t a i l what
4
p a r t i c u l a r phases of the general question he wished t o discuss
5
and i t was understood that the conference was t o be on a pure-
6
l y formal basis.
7
t i o n t h a t he could not understand why the Federal supervisory
8
agencies had made decisions against expansion of Transamerica 9 s
9
banking i n t e r e s t s , and he showed that he was e n t i r e l y out of
I n his opening atatement, he took the posi-
10
sympathy w i t h t h e i r pdnt of view. His discussion had the tone
I!
of one who f e l t that he wasbloc&od&tevery t u r n of the road.
12
I t seemed t o him that the supervisory a u t h o r i t i e s must have
13
l i t t l e or no confidence I n the managements of the bank of
14
Anerica or Transamerica.
I n typical W A. P. w fashion, he
15
wanted to know why, under such circumstances, we didn 8 t take
16
over the banks and run the o u t f i t . He accepted, apparently
17
without reservation, the idea t h a t he was the dominant or
18
c o n t r o l l i n g figure I n the Transmerica group and i t s banking
19
interests,
20
control and that when he spoke he represented any or a l l of
21
them to which he might be r e f e r r i n g .
22
his desire for freedom to expand i n the banking or any otter
23
f i e l d wherever he thought i t would be b e n e f i c i a l to do so.
24
He contended that he had been discriminated against, but
25
maintained that hewas w i l l i n g t o operate tmrter a m laws or*
regardless of any technical or l e g a l question of
He had l o s t none of
asc5
58l
1 regulations t h a t were applied t o a l l bank holding companies
2
a l i k e * He had nothing t o say, however, by way of explanation
3
when figures as t o branch bank expansion I n the t e r r i t o r y of
4
the Transamerica group f o r the period from 1933 t o 1942 were
5
c a l l e d t o his attention•
6
he regarded as the c r i t i c a l character of l e t t e r s emanating
7
from the o f f i c e of the Comptroller of the Currency, the
a
FDIC and the Board as applied t o the management of the
9
Giannini i n t e r e s t s , which he s&id had been harmful to his i n t e r
10
esta.
He r e f e r r e d a number of times to what
However, when his a t t e n t i o n was directed t o the facts
11
of the Board 9 s p a r t i c i p a t i o n i n the negotiations leading up
12
to the 1939-1940 agreement and the promises of the Giannini
13
i n t e r e s t s i n that connection, he had l i t t l e t o say.
14
n
I t was made p l a i n t o him t h a t the members of the
15
Board were unanimous i n the position which had been taken
16
i n each case where the Board had been c a l l e d upon t o act
17
with relation t o Transamerica and that therewas f u l l accord
18 among the three supervisory agencies on the p o s i t i o n they
19
had taken w i t h respect to expansion of the Transamerica
20
group i n the banking f i e l d . I t was also made clear that the
21 Board would favor l e g i s l a t i o n f r e e z i n g the s i t u a t i o n of
22
bank holding companies with the exception of instances where
23
they might be requested by the appropriate supervisory author-
24
i t i e s to save or protect p a r t i c u l a r s i t u a t i o n s .
25
nection, Mr. Ransom said that he had been i n favor of something
I n t h a t con-
asc3 8
1
along the l i n e s of the death sentence l e g i s l a t i o n proposed I n
2
1939*
3
p a r t i c u l a r proposal and. I n f a c t , that i t s introduction was
4
a t his suggestion through the influence of ex-Senator McAdoo
5
w i t h Senator Glass*
6
of bank holding companies, but would l i k e t o see branch bank-
7
ing permitted throughout a Federal Reserve D i s t r i c t *
8
event, he would l i k e t o be free tohave a branch banking system
9
I n each state I n which Transamerica now has banks*
Mr* Oianninl said that he had been i n favor of that
He did not argue f o r the continuation
I n any
He would
10
be ready t o l i q u i d a t e the bank holdings cf Transamerica, saying
U
t h a t i t could be done through the d i s t r i b u t i o n of i t s stock-
12
holdings among i t s stockholders, that he would l i k e to see
13
t h i s done and t h a t given a reasonable period, say, f i v e
14
years, the l i q u i d a t i o n could be completed and Transamerica
15
eliminated as a bank hiding company* I t was indicated, however,
16
that a holdig company which was not involved i n other busi-
17
nesses or ventures and was merely for the purpose of holding
18
a group of banks together would not necessarily be objection-
19
able to the Board but that there was opposition t o the con-
20
tinued acquisition of varied I n t e r e s t s by Transamerica,
21
that the complicated corporate r e l a t i o n s were a matter of r e a l
22
concern t o the Board and that the use of the holding company
23
a f f i l i a t i o n s as an i n d i r e c t means of circumventing the super-
24
visory p o l i c i e s of the Federal agencies was highly objection-
25
able.
Whatever plan might be adopted, he would l i k e to be t>er-
asc7
583
1
mltted t o carry out commitments i n two s i t u a t i o n s which had
2
not been brought t o the a t t e n t i o n of the Board, one apparent-
3
l y i n w r i t t e n form, involving a change of National City stock,
4
now held by Transamerica, and another not i n w r i t i n g , where
5
he f e l t , nevertheless, a moralobllgatlon which he thought
6
was f u l l y as binding as a w r i t t e n commitment.
7
have a l l the banking units i n C a l i f o r n i a , which are a f f i l i a t e d
8
rith Transamerica, converted t o branchesof the Bank of America
9
and c ould f o l l o w a s i m i l a r course i n other states where he
I f he could
10
had banks, including the two situations where he f e l t he had
11
banks, including the two situations where he f e l t he had out-
12
standing commitments, he would be 100 per cent i n favor of a
13
plan which would not permit any f u r t h e r expansion, except
14
when requested by the supervisory a u t h o r i t i e s . He would have
15
to «clear i t with my "boys* f i r s t 9 but he was so enthusiastic
16
about i t t h a t he wanted t o follow up t h i s l i n e of thought
17
immediately w i t h the other supervisory a u t h o r i t i e s i n
18 Washington.
At the same time, he said that he personally
to
Crowley
19
couldn f t approach Morgenthau
or Crdwley i n view of his l e t t e r /
20
of February 1,
19^3, a copy of which i s i n our f i l e s .
AV one
21
time
h® thought that his son, L. M., might come on and work
22
out such an arrangement and a t another time he wanted the
23
Board or a Board Committee t o undertake the t a s k . At the con24
clusion of the conference i t was understood that the Board
25
or some o f i t s members would advise Mr. Crowley and Mr. Delano
584
asclO
1
regarding the discussions a t t h i s meeting, and t h a t I f these
2
agencies could agree upon a plan t h a t would be f e a s i b l e , the
3
Board wo&ld be glad t o act as the medium through which Mr•
4
Oianninl would be informed.
5
who had known Mr. Oianninl I n the past t h a t he retained much
6
of his old vigor and aggressiveness, but t h a t , on the other
7
hand, there was something of a tendency towards r e l a z a t l o n
a
and a desire t o be c o n c i l i a t o r y , even a t the s a c r i f i c e of his
9
ideas of f u r t h e r expansion.
I t appeared t o the Board members
He was concerned about the
10
burden t h a t L. M. was carryingnd would l i k e t o f i n d some
11
r e l i e f f o r him.
12
"The following seemed t o the members of the Board t o be
13
s u b s t a n t i a l l y the conclusions t h a t could be drawn from the
14
discussions during the conference:
15
16
17
n
l . . That Mr. Oianninl 9 s underlying desire was f o r
untrammeled freedom of expansion;
"2.
That i t was made clear t o Mr. Oianninl t h a t the
18
Federal supervisory a u t h o r i t i e s were i n accord against ex-
19
pansion of Transamerica I n t e r e s t s i n the banking f i e l d ;
20
21
22
" 3 . That i t had become apparent t o him t h a t he and 'his
boys' had no place else to go;
"4.
That confronted w i t h the p o s s i b i l i t y of freezing
23
or a death sentence f o r bank holding companies, he was
24
w i l l i n g to accept some sort of arrangement which would r e -
25
s t r i c t f u r t h e r expansion of the Transamerica group unless r e -
asc9
1
585
quested by the Federal supervisory a u t h o r i t i e s , provided a l l
the banks which they pow have could be r e t a i n e d , together with
3
the two regarding which Jflr*. Giannini said he had outstanding
4
commitments;
S
tt
5.
That such an arrangement was contingent i n his mind
o
upon a l l other bank holding companies being subject t o a cor-
7
responding r e s t r i c t i o n . The conference ended without any
8
d i r e c t i v e s , as Mr. Giannini stated that he wanted t o report
9
the conversation to his associates and i t was understood that
10
the Board or committee of Board members would lilcoiirisc report
11
the discussions t o the other Federal supervisory agencies.
12
Aside from reporting t o the other Federal agencies the sub-
13
stance of these conversations, the Board f e l t t h a t the matter
14
should r e s t unless there I s f u r t h e r
15
e i a n n l n l t h a t he would be w i l l i n g t o carry out a plan by which
16
Transamerica would divest I t s e l f of I t s non-banking I n t e r e s t s
17
and be nothing more than a bank holding company."
18
19
I n d i c a t i o n from Mr.
BY MR. TOWNSEND:
Q
Mr. Eccles* I w i l l ask you I f , following that
20
conference I n February, 19^3* w i t h Mr. A. P. Olannlnl, there
21
came a time when the subject of Transamerica bank acquisitions
22
again came t o the a t t e n t i o n of the Board and yourself as
23
Chairman of the Board.
24
25
A
Several months a f t e r t h i s conference, I think i t
was May or June, the President of the Citizens Bank of Loe
586
asclO
1
Angeles — I don 8 t r e c a l l h i e name —
2
Q
Does the name Ivey suggest anything t o you?
3
A
Yes, Mr. I v e y .
4
Q
When you say the C i t i z e n s Bank, are you r e f e r r i n g
5
6
t o th$ C i t i z e n s N a t i o a l Trust and Savings Association?
A
That i s r i g h t .
The* N a t i o n a l Trust and Savings
7
Association <f Los Angeles, which was a bank w i t h some 30~odd
8
branches I n the Los Angeles metropolitan a r e a , reported t o —
9
I don®t r e c a l l whether he t a l k e d t o Mr. McKee or whether he
10
t a l k e d t o me, but a t leas
we got an informal report t h a t the
11 Transamerlca people were undertaking t o acquire the stock
12
of the C i t i z e n s Bank, and they were very much, of course,
13
concerned about the matter, as the Board was,and the Board
14
r e a l i z i n g t h a t i f Transamerlca succeeded i n acquiring the con-
15
t r o l of t h i s bank, i t would not only give them one banking
16
o f f i c e , but i t would give them another branch system I n the Los
17
Angeles a r e a , where thtfy were already the l a r g e s t banking
18
operation w i t h numerous branches, and so we communicated t o
19
the Federal Bank of San Francicco by w i r e , asking them t o
20
transmit the communication t o Transamerlca.
21
22
MR. TOWNSEND:
I w i l l ask the stenographer t o mark
t h i s f o r i d e n t i f i c a t i o n as Board's E x h i b i t No. 4 0 .
(The document r e f e r r e d t o was marked
Federal Reserve Board 9 s E x h i b i t 40
for ldentlfleatlon.)
23
24
25
B? MR. TOWNSEND *
asclO
Q
2
587
I show you what has been marked f o r ldentlflcatjbn
as Board9 s Exhibit No*. 40, and ask you I f t h a t I s the
communication t o which you have Just r e f e r r e d ,
A
5
6
A
Yes, t h a t i s the wire t h a t was sent t o Crowley and
Delano.
MR. TOWNSEND:
May i t please the Hearing O f f i c e r ,
7
o f f e r the copy of the telegram sent by the Board under date
8
of $ay 26 t o Mr. Day, the President of the Federal Reserve
9
Bank of San Francisco f o r transmission t o Transamerica
10
Corporation.
11
MR. STEWART:
12
THE HEARING OFFICER:
13
MR. TOWNSEND:
14
No objection.
Admitted i n evidence.
W i l l the Stenographer mark t h i s
as Board 8 s Exhibit No. 40, please?
15
(The document r e f e r r e d t o was
marked Federal Reserve Board9 s
E x h i b i t No. 40 and received i n
evidence *)
16
17
18
I
MR. TOWNSEND:
1 now o f f e r i n evidence, may i t please
19
the Hearing O f f i c e r , under the c e r t i f i c a t i o n of the Hearing
20
O f f i c e r of t h i s Board, copies of the l e t t e r sent by Mr. R. B.
21
West, Vice President of the Federal Reserve Bank of San
22
Francisco under date of % 29* 1943* to Transamerica Corpora-
23
t i o n , incorporating the telegram t h a t fyas Just been introduced
24
i n evidence, as Board9a Exhibit N®. 40.
25
MR. STEWART:
No
objection.
588
aecl2
1
THE HEARING OFFICER:
2
NR. TOWNSEND:
H {Board's
I
(The document referred t o was
marked Federal Reserve Board's
Exhibit No. 41 for i d e n t i f i c a t i o n and received i n evidence.)
I
„ I
\
s
MR. TOWNSEND:
7
W i l l the stenographer mark t h i s as
Exhibit No. 41, please?
4 I
6
Admitted.
I now o f f e r i n evidence, may i t
please the Hearing O f f i c e r , a copy of the reply of Trans-
8
america Corporation t o the telegram that has been previously
9
i d e n t i f i e d , the l e t t e r bearing date July 9, 1943, addressed
10
to the Board of Governors of the Federal Reserve System,
11
containing a c e r t a i n enclosure e n t i t l e d "Memorandum i n re
12
telegram of Board of Governors of the Federal Reserve System
13
of May 29, 1943, to accompany l e t t e r of Transamerica Corpora14
• t i o n t o the Board responsive t h e r e t o . "
15
16
17
13
19
20
21
22
23
24
25
pM
589
}
MR. STEWART:
No objection.
2
THE HEARING OFFICER:
3
MR. TOWNSEND:
The document w i l l be admitted.
W i l l the Stenographer mark t h i s as
1
4 Board s Exhibit 42.
(The document r e f e r r e d t o was
marked Federal Reserve Board's
5
6
ffon^anc^recfiveS in*evi£ence.)
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
BY MR. TOWNSEND:
Q
Mr. Eccles, r e c a l l i n g t o your a t t e n t i o n t h a t I n the
r e p l y of Transamerica Corporation, dated July 9, 1943, which
has j u s t been Introduced as Board's Exhibit 42, which was i n
r e p l y to the telegraph which you said was sent to Transamerica
and heretofore put i n evidence, that Transamerica disagreed
w i t h the position of the Board and, generally speaking, pointed
out t h a t the Board had no a u t h o r i t y to take the position t h a t
i t did i n the telegram and, f u r t h e r , t h a t they had taken the
matter up tfltti the l e g a l f i r m of Messrs. W l l k l e , Owens, O t i s ,
F a r r , and Gallagher, who had advised them that there was i n
t h e i r opinion "nothing i n the laws, regulations or agreement
w i t h the Board of Governors of the Federal Reserve System
t h a t would preclude Transamerica Corporation from entering
i n t o transactions such as those r e f e r r e d to i n the Board's
telegram."
I w i l l ask you what the Board did t h e r e a f t e r i n
respect of t h i s situation?
ph
1
2
590
A
The Board had—I think i t was Mr. D r e i b e l b i s , who
2
was then General Counsel of the Board, and Mr. Leachman, who
3
was Special Counsel f o r the Board, and Mr. Cagle, who i s
A
Assistant Chief of Bank Examinations i n charge of the bank
5
holding company, had gone t o C a l i f o r n i a f o r the purpose of
6
making an examination of a Transamax'lca Corporation and to
7
report back to the Board as to what a c t i o n , i f any, the Board
8
could or should undertake i n l i e u of the s i t u a t i o n that existed
9
at t h a t time that might curb the f u r t h e r expansion of the
10
11
Transamerica Group.
Q
Following that recommendation, Mr. Eccles, I w i l l ask
12
you i f the Board considered various methods f o r attempting to
13
deal with the s i t u a t i o n respecting Transamerica 1 s continued
14
acquisition of banks over the objection of the Board?
15
A
Yes.
The Board gave a great deal of consideration
16
to the matter and many meetings were held and discussion
17
had as to what might be donw a f t e r the report was made by
18
Mr. Dreibelbis as a r e s u l t of t h e i r t r i p to C a l i f o r n i a .
19
Q
Can you r e c a l l any of the methods which the Board
20
considered as being perhaps appropriate f o r dealing w i t h the
21
situation?
