Full text of Marriner S. Eccles Papers : United States of America Before the Board of Governors of the Federal Reserve System, in the Matter of Transamerica Corporation : Reply to the Proposed Findings Submitted on Behalf of Respondent, Box 22, Folder 4, Item 2

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UNITED STATES OP AMERICA
BEFORE THE
BOARD OP GOVERNORS OP THE FEDERAL RESERVE SYSTEM

IN THE MATTER OF
TRANSAMERICA CORPORATION

REPLY TO PROPOSED FINDINGS SUBMITTED
ON BEHALF OF RESPONDENT

J. LEONARD TOWNSEND,
SOLICITOR.
G. HOWLAND CHASE,
ASSISTANT SOLICITOR.
GREGORY O'KEEFE, JR.,
OF COUNSEL.




UNITED STATES OP AMERICA
BEFORE THE
BOARD OP GOVERNORS OP THE FEDERAL RESERVE SYSTEM

IN THE MATTER OP
TRANSAMERICA CORPORATION

REPLY TO PROPOSED FINDINGS SUBMITTED
ON BEHALF OF RESPONDENT

The theories underlying the proposed findings submitted
by respondent are the same that have been advanced by r e spondent throughout the course of the hearing.

The position

of counsel f o r the Board with respect to these theories was
f u l l y stated many times as the hearing progressed and has
been reaffirmed i n our requested findings and brief*

I n ad-

d i t i o n , the Hearing O f f i c e r , by his r u l i n g s , himself has i n dicated that he considers irrelevant much of the evidence
introduced pursuant to respondents theories.

There is no

purpose, therefore, i n again discussing such issues as the
"national market for credit", "substitutes f o r the services
performed by commercial banks", "non-bank competitors",




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"predatory practices" as a test of v i o l a t i o n of the Clayton
Act, the interstate character of the commercial banking
business, etc.

However, our f a i l u r e to deal specifically

with each of respondent's proposed findings should not be
construed as an acceptance thereof by counsel for the Board*
We do wish to c a l l attention to some of the numerous
distortions of f a c t , half truths, and inaccuracies, as well
as to some instances where the findings are not supported by
the evidence, i n order to demonstrate the generally misleading and unreliable character of the findings proposed by r e spondent; also to point out that the bulk of the evidence on
which they are based is out of the mouths of o f f i c e r s ,

di-

rectors, or employees of one or another of the organizations
i n the Transaraerica group, most notably L. M. Giannini.
1#
19,

I n respondents proposed findings* Nos. 3* 7$ 8* 11*

107, 152, 156, 157* 158, 161, 162 Trans america asks the

Hearing Officer to f i n d that i t has purchased bank stocks
solely f o r investment, that i t is a mere shareholder and an
investor, that no o f f i c e r or employee of Transamerica is engaged i n the management or operation of any enterprise i n
which Transamerica owns stock, and that the Transamerica banks
do not constitute a single banking group, entity or operation.

* Respondents proposed findings w i l l be referred to herein
as RP; Board's requested findings as BP; Exhibits to
Boards requested findings as BPX.




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I n this connection w© refer the Hearing Officer to the
long history of acquisitions by Transamerica f o r the declared
purpose of merging Transamerica banks, including Bank of
America N, T. & S. A . , into a regional interstate branch banking system (BP 6, 8, 9,
86, 87)•

10, 11, 12, 13, li+, 18-23, 26, 56-61,

Transamerica1s predecessors, Stockholders Auxiliary

Corporation, Bancitaly Corporation and Americommercial Corpor a t i o n , whose major holdings were bank shares, were organized
to do things Bank of America N. T* & S* A* was not permitted
to do by law (R. 208).

One of these things was the acquisi-

t i o n of stocks i n banks (BP 9* 10, 11)•

Transamerica has con-

tinued to perform this function of i t s predecessors (BP
119)•

As i t s banking empire unfolded .over the f i v e - s t a t e area

Transamerica performed the same function f o r other banks i n
the group (BP 19-23)•

Donning the disguise of investor f o r

the purposes of this lawsuit is an afterthought incompatible
with the facts i n evidence*
I n so f a r as the banks involved i n this action are concerned Transamerica has not been content with less than cont r o l of the banks i n which i t "invested11 (BPX 1 ) .

The Hearing

Officer 1 s attention is directed to the testimony of Gordon
Gray, a director of Transamerica, that

fl Mr.

[A• P#] Giannlni

i n the purchase of banks o r d i n a r i l y [wanted] a two-thirds
terest. 11 (R. 12,i|70)

in-

I n the case of the F i r s t National Bank

i n Santa Ana and the F i r s t Trust and Savings Bank of Pasadena,




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Transamerica1 s i n i t i a l campaigns f a i l e d to acquire a majority
of the shares of the respective i n s t i t u t i o n s .

