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February 26, 1947. CONFIDENTIAL Honorable Tom C. Clark, Attorney General, Washington, D. C. Dear Mr. Attorney General: I t has been "well over a year since the luncheon meetings i n your o f f i c e of representatives of the Treasury Department, Federal Dep o s i t Insurance Corporation, the Board of Governors and your A n t i t r u s t D i v i s i o n respecting Transamerica Corporation. Since t h a t time various proposals f o r l e g i s l a t i o n t o t i g h t e n e x i s t i n g controls over bank holding companies g e n e r a l l y have been considered and discussed by the Board and on A p r i l 30, 1946, a b i l l dealing w i t h t h i s subject was introduced by then Chairman Spence of the House Banking and Currency Committee. However, the pressure of war and reconversion matters prevented cons i d e r a t i o n of t h i s l e g i s l a t i o n by the 79th Congress. I t i s expected t h a t a s i m i l a r b i l l w i l l be introduced i n the present Congress and we hope t h a t i t w i l l receive e a r l y and favorable consideration. Meanwhile, however, the problem of how t o deal e f f e c t i v e l y w i t h the Transamerica s i t u a t i o n has continued t o t r o u b l e and concern the Board. L e g i s l a t i o n alone w i l l not solve the problem, unless i t be of the "death sentence" v a r i e t y ; and the Board i s convinced t h a t the passage of such a b i l l i s n e i t h e r desirable nor possible. The most t h a t may be expected of l e g i s l a t i o n i s t o curb the f u t u r e expansion of a bank holding company which, l i k e Transamerica, has followed a consistent p o l i c y of monopolistic growth. I n your l e t t e r t o me of October 31, 1945, you reviewed the f a c t u a l s i t u a t i o n respecting Transamerica as disclosed by the i n v e s t i g a t i o n of your A n t i t r u s t D i v i s i o n . Your l e t t e r points out t h a t a t t h a t time Transamerica " c o n t r o l s 35 banks i n the States of C a l i f o r n i a , Nevada, Arizona, Oregon and Washington, the l a r g e s t of which i s the Bank of America; t h a t many of these 35 banks have numerous branches; t h a t these banks c o n t r o l approximately 40% of the banking o f f i c e s and M r . A t t o r n e y General -2- approximately 36% of the commercial banking deposits i n the f i v e - s t a t e areaj t h a t the Transamerica-cont r o l l e d banks c o n t r o l approximately 80% of deposits i n the State of Nevada and 61% of the commercial banking offices; in California, of the deposits and 49% of the commercial banking o f f i c e s ; i n Oregon, 39% of the deposits and 13% of the commercial banking o f f i c e s ; and i n Washington, 5% of the deposits and 1& of the commercial banking o f f i c e s . I n many counties w i t h i n t h i s f i v e - s t a t e area the percentage c o n t r o l of deposits and commercial banking o f f i c e s i s much g r e a t e r . I n C a l i f o r n i a , f o r example, there are t h i r t e e n counties i n which the Transamerica Corporation controls 100$ of the commercial banking f a c i l i t i e s . This expansion program has been e f f e c t e d over a period of approximatel y twenty years. I n many instances the holding company financed the a c q u i s i t i o n s by borrowing funds from i t s banking s u b s i d i a r i e s , using the assets of the purchased bank as s e c u r i t y f o r the l o a n . " Since your l e t t e r was w r i t t e n , Transamerica has f u r t h e r i n creased i t s dominating p o s i t i o n i n the f i v e - s t a t e area mentioned above by the a c q u i s i t i o n of other banks and by the growth of those already owned t y i t . I n a d d i t i o n , i t s p o r t f o l i o of nonbanking i n t e r e s t s has increased. Both i n your l e t t e r and i n our contemporary meetings you expressed the opinion t h a t , while the s t a t i s t i c a l data r e f e r r e d t o above might be s u f f i c i e n t t o j u s t i f y the Department i n commencing some k i n d of a n t i t r u s t proceeding against Transamerica and i t s a f f i l i a t e d organiz a t i o n s , nevertheless the lack of proof o f any sustained p o l i c y of abuse of power, e i t h e r i n a t t a i n i n g i t s dominant p o s i t i o n or i n perpetuating i t , made the outcome of such a s u i t decidedly dubious. Counsel f o r the Board have r e c e n t l y c a l l e d t o the Board's a t t e n t i o n the decision of the Supreme Court i n American Tobacco Company v . United States, decided on June 10, 194-6. The e f f e c t of t h a t decision seems t o eliminate the need i n c e r t a i n cases f o r the k i n d or extent of proof which had previously been thought necessary i n a n t i t r u s t proceedi n g s . I am wondering, t h e r e f o r e , i f your Department has considered whether the d e c i s i o n i n the Tobacco case might not lessen to a considerable extent the doubt which heretofore i t has entertained as t o the u l t i m a t e success of an a n t i t r u s t proceeding against Transamerica. M r . A t t o r n e y General -3- I would appreciate r e c e i v i n g your present opinion i n the matter, f o r the Board i s again considering the Transamerica s i t u a t i o n i n the l i g h t of the Board's o v e r - a l l r e s p o n s i b i l i t y i n the banking f i e l d generally and i n p a r t i c u l a r i t s r e s p o n s i b i l i t y under section 7 o f the Clayton A c t . Sincerely yours, M. S. Eccles, Chairman.
@FedFRASER