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UNITED STATES OF AMERICA BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM I n the Matter of5 TRANSAMERICA CORPORATION PROPOSED FINDINGS AND CONCLUSIONS SUBMITTED TO HEARING OFFICER EVANS ON BEHALF OF RESPONDENT, TRANSAMERICA CORPORATION Samuel B. S t e w a r t , Jr., Hugo A. Steinmeyer, Gerhard A. G e s e l l , Covington & B u r l i n g of Counsel A p r i l 2, 1951 A t t o r n e y s f o r Respondent, Transamerica C o r p o r a t i o n TABLE OF CONTENTS Pape I. II. III. IV. V. VI. VII. VIII. Transamerica f s Organization and Investments . . . . * . . . . » . . » . . * 1 The Organization of the Bank of America and Transamerica's R e l a t i o n s with the Bank . . . . . . . . . . . . . . . 9 The Growth and Development of the Bank of America . . . * . . . . . . . . . * 20 The O r i g i n of Transamerica ! s I n v e s t ment i n Majority-Owned Banks and the Development of such Banks . , » * * . . . . 51 Transamerica f s R e l a t i o n s w i t h i t s Majority-Owned Banks . . » . . . . . • « . 70 The F i n a n c i a l Services Provided by Banks and the Nature of Competition Therein . * . . . . » . . » • • . . . . * . 75 Competition Has Increased and There Has Been a T o t a l Absence of Any Tendency t o Create a Monopoly o f the Services Provided by Banks . . . . . . . . 88 Conclusions . . . 125 Pursuant t o S e c t i o n 8(b) of the A d m i n i s t r a t i v e Procedure Act [ 5 U.S.C. i 1007(b)] and the Rules of Procedure of the Board of Governors of the Federal Reserve System issued pursuant t o t h a t A c t , Respondent r e s p e c t f u l l y requests the Hearing O f f i c e r t o f i n d each and every one of the f a c t s and conclusions s e t f o r t h h e r e i n . I* TRANSAMERICA»S ORGANIZATION AND INVESTMENTS 1* Transamerica C o r p o r a t i o n ( h e r e a f t e r called Transamerica) i s a c o r p o r a t i o n organized i n October, 1928, and e x i s t i n g under the laws of the State of Delaware, w i t h an o f f i c e and p r i n c i p a l place of business a t b Columbus Avenue, San F r a n c i s c o , C a l i f o r n i a . No bank i s l o c a t e d i n i t s premises and no banking business i s t r a n s a c t e d there* [Bd* Ex* 3; Tr * 1768] 1/ 2* As of December 31, 1950, Transamerica had 9,859,350 shares o u t s t a n d i n g . I t had approximately 1^0,000 shareholders, no one of whom owned as much as 1;% of the o u t s t a n d i n g s t o c k , which i s l i s t e d and traded a c t i v e l y on the New York, San Francisco and Los Angeles stock exchanges* [Bd* Ex* 3W, R* Ex* 387-389? T r . *+226] 3# Transamerica i s engaged i n the business of buy- i n g and h o l d i n g f o r investment s t o c k i n v a r i o u s corporations i n c l u d i n g banks, insurance companies, and i n d u s t r i a l e n t e r p r i s e s of v a r i o u s k i n d s . I n some cases i t owns a m a j o r i t y of the v o t i n g stock of a c o r p o r a t i o n and i n others i t owns only a m i n o r i t y interest* [ B d . Ex* 3} Tr* *f20»+-053 Throughout these Proposed F i n d i n g s and Conclusions, Board E x h i b i t s are r e f e r r e d t o as Bd* Ex*$ Respondents E x h i b i t s are r e f e r r e d t o as R* E x * ; and the T r a n s c r i p t of the Record i s r e f e r r e d t o as T r . « 2 * Transamerica has bought and owned stock i n companies doing business i n v a r i o u s p a r t s of the U n i t e d States and has not l i m i t e d i t s a c t i v i t i e s t o any area o f the United States or t o the purchase of stocks of corporat i o n s engaged i n any p a r t i c u l a r type of business. [Bd. Ex. 3] 5# Transamerica has acquired stock i n t e r e s t s banks and other types of c o r p o r a t i o n s , and a f t e r in holding such stock i n t e r e s t s f o r a t i m e , disposed of them. Since i t s o r g a n i z a t i o n i n 1928, Transamerica has h e l d and d i s posed of stock i n t e r e s t s i n a t l e a s t f i f t y or s i x t y m e r c a n t i l e and i n d u s t r i a l companies. [Bd. Ex. 3 ] 6. Transamerica i s not an o p e r a t i n g company. I t has only t w e n t y - t h r e e o f f i c e r s and employees. Their s o l e d u t i e s are t o determine i t s investment p o l i c y and t o a d m i n i s t e r on behalf of i t s stockholders such investments as are decided upon. [Tr. ^207-10] 7#- No o f f i c e r or employee of Transamerica i s engaged i n the management or o p e r a t i o n of any o f the e n t e r p r i s e s i n which Transamerica owns s t o c k . [ T r . 1+207-10, i+227-29] 8. Transamerica f s i n t e r e s t , a c t i v i t y and responsi b i l i t y r e s p e c t i n g each of the c o r p o r a t i o n s i n which i t - 3 holds investments are s o l e l y and e n t i r e l y those of a s t o c k holder* [Bd* Ex* 3 ; Tr* *f229-30] 9# Transamerica c o l l e c t s no management fee from any bank or c o r p o r a t i o n i n which i t owns s t o c k , i t s sole income from such banks and c o r p o r a t i o n s being i n the form of d i v i d e n d s * [ T r * *+229] 10. Transamerica i s not engaged i n the "commer- c i a l banking" business or i n any of the business i n which the c o r p o r a t i o n s i n which i t holds investments are engaged. [Bd. Ex. 3? T r . 11* Each of the c o r p o r a t i o n s i n which Trans- america holds investments has i t s own o f f i c e r s and d i r e c t o r s who have sole r e s p o n s i b i l i t y f o r determining p o l i c i e s and managing i t s its affairs. [ T r . 228, M-227-28] 12. As of December 31, 1950, Transamerica owned m a j o r i t y stock i n t e r e s t s i n domestic banks and i n 12 a c t i v e insurance, i n d u s t r i a l and commercial c o r p o r a t i o n s . As of t h a t time i t a l s o owned m i n o r i t y stock i n t e r e s t s other banks, insurance and i n d u s t r i a l in corporations. [Bd. Ex. 3W] 13* I n a d d i t i o n t o i t s holdings of bank s t o c k , Transamerica h e l d stock on December 31, 1950, in - 2>+ c o r p o r a t i o n s engaged i n v a r i o u s businesses i n c l u d i n g the following; a c q u i r i n g , managing and s e l l i n g r e a l e s t a t e ; home f i n a n c i n g ; u n d e r w r i t i n g and s e l l i n g l i f e , health, a c c i d e n t , f i r e , automobile and marine insurance; catching, buying, processing and s e l l i n g f i s h and seafood; manuf a c t u r i n g and s e l l i n g h y d r a u l i c c o n t r o l s , l i n e supports f o r a i r c r a f t , a g r i c u l t u r a l implements, D i e s e l engines, n o n - f e r r o u s and aluminum castings and f o r g i n g s , malleable i r o n and s t e e l c a s t i n g s , o i l - w e l l equipment and machinery, and other p r o d u c t s . [Bd. Ex. 3W] Ik. As of January 31, 1951, of the funds i n v e s t e d by Transamerica i n stock was i n v e s t e d i n the stock of banks. Of such funds 22% was i n v e s t e d i n shares of majority-owned banks. On t h i s d a t e , Transamerica had t o t a l assets valued a t $l*+6,000,000. [ R . Ex. 398] 15. Transamerica*s l a r g e s t income-producing investment i s the Occidental L i f e Insurance Company, a l i f e insurance company conducting a n a t i o n - w i d e business. Transamerica owns 100$ of the o u t s t a n d i n g stock of this company. [Bd. Ex. 3W] 16. As of December 31% 1950, Transamerica and s u b s i d i a r i e s h e l d m a j o r i t y stock i n t e r e s t s of the f o l l o w i n g - 5 amounts i n these and no other banks l o c a t e d i n the United States: (a) California (1) (2) (3) 0+) (5) (6) (7) (8) (9) (10) (11) (12) (13) (1*+) (15) (16) (17) (18) (19) (20) (21) (22) (23) (21*) (25) (26) (b) C e n t r a l Bank, Oakland (99.65$) F i r s t Trust and Savings Bank of Pasadena (98.06$) F i r s t N a t i o n a l Bank i n Santa Ana (98.50$) F i r s t N a t i o n a l Trust and Savings Bank of Santa Barbara (95.85$) American Commercial & Savings Bank, Moorpark (90.00$) Bank of Beaumont (9*+.00$) Bank of Newman (97.18$) Bank of Pinole (92.72$) Bank of Tehachapi (92.50$) C e n t r a l Bank of Calaveras (92.50$) Farmers and Merchants Bank of Watts (97.50$) F i r s t N a t i o n a l Bank i n Corcoran (90.00$) F i r s t N a t i o n a l Bank i n Delano (95.33$) F i r s t N a t i o n a l Bank i n Turlock (89.87$) F i r s t N a t i o n a l Bank of B e l l f l o w e r (95.00$) F i r s t N a t i o n a l Bank of Crows Landing (89.60$) F i r s t N a t i o n a l Bank of F a i r f i e l d (90.00$) F i r s t N a t i o n a l Bank o f Garden Grove (90.00$) F i r s t N a t i o n a l Bank of Los A l t o s (87.20$) F i r s t N a t i o n a l Bank of Mountain View (75.63$) F i r s t N a t i o n a l Bank of Oakdale (93.00$) F i r s t N a t i o n a l Bank of San J a c i n t o (87.60$) F i r s t N a t i o n a l Bank of Weed (90.00$) F i r s t Savings Bank of San J a c i n t o (87.60$) S t a n i s l a u s County Bank (97.08$) Temple C i t y N a t i o n a l Bank of Temple C i t y (95.00$) Oregon (1) (2) (3) 0+) (5) (6) (7) (8) (9) (10) (11) F i r s t N a t i o n a l Bank of P o r t l a n d (68.60$) F i r s t N a t i o n a l Bank of Eugene (97.80$) Bank of Sweet Home (97.50$) Benton County S t a t e Bank (97.33$) C a r l t o n State & Savings Bank (90.00$) Clatsop County Bank (97.00$) Coolidge and McClaine (98.13$) F i r s t N a t i o n a l Bank of Cottage Grove (90.00$) F i r s t N a t i o n a l Bank of F o r e s t Grove (90.00$) F i r s t N a t i o n a l Bank of Lebanon (97.33$) F i r s t N a t i o n a l Bank of P r i n e v i l l e (90.00$) - 6 (12) (13) (l 1 *) (15) (16) .(c) Monroe S t a t e Bank (91.67$) Moreland-Sellwood Bank (97.00$) Scio S t a t e Bank (95.00$) State Bank of Malheur County (9*+.60$) Y a m h i l l S t a t e Bank (90.00$) Nevada (1) F i r s t N a t i o n a l Bank of Nevada (99.17$) (2) Bank of Nevada (70.00$) (3) Farmers' Bank of Carson V a l l e y , I n c . (d) (88.00$) Arizona (1) F i r s t N a t i o n a l Bank of Arizona (80.23$) (e) Washington (1) N a t i o n a l Bank of Washington (62.33$) [Bd. Ex. 3W] 17. I n a d d i t i o n t o the s t o c k i t owns i n the banks l i s t e d i n F i n d i n g No. 16, Transamerica now owns m i n o r i t y i n t e r e s t s i n the stock of v a r i o u s banks. The most s u b s t a n t i a l m i n o r i t y investments a t the present time are: (a) (b) (c) C i Los t i z e nAngeles s N a t i o n(23.5$) a l T r u s t and Savings Bank o f Bank o f America N a t i o n a l T r u s t and Savings A s s o c i a t i o n (7.66$) N a t i o n a l C i t y Bank of New York ( 7 . 2 $ ) [ B d . Ex. 3W] 18. During the p e r i o d from December 31, 1931» through December 31, 19^9, Transamerica*s investments i n the stocks of banks l o c a t e d i n C a l i f o r n i a , Oregon, Washington, Arizona and Nevada banks have d e c l i n e d from approximately - 7 $118,000,000 t o approximately $61,000,000 through reduct i o n i n the amount of bank stocks owned by i t . [ R . Ex. 363] 19 • Transamerica ! s purchases of bank stocks have been s o l e l y f o r investment. They have been c o n s i s - t e n t w i t h and i n f u r t h e r a n c e of i t s investment p o l i c y and have been entered i n t o s o l e l y as d e s i r a b l e investments f o r its stockholders. [ B d . Ex. 3} T r . 20. k2h$] Transamerica f s bank investment p o l i c y has, among other t h i n g s , f a v o r e d investments i n branch banks or i n s t i t u t i o n s t h a t complement branch banks i n which Transamerica already has i n v e s t e d , thereby enhancing the value of p r i o r investments. [ B d . Ex. 35 T r . 21. 10658-61J This p o l i c y has been based upon the e x p e r i - ence and judgment o f i t s o f f i c e r s and d i r e c t o r s that branch banks are d e s i r a b l e and p r o f i t a b l e bank i n v e s t ments . [ B d . Ex. 3; T r . 10658, 10660] 22. Transamerica has r e j e c t e d numerous oppor- t u n i t i e s t o make bank investments because the banks under c o n s i d e r a t i o n d i d not lend themselves p r o p e r l y t o the enhancement i n value of the branch banks i n which i t held - 8 investments and were not a t t r a c t i v e l y p r i c e d f o r a d d i t i o n a l investments [Tr • 10659-60, 10828-*f0] 23. Transamerica has no plans f o r the purchase of any a d d i t i o n a l bank stock a t p r e s e n t . I t has no !, goal ! ! or " o b j e c t i v e " w i t h respect t o f u t u r e a c q u i s i t i o n s and would consider purchasing stock of a bank o f f e r e d t o only i f i t were a good buy and f i t t e d i n t o i t s it investment program. [ T r . *+25M 2b0 Transamerica ! s investments i n banks have been p r o f i t a b l e . [Bd. Ex. 3 j T r . 25. ^8-^9] Transamerica i s not a bank, banking associa- t i o n or t r u s t company, and i s not a u t h o r i z e d t o engage i n the banking business. [Bd. Ex. 3; T r . 87] - 9 II. THE ORGANIZATION OP THE BANK OP AMERICA AND TRANSAMERICA1S RELATIONS WITH THE BANK 26. I n 1904, Mr. A. P. G i a n n i n i organized the Bank of I t a l y t o conduct a banking business i n the State of C a l i f o r n i a . I n 1919 t h i s bank was one of the s t a t e banks t o j o i n the Federal Reserve System. first I n 1927, i t was one of the f i r s t s t a t e banks t o be converted i n t o a n a t i o n a l banking a s s o c i a t i o n under the p r o v i s i o n s of the McFadden Act which a u t h o r i z e d n a t i o n a l banks t o maint a i n t h e i r e x i s t i n g branches and those of predecessor banks. I t s name was a t t h a t time changed t o Bank of N a t i o n a l T r u s t and Savings A s s o c i a t i o n . Italy I n 1930, Bank of I t a l y N t T . & S.A. and Bank of America of C a l i f o r n i a were c o n s o l i d a t e d , the r e s u l t i n g bank c o n t i n u i n g under Bank of I t a l y N.T. & S . A . f s n a t i o n a l c h a r t e r and the name of Bank of America N a t i o n a l Trust and Savings A s s o c i a t i o n . Mr. A. P. G i a n n i n i , except f o r a s h o r t p e r i o d of r e t i r e ment, was a s e n i o r o f f i c e r of Bank of I t a l y , Bank o f I t a l y N.T. & S.A. and Bank of America N.T. & S . A . , from 1904 u n t i l h i s death on June 3, 1949, s e r v i n g w i t h o u t compensation a f t e r he r e t u r n e d from r e t i r e m e n t i n 1932. He f o r m u l a t e d the p o l i c i e s which guided the development and growth of Bank o f I t a l y and i t s successors (hereafter r e f e r r e d t o as Bank of America)« [R. Ex. 71, 72, 255, 392; T r . 195-98, 10455-57, 117^7-48] - 10 27. Bank of America i s a n a t i o n a l banking associa- t i o n s i t u a t e d i n C a l i f o r n i a and o p e r a t i n g under the N a t i o n a l Bank Act and under the s u p e r v i s i o n o f the Comptroller of the Currency. I t s p r i n c i p a l executive o f f i c e s are a t 300 Montgomery S t r e e t , San F r a n c i s c o , C a l i f o r n i a , and i t has 526 branches w i t h i n the S t a t e of C a l i f o r n i a . The Bank a l s o operates branches i n Siam, London, M a n i l a , Tokyo, Kobe and Yokahama, and has r e p r e s e n t a t i v e s w i t h o f f i c e s i n New York, P a r i s , M i l a n and Z u r i c h . [R. Ex. 255] 28. over As of December 31, 1950, Bank o f America had 300,000 separate d e p o s i t accounts. Total capital funds o f the Bank a t t h a t time were approximately $^-00,000,000, e x c l u s i v e of a reserve of $1*7,000,000 f o r p o s s i b l e f u t u r e loan losses. [ R . Ex. 2553 29. Bank o f America had d e p o s i t l i a b i l i t i e s as f o l l o w s , as of December 31, 19*f8: To I n d i v i d u a l s . Partnerships and Corporations Demand Time $2,313,000,000 2,293,000,000 To Governments - Federal S t a t e and Local 6^8,000,000 To Other Banks 162.000,000 To Others ( C e r t i f i e d and Cashiers Checks, e t c . ) T o t a l Deposit L i a b i l i t i e s 153 T 000 T 000 $5,569,000,000 [ R . Ex. 266] - 11 30. Transamerica was organized i n 1928 by stockholders of Bank of I t a l y N.T. & S.A. f o r the purpose of removing the o u t s t a n d i n g shares of t h a t Bank, which had then been i n existence f o r 24 y e a r s , from stock exchange l i s t i n g i n order t o e l i m i n a t e d i r e c t speculation which had caused wide f l u c t u a t i o n s i n the p r i c e of shares and i n j u r e d the r e p u t a t i o n of the Bank. its Thus, in 1928, upon the o r g a n i z a t i o n of Transamerica, the holders of 99.65$ of the stock of Bank of I t a l y N.T. & S.A. exchanged t h e i r stock f o r stock of Transamerica. Mr. A. P. G i a n n i n i served as Chairman of the Board of D i r e c t o r s of Transamerica and w i t h o u t any compensation from 1932 when he r e t u r n e d from r e t i r e m e n t u n t i l h i s death on June 3> 19*9. [Bd. Ex. 3, R. Ex. 390, 392: T r . 223-25, 10586-88, 11747-48] 31. On J u l y 30, 1937, Transamerica d i s t r i b u t e d t o i t s shareholders about 58$ of the Bank of America stock which i t h e l d . This d i s t r i b u t i o n was made, among o t h e r reasons, because the market f o r bank stock had become s t a b l e and the reason f o r the s h e l t e r which Transamerica had p r o v i d e d f o r Bank of America stock no longer e x i s t e d . I n addi- t i o n , Transamerica d e s i r e d t o reduce the e x t e n t t o which i t s assets were concentrated i n a s i n g l e investment, and was concerned over the f i n a n c i a l burdens which might be imposed - 12 upon I t i n the f u t u r e should Bank o f America d e s i r e t o i n crease i t s c a p i t a l . Transamerica was a l s o concerned over t h e l o n g d e l a y o f f o u r years experienced i n o b t a i n i n g a v o t i n g p e r m i t f o r t h e s t o c k o f Bank o f America, First N a t i o n a l Bank o f P o r t l a n d and F i r s t N a t i o n a l Bank o f Nevada. Bank o f America a t t h e same time f e l t t h a t its a f f i l i a t i o n w i t h a h o l d i n g company t h r o u g h s t o c k owners h i p made i t r e s p o n s i b l e t o a t l e a s t t h r e e governmental a u t h o r i t i e s , t h e C o m p t r o l l e r of t h e Currency and, through Transamerica, t h e S e c u r i t i e s and Exchange Commission and the Board o f Governors o f the F e d e r a l Reserve System (hereafter r e f e r r e d t o as t h e Board) and t h a t i t be r e s p o n s i b l e o n l y t o t h e C o m p t r o l l e r . should Thus, t h e s t o c k d i s t r i b u t i o n was t h o u g h t t o be advantageous t o b o t h Transamerica and Bank of America. [R. E x . 351; T r . 10597-98, 10601-05] 32. Since t h e J u l y 30, 1937, distribution, Transamerica has c o n t i n u e d t o reduce i t s h o l d i n g s o f Bank o f A m e r i c a ' s s t o c k t h r o u g h s a l e s i n t h e m a r k e t , exchanges. or I t s h o l d i n g s o f the o u t s t a n d i n g v o t i n g s t o c k a t y e a r - e n d dates by t w o - y e a r p e r i o d s were as f o l l o w s : 1938 41.17 1940 36.53 1942 25.05 1944 23.64 1946 22.32 1948 22.88 [Bd. E x . 21, 225j T r . I O 6 3 7 393 - 13 33* I n October, 19^9, Transamerica s o l d t o the general p u b l i c through an u n d e r w r i t i n g syndicate of about 200 brokers and dealers doing business throughout the United S t a t e s approximately h a l f of i t s remaining Bank of America s t o c k , thereby reducing i t s holdings t o about 11$ [ R . Ex. 359; T r . 10638-39] 3*f. On January 31, 1951, Transamerica issued a d i v i d e n d c o n s i s t i n g of shares of Bank of America s t o c k , reduci n g i t s present h o l d i n g s t o 1,838,850 shares which c o n s t i t u t e but 66$ of the Bank of America stock o u t s t a n d i n g . [R. Ex. 3933 35• There i s no s u b s t a n t i a l degree of identity between the shareholders o f Transamerica and the shareholders of Bank of America e i t h e r as t o shareholders or as t o amounts h e l d . [ T r . ^516-17, 10622] 36. Bank of America has 2^,000,000 shares of stock o u t s t a n d i n g . I t s s e c u r i t i e s are traded i n the over- t h e - c o u n t e r s e c u r i t i e s market and have been h e a v i l y traded since 1937# Shares have been s o l d i n l a r g e amounts through brokers and dealers throughout the c o u n t r y . As of August 31, 1950, the Bank had 180,575 s h a r e h o l d e r s . [ R . Ex. 337A, T r . 118^511885-87, 11890-93] 366-368; - 14 37. During the p e r i o d from January 1, 1937, t o October 31, 1950, a t o t a l of 14,856,687 shares of Transa m e r i c a ^ stock were t r a d e d on the New York, San Francisco and Los Angeles stock exchanges, as f o l l o w s : New York Stock Exchange San Francisco Stock Exchange Los Angeles Stock Exchange - 6,067,700 shares shares 2,581,109 shares 6,207,878 [R. Ex. 387-389] 38. Transamerica has e x e r c i s e d no i n f l u e n c e on Bank of America through the proxy machinery of the Bank. The Proxy Committee of the Bank i s s e l e c t e d by i t s Board of D i r e c t o r s . Transamerica has never p a r t i c i p a t e d , directly or i n d i r e c t l y , i n the s e l e c t i o n of the Proxy Committee. [ T r . 