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Summary of Statement made by Howard J. Stoddard President of the Michigan National Bank, before the Private Corporations Committee of the House of Representatives, relative to Senate Bill No. 97 (an anti-branch bank bill). Lansing, Michigan March 7, 1945 QUESTION Has the state-wide branch banking law which was enacted by the l e g i s l a t u r e in 1933* following the bank troubles of t h a t period, proven unsound and against public i n t e r e s t , so t h a t i t should be repealed? DEFINITIONS Unit Bank - One bank doing a l l of i t s business i n one o f f i c e . Branch Bank - One bank doing i t s business i n several offices. HISTORY OF BRANCH BANKING IN MICHIGAN Until the banking c r i s i s of February 1933* t h e laws did not permit branch banking i n Michigan except within t h e l i m i t s of one c i t y . Following t h e banking t r o u b l e s i n June of 1933 the l e g i s l a t u r e changed the law t o permit banks t o have branches anywhere i n the s t a t e . Almost as an immediate r e s u l t of t h i s progressive l e g i s l a t i o n , i n August of 1933, a D e t r o i t bank was able t o take over two banks in Dearborn and two banks i n Highland Park, and t h u s prevent t h e i r c l o s i n g . If these banks, which had d e p o s i t s i n excess of $25,000,000 had closed, i t would have touched off a second wave of bank f a i l u r e s i n Michigan, and done i r r e p a r a b l e damage • Careless and i n c o r r e c t statements have been published many times regarding the Guardian Group banks as t h e collapse of a branch banking system. Nothing could be f a r t h e r from t h e t r u t h , a s they were i n most cases simpiy unit banks, and i n no instance did they have branches beyond t h e boundaries of" any one c i t y , as t h e law did not permit such branch banking at t h a t t i m e . During the 1935 sessions of t h e State L e g i s l a t u r e , no changes were advocated or made in the law r e l a t i v e to branch banking. During t h e period 1933 t o 1935 many banks w i t h branches were organized, and e x i s t i n g banks were expanded. During t h e 1937 session of t h e L e g i s l a t u r e , a b i l l was passed known as the Michigan Financial I n s t i t u t i o n s Act. All laws r e l a t i v e to banking and other f i n a n c i a l i n s t i t u t i o n s were c a r e f u l l y r e v i s e d by a Study Commission. The laws were recommended and approved by the Michigan Bankers Association. Paradoxical as i t may seem, the Michigan Bankers A s s o c i a t i o n ' i s now active i n the move to b r i n g about the change in the branch banking law. The Michigan Financial I n s t i t u t i o n s Act of 1937 made one very constructive change i n the law r e l a t i v e to branch banking. This was the provision t h a t i f a bank i n one c i t y established an office in another c i t y , i t vrould have t o do so by t a k i n g over another bank, and could not do so by putting i n a new branch as a d d i t i o n a l competition for t h e e x i s t i n g bank or banks. Furthermore, i n order t o take over and e s t a b l i s h a branch in t h i s manner, i t was necessary t o have the approval of the Banking Commissioner and an affirmative vote of 2/3 of t h e stockholders of t h e banks involved. During the 1939 s e s s i o n of the l e g i s l a t u r e , no changes were advocated or recommended in the banking law r e l a t i v e to branch banking, and t h e same sound law i s i n effect at t h i s time. Since 1933* when branch banking was authorized on i t s present b a s i s , t h e r e has not been one s i n g l e instance of warranted c r i t i c i s m from any community, and the i n d i v i d u a l s now desirous of changing t h e law cannot bring f o r t h one valid claim t h a t i t has operated t o t h e detriment of any c i t i z e n , v i l l a g e or c i t y i n the s t a t e of Michigan. As a matter of f a c t , more than 75% of a l l banking customers i n Michigan today are served by banks engaged i n branch banking. HISTORY OF BRANCH BANKING IN OTHER STATES Branch banking