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S t r i c t l y Confidential Not for release August 31, 1945 LjftORANIOT: Approximately twenty-six (26) applications for branches for Bank of America National Trust and Savings Association are now pending, raising once more the question of permitting further expansion of this branch system i n California, Following the policy formulated by the late President Roosevelt, i t has been the practice of this office during the past six years to restrain as much as possible the growth of monopoly i n West Coast banking etna credit f a c i l i t i e s which seems inherent i n the expansionist program of the Bank of America and Transamerica, both of which are dominated by the so-called Giannini interests. This policy of restraint has received the active support and cooperation of both the Board of Governors of the federal Reserve System and the Federal Deposit Insurenee Corporation, It i s deemed appropriate to set forth very b r i e f l y the bases of this general policy, without specifying i n detail the supervisory problems which have been encountered in carrying i t out. -2- Bank of America operates through two so-called main offices and almost five hundred branches throughout the State of California - many times more branches than any other bank i n the United States. For some years, i t s deposits have grown more rapidly than those of any other bank i n the country. In total resources, i t is the second largest bank i n the world, and i s rapidly overtaking the Chase National Bank of New York, the only larger bank i n existence. In fact, i t already has several times as many depositors as Chase or any other bank; i t has more business -loans outstanding than any other bank; and whereas Chase i s one of a number of huge "corporation" banks i n the nation's f i n a n c i a l center, which could be replaced by the numerous other large ban&s located there, Bank of America is a Titan whose a c t i v i t i e s cover an immense state and affect the whole Y/est Coast, and whose collapse and replacement would involve an economically destructive upheaval. The following figures bring out the situation clearly: Bank of America's deposits on June 30, 1^45 were $4,500,000,000, constituting approximately 40$ of a l l deposits i n California banks* Its approximately five _ r > hundred branches amount to almost half of the banking offices of the state, and are located in over 300 communities. There were 595 banks and brajiches i n the Transamerica bank group on June 30, 1945, located in Arizona, California, Nevada, Oregon and Washington, out of a t o t a l of 1,461 banks and branches i n those five stetes. The Transamerica banks and branches constituted approximately 50$ of a l l banking offices i n California, 60% i n Nevada, and 34JS i n Oregon, They held approximately 41% of a l l bank deposits i n California, 79$ of a l l deposits i n Nevada, and 43$ i n Oregon, Throughout their history, Bank of America and Trensamerica Corporation have been dominated by a small group of men who have pursued an aggressive and ruthless policy of expansion, and have engaged in a variety of banking and non-banking a c t i v i t i e s , some being of a highly speculative character. The management of the bank has been o.f the promotional type, and the results of i t s lack of conservatism became apparent i n the early 1930's, when i t s condition was such as to create considerable doubt as to whether i t should be permitted to resume operations after the banking holiday. It was only consideration of -4- the serious effect on the whole West Coast which forced a reluctant decision to permit the Bank of America to reopen at that time. Today i t s condition i s very much improved - by virtue of general economic and war conditions, not by virtue of management. A study of the development of the Giannini empire even during the last twelve years w i l l disclose that the promotional attitude s t i l l predominates. In the light of this brief description, i t w i l l not be d i f f i c u l t to see the application of certain basic principles and policies which render i t inappropriate, except to meet -compelling local need, for the Comptroller to authorize Bank of America to establish additional branch offices. F i r s t of these principles i s the American government policy against monopoly, unfair competition, and absentee ownership, and i n favor of small businessses, free competition, and l o c a l ownership and control. The Comptroller i s not charged with the enforcement of the anti-trust laws, but he should and does exercise his discretionary power i n the l i g h t of the purposes which the statutes i n thie f i e l d were designed to achieve. The opportunity to monopolize the f i e l d and prevent the development of new competition i s greater i n banking than i n most industrial and commercial f i e l d s . Furthermore, 10 monopoly i n banking i s singularly dangerous because of the influence banks exercise over the entire economy through control of credit and l i q u i d funds. Even apart from the foregoing, the potential disastrous effects of a failure of a branch-bank system of such