10639-41] 39. whom Bank of America has 25 d i r e c t o r s , a l l of p a r t i c i p a t e a c t i v e l y i n d i r e c t i n g the a f f a i r s of Bank of America. Of t h i s number, 8 have been s e l e c t e d from the management of the Bank and the remaining 17 have been chosen as persons of s t a t u r e and judgment i n the v a r i o u s businesses i n which they are engaged. [R. Ex. 255; T r . 10690-98, 12858-593 40. There was no change i n the Board of D i r e c t o r s of Bank of America i n 1928 when Transamerica was organized and r e c e i v e d the Bank f s s t o c k . Of the Bank of America*s - 15 present Board of 25 d i r e c t o r s , 5 were e l e c t e d p r i o r to 1928, 6 between 1928 and 1937, and 14 since 1937. [Bd. Ex. 26, 291; T r . 379495, 10642-43, 12858-59] 41. Transamerica has never suggested the name of any d i r e c t o r of Bank of America, nor have i t s views been sought i n the e l e c t i o n of directors. [ T r . 10698-993 42. Transamerica and Bank of America have but a s i n g l e common d i r e c t o r , Mr. L . M. G i a n n i n i , President of Bank of America, who was a member of the Board of the Bank l o n g p r i o r t o the o r g a n i z a t i o n of Transamerica and who i s not i n any sense a r e p r e s e n t a t i v e of Transamerica on the Board of Bank of America. Mr. L . M. G i a n n i n i does not c o n t r o l Transamerica d i r e c t l y or i n d i r e c t l y , and h i s sole connection w i t h Transamerica i s as a d i r e c t o r . In t h i s c a p a c i t y he o c c a s i o n a l l y attends d i r e c t o r s 1 meetings and i n f r e q u e n t l y gives advice when requested. He plays no p a r t i n the a c t i v e management of Transamerica. [ T r . 4254-57, 10579-83, I O 6 5 2 - 5 7 , 10687] 43• The t o t a l s t o c k h o l d i n g s of Mr. L . M. Giannini, his wife, his children, his s i s t e r , his fatherfs e s t a t e and of a l l t r u s t s of which he i s a b e n e f i c i a r y and of a l l o t h e r s t o c k h o l d i n g s over which he has v o t i n g c o n t r o l , - 16 amount t o l e s s than 2/lOths of 1% of Bank of Amerlca f s v o t i n g stock and 3 / l O t h s o f 1;% of Transamerica f s v o t i n g stock. [ T r . 10657-58] 44. The p o l i c i e s and operations of Bank of America have always been determined and executed by i t s o f f i c e r s and d i r e c t o r s w h o l l y independently of Transamerica. [ T r . 5577-78, 5736-39, 9872-73 IO616-I7] 45. Transamerica has never p a r t i c i p a t e d in the d i r e c t i o n o f any o f Bank of America*s a f f a i r s or d e t e r m i n a t i o n of Bank of America's p o l i c i e s , o t h e r than t o vote i t s stock a t the annual s t o c k h o l d e r s 1 meetings. [ T r . 4232-33, 10616-17, 10655-56] 46. Transamerica has never, through i t s stock- h o l d i n g s or o t h e r w i s e , sought t o p a r t i c i p a t e i n the operat i o n of Bank o f America or t o impose p o l i c i e s upon Bank o f America or i t s o f f i c e r s or d i r e c t o r s or t o i n t e r f e r e i n the conduct of the Bank f s b u s i n e s s . [ T r . 4232-33, 9872-73, 5577-78, 10616-17,5736-39, 10655-56] 47. None of the o f f i c e r s or d i r e c t o r s of the Bank of America has ever r e c e i v e d d i r e c t i o n s or suggestions from Transamerica or i t s o f f i c e r s or d i r e c t o r s as t o the o p e r a t i o n or management of the Bank's b u s i n e s s . [ T r . 5577-78, 5736-39, 6419, 8 7 8 9 90, 9834-38, 9872-73, 9969-71, 10118-20, 10415-16] - 17 48. Bank of America makes no r e p o r t s whatsoever t o Transamerica, except those which are made t o a l l share- holders . [ T r • 4233] 49. Bank of America e s t a b l i s h e s i t s own i n t e r e s t r a t e s , l e n d i n g , investment, and other o p e r a t i n g p o l i c i e s w i t h o u t c o n s u l t a t i o n w i t h Transamerica and w h o l l y independ e n t l y of the r a t e s and p o l i c i e s adopted by any Transamerica majority-owned bank. [ T r . 5577-78, 5736-39, 8774-75, 9772-24, 9764-65, 9872-73, 10126-27, 10140-41, 10632] 50. The growth of Bank of America and i n p a r t i - c u l a r i t s establishment of branches has a t a l l times been c a r r i e d out w i t h o u t d i r e c t i o n from or c o n s u l t a t i o n w i t h Transamerica and w i t h o u t c o n s i d e r a t i o n of the e f f e c t of such growth or branches upon banks i n which Transamerica has a m a j o r i t y stock i n t e r e s t . [ T r . 4531, 10616] 51. The r e l a t i o n s of Bank of America w i t h banks i n which Transamerica owns a m a j o r i t y stock i n t e r e s t do not d i f f e r i n any way from the Bank's r e l a t i o n s w i t h other banks i n which Transamerica has no i n t e r e s t whatsoever. [ T r . 3116-18, 3252-54, 10628-31, 10647-48] - 18 52. Transamerica has never made any e f f o r t to d i r e c t or suggest t h a t Bank of America r e f r a i n from comp e t i n g w i t h other banks i n which Transamerica has an i n vestment • [ T r . 4232-33, 5577-78, 5736-39, 9872-73* 10616-17, 10655-56] 53. A l l business d e a l i n g s between Bank of America and Transamerica and between Bank of America and Transameri c a ^ majority-owned banks and companies, have, since 1937, been brought about s o l e l y by business c o n s i d e r a t i o n s and have been n e g o t i a t e d as t o terms and c o n d i t i o n s on an armslength basis. A l l business dealings which were o r i g i n a t e d before 1937 and continued a f t e r 1937 were reexamined and, in i n the few instances where i t was necessary, were r e n e g o t i ated as t o terms and c o n d i t i o n s on an arms-length b a s i s . [R. Ex. 385; T r . 10619-31, 10636-37, 12791-93] 5^. Transamerica does not d i r e c t l y or indirectly, by v o t i n g stock or o t h e r w i s e , c o n t r o l or e x e r c i s e a c o n t r o l l i n g i n f l u e n c e upon Bank of America. 55• Transamerica has not attempted, d i r e c t l y or i n d i r e c t l y , by v o t i n g stock or o t h e r w i s e , t o c o n t r o l or e x e r c i s e a c o n t r o l l i n g i n f l u e n c e upon Bank of America. - 19 56. Transamerica has n e i t h e r the power t o c o n t r o l Bank of America nor the power t o e x e r c i s e a c o n t r o l l i n g in- f l u e n c e upon Bank of America. 57* Transamerica has never used the stock owned by i t i n Bank of America or i n any other bank i n an attempt t o b r i n g about any l e s s e n i n g of c o m p e t i t i o n between any such bank and Bank of America, t o r e s t r a i n commerce, or t o create a monopoly of any l i n e of commerce. - 20 III THE GROWTH AND DEVELOPMENT OF THE BANK OF AMERICA 58# S t a r t i n g w i t h a s i n g l e £e novo banking o f f i c e , $150,000 of c a p i t a l and no d e p o s i t l i a b i l i t i e s in 190*+, Bank of America (then Bank of I t a l y ) has s t e a d i l y grown• By 1950, i t operated 526 branches i n over 300 C a l i f o r n i a communities, had won the patronage o f over W,000,000 d e p o s i t o r s , had made, i n t h a t y e a r , about 2,^70,000 l o a n s , and had more than 180,000 s t o c k h o l d e r s . [ R . Ex. 76G, 255] 59* Since 190^, the c o n t r o l l i n g and dominant purpose of Mr. A. P. G i a n n i n i and those associated w i t h him i n the management of Bank of America has been t o create and develop a branch bank i n C a l i f o r n i a , equipped t o provide on the most e f f i c i e n t basis p o s s i b l e maximum s e r v i c e f o r borrowers, d e p o s i t o r s and others d e a l i n g w i t h the bank, w i t h p a r t i c u l a r emphasis upon the needs and problems of the s m a l l borrower and s m a l l d e p o s i t o r . The s u c c e s s f u l achievement of these purposes has been the p r i n c i p a l reason f o r the s i z e and growth of Bank of America. [ R . Ex. 255, 2 7 ^ 2 7 7 ; T r . 197-98, 553^-36, 6328, 9772. 9820. 10538, 10551-52] - 21 60. Bank o f America has pioneered the develop- ment of branch banking i n the United S t a t e s . [ T r . 10*+7^-75] 61. As e a r l y as 1919, Bank of I t a l y agreed t o become a member of the Federal Reserve System, but only a f t e r i t had set f o r t h t o the F e d e r a l Reserve o f f i c i a l s i t s p l a n t o develop a branch bank, i n accordance w i t h which i t intended t o e s t a b l i s h branches i n the premises of banks whose assets might be a c q u i r e d whenever a d e s i r able o p p o r t u n i t y presented i t s e l f , and had r e c e i v e d e x p l i c i t assurances t h a t branch banking was approved and t h a t i t s p l a n of growth would be appraised s o l e l y on the basis of i t s f i n a n c i a l soundness. [ R . Ex. 13-153 62. Bank o f America's o b j e c t i v e i n e s t a b l i s h i n g branches has been and i s t o develop a statewide branch bank t h a t i s able t o render a c o n s t r u c t i v e s e r v i c e t o customers of the Bank, t o the S t a t e o f C a l i f o r n i a and t o the n a t i o n , and t h a t w i l l operate p r o f i t a b l y i n the i n t e r e s t of the s t o c k h o l d e r s and of the general economy. [ T r . 10,538] 63. Bank of America f s management foresaw, and experience has proved, the a b i l i t y through branch banking of: - 22 (a) O f f e r i n g a greater v a r i e t y of s e r v i c e s t o more persons, through (1) A b i l i t y t o serve s m a l l communities which could not support a u n i t bank (30% o f Bank of America f s branches are i n one-bank towns which c a r r y only 10$ o f the Bank f s d e p o s i t (2) liabilities), A b i l i t y t o make l a r g e loans t o corporate and m u n i c i p a l borrowers because of the l a r g e r l e n d i n g l i m i t c o n f e r r e d by g r e a t e r resources, (3) A b i l i t y t o render a greater v a r i e t y of services than a u n i t bank. (b) A t t a i n i n g e f f i c i e n c y of o p e r a t i o n , (1) S p e c i a l i z a t i o n of personnel, (2) A b i l i t y t o pay b e t t e r - t r a i n e d personnel, (3) A b i l i t y t o employ e x p e r t s , (*+) Smaller overhead p r o p o r t i o n a t e t o s i z e of (c) (d) through operations. A t t a i n i n g greater s a f e t y of d e p o s i t s , (1) A b i l i t y to d i v e r s i f y loans, (2) F l e x i b i l i t y i n investments. through O f f e r i n g general b e n e f i t s f o r the p u b l i c , through - 23 (1) Greater m o b i l i t y o f f u n d s , through a b i l i t y t o use s u r p l u s d e p o s i t s o f some branches i n o t h e r branches where loans are needed, (2) Independence of western business and i n d u s t r y o f W a l l S t r e e t banks, t h r o u g h a b i l i t y o f a w e s t e r n bank, interested i n western development, t o f i n a n c e l a r g e business and i n d u s t r i a l d e v e l o p ments . [ R . Ex. 112, 150, 255; T r . 85, 197-200, 824-25, 828, 2578, 2 7 6 5 - 6 7 . 5692-96. 5 W - 3 0 , 6027, 6216-29, 6235, 6237, 62^6. 6295-97, 8396, 922652, 9562-91, 9 8 ^ 7 - ^ 9 , 10^6368, 10518-21, 10561-61+2 6*f. A branch bank can p r o v i d e b e t t e r service and achieve g r e a t e r m o b i l i t y of funds and d i v e r s i f i c a t i o n o f r i s k as the area i n which i t and the number and convenient i s represented i s broadened d i s t r i b u t i o n of the locations a t w h i c h the p u b l i c has d i r e c t p e r s o n a l access t o its f a c i l i t i e s are i n c r e a s e d ; and i t was t o a t t a i n these o b j e c t i v e s t h a t Bank o f America s o u g h t , under f e d e r a l and s t a t e law and r e g u l a t i o n , t o e s t a b l i s h a s t a t e - w i d e branch bank. [ R . E x . 76; T r . 98b?, 10^72-73] 65* Bank of America f o l l o w e d l o g i c a l business methods i n the e s t a b l i s h m e n t o f branches throughout the State. - 2>+ S t a r t i n g f i r s t i n San F r a n c i s c o , s h o r t l y t h e r e a f t e r i n San Jose, then i n Los Angeles, and subsequently a t other major communities l o c a t e d throughout the S t a t e , i t established p r i n c i p a l branches and from those c e n t r a l l o c a t i o n s branched out i n t o neighboring community centers w i t h a view t o o p e r a t i n g branches a t any p o i n t i n the State where the volume of banking business —* e x i s t i n g or p o t e n t i a l - - was considered s u f f i c i e n t t o j u s t i f y the o p e r a t i o n of a branch. I n determining l o c a l i t i e s where branches should be l o c a t e d when an o p p o r t u n i t y was presented, Bank of America depended l a r g e l y upon the advice of i t s o f f i c e r s and d i r e c t o r s most f a m i l i a r w i t h the area t o be served and made c a r e f u l surveys before e s t a b l i s h i n g new branches. [ R . Ex. 75, 76; Tr* 5697-5701, 10^85-92] 66. P r i o r t o the establishment of a branch and i n r e v i e w i n g the progress and s t a t u s of e x i s t i n g branches, the management of Bank of America c o l l e c t e d data from p u b l i c records and p u b l i c o f f i c i a l s of each community under c o n s i d e r a t i o n , inspected and surveyed the community and i t s b u i l d i n g s , residences, businesses and economy. A f t e r o b t a i n i n g t h a t i n f o r m a t i o n , the management considered the f o l l o w i n g f a c t o r s , among o t h e r s ; (1) The p o t e n t i a l business a v a i l a b l e f o r types of f i n a n c i a l i n s t i t u t i o n s all including - 25 banks, insurance companies, government d e p o s i t o r i e s and l e n d i n g agencies, savings and loan a s s o c i a t i o n s and s m a l l loan companies; (2) The amount of e x i s t i n g and p o t e n t i a l comp e t i t i o n from the o r g a n i z a t i o n s l i s t e d i n sub-paragraph ( 1 ) ; (3) The economy and business of the l o c a l area, i t s age and prospects f o r growth and development; (k) The l o c a l p h y s i c a l c h a r a c t e r i s t i c s such as c l i m a t e , s o i l , n a t u r a l resources, topography and t r a n s p o r t a t i o n (5) facilities. The l o c a l p o p u l a t i o n , i t s make-up, sources of income and background. [ T r . M-763, ^765-71] 67. The development of branches by the Bank of America system i n and around Sacramento, C a l i f o r n i a , illu- s t r a t e s the t y p i c a l p o l i c i e s and procedures f o l l o w e d by the Bank i n p r o v i d i n g banking s e r v i c e s t o a growing community. S t a r t i n g w i t h one branch i n the center of the community, Bank of America increased the number o f branches as the p o p u l a t i o n and i n d u s t r i a l requirements of the community grew, i n order t o p r o v i d e banking s e r v i c e s in close p r o x i m i t y t o each new community c e n t e r , and d i v e r s i f i e d - 26 i t s business and s e r v i c e s t o meet the requirements of the area. A f t e r s o l i c i t a t i o n by business and community i n t e r e s t s i n Sacramento, the C a l i f o r n i a Superintendent of Banks was p r e v a i l e d upon t o make an e x c e p t i o n t o the de novo r u l e and grant Bank of America permission t o e s t a b l i s h i t s f i r s t branch, a de novo, i n the business s e c t i o n of the city. W i t h the growth of Sacramento and the development of a g r i c u l t u r e i n the Sacramental R i v e r V a l l e y , the c i t y grew and Bank of America then e s t a b l i s h e d a d d i t i o n a l branches by a c q u i r i n g the assets of c e r t a i n banks. A f t e r the deple- t i o n of banking f a c i l i t i e s i n the c i t y by f a i l u r e s i n the 1930 ! s and the r a p i d recovery and development d u r i n g World War I I , a d d i t i o n a l banking o f f i c e s were needed. I n the postwar p e r i o d , Bank of America's management surveyed the e n t i r e area i n the manner s t a t e d i n F i n d i n g No. 66 and determined t h a t t h r e e new branches were needed i n and neighborhood-business d i s t r i c t s . satellite I t a l s o determined t h a t much of the business concentrated i n and o v e r l o a d i n g i t s e x i s t i n g branches could be dispersed by e s t a b l i s h i n g o f f i c e s where the people l i v e d and shopped. Bank of America, a f t e r o b t a i n i n g a p p r o v a l , Therefore, established three a d d i t i o n a l de novo branches. [ R . Ex. 187; T r . 5^27-67? 68. The branch o f f i c e s maintained by Bank of America v a r y i n s i z e and p h y s i c a l c h a r a c t e r i s t i c s depending - 27 upon the needs of each p a r t i c u l a r community and area served. Except i n major i n d u s t r i a l communities, Bank of America has n o t as a business matter seen f i t t o conduct i t s business from monumental banking b u i l d i n g s of the t r a d i t i o n a l t y p e , and i n many cases has r e n t e d o r d i n a r y s t o r e space and conducted banking from the premises w i t h o u t needless and undue investments i n f i x e d assets• [ T r . 10567-69] 69. The S t a t e of C a l i f o r n i a was p a r t i c u l a r l y s u i t a b l e f o r the establishment of a s t a t e - w i d e branch bank because of i t s geographic c h a r a c t e r i s t i c s , i t s w e a l t h and d i v e r s i t y of r e s o u r c e s , i t s growing and w i d e l y d i v e r s i f i e d i n d u s t r i a l and a g r i c u l t u r a l a c t i v i t y , the f l u c t u a t i o n s which take place i n the economic w e l l - b e i n g of v a r i o u s areas of the S t a t e , and the d e s i r a b i l i t y of e s t a b l i s h i n g f o r t h a t S t a t e a banking i n s t i t u t i o n of s u f f i c i e n t skills and resources so t h a t i t would not be dependent upon eastern f i n a n c i a l institutions. [ R . Ex. 398; T r . 6219, 6225, 6297, 98V?, 10520] 70. The S t a t e of C a l i f o r n i a i s about 800 miles long and has an average w i d t h of about 250 m i l e s , contain- i n g about 158,000 square m i l e s . I t s average temperatures v a r y from f r e e z i n g t o t r o p i c a l . Large areas are mountainous, others are d e s e r t . Other v a s t areas are devoted t o h i g h l y - 28 commercialized a g r i c u l t u r e , producing a range of crops from s e m i - t r o p i c a l f r u i t s t o t r u c k garden v e g e t a b l e s . Other e x t r a c t i v e and basic food p r o d u c t i o n includes oil, m i n e r a l s , beef, d a i r y p r o d u c t s , f i s h and lumber. A l l of t h i s p r o d u c t i o n has developed r a p i d l y d u r i n g the life span of Bank of America and i n every area of the S t a t e . [ R . Ex. 398] 71. The i n f l u x of p o p u l a t i o n caused by the development of the e x t r a c t i v e i n d u s t r i e s has r e s u l t e d i n p a r t i n the development of w i d e l y d i v e r s i f i e d manufacturing i n d u s t r i e s such as s t e e l m i l l s , aluminum p r o d u c t i o n , air- plane manufacture, s h i p b u i l d i n g , c l o t h i n g and f u r n i t u r e manufacturing, heavy equipment manufacturing of a l l k i n d s , household equipment manufacture and l o c a l assembly p l a n t s of products manufactured i n the e a s t e r n s t a t e s . This manufacturing development has been s t a t e - w i d e and has been i n c r e a s i n g . [ R. E x . 398] 72. During the p e r i o d of the growth of Bank of America the p o p u l a t i o n and economic a c t i v i t y of California have been expanding a t a r a p i d r a t e and the Bank 1 s growth has been d i r e c t l y responsive t o such expansion, w h i c h has been o f the f o l l o w i n g magnitude: - 29 1929 P o p u l a t i o n (thousands) 5,677 19*4-8 Rate of Growth 1 0 , 8 2 $ Income Payment t o I n d i v i d u a l s $5,217 (millions) $17,099 170 R e t a i l Sales ( m i l l i o n s ) $11,697 272 $3,1^3 Manufacturing Employment (thousands of workers) 263.O 1*89.2 Manufacturing Wage Payments (millions) $ 37^.1 New C o n s t r u c t i o n ( m i l l i o n s ) $ 667.3* $2,1+92,1 & $ 1,^09 86 277 273 As o f 1939 [ R. Ex. 293J 73. The growth, success, and present s i z e of Bank o f America are a t t r i b u t a b l e i n major p a r t t o the p u b l i c response t o i t s b e t t e r s e r v i c e and aggressive development and merchandising of new f i n a n c i a l s e r v i c e s and techniques and only i n s m a l l p a r t t o i t s a c q u i s i t i o n of the assets o f other banking i n s t i t u t i o n s . [ T r . 