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BOARD OF GOVERNORS OPTHC F E D E R A L RESERVE SYSTEM Office Correspondence *A | P Chairman Eccles T»nte Mav 9. 1959 Subject T?mm Mr. Thurston The Court of Appeals decision in the Bank of America vs. S.l.C. case spanks the Commission pretty hard. I t holds that the Secretary was justified in letting the S.l.C. have Bank of America examination reports, but that the S.l.C. had no right to broadcast the information contained therein in the way that i t was done. The decision states that this was calculated "to cause serious prejudice to the bank and bring i t , in advance of any hearing, into public disrepute11. And that "there is nothing in the Act which authorizes publicity in advance of hearing". The Court said further: "Under regulations prescribed by the Administrative Committee of the Federal Register, notices of hearing must be published in the Register, but the rule does not require the publication as part of such notice of the evidentiary facts; and where, as in this case, the latter are obtained from confidential sources, neither the purpose nor intent of the Act contemplates their broadcast to the public. I t is not difficult to see that such a power might easily be made an instrument of oppression and, lacking specific congressional authorization, we think i t ought not to be indulged. In addition to this, pretrial publication of evidence—labeled as believed to be true—ought, we think, to be avoided, especially as emanating from the tribunal charged with the judicial responsibility of weighing i t and assuring the accused a fair hearing. And, i f this is the correct view, i t is particularly pertinent here, for after a l l the Bank is not a party in the proceeding instituted by the Commission. Its connection with the investigation grows wholly out of the fact that its largest stockholder, Transamerica, in certifying its own financial condition, is believed by the Commission to have violated the provisions of the Securities Exchange Act. So far as the Bank is concerned, even i f the charge, as to i t , is true, any possible violation by i t of the banking laws, is a matter not within the Commission's reach. And certainly until findings are made, the Bank is entitled to have judgment, public and official, suspended.11 The opinion also holds in effect, as I read i t , that the S.l.C. shall not go behind the Comptrollerfs findings, stating, "The Bank must follow the Comptrollerfs orders. And i f Transamerica can show the Bankvs compliance therewith, we may assume the Commission would hate no right to substitute its opinion in place of the Comptrollerfs." - 2 As to the subpoenas that were issued to the bank's officers, the Court states: " I t is perfectly clear, we think, that conq?liance with these demands w i l l , for a l l practical purposes, close the Bank, and i t is equally clear that by transferring the place of hearing from Washington to San Francisco the Commission may carry on i t s investigation without unduly and unreasonably hampering the Bank in its business• I f this is so, then any other course is so unreasonable as to require correction** Finally, on this point, the Court states: "While i t is true the Act authorizes the Commission to subpoena witnesses from any part of the United States, w think e i t a f a i r statement that Congress never intended that the power should be exercised to bring from one side of the country to the other the principal officers of a bank and the books and records covering a period of ten years to appear before an examiner of an administrative commission. The right to be free of suit except in the District of which one is an inhabitant is a fixed part of our federal judicial history* Its statutory requirement arose out of the experience of colonial days* I t s wisdom has been proved in the passage of time, and no more obvious reversal of its spirit could be cited than is shown i n the facts of this case* For a l l of these reasons, w are of opinion the subpoenas are une reasonable . . * .