22
A
Of course, i t always had I n mind the question of
23
adequate holding company l e g i s l a t i o n t h a t would tend to curb
24
f u r t h e r expansion by bank holding companies, except with the
25
approval or consent of the banking a u t h o r i t i e s , but the question
Ph3
591
I
of dealing w i t h the s i t u a t i o n as I t existed a t t h a t time
2
they had not considered and as has been brought out here,
3
the supervisory agencies had agreed upon a program t o use
4
such Influences as they had to prevent f u r t h e r expansion,
5
but u n t i l t h i s time there had been no other consideration•
6
I t h i n k the question of the modification of voting
7
permits or the cancellation of voting permits are also given
8
some consideration.
9
Q
I w i l l ask you I f a t the time t h a t Mr. Dreibelbls
10
r e f e r r e d or discussed the matter w i t h the Board following the
11
I n v e s t i g a t i o n I n 19^3* whether the matter of a proceeding
12
under the Clayton Act was discussed?
13
14
15
A
Mr. Dreibelbls did suggest the p o s s i b i l i t y of pro-
ceedings under the Clayton Act at the time.
Q
Did the Board at any time p r i o r to t h a t time, to
16
your knowledge, ever consider t h a t i t had any r e s p o n s i b i l i t i e s
17
under the Clayton Act?
18
A
The Board up to that time had no knowledge, at least
19
I d i d n ' t have, and I don*t know t h a t any other Board member
20
had any knowledge whatever as to t h e i r power or a u t h o r i t y or
21
r e s p o n s i b i l i t y under the Clayton Act.
22
t o the a t t e n t i o n by the Board*s counsel or by anybody else
23
connected with the Board*
24
25
Q
I t had never been brought
I n connection with Mr. Dreibelbls 1 discussion of
t h a t subject w i t h the Board, I w i l l ask you whether he
PM
592-593
1
submitted any memorandum respecting t h a t p a r t i c u l a r phase of
2
the Board 9 s r e s p o n s i b i l i t y a t t i & time?
A
4
Yes, he d i d .
He submitted a memorandum to the Board
f o r t h e i r consideration a t that time.
Q
5
I show you a document e n t i t l e d "Responsibilities
6
and Powers of Board under the Clayton Act, 11 marked "confiden-
7
tial
8
"j.P.D."
and bearing at the end the i n i t i a l s of the d i c t a t o r ,
Were they the i n i t i a l s of Mr. Dreibelbis?
9
10
A
They were.
ii
Q
And i t i s dated July 26, 1 9 ^ .
12
13
14
I w i l l ask you i f
that i s the memorandum that you have Just r e f e r r e d t o .
A
That i s the memorandum.
MR. STEWART:
This i s a rather lengthy document,
15
i f the Hearing O f f i c e r please*
16
time to read i t now and consider whether I have any objection
17
or can we leave i t open?
18
recess at some time.
19
MR. TOWNSEND:
Do you wish me to take the
Perhaps I can read i t over at a
I have no objection to t h a t , but
I
20
am g e t t i n g very close to the conclusion of my examination of
21
t h i s witness.
22
23
MR. STEWART:
on t h i s document at t h i s time?
24
MR, TOWNSEND:
25
MR. STEWART:
You don't have any f u r t h e r questions
On that document, yes.
You haven't offered i t y e t .
I f you w i l l
!
Ph5
594
1 leave i t open f o r the t i n e being, I w i l l read i t
2
MR. TOWNSEND:
3
BY MR. TOWNSEND:
4
Q
later.
Very good.
Mr. Eccles, I w i l l ask you i f the Board made any
5
decision at the time of Mr. D r e i b e l b i s ' memorandum concerning
6
the taking of any o f f i c i a l action i n respect to t h i s program
7
of bank acquisition by the Giannini's?
8
9
A
I t h i n k while the matter was under consideration
and discussion, the Board was advised that as a r e s u l t of a
10
request made by the Attorney General f o r c e r t a i n information
11
from the Board's f i l e s , that the Attorney General was con-
12 s i d e r i n g the question of whether or not there was grounds f o r
13
a Sherman Act proceeding, so n a t u r a l l y while that i n v e s t i -
14
gation of the Department of Justice was under way, the Board
15
f e l t t h a t i t would not be appropriate f o r i t t o do anything
16 f u r t h e r i n the matter.
17
Q -
Did there come a time when the Board had any d i s -
18
cussions w i t h the Attorney General's Department respecting
19
the progress of the Investigation which you say you were ad-
20
vised about as having been undertaken by t h a t department?
21
A
Yes.
As I r e c a l l , there were some conferences
22
held i n the Attorney General's o f f i c e i n , I think i t was
23
1947, at which were present the representatives of the Federal
24
Deposit Insurance Corporation, the Comptroller* a O f f i c e , and
25
the Board.
yft.G
595
Q
On the question of the year involved, Governor,
I show you a l e t t e r dated October 31, 19*5, or a copy of a
l e t t e r dated October 31, 19^5, from the Attorney General to
y o u r s e l f , and ask you i f that w i l l r e f r e s h your r e c o l l e c t i o n
as t o the approximate time of those conferences.
You used
the date 19^7 i n your testimony a moment ago.
I f t h a t doesn't r e f r e s h your r e c o l l e c t i o n , I show
you another l e t t e r dated February 26, 19^7, addressed by you
to the Attorney General, and I w i l l d i r e c t your a t t e n t i o n t o
the f i r s t paragraph and ask you i f that refreshes your r e c o l l e c t i o n as t o the time of the conferences?
A
Yes, 1 t h i n k I —
Q
W i l l you r e s t a t e f o r the record the time that you
t h i n k the conferences were o r i g i n a l l y held with the Attorney
General, Nr. Eccles?
A
I n 19*15, I think a f t e r the i n v e s t i g a t i o n of the
Attorney General had been p r e t t y f a r advanced, i f not completed—
Mt. STEWART:
I f the witness i s about t o state what
happened, I would l i k e him f i r s t t o i d e n t i f y who was
present.
A l l he said so f a r was some representatives.
THE WITNESS:
I remember Mr. Delano was present
from the Comptroller's o f f i c e , and Mr. C l e r k .
Mr. Tom C l a r k ,
Attorney General, was present, and I am not sure who was
there f o r the F . D . I . C .
I t h i n k i t may have been Francis
ph7
1
596
Brown, the attorney.
2
MR. STEWART:
Were you there?
3
THE WITNESS:
Yea, I was t h e r e .
The Attorney
4
General had a couple of his s t a f f people t h e r e .
5
General lndloated—
BY MR. TOWNSEND:
6
Q
7
Don't say anything that was said a t the conference.
8
I
9
ferences were held and who attended.
10
11
12
The Attorney
j u s t want to i d e n t i f y f o r the moment the f a c t t h a t the conHave you i d e n t i f i e d a l l
t h a t you can r e c a l l who were there a t t h a t time?
A
A l l that I would be stare o f .
MR. TOWNSEND:
Mr. Hearing O f f i c e r , i n the formal
13
demand served upon the Board yesterday morning by counsel f o r
14
the Respondent, he requested that there be produced a l l cor-
15
respondence between the Board of Governors or any of i t s
16
members and the Attorney General of the United S t a t e s , including
17
p a r t i c u l a r l y the l e t t e r w r i t t e n by Attorney General Clark to
18
Chairman Eocles, dated October 31* 1945, and a l e t t e r w r i t t e n
19
by Chairman
20
26, 1947, and a r e p l y t o the l a s t mentioned l e t t e r w r i t t e n
21
by the Attorney General.
22
E
ccles t o Attorney General C l a r k , dated February
I have now Introduced through the witness the f a c t
23
of the existence of c e r t a i n conferences or a conference, as
24
the case may be, at the O f f i c e of the Attorney General, and I
25
have i d e n t i f i e d the persons present, and I now produce f o r
>h8
597
I counsel the l e t t e r dated October 31$ 19^5 from Mr. Clark to
2! Mr. Eccles, or a copy of that l e t t e r , as well as a copy of
3 your l e t t e r to Mr* Clark of February 26, 19*7* and a copy of
M r . Clark's l e t t e r to you, dated March 4, 19^7 •
4
5
ME. STEWART:
Do you have the o r i g i n a l s , Mr. Town-
MR. TOWNSEND:
I am sure I can get you photostatic
i> send?
7
copies of them.
8
MR. STEWART:
9
10
MR. TOWNSEND:
I would l i k e Just to look at them,
Yes.
BY MR. TOWNSEND:
11
Q,
12
Mr. Eccles, did there come a time when the Board
13
decided to take action on i t s own i n respect of the subject
14
of the acquislon of banks by Transamerlca Corporation?
15
MR. STEWART:
16
MR. TOWNSEND:
You are not offering these, I take i t .
I am not.
I w i l l have no objection
to your putting them i n , though, Mr. Stewart.
17
18
MR. STEWART:
I w i l l , i n due course.
19
THE WITNESS:
I n 19^7, the matter was again discussed
by the Board.
20
21
BY MR. TOWNSEND:
Q
22
Do you r e c a l l the approximate time the Board dis-
cussed the matter?
23
24
A
I t was in the P a l l of 19^7.
25
Q
Do you r e c a l l the reasons why the Board decided at
I
Ph9
1
2
598
t h a t t i n e t o again discuss the matter?
A
There had been no a c t i o n undertaken w i t h reference
3
t o t h i s s i t u a t i o n by the Attorney General or by the bank
4
holding company which was pending, and Transamerlca was con-
5
t i n u i n g i t s expansion program.
MR. STEWART?
6
I object t o t h a t and move t o s t r i k e
7
out the answer, i f the Hearing O f f i c e r p l e a s e .
8
been no evidence of an expansion program, except the c l a i m
9
of the w i t n e s s .
MR. TOWNSEND:
10
If
There has
I t h a s n ' t been e s t a b l i s h e d by t h i s
11
time t h a t Transamerlca had an expansion program, may i t
12
the Hearing O f f i c e r , then I am a t a loss t o know what t h i s
13
g r e a t p i l e of evidence over here t h a t has been p r e v i o u s l y
14
introduced i n the record means.
15
MR. STEWART:
16
THE
17
18
19
20
21
22
23
24
25
please
So am I .
HEARING OFFICER:
The witness may answer the
question.
MR. TOWNSEND:
He has answered i t .
The motion was
t o s t r i k e the answer.
THE HEARING OFFICER:
Motion denied.
Excuse me.
599
T&lry 3
BY MR. TOWNSEND:
Q
Were there any f u r t h e r additions t h a t you want to
Hmake t o t h a t answer, Mr. Ecoles?
Would you l i k e your answer
read back t o you?
A
No, I have nothing f u r t h e r and I do not care to
hear i t .
BY MR. TOWNSEND:
?
8
9
10
n
Q
Did the Board consider a l e g a l memorandum or a l e g a l
memorandum from i t ' s Counsel w i t h respect to the matter?
A
The Board did consider a memorandum.
The Board
f e l t t h a t t h i s s i t u a t i o n should be, again, considered i n the
12 l i g h t of the <&\?elo£ments t h a t had taken place and that were
13
taking p l a c e , t h a t Counsel was asked to present h i s recommenda-
14
tions as to what, i f anything, could or should be done about
15
t h i s expansion program.
MR. STEWART:
16
Just a moment.
May we have the
17
witness specify who made t h a t request of Counsel?
m
there was a request made.
MR. TOWNSEND:
19
He Just said
I t w i l l appear I n due course,
20
Mr. Stewart, i f you w i l l Just bear w i t h us a minute.
21
appear i n the memorandum i t s e l f .
will
BY MR. TOWNSEND:
22
23
It
Q
Mr. Eccles, I hand you a document which i s e n t i t l e d
24
"Memorandum to Board of Governors, from Mr. Townsend11, dated
25
October 31* 19^7$ and I w i l l ask you i f t h a t i s the memorandum
600
ascl
1
that you have Identified?
2
A
3
This Is the memorandum.
THE HEARING OFPICER:
4
Wouldn't this be a good time
to recess for ten minutes?
s
MR. TOWNSEND;
6
It will be satisfactory, Mr. Hearing
Officer.
7
THE HEARING OFFICERi
s
The hearing will recess for
ten minutes.
? j
(Recess taken.)
io j
THE HEARING OFFICER:
The hearing will come to order,
n | please.
12
MR. TOWNSEND:
Before I proceed to offer the document
is
that has Just been identified by the witness, I will ofer what
i4
was previously referred to as the nemorandum prepared by Mr.
is
Dreibelbls inl944 in relation to the Clayton Act authority
i6
of the Board, may i t please the Hearing Officer.
?7
MR. STEWART:
No objection,
is '
THE HEARING OFFICER:
19
MR0 TOWNSEND: Will the stenographer mark this
Admitted.
20 j! as Board's Exhibit No. 43?
!
21 i
I
22
v
'
(The document referred to was marked
Federal Reserve Board's Exhibit 43
for identification and received in
evidence.)
23
24
25
MR. TOWNSEND:
Now, may i t please the Hearing
Officer, I offer In evidence the memorandum identified by the
ascl
601
?
witness Just p r i o r t o the recess as being the l e g a l memorandum
2
submitted t o the Board October 31* 1947*
*>.
MR. STEWART:
I f the Hearing O f f i c e r please, I do
4
not object to the admission of t h i s paper f o r a l i m i t e d pur-
5
pose* I must object;, however, t o I t s consideration as evidence
6
of any of the facts stated i n i t *
7
see from an examination of i t , i t i s about two-thirds or t h r $ e -
a
fourths f a c t u a l I n advance of f a c t u a l i n v e s t l g a t i n n .
9
glad t o have I t i n the record as an i n d i c a t i o n i n the record
As the Hearing O f f i c e r w i l l
I am very
10
of the kind of representations as t o the f a c t s , upon the basis
n
of which the Board was induced t o i n i t i a t e thlsproceedlng*
12
I t , of course, has no more evidentiary value, however, than
13
did my own statement yesterday on the record which counsel
14
quite properly said was merely a statement of counsel,and
15
so as t o t h i s one*
16
t o i t s receipt as evidence of any of the f a c t s , while not
17
objecting t o i t as evidence of what was before the Board i n
18
the order of October, 19^7•
19
I , thereforf,
MR. TOWNSEND:
do most seriously object
Obviously, may i t please the Hear-
20
ing O f f i c e r , I am not o f f e r i n g i t as proof of the f a c t s which
21
are stated i n t h e r e , becausenaturally the f a c t u a l statements
22
i n here must appear aa the conclusions of the person w r i t i n g
23
the memorandum. I am o f f e r i n g i t t o demonstrate what the
24
Board had before i t a t the time t h a t i t decided t o take the
25
action i n the case.
602
asc2
3
1
2
MR. STEWART:
For t h a t limited purpose, s i r , no
objection.
THE HEARING OFFICER:
3
4
b a s i s o f t h e statements o f r e s p e c t i v e
5
6
I t w i l l be a d m i t t e d on t h e
MR. TOWNSEND:
counsel.
W i l l t h e stenographer mark t h i s as
B o a r d ' s E x h i b i t No. 44, please?
7
(The document r e f e r r e d t o was marked
F e d e r a l Reserve B o a r d ' s E x h i b i t 44
f o r i d e n t i f i c a t i o n and r e c e i v e d I n
evidence.)
8
9
10
11
MR. TOWNSEND:
May i t please t h e H e a r i n g O f f i c e r ,
I should l i k e t o read t h i s document, so t h a t t h e r e w i l l be
12 no q u e s t i o n as t o what I t s c o n t e n t s a r e .
13
"To t h e Board o f Governors f r o m Mr. Townsend.
14
" T h i s memorandnm I s s u b m i t t e d i n response t o C h a l r -
15 man E c c l e s ' r e c e n t r e q u e s t t h a t I pepare f o r Board c o n s i d e r a 16 ! t l o n a b r i e f a n a l y s i s o f t h e o v e r - a l l Transamerlca
situation,
17 t o g e t h e r w i t h any suggestions which I may have f o r
dealing
is w i t h t h e p r o b l e m .
19
20
" S t a t i s t i c a l l y , the s i t u a t i o n i s t h i s :
as o f December
31* 1946, Transamerlca c o n t r o l l e d 41 banks, h a v i n g 578
23 branches w i t h d e p o s i t s o f $6,585,000,000 and served 379
22 towns.