5717-18, 10551-52, 10559-61] 7k, The increase i n the d e p o s i t l i a b i l i t i e s and loans of Bank of America has r e s u l t e d i n l a r g e p a r t from a d d i t i o n a l and improved bank s e r v i c e s , which were brought t o the a t t e n t i o n of the p u b l i c by a d v e r t i s i n g . v i c e s were of the f o l l o w i n g c h a r a c t e r : These s e r - During 1950 over one and o n e - h a l f m i l l i o n i n s t a l l m e n t c r e d i t and consumer f i n a n c e loans were made t o i n d i v i d u a l s and business - 30 e n t e r p r i s e s — a class of loan which was not made on an e x t e n s i v e basis by any "commercial bank" p r i o r t o about 1936 • During the postwar p e r i o d , Bank of America made over $600,000,000 of loans under a government-sponsored v e t e r a n s 1 assistance program, a type of business which was not sought by other "commercial banks11 and l e n d i n g i n s t i t u t i o n s * The savings deposits of Bank of America have been maintained a t a h i g h l e v e l by the development of v a r i o u s savings programs and savings c l u b s , i n c l u d i n g school s a v i n g s . The most r e c e n t savings program i s one wherein a d e p o s i t o r can combine the advantages of a planned savings program w i t h term l i f e insurance # Bank of America has made a s u b s t a n t i a l p a r t of a l l of the loans i n C a l i f o r n i a i n a i d of r e s i d e n t i a l c o n s t r u c t i o n , and i n the development of such loans has emphasized repayment by i n s t a l l m e n t s * I t has f o r m u l a t e d procedures t o f a c i l i t a t e making and handling loans t o s m a l l businesses, and supplementing t h a t s e r v i c e has made a v a i l a b l e t o s m a l l businesses advice and economic data c o l l e c t e d and analyzed by the Bank f s e x p e r t s * I t has e s t a b l i s h e d branches a t numerous l o c a t i o n s convenient t o where people l i v e , work and shop* I t has developed a f u l l scale f o r e i g n banking department, i n c l u d i n g the issuance of t r a v e l e r s cheques, a s e r v i c e not u s u a l l y o f f e r e d by banks, and a f u l l l i n e of t r u s t s e r v i c e s a v a i l a b l e i n the s m a l l e s t branches• I t has b u i l t up g o o d w i l l through prompt, courteous - 31 and e f f i c i e n t s e r v i c e i n a l } phases of the banking b u s i ness , thereby o b t a i n i n g s a t i s f i e d customers. R. Ex. 255, 273; T r . 3334, 3430, 5463, 5481-82, 5^95-5502, 551315, 5520-26, 5535-36, 5566, 5574 5576, 5707-09, 5711-12, 5718-19, 8511, 9701-03, 9772, 10551-58, IO56O] 75. The e x t e n t t o which the growth and present s i z e of Bank of America are a t t r i b u t a b l e t o s e r v i c e rendered the small borrower and small d e p o s i t o r i s seen from the following figures: (a) About 50$ of Bank of America f s d e p o s i t accounts have balances of $100 or l e s s . (b) I n a recent y e a r , over 57$ of the loans made were of amounts of $500 or l e s s . (c) I n 1950, the average of a l l demand d e p o s i t balances of i n d i v i d u a l s , p a r t n e r s h i p s , and c o r p o r a t i o n s was $1,567; f o r savings d e p o s i t accounts the average was $811. [R. Ex. 148, 149, 255] 76. The s t a t e - w i d e branch banking system p r e s e n t l y operated by Bank of America had by 1928 secured r e p r e s e n t a t i o n i n 51 c o u n t i e s , and by 1936 r e p r e s e n t a t i o n i n 56 of the 58 counties i n C a l i f o r n i a . I n the remaining two c o u n t i e s , up t o the present t i m e , t h e r e are no banking o f f i c e s of Bank of America or any o t h e r bank. A summary - 32 ~ of the counties entered during v a r i o u s periods and t o t a l counties c o n t a i n i n g branches a t various times over the p e r i o d , 190*+-1936, i s as f o l l o w s : No. Counties Represented No, Counties Entered 190M--1910 2 2 1911-1915 2 if 1916-1920 11 15 1921-1925 22 37 1926-1928 lb 51 1929-1930 1 52 1931-1936 1+ 56 S i m i l a r l y , the development of the Bank of America system through e n t r y i n t o the v a r i o u s separate communities i n C a l i f o r n i a shows: No. , Communit:Les Entered T o t a l No. Communities Entered 190^-1910 2 2 1911-1915 2 b 1916-1920 15 19 1921-1925 78 97 1926-1928 130 227 1929-1930 13 2*4-0 1931-1936 5^ 29*+ 1937-19^0 12 306 19^1-19^8 16 322 [ R. Ex. 75, 76] - 33 77 • The establishment of branches by Bank of America has been d i r e c t l y r e l a t e d t o the d i s t r i b u t i o n of the S t a t e * s p o p u l a t i o n , and the number of banking o f f i c e s l o c a t e d i n and d e p o s i t l i a b i l i t i e s a t t r i b u t a b l e t o each of the StateVs major m e t r o p o l i t a n areas d i r e c t l y r e f l e c t (as of 19*+7) the r e l a t i v e s i z e and importance of each area i n the S t a t e ' s economy: Percent o f Percent of Bank of America Percent o f California Bank of America Deposit Population L i a b i l i t i e s Branches Los Angeles Metrop o l i t a n Area bO.1% 35.8JS 31.9* San Francisco M e t r o p o l i t a n Area 21.6 27.? 23.8 San Diego Metrop o l i t a n Area 5.6 3.5 Fresno Metrop o l i t a n Area 2.7 3.8 2.8 San Jose Metrop o l i t a n Area 2.7 3.0 2.6 Sacramento Metrop o l i t a n Area 2.5 3.0 2.0 B a k e r s f i e l d Metrop o l i t a n Area 2.1 1.9 1.1+ Stockton Metrop o l i t a n Area 2.0 2.2 l.»f Combined E i g h t M e t r o p o l i t a n Areasi 79.^f 81.1 69.9 A l l Other Areas 20.6 18.9 30.1 [ R . Ex. 123, P# - 78. - Once the Bank of America system has obtained adequate f a c i l i t i e s through which t o o f f e r i t s s e r v i c e s a community or s e c t i o n , i t has not sought f u r t h e r in offices i n such communities i n the absence of p o p u l a t i o n s h i f t s , neighborhood changes, growth of business beyond c a p a c i t y of e x i s t i n g f a c i l i t i e s , or other changes of conditions, and i n many communities i t s share of the banking f a c i l i t i e s has e i t h e r remained constant or d e c l i n e d * [ R . Ex. 75, 82, 2b9i Tr* 5^27-67* 10*+62j 79m In communities, the percentage of bank- i n g o f f i c e s of the Bank of America system has d e c l i n e d between some p r i o r year and the present t i m e , and i n these communities are l o c a t e d 31$ of Bank of America f s branches, carrying of i t s d e p o s i t l i a b i l i t i e s and bQ% o f its loans * [ R . Ex. 2*4-71 80. I n 93 a d d i t i o n a l communities, the Bank of America system f s percentage of a l l banking o f f i c e s in o p e r a t i o n has e i t h e r f a i l e d t o r i s e or has r i s e n no more than 1$, and i n these communities are l o c a t e d 35% of Bank of America's branches c a r r y i n g 36$ of i t s d e p o s i t and 39% o f i t s liabilities loans. [ R. E x . 2*+83 - 35 81* I n t w o - t h i r d s of the communities where the percentage of banking o f f i c e s of the Bank of America system has d e c l i n e d , remained s t a t i o n a r y or r i s e n no more than 1$, i t s previous h i g h percentage was a t t a i n e d by 1937* [ R * Ex* 2*4-9] 82. The e x t e n s i o n o f i t s branch banking system i n C a l i f o r n i a has been accomplished by Bank of America i n p a r t by the establishment of branches a t new l o c a t i o n s and i n p a r t through the a c q u i s i t i o n of the assets of e x i s t i n g banks and establishment of branches a t t h e i r l o c a t i o n s — i n each case w i t h the s p e c i f i c approval of the Comptroller of the Currency, None of the Bank ! s growth has been accomplished by the a c q u i s i t i o n of the stock of other banks. [R* Ex* 75] 83* Bank of America has never expanded, e i t h e r by establishment of an o f f i c e or by a c q u i s i t i o n of a bank f s a s s e t s , w i t h the purpose of p r e v e n t i n g a p o t e n t i a l competitor from expanding, or merely t o increase the Bank's s i z e , [ T r . 10^62, 10538-39] - 36 84. The a c q u i s i t i o n o f assets and assumption of l i a b i l i t i e s of an e x i s t i n g bank and establishment of a branch i n i t s premises does not guarantee t h a t the d e p o s i t l i a b i l i t i e s and loans thus obtained w i l l be r e t a i n e d , and i t has no bearing whatsoever on the a b i l i t y of the branch t o increase i t s d e p o s i t and l o a n business a f t e r i t has been e s t a b l i s h e d since a s u b s t a n t i a l t u r n o v e r of d e p o s i t s and loans i s customary i n the banking business. For example, i n the p e r i o d from 1933 through 19^8, approximately o n e - t h i r d of the d e p o s i t accounts of Bank of America ( i n c l u d i n g accounts of Bank of America, State Bank) were closed every year and a comparable number of new accounts were opened, thus i n d i c a t i n g a 100$ t u r n over i n d e p o s i t o r s about every t h r e e years• [R. Ex, 183; T r . 10560-61] 85. From December 31, 1928 t o December 31, 1948, the t o t a l d e p o s i t l i a b i l i t i e s of the Bank of America system grew from approximately $1,068,000,000 t o approximately $5,640,000,000, and d u r i n g t h i s same p e r i o d o n l y $177,000,000 of d e p o s i t l i a b i l i t i e s were assumed from other institutions, an amount equal t o 3.87$ of the t o t a l i n c r e a s e . I n the next two years (1949 and 1950) Bank of America f s d e p o s i t t i e s grew by an a d d i t i o n a l $551,000,000, and t h i s liabili- increase d i d not i n c l u d e any d e p o s i t l i a b i l i t i e s assumed from any other bank, [R. Ex. 255; T r . 4880-81, 7756] - 37 86. The great m a j o r i t y of Bank of America's a c q u i s i t i o n s were made necessary by an a d m i n i s t r a t i v e p o l i c y of the C a l i f o r n i a Superintendent of Banks known as the de novo r u l e , which operated as f o l l o w s * a. From the time t h a t s t a t e - w i d e branch banking i n C a l i f o r n i a was authorized i n 1909 u n t i l a t l e a s t 1927, i t was the general p o l i c y of the successive Superintendents of Banks not t o permit the establishment of branches o u t side of the c i t y where a bank maintained i t s head o f f i c e except by the purchase of the assets o f , or merger w i t h , an e x i s t i n g bank. This p o l i c y made i t impossible f o r Bank of America t o e s t a b l i s h branches i n communities o u t side of San Francisco except by a c q u i s i t i o n of assets or merger w i t h e x i s t i n g banks. The Bank challenged the l e g a l i t y of t h i s a d m i n i s t r a t i v e p o l i c y but the Superint e n d e n t s a p p l i c a t i o n of the p o l i c y was upheld by the Supreme Court of C a l i f o r n i a i n 1926 i n the case of Bank of I t a l y v . Johnson* 200 Cal. 1. b. A f t e r the passage of the McFadden Act i n 1927, p e r m i t t i n g n a t i o n a l banks t o engage i n branch banking, Bank of I t a l y became Bank of I t a l y N.T. & S.A. under a national charter. Under the McFadden A c t , de novo branches could not be obtained outside the head o f f i c e c i t y until 1933 when the Banking * e t was amended. [a. 219} T r . 10^78-81] - 38 87* Another f a c t o r t h a t r e s u l t e d i n many a c q u i s i t i o n s was t h a t d u r i n g the 1920*3 and 1 9 3 0 ' s , the p e r i o d of the g r e a t m a j o r i t y of a c q u i s i t i o n s , t h e r e were an u n u s u a l l y l a r g e number of bank f a i l u r e s and a g r e a t many more near f a i l u r e s * Many banks had been unwisely organized or i m p r o v i d e n t l y managed and e v e n t u a l l y stronger banks were asked t o take them over and salvage them as best they could* Such requests were made e i t h e r by the s u p e r v i s o r y a u t h o r i t i e s or the owners, or i n some cases the communities concerned, and were made n o t o n l y t o Bank o f America and the l a r g e r Transamerica majority-owned banks, but t o other s t r o n g banks as w e l l * Between 1921 and 19^9, due l a r g e l y t o the c o n d i t i o n s described above, the number of banks throughout the country d e c l i n e d from more than 30,000 t o about 1^,000 n o t w i t h s t a n d i n g the tremendous increase i n the p o p u l a t i o n and expansion of the economy* [ R . Ex. 75, 90, 98. 99, 102, 2 0 8 T r . 821-2»+, 827-28. if770-71, 5760-61, 6625-28, 9588, lo*+97, 105^7} u* S* Census] 88* A further factor affording opportunities f o r a c q u i s i t i o n s has been the l a r g e number of banks i n t h i s country t r a d i t i o n a l l y owned by f a m i l y groups* As the f a m i l y l i n e runs o u t , or i n response t o the demands - 39 o f e s t a t e t a x e s , e n t i r e banks, r a t h e r than p a r t i a l are n o r m a l l y put up f o r s a l e . interests, I n such circumstances, other banks, and i n p a r t i c u l a r branch banks, have taken advantage o f the o p p o r t u n i t y t o o b t a i n a going p r o p e r t y r a t h e r than e s t a b l i s h a new o f f i c e where the bank i n q u e s t i o n has been sound and w i l l complement i t s system. [ T r . 199-200, 10827-28] 89. Since the time when the establishment of de novo branches of n a t i o n a l banks i n C a l i f o r n i a on a s t a t e wide basis was f i r s t a u t h o r i z e d by the Banking Act of 1933, the Bank of America system has i n c r e a s i n g l y u t i l i z e d the de novo method of e s t a b l i s h i n g new branches, and d u r i n g 1933 through 19^8, has e s t a b l i s h e d 38 branches a f t e r a c q u i s i t i o n and 89 de novo. [R. Ex. 75] 90. I n those areas of the country where the purchase of e x i s t i n g banks was f o r c e d upon developing branch banks by the de novo r u l e , the r e s u l t was the e l i m i n a t i o n of the weaker banks and the t r a n s f e r of their businesses t o s t r o n g e r i n s t i t u t i o n s , w i t h a marked improvement i n the s t a b i l i t y of the banking s t r u c t u r e . For example, the number of bank f a i l u r e s i n the U n i t e d s t a t e s from 1921 t o 1948 c o n s t i t u t e d about 40$ of the t o t a l number of banks e x i s t i n g i n 1921, whereas i n C a l i f o r n i a , a - ko pioneer S t a t e i n branch banking, the number of f a i l u r e s was only 19%* [ R* Ex* 90} T r . 821-22, 9588] 91# I n the U n i t e d States as a whole, even though the dg. novo r u l e has n o t been a p p l i c a b l e i n a l l s t a t e s , branch banks have e s t a b l i s h e d a f t e r a c q u i s i t i o n , rather than de novo t about k0% of a l l t h e i r branches, and 37% of a l l t h e i r branches l o c a t e d i n counties n o t contiguous t o the head o f f i c e county* [ R * Ex* 331] 92* Bank of A m e r i c a ^ a c q u i s i t i o n s of the assets of banks have a l l been e f f e c t e d t o take advantage of o p p o r t u n i t i e s which, as they were presented, fitted i n t o i t s plans f o r the development of a w e l l rounded s t a t e - w i d e branch bank* They have occurred i n a v a r i e t y of circumstances and have been based upon many business reasons i n c l u d i n g the f o l l o w i n g : (a) t o acquire i n s t i t u t i o n s i n f a i l i n g or f r o z e n c o n d i t i o n , sometimes a t the request of the s u p e r v i s o r y a u t h o r i t i e s and on other occasions a t the request of owners anxious t o sell; (b) t o o b t a i n adequate r e p r e s e n t a t i v e premises not otherwise a v a i l a b l e ; - kl (c) - t o round out the Bank*s f u l l l i n e of s e r v i c e s by adding a p a r t i c u l a r type of business t h a t had not been f u l l y developed l o c a l l y by the Bank f s branches; (d) t o o b t a i n the s e r v i c e s of unusually competent bank executives who were then l e f t i n charge of the operations of the newly e s t a b l i s h e d branch; (e) t o solve serious management problems i n a s e l l i n g i n s t i t u t i o n r e l a t i n g e i t h e r t o the continued s u p e r v i s i o n of the business or the l i q u i d a t i o n of problem l o a n s . [ T r . 3097, 101*82, 10**92~511, 10681-82] 93# Since about 1936, by which time the Bank of America had e s t a b l i s h e d branches i n s u b s t a n t i a l l y every s e c t i o n of C a l i f o r n i a , i t s growth through a c q u i s i t i o n of assets and assumption of d e p o s i t l i a b i l i t i e s of other insti- t u t i o n s has s h a r p l y d e c l i n e d and has been i n s i g n i f i c a n t in i t s t o t a l growth. [ R. Ex. 75] From December 31* 1936 t o December 31, 1950, the t o t a l d e p o s i t l i a b i l i t i e s of the Bank of America system grew from approximately $1,32^,000,000 t o a p p r o x i mately $6,192,000,000, and d u r i n g t h i s same p e r i o d only - b2 - $27,000,000 of d e p o s i t l i a b i l i t i e s were assumed from other i n s t i t u t i o n s , an amount equal t o 6/10ths o f of the t o t a l increase* [ B d . Ex. 8, 11, R. Ex« 255] 95* On numerous occasions, l a r g e and s m a l l banks have been o f f e r e d f o r s a l e , considered by the management of Bank of America as a v a i l a b l e , and r e j e c t e d because they d i d n o t f i t i n t o the plans f o r the development of Bank of America as a s t a t e - w i d e branch bank* [ R , E x . 332} T r . 96* ll^O-^J I n the past 25 or 30 years a t l e a s t 17 banks w i t h approximately 160 t o 170 banking o f f i c e s and d e p o s i t l i a b i l i t i e s a t the time o f o f f e r o f about $700,000,000 t o $800,000,000 i n the aggregate, were o f f e r e d f o r s a l e a t v a r i o u s t i m e s , considered by the management of Bank of America as a v a i l a b l e , and r e j e c t e d because they d i d not f i t i n t o the plans f o r the development of Bank of America as a s t a t e - w i d e branch bank. The banks so considered includedt Approximate Date Of A v a l l a f r i l j t y Wells Fargo Bank and Union T r u s t Company, San Francisco 1920-192? P a c i f i c N a t i o n a l Bank, San F r a n c i s c o 1927-1932 S e c u r i t y Trust & Savings Bank o f San Diego 1932, 1935, 1938, 19*+5 C a l i f o r n i a Bank, Los Angeles 1936 - - American T r u s t Co., San F r a n c i s c o 1933-1935 San Diego T r u s t and Savings Bank 1933-1938 F i r s t N a t i o n a l T r u s t & Savings Bank, San Diego 193^19^3 Bank of Eureka 1935 H i b e r n i a Bank, San Francisco 1935 Union Bank & Trust C o . , Los Angeles 1936 Farmers and Merchants Bank, Long Beach 19^2-19^3, 19^6 C i t i z e n s N a t i o n a l Trust & Savings Bank,of R i v e r s i d e 19M+-19^-8 F i r s t N a t i o n a l Bank, Glendale 19M+, 19^8 Union N a t i o n a l Bank, Pasadena 19^5 Farmers and Merchants Bank, Oakdale 19^-6 Pasadena F i r s t N a t i o n a l Bank 19^7-19^8 Oakland Bank of Commerce 19*+8 [ R . Ex. 332, 36^. 365, 381. 382} T r . 10581-82, 10536, 10783-97, 10799-808, 10813-17, 10821, 10825-28. 10832-36, 108^11+2, 108M+-M3, 116^0-^3 , 11656-58, 11695-71 1 *, 1176976, 11780-86, 1182^-31, 11835-36, H8^0->+3, 1186M-70, 121*15-22, 12»f69-7l3 97• I t has been a p a r t o f the p o l i c y i n the development of the Bank o f America system t o m a i n t a i n f l e x i b i l i t y i n the l o c a t i o n o f i t s branches t o meet changi n g economic c o n d i t i o n s and t h i s has sometimes r e q u i r e d the discontinuance of banking o f f i c e s . [ T r . 10561-67] - 98* ¥+ - I n the almost h a l f - c e n t u r y of development of Bank of America system, i t has been necessary t o d i s continue a l i m i t e d number of banking o f f i c e s e s t a b l i s h e d or a c q u i r e d by i t * Discontinuances have taken place since 1928 under the f o l l o w i n g circumstances: (a) I n a t o t a l of some 27 i n s t a n c e s , a bank has been acquired and i t s business simultaneously merged w i t h t h a t of an e x i s t i n g branch* I n 15 of those i n s t a n c e s , the o f f i c e o f the bank acquired was d i s c o n t i n u e d and i n the other 12 instances the o f f i c e of the e x i s t i n g branch was discontinued* These discontinuances were brought about by the i n a b i l i t y o f the p a r t i c u l a r community t o support as many banking o f f i c e s as had p r e v i o u s l y been i n existence and i n most cases the bank had been o f f e r e d by i t s owners because the needs of the community could be best served by merging i t i n t o the Bank of America system. I n many s i t u a t i o n s the banks acquired and d i s c o n t i n u e d were i n f a i l i n g or f r o z e n c o n d i t i o n and the a c q u i s i t i o n was necessary t o p r o t e c t t h e i r d e p o s i t o r s * I n most of these instances the c h a r a c t e r i s t i c s of the community were such t h a t under the c r i t e r i a a p p l i e d by bank s u p e r v i s o r y a u t h o r i t i e s community was a one-bank town* Examples of discontinuances under the above circumstances a r e : the Bank of Corning (one-bank town) F i r s t C e n t r a l N a t i o n a l Bank, Calexico (one-bank town) - - Bank o f Suisun, N. A, (one-bank town) Ferndale Bank (one-bank town) F i r s t N a t i o n a l Bank of Orland (one-bank town) F i r s t N a t i o n a l Bank o f Sonora and Tuolumne County Bank (one-bank town) ( f a i l i n g c o n d i t i o n ) Farmers and Merchants Bank o f Gardena (one-bank town) Winters N a t i o n a l Bank (one-bank town) Fortuna State Bank (one-bank town) Bank of Lassen County. S u s a n v i l l e town) ( f a i l i n g c o n d i t i o n ) (one-bank F i r s t N a t i o n a l Bank of V a c a v i l l e and V a c a v i l l e Savings Bank (one-bank town) ( f a i l i n g condition) F i r s t N a t i o n a l Bank of Paso Robles (one-bank town) F i r s t N a t i o n a l Trust and Savings Bank Fullerton ( f a i l i n g condition; [R« Ex. 301, 302: Tr* l O ^ - Q ^ , ltf+97-506, 10512-151 (b) On some occasions when banking o f f i c e s were acquired i n the l o g i c a l development of the Bank o f America s t a t e - w i d e branch banking system, i t was necessary f o r it a t the same time t o accept other o f f i c e s which were being s o l d w i t h those i t d e s i r e d t o a c q u i r e . I n such i n s t a n c e s , some degree of overlapping w i t h e x i s t i n g f a c i l i t i e s resulted. I n such circumstances, every e f f o r t vsr made t o keep a l l of the a c q u i r e d o f f i c e s i n o p e r a t i o n , and they were discontinued only when t h e i r o p e r a t i o n proved uneconomical. Principal - 1+6 examples of discontinuances brought about under these circumstances were i n connection w i t h the a c q u i s i t i o n o f Merchants N a t i o n a l T r u s t and Savings Bank of Los Angeles and United S e c u r i t y Bank and T r u s t Company of San F r a n c i s c o . [ R . Ex. 301, 302; T r . 