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Due t o t h e i m p l i c a t i o n of^ Mr. Stowart*s q u e s t i o n s ^ r e l a t i v e t o my connection w i t h t h e Utah C o n s t r u c t i o n Company, I d e s i r e t o s t a t e f o r t h e r e c o r d t h a t t h e r e i s no l e g a l requirement t h a t government o f f i c i a l s o r Members o f Congress cannot be stockholders o r d i r e c t o r s o f companies which do business w i t h the Government, n e i t h e r i s t h e r e any i m p r o p r i e t y i n such a r e l a t i o n s h i p j but i t would be e n t i r e l y improper f o r o f f i c i a l s o f the Government o r Members o f Congress, whether o r n o t t h e y are stockholders o r d i r e c t o r s o f companies doing business w i t h t h e Government, t o use t h e i n f l u e n c e o f t h e i r p o s i t i o n s t o secure government business f o r anyone. I c e r t a i n l y have n o t done so, e i t h e r f o r the companies w i t h which I am connected o r any o t h e r companies, nor have I been asked t o do so. To be an o f f i c e r o r d i r e c t o r o f a company i s n o t i c e t o the p u b l i c o f o n e ' s i n t e r e s t i n such a. company, but one may be j u s t as i n t e r e s t e d through being a s u b s t a n t i a l s t o c k h o l d e r , o r t h r o u g h f a m i l y connections, w i t h o u t t h e p u b l i c knowing a n y t h i n g about t h e connection. There i s no more i m p r o p r i e t y i n being an o f f i c e r o r d i r e c t o r than i n being j u s t a s t o c k h o l d e r . Had Congress f e l t t h a t t h e r e was, no doubt t h e y would have p r o v i d e d t h a t Members o f the Board could n o t be a s t o c k h o l d e r , o f f i c e r o r d i r e c t o r o f any coirpany, i n s t e a d o f j u s t banking i n s t i t u t i o n s . I t would be v e r y i n - a d v i s a b l e and i m p r a c t i c a l t o r e q u i r e t h a t anyone connected w i t h the Government o r Congress must sever a l l o f f i c i a l connections w i t h business and dispose o f a l l t h e i r i n t e r e s t s ; i t would g r e a t l y reduce the number o f people w i l l i n g t o accept p u b l i c s e r v i c e . ment and i n Congress Many o f our most experienced and able people i n Governover the years have been o f f i c e r s , d i r e c t o r s o r s t o c k - holders o f c o r p o r a t i o n s . The war could n o t have been c a r r i e d on w i t h o u t the great s e r v i c e s o f the Dollar-a-Year-Men on leave from business i n s t i t u t i o n s . I should l i k e a l s o t o p o i n t out t h a t each o f my present business connections e x i s t e d l o n g before I came t o the Board, I being the senior member o f the f a m i l y . made by me since I came w i t h the Board. A l l o f them are r e l a t e d t o f a m i l y i n t e r e s t s , No new business connections have been Did t h e Utah C o n s t r u c t i o n Company do business w i t h t h e Government before you came t o Washington? Was t h e business o f t h e Government on a b i d b a s i s o r a n e g o t i a t e d basis? ( P r a c t i c a l l y a l l business w i t h the Government, except d u r i n g t h e war p e r i o d , has been on a c o m p e t i t i v e b i d b a s i s . ) Why w a r n 1 t i t on a c o m p e t i t i v e b i d basis d u r i n g the War? (Due t o t h e emergency, time d i d n o t p e r m i t p r e p a r a t i o n o f p l a n s , s p e c i f i c a t i o n s , e t c . , and w a i t i n g f o r b i d s before work commenced.) What i s your i n t e r e s t d i r e c t l y o r i n d i r e c t l y i n the Utah C o n s t r u c t i o n Company? ( I n c l u d i n g a l l members o f my f a m i l y , about 15% personaly about 2%) Have you ever advised y o u r f a m i l y w i t h reference t o your views about t h e expansion o f F i r s t S e c u r i t y Corporation? (Yes, I have suggested t h a t I d i d not t h i n k i t would be good p u b l i c r e l a t i o n s o r d e s i r a b l e from any standpoint t o expand, merely f o r the sake o f becoming b i g g e r , by t a k i n g over o t h e r i n s t i t u t i o n s ; t h a t whenever they got more t h a n l / 3 o f the business o f a l a r g e area