I t s t o t a l banking o f f i c e s comprised 40 p e r cent o f
23 a l l t h e b a n k i n g o f f i c e s i n t h e r i v e - s t a t e area o f A r i z o n a ,
24 C a l i f o r n i a , Nevada, Oregon, and Washington. I t s d e p o s i t s
25 bomprise 38 per cent o f a l l t h e d e p o s i t s i n t h a t a r e a . These
asc4
603
1
percentages would be considerably higher I f we eliminated
2
the States of Arizona and Washington, where the Transamerica
3
controlled banking o f f i c e s and deposits are r e l a t i v e l y small.
4
This s i t u a t i o n may be compared with t h a t exhibited i n 1923,
5
when Transamerica controlled only seven banks, having 429
6
branches, w i t h deposits of $878,861,000 and served 242 towns.
7
Since t h a t time, Transamerica has acquired 56 Independent
8
banks by d i r e c t purchase and 73 nor* fey abeerptien Sntfc I t s
9
various c o n t r o l l e d bax&s«In addition,* I t has received permission t o e s t a b l i s h 79 de novo branches.
10
11
The f a c t of t h i s
s t a r t l i n g increase i n banking o f f i c e s and controlled deposits
12 Isnot surprising f o r the expansion policy of the Transamerica
13
management has been common knowledge among the banking super-
14
visory agencies f o r many years.
15
been a period between 1939 and 1944 when those agencies were
Indeed, there seems t o have
16 united i n t h e i r opinion t h a t Transamerica should be discour17
aged by every means
from continuing such expansion* That no
13
e f f e c t i v e method has1
19
pansion may, however, be surprising t o those who r e a l i z e the
20
extent t o which i t has caused genuine alarm among the banking
been devised f o r preventing* t h i s ex-
21 agencies over t h i s period. We have be*n aware, of course, that
22
the A n t i - t r u s t Division of the Justice Department has had
23
thd Transamerica s i t u a t i o n under review f o r sane time. I n
24
f a c t , the Board supplied much of the background material f o r
25
t h i s investigation*
ii
However, indications give l i t t l e promise
Are
5
11
604
that any action w i l l be taken by Justice I n the near f u t u r e .
Almost two years ago we were advised by the Attorney General
that his Department f e l t t h a t while I t s i n v e s t i g a t i o n had
revealed a good s t a t i s t i c a l case of monopoly against Trans~
america, nevertheless, i t was f e l t t h a t there was I n s u f f i c i e n t
6
provable evidence of abuse of power t o J u s t i f y commencement of
7
such action at that time.
8
of the Supreme Court i n the American Tobacco case, the Chair-
9
[nan wrote the Attorney General and inquired i f his Department
Later on, following the decision
10
bad considered whether the decision I n that case might not have
n
eliminated proof of abuse of power as an indispensable
12 element of prof in such cases as the one against Transamerlca
13
appeared to be.
I n r p l y the Attorney General advised that
14
the Department was studying the matter and l a t e r advised that
15
he had requested the Secretary of the Treasury to consider
16
the e n t i r e matter and t o advise him of his views.
17
l y upon r e c e i p t of t h i s information, the Chairman wrote the
Immediate-
18 Secretary asking that he expedite action upon the Attorney
19
General ? s request. That, I b e l i e v e , I s the l a s t t h a t has been
20
heard i n the matter.
21
"Meanwhile, the Transamerlca banking acquisitions
22
have been proceeding apace. I n 1945 i t bought f i v e banks hav-
23
ing deposits of 44 m i l l i o n d o l l a r s ;
24
banks with deposits of 31 m i l l i o n d o l l a r s ;
25
Lt has acquired three banks with deposits of 15 m i l l i o n dollars*
i n 1946 I t bought f i v e
already I n 1947
jasc6
605
\
I n a d d i t i o n , i n 19^59 two de novo branches of the Transamerica
2
banks were established with the approval of the Comptroller.
3
Last year seven approvals were obtained and since the
4-
f i r s t of t h i s year, the Comptroller has granted t e n such ap-
5
provals.
6
shortly be passed no doubt has accelerated the Transamerica
The l i k e l i h o o d t h a t bank control l e g i s l a t i o n might
1 expansion program.
I n f a c t , I t now appears t o be racing
8
against time.
( I n c i d e n t a l l y , i t i s understood t h a t the
9
Transamerica a c q u i s i t i o n of shares of the Citizens of Los
j
10
!Angeles has been stepped up t o a considerable degree during
j
11
12
Ithe y e a r . )
|
I n the l i g h t of t h i s o v e r - a l l s i t u a t i o n , there
are a number of pertinent considerations which the Board
13
might wish to discuss. The f i r s t i s t h a t the proposed bank
14
holding company l e g i s l a t i o n does not purport to deal with
15
banks which a bank holding company already owns, except, of
16
course, i n a supervisory manner. Hence, t h a t l e g i s l a t i o n ,
if
17
passed, w i l l hot help solve the problem of whether or not
18
19
20
21
22
23
24
25
Transamerica should be permitted t o keep a l l of the banks which
i t now owns. The second i s
hat any u l t i m a t e o f f i c i a l action
looking t o the divorcement of Transamerica from some or a l l
of I t s non-branch i n s t i t u t i o n s might w e l l be prevented i f
Transamerica ahould obtain approval t o branch them.
Arms
1
2
3
rs 1
606
n
The Board has known f o r some time that Transamerlca
had made a p p l i c a t i o n to branch most, i f nob a l l , these banks.
"A t h i r d consideration i s t h a t Comptroller, i n passing
4
upon such a p p l i c a t i o n s , might not f e e l J u s t i f i e d i n refusing
5
them solely on the ground that the Transamerlca banking empire
6
i s already too l a r g e , p a r t i c u l a r l y as the agency has f a i l e d
7
to take action against Transamerlca on that ground and the
3
Board has asserted no o f f i c i a l
9
matter.
10
II
11
position or I n t e r e s t i n the
The questions which these considerations pose, t h e r e f o r e ,
are whether the Board now possesses any power f o r dealing
12 with the monopolistic aspects of t h i s s i t u a t i o n and, i f so,
13
what steps are necessary to be taken i n order f o t i t to exercise
14
such power•
15
"The answer to the f i s t question i s that the Board does
16
have the d i r e c t power, as w e l l as the duty, to carry out
17
c e r t a i n aspects of the n a t i o n a l policy against r e s t r a i n t of
18
trade and monopoly.
19
Board i s authorized to require a company to divest i t s e l f of
20
the stocks of any banks which that company might have acquired
21
i f the Board f i n d s , a f t e r hearing, that the e f f e c t of such
22
acquisitions
23
the banks so acquired and those already owned by such company
24
or i f such acquisitions tend to create a banking monopoly.
25
51
Under Section 11 of the Clayton Act the
may be to s u b s t a n t i a l l y lessen competition between
I t i s t r u e , of course, the the Board has never exercised
Rs2
607
1 | the :power Just referred t o , notwithstanding the fact that i t
|
2 { has been on the statute books since the passage of the
3 | Clay
Clayton Act in 1914.
Nevertheless, there can be no doubt
i
that
4 j that Congress Intended the Board to have primary Responsibility
for
5 for enforcing this phase of the national policy i n the banking
flel
f i e l d . That the Department of Justice shares this view is
6
7
attested by the fact that only recently a representative from
a
that department discussed with the w r i t e r the extent to
9 which the Board had considered this responsibility i n r e l a t i o n
10 to a somewhat substantial banking acquisition which occurred
n | in the Philadelphia d i s t r i c t .
12
i«
"Whether the Board should commence a Clayton Act
13 jproceeding against Transamerlca i s , of course, basically a
14 matter of policy for Board determination.
Before i t can decide
is that question, however, i t must f i r s t determine the facts
16 I known to be provable i n such a proceeding and decide whether
17 jthose facts constitute Just cause for issuing the complaint.
18 j
i
i
"As the Board is aware, i t does not possess the power of
\9 jsubpoena. Hence,in considering this question, the fact must be
ij
20 ;faced that a l l evidence to establish a case would have to be
j
21 'produced without resort to compulsory process.
Examination
22 jof the voluminous f i l e s and reports of the Board, together
23 pith
an appraisal of such voluntary testimony as may be available,
jboth
here and i n the West, would, i n the w r i t e r ' s Judgment,
j
5 bonsume a period from two to three months. However, when i t is
2
608
Ars3
1
considered t h a t the Board has repeatedly stressed, both
2
before the Attorney General and the Congress, that the size
3
of the Transamerica banking group has assumed dangerous,
4
not monopolistic, proportions, i t i s the w r i t e r f s view that
5
the Board should exhaust the f u l l reach of i t s powers f o r
6
dealing with the problem*
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
if
" I t I s ray recommendation t h a t the Board d i r e c t such an
i n v e s t i g a t i o n be undertaken. ff
Arms
rsl
609
BY MR* TOWNSEND:
1
2
3
Q
Mr. Eccles, did the Board a t t h a t time d i r e c t th£
the i n v e s t i g a t i o n be undertaken?
4
A
The Beard d i d .
5
Q
To whom did i t issue these Instructions?
6
A
I t Issued these i n s t r u c t i o n s to i t s counsel.
7
Q
And was the i n v e s t i g a t i o n —
a
MR. STEWART:
9
MR. TOWNSEND:
Could we have a name, please?
I t h i n k i t was the l e g a l d i v i s i o n , as
10
i t reads I n the minutes.
1!
v e r i f y i t f o r you.
12
MR STEWART:
13
shows i n the records.
MR. TOWNSEND:
14
I f you would l i k e t h a t , I
will
I would j u s t l i k e i t accurately as i t
May i t be s t i p u l a t e d t h a t i f i t
is
15
according to the witness* r e c o l l e c t i o n , t h a t the l e g a l d i v i s i o n
16
of the
17
question?
THE WITNESS:
\B
19
Board was d i r e c t e d to undertake the i n v e s t i g a t i o n i n
I could add t h i s :
I t h i n k w i t h such
support as i t needed from other s t a f f people.
BY MR. TOWNSEND:
20
21
q
I s t h a t your present r e c o l l e c t i o n of what was done?
22
A
Yes.
23
(Discussion o f f the r e c o r d . )
24
BY MR. TOWNSEND:
25
®
Upon conclusion of t h a t i n v e s t i g a t i o n , the Board issued
Al«2
610
the complaint I n t h i s case.
,
f
A
^
I s t h a t right?
That I s r i g h t •
^
Q" , - i f r . E c c l e * , one f i n a l subject matter and I can con-
i elude my d i r e c t examination.
!:
i'i;
There has been f i l e d I n these proceedings by Transamerica
! Corporation c e r t a i n a f f i d a v i t s by L. M. Glannini, Sam Husbands,
/
vice president of Transamerica Corporation, upon which was
8
predicated a charge that you have been personally biased and
9
prejudiced against the Glanninls and the respondent i n t h i s
10
1i
case, and that i t
i s as a r e s u l t of that personal bias and
prejudice that these proceedings now under way may be said to
12
have had t h e i r o r i g i n .
13
I would l i k e to know i f you have any statement that you
14
would l i k e to make i n the record on that general subject.
15
A
Yes, I think I would l i k e to comment upon that subject.
16
There i s nothing that could be said which i s f u r t h e r from
17
the t r u t h than that I have a personal prejudice.
Had i t been
18
possible, i n my public duty, my public p o s i t i o n , for me to
19
follow ray personal i n c l i n a t i o n , I would certaimly have preferred
20
to not be placed i n this p o s i t i o n .
21
The record i s r e p l e t e , i t seems to me—
22
MR. STEWART:
I object, i f the Haaring O f f i c e r pleaoe,
23
to the witness characterizing what i s i n the record.
The record
24
speaks f o r i t s e l f .
25
I have no objection to his s t a t i n g his
personal f e e l i n g s , but he shouldn't characterize the record.
Are 11
f
611
MR. TOWNSEND:
The record w i l l speak f o r I t s e l f , may
2
I t please the Hearing O f f i c e r , —
3
MR. STEWART:
4
MR. TOWNSEND:
I agree.
—and I say t h a t , I n the l i g h t of
5
Mr. Eccles' position I n t h i s matter, he should be permitted
6
to make a statement f o r what I t I s worth I n t h i s record.
7
the time comes to examine I t I n a n a l y t i c a l d e t a i l , should
a
that f a c t be necessary, we, I am sure, can weed out any part
9
that might be technically inadmissible.
THE HEARING OFFICER:
10
M
When
The witness may answer the
question—or may continue his comment.
ii
THE WITNESS:
The record i s replete with
evidence
13
that great e f f o r t and patience were shown on the part of the
14
Board over the past ten years i n an e f f o r t to come to an
15
agreement, an arrangement, with the Transamerica people that
16
would make action such as i s now being undertaken unnecessary.
17
I t has been shown that i n 19^0 the Board, a t the
18
I n s t i g a t i o n of the Transamerica people, intervened with the
19
other supervisory agencies—particularly the Secretary of
20
the Treasury, the Comptroller of the Currency and the FDIC—
21
i n order to t r y to work out an arrangement that would avoid
22
the f u r t h e r c r i t i c i s m and objection on the part of those
23
agencies.
24
25
The Board did Intervene and succeeded, at that time, i n
working out what was then a s a t i s f a c t o r y arrangement with
I
612
; reference to the Bank of America.
2
•
f
C e r t a i n l y , i f there i s prejudice on my part I n t h i s
! matter, then i t must be apparent that there i s likewise
/i
prejudice on the part of a l l of the other supervisory agencies
|| as w e l l as upon the part of every member of t h i s Board; that
/£.
\!• the record c e r t a i n l y does not single me out f o r prejudice—not
!
7
only th«& present members of the Board, who were unanimous i n
a
favoring t h i s a c t i o n , but the members of the Board who are not
9
at present members of the Board.
I have i n mind p a r t i c u l a r l y that
10
Mr. McKee, Mr. Ransom—who has since passed away—favored
n
every action that the Board took i n t r y i n g t o deal adequately
12
with t h i s s i t u a t i o n .
13
I f the Board i s i n error i n carrying out what they
14
interpreted to be t h e i r public responsibility, i f the Board be
15
i n error i n following the advice of counsel, not only the
16
advice of those i n the present l e g a l department but counsel
17
who were formerly with the Board, then i t cannot be said t h a t ,
18
because of e r r o r , the Board, and me as a member of the Board,
19
have acted only i n bias and prejudice.
20
C e r t a i n l y , t h i s procedure i s not f i n a l .
C e r t a i n l y , any
21
order that the Board might issue i s subject to review by the
22
courts; and so i t does not seem that the accusation of pre23
j u d i c e , i n view of the opportunity that i s afforded to the
24
Transamerlca people to have t h i s e n t i r e subject reviewed by
25
the courts, i s j u s t i f i e d .
Are 11
613
I
C e r t a i n l y my personal relationships to the Olanninls
2
and w i t h t h e i r i n s t i t u t i o n s over the long period of years
3
would not indicate any reason f o r my having prejudice.
4
As I stated yesterday, the personal business relationships
5
have been most agreeable and pleasant.
However, being one
6
member of a Board of seven—and the Board being only one of
7
three supervisory agencies—even i f I should undertake to show
8
f a v o r i t i s m o r , l e t me put i t , prejudice, i n favor of the
9
Gianninls, the other members of the Board and the other
10
supervisory agencies would have carried on and would have, no
1!
doubt, whether 1 had been here or n o t , undertaken t h i s course.
12
Even before I came here, the evidence indicates,
13
that d i f f i c u l t y had been had witl^fpredece^sor Board of which
14
Mr. Eugene Myer was the Governor
15
w i t h , I understand, the C o m p t r o l l e r ^ o f f i c e j that t h i s
16
f r i c t i o n , you might say, which developed—this c r i t i c i s m ,
17
e f f o r t en the part of the Board since I came with it—was not
18
o r i g i n a l or new^ and I was s u f f i c i e n t l y hopeful to feel—both
19
Mr. McKee and I — t h a t possibly the Transamerica people had
20
not been handled r i g h t , that there was a way of g e t t i n g around
21
the table and having
22
l e g i s l a t i o n or ether action; and with great hope and expectation
23
we undertook such ft course, and I t is w i t i the greatest
24
disappointment on my part that the r e l a t i o n s h i p ^ has f i n a l l y
25
and d i f f i c u l t y had been had
this
an understanding without resort to
ended I n the course that i t has now taken.
regret that I say t h a t .