10569-72] (c) The remainder of the banking o f f i c e s which i t was found necessary t o d i s c o n t i n u e were n o t d i s c o n t i n u e d u n t i l a s u b s t a n t i a l p e r i o d had elapsed a f t e r t h e i r acquisi- t i o n or e s t a b l i s h m e n t , and were i n every case brought about by normal economic c o n s i d e r a t i o n s , such as a d e c l i n e in p o p u l a t i o n , or i n economic a c t i v i t y w i t h i n the p a r t i c u l a r community, which made i t uneconomical t o continue the banking o f f i c e i n operation. The c r i t e r i a a p p l i e d i n determin- i n g whether an o f f i c e should be continued i n o p e r a t i o n were the same i r r e s p e c t i v e of whether the o f f i c e had been a c q u i r e d from a p r e - e x i s t i n g bank or had been e s t a b l i s h e d o r i g i n a l l y de novo. [ R . EX. 301, 302; T r . 10561-67J 99. I n the course of i t s development as a s t a t e - wide branch bank, Bank of America has never d i s c o n t i n u e d a bank or branch w i t h the purpose of suppressing c o m p e t i t i o n or p r e v e n t i n g a c o m p e t i t o r from o p e r a t i n g i n any s e c t i o n or community. [ T r . 10562, 1056^-66] - if7 100a Bank of America never has been, and i s not now, seeking t o a c q u i r e a l l banks i n C a l i f o r n i a or any given number of them or any g i v e n percentage of t o t a l d e p o s i t liabilities* I t b e l i e v e s there are communities i n which i t should e s t a b l i s h branches i n the f u t u r e i n order t o round out i t s f a c i l i t i e s , and when and i f opportunities become a v a i l a b l e i t hopes t o do so w i t h the permission of the Comptroller of the Currency* Whether such e s t a b l i s h - ments would be by a c q u i s i t i o n or de novo would depend on c o n d i t i o n s i n the community, p a r t i c u l a r l y the community^ a n t i c i p a t e d r a t e of growth and o t h e r f a c t o r s r e q u i r e d t o be considered by the Comptroller of the Currency* [ T r * 10536, 10538-39, 11^90-923 101* The present size of the Bank of America i s not such t h a t i t can no longer e f f e c t economies through the o p e r a t i o n of a d d i t i o n a l branches because branch banki n g i s unique i n t h a t the establishment of each new branch b r i n g s both b e n e f i t s and economies n o t o n l y t o the new community or s e c t i o n served, but t o a l l other communities served by the Bank* [ T r * im-90-983 102* I l l u s t r a t i o n s of o p p o r t u n i t i e s t o a c q u i r e banks which f i t i n t o Bank o f America f s p l a n of development are seen i n i t s c o n t r a c t s t o a c q u i r e the assets and assume the d e p o s i t l i a b i l i t i e s of 22 banks i n C a l i f o r n i a w i t h 27 - 1+8 banking o f f i c e s , majority-owned by Transamerica. The Comptroller of the Currency has approved the establishment of branches a t these o f f i c e s by Bank of America, but a t the instance of the Board, the Bank has been prevented from o p e r a t i n g them pending d i s p o s i t i o n o f t h i s proceeding. [Bd. Ex. 353, R. Ex. 321, 329; T r . 10507-08] 103# These contemplated a c q u i s i t i o n s are i n f u r t h e r a n c e of Bank of America 1 s p o l i c y of o b t a i n i n g adequate s t a t e - w i d e r e p r e s e n t a t i o n and a l l of the banks it proposes t o acquire complement the present Bank o f America branches i n some i m p o r t a n t r e s p e c t : (a) Eighteen w i l l give Bank of America i t s first r e p r e s e n t a t i o n i n v a r i o u s communities i n the State: American Commercial & Savings Bank, Moorpark Bank o f Beaumont Bank of Newman Bank of Pinole Bank of Tehachapi C e n t r a l Bank of Calaveras Farmers and Merchants Bank o f Watts F i r s t N a t i o n a l Bank i n Corcoran F i r s t N a t i o n a l Bank i n Delano F i r s t N a t i o n a l Bank of B e l l f l o w e r F i r s t N a t i o n a l Bank o f Crows Landing F i r s t N a t i o n a l Bank of F a i r f i e l d F i r s t N a t i o n a l Bank of Garden Grove F i r s t N a t i o n a l Bank of Los A l t o s F i r s t N a t i o n a l Bank of San J a c i n t o ) F i r s t Savings Bank of San J a c i n t o ) F i r s t N a t i o n a l Bank of Weed Temple C i t y N a t i o n a l Bank of Temple C i t y . [ R . Ex. 303] (b) These banks w i l l meet Bank of America's r e q u i r e ment f o r more a p p r o p r i a t e and needed a d d i t i o n a l premises i n communities i n which i t i s already represented but w i t h i n f e r i o r or inadequate premises; F i r s t T r u s t and Savings Bank o f Pasadena F i r s t N a t i o n a l Bank i n Santa Ana F i r s t N a t i o n a l Bank i n Turlock [ T r . 10506-08, 10510-11, IO68I-83] (c) These banks w i l l b r i n g t o Bank o f America s p e c i a l i z e d types of business such as t r u s t or commercial accounts which Bank of America needs t o round out i t s l i n e of s e r v i c e s in c o m p e t i t i o n w i t h other banks i n these communities; F i r s t Trust and Savings Bank of Pasadena F i r s t N a t i o n a l Bank i n Santa Ana F i r s t N a t i o n a l Trust and Savings Bank of Santa Barbara [ T r . 10506-10, 10681-833 10k. Even i f the d e p o s i t l i a b i l i t i e s of these banks were added t o the others assumed by the Bank of America system, the maximum a t t r i b u t a b l e t o assumption from other banks i n the 22-year p e r i o d , 1928-1950, would c o n s t i t u t e only about 6% of the t o t a l amount of Bank of America f s d e p o s i t l i a b i l i t i e s on December 31) 1950$ and the maximum d e p o s i t increase a t t r i b u t a b l e t o assumption from - 50 o t h e r banks d u r i n g 1937 through 1950 would r e p r e s e n t only about k% o f the t o t a l d e p o s i t increase d u r i n g t h a t p e r i o d * [Bd* Ex. 8, R* Ex* .255, 398; Tr* *+880-8l, 77563 105« Bank o f America has no i n t e n t i o n o f a c q u i r - i n g or seeking t o acquire the assets o f any C a l i f o r n i a bank i n which Transamerica owns s t o c k other than those l i s t e d i n F i n d i n g No. 103* [Bd. Ex. 286, Tr* R. Ex* 321; 11^90-92j - 51 IV THE ORIGIN OP TRANSAMERICA*S INVESTMENT IN MAJORITY-OWNED BANKS AND THE DEVELOPMENT OP SUCH BANKS Oregon 106. I n 1930, Transamerica purchased s l i g h t l y more than 50$ of the o u t s t a n d i n g v o t i n g stock of F i r s t N a t i o n a l Bank of P o r t l a n d , Oregon. I t s h o l d i n g s a t the present time are 68.6$ of the o u t s t a n d i n g v o t i n g s t o c k . [Bd. Ex. 3] 107. F i r s t N a t i o n a l Bank of P o r t l a n d , Oregon, i s a n a t i o n a l banking a s s o c i a t i o n w i t h i t s head o f f i c e a t P o r t l a n d , Oregon. The Bank i s independently managed and operated, conducts i t s business and f o r m u l a t e s i t s policies independently, and does not operate under the d i r e c t i o n , c o n t r o l or guidance of Transamerica. [Bd. Ex. 3; T r . 6567-68, 6585-88, 6696-6701] 108. Branch banking was s p e c i f i c a l l y a u t h o r i z e d i n Oregon by l e g i s l a t i o n i n 1933j and since t h a t date F i r s t N a t i o n a l Bank of P o r t l a n d has sought e n e r g e t i c a l l y t o e s t a b l i s h a s t a t e - w i d e branch bank equipped t o provide maximum s e r v i c e f o r persons d e a l i n g w i t h the Bank, and t o achieve t h i s o b j e c t i v e has from time t o time e s t a b l i s h e d new branches throughout the State b o t h a f t e r the a c q u i s i t i o n of e x i s t i n g banking o f f i c e s and by the establishment of branches de novo. [R. Ex. 771 227; T r . 6640-41, 6658] - 52 109. The branch banking l e g i s l a t i o n was adopted i n p a r t as a r e s u l t of the f a i l u r e of u n i t banks i n Oregon i n the p e r i o d from 1928 t o 1933- There were 243 banks i n o p e r a t i o n a t the end o f 1928 and o n l y 156 i n o p e r a t i o n a t the beginning of 1933• [R. Ex. 240, 246] 110. I n e s t a b l i s h i n g a s t a t e - w i d e branch bank, F i r s t N a t i o n a l Bank o f P o r t l a n d has sought f i r s t t o provide s u f f i c i e n t coverage f o r the C i t y of P o r t l a n d and then t o secure adequate branch f a c i l i t i e s I n communit i e s throughout the S t a t e , w i t h p a r t i c u l a r emphasis upon e s t a b l i s h i n g branches a t county s e a t s . The Bank as of December 31, 1949, had 44 branches, a l l of which were l o c a t e d i n separate communities, except f o r the P o r t l a n d branches. [Bd. Ex. 3V, R. Ex. 77; T r . 6851] 111. During the p e r i o d of the growth of F i r s t N a t i o n a l Bank of P o r t l a n d the p o p u l a t i o n and economic a c t i v i t y of Oregon have been expanding a t a r a p i d r a t e and the Bank's growth has been d i r e c t l y responsive t o such expansion, which has been of the f o l l o w i n g magnitude : - 53 - 1929 1948 Rate of Growth 941 1,636 74^ Income Payments t o Individuals (millions) $603 $2,134 254 R e t a i l Sales $443 $1,506 240 114 34 P o p u l a t i o n (thousands) (millions) Manufacturing Employment (thousands of workers) 85..1* * / As of 1939 [R. Ex, 293] 112. As of December 31> 1947* there were branches of F i r s t N a t i o n a l Bank of P o r t l a n d , or another bank m a j o r i t y owned by Transamerica i n 27 out of Oregon's 36 c o u n t i e s , these counties c o n t a i n i n g 90$ of the p o p u l a t i o n of Oregon. [R. Ex. 130] 113. As of September 20, 1949, F i r s t National Bank of P o r t l a n d had 11 t a p p r o x i m a t e l y 25$) of i t s banking o f f i c e s i n Multonomah County which i n c l u d e s the C i t y of Portland. That county contains 35$ of Oregon's p o p u l a t i o n . [R. Ex. 243; T r . 7004] 114. The establishment of branches s e r v i n g the C i t y of P o r t l a n d has been i n d i r e c t response t o the growth of t h a t c i t y and the surrounding area i n recent y e a r s . [R. Ex. 147; U.S. Census] 115• I n the 26 c o u n t i e s i n Oregon ( o t h e r t h a n Multonomah) i n which t h e F i r s t N a t i o n a l Bank of Portland has a branch or t h e r e i s another bank m a j o r i t y - o w n e d by Transamerica, an a d d i t i o n a l o f f i c e has been o b t a i n e d i n o n l y 13 c o u n t i e s a f t e r the i n i t i a l entry. [R. Ex. 243] 116. The growth of F i r s t N a t i o n a l Bank o f P o r t l a n d has been p r i m a r i l y the r e s u l t o f p u b l i c response t o i t s s u p e r i o r e f f i c i e n c y and s e r v i c e as a s t a t e - w i d e branch bank and not of a c q u i s i t i o n s , and has r e f l e c t e d the growth o f the communities served and the increasing i n d u s t r i a l a c t i v i t y i n the S t a t e of Oregon. [ T r . 6677-80, 6685] 117- Under the l e g i s l a t i o n a u t h o r i z i n g branch banking i n Oregon, and the n a t i o n a l banking laws (R.S. Sec. 5155) making s t a t e law a p p l i c a b l e t o p e r m i s s i b l e l o c a t i o n o f n a t i o n a l bank branches, no branch c o u l d or can be e s t a b l i s h e d i n a community of l e s s than 50,000 p o p u l a t i o n h a v i n g an e x i s t i n g banking o f f i c e , except a f t e r the a c q u i s i t i o n o f an e x i s t i n g banking o f f i c e . There has been and i s no community i n Oregon h a v i n g 50,000 or more p o p u l a t i o n o t h e r t h a n the C i t y o f Portland. [R. Ex. 227; U. S. Census] - 55 118, Of the 44 branches operated by F i r s t N a t i o n a l Bank of P o r t l a n d as of December 31, 1949, 11 were e s t a b l i s h e d de novo, 2 a f t e r o r g a n i z a t i o n of new banks, and 31 by the purchase of the assets and the assumption of d e p o s i t l i a b i l i t i e s of other banks. All of these branches, whether e s t a b l i s h e d de novo, or a f t e r a c q u i s i t i o n , were approved by the C o m p t r o l l e r of the Currency upon c o n s i d e r a t i o n of the f a c t o r s set f o r t h in F i n d i n g No, 243. [R, Ex. 77, 232] 119• Transamerica has a s s i s t e d F i r s t National Bank of P o r t l a n d , a t the l a t t e r f s r e q u e s t , i n a c q u i r i n g banks which were needed f o r the l o g i c a l development of i t s s t a t e - w i d e branch bank because Transamerica considered the sound development of such s t a t e - w i d e f a c i l i t i e s would enhance i t s investment i n F i r s t N a t i o n a l Bank of P o r t l a n d . [Bd. Ex, 3; T r , 4244-47, 6633-35, 6639-42, 6658] 120, Transamerica has not purchased the stock of any bank l o c a t e d i n Oregon since the a c q u i s i t i o n of stock of F i r s t N a t i o n a l Bank of P o r t l a n d i n 1930, except a t the request of t h a t Bank and w i t h a view t o consenting t o the sale t o t h a t Bank o f the assets of the banks whose stock Transamerica a c q u i r e d . Nine branches of F i r s t National Bank of P o r t l a n d were e s t a b l i s h e d a t l o c a t i o n s o f banks, - 56 whose assets were purchased and d e p o s i t l i a b i l i t i e s assumed by F i r s t N a t i o n a l Bank of P o r t l a n d a f t e r the stock had been acquired by Transamerica. I n a d d i t i o n , since 1937* Trans- america has acquired a m a j o r i t y stock i n t e r e s t i n 15 banks a t the request of F i r s t N a t i o n a l Bank of P o r t l a n d , which has f i l e d a p p l i c a t i o n s w i t h the C o m p t r o l l e r t o e s t a b l i s h branches i n the premises of each of these banks, but such a p p l i c a t i o n s have not y e t been acted upon by the C o m p t r o l l e r . A l l but one of the 15 banks are l o c a t e d i n communities of less than 50,000 p o p u l a t i o n i n which F i r s t N a t i o n a l Bank of P o r t l a n d d e s i r e s t o e s t a b l i s h a branch, and under Oregon law, may do so o n l y through the a c q u i s i t i o n of an e x i s t i n g banking o f f i c e . I t was p o s s i b l e f o r Transamerica t o p u r - chase these 15 banks because the owners d e s i r e d t o r e t i r e or withdraw from the banking business, the banks were operat i n g u n s a t i s f a c t o r i l y on a r e s t r i c t e d b a s i s , or because the banks were u n p r o f i t a b l e t o t h e i r former owners. [Bd. Ex. 287, 288, R. Ex. 232: T r . 4244-47, 6633-35> 6639-58] 121. A l l of the banks i n Oregon i n which Trans- america holds a m a j o r i t y stock i n t e r e s t are operated as a f f i l i a t e s of F i r s t N a t i o n a l Bank of P o r t l a n d and are expected t o become branches of t h a t Bank as soon as the approval of the s u p e r v i s o r y a u t h o r i t i e s i s r e c e i v e d . [Bd. Ex. 287, 288; T r . 6640, 6932-40] - 57 122. Of the 31 banking o f f i c e s acquired by F i r s t N a t i o n a l Bank of P o r t l a n d by purchase of assets, s i x , the M o n t a v i l l a Savings Bank ( P o r t l a n d ) , Bank of Woodburn, F i r s t N a t i o n a l Bank of Salem, F i r s t Inland N a t i o n a l Bank ( P e n d l e t o n ) , Shute Savings Bank ( H i l l s b o r o ) , and American N a t i o n a l Bank ( P o r t l a n d ) , were i n f a i l i n g c o n d i t i o n a t the time of purchase. [R. Ex. 232; T r . 6588-91, 6625-28] 123. I n s i x other i n s t a n c e s , F i r s t National Bank of P o r t l a n d acquired assets and assumed l i a b i l i t i e s of an e x i s t i n g bank and d i d not open a branch i n the o f f i c e of the bank so a c q u i r e d , but t r a n s f e r r e d these assets and l i a b i l i t i e s t o a l r e a d y e x i s t i n g branches. I n each case where t h i s occurred, the bank whose assets were acquired was f a i l i n g or i n poor f i n a n c i a l c o n d i t i o n , and i n f i v e cases the s e c t i o n could n o t , because of changing economic c o n d i t i o n s , support two banking o f f i c e s . [R. Ex* 232; T r . 6564-65, 6629-31, 6635-39] Nevada 124. The a c q u i s i t i o n by Transamerica i n February, 1934, of the stock of F i r s t N a t i o n a l Bank i n Reno, the name of which has since been changed t o F i r s t N a t i o n a l Bank of Nevada, was m o t i v a t e d by s o r e l y d i s t r e s s e d economic c o n d i t i o n s i n Nevada a t the t i m e . A c h a i n of banks known as the • 58 W i n g f i e l d Group had been closed because of t h e i r financial condition. Various e f f o r t s were made t o reorganize and r e - open them. A l e g i s l a t i v e i n v e s t i g a t i o n was conducted on the e n t i r e banking s t r u c t u r e i n Nevada. The e n t i r e Nevada b u s i - ness community was p r o s t r a t e from the almost t o t a l absence of banking f a c i l i t i e s . I n October, 1933* the Governor of Nevada wrote t o Transamerica, s t a t i n g t h a t the r e o r g a n i z a t i o n of the W i n g f i e l d Group was a f a i l u r e and r e q u e s t i n g t h a t Transamerica a s s i s t i n r e e s t a b l i s h i n g banking s e r v i c e s in Nevada, e i t h e r by s u p p l y i n g a d d i t i o n a l c a p i t a l t o the Wingf i e l d Group or i n some o t h e r way. Transamerica p r e f e r r e d not t o acquire the stock of the W i n g f i e l d Group because of i t s very poor f i n a n c i a l c o n d i t i o n and r e p u t a t i o n . Upon f u r t h e r requests by p u b l i c o f f i c i a l s and o t h e r s , and w i t h the understanding t h a t l e g i s l a t i o n e n a b l i n g s t a t e - w i d e branch banking would be enacted, Transamerica f i n a l l y agreed t o acquire stock i n F i r s t N a t i o n a l Bank i n Reno, which was i n dependent of the W i n g f i e l d Group of banks, and made c a p i t a l c o n t r i b u t i o n s t o F i r s t N a t i o n a l Bank i n Reno which enabled t h a t Bank t o e s t a b l i s h de novo branches i n s u b s t a n t i a l l y of the l o c a t i o n s where the W i n g f i e l d Group had f o r m e r l y operated. [R. Ex. 81, 194-204, 206; T r . 5587-5614] all - 59 125. Mr. C a r l Wente became President of F i r s t N a t i o n a l Bank of Nevada s h o r t l y a f t e r Transamerica acquired i t s m a j o r i t y i n t e r e s t i n the Bank. Under h i s l e a d e r s h i p , the Bank's p o l i c i e s were devoted t o the r e s t o r a t i o n of the people's confidence i n banks and banking, i n order t o b r i n g money out of h i d i n g . These new p o l i c i e s s t i m u l a t e d economic a c t i v i t y , p a r t i c u l a r l y on farms and c a t t l e ranges. Live- stock and a g r i c u l t u r a l loans were made by the Bank f o r the f i r s t t i m e , an aggressive a d v e r t i s i n g p o l i c y was i n s t i t u t e d , i n s t a l l m e n t c r e d i t was g r e a t l y expanded, and I n t e r e s t r a t e s were reduced and made more f l e x i b l e . The net r e s u l t was an increase i n the Bank's deposit l i a b i l i t i e s from $7,000,000 t o $28,000,000 between February, 193^ and the end of 1937, about the time Mr. Wente l e f t the Bank. Not only d i d the Bank prosper but i t played a s u b s t a n t i a l r o l e i n the improvement of Nevada's economy d u r i n g t h i s p e r i o d . [ T r . 