Shortly f o l l o w -

ing the f a i l u r e of the f i r s t attempts Transamerica renewed i t s
e f f o r t s to acquire stock, i n each case making i t s

proposition

more attractive by an increase i n price to be paid f o r the
shares and through other special Inducements to key persons *
F i n a l l y , Transamerica acquired majority stock control i n the
two banks (BX 132, 13k,

136, 139; R« 1337-1381; BP 5 0 ( a ) ,

l*8(c)).
As an "investor 11 , Transamerica has taken some unusual
steps to protect i t s "investment11.

For example, i t has se-

lected the directors of the banks comprising the Transamerica
group and has taken options on the q u a l i f y i n g shares of the
great majority of such directors.

I n many cases Transamerica

made loans to the directors to purchase their
shares.

qualifying

I t has selected the p r i n c i p a l o f f i c e r s of these banks.

I t has put into effect uniform methods of operation codified
i n a manual developed by Bank of America N. T. & S. A.

It

requires detailed reports from each of the Transamerica maj o r i t y owned banks on forms supplied or approved by Transamerica.

I t receives reports of examinations of these banks

made by the inspection department of Bank of America N. T. &
S. A. and copies of reports of examinations made by various
bank supervisory agencies (BF 82-92, 116, 117)•




-k-

I n HP 7, respondent states that no o f f i c e r or employee
of Transamerica is engaged i n the management or operation of
any enterprise i n which Transamerica owns stock*

This is

not supported by the evidence and is completely untrue*

For

example, as of December 31$ 19U7* the most recent date concerning which there is information i n the record, many o f f i cers of Transamerica were officers and/or directors of many
of the Transamerica owned companies and banks*
I n that year A* P* Giannini, chairman of the board of
Transamerica, was Founder-Chairman of Bank of America N. T*
& S* A* and a director of Occidental L i f e Insurance Company
of C a l i f o r n i a ;
Sam H* Husbands, executive vice president of Transamerica,
was a director and chairman of the board of A l l i e d Building
Credits and a director of General Metals Corporation;
James F. Cavagnaro, senior vice president of Transamerica,
was a director and vice president of Coast Service Co*, a d i rector and vice president of Corporation of America, a director and vice president of Timeplan, Inc*, a director of
A l l i e d Building Credits, a director of Occidental L i f e Insurance Company and a director of Pacific National F i r e Insurance
Company;
W* L* Andrews, vice president and treasurer of Transamerica, was a director and president of Coast Service Co*,
a director and president of Inter-America Corporation, a d i rector and president of Timeplan, I n c . , a director, vice




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president and treasurer of Corporation of America and a d i rector of General Metals Corporation;
A. L. E. Ponsford, secretary and assistant treasurer of
Transamerica, was a director of Timeplan, I n c . , secretary and
treasurer of Coast Service Co. and secretary of Corporation
of America;
G. M. McClerkin, vice president of Transamerica, was a
vice president of Corporation of America and a director of
the F i r s t National Bank of Arizona;
A. Fenton, vice president of Transamerica, was a director
of A l l i e d Building Credits;
M. P. McLellan, assistant secretary of Transamerica, was
secretary and treasurer of Timeplan, Inc*
L. M. Giannini is a director and member of the executive
committee of Transamerica as well as a director and president
of Bank of America N. T. & S. A.

Since 1918 he has been iden-

t i f i e d with the Transamerica group as an interlocking o f f i c e r
and/or director of various banks and companies.

He has been

a director of the F i r s t National Bank of Portland, a director
and chairman of the board of Occidental L i f e Insurance Company, a director and president of Corporation of America, a d i rector of Capital Company, a director of Inter-America Corpor a t i o n and a director of Pacific National Fire Insurance
Company.
E. D. Woodruff, another director of Transamerica, has
been a director and president of Capital Company and a




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director of Western Merchandise Mart*
(EX 3, 72, 1^0, 298, 3U6-a-3U6-c;
RX 2 5 5 s R . 1 0 6 7 , 6 7 0 6 . i o , 5 8 I N
BP 63-66, 68-70, 7k, 85, 98)
I n answer to the suggestion that the Transamerica banks
do not constitute a single integrated banking group, the Hearing Officer is referred to BP 6-22, 56-59* 71+-119*

Prom these

findings i t w i l l be seen that the intent of A* P. Giannini was
to create a regional interstate branch banking system*

Pur-

suant to' this purpose he caused Transamerica to acquire banks
i n the f i v e - s t a t e area*

Prom the facts disclosed i n these

findings with respect to the control, operation and management
of these banks, i t is clear that they constitute a single
integrated banking u n i t , the individual components of which
have retained t h e i r separate corporate identities only because
of t h e i r i n a b i l i t y l e g a l l y to combine into a single banking
corporation*
I n RF 161 and 162 respondent states that the management
and operation of many of the Transamerica majority owned banks
was not disturbed by Transamerica1 s acquisition of them*

As

indicated above, BP 116 and 117 contain numerous instances i n
which Transamerica has installed i n banks acquired by i t p r i n cipal officers drawn from within the Transamerica group*

In

RP 160 respondent makes special mention of the selection of
Belgrano as president of the F i r s t National Bank of Portland,
by the directors of that bank*

The record indicates that

Belgrano was selected after his name was suggested by Wente



7-

who then was a senior vice president of Bank of America N. T#
& S« A* and a director of the F i r s t National Bank of Portland
(BP 116(b))•

2#

I n RF 31 respondent states several reasons f o r Trans-

america1s d i s t r i b u t i o n i n 1937 of $8% of i t s Bank of America
stock*

The primary reason f o r this d i s t r i b u t i o n was not to

relinquish control of Bank of America but to get out from under
the burdens of being classified as a holding company a f f i l i a t e
of member banks within the federal banking laws.