magnitude render inadvisable the authorization of further expansion of i t s branch network Bank of America i s i n relatively sound condition today and i t s failure with i n the foreseeable future is improbable. However, supervisory authorities must always bear i n mind the p o s s i b i l i t y of bank failures due to rapid changes i n economic conditions or to unsound and speculative management, and policies should be adopted which w i l l minimize the harm resulting from the collapse of any one institution. The primary obligation of the Comptroller, in exercising his discretion regarding the chartering of new banks, the granting of branch permits, etc., is the maintenance of a safe and sound banking system. Any further growth of Bank of America - and consequent increased dominance i n California banking - is undesirable from this point of view. The enormous importance of banks to modern industrial l i f e gives r i s e to another danger implicit i n the existence of a banking i n s t i t u t i o n of the unparalleled power and extent 10 of Bank of America* Banking has long been r ecog&ised as a matter requiring governmental supervision and control, and the federal statutes provide general sanctions designed to enable the supervisory authorities to maintain safe and sound banking practices and to prevent violations of the banking laws. Unfortunately, these sanctions - for example, the forfeiture of a bank's charter - are extremely drastic. Where a single bank i s badly managed, or resistant to proper supervisory requirements, these sanctions can be brought to bear, and this p o s s i b i l i t y alone is sufficient to make the vast majority of banks receptive to criticisms, corrections, and recommendations. But any responsible o f f i c i a l hesitates to invoke such sanctions where the offending bank furnishes a major part of the banking f a c i l i t i e s of a great State; the hazards involved i n mere unfavorable rumors regarding a bank make bank supervisors reluctant even to threaten the use of a serious sanction. Being f u l l y av/are of this situation, the management of a mammoth, many-branched institution can sometimes defy governmental regulation, and violate almost with impunity the laws enacted by Congress for i t s control and the protection of the public. The history of Bank -7of America reveals just such a situation and attitude. Even i n the case of a branch bank system of comparable size with an outstanding record of safe, sound and conservative management, the foregoing principles would dictate the greatest caution i n the handling of applications for new branches. The fact that the record of Bank of America cannot be so characterized simply renders more imperative the policy which the Comptroller has followed in t h i s case. In regard to the twenty-six (26) applications for branches with which we are presently confronted, no departure is contemplated from the basic policy of restraining a l l possible any further expansion of the Giannini banking interests. Some twenty (20) of these applications cazi and should be rejected. However, i n approximately a half dozen cases the communities involved are entitled to more adequate banking accommodation, and careful investigation f a i l s to reveal any practical method of securing such additional accommodation save through granting to the Bank of America permission to establish branches at these points. There is considerable pressure from these communities and from their representatives i n Congress. For six years -8- there has been no increase i n the number of branches of the Bank of America, although during that period this state, which permits branch banking, has grown enormously i n population and financial resources and pern.its i n corsiderable number have been granted to competing institutions. In the light of these facts i t would seem judicious to authorize branches of the Bank of America i n the few exceptional cases mentioned. To refuse would penalize the l o c a l camnainities involved and might give some weight to the charge of arbitrary and prejudicial conduct of this office. A brief resume of thirteen (13) of the pending applications i s attached hereto. The balance are s t i l i under investigation by f i e l d representatives Preston Delano August 13,1945 BANK OF AMERICA NATIONAL TRUST & SAYINGS ASSOCIATION BRANGH APPLICATIONS 1# Manchester and Crenshaw Boulevards Inglewood, Los Angeles County Date: 4-11-45 Population: 30,000 Existing f a c i l i t i e s : DECISION: Z. Branch of Bank of America Branch of Security-First Nat. Bank Branch of Citizens National Trust & Savings Bank within one block of proposed site of this application Should be rejected <LS area already has adequate banking service. Wilshire Blvd. and Fairfax Ave. City of Los Angeles Date: 4-18-45 Population: 63,000 estimated i n this l o c a l i t y Existing f a c i l i t i e s : DECISION: This area, i s now being served by thirteen (13) banking units, the national bank units of ih ich are 5 branches of Bank of America 2 branches of Citizens National T&S Bank 1 branch of Security-First National Bank 1 branch of iknk of America is four (4) short blocks from Wilshire & Fairfax Should be rejected as area already has adequate banking service. 