5782-95] 126. i n the n a t i o n . Nevada i s the most sparsely populated State The branches of F i r s t N a t i o n a l Bank of Nevada, t h e r e f o r e , are few and w i d e l y s c a t t e r e d . I n 193^ and 1935, F i r s t N a t i o n a l Bank of Nevada e s t a b l i s h e d s i x de novo branches; by the end of 1937, i t had e s t a b l i s h e d f o u r more o f f i c e s , three of them i n the premises of banks whose assets were acquired. [R. Ex. 81, 206; U.S. Census] - 60 127. F i r s t N a t i o n a l Bank of Nevada has grown from the one banking o f f i c e i t had i n February, 1932*> when Transamerica acquired a m a j o r i t y i n t e r e s t i n i t s s t o c k , a t o t a l of 12 banking o f f i c e s as of June, 19^8. to I n accord- ance w i t h the p o l i c y of the Bank t o make a v a i l a b l e adequate banking s e r v i c e s t o the people o f the S t a t e c o n s i s t e n t w i t h the a b i l i t y of p a r t i c u l a r communities and counties t o supp o r t a banking o f f i c e , these 12 banking o f f i c e s of the Bank are l o c a t e d i n 9 of the S t a t e f s 17 c o u n t i e s . counties c o n t a i n about 75$ of the S t a t e ! s These nine population. [R. Ex. 81, 129, 208, Bd. Ex. 8, 9, 10] 128. During the p e r i o d of the growth of F i r s t N a t i o n a l Bank of Nevada the p o p u l a t i o n and economic a c t i v i t y of Nevada have been expanding and such growth as the Bank has enjoyed has been d i r e c t l y responsive t o such expansion, which has been of the f o l l o w i n g magnitude: 1929 1948 Rate of Growth 90 164 82$ Income Payments t o I n d i v i d u a l s (millions) $74 $275 272 R e t a i l Sales $48.8 $171 250 P o p u l a t i o n (thousands) (millions) Manufacturing Employment (thousands of workers) t/ 1.6* 3.4 125 As of 1939 [R. Ex. 293] - 61 129. Each of the banking o f f i c e s of F i r s t N a t i o n a l Bank of Nevada i s l o c a t e d i n a separate community, except f o r two banking o f f i c e s i n the c i t y of Reno, which has 20$ of the S t a t e ' s population. [R. Ex. 81j U.S. Census] 130. Of the 11 branches operated by F i r s t N a t i o n a l Bank of Nevada as of 1948, 7 were e s t a b l i s h e d de novo and o n l y 4 through a c q u i s i t i o n . One of these 4, Mason V a l l e y Bank, Y e r i n g t o n , was i n f a i l i n g c o n d i t i o n when acquired and w i t h respect t o each of the o t h e r 3 ( F i r s t N a t i o n a l Bank, E l k o , Farmers and Merchants N a t i o n a l Bank of Eureka, F i r s t S t a t e Bank, Las Vegas) the owner d e s i r e d t o s e l l and requested F i r s t N a t i o n a l Bank of Nevada t o consider i t s acquisition. [Bd. Ex. 8, 9, R. Ex. 8 l ; T r . 5758-60, 5774-76] 131. Many of the branches e s t a b l i s h e d by F i r s t N a t i o n a l Bank of Nevada, b o t h through a c q u i s i t i o n and de novo, were a t the request of the r e s i d e n t s of the community concerned. For example, F i r s t N a t i o n a l Bank of Nevada, on hearing t h a t the r e s i d e n t s of F a l l o n , Nevada, d e s i r e d a bank i n t h e i r community, f i r s t gave them f u l l opportunity t o e s t a b l i s h a l o c a l bank, and e s t a b l i s h e d a branch i n the community o n l y a f t e r i t was t o l d t h a t the r e s i d e n t s had been unable t o r a i s e enough c a p i t a l t o s e t up a l o c a l bank. [R. E x . 208; T r . 5771-74] - 62 132. A c q u i s i t i o n s have played an i n s i g n i f i c a n t r o l e i n the growth o f F i r s t N a t i o n a l Bank of Nevada. During 1934 through 19^9 i t s t o t a l d e p o s i t l i a b i l i t i e s grew from under $7*000,000 t o about $114,000,000, and d u r i n g the same p e r i o d o n l y about $6,500,000 of d e p o s i t l i a b i l i t i e s were assumed from o t h e r i n s t i t u t i o n s , an amount equal t o the t o t a l of increase. [Bd. Ex. 3, 10, R. Ex. 133. 83] I n 1941, Transamerica p r o v i d e d the c a p i t a l f o r the o r g a n i z a t i o n of Bank of Nevada. I t s head o f f i c e was e s t a b l i s h e d i n Las Vegas and a branch was e s t a b l i s h e d i n Boulder C i t y . A m a j o r i t y of the stock of Bank of Nevada has been owned by Transamerica since i t s organization. [Bd. Ex. 3, 8, 9] 134. At the request of F i r s t N a t i o n a l Bank of Nevada, Transamerica purchased a m a j o r i t y stock i n t e r e s t in Farmers* Bank o f Carson V a l l e y , Minden, Nevada, w i t h a view t o consenting t o a sale of t h a t bank's assets t o F i r s t National Bank of Nevada, which d e s i r e d t o e s t a b l i s h a branch a t its l o c a t i o n i n Minden. This bank was o f f e r e d t o Transamerica by i t s owners, who had determined t o r e t i r e from the banking business. [Bd. Ex. 3, 8; T r . 5620, 5758-59, 5950-56} - 63 Washington 135. Transamerica f i r s t acquired a stock i n t e r - e s t i n N a t i o n a l Bank of Tacoma, Washington, d u r i n g the year 1936. I t s name was l a t e r changed t o N a t i o n a l Bank of Washington. Transamerica now owns a m a j o r i t y stock i n t e r - e s t i n t h a t Bank. [Bd. Ex. 3] 136. N a t i o n a l Bank of Washington i s engaged i n o p e r a t i n g a branch bank on a sound b a s i s which the management of the Bank considers most a p p r o p r i a t e t o meet the needs of the p u b l i c served by the Bank. [Bd. Ex. 3] 137. During the p e r i o d of the growth of N a t i o n a l Bank of Washington, the p o p u l a t i o n and economic a c t i v i t y o f Washington have been expanding a t a r a p i d r a t e , and the Bank's growth has been d i r e c t l y responsive t o such expansion, which has been of the f o l l o w i n g magnitude: 1^48 Rate of Growth 1,555 2,487 60$ Income Payments t o I n d i v i d u a l s (millions) $1,104 $3,578 224 7^5.9 $2,480 232 1929 P o p u l a t i o n (thousands) R e t a i l Sales (millions) Manufacturing Employment (thousands o f workers) t / As of 1939 $ 126.0* 173.8 38 [R. Ex. 2933 - 64 138. N a t i o n a l Bank of Washington had o n l y one branch i n 1936, but by 1939 i t had grown t o a t o t a l of 10 banking o f f i c e s l o c a t e d i n f i v e of the S t a t e ' s 39 c o u n t i e s , these f i v e counties c o n t a i n i n g approximately h a l f of the S t a t e f s p o p u l a t i o n . I t has not e s t a b l i s h e d any a d d i t i o n a l branches since 1939* and has never had an important place i n banking i n the S t a t e . [Bd. Ex. 11, R. Ex. 78,131] 139. Each of the 10 banking o f f i c e s of Nat- i o n a l Bank of Washington i s l o c a t e d i n a separate community. [R. Ex. 140. 78] A c q u i s i t i o n s have played an i n s i g n i f i c a n t r o l e i n the growth of N a t i o n a l Bank of Washington. During 1936 through 1949 i t s t o t a l deposit l i a b i l i t i e s grew from approximately $14,500,000 t o $98,000,000, and d u r i n g the same p e r i o d o n l y $5*700,000 of d e p o s i t l i a b i l i t i e s were assumed from o t h e r i n s t i t u t i o n s , an amount equal t o 7 of the t o t a l increase. [Bd. Ex. 3* 10, R. Ex. 83] Arizona 141. I n 1937* Transamerica f i r s t acquired a stock i n t e r e s t i n F i r s t N a t i o n a l Bank of A r i z o n a a t Phoenix, and Phoenix N a t i o n a l Bank, which had one branch as w e l l as - 65 an a f f i l i a t e , Phoenix Savings Bank and T r u s t Co., which c a r r i e d on a savings business i n the same banking o f f i c e as the head o f f i c e of the Phoenix N a t i o n a l Bank. Later i n the same y e a r , F i r s t N a t i o n a l Bank of Arizona a t Phoenix c o n s o l i d a t e d w i t h Phoenix N a t i o n a l Bank t o form F i r s t N a t i o n a l Bank of Arizona, having a head o f f i c e and two branches. Phoenix Savings Bank and T r u s t Co. con- t i n u e d t o operate i n the head o f f i c e of F i r s t National Bank of Arizona ( f o r m e r l y the head o f f i c e of Phoenix N a t i o n a l Bank) u n t i l 1949 when i t s assets were acquired and d e p o s i t l i a b i l i t i e s assumed by F i r s t N a t i o n a l Bank of Arizona, and i t was l i q u i d a t e d . Transamerica now owns a m a j o r i t y of the stock of F i r s t N a t i o n a l Bank of Arizona. [Bd. Ex. 3, 8, 334] 142. F i r s t N a t i o n a l Bank of Arizona i s engaged i n o p e r a t i n g a branch bank on a sound b a s i s which the management o f the Bank c o n s i d e r s most a p p r o p r i a t e t o meet the needs o f the p u b l i c served by t h e Bank. [Bd. Ex. 3] 143. During the p e r i o d of the growth of F i r s t N a t i o n a l Bank of A r i z o n a the p o p u l a t i o n and economic a c t i v i t y of Arizona have been expanding a t a r a p i d r a t e and the Bank's growth has been d i r e c t l y responsive t o - 66 such expansion, which has been of the f o l l o w i n g magnitude : 1929 1948 Rate o f Growth 430 664 54^ Income Payments t o I n d i v i d u a l s (millions) $245 $823 236 R e t a i l Sales $193.8 $652 236 Population (thousands) (millions) Manufacturing Employment (thousands of workers) 8.4* 77 14.9 As of 1939 [R. Ex. 293] 144. As of December 31, 1949, F i r s t National Bank of Arizona had a t o t a l of 6 banking o f f i c e s i n 2 of A r i z o n a ' s 14 c o u n t i e s . located These 2 counties c o n t a i n almost h a l f of the S t a t e ' s p o p u l a t i o n . [Bd. Ex. 11, 334, R. Ex. 1273 145. Three of the o f f i c e s of F i r s t N a t i o n a l Bank of Arizona are l o c a t e d i n Phoenix, A r i z o n a , which has 14$ o f the S t a t e ' s p o p u l a t i o n , and the remaining 3 are l o c a t e d i n separate communities. [R. Ex. 80; U. S. Census] 146. Since the 1937 c o n s o l i d a t i o n , First N a t i o n a l Bank of Arizona has e s t a b l i s h e d t h r e e a d d i t i o n a l branches, one a f t e r a c q u i s i t i o n and two de novo. [R. Ex. 80] - 67 147. A c q u i s i t i o n s have played an i n s i g n i f i c a n t r o l e i n the growth of the F i r s t N a t i o n a l Bank of A r i z o n a , During 1937 through 1949 the t o t a l d e p o s i t l i a b i l i t i e s of t h i s Bank and i t s f o r m e r l y a f f i l i a t e d savings bank grew from approximately $18,000,000 a t the time Transamerica purchased t h e i r stock t o approximately $83,000,000, and d u r i n g the same p e r i o d o n l y $3,000,000 of d e p o s i t liabi- l i t i e s were assumed from o t h e r i n s t i t u t i o n s , an amount equal t o approximately 5$ of the t o t a l increase. [Bd. Ex. 3, 10, R. Ex. 83] California 148. I n 1937 Transamerica acquired a m a j o r i t y stock i n t e r e s t i n C e n t r a l Bank of Oakland, which c o n s i s t e d of a head o f f i c e and two branches. At the time C e n t r a l Bank of Oakland had been the s u b j e c t of an unfavorable r e p o r t by the bank examiner. [Bd. Ex. 3, 8; T r . 5734] 149. I n October, 1937, C e n t r a l Bank of Oakland was d i s s o l v e d and i t s assets and d e p o s i t l i a b i l i t i e s trans- f e r r e d t o C e n t r a l Bank, Oakland. [ T r . 7696-97] 150. Since 1937, C e n t r a l Bank, Oakland, has developed i n t o a s e c t i o n a l branch bank w i t h 11 branches, f o u r of which are l o c a t e d i n the C i t y of Oakland and the balance I n separate s u r r o u n d i n g communities. [R. Ex. 79, 254] - 68 151. C e n t r a l Bank and i t s branches compete a g g r e s s i v e l y w i t h Bank of America and i t s branches, p a r t i c u l a r l y i n Oakland where both banks have branches, and there has been no l e s s e n i n g of c o m p e t i t i o n between them. [ T r . 5801, 7130-31, 71^3, 8770-75, 12856-57] 152. C e n t r a l Bank, Oakland, has a t a l l times been managed and operated by i t s d i r e c t o r s and o f f i c e r s w h o l l y independently of Transamerica and a l l o t h e r banks, and has never r e c e i v e d i n s t r u c t i o n s from Transamerica or any bank w i t h respect t o i t s operations. [ T r . 4227-30, 5802-03] 153- C e n t r a l Bank, Oakland, i s organized under the laws of the State of C a l i f o r n i a and operates under the s u p e r v i s i o n o f the C a l i f o r n i a Superintendent of Banks and the Federal Deposit Insurance C o r p o r a t i o n , b o t h of which a u t h o r i t i e s have, as r e q u i r e d by law, e x p r e s s l y approved a l l branches e s t a b l i s h e d by it. [R. Ex. 398] 154. A t v a r i o u s times since 1937, Transamerica acquired the stock of t h e 22 banks i n C a l i f o r n i a ( l i s t e d i n F i n d i n g No. 103) the assets of which Bank of America c o n t r a c t e d t o buy i n 1950. Transamerica acquired the stock of those banks p r i m a r i l y w i t h the view t o the p r o f i t a b i l i t y - 69 of such i n v e s t m e n t s , b u t a l s o h a v i n g i n mind the f a c t that the banks would make n a t u r a l and l o g i c a l branches o f Bank o f America. The p o s s i b i l i t y of s a l e s of these assets t o Bank o f America a t some l a t e r date made the investments more a t t r a c t i v e b o t h because such s a l e s would be p r o f i t a b l e t o Transamerica and because the r e s u l t i n g branches would enhance the v a l u e o f i t s investment i n Bank o f America. [ T r . 4241-42, 155. 10660-61] I n 1946, Transamerica purchased m a j o r i t y s t o c k i n t e r e s t s i n F i r s t N a t i o n a l Bank of Mountain View, F i r s t N a t i o n a l Bank o f Oakdale and i t s a f f i l i a t e County Bank. Stanislaus Since 1946, S t a n i s l a u s County Bank has moved from the premises o f F i r s t N a t i o n a l Bank o f Oakdale and e s t a b l i s h e d new premises o f i t s own. Transamerica p u r - chased the s t o c k of these banks, upon an o f f e r by the owners, s o l e l y f o r investment. [Bd. E x . 3, R. Ex. 303; T r . 4241, 10660-61] - 70 V. TRANSAMERICA1S RELATIONS WITH ITS MAJORITY-OWNED BANKS 156. The r e l a t i o n s between Transamerica and each of the banks i n which i t holds a m a j o r i t y stock i n t e r e s t are e n t i r e l y c o n s i s t e n t w i t h , and i n f u r t h e r a n c e o f , the investment i n t e r e s t Transamerica has i n each such bank and the investment purpose i t had i n a c q u i r i n g such s t o c k , and r e f l e c t no e f f o r t by Transamerica t o c o n t r o l the banks 1 operations or t o b r i n g about a s i n g l e integrated operation. [ T r . 4230] 157 • The Transamerica majority-owned banks i n C a l i f o r n i a , A r i z o n a , Nevada, Washington and Oregon, are each managed and operated w i t h o u t i n s t r u c t i o n s , direction or c o n t r o l from Transamerica. [ T r . 4227-30] 158. The 47 Transamerica majority-owned banks have 314 d i r e c t o r s h i p s i n the aggregate of which only t h r e e are occupied by o f f i c e r s or d i r e c t o r s of Transamerica. Such l i m i t e d r e p r e s e n t a t i o n has not r e s u l t e d i n Transamerica c o n t r o l l i n g the o p e r a t i o n of such banks i n any way. [Bd. Ex. 3V, 298; T r . 4590-93] - 71 159- The 314 d i r e c t o r s h i p s are f i l l e d by 266 i n d i v i d u a l s , so t h a t t h e r e are 48 d u p l i c a t i o n s . Eight of these e x i s t i n C a l i f o r n i a between n a t i o n a l banks and savings bank a f f i l i a t e s s h a r i n g the same banking o f f i c e and operated by the same s t a f f s . The other 40 are h e l d by o f f i c e r s of F i r s t N a t i o n a l Bank o f P o r t l a n d , who serve as o f f i c e r s or d i r e c t o r s o f one or more other banks i n Oregon i n which Transamerica has m a j o r i t y stock i n t e r e s t s . [Bd. Ex. 3V, 298; T r . 4485, 4487, 6694] 160. Throughout the p e r i o d t h a t Transamerica has h e l d a m a j o r i t y of i t s s t o c k , F i r s t N a t i o n a l Bank of P o r t l a n d has had about 20 d i r e c t o r s on i t s Board, of whom no more than 2 were suggested by Transamerica. The manage- ment of F i r s t N a t i o n a l Bank of P o r t l a n d has never submitted the names of other d i r e c t o r s t o Transamerica f o r a p p r o v a l . Mr. E. B. MacNaughton*s successor as p r e s i d e n t , Mr. Frank Belgrano, was s e l e c t e d by Mr. MacNaughton and the Board of D i r e c t o r s of the Bank, and not by Transamerica or its representatives. [Bd. 161. Ex. 298; T r . 6568, 6696-67OI, 6712] Many of the Transamerica majority-owned banks are managed and operated by persons who were members of t h e i r r e s p e c t i v e s t a f f s a t the time o f Transamerica 1 s i n i t i a l investment i n such banks. [ T r . 4242, 5791-92, 6567-68, 6934] - 72 162. I t has been a basic f e a t u r e of Trans- america's investment p o l i c y r e s p e c t i n g majority-owned banks t h a t the incumbent management be r e t a i n e d whereever p o s s i b l e and p e r m i t t e d t o continue t o operate those banks so long as they remain p r o f i t a b l e . [ T r . 199-200, 4242, 5680, 6934] 163. Each of the majority-owned banks of Trans- america has been o p e r a t i n g p r o f i t a b l y since the date of Transamerica 1 s a c q u s i t i o n of i t s s t o c k , and Transamerica f s e q u i t y i n the net asset value of these banks i s more than double what Transamerica p a i d f o r i t s stock. [ T r . 4248-49] 164. Transamerica*s e q u i t y of the 1948 p r o f i t s of the nine banks i n which i t has acquired a m a j o r i t y stock i n t e r e s t since June, 1946, c o n s t i t u t e s a y i e l d of between and 12$ on i t s investment. [ T r . 4237-40] 165. Each of the Transamerica majority-owned banks i n C a l i f o r n i a , A r i z o n a , Nevada, Washington and Oregon determines i t s own p o l i c i e s w i t h respect t o i n t e r e s t r a t e s , l o a n s , investments and o t h e r o p e r a t i n g matters w i t h o u t d i r e c t i o n f r o m or c o n s u l t a t i o n w i t h Transamerica or Bank of America and w h o l l y independently of the r a t e s and p o l i c i e s adopted by Bank of America. [ T r . 4227-28, 4230-31, 4590-91, 5970-71, 6960-61, 6974] - 73 166. There I s no d i v i s i o n of t e r r i t o r y or a l l o c a t i o n of customers i n e f f e c t between the Transamerica majority-owned banks i n C a l i f o r n i a , A r i z o n a , Nevada, Washington and Oregon, and each competes f o r business where and i n such manner as i t s o f f i c e r s and d i r e c t o r s see f i t w i t h o u t regard t o the l o c a t i o n or nature of any other bank i n which Transamerica owns stock. [ T r . 5801, 10632] 167. Banking o f f i c e r s and employees f r e - quently change jobs and employers among banks and other f i n a n c i a l i n s t i t u t i o n s since they f i n d t h i s a more r a p i d means of advancement than under the s e n i o r i t y system of many banks. There i s always a s t r o n g demand from smaller banks and business c o r p o r a t i o n s f o r employees who have been thoroughly t r a i n e d i n a l a r g e banking o r g a n i z a t i o n . Such changes i n p o s i t i o n s by i n d i v i d u a l s as have occurred among banks and companies i n which Transamerica owns stock have not been g r e a t e r i n degree or d i f f e r e n t i n k i n d than i s normal i n the banking business, e s p e c i a l l y as between correspondent banks, and such changes have not been d i r e c t e d by Transamerica, or by anyone e l s e except the employees affected. [R. Ex. 214; T r . 325^-55, 6081-90,12857-583 - 74 168. Transamerica has never had a general v o t i n g permit t o vote stock i n any bank other than Pij^st N a t i o n a l Bank cf P o r t l a n d , F i r s t N a t i o n a l Bank of Nevada, and Bank of America, which permit was obtained p r i o r t o J u l y , 1937* [Bd. Ex. 4] 169. Transamerica has never attempted t o use i t s stock i n any bank t o c o n t r o l the p o l i c i e s or operat i o n s of t h a t bank. 170. Transamerica has never used or attempted t o use i t s stock i n any bank t o b r i n g about the l e s s e n i n g of c o m p e t i t i o n between t h a t bank and any other bank or banks. 171. The banks i n which Transamerica holds a m a j o r i t y stock i n t e r e s t do not c o n s t i t u t e a s i n g l e banki n g group or e n t i t y . [ T r . 4230] - 75 VI. THE FINANCIAL SERVICES PROVIDED BY BANKS AND THE NATURE OF COMPETITION THEREIN 172. A bank i s one of the o r g a n i z a t i o n s utilized t o provide v a r i o u s d e p o s i t , l e n d i n g and r e l a t e d f i n a n c i a l s e r v i c e s t o the p u b l i c . [ T r . 2236. 2262-63, 2266-69, 24212 2 , 8490-91, 9188-94, 9 6 5 8 - 6 1 ] 173* "Commercial banking" i s a term w i t h o u t legal significance. [ T r . 2222-23, 9190-91] 174 f There i s n o t h i n g unique, s p e c i a l , or unusal t o d i s t i n g u i s h the f i n a n c i a l s e r v i c e s o f f e r e d by "commercial banks" from those o f f e r e d by the numerous o t h e r individuals and i n s t i t u t i o n s t h a t provide s i m i l a r and i d e n t i c a l s e r v i c e s i n vigorous c o m p e t i t i o n w i t h "commercial banks." [ T r . 2421-22, 2611-19, 2635-36, 8490-91, 8544-45, 9276-79] 175• Before opening a new banking o f f i c e , "commer- c i a l banks" consider not o n l y the c o m p e t i t i o n a f f o r d e d by "commercial banks," but a l s o the nature and e x t e n t of the c o m p e t i t i o n a f f o r d e d by other f i n a n c i a l i n s t i t u t i o n s perform- i n g s e r v i c e s c o m p e t i t i v e w i t h those performed by a "commercial banks." [ T r . 4769-703 - 76 176. When the Board exercises s t a t u t o r y a u t h o r i t y t o supervise s p e c i a l i z e d l i n e s of c r e d i t , such as s e c u r i t i e s margin requirements and housing or consumer f i n a n c i n g , its r e g u l a t i o n s are not c o n f i n e d t o "commercial banks" but extend t o a l l i n d i v i d u a l s and i n s t i t u t i o n s engaged i n p r o v i d i n g such services. I n a d d i t i o n , the Board*s r e c e n t v o l u n t a r y c r e d i t r e s t r a i n t program, a f f e c t i n g a l l types of c r e d i t , contem- p l a t e s p a r t i c i p a t i o n by the "90,000 p r i v a t e f i n a n c i n g t u t i o n s " i n the U n i t e d S t a t e s , " i n c l u d i n g w i t h o u t insti- limitation a l l i n d i v i d u a l s , f i r m s , p a r t n e r s h i p s , c o r p o r a t i o n s and o t h e r o r g a n i z a t i o n s of any k i n d which are engaged i n the business of extending c r e d i t , making l o a n s , or purchasing, discounting, s e l l i n g , d i s t r i b u t i o n g , d e a l i n g i n , or u n d e r w r i t i n g s e c u r i ties . . . " [ T r . 