This was the

reason stated by Trans america i n i t s l e t t e r to stockholders
dated May 11+, 1937•

The other reasons imported into evidence

by respondent are simply afterthoughts for the purposes of
this s u i t .

None of them was advanced i n the aforementioned

l e t t e r written to stockholders at the time of d i s t r i b u t i o n
(RX 351; BF 95)•

3*

RF 38 states that Transamerica has exercised no i n -

fluence on Bank of America through the proxy machinery of that
bank and that Transamerica has never participated d i r e c t l y or
i n d i r e c t l y i n the selection of the proxy committee.

The Hear-

ing Officer is referred to our findings BF 7^-76, 99-103*
105-107f wherein i t is demonstrated that upon the return of
the Giannini management to the Control of Transamerica i n 1932*
the board of directors of Transamerica by resolution authorized




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A. P. Giannini, as chairman of the board of Transamerica, "to
designate..»the particular person or persons who shall represent" Transamerica on the board of directors of Bank of
America N. T. & S. A.} that i n the period 1932-1937 A. P*
Giannini was enabled to select each member of the board of
Bank of America N# T. & S. A . ; that the board of directors of
Bank of America N. T. & S. A. has selected proxies closely
i d e n t i f i e d with the Gianninis, and that, through this proxy
machinery, the Giannini management has been able to perpetuate
itself.

U.

I n RF lj.2 respondent attempts to play down the im-

portance of L* M. Giannini i n the Transamerica organization*
The Hearing Officer is referred to our findings BF 63-66, 68,
71* 7b$ 98 which show the unique role played by L. M. Giannini
i n the Transamerica organization, including Bank of America
N. T. & S. A . , since 1918.

For example, i n a p u b l i c i t y r e -

lease by Bank of America N. T. & S. A. to a l l of i t s branch
managers on November 3 0 ,

19U8, i t was stated:

" I t was Mario

[L. M. Giannini] who stood shoulder to shoulder with his f a ther i n the battle of the proxies which regained them operating
control of t h e i r bank and investment company."

Respondent asks the Hearing Officer to f i n d i n RF 51
that the relations of Bank of America N. T. & S. A* with the




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Transamerica majority owned banks do not d i f f e r i n any way
from that bankfs relations with other banks i n which Transamerica has no interest whatever.

The record amply demon-

strates that there are a great many intimate and unusual r e lationships between Bank of America N. T. & S. A. and the
Transamerica majority owned banks.

Thus, Bank of America

N. T. & S. A. sends i t s inspection department personnel to
examine these Transamerica banks, and i t s operating manual
has been installed i n them.

I n numerous instances,

officers

of Bank of America N. T. & S. A. have been transferred to key
positions i n the Transamerica banks and, i n addition,

certain

officers of Bank of America N. T. & S. A. — f o r example,
S. C. Beise, vice president, and Edmund Nelson, vice president —
have been active i n the a f f a i r s of the banks acquired by Transamerica at or about the time of acquisition.

Bank of America

N. T. & S. A. has also provided various miscellaneous goods
and services f o r the Transamerica majority owned banks, including stationery supplies, mechanical maintenance and burglar
alarm inspection (BP 111, 112, 116, 117, 119, 120; BPX 1+0;
BX 197, 198; R. 1195-1196, 1236-1239, 126U-1267, 1288-1290,
1369-1376, 1550-155D•

6.

With respect to RP 53 i n which respondent states that

the terms and conditions of a l l business dealings have been
negotiated on an arn^s length basis since 1937, we i n v i t e the




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Hearing Officer to compare this statement with the facts set
f o r t h i n our findings under the heading ^Intercompany Relationships between Bank of America, N. T. & S* A* and Transamerica
Companiestt (BP 118-131).

7*

I n RP

respondent states that Transamerica does

not, has not attempted and has not the power to control or i n fluence Bank of America N* T. & S« A*
not supported by the evidence *

These statements are

For facts showing that Trans-

america can and does control Bank of America N« T* & S. A* the
Hearing Officer is referred to our findings BP 95-131#

The

history of the growth and development of the Transamerica banking group, starting with the organization of the Bank of I t a l y
i n 1901+> shows that Bank of America N. T» & S, A, has always
been the most important single element of the group (BP 1-131) #

Q.