has grown and developed i n many other s t a t e s besides Michigan, At the present time, state-wide branch banking i s l e g a l i n 19 other s t a t e s , and t h e r e i s no movement or clamor i n any other s t a t e for any l e g i s l a t i o n seeking t o c u r t a i l the modern development of branch banking. I t i s as e s s e n t i a l and impoiv t a n t a part of our progressive development as a r e good highways, automobiles and air lines. HISTORY OF THE MICHIGAN NATIONAL BANK The Michigan National Bank was organized on January 1, 1941* through the c o n s o l i dation i n t o one bank of separate banks in s i x d i f f e r e n t Michigan c i t i e s . This forward looking e n t e r p r i s e and development immediately aroused a storm or p r o t e s t from t h e banking f r a t e r n i t y , who apparently feared the competition of t h i s new system. Strangely enough, there was no p r o t e s t from the p u b l i c , but on the other hand an e n t h u s i a s t i c response to the f a c i l i t i e s made a v a i l a b l e through the new organization. Some of our competitors even went so far as to exert pressure on the S t a t e Banking Commissioner, who brought proceedings before the Michigan Supreme Court, attempting t o n u l l i f y our consolidation. The Supreme Court, by a unanimous d e c i s i o n , upheld t h e consolidation as being i n f u l l compliance w i t h Michigan banking laws. Despite t h e charges and c r i t i c i s m s leveled against the bank by i t s competitors a t t a c k s which have never been made against any other f i n a n c i a l i n s t i t u t i o n i n the h i s t o r y of t h e s t a t e - the bank has enjoyed an almost u n p a r a l l e l e d growth. Beginning with t o t a l resources of some 57 m i l l i o n d o l l a r s in 1941> the bank now has resources i n excess of 165 m i l l i o n d o l l a r s . During t h e past four years, i t his probably rendered more public s e r v i c e i n t h e form of loans made to i n d i v i d u a l s of moderate means, than any other bank i n Michigan, r e g a r d l e s s of s i z e . In one phase of i t s work alone, namely the Personal Loan Department, the bank has made more t h a n 125,000 separate loans of l e s s than $1,000 each, and a t r a t e s of i n t e r e s t l e s s than 1/4 t h a t being charged by most personal finance companies. The bank, through i t s o f f i c e r s and d i r e c t o r s , has entered i n t o t h e very l i f e and a c t i v i t y of every community which we s e r v e . I t s common stock i s wholly owned by Michigan r e s i d e n t s , and operated by Michigan men. No worthy loan or s e r v i c e request has ever been made t h a t d i d not receive t h e most c a r e f u l a t t e n t i o n . I t has as i t s motto the simple statement, "Banking That i s Building Michigan." —2— WHY THE PRESENT BRANCH BANKING LAW SHOULD NOT BE CHANGED I f one looks a t a map of Michigan a n d draws a l i n e from Bay C i t y w e s t t o Lake Michigan, and one from Toledo w e s t t o Lake Michigan, he w i l l have e n c l o s e d within these lines probably the richest and certainly the finest area in United States. At present t h i s area is indeed "The Arsenal of Democracy." Within this rectangular area of 150 miles by 200 miles, and counting the metropolitan area of Detroit as one city, arc 12 cities with a population of over 25,000 each. The t o t a l present population for the entire area is probably no less than 4 million people; half of this number, hov/ever, within a 25 mile radius of Detroit. Large financial interests develop in large centers of population. I t was onlynatural, therefore, that Detroit on the east and Chicago on the west of t h i s great section of Michigan, should become the leading financial and trading centers for this rich area. New York banks, Chicago banks and Detroit banks all developed "out-of-town" or "out-state" departments designated to serve this t e r r i t o r y . The local banks in the other 11 mentioned cities were of insufficient size to take care of the deposit and loan requirements of many large industries located within their borders