12007-08; Program f o r V o l u n t a r y C r e d i t R e s t r a i n t announced by the Board March 9, 1951; Statement of V o l u n t a r y C r e d i t R e s t r a i n t Committee March 19, 1951] 177* The p r o v i s i o n of v a r i o u s f i n a n c i a l s e r v i c e s by "commercial banks" and other i n d i v i d u a l s and i n s t i t u t i o n s does not c o n s t i t u t e i n t e r s t a t e commerce. 178. "Commercial banking" i s not a l i n e of commerce s u b j e c t t o m o n o p o l i z a t i o n w i t h i n the meaning of the C l a y t o n Act. - 77 179# Even i f the p r o v i s i o n of some or a l l of the s e r v i c e s t h a t "commercial banks11 o f f e r were commerce, a l l i n d i v i d u a l s and i n s t i t u t i o n s p r o v i d i n g i d e n t i c a l , similar or c l o s e l y c o m p e t i t i v e f i n a n c i a l s e r v i c e s would be engaged i n the same l i n e or l i n e s of commerce * 180* The p r i n c i p a l s e r v i c e s which "commercial banks" provide a r e : Extension of Non-Farm C r e d i t Secured by Real Estate Extension of Consumer C r e d i t Extension of Farm C r e d i t Extension of Short Term Business C r e d i t Extension of Long Term Business C r e d i t Safe-keeping of Funds (a) Through i n t e r e s t bearing time deposits (b) Throuj^u demand deposits s u b j e c t t o check Trust Services They a l s o perform a v a r i e t y of other s e r v i c e s , i n c l u d i n g p r o v i s i o n of safe d e p o s i t financial facilities, issuance of t r a v e l e r s cheques and l e t t e r s of c r e d i t , t i o n of funds and purchase of s e c u r i t i e s as agent, i n of which they face c o m p e t i t i o n from a v a r i e t y of collecall individuals and i n s t i t u t i o n s • [ T r . 2266-69, 2282-87, 2509-10, 8^7^-76. & 9 0 - 9 1 , 896V, 931718, 9659-603 - 78 181. The p r i n c i p a l i n d i v i d u a l s and i n s t i t u t i o n s t h a t compete w i t h "commercial b a n k s w i t h respect t o each of the p r i n c i p a l s e r v i c e s a r e : E x t e n s i o n of Non-Farm C r e d i t Secured by Real E s t a t e — P r i n c i p a l Competitors L i f e Insurance Companies Private Individuals Mutual and Stock Savings Banks Savings and Loan A s s o c i a t i o n s B u i l d i n g and Loan A s s o c i a t i o n s E x t e n s i o n of Consumer C r e d i t — P r i n c i p a l Competitors Automobile Finance Companies Commercial Finance Companies I n d u s t r i a l C r e d i t Unions I n d u s t r i a l Loan Companies R e t a i l C r e d i t Stores Personal Loan Companies Private Extension of Farm C r e d i t — Individuals P r i n c i p a l Competitors Federal Land Banks Banks f o r Cooperatives Production C r e d i t A s s o c i a t i o n s L i f e Insurance Companies Private Individuals - 79 E x t e n s i o n of S h o r t Term Business C r e d i t — Principal Competitors Trade C r e d i t o r s Mutual and Stock Savings Banks Accounts R e c e i v a b l e F i n a n c i n g Companies Commercial Finance Companies F e d e r a l Reserve Banks R e c o n s t r u c t i o n Finance Corporation Other Government Lending Agencies Banks f o r Cooperatives L i f e I n s u r a n c e Companies Private E x t e n s i o n o f Long Term Business C r e d i t — Individuals Principal Competitors L i f e I n s u r a n c e Companies Private Individuals F e d e r a l Reserve Banks R e c o n s t r u c t i o n Finance Corporation Other Government Lending Agencies Finance Companies - 80 Safe-keeping of Funds (a) Through i n t e r e s t b e a r ing time-deposits P r i n c i p a l Competitors U. S. P o s t a l Savings System Mutual and Stock Savings Banks Savings and Loan A s s o c i a t i o n s U. S. Government Savings Bonds L i f e Insurance Endowment and Annuity Policies (b) Through demand d e p o s i t s s u b j e c t t o check — P r i n c i p a l Competitors U. S. P o s t a l Savings System & Post O f f i c e Money Orders T r a v e l e r s Cheque Agencies Radio and T e l e g r a p h i c Communication Companies Express Companies Private Corporations Private Individuals [ T r • 2250-52, 2277-81, 2558-61, 2613-15, 2626-29, 3432, 5240, 5249, 5545-46, 5 6 8 4 - 8 5 , 852627, 8534-35, 9001, 9050-51, 9057-58, 9061, 9071, 9289-91, 9854-55, 9862-64, 10534-36, 10662-63, 10689-90, 12069-70] 182. "Commercial banks" t h r o u g h o u t the U n i t e d S t a t e s extended, as o f 1948, o n l y the f o l l o w i n g percentages o f t o t a l c r e d i t extended i n the f i v e c a t e g o r i e s l i s t e d below: - 8l Non-Farm C r e d i t Secured by Real E s t a t e 19$ Consumer C r e d i t 42% Farm C r e d i t 36$ Short-Term ( t o c o r p oBusiness rations) Credit 14-20$ Long-Term Business C r e d i t 17$ These same percentages apply t o "commercial bank" loans i n the f i v e - s t a t e area d e f i n e d i n the c o m p l a i n t , except t h a t the percentage f o r Consumer C r e d i t i s between 42$ and 50$. [ T r . 8504-06, 8508, 8511, 8516, 8518, 9067] 183. Banks of whatever type d e r i v e the g r e a t b u l k of t h e i r p r o f i t s from loans and investments, which are t h e i r p r i n c i p a l a s s e t s , and they seek d e p o s i t s , which are liabili- t i e s , o n l y because t h e i r a b i l i t y t o l e n d and i n v e s t i s in approximate p r o p o r t i o n t o the amount of t h e i r c a p i t a l funds and d e p o s i t s . I n 1946, a l l insured banks i n the U n i t e d States d e r i v e d 81.4$ of t h e i r p r o f i t s from loans and investments. [ T r . 8476, 8542-43, 9256-57, 9261-63, 9294, 9676, 9708] 184. The f i n a n c i a l s e r v i c e s described i n F i n d i n g No. 177 and reasonably adequate s u b s t i t u t e s f o r such s e r v i c e s are r e a d i l y a v a i l a b l e t o the p u b l i c and meet the p u b l i c ' s - 82 requirements, whether o f f e r e d by "commercial banks" or by other i n d i v i d u a l s and i n s t i t u t i o n s . [ T r . 2421-22, 2611-19, 2635-36, 8490-91, 8544-45, 9276-79] 185. The c o m p e t i t i o n of the i n d i v i d u a l s and i n s t i - t u t i o n s t h a t compete w i t h "commercial banks" i n the p r o v i s i o n of f i n a n c i a l s e r v i c e s i s v i g o r o u s , constant and i n c r e a s i n g l y effective. For example, "commercial banks" have i n recent years h e l d a d e c l i n i n g p r o p o r t i o n of long term savings and extended a d e c l i n i n g p r o p o r t i o n of a l l r e a l e s t a t e credit. [ T r . 2605-09, 2611-19, 2627-28, 2635-36, 8530-31, 9276-793 186. The geographical area w i t h i n which banks and other i n d i v i d u a l s and i n s t i t u t i o n s o f f e r e f f e c t i v e competit i o n f o r each o t h e r v a r i e s i n accordance w i t h the nature and c h a r a c t e r i s t i c s of each s e r v i c e p r o v i d e d : (a) there i s nation-wide competition f o r large loans and l a r g e d e p o s i t s , as w e l l as f o r v a r i o u s types of r e a l e s t a t e loans, long term c r e d i t s , farm c r e d i t and t r u s t (b) services; f o r consumer c r e d i t , s h o r t term c r e d i t and small d e p o s i t s the area of e f f e c t i v e compet i t i o n i s g e n e r a l l y somewhat narrower, depending upon economic, i n d u s t r i a l and geographical c h a r a c t e r i s t i c s which vary fom community t o community. - 83 (c) i n no case are p o l i t i c a l boundaries such as c i t y , county o r s t a t e l i n e s i n d e t e r m i n i n g areas of significant competition. [ T r . 2530-31, 5^63-64, 6037, 6 3 8 8 89, 8557, 8559-60, 8576-78, 985861, 10191-92, 10529-32, 10632-34, 12349-51, 12354-55, 12357] 187. C o m p e t i t i o n i n the p r o v i s i o n of s e r v i c e s i n any g i v e n area i s not c o n f i n e d t o financial individuals or i n s t i t u t i o n s whose o f f i c e s or places of business are l o c a t e d w i t h i n such a r e a . [R. Ex. 185; T r . 5729-30, 6 0 3 7 , 629697, 6 3 8 8 - 8 9 , 6 6 8 1 - 8 2 , 8552-53, 9 8 5 8 , 10047-48, 188. 10529-32, N e i t h e r "commercial banks" nor t h e 10632-343 individuals and i n s t i t u t i o n s w i t h which they compete c o n f i n e t h e i r services t o the community, or s t a t e , or o t h e r p r e c i s e g e o g r a p h i c a l area i n which they may be l o c a t e d . [R. Ex. 185; T r . 5729-30, 6037, 6296-97, 6 3 8 8 - 8 9 , 6 6 8 1 - 8 2 , 8552-53, 9858, 10047-48, 10529-32, 10632-34] 189. The f i v e - s t a t e area d e f i n e d i n the c o m p l a i n t t o include C a l i f o r n i a , Nevada, A r i z o n a , Oregon and Washington i s not the g e o g r a p h i c a l area of e f f e c t i v e c o m p e t i t i o n f o r any of t h e f i n a n c i a l s e r v i c e s p r o v i d e d by "commercial b a n k s , " [ T r . 8551-53, 8556-60, 8621, 930001, 9857, 10529-32, 10632-34, 12012-16, 12357] • 84 190• No s i n g l e one of the f i v e s t a t e s named i n the compalint i s the geographical area of e f f e c t i v e competit i o n f o r any of the f i n a n c i a l s e r v i c e s provided by "commerc i a l banks." [ T r . 8551-53, 8556-60, 8621, 9300-01, 9857, 10632-34, 12012-16, 12357] 191. I n d i v i d u a l banks emphasize d i f f e r e n t f u n c - t i o n s and s e r v i c e s , v a r y i n g w i t h the passage of t i m e , the area and community i n which the bank i s l o c a t e d , and the management p o l i c i e s of the p a r t i c u l a r bank. For example, p r i o r t o 1941, Bank of America's p o l i c y of c a t e r i n g t o the small d e p o s i t o r produced a predominance of savings d e p o s i t s . Sine t h a t t i m e , however, i t s demand ( s o - c a l l e d "commercial") deposits have r u n s l i g h t l y l a r g e r i n volume than i t s savings deposits. [R. Ex. 255; T r . 5481-87, 54995502, 5692, 9630-31, 9677-78, 9709-13, 9736-37] 192. There has been constant change w i t h respect t o the p r o v i s i o n of f i n a n c i a l s e r v i c e s a r i s i n g from (a) the aggressiveness of some banks i n u n d e r t a k i n g t o provide s e r v i c e s not t r a d i t i o n a l l y o f f e r e d by banks, such as consumer c r e d i t which was f i r s t o f f e r e d on an e x t e n s i v e and f u l l - l i n e basis by Bank of America which i n t u r n was f o l l o w e d by other banks, and (b) the e n t r y of other i n d i v i d u a l s and i n s t i t u t i o n s - 85 i n t o c o m p e t i t i o n w i t h "commercial banks" i n the p r o v i s i o n of v a r i o u s s e r v i c e s p r e v i o u s l y o f f e r e d o n l y by "commercial banks", such as d i r e c t business f i n a n c i n g by insurance companies and government agencies. [ T r . 2241-42, 2244, 2262-63, 2287, 2605-09., 2618, 5481,5502, 5513-15, 5520-21, 8510, 9188-94, 10533-36] 193* The nature of the s e r v i c e s rendered by "commercial banks" has changed from time t o time i n response t o c o m p e t i t i o n a f f o r d e d by o t h e r i n s t i t u t i o n s , the develop- ment of new s e r v i c e s by the banks themselves, and p u b l i c demand. For example, the l e n d i n g f u n c t i o n has been l a r g e l y abandoned by some "commercial banks" which as a matter of choice i n v e s t t h e i r funds t o an i n c r e a s i n g e x t e n t i n government bonds, w h i l e o t h e r "commercial banks" have developed and are s t i l l developing new forms of l e n d i n g s e r v i c e s . [ T r . 2292, 5481-87, 5499-5502. 5513-15, 5520-21, 9188-94, 9 2 6 2 - 6 3 , 9630-31, 9709-11, 9736-38] 194. The c r e a t i o n of money i s i n c i d e n t a l t o bank- i n g operations i n the banking system as a whole, i s not an a r t i c l e or commodity i n t r a d e or commerce, i s not s u b j e c t t o c o m p e t i t i o n by the banks, and i s not capable of monopoliz a t i o n under the C l a y t o n A c t . [R. Ex. 298; T r . 9220, 9661-64, 9675-76, 12033-34] - 86 195. The p r o v i s i o n o f f a c i l i t i e s f o r h a n d l i n g demand d e p o s i t s s u b j e c t t o check i s one o f many s e r v i c e s a n c i l l a r y t o the safekeeping of funds and t o the o b t a i n i n g o f l e n d a b l e f u n d s , and i s not a separate business activity engaged i n f o r p r o f i t , and i s not a l i n e o f commerce under the C l a y t o n A c t , [Tr. 196. A l t e r n a t i v e methods e x i s t f o r payment o f funds by means o t h e r t h a n bank checks, 8184-95, 8194-95, 8542-43, 9256-57, 9678-79, 9703-04, 9855-56, 10468-69] 2287-89, including: (1) Currency payments (2) P o s t a l money o r d e r s (3) D e b i t s and c r e d i t s on open accounts, where money claims f l o w back and f o r t h between businesses. (4) American Express T r a v e l e r s cheques (5) T e l e g r a p h i c money o r d e r s (6) Radio money o r d e r s (7) Express Co. money o r d e r s (8) Commercial d r a f t s or b i l l s o f exchange (9) Corporate t r e a s u r e r ' s d r a f t s on c o r p o r a t i o n s which h o l d memberships i n c l e a r i n g house associations . [R. Ex. 318, 319; T r . 2277-81, 2558-61, 8534-35, 929O-9I, 9854-55, 10662-63, 10689-90] - 87 197. The occupation of business o f f i c e s i s not a s e r v i c e o f f e r e d by banks t o the p u b l i c , i s not a s u b j e c t of c o m p e t i t i o n , and i s not capable of m o n o p o l i z a t i o n under the Clayton A c t . [R. Ex. 332j T r . 8621-24, 8904, 9322-23, 9853-54- 10568-69] 198. I n s t i t u t i o n s and i n d i v i d u a l s w i t h v a s t r e - sources compete w i t h Bank of America and the banks m a j o r i t y owned by Transamerica i n p r o v i d i n g the same f i n a n c i a l services. [ T r . 2605-09, 2611-19, 2627-28, 2635-36, 5249-51, 9276-79] 199- N e i t h e r Bank of America, nor the banks majority-owned by Transamerica, nor a l l of them i n the aggregate p r o v i d e more than a small p o r t i o n of the t o t a l of each of the f i n a n c i a l s e r v i c e s a v a i l a b l e t o the p u b l i c served by such banks. [ T r . 8504-06, 8508, 8511, 8516, 8518] 200. The r e c o r d does not show the percentage of any of the f i n a n c i a l s e r v i c e s rendered now or i n the past by Bank of America, or the Transamerica majority-owned banks, or a l l of them i n the aggregate, i n r e l a t i o n t o the t o t a l amount of any such s e r v i c e provided i n the f i v e - s t a t e area d e f i n e d i n the complaint or n a t i o n - w i d e . - 88 - VII COMPETITION HAS INCREASED AND THERE HAS BEEN A TOTAL ABSENCE OP ANY TENDENCY TO CREATE A MONOPOLY OP THE SERVICES PROVIDED BY BANKS 201. Throughout t h e p e r i o d s i n c e Transamerica was o r g a n i z e d , c o m p e t i t i o n among "commercial banks^" b o t h w i t h i n and w i t h o u t the f i v e - s t a t e area d e f i n e d i n the c o m p l a i n t , has not d i m i n i s h e d b u t , on t h e c o n t r a r y , has i n c r e a s e d w i t h r e s u l t i n g b e n e f i t s t o the p u b l i c . [ T r . 3251, 6390-91, 645960, 6471, 6485, 1004852, 10632-34] 202. "Commercial banks" l o c a t e d b o t h w i t h i n and w i t h o u t t h e f i v e - s t a t e area d e f i n e d i n the c o m p l a i n t have i n c r e a s e d i n s i z e and s t r e n g t h t h r o u g h o u t t h e p e r i o d s i n c e Transamerica was organized and have a t a l l p r o v i d e d v i g o r o u s and e f f e c t i v e times competition. ' [R. Ex. 121, 125; T r . 64596 0 , 6471, 6485, 6 6 7 6 , 10048-52, 10632-34] 203. "Commercial banks" l o c a t e d o u t s i d e o f the f i v e - s t a t e area have r e p r e s e n t a t i v e s who m a i n t a i n o f f i c e s and s o l i c i t business i n the f i v e - s t a t e area d e s c r i b e d i n the c o m p l a i n t , make numerous loans t o persons r e s i d i n g or d o i n g business i n such a r e a , c a r r y d e p o s i t accounts f o r such i n d i v i d u a l s o r concerns, and o f f e r o t h e r financial - 89 s e r v i c e s i n the area both d i r e c t l y and through correspondent banks. Some banks l o c a t e d i n the f i v e - s t a t e area which have no branches or a small number o f branches a l s o m a i n t a i n t r a v e l l i n g s o l i c i t o r s who compete f o r business i n s e c t i o n s . where the bank has no branch. [ T r . 5724-30, 10529-32] 204. Bank of America has l o s t business t o "commercial banks" l o c a t e d i n the E a s t , even t o the e x t e n t of l o s i n g a l l or a p o r t i o n of an e x i s t i n g account t o such banks. For example, i n the e a r l y development of the mov- i n g p i c t u r e business, Bank of America d i d a l a r g e p a r t of the f i n a n c i n g . As the producers and d i s t r i b u t o r s grew, l a r g e p o r t i o n s o f t h e i r business were t r a n s f e r r e d t o l a r g e eastern banks. Recently, Bank of America l o s t a p a r t of the account of a b i g d i s t i l l i n g c o r p o r a t i o n t o a New York bank. [ T r . 10632-4] 205* I n t e r e s t r a t e s i n the f i v e - s t a t e area f o l l o w the n a t i o n a l market, because borrowers w i t h top c r e d i t r a t i n g s can r e a d i l y borrow anywhere, and r a t e s e s t a b l i s h e d by n a t i o n - w i d e c o m p e t i t i o n f o r loans t o such prime borrowers are the basis of r a t e scales e s t a b l i s h e d f o r a l l types of l o a n s . A l l r a t e s are a l s o s t r o n g l y i n f l u e n c e d by the n a t i o n a l character of the f i s c a l p o l i c y - 90 of the U n i t e d States Government. I n t e r e s t rates (paid on d e p o s i t s and charged on loans) and s e r v i c e charges of Bank of America and the Transamerica majority-owned banks are the r e s u l t of c o m p e t i t i o n w i t h banks and f i n a n c i a l o r g a n i z a t i o n s throughout the United S t a t e s . [ T r • 2313, 2640-50, 8551-61, 8576-78, 9226-27, 9300-01, 9857-62] 206. Large banks conduct business i n both deposits and loans w i t h customers from a l l over the n a t i o n , and f r e q u e n t l y , i n a d d i t i o n , handle both deposits from, and loans to^ customers outside the c o n t i n e n t a l United States. [R. Ex. 273; T r • 8551-61, 10529-32] 207. Transamerica 1 s p r o p o r t i o n a t e share of the c a p i t a l i n banks i n which i t owns stock — both m a j o r i t y and m i n o r i t y i n t e r e s t s - - as of December 31, 1948, r e p r e sented but 1.22$ of t o t a l c a p i t a l funds of a l l banks i n the United S t a t e s , and only 13$ of a l l banks i n the f i v e s t a t e area d e f i n e d i n the c o m p l a i n t . [R. Ex. 51; T r . 4225-26] 208. A s u b s t a n t i a l p o r t i o n of the l a r g e r loans and d e p o s i t l i a b i l i t i e s of Bank of America and of the Transamerica majority-owned banks are a t t r i b u t a b l e to - 91 customers who l i v e and whose places of business are l o c a t e d o u t s i d e the f i v e - s t a t e area described i n the complaint and f o r whose business such banks are i n c o m p e t i t i o n w i t h numerous "commercial banks" and other i n s t i t u t i o n s l o c a t e d o u t s i d e the f i v e - s t a t e area. For example, i n 1949 Bank of America had $268,000,000 i n d e p o s i t l i a b i l i t i e s of domestic c o r p o r a t i o n s d o m i c i l e d o u t s i d e the f i v e - s t a t e a r e a . [R. Ex. 273; T r . 6038-40, 6734-35, 6755-56, 6762, 209. 6760, 6768] The f o l l o w i n g banks, a l l of which are d o m i c i l e d w i t h i n the f i v e - s t a t e area d e f i n e d i n the complaint, had the i n d i c a t e d n a t i o n a l s i z e r a n k i n g i n 1948, measured by t o t a l d e p o s i t liabilities: Bank S e c u r i t y F i r s t N a t i o n a l Bank, Los Angeles National Rank 8 American T r u s t Company, San Francisco 18 A n g l o - C a l i f o r n i a N a t i o n a l Bank> San Francisco 34 Wells-Fargo Bank & Union T r u s t Co., San Francisco 33 C a l i f o r n i a Bank^ Los Angeles 36 The Bank of C a l i f o r n i a , N. A . , San F r a n c i s c o , P o r t l a n d & S e a t t l e 55 - 92 Crocker F i r s t N a t i o n a l Bank San F r a n c i s c o 53 San F r a n c i s c o Bank ; San F r a n c i s c o 6l Farmers & Merchants Bank^ Los Angeles 65 S e a t t l e F i r s t N a t i o n a l Bank, Seattle 23 N a t i o n a l Bank of Commerce, Seattle 46 U n i t e d S t a t e s N a t i o n a l Bank, Portland 24 V a l l e y N a t i o n a l Bank, Phoenix 75 [R. Ex. 123; T r . 