I t i s with personal
!i
614
A e
S
| Arr.S
<
MR. STEWART:
If
t h e H e a r i n g O f f i c e r p l e a s e , I move
2
t e s t r i k e out t h e statement o f t h e w i t n e s s as b e i n g
3
and i m m a t e r i a l , r e p l e t e w i t h h e a r s a y , argumentative i n the
i
extreme, s p e c u l a t i v e , c o n t a i n i n g conclusions both of law and
5
o f f a c t , as c o n s t i t u t i n g an unconscionable e f f o r t t o
6
t h e o t h e r members of t h e Beard i n t h e i r d e c i s i o n i n t h i s
7
m a t t e r and as much more i n the n a t u r e o f a summation o f
a
counsel than as proper
v
'o
n
influence
testimony.
THE HEARING OFFICER:
stand f e r what i t
irrelevant
The w i t n e s s ' statement may
is worth.
MR. TOWNSEND:
I have no f u r t h e r questions, Mr.
Hearing O f f i c e r .
THE HEARING OFFICER:
4
is
Are you ready, Mr. Stewart,
te proceed with your cross examination?
MR. STEWART:
Any time, s i r .
I understood you had a desire f o r an ©ff-the-record
"'7
conference on some of these matters during the lunch hour.
an
Perhaps, i f you wish to do t h a t , i t might be/appropriate time
19
20
21
22
23
24
25
to take a luncheon recess.
THE HEARING OFFICER:
Very w e l l .
We w i l l reconvene
here a t 2:15 e f c l o c k , then.
(Whereupon at 12:10 p.m., the hearing recessed, to
reconvene at 2:15
m. the same day.)
ascl
Arms Cohn
615
AFTERNOON SESSION
I
(Whereupon, a t 2 s25 o 9 clock p . m«, the hearing
2
3
was resumed pursuant to the recess.)
THE HEARING OFFICER:
4
5
W i l l the hearing come to
order, please?
Mr. Stewart.
6
MARRINER S. ECCLES
7
a
the witness on the stand at the time of the recess, resumed
9
the witness stand and t e s t i f i e d f u r t h e r as follows:
10
CROSS EXAMINATION
n
12
BY MR. STEWART:
Q
Mr0 Eccles, you have t o l d us that you have beenln
13
Washington since November, 193^•
14
to Washington as amember of the o r i g i n a l group assembled by
15
President Roosevelt t o operate the o r i g i n a l New Deal?
16
A
I s I t a f a c t that you came
I had never met President Roosevelt when I came to
17
Washington and I d i d n ' t meet him u n t i l three or four months
18
a f t e r I camehere.
19
had the remotest Idea t h a t I existed or t h a t he knew what my
20
views werf, so that I would have to say that I came here
21
because I was asked by the Treasury very nnexpectedly t o
22
coa. i n . » d help outf connection
23
a c t i v i t i e s t h a t the Treasury had taken on i n 1933 and 1934.
24
I had t o give a good deal of consideration to that
25
I don 9 t know t h a t President Roosevelt
w i t h . o n . of t h . .tronuou.
matter and I came v e r y , v e r y r e l u c t a n t l y . Icame p r i m a r i l y
asc2
6l6
because I t was the time ofemergency,of decision I n the country
2
and I had never given any public service, and I f e l t that
I t was rather d i f f i c u l t not t o do so.
I was not connected w i t h the New Deal p o l i t i c a l l y .
4
As a matter of f a c t , I never held a public o f f i c e a t any time
c
7
8
9
10
n
up u n t i l the time I came I n t o the Treasury and had been considered a Republican, i f I had been considered anything
politically,so
f a r as my p o l i t i c a l f a i t h was concerned.
considered myself an Independent and s t i l l do.
Q
came t o
What position did you come i n t o when you f i r s t
Washington?
12
A
Assistant to the Secretary of the Treasury.
13
Q
That was a t what date?
14
A
I think i t was February 1 s t .
15
Q
1934?
16
A
1934.
17
Q
And you came to t h i s Board i n November, 1964?
18
A
That i s c o r r e c t .
19
Q
And t h a t was on the appointment of President'
20
21
22
I
Rosevelt?
A
Roosevelt.
The f i r s t was not on the appointment of President
The appointment was made by the Secretary and
Seoretary o f the
23
a confirmation was not required.
An assistant t o the/Treasury
24
25
was d i f f e r e n t than an Assistant Secretary of the Treasury.
Q
I am speaking now of your f i r s t appointment t c t h i s
Are 11
617
1 Board.
2
A
That was i n November, 193*1, by the President.
3
Q
By t h a t time you were acquainted w i t h him?
4
A
That I s r i g h t .
5
Q
You, nevertheless, continued t o maintain a r e s i -
6
dence I n the Hotel Ben Lomond I n Ogden, Utah, d i d n ' t you,
7
Mr. Eccles?
8
A
9
I did n o t .
I maintained a residence and owned a
home on Van Buren Avenue.
10
Q
And you did continue t o maintain that?
11
A
I continued t o maintain t h a t home.
<2
Q
And do you s t i l l have that?
13
A
I disposed of t h a t home severalyears ago.
14
Q
Whore have you resided since then, sir?
15
A
I have resided at the Shoreham H o t e l .
16 l i k e w i s e , an apartment a t the Ben Lomond Hotel i n
17
Q
That was the point of my question.
X maintain,
Ogden.
You have main-
18 tained a residence i n Utah as w e l l as a residence 1 n Washing
19
20
21
ton?
A
I have voted InUtah and I have paid my Income tax
i n Utah.
22
Q
And maintained a residence there?
23
A
To maintain a residence, t o be able t o vote, you
24
25
have t o maintain a residence.
Q
And you have done that?
asc4
6l8
1
A
That i s r i g h t .
2
Q
Again r e f e r r i n g t o some of the matters about which
3
you t e s t i f i e d on d i r e c t examination, I believe you t o l d us
4
you organized the Eccles Investment Company?
A
I f I d i d n ' t , I am w i l l i n g t o t e s t i f y t o t h a t e f f e c t
7
Q
When was t h a t ,
8
A
I t h i n k t h a t i t was i n 1916 t h a t i t was incorporated.
9
Q
And you were i t s vice president and general manager
5
6
10
now.
sir?
i n 1929?
H
A
That I s c o r r e c t .
12
Q
You have been i t s president since 1929?
13
A
That i s c o r r e c t . % mother was president p r i o r to
14
15
16
17
18
19
20
21
t h a t time.
Q
And you have held t h a t o f f i c e as president through-
out the period of your service i n Washington?
A
That i s correct $
general manager*
Q
and s t i l l hold i t *
I was
My mother was president.
President* And I n what business I s t h a t company
engaged, s i r ?
A
That company i s a personal holding company t h a t was
22
organised f o r the purpose of taking over the I n t e r e s t of three
23
brothers, f i v e s i s t e r s , Including myself, i n an e s t a t e , and
24
25
seven of those members were minors. The I n t e r e s t s included a
v a r i e t y of i n t e r e s t t h a t came i n from the estate* including a
619
asclO
>
few banking shares, which were substantial a t t h a t time, i n -
2
cluding sugar stocks, lumber stocks, and r e a l e s t a t e , a
3
v a r i e t y of r e t a i l lumber stocks, construction stock,
4
construction company, and those were the p r i n c i p a l things.
S
There was just a v a r i e t y of holdings that were put i n t o t h i s
6
family corporation.
7
Q
And a t the present time, that company owns
per
a
cent of the voting shares of the F i r s t Security Corporation,
9
does i t ?
(0
A
That i s oorrect.
n
Q
And about one-half of 1 per cent of the non-voting
12
shares?
13
A
That i s r i g h t .
14
Q
So that e i t h e r as a banker or a supervisor of
15
banks, you have been active i n banking matters f o r more than
16
30 years, haven*t you, Mr. Eccles?
17
A
Yes, f o r more than 30 years.
18
Q
And i n those capacities, you have doubtless
19
20
done a great deal of work with figures and s t a t i s t i c s
A
X don't
say X am a s t a t i s t i c i a n or accountant. X
21
have been a business executive and X have r e l i e d pretty
22
l a r g e l y upon the technicians f o r my accounting work and for
23
my s t a t i s t i c s .
24
25
Q
The s t a f f of the Board of Governors of the Federal
Reserve System makes many surveys and publishes a great volume
asc6
620
of s t a t i s t i c s on many subjects, doesn't i t ?
A
I t does.
Q
And f o r a t least the l a s t 15 years you have been
f a m i l i a r with and have had some part I n supervising the
preparation and publication of those surveys and s t a t i s t i c s ,
haven 1 t you?
7
A
I wouldn*t say t h a t I had had any d i r e c t responsi-
8
b i l l t y f o r the supervision. When I came t o the Board, there
9
was a s t a f f organized a good deal along the l i n e s i t
is
10
presently organized, and the Federal Reserve B u l l e t i n was
11
being published then and i s being published now.
12
weekly reports and the s t a t i s t i c s generally were being pro-
13
vided a t t h a t time by the s t a f f and the changes t h a t hav® been
14
raa<le have come over the years i n a very gradual manner, based
15
upon the changed conditions of the economy and the needs i n
16
accordance with the changes i n the s t a t u t e .
17
Q
The various
Your work Was at least i n e v i t a b l y led you to a survey
18 of s t a t i s t i c s and f i n a n c i a l matters and the underlying facts
19
20
21
22
on which they are based, as i t not?
A
I have studied a good many f i n a n c i a l statements,
and I tare studied a good many s t a t i s t i c s .
Q
And I assume t h a t you have discovered i n the course
23
of those studies that i t i s important and necessary f o r anyone
24
dealing with figures and s t a t i s t i c s upon economic matters t o
25
have a thorough knowledge of the basic f a c t s and conditions
sc7
j,asc7
621
1:
n d e r l y i n g those f i g u r e s and s t a t i s t i c s ?
i j;underlying
j!
A
2 *
I t i s c e r t a i n l y d e s i r a b l e . I haven't always been
"able
b l e t o agree w i t h everybody who uses f i g u r e s , so
Sj
of
4 ' j i t must be t h a t there are d i f f e r e n t Ii n t e r p r e t a t i o n s o
.1
Igures.
ifigures.
q
Host of them are subject t o being i n t e r p r e t
6
Q
Host of them are subject t o being i n t e r p r e t e d
l t h e r one way or the opposite way, a r e n ' t t h e y , Gove
7
e i t h e r one way or the opposite way, a r e n ' t t h e y , Governor?
A
W e l l , sometimes there i s a compromise or a
8
A
W e l l , sometimes there i s a compromise or a middlei f - t h e - r e a d method of i n t e r p r e t i n g them.
9
o f - t h e - r o a d method of i n t e r p r e t i n g them.
10
Q
And you have made i t your business, haven't
q
And you have made i t your business, haven't you,
fovernor, t o acquire the basic knowledge i n these s i t
11
1 Governor, t o acquire the basic knowledge i n those s i t u a t i o n s
n which you were I n t e r e s t e d and I n which you conslds
12
12 i n which you were i n t e r e s t e d and I n which you considered
13
ou had a d m i n i s t r a t i v e duties which underly the s t a t l
13 you had a d m i n i s t r a t i v e duties which underly the s t a t i s t i c s
14
nd surveys of the Board?
u and surveys of the Board?
A
I have t r i e d t o be s u f f i c i e n t l y w e l l inform
15
A
I have t r i e d t o be s u f f i c i e n t l y w e l l informed t o be
16
b l e t o act i n t e l l i g e n t l y .
{able t o act i n t e l l i g e n t l y .
Q
And as a member of the Board from the Twelf
17
Q
And as a member of the Board from the T w e l f t h
18 federal Reserve D i s t r i c t , you have doubtless become
jFederal Reserve D i s t r i c t , you have doubtless become thoroughly
19
' a m i l i a r w i t h the banking s t r u c t u r e and economic cond
f a m i l i a r w i t h the banking s t r u c t u r e and economic conditions
20 tnd r e l a t e d f a c t s i n the T w e l f t h Federal Reserve Diet
and r e l a t e d f a c t s i n the T w e l f t h Federal Reserve D i s t r i c t ,
21
laven't you, Governor?
jtiaven't you, Governor?
22
A
I wouldn't say t h a t I was anybetter Informs
A
I wouldn't say t h a t I was any better Informed w i t h
23 •eference t o the banking f a c t s of the T w e l f t h Federal
£ reference t o the banking f a c t s of the T w e l f t h Federal Reserve
24 > l s t r l c t than possibly any other d i s t r i c t . I couldn't
!4
d i s t r i c t than possibly any other d i s t r i c t . I couldn't give the
25 anking s t a t i s t i c s f o r any p a r t i c u l a r d i s t r i c t .
I lo
banking s t a t i s t i c s f o r any p a r t i c u l a r d i s t r i c t .
I look a t the
V
,t
aec8
622
i
s t a t i s t i c s from the country as a whole p r e t t y l a r g e l y . A f t e r
t
a l l , t h e r e are 12 d i s t r i c t s , and 16*000 banks, so I t would
not be w e l l t o t r y tokeep up on the s t a t i s t i c s of the banking
*
p i c t u r e by d i s t r i c t s .
Q
What states are included I n the T w e l f t h Federal
e I Reserve D i s t r i c t ?
I
7 '
A
Arizona , C a l i f o r n i a , Nevada, Utah, Idaho, Oregon,
a ! and Washington.
I wouldn't be sure whether t h a t includes
9
I f o r g e t whether western Wyoming comes i n
a l l of Arizona*
10
there or n o t .
u
l y the s t a t e s .
12
q
I am not j u s t c e r t a i n , but those are e s s e n t i a l -
I show you a l i t t l e map which appears t o have come
is I out of a p u b l i c a t i o n of the Board and askyou i f
^ j helps r e f r e s h your r e c o l l e c t i o n about i t ,
15 '
i?
Governor?
a
Yes.
Q
There i s a l i t t l e piece of Arizona t h a t i s not
included!
j!
that
I s t h a t correct?
A
There I s .
There i s no p a r t of Wyoming, t h a t
Q
Wyoming i s e n t i r e l y i n the Tenth D i s t r i c t , i s
A
That i s r i g h t .
is.
it
20 jj not?
21 |j
The eastern p a r t o f Arizona i s
22
| I n the D a l l a s D i s t r i c t
23
|
Q
And t h a t d i s t r i c t i s your tone d i s t r i c t ?
\
A
That i s
i
Q
So t h a t your experience as a banker, before you cams
24
|
25
correct.
Iaso9
i<
623
i
t
!
t o Washington, was p r i m a r i l y i n t h a t d i s t r i c t ?
4
W e l l , X would say e n t i r e l y .
Q
That was before your f a m i l y ' s banks went i n t o Wyoming,
! was i t ?
5
A
6
7
No, I was going t o make t h a t exception, t h a t i n the
twenties, i n f a c t , I think e a r l y twenties, we had a bank a t
Rook Springs, Wyoming.
8
9
Q
So t h a t youare a t l e a s t f a m i l i a r with conditions i n
t h a t d i s t r i c t as i n any of them, are you, Governor?
10
n
n
A
A
I would say t h a t I would be b e t t e r acquainted w i t h
the conditions i n t h a t d i s t r i c t , not s t a t i s t i c a l l y , but with
12
>2 reference t o the general economic conditions i n t h a t section.
13
14
Q
And the banking structure there?
A
As t o the s t a t i s t i c s of i t ,
15
> the s t a t i s t i c s .
I know nothing about
I do know something about the. general c r e d i t ,
16
> the general economic s i t u a t i o n of the d i s t r i c t , I would say,
17
r b e t t e r than other sections of the country.
18
Q
That i s the point I wanted to develop.
The p r l n c i -
19
19 (pal Federal Reserve Bank i n the Twelfth D i s t r i c t I s i n what
20
20 jcity?
21
22
23
24
A
The M a d o f f i c e i s a t San Francisco.
Q
There are branches of t h a t bank i n what c i t i e s ?
A
Los Angeles and Portland, S e a t t l e and S a l t Lake.
Q
And what areas are served by those Federal Reserve
25 feanks and branches?
25
I w i l l g i v e you t h i s l i t t l e map a g a i n ,
asclO
1
2
624
I f I t w i l l a i d you I n answering t h a t .
A
The southern part of C a l i f o r n i a and Arizona are
3
I n the Los Angeles D i s t r i c t and the western part of Nevada.
4
The northern part of C a l i f o r n i a I s I n the San Francisco
5
District.
6
the Panhandle of Idaho i s i n the Portland D i s t r i c t , the State
7
of Washington.
tf
9
10
Q
The e n t i r e State of Oregon and what i s known as
There I s a narrow s t r i p of Washington also i n the
Portland D i s t r i c t , I s n ' t t h e r e , along the southern border?