or contiguous to t h e i r communities, so most business of t h i s type, involving millions of dollars, naturally went to New York, Chicago and Detroit. The consolidation into one bank of the six units of the Michigan National Bank immediately created a bank of metropolitan size, with capital funds and deposits of an amount sufficient to compete with the banks in New York, Chicago and Detroit for business. In other words, certain industries in Lansing, for example, fomcrly doing their banking business in New York, Chicago or Detroit, discovered that they could for the f i r s t time do t h e i r business at home with an office of the Michigan National Bank. Duplicate t h i s example by many others, both existing and potential, and one of the major reasons for the pressure being exerted to limit the size and growth of the Michigan National Bank by legislation is not difficult to discover. FALLACY OF RESTRICTING BRANCH BANKING ON A MILEAGE BASIS A glance a t t h e map of Michigan again shows the u t t e r absurdity of the proposed law, which has as i t s purpose r e s t r i c t i n g branch banking to a c i r c l e of 50 miles diameter. YThy branch banking should be sound f o r 50 miles and not f o r 51 miles i s d i f f i c u l t for an i n t e l l i g e n t person t o understand. Service, not d i s t a n c e , i s the measure of sound banking. The sponsors of Senate B i l l No, 97 s t a t e t h a t i t s purpose i s t o protect the small u n i t banks. That i s c l e a r l y i n e r r o r , a s i n order t o accomplish such a purpose, a l l branch banking would have t o be p r o h i b i t e d . Under the proposed law, banks in t h e l a r g e r c i t i e s throughout t h e area mentioned can s t i l l reach out over a c i r c l e of 50 miles i n diameter, and thus take over approximately 80$ of t h e -3- s t a t e ' s snail banks and operate then as branches. For example, a bank situated in Lansing could reach north as far as Owosso and St. Johns, and south as far as Charlotte and Eaton Rapids, and take over and nake these banks branches of a Lansing institution. A bank in Saginaw could reach into Midland, Bay City, Vassar, Frankennuth, and likewise nake these branches of a Saginaw bank. Snail cities can thus be covered a l l over the state, so if the legislators representing the rural districts feel the enactment of the proposed law would protect snail town'banks from being absorbed by larger institutions, they are utterly misinformed. In t h i s connection, i t is interesting to note that almost one-half of the state's population live in the area having a 50 mile diameter and centering in Detroit, Even if the law were changed, this whole area could be covered by one or two banking institutions with branches, We defend branch banking, and believe i t to be sound. However, if in the opinion of the majority of the legislators changes should be made, then the sensible thine t o do is make the change on a population basis - that i s , not permit branch banking in communities with say under 30,000 population. This will accomplish their purpose, but the proposed mileage restriction will not accomplish their objective, CONCLUSION The words u t t e r e d s e v e r a l y e a r s ago by Senator C a r t e r Glass of V i r g i n i a , F a t h e r of the Federal Seserve System, d e s c r i b e t h e p r e s e n t controversy most a c c u r a t e l y : "The p l e a a g a i n s t branch banking comes from bankers and not from the people who t r a n s a c t b u s i n e s s w i t h them; n o t from t h e people who want t o borrow money, n o t from t h e people who want t o buy c r e d i t o r s e r v i c e . I t comes from bankers who want t o exclude from t h e i r p a r t i c u l a r communities anyone e l s e who wants t o s e l l c r e d i t and banking s e r v i c e . " -4- LIST OF MICHIGAN BANKS HAVING BRANCHES (Asterisk denotes where "bank has "branches in other cities) Location Central Office Name of Bank Ann Arbor *Bad Axe Battle Creek Battle Creek Bay CityBay City *Big Rapids *Blissfield *Buchanan Cadillac *Calumet *Caro *Coldwater *Constantine *Detroit Detroit Detroit *Detroit