they would be s u b j e c t i n g themselves t o p u b l i c , as w e l l as o f f i c i a l , c r i t i c i s m and may be accused o f tending toward monopoly.) have Records should show Banking B i l l o f 1947 w o u l d / c o n t r o l l e d Eccles Investment Company, would have c o n t r o l l e d F i r s t S e c u r i t y — the amendment opposed by Senator Downey b u t accepted by t h e Board would have made Eccles Investment Company a h o l d i n g company. Senate r e p o r t e d B i l l o u t unanimously a f t e r telegrams, l e t t e r , e t c . from Mario (?) Giannini• What was t h e date t h e Lakewood V i l l a g e membership was being consummated? Size o f t h e i r Nevada o r g a n i z a t i o n s . Number o f Banking o f f i c e s . Percentage o f d e p o s i t s t o t h e t o t a l Arizona and Nevada are i n t h e t r a d e area o f Los Angeles and k a n f r a n c i s c o r e s p e c t i v e l y and are not i n t h e t r a d e area o f t h e o t h e r i n t e n n o u n t a i n s t a t e s . None of the banks owned by Transamerica are i n t h e same t r a d e areas as t h e F i r s t S e c u r i t y ^anks and are i n no way c o m p e t i t i v e w i t h them. The most persuasive argument f o r need o f determining irfi ether basis f o r proceeding under t h e Clayton Act e x i s t e d was t h e t h i r d argument given i n t h e Counsel's r e p o r t t o t h e Board i n t h e F a l l of 1947* Would a l s o l i k e t o i n q u i r e njhether or n o t t h e percentage of banking o f f i c e s and t o t a l d e p o s i t s o f banks i n Transamerica i n Oregon and C a l i f o r n i a have i n c r e a s e d since 1940. C l a r k ' s l e t t e r t o me o f 1945 r e l a t i v e t o Transamerica should be put i n t h e r e c o r d ; a l s o my r e p l y i n t h e Spring o f 1947 suggesting changed s i t u a t i o n because o f tobacco cases; and a l s o h i s r e p l y . W y a t t ' s l e g a l o p i n i o n should be put i n t h e r e c o r d r e l a t i v e t o my having met requirements. (by Mr. Townsend) Q/ Mr. Eccles, one f i m a l subject matter and I can conclude my d i r e c t examination. There has been f i l e d i n these proceedings by Transamerica Corporation c e r t a i n ^ " f i d a v i t s by L . M. G i a n n i n i , Sam Husbands, v i c e president of Transamerica Corporation, upon which was predicated a charge t h a t you have been personally biased and prejudiced against t h e Gianninis and the respondent i n t h i s case, and t h a t i t i s as a r e s u l t of t h a t personal bias and prejudice t h a t these proceedings now under way may be said t o have had t h e i r o r i g i n . I would l i k e t o know i f you have any statement t h a t you would l i k e t o made i n t h e record on t h a t general s u b j e c t . A. Yes, I t h i n k I would l i k e t o comnient upon t h a t s u b j e c t . There i s nothing t h a t could be said which i s f u r t h e r from t h e t r u t h than t h a t I have a personal p r e j u d i c e . Had i t been p o s s i b l e , i n my p u b l i c duty, my p u b l i c p o s i t i o n , f o r me t o f o l l o w my personal i n c l i n a t i o n , I would c e r t a i n l y have p r e f e r r e d t o not be placed i n t h i s p o s i t i o n . The record i s r e p l e t e , i t seems t o me— MR. £vFEV»/dfT: I o b j e c t , i f t h e Hearing O f f i c e r please, t o the witness character- i z i n g what i s i n t h e record. The record speaks f o r i t s e l f . I have no o b j e c t i o n t o h i s s t a t i n g h i s personal f e e l i n g s , but he shouldn*t characterize t h e record. MR. TOK<NSEND: The record w i l l speak f o r i t s e l f , may i t please the Hearing O f f i c e r , — MR. STEWART: I agree. MR. TOWNSEND: —and I say t h a t , i n the l i g h t of Mr. Eccles* p o s i t i o n i n t h i s m a t t e r , he should be permitted t o make a statement f o r what i t i s worth i n t h i s record. When t h e time comes t o examine i t i n a n a l y t i c a l d e t a i l , should t h a t f a c t be necessary, we, I am sure, can weed out any part t h a t might be t e c h n i c a l l y inadmissible. THE HEiiRIi.G OFFICER: The witness may answer t h e question—or may continue h i s comment• The WITNESS: The record i s r e p l e t e w i t h evidence t h a t great e f f o r t and patience were shown on the part of t h e Board over the past t e n years i n an e f f o r t t o come t o an agreement, en arrangement, w i t h t h e Transamerica people t h a t would make a c t i o n such as i s now being undertaken unnecessary. I t has been shown t h a t i n 1940 the Board, at the i n s t i g a t i o n of t h e Transamerica people, intervened w i t h the other supervisory a g e n c i e s — p a r t i c u l a r l y the Secretary of the Treasury, the Comptroller of the Currency and the FDIC-fein order t o t r y t o work out an arrangement t h a t would avoid t h e f u r t h e r c r i t i c i s m and o b j e c t i o n on the part of those agencies. The Board d i d intervene and succeeded, at t h a t t i m e , i n working out what was then a s a t i s f a c t o r y arrangement w i t h reference t o the Bank of America* C e r t a i n l y , i f t h e r e i s prejudice on my p a r t i n t h i s matter, then i t must be apparent t h a t t h e r e i s l i k e w i s e 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; t h a t t h e record c e r t a i n l y does not s i n g l e me out f o r prejudice—not only t h e present members of t h e Board, who were unanimous i n f a v o r i n g t h i s a c t i o n , but t h e members of t h e Board who are not at present members of t h e Board. I have i n mind p a r t i c u l a r l y t h a t Mr. McKee, Mr. Ransom—'tfio has since passed away—favored every a c t i o n t h a t t h e Board took i n t r y i n g t o deal adequately with t h i s situation. I f t h e Board i s i n e r r o r i n c a r r y i n g out what t h e y ' i n t e r p r e t e d t o be t h e i r p u b l i c r e s p o n s i b i l i t y , i f the Board be i n e r r o r i n f o l l o w i n g the advice of counsel, not only t h e advice of those i n the present l e g a l d e p a r t ment but counsel who were formerly w i t h t h e Board, then i t cannot be s a i d t h a t , because o f e r r o r , t h e Board, and me as a member of t h e Board, have acted only i n bias and p r e j u d i c e . 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 order t h a t t h e Board might issue i s subject t o review by the courts; and so i t does not seem that the accusation of p r e j u d i c e , i n view of the opportunity t h a t i s afforded t o the Transamerica people t o have t h i s e n t i r e subject reviewed by the courts, i s justified. C e r t a i n l y my personal r e l a t i o n s h i p s t o the Gianninis and w i t h t h e i r i n s t i t u t i o n s over t h e long period of years would not i n d i c a t e any reason f o r my having p r e j u d i c e . As I s t a t e d yesterday, t h e personal business r e l a t i o n s h i p s have been most agreeable and pleasant. However, being one member of a board of seven— and the Board being only one of t h r e e supervisory agencies-—even i f I should undertake t o show f a v o r i t i s m o r , l e t me put i t , p r e j u d i c e , i n favor o f the G i a n n i n i s , the other members of the Board and the other supervisory agencies would have c a r r i e d on and would have, no doubt, whether I had been here or n o t , undertaken t h i s course. Even before 1 came here, the evidence i n d i c a t e s , t h a t d i f f i c u l t y had been had w i t h a predecessor Board of which Mr. Eugene Myer was the Governor and d i f f i c u l t y had been had w i t h , I understand, the Comptroller's o f f i c e ; t h a t t h i s f r i c t i o n , you might say, which developed—this c r i t i c i s m , t h i s e f f o r t on t h e part of the Board since I came w i t h it—was not 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 t o feel—both ^ r . McKee and I — t h a t p o s s i b l y the Transamerica people had not been handled r i g h t , t h a t t h e r e was a way of g e t t i n g around t h e t a b l e and having an understanding without r e s o r t t o l e g i s l a t i o n or other a c t i o n ; and w i t h great hope and expectation we undertook such a course, and i t i s w i t h the greatest disappointment on p a r t t h a t the r e l a t i o n s h i p has f i n a l l y ended i n t h e course t h a t i t has now taken. -3-