A
A very small part of Portland i s i n t h a t d i s t r i c t
11
a very small part of southern Washington i s i n the Portland
12
District.
13
I n the S a l t Lake D i s t r i c t I s a l l of Idaho with the
14
exception of t h a t portion of the Panhandle and a l l of Utah
15
and the eastern part of Nevada.
16
Q
And the S e a t t l e D i s t r i c t ?
17
A
That I s the State of Washington.
18
Q
Except f o r the s t r i p which i s i n the Portland Dis-
19
20
21
22
23
24
25
trict?
A
Yes.
~
phi
625
#1A
1
Q
And you have told us that Wyoming is i n the Tenth
2
District.
What is the looatlon of the principal Federal
3
Reserve Bank in that district?
4
A
Kansas City.
5
Q
And Wyoming is i n the Jurisdiction of what branch
6
of that bank?
7
A
I think i t is the Omaha.
8
Q
I assume that you are also acquainted with the
9
10
geography and the distribution of population in that Twelfth
Federal Reserve D i s t r i c t and that portion of the Tenth we
11 have been discussing.
12
A
Well, in a general way, yes.
13
Q
And you are also f a m i l i a r , are you not, with the
14
allegations of the complaint i n this proceeding?
15
A
I think i n a general way.
16
Q
And with the facts upon which those allegations are
17
based?
18
A
19
20
I n a general way.
I nay have to refresh my memory
with reference to I t .
Q
You have t e s t i f i e d on your direct examination this
21 morning that in 19^4 you sought the advice of the Board's
22
counsel, Mr. Drebelbls, as to the Board's powers to curb the
23
expansion of Transamerlca Corporation, and the Board's s o l i c i t o r ,
24
Mr. Townsend, has introduced a copy of Mr. Drebelbls r memor-
25
andum into evidence as Exhibit 43.
jss&2
626
i
MR. STEWART:
Nay I have t h a t , Mr. Townsend?
BY MR. STEWART:
•S
1
Q
While he 1b looking for t h a t , Mr. Eccles, an I cor-
reot In understanding that that memorandum, which was pre5
pared by Mr. Drelbelbls, Is the f i r s t opinion which was ever
obatlned by the Board fron any counsel with respect to I t s
7
powers under the Clayton Act?
8
A
I could not say.
9
Q
You do not have any e a r l i e r one, do you?
10
A
I don't r e c a l l specifically any e a r l i e r written
11 opinion.
I could not say whether—
Certainly there was plenty of discussion.
I f there
12
are other opinions, I suppose they are i n the f i l e , but I just
13
don't r e c a l l .
14
15
16
17
18
19
20
21
22
23
24
25
Q
Didn't Mr. Drelbelbls t e l l you at that tine that
the natter had never been considered before?
A
X don't think so.
Q
As a natter of f a c t , didn't you t e s t i f y this morning,
Hr. Ecoles, that no member of the Board had ever known of the
existence of any such powers before that tine?
A
I f you are speaking of the Clayton Act, the power
!>f the Clayton Act, that Is correct.
Q
And Mr. Drelbelbls' nenorandun, then, was the
f i r s t opinion which the Board had received fron any counsel
with respect to i t s powers and under the Clayton Act?
A
That is correct.
Ph3
1
$27
Q
And yet I t I s a f a c t , i s n ' t i t , Governor, t h a t the
2
Clayton Act had at t h a t time been on the books f o r t h i r t y
3
year??
4
A
That i s c o r r e c t .
5
Q
And the Board had counsel throughout t h a t period
6
who were charged w i t h the duty of advising i t as to i t s l e g a l
7
responsibilities?
3
A
(Discussion o f f the r e c o r d . )
9
B7 NR. STEWARTS
10
n
That i s c o r r e c t .
Q
Hr. Townsend d i d n ' t read t h i s whole opinion, but i t
12
i s i n the record, and I would j u s t a t t h i s point l i k e to
13
d i r e c t your a t t e n t i o n t o the l a s t paragraph of i t , Hp. Eccles,
14
which reads as followss
55
gaged i n commerce"—and those words are underscored—"within
16
the meaning of the commerce clause of the Constitution i s an
17
extremely touchy one t o banks.
13
met head-on nor expressly decided by the Supreme Court.
19
H i s t o r i c a l l y , the Board has never prooeeded under Section 7
20
of the Clayton Act.
21
f u r t h e r reason t h a t such an opinion would have a persuasive
2?.
a u t h o r i t y i n court, i t might be advisable to explore the
23
questions raised w i t h the Attorney General w i t h a view possibly
24
of obtaining an opinion w i t h respect t o the Board's a u t h o r i t y
25
and r e s p o n s i b i l i t y
"The question of whether banks en-
The issue has never been
For a l l of these reasons and f o r the
Are
11
628
Pursuant t o t h a t recommendation of Mr. D r e i b e l b l s ,
1
the Board d i d t u r n over a l l of the f i l e s on t h i s Transamerlca
matter t o the Attorney General f o r use i n connection w i t h the
A,
a n t i - t r u s t i n v e s t i g a t i o n he was then making, d i d n ' t he,
Governor?
MR. TOWNSEND:
(s
I o b j e c t , may i t please the Hearing
7
O f f i c e r , t h a t he i s attempting t o indicate t h a t the turning
8
over of the f i l e s of the Board which have been heretofore
9
t e s t i f i e d to by t h i s witness i s i n r e l a t i o n t o the memorandum
W
of Mr. Dreibelbls to which he has j u s t r e f e r r e d .
n
record i s very c l e a r tteb Mr. Eccles t e s t i f i e d t h i s morning
12
that the f i l e s of the Board were made a v a i l a b l e to the Attorney
13
General at a time p r i o r to Mr. Dreibelbls• memorandum, and I
14
think t h a t f o r the purpose of correctness t h a t we ought t o
15
require the question t o conform to the evidence as i t has been
16
introduced.
MR. STEWART:
17
With the a i d of counsel's objection,
18
Mr. Eccles can doubtless answer the question, s i r .
19
f o r his statement upon the f a c t .
MR. TOWNSEND:
20
21
calls
I have objected to the form of the
THE HEARING OFFICER:
I w i l l sustain the objection
and ask t h a t counsel rephrase the question.
BY MR. STEWART:
24
25
It
question.
22
23
I t h i n k the
Q
Mr. Eccles, when were the f i l e s of the Board i n t h i s
629
ph5
1 Transamerlca natter turned over to the Attorney General?
A
2
3
in
5
19
And Mr. Drelbelbis's opinion was also sone tine i n
wasn't i t ?
6
A
That i s oorreet.
7
Q
You don't r e c a l l at this tine whether i t was before
8
Sel
Reg fws
as I r e c a l l .
Q
4
I don't remenber the t i n e , except i t was aone tine
or after that?
9
A
No, I do not.
10
Q
I s n ' t i t a f a c t , Mr. Eccles, that after Mr.
n
Drelbelbls' opinion was received, you, or somebody on behalf
12
of the Board, with your knowledge, did take up the question
13
with the Attorney General?
14
15
16
17
18
19
20
21
22
23
24
25
Arms
630
rsl
1
2
MR. TOWNSEND:
W i l l you j u s t repeat that question
f o r me, please?
3
(Question read*)
4
MR. TOWNSEND:
I don f t understand what question I s
5
being asked of the witness as to what was taken up with the
6
Attorney General.
7
Hay I inquire of counsel i f he i s asking whether the
8
subject of Mr. D r e l b e l b l s 1 memorandum was taken up w i t h the
9
Department of Justice?
10
MR. STEWART:
11
The questions raised by Mr. D r e l b e l b l s 1
memorandum, yes.
12
MR. TOWNSEND:
13
THE WITNESS:
14
BY MR. STEWART:
Very good.
I don f t r e c a l l that they were.
15
Q
Do you r e c a l l e i t h e r way on the subject?
16
A
No, I don f t r e c a l l e i t h e r way.
17
Q
You know, don f t you, Mr. Eccles, that the Attorney
18
General and the Federal Bureau of I n v e s t i g a t i o n did investigate
19
the question of an a n t 1 - t r u s t proceeding against Transamerlca
20
f o r a period of about two years?
21
22
A
Ye8, I understood that that was what they were doing?
Q
And I t was a t the termination of that two-year
23
i n v e s t i g a t i o n , i n the l a t t e r part of 19*15* that you had the
24
discussions with the Attorney General about which you t e s t i f i e d
25
on d i r e c t t h i s morning?
ArsS
1
2
3
6 3 1
A
I think that I t was a f t e r that investigation had
been completed*
Q
And I n the l a t t e r part of 19^5$ at a conference which
4
you attended, the Attorney General advised you, did he not,
5
that the facts developed I n his Investigation did not Justify
6
the b e l i e f that even a prima facie case of v i o l a t i o n could
7
be proved against Transamerlca?
MR. TOWNSEND:
6
9
Just a moimant, Mr. Eccles*
I want to object at this time, may I t please the Hearing
10
Officer.
11
Board last night for the production of the advice that
12
the Attorney General gave to the Board respecting the findings
13
of his Department.
14
this morning and I submit that any opinion of the Attorney
15
General which has been rendered i n the question,and which
16
the testimony i n this case shows was rendered by the Attorney
17
General, Is one in written form and Mr. Stewart has I t in
18
his possession; and I w i l l Interpose no objection to I t s
19
introduction i n evidence at this time and therefore i t calls
20
for no conclusion of the witness as to what the document, In
21
Mr. Stewart called for and made a demand upon the
I have produced that f i l e for Mr. Stewart
f a c t , states.
22
MR. STEWART:
Counsel stated that this morning, and
23
I told him then that I would introduce i t at the proper time
24
and place*
25
Meanwhile, I submit t h a t I am e n t i t l e d to examine the
632
Are 11
I
witness upon the subject of his conferences as of that date
2
concerning which he t e s t i f i e d on d i r e c t examination t h i s
3
morning.
Those conferences, I may say, are not reduced to
4
writing.
I n f a c t , the w r i t i n g was preliminary to the con-
5
ferences, as i t appears on i t s f a c e .
6
7
8
9
THE HEARING OFFICER:
Mr. Stewart, you may ask the
witness the d i r e c t question—the outcome of the conference.
MR. STEWART:
That i s what I thought I had done.
May I ask the Stenographer to repeat the question.
10
(Question r e a d . )
11
MR. TOWNSEND:
My objection to t h a t was that anything
12
that the Attorney General advised him
13
has been reduced to a l e t t e r , and t h a t , u n t i l the
14
Into evidence, i t i s improper f o r him to discuss the matter
15
i n the form i n which he has attempted to do so.
16
THE HEARING OFFICER:
i n an o f f i c i a l form
l e t t e r goes
The Heading O f f i c e r w i l l
17
sustain the objection and ask Mr. Stewart to ask a d i r e c t
18
question as to the outcome of the conference.
19
MR. STEWART:
Mr. Hearing O f f i c e r , may I ask i f
20
am to be forced to examine t h i s witness without leading
21
questions, as i f i t were d i r e c t examination?
22
examination.
23
24
25
MR. TOWNSEND:
I
This i s cross
I have no objection to his asking
leading questions, may i t please the Hearing O f f i c e r .
i t i s proper and r i g h t f o r him to do so.
I
think
d I am not r a i s i n g
Are
11
633
1
a question on the ground t h a t I t I s a leading question.
2
r a i s i n g the objection on the ground t h a t he I s attempting
3
to have the witness characterize what I s obviously a long
4
opinion of the Attorney General without having put I t
5
the f i l e or I n t o the record of t h i s case f o r use I n examining
6
the witness—a foundation f o r which I have already stated
7
by turning the l e t t e r over to counsel.
8
that I s a reasonable way to proceed.
MR. STEWART:
9
the witness one word about the l e t t e r .
11
a conference.
13
THE HEARING OFFICER:
16
I t seems to me that
I am asking him about
I n that event I w i l l reverse
my r u l i n g and l e t the witness answer.
BY MR. STEWART:
14
15
Into
And of course, s i r , I haven 9 1 asked
10
12
I am
Q
Do you remember the question, or would you l i k e
it
repeated?
17
A
W i l l you repeat I t ?
18
Q
I n the l a t t e r part of 19^5* a t a conference attended
19
by you, i s n ' t i t a f a c t that the Attorney General advised you
20
that the f a c t s developed i n his I n v e s t i g a t i o n did not J u s t i f y
21
the b e l i e f that even a prima f a c i e case of v i o l a t i o n could be
22
proved against Transamerlca?
23
24
A
I don't remember whether that was s p e c i f i c a l l y stated
a t the conference or not.
25
Q
len*t
that the substance of what he advised you?
Ar85
1
A
No*
The discussion was—
The meeting was held
2
f o r the purpose of discussing the need of bank holding company
3
l e g i s l a t i o n — a discussion f o r the need of g e t t i n g bank holding
4
company l e g i s l a t i o n .
5
agencies were present.
6
c e r t a i n l y p r i m a r i l y with reference to the kind of a bank
7
holding company b i l l that would meet the s i t u a t i o n and would
8
be agreeable to the other supervisory agencies.
9
General was p r i m a r i l y t h e , I would say, the—
For that reason, the other supervisory
As I r e c a l l the discussion, I t was
The Attorney
I suppose,
10
because of t h i s I n v e s t i g a t i o n t h a t he had made with reference
n
to Transamerlca, that he had some I n t e r e s t I n the whole
12
question of necessary
13
regulatory l e g i s l a t i o n .
I don f t r e c a l l at t h i s time who called the conference.
14
I t happened to be i n the Attorney General 9 s o f f i c e , but I don't
15
r e c a l l , I am not sure that he c a l l e d the conference or that
16
i t was suggested by somebody e l s e .
17
Q
I j u s t don't r e c a l l .
That i s a l l very i n t e r e s t i n g , Mr. Eccles.
But i s n ! t
10
i t the ultimate f a c t that a t or about t h a t time the Attorney
19
General declined to undertake a prosecution of Transamerlca
20
under the a n t i - t r u s t laws?
2*
A
I think that i s c o r r e c t .
22
Q
All right,
2-3
Now, i t was also about that time, wasn't i t , that the
sir.
24
Board engaged, as a part of i t s l e g a l s t a f f ,
25
had f o r some years past been engaged as counsel f o r the
the attorney who
6
Ars6
35
1
S e c u r i t i e s and Exchange Commission I n I t s prosecution of oharges
2
against Transamerlca Corporation?
A
t
I don't know how near to t h i s meeting the Board
employed Mr. Townsend.
5
Q
W i l l i t r e f r e s h your r e c o l l e c t i o n i f I t e l l you
j t h a t i t was i n December 19^5 t h a t Mr. Townsend argued—made
ji
7
the f i n a l argument—before the S e c u r i t i e s and Exchange Commie -
8
sion i n the other matter on which he had been engaged against
9
Transamerlca?
10
n
record,
12
Governors on March 1 , 19^5*
13
m
MR. TOWNSEND: I am w i l l i n g to s t i p u l a t e f o r the
r . Stewart, t h a t I came to work f o r the Board of
MR. STEWART:
a t the time I
stated?
is
MR. TOWNSEND:
16
MR. STEWART:
17
18
I t appears of record.
All right.
He has answered the question, Mr. Eccles.
You needn't do
it.
»9
20
And t h a t you did argue the SEC case
BY MR. STEWART:
Q
Mr. Townsend, who, of course, i s the lawyer to whom
21
I r e f e r r e d , was then assigned by you, was he n o t , to work on the
22
Transamerlca matter f o r the Board?
23
24
25
A
I would l i k e to make a statement I n connection w i t h
the employment of counsel.
Q
W i l l you answer my question f i r s t ? then you may make
636
Ars7
I
any statement that you desire, s i r .
2
A
I t relates to your question.
3
Mr. Leachman was recommended by Mr. Drelbelbls, who Is
4
the general counsel,as a special counsel who should be—
Nr.
5
Leachman was recommended by Mr. Drelbelbls* the general
6
counsel, as a special counsel for the Board In connection with
7
the consideration of this Transamerlca case—or problem, l e t ' s
8
put I t that way*
9
He was In Dallas, Texas, and he was a member of a law firm and
Mr. Leachman was not l i v i n g In Washington.
!0
was not giving the Board his entire time, and yet the cost
11
of the employment of Mr. Leachman, the Board f e l t , was entirely
12
too expensive I n relationship to the situation; and so the
13
Board raised the question with Mr. Drdbelbls about getting
14
a f u l l - t i m e counsel with the Board Instead of employing
15
i n d e f i n i t e l y this outside counsel.