I n RF 211 and 212 respondent states that the percentage

rate of deposit growth (1938-19^8) of Bank of America N« T. &
S. A. and the Transamerica majority owned banks was much less
than the percentage rate of growth of 62 other banks i n C a l i fornia*
Such comparisons are not significant for two reasons*

It

is not relevant to consider statistics r e l a t i n g to the Bank of
America N# T. & S* A, alone or the Transamerica majority owned
banks alone.




The only relevant figures are those concerned

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with the Transamerica group as a whole, including Bank of
America N« T* & S. A*

Neither is i t material to compare Bank

of America N* T. & S* A. and the Transamerica banks with other
non-group banks i n California.

We are not concerned here with

how fast 62 banks not involved i n the complaint grew from the
standpoint of deposits.

We recognize that a l l banks experi-

enced a tremendous deposit growth over the period stated.

We

are concerned with other non-group banks only i n so f a r as i t
i s necessary to show the portion of the market presently occupied by them i n r e l a t i o n to the Transamerica group banks.
Notwithstanding the foregoing remarks, we would nevertheless l i k e to point out how the statistics presented are misleading and deceptive*
I n the f i r s t place, stating deposit increases i n terms of
percentages ignores the dollar amount of increase involved*
For example, an i n s t i t u t i o n with

b i l l i o n of deposits which

has had a deposit increase of $1 b i l l i o n may be said to have
only a 20% increase.

Another i n s t i t u t i o n with $1 m i l l i o n of

deposits which has had a deposit increase of $1 m i l l i o n may be
said to have a 100$ increase.
tions are incomparable*

Now, obviously, the two situa-

That the rate of increase declines as

the base grows larger is shown from the experience of a l l banks
i n California outside the Transamerica group*

Seventy such

banks which had deposits of less than $1 m i l l i o n at the end of
1938 had an increase over the ensuing ten-year period of klk%$




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72 banks which had deposits ranging from $1 m i l l i o n to $50
m i l l i o n at the end of 1938 had an increase of 297$ i n the same
period; and 11 banks which had deposits i n excess of $50 m i l l i o n at the end of 1938 had an increase of 163$ (B« 8080-8082).
As mentioned heretofore, respondent also separates Bank of
America N. T. & S. A. figures from those of other banks i n the
Transamerica group.

Actually, the Transamerica group had de-

posits aggregating about $1,533,500,000 i n 1938.

At the end

of 191+8, these banks had aggregate deposits of approximately
$5,937,500,000, indicating an increase i n the period of
$4,^0^,000,000.

A l l the other banks i n California i n 1938 had

i n the aggregate deposits of $2,538,000,000.

At the end of

191+8 the same banks had $7,299,000,000, representing an increase
of $lj.,761,000,000.

Stated percentagewise, the Transamerica

group of banks had an increase of 287$ as contrasted with a
rate of increase of 188$ f o r a l l the other institutions

in

C a l i f o r n i a combined.
Respondent has stated the rates of growth of 62 California
banks i n the period 1938-191+8.

I t is f a i r to compare with

these the rates of growth of 26 Transamerica majority owned
banks i n the same period; 3 of these banks had increases ranging between 100$ and 200$; 10 banks between 200$ and 300$; k
banks between 300$ and 1+00$; 2 banks between 1+00$ and 500$; 1
bank between 500$ and 600$; 1 bank between 600$ and 700$; 1+
banks between 700$ and 800$; and 1 bank over 1,000$#




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A sampling of the experience of 5 l individual branches
of Bank of America N. T. & S. A• located over a wide area i n dicates that i n this same period 7 had increases ranging* between 600$ and 800$; 25 had increases between 800$ and 1,000$;
7 had increases between 1,000$ and 1,200$; 5 had increases between 1,200$ and l,lj.00$; k had increases between 1,500$ and
1,800$; 2 had increases exceeding 3,000$, and 1 had an increase
exceeding 1^,000$ (R. 8066-8078; RX 121).
I n RP 222 respondent states that i n the period 1938-19^8
the rate of growth of deposit l i a b i l i t i e s of the F i r s t National
Bank of Nevada was about one-third of the rate of growth of the
aggregate deposit l i a b i l i t i e s of a l l other banks i n Nevada*
The comparative rate of growth f o r Nevada is as immaterial as
that offered with respect to California dealt with above.

But

again we would like to point out that the comparison stated is
not only misleading and deceptive but unsupported by the sources
cited.
I n the case of the F i r s t National Bank of Nevada deposits
i n 1938 aggregated $28,689,000 and at the end of 191*8 aggregated fllij.,062,000, an increase of #85,373,000 or 297$#

There

were 3 other banks i n Nevada at the end of 1938 and they had
deposits aggregating $1*, 160,000; at the end of 191+8 these same
banks had deposits aggregating $13,9^5,000, an increase of
#9,785,000 or 235$ (RX 125, 136 r e v . ) .




-lit-

9*

I n RP 85, 9k, and lOij. respondent purports to show

the percentage of deposit growth of Bank of America N. T. &
S. A* attributable to acquired deposits.