4874, 4877, 4887] 210. The r a t e of growth of a l l "commercial banks" l o c a t e d i n each o f the f i v e s t a t e s named i n the c o m p l a i n t , e x c l u d i n g Bank o f America and the Transamerica m a j o r i t y owned banks, from 1938 through 1948, has been of the f o l l o w i n g magnitude, as measured by d e p o s i t State liabilities: Rate of Growth 1938 - 1948, o f Deposit L i a b i l i t i e s California 188$ Oregon 377 Nevada 235 Arizona 437 Washington 328 [R. Ex. 126] - 93 211. Of the t o t a l of 170 banks l o c a t e d i n C a l i f o r n i a as of December 31, 1948, other than Bank of America and the Transamerica majority-owned banks, 14 had experienced an increase i n t o t a l d e p o s i t lia- b i l i t i e s from 1938 through 1948 of over 800$, 15 had shown an increase i n the same p e r i o d of between 600$ and 800$, and 33 had experienced an increase i n t h i s p e r i o d of between 400$ and 600$. [R. Ex. 121] 212. The r a t e of growth of the Bank of America from 1938 through 1948 measured by d e p o s i t liabilities was 292$, and the average r a t e of growth of the Transamerica majority-owned banks i n C a l i f o r n i a d u r i n g the same p e r i o d measured by d e p o s i t l i a b i l i t i e s was 209$. [R. Ex. 141j T r . 8071-74] 213. Bank of America has obtained an i n c r e a s - i n g share of the banking business r e s u l t i n g from the expansion of C a l i f o r n i a because i t has pioneered branch banking and has been more a l e r t and aggressive o f f e r i n g new and improved s e r v i c e s than most of in its c o m p e t i t o r s , who, u n t i l recent y e a r s , were slow to recognize and meet the i n c r e a s i n g f i n a n c i a l requirements of the S t a t e . [ T r . 5481-5502, 10474-75] 214. The l a r g e s t banks l o c a t e d i n the State of C a l i f o r n i a , other than Bank of America, had deposit l i a b i l i t i e s as of December 31, 1948, as i n d i c a t e d i n the f o l l o w i n g t a b l e , and from 1938 through 1948 had a l l experienced a s u b s t a n t i a l growth as measured by d e p o s i t liabilities: Deposit L i a bilities (in millions) Dec. 31, 1948 Banks Security-First National Bank of Los Angeles $1,620 Rate o f Growth 1938 - 1948 186$ American T r u s t Company San Francisco 928 235 Anglo-California National Bank of San Francisco 469 129 Wells Fargo Bank and Union T r u s t Company, San Francisco 465 88 C a l i f o r n i a Bank, Los Angeles 431 310 The Bank o f C a l i f o r n i a N. A . , San Francisco 321 192 Crocker F i r s t N a t i o n a l Bank of San Francisco 316 133 [R. Ex. 121, 251] 215. I n the e i g h t l a r g e s t m e t r o p o l i t a n areas of C a l i f o r n i a , c o n t a i n i n g about 80$ of the S t a t e ' s p o p u l a t i o n , and i n which are l o c a t e d 70cfo of Bank of America f s banking o f f i c e s c a r r y i n g 8 l $ of i t s deposit - 95 l i a b i l i t i e s , Bank of America faces vigorous c o m p e t i t i o n from s t r o n g and growing branch and u n i t banks. For example: (a) I n the San Francisco m e t r o p o l i t a n area, c o n t a i n i n g 20$ of the S t a t e ' s p o p u l a t i o n . Bank of America has 121 o f f i c e s carrying 34$ of the d e p o s i t l i a b i l i t i e s , w h i l e s i x of i t s l a r g e s t competitors i n t h a t area have 83 o f f i c e s c a r r y i n g 49$ of the d e p o s i t liabilities. The l a r g e s t of the s i x c o m p e t i t o r s , American T r u s t Company, alone has 59 o f f i c e s c a r r y i n g 17$ of the d e p o s i t liabilities. (b) I n the Los Angeles m e t r o p o l i t a n area, cont a i n i n g about 40$ of the S t a t e * s p o p u l a t i o n , Bank of America has 162 banking o f f i c e s c a r r y i n g 37$ of the d e p o s i t liabilities, w h i l e f o u r o f i t s l a r g e s t c o m p e t i t o r s have 172 o f f i c e s c a r r y i n g 51$ of the d e p o s i t liabilities. The l a r g e s t o f these, Sec- u r i t y F i r s t N a t i o n a l Bank, Los Angeles, alone has 99 o f f i c e s c a r r y i n g 30$ of the deposit liabilities. [R. Ex. 122, 1233 - 96 216. While Bank of America i s the only bank i n the S t a t e of C a l i f o r n i a t h a t operates a s t a t e - w i d e branch bank, every s e c t i o n of the State of C a l i f o r n i a in which there i s a branch of Bank of America i s served by one or more competing branch banks as w e l l as by competing u n i t tanks. [R. Ex. 121-123, 254] 217. The branch banking development of Bank of America has g r e a t l y s t i m u l a t e d the development of other branch banks and has i n no way hindered t h a t growth or c o n f i n e d such growth t o l i m i t e d s e c t i o n s or areas of the S t a t e . [Bd. Ex. 308A, 314A, 316A, R. Ex. 121-123; T r . 5571-74, 11714-153 218. The s e c t i o n a l branch banks i n C a l i f o r n i a are i n vigorous and aggressive c o m p e t i t i o n w i t h Bank of America, and t h e i r banking o f f i c e s i n the s e c t i o n s and communities vhere such banks conduct a banking b u s i ness are comparable i n number and c o m p e t i t i v e s t r e n g t h t o those of Bank of America. Name Security-First National Bank of Los Angeles The American Trust Company San Francisco Banking Offices 126 77 • 97 C a l i f o r n i a Bank, Los Angeles 38 Anglo-California National Bank, San Francisco 24 [Bd. Ex. 308A, 31^A, 316A, R. Ex. 85i T r . 5729-30, 6459-oO, 61+71, 6485] 219. U n i t e d States N a t i o n a l Bank of P o r t l a n d i n which Transamerica owns no i n t e r e s t , i s the l a r g e s t bank i n the s t a t e of Oregon. That bank has pursued a p o l i c y of developing a s t a t e - w i d e branch bank system i n Oregon, and has done so p r i m a r i l y by e s t a b l i s h i n g branches i n the premises of banks whose assets were acquired and deposits assumed. United States N a t i o n a l Bank has had a growth i n o f f i c e s and d e p o s i t l i a b i l i t i e s comparable t o t h a t of F i r s t N a t i o n a l Bank o f P o r t l a n d . During the p e r i o d from 1928 through 19^8, U n i t e d S t a t e s N a t i o n a l Bank grew from $64,802,000 t o $556,61^,000 i n d e p o s i t l i a b i l i t i e s , had assumed $70,732,000 of d e p o s i t l i a b i l i t i e s of other banks, and achieved the rank of 24th l a r g e s t bank i n the n a t i o n . During t h a t p e r i o d United S t a t e s N a t i o n a l Bank acquired the assets of banks and, depending on the circumstances, d i s c o n t i n u e d banking o f f i c e s or e s t a b l i s h e d branches and l a t e r d i s c o n t i n u e d such branches. The t o t a l banking o f f i c e s so d i s c o n t i n u e d d u r i n g the p e r i o d were nine. [ R . Ex. 2>+3, 2*f6; T r . *f88**-85 8282-si] - 98 220. Beginning i n about 19^3 the Commercial N a t i o n a l Bank group of banks, l o c a t e d i n v a r i o u s communities i n Oregon, began i t s development. Since t h a t time i t has developed i n t o a group of three banks and f i v e branches. That group of banks has common o f f i c e r s and common c o n t r o l l i n g stock i n t e r e s t s and has grown by a c q u i r i n g the stock or assets of a t o t a l of f i v e banks. The t o t a l d e p o s i t l i a b i l i t i e s of the group i n 19^9 were $19,301,000. [ R . E x . 2M+j T r . 221. 2931-32} I n Nevada, Nevada Bank of Commerce, i n which Transamerica owns no i n t e r e s t , commenced o p e r a t i o n s in 1939 and since t h a t date has shown phenomenal growth t o the p o i n t where i t s d e p o s i t l i a b i l i t i e s as of December 31, 19^8, were $15,328,000. [ R . Ex. 100, 125] 222. During the p e r i o d from 1938 through 19^8, the r a t e of growth of the d e p o s i t l i a b i l i t i e s of F i r s t N a t i o n a l Bank o f Nevada was about one t h i r d of the r a t e of growth of the aggregate d e p o s i t l i a b i l i t i e s of a l l of the other banks i n Nevada i n which Transamerica has no interest. [ R . Ex. 125, 136, 1^13 223. I n A r i z o n a , V a l l e y N a t i o n a l Bank, i n which Transamerica owns no i n t e r e s t , i s the l a r g e s t bank i n the S t a t e , has i t s p r i n c i p a l o f f i c e i n Phoenix, and i n 19*+8, - 99 had d e p o s i t l i a b i l i t i e s of $230,000,000 and operated 26 offices. These f i g u r e s may be compared w i t h d e p o s i t l i a b i l i t i e s on the same date of $87,000,000 and o p e r a t i o n of s i x o f f i c e s by the Transamerica majority-owned bank, F i r s t N a t i o n a l Bank of A r i z o n a . [Bd. Ex. 11, 313A, 33*+ R. Ex. 1363 22b. During the p e r i o d from 1928 through 19^8, V a l l e y N a t i o n a l Bank acquired the assets of s i x banks and assumed t o t a l d e p o s i t l i a b i l i t i e s of $20,156,000, an amount equal t o about 9% of i t s t o t a l d e p o s i t lia- b i l i t i e s as of December 31, 19^8. [Bd. Ex. 3 1 3 I , T r . *+888] 225. Not only V a l l e y N a t i o n a l Bank of Phoenix, which i s three times l a r g e r than F i r s t N a t i o n a l Bank of A r i z o n a , but a t l e a s t two other s t r o n g Arizona banks, i n which Transamerica owns no s t o c k , have experienced a more r a p i d r a t e o f growth from 1938 through 19*+8 than F i r s t N a t i o n a l Bank of A r i z o n a , as i s seen from the f o l l o w i n g table; Banks m i l l i o n s ) Dec. V a l l e y N a t i o n a l Bank 19*4-8 Growth $230 Southern Arizona Bank & T r u s t Co., Tucson kl6 Bank of Douglas 27 668 F i r s t N a t i o n a l Bank of Arizona 87 252 [R. Ex. 125, 136, 1^1] - 100 226. There are f o u r banks l o c a t e d i n the S t a t e of Washington which are s u b s t a n t i a l l y l a r g e r than the Transamerica majority-owned bank, N a t i o n a l Bank of Washington, and w i t h which t h a t bank competes, as w e l l as many smaller competing banks. The r a t e of growth o f three o f these f o u r l a r g e r banks from 1938 through 19^8 has exceeded t h a t of N a t i o n a l Bank of Washington, as f o l l o w s ; Banks Deposit l i a b i l i t i e s (in millions) 19^8 Rate of Growth $629 327% S e a t t l e F i r s t N a t i o n a l Bank N a t i o n a l Bank of Commerce, Seattle 3M+ 365 People's N a t i o n a l Bank, S e a t t l e 125 380 The Old N a t i o n a l Bank, Spokane 102 39^ 98 358 N a t i o n a l Bank o f Washington [R. E x . 125, 136, 1^1] 227. S e a t t l e F i r s t N a t i o n a l Bank and N a t i o n a l Bank of Commerce both are extensive branch banks. I n the p e r i o d from 1928 t o June 30, 19*+8, S e a t t l e F i r s t N a t i o n a l Bank acquired the assets of k2 banks, and i n 19^8 had ^3 branches. N a t i o n a l Bank of Commerce i n the p e r i o d from 1906 t o June 30, 19^8, acquired the assets of 30 banks, a l l but one of which were acquired a f t e r 1926. I n 19^8 N a t i o n a l Bank of Commerce had 27 branches and one a f f i l i a t e d bank. [Bd. Ex. 312A, 3121, 317A, 3171] - 101 228. I n the p e r i o d from 1928 through 19^8, S e a t t l e F i r s t N a t i o n a l Bank assumed d e p o s i t liabilities of other banks of $1*+9,M*6,000, which i s an amount equal t o 2k% of i t s d e p o s i t l i a b i l i t e s a t the end of During the same p e r i o d N a t i o n a l Bank of Commerce assumed $35,055,000 of d e p o s i t l i a b i l i t i e s of other banks, an amount equal t o 10$ of i t s deposit l i a b i l i t i e s a t the end of 19*+8. [ T r . 1*883-8**, 1*887-88, 775^-56] 229. Throughout the p e r i o d since Transamerica's o r g a n i z a t i o n i n 1928, seventy-one new banks have been e s t a b l i s h e d w i t h i n the f i v e - s t a t e area d e f i n e d i n the c o m p l a i n t , and, i n s u c c e s s f u l c o m p e t i t i o n w i t h p r e v i o u s l y e s t a b l i s h e d banks, have obtained t o t a l d e p o s i t liabilities of more than $300,000,000 as of December 31, 19^8, as follows: Number of New Banks State Deposit Liabilities 19^*8 California 32 $205,000,000 Oregon 16 1*7,000,000 Washington 21 35,000,000 2 23,000,000 71 $310,000,000 Nevada Totals [R. Ex. 100] - 102 230. I n order t o e n t e r the "commercial banking" business, a newcomer i s not r e q u i r e d t o provide any subs t a n t i a l accumulation of c a p i t a l , t o master i n v o l v e d t e c h nologies, to construct f a c i l i t i e s , der p a t e n t s . or t o secure r i g h t s un- A newcomer may a c c o r d i n g l y enter the business w i t h great speed and f a c i l i t y . Regulations of the s t a t e and f e d e r a l a u t h o r i t i e s have not s e r i o u s l y r e s t r i c t e d f r e e dom of e n t r y . Two hundred new banks and branches were e s t a b l i s h e d i n the f i v e - s t a t e area i n the p e r i o d 1936-1947. [R. Ex. 100, 102, 234; T r . 821, 10567-693 231. I n many instances where Bank of America or a Transamerica majority-owned bank sought t o open new branches i n community centers r e q u i r i n g s e r v i c e , competing banks have succeeded i n o b t a i n i n g a u t h o r i t y t o open branches even where they were l a t e i n r e c o g n i z i n g the need f o r such facilities. [ T r . 6642, 7064, 7073-74, 10541] 232. The procedures f o l l o w e d by Bank of America, and the Transamerica majority-owned banks i n a c q u i r i n g assets of another bank and by Transamerica i n a c q u i r i n g stock have f o l l o w e d normal and accepted business methods w i t h o u t use of coercive i n f l u e n c e and such t r a n s a c t i o n s have been n e g o t i a t e d a t arms-length a t f a i r p r i c e s and terms. [ T r . 8332-34, 10482, 10492515, 10681-833 - 103 233• I n no instance where a bank i n which Trans- america owns stock has d e s i r e d t o purchase assets of another bank has i t had power or attempted t o f o r c e the sale a g a i n s t the wishes of the owner. [Tf. 234. 3120-22] I n no instance where Transamerica has d e s i r e d t o purchase stock i n a bank has i t had power or attempted t o f o r c e a sale a g a i n s t the wishes of the owners. [ T r . 4251-53, 8329-30] 235• No bank*s assets have ever been purchased by Bank of America or a Transamerica majority-owned bank from a bank whose owners were u n w i l l i n g t o s e l l , and some of such banks might otherwise have been l i q u i d a t e d , thus d e p r i v i n g the community of a banking f a c i l i t y . [ T r . 4243-44, 10492-98] 236. The establishment and a c q u i s i t i o n of new banking o f f i c e s , as w e l l as discontinuance of o f f i c e s over the years f o r economic reasons, i s a u s u a l , o r d i n a r y , and necessary i n c i d e n t t o the development of a s t a t e - w i d e or s e c t i o n a l branch bank. This i s e v i d e n t from the experience of three competing branch banks i n C a l i f o r n i a , each of which e s t a b l i s h e d and d i s c o n t i n u e d o f f i c e s i n the 20-year p e r i o d from 1928 through 1948, as f o l l o w s : - 104 Offices Established Offices Discontinued Offices at End of Period Security-First N a t i o n a l Bank 70 American T r u s t Company 16 38 75 7 21 38 C a l i f o r n i a Bank 124 [R. Ex. 853 237. The Importance of the a c q u i s i t i o n of banks and branches i n the development of a branch bank i s shown by the f o l l o w i n g comparison of the t o t a l number of banks and branches acquired by competing C a l i f o r n i a branch banks w i t h the number of t h e i r banking o f f i c e s as of 19*8: No. o f Banks & Branches Acquired S e c u r i t y - F i r s t N a t i o n a l Bank and Los Angeles F i r s t N a t i o n a l T r u s t & Savings Bank No. of Banking Offices As of 1948 108 126 American T r u s t Company 64 77 A n g l o - C a l i f o r n i a N a t i o n a l Bank 26 24 9 10 Citizens National Trust & Savings Bank of R i v e r s i d e [Bd. Ex. 308a, 3081, 314a, 3 1 * 1 , 3 1 5 A , 3 1 5 1 , 3 1 6 a , 3161] 238. During the p e r i o d from 1928 through 19*8 other branch banks i n C a l i f o r n i a assumed p r o p o r t i o n a t e l y more d e p o s i t l i a b i l i t i e s of other banks than d i d the Bank of America system: - 105 D e p o s i t L i a b i l i t i e s Assumed as a Per Cent of T o t a l Depos i t L i a b i l i t i e s as o f December 31, 1948 Bank of America 3.155* 16.30 S e c u r i t y - F i r s t N a t i o n a l Bank A n g l o - C a l i f o r n i a N a t i o n a l Bank Citizens National Trust & Savings Bank, R i v e r s i d e 4.32 [ T r . 4882, 4887, 7755-56] 239• The growth of Bank o f America and the Trans- america m a j o r i t y - o w n e d banks has been f u l l y approved by the appropriate supervisory a u t h o r i t i e s , s i n c e the e s t a b l i s h m e n t o f every branch by such banks has been approved by the f e d e r a l or s t a t e a u t h o r i t i e s r e s p e c t i v e l y charged w i t h s u p e r v i s i o n o f those banks 1 o p e r a t i o n s . [R. Ex. 75, 77-81, 398] 240. The a c q u i s i t i o n of assets o f banks and e s t a b l i s h m e n t of branches by the banks i n which Transamerica h o l d s s t o c k have not l i m i t e d or reduced c o m p e t i t i o n b u t , i n f a c t , have s t i m u l a t e d c o m p e t i t i o n as demonstrated by the t e s t i m o n y of l a r g e and s m a l l d e p o s i t o r s , borrowers, bank owners, and the o f f i c e r s of the banks themselves. [ T r . 3139, 3250-51, 6316-17, 631920, 6328-37, 6382-86, 6390-91, 6459-60, 6471, 6485] - 106 241 # Asset a c q u i s i t i o n s by Bank of America and the Transamerica m a j o r i t y - o w n e d banks have i n many i n s t a n c e s been from i n s t i t u t i o n s t h a t were i n f a i l i n g c o n d i t i o n or f o r o t h e r reasons going out of b u s i n e s s , and such a c q u i s i t i o n s kept the a c q u i r e d f a c i l i t i e s as g o i n g o p e r a t i o n s , protected t h e i r d e p o s i t o r s and the communities t h e y served, and i n no way lessened c o m p e t i t i o n . [R. E x . 391; T r . 5760, 6 5 8 8 , 6625-28, 10493-502] 242. The s u c c e s s f u l development of branch banking by Bank of America and the Transamerica m a j o r i t y - o w n e d banks has s t i m u l a t e d the development o f competing branch banks throughout the s t a t e s i n which those banks o p e r a t e , and these competing branch banks have grown i n s t r e n g t h and become i n c r e a s i n g l y more e f f e c t i v e competitors. [Bd. Ex. 308A, 3HA-317A, R. Ex. 121, 125; T r . 3251, 5495-5502] 243. Every branch opened by Bank o f America or any n a t i o n a l bank m a j o r i t y - o w n e d by Transamerica, whether de novo o r f o l l o w i n g purchase of assets from an e x i s t i n g bank, has been e s t a b l i s h e d w i t h the express a p p r o v a l o f the C o m p t r o l l e r o f the Currency, whose l e g a l d u t y i t i s t o take i n t o c o n s i d e r a t i o n , among o t h e r m a t t e r s : (l) C o m p e t i t i v e f a c t o r s , such as whether the e s t a b l i s h m e n t o f the branch would be p r e j u d i c i a l t o o t h e r e x i s t i n g banks. - 107 (2) E f f e c t upon the p u b l i c i n t e r e s t , in terms of the c u r r e n t or near f u t u r e banking needs of the area or community. (3) A b i l i t y of the bank t o meet such bank- i n g needs i n view of i t s management, c a p i t a l s t r u c t u r e , and prospects of p r o f i t a b l e operation. [ R . Ex. 244. 329] The growth of Bank of America and the Trans- america majority-owned banks has been accomplished w i t h o u t v i o l a t i n g any s t a t e or f e d e r a l r e g u l a t i o n or s t a t u t e , and w i t h the f u l l approval of the C o m p t r o l l e r of the Currency, the Board, Federal Deposit Insurance C o r p o r a t i o n and s t a t e s u p e r v i s o r y a u t h o r i t i e s where a p p r o p r i a t e . For example, the Board i t s e l f has a t times issued s p e c i a l v o t i n g permits a u t h o r i z i n g Transamerica t o vote i t s stock f o r the l i q u i d a t i o n of banks and discontinuance of banking o f f i c e s and the sale of t h e i r assets t o o t h e r banks majority-owned by Transamerica, which l i q u i d a t i o n s and discontinuances are among those challenged by Paragraphs FIVE and SIX of the c o m p l a i n t . The most recent permit of t h i s c h a r a c t e r was issued i n 1947, about a year before the f i l i n g of the c o m p l a i n t , and a u t h o r i z e d Transamerica t o vote i t s stock i n Bank of Newman f o r the discontinuance of the Crow f s Landing branch of Bank of Newman and i t s c o n s o l i d a t i o n w i t h F i r s t N a t i o n a l Bank of Crow*s Landing. [B. Ex. 72-75, 77-81, 2 3 6 , 338, 3 3 9 ; T r . 3658-59] - 108 245. N e i t h e r Bank of America nor any Transamerica m a j o r i t y - o w n e d bank has engaged i n p r i c e or r a t e f i x i n g , in d i v i s i o n o f t e r r i t o r i e s or a l l o c a t i o n o f customers, or a c t i o n of any k i n d i n r e s t r a i n t o f commerce. 246. No person, p a r t n e r s h i p , c o r p o r a t i o n , commun- i t y or area served by Bank of America o r a Transamerica m a j o r i t y - o w n e d bank has complained of i n j u r y , or has had reason t o complain, t h a t t h e r e has been any l e s s e n i n g o f c o m p e t i t i o n i n the p r o v i s i o n of banking s e r v i c e s . 247. The dominant purpose i n t h e e s t a b l i s h m e n t of a d d i t i o n a l branches by Bank of America and the Transamerica m a j o r i t y - o w n e d branch banks has been t o make such banks 1 s e r v i c e s more r e a d i l y a v a i l a b l e t o the p r a c t i c a l number o f customers and p o t e n t i a l largest customers. [R. E x . 81, 194; T r . 