16
Mr. Drelbelbls recommended to the Board that they
17
employ Mr. Townsend as the assistant general counsel and the
18
Board did so, and upto that time I don't think any member of
19
the Board ever heard of Mr. Townsend, or certainly had never
20
met him.
21
Q
Is that the end of your statement, sir?
22
A
That Is i t .
23
Q
I n any case, when Mr. Townsend was employed I take
24
25
i t that you learned of his past work on Transamerlca matters?
A
I don't remember that we did.
I d o n ' t r e c a l l that
Are
11
637
1
the question of his past work on Transamerlca was even
1
considered.
Q
I see.
However that may be, you did assign him to
work on the Transamerlca matter shortly a f t e r he Joined the
B o a r d s s t a f f , d i d n ' t you?
A
The general counsel is the one that the Board was
7
holding responsible f o r a l l leg&l matters, and I t was the
8
general counsel who was avthorlzed t o employ him and to assign
9
t h i s work to him.
10
Q
Did he take Mr. Leachmenfs place on the work?
11
A
He d i d .
12
Q
And he had been employed f o r that purpose?
13
A
W e l l , he was employed f o r any work that the general
14
counsel might assign him t o .
15
assigned by the general counsel f o r that purpose.
At that p a r t i c u l a r time he was
16
Q
17
No action having been taken by the Attorney General up to
I see.
18
February
19
his previous opinion that no prosecution of Transamerlca was
20
warranted, d i d n ' t you, Mr. Eccles?
of 19^7* youthen f u r t h e r urged him to reconsider
21
A
That i s correct.
22
Q
But the Attorney General did not express any d i f f e r e n t
23
24
25
opinion to you a f t e r t h a t , did he?
A
As a matter of f a c t , the Attorney General never
expressed an opinion a f t e r t h a t .
We g o t no response from the
Are 11
638
1
Attorney General, except that he advised me verbally—when
2
I asked him why we had not received a response t o t h i s question—
3
he advised me that he had been asked by Mr. Snyder to send any
4
communication of t h i s sort over to him, and which he had done.
5
He had sent t h i s communication over to the Secretary of the
6
Treasury.
7
Q
Regardless of whom he communicated w i t h , you have
8
never heard of his expressing any d i f f e r e n t opinion than the
9
one you have had fron/*1^19^5* have you?
to
A
I then—
I never received a reply from him nor
11
one from the Secretary of the Treasury, although I then
I?
wrote the Secretary of the Treasury with reference to the
13
same matter.
14
Q
15
I say, regardless of with whom the Attorney General
communicated you have never beard of his expressing any d i f f e r e n t
.opinion
16
/about the Transamerica matter than the one you had from him
17
IB
i n 19^5, have you?
A
No*
That i s correct.
Q
And i t was a f t e r a l l of t h a t , Mr.
19
20
21
22
23
24
25
Eccles, a f t e r
your counsel, Mr. Drelbelbis,recommended the reference to the
Attorney General and a f t e r the Attorney General
investigated
and declined to prosecute, a n d , a f t e r being urged to reconsider,
had r e f r a i n e d from giving any d e f i n i t e opinion—it was a f t e r
a l l that that you f e l t , as you t e s t i f i e d t h i s morning on d i r e c t
examination, that your public duty required you to zsk Mr.
ArslO
639
Townsend f o r a f u r t h e r opinion on the subject.
Is that
correct?
MR. TOWNSEND:
I object to the form of the question,
may i t please the Hearing O f f i c e r .
I t suggests facts i n
Juxtaposition, one to another, which i s wholly f a l l a c i o u s and
erroneous
and Intended merely by Mr. Stewart to suggest
7
that the Department of Justice investigation was undertaken
8
at the request of the Board, which, i t already appears
9
record, i s not the f a c t .
10
I object to the form of the question.
n
THE HEARING OFFICER:
12
MR. STEWART:
13
Objection overruled.
Perhaps I can change the form of the
question, s i r , and get away from counsel f s objection.
14
15
i n the
BY MR. STEWART:
Q
I t was a f t e r a l l of these matters we have been
16
discussing here today,
17
t e s t i f i e d t h i s morning, that i t was your public duty that
18
required you to ask Mr. Townsend f o r a f u r t h e r opinion on the
19
same subject?
20
A
Vt. Eccies, that you f e l t , as you
That i s c o r r e c t — i n the l i g h t of what i s i n the
21
l e t t e r , which has not been introduced, from the Attorney General
22
and i n the l i g h t of the l e t t e r which we wrote to the Attorney
23
General, a copy of which was l a t e r sent to Mr. Snyder, which
24
has not been introduced.
25
Q
And you then, a f t e r you asked Mr, Townsend f o r that
Are 11
640
1
further opinion, promptly obtained from him, i n the f a l l of
2
19^7, the opinion which you had requested and which he read
3 | into the record this morning as Board1 Exhibit 44, didn't you?
i
4
A
5 j it—
I don't r e o a l l how promptly i t was.
We did receive
I don't r e c a l l whether I t was a question of a legal
6
opinion.
7
give us a report with recommendations on this Transamerlca
e
matter.
9
i t is—
10
Q
11
got i t .
1?
I think what we asked Mr. Townsend for was to
I don't know whether i t makes any difference whether
A
I n any case, you asked him for that opinion, and you
That is r i g h t .
I asked him for the communication.
'3
The communication he gave to us was certainly a result of the
u
request that I asked f o r .
'5
16
q
And I t was upon the basis of that three-page opinion
that you presented the matter to the Board and thatthe Board
authorized the investigation which led to the i n i t i a t i o n of
10
'9
this proceedingj is that correct?
A
Not that solely.
That was one of the factors,
20
certainly.
21
before over
22
for actionj but that taken into account with everything that had
23
preceded i t was responsible for the authorization to determine
24
whether or not this action was warranted.
25
Q
K i a t , without a l l of the background that had gone
the years, would not certainly have been any basis
And t h a t
background was the background m have been
641
Arsl2
?
discussing here t h i s a f t e r n o o n , wasn't
2
A
Yes, t h a t I s p a r t of
it?
it*
3
Q
I t I s a l l of i t , i s n ' t i t , Mr. Eccles?
li
!i
4 jj
A
W e l l , i t i s p r e t t y hard to discuss i n a few minutes
li
s s! a background t h a t has taken 30 y e a r s .
1 would say the high
i
6
spots.
7
Q
e
Now, you r e f e r r e d t o the a c t i o n of the Board upon the
9
All right,
sir.
I n i t i a t i o n of t h i s matter as being unanimous.
Can y o u t e l l
me, M r . Ec'dlet, how many times, i f e v e r , during your 15 years
n
as a member of the Board, the Board has f a i l e d t o go along
?2
w i t h your recommendations?
w i
14
^
A
I c a n ' t remember, v o l u n t a r i l y , but I t i s c e r t a i n l y
a good many times.
5
Q
Can you name one f o r me?
A
You w i l l f i n d some, I am sure, i n the report of the
| committees
of Congress.
I have i n mind r i g h t now a p a r t i c u l a r l y
I important period i n connection w i t h 19—
I t h i n k i t was i n
j]C-the Spring of 1937* when there was d i v i s i o n w i t h reference
jr t o the matter of reserve requirements and a matter of open
P
! market operation a t the time of the downturn i n 1937*
22
23
!
|
Q
Can you t h i n k of any i n , say, the l a s t f i v e y e a r s —
jl
| up to the time t h a t you ceased to be chairman?
|
S4
25
A
I d o n ' t remember s p e c i f i c a l l y , but I thought, f o r
ii
l! instance, i n the case of the holding company l e g i s l a t i o n ,
in
i t h i s matter of a Section 30 case, that Mr. Ransom was, a t that
|
^ !
time, favorable to the "death sentence. 11
Q
That was back I n 1938, wasn't I t ?
/
A
That I s r i g h t ; t h a t was I n 1938*
r
Q
That was 10 years ago—11 years ago.
(•
A
I happen to r e c a l l that period.
7
Q
I s thatthe most recent one you can remember?
3
A
I remember a good many instances where there has
9
been disagreement i n the Board and where, i n order to get an
10
agreement, there has been compromise—there has been a modif
and
11
c a t i o n / t h a t that has happened a great many times.
12
Q,
Can you r e c a l l a recent instance of that?
I don't
13
want to drag t h i s out i n d e f i n i t e l y , but I would } i k e a specific
14
instance, i f you can give i t to me.
15
A
Of lourse I haven't, as you know, been chairman of
16
the Board f o r more than a year.
17
Q
I said up to the time that you ceased to be chairman,
A
I could review the matter and could give you, I am sure*
18
sir.
19
20
a ntaabor
important instances where that has transpired.
21
Q
But none of them stands out i n your memory a t the
22
present time?
23
A
No, I don't remember anything specific at the present
Q
All right.
24
time.
L e t ' s get along to something e l s e .
Are 11
1
643
Oh, by the way, before I leave t h a t , i s I t the f a c t
2
that although you were not re-designated as chairman of t h i s
3
Board by President Truman when your previous term expired,
4
1946, that a t the present time you are serving as chairman
5
pro tem during the absence of Mr. McCabe and by e l e c t i n n of
6
the Board?
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A
in
That i s correct.
MR. STEWART:
mid-afternoon recess?
Would this-be a good time f o r the
I am about to s t a r t into anothersubject.
THE HEARING OFFICER:
ten minutes.
(Short recess taken.)
The hearing w i l l recess f o r
p*6
#3
THE HEARING OFFICER:
i
2
W i l l the hearing come to
order, please.
MR. TOWNSEND» Before Mr. Stewart resumes his
3
4 examination, may i t please the Hearing O f f i c e r , the witness'
5
recollection has been refreshed by discussion with me during
6
the intermission concerning an impression that I think he has
7
given in the record, an erroneous impression as to a certain
8
conversation that he has reported discussing the the Attorney
9
General•
10
May I respectfully request that the witness be per-
11
mitted to correct his testimony in the light of his present
12
reoollection?
13
MR. STEWART: Mr. Hearing Officer, the witness w i l l
14
have adequate opportunity to correct anything he wants to on
15
direct examination, after I am through with him, and I respect-
16
f u l l y object at this t i n e , not only to taking a matter out
17
of order, but also to the witness conferring with counsel during
18
the middle of cross examination.
19
20
MR. TOWNSEND:
I t is most irregular.
I f the Hearing Officer should decide
to postpone the correction of the record by the witness, him-
21 s e l f , then I think i n light of the erroneous impression that
22
has been given the press in eonnectlon with this matter,
23
and following the example set by Mr. Stewart on only yesterday,
24
I should say that i t is unfair to leave the impression, because
25
i t is a matter that was under discussion and involved what the
645
Ph7
1 Attorney General said to Mr* Eocles about having referred
2
! the subject of the Sherman Act Investigation to the Secretary
i
3
of the Treasury, and I f he could not be permitted to correct
4
i t now, I w i l l say that i n due course I w i l l show, so that the
5
press w i l l not be misinformed, that Governor Eccles was told
6
by the Attorney General, not that the Secretary had asked the
7
Attorney General to r e f e r such matters to him, but rather that
S the Attorney General had, himself, voluntarily referred the
i
9
i matter to the Secretary,
10
n
12
Ml. STEWART:
are the f a c t s , I w i l l accept i t without further need for c l a r i f i c a t i o n from the witness.
13
MR. TOKWSEND:
14
15
16
17
IS
19
20
21
22
23
24
25
Upon counsel's assurance that those
I t is so understood.
BY MR. STEWART:
Q
Now, Mr. Eccles, getting back to Ootober 31* 1947,
the Board on that date, I believe you previously t e s t i f i e d ,
unanimously adopted a resolution directing that an investigation be undertaken under the direction of i t s legal division
to ascertain whether there i s just cause for the Board to
I n s t i t u t e statutory proceeding contemplated by Section 11 of
the Clayton Act, looking to the entry of an order requiring
Transamerlca Corporation to divest i t s e l f of certain bank
stocks, is that correct?
A
That is correct.
Q
And did you w r i t e a l e t t e r to the Comptroller
Are 11
646
1 of the Currency about that?
2
A
Yes, as I r e c a l l , a l e t t e r was w r i t t e n to the
3
Comptroller of the Currency, advising h i » , and I believe
4
that—
Q.
5
6
You said you wrote i t .
here and then we won't have t o guess about i t .
7
NR. STEWART:
8
MR. TOWNSEND:
9
MR. STEWART:
MR. STEWART:
I would r a t h e r have yours, i f you
can f i n d i t q u i c k l y .
MR. TOWNSEND:
I w i l l get i t f o r you.
That i s the
l e t t e r ; no question about i t .
BY M.
18
!9
I w i l l remember i t as soon as I see
it.
16
17
I have a copy t h a t was published i n
MR. TOWNSEND:
14
15
I have i t soaewhere, i f you w i l l
the newspaper, i f you want to take t h a t one.
12
13
Do you have i t ?
bear w i t h a e .
10
II
L e t ' s see i f you have i t
Q
STEWART:
I show you a purported copy of the l e t t e r which your
20
counsel has i d e n t i f i e d and ask you i f that refreshes your
21
r e c o l l e c t i o n that you sent a l e t t e r i n those terns to Hr.
22
Delano a t or about November 7,
Do you recognize i t , Governor?
23
24
A
25
recall
19^7.
Yes, I think that i s the l e t t e r , verbatim, as I
it.
UiS
647
I®. STEWART:
Since this I s hardljs^the fora to put
I n , I w i l l Just read i t i n the reoord.
MR. TOWHSEHD:
No objection.
MR. STEWART: The following l e t t e r marked "personal
Mi
! av
' 'd confidential" was addressed by Marriner Eccles to Preston
T
jDelano, Comptroller of the Currency, on November 7 $ 19^7*
i
"Dear Preston:
7
At a recent meeting, the Board
. preceived
1
s
and considered a report from i t s Legal Division
9 discussing Transamerlca Corporation and i t s group of control
jo |banks»
I n that report, counsel for the Board advised that
n !in his opinion the s t a t i s t i c a l data respecting these banks
!
;raises serious questions as to the Board*a responsibilities
13 under Section 11 of the Clayton Act®
That Section, as you
14 know, places upon the Board primarily the responsibility for
15
effectuating certain aspects of the Federal anti-monopoly
16
policy.
17
" I t was counsel9s recommendation that the Board
18
investigate the entire Transamerlca situation i n the l i g h t
19
of these statutory provisions to determine what action, i f
20
any, the Board should take thereunder*
2!
* This is to advise you that at i t s meeting of
22
October 31* l a s t , the Board unanimously adopted a resolution,
23
directing that an investigation be undertaken under the
24
direction of i t s legal d i v i s i o n to ascertain whether there
25
i s Just cause for the Board t o i n s t i t u t e the statutory pro
phlO
1 contemplated by Section 11 of the Clayton Act, looking to
2
the entry of an order requiring Transamerlca Corporation to
3
divest of i t s stocks of any or a l l of the banks which i t now
4
owns, with the exception of that of Bank of America national
5
Trust and Savings Association.
BY MR. STEWART:
6
7
11
S i n c e r e l y yours a
Q
Was that an accurate report, Mr. Eccles, to Btr.
a Delano of the action of the Board?
9
A
I t must have been.
I don*t r e c a l l , but I
10
assume a l e t t e r of that sort would not be sent out unless
11
I t did express what the action was.
MR, STEWART:
12
I have requested the production of
13
the Board*s order or the minutes thereof*
14
that that matter has not yet been determined or may I have
15
those now?
16
THE HEARING OFFICER:
17
MR. STEWART:
I understand
I t w i l l be shortly, Mr. Stewart
Very w e l l , s i r , I shall pass that u n t i l
i a I know whether I can look at them.
BY MR* STEWART:
19
20
Q
I c a l l your attention, Mr. Eccles, to the fact
21
that i n your l e t t e r to Mr. Delano, you indicated that the
22
order toward which this investigation was looking, was an
23
order for the divestment of stocks of any or a l l of the banks
24
which i t
25
ca National Trust and Savings Association.
now owned, with the exception of that of Bank of Amerl
Of course, you
l
plill
649
ilknow t h a t t h e complaint i n t h i s proceeding demands the d i v e s t -
[!
: jiment o f t h a t s t o c k a l s o ?
^ ;
A
That i s
correct.
j;
Q
When d i d t h a t ohange come a b o u t , Governor?
r. !}
A
W e l l , t h a t change came about a f t e r t h e i n v e s t i g a t i o n
and the r e p o r t .