We do not regard this

comparison significant for any purpose.

Again we would l i k e to

point to the irrelevancy of Bank of America N. T. & S. A. f i g ures alone.

Whatever proportion of deposits were acquired,

the only relevant inquiry is what portion of the market with
respect to deposits is occupied at the present time by the
Transamerica group i n the area involved as a result of the acq u i s i t i o n of stock i n banks.
However, even assuming the relevance of the statistics
offered i n these proposed findings, they demonstrate the deceptive and unreliable quality of the factual material that is
being urged upon the Hearing Officer by respondent.

For exam-

p l e , the 1928 deposit figure used as a base i n RF 85 is not
limited to deposits held by the Bank of America N. T. & S. A.
as a legal entity but also includes deposits of Bank of America
of California and other banks which were then majority owned
by Transamerica and i t s subsidiaries and which subsequently became part of Bank of America N. T. & S. A. p r i o r to July 31$
1937•

This treatment not only presents an i n f l a t e d figure of

deposits for 1928 but also understates the deposits actually
acquired thereafter by Bank of America N. T. & S. A . , the legal
entity.

The figures are contrived to present the lowest possi-

ble percentage consistent with colorable recognition of the
underlying facts.




Incidentally, the device of including the

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Bank of C a l i f o r n i a figures i n the base is typical when the
end sought is a percentage favorable to respondent.

Note i n

section 11, page 18, i n f r a , how the opposite is done when the
end sought is a high percentage of deposits assumed by a nongroup bank.
Moreover, to compare the amount of deposits acquired at
some time i n the past with the amount of present deposits is
ridiculous on i t s face.

Deposits i n the five-state area have

quadrupled over the period 1938 to 19^8 due to war expansion,
migration of peoples and f a c i l i t i e s and post-war

inflation.

Hence, to relate uninflated figures of the period of acquisit i o n before 1938 to the i n f l a t e d figures of the present day is
wholly i n v a l i d .
Of course, the real significance of acquired deposits is
found i n the office which the deposits represented.

The o f -

fice acquired with the deposits gave the Transamerica group a
place from which to grow; i t also gave them the business pot e n t i a l of the old organization at an established banking o f fice i n a line of business where the opening of a new outlet i n
any area is subject to permission by supervisory agencies.
The Hearing Officer w i l l r e c a l l that i n the cross examinat i o n of respondents witness, D. S. Langsdorf, who presented
the testimony on which the aforementioned findings are based,
the witness agreed that there were many other ways of measuring
the impact of purchased growth than the method r e l i e d on i n r e spondents proposed findings.




Among the other methods suggested

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were:

(1) I n recognition of the fact that the deposits of a l l

banks i n the area have had an average increase of about 1*00$
i n the period 1938 to 19M3, to weight the t o t a l of deposits acquired to give effect to the likelihood that the banks acquired
by Transamerica would have had deposit growth i n the period,
i n common with a l l banks, i f they had retained their unit-bank
status; (2) to i d e n t i f y the now existing branches of Bank of
America N. T# & S« A. which resulted from the take-over of
banks and to compare, as of the present, the deposits of those
branches with the t o t a l deposits of Bank of America N. T. &
S• A . ;

(3) to compute, as of the beginning date of the period

under consideration, the t o t a l of deposits of a l l of the banks
subsequently taken over, and compare this t o t a l with the deposits of the acquiring i n s t i t u t i o n as at the same date; (Ij.)
to compare the t o t a l of deposits acquired i n a given year with
the t o t a l deposits of the acquiring bank as at the end of that
same year; (5) to compare, year by year, the deposits acquired
against the year-by-year deposit growth of the acquiring bank;
and (6) to compare the t o t a l of deposits acquired by the Bank
of America N, T. & S. A. i n the period 1928 to 1937 to the
t o t a l deposits of that bank as of July 31* 1937* which was the
date on which i t s status as a bank majority owned by Transamerica was changed, and which was a date p r i o r to the incidence
of the accelerated growth of deposits experienced by a l l banks
as a r e s u l t of the war e f f o r t .




-17-

We submit that any of these other methods is a more appropriate measure i f the matter is worthy of consideration at
a l l (RX 81|j R. 7719-7876, 7754-7778,

10*

7803-7883)•

Substantially the same criticism applies to the ac-

q u i s i t i o n of deposits i n the other states (RF 132, ll+0, li|7)
with the additional factor that respondent purports to measure
the effect of acquired deposits on banks which themselves were
acquired.

The l a t t e r fact, of course, is not reflected i n the

figures presented (EX 8; RX 83; R# 7650-7669)•

11•

I n RF 238 respondent requests the Hearing Officer to

f i n d that i n the period 1928 to 1948 the Security-First National
Bank, Los Angeles, assumed deposit l i a b i l i t i e s amounting to
16.30$ of the t o t a l deposit l i a b i l i t i e s of the i n s t i t u t i o n as
of December 31, 191+8.

We would l i k e to point out the device

by which this unusually large percentage is arrived at.