Detroit Detroit *Detroit *Plint Flint Grand Rapids Grand Rapids Grand Rapids *Hartford *Hudson *Ionia *Kalamazoo *Kinde *Lake City Lansing Lansing *Lansing *Mendon *Milford Muskegon *Pontiac *Royal Oak Saginaw *Sandusky *Scottsville *Stambaugh *Trenton *Warren Wyandotte Ann Arbor Bank Hubbard State Bank Central National Bank Security National Bank National Bank of Bay City Peoples Commercial & Savings Bank Citizens State Bank The Jipson-Carter State Bank Union State Bank Cadillac State Bank Merchants' and Miners' Bank State Savings Bank Branch County Savings Bank First-Commercial Savings Bank Commonwealth Bank The Detroit Bank Industrial National Bank Manufacturers National Bank The Michigan Bank National Bank of Detroit Wabeek State Bank of Detroit Citizens Commercial & Savings Bank Genesee County Savings Bank Old Kent Bank Peoples National Bank Union Bank of Michigan Van Buren State Bank Hudson State Savings Bank State Savings Bank First National Bank & Trust Co. Kinde State Bank Lake City State Bank American State Bank Bank of Lansing Michigan National Bank First State Bank Oakland County State Bank Hackley Union National Bank Community National Bank Wayne-Oakland Bank Second National Bank & Trust Co. State Bank State Savings Bank Commercial Bank Peoples State Bank The Community Bank Wyandotte Savings Bank No. of Branches 1 1 2 2 3 1 1 1 1 2 1 1 1 1 21 31 7 3 3 29 4 5 1 13 5 2 1 1 1 2 1 1 1 1 9 1 1 1 1 1 1 1 1 1 1 1 _2 174 Resources 12-31-44 32,195,400 4,558,700 16 xu,007,600 6007600 16,484,200 ^,186,200 22 25,549,400 2,134,500 2,781,000 3,877,000 a A a? c 6,497,600 227,900 ,395,600 J 4^856,300 ? 1,685,200 j 191,765,800 j 470,795,100 62,381',300 536,748,300 3,283,200 1,295,919,300 69,481,700 64,288,500 24,617,700 108,589,200 24,668,400 14,654,300 1,863,400 2,887,600 5,683,900 35,691,400 1,532,100 2,333,200 n n rs -i /^ •» "I r-w A r 19,981,100 162,740,600 1,255,500 2,400,600 36,382,600 43,842,900 (C«5, 1 /i , o U U 71,526,500 5,781,800 2,898,700 1,260,200 3,508,700 6,110,000 7,160,700 3,481,675,300 (These banks have more than 75% of total banking resources in the State. «-* ^*\ /*v CilTY-COUNTY STATE MAP RAND^MQNALLY MICHIGAN SIZE 82 X 11 246,338 Kent MICHIGAN 4798 Lake 32,116 Lapeer Alcona . .K21 8,436 Leelanau F12 Alger 53,110 Lenawee Allegan P 14 20,863 Livingston Alpena J 21 7,423 Luce J 16 9,438 Mackinac . L2C Arenac 107.638 Macomb Baraga ........ . ..F7 18.450 Manistee Barry P 16 47,144 Marquette Bay M 20 19,378 Mason . Benzie K 14 16,902 Mecosta... Berrien 013 24,883 Menominee 27,094 Midland Calhoun 8,034 Missaukee Cass 58,620 Monroe Charlevoix 1 16 28,581 Montcalm .1 19 3,840 Montmorency Chippewa F 18 94,501 Muskegon Clare L 18 19,286 Newaygo O 18 254,068 Oakland Crawford J 18 14.812 Oceana Delta H 1! 8.720 Ogemaw Dick.nson 08 11,359 Ontonagon P17 Eaton 13,309 Osceola Emmet H 17 2,543 Oscoda . O 21 5,827 Otsego L19 Gladwin 59,660 Ottawa Gogebic . F 3 12,250 Presoue Isle K 1 5 Grand Traverse 3 668 Rosoommon Gratiot N 18 130,468 Saginaw R19 76.222 Saint Clair E6 Houghton 31,749 Saint Joseph L 23 30,114 Sanilac Ingham P19 9,524 Schoolcraft O 17 41,207 Shiawassee K21 losco 35,694 Tuscola Iron Q; 35,111 VanBuren M 17 80,810 Washtenaw Jackson 2,015,623 Wayne 0 1 9 Kalamazoo 0 16 17,976 Wexford Kalkaska K 16 5.256,106 State Total 88 Counties 5,463 10 167 •11 8,:'i i..\9r,j 9.23., 2>"oi i 74.9b! 7.800 89 I V ...: 2 .( 21,910 13,031 1 1,644 2;. 807 9.16! 26.6. ! 3.765 34,037 28,"I! 14,124 15.79! 9.385 i i 797 12 20= 47 631 15.710 20 24 1 . 93. ou.085 5 1 59 State Population 5,256,106 County Population is shown in thousands with county name 100,000 and over 9 25,000 to 100,000 • 5,000 to 25,000 • 1,000 to 5,000 o under 1,000 Berkly Hun.ins.on V Y « d s . » . # R http://fraser.stlouisfed.org/ MADE IN U S / Speciallyof engraved and indexed for use with the Rand McNally Commercial Atlas and Marketing Federal Reserve Bank St. Louis Guide. sii O 1' OS L15 N 22 J 14 R 21 P21 F 16 G 16 P M K M F9 M 16 H 9 M 19 K 17 R 22 N 16 J20 N 1.1 M 15 P 22 M 13 K !9 F4 L16 J 20 J 18 O 14 . 1 20 K 18 N 20 O 24 R 16 N 24 F 13 0 2 0 N 2 2 0 14 O 21 K 15
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