6 6 4 l , 6 6 5 8 , 10538-393 248. Branch b a n k i n g , which has been developed by banks i n which Transamerica has i n v e s t e d , has brought t o the v e r y s m a l l e s t communities t h e e x p e r t f i n a n c i a l s k i l l s and s e r v i c e s t h a t o t h e r w i s e would have been a v a i l a b l e o n l y in the l a r g e s t c i t i e s , and has i n t h a t way f u r t h e r e d competition. [ T r . 5689-90, 10463-68] - 109 249. Transamerica f s stock a c q u i s i t i o n s have promoted c o m p e t i t i o n because as an i n v e s t o r i t has encouraged and a s s i s t e d the growth of branch banking which has broadened the use and a v a i l a b i l i t y of t r a d i t i o n a l banking s e r v i c e s and a g g r e s s i v e l y developed new f i n a n c i a l [R. Ex. 255; Tr. services. 6676-80, 9771-73, 10551-52] 250. Banks i n which Transamerica has i n v e s t e d have grown and been successful because they have brought f i n a n c i a l s e r v i c e s t o the people and have thus b e t t e r satis- f i e d the needs of a l l the communities served. [ T r . 10559-61] 251. The growth and development of Bank of America has been of s u b s t a n t i a l assistance i n e n a b l i n g the communities served by i t s branches t o f i n a n c e t h e i r needs and expansions, and has g r e a t l y reduced those communities 1 dependence upon e a s t e r n f i n a n c i a l c e n t e r s . [ T r . 5693-95, 6212, 1051921] 252. The f a c i l i t i e s and s e r v i c e s o f f e r e d by Bank of America and Transamerica majority-owned banks have been of such c h a r a c t e r t h a t v a r i o u s communities and governmental a u t h o r i t i e s have urged the establishment by such banks of branches i n s p e c i f i c l o c a l i t i e s i n order t o procure adequate banking s e r v i c e . [R. Ex. 194-204, 208; r . 57^445, T10545-48] - 110 253- I n no case has the purpose or e f f e c t of T r a n s a m e r i c a ^ a c q u i s i t i o n of bank s t o c k been t o e l i m i n a t e any s u b s t a n t i a l c o m p e t i t o r of any bank. [Tr. 254. 4244-48] No a c t i o n or course o f conduct i n the d e t e r - m i n a t i o n or e x e c u t i o n of Transamerica*s investment policy evidences any purpose of e l i m i n a t i n g or l e s s e n i n g competit i o n or c r e a t i n g a monopoly. No s t o c k a c q u i r e d by Trans- america has been used f o r the purpose of l e s s e n i n g competit i o n , r e s t r a i n i n g commerce, or c r e a t i n g a monopoly, and no such a c q u i s i t i o n has had the e f f e c t of l e s s e n i n g c o m p e t i t i o n , r e s t r a i n i n g commerce, or t e n d i n g t o c r e a t e a monopoly. 255. No bank or banking o f f i c e has been a c q u i r e d by Bank of America or any Transamerica m a j o r i t y - o w n e d bank and c l o s e d f o r the purpose of e l i m i n a t i n g a c o m p e t i t o r . 256. No course of conduct on the p a r t of Trans- america, alone or i n c o n c e r t w i t h o t h e r s , i n d i c a t e s any reasonable p r o b a b i l i t y o f i t s a c h i e v i n g e f f e c t i v e monopoly power w i t h r e s p e c t t o the s e r v i c e s p r o v i d e d by "commercial b a n k s . " 257. Because of the v a r i a t i o n i n s i z e of banking o f f i c e s , the number o f personnel they employ, the amount of business t h e y h a n d l e , the range of t h e i r s e r v i c e s , the economic c h a r a c t e r i s t i c s of the areas i n which t h e y are l o c a t e d , - Ill - the c h a r a c t e r of the p o p u l a t i o n i n the community where they are l o c a t e d , and o t h e r d i f f e r e n c e s , comparisons of the number of banking o f f i c e s operated by d i f f e r e n t banking i n s t i t u t i o n s do not measure market occupancy or c o n t r o l . [R. Ex. 254, 332, 398; T r . 5689, 8621-24, 8904, 9322-23, 9853-54, 10568-693 258. Growth of percentages of a l l banking o f f i c e s , deposits and loans h e l d by any bank or group of banks i s not s i g n i f i c a n t i n i n d i c a t i n g a tendency t o c r e a t e a monopoly. [ T r . 12327, 12329-32] 259. The growth and s i z e of e i t h e r Bank of America, the Transamerica majority-owned banks, or a l l of them i n the aggregate are not such as t o i n d i c a t e any tendency t o create a monoploy. 260. There has been no showing t h a t a t the time Transamerica purchased a m a j o r i t y of the stock i n any bank there was s u b s t a n t i a l c o m p e t i t i o n between t h a t bank and Bank of America or any bank majority-owned by Transamerica. 261. There has been no l e s s e n i n g of such competi- t i o n , i f any, as may have e x i s t e d between any of the banks i n which Transamerica has acquired s t o c k . [ T r . 4772, 5801, 6703-05, 7126-30, 7143-7212, 8774, 12856-57] - 112 262. C i t i z e n s N a t i o n a l T r u s t and Savings Bank of Los Angeles, a branch bank having about 35 branches i n and around Los Angeles, competes v i g o r o u s l y w i t h Bank of America. There has been no lessening of c o m p e t i t i o n between C i t i z e n s and Bank of America or any other bank i n which Transamerica holds stock f o l l o w i n g Transamerica*s purchase of a m i n o r i t y i n t e r e s t i n C i t i z e n s stock under the f o l l o w i n g circumstances: (a) For some time p r i o r t o 19^3* substantial stockholders of C i t i z e n s had expressed d i s s a t i s f a c t i o n w i t h i t s management and a committee of the d i r e c t o r s had been appointed t o o b t a i n new s e n i o r o f f i c e r s . Transamerica ac- q u i r e d p r a c t i c a l l y a l l of i t s h o l d i n g s of C i t i z e n s stock i n May, 19^3, a f t e r being urged by these s u b s t a n t i a l stockholders t o take an i n t e r e s t and help them solve the management p r o blem. Transamerica's management b e l i e v e d C i t i z e n s stock would be a p r o f i t a b l e (b) investment. Since 19^3, Transamerica has voted i t s stock t o nominate and e l e c t 5 out of 21 d i r e c t o r s . Citizens These d i r e c - t o r s have by t h e i r advice and suggestions c o n t r i b u t e d substant i a l l y t o the s u c c e s s f u l management of C i t i z e n s , which has g r e a t l y prospered i n the years since 1943(c) Some time a f t e r the a c q u i s i t i o n , Transamerica o f f e r e d t o s e l l i t s h o l d i n g s i n C i t i z e n s t o some of the d i r e c t o r s , and n e g o t i a t i o n s took place f o r such a s a l e , but t h e r e was i n a b i l i t y t o agree on the terms and the sale was never made. - 113 (d) of Transamerica never i n t e n d e d t o a c q u i r e control Citizens. (e) Transamerica has never c o n t r o l l e d C i t i z e n s in any r e s p e c t whatsoever. (f) Transamerica has never attempted t o influence the p o l i c i e s of C i t i z e n s i n order t o l e s s e n or e l i m i n a t e compet i t i o n between t h a t Bank and any o t h e r bank. (g) Transamerica d i d n o t purchase s t o c k i n C i t i z e n s f o r the purpose of a r r a n g i n g f o r the s a l e o f the assets of t h a t Bank t o any o t h e r bank. (h) As of December 31, 1949, Transamerica owned about 59,000 shares or 23.5$ of the t o t a l o u t s t a n d i n g s t o c k i n Citizens. [Bd. Ex* 3V, 227, 228, 237-242; T r . 1875-77, 1884-89, 1902-03, 1963-65, 1969, 2035-38, 204142. 2044-52, 2055-60, 2071-75, 2080, 2084-86, 2116-18, 212023] 263. Transamerica has not a t any t i m e , directly or i n d i r e c t l y , a c q u i r e d any s t o c k o f any o f the banks below from paragraphs FIVE and SIX o f the c o m p l a i n t . F i r s t N a t i o n a l Bank, Alturas, California C e n t r a l Bank o f C a l i f o r n i a , Auburn, C a l i f o r n i a B e r k e l e y Bank, Berkeley, C a l i f o r n i a listed - 114 F i r s t N a t i o n a l Bank, Chino, C a l i f o r n i a C l o v e r d a l e Commercial & Savings Bank, Cloverdale, C a l i f o r n i a F i r s t N a t i o n a l Bank, Colton, C a l i f o r n i a Bank o f D i x o n , Dixon, C a l i f o r n i a F i r s t N a t i o n a l Bank, Exeter, California F i r s t N a t i o n a l Bank, Geyserville, California Bank o f P a c i f i c Grove, P a c i f i c Grove, C a l i f o r n i a Petaluma Savings Bank, Petaluma, C a l i f o r n i a Richmond Commercial & Savings Bank, Richmond, C a l i f o r n i a San C a r l o s Bank, San C a r l o s , C a l i f o r n i a S t a t e Bank of Ramona, Ramona, C a l i f o r n i a F i r s t N a t i o n a l Bank, South Pasadena, C a l i f o r n i a Lassen I n d u s t r i a l Bank, Susanville, California Commercial Bank, Turlock, California E l Dorado County Bank, Placerville, California Dairymen 1 s Coast Bank, V a l l e y Ford, C a l i f o r n i a - 115 Golden S t a t e Bank, Walnut Park, C a l i f o r n i a C i t i z e n s S t a t e Savings Bank, Gardena, C a l i f o r n i a N a t i o n a l Bank o f Hermosa Beach, Hermosa Beach, C a l i f o r n i a Bank o f I s l e t o n , Isleton, California F i r s t N a t i o n a l Bank, Long Beach, C a l i f o r n i a Arroyo-Seco S t a t e Bank, Los A n g e l e s , C a l i f o r n i a F l o r e n c e N a t i o n a l Bank, Los A n g e l e s , C a l i f o r n i a P a c i f i c N a t i o n a l Bank, Los Angeles, C a l i f o r n i a Monterey Park Commercial & Savings Bank, Monterey Park, C a l i f o r n i a Bank of Norwalk, Norwalk, C a l i f o r n i a Bank o f San Clemente, San Clemente, C a l i f o r n i a F i r s t N a t i o n a l T r u s t & Savings Bank, Whittier, California Commercial & Savings Bank o f S u t t e r County, Yuba C i t y , C a l i f o r n i a Broadway Commercial & Savings Bank, Burlingame, C a l i f o r n i a F i r s t N a t i o n a l Bank, Alhambra, C a l i f o r n i a F i r s t N a t i o n a l Bank, Sebastopol, C a l i f o r n i a - 116 Oregon S t a t e Bank, P o r t l a n d , Oregon American N a t i o n a l Bank, P o r t l a n d , Oregon M o n t a v i l l a Savings Bank, P o r t l a n d , Oregon F i r s t N a t i o n a l Bank, A s t o r i a , Oregon F i r s t I n l a n d N a t i o n a l Bank, P e n d l e t o n , Oregon Shute Savings Bank, H i l l s b o r o , Oregon F i r s t N a t i o n a l Bank, Salem, Oregon Bank o f Woodburn, Woodburn, Oregon F i r s t N a t i o n a l Bank, Condon, Oregon F i r s t N a t i o n a l Bank, Cucamonga, C a l i f o r n i a R u s s - W i l l i a m s Banking Company, Ferndale, C a l i f o r n i a McCloud N a t i o n a l Bank, McCloud, C a l i f o r n i a Wallowa N a t i o n a l Bank, E n t e r p r i s e , Oregon F i r s t N a t i o n a l Bank, LaGrande, Oregon Commercial N a t i o n a l Bank, Lakeview, Oregon F i r s t N a t i o n a l Bank, Medford, Oregon F i r s t N a t i o n a l Bank, T i l l a m o o k , Oregon - 117 F i r s t N a t i o n a l Bank, U n i o n , Oregon S i e r r a V a l l e y Bank, Loyalton, California Plumas County Bank, Quincy, C a l i f o r n i a Bank o f M i l p i t a s , Milpitas, California C i t i z e n s Bank, Laguna Beach, C a l i f o r n i a F i r s t N a t i o n a l Bank, Fallbrook, California Westwood N a t i o n a l Bank, Westwood, C a l i f o r n i a D e l t a Bank, Rio V i s t a , C a l i f o r n i a Bank o f P o i n t Arena, P o i n t Arena, C a l i f o r n i a F i r s t N a t i o n a l Bank, D e l Rey, C a l i f o r n i a C a l i s t o g a N a t i o n a l Bank, Callstoga, California Lumbermen's N a t i o n a l Bank, Bend, Oregon N o r t h Bend N a t i o n a l Bank, N o r t h Bend, Oregon L i n d s a y Savings Bank, Lindsay, C a l i f o r n i a F i r s t N a t i o n a l Bank, Glendora, C a l i f o r n i a F i r s t N a t i o n a l Bank, M o l a l l a , Oregon - 118 F i r s t N a t i o n a l Bank of Coos Bay, M a r s h f i e l d , Oregon S t e i w e r & Carpenter Bank, F o s s i l , Oregon Mason V a l l e y Bank, Y e r l i n g t o n , Nevada Yuma Branch o f Miners & Merchants Bank, Bisbee, Arizona Coffman-Dobson Bank & T r u s t Company, C h e h a l i s , Washington Toledo S t a t e Bank, T o l e d o , Washington S t a t e Bank of W i n l o c k , W i n l o c k , Washington Bank of Alameda County, Alvarado, C a l i f o r n i a F i r s t N a t i o n a l Bank, Clovis, California Bank o f America, San Pedro (Los A n g e l e s ) , California F i r s t N a t i o n a l Bank, Auburn, C a l i f o r n i a Chino Savings Bank, Chino, C a l i f o r n i a F i r s t Savings Bank, Colton, C a l i f o r n i a S e c u r i t y Savings Bank, Exeter, C a l i f o r n i a Sonoma County N a t i o n a l Bank, Petaluma, C a l i f o r n i a F i r s t N a t i o n a l Bank, Santa Rosa, C a l i f o r n i a - 119 F i r s t N a t i o n a l Bank, Turlock, California New F i r s t N a t i o n a l Bank, Visalia, California S e c u r i t y Savings Bank, Visalia, California V a l l e j o Bank of Savings, Vallejo, California F i r s t N a t i o n a l Bank, Anaheim, C a l i f o r n i a F i r s t N a t i o n a l Bank, Gardena, C a l i f o r n i a Graham N a t i o n a l Bank, Los A n g e l e s , C a l i f o r n i a F i r s t N a t i o n a l Bank, Healdsburg, C a l i f o r n i a F i r s t Savings Bank, Healdsburg, C a l i f o r n i a Donahue-Kelly Banking Company, San F r a n c i s c o , C a l i f o r n i a Eagle Rock S t a t e Bank, Los A n g e l e s , C a l i f o r n i a F i r s t N a t i o n a l Bank, Ventura, C a l i f o r n i a Home Savings Bank, Ventura, C a l i f o r n i a A t l a n t i c Avenue Bank, Bell, California F i r s t N a t i o n a l Bank, Ducor, C a l i f o r n i a F i r s t N a t i o n a l Bank, Vacaville, California V a c a v i l l e Savings Bank, Vacaville, California - 120 F i r s t N a t i o n a l Bank, Sonora, C a l i f o r n i a Tuolumne County Bank, Sonora, C a l i f o r n i a F i r s t N a t i o n a l Bank, Redondo Beach, C a l i f o r n i a F i r s t N a t i o n a l Bank, Orland, C a l i f o r n i a Bank of Lassen County, Susanville, California Sebastopol Savings Bank, Sebastopol, C a l i f o r n i a H i b e r n i a Bank, P o r t l a n d , Oregon N a t i o n a l Bank o f Commerce, A s t o r i a , Oregon S t a t e Bank o f Echo, Echo, Oregon F o r t u n a S t a t e Bank, Fortuna, C a l i f o r n i a S t a t e Bank o f Ashland, A s h l a n d , Oregon Covina V a l l e y Savings Bank, Covina, C a l i f o r n i a F i r s t N a t i o n a l Bank, Covina, C a l i f o r n i a F i r s t Savings Bank, Glendora, C a l i f o r n i a Bank o f Lakeview, Lakeview, Oregon F i r s t N a t i o n a l Bank, Napa, C a l i f o r n i a - 121 Estacada S t a t e Bank, P o r t l a n d , Oregon Winters N a t i o n a l Bank, Winters, C a l i f o r n i a Farmers & Merchants Bank, Gardena, C a l i f o r n i a C i t i z e n s N a t i o n a l Bank, Ontario, California Bank o f G a i t , Gait, California F i r s t N a t i o n a l Bank, Laton, C a l i f o r n i a F i r s t N a t i o n a l T r u s t & Savings Bank, Fullerton, California [Bd. E x . 264. 3J 8, R. Ex. 232] N e i t h e r Transamerica, nor Bank o f America, nor any Transamerica m a j o r i t y - o w n e d bank, nor a l l of them i n the aggregate has now, or ever has had, a monopoly of "commercial banking" or any s e r v i c e p r o v i d e d by "commercial banks" i n the n a t i o n , i n any s t a t e or group of s t a t e s , or i n any s e c t i o n or community. 265. N e i t h e r Transamerica, nor Bank of America, nor any Transamerica m a j o r i t y - o w n e d bank, nor a l l of them i n the aggregate has now, or ever has had, any purpose or i n t e n t i o n t o a c q u i r e a monopoly of "commercial banking" or any s e r v i c e p r o v i d e d by "commercial banks" i n the n a t i o n , i n any s t a t e or group o f s t a t e s , or i n any s e c t i o n or commun ity. - 122 266. N e i t h e r Transamerica, nor Bank o f America, nor any Transamerica m a j o r i t y - o w n e d bank, nor a l l o f them i n the aggregate has now, or ever has had, power t o w i t h h o l d or c o n t r o l t h e q u a n t i t y of the s e r v i c e s p r o v i d e d by "commercial banks" a v a i l a b l e t o the p u b l i c i n the n a t i o n , i n any s t a t e o r group o f s t a t e s , or i n any s e c t i o n or community. 267. N e i t h e r Transamerica, n o r Bank o f America, nor any Transamerica m a j o r i t y - o w n e d bank, n o r a l l of them i n t h e aggregate has now, o r ever has had, power t o e s t a b l i s h the p r i c e , r a t e s o r terms on which t h e s e r v i c e s pro- v i d e d by "commercial banks" s h a l l be a v a i l a b l e t o the p u b l i c i n the n a t i o n , i n any s t a t e o r group o f s t a t e s , or i n any s e c t i o n o r community. 268. N e i t h e r Transamerica, n o r Bank o f America, n o r any Transamerica m a j o r i t y - o w n e d bank, nor a l l o f them i n the aggregate has d i s c r i m i n a t e d among u s e r s o f services p r o v i d e d by "commercial banks" i n t h e n a t i o n , i n any s t a t e o r group of s t a t e s , o r i n any s e c t i o n o r community. 269. N e i t h e r Transamerica, nor Bank o f America, nor any Transamerica m a j o r i t y - o w n e d bank, nor a l l of them i n the aggregate has ever o p e r a t e d , o r now o p e r a t e s , banking - 123 o f f i c e s beyond the needs of the p u b l i c f o r the purpose or w i t h the e f f e c t of d i s c o u r a g i n g the establishment of banking o f f i c e s by others i n the n a t i o n , i n any s t a t e or group of s t a t e s , or i n any s e c t i o n or community. 270. N e i t h e r Transamerica, nor Bank of America, nor any Transamerica majority-owned bank, nor a l l of them i n the aggregate has excluded or sought t o exclude any competitor or p o t e n t i a l competitor from engaging i n b u s i ness as a "commercial bank11 i n the n a t i o n , i n any s t a t e or group of s t a t e s , or i n any s e c t i o n or community. 271. No evidence presented by any c o m p e t i t o r , p o t e n t i a l c o m p e t i t o r , customer or p o t e n t i a l customer i n d i cates t h a t t h e r e i s any reasonable p r o b a b i l i t y t h a t Transamerica, Bank of America or any Transamerica majority-owned bank or a l l of them i n the aggregate have any reasonable p r o b a b i l i t y of c r e a t i n g a monopoly w i t h respect t o "commerc i a l banking" or any of the s e r v i c e s provided by "commercial banks" i n the n a t i o n , i n any s t a t e or group of s t a t e s , or i n any s e c t i o n or community. 272. The power, i f any, of Transamerica, Bank of America, any Transamerica majority-owned bank or a l l of them i n the aggregate t o w i t h h o l d or c o n t r o l any s i g n i f i c a n t - 124 q u a n t i t y of the s e r v i c e s p r o v i d e d by "commercial banks" a v a i l a b l e t o the p u b l i c i n the n a t i o n , i n any s t a t e or group o f s t a t e s , or i n any s e c t i o n or community, or t o f i x r a t e s or terms or d i s c r i m i n a t e w i t h r e s p e c t t o such s e r v i c e s has not i n c r e a s e d by reason of the growth of such banks. 273• "Commercial banking" i s so t h o r o u g h l y s u b j e c t t o Government r e g u l a t i o n and a c t u a l Government p a r t i c i p a t i o n t h a t t h e r e i s no reasonable probability t h a t any p r i v a t e group c o u l d a t t a i n e f f e c t i v e monopoly power over it. 274. "Commercial banking" i s i n c a p a b l e of m o n o p o l i z a t i o n because i t depends e n t i r e l y upon c o n t i n u e d customer s a t i s f a c t i o n , and by the mere t r a n s f e r o f a dep o s i t or l o a n t o another bank a customer can o b t a i n the same s e r v i c e , and even c r e a t e the c a p a c i t y t o p r o v i d e that service i f necessary. [R. Ex. 183; T r . 8542-43, 925859, 9294-96, 9678-79, 9839-40, 10560-61] - 125 VIII. CONCLUSIONS 275- The Board lacks j u r i s d i c t i o n i n t h i s matter because Transamerica i s not a bank, banking a s s o c i a t i o n , or t r u s t company, w i t h i n the meaning of S e c t i o n 11 of the Clayton A c t . 276. The Board lacks j u r i s d i c t i o n i n t h i s m a t t e r because banks are not c o r p o r a t i o n s engaged i n commerce, w i t h i n the meaning of S e c t i o n 7 of the Clayton A c t . 277. Transamerica has not v i o l a t e d S e c t i o n 7 of the Clayton A c t , because i t purchased the bank stocks it owns s o l e l y f o r investment and has not used any of them by v o t i n g or otherwise t o b r i n g about, or i n a t t e m p t i n g t o b r i n g about, the s u b s t a n t i a l lessening of c o m p e t i t i o n . 278. Transamerica has not v i o l a t e d S e c t i o n 7 of the C l a y t o n A c t , because i t s a c q u i s i t i o n s of the stock of banks have not had the e f f e c t , have not been used by v o t i n g or o t h e r w i s e , and i t has not been shown t h a t t h e i r effect has b e e n , i s or may be (a) t o tend t o create a monopoly of - 126 any l i n e o f commerce, (b) t o s u b s t a n t i a l l y l e s s e n c o m p e t i t i o n between t h e banks i n which i t a c q u i r e d s t o c k , or (c) t o r e s t r a i n commerce i n any s e c t i o n o r community. Respectfully submitted, A t t o r n e y s f o r Respondent, Transamerica C o r p o r a t i o n Covington & B u r l i n g of Counsel A p r i l 2, 1951
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