The

Hearing Officer w i l l r e c a l l that respondent's witness, D. S.
Langsdorf, stated that f o r the purposes of RX 81+, on which this
proposed f i n d i n g is based, he treated the consolidation of the
Security Trust and Savings Bank and the Los Angeles F i r s t Nat i o n a l Trust and Savings Bank, which took place i n March 1929,
as i f the Los Angeles F i r s t National had acquired the Security
Trust and Savings.

Consequently, he included as acquired de-

posits a l l of the deposits that were i n the Security Trust and




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Savings Bank at the time of the consolidation.

These deposits

represented over 99$ of the t o t a l acquired deposits l i s t e d i n
RF 238 f o r S e c u r i t y - F i r s t National Bank.
As pointed out i n section 9$ page 1$,

t h i s treatment is

just the opposite of what was done i n the case of Bank of
America N. T. & S. A. and Bank of C a l i f o r n i a because respondent
desired here to develop a very high percentage of assumed deposits f o r S e c u r i t y - F i r s t National.

(EX 308-a; RX Qki R* 7776-7785)

A similar d i s t o r t i o n with respect to banking offices appears i n RF 236 where respondent purports to show the number of
banking offices established and discontinued by three C a l i f o r nia branch banks outside the Transamerica group i n the period
1928 to 19^8.

The proposed f i n d i n g states that 70 offices were

established by the S e c u r i t y - F i r s t National Bank.

That t o t a l

includes 55 offices which were operated by the Security Trust
and Savings Bank at the time that i n s t i t u t i o n was consolidated
with the Los Angeles F i r s t National (BX 308-a; RX 85; R« 7950-7955)*

12.

I n RF 258 respondent requests the Hearing Officer to

f i n d that the growth of percentages of a l l banking o f f i c e s , deposits and loans held by any bank or group of banks is not s i g n i f i c a n t i n indicating a tendency to create a monopoly.

The

testimony of D r . E. A. Goldenweiser cited by respondent does
not support any such f i n d i n g .

What Dr. Goldenweiser stated was

that the growth of percentages with respect to o f f i c e s , or
with respect to loans, e t c . , each taken by i t s e l f , was not




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significant.

I n presenting this proposed f i n d i n g respondent

has distorted the testimony of the witness by omitting the
qualification

nin

and of i t s e l f " and applying what was said

with respect to o f f i c e s , loans and deposits, separately, to
o f f i c e s , loans and deposits, c o l l e c t i v e l y .

I n Dr.

Goldenweiser1s own words:
ff But,

you see the emphasis is on i n and of i t s e l f .
I t has to be a part of a general set of figures or a
general set of presentations and has to be judged i n the
t o t a l background. And I think i t is awfully important
to recognize a l l the time, i t s been my contention always
that i n economic matters decisions have to be based on a
whole complex of facts, and that each item which i n i t self may appear to be of very limited significance may
assume very much greater significance i f i t is supported
by others or presents a part of a general picture, so
that when I say that they are not s i g n i f i c a n t , I have
used the word p a r t l y i n the sense, I have used the words
i n the sense that not i n themselves indicative.
Whether
they are significant or not is a part of a general p i c ture is an entirely different question, and i t is very
d i f f i c u l t to take each one by i t s e l f and determine i t s
specific weight.11 (R. 12,352-12,353)
(R.

13*

12,327-12,332,

12,350-12,353)

RF 257 states that comparisons of the number of bank-

ing offices operated by d i f f e r e n t banking institutions do not
measure market occupancy or control because banking offices
d i f f e r i n their characteristics.

We agree that the incidental

characteristics of banking offices d i f f e r .

However, whatever

these characteristics, they are appropriate to meet the needs
of the public i n the area i n which the office is located
(RX 255* Report for 1950, p. 10, Report f o r 19^9, p# 13;
R. 10,506-10,511, 10,567-10,569, 10,681-10,683)•




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Moreover,

operating as they do over a wide geographic area, i n the
largest c i t i e s as w e l l as i n the very small communities,

in

a g r i c u l t u r a l as well as commercial and i n d u s t r i a l regions, the
banking o f f i c e s of the Transamerica group represent a cross
section of characteristics which make them susceptible to comparison with the other banking offices of the area (EX 257)*
Banking offices are the places at which the banking b u s i ness is conducted and the outlets from which banking services
are supplied to the p u b l i c .

They are toeholds f o r future ex-

pansion.
I t is therefore appropriate to use banking offices as a
measure of market occupancy.

This measure, considered with

measures of other aspects of the commercial banking business
such as loans and deposits — even number of accounts and number
of employees - -

does give an indication of the r e l a t i v e

satura-

t i o n of the market by the Transamerica group*
Indeed, respondent i t s e l f uses banking offices as a measure
of market occupancy i n RF 77, 79, 80, 215, 2 l 8 .

li*.

RF 173, 17U, and 182 are concerned with the nature

of commercial banking.
I n RF 173 respondent states that the term "commercial banking" i s without legal significance.