7
8
Q
I s t h a t t h e most s p e c i f i c answer* you can g i v e me
on t h a t ?
9
A
I t i s the most s p e c i f i c answer I can g i v e you.
,0
Q
How, s i r , f i l l o w i n g t h e making o f t h a t order of
n
October 31, t h e Board's s t a f f conducted an i n t e n s i v e
12 g a t l o n i n Washington, D. C. and i n C a l i f o r n i a , d i d n ' t
13
A
investlit?
Yes.
14
MR. TOWNSEND:
,5
THE WITNESS:
I f you know.
W e l l , I understood t h a t i t had.
I t was
16 c e r t a i n l y what they were a u t h o r i z e d t o do.
BY MR. STEWART:
17
is
Q
Who was i n charge o f t h a t
19
A
Mr. Townsend.
20
Q
And how many memebers o f the s t a f f were assigned
21
22
to i t ?
A
X
d o n ' t know.
I t h i n k Mr. Chase, Mr. Thompson,
23
Mr. S m i t h , Mr. H a r b e t t .
24
l e a s t those were the p r i n c i p a l ones.
Investigation?
Q
I d o n ' t know how many o t h e r s .
Those were the key f i g u r e s t o t h e best of your
At
phl2
650
1 knowledge?
2
A
Tea.
3
Q
And there were a number of other a s s i s t a n t s , Z
4
5
assume?
A
I think they had assistance from the s t a f f of the
6
Federal Reserve Bank of San Francisco when they got t h e r e .
7
The s t a f f people there worked w i t h them and they had a good
8
deal of information from the bank f i l e s .
9
10
Q
How was that arranged, s i r ?
MR. TOWNSEND:
Just a minute.
I have looked back
11 over my notes on the course of the examination thus f a r and
12 I f i n d t h a t a considerable portion of the cross examination
13
of Mr. Eccles thus f a r i s directed t o matters concerning the
14
subject matter of the i n v e s t i g a t i o n t h a t took place by the
15
Board, preliminary to the issuance of the complaiifc i n t h i s case.
16
I have been r e l u c t a n t t o interpose any objection
17
so long as i t appeared that he was merely covering i n general
18
the s i t u a t i o n t h a t we had discussed i n b r i e f form i n the d i r e c t
19
examination, but i t seems to me t h a t the time has cose when
20
i t i s appropriate f o r me to object t h a t the cross examination
21
on t h i s phase of the Board's preliminary discussions and con-
22
s i d e r a t i o n s , p r i o r t o the issuance of t h i s complaint, are
23
e n t i r e l y i r r e l e v a n t and immaterial to what we are here seek-
24
ing to e s t a b l i s h .
25
The Board has Issued i t s complaint.
We are here
Are 11
651
I
to t r y the Issues of the complaint.
I t eannot possibly be
2
relevant a t t h i s stage or a t any stage when I t gets I n t o a
3
c o u r t , I f I t ever gets t o a c o u r t , as to the methods pursued
4
by the Board, leading up t o the Issuance of the complaint.
A f t e r a l l , t h i s s i t u a t i o n i s no d i f f e r e n t from t h a t which
6
obtains i n any administrative qgenoy which, having issued a
7
complaint which c a l l s f o r a hearing, sets the matter down f o r
8
a hearing and i t i s the basis of the complaint upon which the
9
hearing i s t o be
10
held.
And so I r e s p e c t f u l l y suggest t h a t i t i s appropriate
11
f o r me to object a t t h i s time t o any f u r t h e r minute examin-
12
ations as t o the discussions of the Board which obtained at
13
a time s i x or eight months p r i o r t o the issuance of the
14
complaint as to who p a r t i c i p a t e d i n the i n v e s t i g a t i o n , as to
15
where they went t o conduct the i n v e s t i g a t i o n , as to the
16
papers t h a t were a v a i l a b l e t o them or the f i l e s or where they
17
were obtained.
18
That has nothing t o do w i t h t h i s proceeding, may
19
i t please the Hearing O f f i c e r , and i t seems t o me t h a t i n the
20
i n t e r e s t of time we ought t o have a r u l i n g t o t h a t e f f e c t .
21
HE. STEWART:
I f counsel had waited two more ques-
22
t i o n s , which would have taken less time than h i s objection
23
t o s t a t e , he wouldn't have had to make the objection.
24
25
THE HEARING OFFICER:
The Hearing O f f i c e r w i l l
overrule the objection and ask the witness t o answer i t .
phi*
6 52
1
MR. STEWARTs
2
BY MR.STEWART:
3
4
Q,
I w i l l repeat the question, s i r .
Hon was the natter of the Investigation through
the San Francisco Reserve Bank arranged?
5
A
I could not t e l l you.
6
Q
Consultations were held with you, weren't they,
7
Mr. Eccles, fron tine to tine with respect to the charges
8
which were to be made In the complaint?
9
A
They were not.
10
Q
They were not?
11
A
They were not.
12
Q
You reviewed the complaint before i t was filed?
13
A
Yes.
MR. STEWART:
14
I would l i k e to ask now that a copy
15
of the complaint be handed to the witness, because I wish
16
to direct his attention to certain matters in i t .
17
(The doounent was furnished to the witness.)
18
BY MR. STEWART:
19
Q
I would l i k e to direct your attention to Page 12 of
20
the conplalnt and to the fact that there are l i s t e d on that
21
page, In paragraph 5, Just above the place where paragraph 6
22
begins on Page 12, two banks in the State of Arizona, and
23
three banks I n the State of Washington, and one bank I n the
24
State of Nevada, and also ask you to look at the previous
25
page on which you w i l l find l i s t e d additional banks fron
14
phi4a
i
653
those three states*
'i
A
Where I s that?
-i
Q
On Page 11.
On Pages 11 and 12 you w i l l f i n d l i s t e d
a number of banks from the three states of Arizona, Nevada
and Washington.
r,
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A
Yes.
Do you see then?
ascl
m
f — pSul
1
Q
I also d i r e c t your a t t e n t i o n to the a l l e g a t i o n of
2
Paragraph 9 of the complaint, which you w i l l f i n d on page
3
17 — I think t h a t i s the l a s t page of the complaint — t h a t , *
4
and I quote:
5
stocks of the banks l i s t e d i n Paragraphs 4, 5* and 6, and so
6
f o r t h — n noting that 5 i » one of them n — was contrary to
7
law, i n v i o l a t i o n of Section 7 of the Clayton Act and the
8
e f f e c t of such acquisition of such stocks *may be, has been
9
and i s 8 t o substantially lessen competition, to r e s t r a i n com-
"The acquisition by Respondent of the c a p i t a l
10
merce and t o tend to create a monopoly of commerce by
11
the Respondent i n the commercial banking bualness
12
5 - s t a t e area of C a l i f o r n i a , Oregon, Nevada, Arizona, and
13
Washington, or i n various sections or communities I n the said
14
f i v e states*. 1 1
9
i n the
Do you see that?
15
16
A
Yes.
17
Q
You knew and intended, did you not, when that com-
18
p l a i n t was f i l e d , that the alleged v i o l a t i o n of the Claytn
19
Act and substantially lessening competition and r e s t r a i n i n g
20
commerce, intending to create a monopoly should apply to the
21
States of Arizona, Nevada, and Washington, as w e l l as t o the
22
other states mentioned?
23
24
25
A
Yes, I knew that the complaint covered a l l of the
banks that were controlled by Transamerlca.
Q
Well, regardless of whether they were controlled by
I
655
| asc2
?
)
1 !j Transamerlca or not, you Intended I t t o apply t o Arizona,
2
!
jNevada, and Washington, d i d n ' t you?
!j
\>.
MR. TOWNSEND: Just a moment. Thefre I s no evidence
ii
4 !• that Governor Eccles Intended t o do anything I n t h i s case,
3
O Ijmay I t please the Hearing O f f i c e r .
jj
6
7
!
10
n
12
13
14
15
16
17
18
He made quite a statement on the sub-
MR. TOWNSEND:
I t seems t o me that the observa-
ject.
8
9
MR. STEWART:
t i o n I made a few moments ago i s going to become even more
pertinent as we get into t h i s sort of examination.
I did not
take Mr. Eccles over the complaint i n t h i s case, and i t would
be obviously an Improper thing f o r counsel for Respondent t o
do I t .
After a l l , t h i s i s a complaint having been Issued
by the Board, not the individual complaint of Mr. Eccles or any
other i n d i v i d u a l and f o r counsel t o attempt to cross examine
the witness about the minutiae of t h i s complaint, i n the
absence of making Mr. Eccles his own witness for the purpose
jof giving the answers i n respect to these questions, assuming
19
that he can give the answers t e the questions, I s highly
20
{improper cross examination.
21
MR. STEWART:
I f the Hearing O f f i c e r please, the
22 Witness t e s t i f i e d before I asked him the f i r s t of these
23 questions that he reviewed the complaint before i t was f i l e d
24
25
and I now intend to ask him some questions about i t .
MR.TOWNSEND:
Of course, he reviewed the complaint
656
asc3
I
so f a r as h i s o f f i c i a l duty may have been t o review the com-
2
plaint.
I t Just seems t o me t o permit t h i s examination t o get
down i n t o the minutiae of the complaint i s c e r t a i n l y grossly
4
Improper under these circumstances, unless, of course, he
5
wants t o make Mr. Eccles h i s own witness, i n which event
6
c e r t a i n l y w i l l have no o b j e c t i o n .
MR. STEWARTs
7
I
I t h i n k i t i s obvious from what has
8
t r a n s p i r e d , s i r , t h a t he wouldn®t want t o do t h a t ,
sir.
9
I submit t h a t I am e n t i t l e d t o examine, Mr. Eccles, however,
10
as an adverse witness who has t e s t i f i e d adversely and t h a t
11
I am e n t i t l e d t o examine him upon t h i s whole subject matter
12
which he c e r t a i n l y covered l i k e a blanket i n his d i r e c t exam-
13
inable
14
minutiae, I would hardly t h i n k t h a t an examination upon three
15
of the f i v e states involved i n the complaint i s i n the c a t e -
16
gory of minutiae.
17
18
19
20
21
22
23
24
25
Let me Just say as t o Mr. Townsend9s comment about
657
THE HEARING OFFICER:
i
The Hearing O f f i c e r w i l l
overrule the objection.
THE WITNESS:
I would —
BY MR. STEWART:
?
Q
Do you r e c a l l the question, Mr. Eccles?
A
W i l l you repeat the question?
Q
The question was:
You knew and intended, did you
8
not, when the complaint was f i l e d , that the charged violatrirfcn
9
of the Clayton Act of s u b s t a n t i a l l y lessening competition,
10
r e s t r a i n i n g commerce, intending to create a monopoly,should
n
apply to the states of Arizona,
12
w e l l as the other states merftloned?
13
A
Nevada
and Washington, as
Each Board member had a copy of the complaint f o r
14
consideration a t the Board meeting.
15
complaint. I did not discuss the complaint with counsel
16
except as the complaint was discussed by the Board as a whole,
17
and I assume that not only I but t h a t a l l Board members knew,
18
c e r t a i n l y , i n a general way, what the complaint covered.
19
Q
I did not see the
Of course, speaking only f o r yourself.—as I presume
20
you should—was i t your knowledge and i n t e n t i o n , at thetime
21
you approved and voted f o r t h i s complaint, to include the
22
states of Arizona, Nevada and Washington i n those charges of
23
lessening competition and tending to create a monopoly?
24
P
Yes.
25
Q
All right.
658
Ars2
1
Now, you have t o l d us e a r l i e r that you are f a m i l i a r —
2
g e n e r a l l y , a t least—with the economic conditions and the
3
banking s i t u a t i o n I n those s t a t e s , and I should l i k e to
4
d i r e c t your a t t e n t i o n p a r t i c u l a r l y to the state of Arizona and
5
ask you to state f o r the record the specific communities i n
6
Arizona i n which i t was your i n t e n t i o n to charge that
7
competition between banks had been lessened or trade had been
8
restrained or that there had been any tendency to create a
9
monopoly•
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
ascl
#05
659
1
NR. TOWNSEND:
Again, may I t please the Hearing
2
Officer, I point to the e v i l of the l i n e of questioning that
3
Is obviously being pursued by counsel.
4
ness to subject himself to minute cross examination on the
5
allegations of this complaint I s obviously improper and beyond
6
the scope of the direct examination, that i t w i l l take up
7
nowhere I n the determination of the Issues that are here be-
To require t h i s w i t -
8 fore us, and is just going to require a space of time
9
devoted to a f r u i t l e s s investigation.
10
THE HEARING OFFICERs
n
BY MR. STEWARTt
Objection overruled.
12
Q
Do you r e c a l l the question, sir?
13
A
No.
14
MR. TOWNSEND:
15
BY MR. STEWART :
16
17
Q
W i l l you repeat the question, sir?
I say, r e c a l l i n g your e a r l i e r testimony that you
were f a m i l i a r with the general economic and canking situa-
18 tions i n those states, I would l i k e to ask you to direct your
19
attention to the State of Arizona and to state for the record
20
the specific communities i n Arizona i n which i t was your
21
intention to charge that competition between banks had been
22
lessened or that trade had been restrained or that there had
23
been a tendency to create a monopoly.
24
25
MR* TOWNSEND:
I object again, on the further ground,
m j I t please the Hearing O f f i c e r , that there I s no evidence
660
asc2
I
that t h i s witness Intended to charge anything.
2
Bosrd's charge.
I t I s the
I s n f t I t obvious that theyare t r y i n g to put
words I n t h i s witness 1 mouth that are u t t e r l y inconsistent
4
with the entire course of these proceedings, and I most
5
respectfully urge, s i r , that i f Mr. Stewart i s to be permitted
6
to examine t h i s witness on the subject of the Individual i n -
7
t e n t , on the part of the witness, i n respect to any one of
8
these allegations, as though i t were his charge, that such an
9
impression is wholly unfair to both sides of the case and
10
p a r t i c u l a r l y to the Board1s case.
1)
THE HEARING OFFICER:
The Hearing Officer w i l l
12
have to overrule the objection and l e t the witness answer as
13
he deems best.
14
THE WITNESS:
I did not consider any of the com-
15
munities s p e c i f i c a l l y I n the State of Arizona or any other
16
state.
17
account the whole, o v e r - a l l situation, which seems to me i s
As f a r as my consideration was concerned, I took into
18 the only way this matter can be considered, which i s not
19
the question of whether i n some particular community, whether
20
i n Arizona, California, or Oregon or i n any other community
21
that ©"monopoly existed or that the operation tended toward
22
the creation of a monopoly i n any particular individual
23
community or s t a t e . I took into account the e f f e c t upon the
24
entire area of a c o n t i n u a t i o n of the growth of the Trans-
25
amerlca Corporation, certainly i n the l i g h t of what had hap-
661
aac3
1 pened i n the past w i t h reference t o i t s growth, t h a t there
2
was a question, as I understood i t , or whether or not t h i s
3
expansion of Transamerlca was tending toward the c r e a t i o n of
4
a monopoly or was tending t o lessen competition, not i n any
5
one I s o l a t e d or p a r t i c u l a r community or one p a r t i c u l a r
BY MR. STEWART;
6
7
state.
Q
Let me see i f I understand you c o r r e c t l y , s i r .
Is
8 i t your i n t e n t i o n t o convey to the Hearing O f f i c e r and the
9
impression upon t h i s record t h a t you not only did not know of
10
any s p e c i f i c community i n any of the states i n which there had
11
been a lessening of competition, but t h a t you d i d n ' t regard
12
that as necessary f o r your decision upon the matter?
13
A
I think that that i s true.
14
Q
I t was the o v e r - a l l s t a t i s t i c a l p i c t u r e t h a t you r e -
15
garded as of importance rather than the question of whether
16 any monopoly existed I n any place?
17
A
That i s c o r r e c t .
That i s c o r r e c t .
18
Q
Are you f a m i l i a r w i t h the r e l a t i v e growth i n Arizona
19
l u r i n g the l a s t 10 years of the deposits, loans, and banking
20
o f f i c e s of the V a l l e y National Bank and the F i r s t National Bank
21
>f Arizona, and i t s a f f i l i a t e the Phoenix Savings Bank.
22
MR. TOWNSENDj
I o b j e c t , may i t p l e a s e the Hearing
23
O f f i c e r , there i s no question involved I n t h i s case about the
24
Talley National Bank or any other bank except the banks con-
25
t r o l l e d by Transamerlca Corporation. I f t h i s l i n e of i n q u i r y
66k
asco
i
i s t o be pursued, we can cover every bank i n the United
2
States of America.