23. Magnolia Boulevard and Hollywood Way, Burbank, California 4-24-45 Date Population: 34,000 Existing f a c i l i t i e s : DECISION: 4. None i n immediate area Two branches of Bank of America One of Security-First Rational and One of California Bank within radius of 2 miles. Although close, should probably be granted. The particular l o c a l i t y i n which i t i s proposed to establish this branch i s i n need of banking service, and a branch would serve a public need. Crenshaw Boulevard and Rodeo Road, City of Los Angeles Date: 4«25«45 Population: Population of this area d i f f i c u l t to estimate as examiner concludes proposed branch would only be of service to a circle with radius of 600 yards* Existing f a c i l i t i e s : DECISION: 3 branches of Bank of America are within two (2) miles, and one branch i s within 4 1/2 miles of this location. Security-First National is establishing branch less than one mile from this location* Should be rejected as area has adequate banking f a c i l i t i e s . -35. Pacific Ave. and Pine St., Stockton, California Date: 4-30-45 Population: Area 12,000 to 15,000 Existing f a c i l i t i e s : DECISION: 6. No banks i n this trading area. Should be granted- AmericaiTrust Company has already been granted permission by the State Superintendent to establish a branch i n this v i c i n i t y but the concentration of population indicates that two branches can be supported. Lynwood, California Date: 5-5-45 Population: 10,000 Existing f a c i l i t i e s : DECISION: Branch of Security-First National Bank Should be rejected. Entire community is primarily residential. With the return to normal postwar conditions, i t appears highly improbable that public necessity w i l l require other than existing banking f a c i l i t i e s . Examiner Goddard doubts that two branches are justified, particularly in view of the large number of banking offices within a short radius of this town. Within a radius of five (5) miles there are: 10 branches of Bank of America 6 branches of other banks 2 independent banks -47. San Gabriel, California Date: 5-10-45 Population: 11,000 Existing f a c i l i t i e s : DECISIQS: 8* 1 branch of California Bank Should be granted. There is a real need for additional banking f a c i l i t i e s here* The one branch of the California Bank does not meet the situation. y / Costa tfesa, Orange County. Date: 5-11-45 Population: Normally 2,500; war a c t i v i t i e s have increased i t t o 5,000. Costa Mesa i s an unincorporated village at the junction point of two highways about 14 miles south of Long Beach* Existing f a c i l i t i e s : DECISION: Branch of Bank of America at Newport Beach 2 miles away and at Balboa^ 4 miles distant. Many other banking f a c i l i t i e s within 7 miles. Should be rejeoted. E i s t r i c t Chief Irwin Wright comments "The present business boom i n t h i s village is obviously of a temporary nature, and with the cessation of h o s t i l i t i e s there w i l l be a contraction in business and ulatxon to the noint where maintenance of ranch bank woulcl be wholly unjustifiable.'' n 9. Wilshire Boulevard and Fourteenth St., Santa Monica, California Date: 5-11-45 Population: 25,000 i n area Existing f a c i l i t i e s : DECISION: 10. One state bank 2 branches of Security-First Nat. Bank 1 branch of California Bank 1 branch of Bank of America Should be rejected as area already has adequate banking service. American Avenue and Anaheim Street, Long Beach, Los Angeles County. Date: 5-18-45 Population: The 1940 figure was 50,000, wartime activities have increased this figure to about 62,000. Existing f a c i l i t i e s : DECISION: 3 branches 2 branches California authorized of Bank of America of Security-First Nat. Bank State Department has just branch of California Bank. Should be rejected. Careful survey f a i l s to disclose the need for additional banking facilities. -6!!• Lower Lake Lake County, California Date: 6-8-45 Population: 1,500 Existing f a c i l i t i e s : DECISION: None Should be granted. This community i s entitled to branch service. 12* Glendale Park District Glendale, Los Angeles County. Date: 6-20-45 Population: 16,000 area Existing f a c i l i t i e s : i national bank and branch thereof 2 branches of Bank of America 2 branches of Security-First Nat. Bank DECISION: Should be rejected. The Glendale Park District is a residential d i s t r i c t so closely tied i n with the business d i s t r i c t of Glendale that a branch at that point is in the opinion of the examiner unjustified. There appears to be no reason to believe that residents i n the proposed area w i l l refrain from customary habit of going to town tc conduct banking or other business. - 7 — 13. Sherman Oaks Los Angeles County Date: 8-20-45 Population: 20,000 Existing f a c i l i t i e s : DECISION: Banking " f a c i of l i t yBank " (asof distinguished from branch) America. Should be granted. Because of close of h o s t i l i t i e s this " f a c i l i t y " now being terminated and should be replaced by a branch.
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