I n support i t offers

evi-

dence of statutes, and regulations, and resolutions of bankers1
conventions which are said to give no special connotation to




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the term commercial bank.

Of course, the regulatory pronounce-

ments r e f e r r e d to are concerned with the protection of deposit o r s , rather than the preservation of the i n d i v i d u a l enterprise
system.

Prom the standpoint of protecting deposits there may

be no need to d i s t i n g u i s h between commercial banks and other
banks which accept deposits.

I t i s another matter to say that

because some state statutes do not make t h i s d i s t i n c t i o n that
the Board is foreclosed from s i n g l i n g out an area of the credit
market that is being preempted by a banking group acting i n
contravention of the federal a n t i t r u s t laws.
RF 174 i s an a r t f u l l y worded statement which suggests something d i f f e r e n t from what i t says.

For a f u l l exposition of

the nature of the commercial banking business and the unique
aspects of i t we r e s p e c t f u l l y r e f e r the Hearing O f f i c e r to our
requested findings (BF 132-141)•
I n RF 182 respondent recites certain percentages of t o t a l
credit extended by commercial banks which purport to show that
i n certain categories, s p e c i f i c a l l y ,

the short term credit

f i e l d , the r o l e of the commercial bank is r e l a t i v e l y unimportant.
However, i t w i l l be recalled that Dr. Jacoby, the witness on
whose testimony respondent r e l i e s to support t h i s f i n d i n g ,

ac-

knowledged that the gross base on which his calculations were
predicated included trade credit which he estimated constituted
60 or 65$ of the t o t a l gross f i g u r e #

If

consideration i s

l i m i t e d to short term business credit extended by i n s t i t u t i o n a l




-22-

lenders, Dr. Jacoby agreed that the percentage of such credit
extended by commercial banks would be a major fraction, somewhere i n the area between 50 and 80$ (R. 9068-9073)•

15®

RF 86 contradicts the 1930 testimony of James A.

Bacigalupi, former president of Bank of America N. T. & S. A . ,
before the House Committee on Banking and Currency.

The pro-

posed f i n d i n g says that the great majority of Bank of America1s
acquisitions were made necessary by the California de novo rule
which would not permit the establishment of branches outside
of the c i t y where a bank maintained i t s head office except by
the purchase of assets o f , or merger with, an existing bank.
The great majority of the bank f s acquisitions had been accomplished p r i o r to the year i n which Bacigalupi t e s t i f i e d
(BPX 6 ) .

Concerning these acquisitions, he stated as follows:

"With the single exception of Sacramento then, the
uniform policy of the Bank of I t a l y has been to enter
outside communities only through the acquisition of an
established local bank; to convert i t into a branch o f fice; . . .
tfWhen

San Jose was entered, i t was reasoned that the
prudent way to enter an outside community was to purchase
an established bank, because otherwise i t could only be
hoped, at the outset, to attract a few disgruntled depositors, and before sufficient good business could be worked
i n t o , p r i n c i p a l l y that which theretofore could f i n d no
accommodation there on account of the smaller capital and
limited resources of the local banks, i t would be years.
Then again, the bank would inevitably be confronted with
the necessity of building a brand new local s t a f f f o r the
branch office — not the easiest thing i n modern banking.
"Subsequent experience of the Bank of I t a l y has amply
demonstrated the soundness of this reasoning. By purchasing




-23-

a good b a n k . • . i t acquired a s t a f f , an advisory board,
and local stockholders who were interested i n the l o c a l i t y and familiar with local people, values, and conditions." (R. 199-200)
Not only was i t the stated policy of the Giannini i n t e r ests to acquire banks i n preference to establishing de novos
but the numerous acquisitions after the California de novo rule
was l i f t e d indicate that the r u l e ' s demise did not change at
a l l what had been their previous practice.
acquire banks as before.

They continued to

Thus, f o r example, i n the years

1922-1926, inclusive, while the rule was i n effect, the group
acquired approximately 11$ banks and branches i n California*
On the other hand, i n the period 1927-1931, inclusive,

after

the California de novo rule had been l i f t e d , the group acquired
approximately 320 banks and branches i n California.

Furthermore,

even during the period the California de novo rule and the
McFadden Act were i n effect, the Transamerica group established
116 de novo branches.

With one exception, a l l of the acquisi-

tions and de novos referred to above are now part of Bank of
America N. T. & S. A.
Whatever may have been the r e l a t i v e status of the de novo
rule from time to time, i t seems to us, as we hope i t w i l l seem
to the Hearing O f f i c e r , that Transamerica counsel have taken a
r u l e , designed to protect the independent banks, v i r t u a l l y as
a command to go out and buy up banks and branches.

After

all,

the de novo rule was promulgated to preserve independent banks*
I t was not designed to provide an excuse f o r bank acquisitions
by those who would destroy them.



-2J|-

(BFX 6, 7, 10)

16.

We contend that RF 232, 233, 234 are irrelevant

and immaterial i n any event.

