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October 31, 19U$

Hoaorablu * e r r i n « r S. Lcoles
C h a i m a , 3oard o f aorernors
of t h s Federal Keeerre Syston
*aahingten, a , C .
isy door n r . Chairaant
I dooiro t o oot out b r i e f l y tho s t a t u s o f tho Government's
i n v e s t i g a t i o n of tho frsnssftsries Corporation, f o r tho porpooo o f
a f f o r d i n g background f o r our conference on tho o a t t o r . Tho d a t e
o f such conference w i l l bo sot a t a t l a e mutually s a t i s f a c t o r y t o
the i n t e r a c t e d government arsncles*
Tho Department'e i n v e s t i g a t i o n t o d a t a disoloaos t h a t t h o
Tranaemarica Corporation, a holding eonpeny, c o n t r o l s I S banks i n
tho S t a t e s o f C a l i f o r n i a , Nevada, Arisona, Oregon and Washington,
tho l a r g e s t of which i s tho flenk o f i * * r i c a j t h a t many of theoo
35 beaks have m a r o u a branches) t h a t theoo banks c o n t r o l apparosiaately
o f tho banking o f f i c e s and approximately
of tho
coomercial benkinr deposits i n tho f i v e - a t a t e e r e a j t h a t tho
f r i n s s a o r l p f ^ ^ t f * 1 ) 1 fr^nfrif c o n t r o l approximately fee o f decosits
i n Urn Ctato o f gevada and 61* o f t h e o o a w o i s l basking o f f i c e s )
i n C a l i f o r n i a , U2]£ o f tho deposits and
o f the cowoercial banking
o f f i c e s j i n Oregon, 3 9 * of t h e deposits end
o f t h o n—eor>1>1
banking o f f i o o s j and i n Vaahington, 5 1 o f tho dapoeits and
o f tho
» — m i H I banking o i f i c e a . I n many countiee w i t h i n t h i s f i v e - e t a t e
area t h e percentage c o n t r o l o f depoaita and coeutereial banking
o f f i c e s i s snch r r e a t e r *
I n C a l i f o r n i a , f o r a m p l e , there a r e
t h i r t e e n coantios i n which tho Tram.snerioa Corporation c o n t r o l s
IBQt o f tho o o M s r c i a l banking f n c i l i t i e e . m a expansion program
has been e f f e c t e d ovor a period o f appro*! l a t e l y twenty years*
In
HMqr i n stone ee tl.o holding company financed tho a c q ^ i a l t i a n a by
borrosing funds f r o a i t s banking a u b e i d i a r i e e , usin,: the aaaete o f
the parahaaod bonk a a o e o u r i t y f o r tho loan*




Apparently there has been a desire on the part of Transanerioa
Corporation to build good w i l l among the banks i n the f i v e - s t a t e
area by o f f e r i n g vary l i b e r a l terms i n i t s purchases, i n many oases
the p r i c e paid exceeded the book value of a bank's assets.
Frequently
the personnel of acquired banks was put on the pay r o l l of Transamerica
and the ranking o f f i c i a l s were e i t h e r retained or l i b e r a l l y pensioned*
I n a d d i t i o n , the i n v e s t i g a t i o n discloses t h a t the Transamerica
Corporation controls tpo investment banking companies, several i n surance companies, several metal f a b r i c a t i o n companies, and a large
r e a l estate company of p a r t i c u l a r s i g n i f i c a n c e
the State of
California*
An a n t i t r u s t s u i t might be based upon a charge of conspiracy
between t h e holding company and i t s banking subsidiaries t o monopolise
a s u b s t a n t i a l part of the c o n e r o i a l banking and c r e d i t f a c i l i t i e s i a
the f i v e - s t a t e a r e a . The d i f f i c u l t y w i t h the case a t t h i s time l i e s
i n the f a c t t h a t we have not been able to develop substantial evidence
e i t h e r t h a t the Transamerica Corporation achieved i t s present dominati n g p o s i t i o n i n the commercial banking f i e l d through i l l e g a l trade
practices as those terms are defined i n court decisions i n t e r p r e t i n g
the Sherman A c t , or t h a t i t abused i t s dominant position once i t was
achieved* I n the abssnos of complete monopoly, evidence of one or
both of these types of abuse i s e s s e n t i a l t o make a case under the
Sherman Act* We have a few i l l u e t r a t i c n e i n d i c a t i n g the use of
ooeroive t a c t i c s by Transsmerica i n t h e a c q u i s i t i o n of independent
banks, such as c r e a t i n g a run on a bank through c o l l e c t i o n by agents
of Transamerica of passbooks which were presented f o r payment over the
counter i n a single day, thus causing l a r g e withdrawals! threats t o
e s t a b l i s h a branch i n an area already adequately served by Independent
banking i n t e r e s t s , one of which t h e Transamerica Corporation desired
t o buy) promotion of i n t e r n a l dissension i n the management of the
desired bank, coupled w i t h the purchase of a s u f f i c i e n t amount of
stock t o place the purchaser i n a strong bargaining position w i t h the
stockholders owning substantial i n t e r e s t s * There are many rumors t h a t
such practices were followed r e g u l a r l y i n acquiring independent oanks*
I t has been impoesible, however, t o pin down a s u f f i c i e n t number of
them t o make a prima f a c i e case on the theory suggested. I t i s possible
t h a t such testimony could be secured through grand j u r y proceedings*
I n view of the experience of the agents of the Federal Bureau of I n v e s t i gation, however, t h i s appears somewhat doubtful*




2

I f s u f f i c i e n t evidence could be secured t o support e i t h e r
souses i n achieving i t s present position or abuse of the position
once achieved, there apparently would be no d i f f i c u l t y i n proving
r e s t r a i n t s on commercial competition* C e r t a i n l y the commerce of
esquired banks and of independent banks which might and probably
would have been organised except f o r f e a r of being assimilated by
the Transamerica group, would be restrained* I n a d d i t i o n , borrowers
conducting i n t e r s t a t e commercial enterprises are deprived of comp e t i t i v e eourcee of banking f a c i l i t i e s *
The commerce of enterprises
competing with commercial businesses owned by the Transamerica Corporation i n s i t u a t i o n s where the former must secure t h e i r f i n a n c i a l
requirements from Transamerica banks, i s r e s t r a i n e d , since such
iiidependent enterprises must r e v e a l t h e i r c o n f i d e n t i a l operations
i n securing c r e d i t from the Transamerica banks*
I f a case of attempt t o monopolise ocmmercial banking f a c i l i t i e s
could be developed, i t i s suggested that r e l i e f mi^ht take the form
of r e q u i r i n g the holding company t o dispose of a l l i n t e r e s t i n and
control over subsidiary banks owned by i t , including the stock of i t s
l a r g e s t subsidiary, the Bank of America* Since the Bank of America,
through i t s branches, comprises approximately 90$ of the commercial
banking i n t e r e s t s of the Transamerica Corporation, i t would appear
t h a t e f f e c t i v e competition i n the commercial banking f i e l d i n the
f i v e - s t a t e area would require some type of reorganisation of the Bank
of America which would provide f o r the creation of several d i s t i n c t
and competing units t o be carved out of the e x i s t i n g Bank of America
organisation* Whether d i v e s t i t u r e should be sought of some of the
non-bsnking enterprises owned by the Bsnk of America, euch as i n surance companies, r e a l estate companies, e t c * , would depend upon the
development of the data which i e a t the preeent time inconclusive and
fragmentary.
I t r u s t t h i s b r i e f description of the status of our i n v e s t i gation w i l l a f f o r d a basis f o r discussion a t the coming conference*




Sincerely yours,

Attorney General