3
MR. STEWARTi
We may have t o do t h a t .
4
MR. TOWNSEND: This witness has never discussed the
5
subject of the V a l l e y National or any of the banks t h a t he
6
has mentioned and I object t o the question.
MR. STEWART:
7
a
of the competing banks.
THE HEARING OFFICER:
9
10
I s h a l l develop, s i r , t h a t i t i s one
The bank t h a t you question
about i s not mentioned i n the complaint.
u
MR. STEWART:
Two of the three t h a t I mention
12
a r e , s i r , and the t h i r d one I s h a l l show by the witness,
13
t h i n k , t o be the largest bank i n the area.
14
I
MR. TOWNSEND: And I object on the ground t h a t t h a t
15
i s part of Mr. Stewart»s case, not proper examination of t h i s
16
witness.
17
witness, and,consequently, i t i s a premature attempt t o t r y
T8
hi8own case through Improper cross examination.
19
20
2?
I have developed nothing of t h a t nature w i t h t h i s
THE HEARING OFFICER:
I w i l l sustain the objection
a t t h i s time.
MR. STEWART:
Let us leave out the reference t o the
22
V a l l e y National and l e t me ask you, Mr. Eccles, are you f a m i l -
23
i a r w i t h the r e l a t i v e growth i n Arizona during the past 10
24
25
years of the deposits, loans, and banking o f f i c e s of the F i r s t
National Bank of Mzona and i t s a f f i l i a t e , Phoenix Savings Bank
asc3
663
I and Trust Company, which are mentioned I n tho complaint,
2
w i t h t h e i r competition I n t h a t state?
3
MR•TOWNSEND:
4
(Question read by the r e p o r t e r . )
5
MR. TOWNSEND:
6
THE WITNESS:
7
BY MR. STEWART:
8
9
10
Q
W i l l you read the l a s t question?
I f you know.
No, I am not f a m i l i a r w i t h the growth.
And you f e l t t h a t you could approve t h i s complaint
without being f a m i l i a r w i t h t h a t , did you?
MR. TOWNSEND:
There again, may i t please the
11 Hearing O f f i c e r , are the kind of questions t h a t we are having.
12 This witness i s being i n t e r r o g a t e d , and I must most
13
r e s p e c t f u l l y urge these considerations upon you.
14
i n t e r r o g a t e d on t h i s complaint as i f i t I s his complaint.
15
The impression i s going abroad t h a t Mr. Eccles issued the com-
He i s being
16 p l a i n t and t h a t he has studied and understands and knows and
17 approved every s p e c i f i c word i n i t .
There i s not one l o t a
18 of f a i r n e s s i n connection w i t h t h i s type of i n v e s t i g a t i o n ,
19
there i s no attempt on Mr.Stewards p a r t t o develop the manner
20
i n which the complaint was processed and considered by the
21 Board, and I t h i n k i t i s ©bviouslly u n f a i r t o permit the
22
kind of cross examination t h a t i s going on here when we know,
23
i n a d d i t i o n t o what I have been saying, t h a t i t can*t possibly
24
help us i n a r r i v i n g a t a determination of the issues t h a t qre
25
^efore you.
I most r e s p e c t f u l l y renew ray objection t o t h a t
66k
asco
l i n e of questioning.
MR. STEWART:
Mr. Hearing O f f i c e r , I understosd
t h a t t h i s was a t r i a l on the question of tendency t o monopoly
and lessening of competition, and I am t r y i n g my hardest to
. iitf f i n d out whether there i s anything of t h a t kind involved i n
•*> ! i t .
MR. TOWNSEND:
7
On t h a t question, may i t plaase the
8
Hearing O f f i c e r , I r e f e r Mr. Stewart t o a l l of the e x h i b i t s
9
t h a t have been put i n t o t h i s record by ether q u a l i f i e d w i t -
10
nesses, which have traced f o r him, back t o 1904, the amount
1 and the kinds of a c q u i s i t i o n , the comparative figures respect2
ing the amount of deposits t h a t his bank or the banks of
3
Transamerica controls show i n r e l a t i o n t o a l l of the banks
4
of the s t a t e , and, indeed, a l l of the counties i n the states,
5
so t h a t we are now dealing w i t h an e n t i r e l y d i f f e r e n t subject
6
and i t i s one t h a t has not been taken up with t h i s witness,
7
because he I s obviously not a q u a l i f i e d witness on those
8
subjects.
9
the size of the various competing i n s t i t u t i o n s i s , but that
Mr. Steaart w i l l have ample time t o develop what
20
i s not proper cross examination of a witness who hasn't even
21
mentioned the subject or couldn't possibly have any r e l a t i v e
22
information i n connection w i t h i t .
23
of —
24
25
MR. STEWART:
I must i n s i s t on the r i g h t
I t h i n k , s i r , t h a t the witness might
v e i l take exception t o counsel»s statement that he i s not
665
asc7
1
q u a l i f i e d on t h i s .
2
v i s i n g i t f o r 15 years and he has l i v e d and worked as a banker
3
a l l his l i f e i n the area we are t a l k i n g about.
4
A f t e r a l l , he has been charged w i t h super-
MR. TOWNSENDi
There again, may i t please the Hear-
5
ing O f f i c e r , I t Just shows the unfairness of counsel f o r the
6
other s i d e . He knows as w e l l as I do, and I Extend t o reply
7
ea h time t h a t he goes o f f the record i n connection with
8 his gratuitous statements.
9
There i s no evidence i n t h i s
record, nor could there be any, t h a t the duty of t h i s witness
10 would have continued t o acquaint himself w i t h the size of
11 i n d i v i d u a l I n s t i t u t i o n s , t h e i r growth, the amount of t h e i r
12 deposits, where they are located, what other banks are i n the
13
community and merely t o enumerate t h a t l i s t i s to point out
14
the absurdity of counsel*s statement.
15
f o r purposes confined t o t h i s record.
16
17
y
18
19
9
MR. STEWART:
I t i s obviously not
I f he doesn't knew I t , s i r , that may
foe m a t e r i a l .
THE HEARING OFFICER:
l The Hearing O f f i c e r w i l l
sustain the objection a t t h i s time.
20
MR. STEWART:
21
(Question read by the r e p o r t e r . )
22
MR. STEWART:
23 objection i s sustained.
23
24
25
What was the question?
That i s the question to which the
Arms
Millar
666
BY MR. STEWART:
Q
You did approve t h i s complaint, didn*t you, Mr.
ISccles, before i t was f i l e d ?
A
I voted with the Board.
Q
And that was to approve i t ?
A
Approve
Q
And authorize i t s
A
^hat I s r i g h t .
Q
And you did not f e e l t h a t i t was necessary for you,
It.
filing?
I n the performance of the public duty, which you discussed
t h i s morning, to inquire as to the competitive s i t u a t i o n i n
any l o c a l i t y discussed i n the complaint before taking that
notion?
A
I think I answered t h a t question.
Q
The answer i s you did not?
A
That i s r i g h t .
Q
All right,
sir.
Are you f a m i l i a r with the growth and development and
a c t i v i t y of the V a l l e y National Bank i n Phoenix, Arizona,
during the l a s t 15 years i n which you have been a member of the
Reserve Board?
MRa TOWNSEND:
Same objection and i t is r e l a t i n g to a
bank as to which ycu have already sustained an objection, may
i t please the Hearing O f f i c e r .
MR, STEWART:
I am «uet asking i f he I s f a m i l i a r .
dhm?
667
MR. TOWNSEND:
I renew the objection.
THE HEARING OFFICER:
Objection sustained.
BY MR. STEWART:
Q
Aren*t you acquainted w i t h the f a c t , Mr.Eccles,
t h a t the Reconstruction Finance Corporation has held a subs t a n t i a l Investment i n the preferred stock of the V a l l e y
n a t i o n a l Bank since 1933?
MR. TOWNSEND:. Same objection, may i t please the
Hearing O f f i c e r .
THE HEARING OFFICER:
Mr. Stewart, do you care to
atate your purpose?
MR. STEWART:
Yes, s i r , I do.
As I said a moment
ago, t h i s complaint charges lessening of competition, r e s t r a i n t
of trade and tendency to monopoly.
It
charges i t i n f i v e
states and I propose to prove, s i r , by t h i s l i n e of evidence
and out of the mouth of t h i s witness that there not only has
not been a lessening of competition, there has not been a
tendency to mnopoly or r e s t r a i n t of t r a d e , but a c t u a l l y the
biggest bank i n the whole inter-mountain area, namely the V a l l e y
National Bank, has been growing andexpandlng with the f u l l
approval of the government regulatory agencies a l l through
these years doing a l l of the things which i n t h i s complaint are
charged t o Transamerlca Corporation as being Improper and I
submit that i t i s very relevant evidence.
MR. TOWNSEND:
I couldn 8 t think again, may i t please
dhm3
668
1
the Hearing O f f i c e r , of a more patent demonstration of the
2
points t h a t I have raised i n my previous o b j e c t i o n .
3
Stewart knows, i f he knows anything about the V a l l e y National
4
Bank, t h a t i t i s not a bank holding company.
5
or acquire the stocks of any bank.
6
National Bank has been apandlng, and as to t h a t I know nothing,
7
i t c e r t a i n l y has not been expanding through the method which
a
i s the object of the Clayton Act to p r o h i b i t .
9
r e c a l l t h a t Section 7, the p r o h i b i t i o n which i s involved
Mr.
I t cannot buy
Consequently, i f the V a l l e y
Your Honor w i l l
10
i n t h i s case, p r o h i b i t s one company from acquiring the stocks
I!
of another company.
We may assume f o r the moment t h a t a bank cannot
12
13
acquire the stocks of another company.
Hence, even i f
there
14
be any relevance to the general subject matter of Mr. Stewart 9 s
15
observations, t h i s Board, under the Clayton Act, would be
16
powerless to do anything about
it.
Therefore, I renew the objection t h a t I made a t the
17
18
outset i n connection w i t h the subject of the v a l l e y National
19
Bank.
20
has got branches, whether i t has more branches than the Trans-
I say t h a t whether I t had preferred stock, whether
it
/
21
22
america may have banking o f f i c e s i n those areas i s
clearly
beyond the pale of t h i s i n q u i r y , which i s to determine the
23
a l l e g a t i o n s of t h i s complaint aimply and p a r t i c u l a r l y i s im24
proper cross examination of a witness who hasn*t even mentioned
25
the V a l l e y National Bank or whose i n t e r e s t or knowledge of the
tifcm4
669
1
2
s i t u a t i o n had been gone into a t a l l on d i r e c t examination.
I f Mr. Stewart thinks that the V a l l e y National
3
picture or the picture of any other I n s t i t u t i m w i t h which
4
his c l i e n t i s interested or wants t o put matter into the
5
record, when the time comes f o r i t to go i n i n the proper way,
Q
I don 0 t think that I w i l l f i n d myself objecting to any relevant
7
information on t h i s subject, over which t h i s Board could
8
possibly have any control,
9
MR. STEWART:
I f the Hearing O f f i c e r please, I
10
appreciate that I can put t h i s evidence into the record when
11
I get to my case, but I submit that i t i s most relevant a t
12
t h i s time, upon the cross examination of t h i s witness who
13
made a prolonged speech t h i s morning about public duty and
14
what I t was that called for the exercise of public duty and
15
how the banking agencies were unanimous i n t h e i r treatment
16
of these s i t u a t i o n s , and I propose here to ask him a few
17
questions to demonstrate that that was not so, to demonstrate
18
that t h i s sort of policy has had the positive blessing of the
19
banking agencies i n other comparable situations and that the
20
thing that he has called his public duty here is nothing but
21
the rankest sort of discrimination.
22
23
24
25
That is what I am t r y i n g to get a t by t h i s l i n e of
questions, i f I may be permitted to ask them.
MRo TOWNSEND:
His own description, Your Honor,
i s the best indication that I could think of to demonstrate
670
dhm3
t
2
the impropriety of the questions a t t h i s time.
THE HEARING OFFICER:
3
sustain the o b j e c t i o n .
4
MR. STEWART:
The Hearing O f f i c e r w i l l
I would j u s t l i k e , i n order to avoid
5
wasting the time of the Hearing O f f i c e r and everybody e l s e ,
6
to be sure t h a t I understand the f u l l scope of the Hearing
7
Officer®s r u l i n g .
3
from going i n t o , on cross examination, any subject r e l a t i n g
9
to the e&stence of competition or the existence of r e s t r a i n t
Do I understand t h a t I am being excluded
10
of trade or the existence of the tendency to create a monopoly
11
i n any of the areas r e f e r r e d to
12
being excluded?
13
MR. TOWNSEND:
i n the complaint?
Is that
May i t please the Hearing O f f i c e r ,
14
I submit t h a t i t i s inappropriate f o r counsel to engage the
15
Hearing O f f i c e r i n a debate as t o the scope and breadth of
16
his r u l i n g .
17
of a p a r t i c u l a r question.
18
may continue his examination i n such manner as he deems
19
necessary f o r the p r o t e c t i o n of the record and that the matter
20
of determining i n advance what r u l i n g s are going to be made on
21
such questions would be e n t i r e l y out of order.
22
You r u l e d , as I understand i t , on the p r o p r i e t y
MR. STEWART:
I t seems to me t h a t Mr.Stewart
I most d e f e r e n t i a l l y ask f o r
23
Information from the Hearing O f f i c e r .
24
time I f I Just know where we are going.
25
MR* TOWNSEND:
I think i t w i l l save
I j u s t do not want the record to show
any shotgun disposal of matters which counsel w i l l
thereafter,
dhm?
671
\
perhaps a t some court hearing, claim to have been included
2
w i t h i n the breadth of your r u l i n g .
MR. STEWART:
3
I c e r t a i n l y s h a l l , s i r , and I want
4
to warn counsel r i g h t now that I regard this as a reversible
5
e r r o r i n t h i s case and I s h a l l so contend a l l the way through.
THE HEARING OFFICER:
6
I t i s the i n t e n t i o n , Mr.
7
Stewart, of the Hearing O f f i c e r to o f f e r wide l a t i t u d e
8
that he thinks consistent w i t h the examination under question.
9
The Hearing O f f i c e r ' s f e e l i n g is t h a t t h i s is not proper
10
cross examination and on that basis he sustains the objection.
MR. STEWART:
11
12
my question, so I guess I w i l l j u s t have to go ahead.
BY MR. STEWART:
13
14
That, of course, s i r , does not answer
Q
I show you, Mr. Eccles, the P r e s i d e n t s annual report
v
15
to the stockholders of the
16
Arizona, f o r January 11, 19^9 and ask you i f you have seen
17
t h a t document before *
MR* TOWNSEND:
18
19
I object to the question, improper
cross examination.
THE HEARING OFFICER:
20
21
answer.
22
Ask him i f he has seen i t
THE WITNESS:
24
BY MR. STEWART:
Q
I think the witness can
I overrule the objection and the witness may answer.
23
25
a l l e y National Bank, Phoenix,
before.
No, I haven't seen i t before.
Are you f a m i l i a r with the general m a t e r i a l i n the
dhm?
672
1
report about conditions i n Arizona, competitive conditions
2
i n Arizona, of other banks i n Arizona?
3
4
MR. TOWNSEND:
he has never seen the r e p o r t ,
5
MR. STEWART:
6
MR. TOWNSEND:
7
8
9
The witness has already stated t h a t
This i s another question.
I object, on the basis of the
witness 0 previous answer.
THE HEARING OFFICER:
I overrule that objection and
w i l l l e t the witness answer.
10
THE WITNESS:
1!
I have never been i n the s t a t e .
I am not f a m i l i a r with Arizona a t a l l .
12
MR. STEWART:
All right,
sir.
13
I t h i n k , s i r , that that brings me to a new l i n e of
14
questions which I probably could not f i n i s h by 4 : 3 0 , so i n
15
accordance with the previous suggestion I would suggest we
16
recess i f i t meets with the Hearing O f f i c e r ' s approval,,
17
18
19
THE HEARING OFFICER:
The Hearing O f f i c e r
w i l l recess u n t i l 10:30 tomorrow morning.
(Whereupon, at 4:15 o*clock p.m., the hearing
20
was recessed, to reconvene a t 10:30 o*clock a . m . , the
21
follcw ing day, Wednesday, February 9$ 1949.)
22
23
24
25
@FedFRASER