As to whether the facts support

the conclusions indicated we commend to the attention of the
Hearing Officer our findings BF 50(a)(b) which outline the
methods employed by Transamerica i n acquiring the stock of the
F i r s t Trust and Savings Bank of Pasadena and the Citizens Nat i o n a l Trust and Savings Bank of Los Angeles.

Moreover, one of

the citations used to support RF 232 is a reference to the
F i r s t National Bank i n Santa Ana, a Transamerica majority owned
bank, which Bank of America N. T. & S. A. desires to convert
into a branch of i t s system.

We refer the Hearing Officer to

the circumstances surrounding the acquisition of this bank by
Transamerica i n 1943 which show the unusual lengths to which
Transamerica went i n attempting to acquire i t (BX 132, 134, 136,
139; R* 1337-1381).

17 •

F i n a l l y , we address ourselves to the matter of the

so-called "rejected opportunities 11 to buy banks which has been
so g l i b l y and gratuitously insinuated into this record by L. M.
Giannini.
On the basis of that testimony respondent asks the Hearing
Officer i n RF 22, 95 and 96 to f i n d that numerous opportunities
to buy banks had been rejected by Transamerica and Bank of
America and i n that connection l i s t s 17 banks which purportedly
f a l l i n that category.




-25-

To begin with, we do not think the Hearing O f f i c e r should
believe t h i s witness.

His openly h o s t i l e ,

evasive testimony,

his continual harassment of the orderly course of the

trial,

his repeated and obviously malicious attacks on the motives and
methods of those responsible, i n the performance of t h e i r

offi-

c i a l duties, f o r the i n i t i a t i o n and conduct of t h i s proceeding,
coupled with the fact of his personal interest i n the outcome
of the l i t i g a t i o n , raise grave doubts as to his

credibility.

This conclusion i s strengthened when we compare his phenomenal
knowledge of the minutest details on direct examination with his
studied lack of r e c o l l e c t i o n on cross examination concerning important matters i n the a f f a i r s of corporations i n which he and
his f a t h e r , as p r i n c i p a l o f f i c e r s and/or d i r e c t o r s , played such
dominant r o l e s .

We suggest that the Hearing O f f i c e r examine

the entire testimony of t h i s witness from the standpoint of his
c r e d i b i l i t y as i t is our purpose here to deal with i t only i n
so f a r as i t related to the "rejected opportunities" to buy
certain of the banks named.
Giannini stated that 17 named banks were at one time or
another offered f o r sale and rejected because they did not

fit

into a program f o r a state-wide branch banking system (R. 10,536,
10,537).
At the outset, we should point out that the source of his
purported knowledge of a great many of these so-called opport u n i t i e s i s , by his own statement, founded on what other people
t o l d him.




To develop the true facts of the situations,

-26-

counsel

f o r the Board produced with respect to certain of these banks
persons most prominently i d e n t i f i e d with t h e i r management and
control.

I n many cases these witnesses t e s t i f i e d that there

never had been any o f f e r of the i n s t i t u t i o n made.

Indeed, f a r

from r e j e c t i n g opportunities to buy these banks, i t appeared
i n some Instances that Transamerica and Bank of America N. T.
& S. A. were actively engaged i n s o l i c i t i n g opportunities to
buy them.
if

I n other cases the testimony was to the effect that

there had been any negotiation i t was i n i t i a t e d by the

Gianninis and broke down on the question of price to be paid
(R. 10,781, 10,791, 10,800, 10,831*-10,835, 10,837-10,838, 10,81*3,
12, 091*-12,096, 12,102, 12,108-12,110, 12,137-12,139,
12,380-12,381*, 12,1*87-12,1*93, 12,506-12,510,
12,71*7, 12,772-12,773,

12,230,

12,517-12,523,

12,777-12,781).

Even i f we assume there were rejected opportunities,

it

does not demonstrate that the Transamerica group would not buy
those or other banks today.

Nor does i t establish that banks

w i l l be turned down i n the f u t u r e .

I n t h i s connection, the

Hearing O f f i c e r w i l l r e c a l l the testimony of numerous C a l i f o r n i a
and Oregon bankers that i n recent years Transamerica or Bank of
America N. T. & S. A. have been continuously attempting to acquire t h e i r banks.

Indeed, the record shows they have even

made repeated attempts to acquire banks which Giannini claimed
they had rejected (BP 52-55)•




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CONCLUSION

As indicated at the outset we have not attempted to deal
s p e c i f i c a l l y with each and every f i n d i n g proposed by respondent.
However, we submit that our foregoing comments are s u f f i c i e n t l y comprehensive to demonstrate that the proposed findings
submitted on behalf of respondent are i n general I r r e l e v a n t ,
immaterial or u n r e l i a b l e .
Respectfully submitted,

J. LEONARD TOWNSEND,
Solicitor,
Board of Governors of the
Federal Reserve System,
Washington, D. C.

G. HOWLAND CHASE,
Assistant S o l i c i t o r *
GREGORY OfKEEFE, JR.,
Of Counsel.




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